inversiones alsacia s.a. and subsidiary · inversiones alsacia s.a. y subsidiaria consolidated...

INVERSIONES ALSACIA S.A. AND

SUBSIDIARY

Consolidated Financial Statements

December 31, 2014 and 2013

(With the Independent Auditor's Report Thereon)

INVERSIONES ALSACIA S.A. AND

SUBSIDIARY

CONTENTS

Independent Auditor’s Report

Classified Statements of Financial Position

Statements of Comprehensive Income per Function

Statements of Changes in Equity

Statements of Cash Flows – Direct Method

Notes to the Financial Statements

Ch$ : Chilean Pesos

ThCh$: Thousands of Chilean pesos

UF : Unidades de Fomento (inflation-adjusted units)

US$ : United States dollars

ThUS$ Thousands of United States Dollars

INVERSIONES ALSACIA S.A. AND SUBSIDIARY

Consolidated Financial Statements

December 31, 2014 and 2013


CONTENT Independent Auditor’s Report Consolidated Classified Statements of Financial Position Consolidated Statements of Comprehensive Income per Function Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements CL$ - Chilean Pesos ThCh$ - Thousands of Chilean Pesos Co$ - Colombian Pesos US$ - United States Dollars MUS$ - Thousands of United States Dollars


CONTENTS

Page

NOTES TO THE CONSOLIDATES FINANCIAL STATEMENTS ------------------------------------------------------------------ 1

NOTE 1 – REPORTING ENTITY ------------------------------------------------------------------------------------------------------------ 1

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------------------------------------- 6 2.1 Basis of preparation -------------------------------------------------------------------------------------------------------------- 6 2.2 New accounting pronouncements -------------------------------------------------------------------------------------------- 8 2.3 Basis of consolidation ---------------------------------------------------------------------------------------------------------- 10 2.4 Transactions in foreign currency -------------------------------------------------------------------------------------------- 11 2.5 Property, plant and equipment ----------------------------------------------------------------------------------------------- 12 2.6 Intangible assets other than goodwill -------------------------------------------------------------------------------------- 13 2.7 Impairment loss on non-financial assets ---------------------------------------------------------------------------------- 14 2.8 Financial assets ----------------------------------------------------------------------------------------------------------------- 14 2.8.1 Classification of financial assets --------------------------------------------------------------------------------------------- 15 2.8.2 Recognition and measurement of financial assets --------------------------------------------------------------------- 15 2.9 Derivatives and hedging activities ------------------------------------------------------------------------------------------ 16 2.10 Inventories ------------------------------------------------------------------------------------------------------------------------ 16 2.11 Trade and other receivables -------------------------------------------------------------------------------------------------- 16 2.12 Cash and cash equivalents --------------------------------------------------------------------------------------------------- 17 2.13 Share capital --------------------------------------------------------------------------------------------------------------------- 17 2.14 Trade and other payables ----------------------------------------------------------------------------------------------------- 17 2.15 Other financial liabilities ------------------------------------------------------------------------------------------------------- 17 2.16 Income taxes and deferred taxes ------------------------------------------------------------------------------------------- 17 2.17 Provisions ------------------------------------------------------------------------------------------------------------------------- 19 2.18 Revenue recognition ----------------------------------------------------------------------------------------------------------- 19 2.19 Leases ----------------------------------------------------------------------------------------------------------------------------- 20 2.20 Overhaul --------------------------------------------------------------------------------------------------------------------------- 20 2.21 Dividend policy ------------------------------------------------------------------------------------------------------------------- 20 2.22 Non-current assets (or disposal groups) held for sale ----------------------------------------------------------------- 20 2.23 Other non-financial liabilities ------------------------------------------------------------------------------------------------- 20 2.24 Environment ---------------------------------------------------------------------------------------------------------------------- 21

NOTE 3 – FINANCIAL RISK MANAGEMENT ---------------------------------------------------------------------------------------- 21 3.1 Concentration and management of credit risk --------------------------------------------------------------------------- 21 3.2 Exchange risk management -------------------------------------------------------------------------------------------------- 21 3.3 Fuel price risk management -------------------------------------------------------------------------------------------------- 22 3.4 Interest rate risk management ----------------------------------------------------------------------------------------------- 22 3.5 Liquidity risk ---------------------------------------------------------------------------------------------------------------------- 23

NOTE 4 – SIGNIFICANT ACCOUNTING ESTIMATES AND CRITERIA ------------------------------------------------------ 23

NOTE 5 – CASH AND CASH EQUIVALENTS ---------------------------------------------------------------------------------------- 25

NOTE 6 – FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------------------ 27 6.1 Financial instruments by category ------------------------------------------------------------------------------------------ 27 6.2 Credit quality of financial assets --------------------------------------------------------------------------------------------- 28 6.3 Fair value estimates ------------------------------------------------------------------------------------------------------------ 29

NOTE 7 – OTHER FINANCIAL ASSETS ----------------------------------------------------------------------------------------------- 30

NOTE 8 – OTHER NON-FINANCIAL ASSETS --------------------------------------------------------------------------------------- 30 NOTE 9 – TRADE AND OTHER RECEIVABLES ------------------------------------------------------------------------------------ 31

NOTE 10 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES ----------------------------------------------- 33 10.1 Accounts receivable due from related parties ---------------------------------------------------------------------------- 33 10.2 Accounts payable to related parties ---------------------------------------------------------------------------------------- 36 10.3 Transactions with related parties -------------------------------------------------------------------------------------------- 36

10.4 Payments to the Board of Directors and key management personnel --------------------------------------------- 38 NOTE 11 – INVENTORIES ----------------------------------------------------------------------------------------------------------------- 38

NOTE 12 – CURRENT TAX ASSETS --------------------------------------------------------------------------------------------------- 39

NOTE 13 – INTANGIBLE ASSETS OTHER THAN GOODWILL ---------------------------------------------------------------- 39

NOTE 14 – PROPERTY, PLANT AND EQUIPMENT ------------------------------------------------------------------------------- 41

NOTE 15 – CURRENT AND DEFERRED INCOME TAXES ---------------------------------------------------------------------- 44 NOTE 16 – EQUITY ACCOUNTED INVESTEES ------------------------------------------------------------------------------------ 47

NOTE 17 – OTHER FINANCIAL LIABILITIES ---------------------------------------------------------------------------------------- 48

NOTE 18 – TRADE AND OTHER PAYABLES --------------------------------------------------------------------------------------- 56

NOTE 19 – OTHER PROVISIONS ------------------------------------------------------------------------------------------------------- 56

NOTE 20 – OTHER NON-FINANCIAL LIABILITIES -------------------------------------------------------------------------------- 57

NOTE 21 – SHARE CAPITAL ------------------------------------------------------------------------------------------------------------- 58 21.1 Share capital --------------------------------------------------------------------------------------------------------------------- 58 21.2 Dividend policy ------------------------------------------------------------------------------------------------------------------- 58 21.3 Shareholders --------------------------------------------------------------------------------------------------------------------- 58

NOTE 22 – OTHER RESERVES ---------------------------------------------------------------------------------------------------------- 59

NOTE 23 – REVENUE ----------------------------------------------------------------------------------------------------------------------- 60

NOTE 24 – COST OF SALES ------------------------------------------------------------------------------------------------------------- 60

NOTE 25 – ADMINISTRATIVE EXPENSES ------------------------------------------------------------------------------------------- 60 NOTE 26 – OTHER INCOME / OTHER EXPENSES PER FUNCTION --------------------------------------------------------- 61

NOTE 27 – FINANCE INCOME ----------------------------------------------------------------------------------------------------------- 61

NOTE 28 – FINANCE COSTS ------------------------------------------------------------------------------------------------------------- 62

NOTE 29 –EARNINGS (LOSSES) PER SHARE ------------------------------------------------------------------------------------- 62

NOTE 30 – FOREIGN CURRENCY TRANSLATION DIFFERENCES --------------------------------------------------------- 62 30.1 Foreign currency translation difference recognized in profit or loss ------------------------------------------------ 62 30.2 Assets and liabilities in foreign currency ---------------------------------------------------------------------------------- 63

NOTE 31 – GAIN (LOSS) FROM ASSETS AND LIABILITIES IN UNIDAD DE FOMENTO ------------------------------ 65

NOTE 32 – CONTINGENCIES ------------------------------------------------------------------------------------------------------------ 65 32.1 Pledged shares ------------------------------------------------------------------------------------------------------------------ 65 32.2 Direct guarantees --------------------------------------------------------------------------------------------------------------- 65 32.3 Guarantees from third parties ------------------------------------------------------------------------------------------------ 65 32.4 Restrictions ----------------------------------------------------------------------------------------------------------------------- 65 32.5 Lawsuits --------------------------------------------------------------------------------------------------------------------------- 66

NOTE 33 – SANCTIONS (UNAUDITED) ----------------------------------------------------------------------------------------------- 69

NOTE 34 – FINANCIAL POSITION ------------------------------------------------------------------------------------------------------ 69

NOTE 35 – ENVIRONMENT (UNAUDITED) ------------------------------------------------------------------------------------------- 71

NOTE 36 – SUBSEQUENT EVENTS ---------------------------------------------------------------------------------------------------- 71


CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION

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

Statement of financial position

December 31, December 31,

2014 2013

Note ThCh$ ThCh$

Assets

Current assets

Cash and cash equivalents 5 3,607,264

7,830,565

Other current financial assets 7 -

5,123,085

Other current non-financial assets 8 977,859

836,126

Trade and other receivables 9 11,088,092

7,280,972

Accounts receivable due from related parties, current 10 10,331,205

38,032,173

Inventories 11 1,137,851

1,273,293

Current tax assets 12 330,988

735,535

Total current assets 27,473,259 61,111,749

Non-current assets

Other non-current financial assets 7 -

11,564,671

Other non-current non-financial assets 8 112,083

111,993

Accounts receivable due from related parties, non-current 10 118,935,925

87,657,433

Equity accounted investees 16 -

-

Intangible assets other than goodwill 13 6,107,236

7,345,218

Property, plant and equipment 14 29,415,903

35,549,979

Deferred tax assets 15 17,250,740

6,560,217

Total non-current assets 171,821,887 148,789,511

Total assets 199,295,146 209,901,260


CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION, CONTINUED



Statement of financial position

2014 2013

Note ThCh$ ThCh$

Liabilities and equity

Liabilities

Current liabilities

Other current financial liabilities 17 6,828,898 48,264,641

Trade and other payables 18 13,568,381 12,656,325

Accounts payable due to related parties 10 522,686 468,528

Other current non-financial liabilities 20 953,342 1,047,404 Other short-term provisions, current 19 4,531,746 2,447,712

Current tax liabilities, current - 57,580

Total current liabilities 26,405,053 64,942,190

Non-current liabilities

Other non-current financial liabilities 17 215,521,742 171,618,958

Other non-current non-financial liabilities 20 3,061,708 4,015,050

Total non-current liabilities 218,583,450 175,634,008

Total liabilities 244,988,503 240,576,198

Equity

Share capital 21 10,566,074 10,566,074

Accumulated deficit (54,472,429) (39,454,010)

Other reserves 22 (1,787,002) (1,787,002)

Equity attributable to owners of the parent (45,693,357) (30,674,938)

Non-controlling interest 23 - -

Total equity (45,693,357) (30,674,938)

Total liabilities and equity 199,295,146 209,901,260


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME PER FUNCTION


From January 1 to December 31,

Statement of profit or loss

2014 2013

Note ThCh $ ThCh $

Revenue 24 93,367,760 81,452,016

Cost of sales 25 (75,743,955) (70,410,585)

Gross profit 17,623,805 11,041.431

Other income per function 27 230,643 376,947

Administrative expenses 26 (17,168,616) (11,341,516)

Other expenses per function 27 (2,081,954) (1,140,779)

Finance income 28 9,817,206 10,205,814

Finance cost 29 (18,798,943) (19,646,181)

Share of profit of equity accounted investees (1,850,729) (1,697,671)

Profit or loss for index-adjusted unit (314,287) (113,445)

Foreign currency translation difference 31 (13,165,650) (6,335,714)

Loss before tax (25,708,525) (18,651,114)

Income tax expense 15 6,428,020 2,087,112

Loss from continuing operations (19,280,505) (16,564,002)

Loss (19,280,505) (16,564,002)

Loss attributable to

Owners of the parent (19,280,505) (16,564,002)

Loss (19,280,505) (16,564,002)

Loss per share

Basic loss per share

Basic loss per share – continuing operations 30 (527.73) (453.37)

Basic loss per share (527.73) (453.37)

Diluted loss per share

Dilutes loss per share – continuing operations (527.73) (453.37)

Diluted loss per share (527.73) (453.37)

Other comprehensive income - -

Total comprehensive income (19,280,505) (16,564,002)


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


For the twelve-month period ended December 31, 2014:

Note Share capital Revaluation

surplus Other sundry

reserves Other reserves

Retained earnings

(accumulated deficit)

Equity attributable to owners of the

parent Non-controlling

interest Total equity ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Balance at January 1, 2014 21 and

22 10,566,074 - - (1,787,002) (39,454,010) (30,674,938) - (30,674,938) Increase (decrease) due to changes in accounting policies 738,943 738,943 - 738,943

Increase (decrease) due to correction of errors

Balance at January 1, 2014 10,566,074 - - (1,787,002) (38,715,067) (29,935,995) - (29,935,995)

Changes in equity

Comprehensive income

Effect for change in income tax rate – Circular No.856

15 - - - - 3,523,143 3,523,143 - 3,523,143

Loss - - - - (19,280,505) (19,280,505) - (19.280.505)

Comprehensive income - - - - (15,757,362) (15,757,362) - (15,757,362)

Increase (decrease) due to transfers and other changes - - - - - - - -

Total changes in equity - - - - - - - -

Balance at December 31, 2014 10,566,074 - - (1,787,002) (54,472,429) (45,693,357) - (45,693,357)


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


For the twelve-month period ended December 31, 2013:

Note Share capital Revaluation

surplus Other sundry

reserves Other reserves

Retained earnings

(accumulated deficit)

Equity attributable to owners of the

parent Non-controlling

interest Total equity ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Balance at January 1, 2013 21 and

22 10,566,074 - - (1,787,002) (22,890,008) (14,110,936) - (14,110,936) Increase (decrease) due to changes in accounting policies - - - - - - - -

Increase (decrease) due to correction of errors - - - - - - - -

Balance at January 1, 2013 10,566,074 - - (1,787,002) (22,890,008) (14,110,936) - (14,110,936)

Changes in equity

Comprehensive income Gain (loss) - - - - (16,564,002) (16,654,002) - (16,564,002)

Comprehensive income - - - - (16,564,002) (16,564,002) - (16,564,002)

Increase (decrease) due to transfers and other changes - - - - - - - -

Total changes in equity - - - - - - - -

Balance at December 31, 2013 10,566,074 - - (1,787,002) (39,454,010) (30,674,938) - (30,674,938)

INVERSIONES ALSACIA S.A. Y SUBSIDIARIA

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the twelve-month period ended December 31, 2014 and 2013 Consolidated statement of cash flows 2014 2013

ThCh$ ThCh$

Receipts from operating activities

Cash receipts from sale of goods and rendering of services 89,432,178 77,748,843

Other cash receipts from operating activities 94,011 460,175

Payments for operating activities

Cash payments to suppliers for goods and services (54,727,119) (47,793,925)

Cash payments to and on behalf of employees (31,999,702) (28,025,516)

Other cash payments for operating activities -

Net cash from (used in) operating activities 2,799,368 2,389,577

Other payments to acquire equity or debt securities belonging to other entities (181,839,092) (303,352,361)

Loans to related parties (63,578,368) (116,258,175)

Receipt from related parties 91,327,183 133,740,243

Sale (acquisition) of property, plant and equipment (374,419) (99,549)

Other receipts to acquire equity or debt securities belonging to other entities 180,692,958 323,797,214

Interest received 43,421 246,925

Net cash from (used in) investing activities 26,271,683 38,074,297

Proceeds from issuance of other equity securities - -

Proceeds from long-term loans - -

Proceeds from short-term loans - -

Total proceeds from loans - -

Loans from related parties - -

Repayment of loans (19,951,641) (24,993,321)

Interest paid (13,342,711) (19,047,840)

Other cash inflows (outflows) - -

Net cash from (used in) financing activities (33,294,352) (44,041,161)

Net increase (decrease) in cash and cash equivalents before changes in exchange rate (4,223,301) (3,577,287)

Effect of movements in exchange rate on cash held - 6,578

Net increase (decrease) in cash and cash equivalents (4,223,301) (3,570,709)

Cash and Cash Equivalents at January 1 6 7,830,565 11,401,274

Cash and cash equivalents at December 31 6 3,607,264 7,830,565

1

INVERSIONES ALSACIA S.A.AND SUBSIDIARY

NOTES TO THE CONSOLIDATES FINANCIAL STATEMENTS

NOTE 1 – REPORTING ENTITY

The parent, Inversiones Alsacia S.A., was recorded on January 27, 2005 in the securities register of the

Chilean Superintendence of Securities and Insurance (Superintendencia de Valores y Seguros de Chile,

SVS) under No.883, as part of a bidding process for the concession of the business unit Troncal No.1 of

Transantiago of the Chilean Ministry of Transport and Telecommunications.

