Cia. de Saneamento Básico do Estado de São Paulo - SABESP

Transcription

1 Cia. de Saneamento Básico do Estado de São Paulo - SABESP Report of Independent Accountants on the Limited Review of Quarterly Information (ITR) September 30, 2003

2 Report of Independent Accountants on the Limited Review To the Board of Directors and Shareholders Companhia de Saneamento Básico do Estado de São Paulo - SABESP 1 We have carried out limited reviews of the Quarterly Information (ITR) of Companhia de Saneamento Básico do Estado de São Paulo SABESP for the quarters and periods ended September 30 and June 30, 2003, and September 30, This information is the responsibility of the Company s management. 2 Our reviews were carried out in conformity with the specific standards established by the Institute of Independent Auditors of Brazil (IBRACON), in conjunction with the Federal Accounting Council (CFC), and mainly comprised: (a) inquiries of and discussions with management responsible for the accounting, financial and operating areas of the Company with regard to the main criteria adopted for the preparation of the quarterly information and (b) a review of the significant information and of the subsequent events which have, or could have, significant effects on the Company s financial position and operations. 3 Based on our limited reviews, we are not aware of any material modifications that should be made to the quarterly information referred to above in order that such information be stated in conformity with the accounting practices adopted in Brazil applicable to the preparation of quarterly information, consistent with the Brazilian Securities Commission (CVM) regulations. 4 Our reviews were carried out with the objective of issuing a report on the quarterly information referred to in the first paragraph. The statement of cash flow and the information in currency of constant purchasing power, presented in the quarterly information to provide additional information on the Company, are not required in conformity with accounting practices adopted in Brazil. The statement of cash flow and the information in currency of constant purchasing power were subject to the limited review procedures described in the second paragraph, and we are not aware of any material modifications that should be made to them in order that they be properly presented, in all material respects, in relation to the quarterly information taken as a whole. São Paulo, November 12, 2003 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Júlio César dos Santos Contador CRC 1SP137878/O-6

3 REGISTRATION WITH THE CVM DOES NOT IMPLY ANY ANALYSIS OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION PROVIDED IDENTIFICATION 4 State Registration Number (NIRE) NAME 3 Federal Corporate Taxpayers Registration Number (CNPJ) HEAD OFFICE 1 ADDRESS Rua Costa Carvalho, POSTAL CODE AREA CODE 4 MUNICIPALITY São Paulo 7 TELEPHONE AREA CODE 12 FAX dalmonogueira@sabesp.com.br 8 TELEPHONE FAX - 2 SUBURB OR DISTRICT Pinheiros 9 TELEPHONE FAX - 10 TELEX 5 STATE SP INVESTOR RELATIONS OFFICER (Company Mail Address) 1 NAME Rui de Britto Álvares Affonso 2 ADDRESS Rua Costa Carvalho, POSTAL CODE AREA CODE AREA CODE raffonso@sabesp.com.br 5 MUNICIPALITY São Paulo 8 TELEPHONE FAX SUBURB OR DISTRICT Pinheiros 9 TELEPHONE 10 TELEPHONE 11 TELEX 14 FAX - 15 FAX - 6 STATE SP GENERAL INFORMATION/INDEPENDENT ACCOUNTANT CURRENT YEAR CURRENT QUARTER PRIOR QUARTER 1 BEGINNING 2 END 3 QUARTER 4 - BEGINNING 5 END 6 QUARTER 7 BEGINNING 8 - END 1/1/ /31/ /1/2003 9/30/ /1/2003 6/30/ INDEPENDENT ACCOUNTANT PRICEWATERHOUSECOOPERS AUDITORES INDEPENDENTES 10 CVM CODE PARTNER RESPONSIBLE Júlio César dos Santos 12 INDIVIDUAL TAXPAYERS REGISTRATION NUMBER OF THE PARTNER RESPONSIBLE

4 CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO CAPITAL COMPOSITION NUMBER OF SHARES (THOUSAND) 1 CURRENT QUARTER 9/30/ PRIOR QUARTER 6/30/ SAME QUARTER IN PRIOR YEAR 9/30/2002 Paid-up Capital 1 Common 28,479,577 28,479,577 28,479,577 2 Preferred Total 28,479,577 28,479,577 28,479,577 Treasury Stock 4 Common Preferred Total CHARACTERISTICS OF THE COMPANY 1 TYPE OF COMPANY Commercial, industrial and other companies 2 SITUATION Operating 3 NATURE OF OWNERSHIP State-owned 4 ACTIVITY CODE water, sanitation and gas services 5 MAIN ACTIVITY Water treatment and distribution, sewage collection and treatment 6 TYPE OF CONSOLIDATION Not submitted 7 TYPE OF REPORT OF THE INDEPENDENT ACCOUNTANT Without exception COMPANIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENTS 1 ITEM 2 CNPJ 3 NAME DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER 1 ITEM 2 EVENT 3 DATE APPROVED 4 IAMOUNT 5 DATE OF PAYMENT 6 TYPE OF SHARE 7 AMOUNT PER SHARE 2

5 01.09 SUBSCRIBED CAPITAL AND ALTERATIONS IN THE CURRENT YEAR 1 ITEM 2 DATE OF ALTERATION 3 CAPITAL (In thousands of reais) 4 AMOUNT OF THE ALTERATION (In thousands of reais) 5 NATURE OF ALTERATION 7 NUMBER OF SHARES ISSUED (Thousands) 7 SHARE PRICE ON ISSUE DATE (Reais) INVESTORS RELATIONS OFFICER 1 DATE 2 SIGNATURE 11/14/2003 3

