In this annual report, references to “US$”, “US dollars” and “dollars” are to United States dollars, references to ThUS$ are thousands of US dollars and MUS$ are millions of U.S. dollars; references to “pesos” or “Ch$” are to Chilean pesos, references to “Ch$ million” or “MCh$” are to millions of Chilean pesos; and references to “UF” are to Unidades de Fomento. The Unidad de Fomento (“UF”) is a unit of account that is linked to, and is adjusted daily to reflect changes in the Chilean consumer price index. As of December 31, 2011, one UF was equivalent to Ch$22,294.03. Percentages and certain dollar and peso amounts contained herein have been rounded for ease of presentation. Unless otherwise indicated, the exchange rate used to translate peso amounts into dollars appearing throughout this annual report is the Dolar Observado (the “Observed Exchange Rate”) reported by the Banco Central de Chile (the “Central Bank”) on December 31, 2011, which was Ch$519.20 = US$1.00. These translations should not be construed as representations that the peso amounts actually represent such dollar amounts or could be converted into dollars at the rates indicated or at any other rate.

Our Consolidated Financial Statements and, unless otherwise indicated, other financial information concerning AFP Provida S.A. included in this report are presented in Chilean pesos. Until the year ended December 31, 2009, AFP Provida S.A. prepared its financial statements in accordance with generally accepted accounting principles in Chile (Chilean GAAP). In accordance with the rules of the Superintendency of Pensions beginning in 2010, AFP Provida S.A. has prepared its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standard Board (IASB).

The terms “AFP Provida”, “Provida” and the “Company”, unless the context indicates otherwise, refer to Administradora de Fondos de Pensiones Provida S.A. References to “AFP” or “AFPs” refer to private pension fund administrators in general.

The term “Authority” means the Superintendencia de Pensiones (“Superintendency of Pensions”), the principal regulator of Chile’s pension system.

In this annual report and as related to Provida’s business, the term “participant” means a client that has made contributions at least once to his individual capitalization account, while “contributor” means a participant periodically making pension contributions. The term “individual capitalization account” (ICA) means for each participant the account where he or she maintains his/her mandatory savings invested in shares of the selected pension fund until the age of retirement.

FORWARD-LOOKING STATEMENTS

This Form 20-F contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements appear throughout this Form 20-F and include statements regarding intent, belief or current expectations of our officers or our management with respect to (i) our asset growth and financing plans, (ii) trends affecting our financial condition and results of operations, (iii) the impact of competition and regulations, and (iv) our exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and market price risk. Forward-looking statements include known and unknown risks and uncertainties and are indicated by words such as “anticipate”, “believe”, “expect”, “intend”, “risk”, “could”, “may”, “seeks”, and similar words and phrases and the negatives and variations thereof. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those described in such forward-looking statements in this Form 20-F, including, without limitation, “Business overview”, “Operating and Financial Review and Prospects” and “Quantitative and Qualitative Disclosures About Market Risk”.

Some factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this Form 20-F include, but are not limited to: general economic conditions in Chile and Latin America and the other countries in which we have significant business activities or investments, including the United States; the monetary and interest rate policies of the Central Bank; unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; changes in Chilean and foreign laws, regulations and taxes; changes in competition and pricing environments; natural disasters; the inability to hedge certain risks economically;

Table of Contents

the adequacy of loss reserves; technological changes; changes in consumer spending and saving habits; and our success in managing the risks involved in the foregoing.

The forward-looking statements contained in this document are made only as of the date of this report, and we do not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

Item 3. KEY INFORMATION

Recent regulatory changes

The Law for the Pension Reform N°20,255 (the “Pension Reform Law” or “Reform Law”) was enacted on March 11, 2008 and published in the Official Gazette on March 17, 2008. The first stage of the Pension Reform Law, referred to as the “solidarity principle” and directed at granting pensions and solidarity pension contributions to the country's poorest sectors, was implemented in July 2008.

In October 2008, matters relating to collective voluntary pension savings, Governmental subsidy to formalize the hiring of young workers, voluntary affiliation, and certain life and disability insurance (entitlement of women up to 65 years of age, entitlement of spouses to become insurance beneficiaries, and the elimination of a second determination in cases of total disability) were implemented. Additionally, investment measures were implemented, such as expanding the investment alternatives to pension funds in Chile and at the international level; gradually increasing the abroad investment limits; establishing an investment regime fixing limits on indirect investment and authorizing Fund Type E to invest in variable income (up to 5% of its portfolio).

One of the main changes introduced by the Pension Reform Law and implemented in 2009 was the life and disability insurance bidding process in order to: (i) increase transparency in fees charged by AFPs and in costs related to the life and disability insurance; (ii) obtain a more competitive price for this insurance; (iii) correct gender inequities; and iv) not permitting AFPs to assume individual risks by reducing incentives to discriminate among participants, leading AFPs to focus on competence based on variables in the administration of individual accounts. Likewise, this new modality intends to appropriately regulate and control the risks of providing life and disability insurance.

The life and disability bidding process is carried out by the AFPs as a whole. This process is ruled by regulations established in the Law and in the bidding conditions. In this offer, any life insurers may participate provided that they are legally constituted at the bidding date. The insurance should be awarded to one or more insurance companies offering the best economic offer. Awarding the insurance to more than one insurer avoids excessive risk concentration for the coverage of the entire life and disability insurance risk. The awarding criteria are established by the General Rule of the Superintendency of Pensions and the Superintendency of Securities and Insurance.

Likewise, the participants’ contributions destined to finance the insurance expressed as a percentage of remunerations and taxable incomes, have a uniform character for all the system’s participants. Although the AFPs are not responsible for financing the insurance, the premiums are collected along with mandatory contributions of participants, being transferred to the insurance companies.

Table of Contents

A difference due to participants’ gender may arise between the contribution to finance the insurance and the necessary premium to finance such insurance. The AFPs should transfer the difference in each of the capitalization accounts of those participants who paid a higher contribution to such premium.

In the case of bankruptcy of any awarded insurance company, the rest of the insurers would assume the corresponding risk regarding those casualties occurred since the bankruptcy date and until the expiration date of the contract. In the case of bankruptcy of all involved insurance companies, the State guarantees the necessary additional contributions to complete the required amount to finance the life and disability pension through the “State Guarantee”. The coverage of such guarantee is from 100% of the prevailing minimum pension and 75% over the excess of the pension with a maximum of UF 45 for each beneficiary or pensioner.

In May 2009, the first life and disability insurance bidding process was carried out for a 12-month coverage period effective on July 1, 2009. Under this new modality, the insurance cost is 1.87% over the taxable remunerations of workers for all the AFPs. The second life and disability insurance bidding for a 24-month coverage period effective on July 1, 2010 was awarded at an average cost of 1.49%.

As Provida no longer provides the insurance coverage, the Company reduced the fees charged to its participants from 2.64% to 1.54% over their taxable remunerations starting on July 1, 2009.

It is important to mention that in the case of dependent workers, the contribution to finance the insurance (additional contribution) is paid by the employer, except for dependent young workers (between 18 and 35 years) who receive pension subsidies. This obligation became effective on July 1, 2009, and a temporary grace period for workers with fewer than 100 employees ended in June 2011.

The last change of the Pension Reform Law that was implemented in 2010 was related to the bidding process to award an AFP the individual capitalization account administration of all new participants entering into the private pension system for a 24-month term. This bidding process encouraged price competition among AFPs and has led to lower fees for participants, causing greater sensitivity in price demand, favoring the entrance of new actors in the AFP industry and protecting the participants’ equity interest.

The awarded AFP is the AFP offering the lowest fee (which at the same time must be less than the fees in effect at the date of the bidding process) for a 24-month period, during which such AFP is not able to modify its fees, being extensive to the portfolios of participants already managed by such AFP.

The first bidding process was carried out in January 2010, in which AFP Cuprum S.A., AFP Habitat S.A., AFP Planvital S.A. and AFP Modelo S.A. participated. On February 1, 2010 it was announced that the awarded company was AFP Modelo, offering the lowest fee of 1.14%. AFP Modelo started operations on August 1, 2010, therefore, from that date onwards those dependent and self-employed workers, as well as voluntary participants that enter for the first time to the pension system of individual capitalization, must contribute for a 24-month period in AFP Modelo.

In January 2012, the second bidding process to award all new participants was carried out, in which AFP Modelo, AFP Planvital and AFP Regional (legally incorporated, but it has not started operations yet) participated. On January 30, 2012, the Superintendency of Pensions announced that the AFP offering the lowest fee of 0.77% was AFP Modelo, therefore, beginning on August 1, 2012, all new participants will be incorporated in AFP Modelo.

Provida considers that it possesses competitive advantages to successfully face the new conditions in the industry, such as the support of BBVA Group, which has a leading position in the Latin-American pensions market. Additionally, Provida has carried out all the processes and developments in order to fully comply with all the changes brought about by the implementation of the Pension Reform Law, and has continued training its workers to provide the best service to customers.

Table of Contents

A.	Selected financial data

The following table presents selected financial and operating information for Provida as of the dates and for each of the fiscal years indicated. The 2011, 2010 and 2009 financial information is derived from our audited Consolidated Financial Statements as of December 31, 2011, 2010 and 2009 included herein.

Our audited Consolidated Financial Statements as of and for the years ended December 31, 2011, 2010 and 2009 are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the IASB.

The financial data as of and for each of the years ended December 31, 2011, 2010 and 2009 in the table below are presented in nominal pesos.

In general, amounts are expressed in millions of Chilean pesos except for ratios, operating data, shares and ADS data. For the convenience of the reader, all data presented in dollars in the following summary, from and at the end of the year ended December 31, 2011, are translated at the Observed Exchange Rate for December 31, 2011 of Ch$519.20 per US$1.00. These translations should not be construed as representations that the Chilean peso amounts actually represent such dollar amounts or could be converted into dollars at the rates indicated or at any other rate.

	As of and for fiscal years ended December 31
	2011			2010			2009
	MCh$			MCh$			MCh$
Consolidated Income Statement Data
IFRS:
Revenues from operations(1)		149,779			169,342			214,002
Expenses from operations(2)		(67,151	)		(71,897	)		(133,358	)
Net operating income		82,628			97,445			80,644
Other income (expenses) net(3)		13,939			11,619			8,247
Income tax expense		(17,712	)		(17,440	)		(14,449	)
Profit (loss)		78,855			91,624			74,442
Profit per share and per ADS (4)
Profit from operations per share		249			294			243
Profit (loss) per share		238			277			225
Dividends per share and per ADS (5)		209			187			58
Dividends per share and per ADS (in US$) (6)		0.40			0.40			0.11
Weighted average number of shares outstanding (in thousands)		331,317			331,317			331,317
Consolidated Statement of Financial Position
IFRS:
Current assets		86,178			68,652			62,089
Mandatory investment		201,418			204,526			179,129
Property, plant and equipment		27,787			28,660			29,641
Total assets		390,348			377,992			344,664
Equity		304,780			293,994			269,378

(1)	Revenues from operations include revenues from fee income, gains (losses) on mandatory investments and other revenues.

(2)	Expenses from operations include life and disability insurance premium expense, employee expenses, depreciation and amortization, impairment losses and miscellaneous other operating expenses.

(3)	Other income (expenses) include finance costs, financial income, share of profit (loss) of associates accounted for using equity method, exchange differences, other non-operating income and expenses.

(4)	Profit per share and per ADS data have been calculated on the basis of the weighted average number of shares outstanding during each fiscal year.

(5)	Calculated on the basis of one share per ADS. Dividends per share and per ADS in Chilean pesos represent actual dividends paid to December 31, 2011.

(6)	Dividends per share and per ADS in US dollars have been calculated by translating the Chilean pesos paid into US dollars using the Observed Exchange Rate as of the date of each respective payment.

Table of Contents

Exchange rate information

The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rate between the Chilean peso and the US dollar. Such exchange rates are provided solely for the convenience of the reader and are not necessarily the exchange rates used by the Company in the preparation of the audited Consolidated Financial Statements included in this annual report. No representation is made to the effect that the Chilean peso could have been, or could be, converted into US dollars at the exchange rates indicated below or at any other exchange rate.

Yearly amounts	Average Rate of Chilean pesos per US$1.00
2007	522.69
2008	521.79
2009	559.67
2010	510.38
2011	483.57

Source: Central Bank.

Nominal Rate of Exchange (Chilean pesos per US dollar)
Months	Monthly Average	High	Low
October 2011	510.67	533.74	490.29
November 2011	509.73	526.83	494.08
December 2011	517.26	522.62	508.67
January 2012	499.96	518.20	485.35
February 2012	480.89	488.75	475.29
March 2012	485.90	491.57	480.62

Source: Central Bank.

According to the latest information published by the Central Bank at the date of issuance of this report, the exchange rate on March 30, 2012 was Ch$487.44 per US$1.00.

B.	Capitalization and indebtedness

Not applicable.

C.	Reasons for the offer and use of proceeds

Not applicable.

D.	Risk factors

In addition to the information contained in this annual report, prospective investors should carefully consider the risks described below and the other information contained in this annual report. Provida’s business, financial condition or results of operations could be materially and adversely affected by any of these risks.

The economic situation in Chile significantly affects Provida’s results

The main source of Provida’s revenues from operations comes from the monthly fees charged to its contributors for mandatory contributions made in their individual capitalization accounts, which are compulsory for every salaried worker as long as there is a labor contract in force. These represented 90.5% of the total revenues from operations for the year ended December 31, 2011. As a result, the economic situation in Chile related to activity indicators and employment conditions significantly affects the Company’s results.

Macroeconomic conditions affect the financial capacity of employers and/or entrepreneurs, which might produce a drop in the number of employee contributors or a lack of capacity for creating new jobs, and decrease the salary of workers. Therefore, both variables—number of employee contributors and average salary—determine the salary base

Table of Contents

of the contributors and affect the Company’s results. An increase in the unemployment rate negatively affects Provida’s results and, depending on its magnitude, the impact could be significant.

Additionally, Provida’s financial condition and operations results could also be adversely affected by changes in the economic policies implemented by the Chilean Government, political or economic developments in Chile or those affecting Chile. Changes in development of the Chilean economy could adversely affect Provida’s ability to develop its business strategy.

It is important to note that another factor affecting the country's economy and thus, Provida's results, relate to natural disasters that might occur in Chile, (i.e. an earthquake, such as the one that occurred on February 27, 2010) if they affect the unemployment level in the country.

Pension funds are global investors, which are affected by the economies of neighboring countries as well as by worldwide economic development

Pension funds, such as those managed by Provida, are global investors and are therefore affected by both the economies of neighboring countries as well as by worldwide economic factors. In recent years, pension fund returns have been subject to volatility in international and local financial markets, where foreign investments represented 37.2% of Provida’s total assets under management for the year ended December 31, 2011.

The Pension Reform Law increased the percentage of investments which AFPs are allowed to make abroad, from a range between 30% to 45% to a range between 30% to 60% during the first twelve months following the enactment of the Pension Reform Law (from October 1, 2008 to September 30, 2009); and between 30% to 80% since the thirteenth month (October 1, 2009). In September 2008, the Central Bank gradually increased the maximum investments limits abroad: 45% from October 1, 2008, 50% from December 1, 2008, 55% from April 1, 2009 and 60% from August 3, 2009. In November 2010, the Central Bank increased again the maximum global investment limit abroad from 60% to 80%, gradually increasing as follows: 65% from December 1, 2010, 70% from March 1, 2011, 75% from June 1, 2011 and 80% from September 1, 2011.

Such increase permits pension funds to have new investment opportunities, which could improve the diversity of their investment portfolios, but at the same time increases the potential exposure to the international markets of the total assets managed by the AFPs.

The worldwide economy could affect Provida’s returns obtained on mandatory investments and therefore its net profit.

Provida’s returns on its investments in foreign companies could be affected by changes in the regulatory environment, the exchange rates and the economic situation of the countries where such companies are located

Provida through its subsidiary Provida Internacional S.A. (“Provida Internacional”) maintains equity interests in private pension fund administrators operating in Peru, Ecuador and Mexico, whose results represented in the aggregate MCh$9,092 (MUS$17.5) of Provida’s net profit for the year ended December 31, 2011.

The Company is exposed to risks of exchange rate and market performances in those countries where it holds equity interest in companies that administrate pension funds.

Likewise, an adverse fluctuation in the exchange rate between the currencies of such countries and the Chilean peso could negatively affect the profits from foreign companies and thus, their respective returns.

Additionally, the risks associated with the performances of pension markets where such companies participate, as the pension systems are highly regulated, refer to possible changes in the legal framework and to the economic situation where the companies are, since there is high correlation between their profits and the conditions of activity and employment of the respective country.

Table of Contents

Provida has limitations on significantly increasing its market position

According to official statistics released by the Superintendency of Pensions, Provida has maintained a leading position in the private pension system since its incorporation, which has led to a market share around 40% in terms of number of participants and nearly 30% in terms of assets under management. Given its position in this market and its relative size, it is highly probable that competitors will take steps toward attracting participants from Provida and persuading them to transfer their funds and make contributions to other AFPs, limiting Provida from significantly increasing its market share. A decrease in Provida’s participant portfolio could have a negative impact on its revenues from operations.

Provida is limited in its ability to improve the performance of its assets under management

Provida’s assets under management totaling MCh$20,380,274 (US$39.2 billion) as of December 31, 2011 are very large with respect to the size of the local capital market measured by its total capitalization. The latter reduces Provida’s flexibility to significantly modify its portfolio structures, and consequently to improve the return offered to its participants. Additionally, in situations of instability or uncertainty in the markets, Provida’s reactive capacity is likely to be limited. In this context, Provida cannot ensure that it will be able to maintain a sufficient rate of return on its pension funds to decrease the number of participant transfers. Any decrease in Provida’s participant portfolio could have a negative impact on its revenues from operations.

Additionally, if pension fund returns managed by Provida do not achieve the legal minimum return established by law, due to any instability or uncertainty in capital markets as described above, the Company could lose part of its mandatory investments aimed at covering this difference. (See “Item 4. Information on Provida—B. Business overview—Principal activities—Investment services of participants’ contributions in the pension funds”). This portion must be replenished in a maximum term of 15 days to fulfill the legal requirement to maintain a reserve equal to 1% of the value of each pension fund under management and to continue with its business with the consequent reduction in the Company’s equity.

Provida operates in a regulated market in which its flexibility to manage its business is limited

Provida’s operations are regulated by the Pension Law and, to the extent applicable, Chilean corporation law. The Pension Law defines the scope of the business of pension fund administrators, which only permits Provida to engage in the administration of its pension funds and the rendering of related benefits. Provida is also authorized to establish local related corporations that may complement its line of business or invest in pension fund administrators or entities located in other countries whose business is related to pension matters.

Regarding pension fund investments, Provida must invest such assets in accordance with the types of instruments and within the ranges of assets and maximum percentages allocated per investment and fund type authorized by the Pension Law.

In addition, the Pension Law requires each AFP to maintain a minimum reserve fund known as mandatory investment equal to 1% of the value of each pension fund under management in order to provide a minimum real return on investment for each of its pension funds. This minimum return is based on a weighted average of the real return by all pension funds in the AFP system in a 36-month period. This requirement has been designated in accordance with different portfolio compositions, giving those with a higher component of variable income and therefore higher volatility (funds Type A and B), a larger margin to achieve the requirement. If a fund’s real return for a certain month were lower than the minimum return, the AFP must cover the difference within a 5-day period. To do so, the AFP is permitted to apply funds from the mandatory investments, and in that event, such amount must be refunded within 15 days. In accordance with the Pension Law, if an AFP fails to comply with either the minimum return requirement or the minimum reserve fund requirement, it may eventually be required to be dissolved. See “Item 4. Information on Provida—B. Business overview—Principal activities—Investment services of participants’ contributions in the pension funds”.

The Pension Reform Law increased the investment limits for the pension funds. However, Provida cannot ensure that it will be able to fulfill minimum return requirements or the minimum reserve.

Table of Contents

Provida’s business and results of operations may be affected by changes in laws, regulations or Chilean Government proposals

On January 16, 2008, the Pension Reform Law to the private pension system was approved and was published as the Republic Law (N° 20,255) in the Official Gazette on March 17, 2008. The first changes started to be implemented on July 1, 2008. Changes introduced by the reform can be summarized in four areas: coverage improvement, new industrial organization, investments and new institutional framework.

As a result of the implementation of the Pension Reform Law, there is an important new factor influencing the Company’s ability to capture new affiliations that enter the pension system. The generation of accounts related to new participants entering the system is awarded every two years, beginning in July 2010 and for a 24 month period, to the AFP offering the lowest variable fee. This fee must be lower than the lowest fee operating in the industry and must apply to the AFP’s entire portfolio, not only to the awarded portion.

Provida’s management believes that the approved reform consolidates the current private pension system and provides an adequate legal framework for AFPs to continue developing their activities. In reference to the coverage improvement, Provida believes that this implies a new business opportunity for AFPs. Regarding the new industrial organization aimed at increasing competition and reducing entrance barriers, Provida has the support of the BBVA Group, which has a leading position in the Latin American pensions market, as well as a competitive advantage in successfully facing the new conditions in the industry. Additionally, Provida believes that the flexibility of investment alternatives makes increased competition possible.

However, future changes in laws or regulations in Chile may have a negative effect on Provida’s financial results.

The risk of a higher casualty rate and the consequent effect on expenses from operations is subject to the fluctuation of interest rates for life annuities and the returns achieved by pension funds.

In terms of expenses from operations, life and disability insurance has represented an important source of expenditures for the Company. Life and disability insurance is considered a long-term obligation because the benefits to disabled participants are rendered following the final disability determination test, which is three years after the initial disability determination (in the case of partial disability defined as a decrease between one half and two thirds of the working capacity). Until October 2009, the total disability benefits (in the case of total disability, defined as a decrease in more than two thirds in the working capacity) were also granted three years after the initial disability determination.

Before the changes introduced by the Pension Reform Law that included the bidding process of the life and disability insurance by all the AFPs in July 2009 (see “Item 3. Key Information—Recent Regulatory Changes”), Provida by law was obligated to provide life and disability benefits by individually contracting an insurance in order to comply with such obligation.

Even though, the Pension Reform Law eliminated the AFP’s individual obligation regarding the coverage of casualties beginning on July 1, 2009, by awarding the life and disability administration to a group of insurers, the obligation of those casualties pending payment due to temporary disability under coverage as of June 30, 2009, will remain in Provida.

At the moment that the final disability determination is made, the AFP is obligated to cover any shortfall equivalent to the difference between a participant’s savings in his/her individual capitalization account and the benefits granted to him/her by law. These benefits relate to the present value of the life annuity pension discounted by the life annuity rates in force at the time of the payment. Such pension will be equivalent to a percentage of the participant’s average taxable remuneration for the last ten years depending on the decrease of his/her working capacity: i.e., 50% of his/her taxable income in case of experiencing a loss of between one-half and two-thirds of working capacity, and 70% of his/her taxable income in case of experiencing a loss of more than two-thirds of working capacity. As a result, changes in interest rates impact the final value of an AFP’s payment obligations.

According to the insurance contract still in force maintained by Provida with BBVA Seguros de Vida entered into before the Pension Reform Law implementation, the Company has the obligation to make additional premium payments if the casualty costs are greater than the temporary payments and up to a maximum amount previously

Table of Contents

defined. The risk of a greater casualty cost and its consequent effect in the Company’s expenses from operations is subject beginning on July 1, 2009 to the returns of life annuities and pension funds, factors that have an inverse relationship in the economic cost of casualties, therefore, the Administrator could be forced to pay additional contributions if the evolution of such factors so determine.

Provida requested BBVA Seguros de Vida, in conformity with the new regulation, to value reserves at the prevailing interest market instead of an historical interest rate (defined as the minimum interest rate of the previous semester) so that the Company’s liability would more accurately reflect the amount that will be effectively paid (i.e. fair value). Moreover, by mutual consent of the parties (previous compensation to the insurer for change in conditions) the financial performance of cash flows surplus was modified with a benchmark determined by assets of similar duration to that of the insurance liability.

In view of changes made in the management of assets and liabilities associated with the life and disability insurance, AFP Provida has mitigated the risk associated with interest rate fluctuation.

Finally, the Company continues recording its obligations for this concept at fair value in accordance with the casualty model that considers the future evolution of relevant variables under conservative scenarios, which might include constituting higher provisions than those required by law that correspond to the surplus of the insurers’ balance sheets. In view of the low interest rates expected at the moment of payment of the obligations and also applied in the casualty model, Provida has recorded a credit in its provisions for unfavorable casualty rate by MCh$2,696 as of December 31, 2011.

Provida is exposed to the credit risk of the insurers such that the risk of failure of an insurer to pay any required shortfall amount is borne by Provida

Under the Pension Reform Law, the Pension Fund Administrators together must purchase insurance for their affiliates, called life and disability insurance (SIS). The right to provide such insurance is awarded through a bidding process, which is carried out by all AFPs.

In the case of bankruptcy of all involved insurance companies, the State guarantees the necessary additional contributions to complete the required amount to finance the life and disability pension through the State guarantee. The coverage of such guarantee is from 100% of the prevailing minimum pension and 75% over the excess of the pension with a maximum of UF 45 per month (MCh$1 approximately) for each beneficiary or pensioner.

Item 4. INFORMATION ON PROVIDA

A.	History and development

Administradora de Fondos de Pensiones Provida S.A. is a corporation formed under the laws of Chile. Its deed of incorporation was executed on March 3, 1981 and was registered in the Registry of Commerce in Santiago of Chile on April 6, 1981, under number 6,060, subsection 3,268. Provida’s by-laws specify that the Company shall have a duration of one hundred years, beginning on the date on which its existence was authorized. Provida’s registered office is located at 100 Pedro de Valdivia Avenue, 16th floor, Providencia, Santiago, Chile. Provida’s telephone number at that location is (56-2) 351-1200 and its website is www.bbvaprovida.cl.

Provida is one of the oldest private pension fund administrators operating in Chile, maintaining a leading position in the Chilean private pension industry since its incorporation. As of December 31, 2011, according to official statistics released by the Superintendency of Pensions, Provida was the largest of the six AFPs operating in Chile in terms of the number of participants, contributors, assets under management, participants’ salary base and number of branch offices. The Chilean private pension system was created in May 1981, when Decree Law 3,500 of November 13, 1980 (the “Pension Law”) was implemented to replace the prior social security system. Subsequently, on March 11, 2008 the Pension Reform Law was promulgated in order to improve the pension system, reinforcing the solidarity character of the system, extending its coverage, increasing competitiveness in the industry and boosting gender equality.

Table of Contents

At the end of the 1990s and in order to reinforce its competitive position, Provida, like other major AFPs, engaged in a merger processes with smaller and less efficient AFPs, in an attempt to increase market share and achieve greater economies of scale. Provida purchased and merged with AFP Unión S.A. and AFP Protección S.A. in 1998 and 1999, respectively. Provida has sustained an increase in its market share through these acquisitions with growth in its market shares from 29% before the mergers to 40% in 2011 in terms of participants and from 20% to 29% in 2011 in terms of total assets under management.

Since 1993 Provida has participated in establishing private pension systems in other countries in Latin America, achieving at the end of the 1990s equity interests in AFPs in Peru, Ecuador, Mexico, El Salvador and Colombia through its subsidiary, Provida Internacional. In 1999, BBVA Group purchased a controlling interest in Provida and since 2001 the Company has participated with BBVA Group under a joint strategy to boost the aggregate pension holdings in Latin America.

In 2001 Provida Internacional sold its interest in the Mexican company AFORE Profuturo S.A. de C.V., a sale that allowed Provida to complete the consolidation of its strategic position in Mexico, along with the BBVA Group after the purchase of a 7.50% equity interest in AFORE Bancomer S.A. de C.V. (“AFORE Bancomer”).

Additionally, in September 2001, Provida became the owner of 100% of the shares of AFP Génesis S.A., which had a leading position in the Ecuadorian fund management industry. Since then, AFP Génesis’ financial statements have been consolidated with those of Provida.

In 2003, Provida sold its equity interest in AFPC Porvenir S.A. in Colombia to the Sarmiento Group, the controlling shareholder of such administrator. This decision was based on the fact that the Colombian market had matured and was undergoing changes in regulations and the fact that Provida did not have management control of the company while the BBVA Group had a controlling position in another administrator, AFPC Crecer. In conjunction with the above transaction, Provida acquired a 100% equity interest in AFP Porvenir S.A. in the Dominican Republic from the Sarmiento Group and the minority shareholders with the expectation of the future merger with BBVA Crecer, the AFP of the BBVA Group in that country.

In May 2004, Provida sold its 30.00% equity interest in AFP Porvenir in the Dominican Republic to the local investor Progreso Group retaining a 70.00% equity interest to carry out the merger process between AFP Porvenir and BBVA Crecer, in which the BBVA Group held a 70.00% equity interest. Following the merger, Provida and the BBVA Group each held a 35.00% equity interest in AFP Porvenir and the remaining 30.00% was held by the Dominican financial investor Progreso Group.

Also in October 2004, Provida Internacional sold its equity interest in AFP Crecer in El Salvador to Fondo Universal S.A. de C.V., a disposal that was triggered by moderate growth perspectives for that mature market.

In 2007, Provida Internacional sold 10.00% of its equity interest in BBVA Crecer AFP S.A. to one of the companies of the Vicini Group, retaining a 25.00% equity interest in such AFP. In December 2007, Provida Internacional sold the remaining 25.00% equity interest to the Bank of Nova Scotia of Canada, as a result of which Provida Internacional no longer has an equity interest in that company.

Regarding local investments, Provida became a shareholder of Investment DCV in 1993, a company whose main purpose is to invest in entities engaged in offering securities to the public and in which Provida currently holds a 23.14% equity interest. Since 2000, Provida has been a shareholder in PreviRed.com (“PreviRed”), a company that provides electronic collection services for pension contributions. Provida currently holds a 37.87% equity interest in PreviRed.com. Finally, in 2002 a consortium composed of all AFPs was awarded the administration of Unemployment Insurance through a new company called Administradora de Fondos de Cesantía de Chile S.A. (“AFC”), in which Provida holds a 37.80% equity interest.

There were no significant events in 2011, 2010 and 2009 concerning Provida’s domestic and international business and investments.

Table of Contents

Capital expenditures and divestitures

In 2011, 2010 and 2009, aggregate capital expenditures totaled MCh$10,196 (approximately MUS$20) and divestitures totaled MCh$964 (approximately MUS$2) as follows:

In 2011, capital expenditures were MCh$3,670 related to investments in property, plant and equipment made in the ordinary course of business, specifically the installations and restructuring of branch offices, and purchase of computer equipment and software. Capital divestitures were MCh$911 and were related to sales of property, plant and equipment mainly real estate.

In 2010, capital expenditures were MCh$3,544 related to investments in property, plant and equipment made in the ordinary course of business, specifically the implementation of the Top One project (office restructuring), purchase of computer equipment and software, and purchase of land. Capital divestitures were MCh$53 and were related to sales of property, plant and equipment, mainly land and office fixtures.

In 2009, capital expenditures were MCh$2,982 and were related to investments in property, plant and equipment made in the ordinary course of business and in particular to facilities and branch offices remodeling, and purchase of computer equipment and software. Regarding capital divestitures, no sales of property, plant and equipment or sales of permanent investments were recorded during the year.

The following table sets out information corresponding to capital expenditures and divestitures for the years ended December 31, 2011, 2010 and 2009:

	For years ended December 31,
	2011	2010	2009
	MCh$	MCh$	MCh$
Capital Expenditures	(3,670)	(3,290)	(2,982)
Divestitures	911	53	-

Source: Superintendency of Pensions

There has been no indication of any public takeover offer by any third party in respect of Provida’s shares, nor has there been any indication by Provida of any public takeover attempt in respect of any other company’s shares, in either the last or current fiscal year.

B.	Business overview

Principal activities

Chilean AFPs are regulated by Law Decree 3,500 and by the Superintendency of Pensions. In order to commence operations, an AFP must hold a minimum capital equal to UF 5,000 (approximately ThUS$215), which increases based on the number of participants up to UF 20,000 (approximately ThUS$859) for AFPs with over 10,000 participants. The Administrators must maintain at all times shareholders’ equity equal to at least the minimum capital required. If shareholders' equity of an AFP is reduced to an amount lower than the minimum required, the AFP shall be required to make up the difference within six months every time that this occurs. If an AFP is not able to do so, the Superintendency of Pensions would revoke the AFP’s authorization of existence and liquidate it.

The AFPs are required by law to be single-purpose companies authorized to provide the following services:

-	collection and management of contributions made by participants;

-	investments of participants’ contributions in pension funds managed by the AFP;

-	provide life and disability benefits for participants; and

-	provide a senior pension for participants.

Table of Contents

Services of collection and management of contributions made by participants

The services provided by the AFPs in connection with collection and management of contributions include mandatory contributions and voluntary contributions made by its participants.

Regarding mandatory contributions and in accordance with the Pension Law, each dependent worker and participant of Provida must contribute 10% of his/her taxable salary into his/her individual capitalization account. Such contributions are deducted from the participant’s salary and are used to purchase shares of some of the five types of funds that Provida manages. These funds are legal entities separate from Provida as Administrator.

The Pension Reform Law established the requirement for self-employed workers to make contributions of 10% of their remunerations. Such requirement became effective beginning on January 1, 2012 and from that date onward, self-employed workers must gradually make contributions based on a 10% out of 40% of their salary in the first year, 10% out of 70% of their salary in the second year and 10% of their total salary during the third year, equating to the contribution of dependent workers. Additionally, the new regulation incorporates the concept of voluntary participant, which applies to any individual who does not engage in a remunerated activity and decides to make pension contributions for his/her retirement.

Provida collects monthly mandatory contributions that are withheld from the salaries of Provida’s participants by their employers and those contributions from Provida’s self-employed participants and voluntary participants. Those monthly contributions are credited into each participant’s individual capitalization account. In the case of dependent workers, each employer must provide Provida with a monthly payroll listing all its employees who are participants of Provida, identifying the payments being made on behalf of each employee for pension contributions, both mandatory and voluntary. Self-employed workers prepare and submit their own payrolls. The voluntary participants may prepare their own payrolls or another person may do so on their behalf. In order to expedite the preparation, dependent workers whose spouses are voluntary participants, can grant authorization to their employers to deduct the contributions to be added to their spouses’ from their salaries. In all cases, the payroll, along with the checks or cash for the total contribution, must be submitted to any Provida branch office or any designated collection agent. Checks and cash deposited in banks and payrolls are submitted to the operational center in Santiago for processing. Each AFP also administers an individual and private indemnity account in the fund for household workers (such as housekeepers).

Provida offers its participants the option to establish a voluntary savings account into which they may deposit additional funds to be invested in the elected pension fund. Because this voluntary account is not designated as pension savings but free disposal, the participant may make deposits into his/her account as often as desired and is able to make withdrawals up to six times a year with no amount restriction. Currently, Provida charges a variable fee of 0.92% per month over the administered funds. This account is kept open in the pension fund registers, regardless of its account balance status.

Finally and in connection with voluntary pension savings, these correspond to additional amounts of contributions that each worker may add to improve his future pension. The maximum voluntary monthly contribution with associated tax benefits is UF 50 (approximately US$2,150). If these funds are withdrawn for uses other than pension, the amount withdrawn will be charged a higher tax rate applicable to each particular case.

AFPs are entitled to charge a fee over funds of voluntary pension savings and for collection of such funds for other institutions. Currently, Provida charges a monthly fee equivalent to 0.56% on an annual basis over accumulated funds and has established a fee of Ch$1,250 (approximately US$2.40) for fund transfers collected for other financial institutions.

As a way to improve the volume of participants’ contributions and therefore the coverage of the private system, the Pension Reform Law incorporates the alternative of Collective Voluntary Pension Savings (“APVC” for its Spanish acronym) that corresponds to a contract to be agreed between the employer and his workers and the AFP or an authorized institution. This APVC is financed in a joint manner, because the employers agree to contribute a percentage of the savings made by employees who voluntarily select this modality. The conditions of the APVC administration contract are agreed between the employer and the AFP or the authorized institution. In order to promote this modality, tax incentives have been established for workers.

Table of Contents

Investment services of participants’ contributions in the pension funds

The general investment policy of the pension funds is determined by Provida’s Board of Directors. In the process of management’s investment decisions, the following committees of Provida are involved:

- Committee of Investment and Conflict of Interest Resolution of AFP Provida’s Board of Directors. This committee consists of three directors; two of them must be “autonomous” according to the criteria established in the Pension Reform Law, the President being one of the autonomous directors. Among its functions are: to design an investment policy and a risk profile for each fund type; to supervise the fulfillment of the investment policy approved by the Board of Directors and the investment limits of pension funds established by law; to review objectives, policies and procedures to and from the administration of the investment risk in the pension funds; to examine information regarding operations of the pension funds with derivative instruments, foreign investments (equities, fixed income and currencies) and related companies and to approve investments in any new kind of asset, among others.

- Committee of Investments and Risks: this is comprised of the Chief Executive Officer, the Chief Investment Officer, Risk Manager and other executives that might be designated. Among the responsibilities and attributions of this committee are: to review the different measures of risk-return presented by the Risk Management; to approve different issuers, counterparts, mutual funds agencies, agents, among others, proposed by the Investment Management; to take notice about any event or contingency that might affect the equity of pension funds and to review situations associated with penalties and warnings; among others.

The organizational structure and the clear definition of the powers vested, attributions and responsibilities play an important role in the investment process. The structure is designed to fully develop the staff’s abilities and the optimum implementation of the investment policy in order to reach the proposed goals, managing the complexity of different instruments and markets in which the different type of funds are invested in, and the appropriate management of financial and operative risks faced by them.

For this, the responsible for assets management is the Investment Area that has three management divisions: Variable Income, Fixed Income and Research, and Middle Office Deputy management, all of them reporting directly to the Chief Investment Officer. These Units include full-time research analysts with experience in investments, economics and securities. Provida also receives external advisory services provided by domestic and international consultants who provide advice to the Investment Area on tendencies and developments affecting the value of current and potential investments.

In Chile, all secondary market trading by AFPs must be executed in the formal trading markets either through a securities exchange or a competitive bidding process. The Department of Administration and Valuation, which is part of the Back Office Unit, all of them belonging to the Planning and Control Division of the Company, validates investments each day before entering into them. Additionally, this unit has the obligation of disclosing to the Superintendency of Pensions a daily report with all investment activities.

It is important to note that since 2006, Provida has a quality certification in accordance with the ISO 9001-2000 Norm, which has been renewed annually, and is effective up to December 2012. This certification includes all the financial operations made by the Money Market Desk, which is part of the Investment Area, and also to tasks executed by the Back Office Unit, as part of the Planning and Control Division.

The general objective of Provida’s investment activity is to administer the investment portfolios composed of the participants’ contributions in order to obtain the highest possible return for the level of risk and terms of these participants’ profiles. For this and according to the current regulation, the participants have five fund types, allowing maximizing the expected pension according to their specific risk profiles.

To aid the participants’ in making the best choice, Provida seeks at all times that the five fund types (fund Type A, B, C, D and E) have clear differences among them regarding potential risk and returns. These differences are limited by the current regulations, including the requirement of a minimum return.

The main difference among the different fund types, as stipulated in the regulation, is the proportion invested in variable income securities. Fund Type A has the highest concentration allowed in variable income securities with a maximum of 80%; fund Type B has a maximum concentration of 60%; fund Type C has a maximum concentration of 40%; fund Type D has a maximum concentration of 20% and fund Type E (begun in October 2008) has the lowest concentration with a maximum of 5%.

Table of Contents

The regulation establishes several restrictions regarding the investment activities that can be developed by each fund to guarantee the maintenance of such differences among the funds according to the risk of variable income securities permitted for each of them.

The investment philosophy behind the five fund types is to combine the highest possible diversification with low costs and a high degree of transparency. These principles must always be present when making and implementing the investment decisions.

The Pension Reform Law increased the range allowed for AFPs to make investments abroad, from a range between 30% to 45% to a range between 30% to 60% during the first twelve months following the enactment of the Pension Reform Law (from October 1, 2008 to September 30, 2009); and between 30% to 80% since the thirteenth month (October 1, 2009). In September 2008, the Central Bank gradually increased the maximum investments limits abroad: 45% from October 1, 2008, 50% from December 1, 2008, 55% from April 1, 2009 and 60% from August 3, 2009. In November 2010, the Central Bank increased again the maximum global investment limit abroad from 60% to 80%, gradually increasing as follows: 65% from December 1, 2010, 70% from March 1, 2011, 75% from June 1, 2011 and 80% from September 1, 2011.

The table below summarizes the Pension Reform Law’s ranges for foreign investments per each Type of Fund:

Investment ranges in foreign investments per each Type
	October 1, 2008 – September 30, 2009	October 1, 2009 onwards
Fund Type A	25% - 80%	45% - 100%
Fund Type B	20% - 70%	40% - 90%
Fund Type C	15% - 60%	30% - 75%
Fund Type D	10% - 30%	20% - 45%
Fund Type E	5% - 25%	15% - 35%

The maximum investment limits abroad per each Fund Type determined by the Central Bank beginning December, 2010 is as follows:

	Fund Type
	A	B	C	D	E
December 1, 2010	85%	75%	65%	35%	30%
March 1, 2011	90%	80%	70%	40%	35%
June 1, 2011	95%	85%	75%	45%	35%
September 1, 2011	100%	90%	75%	45%	35%

The Pension Law also distinguishes among the age and gender of the individuals who may select to participate in the different fund Types. A description of the requirements to participate in each of the funds is detailed as follows:

	Multiple funds allowable selections
	Men up to 55 years old and women up to 50 years old	Men from 56 years old and women from 51 years old not pensioned	Pensioned participants
Fund Type A	Allowed	Not allowed	Not allowed
Fund Type B	Allowed	Allowed	Not allowed
Fund Type C	Allowed	Allowed	Allowed
Fund Type D	Allowed	Allowed	Allowed
Fund Type E	Allowed	Allowed	Allowed

Source: Superintendency of Pensions

According to the Pension Law, if at the ages of 56 and 51, men and women respectively who have their mandatory contribution and/or their indemnity account in fund Type A do not make any choice regarding the destination of their mandatory pension funds, these are gradually transferred to fund Type B.

Table of Contents

Moreover, if the participant does not voluntarily choose a fund, the mandatory contributions are assigned and modified by law according to the participant’s age:

-	Contributions made by men and women younger than 35 are to fund Type B;

-	Contributions made by men between 36 and 55 and women between 36 and 50 to fund Type C; and

-	Contributions made by men older than 56 and women older than 51 to fund Type D.

For participants who apply to programmed withdrawal, temporary income with deferred life annuities or immediate life annuities with programmed withdrawal plan, 100% of their savings are initially allocated in fund Type D. Thereafter, these participants may opt for any fund among the permitted alternatives.

After the creation of multiple funds, fund Type C managed by Provida continues to have the highest proportion of assets (44.5% at the end of 2011) while fund Types A, B and D managed by the Company have reached significant sizes after the voluntary changes and substantive transfers recorded from September 2002.

	Assets under management of Provida
	December 2002					December 2011
	MCh$		% of the total			MCh$		% of the total
Fund Type A		112,692		1.1	%		3,226,152		15.8	%
Fund Type B		1,177,690		11.7	%		3,587,273		17.6	%
Fund Type C		7,346,323		73.2	%		9,071,418		44.5	%
Fund Type D		1,016,124		10.1	%		3,431,964		16.9	%
Fund Type E		395,863		3.9	%		1,063,467		5.2	%
Total		10,048,691		100.0	%		20,380,274		100.0	%

Source: Superintendency of Pensions

Under the Pension Law, each pension fund is a separate legal entity from the AFP, not affected in any way by the AFP’s financial situation. In the event of the AFP’s bankruptcy, the Superintendency of Pensions would assume control of the fund, allowing participants 90 days to transfer funds in their individual capitalization accounts to another AFP. At the end of this period, the fund custodian appointed by the Superintendency of Pensions would transfer all remaining accounts to another fund designated by the custodian.

The Pension Law establishes that each AFP must maintain a reserve for mandatory investments equal to 1% of the value of each pension fund under management. The mandatory investment is calculated in accordance with instructions issued by the Superintendency of Pensions, and corresponds to the value of each pension fund two days prior to calculation. Since June 1995, the Pension Law has required AFPs to invest this mandatory investment in shares of the respective pension fund managed by the AFP. This legislation is intended to eliminate potential conflicts of interest that could arise between investment decisions relating to a portfolio held as AFP’s reserves and those relating to the portfolio where pension funds are invested.

The mandatory investment’s purpose is to provide a guarantee in the event that the performance of a specific pension fund drops below the required minimum level of return. This requirement has been determined in accordance with the different portfolio compositions, requiring those with a greater investment in variable income securities and therefore potentially subject to higher volatility (funds Type A and B), a larger margin to achieve the requirement. As a consequence, for pension funds Type C, D and E, this level is the lesser of (a) the weighted average annual real return for the last 36 months of the same type of all pension funds in the system less 2% and (b) 50% of the weighted average annual real return for the last 36 months of the same type of all pension funds in the system. The minimum return for pension funds Type A and B is the lesser of (a) the weighted average annual real return for the last 36 months of the same type of all pension funds in the system less 4% and (b) 50% of the weighted average annual real return for the last 36 months of the same type of all pension funds in the system.

The Pension Reform Law includes an exception to the previous paragraph for those funds that have less than 36 months of operation. In these cases, such AFP will be liable to the fund to the extent that the weighted annual real return of funds Types A and B are less than the lesser of (a) the weighted average annual real return of all funds of the same type for the period equivalent to the operating months of the new fund, less 6%, and (b) 50% of the weighted average real return of all funds of the same type for the period equivalent to the operating months of the new fund type.

Table of Contents

In the case of pension funds Type C, D and E, the weighted average real return may not be less than the lesser of (a) the weighted average real return of all funds of the same type for the period equivalent to the operating months of the new fund, less 4 %, and (b) 50% of the weighted average real return of all fund types of the same type for the period equivalent to the operating months of the new fund type. The latter will not be applicable to the administrators with respect to any of their pension funds that have less than twelve operating months.

The average annual real return is calculated by the Superintendency of Pensions according to a weighted formula established by the Pension Law that among other issues limits the maximum participation of any AFP in the calculation. If for a certain month, the pension fund’s annual real return on investment falls below the minimum return required, the difference must be covered by the mandatory investments. If the resources from mandatory investments are applied and the minimum return is still not reached, the Chilean Government will have to make up the difference.

In the event that the pension funds managed by an AFP fail to fulfill the required minimum level of investment return, the AFP is required to cover the difference within five days of such determination by the Superintendency of Pensions. If reserves are used to fund any deficit in the required level of return, the AFP must replenish them within fifteen days. If a deficit is not covered or if reserves are not replenished, the AFP will be liquidated by the Superintendency of Pensions.

As of and for all periods presented, the Company has complied with the minimum reserve and minimum return requirements.

Services of granting life and disability benefits

The Pension Reform Law eliminated the individual responsibility of AFPs in connection with the life and disability insurance, by establishing that the AFPs altogether should purchase a fixed and single insurance premium through a bidding process to cover this obligation. Such insurance is awarded to one or more insurance companies, providing the best economic offer (See “Item 3. Key Information—Recent regulatory changes”).

Additionally, through the Pension Reform Law, a solidarity pension system financed by the resources of the State, which began granting benefits on July 1, 2008, was created to complement the existing private pension system. The solidarity pension system grants, among other benefits, basic solidarity pensions of disability and solidarity pension contributions of disability. To have these benefits, certain requirements must be met:

Basic solidarity pension for disability: being declared disabled by a Medical Commission designated by the Superintendency of Pensions; not being eligible to receive any pension under any pension regime; being between 18 and 65 years of age; being part of a family group belonging to the 60% of the poorest population in Chile and demonstrating residence in Chile for a period of not less than five years in the last six years prior to the submission of the request.

Solidarity pension contribution of disability: being declared disabled by a Medical Commission designated by the Superintendency of Pensions; being affiliated with the Pension System established by the 3,500 Law Decree of 1980; not receiving a pension from any other pension regime; being between 18 and 65 years of age; being part of a family group belonging to the 60% of the poorest population in Chile; demonstrating residence in Chile for a period of not less than five years in the last six years prior to the submission of the request and being eligible for a disability pension, provided that the sum of the amount of such pension plus any other pension received from such system is less than the basic solidarity pension of disability.

The solidarity system is administered by the Social Pension Institute, having the right to grant, terminate, suspend or modify benefits, when applicable. Additionally, it regulates the request processing, the operating manner and benefit payments of the solidarity system, adding the necessary regulations for its application and operation. However, the current participants to the private pension system are able to submit their requests to access the solidarity pension system to the AFP which they are part of for further submission to the Social Pension Institute.

Table of Contents

Services of granting senior pension benefits

As required by the Pension Law, each AFP must provide specific senior pension benefits to their participants who meet the legal age requirement: 60 years of age for women and 65 years of age for men.

Participants meeting certain requirements can obtain senior pensions before the legal age. Such requirements were modified in 2004, which gradually increased, over a term of 6 years, the required percentages between the calculation of the anticipated pension over the average taxable remuneration of the last ten years and over the minimum legal pension. The latter is intended to increase the level of pensions received and to restrain the trend of retirement before reaching the legal age, motivated by the possibility of receiving a permanent salary in case of unemployment or having two incomes (remuneration and pension).

