COMPANHIA DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO – SABESP

PUBLICLY HELD COMPANY

CORPORATE TAXPAYER’S ID (CNPJ) 43.776.517/0001-80

PAYMENT OF INTEREST ON OWN CAPITAL

NOTICE TO SHAREHOLDERS

We hereby inform the Shareholders that on March 24 ^th , 2016, the Board of Directors decided on, pursuant to item XI of article 13, and paragraph 1 of article 28 of the Company’s Bylaws, the payment of dividends in the form of interest on own capital related to the period from January to December 2015, to the Shareholders registered as such on April 5 ^th , 2016.

I – AMOUNT, DATE AND CREDIT AND PAYMENT TERMS

The dividends as interest on own capital, totaling one hundred and forty-nine million, eight hundred and ninety-three thousand, seven hundred and fourteen reais and twenty-seven cents (R$ 149,893,714.27 ) corresponding to  R$ 0.2193 per common share, will be paid no later than sixty (60) days after the 2016 Annual Shareholders' Meeting.

II – WITHHOLDING INCOME TAX

Income tax shall be withheld from payment of dividends as interest on own capital, pursuant to the laws in force, except for the immune or exempt shareholders proving such condition until April 27 ^th ,  2016, and corresponding documents shall be sent to the Company's headquarters located at Rua Costa Carvalho, 300 – Sala 265 – São Paulo – SP – CEP 05429-900, in attention to the Superintendência de Captação de Recursos e Relações com Investidores.

Referring to the entities of Supplementary Private Pension, Insurance Companies and Fapi, such proof shall occur by means of Declaration, a model of which is available at the Investors Area, in the item Information to Shareholders on the website www.sabesp.com.br.

III – ATTRIBUTION TO DIVIDENDS

The aforementioned interest on own capital will be computed in the calculation of the mandatory minimum dividends, as provided for in the caput of Article 28 of the Company’s Bylaws, pursuant to article 9, paragraph 7, of Law 9,249/95.

IV – INSTRUCTIONS FOR THE CREDIT AND PAYMENT OF INTEREST ON OWN CAPITAL

The shareholders will have their credits available on the initial date of payment of such right, as set forth in above item I, in accordance with their checking account and domicile provided to Itaú Unibanco S.A.

To shareholders whose registry information does neither include their Individual/Corporate Taxpayer’s Identification Number (CPF/CNPJ) nor completion of banking instructions (bank, branch and account number), the interest will be credited, pursuant to item I above, as of the third business day counted from the date of registry update in Itaú Unibanco S.A.’s electronic files. This update may be carried out at any of its branches.

The shares will trade ex-interest as of April 6 ^th , 2016.

VI - Further information may be obtained at any of Itaú Unibanco S.A.’s branches, which are specialized in assisting shareholders, during banking hours.

São Paulo, March 24 ^th , 2016.

Rui de Britto Álvares Affonso

Chief Financial Officer and Investor Relations Officer