6 02.01 BALANCE SHEET ASSETS (In thousands of reais) Code Description 09/30/ /30/ Total assets 16,545,263 16,861, Current assets 1,801,405 2,204, Cash and banks 454,115 1,068, Cash, banks and short-term investments 404, , Treasury debentures 46,651 46, Foreign currency deposits 0 632, Other cash and banks 2,755 3, Credits 1,095, , Customers 1,095, , Inventories 21,860 20, Storeroom 21,860 20, Other 229, , Accounts receivable from shareholders 176, , th month salary advances 15,640 11, Deferred taxes and contributions 3,736 2, Taxes and contributions to be offset 10, Other accounts receivable 23,281 21, Long-term receivables 1,071,328 1,023, Sundry credits 1,071,328 1,023, Customers 41,473 14, Compensation for concession termination 148, , Judicial deposits 23,408 23, GESP agreement 607, , Deferred taxes and contributions 226, , Other accounts receivable 23,977 22, Receivables from related companies Associated companies Subsidiary companies Other related companies Other Permanent assets 13,672,530 13,633, Investments Associated companies Subsidiary companies Other investments Shares of other companies Shares of other companies with tax incentives Compulsory deposits Eletrobrás Property, plant and equipment 13,564,480 13,524, Operational property, plant and equipment 11,088,356 11,031, Construction in progress 2,476,124 2,492, Deferred assets 107, , Organization and reorganization expenses 107, ,219 4

7 02.02 BALANCE SHEET LIABILITIES AND SHAREHOLDERS EQUITY (In thousands of reais) Code Description 09/30/ /30/ Total liabilities 16,545,263 16,861, Current liabilities 1,715,616 1,874, Loans and financing 499,194 1,112, Debentures 518,368 77, rd issue of debentures 413, th issue of debentures 75,001 50, Interest on debentures 30,273 27, Suppliers 35,640 24, Taxes, fees and contributions 149, , REFIS Program 0 66, Taxes and contributions PAES Program 32, COFINS and PASEP 101,519 64, INSS 14,521 14, Other 1,406 21, Dividends payable Provisions 168, , Vacations 91,061 89, th month salary 45,708 29, Social charges 2,814 2, FINSOCIAL 7,872 7, Customer claims 10,982 7, Profit sharing 10,476 24, Debt with related companies Other 343, , Salaries and payroll charges 9,069 3, Services 42,456 36, Interest on capital 278, , Deferred taxes and contributions 9,903 9, Other liabilities 3,683 3, Long-term liabilities 7,206,915 7,393, Loans and financing 5,682,166 5,557, Debentures 653,883 1,090, rd issue of debentures 0 413, th issue of debentures 224, , th issue of debentures 428, , Provisions 360, , Provision for labor indemnities 24,724 24, Civil 19,379 12, Social security charges 6,466 6, Suppliers 140, ,750 5

8 02.02 BALANCE SHEET LIABILITIES AND SHAREHOLDERS EQUITY (In thousands of reais) Code Description 09/30/ /30/ Customers 164, , Others 5,512 5, Debts with related companies Others 509, , Deferred taxes and contributions 84,922 81, REFIS Program 0 44, Social security liabilities 125, , Taxes and contributions PAES Program 282, , Other accounts payable 16,217 16, Deferred income Shareholders equity 7,622,732 7,593, Paid-in capital 3,403,688 3,403, Capital reserves 50,706 50, Support for projects reserve 34,926 34, Incentive reserves 15,780 15, Revaluation reserves 2,754,051 2,778, Own assets 2,754,051 2,778, Subsidiary/associated companies Revenue reserves 935, , Legal 104, , Statutory For contingencies Unrealized profits Retained earnings Special for undistributed dividends Other revenue reserves 830, , Reserve for investments 830, , Retained earnings/accumulated deficit 478, ,287 6

9 03.01 STATEMENT OF OPERATIONS (In thousands of reais) Code Description 07/01/2003 to 09/30/ /01/2003 to 09/30/ /01/2002 to 09/30/ /01/2002 to 09/30/ Gross sales and/or services revenues 1,081,814 3,135, ,275 2,897, Water supply retail 554,670 1,599, ,312 1,475, Water supply wholesale 66, ,974 58, , Sewage collection and treatment 437,45 5 1,268, ,300 1,154, Other services rendered 23,663 79,128 30,591 99, Gross revenue deductions (50,436) (147,987) (30,928) (85,557) COFINS (32,454) (95,422) (25,420) (70,321) PASEP (17,982) (52,565) (5,508) (15,236) 3.03 Net sales and/or services revenues 1,031,378 2,987, ,347 2,812, Cost of sales and/or services (501,509) (1,492,072) (462,974) (1,335,847) 3.05 Gross profit 529,869 1,495, ,373 1,476, Operating expenses/income (474,294) (688,559) (1,478,921) (2,781,798) Selling (99,152) (288,133) (95,714) (295,754) General and administrative (58,188) (169,978) (54,437) (156,128) Financial (316,954) (230,448) (1,328,770) (2,329,916) Financial income 61, ,463 43, , Financial income 64, ,895 45, , COFINS/PASEP (2,985) (6,432) (1,644) (4,116) Financial expenses (378,150) (362,911) (1,372,167) (2,439,885) Financial expenses (378,150) (362,911) (1,372,167) (2,439,885) Other operating income Other operating expenses

