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10-K - Semapa - Sociedade de Investimento e Gestão,SGPS,S.A. informa sobre relatório de gestão e contas anuais consolidadas e individuais do exercício de 2015 - versão em inglês

Company: Semapa Date: 2016-03-30 Language: English Register to download
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*Report and Accounts*

*2015*

# *Report and Accounts 2015*

| Part 1 | Management Report                                                                                                            |
|--------|------------------------------------------------------------------------------------------------------------------------------|
| Part 2 | Corporate Governance Report                                                                                                  |
| Part 3 | Consolidated Financial Statements                                                                                            |
| Part 4 | Statutory<br>Auditor<br>Certificate<br>and<br>Report<br>of<br>the<br>Audit<br>Board<br>on<br>the<br>Consolidated<br>Accounts |
| Part 5 | Separate Financial Statements                                                                                                |
| Part 6 | Statutory<br>Auditor<br>Certificate<br>and<br>Report<br>of<br>the Audit Board on the Separate Accounts                       |

Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. Public Limited Company Av. Fontes Pereira de Melo, nº 14, 10º, 1050-121 Lisboa Companies Registry and Corporate Person no.: 502 593 130 Share Capital: € 81,645,523

## **PART 1**

## **MANAGEMENT REPORT**

| 1. Macroeconomic Framework5                                                                     |  |
|-------------------------------------------------------------------------------------------------|--|
| 2. Overview of Semapa Group Operations6                                                         |  |
| 3. Paper and Paper Pulp Business Area 10                                                        |  |
| 3.1. Leading Business Indicators10                                                              |  |
| 3.2. Overview of Operations of the Paper and Paper Pulp Business Area 10                        |  |
| 3.3. Business Review 12                                                                         |  |
| 3.4. Industrial Operations 15                                                                   |  |
| 3.5. Development  15                                                                            |  |
| 3.6. Resources and Supporting Functions 16                                                      |  |
| 4. Cement and Derivatives Business Area 22                                                      |  |
| 4.1. Leading Business Indicators22                                                              |  |
| 4.2. Leading Operating Indicators23                                                             |  |
| 4.3. Overview of the Cement and Derivatives Business Area  23                                   |  |
| 4.4. Business Review 25                                                                         |  |
| 4.5. Resources and Supporting Functions 37                                                      |  |
| 4.6. Organization 38                                                                            |  |
| 5. Environment Business Area 39                                                                 |  |
| 5.1. Leading Business Indicators39                                                              |  |
| 5.2. Leading Operating Indicators39                                                             |  |
| 5.3. Overview of the Environment Business Area 39                                               |  |
| 6. Semapa Group Human Resources 41                                                              |  |
| 7. Social Responsibility in the Semapa Group  42                                                |  |
| 8. Semapa Group – Financial Area 43                                                             |  |
| 8.1. Indebtedness  43                                                                           |  |
| 8.2. Financial Results 44                                                                       |  |
| 8.3. Risk Management 44                                                                         |  |
| 8.4. Listed Share Price 44                                                                      |  |
| 8.5. Dividends 45                                                                               |  |
| 8.6. Net earnings 46                                                                            |  |
| 8.7. Main Effects of the Public Exchange Offer on the Consolidated and Individual Statements 46 |  |
| 9. Highlights in 2015  47                                                                       |  |
| 10. Outlook  49                                                                                 |  |
| 11. Acknowledgements 52                                                                         |  |
| 12. Proposed Allocation of Profits 53                                                           |  |

## *1. Macroeconomic Background*

The world economy grew at a slower pace in 2015 (3.1% vs. 3.4% in 2014, *World Economic Outlook*, FMI, January 2016), behaving differently according to the geographic areas.

The USA and the United Kingdom were among the developed economies showing a favourable evolution. UK GDP grew 2.2% in 2015 (*World Economic Outlook*, FMI, January 2016). The USA is undergoing moderate economic growth; in 2015 GDP grew approximately 2.5% and the unemployment rate continued to fall to 5%. Inflation was lower due to the fall in oil prices. This framework lead to the FED raising its policy rates in December 2015 to levels ranging from 0.25% to 0.5%.

GDP growth in the Euro area accelerated from 0.9% in 2014 to 1.5% in 2015. Inflation was close to 0%, which caused the ECB to lower its policy rates again and to implement new quantitative easing measures.

China's growth rate slowed down, with less exports and imports, partly based on less investment and industrial activity, nonetheless at significantly high level and playing a proportionally decisive part in overall growth. Such developments, and market concerns about the performance of the Chinese economy in the future, are impacting other economies through trade channels and lower commodity prices, as well as less trust and increased volatility in the financial markets.

The slowdown was even more visible in other less developed economies, which were hindered by external demand, political tensions and uncertainties and other cyclical factors, particularly commodity price developments in the international markets. The evolution of oil prices, in particular, caused economies to behave differently, depending on whether they are mostly importers or exporters. Oil prices have taken a sharp fall since September 2015, reflecting expectations of the Organisation of Petroleum Exporting Countries (OPEC) for sustained growth of production, while global production still largely exceeds oil consumption.

In 2015, the US Dollar appreciated markedly *vis‐à‐vis* the Euro and the main Latin‐American currencies. Emerging country currencies were affected by the ongoing fall of commodity prices, and the outflow of capital to the developed countries.

As for the Portuguese economy, GDP growth was around 1.6 % in 2015, as a result of the favourable behaviour of exports. The unemployment rate remained persistently high and inflation reached an all‐time low.

Overall, the year featured a build up of uncertainties, including that arising from growing geopolitical tensions in different parts of the world. Very low levels of growth are expected to persist, and this together with deflation prospects in several developed economies like the EU and Japan threatens to weaken the economic growth prospects for the world economy. Three core factors continue to impact the global outlook: (1) gradual slowdown and rebalancing of the economic activity in China, (2) lower energy and other commodity prices, and (3) gradual tightening of the US monetary policy, against easing of the monetary policy by central banks.

## *2. Overview of Semapa Group Operations*

#### **Turnover**

In 2015 the Semapa Group recorded a consolidated turnover of 2,132.3 million euros, an increase of 6.7% on 2014. Exports and foreign sales amounted to 1,611.7 million euros: 75.6% of turnover.

The EBITDA grew 16.6% in 2015 in relation to the previous year, standing at 478.2 million euros. The consolidated EBITDA margin stood at 22.4%, 1.9 p.p. above the figure in 2014.

#### **EBIT**

Consolidated EBIT grew by 27.4% compared to 2014, and stood at 287.9 million euros.

#### **Net income**

Concerning Net Income, the Group's strong performance, as shown by the indicators, was mostly harmed by the reduction in the Portucel stake after July 2015 and an increase in income taxes.

#### **Leading Business Indicators**

| IFRS - accrued amounts (million euros)                                                 | 2015           | 2014              | Var.               |
|----------------------------------------------------------------------------------------|----------------|-------------------|--------------------|
| Turnover                                                                               | 2,132.3        | 1,998.2           | 6.7%               |
| Total EBITDA<br>EBITDA margin (%)                                                      | 478.2<br>22.4% | 410.0<br>20.5%    | 16.6%<br>1.9 p.p.  |
| Depreciation and impairment losses<br>Provisions (increases and reversals)             | (199.3)<br>9.0 | (172.3)<br>(11.6) | -15.7%<br>>100%    |
| EBIT<br>EBIT margin (%)                                                                | 287.9<br>13.5% | 226.0<br>11.3%    | 27.4%<br>2.2 p.p.  |
| Net financial profit                                                                   | (122.3)        | (103.9)           | -17.7%             |
| Profit before tax                                                                      | 165.6          | 122.2             | 35.6%              |
| Income tax                                                                             | (34.8)         | 30.1              | <-100%             |
| Retained profits for the year                                                          | 130.8          | 152.3             | -14.1%             |
| Attributable to Semapa shareholders<br>Attributable to non-controlling interests (NCI) | 81.5<br>49.3   | 112.8<br>39.5     | -27.7%<br>24.8%    |
| Cash-flow                                                                              | 321.1          | 336.2             | -4.5%              |
|                                                                                        | 31-12-2015     | 31-12-2014        | Dec15 vs.<br>Dec14 |
| Equity (before NCI)                                                                    | 716.3          | 900.4             | -20.4%             |
| Net debt                                                                               | 1,803.0        | 1,385.7           | 30.1%              |

#### **Notes:**

• Total EBITDA = operating profit + depreciation and impairment losses + provisions (increase and reversal)

• Cash flow = retained earnings + depreciation and impairment losses + provisions (increase and reversal)

• Net debt = non-current interest bearing debt (net of loan issue charges) + current interest-bearing debt (including debts to shareholders) – cash and cash equivalents

• In comparison with 2014, the year was impacted by the full consolidation of the Supremo Group on 1 July 2015, the inclusion of AMS in January and the change in Portucel's stake from 81.19% to 69.4% in July 2015; the latter only impacts the retained profits attributable to Semapa shareholders

In the 2015 financial year the Semapa Group recorded a consolidated turnover of 2,132.3 million euros, an increase of 6.7% over the previous year. Turnover by business area was as follows:

#### **Paper and Pulp: 1,628.0 million euros** Ï **5.6%**

Turnover in the paper and pulp business area in 2015 stood at 1,628.0 million euros, approximately 5.6% above the previous year's figure, with the price of pulp and paper developing favourably.

#### **Cement<sup>1</sup> : 476.7 million euros** Ï **11.0%**

In 2015, the turnover of the Cement business area was 476.7 million euros, 11.0% higher than the figure in the previous year. This increase was mainly due to the growth in turnover of operations in Portugal, Lebanon and Angola, and the integration of the Supremo Group from July 2015.

#### **Environment: 27.6 million euros** Ï **4.9%**

The Environment business area recorded turnover of approximately 27.6 million euros in 2015, up by around 4.9% against 2014.

Total EBITDA for 2015 increased by approximately 16.6% in relation to the previous year, standing at 478.2 million euros. The consolidated EBITDA margin stood at 22.4%, 1.9 p.p. above the figure in 2014.

#### **Paper and Pulp: 390.0 million euros** Ï **18.7%**

Consolidated EBITDA in 2015 stood at 390.0 million euros, which represents an increase of 18.7% in relation to the previous year. The EBITDA margin stood at 24.0% in 2015, 2.7 p.p. up from the previous year. This evolution reflects the positive impact of the increase in selling prices for paper and pulp, which has already been mentioned.

#### **Cement: 85.4 million euros** Ï **14.7%**

EBITDA in the cement business area stood at 85.4 million euros, which translated into an increase of 14.7% in relation to 2014. The EBITDA grew essentially as a result of operations in Portugal, where this indicator increased 7.2 million euros.

The increase in the EBITDA in Portugal resulted from the positive development of the domestic market, subsequent growth in sales and the persistent reduction of operating costs.

In 2015, the EBITDA margin stood at 17.9%, 0.6 p.p. up from that recorded in the previous year.

#### **Environment: 8.1 million euros** Ï **109.6%**

EBITDA in 2015 in the environment area stood at approximately 8.1 million euros, which represented a growth of around 109.6% against 2014. The EBITDA margin stood at 29.2%, up by around 14.6 p.p. from the value in 2014.

<sup>1</sup> The integration of the Supremo Group in the Semapa consolidated financial statements for 2015, taking into account that the acquisition of the remaining 50% of the Group that forced the full consolidation occurred at the end of the month of June, had the following impact: 50% of the results of the first half were integrated using the equity method, the balance sheet position was fully consolidated (100%) with reference to 30 June 2015 and the results in the second half (July to December) were also fully consolidated (100%).

#### **Holdings (Semapa SGPS and instrumental sub‐holdings)**

The EBITDA of the holdings had a negative impact of 5.3 million euros, comparing unfavourably with the positive amount of 3.2 million euros in 2014, essentially due to the increase in personnel costs. It should be noted that this increase resulted from the reclassification of balance sheet gratuities paid in the first half of 2015, as decided at the Annual General Meeting for the approval of the 2014 accounts held in April 2015, for personnel costs by virtue of the accounting standards in force requiring that these payments be recorded as results applied to staff costs.

## *3. Paper and Paper Pulp Business Area*

## **3.1. LEADING BUSINESS INDICATORS**

| IFRS - accrued amounts (million euros)                                                                                    | 2015                  | 2014                  | Var.                   |
|---------------------------------------------------------------------------------------------------------------------------|-----------------------|-----------------------|------------------------|
| Turnover                                                                                                                  | 1,628.0               | 1,542.3               | 5.6%                   |
| EBITDA<br>EBITDA margin (%)                                                                                               | 390.0<br>24.0%        | 328.4<br>21.3%        | 18.7%<br>2.7 p.p.      |
| Depreciation and impairment losses<br>Provisions (increases and reversals)                                                | (137.0)<br>14.6       | (126.8)<br>1.3        | -8.1%<br>989.5%        |
| EBIT<br>EBT margin (%)                                                                                                    | 267.6<br>16.4%        | 203.0<br>13.2%        | 31.8%<br>3.3 p.p.      |
| Net financial profit                                                                                                      | (50.3)                | (34.2)                | -47.2%                 |
| Profit before tax                                                                                                         | 217.3                 | 168.9                 | 28.7%                  |
| Tax on profts                                                                                                             | (31.6)                | 8.0                   | -494.1%                |
| Retained profits for the year<br>Attributable to Portucel shareholders<br>Attributable to non-controlling interests (NCI) | 185.7<br>185.3<br>0.4 | 176.9<br>176.9<br>0.0 | 5.0%<br>4.8%<br>>1000% |
| Cash-Flow                                                                                                                 | 308.1                 | 302.3                 | 1.9%                   |
|                                                                                                                           | 31-12-2015            | 31-12-2014            | Dec15 vs.<br>Dec14     |
| Equity (before NCI)                                                                                                       | 1,041.7               | 1,300.6               | -19.9%                 |
| Net debt                                                                                                                  | 654.5                 | 273.6                 | 139.2%                 |

#### **Notes:**

• Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments

• In comparison with 2014, the year was impacted by the inclusion of AMS on 1 January 2015

## **3.2. OVERVIEW OF OPERATIONS OF THE PAPER AND PAPER PULP BUSINESS AREA**

Turnover of the Portucel Group in 2015 was 1.6 billion euros, up by 5.6% compared with the amount recorded in the previous year, resulting essentially from the favourable change in pulp and paper prices (in the context of the valuation of the US dollar vis‐à‐vis Euro). The incorporation of the tissue business in the universe of the Group's consolidation helped to boost growth. Paper sales accounted for 75% of turnover, energy 12%, pulp 9% and tissue approximately 3%.

Consumption of uncoated woodfree printing and writing **paper** (UWF) in Europe declined only slightly (around 0.3%), while exports grew as a result of the favourable behaviour of the USD exchange rate. Taking advantage of the positive exchange rate development, Portucel expanded sales in the USD‐based markets, recording an increase of around 1.7% of sales volume in these markets. The Group's average sales price saw a very positive change, increasing 5% in relation to 2014, which helped paper sales in 2015 to grow 4.0%, above 1.2 billion euros, and achieve the highest value ever. In the same period, the benchmark index in Europe, PIX A4‐ Copy B, fell 0.6%. In volume terms, this slight drop of 0.6% was essentially due to the effort put forth in replenishing stocks, the levels of which were very low, and to the increase in volume in transit to customers.

The bleached eucalyptus kraft **pulp** (BEKP) business maintained the positive performance it has demonstrated since the first of the year, with a significant improvement in prices over the same period of 2014. In fact, the price index in dollars experienced a favourable variation, with an average price of 784 USD/ton, compared to the 746 USD/ton figure in the same period of the previous year The exchange rate effect contributed to the sharp rise in the price in euros, and the reference index PIX BHKP reached an average of 705 euros/ton, an increase of 25.6% compared to the previous year. The upward trend in pulp prices resulted in growth of 23.2% in the value of sales, despite a reduction of approximately 1.7% in the amount sold.

The reduction in the volume of pulp sales in 2015 resulted essentially from the reduced availability of pulp for sale, due to the stoppage of the Cacia mill, while work was being done on the capacity expansion project. Representing a 20% increase in installed capacity, this project was successfully completed and the Cacia mill resumed production in late June. Output figures have been consistent with the anticipated learning curve as the mill moves towards stability at the new target output levels established for the project: 350,000 tons *per annum* of BEKP.

The production and sale of **energy** were affected by the maintenance stoppages in Cacia, Setúbal and Figueira da Foz. Consequently, gross annual production of the Group was 4.2% below the figure in 2014, which, alongside the drop in invoiced amounts, determined 16.1% decrease in electricity sales to the grid. The lower energy prices of the natural gas co‐generation plants were influenced by the reduction in the price of Brent and the EUR/USD exchange rate. One might add that, at the end of the year, the natural gas co‐generation plant in Figueira da Foz was impacted negatively by the reduction in energy sales price, as laid down in Decree‐Law 23/2010, altered by Decree‐Law 68‐A/2015. Therefore, starting 2016, the plant will be operating for self‐consumption.

In the **tissue** business, the AMS sales volume of products and goods recorded growth of around 6% compared to the previous year, made possible by the increased production capacity for conversion into finished product. September was marked by the completion and successful start‐up of the second machine for reel production, which doubled production capacity from 30,000 to 60,000 tons *per annum*. The increase in amounts sold, together with the slight improvement in average sales price, resulted in a 9% increase in tissue sales, amounting to 55.8 million euros.

The EBITDA of Portucel Group has evolved favourably to 390.0 million euros, which represents an increase of 18.7% compared to the previous year. The EBITDA margin stood at 24%, 2.7 p.p. up from the previous year. In addition to the results generated by the Group's current operations, the figure for EBITDA also includes a surplus of 8 million euros on AMS operations and also a negative figure of approximately 10.9 million euros relating to the impact of future business operations ‐ including the project in Mozambique and the pellets project in the United States, both still in the investment phase. Furthermore, the implementation of the anti‐dumping rate in the United States resulted in a negative impact of 3.8 million euros.

This evolution reflects the positive impact of the increase in selling prices for paper and pulp, which has already been mentioned. On the production factors side, raw material costs have improved significantly. The Group's supply mix featured an increase in the share of domestic wood, to the detriment of wood from the Spanish market. This change, combined with the optimisation of the cost of logistics and improved specific consumption, triggered a positive development in the main cost item, although the need for significant wood imports from South America remains.

Personnel costs increased 34.2 million euros, arising essentially from some non‐recurrent factors, like payments to the Pensions Fund, increased redundancy settlement costs regarding compensation under the ongoing rejuvenation program, and the cost estimate for the 2015 performance bonus. Personnel costs also reflect the increase in the Group's workforce, namely with the project in Mozambique (228 employees at year‐end) and AMS staff inclusion costs.

Operating results represented a clear improvement, growing by 31.8% to 267.6 million euros.

The financial results in 2015 amounted to a negative 50.3 million euros, which compares with a negative value of 34.2

million euros in 2014. The main difference is due to the recognition of the costs associated with the early redemption of part of the Portucel Senior Notes 5.375% retail bond issue. Two hundred million euros (out of a total loan of 350 million) were repaid. The redemption price paid was the nominal value of the Redeemable Notes, plus the applicable premium, amounting to approximately 14.6 million euros. This early redemption also resulted in the immediate recording of around 2.3 million euros of costs incurred with the issue of this loan. Financial costs will reduce significantly as a result of such repayment, as the Group negotiated simultaneously a new loan issue for the same amount (200 million euros) in better terms and extended maturity. The financial results include the cost of operations of exchange coverage contracted for 2015 (around 6.8 million euros).

The consolidated net income for the year stood at 185.3 million euros, representing growth of 4.8% in relation to the same period in the previous year.

## **3.3. BUSINESS REVIEW**

## **3.3.1. Paper**

### **3.3.1.1. Market Background**

Figures in 2015 point to a slight decline in apparent consumption of UWF in Europe of 0.3% in relation to 2014, whilst the main benchmark index for UWF prices (PIX A4‐Copy B) was down by 0.7% year‐on‐year. In this environment, as already observed throughout the year, the weakness of the Euro against the Dollar drove the European industry to look for more profitable opportunities, boosting the volume of exports and consequently reducing the volume sold to the European market. The production capacity utilization rate stood at close to 92%, one and a half percentage points up from the previous year, whilst order books in the industry were 1.3% fuller than in 2014.

In the US, the apparent consumption of UWF paper had dropped by 0.4% until November, with the significant reduction in imports of 12.1%, as a result of the anti‐dumping measures imposed on imports from China, Australia, Brazil and Portugal. Nonetheless, the industry's capacity utilization rate was 93%, one percentage point below the previous year's figure. The leading price index for the sector (Risi 20lb A4) fell by 1.8% in relation to the same period in the previous year, in line with the trend since 2010, dropping 12% in total since the highest price recorded that year.

#### **3.3.1.2. Operational Performance**

| (000 tons)                   | 2015  | 2014  | Var.  |
|------------------------------|-------|-------|-------|
| UWF Output                   | 1,571 | 1,559 | 0.8%  |
| UWF Sales                    | 1,555 | 1,564 | -0.6% |
| Foex – A4-B copy Euros / ton | 822   | 827   | -0.6% |

In this context, in 2015 the Portucel Group achieved an all‐time high in paper sales, 4% more than in the previous year, supported by rising sales in foreign markets of 1.7% in volume and 14.5% in value, with continued expansion into new regions and growing penetration in Latin America and Africa. Sales in Europe were cooler, mostly as a result of the greater focus on USD‐denominated markets that contributed more.

#### **3.3.1.3. Branding**

In 2015 the Portucel Group continued to focus on its own brands.

The Navigator brand continued to lead the market in the premium segment office paper in 2015, with sales growing by 2.4% globally.

The annual EMGE – Paper Industry Consultants study among wholesale professionals rated Navigator again as the leading brand in Europe, both in terms of spontaneous awareness and Brand Performance, obtained through the weighted average of several technical and marketing features. This was the 10th consecutive survey to have rated Navigator the top brand in Western Europe.

Due to its outstanding performance over the last years, the Navigator brand has earned the title of "World's Best Selling Premium Office Paper",selling in more than 110 countries.

With a unique formula, Discovery is today the best‐selling brand of 75g/m2 office paper in Europe. It should be highlighted its performance in Latin America in the last year. It is currently available in over 60 countries worldwide. Furthermore, the Discovery brand occupies second place for the first time regarding spontaneous knowledge and came in seventh in terms of Brand Performance in the 2015 EMGE study.

The Pioneer brand also managed to be in the top‐20 brands with more spontaneous knowledge in the annual study conducted by EMGE with merchants, besides the fact that it came in fourth as far as Brand Performance is concerned.

## **3.3.2 Pulp**

### **3.3.2.1. Market Background**

The recovery which started in the 4th quarter of 2014 continued in 2015, with the paper pulp market benefiting from several factors, namely new capacities coming online at a slower pace, a reduction in supply due to the traditional maintenance stoppages and strong demand from the Chinese market. The activity slowed down at the end of the year, due to the strong pressure on commodity prices and less economic growth in China, the main export destination of pulp.

These market developments in 2015 helped prices to keep on rising, and the average of the PIX benchmark index rose 5.1% against the previous year, from USD 746 to USD 784. In euros, and influenced by the exchange rate effect motivated by the deterioration of the Euro against the Dollar, the price variation was more significant, as is seen in the chart below, rising from 114 euros since the beginning of 2015.

#### **Monthly variation of the PIX Price Europe ‐ BHKP**

As reported above, the Chinese market remained the main driving force behind demand. PPPC W‐20 figures for pulp sales to this market in 2015 point to an overall increase of 11.0%, with eucalyptus pulp growing by 14.1%.

## **3.3.2.2. Operational Performance**

| (000 tons)             | 2015  | 2014  | Var.  |
|------------------------|-------|-------|-------|
| BEKP Output            | 1,423 | 1,418 | 0.4%  |
| BEKP Sales             | 253   | 257   | -1.7% |
| Foex – BHKP Euros /ton | 707   | 561   | 25.9% |

The Group's BEKP pulp sales totalled approximately 253 thousand tons in 2015, with an improved position in the decorative and special papers segment, which accounted for more than 75%.

## **3.3.3 Tissue**

#### **3.3.3.1. Market Background**

The Group intervenes in two market segments for the tissue business area: Household (*At Home*), which accounts for 75% of the total market, and Professional (*Away From Home)*, supplying an array of products in both segments. The sales strategy focuses particularly on the Iberian market, while developing other markets with great potential, in Europe and Africa mostly.

This is the result of the Group's expansion plans, which now include a strong growing business segment, where it will gradually introduce its business model.

The tissue paper market represents in Western Europe approximately 6.4 million tons, Germany and the United Kingdom leading the way of countries with the highest consumption rates per capita and over 2 million tons per year in total. The European market has grown, on average, around 1.3%/year over the past 10 years.

Toilet paper and paper towels are the most representative product categories across Western Europe, whereas the utilisation rate of paper napkins and paper tissue is higher in Southern Europe and Central and Northern Europe, respectively.

#### **3.3.3.2. Operational Performance**

|                               | (000 tons) | 2015 |
|-------------------------------|------------|------|
| Output of reels               |            | 33   |
| Output of finished products   |            | 36   |
| Sale of finished products     |            | 35   |
| Sale of reels and other goods |            | 4    |

In terms of results, the tissue business sales reached approximately 55.8 million euros, representing a growth of close to 9% over the previous year, 52% of which was generated through the Household channel, while the remaining 48% was originated through the Professional channel.

The occupation rate of the paper machines reached 95%, which compares favourably with an average of 88% of other producers in Western Europe.

## **3.4. INDUSTRIAL OPERATIONS**

In 2015, 1.4 million tons of air dry pulp and 1.6 million tons of paper were produced. Pulp production was 0.4% more than in the previous year and paper production grew by 1.1% against 2014, reaching the highest volume so far.

Of all three pulp plants of the Portucel Group, Figueira da Foz stood out for having met the record high of 580 thousand tons of pulp. The Cacia plant owes its lower production, in comparison with 2014, to the annual stoppage that took longer than usual, during the implementation of the previously announced capacity increase project.

Paper production at the two Setúbal plants broke the barrier of 800 thousand tons of finished goods for the first time.

The levels of efficiency of the industrial equipment, in most cases, grew significantly, as the result of a consolidated strategy of ongoing improvement.

The quality of the industrial assets, good maintenance and good knowledge of production procedures were the core factors leading to the results achieved.

Operating costs had a positive performance globally.

The cost of wood, the main input in pulp production, dropped 4.1% compared with 2014, due to a decrease in the specific consumption of wood by 1.3% and more favourable average price.

The cost of chemicals used in pulp production was also down by approximately 2%, in spite of the rise in costs at the Cacia Plant for the aforementioned reasons.

The increase in the variable costs of eucalyptus fibre, the main input, impacted paper production. The cost of eucalyptus fibre used to produce paper grew 17% in relation to 2014. In an integrated process, which is the case of the Group's plants, such cost increase is transformed into a benefit for pulp production.

The costs of chemicals and energy used in paper production remained largely untouched.

Under the fixed cost component, maintenance costs at the Portucel Group developed unfavourably, 5.2% above the previous year. This was caused essentially by the annual stoppage of the Figueira da Foz mill and the irregular performance of the Cacia Mill. On the other hand, maintenance costs at the Industrial Complex in Setúbal developed favourably, having dropped 5.4% since 2014.

Regarding tissue production in 2015, Vila Velha de Ródão reached 30,019 tons of paper and 35,346 tons of finished goods in total, which translate an increase of 12.6% and 7.5%, respectively, against 2014.

As for the main variable costs of paper production, short fibre and long fibre, both purchased from external entities, prices increased significantly compared with 2014, 16% and 2% respectively. The synergies arising from the integration in the Group prevented further rise in the purchase price. There were no significant variations in energy costs translated in €/ton in comparison with the same period of 2014.

## **3.5. DEVELOPMENT**

Concerning industrial investment, the output capacity of the Cacia pulp mill grew. Representing a 20% increase in installed capacity, this project was successfully completed and the Cacia mill resumed production in late June. Output figures have been consistent with the anticipated learning curve as the mill moves towards stability at the new target output levels established for the project: 350,000 tons *per annum* of BEKP.

In March 2015, the Group announced its entry in the tissue segment through the purchase of the company AMS – BR Star Paper ‐ based in Vila Velha de Ródão, Portugal. It was purchased for the amount of 41 million euros, with approximately 24 million euros of debt taken up by the Group, and the completion of the plan to increase tissue paper

production capacity, which involved an additional investment of 36 million euros. The new capacity began operating in September, and included a second production machine with 30 thousand ton capacity, as well as the new transformation capacity of over 20 thousand tons. At the end of 2015, the nominal capacity of the Vila Velha de Ródão unit amounted to 60 thousand tons of reels and 64 thousand tons of transformed goods.

In addition to the acquisition of AMS, the Group stepped up its efforts to pursue alternative areas of growth outlined in its strategic plan. Portucel intends to invest in a tissue paper production line and the corresponding transformation into a final good, with a nominal capacity of 70 thousand tons per year at an estimated value of around 121 million euros. However, the decision to invest will depend on several assumptions, including the approval by AICEP of the application to the Portugal 2020 programme under assessment, which will grant funding and/or tax allowances.

The construction project for the pellet factory in the USA continues at a good pace, specifically through the consolidation of the project team now working in Greenwood, South Carolina. The civil construction work got under way in early August 2015. Work started on the foundations and buildings where the main equipment has already been fitted, and mechanical installation work is due to be completed in April 2016 The commissioning and trial operation period will start in May, with production planned to start up in July. Contracts have already been awarded for approximately 96% of the investment total.

During the year, the initial amount estimated at 110,8 million USD was reviewed upwards to 116.5 million USD, and the plant's nominal production capacity grew from 460,000 tons to 500,000 tons a year.

Portucel also continues to make progress with the forestry production project in Mozambique. In 2015 the Group pressed ahead with its new forestry plantations.

In an important milestone, Portucel Moçambique successfully obtained the environmental license needed for forestry operations in Zambézia and Manica provinces.

The construction of the Luá Nurseries, in Zambézia province, was also completed, for the production of cloned saplings on an industrial basis, with capacity for 6 million plants a year in the first year, which has doubled meanwhile. The nursery's official opening took place in the beginning of September; it was attended by some managers of the Portucel Group, the President of the Republic of Mozambique and representatives of the International Finance Corporation.

In spite of the unfavourable weather conditions, with flooding at historical levels in the beginning of the year and extreme drought throughout the remainder of the year, it was possible to keep up planting operations, albeit at a slower pace than expected.

Finally, the organisation was adjusted to the acceleration of operations, with the completion of the construction of the housing centre for some Staff located in Zambézia (in Nipiode).

In this context, in 2015 capital expenditure totalled approximately 152.3 million euros, including 67 million euros in the pulp and paper business (42 million euros of which were in the Cacia expansion project), 36 million euros in tissue capacity expansion at the Vila Velha de Ródão plant, 18 million euros in the Mozambique project and 32 million euros in the construction of the pellet mill in the United States.

## **3.6. RESOURCES AND SUPPORTING FUNCTIONS**

## **3.6.1. Sustainability**

Sustainable Development is one of the key pillars of the Portucel Group and it is paramount for the success of present and future business. In 2015 the Group took important steps in the management model, in particular:

- Redesigning of the mission by committing to "Becoming a global company, known for transforming, in an innovative and sustainable way, the forest into goods and services that contribute to human welfare".
- Establishing a new Sustainable Governance model under a newly formed Sustainability Directorate and the Sustainability Forum.
- Consolidating the pillars of the growth strategy, in particular the creation of value, the sustainable management of resources and environmental preservation, the creation of lasting employment, the promotion of quality of life and social well‐being.

Considering the context, the following projects and initiatives in particular were developed in 2015:

- Design of the Portucel Moçambique Social Development Programme. Developed over a time horizon of 7 years, by 2015 this programme had delivered direct support to 4,600 households, in 6 districts of the Zambézia and Manica provinces, including farming activities.
- Investment in better process technology for the Cacia Industrial Complex, fostering better environmental performance, on a par with the creation of value by increasing productive capacity.
- Progress in the Group's sustainability reporting through the adoption of the G4 version of the GRI ‐ *Global Reporting Initiative*, which encourages stakeholders to deliver their feedback on important topics for reporting, i.e. on the most relevant issues for the development of the Group's business.
- Social Responsibility exercised though the volume of jobs created, the professional qualification of Staff and local development initiatives and community support. Job creation is a cross‐cutting and critical issue for the construction of a strong and inclusive Europe. In Portugal, the Portucel Group is supplied by more than 5,000 companies from several sectors of the economic fabric and it is responsible, either directly or indirectly, for generating 30,000 jobs.
- Consolidation of the supply of certified timber (FSC® or PEFC) or timber of controlled origin to the plants, thus keeping up with the previous period's sales levels of FSC®, PEFC or Ecolabel premium graphic and office stationery.
- Active presence in leader organisations for promoting corporate sustainability, BCSD Portugal ‐ *Conselho Empresarial para o Desenvolvimento Sustentável* at the national level and WBCSD – World Business Council for Sustainable Development at the international level. BCSD Portugal published a case‐study of the Group in the field of low‐carbon economy: "Portucel Group: Low Carbon by Nature" included under the climate change theme. On the international stage, the Portucel Group's CEO was appointed to co‐chair of WBCSD's Forest Solutions Group (FSG), which works to promote global solutions and good practices in the forestry products industry.

Therefore, in 2015 the Portucel Group consolidated its role in building a more sustainable future in cooperation with all of its business partners.

## **3.6.2 Forestry and Timber Supply**

### **Sustainable Management**

At the end of the year, the Group's agro‐forestry holdings covered 120 thousand hectares, divided into almost 1,400 management units distributed over 167 municipalities and 609 parishes in the country. Fifty‐four per cent of assets managed are on property owned by the company and approximately 73% of the area under management consists of eucalyptus stands or ongoing plantations of this species.

Forestry operations in 2015 were held back at lower levels than in the previous year, due to the weather conditions, unsuited for much of the year to planting out eucalyptus. A total of 2,8 thousand hectares were forested or reforested by the end of the year and 3 million selected eucalyptus saplings were planted out.

Regarding forest preservation and improvement measures, over 12.6 thousand hectares were controlled for spontaneous vegetation and around 8 thousand hectares for stem cuttings selection. Fertilisation measures were also conducted on approximately 12.2 thousand hectares and around 4,900 km of tracks and paths were maintained or improved.

In 2015, approximately 618 thousand m3 of eucalyptus timber was extracted and shipped to the Group's destinations (99.5% of which was certified wood).

In 2015, investment in fire prevention amounted to around 3 million euros, with emphasis being placed on prevention, mitigation and Research & Development measures.

For the Portucel Group the forest is one of the most important pillars supporting its business, as owner and manager of forest holdings, adopting responsible planning and management best practices, subject to a set of principles and rules that reconcile environmental, social and technical‐financial concerns.

Assuming forest certification as a means to enhance its presence in the increasingly demanding international market regarding the origin of the raw materials of its products and to respond to society's legitimate worries, in 2015 the Group managed to secure its certificates under two internationally acknowledged programmes, the FSC® and the PEFC, having renewed the PEFC certificate in accordance with the new Portuguese regulatory framework. These certificates cover products like eucalyptus wood for paper and pulp production (the Group's main output) and cork, hereby having its responsible management of forest holdings being confirmed by independent entities. The Group's certified area – which grew more than 20 thousand hectares in a little over 5 years – includes all holdings on mainland Portugal and corresponds to a significant share of all Portuguese certified forests (33% FSC and 47.5 % PEFC).

### **Timber suppliers**

Timber supply in a competitive market is a critical factor for the Group. The supply of eucalyptus wood on the Iberian market fell short of the consumption needs. Raw material consumption in the three industrial facilities reached 4.3 million m3 . Supply amounted to 4.3 million m3 , 75% of which from Portugal, including self‐supply, 11% from Spain and 14% from outside the Iberian market: Uruguay, Brazil and Chile. Supply cost savings amounted to more than 14 million euros in comparison with the previous year.

In the pursuit of its Policy of Corporate Responsibility and engagement with its local communities, the Group remained committed to the Certification of Forest Management and of the Chain of Custody.

Of all timber supplied to the plants, 40% was certified and 60% was of protected origin. In Spain, where the supply of certified wood is strong, 80% of the purchased timber was certified.

In addition to the certification prize, the first to be awarded worldwide, the Group continued to promote forest certification measures and of the Custody Chain with suppliers and owners' associations.

Furthermore, it has been working with suppliers, owners and service providers for the sharing of knowledge in best forestry practices, thus increasing the productivity of private eucalyptus forests.

The woodchip market in Europe, and especially in the Iberian Peninsula, has undergone significant development in recent years and global shipping of this commodity has increased.

## **3.6.3 Energy**

The Portucel Group recorded gross power output of 2,291 GWh in 2015, slightly down by 4.2% on the previous year. This figure for total power output corresponds to approximately 4.8% of the total power generated in Portugal.

The production and sale of energy were affected by the maintenance stoppage and an extensive overhaul of one of the turbo‐generators of the Cacia mill, and the maintenance stoppage in the last quarter of one of the turbo‐ generators of the renewable co‐generation of the Setúbal plant, which had a significant effect on the energy balance of this plant. The natural gas cogeneration at the Figueira da Foz Industrial Complex, in the last quarter of the year also underwent planned maintenance stoppage.

The electric power generated by biomass power plants (3 cogeneration units and 2 other plants) totalled 1,158 GWh, slightly down by 4.8% on the previous year, and accounting for more than 50% of estimated total Portuguese power output from this renewable resource in 2015. The drop in electrical power generated from this primary source of energy was due to the aforementioned reasons of repairing the turbo‐generators of the renewable cogenerators in the Cacia and Setúbal plants.

**Evolution of Portucel Soporcel Group Gross Power Output from Biomass**

The two new biomass power stations, dedicated solely to generating electricity, contributed a total gross output of 216 GWh, with sales to the national grid of 186 GWh, well in excess of the initial expectations for the project, which were for 167 GWh. Following some maintenance of the Cacia Plant, the latter improved its performance significantly compared with 2014, with production increasing 23%. This success was due essentially to high standards of stability and performance in operation and maintenance, and better control of biomass bought abroad.

The new combined‐cycle natural gas cogeneration plant in Setúbal contributed to gross output of 642 GWh (up by 1.5% on the previous year), achieving a new record high in production. The cogeneration plant has reached a stability level after a number of adjustments and changes were made to it in respect of some of the mechanical components of the natural gas turbines, in order to improve its availability.

The combined‐cycle natural gas cogeneration plant at the Figueira da Foz Industrial Complex, fully consolidated in the Group's accounts since 2013, produced 432 GWh in 2015, 10.7% less than in the previous year due to the extended, programmed maintenance and regulatory changes concerning the development of power sold.

Despite the increase in power generation from natural gas, due to the energy needs of the Setúbal and Figueira da Foz

paper mills, 50.5% of the Group's electrical power production was derived from co‐generation plants and power stations fuelled by biomass, i.e. a renewable resource. It is important to note that co‐generation combines the production of electrical power with much larger quantities of thermal energy, making it considerably more efficient than conventional processes which generate only power.

### **Bioenergy and Fossil Fuels**

The two biomass power stations at the Cacia and Setúbal Industrial Complexes and the Group's three biomass co‐ generation plants have allowed it to consolidate its dominant position in the Portuguese renewable energy market. The great benefit in terms of reduced CO2 emissions will have an impact on the national balance for these emissions and will reduce the country's dependence on imported fossil fuels, a national aspiration which the Group is accordingly helping to achieve. These plants of the Portucel Group are expected to cut CO2 emissions by more than 460 thousand tons compared to the national average.

The Group has continued to supply its biomass reception centres, including those located at its plants, allowing it to optimize further the operation of the chipping equipment used to process the biomass as well as the logistics involved in biomass operations.

Several measures were implemented in 2015 to improve the levels of humidity and aggregates content of several types of residual biomass purchased, improving the correlation between humidity levels and biomass acquisition cost.

#### **Forest Biomass for Energy Purposes**

The year 2015 developed along the same lines as the previous years, with high biomass supply, particularly leftovers from the forest activities. The biomass power stations of Cacia and Setúbal were supplied with approximately 317 thousand tons of biomass, not including bark.

## **3.6.4 Environment**

In 2015 plenty of thought was put into the development of a strategic environmental plan. This plan is intended to prepare the Portucel Group for the next 10 years, namely for the challenges arising from the new requirements in this field, which have either been published or are being prepared, including the conclusions on the best technologies available for the sector and the Large Combustion Plants. The development of the plan highlighted the fact that current performance is already in conformity with such guidelines, it helped to point out areas for improvement, technological solutions and setting up action plans.

Furthermore, strong investment was made in the environmental area in the Group's industrial facilities, and in the collection and treatment system of non‐condensable gases, the new washing press in the bleaching stage and the new lime kiln at the Cacia Industrial Complex, besides the investment in a washer for concentrated non‐condensable gases, which are used as a source of energy in the lime kiln at the Figueira da Foz Industrial Complex.

The investments mentioned helped to improve the environmental performance of the Portucel Group, both in terms of air and water emissions and the rational use of sources.

In order to honour the commitments made in the Management Systems Policy and the Sustainability Policy, the Portucel Group identifies, monitors and controls the environmental aspects of its operations, with the aim of eliminating or minimizing impact, by implementing practices based on strict compliance with legislation and the principle of ongoing improvement.

Environmental indicators continued to present sustained positive performance at all industrial units, due to the improvements to processes which have been consistently implemented in various areas: air, water, waste, energy and materials.

With 2009 as the reference year, improvements to processes translated into environmental gains, per ton of product, pulp and paper produced, namely 9% less water used and approximately 7% less primary energy consumption.

Water and air emissions per ton of goods produced evolved favourably, down by 14% and 31% in the same period.

In addition to the aforementioned reductions, the stabilisation of the Group's performance in line with the sector's top technologies must be highlighted.

## **3.6.5 Innovation, Research and Development**

The Group is known for focusing on the development of innovative products, not only in terms of intrinsic quality, but also of consumer segmentation, which continued to receive particular attention in 2015.

In 2015 the Directorate for Innovation and Internal Consulting was created, whose main mission is to foster programmes and projects applied across the Portucel Group, addressing matters relating to Innovation, Lean Manufacturing and the program management of internal projects. It is informally linked with the company's different business areas, developing specific governances for each of the subjects mentioned above.

In 2015, the Group continued to invest in research in forestry, pulp and paper, through the work of its forestry and paper research institute, RAIZ, conducted in close cooperation with the Group's respective business sectors and a range of bodies in the national and international science and technology sector.

The main contributions of RAIZ in Forest Research and Consulting were (i) the onset of the production of the improved seed at the orchard in Espirra; (ii) the incorporation of new materials in the Genetic Improvement Programme; (iii) and the support lent to the PSF for the review of the fertilisation programme, the irrigated eucalyptus project and the implementation of a more precise model for estimating forest productivity.

The main contributions of RAIZ in Forest Research and Consulting resulted in the completion of two QREN Projects in the areas of new cellulosic materials and the new bio‐based products, as the predecessors of chemical synthesis bio‐ industry and biomaterials from lignocellulose renewable sources.

In connection with environmental research, sludge production and management, in particular, are a growing concern due to the amounts generated and the present management cost thereof, the growing pressure and the environmental requirements in this field. In 2015, significant progress was achieved in the search for technological solutions to drying sludge and biomass for the Group's three industrial units to assess the technical‐economic feasibility, in view of using it for energy production and efficiency gains.

## *4. Cement and Derivatives Business Area*

## **4.1. LEADING BUSINESS INDICATORS**

| IFRS - accrued amounts (million euros)                                                                                   | 2015                    | 2014               | Var.                         |
|--------------------------------------------------------------------------------------------------------------------------|-------------------------|--------------------|------------------------------|
| Turnover                                                                                                                 | 476.7                   | 429.6              | 11.0%                        |
| EBITDA<br>EBITDA Margin (%)                                                                                              | 85.4<br>17.9%           | 74.4<br>17.3%      | 14.7%<br>0.6 p.p.            |
| Depreciation and impairment losses<br>Provisions (increases and reversals)                                               | (59.1)<br>(2.9)         | (42.6)<br>(7.5)    | -38.8%<br>61.6%              |
| EBIT<br>EBIT Margin (%)                                                                                                  | 23.4<br>4.9%            | 24.4<br>5.7%       | -3.9%<br>-0.8 p.p.           |
| Net financial profit                                                                                                     | (41.7)                  | (14.7)             | -184.2%                      |
| Pre-tax profit                                                                                                           | (18.3)                  | 9.7                | -288.2%                      |
| Tax on profits                                                                                                           | (3.7)                   | 5.2                | -170.2%                      |
| Retained profits for the year<br>Attributable to Secil equity holders<br>Attributable to non-controlling interests (NCI) | (22.0)<br>(25.3)<br>3.4 | 15.0<br>8.8<br>6.2 | -246.8%<br>-388.8%<br>-45.3% |
| Cash-flow                                                                                                                | 40.0                    | 65.0               | -38.4%                       |
|                                                                                                                          | 31-12-2015              | 31-12-2014         | Dec15 vs.<br>Dec14           |
| Equity (before NCI)                                                                                                      | 426.1                   | 506.3              | -15.8%                       |
| Net debt                                                                                                                 | 457.4                   | 178.4              | 156.4%                       |

\* includes Angola and Cape Verde

**Notes:** 

- Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.
- The integration of the Supremo Group in the Semapa consolidated financial statements for 2015, taking into account that the acquisition of the remaining 50% of the Group that forced the full consolidation occurred at the end of the month of June, had the following impact: 50% of the results of the first half were integrated using the equity method, the balance sheet position was fully consolidated (100%) with reference to 30 June 2015 and the results in the second half (July to December) were also fully consolidated (100%).

## **4.2. LEADING OPERATING INDICATORS**

|                                   | Unit     | 2015  | 2014  | Var.   |
|-----------------------------------|----------|-------|-------|--------|
| Annual cement production capacity | 1 000 t  | 9,750 | 7,650 | 27.5%  |
| Sales                             |          |       |       |        |
| Grey cement                       | 1 000 t  | 4,731 | 4,668 | 1.3%   |
| White cement                      | 1 000 t  | 80    | 73    | 10.4%  |
| Clinker                           | 1 000 t  | 482   | 633   | -23.9% |
| Ready-mixed                       | 1 000 m3 | 1,389 | 939   | 48.0%  |
| Aggregates                        | 1 000 t  | 2,179 | 1,792 | 21.6%  |
| Precast concrete                  | 1 000 t  | 29    | 24    | 20.5%  |
| Mortars                           | 1 000 t  | 100   | 90    | 10.6%  |
| Hydraulic lime                    | 1 000 t  | 26    | 24    | 9.2%   |
| Mortar fixative                   | 1 000 t  | 15    | 12    | 31.2%  |

## **4.3. OVERVIEW OF THE CEMENT AND DERIVATIVES BUSINESS AREA**

Financial year 2015 for Secil in Portugal, as in the previous year, was expected to be subject to uncertainties, much due to the economic situation of the building industry in Portugal and the relevant developments. The other markets where the Group operates, Tunisia and Lebanon, although not in recession, are limited by other instability factors, including political and social turmoil, with not always predictable developments constraining activities. In the case of Angola, the negative effects of oil price developments and the difficulties felt since the end of 2014 in processing payments abroad as a result of the foreign‐exchange restrictions imposed by the National Bank of Angola, paint a rather negative image for the construction and public works sector.

In 2015 the entire share capital of Supremo Group was bought. At the end of June 2015, the Semapa Group, through its subsidiary NSOSPE ‐ in which Secil held 49.9% of the share capital ‐ purchased the remaining share capital of Supremo Cimentos, S.A.

After the Supremo Group integrated the Secil Group, the Group's installed cement capacity grew by approximately two million tons, thus playing an important part in the Secil Group's operations and results from 2015 onwards. The construction project of the new plant of Adrianópolis, in Brazil, was concluded in April; the clinker line began producing on 3 April and the cement mill on 19 April.

In 2015, the turnover of the Cement and Derivatives business area was 476.7 million euros, 11.0% higher than the figure in the previous year. This increase was mainly due to the growth in turnover of operations in Portugal, Lebanon and Angola, and the integration of the Supremo Group on 1 July 2015.

EBITDA in the cement business area stood at 85.4 million euros, which translated into an increase of 14.7% in relation to 2014. In 2015, the EBITDA margin stood at 17.9%, 0.6 p.p. up from that recorded in the previous year. The EBITDA grew essentially as a result of operations in Portugal, where this indicator increased 7.2 million euros.

Operating income stood at 23.4 million euros, as compared with the figure of 24.4 million euros recorded in the previous year, due to an increase in the EBITDA mentioned before, which was offset by the increase in depreciations

and impairment losses.

The Group recorded a financial loss of 41.7 million euros, a significant drop against the negative figure of 14.7 million euros in 2014. The net cost of financing increased, mostly due to the integration of the Supremo Group with high financing costs, the investment made in the new Adrianópolis plant and the high interest rates charged in Brazil.

Consolidated net income in 2015 totalled ‐25.3 million euros.

Turnover in the Cement and Clinker segment grew by 3.4% in relation to 2014. The Ready‐Mixed concrete segment grew by 55.2%, specially due to market growth and the construction of the Marão Tunnel in Portugal. The Aggregates, Mortar and Pre‐cast segments together also increased against the previous year's figure, which stood at 20.1%.

The share of turnover from total operations outside Portugal and from exports by Portugal‐based operations decreased: 63.7% as compared to the figure of 65.8% recorded in 2014.

EBITDA in the Cement and Clinker segment in 2015 grew by 1.1% in relation to 2014. The Ready‐Mixed concrete segment and the other segments achieved a positive EBITDA.

The geographical breakdown shows that the share of EBITDA for total operations in Portugal increased in relation to the previous year, with these operations accounting for 40.5% of total EBITDA in 2015.

## **4.4. BUSINESS REVIEW**

## **4.4.1. Portugal**

### **4.4.1.1. Market Background**

After a 0.9% growth in GDP in 2014, a 1.6% growth is seen for 2015 (Bank of Portugal – December 2015 Economic Bulletin). In 2015, construction continued its unstable behaviour, some of the business indicators in the sector improving, whilst others declined. According to the latest figures available from FEPICOP, the Portuguese Construction and Public Works Industry Federation, in the 1st half of 2015, building investment grew 4.7% year on year. While the core indicators in the housing segment recovered, public works dropped by 38%.

In November 2015, the construction production index (INE – the Indices of Production, Employment and Remuneration in Construction – November 2015) was down by 2.4%, on a year on year basis. The Building and Civil Engineering sectors both registered a decline in the aggregate index, presenting both a drop of 2.4%. Although these indices continue to fall, the year‐on‐year variation has decreased, extending the trend of less negative numbers in the construction sector.

In this adverse environment, the Secil Group presented the following overall indicators for its operations in Portugal in 2015:

| Portugal           |       | Turnover | EBITDA |      |      |       |          | Quantities Sold |       |      |
|--------------------|-------|----------|--------|------|------|-------|----------|-----------------|-------|------|
| (million euros)    | 2015  | 2014     | Var.   | 2015 | 2014 | Var.  | Unit     | 2015            | 2014  | Var. |
| Cement and clinker | 154.9 | 173.4    | -11%   | 28.5 | 31.4 | -9%   | 1,000 t  | 2,346           | 2,601 | -10% |
| Ready-mixed        | 64.4  | 41.0     | 57%    | 3.3  | -4.8 | 168%  | 1,000 m3 | 1,027           | 664   | 55%  |
| Aggregates         | 12.0  | 8.8      | 36%    | 1.4  | -0.4 | 468%  | 1,000 t  | 2,096           | 1,739 | 20%  |
| Mortars            | 10.8  | 9.7      | 12%    | 1.9  | 1.4  | 36%   | 1,000 t  | 141             | 126   | 12%  |
| Precast            | 2.5   | 3.1      | -18%   | 0.1  | -0.1 | 230%  | 1,000 t  | 20              | 19    | 4%   |
| Others             | 1.0   | 0.5      | 76%    | -0.5 | -0.1 | -361% |          |                 |       |      |
| Total              | 245.5 | 236.4    | 4%     | 34.6 | 27.4 | 26%   |          |                 |       |      |

### **4.4.1.2. Cement and Clinker**

According to the latest figures available, cement consumption in Portugal was up by 5.1%, for the first time since 2008. It is thus estimated that the market reached approximately 2.7 million tons (CEMAPRE – the Centre for Mathematics Applied to Forecasts and Economic Decision).

Cement sales by Secil in the Portuguese market were in line with this trend, standing at 1,048 thousand tons, 2% more than in 2014. Generally speaking, monthly growth in sales was recorded throughout 2015. Overcapacity in Portugal and Spain remained unchanged, creating a competitive environment in the domestic market.

White cement manufactured by Secil was used in a number of high‐profile construction projects, including: the headquarters of the Santander Lisboa Bank building – expansion, at the Vila Real University – Classroom building of the School for Life Sciences and Environment, the Health Care Centres of Abrantes and Vila Nova de Gaia and grey cement: in the João Rocha Sports facilities – Sporting – Lisboa, Football City in Jamor – Oeiras, Increasing Power Output of the Hydroelectric Plants of Salamonde (II) and Venda Nova (III), new Fire Station in Braga, Leroy Merlin – Braga, Jerónimo Martins ‐ Distribution Centre North – Alfena, Valongo, etc.

In the international markets, the European Industry, which is equally overproductive, caused a higher level of competition. In the external market, countering the trend seen in previous years, sales decreased in relation to 2014. Cement and clinker sold amounted to 1.57 million tons, which is 301 thousand tons less than in the previous year.

Besides the excess supply in the Mediterranean, the countries whose economies depend on fuel export revenue also consumed less, as a result of lower oil prices.

#### **Indicators**

Cement and clinker business in Portugal, including sales in Portugal and exports, recorded turnover of 154.9 million euros, down by 10.7% in relation to the figure for the previous year.

As already mentioned, this decrease reflected the drop in the export business, which showed a drop in turnover of 19.3%, and the decrease in turnover in the domestic market of 2.0% over the same period in 2014.

The EBITDA reached 28.5 million euros, 9.4% less than the figure recorded in 2014, as a result of thermal and electrical energy cost reduction.

Less fuel costs resulted from the increase in the amount of fossil fuels replaced with alternative fuels and lower fuel prices. The Group has also increased the use of industrial waste as thermal fuel. Overall, the rate of use of alternative fuels went from 41% in 2014 to 46% in 2015. Efforts and investment in this area continue to be a priority, in order to obtain a higher rate of use of alternative fuels, with consequent savings in energy costs.

Electrical energy cost reduction resulted from lower energy price, and mostly from greater efficiency in operations, which helped to reduce consumption.

### **Industrial Operations**

Cement output from the Group mills in Portugal stood at 1,995 thousand tons in 2015, representing a reduction of 6.8% in relation to 2014 and lower demand in export markets.

|              |         | 2015  | 2014  | Var. |
|--------------|---------|-------|-------|------|
| Grey Cement  | 1.000 t | 1.913 | 2.066 | -7%  |
| White Cement | 1.000 t | 82    | 74    | 11%  |
| Total        | 1.000 t | 1.995 | 2.140 | -7%  |

#### **Cement Output**

The cement produced at the Secil Group's three plants in Portugal continues to present fairly uniform final characteristics and high quality standards, an aspect which is regarded as essential to ensure general market recognition of the high standards set by Secil.

Operational performance in 2015 was quite positive, having improved the efficacy of output management and reduced clinker and cement production costs below 2014 levels.

### **Capital expenditure**

Capital expenditure in 2015 totalled 7.3 million euros. Investments were made in packaging, the paint machine for the sack plant and improving plant safety conditions.

#### **4.4.1.3. ReadyMixed Concrete**

Sales of ready‐mixed concrete grew the most, 57.1% more than in the previous year. The year featured the supply of concrete to the Marão Tunnel project, unrivalled project in recent years. The rest of the market also grew over the previous year, and the estimated growth of the ready‐mix market on mainland Portugal is 13%, of which the Marão Tunnel project is accountable for 10%. This particularly impacted sales on the mainland, which is accountable for the largest share of sales of ready‐mixed concrete of the Group in Portugal, since sales in Madeira were down by 29% due to overcapacity and the slowdown in building activity.

EBITDA of this business unit stood at around 3.3 million euros, representing a clear improvement in relation to the previous year.

#### **4.4.1.4. Aggregates**

The sale of aggregates in the group grew significantly (36.4%), volume sales having increased 20.5% due to the enhanced dynamics in all operation areas on Mainland Portugal. Algarve recorded the highest rise in sales, where our customer portfolio grew as a result of the financial difficulties that our competitors encountered, subsequently failing in production. Besides, the refurbishment of the EN 125 road in the Algarve and the conclusion of the building of the Marão Tunnel in the north of Portugal were important projects. Local government projects also picked up in 2015. Sales in Madeira were down by 21%, due to overcapacity and the slowdown in building activity.

The EBITDA of this business unit stood at around 1.4 million euros, representing a clear improvement in relation to the previous year.

#### **4.4.1.5. Mortars**

Sales performance of mortars, like most other units in Portugal, increased in sales volume on the domestic market by 14.0%. The domestic market showed signs of recovery and goods with higher margins were sold, namely technical goods. This area has also focused on the development and promotion of solutions directed to building renovation/refurbishment. There is significant potential in refurbishments, but there is a shortage of support and financing.

Sales volume in the foreign markets was down by 0.15% against the previous year, amounting to 15.6 thousand tons, as a result of focusing on the international markets and the significant effort to promote products among customers and by attending international fairs.

In this context, turnover rose 11.6% in comparison with the previous year, and stood at around 10.8 million euros.

EBITDA stood at approximately 1.9 million euros, representing an increase of 36.1%.

#### **4.4.1.6. Precast Concrete**

Sales of pre‐cast concrete 2015 continued to be impacted by fierce competition in the market, with supply outstripping demand and low prices.

In this context, sales volume of the pre‐cast business unit was up 4.0% against the previous year, amounting to 20 thousand tons, as a result of 11.8% more external sales.

Therefore, turnover in 2015 stood at 2.5 million euros, translating a decline of 18.4% on the previous year.

Operating performance was better than in 2014, the EBITDA of this business unit having grown by 230.4% in 2015, amounting to 0.1 million euros.

## **4.4.2 Lebanon**

#### **4.4.2.1. Market Background**

According to the latest figures published by the IMF, the Lebanese economy is expected to have grown by 2% in 2015, as was the case in 2014 (*World Economic Outlook*, IMF, October 2015).

Lebanon is still feeling the impact of the global slowdown and regional instability, especially with the situation in Syria. The Syrian crisis and the influx of refugees continue to overshadow the short‐term outlook on Lebanon, exacerbating the long‐running political weaknesses and vulnerabilities there. Despite this situation, there are expectations of modest economic growth.

The following table presents overall indicators for the Secil Group's business operations in Lebanon in 2014 and 2015:

| Lebanon            | Turnover |      |      | EBITDA |      |      |          | Quantities Sold |         |      |
|--------------------|----------|------|------|--------|------|------|----------|-----------------|---------|------|
| (million euros)    | 2015     | 2014 | Var. | 2015   | 2014 | Var. | Unit     | 2015            | 2014    | Var. |
| Cement and clinker | 87.5     | 82.4 | 6%   | 34.8   | 29.4 | 18%  | 1,000 t  | 1,133.8         | 1,244.1 | -9%  |
| Ready-mixed        | 7.6      | 7.2  | 5%   | 0.5    | 0.6  | -17% | 1,000 m3 | 112.6           | 124.2   | -9%  |
| Total              | 95.1     | 89.7 | 6%   | 35.3   | 30.1 | 18%  |          |                 |         |      |

#### **4.4.2.2. Cement and Clinker**

In regard to cement consumption in 2015, there has been a significant drop. The market fell by 8.6% as a result of the slowdown in the construction sector due to the unstable environment in the region, and the adverse weather conditions in the first quarter of 2015. The construction business, according to the data available (*Blominvest Bank*), dropped 11.76% in the first ten months of 2015, a trend that has been ongoing since 2011 and which was aggravated by the political insecurity and unrest. The cement industry has also been impacted by the decrease in public investment in infrastructure works by the Portuguese government. The demand for cement was also negatively impacted by the rise in the demand for small housing projects, including in the Beirut and Mount Lebanon regions, which are considered the most attractive for land and housing development.

## **Indicators**

In this context, the sales volume in the cement business unit in Lebanon decreased, totalling 1,133.8 thousand tons, down by 8.9% on the previous year, with all sales being made on the domestic market.

In 2015, turnover stood at 87.5 million euros, up by 6.2% compared with the same period of the previous year, due fundamentally to the appreciation of the US dollar against the euro, since the competitive environment in the market is increasingly challenging, as reflected on the average sales prices in the local currency, which dropped. Decreasing demand and projects and the subsequent rise in competition caused discount levels to rise.

EBITDA reached 34.8 million euros, 18.3% more than the figure recorded in 2014. In 2015 production improved its performance. No clinker was purchased in 2015, which helped to raise margins. Production costs were also lower than in 2014, due to less spending in thermal energy, as a result of the overall decrease in fuel costs, with more favourable effects as from the second half of 2015, and due to the replacement of 4.5% with 6% petcoke. Fixed costs also decreased compared with the previous year, due to lower maintenance costs.

### **Industrial Operations**

Annual cement output from the Sibline plant stood at 1,162 thousand tons. Clinker output recorded an all‐time high of 1,007 thousand tons, representing an increase of 5.9% over the previous year, mostly due to improved performance in production. Clinker production grew and production indicators also improved (average daily clinker output and the kiln utilisation factor increased).

### **Capital expenditure**

Investments totalled 4.6 million euros, and included the start of the installation of the bag filter in line 2, which involved an investment of 2.5 million euros in 2015.

### **4.4.2.3. ReadyMixed Concrete**

In 2015, sales volume of the ready‐mix concrete business stood at approximately 113 thousand m3 of concrete,

representing a drop of 9.4% in comparison with the previous year's value.

Turnover also grew by 7.6 million euros in total, amounting to a rise of 4.7%, as a result of less construction and a very competitive environment (which impacted sales prices).

Therefore, EBITDA of this business unit stood at 0.5 million euros, representing a drop of 17.1% in relation to the previous year.

## **4.4.3 Tunisia**

### **4.4.3.1. Market Background**

In Tunisia, after the political transition, the economic transformation required to ensure sustained growth remains to be concluded. The year 2015 was marked by trade union claims, terrorist attacks, and ongoing political instability, thus hampering economic recovery.

According to the latest figures published by the IMF, the Tunisian economy is expected to grow by 1% in 2015, below the 2.3% figure registered in 2014 (*World Economic Outlook*, IMF, January 2016). In Tunisia, the economy remained fragile and growth was insufficient to bring high levels of unemployment down. The IMF will continue to help Tunisia to implement its economic programme through financial support, policy advice and technical assistance.

In 2014, specially from June onwards, cement demand on the domestic market contracted, due to the recession in the residential and commercial construction and public works industry. This trend worsened in the first half of 2015 and recovered in the second half. The market is estimated to have dropped approximately 0.4% in relation to 2014. Competition on the Tunisian market is growing and pressure on sale prices is high, with the consequent drop in local market prices. Installed capacity is higher than cement demand, particularly aggravating competition in sales prices on the domestic and the export markets.

| Tunisia            |      | Turnover |      |      | EBITDA |      |          | Quantities Sold |         |      |
|--------------------|------|----------|------|------|--------|------|----------|-----------------|---------|------|
| (million euros)    | 2015 | 2014     | Var. | 2015 | 2014   | Var. | Unit     | 2015            | 2014    | Var. |
| Cement and clinker | 62,4 | 68,1     | -8%  | 11,2 | 17,2   | -35% | 1,000 t  | 1.138,7         | 1.287,5 | -12% |
| Ready-mixed        | 7,4  | 7,2      | 2%   | 0,3  | 0,5    | -38% | 1,000 m3 | 147,4           | 150,5   | -2%  |
| Precast            | 0,2  | 0,1      | 71%  | 0,0  | 0,0    | 15%  | 1,000 t  | 8,0             | 4,7     | 72%  |
| Total              | 70,0 | 75,5     | -7%  | 11,5 | 17,6   | -35% |          |                 |         |      |

The following table presents overall indicators for the Secil Group's business operations in Tunisia in 2014 and 2015:

### **4.4.3.2. Cement and Clinker**

Secil cement sales were down over 2014 and sales volume decreased 11.6%, impacted by declining sales on the domestic market, down by 24.6%, partially offset by export sales, which increased significantly. Domestic market sales decreased, as a result of the unfavourable competitive framework and the social and industrial unrest, which made it difficult to operate the mill during some periods of the year (occasional stoppages due to strikes).

Following an increase in the beginning of 2015, the price of cement sold on the domestic market dropped at the end of February to levels below that in January 2014. This price reduction resulted from the reduction in the prices of most other operators.

