INVERSIONES ALSACIA S.A. · Inversiones Alsacia S.A. is controlled by Global Public Services S.A....

INVERSIONES ALSACIA S.A.

Separate Financial Statements

as of December 31, 2015 and 2014

and for the years then ended

(With the Independent Auditor’s Report thereon)


CONTENTS

Independent Auditor’s Report

Separate Classified Statements of Financial Position

Separate Statements of Comprehensive Income per Function

Separate Statements of Changes in Equity

Separate Statements of Cash Flows – Direct Method

Notes to the Separate Financial Statements

Ch$ : Chilean pesos

ThCh$ : Amounts expressed in thousands of Chilean pesos

US$ : Amounts expressed in United States dollars

ThUS$ : Thousands of United States dollars


Separate Financial Statements

December 31, 2015 and 2014

INVERSIONES ALSACIA S.A. SEPARATE CLASSIFIED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2015 AND 2014

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

Statement of financial position

December 31, December 31,

2015 2014

Note ThCh$ ThCh$

Assets

Current assets

Cash and cash equivalents 5 6,589,192 3,607,264

Other current non-financial assets 7 674,000 977,859

Trade and other receivables 8 4,699,931 11,088,092

Accounts receivable due from related parties, current 9 13,573,660 10,331,205

Inventories 10 735,849 1,137,851

Current tax assets 11 585,355 326,760

Total current assets 26,857,987 27,469,031

Non-current assets

Other non-current financial assets 6 3,820,265 -

Other non-current non-financial assets 7 113,883 112,083

Accounts receivable due from related parties, non-current 9 135,963,633 118,935,925

Equity accounted investees 12 7,785,577 7,704,564

Intangible assets other than goodwill 13 4,896,923 6,107,236

Property, plant and equipment 14 20,001,139 22,458,261

Deferred tax assets 15 - 17,250,740

Total non-current assets 172,581,420 172,568,809

Total assets 199,439,407 200,037,840

INVERSIONES ALSACIA S.A. SEPARATE CLASSIFIED STATEMENTS OF FINANCIAL POSITION, CONTINUED

AS OF DECEMBER 31, 2015 AND 2014



Statement of financial position

2015 2014

Note ThCh$ ThCh$

Liabilities and equity

Liabilities

Current liabilities

Other current financial liabilities 16 24,785,893 6,828,898

Trade and other payables 17 12,177,048 12,302,931

Accounts payable due to related parties 9 1,734,307 1,265,380

Employee benefits 18 1,438,206 1,265,450

Other short-term provisions, current 19 9,276,797 4,531,746

Other current non-financial liabilities 20 1,047,404 953,342

Total current liabilities 50,399,655 27,147,747

Non-current liabilities

Other non-current financial liabilities 16 241,275,349 215,521,742

Other non-current non-financial liabilities 20 1,920,242 3,061,708

Total non-current liabilities 243,195,591 218,583,450

Total liabilities 293,595,246 245,731,197

Equity

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

Accumulated deficit (102,934,911) (54,472,429)

Other reserves 21 (1,787,002) (1,787,002)

Equity attributable to owners of the parent (94,155,839) (45,693,357)

Non-controlling interest - -

Total equity (94,155,839) (45,693,357)

Total liabilities and equity 199,439,407 200,037,840

INVERSIONES ALSACIA S.A. SEPARATE STATEMENTS OF COMPREHENSIVE INCOME PER FUNCTION

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014


From January 1 to December 31,

Statement of comprehensive income

2015 2014

Note ThCh $ ThCh $

Revenue 23 87,845,973 93,367,760

Cost of sales 24 (72,963,036) (75,743,955)

Gross profit 14,882,936 17,623,805

Other income per function 26 1,864,238 230,643

Administrative expenses 25 (16,364,583) (17,168,616)

Other expenses per function 26 (1,257,020) (2,081,954)

Finance income 27 12,062,896 9,817,206

Finance cost 28 (22,062,971) (18,798,943)

Share of profit of equity accounted investees (4,319,477) (1,850,729)

Profit or loss for index-adjusted unit (293,334) (314,287)

Foreign currency translation difference 30 (15,724,427) (13,165,650)

Loss before tax (31,211,742) (25,708,525)

(Expenses) Income tax expense 15 (17,250,740) 6,428,020

Loss (48.462,482) (19,280,505)

Loss attributable to

Owners of the parent (48.462,482) (19,280,505)

Non-controlling interests - -

Loss (48.462,482) (19,280,505)

Loss per share

Basic loss per share

Basic loss per share – continuing operations 29 (1,326.37) (527.73)

Basic loss per share (1,326.37) (527.73)

Diluted loss per share

Dilutes loss per share – continuing operations (1,326.37) (527.73)

Diluted loss per share (1,326.37) (527.73)

Other comprehensive income - -

Total comprehensive income (48.462,482) (19,280,505)

INVERSIONES ALSACIA S.A. SEPARATE STATEMENTS OF CHANGES IN EQUITY



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 as of January 1, 2015 10,566,074 - - (1,787,002) (54,472,429) (45,693,357) - (45,693,357)

Changes in equity

Comprehensive income

Loss - - - - (48,462,482) (48,462,482) - (48,462,482)

Other comprehensive income - - - - - - - -

Comprehensive income - - - - (48,462,482) (48,462,482) - (48,462,482)

Total changes in equity - - - - (48,462,482) (48,462,482) - (48,462,482)

Balance as of December 31, 2015 10,566,074 - - (1,787,002) (102.934.911) (94,155,839) - (94,155,839)

INVERSIONES ALSACIA S.A. SEPARATE STATEMENTS OF CHANGES IN EQUITY, CONTINUED


The accompanying notes are an integral part of these separate financial statements

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

Changes in equity

Comprehensive income Loss - - - - (19,280,505) (19,280,505) - (19,280,505) Other comprehensive income - - - - - - - -

Comprehensive income - - - - (19,280,505) (19,280,505) - (19,280,505)

Other changes - - - - 3,523,143 3,523,143 - 3,523,143

Total other changes - - - - 3,523,143 3,523,143 - 3,523,143

Total changes in equity - - - - (15,757,362) (15,757,362) - (15,757,362)

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

INVERSIONES ALSACIA S.A. SEPARATE STATEMENTS OF CASH FLOWS



Separate statement of cash flows 2015 2014

ThCh$ ThCh$

Receipts from operating activities:

Cash receipts from sale of goods and rendering of services 92,333,827 89,432,178

Other cash receipts from operating activities 1,917,540 94,011

Payments for operating activities:

Cash payments to suppliers for goods and services (49,598,529) (54,727,119)

Cash payments to and on behalf of employees (32,808,151) (31,999,702)

Other cash payments for operating activities (178,876) -

Net cash from operating activities 11,665,811 2,799,368

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

Loans to related parties - (63,578,368)

Receipt from related parties - 91,327,183

Sale (acquisition) of property, plant and equipment (2,089,516) (374,419)

Other receipts to acquire equity or debt securities belonging to other entities - 323,797,214

Interest received - 43,421

Net cash from (used in) investing activities (2,089,516) 26,271,683

Loans from related parties 12,298,444 -

Payments derivative financial instrument (2,501,852) -

Repayment of loans (4,198,186) (19,951,641)

Interest paid (12,192,773) (13,342,711)

Net cash (used in) financing activities (6,594,367) (33,294,352)

Net increase (decrease) in cash and cash equivalents before changes in exchange rate 2,981,928 (4,223,301)

Cash and Cash Equivalents as of January 1 3,607,274 7,830,565

Cash and cash equivalents as of December 31 6,589,192 3,607,264


CONTENTS

Page

NOTE 1 – REPORTING ENTITY ------------------------------------------------------------------------------------------------------------ 3

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------------------------------------- 4 2.1 Basis of preparation -------------------------------------------------------------------------------------------------------------- 4 2.2 Basis of measurement ----------------------------------------------------------------------------------------------------------- 5 2.3 Functional and presentation currency ---------------------------------------------------------------------------------------- 5 2.4 Use of estimates and judgments ---------------------------------------------------------------------------------------------- 5 2.5 New accounting pronouncements -------------------------------------------------------------------------------------------- 7 2.6 Transactions in foreign currency ---------------------------------------------------------------------------------------------- 8 2.7 Investments ------------------------------------------------------------------------------------------------------------------------- 8 2.8 Property, plant and equipment ------------------------------------------------------------------------------------------------- 8 2.9 Intangible assets other than goodwill ---------------------------------------------------------------------------------------- 9 2.10 Inventories ------------------------------------------------------------------------------------------------------------------------ 10 2.11 Cash and cash equivalents --------------------------------------------------------------------------------------------------- 10 2.12 Employee benefits -------------------------------------------------------------------------------------------------------------- 10 2.13 Provisions ------------------------------------------------------------------------------------------------------------------------- 10 2.14 Other non-financial liabilities ------------------------------------------------------------------------------------------------- 11 2.15 Financial instruments ----------------------------------------------------------------------------------------------------------- 11 2.16 Derivative financial instruments --------------------------------------------------------------------------------------------- 12 2.17 Impairment ------------------------------------------------------------------------------------------------------------------------ 12 2.18 Leases ----------------------------------------------------------------------------------------------------------------------------- 13 2.19 Share capital --------------------------------------------------------------------------------------------------------------------- 14 2.20 Dividend policy ------------------------------------------------------------------------------------------------------------------- 14 2.21 Revenue recognition ----------------------------------------------------------------------------------------------------------- 14 2.22 Overhaul --------------------------------------------------------------------------------------------------------------------------- 15 2.23 Income tax and deferred taxes ---------------------------------------------------------------------------------------------- 15

