AUDIT COMMITTEE INTERNAL CHARTER – V5

AUDIT COMMITTEE INTERNAL CHARTER – V5

Article 11 - The Committee will be composed of three (3) members of the Board who meet the requirements of the U.S. Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE) for foreign issuers.

Sole Paragraph.  The executive officers of the Company, its subsidiaries, its controlling shareholder, its affiliates and companies under common control are not allowed to be members of the Company’s Audit Committee.

Article 12 - All Members of the Committee must:

a.     comply with all the independence requirements provided for in the applicable legislation and regulations, without prejudice to exceptions that may be permitted;

b.    have sufficient technical knowledge in accounting and financial matters; and

c.     have at least 30 (thirty) hours available every month.

Article 13 - The Board must verify compliance with the independence requirements when appointing a Board member to be part of the Committee and periodically thereafter. Any exceptions permitted by law, individually or jointly, must be disclosed in the applicable reports.

Article 14 - At least one Committee Member, the Financial Expert of the Audit Committee ("Financial Expert") must meet the requirements of article 22-V (b) of the Novo Mercado Regulations and, pursuant to the Bylaws, have proven experience in internationally accepted  accounting standards; analysis, preparation and evaluation of financial statements; and knowledge of internal controls and information disclosure policies.

Sole Paragraph - The Financial Expert will be appointed by the Board.

TERM OF OFFICE

Article 15 - Committee Members shall perform their duties as long as they sit on the Board, or until
otherwise determined by the General Shareholders’ Meeting or the Board itself.

Paragraph 1 - Pursuant to the Bylaws, the Board has a unified term of office of two (2) years, with up to three (3) consecutive reappointments being permitted, which is the maximum continuous period for being a Member of the Committee.

Paragraph 2 - After the end of the period for consecutive reappointments, Committee Members may only be appointed again after at least three (3) years of the end of their term of office.

Paragraph 3 - After serving a term of office for any period, Committee Members may only be reappointed after at least three (3) years of the end of their term of office.

Paragraph 4 - Except in case of resignation or dismissal, the term of office of Committee Members is automatically extended until a replacement is appointed by the General Shareholders’ Meeting or by the Board of Directors.

Paragraph 5 – The resolution of the Board of Directors, whose purpose is the dismissal of a Member of the Audit Committee, must be duly justified.

COORDINAATOR

Article 16 - The Financial Expert appointed by the Board will be the Coordinator of the Committee.

Article 17 - The Coordinator will:

a.     propose meeting agendas, in line with the annual work plan, to allow the Committee to achieve its goals;

b.    call and coordinate  Committee meetings;

c.     facilitate the submission of Committee Members’ requests to the Company’s Management and Independent Auditors;

d.    comply and enforce compliance with this Charter;

e.    request that the Executive Officers  hire specialized services when approved by the Committee; and

f.      submit the Committee’s opinions and reports to the Board.

Sole Paragraph – In the absence or temporarily impediment, the Coordinator shall indicate the Member who will coordinate the meetings.

EXECUTIVE SECRETARY

Article 18 - The Committee will be assisted by one or more Executive Secretary(ies) with knowledge of the Committee’s duties and responsibilities and the applicable legislation.

Sole Paragraph - The Executive Secretary(ies) will be selected by the Committee, with the support of the Executive Officers.

Article 19 - The Executive Secretary(ies) will, either directly or through delegation:

a.     prepare and send the call notices for the Committee meetings;

b.    request from the Company's management any information and/or clarification deemed necessary to perform the Committee's duties;

c.     invite, on behalf of the Coordinator, the Company’s Independent Auditors, Executive Officers, Heads of Departments, employees, consultants and any other guests to meetings;

d.    invite, on behalf of the Coordinator, the members of the Fiscal Council to attend meetings;

e.    prepare and distribute the documents related to the agenda;

f.      draft the minutes of the Committee meetings, have them signed and send out copies thereof to the Company’s Board, Fiscal Council and Chief Executive Officer;

g.    keep the annual schedule of Committee meetings up to date;

h.    take the administrative measures needed for the Committee meetings to be held;

i.      prepare documents and presentations, at the request of the Coordinator; and

AUDIT COMMITTEE INTERNAL CHARTER – V5

AGENDA

Article 28 - The agenda of the meeting will be proposed by the Coordinator, based on the annual work plan.

