SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) OF CHILE Response to Survey on Implementation of IOSCO Objectives and Principles of Securities Regulation Principles Relating to the Issuer 1

Information presented is as of February 20, 2001 Contact Person Salvador J. Seda, International Relations Research and International Relations Division Superintendencia de Valores y Seguros Teatinos 120, Piso 7 Santiago 6500692 Chile Tel (56 2) 549 5840 Fax (56 2) 549 5937 E-mail: [email protected]

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The responses to this survey were prepared by the staff of the Research & International Relations Division of the SVS and do not necessarily reflect the views of the SVS.

Principles for Issuers Principle 14: There should be full, accurate and timely disclosure of financial results and other information which is material to investors’ decisions. 14-1.1. Is the securities regulatory system governing the conduct of issuers based on the principle of full and fair disclosure to investors? Law Nº18,045 of Securities Market is base on the principle of full and fair disclosure. Article 10 establishes that the information must be full, veracious and timely. 14-1.2. If yes to 14-1.1, where is that principle set out in your jurisdiction? Article 10 as states in the above answer. 14-1.3. Does the securities regulator have the power to delay or stop offerings? Yes. 14-1.4. If yes to the preceding question, what are the specific circumstances in which the securities regulator may delay or stop an offering? The SVS has the power to delay or stop offering if the issuer’s registration statement is incomplete or inaccurate. 14-2.1. When issuers offer securities to the public: a. Are they required to file with the securities regulator a prospectus (or any other equivalent information document)? Yes, issuers offering securities are required to file a registration statement that includes a prospectus. There are exemptions for certain types of securities, such as government debt, bank deposit and the transaction of shares in special conditions (closely held corporations). b. Is the issuer required to publish or distribute this prospectus (or equivalent information document)? The prospectus is filled in accordance to the registration procedures and it is available to all investors. Usually the issuers deliver the prospectus to the potential investors. c. If yes, what is the time frame for distribution or publication? Once is approved by the SVS. 14-2.2. Do the prospectus requirements apply to all companies offering securities to the public? If not, please explain. The prospectus requirements apply to all companies offering securities to the public, less the exemptions explained in answer 14-2.1.

14-2.3. In addition to requiring a prospectus for offerings of equity, is the prospectus also required for other (and which) types of offerings of interests in a company? (Examples could include offerings of warrants, debt securities, preemptive rights offerings to existing shareholders or exchange offerings, etc.) The prospectus is required for equities, bonds and commercial papers. 14-3.1. Is the prospectus (or equivalent document) required to contain information on specific and designated topics? The following are provided by way of example only: a. A description of the securities offered and details of the transaction in which the securities are being offered? b. Audited financial statements? c. A description of the issuer’s business and property and the legal environment in which the company operates? d. Identification of the issuer’s directors and senior management, their compensation and shareholdings and any transactions with the issuer or its affiliates that result in personal benefits to the issuer’s directors or senior management? e. A description by the Board or management of the company’s financial condition and results of operations? f. Information on company formation? g. Disclosure of the identity of substantial shareholders? All of the above topics are incorporated in the prospectus. 14-3.2. In addition to any specific disclosure requirements, please describe any general requirement that the issuer must disclose information about the company, the transaction and the securities that would be material to an investor’s investment decision or that is necessary to keep the disclosure made from being misleading? In the registration statement is required to add any additional material news. 14-3.3. (a) Are there different disclosure requirements fo r different types of securities or according to the different circumstances in which securities are issued? The differences have been based on the types of securities, but basically are the same. (b) If yes, what are the main differences? For example, if an issue is offering a bond, it is required to deliver information about the bond, such as specific ratios, the payment of dividend and amortization, etc. 14-4.1. Are there restrictions on, or disclosure requirements with respect to, the content of information that an issuer discloses outside the prospectus during an offering, such as in advertisements, "roadshow" materials or on the issuer’s Internet web site?