NOTE 3 – DETERMINATION OF FAIR VALUES ------------------------------------------------------------------------------------ 17 4.1 Concentration and management of credit risk --------------------------------------------------------------------------- 18 4.2 Market risk ------------------------------------------------------------------------------------------------------------------------ 19 4.3 Liquidity risk ---------------------------------------------------------------------------------------------------------------------- 20

NOTE 5 – CASH AND CASH EQUIVALENTS ---------------------------------------------------------------------------------------- 21

NOTE 6 – OTHER FINANCIAL ASSETS ----------------------------------------------------------------------------------------------- 22

NOTE 7 – OTHER NON-FINANCIAL ASSETS --------------------------------------------------------------------------------------- 23

NOTE 8 – TRADE AND OTHER RECEIVABLES ------------------------------------------------------------------------------------ 23

NOTE 9 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES ------------------------------------------------- 25 9.1 Accounts receivable due from related parties ---------------------------------------------------------------------------- 25 9.2 Accounts payable to related parties ---------------------------------------------------------------------------------------- 27 9.3 Transactions with related parties -------------------------------------------------------------------------------------------- 27 9.4 Payments to the Board of Directors and key management personnel --------------------------------------------- 28

NOTE 10 – INVENTORIES ----------------------------------------------------------------------------------------------------------------- 29 NOTE 11 – CURRENT TAX ASSETS --------------------------------------------------------------------------------------------------- 29

NOTE 12 – EQUITY-ACCOUNTED INVESTEES ------------------------------------------------------------------------------------ 30

NOTE 13 – INTANGIBLE ASSETS OTHER THAN GOODWILL ---------------------------------------------------------------- 31

NOTE 14 – PROPERTY, PLANT AND EQUIPMENT ------------------------------------------------------------------------------- 33

NOTE 15 – INCOME TAX AND DEFERRED TAXES ------------------------------------------------------------------------------- 35

NOTE 16 – OTHER FINANCIAL LIABILITIES ---------------------------------------------------------------------------------------- 37 NOTE 17 – TRADE AND OTHER PAYABLES --------------------------------------------------------------------------------------- 45


CONTENTS, CONTINUED

NOTE 18 – PROVISION FOR EMPLOYEE BENEFITS ---------------------------------------------------------------------------- 45

NOTE 19 – OTHER CURRENT PROVISIONS ---------------------------------------------------------------------------------------- 45

NOTE 20 – OTHER NON-FINANCIAL LIABILITIES -------------------------------------------------------------------------------- 46

NOTE 21 – SHARE CAPITAL ------------------------------------------------------------------------------------------------------------- 47 21.1 Share capital --------------------------------------------------------------------------------------------------------------------- 47 21.2 Dividend policy ------------------------------------------------------------------------------------------------------------------- 47 21.3 Capital management ----------------------------------------------------------------------------------------------------------- 47

21.4 Other reserves----------------------------------------------------------------------------------------------------------------------- 48

NOTE 23 – REVENUE ----------------------------------------------------------------------------------------------------------------------- 50

NOTE 24 – COST OF SALES ------------------------------------------------------------------------------------------------------------- 51

NOTE 25 – ADMINISTRATIVE EXPENSES ------------------------------------------------------------------------------------------- 51

NOTE 26 – OTHER INCOME / OTHER EXPENSES PER FUNCTION --------------------------------------------------------- 52

NOTE 27 – FINANCE INCOME ----------------------------------------------------------------------------------------------------------- 52

NOTE 28 – FINANCE COSTS ------------------------------------------------------------------------------------------------------------- 53

NOTE 29 – EARNINGS (LOSSES) PER SHARE ------------------------------------------------------------------------------------ 53

NOTE 30 – FOREIGN CURRENCY TRANSLATION DIFFERENCES --------------------------------------------------------- 53

NOTE 31 – CONTINGENCIES ------------------------------------------------------------------------------------------------------------ 53 31.1 Pledged shares ------------------------------------------------------------------------------------------------------------------ 53 31.2 Direct guarantees --------------------------------------------------------------------------------------------------------------- 54 31.3 Guarantees from third parties ------------------------------------------------------------------------------------------------ 54 31.4 Covenants ------------------------------------------------------------------------------------------------------------------------- 54 31.5 Lawsuits --------------------------------------------------------------------------------------------------------------------------- 54

NOTE 32 – SUBSEQUENT EVENTS ---------------------------------------------------------------------------------------------------- 55


NOTES TO THE SEPARATE FINANCIAL STATEMENTS

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NOTE 1 – REPORTING ENTITY

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. Inversiones Alsacia S.A., was recorded on January 27, 2005 in the securities register of the Chilean Superintendence of Securities and Insurance (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. 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. Inversiones Alsacia S.A. prepares its separate financial statements for their presentation before the Superintendence of Securities and Insurance as reporting entity; accordingly, the Company prepares consolidated financial statements. 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.

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 Ministerio de

Transportes y Telecomunicaciones (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 total term of the

concession is 156 months, for the application of provisions in Article No.3.4.4.2.1 of the bidding bases.

On October 22, 2005, the Company started to provide passenger public transport services.



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a) Amendments to the Concession Agreement: Between the period from June 2006 through December 2010, a series of amendments and addendums have been entered into to establish changes in the revenue system, payment of the operative technical reserve, authorize the increase in the bus fleet, modify routes, with the main purpose of ensuring the continuity and adequate coverage of the public transportation services and a method to compensate the demand. New concession agreement On December 22, 2011, a new concession agreement is entered into with the Chilean Ministry of Transport and Telecommunications (MTT), superseding the previous one with a life from May 2012 to October 2018 (concession end date). As part of the agreements established as part of the new agreement, the Government and the Company agreed 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. NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been used in the preparation of these separate financial statements and have been applied consistently to all periods presented in these separate financial statements. 2.1 Basis of preparation The separate financial statements of Investments Alsancia S.A. and subsidiary as of December 31, 2015 and 2014, 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.

(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 information contained in these separate financial statements is the responsibility of the Board of Directors of Inversiones Alsacia S.A. which approved such separate financial statements in March 30, 2016.



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The separate financial statements reflect fairly the Company’s financial position and equity as of December

31, 2015 and 2014 as well as the results of its separate operations, changes in equity and cash flows for

the year then ended.

The separate classified statement of financial position as of December 31, 2015 as well as the

accompanying notes are presented on a comparative basis to the balances as of December 31, 2014; the

separate statement of comprehensive income per function, separate statement of cash flows and the

separate statement of changes in equity are presented for the year ended as of December 31, 2015 and

2014.

The translation of these financial statements is provided as a free translation from the Spanish language

original, which is the official and binding version. Such translation has been made solely for the convenience

of non-Spanish readers.

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except for derivative financial

instruments at fair value.

These financial statements are presented in thousands of Chilean pesos and have been prepared from the

accounting records maintained by Inversiones Alsacia S.A.

2.3 Functional and presentation currency

The separate financial statements prepared by the Company are stated using the currency of the primary economic environment in which the entity operates (functional currency). The functional currency of the Company is the Chilean peso, which is also the presentation currency of the separate financial statements. All financial information is presented in thousands of Chilean pesos and has been rounded to the nearest number (ThCh$).

2.4 Use of estimates and judgments In preparing these separate financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying judgments are reviewed on an ongoing basis. Accounting estimate reviews are recognized prospectively. (i) Judgments

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the separate financial statements is included in the following notes:

Note 14 : Estimated useful lives of property, plant and equipment Note 24 : Lease classification Note 31.5 : Probability of occurrence and uncertain amount of liabilities or contingencies



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(ii) Assumptions and uncertainties in estimates

The information about assumptions and estimation uncertainties is included in the following note:

Note 13 : Key assumptions for determining the expected income for services rendered used to amortize the operating technical reserve.

Note 15 : Recognition of deferred tax assets; availability of future taxable profit. Measurement of fair values A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. Management has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values. Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Company's Senior Management. When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Note 3, Determination of fair values.



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2.5 New accounting pronouncements

2.5.1 New accounting standards

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

New IFRS Mandatory application 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, 2018. Early adoption is permitted.

IFRS 16, Leases Annual periods beginning on or after January 1, 2019. Early adoption is permitted.

Amendments to IFRS

IAS 1 Presentation of financial statements: Disclosure Initiative

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

IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization.


IAS 27, Separate Financial Statements, IFRS 10, Consolidated Financial Statements and IFRS 12, Disclosures of Interests in Other Entities. Applying the consolidation exception.

Annual periods beginning on or after January 1, 2016.

IAS 41, Agriculture, and IAS 16, Property, Plant and Equipment: Bearer plants.


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.

Mandatory date deferred indefinitely.