Despite the increase in supply and competition, in the export market sales increased in comparison with 2014, with 129 thousand tons sold. This rise was brought about by lower prices than in the previous year, due to competitive pressure on prices. This increase also resulted from the rise in the monthly exports authorised by the Tunisian

government, compared to 2014. Libya was the main export destination. However, in spite of the growth in sales, political unrest has been a big challenge.

#### **Indicators**

The turnover of the cement business unit amounted to approximately 62.4 million euros, down by 8.4% over the figure for 2014, due to less sales on the domestic market, partially offset by the rise in export volume. The appreciation of the Tunisian dinar against the euro by approximately 3.4% produced a positive impact.

In 2015, the cement unit recorded EBITDA of 11.2 million euros, 34.8% below that recorded in the previous year. This drop was largely due to decreased sales on the domestic market and less clinker produced as a result of the strikes. The variable costs of clinker production were identical to that in the previous year, with a slight decrease. The energy gains helped to improve thermal energy consumption indicators in comparison with 2014, due to the decrease in gas used (as a result of the investment made in 2014 in the petcoke feed to the pre‐heater to replace natural gas). The cost of electrical power, on the other hand, was largely the result of the rise in electric power price.

### **Industrial Operations**

Cement output stood at approximately 1.2 million tons, 12.9% down on the output recorded in the previous year. Clinker output reached 943 thousand tons, 5.4% less than in the year before. Total production in 2015 was affected by strikes of external staff working in the quarry, which resulted in a drop in kiln output and occasional stoppages.

### **Capital expenditure**

Investment amounted to 2.2 million euros, and included the installation of a concrete station to supply the second stage of the motorway project connecting Gabès to Medenine, which required the installation of a station on the construction site.

#### **4.4.3.3. Readymixed and precast concrete**

Concrete volume sales decreased by 2.1%, with less than 3.1 thousand m3 sold, and turnover grew by 3.7% to 7.6 million euros. Ready‐mixed concrete consumption decreased with less large public works and due to the country's overall unstable economy. The drop was more significant in the Sfax region, motivated by less public and private works. In addition to the shrinking market, the drop in sales also reflects enhanced competition, with two new operators in the market, one in Sfax and another in Gabès. The appreciation of the Tunisian dinar against the euro by approximately 3.4% produced a positive impact.

Accrued EBITDA for the 12 months of the year stood at approximately 0.3 million euros, representing a decrease of 37.1% over 2014.

## **4.4.4 Angola**

### **4.4.4.1. Market Background**

The outlook for 2015 is moderately favourable and although the IMF is forecasting growth of 3.5% for Angola in 2015 (*World Economic Outlook*, IMF October 2015), the impact from the recent variations in the price of oil cannot help but affect the economy over the course of this year. The steep drop in international oil prices, on which tax revenue is strongly dependent (around 75%), impacted tax performance 2015. This situation had organisations review growth forecasts for 2015 downwards. Less revenue caused the kwanza to depreciate sharply vis‐à‐vis major world currencies, inflation to rise and difficulties in foreign payments.

The following table presents overall indicators for the Secil Group's business operations in Angola in 2014 and 2015:

| Angola             | Turnover |      |      | EBITDA |      |       |         | Quantities Sold |       |      |
|--------------------|----------|------|------|--------|------|-------|---------|-----------------|-------|------|
| (million euros)    | 2015     | 2014 | Var. | 2015   | 2014 | Var.  | Unit    | 2015            | 2014  | Var. |
| Cement and clinker | 24.2     | 21.7 | 11%  | 1.4    | -1.1 | 224%  | 1,000 t | 199.9           | 184.8 | 8%   |
| Total              | 24.2     | 21.7 | 11%  | 1.4    | -1.1 | -224% |         |                 |       |      |

### **4.4.4.2. Cement and Clinker**

The cement market in Angola was not immune to these difficulties and domestic consumption in 2015 decreased by around 8.8% year on year, standing at 5.2 million tons. This amount was almost entirely supplied by cement produced in Angola, since the Joint Executive Decree No. 01/15 of 05 January, adopted by the Government, established a cap for all cement imports in 2015. This decree limited the effect of the market downturn on domestic producers, however cement output capacity is currently higher than needs, resulting in oversupply.

The amounts sold by Secil Lobito grew by 8.2% compared to the previous year; 200 thousand tons were sold, 15 thousand tons more than in 2014, countering the market trend. This growth was influenced by the stoppage during a part of the year in a competitor, which faced financial problems and whose installed capacity represents 17% of the production capacity in Angola.

CEM I 42,5R cement, with increased value added, reached record sales levels, accounting for 28.4% of sales, which put Secil Lobito in a stronger position regarding the production of differentiated, high‐resistance cements.

## **Indicators**

Turnover grew by 11.2% and stood at 24.2 million euros, due to the combined effect of greater quantity and higher sales price. In 2014 sales prices dropped significantly, while in 2015 they increased 5%. As was expected, in virtue of the deterioration of the margins of national producers due to the depreciation of the kwanza (increased cost of all imported materials) and the rise in fuel prices (diesel for producing electric energy and fuel oil for thermal energy).

However, in spite of the adjustment in sales prices, the rise in cost was marked, causing the profit of national producers to deteriorate.

The turnover of our operations in Angola was negatively affected by the depreciation of the kwanza against the euro by 630 thousand euros.

The EBITDA was up compared with the previous year, when it was less 1.1 million euros, amounting to 1.4 million euros in 2015. This improvement was due to the increase in turnover, the maintenance of variable costs and the cuts in staff costs.

Regarding input costs, the variable costs remained unchanged, in spite of the increase in the cost of clinker imports. The fixed costs also dropped, due to staff costs that decreased as a result of Workforce cuts. In the late 2015, the Workforce amounted to 211, representing a reduction of 16 Employees; staff costs were cut by around 15%.

### **Capital expenditure**

Investments in 2015 totalled 665 thousand euros (down by 47% against 2014), of which around 365 thousand euros were used to build walls and fences around the company's properties to prevent illegal occupations.

## **4.4.5 Brazil2**

Operations in Brazil in 2015 featured the acquisition of the remaining 50% of the Supremo Group in June and the completion of the new cement plant at the end of April, Supremo's total installed cement capacity having reached two million tons in that country.

The integration of the Supremo Group in the Semapa consolidated financial statements for 2015, taking into account that the acquisition of the remaining 50% of the Group that forced the full consolidation occurred at the end of the month of June, had the following impact: 50% of the results in the first half of the year were integrated using the equity method, the balance sheet position was fully consolidated (100%) with reference to 30 June 2015 and the results in the second half (July to December) were also fully consolidated (100%), which greatly contributed to the

<sup>2</sup> The integration of the Supremo Group in the Semapa consolidated financial statements for 2015, taking into account that the acquisition of the remaining 50% of the Group that forced the full consolidation occurred at the end of the month of June, had the following impact: 50% of the results of the first half were integrated using the equity method, the balance sheet position was fully consolidated (100%) with reference to 30 June 2015 and the results in the second half (July to December) were also fully consolidated (100%). For a more suitable comparative analysis, the main economic and financial indicators of the Group are provided separately.

increased consolidated debt of the Semapa Group reported at the end of 2015. Consequently, the cement business in Brazil is presented separately here.

| IFRS - accrued amounts (million euros)                                                                             | 2015                  | 2014                |
|--------------------------------------------------------------------------------------------------------------------|-----------------------|---------------------|
| Sales                                                                                                              | 60.0                  | 54.4                |
| EBITDA<br>EBITDA Margin (%)                                                                                        | (1.4)<br>-2.3%        | 6.5<br>12.0%        |
| Depreciation and impairment losses<br>Provisions (increases and reversals)                                         | (7.0)<br>(0.2)        | (2.3)<br>(0.1)      |
| EBIT<br>EBIT Margin (%)                                                                                            | (8.6)<br>-14.3%       | 4.2<br>7.6%         |
| Net financial profit                                                                                               | (25.5)                | (4.7)               |
| Profit before tax                                                                                                  | (34.1)                | (0.5)               |
| Tax on profits                                                                                                     | 9.6                   | (1.2)               |
| Retained profits for the year<br>Attributable to Supremo equity holders<br>Attributable to minority interests (MI) | (24.4)<br>(24.4)<br>- | (1.8)<br>(1.8)<br>- |
| Cash-flow                                                                                                          | -17.2                 | 0.6                 |
|                                                                                                                    | 31-12-2015            | 31-12-2014          |
| Equity (before MI)                                                                                                 | 151.1                 | 93.2                |
| Net debt                                                                                                           | 121.0                 | 168.6               |

### **4.4.5.1. Market Background**

The economy of Brazil was significantly affected by the political instability, tax adjustments and a number of proceedings/inquiries which received plenty of media coverage in 2015. The combination of these events produced a great deal of uncertainty about which way the economy would go, making expectations difficult to manage. In this scenario, there was a strong deterioration of the major macroeconomic indicators, specifically: a decline in the GDP, the currency depreciation and an increase in the interest rates in order to control the inflationary pressure.

Economic agents expect GDP to have dropped around 3.8% and inflation to have reached 10.7%. Interest rates increased several times to 14.25% and the behaviour of the exchange rate is still unstable. Recent IMF projections also point to a contraction of the Brazilian economy of 3.8% (*World Economic Outlook‐Update*, IMF, January 2016).

Recent information (SNIC – January 2016) about the cement market in Brazil suggest a drop in the market of around 9.2% year on year; in the South and South‐East (Supremo Group markets) the fall may have been slightly below the average. Added to the economic situation and the decrease in investment, the entry of new operators made the market even more competitive.

## **4.4.5.2. Cement and Clinker**

### **Indicators**

| Brazil                          | Turnover |      |      | EBITDA |      |       |
|---------------------------------|----------|------|------|--------|------|-------|
| (million euros)                 | 2015     | 2014 | Var. | 2015   | 2014 | Var.  |
| Cement and clinker, Ready-mixed | 60,0     | 54,4 | 10%  | -1,4   | 6,5  | -121% |
| Total                           | 60,0     | 54,4 | 10%  | -1,4   | 6,5  | -121% |

In 2015, total operations by the Supremo Group generated turnover of 60.0 million euros, representing an increase of around 10.2% in relation to the previous year. Limited production capacity in the first three months of the year and problems in importing cement precluded higher growth in sales. Such constraints were offset at the end of April when the Adrianópolis plant began production and the average daily sales volume increased.

When the Adrianópolis plant went into operation, some of the operating costs and financial expenses (interest on loans) that were being capitalised previously began to be recognised directly in the results, in accordance with the applicable accounting standards. This had the corresponding (negative) impact on the EBITDA, which registered a negative figure of 1.4 million euros, significantly lower than in the previous year, and on the financial results of the Supremo Group which were a negative 25.5 million euros at the close of 2015 vs. the negative 4.7 million euros in the previous year.

Consequently, net income in 2015 totalled the negative figure of 24.4 million euros, which translates a loss of approximately 22.7 million euros year on year, as a consequence of the increase in debt and interest rates and currency depreciation.

At the end of 2015, net debt of the Supremo Group amounted to 121.0 million euros, which translated a decrease of 47.6 million euros compared to the figure on 31 December 2014, mostly due to the currency exchange.

### **Industrial Operations**

| Brazil             | Quantities Sold |       |       |        |  |
|--------------------|-----------------|-------|-------|--------|--|
| (million euros)    | Unit            | 2015  | 2014  | Var.   |  |
| Cement and clinker | 1,000 t         | 716.5 | 495.0 | 44.7%  |  |
| Ready-mixed        | 1,000 m3        | 214.9 | 246.1 | -12.7% |  |

The clinker line at the Adrianópolis plant began producing on 3 April and the cement mill on 19 April.

With the start‐up of the new plant, the cost scenario is naturally not the same as that of the previous year, due to the size of the plants and a totally different operating structure. The new plant consumes less thermal and electric power than other plants, fostering better performance of the variable costs, in addition to producing better quality clinker, which helps to reduce the amount of clinker added to the cement. Consequently, unit costs of production reduced significantly.

### **Capital expenditure**

Capital expenditure by the Supremo Group in 2015 stood at 58.5 million euros, mostly related to the completion of the new cement mill project in Andrianópolis.

## **4.5. RESOURCES AND SUPPORTING FUNCTIONS**

## **4.5.1. Sustainability**

Sustainability is a strategic issue for the management of the Secil Group, which is why it is committed to participating in the CSI – Cement Sustainability Initiative, under the WBCSD – World Business Council for Sustainable Development, namely through the measures for redesigning the priority goals and establishing the most suitable structure for their fulfilment, in the context of the rejuvenation of the CSI.

Furthermore, Secil's CEO participated in the drafting of and outspokenly supported the Low Carbon Partnership Initiative for the cement industry, the WBCSD's input to the Paris Agreements.

The following steps have been taken in the cement business unit in Portugal:

- The alternative fuel substitution rate rose slightly to 45%, allowing further substitution of fossil fuels;
- The total rate of clinker incorporation in cement was down to 75.5% in 2015, from 77.0% in 2014, which was due to the decrease in the rate of all types of cement, and the drop in the volume of exported cement, namely the more resistant type;
- Carbon emissions went down from 656 kg of CO<sup>2</sup> released per ton of cement products in 2014, to 620 kg of CO2 per ton of cement products in 2015, lower than the set target (629 kg of CO2 per ton of cement products), reflecting the lower proportion of clinker incorporated in cement and the reduced specific emission factor at the Secil‐Outão plant;
- Carbon emissions of all 3 plants together were lower than the licences granted by the Portuguese Government under the NIMs – National Implementing Measures for allocations 2013‐2020.

## **4.5.2. Environment**

The cement industry has proven its commitment by reducing carbon emissions. It was the first industry to deliver a roadmap of progress against the targets for a low carbon economy (Cement Technology Roadmap – Carbon emissions reductions up to 2050), jointly published by the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA) in 2009.

In 2013, the European Cement Association (CEMBUREAU) published a roadmap of the European cement industry, titled "*The role of Cement in the 2050 Low Carbon Economy*".

Secil participated actively in the drafting of these two documents as member of the CSI and the CEMBUREAU.

In the latter of the two documents mentioned above, CEMBUREAU proposed to reduce CO2 emissions by 32% compared to a 1990 baseline, using proven conventional technologies. Such reduction may increase to 80%, as soon as ground breaking technologies, such as the Carbon Capture and Storage/Use (CCS/U), become technically and economically viable.

In July 2015 the European Commission (CE) tabled a proposal to revise the Directive on the European Carbon Dioxide Emissions Market (EU‐ETS), which will have to be adopted in co‐decision with the European Parliament and the European Council.

The EU‐ETS should be an incentive for investment, growth and the creation of jobs, allowing the cement industry and the equivalent to foster innovative solutions in shaping the Europe of tomorrow. Therefore, the proposal submitted should protect the more efficient facilities in the European market from competition by non‐European manufacturers, which are not subject to proportionate restrictions for reducing CO2 emissions, and foster competition between

European producers for exporting outside Europe. Consequently, it should ensure technically viable emission reduction rates, while guaranteeing affordable energy prices.

However, the proposal of the EC does not provide for these two situations and, if it is not changed, it will burden the more efficient facilities with undue costs, up to 30% of the Gross Value Added.

The EP and the European Council will assess the proposal in 2016 and the EC is also available to discuss its details. Either individually or as a member of the CEMBUREAU, Secil undertakes to ensure that it is reviewed fairly and realistically by the relevant entities.

Nevertheless, we recall that under the Paris Agreements (definitely the biggest event in 2015) the negotiating conditions are expected to deteriorate further for the sectors covered by the EU‐ETS. We believe that a greater effort is needed to support those areas that are not included, namely the carbon efficiency of buildings and infrastructures, to which the cement industry can contribute significantly, by providing concrete construction solutions of proven sustainability.

## **4.6. ORGANIZATION**

The priorities set in 2012 and 2013 for the implementation of an activities adjustment and rationalisation plan in Portugal are still reflected in 2015 financial year for all units. Although most of the measures for reducing costs and maximising efficiencies had been implemented by 2012 and 2013, in 2015 plants continued their efforts to streamline and pursue excellence in the different procedures. Improved efficiency is one of the Group's main priorities in all geographical regions, and not only in Portugal. The various operational units have continued to pursue a series of initiatives/projects of this type, with the aim of improving their profitability and the efficiency of procedures.

## *5. Environment Business Area*

## **5.1. LEADING BUSINESS INDICATORS**

| IFRS - accrued amounts (million euros)                                                                                | 2015            | 2014            | Var.                  |
|-----------------------------------------------------------------------------------------------------------------------|-----------------|-----------------|-----------------------|
| Turnover                                                                                                              | 27.6            | 26.3            | 4.9%                  |
| EBITDA<br>EBITDA margin (%)                                                                                           | 8.1<br>29.2%    | 3.9<br>14.6%    | 109.6%<br>14.6 p.p.   |
| Depreciation and impairment losses<br>Provisions (increases and reversals)                                            | (3.0)<br>(0.1)  | (2.6)<br>0.0    | -14.1%<br><-1000%     |
| EBIT<br>EBIT margin (%)                                                                                               | 5.0<br>18.1%    | 1.3<br>4.8%     | 294.0%<br>13.3 p.p.   |
| Net financial profit                                                                                                  | (0.9)           | (1.1)           | 21.3%                 |
| Profit before tax                                                                                                     | 4.2             | 0.2             | >1000%                |
| Tax on profits                                                                                                        | (0.4)           | 0.4             | -208.8%               |
| Retained profits for the year<br>Attributable to ETSA shareholders<br>Attributable to non-controlling interests (NCI) | 3.8<br>3.8<br>- | 0.6<br>0.6<br>- | 569.1%<br>569.1%<br>- |
| Cash-Flow                                                                                                             | 6.8             | 3.1             | 117.0%                |
|                                                                                                                       | 31-12-2015      | 31-12-2014      | Dec15 vs.<br>Dec14    |
| Equity (before NCI)                                                                                                   | 62.5            | 58.8            | 6.4%                  |
| Net debt                                                                                                              | 18.1            | 15.4            | 18.2%                 |

#### **Note:**

Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

## **5.2. LEADING OPERATING INDICATORS**

The following table sets out the main operating indicators for the ETSA Group in the financial years of 2015 and 2014:

|                                                                  | Unit    | 2015 | 2014 | Var.   |
|------------------------------------------------------------------|---------|------|------|--------|
| Collection of raw materials - Animal w aste (categories 1 and 2) | 1 000 t | 43.3 | 40.1 | 8.0%   |
| Collection of raw materials - Animal w aste (category 3)         | 1 000 t | 73.0 | 73.3 | -0.5%  |
| Collection of used food oil                                      | 1 000 t | 1.7  | 2.1  | -20.7% |
| Sales - animal fats                                              | 1 000 t | 12.7 | 14.8 | -13.9% |
| Sales - meal                                                     | 1 000 t | 21.3 | 19.1 | 11.5%  |
| Sales - used food oil                                            | 1 000 t | 1.9  | 1.8  | 6.7%   |

## **5.3. OVERVIEW OF THE ENVIRONMENT BUSINESS AREA**

The ETSA Group recorded turnover of approximately 27.6 million euros in 2015, up by around 4.9% vs. 2014.

This favourable development was essentially caused by the consolidated provision of services amounting to 11.5 million euros, mostly due to (i) the amounts of animal carcasses collected, under the SIRCA service delivered to the

Portuguese government, and (ii) the increase in the average value of contracts per store for collection of animal by‐ products from hypermarkets in Portugal.

Consolidated sales over the relevant period amounted to approximately 16 million euros, dropping around 8.0% in relation to the previous year. This change is mostly due to the decrease in fat sales of around 26.3%, compared to the same period in 2014 (arising from the combined 13.9% drop in amounts sold and decrease of around 14.4% of its average sales price). The decline in fat sales was partially offset by sales of blood meal (about 0.9 million euros in 2015), the production and marketing of which began at the end of 2014.

EBITDA for the ETSA Group totalled approximately 8.1 million euros in 2015, reflecting an increase of about 109.6% in comparison with the previous year. This is explained fundamentally by the progressive and selective reduction in the average cost of goods sold per ton of raw material processed.

The implementation of Phase II of the Programme for Structural Cost Reduction and the overall reduction in the cost of thermal and mineral fuels used in the industrial conversion process and transport of by‐products, respectively, as a result of the investment made and of the drop in oil prices, produced a positive impact on the period's performance.

The financial results were a negative 0.9 million euros, lower than in the previous year, arising particularly from the repricing of the applicable loan terms.

The combined impact of these factors resulted in Net Income attributable to equity holders of the ETSA Group for 2015 of approximately 3.8 million euros.

## *6. Semapa Group Human Resources*

The Semapa Group's human resource policy is geared to continuous improvement in productivity by developing Workforce skills and expertise, in conjunction with streamlining and rationalization.

A commitment to a highly skilled workforce, with specialized professional careers, continues to be one of the key features of the Group's human resources policy, reflected in professional development and training activities and programmes.

The Workforce of the Semapa Group went from 4,668 at the end of December 2014 to 5,621 at the end of December 2015, as shown in the following table:

|                | 31-12-2015 | 31-12-2014 | Var. |
|----------------|------------|------------|------|
| Pulp and Paper | 2,662      | 2,325      | 337  |
| Cement         | 2,647      | 2,034      | 613  |
| Environment    | 287        | 285        | 2    |
| Holdings       | 25         | 24         | 1    |
| Total          | 5,621      | 4,668      | 953  |

The increase in the Paper and Paper Pulp and Cements and Derivatives areas is essentially the product of staff hired for the new businesses and Supremo, respectively.

## *7. Social Responsibility in the Semapa Group*

Helping to sustainably develop its local communities is one of the strategic principles guiding the Semapa Group. The Group has been aware at all times that sustainable growth depends on the well‐being of its Workforce, and on the support and ties it builds with the communities around its production units and commercial premises.

The Group is accordingly involved in a wide array of projects designed in the last instance to improve the quality of life of the communities around its plants and facilities, and to preserve the environment.

Taken together, donations by the Semapa Group to welfare charities totalled approximately 2.2 million euros in 2015.

The following were some of the numerous initiatives and projects supported by the Group:

- Cooperation agreements with institutions working in the fields of social inclusion, sport and the arts, with programmes in the local communities around the Group's facilities.
- *Pera Project*: supported by the Group since 2013/ 2014 school year, the project pays for the breakfasts of pupils with food shortage at the schools in the catchment areas of the Group's plants. The partnership with the Ministry of Education and Science supports the Eixo board of schools, Jaime Magalhães Lima secondary school, Vila Velha de Ródão board of schools, Figueira Mar ‐ Figueira da Foz and the Ordem de Santiago Setúbal board of schools.
- *Floresta Segura*: one of the Group's most important sustainability and social responsibility initiatives. With a strong national impact, the project was developed jointly with the National Fire Fighting School since 2012, and is aimed at reducing the number of fire events by raising the awareness about prevention. In 2015, close to 15 sessions were held in the areas where the likelihood of fires breaking out is higher, for example in Azambuja, Paredes and Monchique, and they aimed at teaching the rural population how to burn undergrowth safely.
- Paper grants: in 2015 grants were given out to schools and charities in the plants' catchment areas; 146 social, educational and cultural projects were donated up to 23,000 tons of paper. Furthermore, ongoing aid is provided to the boards of schools of the communities around the Group's plants and facilities, which is translated into fundamental support for the educational communities.
- Support to the Salvador Association: an Association that works to defend the interests and rights of persons with reduced mobility, especially individuals with motor disability.
- Support to the Quinta Essência Association: a charity that helps people with intellectual disabilities to achieve independence through the integrated development of their personal, social and vocational skills.
- Support to *SMDV Projecto Família*: a pioneering project in Portugal, seeking to work with families with children at risk. The aim is to keep the family together through intensive, immediate and individualised support.
- Support to AMI ‐ Assistência Médica Internacional and also to the Ronald McDonald Foundation, in both Lisbon and Porto.

# *8. Semapa Group – Financial Area*

## **8.1. INDEBTEDNESS**

| (million euros) | 31-12-2015 | 31-12-2014 | Var.   |
|-----------------|------------|------------|--------|
| Pulp and Paper  | 654.5      | 273.6      | 380.9  |
| Cement          | 457.4      | 178.4      | 279.0  |
| Environment     | 18.1       | 15.4       | 2.8    |
| Holdings        | 673.0      | 918.3      | -245.3 |
| Total           | 1,803.0    | 1,385.7    | 417.3  |

**Evolution** 

#### **Consolidated Net Debt**

Note: on 31 December 2014, the Supremo Group was not fully consolidated into the Semapa Group

On 31 December 2015, consolidated net debt stood at 1,803.0 million euros, representing an increase of 417.3 million euros over the figure recorded at year‐end 2014, positively influenced by the creation of operating cash flow of around 391.6 million euros and:

- Pulp and paper: + 380.9 million euros, as a result of payment of dividends and reserves in the total amount of 440.5 million euros (310.5 million euros in May and 130 million euros in December), 98.2 million euros of which were appropriated by minority holders of Portucel, and of the closing of the AMS acquisition process, with a payment of 41 million euros. The capital expenditure totalled approximately 152.3 million euros, including 67 million euros in the pulp and paper business (42 million euros of which were in the Cacia expansion project), 36 million euros in tissue capacity expansion at the Vila Velha de Ródão plant, 18 million euros in the Mozambique project and 32 million euros in the construction of the pellet mill in the United States.
- Cement: + 279.0 million euros, resulting essentially from investments in Brazil and the full consolidation of the Supremo Group;
- Environment: + 2.8 million euros; and

 Holdings: 245.3 million euros less, essentially due to the net effect of the dividends of around 342 million euros received from Portucel and the dividends and reserves paid of 101.2 million euros (39.9 million euros in May and 61.2 million euros in December).

## **8.2. FINANCIAL RESULTS**

In 2015 financial results amounted to a negative figure of 122.3 million euros, down by 17.7% in relation to the figure recorded in the previous year. The negative figure of 18.4 million euros was primarily the result of:

- Recognition of the costs (contractual premium) associated with the early redemption of part of the Portucel Senior Notes 5.375% retail bond issue, in a total amount of about 14.6 million euros, as well as the recognition of around 2.3 million euros associated with costs incurred with the issue of this loan, which at the date of reimbursement were yet to be reflected in the results;
- The effect of acquiring the remaining 50% of the Supremo Group and the investment made in the new Adrianópolis plant, which had an impact of around 20.3 million euros;
- Positive effect resulting from a decrease in interest rates and debt renegotiation.

## **8.3. RISK MANAGEMENT**

Details of risk management may be consulted in the relevant section of the Notes to the Consolidated Financial Statements (Semapa Group).

## **8.4. LISTED SHARE PRICE**

In 2015, stock markets were impacted by severe volatility, due to several of the year's events, including central banks' monetary policies, exchange rate development and, in particular, euro depreciation, the drop in oil price and geopolitical conflicts in the Middle East and Eastern Europe. However, the shares were still one of the financial assets with the best yield in 2015 (2.20% average), exceeding the average yield of bonds and commodities.

European stock markets had a positive performance globally, with the German and Portuguese stock exchanges in particular valuing around 10%, in spite of the events that impacted the domestic stock markets negatively, namely in the banking sector.

Semapa stock set itself apart positively, having registered during the period in analysis a rise of 26.6%, above the PSI20 average. The Semapa stock value reached a high of 14.185 euros on 10 April, and a low of 9.755 euros on 7 January.

9 10 11 12 13 14 15 16 Euros Presentation of 2014 results Presentation of results Q1 2015 Preliminary Announcement OPT Announcement of dividend payment Payment of dividends 2014 OPT Period Presentation of results H1 2015 Announcement of reserve payment Reserves payment Presentation of results Q3 2015

**Evolution of average prices of SEMAPA shares in 2015**

## **8.5. DIVIDENDS**

8

In May 2015, Semapa distributed dividends with a total value of 39.9 million euros, corresponding to 0.375 euros per share and in December 2015 it distributed free reserves of 61 million euros, corresponding to 0.75 euros per share.

Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

In May 2015, Portucel paid dividends and distributed reserves totalling 310.5 million euros, corresponding to 0.433 euros per share. In December 2015, Portucel distributed in advance the earnings of 2015 in the amount of 30 million euros, equivalent to 0.0418 euros per share, and earnings carried forward amounting to 100 million euros, equivalent to 0.1395 euros per share, within the information included in the Voluntary General Tender Offer Prospectus dated 3 July 2015, as stated in Portucel's communication to the market released on 23 November 2015.

## **8.6. NET EARNINGS**

Consolidated net income in 2015 attributable to shareholders of Semapa was 81.5 million euros, which translated a reduction of 27.7% in comparison with the previous year. Net income was 0.849 euros per share, which represents a drop of 15.0%, lower in percentage than the absolute results due to the decrease in the number of shares.

This decrease is explained essentially by the combined effect of the following factors:

- An increase in total EBITDA of approximately 68.2 million euros;
- Increase in amortisations and impairment losses, resulting from the revised useful life of some industrial equipment, the integration of AMS and the full consolidation of Supremo;
- A reduction of provisions with a value of 20.6 million euros, due essentially to the release of provisions which proved to be unnecessary;
- A worsening of net financial results by about 18.4 million euros, in relation to the previous year;
- An increase of about 64.9 million euros in income taxes, due primarily to the reversion of deferred taxes on tax losses incurred by Semapa and to the termination of the Special Tax Regime for Company Groups applied to Portucel and its subsidiaries, of which Semapa is a controlling company, due to the fact that, with the settlement of the Public Exchange Offer made by Semapa, the legal requirement of holding a minimum stake in order for that Special Taxation Regime of Company Groups to be applied to those companies, effective as from 1 July 2015, is not met;

Following the decrease in Semapa's holdings in Portucel, after the completion of the Public Exchange Offer in July 2015, Semapa appropriated lower results from Portucel in the second half (69.40% versus 81.19%, previously).

The net results of the individual Financial Statements in 2015 came to a positive 236.0 million euros, as explained next.

## **8.7. MAIN EFFECTS OF THE PUBLIC EXCHANGE OFFER ON THE CONSOLIDATED AND INDIVIDUAL STATEMENTS**

In the Consolidated Financial Statements, the Public Exchange Offer was entered in the accounts as an acquisition of own shares in the amount of 305 million euros, which produced a decrease in equity by that amount, and as a sale of Portucel shares, which resulted in a capital gain of 165 million euros that was recorded in results carried forward, as required by the implementation of the IFRS rules. The net impact of this operation on consolidated equity was therefore negative, in the amount of 140 million euros.

On the Individual Statements, the net impact on equity was a negative 144 million euros: the acquisition of own shares produced, as was the case in the Consolidated Financial Statements, a 305 million euro reduction in equity, and the gain from the sale of Portucel shares, which came to a positive 161 million euros, was recorded in the results of the period, as required by the application of the Accounting Normalisation System (SNC). The net results of the individual Financial Statements in 2015 came to a positive 236.0 million euros, as shown before.

# *9. Highlights in 2015*

GENERAL MEETINGS

- On 30 April 2015, Semapa's Annual General Meeting approved the proposal for the reduction of its share capital by 11,822,445 euros, from 118,332,445 euros to 106,510,000 euros, through the cancellation of 11,822,445 own shares.
- The Extraordinary General Meeting of Semapa was held on 23 June 2015, at which 98.6% of the capital present or represented voted favourably to approve the only two proposals presented by the shareholder Sodim, SGPS, S.A.: a) Acquisition of a maximum of 48,461,924 own shares by Semapa, and each shareholder who accepted this offer would receive 3.40 shares of Portucel for each Semapa share owned by it, and b) Reduction of the share capital of Semapa, by up to 48,461,924 euros, through the cancellation of a maximum of 48,461,924 own shares to be purchased according to the terms of the offer. The shareholders of 74.97% of the share capital of Semapa were present or represented at the shareholders' meeting. After the public exchange offer, which occurred from 6 to 24 July 2015, Semapa purchased 24.864.477 own shares, which were cancelled as a result of the share capital reduction, which now stands at 81,645,523 euros, represented by 81,645,523 shares. The Semapa Group reduced its stake in Portucel from 75.85% to 64.84% of the share capital and from 81.19% to 69.40% of the non‐suspended voting rights, the effect of which was the Portucel Group's withdrawal from Semapa's tax consolidation, thereby increasing the heading of taxes.
- The Company's Board of Directors met on 1 July 2015 and approved, effective immediately, the co‐opting of Engineer João Nuno de Sottomayor Pinto de Castello Branco to act as a member of the Board of Directors of the company and his appointment as Chairman of the Executive Board, following Mr. Pedro Mendonça de Queiroz Pereira's resignation from this position. This decision was ratified by the Extraordinary General Meeting (EGM) on 3 November 2015. The EGM also approved i) the election of a Director, Eng. Carlos Eduardo Coelho Alves, to exercise non‐executive functions, until the end of the current term of office for the other company officers; and ii) the adjustment of the number of Semapa shares that correspond to one vote, going from 100 shares to 83 shares as a result of the public tender offer carried and the corresponding alteration in the share capital of the Company.

#### INVESTMENTS

- In February 2015, Portucel S.A. purchased 99.87% of the tissue producing company, AMS BR Star Paper S.A., Portugal, with a production capacity of 30,000 tons of tissue and 50.000 tons of converting. The company completed its plan to double the tissue paper production capacity in September 2015. On 13 October, the Portucel Group inaugurated two investments made in the Cacia and Vila Velha de Ródão plants, totalling 95.3 million euros, and announced a new investment of 121 million euros in Cacia, in a new tissue paper production line with a capacity of 70 thousand tons per year, based on a set of assumptions, including the approval by AICEP of the application to the Portugal 2020 programme for financial and/or tax incentives, among others.
- During the month of April 2015, Supremo Cimentos, S.A. completed the construction of a new integrated clinker and cement plant in Adrianópolis, in the State of Paraná, Brazil, which went into operation at the end of April. The installed cement capacity of Supremo reached two million tons. At the end of June 2015, the Semapa Group, through its subsidiary NSOSPE, acquired the remaining 50% of the share capital of Supremo

Cimentos, S.A. Then in July 2015, Semapa sold its stake in NSOSPE to Secil; this company now directly and indirectly holds 100% of Supremo, which is why the subsidiary is now fully consolidated in the Group.

#### **Subsequent Events**

 Between 1 January 2016 and 2 March 2016, Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. purchased 374,999 own shares, and now owns 0.466% of its share capital.

## *10. Outlook*

The latest economic projections for 2016 and 2017 continue to point to a downward trend in global economic growth. The review considers a slower recovery of the emerging and developing economies, but also points to less expected growth in the USA in the coming two years. The Euro Area, on the other hand, progressed quite positively, and growth is expected to speed up in 2016. The main risks for global economic growth are still the slowdown in Asian economies and changes in the growth model of China, the fall in the prices of raw materials, oil in particular, and the normalisation of US monetary policy by setting quantitative easing aside.

In Portugal, the general economic outlook for 2016 is slightly better than in recent years. The latest projections of the Bank of Portugal point to a 1.7% growth in economic activity in 2016. The most recent projections of the IMF also hint at 1.5% growth.

## **Paper and Pulp**

While pulp prices are still at an interesting level, sustaining good demand levels, the drop in prices at the beginning of 2016 suggests a less favourable behaviour for the sector in the coming months. The severe pressure that the prices of raw materials are still under and the slowdown in economic growth in China lead to much market instability, causing the fear that growing demand may not follow in the steps of the new pulp capacity that is expected for this year. Exchange rate developments will remain the core factor of competitiveness between pulp manufacturers.

The tissue paper sector should continue to perform well, specifically in terms of demand, with interesting levels of growth in consumption in Europe and emerging economies, like China, Turkey and Latin America. However, there is more competitive pressure, especially among companies which intend to reinforce their production capacity in the short term.

In the UWF paper market, the prospects are still positive and Portucel has confirmed with its customers in Europe that the price rose again in February 2016. The impact of the recent reduction in and conversion of capacity of some productive units in Europe should be visible in 2016, helping towards balancing the market. It is worth noting, however, that there are a set of factors that could cause some instability in the paper market over the next few months. On the one hand, the impacts resulting from the anti‐dumping case brought by American authorities will cause changes between supply and demand in various locations, specifically a greater pressure on the supply in several countries in Asia, Latin America and Europe. The depreciations in exchange rates and the control of foreign currency in some countries of the Middle East, Africa and Latin America may also create additional difficulties for international trade.

The anti‐dumping measures taken by the US Department of Commerce also affected the Portucel Group, on which a provisional rate of 29.53% was applied on 20 August 2015. Portucel finds the duty inappropriate, and it highlighted that the calculation had been partly founded on opposite assumptions to the information that the Department of Commerce classified as wrong, which was proven by the announcement on 11 January 2016 of the decision of the Department of Commerce to fix the final anti‐dumping rate at 7.8%.

In the scope of this proceeding the final anti‐dumping rates applied to the other countries (Australia, Brazil, China and Indonesia) ranged between 22% and 222%; in the case of China and Indonesia, these anti‐dumping rates accrue the countervailing duties.

While the current rate is well below that of 20 August, Portucel still disagrees entirely with any anti‐dumping margin and it will continue to resort to procedural means to prove that the measure is inappropriate.

Following Portucel Group's strategic option to diversify its business and enter the tissue business, Portucel intends to invest in a tissue paper production line and the corresponding transformation into a final product, with a nominal

capacity of 70 thousand tons per year, with an estimated value of around 121 million euros. However, the decision to invest will depend on several assumptions, including the approval by AICEP of the application to the Portugal 2020 programme under assessment, which will grant funding and/or tax allowances. The Group also applied to the PIN project, which was awarded by AICEP last January.

The construction project for the pellet factory in the USA continues at a good pace, specifically through the consolidation of the project team based in Greenwood, South Carolina. The civil construction projects got underway at the beginning of August 2015. With 90% of the investment amount already awarded, the equipment assembly is well under way and should be completed by April 2016. The commissioning and test period will begin in May, and the start up of production is planned for July. During the year, the initial investment amount estimated at 110 million USD was reviewed upwards to 116.5 million USD, and the plant's nominal production capacity grew from 460,000 tons to 500,000 tons a year.

In Mozambique, after an initial phase centred primarily on trials to select the best genetic material for producing raw material for paper pulp and energy processing, operations will grow significantly in 2016 as the Group presses ahead with its new forestry plantations.

#### **Cement**

For Portugal, the projections of GDP growth in 2016, the recovery in domestic demand and investment, with a reversal in the licensing of home construction and an increase in construction productivity, helped to foresee a slight growth in the construction market and in cement consumption in 2016. The expected recovery in the domestic market, combined with savings and gains achieved through the streamlining measures implemented in previous years, offer the prospect of an improvement in results.

In Lebanon, 2016 should not be very different to 2015. The changes which have occurred in the Middle East have not helped to preserve macroeconomic stability. The cement market is expected to decline in 2016 due to the expected slowdown in residential construction and lower investor confidence, caused by the lingering uncertain political situation in the country and region. Continuation of a challenging and competitive environment with impact on sales prices is expected. However, these negative effects may be partly offset by less energy costs due to lower oil prices. Block sales should rise in the coming months, as the new plant is receiving more orders and is beginning to build a customer portfolio.

For Tunisia, the latest IMF figures point to 3% growth of the economy. However, economic growth prospects remain very uncertain due to recent events and the unstable environment. Competition should continue to be intense and increased pressure on sales prices is expected (in the domestic and foreign markets).

The outlook for 2016 for Angola is negative. Although the IMF is forecasting growth of 3.5% for the economy in 2016, the negative impact from the recent variations in the price of oil cannot help but affect the economy over the course of this year. The difficulties in processing payments abroad, as a result of the foreign‐exchange restrictions imposed by the National Bank of Angola, paint a rather negative image for the construction and public works sector. The year got off with decreasing diesel and fuel oil prices, together with a new and steep 15% depreciation of the kwanza. Although the cement market is expected to drop in 2016, increasing costs will impact clinker producers more than other Group activities.

In Brazil, no improvement in the macroeconomic scenario is expected in 2016, which foretells the continuation of the difficulties in economic activity and especially in the activities tied to the construction sector, due to the difficulty in investments coming to fruition. The economy may shrink 3.5%, according to the latest estimates of the IMF (January 2016).

The cement market is expected to drop again, albeit slightly less than in 2015. Public works should not perform better than in 2015, but there are the elections for the local governments that may bring some dynamics to the sector. On the other hand, the privatisation programme that was announced is anticipated with some excitement.

#### **Environment**

Considering the current macroeconomic, financial and sector environment, slight improvements are envisaged in the medium term in the sector operated by the ETSA Group. The boosting consumption of foodstuffs (due to effective increase or simply to changes in the average shopping basket) will result in a slight increase in the animal slaughter rate, after a period of reinvestment in the main collection centres and especially after the implementation of gradual import replacement mechanisms which, consequently, although deferred and still uncertain, will allow an increase in some categories of by‐products generated. However, the competition between operators in arranging raw material, which is scanty, will remain intense, because of the pronounced overcapacity of industrial processing.

The ETSA Group's prime objectives in the short term include (i) concentrating on the horizontal expansion of its production and destination markets of its end products (exports accounted for close to 32.8% of total accrued sales in 2015), (ii) identifying fresh opportunities for vertical growth, channelling its investments to improving operational efficiency, extracting maximum value from the channels operated and retaining the loyalty of the main conventional and alternative collection centres, (iii) the gradual and progressive recovery of balanced sales margins in the market, and (iv) focus on sustained innovation and research and development addressed at ensuring new profit thresholds for the business.

## *11. Acknowledgements*

In 2015, the Semapa Group stepped up its efforts to pursue alternative areas of growth in the different businesses, by developing new business segments and expanding its geographical presence. This is a Portuguese Group rooted in manufacturing industry whose successful strategic decisions have led it to preserve the leading role in the country's economy.

We wish to express our thanks to the following, for their important contribution to our success:

- our Shareholders, who have accompanied our progress and whose trust we believe we continue to deserve;
- our Employees, whose efforts and dedication have made possible the company's dynamism and development;
- for the support and understanding of our Customers and Suppliers, who have acted as partners in our endeavours;
- for the cooperation of the Financial Institutions, and the Regulatory and Supervisory Authorities, and;
- for the cooperation of the Audit Board and the officers of the General Meeting.

# *12. Proposed Allocation of Profits*

Considering the Company needs to maintain a financial structure compatible with the sustained growth of the Group it manages in the various Business Areas in which it operates;

Considering the Company's independence from the financial sector involves preserving consolidated levels of short, medium and long‐term debt, which allow it to maintain sound solvency indicators, and,

Considering the Remuneration Committee and the company's Executive Board have taken a stance on the amounts which, in their view, should be paid to the members of the Board of Directors and the Company's Employees, respectively, for the financial year of 2015, the total approximate amount of which is known,

It is hereby proposed:

1. That the Net Profits for the individual period, determined under the SNC rules, in the amount of 235,960,574.76 euros (two hundred and thirty‐five million, nine hundred and sixty thousand and five hundred and seventy‐four euros and seventy‐six cents) be allocated as follows:

| Dividends on shares in circulation   26,736,183.03 euros*     |                        |
|---------------------------------------------------------------|------------------------|
|                                                               | (32.9 cents per share) |
| Free reserves  205,274,391.73 euros                           |                        |
| Share of the Employees and Directors                          |                        |
| in the profits of the financial year up to 3,950,000.00 euros |                        |
|                                                               |                        |

\* excluding own shares held; 380,529 own shares were considered; on the payment date, if this amount is changed, the total dividends payable may be adjusted, while the amount payable per share will remain unchanged.

2. That the individual distribution of the share in profits be made by the Executive Board in that which relates to the Employees and by the Remuneration Committee in that which relates to the directors and, since this amount was already reflected in the financial statements, it shall be transferred to item Free Reserves.

3. That the amount regarding the participation of Employees and Directors in the annual profits which in accordance with applicable accounting standards has been specialized in personnel costs, is reversed by the respective amount of credit in free reserves.

Lisbon, 03 March 2016

#### The Board of Directors

#### *Chairman*

Pedro Mendonça de Queiroz Pereira

#### *Members*

- João Nuno de Sottomayor Pinto de Castello Branco
- José Miguel Pereira Gens Paredes
- Paulo Miguel Garcês Ventura
- Ricardo Miguel dos Santos Pacheco Pires
- António Pedro de Carvalho Viana‐Baptista
- Carlos Eduardo Coelho Alves
- Francisco José Melo e Castro Guedes
- Manuel Custódio de Oliveira
- Vítor Manuel Galvão Rocha Novais Gonçalves
- Vítor Paulo Paranhos Pereira

PART 2

CORPORATE GOVERNANCE REPORT

| PART I<br>-INFORMATION ON SHAREHOLDER STRUCTURE,ORGANIZATION AND CORPORATE GOVERNANCE  3 |
|------------------------------------------------------------------------------------------|
| A. CAPITAL STRUCTURE  3                                                                  |
| I. CAPITAL STRUCTURE  3                                                                  |
| II. HOLDINGS OF SHARES AND BONDS  4                                                      |
| B. CORPORATE BOARDS AND COMMITTEES  6                                                    |
| I. GENERAL MEETING  6                                                                    |
| II. MANAGEMENT AND SUPERVISION  7                                                        |
| III. AUDITING  26                                                                        |
| IV. STATUTORY AUDITOR  30                                                                |
| V. EXTERNAL AUDITOR  31                                                                  |
| C. INTERNAL ORGANIZATION  33                                                             |
| I. ARTICLES OF ASSOCIATION  33                                                           |
| II. NOTIFICATION OF IRREGULARITIES (WHISTLEBLOWING)  33                                  |
| III. INTERNAL CONTROL AND RISK MANAGEMENT  34                                            |
| IV. INVESTOR SUPPORT  36                                                                 |
| V. WEBSITE (59 TO 65)  36                                                                |
| D. REMUNERATION  37                                                                      |
| I. POWERS TO DETERMINE REMUNERATION  37                                                  |
| II. THE REMUNERATION COMMITTEE  37                                                       |
| III. REMUNERATION STRUCTURE  38                                                          |
| IV. DISCLOSURE OF REMUNERATION  40                                                       |
| V. AGREEMENTS WITH REMUNERATION IMPLICATIONS  42                                         |
| VI. STOCK OR STOCK OPTION PLANS  42                                                      |

## Report and Accounts 2015

| E. RELATED PARTY TRANSACTIONS                                                                       |
|-----------------------------------------------------------------------------------------------------|
| I. CONTROL MECHANISMS AND PROCEDURES                                                                |
| II. DETAILS OF TRANSACTIONS                                                                         |
| PART II - ASSESSMENT OF CORPORATE GOVERNANCE                                                        |
| 1. IDENTIFICATION OF THE CORPORATE GOVERNANCE CODE ADOPTED                                          |
| 2. ANALYSIS OF COMPLIANCE WITH THE ADOPTED CORPORATE GOVERNANCE CODE                                |
| 3. ADDITIONAL INFORMATION                                                                           |
| ANNEX I - Disclosures required by Articles 447 and 448 of the Companies Code and paragraphs 6 and 7 |
| of Article 14 of Securities Market Commission Regulation 5/2008                                     |
| ANNEX II - Remuneration Policy Statement                                                            |
| ANNEX III - Declaration required under Article 245.1 c) of the Securities Code 62                   |

# *Part I - Information on Shareholder Structure, Organization and Corporate Governance*

## A. CAPITAL STRUCTURE

## I. CAPITAL STRUCTURE

1. Capital structure (share capital, number of shares, distribution of capital between shareholders, etc.), including indication of shares not admitted to trading, different classes of shares, the rights and obligations attaching to these and the percentage of share capital that they represent (article 245-A.1 a)).

Semapa has a share capital of 81,645,523 Euros, represented by a total of 81,645,523 shares, with a nominal value of one euro each. All shares are ordinary shares and have the same rights and obligations attached to it, and are admitted for trading.

A breakdown of the capital structure, indicating shareholders with qualifying holdings, is provided in the table in item 7 below.

2. Any restrictions on the transfer of shares, such as clauses on consent for disposal, or limits on the ownership of shares (article 245-A.1 b)).

Semapa has no restrictions of any kind on the transferability or ownership of its shares.

3. Number of own shares, corresponding percentage of share capital and percentage of voting rights which would correspond to own shares (article 245-A.1 a)).

On 31 December 2015, Semapa held 5,530 own shares, corresponding to 0.005% of its share capital. If the voting rights were not suspended, the percentage of voting rights would be the same as the percentage of the total capital.

4. Significant agreements to which the company is party and which take effect, are amended or terminate in the event of a change in the control of the company as a result of a takeover bid, together with the respective effects, unless, due to its nature, disclosure of such agreements would be seriously detrimental to the company, except if the company is specifically required to disclose such information by other mandatory provision of law (article 245-A.1 j)).

Semapa is not a party to any loan agreement, other debt instruments or any significant agreements to which the company is a party and which take effect, alter or terminate upon a change of control of the company.

5. Rules applicable to the renewal or revocation of defensive measures, in particular those providing for limits on the number of votes which can be held or cast by a single shareholder individually or in a concerted manner with other shareholders.

There are no defensive measures in place in the company, namely any limiting shareholder's exercisable voting rights.

6. Shareholders' Agreements known to the company or which might lead to restrictions on the transfer of securities or voting rights (article 245-A.1 g)).

The company is only aware of the ongoing and open coordination of the exercise of voting rights mentioned in item 7 below, resulting in the allocation to Sodim, SGPS, S.A. on 31 December 2015 of 71.092% of non suspended voting rights, above the 69.650% arising from the direct and indirect holdings.

## II. HOLDINGS OF SHARES AND BONDS

7. Identification of persons and organizations who, directly or indirectly, own qualifying holdings (article 245-A.1 c) and d) and article 16), detailing the percentage of the share capital and votes imputable and the respective grounds.

The owners of qualifying holdings in Semapa on 31 December 2015 are identified in the following table:

|                                                             |                                                                                                 |                                    | % non                                                        |
|-------------------------------------------------------------|-------------------------------------------------------------------------------------------------|------------------------------------|--------------------------------------------------------------|
|                                                             |                                                                                                 |                                    | suspended                                                    |
|                                                             |                                                                                                 |                                    | voting rights                                                |
|                                                             | 15,252,726                                                                                      | 18.682%                            | 18.683%                                                      |
|                                                             |                                                                                                 |                                    |                                                              |
| Mafalda Mendes de Almeida de Queiroz Pereira Sacadura Botte |                                                                                                 |                                    | 0.000%                                                       |
| Lua Mendes de Almeida de Queiroz Pereira                    |                                                                                                 |                                    | 0.000%                                                       |
| Herança indivisa de Maria Rita C.M.A. de Queiroz Pereira    |                                                                                                 |                                    | 0.020%                                                       |
| Cimigest, SGPS, S.A.                                        | 3,185,019                                                                                       | 3.901%                             | 3.901%                                                       |
| Cimo - Gestão de Participações, SGPS, S.A.                  | 16,199,031                                                                                      | 19.841%                            | 19.842%                                                      |
| Longapar, SGPS, S.A.                                        | 22,225,400                                                                                      | 27.222%                            | 27.224%                                                      |
| OEM - Organização de Empresas, SGPS, S.A.                   | 535,000                                                                                         | 0.655%                             | 0.655%                                                       |
| Sociedade Agrícola da Quinta da Vialonga, S.A.              | 625,199                                                                                         | 0.766%                             | 0.767%                                                       |
| Total:                                                      | 58,039,639                                                                                      | 71.087%                            | 71.092%                                                      |
|                                                             | -                                                                                               | -                                  | -                                                            |
| Bestinver Empleo, F.P.                                      | 13,930                                                                                          | 0.017%                             | 0.017%                                                       |
| Bestinver Bolsa, F.I.M.                                     | 2,319,127                                                                                       | 2.840%                             | 2.841%                                                       |
| Bestinver Ahorro Fondo de Pensiones                         | 198,347                                                                                         | 0.243%                             | 0.243%                                                       |
| Bestinver Empleo III Fondo de Pensiones                     | 2,221                                                                                           | 0.003%                             | 0.003%                                                       |
| Bestinver Hedge Value Fund, FIL                             | 1,503,046                                                                                       | 1.841%                             | 1.841%                                                       |
| Bestinver Global F.P.                                       | 405,052                                                                                         | 0.496%                             | 0.496%                                                       |
| Bestinver Mixto, F.I.M.                                     | 195,019                                                                                         | 0.239%                             | 0.239%                                                       |
| Bestvalue F.I.                                              | 519,214                                                                                         | 0.636%                             | 0.636%                                                       |
|                                                             | Entity<br>A -Sodim, SGPS, S.A.<br>Directors of Sodim<br>B - Bestinver Gestión, S.A., S.G.I.I.C. | No. shares<br>400<br>400<br>16,464 | % capital and<br>voting rights<br>0.000%<br>0.000%<br>0.020% |

### Report and Accounts 2015

| Bestinver Prevision, F.P.                               |        | 38,849    | 0.048% | 0.048% |
|---------------------------------------------------------|--------|-----------|--------|--------|
| Divalsa de Inversiones SICAV                            |        | 13,543    | 0.017% | 0.017% |
| Bestinver SICAV – Bestinfund                            |        | 79,928    | 0.098% | 0.098% |
| Bestinver Empleo II, F.P.                               |        | 3,571     | 0.004% | 0.004% |
| Bestinver Futuro EPSV                                   |        | 6,607     | 0.008% | 0.008% |
| Bestinver SICAV Iberian                                 |        | 229,426   | 0.281% | 0.281% |
| Bestinver Renta F.I.M.                                  |        | 177,186   | 0.217% | 0.217% |
| Bestinver Consolidacion EPSV                            |        | 1,975     | 0.002% | 0.002% |
| Bestinfond, F.I.M.                                      |        | 1,459,715 | 1.788% | 1.788% |
|                                                         | Total: | 7,166,756 | 8.778% | 8.778% |
| C - Santander Asset Management España, S.A., S.G.I.I.C. |        |           |        |        |
| Laredo Fondo, F.I.                                      |        | 3,000     | 0.004% | 0.004% |
| Santander Acciones Españolas, F.I.                      |        | 2,072,457 | 2.538% | 2.539% |
| Santander Small Caps España, F.I.                       |        | 192,889   | 0.236% | 0.236% |
|                                                         | Total: | 2,268,346 | 2.778% | 2.778% |
|                                                         |        |           |        |        |

The voting rights relating to the companies in group A are allocated on the basis of (i) direct ownership of the shares; (ii) the open coordination of the exercise of voting rights, which means that the voting rights held by these companies taken together in Semapa are allocated to each of them, as explained next, and (iii) the existence of, direct and indirect, controlling relationships of Sodim, SGPS, S.A. also described ahead.

The allocation to Sodim by virtue of the open coordination of the exercise of voting rights, under the terms in which they have been announced according to article 20.1 c) and h) of the Securities Code, matches the part identified by the letter "A" in the table above.

The allocation to Sodim by virtue of the controlling relationship, in accordance with article 20.1 b) of the Securities Code, was on 31 December 2015 as follows:

| Entity                                        | Allocation                | No. shares | % capital and<br>voting rights | % non<br>suspended<br>voting rights |
|-----------------------------------------------|---------------------------|------------|--------------------------------|-------------------------------------|
| Sodim, SGPS, S.A.                             |                           | 15,252,726 | 18.682%                        | 18.683%                             |
| Cimigest, SGPS, SA                            | 100% owned by<br>Sodim    | 3,185,019  | 3.901%                         | 3.901%                              |
| Cimo - Gestão de Participações,<br>SGPS, S.A. | 100% owned by<br>Cimigest | 16,199,031 | 19.841%                        | 19.842%                             |
| Longapar, SGPS, S.A.                          | 100% owned by<br>Cimigest | 22,225,400 | 27.222%                        | 27.224%                             |
|                                               | Total:                    | 58,862,176 | 69.646%                        | 69.650%                             |

In relation to the companies in groups B and C, voting rights are allocated on the basis of direct and indirect ownership of shares, by virtue of domain relations.

8. Indication of the number of shares and bonds held by members of the management and supervisory bodies.

This information is provided in Annex I to this Report.

9. Special powers of the management board, in particular concerning resolutions to increase capital (article 245-A.1 i)), indicating, with regard to these, the date on which they were granted, the period during which such powers may be exercised, the upper limit for the increase in share capital, shares already issued under the powers granted and the form taken by these powers.

Under the Articles of Association, the Board of Directors has no powers to resolve on increases to the share capital.

## 10. Information on the existence of significant dealings of a commercial nature between qualifying shareholders and the company.

In 2015 there were no significant dealings of a commercial nature between qualifying shareholders and the company, on the basis of the criteria set out in item 91 below.

However, it should be mentioned that in May 2015, Banco Português de Investimento S.A. participated as a Financial Intermediary in the Voluntary General Tender Offer with the nature of an exchange offer for the acquisition of all of Semapa's ordinary shares. The deal was monitored by the Audit Board.

## B. CORPORATE BOARDS AND COMMITTEES

## I. GENERAL MEETING

## a) Composition of the General Meeting

### 11. Officers of the General Meeting and their term of office (starting and ending dates).

The officers of the General Meeting are:

- Chairman: Francisco Xavier Zea Mantero (term of office from 23/05/2014 to 31/12/2017)
- Secretary: Rita Maria Pinheiro Ferreira Soares de Oliveira (term of office from 23/05/2014 to 31/12/2017)

## b) Exercise of voting rights

12. Any restrictions on voting rights, such as limitations on the exercise of voting rights based on the ownership of a given number or percentage of shares, time limits for exercising voting rights, or systems for detaching voting rights from ownership rights (article 245-A.1 f));

Under Semapa's Articles of Association, each 83 shares in the company carry one vote. Nonetheless, the minimum

number of shares required by the company for a shareholder to be able to attend and vote is well below the limit indicated in article 384.2 a) of the Companies Code (which is for at least one vote for each 1000 euros of share capital), and this limit is merely intended to prevent participation by shareholders with negligible holdings in the capital from affecting the interests of the company and the shareholders in general; it does not function as a real restriction as shareholders are in any case entitled to group together as provided by law.

Despite the existence of time limits established in Semapa's Articles of Association for attendance of the General Meeting, the mandatory legal rules on this matter apply, such as article 23-C of the Securities Code. The time limit established by the Articles of Association for exercise of postal voting rights is the day prior to the general meeting.

The Articles of Association make no provision for electronic voting. Nevertheless, the Board of Directors might regulate on alternative ways to vote besides paper format, as long as authenticity and confidentiality of the votes are also guaranteed until the moment of the voting. Although the Board of Directors has never used this capacity, the Chairman of the General Meeting accepts electronic votes which are received under comparable conditions as the vote by mail, in what regards the deadline, comprehensibility, the guarantee of authenticity, confidentiality, and other formal issues. Signature acknowledgement shall be replaced by the digital signature and closed and separate envelopes for each item in the agenda by separate annexes to the email.

There are no systems for detaching voting rights from ownership rights.

Lastly, Semapa has no procedures in place which result in mismatching between the right to receive dividends or to subscribe new securities and the voting right attached to each ordinary share.

## 13. Indication of the maximum percentage of the voting rights which can be exercised by a single shareholder or by shareholders connected in any of the forms envisaged in article 20.1

There are no rules in the Articles of Association which lay down that voting rights are not counted if in excess of a given number, when cast by a single shareholder or shareholders related to him.

## 14. Identification of shareholder resolutions which, under the Articles of Association, can only be adopted with a qualified majority, in addition to those provided for in law, and details of the majorities required.

The company has established no quorums for constituting meetings or adopting resolutions different from those provided for on a supplementary basis in law.

## II. MANAGEMENT AND SUPERVISION

## a) Composition

### 15. Identification of the governance model adopted

The company has adopted the governance model provided for in article 278.1 a) of the Companies Code (Board of Directors and Audit Board) and in article 413.1 b) (Audit Board and Statutory Auditor), of the same code.

16. Rules in the Articles of Association on procedural and material requirements applicable to the appointment and substitution of members, as the case may be, of the Board of Directors, the Executive Board of Directors and the General and Supervisory Board (article 245-A.1 h) .

Semapa's Articles of Association set no special rules on the appointment and replacement of directors, and the general supplementary rules contained in the Companies Code therefore apply here.

17. Composition, as the case may be, of the Board of Directors, the Executive Board of Directors and the General and Supervisory Board, detailing the provisions of the Articles of Association concerning the minimum and maximum number of directors, duration of term of office, number of full members, date of first appointment and the end of their terms of office for each member.

The company's Articles of Association (11.1) stipulate that the Board of Directors comprises three to fifteen directors appointed each for a four-year term.

We indicate below the date of first appointment of each member, together with the date on which their term of office expires:

| Members of the Board of Directors:               | Date of first appointment and end<br>date of term of office |
|--------------------------------------------------|-------------------------------------------------------------|
| Pedro Mendonça de Queiroz Pereira                | 1991-2017                                                   |
| João Nuno de Sottomayor Pinto de Castello Branco | 2015-2017                                                   |
| José Miguel Pereira Gens Paredes                 | 2006-2017                                                   |
| Paulo Miguel Garcês Ventura                      | 2006-2017                                                   |
| Ricardo Miguel dos Santos Pacheco Pires          | 2014-2017                                                   |
| António Pedro de Carvalho Viana-Baptista         | 2010-2017                                                   |
| Carlos Eduardo Coelho Alves                      | 2015-2017                                                   |
| Francisco José Melo e Castro Guedes              | 2001-2017                                                   |
| Manuel Custódio de Oliveira                      | 2014-2017                                                   |
| Vítor Manuel Galvão Rocha Novais Gonçalves       | 2010-2017                                                   |
| Vítor Paulo Paranhos Pereira                     | 2014-2017                                                   |

It should be noted that during the financial year of 2015 the director Jorge Maria Bleck resigned from office on 29 April 2015, his resignation taking effect on 31 May 2015.

18. Distinction between executive and non-executive members of the Board of Directors and, in relation to non-executive directors, identification of those who can be regarded as independent or, if applicable, identification of the independent members of the General and Supervisory Board.

The executive members of the Board of Directors are those who belong to the Executive Board, as per paragraph 28 below, the other members being non-executive.

It should be noted that in 2015 Pedro Mendonça de Queiroz Pereira left his office, resigning from Chief Executive Officer of the company on 1 July 2015, and the vacant seat was taken over by Eng. João Nuno de Sottomayor Pinto de Castello Branco, appointed on that same day. Pedro Mendonça de Queiroz Pereira, Chairman of the Board of Directors, although no longer a member of the Executive Board, remains very close to the relevant decisions of daily corporate management.

Given that, on 31 December 2015, the company's Board of Directors comprised eleven members, only four of which sat on the Executive Board, it is considered that Semapa had a sufficient number of non-executive directors, which assures they are effectively able to oversee, assess and monitor the work of the other directors.

On the basis of the criteria laid down by the Securities Market Commission, the following non-executive directors, in office on 31 December 2015, may be classified as independent: António Pedro de Carvalho Viana-Baptista, Carlos Eduardo Coelho Alves and Vítor Manuel Galvão Rocha Novais Gonçalves, as they are not associated with any specific group of interests in the company nor are under any circumstance likely to affect an exempt analysis or decision. On the other hand, the DIrectors Pedro Mendonça de Queiroz Pereira, Francisco José Melo and Castro Guedes, Manuel Custódio de Oliveira and Vítor Paulo Paranhos Pereira may not be classified as independent in the light of the criteria referred, since they are all members of the Board of Directors of companies owning qualified holdings in Semapa.

Consequently, about 1/4 of the directors are independent, which the company considers to be appropriate and in line with the independent work of the Board of Directors.

## 19. Professional qualifications and other relevant biographical details of each of the members, as the case may be, of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors.

#### **Pedro Mendonça de Queiroz Pereira**

Pedro Queiroz Pereira attended General High School studies in Lisbon and *Instituto Superior de Administração*. He lived in Brazil from 1975 to 1987, where he held directorship positions in several companies in the industry, trade, tourism and agriculture areas. After returning to Portugal, he continued to work as director for several companies belonging to the Queiroz Pereira family. In 1995, when the scope of activities of the Queiroz Pereira family expanded to the concrete industry, he was elected Chairman of the Board of Directors of Secil and Semapa, and also CEO of the latter. Since 2004, Pedro Queiroz Pereira has also held the office of Chairman of the Board of Directors of Portucel.

#### **João Nuno de Sottomayor Pinto de Castello Branco**

João Castello Branco is a graduate in mechanical engineering by *Instituto Superior Técnico* and holds a master degree in management by INSEAD. He has served, since July 2015, as CEO of Semapa, and up to that date was Partner-Director of McKinsey & Company - at the Iberian Office. He has joined McKinsey in 1991, where he practised in several fields, at the service of some of the leading institutions in Portugal and Spain. He has also worked in these sectors in Europe, Latin America and the USA. He was a member of the McKinsey leadership team of Banking Practices in Europe, also having led the Corporate Finance, Banking and Insurance Practices. He also led teams at McKinsey working in competitiveness, productivity and innovation, in Portugal and Spain. Before joining McKinsey, he worked at the engine development centre of Renault, in France. He has been, since 2015, Director of Portucel and Secil.