Law Nº18,045 in its article 65 points out that the information outside the prospectus must be approved by the regulator. 14-4.2. Do any such restrictions extend to those acting on behalf of the issuer in connection with the offering, such as the underwriters or advisors? Yes, the underwriter or others acting on behalf of the issuer are subject to the same restriction. 14-5.1. Does the securities regulator have the power to review the prospectus (or equivalent document) to determine whether it satisfies the prospectus requirements and to comment on the disclosure? Yes, the SVS has the authority to review the prospectus. Moreover, the prospectus must be the same filled in the registration statement. 14-5.2. In practice, does the securities regulator actually review all prospectuses? Yes, the SVS reviews the prospectus in full detail. 14-5.3. If no, is there a formal system for determining which prospectuses are reviewed? 14-6.1. Is the issuer, or any and what other person required to take legal responsibility for the content of the prospectus? Yes, directors and everyone who has signed the registration statement are liable for the content of the prospectus. 14-6.2. For each of the responsible entities described in your answer to Question 146.1, specify which portions of the prospectus that entity is considered legally responsible for. Each entity or persons mentioned before are responsible for the entered content of the prospect. 14-6.3. Are there any circumstances in which the issuer would not be required to take legal responsibility for the contents of the prospectus? No, the above persons always are responsibility for the information delivered. a. Does the securities regulator have the power to enforce prospectus disclosure requirements by delaying or stopping the offering or through other actions?

Yes, the regulator has the power to enforce prospectus disclosure requirements. See response to question 14-1.4 above. b. If yes, are these actions civil, administrative or criminal in nature? The regulator may take administrative actions. c. May any of these actions be taken immediately, such as a trading halt or a temporary injunction? Yes, the regulator has the authority to order a trading halt or a temporary injunction. 14-7.2. Are the persons legally responsible for the content of the prospectus subject to liability in actions brought by p rivate individuals or entities? Yes, the persons in response to question 14-6.1 above may be subject to liability in actions brought by private individuals or entities. 14-8.1. Are there circumstances (and what) in which an issuer is permitted to withhold information from the public: for example, trade secrets, incomplete merger negotiations or information affecting national security or upon the approval of the regulator? An issuer may request confidential treatment for information (material facts) filed with the SVS that, if disclosure publicly, would result in competitive harm. The information filed in the registration statements is considered public and should not harm the company. 14-8.2. Are there any circumstances in which an issuer would be permitted to proceed with an offering without disclosing information of the type described in answer to Question 14-8.1? If there are material facts during the offering these must be disclosure publicly, but as notice in the question 14.8.1 the issuer may request confidentiality. 14-9.1. Are issuers required to prepare listing particulars (or an equivalent document) when they seek to list their securities on a stock exchange or other regulated securities market? Yes, the issuers seeking a listing must prepare and file a registration statement for the issuer and the securities. Additionally, the company must fulfill the requirements of the exchanges. 14-9.2. If yes to the preceding question, is this listing document made available to the public? Yes, the registration statement is available publicly.

14-9.3. If the answer to Question 14-9.1 is yes: a. Does the listing document require the same information (other than the offering-related information) that is required in a prospectus? The listing document requires the same information that is required in a prospectus, since the registration statement allows a company to list its stocks. b. What are the main differences? 14-9.4. Is the listing document also subject to a general requirement to disclose all material information about the issuer? As response in the question 14-9.3 the registration statement of the issuer and its shares allow it to list in a exchange. 14-9.5. Does the regulator have the authority to enforce listing document disclosure requirements by delaying or refusing a listing? Yes, the SVS has the authority to delay or refuse a registration statement and therefore the capacity to be listed. 14-10.1. Are companies required to disclose financial and other information at regular intervals, for example, in annual, semiannual or quarterly reports? Yes, companies are required to disclosure quarterly reports. 14-10.2. If yes to 14-10.1, which issuers are subject to the obligation and where is that obligation set out, for example in the legislation or in listing rules of an Exchange? All issuers who are registered are subject to the obligation and it is set out in the legislation. 14-10.3. If yes to 14-10.1, describe the following with respect to each different type of report: a. The subject matter of the report; b. When this report is required and the time for completion; c. Whether and when the report is published or otherwise made available to the public; Annual Report •

Describes the issuer’s business operations, its management and its financial condition and results of operations for the preceding fiscal year, and includes audited consolidated and individual financial statements.