10 03.01 STATEMENT OF OPERATIONS (In thousands of reais) Code Description 07/01/2003 to 09/30/ /01/2003 to 09/30/ /01/2002 to 09/30/ /01/2002 to 09/30/ Equity in the results Operating profit (loss) 55, ,938 (978,548) (1,305,231) 3.08 Non-operating income (expense) (599) (32,638) 2,144 (5,823) Revenues 3,199 6,296 4,791 9, Revenues 3,342 6,548 4,962 9, COFINS/PASEP (143) (252) (171) (375) Expenses (3,798) (38,934) (2,647) (15,381) Loss on disposal of property, plant and equipment (3,889) (39,176) (2,157) (11,961) Other (490) (3,420) 3.09 Result before taxes/participation 54, ,300 (976,404) (1,311,054) 3.10 Provision for income tax and social contribution (42,482) (197,361) (2,842) (2,842) Provision for income tax (33,700) (152,399) (2,842) (2,842) Provision for social contribution (8,782) (44,962) Deferred income tax 16,402 (43,539) 324, , Deferred income tax 14,909 (23,609) 226, , Deferred social contribution 1,493 (19,930) 85, , Reversal of deferred income tax ,823 35, Statutory participations/contributions 0 0 (8,476) (25,427) Participations Contributions 0 0 (8,476) (25,427) Extraordinary item 0 0 (8,476) (25,427) 3.13 Reversal of interest on capital Net income (loss) for the period 28, ,400 (663,596) (881,610) 8

11 03.01 STATEMENT OF OPERATIONS (In thousands of reais) Code Description 07/01/2003 to 09/30/ /01/2003 to 09/30/ /01/2002 to 09/30/ /01/2002 to 09/30/2002 NUMBER OF SHARES, EX-TREASURY (THOUSAND) 28,479,577 28,479,577 28,479,577 28,479,577 NET INCOME PER SHARE LOSS PER SHARE ( ) ( ) 9

12 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated 1. Operations Companhia de Saneamento Básico do Estado de São Paulo (SABESP) operates public water and sewage systems in the State of São Paulo, Brazil, providing water and sewage services to a broad range of residential, commercial, industrial and government customers, and also supplies water on a bulk basis to certain municipalities in the São Paulo Metropolitan Region which do not operate water systems. The Company provides water and sewage services in 323 municipalities in the State of São Paulo through concessions granted by the municipalities. Substantially all of these concessions have 30-year terms, one of which expires in 2004 and the rest expire between 2005 and Each of these concessions is automatically renewable for a period equal to its initial term, unless the municipality or SABESP exercises the right to terminate the concession at least six months prior to its expiration date. The Company does not have a formal concession to provide water and sewage services in the City of São Paulo, which accounts for a substantial majority of the sales and services rendered, and in 42 other municipalities in the State of São Paulo it operates based on a public deed of authorization. None of these other municipalities has a significant population, other than the City of Santos. The Company believes that it has a vested right to provide water and sewage services based upon, among other things, the ownership of the water and sewage systems serving the City of São Paulo and these other municipalities and certain succession rights resulting from the merger which formed SABESP. 2. Presentation of the Financial Statements The financial statements have been prepared in conformity with accounting practices adopted in Brazil and Brazilian Securities Commission (CVM) regulations. 3. Significant Accounting Practices (a) (i) Determination of results of operations Gross revenues from sales and services Revenues are recorded as the services are rendered. Water supply and sewage services rendered but not billed by the balance sheet date are measured and recorded as a contra entry to customer accounts receivable so that costs can be matched against revenues for each period. 10

13 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated (ii) Financial income and expenses These are represented mainly by interest, monetary and foreign exchange variations on loans and financings, and shortterm investments, calculated and recorded on the accrual basis of accounting. (iii) Income tax and social contribution Income tax and social contribution are recorded on the accrual basis of accounting. The provisions for income tax and deferred income tax on tax losses and on temporary differences are recorded at the base-rate of 15% plus an additional of 10%. The provisions for social contribution on net income and deferred social contribution on tax losses and on temporary differences are recorded at the rate of 9%. (iv) Other income and expenses Other income and expenses are recognized on the accrual basis of accounting. (b) Short-term investments These are represented mainly by Financial Investment Funds (FIF) and by Bank Deposit Certificates (CDBs) and are stated at amounts invested plus accrued income (on a pro-rata basis) up to the end of the period. (c) Allowance for doubtful accounts The allowance is recorded at an amount considered sufficient to cover any probable losses on realization of accounts receivable from customers, and is charged to income for the period in selling expenses. (d) Inventories Inventories of materials used in operations and in the maintenance of the water and sewage systems are stated at average purchase cost and recorded in current assets. Inventories for investment are recorded in property, plant and equipment and are stated at average cost of purchase. (e) Other current assets and long-term receivables These are stated at cost plus accrued income or realizable value, when applicable. (f) Permanent assets These are stated at cost plus price-level restatements up to December 31, 1995, and take the following into consideration: 11