As a result of Law No.20.382 dated October 2009, the Company’s registration under No.883 of the securities register was cancelled and the Company became a party of the reporting entities under No.126 on May 9, 2010.

Inversiones Alsacia S.A. was incorporated as a closely held corporation via public deed dated November

27, 2004; this company is engaged mainly on providing passenger public transport services in the

tendered roads of Santiago de Chile as well as any other activity related to this business purpose.

At the Shareholders meeting held on December 9, 2004, it was agreed to extend the Company’s line of

business to static and dynamic advertising activities through the use of advertising zones in buses and

other services related to its main line of business.

The Company’s registered address is Santa Clara No.555, Huechuraba, Santiago, Chile.

The total term of the concession is 156 months.

In conformity with its by-laws, the Company’s share capital amounts to ten billon five hundred sixty-six

million seventy-four thousands pesos (ThCh$10,566,074) which is divided into thirty six thousand five

hundred and thirty five same series shares (36,535) with no par value. The Company’s shares are

distributed as follows:

Shareholder Paid

Shares Ownership percentage

Carlos Ríos Velilla

Global Public Services S.A.

1

36,534

0.003%

99.997%

Total 36,535 100%

Inversiones Alsacia S.A. is controlled by Global Public Services S.A. which directly owns 99.997% of shares with voting rights. Global Public Services S.A. is a closely held corporation incorporated in the Republic of Panama and is the group’s ultimate parent.

2

The Chilean State decided to carry out an ambitious plan to modernize the passenger public transport in

the city of Santiago. This gave birth to Transantiago, a program sponsored by the Chilean Government

which is intended to implement a new, modern, efficient and integrated public transport service with high

quality for all of its users.

For these purposes the Chilean Government set up a bidding process which involved, among other

things, restructuring existing bus routes and dividing roads into two: main and local services. Under this

scenario, Inversiones Alsacia S.A. was created to be part of the bidding process and was awarded the

operation of Troncal No.1, one of the main roads going through Santiago.

On October 2, 2005, the Company started to provide passenger public transport services in relation to the

business unit Troncal No.1 of Transantiago; this involved the operation of 228 buses at the beginning of

the transition stage up to a total of 533 buses before the beginning of the normal service stage.

The normal service stage began on February 10, 2007 involving a significant change in the citizenship’s

way of transport and, as a result, an adaptation process on the part of all agents involved in the system

which was expected to last through 2007. By the end of 2007, Inversiones Alsacia S.A. already had a fleet

of 566 operating buses and a supplementary fleet of 52 buses.

In 2008, 40 additional B9 buses were incorporated to complete a fleet of 583 buses.

In 2010 the Company’s fleet was 627 buses. Services continue to adapt to user needs thus generating

new routes, extensions and modifications.

Concession agreement On January 28, 2005, Inversiones Alsacia S.A. signed a Concession Agreement for the use of roads located in the city of Santiago to provide paid passenger public transport services with the Ministry of Transport and Telecommunications of Chile (hereinafter also MTT). This agreement was signed as a result of the bidding process carried out by the MTT under Article No.30 of Law No.18.696. The Company presented an offer and was awarded the business unit Troncal No.1 in accordance with Resolution No.109 issued in 2005 by the Chilean Subsecretariat of Transport and published in the Official Gazette on January 14, 2005. This agreement became effective from the publication date of the Resolution in the Official Gazette and shall be in force up to the completion of the concession period. The duration of the concession period is 156 months as established in Article No.3.4.4.2.1 of the bidding basis. Under the Concession Agreement, the Company promised to pay UF615,010 as an operative technical reserve (RTO) which corresponds to an amount included in the tickets paid by users which is intended to cover temporary mismatches between the system’s revenues and expenses.

3

Inversiones Alsacia S.A. has fulfilled this obligation, which has been certified by the Ministry of Transport and Telecommunications of Chile by means of Official Letter No.2783 dated July 2, 2009. a) Modification to the Concession Agreement: a.1) On June 30, 2006, the following modifications were made to the Concession Agreement: i) The initial date of the normal service stage is February 10, 2007. ii) RTO payments are as follows:

Installment 2 UF191,309 Payable on July 1, 2007. Installment 3 UF170,836 Payable on July 1, 2008.

iii) Elimination of the payment of $16 per ticket acquired from the Administrador Financiero del

Transantiago (hereinafter AFT) related to the contribution to the two transitory account of Transantiago from July 1, 2006 to December 31, 2006.

iv) On the date of initiation of the stage II at the latest, the operator shall confirm to the MTT that it has

obtained the construction permits for the different terminals. This term shall not be extended and, in addition, within the fifteen days following its completion, the operator shall provide the MTT a gantt letter or schedule containing the main works to be built or implemented in each terminal. Also, 120 days after the start up of the normal service stage at the latest, the operator shall confirm the MTT it has obtained the authorization to operate for all terminals.

v) On June 30, 2006, the AFT signed a promissory note for UF221,208 in favor of the Company; this

promissory note matures on October 31, 2009. UF200,000 were disposed of in January 2007 and the remaining balance of UF21,208 accrues interest on a daily basis at a fixed rate of 3.56 per year.

a.2) During February 2007, the Company signed with the MTT a modification to the Concession

Agreement. The main aspects related to this modification are as follows: i) For the period from February 10, 2007 and May 5, 2007, minimum income is guaranteed based on

the referential demand which has replaced the validation of users. ii) An increase in the fleet has been established for the beginning of the normal service stage as well

as the associated payment. iii) The installment of the RTO which matures on February 10, 2007 shall be paid in 3 installments:

55% on March 10; 22.5% on April 10; and 22.5% on May 10, 2007. iv) A procedure to govern the situation of terminals and deposits related to the additional transitory

fleet has been established.

4

a.3) On May 9, 2007, the Company signed a modification to the Concession Agreement and on June 4, 2007 it also signed an addendum to the modification with the purpose of establishing that the Company’s revenue for the period from May 6 to June 5, 2007 shall correspond to the difference between 100% of the base referential demand and the payment per transported passenger adjusted in conformity with the bidding basis.

a.4) On June 29, 2007, the Company signed one modification and two addendums to the Concession

Agreement with the main purpose of: i) changing the payment date for the Company’s revenue from July 10 to July 12; ii) deferring the payment of the RTO from July 1 to July 16, 2007 and; iii) regulating the payment method in buses without validation equipment. a.5) On July 17 and August 17, 2007, the Company signed two new addendums with the MTT regarding

the modification made on June 29; as a result, the payment date of the RTO was postponed to August 17 and October 24, respectively.

a.6) On July 19, 2007, the Company and the MTT signed an agreement protocol for making

modifications to the Concession Agreement; such modification was made on November 9, 2007. They also signed an addendum to this modification on December 10 and 28, 2007 and April 21, June 30 and July 17, 2008, respectively, with the purpose of modifying service hours; regulating the payment method in buses without validation equipment; postponing the payment of the RTO; incorporating the quota capacity per hour index (ICPH) and the regularity compliance index (ICR); incorporating the additional and/or supplementary fleet to the base fleet and increasing the bus fleet which on a transitional basis can be used buses.

a.7) On May 9, 2007, the Company signed with the AFT a modification to the collection and custody

contractual agreement. a.8) On March 7, 2008, the Company and the AFT signed a supplement to the rendering of services and

technological equipment agreement which establishes the formula to estimate the payments to be made by the licensees for the systems and services provided by the AFT up to that date; determine the general operation and remuneration conditions related to the equipment of the paid zones; adopt improvements intended to increase the current service levels and functions and; determine the transitory and permanent conditions for the equipment, systems and services to be provided by the AFT and the remuneration conditions related to such services.

a.9) On March 18, 2008, the Company and the AFT signed a modification to the collection and custody

contractual agreement with the purpose of authorizing the AFT to receive the payment or reimbursement of the costs, expenses and commissions related to obtaining loans.

a.10) On July 3, 2009, the Company and the MTT signed a modification to the Concession Agreement

related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses; this modification was intended to formalize the extension of the concession period awarded to the Company from 48 months to 156 months. This was communicated as a significant event to the Chilean Superintendence of Securities and Insurance.

5

a.11) On January 29, 2010, the Company and the MTT signed an agreement protocol to make a modification to the Concession Agreement related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses, which was signed by the Company on March 5, 2010; the main purposes of this modification were as follows:

- Establishing a procedure to change routes considering public interest zones, common wealth and with the purpose of ensuring the continuity and proper coverage of the public transport services and a method for compensating the demand.

- To verify the effective, correct and proper rendering of the transport services, a measurement shall be made based on the parameters of the capacity per hour per kilometers (QKHCR), Frequency Ratio (ICF) and Regularity Ratio (ICR).

- Incorporating a new methodology to estimate revenue.

a.12) On July 30, 2010, the Company and the MTT signed an addendum to the Concession Agreement related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses, which includes the following main modifications:

- Increasing the fleet by 461 capacities.

- Buses of the supplementary fleet shall become part of the base fleet provided that they correspond to standard Transantiago buses with technology Euro III or EPA98 diesel or higher, and have a system for the subsequent treatment of emissions that allows reducing them at least by 80%.

- Considering the increase in the base fleet, the Company’s referential demand was adjusted to the requirements of rendering of services for the year-end from August to December 2010.

a.13) On December 31, 2010, the Company and the MTT signed an addendum to the Concession Agreement related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses; the main modification corresponds to the setting of a referential demand for the year-end from January 1, 2011 to the date in which the offer by Metro S.A. related to the extension of line No.1 to the Maipú square increases.

New concession agreement

During 2012, the Concession Agreement related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses, which was signed with the Ministry of Transport and Telecommunications was replaced by a new agreement which was signed by the parties on December 22, 2011 and became effective on May 1, 2012. As part of the agreements established as part of the new agreement, the Government and the Company agreed to an amount of ThCh$9,090,243 (before discounts), which relates to an indemnity for early termination that is estimated based on the difference resulting from the application of the revenue formula of the agreement in force up to that date and the revenue formula established in the new signed agreement. This indemnity was received on April 30, 2012.

6

On April 17, 2012, the Chilean Controllership Office became informed of Resolution No.258 issued by the MTT; this resolution, which approves the mentioned indemnity, terminates the Concession Agreement and approves the New Concession Agreement. The payment of the indemnity was recognized as deferred revenue which is amortized on a straight-line basis in operating income up to the completion of the concession agreement in force (October 2018). Outstanding invoices of ThCh$2,272,648 (net of provision) which were classified as Trade and other receivables were reduced from the amount of the indemnity. On December 12, 2013, the Chilean Controllership Office became informed of Resolution No.183 issued by the Ministry of Transport and Telecommunications which approves the addendum to the New Concession Agreement related to the use of the roads of Santiago to provide paid public passenger transport services by means of buses signed on August 27, 2013. This modification changes the “Technical Specifications Business Unit No.4” by increasing the PPT0 Parameter to $475.25 for the year-end from December 14, 2012 to April 29, 2013, and subsequently to $476.29 starting from April 30, 2013.

On January 30, 2014 the Chilean Controllership Office received Resolution No.191 issued by the Ministry of Chilean Transport and Telecommunications approving the Ad-referendum concession contract for the use of roads for the paid public urban transport of passengers using buses on August 23, 2013. Such amendment includes the following changes: a) Incentives of up to 15% on the price paid per kilometer of the diesel for the implementation of buses with CNG, Electric or Hybrid Technology. b) There shall be no review of PPT by AIPK mechanism, if the CIFO for the previous 24 months is lower than 97%. c) Appendixes 1, 3, 4, 6 and 7 was modified, modifying the fines and discounts of ICF and ICR applied for each level. On April 7, 2014, the Chilean Controllership Office received Resolution No.97 issued by the Chilean Ministry of Transport and Telecommunications of Chile approving the Ad-referendum to the concession contract for the use of roads for the paid public urban transport of passengers using buses on February 17, 2014. Such amendment, changes the “Business Unit No.1 Technical Sheet” increasing the PPT0 Parameter from its original value of Ch$476.73 to Ch$493.73 starting on January 16, 2014. In addition, this amendment includes the requirement to add 20 new buses B2.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been used in the preparation of these consolidated financial statements and have been applied consistently to all periods presented in these financial statements.

2.1 Basis of preparation

The consolidated financial statements of Inversiones Alsancia S.A. and subsidiary at December 31, 2014 and 2013, have been prepared in conformity with the standards issued by the Chilean Superintendence of Securities and Insurance which completely adopt the International Financial Reporting Standards (hereinafter IFRS) issued by the International Accounting Standards Board (IASB). Notwithstanding the above, there are two issues that have generated special instructions issued by the Chilean Superintendence of Securities and Insurance (SVS), as detailed below: (1) The accounting treatment of the indemnity agreed and paid by the Ministry of Transport and

Telecommunications of Chile due to the early termination of the Concession Agreement, entered into in December, 2011 has been recorded and presented in these financial statements as required by the SVS in its Official Letter No.17.967 dated August 13, 2013 and Official Letter No.6.484 dated March 7, 2014.

7

(2) The effects from the recognition of deferred taxes established in Circular No.856 dated October 17, 2014. Such Circular establishes a mandatory single-time exception to the framework for preparing and presenting financial information. Such Circular provides instructions to the regulated entities to “account for those differences in deferred tax assets and liabilities generated as direct effect of an increase in the corporate income tax rate introduced by Law No.20.780 in the related year against equity.” Consequently, these results in a change in the framework for preparing and presenting financial information adopted prior to the issuance of such Circular, as IFRS require full, explicit and unreserved adoption.

The consolidated financial statements reflect fairly the Company’s financial position and equity at

December 31, 2014 and 2013 as well as the results of its consolidated operations, changes in equity and

cash flows for the year then ended.

The consolidated classified statement of financial position at December 31, 2014 as well as the

accompanying notes are presented on a comparative basis to the balances at December 31, 2013; the

consolidated statement of comprehensive income per function, consolidated statement of cash flows and

the consolidated statement of changes in equity are presented for the year ended at December 31, 2014

and 2013.

The consolidated financial statements of Inversiones Alsacia S.A. and subsidiary have been prepared on

a going concern basis.

Inversiones Alsacia S.A. is the issuer of a bond issued in 2011 in New York (USA) under regulation 144-A;

this bond represents the Company’s main financial obligation with third parties. The contract related to the issuance of this bond establishes an administration of the cash flows from Alsacia and Express de Santiago Uno S.A. centralized in Alsacia. Section No.4 of this contract establishes that all amounts collected by Alsacia and Express shall be received in a single account named “Revenue Account” which is managed by the Company. Funds collected in the Revenue Account are subsequently distributed to both companies to cover expenses. In this way, the funds belonging to one company can be used to cover the other’s expenses if required. This is stipulated in section 4.02 d) (iv) which states that the funds of the O&M Accounts can be transferred between the companies based on the Licensees.

8

Accordingly, the cash positions at the reporting date can be distributed based on the needs existing at the specific time. Therefore, to gain a better understanding of the Company’s consolidated financial statements and avoid inappropriate interpretations, these consolidated financial statements should be read and analyzed along with the financial statements of the related parte Express de Santiago Uno S.A. The information contained in these consolidated financial statements is the responsibility of the Board of Directors of Inversiones Alsacia S.A. which approved such consolidated financial statements in March 30, 2015.

The preparation of the consolidated financial statements in conformity with the standards and instructions of the Chilean Superintendence of Securities and Insurance requires the use of certain accounting estimates and criteria. It also requires management to apply judgment in the application of accounting policies. Note 4 includes the areas involving a higher degree of judgment and complexity in the application of criteria or those areas in which assumptions and estimates are significant for the preparation of the consolidated financial statements. 2.2 New accounting pronouncements

New accounting standards The following new standards, amendments and interpretations have been issued but are not yet effective:

New IFRS Effective date

IFRS 9, Financial Instruments Annual periods beginning on or after January 1, 2018. Early adoption is permitted.

IFRS 14 Regulatory Deferral Accounts Annual periods beginning on or after January 1, 2016. Early adoption is permitted.

IFRS 15 Revenue from Contracts with Customers Annual periods beginning on or after January 1, 2017. Early adoption is permitted.

IFRS Amendments

IAS 19, Employee Benefits – Employee Contributions Annual periods beginning on or after July 1, 2014. (January 1, 2015). Early adoption is permitted.

