Press 3q ingles

Earnings Release 3rd Quarter

2014

Earnings Release 3rd Quarter 2014

1.

3Q 2014 Highlights

2.

Recent Events

3.

Consolidated Income Statements

4.

Retail Business Indicators

5.

Stores

6.

Financial Business Indicators

7.

Financial Statements La Polar S.A. - IFRS

8.

a.

Consolidated income statements by function

b.

Consolidated Balance Sheet

c.

Cash Flow

Debt Restructure Stages a. Debt Restructure b. Debt Restructure Essential Facts

9.

Annex

Notes:     

Quarters are named as: 1Q, 2Q, 3Q, 4Q accordingly Semesters are named as: 1H, 2H accordingly and 9M for year to date Calendar years are named LTM (Last twelve months) Currency symbols: CLP $ for Chilean Pesos, US $ U.S. Dollars, M Millions, B Billions Exchange rate used in this 3Q report: 1 US $ = CLP $ 599.2 Source: Internal Revenues Service ( Servicio de Impuestos Interno – SII – Chile)

1

Earnings Release 3rd Quarter 2014

1.

3Q 2014 Highlights

ďƒź On September the 1st, after a negotiation process that lasted for about 6 months, it was unanimously approved by the creditors meeting of Empresas La Polar, the proposed terms that were previously approved by large majorities in the Extraordinary Shareholders Meeting (August 8th of 2014) and Bondholders meetings (August 27th of 2014), for the restructure of most of the financial debt of the company. This important agreement, which included, both of the shareholders and the creditors efforts, will enable the company to have a radical improvement in its financial position and financial indicators, especially in its debt. Also the effects of the restructure will allow the company to develop its full growth potential, especially in its credit card. ( See details of this financial agreement on page 18) These changes are not reflected in these financial statements as they will be materialized only after obtaining regulatory approvals, this process to date is ongoing and its conclusion is expected in early 2015.

The extensive and complex negotiation process between creditors and shareholders, led to a situation of high uncertainty, which affected both employees and suppliers of the company, some of whom decided to decrease in amount and/or periods, and even the suspension of the lines of credit with the company until the outcome of the process. The same situation occurred with insurance companies that protect the credit of the company suppliers. This resulted in lower shipments which were reflected in a lack of a balanced stock. Once obtained the agreement approval, these credit lines have been normalized and La Polar has even been able to access to new sources of financing, which has improved the stock levels for Christmas.

The company has made significant efforts to make more efficient its processes and as was announced during this year 2014, the expenses reduction plan that includes initiatives such as the reduction of the executive staff, stores back office efficiency, closing regionals warehouses, Panamericana and San Fernando stores closure, implementation of self-service model for both retail and financial business and rationalization of marketing expenses, among others. The preliminary results of these efforts are beginning to be reflected in this quarter on the SG&A that were substantially lower than previous periods, were its total effects will be seen during 2015.

ďƒź Total revenues for the third quarter reached CLP $ B 85, which represents a decrease of 8.4% compared to 3Q 2013. In the retail segment the variation of SSS was a -7.5% decrease, this decrease is mainly due to a slowdown in consumption, which led to a general market contraction in the third quarter. Also there is a post World Cup effect that led to a fall of 21% in electronics sales during July.

In addition, as it was mentioned above, as a result of the financial restructure process, the company had to deal with lower shipments of the suppliers, due to the lower credit lines, which was reflected in the lack of a balanced stock, affecting the national brands sale in a negative 17%. In contrast, it was managed to grow in own brands by 9% which allowed and increase in the retail margin by 2

Earnings Release 3rd Quarter 2014

almost one percentage point, reaching 25.8% in the 3Q 2014. This is even considering the negative effect of the depreciation of the exchange rate.

Meanwhile the financial business was affected by lower credit card loans experienced in recent months, due to the restrictions that affected the company because of the financial restructuring process mentioned above. Also there was a decline in the maximum interest rate that led to a decreased in the financial revenues by 6.3% compared to 3Q13.