#### **José Miguel Pereira Gens Paredes**

José Miguel Paredes holds a degree in Economics and initiated his professional activity in 1985, at the *Direcção Geral de Concorrência e Preços*. The following years, he worked at the Rodoviária Nacional, Interbiz, Cosec, Direcção de Crédito Externo, General Bank, Tesouraria / Sala de Câmbios and United Distillers. In 1994, he became Financial Director of Semapa and some of the other companies in the group. Since 2004 he is the market relations officer for Semapa and was elected Chief Executive Officer of Semapa in 2006. In 2008 José Parades was appointed Director of ETSA. He also became Director of Portucel and Secil in 2011 and 2012, respectively.

#### **Paulo Miguel Garcês Ventura**

Miguel Ventura has a degree in Law and graduated from INSEAD IEP '08Jul and COL '15Dec. He began practising Law in 1995. In 1997 he became an officer of the General Assemblies in several subsidiaries of Cimigest, Sodim and Semapa and was appointed Company Secretary of Semapa. From 2005 to 2007 he was a member of the Lisbon District Council of the Bar Association. He has held office as Director of Semapa and other related companies since 2006. In 2007 Miguel Ventura was appointed Vice-President of the General Meeting of REN and Estradas de Portugal. He also became Director of Portucel and Secil in 2011 and 2012, respectively. In 2014 he was elected member of the General Board of *AEM – Associação de Empresas Emitentes de Valores Cotados em Mercado*.

#### **Ricardo Miguel dos Santos Pacheco Pires**

Ricardo Pires holds a degree in Business Administration and Management from *Universidade Católica Portuguesa*, and he is specialised in Corporate Finance from ISCTE. He also has an MBA in Corporate Management from *Universidade Nova de Lisboa*. He began his career as a consultant, from 1999 to 2002 for BDO Binder and later for GTE Consultores. From 2002 to 2008 he held several positions in the Corporate Finance Board at ES Investment, where he developed different M&A and capital market projects in the Energy, Paper and Pulp and Food & Beverages sectors. He has worked for Semapa since 2008, first as Director of Strategic Planning and New Business and Chief of Staff of the Chairman of the Board of Directors since 2011. In 2014 he was appointed Chief Executive Officer of Semapa, and holds positions in other related companies.

#### **António Pedro de Carvalho Viana-Baptista**

António Viana Baptista holds a degree in Economics, a post-graduate degree in European Economy and holds an MBA (INSEAD). He is currently CEO of Credit Suisse AG for Spain and Portugal, and is also non-executive Director and member of the Audit Committee of Jerónimo Martins, S.A. and Jasper Inc, California. He has been non-executive Director of Semapa since 2010. Between 1998 and 2008, he held positions at Telefonica S.A. as Chairman of Telefónica Internacional from 1998 to 2008, Chairman of Telefónica Móviles from 2002 to 2006, and Chairman of Telefonica España from 2006 to 2008, and was also Director of Telefonica S.A. and Portugal Telecom representing Telefonica. Between 1991 and 1998, he was Director of *Banco Português de Investimento*. From 1984 to 1991, he was Principal Partner of Mckinsey & Co.

#### **Carlos Eduardo Coelho Alves**

Carlos Alves has a degree in mechanical engineering by the Instituto Superior Técnico and is an expert Industrial Manager by the Portuguese Association of Engineers. He began working as a Lecturer of the subjects of Machine Components I and II at *Instituto Superior Técnico* and was a Trainee Expert of the Works Monitoring Division at *Laboratório Nacional de Engenharia Civil* in Lisbon. He was engineer of the technical services of Cometna - Companhia

Metalúrgica Nacional, SARL and later director in charge of manufacturing and managing director of Cobrascom S.A. (Rio de Janeiro, Brazil). Between 1989 and 2009, he held directorship positions in Semapa, Secil, Portucel and Enersis. He has been non-executive Director of Semapa since 2015.

#### **Francisco José Melo e Castro Guedes**

Francisco Guedes holds a degree in Economic and Financial Sciences and holds an MBA from INSEAD. He initiated his professional career in 1971 at *Companhia União Fabril*. He performed military service from 1972 to 1975. In the following years, in 1976 he was Financial Director of *Companhia Rio Moju* and from 1977 to 1987 of the Anglo American Corporation, in Brazil. He held office as Executive Director, the Holding's Financial Director, Director in charge of all (nongold) mining and industrial companies in Brazil and Financial Director of *Mineração Morro Velho*. Between 1988 and 1989 Francisco Guedes was in charge of the Ricardo Schedel Brokerage. In 1990, he was manager of the Aroeira project at Formentur, and in the following years he was director and manager at Anglo American Corporation Portugal, Nacional – C.I.T.C., Nutrinveste and Sociedade Ponto Verde. He has occupied since 2001 management positions at Semapa and other group companies. In 2009 he was appointed Director of Portucel.

#### **Manuel Custódio de Oliveira**

Manuel Oliveira has a degree in Economy. In 1977 he began working as Director of the Lagoalva Group, and still holds this position today. In 1978 he worked for Thomson Maclinctock, and in 1979 for Glaxo Farmacêutica. In 1980 he took office as Director at Sodim and became Financial Director at Cimianto. In the 90s still, he was Chairman of AIPA (*Associação das Indústrias de Produtos de Amianto*) and negotiator in Brussels for the Asbestos dossier. In the following years, he was Chairman of the Board of Directors of Antasobral – Sociedade Agropecuária, S.A., Director of Sousa Campilho – Investimentos, SGPS, S.A. and Esforço – Investimentos Imobiliários, S.A. and manager of Zona de Caça e Pesca da Herdade Sobral e Mergulhos, Lda. Since 2013 he has held office as Chairman of the Board of Directors of Cimilonga, Longavia, Refundos and Sonagi Imobiliária, and as Director of Beira-Rio, Cimigest, Sodim and Sonagi. In 2014 he was appointed non-executive Director of Semapa, company for which he had previously worked as a consultant.

#### **Vítor Manuel Galvão Rocha Novais Gonçalves**

Vítor Novais Gonçalves has a degree in Business Management by ISC-HEC, in Brussels. He began his professional activity in 1984 at Unilever as Management Trainee and later as Product Manager and Market Manager. Between 1989 and 1992, he held office as Business Manager in the Venture Capital Area at Citibank Portugal and later he was responsible for the area of Corporate Finance and member of the Management Committee. Between 1992 and 2000, he carried out duties in the financial area of Grupo José de Mello, having held directorships in several companies and having been, among other things, Strategic Marketing and Development Director of Banco Mello and General Manager of Companhia de Seguros Império. Between 2001 and 2009 he carried out duties in the telecommunications area at SGC Group as Director of SGC Comunicações, being responsible for the Strategic Marketing and Business International Development. He is Director of Zoom Investment since 2009, of Semapa since 2010 and of Portucel since 2015.

#### **Vítor Paulo Paranhos Pereira**

Vítor Paranhos Pereira has a degree in economics by *Universidade Católica Portuguesa* and attended AESE (*Universidade de Navarra*). He began working in 1982 at the company Gaspar Marques Campos Correia & Cª. Lda. as Financial Director until 1987. From 1987 to 1989 he was Deputy Financial Director of *Instituto do Comércio Externo de Portugal* (ICEP). He joined the group in 1989 as Financial Director of Sodim, and in 2009 became member of the Board of Directors of that

company. He also holds directorships in several companies related to Sodim, namely Hotel Ritz since 1998 and Hotel Villa Magna since 2001. He has held office as Director of Sonagi since 1995. In 2006 he was appointed Chairman of the Audit Board of *Associação de Hotelaria de Portugal* (AHP). Since 2007 he has been Chairman of the General Meeting of *Associação Portuguesa de Fundos de Investimento, Pensões e Patrimónios* (APPFIPP). He has served as member of the Audit Board of Eurovida – Companhia de Seguros, S.A. and Popular Seguros – Companhia de Seguros, S.A. since 2009. In 2014 he was appointed member of the Board of Directors of Semapa and Cimigest.

20. Habitual and significant family, professional or business ties between members, as the case may be, of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors with shareholders to whom a qualifying holding greater than 2% of the voting rights may be allocated.

Besides the directorships held by several Directors in companies which own qualifying holdings in Semapa, namely Sodim and subsidiaries, as described in paragraph 26 below, and Pedro Mendonça Queiroz Pereira's shareholdings in Sodim, OEM and Vialonga, there are no habitual or significant family, professional or business ties between members of the Board of Directors and shareholders in Semapa which own qualifying holdings.

21. Organizational or functional charts showing the division of powers between the different corporate boards, committees and/or company departments, including information on delegated powers, in particular with regard to delegation of the day-to-day management of the company.

The following simplified chart shows the organization of Semapa's different bodies, committees and departments:

The management of the company is centred on the relationship between the Board of Directors and the Executive Board.

The two bodies are coordinated and kept in contact through the close cooperation between the Chairman of the Board and the executive team and, in particular with the CEO, through the availability of the members of the Executive Board to convey all relevant or urgent or requested information on the day-to-day management of the company to the nonexecutive directors, in order to keep them abreast of the company's life at all times. In addition, meetings of the Board of Directors are called for all decisions regarded as especially important, even if they fall within the scope of the powers delegated to the Executive Board, and the Chairman of the Board and the non-executive members often attend the meetings of the company's Executive Board.

Information requested by the other members of corporate boards is also provided in good time and in an appropriate form by the members of the Executive Board.

In order to assure that information is communicated on a regular basis, the Chief Executive Officer also sends the notices and minutes of meetings of the Executive Board to the Chairman of the Audit Board.

Although duties and responsibilities are not rigidly compartmentalised within the Board of Directors, four main areas may be distinguished in the way responsibilities are shared:

- 1 st Strategic planning and investment policy, which are the responsibility of the CEO, João Nuno de Sottomayor Pinto de Castello Branco.
- 2 nd Financial and accounting, which are the responsibility of the director José Miguel Pereira Gens Paredes.
- 3 rd Legal, corporate governance and IT issues, which are the responsibility of the director Paulo Miguel Garcês Ventura.
- 4 th New business areas, which is the responsibility of the director Ricardo Miguel dos Santos Pacheco Pires.

Regarding strategic planning and Investments Policy, and without prejudice to the mentioned office, this is an area that naturally entails more intervention on behalf of the non-executive members and that counts on the substantial involvement of the Chairman of the Board.

The Executive Board has been granted broad management powers, largely detailed in the respective act of delegation, and only limited with regard to the matters indicated in article 407.4 of the Companies Code. Powers are specifically delegated for the following:

- a) To negotiate and resolve to enter into any commercial or civil contract, by public or private act, on the terms and conditions it deems most appropriate, and to take all decisions it sees fit in the performance of these contracts;
- b) To resolve to issue, sign, draw, accept, endorse, guarantee, protest or carry out any other act in connection with the use of bills or credit instruments;
- c) To resolve on all routine banking operations, with Portuguese or foreign financial institutions, namely opening, consulting and establishing the form of effecting movements in bank accounts, in all the legally admissible forms;
- d) To negotiate and resolve to contract and amend loan agreements, with financial institutions or other entities, including the provision of the respective guarantees in cases where the law permits such delegation, all on the terms it sees fit;
- e) To resolve to acquire, dispose of and encumber assets of all kinds, on the terms and conditions it sees fit, negotiating and resolving on the conclusion for such purposes, by public or private document, of any

contractual instrument, and carrying out any accessory or complementary acts which may be necessary for the performance of these contracts;

- f) To take all decisions and carry out all acts in connection with the exercise by the company of its position as shareholder, namely by appointing its representatives at the General Meetings of companies in which it has holdings and adopting unanimous resolutions in writing;
- g) To draft the company reports, balance sheets, financial statements and proposals for allocation of profits;
- h) To take all steps necessary or appropriate in connection with the company's industrial relations with its employees, namely contracting, dismissing, transferring, defining terms of employment and pay, and revising and amending the same;
- i) To resolve on representation of the company before any court or mediation or arbitration body, taking all decisions as may be necessary or appropriate in connection with any proceedings pending before the same or to bring the same, and namely to desist, confess or settle;
- j) To appoint attorneys for the company within the powers delegated to it;
- k) To take all steps necessary or appropriate in connection with existing or planned issues of bonds and commercial paper, including the actual decision to issue; and
- l) In general, to carry out all acts of day-to-day management in the company, except for those which cannot be delegated under article 407.4 of the Companies Code.

The Executive Board is barred from resolving on the following:

- i) Selection of the Chairman of the Board of Directors;
- ii) Co-opting of directors;
- iii) Requests for the call of a General Meeting;
- iv) Annual reports and financial statements;
- v) Provision of bonds and personal or real guarantees by the company;
- VI) Change in registered offices and increases in share capital; and
- vii) Plans for merger, break-up or transformation of the company.

At the end of the financial year, some company practices were institutionalised to ensure the intervention of the Directors in strategic decision making, according to amount, risk or special features.

In the case of the Audit Board, which has the powers established in law, there are no delegated powers or special areas of responsibility for individual members.

The main purpose of the Internal Control Committee (ICC) is to detect and control all relevant risks in the company's affairs, in particular financial risks, and the Committee enjoys full powers to pursue this aim, as set out in item 29 of this report.

The Corporate Governance Supervisory Committee (CGSC) exists to monitor, on a permanent basis, compliance by the company with corporate governance requirements established in law, regulation and the Articles of Association, and to exercise the other powers detailed in item 29 of this report.

The functions of the Investor Support Office are detailed in item 56 of this report.

The Company Secretary is appointed by the Board of Directors and has the powers defined in law.

The Remuneration Committee draws up an annual statement on remuneration policy for members of the board of directors and audit board, and conducts analyses and sets the remuneration of directors.

The Legal Department provides the company with legal advice and is in charge of legal compliance in order to assure that procedures and proceedings comply with the relevant legislation. The Financial Division is primarily engaged in financial management and planning. The Accounts and Tax Department is mainly responsible for rendering the company's accounts and complying with its tax obligations, avoiding abusive tax planning. As for the New Business Division, it is in charge of identifying and researching new business opportunities towards their implementation.

## b) Functioning

22. Existence of the rules of procedure of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, and place where these may be consulted.

The Board of Directors has rules of procedure which are published on the company website (http://www.semapa.pt/en/rules-corporate-members), where they may be consulted.

23. Number of meetings held and attendance record of each member of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be.

The Board of Directors met 13 times in 2015, and attendance by each member was as follows:

| Members of the Board of Directors:               | Members<br>present (%) | Members present<br>and represented (%) |
|--------------------------------------------------|------------------------|----------------------------------------|
| Pedro Mendonça de Queiroz Pereira                | 100                    | 100                                    |
| João Nuno de Sottomayor Pinto de Castello Branco | 100                    | 100                                    |
| José Miguel Pereira Gens Paredes                 | 100                    | 100                                    |
| Paulo Miguel Garcês Ventura                      | 100                    | 100                                    |
| Ricardo Miguel dos Santos Pacheco Pires          | 100                    | 100                                    |
| António Pedro de Carvalho Viana-Baptista         | 77                     | 85                                     |
| Carlos Eduardo Coelho Alves                      | 100                    | 100                                    |
| Francisco José Melo e Castro Guedes              | 92                     | 92                                     |
| Jorge Maria Bleck                                | 57                     | 57                                     |
| Manuel Custódio de Oliveira                      | 92                     | 100                                    |
| Vítor Manuel Galvão Rocha Novais Gonçalves       | 92                     | 100                                    |

| Members of the Board of Directors: | Members<br>present (%) | Members present<br>and represented (%) |
|------------------------------------|------------------------|----------------------------------------|
| Vítor Paulo Paranhos Pereira       | 100                    | 100                                    |

## 24. Indication of the company bodies empowered to assess the performance of executive directors.

The Remuneration Committee determines how the system will work and prepares the framework for the assessment of the executive directors. It is also responsible for the final check to the performance factors and their impact in terms of remuneration. However, assessment in the strict sense, as the specific appraisal of individual performance, is the responsibility of the team supervisor, as is the case of the members of the Executive Board, and of the Chairman of the Board of Directors, of the Chief Executive Officer, and in both cases with the participation of other non-executive directors whom the supervisor deems appropriate to involve.

## 25. Predetermined criteria for assessing the performance of executive directors.

Basic criteria for assessing the performance of executive directors are as defined in item 2 of chapter VI of the Remuneration Policy Statement for setting the variable remuneration component. Such criteria are met through a system of KPIs, which include quantitative and qualitative, individual and collective, components. EBITDA, earnings before tax and TSR are the quantitative elements jointly considered.

26. Availability of each of the members of the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, indicating office held simultaneously in other companies, inside and outside the group, and other relevant activities carried on by the members of these bodies during the period.

The members of the Board of Directors have the appropriate time available to perform the duties entrusted to them, and the other activities carried on by the executive members during the period, outside the business group to which Semapa belongs, are negligible when compared to performance of their duties in the companies and other companies in the same business group.

Besides the activities mentioned under item 19, the members of the Board of Directors perform the duties detailed below:

## Pedro Mendonça de Queiroz Pereira

**Office held in other companies belonging to the same group as Semapa:** 

| ABOUTBALANCE SGPS S.A. | Chairman of the Board of Directors 1 |
|------------------------|--------------------------------------|
| CELCIMO, S.L.          | Chairman of the Board of Directors   |
| INSPIREDPLACE, S.A.    | Chairman of the Board of Directors   |

#### 1 In office until 10 February 2015.

### Report and Accounts 2015

| SEINPART - Participações, SGPS, S.A.                  | Chairman of the Board of Directors  |
|-------------------------------------------------------|-------------------------------------|
| SEMINV - Investimentos, SGPS, S.A.                    | Chairman of the Board of Directors  |
| Office held in other companies:                       |                                     |
| ABOUT THE FUTURE – Empresa Produtora de Papel, S.A.   | Chairman of the Board of Directors2 |
| CIMIGEST, SGPS, S.A.                                  | Chairman of the Board of Directors  |
| CIMINPART - Investimentos e Participações, SGPS, S.A. | Chairman of the Board of Directors  |
| CMP - Cimentos Maceira e Pataias, S.A.                | Chairman of the Board of Directors  |
| COSTA DAS PALMEIRAS – Turismo e Imobiliário, S.A.     | Chairman of the Board of Directors  |
| ECOVALUE – Investimentos Imobiliários, Lda.           | Manager                             |
| HOTEL RITZ, S.A.                                      | Chairman of the Board of Directors  |
| PORTUCEL, S.A.                                        | Chairman of the Board of Directors  |
| Portucel Soporcel Switzerland Ltd.                    | Chairman of the Board of Directors  |
| SECIL - Companhia Geral de Cal e Cimento, S.A.        | Chairman of the Board of Directors  |
| SODIM, SGPS, S.A.                                     | Chairman of the Board of Directors  |
| SOPORCEL - Sociedade Portuguesa de Papel, S.A.        | Chairman of the Board of Directors3 |
| TERRAÇOS D'AREIA – SGPS, S.A.                         | Chairman of the Board of Directors  |
| VILLA MAGNA S.L.                                      | Chairman of the Board of Directors  |

## João Nuno de Sottomayor Pinto de Castello Branco

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| CIMIGEST, SGPS, S.A.                           | Director                                |
|------------------------------------------------|-----------------------------------------|
| PORTUCEL, S.A.                                 | Vice-Chairman of the Board of Directors |
| SECIL - Companhia Geral de Cal e Cimento, S.A. | Vice-Chairman of the Board of Directors |
| SODIM, SGPS, S.A.                              | Director                                |

## José Miguel Pereira Gens Paredes

#### **Office held in other companies belonging to the same group as Semapa:**

ABAPOR - Comércio e Indústria de Carnes, S.A. Chairman of the Board of Directors

<sup>2</sup> In office until 12 June 2015.

<sup>3</sup> In office until 12 June 2015

| ABOUTBALANCE SGPS S.A.                                     | Director4                          |
|------------------------------------------------------------|------------------------------------|
| Aprovechamiento Integral de Subprodutos Ibéricos, S.A.     | Director                           |
| BIOLOGICAL - Gestão de Resíduos Industriais, Lda.          | Manager                            |
| CELCIMO, S.L.                                              | Director                           |
| ETSA - Investimentos, SGPS, S.A.                           | Chairman of the Board of Directors |
| ETSA LOG, S.A.                                             | Chairman of the Board of Directors |
| INSPIREDPLACE, S.A.                                        | Director                           |
| I.T.S. - Indústria Transformadora de Subprodutos, S.A.     | Chairman of the Board of Directors |
| SEBOL - Comércio e Indústria de Sebo, S.A.                 | Chairman of the Board of Directors |
| SEINPART - Participações, SGPS, S.A.                       | Director                           |
| SEMINV - Investimentos, SGPS, S.A.                         | Director                           |
| Office held in other companies:                            |                                    |
| ABOUT THE FUTURE – Empresa Produtora de Papel, S.A.        | Director5                          |
| CIMIGEST, SGPS, S.A.                                       | Director                           |
| CIMINPART - Investimentos e Participações, SGPS, S.A.      | Director                           |
| CIMIPAR – Sociedade Gestora de Participações Sociais, S.A. | Director                           |
| CIMO – Gestão de Participações, SGPS S.A.                  | Chairman of the Board of Directors |
| CMP - Cimentos Maceira e Pataias, S.A.                     | Director                           |
| HOTEL RITZ, S.A.                                           | Director                           |
| LONGAPAR, SGPS, S.A.                                       | Chairman of the Board of Directors |
| MOR ON-LINE – Gestão de Plataformas de Negociação          |                                    |
| de Resíduos On-Line, S.A.                                  | Director                           |
| OEM - Organização de Empresas, SGPS, S.A.                  | Director                           |
| PORTUCEL, S.A.                                             | Director                           |
| SECIL - Companhia Geral de Cal e Cimento, S.A.             | Director                           |
| SODIM, SGPS, S.A.                                          | Director                           |
| SOPORCEL - Sociedade Portuguesa de Papel, S.A.             | Director6                          |
| VILLA MAGNA S.L.                                           | Director                           |

 4 In office until 10 February 2015

5 In office until 12 June 2015.

6 In office until 12 June 2015.

## Paulo Miguel Garcês Ventura

#### **Office held in other companies belonging to the same group as Semapa:**

| ABAPOR - Comércio e Indústria de Carnes, S.A.             | Director                           |
|-----------------------------------------------------------|------------------------------------|
| ABOUTBALANCE SGPS S.A.                                    | Director7                          |
| Aprovechamiento Integral de Subprodutos Ibéricos, S.A.    | Director                           |
| BIOLOGICAL - Gestão de Resíduos Industriais, Lda.         | Manager                            |
| CELCIMO, S.L.                                             | Director                           |
| ETSA - Investimentos, SGPS, S.A.                          | Director                           |
| ETSA LOG, S.A.                                            | Director                           |
| INSPIREDPLACE, S.A.                                       | Director                           |
| I.T.S. - Indústria Transformadora de Subprodutos, S.A.    | Director                           |
| SEBOL - Comércio e Indústria de Sebo, S.A.                | Director                           |
| SEINPART - Participações, SGPS, S.A.                      | Director                           |
| SEMAPA Inversiones, S.L.                                  | Director                           |
| SEMINV - Investimentos, SGPS, S.A.                        | Director                           |
| Office held in other companies:                           |                                    |
| ABOUT THE FUTURE – Empresa Produtora de Papel, S.A.       | Director8                          |
| CIMIGEST, SGPS, S.A.                                      | Director                           |
| CIMINPART - Investimentos e Participações, SGPS, S.A.     | Director                           |
| CIMIPAR – Sociedade Gestora de Participações Sociais, S.A | Chairman of the Board of Directors |
| CIMO – Gestão de Participações, SGPS S.A.                 | Director                           |
| CMP - Cimentos Maceira e Pataias, S.A.                    | Director                           |
| HOTEL RITZ, S.A.                                          | Director                           |
| LONGAPAR, SGPS, S.A.                                      | Director                           |
| OEM - Organização de Empresas, SGPS, S.A.                 | Chairman of the Board of Directors |
| PORTUCEL, S.A.                                            | Director                           |
| SECIL - Companhia Geral de Cal e Cimento, S.A.            | Director                           |
| SODIM, SGPS, S.A.                                         | Director                           |
| SOPORCEL - Sociedade Portuguesa de Papel, S.A.            | Director 9                         |

 7 In office until 10 February 2015.

<sup>8</sup> In office until 12 June 2015.

<sup>9</sup> In office until 12 June 2015.

## Report and Accounts 2015

VILLA MAGNA S.L. Director ANTASOBRAL - Sociedade Agropecuária, S.A. Chairman of the General Meeting BEIRA-RIO – Sociedade Construtora de Armazéns, S.A. Chairman of the General Meeting CIMILONGA – Imobiliária, S.A. Chairman of the General Meeting ESTRADAS DE PORTUGAL, S.A. Vice-Chairman of the General Meeting GALERIAS RITZ – Imobiliária, S.A. Chairman of the General Meeting LONGAVIA – Imobiliária, S.A. Chairman of the General Meeting PARQUE RITZ – Imobiliária, S.A. Chairman of the General Meeting REFUNDOS – Sociedade Gestora de Fundos de Investimento Imobiliário, S.A. Chairman of the General Meeting SONAGI – Imobiliária, S.A. Chairman of the General Meeting SONAGI, SGPS, S.A. Chairman of the General Meeting VALUELEGEND – SGPS, S.A. Chairman of the General Meeting VÉRTICE – Gestão de Participações, SGPS, S.A. Chairman of the General Meeting Sociedade Agrícola da Quinta da Vialonga, S.A. Chairman of the General Meeting

## Ricardo Miguel dos Santos Pacheco Pires

#### **Office held in other companies belonging to the same group as Semapa:**

| ABOUTBALANCE SGPS S.A.                                     | Director10 |
|------------------------------------------------------------|------------|
| INSPIREDPLACE, S.A.                                        | Director   |
| SEINPART - Participações, SGPS, S.A.                       | Director   |
| SEMINV - Investimentos, SGPS, S.A.                         | Director   |
| Office held in other companies:                            |            |
| CIMIGEST, SGPS, S.A.                                       | Director   |
| CIMIPAR – Sociedade Gestora de Participações Sociais, S.A. | Director   |
| CIMO – Gestão de Participações, SGPS S.A.                  | Director   |
| HOTEL RITZ, S.A.                                           | Director   |
| LONGAPAR, SGPS, S.A.                                       | Director   |
| OEM - Organização de Empresas, SGPS, S.A.                  | Director   |
| PORTUCEL, S.A.                                             | Director   |
| PYRUS AGRICULTURAL LLC                                     | Director   |

 10 In office until 10 February 2015.

| PYRUS INVESTMENTS LLC                          | Director |
|------------------------------------------------|----------|
| PYRUS REAL ESTATE LLC                          | Director |
| SECIL - Companhia Geral de Cal e Cimento, S.A. | Director |
| SODIM, SGPS, S.A.                              | Director |
| UPSIS S.A.                                     | Director |
| VIEZNADA S.L.                                  | Director |
| VILLA MAGNA S.L.                               | Director |

## António Pedro de Carvalho Viana-Baptista

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| ARICA B.V.                                | Director                           |
|-------------------------------------------|------------------------------------|
| CREDIT SUISSE AG (for Spain and Portugal) | CEO                                |
| JASPER WIRELESS Inc.                      | Director                           |
| JERÓNIMO MARTINS SGPS, S.A.               | Director and Member of the         |
|                                           | Audit Committee                    |
| LARGO Ltd                                 | Chairman of the Board of Directors |

## Carlos Eduardo Coelho Alves

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

**Office held in other companies:** No office held in other companies

## Francisco José Melo e Castro Guedes

#### **Office held in other companies belonging to the same group as Semapa:**

| CELCIMO, S.L.                   |                                                     | Director                           |
|---------------------------------|-----------------------------------------------------|------------------------------------|
|                                 | SEMAPA Inversiones, S.L.                            | Chairman of the Board of Directors |
| Office held in other companies: |                                                     |                                    |
|                                 | ABOUT THE FUTURE – Empresa Produtora de Papel, S.A. | Director11                         |
|                                 | CIMENT DE SIBLINE S.A.L.                            | Director                           |

 11 In office until 12 June 2015.

| CIMIGEST, SGPS, S.A.                           | Director                             |
|------------------------------------------------|--------------------------------------|
| CMP- Cimentos Maceira e Pataias, S.A.          | Director                             |
| MARGEM – Companhia de Mineração                | Director12                           |
| SOPORCEL - Sociedade Portuguesa de Papel, S.A. | Director13                           |
| PORTUCEL, S.A.                                 | Director14                           |
| SECIL - Companhia Geral de Cal e Cimento, S.A. | Director                             |
| SODIM, SGPS, S.A.                              | Director                             |
| SUPREMO CIMENTOS, S.A.                         | Chairman of the Board of Directors15 |
|                                                |                                      |

## Manuel Custódio de Oliveira

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| ANTASOBRAL - Sociedade Agropecuária, S.A.                | Chairman of the Board of Directors |
|----------------------------------------------------------|------------------------------------|
| BEIRA-RIO – Sociedade Construtora de Armazéns, S.A.      | Director16                         |
| CIMIGEST, SGPS, S.A.                                     | Director                           |
| CIMILONGA – Imobiliária, S.A.                            | Chairman of the Board of Directors |
| ESFORÇO - Investimentos Imobiliários, S.A.               | Director                           |
| HOTEL RITZ, S.A.                                         | Director                           |
| LONGAVIA – Imobiliária, S.A.                             | Chairman of the Board of Directors |
| REFUNDOS – Sociedade Gestora de Fundos de                |                                    |
| Investimento Imobiliário, S.A.                           | Chairman of the Board of Directors |
| SODIM, SGPS, S.A.                                        | Director                           |
| SONAGI, SGPS, S.A.                                       | Chairman of the Board of Directors |
| SONAGI – Imobiliária, S.A.                               | Chairman of the Board of Directors |
| SOUSA CAMPILHO - Investimentos, SGPS, S.A.               | Director                           |
| VIEZNADA S.L.                                            | Director                           |
| VILLA MAGNA S.L.                                         | Director                           |
| Zona de Caça e Pesca da Herdade Sobral e Mergulhos, Lda. | Manager                            |

<sup>12</sup> In office until 24 June 2015

<sup>13</sup> In office until 12 June 2015

<sup>14</sup> In office until 1 July 2015

<sup>15</sup> In office until 24 June 2015

<sup>16</sup> In office until 31 July 2015.

## Vítor Manuel Galvão Rocha Novais Gonçalves

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| BELDEVELOPMENT, S.A.                               | Director |
|----------------------------------------------------|----------|
| EXTRASEARCH SGPS S.A.                              | Director |
| MAGALHÃES e GONÇALVES - Consultoria e Gestão, Lda. | Manager  |
| PORTUCEL, S.A.                                     | Director |
| QUALQUER PRUMO – Sociedade Imobiliária, Lda.       | Manager  |
| TCARE - Conhecimento e Saúde, S.A.                 | Director |
| VRES – Vision Real Estate Solutions, S.A.          | Director |
| ZOOM INVESTMENT, SGPS, S.A.                        | Director |
| ZOOM INVESTMENT TURISMO, S.A.                      | Director |

## Vítor Paulo Paranhos Pereira

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| ANTASOBRAL - Sociedade Agropecuária, S.A.           | Director                           |
|-----------------------------------------------------|------------------------------------|
| BEIRA-RIO – Sociedade Construtora de Armazéns, S.A. | Director17                         |
| CAPITAL HOTELS BV                                   | Director                           |
| CIMIGEST, SGPS, S.A.                                | Director                           |
| CIMILONGA – Imobiliária, S.A.                       | Director                           |
| GALERIAS RITZ, S.A.                                 | Chairman of the Board of Directors |
| HOTEL RITZ, S.A.                                    | Director                           |
| LONGAVIA – Imobiliária, S.A.                        | Director                           |
| PARQUE RITZ, S.A.                                   | Chairman of the Board of Directors |
| REFUNDOS – Sociedade Gestora de Fundos de           |                                    |
| Investimento Imobiliário, S.A.                      | Director                           |
| SODIM, SGPS, S.A.                                   | Director                           |
| SODIMPARQUE – Parqueamento e Garagens, Lda.         | Manager                            |

 17 In office until 31 July 2015

| SONAGI, SGPS, S.A.         | Director |
|----------------------------|----------|
| SONAGI – Imobiliária, S.A. | Director |
| VALUELEGEND – SGPS, S.A.   | Director |
| VIEZNADA S.L.              | Director |
| VILLA MAGNA S.L.           | Director |

## c) Committees belonging to the management or supervisory bodies and managing directors

27. Identification of committees set up by the Board of Directors, the General and Supervisory Board and the Executive Board of Directors, as the case may be, and place where the rules of procedure may be consulted

The following committees exist in the company within the Board of Directors: Executive Board, Internal Control Committee and Corporate Governance Supervisory Committee.

All committees have rules of procedure, which are published on the company website (http://www.semapa.pt/en/rules-corporate-members), where they may be looked up.

The following are the Executive Board's operating rules:

- a) The Executive Board shall meet when convened by its Chairman or any other two members;
- b) The members of the Executive Board may be represented by another member, and each person may not represent more than one member;
- c) The CEO has a casting vote;
- d) Absent members may cast written votes, and
- e) The CEO is particularly responsible for reporting and communicating with the Board of Directors.

## 28. Composition, if applicable, of the executive board and/or identification of the managing director(s).

The following are the members of the Executive Board, who, excluding the CEO who assumed office on 1 July 2015, were appointed by resolution of the Board of Directors on 19 June 2014:

Eng. João Nuno de Sottomayor Pinto de Castello Branco, who chairs the board;

- Dr. José Miguel Pereira Gens Paredes
- Dr. Paulo Miguel Garcês Ventura, and
- Dr. Ricardo Miguel dos Santos Pacheco Pires.

The office of CEO was held by Pedro Mendonça de Queiroz Pereira until 1 July 2015, when he resigned.

## 29. Indication of the powers of each of the committees created and summary of the activities carried on the exercise of these responsibilities.

The powers of the Executive Board are described in item 21 of this report.

The Executive Board is the company's executive body, which has performed its duties in the scope of the powers entrusted to it by the Board of Directors. The Board meets on a regular basis and whenever necessary in the light of ongoing business and monitoring of the company's activity. In 2015 it held forty one meetings. These meetings are attended by the members of the Board, and regularly by the non-executive directors, as well as the company secretary, Rui Gouveia. When the matters to be discussed so require, the directors of the group's companies and some of the company's managers may also take part in the meetings.

In view of implementing its purpose to detect and control all relevant risks in the company's affairs, in particular financial risks, the ICC has the following the responsibilities and powers:

- a) To ensure compliance by the company with the regulatory framework applicable to it, deriving both from law and regulations;
- b) To monitor the company's business affairs, with integrated and permanent analysis of the risks associated with these affairs;
- c) To propose and follow through the implementation of specific measures and procedures relating to the control and reduction of the company's business risks, with a view to perfecting the internal risk control and management system;
- d) To check implementation of the adjustments to the internal control and risk management system proposed by the Audit Board; and
- e) To monitor the quality control of financial and accounting information, taking steps to ensure that it is reliable.

The ICC met twice in the financial year 2015 and is composed of Joaquim Martins Ferreira do Amaral, Jaime Alberto Marques Sennfelt Fernandes Falcão and Margarida Isabel Feijão Antunes Rebocho. This committee conducted the activities, ensured the monitoring and implemented all the verifications which correspond to its duties, and held joint meetings with the Executive Director José Miguel Paredes, and the members of the Audit Board. The fact that Margarida Rebocho is the Tax and Accounting Director of Semapa has made reporting and access to the company's everyday activities easier, without jeopardising the distancing required, which is guaranteed by a majority of members who do not take part in the daily activities.

The CGSC monitors on a continuous basis the company's compliance with the provisions of the law, regulations and articles of association applicable to corporate governance, and is responsible for critical analysis of the company's practices and procedures in the field of corporate governance and for proposing for debate, altering and introducing new procedures designed to improve the structure and governance of the company. The CGSC is also required to assess annually corporate governance and submit to the Board of Directors any proposals as it sees fit.

The CGSC met four times in the financial year 2015 and is composed of Jorge Manuel de Mira Amaral, Gonçalo Allen Serras Pereira and Francisco José Melo e Castro Guedes, who was appointed member of this Committee after he resigned from office as Executive Director. The CGSC conducted its oversight and corporate governance assessment activities throughout the financial year. It also participated actively in the drafting of the Annual Report on Corporate Governance, for which it obtained the necessary information, particularly by keeping in touch and attending the meetings with the Executive Director, Miguel Ventura, and a member of the Legal Department.

## III. AUDITING

## a) Composition

## 30. Identification of the supervisory body corresponding to the model adopted.

The company's affairs are supervised by the Audit Board and the Statutory Auditor, in accordance with article 413.1 b) of the Companies Code.

31. Composition, as applicable, of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, indicating the minimum and maximum numbers of members and duration of their term of office, as established in the Articles of Association, number of full members, date of first appointment and end date of the term of office of each member; reference may be made to the item in the report where this information is contained in accordance with paragraph 17.

As established in the Articles of Association, the Audit Board consists of three to five full members, one of which serves as Chairman with a casting vote, and of one or two alternate members, depending on whether there are three or more full members, all holding office for four year terms.

| Members of the Audit Board                   | Date of first appointment and end<br>date of term of office |
|----------------------------------------------|-------------------------------------------------------------|
| Miguel Camargo de Sousa Eiró                 | 2006-2017                                                   |
| (Chairman)                                   |                                                             |
| Gonçalo Nuno Palha Gaio Picão Caldeira       | 2006-2017                                                   |
| (Full member)                                |                                                             |
| José Manuel Oliveira Vitorino                | 2015-2017                                                   |
| (Alternate member replacing the Full Member) |                                                             |

Duarte Nuno d'Orey da Cunha was full member of the Audit Board until 2 July 2015, when he resigned from office.

32. Identification, as applicable, of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs who are deemed independent, in accordance with article 414.5 of the Companies Code; reference may be made to the item in the report where this information is contained in accordance with paragraph 18.

Semapa has always considered that all members of the Audit Board were independent, pursuant to article 414.5 of the Companies Code.

The members of the Audit Board, Miguel Camargo de Sousa Eiró (Chairman), Gonçalo Nuno Palha Gaio Picão Caldeira

and José Manuel Oliveira Vitorino are deemed independent by Semapa, in accordance with article 414.5 of the Companies Code. The former two are currently in their third term and the latter in his first term in office.

The understanding that fulfilling a third term does not compromise the status of independence was reinforced by the opinion of the Securities Market Commission of 12 November 2011, which concluded that only the third "re-election" of members of the audit board, for a fourth term of office, causes them not to meet the independence criterion.

However, in the request for prior registration of the Public Tender Offer in 2015, the Portuguese Securities Market Commission reported that it did not considered Gonçalo Picão Caldeira as an independent member of the Audit Board of Semapa. The Portuguese Securities Market Commission founded its qualification of non-independence of the aforementioned member on the fact that he took up office as advisor to the Board of Directors of Semapa, from April 2002 and February 2004. The Securities Market Commission's views of non-independence of the member of the Audit Board are not shared by Semapa, nor by the member himself.

33. Professional qualifications, as applicable, of each of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs and other relevant biographical details; reference may be made to the item in the report where this information is contained in accordance with paragraph 21.

#### **Miguel Camargo de Sousa Eiró**

Miguel Eiró graduated in Law by *Universidade de Lisboa* in 1971. He joined the Portuguese Bar Association on 28 June 1973, and was a member of its Lisbon District Committee between 1982/1984 and a member of the General Committee between 1999/2002 and 2002/2004. He is an Intellectual Property Agent and attended a course in Mediation. He has been practising Law since his graduation in 1971, and is currently partner and director at the law firm "Correia Moniz & Associados – Sociedade de Advogados, R.L." law firm. Between 1972 and 1975 Miguel Eiró performed military service in the Portuguese navy as a Law Expert. He was member of the Board of the Centre for Arbitrage of the Portuguese Bar Association between 1997/1999. In 2004 he was arbitrator at the Centre for Automobile Conflict Resolution and served as arbitrator in several more arbitration cases. Between 1975 and 1980 he was Director of Brisa – Auto Estradas de Portugal, S.A., and of other companies during his working life. He became member of the Audit Board of Semapa in 2006, of Portucel in 2007, and of Secil in 2013, and is currently Chairman of these supervisory bodies.

#### **Gonçalo Nuno Palha Gaio Picão Caldeira**

Gonçalo Picão Caldeira has a degree in law and joined the Portuguese Bar Association in 1991, after completing a legal internship. He holds an MBA from *Universidade Nova de Lisboa* and attended a course in real estate management and evaluation from ISEG. Gonçalo Picão Caldeira has performed management and property development functions in family-owned companies since 2004. He collaborated previously with BCP Group (1992-1998) and Sorel Group (October 1998 to March 2002). He also worked for Semapa from April 2002 to February 2004. He has been a member of the Audit Board of Semapa, Portucel and Secil since 2006, 2007 and 2013, respectively.

#### **José Manuel Oliveira Vitorino**

José Manuel Vitorino has a degree in corporate organisation and management by *Instituto Superior de Economia da Universidade de Lisboa*. He was an Assistant Professor at *Faculdade de Economia da Universidade de Coimbra* until 1980, after which he joined PricewaterhouseCoopers and performed functions in auditing and financial consultancy, in national and foreign companies and groups, and in projects by taking part in international teams. He is a qualified Statutory Auditor and by the executive training programme of the Universidade Nova de Lisboa. He had been performing Partner duties for several years, when he left PricewaterhouseCoopers in 2013, after reaching the default retirement age. He is currently the Chairman of the Audit Board of Novo Banco, SA., member of the Audit Board of ANA

- Aeroportos de Portugal, SA., member of the Audit Board of SEMAPA, SGPS, SA. and member of the Audit Board of PORTUCEL, SA.

## b) Functioning

34. Existence and place where the rules of procedure may be consulted for the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be; reference may be made to the item in the report where this information is contained in accordance with paragraph 22.

The audit board has rules of procedure which are published on the company website (http://www.semapa.pt/en/rulescorporate-members), where they may be consulted.

35. Number of meetings held and rate of attendance at meetings of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be; reference may be made to the item in the report where this information is contained in accordance with paragraph 23.

In the financial year 2015, the Audit Board met 5 times, with members present at all meetings (physical presence).

36. Availability of each of the members of the Audit Board, the Audit Committee, the General and Supervisory Board or the Committee for Financial Affairs, as the case may be, indicating office held simultaneously in other companies, inside and outside the group, and other relevant activities carried on by the members of these bodies during the period; reference may be made to the item in the report where this information is contained in accordance with paragraph 26.

The members of the Audit Board have the appropriate time available to perform the duties entrusted to them. Besides the activities mentioned under item 33, the members of the Audit Board perform the duties detailed below:

## Miguel Camargo de Sousa Eiró

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

PORTUCEL, S.A. Chairman of the Audit Board SECIL - Companhia Geral de Cal e Cimento, S.A. Chairman of the Audit Board

## Gonçalo Nuno Palha Gaio Picão Caldeira

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

#### **Office held in other companies:**

| LINHA DO HORIZONTE – Investimentos Imobiliários, Lda. | Manager                   |
|-------------------------------------------------------|---------------------------|
| LOFTMANIA – Gestão Imobiliária, Lda.                  | Manager                   |
| PORTUCEL, S.A.                                        | Member of the Audit Board |
| SECIL - Companhia Geral de Cal e Cimento, S.A.        | Member of the Audit Board |

## José Manuel Oliveira Vitorino

**Office held in other companies belonging to the same group as Semapa:** No office held in other companies belonging to the same group as Semapa

| Office held in other companies:  |                             |  |
|----------------------------------|-----------------------------|--|
| ANA Aeroportos de Portugal, S.A. | Member of the Audit Board   |  |
| NOVO BANCO, S.A.                 | Chairman of the Audit Board |  |
| PORTUCEL, S.A.                   | Member of the Audit Board   |  |

## c) Powers and responsibilities

## 37. Description of the procedures and criteria applicable to the work of the supervisory body for the purposes of contracting additional services from the external auditor.

For the purposes of contracting additional services from the external auditor, the Audit Board adopted in 2014 the following criteria: (i) all services are subject to reporting and approval by the Audit Board, and (ii) the Audit Board shall approve the contracting of services it finds duly justified by management.

Thus, the Audit Board analyses the additional services and proposals submitted by the external auditor for provision of the same as transmitted to them by the directors, seeking to safeguard, essentially, that the independence and impartiality of the external auditor needed for the provision of audit services is not undermined and that the additional services are provided to a high standard of quality and independence.

## 38. Other duties of the supervisory bodies and, if applicable, of the Committee for Financial Affairs.

As stated above, the Audit Board has the duties established in law, in particular those stated in article 420 of the Companies Code, as well as those indicated in the Rules of Procedure of the Audit Board, which are:

- − To oversee the management of the company;
- − To ensure compliance with the law and the articles of association;
- − To check that books, accounting records and the respective supporting documents are in order;
- − To check, as and when it sees fit, the state of cash and inventories of any type of goods or valuables belonging to the company or received by the same as security, deposit or on another basis;

- − To check the accuracy of financial reporting;
- − To check that the accounting policies and valuation criteria adopted by the company lead to a correct valuation of the company's assets and profits or losses;
- − To draw up an annual report on its audit activities and to issue its opinion on the report, accounts and motions submitted by the directors;
- − To call the General Meeting, when the respective Chairman fails to do so;
- − To monitor the effectiveness of the risk management system, or internal control system and the internal audit system, if any;
- − To receive reports of irregularities (whistleblowing) submitted by shareholders, company employees or others;
- − To contract the provision of services by experts who assist one or more of its members in the exercise of their duties, which experts shall be contracted and remunerated in line with the importance of the matters entrusted to them and the economic situation of the company;
- − To perform any other duties established in law or the articles of association;
- − To oversee the process of drafting and disclosure of financial information;
- − To propose to the General Meeting the appointment of the statutory auditor;
- − To oversee the auditing of the company's financial statements and reports;
- − To monitor the independence of the statutory auditor, namely with regard to the provision of additional services.

Nonetheless, although the powers of the Audit Board do not expressly include the possibility of proposing the dismissal of the auditor to the general meeting, it is fully accepted that these powers derive from its general duties and responsibilities – oversight and notification of irregularities detected to the first General Meeting held after such discovery. If the irregularities constitute due cause for dismissal, the Audit Board must inevitably submit a proposal to the shareholders to this effect.

The Audit Board is also the prime point of contact with the External Auditor, with direct access to and knowledge of his work. The company believes that this direct supervision by the Audit Board is possible, without interference from the Board of Directors, in relation to the work carried out by the External Auditor, provided that it does not undermine a prompt and adequate information of the management body, which has ultimate responsibility for the company's affairs and financial statements. Complying with this principle, the External Auditor's reports are addressed to the Audit Board and discussed at joint meetings of this board with a member of the Board of Directors, and the Audit Board ensures that the necessary conditions are in place in the company for the provision of audit services. The Audit Board is further in charge of suggesting and monitoring, with the support of the company's internal services, the External Auditor's pay.

## IV. STATUTORY AUDITOR

## 39. Identification of the statutory audit firm and the partner and statutory auditor representing the same.

#### Statutory Auditor

| Full:      | PricewaterhouseCoopers & Associados – SROC, Lda, represented by José Pereira Alves |
|------------|------------------------------------------------------------------------------------|
|            | (ROC) or António Alberto Henriques Assis (ROC)                                     |
| Alternate: | Jorge Manuel Santos Costa (ROC)                                                    |

## 40. Indication of the consecutive number of years for which the statutory audit firm has held office in the company and/or group.

PricewaterhouseCoopers has held office with the company for 13 consecutive years.

### 41. Description of other services provided by the statutory auditor to the company.

In addition to legal auditing services, PricewaterhouseCoopers provides the company with tax consultancy and reliability assurance services.

## V. EXTERNAL AUDITOR

## 42. Identification of the external auditor appointed for the purposes of article 8 and the partner and statutory auditor representing such firm in the discharge of these duties, together with their respective registration number with the Securities Market Commission.

The company's external auditor and its representative are indicated in item 39, and PricewaterhouseCoopers is registered with the Securities Market Commission under number 20161485.

## 43. Indication of the consecutive number of years for which the external auditor and the respective partner and statutory auditor representing the same in the discharge of these duties has held office in the company and/or group.

The external auditor is the statutory auditor who has held office in the company for 13 years, as stated in item 40. The actual representative of the external auditor, José Pereira Alves (ROC), has held office in the company since the elective General Meeting of Semapa on 23 May 2014.

## 44. Policy on rotation of the external auditor and the respective partner and statutory auditor representing the same in the carrying out of these duties, and the respective frequency of rotation.

The company has no policy that requires the rotation of the external auditor or its representative. However, if the Audit Board decides to retain the external auditor for more than two terms of office it must issue a recommendation in favour of such continued appointment.

Since the Statutory Auditor of Semapa ended his term in 2013, the Audit Board heard the Board of Directors, and asked the internal services to prepare a restricted tender by invitation, addressed to four Audit Firms, for the selection of the external auditor and the Statutory Auditor of Semapa and its subsidiaries for the period of four years initiated in 2014. The bids were analysed by a Selection Committee, the process was overseen by the Audit Board.

Finally, the Audit Board submitted to the shareholders a proposal for retaining the External Auditor, issuing its opinion in a report in which it argued the pros and cons of maintaining the same Audit Firm for a new term, it underscored that the quality of the work performed by PricewaterhouseCoopers and the firm's accrued experienced in the sectors in which Semapa invests outweighed the drawbacks of retaining it. Nonetheless, in line with best international practices and in view of enhancing PricewaterhouseCoopers's independence, rotation of the partner representing the firm was proposed. The proposal submitted by the Audit Board was adopted by the shareholders at the General Meeting of 23 May 2014.

## 45. Indication of the body responsible for assessing the external auditor and the intervals at which this assessment is conducted.

As part of its supervisory work and auditing of the company's accounts, the Audit Board assesses the external auditor each year, and the result of this assessment is included in its Report and Opinion on the annual accounts.

46. Identification of work, other than audit work, carried out by the external auditor for the company and/or companies in a controlling relationship with it, and indication of the internal procedures for approval of the contracting of these services and indication of the reasons for contracting them.

The services delivered by the external auditor other than audit work include tax consultancy and reliability assurance services. All additional work has been approved by the Audit Board based on the criteria and procedures described in item 37.

These services consist essentially of support services to safeguard compliance with tax obligations in Portugal and abroad, and are approved by the Audit Board. The Board of Directors and the Audit Board consider that the contracting of these services is justified by the External Auditor's accrued experience in the sectors in which the company operates and by the quality of its work, in addition to the careful definition of the services required at the contracting stage. The Audit Board bases itself further on the departments' internal analyses and opinions.

In the framework of the provision of tax consultancy services and services other than auditing, our auditors have set strict internal rules to guarantee their independence, and these rules have been adopted in the provision of these services and monitored by the company, in particular by the Audit Board and the Internal Control Committee.

47. Indication of the annual remuneration paid by the company and/or controlled, controlling or group entities to the auditor and other individuals or organizations belonging to the same network, specifying the percentage relating to the following services:

| Services                                | Company   |            | Group entities (including the<br>company itself) |            |
|-----------------------------------------|-----------|------------|--------------------------------------------------|------------|
|                                         | Amount    | Percentage | Amount                                           | Percentage |
| Value of auditing services              | 34,765.00 | 100%       | 624,022.00                                       | 78.79%     |
| Value of reliability assurance services | -         | -          | 105,014.00                                       | 13.26%     |
| Value of tax consultancy services       | -         | -          | 62,962.00                                        | 7.95%      |

In 2015, services other than audit services contracted by the company or controlling entities from the External Auditor, including by entities belonging to the same corporate group or service network, represented 21.21% of the total services provided, which percentage is below the recommended upper limit of 30%.

## C. INTERNAL ORGANIZATION

## I. ARTICLES OF ASSOCIATION

## 48. Rules applicable to amendment of the Articles of Association (article 245-A.1 h)).

There are no specific rules at Semapa on the amendment of the Articles of Association, and the general supplementary rules contained in the Companies Code therefore apply here.

## II. NOTIFICATION OF IRREGULARITIES (WHISTLEBLOWING)

### 49. Whistleblowing - procedures and policy

The company has a set of "Regulations on Notification of Irregularities", which govern the company's procedures that employees can use to report irregularities allegedly taking place within the company.

These regulations lay down the general duty to report alleged irregularities, requiring that such reports are made to the Audit Board, and also provide for an alternative solution in the event of conflicts of interests on the part of the Audit Board regarding to the report in question.

The Audit Board, which may be assisted for these purposes by the Internal Control Committee, shall investigate all facts necessary for assessment of the alleged irregularity. We further note that, in the event of conflict of interest regarding an irregularity committed by a member of the Audit Board, a copy of the report must also be sent to the Chairman of the Board of Directors.

This process ends with the report being filed or submitted to the Board of Directors or the Executive Board, depending on whether a company officer is implicated or not, a proposal for application of the measures most appropriate in light of the irregularity in question.

The regulations also contain other provisions designed to safeguard the confidentiality of the disclosure and nonprejudicial treatment of the employee reporting the irregularity, as well as rules on providing information on the regulations throughout the company.

Access to the "Regulations on Notification of Irregularities" is reserved.

The Company also has a set of "Principles of Professional Conduct", approved by the Board of Directors on 30 December 2002. This document establishes ethical principles and rules applicable to company staff and officers.

In particular, this document establishes the duty of diligence, requiring professionalism, zeal and responsibility, the duty of loyalty, which in relation to the principles of honesty and integrity is especially geared to safeguard conflict of interest situations, and the duty of confidentiality, in relation to the treatment of relevant information.

The document also establishes duties of corporate social responsibility, namely of environmental conservation and protection of all shareholders, ensuring that information is fairly disclosed, and all shareholders treated equally and fairly.

## III. INTERNAL CONTROL AND RISK MANAGEMENT

## 50. People, bodies or committees responsible for internal audits and/or implementation of internal control systems.

Although the company has no specific independent structure for internal audits, internal control and risk management are conducted by the Board of Directors, the Audit Board, the External Auditor and through an organizational unit with special responsibilities in this area, the Internal Control Committee (ICC).

It should be clearly noted that in consolidated terms the company has 5,621 employees in total and the holding, individually, only has 25. The corporate universe represented by most of the group's workers, and which concerns the holdings main subsidiaries, Portucel and Secil, is covered by separate auditing systems with organisational units with special auditing responsibilities.

## 51. Description of the lines of command in this area in relation to other bodies or committees; an organizational chart may be used to provide this information

The lines of command are shown in the organizational chart in item 21 of this report, and the responsibilities of the bodies and committees involved are better described in item 54.

### 52. Existence of other departments with responsibilities in the field of risk control.

Non existence of other departments with responsibilities in the field of risk control.

## 53. Identification of the main risks (economic, financial and legal) to which the company is exposed in the course of its business.

Chapter 2 of the notes to the consolidated financial statements provides a detailed analysis of all financial and operational risks, including foreign exchange risk, interest rate risk, credit risk, liquidity risk, price risk, raw material supplies risk, sales price risk, risk of product demand, risk of competition, risk of environmental legislation, human resources risk, energy cost risk and economic and market risks in general.

With regard to legal risks, which are not detailed in the same way in the notes to the financial statements, it is important to point out that they derive essentially from tax and regulatory risks which are covered by the analysis of operational

risks, specific general liability risks or risks relating to the negotiation and conclusion of contracts. These risks are controlled by legal counsels both in Semapa as the holding company and in its subsidiaries, and through recourse to external lawyers whenever justified by their particular expertise, the amount at stake or other factors in specific cases.

## 54. Description of the process of identification, assessment, monitoring, control and risk management.

The Audit Board plays a particularly important role in this field, with all the powers and responsibilities assigned to it directly by law.

The main purpose of the Internal Control Committee (ICC) is to detect and control all relevant risks in the company's affairs, in particular financial and legal risks, and the Committee is vested with the powers set out in item 21 of this report.

In addition to the important role played by the Audit Board in this field, internal procedures for risk control are also particularly important in each of the company's main subsidiaries. The nature of the risks and the degree of exposure vary from company to company, and each subsidiary therefore has its own independent system for controlling the risks which it is subject to.

Independent audits of Semapa and the companies it controls are carried out by PricewaterhouseCoopers. The company's External Auditor checks, in particular, the application of remuneration policies and systems, and the effectiveness and workings of internal control procedures through the information and documents provided by the company, and in particular by the Remuneration Committee and the Internal Control Committee. The respective conclusions are reported by the External Auditor to the Audit Board, which then reports the shortcomings detected, if any.

The implemented internal control and risk management systems have proven to be effective, and no situations have so far arisen which have not been anticipated, duly guarded against or expressly accepted in advance as controlled risks.

As stated above, in addition to its own powers in this field and in order to safeguard against the acceptance of excessive risks by the company, the Board of Directors created the ICC which, in accordance with the responsibilities defined by the Board of Directors, is responsible for assuring internal control and risk management. The Audit Board is responsible for overseeing the effectiveness of the risk management system and the internal control system, proposing adjustments to the existing system whenever necessary, being the ICC responsible for implementing these adjustments. Finally, it should be noted that these systems are monitored and overseen at all times by the Board of Directors, which has ultimate responsibility for the company's internal activities.

## 55. Main elements of the internal control and risk management systems implemented in the company with regard to the process of disclosure of financial information (article 245-A.1 m)).

The disclosure of financial information is the responsibility of the market relations officer and, where applicable, it falls to the Audit Board, the Internal Control Committee and the External Auditor to assess the quality, reliability and completeness of the financial information approved by the company's Board of Directors and drawn up by the Financial and Accounts and Tax departments.

The process of preparing financial information is subject to an internal control system and to rules, which are designed to assure that the accounting policies adopted by the company are properly and consistently applied and that the estimates and judgements used in preparing this information are reasonable.

With regard to internal control procedures for the process of disclosing financial information, the company has

implemented rules, which are intended to assure that disclosures are made in good time and to mitigate the risk of unevenness in the information provided to the market.

## IV. INVESTOR SUPPORT

## 56. Office responsible for investor support, composition, functions, information provided and contact details

The investor support service is provided by an office reporting to the director José Miguel Paredes. This office is adequately staffed and enjoys swift access to all sectors of the company, in order to ensure an effective response to requests, and also to transmit relevant information to shareholders and investors in due time and without any inequality.

The director can be contacted through his email address (jmparedes@semapa.pt) or on the company's general telephone numbers (+351 21 318 47 00). All public information regarding the company can be accessed by these means. It should be noted, in any case, that the information most frequently requested by investors is available at the company's website at www.semapa.pt, and it generally concerns information about the Semapa group, the company's business, corporate governance and financial information.

### 57. Market relations officer.

The market relations officer is José Miguel Paredes.

## 58. Information on the number of enquiries received in the period or pending from previous periods, and enquiry response times.

Semapa receives various types of enquiries, which are normally answered within 24 hours of receipt, although some enquiries, because of their breadth, scope or complexity, necessarily take longer to process. There are also specific times of the year when Semapa receives more enquiries, in particular in the run-up to general meetings and the payment of dividends, when response times may sometimes be longer. There are no enquiries pending from previous years.

## V. WEBSITE (59 TO 65)

| Description                                                                                                                                                                         | Internet address                                                                |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
| 59. Semapa Website                                                                                                                                                                  | http://www.semapa.pt/en/home                                                    |
| 60. Address where information is provided on<br>the company's name, public company<br>status, registered office and other data<br>required by article 171 of the Companies<br>Code. | http://www.semapa.pt/en/location                                                |
| 61. Address where the articles of association<br>and rules of procedures of company boards<br>and/or committees can be consulted.                                                   | http://www.semapa.pt/en/laws<br>http://www.semapa.pt/en/rules-corporate-members |

| Description                                                                                                                                                                                                                                                                                                                                                                      | Internet address                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
| 62. Address where information is provided on<br>the identity of company officers, market<br>relations officer, the Investor Support<br>Office or equivalent structure, respective<br>powers and responsibilities and contact<br>details.                                                                                                                                         | http://www.semapa.pt/en/company-officers<br>http://www.semapa.pt/en/investor-support-office |
| 63. Address<br>for<br>consultation<br>of<br>financial<br>statements and reports, which must be<br>accessible for no less than five years,<br>together with the six-monthly corporate<br>diary, disclosed at the start of each<br>semester, including, amongst other things,<br>General Meetings, disclosure of annual,<br>half-yearly and, if applicable, quarterly<br>accounts. | http://www.semapa.pt/en/demonstracoes-financeiras<br>http://www.semapa.pt/en/eventos        |
| 64. Address where notice of general meetings<br>is posted, together with all preparatory<br>information and subsequent information<br>related to meetings.                                                                                                                                                                                                                       | http://www.semapa.pt/en/general-meeting-april-30-2015                                       |
| 65. Address<br>for<br>consultation<br>of<br>historical<br>archives, with resolutions adopted at the<br>company's General Meetings, the share<br>capital represented and the results of<br>votes, for the past three years.                                                                                                                                                       | http://www.semapa.pt/en/ag-arquivo                                                          |

## D. REMUNERATION

## I. POWERS TO DETERMINE REMUNERATION

66. Indication of powers to set the remuneration of company officers, members of the executive board or managing director and the company managers.

Powers to determine the remuneration of the Board of Directors and the Audit Board lie with the Remuneration Committee.

Powers to determine the remuneration of company managers lie with the Board of Directors.

## II. THE REMUNERATION COMMITTEE

67. Composition of the remuneration committee, including identification of individuals or organizations contracted to provide support, and declaration regarding the independence of each member and adviser.

The Remuneration Committee comprises José Gonçalo Ferreira Maury, Frederico José da Cunha Mendonça e Meneses and João Rodrigo Appleton Moreira Rato and does not subcontract auxiliary staff.

The company considers the Committee's members to be independent, although the Portuguese Securities Market Commission has a different understanding in relation to Frederico da Cunha. With regards to this member, the following needs to be said:

First, he is linked to Semapa due to the fact that until 2005 he was non-executive director for the company and currently earns a retirement pension as a result of the duties performed. However, Semapa considers that, since non-executive duties were performed, by virtue of the elapsed time and the right to a pension being an acquired right, independent from the will of Semapa's directors, the impartiality of analysis and decision is not impaired. Secondly, he exercised administrative duties from June 2013 to May 2014 in Sodim, a company to which approximately 71% of the nonsuspended voting rights of Semapa are now allocated, according to item 7 above. The company considers that this does not affect his unbiased analysis and decision. In effect, and considering that what is at stake here is the independence from the executive members of the Board of Directors, Semapa considers that this committee member exercises his duties in the Remuneration Committee independently.

José Maury resigned in 2014 from office at Egon Zehnder, a HR services company which over the years supported Semapa and other related companies in procurement procedures. Due both to the aforementioned resignation, and to the nature and limited extent of the services provided by Egon Zehnder, we consider that the independence of this member of the Committee was not undermined.

## 68. Expertise and experience of the members of the remuneration committee in the field of remuneration policy.

One of the members of the Remuneration Committee, José Maury has vast knowledge and experience in matters of remuneration policy and he was a partner of the company Egon Zehnder for a number of years, which is a leading recruitment company, involving thorough knowledge of assessment procedures and criteria and related remuneration packages.

## III. REMUNERATION STRUCTURE

## 69. Description of the remuneration policy for members of the management and supervisory bodies as referred to in article 2 of Law no. 28/2009, of 19 June.

The remuneration policy for members of the management and supervisory bodies is set out in the Remuneration Policy Statement issued by the Remuneration Committee and contained in Annex II to this Report.

70. Information on how remuneration is structured in order to align the interests of members of the management body with the long term interests of the company, and on how it is based on performance assessment and discourages excessive risk-taking.

The way in which remuneration is structured and how it is based on the directors' performance follows with clarity the Remuneration Policy Statement of the Remuneration Committee, specifically items 1 and 6 of chapter VI, to which we make reference.

Following such principles, to determine precisely the variable remuneration component, a set of KPIs are applied, for which EBITDA, earnings before tax and the TSR are the quantitative elements considered, as mentioned in item 25 above.

The effect of the alignment of the interests in the long-term results, to some extent, from an existing KPI of the value of the company over time, the TSR, albeit in a form that is more limited than that arising from Semapa's *de facto* situation in relation to the significant stability of the Executive Board's members. Such stability is naturally linked to longer time lines, including in the wage component, as future results influence future remunerations for which expectations exist.

The same is true for excessive risk-taking. The company has no separate remuneration mechanism aimed specifically at that. Risk is an intrinsic characteristic of any act of management and, as such, it is unavoidably and continuously considered in all management decisions. A quantitative or qualitative assessment of risk as good or bad cannot be made autonomously, but only in the light of its impact on company's performance over the time. It is thus confused with longterm interests, and consequently benefits from the aforementioned incentives to overall alignment over time.

## 71. Reference, if applicable to the existence of a variable remuneration component and information on any impact on this from performance assessments.