IAS 16, Property, plant and equipment, and IAS 38, Intangible Assets: Clarification of acceptable methods of depreciation and amortization

Annual periods beginning on or after January 1, 2016. Early adoption is permitted.

IFRS 10, Consolidated Financial Statements, and IAS 28, Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

Annual periods beginning on or after January 1, 2016. Early adoption is permitted.

IAS 27, Separate Financial Statements , Equity Method

in Separate Financial Statements. Annual periods beginning on or after January 1, 2016. Early adoption is permitted.

9

IFRS 9, Financial Instruments – Amendments and Improvements IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting. On November 19, 2013, the IASB issued a new document that expands and amends this and other related standards, Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39. This document includes the new hedge accounting model, allows the early adoption of the requirement of presenting changes in value associated with own credit risk in liabilities designated at fair value through profit or loss, which are recognized in Other Comprehensive Income. On July 24, 2014, the IASB issued the fourth and last version of its ninth standard on financial instruments, IFRS 9 Financial Instruments. The new standard includes revised guidance on the classification and measurement of financial assets, including a new expected credit loss model for calculating impairment, and supplements the new general hedge accounting requirements published in 2013. The effective date corresponds to Financial Statements issued for periods beginning on or after January 1, 2018. Early adoption is permitted. This standard is of mandatory early adoption and implementation in Chile for stock brokers and product stock brokers, in accordance with Circular No.615 issued by the Chilean Superintendency of Securities and Insurance, dated June 10, 2010. Management believes it will apply this Standard on the date in which its first-time adoption is effectively determined by the IASB, and has not had the opportunity to consider the possible impact of the adoption of this Standard and its amendments. Amendment to IAS 16, Property, plant and equipment, and IAS 38, Intangible assets: Clarification of acceptable methods of depreciation and amortization. In May 2014, the IASB issued this amendment that introduces a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriate. This presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible assets are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue – e.g. the right to operate a toll road until the operator has collected a sum of 10 million. Likewise, the amendment to IAS 16 explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. This is because such methods reflect factors other than the consumption of economic benefits embodied in the asset – e-g. changes in sales volumes and prices. Amendments are effective for periods beginning on or after January 1, 2016, and applied on a retrospective basis. Early adoption is permitted. The management has not the opportunity to consider the potential impact of the adoption of these amendments.

10

Amendment to IFRS 10, Consolidated Financial Statement, and IAS 28, Investments in associates and joint ventures: Sale or contribution of assets between an investor and its associate or joint venture. On September 11, 2014, the IASB issued this amendment that requires that when transferring subsidiaries to an associate or joint venture, the total gain should be recognized when assets transferred meet the definition of “business” under IFRS 3 Business Combinations. This amendment establishes a strong pressure on the definition of “business” for recognition in profit or loss. Also, it introduces new and unexpected recognition for transactions that partially consider maintenance in assets that are not businesses. The amendments will be effective beginning on or after January 1, 2016 and are applicable prospectively. Early adoption is permitted. Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

2.3 Basis of consolidation

a) Subsidiaries

A subsidiary correspond to an entity in which the investor (parent) has existing rights that give it the current ability to direct the relevant activities, i.e., the activities that significantly affect the investee’s returns. Power arises from rights. Sometimes assessing power is straightforward such as when power over an investee is obtained directly and solely from the voting rights granted by equity instruments such as shares, and can be assessed by considering the voting rights from those shareholdings. In other cases, the assessment will be more complex and require more than one factor to be considered, for example when power results from one or more contractual arrangements.

11

The subsidiary Lorena S.P.A. owns a bus depot used by the Parent and is the guarantor of the loan granted to the Parent by Banco Internacional de Chile and bond 144-A. The table below includes the interest of Inversiones Alsacia S.A. on its subsidiary Inversiones S.P.A.: December 31, 2014

Subsidiary ID

Subsidiary name

Country of origin of the subsidiary

Functional currency

Direct ownership percentage

%

Indirect ownership percentage

%

Total ownership percentage

% 76.130.466-6 Inversiones Lorena S.P.A Chile Chilean pesos 100% 0,00% 100%

As of December 31, 2013

Subsidiary ID

Subsidiary name

Country of origin of the subsidiary

Functional currency

Direct ownership percentage

%

Indirect ownership percentage

%

Total ownership percentage

% 76.130.466-6 Inversiones Lorena S.P.A Chile Chilean pesos 100% 0,00% 100%

2.4 Transactions in foreign currency a) Presentation and functional currency Items included in the consolidated financial statements of Inversiones Alsacia S.A. and subsidiary are measured using the currency of the primary economic environment in which an entity operates (functional currency). The functional currency of Inversiones Alsacia S.A. and subsidiary is the Chilean peso, which is also the presentation currency of the consolidated financial statements. b) Balances and transactions Transactions in foreign currency and Unidad de Fomento are translated at the exchange rate of the related currency or Unidad de Fomento at the date when the transaction meets the requirements for initial recognition. Monetary assets and liabilities expressed in currencies or Unidad de Fomento other than the functional currency are translated into Chilean pesos at the year-end exchange rate. Foreign exchange gains and losses resulting from the settlement of transactions in foreign currency or the measurement of monetary assets and liabilities in foreign currency are recognized in profit or loss in the caption foreign currency gain (loss). Gains and losses arising from the translation of assets and liabilities in Unidad de Fomento are recognized in profit or loss within the caption gain (loss) from assets and liabilities in Unidad de Fomento.

12

c) Translation of foreign currency and Unidad de Fomento At December 31, 2014 and 2013, exchange rates are as follows:

Currency

December 31 2014

December 31 2013

United States dollar US$ 606.75 524.61

Unidad de Fomento Colombian peso

UF CO$

24,627.10 0.25

23,309.56 0.27

2.5 Property, plant and equipment

The main property, plant and equipment of Inversiones Alsacia S.A. and subsidiary correspond to buses for public passenger transport. a) Recognition and measurement

Items of property, plant and equipment are measure at cost less accumulated depreciation and accumulated impairment losses. New property, plant and equipment are recognized at acquisition cost. Acquisitions in a currency other than the functional currency are translated at the exchange rate on the date of the acquisition. Subsequent expenditure (replacement of components, improvements and extensions) are included in the initial cost of the asset or recognized as a separate asset only when it is probable that the future economic benefits associated with the item of property, plant and equipment will flow to the Group and the cost of the item can be estimated reliably. The cost of the replaced component is derecognized. Other repair and maintenance expenditure are expensed as incurred. .

13

Ongoing repairs and overhauls are expensed as incurred unlike the replacement of significant parts or strategic spare parts which are deemed to be improvements and are capitalized and depreciated over the remaining life of the assets under the component approach. Gains or losses from the sale of property, plant and equipment are estimated by comparing the amount received from the sale to the carrying amount of the asset and are recognized in comprehensive income per function. b) Depreciation Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. c) Estimated useful lives The estimated useful lives per class of asset are as follows:

Minimum useful life in year

Maximum useful life in year

Buildings 10 40

Plant and equipment 5 10

Information technology equipment 3 6

Fixed facilities and fixtures 5 10

Motor vehicles 5 11

Other property, plant and equipment 1 10

The residual values, depreciation method and useful lives of items of property, plant and equipment at each reporting date are reviewed annually and adjusted if required. 2.6 Intangible assets other than goodwill a) Computer program licenses Acquired licenses related to computer programs are capitalized based on their acquisition cost and the costs incurred in preparing them for the use of the specific program. These costs are amortized over their estimated useful lives of 5 years. Expenses related to the maintenance of computer programs are recognized as expenses as incurred. Costs directly related to the production of unique and identifiable computer programs controlled by Inversiones Alsacia S.A. and subsidiary which are likely to generate economic benefits higher than costs for more than one year are recognized as intangible assets. Direct costs include the expenses related to the personnel developing the computer programs and any other expense related to their development and maintenance.

14

b) Operative technical reserve The operative technical reserve is defined as a provision included in the rate paid by users intended to cover possible temporary mismatches between the revenues and expenses of the Transantiago passenger transport system. Amounts paid and owed to the Transantiago Financial Administrator (AFT) in relation to the operative technical reserve for the Troncal No.1 business unit are recorded as a deferred tax that is amortized against operating profit during the operation period of the concession based on the projected revenue curve to be obtained from the rendering of transport services. 2.7 Impairment loss on non-financial assets The carrying amounts of the Company’s non-financial assets, other than deferred taxes, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell and use value. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The Company has only one cash generating unit named “Transport Services”. An impairment loss is recognized if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. Impairment losses recognized in prior years are assessed at each reporting date for any indication that the loss has decreased or disappeared. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized. 2.8 Financial assets Inversiones Alsacia S.A. and subsidiary classify its financial assets under the following categories: at fair value through profit or loss, loans and receivables, financial assets held to maturity and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at the date of initial recognition.

15

2.8.1 Classification of financial assets (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit and loss are financial assets held for trading. Financial assets are classified as available for sale if acquired principally for the purpose of selling them in the short-term. Assets classified as at fair value through profit or loss are classified as current assets. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognized within current assets, except for those with maturities over 12 months from the reporting date, which are classified as non-current assets. Loans and receivables are recorded within trade and other receivables. They are initially recognized at fair value recognizing a financial result for the period between their initial recognition and subsequent measurement. In the specific case of trade and other receivables the Company used the nominal value based on its short collection periods. Inversiones Alsacia S.A. and subsidiary assess at each reporting date whether there is objective evidence that a financial asset or group of financial assets may have experienced impairment losses. (c) Financial assets held to maturity Financial assets held to maturity are financial assets with fixed or determinable payment and fixed maturity that the Company has the positive intent and ability to hold to maturity. Should the Company sell a non-insignificant amount of financial assets held to maturity, the whole category would be classified as available for sales. Financial assets held to maturity are classified as non-current except for those maturing within 12 months from the reporting date which are classified as current. (d) Financial assets available for sale Available-for-sale financial assets are non-derivative financial assets with fixed or determinable payment and fixed maturity that are designated as available for sale or are not classified in any of the above categories of financial assets. Financial assets available for sale are recorded within current assets unless management has the intent of disposing of the investment during the months after the reporting date. 2.8.2 Recognition and measurement of financial assets Acquisitions and disposals of financial assets are recognized initially on the trade date, which is the date that Inversiones Alsacia S.A. and subsidiary commits to acquire or sell the asset. (a) Initial recognition Financial assets are initially recognized at fair value plus transaction costs in the case of financial assets not recorded at fair value through profit or loss. Financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are recorded in profit or loss.

16

(b) Subsequent measurement Financial assets available for sale and financial assets at fair value through profit or loss are subsequently measured at fair value (with a balancing entry in comprehensive income and profit and loss, respectively). Loans and receivables are measured at amortized cost using the effective interest method. Financial assets are derecognized when the rights to receive the cash flows from the investments have expired or have been transferred and Inversiones Alsacia S.A. and subsidiary have transferred substantially all of the risks and rewards of ownership. Inversiones Alsacia S.A. and subsidiary assess at each reporting date whether there is objective evidence that a financial asset or group of financial assets may have experienced impairment losses. 2.9 Derivatives and hedging activities Derivatives are initially recognized at their fair value on the date the derivative agreement was entered into and are subsequently remeasured at fair value. The method used to recognize the resulting gain or loss depends on whether the derivative has been designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain derivatives as not qualifying for hedge accounting. Such derivatives are classified as other financial assets or liabilities. Changes in the fair value of any derivative not designated as a hedging derivative are recognized immediately in the consolidated statement of profit or loss within foreign currency translation and finance costs based on their nature. 2.10 Inventories Inventories detailed in note 11 are measured at the lower of cost or net realizable value. Cost is determined using the weighted average method. The net realizable value is the sale price estimated in the normal course of business less variable cost to sell. The Company accrues an estimate for obsolescence in relation to spare parts not to be used during the following 6 months and spare parts with no turnover for a period over 2 years. 2.11 Trade and other receivables Trade receivables are recognized at their nominal amount. In addition, doubtful accounts are reviewed based on an objective review of all outstanding balances at each reporting date. Impairment losses related to doubtful accounts are recognized in the consolidated statement of comprehensive income when they arise. Trade receivables are recorded within current assets within trade and other receivables if they mature within 12 months from the reporting date.

17

2.12 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and in bank, time deposits and other financial investments (highly liquid marketable securities) with maturities of three months or less from the acquisition date. Cash and cash equivalents also includes investments related to cash management such as buy-back and reverse repurchase agreements maturing within three months or less from the acquisition date. Bank overdrafts used are recorded within other financial liabilities. 2.13 Share capital Share capital is represented by one class of common stock. Legal minimum dividends for common stock are recognized as a reduction in equity as accrued. 2.14 Trade and other payables Trade and other payables are initially measured at fair value and subsequently at amortized cost using the effective interest method when they mature in a period over 90 days. Inversiones Alsacia S.A. and subsidiary recognize employee vacations on an accrual basis at their nominal amount. The resulting amounts are recorded as current trade and other payables. 2.15 Other financial liabilities Obligations with banks and financial institutions are initially measured at fair value less transaction costs. Subsequently, they are measured at amortized cost and any difference between the funds obtained (net of the cost incurred for obtaining them) and the repayment amount is recognized in profit or loss over the term of the debt using the effective interest method. The effective interest method consists of applying the market rate to debts with similar characteristics (net of the costs incurred for obtaining them). Financial liabilities are classified within current and non-current liabilities based on their contractual maturities. 2.16 Income taxes and deferred taxes On September 29, 2014, the Tax Reform Law was enacted, which, among other aspects, defines the default tax system applicable to the Company, the corporate income tax rate that will be gradually applied to companies between 2014 and 2018 and allows that companies may elect from one of two tax systems established therein: the attributed income system or the partially-integrated system, which results in entities being subject to different tax rates starting from 2017.

18

The attributed income system is applicable to individual entrepreneurs, single-owner limited liability companies, communities and partnerships when formed exclusively by natural persons domiciled or residents in Chile, and the Partially-Integrated regime is applicable to the remaining taxpayers, such as openly and closely-held shareholders’ corporations, joint stock companies or partnerships whose owners are not solely natural persons domiciled or residents in Chile. Likewise, taxpayers may opt for a change in the tax system to use a system other than the default system within the last three months of the previous commercial year (2016) through an approval by the shareholders at an Extraordinary Shareholders’ Meeting with a quorum of at least two thirds of voting-right shares issued, and it will become effective through submission of the statement signed by the Company, and the minutes, drafted as public deed, submitted by the Company. Taxpayers are subject to the tax system that was assigned to them during at least five consecutive commercial years. Subsequent to such period, they will be able to change the tax system, and will be subject to such new system for at least five consecutive years. The default tax system applicable to the Company starting from January 1, 2017 is the partially-integrated system.

Income tax expense for the period includes the taxes of Inversiones Alsacia S.A., and subsidiary, based on the net taxable income for the period, including prior year tax adjustments and changes in deferred taxes. Deferred income tax is calculated, in respect of temporary differences between the carrying amounts of assets and liabilities and the amounts used for taxation purposes.

Deferred tax is determined by using tax rates effective in Chile at the reporting date that is expected to be applied when the related deferred tax asset is realized or deferred tax liability is settled the current tax rates are detailed below:

Year Tax rate

2014 21.0%

2015 22.5%

2016 24.0%

2017 25.5%

2018 27.0%

As a result of the instructions issued by the Chilean Superintendence of Securities and Insurance in its Circular No. 856 of October 17, 2014, differences in deferred tax assets and liabilities generated as a direct effect of the increase in the corporate income tax rate required by Law No. 20.780 as of September 30, 2014, were recognized for one time only in equity in the caption Retained earnings (accumulated deficit). Likewise, the effects of the measurement of deferred taxes arising subsequent to that date are recognized in profit or loss for the year in conformity with the criteria indicated above.

Deferred income tax assets are recognized to the extent that it is probable that the Group entities will obtain sufficient future taxable income available against which might offset other differences.

19

2.17 Provisions

Inversiones Alsacia S.A. and its subsidiary recognize a provision when they have a contractual obligation and an obligation has resulted from a past event. Provisions for onerous contracts, litigation and other contingencies are recognized when:

(i) As a result of a past event Inversiones Alsacia S.A. and subsidiary have a present legal or constructive obligation;

(ii) An outflow of economic benefits will be required to settle the obligation; and (iii) The amount of the obligation can be estimated reliably.

Provisions are measured at the present value of the disbursements required to settle the obligation using Inversiones Alsacia S.A. and subsidiary's best estimate. The discount rate used to determine the present value reflects the current market assessments of the time value of money and the risks specific to the liability.

2.18 Revenue recognition

a) Revenue from transport services

Revenue from the rendering of transport services includes the fair value of the consideration received or paid for the rendering of the passenger transport service in the course of ordinary activities.