IFRS 11, Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations.


The Company does not anticipate the early adoption of these standards. 2.5.2 New accounting standards early adopted The following new standard has been applied in the accompanying separate financial statements:

Amendment to IAS 27, Separate Financial Statements: Equity Method in Separate Financial Statements – New option for subsidiaries, associates and joint ventures

On August 12, 2014 the IASB issued this amendment which allows the use of the equity method in separate financial statements, and its application not only for associates or joint ventures, but also for subsidiaries. The introduction of the equity method corresponds to a third option (in addition to the currently existing cost and fair value options) which is likely to increase the diversity for reporting practices.



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2.6 Transactions in foreign currency

Transactions in foreign currencies and Unidad de Fomento (UF) are translated into the functional currency at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies and indexation-adjusted units at the date of the statement of financial position are translated into the functional currency at the exchange rate. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined.

The balances of assets and liabilities in foreign currency and UF have been translated to Chilean pesos using the following exchange rates:

Currency

As of December 31, 2015


United States dollar US$ 710.16 606.75

Unidad de fomento UF 25,629.09 24,627.10

2.7 Investments

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In the separate financial statements interest in the subsidiaries is recorded using the equity method of accounting, which is initially recognized at cost and includes transaction costs. Subsequent to initial recognition, the separate financial statements include the Company's interests of share of the profit or loss and OCI of equity accounted investees. Direct subsidiaries are as follows:

2015 2014

Inversiones Lorena S.p.A. 100.00% 100.00% Inversión Eco Uno S.A. 21.59% 21.59%

2.8 Property, plant and equipment

a) Recognition and measurement

Items of property, plant and equipment are measured 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 Company 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.



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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 years

Maximum useful life in years

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. 2.9 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.



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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. 2.10 Inventories

Inventories are measured at lower of cost or net realizable value. This include expenditure incurred in acquiring the inventories required to bringing them to their existing location and condition, net of commercial discounts and other discounts. Cost is determined using the weighted average method. 2.11 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. 2.12 Employee benefits

Employee benefit obligations correspond to accrued vacations recognized as obligations as an employee provides services to the employer. These obligations are measured on an undiscounted basis and are recognized as expenses as the related services is provided. Such amounts are recognized as current trade and other payables.

The Company records no other benefit plans for its employees. 2.13 Provisions

Provisions are recognized when the Company has a present obligation legal or constructive as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(i) Legal matters

Provisions for litigation and lawsuits are recorded in the event of legal actions, Government investigations, proceeding or other pending actions that are likely to be filed against the Company in the future, as a result of past events, and it is probable that an outflow of economic benefits will be required to settle the obligation, and when the obligation can be estimated reliably.



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(ii) Environmental matters

Disbursements related to environmental preservation, which relate to income for future and current operations, are recognized as costs or assets, as appropriate. Disbursements related to operations conducted in past that do not relate to current or future income, are recognized in profit or loss. The recognition of these provisions is consistent with the identification of a related obligation containing environmental remediation, for which the Company has proper information to determine a reasonable estimate of the related cost. Subsequent adjustments to estimates, if required, are conducted when obtaining further information.

2.14 Other non-financial liabilities

The deferred revenue related to the indemnity received due to the change in the concession agreement are 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 SVS. 2.15 Financial instruments The Company classifies non-derivative financial assets under Loans and receivables. The Company classified non-derivative financial liabilities under Other financial liabilities. (i) Non-derivative financial assets and financial liabilities – Recognition and derecognition The Company initially recognizes loans and receivables on the date that they are originated. All other financial assets and financial liabilities are initially recognized on the trade date. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial assets that is created or retained by the Company is recognized as a separate asset or liability. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

Financial assets and financial liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. (ii) Non-derivative financial assets- Measurement (ii.1) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Held-to-maturity financial assets are initially recognized at fair value plus any transaction cost directly attributable. Subsequent to initial recognition, these are measured at amortized cost using the effective interest method.



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Loans and receivables comprise cash and cash equivalents, trade and other receivables, and other financial assets. Held-to-maturity financial assets are initially recognized at fair value plus any transaction cost directly attributable. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method. (iii) Non-derivative financial liabilities – Measurement Non-derivative financial liabilities correspond to other financial liabilities (bank borrowings), trade and other payables and payables due to related entities, which are initially recognized at fair value less directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method. 2.16 Derivative financial instruments The Company holds derivative financial instruments to hedge its foreign currency risk exposure. Embedded derivatives are separated from the host contract and accounted for separately if certain criteria are met. Derivatives are initially recognized at fair value; any directly attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss. Derivative financial instruments are recognized at cost if their fair value cannot be measured reliably. The fair value of forward exchange contracts is based using current forward contract exchange rates with similar maturities. In conformity with the treasury department policy, the Company has no derivative financial instruments held-for-trading. 2.17 Impairment

(i) Non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. 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 recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, 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. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.



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Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (ii) Non-derivative financial assets

Financial assets not classified as at fair value through profit or loss, are assessed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, disappearance of an active market for a security and observable data that indicate there is a measurable decrease in expected cash flows of a group of assets.

a. Financial assets measured at amortized cost

The Company considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. The impairment estimate is calculated considering a percentage of the current debt, as well as the total of balances due exceeding 180 days. Trade and other receivables are written-off when lawyers inform that all collection instances have been exhausted.

2.18 Leases

(i) Determining whether an arrangement contains a lease

At inception of an arrangement, the Company determines whether the arrangement is or contains a lease. This will apply if the following two points are compiled:

• compliance with the contract depends on the use of specific assets; and • the contract grants the right to use the asset.

At inception or on reassessment of an arrangement that contains a lease, the Company separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company’s incremental borrowing rate.



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(ii) Finance lease

Assets held by the Company under leases (lessee) that transfer to the Company substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. When the Company is the lessor, it accounts for a finance lease by recognizing a receivable, when applicable, with the sale of an asset with credit. Minimum lease payments made under finance leases are apportioned 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. Finance income is recognized by a lessor under receivables and distributes lease payments received to reduce the carrying amount of receivables.

(iii) Operating lease

Assets held under other leases are classified as operating leases and are not recognized in the Company’s statement of financial position. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease. 2.19 Share capital Ordinary shares are classified as equity. If exist, incremental costs attributable to the issue of new shares are recognized as a deduction from revenue obtained in equity, net of tax. Discretionary dividends thereon are recognized as distributions within equity upon approval by the Company’s shareholders.

2.20 Dividend policy

Article No.79 of the Chilean Public Company Act establishes that, except otherwise unanimously agreed in at the related shareholders meeting, shareholders’ corporations must annually distribute as cash dividend to their shareholders, at pro rata of their interests or in the proportional amount established by the Company’s by-laws, in the event preference shares exist, at least 30% of net profit for each year. In the case of closely-held corporation, they will follow the provisions in their by-laws; if none, the standards stated above will be follow. 2.21 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 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 SVS.



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c) 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. recognizes 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 recorded when the service has been totally provided. A service is deemed to have been rendered when it is accepted by the client. 2.22 Overhaul

Costs incurred in major overhaul that involves extending the useful life of a tapped good (overhauls) are capitalized and depreciated until the 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. 2.23 Income tax and deferred taxes

Income tax expense comprises current and deferred tax. Current taxes and deferred taxes are recognized in profit or loss. (i) Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met. The Company determines income tax on the tax rate determined based on current Chilean tax regulations included in the Income Tax Law for each period. On September 29, 2014, the Tax Reform Law was enacted, which, among other aspects, defines the by 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 opt for 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. 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. The default tax system applicable to the Company starting from January 1, 2017 is the partially-integrated system.



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Likewise, the Company 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. The Company shall be subject to the tax system assigned to them during, at least, five consecutive years. After this period the Company will able to change the tax system, and should be subject to such new system for at least five consecutive years. (ii) Deferred tax Deferred tax is recognized for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax assets and liabilities are offset in the statement of financial position if there is a legal right to offset assets and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred tax assets and liabilities are offset only if certain criteria are met. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date, as follows:

Year Tax rate

2014 21.0%

2015 22.5%

2016 24.0%

2017 25.5%

2018 27.0%

(iii) Tax exposures In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.