The period (from/until) and the required percentages are described in the following table:

Percentage over the taxable average remuneration
Period (from/until)	%
August 19, 2004 – August 18, 2005	52%
August 19, 2005 – August 18, 2006	55%
August 19, 2006 – August 18, 2007	58%
August 19, 2007 – August 18, 2008	61%
August 19, 2008 – August 18, 2009	64%
August 19, 2009 – August 18, 2010	67%
From August 19, 2010	70%

Percentage over the minimum pension requirement
Period (from/until)	%
August 19, 2004 – August 18, 2005	110%
August 19, 2005 – August 18, 2006	130%
August 19, 2006 – August 18, 2007	140%
From August 19, 2007	150%

The Chilean Government guarantees a minimum level of senior pensions for all AFP participants who have contributed for at least 20 years (including any year contributed under the former system) having reached the retirement age stipulated by the law. In the event that the participant’s contributions into his/her individual capitalization account together with the amount paid pursuant to any recognition bond do not meet these minimum levels, the AFP pays the pension from the participant’s individual capitalization account until the account is depleted.

The solidarity pension system financed by the State resources and incorporated through the Pension Reform Law, also grants benefits for the solidarity basic senior pensions and for the solidarity senior pension contributions. To obtain these benefits the participants must meet certain requirements:

Solidarity basic senior pension:

-	Being at least 65 years of age at the moment of the claim.

-	Not being eligible to any pension under any pension regime either as a titular or as a beneficiary of a life disability.

-	Demonstrating 20 years (continuous or discontinuous) of residence in Chile, accounted from the time the participant had reached 20 years of age and for a period of not less than four years of residence in the last five years prior to the submission of the request in order to obtain the benefits.

-	Being part of a family group belonging to the poorest population in Chile in accordance with the coverage schedule mentioned below.

As of July 1, 2011 the amount of the benefit was Ch$78,449 per month. This benefit will be automatically adjusted in 100% of the variation of inflation from the last 12 months since the last adjustment. When inflation exceeds 10% since the last adjustment, the adjustment will be made immediately, regardless if 12 months have passed or not.

Table of Contents

Solidarity senior pension contribution

-	Being at least 65 years of age at the moment of the claim.

-	Receiving a pension inferior to the maximum pension with solidarity contribution (PMAS).

-	Not being a contributor in the Chilean police officers’ social security system (“Dipreca” for its Spanish acronym) or the Chilean armed forces social security system (“Capredena” for its Spanish acronym), or receiving pension under such regimes as a titular or beneficiary of a life pension.

-	Demonstrating 20 years (continuous or discontinuous) of residence in Chile, accounted from the time the participant had reached 20 years of age and for a period of not less than four years of residence in the last five years prior to the submission of the request in order to obtain the benefits.

-	Being part of a family group belonging to the poorest population in Chile in accordance with the coverage schedule mentioned below.

Amount and date of entrance PMAS
Period	Coverage In Ch$
July 1, 2008 – June 30, 2009	70,000
July 1, 2009 – August 31, 2009	120,000
September 1, 2009 – June 30, 2010	150,000
July 1, 2010 – June 30, 2011	200,000
From July 1, 2011	255,000

Gradual Coverage of the benefits for Basic Pension and Solidarity senior pension contribution
Period	Coverage
July 1, 2008 – June 30, 2009	40% of the poorest population in Chile
July 1, 2009 – August 31, 2009	45% of the poorest population in Chile
September 1, 2009 – June 30, 2010	50% of the poorest population in Chile
July 1, 2010 – June 30, 2011	55% of the poorest population in Chile
From July 1, 2011	60% of the poorest population in Chile

At retirement, the participant chooses among four options for receiving his/her pension benefits: an immediate life annuity, a temporary income with deferred life annuity, a programmed withdrawal plan or an immediate life annuity with a programmed withdrawal plan.

Immediate life annuity: the participant selects a life insurance company, which pays the participant a monthly fixed income for the rest of his/her life in exchange for transferring the total amount in his/her individual capitalization account. Currently, for the participants that elect this alternative, the insurance company must offer a pension that is equal to or greater than the minimum seniority pension guaranteed by the State. From July 1, 2008, due to the Pension Reform Law, the life annuity must be equal to or higher than the basic solidarity senior pension applicable at the moment of retirement.

Temporary income with deferred life annuities: the participant contracts with a life insurance company to start receiving life annuity plan benefits on a specific date in the future, immediately transferring the associated funds of such life annuity to the insurer. Likewise, the surplus to the temporary pension that covers the period from the moment when the participant selects his/her option until the annuity payments begin, is maintained in the individual capitalization account with the AFP.

A programmed withdrawal plan: the participant keeps his/her funds deposited in his/her individual capitalization account with the AFP and receives a monthly pension in accordance with a pre-established formula that considers the historical pension fund return and the rates offered by the insurance companies, as well as the participant’s life expectancy. The amount of the participant’s monthly pension under the programmed withdrawal plan is recalculated every twelve months based on the surplus amount in the individual capitalization account of the participant and the variables described above. In the event that such amount falls below the minimum pension level, the Government’s guarantee becomes enforceable, if applicable. If the participant chooses a programmed withdrawal plan, it is possible to switch him/her to a life annuity plan. However, if a participant elects to transfer savings from his/her individual capitalization account to a life insurance company to receive life annuity benefits, the participant may no longer return to the programmed withdrawal plan.

Table of Contents

Immediate life annuity with a programmed withdrawal plan: the participant contracts an immediate life annuity with a life insurance company financed with part of the balance maintained in his/her individual capitalization account, allocating the remaining balance to the programmed withdrawal plan. In this case, the pension would correspond to the sum of the amounts received from each modality. The participants allowed to opt for this modality, should be able to obtain an immediate life annuity equal to or higher than the minimum seniority pension guaranteed by the State (with the Pension Reform Law, the life annuity must be equal to or higher than the basic solidarity senior pension).

All pension obligations that an AFP must pay through programmed withdrawals from the individual capitalization account are expressed in shares of pension funds and translated to UF, being recalculated annually according to the new balance of the account. Insurance annuity amounts are expressed in UF and are thus indexed to reflect the impact of inflation. The AFP has no financial obligations once the annuity is purchased. In the case of the bankruptcy of companies that are providing insurance annuities, the Chilean Government guarantees 100% of this obligation up to the legal minimum pension amount per month and 75% of the pensions over the minimum pension up to UF 45 (approximately US$1,900).

Additionally, a participant who has been affiliated with the pension system for at least 10 years, may withdraw part of the balance of his/her individual capitalization account and freely use the surplus provided that he/she is able to obtain a pension from his/her pension funds equal to or superior to 70% of his/her average taxable remuneration and equal to or superior to 150% of the legal minimum prevailing pension. Such surplus corresponds to the difference between the total pension savings in the participant’s capitalization account and the funds required to finance the highest value resulting from the application of the aforementioned requirements (70% of average taxable remuneration and 150% of the legal minimum pension). To calculate the requirement, the lowest rate between the average rate of the life annuities informed and the rate of programmed withdrawal of the fund where the participant has his/her account, is used.

With the Pension Reform Law, the right to withdraw the disposable surplus will be limited to those participants that have a pension superior or equal to 100% of the maximum pension with a solidarity contribution, and 70% of the average of remunerations received and salaries declared.

Primary revenues

(i) Fee income

The most significant source of revenues from operations for Provida is the monthly fee charged to participants in connection with deposits into his/her individual capitalization account. Under the Pension Law, an AFP is permitted to charge a fee for:

-	Collection and administration of mandatory contributions;

-	Pension payments of programmed withdrawals and temporary income;

-	Collection and administration of voluntary savings;

-	Management and transfer of voluntary pension savings to other entities, and

-	Transfer of contributions made by voluntary participants.

Provida currently charges fees for each of the above services as well as the rest of the AFPs, excepting AFP Habitat and AFP Modelo, which do not charge fees for transferring contributions of voluntary participants.

In accordance with the Pension Law, each AFP is allowed to set the fees it charges to its participants or pensioners. In connection with fees charged, the Pension Law establishes that each AFP must apply the same fee levels to each of its participants.

Although there is no legal limit on the fees that an AFP may charge, competitive pressures have limited the range of fees charged by AFPs.

The AFP earns fees in connection with the collection of contributions to participants’ individual capitalization accounts and the administration of such accounts. In 2011, out of the total of Provida’s revenues from operations, MCh$140,359 or 93.7% corresponded to fee income received for the service of administering accounts and ancillary services. Almost all of the fee income comes from charges levied on participants’ monthly mandatory contributions to their individual capitalization accounts.

Table of Contents

Collection and administration of mandatory contributions.

Fee structure is one of the competitive variables of the AFP industry. With the enforcement of the Pension Reform Law, the ability that each AFP had to determine whether to charge a fixed fee deducted from the pension fund was eliminated. Consequently, each AFP may charge only a variable fee, which is a percentage of the salary used to calculate the mandatory pension contribution or a combination of both types of fees. Variable fees are charged as a percentage of a participant’s monthly taxable salary that is subject to a mandatory contribution of 10% of the salary base. In accordance with the Pension Reform Law, the maximum amount of taxable income should be adjusted in January of each year as per the variation of the real wage index as measured by the Chilean Instituto Nacional de Estadísticas (National Statistics Institute). In January 2011, this maximum amount increased from UF 64.7 (MCh$1,44) to UF 66.0 (MCh$1,47) per month, whereas in January 2012 the amount was adjusted to UF 67.4 (MCh$1,50).

For instance, if a participant receives a monthly salary of Ch$200,000 as a dependant worker, he/she must contribute Ch$20,000 to an AFP. Under Provida’s variable fee currently in force (1.54% of taxable remuneration), the total monthly fee collected in relation to that account would be a variable fee of Ch$3,080.

The requirement to charge a uniform fee to all participants has limited the AFPs’ flexibility to reward long-term or higher-income contributors with lower fees compared to those charged to newer and/or lower funds accounts. Although changes to this rule have been proposed on several occasions, Provida cannot ensure that a change will be adopted that would allow Provida to reward long-term or higher-income contributors through lower fees.

The fee structure for the years 2011, 2010 and 2009 is as follows:

Monthly fees for mandatory contributions
	2011	2010	2009
Provida	1.54%	1.54%	1.54%
Industry High	2.36%	2.36%	2.36%
Industry Low	1.14%	1.14%	1.36%
Industry Average	1.55%	1.55%	1.64%

Source: Superintendency of Pensions

Pension payments of programmed withdrawals or temporary income

With respect to fees charged for programmed withdrawals or temporary income, the Pension Reform Law authorizes the AFPs to charge only a variable fee over the pension paid. Currently, all the AFPs charge a variable fee of 1.25%.

Under this modality, the participant maintains his/her funds deposited in an individual capitalization account in the AFP and withdraws a monthly pension in accordance with a pre-established formula determined by law. In the event that such amounts fall below the minimum pension level, the Government’s guarantee applies, depending on the contribution level of participants. See “Item 4. Information on Provida—B. Business overview—Principal activities—Services of granting senior pension benefits”.

Collection and administration of voluntary savings

The Pension Reform Law required a fee charge for the administration of voluntary savings accounts calculated as a percentage of the balance kept on such accounts. Currently, Provida charges a fee of 0.92%, while the rest of the AFPs’ fee charges are in the range of 0.60% to 0.95% per year.

Table of Contents

Administration and transfer of voluntary pension savings.

The AFPs, like other authorized institutions, also offer participants the option to have a voluntary pension savings account, in which they can make monthly deposits previously determined to improve their future pensions. AFPs are allowed by law to charge a fee on assets under management, and fees currently range between 0.50% and 0.70% on an annual basis, and the fee charged by Provida is 0.56%. Fixed fees on fund transfers collected for other institutions can be also charged, currently ranging between Ch$1,101 and Ch$1,437 for each fund transfer (approximately US$2.12 and US$2.77). The current fee charged by Provida is Ch$1,250 (approximately US$2.41).

With the Pension Reform Law, the AFPs have the right to charge a fee for administering the collective voluntary pension savings and on the transfer of these savings deposits towards other administrators or authorized institutions. Fees for administration may be freely agreed between the employer and the AFP or the authorized institutions, allowing for different fees to be charged for different contracts. Additionally, different fees could be charged in relation to the same contract according to the number of workers incorporated in the plan.

Under no circumstance will an AFP be able to establish conditions to the affiliation or transfer of participants who are parties to a collective voluntary pension savings contract.

Transfer of contributions made by voluntary participants

The AFPs have the right to charge a fixed fee for transferring contributions made by voluntary participants collected by the AFP, but whose destination is another AFP or authorized institution. Provida currently charges a fee of Ch$1,250 (approximately US$2.41) per operation, while the rest of the AFPs charge a fee between Ch$1,100 and Ch$1,144 (approximately US$2.12 and US$2.20). Two out of six AFPs in the industry do not charge a fee for such service.

The fees can be changed at any time upon three months’ notice to participants, the Superintendency of Pensions and the public. The following table sets forth the fee rates charged by Provida for each of the services in the last three years:

Fee rates charged by Provida
	As of December 31,
	2011	2010	2009

Variable fee on monthly mandatory contributions	1.54%	1.54%	1.54%
Monthly variable fee on payments of programmed withdrawals and temporary income	1.25%	1.25%	1.25%
Variable fee for voluntary savings accounts (annual basis over administered funds)	0.92%	0.92%	0.92%
Fee charged on voluntary pension savings:
Fixed fee per transfer (Ch$)	1,250	1,250	1,250
Variable fee for management (annual basis over administered funds)	0.56%	0.56%	0.56%
Fixed Fee for transfer contributions made by voluntary participants (Ch$)	1,250	1,250	1,250

Ratios of fees to total fee income:
Variable fee on monthly mandatory contributions	96.6%	96.8%	98.1%
Variable fee on payments of programmed withdrawals or temporary income	1.9%	1.8%	1.1%
Variable fee on voluntary pension savings	1.5%	1.4%	0.8%
Fixed fee on voluntary pension savings transfers	0.0%	0.0%	0.0%
Fixed fee on transfer of contributions made by voluntary participants	0.0%	0.0%	0.0%

The AFPs charge fees on active accounts into which contributions are made. Accordingly, the numbers of contributors, as well as their average salaries, and not the number of participants, determine the monthly mandatory fee income of each AFP. In 2011, Provida had the largest average market share of contributors among all AFPs (36.8%).

Table of Contents

(ii) Gains (losses) on mandatory investments

Gains (losses) on mandatory investment (see “Item 4. Information on Provida—B. Business overview—Principal activities—Investment services of participants’ contributions in pension funds”) represented -2.3%, 12.9% and 15.3% of Provida’s revenues from operations in 2011, 2010 and 2009, respectively. As detailed in the following tables, such returns have evolved in accordance with the performance of each of the pension funds, as well as the relative importance of each fund relative to the total assets under management.

	2011	2010	2009
Gains (losses) on mandatory investment (in MCh$)	(3,469)	21,886	32,829
Weighted average real returns of pension funds	-5.2%	9.5%	26.1%

Mandatory investments of pension funds (in MCh$)	201,418	204,526	179,129
% Mandatory investment’s participation in portfolio	1.0%	1.0%	1.0%

Gains (losses) on mandatory investments and real average returns for each fund
	2011		2010		2009
	Gains (losses)	Returns	Gains (losses)	Returns	Gains (losses)	Returns
	MCh$	%	MCh$	%	MCh$	%
Fund Type A	(3,106)	-11.6%	4,956	11.6%	8,749	43.8%
Fund Type B	(1,700)	-8.0%	4,878	11.2%	7,990	33.3%
Fund Type C	(378)	-4.2%	9,314	8.8%	13,197	22.5%
Fund Type D	1,187	0.0%	2,309	6.5%	2,551	14.9%
Fund Type E	528	4.2%	429	5.8%	342	7.3%
Total	(3,469)	-5.2%	21,886	9.5%	32,829	26.1%

Source: Superintendency of Pensions.

Mandatory investment maintained in each fund and percentage of each fund in the total
	2011		2010		2009
	Mandatory Investment	Participation	Mandatory Investment	Participation	Mandatory Investment	Participation
	MCh$	%	MCh$	%	MCh$	%
Fund Type A	32,178	16.0%	39,868	19.5%	33,455	18.7%
Fund Type B	35,629	17.7%	39,690	19.4%	34,951	19.5%
Fund Type C	89,593	44.5%	90,871	44.4%	81,073	45.3%
Fund Type D	33,762	16.7%	28,800	14.1%	24,252	13.5%
Fund Type E	10,256	5.1%	5,297	2.6%	5,399	3.0%
Total	201,418	100%	204,526	100%	179,129	100%

Source: Superintendency of Pensions.

As shown in the tables above, fund Type C has the highest concentration of total administered assets. Likewise, the most risky funds (funds Types A and B) have a higher concentration as compared to the less risky funds (funds Types D and E), as a result of the existence of a greater portfolio of younger clients (assigned to such funds by law), and also a greater preference for riskier investment options by participants. It is important to note that during 2011 the relative weight of Types A and B decreased due to negative returns achieved by such funds, as well as the transfer of contributors to less risky funds. As a result, the market share of less risky funds increased during 2011.

(iii) Other revenues

Other revenues are mainly revenue from fees charged by the subsidiary AFP Génesis in Ecuador, for services rendered by Administradora de Fondos de Cesantía and fees recovered from other AFPs, which were MCh$10,738 or 7.2% of Provida’s revenues from operations in 2011. In addition, other revenues include the financial revenues of life and disability insurance for MCh$2,151 or 1.4% of Provida’s revenues from operations arising from the excess of cash flows of the insurer in view of premium payments made by the Company.

Table of Contents

Primary expenses

(i) Employee Expenses

Employee expenses were MCh$30,605, equivalent to 45.7% of the total of Provida’s expenses from operations as of December 31, 2011. Wages and salaries of administrative personnel totaled MCh$17,287, equivalent to 56.5% of total employee expenses, while the administrative staff of 909 workers (annual average) represented 68% of the Company’s total staff during the year. Wages and salaries of sales personnel amounted to MCh$9,208, equivalent to 30.1% of the total of employee expenses, while the sales staff of 433 workers (annual average) represented 32% of the Company’s total workers. Short-term benefits to employees were MCh$2,500 equivalent to 8.2% of total employee expenses, and indemnities for cessation of labor relationship amounted to MCh$1,611 equivalent to 5.2% of total employee expenses.

ii) Miscellaneous other operating expenses

Miscellaneous other operating expenses were MCh$30,665 in 2011, representing 45.6% out of the total Provida’s operating expenses. This item is composed of: administrative expenses (real estate, telecommunications and services) equivalent to 72.2% of total miscellaneous other operating expenses, data processing expenses (maintenance, repair and liaison services) equivalent to 12.4% of total miscellaneous other operating expenses, other operating expenses (disability qualification costs and Board of Directors’ remunerations) representing 9.6% of total miscellaneous other operating expenses and marketing expenses (publicity and communications to clients) representing 5.8% of miscellaneous other operating expenses.

(iii) Depreciation and Amortization expenses

Total depreciation and amortization expenses were MCh$8,207 in 2011, equivalent to 12.2% of total expenses from operations. The amortization expenses totaled MCh$2,353 and depreciation expenses were MCh$5,854 in 2011.

(iv) Life and disability insurance premium

The Chilean Pension Law previously required AFPs to individually purchase insurance to cover their obligation to provide life and disability benefits to their participants (see “Item 10. Additional information—C. Material contracts” and “Item 19. Exhibits—4.1 Life and disability insurance contract”). Beginning in July 2009 with the implementation of the Pension Reform Law, the requirement to provide the life and disability insurance was awarded to a group of insurers through a bidding process, having the same value for all the participants regardless of the AFP to which they contribute.

In the year 2009, the recurring expense for such concept was only recorded until the month of July, when the temporary premium of the contract with coverage between January 2005 and June 2009 and the provisions for higher casualty rate were recorded. In 2010, this item only included expenses related to the recovery of leftovers from previous coverage periods stemming from the last insurance contract, and provisions for unfavorable casualty rate due to changes in the value of payable casualties. In 2011, a credit was recorded as a result of reversals on provisions for casualty rate stemming from the difference between the amount required as of December 2010 by using the best available information, and the estimation made by Provida’s model as of December 2011. These lower provisions arise from lower expected discount rates at the moment of paying the casualties.

Likewise, insurance regulations governing life and disability insurance policies instructed that casualties reserves should be determined at a market interest rate instead of historical rates (defined as the minimum of the previous semester) to contracts with coverage commencing in July 2009, giving the alternative to insurers to voluntarily apply such methodology to existing contracts. Provida requested that BBVA Seguros de Vida, adopt this new regulation to the January 2005-June 2009 contract so that the Company’s liability would more accurately reflect the amount that will be effectively paid (i.e. fair value). Moreover, by mutual consent of the parties (previous compensation to the insurer for change in conditions) the financial performance of cash flows surplus was modified with a benchmark determined by assets of similar duration than the liability of the insurance.

Because Provida’s insurance contract for coverage prior to July 2009 is in a runoff stage, Provida only maintains those casualties pending payment due to temporary disability period. The liability amount determined by the

Table of Contents

insurance company is recorded at market interest rate and Provida continues applying its casualty model by determining the liability amount at forward rates at the moment of casualty payments.

In accordance with the Authority’s request, Provida recognizes the higher amount resulting from the accounted liability amount (from the insurance company) and the amount determined by its casualty model, thus the expense to be recognized depends on interest rates fluctuation.

A credit amount MCh$2,326 was recorded by the life and disability insurance premium as of December 31, 2011, while for the years ended December 31, 2010 and December 31, 2009 expenses were recorded in the amounts of MCh$2,338 and MCh$61,494, respectively. See “Item 5. Operating and financial review and prospects—A. Operating results—Operating results for the years ended December 31, 2011 and 2010”.

Payments of benefits for the participant or his/her beneficiaries

Before the Pension Reform Law became effective, if a participant died or became disabled before the legal age of retirement (65 years of age for men and 60 years of age for women) and had not accumulated sufficient funds in his/her individual capitalization account to provide the participant or his/her beneficiaries the benefits required by the Pension Law, the AFP had an obligation to make up for the shortfall to the participant’s account. Additionally, all AFPs were required to obtain individually an insurance policy with a licensed life insurer to provide coverage for this obligation. With the Pension Reform Law, women’s age became the same as men’s age (65 years old) to apply for these benefits and the individual requirement for the AFPs was eliminated beginning in July 2009 and AFPs are no longer liable for any shortfalls. See “Item 4. Information on Provida—B. Business overview—Principal activities—Services of granting life and disability benefits”.

Participants are eligible for the life and disability benefits provided that they are salaried workers who were contributing to an AFP at the time of the disability or death or they have made at least one contribution in the last year and that contribution was preceded by at least six monthly contributions in the last twelve months. Likewise, self-employed participants are eligible for these benefits if they have made contributions in the month prior to the disability or death.

The Pension Reform Law will gradually incorporate to self-employed workers by requiring them to make mandatory contributions (See “Item 4. Information on Provida—B. Business overview—Principal activities—Services of collection and management of contributions made by participants”). Given the above, life and disability insurance coverage for self-employed workers that have made mandatory contributions will be subject to an annual taxable income equal to or superior to seven minimum monthly incomes, permitting them to have an annual coverage commencing on May 1 of the year in which contributions were made until April 30 of the following year. In those cases where the taxable income is inferior to the aforementioned requirement, the coverage will be proportionate to participants’ contributions.

Disability benefits are given to those participants who have been qualified as disabled by a Medical Commission designated by the Superintendency of Pensions. A participant is qualified as disabled if his/her working capacity is diminished by at least 50%, as follows:

Participants with a partial disability, defined as experiencing a loss of between one-half and two-thirds of their working capacity, are entitled to receive a pension equal to 50% of their prior income, which is defined as their monthly average taxable income for the last ten years, or for the latest period during which they worked, as adjusted for inflation. The entitlement to partial disability benefits has a temporary character and covers a three-year period beginning after the first disability determination. At the end of such period, the Medical Commission makes a second disability determination (final determination) and concludes whether the temporary disability continues, changes to a total disability status, or whether the participant is no longer disabled.

Participants with total disability, defined as experiencing a loss of more than two-thirds of their working capacity, are entitled to receive a pension equal to 70% of their prior income. Under the Pension Reform Law effective from October 1, 2008, the partial disability status for total disability was eliminated, therefore, when the Medical Commission qualifies a participant as totally disabled, this determination will be considered as definitive and unique.

Table of Contents

Life benefits are granted to the legal beneficiaries of participants who have died before reaching the legal age of retirement. Benefits are established as a percentage of the participant’s prior income. The applicable percentage depends primarily on the family status of his/her beneficiaries: for a spouse with no children, the percentage is 42.0%; for a spouse with children, 35.0%, plus 10.5% for each child up to 18 years of age (until the age of 24 for students and until death for disabled children).

Before the implementation of the Pension Reform Law, if the disabled or deceased participant’s individual capitalization account did not have the amount of funds necessary to pay the pension stipulated by law, the insurers (under its contract with the AFPs) had to make up the shortfall in case of death or total disability. In the case of disability after the determination of partial disability (or total disability until October 2008), the AFP had to record a provision in order to settle the shortfall three years from when the final disability determination was made, taking into account the three years of temporary pension payments that would be received by the participant following the initial disability determination.

In order to determine the costs of the aforementioned benefits, the insurer made these calculations at the time of the initial disability determination, three years before the shortfall was paid and if it was required by the final disability determination, on the basis of the information available to it at that time, including current annuity rates and the amount of funds in the participant’s individual capitalization account. If a final disability determination was made, the insurer updated the amount of initial disability reserve based on the information available at such time.

As previously mentioned, with the implementation of the Pension Reform Law, the insurers receive a single premium for providing life and disability benefits , therefore the insurers are ultimately responsible for the associated payments.

Payments by Provida to the insurer

Before modifications introduced by the Pension Reform Law and under the insurance policy in force until June 2009, Provida paid the insurer a temporary rate, equal to 1.00% of the aggregate taxable remuneration of all of Provida’s contributors, which was intended to provide the insurer a portion of the funds it would be required to pay to beneficiaries for life and disability benefits, which annually amounted to MCh$44,440 for temporary premium. Also, Provida paid the insurer until June 2009 a monthly fixed management fee, which averaged MCh$37 per month, a figure that is not considered as premium paid to the insurer for casualties of its affiliates. In 2010 the aggregate payments to the insurer regarding the life and disability insurance premium were MCh$649. In 2011 the aggregate payments to the insurer were MCh$370 concerning the life and disability insurance premium.

In the first quarter of each year until the close of each contract (48 months after the termination, extendable for two years upon mutual consent), Provida and the insurer compare the funds paid by the Company for the prior fiscal year under the temporary rate and true-ups to the sum of (i) the funds effectively accumulated and paid by the insurer to participants or their beneficiaries and (ii) the estimated requirement by the insurer necessary to pay disabled participants once final disability determinations of disabled status have been made by the Medical Commission referred to above (the sum of (i) and (ii) is referred to herein as the total cost of casualties). If the casualty costs are greater than temporary payments, Provida must pay the insurer the difference, up to a maximum amount based on the maximum casualty rate (where the casualty rate is the quotient between the cost of casualties and the aggregate taxable remunerations of all of Provida’s contributors) established in the insurance contract that for 2009 was 1.70%. Provida has no obligation to pay the insurer for a casualty rate exceeding the maximum rate. Monthly premiums were paid during the entire contract’s term at a temporary premium of 1.00%. Provida’s participation in the surplus is 100% if the casualty rate is equal or lower than 1.70%. If the casualty rate is lower than the temporary rate, the insurer would reimburse the difference to the Company. For the fiscal year 2010, the provisions made by Provida regarding payments to the insurer (in March 2010) resulting from comparing the temporary rate and the accounted casualty costs, as well as additional provisions attributable to the application of the Company’s casualty model were MCh$1,689. For the fiscal year 2011, a credit in provisions for MCh$2,696 was recorded due to the adjustments made when determining the difference between the amounts required as of December 2010 by using the best available information, and the estimation made by Provida’s model as of December 2011. These lower provisions arise from lower expected discount rates at the moment of paying the casualties.

The last life and disability insurance contract with coverage from January 1, 2005 to June 30, 2009 was entered into with BBVA Seguros de Vida S.A. Under such contract, the maximum casualty rate expressed as a percentage of the contributors’ taxable remunerations initially amounted to 1.27%, with a monthly premium paid for the contract

Table of Contents

coverage period calculated at a provisional rate of 0.70%. The Company’s participation in the surplus will be 100% if the casualty rate is equal to or lower than the maximum rate of the contract, as calculated over the contributors’ taxable remunerations. Additionally, the contract established monthly payments to the insurance company calculated at a provisional rate of 0.70% applied to the total of remuneration and monthly taxable income of the contributors, plus a monthly fixed premium of UF 2,150 (MCh$48) during the coverage period of the contract. As a result of updating the mortality tables effective beginning in the year 2008 and the resulting impact in the higher costs in the insurance, upon mutual assent of the parties, in view of the changes in the economic conditions of the contract, the terms of the insurance contract were modified. Beginning in January 2008, the maximum casualty rate was 1.70% expressed as a percentage of the contributing contributors’ taxable remuneration, while the temporary rate was 1.00%, retaining the monthly fixed premium of UF 2,150.

The insurance contract also contemplates yearly true-ups payable to the insurance company, for the difference between payments made by Provida (temporary premium and previous true-ups) and the total accounted cost of casualties (paid or accrued by the insurer) at each year end, which have taken place on March 31 of each year from 2006 onwards. Also, on that date monthly financial revenues will be paid, based on the value recorded at December 31 of the previous year, calculated by applying the rate of return established in the contract over the surplus of cash flow maintained by the insurer (total payments made by Provida minus casualties paid by the insurer).

The General Rule N°243 from the Superintendency of Securities and Insurance, ruling insurance companies, effective beginning on July 1, 2009, instructed that casualty reserves should be determined on a monthly basis at the market interest rate instead of the historical rate, giving the alternative to apply this methodology to insurance contracts previous to the implementation date of the norm. Provida requested that BBVA Seguros de Vida adopt such a rule. Consequently and given the impact of this over the administration of the insurance contract and the associated risks, the parties by common agreement modified the conditions of financial revenues. The above, considering that the rendering of life and disability insurance implies a mismatch risk between the assets and liabilities duration arising from such obligation.

The final settlement of this contract will occur 48 months after the expiration date of the coverage period as of June 30, 2009, but can be extended for up to 2 years by mutual agreement.

The previous insurance policy was in force from August 1, 2003 to December 31, 2004 and was entered into with BBVA Seguros de Vida S.A. The maximum casualty rate was 1.10%, expressed as a percentage of the contributing contributors’ taxable remunerations. Provida’s participation in the surplus was 100% if the casualty rate was equal to or lower than 1.10% and greater than 0.85% of the contributors’ taxable remunerations and 90% if the casualty rate was equal to or less than 0.85%. Additionally, the contract contemplated monthly payments calculated at a provisional rate of 0.70% applied to the total of remunerations and monthly taxable remunerations of the contributors and a monthly fixed premium of UF 2,150 for the contract coverage period. In March 2005, Provida began to make yearly true-ups to the insurance company. The final settlement date of this contract was contemplated to occur on December 31, 2008, but it was extended by common agreement of the parties, and finally settled in April 2011.

The following table sets forth the cost of casualties, the payments to the insurance company and the provisions for unfavorable casualty rates of each insurance contract as of December 31, 2011:

Insurance Company	Period covered by the Contract	Costs for claims reported by the Insurance Company		Payments made to the Insurance Company (MCh$)		Provision at the date of the information provided by the Insurance Company	Gross Provision at the current year-end (not including financial revenues effects)*
		Date	MCh$	To reported date	At 12-31-2011		MCh$
BBVA Seguros de Vida S.A. (**)	08-2003 to 12-2004	04/30/2011	88,344	88,182	88,182	-	-
BBVA Seguros de Vida S.A. (***)	01-2005 to 06-2009	12/31/2011	361,701	361,976	361,976	-	(5,780)
Total						-	(5,780)

(*)

BBVA Seguros de Vida S.A. adopted General Rule N°243 effective beginning on July 1, 2009 allowing insurers to determine the casualty reserve for those life and disability insurance contracts which coverage period began before June 30, 2009, at a market interest rate on a monthly basis. This resulted in a decreased amount of reserves, as the reserves were determined at historical rates lower than the current ones. Likewise, Provida by estimating that average market rates would be lower than the effective discount rate for the next three year, has made an additional provision that explains the difference between the amount required by the insurer and the actual amount provisioned by Provida.

(**)	The insurance contract subscribed with BBVA Seguros de Vida S.A. for August 2003 to December 2004 coverage period was closed in April 2011. The casualty rate of such policy exceeded the maximum rate of 1.10%. Consequently the excess of costs for MCh$157 was assumed by the insurer.

(***)

Includes accrued premiums for a total amount of MCh$577 discounted from the balance payable to BBVA Seguros de Vida according to the respective contracts.

Table of Contents

Principal markets

As of December 31, 2011 there were 6 AFPs operating in Chile. The most recent incorporation was AFP Modelo, which in August 2010 started to render services to the new participants’ portfolio entering into the pension system, for a two-year term awarded in the bidding process carried out in February 2010. Additionally, there is another AFP, AFP Regional, legally incorporated but had not yet begun operations.

As previously mentioned Provida is the largest and one of the oldest AFPs operating in Chile and has occupied a leading position in the private pension industry since its establishment.

Provida’s leading position is shown in the following table regarding market shares for the most relevant variables as of December 31, 2011:

	Market Share for relevant variables, as of December 31, 2011
AFP	Pension Funds	Participants(*)	Contributors(*)	Revenues	Expenses	Profit
Provida	29.0%	39.6%	36.8%	32.6%	28.2%	38.5%
Habitat	25.4%	24.5%	25.4%	24.5%	17.4%	30.1%
Capital	22.0%	21.7%	21.1%	20.0%	31.1%	11.3%
Cuprum	20.5%	6.9%	9.6%	17.6%	16.4%	16.7%
Planvital	2.9%	4.4%	3.6%	3.9%	4.7%	2.9%
Modelo	0.2%	2.9%	3.5%	1.4%	2.2%	0.5%
Total	100%	100%	100%	100%	100%	100%

Source: Superintendency of Pensions.

(*) Average market share for 2011.

In accordance with the Pension Law, no company in Chile other than an AFP may provide pension benefits of a similar nature, with the only exception that the management of voluntary pension savings and collective voluntary pension savings has been opened to other authorized institutions.

With the implementation of multiple funds, the industry incorporated a new competitive aspect given that the larger number of pension funds portfolios causes participants to require higher levels of information in order to make optimal decisions regarding their risk and age profiles, and thus the pension advisory services granted by AFPs became of special relevance.

From the implementation of multiple funds through the end of the year 2007, the returns reached by each of the five funds recorded outstanding levels, with highest returns in those funds with a greater concentration of variable income investments, such as funds Type A and B. However, during 2008 as a result of the financial crisis, affecting worldwide stock markets, the returns significantly dropped to the point of showing negative levels, adversely impacting primarily the high-risk funds and consequently decreasing their total accumulated returns. Subsequently, during the years 2009 and 2010 when stability in the markets was recovered, the trend returned to positive returns levels, where fund Types A and B obtained the highest returns. In the year 2011, stock markets recorded losses again, leading the most risky funds to obtain negative rates of return during the period, basically due to negative returns experienced by local and foreign stock markets.

The following table sets forth information with reference to real returns, over a twelve-month period (as of year end 2011, year end 2010 and year end 2009); the annual average since the multiple funds’ inception (as of year end 2011, year end 2010 and year end 2009) and the relative positions of each of the pension funds managed:

Table of Contents


Real return last 12 months
Fund type	Jan 11 – Dec 11		Provida’s position		Jan 10 – Dec 10		Provida’s position		Jan 09 – Dec 09		Provida’s position
Fund Type A		-11.59%		5		11.58%		3		43.78%		3
Fund Type B		-8.00%		6		11.22%		3		33.39%		3
Fund Type C		-4.16%		5		8.77%		5		22.48%		3
Fund Type D		0.02%		4		6.53%		4		14.86%		4
Fund Type E		4.19%		3		5.78%		4		7.32%		4

Source: Superintendency of Pensions

Annual average real return from the beginning of the multiple fund system
Fund type	Sep 02 – Dec 11		Provida’s position		Sep 02 – Dec 10		Provida’s position		Sep 02 – Dec 09		Provida’s position
Fund Type A		6.85%		2		9.32%		1		9.02%		2
Fund Type B		5.53%		5		7.30%		5		6.77%		5
Fund Type C		4.84%		5		5.98%		5		5.60%		5
Fund Type D		4.37%		4		3.30%		4		4.68%		5
Fund Type E		3.45%		4		3.36%		4		3.03%		4

Source: Superintendency of Pensions

In terms of voluntary pension savings, as of December 31, 2011, Provida recorded the highest number of APV accounts in the AFP industry, with a total of 185,256 active accounts, representing a market share of 27%. On the same date, funds accumulated by such APV accounts were MCh$276,559, a market share of 15%. Additionally, the law permits other financial institutions such as banks, insurance companies and investment companies to manage this kind of savings. While competitors have the advantage of offering a wider variety of products considering that AFP investments levels are limited by law, the AFPs have lower costs than other market participants and charge lower fees. According to the latest information available from the Superintendency of Pensions as of December 2011, the AFPs continue to play an important role in the voluntary pension savings market with market shares of 65% in the number of accounts and 59% in administered funds, followed by mutual funds with a market share of 15% in terms of number of accounts and by Insurance Companies with a market share of 17% in terms of assets under management.

Marketing and sales

Provida’s activities, as with all AFPs in the industry, are limited to offering only those products and services permitted under the Pension Law. As a result, Provida seeks to maximize its income by attracting and retaining participants as well as by offering the possibility to make voluntary pension contributions and to receive payments under the programmed withdrawals modality.

Provida attracts participants mainly through its sales force, which targets potential clients who may be interested in changing the administration of their pension savings.

Although the scope of potential clients was restricted by the bidding process of new participants that enter the private pension system for the first time, as established by the Pension Reform Law, the same Law gradually incorporated the contribution obligation of self-employed workers, widening the pension market. See “Item 4. Information on Provida—B. Business overview—Principal activities—Services of collection and management of contributions made by participants”.

The sales force also performs tasks aimed at retaining participants’ portfolios in order to avoid client transfers to other AFPs. Provida also captures new participants through its wide network of pension service centers without sales agents’ intervention.

As the largest AFP in the Chilean private pension system, Provida seeks to capitalize on its brand name recognition to attract new clients and retain the existing ones. Management believes that Provida’s prestige is boosted by its consolidated leading market position, as well as by the support granted by its organizational group, the BBVA Group, a leader in the Latin American private pension fund system.

Table of Contents

During 2011, Provida has developed various projects for mobile technologies in order to strengthen its offering to participants, searching to generate a greater presence and range of services available anytime, anywhere. Among these services are: i) mobile services designed for Android and iPhone smartphones, which allows searching offices through georeference and also access to Provida’s web site, ii) the mobile public web portal, where clients and non-clients may obtain general information of the Administrator (branch offices, value of shares and general information); and iii) mobile virtual branch office for smartphones where Provida’s participants may obtain certificates and balances, request savings withdrawals and fund transfers, among other functions.

On the other hand, the year 2011 was highlighted by the strengthening of training, sponsoring and promotion activities of the Provida brand throughout the country. In terms of external action, the Administrator sponsored its third edition of social security courses organized by the School of Government of Adolfo Ibañez University. The main objective is to promote through the employers, the scope and benefits of the Private Pension System.

In addition, the Administrator actively participated in the activities promoted by the AFP Official Association in Chile during the anniversary of 30 years of Private Pension System.

During 2011, AFP Provida started to develop products and services to the self-employed segment of the labor force, seeking to differentiate itself through excellent service and the power of Provida’s remote services and branch offices. New innovations resulting from this initiative include automatic payment from participants’ checking accounts and credit cards.

Advertising campaigns played an important role in the Company’s communication plan. These advertising campaigns emphasized and encouraged: the advantages and use of password-based services; the advantages of receiving account statements via e-mail; encouragement of voluntary pension savings contributions by younger participants; encouragement of the use of tax benefits through savings (i.e., through “2-57 bis accounts”); and encouragement of the use of year-end direct deposits to take advantage of the tax benefits of voluntary savings contributions.

Additionally, the Company continued sending weekly communications, containing economic and financial information to participants having voluntary products. The objective was to foster customer loyalty and encourage such customers to maintain their voluntary balances in AFP Provida. In addition, a written and broadcast media campaign was carried out, and regional publicity events were held.

During 2011, Provida delivered proactive and specialized service in the employer area through the use of highly qualified account executives, consolidating such area. This generated a 51% increase in the regularization of residual and uncredited contributions as compared to 2010, totaling MCh$2,779 in mandatory and voluntary products. Finally, it is worth noting employers’ satisfaction regarding service and advice delivered by Provida, which was reflected in the quarterly evaluations.

Among Provida’s strategic projects, the Company launched a new call center telephone number exclusively for employers, which answers each and every request either through self-assistance or with assistance from a specialized pension executive.

Provida’s website implemented a new password-protected application allowing employers to clarify and resolve pending pension situations regarding incomplete, uncredited or due pay rolls. This development is an innovative and unique tool in the pension industry that facilitates the flow of information between Provida and the employers in a fast and efficient way.

As for telephone service, during 2011 more than 830,000 pension calls were answered, a 34% increase from 2010, of which more than 440,000 were assisted by executives from the pension platform. The difference between the fast-assistance telephone services and pension advisory telephone services was achieved by obtaining efficient, effective and prompt client service with a 95% assistance level in both areas.

In addition, in 2011, Provida’s call monitoring service was expanded to 42 branch offices, so that all entering calls were assisted by the call center’s pension executives platform. This allowed executives of branch offices to exclusively focus on person assistance with no interruption from telephone calls.

Table of Contents

As for development of new services, two lines of assistance were implemented in 2011. One line was oriented to clients and the other line to employers, permitting automatic and personalized service to each of these segments.

Larger projects included the first phase of the “Optimization of In-Office Services” project, which was implemented during the second half of 2011 and seeks to improve processes related to benefits procedures by using a technology-based approach to BPM (Business Process Management). This approach allows the administration of business processes to be automated, monitored and optimized. The first stage of this functionality was implemented in respect of normal senior pension procedures with no recognition bond, or with a recognition bond paid under the Solidarity Basic Senior Pension. Under this new operating model, the 10-day average delay between the application and the payment order has been eliminated, and the process is now completed on the same day it is requested by the participant.

In the fourth quarter of 2011, AFP Provida implemented a change in its web site design, which aligns with the corporate principles defined by BBVA Group for the administration pension business.

Finally, in December 2011, audits to validate ISO 9001 Certification were carried out for Provida’s Call Center, website and “contact us” link. These were successfully approved and enabled continuous enhancements in the processes and services furnished to clients.

AFP Provida has the largest commercial network at the national level among all AFPs, as of December 31, 2011 with 59 branch offices distributed throughout the country, and divided into 41 Top One service centers that have self-service terminals, pension advisory and fast assistance capabilities, 16 pension advisory centers oriented to advisory, pension inquires, formalities and benefits of the pension system and 2 centers of AFC exclusive assistance. Approximately 16.9% of the branches are located in the northern region, 25.4% in the central-northern region, 8.5% east of Santiago, 11.9% west of Santiago, 20.3% in the southern-center region and 16.9% in the southern region as of December 31, 2011. The offices have a uniform style nationwide and vary in size according to the needs of the region where they are located and the three branch profiles defined previously.

Sales Force

Provida has focused its efforts to maintain a more specialized and highly productive sale force, reducing its sales staff that did not fulfill this profile.

The following table compares the relative sizes of Provida’s sales force with those of its competitors as of December 31, 2011, 2010 and 2009:

	Total AFP Sales Force
	As of December 31,
	2011		2010		2009
	No. Sales Agents	Market Share	No. Sales Agents	Market Share	No. Sales Agents	Market Share
Provida	429	22.3%	443	19.9%	466	21.2%
Habitat	307	15.9%	329	14.8%	329	14.6%
Capital	493	25.6%	780	35.0%	637	30.0%
Cuprum	474	24.6%	460	20.6%	471	23.4%
Planvital	224	11.6%	216	9.7%	222	10.8%
Modelo (*)	-	0.0%	-	0.0%	N/A	N/A
Total	1,927	100%	2,228	100%	2,125	100%

Source: Superintendency of Pensions.

(*) As AFP Modelo started operations in August 2010 and according to the information released by the Superintendency of Pensions, it has not yet reported a sales force as of December 2011.

Provida has not focused its marketing efforts on any specific industry or region. Each sales agent is assigned to cover certain enterprises within a geographic coverage area. Sales personnel have visiting programs tailored to different companies to promote Provida and encourage employees to transfer to Provida from other AFPs. During these regularly scheduled visits, salespersons emphasize Provida’s size, historic performance, leading market position and reputation for high quality of customer service in order to attract participants, reinforcing the concepts of experience, capability and trust.

Table of Contents

Regarding new participants in the system, it is important to note that the Pension Reform Law established that the bidding of the new participants portfolio, awarding the generation of new accounts for a two-year period, should be the AFP offering the lowest fee among the current fees, which must be applied to its entire portfolio and not only to the awarded portion. The latter has implied that the AFPs are not able to grow by capturing new workers that enter the labor market for the first time. Therefore, the main future growth sources for Provida will be focus on capturing participants with voluntary pension savings, and the reincorporation of inactive participants as active contributors, especially self employed workers.

Provida’s total selling and marketing expenses amounted to MCh$10,992 in the fiscal year 2011, MCh$12,063 in the fiscal year 2010, MCh$12,742 in the fiscal year 2009. The ratio of commercial expenses (corresponding to sales remunerations plus marketing expenses) over fee income was 7.8%, 9.3% and 7.5% for the fiscal years 2011, 2010 and 2009, respectively. Provida has followed a policy to make its commercial expense more efficient, decreasing such expenses by 8.9% in 2011 as compared to 2010, and 5.3% in 2010 as compared to 2009.

Seasonality of the Company’s main business

The nature of the significant activities carried out by Provida relates primarily to activities related to its unique line of business, pension fund administration. Given the above, such activities are not affected by seasonal factors.

Licenses

The software license contract entered into with BBVA Inversiones Chile corresponds to intellectual property rights related to the use, as well as its instructions of use and functionality of, software implemented on different operating and administrative processes. This represented a total expense of MCh$2,832 for Provida as of December 31, 2011, MCh$3,578 as of December 31, 2010, and MCh$735 December 31, 2009. The enhancements incorporated for new projects amounted to MCh$0 for the fiscal year 2011, MCh$746 for the fiscal year 2010 and MCh$742 for the fiscal year 2009. For further information see “Item 10. Additional information—C. Material contracts” and “Item 19. Exhibits—4.2 Software license contract”.

In addition, the software license maintenance contract described above included in the “miscellaneous other operating expenses” line, recording updating services for changes related to new regulations or new requirements amounting to MCh$0 for fiscal year 2011, MCh$73 for fiscal year 2010 and MCh$612 for fiscal year 2009. For further information see “Item 10. Additional information—C. Material contracts” and “Item 19. Exhibits—4.3 Software maintenance contract”.

Government regulation

All AFPs are subject to extensive and continuous regulatory reviews. The principal authorities regulating AFPs in Chile are the Superintendency of Pensions, the Central Bank, the Superintendency of Securities and Insurance, the Rating Commission and the Pension Advisors Council. AFPs are primarily subject to the Pension Law and to the Corporation Law, and have the Superintendency of Pensions as their main regulator.

The Superintendency of Pensions

General. The Pension Reform Law created the Superintendency of Pensions, which is considered to all effects as the successor of the Superintendency of AFPs. The Superintendency of Pensions, an independent governmental agency under the supervision of the Ministry of Labor and Social Security, is in charge of supervising and controlling AFPs. The Superintendency of Pensions authorizes the creation of new AFPs and mergers of existing ones and has broad powers to interpret and enforce legal and regulatory requirements. Furthermore, in cases of non-compliance, it has the ability to impose sanctions, such as admonitions and fines and in extreme cases it may order the liquidation of an AFP. In addition, any amendment of an AFP’s by-laws, such as an increase in capital, is subject to the Superintendency of Pensions’ approval. New functions and powers of the Superintendency of Pensions include the authority to monitor and supervise the solidarity pension system administered by the Social Pension Institute and establish and administer the Pension Advisors Registry.

Table of Contents

The Superintendency of Pensions’ officers frequently inspect the AFPs’ branch offices and examine their activities and records. AFPs are required to submit their quarterly financial statements to the Superintendency and periodically provide detailed information on their operations. The audited financial statements for each fiscal year must be filed with the Superintendency of Pensions within 60 days after the end of the fiscal year covered by the report.

The Central Bank

The Central Bank is an independent legal entity created under the Chilean Constitution. It is subject to the Central Bank Act and, to the extent applicable and not inconsistent, also to the laws and regulations applicable to the private sector. It is governed and administered by a Council composed of five members appointed by the President of the Republic and requiring a “special majority” vote of the Chilean Senate to be elected.