Sole Paragraph - The Coordinator shall include in the agenda items or issues proposed by the other Committee Members or the Board provided that such items and issues are within the Committee’s competence.

MEETING MINUTES AND RESOLUTIONS

Article 29 - Minutes containing the date and location of the Meeting; names of Committee Members, speaker(s) and/or invitee(s) in attendance; issues presented and discussed; and resolved and unresolved issues shall be drafted for each meeting.

Paragraph 1 - Each Member will have one (1) vote and resolutions will be approved by a majority vote of those present at the meeting. In the event of a tie, the Meeting Coordinator will have the casting vote.

Paragraph 2 – The dissenting Members shall state their disagreement in the meeting’s minutes.

Paragraph 3 - The minutes will be signed by all Members.

Paragraph 4 - The Member who does not participate in the meeting shall be aware of the contents of the minutes, and shall sign it as "aware" of the matters discussed and deliberated. The signature in the condition of "aware" does not imply that the Member agrees with the resolutions contained in the minutes.

Paragraph 5 - Specific excerpts containing the issues addressed at the meeting will be taken from the minutes and signed by the Company’s representatives who raised such issue.

Article 30 - The minutes of Committee meetings will be disclosed in accordance with the Law.

Paragraph 1 - If the Board of Directors considers that the disclosure of the entire minutes of a Committee meeting could jeopardize the Company's legitimate interest, it is possible to disclose only an excerpt of the minutes.

Paragraph 2 - In all cases, the minutes will be filed at the Company's headquarters in full, including for the purpose of future examination by the control bodies, which will have full and unrestricted access to its contents, subject to the rules related to the transfer of confidential information, pursuant to paragraphs 2 through 5 of article 86 of Federal Law 13,303/2016.

Chapter VI - DUTIES AND RESPONSIBILITIES

Article 31 - The Committee will have the duties and responsibilities set out in this Chapter VI, without prejudice to those established by law, Novo Mercado Regulations, rules issued by the Brazilian Securities and Exchange Commission, the Bylaws and other pertinent regulations.

RISK MANAGEMENT AND INTERNAL CONTROLS

Article 32 - Regarding risk management, the Committee will have the duties and responsibilities set forth in the Institutional Policy for Corporate Risk Management.

Article 33 - With regard to internal controls, the Committee will:

I - understand the internal environment, processes and internal control systems implemented by the Board of Executive Officers to approve transactions, and register and process data relevant to the Company's business;

II - monitor the controls implemented by the Board of Executive Officers to ensure that the financial statements are derived from the corresponding systems, essentially comply with the legal, regulatory and statutory standards and requirements, and are reviewed by the Board of Executive officers;

III - analyze the information provided by the Board of Executive Officers concerning the effectiveness of internal controls, as well as consider whether the recommendations made by the Internal Auditors and Independent Auditors have been properly implemented by the Board of Executive Officers;

IV - monitor the controls implemented by the Board of Executive Officers to ensure the physical and logical security of the electronic information systems, as well as the contingency plans to process the information relevant to the Company’s business in the event of a system failure, or for protection against fraud or improper use of Company equipment; and

V - supervise the Company's internal control activities.

FINANCIAL STATEMENTS AND QUARTERLY INFORMATION

Article 34 - Regarding the financial statements and quarterly information, the Committee will:

I - monitor annual and quarterly financial reporting, in compliance with the applicable legislation and the best corporate governance practices;

II - review the annual financial statements and quarterly information, as well as announcements to the market related thereto before disclosure;

III - review relevant accounting issues, including recent professional and regulatory pronouncements, as well as gain an understanding of their impacts on the financial statements and quarterly information;

IV - suggest changes to improve the relevance, integrity, quality and timeliness of financial statements and quarterly information;

V - meet with the Chief Financial Officer and Investor Relations Officer and/or the designated people, as well as with the Independent Auditors, to review the financial statements and quarterly information, the main accounting policies and judgments and the Independent Auditors’ reports;