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NOTE 3 – DETERMINATION OF FAIR VALUES

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Administration and Finance Management used third party information to measure fair values, then assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Derivative financial instruments are measured at fair value based on Level 2 variables. The Company has no financial instruments measured in Levels 1 and 3. The carrying amount of financial instruments formed by cash, trade and other receivables, other financial liabilities, trade and other payables, receivables due from related parties and trade payables due to related parties is an approximation to the fair value, due to the short-term maturity of such financial instruments. Accounting classifications and fair values

As of December 31, 2014 and 2015, the detail of the carrying amounts and fair values of financial assets and liabilities is the following. The following table does not include information on the fair value hierarchies for financial assets and liabilities not measured at fair value if the carrying amount is an approximation to the fair value:

As of December 31, 2015 As of December 31, 2014

Carrying amount Fair value

Carrying amount Fair value

ThCh$ ThCh$ ThCh$ ThCh$

Current financial assets Cash and cash equivalents 6,589,192 6,589,192 3,607,264 3,607,264 Trade and other receivables 4,699,931 4,699,931 11,088,092 11,088,092 Receivables due from related parties 13,573,660 13,573,660 10,331,205 10,331,205 Non-current financial assets Other financial assets 3,820,265 3,820,265 - - Receivables due from related parties 135,963,633 135,963,633 118,935,925 118,935,925 Total financial assets 164,646,681 164,646,681 143,962,486 143,962,486

Current financial liabilities Other financial liabilities 24,785,893 24,785,893 6,828,898 6,828,898 Trade and other payables 12,117,048 12,117,048 12,302,931 12,302,931 Payables due to related parties 1,734,307 1,734,307 1,265,380 1,265,380 Non-current financial liabilities Other financial liabilities 241,275,349 241,275,349 215,521,742 215,521,742 Total financial liabilities 279,912,597 279,912,597 235,918,951 235,918,951



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NOTE 4 – FINANCIAL RISK MANAGEMENT The Company is exposed to the risks related to the industry in which it performs business and the risks related to the Company's financial structure, mainly related to the credit, market and liquidity risks. Senior Management oversees the risk management controlling the compliance with the regulatory framework in relation to the financial risk. 4.1 Concentration and management of credit risk Approximately 99.4% of the Company’s revenue results from the services provided to the Chilean Government as per the concession agreement in effect with the Ministerio de Transportes y Telecomunicaciones. The Ministerio de Transportes y Telecomunicaciones in turn delegates the payment function to the Administrador Financiero del Transantiago. 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 risk of collection is very low as the final client is the MTT, which pays for the services received within a 15-day period based on the Concession Agreement. In addition, approximately 0.6% 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. Credit quality of financial assets Financial assets held by the Company are classified in two large groups: i) Commercial loans with clients – for purposes of measuring their risk they are classified based on

aging and allowances for doubtful accounts are accrued for; ii) Financial investments held in appropriate financial institutions classified according to the Company's

policies.

Current assets

As of December 31, 2015 ThCh$

As of December 31, 2014 ThCh$

Cash and cash equivalents 6,337,530 2,146,687

Total 6,337,530 2,146,687

Trade and other receivables without credit rating, current 4,699,931 11,088,092

Total 4,699,931 11,088,092

None of the financial assets pending maturity have been negotiated during the period.



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4.2 Market risk The main market risks the Company is exposed to are price risk, exchange rate risk, inflation risk and interest rate risk. Foreign currency exchange risks The Company is exposed to exchange risks arising from the net exposure assets and liabilities in foreign currencies arising mainly on other financial liabilities (bond placement). Assets and liabilities per currency at each reporting date are as follows:

Currency

As of December 31 As of December 31 2015 2014

ThCh$ ThCh$

Cash and cash equivalents US dollars 1,161,283 -

Receivables due from related parties US dollars 142,668,597 123,828,177

Other financial liabilities US dollars (260,201,056) (216,422,907)

Trade and other payables US dollars (41,092) (168,606)

Other non-financial liabilities US dollars - (3,061,708)

Total net liability position (116,412,268) (95,825,044)

In order to cover the exchange risk arising from the obligation of bond 144-A for the notional amount of US$70,768,698 (recognized in other financial liabilities), the Company entered into derivative instruments with Bank of America Merrill Lynch the reduce the Company's exposure in the event of a depreciation of the Chilean peso in a range from 650 to 725 Chilean pesos per US$1 (see Note 6). The Company is assessing the program structure for hedging the foreign currency mismatches, given the Company's policy will continue to maintain a proper hedging of possible currency mismatches. The exchange rate affects the Company’s separate 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. Exchange rate sensitivity analysis As of December 31, 2015, the effect of exchange differences recognized in the statement of comprehensive income related to assets and liabilities denominated in foreign currency amount to a loss of ThCh$15,724,226 (loss of ThCh$13,237,664 in 2014). A variation of 100 base points in the exchange rate would have increased or decreased equity in 2015 by ThCh$1,175,735 after taxes (ThCh$958,250 in 2014).



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Price risk 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. As a result, the adjustment of revenue closely reflects the composition of costs. As of 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

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 of 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, in case of decreases in fuel prices. Interest rate risk Interest rate risk arises from financing sources with variable interest rates, which may increase the Company's finance expenses if significant fluctuation exist. 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. 4.3 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 that the Company, beyond its own policies, maintain a responsible financial position, and it is subject to limitations to invest in property, plant and equipment and pay dividends. The Company’s cash flow generation has been sufficient to meet is financial obligations. In addition, no

significant investments have been made or are planned to be made in the medium term, except for investments in major maintenance (overhauls).



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As of December 31, 2015 and 2014, the detail of contractual maturities of financial liabilities is as follows:

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.

As of December 31, 2015 and 2014, cash and cash equivalents are as follows:

Classes of cash and cash equivalents Interest

rate Currency

December 31, December 31, 2015 2014

ThCh$ ThCh$

Cash on hand - Ch$ 4,652 7,604

Cash in bank - Ch$ 247,010 1,452,973

Mutual funds (1) Ch$ 5,176,247 2,146,687

Time deposits (2) - U.S. dollar 1,161,283 -

Total cash and cash equivalents - 6,589,192 3,607,264

(1) As of December 31, 2015, cash and cash equivalents correspond to 2,842,463.39 deposits from the

“Ejecutiva” series of Ch$1,821.04. As of December 31, 2014, cash and cash equivalents correspond to 6,565.06 from the “Money Market” series of Ch$4,570.22 and 1,198,328.58 deposits from the “Ejecutiva” series of Ch$1,766.37.

(2) As of December 31, 2015, the Company has fixed-term bank deposits amounting to USD1,635,117.93 maturing on January 19, 2015.

Contractual cash flows


Carrying amount

Less than 1 year

Between 2 and 5 years

Over 5 years


Other financial liabilities 266,061,242 25,672,718 297,098,966 -

Trade and other payables 12,117,048 12,117,048 - -

Payables due to related parties 1,734,307 1,734,307 - -


Other financial liabilities 222,350,640 7,325,274 265,354,954 -

Trade and other payables 12,302,931 12,302,931 - -

Payables due to related parties 1,265,380 1,265,380 - -



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Term deposits were performed in December 2015 and its maturity is part of the current regulation to consider it as cash equivalent:

Type of investment Bank Currency

Time deposit amount

US$

December 31, 2015 ThCh

Current

Time deposit Santander Chile US$ 913,516.61 648,743

Time deposit Santander Chile US$ 721,601.32 512,540

Total 1,161,283

As of December 31, 2015 and 2014, balances of cash and cash equivalents per currency are as follows:

Currency

December 31 December 31

2015 2014

ThCh$ ThCh$

Ch$ 5,427,909 3,601,300

US$ 1,161,283 5,964

Total 6,589,192 3,607,264

NOTE 6 – OTHER FINANCIAL ASSETS

The fair value of hedge contracts is based on current exchange rates of contracts with similar maturities.

As of December 31, 2015, current derivative financial instruments are composed of US dollar hedge as

shown below.

Hedge rights

Capital ThCh$

Fair value adjustment

Other financial assets

ThCh$ ThCh$

Bank of America Merrill Lynch 112,857,469 116,677,734 3,820,265

Total other financial assets, non-current 3,820,265



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NOTE 7 – OTHER NON-FINANCIAL ASSETS

As of December 31, 2015 and 2014, other non-financial assets are as follows:

Other non-financial assets December 31,

2015 December 31,

2014

Current Advanced insurance 446,506 652,892 Other advances expenses 138,485 250,288 Guarantee certificates 89,009 74,679

Total other non-financial assets – current 674,000 977,859

Non-current Lease guarantee 113,883 112,083

Total other non-financial assets – non-current 113,883 112,083

Total other non-financial assets 787,883 1,089,942

NOTE 8 – TRADE AND OTHER RECEIVABLES As of December 31, 2015 and 2014, trade and other receivables are as follows:

Trade and other receivables


ThCh$ ThCh$

Domestic trade receivables 4,554,508 10,759,656

Accumulated impairment on trade receivables (52,912) (1,178)

Trade receivables – net 4,501,596 10,758,478

Other receivables:

Personnel loans 101,769 121,350

Legal withholdings AFT (at the Court's request) - 190,134

Other receivables 96,566 18,130

Total trade and other receivables 4,699,931 11,088,092

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.



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As of December 31, 2015 and 2014, the balances of trade and other receivables per type of currency are

as follows:

Currency


2015 2014

ThCh$ ThCh$

Chilean peso 4,699,931 11,088,092

Total trade and other receivables 4,699,931 11,088,092

Trade and other receivables classified by category are as follows:

December 31, December 31, Category 2015 2014 ThCh$ ThCh$

Passenger transport (1) 3,414,830 3,274,599 PPT AIPK adjustment mechanism (2) 651,761 7,182,159 Provision for AIPK Income (3) 478,649 -

Advertising 82,810 303,721

Other 71,881 327,613

Total trade receivables 4,669,931 11,088,092

(1) Provision for revenue from payments received between December 15 and 31, 2015 and December

15 and 31, 2014, which were paid by the Transantiago Financial Administrator during January 2016 and January 2015, 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 as of December 31, 2015, 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.