The remuneration of executive directors includes a variable component which depends on a performance assessment, as described in the Remuneration Policy Statement, in particular in item 2 of chapter VI.

The performance assessment under the variable remuneration, in its individual and qualitative component, accounts for approximately 40% of that remuneration component. In the case of non-executive directors, without prejudice to the exceptional status of the Chairman of the Board of Directors, who remains very close to the relevant decisions of daily corporate management, a variable remuneration is sometimes awarded, albeit more exceptionally, in line not with the performance or value of the company, but rather with the outcome of the performance of management tasks closer in nature to executive duties.

There are no upper limits to remuneration, notwithstanding the limit set by the articles of association on directors' profit sharing.

The remuneration of the members of the Audit Board includes no variable component.

## 72. Deferred payment of the variable component of remuneration, indicating the deferral period.

Payment of the variable component of remuneration is not deferred at Semapa.

73. Criteria applied in allocating variable remuneration in shares and on the continued holding by executive directors of these shares, on any contracts concluded with regard to these shares, specifically hedging or transferring risk, the respective limits and the respective proportion represented of total annual remuneration.

At Semapa, the variable remuneration has no component consisting of shares.

74. Criteria applied in allocating variable remuneration on options and indication of the deferral period and the price for exercising options.

At Semapa, the variable remuneration has no component consisting of options.

## 75. Main parameters and grounds for any annual bonus system and any other non-cash benefits.

The criteria for setting annual bonuses are those related to the variable remuneration, as described in item 2 of chapter VI of the Remuneration Policy Statement, and in item 25 above, and no other non-cash benefits are allocated.

## 76. Main features of complementary or early retirement schemes for directors and the date of approval by the General Meeting, on an individual basis.

There are no complementary or early retirement schemes for directors currently in place in the company. Nevertheless, Frederico José da Cunha Mendonça e Meneses receives a monthly pension, because he exercised an option under the expiry of a past pension scheme for directors.

At present, this is the only pension which Semapa pays. It is a lifetime monthly pension paid 12 months per year, for which the following is provided: (i) the transferability of half of its value to the surviving spouse or minor or disabled children and (ii) mandatory deduction from this pension either the value of remunerated services later delivered to Semapa or controlled companies, or the value of pensions that the beneficiary is entitled to receive from the national social insurance scheme related to the same period of service. Semapa's liability with this pension is as mentioned in Note 29 to the Consolidated Financial Statements and Note 25 to the Individual Financial Statements.

## IV. DISCLOSURE OF REMUNERATION

## 77. Indication of the annual remuneration earned from the company, on an aggregate and individual basis, by the members of the company's management body, including fixed and variable remuneration and, in relation to the latter, reference to the different components.

Below we indicate the remuneration earned in 2015, paid by Semapa to the members of the company's management body, distinguishing between fixed and variable remuneration, but without a breakdown of the different components of the latter, insofar as it is set as a whole, taking into account the factors described in the Remuneration Policy Statement issued by the Remuneration Committee, without identifying components.

| Board of Directors          |                                                  | Fixed<br>Remuneration | Fixed<br>Remuneration |
|-----------------------------|--------------------------------------------------|-----------------------|-----------------------|
|                             | António Pedro de Carvalho Viana Baptista         | 128,305.13            | ─                     |
| Carlos Eduardo Coelho Alves |                                                  | ─                     | ─                     |
|                             | Francisco José de Melo e Castro Guedes           | 77,825.00             | 200,000.00            |
|                             | João Nuno de Sottomayor Pinto de Castello Branco | 349,800.00            | ─                     |
|                             | José Miguel Pereira Gens Paredes                 | 311,300.02            | 548,684.00            |

| Board of Directors                         | Fixed        | Fixed        |
|--------------------------------------------|--------------|--------------|
|                                            | Remuneration | Remuneration |
| Jorge Maria Bleck                          | ─            | ─            |
| Manuel Custódio de Oliveira                | 124,678.13   | ─            |
| Paulo Miguel Garcês Ventura                | 311,300.00   | 522,269.00   |
| Pedro Mendonça de Queiroz Pereira          | 430,308.43   | 891,702.00   |
| Ricardo Miguel dos Santos Pacheco Pires    | 247,625.00   | 414,420.00   |
| Vítor Manuel Galvão Rocha Novais Gonçalves | 128,305.13   | ─            |
| Vítor Paulo Paranhos Pereira               | 128,305.13   | ─            |
| TOTAL                                      | 2,237,751.97 | 2,577,075.00 |

*NOTE: Figures in Euros*

## 78. Amounts paid on any basis by other controlled, controlling or group companies or companies under common control.

It should be clarified that the amounts referred to in this item do not relate only to companies controlled by Semapa. They also include amounts over which Semapa and its officers have no control, as they are the concern of its shareholders, the shareholders of shareholders and other companies controlled by shareholders, where a controlling relationship is involved.

The following directors earned remunerations in other controlling or group companies or companies under common control: Pedro Mendonça de Queiroz Pereira, Francisco José de Melo e Castro Guedes and Vítor Paulo Paranhos Pereira, amounting to 3,214,822.63 euros, 152.654.34 euros and 127,350.00 euros, respectively.

## 79. Remuneration paid in the form of profit sharing and/or payment of bonuses, and the grounds on which these bonuses and/or profit sharing were granted.

The amount of the remuneration paid by Semapa in the form of profit-sharing and/or payment of bonuses corresponds to the variable remuneration referred to in item 77 of this report, which amounts were determined by the Remuneration Committee based on the actual application of the criteria described in item 2 of chapter VI of the Remuneration Policy Statement.

## 80. Compensation paid or owing to former executive directors in relation to termination of their directorships during the period.

No compensation was paid or is due to former executive directors for termination of their directorships.

81. Indication of the annual remuneration earned, on an aggregate and individual basis, by the members of the company's supervisory body, for the purposes of Law 28/2009, of 19 June.

| Audit Board                            | Fixed<br>Remuneration | Variable<br>Remuneration |
|----------------------------------------|-----------------------|--------------------------|
| Miguel Camargo de Sousa Eiró           | 19,958.57             | ─                        |
| Duarte Nuno d'Orey da Cunha            | 10,019.79             | ─                        |
| Gonçalo Nuno Palha Gaio Picão Caldeira | 14,256.13             | ─                        |
| José Manuel Oliveira Vitorino          | 7,147.15              | ─                        |
| TOTAL                                  | 51,381.64             | ─                        |

*NOTE: Figures in Euros* 

## 82. Indication of remuneration earned in the reporting period by the Chairman of the General Meeting.

During the financial year of 2015, the Chairman of the General Meeting earned 6,000.00 euros.

## V. AGREEMENTS WITH REMUNERATION IMPLICATIONS

## 83. Contractual limits for compensation payable for the unfair dismissal of directors and the respective relationship with the variable remuneration component;

Semapa has no contract with directors limiting or otherwise altering the supplementary legal rules on fair or unfair termination.

84. Reference to the existence and description of agreements between the company and directors or managers, as defined by article 248-B.3 of the Securities Code, which provide for compensation in the event of resignation, dismissal without due cause or termination of employment contract as a result of a change of control of the company, indicating the amounts involved (article 245.-A.1 l)).

There are also no agreements between the company and the company officers or managers providing for compensation in the event of resignation, unfair dismissal or redundancy as the result of a takeover.

The company does not enter into any contracts with directors with the effect of mitigating the risk inherent to the variability of the remuneration set by the company. With regard to the conclusion of contracts of this type by directors with third parties, the company does not encourage this, nor is there any director who has done so.

## VI. STOCK OR STOCK OPTION PLANS

## 85. Identification of plan and beneficiaries.

The company has no stock or stock option plans.

86. Description of plan (terms of allocation, non-transfer of share clauses, criteria on the price of shares and the price of exercising options, the period during which the options may be exercised, the characteristics of the shares to be distributed, the existence of incentives to purchase shares and/or exercise options)

Not applicable.

87. Stock option rights allocated to company employees and staff.

Not applicable.

88. Control mechanisms in an employee ownership scheme insofar as voting rights are not directly exercised by employees (article 245-A.1 e)).

There is no employee ownership scheme in Semapa.

## E. RELATED PARTY TRANSACTIONS

## I. CONTROL MECHANISMS AND PROCEDURES

89. Procedures implemented by the company for controlling related party transactions (reference is made for this purpose to the concept deriving from IAS 24).

The company has established the procedures and criteria referred to in item 91 for transactions with holders of qualifying holdings.

## 90. Indication of transactions subject to control during reporting period

In 2015, without prejudice to the oversight by the Audit Board of the situations described in item 10 above, no transactions were subject to control given that, through application of the criteria referred to in item 91 below, none of the company's transactions with the qualifying shareholders, or with entities in any way related to such shareholders, as defined in article 20 of the Securities Code, were subject to prior clearance from the Audit Board. There were no transactions between the company and qualifying shareholders outside of regular market conditions.

91. Description of the procedures and criteria applicable to intervention by the supervisory body for the purposes of prior assessment of transactions to be carried out between the company and qualifying shareholders or related entities, under article 20 of the Securities Code.

The Board of Directors must subject to review and prior opinion of the Audit Board the transactions between the company and qualifying shareholders or entities in any way related to these shareholders, as defined in article 20 of the Securities Code, whenever one of the following criteria is met with regard to each period:

- a) When each such transaction has a value greater than or equal to 1% of the company's consolidated turnover in the previous year;
- b) When the accrued value, with regard to the same qualifying shareholder, or entity related to the same in any way, as defined in article 20 of the Securities Code, is greater than or equal to double the amount resulting from application of the criteria referred to in the preceding sub-paragraph.

## II. DETAILS OF TRANSACTIONS

## 92. Indication of the place in the financial reports and account where information is available on related party transactions, in accordance with IAS 24, or, alternatively, reproduction of this information.

Information on related party transactions is contained in Note 35 of the attachment to consolidated financial statements and Note 31 of the attachment to the individual financial statements.

## *Part II – Assessment of Corporate Governance*

## 1. IDENTIFICATION OF THE CORPORATE GOVERNANCE CODE ADOPTED

Semapa has adopted the 2013 Corporate Governance Code of the Securities Market Commission (Regulation of the CMVM no. 4/2013) due to the natural evolution from the 2010 Corporate Governance Code of the same body, adopted in the past by Semapa.

The Code adopted is disclosed by the Securities Market Commission and may be consulted on the website.

# 2. ANALYSIS OF COMPLIANCE WITH THE ADOPTED CORPORATE GOVERNANCE

## CODE

The following table indicates the recommendations adopted and not adopted. For the recommendations adopted, we indicate only the place in this report where detailed information is contained. For recommendations not adopted, information is provided below the table on the respective grounds for non-adoption and any alternative measures taken.

| # | Adoption | Text | Reference |
|---|----------|------|-----------|
|   |          |      |           |

| I.1 | Adopted | Companies shall encourage shareholders to attend and vote at                   | Part I, items 12 and |
|-----|---------|--------------------------------------------------------------------------------|----------------------|
|     |         | General Meetings and shall not set an excessively large number of              | 13                   |
|     |         | shares required for the entitlement to one vote, and implement the             |                      |
|     |         | means necessary to exercise the right to vote by mail and                      |                      |
|     |         | electronically.                                                                |                      |
| I.2 | Adopted | Companies shall not adopt mechanisms that hinder the passing of                | Part I, item 14      |
|     |         | resolutions by shareholders, including fixing a quorum for                     |                      |
|     |         | resolutions greater than that provided for by law.                             |                      |
| I.3 | Adopted | Companies shall not establish mechanisms intended to cause                     | Part I, item 12      |
|     |         | mismatching between the right to receive dividends or the                      |                      |
|     |         | subscription of new securities and the voting right of each common             |                      |
|     |         | share, unless duly justified in terms of long-term interests of                |                      |
|     |         | shareholders.                                                                  |                      |
| I.4 | Adopted | The company's articles of association that provide for the restriction         | Part I, item 13      |
|     |         | of the number of votes that may be held or exercised by a single               |                      |
|     |         | shareholder,<br>either<br>individually<br>or<br>in<br>concert<br>with<br>other |                      |
|     |         | shareholders, shall also provide for a resolution by the General               |                      |
|     |         | Assembly (5 year intervals), on whether that statutory provision is to         |                      |
|     |         | be amended or prevails – without increased quorum requirements                 |                      |
|     |         | in addition to those required by law – and that in said resolution, all        |                      |
|     |         | votes issued be counted, without applying said restriction.                    |                      |
| I.5 | Adopted | Measures shall not be adopted that require payment or acceptance               | Part I, item 4       |
|     |         | of charges by the company in the event of change of control or                 |                      |
|     |         | change in the composition of the Board and that which appear likely            |                      |
|     |         | to impair the free transfer of shares and free assessment by                   |                      |
|     |         | shareholders of the performance of Board members.                              |                      |

#### I. Voting and Corporate Control

**#** *Adoption Text Reference* 

#### II. Supervision, Management and Oversight

|  |  |  | II.1 Supervision and Management |
|--|--|--|---------------------------------|
|--|--|--|---------------------------------|

| II.1.1.   | Adopted        | Within the limits established by law, and except due to the small size<br>of the company, the Board of Directors shall delegate the day-to-day<br>management of the company and said delegated powers shall be                                                                                                                                                                                                                                                                                                                                                                                                                   | Part I, items 21, 28<br>and 29                            |
|-----------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|           |                | identified in the Annual Report on Corporate Governance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                           |
| II.1.2    | Adopted        | The Board of Directors shall ensure that the company acts in<br>accordance with its objectives and shall not delegate its<br>responsibilities as regards the following: i) define the strategy and<br>general policies of the company, ii) define business structure of the<br>group, iii) decisions considered strategic due to the amounts, risk or<br>particular characteristics involved.                                                                                                                                                                                                                                    | Part I, item 21                                           |
| II.1.3    | Not applicable | The General and Supervisory Board, in addition to its supervisory<br>duties, shall take full responsibility at corporate governance level,<br>and a requirement shall therefore be enshrined, in the articles of<br>association or by equivalent means, that this body shall pronounce<br>on the strategy and major policies of the company, the definition of<br>the corporate structure of the group and the decisions that are to be<br>considered strategic due to the amounts or risk involved. This body<br>shall also assess compliance with the strategic plan and the<br>implementation of key policies of the company. | Part I, item 15                                           |
| II.1.4 a) | Not adopted    | Except for small-sized companies, the Board of Directors and the<br>General and Supervisory Board, depending on the model adopted,<br>shall create the necessary committees in order to:<br>a) Ensure competent and independent assessment of the<br>performance of the executive directors and its own overall<br>performance, as well as of other committees.                                                                                                                                                                                                                                                                  | Explanation of<br>Recommendations<br>not adopted<br>below |
| II.1.4 b) | Adopted        | b) Reflect on the governance system, structure and practices<br>adopted, verify their effectiveness and propose to the competent<br>bodies, measures to be implemented with a view to their<br>improvement.                                                                                                                                                                                                                                                                                                                                                                                                                      | Part I, items 21, 27,<br>28 and 29                        |
| II.1.5    | Adopted        | The Board of Directors or the General and Supervisory Board,<br>depending on the applicable model, shall set goals in terms of risk<br>taking and create systems for their control to ensure that the risks<br>effectively incurred are consistent with those goals.                                                                                                                                                                                                                                                                                                                                                             | Part I, items 50 to<br>55                                 |
| II.1.6    | Adopted        | The Board of Directors shall include a number of non-executive<br>members ensuring effective monitoring, supervision and assessment<br>of the activity of the remaining members of the board.                                                                                                                                                                                                                                                                                                                                                                                                                                    | Part I, item 18                                           |

| #       | Adoption       | Text                                                                                                                                                                                                                                                                                                                                                                                                | Reference                      |
|---------|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| II.1.7  | Adopted        | Non-executive members shall include an appropriate number of<br>independent members, taking into account the adopted governance<br>model, the size of the company, its shareholder structure and the<br>relevant free float.<br>The independence of the members of the General and Supervisory<br>Board and members of the Audit Committee shall be assessed in                                     | Part I, item 18                |
|         |                | accordance with the law in force. The other members of the Board<br>of Directors are considered independent if the member is not<br>associated with any specific group of interests in the company nor is<br>under any circumstance likely to affect an exempt analysis or<br>decision, particularly due to:<br>a. Having been an employee at the company or at a related or group                  |                                |
|         |                | company in the past three years;<br>b. Having, in the past three years, provided services or established a<br>significant commercial relationship with the company or a related<br>or group company, either directly or as a partner, board member,<br>manager or director of a legal person;<br>c. Being the beneficiary of remuneration paid by the company or by                                 |                                |
|         |                | a related or group company, other than the remuneration<br>deriving from a directorship;<br>d. Living with a life partner or a spouse, relative or any first degree<br>next of kin and up to and including the third degree of collateral<br>affinity of board members or natural persons that are direct and                                                                                       |                                |
|         |                | indirectly holders of qualifying holdings;<br>e. Being a qualifying shareholder or representative of a qualifying<br>shareholder.                                                                                                                                                                                                                                                                   |                                |
| II.1.8  | Adopted        | Directors who exercise executive duties shall respond to enquiries<br>from other company officers by providing the information requested<br>in a timely and appropriate manner.                                                                                                                                                                                                                     | Part I, item 21                |
| II.1.9  | Adopted        | The Chairman of the Executive Board or of the Executive Committee<br>shall submit, as applicable, to the Chairman of the Board of<br>Directors, the Chairman of the Supervisory Board, the Chairman of<br>the Audit Committee, the Chairman of the General and Supervisory<br>Board and the Chairman of the Financial Matters Board, the<br>convening notices and minutes of the relevant meetings. | Part I, item 21                |
| II.1.10 | Not applicable | If the Chairman of the board of directors exercises executive duties,<br>said body shall appoint, from among its members, an independent<br>member to ensure the coordination of the work of other non<br>executive members and the conditions so that these can make<br>independent and informed decisions or to ensure the existence of<br>an equivalent mechanism for such coordination.         | Part I, items 18, 21<br>and 28 |

#### II.2 Oversight

| II.2.1. | Adopted | Depending on the applicable model, the Chairman of the Supervisory<br>Board, the Audit Committee or the Financial Matters Committee<br>shall be independent in accordance with the applicable legal<br>standard, and have the necessary skills to carry out their relevant<br>duties.                                        | Part I, item 32 |
|---------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| II.2.2. | Adopted | The supervisory body shall be the main representative of the<br>external auditor and the first recipient of the relevant reports, and is<br>responsible, in particular, for proposing the relevant remuneration<br>and ensuring that the proper conditions for the provision of services<br>are provided within the company. | Part I, item 38 |
| II.2.3  | Adopted | The supervisory board shall assess the external auditor on an annual<br>basis and propose to the competent body its dismissal or<br>termination of the contract for provision of their services when there<br>is a valid basis for such dismissal.                                                                           | Part I, item 38 |

| #       | Adoption    | Text                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Reference                                              |
|---------|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
|         |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                        |
| II.2.4. | Adopted     | The supervisory board shall assess the functioning of the internal<br>control systems and risk management and propose adjustments as<br>may be deemed necessary.                                                                                                                                                                                                                                                                                                                                                    | Part I, items 50, 54<br>and 55                         |
| II.2.5. | Not adopted | The Audit Committee, the General and Supervisory Board and the<br>Supervisory Board decide on the work plans and resources<br>concerning the internal audit services and services that ensure<br>compliance with the rules applicable to the company (compliance<br>services), and shall be recipients of reports made by these services<br>at least when they concern matters related to financial reporting,<br>identification or resolution of conflicts of interest and detection of<br>potential illegalities. | Explanation of<br>Recommendations<br>not adopted below |

#### II.3 Remuneration setting

| II.3.1    | Adopted        | All members of the Remuneration Committee or equivalent shall be<br>independent from the executive board members and include at least<br>one member with knowledge and experience in matters of<br>remuneration policy.                                                                                                                                                                                                                                                                                                              | Part I, items 67 and<br>68                             |
|-----------|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
| II.3.2.   | Adopted        | No natural or legal person that provides or has provided services in<br>the past three years, to any structure under the board of directors,<br>the board of directors of the company itself or who has a current<br>relationship with the company or consultant of the company, shall<br>be hired to assist the Remuneration Committee in the performance<br>of their duties. This recommendation also applies to any natural or<br>legal person that is related by employment contract or provision of<br>services with the above. | Part I, item 67                                        |
| II.3.3 a) | Adopted        | The statement on the remuneration policy for the management and<br>supervisory bodies referred to in article 2 of Law No. 28/2009 of 19<br>June, shall also contain the following:<br>a) Identification and details of the criteria for determining the<br>remuneration paid to the company officers;                                                                                                                                                                                                                                | Annex II to the<br>Corporate<br>Governance Report      |
| II.3.3 b) | Not adopted    | b) Information regarding the maximum potential amount, in<br>individual terms, and the maximum potential amount, in aggregate<br>form, to be paid to members of corporate bodies, and identify the<br>circumstances in which these maximum amounts may be payable;                                                                                                                                                                                                                                                                   | Explanation of<br>Recommendations<br>not adopted below |
| II.3.3 c) | Adopted        | c) Information on whether payments are due for the dismissal or<br>termination of appointment of board members.                                                                                                                                                                                                                                                                                                                                                                                                                      | Annex II to the<br>Corporate<br>Governance Report      |
| II.3.4    | Not applicable | Approval of stock and/or option plans or plans based on share price<br>variation for company officers shall be submitted to the General<br>Meeting. The proposal shall contain all the necessary information for<br>a correct assessment of said plan.                                                                                                                                                                                                                                                                               | Part I, items 73 and<br>74                             |
| II.3.5    | Not applicable | Any retirement benefit scheme established for company officers<br>shall be submitted to the General Meeting for approval. The<br>proposal shall contain all the necessary information in order to<br>correctly assess said system.                                                                                                                                                                                                                                                                                                   | Part I, item 76                                        |

#### III. Remunerations

| III.1 | Adopted     | The remuneration of the executive directors shall be based on actual<br>performance and shall discourage excessive risk-taking.                                                                                          | Part I, items 69 and<br>70                             |
|-------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
| III.2 | Adopted     | The remuneration of non-executive directors and the remuneration<br>of the members of the supervisory board shall not include any<br>component whose value depends on the performance of the<br>company or of its value. | Part I, item 71                                        |
| III.3 | Not adopted | The variable component of remuneration shall be reasonable overall<br>in relation to the fixed component of the remuneration and upper<br>limits shall be set for all components.                                        | Explanation of<br>Recommendations<br>not adopted below |

| #     | Adoption       | Text                                                                                                                                                                                                                                                                                                                                                                                  | Reference                                              |
|-------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
|       |                |                                                                                                                                                                                                                                                                                                                                                                                       |                                                        |
| III.4 | Not adopted    | A significant part of the variable remuneration should be deferred<br>for a period of not less than three years, and the right to payment<br>shall depend on the continued positive performance of the company                                                                                                                                                                        | Explanation of<br>Recommendations<br>not adopted below |
| III.5 | Adopted        | during that period.<br>Members of the board of directors shall not enter into contracts<br>either with the company or with third parties which have the effect<br>of mitigating the risk inherent in the variability of their remuneration<br>as fixed by the company.                                                                                                                | Part I, item 84                                        |
| III.6 | Not applicable | Executive directors shall maintain the company's shares that were<br>allotted by virtue of variable remuneration schemes, up to twice the<br>value of the total annual remuneration, except for those that need<br>to be sold for paying taxes on earnings from said shares, until the<br>end of their term of office.                                                                | Part I, items 73 and<br>74                             |
| III.7 | Not applicable | When the variable remuneration includes the allocation of options,<br>the beginning of the exercise period shall be deferred for a period of<br>no less than three years.                                                                                                                                                                                                             | Part I, items 73 and<br>74                             |
| III.8 | Adopted        | When the removal of a director is not due to serious breach of their<br>duties nor to their unfitness for the normal exercise of their<br>functions, but is even so attributable to inadequate performance,<br>the company shall be endowed with the adequate and necessary<br>legal instruments to ensure that no damages or compensation,<br>beyond those legally due, are payable. | Part I, item 83                                        |

#### IV. Audit

| IV.1 | Adopted | The external auditor shall, within the scope of its duties, verify the<br>implementation of remuneration policies and systems for company<br>officers as well as the efficiency and effectiveness of the internal<br>control mechanisms and report any shortcomings to the supervisory<br>body of the company.                                                                                                                                                                                                                                                 | Part I, item 54 |
|------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| IV.2 | Adopted | The company or any entity with which it maintains a control<br>relationship shall not engage the external auditor or any entity with<br>which it finds itself in a group relationship or that belongs to the<br>same network, for services other than audit services. If there are<br>reasons for contracting such services - which must be approved by<br>the supervisory board and explained in its Annual Report on<br>Corporate Governance - these services shall not account for more<br>than 30% of the total value of services rendered to the company. | Part I, item 47 |
| IV.3 | Adopted | Companies shall rotate auditors after two or three terms, depending<br>on whether the terms are four or three years, respectively.<br>Retention of the auditor beyond this period must be based on a<br>specific opinion of the supervisory board that explicitly considers the<br>conditions of auditor's independence and the benefits and costs of<br>its replacement.                                                                                                                                                                                      | Part I, item 44 |

#### V. Conflicts of interests and related party transactions

| V.1 | Adopted | The company's transactions with qualifying shareholders, or entities<br>with which they are in any type of relationship pursuant to article 20<br>of the Securities Code, shall be conducted on regular market<br>conditions.                                                                                                                                                                                 | Part I, items 89 to<br>91 |
|-----|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| V.2 | Adopted | The supervisory or audit board shall establish the procedures and<br>criteria necessary to define the relevant level of significance of<br>transactions with qualifying shareholders - or entities with which<br>they are in any of the relationships described in article 20.1 of the<br>Securities Code –, and the execution of transactions of significant<br>relevance requires clearance from such body. | Part I, item 91           |

**#** *Adoption Text Reference* 

#### VI. Information

| VI.1 | Adopted | Companies shall provide, via their websites in both the Portuguese<br>and English languages, access to information on the course of their<br>affairs, as regards economic, financial and governance issues.                            | Part I, items 59 to<br>65 |
|------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| VI.2 | Adopted | Companies shall ensure the existence of an investor support and<br>market relations office, which responds to enquiries from investors<br>in a timely fashion and records shall be kept of the submittal and<br>handling of enquiries. | Part I, item 56           |

## Explanation of Recommendations not adopted:

## Recommendation II.1.4 a)

This recommendation states that "Except for small-sized companies, the Board of Directors and the General and Supervisory Board, depending on the model adopted, shall create the necessary committees in order to ensure a competent and independent assessment of the performance of the executive directors and its own overall performance, as well as of other existing committees..."

Although the company will not adopt this recommendation, the criticism of the recommendation itself must be distinguished from the "explain" in the technical sense.

Starting with the first, the exaggerated advocacy of creating committees to supervise committees must be highlighted. It is only bureaucracy which causes management to get lost in a web of time and resource consuming formalities, distancing it increasingly from the essence which should be preserved.

As for the *explain*, one should begin by attempting to identify the main principles probably underpinning this recommendation and which must be safeguarded. They appear to be a concern that the supervisor is supervised and that remunerations are assessed independently. Both concerns are effectively addressed in Semapa.

The committees are supervised by the entities which established them, the Board of Directors, which is ultimately responsible for managing the company, and by the body appointed by the shareholders for overseeing all of the company's affairs, the Audit Board. Creating an intermediate level, in a holding company with a simplified and reduced management structure, does not seem to add value to the supervisory function. The Remuneration Committee reports directly to the shareholders and is excluded from this regime.

The assessment of the executive directors, on the other hand, is a more complex issue. When assessing performance, there is always tension between proximity, which ensures greater precision and full knowledge of the facts, and distance, which grants independence. An assessment committee could guarantee greater independence due to the distance it enjoys, but the full knowledge of the facts that proximity ensures would be damaged. At Semapa, the compromise solution described in Part I, item 24 above has now been adopted. As mentioned, the Remuneration Committee ensuring greater independence sets the system and conducts the final checks to the performance factors, but the specific appraisal of individual performance is the responsibility of the team supervisor, as is the case of the members of the Executive Board, and of the Chairman of the Board of Directors, of the CEO, and in both cases with the participation of other non-executive directors whom the supervisor deems appropriate to involve.

## Recommendation II.2.5

This recommendation states that "the Audit Committee, the General and Supervisory Board and the Supervisory Board decide on the work plans and resources concerning the internal audit services and services that ensure compliance with the rules applicable to the company (compliance services), and shall be recipients of reports made by these services at least when they concern matters related to financial reporting, identification or resolution of conflicts of interest and detection of potential illegalities."

The company does not have internal departments solely dedicated to audit or compliance and these functions are assigned essentially to the Internal Control Committee, the Audit Board and to other of Semapa's departments, in particular the Legal Department for the detection of potential illegalities. The decision not to have departments with special functions in this area is due to Semapa's simplified administrative structure as a holding company, without prejudice to the existence of independent departments of this type in its subsidiaries, as described in item 50.

In view of this fundamental option and in the absence of autonomous internal audit and compliance units, these units to not have work plans. Nonetheless, the Audit Board has the knowledge and the chance to deliver an opinion on the activities performed by the Internal Control Committee and Semapa's departments in this framework, on the resources allocated to the departments that also perform compliance duties, and is the recipient, where available, of the reports and opinions made by these services when they concern matters related to financial reporting, identification or resolution of conflicts of interest and detection of potential illegalities.

This recommendation has not been adopted by the company, but also here we strongly feel that the purpose and concerns which justify this recommendation are fully guaranteed.

## Recommendation II.3.3 b) and Recommendation III.3

Recommendation II.3.3 b) states that "The statement on remuneration policy for the management and supervisory bodies referred to in article 2 of Law No. 28/2009 of 19 June, shall also contain the following: b) Information regarding the maximum potential amount, in individual terms, and the maximum potential amount, in aggregate form, to be paid to members of corporate bodies, and identify the circumstances in which these maximum amounts may be payable;"

Recommendation III.3 states that "The variable component of remuneration shall be reasonable overall in relation to the fixed component of the remuneration and upper limits should be set for all components".

These recommendations have not been adopted by Semapa insofar as the remuneration policy statement, contained in Annex II to this report, only sets aggregate upper limits for variable remuneration, as a percentage of profits, and not for fixed remuneration.

However, Semapa considers that the principles pursued by the recommendation are guaranteed in three ways. First, through the aforementioned existence of a percentage limit of the variable part on the earnings. Second, by ensuring elements of fairness arising from the statement. Third, since the KPI system implemented under the remunerations policy provides for the values for the variable remuneration of each executive director, fixing the double thereof as the ceiling, which may be exceeded only in exceptional situations.

## Recommendation III.4

This recommendation states that "A significant part of the variable remuneration should be deferred for a period of no

less than three years, and the right to payment shall depend on the continued positive performance of the company during that period".

The explanation for not adopting this recommendation can be found in the remuneration policy statement in force, Annex II hereto, which states in particular that:

"Specialists in this field have drawn attention to significant advantages in deferring payment of the variable component of remuneration to a date when the entire period corresponding to the term of office can in some way be appraised.

We accept this principle as theoretically sound, but it appears to us to offer few advantages in the specific case of Semapa and other similar companies.

One of the main arguments supporting this system is that directors should be committed to achieving sustainable medium-term results, and that the remuneration system should support this, avoiding a situation where remuneration is pegged simply to one financial year, which may not be representative, and which may present higher profits at the cost of worse results in subsequent years.

However, whilst this danger is real and is worth safeguarding against by means of systems such as this in companies where the capital is completely dispersed and the directors may be tempted to take a short term view, maximizing quick results by sacrificing long term potential, this does not correspond to the situation in a company such as Semapa, with a stable shareholder structure and management, where these concerns are inherently less of an issue."

In substance, a director whose remuneration is not deferred, but who is paid over a longer period of time according to the results achieved in a given year is more in line with long-term management than a director who holds an office for 3 or 4 years and whose remuneration is deferred for that period. The recommended three-year period must be weighed against the executive directors' time with Semapa since these powers were first awarded to an executive board: Pedro Queiroz Pereira - 13 years, João Castello Branco - elected only in 2015, Carlos Alves – 7 years, José Honório - 12 years, Gonçalo Serras Pereira - 4 years, Carlos Horta e Costa – 6 years, Francisco Guedes - 11 years, Miguel Ventura – 10 years and still in office, José Miguel Paredes – 10 years and still in office, Ricardo Pires – elected only in 2014.

Therefore, this recommendation is not adopted by the company, without prejudice to the underlying substance, which is guaranteed to a greater extent than if such recommendation were implemented.

## 3. ADDITIONAL INFORMATION

There are no other disclosures or additional information which would be relevant to an understanding of the governance model and practices adopted.

## *Annex I*

## *To the Corporate Governance Report*

# DISCLOSURES REQUIRED BY ARTICLES 447 AND 448 OF THE COMPANIES CODE AND PARAGRAPHS 6 AND 7 OF ARTICLE 14 OF SECURITIES MARKET COMMISSION REGULATION 5/2008

(with regard to financial year 2015)

- 1. Securities issued by the company and held by company officers, in the sense defined in paragraphs 1 and 2 of Article 447 of the Companies Code(\*):
  - José Miguel Pereira Gens Paredes 50 *"Obrigações SEMAPA 2014/2019"*
  - Duarte Nuno d'Orey da Cunha 2,907 shares in the company and 65 *"Obrigações SEMAPA 2014/2019"*
  - Undivided estate of Maria Rita de Carvalhosa Mendes de Almeida de Queiroz Pereira 16.464 shares in the company

*(\*) The bonds issued by Semapa with the name "Obrigações SEMAPA 2014/2019" correspond to bonds with a variable 6-month EURIBOR rate, on the next working day TARGET immediately preceding the first day of each interest period, plus 3.25% a year, expiring in 2019.* 

- 2. Securities issued by companies controlled by or belonging to the same group as Semapa held by company officers, in the sense defined in paragraphs 1 and 2 of Article 447 of the Companies Code (\*\*):
  - Carlos Eduardo Coelho Alves 578,309 shares in Portucel, S.A.
  - Duarte Nuno d'Orey da Cunha 16,000 shares in Portucel, S.A. and 1 bond issued by Portucel, S.A.
  - José Miguel Pereira Gens Paredes 1 bond issued by Portucel, S.A.

(\*\*) *The company bonds of Portucel, S.A. referred to in this item correspond to bonds named "Obrigações Portucel €350,000,000 5.375% Senior Notes due 2020".*

## 3. Securities issued by the company and controlled companies held by companies in which directors and auditors hold corporate office:

- Cimigest, SGPS, S.A. 3.185.019 shares in the company
- Cimo Gestão de Participações, SGPS, S.A. 16,199,031 shares in the company

- Longapar, SGPS, S.A. 22,225,400 shares in the company, 1,000 shares in Secil Companhia Geral de Cal e Cimento, S.A. and 5,000 shares in ETSA – Investimentos, SGPS, S.A.
- OEM Organização de Empresas, SGPS, S.A. 535,000 shares in the company
- Sodim, SGPS, S.A. 15.252.726 shares in the company

## 4. Acquisition, disposal, encumbrance or pledge of securities issued by the company, controlled companies or companies in the same group by company officers and the companies referred to in 3 (\*\*\*):

On 31 March 2015, Sodim, SGPS, S.A. exchanged 404,779 Semapa shares, for 12.51 euros per share, for the purposes of paragraph 2 of article 14 of Securities Market Commission Regulation 5/2008.

The following company officers no longer hold *"Obrigações SEMAPA 2012/2015"*, as a result of the repayment of that loan issue on 30 March 2015:

- José Miguel Pereira Gens Paredes 205 *"Obrigações SEMAPA 2012/2015"*
- Paulo Miguel Garcês Ventura 125 *"Obrigações SEMAPA 2012/2015"*
- Ricardo Miguel dos Santos Pacheco Pires 14 *"Obrigações SEMAPA 2012/2015"*
- Vítor Manuel Galvão Rocha Novais Gonçalves 50 *"Obrigações SEMAPA 2012/2015"*
- Miguel Camargo de Sousa Eiró 50 *"Obrigações SEMAPA 2012/2015"*
- Duarte Nuno d'Orey da Cunha 25 *"Obrigações SEMAPA 2012/2015"*

*(*∗∗∗*) The bonds issued by Semapa with the name "Obrigações SEMAPA 2012/2015" are the company's bonds at a fixed rate of 6.85 per cent per annum, maturing in 2015.* 

## 5. Transactions in own shares:

On 30 April 2015, a Semapa reduced its share capital by cancelling 11,822,445 of its own shares, corresponding to 9.99% of its share capital.

On 30 July 2015, following the takeover bid from 6 to 24 July 2015, Semapa purchased 24,864,477 of own shares, corresponding to 23.345% of the share capital, which were cancelled immediately through share capital reduction.

## *Annex II*

## *To the Corporate Governance Report*

## REMUNERATION POLICY STATEMENT

Law 28/2009, of 19 June, requires the Remuneration Committee to submit each year for the approval of the General Meeting of shareholders a statement on the remuneration policy for members of the management supervisory bodies. A draft document was accordingly submitted to shareholders in 2015, resulting in approval of a remuneration policy statement as transcribed below:

## "Remuneration Policy Statement - Semapa Directors and Auditors

## I. Introduction

Semapa's Remuneration Committee drew up a remuneration policy statement for the first time in early 2007, and this text was then submitted to the company's General Meeting that year and approved. The statement was drawn up under the terms of the relevant recommendation of the Securities Market Commission then in force.

At that time, the Remuneration Committee stated its view that the options defended should be maintained until the end of the term of office of the company officers. The term of office in question ran from 2006 to 2009.

It was necessary to renew the statement in 2010, not only because of the start of a fresh term of office but also because Law 28/2009, of 19 June took effect, making it mandatory for the Remuneration Committee to submit a remuneration policy statement each year for the approval of the General Meeting.

This Committee is still of the view that a remuneration policy, due to its nature as a set of principles, should be generally stable for the duration of a mandate.

In view of the changes to recommendations resulting from publication by the Securities Market Commission of the 2013 Corporate Governance Code, the Remuneration Committee adjusted in 2014 this Statement to the new recommendations.

This year it has been decided to propose once more the approval of a statement similar in content to that currently in force.

The two most common possibilities for setting the remuneration of company officers are significantly different from each other. On the one hand, the remuneration may be fixed directly by the General Meeting, a solution which is not often adopted for various reasons of practicality, whilst on the other hand there is the option of remuneration being set by a committee, which decides in accordance with criteria on which the shareholders have had no say.

We have therefore considered an intermediate solution, whereby a declaration on remuneration policy, to be followed by the Committee, is submitted for the consideration of the shareholders. The best course of action is to take the best features of the two theoretically possible solutions, as we shall seek to do in this document, retaining and reproducing much of what we have defended in the past, but also seeking to secure the benefits of the company's wider experience and knowledge and of compliance with the legal requirements in this area, as referred to above.

## II. Legal requirements and recommendations

This statement is issued in the legal framework formed by Law 28/2009, of 19 June (as referred to above), and the recommendations of the Securities Market Commission for 2013.

In addition to requiring annual statements, approved by the general meeting and duly disclosed, the new law requires the statement on remuneration policy to include information on:

- a) Arrangements for aligning the interests of members of the management body with those of the company;
- b) Criteria for setting the variable component of remuneration;
- c) The existence of share bonus and share option plans for directors and auditors;
- d) The possibility of the variable component of remuneration, if any, being paid, wholly or in part, after the accounts have been finalized for the entire term of office;
- e) Rules limiting variable remuneration in the event of the company's results revealing significant deterioration in the company's performance in the last period for which accounts are closed or when such deterioration may be expected in the period underway.

The recommendations from the Securities Market Commission currently in force recommend that:

II.3.3. The statement on the remuneration policy for the management and supervisory bodies referred to in article 2 of Law No. 28/2009 of 19 June, shall also contain the following:

- a) Identification and details of the criteria for determining the remuneration paid to the company officers;
- b) Information regarding the maximum potential amount, in individual terms, and the maximum potential amount, in aggregate form, to be paid to members of corporate bodies, and identify the circumstances in which these maximum amounts may be payable;
- c) Information on whether payments are due for the dismissal or termination of appointment of board members.

## III. Rules deriving from law and the articles of association

Any system for setting remuneration will inevitably have to consider the legal rules, as well as any private rules which may be established in the articles of association.

The legal rules for the board of directors are essentially established in article 399 of the Companies Code, and may in practice be summarised as follows:

- Remuneration is to be set by the General Meeting of shareholders or by a committee appointed at such meeting.
- The remuneration fixed shall take into account the duties performed and the state of the company's affairs.
- The remuneration may be fixed or else consist in part of a percentage of the profits of the period, but the maximum percentage for distribution to directors must be authorized by a clause in the articles of association, and shall not apply to the amounts allocated to reserves or to any portion of the profits not legally available for distribution to the shareholders.

For the members of the Audit Board and the officers of the General Meeting, the law lays down that the remuneration shall consist of a fixed sum, which shall be determined in the same way by the General Meeting of shareholders or by

a committee appointed by the same, taking into account the duties performed and the state of the company's affairs.

Semapa's articles of association contain a specific clause, number seventeen, dealing only with the directors and governing also retirement provision. We transcribe the relevant passages:

*"2 – The remuneration of the directors […] is fixed by a Remuneration Committee comprising an uneven number of members, elected by the General Meeting.* 

*3 –The remuneration may consist of a fixed part and a variable part, which shall include a share in profits, which shall not exceed five per cent of the net profits of the previous period, for the directors as a whole. "* 

This is the formal framework to be observed in defining the remuneration policy.

## IV. Historical background

Since the incorporation of Semapa and up to 2002, all directors of Semapa received remuneration comprising a fixed component, paid fourteen times a year, and fixed by the Remuneration Committee, then called the *Comissão de Fixação de Vencimentos*.

In 2003, the resolution on the distribution of profits from 2002 included, for the first time, a part of the profits to be directly paid as remuneration to the directors, divided between the directors as decided by the Remuneration Committee.

This procedure was repeated through to 2005, with regard to the profits from 2004.

In 2006, the allocation of profits from 2005 did not provide for any amount for directors' remuneration. The variable component of the remuneration was fixed in 2006 by the Remuneration Committee, also with reference to the profits, in accordance with the articles of association.

This is the procedure which has stayed in place through to the present, although since 2007 this has taken place within the terms of a remuneration policy statement approved by the company's General Meeting. However, this year we addressed again the benefits of returning to the previous procedure of having the shareholders decide directly at the General Meeting the total amount to be paid, according to the year's results and as proposed by the Remunerations Committee, which would be in charge of the individual distributions.

It should be noted that the allocation of a percentage of profits is not applied directly, but rather as an indicator, and also as a limit, in line with the articles of association, on amounts which are determined in a more involved process, taking into account the factors set out in the remuneration policy statement in force and the KPIs mentioned below.

There has therefore been a constant procedure since 2003, with the directors' remuneration comprising a fixed component and a variable component.

Since the incorporation of the company, the members of the audit Board have received fixed monthly remuneration. Since the officers of the general meeting started to receive remuneration, this has been set in accordance with the number of meetings actually held.

## *V. General Principles*

The general principles to be observed when setting the remuneration of the company officers are essentially those which in very general terms derive from the law: on the one hand, the duties performed and on the other the state of the company's affairs. If we add to these the general market terms for similar situations, we find that these appear to be the three main general principles:

#### a) Duties performed.

It is necessary to consider the duties performed by each company officer not only in the formal sense, but also in the broader sense of the work carried out and the associated responsibilities. Not all the executive directors are in the same position, and the same is also true, for example, of the members of the audit board. Duties have to be assessed in the broadest sense, taking into account criteria as varied as, for example, responsibility, time dedicated, or the added value to the company resulting from a given type of intervention or representation of a given institution.

The fact that time is spent by the officer on duties in other controlled companies also cannot be taken out of the equation, due, on the one hand, to the added responsibility this represents, and, on the other hand, to the existence of another source of income.

It should be noted that Semapa's experience has shown that the directors of this company, contrary to what is often observed in other companies of the same time, have not always been neatly split into executive and non-executive. There are a number of directors with delegated powers and who are generally referred to as executive directors, but some of directors without delegated powers have been closely involved in the life of the company in a variety of ways.

b) The state of the company's affairs.

This criterion must also be understood and interpreted with care. The size of the company and the inevitable complexity of the associated management responsibilities are clearly the relevant aspects of the state of affairs, understood in the broadest sense. There are implications here for the need to remunerate a responsibility which is greater in larger companies with complex business models and for the capacity to remunerate management duties appropriately.

c) Market criteria.

It is unavoidably necessary to match supply to demand when setting any level of pay, and the officers of a corporation are no exception. Only respect for market practices makes it possible to keep professionals of a calibre required for the complexity of the duties performed and the responsibilities shouldered, thereby assuring not only their own interests but essentially those of the company, and the generation of value of all its shareholders. In the case of Semapa, in view of its characteristics and size, the market criteria to be considered are those prevailing internationally, as well as those to be observed in Portugal.

## VI. Compliance with legal requirements and recommendations

Having described the historical background and the general principles adopted, we shall now consider the issue of compliance by these principles with the relevant legal requirements.

1. Article 2 a) of Law 28/2009. Alignment of interests.

The first requirement that Law 28/2009 regards as essential in terms of the information in this statement is for a description of the procedures which assure that the directors' interests are aligned with those of the company.

We believe that the remuneration system adopted in Semapa is successful in assuring such alignment. Firstly, because the remuneration sets out to be fair and equitable in the light of the principles set out, and secondly because it links the directors to results by means of a variable remuneration component which is set primarily in the light of these results.

2. Article 2 b) of Law 28/2009. Criteria for the variable component.

The second requirement established by the law is for information on the criteria used to determine the variable component.

The company's results are the most important factor in setting the variable remuneration: not the results seen as an

absolute value, but as viewed from a critical perspective in the light of what may be expected of a company of this size and characteristics, and in view of the actual market conditions. The importance of the results in setting the variable component derives from the actual articles of association, which expressly provide for the possibility of "profit sharing" and limit this to a percentage of profits.

In setting the variable component, other factors are also considered, resulting in the main from the general principles market, specific duties, the state of the company's affairs. These factors are often more individual, relating to the specific position and the performance of each director. These weightings are calculated according to a KPI system, for which EBITDA, earnings before tax and the shareholder's internal rate of return in the long term are the quantitative elements considered.

Another important factor which is taken into overall account when setting the variable component is Semapa's option not to provide any share or option plans.

3. Article 2 c) of Law 28/2009. Share or option plans.

The decision whether or not to provide share or option plans is structural in nature. The existence of such a plan is not a simple add-on to an existing remuneration system, but rather an underlying to change to the existing system, at least in terms of the variable remuneration.

Although a remuneration system of this type is not incompatible with the company's articles of association, we feel that the wording of the relevant provisions in the articles and the historical background to the existing system argue in favour of maintaining a remuneration system without any share or option component.

This is not to say that we see no merits in including a share or option component in directors' remuneration, nor that we would not be receptive to restructuring directors' remuneration to incorporate such a plan. However, such a component is not essential in order to promote the principles we defend and, as we have said, we do not believe that this was the fundamental intention of the company's shareholders.

4. Article 2 d) of Law 28/2009. Date of payment of variable remuneration.

Specialists in this field have drawn attention to significant advantages in deferring payment of the variable component of remuneration to a date when the entire period corresponding to the term of office can in some way be appraised.

We accept this principle as theoretically sound, but it appears to us to offer few advantages in the specific case of Semapa and other similar companies.

One of the main arguments supporting this system is that directors should be committed to achieving sustainable medium-term results, and that the remuneration system should support this, avoiding a situation where remuneration is pegged simply to one financial year, which may not be representative, and which may present higher profits at the cost of worse results in subsequent years.

However, whilst this danger is real and is worth safeguarding against by means of systems such as this in companies where the capital is completely dispersed and the directors may be tempted to take a short term view, maximizing quick results by sacrificing long term potential, this does not correspond to the situation in a company such as Semapa, with a stable shareholder structure and management, where these concerns are inherently less of an issue.

5. Article 2 e) of Law 28/2009. Procedures limiting variable remuneration.

Procedures of this kind are designed to limit variable remuneration in the event of the results showing a significant deterioration in the company's performance in the last reporting period or when such a deterioration may be expected in the period underway.

This type of provision also reflects a concern that good performance in the short term, which may boost directors'

remuneration, could be achieved at the cost of future performance.

For obvious reasons, the arguments presented above also apply here. It should also be noted that a system of this kind would have little practical effect if not combined with significant deferral of remuneration, which is not proposed for Semapa.

6. Recommendation II.3.3 a). Criteria for determining the remuneration paid.

The criteria for determining the remuneration paid to the company officers are that which are drawn from the principles listed in chapter V above and that described in item 2 of chapter VI above, concerning the variable component of the directors' remuneration.

Besides these, there are no predetermined mandatory criteria at Semapa for setting the remuneration. However, the executive directors are submitted to performance assessment based on the aforementioned KPI system, for awarding the variable remuneration.

7. Recommendation II.3.3. b). Maximum potential, individual and aggregate remuneration.

Semapa's Articles of Association only lay down the maximum potential aggregate amount of variable remuneration payable to directors which, according to clause 17.3, corresponds to a share in profits not exceeding five per cent of the net profits of the previous period. Without prejudice to the fact that this Committee agrees with the meaning of the recommendation concerning the fixing of maximum potential amounts, in Semapa's case in our view, where a statutory provision on this matter already exists, no complementary rules limiting amounts are required, without prejudice to setting such limits for controlled companies. The maximum amount can be reached whenever performance criteria have been fulfilled completely.

8. Recommendation II.3.3. c). Payments for the dismissal or termination of duties.

There are no agreements, and no such provisions have been defined by this Committee, on payments by Semapa relating to dismissal or termination of directors' duties.

This fact is the natural result of the particular situations existing in the company, and not a position of principle taken by this Committee against the existence of agreements of this nature.

The supplementary legal rule in this matter apply here.

## VII. Specific Options

The specific options for the remuneration policy we propose are as follows:

- I. The remuneration of executive directors shall comprise a fixed component and a variable component.
- II. The remuneration of non-executive directors shall comprise only a fixed component that may be complemented according to the piling on of added responsibilities.
- III. The remuneration of the members of the Audit Board and the officers of the General Meeting shall comprise a fixed component only.
- IV. The fixed component of the remuneration of directors shall consist of a monthly amount payable fourteen times a year or of a pre-set amount for each meeting of the Board of Directors attended.
- V. A monthly rate shall be set for the fixed component of the remuneration of directors for all those who are members of the Executive Board and those who, although not members of such Board, perform duties or carry out specific work of a repeated or ongoing nature.
- VI. The pre-set amount for participation in meetings of the Board of Directors shall be fixed for those who have

duties which are essentially advisory and supervisory.

- VII. The fixed remuneration of the members of the Audit Board shall consist in all cases of a pre-set amount paid fourteen times a year.
- VIII. The fixed remuneration of the officers of the General Meeting shall consist in all cases of a pre-set amount for each meeting, the remuneration for second and subsequent meetings being lower than that for the first general meeting of the year.
  - IX. The procedure for assigning variable remuneration to the executive members of the Board of Directors shall comply with the criteria proposed by the Remuneration Committee, and the total such remuneration shall not exceed five per cent of the consolidated net profits (IFRS format).
  - X. In setting all remuneration, including in particular the distribution of the total amount allocated to the variable remuneration of the Board of Directors, the general principles established above shall be observed: the duties performed, the state of the company's affairs and market criteria.

Lisbon, 27 March 2015

The Remuneration Committee

*José Gonçalo Ferreira Maury,* 

*Frederico José da Cunha Mendonça e Meneses* 

*João Rodrigo Appleton Moreira Rato"*

## *Annex III*

## *To the Corporate Governance Report*

## DECLARATION REQUIRED UNDER ARTICLE 245.1 C) OF THE SECURITIES CODE

Article 245.1 c) of the Securities Code requires that each of the persons responsible for the issuers make a number of declarations, as described in this article. In the case of Semapa, a uniform declaration has been adopted, worded as follows:

*I hereby declare, under the terms and for the purposes of Article 245.1 c) of the Securities Code that, to the best of my knowledge, the management report, annual accounts, legal accounts certificate and other financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., for the financial year of 2015, were drawn up in accordance with the relevant accounting rules, and provide a true and fair view of the assets and liabilities, financial affairs and profit or loss of said company and other companies included in the consolidated accounts, and that the management report contains a faithful account of the business, performance and position of said company and other companies included in the consolidated accounts, describing the main risks and uncertainties which they face.* 

Considering that the members of the Audit Board and the Official Auditor sign an equivalent declaration in relation to the documents for which they are responsible, a separate declaration with the above text was signed by the directors only, as it was deemed that only the company officers fall within the concept of "persons responsible for the issuer". As required by this rule, we provide below a list of the persons signing the declaration and their office in the company:

| Name                                             | Title                              |
|--------------------------------------------------|------------------------------------|
| Pedro Mendonça de Queiroz Pereira                | Chairman of the Board of Directors |
| João Nuno de Sottomayor Pinto de Castello Branco | Member of the Board of Directors   |
| José Miguel Pereira Gens Paredes                 | Member of the Board of Directors   |
| Paulo Miguel Garcês Ventura                      | Member of the Board of Directors   |
| Ricardo Miguel dos Santos Pacheco Pires          | Member of the Board of Directors   |
| António Pedro de Carvalho Viana-Baptista         | Member of the Board of Directors   |
| Carlos Eduardo Coelho Alves                      | Member of the Board of Directors   |
| Francisco José Melo e Castro Guedes              | Member of the Board of Directors   |
| Manuel Custódio de Oliveira                      | Member of the Board of Directors   |
| Vítor Manuel Galvão Rocha Novais Gonçalves       | Member of the Board of Directors   |

## Report and Accounts 2015

| Name                         | Title                            |
|------------------------------|----------------------------------|
| Vítor Paulo Paranhos Pereira | Member of the Board of Directors |

## PART 3

## CONSOLIDATED FINANCIAL STATEMENTS

## CONSOLIDATED INCOME STATEMENT FOR THE PERIODS ENDED AS AT 31 DECEMBER 2015 AND 2014

| Amounts in Euro                                                             | Notes | 2015          | 2014          | 4th Q 2015    | 4th Q 2014    |
|-----------------------------------------------------------------------------|-------|---------------|---------------|---------------|---------------|
|                                                                             |       |               |               | (unaudited)   | (unaudited)   |
|                                                                             |       |               |               |               |               |
| Revenues                                                                    |       |               |               |               |               |
| Sales                                                                       | 4     | 2,099,937,636 | 1,962,196,710 | 553,449,796   | 506,573,571   |
| Services rendered                                                           | 4     | 32,398,054    | 35,959,184    | 8,045,228     | 9,184,525     |
| Other Income                                                                |       |               |               |               |               |
| Gains on dis posal of non-current as sets                                   | 5     | 2,863,693     | 1,481,070     | 2,426,073     | 967,963       |
| Other operating income                                                      | 5     | 55,484,421    | 57,570,313    | 15,861,516    | 31,101,168    |
| Change in fair value of biological assets                                   | 18    | 3,027,505     | 2,630,117     | 5,152,474     | 2,677,932     |
| Costs, expenses and losses                                                  |       |               |               |               |               |
| Cost of inventories sold and consumed                                       | 6     | (849,960,294) | (814,782,892) | (207,364,005) | (201,224,455) |
| Variation in production                                                     | 6     | 22,301,850    | (13,436,632)  | (10,458,670)  | (26,172,488)  |
| Cost of materials and s ervices cons umed                                   | 6     | (596,557,719) | (585,475,666) | (157,079,620) | (150,488,993) |
| Payroll costs                                                               | 6     | (244,824,037) | (194,681,637) | (77,846,242)  | (47,673,543)  |
| Other costs and los ses                                                     | 6     | (46,512,766)  | (41,506,402)  | (15,126,876)  | (13,382,929)  |
| Provisions                                                                  | 6     | 8,990,627     | (11,631,495)  | (2,866,360)   | (17,019,980)  |
| Depreciation, amortisation and impairment losses                            | 8     | (199,260,701) | (172,287,575) | (58,157,017)  | (46,653,991)  |
| Operational results                                                         |       | 287,888,269   | 226,035,095   | 56,036,297    | 47,888,780    |
| Group share of (los s) / gains of ass ociated companbies and joint ventures | 9     | (4,287,184)   | 26,109        | 25,484        | (147,766)     |
| Net financial res ults                                                      | 10    | (117,975,536) | (103,876,737) | (18,170,396)  | (25,768,677)  |
| Profit before tax                                                           |       | 165,625,549   | 122,184,467   | 37,891,385    | 21,972,337    |
| Income tax expens e                                                         | 11    | (34,839,050)  | 30,082,303    | (8,478,949)   | 20,977,020    |
| Profit for the year                                                         |       | 130,786,499   | 152,266,770   | 29,412,436    | 42,949,357    |
| Profit for the year                                                         |       |               |               |               |               |
| Attributable to Semapa's Shareholders                                       |       | 81,530,041    | 112,797,846   | 15,674,556    | 32,762,377    |
| Attributable to non - controlling interests                                 | 13    | 49,256,458    | 39,468,924    | 13,737,880    | 10,186,980    |
| Earnings per share                                                          |       |               |               |               |               |
| Basic earnings pershare, Eur                                                | 12    | 0.850         | 1.014         | 0.139         | 0.290         |
| Diluted earnings pershare, Eur                                              | 12    | 0.850         | 1.014         | 0.139         | 0.290         |

## STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIODS ENDED AS AT 31 DECEMBER 2015 and 2014

| Amounts in Euro                                                        | Notes | 2015         | 2014        | 4th Q 2015  | 4th Q 2014  |
|------------------------------------------------------------------------|-------|--------------|-------------|-------------|-------------|
|                                                                        |       |              |             | (unaudited) | (unaudited) |
|                                                                        |       |              |             |             |             |
| Retained earnings for the year                                         |       |              |             |             |             |
| without non ‐ controlling interests                                    |       | 130,786,499  | 152,266,770 | 29,412,436  | 42,949,357  |
| Items that may subsquently be reclassified to the income statement     |       |              |             |             |             |
| Derivative financial instruments                                       |       |              |             |             |             |
| Fair value changes                                                     | 34    | 4,232,105    | 2,822,312   | 4,125,131   | 980,385     |
| Tax on items above when applicable                                     | 28    | (405,180)    | 865,908     | (1,093,598) | 312,498     |
| Currency thanslation differences                                       | 27    | (9,423,201)  | 12,368,220  | 14,385,089  | 4,834,155   |
| Items that may not subsquently be reclassified to the income statement |       |              |             |             |             |
| Remeasurements of post employment benefits                             |       |              |             |             |             |
| Remeasurements positive / (negative)                                   | 29    | (10,421,772) | 343,040     | 4,968,687   | (3,289,118) |
| Tax on items above when applicable                                     | 28    | 2,747,201    | (300,285)   | 1,872,758   | (123,409)   |
| Other comprehensive income recognised in equity                        |       | (13,270,847) | 16,099,195  | 24,258,067  | 2,714,511   |
|                                                                        |       |              |             |             |             |
| Total comprehensive income for the year                                |       | 117,515,652  | 168,365,965 | 53,670,503  | 45,663,868  |
|                                                                        |       |              |             |             |             |
| Attributable to:                                                       |       |              |             |             |             |
| Semapa's Shareholders                                                  |       | 60,499,002   | 119,299,976 | 35,617,904  | 33,337,281  |
| Non - controlling interests                                            |       | 57,016,650   | 49,065,989  | 18,052,599  | 12,326,587  |
|                                                                        |       | 117,515,652  | 168,365,965 | 53,670,503  | 45,663,868  |

## CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2015 and 2014

| Amounts in Euro                                        | Notes        | 31‐12‐2015    | 31‐12‐2014    |
|--------------------------------------------------------|--------------|---------------|---------------|
|                                                        |              |               |               |
| Assets                                                 |              |               |               |
| Non ‐ currents assests                                 |              |               |               |
| Goodwill                                               | 15           | 335,643,370   | 296,680,236   |
| Other intangible ass ets                               | 16           | 296,675,604   | 279,829,481   |
| Property, plant and equipment                          | 17           | 2,336,937,941 | 2,009,740,138 |
| Inves tment properties                                 |              | 978,621       | 1,408,751     |
| Biological ass ets                                     | 18           | 116,996,927   | 113,969,423   |
| Inves tment in as sociates and joint ventures          | 19           | 3,403,708     | 87,086,273    |
| Financial as stes at fair value through profit or loss | 20           | 342,968       | 451,485       |
| Available-for-s ale financial as sets                  | 21           | 229,136       | 229,136       |
| Deferred tax assets                                    | 28           | 74,480,542    | 59,717,547    |
| Other non - current assets                             |              | 6,777,734     | 4,914,177     |
|                                                        |              | 3,172,466,551 | 2,854,026,647 |
| Current assets                                         |              |               |               |
| Inventories                                            | 23           | 309,759,678   | 285,676,152   |
| Receivables and other current assets                   | 24           | 309,595,216   | 283,512,404   |
| State and other public entities                        | 25           | 69,012,939    | 77,343,459    |
| Non-current assets held for sale                       | 33           | 1,199,597     | 1,114,053     |
| Cas h and cash equivalents                             | 2.1.3 and 31 | 206,255,764   | 602,971,772   |
|                                                        |              | 895,823,194   | 1,250,617,840 |
| Total assets                                           |              | 4,068,289,745 | 4,104,644,487 |
|                                                        |              |               |               |
| Equity and liabilities                                 |              |               |               |
| Capital and reserves                                   |              |               |               |
| Share capital                                          | 26           | 81,645,523    | 118,332,445   |
| Treasury shares                                        | 26           | (53,116)      | (108,444,835) |
| Share premiums                                         |              | 3,923,459     | 3,923,459     |
| Translation reserve                                    | 27           | (65,903,206)  | (46,975,997)  |
| Fair value res erve                                    | 27           | (4,921,087)   | (10,076,983)  |
| Other res erve                                         | 27           | 665,696,408   | 1,033,462,266 |
| Retained earnings                                      | 27           | (45,580,416)  | (202,619,762) |
| Profit for the year                                    |              | 81,530,041    | 112,797,846   |
| Consolidated shareholders' equity                      |              | 716,337,606   | 900,398,439   |
|                                                        |              |               |               |
| Non - controlling interests                            | 13           | 415,289,455   | 336,424,414   |
| Total equity                                           |              | 1,131,627,061 | 1,236,822,853 |
| Non ‐ current liabilities                              |              |               |               |
| Deferred tax liabilities                               | 28           | 305,515,909   | 293,334,065   |
| Pensions and other pos t-employment benefits           | 29           | 4,667,743     | 2,512,719     |
| Provis ions                                            | 30           | 104,230,815   | 81,935,468    |
| Interes t-bearing liabilities                          | 31           | 1,497,214,815 | 1,276,083,559 |
| Other non-current liabilities                          | 32           | 43,480,192    | 38,551,650    |
|                                                        |              | 1,955,109,474 | 1,692,417,461 |
| Current liabilities                                    |              |               |               |
| Interes t-bearing liabilities                          | 31           | 512,032,570   | 712,556,265   |
| Payables and other current liabilities                 | 32           | 358,185,023   | 343,558,899   |
| State and other pubic entities                         | 25           | 111,257,640   | 119,204,285   |
| Non-current liabilities held for s ale                 | 33           | 77,977        | 84,724        |
|                                                        |              | 981,553,210   | 1,175,404,173 |
| Total liabilities                                      |              | 2,936,662,684 | 2,867,821,634 |
|                                                        |              |               |               |
| Total equity and liabilities                           |              | 4,068,289,745 | 4,104,644,487 |

## CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIODS ENDED AS AT 31 DECEMBER 2015 AND 2014

|                                                                                                                     |                   | Sha<br>re                | Trea<br>sury              | Sha<br>re         | val<br>Fair<br>ue        | Oth<br>er                 | slat<br>Tran<br>ion      | d<br>Ret<br>aine          | Prof<br>it               |                           | trol<br>ling<br>Non<br>‐con |                           |
|---------------------------------------------------------------------------------------------------------------------|-------------------|--------------------------|---------------------------|-------------------|--------------------------|---------------------------|--------------------------|---------------------------|--------------------------|---------------------------|-----------------------------|---------------------------|
| Amo<br>s in<br>Eur<br>unt<br>o                                                                                      | Not<br>es         | Cap<br>ital              | Sha<br>res                | Prem<br>ium<br>s  | rese<br>rve              | rese<br>rve               | rese<br>rve              | ings<br>earn              | for<br>the<br>yea<br>r   | Tota<br>l                 | inte<br>rest<br>s           | Tota<br>l                 |
| ity a<br>s of<br>Equ<br>1 Ja<br>ry 2<br>015<br>nua                                                                  |                   | 118<br>,332<br>,445      | (108<br>)<br>,444<br>,835 | 3,92<br>3,45<br>9 | (10,<br>)<br>076<br>,983 | 1,03<br>3,46<br>2,26<br>7 | (46,<br>)<br>975<br>,997 | (202<br>)<br>,619<br>,762 | 112<br>,797<br>,846      | 900<br>,398<br>,440       | 336<br>,424<br>,414         | 1,23<br>6,82<br>2,85<br>3 |
| of<br>ofit<br>of t<br>App<br>lica<br>tion<br>201<br>4 pr<br>he y<br>ear                                             |                   |                          |                           |                   |                          |                           |                          |                           |                          |                           |                             |                           |
| fer<br>the<br>- Tr<br>to o<br>ans<br>r re<br>serv<br>es                                                             | 27                | -                        | -                         | -                 | -                        | 70,2<br>56,0<br>68        | -                        | -                         | (70,<br>256<br>,068<br>) | -                         | -                           | -                         |
| ivid<br>end<br>id /<br>id<br>- D<br>Res<br>s pa<br>erve<br>s pa                                                     | 14	a<br>nd	2<br>7 | -                        | -                         | -                 | -                        | (61,<br>)<br>229<br>,995  | -                        | -                         | (39,<br>)<br>939<br>,176 | (10<br>1)<br>1,16<br>9,17 | -                           | (101<br>)<br>,169<br>,171 |
| - Pr<br>ofit<br>-sha<br>ring<br>bo<br>nus<br>es                                                                     | 14                | -                        | -                         | -                 | -                        | -                         | -                        | 2,60<br>2,60<br>2         | (2,6<br>02,6<br>02)      | -                         |                             | -                         |
| har<br>d ca<br>llat<br>Tre<br>qui<br>siti<br>ion<br>asu<br>ry s<br>es a<br>ons<br>an<br>nce<br>s                    | 26	a<br>nd	2<br>7 | (36,<br>)<br>686<br>,922 | 108<br>,391<br>,719       | -                 | -                        | (376<br>)<br>,791<br>,932 | -                        | (765<br>)<br>,799         | -                        | (305<br>)<br>,852<br>,934 | -                           | (305<br>)<br>,852<br>,934 |
| Divi<br>den<br>ds p<br>aid<br>by s<br>ubs<br>idia<br>ries<br>trol<br>ling<br>int<br>to<br>sts<br>non<br>-con<br>ere | 13                | -                        | -                         | -                 | -                        | -                         | -                        | -                         | -                        | -                         | (11<br>7)<br>1,37<br>4,79   | (11<br>7)<br>1,37<br>4,79 |
| Oth<br>reh<br>for<br>the<br>r*<br>ive<br>inco<br>er c<br>omp<br>ens<br>me<br>yea                                    |                   | -                        | -                         | -                 | 3,42<br>0,46<br>9        | -                         | (17,<br>)<br>160,<br>530 | (7,2<br>78)<br>90,9       | -                        | (21,<br>)<br>031<br>,039  | 7,76<br>0,19<br>2           | (13,<br>)<br>270<br>,847  |
| s /<br>Acq<br>uis i<br>tion<br>Dis<br>als<br>trol<br>ling<br>int<br>to n<br>sts<br>pos<br>on-<br>con<br>ere         |                   | -                        | -                         | -                 | -                        | -                         | -                        | 162<br>,465<br>,205       | -                        | 162<br>,465<br>,205       | 125<br>,313<br>,863         | 287<br>,779<br>,068       |
| Cha<br>s in<br>the<br>soli<br>dat<br>ion<br>ime<br>ter<br>nge<br>con<br>per                                         |                   | -                        | -                         | -                 | -                        | -                         | -                        | -                         | -                        | -                         | 6,92<br>5,24<br>2           | 6,92<br>5,24<br>2         |
| Oth<br>ts<br>er m<br>ove<br>men                                                                                     |                   | -                        | -                         | -                 | 1,73<br>5,42<br>7        | -                         | (1,7<br>79)<br>66,6      | 28,3<br>18                | -                        | (2,9<br>34)               | 984<br>,083                 | 981<br>,148               |
| Prof<br>it fo<br>r th<br>e ye<br>ar                                                                                 |                   | -                        | -                         | -                 | -                        | -                         | -                        | -                         | 81,5<br>30,0<br>41       | 81,5<br>30,0<br>41        | 49,2<br>56,4<br>58          | 130,<br>786<br>,499       |
| ity a<br>s of<br>emb<br>Equ<br>31<br>Dec<br>er 2<br>015                                                             |                   | 81,6<br>45,5<br>23       | (53,<br>)<br>116          | 3,92<br>3,45<br>9 | (4,9<br>87)<br>21,0      | 665<br>,696<br>,408       | (65,<br>)<br>903<br>,206 | (45,<br>)<br>580<br>,414  | 81,5<br>30,0<br>41       | 716<br>,337<br>,608       | 415<br>,289<br>,455         | 1,13<br>1,62<br>7,06<br>1 |
|                                                                                                                     |                   |                          |                           |                   |                          |                           |                          |                           |                          |                           |                             |                           |

*\*Net od deferred taxes*

|                                                                                                                    |           | Sha<br>re           | Trea<br>sury              | Sha<br>re         | Fair<br>val<br>ue        | Oth<br>er                 | slat<br>ion<br>Tran      | aine<br>d<br>Ret          | Prof<br>it                |                          | trol<br>ling<br>Non<br>‐con |                           |
|--------------------------------------------------------------------------------------------------------------------|-----------|---------------------|---------------------------|-------------------|--------------------------|---------------------------|--------------------------|---------------------------|---------------------------|--------------------------|-----------------------------|---------------------------|
| Amo<br>s in<br>Eur<br>unt<br>o                                                                                     | Not<br>es | Cap<br>ital         | Sha<br>re                 | Prem<br>ium<br>s  | rese<br>rve              | rese<br>rve               | rese<br>rve              | ings<br>earn              | for<br>the<br>peri<br>od  | Tota<br>l                | inte<br>rest<br>s           | Tota<br>l                 |
| ity a<br>s of<br>ry 2<br>014<br>(re<br>ed)<br>Equ<br>1 Ja<br>stat<br>nua                                           |           | 118<br>,332<br>,445 | (47,<br>164,<br>986<br>)  | 3,92<br>3,45<br>9 | (14,<br>243<br>,578<br>) | 924<br>,814<br>,439       | (49,<br>274<br>,921<br>) | (201<br>,788<br>,562<br>) | 146<br>,125<br>,472       | 880<br>,723<br>,768      | 329<br>,273<br>,818         | 1,20<br>9,99<br>7,58<br>6 |
| lica<br>of<br>ofit<br>of t<br>he y<br>App<br>tion<br>201<br>3 pr<br>ear                                            |           |                     |                           |                   |                          |                           |                          |                           |                           |                          |                             |                           |
| -Tr<br>fer<br>ine<br>d ea<br>rnin<br>to r<br>eta<br>ans<br>gs                                                      |           | -                   | -                         | -                 | -                        | 108<br>,647<br>,828       | -                        | -                         | (108<br>,647<br>,828<br>) | -                        | -                           | -                         |
| ivid<br>end<br>id /<br>id<br>- D<br>Res<br>s pa<br>erve<br>s pa                                                    | 14        | -                   | -                         | -                 | -                        | -                         | -                        | -                         | (37,<br>)<br>477<br>,644  | (37,<br>)<br>477<br>,644 | -                           | (37,<br>)<br>477<br>,644  |
| Tre<br>har<br>qui<br>siti<br>asu<br>ry s<br>es a<br>ons                                                            |           | -                   | (61,<br>279<br>,849<br>)  |                   |                          |                           |                          |                           |                           | (61,<br>279<br>,849<br>) | -                           | (61,<br>279<br>,849<br>)  |
| den<br>id b<br>bsid<br>llin<br>Divi<br>iari<br>es t<br>ntro<br>g in<br>tere<br>sts<br>s pa<br>y su<br>o no<br>n-co | 13        | -                   | -                         | -                 | -                        | -                         | -                        | -                         | -                         | -                        | (40,<br>)<br>119,<br>135    | (40,<br>)<br>119,<br>135  |
| r*<br>Oth<br>reh<br>ive<br>inco<br>for<br>the<br>er c<br>omp<br>ens<br>me<br>yea                                   |           | -                   | -                         | -                 | 4,16<br>6,59<br>5        | -                         | 2,29<br>8,92<br>4        | 36,4<br>03                | -                         | 6,50<br>1,92<br>2        | 9,59<br>7,27<br>3           | 16,0<br>99,1<br>95        |
| Diff<br>s in<br>llin<br>g in<br>isit<br>ion<br>ntro<br>tere<br>sts<br>ere<br>nce<br>no<br>n-co<br>aqu<br>s         |           | -                   | -                         | -                 | -                        | -                         | -                        | (863<br>)<br>,378         | -                         | (863<br>)<br>,378        | (1,7<br>82)<br>90,4         | (2,6<br>60)<br>53,8       |
| Oth<br>ts<br>er m<br>ove<br>men                                                                                    |           | -                   | -                         | -                 | -                        | -                         | -                        | (4,2<br>25)               | -                         | (4,2<br>25)              | (5,9<br>84)                 | (10,<br>)<br>209          |
| Prof<br>it fo<br>r th<br>e ye<br>ar                                                                                |           | -                   | -                         | -                 | -                        | -                         | -                        | -                         | 112<br>,797<br>,846       | 112<br>,797<br>,846      | 39,4<br>68,9<br>24          | 152,<br>266<br>,770       |
| s of<br>emb<br>Equ<br>ity a<br>31<br>Dec<br>er 2<br>014                                                            |           | 118<br>,332<br>,445 | (108<br>)<br>,444<br>,835 | 3,92<br>3,45<br>9 | (10,<br>)<br>076<br>,983 | 1,03<br>3,46<br>2,26<br>7 | (46,<br>)<br>975<br>,997 | (202<br>)<br>,619<br>,762 | 112<br>,797<br>,846       | 900<br>,398<br>,440      | 336<br>,424<br>,414         | 1,23<br>6,82<br>2,85<br>4 |
|                                                                                                                    |           |                     |                           |                   |                          |                           |                          |                           |                           |                          |                             |                           |

*\*Net od deferred taxes*

## CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIODS ENDED AS AT 31 DECEMBER 2015 and 2014

| Amounts in Euro                                                | Notes     | 2015            | 2014            | 4th Q 2015      | 4th Q 2014    |
|----------------------------------------------------------------|-----------|-----------------|-----------------|-----------------|---------------|
|                                                                |           |                 |                 | (unaudited)     | (unaudited)   |
| Operating activities                                           |           |                 |                 |                 |               |
| Receipts from customers                                        |           | 2,271,981,574   | 2,134,644,998   | 651,151,072     | 521,972,135   |
| Payments to suppliers                                          |           | (1,728,521,435) | (1,672,201,602) | (456,862,163)   | (422,355,184) |
| Payments to personnel                                          |           | (191,152,511)   | (172,778,420)   | (62,940,042)    | (46,167,090)  |
| Cash flow from operations                                      |           | 352,307,628     | 289,664,976     | 131,348,867     | 53,449,861    |
|                                                                |           |                 |                 |                 |               |
| Income tax received / (paid)                                   |           | 13,187,329      | (25,748,991)    | 11,810,360      | (22,732,739)  |
| Other receipts / (payments) relating to operating activities   |           | 6,831,019       | 122,905,450     | 13,316,193      | 62,698,941    |
| Cahs flow from operating activities (1)                        |           | 372,325,976     | 386,821,435     | 156,475,420     | 93,416,063    |
| Investing activities                                           |           |                 |                 |                 |               |
| Inflows                                                        |           |                 |                 |                 |               |
| Financial investments                                          |           | 727,951         | 597,786         | -               | 80,815        |
| Property, plant and equipment                                  |           | 1,444,055       | 1,359,409       | 613,682         | 88,269        |
| Government grants                                              |           | 14,123,184      | 78,825          | 14,123,184      | 78,825        |
| Interest and similar income                                    |           | 1,338,465       | 5,241,992       | 910,000         | 1,344,294     |
| Dividends                                                      | 19        | 1,505,827       | 665,104         | -               | -             |
|                                                                |           | 19,139,482      | 7,943,116       | 15,646,866      | 1,592,203     |
| Outflows                                                       |           |                 |                 |                 |               |
| Financial investments                                          |           | (148,415,802)   | (23,246,904)    | (365,065)       | 58,531,674    |
| Cash and cash equivalents - changes in consolidation perimeter |           | 15,078,447      | (17,972)        | -               | (17,972)      |
| Property, plant and equipment                                  |           | (145,130,325)   | (39,983,551)    | (58,681,332)    | (21,766,876)  |
|                                                                |           | (278,467,680)   | (63,248,427)    | (59,046,397)    | 36,746,826    |
|                                                                |           |                 |                 |                 |               |
| Cash flow from investing activities (2)                        |           | (259,328,198)   | (55,305,311)    | (43,399,531)    | 38,339,029    |
| Financing activities                                           |           |                 |                 |                 |               |
| Inflows                                                        |           |                 |                 |                 |               |
| Proceeds from borrowings                                       |           | 4,770,991,799   | 1,625,615,275   | 1,312,945,759   | 669,564,817   |
| Outflows                                                       |           | 4,770,991,799   | 1,625,615,275   | 1,312,945,759   | 669,564,817   |
| Repayments of borrowings                                       |           | (4,960,702,683) | (1,768,828,147) | (1,281,805,936) | (690,859,667) |
| Repayment of financial leases                                  |           | (821,710)       | (848,167)       | (241,454)       | (226,274)     |
| Interest and similar expenses                                  |           | (122,862,869)   | (104,093,550)   | (19,630,186)    | (21,444,809)  |
| Dividends                                                      | 13 and 14 | (212,075,465)   | (77,410,903)    | (109,024,767)   | 407,934       |
| Treasury shares aquisitions                                    | 26        | -               | (61,279,849)    | -               | (61,279,849)  |
|                                                                |           | (5,296,462,727) | (2,012,460,616) | (1,410,702,343) | (773,402,665) |
|                                                                |           |                 |                 |                 |               |
| Cash flow from financing activities (3)                        |           | (525,470,928)   | (386,845,341)   | (97,756,584)    | (103,837,848) |
|                                                                |           |                 |                 |                 |               |
| CHANGE IN CASH AND CASH EQUIVALENTS (1)+(2)+(3)                |           | (412,473,150)   | (55,329,217)    | 15,319,305      | 27,917,244    |
| EXCHANGE GAINS / (LOSSES) ON CASH AND CASH EQUIVALENTS         |           | 15,757,142      | 8,821,891       | 1,220,722       | 2,408,150     |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR         | 31        | 602,971,772     | 649,479,098     | 189,715,737     | 572,646,378   |
| CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR               | 31        | 206,255,764     | 602,971,772     | 206,255,764     | 602,971,772   |

| 1. |        | Summary	of	the	principal	accounting	policies		9                     |  |
|----|--------|---------------------------------------------------------------------|--|
|    | 1.1    | Basis	of	preparation	9                                              |  |
|    | 1.2    | Additional	disclosures		10                                          |  |
|    | 1.3    | Basis	of	consolidation		10                                          |  |
|    | 1.3.1  | Subsidiaries		10                                                    |  |
|    | 1.3.2  | Associates		11                                                      |  |
|    | 1.3.3  | Joint	Ventures		11                                                  |  |
|    | 1.4    | Segmental	reporting		12                                             |  |
|    | 1.5    | Foreign	currency	translation		12                                    |  |
|    | 1.5.1  | Functional	and	Reporting	currency		12                               |  |
|    | 1.5.2  | Balances	and	transactions	expressed	in	foreign	currencies		13       |  |
|    | 1.5.3  | Group	Companies		13                                                 |  |
|    | 1.6    | Intangible	assets		13                                               |  |
|    | 1.6.1  | CO2	emission	rights		13                                             |  |
|    | 1.6.2  | Brands		13                                                          |  |
|    | 1.7    | Goodwill		14                                                        |  |
|    | 1.8    | Property,	plant	and	equipment		14                                   |  |
|    | 1.9    | Investment	properties		14                                           |  |
|    | 1.10   | Impairment	of	non‐current	assets		15                                |  |
|    | 1.11   | Biological	assets		15                                               |  |
|    |        |                                                                     |  |
|    | 1.12   | Financial	investments		15                                           |  |
|    | 1.13   | Derivative	financial	instruments	and	hedge	accounting		17           |  |
|    | 1.14   | Corporate	income	tax		18                                            |  |
|    | 1.15   | Inventory		18                                                       |  |
|    | 1.16   | Receivables	and	other	current	assets		19                            |  |
|    | 1.17   | Cash	and	cash	equivalents		19                                       |  |
|    | 1.18   | Share	capital	and	treasury	shares		19                               |  |
|    | 1.19   | Interest‐bearing	liabilities		19                                    |  |
|    | 1.20   | Borrowing	Costs		20                                                 |  |
|    | 1.21   | Provisions		20                                                      |  |
|    | 1.22   | Pensions	and	other	post‐employment	benefits		20                     |  |
|    | 1.22.1 | Pensions	obligations	–	defined	benefit	plans		20                    |  |
|    | 1.22.2 | Pension	obligations	–	defined	contribution	plans		21                |  |
|    | 1.22.3 | Holiday	pay,	allowances	and	bonuses		21                             |  |
|    | 1.23   | Payables	and	other	current	liabilities		21                          |  |
|    | 1.24   | Non‐current	assets	held	for	sale	and	discontinued	operations		21    |  |
|    | 1.25   | Government	grants		22                                               |  |
|    | 1.26   | Leases		22                                                          |  |
|    | 1.27   | Dividends	distribution		22                                          |  |
|    | 1.28   | Revenue	recognition	and	accrual	basis		22                           |  |
|    | 1.29   | Contingent	assets	and	liabilities		23                               |  |
|    | 1.30   | Subsequent	events		23                                               |  |
|    | 1.31   | New	standards,	changes	and	interpretation	of	existing	standards		23 |  |
| 2. |        | Risk	management		24                                                 |  |
|    | 2.1    | Financial	risk	factors		24                                          |  |
|    | 2.1.1  | Currency	risk		24                                                   |  |
|    | 2.1.2  | Interest	rate	risk		26                                              |  |
|    | 2.1.3  | Credit	risk		27                                                     |  |
|    | 2.1.4  | Liquidity	risk		29                                                  |  |
|    | 2.1.5  | Capital	risk		29                                                    |  |
|    |        |                                                                     |  |
|    | 2.2    | Operational	risk	factors		30                                        |  |
|    | 2.2.1  | Risks	relating	to	the	Pulp	and	Paper	segments		30                   |  |
|    | 2.2.2  | Risks	relating	to	the	Cement	and	derivatives	segment		36            |  |
|    | 2.2.3  | Risks	relating	to	the	Environment	segment		37                       |  |
|    | 2.2.4  | Risks	relating	to	the	Group	in	general		38                          |  |
|    | 2.2.5  | Context	risks		38                                                   |  |
| 3. |        | Important	accounting	estimates	and	judgments		38                    |  |
|    | 3.1    | Impairment	of	Goodwill		39                                          |  |
|    | 3.2    | Income	tax		39                                                      |  |
|    | 3.3    | Actuarial	assumptions		39                                           |  |
|    | 3.4    | Fair	value	of	biological	assets		39                                 |  |

| 4.<br>Segment	reporting		40<br>5.<br>6.<br>7.<br>8.<br>9.<br>10.<br>11.<br>12.<br>13.<br>14.<br>15.<br>16.<br>17.<br>18.<br>19.<br>20.<br>21.<br>22.<br>23.<br>24.<br>25.<br>26.<br>27.<br>28.<br>29.<br>30.<br>31.<br>32.<br>33.<br>34.<br>35.<br>36.<br>37.<br>38.<br>39.<br>40.<br>41.<br>42.<br>43.<br>44.<br>45.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 3.5 | Recognition	of	provisions	and	adjustments		40 |  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----|-----------------------------------------------|--|
| Other	income		41<br>Cost,	expenses	and	losses		42<br>Remuneration	of	statutory	bodies		43<br>Depreciation,	amortisation	and	impairment	losses		43<br>Group	share	of	(loss)/gains	of	associated	companies		44<br>Net	Financial	Results		44<br>Income	tax		45<br>Earnings	per	share		46<br>Non‐controlling	interests		46<br>Application	of	previous	year's	profit		48<br>Goodwill		48<br>Other	intangible	assets		51<br>Property,	plant	and	equipment		52<br>Biological	assets		53<br>Investment	in	associates	and	joint‐ventures		54<br>Financial	assets	at	fair	value	through	profit	or	loss		56<br>Available‐for‐sale	financial	assets		56<br>Impairment	in	non‐current	and	current	assets		57<br>Inventories		57<br>Receivables	and	other	current	assets		58<br>State	and	other	public	entities		59<br>Share	capital	and	treasury	share		60<br>Reserves	and	retained	earnings		61<br>Deferred	taxes		62<br>Pensions	and	other	post‐employment	benefits		63<br>Provisions		70<br>Interest‐bearing	liabilities		70<br>Payables	and	other	current	liabilities		76<br>Assets	and	liabilities	held	for	sale		77<br>Financial	assets	and	liabilities		77<br>Balances	and	transactions	with	related	parties		81<br>Environmental	related	expenditures		82<br>Audit	fees		82<br>Number	of	employees		83<br>Commitments		83<br>Other	commitments	of	the	Group		84<br>Contingent	assets		85<br>Exchange	Rates		86<br>Companies	included	in	the	consolidation		87<br>Shareholders	equity	and	net	profit	reconciliation	with	the	individual	financial	statements		89<br>Subsequent	events		90 |     |                                               |  |
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| Note	added	for	translation		90                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |                                               |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 46. |                                               |  |

(Translation of a report originally issued in Portuguese) 

(In these notes, unless indicated otherwise, all amounts are expressed in Euro) 

The SEMAPA Group ("Group") comprises Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. ("Semapa") and its subsidiaries. Semapa was incorporated on 21 June 1991 and has as its main Business object the management of financial investments in other companies as an indirect form of carrying out economic activity 

**Head Office:** Av. Fontes Pereira de Melo, 14, 10th Floor, Lisbon **Share Capital:** Euro 81,645,523 **Corporate body no.:**  502 593 130

Semapa leads an Enterprise Group with activities in three distinct business segments: pulp and paper, cement and derivatives, and environment, developed respectively through its subsidiaries Portucel, S.A. (Portucel or Portucel Group), renamed in February 2016 to The Navigator Company, Secil ‐ Companhia Geral de Cal e Cimento, S.A. (Secil or Secil Group) and ETSA – Investimentos, SGPS, S.A. (ETSA or ETSA Group). 

These consolidated financial statements were approved by the Board of Directors on 03 March 2016. 

The Group's senior management, that are the members of the Board of Directors who sign this report, declare that, to the best of their knowledge, the information contained herein was prepared in conformity with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and results of the companies included in the Group's consolidation scope. 

## 1. Summary of the principal accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are described below. 

#### 1.1 Basis of preparation

The Group's consolidated financial statements as of 31 December 2015 have been prepared in accordance with International Financial Reporting Standards adopted by the European Union (IFRS – formerly referred to as the International Accounting Standards ‐ IAS ) issued by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or by the former Standing Interpretations Committee (SIC) in force on the date of preparation of the mentioned financial statements. 

The accompanying consolidated financial statements were prepared on the going concern basis from the accounting books and records of the companies included in the consolidation (Note 43), and under the historic cost convention, except for: biological assets, financial assets at fair value through profit and loss, available‐for‐ sale financial assets, derivative financial instruments and financial instruments which are recorded at fair value (Notes 18, 20, 21 and 34). Tangible assets acquired until 1 January 2004 have been recorded at revaluated cost. 

The preparation of the financial statements requires the use of important estimates and judgments in the application of the Group's accounting policies. The principal statements which involve a greater degree of judgment or complexity, or the most significant assumptions and estimates used in the preparation of the aforesaid financial statements are disclosed in Note 3. 

#### 1.2 Additional disclosures

#### *Comparability*

At the end of June 2015, the Brazilian subsidiary, NSOSPE, S.A., acquired 50% of the share capital of Supremo Cimentos S.A. and obtained control of 100% of this subsidiary (until then the control was jointly shared with three Brazilian shareholders). Thus, the Group assessed the acquisition differences as at 30 June. 

Therefore, the financial position of Supremo was incorporated in the Consolidated Statement of Financial Position as of 30 June 2015 using the full consolidation method. In the consolidated income statement, taking into account that the acquisition differences assessment was performed with reference to June 30, the results of operations of this subsidiary, for the six months period between July and December were incorporated under the full consolidation method (line by line). The first semester results (50%) were recognised by the equity accounting method. 

Additionally, in February 2015, the Group acquired 100% of AMS which is integrated in this consolidated financial statements by the full consolidation method with reference to 1 January, 2015. 

#### *Public Exchange Offer (OPT)*

As at the Extraordinary General Meeting of Semapa, held as at 23 July 2015, the following two proposals submitted by the shareholder Sodim, SGPS, S.A. were approved by 98.6% of the share capital present or represented: a) acquisition by Semapa of a maximum of 48,461,924 own shares, where each shareholder that would accept the offer would receive 3.40 shares of Portucel for each Semapa share owned; and b) the reduction of the share capital of Semapa up to Euro 48,461,924.00, through the cancellation of up to 48,461,924 treasury shares, acquired under the offer. The share capital of Semapa present or represented at the shareholders' meeting amounted to 74.97%. 

As of 30 July 2015, following the closure of the Public Exchange Offer, Semapa acquired 24,864,477 shares, which were cancelled through a share capital decrease after proper settlement of the tender offer. Thus, Semapa reduced its share capital to Euro 81,645,523 represented by 81,645,523 shares and reduced the attributable participation in Portucel from 75.85% to 64.84% of the share capital and 81.19% to 69.40% of non‐suspended voting rights. 

#### 1.3 Basis of consolidation

#### 1.3.1 Subsidiaries

Subsidiaries are all the entities over which the Group has the right to determine their financial and operating policies, generally where the Group's interest is represented by more than half of the voting rights. The existence and the effect of the potential voting rights which are currently exercisable or convertible are taken into account when the Group assesses whether it has control over another entity. 

These company's shareholders equity and net profit/(loss), corresponding to the third‐party investment in such companies, are presented under the caption non‐controlling interests respectively in the Consolidated Statement of Financial Position, in a separate component of shareholders' equity, and in the Consolidated Separated Income Statement. Companies included in the consolidated financial statements are detailed in Note 43. 

The purchase method is used in recording the acquisition of subsidiaries. The cost of an acquisition is measured by the fair value of the assets transferred, the equity instruments issued and liabilities incurred or assumed on acquisition date. 

The identifiable assets acquired and the liabilities and contingent liabilities assumed in a business combination are initially measured at fair value on the acquisition date, irrespective of the existence of non‐controlling interests. The excess of the acquisition cost relative to the fair value of the Group's share of the identifiable assets and liabilities acquired is recorded as goodwill when the Group acquires control, as described in Note 15. 

The subsidiaries are consolidated using the full consolidation method with effect from the date that control is transferred to the Group. In the acquisition of additional share capital of controlled entities, the excess between 

the proportion of acquired net assets and respective acquisition cost is directly recognised in Equity under the caption Retained earnings (Note 27). 

If the acquisition cost is less than the fair value of the net assets of the subsidiary acquired (negative goodwill), the difference is recognised directly in the income statement under the caption Other operating income. Transaction costs directly attributable are immediately expensed. 

Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between group companies are eliminated. Unrealised losses are also eliminated, except where the transaction displays evidence of impairment of a transferred asset. 

Subsidiaries' accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Group. 

#### 1.3.2 Associates

Associates are all the entities in which the group has significant influence but does not have control, generally applied in the case of investments representing between 20% and 50% of the voting rights. Investments in associates are equity accounted. 

In conformity with the equity accounting method, financial investments are recorded at their acquisition cost, adjusted by the amount corresponding to the Group's share of changes in the associates' shareholders' equity (including net income/loss) and by dividends received. 

The difference between the acquisition cost and the fair value of the associate's identifiable assets, liabilities and contingent liabilities on the acquisition date, if positive, are recognised as Goodwill and recorded under the caption Investments in associates. If these differences are negative, they are recorded as income for the period under the caption Group share of (loss)/gains of associated companies. Transaction costs directly attributable are immediately expensed. 

An evaluation of investments occurs when there are signs that the asset could be impaired, and any identified impairment losses are recorded under the same caption. With the exception of goodwill, when the impairment losses recognised in prior years no longer exist, they are reversed. 

When the Group's share in the associate's losses is equal to or exceeds its investment in the associate, the Group ceases to recognise additional losses, except where it has assumed liability or made payments in the associate's name. Unrealised gains on transactions with associates are eliminated to the extent of the Group's share in the associate. Unrealised losses are also eliminated, except if the transaction reveals evidence of impairment of a transferred asset. 

Associate's accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Group. Investments in associated companies are disclosed in Note 19. 

#### 1.3.3 Joint Ventures

A jointly‐controlled entity is a joint venture which involves the establishment of a company, a partnership or another entity in which the Group has an interest. 

Jointly‐controlled entities are included in the consolidated financial statements under the equity method, recorded at their acquisition cost, adjusted by the amount corresponding to the Group's share of changes in the associates' equity (including net profit/(loss)) and by dividends received.

#### 1.4 Segmental reporting

An operating segment is a component of an entity: 

- a) that engages in business activities that may earn revenues and incur in expenses (including revenues and expenses relating to transactions with other components of the same entity);
- b) whose operating results are regularly reviewed by the chief operating decision maker of the entity for the purposes of making decisions about allocating resources to the segment and assessing its performance; and
- c) for which separate financial information is available.

Operating segments are consistently disclosed with the internal model of management information provided to the chief operating decision maker of the entity (CODM‐Chief Operating Decision‐Maker). The CODM is responsible for allocating resources to the segment and assess its performance, as well as for the strategic decision making. 

Three operating segments have been identified: pulp and paper, cement and derivatives and environment. 

#### *Pulp and paper*

Portucel, S.A. is the subsidiary, acquired in 2004, that leads the Enterprise Group dedicated to the production and sales in Portugal, Germany, Spain, France, Italy, United Kingdom, Netherlands, Austria, Belgium, Switzerland, Morocco, Poland, Turkey, United States of America and Mozambique, among others, of cellulose pulp and paper and its related products purchase of wood, forest and agricultural production, cutting timber and sale of pulp and paper, activities developed in Portugal mainly by itself and its subsidiaries About the Future, S.A., Soporcel – Sociedade Portuguesa de papel, S.A. Portucel – Papel Setúbal, S.A., Celcacia, S.A., Fine Paper, S.A. and PortucelSoporcel Florestal, S.A., among others. 

#### *Cement and derivatives*

Secil – Companhia Geral de Cal e Cimento, S.A. leads the Enterprise Group of cements and related products which operates in Portugal, Tunisia, Angola, Netherlands, France, Lebanon and Cape Verde, with cement production taking place at the Outão, Maceira, Pataias, Gabés (Tunisia), Lobito (Angola) and Beirut (Lebanon) plants, and the production and sale of ready mixed, aggregates and precast concrete and the operations of quarries facilities via its subsidiaries of the sub‐holding Secil Betões e Inertes, SGPS S.A.. 

The Group holds 100% interest in Supremo Cimentos, S.A., a cement company operating in southern Brazil (Santa Catarina state), with a fully integrated factory of clinker and cement placed in Pomerode, as well as aggregate and concrete operations. 

#### *Environment*

ETSA – Investimentos, SGPS, S.A. leads the Enterprise Group of environment which operates in Portugal. 

Geographical segment is an individual area committed to supplying products or services in a particular economic environment and which is subjected to different risks and benefits than those arising from segments which operate in other economic environments. The geographical segment is based on the destination country of the goods and services sold by the Group. 

The segment reporting accounting policies are those consistently used in the Group. All the inter‐segment sales and services are performed at market prices and eliminated on consolidation. The segment reporting is presented in Note 4. 

#### 1.5 Foreign currency translation

#### 1.5.1 Functional and Reporting currency

The items included in the financial statements of each one of the Group's entities are measured using the currency of the economic environment in which the entity operates (functional currency). 

The consolidated financial statements are presented in Euro, which is the Group's functional and reporting currency. 

#### 1.5.2 Balances and transactions expressed in foreign currencies

All the Group's assets and liabilities denominated in foreign currencies were converted into Euro using the exchange rates ruling at the statement of financial position date. 

The currency differences, favourable and unfavourable, arising from the differences between the exchange rates ruling at the transaction date and those ruling on collection, payment or statement of financial position dates, were recorded as income and costs in the consolidated income statement for the year 

#### 1.5.3 Group Companies

The results and financial position of all Group entities that have a functional currency different from the Group's reporting currency are translated into the presentation currency as follows: 

(i) The assets and liabilities of each statement of financial position are translated at the exchange rates ruling at the date of the financial statements; 

The resulting exchange rate differences are recognised as a separate component of shareholders' equity, under the caption Translation reserve. 

(ii) The income and costs of each income statement are translated using the average exchange rate of the reporting period, except where the average exchange rate is not a reasonable approximation of the cumulative effect of the rates ruling on the transaction dates, in which case the income and costs are converted at the exchange rate ruling on the transaction dates. 

#### 1.6 Intangible assets

Intangible assets are stated at cost of acquisition deducted of accumulated amortisation and impairment losses. Depreciation is calculated using the straight‐line method, over a period between 3 to 5 years and annually for CO2 emission rights. 

#### 1.6.1 CO2 emission rights

The CO2 emission rights attributed to the Group at no cost within the PNALE (national plan for the assignment of CO2 emission rights), are recognised at fair value under the caption Intangible assets on the assignment date, with a corresponding liability being recorded under Deferred income – grants, for the same amount. 

The Group records as an operating cost with a corresponding liability and an operating income as a result of the recognition of the proportion of the corresponding grant relating to the Group's CO2 emissions. 

Sales of emission rights give rise to a gain or loss, being the difference between the amount realised and the respective initial recognition cost, net of the corresponding government grant. 

At the date of the consolidated statement of financial position, CO2 emission rights' portfolio is valued at the lower of the assumed acquisition cost or their market value. On the other hand, liabilities due for those emissions are valued at market value at the same date. 

#### 1.6.2 Brands

Whenever brands are identified in a business combination, the Group records them separately in the consolidated financial statements as an asset at historical cost, which represents their fair value on the acquisition date. 

On subsequent measurement, brands are stated in the Group's consolidated financial statements at cost less accumulated amortisation and impairment losses. 

#### 1.7 Goodwill

Goodwill represents the excess of the consideration paid over the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiaries at the acquisition date. 

Goodwill is not amortised and is subject to impairment tests at least once a year. Impairment losses relating to Goodwill cannot be reversed. Gains or losses arising from the sale of an entity include the amount of the corresponding Goodwill. 

### 1.8 Property, plant and equipment

Property, plant and equipment acquired up to 1 January 2004 (date of transition to IFRS) are recorded at acquisition cost, or acquisition cost revaluated in accordance with accounting principles generally accepted in Portugal up to that date, less depreciation and accumulated impairment losses. 

Regarding the subsidiaries CMP, Société des Ciments de Gabés (SCG), Portucel and Soporcel, among others, the cost of the tangible fixed assets on the date these subsidiaries were acquired, was calculated based on valuations made by independent entities. 

Property, plant and equipment acquired after transition date are recorded at acquisition cost, less depreciation and impairment losses. Acquisition cost includes all the expenses directly attributable to the acquisition of the assets. 

Subsequent costs are included in acquisition cost of the asset or recognised as separate assets, as appropriate, only when it is probable that future economic benefits will flow to the company and the respective cost can be reliably measured. Other repairs and maintenance costs are recognised as a cost in the period they are incurred. 

Depreciation is calculated over the acquisition cost, using the straight‐line method since the asset is available for use and using the rates that best reflect their estimated useful life, as follows: 

|                                     | Average<br>Useful life |
|-------------------------------------|------------------------|
| Land                                | 14                     |
| Buildings	and	other	constructions   | 12	–	30                |
| Equipment:                          |                        |
| Machinery	and	equipment             | 6	–	25                 |
| Transportation	equipment            | 4	‐	9                  |
| Tools	and	utensils                  | 2	‐	8                  |
| Administrative	equipment            | 4	‐	8                  |
| Returnable	containers               | 6                      |
| Other	property,	plant	and	equipment | 4	‐	10                 |

The residual values of the assets and respective useful lives are reviewed and adjusted when necessary at the statement of financial position date. When the carrying amount of the asset exceeds its realisable value, the asset is written down to the estimated recoverable amount, and an impairment charge is booked (Note 1.10). 

Gains or losses arising on the write off or disposal represent the difference between the proceeds received on disposal less costs to sell and the asset's carrying amount, and are recognised in the income statement as other operating income or expenses (operational). 

#### 1.9 Investment properties

Investment properties are valued at acquisition cost, less depreciation and impairment losses, being the cost of those acquired up to 1 January 2004 (date of transition to IFRS) the historical acquisition cost, or the revalue cost in accordance with generally accepted accounting principles in Portugal up to that date. 

#### 1.10 Impairment of non‐current assets

Non‐current assets which do not have a defined useful life are not subject to depreciation, but are subject to annual impairment tests. Assets subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 

Impairment losses are recognised as the amount of the excess of the asset's carrying value over its recoverable amount. The recoverable amount is the higher of the fair value less cost to sell amount and the value in use. 

For the purpose of conducting impairment tests, the assets are grouped at the lowest level for which cash flows can be identified separately (cash generating units that the assets belong to), when it is not possible to do so individually for each asset. 

The reversal of impairment losses recognised in previous periods is recorded when it can be concluded that the recognized impairment losses no longer exist or have decreased (with the exception of impairment losses relating to Goodwill – see Note 1.7). 

The reversal of impairment losses is recognised in the income statement as Other operating income, unless the asset has been revalue in which case the reversal corresponds to an additional revaluation. However, the reversal of the impairment loss is reversed only up to the limit of the amount that would have been recognised (net of amortisation or depreciation) had the impairment loss not been recorded in previous years. 

#### 1.11 Biological assets

Biological assets are measured at fair value deducted by costs at the point of harvest. The Group's biological assets mainly comprise the forests held for the production of timber, suitable for incorporating in the production process of BEKP, including among other species pine and cork. 

When calculating the fair value of the forests, the Group used the discounted cash flows method, based on a model developed in house that is subject to periodical reviews by external and independent experts, which considers assumptions about the nature of the assets being valued, namely, the expected yield of the forests, the timber selling price deducted by costs relating to harvest and transportation, the rents of the woodlands (own and rented) and also plantation costs, maintenance costs, the inherent cost of the rented forests and a discount rate. 

All costs incurred in land preparation for first forestation are considered as a tangible asset, depreciated over their estimated useful life. 

The discount rate corresponds to a market rate without inflation, determined on the basis of the Group's expected rate of return on its forests. 

Changes in estimates of growth, growth period, price, cost and other assumptions are recognised as changes in fair value of biological assets. 

At the time of harvest, wood is recognised at fair value less estimated costs since that point and the point of sale, as at this stage the power plants. 

#### 1.12 Financial investments

The Group classifies its financial investments in the following categories: financial assets at fair value through profit and loss, loans granted and receivables, held‐to‐maturity investments and available‐for‐sale financial assets. The classification depends on the intention motivating the investment's acquisition. Management determines the classification at the moment of initial recognition of the instruments and reappraises this classification on each reporting date. 

All acquisitions and disposals of these investments are recognised at the date of the respective purchase and sale contracts, irrespective of the financial settlement date. 

Financial investments are initially recorded at the acquisition cost, and the fair value is equal to the price paid, plus transaction expenses, except for the assets at fair value through profit and loss. The subsequent measurement depends on the category the investment falls under, as follows:

#### Loans granted and receivables

Loans granted and accounts receivable are non‐derivative financial assets with fixed or determinable payments and which are not quoted in an active market. They are originated when the Group advances money, goods or services directly to a debtor without any intention of negotiating the debt. These investments for the purpose are included in current assets, except when their maturity exceeds 12 months after the statement of financial position date, in which case they are classified as non‐current assets. Loans granted and accounts receivable are reported as part of receivables and other current assets in the consolidated statement of financial position (Note 24). 

#### Financial assets at fair value through profit and loss

A financial asset is classified under this category if primarily acquired for the purpose of being sold in the short‐ term or if so designated by management. Assets in this category are classified as current if held for trading or if they are realisable in a period of up to 12 months of the statement of financial position date. These investments are measured at fair value through the income statement (Note 20). 

#### Investments held to maturity

Investments held to maturity are non‐derivative financial assets, with fixed or determinable payments and fixed maturities which the Group has the intention and ability to hold to maturity. Investments in this category are recorded at amortised cost using the effective interest rate method. 

#### Available for sale financial assets

Available‐for‐sale financial assets are non‐derivative financial assets that do not meet the conditions to be classified in the above categories. These assets are included in non‐current assets unless management expects to sell them over the 12 months period following the statement of financial position date (Note 21). These financial instruments are recognised at market value, as quoted on the statement of financial position date. 

If there is no active market of a financial asset, the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash‐flows analysis and option pricing models refined to reflect the issuer's specific circumstances. 

Potential gains and losses arising from these investments are recorded directly in the fair value reserve until the financial investment is sold, received, or disposed of in any way, at which time the accumulated gain or loss formerly reflected in fair value reserve is taken to the income statement (Note 27). 

If there is no market value or if it is not possible to determine one, equity investments are recognised at their subsequently measured at acquisition cost. An impairment loss is recognised whenever a reduction of value is identified and it is justifiable. 

At each reporting date the Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. If a prolonged decline in fair value of the available‐for‐sale financial assets takes place, then the cumulative loss – measured as the difference between acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in the income statement‐ is removed from equity and recognised in the income statement. 

An impairment loss recognised on available‐for‐sale financial assets is reversed if the loss was caused by specific external events of an exceptional nature that are not expected to recur but which subsequent external events have reversed. For equity investments hold by third parties classified under this category, the reversal does not affect the income statement and the assets subsequent increase in value is thus taken to the fair value reserve. 

#### 1.13 Derivative financial instruments and hedge accounting

#### *Derivative financial instruments*

The Group uses derivative financial instruments to manage the financial risks to which it is exposed. 

Although the derivative financial instruments contracted represent effective economic hedging instruments, not all of them qualify as hedging instruments in accordance with the rules and requirements of IAS 39. Derivative financial instruments, which do not qualify as hedging instruments, are stated on the statement of financial position at fair value and changes in fair value are recognised in gains and losses in financial instruments (Note 10). 

Whenever possible, the fair value of derivatives is estimated based on quoted instruments. In the absence of market prices, the fair value of derivatives is estimated based on the discounted cash flow method and option valuation models, in accordance with the assumptions generally used in the market. The fair value of derivative financial instruments is mainly included in the captions receivables and other‐current assets and payables and other‐current liabilities. 

The derivative financial instruments used for hedge purposes may be classified as hedge instruments whether they fulfil all of the following conditions: 

- i) At acquisition date, there is formal designation and documentation of the hedging relationship, namely regarding the hedged item, the hedging instrument and the company's evaluation of the hedging effectiveness;
- ii) There is an expectation that the hedge will be highly effective, at the inception of the hedging relation and along its duration;
- iii) The effectiveness of the hedge may be measured at the beginning of the operation and while it is running;
- iv) For cash flow hedges, the realization of the cash flows must be highly probable.

Whenever expectations of changes in interest or exchange rates justify it, the Group seeks to hedge against adverse movements through derivative instruments, such as interest rate swaps (IRS), exchange an interest rate collars, exchange forwards, among others. 

In the selection of derivative financial instruments, it is their economic aspects that are the main focus of assessment. The management also evaluates the impact of each additional derivative financial instruments to its portfolio, namely in earnings' volatility. 

#### *Coverage of cash flows (interest rate and exchange risk rate)*

In order to manage the risk of interest and exchange rates, the Group enters into cash flow hedge. 

Those transactions are recorded in the statement of financial positions at their fair value and, to the extent that they are considered effective hedging's, changes in fair value are initially recorded in shareholder's equity and recycled to financial results under the caption gains / (losses) in derivative financial instruments at the settlement date. 

If the hedge instruments present ineffectiveness, that inefficiency is immediately recognised in profit and loss. As so, net expenses associated to the hedged interest‐bearing liabilities are deferred in accordance with the hired hedging instrument inherent rate. 

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is recycled to the income statement when the hedge instrument is also recognised in the income statement. 

#### *Net investment hedging (exchange rate risk)*

In order to manage the exposure of its investments in foreign subsidiaries to fluctuations in the exchange rate (net investment), the group enters into exchange rate forwards. 

Those exchange rate forwards, hired as hedging derivative financial instruments over foreign subsidiaries, are recorded at their fair value in the statement of financial position. As long as they meet the conditions to be considered effective, changes in fair value of the exchange rate forwards are recorded directly on equity, as translation reserves. Gains and losses accumulated in those reserves are recycled to the income statement when the foreign subsidiaries are disposed. 

#### 1.14 Corporate income tax

Corporate income tax includes current and deferred tax 

#### *Current tax*

Current income tax is calculated based on net profit, adjusted in conformity with tax legislation in force at the statement of financial position date. 

#### *Deferred tax*

Deferred tax is calculated using the liability method, based on the temporary differences between the book values of the assets and liabilities and their respective tax base. The income tax rate expected to be in force in the period in which the temporary differences will reverse is used in calculating deferred tax. 

Deferred tax assets are recognised whenever there is a reasonable likelihood that future taxable profits will be generated against which they can be offset. Deferred tax assets are revised periodically and decreased whenever it is likely that tax losses will not be utilised. 

Deferred taxes are recorded as a cost or income for the year, except where they result from amounts recorded directly under shareholders' equity, situation in which deferred tax is also recorded under the same caption. Tax benefits attributed to the Group regarding its investment projects are recognised through the income statement as there is sufficient taxable income to allow its use. 

#### *Tax business group*

Group Semapa is subject to the special regime governing business groups (RETGS) comprising companies in which the shareholding is equal to or more than 75% and which meet the conditions laid down in articles 69 and following of the Corporate Income Tax Code (CIT Code). 

Companies included within the consolidation scope of the group of companies subject to this regime, calculate and recognise corporate income tax (CIT) as though they were taxed on an individual basis. However the liabilities are recognised as due to the dominant entity of the tax business group, currently Semapa, SGPS, S.A. which is responsible for the Group's overall clearance and payment of the corporate income tax. Where there are gains on the use of this regime, these are recorded in the dominant entity financial statements. 

#### 1.15 Inventory

Inventories are valued in accordance with the following criteria: 

#### i) Goods and raw materials

Goods and raw, subsidiary and consumable materials are valued at the lower of their purchase cost or their net realisable value. The purchase cost includes ancillary costs, and it is determined using the weighted average cost as the valuation method. 

#### ii) Finished products and work in progress

Finished and intermediate products and work in progress are valued at the lower of their production cost (which includes incorporated raw materials, labour and general manufacturing costs, based on a normal production capacity level) or their net realisable value. 

The net realisable value corresponds to the estimated selling price after deducting estimated completion and selling costs. Differences between costs and net realisable value, if lower, are recorded under the caption Inventories consumed and sold. 

#### 1.16 Receivables and other current assets

Debtors' balances and other current assets are recorded at fair value and are subsequently recognised at their amortised cost, net of impairment losses, so as to state them at their expected net realisable value (Note 24). 

Impairment losses are recorded when there is objective evidence that the Group will not receive the full amount outstanding in accordance with the original conditions of the accounts receivables. 

#### 1.17 Cash and cash equivalents

Cash and cash equivalents includes cash, bank accounts and other short‐term investments with an initial maturity of up to 3 months which can be mobilised immediately without any significant risk in value fluctuations. For cash flow statement purposes, this caption also includes bank overdrafts, which are presented in the statement of financial position as a current liability, under the caption Interest‐bearing liabilities. 

#### 1.18 Share capital and treasury shares

Ordinary shares are classified in shareholders 'equity (Note 26). 

Costs directly attributable to the issue of new shares or other equity instruments are reported as a deduction, net of taxes, from the proceeds of the issue. 

The costs directly attributable to the issue of new shares or options for a business acquisition are included in the acquisition cost as part of the purchase price. 

Treasury shares are recorded at their acquisition amount as a decrease in shareholders' equity, in the caption Treasury shares, while the gains or losses inherent in their disposal are recorded under Other reserves. 

When any Group company acquires shares of the parent company (treasury shares), the payment, which includes directly‐attributable incremental costs, is deducted from the shareholders' equity attributable to the holders of the parent company's capital until the shares are cancelled, redeemed or sold. 

When such shares are subsequently sold or repurchased, any proceeds, net of the directly attributable transaction costs and taxes, is reflected in the shareholders' equity of the company's shareholders, under other reserves. 

#### 1.19 Interest‐bearing liabilities

Interest‐bearing liabilities are initially recognised at fair value, net of the transaction costs incurred, and are subsequently stated at their amortised cost. Any difference between the amounts received (net of transaction costs) and the repayment amount is recognised in the income statement over the term of the debt, using the effective interest rate method. 

Interest‐bearing debt is classified as a current liability, except where the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the consolidated statement of financial position date (Note 31). 

### 1.20 Borrowing Costs

Borrowing costs relating to loans are generally recognised as financial costs, in accordance with the accrual accounting principle (Note 10). 

Borrowing costs directly related to the acquisition, construction or production of fixed assets are capitalised when their construction period exceeds one year, and form part of the asset's cost. 

Capitalization of these charges commences after the start of the asset's preparation or development activities and ceases when substantially all the activities necessary to prepare the qualifying assets for their intended use or sale are completed or when the relevant project is suspended or substantially concluded. 

Any financial income directly related to a specific investment is deducted from the borrowing costs of the referred asset. 

#### 1.21 Provisions

Provisions are recognised whenever the Group has a legal or constructive obligation, as a result of past events, in which it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. 

Provisions for future operating losses are not recognised. Provisions are reviewed on statement of financial position date and are adjusted so as to reflect the best estimate at that date (Note 30). 

The Group incurs expenditure and assumes liabilities of an environmental nature. Accordingly, expenditures on equipment and operating techniques that ensure compliance with applicable legislation and regulations (as well as on the reduction of environmental impacts to levels that do not exceed those representing a viable application of the best available technologies, on those related to minimizing energy consumption, atmospheric emissions, the production of residues and noise), are capitalised when they are intended to serve the Group's business in a durable way, as well as those associated with future economic benefits and which serve to prolong life expectancy, increase capacity or improve the safety or efficiency of other assets owned by the Group (Notes 30 and 37). 

In addition, quarries have to be subject to environmental remediation and improvements. It is the Group's practice to continuously and progressively reconstitute the land freed up by the quarries, recognising in the income statement of the period the expenditure incurred. 

Quarries whose reconstitution is only possible at the closure of operations, the Group has requested independent and specialised entities to quantify those obligations, having for this purpose recognised a provision under the caption Provisions (Note 30). 

#### 1.22 Pensions and other post‐employment benefits

#### 1.22.1 Pensions obligations – defined benefit plans

Some of the Group's subsidiaries have assumed the commitment to make payments to their employees in the form of complementary retirement pensions, disability, early retirement and survivors' pensions, having constituted defined‐benefit plans. 

As referred to in Note 29, the Group constituted autonomous Pension Funds as a means of funding a part of the commitments for such payments. According to IAS 19, companies with pension plans recognise the costs with the granting of these benefits as and when the services are rendered by the beneficiary employees. In this manner, the Group's total liability is estimated at least every six months at the date of the interim and annual financial statements, for each plan separately by an independent and specialised entity in conformity with the projected unit credit method. 

The costs relating to past liabilities, which result from the implementation of a new plan or additional benefits granted, are recognised immediately in situations in which the benefits are being paid or are overdue. The calculated liability is presented in the Consolidated Statement of financial position after deducting the market value of the funds constituted, under the caption Pensions and other post‐employment benefits included in non‐ current liabilities. 

Remeasurement gains and losses resulting from differences between the assumptions used for purposes of calculating the liabilities and what effectively occurred (as well as from changes made thereto and from the difference between the expected amount of the return on the funds' assets and the actual return) are recognised when incurred directly in the statement of comprehensive income (Note 27). 

The gains and losses generated by a curtailment or settlement of a defined‐benefit plan are recognised in the income statement when the curtailment or settlement occurs. A curtailment occurs when there is a material reduction in the number of employees or the plan is altered in such a way that the benefits awarded are reduced with a material impact. 

#### 1.22.2 Pension obligations – defined contribution plans

Some of the Group's subsidiaries have assumed commitments, regarding contributing to a defined contribution plan with a percentage of the beneficiaries' salary, in order to provide retirement, disability and survivors' pensions. 

In order to capitalise those contributions, pension funds were set up, for which employees can make additional voluntary contributions. 

Therefore, the responsibility with these plans corresponds to the contribution made to the funds based on the percentage of the employees' salaries defined in the respective agreements. These contributions are recognised as a cost in the income statement in the period to which they refer, regardless of the date of the settlement of the liability 

#### 1.22.3 Holiday pay, allowances and bonuses

Under the terms of the prevailing legislation, employees are entitled annually, if hired until 2003, to 25 working days leave (22 days if hired after 2003), as well as to a month's holiday allowance, entitlement to which is acquired in the year preceding its payment. 

According to the current Performance Management System ("Sistema de Gestão de Desempenho"), employees have the right to a bonus based on annually‐defined objectives. The entitlement of this bonus is usually acquired in the year preceding its payment. 

These liabilities are recorded in the period in which the employees acquire the respective right, irrespective of the date of payment, whilst the balance payable at the date of the consolidated statement of financial position is shown under the caption Payables and other current liabilities. 

#### 1.23 Payables and other current liabilities

Trade creditors and current accounts payable are initially recorded at their fair value and subsequently at amortised cost (Note 32). 

#### 1.24 Non‐current assets held for sale and discontinued operations

Non‐current assets (or discontinued operations) are classified as held for sale if its value is realisable through a sale transaction rather than through its continuing. 

It is considered that this situation exists only when: (i) the sale is highly probable and the asset is available for immediate sale in its present condition, (ii) the Group has assumed a commitment to sell, and (iii) it is expected that the sale will take place within a period of 12 months. In this case, non‐current assets are valued at lower between carrying value and fair value less costs to sell. 

From the moment that certain tangible assets are considered as "held for sale", depreciation ceases, and the assets are classified as non‐current assets held for sale. 

Gains or losses on disposals of tangible assets, determined as the difference between the sale price and its net book value, are recorded under the caption "gains and losses on disposals of assets". 

#### 1.25 Government grants

Government grants are recognised at their fair value and only when there is a reasonable assurance that the grant will be received and the group will comply with all required conditions. Government grants related to operating costs are deferred and recognised in the income statement over the period that matches the costs with the compensating grants. 

Grants related to biological assets carried at fair value, in accordance with IAS 41, are recognised in the income statement when the terms and conditions of the grant are met. 

Government grants that the Group receives to compensate its capital expenditures are reported under the caption Payables and other current liabilities and are recognised in the income statement during the estimated useful life of the granted asset, by deducting the value of its amortisation. 

#### 1.26 Leases

Property, plant and equipment acquired under leasing contracts, as well as the corresponding liabilities, are recorded using the financial method. According to this method, the asset's cost is recorded in property, plant and equipment and the corresponding liability is recognised under the caption interest‐ bearing liabilities‐ financial leases, while the interest included in the instalments and the asset's depreciation, calculated as described in Note 1.8, are recorded as costs in the income statement of the period to which they relate. 

Leases, under which a significant part of the risks and benefits of the property is assumed by the lessor, with the Group being the lessee, are classified as operating leases. Payments made under operating leases, net of any incentives received by the lessee, are recorded in the income statement during the period of the lease (Note 39). 

#### Leases included in contracts according to IFRIC 4

The Group recognises an operating or financial lease whenever it enters into an agreement, encompassing a transaction or a series of related transactions which even if not in the legal form of a lease, transfers a right to use an asset in return for a payment or a series of payments (Note 17). 

#### 1.27 Dividends distribution

The distribution of dividends to shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the shareholders and up until the time of their payment. 

#### 1.28 Revenue recognition and accrual basis

#### Revenue

Income derived from sales is recognised in the consolidated income statement when risks and benefits inherent in the ownership of the respective assets are transferred to the purchaser and the amount of the income can be reasonably quantified. 

Sales are recognised net of taxes, discounts and other costs associated with their realisation, at the fair value of the amount received or receivable. 

The income derived from the services rendered is recognised in the consolidated income statement with reference to the stage of completion of the services rendered at the statement of financial position date. 

#### Accrual accounting principle

Interest received is recognised in accordance with the principle of accrual accounting, taking into consideration the amount of debt and the effective rate of interest during the period to maturity. 

The Group companies record their costs and income in accordance with the accrual accounting principle, in terms of which costs and income are recognised as and when generated, irrespective of the moment in which they are received or paid. The differences between the amounts received and paid and the respective costs and income are recognised in the Receivables and other current assets and Payables and other current liabilities headings (Notes 24 and 32, respectively). 

#### 1.29 Contingent assets and liabilities

Contingent liabilities in which there is probability of an outflow of funds affecting future economic benefits is only probable, are not recognised in the consolidated financial statements, and are disclosed in the notes, unless the probability of the outflow of funds affecting future economic benefits is remote, in which case they are not the disclosed. 

Provisions are recognised for liabilities which meet the conditions described in note 1.21. 

Contingent assets are not recognised in the consolidated financial statements but are disclosed in the notes when it is probable that a future economic benefit will arise from them (Note 42). 

#### 1.30 Subsequent events

Events after statement of financial position date which provide additional information about the conditions prevailing at the date of the statement of financial position are reflected in the consolidated financial statements. Subsequent events which provide information about conditions which occur after the statement of financial position date are disclosed in the notes to the consolidated financial statements, if material. 

#### 1.31 New standards, changes and interpretation of existing standards

The application of the interpretations and amendments to the standards mentioned below, are mandatory by the IASB for the financial years that begin on or after 1 January 2015: 

| Effective standards and interpretations as at 31 December 2015 | Changes                                                               | Effective date * |
|----------------------------------------------------------------|-----------------------------------------------------------------------|------------------|
| Annual improvements to IFRSs 2011 – 2013                       | Clarifications                                                        | 1 January 2015   |
| IFRIC 21 – 'Levies'                                            | New interpretation – Accounting for liabilities referring to 'levies' | 1 January 2015   |
| * Periods beginning on or after                                |                                                                       |                  |

The adoption of these standards did not have any relevant impact in the Group's consolidated financial statements. 

#### New standards and interpretations not mandatory in the European Union:

There are new standards, interpretations and amendments of existing standards, that despite having already been published, they are only mandatory for the periods starting after 1 February 2015, which the Group decided not to early adopt in the current period, as follows: 

### Report and Accounts 2015

| Amendments that became effective, on or after 1 February 2015                                           | Changes                                                                                                                                      | Effective date *     |
|---------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|----------------------|
| Annual improvements to IFRSs 2010 - 2012                                                                | Clarifications                                                                                                                               | 1 February 2015      |
| IAS 19 – Employee Benefits                                                                              | Accounting for contributions independent of yea rs of service                                                                                | 1 February 2015      |
| IAS 16 and IAS 38 - Acceptable methods of depreciation / amortis ation                                  | Clarification that revenue based methods should not be used to measure the<br>consumption of fixed and inta ngible assets' economic benefits | 1 January 2016       |
| IAS 16 and IAS 41 – Agriculture: bearer plants                                                          | Bearer plants are included within the scope of IAS 16, meas ured either at cos t or<br>revaluated a mounts                                   | 1 January 2016       |
| IFRS 11 – Joint arrangements                                                                            | Accounting for acquisition of interest in a joint operation that is a business                                                               | 1 January 2016       |
| IAS 1 – Pres entation of financial statements                                                           | Review of dis closures under the "Disclos ure initiative" IASB project                                                                       | 1 January 2016       |
| IAS 27 – Separate financial statements                                                                  | Option to measure investments in subs idiaries, joint ventures and associates using<br>equity method                                         | 1 January 2016       |
| Annual improvements to IFRSs 2012 – 2014                                                                | Clarifications                                                                                                                               | 1 January 2016       |
| * Periods beginning on or after                                                                         |                                                                                                                                              |                      |
| Standards and amendments that became effective, on or after 1 February 2015, not yet endorsed by the EU | Changes                                                                                                                                      | Effective date *     |
| Amendments to IFRS 10, 12 and IAS 28: Investment entities - applying cons olidation exception           | Investment entities' exemption applies to an intermediate parent that is a subsidiary 1 de janeiro de 2016                                   |                      |
| IFRS 9 – Financial instruments                                                                          | New s tandard for the a ccounting of financial ins truments'                                                                                 | 1 de janeiro de 2018 |
| IFRS 15 – Revenue from contracts with customers                                                         | Revenue recognition for the provis ion of goods or services, following a five step<br>approach                                               | 1 de janeiro de 2018 |

 *\* Periods beginning on or after* 

The Group will adopt the new standards in the years in which they become of effective implementation. Up to the date of issuing this report, the Group had not assessed the effects on the consolidated financial statements arising from the adoption of these standards. 

## 2. Risk management

#### 2.1 Financial risk factors

Semapa, as a holding company develops direct and indirect managing activities over its subsidiaries. Therefore the fulfilment of the assumed obligations depends on the cash flow generated by its subsidiaries. Thus, the company depends on the eventual dividends distribution by subsidiaries, interests' payment, loans reimbursement and other cash‐flows generated by those companies. 

The ability of Semapa subsidiaries to make funds available will depend, partly, of their ability to generate positive cash flows and, on the other hand, of the respective earnings, available reserves and financial structure. 

The Semapa group has a risk‐management programme which focuses its analysis on the financial markets with a view to mitigate the potential adverse effects on the Semapa Group's financial performance. Risk management is undertaken by the Financial Management of the holding and main subsidiaries, in accordance with the policies approved by the Board of Directors. An Internal Control Commission with specific functions over the operations risk control is established at Semapa level. 

#### 2.1.1 Currency risk

Variations in the euro's exchange rate against other currencies can affect the Group's revenue in a number of ways. 

Regarding the Pulp and Paper segment a significant portion of its sales is denominated in currencies other than Euro. Thus, its development could have a significant impact on future sales of the Company mainly regarding USD exposure. Also sales in Sterling Pound (GBP), Polish Zloty (PLN) and Swiss Franc (CHF) have some expression, as sales in other currencies are less significant. 

Purchases of certain raw materials are made in USD, particularly the share of imports of wood pulp and softwood; therefore variations in this currency may have an impact on acquisition values. 

Furthermore, once a sale or purchase is made in a currency other than the Euro, the Group takes on an exchange risk up to the time it receives the proceeds of that sale or settles the purchase, if no hedging instruments are in place. Therefore, the Group is permanently exposed to currency risk trough a significant amount of receivables and, albeit with lesser significance, payables. 

The currency risk inherent to the segment of Cement and derivatives is mainly due to the current investments, hold and in development, located in Brazil and to the purchases of fuel and freight ships, both paid in USD. This segment continued its policy of maximizing the potential of covering their foreign exchange exposure, through compensating the exchange flows internally. This segment comprises assets located in Tunisia, Angola and 

Lebanon therefore any change in these countries' exchange rates could have an impact on Semapa statement of financial position. 

For the flows that are not compensated naturally, the risk has been assessed and covered by contracting structures of exchange options, which set the limit for the amount to pay, while it allows benefits from a favourable evolution in the exchange rate. 

Occasionally, when considered appropriate, the Group manages foreign exchange risks through the use of derivative financial instruments, in accordance with a policy that is subject to periodic review, the prime purpose of which is to limit the exchange risk associated with future sales and purchases and accounts receivable and payables which are denominated in currencies other than the Euro. 