The portfolio risk, measured as the level of provisions or risk rate, was at the end of the 3Q14 at 10.4%. This rate is within the average for the segment in which we operate and is considered adequate despite the fewer placements we have had in recent months and the increased unemployment in the country. (See page 10 for details and portfolio indicators)  Regarding the SG&A of 3Q14, these goes slightly up compared to the same quarter last year.

However these costs include an extraordinary settlements of CLP $ M 1.800 as part of the efficiency plan implemented by the company in the last months of 2014. Excluding these extraordinary expenses, the SG&A of 3Q14 is 4.9% lower over the same period last year.  On September the 29th of 2014, it was published in the “Diario Oficial”, the law N° 20,780, which introduces several changes to the current tax system in Chile. ( Tax Reform Law) The Tax Reform Law considers a progressive increase in the first category income tax for commercial years 2014, 2015, 2016, 2017 and 2018 onwards, changing the current rate of 20%, to 21%, 22.5%, 24%, 25.5% and 27% respectively, as long as the Partially Integrated System is applied, or, for commercial years 2014, 2015, 2016 and 2017 onwards, increasing the tax rate to 21%, 22.5%, 24% and 25%, respectively, in case it is chose the implementation of the Attributed Income system.

As established in law N° 20,780, it will be applied as a rule to the company, because it is an open stock company, the Partially Integrated System, unless that in the future the Shareholders of the company decides to choose for the Attributed Income system.

As a complement for what was previously mentioned, on October the 17th of 2014, the Securities and Insurance Supervisor, issued a legal document where it was stated that, despite the IAS 12 and their interpretations, the differences in assets and liabilities for deferred taxes that occur as a result of the increase in the first category income tax, shall be accounted In this period against equity.

The increase in tax rates previously mentioned will produce on the 30th of September of 2014, a decrease in the “Total Equity” of CLP $ Th, 12,934,525, which means an equivalent decrease in the “Equity attributable to owners of the parent”.

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Earnings Release 3rd Quarter 2014

2.

Recent Events

ďƒź In order to realize the previously mentioned restructure financial plan, date on the 29th of September of 2014, it was formalized the document input of the documents required by the Securities and Insurance Supervisor, for the modification of the corresponding issuance contracts for the F and G Series and the issuance of a convertible bond and the capital increase associated. These documents (previously approved by the Shareholders Meeting, Bondholders Meeting and Creditors Meeting) modify the Preventive Judicial Agreement to which the company is held. Then on the 21st of October of 2014, the Securities and Insurance Supervisor, through a legal document, made their comments regarding these processes. On the 13th of November of 2014, giving response to this legal document, it was send the convertible bond prospectus as well as the modifications for the F and G Series, with the corrections and clarifications that were requested by the Securities and Insurance Supervisor. ( For more detail see page 18)

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Earnings Release 3rd Quarter 2014

3.

Consolidated Income Statements

3Q 2014 EBITDA CLP $ B Revenues Costs Gorss Margin % Revenues SG&A (w/o depreciation) % Revenues EBITDA % Revenues Depretiation Operating Income Non - Operating Income Profit (Loss) Before Taxes Benefits (Expenses) Income Tax Profit (Loss)

Consolidated* 3Q 2014 r 3Q 2013 85.4 -8.4% 93.2 (58.1) (58.9) 27.3 -20.4% 34.3 31.9% 36.8% (32.6) 0.6% (32.4) -38.2% -34.8% (5.4) 1.8 -6.3% 2.0% (1.9) (7.2) (8.6) (15.8) 5.0 (10.9)

3Q 2014 69.6 (51.6) 18.0 25.8% (23.5) -33.7% (5.5) -7.9%

Retail r -7.4% -4.0% 17.5%

3Q 2013 75.2 (56.4) 18.7 24.9% (20.0) -26.6% (1.3) -1.7%

3Q 2014 16.9 (6.5) 10.4 61.5% (10.2) -60.6% 0.1 0.9%

Financial r 3Q 2013 -6.3% 18.0 (2.5) -33.1% 15.5 86.2% -17.6% (12.4) -69.0% 3.1 17.2%

(1.6) 0.2 (7.2) (7.0) 1.6 (5.4)

We can see a decline in retail revenues by 7.4% compared to the third quarter of 2013; this is line with the fall in consumption experienced in the country. Also the rising in the exchanged rate has affected the sales of the company for the year 2014, which has led to a lower consumer activity.