The Central Bank is responsible for, among other things, monetary policy and exchange controls in Chile. The appropriate registration of a foreign investment in Chile grants the investor access to the formal exchange market. Foreign investments can be registered with the Foreign Investment Committee under Decree Law N° 600 or can be registered with the Central Bank under the Central Bank Act. Additionally, the Central Bank is responsible for establishing the maximum investment limits permitted for pension funds by type of securities and by type of issuer within certain defined ranges. However, it cannot establish minimum investment limits.

The Superintendency of Securities and Insurance (the “SVS”)

The SVS is an independent governmental agency that supervises, regulates and controls the Chilean capital markets. As an open corporation listed on the Chilean stock exchange, Provida is subject to the supervision, regulation and control of the SVS.

The Rating Commission

The Rating Commission is composed of one representative of the Superintendency of Pensions, one representative of the Superintendency of Banks and Financial Institutions and one representative of the Superintendency of Securities and Insurance. All of the representatives are designated by their respective Superintendents and by four representatives of the AFP industry. The Rating Commission’s main objective is to determine whether securities qualify as acceptable for pension fund investment.

With the Pension Reform Law, the approval of securities on foreign investments is made by the Investment Regime, a new legal body incorporated by the regulation for pension fund investments.

Pension Advisors Council

The Pension Advisors Council is composed of one person appointed by the President of the Republic of Chile with certain requirements; one executive designated by the Central Bank of Chile; one executive designated by the AFPs and two executives designated by the Deans of the economics and business administration faculties of credited Universities.

The main functions of this Council relate to the issuance of pronouncements regarding matters covered by the Investments Regime and proposals to regulate investments of pension funds, especially in connection with investment limit structures, mechanisms for measuring the risk of investment portfolios and operations with derivative instruments made by pension funds. Additionally, it will advise the Superintendency of Pensions in terms of investments of pension funds.

The Investment Regime will be created through a resolution passed by the Superintendency of Pensions and subscribed by the Treasury, having previously consulted the Pension Advisory Council, and it will include certain regulations that regulate investments made by the Administrators with the resources of pension funds in order to achieve appropriate returns and safety for such resources.

Table of Contents

C.	Organizational structure

Provida was integrated into the BBVA Group in July 1999. The BBVA Group is an internationally diversified financial group with a significant presence in the traditional banking sector, as well as other sectors such as pensions, insurance, real estate and financial services. On December 31, 2011 the BBVA Group had 987,277 shareholders and 110,645 employees worldwide in a network of 7,457 branches. Within the pension fund business, the BBVA Group is a leader in Latin America, managing an estimated value of assets of US$72 billion (approximately MCh$37,199,289) and providing services to approximately 12 million clients. In Chile, the BBVA Group manages assets of MUS$39,253 (MCh$20,380,274) through Provida in a competitive market in which Provida has sustained a leading position over time.

The following chart sets out the related companies comprising Provida’s corporate structure as at December 31, 2011:

International

After the implementation of the private pension system in Chile, a number of other Latin American and European countries adopted substantially similar private pension systems. Currently, private pension systems are also in place in Peru, Colombia, Argentina, Uruguay, Bolivia, Mexico, El Salvador, Costa Rica, Panama, the Dominican Republic, Croatia and Poland.

The Pension Law states that the “sole objective” of each AFP is limited to the administration of pension funds and the granting of related benefits. In addition, the law allows an AFP to invest, through a subsidiary created by the AFP for such purposes, in foreign companies whose purpose is to grant social security benefits.

In May 1995, Provida amended its by-laws to allow for the creation of a subsidiary, Provida Internacional, whose objective is to invest in companies in countries other than Chile with the purpose of granting social security benefits in those countries.

Table of Contents

International Strategy

As of December 31, 2011, the BBVA Group through Provida’s participation is the largest pension group in Latin America, with approximately 12 million participants and more than US$72 billion in assets under management. Provida’s international strategy has focused on the efficiency of its current investments and the analysis of new pension projects in Latin America together with the BBVA Group. Provida’s strategy is to act as a consultant to local AFPs in those countries with large pension markets with the expectation of generating fees for advisory services, while in countries with smaller pension markets; Provida will actively seek new investments in local AFPs.

In accordance with such strategy, certain changes in the investment portfolio of foreign subsidiaries were carried out in recent years to boost the pension franchise with the BBVA Group as described in “Item 4. Information on Provida—A. History and development”.

The main market indicators regarding Provida’s foreign investments hold through its wholly owned subsidiary Provida Internacional S.A. are as follows:

	As of December 31, 2011
	Number of Affiliates		Market share		Ranking		Assets under Management (MUS$)		Market Share		Ranking
Peru – AFP Horizonte		1,352,534		27%		1		7,194		24%		3
Ecuador – AFP Génesis		240,086		69%		1		67		67%		1
Mexico – AFORE Bancomer		4,381,799		10%		4		17,719		15%		2

	As of December 31, 2010
	Number of Affiliates		Market share		Ranking		Assets under Management (MUS$)		Market Share		Ranking
Peru – AFP Horizonte		1,272,036		27%		1		7,295		23%		3
Ecuador – AFP Génesis		220,320		78%		1		63		72%		1
Mexico – AFORE Bancomer		4,459,695		11%		3		16,206		16%		2

	As of December 31, 2009
	Number of Affiliates		Market share		Ranking		Assets under Management (MUS$)		Market Share		Ranking
Peru – AFP Horizonte		1,209,597		27%		1		5,616		23%		3
Ecuador – AFP Génesis		202,520		80%		1		63		72%		1
Mexico – AFORE Bancomer		4,503,980		11%		3		13,216		15%		2

Source: Based on Superintendency of Banks and Insurances in Peru, National Commission for Saving System for Retirement in Mexico, Superintendency of Companies and Stock Markets in Ecuador.

Peru-AFP Horizonte. Provida Internacional holds a 15.87% equity interest in AFP Horizonte in Peru, where it has been present since 1993. In 2011, Provida’s share of profits in this equity investee was MCh$2,184, a decrease of 2.8%, (MCh$64), with respect to 2010. This decrease was as a result of losses from mandatory investments in 2011 as compared to the gains obtained in 2010. In 2010, Provida’s share of profits was MCh$2,248, declining by 3.4% (MCh$80) with respect to 2009 due to lower returns generated from mandatory investments in 2010.

Ecuador-AFP Génesis. The initial investment in AFP Génesis was made in 1995 and Provida Internacional held a 25.00% equity interest until September 2001, when it acquired the remaining 75.00% of the shares held by Filanbanco, becoming the sole shareholder with 100% of the shares. In 2011, this subsidiary generated profits of MCh$3,106, increasing 10.4% (MCh$292) with respect to 2010. This positive result was largely attributable to higher fee income and the positive effect of the depreciation of Chilean peso (10.9%) with respect to the dollar in 2010 (AFP Génesis’ functional currency is the dollar). In 2010, this subsidiary generated profits of MCh$2,813 to Provida Internacional, an increase of 38.5%, or MCh$782, with respect to the amount recorded in 2009. This increase was driven by higher fee income recorded in 2010.

Table of Contents

Mexico-AFORE Bancomer. In November 2000, Provida Internacional purchased a 7.50% equity interest in AFORE Bancomer in Mexico. In 2011, Provida’s share of profits in this equity investee was MCh$3,802, an increase of MCh$186 (5.1%) with respect to 2010, primarily caused by higher fee income received in the period. In 2010, Provida’s share of profits was MCh$3,616, an increase of MCh$761, (26.7%), with respect to 2009, mainly due to higher fee income received in the period.

The following table describes the total Provida’s share of profits in its equity investees, both foreign and local, for the last three fiscal years:

	For the years ended December 31,
	2011			2010			2009
	MCh$			MCh$			MCh$
Net Profit Provida		78,855			91,624			74,442
– Net Profit excluding gains of associated entities (*)		69,144			82,835			67,721
– Share of profit (loss) of foreign associated entities accounted for using equity method (*)		5,986			5,864			5,182
– Share of profit (loss) of local associated entities accounted for using equity method		3,725			2,925			1,539
Share of profit (loss) of associated entities for using equity method/Net Profit		12.3	%		9.6	%		9.0	%

(*) Profits on associated entities do not include the consolidated entity AFP Génesis in Ecuador, which is consolidated with Provida.

D.	Property, plant and equipment

Since 1981, Provida’s strategy has included the development of a nationwide network of branches, however, the commercial network has been restructured during recent years pursuant to the new “Top One” assistance model, which integrated pension advisory services and quick-service processing of transactions in branch offices and outsourced collection and payment services in order to focus the customer assistance network. The latter has led to a reduction in the number of branch offices throughout the country from 82 in 2009, the year in which the aforementioned reduction process started, to 59 branch offices in 2010. Provida still maintains 59 branch offices as of December 31, 2011.

As of December 31, 2011, Provida maintained 42 owned offices of which 22 were exclusively used as branch offices, 12 were used as branch offices but partially rented to third parties, 5 were fully rented, 2 remained unoccupied and the remaining 1 was used as an administrative office.

The principal property that Provida owns is its 18-story headquarters building, known as the BBVA Tower, located in the east commercial neighborhood of Santiago and with a total of 13,014.18 square meters. Since 2003, it has been the BBVA Group’s corporate building in Chile, accommodating all staff units of Provida and renting spaces to staff departments of BBVA Chile S.A. The Company’s Operations Area is located in downtown Santiago.

Item 4A. UNRESOLVED STAFF COMMENTS

None.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.	Operating Results

Critical accounting policies

Financial Reporting Release Section 501.14, released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of the financial statements. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies involved in the preparation of our financial statements in accordance with the International Financial Reporting Standards (IFRS) are limited to those described below. For a summary of significant accounting policies and methods used in the preparation of the financial statements, see Note 4 to the audited Consolidated Financial Statements.

Table of Contents

Accounting of life and disability insurance costs

According to the Pension Law, until June 30, 2009, Provida obtained insurance to cover its obligation to provide life and disability benefits to its participants to the extent that the participants did not have sufficient funds in their individual capitalization accounts to finance the pensions. See “Item 4. Information on Provida—B. Business overview—Primary expenses”.

The Pension Reform Law eliminated the individual responsibility of AFPs to provide life and disability insurance benefits, stipulating a bidding process of all AFPs for life and disability insurance. The first bidding process was awarded on July 1, 2009, to a group of 5 insurance companies for a 12-month term, with a premium of 1.87%. On July 1, 2010 for a 24-month term, the second bidding was awarded to a group of 7 insurance companies with a premium of 1.49%.

As a consequence Provida only maintains a contract for coverage prior to July 2009 that is in a runoff stage, as a result of the modality payment of casualties due to temporary disability period (three years). Therefore, the Company’s results are affected by the cost of the insurance stemming from an insurance contract with expired coverage, depending on the relevant variables evolution at the moment of casualty payments.

For the contract previously mentioned, the Superintendency of Pensions requires AFPs to provision 100% of the contracts’ balances as the minimum amounts, provided by the insurers in their consolidated financial statements. Nevertheless, Provida, through its experience, has concluded that, in certain discount rate scenarios, the insurer’s calculations regarding the required amounts to provision in respect of future disability payments differ from the actual amounts that the insurer will be required to pay.

Even though, the rules of the Superintendency of Pensions do not require AFPs to make additional provisions over those of the insurer, if the AFPs have enough evidence supporting a higher cost of the insurance, they shall establish provisions corresponding to such higher cost.

Provida has developed its casualty model to more accurately accrue the amounts that are required to be paid to disabled participants once their final determination is made. The basic premise is to use Provida’s best estimate, at the time of the initial determination, the information it believes will apply to payment (final determination). The variables associated with the model are: disability status, rate of return of pension funds over the three years of the temporarily disabled period and the interest rate prevailing at the moment of payment (expected rate). This approach contrasts with that taken by insurance companies, which only use information relating to the disabled status of persons at the time of the initial determination, that is, three years before payments are made, and which updates the discount rates on monthly basis in accordance with discount rate prevailing in the market in order to value the reserves.

The provisions determined under the casualty model represent the Company’s best estimate of the required future payments for life and disability benefits.

The sensitivity analysis below represents the potential changes in fair value, cash flows and earnings based on parameters that in the management’s opinion are the most relevant to determine the insurance obligation, incorporating the factors listed in the table.

	2011
	Most Likely Aggregate Negative Variable Scenario		Base Scenario (**)		Most Likely Aggregate Positive Variable Scenario
Discount Rate		2.81%		3.09%		3.37%
Rate of return on ICAs		0.00%		0.00%		0.00%
Total Liability (MCh$) (*)		5,807		3,544		1,282

(*) The liability is presented net of financial revenues generated by the insurance contract still in force.

(**) The base case is the casualty rate estimated by the casualty model, which is higher than the amounts in the insurer’s balance sheet and therefore, the amounts estimated by the model were used.

Table of Contents

The following is a description of the key information used by Provida in its casualty model and how such information compares with the information used by insurance companies:

Discount rates: In order to calculate the amount of the required provisions necessary to cover the premiums paid on life and disability insurance, the law requires that the provision be discounted by the market rate for annuities. Commencing in July 2009 as a result of a policy framework originated by the joint insurance bidding process, the insurers could adopt the regulation to value reserves at the prevailing interest market instead of an historical interest rate (minimum of the previous semester when constituting the provision) as if it were a life annuity.

Likewise, Provida estimates the forward rates at the moment of payment for a maximum period of 18 months, since most disability casualties under a temporary disability determination will be paid in such period. Given the high volatility of interest rates, the relevance of such interest rates when determining the liability value and the short term in which such liability will be paid, it has been determined in accordance with the variability of the rates in a term of 5 years, the maximum and minimal amounts that this variable could be with a 95% of trust. Such rates are segmented for future periods of expiration of these obligations (6, 12 and 18 months). During the year 2011, Provida used an average discount rate of 3.09% to economically value the reserves for casualties of its affiliate portfolio (base scenario), while the insurance company valued such reserve at 3.11%. This difference in rate explains the difference between the value of the liability under Provida and the amount acknowledged by the insurance company.

In order to establish the most likely positive and negative scenarios, the historical volatilities were calculated (standard deviation) and an average rate (3.09%) was applied, resulting in a minimal rate of 2.81%, while in the most likely positive scenario the maximum rate was 3.18%.

Returns on participants’ individual capitalization accounts: Participants have a positive balance in their individual capitalization accounts, and this balance is subject to the pension funds returns over the three years following the establishment of the initial reserve for disability until the final disability determination is made. The insurer’s calculations do not take into account that the participant’s individual capitalization account will grow over such three-year period, and for sensitivity purposes, Provida has used the same criteria in this period of evaluation due to high volatility experienced by pension fund returns.

Other factors are included as variables in the casualty model which, however, do not significantly impact the calculation of the premium such as the death of disabled participants in light of a certain percentage of participants that receive an initial disability entitlement determination and die prior to the final determination of their disability. Because survivor beneficiary benefits are lower than disability payments, this percentage can significantly influence the amount of disability payments that are ultimately required to be made. The insurer assumes that no disabled participants will die prior to the final determination of their disability. As the contract is in a run off stage until June 30, 2013, Provida has assumed the same criteria of the insurance company.

In the case of incurred but not reported claims, Provida does not make any provisions, since the coverage period for disability finished and the deceased participants under coverage reported, represent a minimum percentage of casualties.

Therefore, during the term of an insurance contract, the Company calculates and establishes provisions for the expected cost to the insurer. In fact, through the application of the casualty model previously described, the provisions made by Provida with respect to future premium payments to be made to the insurer tend to reflect in a more accurate way the effective payments that it will have to make so that there is a higher correlation between revenues and expenses for a specific period. The information in the casualty model is reviewed monthly, making any modification considered appropriate at that moment.

Finally, it is important to note that this expense has been decreasing due to proximity of the expiration date of such contract, which will be on June 30, 2013.

In accordance with IFRS criteria, the Company must maintain its liability at fair value and given the low discount rates used in the casualty model to discount disability payments, the casualty rate estimated by the model is higher than the amounts established in the insurers’ balance sheets and therefore, the amount given by the model was used as basis to estimate provisions for the year ended on December 31, 2011 as occurred in the year 2010.

Table of Contents

However, under the rules of the Superintendency of Pensions, Provida must apply the discount rate of the insurer to the provision should it be lower than the casualty model, a situation that has not occurred as of and for the years 2009, 2010 and 2011.

Mandatory investments

The principal financial investments of Provida are mandatory investments which aim to guarantee the minimum return required by law equal to 1% of investment in shares of each pension fund under administration. The mandatory investment requirement is calculated according to instructions issued by the Superintendency of Pensions. Mandatory investments represented approximately 50% of total consolidated assets as of December 31, 2011 and 2010, respectively. As established in D.L. 3500, the mandatory investment’s purpose is to provide an actual minimum rate of return over the investment portfolios for each one of the pension funds. This minimum rate of return is based on the weighted average real rate of return of all pension funds of the AFP system, over a 36-month period. This requirement has been determined in accordance with the different portfolio compositions, requiring a larger margin for those with a greater investment in variable income securities and therefore potentially subject to higher volatility (Funds Type A and B). If for a certain month the rate of return of a pension fund was lower than the minimum rate of return requirement, the AFP is required to cover the difference within five days of such determination by the Superintendency of Pensions. If mandatory investments are used to fund any deficit in the required level of return, the AFP must replenish them within fifteen days. If a deficit is not covered or if mandatory investments are not replenished, the AFP will be liquidated by the Superintendency of Pensions.

Although gains and losses on mandatory investments have certain risks to the stability of the Company’s results in view of the evolution of the returns obtained by different portfolio compositions in the pension funds, the greatest risk associated with mandatory investments is non-compliance with the minimum rate of return requirement. Provida’s risk management policies for mandatory investment is described in Note 4 to Provida’s audited Consolidated Financial Statements.

Provida’s management has designated mandatory investments as financial assets at fair value through profit and loss as those financial assets are managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented investment management policy, and information about the mandatory investments is provided internally on that basis.

Impairment of Long-Lived assets

Goodwill

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Impairment of Tangible and Intangible Assets other than Goodwill

At the end of each reporting period, Provida reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Table of Contents

If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, Provida estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Recent Accounting Pronouncements

Please see “Item 18. Financial Statements” and Note 3 to Provida’s audited Consolidated Financial Statements for additional information regarding recent accounting pronouncement.

Introduction to Provida’s operating results

The following discussion should be read in conjunction with the audited Consolidated Financial Statements of Provida and its Subsidiary, and the Notes thereto included elsewhere in this annual report. See “Item 18. Financial Statements”.

Provida is the largest AFP in Chile, providing management of pension funds and various related services. These services are limited to those permitted for AFPs under the Pension Law and revenues are largely dependent on the level of fees charged to participants. As a consequence, Provida’s operating results are dependent on the general level of economic activity in Chile and, in particular, on the number of workers who affiliate with Provida and make monthly contributions, as well as the amount of their taxable salaries subject to contributions. Given that during recent years the economy has grown, Provida estimates that the growth in the number of workers in Chile and their aggregate salaries will maintain their growing trend in the future, although not necessarily at the same rate as in the past. Because of its important market share, the broad geographic coverage of its branch network, and the diversity of its participants, Provida believes that its revenues are not dependent on any particular sector of economic activity.

The principal source of revenues from operations for Provida (See “Item 4. Information on Provida—B. Business overview—Primary revenues”) is the fees charged to contributors in connection with deposits of their monthly mandatory contributions. Therefore, the revenues from operations of Provida can be materially impacted by any combination of significant changes in fee rates, the number of contributors or taxable salaries. From December 1999 until April 2006, Provida charged a variable fee of 2.25% over each contributor’s salary and a nominal fixed fee of Ch$390 per month discounted from the contributor’s accounts. From May 2006 onwards, the variable fee increased to 2.39% and the fixed fee was eliminated. In January 2008, the variable fee increased to 2.59%, and subsequently in October 2008, it increased again to 2.64%. In July 2009, the variable fee decreased by 1.54% due to the Pension Reform Law’s elimination of AFPs’ individual obligation to provide life and disability insurance (See “Item 3. Key Information—Recent regulatory changes”) and has remained the same during the years 2010 and 2011. For voluntary pension savings, Provida established a nominal fixed fee of Ch$1,250 for each transfer of funds from other institutions and a yearly fee of 0.56% over administered funds for voluntary pension savings. In relation to voluntary accounts, in October 2008 Provida started to charge a variable fee of 0.92% for administered balances and eliminated the fixed fee for withdrawals. Additionally, the Company charges a variable fee of 1.25% over the pensions for programmed withdrawals. With respect to pensions for programmed withdrawals or temporary incomes, the Company charges a

Table of Contents

variable fee of 1.25% over the pensions. Additionally, the Company charges a fixed fee of Ch$1,250 for transferring contributions of voluntary participants to other institutions (See “Item 4. Information on Provida—B. Business overview—Primary revenues”).

Generally, another significant source of revenues has been the gains on mandatory investments. Gains generated from mandatory investments belong to the AFP but do not necessarily result in increased cash flow because as the pension funds grow, so do the reserve requirements imposed on mandatory investments.

The most significant components of Provida’s expenses from operations (See “Item 4. Information on Provida—B. Business overview—Primary expenses”) are employee expenses for both administrative and sales staff, and miscellaneous other operating expenses that include marketing expenses, data processing expenses, administration costs, disability qualification costs and the Board of Directors’ remunerations. Until 2009 the cost of life and disability insurance premiums was the most important expense in the total expenses from operations (46%). Such expense was a recurring cost until July 2009, when the Pension Reform Law eliminated AFPs’ individual responsibility to provide benefits related to the life and disability insurance.

Other income (revenues) of Provida are: share of the profit (loss) from equity accounted associates, financial costs, income from investments, exchange difference, other non-operating income and other non-operating expenses.

The following table sets forth the composition of Provida’s revenues from operations and expenses for the periods indicated:

	As of December 31,
REVENUES FROM OPERATIONS:	2011		2010		2009
Fee income		93.7%		76.9%		79.1%
Gains (losses) on mandatory investments		-2.3%		12.9%		15.4%
Other revenues from operations		8.6%		10.2%		5.5%
TOTAL REVENUES FROM OPERATIONS		100%		100%		100%

Source: Superintendency of Pensions

	As of December 31,
EXPENSES FROM OPERATIONS:	2011		2010		2009
Life and disability insurance premium		-3.5%		3.3%		46.1%
Employee expenses		45.6%		43.1%		25.9%
Depreciation and amortization expenses		12.2%		11.1%		8.7%
Loss on impairment		0.0%		0.8%		0.0%
Miscellaneous other operating expenses		45.7%		41.7%		19.3%
TOTAL EXPENSES FROM OPERATIONS		100%		100%		100%

Source: Superintendency of Pensions

The following table sets forth additional relevant information on Provida that corresponds to monthly averages for the following periods:

	As of December 31,
Monthly Averages	2011		2010		2009
Number of contributors		1,786,857		1,785,997		1,745,147
Administrative personnel		909		898		1,035
Sales personnel		433		460		519

Source: Superintendency of Pensions

Table of Contents

Operating results for the years ended December 31, 2011 and 2010

Provida recorded a profit after taxes of MCh$78,855 for the year ended December 31, 2011, a decrease of 13.9% as compared to the profit after taxes of MCh$91,624 for the year ended December 31, 2010.

The following is a year-to-year comparison by major income statement line item for the years ended December 31, 2011 and 2010.

Revenues from operations

In fiscal year 2011, total revenues from operations were MCh$149,778, a decrease of MCh$19,563 or 11.6% as compared to the prior fiscal year. This result was primarily caused by lower gains from mandatory investments of MCh$25,355, which was partially offset by higher revenues of MCh$5,792. An explanation of variations for each class of revenues from operations for the fiscal year 2011 as compared to the fiscal year 2010 is described below:

In fiscal year 2011, revenues were MCh$153,248, an increase of MCh$5,792 or 3.9% with respect to the fiscal year 2010. This increase is mainly explained by the combined effect of higher fee income of MCh$10,086, and increased revenues from mandatory contributions, which was partially offset by lower other revenues of MCh$4,294, due to lower financial revenues recorded in the period.

Fee income was MCh$140,359 in fiscal year 2011, an increase of MCh$10,086 (or 7.7%) as compared to fiscal year 2010. This increase was mainly attributable to higher mandatory contributions of MCh$9,359 as a result of higher participant’s salary base (7.4%), and also higher revenues on pension payments to pensioned participants (MCh$423 or 18.6%) and administration of voluntary savings (MCh$304 or 16.5%).

As a result of the previously mentioned growing trend of its participants’ salary base previously mentioned, Provida has maintained its leading position in the pension industry with an average market share of 40% in terms of number of participants, 37% in terms of contributors, 30% in terms of salary base and 29% in total assets under management in the fiscal year 2011. In figures, the average number of contributors was 1,786,857; the monthly average salary base was around MUS$1,450, and the assets under management were MUS$39,253 as of December 31, 2011.

Other revenues were MCh$12,889 in fiscal year 2011, decreasing by MCh$4,294 (25.0%), with respect to fiscal year 2010. This decrease was basically due to lower financial revenues of MCh$4,975 stemming from the contract of the life and disability insurance, expired in June 2009 and currently in a runoff stage. The latter has implied that only payments for casualty rate are recorded, therefore cash flows have decreased, as well as lower returns generated in the period in conformity with the insurance company contract.

In fiscal year 2011, there were losses on mandatory investments of MCh$3,470, a decrease of MCh$25,355 with respect to the gains recorded in fiscal year 2010. The weighted average nominal return of pension funds was -1.44% in fiscal year 2011 as compared to the nominal return of +12.18% recorded in fiscal year 2010. The nominal returns per fund type in 2011 were: Type A -8.13%, Type B -4.41%, Type C -0.41%, Type D +3.93% and Type E +8.26%.

The negative overall return in the year was triggered by the losses recorded in the foreign stock markets (MSCI World -7.6%: Japan -17.3% and Europe -8.5%; MSCI Emerging -20.5%: China -21.7%, Russia -21.7%, Brazil -17.2% and Mexico -3.1%), and the local stock market (IPSA -15.2%). These losses were slightly offset by better results achieved by local and foreign fixed income given the decrease of interest rates.

While 2011 is the first year with negative returns after the financial crisis of 2008, the two situations are not comparable and losses in 2011 are much lower. However, it is important to note that the volatility and uncertainty are inherent to the economies and their capital markets and thus the private pension system.

Additionally, it is a continuing focus of the Company to perform a detailed review of direct and indirect investments in issuers, both domestic and foreign to reduce potential credit risks. It should be noted that throughout the year the Company did not hold any exposure to European sovereign debt assets.

Table of Contents

Expenses from operations

In fiscal year 2011, total expenses from operations were MCh$67,150, a decrease of MCh$4,746 or 6.6% as compared to the prior fiscal year. This decrease was basically caused by the combined effect of a credit recorded for life and disability insurance premium, with a variation of MCh$4,664; the nil expense in impairment losses in 2011 as compared to the expense of MCh$556 recognized in 2010 and lower employee expenses of MCh$379. These decreases were partially offset by an increase of MCh$657 in miscellaneous other operating expenses and an increase in depreciation and amortization costs of MCh$195. An explanation of variations for each class of expenses from operations for fiscal year 2011 as compared to fiscal year 2010 is provided below.

Life and disability insurance premium recorded a credit of MCh$2,326 in fiscal year 2011, with a positive variation of MCh$4,664 as compared to an expense recorded in fiscal year 2010.

This result was primarily attributable to lower average forward rates at the end of year 2010 as compared to average forward rates expected at the end of year 2011 (3.01% in December 2010 versus 3.09% in December 2011), which resulted in a reversal in the provision for casualty rate, with a variation of MCh$4,385 with respect to fiscal year 2010. The reversal of provisions was determined by the difference between the amount required at the end of year 2010 using the most accurate available information, and the amount estimated by Provida’s model as of December 31, 2011.

In addition, a lower expense in temporary premium of MCh$279 was recorded in 2011, since in fiscal year 2010 a greater amount of residual and uncredited contributions were processed.

Finally, it is important to note that Provida currently maintains the obligation in respect of casualties pending of payment under the temporary disability determination that remain under coverage as of June 30, 2009, and the expiration of the contract is determined for the next 48 months, that is, June 30, 2013, by mutual consent of the parties.

Employee expenses amounted to MCh$30,605 in fiscal year 2011, a decrease of MCh$379, or 1.2%, as compared to fiscal year 2010. This result was driven by lower wages and salaries of sales personnel, and lower indemnities, which was partially offset by higher wages and salaries of administrative personnel and higher short term benefits.

Total wages and salaries of administrative personnel were to MCh$17,287 in fiscal year 2011, increasing MCh$1,351 or 8.5% as compared to 2010. This result was driven by higher expenses incurred in fixed salaries that were inflation adjusted; accrued vacations in view of the decreased reversal of provisions due to lower use of vacations and seniority awards due to the higher provision for the new seniority award for 30 years of permanence in the Company. It added to the above, the superior expense in wages and salaries of administrative personnel recorded by the associated entity Genesis in Ecuador.

In figures, the average administrative staff amounted to 909 workers in fiscal year 2011, while in fiscal year 2010 it was 898, an increase of 1.2%. By comparing the end of each period, the administrative staff increased by 3.5%, from 890 in December 2010 to 921 workers in December 2011.

Total wages and salaries of sales personnel amounted to MCh$9,208 in fiscal year 2011, a decrease of MCh$1,314 or 12.5% with respect to fiscal year 2010. This positive variation was basically caused by lower variable compensation paid, in turn attributable to lower commission paid to sales agents due to a smaller staff, as well as the lower expense recorded in wages and salaries of sales personnel recorded by the associate Genesis in Ecuador. The latter was partially offset by a higher provision made for the seniority award made to 30-year Company employees and increased fixed salaries in view of inflation adjustments, and increases in gross salaries as established in the collective agreement.

In figures, the average number of sales employees was 433 workers in fiscal year 2011, a decrease of 5.9% with respect to the average number maintained in fiscal year 2010 (460 sales agents). By comparing the end of each period, the sales force decreased by 3.4% from 444 salespeople in December 2010 to 429 in December 2011.

Short-term benefits to employees were MCh$2,500 in fiscal year 2011, increasing by MCh$635 or 34.0% as compared to fiscal year 2010 due to higher provisions required for bonuses.

Table of Contents

Indemnities paid in fiscal year 2011 were MCh$1,611, a decrease of MCh$1,050 or 39.5% compared to fiscal year 2010. This decrease is due to lower indemnities paid to administrative personnel for MCh$1,251, as well as to sales personnel for MCh$1,409.

Depreciation and amortization expenses totaled MCh$8,207 in fiscal year 2011, an increase of MCh$196 or 2.4% with respect to fiscal year 2010 mainly due to the following:

Depreciation expense was MCh$2,353 in fiscal year 2011, an increase of MCh$113 or 5.1% compared to fiscal year 2010. This increase was mainly caused by higher depreciation largely attributable to purchases of computer hardware made in the period.

The amortization expense was MCh$5,854 in fiscal year 2011, an increase of MCh$82 or 1.4% with respect to fiscal year 2010, due to higher amortization costs in the period, related to software internal development enhancements made in the period.

Impairment losses were nil in fiscal year 2011, a decrease of MCh$556 as compared to the impairment loss recognized in fiscal year 2010 due to furniture repairs due to damage caused by the earthquake that occurred in Chile in February 2010.

Miscellaneous other operating expenses were MCh$30,681 in fiscal year 2011, an increase of MCh$673 or 2.2% compared to fiscal year 2010 due to the following:

Marketing expenses were MCh$1,784 in fiscal year 2011, an increase of MCh$243, or 15.8%, compared to fiscal year 2010. This increase was basically caused by higher expenses in administration of publicity due to creative services and events and promotions.

Data processing expenses were MCh$3,794 in fiscal year 2011, an increase of MCh$524 or 16.0% with respect to fiscal year 2010. This result was caused by higher host maintenance and installations expenses related to minor developments required in the period that are not qualified as investments, basically normative requirements and enhancements in systems. Additionally, higher expenses were recorded in host maintenance with related companies in view of small enhancements that did not extend the useful life of the asset.

Administration expenses were MCh$22,139 in fiscal year 2011, a decrease of MCh$339 or 1.5% compared to fiscal year 2010. This decrease was mainly attributable to lower advisory expenses, due to a decreased installment payment for outsourcing services paid to BBVA Servicios Corporativos and services related to the collection for unpaid contributions (DNPA for its Spanish acronym). In addition, lower operational write-offs were recorded due to adjustments made in provisions that were not required, since the level of operating errors has decreased.

Other expenses from operations are associated with expenses incurred for evaluation and qualification of disability status of participants and remuneration of the Board of Directors, which amounted to MCh$2,947 in fiscal year 2011, higher by MCh$229 or 8.4% with respect to the fiscal year in 2010. This result was explained by higher compensation paid to the Board of Directors, due to per diem paid to Spanish Directors, an expense that was not incurred in 2010.

Other income (expenses)

Financial income (expenses) was MCh$1,553 in fiscal year 2011, an increase of MCh$1,271 or 451.0% with respect to fiscal year 2010, due to the higher liquidity levels for the Company’s and better returns obtained from such investments, which consist primarily of time deposits.

In the fiscal year 2011, share of profit (loss) from equity accounted associates was MCh$9,711, an increase of MCh$922 or 10.5% with respect to fiscal year 2010. This increase was the outcome of better results generated by the local associates, which contributed in the aggregate of MCh$800, given the positive development of revenues on sales by Previred and fee income in the case of AFC; as well as the positive contribution of MCh$186 made by AFORE Bancomer in Mexico due to its higher fee income. The above was slightly offset by the lower result recorded by AFP Horizonte in Peru of MCh$64, basically due to lower gains in mandatory investments.

Table of Contents

Other non-operating revenues were MCh$3,050 in fiscal year 2011, an increase of MCh$486 or 19.0% as compared to fiscal year 2010. This result was attributable to the profit from the sale of real estate assets not used by the Company and the reversal of provision in labor litigation from previous years, as the final determination was favorable for the Company. Provisions for labor suits are accounted for as other operating expenses, but the reversal of provisions corresponding to previous periods must be accounted for as revenues. The latter was partially offset by lower rentals revenues. For more information on litigation provisions, see Notes 22 and 31 to the audited Consolidated Financial Statements.

Income tax expense

Income tax expense was MCh$17,712 in fiscal year 2011, higher by MCh$272 or 1.6% with respect to the fiscal year 2010. This result was driven by a lower tax expense caused by decreased profits before taxes which was partially offset by the effect of increased tax rates from 17% in 2010 to 20% in 2011. The tax rate for companies effective for 2012 is 18.5%.

Profit

During fiscal year 2011, the Company recorded a profit of MCh$78,855, a decrease of MCh$12,769 or 13.9% compared to the profit recorded in fiscal year 2010. This decrease was basically caused by losses from mandatory investments, which were partially offset by the remarkable result obtained from the Company’s recurring business, defined as revenues minus life and disability insurance premium, personnel expenses and miscellaneous other operating expenses, which increased by 12.1% or MCh$10,178 with respect to the fiscal year 2010.

Operating results for the years ended December 31, 2010 and 2009

Provida recorded a profit after taxes of MCh$91,624 for the year ended December 31, 2010, an increase of 23.1% as compared to the profit for the year ended December 31, 2009.

The following is a year-to-year comparison by major line item of results for the years ended December 31, 2009 and 2010.

Revenues from operations

In fiscal year 2010, total revenues from operations were MCh$169,342, a decrease of MCh$44,660 or 20.9% as compared to the prior year. This result was basically driven by lower revenues of MCh$33,717 and lower gains on mandatory investments of MCh$10,943.

In 2010, revenues were MCh$147,456, a decrease of MCh$33,717 or 18.6% with respect to the fiscal year 2009. This result was basically driven by lower fee income (MCh$39,092), in view of the lower fees charged to clients due to the elimination of the AFP single responsibility in the life and disability insurance. The remaining components called other revenues partially offset this evolution with an increase of MCh$5,375, basically due to higher financial revenues registered during the period.

Fee income was MCh$130,273 in fiscal year 2010, a decrease of MCh$39,092 (or 23.1%) as compared to fiscal year 2009. This decrease was basically driven by lower fee charged to participants beginning in July 2009 due to the elimination of the AFP individual responsibility for the life and disability insurance as determined by the Pension Reform Law. As a result, the average fee in 2010 was 1.54%, decreasing by 29.4% over the average fee charged in 2009 which was 2.18%.

In light of this change, the net fee received by the Company, defined as fee income minus the life and disability insurance expense provides a more accurate basis for comparison with the prior year. In the fiscal year 2010, the net fee was MCh$127,936, an increase of MCh$20,065 or 18.6% with respect to fiscal year 2009. This result was attributable to an increase of 7.6% in Provida’s participant salary base, and the lower expenses for the life and disability insurance.

In keeping with the growing trend of its participants’ salary base previously mentioned, Provida has maintained its leading position in the pension industry with an average market share around 40% in terms of number of

Table of Contents

participants and over 30% in terms of salary base and total assets under management. In figures, the average number of contributors was 1,785,997 and the monthly average salary base was MUS$1,474 and assets under management were MUS$44,137 as of December 31, 2010.

Other revenues were MCh$17,182 in fiscal year 2010, increasing by MCh$5,375, or 45.5%, with respect to fiscal year 2009. This increase was basically due to higher financial revenues of MCh$3,669 stemming from the contract of the life and disability insurance, attributable to returns obtained by the insurer in connection with the contract effective January 2005-June 2009; by mutual consent of the parties (previous compensation to the insurer for change in conditions) the financial performance was modified for the AFP, with a benchmark determined by assets of similar duration than the insurance liability. In addition, there were higher revenues from operations of MCh$1,649 in our indirect subsidiary AFP Genesis in Ecuador, as a result of the growth observed in fees received due to new products offered to its participant portfolio that recorded an increase of 10.7% as compared to prior year, while the average administered funds rose by 9.9%.

In fiscal year 2010, gains on mandatory investments were MCh$21,886, a decrease of MCh$10,943 or 33.3% with respect to the gains recorded in fiscal year 2009. The weighted average nominal return of pension funds was 12.18% in fiscal year 2010 as compared to the outstanding nominal return of 23.12% recorded in fiscal year 2009, due to the recovery observed in stock markets. Returns in fiscal year 2010 were positively affected by results obtained by local stock markets, whose accumulated return was 38%, and foreign stock markets, mainly emerging markets. The result was also affected by the favorable return of local fixed income attributable to the decrease in the long term rates.

The lower return in fiscal year 2010 as compared to fiscal year 2009 was basically triggered by lower returns in foreign stock markets in 2010 (Developed Markets: Japan -5.6%, Europe -2.0% and USA +8.1%; Emerging Markets: Mexico +11.3%, Russia +13.5%, Brazil -5.9%, China -6.3% v/s 2009 Developed Markets: Japan +34.1%, Europe +25.1% and USA +23.2%, and Emerging Markets: Mexico +42.4%, Russia +125.2%, Brazil +80.8% and China +60.5%) and the local stock market (2010 IPSA +37.6% v/s IPSA +50.7%).

Expenses from operations

In fiscal year 2010, total expenses from operations were MCh$71,897, a decrease of MCh$61,461 or 46.1% as compared to the prior year. This decrease was basically caused by lower life and disability insurance premium of MCh$69,157; decreased employee expenses of MCh$3,521; decreased depreciation and amortization expenses of MCh$3,579 which were partially offset by an increase of MCh$4,239 in miscellaneous other operating expenses and an increase for impairment losses of MCh$556. An explanation of variations for each class of expenses from operations for fiscal year 2010 as compared to fiscal year 2009 is provided below:.

Life and disability insurance premium amounted to MCh$2,338 in fiscal year 2010, a decrease of MCh$59,157, or 96.2%, as compared to fiscal year 2009. This decrease was basically caused by the Pension Reform Law’s change of the individual responsibility for AFPs to provide life and disability benefits. Thus, since August 2009 the AFP has recorded significantly lower expenses incurred in insurance premium, except for those expenses belonging to the recovery of leftovers from previous months.

The other significant component is provisions for higher casualty rate, as Provida must cover the difference between the necessary capital to cover the pension determined by law and savings of participants in their individual capitalization accounts up to a maximum casualty rate established in the contract. Even though the Company provisioned the cost of the life and disability insurance at fair value according to the casualty model at the close of the contract in 2009, the market conditions have exhibited a downward trend of discount rates used to casualties pending of payment. Consequently, additional provisions were made of MCh$1,689 in the fiscal year 2010 given that the average rate for casualties pending of payment is expected to be 3.01%, while at the close of 2009 such expected rate was 3.30%. It is important to mention that the rate applied in the model at the close of 2009 was lower than the discount rate prevailing in the market at that date (3.56%), which was used by the insurer to value reserves for casualties, so the model took in consideration the forecasts of lower forward rates.

In comparative terms, the fiscal year 2010 recorded savings of MCh$14,486 for casualty provisions due to in the fiscal year 2010 additional provisions were made for the aforementioned reasons, but such provisions were significantly lower than the provisions recorded at the close of fiscal year 2009, when the aim was to provision the total insurance liability according the information available at that moment.

Table of Contents

Employee expenses amounted to MCh$30,984 in fiscal year 2010, a decrease of MCh$3,520, or 10.2%, as compared to fiscal year 2009 mainly due to the following:

Total wages and salaries of administrative personnel were MCh$15,936 in fiscal year 2010, decreasing by MCh$1,112 or 6.5% compared to fiscal year 2009. This decrease was basically driven by a decrease in the number of staff employees due to the outsourcing of certain supporting services in non-core areas to the related company BBVA Servicios Corporativos Limitada. Also, in 2010 there were lower salaries to chiefs and supervisors of sales staff in view of lower awards and commissions paid. The latter was partially offset by a higher expense incurred in overtime, higher legal contributions due to the life and disability insurance which must be paid by the employer, and higher expenses in training relating mainly to corporate matters.

In figures, the average administrative staff amounted to 898 workers in fiscal year 2010, while in fiscal year 2009 it was 1,035, a decrease of 13.2%. By comparing the end of each period, the administrative staff decreased by 9.7%, from 986 in December 2009 to 890 workers in December 2010.

Total wages and salaries of sales personnel were MCh$10,522 in fiscal year 2010, an increase of MCh$184 or 1.8% compared to fiscal year 2009. This increase was attributable to our Ecuadorian subsidiary AFP Genesis which increased its sales staff as such leading to higher incentives of MCh$218, this increase was partially offset by a decrease of MCh$34 in AFP Provida as a result of lower variable based remunerations as a result of lower awards and commissions paid to the sales staff.

In figures, the average number of sales employees was 460 workers in fiscal year 2010, a decrease of 11.3% with respect to the number maintained in fiscal year 2009 (519 sales agents). With respect to the evolution at the end of each period, the sales force decreased by 4.7% from 466 salespeople in December 2009 to 444 in December 2010.

Short-term benefits to employees were MCh$1,865 in fiscal year 2010, decreasing by MCh$993 or 34.7% as compared to fiscal year 2009 due to lower benefits for bonuses due to reduced total administrative employees.

Indemnities paid in fiscal year 2010 were MCh$2,661, a decrease of MCh$1,600 or 37.6% compared to fiscal year 2009. This decrease is due to 2009 adjustments to greater reductions in administrative staff and sales employees in 2010 than in 2009.

Depreciation and amortization expenses were in the aggregate of MCh$8,011 in fiscal year 2010, a decrease of MCh$3,579 or 30.9% with respect to fiscal year 2009 mainly due to the following:

Depreciation expense was MCh$2,188 in fiscal year 2010, a decrease of MCh$636 or 22.5% compared to fiscal year 2009. This decrease was mainly attributable to lower depreciation of buildings of MCh$789 in fiscal year 2010, since in year 2009 Provida restructured its commercial network, pursuant to the new “Top One” assistance model, which integrated the pension advisory services and quick-service processing of transactions, by outsourcing collection and payment services in order to focus the customer assistance network. Consequently, renewals in infrastructure no longer used under the “Top One” model were fully depreciated in that year. The above was partially offset by higher depreciation of MCh$117 from the subsidiary Genesis in Ecuador.

The amortization expense was MCh$5,823 in fiscal year 2010, a decrease of MCh$2,943 or 33.6% with respect to fiscal year 2009. This result was largely attributable to lower amortization in evolutionary developments associated to the Unified Platform due to the fact that the year 2009 included the amortization of evolutionary developments for the period between 2005-2009, while the year 2010 only included new developments basically related to changes implemented by the Pension Reform Law.

Impairment losses increased by MCh$556 in fiscal year 2010 compared to fiscal year 2009 where no impairment losses were recognized. Impairment losses are related to expenses incurred in furniture repairs due to damage caused by the earthquake that occurred in Chile in February 2010.

Miscellaneous other operating expenses were MCh$30,008 in fiscal year 2010, an increase of MCh$4,239 or 16.4% compared to fiscal year 2009 due to the following:

Table of Contents

Marketing expenses were MCh$1,541 in fiscal year 2010, a decrease of MCh$863, or 35.9%, compared to fiscal year 2009. This decrease was basically caused by lower expenses in media publicity as compared to the prior year in which increased media promotion was used including the "Pay Well" campaign relating to the Pension Reform Law. Additionally, in 2010 there were lower expenses in sales support material and lower expenses in communications since in fiscal year 2009 the Company incurred in expenses to disseminate information about the Pension Reform Law to employers and participants.

Data processing expenses were MCh$3,270 in fiscal year 2010, an increase of MCh$90 or 2.8% with respect to fiscal year 2009, due to higher expenses in host maintenance cost and installations in connection with new inquiries of software maintenance, which were offset by lower costs in host maintenance with related companies due to lower costs with CCR (Regional Computing Center).

Administration expenses were MCh$22,478 in fiscal year 2010, an increase of MCh$5,634 or 33.4% compared to fiscal year 2009. This increase was mainly attributable to higher expenses in connection with advisory services related to the externalization of supporting services in non-core areas to the related company BBVA Servicios Limitada. The period also recorded higher expenses in services rendered by third parties such as typing, pension payments and custody services related to the increase of pension funds. The aforementioned was partially offset by lower expenses in installments as in 2009 Provida made payments to the Association of AFP, and lower common expenses in accordance with the fewer number of branch offices.

Other expenses from operations are associated with costs incurred for evaluation and qualification of disability status of participants and the remunerations of the Board of Directors, which amounted to MCh$2,718 in fiscal year 2010, lower by MCh$623 or 18.6% with respect to the fiscal year in 2009. This result was explained by lower expenses related to qualification of disability status, basically medical fees and clinical examinations due to the greater number of claims was evaluated in 2009 since Provida is only covering casualties pending evaluation and those ones in process of final determination. The above was partially offset by higher remunerations of the Board of Directors given the existence of one more remunerated Director and two alternate Directors beginning on May 2009.

Other income (expenses)

Share of profit (loss) from equity accounted associates is highlighted amounting to MCh$8,789 in fiscal year 2010, higher by MCh$2,068 or 30.8% with respect to fiscal year 2009. This increase was the outcome of higher profits generated by local subsidiaries that contributed in the aggregate of MCh$1,386 due to higher fee income generated by AFC and fees on sales from PreviRed, adding a higher result achieved by AFORE Bancomer in Mexico (MCh$761) due to higher levels of fee income received. The above was partially offset by lower profits generated by AFP Horizonte in Peru (MCh$80) due to lower gains on mandatory investments recorded in 2010.

Income tax expense

Income tax expense was MCh$17,440 in fiscal year 2010, higher by MCh$2,991 or 20.7% with respect to the fiscal year 2009, basically due to higher profit before taxes recorded in the period.

It is important to note that on July 31, 2010, the Law N˚20,455 was published in order to finance the country’s reconstruction, after the earthquake occurred on February 27, 2010, by temporarily increasing the tax rate at 20.0% for the commercial year 2011 then decreasing to a 18.5% tax rate for the commercial year 2012 and returning back to a 17.0% tax rate in commercial year 2013.

Profit

During fiscal year 2010, the Company had profit of MCh$91,624, an increase of MCh$17,182 or 23.1% compared to the profit recorded in fiscal year 2009. This performance is sustained by recurring business, where revenues minus life and disability insurance premium, personnel expenses and miscellaneous other operating expenses increased by MCh$24,722 or 41.6% compared to fiscal year 2009, totaling MCh$84,127 at the end of fiscal year 2010. The key drivers of this result were the growth in the salary base of participants, accompanied by a decrease in expenses from operations specifically, life and disability insurance premium, partially offset by lower gains on mandatory investments.

Table of Contents

Impact of inflation and price-level restatement

Under IFRS Provida no longer applies price-level restatement.

B.	Liquidity and capital resources

Overview

The Company’s principal uses of funds are payments of personnel remunerations and other expenses from operations, replenishment of mandatory investments and dividend payments. Provida has financed these expenses by using cash generated from its operations, as well as through short-term debts. Management considers that these sources of funds will be sufficient to finance contemplated capital requirements, as well as payments of its obligations. Due to the nature of its business, Provida has significant cash flows related to fees received from mandatory and voluntary pension savings, which are expected to remain at similar levels as those recorded in recent years. Additionally, management considers that the expected growth of its customer portfolio will continue to increase its working capital requirements, for which, the Company would be well positioned to finance such requirements.

In 2009, the net variation in cash and cash equivalents was positive by MCh$10,898 (MUS$21), due to net positive cash flows originated by activities from operations. During 2010, the net variation in cash and cash equivalent was negative by MCh$3,323 (MUS$2) as a result of the negative cash flows stemming from financing activities. In 2011, the variations in cash and cash equivalent were negative by MCh$1,074 (MUS$6) due to net negative cash flows originated from financing and investment activities, which was partially offset by the positive cash flows originated from operations.