The Group's exposure to foreign exchange rate risk as of 31 December 2015, based on the financial assets and liabilities that amounted to a net amount of Euro 173,402,678, passive position (31 December 2014: 89,305,838, passive position) converted at the exchange rate as of that date is detailed as follows: 

|                                  | United States | British     | Polish    | Swedish     |              | Swiss     | Danish   | Brazilian     |
|----------------------------------|---------------|-------------|-----------|-------------|--------------|-----------|----------|---------------|
| Amounts in Foreign Currency      | Dollar        | Pound       | Zloty     | Krone       | Turkish Lira | Franc     | Krone    | Real          |
| As of 31 December 2015           |               |             |           |             |              |           |          |               |
| Assets                           |               |             |           |             |              |           |          |               |
| Cash and cash equivalents        | 75,589,049    | 80,059      | 145,981   | 25,835      | (56,556)     | 4,206     | 1,511    | 48,038,430    |
| Receivables                      | 68,950,256    | 10,755,436  | 4,851,130 | 720,975     | -            | 2,453,274 | 739,172  | 24,605,240    |
| Investments in Joint Ventures    | -             | -           | -         | -           | -            | -         | -        | -             |
| Other assets                     | 840,287       | -           | -         | -           | -            | -         | -        | 8,342,539     |
| Total financial assets           | 145,379,592   | 10,835,495  | 4,997,111 | 746,810     | (56,556)     | 2,457,480 | 740,683  | 80,986,209    |
| Liabilities                      |               |             |           |             |              |           |          |               |
| Interest-bearing liabilities     | (11,261,017)  | -           | -         | -           | -            | -         | -        | (538,356,953) |
| Payables                         | (10,784,169)  | (23,374)    | (2,044)   | (2,434,317) | -            | -         | (49,623) | (252,863,781) |
| Total financial liabilities      | (22,045,186)  | (23,374)    | (2,044)   | (2,434,317) | ‐            | ‐         | (49,623) | (791,220,734) |
|                                  |               |             |           |             |              |           |          |               |
| Derivative financial instruments | (110,050,000) | (8,700,000) | ‐         | ‐           | ‐            | ‐         | ‐        | ‐             |
|                                  |               |             |           |             |              |           |          |               |
| Net financial position           | 13,284,406    | 2,112,121   | 4,995,067 | (1,687,507) | (56,556)     | 2,457,480 | 691,060  | (710,234,525) |
| As of 31 December 2014           |               |             |           |             |              |           |          |               |
| Total financial assets           | 187,786,189   | 9,092,628   | 3,785,505 | 1,318,718   | 44,556       | 3,520,448 | 654,083  | 340,646,028   |
| Total financial liabilities      | (71,874,589)  | (149,781)   | (2,044)   | (215,408)   | (26,427)     | -         | -        | (153,447,068) |
|                                  |               |             |           |             |              |           |          |               |
| Derivative financial instruments | (234,880,000) | (7,100,000) | ‐         | ‐           | ‐            | ‐         | ‐        | (128,100,000) |
|                                  |               |             |           |             |              |           |          |               |
| Net financial position           | (118,968,400) | 1,842,847   | 3,783,461 | 1,103,310   | 18,129       | 3,520,448 | 654,083  | 59,098,960    |

|                                  | Australian | Norwegian | Mozambican   | MAD       | 000 Libanese | Tunisian     | Angolan                      |
|----------------------------------|------------|-----------|--------------|-----------|--------------|--------------|------------------------------|
| Amounts in Foreign Currency      | Dollar     | Krone     | Metical      |           | Pounds       | Dinar        | Kwanza                       |
| As of 31 December 2015           |            |           |              |           |              |              |                              |
| Assets                           |            |           |              |           |              |              |                              |
| Cash and cash equivalents        | -          | 1,009     | 30,314,080   | 487,365   | 25,195,322   | 18,794,894   | 857,691,705                  |
| Receivables                      | 170,763    | 1,025,448 | 50,281       | -         | 27,443,035   | 30,141,060   | 201,755,690                  |
| Investments in Joint Ventures    | -          | -         | -            | -         | -            | -            | -                            |
| Other assets                     | -          | -         | -            | -         | -            | 79,331       | 403                          |
| Total financial assets           | 170,763    | 1,026,457 | 30,364,361   | 487,365   | 52,638,357   | 49,015,285   | 1,059,447,798                |
| Liabilities                      |            |           |              |           |              |              |                              |
| Interest-bearing liabilities     | -          | -         | -            | -         | (11,195,927) |              | (62,429,085) (1,451,165,358) |
| Payables                         | -          | -         | (53,389,395) | (131,017) | (28,181,597) | (28,205,883) | (453,995,841)                |
| Total financial liabilities      | ‐          | ‐         | (53,389,395) | (131,017) | (39,377,524) |              | (90,634,968) (1,905,161,199) |
| Derivative financial instruments | ‐          | ‐         | ‐            | ‐         | ‐            | ‐            | ‐                            |
| Net financial position           | 170,763    | 1,026,457 | (23,025,034) | 356,348   | 13,260,833   | (41,619,683) | (845,713,401)                |
| As of 31 December 2014           |            |           |              |           |              |              |                              |
| Total financial assets           | -          | 2,188,146 | 14,967,238   | 152,654   | 95,534,540   | 55,037,837   | 1,392,206,768                |
| Total financial liabilities      | (13,029)   | -         | (19,081,477) | (59,798)  | (42,244,853) |              | (92,434,420) (1,340,808,332) |
| Derivative financial instruments | ‐          | ‐         | ‐            | ‐         | ‐            | ‐            | ‐                            |
| Net financial position           | (13,029)   | 2,188,146 | (4,114,239)  | 92,856    | 53,289,688   | (37,396,583) | 51,398,436                   |

The exchange rate derivative financial instruments aim to hedge the currency risk of future transactions in foreign currency. 

As of 31 December 2015, a devaluation/valuation of 10% in all currency rates when compared to Euro, would have an impact on results amounting to Euro (15,931,232)/13,214,930, respectively (31 December 2014: Euro (2.286.369)/951.531), and on equity before taxes of Euro (2,066,930)/2,574,030 (31 December de 2014: Euro (2.675.922)/3.126.130), considering the effect of exchange rate hedging contracts in place. 

#### 2.1.2 Interest rate risk

A significant share of the Group's financial liabilities cost are indexed to short‐term reference interest rates, which are reviewed more than once a year (generally every six months for medium and long‐term debt). Hence, changes in interest rates can have an impact on the Company's earnings. Where the Board considers appropriate, the Group relies on the use of derivative financial instruments, including interest rate swaps and collars to manage the interest rate risk, and these tools aim to fix the interest rate on loans it obtains, within certain parameters. 

At the end of 2015, the Group Portucel contracted two Interest Rate Swaps, one of which with a notional of Euro 125 million and maturing in May 2020, in order to hedge the interest rate risk of a Commercial Paper Programme which was issued simultaneously. The other aimed to partially hedge the interest rate risk of the bond loan, with a notional of Euro 75 million and maturing in September 2023. 

In 2009, the Secil Group contracted one interest rate Swap to hedge the interest rate risk, with a notional amount of Euros 40,000,000 and maturity in 2017. The remaining debt of the Group continued indexed to a variable interest rate. 

During 2009 Semapa SGPS, S.A. contracted three interest rate collar structures over two bond loans in order to fix the interest costs within a certain limit of payments. Two of these three collars were cancelled in 2015, thus as of 31 December 2015, only one of these collars (maturing in April 2016) is still active, and matches the bond loan (Euros 175,000,000). 

The sub‐group ETSA kept all its debt allocated to a variable tax rate. 

On 31 December 2015 and 2014, the detail of the financial assets and liabilities with interest rate exposure, taking in consideration the maturities and the next repricing date was as follows: 

| Amounts in Euro              | Until 1 mounth | 1‐3 months   | 3‐12 months   | 1‐5 years     | + 5 years     | Total           |
|------------------------------|----------------|--------------|---------------|---------------|---------------|-----------------|
| As of 31 December 2015       |                |              |               |               |               |                 |
| Assets                       |                |              |               |               |               |                 |
| Non-current                  |                |              |               |               |               |                 |
| Other non-current assets     | -              | -            | -             | -             | -             | ‐               |
| Current                      |                |              |               |               |               |                 |
| Cash equivalents             | 162,079,058    | 44,176,706   | -             | -             | -             | 206,255,764     |
| Total financial assets       | 162,079,058    | 44,176,706   | ‐             | ‐             | ‐             | 206,255,764     |
| Liabilities                  |                |              |               |               |               |                 |
| Non-current                  |                |              |               |               |               |                 |
| Interest bearing liabilities | 276,906,487    | 51,675,729   | 420,971,141   | 516,704,815   | 241,154,223   | 1,507,412,395   |
| Other liabilities            | -              | -            | -             | -             | -             | ‐               |
| Current                      |                |              |               |               |               |                 |
| Interest bearing liabilities | 230,121,217    | 10,583,188   | 275,401,058   | 1,923,764     | -             | 518,029,227     |
| Total financial liabilities  | 507,027,704    | 62,258,917   | 696,372,199   | 518,628,579   | 241,154,223   | 2,025,441,622   |
|                              |                |              |               |               |               |                 |
| Difference                   | (344,948,646)  | (18,082,211) | (696,372,199) | (518,628,579) | (241,154,223) | (1,819,185,858) |

| Amounts in Euro              | Until 1 mounth | 1‐3 months    | 3‐12 months   | 1‐5 years     | + 5 years     | Total           |
|------------------------------|----------------|---------------|---------------|---------------|---------------|-----------------|
|                              |                |               |               |               |               |                 |
| As of 31 December 2014       |                |               |               |               |               |                 |
| Assets                       |                |               |               |               |               |                 |
| Non-current                  |                |               |               |               |               |                 |
| Other non-current ass ets    | -              | -             | -             | -             | -             | ‐               |
| Current                      |                |               |               |               |               |                 |
| Cash equivalents             | 580,329,895    | 22,641,877    | -             | -             | -             | 602,971,772     |
| Total financial assets       | 580,329,895    | 22,641,877    | ‐             | ‐             | ‐             | 602,971,772     |
| Liabilities                  |                |               |               |               |               |                 |
| Non-current                  |                |               |               |               |               |                 |
| Interest bearing liabilities | 14,688,934     | 143,667,656   | 337,261,905   | 436,307,115   | 350,897,437   | 1,282,823,047   |
| Other liabilities            | -              | -             | -             | -             | -             | ‐               |
| Current                      |                |               |               |               |               |                 |
| Interest bearing liabilities | 121,411,381    | 109,648,649   | 474,039,763   | 6,726,530     | -             | 711,826,323     |
| Total financial liabilities  | 136,100,315    | 253,316,305   | 811,301,668   | 443,033,645   | 350,897,437   | 1,994,649,370   |
|                              |                |               |               |               |               |                 |
| Difference                   | 444,229,580    | (230,674,428) | (811,301,668) | (443,033,645) | (350,897,437) | (1,391,677,598) |

Semapa uses the sensibility analysis technique to measure impacts on earnings and equity of increase or decrease on interest rates maintaining the other variables constant. This analysis is only for theoretical reasons since changes in interest rates rarely occur in isolation from changes in other market factors. 

The sensitivity analysis is based on the following assumptions:

- Changes in market interest rates affect interest income and expenses arising from financial instruments subject to floating rates;
- Changes in market interest rates only lead to interest income and expenses regarding fixed rate financial instruments if those are measured at their fair value;
- Changes in market interest rates affect the fair value of derivative financial instruments as well as other financial assets or liabilities;
- Changes in fair value of derivative financial instruments and other financial assets and liabilities are measured using the discounted cash flows method, with market interest rates at year end;

Under these assumptions, an increase of 0.5% on the interest rates for all currencies where the Group has interest‐bearing liabilities or derivative financial instruments as of 31 December 2015 would have a negative impact in the profit before tax of approximately Euro 7,440,907 (31 December 2014: down by Euros 4,810,540), and would have a positive impact in equity of approximately Euro 6,029,220 (31 December 2014: up by Euro 2,192,721). 

#### 2.1.3 Credit risk

The Group is exposed to credit risk in the credit it grants to its customers and, accordingly, it has adopted a policy of managing such risk within present limits, by serving insurance policies with a specialized independent company. 

The deterioration in global economic conditions or adverse situations which only affect economies at the local level could give rise to situations in which customers are unable to meet their commitments stemming from the sales of products. 

Credit insurance has been one of the instruments adopted by the Semapa Group to mitigate the negative impact of this type of risk. Sales that are not covered by credit insurance are subject to rules which ensure that sales are made to customers with a satisfactory credit history and are within reasonable exposure limits and approved for each costumer. 

The Group renegotiates periodically the receivables in accordance with its own management risk policy. 

As of 31 December 2015 and 31 December 2014, accounts receivable from customers showed the following ageing structure, considering the due dates for the open balances, before impairment charges: 

### Report and Accounts 2015

|                                   |                                | Cement       |             | Total        |              |
|-----------------------------------|--------------------------------|--------------|-------------|--------------|--------------|
| Amounts in Euro                   | Pulp and paper and derivatives |              | Environment | 31‐12‐2015   | 31‐12‐2014   |
|                                   |                                |              |             |              |              |
| Not overdue                       | 164,199,355                    | 38,919,182   | 2,841,248   | 205,959,785  | 190,024,674  |
| 1 to 90 days                      | 15,340,136                     | 20,646,529   | 4,073,886   | 40,060,551   | 32,830,877   |
| 91 to 180 days                    | 1,357,123                      | 1,597,901    | 822,420     | 3,777,444    | 3,149,781    |
| 181 to 360 days                   | 266,005                        | 1,819,161    | 37,145      | 2,122,311    | 2,097,724    |
| 361 to 540 days                   | 90,319                         | 1,629,435    | 26,167      | 1,745,921    | 1,661,527    |
| 541 to 720 days                   | 149,553                        | 932,590      | 5,077       | 1,087,220    | 1,267,191    |
| more than 721 days                | 733,961                        | 12,705,081   | 682,958     | 14,122,000   | 12,657,902   |
|                                   | 182,136,452                    | 78,249,879   | 8,488,901   | 268,875,232  | 243,689,676  |
| Litigation - doubtful debts       | 2,565,460                      | 10,205,514   | -           | 12,770,974   | 11,557,198   |
| Impairments (Note22)              | (2,565,460)                    | (24,793,372) | (696,936)   | (28,055,768) | (26,440,980) |
| Net receivables balance (Note 24) | 182,136,452                    | 63,662,021   | 7,791,965   | 253,590,438  | 228,805,894  |

The presented amounts correspond to the open items by the contracted due dates. Despite some delays in the liquidation of those amounts, that does not result, in accordance with the available information, in the identification of impairments further than the ones considered through the respective losses. 

These are identified using the information periodically collected about the financial behaviour of the Group customers, which allow, in conjunction with the experience obtained in the client portfolio analysis and with the history of credit defaults, in the share not attributable to the insurance company, to define the amount of losses to recognise in the period. The existing guarantees for a significant part of the open and old balances, justify the fact that no impairment has been recorded related to those amounts. 

The table below represents the quality of the Group's credit risk, as of 31 December 2015 and 2014, for financial assets (Cash and cash equivalents and Derivative financial instruments), whose counterparts are financial institutions: 

| Amounts in Euro | 31‐12‐2015  | 31‐12‐2014  |
|-----------------|-------------|-------------|
| AA-             | 12,843,478  | 49,279,195  |
| A+              | 48,921      | 100,064,147 |
| A               | 24,811,095  | 82,591,756  |
| A-              | 435,555     | 55,460      |
| BBB+            | 5,100,033   | 77,881      |
| BBB             | 1,008       | 20,109,900  |
| BBB-            | -           | 27          |
| BB+             | 9,317,115   | -           |
| BB              | 24,767      | 80,758,978  |
| BB-             | 27,405,274  | 152,144,881 |
| B+              | 33,382,179  | 39,907,523  |
| B               | -           | 52,664      |
| Others          | 92,525,634  | 77,517,989  |
|                 | 205,895,059 | 602,560,401 |

The caption others comprise short‐term investments in Angola's financial institutions, relatively to which it was not possible to obtain the ratings with reference to the presented dates. 

The ageing analysis of receivables already overdue is as follows: 

| Amounts in Euro                               |              | 31‐12‐2015                     | 31‐12‐2014   |                                |  |
|-----------------------------------------------|--------------|--------------------------------|--------------|--------------------------------|--|
|                                               | Gross amount | Fair value of credit insurance | Gross amount | Fair value of credit insurance |  |
| Accounts receivables overdue but not impaired |              |                                |              |                                |  |
| Overdue - less than 3 months                  | 38,820,000   | 17,589,634                     | 33,774,424   | 14,974,534                     |  |
| Overdue - more than 3 months                  | 6,706,832    | 1,329,127                      | 5,582,994    | 1,506,206                      |  |
|                                               | 45,526,832   | 18,918,761                     | 39,357,418   | 16,480,740                     |  |
| Accounts receivable overdue and impaired      |              |                                |              |                                |  |
| Overdue - less than 3 months                  | 275,416      | -                              | 47,944       | -                              |  |
| Overdue - more than 3 months                  | 27,780,352   | -                              | 26,334,037   | -                              |  |
|                                               | 28,055,768   | ‐                              | 26,381,981   | ‐                              |  |

In accordance with the above‐mentioned, it should be noted that the Group adopted a policy of credit insurance for all accounts receivable from costumers and has the procedure of selecting the financial entities for counterparts in its transactions that show solid financial ratings. Thus, it is considered that the effective Group's exposure to the credit risk has been mitigated and is within acceptable levels. 

The maximum exposure to the credit risk as at 31 December 2015 and 2014 is detailed in the following schedule: 

| Amounts in Euro                                            | 31‐12‐2015  | 31‐12‐2014  |
|------------------------------------------------------------|-------------|-------------|
|                                                            |             |             |
| Non‐current                                                |             |             |
| Available-for-sale financial assets (Note 21)              | 229,136     | 229,136     |
| Other non-current assets                                   | 6,777,734   | 4,914,177   |
| Current                                                    |             |             |
| Receivables and other current assets (Note 24)             | 285,359,246 | 270,639,851 |
| Derivative financial instruments (Note 24)                 | 3,650,428   | -           |
| Cash and cas h equivalents                                 | 205,895,059 | 602,560,401 |
|                                                            | 501,911,603 | 878,343,565 |
|                                                            |             |             |
| Credit risk exposures relating to off balance sheets itens |             |             |
| Warranties (Note 39)                                       | 22,148,954  | 16,565,918  |
|                                                            | 22,148,954  | 16,565,918  |

#### 2.1.4 Liquidity risk

The Group manages liquidity risk in two ways: ensuring that its interest‐bearing debt has a large medium and long‐term component with maturities in harmony with the characteristics of the industry in which it operates, and having access to credit facilities available at any moment, assuring the adequate liquidity. 

The liquidity of the agreed financial liabilities will generate the following not discounted cash flows, including interests till maturity at statement of financial position date: 

| Ammounts in Euro                       | Until 1 mounth | 1‐3 months  | 3‐12 months | 1‐5 years     | + 5 years   | Total         |
|----------------------------------------|----------------|-------------|-------------|---------------|-------------|---------------|
| As of 31 December 2015                 |                |             |             |               |             |               |
| Liabilities                            |                |             |             |               |             |               |
| Interest-bearing liabilities           |                |             |             |               |             |               |
| Bond loans                             | -              | -           | 190,602,303 | 657,831,362   | 212,780,375 | 1,061,214,040 |
| Commercial paper                       | 242,107        | 467,671     | 160,935,884 | 450,142,272   | -           | 611,787,933   |
| Bank loans                             | 34,133,474     | 26,019,892  | 84,375,685  | 262,152,840   | 70,680,329  | 477,362,219   |
| Financial leases                       | 78,224         | 156,448     | 838,361     | 2,493,065     | 790,274     | 4,356,372     |
| Other loans                            | 86,863,674     | 69,409,181  | 2,587,828   | 2,326,450     | -           | 161,187,132   |
| Derivatives financial instruments      | -              | -           | 640,982     | 3,837,017     | -           | 4,477,999     |
| Accounts payable and other liabilities | 363,088        | 330,686     | 881,830     | 1,576,955     | -           | 3,152,559     |
| Total liabilities                      | 121,680,567    | 96,383,878  | 440,862,871 | 1,380,359,961 | 284,250,978 | 2,323,538,255 |
| As of 31 December 2014                 |                |             |             |               |             |               |
| Liabilities                            |                |             |             |               |             |               |
| Interest-bearing liabilities           |                |             |             |               |             |               |
| Bond loans                             | 322,460        | 479,551,764 | 43,561,012  | 648,392,083   | 442,154,097 | 1,613,981,416 |
| Commercial paper                       | 43,579,878     | 216,899     | 129,966,067 | 95,410,892    | 20,371,656  | 289,545,392   |
| Bank loans                             | 4,868,544      | 9,105,100   | 52,855,313  | 183,832,818   | 46,004,114  | 296,665,889   |
| Financial leases                       | 80,369         | 155,269     | 865,434     | 3,305,282     | 1,041,239   | 5,447,593     |
| Other loans                            | 371,925        | 226,771     | 2,754,959   | 5,641,512     | -           | 8,995,167     |
| Derivatives financial instruments      | -              | 407,410     | 10,607,527  | 8,483,036     | -           | 19,497,973    |
| Accounts payable and other liabilities | 82,775,572     | 86,980,001  | 16,485,840  | 1,444,899     | -           | 187,686,312   |
| Total liabilities                      | 131,998,748    | 576,643,214 | 257,096,152 | 946,510,522   | 509,571,106 | 2,421,819,742 |

As of 31 December 2015 and 2014, bank loans granted and not withdrawn amount to Euro 736,308,629 e Euro 758,311,960 respectively. 

#### 2.1.5 Capital risk

The objectives of Semapa when managing capital are to safeguard the Group´s ability to continue as a going concern and value creation for shareholders, through a conservative dividend policy based on principles of financial 

strength. The aim has been to maintain a financial structure compatible with the Group´s sustained growth and different business areas, whilst maintaining sound solvency and financial autonomy indicators. Accordingly, capital for the purposes of capital management corresponds to the shareholders equity and it is not considered any financial liability as an integral part thereof. 

#### 2.2 Operational risk factors

#### 2.2.1 Risks relating to the Pulp and Paper segments

#### *Risks relating to the forestry sector*

At the end of 2015, Portucel Group managed an area of more than 120 thousand acres of land, from north to south of Portugal and Azores, divided in 1,373 Management Units in 167 counties, according to the principles laid down in its Forestry Policy. Eucalyptus trees and the forestation areas in progress with similar kind of species occupy 73% of this area, namely the Eucalyptus globulus, the species that is universally acknowledged as the tree with the ideal fibre for producing high quality paper. 

The Group is also managing, in a development stage, the forestation of 356,210 hectares in Mozambique, namely in the provinces of Manica and Zambezia, of which 47 thousand acres were ready to plant and were already planted 6.9 thousand acres, under a concession agreement reached with the Mozambique government. 

Most of the Group's forestry resources are certified by the FSC (Forest Stewardship Council) and PEFC (Programme for the Endorsement of Forest Certification Schemes), certification programs which guarantee that the Company's forests are managed in a responsible manner from an environmental, economic and social standpoint, complying with stringent and internationally‐recognised criteria. 

The main risk factor threatening the eucalyptus forests lies in the low productivity of Portuguese forests and in the worldwide demand for certified products, considering that only a small proportion of the Portuguese forests is certified. It is expected that this competitive pressure will remain in the future. As an example, although the forestry area managed by the Group represents only about 3% of Portugal's total forested area, it corresponds to 48% of all certified Portuguese forests according with PECF standards and 33% of all certified Portuguese forests according with FSC standards. 

The main risks associated with the sector are the ones related to the productive capacity of the plantations, the risk of wildfires as well as the regulatory risk, given the review announced by the Government of the legal regime applicable to forestation and reforestation with resort to forestry species, as established in Decree‐Law No. 96/2013, of 19 July. 

In order to maximize the productive capacity of the areas it manages, the Group has developed and employs Forestry Management models which contribute to the maintenance and on‐going improvement of the economic, ecological and social functions of the forestry areas, not only regarding the population but also from the forestry landscape perspective, namely: 

- (i) Increase the productivity of its woodlands through the use of the best agro‐forestry practices adapted to local conditions and compatible with the environment in order to ensure adequate biodiversity levels.
- (ii) Establish and improve the network of forestry infrastructures to enable the required accessibility for management, whilst making them compatible with the forestry protection measures against wildfires.
- (iii) Ensure compliance with the water‐cycle functions, promoting, whenever possible, the rehabilitation and qualitative protection of water resources.

The Group also has a research institute, Raíz, whose activity is focused in 3 main areas: Applied Research, Consulting and Training. In the forestry research area, Raíz seeks: 

- (i) To improve the productivity of the eucalyptus forests
- (ii) To enhance the quality of the fibre produced from the eucalyptus specie
- (iii) To implement a sustained forestry management program from an economic, environmental and social perspectives

(iv) To enhance practices and processes that reduce wood production costs 

The activity of Portucel Group is exposed to risks related to forest fires, namely: 

- (i) The destruction of current and future wood, stocks of owned by the Group and by third parties;
- (ii) Increase exploration costs and subsequent preparation for planting costs.

The manner in which the Group manages its woodlands constitutes the front line for mitigating this risk 

Amongst the various management measures to which the Group has committed under this program, the strict compliance for the biodiversity rules and the construction and maintenance of access roads and routes to each of the operational areas assume particular importance in mitigating the risk of wild fires. 

Moreover, the Group has a stake in the Afocelca grouping – a complementary corporate grouping (CCG) between the Portucel Group and the ALTRI Group, whose mission is to provide assistance to the fight against forest fires at the grouped companies' land holdings, in close coordination and collaboration with the National Civil Protection Authority (Autoridade Nacional de Protecção Civil – ANPC). This grouping manages an annual budget of some 3 million euro, and has created an efficient and flexible structure which implements practices aimed at reducing protection costs and minimizing the losses by forest fires for the members of the grouping, which own and manage more than 210 thousand acres of forests in Portugal. 

#### *Risks relating to the production and trading of BEKP (Bleached Eucalyptus Kraft Pulp) and UWF paper (Uncoated fine papers for printing and writing)*

#### *Supply of raw materials*

The wood supplied by the Group's forestry's represents less than 20% of the Group's needs, meaning the Group needs to buy wood in Iberian market and outside that. 

The supply of wood, namely eucalyptus, is subject to price and exchange rate fluctuations and difficulties encountered in the supply of raw materials that could have a significant impact on the production costs of companies producing BEKP (Bleached Eucalyptus Kraft Pulp). Also relevant (mostly in imports) is the volatility of wood transportation costs to the factories, which floats depending on oil prices and sea freight costs. 

The planting of new areas of eucalyptus and pine is subject to the authorization of the relevant entities, so that increases in forested areas, or the substitution of some of the currently used areas, depend on forest owners, which are estimated to be around 400,000, on the applicable legislation and the speed of the responsible authorities in approving the new projects as well as the volatility in the legal regime, as exemplified by Decree‐Law No. 93/2013 of 19 July, with a revision announced to 2016. 

If domestic production proved to be insufficient, in volume and in quality, namely of certified wood, the Group could have to place greater reliance on imports of wood from Africa and South America. 

Regarding imports of wood, there is a risk related to its shipment from the place of origin to the harbours supplying the Group that are far from Cacia and Figueira da Foz mills. This transportation risk is reduced by the agreed purchasing conditions, where the ownership of raw materials is transferred at the port of arrival, and complemented by insurance coverage of potential supplying losses caused by any transportation accident that may affect the supplying of wood. 

The Group seeks to maximize the added value of its products, particularly through increased integration of certified wood in these products. 

The low expression of this wood outside the forests directly managed by the Group has meant a shortage of supply, to which the Group has responded with an increase in the price offered when comparing to wood originated from forests that are not certified, through a price bonus for certified wood, a new initiative from Group. 

Furthermore, and considering the unparalleled contribution of the eucalyptus industry to the National Value Added of the Portuguese Economy, both direct and indirect, as well as the significance of such industries in exports and employment, and the increasing demand for eucalyptus, not easily satisfied by national forests, the Group has made the Government and the public opinion aware of the need to guarantee that, until the internal production of this type of wood does not increase significantly on an economically viable basis, the use of bio fuels for energy production should not be put ahead of the use of eucalyptus wood in the production of tradable goods. 

As at 31 December 2015, an increase of 10% on the cost of a cubic meter of the eucalyptus wood consumed in the production of BEKP, would have had an impact in Group's earnings of some Euro 29,700,000 (2014: Euro 31,400,000). It should be noted that this increase is partially due to the increase in the volumes produced. 

For other raw materials including chemicals, the main risk identified is the lack of availability of products under the increasing demand for these products in emerging markets, particularly in Asia and markets which supply them, you can create specific imbalances of supply and demand. 

The Group seeks to mitigate these risks through proactive sourcing, which seeks to identify sources of supply geographically dispersed, yet seeking to ensure supply term that assures volume levels, price and quality consistent with its requirements contracts. 

Finally, another resource required for the production process is water. The concern with the use of this resource that the Group assumes as finite is significant. Over the past few years investments have been made aimed at reducing the use of water in the process, which decreased more than 20% between 2005 and 2015. In addition, the quality levels achieved in the effluent treatment are among the highest and effluent volumes between 2005 and 2015 have been reduced by more than 13% as a result of investment in process improvement, aimed at minimizing the environmental impact of the Group. 

#### *Market price for UWF paper, BEKP and Tissue*

The increase in competition, caused by an imbalance of supply and demand in the BEKP, UWF or tissue markets may have a significant impact on prices and, as a consequence, in the Group's performance. The market prices of BEKP, UWF paper and tissue paper are defined in the world global market in perfect competition and have a significant impact on the Group's revenues and on its profitability. Cyclical fluctuations in BEKP, Tissue paper and UWF Paper prices mainly arise from both changes in the world supply and demand and the financial situation of each of the international market players (producers, traders, distributors, clients, etc.), creating successive changes in equilibrium prices and raising the global market's volatility. 

The BEKP and paper markets are highly competitive. Significant variations in existing production capacities could have a strong influence on world market prices. These factors have encouraged the Group to follow a defined marketing and branding strategy and to invest in relevant capital expenditure to increase productivity and the quality of the products it sells. 

On 31 December 2015, a 10% drop in the price per ton of BEKP and of 5% in the price per ton of UWF paper and Tissue paper sold by the Group in the period, would have represented an negative impact on its earnings of about Euro 13,900,000 (2014: Euro 11,400,000) and Euro 63,300,000 (2014: Euro 58,500,000). 

#### *Demand for Group products*

Notwithstanding the references below to the concentration of the portfolio of the Group's customers, any reduction in demand for BEKP, UWF and tissue in the markets of the European Union and the United States could have a significant impact on the Group's sales. The demand for BEKP produced by the Group also depends on the evolution of the capacity for paper production in the world, since the Group's major customers are themselves paper producers. 

The demand for printing and writing paper has been historically related with macroeconomic factors and the increasing use of copy and print material. A breakdown of the global economy and the increase of unemployment can cause a slowdown or decline in demand for printing and writing paper, thus affecting the performance of the Group. 

Regarding Tissue segment, the key variables affecting the demand are: 

- Expected future economic growth;
- Population growth and other demographic changes;
- Product penetration levels;
- Developments in the quality of Tissue paper and product specifications; and
- Substitution effects.

Tissue paper consumption is not very sensitive to cyclical changes in the economy, although it tends to grow faster with higher economic growth. 

The importance of economic growth for the consumption of Tissue is more obvious in developing countries. When the level of the income per capita is very low, the consumption of Tissue tends to be reduced. There is a threshold after which consumption accelerates. Economic growth allows greater penetration of the product, which is one of the main drivers of demand for such paper in the population with lower incomes. The Tissue paper is a product that does not face major threats of substitution by other materials, and there are no expected changes at this level. 

Consumer preferences may have an impact on global paper demand or in certain particular types of paper, such as the demand for recycled products or products with certified virgin fibre. 

Regarding this matter, and in the case of the UWF, the Group believes that the marketing strategy and branding that has been followed, combined with the significant investments made to improve productivity and produce high quality products, allow it to deliver its products in market segments that are less sensitive to variations in demand, resulting in a lower exposure to this risk. 

#### *Energy*

The process is dependent on the constant supply of electricity and steam energy. Responding to that, the Group has several cogeneration units, which provide this supply, and redundancies were planned between the generating units in order to mitigate the risk of any unplanned stops of those units to pulp and paper mills. The excess production from the consumption needs is sold in the market at regulated tariffs for 15 years after the settlement. After this period, the defined tariffs do not compensate market production as they are lower than the ones in which the group incurs for acquiring electricity, which can be proven by the reduction shown in the revenues arising from this segment. 

#### *Country risk ‐ Mozambique*

As the investment project in Mozambique gains relevance, exposure to specific risk in this country increases. 

The exposure to this risk means that the planning of investments in terms of timing, choice of suppliers / partners and geographic location is made considering this effect. The Group monitories the achievement of each step in a way that can assume with reasonable certainty that no risk that there will be effects due to condition them. 

In the 12 month period ended 31 December 2015, the expenditure with this project amounted to Euro 54,000,000 (31 December 2014: Euro 28,000,000), mainly related to plantation, land preparation, construction of Africa's largest forestry nursery and the identification of eucalyptus species with adequate industrial use to be planted in the areas awarded by the Mozambique State. 

#### *Competition*

Increased competition in the paper and pulp markets may have a significant impact in price and, as a consequence, in the Group's profitability. 

As paper and pulp markets are highly competitive, the start of production of new units with added productive capacity may have a relevant impact in prices worldwide. 

BEKP producers from the southern hemisphere (namely from Brazil, Chile, Uruguay and Indonesia), with significantly lower production costs than those in the northern hemisphere, have been gaining weight in the market, undermining the competitive position of European pulp producers. 

These factors have forced the Group to make significant investments in order to keep production costs competitive and produce high quality products as it is likely that this competitive pressure will remain strong in the future. 

The Group sells around 63% of its paper production in Europe, holding significant market shares in Southern European countries and relevant market shares in the other major European markets, as well as an important presence in the USA, nearly half of all the other markets (Overseas), despite the imposition of anti‐dumping duties resulting from its strength in the domestic market (Portugal), which represents about 5% of paper sales. 

#### *Concentration of customer portfolio*

As at 31 December 2015, the Group's 10 main BEKP customer groups accounted for 14% of the period's production of BEKP and 76% of external sales of BEKP. This asymmetry is a result of the strategy pursued by the Group, consisting of a growing integration of the BEKP produced into the UWF paper produced and sold. 

As such, the Group considers its exposure to the risk of customer concentration regarding the sale of BEKP, as small. 

As at 31 December 2015, the Group's 10 main customer groups for UWF paper represented 53% of this product's sales during the period, although the Group's 10 main individual costumer did not exceed 26% of the UWF paper sales. Also regarding UWF paper, the Group follows a strategy of mitigating the risk of customer concentration. The Group sells UWF paper to about 123 countries and 700 individual costumers, thereby allowing a dispersion of the risk of sales concentration in a reduced number of markets and/or customers. 

Tissue sales amounted to Euro 53.7 million in 2015, an increase of 10% when compared to the same period of 2014. Its commercial activity is mainly focused in the Iberian markets, representing 98 % of its sales. The 10 main customers represent about 56% of total sales. 

With the new production equipment's in place, given the investment in the second Tissue paper machine made in 2015, the Group believes it will be able to expand its commercial activity to external markets, namely to Spain and Western Europe. 

#### *Environmental legislation*

In recent years, environmental legislation in the EU has become increasingly restrictive regarding the control of effluents. The companies of the Group comply with the prevailing legislation. 

On September 2014, BREF (Best available techniques Reference document – Commission executive decision 2014/687/EU) was approved for the paper and pulp sector, with redefined limits and requirements for these sectors. The companies have four years to promote the required adjustments to its practices and equipment's. Furthermore, the technical discussion on the Large Combustion Facilities Reference Document was finalized, being the formal and political approval expected for early 2017. The publication of this document will have an impact on the group's equipment, particularly in boilers and combustion facilities, which will be covered by the new legislation to be published, therefore requiring new investments. 

As such, the group has been monitoring the technical development of this matter, trying to anticipate and plan the necessary improvements to their equipment so to comply with the limits to publish. There is a possibility that the Group may need to perform additional investments in this area in order to comply with any changes in limits and environmental rules which may be approved. 

To date, the legislative changes that are known relate to the evolution of the system of allocation of EU emission trading of CO2 emission rights (CELE), established by Directive 2003/87/CE, and recently amended by Directive 2009/29/CE (new CELE Directive), which outlines the legal framework of the CELE for the period 2013‐2020 and 

which was transposed into national law by Decree‐Law 38/2013 of 15 March, which came to result in reducing the scope of free allocation of CO2 emission rights allowances.

With this scenario, it is expected an increase the costs for the transformation industry in general and in particular for the paper and pulp industry, without any compensation for the CO2 that, annually, is absorbed by the forests of this industry. 

In order to reduce the impact of this change, the Group has been following a strategy of carrying out a series of environment related investments that, among other advantages, have resulted in a continued reduction of the CO2 emissions, in spite of the continuous increase in the production volume over the last years. 

In 2015, an environmental strategic plan was analysed and established, aiming to adapt Portucel Group to a set of new and future requirements in the environmental area, namely to the recently published reference document for the sector (Best available techniques Reference document – Commission executive decision 2014/687 / EU) and for Large Combustion Facilities. The aforementioned reference documents correspond to the implementation of Directive 2010/75/EU on industrial emissions. 

The Environmental Strategic Plan aimed for areas other than the environmental covered by this document. It was possible to confirm that Portucel Soporcel Group is generically in compliance with this future referential and to identify some areas for improvement as well as technological solutions such as atmosphere emissions from biomass boilers. 

#### *Risks associated with the production of energy*

Energy is considered to be an activity of growing importance in the Group allowing the use of the biomass generated in the BEKP production, but also ensuring the supply ‐ under the co‐generation regime ‐ of thermal and electric power at the BEKP and UWF paper industrial complexes, also enabling, among others, the group's wood suppliers to generate additional income from the sale of biomass and contributing to the reduction of the risk of fires in the country. 

Considering the increasing integration of the Group's mills dedicated to the production of BEKP and UWF paper and as a means of increasing the use of the biomass gathered in the woodlands, the Group built new biomass power‐generating units, to produce electrical power trough biomass. 

In this sector, the main risk is linked to the supply of raw material, namely, biomass. The group has played a pioneering role and has been developing a market for the sale of biomass for supplying the power plants it owns. The fostering of this market in a phase prior to the start‐up of the new power‐generating units has enabled it to secure a sustained raw‐material supply network which it may utilize in the future. 

As previously mentioned, the Group has been making the Government and public opinion aware of the need to guarantee that biomass is viewed in a sustainable manner, avoiding the use of eucalyptus wood for biomass, as an alternative of its use in the production of tradable goods. The incentives in place in Portugal only consider the use of residual forest biomass, rather than the use of wood to produce electrical power. 

In addition, and despite the legal provisions, 

- Decree‐Law 23/2010 and Act 140/2012, revised by Act 325‐A/2012, applicable to the ERP system ‐ Special Regime in cogeneration;
- For units powered through residual forestry biomass, dedicated to the production of electricity, the legal framework is provided by Decree‐Law 33‐A/2005, revised by Decree‐Law 225/2007, that extends from 15 to 25 years the guaranteed tariffs under the ERP system, which enables some revenue stability to be planned for the near future,

there is a risk that the change in sales tariffs may eventually penalize the products produced by the Group (already occurring, with specific measures over the energy price and the introduction an Extraordinary Contribution to the Energy Sector affecting cogenerating units with a capacity of more than 20MW). The constant search for the 

optimization of production costs and efficiency of the generating units is the way the Group seeks to mitigate this risk. 

As a result of the measures taken under the Financial Adjustment Programme that Portugal was subject to, the whole remuneration system of the national electricity sector was revised, being the major impact in the electricity produced from cogeneration, one of the most efficient ways to produce energy. 

The Group represents a relevant part (4.8%) of the energy produced in Portugal. The units owned and operated by the group have been watching a review of electricity prices over a transitory period initiated in 2012, through 2020 and ending in 2025. As a consequence, operation will become economically unfeasible. Over the aforementioned period, the energy generated by these units will no longer be sold to the national grid (already the case in the Figueira da Foz unit), as it will no longer be economically feasible. These units will be converted into auto consumption units after the transitory period applicable to each installation. 

#### *Risks associated to transport and logistics*

The Group exports over 95% of its production. As a consequence, transportation and logistics costs are materially relevant. A continuous rise in transport costs may have a significant impact in the Group's earnings. 

#### *Other risks associated with the pulp and paper segment*

The Group's manufacturing facilities are subject to risks inherent to any industrial activity, such as accidents, breakdowns or natural disasters that may cause losses in the Group's assets or temporary interruptions in the production process. 

Likewise, these risks may also affect the Group's main customers and suppliers, which would have a significant impact on the levels of the Group's profitability, should it not be possible to find new customers to ensure sales levels and new suppliers that would enable the Group to maintain its current cost structure. 

The Group exports over 95% of its production of UWF paper and about 31% of its production of tissue paper. As a consequence, transportation and logistics costs are materially relevant. A continuous rise in transport costs may have a significant impact in the Group's earnings. 

#### 2.2.2 Risks relating to the Cement and derivatives segment

#### *Supply of raw materials*

Regarding the segment of Cement and derivatives, the main raw materials in the manufacturing process of cement are limestone and clay or marl, which extraction is carried out in its own quarries, located within the factory, with reserves that ensure the Group sustained operation in the coming years. 

#### *Sale Price*

The cement and derivatives segment develops its activity in diverse geographically markets and therefore prices depend essentially on the economic situation of each country.

#### *Demand for Group's products*

The segment of Cement and derivative's turnover is dependent on the level of activity in the building sector in each one of the geographic markets in which it operates. The construction sector tends to be cyclical, in particular in mature economies, and depends on the level of residential and commercial building, as well as on the level of investments in infrastructures. 

The construction sector is sensitive to factors such as interest rates and therefore a downturn in economic activity in any specific economy may lead to a recession in this industry. 

Despite the Group considering that its geographical diversification is the best means to stabilise earnings, its business, financial situation and operating profit can be negatively affected by a downswing in the construction sector in any of the significant markets in which it operates. 

#### *Competition*

The companies of the segment of Cement and derivatives develop its activity in a strong competitive environment. In the Portuguese market, and in the current context, any excess capacity of national operators together with imports from the Spanish market, which is in sharp decline, may affect the performance of this segment. 

#### *Energy costs*

A significant part of the Group's costs relates to energy costs. Energy is a cost factor with a substantial weight on the business carried on by the Group. The Group hedges to a certain degree against the energy price risk through the usage of alternative fuels at its factories and long‐term electric power supply contracts for certain of its energy requirements. However significant fluctuations in electricity and fuel costs can have a negative impact on the Group's business, financial situation and operating profit. 

#### *Country risks – Brazil, Tunisia, Lebanon and Angola*

Secil is exposed to the country risk of Brazil, Tunisia, Lebanon and Angola where the Group holds investments in production units. 

#### *Environmental legislation*

In recent years, environmental legislation in Portugal and in the European Union has become increasingly restrictive regarding the control of effluents. Group Secil complies with the prevailing legislation and for that the Group has performed significant investments in the recent years. Although no significant changes in the legislation are expected in the near future, if that were to happen, the Group may need to incur in increased expenditure, in order to comply with any new environmental requirements that may come into force. 

#### 2.2.3 Risks relating to the Environment segment

#### *Supply of raw materials*

The supply of raw material for the segment of Environment, developed by the subgroup ETSA, is conditioned by the availability of animal carcasses and waste from the food industry, particularly in slaughterhouses. This market is relatively vulnerable to the deterioration of the economic situation, as well as changes in consumption habits and ease of substitution between food products, which could limit the activity of this subgroup. 

#### *Sale Price*

ETSA's business is exposed to volatility in prices of soft commodities on international markets (cereals and cereal products), since these are substitute products to those transacted by ETSA. 

The correlation between ETSA's selling prices and movements in prices of soft commodities on international markets is an additional risk factor for the activity. 

#### *Demand of Group's products*

A decrease in demand or diminished level of activity in animal feed industry, agriculture exploitations, pet food and biodiesel may have a significant impact on group ETSA's turnover. 

#### *Competition*

Sub‐group ETSA develops its activity in a market where it competes with other companies operating in the collection and recovery of animal by‐products and other companies that produce substitutes for these products such as industries related to the production of cereals and edible oils. In this framework, any increase or decrease in competition will be reflected in the levels of profitability of the Group. 

#### 2.2.4 Risks relating to the Group in general

#### *Environmental legislation*

The Group has been following a strategy of carrying out a series of environmental related investments that, among other advantages, have resulted in a continued reduction of the CO2 emissions. 

On the other hand, under the terms set in Decree‐Law 147/2008, dated 29 June that transposed directive 2004/35/CE to the national law, the Group ensured the environmental insurances demanded by the referred law, guaranteeing regulatory compliance and reducing exposure to environmental risks. 

#### *Human Resources*

The Group's ability to successfully implement outlined strategies depends on its capacity to recruit and retain key talents for each role. Although the Group's human resources policy seeks to achieve these goals, there might be some limitations to achieve them in the future. 

#### *Other risks*

The Group's manufacturing facilities are subject to risks inherent to any industrial activity, such as accidents, breakdowns or natural disasters that may cause losses in the Group's assets or temporary interruptions in the production process. 

Likewise, these risks may also affect the Group's main customers and suppliers, which would have a significant impact on the levels of the Group's profitability, should it not be possible to find new customers to ensure sales levels and new suppliers that would enable the Group to maintain its current cost structure. 

#### 2.2.5 Context risks

The lack of efficiency in the Portuguese economy continues to be accompanied by management, as it may have a negative effect on the Group's ability to be competitive. This is more so, but not exclusively, in the following areas: 

- Ports and railroads;
- Roads particularly those providing access to the Group's producing units;
- Rules regarding territory management and forest fires;
- Low productivity of the country's forests;
- The lack of certification of the vast majority of the Portuguese forest

## 3. Important accounting estimates and judgments

The preparation of consolidated financial statements requires that Group's management make judgments and estimates that affect the amount of revenue, costs, assets, liabilities and disclosures at statement of financial position date. 

These estimates are influenced by Group's management's judgments, based on: (i) the best information and knowledge of present events and in certain cases on the reports of independent experts; and (ii) the actions which the Group considers it may have to take in the future. However, on the date on which the operations are realised, the outcome could be quite different from those estimates. 

The estimates and assumptions which present a significant risk of generating a material adjustment to the book value of assets and liabilities in the following financial year are presented below: 

### 3.1 Impairment of Goodwill

The Group tests the goodwill carried in the consolidated statement of financial position for impairment losses annually, in accordance with the accounting policy described in Note 1.10. The recoverable amounts of the cash generating units are ascertained based on the calculation of their value‐in‐use and fair value less cost to sell. These calculations require the use of estimates and assumptions that if different may have an impact in the estimated recoverable value (Note 15). 

#### 3.2 Income tax

The Group recognises additional tax assessments resulting from audits carried out by the tax authorities. When the final outcome of the above reviews is different from the amounts initially recorded, the differences will have an impact on corporate income tax and deferred taxes in the periods where such differences are identified. 

In Portugal, the annual tax returns are subject to review and potential adjustment by tax authorities for a period of up to 4 years. However, if tax losses are utilised, these may be subject to review by the tax authorities for a period of up to 6 years. In other countries where the Group operates, these periods are different and, in most cases, higher. 

The Board of Directors believes that any reviews/ inspections by tax authorities will not have a material impact on the consolidated financial statements as of 31 December 2015, at this date all years until 2012 have been reviewed by the Tax Authorities.

#### 3.3 Actuarial assumptions

Liabilities relating to defined‐benefit plans are calculated based on actuarial assumptions (Note 29). Changes to those assumptions can have a material impact on the aforesaid liabilities. 

As of 31 December 2015, a decrease of 0.5% in the discount rate used in the actuarial assumptions would mean an overall increase of liabilities amounting to approximately Euro 13 million in their assessed value. 

#### 3.4 Fair value of biological assets

In determining the fair value of biological assets the Group used the discounted cash flows method considering assumptions related to the nature of the assets being valued (Note 1.11). Changes in these assumptions may have an impact in the value of those assets. 

As of 31 December 2015, an increase of 0.5% in the discount rate of 7.4% used to value those assets, would decrease their value by Euro 4.4 million. 

To Mozambique, the increase of 0.5% in the used discount rate (11.99%) would result in a devaluation of this asset in about Euro 197,000. 

#### 3.5 Recognition of provisions and adjustments

The Group is involved in several lawsuits underway, for which, based in the opinion of its lawyers, a judgment is made in order to asses if a provision for these contingencies should be booked Impairment in accounts receivable are calculated essentially based on accounts receivable's ageing, customers' risk profile and customers' financial situation. 

## 4. Segment reporting

Segmental information is presented in relation to the business segments identified, namely Pulp and Paper, Cement and Derivatives, Environment and Holdings. The earnings, assets and liabilities for each segment correspond to those which are directly attributed to them, as well as those which can be imputed to them on a reasonable basis. 

*Operating segments*

Financial information by operating segment for the year ended 31 December 2015 is shown as follows: 

|                                                                            | Pulp and         | Cement          |             |              |               |
|----------------------------------------------------------------------------|------------------|-----------------|-------------|--------------|---------------|
| Amounts in Euro                                                            | paper            | and derivatives | Environment | Holdings     | Consolidated  |
| Revenue                                                                    |                  |                 |             |              |               |
| Revenue                                                                    | 1,628,023,107    | 476,697,994     | 27,614,589  | -            | 2,132,335,690 |
| Operational results                                                        | 267,581,540      | 23,420,966      | 5,011,612   | (8,125,849)  | 287,888,269   |
| Net financial res ults (Note 10)                                           | (50,258,882)     | (37,399,870)    | (851,826)   | (29,464,958) | (117,975,536) |
| Group share of (los s) / gains of ass ociated companies and joint ventures | -                | (4,287,184)     | -           | -            | (4,287,184)   |
| Income tax expens e (Note 11)                                              | (31,629,009)     | (3,683,227)     | (404,551)   | 877,737      | (34,839,050)  |
| Profit for the year                                                        | 185,693,649      | (21,949,315)    | 3,755,235   | (36,713,070) | 130,786,499   |
| Profit for the year - Attributable to non-controlling interes t            | (<br>45,878,534) | (3,377,504)     | (420)       | -            | (49,256,458)  |
| Profit for the year ‐ Attributable to Semapa's Sahreholders                | 139,<br>815,115  | (25,326,819)    | 3,754,815   | (36,713,070) | 81,530,041    |
| Other information                                                          |                  |                 |             |              |               |
| Segment ass ets                                                            | 2,346,662,894    | 1,513,931,367   | 93,865,227  | 113,830,257  | 4,068,289,745 |
| Deferred tax as sets (Note 28)                                             | 50,934,325       | 23,486,104      | 60,113      | -            | 74,480,542    |
| Total as sets for post-employment benefits (note 29)                       | 3,755,326        | -               | -           | -            | 3,755,326     |
| Investment in as sociates and joint ventures (Note 19)                     | -                | 3,403,708       | -           | -            | 3,403,708     |
| Total segment liabilities                                                  | 1,296,342,373    | 990,426,641     | 31,351,044  | 618,542,626  | 2,936,662,684 |
| Depreciation, amortisation and impairment loss es (Note 8)                 | 136,98<br>7,485  | 59,095,584      | 2,952,140   | 225,492      | 199,260,701   |
| Provisions (Note 30)                                                       | (14,562,355)     | 2,872,432       | 109,297     | 2,589,999    | (8,990,627)   |
| Capital expenditures (Note 17)                                             | 148,455,971      | 25,993,102      | 4,395,623   | 74,384       | 178,919,080   |

#### Financial information by operating segment for the year ended 31 December 2014 is shown as follows:

|                                                                            | Pulp and         | Cement          |             |              |               |
|----------------------------------------------------------------------------|------------------|-----------------|-------------|--------------|---------------|
| Amounts in Euro                                                            | paper            | and derivatives | Environment | Holdings     | Consolidated  |
| REVENUE                                                                    |                  |                 |             |              |               |
| Revenue                                                                    | 1,542,279,415    | 429,556,788     | 26,319,691  | -            | 1,998,155,894 |
| Operational results                                                        | 203,005,028      | 24,386,156      | 1,271,879   | (2,627,968)  | 226,035,095   |
| Net financial res ults (Note 10)                                           | (34,152,250)     | (14,691,141)    | (1,082,364) | (53,950,982) | (103,876,737) |
| Group share of (los s) / gains of ass ociated companies and joint ventures | -                | 26,109          | -           | -            | 26,109        |
| Income tax expens e (Note 11)                                              | 8,026,349        | 5,241,439       | 371,721     | 16,442,794   | 30,082,303    |
| Profit for the year                                                        | 176,879,127      | 14,962,563      | 561,236     | (40,136,156) | 152,266,770   |
| Profit for the year- Attributable to non-controlling interes t             | (3<br>3,287,124) | (6,181,737)     | (63)        | -            | (39,468,924)  |
| Profit for the year‐ Attributable to Semapa´s Shareholders                 | 143,5<br>92,003  | 8,780,826       | 561,173     | (40,136,156) | 112,797,846   |
| OTHER INFORMATION                                                          |                  |                 |             |              |               |
| Segment ass ets                                                            | 2,634,596,448    | 1,194,801,758   | 91,643,716  | 183,602,565  | 4,104,644,487 |
| Deferred tax as sets (Note 28)                                             | 23,418,573       | 12,120,684      | 34,629      | 24,143,661   | 59,717,547    |
| Total as sets for post-employment benefits (Note 29)                       | 1,477,709        | -               | -           | -            | 1,477,709     |
| Investment in as sociates and joint ventures (Note 19)                     | -                | 87,086,273      | -           | -            | 87,086,273    |
| Total segment liabilities                                                  | 1,333,804,313    | 587,427,930     | 32,881,830  | 913,707,561  | 2,867,821,634 |
| Depreciation, amortisation and impairment loss es (Note 8)                 | 126,77<br>3,895  | 42,568,263      | 2,587,038   | 358,379      | 172,287,575   |
| Provisions (Note 30)                                                       | (1,336,655)      | 7,465,205       | (7,055)     | 5,510,000    | 11,631,495    |
| Capital expenditures (Note 17)                                             | 53,048,639       | 16,682,119      | 5,575,887   | 103,925      | 75,410,570    |

#### *Geographical segments*

|                             |                | Cement and  |             |               | Total   |
|-----------------------------|----------------|-------------|-------------|---------------|---------|
| 2015                        | Pulp and paper | derivatives | Environment | Total amount  | %       |
| Sales and services rendered |                |             |             |               |         |
| Portugal                    | 325,455,317    | 172,829,117 | 22,297,754  | 520,582,188   | 24.41%  |
| Rest of Europe              | 884,577,342    | 4,840,883   | 5,210,225   | 894,628,450   | 41.96%  |
| America                     | 219,716,825    | 46,358,484  | -           | 266,075,309   | 12.48%  |
| Africa                      | 153,958,989    | 157,091,442 | 106,610     | 311,157,041   | 14.59%  |
| Asia                        | 43,879,958     | 95,578,068  | -           | 139,458,026   | 6.54%   |
| Overseas                    | 434,676        | -           | -           | 434,676       | 0.02%   |
|                             | 1,628,023,107  | 476,697,994 | 27,614,589  | 2,132,335,690 | 100.00% |
|                             |                |             |             |               |         |
|                             |                | Cement and  |             |               | Total   |
| 2014                        | Pulp and paper | derivatives | Environment | Total amount  | %       |
| Sales and services rendered |                |             |             |               |         |
| Portugal                    | 226,565,846    | 147,106,104 | 19,280,164  | 392,952,114   | 19.67%  |
| Rest of Europe              | 959,585,168    | 3,386,455   | 6,773,738   | 969,745,361   | 48.53%  |
| America                     | 187,818,459    | 23,693,529  | -           | 211,511,988   | 10.59%  |
| Africa                      | 126,115,295    | 165,675,045 | 265,789     | 292,056,129   | 14.62%  |
| Asia                        | 41,971,590     | 89,695,655  | -           | 131,667,245   | 6.59%   |
| Overseas                    | 223,057        | -           | -           | 223,057       | 0.01%   |

The revenue presented in different business and geographical segments corresponds to revenue generated with external customers based on the final destiny of the products and services commercialised by the Group, not representing any of them, individually, 10% or more of the overall revenue of the Group. 

## 5. Other income

As of 31 December 2015 and 2014, the caption other income comprises: 

| Amounts in Euro                           | 2015       | 2014       |
|-------------------------------------------|------------|------------|
| Grants - CO2 emission allowances          | 15,319,904 | 14,266,181 |
| Impairment reversal (Note 22)             | 2,168,234  | 1,493,080  |
| Gains on disposals of emission allowances | 1,602,000  | 1,561,769  |
| Supplementary income                      | 645,536    | 1,437,764  |
| Gains on disposals of non-current assets  | 2,863,693  | 1,481,070  |
| Gains on inventories                      | 2,864,009  | 1,014,128  |
| Gains on disposals of current assets      | 10,937     | 26,006     |
| Government grants                         | 364,818    | 453,104    |
| Own work capitalised                      | 17,058,604 | 22,119,246 |
| Revenues from waste management            | 468,897    | 956,663    |
| Other operating income                    | 14,981,482 | 14,242,372 |
|                                           | 58,348,114 | 59,051,383 |

As at 31 December 2015 the caption "Own work capitalised" comprises Euro 16,940,059 (31 December 2014: Euro 21,641,617) regarding the preparation of land for forestation. These costs are related with the Mozambique project, capitalised in accordance with the accounting policy described in Note 1.11. 

The amount presented under the caption Grants – CO2 emissions allowances regards to the recognition of the grant, due to the allocation of free allowances (Note 1.6.1). 

## 6. Cost, expenses and losses

As of 31 December 2015 and 2014, Costs, expenses and losses were detailed as follows: 

| Amounts in Euro                                        | 2015            | 2014            |
|--------------------------------------------------------|-----------------|-----------------|
| Cost of sales and services rendered                    |                 |                 |
| Cost of inventories sold and consumed                  | (849,960,294)   | (814,782,892)   |
|                                                        |                 |                 |
| Cost of materials and services consumed                |                 |                 |
| Energy and fluids                                      | (156,266,600)   | (163,994,728)   |
| Inventory transportation                               | (178,563,823)   | (190,968,064)   |
| Professional fees                                      | (112,350,885)   | (96,831,839)    |
| Repair and maintenance                                 | (57,332,652)    | (54,056,011)    |
| Insurance                                              | (12,052,498)    | (13,270,231)    |
| Subcontracts                                           | (4,346,067)     | (8,329,791)     |
| Others                                                 | (75,645,194)    | (58,025,002)    |
|                                                        | (596,557,719)   | (585,475,666)   |
| Variation in production                                | 22,301,850      | (13,436,632)    |
| Payroll costs                                          |                 |                 |
| Statutory bodies (Note 7)                              | (22,893,906)    | (11,765,345)    |
| Other remunerations                                    | (145,631,316)   | (128,585,112)   |
| Pension costs (Note 29)                                | (17,513,653)    | (6,589,036)     |
| Other payroll costs                                    | (58,785,162)    | (47,742,144)    |
|                                                        | (244,824,037)   | (194,681,637)   |
| Others costs and losses                                |                 |                 |
| Membership fees                                        | (715,816)       | (708,031)       |
| Donations                                              | (2,176,919)     | (1,750,723)     |
| Cost with emission allowances                          | (17,547,630)    | (16,466,535)    |
| Inventories and other receivables impairment (Note 22) | (5,459,704)     | (6,534,927)     |
| Losses on inventories                                  | (4,016,034)     | (1,920,435)     |
| Indirect taxes                                         | (8,779,652)     | (7,687,521)     |
| Losses on disposal of non-current assets               | (603,611)       | (1,449,611)     |
| Other operating costs                                  | (7,213,400)     | (4,988,619)     |
|                                                        | (46,512,766)    | (41,506,402)    |
| Provisions (Note 30)                                   | 8,990,627       | (11,631,495)    |
| Total of Costs, Expenses and Losses                    | (1,706,562,339) | (1,661,514,724) |

The caption Other payroll costs, in 2015 and 2014, was detailed as follows: 

| Amounts in Euro         | 2015         | 2014         |
|-------------------------|--------------|--------------|
| Other payroll cost      |              |              |
| Social security costs   | (31,811,485) | (29,456,610) |
| Insurance               | (3,629,601)  | (3,731,156)  |
| Social welfare expenses | (6,317,021)  | (5,810,447)  |
| Other payroll cost      | (17,027,055) | (8,743,931)  |
|                         | (58,785,162) | (47,742,144) |

## 7. Remuneration of statutory bodies

As of 31 December 2015 and 2014, the caption Remuneration of statutory bodies was detailed as follows: 

| Amounts in Euro                                                   | 2015       | 2014       |
|-------------------------------------------------------------------|------------|------------|
| Members of Semapa's Board of Directors                            | 9,600,599  | 5,514,431  |
| Profit-sharing bonus es reclas sified to payroll cos ts (Note 14) | 2,377,075  | -          |
| Corporate bodies from other group companies                       | 10,916,232 | 6,250,914  |
|                                                                   | 22,893,906 | 11,765,345 |

In 2015 the caption Statutory bodies comprises Euro 2,377,075 of Profit‐sharing bonuses reclassified to Payroll costs related with the profit‐sharing deliberated at the Annual General Meeting of the 2014 financial statements approval that took place on 30 April 2015 (Note 14). According with the applicable accounting standards, and taking into account that the deliberation of the profit‐sharing bonuses occurred after the financial statements were approved for issue, the bonuses were reclassified to the 2015 income statement. The comparability of the caption Remunerations of statutory bodies is therefore diminished by this fact. If the amount paid had been recognized in 2014 this caption would amount to Euro 7,891,506. 

Additionally, the increase in remunerations of statutory bodies and corporate bodies from other group companies is mainly due to the increase in the number of Board members that are part of the several Boards existing within the Group. 

## 8. Depreciation, amortisation and impairment losses

As of 31 December 2015 and 2014, the caption Depreciation, amortisation and impairment losses were detailed as follows: 

| Amounts in Euro                                         | 2015          | 2014          |
|---------------------------------------------------------|---------------|---------------|
| Depreciation of property, plant and equipment           |               |               |
| Land                                                    | (4,371,962)   | (3,479,868)   |
| Environmental restoration and landscaping               | (115,672)     | (116,393)     |
| Buildings                                               | (18,799,172)  | (17,594,847)  |
| Other tangible as sets                                  | (170,726,272) | (156,092,551) |
| Government grants                                       | 6,699,612     | 6,342,325     |
|                                                         | (187,313,466) | (170,941,334) |
| Amortisation and impairment losses of intangible assets |               |               |
| Industrial property and other rights                    | (32,522)      | (27,930)      |
| Goodwill (Note 16)                                      | (11,075,942)  | -             |
| CO2 emission rights                                     | (144,997)     | 70,202        |
|                                                         | (11,253,461)  | 42,272        |
|                                                         |               |               |
| Impairment losses in assets held for sale               | (50,006)      | (60,016)      |
|                                                         |               |               |
| Impairment losses in investment properties              | (18,791)      | (18,791)      |
|                                                         |               |               |
| Impairment (losses) / reversals in tangible assets      |               |               |
| Land                                                    | (197,610)     | (105,316)     |
| Buildings                                               | (302,727)     | 382,061       |
| Equipments and other tangibles                          | 930,890       | (1,063,032)   |
| Assets under construction                               | (1,778,035)   | (523,419)     |
|                                                         | (1,347,482)   | (1,309,706)   |
| ICMS ‐Tax on movement of goods and services             |               |               |
| Tax included in depreciations (Brazil)                  | 722,505       | -             |
|                                                         | 722,505       | -             |
|                                                         | (199,260,701) | (172,287,575) |

## 9. Group share of (loss)/gains of associated companies

In 2015 and 2014, the Group recorded its share of the net income/ (loss) of associated companies and joint‐ ventures as follows: 

| Amounts in Euro                              | 2015        | 2014      |
|----------------------------------------------|-------------|-----------|
| Joint Ventures                               |             |           |
| Supremo Cimentos, S.A.                       | (5,551,271) | (883,384) |
| Associated companies                         |             |           |
| Setefrete, SGPS, S.A.                        | 1,159,706   | 723,055   |
| J.M.J. - Henriques, Lda.                     | (1,717)     | (1,660)   |
| Ave-Gestão Ambiental e Val. Energética, S.A. | 106,098     | 149,764   |
| Sociedade de Inertes, Lda.                   | -           | 38,334    |
|                                              | (4,287,184) | 26,109    |
|                                              |             |           |

Supremo Cimentos net loss corresponds to the application of the equity method (50% interest) during the first semester of 2015. Due to the acquisition of the remaining 50% occurred at the end of June, as at 30 June 2015, the group applied the full consolidation method to this subsidiary. 

The company does not recognise deferred taxes on these amounts, when positive, as it considers that the provisions of article 51 of the Corporate Income Tax Code (Portuguese initials IRC) apply. 