14 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Depreciation of property, plant, and equipment is calculated on the straight-line basis at the annual rates mentioned in Note 6. The revaluation of property, plant, and equipment items, carried out in two separate stages in 1990 and 1991, was based on an appraisal report issued by independent valuers and is realized through depreciation, sale, and disposal of the respective assets, with a contra entry to "Retained earnings". Interest charges on financings raised with third parties for construction in progress are capitalized as part of the cost of assets. Deferred charges are amortized on the straight-line basis over five years as from the date when benefits start to be generated. (g) Loans and financing These are restated based on the related monetary and foreign exchange variations, plus other charges incurred to the balance sheet date. (h) Provision for vacation pay The provision for vacation pay and related social charges is accrued as earned by employees. (i) Provision for contingencies Provisions for contingencies are recorded to cover losses related to labor, tax, civil, commercial and other lawsuits, at administrative and court levels, which are considered by legal counsel to be probable and able to be estimated at September 30, 2003 and June 30, (j) Environmental expenditures Expenditures relating to ongoing environmental programs are expensed as incurred. Ongoing programs are designed and performed to minimize the environmental impact of the operations and to manage the environmental risks inherent to the activities. Provisions with respect to such costs are recorded at the time they are considered to be probable and able to be reasonably estimated. (k) Actuarial liability The Company sponsors a private defined benefit pension plan. CVM Deliberation 371/2000 determines the recognition of actuarial liabilities exceeding the fair value of the assets of the pension plans. As prescribed by this regulation, these liabilities are being recognized over a period of five years as from

15 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated (l) Other current and long-term liabilities These are stated at their known or estimated amounts, including accrued charges and monetary and foreign exchange variations, when applicable. (m) Interest on capital This interest has been recorded in accordance with Law 9249/95, for tax deductibility purposes, calculated on a daily prorata basis, at the Long-term Interest Rate (TJLP) and recorded in conformity with CVM Deliberation 207/96. (n) Net income or loss per thousand shares Net income or loss per thousand shares is calculated based on the number of shares issued at the balance sheet date. (o) Use of estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results in the future could differ from those estimates. 4. Customers Receivables from customers (except agreements) do not include fines, interest or any other charges on overdue bills and are summarized as follows: 13

16 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Balance sheet balances September 2003 June 2003 Current assets General customers - Consumers (i) 332, ,561 - Special customers (ii) 89,116 77,024 - Agreements (iii) 55,317 44, , ,797 Government entities - Municipal São Paulo 243, ,360 - Municipal other 132, ,893 - State 77,495 62,955 - GESP Agreement 37,706 37,706 - Federal 14,915 12, , ,039 Bulk sale customers municipal authorities - Guarulhos 203, ,681 - Mauá 52,631 49,389 - Mogi das Cruzes 3,342 3,173 - Santo André 172, ,346 - São Bernardo do Campo 162, ,740 - São Caetano do Sul 2,287 2,317 - Diadema 44,650 42, , ,753 Amounts to be billed 228, ,904 Subtotal 1,852,001 1,661,493 Allowance for doubtful accounts Private and government (280,798) (278,637) Bulk sales (475,621) (457,670) (756,419) (736,307) Total 1,095, ,186 Receivables from general customers refer to (i) consumers - households and small and medium-sized businesses (ii) special consumers - large consumers, companies, industries, condominiums and special billing consumers (industrial waste, wells, etc.); and (iii) agreements to refinance overdue receivables in installments. 14

17 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Aging analysis September 2003 June 2003 Amounts not yet due 485, ,461 Overdue up to 30 days 121, ,132 Overdue from 31 to 60 days 56,943 58,508 Overdue from 61 to 90 days 52,919 41,485 Overdue from 91 to 120 days 50,724 39,386 Overdue from 121 to 180 days 116,767 76,032 Overdue from 181 to 360 days 200, ,617 Overdue from more than 360 days 767, ,872 Subtotal 1,852,001 1,661,493 Allowance for doubtful accounts (756,419) (736,307) Total 1,095, ,186 Allowance for doubtful accounts The additional allowances charged during the periods are as follows: 3 rd quarter of nd quarter of 2003 Supplement Supplement Prior balance 736, ,204 General customers/government entities 2,162 9,881 Bulk sales customers municipal authorities 17,950 22,222 Total 20,112 32,103 Current balance 756, ,307 The Company s accounting policy for establishing the allowance for doubtful accounts is as follows: (*) accounts receivable (excluding accounts receivable from the State Government) over R$ 5 and less than R$ 30 overdue for more than 360 days; (**) accounts receivable balances (excluding accounts receivable from the State Government) over R$ 30 overdue for more than 360 days, for which legal action has been taken; (***) accounts receivable balances (excluding accounts receivable from the State Government) less than R$ 5 overdue for more than 180 days are written-off through a direct charge to Selling expenses. The Company recorded direct charges for probable losses in accounts receivable incurred in the 3rd quarter of 2003, in the amount of R$ 29,606 (net of recoveries, of R$ 9,494 up to R$ 5 and R$ 20,112 over R$ 5), directly to results for the period, in conformity with the guidelines of Law 9430/96, recorded in Selling expenses. In 2002 these losses amounted to R$ 39,137 in the 3 rd quarter. 15

18 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Bulk sale customers municipal authorities The amounts receivable on bulk sales refer to the sale of treated water to certain municipal authorities which distribute, bill and charge for this water. Change Municipality Balance June 2003 Billed Received Balance - September 2003 Guarulhos 192,681 19,171 8, ,189 Mauá 49,389 6,319 3,077 52,631 Mogi das Cruzes 3,173 3,141 2,972 3,342 Santo André 165,346 11,394 4, ,380 São Bernardo do Campo 158,740 15,197 11, ,576 São Caetano do Sul 2,317 3,360 3,390 2,287 Diadema 42,107 5,317 2,774 44,650 Total 613,753 63,899 36, ,055 Municipality of São Bernardo do Campo (i) The Company is negotiating with the Municipality the transfer of the services and resolution of the debt. (ii) Based on a judicial decision, the Municipality of São Bernardo do Campo is paying the debt relating to the processes 1256/96, amounting to R$ 22,426, in nine annual installments, and 2640/84, amounting to R$ 9,556, in eight annual installments, both subject to monetary adjustments upon receipt. The amount of both agreements is recorded in current assets and long-term receivables, in the amounts of R$ 3,686 and R$ 28,296, respectively. State Government Balance June 2003 Billed Received JSCP (*) Balance - September ,955 61,449 37,662 (9,247) 77,495 (*) JSCP amount related to interest on capital in 2002, payable to the State Government, offset against amounts receivable. 16