In 2012, Provida expects that the major cash outflows may include:

-	Budgeted capital expenditures of MCh$3,500 (MUS$7); and

-	Budgeted dividends of MCh$59,000 (MUS$114).

-	Regarding payments and refinancing of short-term contractual obligations, Provida is not expecting to require short term financing as it will generate enough resources to comply with its operating cycle.

Moreover, capital requirements for 2012 are expected to be financed through the combination of the existing capital sources and cash flows generated by operations. In terms of external financing, the Company does not foresee long -term financing needs. The financing of working capital is expected to be covered by Provida’s own resources, since Provida has generated significant cash flows from its operations and a portion of the related profits has remained in the Company. See “—D. Tabular disclosure of contractual obligations”.

Sources and uses of funds

Cash and working capital. The Company has recorded positive working capital of MCh$29,062 (MUS$56), MCh$23,512 (MUS$45) and MCh$13,697 (MUS$29) as of December 31, 2011, 2010 and 2009, respectively. These higher liquidity levels in the past three years are the result of a decrease in the life and disability insurance obligation and higher revenues from our recurring business.

Net cash provided by operating activities. Net cash provided by operating activities was MCh$85,947 in 2011, representing an increase of MCh$18,221 with respect to net cash provided by operating activities in 2010. The increase was explained by the combined effect of: (i) higher fee income received of MCh$9,755 with respect to 2010, driven by the higher client’s salary base in 2011, (ii) lower other payables from operations of MCh$8,402 with respect to 2010; and (iii) higher other inflows from operations of MCh$7,526 with respect to 2010, related to the lower balance of additional contributions receivable from insurers. The above was partially offset by increased taxes on profits of MCh$5,485 due to the increase in tax rate to companies from 17% in 2010 to 20% in 2011.

Net cash provided by operating activities was MCh$67,726 in 2010, representing an increase of MCh$30,477 with respect to net cash provided by operating activities in 2009. The increase is explained by the following: (i) lower life and disability insurance premium paid for MCh$80,930 in 2010 as compared to 2009 which was caused by the Pension Reform Law’s change of the individual responsibility for AFPs to provide life and disability benefits; (ii) lower total remunerations paid in 2010 as compared to 2009 for MCh$5,686 mainly by a decrease in number of staff employees due to the outsourcing of certain supporting services in non-core

Table of Contents

areas and lower benefits for bonuses due to reduced total administrative employees; (iii) higher dividends received from related companies of MCh$706 in 2010 as compared to 2009; and (iv) other cash increases of MCh$165. The aforementioned increases were partially offset by the following effects: (i) a decrease in fee income received of MCh$38,558 in 2010 as compared to 2009 caused by lower fee charged to participants beginning July 2009, the average fee in 2010 was 1.54% as compared to average fee in 2009 of 2.18% in connection with the change of the coverage of the life and disability benefits previously mentioned ; (ii) higher income tax paid of MCh$3,455 in 2010 as compared to 2009; and (iii) increased other net cash outflows from operations of MCh$14,997 in 2010 as compared to 2009 related to outsourcing of pension and saving payment services.

Net cash used in investing activities. Net cash used in investing activities was MCh$16,560 in 2011, increasing by MCh$8,087 as compared to net cash used in investing activities in 2010. The increase in use of funds from investing activities in 2011 was mainly due to higher other cash outflows of MCh$11,237 paid in 2011 as compared to 2010, referred to investments in time deposits, which were partially offset by higher net cash generated by the purchase/sale of shares from mandatory investment purchases for a net amount of MCh$3,150 with respect to 2010.

Net cash used in investing activities was MCh$8,473 in 2010, increasing by MCh$1,169 as compared to net cash provided by in investing activities in 2009. The increase in use of funds from investing activities in 2010 was mainly due to higher other cash outflows of MCh$2,076 paid in 2010 as compared to 2009 which were partially offset by lower use of funds in 2010 as compared to 2009 in mandatory investment purchases for a net amount of MCh$907.

Net cash used in financing activities. The Company’s net cash used in financing activities increased by MCh$7,884 in 2011, from MCh$62,577 in 2010 to MCh$70,460 in 2011. The increase in cash used in financing activities is mainly attributable to higher dividends paid to shareholders due to better results achieved by the Company, which were MCh$69,760, higher by MCh$7,825 in 2011 as compared to MCh$61,935 in 2010.

Net cash used in financing activities increased by MCh$43,530 in 2010 to MCh$62,577 as compared to MCh$19,047 in 2009. The increase in cash used in financing activities is primarily explained by higher dividends paid to shareholders which were MCh$61,935 in 2010 as compared to MCh$19,088 of dividends paid in 2009 due to better results obtained by the Company.

C.	Off-balance sheet arrangements

There are no off-balance sheet arrangements that could have any material effect on Provida’s results.

D.	Tabular disclosure of contractual obligations

The following table represents Provida’s contractual obligations and commercial commitments as of December 31, 2011:

	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
	MCh$		MCh$		MCh$		MCh$		MCh$
Contractual Obligations
Life and Disability Insurance		5,780		5,780		-		-		-
Outsourcing contracts		53,648		5,200		10,932		11,684		25,832
Total Contractual Obligation		59,428		10,980		10,932		11,684		25,832
Commercial Commitments
Bank lines overdrafts		-		-		-		-		-
Capital lease contracts		418		63		120		104		131
Total Commercial Commitments		418		63		120		104		131

In the last two years, Provida’s most important contractual obligations are those related to the contract for outsourcing services, which will have a duration of ten years. The rest of Provida’s obligations related to outsourcing services represent the one -month lag for receipt of payment. Consequently, from year one on, there is no obligation for this concept. See Note 25 to the audited Consolidated Financial Statements.

Table of Contents

In previous years, Provida’s most significant contractual obligation related to the life and disability insurance policy entered into with BBVA Seguros de Vida S.A. Beginning on June 2009, as per the modification introduced by the Pension Reform Law in relation to the joint bidding process of the life and disability insurance, the AFPs are no longer responsible for such insurance. Thus, premiums originally established with the life insurers for granting benefits are not paid by AFPs, but AFPs are responsible for casualties under coverage until June 30, 2009.

The use of the banks’ credit lines overdrafts is Provida’s most material commercial commitment, used to finance business operations. As of December 31, 2011, the unused lines of credit amounted to MCh$62,000. Finally, Provida’s capital leases are basically connected with the financing of property, plant and equipment.

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.	Directors and senior management

Provida’s Directors as of December 31, 2011 were as follows:

Directors (1) (2)	Position	Current position held since	Expiration of current term
Joaquín Cortez Huerta(3)	Chairman of the Board of Directors	2011	2013
Jesús del Pino Durán	Vice-Chairman	2007	2013
Luis Fernando Ferreres Crespo	Director	2007	2013
Francesc Jorda Carré	Director	2010	2013
José Martos Vallecillos	Director	2011	2013
María Cristina Bitar Maluk	Director	2010	2013
Jorge Marshall Rivera	Director	2010	2013
Jorge Granic Latorre	Alternate Director	2009	2013
Osvaldo Puccio Huidobro	Alternate Director	2010	2013

(1)	None of the above mentioned Directors and Executive Officers individually owns one percent or more of shares in Provida.

(2)	The Board of Directors was elected during the Ordinary Shareholder’s meeting held on April 29, 2011. In such meeting Mr. Joaquín Vial Ruiz-Tagle was designated as Chairman of the Board of Directors.

(3)

During the Ordinary Shareholder’s meeting held on October 19, 2011, the designation of Mr. Joaquín Cortez Huerta as a new Chairman of the Board, was unanimously approved by the Board of Director’s members, replacing Mr. Joaquín Vial Ruiz-Tagle, who submitted his voluntary resignation from that position in such date.

Joaquín Cortez Huerta is the Chairman of the Board and has been Director of Provida since October 19, 2011. He received a commercial engineering degree from the Catholic University of Chile and a Master of Arts in economics from the University of Chicago in the United States. Before his designation as a Chairman of the Board of Directors, he was the Chief Investment Officer since July 2008 and previously, he held the same position between 1996 and April, 2007.

Jesús del Pino Durán is the Vice-Chairman of the Board and Director of Provida and has been Director of Provida since 2007. He received a degree in law and economics from the University of Seville and PADE Master in IESE, Spain.

Luis Fernando Ferreres Crespo is Director of Provida since 2007. He received a chemical engineering degree from the Universidad de Lejona (País Vasco), Spain.

Francesc Jorda Carré is Director of Provida since 2010. He received his economics degree from UNED in Madrid, Spain.

José Martos Vallecillos is Director of Provida since 2011. He received his degree in Information Sciences from the Universidad Autónoma de Barcelona, Spain and a law degree from the Universidad de Barcelona, Spain.

Table of Contents

María Cristina Bitar Maluk is Director of Provida since 2010. She received her economics degree with a minor in Sociology from Dartmouth College in the United States, a Master of Business Administration from Tulane University and a Master of Business Administration from the University of Chile.

Jorge Marshall Rivera is Director of Provida since 2010. He received his commercial engineering degree from the University of Chile and an economics degree from Harvard University in the United States. During 2009, he was an Alternate Director of Provida.

Jorge Granic Latorre is Alternate Director of Provida since 2009. He received a law degree from the Catholic University of Chile.

Osvaldo Puccio Huidobro is Alternate Director of Provida since 2010. He received a philosophy degree from the University of Humboldt in Berlin, Germany.

Provida’s senior management as of December 31, 2011 was as follows:

Senior Management (1)	Position	Current position held since	Expiration of current term
Ricardo Rodríguez Marengo	Chief Executive Officer	2007	N/A
Gonzalo Camargo Cárdenas (2)	Chief Investment Officer	2011	N/A
Carlo Ljubetic Rich	Chief Commercial Officer	2000	N/A
Magaly Pacheco Mena	Chief Operational Officer	2010	N/A
Rodrigo Peña Socías	General Counsel	2009	N/A
Victor Ogno Canales	Controller	2010	N/A
Mauricio Araya Ahumada	Human Resources Manager	2006	N/A
María Paz Yáñez Macías	Planning and Control Division Manager	2002	N/A
Juan Sepúlveda Parra	Pension Accounting Division Manager	2007	N/A
Iván Baeza Galaz	Pension Marketing Division Manager	2007	N/A

N/A: Not applicable

(1)	None of the above mentioned Executive Officers individually owns one percent or more of shares in Provida.

(2)	Mr. Gonzalo Camargo Cárdenas assumed the position of Chief Investment Officer on October 19, 2011, replacing Mr. Joaquín Cortez Huerta who was designated as the Chairman of the Board of Directors of AFP Provida.

Ricardo Rodríguez Marengo is Chief Executive Officer since 2007. He received a business management degree from the Catholic University in Argentina. Previously, he was Commercial Chief Officer in AFJP BBVA Consolidar in Argentina.

Gonzalo Camargo Cárdenas is the Chief Investment Officer since October 19, 2011. He received an economics degree from the Catholic University of Peru, and a Master of Science in Finance and Economics from the Centro de Estudios Monetarios y Financieros (CEMFI), Spain and a Doctorate in Economics from the Catholic University of Peru. Previously, he held the position of Investment Officer in AFP Horizonte Peru and CEO in the Administradora de Fondos Mutuos de BBVA Banco Continental in Peru.

Carlo Ljubetic Rich is Chief Commercial Officer since 2000. He received an industrial engineering degree from the University of Santiago of Chile.

Magaly Pacheco Mena is the Chief Operation Officer since 2010. She received her civil industrial engineering degree from the University of Chile. Between 2009 and 2010, she performed as Manager of Operational Projects for AFP Provida and previously between 2008 and 2009 she performed as Benefit Administration Manager for AFP Provida.

Rodrigo Peña Socías is General Counsel since 2009. He received a law degree and a master degree in economics and business administration from the Gabriela Mistral University, Chile.

Table of Contents

Victor Ogno Canales is the Controller since 2010. He received his general accountant degree from the University of Chile.

Mauricio Araya Ahumada is Human Resources Manager since 2006. He received a commercial engineering degree and an MBA from the Catholic University of Valparaiso, Chile.

María Paz Yáñez Macías is the Planning & Control Division Manager since 2002. She received a commercial engineering degree from the Catholic University of Chile.

Juan Sepúlveda Parra is the Pensions Accounting Division Manager since 2007. He received his general accountant degree in Santiago, Chile. Between 1992 and 2007, he served as the Chief of the Accounting Department of Fund Account for AFP Provida.

Iván Baeza Galaz is the Pensions Marketing Division Manager since 2007. He received a civil industrial engineering degree from University of Chile. Between 1999 and 2007, he served as the Chief of the Commercial Development Department for AFP Provida.

B.	Compensation

The per diem compensation paid by Provida to all Directors during the fiscal year 2011 was an aggregate of MCh$570, a 111.6% increase year-over-year. The detail of per diem paid in 2011 was as follows:

	Per Diem
Directors	(MCh$)
Joaquín Vial Ruiz-Tagle(1)	55
Joaquín Cortez Huerta	11
Jesús del Pino Durán	88
Jorge Marshall Rivera	66
María Cristina Bitar Maluk	66
Luis Ferreres Crespo	66
Francesc Jordá Carré	67
José Martos Vallecillos	61
Jorge Granic Latorre	43
Osvaldo Puccio Huidobro	47
Total	570

(1)	Mr. Joaquín Vial Ruiz-Tagle received per diem amounts during the year 2011 until cessation of his service as Director on October 19, 2011.

None of the Directors have service contracts with the Company or any of its subsidiaries that grant benefits to Directors for their services to the Company.

The aggregate compensation of Provida’s senior management during fiscal year 2011, including 21 managers (area and division), 7 deputy managers and 19 department chiefs, was MCh$3,652. Severance payments made during 2011 to all executives who left the Company for different reasons totaled MCh$453.

The Company has maintained the plan of variable incentives known as “Direction Oriented to Results” (DOR) currently implemented for managers and department chiefs. This evaluation system is focused on the employees’ reaching certain quantitative and tactical objectives previously set for each executive. Its payment is conditioned on the level of specific goal achieved and the contribution made by each executive, which is calculated using a methodological evaluating process.

C.	Board practices

Provida is subject to strict norms of corporate governance established by Chilean law, to the applicable regulation, and to the policies, rules and conduct code ruling its activity. Provida is administered by a Board of Directors that ordinarily meets once a month. In accordance with the Company’s by-laws, the Board of Directors consists of seven regular members and two alternate members elected for a two-year term in the Ordinary Shareholders’ Meeting.

Table of Contents

Cumulative voting is permitted for the election of Directors. Under Chilean law, a company’s executive officers may not serve as such company’s directors. As a result, Provida’s Board consists entirely of “non-executive” directors.

The Pension Reform Law incorporates additional limitations over executives that might be designed as directors of AFPs and the requirement that at least two of the Board of the Directors’ members be considered as autonomous. Commencing on October 2008, providing that Directors and/or executives of other AFPs, banks or financial institutions, stock exchanges, stock intermediaries, administrators of investments funds, administrators of mutual funds or insurance companies may not be appointed to assume as Directors of an AFP. Either those Directors of other companies, foreign or local, that belong to the business conglomerate, may not be appointed as Director of an AFP. A Director will be considered as autonomous when he or she has no relationship with the AFP, the other corporations of the conglomerate of which he or she takes part in, its controlling shareholder, and principal executives of any of such companies that might generate a potential conflict of interest or hinder his/her independence from the conglomerate.

As a consequence of modifications introduced by Law Nº20,382 regarding Corporate Governance in the Chilean Corporation Law, Directors of Corporations, such as AFPs, complying with certain requirements, must also meet independence criteria instructed by this law, similar to those criteria established in Law Nº 20,255 –Pension Reform Law- in relation to the autonomous nature of a Director. Two of the current Directors of Provida meet the requirements of autonomy and independence as per the applicable Chilean Law.

Directors’ Committee

The concept of a “Directors’ Committee” was introduced by Law N° 19,705 passed on December 2001 (which regulates public share offerings and conflicts of interest) and Circular 1,526 passed in February 2001 by the SVS. At the Board of Directors’ meeting held on May 29, 2001, Provida elected the members for its first committee, starting meetings on the same date. This committee assumed functions formerly carried out by the Audit Committee.

At the beginning of 2010, the Law Nº20,382 on Corporate Governance become effective, which modified the Chilean Corporation Law by instructing the Corporations satisfying certain requirements appointed in such law, must have a Directors’ Committee composed of 3 members, with a majority being independent. In this context, during the Ordinary Shareholder’s meeting held on April 29, 2011, Provida elected the new members of the Directors’ Committee, two of them met the requirement of independence as determined by the applicable Chilean laws.

Under Provida’s by-laws and Chilean Corporation Law, the responsibilities of the Directors’ Committee include: proposing external auditors; examining reports made by the external auditing firm; approving additional services to be provided by the external auditing firm; analyzing reports made by the Controller Division of Provida; reviewing resolutions and notes issued by regulatory organizations; reviewing the report on the implementation of financial controls; reviewing and evaluating the plan by Provida’s Audit Division for the year and analyzing information in connection with operations included in articles 147 et seq. of Law N° 18,046 for Corporations, suggesting approval of transactions with related parties that shall be laid under their knowledge.

The members of the Directors’ Committee are elected by the Board of Directors. For the fiscal year 2011, the Directors’ Committee consisted of Mr. Jesús del Pino Durán, who was also designated as the “financial expert” of the Directors’ Committee; Mrs. María Cristina Bitar Maluk and Mr. Jorge Marshall Rivera. This Committee met twelve times in 2011 during which meetings, the following persons were also in attendance: the Chief Executive Officer, Mr. Ricardo Rodriguez; the Responsible Controller, Mr. Victor Ogno; the Committee Secretary, Mr. Rodrigo Peña, and occasionally, the partners of the external auditing firm, Deloitte and managers of the various AFP Provida Divisions.

During the fiscal year 2011, the Directors’ Committee did not incur any expenses except those in relation to the compensation of its members. The total fees paid in 2011 for participation in the Directors’ Committee was as follows:

	Fees
Directors	(MCh$)
Jorge Marshall Rivera	22
María Cristina Bitar Maluk	22
Total	44

Table of Contents

Committee of Investment and Conflict of Interest Resolution of AFP Provida’s Board of Directors

AFP Provida S.A. has a Committee of Investment and Conflict of Interest Resolution that is comprised by directors: Mr. Joaquín Cortez Huerta, Mrs. María Cristina Bitar Maluk and Mr. Jorge Marshall Rivera.

Among its functions are: designing an investment policy and a risk profile for each fund type; supervising the implementation of the investment policy approved by the Board of Directors and the investment limits on pension funds established by law; reviewing objectives, policies and procedures with respect to the administration of risk in pension fund investments; examining information regarding the performance of pension funds investing in derivative instruments, foreign investments (equities, fixed income and currencies) and related companies, and issuing an annual report for the Board of Directors regarding such performance; approving the investment in new kinds of assets; allocating assets of each fund type, with special emphasis when allocating assets in the different geographic sectors; granting extraordinary authorization to depart from the investment policy defined by the Board of Directors and other relevant matters.

The Pension Reform Law requires that administrators must establish investment policies for each of the pension fund types administered by them, which will be elaborated by the Board of Directors. In addition, administrators must have a policy to deal with conflicts of interest, which is approved by the administrators’ Board of Directors. Administrators submit, as only one document, a copy of the Policy of Investment and of the Deal with Conflicts of Interest to the User Commission and the Superintendency of Pensions, which publishes it on its website.

The policy to deal with conflicts of interest must, in general terms, address the following matters: i) internal control rules and procedures that ensure an appropriate management and resolution of conflicts of interest that might affect directors, managers, administrators, and principal executives of the administrator; ii) confidentiality and the handling of confidential information; and iii) requirements and procedures for the election of candidates for director positions in corporations in which the pension funds invest.

Significant differences between our corporate governance practices and the NYSE Corporate Governance Standards

Provida’s corporate governance practices are regulated by Chilean law (in particular, Ley sobre Sociedades Anónimas, Law N° 19,705 approved in December 2001, regulating public offerings of securities and governing conflicts of interests; Law N° 20,382 of the Chilean Securities Exchange Act regarding corporate governance standards of public companies which reformed the Chilean Corporation Law and the Chilean Securities Exchange Act; Note N° 1,526 passed in February 2001 by the Superintendency of Securities and Insurance and the Pension Reform Law N° 20,255, among others) in addition to Provida’s by-laws. Since Provida has securities registered with the United States Securities and Exchange Commission (the “SEC”) and listed on the New York Stock Exchange (the “NYSE”), it is subject to the Corporate Governance standards applicable to “foreign private issuers” (as defined under the United States Securities Exchange Act of 1934, the “Exchange Act”) listed on the NYSE.

In general, foreign private issuers may comply with the corporate governance practices applicable to them in their local jurisdiction instead of the standards required under the NYSE Corporate Governance Standards set out in Section 303A of the NYSE Listed Company Manual. However, foreign private issuers listed on the NYSE must comply with Sections 303A.06, 303A.11 and 303A.12 (b) and (c) of such manual.

Sections 303A.11 requires that foreign private issuers disclose any significant differences in which their corporate governance practices differ from the standards applicable to domestic companies under NYSE listing standards. For the purposes of Section 303A.11, the relevant differences between the corporate governance practices followed by Provida and the NYSE Corporate Governance Standards for U.S. companies are as follows:

Table of Contents

NYSE Corporate Governance Standard applicable to domestic listed companies			Corporate governance standards applicable to Provida under Chilean law
Section 303A.01 requires that a majority of the directors of a listed company be independent, such independence being determined in accordance with the criteria in the Section 303A.02.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant Corporate Governance Standard. The Pension Reform Law (Law N° 20,255) establishes that a board of directors must be composed of a minimum of five directors, two of them being considered as “autonomous” according to the criteria established in the Pension Reform Law. Each autonomous Director must have an Alternate Director that satisfies the autonomy requirements established for regular Directors. The Law N°20,382 regarding Corporate Governance also establishes the independence criteria that a Director of a Chilean Open Corporation must satisfy.
Section 303A.02 sets out the criteria to determine directors’ independence (no director qualifies as “independent” unless, among other things, the board of directors affirmatively determines that the director has no material relationship with the listed company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). The board of directors must express its opinion regarding the independence of each director on a case-by-case basis.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant Corporate Governance Standard. Law N°20,382 introduced improvements to regulations regarding corporate governance standards. Such improvements amended the Chilean Corporation Law, where the independence criteria that a Director of a Chilean Open Corporation must satisfy, are similar to those criteria established in Law N° 20,255 Pension Reform Law. These criteria are described as follows: The Pension Reform Law (Law N° 20,255) establishes that a director will be considered “independent” when he or she has no relationship with the AFP, the other corporations of the corporate group to which the AFP belongs, its controlling shareholder, and the principal executives of any of the group companies that might generate a potential conflict of interest or hinder his/her independence. The standards of independence according to the Pension Reform Law are substantially similar to those under the NYSE Corporate Governance Standard. It also establishes that directors and/or executives of an AFP may not be appointed as directors and/or executives of other AFPs, banks or financial institutions, stock exchanges, stock intermediaries, administrators of investments funds, administrators of mutual funds or insurance companies. Additionally, directors of Chilean or foreign corporations belonging to the same corporate group as the AFP may not be appointed as directors of the AFP.
Section 303A.03 requires that non-management directors must meet at regularly scheduled sessions without management.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the NYSE Corporate Governance Standard. Under Chilean law, a company’s executive officers may not serve on such company’s board of directors. As a result, Provida’s Board of Directors consists entirely of “non-management” directors, making separate “non-management” meetings unnecessary.

Table of Contents

NYSE Corporate Governance Standard applicable to domestic listed companies			Corporate governance standards applicable to Provida under Chilean law
Section 303A.04 requires that listed companies have a nominating/corporate governance committee composed entirely of independent directors.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Standard. Provida does not have a nominating-corporate governance committee because neither the applicable Chilean Law nor Provida’s by-laws provide for this requirement. Provida’s shareholders have the right to make director nominations at the ordinary shareholders’ meeting.
Section 303A.05(a) requires listed companies have a compensation committee composed entirely of independent directors. Under Section 303A.05(b), the compensation committee must have a written charter that addresses the committee’s purpose and responsibilities which, at a minimum, are those set out in Section 303A.05(b)(i).			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Standard. Provida has no compensation committee because neither the applicable Chilean Law nor Provida’s by-laws require this.
Under Section 303A.06, the audit committee must satisfy the requirements of Rule 10A-3 of the Exchange Act.			According to the current Chilean Corporation Law, Chilean Open Corporations with an equity market value equal to or greater than UF 1,500,000, and where at least 12.5% of its total voting shares are held by individual shareholders controlling or owning less than 10% of voting shares, must have a Directors’ Committee, as the case of Provida. In conformity with such Law, the Directors’ Committee must be comprised by three members, with a majority satisfying the independence requirement. In the Board of Directors’ meeting held on May 29, 2001, Provida’s Board elected its first Directors’ Committee. This Committee assumed the functions of the former Auditing Committee required existing under the Chilean Law, and it has two independent Directors. Provida’s Directors’ Committee currently satisfies the requirements established in the current Chilean Corporation Law, as well as the requirements of Rule 10A-3 under the Exchange Act. Additionally, Law N° 20,255 requires the formation of a Committee of Investments and Conflicts of Interests Resolution, which must be composed of three directors, at least two of whom must be independent, and one of the independent directors must be Chairman of the Committee.
Under Section 303A.07(a), the audit committees of listed companies are subject to additional requirements, such as knowledge in finances and at least one of its members must have experience in accounting or financial matters. Section 303A.07(b) requires that the audit committee members must satisfy the requirements for independence set out in Section 303A.02. Section 303A.07(c) requires that the audit committee must have a written charter that addresses the duties and responsibilities of the audit committee which, at a minimum, must include those set out in Rule 10A-3 of the Exchange Act and under Section 303A.07(c). Section 303A.07(d) requires that each listed company have an internal audit department to provide			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Standard. Under Chilean law, our Directors’ Committee has assumed the functions of the former Audit Committee and it is not required to meet the additional requirements set out in Section 303A.07. All members of Provida’s Directors’ Committee currently satisfy the “independence” requirement of members established in Rule 10A-3 of the Exchange Act. Duties and responsibilities of the Directors’ Committee are established in the Chilean corporation law, including: the election of external auditors, the review of reports

Table of Contents

NYSE Corporate Governance Standard applicable to domestic listed companies			Corporate governance standards applicable to Provida under Chilean law
management, and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control.			made by the external auditing firm, the approval of additional services rendered by the external auditing firm, the analysis made by Provida’s Audit Division, the review of Resolutions and Notes issued by regulatory organizations and the approval of transactions with related parties. Provida’s Audit Division provides ongoing reports to management and the Directors’ Committee regarding risk management and internal control processes of Provida.
Under Section 303A.08, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Rule. Under Chilean law, Provida’s compensation policies do not provide for equity compensation of the same issuance. Thus, shareholder approval is not currently necessary. However, shareholders would not be entitled to vote if the Company were to choose to implement an equity compensation plan in the future.
Under Section 303A.09, listed companies must adopt and disclose corporate governance guidelines. Likewise, the board of directors should evaluate the performance of its functions and its committees at least once a year.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Rule. The Company follows the rules regarding the disclosure of corporate governance guidelines established by Chilean Law. Chilean law does not require that boards of directors evaluate the performance of their functions.
Under Section 303A.10, listed companies must adopt and disclose a Code of Business Conduct and Ethics for directors and employees and promptly disclose any waivers of the code for directors or executive officers.			Under Section 303A.00 Provida is permitted to follow Chilean law in lieu of the relevant NYSE Corporate Governance Rule. The Company has a Code of Conduct which governs the Company’s business conduct and ethics for directors and employees. See “Item 16B. Code of Ethics”.

The above description of the differences between the NYSE Corporate Governance Standards and the corporate governance practices applicable to Provida under Chilean Law is included in an English version on our website at www.bbvaprovida.cl.

Table of Contents

Employees

The following chart sets out Provida’s organizational structure and the numbers of its employees for each major operational area as of December 31, 2011:

Total number of employees as of December 31, 2011: 1,350 employees

Table of Contents

The daily operations of Provida are supervised by the Chief Executive Officer. The executives that report directly to the CEO are the Marketing and Sales Area Officer, the Investment Area Officer, the Operational Area Officer, the Risk Manager, the Planning & Control Manager, the Pension Marketing Manager, the Pension Account Manager, the Controller of Auxiliary Accounting Data and a staff composed of the General Counsel, the Controller, the Human Resources Division Manager and Compliance Manager and Information Security Manager.

As of December 31, 2011, Provida had 1,350 employees, 429 of which were members of the sales force, representing 32% of Provida’s total staff. As of December 31, 2010, Provida had 1,334 employees, of which 444 were members of the sales force, representing 33% of its total staff. As of December 31, 2009, Provida had 1,452 employees, of which 466 were members of the sales force, representing 32% of its total staff.

Labor relationships

Provida’s employees are represented by two labor unions. El Sindicato Nacional de Trabajadores de AFP Provida (“Labor Union N° 1”) was established in 1986. Its membership represented 31.3% of the Company’s total employees as of December 31, 2011, of which 310 were sales agents and the rest corresponded to administrative staff. The second labor union, El Sindicato Nacional de Trabajadores Administrativos de AFP Provida (“Labor Union N° 2”) was established in 1997 and its members are only administrative employees representing 25.0% of the Company’s total employees as of December 31, 2011.

In December, 2010 a new collective bargaining agreement was executed between Provida and Labor Union Nº1 and Labor Union Nº 2, which resulted in collective agreements that will be in effect until January 31, 2013 and December 31, 2013, respectively.

E.	Share ownership

The number of shares owned by Provida’s Directors and Executive Officers as of December 31, 2011 is the following:

Name of shareholder	Position	Number of shares of common stock owned
Carlo Ljubetic Rich	Officer	28,589

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.	Major shareholders

Provida is a publicly traded corporation with equity divided into 331,316,623 shares of common stock, in nominative registered form, with no par value and each share of common stock representing the right to one vote. Since July 1, 1999, Provida has been controlled by its major shareholder BBVA Inversiones Chile S.A., which currently owns 51.62% of issued shares in the Company but has no special voting rights. The remaining subscribed and paid shares are distributed between small local and foreign investors, including executives of Provida who each have an individual participation lower than 1% of the issued share capital. No major shareholder has special voting rights.

As of December 31, 2011, share ownership was as follows:

Name of shareholder	Number of shares of common stock owned		Percentage of ownership
BBVA Inversiones Chile S.A. (1)		171,023,573		51.62	%
The Bank of New York (2)		76,705,065		23.15	%
Penta Corredores de Bolsa S.A. (3)		19,720,879		5.95	%
Larraín Vial Corredora de Bolsa S.A.		9,433,912		2.85	%
Bolsa Electrónica de Chile Bolsa de Valores		8,624,383		2.60	%
Banchile Corredores de Bolsa S.A.		4,185,697		1.26	%
Directors and executive officers		28,590		0.01	%

(1)	Corporation incorporated in Chile and whose major shareholder is Banco Bilbao Vizcaya Argentaria, Spain.

(2)	Depositary Bank of ADS, Banco Itaú acting as custodian.

(3)

Financial services holding company including broker-dealer functions. Penta Corredores de Bolsa S.A. was not a significant holder of Provida shares as of December 31, 2008, and according to public filings, began to acquire Provida shares in the second quarter of 2009. Information on the purpose of its acquisitions, including whether its holdings are for its own account or those of its customers, is not publicly available.

Table of Contents

B.	Related party transactions

Article 89 of the Chilean Corporation Law requires that a Chilean company’s transactions with related parties be on a market basis or on similar terms to those usually prevailing in the market. Directors and executive officers who violate Article 89 are liable for losses to the Company resulting from such violation. In addition, the Chilean Corporation Law, Article 44 establishes that any transaction in which a director has a personal interest or is acting on behalf of a third party may be approved only when the board of directors has been informed of this fact and such transaction has similar terms to those prevailing in the corresponding market. Resolutions approving such transactions must be disclosed to the company’s shareholders in the next shareholders’ meeting following the board of directors’ approval of said transaction. Violations of Article 44 may result in administrative or criminal penalties and personal liability to the Company, shareholders or third parties that may have suffered losses as a result of such violation. On occasion, Provida has entered into transactions with related parties or with entities that have relationships with certain of its Directors. All of these transactions have been made in compliance with the requirements of Articles 44 and 89 of Chilean Corporation Law.

In recent years, Provida has entered into transactions with companies under common control belonging to the BBVA Group (the “BBVA Group”) including BBVA Inversiones Chile S.A., BBVA Corredores de Bolsa S.A., BBVA Chile S.A., BBVA Compañía de Seguros de Vida S.A., Servicios de Administración Previsional S.A., Unemployment Funds Administrator of Chile S.A., BBVA Bancomer Servicios S.A., Banco Bilbao Vizcaya Argentaria S.A. (Spain), BBVA Servicios Corporativos Ltda., BBVA Corredora Técnica S.A. and Aplica Soluciones Tecnologicas Chile Ltda.

BBVA Inversiones Chile S.A. is Provida’s major shareholder. The transactions entered into with this entity related to the licensing by BBVA Inversiones Chile S.A. of the software used in most operating and administrative processes (Unified Platform) and maintenance services, both corrective and developing, of the Unified Platform used in the Maintenance Center of BBVA Inversiones Chile S.A. The two parties also entered into a lease agreement of offices and self-service centers.

BBVA Corredores de Bolsa S.A. is a subsidiary of BBVA Chile S.A. BBVA Group is the main shareholder of both Provida and BBVA Corredores de Bolsa S.A. The transactions with this entity are financial services rendered to Provida.

BBVA Chile S.A. There is a relationship through the major common shareholder BBVA Group. The transactions between Provida and this entity include lease agreements, collection services savings withdrawals and pension payments, overdraft lines, loans and bank current accounts.

BBVA Compañía de Seguros de Vida S.A. This entity is part of the BBVA Group. On January 1, 2005, BBVA Compañía de Seguros de Vida S. A. was awarded the bidding of Provida’s life and disability insurance until June, 2009. This contract was amended in September 2010 regarding the applicable measurement period. See “Item 10. Additional Information—C. Material Contracts”.

Servicios de Administración Previsional S.A. A company in which Provida has a 37.9% equity interest. PreviRed.com renders certain services to Provida, where the most important service is the electronic collection. The other services are referred to young workers subsidies, DNPA (declaration of non-payment) services, password administration, data processing and technological services, report SAS 70 and monitoring services.

Administradora de Fondos de Cesantía Chile S.A. (“AFC”) This is a subsidiary in which Provida has a 37.8% equity interest and together with the other shareholders of this entity have guaranteed this entity’s debt in the aggregate amount of UF 400,000, of which Provida has guaranteed MCh$3,371 (approximately MUS$6) in proportion to its equity interest in AFC. This guarantee is required under certain of AFC’s credit agreements, specifically those in relation to guaranty bills and promissory notes. The guarantee will expire on April 25, 2013. In addition, Provida is paid by AFC for rendering technological support and technological advisory services.

BBVA Bancomer Servicios S.A. There is a relationship through the major common shareholder of the BBVA Group. From 2005, this entity has rendered data processing services in the Processing Center, BBVA Bancomer Services in Mexico, for the Company and its pension funds. This contract was transferred to the company Aplica Tecnologia Avanzada S.A., as a result of the merger between BBVA Bancomer and BBVA Bancomer Servicios S.A.

Table of Contents

Banco Bilbao Vizcaya Argentaria S.A. There is a relationship through the major common shareholder of the BBVA Group. On December 16, 2009 a contract was entered into related to services of data processing outsourcing, advisory and maintenance of terminals and help-desk.

BBVA Servicios Corporativos Ltda. There is a relationship through the major common shareholder of the BBVA Group. On January 1, 2010 a contract was entered into for the externalization of Provida’s services. The contract will have a duration of 10 years, renewable for periods of 10 years.

Aplica Soluciones Tecnologicas Chile Ltda. There is a relationship through the major common shareholder of the BBVA Group. On January 4, 2010 a contract was entered into related to the design and development of software system.

For the fiscal years 2011, 2010 and 2009, details of the related party transactions were disclosed in Note 11 to the audited and Consolidated Financial Statements.

Company	Transaction	Amount of transactions							Effect on revenues (expense)
		2011			2010		2009		2011			2010			2009
		MCh$			MCh$		MCh$		MCh$			MCh$			MCh$
BBVA Inversiones Chile S.A.	Purchase of software license Software License		2,832			3,578		735		(566	)		(610	)		(3,069	)
	Software Maintenance Service (CMA)		-			73		612		-			(73	)		(612	)
	Office Rental		1			1		1		1			1			1
	Self service dispenser lease		114			40		22		(114	)		(40	)		(22	)
BBVA Corredores de Bolsa S.A.	Financial services		169			163		150		(169	)		(163	)		(150	)
BBVA Chile S.A.	Rentals (agencies, BBVA Tower)		1,250			1,588		1,894		1,250			1,588			1,894
	Rentals (agencies, Huérfanos and Bandera Tower)		518			543		656		(518	)		(543	)		(656	)
	Community fees as lessor		167			248		156		167			248			156
	Community fees as lessee		210			76		313		(210	)		(76	)		(313	)
	Pension payment service		26			161		821		(26	)		(161	)		(821	)
	Collection contract		4			3		295		(4	)		(3	)		(295	)
	Expense for bank account maintenance		1			46		9		(1	)		(46	)		(9	)
	Savings payment service		50			80		139		(50	)		(80	)		(139	)
BBVA Compañía de Seguros de Vida S.A.	Premiums paid and provisioned		370			649		44,797		(370	)		(649	)		(44,797	)
	Casualty rate provision		(3,031	)		1,690		16,156		3,031			(1,690	)		(16,156	)
	Financial revenue provision		2,151			7,126		3,457		2,159			7,126			3,457
	Insurance settlement		990			933		33,458		-			-			-
Servicio de Administración Previsional S.A.	Electronic collection service		1,624			1,517		1,299		(1,624	)		(1,517	)		(1,299	)
	Young worker subsidy		15			11		11		(15	)		(11	)		(11	)
	DNPA (declaration of non-payment) service		94			85		-		(94	)		(85	)		-
	Password administration		166			73		69		(166	)		(73	)		(69	)
	Data processing		147			519		22		(147	)		(519	)		(22	)
	File transference		14			12		15		(14	)		(12	)		(15	)
	Technological services		5			7		8		(5	)		(7	)		(8	)
	Pension Reform services and reports		-			-		30		-			-			(30	)
	SAS 70 report		(11	)		12		-		11			(12	)		-
	MAC Service		24			-		-		(24	)		-			-
	Monitoring Service		1			-		-		(1	)		-			-

Table of Contents

Company	Transaction	Amount of transactions								Effect on revenues (expense)
		2011		2010			2009			2011			2010			2009
		MCh$		MCh$			MCh$			MCh$			MCh$			MCh$
Administradora de Fondos de Cesantía Chile S.A.	Technological consulting and services		219		235			297			219			235			297
	Technological Supportive Services		271		455			383			271			455			383
	Loans in current account		-		(84	)		(83	)		-			-			-
BBVA Bancomer Servicios S.A.	Data Processing		1,428		1,143			884			(1,428	)		(1,143	)		(884	)
Banco Bilbao Vizcaya Argentaria S.A.	AFP technological platform service		57		43			2			(57	)		(43	)		(2	)
BBVA Servicios Corporativos Ltda.	Outsourcing services for corporate support		5,102		5,524			-			(5,102	)		(5,524	)		-
	Office rentals		491		479			-			491			479			-
	Common Charges as lessee		21		35			-			56			35			-
BBVA Corredora Técnica de Seguros Ltda.	Rental of branch offices		-		-			11			-			-			11
Aplica Soluciones Tecnológicas Chile Ltda.	Technological services		412		73			-			(36	)		(73	)		-

During the fiscal year 2011, the Board of Directors, with the recommendation of the Directors’ Committee, approved the following transactions with related parties. All of these transactions were entered into similar terms and conditions to those prevailing in the market.

-	In the Ordinary Meeting held on February 23, 2011, the Board of Directors approved a reduction of UF 36,110 per year in the service fee paid to BBVA Servicios Corporativos Limitada for the year 2011. A copy of this amendment is attached as Exhibit 4.4.1 hereto.

In the Ordinary Meeting held on June 22, 2011, the Board of Directors approved a modification of the Data Processing Contract entered into with Aplica Tecnología Avanzada S.A. de C.V. (“ATA”) in order to enlarge the perimeter authorized in December 2010 by increasing the number of recurring users to 15 additional users, and approving an additional cost of US$120,000.

In the Ordinary Meeting held on December 21, 2011, the Board of Directors approved the new fee for the Data Processing Contract entered into between AFP Provida S.A. and Aplica Tecnología Avanzada S.A. de C.V. (ATA) for 2012. The price of the services for the year 2012 will be ThUS$3,098 plus taxes, as compared to ThUS$2,340 in 2011.

C.	Interests of experts and counsel

None.

Table of Contents

Item 8. FINANCIAL INFORMATION

A.	Consolidated statements and other financial information

See “Item 3. Key information—A. Selected Financial Data” and “Item 18. Financial Statements” and other financial information filed with this annual report.

Dividends and dividend policy

At the Ordinary Shareholders’ meeting held on April 30, 2009, the Board of Directors announced its intention to pay a dividend for the fiscal year 2009 for an amount equivalent to 75% of Provida’s net profit, a proposal that was approved in the Ordinary Shareholders’ meeting held on April 30, 2010. At the same meeting, the Board of Directors announced its intention to pay a dividend for the fiscal year 2010 for an amount equivalent to 75% of Provida’s profit, which was ratified in the Shareholders’ meeting held on April 29, 2011. Finally, at the same meeting, the Board of Directors announced its intention to pay a dividend for the fiscal year 2011 for an amount equivalent to 75% of Provida’s profit, which will be submitted for vote in the Shareholders’ meeting to be held on April 27, 2012.

	Dividends per share for each period
		2011(2)	2010	2009
Total dividend (Ch$)		178,5	207.40	184.36
Dividend ratio (1)		75%	75%	75%

(1)	Annual dividends for the corresponding annual net profit.

(2)	Dividend to be ratified and approved at the Ordinary Shareholders meeting scheduled for April 27, 2012.

B.	Significant changes

None.

Item 9. THE OFFER AND LISTING

A.	Offer and listing details

Provida estimates that during 2011, shares of its common stock were traded on nearly all trading days of the Santiago Stock Exchange. The table below shows, for the periods indicated, the quarterly high and low trading prices in pesos per share of common stock listed on the Santiago Stock Exchange, the quarterly high and low trading prices in dollars per ADS traded on the New York Stock Exchange and the high and low trading prices for the last five months in pesos per share of common stock and in dollars per ADS listed on the Santiago Stock Exchange and the New York Stock Exchange, respectively. See “Presentation of Information” for the exchange rates applicable during the periods set out below.

	Santiago Stock Exchange				NYSE
	(Ch$ per share(1))				(US$ per ADS(2))
Period	High		Low		High		Low
1st Quarter 2007		940.00		858.68		26.49		23.35
2nd Quarter 2007		1,110.00		925.00		31.70		25.68
3rd Quarter 2007		1,249.10		1,160.00		38.12		31.74
4th Quarter 2007		1,330.00		1,228.00		40.00		36.06

1st Quarter 2008		1,260.00		1,065.00		37.23		35.15
2nd Quarter 2008		1,280.00		890.00		42.44		25.53
3rd Quarter 2008		1,035.00		849.68		33.10		23.67
4th Quarter 2008		904.00		560.00		24.19		12.10

1st Quarter 2009		710.00		660.00		18.50		13.52
2nd Quarter 2009		967.71		700.00		25.88		18.14
3rd Quarter 2009		1,289.40		910.00		35.75		24.06
4th Quarter 2009		1,528.00		1,270.00		45.65		34.40

Table of Contents

	Santiago Stock Exchange			NYSE
	(Ch$ per share(1))			(US$ per ADS(2))
1st Quarter 2010		1,700.00	1,528.00		50.49	43.00
2nd Quarter 2010		1,733.00	1,515.10		48.29	41.80
3rd Quarter 2010		2,037.00	1,539.90		62.91	42.26
4th Quarter 2010		2,700.00	2,015.00		86.91	62.91

1st Quarter 2011		2,616.50	2,204.70		80.70	67.48
2nd Quarter 2011		2,620.00	2,199.70		82.78	69.13
3rd Quarter 2011		2,360.50	1,800.20		76.79	56.42
4th Quarter 2011		2,331.00	1,920.00		67.01	55.00

November 2011		2,100.00	2,026.00		62.25	58.10
December 2011		2,331.00	2,070.00		67.01	59.79
January 2012		2,360.00	2,200.00		73.13	65.99
February 2012		2,400.00	2,250.00		75.25	70.40
March 2012		2,560.00	2,350.00		79.00	70.82

Source: Santiago Stock Exchange – Official Quotations Bulletin.

(1) Pesos per share of common stock reflect the nominal closing price on the trade date.

(2) Each ADS represents 15 shares of common stock.

As of March 30, 2012, the closing trading price for shares of Provida’s common stock listed on the Santiago Stock Exchange was Ch$2,557.90 per share or US$78.71 per ADS, with each ADS representing fifteen shares of the Company’s common stock, converted at the Observed Exchange Rate of Ch$487.44 = US$1.00 in the same date.

As of March 30, 2012, the closing trading price per ADS traded on the New York Stock Exchange was US$79.00 per ADS.

It is not possible for Provida to determine the proportion of ADS beneficially owned by U.S. residents.

B.	Plan of distribution

Not applicable.

Markets

General

The Chilean stock markets are sophisticated and developed, reflecting the particular economic history and development of Chile. The Government’s policy of privatization of state-owned companies, implemented during the 1980s, led to an expansion of privately-held shares, resulting in the increased importance of stock markets in Chile regulated by the SVS. Certain elements of Chile’s stock markets, including pension fund investors, are highly regulated with respect to investment and compensation criteria, even though Chile’s stock markets are generally less regulated than U.S. stock markets with respect to disclosure requirements and use of information.

History and description

The Santiago Stock Exchange was established in 1893 and is a private company whose equity consists of 48 shares held by 48 shareholders. As of December 31, 2011, 226 companies had shares listed on the Santiago Stock Exchange, which is the most important exchange in Chile, accounting for 86.9% of all equity traded in Chile. Approximately 12.9% of equity trading is conducted on the Chilean Electronic Stock Exchange, an electronic trading market that was created by banks and brokerage houses, non-members of the Santiago Stock Exchange. The remaining 0.2% of equity is traded on the Valparaíso Stock Exchange.

Table of Contents

Equities, investment fund shares, fixed-income securities, short-term and money-market securities, gold and US dollars are traded on the Santiago Stock Exchange. In 1991, the Santiago Stock Exchange introduced a forwards market for two instruments: US dollar futures and Selective Share Price Index (the “IPSA”) futures. In 1994 a stock options market was opened. Equities are traded through an electronic system called Telepregón that operates continuously from 9:30 to 16:30 (Chilean time). The Electronic Stock Exchange of Chile operates continuously from 9:30 to 16:30 (Chilean time) on each business day.

There are two share price indexes for the Santiago Stock Exchange: the General Share Price Index (“IGPA”) and the Selective Share Price Index (“IPSA”). The IGPA is calculated using the prices of shares for more than 180 issuers and is broken into five main sectors: banks and finance, farming and forest products, mining, industrial, and miscellaneous. The IPSA is an index for companies with the greatest market capitalization, which currently includes 40 major companies. Shares covered by the IPSA are weighted according to the value at which the shares traded, and they represent over 83.6% of the entire market capitalization of the stocks traded on the Santiago Stock Exchange. Currently Provida’s shares of common stock are not included in the IPSA index.

The table below summarizes market capitalization, trading volumes and performance indicators for stocks traded on the Santiago Stock Exchange in the last 5 fiscal years:

As of:	Market Capitalization (1)	Annual Trading Volume (1)	IGPA Index (2)	IPSA Index (2)
	(US$ billion)	(US$ million)
December 31, 2007	213.30	50,400.31	287.09	338.96
December 31, 2008	134.10	31,789.74	230.96	263.65
December 31, 2009	230.40	41,493.53	339.19	397.35
December 31, 2010	340.50	45,988.00	468.71	547.15
December 31, 2011	269.25	57,332.00	410.60	463.87

Source: The Santiago Stock Exchange.

(1) US dollar equivalents for the year-end stock market capitalization and trading volume figures are translated at the Observed Exchange Rate for the last day of such period.

(2) Index base = 100 on December 31, 1996.

Volatility

The IPSA has increased at an annual real rate of 7.61% (with a standard deviation of 26.62%) for the period between December 31, 2006 and December 31, 2011. During 2011, the IPSA decreased by 15.2% in real terms. As the table below shows, variations in the performance of listed stocks are often significant and reflect the high level of volatility characteristic of the Santiago Stock Exchange:

	Real Annual % Change in
Year	IGPA Index	IPSA Index
2007	16.87	13.30
2008	(19.55)	(22.13)
2009	46.86	50.70
2010	38.17	37.60
2011	(12.39)	(15.22)

Source: The Santiago Stock Exchange.