The Company recognizes the revenue from transport services once the service has been provided.

b) Revenue from advertising

Revenue from advertising is stated net of the tax on sales, returns, rebates and discounts (if any) and after eliminating sales within the group.

Inversiones Alsacia S.A. and subsidiary recognize the revenue from advertising activities when they can be estimated reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the specific conditions for each of the Company’s activities are met. Revenue from the sale of advertising services are recognized when the service has been provided. A service is deemed to have been rendered when it is accepted by the client.

c) Revenue from indemnity for change in concession agreement

The revenue from the change in concession agreement is recognized on a straight-line basis up to the termination date of the agreement (October 2018) in conformity with the instructions contained in Letter No.6484 issued on March 7, 2014 by the Chilean Superintendence of Securities and Insurance.

20

2.19 Leases

Leases as lessee – finance leases

Inversiones Alsacia S.A. and subsidiary lease property, plant and equipment. Assets held by the Company under leases which transfer to the Company substantially all of the risks and rewards incidental to ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments. Minimum lease payments made under finance leases are allocated between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Assets acquired under finance leases are depreciated over the lower of their useful lives of the lease term. Leases as lessor – operating lease Leases in which the lessor retains a significant portion of the risks and rewards incidental to ownership are classified as operating leases. Payments for operating leases (net of any incentive received from the lessor) are allocated to profit or loss on a straight-line basis over the term of the lease.

2.20 Overhaul

Costs incurred in major overhaul that involves extending the useful life of a tapped good (overhauls) are capitalized and depreciated until de moment of the next overhaul. The depreciation rate is determined using a technical basis based on use expressed in cycles and kilometers.

Non-programmed as well as minor overhauls are expenses as incurred.

2.21 Dividend policy

In conformity with the Corporate Act (Ley de Sociedades Anónimas) and unless otherwise unanimously agreed by shareholders, the Company is obligated to pay a mandatory minimum dividend equivalent to 30% of the profit for the period.

The obligation related to the payment of dividends to shareholders is recognized at the reporting date as a decrease in equity.

2.22 Non-current assets (or disposal groups) held for sale

Non-current assets (or disposal groups) classified as assets held for sale are recognized at the lower of their carrying amount or fair value less cost to sell.

2.23 Other non-financial liabilities

The deferred revenue related to the indemnity received due to the change in the concession agreement were recorded on a straight-line basis within profit from continuing operations up to the end of the concession in October 2018, as required in Letter No.6484 issued on March 7, 2014 by the Chilean Superintendence of Securities and Insurance.

21

2.24 Environment

Disbursements related to environmental protection are expensed as incurred.

NOTE 3 – FINANCIAL RISK MANAGEMENT

3.1 Concentration and management of credit risk

Approximately 99% of the Company’s revenue results from the services provided to the Chilean Government as per the concession agreement in effect with the Ministry of Transport and Telecommunications de Chile. The Ministry of Transport and Telecommunications in turn delegates the payment function to the Transantiago Financial Administrator. The way in which such revenue is determined is included in the concession agreement and consists mainly of the following:

(i) The amount of validations made by passengers in the buses operated by the Company; and (ii) The number of kilometers run by buses.

The uncollectible risk is very low as the final client is the MTT, which pays for the services received within a 15-day period.

In addition, approximately 0.7% of revenue relates to the sale of advertising space. Such customers have demonstrated a good payment behavior and the related sales are made under agreements with customers with good commercial background. 3.2 Exchange risk management As a result of the placement of bonds in the amount of US$464,000,000 made in February 2011, there was a currency mismatch in the balance sheet as liabilities expressed in United States dollars are higher than assets expressed in the same currency. To address this situation, the Company entered into exchange rate option contracts (Chilean peso/ United States dollar) for the total of such liabilities; these option contracts protect the Company against a depreciation of the Chilean peso compared to the United States dollar (from $585 to $750 per US$1). In August 2014, these contracts were finalized, as part of the process of restructuring bonds, mentioned in Note 17. The Company is evaluating the program structure to hedge foreign currency mismatches, since the Company’s policy will continue to try to maintain an adequate coverage of potential currency mismatches.

Approximately 10.5% of the Company’s revenue is directly adjusted by changes in the exchange rate for the United States dollar.

Assets and liabilities per currency at each reporting date are as follows:

In thousands of Chilean pesos December 31,

2014 December 31,

2013

ASSETS 199,295,146 209,901,260

United States dollars 123,828,177 107,494,013

Chilean pesos 75,466,969 102,407,247

LIABILITIES AND EQUITY 244,988,503 209,901,260


Chilean pesos 24,381,940 3,591,279

NET LIABILITIES IN UNITED STATES DOLLARS 96,778,386 98,815,968

OPTION CONTRACTS (*) - 206,309,981

(*) Exchange rate from $585 to $750 per US$1.

22

At December 31, 2014, net liabilities in United States dollars are similar to the net liabilities at December 31, 2013, basically due to the debt restructuring performed by the Company.

Changes in the exchange rate affect the Company’s financial statements because its obligations are expressed in foreign currency and, therefore, changes, whether positive or negative are reflected in the foreign currency translation gain (loss) account in the statement of profit or loss which affects the Company’s equity but it does not directly affect cash flows. Note 31.2 includes a detail of assets and liabilities per currency.

For other price fluctuations, the Company has a natural coverage based on the indexation mechanism of the Concession Agreement which includes a mechanism related to the adjustment of revenue based on price changes in the main operating costs and supplies. This mechanism was designed from the early stages of the concession. At December 31, 2014, such indexes are as follows:

30.0% = Consumer price index (CPI) 23.4% = Labor cost index 29.2% = Diesel price 10.5% = Exchange rate Chilean Peso / US Dollar 6.9% = Tire and lubricant cost

At December 31, 2013, such indexes are as follows:

30.0% = Consumer price index (CPI) 23.4% = Labor cost index 29.2% = Diesel price 10.5% = Exchange rate Chilean Peso / US Dollar 6.9% = Tire and lubricant cost

As a result, the adjustment of revenue closely reflects the composition of costs. 3.3 Fuel price risk management

The revenue adjustment formula included in the Concession Agreement includes a variation in the price of diesel in Chilean pesos weighting it at 29.2%. The weighting of diesel in relation to total costs is approximately 4% lower than revenue. However, the adjustment formula provides high degree hedging against variations in the cost of fuel. Accordingly, price increases in Chile may result in an improvement in the Company’s or a decrease in operating profit. 3.4 Interest rate risk management The Company records almost no exposure to interest rate risk as its debts have a fixed interest rate up to 2018 and financial investments have a maturity under 180 days.

23

3.5 Liquidity risk The Company manages its liquidity risk by following conservative policies and meeting the conditions stipulated in the bond issuance contract. Under the Company’s policies, investments are made only in banks or institutions rated as AA or over and with maturities under 180 days. In relation to the bond issuance contract, the Company is obligated to maintain all the funds required to cover 15 days of operating expenses and 1 month of investment in major maintenance (overhauls). In addition, these agreements require the Company to maintain a responsible financial position and the Company is also subject to restrictions to perform investments in property, plant and equipment and pay dividends. The Company’s cash flow generation has been sufficient to meet its financial obligations. In addition, no significant investments have been made or are planned to be made in the medium term, with the exception of investments in overhauls on buses. Note 6 includes a detail of the Company’s financial investments.

NOTE 4 – SIGNIFICANT ACCOUNTING ESTIMATES AND CRITERIA

The Company’s accounting estimates and criteria are assessed on an ongoing basis and they are based on historical experience and other factors such as the probability of occurrence of future events which are considered reasonable under the circumstances. Inversiones Alsacia S.A., and subsidiary make investments and assumptions in relation to the future. The estimates and assumptions with a significant risk of causing a material adjustment to the balances of assets and liabilities in the future year-end are as follows: a) Useful life of plant and equipment The management of Inversiones Alsacia S.A., and subsidiary estimate the useful lives and related depreciation expense for its plan and equipment. Possible changes in estimates could arise as a result of technical innovation and actions taken by competitors in response to severe cycles in the sector. Management will increase the depreciation expense when the useful lives are lower than those previously estimated or will amortize technically obsolete or non-strategic assets that have been abandoned or sold. b) Litigation or contingencies The Company’s management is not aware of any contingencies other than those accrued for as having a high probability of loss. c) Operative technical reserve During the year the operative technical reserve is amortized based on the forecasted curve of revenue expected to be obtained from the rendering of transport services. The curve of revenue is the result of fixed monthly revenue plus variable income based on the projection of demand, payment index per transported passenger, rate indexation vectors, kilometers run and available quotas.

24

d) Deferred taxes Deferred tax assets and liabilities are recognized when temporary differences exist, except for the situations described in IAS 12. e) Impairment Financial assets A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset. An impairment loss with respect to a financial asset measured at amortized cost and investments in debt securities classified as available for sale is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses for an equity security available for sale are recognized as the accumulated difference between acquisition cost and fair value less any previously recognized impairment loss. All individually significant assets are assessed for specific impairment. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. All impairment losses are recognized in profit or loss. Accumulated impairment losses on available-for-sale financial assets previously recognized in equity are reclassified to profit or loss. An impairment loss is reversed only if it can be related objectively to an event occurring after it was recognized. For financial assets at amortized cost and financial assets available for sale which correspond to debt securities the reversal is recognized in profit or loss. Non-financial assets The carrying amounts of the Company’s non-financial assets, other than deferred taxes, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

25

An impairment loss is recognized if the carrying amount of the asset or CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. Impairment losses recognized in prior years are assessed at each reporting date for any indication that the loss has decreased or disappeared. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized. The Company’s results are projected using a model that considers estimates of fixed and variable income, direct costs of operations (salaries, fuel, bus maintenance expense and others), fixed depreciation and amortization expense, financial performance of investment and finance costs (mainly from interest related to debt contracts).

NOTE 5 – CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and in bank, time deposits and other financial investments with maturities of 90 days or less from the acquisition date. Cash and cash equivalents also includes investments related to cash management such overnight maturing within three months or less from the acquisition date.

At December 31, 2014 and 2013, cash and cash equivalents are as follows:

Classes of cash and cash equivalents Interest

rate Currency

December 31, December 31, 2014 2013

ThCh$ ThCh$

Cash on hand - Ch$ 7,604 8,955

Cash in bank - Ch$ 1,452,973 92,538

Mutual funds (1)

Ch$ 2,146,687 4,580,248

Time deposits (2) - US$ - 3,148,824

Total cash and cash equivalents -

3,607,264 7,830,565

(1) At December 31, 2014, mutual funds relate to 6,565.06 deposits in the “Money Market” fund with a

deposit value of $4,570.22, and 6,565.06 deposits in the “Ejecutiva” series fund with a deposit value of $1,766.37. At December 31, 2013, mutual funds relate to 2,686,709.0287 deposits in the “Ejecutiva” fund with a deposit value of $1,704.780.

26

(2) Time deposits were made in November and December 2013 and they mature within the term to be considered cash and cash equivalents:

Type of investment Bank Currency

Time deposit amount

US$

December 31, 2013 ThCh

Current

Time deposit Santander Chile US$ 1,000,000 524,735

Time deposit Crédito e Inversiones US$ 4,000,000 2,099,256

Time deposit Santander Chile US$ 1,000,000 524,833

Total 3,148,824

At December 31, 2014 and 2013, balances of cash and cash equivalents per currency are as follows:

Type of currency


2014 2013

ThCh$ ThCh$

CL$ 3,601,300 4,681,741

US$ 5,964 3,148,824

Total 3,607,264 7,830,565

Cash and cash equivalents included in the consolidated statement of cash flows are as follows:

Classes of assets presented in the statement of cash flows


2014 2013

ThCh$ ThCh$

Cash and cash equivalents 3,607,264 7,830,565

Total 3,607,264 7,830,565

27

NOTE 6 – FINANCIAL INSTRUMENTS

6.1 Financial instruments by category

December 31, 2014:

Financial assets at December 31, 2014

Loans and receivables

ThCh$

Assets at fair value through profit or loss

ThCh$ Total

ThCh$

Cash and cash equivalents 3,607,264 - 3,607,264

Trade and other receivables - current 11,088,092 - 11,088,092

Accounts receivable due from related parties - current 10,331,205 - 10,331,205

Accounts receivable due from related parties - non-current 118,935,925 - 118,935,925

Total financial assets 143,962,486 - 143,962,486

Financial liabilities at December 31, 2014

Liabilities at fair value through profit

or loss ThCh$

Other financial liabilities

ThCh$ Total

ThCh$

Other financial liabilities - current 6,828,898 - 6,828,898

Trade and other payables - current 13,568,381 - 13,568,381

Accounts payable due to related parties - current 522,686 - 522,686

Other financial liabilities – non-current 215,521,742 - 215,521,742

Total financial liabilities 236,441,707 236,441,707

December 31, 2013:

Financial assets at December 31, 2013

Loans and receivables

ThCh$

Assets at fair value through profit or loss

ThCh$ Total

ThCh$

Cash and cash equivalents 7,830,565 - 7,830,565

Other financial assets - current 5,123,085 - 5,123,085

Trade and other receivables - current 7,280,972 - 7,280,972

Accounts receivable due from related parties - current 38,032,173 - 38,032,173

Other financial assets - non-current 11,564,671 - 11,564,671

Accounts receivable due from related parties - non-current 87,657,433 - 87,657,433

Total financial assets 157,488,899 - 157,488,899

28

Financial liabilities at December 31, 2013

Liabilities at fair value through profit

or loss ThCh$


ThCh$ Total

ThCh$

Other financial liabilities - current 48,264,641 - 48,264,641

Trade and other payables - current - 12,656,325 12,656,325

Accounts payable due to related parties - current - 468,528 468,528

Other financial liabilities – non-current 171,618,958 - 171,618,958

Total financial liabilities 219,883,599 13,124,853 233,008,452

6.2 Credit quality of financial assets The Company’s financial assets can be classified within two main groups: i) Commercial loans with clients – for purposes of measuring their risk they are classified based on

aging and estimates of impairment for doubtful accounts are accrued for; and ii) Financial investments made by the Company as described in Note 2.

Current assets

December 31, 2014

ThCh$

December 31, 2013

ThCh$

Cash and cash equivalents 3,607,264 7,830,565

Total 3,607,264 7,830,565

Trade and other receivables without credit rating 11,088,092 7,280,972

Total 11,088,092 7,280,972

No non-matured financial assets have been renegotiated during the year.

29

6.3 Fair value estimates The tables below present the fair value by category of financial instrument compared to the current and non-current fair value included in the consolidated statements of financial position:

Fair value estimate

At December 31, 2014 At December 31, 2013 Carrying Fair Carrying Fair amount value amount value ThCh$ ThCh$ ThCh$ ThCh$

Current financial assets

Cash and cash equivalents 3,607,264 3,607,264 7,830,565 7,830,565

Other financial assets - - 5,123,085 5,123,085

Trade and other receivables 11,088,092 11,088,092 7,280,972 7,280,972

Accounts receivable due from related parties 10,331,205 10,331,205 38,032,173 38,032,173

Non-current financial assets

Other financial assets - - 11,564,671 11,564,671

Accounts receivable due from related parties 118,935,925 118,935,925 87,657,433 87,657,433

Total financial assets 143,962,486 143,962,486 157,488,899 157,488,899

The carrying amount of cash and cash equivalents and other financial assets equals their fair value due to their short-term nature.

At December 31, 2014 At December 31, 2013 Carrying Fair Carrying Fair Fair value estimate amount value amount value ThCh$ ThCh$ ThCh$ ThCh$

Current financial liabilities

Other financial liabilities 6,828,898 6,828,898 48,264,641 48,264,641

Trade and other payables 13,568,381 13,568,381 12,656,325 12,656,325

Accounts payable due to related parties 522,686 522,686 468,528 468,528

Non-current financial liabilities

Other financial liabilities 215,521,742 215,521,742 171,618,958 171,618,958

Total financial liabilities 236,441,707 236,441,707 233,008,452 233,008,452

It is assumed that the carrying amount of current financial liabilities approximates their fair value due to their short-term nature.