## 10. Net Financial Results

As of 31 December 2015 and 2014, Net financial results comprise: 

| Amounts in Euro                                                                 | 2015          | 2014          |
|---------------------------------------------------------------------------------|---------------|---------------|
| Interest paid on loans from shareholders (Note 35)                              | (14,269)      | (347,181)     |
| Interest paid on loans from associated companies and joint ventures (Note 35)   | (5,144)       | -             |
| Interest paid on other borrowings                                               | (76,450,434)  | (91,601,898)  |
| Interest earned on loans from associated companies and joint ventures (Note 35) | 712           | 2,111,120     |
| Other interest earned                                                           | 6,909,475     | 4,216,153     |
| Fair value in available-for-sale financial assets (Note 21)                     | -             | (146,429)     |
| Financial assets at fair value through profit and loss (Note 20)                | (108,517)     | (31,438)      |
| Gains / (losses) on financial instruments - hedging (Note 34)                   | (19,794,003)  | (4,468,837)   |
| Gains / (losses) on financial instruments - trading (Note 34)                   | 924,788       | (1,680,808)   |
| Expenses with loans issuing and other comissions                                | (12,377,410)  | (11,269,780)  |
| Early repayment of bond loan                                                    | (14,625,021)  | -             |
| Foreign exchange gains / (losses)                                               | (1,702,692)   | (767,453)     |
| (Costs)/gains with compensatory interest                                        | 87,191        | 862,522       |
| Other financial expenses                                                        | (892,939)     | (942,537)     |
| Other financial income                                                          | 72,727        | 189,829       |
|                                                                                 | (117,975,536) | (103,876,737) |

As disclosed to the market, the subsidiary Portucel proceeded to the partial early repayment of Euro 350 million Senior Notes 5.375% bonds, in the amount of Euro 200 million, which led to the immediate recognition of costs associated with the reimbursement of the bonds (Euro 14,625,021). 

The caption financial assets at fair value through profit and loss resulting from changes in fair value recorded in listed securities held by the Group as described in Note 20. 

Gains / (losses) on trading and hedging financial instruments comprise the results from the instruments detailed in Note 34. 

## 11. Income tax

Group Semapa is subject to the special regime governing business groups comprising companies in which the shareholding is equal to or more than 75% and which meet the conditions laid down in articles 69 and following of the Corporate Income Tax (CIT) Code. 

As of 31 December 2015, the tax business group led by Semapa as the dominant society comprises Groups Secil and ETSA, as well has all the subsidiaries that meet the legal requirements of the Corporate Income Tax Code. The companies that integrate the Portucel Group also integrated the tax business group led by Semapa until 30 June 2015. After 1 July 2015 a new taxation group led by Portucel SA was created. This change occurred in July 2015 (Note 1.2) and took place because of the Public Exchange Offer that decreased the direct and indirect interest held in this subsidiary to a percentage below the legal requirement of 75%. 

Companies included within the consolidation scope of the group of companies subject to this regime, calculate and recognise corporate income tax (CIT) as though they were taxed on an individual basis. However the liabilities are recognised as due to the dominant entity of the tax business group, currently Semapa, SGPS, S.A. which is responsible for the Group's overall clearance and payment of the corporate income tax. Where there are gains on the use of this regime, these are recorded in the dominant entity financial statements. 

As of 31 December 2015 and 2014, income tax expense comprises: 

| Amounts in Euro            | 2015         | 2014         |
|----------------------------|--------------|--------------|
| Current tax                | (47,843,783) | (13,461,483) |
| Provisions for current tax | (1,489,667)  | 40,632,950   |
| Deferred tax               | 14,494,400   | 2,910,836    |
|                            | (34,839,050) | 30,082,303   |

The reconciliation of the effective tax rate in the years ended 31 December 2015 and 2014 is as follows: 

| Amounts in Euro                             | 2015         | 2014         |
|---------------------------------------------|--------------|--------------|
| Profit before tax                           | 165,625,549  | 122,184,467  |
|                                             |              |              |
| Expected income tax                         | 37,265,749   | 29,935,194   |
| State surcharge                             | 7,678,340    | 9,283,778    |
| Differences (a)                             | (4,401,018)  | 8,294,827    |
| Prior year tax adjustments                  | 2,396,511    | (26,001,146) |
| Recoverable tax losses carried forward      | (34,549,383) | (36,041,557) |
| Non recoverable tax los ses                 | 34,926,345   | 28,726,424   |
| Impairment and reversal of provis ions      | (2,853,920)  | (19,585,378) |
| Impact of the change in the income tax rate | (1,388,149)  | (24,943,384) |
| Provision for current tax                   | 6,264,166    | 3,928,859    |
| Tax benefits                                | (13,691,838) | (83,099)     |
| Other                                       | 3,192,247    | (3,596,821)  |
|                                             | 34,839,050   | (30,082,303) |
| Effective tax rate                          | 21.03%       | -24.62%      |

(a) This amount is made up essentially of : 36,060,565 86,715,004

| Effects arising from the application of the equity method | 4,287,184     | (26,109)      |
|-----------------------------------------------------------|---------------|---------------|
| Capital gains / (losses) for tax purposes                 | 87,977,149    | (321,025,819) |
| Capital gains / (losses) for accounting purposes          | (119,942,630) | 320,328,181   |
| Impairment of taxed provisions                            | 12,330,502    | 17,688,914    |
| Tax benefits                                              | (2,386,320)   | (5,850,495)   |
| Reversal of taxed provisions                              | (11,971,077)  | (3,225,071)   |
| Intra-group earning's subject to taxation                 | 1,910,953     | 17,915,382    |
| Employees benefits                                        | 2,426,738     | (688,538)     |
| Others                                                    | 5,807,422     | 8,739,990     |
|                                                           | (19,560,079)  | 33,856,435    |
| Tax effect  (2015: 22.5% and 2014: 24.5%)                 | (4,401,018)   | 8,294,827     |

Pursuant to prevailing legislation, the gains and losses relating to group and associated companies resulting from the application of the equity method are deducted from or added to, respectively, to the net income of the year for the purpose of calculating taxable income. 

Dividends are considered when determining the taxable income in the year in which they are received, if the assets are held for less than one year or if investments represent less than 5% of the share capital. 

On July 1, 2015, all companies included in Semapa and Portucel's tax business groups changed their tax reporting period, which previously corresponded to the accounting year end (calendar year), to the period starting 1 July of each year and ending 30 June of the following year 

## 12. Earnings per share

There are no convertible financial instruments over Semapa' shares, so there is no dilution of earnings. 

| Amounts in Euro                                     | 2015       | 2014        |
|-----------------------------------------------------|------------|-------------|
| Profit attributable to Semapa's shareholders        | 81,530,041 | 112,797,846 |
| Weighted average number of ordinary shares in issue | 95,945,583 | 112,884,470 |
| Basic earnings per share                            | 0.850      | 1.014       |
| Diluted earnings per share                          | 0.850      | 1.014       |

Considering the company's 2015 net profit for the year, determined in accordance with the Portuguese GAAP (Note 44) in the separate financial statements, the Board of Directors proposes the distribution of a gross dividend of Euro 0.329 per share. 

## 13. Non‐controlling interests

As of 31 December 2015 and 2014, non‐controlling interests shown in the Income statement are detailed as follows: 

|                                                      | Income      |             |
|------------------------------------------------------|-------------|-------------|
| Amounts in Euro                                      | 2015        | 2014        |
| Portucel, S.A.                                       | 45,517,231  | 33,284,403  |
| Raiz - Instituto de Investigação da Floresta e Papel | 7,172       | 2,721       |
| Portucel Moçambique                                  | 354,130     | -           |
| Secil Betões e Inertes Group                         | 12,835      | (7,614)     |
| Société des Ciments de Gabés                         | (21,052)    | 142,776     |
| IRP - Indústria de Rebocos de Portugal, S.A.         | 87,061      | 94,566      |
| Secil - Companhia de Cimento do Lobito, S.A.         | (3,244,793) | (2,618,003) |
| Ciments de Sibline, S.A.L.                           | 6,504,265   | 8,566,966   |
| Cimentos Madeira Group                               | 29,024      | 23,711      |
| ETSA - Investimentos, SGPS, S.A.                     | 122         | 261         |
| Others                                               | 10,463      | (20,863)    |
|                                                      | 49,256,458  | 39,468,924  |

As of 31 December 2015 and 2014, non‐controlling interests in the Consolidated Statement of financial position are detailed as follows: 

|                                                      | Equity      |             |
|------------------------------------------------------|-------------|-------------|
| Amounts in Euro                                      | 31‐12‐2015  | 31‐12‐2014  |
| Portucel, S.A.                                       | 318,741,724 | 244,605,787 |
| Raiz - Instituto de Investigação da Floresta e Papel | 242,425     | 235,255     |
| Portucel Moçambique                                  | 8,379,878   | -           |
| Secil Betões e Inertes Group                         | 70,521      | 57,686      |
| Société des Ciments de Gabés                         | 1,167,373   | 1,265,100   |
| IRP - Indústria de Rebocos de Portugal, S.A.         | 455,823     | 518,762     |
| Secil - Companhia de Cimento do Lobito, S.A.         | (441,657)   | 2,957,344   |
| Ciments de Sibline, S.A.L.                           | 80,385,115  | 80,304,435  |
| Cimentos Madeira Group                               | 5,138,167   | 5,339,388   |
| ETSA - Investimentos, SGPS, S.A.                     | 6,987       | 6,568       |
| Others                                               | 1,143,099   | 1,134,089   |
|                                                      | 415,289,455 | 336,424,414 |

In 2014, the Group celebrated agreements with IFC ‐ International Finance Corporation leading IFC to participate in Portucel Moçambique S.A. share capital, in order to ensure the construction phase of the Group's forestry project in Mozambique. In 2015, Portucel Moçambique S.A. operated a share capital increase amounting to Metical 1,000 million to Metical 1,680,798, from which IFC subscribed, although not yet realized, Metical 332,798 million, corresponding to 19.8% of the share capital. 

As the conditions to the capital increase (realized by Portucel Group in its own share by incorporating credits held over the society) are substantially met, it was recognized in the Group's Financial Statements, having the corresponding non‐controlling interests also been recognized. 

The movement in the non‐controlling interests', by operating segments, in the years ended 31 December 2015 and 2014 is as follows: 

|                                | Pulp         | Cement          |             |               |
|--------------------------------|--------------|-----------------|-------------|---------------|
| Amounts in Euro                | and paper    | and derivatives | Environment | Total         |
| Balance as of 1 January 2014   | 251,262,730  | 78,004,586      | 6,502       | 329,273,818   |
| Acquisitions / (Dis posals )   | (1,805,914)  | 15,432          | -           | (1,790,482)   |
| Dividends                      | (37,779,790) | (2,339,345)     | -           | (40,119,135)  |
| Currency translation reserve   | 380,390      | 9,688,907       | -           | 10,069,297    |
| Financial instruments          | (478,378)    | -               | -           | (478,378)     |
| Actuarial gains and losses     | (19,113)     | 25,467          | -           | 6,354         |
| Other movements in equity      | (6,010)      | 25              | -           | (5,985)       |
| Profit for the year            | 33,287,126   | 6,181,732       | 66          | 39,468,924    |
| Balance as of 31 December 2014 | 244,841,042  | 91,576,804      | 6,568       | 336,424,414   |
| Acquisitions / (Dis posals )   | 132,461,706  | (222,601)       | -           | 132,239,105   |
| Dividends                      | (98,167,519) | (13,207,278)    | -           | (111,374,797) |
| Currency translation reserve   | 1,334,728    | 6,402,602       | -           | 7,737,330     |
| Financial instruments          | 406,445      | -               | -           | 406,445       |
| Actuarial gains and losses     | (375,687)    | (7,896)         | -           | (383,583)     |
| Other movements in equity      | 984,778      | (694)           | (1)         | 984,083       |
| Profit for the year            | 45,878,534   | 3,377,504       | 420         | 49,256,458    |
| Balance as of 31 December 2015 | 327,364,027  | 87,918,441      | 6,987       | 415,289,455   |

The increase verified on the non‐controlling interests affected to the Pulp and Paper segment is mainly due to the increase share of the non‐controlling interests in Portucel's equity related with the public exchange offer described in Note 1.2. 

## 14. Application of previous year's profit

In accordance with the resolutions of the Annual General Meeting of the financial statements approval, the profit of the 2014 and 2013 exercises were applied as follows: 

|                        | Application of year's net profit |             |  |
|------------------------|----------------------------------|-------------|--|
| Amounts in Euro        | 2014                             | 2013        |  |
| Dividens distribution  | 39,939,176                       | 37,477,644  |  |
| Profit-sharing bonuses | 2,602,602                        | -           |  |
| Other reserves         | 70,256,068                       | 108,647,828 |  |
| Profit for the year    | 112,797,846                      | 146,125,472 |  |
|                        |                                  |             |  |
| Dividends per share    | 0.3750                           | 0.3320      |  |

The legal reserves are constituted by its maximum amount. 

At the Annual General Meeting of the company, which took place on 30 April 2015, the distribution of dividends corresponding to Euro 0.375 per share, amounting to Euro 39,939,176 was approved. 

It was also approved that an amount up to Euro 2,800,000 of the 2014 net profit would correspond to Board members and other employees' profit‐sharing bonuses. Thus, an amount of Euro 2,377,075 (Note 7) was paid to the Company's Board of Directors and Euro 225,527 to other employees. 

Additionally, at the Extraordinary General Meeting of the company, which took place on 18 December 2015, the distribution of reserves corresponding to Euro 0.75 per share, amounting to Euro 61,229,995 was approved (Note 27). 

## 15. Goodwill

The movement in Goodwill for the years' ended as of 31 December 2015 and 2014 were as follows: 

| Amounts in Euro                  | 31‐12‐2015   | 31‐12‐2014  |
|----------------------------------|--------------|-------------|
| Balance at the beginning of year | 296,680,236  | 296,680,236 |
| Change in perimeter              | 27,436,872   | -           |
| Acquisitions                     | 37,681,421   | -           |
| Disposals                        | (13,240,613) | -           |
| Exchange rate adjustments        | (12,914,546) | -           |
| Final balance                    | 335,643,370  | 296,680,236 |
|                                  |              |             |

*Note: The amounts presented are net of impairment losses (Note 22)*

Goodwill is attributed to the Group's cash generating units (CGU's) that correspond to the operating segment identified in Note 4, as follows: 

| Amounts in Euro        | 31‐12‐2015  | 31‐12‐2014  |
|------------------------|-------------|-------------|
| Cement and derivatives | 176,312,908 | 124,692,243 |
| Pulp and paper         | 122,907,528 | 135,565,059 |
| Environment            | 36,422,934  | 36,422,934  |
|                        | 335,643,370 | 296,680,236 |

In accordance with IAS 36, Goodwill is subject to impairment tests performed on an annual basis, in accordance to the accounting policy described in Note 1.7. 

As a result of the performed CGU's impairment tests, the recoverable value was determined based on value in use, according to the discounted cash flows method. The impairment tests were based on the historical performance of these units as well as the development of their business expectations with the actual production structure, using the budgets for the following year and an estimate of cash flows for the next period of 4 years. 

The main assumptions used for impairment testing, these UGC's were as follows: 

|                          | Risk‐free interest |        | Growth |          |
|--------------------------|--------------------|--------|--------|----------|
| Operating Segment        | rate               | WACC   | rate   | Tax rate |
| Pulp and paper           |                    |        |        |          |
| Explicit planning period | 0.65%              | 6.79%  | -      | 29.50%   |
| Perpetuity               | 0.65%              | 6.79%  | 1.00%  | 29.50%   |
| Cement and derivatives   |                    |        |        |          |
| Portugal                 |                    |        |        |          |
| Explicit planning period | 0.65%              | 6.41%  | -      | 27.50%   |
| Perpetuity               | 0.65%              | 6.41%  | 1.75%  | 27.50%   |
| Madeira                  |                    |        |        |          |
| Explicit planning period | 0.65%              | 6.63%  | -      | 21.50%   |
| Perpetuity               | 0.65%              | 6.63%  | 1.75%  | 21.50%   |
| Tunisia                  |                    |        |        |          |
| Explicit planning period | 0.65%              | 7.94%  | -      | 25.00%   |
| Perpetuity               | 0.65%              | 7.94%  | 1.75%  | 25.00%   |
| Lebanon                  |                    |        |        |          |
| Explicit planning period | 0.65%              | 10.45% | -      | 15.00%   |
| Perpetuity               | 0.65%              | 10.45% | 1.75%  | 15.00%   |
| Angola                   |                    |        |        |          |
| Explicit planning period | 0.65%              | 11.48% | -      | 30.00%   |
| Perpetuity               | 0.65%              | 11.48% | 1.75%  | 30.00%   |
| Brazil                   |                    |        |        |          |
| Explicit planning period | 0.65%              | 10.19% | -      | 34.00%   |
| Perpetuity               | 0.65%              | 7.82%  | 1.75%  | 34.00%   |
| Environment              |                    |        |        |          |
| Explicit planning period | 0.65%              | 6.56%  | -      | 25.50%   |
| Perpetuity               | 0.65%              | 6.56%  | 1.25%  | 25.50%   |

As a result of the impairment tests performed and respective sensitive analysis to its main assumptions, no impairment losses have been identified on the goodwill of the CGU´s. 

#### *Changes in the perimeter*

#### AMS BR acquisition

In the beginning of February 2015 the Portucel Group completed the acquisition of the capital of AMS BR Star Paper, S.A., a paper company in the Tissue segment, based in Vila Velha de Ródão. 

The allocation of fair values to assets and liabilities of this subsidiary, as at 1 January 2015, was made in a preliminary way in the first quarter of 2015 and it has been revised, which resulted in establishing a final difference of acquisition / goodwill, whose details are presented as follows: 

|                                                    | Goodwill AMS BR |            |  |
|----------------------------------------------------|-----------------|------------|--|
| Amounts in Euro                                    | Final           | Initial    |  |
|                                                    |                 |            |  |
| Amount of acquisiton                               |                 |            |  |
| Shares                                             | 38,622,294      | 38,622,294 |  |
| Credits from additional paid in capital            | 2,327,500       | 2,327,500  |  |
| Total amount of acquisition                        | 40,949,794      | 40,949,794 |  |
|                                                    |                 |            |  |
| AMS adjusted equity as at 1 January 2015           | 38,039,211      | 17,284,378 |  |
| % s hares acquired                                 | 100.00%         | 100.00%    |  |
| AMS acquired equity                                | 38,039,211      | 17,284,378 |  |
| Creditors from additional paid in capital acquired | 2,327,500       | 2,327,500  |  |
|                                                    |                 |            |  |
| Total Equity + credits acquired                    | 40,366,711      | 19,611,878 |  |
| Acquisitions difference (GW)                       | 583,082         | 21,337,916 |  |

#### Supremo Cimentos acquisition

At the end of June 2015, the Brazilian subsidiary, NSOSPE, SA, acquired 50% of the capital of Supremo Cimentos SA, and obtained control of 100% of this subsidiary, (until then the control was jointly with three Brazilian shareholders). 

Thus, the Group assessed the acquisition differences as at June 30, whose details are as follows: 

|                                       | Supremo     |
|---------------------------------------|-------------|
| Amounts in Reais                      | Cimentos    |
| Amount of acquisition (50%)           | 290,784,722 |
| Supremo's equity at 30 June 2015      | 324,114,388 |
| % shares acquired                     | 50.00%      |
| Supremo's acquired equity             | 162,057,194 |
| Total equity acquired                 | 162,057,194 |
| Acquisition difference ‐ GW (BRL)     | 128,727,528 |
| Exchange rate EUR/BRL on 30 June 2015 | 3.470       |
| Acquisition difference ‐ GW (EUR)     | 37,098,339  |

The changes in perimeter from the integration of the assets and liabilities of these subsidiaries are detailed as follows: 

|                                           | Changes in the perimeter |              |               |  |
|-------------------------------------------|--------------------------|--------------|---------------|--|
| Amounts in Euro                           | Supremo                  | AMS BR       | Total         |  |
|                                           |                          |              |               |  |
| Non‐current assets                        |                          |              |               |  |
| Other intangible assets                   | 26,549,889               | 288,276      | 26,838,165    |  |
| Land, buildings and equipment             | 346,125,238              | 45,235,000   | 391,360,238   |  |
| Investment properties                     | -                        | 428,484      | 428,484       |  |
| Deferred tax assets                       | 6,605,900                | -            | 6,605,900     |  |
| Other non-current assets                  | 1,915,677                | 5,952,483    | 7,868,160     |  |
| Current assets                            |                          |              |               |  |
| Inventories                               | 7,454,470                | 7,631,176    | 15,085,646    |  |
| State and other public entities           | 8,108,812                | 715,326      | 8,824,138     |  |
| Other current assets                      | 5,098,447                | 14,593,916   | 19,692,363    |  |
| Cash and cash equivalents                 | 1,926,505                | 9,739,020    | 11,665,525    |  |
| Non‐current liabilities                   |                          |              |               |  |
| Interest bearing liabilities              | (118,967,665)            | (33,806,543) | (152,774,208) |  |
| Deferred tax liabilities                  | (32,478,894)             | -            | (32,478,894)  |  |
| Accounts payable - Shareholders           | (50,028,145)             | -            | (50,028,145)  |  |
| Other non-current liabilities             | (38,731,306)             | (1,452,888)  | (40,184,194)  |  |
| Current liabilities                       |                          |              |               |  |
| State and other public entities           | (2,216,778)              | (85,051)     | (2,301,829)   |  |
| Interest bearing liabilities              | (46,149,400)             | (7,852,095)  | (54,001,495)  |  |
| Other current liabilities                 | (21,805,334)             | (1,020,393)  | (22,825,727)  |  |
| Total identifiable assets and liabilities | 93,407,415               | 40,366,711   | 133,774,126   |  |
| Net assets acquired                       | 46,703,707               | 40,366,711   | 87,070,418    |  |
| Goodwill                                  | 37,098,339               | 583,082      | 37,681,421    |  |
| Total amount of acquisition               | 83,802,047               | 40,949,793   | 124,751,840   |  |

## 16. Other intangible assets

During 2015 and 2014, changes under the Other intangible assets heading were as follows: 

| Amounts in Euro                                | Brands       | Expenditures on<br>research and<br>development | Industrial properties<br>and other rights | CO2 emission<br>allowances | Assets under<br>construction | Total        |
|------------------------------------------------|--------------|------------------------------------------------|-------------------------------------------|----------------------------|------------------------------|--------------|
| Acquisition cost                               |              |                                                |                                           |                            |                              |              |
| Amount as of 1 January 2014                    | 255,662,750  | 11,737                                         | 251,596                                   | 14,585,027                 | 24,436                       | 270,535,546  |
| Acquisition / attributions                     | -            | -                                              | -                                         | 20,957,864                 | 30,340                       | 20,988,204   |
| Dispos als                                     | -            | -                                              | -                                         | (1,985,025)                | -                            | (1,985,025)  |
| Adjustments , transfers and write-off's        | -            | -                                              | 22,226                                    | (12,705,121)               | (22,228)                     | (12,705,123) |
| Exchange rate adjustment                       | 3,247,380    | -                                              | -                                         | -                          | -                            | 3,247,380    |
| Amount as of 31 December 2014                  | 258,910,130  | 11,737                                         | 273,822                                   | 20,852,745                 | 32,548                       | 280,080,982  |
| Change of perimeter                            | 26,549,889   | -                                              | -                                         | 288,276                    | -                            | 26,838,165   |
| Acquisition / attributions                     | -            | -                                              | -                                         | 21,158,004                 | 20,361                       | 21,178,365   |
| Dispos als                                     | -            | -                                              | -                                         | (1,384,000)                | -                            | (1,384,000)  |
| Adjustments , transfers and write-off's        | -            | -                                              | (58,879)                                  | (16,775,571)               | (49,065)                     | (16,883,515) |
| Exchange rate adjustment                       | (1,602,282)  | -                                              | -                                         | (13,618)                   | -                            | (1,615,900)  |
| Amount as of 31 December 2015                  | 283,857,737  | 11,737                                         | 214,943                                   | 24,125,836                 | 3,844                        | 308,214,097  |
| Accumulated amortisation and impairment losses |              |                                                |                                           |                            |                              |              |
| Amount as of 1 January 2014                    | ‐            | (10,844)                                       | (212,725)                                 | (432,181)                  | ‐                            | (655,750)    |
| Amortisation and impairment losses             | -            | -                                              | (27,930)                                  | 70,202                     | -                            | 42,272       |
| Adjustments , transfers and write-off'         | -            | -                                              | -                                         | 361,977                    | -                            | 361,977      |
| Amounts as of 31 December 2014                 | ‐            | (10,844)                                       | (240,655)                                 | (2)                        | ‐                            | (251,501)    |
| Amortisation and impairment losses             | (11,075,942) | -                                              | (32,522)                                  | (144,997)                  | -                            | (11,253,461) |
| Adjustments , transfers and write-off'         | -            | -                                              | 58,879                                    | 119,498                    | -                            | 178,377      |
| Exchange rate adjustment                       | (211,908)    | -                                              | -                                         | -                          | -                            | (211,908)    |
| Amount as of 31 december 2015                  | (11,287,850) | (10,844)                                       | (214,298)                                 | (25,501)                   | ‐                            | (11,538,493) |
| Net book value as of 1 January 2014            | 255,662,750  | 893                                            | 38,871                                    | 14,152,846                 | 24,436                       | 269,879,796  |
| Net book value as of 31 December 2014          | 258,910,130  | 893                                            | 33,167                                    | 20,852,743                 | 32,548                       | 279,829,481  |
| Net book value as of 31 December 2015          | 272,569,887  | 893                                            | 645                                       | 24,100,335                 | 3,844                        | 296,675,604  |

The amount shown under the caption Brands comprises: 

#### *Pulp and Paper segment*

 Euro 151,488,000, regarding the initial valuation of Navigator and Soporset brands, determined by an external evaluation conducted by a specialised and independent entity, using the updated cash flow projections with an appropriate discount rate, following the allocation of fair value to the assets and liabilities of Portucel Group. 

#### *Cement and derivatives segment*

 Euro 121,081,887, regarding the initial valuation of the brands Secil Portugal (Euro 71,700,000), Sibline (Lebanon‐ Euro 18,555,554), Gabès (Tunisia – Euro 9,143,249) and Supremo (Brazil – Euro 21,683,084), determined by an external evaluation conducted by a specialized and independent entity, using the cash flow projections with an appropriate discount rate, following the allocation of fair value to assets and liabilities of Secil Group. 

Sibline, Gabés and Supremo cement brands are subject to exchange rate update in accordance with the accounting policy described in Note 1.5. 

The referred amounts are not subjected to amortisation as their useful life is undefined (Note 1.6). For valuation purposes, is considered that brand have an undefined useful life, because it is assumed that it is not possible to determine with an acceptable degree of reliability a time limit for their continuity in the market. The Group tests annually the impairment of these intangible assets in accordance with IAS 36. 

Brands are subject to impairment tests to determine the recoverable amount based on its value in use, in accordance with the discounted cash flow method. 

The main assumptions used in the valuation of brands of Pulp and Paper segment in 2015, for the purposes of impairment testing, were as follows: 

|           |         | Risk‐free       | Discount | Tax   |
|-----------|---------|-----------------|----------|-------|
| Brand     | Markets | interest rate * | rate     | rate  |
|           | Europe  | 1.16%           | 8.70%    | 29.5% |
| Navigator | USA     | 2.22%           | 8.70%    | 29.5% |
|           | Europe  | 1.16%           | 8.70%    | 29.5% |
| Soporset  | USA     | 2.22%           | 8.70%    | 29.5% |

*\* Each risk‐free rate comprises its own country risk*

The main assumptions used in the valuation of brands of Cement and derivatives performed in 2015, for the purposes of impairment testing, were as follows: 

|                              |          | Risk‐free       | Discount | Tax   |
|------------------------------|----------|-----------------|----------|-------|
| Brand                        | Markets  | interest rate * | rate     | rate  |
| Secil Portugal               | Portugal | 2.59%           | 6.41%    | 27.5% |
| Ciments de Sibline           | Lebanon  | 9.18%           | 11.81%   | 15.0% |
| Supremo Cimentos             | Brazil   | 9.62%           | 14.31%   | 34.0% |
| Société des Ciments de Gabés | Tunisia  | 6.78%           | 10.15%   | 25.0% |

*\* Each risk‐free rate comprises its own country risk*

The brands were valued by an independent entity based on the discounted post‐tax cash flow method denominated "income split method" associated to the influence of the brand (difference between the net margin of the brand less investments in marketing and the net margin of the associated brand), discounted to the evaluation period based on a specific discount rate. 

As result of impairment tests and sensitivity analysis to the main assumptions, an impairment charge was recognised in Ciments de Sibline cement brand (Lebanon) amounting to Euro 11,075,942 (Note 8). 

## 17. Property, plant and equipment

The following movements were registered in the years ended 31 December 2015 and 2014 under the caption Property, plant and equipment, as well as on the respective depreciation and impairment losses accounts: 

|                                                 |              | Buildings and       | Equipments and  | Assets under  |                 |
|-------------------------------------------------|--------------|---------------------|-----------------|---------------|-----------------|
| Amounts in Euro                                 | Land         | other constructions | other tangibles | construction  | Total           |
| Acquisition Cost                                |              |                     |                 |               |                 |
| Amount as of 1 January 2014                     | 362,587,545  | 990,787,808         | 4,804,881,842   | 29,544,979    | 6,187,802,174   |
| Change of consolidation perimeter               | -            | -                   | (1,510,000)     | 614,010       | (895,990)       |
| Acquisition                                     | 2,922,164    | 1,727,815           | 6,390,668       | 64,369,923    | 75,410,570      |
| Dispos als                                      | (86,721)     | (141,970)           | (9,583,263)     | -             | (9,811,954)     |
| Adjus tments , tranfers and write-off's         | 1,829,544    | (1,684,354)         | 31,544,181      | (33,516,519)  | (1,827,148)     |
| Exchange rate adjustment                        | 2,854,345    | 6,510,403           | 19,643,904      | 690,398       | 29,699,050      |
| Amount as of 31 December 2014                   | 370,106,877  | 997,199,702         | 4,851,367,332   | 61,702,791    | 6,280,376,702   |
| Change of consolidation perimeter               | 63,820,274   | 65,750,405          | 201,416,646     | 85,128,653    | 416,115,978     |
| Acquisition                                     | 3,744,300    | 5,687,667           | 8,992,121       | 160,494,992   | 178,919,080     |
| Dispos als                                      | (1,946,403)  | (3,274,977)         | (4,412,902)     | (56,445)      | (9,690,727)     |
| Adjus tments , tranfers and write-off's         | 750,248      | 47,142,941          | 150,050,882     | (197,311,209) | 632,862         |
| Exchange rate adjustment                        | (8,798,722)  | (10,489,982)        | (17,492,500)    | (6,808,638)   | (43,589,842)    |
| Amount as of 31 December 2015                   | 427,676,574  | 1,102,015,756       | 5,189,921,579   | 103,150,144   | 6,822,764,053   |
| Accumulated depreciations and impairment losses |              |                     |                 |               |                 |
| Amount as of 1 January 2014                     | (48,036,741) | (626,433,366)       | (3,410,130,326) | (1,493,293)   | (4,086,093,726) |
| Change of consolidation perimeter               | -            | -                   | 629,167         | -             | 629,167         |
| Depreciation and impairment los ses             | (3,585,182)  | (17,305,012)        | (156,639,760)   | (523,419)     | (178,053,373)   |
| Dispos als                                      | 358          | 127,521             | 7,871,803       | -             | 7,999,682       |
| Adjus tments , tranfers and write-off's         | (341,108)    | 111,605             | 1,095,970       | (267,501)     | 598,966         |
| Exchange rate adjustment                        | (363,536)    | (3,184,179)         | (12,064,592)    | (104,973)     | (15,717,280)    |
| Amount as of 31 December 2014                   | (52,326,209) | (646,683,431)       | (3,569,237,738) | (2,389,186)   | (4,270,636,564) |
| Change of consolidation perimeter               | (839,748)    | (3,019,328)         | (20,896,664)    | -             | (24,755,740)    |
| Depreciation and impairment los ses             | (4,569,572)  | (19,217,571)        | (169,284,196)   | (1,778,035)   | (194,849,374)   |
| Dispos als                                      | -            | 1,570,751           | 3,723,862       | -             | 5,294,613       |
| Adjus tments , tranfers and write-off's         | 1,410,010    | 4,526,592           | 1,645,122       | (1)           | 7,581,723       |
| Exchange rate adjustment                        | (342,925)    | (1,653,241)         | (6,890,236)     | 425,632       | (8,460,770)     |
| Amount as of 31 December 2015                   | (56,668,444) | (664,476,228)       | (3,760,939,850) | (3,741,590)   | (4,485,826,112) |
|                                                 |              |                     |                 |               |                 |
| Net book value as of 1 January 2014             | 314,550,804  | 364,354,442         | 1,394,751,516   | 28,051,686    | 2,101,708,448   |
| Net book value as of 31 December 2014           | 317,780,668  | 350,516,271         | 1,282,129,594   | 59,313,605    | 2,009,740,138   |
| Net book value as of 31 December 2015           | 371,008,130  | 437,539,528         | 1,428,981,729   | 99,408,554    | 2,336,937,941   |

In 2009, with the start of operations in the new paper mill, the Group recognized as a finance lease contract the cost of the Precipitated Calcium Carbonate production unit, installed by Omya, S.A. at the industry site in Setubal for the exclusive use of the new factory. This contract foresees the transfer of the ownership of the assets upon the end of the contract. Following the above‐mentioned agreements, the Group applies "IFRIC 4 – Determining whether an arrangement contains a lease". As at 31 December 2015 the net book value of this equipment is Euro 4,540,540 (31 December 2014: Euro 6,054,054). 

The Group reviews the useful lives of the assets in use on a regular basis. In 2014, Portucel Group changed the useful life of certain assets of manufacturing equipment with more years in use. The inherent rationale behind this amendment is based on the current expectations of the Group as to its future strategy and estimated impacts of the expected use of such assets. Therefore the referred assets where depreciated until the end of 2015, which increased the depreciation expenses by Euro 14.2 million (2014: Euro 12.7 million). 

As of 31 December 2015, assets under construction included Euro 19,541,078 (31 December 2014: Euro 11,865,280), related to advance payments and supplies of Property Plant and Equipment, related to investment projects being developed by the Group. These amounts are fully guaranteed by first demand bank guarantees, handed by the respective suppliers that are promoting the investments of the Group companies, in accordance with the implemented policies for the mitigation of credit risk. 

Additionally, it also includes Euro 31,659,352 related to the investment in the Pellets factory located in the United States and Euro 34,205,812 relating to investments associated with Mozambique project. 

The caption Land comprises forest land where the Group has installed part of its forestry assets, amounting to Euro 93,368,356, and the remainder being installed on leased land (see Note 39). This caption also comprises Euro 1,609,030 related to the land where it will be built the Pellets factory in the USA and Euro 3,652,351 for the costs capitalized to the preparation of land for the initial forestation in Mozambique, already in operation, which is being depreciated over the period of the concession agreement, as well as Euro 21,943,489 of land allocated to the plant's perimeter. 

Commitments related to Property, plant and equipment acquisitions, as well as those that are given as guarantees are detailed in Notes 39 and 40 respectively. 

## 18. Biological assets

As of 31 December 2015 and 2014, changes in biological assets were as follows: 

| Amounts in Euro                     | 31‐12‐2015   | 31‐12‐2014   |
|-------------------------------------|--------------|--------------|
| Amount at the beginning of the year | 113,969,423  | 111,339,306  |
| Changes in fair value               |              |              |
| Logging in the period               | (24,230,097) | (22,802,444) |
| Growth                              | 1,773,520    | 6,435,679    |
| New plantations                     | 7,984,092    | 5,962,035    |
| Other changes in fair value         | 17,499,989   | 13,034,847   |
| Total changes in fair value         | 3,027,504    | 2,630,117    |
|                                     | 116,996,927  | 113,969,423  |

The amounts show as other changes in fair value mainly relates to the management costs for the forestry assets (silviculture, structure and rent costs) and are as follows: 

| Amounts in Euro           | 31‐12‐2015 | 31‐12‐2014  |
|---------------------------|------------|-------------|
| Cost of asset management  |            |             |
| Forestry                  | 4,812,404  | 3,284,945   |
| Struture                  | 3,412,329  | 2,871,559   |
| Fixed and variable rents  | 9,275,256  | 8,272,480   |
|                           | 17,499,989 | 14,428,984  |
| Assumptions changes       |            |             |
| Wood price                | -          | 4,264,832   |
| Equity rate cost          | -          | 2,667,904   |
| Changes in other species  | -          | (752,571)   |
| Other expectations change | -          | (7,574,302) |
|                           | ‐          | (1,394,137) |
|                           |            |             |
|                           | 17,499,989 | 13,034,847  |

Biological assets as of 31 December 2015 and 2014 are as follows: 

| Amounts in Euro         | 31‐12‐2015  | 31‐12‐2014  |
|-------------------------|-------------|-------------|
| Eucalyptus              | 104,896,897 | 106,489,354 |
| Pine                    | 5,407,458   | 4,901,496   |
| Cork                    | 1,346,681   | 995,962     |
| Other species           | 128,445     | 176,494     |
| Eucalyptus (Mozambique) | 5,217,446   | 1,406,117   |
|                         | 116,996,927 | 113,969,423 |

These values, calculated in accordance with the expected extraction of their productions, correspond to the following future production expectations: 

| Amounts in Euro                                              | 31/12/2015 | 31/12/2014 |
|--------------------------------------------------------------|------------|------------|
| Euchaliptus (Portugal) - wood potential extration km3ssc     | 11,822     | 11,409     |
| Pine (Portugal) - wood potential exration k ton              | 481        | 496        |
| Pine (Portugal) - pinecones potential extration k ton        | n/a        | n/a        |
| Cork (Portugal) - cork potential extration k @               | 626        | 636        |
| Eucalyptus (Portugal) - wood potencial extration h m3ssc (1) | 1,400      | 406        |

*(1) Evaluation for areas with one or more years of age as at 31 December 2015*

Additionally, there are no biological assets whose title is restricted and / or pledged as security for liabilities or non‐reversible commitments for the purchase of biological assets. 

## 19. Investment in associates and joint‐ventures

The following movements were registered in this caption during the years ended 31 December 2015 and 2014: 

| Amounts in Euro                                                                    | 31/12/2015   | 31/12/2014   |
|------------------------------------------------------------------------------------|--------------|--------------|
| Opening balance                                                                    | 87,086,273   | 102,761,132  |
| Change in consolidation perimeter                                                  | (77,889,593) | (38,975)     |
| Group share of (loss ) / gain of as sociated companies and joint ventures (Note 9) | (4,287,184)  | 26,109       |
| Dividends received                                                                 | (1,505,827)  | (665,104)    |
| Exchange rate adjustments                                                          | 39           | (14,996,889) |
| Closing balance                                                                    | 3,403,708    | 87,086,273   |

As of 31 December 2015 and 2014 the caption Investments in associates and joint ventures presented in the consolidated statement of financial position, including goodwill, comprises: 

|                                | Book Value |            |        |            |
|--------------------------------|------------|------------|--------|------------|
| Entities                       | % Held     | 31‐12‐2015 | % Held | 31‐12‐2014 |
| Joint Ventures                 |            |            |        |            |
| Supremo Cimentos, S.A.         | -          | -          | 50.00% | 83,440,864 |
| Associated companies           |            |            |        |            |
| Setefrete, SGPS, S.A.          | 25.00%     | 2,895,568  | 25.00% | 3,091,925  |
| MC - Materiaux de Construction | 49.36%     | 2,264      | 49.36% | 2,223      |
| J.M.J. - Henriques, Lda.       | 50.00%     | 378,442    | 50.00% | 380,161    |
| Ave, S.A.                      | 35.00%     | 127,434    | 35.00% | 171,100    |
|                                |            | 3,403,708  |        | 87,086,273 |

At the end of June 2015, the Brazilian subsidiary, NSOSPE, S.A., acquired the remaining 50% of the share capital of Supremo Cimentos S.A., and obtained control of 100% of the subsidiary. Until then the control was jointly shared with three Brazilian shareholders, therefore the company was included in the consolidated financial statements under the equity method. Since 30 June 2015, the company was incorporated using the full consolidation method, due to the control obtained with the acquisition of the remaining 50%. 

As of 31 December 2015 and 2014, Goodwill included in carrying amount of these investments is detailed as follows: 

| Amounts in Euro        | 31‐12‐2015 | 31‐12‐2014 |
|------------------------|------------|------------|
| Joint Ventures         |            |            |
| Supremo Cimentos, S.A. | -          | 27,436,872 |
| Associated companies   |            |            |
| Setefrete, SGPS, S.A.  | 2,227,750  | 2,227,750  |
|                        | 2,227,750  | 29,664,622 |

At 31 December 2015 and 31 December 2014, the financial information relating to associated companies was as follows: 

|                                    |    | 31 December 2015 |             |           |           |            |
|------------------------------------|----|------------------|-------------|-----------|-----------|------------|
|                                    |    | Total            | Total       |           | Net       |            |
| Amounts in Euros                   |    | assets           | liabilities | Equity    | Profit    | Revenue    |
| Ave-Gestão Ambiental e Valorização |    |                  |             |           |           |            |
| Energética, S.A.                   | a) | 3,917,745        | 3,553,638   | 364,107   | 303,136   | 11,747,355 |
| MC- Materiaux de Construction      | b) | 721,482          | 694,002     | 27,480    | (97,997)  | 4,229,614  |
| J.M.J. - Henriques, Lda.           | b) | 1,078,986        | 322,102     | 756,884   | (3,434)   | -          |
| Setefrete, SGPS, S.A.              | c) | 8,105,038        | 5,433,765   | 2,671,273 | 4,638,825 | 102,813    |
|                                    |    |                  |             |           |           |            |

**a)** 30 November 2015 figures

**b)** 31 December 2015 figures

**c)** 31 December 2014, adjusted of distributed dividends on the period ended 31 December 2015

|                                    |    | 31 December 2014 |             |           |           |            |
|------------------------------------|----|------------------|-------------|-----------|-----------|------------|
|                                    |    | Total            | Total       |           | Net       |            |
| Amounts in Euros                   |    | assets           | liabilities | Equity    | Profit    | Revenue    |
| Ave-Gestão Ambiental e Valorização |    |                  |             |           |           |            |
| Energética, S.A.                   | b) | 3,989,252        | 3,500,394   | 488,858   | 427,896   | 12,379,830 |
| MC- Materiaux de Construction      | b) | 622,391          | 500,547     | 121,844   | (5,134)   | 7,603,069  |
| J.M.J. - Henriques, Lda.           | b) | 1,076,917        | 316,595     | 760,322   | (3,320)   | -          |
| Setefrete, SGPS, S.A.              | a) | 5,664,562        | 2,207,862   | 3,456,700 | 2,892,221 | 102,813    |

a) 31 December 2013, adjusted of distributed dividends on the period ended 31 December 2014

b) 31 December 2014 figures

At 31 December 2015 and 31 December 2014, the financial information relating to joint‐ventures was as follows: 

|                            | 31‐12‐2015   | 31‐12‐2014  |              |
|----------------------------|--------------|-------------|--------------|
| Amounts in Euro            | Secil Unicon | Supremo     | Secil Unicon |
| Assets                     |              |             |              |
| Non-current As sets        | 7,845        | 352,113,354 | 7,548        |
| Current Assets             | 3,763,159    | 23,840,709  | 3,262,276    |
|                            | 3,771,004    | 375,954,063 | 3,269,824    |
| Liabilities                |              |             |              |
| Non-current liabilities    | 5,809,634    | 204,306,369 | 1,296,278    |
| Current liabilities        | 5,816,666    | 59,639,710  | 10,302,039   |
|                            | 11,626,300   | 263,946,079 | 11,598,317   |
| Non‐Controlling interest   | (2,765,743)  | ‐           | (2,578,045)  |
| Net Asset                  | (5,089,553)  | 112,007,984 | (5,750,448)  |
|                            |              |             |              |
| Amounts in Euro            | Secil Unicon | Supremo     | Secil Unicon |
| Revenues                   | 4,782,747    | 54,437,178  | 4,520,661    |
| Operational Results        | (398,100)    | 4,162,771   | (266,677)    |
| Profit before tax          | (917,622)    | (520,951)   | (869,024)    |
| Non- controlling interests | (187,699)    | -           | (178,465)    |
| Profit for the year        | (739,105)    | (1,766,768) | (702,941)    |
|                            |              |             |              |

## 20. Financial assets at fair value through profit or loss

The following movements were registered in this caption during the years ended 31 December 2015 and 2014: 

| Amounts in Euro                         | 31‐12‐2015 | 31‐12‐2014 |
|-----------------------------------------|------------|------------|
| Fair value at the beginning of the year | 451,485    | 482,923    |
| Acquisitions                            | -          | -          |
| Disposals                               | -          | -          |
| Changes in fair value                   | (108,517)  | (31,438)   |
|                                         | 342,968    | 451,485    |

As of 31 December 2015 and 2014, Financial assets at fair value through profit or loss comprises: 

|                   | Fair Value |            |  |
|-------------------|------------|------------|--|
| Amounts in Euro   | 31‐12‐2015 | 31‐12‐2014 |  |
| CEMG Holding Fund | 295,710    | 435,665    |  |
| Others            | 47,258     | 15,820     |  |
|                   | 342,968    | 451,485    |  |

The classification of financial assets at fair value through profit or loss in accordance with the fair value hierarchy defined in IFRS 13 is shown in Note 34. 

## 21. Available‐for‐sale financial assets

The following movements were registered in this caption during the years ended 31 December 2015 and 2014: 

| Amounts in Euro                         | 31‐12‐2015 | 31‐12‐2014 |
|-----------------------------------------|------------|------------|
| Fair value at the beginning of the year | 229,136    | 346,257    |
| Acquisitions                            | -          | 29,308     |
| Changes in fair value (Note 10)         | -          | (146,429)  |
|                                         | 229,136    | 229,136    |

As of 31 December 2015 and 2014 the fair value of available‐for‐sale financial assets comprises: 

|                      | Fair Value |            |  |
|----------------------|------------|------------|--|
| Amounts in Euro      | 31‐12‐2015 | 31‐12‐2014 |  |
| Liaision Technologie | 229,136    | 229,136    |  |
|                      | 229,136    | 229,136    |  |

The classification of assets available for sale, according to the fair value hierarchy defined in IFRS 13 , is shown in Note 34. 

## 22. Impairment in non‐current and current assets

In the years ended 31 December 2015 and 2014, the following movements were registered on impairments in non‐current assets: 

|                        |           | Other non‐ | Property, plant               | Investments   |           |
|------------------------|-----------|------------|-------------------------------|---------------|-----------|
| Amounts in Euro        | Goodwill* |            | ‐current assets and equipment | in associates | Total     |
| As of 1 January 2014   | ‐         | 1,855,975  | 102,292                       | 2,002         | 1,960,269 |
| Increases              | -         | -          | -                             | -             | -         |
| Direct utilisations    | -         | -          | -                             | -             | -         |
| As of 31 December 2014 | ‐         | 1,855,975  | 102,292                       | 2,002         | 1,960,269 |
| Increases              | -         | -          | -                             | -             | -         |
| Reversals              | -         | -          | -                             | 14,100        | 14,100    |
| As of 31 December 2015 | ‐         | 1,855,975  | 102,292                       | 16,102        | 1,974,369 |

*\* Goodwill impairment referring to subsidiaries*

During the year ended 31 December 2015 and 2014, the following movements were registered on impairments in current assets: 

|                                   |             | Accounts    | Other       |             |
|-----------------------------------|-------------|-------------|-------------|-------------|
| Amounts in Euro                   | Inventories | receivable  | receivables | Total       |
| As of 1 January 2014              | 7,319,705   | 25,519,809  | 6,821,397   | 39,660,911  |
| Exchange rate adjus tment         | 448,889     | 176,545     | 5,609       | 631,043     |
| Increases (Note 6)                | 3,762,853   | 2,099,407   | 672,667     | 6,534,927   |
| Reversals (Note 5)                | (134,302)   | (1,354,781) | (3,997)     | (1,493,080) |
| Direct utilisations               | (12,959)    | -           | -           | (12,959)    |
| As of 31 December 2014            | 11,384,186  | 26,440,980  | 7,495,676   | 45,320,842  |
| Change in consolidation perimeter | 890,363     | 235,137     | -           | 1,125,500   |
| Exchange rate adjus tment         | 272,111     | (105,720)   | 5,132       | 171,523     |
| Increases (Note 6)                | 2,372,304   | 2,270,847   | 816,553     | 5,459,704   |
| Reversals (Note 5)                | (588,717)   | (1,579,517) | -           | (2,168,234) |
| Direct utilisations               | (10,610)    | 794,041     | -           | 783,431     |
| As of 31 December 2015            | 14,319,637  | 28,055,768  | 8,317,361   | 50,692,766  |

## 23. Inventories

As of 31 December 2015 and 2014 the caption Inventories comprised: 

| Amounts in Euro                    | 31‐12‐2015  | 31‐12‐2014  |
|------------------------------------|-------------|-------------|
| Raw Materials                      | 185,432,836 | 191,112,218 |
| Work in progress                   | 14,395,489  | 12,584,288  |
| Byproducts and waste               | 1,072,438   | 1,029,165   |
| Finished and intermediate products | 108,857,913 | 80,864,588  |
| Advances to inventories' suppliers | 1,002       | 85,893      |
|                                    | 309,759,678 | 285,676,152 |

*Note: Values are presented net of impairment losses (Note 22)*

During the year ended 2015 and 2014, movements in Raw materials, finished products and goods and Advances to inventories were as follows: 

| Amounts in Euro                                | 31/12/2015    | 31/12/2014    |
|------------------------------------------------|---------------|---------------|
| Opening balance                                | 272,062,699   | 281,600,840   |
| Acquisitions                                   | 872,189,346   | 805,244,751   |
| Closing balance                                | (294,291,751) | (272,062,699) |
| Cost of inventories sold and consumed (Note 6) | 849,960,294   | 814,782,892   |

As of 31 December 2015 and 2014, location of inventories by geographical segment, were as follows: 

| Amounts in Euro          | 31‐12‐2015  | 31‐12‐2014  |
|--------------------------|-------------|-------------|
| Portugal                 | 222,513,096 | 207,800,836 |
| Other European countries | 6,333,152   | 3,240,119   |
| USA                      | 27,267,940  | 19,794,719  |
| Africa                   | 22,733,123  | 25,428,214  |
| Asia                     | 30,912,367  | 29,412,264  |
|                          | 309,759,678 | 285,676,152 |

## 24. Receivables and other current assets

As of 31 December 2015 and 2014 the caption Receivables and other current assets comprised: 

| Amounts in Euro                                 | 31‐12‐2015  | 31‐12‐2014  |
|-------------------------------------------------|-------------|-------------|
| Accounts receivable                             | 253,590,438 | 228,805,894 |
| Accounts receivable - related parties (Note 35) | 879,025     | 26,424,774  |
| Derivative financial instruments (Note 34)      | 3,650,428   | -           |
| Other receivables                               | 27,438,052  | 10,582,250  |
| Accrued income                                  | 3,451,731   | 4,826,933   |
| Deferred costs                                  | 20,585,542  | 12,872,553  |
|                                                 | 309,595,216 | 283,512,404 |

*Note: The presented figures are net of impairment losses.*

As of 31 December 2015 and 2014, Other receivables comprised: 

| Amounts in Euro                      | 31‐12‐2015 | 31‐12‐2014 |
|--------------------------------------|------------|------------|
| Other receivables                    |            |            |
| Advance payments to suppliers        | 1,640,696  | 3,235,050  |
| Financial incentives to be received  | -          | 111,320    |
| Collateral provided to other parties | 1,199,423  | -          |
| Share capital subscribers (Note 13)  | 5,713,991  | -          |
| Others                               | 18,883,942 | 7,235,880  |
|                                      | 27,438,052 | 10,582,250 |
|                                      |            |            |

As of 31 December 2015 and 2014, captions Accrued income and Deferred costs comprised: 

| Amounts in Euro                 | 31/12/2015 | 31/12/2014 |
|---------------------------------|------------|------------|
| Accrued income                  |            |            |
| Interest receivable             | 776,353    | 688,579    |
| Other                           | 2,675,378  | 4,138,354  |
|                                 | 3,451,731  | 4,826,933  |
| Deferred costs                  |            |            |
| Insurance                       | 669,351    | 81,470     |
| Rents and leases                | 270,753    | 323,931    |
| Post-employment plans (Note 29) | 3,755,326  | 1,477,709  |
| Other                           | 15,890,112 | 10,989,443 |
|                                 | 20,585,542 | 12,872,553 |
|                                 | 24,037,273 | 17,699,486 |

As at 31 December 2015 and 2014, the excess funding for some of the funds allocated to the defined benefit plans referred to above, amounting to Euro 3,755,326 and to Euro 1,477,709, respectively, were recognised as current assets by enabling a lower need for future contributions by the Group to finance those pension schemes (Note 29). 

## 25. State and other public entities

At 31 December 2015 and 2014, there were no arrears debts to the State and other public entities. 

As mentioned in Note 11, the tax group dominated by Semapa, SGPS, S.A. , comprises the Portuguese entities (that comply with the conditions laid down in Article 69 of the CIT Code) of Group Secil and ETSA, and until 30 June 2015 the Group Portucel. Thus, although those companies ascertain and record the income tax as if they were taxed on an individual basis, the overall corporate income tax as well as the overall clearance/payment is performed by the parent company, in this case Semapa SGPS, S.A.. 

The balances relating to these entities were as follows: 

#### *Current assets*

| Amounts in Euro                             | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------------------------|------------|------------|
|                                             |            |            |
| Corporate Income Tax - CIT                  | 3,639,642  | 7,896,313  |
| Personnel Income Tax - withheld on salaries | 124,750    | 117,959    |
| Value added tax to be recovered             | 17,855,100 | 22,853,766 |
| Value added tax - refund requested          | 47,165,878 | 46,233,607 |
| Other                                       | 227,569    | 241,814    |
|                                             | 69,012,939 | 77,343,459 |
|                                             |            |            |

#### *Current liabilities*

| Amounts in Euro                            | 31‐12‐2015  | 31‐12‐2014  |
|--------------------------------------------|-------------|-------------|
| Corporate Income Tax - CIT                 | 37,348,475  | 8,511,110   |
| Personnel Income Tax - witheld on salaries | 3,407,002   | 2,837,817   |
| Value added tax                            | 38,556,467  | 46,306,617  |
| Social Security                            | 4,012,759   | 3,671,735   |
| Additional tax payments                    | 27,396,686  | 57,222,485  |
| Other                                      | 536,251     | 654,521     |
|                                            | 111,257,640 | 119,204,285 |

As of 31 December 2015 and 2014, the caption Corporate Income tax – CIT comprise (net between current assets and current liabilities) is detailed as follows: 

| Amounts in Euro                                        | 31‐12‐2015  | 31‐12‐2014  |
|--------------------------------------------------------|-------------|-------------|
| Corporate income tax for the year                      | 39,001,519  | 15,331,981  |
| Exchange rate differences                              | 68,905      | 310,891     |
| Payments on account and additional payments on account | (5,084,565) | (8,555,404) |
| Witholding tax                                         | (2,088,990) | (1,521,336) |
| Prior years corporate income tax                       | 1,811,964   | (4,951,335) |
|                                                        | 33,708,833  | 614,797     |

The movement of provisions for additional tax liabilities, in the year ended 31 December 2015 and 2014 is as follows: 

| Amojnts in Euro | 31‐12‐2015   | 31‐12‐2014   |
|-----------------|--------------|--------------|
| Opening balance | 57,222,485   | 72,996,021   |
| Increases       | 6,170,831    | 4,805,601    |
| Decreases       | (2,853,919)  | (20,579,137) |
| Transfers       | (33,142,711) | -            |
|                 | 27,396,686   | 57,222,485   |

## 26. Share capital and treasury share

As of 31 December 2015 and 2014, Semapa share capital was fully subscribed and paid up, being represented by 81,645,523 shares and by 118,332,445 shares, respectively, with a unit nominal value of 1 Euro. 

During the year of 2015, the company performed two reductions of its share capital, both by extinction of treasury shares. 

The first resulted of the approval by the Annual General Meeting of Semapa that took place on 30 April 2015, of the proposal of share capital reduction by the extinction of 11,822,445 treasury shares. This reduction amounted Euro 11,822,445 and share capital decreased from Euro 118,332,445 to Euro 106,510,000. 

Additionally and as already mentioned, following the closure of the Public Exchange Offer, Semapa acquired 24,864,477 shares, which were cancelled through a share capital decrease after proper settlement of the tender offer. Thus, Semapa reduced its share capital to Euro 81,645,523 represented by 81,645,523 shares of nominal value of Euro 1. 

At 31 December 2015 and 2014, the following entities had substantial holdings in the company's capital: 

|                                                    |                  | %          |            |  |
|----------------------------------------------------|------------------|------------|------------|--|
| Name                                               | Number of shares | 31/12/2015 | 31/12/2014 |  |
| Longapar, SGPS, S.A.                               | 22,225,400       | 27.22      | 18.78      |  |
| Cimo - Gestão de Participações, SGPS, S.A.         | 16,199,031       | 19.84      | 13.69      |  |
| Sodim, SGPS, S.A.                                  | 15,252,726       | 18.68      | 13.23      |  |
| Banco BPI, S.A.                                    | -                | -          | 10.15      |  |
| Bestinver Gestión, SGIIC, S.A.                     | 7,166,756        | 8.78       | 7.13       |  |
| Norges Bank (Norway Central Bank)                  | -                | -          | 4.77       |  |
| Cimigest, SGPS, S.A.                               | 3,185,019        | 3.90       | 2.69       |  |
| Santander Asset Management España, SA              | 2,268,346        | 2.78       | -          |  |
| Sociedade Agrícola da Quinta da Vialonga, S.A.     | 625,199          | 0.77       | 0.53       |  |
| OEM - Organização de Empresas, SGPS, S.A.          | 535,000          | 0.66       | 0.45       |  |
| Treasury s hares                                   | 5,530            | 0.01       | 10.00      |  |
| Other shareholders with less than 2% participation | 14,182,516       | 17.37      | 18.58      |  |
|                                                    | 81,645,523       | 100.00     | 100.00     |  |

As of 31 December 2015, Semapa ‐ Sociedade de Investimento e Gestão, SGPS, SA holds 5,530 treasury shares. 

### 27. Reserves and retained earnings

As of 31 December 2015 and 2014 the captions Fair value reserve, Translation reserve and Other reserves comprised: 

| Amounts in Euro                     | 31‐12‐2015   | 31‐12‐2014    |
|-------------------------------------|--------------|---------------|
|                                     |              |               |
| Fair value of financial instruments | (3,639,345)  | (8,795,241)   |
| Other fair value reserves           | (1,281,742)  | (1,281,742)   |
| Total amount of fair value reserve  | (4,921,087)  | (10,076,983)  |
|                                     |              |               |
| Translation reserve                 | (65,903,206) | (46,975,997)  |
|                                     |              |               |
| Legal reserve                       | 23,666,489   | 23,666,489    |
| Others reserves                     | 642,029,919  | 1,009,795,777 |
| Total amount of other reserves      | 665,696,408  | 1,033,462,266 |
|                                     |              |               |
| Total                               | 594,872,115  | 976,409,286   |

#### *Fair value of financial instruments*

The negative amount of Euro 3,639,345 net of deferred tax, shown under the caption Fair value of financial instruments, relates to the appropriation of the financial instruments fair value changes classified as hedging, described in Note 34, and accounted in accordance with the policy described in Note 1.13. 

#### *Translation reserve*

The negative figure refers to the exchange differences appropriated by the Group, resulting from the financial statements translation of the companies operating outside the Euro zone, namely Tunisia, Lebanon, Angola, USA (including net investment), United Kingdom, and Brazil. 

#### *Legal Reserve*

Commercial Company law prescribes that at least 5% of annual net profit must be transferred to the legal reserve until this is equal to at least 20% of the issued capital, which is verified as of 31 December 2014. This reserve cannot be distributed unless in the event of the company's winding up; however, it may be used to absorb losses after the other reserves have been exhausted or it can be incorporated into the issued capital. 

#### *Other reserves*

This caption corresponds to available reserves for distribution to shareholders constituted through the appropriation of prior year's earnings. 

At the Extraordinary General Meeting of the company, which took place on 18 December 2015, the distribution of reserves corresponding to Euro 0.75 per share, amounting to Euro 61,229,995 was approved. 

The 2015 reduction of Euro 376,791,932 in the caption Other reserves is due to the aforementioned extinctions of treasury shares and corresponds to the difference between the nominal value of the cancelled shares (which reduced the share capital) and the acquisition value for which they were initially recorded. 

#### *Retained earnings*

Increase and decrease interest held in subsidiaries without loss of control 

The Group records in this caption the differences between the group share of net assets acquired/disposed of and the acquisition/disposal price to non‐controlling interest of already controlled entities. 

As of 31 December 2015, the accumulated negative amount of these differences, regarding additional stake acquisition in subsidiaries, amounts to Euro 416,498,687 (31 December 2014: Euro 416,498,687 negative amount). 

Following the closure of the general Public Tender Offer referred in Note 1.2, 84,539,108 shares of Portucel were given in exchange for Semapa's own shares, thus a gain of Euro 165,213,913 was recognised directly in the consolidated shareholder's equity under the caption Retained earnings, due to the fact that the transaction qualifies has a disposal to non‐controlling interest without loss of control. 

Additionally a loss amounting to Euro 2,748,708 was also recognised, corresponding to the Group share over the difference between IFC share capital subscription and Portucel Moçambique's shareholders equity at the transaction date. 

#### Remeasurements (Actuarial gains or losses)

The differences between the assumptions used for the purpose of determining liabilities related to post‐ employment benefits and what effectively occurred are equally recorded under this caption (as well as changes made to those assumptions and the difference between the expected return on the assets of the funds and their actual yield) as described in Note 1.22.1. In 2015, the group recorded negative remeasurements, net of deferred taxes, amounting to Euro 7,674,571. 