The company restructure plan that sought to have a greater efficiency has been already reflected in the SG&A of the end of the third quarter of 2014 while maintaining a similar value compared to last year with a rise of 0.6%. However, it continues to implement the new model of self-service for both business segments (Retail and Financial), whose results will be reflected in a greater extent at the end of the second half of 2014.

The consolidated EBITDA falls to negative levels with a margin of 6.3%, this is mainly to low sales over the previous year, for the previously mentioned reasons that affected the national economy.

9M 2014 EBITDA CLP $ B Revenues Costs Gorss Margin % Revenues SG&A (w/o depreciation) % Revenues EBITDA % Revenues Depretiation Operating Income Non - Operating Income Profit (Loss) Before Taxes Benefits (Expenses) Income Tax Profit (Loss)

9M 2014 278.0 (184.1) 94.0 33.8% (102.4) -36.8% (8.5) -3.0%

Consolidated r 9M 2013 1.3% 274.6 (176.0) -4.7% 98.6 35.9% 10.9% (92.4) -33.6% 6.2 2.3%

(5.6) (14.1) (22.7) (36.8) 4.5 (32.3)

9M 2014 225.4 (165.1) 60.3 26.7% (71.9) -31.9% (11.7) -5.2%

Retail r -0.1% -0.3% 17.9%

9M 2013 225.7 (165.2) 60.4 26.8% (61.0) -27.0% (0.6) -0.2%

9M 2014 56.0 (19.0) 37.0 66.1% (33.8) -60.4% 3.2 5.8%

Financial r 9M 2013 14.5% 48.9 (10.8) -2.9% 38.1 77.9% 7.7% (31.4) -64.1% 6.7 13.8%

(4.8) 1.4 (18.6) (17.2) 3.7 (13.5)

* Cancellation of intersegment (For more detail see page 22)

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Earnings Release 3rd Quarter 2014

4.

Retail Business Indicators

3Q´13

4Q´13

1Q´14

2Q´14

3Q´14

75,169

104,489

72,494

82,811

69,605

3Q´13

3Q´14

D%

75,169

69,605

-7%

U12M 3Q14

D%

329,848

2%

Retail Revenues (CLP $ M)

Retail Revenues (CLP $ M)

U12M 3Q13 Retail Revenues (CLP $ M) 324,175

Revenues from the retail business in the third quarter of 2014 compared to the same period last year, decreased by 7% to CLP B $ 70.

0,3%

1,3%

-1,7%

Retail Revenues LTM

1,7%

334

335

330

Revenues ( CLP B $) 330

324

3Q 13

4Q 13

1Q 14

2Q 14

3Q 14

6

Earnings Release 3rd Quarter 2014

Retail Margin LTM

27%

27%

27%

27%

27% 3Q 13

4Q 13

1Q 14

2Q 14

3Q 14

Sales UF/sqm 1Q

2Q

3Q

4Q

2013

6.2

7.4

6.8

9.3

2014

6.4

7.2

6.0

Var %

3%

-3%

-11%

-

In the third quarter of 2014, the sales of UF/sqm reached a value of 6.0 decreasing 11% over the same period last year.

5. Stores 2013

Number of Stores Sales Surface ( Thousands sqm) Revenues ( Th. $/sqm)

2014

Q1

Q2

Q3

Q4

Q1

Q2

Q3

40 160,700 427

40 160,300 510

40 160,500 468

40 161,300 648

40 161,500 452

40 160,700 515

38 159,700 436

At the end of the third quarter of 2014 La Polar has 38 stores. Panamerica and San Fernando stores were closed.