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Due with 75 days after the end of the fiscal year.

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These reports are public immediately upon filing with the SVS.

Quarterly Report •

Describes the issuer’s business operations, its management and its financial condition and results of operations for the preceding fiscal year, and includes non-audited consolidated and individual financial statements.

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Due with 30 days after the end of the quarterly period.

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These reports are public immediately upon filing with the SVS.

14-10.4. Are annual and other periodic reports required to contain the same general type of issuer information that would be required in a prospectus or in a listing document? Annual reports contain similar information that would be required in a prospectus. 14-10.5. With respect to the reports described in answer to Question 14-10.3, does the regulator review these reports? What are the regulator's powers upon review of these reports? The SVS performs a full review of the registration statements and the reports described in the question 14-10.3. 14-11.1. With respect to the various reports described in answer to Question 14-10.3: a. Is the issuer required to take legal responsibility for the content of the report? Yes, the issuer is required to take legal responsibility for the content of the report. b. Does the securities regulator have the power to take action for incomplete or misleading information in these reports? Yes, the SVS has the power to take actions. 14.12.1. Are issuers subject to a general and continuing obligation to disclose promptly any material information that would affect significantly the price of their securities? Yes, the issuers are subjects to a general and continuing obligation to disclose promptly any material information that would affect significantly the price of their securities. 14.12.2. If yes to 14-12.1, which issuers are subject to the obligation and where is that obligation set out, for example in the legislation or in listing rules of an Exchange? Every issuer who has filled a registration statement is subject to the obligation described in the question 14-12.1 and it is set out in the legislation. a. Are there specific events that an issuer is required to disclose?

Law Nº18,045 of Securities Market in its Article 9 defines material news. This is a general definition, therefore it has an ample extension of action. b. If so, which specific events must be disclosed? General Rule Nº30 describes a gro up of examples that would be material news. c. Is this disclosure of specific events required in addition to, or as an alternative to, the general and continuing obligation referred to in Question 14-12.1? The issuers registered are obligated to disclose material news.

14-13.1. Are issuers required to disclose information to shareholders in order to help them make voting decisions? The issuers are required to disclosure only the items of the meeting. 14-13.2. If yes to the preceding question, what types of voting decisions would trigger a disclosure requirement? In the case of related party transactions may be required a study which must be delivered to the shareholders prior the special meeting called to vote about the transaction. 14-14.1. Are there laws in your jurisdiction that establish the duties of directors and officers to the company and its shareholders? Yes, Law Nº18,046 in its chapter IV establishes the duties of directors and officer to the company and its shareholders. Principle 15: Holders of securities in a company should be treated in a fair and equitable manner 15-1.1. Are there laws in your jurisdiction that protect minority shareholders from unfair treatment? Yes, Law Nº18,046 establishes different ways to protect minority shareholders from unfair treatment. 15-1.2. If yes to the preceding question, what type of protections do shareholders have? (Examples might include: dissenter’s rights of appraisal, mandatory cash buy-outs, rights to petition the securities regulator, or other mechanisms to ensure that the value of their shares is not diminished by their minority position, rights of the minority shareholders to appoint an auditor, rights of shareholders holding a certain percentage