30

NOTE 7 – OTHER FINANCIAL ASSETS

At December 31, 2014 and 2013, other financial assets are as follows:

Type of investment Bank Type of

currency December 31, December 31,

2014 2013

Current

Reserve

Bank of New York US$ - 5,123,085

Total other financial assets - current - 5,123,085

Non-current

Derivative instruments - US$ - 11,564,671

Total other financial assets – non-current - 11,564,671

Total other financial assets - 16,687,756

NOTE 8 – OTHER NON-FINANCIAL ASSETS

At December 31, 2014 and 2013, other non-financial assets are as follows:

Other non-financial assets December 31,

2014 December 31,

2013

Current Advanced insurance 652,892 762,876 Other advances expenses 250,288 - Guarantee certificates 74,679 73,250

Total other non-financial assets – current 977,859 836,126

Non-current Lease guarantee 112,083 111,993

Total other non-financial assets – non-current 112,083 111,993

Total other non-financial assets 1,089,942 948,119

31

NOTE 9 – TRADE AND OTHER RECEIVABLES At December 31, 2014 and 2013, trade and other receivables are as follows:

Trade and other receivables


ThCh$ ThCh$

Domestic trade receivables 10,759,656 7,054,982

Accumulated impairment on trade receivables (1,178) (1,178)

Trade receivables – net 10,758,478 7,053,804

Other receivables (1) and (2) 329,614 227,168

Total trade and other receivables 11,088,092 7,280,972

(1) At December 31, 2014, these balances relate to loans to employees (ThCh$121,350) and judicial retentions made by the AFT at the request of a court (ThCh$190,134) and others for (ThCh$18,130).

(2) At December 31, 2013, these balances relates to loans to employees (ThCh$121,463) and judicial

retentions made by the AFT at the request of a court (ThCh$62,715) and others for (ThCh$42,990). The Company accrues provisions for impairment in case there is evidence of impairment of trade receivables. The criteria applied to determine whether there is objective evidence of impairment losses are the maturity of the portfolio, actual impairment (default) and actual market signals. At December 31, 2014 and 2013, the balances of trade and other receivables per type of currency are as follows:

Type of currency


2014 2013

ThCh$ ThCh$

Chilean peso 11,088,092 7,280,972

Total trade and other receivables 11,088,092 7,280,972

32

Trade and other receivables classified by category are as follows:

December 31, December 31, Category 2014 2013 ThCh$ ThCh$

Passenger transport (1) 3,274,599 3,519,615 PPT AIPK adjustment mechanism (2) 7,182,159 - Provision for AIPK Income (3) - 3,107,703

Advertising 303,721 426,486

Other 327,613 227,168

Total trade receivables 11,088,092 7,280,972

(1) Provision for revenue from payments received between December 15 and 31, 2014 and December

15 and 31, 2013, which were paid by the Transantiago Financial Administrator during January 2015 and January 2014, respectively, in conformity with the basis of the Concession Agreement and its subsequent amendments.

(2) Relates to the Adjustments of Price Per Passenger (PPT) using the Demand of Kilometer Per Passenger (AIPK) method that within the tariff review process started in May 2014, was proposed and accepted by the Ministry of Transport and Telecommunications of Chile, up to an amount of Ch$85.0, whose settlement will be deferred retrospectively starting from May 1, 2014. In addition, a proposal was submitted to Experts’ Panel that considers additional income from the adjustment of the tariff of up to Ch$65.13. Such panel must provide its opinion on the applicability of such tariff adjustment.

(3) This balance relates to the revenue accrued at December 31, 2014 and 2013, respectively, under

the mechanism named AIPK which compensates the Company based on the changes in user demand as a result of a base value defined at the beginning of the validity of the Concession Agreement. This mechanism is estimated every 24 settlements that is, every 12 months, and it operates within a range of application.

At December 31, 2014 and 2013, the Company’s trade receivables are as follows:

Maturity of trade and other receivables


ThCh$ ThCh$

Maturity under three months 11,088,092 7,280,972

Maturity between three and twelve months - -

Total trade receivables, current 11,088,092 7,280,972

33

The tables below show the changes in impairment of trade receivables related to transport services:

December 31, 2014 Impairment ThCh$

Net value at January 1, 2014 (1,178)

Impairment for the period -

Reversal of impairment -

Net value at December 31, 2014 (1,178)

December 31, 2013 Impairment ThCh$

Net value at January 1, 201 (1,178)

Impairment for the period -

Reversal of impairment -

Net value at December 31, 2013 (1,178)

NOTE 10 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES

10.1 Accounts receivable due from related parties In general, transactions with related parties correspond to actual payment and collection transactions not subject to special conditions. These transactions are in conformity with Articles Nos. 44 and 49 of Law No.18.046 for public companies. Short and long-term fund transfers from and to the parent of between related parties which do not relate to the collection or payment of services are recorded as commercial current accounts.

34

At December 31, 2014 and 2013, accounts receivable due from related parties are as follows: December 31, December 31, 2014 2013

ID number Company Country Relationship Currency ThCh$ ThCh$

Current

99.577.390 - 2 Express de Santiago Uno S.A. (1) Chile Common owner US$ 5,242,823 36,866,558

99.577.390 – 2 Express de Santiago Uno S.A. (1) Chile Common owner CL$ 4,439,843 668,113

59.141.620-0 Desarrollo y Soluciones Informáticas Chile Common owner CL$ 13,026 -

0-E Panamerican Investment S.A. Panamá Common owner US$ 6,105 -

76.195.710 - 4 Inversiones Eco Uno S.A. Chile Associate CL$ 179,336 149,962

76.099.998-9 Camden Servicios S.P.A.(3) Chile Common owner CL$ 450,072 347,540

Total accounts receivable due from related parties, current 10,331,205 38,032,173

Non-current

99.577.390 - 2 Express de Santiago Uno S.A. (1) Chile Common owner US$ 61,318,901 37,745,274

99.577.390 - 2 Express de Santiago Uno S.A. (1) Chile Common owner CL$ 356,676 3,448,873

0-E Panamerican Investment S.A.(2) Panamá Shareholder US$ 55,498,844 45,033,942

59.164.000 - 0 Panamerican Investment S.A.(2) Chile Common owner US$ 1,761,504 1,429,344

Total accounts receivable due from related parties, non-current 118,935,925 87,657,433

(1) This balance relates to a documented debt maintained by Express de Santiago Uno S.A. of

US$198,709,385 which accrues interest at an annual rate of 8.05% payable on a semiannual basis. The principal is amortized as follows:

Date Amortization Date Amortization

02-18-2011 0.00% 02-18-2015 7.78%

08-18-2011 0.00% 08-18-2015 6.03%

02-18-2012 3.45% 02-18-2016 8.51%

08-18-2012 3.00% 08-18-2016 6.38%

02-18-2013 6.31% 02-18-2017 10.19%

08-18-2013 4.72% 08-18-2017 8.36%

02-18-2014 7.67% 02-18-2018 11.94%

08-18-2014 5.54% 08-18-2018 10.11%

On August 18, 2014, the Company reported as an essential event to the Chilean Superintendence of Securities and Insurance that together with the related company Express de Santiago Uno S.A, they had started a restructuring process of the bond issued by the Company, in accordance with Rule 144-A and Regulation S the U.S. Securities Act. As of August 18, 2014, principal owed amounted to US$347,304,000.

35

This process ended successfully on December 17, 2014, issuing new bonds to be exchanged replacing the original securities. The principal amount of the new bonds amounts to US$364,433,466, including the capitalization of the unpaid interests in August of US$13,892,000 and the accrued interest from August 18, 2014 and September 30, 2014 of US$3,237,466, maintaining the same annual interest rate of 8.0%. Because of the restructuring process of the debt related to the bond under Rule 144-A (see Note 17b), on December 17, the repayment schedule held by Express, was modified resulting in the same schedule for repayments for the bond under Bond 144-A, as follows

Due date

Amortization loan US$

06-22-2015 1,621,670.49

12-22-2015 632,176.63

06-22-2016 2,569,935.43

12-22-2016 2,569,935.43

06-22-2017 2,776,079.99

12-22-2017 2,776,079.99

06-22-2018 659,662.57

12-22-2018 4,645,123.94

12-31-2018 81,917,301.16

100,167,965.62

(2) This balance relates to a documented debt maintained by Panamerican Investment S.A. for an

initial capital of US$72,118,294.94 which accrues interest at an annual rate of 8.05% and has one single maturity on August 20, 2018.

(3) This balance relates to transactions made under the purchase of spare parts and management and

logistic administration services contract.

36

10.2 Accounts payable to related parties At December 31, 2014 and 2013, accounts payable to related parties are as follows: December 31, December 31, 2014 2013 ID number Company Country Relationship Currency ThCh$ ThCh$

Current

99.577.390 - 2 Express de Santiago Uno S.A. (1) Chile Common owner CL$ 522,686 468,528

Total accounts payable to related parties, current 522,686 468,528

(1) This balance relates to amounts provided by Express de Santiago Uno S.A. as cash reserve intended to cover

obligations acquired as a result of the bond issuance by Inversiones Alsacia S.A.

10.3 Transactions with related parties

Related parties include the following entities or individuals: (a) Shareholders with the possibility of exercising control. (b) Affiliates and members of affiliates. (c) Parties with an interest in the entity which results in significant influence over such entity. (d) Parties with joint control over the entity. (e) Associates. (f) Interests in joint ventures. (g) Key management personnel of the entity or its parent. (h) Close family members of the individuals described above. (i) An entity in which any of the individuals described above has control, joint control or significant

influence.

37

At December 31, 2014 and 2013, transactions with related parties are as follows: December 31, 2014

ID number Company Country of

origin Relationship Currency Transaction Amount

Credit (debit) to profit or

loss

21.922.672-1 Carlos Ríos Velilla Colombia Shareholder-Director

ThCh$ Director payment 36,000 (36,000)

58.431 Per Gabell Perú Director ThCh$ Director payment 36,000 (36,000)

76.019.829-3 Ases. Inversiones Rio Piedra Ltda.

Chile Director Company ThCh$ Board of director advisory 15,000 (15,000)

0-E P.S.C. Consulting Panamá Director Company ThCh$ Board of director advisory

124,532 (124,532)

78.773.240-2 Asesoría e Inversiones Borinquen Ltda.

Chile Director Company ThCh$ Director payment 21,000 (21,000)

99.577.390-2 Express de Santiago Uno S.A.

Chile Related party ThCh$ Transfer of funds received

3,601,419 -

76.099.998-9 Camden Servicios S.P.A. Chile Common owner ThCh$

Purchases of spare parts and management and logistic administration services

10,123,507 (10,123,507)

76.452.480-2 Rioma Ltda. Chile Director Company ThCh$ Board of director advisory

182,000 (182,000)

78.131.470-6 Rentas y Asesorías Harfield S.P.A.

Chile Director related company

ThCh$ Board of director advisory

118,440 (118,440)

December 31, 2013

ID number Company Country of

origin Relationship Currency Transaction Amount

Credit (debit) to profit or

loss

21.922.672-1 Carlos Ríos Velilla Colombia Shareholder-Director

ThCh$ Director payment 36,000 (36,000)

0-E Rubén Ríos Velilla Colombia Director ThCh$ Director payment 30,000 (30,000)

76.019.829-3 Ases. Inversiones Río Piedra Ltda.

Chile Director Company ThCh$ Board of director advisory

36,000 (36,000)

0-E P.S.C. Consulting Panamá Director Company ThCh$ Director payment 18,000 (18,000)

9.669.081-9 Andrés Echeverría Chile Director ThCh$ Director payment 9,000 (9,000)

99.577.390-2 Express de Santiago Uno S.A.

Chile Related party ThCh$ Transfer of funds received

15,973,904 -

76.099.998-9 Camden Servicios S.P.A Chile Common owner ThCh$

Purchases of spare parts and management and logistic administration services

3,423,374 (3,423,374)

76.452.480-2 Rioma Ltda. Chile Director Company ThCh$ Board of director advisory

156,000 (156,000)

78.131.470-6 Rentas y Asesorías Harfield S.P.A.

Chile Director related company

ThCh$ Board of director advisory

128,310 (128,310)

Inversiones Alsacia S.A. and subsidiary policy is to report all transactions with related parties during the year except for dividends paid and capital contributions received which are not deemed to be transactions.

38

10.4 Payments to the Board of Directors and key management personnel At December 31, 2014 and 2013, payments, salaries as well as financial, commercial and management advisories received by members of the Board of Directors amount to ThCh$108,000 and ThCh$129,000, respectively. Inversiones Alsacia S.A. and subsidiary have an incentive system based on the Company’s operating profit which consists of an annual bond payable to main executives and individuals in other eligible positions. The incentive system has the purpose of motivating and recognizing executives through a formal scheme that rewards good individual performance as well as team work. The main managers and executives are those individuals with the authority and responsibility for directly or indirectly planning, directing and controlling the entity’s activities, including any member (whether executive or not) of the Company’s Administration Board or governing body. Total payments made to the Company’s main executives and managers for the year from January to December 2014 and 2013 amounted to ThCh$2,017,426 and ThCh$2,530,660, respectively. During the years ended December 31, 2014 and 2013, no provision for severance payments has been accrued.

NOTE 11 – INVENTORIES

At December 31, 2014 and 2013, inventories are follows:

Inventories

December 31, 2014

December 31, 2013

ThCh$ ThCh$

Spare parts and technical inventories 1,112,665 1,217,388

Fuel 83,898 114,617

Accumulated impairment on spare parts and technical inventories (58,712) (58,712)

Total Inventories 1,137,851 1,273,293

Inventories will be used in maintenance services, and they are measured at their average acquisition cost. Inventories do not include liability guarantees. The amount of inventories recognized as cost was ThCh$15,131,261 at December 31, 2014 (ThCh$9,628,272 at December 31, 2013).

39

NOTE 12 – CURRENT TAX ASSETS At December 31, 2014 and 2013, current tax assets are as follows:

Current tax asset

December 31, 2014

ThCh$

December 31, 2013

ThCh$

SENCE training credit (1) 330,988 735,535

Total current tax assets 330,988 735,535

(1) This balance relates to training expenses made by the Company during the year which are used as credit against income taxes. NOTE 13 – INTANGIBLE ASSETS OTHER THAN GOODWILL

At December 31, 2014 and 2013, separately acquired intangible assets are as follows:

December 31, 2014

Gross value Accumulated amortization Net value

ThCh$ ThCh$ ThCh$

RTO (1) 12,950,228 (8,578,197) 4,372,031

Reserves for AFT (2) 2,247,539 (1,488,764) 758,775

Computer licenses (3) 2,846,019 (1,869,589) 976,430

Total intangible assets other than goodwill 18,043,786 (11,936,550) 6,107,236

December 31, 2013

Gross value Accumulated amortization Net value

ThCh$ ThCh$ ThCh$

RTO (1) 12,950,228 (7,530,189) 5,420,039

Reserves for AFT (2) 2,247,539 (1,306,880) 940,659

Computer licenses (3) 2,532,257 (1,547,737) 984,520

Total intangible assets other than goodwill 17,730,024 (10,384,806) 7,345,218

(1) This balance relates to the total contribution made to the Operative Technical Reserve (RTO) by the

Troncal No.1 business unit. The RTO is defined as a provision included in the tickets paid by users

which is intended to cover temporary mismatches between the system’s revenues and expenses. This amount is amortized based on the projected revenue curve to be obtained from the rendering

of transport services. The amortization expense is part of the cost to sell within the consolidated

statement of comprehensive income per function.

40

(2) From the beginning of the stage I defined in the bidding bases Transantiago 2003, the AFT will be

the exclusive issuer of tickets related to the collection of coins paid by users to access the system’s

transport services. The AFT provides such tickets to Inversiones Alsacia S.A. which pays a total of

$20 per ticket. From this amount, $16 corresponds to a deposit intended to increase the system’s

RTO and are to be credited by the AFT to the transitory account 2. The AFT can freely dispose of

the remaining $4. This reserve corresponds to the total amount resulting from the $16 per ticket acquired by the Company during 2006 and 2005. This amount is amortized based on the projected

revenue curve to be obtained from the rendering of transport services. In accordance with the

amendment to the Concession Agreement, Article No.4, signed on September 30, 2006 between

the Company and the Chilean Ministry of Transport and Telecommunications, starting from July 1,

2006 the Company stopped paying the $16 per each ticket bought from the AFT. The amortization

expense is part of the cost to sell within the consolidated statement of comprehensive income per

function.

(3) Computer licenses were classified as intangible assets with definite useful lives and relate to

software acquired from third parties. These licenses have an estimated useful life from 3 to 5 years

and are amortized on a straight-line basis.