Liquidity

As of December 31, 2011, 2010 and 2009, the market capitalization of equity securities listed on the Santiago Stock Exchange reached US$269.25 billion, US$340.56 billion and US$248.5 billion, respectively. The ten companies with the largest market capitalization on the Santiago Stock Exchange represented 65.1% in 2011, 64.3% in 2010 and 66% of the IPSA index in 2009. The average monthly trading volumes for the years ended December 31, 2011, 2010 and 2009, were MUS$4,777, MUS$5,002 and MUS$3,832 respectively.

Table of Contents

Foreign ownership

Foreign investment in Chile is governed by Decree Law N° 600 and by the Central Bank Act. Capital and earnings can be remitted through the formal exchange market. Ownership of Chilean shares by foreign investors through an ADS program is regulated by the Central Bank Act and by Chapter XXVI, which does not require a withholding period before remitting capital or earnings abroad. Even though Chapter XXVI was repealed in April 2001, it is still applicable to foreign investment contracts executed before that date (See “Item 10. Additional Information—D. Exchange controls”).

Foreign capital investment funds (“FCIF”) are regulated by Law N° 18,657, and receive preferential tax treatment. FCIFs are required to obtain a favorable report issued by the SVS, in case capital may not be remitted within five years from the date the investment is made, although earnings may be remitted at any time. A FCIF may hold a maximum of 5% of shares in a specific company, although this might be increased if the company issues new shares. Furthermore, no more than 10% of a FCIF’s assets may be invested in one company’s stock, and no more than 25% of the current outstanding shares of any listed company may be owned on a cumulative basis by one FCIF.

Market information

Since November 16, 1994, Provida’s ADS have been listed on the New York Stock Exchange under the symbol “PVD”. Until August 25, 1999, each ADS represented one share of Provida’s common stock, while after the increase in Provida’s issued share capital each ADS came to represent fifteen shares of common stock. Until February 7, 1996, the ADS were deposited with The Chase Manhattan Bank N.A. which acted as depositary. After that date, Provida’s ADS have been deposited with The Bank of New York Mellon as the successor depositary (the “Depositary”).

During the fiscal year 2011, a total of 116,062,410 shares of Provida’s common stock were jointly traded in Chilean Stock markets (the Santiago Stock Exchange, the Valparaíso Stock Exchange and the Electronic Stock Exchange) and the New York Stock Exchange, amounting to 35.0% of the Company’s shares of common stock.

In 2011, the value of trades of Provida’s stock listed on the Chilean stock market was MCh$120,040 (approximately MUS$231), lower by 14.3% with respect to the figure recorded for the previous year, and the value of trades of Provida’s stock listed on the New York Stock Exchange was MUS$296, higher by 79.9% with respect to the figure for 2010. In total, trades had a value of MCh$273,763 (MUS$527), equivalent to 261.3% of the Company’s paid-in capital.

The breakdown by each stock exchange for the fiscal year 2011 is as follows:

- A total of 42,720,607 shares of Provida’s common stock were traded on the Santiago Stock Exchange for a total value of MCh$97,728. The average price reached was Ch$2,288 per share.

- A total of 9,633,871 shares of Provida’s common stock were traded on the Electronic Stock Exchange for a total of MCh$22,177.

- A total of 71,917 shares of Provida’s common stock were traded on the Valparaíso Stock Exchange for a total of MCh$134.

- A total of 4,242,401 ADS (1 ADS representing 15 shares of Provida’s common stock) were traded on the New York Stock Exchange for a total of MUS$296.

D.	Selling shareholders

Not applicable.

Dilution

Not applicable.

Table of Contents

F.	Expenses of the issue

Not applicable.

Item 10. ADDITIONAL INFORMATION

A.	Share capital

Not applicable.

B.	Memorandum and articles of association

Organization and register

Provida is a corporation organized under the Chilean Corporation Law and under the Decree Law 3,500. Shareholder rights in Chilean corporations are governed by the applicable provisions of the Chilean Corporations Act (“Ley de Sociedades Anónimas 18,046”) such provisions are consistent with or do not conflict with those established in the Decree Law 3,500 and the company’s by-laws, which effectively serve the purpose of both the articles of association or certificate of incorporation and the by-laws of a company incorporated in the United States. The Company’s deed of incorporation was executed on March 3, 1981 and was registered in the Registry of Commerce of Santiago on April 6, 1981, on number 6,060, number 3,268. The last modification to the Company’s by-laws was approved at the Extraordinary Shareholders’ meeting held on April 30, 2009, in which they agreed to modify the composition of the Board of Directors in order to establish that the Company will be administer by a Board of Directors composed of 7 Directors and 2 Alternate Directors. The Company’s current by-laws have been filed as Exhibit 1.1 to the annual report on Form 20-F for the fiscal year ended December 31, 2011.

Purpose

Article 4 of the Company’s amended and restated by-laws establishes its corporate purpose as follows: “the Company’s exclusive purpose is to (i) manage pension funds established by law; (ii) provide and administer the benefits established in the Decree Law 3,500 passed in 1980 and its amendments and those specifically authorized by other present or future legal enactments; (iii) constitute and/or participate, as a complement to its line of business, in related companies pursuant to Article 23 and 23 bis of said Decree Law 3,500; (iv) carry out activities authorized by law constituting and/or participating in related companies or united corporations authorized by law and/or as agreed to by the Superintendency of Pension Fund Administrator and (v) constitute and/or participate in corporations constituted as securities custodian companies under Law 18,876.

Board of Directors

Provida is administered by a Board of Directors composed of 7 Directors and 2 Alternate Directors. Out of the 7 Directors, two of them shall be considered as autonomous in accordance with Decree Law 3,500. These two Directors considered as autonomous, must have an Alternate Director, being able to replace the respective Director considered as Autonomous and complying with the same requirements Directors hold their position for a term of two years, after which time elections are held, where the members can be reelected. The Board of Directors holds ordinary meetings once a month. The quorum to hold meetings requires the presence of a majority of its members, and all resolutions require majority approval of those present and voting. In addition:

(a)

there are no restrictions in the Company’s by-laws relating to the right of Directors and Officers to vote on a proposal in which there is or might be a conflict of interest. However, under Chilean law, the Board of Directors must decide in advance whether a transaction is intended to contribute to the equity interest, and whether it is suitable in price, terms and conditions than those transactions prevailing in the market, and whether it is in compliance with the rest of requirements determined by the Chilean Corporation Law. Directors, managers, administrators, main executives or liquidators holding equity interests or taking part in negotiations intended to concrete an operation with related parties, shall inform the Board of Directors about that and shall be excluded from voting on the Board’s decisions related to such transaction;

Table of Contents

(b)	the aggregate compensation of the Board of Directors is fixed at an Ordinary Shareholders’ Meeting;

(c)	there are no restrictions in the Company’s by-laws relating to the borrowing powers of Directors;

(d)	there are no restrictions in the Company’s by-laws setting out age limits or retirement requirements for Directors and Officers; and

(e)	under the Company’s by-laws, Directors do not need to be shareholders of the Company to be appointed.

Share capital

The Company’s share capital is divided into 331,316,623 ordinary shares of common stock, in registered form, of the same and unique series, with no par value. Each ordinary share entitles the holder thereof to one vote and to participate in any distributions by the Company in proportion to the number of shares that they own. Shareholders have pre-emptive rights to subscribe for new shares that may be issued by the Company from time to time in proportion to the shares they hold at the time of the increase of capital. In addition:

(a)

there are no restrictions in the by-laws setting out a time limit for dividend entitlements to lapse. All shares are entitled to equal dividend payments. However, in accordance with the rule currently in force, if five years pass since a dividend was declared and it remains unpaid, the dividend will go to the Chilean Fire Department;

(b)	there are no restrictions in the by-laws concerning staggered intervals for the re-election of Directors or any articles permitting or requiring cumulative voting;

(c)	all shareholders have the right to participate in the Company’s net profit. According to its by-laws, the Company is required to distribute an annual cash dividend to all shareholders in proportion to the shares held for a value of at least thirty-percent of that fiscal year’s net profit;

(d)

in the case of a liquidation (which would be carried out by the Superintendency of Pensions) those pension funds managed by the Company would also be liquidated. As required by law, all shareholders have the same right to participate in any surplus in the case of the Company’s liquidation after having settled all its pending debts;

(e)	there are no redemption rights under the by-laws;

(f)	there is no right to a sinking fund under the by-laws;

(g)	all the Company’s shares are issued and fully paid. Consequently, shareholders are not subject to further capital requirements;

(h)	there are no restrictions in the Company’s by-laws discriminating against any existing or prospective shareholder as a result of such shareholder owning a substantial number of shares in the Company;

(i)	the by-laws do not describe any limitation on the rights to own shares in the Company;

(j)

there are no articles in the by-laws governing the ownership threshold above which a shareholder must disclose his/her shareholding. Nevertheless, as required by law, if as a consequence of any acquisition, a person or group of persons with agreement in acting has or exceeds two thirds of the voting of the Company, shall be forced to make a public offer for the rest of the outstanding shares, within a period and in a way established by the Chilean stock market Law; and

(k)	there are no restrictions in the by-laws imposing more stringent conditions than those required by law to change the capital of the Company.

In order to modify shareholders’ rights, the by-laws must be amended to reflect such modification. To amend the Company’s by-laws, the pertinent modification must be proposed and approved at the Extraordinary Shareholder’s meeting and subsequently, the Superintendency of Pension shall authorize such amendment by a resolution that must be published in the Official Gazette, as well as in the Register of Business Enterprises.

Table of Contents

According to the by-laws, shareholders’ meetings can be ordinary or extraordinary. An ordinary shareholders’ meeting must take place within four months from the close of the relevant fiscal year. Any other shareholders’ meeting is an extraordinary shareholders’ meeting. Generally, the Board of Directors calls shareholders’ meetings; however, these can be called by the Superintendency of Pensions, other institutions authorized by law or by shareholders representing at least 10% of the issued and fully paid share capital. Notice of the meeting must be published in a newspaper of general circulation, in the domicile of the Company three times during three different days.

C.	Material contracts

During 2011, Provida did not enter into any material contracts, excepting only contracts that were in the ordinary course of business. During 2010, Provida entered into an agreement with BBVA Servicios Corporativos Ltda. related to outsourcing services, described below. During 2009, Provida did not enter into any material contracts, and only entered into contracts in the ordinary course of business. Additionally, two contracts entered into in 2004 and 2005, which are currently in force between the parties are also described:

On December 31, 2009 with effect and enforcement beginning on January 1, 2010, Provida entered into a contract regarding the outsourcing of services with BBVA Servicios Corporativos Ltda. This contract includes the transfer of Provida's workers who currently render such services; the sale of the necessary tangible assets associated to tasks rendered by such workers necessary to carry out these services; the cessation of contracts with providers, the cessation of certain rental agreements; the real estate and room rentals necessary to its functioning and the subscription of outsourcing service contracts. The contract has a duration of 10 years renewable for periods of 10 years. The annual price was UF 260,530 (MCh$5,808) for the year 2010, which increased in accordance with volume annually at a rate of 3.38%. In the Ordinary Meeting held on February 23, 2011, the Board of Directors approved a reduction of UF 36,110 per year in the service fee paid to BBVA Servicios Corporativos Limitada for the year 2011, with an annual price of UF 233,225.91 (MCh$5,200). In order to obtain further information on this contact, please see “Item 19. Exhibits—Exhibit 4.4, Outsourcing Contract between AFP Provida and BBVA Servicios Corporativos Ltda.”, and “Item 19. Exhibits—Exhibit 4.4.1, Amendment dated March 30, 2011 to the Outsourcing Contract between AFP Provida and BBVA Servicios Corporativos Ltda”.

On December 22, 2004, Provida entered into an insurance agreement with BBVA Seguros de Vida S.A., a participant of Provida, effective from January 1, 2005 until June 30, 2009, pursuant to which Provida took out insurance for its life and disability payment obligations in excess of a certain casualty rate level, as negotiated with BBVA Seguros de Vida S.A. Under this agreement, Provida pays all casualties up to the maximum rate specified therein. This insurance agreement was modified by mutual consent of the parties effective as of January 2008 in order to update the mortality tables used to calculate benefits, which increased the cost of the insurance. In July 2009, the conditions under which the contract operated were modified by mutual consent, taking into consideration that the life and disability insurance constituted a mismatch risk between the assets and liabilities duration arising from such obligation and supported in a change instructed by Superintendency of Securities and Insurance that allowed to maintain a technical reserve valued according to the conditions prevailing in the market. The above implied to modify the calculation of the monthly financial revenues by defining a benchmark to invest assets and establishing that the difference in the return between the defined benchmark and the asset portfolio would be 90% to Provida and 10% to the insurer when the difference was positive and 10% to Provida and 90% to the insurer when the difference was negative. Likewise, it was established that reviews should be made monthly.

During September 2010, BBVA Seguros de Vida S.A. requested a revision of its contract with AFP Provida S.A., since there were interpretative differences regarding the review periods, pointing out that the insurer’s idea was to establish reviews over accrued periods through partial settlements made monthly. After considering arguments and making a revision, it was concluded that under the management framework of the insurance contract, it was logical to establish a procedure of accrued reviews with partial settlements that is effective until the last month of the enforcement of the contract. The above implied a new modification of contract in December 2010. For further information on the contract and amendments please see “Item 4. Information on Provida—B. Business overview—Primary expenses” and “Item 5. Operating and financial review and prospects—B. Critical accounting policies—Accounting of life and disability insurance costs” and “Item 19. Exhibits”.

Table of Contents

On December 1, 2005, with an amendment in January 2009, Provida entered into a non-exclusive worldwide software licensing contract and a software maintenance contract with BBVA Inversiones Chile S.A. (formerly known as BBVA Pensiones Chile S.A.) pursuant to which Provida licensed from BBVA Inversiones Chile S.A. the intellectual property rights relating to software use, its application on different operating and administrative processes which is the software used in most operating and administrative processes (Unified Platform). During 2011, 2010 and 2009, enhancements for new projects were incorporated amounting to MCh$0, MCh$2,832 and MCh$742 respectively. Provida paid BBVA Inversiones Chile S.A. amounts of MCh$2,832 in 2011, MCh$3,578 in 2010 and MCh$735 in 2009 in connection with the software license, and MCh$0 in 2011, MCh$73 in 2010 and MCh$612 in 2009 in connection with the maintenance agreement. Both the license contract and the maintenance contract have an unlimited term and may be terminated by either party by giving twelve months prior notice or if Provida ceases to be part of the BBVA Group.

D.	Exchange controls

The Central Bank is responsible for, among other things, monetary policy and exchange controls in Chile. Appropriate registration of a foreign investment in Chile grants the investor access to the formal exchange market. Foreign investments can be registered with the Foreign Investment Committee under Decree Law N° 600 or can be registered with the Central Bank under the Central Bank Act. The latter is an organic constitutional law requiring a “special majority” vote of the Chilean Congress to be modified.

The Foreign Investment Contract (the “Contract”) among the Central Bank, Provida and the Depositary pursuant to the Central Bank Act – Article 47 – and Chapter XXVI – Compendium of Foreign Exchange Regulations – of the Central Bank, addressed the issue of ADS by a Chilean company. On April 16, 2001, the Central Bank approved a series of amendments to the Compendium of Foreign Exchange Regulations, thereby establishing an entirely new regime. The new Compendium represents the culmination of a deregulation process, which has resulted in the elimination of many of the exchange restrictions established by the former Compendium. Chapter XXVI has been repealed. Notwithstanding, the applicable law that governs the Contract is that in force at the execution of the Contract. Therefore, for the purposes of the Contract, Chapter XXVI is still applicable.

Absent the Contract, under applicable Chilean exchange controls regulations, investors might not be granted access to the formal exchange market for the purpose of converting pesos to dollars and repatriating from Chile the amounts received with respect to deposited shares or shares withdrawn from deposit on surrender of ADS (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying shares and any rights arising therefrom). The following is a summary of certain restrictions contained in the Contract. This summary does not purport to be complete, and is qualified in its entirety by reference to Chapter XXVI, prior to the amendment by the Central Bank on April 16, 2001 and the Contract.

Under Chapter XXVI and the Contract, the Central Bank agreed to grant to the Depositary, on behalf of ADS holders, and to any investor not residing or domiciled in Chile who withdraws shares upon delivery of ADS (such shares being referred to herein as “Withdrawn Shares”), access to the formal exchange market to convert pesos to dollars (and remit such dollars outside Chile) in respect of shares represented by ADS or Withdrawn Shares. This includes amounts received as (a) cash dividends, (b) proceeds from the sale in Chile of Withdrawn Shares subject to receipt by the Central Bank of a certificate from the holder of the Withdrawn Shares (or from an institution authorized by the Central Bank) that such holder’s residence and domicile are outside Chile and a certificate from a Chilean stock exchange (or from a brokerage or securities firm established in Chile) that indicates that such Withdrawn Shares were sold on a Chilean stock exchange, (c) proceeds from the sale in Chile of rights to subscribe for additional shares, (d) proceeds from the liquidation, merger or consolidation of a company and (e) other distributions, including without limitation those resulting from any re-capitalization, as a result of holding shares represented by ADS or Withdrawn Shares. Transferees of Withdrawn Shares were not entitled to any of the foregoing rights under Chapter XXVI unless the Withdrawn Shares were re-deposited with the Depositary. Under certain circumstances, investors receiving Withdrawn Shares in exchange for ADS had the right to re-deposit such shares.

Chapter XXVI provided access to the formal exchange market in relation to dividend payments provided the company certify to the Central Bank that such dividend payment has been made and any applicable tax has been withheld. Chapter XXVI also provided access to the formal exchange market in relation to the sale of Withdrawn Shares or distributions in relation to such shares. This is conditional upon receipt by the Central Bank of certification

Table of Contents

from the Depositary that such shares were withdrawn in exchange for ADS and the receipt under a waiver benefit of the Foreign Investment Contract until such Withdrawn Shares were re-deposited.

Chapter XXVI and the Contract provided that a person who brought foreign currency into Chile to purchase shares with the benefit of the Contract had to convert it into pesos on the same date and that person had 5 days within which to invest in shares in order to receive the benefits of the Contract. If such person decided during that period not to acquire shares, the person could access the formal exchange market to re-acquire dollars, provided that the applicable request was presented to the Central Bank within 7 days of the initial conversion into pesos. Shares acquired as described above could be deposited for ADS and the benefits of the Contract received, subject to receipt by the Central Bank of a certificate from the Depositary that such deposit was effected and that the related ADS were issued and receipt by the custodian of a declaration from the person making such deposit waiving the benefits of the Contract with respect to the deposited shares. Both periods mentioned above were modified by the Central Bank on September 20, 1995. Formerly, the period was 60 days for converting dollars into pesos and 90 days from the initial conversion for informing the Central Bank that the person had not acquired shares of common stock and had reacquired dollars.

Access to the formal exchange market under any of the circumstances described above is not automatic. Pursuant to Chapter XXVI, such access requires the approval of the Central Bank based on a request presented through a banking institution established in Chile. The Contract states that if the Central Bank does not act on such request within seven banking days, the request can be deemed approved.

Under current Chilean law, the Contract cannot be unilaterally modified by the Central Bank. However, no assurance can be given that additional Chilean restrictions applicable to ADS holders on disposals of the underlying shares or the repatriation of the proceeds from such disposals could not be imposed in the future, nor can there be any assessment as to the duration or impact such restrictions could have if they were introduced.

Taxation

Chilean tax considerations

Taxation of dividends. In accordance with D.L. 824 of 1974 on tax income, as amended, foreign investors domiciled and tax resident abroad are subject to a tax on the gross amount of dividends paid to them, which is generally imposed at a rate of 35% and withheld and paid by the disbursement officer on behalf of the investor (the “Withholding Tax”). Because this tax is a withholding tax, it is not necessary for a foreign investor to submit an income tax statement. Certain taxes paid by the Company (the “First Category Taxes”) with respect to the profits from which the dividends are paid are credited against Withholding Taxes at the time of the withholding. The First Category Tax credit, if available, does not reduce the Withholding Tax on a one for one basis because it also increases the base on which the Withholding Tax is imposed. In addition, if the Company distributes less than all of its distributable income, the credit for First Category Tax paid by the Company is reduced proportionately. The amount of the credit will depend on the tax rates imposed on such profits. The rate of the First Category Tax was 20% for the year 2011 and it is 18.5% for the year 2012 and 17% for the year 2013.

The example below illustrates the effective Chilean Withholding Tax burden on a cash dividend received by a foreign holder, assuming a Withholding Tax rate of 35%, an effective First Category Tax at the maximum rate of 20.0%, and a distribution of 100% of the Company’s net profit that is distributable after payment of the First Category Tax.

Example: Considering the distribution of profits with a tax of 20% in Ch$

Company taxable profit	100
First Category Tax (20% of Ch$100)	(20)
Net distributable profit	80
Dividend distributed by the Company	80
Increase in Credit for First Category Tax	20
Withholding Tax (35% of the Company’s taxable profit plus increase in credit for first category tax)	(35)
Credit for First Category Tax	20
Net Withholding Tax	(15)
Net dividend received	65 (80 – 15)
Effective dividend Withholding Tax rate	18.75% (15/80)

Table of Contents

The foregoing tax consequences apply to cash dividends paid by the Company to the Depositary as representative of the holders of ADS. Disbursements of such cash dividends by the Depositary to the holders of ADS will not be subject to Chilean taxation. Dividend distributions made in property (other than shares) will be subject to the same Chilean tax rules as cash dividends based on the fair market value of such property. Stock dividends are not subject to Chilean taxation.

Currently there is no income tax treaty between Chile and the United States. A proposed income tax treaty from 2010 is not yet in effect, and there can be no assurance as to whether or when it will enter into force.

Capital gains. Gains from the sale or exchange of ADS (or ADRs evidencing ADS) outside of Chile are not subject to Chilean taxation.

For companies, gains recognized on a sale or exchange of shares (as distinguished from sales or exchanges of ADS representing such shares) will be subject to a capital gains tax (at a rate of 20% for 2011 and 18.5% for 2012), and an additional annual tax (the former being creditable against the latter) if: (i) the foreign holder has held the shares for less than one year since exchanging ADS for the shares, (ii) the foreign holder acquired and disposed of the shares in the ordinary course of its business or as a regular trader of shares or (iii) the foreign holder transferred shares of common stock to a related person, as defined in the Chilean tax law. For individuals, gains on the disposition of shares will be subject only to the capital gains tax.

The tax basis of shares received in exchange for ADS is the acquisition value of the shares. The valuation procedure set forth in the Deposit Agreement establishes the value of shares received at the highest price at which they were traded on the Santiago Stock Exchange on the date of the exchange (the “Stock Exchange Price”). Consequently, the conversion of ADS into shares and the immediate sale of such shares for the value established under the Deposit Agreement do not generate a capital gain; therefore, the conversion and sale are not subject to taxation in Chile. It is possible to exchange ADS for shares, but, under Chilean law, it is not possible to exchange shares for ADS.

Moreover, the sale of such shares for a value greater than their Stock Exchange Price, in accordance with amendments incorporated by the Law 20,448(1) of the year 2010, would be subject to tax in Chile, unless the seller complies with certain requirements of Chilean law regarding the Article 107 exemption in conformity with the Chilean income tax law, and the shares have been acquired in a Chilean Stock Exchange expressly authorized by the Securities and Insurance Superintendency. If the seller does not comply with such requirements, the excess of the sale proceeds over the shares’ Stock Exchange Price would be subject to additional taxes at a rate of 35%.

The exercise of preemptive rights relating to the shares is not subject to Chilean taxation. Any gain on the sale or assignment of preemptive rights relating to the shares is subject to both the First Category Tax and the Withholding Tax (the former being creditable against the latter).

Other Chilean taxes. No Chilean inheritance, gift or succession taxes apply to the transfer or disposition of ADS by a foreign holder, but such taxes generally do apply to the transfer or disposition of shares by a foreign holder by bequest, devise or gift. No Chilean stamp, issue, registration or similar taxes or duties apply to foreign holders of ADS or shares.

U.S. federal income tax considerations

The following is a discussion of material U.S. federal income tax consequences to a U.S. Holder described below of owning and disposing of shares or ADS, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to hold such securities. The discussion applies only to a U.S. Holder that holds shares or ADS as capital assets for U.S. federal income tax purposes and it does not describe all of the tax consequences that may be relevant to holders subject to special rules, such as:

(1) The law 20,448 of 2010 derogated from the article 18ter and incorporated the current article 107 of the income tax law, however, the new text of the article 107 of the income tax law states that in order to exempt from taxes the greater value from a sale of shares or capital gains, it expressly requires that shares should be acquired in a stock exchange in a country authorized by the Superintendency of Securities and Insurance, in other words, in order to use the exemption, ADRs are required to be acquired in a stock exchange authorized by the Superintendency of Securities and Insurance, unless the Internal revenue service applies a different interpretation in the future.

Table of Contents

-	Certain financial institutions

-	Dealers or traders in securities

-	Persons holding shares or ADS as part of a hedging, straddle, wash sale, conversion transaction or integrated transaction

-	Persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar

-	Entities classified as partnerships for U.S. federal income tax purposes

-	Persons liable for the alternative minimum tax

-	Tax-exempt entities, including “individual retirement accounts” or “Roth IRAs”

-	Persons that own or are deemed to own ten percent or more of our voting stock

-	Persons who acquired our ADS or shares pursuant to the exercise of any employee stock option or otherwise as compensation

-	Persons holding shares or ADS in connection with a trade or business conducted outside of the United States

If an entity that is classified as a partnership for U.S. federal income tax purposes holds shares or ADS, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partnerships holding shares or ADS and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of the shares or ADS.

This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly with retroactive effect. It is also based in part on representations of the Depositary and assumes that each obligation under the Deposit Agreement and any related agreement will be performed in accordance with its terms.

A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of shares or ADS and is:

-	an individual citizen or resident of the United States;

-	a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; or

-	an estate or trust, the income of which is subject to U.S. federal income taxation regardless of its source.

In general, a U.S. Holder who owns ADS will be treated as the owner of the underlying shares represented by those ADS for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADS for the underlying shares represented by those ADS.

The U.S. Treasury has expressed concerns that parties to whom American depositary shares are pre-released or intermediaries in the chain of ownership between United States holders and the issuer of the security underlying the American depositary shares may be taking actions that are inconsistent with the claiming of foreign tax credits for United States holders of American depositary shares. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the analysis of the creditability of Chilean taxes and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by such parties or intermediaries.

U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and foreign tax consequences of owning and disposing of shares or ADS in their particular circumstances.

Taxation of distributions

Subject to the passive foreign investment company rules described below, distributions paid on ADS or shares, other than certain pro rata distributions of shares, will be treated as dividends to the extent paid out of the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid by “qualified foreign corporations” to certain non-corporate U.S. Holders in taxable years beginning before January 1, 2013 may be taxable at favorable rates, up to a maximum rate of 15%. A foreign corporation is treated as a qualified foreign corporation

Table of Contents

with respect to dividends paid on stock that is readily tradable on an established securities market in the United States, such as the New York Stock Exchange where our ADS are traded. U.S. Holders should consult their tax advisers regarding the availability of the reduced tax rate on dividends in their particular circumstances. The amount of a dividend will include any amounts withheld by the Company in respect of Chilean taxes (taking into account the credit for First Category Taxes, as described in “Chilean Tax Considerations—Taxation of dividends”). The amount of the dividend will be generally treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations under the Code. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s or, in the case of ADS, the Depositary’s receipt of the dividend. The amount of any dividend income paid in Chilean pesos will be a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of such receipt regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of its receipt.

Subject to applicable limitations that may vary depending upon the U.S. Holder’s circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, Chilean income taxes withheld from dividends on shares (after reduction for the credit for First Category Tax) generally will be creditable against the U.S. Holder’s U.S. federal income tax liability. If, however, the proposed U.S. -Chile Treaty becomes effective, any Chilean income taxes withheld from dividends on shares or ADS in excess of the rate provided by the treaty will not be creditable by a U.S. Holder who is eligible for the benefits of the treaty. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the availability of foreign tax credits in their particular circumstances. Instead of claiming a foreign tax credit, a U.S. Holder may, at its election, deduct such Chilean taxes in computing its taxable income, subject to generally applicable limitations under U.S. law.

An election to deduct foreign taxes instead of claiming foreign tax credits applies to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States.

Sale or other disposition of shares or ADS

Subject to the passive foreign investment company rules described below, for U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of shares or ADS will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the shares or ADS for more than one year. The amount of gain or loss will be equal to the difference between the U.S. Holder’s tax basis in the shares or ADS disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Because such gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes, the creditability of any Chilean taxes imposed on gain from shares or ADS may be significantly limited. See “—Chilean tax considerations—Capital gains”. U.S. Holders should consult their tax advisors regarding the creditability of such Chilean taxes.

Passive Foreign Investment Company Rules

In general, a non-U.S. corporation will be considered a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes for any taxable year in which: (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of such other corporation and received directly its proportionate share of the income of such other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains.

We do not believe that we should be treated as a “PFIC” for U.S. federal income tax purposes for our 2011 taxable year. However, because PFIC status depends upon the composition of a company’s income and assets and the market value of its assets from time to time, which may be determined in large part by reference to the market value of the Company’s stock, and because of uncertainties in the manner of application of the PFIC rules, including uncertainties as to the valuation and proper characterization of certain of our assets as passive or active, in particular uncertainty as to the characterization of certain reserves denominated as mandatory investments, there can be no assurance that we will not be considered a PFIC for any taxable year. You should consult your own tax adviser to determine whether we were a PFIC for our 2011 taxable year and what the U.S. federal income tax consequences of an investment in a PFIC are to you.

Table of Contents

If the Company were a PFIC for any taxable year during which a U.S. Holder held shares or ADS, such holder would be subject to special rules generally intended to eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Unless a U.S. Holder has made the mark-to-market election described below, upon a disposition of shares or ADS, including, under certain circumstances, a pledge or a disposition pursuant to an otherwise tax-free reorganization, gain recognized by a U.S. Holder would be allocated ratably over the holder’s holding period for the shares or ADS. The amounts allocated to the taxable year of the disposition and to years before the company became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for such taxable year, and an interest charge will be imposed on the resulting tax liability for each such taxable year. Similar rules would apply to any distribution in respect of shares or ADS to the extent it exceeds 125% of the average of the annual distributions on shares or ADS received by a U.S. Holder during the preceding three years or such holder’s holding period, whichever is shorter. If the company were a PFIC, a U.S. Holder would also be subject to these adverse U.S. federal income tax rules on indirect or constructive distributions on, or dispositions of, shares of any subsidiary of the Company that is a PFIC. If the Company were a PFIC for any year during which a U.S. Holder holds shares or ADS, it would generally continue to be treated as a PFIC with respect to such holder for all succeeding years during which the U.S. Holder holds shares or ADS even if the Company ceased to meet the threshold requirements for PFIC status.

Alternatively, if the shares or ADS are “regularly traded” on a “qualified exchange”, a U.S. Holder may make a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described above. A mark-to-market election is not available, however, with respect to subsidiary PFICs. The shares or ADS will be treated as “regularly traded” in any calendar year in which more than a minimum quantity of the shares or ADS, as the case may be, are traded on a qualified exchange on at least 15 days during each calendar quarter. A “qualified exchange” includes a foreign exchange that is regulated by a governmental authority in which the exchange is located and with respect to which certain other requirements are met. The New York Stock Exchange, on which our ADS are listed, is a qualified exchange for U.S. federal income tax purposes. Consequently, if the ADS are regularly traded on the New York Stock Exchange, the mark-to-market election would be available to a U.S. Holder of ADS if the Company is or becomes a PFIC.

If the mark-to-market election is available and a U.S. Holder makes a mark-to-market election such holder generally will recognize as ordinary income the excess, if any, of the fair market value of the shares or ADS at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of the excess, if any, of the adjusted tax basis of the shares or ADS over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder makes the election, such holder’s basis in the shares or ADS will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of such shares or ADS in a year when the Company is a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of previously included income as a result of the mark-to-market election).

A timely election to treat the Company as a qualified electing fund under Section 1295 of the Code would result in alternative treatment. U.S. Holders should be aware, however, that the Company does not intend to satisfy record keeping and other requirements that would permit U.S. Holders to make qualified electing fund elections if the Company were a PFIC.

If a U.S. Holder owns shares or ADS during any year in which the Company is a PFIC, such holder generally must file an Internal Revenue Service Form 8621 (or any other form as the U.S. Treasury may require) with respect to the Company, generally with the holder’s federal income tax return for that year.

If the Company were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFIC for the taxable year in which it paid a dividend or for the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to certain non-corporation U.S. Holders would not apply.

Table of Contents

Information reporting and backup withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding unless (i) the U.S. Holder is an exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability, and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Certain U.S. Holders who are individuals may be required to report information relating to their ownership of securities of a non-U.S. person, subject to certain exceptions (including an exception for securities held in certain accounts maintained by U.S. financial institutions, such as our ADS). U.S. Holders are recommended to consult their tax advisers regarding the effect, if any, of these rules on their ownership and disposition of shares or ADS.

INVESTORS SHOULD CONSULT THEIR TAX ADVISERS ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF ADS OR SHARES.

F.	Dividends and paying agents

Not applicable.

G.	Statement by experts

Not applicable.

H.	Documents on display

We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit and disclosure rules of the Exchange Act. We file or furnish reports and other information to the SEC to the extent required by the statutory requirements applicable to our Company. Reports and other information filed or furnished by us to the SEC may be inspected and copies obtained at the public reference room maintained by the SEC at 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operations of the Public Reference Section by calling the SEC at 1-800-732-0330. Our filings with the SEC are also available through the SEC’s website at http://www.sec.gov and can also be inspected and copies obtained at the offices of the New York Stock Exchange Inc., 20 Broad Street, New York, New York 10005.

I.	Subsidiary information

Not applicable.

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s future earnings and financial position are exposed to fluctuations in foreign currency, interest rate, mandatory investments and the value of long-term obligations in connection with life and disability insurance. In the ordinary course of business, Provida manages exposure to risk of its trading and investment activities as mentioned below.

Foreign currency exchange rate risk

As a result of its investment in Provida Internacional, Provida is exposed to foreign exchange rate risks. Provida has investments in associated foreign companies, for an estimated value of MUS$72, contributing MCh$9,092 to Provida’s revenues as of December 31, 2011.

Table of Contents

The devaluation of the domestic currency against the US dollar and the appreciation of the dollar with respect to the Chilean peso could adversely affect the returns on Provida’s equity interests and as a result affect profits recognized on such investments for the relevant period.

Interest rate risk

To meet its working capital needs, the Company has various lines of credit and it can be exposed to minor interest rate risk as a result. There is no interest rate risk in relation to current leasing obligations given that the interest rates under these agreements are fixed.

Mandatory investments

Provida’s main asset is the mandatory investments and is equivalent to a 1% equity interest in that pension fund. Provida is required to maintain a 1% equity interest in each pension fund it invests in. Mandatory investments in pension funds represent nearly 50% of Provida’s total assets under management and given the volatility of local and foreign markets in which the pension funds’ assets are invested; Provida’s future gains/losses on mandatory investments are subject to uncertainty which in turn make Provida’s future earnings from these investments equally uncertain.

Additionally, mandatory investments are held in order to compensate participants in case pension funds do not comply with the legal minimum returns requirements, which would imply that Provida would lose part of its equity interest, as the AFP must replenish the 1% of its reserve by its own resources to compensate participants. The minimum return requirement is calculated by taking the industry’s average returns of pension funds of the previous of 36 months.

Managing these risks is the responsibility of Provida’s trustee, whose aim is to optimize the returns of each fund for a certain level of risk or minimize the level of risk in order to achieve a target return.

Accordingly, Provida has a risk management policy, which defines the activities and criteria Provida applies to identify, measure, control and manage in an efficient way the risks associated with the fund management. Therefore, Provida manages the equity interest of pension funds under internal limits of credit risk, by analyzing the expected losses and applying measures of market risks. This approach is known as value at risk (“VaR”) and measures the probable impact of adverse conditions in securities prices (fixed income, currencies and variable income) on each Fund Type. Moreover, in order to ensure the reliability of future benefits payment and fulfillment of applicable minimum returns requirements, Provida applies a relative VaR analysis over differing positions between each fund type and to the system’s model portfolio.

Life and disability payment obligations

Life and disability insurance obligations are considered long-term obligations because the benefits to disabled participants are rendered following the final disability determination test, which is three years after the initial disability determination (defined as a decrease between one -half and two -thirds of the working capacity). Until October 2008, the total disability benefits (decrease in more than two thirds in the working capacity) were also granted three years after the initial disability determination. See “Item 4. Information on Provida—B. Business overview—Primary expenses”.

In quantitative terms, an AFP had to replenish any shortfall equivalent to the difference between a participant’s savings in his/her individual capitalization account and the benefits granted to him/her by law. These benefits correspond to the present value of the life annuity pension (equivalent to 70% or 50% of the participant’s average taxable remuneration for the last ten years depending on total or partial disability determination) discounted by the life annuity rates in force at the time of the payment. As a result, changes in interest rates impact the final value of an AFP’s payment obligations.

One of the main changes introduced by the Pension Reform Law was the elimination of the AFP’s individual obligation to provide life and disability insurance benefits. On July 1, 2009, a group of insurers was awarded the life and disability administration for a 12 month term. Consequently, Provida only maintains those casualties pending payment due to temporary disability as per the insurance contract which is in a runoff stage.

Table of Contents

Additionally, insurance regulations governing life and disability insurance policies instructed that casualties reserves should be determined at market interest rate rather than historical rates (defined as the minimum interest rate of the previous semester), giving insurers the alternative of applying such methodology voluntarily to existing contracts. AFP Provida requested that BBVA Seguros de Vida, adopt such regulation so that Provida’s liabilities would more accurately reflect the amount that will effectively be paid (i.e. fair value). Likewise, by mutual consent of the parties, (previous compensation to the insurer for change in conditions), the financial performance of cash flow surplus was modified with a bench mark determined by assets of similar duration than the insurer’s liability.

In view of changes made in the management of assets and liabilities associated with the life and disability insurance, AFP Provida has mitigated the associated risk to the interest rate evolution.

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.	Debt securities

Not applicable.

B.	Warrants and rights

Not applicable.

C.	Other securities

Not applicable.

D.	American Depositary Shares

The depositary for our American Depositary Shares (“ADSs”) is the Bank of New York Mellon (“BNYM”).

Holders of our ADSs are generally expected to pay fees to BNYM according to the schedule below:

Persons depositing or withdrawing shares must pay:		For:
U.S.$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	■	Issuance of ADSs, including issuances resulting from a distribution, sale or exercise of shares or rights or other property
	■	Cancellation of ADSs for the purpose of withdrawal including if the deposit agreement terminates
U.S.$0.02 (or less) per ADS	■	Any cash distribution to ADSs registered holders
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs	■	Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders
Registration or transfer fees	■	Transfer and registration of shares on the Company’s share register to or from the name of the depositary or its agent when you deposit or withdraw shares
Expenses of the depositary	■	Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
	■	Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADSs or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	■	As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	■	As necessary

BNYM collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. BNYM also collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. BNYM may collect its annual fee for depositary services by deductions from

Table of Contents

cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. BNYM may generally refuse to provide fee-attracting services until its fees for those services are paid.

The Depositary may remit to us all or a portion of the Depositary fees charged for the reimbursement of certain of the expenses we incur in respect of the ADS program established pursuant to the Deposit Agreement upon such terms and conditions as we may agree from time to time. In the year ended December 31, 2011, the Depositary reimbursed US$45,584.46 with respect to certain fees and expenses. The table below sets forth the types of expenses that the Depositary has agreed to reimburse and the amounts reimbursed in 2011:

	Amount Reimbursed in the Year Ended
Category of Expenses	December 31, 2011
	(In US$)
NYSE and miscellaneous expenses	45,584.46

PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has been no material default in the payment of principal and interest or any other material default in Provida and its subsidiaries’ debt obligations that has not been cured within 30 days.

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

Item 15. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Provida, under the supervision and with the participation of its management, including the Chief Executive Officer, the Pension Accounting Division Manager and the Planning & Control Division Manager, performed an evaluation of the effectiveness as of December 31, 2011 of the design and operation of disclosure controls and procedures (as defined in Rule 13a-15(f) of the Exchange Act). There are, as described below, inherent limitations to the effectiveness of any control system, the main one being that these control systems can provide only reasonable assurance of achieving their control objectives.

Following the evaluation process, Provida’s Chief Executive Officer, the Pension Accounting Division Manager and the Planning & Control Division Manager concluded that Provida’s disclosure controls and procedures are effective as of December 31, 2011 in ensuring that information in relation to Provida and its consolidated subsidiaries, required to be disclosed in reports filed under the Exchange Act is (1) recorded, processed, summarized and reported for the time periods specified in the SEC’s rules and forms and by the deadlines stipulated, and (2) accumulated and communicated to the management, including the principal financial officers in an appropriate way so to allow decisions regarding required disclosures.

Management’s Report on Internal Control Over Financial Reporting

The management of Provida is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15 (f) of the Exchange Act. Provida’s internal control over financial reporting is a framework designed to provide reasonable assurance, for external purposes, regarding the reliability of financial reporting

Table of Contents

and the preparation of financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and includes policies and procedures that:

-	pertain to the maintenance of records that, accurately and fairly reflect Provida’s transactions and disposals of its assets;

-	provide reasonable assurance that transactions are recorded to permit the preparation of financial statements in accordance with IFRS, and that the Company’s expenditures are being made only in accordance with authorizations of Provida’s management and directors; and

-	provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisitions, use or disposal of the Company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of Provida’s management, including the Chief Executive Officer, the Pension Accounting Division Manager and the Planning & Control Division Manager, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on an assessment of those criteria, Provida’s management concluded that, as of December 31, 2011, its internal control over financial reporting was effective.

Our internal control over financial reporting as of December 31, 2011 has been audited by Deloitte, an independent registered public accounting firm, as stated in their report which follows below.

Table of Contents

Deloitte

Auditores y Consultores Limitada

RUT: 80.276.200-3

Av. Providencia 1760

Pisos 6, 7, 8, 9, 13 y 18

Providencia, Santiago

Chile

Fono: (56-2) 729 7000

Fax: (56-2) 374 9177

e-mail: deloittechile@deloitte.com

www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of

Administradora de Fondos de Pensiones Provida S.A.:

We have audited the internal control over financial reporting of Administradora de Fondos de Pensiones Provida S.A. and subsidiaries (the "Company") as of December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the consolidated financial statements as of and for the year ended December 31, 2011 of the Company and our report dated April 26, 2012 expressed an unqualified opinion on those financial statements.

Santiago, Chile

April 26, 2012

Table of Contents

Changes in Internal Control Over Financial Reporting

There has been no change in Provida’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

For the fiscal year 2011, Provida’s Board of Directors determined that Mr. Jesus del Pino Duran, a member of the Directors’ Committee, met the requirements of an “audit committee financial expert” in accordance with SEC rules and regulations. The Board of Directors made this determination based on Mr. del Pino’s understanding of International Financial Reporting Standards (IFRS); his ability to assess the general application IFRS in connection with the accounting for estimates, provisions and reserves, his experience in analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Consolidated Financial Statements, his understanding of internal controls over financial reporting and his understanding of audit committee functions. All three members of the Directors’ Committee have experience in overseeing and assessing the performance of Provida and its consolidated subsidiaries and its external auditors have experience in the preparation, auditing and evaluation of Provida’s Consolidated Financial Statements. The audit committee’s financial expert, here Mr. del Pino, currently satisfies the “independence” standard established in Rule 10A-3 of the Exchange Act.

Item 16B. CODE OF ETHICS

Provida has adopted a code of ethics that is applicable to all employees of Provida. Such document is called “Código de Conducta del Grupo BBVA” (“BBVA Group Code of Conduct”), and it applies to all officers and employees of all subsidiaries of the BBVA Group worldwide. A copy of the BBVA Group Code of Conduct can be obtained from the BBVA Group’s website, www.bbva.com. A copy will also be provided without charge to any person upon written request to the General Counsel of Provida, located at 100 Pedro de Valdivia Avenue, 15th floor, Santiago, Chile.

Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Amounts paid to the auditors for statutory audit and other services were provided as follows:

	As of December 31,
	2011	2010	2009
	MCh$	MCh$	MCh$
Audit Fees(1)	252.8	268.0	336.8
Audit Related Fees(2)	-	-	-
Tax Fees(3)	-	-	-
All Other Fees(4)	-	-	-
Total	252.8	268.0	336.8

(1) Aggregate fees billed for each of the last three fiscal years for professional services rendered by Deloitte for the audit of Provida’s annual financial statements or services that are normally provided by Deloitte, in connection with statutory and regulatory filings or engagements for those fiscal years.

(2) Aggregate fees billed in each of the last three fiscal years for assurance and related services by Deloitte that are reasonably related to the performance of the audit or review of Provida’s financial statements and are not reported under (1) above.

(3) Aggregate fees billed in each of the last three fiscal years for professional services rendered by Deloitte for tax compliance, tax advice, and tax planning.

(4) Aggregate fees billed in each of the last three fiscal years for products and services provided by Deloitte other than the services reported in (1), (2) and (3) above.

Table of Contents

Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None

Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND RELATED PURCHASERS

In 2011, neither Provida nor any of its related companies purchased any of Provida’s equity securities.

Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

From the date of the Ordinary Shareholders’ meeting held on April 29, 2011, where it was agreed that Provida would continue to retain the services of the external auditing firm, there have been no changes in this area for the fiscal year 2011.

Item 16G. CORPORATE GOVERNANCE

To review the significant differences between our corporate governance practices and the NYSE Corporate Governance Standards, please see “Item 6. Directors, Senior Management and Employees—C. Board practices”.

Item 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

Item 17. FINANCIAL STATEMENTS

Provida has responded to Item 18 in lieu of Item 17.

Item 18. FINANCIAL STATEMENTS

Reference is made to Item 19 for a list of Provida’s Consolidated Financial Statements filed as part of this annual report.

Table of Contents

Item 19. EXHIBITS

Index to Consolidated Financial Statements:

	Page
Report of independent registered public accounting firm	F-1
Consolidated Statements of Financial Position, as of December 31, 2011 and 2010	F-2
Consolidated Statements of Comprehensive Income for the years ended December 31, 2011, 2010 and 2009	F-4
Consolidated Statements of Changes in Equity for the years ended December 31, 2011, 2010 and 2009	F-6
Consolidated Statements of Cash Flow for the years ended December 31, 2011, 2010 and 2009	F-8
Notes to the Consolidated Financial Statements	F-9

Index to Exhibits:

1.1	English translation of the By-Laws of Administradora de Fondos de Pensiones Provida S.A. (“Provida”) (incorporated by reference to Provida’s Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission on May 23, 2011).

4.1	English translation of the Life and Disability Insurance Contract between AFP Provida and BBVA Seguros de Vida S.A. and Amendments (incorporated by reference to Provida’s Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission on May 23, 2011).

4.2	English translation of the Software Licensing Contract between AFP Provida and BBVA Inversiones Chile S.A. (formerly BBVA Pensiones Chile S.A.) (incorporated by reference to Provida’s Annual Report on Form 20-F for the year ended December 31, 2009 filed with the Securities and Exchange Commission on May 18, 2010).

4.3	English translation of the Software Maintenance Contract between AFP Provida and BBVA Inversiones Chile S.A. (formerly BBVA Pensiones Chile S.A.) (incorporated by reference to Provida’s Annual Report on Form 20-F for the year ended December 31, 2009 filed with the Securities and Exchange Commission on May 18, 2010).

4.4	English translation of the Outsourcing Contract between AFP Provida and BBVA Servicios Corporativos Ltda. (incorporated by reference to Provida’s Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission on May 23, 2011).

4.4.1	English translation of the Amendment dated March 30, 2011 to the Outsourcing Contract between AFP Provida and BBVA Servicios Corporativos Ltda.

8.1	List of Subsidiaries

12.1	Section 302 Certification of the Chief Executive Officer

12.2.1	Section 302 Certification of the Pension Accounting Division Manager

12.2.2	Section 302 Certification of the Planning and Control Division Manager

13.1	Section 906 Certification of the Chief Executive Officer

13.2.1	Section 906 Certification of the Pension Accounting Division Manager

13.2.2	Section 906 Certification of the Planning and Control Division Manager

Table of Contents

SIGNATURE

The registrant certifies that it meets all of the requirements for filing on Form 20-F and that is has duly caused and authorized the undersigned to sign this annual report on its behalf.

Administradora de Fondos de Pensiones Provida S.A.
By:	/s/ Ricardo Rodríguez Marengo
	Name:	Ricardo Rodríguez Marengo
	Title:	Chief Executive Officer

Dated: April 27, 2012

Table of Contents

Deloitte

Auditores y Consultores Limitada

RUT: 80.276.200-3

Av. Providencia 1760

Pisos 6, 7, 8, 9, 13 y 18

Providencia, Santiago

Chile

Fono: (56-2) 729 7000

Fax: (56-2) 374 9177

e-mail: deloittechile@deloitte.com

www.deloitte.cl

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of

Administradora de Fondos de Pensiones Provida S.A.:

We have audited the accompanying consolidated statements of financial position of Administradora de Fondos de Pensiones Provida S.A. and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2011, all expressed in millions of Chilean pesos. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Administradora de Fondos de Pensiones Provida S.A. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (‘‘IASB’’).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the Company's internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 26, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting based on our audit.