19 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated 5. Receivable from the State Government The accounts receivable relate to supplementary pensions and paid leave benefits paid by the Company to former employees of the state-owned companies which merged to form SABESP. The amounts are reimbursed by the Government of the State of São Paulo (the "State Government" or GESP ), which is the primary obligor in accordance with State Law 200/74. At September 30, 2003, these credits amount to R$ 143,050 (June 2003 R$ 122,104). At September 30, 2003, the Company employs 277 people entitled to these benefits and 2,868 (June ,871) who already receive supplementary pensions. The amount of the future benefits, calculated based on actuarial methodologies is R$ 908,861, and is not recorded in the Company s accounts because it refers to an obligation of the São Paulo State Government. On December 11, 2001, the Company entered into an Agreement for Recognition and Consolidation of Obligations, Payment Commitments and Other Covenants, described in Note 14, under which the São Paulo State Government acknowledges a debt of R$ 320,623, which must be mutually reconciled between the parties, and which corresponds to the balance of these obligations on November 30, The amount of R$ 33,750 (June 2003 R$ 33,750) related to this settlement is recorded under current assets as Receivable from the State Government, and the remaining portion in long-term receivables as GESP Agreement. 17

20 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated 6. Property, Plant and Equipment September 2003 June 2003 Cost Accumulated depreciation Net Net In use Water systems Land 918, , ,336 Buildings 2,564,257 (1,067,072) 1,497,185 1,515,929 Ducts 738,978 (254,603) 484, ,676 Water meters 250,805 (110,106) 140, ,574 Networks 2,993,322 (765,820) 2,227,502 2,201,869 Equipment 165,819 (106,309) 59,510 59,378 Other 294,998 (139,578) 155, ,646 Subtotal 7,926,802 (2,443,488) 5,483,314 5,479,408 Sewage systems Land 343, , ,364 Buildings 1,237,747 (375,523) 862, ,890 Ducts 754,218 (250,245) 503, ,987 Networks 3,932,164 (817,560) 3,114,604 3,057,739 Equipment 381,743 (226,938) 154, ,623 Other 26,297 (10,946) 15,351 15,553 Subtotal 6,675,761 (1,681,212) 4,994,549 4,935,156 General use Land 102, , ,527 Buildings 114,873 (53,702) 61,171 61,907 Transportation equipment 130,905 (105,926) 24,979 27,329 Furniture, fixtures and equipment 247,831 (129,695) 118, ,289 Free lease land 25,312-25,312 25,312 Free lease assets 8,023 (2,471) 5,552 5,552 Subtotal 629,471 (291,794) 337, ,916 Subtotal in use (4,416,494) 10,815,540 10,757,480 Construction in progress Water systems 740, , ,164 Sewage systems 1,711,972-1,711,972 1,693,183 Other 23,488-23,488 23,366 Subtotal construction in progress ,476,124 2,492,713 Intangible assets (39,939) 272, ,125 Total 18,020,913 (4,456,433) 13,564,480 13,524,318 18

21 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated (a) Depreciation Depreciation is calculated at the following annual rates: buildings 4%; ducts 5%; water meters 10%; networks 2%, transportation equipment 20%; furniture, fixtures and equipment 10 to 20% and other from 2 to 20%. (b) Construction in progress The estimated disbursements as from October 2003, up to 2008, relating to Project investments already contracted are approximately R$ 767,195. (c) Disposal of property, plant and equipment The Company wrote-off items of property, plant and equipment in this quarter of R$ 3,889 (R$ 2,157 3rd quarter of 2002), due to obsolescence, decommissioning or theft. (d) Expropriations As a result of the implementation of priority projects related to the water and sewage systems, the Company was forced to expropriate or establish rights of way over third-party properties, in conformity with the relevant legislation. The owners of these properties will be compensated either through amicable or court means. The Company s legal department estimates that the compensation to be paid as from the 4th quarter of 2003, although with no determined dates for disbursement, amounts to approximately R$ 189,000, which will be paid with Company funds. The assets to be received as a result of these negotiations will be recorded as property, plant, and equipment after the transaction is completed. (e) Revaluation of assets and tax effects All property, plant and equipment were revalued in 1990 and 1991 and are being depreciated at rates which take into consideration the remaining economic useful lives of the assets presented in the appraisal reports which, as a rule, are within the above rates. In the period from January to September 2003 the realization of the revaluation reserve amounted to R$ 103,914. As permitted by CVM Instruction 197/93, the Company did not provide for the tax effects (deferred taxes) on the revaluation surplus of property, plant and equipment carried out in 1990 and Had this effect been accounted for, the unrealized amount at September 30, 2003 would be R$ 537,245 (June 2003 R$ 545,665). (f) Intangible assets As from 1999, new concessions have been negotiated taking into account the projected financial results based on appraisal reports issued by independent valuers. 19