As of December 31, 2015 and 2014, the Company’s trade receivables are as follows:

Maturity of trade and other receivables


ThCh$ ThCh$

Maturity under three months 4,699,931 11,088,092

Maturity between three and twelve months - -

Total trade receivables, current 4,699,931 11,088,092



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During the years ended December 31, 2015 and 2014, the detail of receivable impairment movements is

the following:

2015

2014 ThCh$ ThCh$

Opening balance (1,178) (1,178)

Impairment for the period (51,734) -

Impairment reversal - -

Closing balance (52,912) (1,178)

NOTE 9 – BALANCES AND TRANSACTIONS WITH RELATED PARTIES

9.1 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 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. As of December 31, 2015 and 2014, accounts receivable due from related parties are as follows: December 31, December 31, 2015 2014 Tax ID No. Company Country Relationship Currency ThCh$ ThCh$

Current

99.577.390 - 2 Express de Santiago Uno S.A. (2) Chile Affiliate US$ 7,612,526 5,242,823

99.577.390 – 2 Express de Santiago Uno S.A. (2) Chile Affiliate Ch$ 4,957,494 4,439,843

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

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

76.416.052-5 Lavabus Chile S.P.A. Chile Common owner Ch$ 1,040 -

76.195.710 - 4 Inversiones Eco Uno S.A. Chile Subsidiary Ch$ 173,337 179,336

76.099.998-9 Camden Servicios S.P.A.(1) Chile Affiliate Ch$ 513,237 450,072

76.284.543-1 Recticenter SpA (4) Chile Common director Ch$ 303,000 -

Total accounts receivable due from related parties, current 13,573,660 10,331,205

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

logistic administration services contract.



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As of December 31, 2015 and 2014, accounts receivable from related parties are as follows: December 31, December 31, 2015 2014 Tax ID No. Company Country Relationship Currency ThCh$ ThCh$

Non-current

99.577.390 - 2 Express de Santiago Uno S.A. (2) Chile Affiliate US$ 63,913,099 61,318,901

99.577.390 - 2 Express de Santiago Uno S.A. (2) Chile Affiliate Ch$ 907,562 356,676

0-E Panamerican Investment S.A.(3) Panamá Common owner US$ 68,954,419 55,498,844

59.164.000 - 0 Panamerican Investment S.A.(3) Chile Common owner US$ 2,188,553 1,761,504

Total accounts receivable due from related parties, non-current 135.963.633 118,935,925

(2) Corresponds to a documented debt of Express de Santiago Uno S.A. of US$198,709,385 entered

into in February 2012, which accrues an annual interest of 8.05%, payable every six months.

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, in accordance with Rule 144-A and Regulation S the U.S. Securities Act. This process ended successfully on December 17, 2014, issuing new bonds to be exchanged replacing the original securities. Because of the restructuring process of the debt related to the bond under Rule 144-A, the repayment schedule held by Express de Santiago Uno S.A., was modified resulting in the same schedule for repayments for the bond under Regulation 144-A,as follows:

Due date

Amortization loan U.S. dollar

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

(3) 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.

(4) This balance relates to prepayments for overhaul accounts.



27

9.2 Accounts payable to related parties As of December 31, 2015 and 2014, accounts payable to related parties are as follows: December 31,

2015 December 31,

2014 Tax ID No. Company Country Relationship Currency ThCh$ ThCh$

Current

99.577.390 - 2 Express de Santiago Uno S.A. (1) Chile Affiliate Ch$ 539,555 522,686

76.130.466 - 6 Investments Lorena SPA Chile Subsidiary Ch$ 981,104 742,694

76.416.052-5 Lavabus SpA Chile Common owner Ch$ 213,648 -

Total payables to related parties, current 1,734,307 1,265,380

(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. 9.3 Transactions with related parties

As of December 31, 2015 transactions with related parties are as follows:

Tax ID No. Company Country Relationship Currency Description 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 Peru Director ThCh$ Director payment 36,000 (36,000)

0-E P.S.C. Consulting Panama Company Director ThCh$ Board advisory services

200,868 (200,868)

21.822.663-9 Edgard Mac Allister Colombia Director ThCh$ Director payment 24,000 (24,000)

14.629.483-9 Santiago Hernando Perez España Director ThCh$ Director payment 24,000 (24,000)

76.501.761-0 Investments el Morro SpA. Chile Company Director ThCh$ Board advisory services

12,000 (12,000)

99.577.390-2 Express de Santiago Uno S.A.

Chile Affiliate ThCh$ Transfer of funds received

500,782 -

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

Purchases of spare parts and management and logistic administration services

13,285,342 (13,285,342)

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

Chile Company Director ThCh$ Board advisory services

118,440 (118,440)

76.284.543-1 Recticenter SpA. Chile Common director ThCh$ Advance payments

303,000 -

76.416.052-5 Lavabus SpA Chile Common owner ThCh$ Bus cleaning services

798,648 (798,648)



28

As of December 31, 2014, transactions with related parties are as follows:

Tax ID No. Company Country 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 Peru Director ThCh$ Director payment 36,000 (36,000)

76.019.829-3 Ases. Inversiones Rio Piedra Ltda. Chile Company Director ThCh$

Board advisory services 15,000 (15,000)

0-E P.S.C. Consulting Panama Company Director ThCh$ Board advisory services 124,532 (124,532)

78.773.240-2 Asesoría e Inversiones Borinquen Ltda. Chile Company Director ThCh$ Director payment 21,000 (21,000)

99.577.390-2 Express de Santiago Uno S.A. Chile Affiliate ThCh$

Transfer of funds received 3,601,419 -

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

Purchases of spare parts and management and logistic administration services 10,123,507 (10,123,507)

76.452.480-2 Rioma Ltda. Chile Company Director ThCh$ Director advisory services 182,000 (182,000)

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

Related Company Director ThCh$

Board advisory services 118,440 (118,440)

Remunerations to the board of directors are presented in net amounts, net of withholding taxes. Inversiones Alsacia S.A. 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. 9.4 Payments to the Board of Directors and key management personnel As of December 31, 2015 and 2014, payments, salaries as well as financial, commercial and management advisories received by members of the Board of Directors amount to ThCh$132,000 and ThCh$108,000, respectively. Inversiones Alsacia S.A. 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 2015 and 2014 amounted to ThCh$2,242,815 and ThCh$2,017,426, respectively. During the years ended December 31, 2015 and 2014, no provision for severance payments has been accrued.



29

NOTE 10 – INVENTORIES

As of December 31, 2015 and 2014, inventories are follows:

Inventories

December 31, 2015

December 31, 2014

ThCh$ ThCh$

Spare parts and technical inventories 862,441 1,112,665

Fuel 9,731 83,898

Accumulated impairment on spare parts and technical inventories (136,323) (58,712)

Total Inventories 735,849 1,137,851

Inventories correspond to spare parts and fuel to be used in maintenance services; such inventories are measured at their average acquisition cost. As of December 31, 2015 and 2014, the Company does not record pledges or guarantees over inventories. The amount of inventories recognized as cost was ThCh$18,310,824 as of December 31, 2015 (ThCh$15,131,261 as of December 31, 2014). As of December 31, 2015 and 2014, changes in the provision for obsolescence of spare parts and technical inventory is as follows:

Changes 2015

ThCh$ 2014

ThCh$

Opening balance (58,712) (58,712)

Increases (77,611) -

Provision used - -

Closing balance (136,323) (58,712)

NOTE 11 – CURRENT TAX ASSETS As of December 31, 2015 and 2014, current tax assets are as follows:

Current tax asset

December 31, 2015

ThCh$

December 31, 2014

ThCh$

SENCE training credit (1) 585,355 326,760

Total tax assets 585,355 326,760

(1) This balance relates to training expenses made by the Company during the year which are used as

credit against income taxes.



30

NOTE 12 – EQUITY-ACCOUNTED INVESTEES (a) Inversiones Lorena S.p.A.

Inversiones Alsacia S.A. has an interest of 100% in Inversiones Lorena S.p.A., and it recognizes such investment using the equity method accounting. Inversiones Lorena was incorporated via public deed dated January 14, 2011, under Tax ID Number 76.130.466-6, its registered office located at Av. Santa Clara N°555, Huechuraba, Santiago. The company is engaged in making investments and receiving income from movable property.

Investment Carrying amount

Ownership

% Equity Profit or loss

Profit or loss Ownership %

2015 ThCh$ ThCh$ ThCh$ ThCh$

Inversiones Lorena SpA 100.00% 7,704,564 81,013 81,013 7,785,577

Total 7,704,564 81,013 81,013 7,785,577 Investment Carrying amount

Ownership




Inversiones Lorena SpA 100.00% 7,632,220 72,344 72,344 7,704,564

Total 7,632,220 72,344 72,344 7,704,564 (b) Inversiones Eco Uno S.A.

Inversiones Alsacia S.A. has interest of 21.59% in company Inversiones Eco Uno S.A., and it recognizes such investment using the equity method accounting. Inversiones Eco Uno S.A. was incorporated via public deed dated November 22, 2004, under Tax ID Number 76.195.710-4, its registered office located at El Roble 200 ENEA, Pudahuel, Santiago. The company is engaged in making investments and receiving income from movable property.

