ALVARO CLARKE Chairman SECURITIES AND INSURANCE REGULATOR March 29, 2001 “The Chilean Tender Offer Law: Major Corporate Events- Public Tender Offers - Changes in Corporate Control Buenos Aires Argentina

MAJOR CORPORATE EVENTS: THE GOLDEN PRINCIPLE ò All shareholders must receive the same price in equal terms when the company changes ownership. ò A fair division of profits must reach every shareholder. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

THE CONTROL VALUE á Efficiency: if an acquirer realizes that under his control the company can have a higher value, he will be willing to takeover. á Appropriation of inflows or assets: if an acquirer realizes that under his control he can extract value of the company, through deviation of business opportunities or selling at different market prices, he would be willing to takeover. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

CHANGES IN CORPORATE CONTROL CHANGES IN CORPORATE CONTROL ý A transfer will be done when the acquirer’s control value is higher than the current control person value. ý Two reasons could explain the higher value: ò the acquirer is more efficient ò the acquirer can extract a higher value from minority shareholders SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

RULES OF CHANGES IN CORPORATE CONTROL ê There are two rules of transfer in corporate control: ò The market rule that allows selling a controlling interest, determining the price in a private deal. ò The equal condition rule requires a tender offer each time a controlling interest is sold. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

RULES FEATURES n The market rule á The acquirer and the control person negotiate without taking into account minority shareholders. A transfer in the control will occur if it is privately convenient, even if minority shareholders are hurt. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

WHEN A CHANGE IN CORPORATE CONTROL IS DONE? EVEV ++ ACQUIRERCONTROL PERSON E= Efficient V= Extraction of Value SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

THE MARKET RULE : THREE CASES ò If both, acquirer and control person, are equally skillful in extracting value, the transaction will be made only if the acquirer is more efficient. In this case minority shareholders will be better off. ò If the control person is more skillful than the acquirer in extracting value, the transaction will be made only if the acquirer is highly efficient. In this case minority shareholders will receive a double benefit. ò If the acquirer is more skillful than the control person in extracting value, the transaction will be made and the minority shareholder will be hurt. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

MARKET RULE TRANSACTION SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

EQUAL CONDITIONS RULE ò Under the equal conditions rule and if the control person is against changing the corporate control, the acquirer will only take over if he is significant more efficient than the control person. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

SUMMARY á The market rule permits inefficient transactions to be done. á The equal condition rule hinders inefficient transactions. However some efficient transactions are not done as well. á Even though the equal condition rule hinders inefficient transaction, per se it does not prevent the extraction of value from minority shareholders. á Corporate Governance is a key issue to complement these Rules. SVS SUPERINTENDENCIA DE VALORES Y SEGUROS CHILE

THE CHILEAN TENDER OFFER LAW  The following slides will present the above theoretical background applied to the Chilean legislation on Tender Offers SVS CHILEAN SECURITIES AND INSURANCE COMMISION

CHILEAN TENDER OFFERS LAW KEY POINTS TRANSPARENCYANDDISCLOSURE MANDATORY TENDER OFFER CHAIN PRINCIPAL SVS CHILEAN SECURITIES AND INSURANCE COMMISION

TENDER OFFERS KEY POINTS  THE CONTROLLING PREMIUM MUST BE DISTRIBUITED AMONG SHAREHOLDERS  ANY CHANGE OF CONTROLLING INTEREST MUST BE EXECUTED THROUGH A TENDER OFFER MANDATORY TENDER OFFER SVS CHILEAN SECURITIES AND INSURANCE COMMISION

TENDER OFFERS KEY POINTS  EXCEPTIONS:  When the following conditions exist simultaneously:  Transaction must be at market price (  average price of last 60 days must be below 10%)  Payment is in cash  Stock has minimum liquidity  Primary distribution of the corporation  Mergers EXCEPTIONS SVS CHILEAN SECURITIES AND INSURANCE COMMISION

TENDER OFFERS KEY POINTS  WHEN TAKING CONTROL OF A PARENT COMPANY, BUT ITS SUBSIDIARY REPRESENT 75% OF THE CONSOLIDATE ASSETS, FIRST A TENDER OFFER MUST BE EXECUTED FOR THAT SUBSIDIARY CHAIN PRINCIPAL CHAIN PRINCIPAL SVS CHILEAN SECURITIES AND INSURANCE COMMISION

TENDER OFFERS KEY POINTS  TRANSPARENCY AND DISCLOSURE  Advance public notice of 10 business days shall be required prior to any tender offer  Any "insider" information shall be made publicly available  Shareholders with more than a 10% interest in the company must disclose additional stock purchases and must declare if they are an active or passive investor TRANSPARENCYANDDISCLOSURE SVS CHILEAN SECURITIES AND INSURANCE COMMISION

CONCLUSION  The Chilean Tender Offer Law  Combines the market rule and the equal conditions rule.  The market rule operates when the price paid is at market level.  Protection of minority rights is the key point to solve the takeover problem when a major corporate event happens. Countries with good corporate governance standards have lower extraction of value when corporate control changes. SVS CHILEAN SECURITIES AND INSURANCE COMMISION

ALVARO CLARKE Chairman SECURITIES AND INSURANCE REGULATOR March 29, 2001 “The Chilean Tender Offer Law: Major Corporate Events- Public Tender Offers - Changes in Corporate Control Buenos Aires Argentina