Santiago, Chile

April 26, 2012

F-1

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2011 AND 2010.

				12.31.2011		12.31.2010
	Note		MCh$		MCh$
Assets
Current Assets
Cash and cash equivalents		5		36,091		37,166
Financial assets at fair value through profit and loss		15		20,020		4,909
Other financial assets				-		-
Trade and other receivables		8		7,039		11,813
Accounts receivable from related parties		11		6,208		7,397
Inventories		9		395		295
Prepayments		10		469		298
Current tax assets		12		15,925		6,685
Other current assets		19		31		89
Total Current Assets				86,178		68,652

Non-Current Assets
Mandatory investment		6		201,418		204,526
Trade and other receivables, net		8		329		132
Accounts receivable from related parties		11		-		-
Investments accounted for using equity method		14		24,691		21,309
Intangible assets other than goodwill		17		39,838		44,325
Goodwill		18		8,930		8,930
Property, plant and equipment, net		16		27,787		28,660
Deferred tax assets		12		885		995
Prepayments		10		216		366
Other non-current assets		19		76		97
Total Non-Current Assets				304,170		309,340

Total Assets				390,348		377,992

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

F-2

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2011 AND 2010.

				12.31.2011		12.31.2010
	Note		MCh$		MCh$
Liabilities and Equity
Current Liabilities
Interest-bearing borrowings		20		63		64
Trade and other payables		21		20,457		18,639
Accounts payable to related parties		11		1,822		1,873
Provisions		22		14,154		8,724
Current tax liabilities		12		19,792		14,749
Other current liabilities		23		281		486
Accrued liabilities				548		605
Total Current Liabilities				57,117		45,140
Non-Current Liabilities
Interest-bearing borrowings		20		354		402
Provisions		22		-		8,388
Deferred tax liabilities		12		27,270		29,259
Other non-current liabilities		23		827		809
Total Non-Current Liabilities				28,451		38,858
Equity
Issued capital		24		104,764		104,764
Other reserves		24		51		(1,406	)
Retained earnings		24		199,965		190,636
Equity attributable to owners of parent				304,780		293,994
Non-controlling interest				-		-
Total Equity				304,780		293,994
Total Liabilities and Equity				390,348		377,992

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

F-3

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009.

			For the years ended December 31,
			2011			2010			2009
	Note		MCh$			MCh$			MCh$
Revenues from Operations
Revenue		7		153,248			147,456			181,173
Mandatory investments		6		(3,469	)		21,886			32,829
Total Revenues from Operations				149,779			169,342			214,002
Expenses from Operations
Life and disability insurance premium expense		13		2,326			(2,338	)		(61,495	)
Employee expenses				(30,605	)		(30,984	)		(34,504	)
Depreciation and amortization		16-17		(8,207	)		(8,011	)		(11,590	)
Impairment losses		16		-			(556	)		-
Miscellaneous other operating expenses		27		(30,665	)		(30,008	)		(25,769	)
Total Expenses from Operations				(67,151	)		(71,897	)		(133,358	)
Net Operating Income				82,628			97,445			80,644
Other Income (Expenses):
Finance costs		28		(121	)		(103	)		(152	)
Financial income (expenses)				1,553			282			200
Share of profit (loss) of associates accounted for using equity method		14		9,711			8,789			6,721
Exchange differences				122			283			(91	)
Other non-operating income		30		3,050			2,564			2,506
Other non-operating expenses		29		(376	)		(196	)		(937	)
Total Other Income (Expenses)				13,939			11,619			8,247
Profit (Loss) before Income Tax				96,567			109,064			88,891
Income tax expense		12		(17,712	)		(17,440	)		(14,449	)
Profit (loss) after tax from continuing operations				78,855			91,624			74,442
Profit (loss) after tax from discontinuing operations				-			-			-
Profit (Loss)				78,855			91,624			74,442

Profit (Loss) attributable to owners of parent and non-controlling interests
Profit (loss) attributable to owners of parent				78,855			91,624			74,442
Profit (loss) attributable to non-controlling interests				-			-			-
Profit (Loss)				78,855			91,624			74,442
Earnings (Loss) per Share (in Ch$) Basic Earnings Shares:
Basic earnings (loss) per share from continuing operations				238.00			276.54			224.68
Basic earnings (loss) per share from discontinued operations				-			-			-
Basic Earnings (Loss) per Share				238.00			276.54			224.68
Diluted Earnings per Share:
Diluted earnings (loss) per share from continuing operations				238.00			276.54			224.68
Diluted earnings (loss) per share from discontinued operations				-			-			-
Diluted Earnings (Loss) per Share				238.00			276.54			224.68

F-4

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009.

	For the years ended December 31,
	2011		2010			2009
	MCh$		MCh$			MCh$
Profit (loss)		78,855		91,624			74,442
Other Comprehensive Income
Components of other comprehensive income, before tax:
Exchange differences on translation:
Gains (losses) on exchange differences on translation, before tax		1,373		(1,635	)		(2,377	)
Reclassification adjustments on exchange differences on translation, before tax		-		-			-
Other comprehensive income, before tax, exchange differences on translation		1,373		(1,635	)		(2,377	)

Other comprehensive income, before tax		1,373		(1,635	)		(2,377	)
Aggregated income tax relating to components of other comprehensive income		-		-			-
Other Comprehensive Income		1,373		(1,635	)		(2,377	)
Total Comprehensive Income		80,228		89,989			72,065

Comprehensive attributable to
Comprehensive income, attributable to owners of parent		80,228		89,989			72,065
Comprehensive income, attributable to non-controlling interests		-		-			-
Total Comprehensive Income		80,228		89,989			72,065

F-5

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009.

	Changes in Other reserves
	Issued capital		Share premium		Reserve of exchange differences on translation			Other miscellaneous reserves		Other reserves			Retained earnings			Equity attributable to owners of parent			Non- controlling interest		Total Equity
	MCh$		MCh$		MCh$			MCh$		MCh$			MCh$			MCh$			MCh$		MCh$
Equity at beginning of period 01/01/2011		104,610		154		(4,012	)		2,606		(1,406	)		190,636			293,994			-		293,994
Changes in equity
Comprehensive income
Net income		-		-		-			-		-			78,855			78,855			-		78,855
Other comprehensive income		-		-		1,373			-		1,373			-			1,373			-		1,373
Comprehensive income		-		-		1,373			-		1,373			78,855			80,228			-		80,228
Dividends		-		-		-			-		-			(69,526	)		(69,526	)		-		(69,526	)
Increase (decrease) through transfers and other changes		-		-		-			84		84			-			84			-		84
Total changes in equity		-		-		-			84		84			(69,526	)		(69,442	)		-		(69,442	)
Equity at end of period 31/12/2011		104,610		154		(2,639	)		2,690		51			199,965			304,780			-		304,780

	Changes in Other reserves
	Issued capital		Share premium		Reserve of exchange differences on translation			Other miscellaneous reserves		Other reserves			Retained earnings			Equity attributable to owners of parent			Non- controlling interest		Total Equity
	MCh$		MCh$		MCh$			MCh$		MCh$			MCh$			MCh$			MCh$		MCh$
Equity at beginning of period 01/01/2010		104,610		154		(2,377	)		2,463		86			164,529			269,379			-		269,379
Changes in equity
Comprehensive income
Net income		-		-		-			-		-			91,624			91,624			-		91,624
Other comprehensive income		-		-		(1,635	)		-		(1,635	)		-			(1,635	)		-		(1,635	)
Comprehensive income		-		-		(1,635	)		-		(1,635	)		91,624			89,989			-		89,989
Dividends		-		-		-			-		-			(66,236	)		(66,236	)		-		(66,236	)
Increase (decrease) through transfers and other changes		-		-		-			143		143			720			863			-		863
Total changes in equity		-		-		(1,635	)		143		(1,492	)		26,108			24,616			-		24,616
Equity at end of period 31/12/2010		104,610		154		(4,012	)		2,606		(1,406	)		190,636			293,994			-		293,994

F-6

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009.

	Changes in Other reserves
	Issued capital			Share premium		Reserve of exchange differences on translation			Other miscellaneous reserves		Other reserves			Retained earnings			Equity attributable to owners of parent			Non- controlling interest		Total Equity
	MCh$			MCh$		MCh$			MCh$		MCh$			MCh$			MCh$			MCh$		MCh$
Equity at beginning of period 01/01/2009		107,073			154		-			-		-			112,684			219,911			-		219,911
Changes in equity
Comprehensive income
Net income		-			-		-			-					74,442			74,442			-		74,442
Other comprehensive income		-			-		(2,377	)		-		(2,377	)		-			(2,377	)		-		(2,377	)
Comprehensive income		-			-		(2,377	)		-		(2,377	)		74,442			72,065			-		72,065
Dividends		-			-		-			-					(22,333	)		(22,333	)		-		(22,333	)
Increase (decrease) through transfers and other changes		(2,463	)		-		-			2,463		2,463			(265	)		(265	)		-		(265	)
Total changes in equity		(2,463	)		-		(2,377	)		2,463		86			51,844			49,467			-		49,467
Equity at end of period 31/12/2009		104,610			154		(2,377	)		2,463		86			164,528			269,378			-		269,378

F-7

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009.

	For the years ended December 31,
	2011			2010			2009
	MCh$			MCh$			MCh$
Cash Flow from Operating Activities
Fee income		140,543			130,788			169,346
Payment to suppliers		(32,689	)		(28,933	)		(29,098	)
Premium paid		(898	)		(701	)		(81,631	)
Remunerations paid		(30,499	)		(28,043	)		(33,729	)
Dividends received		7,355			4,092			3,386
Interest received		1,450			282			600
Income taxes paid		(14,278	)		(8,793	)		(5,338	)
Other inflows from operations		20,912			13,386			16,243
Other outflows from operations		(5,950	)		(14,352	)		(2,530	)
Net cash flows from (used in) operating activities		85,947			67,726			37,249

Cash flows from (used in) investing activities
Proceeds from sales of property, plant and equipment		911			53			-
Proceeds from sales of shares from mandatory investments		8,809			2,264			5,299
Payments for acquiring shares of mandatory investments		(9,170	)		(5,775	)		(9,717	)
Purchase of property, plant and equipment		(3,670	)		(3,290	)		(2,982	)
Loans to related companies		-			-			747
Other cash outflows from investing activities		(14,575	)		(2,563	)		(779	)
Other cash inflows from investing activities		1,135			838			128
Net cash flows from (used in) investing activities		(16,560	)		(8,473	)		(7,304	)

Cash flows from (used in) financing activities:
Proceeds from borrowings		3,144			18,143			71,090
Proceed from borrowings from related companies		7,400			12,473			5,503
Repayments of borrowings		(2,816	)		(18,133	)		(71,245	)
Repayments of borrowing from related companies		(8,430	)		(13,125	)		(5,307	)
Dividend paid		(69,760	)		(61,935	)		(19,088	)
Net cash flows from (used in) financing activities		(70,462	)		(62,577	)		(19,047	)
Net increase (decrease) in cash and cash equivalents before effect of exchange rate changes		(1,075	)		(3,324	)		10,898
Effect of exchange rate changes on cash and cash equivalents		-			-			-
Net increase (decrease) in cash and cash equivalents		(1,075	)		(3,324	)		10,898
Cash and cash equivalents at beginning of period		37,166			40,489			29,591
Cash and cash equivalents at end of period		36,091			37,165			40,489

F-8

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. LEGAL ASPECTS OF THE ADMINISTRATOR

AFP Provida S.A. is an open corporation and legally domiciled at 100 Pedro de Valdivia Avenue, 16th floor, commune of Providencia in Santiago de Chile. The terms “AFP Provida”, “Provida” and “Company”, refer to the Pension Funds Administrator AFP Provida S.A., unless otherwise stated. References to “AFP” or “AFPs” refer to private pension funds administrators in general.

AFP Provida was constituted by public deed granted by Mr. Patricio Zaldivar Mackenna, Notary of Santiago, on March 3, 1981, and authorized to initiate activities by the Superintendency of Pensions, through Resolution No. E-006/81 of April 1, 1981.

The sole objective of the Company is to administrate Provida’s Pension Funds Types A, B, C, D and E, under the terms established in Decree Law 3.500 of 1980 and its amendments, and to provide the services as established therein. From 1994 onward, through Law 19.301, the business of the AFPs was amplified by allowing them to constitute affiliate corporations. Likewise, they were allowed to invest in Corporations constituted as central securities depositories referred to in Law No. 18,876.

On June 13, 1983, AFP Provida was registered in the Securities Registry of the Superintendency of Securities and Insurance (SVS) under number 0211, initiating affiliation activities into the system on May 2, 1981, and collecting contributions from June 1 of the same year.

AFP Provida is a subsidiary of BBVA Inversiones Chile S.A., a Chilean entity controlled by Banco Bilbao Vizcaya Argentaria S.A. (Spanish Entity).

Business activities of AFP Provida are regulated by the Superintendency of Pensions.

NOTE 2. GENERAL INFORMATION

a) Regulation of the Pension System

Pension Funds Administrators are corporations whose sole and exclusive objective is to administrate Pension Funds and grant and administrate their benefits and services as required by law. They are subject to the rules and regulations of Decree Law 3,500 of 1980 and, in supplementary form, the provisions of Law No. 18,046 of 1981, its amendments and regulations.

Law No. 20,255, which became effective on July 1, 2009, introduced amendments to DL No. 3,500 in relation to the Pension Reform, as well as Law No. 20,366, which presents the benefits of the Solidarity Pension system.

The Superintendency of Pensions is the agency that regulates the Pension Funds Administrators and supervise the compliance with laws and regulations governing them, and also the instructions that the Superintendency issues. The Superintendency of Pensions also monitors the operations of the Administrators in their legal, administrative and financial aspects; applying sanctions for non-compliance with legal and regulatory provisions, and ensures that Administrators be in compliance with the minimum capital and mandatory investment requirements.

b) Economic Activity

AFP Provida is one the largest and oldest private pension funds administrators operating in Chile and has occupied a leading position in the industry of private pension funds administrators from the beginning. AFP Provida is the largest AFP among the six operating in Chile in terms of number of participants, contributors, funds under management, total salaries subject to contributions and number of branch offices. The Chilean private pension funds system was created in May 1981, when Decree Law No. 3,500 of November 13, 1980 (the “Pension Law”) was implemented to replace the old social security system.

To strengthen its competitive position, Provida, like other large AFPs, merged with smaller AFPs in order to increase its market share and reach scale economies.

F-9

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On May 2, 1995, through Resolution No. E-107-95, the Superintendency of Pensions authorized the merger with El Libertador Pensions Fund.

On May 28, 1998, Provida acquired a 99.99% ownership interest of AFP Unión S.A. (“AFP Unión”) from Inversiones Interamericana S.A. Resolution No. E-146-98 authorized it to merge with AFP Provida and their respective pension funds on June 1, 1998.

On March 18, 1998, Corp Group Pensions acquired an 89.1% ownership interest of AFP Protección S.A. (“AFP Protección”); subsequently, on January 1, 1999, Provida acquired AFP Protección’s ownership interest held by Corp Group Pensions and by minority shareholders. Resolution No. E-156-98 authorized the merger of AFP Protección S.A. and AFP Provida and its respective pension funds on January 1, 1999.

These mergers were successful because Provida could sustain the increase in its market share achieved through these acquisitions. In figures, this is reflected by the growth of its market share in terms of participants from 29% before the mergers up to 40% and from 20% up to 29% in terms of funds under management in 2011. AFP Provida continues leading the pension funds industry with funds under management of MUS$39,253 and a portfolio of 3.48 million participants, equivalent to a 29.0% and 38.8% of the market shares, respectively to December 31, 2011.

In addition, starting in 1993, Provida began to participate in private pension funds systems in other Latin American countries. Currently, the Company held ownership interests in AFP Horizonte (Peru), AFP Génesis (Ecuador) and Afore Bancomer (Mexico) through its wholly-owned subsidiary Provida Internacional. Locally, it is an important shareholder of the Centralized Securities Depository (“DCV”) and of PreviRed.com, an entity that offers online services for collection of pension fund contributions. Furthermore, in January 2002, after being granted the administration of the Unemployment Insurance on behalf of a consortium comprised of all AFPs, a new company known as the Administradora de Fondos de Cesantia de Chile S.A. (“AFC”) was created that started operations on October 1, 2002, and in which AFP Provida holds a 37.8% ownership interest.

The law requires that all AFPs have one single social objective and are authorized to provide the following services:

Collect and administrate contributions made by participants - The collection and administration service that AFPs provide refers to both mandatory and voluntary contributions made by participants.

Invest contributions of participants in pension funds administrated by the AFP - In terms of the general objective of its investing activities, Provida administrates the investment portfolios composed of participants contributions, seeking the higher possible returns based on the risk level and terms for the profile of these participants. For this purpose and according to prevailing regulations, participants can choose from five types of funds that allow them to maximize their expected pension in accordance with their specific risk profile. The types of funds differentiate themselves, as stipulated by law, by the percentage invested in variable income securities. Hence, the funds are classified from Fund Type A, with the highest level of variable income securities, to Fund Type E, which includes a maximum 5% invested in variable income. Regulation establishes a series of restrictions on the investing activities that may be carried out in each fund in order to ensure that this differentiation is maintained among the funds according to the variable income risk permitted in each one.

Manage life and disability benefits for participants - Until June 2009, Provida contracted insurance to cover its obligation to provide life and disability benefits for its participants. The selection of the insurance company was performed through a competitive public bidding process open to all companies with life insurance license in Chile and it was designed to deliver the requested coverage under the best terms possible.

In May 2009, the bidding process for life and disability insurance was carried out, for a 12-month coverage period beginning on July 1, 2009. The cost of the insurance under this new format was 1.87% of the contributable salaries of participants in the AFPs. Therefore, since Provida no longer provided coverage of this insurance, the Company reduced the fees charged to its participants from 2.64% to 1.54% over contributable salaries beginning July 2009.

In May 2010, the second bidding process for life and disability insurance was held by the AFPs for the period July 2010-June 2012. The new rate was reduced to 1.49% of the contributable salaries.

F-10

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Provide an old age pension for participants - The service of providing old age pensions stipulates that each AFP must furnish the specific benefits of old age pensions to its participants who meet the legal retirement age requirement of 60 years for women and 65 years for men.

Finally, the last change introduced by the Pension Reform in 2010 refers to the bidding process of all new participants entering to the private pension system over a 24-month period. This change was adopted to motivate price competition so as to obtain lower commissions for the participant; to generate greater price sensitivity to the demand; to ease the entry of new entities into the AFP industry; and to safeguard the participants’ pensions.

This bid is awarded to the AFP offering the lowest fee commission rate (lower than to those prevailing at the time of the bid) for a 24-month period, over which such AFP may not modify its commissions and applies them to its current portfolio.

In January 2010, the first bidding process was carried out for the administration of pension accounts of new participants entering the system over the next 24 months. The administrators competing in this process were: AFP Cuprum S.A., AFP Habitat S.A., AFP Planvital S.A. and AFP Modelo S.A. On February 1, 2010, it was informed that AFP Modelo had been awarded the bid since it presented an offer with the lowest fee commission of 1.14%.

In January 2012 the second bidding process was carried out for the administration of pension accounts of new participants for the next 24 months. This time, the administrators competing in such process were: AFP Regional S.A. (legally incorporated, but it has not started operations yet), AFP Planvital S.A. and AFP Modelo. On January 30, 2012 it was informed that AFP Modelo had presented the lowest fee commission of 0,77%, thus it had again been awarded the administration of pension accounts, thus starting August 1, 2012, new participants who will be affiliated to AFP Modelo over the next 24-months.

Provida believes it has the competitive advantages to successfully face the new conditions of the industry, as well as the support of the BBVA Group, a leader in the Latin American pension market. In addition, Provida has implemented all of the processes and developments conducive to fully comply with the amendments of the Pension Reform Law and is continuously training its employees in order to provide the best service to its customers.

NOTE 3.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

a) New and revised IFRS effective in the current year

The following new and revised IFRS have been adopted in these financial statements:

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

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

Amendments and New Interpretations	Effective date
IFRIC 14 IAS 19: The limit on a defined benefit asset, minimum funding requirements and their Interaction	Annual periods beginning on or after January 1, 2011

F-11

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amendments to IAS 24, Related Party Transactions

On November 4, 2009, the IASB issued Amendments to IAS 24 Related Party Disclosures. The revised standard simplifies the disclosure requirements for entities that are controlled, jointly controlled, or significantly influenced by a governmental entity (referred to as related government-related entities) and clarifies the definition of related entity.

The revised standard is effective for annual periods beginning on or after January 1, 2011 and requires retrospective application. Therefore, in the year of initial application, disclosures for the comparative period will need to be restated. Moreover, earlier application is permitted, either of the whole revised standard or of the partial exemption for government-related entities. If an entity applies either the whole standard or the partial exemption for a period beginning before January 1, 2011, it is required to disclose that fact.

Management estimates that these amendments are not applicable to the Company, as it is not a government –related entity.

Amendment to IAS 32, Financial Instruments: Presentation

On October 8, 2009, the IASB issued an amendment to IAS 32 Financial Instruments: Presentation entitled Classification of Rights Issues, on the classification of rights issues (e.g. rights, options, or warrants). Under the amendments, rights, options and warrants otherwise meeting the definition of equity instruments in IAS 32.11 issued to acquire a fixed number of an entity’s own non-derivative equity instruments for a fixed amount in any currency are classified as equity instruments provided the offer is made pro-rata to all existing owners of the same class of the entity’s own non-derivative equity instruments. The amendment is effective for annual periods beginning on or after February 1, 2010 with earlier application permitted.

Management estimates that these amendments have not had any impact in the accounting policies during the period.

Annual Improvements to IFRS 2010

On May 6, 2010, the IASB issued Improvements to IFRSs 2010 – Incorporating amendments to seven International Financial Reporting Standards (IFRSs). This is the third collection of amendments issued under the annual improvements process, which is designed to make necessary, but non-urgent, amendments to IFRSs. The amendments are effective for annual periods starting on or after July 1, 2010 and for annual periods starting on or after January 1, 2011.

Management estimates that these amendments have not had any impact in the accounting policies during the period.

IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

On November 26, 2009, the International Financial reporting Interpretations Committee (IFRIC) issued IFRIC 19 Extinguishment of Liabilities to Equity Instruments. This interpretation provides guidance on how to account for the extinction of financial liabilities by issuing equity instruments. The interpretation indicates that the issuance of equity instruments to extinguish an obligation constitutes paid consideration. This consideration should be measured at fair value of the equity instrument issued, unless that fair value is not readily determinable, in which case the equity instruments should be measured at fair value of the obligation extinguished. This interpretation is effective for annual periods beginning on or after July 1, 2010.

The application of these new Interpretation has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

F-12

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amendment to IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

On December 2009 the IASB issued Prepayments of Minimum Funding Requirements, amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (IFRIC 14). The amendment has been made to remedy an unintended consequence of IFRIC 14 where the entities are prohibited in some circumstances to recognize as an asset the advance payments for minimum funding contributions. This amendment is effective for annual periods beginning on or after January 1, 2011.

Management estimates that these amendments have not had any impact in the accounting policies during the period.

b) New and revised IFRS in issue but not yet effective

As of the date of issuance of these consolidated financial statements, the following accounting pronouncements have been issued by the IASB. These pronouncements are new pronouncements or amendments, revisions, modifications, or interpretations of existing pronouncements. Further, the application of the below pronouncements is not mandatory until the dates noted below.

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

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

New Interpretations	Mandatory application for:
IFRIC 20, Stripping costs in the production phase of a surface mine.	Annual periods beginning on or after January 1, 2013.

IFRS 9, Financial Instruments

On November 12, 2009, the IASB issued IFRS 9 Financial Instruments (IFRS 9) as the first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Under this standard, all financial instruments

F-13

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs. Moreover, IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortized cost and those measured at fair value. Classification is made at the time the financial asset is initially recognized, namely when the entity becomes a party to the contractual provisions of the instrument. As for debt instruments, a debt instrument that meets business model and cash flow characteristics tests can be measured at amortized cost (net of any write-down for impairment). All other debt instruments must be measured at fair value through profit or loss.

Additionally, on 28 October 2010, the IASB published a revised version of IFRS 9. The revised standard retains the requirements for classification and measurement of financial assets that were published in November 2009 but adds guidance on the classification and measurement of financial liabilities. As part of its restructuring of IFRS 9, the IASB also copied the guidance on derecognition of financial instruments and related implementation guidance from IAS 39 to IFRS 9.

The guidance included in IFRS 9 on the classification and measurement of financial liabilities is unchanged from the classification criteria for financial liabilities currently contained in IAS 39. In other words, financial liabilities will continue to be measured either wholly, or in part, at amortized cost or at fair value through profit or loss (FVTPL). The concept of bifurcating embedded derivatives from a financial liability host contract also remains unchanged. Financial liabilities held for trading would continue to be measured at FVTPL, and all other financial liabilities would be measured at amortized cost unless the fair value option is applied, using the existing criteria in IAS 39.

However, there are two differences compared to IAS 39:

• The presentation of the effects of changes in fair value attributable to a liability’s credit risk; and

• The elimination of the cost exemption for derivative liabilities to be settled by delivery of unquoted equity

On December 16, 2011, the IASB issued Mandatory Effective Date of IFRS 9 and Transition Disclosures, deferring the mandatory effective date of both the 2009 and 2010 versions to annual periods beginning on or after January 1, 2015. Prior to the amendments, application of IFRS 9 was mandatory for annual periods beginning on or after January 1, 2013. The amendments modify the requirements for transition from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9. In addition, the amendments also modify IFRS 7 Financial Instruments: Disclosures to add certain requirements in the reporting period containing the date of initial application of IFRS 9.

Management believes that this new standard will be adopted in its financial statements for the period beginning January 1, 2015. Last, Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

IFRS 10, Consolidated Financial Statements

On May 12, 2011, the IASB issued IFRS 10 Consolidated Financial Statements, which is a replacement of IAS 27 Consolidated and Separate Financial Statements and SIC – 12 Consolidation – Special Purpose Entities. The objective of IFRS 10 is to have a single basis for consolidation for all entities, regardless of the nature of the investee, and that basis is control. The definition of control includes three elements: power over an investee, exposure or rights to variable returns of the investee and the ability to use power over the investee to affect the investor’s returns. NIIF 10 provides detailed guidance on how to apply the control principle in a number of situations, including agency relationships and holdings of potential voting rights. An investor would reassess whether it controls an investee if there is a change in facts and circumstances. IFRS 10 replaces those parts of IAS 27 that address when and how an investor should prepare consolidated financial statements and replaces SIC – 12 in its entirety. The effective date of NIIF 10 is January 1, 2013, with earlier application permitted under certain circumstances.

Management believes that this new standard will be adopted in its financial statements for the period beginning January 1, 2013. Last, Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

IFRS 11, Joint Arrangements

On May 12, 2011, the IASB issued IFRS 11 Joint Arrangements which supersedes IAS 31 Interests in Joint Ventures and SIC – 13 Jointly Controlled Entities – Non-Monetary Contributions by Ventures. IFRS 11 classifies joint

F-14

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

arrangements as either joint operations (combining the existing concepts of jointly controlled assets and jointly controlled operations) or joint ventures (equivalent to the existing concept of a jointly controlled entity). A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. NIIF 11 requires the use of the equity method of accounting for interests in joint ventures thereby eliminating the proportionate consolidation method. The effective date of IFRS 11 is January 1, 2013, with earlier application permitted under certain circumstances.

IFRS 12, Disclosure of Interests in Other Entities

On May 12, 2011, the IASB issued IFRS 12 Disclosure of Interests in Other Entities which requires extensive disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 establishes disclosure objectives and specifies minimum disclosures that an entity must provide to meet those objectives. An entity should disclose information that helps users of its financial statements evaluate the nature and risks associated with interests in other entities and the effects of those interests on its financial statements. The disclosure requirements are extensive and significant effort may be required to accumulate the necessary information. The effective date of IFRS 12 is January 1, 2013 but entities are permitted to incorporate any of the new disclosures into their financial statements before that date.

IAS 27 (2011), Separate Financial Statements

IAS 27 (2008) Consolidated and Separate Financial Statements has been amended for the issuance of IFRS 10 but retains the current guidance for separate financial statements.

IAS 28 (2011), Investment in Associates and Joint Ventures

IAS 28 Investments in Associates has been amended for conforming changes based on the issuance of IFRS 10 and IFRS 11.

IFRS 13, Fair Value Measurement

On May 12, 2011, the IASB issued IFRS 13 Fair Value Measurement, which establishes a single source of guidance for fair value measurement under IFRS. The Standard applies to both financial and non-financial items measured at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” (i.e., an exit price). IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, and applies prospectively from the beginning of the annual period in which the Standard is adopted.

F-15

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amendments to IAS 1, Presentation of Financial Statements

On June 16, 2011, the IASB issued Presentation of Items of Other Comprehensive Income (amendments to IAS 1). The amendments retain the option to present profit or loss and other comprehensive income in either a single continuous statement or in two separate but consecutive statements. Items of other comprehensive income are required to be grouped into those that will and will not subsequently be reclassified to profit or loss. Tax on items of other comprehensive income is required to be allocated on the same basis. The measurement and recognition of items of profit or loss and other comprehensive income are not affected by the amendments, which are applicable for reporting periods beginning on or after July 1, 2012 with earlier application permitted.

Management believes that these amendments will be adopted in its financial statements for the period beginning January 1, 2013. Last, Management believes that the adoption of these amendments would not have an impact in its financial statements.

Amendments to IAS 12, Income Taxes

On December 20, 2010, the IASB published Deferred Tax: Recovery of Underlying Assets – Amendments to IAS 12. The amendments provide an exception to the general principle in IAS 12 Income Taxes (IAS 12) that the measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which the entity expects to recover the carrying amount of an asset.

Specifically, the amendments provide an exception to the general principles of IAS 12 for investment property measured using the fair value model in IAS 40 Investment Property (IAS 40). For the purposes of measuring deferred tax, the amendments introduce a rebuttable presumption that the carrying amount of such an asset will be recovered entirely through sale. The presumption can be rebutted if the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits over time, rather than through sale. The exception also applies to investment property acquired in a business combination if the acquirer applies the fair value model in IAS 40 subsequent to the business combination. The amendments also incorporate the requirements of SIC 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets into IAS 12, i.e., deferred tax arising on a non-depreciable asset measured using the revaluation model in IAS 16 Property, Plant and Equipment should be based on the sale rate. The effective date of the amendments is for annual periods beginning on or after January 1, 2012. Earlier application is permitted.

Management believes that these amendments will be adopted in its financial statements for the period beginning January 1, 2012. Last, Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

Amendment to IAS 19, Employee Benefits

On June 16, 2011, the IASB issued amendments to IAS 19 Employee Benefits (2011) that change the accounting for defined benefit plans and termination benefits. The amendments require the recognition of changes in the defined benefit obligation and in plan assets when those changes occur, eliminating the corridor approach and accelerating the recognition of past service costs. Changes in the defined benefit obligation and plan assets are disaggregated into three components: service costs, net interest on the net defined benefit liabilities (assets) and remeasurements of the net defined benefit liabilities (assets). Net interest is calculated using high quality corporate bond yield. This may be lower than the rate used to calculate the expected return on plan assets, resulting in a decrease in net income. The amendments are effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. Retrospective application is required with certain exceptions.

Management believes that these amendments will be adopted in its financial statements for the period beginning January 1, 2013. Last, Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

Amendment to IAS 32, Financial Instruments: Presentation

On December 2011, the IASB amended the accounting requirements and disclosures related to offsetting of financial assets and financial liabilities by issuing amendments to IAS 32 Financial Instruments: Presentation and IFRS 7

F-16

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments: Disclosures. These amendments are the result of the IASB and US Financial Accounting Standards Board (‘FASB’ undertaking a joint project to address the differences in their respective accounting standards regarding offsetting of financial instruments. The new disclosures are required for annual and interim periods beginning on or after January 1, 2013 and the clarifying amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014. Both require retrospective application for comparative periods.

Management believes that these amendments will be adopted in its financial statements for the periods beginning January 1, 2013 and 2014, respectively. Last, Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

Amendments to IFRS 1, First Time Adoption of IFRS

On December 20, 2010, the IAS amended IFRS 1 First Time Adoption of IFRS to:

• Provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs. This amendment replaces references to a fixed transition date of ‘January 1, 2004’ with ‘the date of transition to IFRSs’ so that first-time adopters of IFRS do not have to apply the derecognition requirements in IAS 39 retrospectively from an earlier date. It also relieves first-time adopters from recalculating ‘day 1’ gains and losses on transactions occurring before the date of transition to IFRS.

• Provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time. In accordance with the amendment, when an entity’s date of transition to IFRS is on or after the functional currency normalization date, the entity may elect to measure all assets and liabilities held before the functional currency normalization date at fair value on the date of transition to IFRS and use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. Entities making use of this exemption should describe the circumstances of how, and why, their functional currency became subject to severe hyperinflation and the circumstances that led to those conditions ceasing.

The amendments require mandatory application for annual periods starting on or after July 1, 2011, with early adoption permitted.

Management believes that these amendments will not have an impact on its financial statements as the Company is not considered a first time adopter once these amendments become effective.

Amendments to IFRS 7, Financial Instruments: Disclosure

On October 7, 2010, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosure that increases the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures of transactions where a financial asset is transferred but the transferor retains some level of continuing exposure (referred to as ‘continuing involvement’) in the asset. The amendments also require disclosure where transfers of financial assets are not evenly distributed throughout the period (e.g., where transfers occur near the end of a reporting period). The amendments are applicable for annual periods beginning on or after July 1, 2011, with early adoption allowed. Moreover, the disclosures are not required for any of the periods presented that start before the initial adoption date.

Management has not had the opportunity to consider the potential impact of the adoption of these amendments.

IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

On October 19, 2011, the IFRS Interpretations Committee published IFRIC 20 Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine (‘IFRIC 20’). IFRIC 20 applies to all types of natural resources that are extracted using the surface mining activity process. The costs from a stripping activity which provide improved access to ore should be recognized as a non-current asset (“stripping activity asset”) when certain criteria are met, whereas the costs of normal operational stripping activities should be accounted for in accordance with the principles in IAS 2 Inventories. The stripping activity asset should be initially measured at cost and subsequently carried at cost or its revalued amount less depreciation and amortization and impairment losses. The interpretation is effective for annual periods beginning on or after January 1, 2013, with early application permitted.

F-17

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Management believes that this new interpretation will not have an impact on its financial statements as the Company’s business activities do not consider the extraction of natural resources.

NOTE 4.

ACCOUNTING POLICIES

a. Statement of compliance with International Financial Reporting Standards (IFRS)

The consolidated financial statements as of December 31, 2011, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (hereinafter “IASB”)

These consolidated financial statements presents fairly the financial position of AFP Provida as of December 31, 2011 and December 31, 2010, as well as the results of operations, the changes in equity and cash flows for the years then ended.

The consolidated financial statements of AFP Provida S.A. for fiscal year 2011 were approved by the Board of Directors at meeting held on February 28, 2012, after that the consolidated financial statements will be submitted to a General Shareholders Meeting that will take place on April 27, 2012, to be approved.

Figures on financial statements are expressed in millions of Chilean pesos (MCh$) rounded up. In case of negative figures, they are reported with the minus sign ( ).

b. Basis of consolidation

The consolidated financial statements include the financial statements of Provida and its subsidiaries. The subsidiaries’ financial statements have been prepared as of the same date as those of Provida, and using uniform accounting policies. When necessary, adjustments are made to uniform any difference between accounting policies that may exist.

All balances and transactions between the subsidiaries and Provida have been eliminated in consolidation. In case of balances and transactions between associated companies and Provida, these are eliminated to the extent of Provida’s direct or indirect interest in these companies.

b.1. Consolidation principles

Subsidiaries are consolidated from the effective date on which Provida takes control of the company and their consolidation ceases from the date when Provida loses control. In case control is lost over a subsidiary, the consolidated financial statements will include the results of the part of that year in which Provida had control over it.

b.2. Subsidiaries

The consolidated financial statements incorporate the financial statements of Provida and entities controlled by it (its subsidiaries). Control is achieved where Provida has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Non-controlling interests in the equity and comprehensive income of subsidiaries are identified separately from the Provida’s equity and is presented in line item “equity attributable to non-controlling interests” within the statement of financial position and in line item “gain (loss) attributable to non-controlling interest within the consolidated statements of comprehensive income, respectively.

The following table sets forth the subsidiaries incorporated in the consolidated financial statements of Provida as of December 31, 2011, 2010 and 2009:

F-18

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

		Ownership interest %
Subsidiary	Country	12.31.2011	12.31.2010	12.31.2009
Provida Internacional S.A.	Chile	99.99%	99.99%	99.99%
A.F.P. Génesis Ecuador	Ecuador	99.99%	99.99%	99.99%

b.3. Associates

An associate is an entity over which Provida has, directly or indirectly, significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. As a general rule, it is presumed that significant influence is exercised in entities, in which Provida holds either directly or indirectly, 20% to 50% of the ownership interest. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting.

The following table sets for the associates incorporated in the consolidated financial statements of Provida as of December 31, 2011, 2010 and 2009:

		Ownership interest %
Subsidiary	Country	12.31.2011	12.31.2010	12.31.2009
Soc.Adm. de Fondos de Cesantia de Chile S.A.	Chile	37.80%	37.80%	37.80%
Inversiones DCV S.A.	Chile	23.14%	23.14%	23.14%
Servicio de Adm- Previsional S.A.	Chile	37.87%	37.87%	37.87%
AFP Horizonte (1)	Peru	15.87%	15.87%	15.87%

(1) Significant influence is exercised indirectly through entities of the BBVA Group.

b.4. Translation of financial statements of foreign operations

Translation of financial statements of subsidiaries with functional currencies other than the Chilean peso has been made as follows:

§ Assets and liabilities are translated at closing exchange rate between the local currency and the Chilean peso.

§ Income and expense items of the foreign operations are translated at the average exchange rate between the corresponding local currency of each foreign operation and the Chilean peso.

§ Equity accounts, except for net income for the year, must be translated at the historical exchange rates between the corresponding local currency of each foreign operation and the Chilean peso.

All translation differences resulting from this process are classified and accumulated as a separate component in Equity denominated “Reserves of exchange differences on translation”.

c. Key assumptions for estimating uncertainties

The information contained in these consolidated financial statements is the responsibility of the Company’s Board of Directors which expressly states that each and every principle and criterion included in the IFRS has been fully applied.

On preparing the consolidated financial statements, specific estimates made by the Company’s management were used to measure certain assets, liabilities, income, expenses.

These estimates basically refer to:

§ Measurement of tangible and intangible assets, including Goodwill, to determine any losses resulting from their impairment.

§ Useful lives of properties, plants and equipment and intangibles.

§ Information available to determine the fair value of financial instruments.

§ Probability of occurrence and estimate of uncertain amount of liabilities or contingent liabilities.

F-19

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Taxable income of the companies included in the consolidated financial statement, to be declared before the respective tax authorities in the future, that have served as a base to record different balances related to income tax in these consolidated financial statements.

Although these estimates were made according to the best information available at the time of these consolidated financial statements on the facts analyzed, it is possible that events which may occur in the future may obligate to modify them (increase or decrease) in future periods. This would be made prospectively, recognizing the effects of the change in estimates in the corresponding subsequent consolidated financial statements.

d. Functional currency and presentation currency.

The Company has defined that its functional currency is the Chilean peso. In order to determine the functional currency, the requirements of IAS 21, The Effects of the Changes in Foreign Exchange Rates, were applied and where both primary factors (revenues and expenses) and secondary factors (financing and currency of collection from operational activities). The presentation currency of the consolidated financial statements is the Chilean peso.

e. Foreign currency transactions

Transactions that each individual group entity makes in a currency other than its functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. Exchange differences that may arise during the year when retranslating the transactions from the exchange rate prevailing at the dates of the transactions and the exchange rate prevailing at the time of collection or payment are recorded as exchange differences in the statement of comprehensive income.

Likewise, at the end of each reporting period, the translation of balances of accounts payable or receivable denominated in a currency other than the functional currency of an individual group entity is made according to the closing exchange rate. Exchange differences are recognized in the statement of comprehensive income.

f. Cash and cash equivalents

Cash and cash equivalents include the balances held in mutual funds and in banks, sight deposits and short-term highly liquid investments, with an insignificant risk of changing values and original maturity of no more than three months from their date of acquisition.

The direct method was used to prepare the consolidated cash flow statement.

The following expressions are used in the consolidated cash flow statements:

§ Cash flows are inflows or outflows of cash and cash equivalents.

§	Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

§	Operating activities are the principal revenue-producing activities of Pension Funds Administrators and other activities that are not investing or financing activities.

§	Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

§	Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

F-20

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

g. Financial Assets

Financial assets held by Provida are classified into the following categories: financial assets ‘at fair value through profit and loss’ (FVTPL)”, ‘loans and receivables’, ‘held-to-maturity’ investments and ‘available-for-sale’ (AFS) financial assets. The classification depends on the nature and purpose of the financial assets and is determined on initial recognition. All regular purchases or sales of financial assets are recognized and derecognized on a trade date basis.

g.1. Effective interest method:

The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest rate basis for financial assets other than those financial assets classified as at FVTPL.

g.2. Financial assets at FVTPL:

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is held for trading if it has been acquired principally for the purpose of selling it in the near term. A financial asset other than those held for trading are designated as at FVTPL upon initial recognition if the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with Provida’s documented risk management policies or investment strategy, and information about the mandatory investments is provided internally on that basis.

Financial assets at FVTPL are stated at fair value, with any gains and losses arising on remeasurement recognized in profit or loss.

g.3. Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivable are measured at amortized cost using the effective interest rate method, less any impairment. Interest income is recognized by applying the effective interest rate.

g.4. Held-to-maturity investments:

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that Provida has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest rate method less any impairment.

g.5. Financial assets available-for-sale (‘AFS’):

AFS are non-derivative financial assets that are either specifically designated as available-for-sale or are not classified as loans and accounts receivable, held-to-maturity, investments or financial assets at fair value through profit and loss.

All financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets, other than those financial assets at FVTPL, are added to the fair value on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at FVTPL are recognized immediately in profit or loss.

Provida does not have any held-to-maturity investments or financial assets available-for-sale as of December 31, 2011, 2010 and 2009.

The Company has classified as loans and receivables is “Trade and other receivables”. Trade and other receivables are assessed for indicators of impairment at the end of each reporting period. Trade and other receivables are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows of the asset have been affected. Objective evidence of impairment for trade and other receivables could include Provida’s past experience of collecting payments, an increase in the number of delayed payments past the average credit period of 60 days. The carrying amount of trade and other receivables is reduced by an impairment loss through the use of an allowance

F-21

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

account. When trade and other receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. For all periods presented there are no objective evidence of impairment in trade and other receivables.

g.6. Derecognition of financial assets

Provida derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If Provida neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, it recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If it retains substantially all the risks and rewards of ownership of a transferred financial asset, it continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and is recognized in profit or loss.

h. Mandatory investments

The principal financial investment of Provida are mandatory investments which aims to guarantee the minimum return required by law equal to 1% of investment in shares of each pension funds under administration. The mandatory investment requirement is calculated in according with instructions issued by the Superintendency of Pensions. Mandatory investments represent approximately 50% of total consolidated assets as of December 31, 2011, 2010 and 2009, respectively.

As established in D.L. 3500, the mandatory investment’s purpose is to provide an actual minimum rate of return over the investment portfolios for each one of the pension funds. This minimum rate of return is based on the weighted average real rate of return of all pension funds of the AFP system, over a 36-month period. This requirement has been determined in accordance with the different portfolio compositions, requiring those with a greater investment in variable income securities and therefore potentially subject to higher volatility (Funds Type A and B), a larger margin to achieve the requirement. If for a certain month the rate of return of a pension fund was lower than the minimum rate of return requirement, the AFP is required to cover the difference within five days of such determination by the Superintendency of Pensions. If mandatory investments are used to fund any deficit in the required level of return, the AFP must replenish them within fifteen days. If a deficit is not covered or if mandatory investments are not replenished, the AFP will be liquidated by the Superintendency of Pensions.

Although gains and losses on mandatory investments have certain risks to the stability of the Company’s results in view of the evolution of the returns obtained by different portfolio compositions in the pension funds, the greatest risk associated with mandatory investments is the non-compliance with the minimum rate of return requirement. Provida’s risk management policies for mandatory investment are described herein below.

i. Inventories

Inventories held by Provida are comprised of office supplies and forms.

The inventories are stated at the lower of cost and net realizable value. The net realizable value is the estimated selling price in the normal course of business less all estimated costs of completion and costs necessary to make the sale. The amount resulting from any adjustment of measuring inventories such as damages, or obsolescence, up to its realizable value, as well as losses for other concepts, will be recognized as expenses in the period in which the loss occurs. Any subsequent recovery in its net realizable value will be as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

F-22

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The carrying amount of inventories will be derecognized from the statement of financial position and recorded as an expense in the period when consumption of any inventory occurs.

j. Intangible Assets

j.1. Goodwill

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquire, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill arising on acquisition of a business is carried at cost as established at the date of acquisition of the business less impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to a cash-generating unit that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. The recoverable amount of a cash-generating unit is equal to the higher value between the fair value less costs to sell and its value in use. Value in use is calculated as the discounted value of the cash flow projections and is based on the most recent budgets approved for the next ten years. The principal hypotheses are a sustainable growth rate to extrapolate the cash flows indefinitely, and the discount rate used to discount the cash flows is equal to the cost of the capital assigned to each cash-generating unit, which is made up of the risk-free rate plus a risk premium. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognized for goodwill is no reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

j.2. Software licenses

Software licenses acquired are carried at costs (including expenditures incurred to acquire and prepare them for its specific use) less accumulated depreciation and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life of IT applications is five years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with effect of any changes in estimate being accounted for on a prospective basis.

j.3. Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less cumulated amortization and accumulated impairment loss.

On the date of transition to IFRS, Provida determined that the acquisition of Chilean AFPs - El Libertador, Unión and Protección- resulted in the recognition of goodwill under Chilean GAAP, such goodwill was reclassified in the opening IFRS statement of financial situation as intangible assets since those acquisitions under IFRS would require separate measurement and recognition of an intangible asset acquired known as Customers List. The reclassification was made for an amount equivalent to the goodwill recorded for Chilean GAAP purposes. The estimated useful life of the Customers List is 20 years which is in line with the goodwill amortization period recorded for Chilean GAAP purposes.

k. Property, plant and equipment

Items of property, plant and equipment are measured at acquisition cost, less accumulated depreciation and impairment losses, if any.

F-23

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Depreciation is recognized so as to write off the cost less their residual values, using the straight-line. Land is not depreciated. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in profit or loss.

The useful life of each class of property, plant and equipment, is as follows:

Classes of Property, Plant and Equipment	Years of Useful Life
Buildings:
Tower on Pedro de Valdivia N°100	100
Agustinas N°1490	60
Agencies	40 - 60
Plant and equipment	10 - 5
IT Equipment	5
Fixed installations and accessories	10
Other property, plant and equipment	5

l. Impairment of Tangible and Intangible Assets other than Goodwill

F-24

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

m. Financial Liabilities

Financial liabilities are initially recorded at fair value, net transaction costs. Subsequent to initial recognition, the financial liabilities are recognized at their amortized cost, using the effective interest rate method.

Provida derecognizes financial liabilities when, and only when, its obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

n. Provisions

Provisions are recognized when Provida has a present obligation (legal or constructive) as a result of a past event, it is probable that Provida will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Contingent liabilities are a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or are present obligations that arise from past events but are not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognized in the financial statements; they are only disclosed in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits is remote.

Contingent assets are a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent assets are not recognized in the financial statements but must be disclosed where an inflow of economic benefits is probable.

n.1. Provisions for unfavorable casualty rate:

Until June 30, 2009, the AFPs were required by law to purchase insurance policies to provide its participants life and disability coverage. Life and disability insurance is for those participants who, in case of disability or death, do not have sufficient funds in their individual capitalization account to finance their pensions as required by law, whereby the insurance company, contracted by the AFP, covers the difference in case of death. For cases of partial disability, the AFP must have provisions to cover the deficit three years later once the final determination has been made, taking into account the three years of temporary pension payments that the affiliate receives after the initial disability determination was made. Under the Pension Reform Law, and from October 2008, a participant with total disability status will receive immediate payment, once his/her status has been confirmed by a Medical Commission.

The insurance company makes these calculations at the time of the initial disability determination, three years before it makes the payments to cover the deficit and if required by the final determination, based on information available on that date, including information on rates for life annuities and funds of the participants’ individual capitalization account. If the final determination confirmed the disability status of a participant, the insurance company revises the amount of the initial disability reserve, based on information available at this time.

Towards the end of the 1990’s, Provida observed requirements for additional payments to the insurance company due to an excessive casualty rate reported each year by the insurance company. Provida concluded that, for specific discount rates situations, the estimate made by the insurance company used to provision the amounts for future disability payments underestimated the effective amounts that the Company had to pay.