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Earnings Release 3rd Quarter 2014

6.

Financial Business Indicators

3Q´13

4Q´13

1Q´14

2Q´14

3Q´14

18,033

21,232

20,087

19,018

16,902

3Q´13

3Q´14

D%

18,033

16,902

-6%

U12M 3Q14

D%

77,238

24%

Financial Revenues (CLP $ M)

Financial Revenues (CLP $ M)

U12M 3Q13 Financial Revenues (CLP $ M) 62,337

In the third quarter of 2014 the financial revenues were CLP $ B 17, which represents a decrease of 6% over the same period last year. This is mainly due to a decrease of 4% of the portfolio compared with the third quarter of the previous year and the effect of a decrease in the maximum interest rate. As an income strategy to offset the effect of the decrease of the maximum interest rate, increase in the insurance business and customer acquisition began in the second half.

Financial Revenues LTM 12,5%

62

3Q 13

-1,4%

3,8%

7,6%

70

76

78

77

4Q 13

1Q 14

2Q 14

3Q 14

Revenues ( CLP B $)

8

Earnings Release 3rd Quarter 2014

Financial Margin LTM

76%

75%

76% 72% 66%

3Q 13

4Q 13

1Q 14

2Q 14

3Q 14

Financial Indicators 2013 FINANCIAL BUSINESS Credit Card Loan Stock (CLP $ B) Provision for loan losses (CLP $ B) % Provision for loan losses Net loan losses ( CLP $ B) Open accounts w/balance (Th.) Average Debt (CLP $ Th.) % of sales with credit card

1Q´13

2Q´13

3Q´13

4Q´13

1Q´14

2014 2Q´14

3Q´14

112

121

139

179

163

153

133

14

13

12

14

15

15

14

12.9%

10.8%

8.3%

7.9%

9.1%

9.9%

10.4%

5

4

4

4

5

5

9

453

461

464

519

508

524

492

247

263

299

344

322

292

271

45.3%

50.3%

52.0%

51.1%

49.2%

56.0%

52.5%

The risk rate at the end of 3Q 2014 was 10.4% compared to the risk rate at the end of 3Q 2013 that was 8.3%. This rise of 25% is associated with the increase in punishment and a decrease in the loans portfolio.

However the cards with balance had a growth of 6% due to the enhancement in the use of the credit card as a payment method. We also see a % of accumulated credit card sales of the first 9 months of 2014 of 52.6% compared with the same period of 2013 of 49.4%.

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Earnings Release 3rd Quarter 2014

Credit Card Loans1 (CLP $ B)

Credit Card Loan Portfolio (CLP $ B) 44% 19

27

77

-12%

120

106

47 3Q´ 2013

SEP´13

2014

SEP´14

Normal

Renegotiated

The credit card loans decreased by 39% associated with a decrease in the sale of financial products and a lower consumption in the selling of hard lines experienced in the third quarter.

The decline in loans was due to the lower cash advance sales because of lower financing obtained during the quarter because of the strategy shift towards private labels and restrictions on external sources of debt.

Risk Rate

26,2% 22,7% 19,1% 16,1%

DEC´11 MAR´12 JUN´12

1

SEP´12

12,4%

12,9%

10,8%

DEC´12 MAR´13 JUN´13

8,3%

SEP´13

7,9%

9,1%

9,9%

DEC´13 MAR´13 JUN´14

Credit card loans with credit card La Polar includes: Cash Advances, and use in Associated Business and finance in La Polar Retail stores. Includes VAT. 10

10,4%

SEP´14

Earnings Release 3rd Quarter 2014

Loan Portfolio Indicators – Gross Loans (%)

44%

56%

37%

63%

29%

71%

24%

76%

19%

17%

15%

13%

12%

81%

83%

85%

87%

88%

Normal

14%

18%

20%

86%

82%

80%

Renegotiated

In the portfolio composition of 3Q 2014, you can see a decrease in the normal portfolio compared to 3Q 2013, going from 87% to 80%. The renegotiated portfolio experienced an increase from 13% of 3Q 2013 to 20% of the 3Q 2014, which is caused by the decrease of the portfolio ending the third quarter of 2014 with CLP $ B 133.