22 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated The amount defined in the related contract, after the conclusion of the negotiations with the municipality and final settlement through subscription of the Company's shares or in cash, is recorded in this account and amortized over the related concession period of 30 years. 7. Loans and Financing Balance of loans September 2003 June 2003 Short-term Long-term Total Short-term Long-term Total Maturity Annual interest rate Indexation Guarantees Domestic Federal Government / Banco do Brasil 152,258 2,317,662 2,469, ,165 2,326,879 2,474, % UPR São Paulo State Government 3 rd issue of debentures 413, , , , CDI % - 4 th issue of debentures 75, , ,000 50, , , CDI + 1.2% - 5 th issue of debentures - 428, , , , CDI+1.85% and 13.25% IGPM - CEF 35, , ,651 32, , , to % to 9.5% UPR Own resources BNDES - 76,182 76,182-34,344 34, % + TJLP Own resources Other 2,269 25,446 27,715 2,252 25,050 27, /11 12% / CDI UPR - Interest and charges 51,958-51,958 48,195-48,195 Total domestic 730,023 3,561,381 4,291, ,635 3,967,774 4,247,409 Foreign Bird US$ 30,596 thousand 51,882 37,563 89,445 87,974 36, , / % Soc.Génerale Currency basket variation + US$ EUR 3,118 thousand 2,619 8,025 10,644 2,541 7,784 10, % EUR Currency Bid basket US$ 440,693 variation + thousand 108,645 1,179,678 1,288, ,095 1,114,813 1,218, /25 3 % to 7.7% US$ Federal Government Federal Government Federal Government Eurobonds US$ 500,000 thousand - 1,461,700 1,461, ,400 1,436,000 2,010, /08 10% and 12% US$ - Deutsche Bank Luxembourg US$ 50,000 thousand 58,468 87, ,170 57,440 86, , % US$ - Interest and charges 65,925-65,925 83,565-83,565 Total foreign 287,539 2,774,668 3,062, ,015 2,680,974 3,590,989 Total 1,017,562 6,336,049 7,353,611 1,189,650 6,648,748 7,838,398 UPR: Standard Reference Unit VARIATION OF CURRENCY BASKET: amount related to Bid and Bird account unit CDI: Interbank Deposit Certificate TJLP : Long-term Interest Rate EUR: Euro IGP-M: Market General Price Index 20

23 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Eurobonds In July 2003, the Company paid Eurobonds in the amount of US$ 200 million. 8. Income Tax and Social Contribution (a) Balance sheet accounts September 2003 June 2003 Current assets Income tax to offset 10,241 - Social contribution to offset ,391 - Deferred income tax 2,749 1,802 Deferred social contribution ,736 2,450 Long-term receivables Deferred income tax 116,041 99,243 Deferred social contribution 110, , , ,330 Current liabilities Deferred income tax 9,903 9,903 9,903 9,903 Long-term liabilities Deferred income tax 65,759 62,923 Deferred social contribution 19,163 18,143 84,922 81,066 (b) (i) Deferred taxes Current assets Mainly calculated on temporary differences in the amount of R$ 10,982 (June 2003 R$ 7,206). (ii) Long-term receivables Calculated on temporary differences, totaling R$ 464,164 (June 2003 R$ 396,971) for income tax and R$ 475,601 (June 2003 R$ 409,334) for social contribution, and on tax losses for social contribution purposes accumulated up to September 30, 2003, in the amount of R$ 749,

24 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated The Company is claiming in court the right to fully offset tax loss carryforwards for income tax and social contribution purposes, without the 30% annual limitation imposed by Law 8981/95; notwithstanding this, the portion offset in the year observed the limitation established in this law. In conformity with CVM Deliberation 273/98 and Instruction 371/02, the realization of credits arising from income tax and social contribution losses on temporary differences will occur by the end of 2006 based on budgetary projections. Approximate percentage realization: Year Realization 15% 23% 29% 33% Also in conformity with the provisions of CVM Instruction 371/02, in addition to the regular projections, the Company has prepared its budget projections to support this realization discounted to present value using the discount rate of 15% approved by the Joint Meeting of the Board of Directors and of the Audit Committee. (ii) Long-term liabilities Mainly calculated on temporary differences totaling R$ 263,035 (June 2003 R$ 251,692) for income tax and R$ 212,928 (June 2003 R$ 201,586) for social contribution. (c) Reconciliation of the effective tax rate The amount recorded as income tax and social contribution expense in the financial statements is reconciled from the nominal rates as shown below: 3 rd quarter of rd quarter of 2002 Income (loss) before taxation 54,976 (989,246) Benefit (expense) at nominal rate of 34% (18,692) 336,344 Reconciliation adjustments: - Non-deductible realization of revaluation reserve (8,427) (7,921) - Other differences 1,039 (7,139) Income tax and social contribution in the results for the period (26,080) 321,284 The effective rate for income tax and social contribution in the quarter was impacted by contingent provisions (customers and suppliers), actuarial liability and realization of the revaluation reserve. 22