VI - ensure that significant adjustments, pending differences and disagreements with the Board of Executive Officers with regard to accounting practices and policies are discussed with the Independent Auditors;

VII - analyze the annual management reports, including the 20-F Form, the Reference Form (Formulário de Referência) and the Report on the Brazilian Corporate Governance Code – Publicly Held Companies (Informe sobre o Código Brasileiro de Governança Corporativa – Companhias Abertas), before they are published/filed; and

VIII - monitor the Accounting Department’s activities, resources and organizational structure in order to ensure it works properly and has the adequate material resources.

COMPLIANCE WITH LAWS AND REGULATIONS

Article 35 - In order to monitor the Company’s process for compliance with the laws and regulations applicable to the matters pertinent to it, the Committee will:

I - review the effectiveness of the supervision system concerning compliance with laws and regulations, as well as the results of internal investigations on possible irregularities;

II - obtain regular updates from the Board of Executive Officers and Company lawyers about issues that may significantly impact the financial statements and quarterly information or compliance policies;

III - make sure that regulatory issues relevant to the Company’s industry have been considered in preparing the financial statements, quarterly information and annual management reports, including the 20-F Form and the Reference Form;

IV - review the results of any compliance inspections by regulatory authorities, as well as the Board of Executive Officers’ responses; and

V - monitor compliance activities.

INDEPENDENT AUDIT

Article 36 - Regarding the Independent Audit, the Committee will:

I - approve the bidding requirements for hiring Independent Auditors, mainly with respect to auditors’ professional qualifications in order to ensure they include the background and experience of the partner responsible for the audit team, independence requirements and any possible conflicts of interest;

II - supervise the activities of the Independent Auditors, evaluating their independence, the quality of services provided and the adequacy of such services to the needs of the Company, as well as permanently evaluate the performance of the Independent Auditors;

III - express its opinion before hiring non-audit services from the independent audit firm or any companies related thereto;

IV - examine the scope of the audit work plan proposed by the Independent Auditors and review it in the current year in light of the Company’s ongoing circumstances, regulatory requirements and changes, among other measures;

V - discuss the Independent Auditors’ work plan and gain an understanding of risk assessment proposals;

VI - discuss with the Independent Auditors any problems found within the normal course of an audit, including any restrictions on the scope of the audit or access to information;

VII - ensure that the relevant findings and recommendations from independent auditors and the responses suggested by the Board of Executive Officers are received, discussed and appropriately implemented, including the resolution of any disagreement between the Board of Executive Officers and the Independent Auditors;

VIII - discuss the adequacy of the accounting policies applied to the Company’s financial statements and quarterly information with the Independent Auditors in order to determine whether they are considered aggressive, balanced or conservative;

IX - meet separately with the Independent Auditors to discuss matters the Committee or the Independent Auditors may deem necessary;

X - ensure the Independent Auditors have access to the Committee whenever requested;

XI - ensure the Company has proper policies in place should it decide to hire professionals from an Independent Audit firm for senior management positions; and

XII - require the Independent Auditors to report to the Committee on the following items prior to the filing of any audit report with the SEC, including Form 20-F: (i) all critical accounting policies and practices used, (ii) all alternative treatments of financial information within the generally accepted accounting principles that have been discussed with the Board of Executive Officers, ramifications thereof and the preferred treatment of the Independent Auditors, and (iii) relevant written communications between the Board of Executive Officers and the Independent Auditors.

INTERNAL AUDIT

Article 37 - Regarding the Independent Audit, the Committee will:

I - oversee and evaluate, at least once a year, the Internal Audit department’s activities, resources and organizational structure in order to ensure it works properly and has the adequate material resources;

II - review and approve Internal Audit’s Work Plan for the subsequent fiscal year based on risk  management processes and compliance with the rules and controls in place, thus making sure it is in keeping with the work of the Independent Auditors;

III - monitor the execution of the Annual Internal Audit Work Plan and, if necessary, approve any amendments due to changes in the risks of the business;

IV - ensure that the relevant recommendations made by Internal Auditors and the responses suggested by the Board of Executive Officers are received, discussed and implemented properly;