of the shares in an issuer to bring legal proceedings against directors, rights of shareholders to require an extraordinary general meeting) The law establishes several topics to protect the minority shareholders: Audit committee Approval of related party transactions by independent directors Class action Preemptive right of all shareholders Withdrawal right in the sale of assets and others matters Calling to extraordinary meeting by minority shareholders Appointment of independent auditor 15-2.1. Are issuers required to disclose publicly the identity and ownership position of major shareholders? Yes, the issuers are required to disclose publicly the identity and ownership position of major shareholders in the quarterly reports. 15-2.2. If yes to the preceding question, what is the ownership level that would trigger disclosure by the issuer? The rule requires the information for the twelve mayor shareholders. 15-2.3. Are there categories of shareholders of issuers who, at the annual meeting of the issuer, are required to disclose publicly their identity and ownership position? The identity and ownership of the twelve mayor shareholders must be delivered in the annual report and therefore is known to the shareholders at the annual meeting. 15-2.4. If yes to the preceding question, what are the circumstances that would require that disclosure by those categories of shareholders? The information is not delivered by categories of shareholders. 15-2.5. Are there categories of shareholders of issuers who, by reason of their percentage shareholding in the issuer are required to disclose publicly their identity and ownership position? The issuer has to send monthly the list of all shareholders. Moreover, the directors and executives have to send their sales and purchases of their stocks. 15-2.6. If yes to the preceding question, what are the circumstances that would require that disclosure by those categories of shareholders and the specific requirements of this disclosure obligation? 15-3.1. Are the persons with reporting obligations of the type described in answer to Question 15-2.5 required to report changes in their shareholdings?

As noticed in question 15-2.5 the directors and executives have to send information about their transactions. 15-3.2. If yes to the preceding question, how significant do the changes have to be in order to be reported? It is not important the size of the transactions. Always have to be reported. 15-4.1. Are all companies required to disclose information in connection with a change in corporate control? (By way of example only, that may occur through a merger, tender offer, exchange offer, business combination.) Yes, the companies must disclose information in connection with a change in corporate control. 15-4.2. If yes to the preceding question: a. Are issuers required to provide audited financial statements to shareholders when the shareholders are being asked to vote on a change in corporate control? The directors have to deliver their opinion about the tender offer. Moreover, the company who wants to carry out a tender offer must delivered audited financial information. b. Is there a different financial statement or other information requirement depending upon the consideration for the transaction (for example whether shareholders will receive cash rather than securities as consideration?) The law establishes a procedure in a tender offer, in this procedure is required different information. This information is delivered to the shareholders in a prospectus that incorporates the opinion of the directors. c. Is the level of information that must be provided generally equivalent to the information contained in a prospectus? The information provided has some similar aspects, but it refers mainly to the special conditions of a tender offer.

15-4.2. Are the require ments the same if the company being acquired is not a listed company? If a company is registered it must fulfill the legislation although the acquired is not listed.

15-5.1. What are the requirements for notification to shareholders of proposals that would result in a change in corporate control or proposals to acquire a substantial interest in the issuer? What are the circumstances in which a mandatory exchange or tender offer or tender must be made? A mandatory tender offer must be always done, however there are some exceptions: - Corporation's first distribution - Mergers - Acquisition as a result of death - Forced transfers - Transfer by corporate controlling interest When a corporate controller conducts a transfer, this may take place only when the following require ments are scrupulously followed: - Premium not substantially higher than the market price (10%). - Payment in cash - Stock with minimal liquidity If these three conditions are not scrupulously adhered to, a mandatory tender offer must be done. 15-5.2. Where applicable, how much time are shareholders given to consider these proposals before they must take action? Since the beginning of a tender offer shareholders have a minimum of 20 days to participate. 15-6.1. What are the requirements for the treatment of shareholders of the same class in an offer that would result in a change in corporate control or in the benefits of a proposal to acquire a substantial interest in the issuer? (For example, is there a requirement for equitable treatment?) Describe any exceptions to these requirements. The law establishes that all shareholders of the same class have to have the same treatment included the ADR´s shareholders. 15-7.1. Under what, if any, circumstances are directors or other members of senior management of an issuer required to disclose any compensation or personal benefits they may receive in connection with a proposed transaction involving the issuer? Directors or other members of senior management cannot do transactions that are contrary to the law, by-laws and the social interest of the company. Moreover, directors who have interest in any transaction must inform the board of directors, and the transactions must have the approval of it. 15-8.1. In general terms, what is the duty of directors in responding to or making a recommendation about a proposal for a change in corporate control?