Changes in intangible assets at December 31, 2014 and 2013 are as follows:

December 31, 2014

RTO AFT Reserve Computer licenses Total

(1) (2) (3) ThCh$ ThCh$ ThCh$ ThCh$

Pending amortization period 46 months 48 months 13 months

Net value at January 1, 2014 5,420,039 940,659 984,520 7,345,218

Separate acquisition - - 313,762 313,762

Amortization for the period (1,048,008) (181,884) (321,852) (1,551,744)

Net value at December 31, 2014 4,372,031 758,775 976,430 6,107,236

December 31, 2013

RTO AFT Reserve Computer licenses Total

(1) (2) (3) ThCh$ ThCh$ ThCh$ ThCh$

Pending amortization period 58 months 60 months 25 months

Net value at January 1, 2013 6,450,646 1,119,523 939,587 8,509,756

Separate acquisition - - 199,437 199,437

Amortization for the period (1,030,607) (178,864) (154,504) (1,363,975)

Net value at December 31, 2013 5,420,039 940,659 984,520 7,345,218

41

NOTE 14 – PROPERTY, PLANT AND EQUIPMENT

At December 31, 2014, property, plant and equipment and changes therein are as follows:

December 31, 2014 Land Net

buildings Net plant and

equipment

Net information technology equipment

Net fixed facilities and

fixtures Net motor vehicles

Net leasehold improvements

Other net property, plant and equipment

Total net property, plant and equipment

ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Gross balance at January 1, 2014

4,910,670 17,688,418 1,524,176 1,218,830 180,143 67,605,970 237,155 465,465 93,830,827

Accumulated depreciation - (4,302,409) (789,179) (972,592) (136,644) (51,523,925) (135,166) (420,933) (58,280,848)

Balance at December 31, 2014 4,910,670 13,386,009 734,997 246,238 43,499 16,082,045 101,989 44,532 35,549,979

Acquisitions - 5,794 131,275 114,417 - 55,000 1,619 27,271 335,376

Capitalizations (1) - - - - - 2,014,316 - - 2,014,316

Disposals (1) - - - - - (1,195,884) - - (1,195,884)

Depreciation - (925,608) (166,723) (112,687) (18,167) (6,028,867) (20,292) (15,540) (7,287,884)

Net balance at December 31, 2014 4,910,670 12,466,195 699,549 247,968 25,332 10,926,610 83,316 56,263 29,415,903

(1) This balance relates to overhauls carried out in 2014.

42

At December 31, 2013, property, plant and equipment and changes therein are as follows:

December 31, 2013 Land Net

buildings Net plant and

equipment

Net information technology equipment

Net fixed facilities and fixtures

Net motor vehicles

Net leasehold improvements

Other net property, plant and equipment

Total net property, plant and equipment

ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Gross balance at January 1, 2013

4,910,670 17,656,451 1,380,574 1,183,913 180,143 65,793,407 223,767 443,340 91,772,265

Accumulated depreciation - (3,345,036) (641,204) (788,650) (118,478) (44,019,159) (114,417) (371,856) (49,398,800)

Balance at December 31, 2013 4,910,670 14,311,415 739,370 395,263 61,665 21,774,248 109,350 71,484

42,373,465

Acquisitions - 31,967 143,602 34,917 - 780,000 13,388 22,125 1,025,999

Capitalizations (1) - - - - - 1,249,878 - - 1,249,878

Disposals (1) - - - - - (217,315) - - (217,315)

Depreciation - (957,373) (147,975) (183,942) (18,166) (7,504,766) (20,749) (49,077) (8,882,048)

Net balance at December 31, 2013 4,910,670 13,386,009 734,997 246,238 43,499 16,082,045 101,989 44,532 35,549,979

(1) This balance relates to overhauls carried out in 2013.

43

At December 31, 2014, property, plant and equipment are comprised as follows:

December 31, 2014

Gross value Accumulated depreciation Net value

ThCh$ ThCh$ ThCh$

Land 4,910,670 - 4,910,670

Buildings 18,159,341 (5,693,146) 12,466,195

Plant and equipment 1,655,451 (955,902) 699,549

Information technology equipment 1,333,247 (1,085,279) 247,968

Fixed facilities and fixtures 180,143 (154,811) 25,332

Motor vehicles 68,479,402 (57,522,792) 10,926,610

Leasehold improvements 238,774 (155,458) 83,316

Other property, plant and equipment 492,736 (436,473) 56,263

Total property, plant and equipment 95,449,764 (66,033,861) 29,415,903

At December 31, 2013, property, plant and equipment are comprised as follows:

December 31, 2013

Gross value Accumulated depreciation Net value

ThCh$ ThCh$ ThCh$

Land 4,910,670 - 4,910,670

Buildings 18,153,547 (4,767,538) 13,386,009

Plant and equipment 1,524,176 (789,179) 734,997

Information technology equipment 1,218,830 (972,592) 246,238

Fixed facilities and fixtures 180,143 (136,644) 43,499

Motor vehicles 68,226,104 (52,144,059) 16,082,045

Leasehold improvements 237,155 (135,166) 101,989

Other property, plant and equipment 465,465 (420,933) 44,532

Total property, plant and equipment 94,916,090 (59,366,111) 35,549,979

44

NOTE 15 – CURRENT AND DEFERRED INCOME TAXES

Deferred taxes correspond to the income tax that Inversiones Alsacia S.A. and subsidiary will pay (liability) or recover (asset) in future periods in relation to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The main deferred tax asset relates to the tax losses to be recovered in future periods. The main deferred tax liability payable in future periods relates to temporary differences resulting from the application of accelerated depreciation on buses and buildings at the date of transition to IFRS.

Deferred tax assets and liabilities are as follows:

December 31, 2014 December 31, 2013

Deferred taxes Deferred tax

assets Deferred tax

liabilities Deferred tax

assets Deferred tax

liabilities ThCh$ ThCh$ ThCh$ ThCh$

Accrued vacations 284,726 - 228,512 - Impairment of accounts receivable 266 - 235 -

Other events 225,663 - 120,562 -

Deferred indemnity 903,386 - 1,012,491 -

Accumulated tax loss 19,612,980 - 9,710,724 -

Amortization of intangibles - 1,274,628 - 1,223,968 Property, plant and equipment - 2,501,653 - 3,215,395

Leased assets - - - 72,944

Total 21,027,021 3,776,281 11,072,524 4,512,307

Deferred taxes 17,250,739

6,560,217 -

In accordance with the restrictions included in sections 4.05 and 5.01 of the issuance contract for bond 144-A, the Company is not allowed to sell assets granted as guarantee as part of the bond issuance. As a result, the difference between the tax and financial value of land corresponds to a permanent difference and no deferred taxes have been recognized.

45

At December 31, 2014 and 2013, the deferred tax resulting from tax losses amounts to ThCh$19,612,981 and ThCh$9,710,724, respectively. These losses can be used against future profits generated by the related companies, as follows:

Deferred tax for tax loss

Country

Deferred tax for tax loss at

Effect for changes in

Accumulated deficit Income (expense)

12/31/2014 ThCh$

01/01/2014 ThCh$

12/31/2014 ThCh$

Inversiones Alsacia S.A. Chile 19,612,981 9,710,724 4,728,592 5,173,665

Total 19,612,981 9,710,724 4,728,592 5,173,665

For companies incorporated in Chile, tax losses to be used against future profits do not expire. At December 31, 2014 and 2013, changes in deferred tax assets are as follows:

Changes


ThCh$ ThCh$

Initial balance 11,072,524 10,441,909

Provisions 56,245 30,000

Tax loss 9,902,257 754,875

Deferred indemnity (109,105) (209,481)

Other events 105,101 55,221

Closing balance 21,027,021 11,072,524

Changes in deferred tax liabilities are as follows:

Changes


ThCh$ ThCh$

Initial balance 4,512,307 5,968,804

Depreciation of property, plant and equipment (713,741) (1,137,881)

Intangible assets 50,660 (290,065)

Other assets (72,944) (28,551)

Closing balance 3,776,281 4,512,307

The tax rate for the calculation of income and deferred taxes in Chile was determined in accordance with Note 2.16.

46

Circular No. 856 issued by the Chilean Superintendence of Securities and Insurance on October 17, 2014, instructed the entities to exceptionally and for one time only recognize differences in deferred tax assets and liabilities generated as a result of the increase in the corporate income tax rate imposed by Law No.20.780 as of September 30, 2014, within equity in the caption Retained earnings (accumulated deficit) for ThCh$3,523,143. The effects of the measurement of deferred taxes arising subsequent to that date are recognized in profit or loss for the year in accordance with the criteria indicated above To reflect the effect of the legal change in income taxes, Inversiones Alsacia S.A. have recorded all credits (debits) resulting from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes in relation to the difference reversed in the mentioned years. The income tax expense is as follows:

Income tax (expense) benefit

December 31,

2014

ThCh$

2013

ThCh$

Current tax expense - -

Effect of deferred taxes 6,428,020 2,087,112

Total income tax (expense) benefit, net 6,428,020 2,087,112

The table below shows a detail of the reconciliation between the income tax expense using the effective tax rate and the domestic tax rate:

Reconciliation between the income tax expense using the effective tax

rate and the domestic tax rate

December 31,

2014

ThCh$

2013

ThCh$

Income tax expense using the domestic tax rate 5,384,376 (3,730,222)

Tax effect of non-deductible expenses 106,897 5,817,334

Effect of tax rate change on equity (3,523,143) -

Effect of annual tax rate change 4,427,981 -

Other decreases in domestic tax expense 31,909 -

(Expense) benefit using the effective tax rate 6,428,020 2,087,112

Reconciliation between the domestic tax rate and the effective tax rate

December 31,

2014

%

2013

%

Domestic tax rate 21.00 20.00

Effect of non-deductible expenses 0.42 (30.80)

Effect of tax rate change on equity (13.74) -

Effect of annual tax rate change 17.27 -

Other decreases in domestic tax expense 0.12 -

Total tax rate 25.07 (10.80)

47

NOTE 16 – EQUITY ACCOUNTED INVESTEES

Inversiones Alsacia S.A. has a interest of 21,59% in Inversiones Eco Uno S.A., Tax ID Number:

76.195.710-4.

At December 31, 2014 and 2013, balances of assets, liabilities, equity and profit or loss of Inversiones Eco

Uno S.A. are as follows:

December 31, December 31, 2014 2013 ThCh$ ThCh$

Total assets 6,068 22,460

Total liabilities 17,396,856 8,834,747

Share capital 16,512,432 16,512,432

Retained earnings (25,324,719) (17,246,146)

Loss for the period (8,578,501) (8,078,573)

Total liabilities and equity 6,068 22,460

(1) At December 31, 2014 and 2013, Inversiones Eco Uno S.A. recorded negative equity and,

accordingly, the result of the investment is recorded within other current provisions (See Note 19

Other Provisions).

48

NOTE 17 – OTHER FINANCIAL LIABILITIES

At December 31, 2014 and 2013, Inversiones Alsacia S.A. and subsidiary record obligations related to the issuance of the bond under the United States rule 144-A; and with Banco Internacional, which accrue interest at rates of 8% and 6.87%, respectively.

Type of financial liabilities

December 31, 2014 December 31, 2013

Current Non-current Current Non-current

ThCh$ ThCh$ ThCh$ ThCh$

Interest accrued by bond 144-A 482,331 - 7,356,669 -

Interest accrued by bank loans 10,163 - 165,090 -

Bond 144-A (a) 4,975,350 207,362,048 32,158,596 159,046,278

Bank loans (b) 592,296 5,325,274 - 6,441,918

Options to hedge against exchange rate risk (c) - - 8,500,719 5,507,710

Drafts payable (d) 768,758 2,834,420 83,567 623,052

Total other financial liabilities 6,828,898 215,521,742 48,264,641 171,618,958

(a) Bond 144 – A

On February 28, 2011, the Company acquired 100% of the shares of BRT Scrow Corporation SpA and, as a result, it has become the debtor of a bond issued under the Regulation 144-A and Regulation S of the U.S. Securities Act and its related amendments, in the amount of US$464,000,000, for a period of 7.5 years, with semi annual payments of interest and principal amortization up to February 18, 2018.

Under Rule 144-A and Regulation S of the U.S. Securities Act and its subsequent amendments, the issuance (including Inversiones Alsacia S.A. and the guarantors under the same regulation) has not been recorded in the United States of America or any other jurisdiction, and such issuance cannot be transferred without the recording of an exemption under the mentioned standard. The guarantees related to the issue include:

(i) Pledge over 100% of the Company’s shares; (ii) Mortgages and pledges over the relevant assets; and (iii) Personal guarantees granted by the related companies.

The funds obtained from the issuance were used, among others, to:

(i) Pre-pay all the Company’s short and long-term debts; (ii) Maintain amount in the Reserve Account, Revenue Account and Overhaul Account; (iii) Perform a disbursement in relation to Panamerican Investments LTD and its agency in Chile to

carry out several actions that have resulted in acquiring control of Inversiones Eco Uno S.A. which is in turn the controller of Express de Santiago Uno S.A.; and

(iv) Pre-pay the financial debt of Express de Santiago Uno S.A.

The funds obtained from operations have been used to renegotiate liabilities and fund investments related to the Company’s line of business.

Expenses directly related to the issuance and placements of bonds have been considered in the determination of the effective interest rate.

49

The bond is amortized based on a business financial model which was defined considering: (i) expectations for the transport business in Santiago in the medium term, and (ii) the operative and administrative synergies of Inversiones Alsacia S.A. with Express de Santiago Uno S.A. This model is as follows:

Date Amortization US$

02-18-2012 16,000,000 08-18-2012 13,900,000 02-18-2013 29,300,000 08-18-2013 21,900,000 02-18-2014 35,600,000 08-18-2014 25,700,000 02-18-2015 36,100,000 08-18-2015 28,000,000 02-18-2016 39,500,000 08-18-2016 29,600,000 02-18-2017 47,300,000 08-18-2017 38,800,000 02-18-2018 55,400,000 08-18-2018 46,900,000

Total 464,000,000

(b) Bond 144-A and debt restructuring process

On August 18, 2014, the Company reported as an essential event to the Superintendence of Securities and Insurance (SVS) that it had started a restructuring process of its issued bonds in accordance with Rule 144-A and Regulation S of the U.S. Securities Act. The amount of the issue at February 2011 amounted to US$464,000,000. At August 18, 2014, principal owed amounted to US$347,304,000. Among the reasons for carrying out this restructuring are the financial impairment generated after the entering into the new Concession Agreement with the Ministry of Transport and Telecommunications effective from May 2012, as well as a reduction in demand and the high levels of evasion, both not yet offset in accordance with the contract, among other reasons indicated in the essential event of August 18, 2014. This process ended successfully on December 17, 2014, issuing new bonds to be exchanged replacing the original bonds. The principal amount of the new bonds amounts to US$364,433,466, including the capitalization of unpaid interests in August 2014 of US$13,892,000, and the accrued interest from August 18, 2014 to September 30, 2014 of to US$3,237,466, maintaining the same annual interest rate of 8.0%.

50

The principal maturity schedule was established as follows: Maturity date US$

12-22-2014 1,000,000

06-22-2015 4,900,000

12-22-2015 2,300,000

06-22-2016 9,350,000

12-22-2016 9,350,000

06-22-2017 10,100,000

12-22-2017 10,100,000

06-22-2018 2,400,000

12-22-2018 16,900,000

12-31-2018 298,033,466

Total 364,433,466

Interest is paid in December 22 and June 22 of each year. In conformity with this restructuring process, the following conditions that might modify the amounts payable were established: 1. If part of the restructuring costs are not paid on December 8, 2014, or the hedge contracts have not

been contracted at that date, the principal payment of US$1,000,000 to be made on December 22, 2014, is added to the payment of June 22, 2015.

2. If the aggregation of restructuring costs and the hedge costs up to June 30, 2015, exceed the amount of US$16,500,000, the principal payment at June 22, 2015 is reduced in the same amount of such excess, and if necessary, also reducing the following payments. If, on the other hand, the payments are below US$16,500,000, principal payment is increased in such difference.

3. Additional mandatory amortizations were established in case the cash balance of the Company, jointly with its subsidiary Express de Santiago Uno S.A., exceed US$15,000,000 as of June 30 and December 30 of each year. The corresponding surplus will be distributed 85% for bondholders and 15% for shareholders. This distribution can be modified to a 75%/25% ratio in case the contract’s concession period is extended, among other conditions.

Additional payments allowed for shareholders were established, which have a base amount of US$2,250,000 per year, subject to compliance with certain prior conditions. This amount should increase

as new extensions to the Concession Agreement are obtained.

Other significant modifications to the bond structure are the following:

a) Establishing a new payment calendar after December 31, 2018 if the Concession Agreement is extended.

b) Removing the requirement of maintaining a debt service hedge ratio exceeding 1.10x

c) Removing the requirement of maintaining a debt service reserve account.

51

d) Establishing of the requirement of appointing a Bondholders’ Representative as an observer in the Board of Directors.

e) Allowing additional indebtedness exclusively for acquiring new buses, to the extent that this is

related to the extension of the Concession Agreement.

f) Adding the related company Camden Servicios Spa as guarantor The restructuring process also included the early termination of hedge contracts, and a new payment schedule for the credit that the Company maintains with the Banco Internacional de Chile.

The main restrictions of the new bond contract are mentioned in Note 32.4.