F-25

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Regulations of the Superintendency of Pensions do not require AFPs to make additional provisions over those amounts reported by the insurance company unless the AFPs have evidence indicating a higher provision. Provida has developed a casualty rate model to more accurately accrue the amounts that will be required to be paid to disabled participants once the final determination is made. The basic assumption of the casualty model is to attempt to use its best estimate at the time of the initial disability determination, using the information it believes will be applicable as to payment (final determination). The variables associated with the model are: disability status, rate of return of pension funds over the three years of the temporarily disabled period, and interest rate prevailing at the moment of payment (expected rate). This estimate differ from that used by insurance companies as which only use information relating to the disabled status of persons at the time of the initial determination, that is, three years before payments.

Therefore, over the term of an insurance contract, the Company measures and accrues the expected cost to the insurer. In fact, through the application of the casualty rate model, the provisions made by Provida with respect to future premium payments to be made to the insurer reflects more accurately the effective payments that will have to make, so that there is a higher correlation between its revenues and expenses for a specific period. The information for the casualty rate model is reviewed monthly, making any modification considered appropriate at that moment.

According to the accounting principle applied by Provida, if the casualty rate calculated by the model is higher than the casualty rate calculated and maintained by the insurance company, then the amounts calculated by the Provida’s model will be used. On the contrary, if the casualty rate calculated by the model is lower than the one calculated by the insurance company, then the amount calculated by the insurance company will be provisioned, which is considered to be the minimum amount under existing regulation.

In view of the lower rates used in the casualty rate model to discount disability payments with regard to the prevailing rates used by the insurance company, the casualty rate calculated by the model is higher than the casualty rate recorded by the insurance company. Therefore, as of December 31, 2011, 2010 and 2009, Provida has recorded a higher expense than the one determined by the insurance company because it believes the amount calculated by the model is the best estimate of the fair value of the obligation.

n.2. Provisions for Employee Benefits

Short-term employee benefits – Short-term benefits include wages, employee vacations, profit-sharing and bonuses payable within twelve months after the end of the period in which the employees render the related service. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably.

Other long-term employee benefits – All employees are entitled to receive years of service award starting with the 5th year employment anniversary and each five years thereafter, up to 30 years. This award is paid in the month when the employee celebrates his/her corresponding employment anniversary. Provida’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognized in profit or loss in the period in which they arise.

Long-term Incentive (LTI) - The General Shareholders’ Meeting of BBVA Bank (controlling parent company) held in Spain on March 13, 2009, approved a Multi-Year Variable Retribution Program of Shares for members of the BBVA Group’s directorship team (“the Program”) which includes several executives of AFP Provida. The Program became effective on April 15, 2009. Liquidation for the LTI 2009-2010 took place on April 15, 2011. Currently, the LTI programs corresponding to 2010-2011 and 2011 are in force.

This Program consists of granting BBVA Bank shares to members of the Group’s executive directors, assigning an initial number of “units” to each one of the beneficiaries. At the end of the Program, the definitive number of shares to be granted will be equal to the result of multiplying the assigned number of “units” by a coefficient between 0 and 2. This coefficient reflects the evolution of specific BBVA Bank’s indicators as compared to the evolution of such indicators of 18 other banks in Europe and the United States.

F-26

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AFP Provida, in order to determine the amount of the obligation to be recorded in its financial statements, for as long as the Program is in force, multiplies the specific number of “units” by the estimated mean price of the share at the time the Program will be settled.

On December 31, 2011, the estimated number of “units” for LTI 2010-2011 was 16,114 that are assigned to 7 AFP Provida’s executives, the amount of which has been recognized on an accrual basis over the term of the Program. Additionally, in the current year the Company has started to accrue the NIO (New incentive for officers) 2011, which includes 18,070 units, assigned to 7 AFP Provida’s executives.

As of December 31, 2011, the expense was MCh$164 due to indicators for the LTI 2010-2011 and NIO were 2.0 and 1.0925, respectively. The LTI 2009-2010 expired on December 31, 2010 and the final indicator was zero, as a result the expense of MCh$67 recognized in 2010 was reversed. These amounts are included in the line item “Employee expenses” in the consolidated statements of comprehensive income.

Provida has not granted any post-employment benefits to its employees.

o. Current taxes and deferred taxes

o.1. Income Tax

In accordance with current tax legislation, the Administrator constitutes provisions for income taxes based on taxable profit for the year, at a tax rate of 20% in December 2011 and 17% in December 2010, as instructed by Chilean Internal Revenue Services, and as required by Decree Law 824 of the Income Tax Law.

On July 31, 2010, Law Nº 20.455 was enacted, in order to finance the reconstruction of the country after the earthquake occurred on February 27, 2010. This law, incorporates temporarily increases tax rates for commercial years 2011 and 2012 (20% and 18.5%, respectively), and returns to an original 17% in 2013.

Current tax for current and prior periods, to the extent unpaid, is recognized as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognized as an asset.

The benefit relating to a tax loss that can be carried back to recover current tax of a previous period shall be recognized as an asset.

o.2. Deferred taxes

Deferred taxes are recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all temporary taxable differences, and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax assets and liabilities are not recognized if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interest in joint ventures, except where Provida is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of the deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively

F-27

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which Provida expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when Provida has a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation and intends to settle current tax liabilities and assets on a net basis.

p. Minimum dividend

Regarding dividends payments, the Board of Directors has agreed to pay an interim dividend in October of each year and a final dividend after the Annual General Shareholders’ Meeting to be held in the following year, for a total amount equal to the legal minimum requirement of 30% but no more than 75% of the profit for the year, which amounts will be dependent on the fulfillment of the forecasted results, cash flow requirements to finance mandatory investments and development of the company and the final profit for the year.

The policy on dividends includes the constitution of an obligation, which will be accrued at the end of each reporting period, when the amount of interim dividends paid against profit for the year is less than the minimum dividend established in the dividend policy agreed on during the General Shareholders’ Meeting. The shortfall will be accrued as a dividend payable.

q. Earnings per share

Basic earnings per share shall be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period. For all periods presented, Provida did not engage in any transactions of any kind that have potential dilutive effects leading to diluted earnings per share that could differ from basic earnings per share.

r. Revenue recognition

Fee income from the Pension Fund is recognized when all the activities relating to the administration of the Pension Funds have been completed. Fee income is not recognized for the Pension Funds’ individual account administration until the contributions have been credited.

s. Information on Capital

Due to the nature of the pension business and its leadership in this market, Provida has significant and sufficient cash flows from fees received from mandatory and voluntary pension savings, allowing it to finance business-related expenses such as employee salaries, administration expenses and life and disability insurance expenses effective until June 30, 2009 in accordance with the Pension Reform Law; in addition to the use of funds associated with the additional constitution of mandatory investments and payment of dividends which are also covered by cash flows generated by its operations, as well as by short-term debts in case of need. These sources of funds have been sufficient to finance the aforementioned requirements, and additional capital requirements are not foreseen in the near term.

In terms of capital regulatory requirements, the Pension Funds Administrators must have a minimum Equity expressed in unidades de fomento or U.F. (inflation-indexed unit of account) according to the number of participants the Administrator has on the date of the financial statements, as shown in the following table:

Number of participants	Number of U.F. required
Less than 5,000	5,000
5,000 – 7,499	10,000
7,500 – 9,999	15,000
10,000 or more	20,000

Since its constitution, Provida has not had any problems complying with the foregoing requirement and, as of December 31, 2011, its Equity under IFRS amounts to U.F. 11,575,263.

F-28

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

t. Risk Management Policy

AFP Provida’s future financial position and results of operations are exposed to foreign currency, interest rates, mandatory investments and life and disability insurance risks. During the normal course of business, Provida manages the risk exposure of its operating and investing activities as described below:

t.1. Foreign currency exchange risk

Provida is exposed to foreign currency exchange rate risks through the foreign operations carried out through its wholly owned subsidiary Provida Internacional. As of December 31, 2011, Provida has invested MUS$72 in foreign operations which, at the same date, have generated MCh$9,092 in profits for Provida.

The devaluation of affiliate companies’ local currencies with respect to the US dollar and the appreciation of the latter with respect to the Chilean peso could adversely affect the share of income recognized by Provida, and hence, its respective profit.

t.2. Interest rate risk

Due to requirements for working capital, the Company may be exposed to minor interest rate risks resulting from financing through credit lines. Current leasing obligations are not subject to interest rate risk since the rates are predefined (fixed) in the respective contracts.

t.3. Mandatory investments

Provida’s principal financial investment is the mandatory investments, constituted by law and equivalent to 1% of pension funds under administration. Provida must keep this 1% invested in shares of each one of the administrated funds. Mandatory investments of the pension funds represented a 52% and 54% of total assets under management of Provida as of December 31, 2011 and December 31, 2010 respectively and, in view of the volatility seen in local and foreign markets where pension funds are invested, the future gains or loss on mandatory investments has posed certain risks to the stability of the Company’s income.

In addition to the aforementioned, it is worthwhile mentioning that mandatory investments are constituted with the purpose of compensating participants in case the Company cannot meet the legal requirement of minimum returns, hence, entailing an equity loss for the AFP if this occurred, since it must additionally replace the 1% reserve with its own resources. Minimum return is calculated in terms of the average returns of the pension fund industry for mobile periods of 36 months.

The risks described above are associated to Provida’s trust management, governed by the objective to optimize the income of each one of the funds for a specific risk level or else to minimize the risk level in order to obtain an objective profit.

In order to attain the foregoing, Provida has a risk management policy in place that defines the activities and criteria it applies to efficiently identify, measure, control and manage the risks associated to fund management. Hence, Provida manages the fund equities according to internal credit risk limits, analyzing expected losses and applying market risk measurements. The latter refers to absolute VaR which measures the probable impact on the different types of funds in case of adverse shocks of instrument prices (fixed income, currencies and variable income). Furthermore, in order to ensure the Company’s solvency, guarantee future benefit payments and comply with minimum return requirements, Provida applies relative VaR over diverging positions between each fund and the system’s model portfolio.

t.4. Life and disability benefits

Life and disability (L&D) insurance is a long-term obligation, given that the benefit promised to disabled participants is granted three years after the first ruling of disability, in the case of partial disability (50% to two thirds of loss of capacities), in other words the final ruling of disability. Up until October 2009, benefits for total disability (more than two thirds of loss of capacities) were also granted after three years.

F-29

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In quantitative terms, the AFP must cover the payment deficit equivalent to the difference between the affiliate’s savings in his individual capitalization account and benefits established by law. These benefits correspond to the current value of a life annuity (equivalent to 70% or 50% of the average taxable income of the affiliate during the last ten years) discounted from the life annuity rates prevailing at the time of payment. Subsequently, the evolution of said interest rates impacts the final value of the payment of the obligation by Provida.

One of the changes introduced by the Pension Reform was the elimination of the individual responsibility of the AFPs regarding L&D insurance benefits. Hence, starting July 1, 2009, a number of insurance companies were awarded the management of L&D insurance for a 12 month period. Subsequently in July 2010, the second bidding process was carried out for the next 24 months. Provida now basically keeps, for the concept of L&D insurance, the obligation of claims pending payment for the period of temporary disability, with the contract currently at the run-off stage.

Additionally, in terms of L&D insurance business, regulation stipulates that the reserves for claims be evaluated at market rate instead of historical rates (minimum of the previous semester), opening up a legal window for insurance companies to voluntarily apply said methodology to old contracts. BBVA Life Insurance, upon request from AFP Provida, resorted to this new regulation since, by doing so, the value of its liabilities would be closer to the actual amount at the time of payment (fair value). Furthermore, upon mutual agreement of the parties (prior to compensation to the insurance company due to the change in conditions), the AFP’s financial performance was modified of its cash surpluses, with a benchmark determined by assets with a similar duration to the liabilities of the insurance.

In view of the changes made in the assets and liabilities management associated to disability insurance, AFP Provida has mitigated the risk associated to the interest rate evolution.

NOTE 5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of December 31, 2011 and December 31, 2010 was MCh$36,091 and MCh$37,166, respectively and is detailed as follows:

	As of December 31,
	2011		2010
	MCh$		MCh$
Time Deposits		28,942		28,778
Cash in banks		7,136		8,219
Cash on hand		13		169
Total cash and cash equivalents		36,091		37,166

Time deposits have a maturity of less than three months from the date of acquisition.

There are no amounts of cash and cash equivalents held by Provida that are not available for its use.

NOTE 6. MANDATORY INVESTMENTS

In order to ensure minimum return requirement of the pension funds, as referred to in article 37 of D.L. 3,500 of 1980, and in compliance with article 40 of the same law, the Administrator must hold an asset known as Mandatory Investment in each Fund Type administrated, equivalent to 1% of each pension fund, which must be invested in shares of the corresponding pension fund.

For all periods presented the Company has complied with the minimum reserve and minimum return requirements.

F-30

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2011 and December 31, 2010, the Administrator held Mandatory Investments for MCh$201,418 and MCh$204,526 in the Pension Funds it administrates, in accordance with the following detail:

	As of December 31,
	2011				2010
	MCh$		Shares		MCh$		Shares
Pension Funds - Type A		32,178		1,285		39,868		1,462
Pension Funds - Type B		35,629		1,595		39,690		1,699
Pension Funds - Type C		89,593		3,869		90,871		3,907
Pension Funds - Type D		33,762		1,676		28,800		1,486
Pension Funds - Type E		10,256		411		5,297		230
Total Mandatory Investment		201,418				204,526

Gains and losses on mandatory investments as of December 31, 2011, 2010 and 2009 were (MCh$3,469), MCh$21,886 and MCh$32,829, respectively and is detailed as follows:

	For the years ended December 31,
	2011			2010		2009
	MCh$			MCh$		MCh$
Gain on mandatory investment held in pension fund Type A		(3,106	)		4,956		8,749
Gain on mandatory investment held in pension fund Type B		(1,700	)		4,878		7,990
Gain on mandatory investment held in pension fund Type C		(378	)		9,314		13,197
Gain on mandatory investment held in pension fund Type D		1,187			2,309		2,551
Gain on mandatory investment held in pension fund Type E		528			429		342
Gain on mandatory investments		(3,469	)		21,886		32,829

NOTE 7. REVENUE

Revenue for the years ended December 31, 2011, 2010 and 2009 is as follows:

	For the years December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Fee income (a)		140,359		130,273		169,365
Other revenue (c)		12,889		17,183		11,808
Total		153,248		147,456		181,173

a. Fee income

Total fee income charged by the Administrator to the Pension Funds it administrates as of December 31, 2011, 2010 and 2009, were MCh$140,359, MCh$130,273 and MCh$169,365 respectively.

Fee income corresponds to the following concepts:

	For the years December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Fees for depositing Mandatory Contributions and APV (Variable fee)		137,664		128,001		167,510
Fees for programmed withdrawals and temporary income (Variable fee)		2,695		2,272		1,855
Total		140,359		130,273		169,365

F-31

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

b. Fees receivable

As of December 31, 2011 and December 31, 2010, Fees Receivable presented within the line item Trade and Other Receivables (see Note 8) corresponded to the following concepts:

	As of December 31,
	2011			2010
Fees Receivable:	MCh$			MCh$
Fund Type A		(1	)		44
Fund Type B		25			60
Fund Type C		184			84
Fund Type D		(15	)		22
Fund Type E		1			4
Total		194			214

c. Other revenues

Other revenues as of December 31, 2011, 2010 and 2009 of the Administrator were as follows:

	For the years December 31,
	2011		2010		2009
Other Revenues	MCh$		MCh$		MCh$
Other revenues - AFP Génesis Ecuador (1)		9,274		8,488		6,839
Insurance contracts settlements (2)		2,151		7,126		3,457
Services rendered by AFC (Unemployment Fund) (4)		491		690		724
Surcharges and collection costs (3)		596		618		560
Revenue for additional contributions (3)		372		261		228
Other revenues		5		-		-
Total		12,889		17,183		11,808

(1) Revenues from fees charged by Ecuadorian subsidiary AFP Genesis for rendering services to administrate the Unemployment Fund.

(2) Other revenues of life and disability insurance originating from the surplus cash of insurance companies, in view of the premium payments made by the Company.

(3) Surcharge and recovery of collection costs for contributions that are not paid on time, benefiting the Administrator under D.L. 3,500, Article 19.

(4) Revenues from services provided and software sold to Administradora de Fondos de Cesantía de Chile S.A. (‘AFC’).

NOTE 8. TRADE AND OTHER RECEIVABLES

As of December 31, 2011 and December 31, 2010, the current and non-current balances of this item are as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Accounts receivable from insurance companies (1)		3,687		-		8,632		-
Fees receivable (2)		194		-		214		-
Accounts receivable from Pension Funds		415		-		144		-
Accounts receivable from the State (3)		192		-		195		-
Other accounts receivable		2,551		329		2,628		132
Total Trade and Other Receivables		7,039		329		11,813		132

(1) Includes items to be recovered from insurance companies (See note 13 f.1)

(2) Includes fees receivable from pension funds (See note 7 b.)

(3) Includes items to be recovered from the State (See note 13 f.2)

F-32

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

a. Accounts receivable from Pensions Funds

The detail of this item is as follows:

	As of December 31, 2011
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Regularization contributions		-		-		194		-		-		194
Banking charges		-		-		2		-		-		2
Indemnization accounts		3		3		5		1		1		13
Programmed withdrawals		2		4		19		78		12		115
Voluntary pensions savings		-		-		91		-		-		91
Total		5		7		311		79		13		415

	As of December 31, 2010
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Regularization contributions		-		-		97		-		-		97
Banking charges		-		-		5		-		-		5
Indemnization accounts		-		-		-		-		-		-
Programmed withdrawals		3		2		7		7		1		20
Voluntary pensions savings		-		-		22		-		-		22
Total		3		2		131		7		1		144

b. Other accounts receivable

The details of this item are as follows:	Years ended as of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Medical leave absences		89		-		123		-
Advances to suppliers		16		-		113		-
Other - AFP Genesis		1,239		-		949		-
Other receivables		1,207		329		1,443		132
Total Other Accounts Receivables		2,551		329		2,628		132

NOTE 9. INVENTORIES

The detail of inventories as of December 31, 2011 and 2010 is as follows.

	As of December 31,
	2011		2010
	MCh$		MCh$
Forms for public use		148		133
Internal manual forms		53		53
Maintenance supplies		34		43
Computer material		68		24
Office supplies		50		20
Data processing forms		20		9
Communications with participants and publicity material		11		7
Cafeteria supplies and products		11		6
Total inventories		395		295

F-33

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. PREPAYMENTS

The detail of current and non-current prepayments as of December 31, 2011 and 2010 is as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Insurance		29		-		-		-
Advertising		-		-		61		-
Advisory services		35		-		11		-
Prepaid expenses		14		-		12		-
Other		391		216		214		366
Total prepayments		469		216		298		366

NOTE 11. BALANCES AND TRANSACTIONS WITH RELATED ENTITIES

All transactions with related parties are approved by the Board of Directors, and have been performed on market conditions or on similar terms to those usually prevailing in the market.

a. Accounts receivable from related entities

As of December 31, 2011 and 2010 the Administrator presented a balance for Accounts Receivable from Related Entities as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
BBVA Seguros de Vida S.A.		5,577		-		6,744		-
BBVA Chile S.A.		173		-		183		-
Soc. Adm. de Fondos de Cesantía Chile S.A.		21		-		84		-
BBVA Comercializadora Ltda.		-		-		-		-
Servicios de Administración Previsional S.A.		436		-		386		-
BBVA Servicios Corporativos Ltda.		1		-		-		-
Total		6,208		-		7,397		-

For all periods presented, no guarantees has been given or received nor has any allowance for doubtful accounts been recorded in respect of accounts receivables from related parties.

F-34

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

b. Accounts payable to related entities

As of December 31, 2011 and 2010, the Administrator presented a balance for Accounts Payable to Related Entities as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
BBVA Seguros de Vida S.A.		17		-		52		-
Servicios de Administracion Previsional S.A. (collection contract and others)		1,061		-		1,470		-
BBVA Chile S.A. (collection contract, pension payments and savings)		133		-		121		-
BBVA España		38		-		43		-
BBVA Inversiones Chile S.A. (CMA)		-		-		4		-
Aplica Soluciones Tecnológicas Ltda		-		-		73		-
Aplica Tecnología Avanzada (former CCR Bancomer)		117		-		110		-
BBVA Servicios Corporativos Ltda.		456		-		-		-
Total		1,822		-		1,873		-

c. Detail of transactions with related parties

Company	Transaction	Amount of transactions							Effect on revenues (expense)
		2011			2010		2009		2011			2010			2009
		MCh$			MCh$		MCh$		MCh$			MCh$			MCh$
BBVA Inversiones Chile S.A.	Purchase of software license Software License		2,832			3,578		735		(566	)		(610	)		(3,069	)
	Software Maintenance Service (CMA)		-			73		612		-			(73	)		(612	)
	Office Rental		1			1		1		1			1			1
	Self service dispenser lease		114			40		22		(114	)		(40	)		(22	)
BBVA Corredores de Bolsa S.A.	Financial services		169			163		150		(169	)		(163	)		(150	)
BBVA Chile S.A.	Rentals (agencies, BBVA Tower)		1,250			1,588		1,894		1,250			1,588			1,894
	Rentals (agencies, Huérfanos and Bandera Tower)		518			543		656		(518	)		(543	)		(656	)
	Community fees as lessor		167			248		156		167			248			156
	Community fees as lessee		210			76		313		(210	)		(76	)		(313	)
	Pension payment service		26			161		821		(26	)		(161	)		(821	)
	Collection contract		4			3		295		(4	)		(3	)		(295	)
	Expense for bank account maintenance		1			46		9		(1	)		(46	)		(9	)
	Savings payment service		50			80		139		(50	)		(80	)		(139	)
BBVA Compañía de Seguros de Vida S.A.	Premiums paid and provisioned		370			649		44,797		(370	)		(649	)		(44,797	)
	Casualty rate provision		(3,031	)		1,690		16,156		3,031			(1,690	)		(16,156	)
	Financial revenue provision		2,151			7,126		3,457		2,159			7,126			3,457
	Insurance settlement		990			933		33,458		-			-			-
Servicio de Administración Previsional S.A.	Electronic collection service		1,624			1,517		1,299		(1,624	)		(1,517	)		(1,299	)
	Young worker subsidy		15			11		11		(15	)		(11	)		(11	)
	DNPA (declaration of non-payment) service		94			85		-		(94	)		(85	)		-
	Password administration		166			73		69		(166	)		(73	)		(69	)
	Data processing		147			519		22		(147	)		(519	)		(22	)
	File transference		14			12		15		(14	)		(12	)		(15	)

F-35

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Company	Transaction	Amount of transactions						Effect on revenues (expense)
		2011		2010		2009		2011		2010		2009
		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
	Technological services	5		7		8		(5	)	(7	)	(8	)
	Pension Reform services and reports	-		-		30		-		-		(30	)
	SAS 70 report	(11	)	12		-		11		(12	)	-
	MAC Service	24		-		-		(24	)	-		-
	Monitoring Service	1		-		-		(1	)	-		-
Administradora de Fondos de Cesantía Chile S.A.	Technological consulting and services	219		235		297		219		235		297
	Technological Supportive Services	271		455		383		271		455		383
	Loans in current account	-		(84	)	(83	)	-		-		-
BBVA Bancomer Servicios S.A.	Data Processing	1,428		1,143		884		(1,428	)	(1,143	)	(884	)
Banco Bilbao Vizcaya Argentaria S.A.	AFP technological platform service	57		43		2		(57	)	(43	)	(2	)
BBVA Servicios Corporativos Ltda.	Outsourcing services for corporate support	5,102		5,524		-		(5,102	)	(5,524	)	-
	Office rentals	491		479		-		491		479		-
	Common Charges as lesee	21		35		-		56		35		-
BBVA Corredora Técnica de Seguros Ltda.	Rental of branch offices	-		-		11		-		-		11
Aplica Soluciones Tecnológicas Chile Ltda.	Technological services	412		73		-		(36	)	(73	)	-

Description of transactions with related parties for the period ended December 31, 2011, 2010 and 2009:

BBVA Inversiones Chile S.A.:

Transactions with this entity in 2011, 2010 and 2009 refer to:

i) Software license contract entered into on December 1, 2005 and new contract in 2010, corresponding to intellectual property rights related to the use, as well as, its instructions of use and functionality, of a software implemented on different operating and administrative processes, amounting to MCh$2,832 as of December 31, 2011, MCh$3,578 as of December 31, 2010 and MCh$735 as of December 31, 2009. During 2011, 2010 and 2009, enhancements for new projects were incorporated amounting to MCh$0, MCh$746 and MCh$742, respectively.

ii) Contract entered into on December 1, 2005 for software maintenance and update services for changes related to new regulations or new requirements. This maintenance service is performed in the Maintenance Center (CMA). During the period, this service amounted to MCh$0 in 2011, MCh$73 in 2010 and MCh$612 in 2009, have been included in the “Miscellaneous other operating expenses” line item.

BBVA Bancomer Servicios (Mexico):

Contract entered into on December 29, 2004 for data processing corresponding to operating and administrative applications. This service is rendered by the regional computing center (CCR). The outstanding balances of MCh$1,428 at December 31, 2011, MCh$1,143 at December 31, 2010 and MCh$884 at December 31, 2009 are included in the “Miscellaneous other operating expenses” line item.

This contract was transferred in 2011 to Aplica Tecnologia Avanzada S.A., as a result of the merger between BBVA Bancomer and BBVA Bancomer Servicios S.A.

BBVA Corredores de Bolsa S.A.: Transactions with this entity are referred to as financial services rendered to Provida.

BBVA Chile S.A.: Transactions with this entity are referred to as rental contracts, collection services, pension payments and saving withdrawals, lines of credit, loans and current accounts.

BBVA Compañía de Seguros de Vida S.A.: On January 1, 2005, BBVA Compañía de Seguros de Vida S.A. was awarded the bid for Provida’s L&D insurance for a coverage period to June 30, 2009.

F-36

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Servicios de Administración Previsional S.A.: This subsidiary renders services to Provida for electronic collection, password administration, data processing, data transference and technological services.

Sociedad Administradora de Fondos de Cesantía de Chile S.A: Provida receives revenues from the AFC (Unemployment Fund) for rendering technological support and technological advisory services.

The Administrators as a group have provided the AFC with a supportive and undividable guarantee of U.F400,000. This guarantee, in accordance with Provida’s equity interest in the company (37.8%), amounts to MCh$3,371 or approximately MUS$6 and was requested so that the AFC could comply with the credit operations with regard to the eventual coverage of bank guarantee letters, expiring on April 25, 2013.

On February 4, 2010, the Administradora de Fondos de Cesantía reimbursed the Administrator with bank guarantee letters for UF 160,000 (MCh$3,567).

Aplica Soluciones Tecnológicas Chile Ltda.: Contract dated January 4, 2010, corresponds to design and development services of the software systems, amounting to MCh$412 as of December 31, 2011 and MCh$133 as of December 31, 2010. During 2011 and 2010, enhancements for new projects were incorporated amounting to MCh$279 and MCh$133 respectively.

BBVA Servicios Corporativos Limitada: Contract for outsourcing the Company’s services. The contract will last for 10 years and is renewable for 10-year periods.

Banco Bilbao Vizcaya Argentaria S.A.: Contract dated December 16, 2009 corresponding to rendering computing services, including consultancy and server maintenance and a help desk.

Board of Directors and key management personnel:

d. Accounts receivable and payable and other transactions

There are no outstanding amounts receivables or payable between Provida and the members of the Board of Directors and key management personnel. No guarantees have been given or received from Directors or Key management personnel. No other transactions have been performed between Provida and the members of the Board of Directors and key management personnel.

d.1 Compensation of Key management personnel

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Salaries		2,715		2,685		3,069
Short-term benefits for employees		937		1,308		1,256
Termination benefits		453		280		464
Total remunerations of key management personnel		4,105		4,273		4,789

In 2011, key management personnel consist of 47 executives distributed in 21 managers, 7 deputy managers and 19 department chiefs. In 2010, there were 50 executives distributed in 19 managers, 7 deputy managers and 24 department chiefs, while in 2009, there were 60 executives comprised by 21 managers, 7 deputy managers and 32 department chiefs.

F-37

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

d.2 Compensation of Board of Directors and Directors’ Committee

Compensation of the Board of Directors amounted to MCh$614, MCh$290 and MCh$226 as of December 31, 2011, 2010 and 2009, respectively, and have been presented within the line item “Miscellaneous other operating expenses”.

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Per Diem		570		270		222
Fees		44		20		4
Total		614		290		226

As of December 31, 2011, the Board of Directors that was elected in the General Shareholders’ meeting held on April 29, 2011 was composed as follows:

Name of Directors	Position
Joaquín Cortez Huerta	Chairman of the Board of Directors
Jesús del Pino Durán	Vice-Chairman
Luis Fernando Ferreres Crespo	Director
Francesc Jorda Carré	Director
José Martos Vallecillos	Director
María Cristina Bitar Maluk	Director
Jorge Marshall Rivera	Director
Jorge Granic Latorre	Alternate Director
Osvaldo Puccio Huidobro	Alternate Director

On October 19, 2011, Mr. Joaquín Vial Ruiz-Tagle submitted his resignation from the position of Chairman of the Board of Directors and Director. To replace Mr. Joaquín Vial Ruiz-Tagle, Mr. Joaquín Cortez Huerta was designated as Chairman of the Board of Directors.

In compliance with the provisions set forth in Article 33 of Corporate Law N°18,046, fees of the Board are fixed annually in the Ordinary Shareholders’ meeting and the amounts that were approved for normal board meetings, extraordinary meetings and committee meetings, are established as follows:

Directors’ Committee:

According to the provisions established in Law 19,075 of December 20, 2000, and Circular N°1,526 of the Superintendency of Insurance and Securities of February 19, 2001, the Administrator constituted the committee of directors which replaced the previous Audit Committee in its faculties and functions.

As of December 31, 2011
Name of Director	Position	Normal Meeting		Extraordinary Meeting		Maximum Amount		Directors' Committee
		MCh$		MCh$		MCh$		MCh$
Joaquín Cortez Huerta	Chairman		250		10		260		-
Jesús del Pino Durán	Vice-Chairman		250		10		260		83
Luis Fernando Ferreres Crespo	Director		250		10		260		-
Francesc Jorda Carré	Director		250		10		260		-
María Cristina Bitar Maluk	Director		250		10		260		83
José Martos Vallecillos	Director		250		10		260		-
Jorge Marshall Rivera	Director		250		10		260		83
Osvaldo Puccio Huidobro	Alternate Director		175		7		182		83
Jorge Granic Latorre	Alternate Director		175		7		182		83

F-38

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. INCOME AND DEFERRED TAXES

a) Current tax assets and liabilities

a.1) Current tax assets

The detail of current tax assets as of December 31, 2011 and 2010 is as follows:

	As of December 31,
	2011		2010
	MCh$		MCh$
Monthly provisional tax payments		15,384		6,168
Credit for training expenses		153		153
VAT tax credit		90		26
Other taxes assets		298		338
Total		15,925		6,685

a.2) Current tax liabilities

The detail of current tax liabilities as of December 31, 2011, 2010 is as follows:

	As of December 31,
	2011			2010
	MCh$			MCh$
Income tax payable		21,484			13,674
Adjustment for income taxes (previous period)		324			589
Other increase and decreases		469			(401	)
Income taxes payable - AFP Génesis Ecuador		(2,497	)		878
Other taxes (tax rate 35%)		12			9
Total		19,792			14,749

b) Deferred taxes

The deferred taxes recognized for deductible and taxable temporary differences as of December 31, 2011 and December 31, 2010 are as follows:

	Deferred tax assets				Deferred tax liabilities
	December 31,				December 31,
	2011		2010		2011		2010
	MCh$		MCh$		MCh$		MCh$
Temporary differences:
Deferred tax relating to depreciation		-		-		1,801		2,157
Deferred tax relating to amortization		-		-		6,219		7,254
Deferred tax relating to provisions		876		936		-		-
Deferred tax relating to revaluation of mandatory investments		-		-		19,092		19,682
Deferred tax relating to other temporary differences		9		59		158		166
Total		885		995		27,270		29,259

Deferred tax assets have been recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. Management of Provida considers that sufficient taxable profits will be available to be utilized.

F-39

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

b.1) Movements in deferred taxes

The following table sets forth the changes in deferred taxes in the consolidated statement of financial position as of December 31, 2011 and December 31, 2010.

	Assets			Liabilities
	MCh$			MCh$
Deferred tax movements
Balance as of January 1, 2010		492			25,641
Increase (decrease) in profit or loss		503			3,618
Increase (decrease) in equity		-			-
Other increase (decrease)		-			-
Balance as of December 31, 2010		995			29,259
Increase (decrease) in profit or loss		(110	)		(1,989	)
Increase (decrease) in equity		-			-
Other increase (decrease)		-			-
Balance as of December 31, 2011		885			27,270

c) Income taxes

c.1) Income tax expense

Income tax expense as of December 31, 2011, 2010 and 2009 is detailed as follows:

	As of December 31,
	2011			2010			2009
Income tax expense	MCh$			MCh$			MCh$
Current tax expense		(21,484	)		(15,581	)		(10,116	)
Tax benefit effect from tax assets not previously recognized		-			-			-
Adjustments to current tax of prior period		-			-			385
Other current tax income (expense)		1,894			1,255			(206	)
Current tax expense (income), net		(19,590	)		(14,326	)		(9,937	)
Deferred tax income (expense) relating to origination and reversal of temporary differences		1,879			(2,698	)		(4,512	)
Deferred tax income (expense) relating to tax rate changes or imposition of new taxes		-			(416	)		-
Tax benefit effect from tax assets not previously recognized		-			-			-
Other deferred tax expense		-			-			-
Deferred tax expense (income), net		1,879			(3,114	)		(4,512	)
Total income tax expense (income)		(17,712	)		(17,440	)		(14,449	)

d) Reconciliation of statutory tax rate with effective tax rate

	For the years ended December 31,
	2011			2010			2009
	MCh$			MCh$			MCh$
Profit before income tax		96,567			109,064			88,891
Statutory tax rate		20%			17%			17%
Income tax applied to profits before taxes		19,313			18,541			15,111
Permanent differences and others		(1,601	)		(1,101	)		(662	)
Total tax for the period		17,712			17,440			14,449

On July 31, 2010, the Law N˚20,455 was published in order to finance the country’s reconstruction, after the earthquake occurred on February 27, 2010, by temporarily increasing the tax rate at 20% for the commercial year 2011 then ease to a 18.5% tax rate for the commercial year 2012 and returning back to a 17% tax rate in commercial year 2013.

F-40

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. LIFE AND DISABILITY INSURANCE

a) Financing life and disability pensions

Before the Pension Reform Law was amended, and according to provisions established by law, Provida had individually contracted insurance to cover its obligation to provide its participants life and disability benefits.

The Pension Reform Law eliminated the individual responsibility that AFPs had with life and disability insurance by establishing that the AFPs as a whole should contract, through public bidding, a fixed, single-premium insurance to cover this risk. This insurance is awarded to one or more insurance companies offering the best economic offer, awarding the insurance to more than one insurer in order to avoid excessive concentration and cover the entire life and disability insurance risk with the same value for all workers. This obligation is paid by the employer and became effective on July 1, 2009, and a temporary grace period for workers with fewer than 100 employees ended in June 2011.

The premium paid to June 30, 2010 was 1.87% of taxable salaries of workers.

The insurance companies that were awarded to cover claims until June 30, 2010, were as follows:

INSURANCE COMPANIES

Interamericana Seguros de Vida S.A.

RBS (Chile) Seguros de Vida S.A.

Chilena Consolidada Seguros de Vida S.A.

BBVA Seguros de Vida S.A.

Ohio National Seguros de Vida S.A.

From July 1, 2010, and for a 24-month period, the new premium in force will be 1.49% over the taxable salaries of workers.

Companies that were awarded the tender to cover claims until June 30, 2012 were as follows:

INSURANCE COMPANIES

BBVA Seguros de Vida S.A.

Ohio National Seguros de Vida S.A

Compañía de Seguros de Vida Cámara S.A.

La Interamericana Seguros de Vida S.A.

Banchile Seguros de Vida S.A. and Euroamerica Seguros de Vida S.A. (coinsurance)

Compañía de Seguros Cruz del Sur S.A. and Seguros Vida Security Previsión S.A. (coinsurance)

Valora Compañía de Seguros de Vida S.A

Insurance coverage continues in the case that the participant dies or becomes disabled before the legal retirement age (65 for men and 65 for women starting October 2008) and has not cumulated sufficient funds in his/her individual capitalization account to finance the benefit payments as established by law, whether for him/her or his/her legal beneficiaries.

In addition, according to law, transitory disabled pensions awarded in accordance with the first ruling by the medical commission are also covered by the insurance.

The additional contribution that the insurance must cover, if necessary, continues to be equivalent to the resulting deficit between the capital necessary to finance L&D insurance pensions and the capital cumulated per participant, including his/her recognition bond, to the occurrence date of the claim.

It is important to point out that, even though Provida does not have individual contracts with prevailing coverage, there is one contract described below that are still operating as a result from the modality of transitory disability that entails payments of disability claims three years after the first disability ruling, only if the disability has been confirmed by a definitive ruling.

F-41

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

b) Insurance Contract

Until June 2009, according to provisions established in legal regulations, Provida has contracted insurance that covers total temporary pensions of participants declared disabled in the first ruling, the additional contribution and the contribution (contributions during the disabled period in case not ratified in the second ruling). These contracts do not exempt Provida from the responsibility and obligation to deposit said additional contribution, pay transitory pensions originating from first rulings, administrate contributions of individual capitalization accounts and make additional contributions to individual capitalization accounts of the participant when appropriate.

In operational terms regarding the contract in force until June 2009, during the first quarter of the year, Provida and the insurance company compare payments made by the Administrator in the previous fiscal year for temporary premiums (the “temporary premium”) and pre-settlements and the sum of (i) the effective amounts paid by the insurer to the participants or their beneficiaries (“Transitory pensions and contributions”) and (ii) the amount estimated by the insurer (“Technical reserves”) required to pay disabled participants once the final rulings or disabled status are declared by the Medical Commission (the sum of (i) and (ii) is referred to in this document as “total cost of casualties”). Additionally, the casualty rate corresponds to the ratio of the total cost of casualties over the taxable income of contributors. If the cost of casualties is higher than temporary payments, Provida must pay to the insurance company the difference up to a maximum limit established in the insurance contracts, based on maximum casualty rate. Provida has no obligation to pay casualties exceeding the maximum rate. However, if the insurer is not able to pay the benefits to the participants, Provida would be responsible for such payments.

The last disability and survival insurance with effective coverage from January 1, 2005 to June 30, 2009 was purchased from BBVA Seguros de Vida S.A. (related company, see Note 11). The initial contract's maximum casualty rate was 1.27% expressed as a percentage of the contributing participants’ taxable remuneration, with a monthly premium paid throughout the coverage period of the contract at a temporary premium rate of 0.70%. Provida’s participation over the surplus was 100% if the casualty rate was equal to or lower than the contract’s maximum casualty rate over the contributing participants’ taxable income. Additionally, the contract established monthly payments calculated at a provisional rate of 0.70% applied to the total of remuneration and monthly taxable income of the participants on a one-month lag plus a monthly fixed premium of UF 2,150 during the coverage period of the contract. As a result of updating the mortality tables and the consequent impact in the higher casualty costs upon mutual assent of the parties, in view of the changes in the economic conditions of the contract, the parameters of the insurance contract were modified. Beginning in January 2008, the maximum casualty rate was 1.70% expressed as a percentage of the contributing participants’ taxable remuneration, while the temporary rate was 1.00%, retaining the monthly fixed premium of UF 2,150.

The aforementioned insurance contract also contemplates annual true-ups for the difference between all payments made by Provida (temporary premium and previous true-ups and the total cost of casualties (paid or accrued by the insurer), at the end of each year and which has been taking place on March 31 of each year from 2006 onwards. Also, on that date monthly financial revenues will be paid, based on the value recorded to December 31 of the previous year, resulting from applying the rate of return established in the contract over the surplus of cash flow maintained by the insurer (total payments made by Provida less casualties paid by the insurer).

On July 1, 2009, BBVA Seguros de Vida adopted General Rule N°243, allowing it to voluntarily determine the casualties’ reserves at a market interest rate on a monthly basis. Consequently and given the impact of such determination over the administration of the insurance contract and its associated risks, the parties, by common agreement, modified the conditions of the financial revenues. The above considering that providing the life and disability insurance implies a mismatch in the risk between the assets and liabilities generated by such obligation and, that the conditions of the contract could be modified by any of the parties if new regulations are enacted with requirements affecting the contract, as actually occurred.

The final settlement of this contract will occur 48 months after the expiration date of the coverage period, i.e. June 30, 2009, but is extendable for up to 2 years by common agreement.

F-42

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The previous insurance policy related to life and disability in force from August 1, 2003 to December 31, 2004 entered into with BBVA Seguros de Vida S.A. Premiums had a maximum rate of 1.10% expressed as a percentage of the contributing participants’ taxable remuneration, with monthly premium paid throughout the contract’s duration at a temporary premium rate of 0.70%. Provida’s participation in the surplus was 100% if the casualty rate is equal to or lower than 1.10% and greater than 0.85% of the participants’ taxable remuneration. If the casualty rate was equal to or less than 0.85%, Provida had the right to an additional participation in 90% of the surplus. Additionally, the contract established monthly payments calculated at a provisional rate of 0.70% applied to the total of remuneration and monthly taxable income of the participants on a one-month lag plus a monthly fixed premium of UF 2,150 for the contract coverage period. The contract's annual true-ups took place on March 31 of each year beginning in 2005. The date of the final settlement of this contract was contemplated to occur on December 31, 2008, but was extended by common agreement of the parties, being finally paid in April 2011.

c. Effect on Profit (Loss)

The net effect on profit (loss) for the life and disability insurance includes the premium expenses presented under line item “Life and Disability Insurance Premium" and revenues from settlements for favorable casualty rate and monthly financial revenues that are presented under line items “Other revenues” within the consolidated statement of comprehensive income.

The net composition of annual expense for life and disability insurance for the years ended December 31, 2011, 2010 and 2009 is detailed as follows:

	For the years ended December 31,
	2011			2010			2009
	MCh$			MCh$			MCh$
Annual expense for life and disability insurance premiums		370			649			45,320
Unfavorable adjustments due to casualty rate		(2,696	)		1,689			16,175
Life and disability insurance premium		(2,326	)		2,338			61,495
Financial income (Note 7 c.)		(2,151	)		(7,126	)		(3,457	)
Total life and disability insurance expense, net		(4,477	)		(4,788	)		58,038

Since January 1, 2004, in relation to casualty adjustments, Provida has implemented its “casualty model” by evaluating actual data regarding claims and reserves according to the expected parameters such as discount rate, final amount of recognition bond, pension funds’ return, among others at the moment of the effective payments of casualties claims. In this regard, the accounting criterion establishes if the amount of casualty rate calculated by the model were less than the cost calculated and registered by the insurance company, by law, this last amount will be accrued according to the current regulation. On the contrary, if the casualty rate calculated by the model were higher than those established in the insurer’s balance, the amount to be provisioned would be the cost determined by the model.

It is important to note that BBVA Seguros de Vida adopted a new regulation effective beginning on July 1, 2009, permitting the insurers to apply the market interest rate on a monthly basis to evaluate their casualties’ reserves for those life and disability contracts with a coverage period expiring before June 30, 2009. Consequently, this resulted in a decrease in the amount of reserves, since they were determined using historical rates that, according to law, would be the minimum rate from the prior semester, which were lower than those rates used for life and disability annuities prevailing in the market.

Likewise, on applying the methodology of its casualties’ model, Provida concluded that life and disability rates for annuities would be at lower average levels than the prevailing market interest rate as of December 2011. However and given that the average forward rates at the close of December 2010 were at lower rates than the average rates expected for December 2011, AFP Provida made a reversal of provisions determined by the difference between the amount required as of December 2010 and the actual amount accrued by Provida as of December 31, 2011 in accordance to its model by using the best available information. As of December 31, 2010, the situation described above was similar, thus Provida also reversed provisions.

F-43

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

d. Liabilities arising from additional contributions

d.1 Collection to be cleared

Until 1987, the Company had collected additional contributions designated to finance the life and disability pension system fund. In this process, there were liabilities which amounted to MCh$310 and MCh$237 as of December 31, 2011 and December 31, 2010 respectively. These liabilities are recorded under “Collections to be cleared” within line item “Trade and other payables” (Note 21).

	As of December 31,
	2011		2010
	MCh$		MCh$
1) Pending additional contributions Contributions of workers not identified in the participants' master file or transferred to other Administrators, or deceased, or for which only the summary sheet has been received identifying the employer, or positive differences resulting from subtracting the balance from the contribution summaries.		46		46
2) Additional contributions to be cleared Additional contributions and health insurance contributions of independent participants paid, for which the support sheets have not been received.		264		191
Total		310		237

The balance of pending contributions will be settled by the internal process of clearance or by transferring those to other pension fund administrators, beginning on January 1, 1998, these contributions are paid directly into the Pension Fund.

d.2. Comparative analysis of pending additional contributions

	As of December 31,
Pending Additional Contributions	2011		2010
	MCh$		MCh$
Beginning balance		46		47
Leftovers from the year		-		-
Cleared leftovers:
• For Provida		-		-
• Sent to other AFPs		-		(1	)
Final Balance		46		46

e. Accounts payable to insurance companies

The accounts payables to insurance companies presented within line item “Trade and other payables” were MCh$380 as of December 31, 2011 and MCh$0 as of December 31, 2010.

f. Assets arising from life and disability insurance payments

Receivables from insurance companies and from the State reflect payments made by Provida on behalf of the insurer and the Government. The reimbursements are made within 30 days and are classified as short-term receivable, as shown below. Records of total payments to the participant must be maintained by the insurance company as well as Provida as stated by law. Additionally, the self-insured portion of the disability is administered by the insurance company according to the law. State reimbursements are guaranteed by law for employees who otherwise do not qualify for life and disability insurance.

F-44

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

f.1 Receivables from Insurance Companies

The balance of “Receivables from Insurance Companies”, under the item “Trade and Other Receivables”, as of December 31, 2011 and as of December 31, 2010, consisted of the following:

	As of December 31,
	2011			2010
	MCh$			MCh$
Balance at end previous year		8,632			532
Life and disability pensions paid by the Company		105,455			102,852
Reimbursements from the Insurance Company (less)		(110,400	)		(94,752	)
Insurance Company’s balance at end of year		3,687			8,632

f.2 Receivables from the State

The balance of “Receivables from the State”, under the item “Trade and Other Receivables”, as of December 31, 2011 and as of December 31, 2010, consisted of the following:

	As of December 31,
	2011			2010
	MCh$			MCh$
Balance at end previous year		195			1,499
• Pensions financed by state guarantee according to
Art. 73 of DL. N° 3,500 of 1980		83,405			42,994
• Payments financed for APS(*) financed by the Administrator		79,193			14,628
• Payments financed by the Administrator		17,551			4,910
• Reimbursement of State Guarantee		(83,725	)		(42,587	)
• Reimbursement of APS(*)		(78,914	)		(14,087	)
• Reimbursement of other payments		(17,513	)		(7,162	)
Balance at end of year		192			195

(*) Solidarity Pension Contribution (‘APS’ for its Spanish acronym)

g. Provisions for higher casualty rate arising from life and disability insurance

Provisions for unfavorable casualty rate amounted to MCh$5,780 as of December 31, 2011 and MCh$8,835 as of December 31, 2010. The provision was presented net of financial income of MCh$5,914 as of December 31, 2010.

The provision made for a higher casualty rate is presented under the item “Provisions”.

Insurance Company	Period covered the Contract (MMYY-MMYY)	Costs for claims reported by the Insurance Company		Payments made to the Insurance Company (MCh$)		Provision at the date of information provided by the Insurance Company	Gross Provision at current year-end (not including financial revenues effects)*
		Date	MCh$	To reported date	At 12-31-2011		MCh$
BBVA Seguros de Vida S.A. (**)	08-2003 to 12-2004	04/30/2011	88,344	88,182	88,182	-	-
BBVA Seguros de Vida S.A. (***)	01-2005 to 06-2009	12/31/2011	361,701	361,976	361,976	-	(5,780	)
Total						-	(5,780	)

(*) BBVA Seguros de Vida S.A. adopted General Rule N°243 effective beginning on July 1, 2009 allowing it to voluntarily determine the casualty reserve for those life and disability insurance contracts which coverage period before June 30, 2009, at a market interest rate on a monthly basis. Consequently, it resulted in a decreased amount of reserves as the reserves were determined at historical rates lower than the current ones. Likewise, Provida by estimating that the market rates would be lower for the next three year than the rates at the effective dates to settle the obligation, has made an additional accrual that explains the difference between the amount required by the insurer and the actual amount accrued by Provida.

(**) The casualty rate of the policy subscribed with BBVA Seguros de Vida S.A. for August 2003 to December 2004 period was closed in April 2011. The casualty rate of such policy exceeded the maximum rate of 1.10%. Consequently the excess of costs for MCh$157 was assumed by such insurer.

(***) Includes accrued premiums for a total amount of MCh$577 discounted from the balance payable to BBVA Seguros de Vida S.A. according to the respective contracts.