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Earnings Release 3rd Quarter 2014

Loan Portfolio Indicators – Portfolio by aging segments 5% 6%

7% 8%

14%

11% 91 to 180 31 to 90

75%

74%

01 to 30 Current

SEP´13

SEP´14

Comparing September 2013 with September 2014, you can see a similar current portfolio.

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Earnings Release 3rd Quarter 2014

7.

Financial Statements of La Polar S.A. - IFRS

Complete Financial Statements of Empresas La Polar S.A are available on the website of the Securities and Insurance Supervisor (www.svs.cl) and the website of Empresas La Polar, www.nuevapolar.cl

a. Consolidated Income Statements 2

Revenues

30-sep-14

30-sep-13

CLP $ M

CLP $ M

278.044

274.579

Cost of Sales

(184.081)

(175.992)

Gross Profit

93.963

98.587

Distribution Costs

(1.413)

(1.186)

(106.624)

(95.993)

Other Profit (Loss)

937

(160)

Financial Revenue

511

3.669

(22.207)

(22.341)

(910)

527

Income from Indexation Units

(1.065)

(309)

Profit (Loss) Before Taxes

(36.807)

(17.205)

4.543

3.665

(32.264)

(13.540)

Administrative Expenses

Financial Costs Foreign Currency Exchange Differences

Profit (Loss) Income Taxes Profit (Loss) After Taxes Discontinue Operations

(6.279) Profit (Loss) of the Discontinue Operations of the Period Profit (Loss)

(32.264)

(19.819)

2

In 2013 it was added the Profit (loss) from the discontinued operations of the period, referring to the decision by the Board to put on sale La Polar S.A.S. 13

Earnings Release 3rd Quarter 2014

b. Consolidated Balance Sheet 3 30-sep-14 CLP $ M

31-dic-13 CLP $ M

30-sep-13 CLP $ M

Current Assets Cash and cash equivalents Other current financial assets Other current non financial assets Current trade and accounts receivables Inventory Tax assets Total current assets

21.012 713 9.367 95.375 56.691 31.484 214.643

21.403 839 7.599 128.520 51.026 32.956 242.342

31.319 11.346 9.966 105.920 54.025 18.662 231.237

Non - Current Assets Fees receivable Other non - current financial assets Intangible assets other than goodwill Properties, plant and equipment Deferred tax assets Total Non - Current Assets

31.788 341 19.033 60.450 5.094 116.707

48.710 437 19.333 61.173 2.865 132.518

28.262 448 19.202 59.450 34.532 141.894

20.146

48.061

Non Current Assets held for sale Total Assets

331.350

395.007

421.192

Current Liabilities Other current financial liabilities Other trade and other accounts payable Other current provisions Current tax liabilities Employee benefits provisions Other current non - financial liabilities Total Current Liabilities

36.806 56.568 3.313 2.646 4.838 1.477 105.648

29.724 72.292 3.987 4.039 5.961 3.145 119.147

20.775 53.132 9.294 4.200 4.307 665 92.372

Non - Current Liabilities Other non - current financial liabilities Other long term provisions Defered tax liabilities Total non - current liabilities

185.349 1.824 52.662 239.836

177.260 3.059 44.941 225.261

174.807 1.914 67.642 244.363

20.631

14.135

345.484

365.039

350.870

302.678 (333.834) 17.023

302.678 (289.937) 17.227

302.678 (251.079) 18.724

(14.134)

29.967

(14.134)