(c) Bank loans

At December 31, 2014, given the bond 144-A restructuring carried out in 2014, the payment schedule of the bank loan with the Banco Internacional de Chile was modified, maintaining the annual interest rate of 6.87% and establishing the payment of principal and interests for June and December until 2018. At December 31, 2013, the Company maintains a loan with the Banco Internacional de Chile for UF UF276,362.77, with an annual interest rate of 6.87%, payable in a single installment in 2018, with interests paid annually in February and August. As mentioned in the previous paragraph, given the restructuring of the bond these conditions were modified. (d) Derivatives not qualifying for hedge accounting

At December 31, 2014, the Company has no derivatives due to the early termination of such contracts in August 2014. At December 31, 2013, the Company has insurance that provides a protection range based on call options. This range starts the coverage when the exchange rate for the US dollar reaches $585 per US$1 and ceases the coverage when such rate reaches $750 per US$1. Therefore, the Company makes purchases at the market exchange rate minus $165 when the exchange rate exceeds $750 and at the market rate when the exchange rate is under $585. Within the range, the Company makes purchases at the market exchange rate minus the difference between the market exchange rate and $585. This insurance was entered into in February 2011 at the same time the bond was issued. At December 31, 2013, the Company records a current liability related to the funding for the acquisition of derivatives of ThCh$8,500,719. These liabilities correspond to the value of the asset acquired by the Company at the time of purchase of the options recorded in the asset. These liabilities are amortized on a bi-annual basis, 5 days before the payments made by the Company to amortize the principal amount of the bond. At December 31, 2013, the total prepayment value of the liability amounts to ThCh$14,008,429.

Drafts payable

Drafts payable relate to drafts signed with VTF Latin America S.A. for the purchase-sale of spare parts from Volvo Commercial Vehicles and Construction Equipment South Cone SpA, which accrue interest at an annual rate of 7.5% and are payable in 9 equal installments starting from August 18, 2014 and up through August 18, 2018.

52

At December 31, 2014, other current financial liabilities are as follows:

Debtor’s ID number Debtor’s name

Debtor’s country

Creditor’s ID number Creditor’s name

Creditor’s country Currency

Type of amortization

Effective rate

Nominal rate

Current

1 to 3 months 4 to 12 months Total

ThCh$ ThCh$ ThCh$

Bond 144-A

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Various debtors Various US$ Semi annual 9.50% 8.00%

- 4,975,350 4,975,350

Total Bond 144 – A current

- 4,975,350 4,975,350

bank loans

99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional Chile Ch$ Semi annual 6.87% 6.87%

- 592,296 592,296

Total Interest accrued by bank loans, current

- 592,296 592,296

Interest accrued by bank loans 99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional Chile Ch$ Semi annual 6.87% 6.87%

- 10,163 10,163

Total Interest accrued by bank loans, current

10,163 10,163

Interest accrued by bond 144-A


- 482,331 482,331

Total interest accrued by bonds, current

- 482,331 482,331

Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin America S.A. Various US$ Semi annual 7.50% 7.50%

- 768,758 768,758

Total drafts payable, current

- 768,758 768,758

Total current financial liabilities at December 31, 2014

6,828,898 6,828,898

In the table above, when the nominal rate is not equal to the effective rate this means that there were costs directly associated with the transaction; in such cases,

the obligation is recorded at the effective rate.

53

At December 31, 2014, other non-current financial liabilities are as follows:


Debtor’s country




Effective rate

Nominal rate

Non-current

1 to 3 years

3 to 5 years

Over 5 years Total


Bond 144-A


207,362,048 - - 207,362,048

Total Bond 144 – A non-current

207,362,048 - - 207,362,048

Bank loans

99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional Chile CL$ Semi annual 6.87% 6.87%

5,325,274 - - 5,325,274

Total Interest accrued by bank loans, non-current

5,325,274 - - 5,325,274

Total option liabilities, non-current

Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin America S.A. Miscellaneous US$ Semi annual 7.50% 7.50%

2,834,420 - - 2,834,420

Total drafts payable, non-current

2,834,420 - - 2,834,420

Total non-current financial liabilities at December 31, 2014

215,521,742 - - 215,521,742

54

At December 31, 2013, other current financial liabilities are as follows:


Debtor’s country




Effective rate

Nominal rate

Current

1 to 3 months 4 to 12 months Total

ThCh$ ThCh$ ThCh$

Bond 144-A


18,676,116 13,482,480 32,158,596

Total Bond 144 – A current 18.676.116 13,482,480 32,158,596

Interest accrued by bank loans


165,090 - 165,090

Total Interest accrued by bank loans, current 165.090 - 165,090

Derivatives not qualifying for hedge accounting

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Bank of America Merrill Lynch USA CL$ Semi annual - -

5,591,272 - 5,591,272

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Credit Suisse Switzerland CL$ Semi annual - -

2,909,447 - 2,909,447

Total option liabilities, current 8,500,719 - 8,500,719

Interest accrued by bond 144-A


7,356,669 - 7,356,669

Total interest accrued by bonds, current 7,356,669 - 7,356,669

Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin America S.A. Various US$ Semi annual 7.50% 7.50%

83,567 - 83,567

Total drafts payable, current 83,567 - 83,567

Total current financial liabilities at December 31, 2013 34,782,161 13,482,480 48,264,641



55

At December 31, 2013, other non-current financial liabilities are as follows:


Debtor’s country




Effective rate

Nominal rate

Non-current

1 to 3 years

3 to 5 years

Over 5 years Total


Bond 144-A


115,943,073 43,103,205 - 159,046,278

Total Bond 144 – A non-current

115,943,073 43,103,205 - 159,046,278

Bank loans


6,441,918

6,441,918

Total Interest accrued by bank loans, non-current

- 6,441,918 - 6,441,918

Derivatives not qualifying for hedge accounting

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Bank of America Merrill Lynch USA CL$ Semi annual - -

2,494,143 287,251 - 2,781,394

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Credit Suisse Switzerland CL$ Semi annual - -

2,444,753 281,563 - 2,726,316

Total option liabilities, non-current

4,938,896 568,814 - 5,507,710

Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin America S.A. Miscellaneous US$ Semi annual 7.50% 7.50%

418,591 204,461 - 623,052

Total drafts payable, non-current

418,591 204,461 - 623,052

Total non-current financial liabilities at December 31, 2013

121,300,560 50,318,398 - 171,618,958



56

NOTE 18 – TRADE AND OTHER PAYABLES

At December 31, 2014 and 2013, trade and other receivables are as follows:

Trade and other payables


ThCh$ ThCh$

Current

Suppliers (a) 9,951,180 9,078,239

Other payables (b) 1,354,684 1,682,048

Personnel withholdings 997,067 753,474

Accrued vacations 1,265,450 1,142,564

Total trade and other payables, current 13,568,381 12,656,325

(a) In the case of common suppliers, the Company’s policy is to pay the related invoices within 60 days from reception; for strategic suppliers, the payment is made within 30 to 45 days.

(b) Other payables include obligations related to notes payable, insurance and other accounts payable.

NOTE 19 – OTHER PROVISIONS

At December 31, 2014 and 2013, other provisions are as follows:

Other provisions, current


ThCh$ ThCh$

Provision for legal claims (1) 777,075 544,099

Provision for negative equity of investee 3,754,671 1,903,613

Total other provisions, current 4,531,746 2,447,712

(1) This balance corresponds to the provision accrued for claims filed against the Company by former

employees, regulatory agencies and others. The provision is recognized in the consolidated statement of income within administrative expenses. The current balance at December 31, 2014 and 2013, is expected to be used within the following 12 months.

57

Changes in provisions between January 1, 2013 and December 31, 2014 are as follows:

Changes in provisions Legal claims

Balance at January 1, 2013 427,367

New legal claims 276,097

Provision for negative equity of investee (Eco Uno S.A.) 1,744,248

Balance at December 31, 2013 2,447,712

New legal claims 232,975

Provision for negative equity of investee (Eco Uno S.A.) 1,851,059

Balance at December 31, 2014 4,531,746

NOTE 20 – OTHER NON-FINANCIAL LIABILITIES

Resolution No.258 issued by the Chilean Ministry of Transport and Telecommunications approved the indemnity agreement signed between the Ministry of Transport and Telecommunications and Inversiones Alsacia S.A. which establishes the amount of ThCh$9,090,243 as final indemnity for the early termination of the Concession Agreement for the Use of the Roads of the City of Santiago. For purposes of these consolidated financial statements, this payment is recognized as deferred income to be amortized on a straight-line basis against operating profit up to the termination of the Concession Agreement in force in October 2018, as required in Letter No.6484 issued on March 7, 2014 by the Chilean Superintendence of Securities and Insurance.

Concept Currency

December 31, 2014 2013

ThCh$ ThCh$

Deferred income, current CL$ 953,342 1,047,404

Total other non-financial liabilities, current

953,342 1,047,404

Deferred income, non-current CL$ 3,061,708 4,015,050

Total other non-financial liabilities, non-current 3,061,708 4,015,050

58

NOTE 21 – SHARE CAPITAL

The Company’s subscribed and paid capital amounts to ten million five hundred sixty-six thousand seventy-four (ThCh$10,566,074) which is divided into thirty-six thousand five hundred thirty-five shares (36,535). 21.1 Share capital

At December 31, 2014 and 2013, the Company’s share capital is as follows:

Series

December 31, 2014 December 31, 2013 Subscribed

capital ThCh$

Paid capital ThCh$

Subscribed capital ThCh$

Paid capital ThCh$

Single 10,566,074 10,566,074 10,566,074 10,566,074

Total capital 10,566,074 10,566,074 10,566,074 10,566,074

Common shares Number of

shares Common

shares Own

shares Total

January 1, 2013 36,535 36,535

December 31, 2014 36,535 36,535

21.2 Dividend policy

In conformity with Article No.79 of the Corporate Act and unless otherwise unanimously agreed by shareholders, the public companies are obligated to pay to their shareholders a mandatory minimum cash dividend equivalent to 30% of the profit for the period in proportion to the shares they own or as established by the by-laws in case there are preferred shares, except when accumulated losses from prior periods have to be absorbed. The Company recorded accumulated losses and a loss for the period; therefore, no dividends were paid. 21.3 Shareholders

The Company’s shareholders are as follows:

Name

Percentages December 31,

2014 December 31,

2013

Carlos Ríos Velilla 0.003% 0.003% Global Public Services S.A. 99.997% 99.997%

Total 100.000% 100.000%

59

21.4 Capital management Capital management relates to the administration of the Company’s equity. Inversiones Alsacia S.A. and subsidiary’ capital management has the purpose of maintaining a balance between the cash flows required to carry out its operations (complying with the Concession Agreement) and performing investments in assets that allow maintaining an operation compliance level covering an adequate leverage level thus optimizing the return for shareholders and maintaining a conservative financial position. The Company manages liquidity by following conservative policies and complying with the conditions established in the bond issuance contract. Under these policies, investment are made only in banks or institutions with a rating of AA or higher and with maturities under 180 days. In conformity with the terms of the bond issuance contract, the Company is obligated to maintain a reserve including the funds required to cover 15 days of operating expenses and 1 month of investments in major bus maintenance (overhaul). In addition, these agreements require that the Company, beyond its own policies, maintain a responsible financial position, and the Company is also subject to restrictions to perform investments in property, plant and equipment and pay dividends.

NOTE 22 – OTHER RESERVES At December 31, 2014 and 2013, other reserves are as follows:

Other reserves December 31,

2014 ThCh$

December 31, 2013

ThCh$

Initial balance (1) (1,787,002) (1,787,002)

Total (1,787,002) (1,787,002)

(1) This balance relates to effect of the conversion from Accounting Principles Generally Accepted in

Chile to International Financial Reporting Standards, which resulted in a Reserve in Equity.

60

NOTE 23 – REVENUE

At December 31, 2014 and 2013, revenue is detailed as follows:

Revenue

From January 1 to December 31, 2014 2013

ThCh$ ThCh$

Collection - Troncal N°1 91,668,133 79,770,115

Indemnity for early termination of Concession Agreement 1,047,404 1,047,404

Static and dynamic advertising in buses 652,223 634,497

Total revenue 93,367,760 81,452,016

Revenue corresponds mainly to the payment of services associated with the Concession Agreement and

the lease of static and dynamic advertising in buses. The revenue related to the indemnity received as a

result of the early termination of the Concession Agreement are recognized as the deferred revenue is

amortized on a straight-line basis as discussed in Note 20, Other non-financial liabilities.

NOTE 24 – COST OF SALES

At December 31, 2014 and 2013, the cost of sales is as follows:

Cost of sales


ThCh$ ThCh$

Salaries and benefits (27,798,875) (24,775,009)

Operating costs (35,084,448) (30,814,639)

General expenses (3,900,888) (5,150,758)

Amortization and depreciation (8,959,744) (9,670,179)

Total cost of sales (75,743,955) (70,410,585)

NOTE 25 – ADMINISTRATIVE EXPENSES

At December 31, 2014 and 2013, administrative expenses are as follows:

Administrative expenses


ThCh$ ThCh$

Salaries and benefits (3,674,557) (3,603,366)

General expenses (12,837,692) (7,162,306)

Amortization and depreciation (656,367) (575,844)

Total administrative expenses (17,168,616) (11,341,516)

61

NOTE 26 – OTHER INCOME / OTHER EXPENSES PER FUNCTION

At December 31, 2014 and 2013, other income by type is as follows:

Other income by type


ThCh$ ThCh$

Income from paramedic contribution Mutual C.CH.C. 18,650 34,300

Sale of scrap - 7,996

Indemnity for bus accidents 35,631 112,704

Leases 91,981 88,113 Recovery of expenses 84,381 133,834

Total other income by type 230,643 376,947

At December 31, 2014 and 2013, other expenses by type are as follows:

Other expenses by type


ThCh$ ThCh$

Disposal of assets (overhaul) (262,560) (241,596)

Non-deductible expenses (30,286) (24,082)

Withholding tax (1,787,880) (851,638)

Other expenses by type (1,187) (18,374)

Non-operating fines (41) (5,089)

Total other expenses by type (2,081,954) (1,140,779)

NOTE 27 – FINANCE INCOME

At December 31, 2014 and 2013, finance income is as follows:

Finance income


ThCh$ ThCh$

Interest and adjustments on mutual funds and time deposits 195,553 586,899

Interest on loan with related party (1 and 2) 9,621,653 9,618,915

Total finance income 9,817,206 10,205,814

(1) The loan granted to Express de Santiago Uno S.A. amounts to US$198,709,385 and accrues interest at an annual rate of 8.05% which is payable semi annually.

(2) The loan granted to Panamerican Investment amounts to US$72,118,294.94, accrues interest at an annual rate of 8.05% and is payable on a single installment on August 20, 2018.

62

NOTE 28 – FINANCE COSTS

At December 31, 2014 and 2013, finance costs are as follows:

Finance costs


ThCh$ ThCh$

Bank commissions and expenses (36,320) (271,617)

Finance interest (1) (18,387,007) (18,810,772)

Adjustment of options and forward to market value 394,009 (402,811)

Interest from banks and other financial institutions (769,625) (160,981)

Total finance costs (18,798,943) (19,646,181)

(1) At December 31, 2014 and 2013, this balance includes interest paid and accrued in relation to the

bond issued by the Company.