25 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated 9. Special Payment in Installments (PAES) The Company adhered to PAES on July 31, 2003, according to Law 10684/2003, including in the Program the debts related to COFINS and PASEP, involved in a lawsuit against the application of Law 9718/98 and the REFIS balance. The debt will be paid in 120 months. Of the amount of R$ 315,216, R$ 32,329 is recorded in short-term and R$ 282,887 in long-term liabilities. The amount paid as from the option for the PAES Program, from July to September 2003, was R$ 7,997, of which R$ 6,260 refer to charges. The assets used as guarantees in REFIS, in the amount of R$ 249,034, remain as such in the PAES Program. 10. Provisions and Contingencies (a) Provisions in long-term liabilities Management, base on an analysis with its legal advisors, recorded a provision in the amount of R$ 360,892 (June 2003 R$ 313,108), considered sufficient to meet probable losses on legal actions. (i) Labor claims the Company is defending several labor claims, most of the amounts involved being under provisional or definite execution, thus being classified as of probable loss and duly provided for. The amount provided refers mainly to overtime and health hazard premium claims, and they are currently in various courts. (ii) Contractors - these refer to actions filed arising from construction contracts which have already been judged by lower courts and await the decision on the appeals filed by SABESP. (iii) Customers - these refer to actions filed by our customers claiming tariff parity, currently in the lower or appellate courts, where decisions to date have been both favorable and unfavorable to the Company. (b) Lawsuits The Company is a defendant in lawsuits and administrative proceedings relating to environmental, tax, civil and labor issues, which are deemed by our legal advisors to be possible gains/losses and are therefore not recorded in the Company's books, totaling approximately R$ 358,000 at September 30, 2003 (June 2003 R$ 353,000). 11. Pension and Health Benefit Plans The Company is the sponsor of Fundação SABESP de Seguridade Social ("SABESPREV"), formed in August 1990 to manage the Company's employees pension and health benefit plans. 23

26 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated The monthly contributions to the defined benefit pension plan amount to 2.10% by the Company and 2.10% by participants. The participants contributions shown in the previous paragraph is the average, because the actual percentage depends on salary levels (between 1% and 8.5%). The health benefit program(optional health plans of free choice) is also funded by Company and participating employee contributions, which in the period were as follows:. Company: 6.21% on average of the payroll;. Participating employees: 3.21% of base salary and premiums, corresponding to 2.25% of gross payroll, on average. 12. Benefits to Employees In order to comply with the provisions of CVM Deliberation 371/00, the amounts of the pension and retirement benefits granted or to be granted, to which employees are entitled after retirement, are presented below. At December 31, 2002, based on the report of the independent actuary, SABESP had a net actuarial liability of R$ 281,195, representing the difference between the present value of the Company s obligations to the participating employees, retired employees, and pensioners, and the fair value of the plan assets. The Company chose to recognize the liability over a five-year period. At September 30, 2003, the amount of R$ 125,948 (at June 30, 2003 R$ 106,898), is recorded in long-term liabilities. In 2003 the estimated expense is R$ 88,816, of which R$ 66,608 were recorded from January to September 2003, as follows: 1 st quarter of nd quarter of rd quarter of 2003 Jan-Sep of 2003 Transfer to Sabesprev 2,840 3,003 3,153 8,996 Actuarial liability 19,299 19,263 19,050 57,612 Total recorded 22,139 22,266 22,203 66,608 As determined by IBRACON NPC 26, approved by CVM Deliberation 371, during the first year of its application, the effects were recorded as extraordinary item, net of the related taxes. As from 2003, these effects started to be recorded as operating expenses. 13. Profit Sharing The profit sharing relating to the period from July 2002 to June 2003 was paid in August 2003, according to the collective agreement. 24

27 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated The Company is accruing up to one month s payroll in connection with the profit sharing program from July 2003 to June In the quarter, the amount of R$ 10,476, was accrued and recorded in current liabilities. 14. Related Party Transactions September 2003 June 2003 Current assets Cash, banks and time deposits with financial institutions controlled by the State Government Nossa Caixa S.A. 257, ,950 State Government customers (Note 4) 115, ,661 Accounts receivable 86, ,386 Agreement 37,706 37,706 Restructuring of accounts offset against JSCP (9,247) (77,431) Accounts receivable from shareholders (Note 5) 176, ,854 Accounts receivable 143, ,104 Agreement 33,750 33,750 Long-term receivables GESP Agreement 607, ,374 Current liabilities Interest on capital up to , ,967 Interest on capital provided in , ,294 Interest on capital payable to the State Government relative to 2002 is being offset against the accounts receivable balance, as shown above. Interest on capital relative to 2001 will be offset against the amounts involved in the Agreement for Recognition and Consolidation of Obligations, Payment Commitments and Other Covenants. 3 rd quarter of rd quarter of 2002 Gross sales and services revenues Water sales 34,411 34,644 Sewage services 27,038 28,096 Collections (37,662) (97,311) Financial income Short-term investments 16,964 21,390 These refer to sales to State Government agencies carried out under the terms and conditions considered by management as regular market conditions, except for the way the receivables are settled, which can be as follows: 25