The directors must make a recommendation to its shareholders regarding a tender offer within 5 days after date the tender offer commences. Principle 16: Accounting and auditing standards should be of a high and internationally acceptable quality 16-1.1. Are any (and which) types of issuers required to publish on an annual basis financial statements audited by an external auditor? (For example: a. Publicly owned companies; b. Companies exceeding certain size tests; or c. Listed companies?) The SVS requires to all company who has filled a registration statement to publish on an annual basis financial statement audited. 16-2.1. Are issuers required to provide audited financial statements in offering prospectuses for all types of offerings? Yes, issuers are required to provide audited financial statements for all types of offerings. 16-2.2. Which, if any, types of offerings do not require audited financial statements? A registered company mus t always deliver audited financial statements. 16-3.1. Does the securities regulator have the power to review financial statements filed by public companies and to comment on or challenge the issuer’s application of accounting principles? Yes, the SVS has the power to review financial statements filed by public companies. And the accounting principles used must satisfy the requirements of the SVS. 16-3.2. If yes to the preceding question, when may that power be exercised? (For example, is that power limited to financial statements contained in prospectuses, or does it also extend to listing documents, annual financial statements and other periodic or event specific reports? The power to review financial statements and comments on the issuer’s application of accounting principles applies to all documents filed with the SVS. 16-4.1. Are the accounting standards used in preparing financial statements for purposes of capital raising and financial reporting based on a written general framework or concept statement (which may be a separate document or may be contained in a statute, in the standards themselves, or elsewhere)?

Yes, the accounting principles used are based on the Chilean Accounting Board. 16-4.2 If yes to the preceding question, which of the topics listed below are addressed in the conceptual framework: a. The objective of financial statements? b. The elements of financial statements (e.g., assets, liabilities, revenues and expenses)? c. The qualitative characteristics of financial statements (e.g., relevance and reliability of financial information presented, materiality, comparability and completeness)? d. Recognition and measurement principles? All of the topics are addressed in the conceptual framework. 16-5.1. What are the principal bases upon which financial statements used for capital raising and financial reporting are required to be prepared? For example: on the basis of an assumption that the company will continue as a going concern; an accrual basis of accounting? The base upon which the financial statement is filed to the SVS is an accrual basis of accounting. 16-6.1. Do the accounting standards used in preparing financial statements for purposes of capital raising and financial reporting address the general topics listed below? a. Presentation of financial information (e.g. financial position, reporting performance and cash flows); b. Consolidated financial information; c. Business combinations; d. Tangible and intangible assets (including impairment of assets); e. Leases; f. Income taxes; g. Employee benefits (e.g., pensions, stock compensation and other benefits); h. Provisions and contingencies; and i. Financial instruments (including derivative financial instruments). Yes, all these topics are addressed in the Chilean framework. 16-6.2. Do the accounting standards used in preparing financial statements for purposes of capital raising and financial reporting also address areas of particular interest to investors, for example: a. Earnings per share; b. Interim financial reporting; c. Segment information about business segments; and d. Related party transactions?