NOTE 29 –EARNINGS (LOSSES) PER SHARE

At December 31,

Disclosures about earnings (losses) per share

2014 2013

Earning (loss) attributable to equity holders of the parent ThCh$ (19.280.505) (16,564,002)

Earning (loss) available to common shareholders, basic ThCh$ (19.211.951) (16,564,002)

Weighted average number of shares, basic

36,535 36,535

Earnings (losses) per share

(527,73) (453.37)

NOTE 30 – FOREIGN CURRENCY TRANSLATION DIFFERENCES

30.1 Foreign currency translation difference recognized in profit or loss At December 31, 2014 and 2013, gains (losses) resulting from the translation of assets and liabilities in foreign currencies other than the functional currency were recognized in profit or loss as follows: Gains (losses) from translation of assets and liabilities in foreign currency


ThCh$ ThCh$

Assets in foreign currency 15,536,564 5,938,203

Liabilities in foreign currency (28,702,214) (12,273,917)

Total foreign currency translation difference (13,165,650) (6,335,714)

63

30.2 Assets and liabilities in foreign currency At December 31, 2014 and 2013, assets and liabilities in foreign currency are as follows:

Classes of current assets

Currency


2014 2013

ThCh$ ThCh$

Cash and cash equivalents

United States dollars - 4,681,741

Non-adjustable pesos 3,607,264 3,148,824

Subtotal 3,607,264 7,830,565

Other financial assets

Non-adjustable pesos - -

United States dollars - 5,123,085

Subtotal - 5,123,085

Other non-financial assets

Non-adjustable pesos 977,859 836,126

Subtotal 977,859 836,126

Trade and other receivables


Subtotal 11,088,092 7,280,972

Accounts receivable due from related parties


United States dollars 5,248,928 -

Subtotal 10,331,205 38,032,173

Inventories


Subtotal 1,137,851 1,273,293

Current tax assets

Non-adjustable pesos 330,988 735,535

Subtotal 330,988 735,535

64

Classes of non-current assets

Currency


2014 2013

ThCh$ ThCh$

Other financial assets United States dollars - 11,564,671

Subtotal - 11,564,671

Other non-financial assets Non-adjustable pesos 112,083 111,993

Subtotal 112,083 111,993

Accounts receivable due from related parties

United States dollars Non-adjustable pesos

118,579,249 356,676

87,657,433 -

Subtotal 118,935,925 87,657,433

Equity accounted investees Non-adjustable pesos

-

Subtotal

-

Intangible assets other than goodwill Non-adjustable pesos 6,107,236 7,345,218

Subtotal 6,107,236 7,345,218

Property, plant and equipment Non-adjustable pesos 29,415,903 35,549,979

Subtotal 29,415,903 35,549,979

Deferred tax assets Non-adjustable pesos 17,250,760 6,560,217

Subtotal 17,250,760 6,560,217

Classes of financial current liabilities

Currency


2014 2013

ThCh$ ThCh$


Adjustable pesos - -

Non-adjustable pesos 602,459 2,788,140


Subtotal 6,828,898 48,264,641

Other non-financial liabilities United States dollars 953,342 1,047,404

953,342 1,047,404

Trade and other payables

United States dollars 168,606 599,902


Subtotal 13,568,381 12,656,008

Accounts payable due to related parties Non-adjustable pesos 522,686 468,528

Subtotal 522,686 468,528

Other provisions Non-adjustable pesos 4,531,746 2,447,712

Subtotal 4,531,746 2,447,712

Current tax liabilities Non-adjustable pesos - 57,580

Subtotal - 57,580

65

Classes of non-current liabilities

Currency


2014 2013

ThCh$ ThCh$




Subtotal 215,521,742 171,618,958

Other non-financial liabilities United States dollars 3,061,708 4,015,050

3,061,708 4,015,050

NOTE 31 – GAIN (LOSS) FROM ASSETS AND LIABILITIES IN UNIDAD DE FOMENTO

At December 31, 2014 and 2013, the gain (loss) from assets and liabilities in Unidad de Fomento is as follows:

Gain (loss) from assets and liabilities in Unidad de Fomento


ThCh$ ThCh$

Gain (loss) from the adjustment of assets and liabilities in Unidad de Fomento (314,287) (113,445)

Total gain (loss) from assets and liabilities in Unidad de Fomento (314,287) (113,445)

NOTE 32 – CONTINGENCIES

32.1 Pledged shares The Company’s shares were pledged by its shareholders in favor of Banco Santander Chile as the custodian of the guarantees securing the issued bonds. 32.2 Direct guarantees The Company has mortgaged its main assets in favor of Banco Santander Chile as the custodian of the guarantees securing the issued bonds. 32.3 Guarantees from third parties At the reporting date, the Company has not received any significant guarantees from third parties. 32.4 Restrictions As a bond issuer, the Company is obligated to comply with certain obligations and restrictions that secure the issued bonds. Such obligations and restrictions are as follows: 1. The Company needs to maintain its legal existence, rights, privileges, licenses and franchises

significant to carry out its activities.

66

2. The Company needs to comply with all the applicable laws, regulations and standards issued by any Government authority, the timely payment of all taxes, and maintaining its assets in good operating conditions and insured.

3. The Company needs to maintain up to date all Government licenses, authorizations or permits

required to carry out its activities.

4. The Company must provide quarterly and annual financial statements and an activity analysis to the bond holders.

5. The Company must provide periodical additional information regarding the financial evolution of its activities and the changes in reserve accounts in guarantee.

6. The Company is restricted to invest in property, plant and equipment; to enter into debts; to sell

property, plant and equipment; to pay dividends; and to perform transactions with related parties.

7. Minimum balance to be maintained in the Reserve O&M Account: the minimum required balance to be maintained was changed from 1 month to 15 days of operating expenses.

8. Minimum balance to be maintained in the Reserve Overhaul Account: the minimum required balance

to be maintained was changed from 6 months to 1 month of expenses.

At December 31, 2014, the Company has complied with all the aforementioned restrictions. 32.5 Lawsuits

The Company accrues provisions for lawsuits filed by thirds parties affected by damages, injuries or deaths caused by the Company’s operations. At the reporting date, the Company’s lawsuits are as follows:

1. On July 14, 2010, the Company was notified of a high-amount lawsuit for compensation of damages in the amount of Ch$158,000,000 which was filed at the 20

th Civil Court of Santiago

under No.C-5.726-2010 by Hugo Arnaldo Escobar Mellado due to a run over occurred on December 13, 2005. On December 12, 2013, the final ruling rejected the civil lawsuit against the Company. On March 14, 2014, the plaintiff presented an appeal against the resolution; resolution of the appeal is pending. Notwithstanding the above, this procedure is covered by insurance.

2. On August 4, 2011, the Company was notified of a lawsuit for compensation of damages in the amount of Ch$120,070,000 filed at the 17

th Civil Court of Santiago under No.C-14,525-2011 by

Julia Amelia del Carmen Zenteno Rojas due to a run over occurred on August 11, 2007. The final ruling presented on October 24, 2013 sentenced the Company to pay Ch$5,000,000 as compensation for non-pecuniary damage. On March 11, 2014, the plaintiff presented an appeal against the resolution; resolution of the appeal is pending. Notwithstanding the above, this procedure is covered by insurance.

67

3. On April 3, 2011, the Company was notified of a lawsuit for compensation of damages in the amount of Ch$160,000,000 which was filed at the 8

th Civil Court of Santiago under No.C-17.654-

2011 by Rosa Virginia Lemus Salinas due to a run over occurred on October 23, 2008. The final ruling is pending. Notwithstanding the above, this procedure is covered by insurance.

4. On October 29, 2011, the Company was notified of a high amount lawsuit for compensation of

damages in the amount of Ch$50,000,000 filed at the 10th Civil Court of Santiago under No.C-

4.146-2010 by Carlina Alicia Cartagena Méndez due to a run over occurred on May 5, 2009. The final ruling presented on May 13, 2013 sentenced the Company to pay Ch$20,000,000 as compensation for non-pecuniary damage. This ruling was appealed by the Company on June 3, 2013, the resolution is pending. This procedure is not covered by insurance.

5. On May 7, 2012, the Company was notified of a high amount lawsuit for compensation of damages in the amount of Ch$135,531,414 filed at the 7

th Civil Court of Santiago under No.C-

3.905-2012 by Edith Riquelme Lagos due to a run over occurred on July 8, 2011. The final ruling presented on April 15, 2013 sentenced the Company to pay Ch$21,131,414. This ruling was appealed by the Company on May 27 2013, the resolution is pending. Notwithstanding the above, this procedure is covered by insurance.

6. On September 7, 2012, the Company was notified of a high amount lawsuit for compensation of

damages in the amount of Ch$205,800,000 filed at the 21st Civil Court of Santiago under No.C-

14.725-2012 by Enrique Gabriel Serrano Contreras due to a run over occurred on September 22, 2011. The final ruling required the Company to pay ChCh$30,000,000 as compensation for moral damage. This ruling was appealed by the Company on May 23, 2014, the resolution is pending. Notwithstanding the above, this procedure is covered by insurance.

7. On December 21, 2012, the Company was notified of a lawsuit for compensation of damages in the amount of Ch$305,000,000 filed at the 4

th Civil Court of Santiago under No.C-15.175-2012 by

Rodolfo Alejandro Barrera Padilla due to a run over occurred on September 20, 2010. Completion of the evidencing period is pending. Notwithstanding the above, this procedure is covered by insurance.

8. On December 12, 2013, the Company was notified of a high amount lawsuit for compensation of damages in the amount of Ch$461,051,452 filed at the 5


12.316-2013 by Carmen Andrade Carrasco due to an accident occurred on March 23, 2012. Completion of the evidencing period is pending. Management is processing the coverage of the related insurance.

9. On November 11, 2014, the Company was notified of a lawsuit for compensation of damages in the amount of Ch$150,000,000 filed at the 16

th Civil Court of Santiago under No.C-14.590-2014

by Rosa Adriana Campos Plaza due to an accident occurred on July 10, 2013. Completion of the evidencing period is pending. Notwithstanding the above, this procedure is covered by insurance.

68

10. On December 12, 2014, the Company was notified of a high amount lawsuit for compensation of damages in the amount of Ch$105,000,000 filed at the 25


7.397-2014 by Gabriela Ortiz de Zárate Pérez due to an accident that occurred on March 2, 2014. The entry of the cause to the evidencing period is pending. Notwithstanding the above, this procedure is covered by insurance Inversiones Alsacia S.A. and subsidiary are part in other minor legal procedures (as plaintiff and defendant). Management along with the Company’s legal advisors estimate that these lawsuits will not have a significant effect on the consolidated financial statements considering that most of them are covered by insurance and, as a result, the Company will only have to pay the related insurance deductible. Is common practice for lawyers representing victims, when preparing their claims for damages, to seek large compensation amounts.

11. On April 11, 2014, the Internal Revenue Service issued Settlement No. 35 of 2013 for Ch$1,748,268, expected to be paid by the Company as additional taxes associated with commission payments to people neither domiciled nor resident in Chile. This settlement was challenged by the Company before the 2

nd Tax and Customs Court located in the Region

Metropolitana. The case is in the first instance stage and no estimated date for a final ruling exist. .

69

NOTE 33 – SANCTIONS (UNAUDITED)

At December 31, 2014, the Company presents the following discounts related to the regularity and frequency indicators established in the Concession Agreement:

Total discounts for ICR (Regularity compliance index): ThCh$1,535,334. Total discounts for ICF (Frequency compliance index): ThCh$2,104,686. Total discounts for ICPKH (new ICT: service fulfillment ratio): ThCh$2,605,474.

Starting from May 1, 2012, the ICT (service fulfillment ratio) which is a compliance index established in the Concession Agreement replaced the ICPKH (Kilometer-Hour Program Compliance Index) which was in force up to April 30, 2012. In addition, administrative charges for amounts under Unidad de Fomento 1,200 were filed and were subsequently subject to defense and administrative appeal currently in progress.

NOTE 34 – FINANCIAL POSITION

34.1 Debt restructuring generated from the issuance of bond 144-A Inversiones Alsacia S.A., carried out a restructuring of bond 144-A issued in February 2011 under Regulation A and Regulation S of the Securities Act of 1933 in the United States, which Express de Santiago Uno S.A. is guarantor. Both companies, opted to Chapter 11 of Title 11 of the Bankruptcy Code of the United States of America, to present the plan to restructure the outstanding balance of the instrument (US$364,433,466). In August 2014, the bondholders approved the restructuring plan submitted. This fact was confirmed by the Bankruptcy Court of the Southern District of New York US District on December 4, 2014. The new bond was issued on December 17, 2014 and maintained the same annual interest rate of 8% but amended with respect to partial payments and repayment dates. The Indenture was entered into on the same date and it maintains the collateral Trustees: Bank of New York Mellon and Banco Santander Chile, adding to the original guarantors (Express de Santiago Uno S.A., Inversiones Eco Uno S.A. and Panamerican Investments Ltd.), Camden Servicios S.P.A. The new amortization table is as follows:

Maturity date Amortization

US$

12-22-2014 1,000,000

06-22-2015 4,900,000

12-22-2015 2,300,000

06-22-2016 9,350,000

12-22-2016 9,350,000

06-22-2017 10,100,000

12-22-2017 10,100,000

06-22-2018 2,400,000

12-22-2018 16,900,000

12-31-2018 298,033,466

364,433,466

70

As noted in the table above, approximately 82% of total debt was scheduled for expiration on December

31, 2018. If an extension of the Concession Contract entered with the Chilean Ministry of Transport and

Telecommunications is achieved, the repayment of debt outstanding will be conducted according to the

repayment table agreed in the Indenture for the new bond.

Because of that indicated above, it has been concluded that the financial position of Inversiones Alsacia S.A. together with Express de Santiago Uno S.A. had a significant decrease in its financial charge with respect to the original bond, which relates to the generation of cash flows to comply with repayments of principal owed and interest. This will allow allocating greater resources to the operation of the business and ensuring payments to relevant suppliers. Accordingly, the mandatory servicing of the debt will amount to approximately US$8,200,000 plus the related accrued interest, an amount which is significantly lower than the payment that would be paid in 2015 (US$67,500,000 plus the related accrued interest) had the debt not been restructured.

34.2 Cash flow projections The Management of Inversiones Alsacia S.A. and Express de Santiago Uno S.A., has prepared financial projections, both individual and combined, advised by the company FTI, these projections were presented to the bondholders in the process of debt restructuring. Based on these projections, the new bond amortization table was structured, according to the projections, the companies has projected an annual EBITDA to fluctuate between US$66,000,000 and US$79,000,000, during the years 2015 and 2018. 34.3 Gain and loss for 2014 The detail of gain and loss recognized in 2014 is as follows: a) Gross profit increased by 59.6% compared with 2013. b) Revenue increased by 14.6% with respect to 2013, mainly because of the increase in price per

passenger transported, which increased by Ch$17 starting from January 16, 2014.

c) Foreign currency translation difference had an adverse and significant effect on the Company’s comprehensive income of ThCh$13,165,650 and ThCh$6,335,714 for 2014 and 2013, respectively, because of the increase in the exchange rate with respect to U.S. dollars on financial liabilities.

The Company expects that in 2015 the U.S. dollar exchange variation will not generate a significant impact on the Company’s profit or loss, mainly for entering into an exchange rate hedging derivatives agreement in 2015. As shown in the consolidated financial statements of Inversiones Alsacia S.A. and subsidiary at December 31, 2014, the Company records negative equity of ThCh$45,626,803, negative working capital of ThCh$8,671,759 ((without the related current account between related companies) and loss for the period of ThCh$19,211,951. Nevertheless, despite the exposed numbers it is expected an improvement in the indicators and economic and financial performance, in accordance with Note 34.1 and 34.2.

Finally, there are strict financial and management control policies which are regularly analyzed due to the fact that the Company is subject to restrictions and the compliance of certain financial indicators as a result of the obligation related to the 144-A bond.

71

NOTE 35 – ENVIRONMENT (UNAUDITED)

As part of their business strategy, Inversiones Alsacia S.A. and subsidiary have defined the care and respect for the environment as a priority. As a result, they have taken several actions to make operations more efficient thus reducing environmental impacts. Disbursements made during 2014 were as follows:

Company Inversiones Alsacia S.A.

Recognition Cost to sell

Amount disbursed in 2014 ThCh$171,059

Reason for the disbursement Retirement of oil and water used to wash buses

Disbursements made during 2013 were as follows:

Company Inversiones Alsacia S.A.

Recognition Cost to sell

Amount disbursed in 2013 ThCh$183,464

Reason for the disbursement Retirement of oil and water used to wash buses

NOTE 36 – SUBSEQUENT EVENTS

At the issue date of these financial statements, the Company has entered into derivative agreements with Bank of America Merril Lynch to hedge the exchange rate risk of the U.S. dollar against the obligation of bond 144-A. The notional amount was US$70,768,698, maturing on December 22, 2018.

During 2015 and up to the date of the financial statements, the Company has been notified of a number of lawsuits against it which relate mainly to different labor and civil matters. Through the present date, the Company is assessing the origin and possible impact of these lawsuits. As of December 31, 2014, given the status of such notices, the Company has made no provisions for these matters. Particularly, on January 27 and February 10, 2015, the Company has been notified of two lawsuits filed by the Labor Union of Alsacia, hereinafter SIMTAL. The first lawsuit relates to the payment of bonds arising from an old collective bargaining (2007), in which such bonds were not distributed, but subsequently replaced with collective instruments entered into in 2010 and 2012; accordingly, the lawsuit is unfounded and does not represent a risk for the Company. The second lawsuit relates to the payment of compensation for holidays that were allegedly not granted, which is based on debatable assumptions by the Company, believing that the legal defense will be able to disparage such assumptions; accordingly, this lawsuit presents a minor risk to the Company. On March 30, 2015, an addendum was entered into between the Company and Dirección de Transporte Público Metropolitano (DTPM), where both parties agreed the payment of the undisputed portion of the adjustment of price per passenger transported which results the portion in dispute that shall be resolved by the Experts’ Panel, which is indicated in Note 9. Between January 1, 2015 and the date of issuance of these consolidated financial statements, there have been no financial or other events which could significantly affect their interpretation.

inversiones alsacia s.a. and subsidiary · inversiones alsacia s.a. y subsidiaria consolidated...

Documents