Investment Carrying amount

Ownership % Equity Profit or loss



Inversiones Eco Uno S.A. 21.59% (17,390,788) (20,382,074) (4,400,490) (8,155,161)

Total (17,390,788) (20,382,074)

(4,400,490) (8,155,161) Investment Carrying amount

Ownership




Inversiones Eco Uno S.A. 21.59% (8,812,287) (8,578,501) (1,851,059) (3,754,671)

Total (8,812,287) (8,578,501)

(1,851,059) (3,754,671)

As December 31, 2015 and 2014, Inversiones Eco Uno S.A. recorded a shareholders’ deficit, and the effect

on profit or loss of such investment is presented in the caption of Other current provisions (see Note 19).



31

NOTE 13 – INTANGIBLE ASSETS OTHER THAN GOODWILL

As of December 31, 2015 and 2014, separately acquired intangible assets are as follows:


Gross value Accumulated amortization Net value

ThCh$ ThCh$ ThCh$

RTO (1) 12,950,228 (9,643,901) 3,306,327

Reserves for AFT (2) 2,247,539 (1,673,720) 573,819

Computer licenses (3) 3,255,470 (2,238,693) 1,016,777

Total intangible assets other than goodwill 18,453,237 (13,556,314) 4,896,923


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

(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 separate statement

of comprehensive income per function.

(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 separate 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.



32

Changes in intangible assets as of December 31, 2015 are as follows:


RTO AFT Reserve Computer licenses Total

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

Pending amortization period 46 months 48 months 13 months -

Net value as of January 1, 2015 4,372,031 758,775 976,430 6,107,236

Additions - - 409,451 409,451

Amortization for the period (1,065,704) (184,956) (369,104) (1,619,764)

Net value as of December 31, 2015 3,306,327 573,819 1,016,777 4,896,923

Changes in intangible assets as of December 31, 2014 are as follows:


RTO AFT Reserve Computer licenses Total

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

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

Additions - - 313,762 313,762

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

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



33

NOTE 14 – PROPERTY, PLANT AND EQUIPMENT

As of December 31, 2015, property, plant and equipment and changes therein are as follows:

December 31, 2015 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 as of January 1, 2015

2,394,670 12,649,235 1,655,453 1,333,247 180,143 68,479,402 238,774 492,736 87,423,660

Accumulated depreciation - (4,624,681) (955,905) (1,085,279) (154,811) (57,552,792) (155,458) (436,473) (64,965,399)

Balance as of December 31, 2015 2,394,670 8,024,554 699,548 247,968 25,332 10,926,610 83,316 56,263 22,458,261

Acquisitions - - 270,846 160,142 12,209 - 17,772 42,136 503,105

Capitalizations - - - - - 1,765,639 - - 1,765,639

Disposals - - - - - (1,190,592) - - (1,190,592)

Depreciation - (770,910) (156,480) (64,167) (16,839) (2,490,535) (20,320) (16,023) (3,535,274)

Net balance as of December 31, 2015 2,394,670 7,253,644 813,914 343,943 20,702 9,011,122 80,768 82,376 20,001,139



34

As of 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 as of January 1, 2014 2,394,670 12,643,441 1,524,526 1,218,830 180,143 67,605,970 237,155 465,465 86,270,200 Accumulated depreciation - (3,856,470) (789,182) (972,592) (136,644) (51,523,925) (135,166) (420,933) (57,834,912)

Balance as of December 31, 2014 2,394,670 8,786,971 735,344 246,238 43,499 16,082,045 101,989 44,532 28,435,288

Acquisitions - 5,794 130,927 114,417 - 55,000 1,619 27,271 335,028

Capitalizations - - - - - 2,014,316 - - 2,014,316

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

Depreciation - (768,211) (166,723) (112,687) (18,167) (6,028,867) (20,292) (15,540) (7,130,487)

Net balance as of December 31, 2014 2,394,670 8,024,554 699,548 247,968 25,332 10,926,610 83,316 56,263 22,458,261



35

NOTE 15 – INCOME TAX AND DEFERRED TAXES

The detail of income tax (expense) benefit is as follow:

2015

ThCh$

2014

ThCh$

Current tax - -

Deferred tax (17,250,740) 6,428,020

Total income tax (expense) benefit (17,250,740) 6,428,020 The table below shows a detail of the reconciliation between the income tax benefit (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

2015

ThCh$

2014

ThCh$

Income tax benefit using the domestic tax rate 7,022,642 5,398,790

Tax effect of non-deductible expenses (504,230) 106,897

Tax effect of rate changes from Circular No. 856 - 3,523,143

Tax effect of change in annual rate - (2,632,719)

Annual tax losses not recognizing deferred taxes (5,197,638) -

Changes in estimates related to prior years (18,571,514) -

Other decreases in legal tax charges - 31,909

(Expense) benefit using the effective tax rate (17,250,740) 6,428,020

Reconciliation between the domestic tax rate and the effective tax rate

December 31

2015

%

2014

%

Legal tax rate 22.50 21.00

Tax effect of non-deductible expenses (1.62) 0.42

Tax effect of rate changes from Circular No. 856 - 13.70

Tax effect of change in annual rate - (10.24)

Annual tax losses not recognizing deferred taxes (16.65) -

Changes in estimates related to prior years (59.50) -

Other decreases in legal tax charges - 0.12

Total tax rate (55.27) 25.00

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.



36

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. Current tax As of December 31, 2015 and 2014, the Company had tax losses of ThCh$23,100,013 and ThCh$16,341,973, respectively, and accordingly determined no current income tax. Deferred tax As of December 31, 2015 and 2014, the detail of deferred tax assets and liabilities is as follows:

December 31, 2015 December 31, 2014 Deferred tax

assets Deferred tax

liabilities Deferred tax

assets Deferred tax

liabilities Deferred taxes ThCh$ ThCh$ ThCh$ ThCh$

Provisions for employee benefits - - 284,726 -

Trade receivables – impairment - - 266 -

Other assets - - 225,663 -

Other non-financial liabilities - - 903,386 -

Tax losses 3,273,383 - 19,612,980 -

Intangible assets - 989,437 - 1,274,628

Property, plant and equipment - 2,283,946 - 2,501,653

Total 3,273,383 3,273,383 21,027,021 3,776,281

Deferred tax assets, net - 17,250,739

In accordance with the covenants included in sections 4.05 and 5.01 of the Indenture 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. As of December 31, 2015, the Company has not recognized deferred tax assets derived from tax loss carried foward, because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom. The amount of unrecognized deferred taxes amounts to ThCh$23,769,152. .



37

As of December 31, 2015 and 2014, changes in deferred tax assets are as follows:

Movements December 31, December 31,

2015 2014 ThCh$ ThCh$

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

Provisions for employee benefits (284,726) 56,214

Trade receivables – impairment (266) 31

Other assets (225,663) 105,101

Other non-financial liabilities (903,386) (109,105)

Tax losses (16,339,597) 9,902,256

Closing balance 3,273,383 21,027,021

As of December 31, 2015 and 2014, changes in deferred tax liabilities are as follows:

Movements


ThCh$ ThCh$

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

Property, plant and equipment (217,707) (786,686)

Intangible assets (285,191) 50,660

Closing balance 3,273,383 3,776,281

NOTE 16 – OTHER FINANCIAL LIABILITIES

As of December 31, 2015 and 2014, Inversiones Alsacia S.A. and subsidiaries 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.

Financial liability

December 31, 2015 December 31, 2014

Current Non-current Current Non-current


Interest accrued by bond 144-A 9,637,768 - 482,331 -

Interest accrued by bank loans 10,048 - 10,163 -

Bond 144-A (a) 13,279,992 234,118,152 4,975,350 207,362,048

Bank loans (b) 924,592 4,925,546 592,296 5,325,274

Drafts payable (d) 933,493 2,231,651 768,758 2,834,420

Total other financial liabilities 24,785,893 241,275,349 6,828,898 215,521,742

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 semiannual payments of interest and principal amortization up to February 18, 2018.



38

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. 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

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.



39

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%.

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 through 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.



40

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.

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

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.

b) Bank loans

As of 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.

c) 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.



41

As of December 31, 2015, other current financial liabilities are as follows:

Debtor’s ID number Debtor’s name

Debtor’s country

Creditor’s ID number Creditor’s name Country Currency Amortization type

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 9.5% 8.0% - 13.279.992 13.279.992

Total Bono 144 – A, current - 13.279.992 13,279,992 Bank loans 99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional de Chile Chile Ch$ Semi-annual 6.87% 6.87% 308.197 616.395 924.592

Total Interest accrued by bank loans, current 308.197 616.395 924.592 Interests accrued by bank loans 99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional de Chile Chile Ch$ Semi-annual - 10.048 10.048

Total Interest accrued by bank loans, current - 10.048 10.048 Interests accrued by Bond 144-A 99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Various debtors Various US$ Semi-annual 9.227.650 410.118 9.637.768

Total interest accrued by bonds, current 9.227.650 410.118 9,637,768 Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin America S.A. Various US$ Semi-annual 7.5% 7.5% 491.135 442.358 933.493

Total drafts payable, current 491.135 442,358 933,493

Total current financial liabilities as of December 31, 2015 10.026.982 14.758.911 24,785,893

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.