Points a, b and c are addressed. 16-6.3. Do the accounting standards used in preparing financial statements for purposes of capital raising and financial reporting address issues unique to specialized industries such as banking, insurance, mining, oil and gas? There are general accounting principles. However in preparing financial statements for specialized industries, they utilize special records. 16-7.1. Are auditors required to follow a published set of generally accepted auditing standards? Yes, all audited financial statements must be audited following a published set of generally accepted auditing standards. 16-7.2. If yes to the preceding question, do those standards expressly require the auditor to: a. Use due professional care in the performance of the audit; b. Adequately plan and supervise the audit; c. Obtain an understanding of the internal control system of the entity; and d. Obtain sufficient evidence to determine whether the financial statements are free of material misstatement? Yes, all these topics are required to auditors. 16-7.3. Is the auditor’s report required to disclose: a. Any exceptions to the application of the accounting principles used; b. Any material uncertainties in the financial statements; and c. Any going concern issues? Yes, all the listed topics are addressed. 16-8.1. Do the standards on auditing include standards to ensure the independence of auditors when performing financial statement audits? Please list the major criteria. The law establishes that auditors must be independent and registered in the SVS if they want to audit registered companies. Moreover, the monthly revenues coming of one client can be up to 15% of the total revenues of this month and the audit company must not have more than 3% of the ownership of the audited company. 16-9.1. Are auditors required to be licensed or approved and to satisfy specific education criteria and other qualifications in order to practice? The auditors must be registered in the SVS if they want to audit registered companies, therefore must satisfy specific education criteria.

16-10.1. Are there ongoing professional education requirements for auditors after they are licensed or approved? Yes, they must satisfy professional education requirements after they are approved. 16-11.1. Are mechanisms in place, such as mandatory professional affiliation, peer review or other means, to ensure that standards on auditing are applied properly? As noticed in question 16-9.1 the auditors must be registered, therefore the SVS to ensure that standards on auditing are applied properly may sanction or cancel the registration of an auditor. 16.12.1. Is there a mechanism for oversight by the regulator: a. Of the conduct of professional accounting firms b. To enforce compliance with standards of auditing if they are not applied properly? As noticed in question 16-9.1 auditors must be registered if they want to audit registered companies, therefore the SVS can cancel or suspend the auditors if they do not work correctly, accurately and faithfully. 16-12.2. If yes to either or both of the preceding questions, give a brief description of this oversight mechanism, including: a. By whom oversight is maintained; The SVS maintains the oversight of registered audit companies. b. The structure, responsibilities, powers and accountability of the oversight body, so far as is relevant to the oversight function; and The law establishes the obligations of registered audit companies and the SVS oversight its accomplishment. c. Whether the oversight body publishes its decisions or opinions and, if so, how they are published. The registration and cancellation of an audit company are publicly disclosure. 16-13.1. By what body are accounting standards set in your jurisdiction? The Chilean accounting board sets the accounting principles, a private sector organization. The board publishes its proposals and standards and solicits the views of its affiliates. Nevertheless, the SVS can establish additional accounting requirements. 16-14.1. Is there a mechanism for oversight of the standard setting body?

The Chilean accounting board is a private and independent board, composed by honor and liable people. These people based on the international accounting principles set the Chilean accounting principles. The decisions are published in bulletins. The SVS does not oversight this private board, however the SVS has the authority to accept or deny the accounting principles established for the Chilean accounting board. 16-14.2. If yes to the preceding question, give a brief description of this oversight mechanism, including: a. By whom oversight is maintained; b. The structure, responsibilities, powers and accountability of the oversight body, so far as is relevant to its oversight function; and c. Whether the oversight body publishes its decisions or opinions and, if so, how they are published. 16-14.3. When there is a dispute or uncertainty regarding the interpretation or application of an accounting standard, are there formal mechanisms for resolution of the dispute or for the provision of an authoritative interpretation? A dispute or uncertainty regarding the interpretation or application of an accounting standard is resolved by discussion between the SVS and auditor. However, the SVS has the power to establish authoritative interpretation. 16-15.1 Are public companies required to disclose publicly the reasons for changes in their outside auditor, other than changes due to mandatory limits on the term of the auditor’s engagement? The general s hareholders meeting appoints the auditor, therefore is a public subject and the shareholders can cancel the contract with the auditor.