29.967

70.322 0 70.322

331.350

395.007

421.192

Liabilities directly associated with non - current assets held for sale Total Liabilities Equity Issued capital Retained earnings Other reserves Equity attibutable to: Owners of the parent Non - controlling interests Total Patrimonio Total Liabilities and Equity

3

For 2013 it is added Non-Current assets held for sale and liabilities directly associated with Non-Current assets held for sale, referring to the decision by the Board to put on sale La Polar S.A.S. 14

Earnings Release 3rd Quarter 2014

Indicators Indicators Current Ratio Acid Ratio

Unit Times Times

Sep´14 2,03 1,50

Jun´14 2,18 1,65

Mar´14 2,04 1,50

Dec´13 2,03 1,61

Sep´13 2,34 1,75

The current ratio decreased in September 2014 compared to September 2013 due to decrease of the most liquid assets.

Indicators Inventory Turnover Inventory Turnover

Unit Times Days

Sep´14 4 92

Jun´14 4 89

Mar´14 4 97

Dec´13 5 78

Sep´13 4 88

Comparing 3Q 2014 in 3Q 2013, shows that the number of days of inventory increased by four days due to a decrease of 13% in cost of sales.

Indicators Average Payment Period

Unit Days

Sep´14 62

Jun´14 70

Mar´14 80

Dec´13 70

Sep´13 51

The decrease in the average payment period from September 2013 is due to the decrease in accounts payable 3%.

Indicators Current Liabilities Non - Current Liabilities

Unit % %

Sep´14 30.6% 69.4%

Jun´14 30.8% 69.2%

Mar´14 32.5% 67.5%

Dec´13 32.6% 67.4%

Sep´13 30.4% 69.6%

Current liabilities at the close of the first quarter of 2014 represented 30.6% of total liabilities.

FD / EBITDA Financial Debt to EBITDA

Indicators Average Collection Period

Unit Days

Sep´14 -38.4

Jun´14 149.8

Mar´14 20.7

Dec´13 23.3

Sep´13 -22.9

Sep´14 169

Jun´14 171

Mar´14 172

Dec´13 189

Sep´13 177

The average collection period had a decrease of 8 days compared to September of 2013, this is due to a decrease of 12% of net portfolio for the third quarter of 2013.

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Earnings Release 3rd Quarter 2014

c. Cash Flow Statements Cash Flow Statements

30-sep-14

30-sep-13

CLP $ M

CLP $ M

Cash Flow from (used in ) operating activities Proceeds from sales of goods providing activities

380,739

302,722

(281,453)

(294,171)

Payment to and on behalf of employees

(45,622)

(41,146)

Other payments related to operating activities

(41,062)

(48,792)

1,864

3,657

Payment to suppliers for goods and services

Interest received Interest paid

(153)

(260)

Reimbursed (paid) income taxes

(1,909)

1,617

Cash Flow from (used in ) operating activities

12,405

(76,374)

Cash Flow from (used in ) investing activities Cash receipts from the loss of control of subsidaries and other businesses Loans to related entities Proceeds from the sale of property, plant and equipment Acquisition of property, plant and equipment

(14,309) 73 (2,748)

Proceeds from sales of intangible assets

(616)

Other incomes (outflows) of cash

Cash Flow from (used in ) investing activities

(6,998) 4,841

(2,675)

(17,081)

Cash Flow from (used in ) financing activities Proceeds from shot - term borrowings Loan payments Payments for finance leases Interest payments Cash Flow from (used in ) financing activities Net decrease in cash and equivalents

7,787

4,130

(7,383)

(4,629)

(945)

(832)

(9,580)

(7,540)

(10,121)

(8,871)

(391)

(102,326)

Cash and cash equivalents at the beginning of the period

21,403

135,935

Cash and cash equivalents at the end of the period

21,013

33,609

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Earnings Release 3rd Quarter 2014

Operating activities had a positive flow of CLP $ M 12,405 which was higher than the negative flow for the same period in 2013 of CLP $ M 76,374, this was due to a lower working capital compared to 2013.