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As of December 31, 2015, other non-current financial liabilities are as follows:


Debtor’s country

Creditor’s ID number Creditor’s name

Country

Currency

Amortization type

Effective rate

Nominal rate

Non-current

2 to 3 years 1 to 3

months 4 to 12 months Total ThCh$ 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% 234,118,152 - - 234,118,152 Total Bond 144 – A, non-current 234,118,152 - - 234,118,152 Bank loans

99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional de Chile Chile Ch$ Semi-annual 6.87% 6,87% 4,925,546 - - 4,925,546 Total Interest accrued by bank loans, non-current 4.925.546 - - 4,925,546 Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin América S.A. Various US$ Semi-annual 7.50% 7,50% 2,231,651 - - 2,231,651 Total drafts payable, non-current 2.231.651 - - 2,231,651 Total non-current financial liabilities as of December 31, 2015 241.275.349 - - 241.275.349



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


Debtor’s country

Creditor’s ID number Creditor’s name Country Currency Amortization type

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 Bono 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 de Chile Chile Ch$ Semi-annual 6.87% 6.87% - 592,296 592.296

Total Interest accrued by bank loans, current - 592.296 592.296 Interests accrued by bank loans 99.577.400-3 Inversiones Alsacia S.A. Chile 97.011.000-3 Banco Internacional de Chile Chile Ch$ Semi-annual 6.87% 6.87% - 10,163 10.163

Total Interest accrued by bank loans, current 10.163 10.163 Interests accrued by Bond 144-A 99.577.400-3 Inversiones Alsacia S.A. Chile 0-E Various debtors Various US$ Semi-annual 9.50% 8.00% - 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 as of December 31, 2014 6.828.898 6,828,898





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


Debtor’s country

Creditor’s ID number Creditor’s name

Country

Currency

Amortization type

Effective rate

Nominal rate

Non-current

2 to 3 years 3 to 5 years

Over 5 years Total

ThCh$ 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% 207,362,048 - - 207,362,048 Total Bono 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 de Chile Chile Ch$ 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 Drafts payable

99.577.400-3 Inversiones Alsacia S.A. Chile 0-E VTF Latin América S.A. Various 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 as of December 31, 2014 215,521,742 - - 215,521,742





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NOTE 17 – TRADE AND OTHER PAYABLES As of December 31, 2015 and 2014, trade and other receivables are as follows:

Trade and other payables


2015 2014 ThCh$ ThCh$

Current

Suppliers (a) 10,881,546 9,951,180

Other payables (b) 254,702 1,354,684

Personnel withholdings 980,800 997,067

Total trade and other payables 12,117,048 12,302,931 (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 18 – PROVISION FOR EMPLOYEE BENEFITS This caption corresponds to provisions for legal holidays to personnel, and is detailed as follows:

Movements December 31,

2015 ThCh$

December 31, 2014

ThCh$

Opening balance 1,265,450 1,142,564

Increases 1,363,734 1,393,037

Provision used (1,190,978) (1,270,151)

Closing balance 1,438,206 1,265,450 As of December 31, 2015 and 2014, employee benefits amounts to ThCh$1,363,734 and ThCh$1,393,037, respectively, and are recognized in the item of Salaries and benefits from cost of sales.

NOTE 19 – OTHER CURRENT PROVISIONS As of December 31, 2015 and 2014, other provisions are as follows:

Other provisions, current


2015 2014 ThCh$ ThCh$

Provision for legal claims (1) 1,121,636 777,075

Provision for negative equity of investee (2) 8,155,161 3,754,671

Total other provisions, current 9,276,797 4,531,746



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(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 separate statement of income within administrative expenses. The current balance as of December 31, 2015 and 2014, is expected to be used within the following 12 months.

(2) This balance represents a provision generated for the negative equity of subsidiary Inversiones Eco Uno S.A as of December 31, 2015 and 2014 (see Note 12).

As of December 31, 2015 and 2014, changes in provisions are as follows:

Changes in provisions Legal claims

Balance as of January 1, 2014 2,447,712

New legal claims 232,975

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

Balance as of December 31, 2014 4,531,746

New legal claims 344,561

Provision for negative equity of investee in Eco Uno S.A. 4,400,490

Balance as of December 31, 2015 9,276,797

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 separate 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 SVS.

Concept Currency December 31

2015 2014 ThCh$ ThCh$

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

Deferred income, non-current Ch$ 1,920,242 3,061,708

Total other non-financial liabilities 2,967,646 4,015,050



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NOTE 21 – SHARE CAPITAL

21.1 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),

which are nominative, without par value and with the same series. The Company’s shares are distributed

as follows:

Shareholder Paid shares Ownership

Carlos Ríos Velilla

Global Public Services S.A.

1

36,534

0.003%

99.997%

Total 36,535 100%

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 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.



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21.4 Other reserves As of December 31, 2015 and 2014, other reserves are as follows:

Other reserves December 31,

2015 ThCh$

December 31, 2014

ThCh$

Opening 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. NOTE 22 – FINANCIAL POSITION AND MANAGEMENT PLANS (a) Financial position

Inversiones Alsacia S.A. has had recurring net losses over the most recent financial years, and as of December 31, 2015 and 2014, it had a negative equity of ThCh$94,155,839 and ThCh$45,693,357, negative working capital of ThCh$23,541.668 and positive working capital of ThCh$321,284 during 2014, and net losses of ThCh$48,462,482 and ThCh$19,280,505, respectively. Accordingly, the Company believes the existing economic imbalance under the terms of the concession agreement indicated below, has a direct impact on the Company’s economic sustainability, and the Company has been unable to develop plans which allow restoring its economic position and operations that ensure the rendering of public transport services. However, the Company has taken steps to resolve the disputes related to the concession agreement, which are currently outstanding against the Chilean Government. (b) Economic imbalance of the concession agreement

The Company’s financial position comes from a recurring economic imbalance with respect to the concession agreement, for which on several occasions the Company has requested that Chilean Ministry of Transport and Telecommunications (MTT) adopts measures intended to its reestablishment, but the MTT has not responded to such requests. The last effort made by the Company was conducted on February 4, 2016, via a letter sent to the MTT, disclosing all aspects that require urgent solutions by the authorities for achieving such balance. This communication clearly states the rights and obligations which, within the interdepence framework inherent to the public-private relationship established in the public service concession agreement and the agreement for the use of roads, the Government has disregarded despite the fact that such agreement establishes as basic principles the contractual balance and the economic sustainability of the Concessionaire at short and long-term as basic principles, such agreement also establishes that, during its execution, the parties may agree on the amendments necessary and leading to a better satisfaction of the public transport needs of Santiago. The concession agreement is subject to the two purposes that give meaning to its performance: the maintaining of economic balance and service continuity. Factors that have permanently and structurally affected the Company’s economic balance are detailed as follows:



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1- No control on evasion. Evasion has become a structural pitfall for Transantiago operating companies, and such issue has increased since the implementation of the system through the present date. In accordance with official measurement figures reported by the Chilean Government, evasion in the system has increased from 19.9% in late 2012 to 27.9% in 2015, compared with 30.5% at Alsacia. Control has been considerably weak and critical for the concessionaires’ economic balance. 2.- Insufficient fleet. The authority has recognized that the fleet is insufficient by 7% to comply with the Semiannual Operating plan required by the MTT. However, semiannual Operating Plans continue to show no changes disregarding such situation, which seriously affects the Company’s management ratios and directly result in lower validations, a significant increase in discounts and the impairment of operations. In addition, the reserve fleet authorized insufficiently covers our operations. 3.- Age and condition of fleet. The Company’s fleet is the oldest in the system, where most buses were introduced during 2005 and 2006. This situation has not been acknowledged by Government Authorities in weighing operational requirements, as well as in their approved reserve fleet and cost indexation factors, in spite of the significant impact of such situation on the Company’s indicators and compliance with the Operational Plan, and incremental costs for a proper maintenance. This is aggravated by the constant vandalism to which the Company is exposed due to a lack of public policies to safeguard the fleet’s operations, which has worsened its condition and has resulted in additional efforts for the Company’s operating and maintenance programs. 4.- Inadequate mechanism for adjusting revenue to the behavior of operating costs. The Cost Adjustment Mechanism (MAC) has not been adjusted to be consistent with the reality faced by the industry, and continues to calculate and weigh costs in a manner which differs from what the Company has been confronted with. This situation has also adversely impacted the Company’s level of operating costs, because it does not have an adequate compensation mechanism. 5.- PPT adjustment by IPK mechanism. The systematic decline in the demand for the system has evidenced the need for making an adjustment to return obtaining margins from revenue. The two-year gap generates a loss of revenue which is not recovered. The aforementioned is particularly sensitive as the final close of the PPT review process for 2014 is still pending. 6.- Discount level and technical feasibility for compliance with the indicators. The agreement establishes discounts in accordance with operational performance, which as explained in sections 2 and 3 above, are technically unfeasible to comply with, which resulted in ThCh$4,516,232 as of 2015, and accelerated the agreement’s economic imbalance. (c) Disputes with respect to the concession agreement against the Chilean Government

In conformity with that indicated above, the Company has filed a number of claims with Government Authorities aimed at the reestablishing of economic and operating conditions which would allow the sustainability for provisioning public transport services to passengers. Additionally, the Company has been involved in discussions with the authorities to outline the necessary agreements to ensure the Company’s operating continuity.