28 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated (a) Agreement for Recognition and Consolidation of Obligations, Payment Commitments and Other Covenants (GESP Agreement) The above agreement was signed on December 11, 2001 between the Company, the State Government of São Paulo, through the State Finance Secretariat, and the Department of Water and Electric Power (DAEE), with the State Department of Water Resources, Sanitation and Works as intervening party. Under such agreement, the State acknowledges that by force of Law No. 200/74, it is responsible for the charges arising from the pension plan and acknowledges the existence of debts arising from invoices for the rendering of water supply and sewage collection services. The total contract value is R$ 678,830, at historical amounts, of which R$ 320,623 refers to pension benefits in the period from March 1986 to November 2001, and R$ 358,207 for rendering of water supply and sewage collection services, invoiced and due from 1985 to December 1, In recognition of the strategic importance of the Taiaçupeba, Jundiaí, Biritiba, Paraitinga, and Ponte Nova reservoirs for ensuring the maintenance of the water volume of the Alto Tietê system, the Department of Water and Electric Power (DAEE) will transfer these properties to the Company as a partial amortization, through the assignment of receivables, of the amount due by the State. The valuation of the reservoirs has already been completed and approved by the Company s Board of Directors amounting to R$ 300,880 thousand (base date June 2002), as stated in the appraisal report to be submitted to the appreciation of the Extraordinary General Meeting of shareholders, after the conclusion of the calculation of the effective amounts related to the retirement and pension supplements. The agreement also established that the legal advisors of the State Finance Secretariat will carry out specific analyses, already under way, to reconcile the amount of pension benefits. The determination of these amounts, estimated to be concluded by the end of the year, is being made by the Institute of Accounting, Actuarial and Finance Researches (FIPECAFI), contracted by SABESP. Up to the conclusion of this work, which management does not expect to find significant variations, and completion the approval process of the appraisal report and corresponding credit assignment related to the mentioned reservoirs, according to sole paragraph of clause 11 of the Agreement, the date to start the payments, which was originally in July 2002, is automatically extended. After the conclusion of the determination of the amounts related to the retirement and pension supplements, as well as the amounts arising from services rendered related to water and sewage services, subject to monetary restatement, and, in the case of balance payable by the State Government, this will be offset against interest on capital relating to (b) Memorandum of Understanding with the State of São Paulo Government The Company and the São Paulo State Government, through the State Finance Secretariat, entered into a Memorandum of Understanding on September 30, 1997 aimed at settling the balance of accounts receivable for sales and services rendered by the Company, the pension and paid leave of employees benefiting from Law 200/74, and other payables, using dividends and/or interest on capital, when applicable. 26

29 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated 15. Financial Instruments (a) Market value of financial instruments The market values of the main financial instruments of the Company approximate their book values, as follows: September 2003 June 2003 Financial investments 238, ,125 Loans and financing 7,353,611 7,838,398 The market values of these financial instruments are determined annually by the Company s management. (b) Concentration of credit risk A significant portion of sales is made to a broad customer base. Credit risk is mitigated due to the large portfolio and the control procedures, which monitor this risk. The allowance for doubtful accounts is sufficient to cover realization losses. (b) Foreign currency Transactions in foreign currency consist of borrowings for the improvement and expansion of the Company's water and sewage systems. 16. Operating Costs and Expenses Jul-Sep 2003 Jan-Sep 2003 Jul-Sep 2002 Jan-Sep Cost of sales and services Salaries and payroll charges 203, , , ,472 General supplies 19,611 54,599 16,926 47,869 Treatment supplies 21,483 69,111 15,807 60,454 Services 50, ,053 53, ,890 Electric power 82, ,312 70, ,365 General expenses 7,405 24,798 8,720 24,757 Depreciation and amortization 122, , , ,040 PASEP credit (4,863) (14,362) ,509 1,492, ,974 1,335, Selling expenses Salaries and payroll charges 34,842 97,063 26,591 75,069 General supplies 1,293 3,705 1,160 3,124 Services 21,963 63,415 22,703 62,397 Electric power General expenses 10,718 26,563 5,345 18,650 27

30 04.01 NOTES TO THE QUARTERLY INFORMATION All amounts in thousands of reais unless otherwise indicated Jul-Sep 2003 Jan-Sep 2003 Jul-Sep 2002 Jan-Sep 2002 Depreciation and amortization 602 1, ,751 Write-off of receivables 29,606 95,154 39, ,422 PASEP credit (56) (165) , ,133 95, , General and administrative expenses Salaries and payroll charges 29,202 82,921 24,947 70,446 General supplies 811 2, ,936 Services 8,882 29,043 14,111 43,171 Electric power General expenses 9,180 24,256 6,233 12,774 Depreciation and amortization 4,269 10,583 2,999 8,363 Tax expenses 5,737 20,244 5,115 18,033 PASEP credit (98) (239) , ,978 54, , Costs, selling, general and administrative expenses (1+2+3) Salaries and payroll charges 267, , , ,987 General supplies 21,715 60,887 18,973 53,929 Treatment supplies 21,483 69,111 15,807 60,454 Services 81, ,511 90, ,458 Electric power 82, ,470 70, ,111 General expenses 27,303 75,617 20,298 56,181 Depreciation and amortization 127, , , ,154 Tax expenses 5,737 20,244 5,115 18,033 Write-off of receivables 29,606 95,154 39, ,422 PASEP credit (5,017) (14,766) ,849 1,950, ,125 1,787, Financial expenses Interest on local loans and financing 134, , , ,334 Interest on foreign loans and financing 66, ,839 84, ,359 Interest on capital - 158, ,222 Interest on capital (reversal) - (158,346) - (108,222) Other financial expenses 16,940 81,076 40,220 75,037 Exchange variations on loans and financing 38, ,836 21,113 55,575 Foreign exchange variations on loans and financing 84,894 (542,105) 1,062,077 1,677,804 Other monetary/foreign exchange variations (5,306) 9,412 9,189 12,004 Provisions 45, ,233 33,519 77,772 PASEP credit (2,886) (8,778) , ,911 1,372,167 2,439, Financial income Monetary variations 34,449 53,980 3,981 29,680 Earnings on financial investments 21,134 59,307 21,512 47,005 Interest 8,598 25,608 19,541 37,386 Other , ,895 45, ,085 28