Investment activities generated a negative flow of CLP $ M 2,675 which is less tan CLP $ M 17,081 for the previous period, this was because in 2013 the operations remained operational in Colombia.

Financing activities generated a negative cash flow of CLP $ M 10,121, most of this amount is due to the bond interest payments of the F and G bond, and credit CLP $ M 7,787 from financial institutions.

17

Earnings Release 3rd Quarter 2014

8. Debt restructure stages

a. Debt restructure On April 10th, the Board of La Polar announced the decision to initiate the process of renegotiating the debt with various creditors, after several instances of negotiation (shareholders and bondholders meetings), it was obtained the approval of the creditors meeting on September 1st, of the terms proposed in the shareholders meeting held on August 8th; finally the restructuring agreement can be summarized in the following points 

 

The issuance of a convertible bond into shares was approved in the amount CLP $ B 163,633 with a maturity year 2113 (payable in one payment at zero interest rate) and the issuance of 1,997,235,044 shares for payment, which implies a dilution of 66.66% from current shareholders.

It was agreed to continue with the payment of interest on the F Bond that currently accrue, until the realization of the exchange.

The contracts of F and G Bonds are modified to be prepaid through convertible bonds.

This process of debt restructuring will allow the company to have a great improvement in financial indicators, especially in its debt, as well as better financial position.

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Earnings Release 3rd Quarter 2014

You can see the bond modification in the next table:

Bond Modification F Series

G Series

Par Value

CLP $ M 196,217

CLP $ M 197,669

Amortization

1 in 2113

1 in 2113

N° of shares to convert

1,677,677,437

319,557,607

Prepaid Value

CLP $ M 137,452

CLP $ M 26,181

Interest Rate

0

0

Senior Debt

Changes in term and prepayment option

F Bond and Senior Modification CLP $ B 59*

F Bond and Senior Modification CLP $ B 59*

1,677,677,437 Shares

Convertible Bond CLP $ B 137

CLP $ B 196

(56%)

Issuance of the convertible bond Convertible Bond CLP $ B 26

Conversion Option for 3 years

66,6%

319,557,607 Shares (11%)

Junior Debt

CLP $ B 197

Changes in term and prepayment option

G Bond and Senior Modification CLP $ B 171*

G Bond and Senior Modification CLP $ B 171*

For both bonds (F and G series there is an approval process in the Securities and Insurance supervisor, to review and approve: (i) The issuance of the convertible bond, (ii) Increased capital to support this bond and (iii) amendments to the F and G Bonds Once this process has ended, it will began a preferential option period (POP) of 30 days, in which current shareholders may subscribe at a price of CLP $ 81,929 per share, their corresponding convertible bonds. Once the POP has ended, the company shall mandatorily prepay, with money received and the available convertible bonds, the portion of the F and G Bonds equivalents to the F Bond in CLP $ B 137 and the G Bond in CLP $ B 26. 

Paid in one coupon, without interest or amortization and with one maturity in 2113 19

Earnings Release 3rd Quarter 2014

b.

Essentials Facts of the debt restructure

Extraordinary Shareholders' Meeting On July 1st, it was held the Extraordinary Shareholders Meeting in which the most important points are the following:  An issue of convertible bonds into shares was approved for $ 81,816,733,577 without interest or amortization and one maturity in 2113. It was approved an exchange ratio of 12.20533 shares per $ 1,000 par value of each convertible bond.  Due to the approval of the issuance of these convertible bonds, a capital increase by $ 81,816,733,577 and the issuance of 998,617,522 shares for payment were approved.  These agreements were subject to approval by the creditors of the company.

Bondholders' Meeting On July 21st, 2014 the Board of Bondholders was held for the F and G series where the following was reported:  The proposed modification that was agreed at the Extraordinary Shareholders Meeting held on July 1, 2014 was rejected.  Banco de Chile was empowered as the representative of the F and G Bondholders to present two new proposals to La Polar on the debt restructuring, which are summarized below: i.