F-45

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

g.1 Reconciling costs and payments to the insurance companies

Figures in MCh$
N° contract		Cost of casualties insurance co.		Premium Paid		Premium Accrued		True- up		Total Payments to insurance co.
	1		88,344		56,118		-		32,065		88,182
	2		361,701		259,743		577		101,655		361,976

g.2 Financial income provision

N° Contract	2011	2010
	MCh$	MCh$
1	-	9
2	2,235	5,905
Total	2,235	5,914

h. Detail according to life and disability insurance contracts

Contract N°		Name of Insurance Company	Period covered by contract	Sub-period covered by contract
	1	BBVA Seguros de Vida S.A.	August 1, 2003 to December 31, 2004		N/A
	2	BBVA Seguros de Vida S.A.	January 1, 2005 to June 30, 2009		N/A

i. Detail of disability insurance costs

Disability
Contract N°		Costs for casualties incurred by insurance company										Costs for casualties incurred by insurance company
Contract N°		(January to December 2011)										(January to December 2010)
		Temporary pensions			Additional contribution				Contributions			Temporary pensions				Additional contribution				Contributions
		N°	MCh$		N°		MCh$		N°	MCh$		N°		MCh$		N°		MCh$		N°		MCh$
	1			-		52		681			-		20		10		38		471		5		6
	2	25,158		4,481		2,284		53,086	87		62		47,566		8,758		2,660		56,557		22		19

j. Detail of life insurance costs

Life
Contract N°		Costs for casualties incurred by insurance company										Costs for casualties incurred by insurance company
Contract N°		(January to December 2011)										(January to December 2010)
		Temporary pensions			Additional contribution				Contributions			Temporary pensions			Additional contribution				Contributions
		N°	MCh$		N°		MCh$		N°	MCh$		N°	MCh$		N°		MCh$		N°	MCh$
	1			-		2		11			-			-		5		53			-
	2			-		104		1,025			-			-		181		1,840			-

F-46

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

k. Detail of financial income of life and disability insurance

	Financial Revenue 2011	Financial Revenue 2010
Contract N°	MCh$	MCh$
1	2	10
2	2,486	5,787
Total	2,488	5,797

l. Detail of life and disability insurance adjustments

As of December 31, 2011
Date of calculation of adjustment		Contract N°		Adjustment Paid		Adjustment for pending payment of financial revenues		Cumulated Cost		Total Cumulated casualties		Cumulated fixed premium + temporary premium		Cumulated Financial revenues
				MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
	30-04-2011		1		32,067		-		88,343		88,343		56,789		3,516
	31-12-2011		2		101,655		2,462		323,661		361,701		262,331		19,159

As of December 31, 2010
Date of calculation of adjustment		Contract N°		Adjustment Paid		Adjustment for pending payment of financial revenues		Cumulated Cost		Total Cumulated casualties		Cumulated fixed premium + temporary premium		Cumulated Financial revenues
				MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
	31-12-2010		1		30,847		10		84,355		85,009		54,787		3,381
	31-12-2010		2		91,606		5,787		255,041		349,341		252,077		16,069

NOTE 14. INVESTMENT IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

14.1 Movements in investments in associates

The following tables set forth the changes in the equity of the Company’s equity method investments during the years ended December 31, 2011 and 2010.

As of December 31, 2011
Associate	Country	Functional Currency	Ownership interest %			Balance as of January 1, 2011		Share of Profit (Loss)		Dividends			Exchange rate on translation		Other			Balance as of December 31, 2011
						MCh$		MCh$		MCh$			MCh$		MCh$			MCh$
Sociedad Administradora de Fondos de Cesantía Chile S.A.	Chile	Chilean Peso		37.80	%		2,369		1,299		-			-		118			3,786
Inversiones DCV S.A.	Chile	Chilean Peso		23.14	%		282		83		(38	)		-		-			327
Servicios de Administración Previsional S.A.	Chile	Chilean Peso		37.87	%		3,054		2,343		(1,328	)		-		(469	)		3,600
Afore Bancomer (1)	Mexico	Mexican Peso		7.50	%		9,239		3,802		(2,836	)		15		-			10,220
AFP Horizonte (1)	Peru	Peruvian Soles		15.87	%		6,365		2,184		(2,967	)		1,176		-			6,758
Total							21,309		9,711		(7,169	)		1,191		(351	)		24,691

F-47

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2010
Associate	Country	Functional Currency	Ownership interest %			Balance as of January 1, 2010		Share of Profit (Loss)		Dividends			Exchange rate on translation			Other			Balance as of December 31, 2010
						MCh$		MCh$		MCh$			MCh$			MCh$			MCh$
Sociedad Administradora de Fondos de Cesantía Chile S.A.	Chile	Chilean Peso		37.80	%		1,332		1,079		-			-			(42	)		2,369
Inversiones DCV S.A.	Chile	Chilean Peso		23.14	%		248		59		(69	)		-			44			282
Servicios de Administración Previsional S.A.	Chile	Chilean Peso		37.87	%		2,975		1,787		(1,329	)		-			(379	)		3,054
Afore Bancomer (1)	Mexico	Mexican Peso		7.50	%		7,925		3,616		(2,328	)		26			-			9,239
AFP Horizonte (1)	Peru	Peruvian Soles		15.87	%		5,101		2,248		(366	)		(1,610	)		992			6,365
Total							17,581		8,789		(4,092	)		(1,584	)		615			21,309

(1) Provida exercise significant influence through BBVA Group participation on those companies.

All of our associates do not have published price quotations. There are no restrictions (e.g. resulting from borrowing arrangements or regulatory requirements) on the ability of associates to transfer funds to Provida in the form of cash dividends, or repayment of loans or advances.

For all periods presented no changes in ownership interest in our investment in associates have occurred.

14.2 Summarized total financial information of investments in associates

The following tables set forth summarized information of the investment in associates where Provida has significant influence, including the aggregated amounts of assets, liabilities, revenues and profit or loss as of December 31, 2011, and 2010:

As of December 31, 2011
Associate	Ownership interests %			Current assets		Non-current assets		Current liabilities		Non-current liabilities		Revenues		Expenses			Profit (loss)
				MCh$		MCh$		MCh$		MCh$		MCh$		MCh$			MCh$
Sociedad Administradora de Fondos de Cesantía Chile S.A.		37.80	%		12,233		1,291		2,038		11,486		12,470		(9,034	)		3,436
Inversiones DCV S.A.		23.14	%		58		1,357		1		1,415		361		(2	)		359
Servicios de Administración Previsional S.A.		37.87	%		6,924		8,714		6,073		9,563		14,936		(8,749	)		6,187
AFORE Bancomer		7.50	%		175,491		1,367		40,594		136,264		119,839		(69,140	)		50,699
AFP Horizonte		15.87	%		18,595		41,509		17,529		42,575		47,137		(33,378	)		13,759
Total					213,301		54,238		66,235		201,303		194,743		(120,303	)		74,440

As of December 31, 2010
Associate	Ownership interests %			Current assets		Non-current assets		Current liabilities		Non-current liabilities		Revenues		Expenses			Profit (loss)
				MCh$		MCh$		MCh$		MCh$		MCh$		MCh$			MCh$
Sociedad Administradora de Fondos de Cesantía Chile S.A.		37.80	%		6,822		2,437		1,776		7,483		9,855		(7,000	)		2,855
Inversiones DCV S.A.		23.14	%		4		1,215		-		1,218		256		(1	)		255
Servicios de Administración Previsional S.A.		37.87	%		6,609		7,840		6,301		8,149		12,148		(7,430	)		4,718
AFORE Bancomer		7.50	%		156,663		2,330		35,806		123,187		117,140		(68,923	)		48,217
AFP Horizonte		15.87	%		18,476		38,396		14,468		42,404		41,490		(27,330	)		14,160
Total					188,574		52,218		58,351		182,441		180,889		(110,684	)		70,205

F-48

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. FINANCIAL INSTRUMENTS

15.1 Capital management

The constant objective of AFP Provida has been the efficient management of its working capital, maintaining significant and enough cash flows in order to fulfill its obligations.

The main use of the Company’s funds are the operating expenses related to the remunerations paid to the personnel, additional constitution of mandatory investments, dividend payments and other administration expenses. Provida has financed these requirements with cash flows generated from its operations, as well as, short-term debts.

The Administration considers that these sources of funds have been enough to finance the capital requirements and the payments of its obligations. Due to the nature of the business, Provida has significant cash flows stemming from fees received from mandatory and voluntary pension savings that are expected to perform similarly than previous years. Likewise, the Administration estimates that the expected growth in the Company’s client portfolio will continue increasing its working capital requirements, a situation where Provida is well positioned to finance its requirements.

In terms of regulation regarding capital matters, the Pension Funds Administrators must maintain a net minimum shareholder’s equity measured in UF, which is directly related to the number of participants that the AFPs have at the date of the financial statements. AFP Provida is in the upper trace due to maintain a number exceeding 10,000 participants, which obligates Provida to dispose to a minimum shareholders’ equity of UF 20,000. Since the Company was established, it has been in compliance with such obligation, and as of December 31, 2011 its shareholders’ equity amounts to UF 11,575,263.

15.2 Financial instruments classified by nature and category

a) The detail of financial assets, classified by nature and category as of December 31, 2011 and 2010 are as follows:

	As of December 31
	2011		2010
	MCh$		MCh$
Financial assets at fair value through profit or loss:
Mandatory investments (See Note 4h. and Note 6)		201,418		204,526
Financial assets(*)		14,322		-
Financial assets AFP Génesis Ecuador		5,698		4,909

(*) Term deposits with maturity of more than one year.

b) The detail of financial liabilities, classified by nature and category as of December 31, 2011 and 2010 are as follows:

	As of December 31,
	2011		2010
	MCh$		MCh$
Amortized cost:
Interest-bearing borrowings		354		402

15.3 Fair value of financial instruments

Management considers that the carrying amounts of financial assets and liabilities recognized at amortized cost in the consolidated financial statements, approximates their fair value.

15.4 Fair value measurement

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

F-49

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – fair value measurements are those derived from inputs other than quoted prices included within 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 – fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	As of December 31, 2011
	Level 1		Level 2		Level 3		Total
	MCh$		MCh$		MCh$		MCh$
Mandatory investments		201,418		-		-		201,418
Financial assets(*)		14,322		-		-		14,322
Financial assets - AFP Genesis		5,698		-		-		5,698

	As of December 31, 2010
	Level 1		Level 2		Level 3		Total
	MCh$		MCh$		MCh$		MCh$
Mandatory investments		204,526		-		-		204,526
Financial assets(*)		-		-		-		-
Financial assets - AFP Genesis		4,909		-		-		4,909

(*) Term deposits with maturity of more than one year.

NOTE 16. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment as of December 31, 2011 and December 31, 2010 are as follows:

	As of December 31,
	2011		2010
Classes of Property, Plant and Equipment:	MCh$		MCh$
Construction in progress		111		404
Land		5,804		6,017
Buildings		15,789		15,470
Plant and equipment		676		876
IT Equipment		1,672		1,537
Fixtures and fittings		2,131		2,394
Leasehold improvements		1,140		1,458
Other Property, plant and equipment		464		504
Property, Plant and Equipment, Net		27,787		28,660

	As of December 31,
	2011		2010
Classes of Property, Plant and Equipment:	MCh$		MCh$
Construction in progress		111		404
Land		5,804		6,017
Buildings		21,559		21,744
Plant and equipment		1,226		1,733
IT Equipment		3,121		3,144
Fixtures and fittings		5,704		4,922
Leasehold improvements		1,787		1,770
Other Property, plant and equipment		852		865
Property, Plant and Equipment, Gross		40,164		40,599

F-50

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

	As of December 31,
	2011			2010
Classes of Property, Plant and Equipment:	MCh$			MCh$
Construction in progress		-			-
Land		-			-
Buildings		(5,770	)		(6,273	)
Plant and equipment		(550	)		(857	)
IT Equipment		(1,449	)		(1,608	)
Fixtures and fittings		(3,573	)		(2,528	)
Leasehold improvements		(647	)		(312	)
Other Property, plant and equipment		(388	)		(361	)
Accumulated depreciation and impairment of Property, Plant and Equipment		(12,377	)		(11,939	)

As of December 31, 2010 the Company recorded impairment losses for MCh$556 caused by the earthquake occurred on February 27, 2010 in Chile.

For all periods presented, there are no items of property, plant and equipment pledged as security for liabilities.

The reconciliation of the carrying amount of property, plant and equipment for the years ended December 31, 2011 and December 31, 2010 is as follows:

As of December 31, 2011:
Movements	Construction in progress			Land			Buildings			Plant and equipment			IT Equipment			Fixtures & Fittings			Leasehold improvements			Other PP&E			Property, Plant and Equipment, net
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Beginning balance as of January 1, 2011		404			6,017			15,470			876			1,537			2,394			1,458			504			28,660
Movements:
Additions		2,380			-			6			43			955			241			43			1			3,669
Disposals		-			(213	)		(675	)		(23	)		-			-			-			-			(911	)
Depreciation expense		-			-			(322	)		(228	)		(813	)		(586	)		(361	)		(42	)		(2,352	)
Impairment loss recognized in profit or loss		-			-			-			-			-			-			-			-			-
Other increases (decreases)		(2,673	)		-			1,310			8			(7	)		82			-			1			(1,279	)
Total movements		(293	)		(213	)		319			(200	)		135			(263	)		(318	)		(40	)		(873	)
Ending balance as of December 31, 2011		111			5,804			15,789			676			1,672			2,131			1,140			464			27,787

As of December 31, 2010:
Movements	Construction in progress			Land		Buildings			Plant and equipment			IT Equipment			Fixtures & Fittings			Leasehold improvements			Other PP&E			Property, Plant and Equipment, net
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Beginning balance as of January 1, 2010		787			6,017		15,555			859			1,479			3,503			932			509			29,641
Movements:
Additions		1,906			-		242			187			793			100			93			32			3,353
Disposals		(2	)		-		-			(44	)		(20	)		(3	)		-			-			(69	)
Depreciation expense		-			-		(323	)		(230	)		(724	)		(657	)		(261	)		(45	)		(2,240	)
Impairment loss recognized in profit or loss		-			-		-			-			-			(556	)		-			-			(556	)
Other increases (decreases)		(2,287	)		-		(4	)		104			9			7			694			8			(1,469	)
Total movements		(383	)		-		(85	)		17			58			(1,109	)		526			(5	)		(981	)
Ending balance as of December 31, 2010		404			6,017		15,470			876			1,537			2,394			1,458			504			28,660

F-51

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. INTANGIBLE ASSETS OTHER THAN GOODWILL

Intangible assets as of December 31, 2011 and 2010, the following amounts:

	As of December 31,
	2011		2010
Classes of Intangible assets	MCh$		MCh$
IT Software		3,642		2,968
Other identifiable intangible assets (*)		36,196		41,357
Intangibles assets, net		39,838		44,325

	As of December 31,
	2011		2010
Classes of Intangible assets	MCh$		MCh$
IT Software		4,944		3,578
Other identifiable intangible assets (*)		51,553		51,553
Intangibles assets, gross		56,497		55,131

	As of December 31,
	2011			2010
Classes of Intangible assets	MCh$			MCh$
IT Software		(1,302	)		(610	)
Other identifiable intangible assets (*)		(15,357	)		(10,196	)
Accumulated depreciation and impairment of intangible assets		(16,659	)		(10,806	)

(*) Correspond to Customers List (see Note 4. j.3)

The reconciliation of carrying amounts of intangible assets for the years ended December 31, 2011 and 2010 is as follows:

As of December 31, 2011:	IT Software			Other identifiable intangible assets(*)			Intangibles assets, net
	MCh$			MCh$			MCh$
Beginning balance as of January 1, 2011		2,968			41,357			44,325
Movements:
Additions		1,585			-			1,585
Disposals		-			-			-
Amortization expense		(692	)		(5,161	)		(5,853	)
Impairment loss recognized in profit or loss		-			-			-
Other increases (decreases)		(219	)		-			(219	)
Total movements		674			(5,161	)		(4,487	)
Ending balance as of December 31, 2011		3,642			36,196			39,838

As of December 31, 2010:	IT Software			Other identifiable intangible assets(*)			Intangibles assets, net
	MCh$			MCh$			MCh$
Beginning balance as of January 1, 2010		-			46,518			46,518
Movements:
Additions		3,578			-			3,578
Disposals		-			-			-
Amortization expense		(610	)		(5,161	)		(5,771	)
Impairment loss recognized in profit or loss		-			-			-
Other increases (decreases)		-			-			-
Total movements		2,968			(5,161	)		(2,193	)
Ending balance as of December 31, 2010		2,968			41,357			44,325

(*) Correspond to Customers List (see Note 4. j.3)

F-52

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. GOODWILL

The following tables set forth goodwill by company as of December 31, 2011 and 2010 is as follows:

Company	Balance as of January 1, 2011		Additions		Impairment		Balance as of December 31,2011
	MCh$		MCh$		MCh$		MCh$
AFORE Bancomer-Mexico		8,460		-		-		8,460
AFP Génesis-Ecuador		273		-		-		273
AFP Horizonte-Peru		197		-		-		197
Total		8,930		-		-		8,930

Company	Balance as of January 1, 2010		Additions		Impairment		Balance as of December 31,2010
	MCh$		MCh$		MCh$		MCh$
AFORE Bancomer-Mexico		8,460		-		-		8,460
AFP Génesis-Ecuador		273		-		-		273
AFP Horizonte-Peru		197		-		-		197
Total		8,930		-		-		8,930

For all periods presented there are no indications of an impairment loss.

NOTE 19. OTHER CURRENT AND NON-CURRENT ASSETS

Other current and non-current assets as of December 31, 2011 and 2010 are as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Deferred interests for leasing		25		76		89		97
Other		6		-		-		-
Total Other Assets		31		76		89		97

NOTE 20. INTEREST-BEARING BORROWINGS

Interest-bearing borrowings as of December 31, 2011 and 2010 are as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Leasing obligations		63		354		60		402
Banco Crédito e Inversiones		-		-		4		-
Total		63		354		64		402

F-53

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21. TRADE AND OTHER PAYABLES

The balance of this account as of December 31, 2011 and 2010 is presented as follows:

	Years as of December,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Minimum Dividend		8,044		-		7,815		-
Withholdings from pensioners (1)		3,608		-		3,416		-
Pensions payable (2)		889		-		1,284		-
Accounts Payable to the National Health Fund (3)		532		-		523		-
Trade payables		4,811		-		3,021		-
Collection to be cleared (Note 13)		311		-		237		-
Other accounts payable		2,262		-		2,343		-
Total Trade and Other Accounts Payable		20,457		-		18,639		-

(1) Withholdings from pensioners as of December 31, 2011 and 2010 is as follows:

	As of December 31,
	2011			2010
	MCh$			MCh$
Balance at previous year's end		3,351			2,858
Withholding health contributions from pensioners and in the period		42,468			37,633
Withdrawals from National Health Fund in the period		(19,734	)		(16,422	)
Withdrawals from Health Care Institutions in the period		(5,269	)		(4,534	)
Withdrawals from compensation fund (CCAF) and others in the period		(17,270	)		(16,183	)
Subtotal		3,546			3,352
Single tax withholdings from pensioners		62			64
Total		3,608			3,416

(2) Pensions payables represent as of December 31, 2011 and 2010 are as follows:

	As of December 31,
	2011		2010
	MCh$		MCh$
Uncollected accrued pensions		714		228
Other		175		1,056
Total		889		1,284

F-54

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(3) Accounts Payable to the National Health Fund: In conformity with the requirements in D.L. 3,500, the Administrator must collect the independent participants’ health contributions and deduct health contributions from pensions financed by the Pension Fund and transfer these amounts to the Fondo Nacional de Salud (‘National Health Fund”) or the corresponding health insurance institution. Accordingly, balances in this item represent contributions collected that must be transferred to the National Health Fund or the respective health insurance institution. The detail for all periods presented is as follows:

	As of December 31,
	2011			2010
	MCh$			MCh$
a) Independent Contributors:
Balance at previous year's end		523			477
Collection of health contributions in the year		6,336			6,343
Withdraw to National Health Fund in the year		(6,326	)		(6,297	)
Balance at end of year		533			523
b) Pensioners:
Balance at previous year's end		3,351			2,858
Collection of health contributions from pensioners in the year		42,468			37,633
Withdraw to National Health Fund in the year		(19,734	)		(16,422	)
Withdraw to Health Care Institutions (Isapres) in the year		(5,269	)		(4,534	)
Withdraw to compensation fund (CCAF) and Others in the period		(17,270	)		(16,183	)
Subtotal contributions of Pensioners (*)		3,546			3,352

(*) Note: Theses amounts are part of withholdings from pensioners.

NOTE 22. PROVISIONS

The detail of provisions as of December 31, 2011 and 2010 is as follows:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Provision for employee benefits (1)		4,915		-		4,262		-
Provision for unfavorable casualty rate (2)		5,780		-		447		8,388
Other Provisions (3)		3,459		-		4,015		-
Total Provisions		14,154		-		8,724		8,388

(1) For a description of the provision for employee benefits, see Note 3.n2.

(2) For a description of the provision for unfavorable casualty rate, see Note 3.n1.

(3)	Other provisions include mainly provisions for advertising and provision for litigations related to pending labor lawsuits with former employees and other pension matters. See Note 31.c for additional information.

Movements in provisions as of December 31, 2011 and 2010 are as follows:

	Balance as of January 1, 2011		Additional Provisions		Provisions Used			Unused provisions reversed			Other Increases (Decreases)		Balance as of December 31, 2011
	MCh$		MCh$		MCh$			MCh$			MCh$		MCh$
Provisions for employee benefits		4,262		2,986		(2,333	)		-			-		4,915
Provisions for unfavorable casualty rate (Net of financial income)		8,835		-		-			(3,055	)		-		5,780
Other Provisions		4,015		804		(743	)		(617	)		-		3,459
Total		17,112		3,790		(3,076	)		(3,672	)		-		14,154

F-55

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

	Balance as of January 1, 2010		Additional Provisions		Provisions Used			Unused provisions reversed			Other Increases (Decreases)		Balance as of December 31, 2010
	MCh$		MCh$		MCh$			MCh$			MCh$		MCh$
Provisions for employee benefits		5,169		1,841		(2,733	)		(15	)		-		4,262
Provisions for unfavorable casualty rate (Net of financial income)		13,360		1,690		933			(7,148	)		-		8,835
Other Provisions		3,782		2,148		(1,810	)		(105	)		-		4,015
Total		22,311		5,679		(3,610	)		(7,268	)		-		17,112

NOTE 23. OTHER CURRENT AND NON-CURRENT LIABILITIES

The amount held by the Administrator under the item Other Liabilities as of December 31, 2011 and 2010, includes the following concepts:

	As of December 31,
	2011				2010
	Current		Non Current		Current		Non Current
	MCh$		MCh$		MCh$		MCh$
Escrow deposit with the court		-		-		345		-
Legal costs collected		26		-		4		-
Provision for BHC (ex Unión) pension responsibility		-		649		-		636
Guarantees received for rental of own offices		-		178		-		173
Other liabilities		255		-		137		-
Total Other Liabilities		281		827		486		809

NOTE 24. ISSUED CAPITAL

24.1 Major shareholders

	As of December 31, 2011
Name of 12 major shareholders	Equity Share			Number of shares
BBVA Inversiones Chile S.A.		51.62	%		171,023,573
The Bank of New York		23.15	%		76,705,065
Penta Corredores de Bolsa S. A.		5.95	%		19,720,879
Larraín Vial Corredores de Bolsa S.A.		2.85	%		9,433,912
Bolsa Eléctronica de Chile - Bolsa de Valores		2.60	%		8,624,383
Banchile Corredores de Bolsa S. A.		1.26	%		4,185,697
MBI Arbitrage Fondo de Inversión		0.60	%		1,999,802
Banco de Chile on behalf of third parties		0.53	%		1,769,577
Banco Itaú on behalf of investors		0.45	%		1,505,832
Celfín Capital Corredores de Bolsa S.A.		0.44	%		1,441,095
Bolsa de Comercio de Santiago -Bolsa de Valores		0.43	%		1,416,900
Banco Santander on behalf of foreigners		0.34	%		1,121,983
Other		9.78	%		32,367,925
Total		100	%		331,316,623

24.2 Issued capital

The issued capital of the as of December 31, 2011, December 31, 2010, December 31, 2009 is represented by 331,316,623 authorized, subscribed and no par value common shares.

F-56

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24.3 Other Reserves

Other reserves within Equity as of December 31, 2011 and 2010 are as follows:

	Balance as of January 1, 2011			Movements 2011		Balance as of December 31, 2011
	MCh$			MCh$		MCh$
Exchange difference on translation (1)		(4,012	)		1,374		(2,638	)
AFP Horizonte - Peru		(2,166	)		1,177		(989	)
AFP Génesis - Ecuador		(463	)		182		(281	)
AFORE Bancomer - Mexico		(1,383	)		15		(1,368	)
Miscellaneous other reserves (2)		2,606			84		2,690
IFRS Adjustment AFC Chile		100			84		184
IFRS Adjustment DCV		43			-		43
Price-level restatement issued capital		2,463			-		2,463
Total		(1,406	)		1,458		51

	Balance as of January 1, 2010			Movements 2010			Balance as of December 31, 2010
	MCh$			MCh$			MCh$
Exchange difference on translation (1)		(2,377	)		(1,635	)		(4,012	)
AFP Horizonte - Peru		(556	)		(1,610	)		(2,166	)
AFP Génesis - Ecuador		(412	)		(51	)		(463	)
AFORE Bancomer - Mexico		(1,409	)		26			(1,383	)
Miscellaneous other reserves (2)		2,463			143			2,606
IFRS Adjustment AFC Chile		-			100			100
IFRS Adjustment DCV		-			43			43
Price-level restatement issued capital		2,463			-			2,463
Total		86			(1,492	)		(1,406	)

(1) Exchange difference on translation:

Reserve for exchange difference on translation is used to record the difference arising from translating the financial statements of our foreign operations from their functional currencies to our presentation currency; and translation of goodwill arising from the acquisition of foreign operations with a functional currency other than the Chilean peso.

(2) Miscellaneous other reserves

Other miscellaneous other reserves include the following:

a) On December 31, 2009 issued capital balance includes price-level restatement adjustments that were not reversed when we adopted IFRS back in 2009. We have elected to not reverse such price-level restatement adjustments based on Circular N°456 issued by the Superintendency of Securities and Insurances which indicates that deflation impacts shall not be applied to issued capital accounts as issued capital at the transition period to IFRS is established in the company’s bylaws, which have been modified based on the distribution of the revalued equity, held at the annual shareholder’s meeting that approves such amount according to Article 10, section 2 of Chile Law N°18.046 Sociedades Anónimas.

b) Share of miscellaneous other reserves of associates accounted for using equity method.

F-57

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24.4 Dividends

According to Company by-laws, unless a different agreement is adopted in the General Shareholders meeting with a unanimous vote of subscribed and outstanding shares, Provida must distribute dividends in cash for an amount at least equivalent to 30% of net earnings per year. With regard to dividend payments, the Board of Directors agreed to pay an interim dividend in the month of October and the final dividend after the General Shareholders’ meeting of the following year, for an amount equal to or less than the legal minimum and not exceeding 75% of net profit.

In the Board of Directors’ meeting held on September 21, 2011, the payment of an interim dividend was approved for the amount of Ch$61.87 per share, charged to profits of the year 2011, equivalent to MCh$20,499 which was paid on October 28, 2011.

On May 27, 2011, a final total dividend was paid for the amount of Ch$207.40 per share, charged to profits of the year 2010, equivalent to MCh$68,715.

On October 29, 2010, an interim dividend was paid for the amount of Ch$60.37 per share, charged to profits of the year 2010 was paid, equivalent to MCh$20,002.

On May 27, 2010, a final total dividend was paid for the amount of Ch$184.36 per share, charged to profits of the year 2009, equivalent to MCh$42,004.

On October 30, 2009 an interim dividend was paid for the amount of Ch$57.58 per share, charged to profits for the year 2009, equivalent to MCh$19,077.

Minimum dividends

As of December 31, 2011, the charge in retained earnings for minimum dividends amounted to MCh$7,800 corresponding to the provision for minimum dividends for the year 2011 for MCh$28,279 minus the reversal of interim dividends paid in year 2011 for an amount of MCh$20,499.

As of December 31, 2010, the charge in retained earnings for minimum dividends amounted to MCh$7,486 corresponding to the provision for minimum dividends for the year 2010 for MCh$27,487 minus the reversal of interim dividends paid in year 2010 for an amount of MCh$20,002.

As of December 31, 2009, the charge in retained earnings for minimum dividends amounted to MCh$3,255 corresponding to the provision for minimum dividends for the year 2009 for MCh$22,333 minus the reversal of interim dividends paid in the year 2009 for an amount of MCh$19,077.

Retained earnings as of December 31, 2011, 2010 and 2019, amounted to MCh$199,965, MCh$190,637 and MCh$164,529 respectively net of minimum dividends.

F-58

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 25. SERVICE CONTRACTS

Provida has entered into service agreement with different companies to complement management, operation and sale operations in its line of business. The relevant aspects of these contracts are indicated below:

Years ended December 31,

2011

2010

2009

MCh$

a. Collection services contracts

Costs charged to the “Administrative expenses” account

in the Statements of Income

a.1) Banco del Estado de Chile

Line of business: Banking activities

Cost of Service (VAT included)

from 1 to 2,000 forms UF 0.054

from 2,001 to 4,000 forms UF 0.048

from 4,001 to 7,000 forms UF 0.042

from 7,001 forms and more UF 0,036

Cost charged to profits (net)

113

130

209

a.2) Banco Santander

Line of business: Banking activities

Cost of service (VAT included): UF 0.023 per form

Cost charged to income (net):

a.3) Banco de Chile

Line of business: Banking activities

Cost of service (VAT included) (*): UF 0.031 per form

Cost charged to income

(*) The bank only provides this collection service in its Puerto Williams Office

a.4) BBVA Chile

Line of business: Banking activities

Cost of service (VAT included): UF 0.024 per form

Cost charged to income

295

a.5) Caja de Compensación Los Andes

Line of business: Compensation Administrator

Cost of service: Ch$ 134.15 per form and Ch$ 24.09 per line, readjustable every 6 months

Cost charged to income

541

639

351

a.7) Caja de Compensación La Araucana

Line of business: Compensation Administrator

Cost of service: Ch$ 133.04 per form and Ch$ 23.91 per line, readjustable every 6 months

Cost charged to income

F-59

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31,

2011

2010

2009

MCh$

a.7) Servicios de Administración Previsional

Line of business: Collection services of pension contributions through internet

Cost of service (VAT included):

Full Internet

from 1 to 9,999 Ch$ 201.56 per form

from 10,000 to 24,999 Ch$ 165.98 per form

from 25,000 to 49,999 Ch$ 142.28 per form

and per line of detail Ch$ 36.25

Mixed

from 1 to 9,999 Ch$ 165.98 per form

from 10,000 to 24,999 Ch$ 139.69 per form

from 25,000 to 49,999 Ch$ 119.74 per form

and per line of detail Ch$ 33.56

from 1-1 lines Ch$ 438.47

from 2-5 lines Ch$ 350.76

from 6-9 lines Ch$ 306.91

10 lines and more Ch$ 0

Declaration of Forms (DNP)

Full Ch$ 47.43

Mixed Ch$ 104.77

Cost charged to income

1,633

1,515

1,299

a.8) Caja de Compensación 18 de Septiembre

Line of business: Compensation Fund

Cost of service: Ch$ 115.92 per form and Ch$ 20.84 per line, readjustable every 6 months

Cost charged to income

Years ended December 31,

2011

2010

2009

MCh$

b. Custody of securities

Safe custody of securities and financial instruments of Provida Pension Funds and Mandatory Investments

b.1) Brown Brothers Harriman & Co.

Line of business: Banking

Type of service provided: Custody

Cost charged to income

589

553

576

b.2) Depósito Central de Valores S.A.

Type of service provided: Custody

Line of business: Safe custody of securities

Cost charged to income

681

608

351

F-60

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

c) Expenses for stock market transactions

The following expenses were incurred for stock market transactions during the period 2011, 2010 and 2009, included under the account “Administration Expenses”

Stock Exchange of Santiago, stock market:	Years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Variable Commission (transactions)		397		298		152
Fixed Costs (Use of Terminals)		102		216		201
Balance at end of period		499		514		353
Stock Exchange of Santiago: Stock market Line of Business: Brokerage Amount owed: MCh$ Nil Payment: Cash

d) Administration services and equipment maintenance

Provida has signed administration and maintenance equipment services contracts, the main services contracts are as follows:

d.1) Telefónica CTC Chile S.A. and Telefónica Empresas:

Telecommunications services have been hired with these companies. The contract contemplates services for long distance allowing signals transportation and the corresponding lines and equipments to provide such services. The costs of these services included in "data processing expenses" and "administrative expenses" amounted to MCh$124, MCh$159 and MCh$159 as of December 31, 2011, 2010 and 2009, respectively.

d.2) Tata Consultancy Services BPO Chile S.A.

This company provides the following services:

Microfilm services and administration of archive and reception departments

This contract contemplates microfilming services of documents and the administration to the reception office and the archive unit. The costs incurred for these services are included in "administrative expenses" and amounted to MCh$405, MCh$331 and MCh$561 as of December 31, 2011, 2010 and 2009, respectively.

Design and management of centralized database

This contract includes the management and safekeeping of the database regarding participants’ contributions that have transferred of AFPs since 1981. Provida accesses and manages this database through centralized query. The agreement was signed on March 1, 2000. The costs for these services are included in “administrative expenses” and amounted to MCh$42, MCh$91 and MCh$133 as of December 31, 2011, 2010 and 2009, respectively.

Agreement for supplying digital forms

This agreement considers the implementation of an information capture process for participant contribution forms and other documents related to the Administrator’s operations, using digital imaging technology in general forms. The costs for these services are included in “administrative expenses” and amounted to MCh$20, MCh$57 and MCh$11 as of December 31, 2011, 2010 and 2009, respectively.

F-61

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

d.3) Agreement of rental and maintenance of equipments

Coasin Chile Ltda.

Contracts of equipment maintenance. The costs of these services are included in “administrative expenses” and amounted to MCh$122, MCh$190 and MCh$166 as of December 31, 2011, 2010 and 2009, respectively.

Nielsoft Informática Ltda.

Contracts of system maintenance. The costs of these services are included in “administrative expenses” and amounted to MCh$523, MCh$313 and MCh$403, as of December 31, 2011, 2010 and 2009, respectively.

d.4) Jordata Ltda.

This agreement considers the information capture process for participant contribution forms and other documents related to the Administrator’s operations. The costs for these services are included in “administrative expenses” and amounted to MCh$5, MCh$20 and MCh$112 as of December 31, 2011, 2010 and 2009, respectively.

d.5) Pensions and savings payments

Contract entered into with BBVA Chile S.A

Providing services of pension payments and saving withdrawals through a contract entered into with BBVA Chile S.A. on February 1, 2003. The related costs correspond to UF 0.044 (VAT included) for transactions between 0 and 25,000 for savings payments, and UF 0.031 (VAT included) for transactions beyond 25,000 for pension payments. The amounts accounted for as "administrative expenses" were MCh$170, MCh$319 and MCh$1,012 as of December 31, 2011, 2010 and 2009, respectively.

Contract entered into with Servipag

Service to pay pensions with Servipag; Contract in force since April 24, 2009, which amount is accounted for as “administrative expenses” for MCh$998, MCh$839 and MCh$0 as of December 31, 2011, 2010 and 2009, respectively.

Contract entered into with Banco Estado

Service to pay pensions with Banco Estado; Contract in force since March 31, 2010, which amount is accounted for as “administrative expenses” for MCh$236 and MCh$839 as of December 31, 2011 and 2010, respectively.

Contract entered into with Caja de Compensación Los Andes

Service to pay pensions with Caja de Compensación Los Andes; Contract in force since August 8, 2011, which amount is accounted for as “administrative expenses” for MCh$8 as of December 31, 2011.

d.6) Quarterly statement

Mailing service payment

Mailing services with AMF and Correos de Chile for delivering the individual capitalization account balance to the participants every four months. This contract is effective from September 2005 and March 2003, respectively. The amounts accounted for as “administrative expenses” amounted to MCh$952, MCh$833 and MCh$579 as of December 31, 2011, 2010 and 2009, respectively.

d.7) Other minor services

Other contracts with EFCO Servicios Generales S.A, Central de Restaurantes Aramark (for cleaning offices services), Comunicaciones Capitulo (telephone line), Imac (air conditioning) and Thyssenkrupp (elevators), resulted in costs recognized as “administrative expenses” amounting to MCh$308, MCh$340 and MCh$259 as of December 31, 2011, 2010 and 2009, respectively.

F-62

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 26. DISAGGREGATION OF REVENUES AND EXPENSES ACCORDING TO THE FUND TYPE WHERE THEY ORIGINATED

The following is a breakdown of operational revenues and expenses according to their origin and the type of fund originating them:

	For the year ended December 31, 2011
	Fund			Fund			Fund			Fund		Fund
	Type A			Type B			Type C			Type D		Type E		Total
A. Revenues	MCh$			MCh$			MCh$			MCh$		MCh$		MCh$
Fees for depositing mandatory contributions and APV		33,586			42,337			47,673			10,705		3,363		137,664
Additional contribution		-			-			-			-		-		-
Fees for programmed withdrawals and temporary income		10			17			535			1,883		250		2,695
Percentual fees		-			-			-			-		-		-
Commission paid by the affiliate		-			-			-			-		-		-
Other fees		-			-			-			-		-		-
Gain on mandatory investments		(3,106	)		(1,700	)		(378	)		1,187		528		(3,469	)

	For the year ended December 31, 2011
	Fund			Fund			Fund			Fund			Fund
	Type A			Type B			Type C			Type D			Type E			Total
B. Expenses	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Life and disability insurance premium		(494	)		(671	)		(840	)		(265	)		(55	)		(2,325	)
Wages and salaries to sales personnel		2,204			2,778			3,162			826			237			9,207
Fees paid for custody of securities
• National		163			205			234			61			18			681
• Foreign		141			178			202			53			15			589
Fees paid to proxies of investments abroad		-			-			-			-			-			-
Expenses for transactions in stock exchange		56			58			326			48			11			499
Other expenses as per Fund Type		-			-			-			-			-			-

	For the year ended December 31, 2010
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
A. Revenues	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Fees for depositing mandatory contributions and APV		32,256		39,812		43,791		9,501		2,641		128,001
Additional contribution		-		-		-		-		-		-
Fees for programmed withdrawals and temporary income		10		23		475		1,571		193		2,272
Percentual fees		-		-		-		-		-		-
Commission paid by the affiliate		-		-		-		-		-		-
Other fees		-		-		-		-		-		-
Gain on mandatory investments		4,956		4,878		9,314		2,309		429		21,886

F-63

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

	For the year ended December 31, 2010
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
B. Expenses	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Life and disability insurance premium		579		715		794		199		51		2,338
Wages and salaries to sales personnel		2,652		3,275		3,638		910		233		10,708
Fees paid for custody of securities
• National		148		166		220		60		14		608
• Foreign		128		157		200		53		15		553
Fees paid to proxies of investments abroad		10		11		24		8		1		54
Expenses for transactions in stock exchange		107		125		192		77		13		514
Other expenses as per Fund Type		-		-		-		-		-		-

	For the year ended December 31, 2009
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
A. Revenues	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Fees for depositing mandatory contributions and APV		38,429		53,061		58,293		11,883		5,844		167,510
Additional contribution		-		-		-		-		-		-
Fees for programmed withdrawals and temporary income		6		14		348		1,321		166		1,855
Percentual fees		-		-		-		-		-		-
Commission paid by the affiliate		-		-		-		-		-		-
Other fees		-		-		-		-		-		-
Gain on mandatory investments		8,749		7,990		13,197		2,551		342		32,829

	For the year December 31, 2009
	Fund		Fund		Fund		Fund		Fund
	Type A		Type B		Type C		Type D		Type E		Total
B. Expenses	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Life and disability insurance premium		10,189		19,424		25,081		5,403		1,398		61,495
Wages and salaries to sales personnel		1,877		3,573		5,648		877		218		12,193
Fees paid for custody of securities
• National		89		169		267		41		10		576
• Foreign		54		103		163		25		6		351
Fees paid to proxies of investments abroad		-		-		-		-		-		-
Expenses for transactions in stock exchange		54		104		164		25		6		353
Other expenses as per Fund Type		-		-		-		-		-		-

NOTE 27. MISCELLANEOUS OTHER OPERATING EXPENSES

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Administration expenses		22,140		22,479		16,844
Data processing expenses		3,794		3,270		3,180
Other operating expenses (1)		2,947		2,718		3,341
Marketing expenses		1,784		1,541		2,404
Total		30,665		30,008		25,769

(1) Correspond to the expenses incurred for the evaluation and qualification of disability status of the participants

F-64

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 28. FINANCE COSTS

The detail of finance costs as of December 31, 2011, 2010 and 2009 is as follows:

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Interests for leasing contracts		28		29		32
Interests for use of bank overdraft line		-		12		36
Other		93		62		84
Total		121		103		152

NOTE 29. OTHER NON-OPERATING EXPENSES

The detail of other non-operating expenses as of December 31, 2011, 2010 and 2009, is as follows:

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Fines from State institutions		61		41		178
Litigation		23		22		608
Other		292		133		151
Total		376		196		937

NOTE 30. OTHER NON-OPERATING INCOME

The balance corresponding to “Other operating income” as of December 31, 2011, 2010 and 2009, is detailed as follows:

	For the years ended December 31,
	2011		2010		2009
	MCh$		MCh$		MCh$
Rentals		1,843		2,184		2,024
Other income		1,207		380		482
Total		3,050		2,564		2,506

NOTE 31. CONTINGENCIES AND RESTRICTIONS

a) Guarantees granted:

Creditor of the Guarantee	Debtor		Type of Guarantee	Files Compromised		Pending payment of balance at closure of Financial Statements		Release of Guarantees
Under secretary of Finance	Name	Relation	Solidarian Codebtor	Type	Accounted Value MCh$	2012 MCh$	2011 MCh$	2012 MCh$	Assets MCh$
Under secretary of Finance	AFC	Subsidiary		Guarantee letters	2,023	169	202	169	169

AFP Provida, as ratified by Shareholders’ vote held on January 7, 2002, has guaranteed a debt in the amount of UF 400,000 (MCh$8,918) to Administradora de Fondos de Cesantía de Chile S.A. The debt was incurred so that Administradora de Fondos de Cesantía de Chile S.A., could comply with certain requirements of the Unemployment Insurance Administration which may include, but are not limited to, standby letters of credit. The guarantee submitted by AFP Provida consisted in constituting the Administrator, in October 2002, as warrantor and solidarian co-signer

F-65

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

exclusively of 37.8% of the aforementioned amount, in the contract for credit line operations intended to cover any eventual payments of bank guarantee letters signed by Administradora de Fondos de Cesantía de Chile S.A., in addition to the respective promissory notes.

On February 4, 2010, the Administradora de Fondos de Cesantía reimbursed the Company with bank guarantee letters of for the amount of UF 160,000 (MCh$3,567).

b) Disability and Survival Pensions and Life Annuities

Article 82 of D.L. 3,500 of 1980 established that when an insurance company does not fulfill obligations originating from signed contracts, the State Guarantee will cover the minimum fixed income defined in Articles 73, 77 and 78. For income or pensions exceeding those amounts, the State Guarantee will cover 75% of the excess, with a maximum of UF 45 (MCh$1).

The Company’s contingency is approximately UF 946,025 (MCh$21,091). The basic assumptions of this calculation made on pensions generated before January 1, 1988 are based on a life expectancy of 28 years for pension beneficiaries, an annual discount rate of 5% and the application of the previously mentioned State Guarantee. Pension fund participants’ claims against insurance companies would be subject to the privilege established in Article 2,472, No 4 of the Civil Code.

c) Insurance Contract

Provida entered into an insurance contract with BBVA Seguros de Vida S.A. from January 1, 2005 to June 30, 2009 with payment rates described in Note 13, letter b), establishing an adjustment in the insurance rate in accordance with variations of casualties and monthly pre-payments offinancial revenues.

On April 30, 2011, Provida received UF 25,016.49 (MCh$558) from the insurance company BBVA Seguros de Vida S.A. for the final settlement from the August 2003 - December 2004 contract.

On March 31, 2011, Provida paid UF 20,652.67 (MCh$460) to the insurance company BBVA Seguros de Vida S.A. corresponding to the January 2005-June 2009 period and UF 62.35 (MCh$1) from the August 2003 – December 2004 period.

On March 31, 2010, Provida received UF 1,945.38 (MCh$43) from the insurance company BBVA Seguros de Vida S.A. for true-ups from the August 2003–December 2004 contract and UF 42,941 (MCh$957) for true-ups from the January 2005 – June 2009 contract.

d) Litigation or other actions in which the company is involved:

As of December 31, 2011, there were other labor lawsuits presented by the Administrator’s former employees, which are filed in various courts throughout the country. In the opinion of the Company’s Legal Advisory Division, at the end of these lawsuits, there will not be relevant unfavorable effects on the Company’s results. Nevertheless, since it is probable than an outflow or resources embodying economic benefits will be required to resolve the lawsuits and a sufficiently reliably estimate of the amount of the obligation can be made, the Company has established a provision for MCh$675 as of December 31, 2011 to cover probable losses due to these lawsuits, which are recorded in the item “Other provisions” disclosed in Note 22.

Additionally, there are pending labor lawsuits related to pension matters in certain courts. According to the opinion of the Company’s Legal Advisory Division, there will not be unfavorable material effects on the Company’s results.

NOTE 32. SEGMENTS

The Company has only one segment.

F-66

Table of Contents

ADMINISTRADORA DE FONDOS DE PENSIONES PROVIDA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 33. SANCTIONS

a) From the Superintendency of Pensions:

According to Resolution N° 32 of April 6, 2010, the Superintendency of Pensions applied a fine of UF 1,000 (MCh$22) for not complying with the obligation to affiliate persons requesting their voluntary incorporation into the Administrator.

According to Resolution N° 69 of December 7, 2010, the Superintendency of Pensions applied a fine of UF 200 (MCh$4) for acquiring shares to the Fund Type E from mutual funds not approved by the Rating Commission in May 2009.

According to Resolution N° 24 of April 15, 2011, the Superintendency of Pensions applied a fine of UF 200 (MCh$4) for maintaining a net seller position in Chilean pesos regarding forward contracts that involved Chilean Peso and Euro concerning Fund Types A, B, C, D and E, thus, breaking the regulation established in Circular N° 1,556 of the Superintendency of Pensions.

According to Resolution N° 0080 of November 29, 2011, the Superintendency of Pensions applied a fine of UF 3,500 (MCh$78) for irregularities in connection with the life and disability insurance coverage. On December 9, 2011, AFP Provida appealed to the Superintendency of Pensions for reconsideration of judgment.

b) From other administrative authorities:

For all periods presented there are no sanctions from other administrative authorities.

NOTE 34. ENVIRONMENT

The Company does not own industrial facilities that can affect the environment.

NOTE 35. SUBSEQUENT EVENTS

According to Resolution N°0015 of February 7, 2012, the Superintendency of Pensions applied a fine of UF 200 (MCh$4) for omitting a forward contract for Fund Type C, and recording a forward contract as sale of Mexican Pesos against Chilean Pesos, but the contract was a purchase of foreign currency related to national currency.

According to Resolution N°0017 of February 9, 2012, the Superintendency of Pensions applied a fine of UF 200 (MCh$4) for irregularities in the electronic transmission of certificates to SCOMP.

At the date of the issue of these financial statements, no significant subsequent event exists that could materially affect these financial statements.

F-67

Title of each class	Name of each exchange on which registered
Common Stock, without nominal (par) value		New York Stock Exchange*
American Depositary Shares (ADS) each representing fifteen shares of Common Stock, without nominal (par) value		New York Stock Exchange

PRESENTATION OF INFORMATION	4
FORWARD-LOOKING STATEMENTS	4
PART I	5
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	5
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	5
ITEM 3. KEY INFORMATION	5
A. Selected financial data	7
B. Capitalization and indebtedness	8
C. Reasons for the offer and use of proceeds	8
D. Risk factors	8
ITEM 4. INFORMATION ON PROVIDA	12
A. History and development	12
B. Business overview	14
C. Organizational structure	36
D. Property, plant and equipment	38
ITEM 4A. UNRESOLVED STAFF COMMENTS	38
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	38
A. Operating results	38
B. Liquidity and capital resources	51
C. Off-balance sheet arrangements	52
D. Tabular disclosure of contractual obligations	52
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	53
A. Directors and senior management	53
B. Compensation	55
C. Board practices	55
D. Employees	61
E. Share ownership	62
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	62
A. Major shareholders	62
B. Related party transactions	63
C. Interest of experts and counsel	65
ITEM 8. FINANCIAL INFORMATION	66
A. Consolidated statements and other financial information	66
B. Significant changes	66
ITEM 9. THE OFFER AND LISTING	66
A. Offer and listing details	66
B. Plan of distribution	67
C. Markets	67
D. Selling shareholders	69
E. Dilution	69
F. Expenses of the issue	70
ITEM 10. ADDITIONAL INFORMATION	70
A. Share capital	70
B. Memorandum and articles of association	70
C. Material contracts	72
D. Exchange controls	73
E. Taxation	74
F. Dividends and paying agents	79
G. Statements by experts	79
H. Documents on display	79
I. Subsidiary information	79
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	79
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	81
A. Debt securities	81
B. Warrants and rights	81
C. Other securities	81
D. American Depositary Shares	81