V - discuss with the Internal Auditors the result of recent inspections conducted by the regulatory bodies;

VI - assess and monitor jointly with Management and the Internal Auditors whether the Company’s related-party transactions are suitable and reasoned;

VII - ensure that the Head of Internal Audit has access to the Committee, when requested;

VIII - assess the performance of the Head of Audit every year;

IX - ratify the selection of the person in charge of Internal Audit appointed by the Collegiate Board of Executive Officers, propose its approval and dismissal to the Board of Directors and supervise the execution of the respective work, in accordance with the Bylaws; andX - approve the Institutional Internal Audit Policy.

PENSION FUND ACTUARIAL CALCULATIONS

Article 38 - Regarding the private pension plans maintained by Fundação Sabesp de Seguridade Social (Sabesp Social Security Foundation) - Sabesprev, the Committee will evaluate the reasonableness of the parameters on which the actuarial calculations are based, as well as the actuarial result of the benefit plans maintained by the pension fund.

STATEMENTS, REPORTING AND SUBMISSION TO THE BOARD OF DIRECTORS

Article 39 - Regarding the Board, the Committee will:

I - keep the Board up to date on the Committee’s activities, particularly with regard to issues that
may cause a significant impact on the Company’s financial condition or business;

II - prepare Detailed and Summary Reports of its activities to be presented together with the financial statements with information on its activities, the conclusions and recommendations of this Committee as well as any other reports required by law and/or requested by the Board;

III - express an opinion to the Board on all periodical financial statements, quarterly information and annual reports, pursuant to the applicable legislation;

IV - provide the Board with information regarding the Independent Auditors’ independence;

V - recommend to  the Board:

(a)      the hiring of  Independent Auditors firm; and

(b)      the dismissal, by justification, of the Independent Audit firm.

VI - evaluate the work plan of the independent auditors, pursuant to article 36-V of these Chart  and submit it to the Board of Directors for consideration.

Sole Paragraph - The Summary Annual Report will include:

a.     the meetings held and the main issues discussed;

b.    the conclusions reached and the main recommendations made by the Committee to the Board; and

c.     any situations in which there is a significant divergence between the Company's management, the independent auditors and the Committee in relation to the Company's financial statements.

PERFORMANCE EVALUATION

Article 40 - Regarding its performance evaluation, the Committee will:

I – evaluate its performance on a regular basis and share the evaluation with the Board at least on an annual basis; and

II - assess compliance with the duties set out in the Charter and regularly report the findings to the Board.

ANNUAL GENERAL SHAREHOLDERS’ MEETING

Article 41 - The Coordinator, accompanied by other members when necessary or convenient, must attend the Company’s Annual General Shareholders’ Meeting.

INTERNAL CHARTER

Article 42 - Concerning its Charter, the Committee will:

I - ensure the Charter is approved by the Board; and

II - revise the Charter whenever needed and submit it to the Board for approval.

Chapter VII - COMPENSATION AND BUDGET

Article 43 - The compensation of Committee Members will be set at the General Shareholders’ Meeting, in accordance with the Bylaws.

Sole Paragraph - Committee members will not receive any compensation other than that relating to their work as a Member of the Committee, the Board or any other committee of the Board.

Article 44 - The Committee will have its own annual budget approved by the Board, in accordance with the Bylaws, to cover expenses for its operation, such as those incurred to conduct or request consultations, evaluations and investigations within the scope of its activities, including the hiring and use of independent external experts.

Sole Paragraph - The Board of Executive Officers will immediately make available the financial resources requested by the Committee to perform its duties, within the limits of the approved budget.

Article 45 - This fifth version of the Audit Committee Internal Charter was approved at the 871^st  Board of Directors’ Meeting, held on September 20, 2018. All provisions to the contrary contained in the Audit Committee Charter approved at the 823^rd Board of Directors’ Meeting, held on April 14, 2016, are hereby repealed.

Sole Paragraph - This Charter will be sent to the CVM within 7 (seven) business days of the approval of these amendments, pursuant to ICVM 480/2009 and amendments thereto.

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.