Counterproposal A: That the issuance of the Convertible Bonds, after its capital increase and the conversion exercise, the bondholders will have at least 80% ownership of La Polar. i.

Counterproposal B: The interest and capital payments of the Bonds are in accordance with the current development table, during the period of this table. If La Polar does not have sufficient funds, it, may be able to preferably offer to its shareholders a capital increase of an amount sufficient to do the payment. 

The suspension of the Creditors Meeting for July 23rd, which was approved.

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Earnings Release 3rd Quarter 2014

Extraordinary Shareholders' Meeting

On August 8th, it was held again an extraordinary Shareholder´s meeting which includes the following:  Se acordó rechazar las contrapropuestas A y B presentadas por el Banco de Chile para los Bonos Series F y G.  It was approved the issuance of a convertible bond so there will be a capital increase of $ 163,333 billion and the issuance of 1,997,235,044 shares for payment. This issuance of shares and capital increase involves a dilution of current shareholders of the company by 66.66%.

Shareholder´s Meeting On August 27th, the Bondholders meeting was held for the F and G Series where the following was reported:  The issuance of a convertible bond into shares was approved in the amount of $ 163,633 billion with a maturity year 2113 (payable in one payment with zero interest rate) and the issuance of 1,997,235,044 shares for payment, which implies at a dilution of 66.67% from current shareholders.  It was agreed to continue the payment of interest on the F series that currently accrue to the realization of the exchange.  Contracts for F and G Bonds are modified to be prepaid through convertible bonds.

Creditors Meeting On September 1st, the Creditors Meeting was held where the following was communicated:  27th.

It was approved all previously agreed in the Bondholders meeting that took place on August

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Earnings Release 3rd Quarter 2014

9 Annex

Retail Business Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

Financial Business Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

2Q 2014

3Q 2014

68,673 -51,361 17,312

81,818 -57,406 24,412

75,169 -56,428 18,741

104,489 -75,849 28,640

72,942 -54,865 18,078

82,811 -58,603 24,208

69,605 -51,639 17,966

25.2%

29.8%

24.9%

27.4%

24.8%

29.2%

25.8%

-19,704 -2,392

-21,305 3,107

-20,010 -1,269

-27,507 1,133

-22,002 -3,925

-26,450 -2,241

-23,484 -5,518

-3.5%

3.8%

-1.7%

1.1%

-5.4%

-2.7%

-7.9%

14,736 -5,251 9,485

16,150 -3,052 13,098

18,033 -2,495 15,538

21,232 -6,798 14,434

20,087 -5,849 14,238

19,018 -6,619 12,399

16,902 -6,506 10,395

60.6%

79.5%

85.5%

68.2%

70.9%

65.2%

61.5%

-9,880 -395

-9,055 4,043

-12,437 3,101

-12,899 1,535

-12,070 2,168

-11,483 917

-10,249 147

-2.7%

25.0%

17.2%

7.2%

10.8%

4.8%

0.9%

-1,055

-1,167

-1,100

1,055

1,167

1,100

91,975 -60,714 31,261

100,662 -65,222 35,441

85,407 -58,146 27,261

Consolidation Adjustments¹ Revenues Costs SG&A (w/o depreciation) Consolidated² Revenues Costs Gross Margin

83,409 -56,612 26,797 % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

97,968 -60,458 37,510

93,202 -58,923 34,279

125,721 -82,647 43,074

32.1%

38.3%

36.8%

34.3%

34.0%

35.2%

31.9%

-29,584 -2,787

-30,360 7,150

-32,447 1,832

-40,406 2,668

-33,018 -1,757

-36,765 -1,325

-32,633 -5,372

-3.3%

7.3%

2.0%

2.1%

-1.9%

-1.3%

-6.3%

¹ Intercompany billing, of the financial business to the retail business for purchases made with the TLP card ² Financial interests that are related to the portfolio financing , which are considered in the cost of sales

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