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The outcomes of such discussions are still pending. Such discrepancies include the following: a) Paid zones. The Company has requested the Government to reverse its decision to end its

administration of paid zones, as this is the only mechanism which to date has proved to be efficient to control evasion. The abandonment of this procedure by the Ministry implies a breach of the concession agreement, which establishes a joint task for controlling evasion, and has an impact on the Company’s revenue.

b) Fleet. As previously mentioned, Government Authorities have not established a mechanism to allow the Company to address the insufficiency of its fleet as formally acknowledged during 2015. In addition, the Company has not received an answer to its request filed on December 10, 2014, with respect to a renewal of its oldest fleet.

c) Amendment of the Operations Plan for the first half of 2016. For the third consecutive semester, the Company has requested that the Ministry adjusts the Operations Plan to make feasible that it provides its services, considering the number of buses needed to cover such services as acknowledged by the authorities. During the last two semiannual periods, such amendments have not been approved.

d) PPT 2014 review process. As explained above, the close of the PPT 2014 review process is still pending, because of the abstention by the Expert’s Panel to provide its view on PPT as reference to calculate the adjustment and with respect to the impact of the evasion control on demand, which has been formally reiterated to the Ministry in the Company’s 2016 request for review.

e) Discount challenges. A number of resources and challenges are still pending resolution by the authorities, through which the Company claims the underapplication of discounts, determined based on operating indicators and requirements which are not consistent with the actual number and conditions of the Company’s buses.

NOTE 23 – REVENUE As of December 31, 2015 and 2014, revenue is detailed as follows:

Revenue

From January 1 to December 2015 2014

ThCh$ ThCh$

Collection Troncal No. 4 (1) 86,277,947 91,668,133

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

Static and dynamic advertising in buses 520,622 652,223

Total revenue 87,845,973 93,367,760

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.



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NOTE 24 – COST OF SALES

As of December 31, 2015 and 2014, the cost of sales is as follows:

Cost of sales

From January 1 to December 31 2015 2014

ThCh$ ThCh$

Salaries and benefits (1) (30,091,770) (27,798,875)

Operating costs (33,034,933) (34,479,186)

General expenses (3,564,278) (3,900,888)

Operating leases (2) (804,596) (605,262)

Amortization and depreciation (5,467,460) (8,959,744)

Total costo de ventas (72,963,037) (75,743,955)

(1) As of December 31, 2015 and 2014, the Company had 3,354 and 3,223 employees, respectively. (2) Operating leases

Operating costs include the lease of bus fleet for performing its business activities. As of December 31, 2015 and 2014, future minimum lease payments from operating leases are as follows:

Operating leases

Maturity 2016 2017 2018 Total


Rental of Volvo buses 876,428 876,428 730,357 2,483,213

Total 876,428 876,428 730,357 2,483,213

The Company leases a bus fleet under operating lease agreements. Leases are usually in effect until the termination of the concession agreement.

NOTE 25 – ADMINISTRATIVE EXPENSES

As of December 31, 2015 and 2014, administrative expenses are as follows:

Administrative expenses

From January 1 to December 31, 2015 2014

ThCh$ ThCh$

Salaries and benefits (5,494,264) (3,674,557)

General expenses (10,288,483) (12,837,692)

Amortization and depreciation (581,836) (656,367)

Total administrative expenses (16,364,583) (17,168,616)



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NOTE 26 – OTHER INCOME / OTHER EXPENSES PER FUNCTION

As of December 31, 2015 and 2014, other income by function is as follows:

Other income by function


ThCh$ ThCh$

Reimbursement from suppliers 567,202 -

Leases 477,879 91,981

Indemnity for bus accidents 166,959 35,631

Recovery of expenses 212,084 84,381

Income from paramedic contribution Mutual C.CH.C - 18,650

Other 440,114 -

Total other income by function 1,864,238 230,643

As of December 31, 2015 and 2014, other expenses by function are as follows:

Other expenses by type


ThCh$ ThCh$

Disposal of assets (overhaul) (365,596) (262,560)

Non-deductible expenses (40,507) (30,286)

Withholding tax (779,633) (1,787,880)

Other expenses by type - (1,187)

Non-operating fines (71,284) (41)

Total other expenses by type (1,257,020) (2,081,954)

NOTE 27 – FINANCE INCOME As of December 31, 2015 and 2014, finance income is detailed as follows:

Finance income


ThCh$ ThCh$

Interest and adjustments on mutual funds and time deposits 73,366 195,553

MTM profit and hedge compensation 2,330,764 -

Interest on loan with related party (1 and 2) 9,658,766 9,621,653

Total finance income 12,062,896 9,817,206

(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 on a semi-annual basis.

(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.



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NOTE 28 – FINANCE COSTS As of December 31, 2015 and 2014, finance costs are as follows:

Finance costs


ThCh$ ThCh$

Bank commissions and expenses (62,749) (36,320)

Finance interest (1) (20,969,710) (18,387,007)

Adjustment of options and forward to market value - 394,009

Amortization of hedging agreement (536,121)

Interest from banks and other financial institutions (494,391) (769,625)

Total finance costs (22,062,971) (18,798,943) (1) As of December 31, 2015 and 2014, this balance includes interest paid and accrued in relation to the bond

issued by the Company.

NOTE 29 – EARNINGS (LOSSES) PER SHARE

December 31

Disclosures about earnings (losses) per share 2015 2014

Earning (loss) attributable to equity holders of the parent ThCh$ (48,462,482) (19.280.505)

Earning (loss) available to common shareholders, basic ThCh$ (48,462,482) (19,280,505)

Weighted average number of shares, basic 36,535 36,535

Earnings (losses) per share (1,326.473) (527.73)

NOTE 30 – FOREIGN CURRENCY TRANSLATION DIFFERENCES As of December 31, 2015 and 2014, 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 22,974,102 15,536,564

Liabilities in foreign currency (38,698,529) (28,702,214)

Total foreign currency translation difference (15,724,427) (13,165,650)

NOTE 31 – CONTINGENCIES 31.1 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.



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31.2 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. 31.3 Guarantees from third parties At the reporting date, the Company have not received any significant guarantees from third parties. 31.4 Covenants As a bond issuer, the Company is obligated to comply with certain obligations and covenants that secure the issued bonds. Such obligations and covenants are as follows: 1. The Company needs to maintain its legal existence, rights, privileges, licenses and franchises

significant to carry out its activities. 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.

As of December 31, 2015, the Company has complied with all the aforementioned covenants. 31.5 Lawsuits

During 2015 and 2014, civil and labor lawsuits have been filed against the Company related to its ordinary course of business. Civil lawsuits have been filed by third parties affected by damages, injury or death caused by the Company’s operations. Likewise, labor lawsuits have been filed by employees, former employees and unions, and correspond mainly to unjustified dismissals and the collection of amounts owed per employment contracts. Such lawsuits which are still in progress.



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As of December 31, 2015 and 2014, the Company has recognized a provision for ongoing legal claims based on opinions of its legal advisors as to probability of occurrence thereof, considering case-laws of previous cases (see Note 18).

NOTE 32 – SUBSEQUENT EVENTS

Between January 1, 2016 and the date of issuance of these financial statements, the following subsequent events have occurred: 32.1 Events related to the issuance of Bond 144-A

Payment of interests on Bond 144-A: On January 15, 2016, the Company complied with its payment of interests owed related to the partial payment of December 22, 2015, of ThUS$11,172,375 (ThCh$8,110,923), in conformity with the terms of the Indenture. Partial payment of principal owed to Banco Internacional: On January 21, 2016, the Company partially paid the principal due of December 22, 2015, of UF12,025.29 (ThCh$309,681), in conformity with the terms of the loan agreement. Period Distribution Payment to its Shareholders: in conformity with the terms of the Indenture, and given its compliance with its payment obligations in accordance with that established in the preceding paragraph, the Company made the relevant Periodic Distribution payment to its shareholders, of ThUS$1,022,727 (ThCh$736,875).

32.2 Sale of hedge

On January 13, 2016, the Company sold the hedge engaged in 2015 for ThUS$4,460 (ThCh$3,257,049).

32.3 Labor lawsuits On March 17, 2016, the Company was noticed that the Court of Appeals of Santiago rejected the appeal for annulment filed by the Workers’ Union of Empresa Alsacia S.A. against the judgment of August 17, 2015 rejecting the claim for the payment of employee benefits. The plaintiff sought the payment of attendance and punctuality bonuses and compensation bonuses for damages, which had been agreed upon during the 2009 collective negotiation, for the period between November 2012 and March 2015, allegedly of ThCh$1,883,607. The Company is currently waiting for the expiration of the term in which the counterparty has to file the appeal of a case-law unification, which is due on April 5, 2016.

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