## 28. Deferred taxes

The following movement took place in the caption Deferred tax assets and liabilities during the year ended 31 December 2015: 

|                                                           | As of 1         | Exchange    | Income statement |               | Retained    | Transfers   | Assets held | Changes in    | As of 31        |
|-----------------------------------------------------------|-----------------|-------------|------------------|---------------|-------------|-------------|-------------|---------------|-----------------|
| Amount in Euro                                            | January 2015    | adjustment  | Increases        | Decreases     | earnings    |             | for sale    | perimeter     | December 2015   |
| Temporary differences originating deferred tax assets     |                 |             |                  |               |             |             |             |               |                 |
| Tax loss es carried forward                               | 111,677,463     | (4,305,110) | 18,360,466       | (115,900,245) | -           | 1,606,865   | -           | 12,333,580    | 23,773,019      |
| Taxed provis ions                                         | 28,318,559      | 319,766     | 1,418,694        | (5,821,730)   | -           | -           | -           | 1,060,208     | 25,295,497      |
| Harmonisati on of depreci ati on criteri a                | 51,484,087      | -           | 69,095,053       | (14,187,179)  | -           | -           | -           | -             | 106,391,961     |
| Underfunding of pens ion funds                            | 6,804,762       | (22,250)    | -                | (1,030,740)   | 151,876     | -           | -           | -             | 5,903,648       |
| Financial ins truments                                    | 6,843,951       | -           | -                | -             | (1,506,697) | -           | -           | -             | 5,337,254       |
| Deferred accounting gai ns on i nter-group trans actions  | 23,511,326      | (10,617)    | 7,962,925        | (3,393,741)   | -           | -           | -           | -             | 28,069,893      |
| Val ui ng growth forests                                  | -               | -           | 1,275,824        | -             | -           | -           | -           | -             | 1,275,824       |
| Fiscal investment i ncentives                             | 16,524,492      | -           | -                | (1,757,966)   | -           | -           | -           | -             | 14,766,526      |
| Fai r values of busines s combinations                    | 1,505,510       | 173,466     | -                | -             | -           | -           | -           | -             | 1,678,976       |
| Other temporary differences                               | 1,116,492       | (2,056,093) | 9,360,489        | (1,826,142)   | -           | (1,242,019) | -           | 6,603,790     | 11,956,517      |
|                                                           | 247,786,642     | (5,900,838) | 107,473,451      | (143,917,743) | (1,354,821) | 364,846     | ‐           | 19,997,578    | 224,449,115     |
| Temporay differences originating deferred tax liabilities |                 |             |                  |               |             |             |             |               |                 |
| Fixed tangible as set reval uation                        | (10,502,140)    | 10,631,387  | -                | 1,000,414     | -           | -           | -           | (58,078,993)  | (56,949,332)    |
| Retirements benefi ts                                     | (5,968,265)     | -           | (8,097,873)      | 74,934        | 10,025,343  | -           | -           | -             | (3,965,861)     |
| Derivative financial instruments                          | (144,728)       | -           | -                | -             | (89,718)    | -           | -           | -             | (234,446)       |
| Valuation of biological as sets                           | (477,515)       | -           | -                | 477,515       | -           | -           | -           | -             | -               |
| Tax incentives                                            | -               | -           | -                | -             | -           | -           | -           | (11,991,792)  | (11,991,792)    |
| Harmonisation of depreci ation criteria                   | (498,818,087)   | 1,772,874   | (29,405,695)     | 68,506,916    | (3,752,884) | -           | -           | (9,077,390)   | (470,774,266)   |
| Deferred accounting l os ses on inter-group transactions  | (3,837,662)     | -           | (358,958)        | 3,827,345     | (320,092)   | -           | -           | -             | (689,367)       |
| Fai r value of intangible as sets - brands                | (258,910,130)   | (3,232,002) | -                | 11,287,851    | -           | -           | -           | -             | (250,854,281)   |
| Fai r value of tangible as sets                           | (157,319,691)   | -           | -                | 15,271,550    | -           | -           | -           | -             | (142,048,141)   |
| Fai r value of bus iness combinati ons                    | (176,481,657)   | 697,197     | -                | 8,855,107     | -           | -           | (30,312)    | (26,549,889)  | (193,509,554)   |
| Other temporay differences                                | (283,005)       | 629,526     | (700,248)        | 15,992        | -           | -           | -           | (2,388,345)   | (2,726,080)     |
|                                                           | (1,112,742,880) | 10,498,982  | (38,562,774)     | 109,317,624   | 5,862,649   | ‐           | (30,312)    | (108,086,409) | (1,133,743,120) |
|                                                           |                 |             |                  |               |             |             |             |               |                 |
| Deferred tax assets                                       | 64,957,138      | (2,110,891) | 29,047,258       | (31,928,650)  | (340,226)   | 13,296,328  | -           | 6,799,176     | 79,720,133      |
| Efect of change in tax rate                               | (5,239,591)     | -           | -                | -             | -           | -           | -           | -             | (5,239,591)     |
| Deferred tax assets                                       | 59,717,547      | (2,110,891) | 29,047,258       | (31,928,650)  | (340,226)   | 13,296,328  | ‐           | 6,799,176     | 74,480,542      |
|                                                           |                 |             |                  |               |             |             |             |               |                 |
| Deferred tax liabilities                                  | (317,351,757)   | 4,856,844   | (9,221,424)      | 26,597,216    | 1,562,179   | -           | (6,747)     | (35,969,912)  | (329,533,601)   |
| Efect of change in tax rate                               | 24,017,692      | -           | -                | -             | -           | -           | -           | -             | 24,017,692      |
| Deferred tax liabilities                                  | (293,334,065)   | 4,856,844   | (9,221,424)      | 26,597,216    | 1,562,179   | ‐           | (6,747)     | (35,969,912)  | (305,515,909)   |

The following movement took place in the caption Deferred income tax assets and liabilities during the year ended 31 December 2014: 

|                                                            | As of 1         | Exchange    | Income Statement |              | Retained    | Transfers   | Assets held | As of 31        |
|------------------------------------------------------------|-----------------|-------------|------------------|--------------|-------------|-------------|-------------|-----------------|
| Amounts in Euro                                            | January 2014    | adjustment  | Increases        | Decreases    | earnings    |             | for sale    | December 2014   |
| Temporary differences originating deferred tax assets      |                 |             |                  |              |             |             |             |                 |
| Tax loss es carri ed forward                               | 173,292,004     | -           | (3,552,635)      | (55,727,117) | -           | (2,334,789) | -           | 111,677,463     |
| Taxed provis ions                                          | 22,213,073      | 391,971     | 6,081,891        | (345,685)    | -           | (22,691)    | -           | 28,318,559      |
| Harmonis ation of depreciation criteria                    | 79,034,444      | -           | 3,717,990        | (31,268,347) | -           | -           | -           | 51,484,087      |
| Underfunding of pens ion funds                             | 7,556,072       | 28,389      | 63,129           | (1,149,665)  | 306,837     | -           | -           | 6,804,762       |
| Financial Instruments                                      | 3,998,980       | -           | -                | -            | 2,844,971   | -           | -           | 6,843,951       |
| Deferred accounting gains on inter-group trans actions     | 22,406,393      | -           | 3,627,447        | (2,522,514)  | -           | -           | -           | 23,511,326      |
| Fiscal inves tment incenti ves                             | 18,202,295      | -           | -                | (1,677,803)  | -           | -           | -           | 16,524,492      |
| Fair value of busi nes s combi nati ons                    | 1,325,414       | 180,096     | -                | -            | -           | -           | -           | 1,505,510       |
| Other temporary differences                                | 3,925,472       | -           | 1,963,413        | (2,353,245)  | (2,441,837) | 22,689      | -           | 1,116,492       |
|                                                            | 331,954,147     | 600,456     | 11,901,235       | (95,044,376) | 709,971     | (2,334,791) | ‐           | 247,786,642     |
| Temporary differences originating deferred tax liabilities |                 |             |                  |              |             |             |             |                 |
| Fixed tangible asset revaluation                           | (13,382,568)    | -           | (781)            | 2,881,210    | -           | (1)         | -           | (10,502,140)    |
| Reti rements benefi ts                                     | (5,613,255)     | -           | (233,738)        | 590,975      | (712,245)   | (2)         | -           | (5,968,265)     |
| Derivative Financial Instruments                           | (765,769)       | -           | -                | 318,411      | 302,630     | -           | -           | (144,728)       |
| Valuation of biological ass ets                            | (1,583,281)     | -           | (477,515)        | 1,583,281    | -           | -           | -           | (477,515)       |
| Harmonis ation of depreciation criteria                    | (480,137,095)   | (136,793)   | (35,373,891)     | 16,829,692   | -           | -           | -           | (498,818,087)   |
| Deferred accounting losses on inter-group transactions     | (13,287,292)    | 90,090      | (905,093)        | 10,264,632   | -           | 1           | -           | (3,837,662)     |
| Fair Value of i ntangible as sets - brands                 | (255,662,750)   | (3,247,380) | -                | -            | -           | -           | -           | (258,910,130)   |
| Fair Value of tangible ass ets                             | (172,591,241)   | -           | -                | 15,271,550   | -           | -           | -           | (157,319,691)   |
| Fair value of busi nes s combi nati ons                    | (177,114,709)   | (3,875,013) | -                | 4,538,376    | -           | -           | (30,311)    | (176,481,657)   |
| Other temporary differences                                | (377,664)       | -           | (2,655)          | 97,312       | -           | 2           | -           | (283,005)       |
|                                                            | (1,120,515,624) | (7,169,096) | (36,993,673)     | 52,375,439   | (409,615)   | ‐           | (30,311)    | (1,112,742,880) |
| Deferred tax assets                                        | 84,531,715      | 289,905     | 3,215,879        | (23,830,280) | 749,919     | -           | -           | 64,957,138      |
| Effect of change in tax rate                               | -               | -           | (1,641,308)      | (3,531,065)  | (67,218)    | -           | -           | (5,239,591)     |
|                                                            | 84,531,715      | 289,905     | 1,574,571        | (27,361,345) | 682,701     | ‐           | ‐           | 59,717,547      |
| Deferred tax liabilities                                   | (320,768,260)   | (1,130,787) | (10,082,988)     | 14,748,099   | (102,271)   | -           | (15,550)    | (317,351,757)   |
| Effect of change in tax rate                               | -               | -           | 6,977,380        | 17,055,119   | (14,807)    | -           | -           | 24,017,692      |
|                                                            | (320,768,260)   | (1,130,787) | (3,105,608)      | 31,803,218   | (117,078)   | ‐           | (15,550)    | (293,334,065)   |
|                                                            |                 |             |                  |              |             |             |             |                 |

## 29. Pensions and other post‐employment benefits

As referred to in Note 1.22, the Group grants various post‐employment benefits to its employees and their families. 

The following is a breakdown of the obligations assumed and reflected in the Consolidated Statement of financial position at 31 December 2015 and 2014: 

|                                                                                 | Pulp and        | Cement and       |               |                         |
|---------------------------------------------------------------------------------|-----------------|------------------|---------------|-------------------------|
| 31 December 2015                                                                | paper           | Derivatives      | Holdings      | Total                   |
| Group liabilities for past services                                             |                 |                  |               |                         |
| Active                                                                          | 59,309,768      | 105,590          | -             | 59, 415,358             |
| Ex - collaborator                                                               | 16,865,214      | -                | -             | 16, 865,214             |
| Retirees                                                                        | 63,137,380      | 27,<br>198,841   | 1,<br>296,605 | 91,<br>632,826          |
| Market value of the pens ion funds                                              | (143,067,688)   | (23,<br>907,220) | -             | (166, 974,908)          |
| Equity                                                                          | -               | 261,049          | -             | 261,049                 |
| Ins urance policies                                                             |                 | ( -<br>206,932)  | -             | ( 206,932)              |
| Res erve account (overfunding due to the change to a defined contribution plan) | -               | (<br>704,608)    | -             | ( 704,608)              |
| Unfunded pensions liabilities                                                   | (3,<br>755,326) | 2,<br>746,720    | 296,605<br>1, | 287,999                 |
| Other unfunded liabilities                                                      |                 |                  |               |                         |
| Healthcare as sistance                                                          | -               | 74,989           | -             | 74,989                  |
| Retirement and death liabilities                                                | -               | 109,559          | -             | 109,559                 |
| Long-service award liabilities                                                  | -               | 439,870          | -             | 439,870                 |
| Total net liabilities                                                           | (3,755,326)     | 3,<br>371,138    | 296,605<br>1, | 912,417                 |
| Total unfunded liabilities                                                      |                 | 3, ‐<br>371,138  | 1,<br>296,605 | 667,743<br>4,           |
| Overfunding (Note 24)                                                           | (3,755,326)     | ‐                | ‐             | (3,            755,326) |

## Report and Accounts 2015

|                                                                                 | Pulp and                | Cement and       |               |                         |
|---------------------------------------------------------------------------------|-------------------------|------------------|---------------|-------------------------|
| 31 December 2014                                                                | paper                   | Derivatives      | Holdings      | Total                   |
| Group liabilities for past services                                             |                         |                  |               |                         |
| Active                                                                          | 3,576,259               | 62,558           | -             | 3, 638,817              |
| Ex - collaborator                                                               | 10,324,394              | -                | -             | 10, 324,394             |
| Retirees                                                                        | 56,287,819              | 27,<br>166,002   | 1,<br>360,557 | 84,<br>814,378          |
| Market value of the pens ion funds                                              | (71,666,181)            | (26,<br>354,855) | -             | (98, 021,036)           |
| Equity                                                                          | -                       | 258,680          | -             | 258,680                 |
| Ins urance policies                                                             |                         | ( -<br>221,975)  | -             | ( 221,975)              |
| Res erve account (overfunding due to the change to a defined contribution plan) | -                       | (<br>795,095)    | -             | ( 795,095)              |
| Unfunded pensions liabilities                                                   | (1,            477,709) | 115,315          | 1,<br>360,557 | 837)<br>(1,             |
| Other unfunded liabilities                                                      |                         |                  |               |                         |
| Healthcare as sistance                                                          | -                       | 69,288           | -             | 69,288                  |
| Retirement and death liabilities                                                | -                       | 469,737          | -             | 469,737                 |
| Long-service award liabilities                                                  | -                       | 497,822          | -             | 497,822                 |
| Total net liabilities                                                           | (1,477,709)             | 1,<br>152,162    | 1,<br>360,557 | 035,010<br>1,           |
| Total unfunded liabilities                                                      |                         | 1, ‐<br>152,162  | 1,<br>360,557 | 512,719<br>2,           |
| Overfunding (Note 24)                                                           | (1,477,709)             | ‐                | ‐             | (1,            477,709) |

As of 31 December 2015 the Pulp and Paper segment presents an overfunding allocated to its liabilities, amounting to Euro 3,755,326 (31 December 2014: Euros 1,477,709) (Note 24). 

#### Sub‐group Portucel

#### *Retirement and pension supplements*

Until 2013, several retirement and survivor plans together with retirement bonus, coexisted within the Group. For certain categories of active employees, in addition to the plans described below, additional plans also existed, financed through independent funds assigned to cover those additional responsibilities 

Under the prevailing Social Benefits Regulation, permanent employees of Portucel that chose not to move to the defined contribution plan, together with the retired employees as of the transition date (1 January 2009) and from 1 January 2014, the former employees of Soporcel, Portucel Soporcel Florestal, Raiz, Empremédia and Portucel Soporcel Lusa, are entitled, after retirement in case of disability, to a monthly retirement pension or disability supplement. This is calculated according to a formula, which considers the beneficiary's gross monthly remuneration updated to the work category at the date of retirement and the number of years of service, up to a limit of 30 (limit of 25 to Soporcel, Portucel Soporcel Florestal, Empremédia, Portucel Soporcel Lusa and Raíz), including a survivor pension to the spouse and direct descendants. 

To cover this liability, externally managed pension funds were set up, and the funds' assets are apportioned between each of the companies. 

In 2013, the Group completed the necessary procedures to convert the defined benefit plans of its subsidiaries Portucel, Soporcel S.A., PS Florestal, S.A., Empremédia, S.A., Raiz and PS Lusa, S.A., to defined contribution plans for the current employees, keeping the acquired benefits of former employees as defined benefit plans. The acquired rights attributable to former employees and retirees in case they leave the company or in case of a job change or retirement, will remain unchanged. 

Notwithstanding, following a negotiation process with its employees as a result of the aforementioned changes to the pension plans, Soporcel allowed its active employees as of 1 January 2014 to choose, until 16 January 2015, to choose between the following alternatives: 

- Alternative A – Benefit safeguard plan, or
- Alternative B – Pure defined contribution plan.

This possibility to choose between these two alternatives was granted to the employees in early 2015, with reference to the situation as of 31 December 2013, aiming to bypass the changes that had been made to the Soporcel pension plan, by simulating that the option had been granted as of 1 January 2014, by the time of the conversion of the defined benefit plan into a defined contribution plan. 

#### Alternative A – Benefits safeguard plan

In general terms, employees that chose alternative A retain the option, as of the retirement date, of the defined benefit plan in force until 31 December 2013 based on the employee's seniority as of that date. They also benefit from a defined contribution plan until they reach 25 year seniority in the Company. 

From a practical point of view, this alternative allows the employees to benefit from two autonomous accounts: 

**Account 1:** which includes an initial contribution corresponding to the amounts delivered to the pension fund under the previous defined benefit plan, in the amount of the liabilities for past services computed as of 31 December 2013, together with the monthly contributions made by the Company during 2014 to the defined contribution plan; and, 

**Account 2:** including the future monthly contributions to be made by the Company until the employees complete 25 years of service in Soporcel, amounting to 2% of the pensionable salary. 

The balance of the Account 1 will be assigned to cover the liabilities associated to a defined benefit (resulting in receiving a pension corresponding to the existing liabilities in the previous defined benefit plan computed as of 31 December 2013), as the employees that chose Alternative A trigger the Safeguard Clause. 

Employees that choose to trigger the Safeguard Clause also benefit from a life rent, acquired from an insurance company with the funds accumulated in Account 2. 

Employees that do not trigger the Safeguard Clause will benefit from the life rent acquired from the insurance company with the funds accumulated in Accounts 1 and 2. 

This means that the benefits awarded by the employees that chose not to trigger the Safeguard Clause will correspond to those that would result in a defined contribution plan, with the corresponding contributions being computed as the sum of the "deposited" contributions in Accounts 1 and 2 (without any adjustment / actuarial update). 

#### Alternative B – Defined Contribution Plan

Employees that chose Alternative B will have access to a defined contribution plan, under which the Company will perform monthly contributions corresponding to 4% of their pensionable salary until the date of retirement or termination of employment contract, with no limitations. 

Thus, under this alternative, employees benefit from a single account, which will be composed by the accumulated balance of the following contributions: 

- initial contribution, corresponding to past service liabilities, computed with reference to 31 December 2013 under the previous defined benefit plan, with a 25% premium;
- contributions made by Soporcel during 2014; and
- future contributions to be made by Soporcel at a 4% rate.

The benefit to be awarded by employees who, until 16 January 2015, had chosen this alternative, will correspond to the value of the life rent that can be acquired from an insurance company with the total accumulated contributions of each employee as of the date of retirement. 

Given these changes, by the end of 2015, the defined benefit plan shown a deficit resulting, amongst other factors, from the changes on the actuarial and financial assumptions, namely from the review on the discount rates used in computing the actuarial liabilities. 

Thus, in order to face that increase in the liabilities, the Group carried out additional contributions to the defined benefit plan in 2015. 

The Group also holds liabilities related to post‐employment defined benefit plans regarding the 13 Portucel employees that chose not to accept the conversion to defined contribution plan, together with former employees, retirees or, when applicable, with granted rights. 

As of 31 December 2015, the liability related with post‐employment benefit plans for two members of Portucel's Board of Directors was Euro 1,697,024 (31 December 2014: Euro 1,424,279). 

#### Secil sub‐group

In 2010, the constitutive contract of Secil's Pension Fund was amended, which is now designated by Pension Fund Secil Group, fully replacing the previous contract and in force as at 1 January of that year. 

The Pension Fund Secil Group comprises Secil and the subsidiaries: 

(i) CMP – Cimentos Maceira e Pataias, S.A. and Unibetão – Industrias de Betão Preparado, S.A. whose funds were incorporated (and simultaneously extinguished) into Secil Pension Fund; 

(ii) Cimentos Madeira, Lda. , which integrated (and extinguished simultaneously) their insurance policy in the Secil pension fund; 

(iii) Britobetão – Central de Betão, Lda., Secil Britas, S.A., Betomadeira, S.A. and Brimade, S.A.. 

Cimentos Madeira amended with effect to 1 January 2012 the post‐employment benefits, namely the supplement to retirement, early retirement, disability, and survivor pensions, to a defined benefit contributions plan. 

In the constitution for the defined‐contribution plan of Cimentos Madeira an allocation was made for the respective fund net assets for those entities with funds in place. A surplus was computed after the allocation of obligations for past services as at 31 December 2011 covered by the defined benefit pension schemes and defined contribution schemes and transferred to a reserve account allocated to the pension fund. The reserve account may be used to fund contributions, to cover pension plan management charges or to improve benefits. 

The Secil Group Pension Fund is the financial support for the payment of benefits provided for in pension plans of each associate (now jointly managed). 

#### *Defined‐benefit plans*

(i) Defined‐benefit plans with funds managed by independent entities 

#### LIABILITIES FOR COMPLEMENTARY RETIREMENT AND SURVIVOR'S PENSIONS

Secil and its subsidiaries CMP ‐ Cimentos Maceira e Pataias, S.A., Unibetão‐ Industrias de Betão Preparado, S.A., Cimentos Madeira, Lda., Betomadeira, S.A. and Societé des Ciments de Gabes have assumed the commitment to pay their employees amounts by way of complementary old age, disability, early retirement and survivors' pensions and a retirement subsidy. 

The liabilities arising from these plans are guaranteed by independent funds, administered by third parties, or covered by insurance policies. 

These plans are valued every six months, at the dates of closing of the interim and annual financial statements, by specialised and independent entities, using the projected unit credit method. 

 (ii) Defined‐benefit plans managed by the Group

#### LIABILITIES FOR COMPLEMENTARY RETIREMENT AND SURVIVOR'S PENSIONS

The responsibilities of Secil's retirees in 31 December 1987 (date of incorporation of Pension Fund) are guaranteed directly by Secil. Similarly, the liability assumed by Secil Martingança, SA are guaranteed directly by this entity. 

Since 26 June 2012 the responsibilities of Cimentos Madeira, Lda and Betomadeira ‐ Betões and Britas da Madeira, S.A. related to all retirees and pensioners that were receiving a pension, were transferred to Cimentos Madeira defined benefit pension plan incorporated in Secil's Pension fund. 

These plans are also valued every six months by specialized and independent entities using the method for calculating capital coverage corresponding to single premiums of the immediate life annuities in the valuation of the liabilities to current pensioners and the projected unit credit method for valuing liabilities relating to current employees. 

#### LIABILITIES FOR HEALTHCARE

The subsidiary Cimentos Madeira, Lda., provide to their employees a healthcare scheme which supplements the official health services and which is available to their families, pre‐retired and retired staff and widows, through an insurance contract. 

#### LIABILITES FOR RETIREMENT AND DEATH BENEFITS

The subsidiary Societé des Ciments de Gabes assumed the commitment to its employees to pay an old‐age retirement and disability subsidy and a death subsidy, with the following attribution criteria: 

 at Societé des Ciments de Gabes (Tunisia), on retirement date and in terms of the General Labour Agreement, article no. 52, a retirement subsidy representing: (i) 2 months of the last salary if the worker has less than 30 years' service to the company, and (ii) 3 months of the last salary, if the worker has 30 years or more service to the company. 

Secil and CMP – Cimentos Maceira e Pataias, S.A. assumed the commitment to its employees to pay a subsidy on death of current employee, equal to one month's last salary earned. 

#### LIABILITIES FOR LONG‐SERVICE AWARDS

Secil and its subsidiaries CMP – Cimentos Maceira e Pataias, S.A. have assumed the commitment to pay their employees bonuses to those who attain 25 years of service, which are paid in the year that employee reaches the number of years of service within the company. 

#### *Assumptions used in the valuation of liabilities*

The actuarial studies conducted by independent entities with reference to 31 December 2015 and 2014 for the purpose of calculating the liabilities for past services on those dates, were based on the following assumptions: 

|                                                  | 31/12/2015             | 31/12/2014             |
|--------------------------------------------------|------------------------|------------------------|
| Social Benefits formula                          | Decree-Law no.187/2007 | Decree-Law no.187/2007 |
|                                                  | of 10 May              | of 10 May              |
| Disability table                                 | EKV 80                 | EKV 80                 |
| Mortality table                                  | TV 88/90               | TV 88/90               |
| Wage growth rate - cement segment                | 1.00%                  | 1.00%                  |
| Wage growth rate - other companies               | 1.00%                  | 2.00%                  |
| Technical interest rate - pulp and paper segment | 2.50%                  | 3.50%                  |
| Technical interest rate - cement s egment        | 2.00%                  | 3.50%                  |
| Assets rate of return - pulp and paper segment   | 2.50%                  | 3.50%                  |
| Assets rate of return - cement segment           | 2.00%                  | 3.50%                  |
| Pensions growth rate - cement segment            | 0.45%                  | 0.45%                  |
| Pensions growth rate - other segments            | 1.00%                  | 0.75%                  |
| Semapa pensions reversability rate               | 50.00%                 | 50.00%                 |
| Number of Semapa complement annual payments      | 12                     | 12                     |

As at 31 December 2015, the Group revised the technical interest rate used in calculating the post‐employment liabilities from 3.5% to 2.5% on the pulp and paper segment and 2% on the cement segment, in line with the different characteristics of the beneficiaries in each post‐employment benefits plan. 

The following table presents five‐year historical information on the present value of liabilities, funds' market value, non‐financed liabilities and net actuarial gains/ (losses). 

Information related to the last five years were as follows: 

| 2011          | 2012        | 2013        | 2014        | 2015         |
|---------------|-------------|-------------|-------------|--------------|
| 247,545,062   | 155,057,532 | 99,516,232  | 100,073,116 | 168,798,865  |
| 120,542,657   | 145,554,473 | 95,945,454  | 99,038,106  | 167,886,448  |
| (127,002,405) | (9,503,059) | (3,570,778) | (1,035,010) | (912,417)    |
|               |             |             |             |              |
| 1,060,676     | 11,654,475  | (6,786,377) | 343,040     | (10,421,772) |
|               |             |             |             |              |

#### FUNDS LINKED TO BENEFIT PLANS' PENSIONS

During 2015 and 2014, fund's assets/insurance policies registered the following movements: 

|                                                 | 31‐12‐2015  |          | 31‐12‐2014  |          |
|-------------------------------------------------|-------------|----------|-------------|----------|
|                                                 | Autonomous  | Covered  | Autonomous  | Covered  |
| Amounts in Euro                                 | fund        | capital  | fund        | capital  |
| Opening balance                                 | 98,021,036  | 221,975  | 95,058,281  | 177,467  |
| Change to a defined contribution plan           | 50,755,836  | -        | -           | -        |
| Exchange rate adjustment                        | -           | 4,061    | -           | 1,036    |
| Endowments made in the year                     | 22,449,723  | 46,423   | 372,000     | 48,255   |
| Expected return                                 | 2,393,836   | 47       | 8,271,463   | 25,132   |
| Differences between actual and expected returns | (6,281)     | -        | 35,608      | -        |
| Pensions paid                                   | (6,639,241) | -        | (5,716,316) | -        |
| Retirements paid                                | -           | (65,574) | -           | (29,915) |
| Closing balance                                 | 166,974,909 | 206,932  | 98,021,036  | 221,975  |

As at 31 December 2015 and 2014, fund's assets were made up as follows: 

| Amounts in Euro   | 31‐12‐2015  | %      | 31‐12‐2014 | %      |
|-------------------|-------------|--------|------------|--------|
| Bonds             | 104,602,244 | 62.6%  | 51,276,557 | 52.3%  |
| Shares            | 37,075,412  | 22.2%  | 20,009,896 | 20.4%  |
| Liquidity         | 15,476,813  | 9.3%   | 17,192,322 | 17.5%  |
| Public debt       | 8,484,672   | 5.1%   | 9,106,088  | 9.3%   |
| Real estate       | 1,059,428   | 0.6%   | 145,253    | 0.1%   |
| Other aplications | 276,340     | 0.2%   | 290,919    | 0.3%   |
|                   | 166,974,909 | 100.0% | 98,021,036 | 100.0% |

#### *Movements in obligations for pension plans and other post‐employment benefits*

Movements occurred in liabilities assumed by the Group, shown in the consolidated statement of financial position as of 31 December 2015, are as follows: 

|                          |             | Exchange    | Net effect                    |           |               | Actuarial         |               |                |                 |
|--------------------------|-------------|-------------|-------------------------------|-----------|---------------|-------------------|---------------|----------------|-----------------|
|                          | Opening     | rate        | of reintroduction Assumptions |           | Costs and     | losses and        |               | Individual     | Closing         |
| Amounts in Euro          | balance     | adjustments | of DB plans                   | change    | incomes       | incomes           | Payments      | accounts       | balance         |
| Post‐employment benefits |             |             |                               |           |               |                   |               |                |                 |
| Assumed by the group     | 7,089,921   | -           | -                             | -         | 243,376       | ( 106,532         | 928,229)      | -              | 6, 511,600      |
| Autonomous fund          | 91,687,668  | -           | 13,<br>049,670                | 7,065,835 | 2,313,513     | 3,<br>(6, 168,518 | 639,242)      | 50,<br>755,836 | 161,<br>401,798 |
| Ins urance policy        | 258,680     | 4,409       | -                             | -         | 11,074        | 52,460            | (65,574)      | -              | 261,049         |
| Retirement and death     | 469,737     | (22,598)    | -                             | -         | (242,<br>270) | (22,062)          | (73,248)      | -              | 109,559         |
| Healthcare assitance     | 69,288      | -           | -                             | -         | 1,534         | 6,787             | (2,620)       | -              | 74,989          |
| Long service award       | 497,822     | -           | -                             | -         | 87,912        | -                 | (<br>145,864) | -              | 439,870         |
|                          | 100,073,116 | (18,189)    | 13,049,670                    | 7,065,835 | 2,415,139     | 3,312,235         | (7,854,777)   | 50,755,836     | 168,798,865     |

#### *Costs incurred in pensions and other post‐employment benefits*

As of 31 December 2015 and 2014 costs incurred in pensions and other post‐employment benefits, were detailed as follows: 

|                                             |          |           |               | 31‐12‐2015  |                   |               |                |
|---------------------------------------------|----------|-----------|---------------|-------------|-------------------|---------------|----------------|
|                                             |          |           | Expected      | Curtalments | Net effect        |               | Impact in the  |
|                                             | Current  | Interest  | return on the | and         | of reintroduction | Period        | profit for the |
| Amounts in Euro                             | services | cost      | plan assets   | settlements | of DB plans       | contributions | year           |
| Post‐employment benefits                    |          |           |               |             |                   |               |                |
| Assumed by the group                        | -        | 243,376   | -             | -           | -                 | -             | 243,376        |
| Autonomous fund                             | 96,182   | 3,096,161 | (3,310,134)   | 1,444,944   | 13,049,670        | -             | 14,376,823     |
| Insurance policy                            | 8,419    | 18,004    | (15,348)      | -           | -                 | -             | 11,075         |
| Retirement and death                        | 6,604    | 6,617     | 3,025         | (258,516)   | -                 | -             | (242,270)      |
| Healthcare assistance                       | -        | 1,534     | -             | -           | -                 | -             | 1,534          |
| Long service award                          | 26,511   | 15,799    | 45,602        | -           | -                 | -             | 87,912         |
| Contributions to defined contribution plans | -        | -         | -             | -           | -                 | 3,035,203     | 3,035,203      |
|                                             | 137,716  | 3,381,491 | (3,276,855)   | 1,186,428   | 13,049,670        | 3,035,203     | 17,513,653     |

|                                             |                     |                  |                                          | 31‐12‐2014                        |                                                |                         |                                         |
|---------------------------------------------|---------------------|------------------|------------------------------------------|-----------------------------------|------------------------------------------------|-------------------------|-----------------------------------------|
| Amounts in Euro                             | Current<br>services | Interest<br>cost | Expected<br>return on the<br>plan assets | Curtalments<br>and<br>settlements | Net effect<br>of reintroduction<br>of DB plans | Period<br>contributions | Impact in the<br>profit for the<br>year |
| Post‐employment benefits                    |                     |                  |                                          |                                   |                                                |                         |                                         |
| Assumed by the group                        | -                   | 305,702          | -                                        | -                                 | -                                              | -                       | 305,702                                 |
| Autonomous fund                             | 404,248             | 5,740,332        | (6,921,809)                              | 732,143                           | -                                              | -                       | (45,086)                                |
| Insurance policy                            | 33,060              | -                | -                                        | -                                 | -                                              | -                       | 33,060                                  |
| Retirement and death                        | -                   | 43,758           | -                                        | -                                 | -                                              | -                       | 43,758                                  |
| Healthcare assistance                       | -                   | 1,880            | -                                        | -                                 | -                                              | -                       | 1,880                                   |
| Long service award                          | 64,525              | 22,472           | -                                        | -                                 | -                                              | -                       | 86,997                                  |
| Contributions to defined contribution plans | -                   | -                | -                                        | -                                 | -                                              | 6,162,725               | 6,162,725                               |
|                                             | 501,833             | 6,114,144        | (6,921,809)                              | 732,143                           | ‐                                              | 6,162,725               | 6,589,036                               |

#### *Actuarial Gains/ losses) in the Statement of comprehensive consolidated income*

Actuarial gains and losses recognised in the year 2015, in the statement of comprehensive consolidated income, are detailed as follows: 

|                          | Other gains | Real vs         | Gross        | Deferred  | Impact      |
|--------------------------|-------------|-----------------|--------------|-----------|-------------|
| Amounts in Euro          | and losses  | expected income | value        | taxes     | on equity   |
| Post‐employment benefits |             |                 |              |           |             |
| Assumed by the group     | (106,532)   | -               | (106,532)    | 29,228    | (77,304)    |
| Autonomus fund           | (9,398,916) | (931,599)       | (10,330,515) | 2,721,770 | (7,608,745) |
| Retirement and death     | 22,062      | -               | 22,062       | (5,262)   | 16,800      |
| Healthcare assistance    | (6,787)     | -               | (6,787)      | 1,465     | (5,322)     |
|                          | (9,490,173) | (931,599)       | (10,421,772) | 2,747,201 | (7,674,571) |

## 30. Provisions

During the course of the years ended 31 December 2015 and 2014, the following movements took place in the caption Provisions: 

|                           | Legal       | Tax         | Environmental |              |              |
|---------------------------|-------------|-------------|---------------|--------------|--------------|
| Amounts in Euro           | claims      | claims      | restauration  | Others       | Total        |
| As of 1 January 2014      | 1,308,009   | 30,700,077  | 7,138,176     | 40,023,894   | 79,170,156   |
| Increases (Note 6)        | 322,453     | -           | -             | 21,565,399   | 21,887,852   |
| Reversals (Note 6)        | (1,732,873) | -           | (157,298)     | (8,366,186)  | (10,256,357) |
| Direct utilisations       | -           | -           | (89,485)      | (2,609,877)  | (2,699,362)  |
| Exchange rate adjustments | -           | -           | -             | 375,349      | 375,349      |
| Financial discounts       | -           | -           | 288,355       | -            | 288,355      |
| Transfers and adjustments | 3,045,879   | (6,592,413) | -             | (3,283,991)  | (6,830,525)  |
| As of 31 December 2014    | 2,943,468   | 24,107,664  | 7,179,748     | 47,704,588   | 81,935,468   |
| Change in perimeter       | -           | -           | 7,506         | 1,151,134    | 1,158,640    |
| Increases (Note 6)        | 21,191      | -           | 419           | 12,157,745   | 12,179,355   |
| Reversals (Note 6)        | (52,236)    | -           | (157,298)     | (20,960,448) | (21,169,982) |
| Direct utilisations       | -           | -           | (174,155)     | (2,369,223)  | (2,543,378)  |
| Exchange rate adjustments | -           | -           | (1,431)       | 163,552      | 162,121      |
| Financial discounts       | -           | -           | 289,714       | -            | 289,714      |
| Transfers and adjustments | (286,376)   | 32,106,930  | -             | 398,323      | 32,218,877   |
| As of 31 December 2015    | 2,626,047   | 56,214,594  | 7,144,503     | 38,245,671   | 104,230,815  |

Provisions for Legal claims were established according to the risk assessments carried out internally by the Group with the support of its legal counsels, based on the probability of the decision being favourable or unfavourable to the Group. 

The amount stated as Tax claims results from the Group's judgement at the statement of financial position date, about the potential disagreement with the tax authorities, considering most recent updates about this events. 

The amount shown as Others is related with provisions for multiple risks of different natures, which may originate cash outflows in the future. 

## 31. Interest‐bearing liabilities

As of 31 December 2015 and 2014 Group's net debt was as follows: 

| Amounts in Euro               | 31‐12‐2015    | 31‐12‐2014    |
|-------------------------------|---------------|---------------|
| Interest‐bearing liabilities  |               |               |
| Non‐current                   | 1,497,214,815 | 1,276,083,559 |
| Current                       | 512,032,570   | 712,556,265   |
|                               | 2,009,247,385 | 1,988,639,824 |
| Cash and cash equivalents     |               |               |
| Cash                          | 360,705       | 411,371       |
| Short term bank deposits      | 60,639,929    | 27,351,689    |
| Other s hort term investments | 145,255,130   | 575,208,712   |
|                               | 206,255,764   | 602,971,772   |
|                               |               |               |
| Interest‐bearing net debt     | 1,802,991,621 | 1,385,668,052 |
|                               |               |               |

#### *Non‐current interest‐bearing liabilities*

As of 31 December 2015 and 2014, non‐current interest‐bearing liabilities were as follows: 

| Amounts in Euro                          | 31‐12‐2015    | 31‐12‐2014    |
|------------------------------------------|---------------|---------------|
| Non‐current                              |               |               |
| Bond loans                               | 760,000,000   | 952,432,984   |
| Commercial paper                         | 213,700,000   | 113,150,000   |
| Bank loans                               | 509,945,116   | 211,626,775   |
| Expenses with loans iss uing             | (10,799,427)  | (10,438,194)  |
| Interest‐bearing bank debt               | 1,472,845,689 | 1,266,771,565 |
|                                          |               |               |
| Financial leases                         | 2,913,024     | 3,670,480     |
| Other loans - IAPMEI                     | 6,788,396     | -             |
| Other loans - QREN                       | 601,846       | 3,439,517     |
| Other interest-bearing debts             | 14,065,860    | 2,201,997     |
| Other interest‐bearing debts             | 24,369,126    | 9,311,994     |
|                                          |               |               |
| Non current interest‐bearing liabilities | 1,497,214,815 | 1,276,083,559 |

#### *Bond loans*

As of 31 December 2015 and 2014, current and non‐current bond loans were as follows: 

| Amounts in Euro                     | 31‐12‐2015  | 31‐12‐2014    |
|-------------------------------------|-------------|---------------|
| Bond loans                          |             |               |
| Portucel Senior Notes Due 2020      | 150,000,000 | 350,000,000   |
| Portucel 2015 / 2023                | 200,000,000 | -             |
| Portucel 2010 / 2015                | -           | 60,000,000    |
| Portucel 2010 / 2015 - 2nd emission | -           | 100,000,000   |
| Semapa 2006 / 2016                  | 175,000,000 | 175,000,000   |
| Semapa 2006 / 2016                  | 1,087,000   | 1,087,000     |
| Semapa 2012 / 2015                  | -           | 299,961,000   |
| Semapa 2014 / 2019                  | 150,000,000 | 149,300,000   |
| Semapa 2014 / 2020                  | 80,000,000  | 80,000,000    |
| SBI 2007 / 2017                     | 40,000,000  | 40,000,000    |
| Secil 2012 / 2017                   | -           | 60,000,000    |
| Secil 2013 / 2016                   | -           | 40,000,000    |
| Secil 2013 / 2018                   | -           | 40,000,000    |
| Secil 2015/2020                     | 60,000,000  | -             |
| Secil 2015/2020                     | 80,000,000  | -             |
| NSOSPE 2012/2017                    | -           | 28,409,973    |
|                                     | 936,087,000 | 1,423,757,973 |

#### *Bond Loans Semapa*

In April 2014 Semapa issued a bond loan amounting to Euro 150 million with maturity of 5 years (2019). As at 31 December 2015 the unit market value of these bonds was Euro 103.01. 

In November 2014 Semapa issued a bond loan amounting to Euro 80 million with maturity of 6 years (2020) and repurchased Euro 48.9 million of "Ogrigações Semapa 2006/2016 – 2ª emissão", which were first issued by Euro 50 million. As at 31 December 2015 the unit market value of these bonds was Euro 102.14. 

In 2015, Semapa reimbursed the bond loan contracted in the year 2012, for a total amount of Euro 300,000,000, which was listed in Euronext Lisbon under the designation "Obrigações Semapa 2012/2015". 

Semapa has one bond loan amounting to Euro 175,000,000 with 10 years maturity. This last is listed in Euronext Lisbon under the designation "Obrigações Semapa 2006/2016". As at 31 December 2015 the unit market value of these bonds was Euro 98.947. 

#### *Bond Loans Portucel*

In 2015, Portucel S.A. reimbursed the last tranche amounting Euro 60,000,000 of the "Obrigações Portucel / 2010‐ 2015". 

In 2015, Portucel, S.A. also reimbursed "Obrigações Portucel ‐ 2010/2015 – 2ª Emissão" bond loan amounting to Euro 100,000,000. 

Additionally, in September 2015 Portucel proceed to the partial anticipated reimbursement of the bond loan denominated "Portucel Senior Notes 5,375%", on the amount of Euros 200,000,000. After this anticipated reimbursement the referred bond loan was reduced to Euros 150,000,000. 

Simultaneously, the Group issued a new bond loan underwritten by two banks, also in the amount of Euro 200 million. This new issue, has a 8 year maturity and is indexed to a variable interest rate. 

#### *Bond Loans Secil*

The subsidiary Secil Betões e Inertes, S.A., issued in 2007 a bond loan amounting to Euro 40,000,000 with interests paid every six months and in arrears. The reimbursement of this bond will occur on the 10th year (2017). However the anticipated reimbursement (Call Option), partial or for the full amount, can be exercised on the 10, 12, 14, 16 and 18 dates of interests' payments. The interests will be paid every six months and in arrears. 

In 2012, Secil issued a bond loan amounting to Euro 60,000,000. In 2015, Secil reimbursed this bond loan and negotiated the issue of a new bond loan, for the same amount. The reimbursement of this new bond loan will occur in 2020. The interests will be paid every six months and in arrears. 

In 2013, Secil contracted two bond loans amounting to Euro 40,000,000 , with an 3 and 5 year maturity each. These two loans were reimbursed in 2015, and a new bond loan was issued for the amount of Euros 80,000,000, with a full reimbursement scheduled to June 2020. However the reimbursement (Call Option) can be exercised on the 4, 6 and 8 interests' payments dates. The interests will be paid every six months and in arrears. 

#### *Bond Loan NSOSPE*

During 2012, the subsidiary NSOSPE (Brazil) issued a debenture loan amounting to Real 128,100,000 with a maturity of 5 years (2017). In September 2015, the entity decided to anticipate the reimbursement of the amount in debt at that date (Real 73,200,000). 

#### *Commercial paper*

In 2015, Semapa contracted a commercial paper amounting to Euro 25,000,000 with 4 years maturity, fully issued as of 31 December 2015. 

In 2014, Semapa contracted a commercial paper program amounting to a maximum amount of Euro 120 million for a period of four years. As at 31December 2015 no issues were in place regarding this program. 

In 2013, Semapa contracted a commercial paper program amounting to a maximum amount of Euro 100,000,000 for a period of seven years. As at 31December 2015 no issues were in place regarding this program. 

In 2008, Semapa and ETSA – Investimentos SGPS S.A. contracted a group commercial paper program amounting to a maximum amount of Euro 70,000,000, for a period of 5 years. After renegotiating the terms of the program the amount was increased to a maximum of Euro 100 million, and the maturity date was extended to September 2020. As at 31 December 2015 no issues were in place regarding this program. 

In 2006, Semapa contracted a commercial paper program amounting to a maximum amount of Euro 175,000,000 with 10 years maturity. As at 31 December of 2015 Euro 153,750,000 was put in place regarding this program. 

In 2015, Portucel contracted a new commercial paper program, amounting to Euro 100 million, whose emissions are underwritten by the Bank for a period of five years, and revoked the commercial paper program of Euro 50 million that would mature in 2016. As at 31 December 2015, the program was not being used. 

In December 2012, Portucel issued a commercial paper program amounting to Euro 125,000,000, whose emissions are underwritten by the Bank for a period of three years.. During 2015, the conditions of this program have been renegotiated, namely its maturity date that was extended to May 2020. As at 31 December 2015, the amount of Euro 125,000,000 was fully used. 

In July 2015, Portucel entered into two new commercial paper programs amounting to Euro 125 million, for a period of 5 years. As at 31 December 2015, the amount put in place amounted to Euro 100 million. 

#### *Maturity of bond loans and other loans*

The reimbursement terms relating to the balance recorded on bond, commercial paper, bank and other medium and long‐term loans is shown as follows: 

| Amounts in Euro   | 31‐12‐2015    | 31‐12‐2014    |
|-------------------|---------------|---------------|
|                   |               |               |
| 1 to 2 years      | 44,202,713    | 295,118,864   |
| 2 to 3 years      | 174,781,242   | 260,886,621   |
| 3 to 4 years      | 358,235,647   | 45,957,422    |
| 4 to 5 years      | 496,092,091   | 33,534,130    |
| More than 5 years | 431,789,525   | 647,354,236   |
|                   | 1,505,101,218 | 1,282,851,273 |

As of 31 December 2015 and 2014, non‐current bank loans were as follows: 

| Amount in Euro                 | 31/12/2015  | 31/12/2014  | Reference rate |
|--------------------------------|-------------|-------------|----------------|
| Non‐current                    |             |             |                |
| Holdings                       |             |             |                |
| Banco BIC                      | 2,857,143   | 8,571,429   | Euribor 3m     |
| Banco do Brasil                | 17,500,000  | 14,500,000  | Euribor 3m     |
| Cement and derivatives segment |             |             |                |
| Amen Bank                      | 2,715,604   | 3,454,091   | TMM            |
| Banque Mediterranee            | 6,940,558   | 7,450,252   | Several        |
| UBCI Credit                    | 7,675,439   | 3,323,699   | TMM            |
| Banco BIC                      | 18,062,508  | 24,250,000  | Euribor 6m     |
| Banco Santander Brasil         | 40,106,605  | -           | CDI            |
| BNDES                          | 43,283,620  | -           | Others         |
| Banco BIC                      | 16,662,508  | -           | Several        |
| Banco do Brasil                | 4,314,436   | -           | CDI            |
| Other loans                    | 6,159,955   | 15,592,384  | Several        |
| Paper and pulp segment         |             |             |                |
| BEI                            | 334,577,851 | 124,940,476 | Euribor 6m     |
| Environment segment            |             |             |                |
| Banco BPI                      | 4,366,668   | 6,433,333   | Several        |
| Banco BIC                      | 4,722,221   | 3,111,111   | Euribor 6m     |
| Total                          | 509,945,116 | 211,626,775 |                |

#### Current interest‐bearing liabilities

As of 31 December 2015 and 2014, current interest‐bearing liabilities were as follows: 

| Amounts in Euro                         | 31‐12‐2015  | 31‐12‐2014  |
|-----------------------------------------|-------------|-------------|
| Current                                 |             |             |
| Bond loans                              | 176,087,000 | 471,324,989 |
| Commercial paper                        | 158,750,000 | 15,000,000  |
| Bank loans                              | 122,126,511 | 210,938,889 |
| Expenses with bond loans issuing        | (2,577,430) | (2,251,787) |
| Interest‐bearing bank debt              | 454,386,081 | 695,012,091 |
|                                         |             |             |
| Shareholders short-term loans (Note 35) | 21,710,283  | 1,578,323   |
| Financial leases                        | 917,559     | 880,771     |
| Other loans - QREN                      | 2,837,311   | 2,981,730   |
| Other debts                             | 32,181,336  | 12,103,350  |
| Other interest‐bearing debts            | 57,646,489  | 17,544,174  |
|                                         |             |             |
| Current interest‐bearing liabilities    | 512,032,570 | 712,556,265 |

As of 31 December 2015 and 2014, current bank loans were as follows:

| Amount in Euro                          | 31‐12‐2015  | 31‐12‐2014  | Reference rate |
|-----------------------------------------|-------------|-------------|----------------|
| Current                                 |             |             |                |
| Holdings                                |             |             |                |
| Caixa Geral de Depósitos                | 460,583     | -           | Euribor 6m     |
| Banco BIC                               | 5,714,286   | 5,714,286   | Euribor 3m     |
| Cement and derivatives segment          |             |             |                |
| Novo Banco                              | -           | 29,244,942  | Euribor 6m     |
| Banco Santander Totta                   | 5,000,000   | 2,671,306   | Euribor 6m     |
| Banco BIC                               | 6,262,492   | 1,350,000   | Euribor 6m     |
| Banco Comercial Português               | 1,865,805   | 1,957,854   | Several        |
| Banco Itaú                              | 16,734,783  | -           | CDI            |
| Banco Santander Brasil                  | 4,718,424   | -           | CDI            |
| BNDES                                   | 9,631,089   | -           | Several        |
| BCG                                     | 3,765,326   | -           | CDI            |
| Banco do Brasil                         | 1,725,774   | -           | CDI            |
| Haitong Bank                            | 1,970,231   | -           | CDI            |
| Other loans                             | 18,237,674  | 22,809,805  | Several        |
| Paper and pulp segment                  |             |             |                |
| Banco Santander Totta (Comercial paper) | -           | 125,000,000 | Euribor 6m     |
| Other loans                             | 40,578,590  | 19,735,140  | Several        |
| Environment segment                     |             |             |                |
| Banco BIC                               | 2,138,889   | 888,889     | Several        |
| Banco BPI                               | 2,566,666   | 1,566,667   | Several        |
| Banco Popular                           | 500,000     | -           | Euribor 6m     |
| Caixa Geral de Depósitos                | 255,899     | -           | Euribor 12m    |
| Total                                   | 122,126,511 | 210,938,889 |                |

#### Liabilities related to financial leasing

As of 31 December 2015 and 2014, the Group's debt‐repayment terms relating to finance leases, except for liabilities resulting from the application of IFRIC 4 (Note 17), are shown as follows: 

| Amounts in Euro           | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------|------------|------------|
| Less than a year          | 994,971    | 1,012,130  |
| 1 to 2 years              | 999,263    | 970,608    |
| 2 to 3 years              | 909,979    | 898,627    |
| 3 to 4 years              | 229,693    | 948,844    |
| 4 to 5 years              | 128,391    | 227,078    |
| More than 5 years         | 692,745    | 822,494    |
|                           | 3,955,042  | 4,879,781  |
| Future interest           | (124,459)  | (328,530)  |
| Liabilities present value | 3,830,583  | 4,551,251  |

As at 31 December 2015 and 31 December 2014, Group's assets acquired under financial lease, was as follows: 

|                                   | 31/12/2015  |              |            |             |              |            |
|-----------------------------------|-------------|--------------|------------|-------------|--------------|------------|
|                                   | Acquisition | Accumulated  | Net book   | Acquisition | Accumulated  | Net book   |
| Amounts in euro                   | Value       | depreciation | value      | value       | depreciation | value      |
| Building                          | 2,000,815   | (86,938)     | 1,913,877  | 2,000,815   | (49,048)     | 1,951,767  |
| Machinery and equipment           | 7,810,878   | (3,871,896)  | 3,938,982  | 4,365,548   | (2,252,534)  | 2,113,014  |
| Machinery and equipment - IFRIC 4 | 14,000,000  | (9,459,460)  | 4,540,540  | 14,000,000  | (7,945,946)  | 6,054,054  |
| Trans port equipment              | 254,549     | (135,759)    | 118,790    | 402,532     | (213,427)    | 189,105    |
|                                   | 24,066,242  | (13,554,052) | 10,512,190 | 20,768,895  | (10,460,955) | 10,307,940 |

In 2010, with the launch of the new paper mill, the Group recognised as a finance lease contract (IFRIC 4) the cost of the precipitated calcium carbonate production unit, installed by Omya, S.A. at the industry site in Setubal for the exclusive use of the new mill. This contract foresees the transfer of the assets' ownership to About The Future, S.A., upon its termination, at 2019. 

#### *Bank credit facilities granted and not drawn*

At 31 December 2015 and 2014, bank credit facilities granted and not drawn amounted to Euro 736,308,629 and Euro 758,311,960 respectively. 

#### Financial *Covenants*

For certain types of financing operations, there are commitments to maintain certain financial ratios within previously negotiated limits. The existing covenants are clauses of Cross default, *Pari Passu*, Negative pledge, Ownership‐clause, clauses related to group's activities maintenance, financial ratios, mainly Net debt/ EBITDA, interest coverage, indebtedness and financial autonomy and fulfilment of regular financial contracts' obligations (operational, legal and tax obligations), common in loan agreements and fully known in the market. 

Additionally, as of 31 December 2015 and 2014 the group comply with the financial ratios limits imposed under its financing contracts. 

## 32. Payables and other current liabilities

As of 31 December 2015 and 2014, the caption Payables and other current liabilities comprised: 

| Amounts in Euro                               | 31‐12‐2015  | 31‐12‐2014  |
|-----------------------------------------------|-------------|-------------|
| Accounts payable to suppliers                 | 186,396,831 | 184,937,519 |
| Accounts payable to suppliers of fixed assets | 12,190,493  | 5,441,311   |
| Instituto do Ambiente                         | 18,471,042  | 17,733,481  |
| Derivative financial instruments (Note 34)    | 6,266,980   | 22,496,057  |
| Other creditors                               | 12,264,514  | 18,945,042  |
| Related parties (Note 35)                     | 4,118,271   | 2,508,166   |
| Accrued costs                                 | 104,329,085 | 79,722,639  |
| Deferred income                               | 14,147,807  | 11,774,684  |
|                                               | 358,185,023 | 343,558,899 |

As of 31 December 2015 and 2014, the captions Accrued costs and Deferred income comprised: 

| Amounts in Euro                  | 31‐12‐2015  | 31‐12‐2014 |
|----------------------------------|-------------|------------|
| Accrued costs                    |             |            |
| Insurance costs                  | 112,841     | 46,961     |
| Payroll expenses                 | 51,055,225  | 33,588,888 |
| Interest payable                 | 15,167,923  | 18,512,920 |
| Accrued - energy costs           | 10,384,355  | 12,117,687 |
| Transport services               | 809,553     | 367,881    |
| Bank services                    | 189,851     | 197,948    |
| Audit fees                       | 54,990      | 71,266     |
| Consulting fees                  | 1,521,309   | 1,730,712  |
| IT Services                      | 219,505     | 435,450    |
| Other                            | 24,813,533  | 12,652,926 |
|                                  | 104,329,085 | 79,722,639 |
| Deferred income                  |             |            |
| Government grants                | 6,280,003   | 5,792,660  |
| Grants - CO2 emission allowances | 7,526,256   | 5,712,446  |
| Others                           | 341,548     | 269,578    |
|                                  | 14,147,807  | 11,774,684 |

#### Government grants

On 18 June 2014, the Group's subsidiary CelCacia ‐ Celulose Cacia, SA, signed two contracts for financial and tax incentives, with AICEP ‐ Agency for Investment and Foreign Trade of Portugal, to support the investment to increase the capacity of the plant in Cacia. The total estimated investment amounts to Euro 49.3 million. The incentives already approved amount to Euro 9.264 million as a repayable financial incentive, and Euro 5.644 million as a tax incentive, to use until 2024. The contract includes an award of achievement, corresponding to the conversion of up to 75% (Euro 6.947.450) of the refundable incentives granted into non‐refundable incentives, by meeting the objectives set by the contract. 

The subsidiary AMS‐BR Star Paper, S.A. finished the construction of a second tissue paper machine in its unit located in Vila Velha de Ródão. This subsidiary has signed contracts with AICEP in March 2014 to partially support this investment through European funds. These contracts include refundable financial incentives amounting to Euro 9,647,700, convertible to non‐refundable incentives up to a limit of 50% (Euro 4,823,850), by meeting the objectives set by the contract and tax incentives (Euro 5,854,240, to use until 2024), which reduced the amount of goodwill recognised following the acquisition. 

The caption Government grants comprises an amount of Euro 6,280,003 (31 December 2014: Euro 5,792,660) regarding loans classified as current liabilities, from the referred financial incentive contracts, with the remaining share to be recognised, as at 31 December 2015, in the amount of Euro 42,157,447 classified in Other non‐current liabilities. 

As at 31 December 2015 and 31 December 2014, the caption Non‐current liabilities were detailed as follows: 

| Amounts in Euro               | 31‐12‐2015 | 31‐12‐2014 |
|-------------------------------|------------|------------|
| Other non‐current liabilities |            |            |
| Government grants             | 42,157,447 | 31,641,551 |
| Equipments - Omya (IFRIC 4)   | 1,322,745  | 6,910,099  |
|                               | 43,480,192 | 38,551,650 |

## 33. Assets and liabilities held for sale

Assets and liabilities held for sale are related with the acquisition of Uniconcreto – Betão Pronto, S.A. by the subsidiary Secil. The decision to dispose these assets and liabilities follows the imposition placed by the competition authority as well as the subsequent internal assessment carried out by the Group. As at this date the Company was unable to conclude the sale of the referred assets.

## 34. Financial assets and liabilities

As its activities are exposed to a variety of financial and operational risk factors, the Group adopts a proactive approach to risk management, as a way to mitigate the potential adverse effects associated with, these risks, namely the risk arising from the price of pulp, foreign exchange risk and interest rate risk. 

In order to minimize the effects of exchange rate variations on Group's sales of pulp and paper's exports to non‐ European countries, financial instruments were contracted to hedge almost all items denominated in foreign currency in the consolidated statement of financial position, as well as for a part of projected sales subject to currency risks. 

In addition and in order to hedge interest rate risk, interest rate swaps and collars associated with bond loans have been contracted. 

As of 31 December of 2015 and 2014, the reconciliation of the consolidated statement of financial position with the various categories of financial assets and liabilities included therein is detailed as follows: 

|                                                         | Financial<br>instruments ‐ | Financial<br>intruments ‐ | Loans and other     | Financial assets at<br>fair value through | Financial assets | Other interests ‐   | Non financial      |
|---------------------------------------------------------|----------------------------|---------------------------|---------------------|-------------------------------------------|------------------|---------------------|--------------------|
| 31 December 2015                                        | trading                    | hedging                   | accounts receivable | profit or loss                            | held‐for‐sale    | bearing liabilities | Assets/Liabilities |
| Amounts in Euro                                         | Note 24/32                 | Note 24/32                | Note 24             | Note 20                                   | Note 21          | Note 32             | Note 24/32         |
| Assets                                                  |                            |                           |                     |                                           |                  |                     |                    |
| Financial ass ets at fair value through profit or los s | -                          | -                         | -                   | 342,968                                   | -                | -                   | -                  |
| Financial ass ets held-for-sale                         | -                          | -                         | -                   | -                                         | 229,136          | -                   | -                  |
| Other non-current ass ets                               | -                          | -                         | 6,777,734           | -                                         | -                | -                   | -                  |
| Current ass ets                                         | 2,236,063                  | 1,414,365                 | 285,359,246         | -                                         | -                | -                   | 20,585,542         |
| Cas h and cash equivalents                              | -                          | -                         | 206,255,764         | -                                         | -                | -                   | -                  |
| Total assets                                            | 2,236,063                  | 1,414,365                 | 498,392,744         | 342,968                                   | 229,136          | ‐                   | 20,585,542         |
| Liabilities                                             |                            |                           |                     |                                           |                  |                     |                    |
| Non-current interest-bearing liabilities                | -                          | -                         | -                   | -                                         | -                | 1,497,214,815       | -                  |
| Other liabilities                                       | -                          | -                         | -                   | -                                         | -                | -                   | 43,480,192         |
| Current interest-bearing liabilities                    | -                          | -                         | -                   | -                                         | -                | 512,032,570         | -                  |
| Current liabilities                                     | 646,872                    | 5,620,108                 | -                   | -                                         | -                | 319,299,194         | 32,618,850         |
| Total liabilities                                       | 646,872                    | 5,620,108                 | ‐                   | ‐                                         | ‐                | 2,328,546,579       | 76,099,042         |

| 31 December 2014                                        | Financial<br>Instruments ‐<br>trading | Financial<br>instruments‐<br>hedging | Loans and other<br>accounts receivable | Financial assets at<br>fair value through<br>profit or loss | Financial assets<br>held‐for‐sale | Other interest‐<br>bearing liabilities | Non financial<br>Assets/Liabilities |
|---------------------------------------------------------|---------------------------------------|--------------------------------------|----------------------------------------|-------------------------------------------------------------|-----------------------------------|----------------------------------------|-------------------------------------|
| Amounts in Euro                                         | Note 24 / 32                          | Note 24 / 32                         | Note 24                                | Note 20                                                     | Note 21                           | Note 32                                | Note 24 / 32                        |
| Assets                                                  |                                       |                                      |                                        |                                                             |                                   |                                        |                                     |
| Financial ass ets at fair value through profit or los s | -                                     | -                                    | -                                      | 451,485                                                     | -                                 | -                                      | -                                   |
| Financial assets held-for-sale                          | -                                     | -                                    | -                                      | -                                                           | 229,136                           | -                                      | -                                   |
| Other non - current as sets                             | -                                     | -                                    | 4,914,177                              | -                                                           | -                                 | -                                      | -                                   |
| Current ass ets                                         | -                                     | -                                    | 270,639,851                            | -                                                           | -                                 | -                                      | 12,872,553                          |
| Cas h and cash equivalents                              | -                                     | -                                    | 602,971,772                            | -                                                           | -                                 | -                                      | -                                   |
| Total assets                                            | ‐                                     | ‐                                    | 878,525,800                            | 451,485                                                     | 229,136                           | ‐                                      | 12,872,553                          |
| Liabilities                                             |                                       |                                      |                                        |                                                             |                                   |                                        |                                     |
| Non-current interest-bearing liabilities                | -                                     | -                                    | -                                      | -                                                           | -                                 | 1,276,083,559                          | -                                   |
| Other liabilities                                       | -                                     | -                                    | -                                      | -                                                           | -                                 | -                                      | 38,551,650                          |
| Current interest-bearing liabilities                    | -                                     | -                                    | -                                      | -                                                           | -                                 | 712,556,265                            | -                                   |
| Current liabilities                                     | 1,342,225                             | 21,153,832                           | -                                      | -                                                           | -                                 | 291,554,677                            | 29,508,165                          |
| Total liabilities                                       | 1,342,225                             | 21,153,832                           | ‐                                      | ‐                                                           | ‐                                 | 2,280,194,501                          | 68,059,815                          |

As of 31 December 2015 and 2014 the fair value of these assets and liabilities is similar to its book value. 

The following table presents the Group´s assets and liabilities measure at fair value as of 31 December 2015 according to the following hierarchic levels: 

- Level 1: Fair value of financial instruments is based on prices ruling on active, liquid markets at the date of the statement of financial position;
- Level 2: Fair value of financial instruments is not determined on the basis of active market prices, but rather resorting to valuation models. The main inputs of the models used are observable in the market, and
- Level 3: Fair value of financial instruments is not determined on the basis of active market prices, but rather resorting to valuation models, the main inputs of which are not observable in the market

#### *Assets measured at fair value*

| Amounts in Euro                                            | 31/12/2015 | Level 1 | Level 2   |
|------------------------------------------------------------|------------|---------|-----------|
| Financial assets at fair value recognised in reserves      |            |         |           |
| Hedging (Note 24)                                          | 1,414,365  | -       | 1,414,365 |
| Financial assets at fair value recognised in results       |            |         |           |
| Trading (Note 24)                                          | 2,236,063  | -       | 2,236,063 |
| Financial assets at fair value through profit or loss      |            |         |           |
| Shares (Note 20)                                           | 342,968    | 342,968 | -         |
| Financial assets held‐for‐sale                             |            |         |           |
| Shares (Note 21)                                           | 229,136    | 229,136 | -         |
|                                                            | 4,222,532  | 572,104 | 3,650,428 |
|                                                            |            |         |           |
|                                                            |            |         |           |
| Amounts in Euro                                            | 31/12/2014 | Level 1 | Level 2   |
| Financial assets at fair value through profit or loss      |            |         |           |
| Shares (Note 20)                                           | 451,485    | 451,485 | -         |
| Financial assets held‐for‐sale                             |            |         |           |
| Shares (Note 21)                                           | 229,136    | 229,136 | -         |
|                                                            | 680,621    | 680,621 | ‐         |
| Liabilities measured at fair value                         |            |         |           |
|                                                            |            |         |           |
| Amounts in Euro                                            | 31‐12‐2015 | Level 1 | Level 2   |
| Financial liabilities at fair value recognised in earnings |            |         |           |

|                                                            | (6,266,980)  | ‐       | (6,266,980)  |
|------------------------------------------------------------|--------------|---------|--------------|
|                                                            |              |         |              |
| Amounts	in	Euro                                            | 31‐12‐2014   | Level 1 | Level 2      |
| Financial liabilities at fair value recognised in earnings |              |         |              |
| Hedging	(Note	32)                                          | (21.153.832) | -       | (21.153.832) |
| Financial liabilities at fair value through profit or loss |              |         |              |
| Trading	(Note	32)                                          | (1.342.225)  | -       | (1.342.225)  |
|                                                            | (22.496.057) | ‐       | (22.496.057) |

#### Derivative financial instruments

Trading (Note 32)

**Financial liabilities at fair value through profit or loss**

As of 31 December 2015, details of the fair value of derivative financial instruments were as follows: 

| Amount in Euro                                        | Fair value changes<br>(trading) | Fair value changes<br>(hedging) | Total        |
|-------------------------------------------------------|---------------------------------|---------------------------------|--------------|
| As of 1 January 2015                                  | (1,342,225)                     | (21,153,832)                    | (22,496,057) |
| Maturity / Settlement                                 | 226,072                         | 32,509,987                      | 32,736,059   |
| Changes in fair value recognised in results (Note 10) | 924,788                         | (19,794,003)                    | (18,869,215) |
| Changes in fair value recognised in equity            | -                               | 4,232,105                       | 4,232,105    |
| Changes in perimeter                                  | 1,780,556                       | -                               | 1,780,556    |
| As of 31 December 2015                                | 1,589,191                       | (4,205,743)                     | (2,616,552)  |

**(646,872)** - (646,872)

#### *Details and maturity of the Derivative Financial Instruments*

The fair value of derivative financial instruments is included under the caption Current payables (Note 32), if negative, and in the caption Current receivables (Note 24), if positive. 

The movement in the balances presented in the years ended 31 December 2015 and 2014, relating to financial instruments were as follows: 

|                                             |             |          |           | 31‐12‐2015  |             | 31‐12‐2014   |
|---------------------------------------------|-------------|----------|-----------|-------------|-------------|--------------|
| Amounts	in	Euro                             | Amount      | Maturity | Positive  | Negative    | Net         | Net          |
| Hedging                                     |             |          |           |             |             |              |
| Interest rate collar (SWAP's)               | 175,000,000 | 2016     | -         | (2,282,117) | (2,282,117) | (7,646,928)  |
| Coverage of net investment (USD)            | 25,050,000  | 2015     | 543,992   | -           | 543,992     | (576,895)    |
| Exchange rate forwards - future sales (USD) | -           | 2015     | -         | -           | -           | (1,233,629)  |
| Interest rate swaps (SWAP's) EUR            | 240,000,000 | 2020/23  | 870,373   | (3,337,991) | (2,467,618) | (5,046,807)  |
| Interest and exchange rate swaps (BRL)      | 128,100,000 | -        | -         | -           | -           | (6,649,573)  |
|                                             |             |          | 1,414,365 | (5,620,108) | (4,205,743) | (21,153,832) |
| Trading                                     |             |          |           |             |             |              |
| Exchange rate forwards (USD)                | 85,000,000  | 2016     | 1,948,961 | (646,872)   | 1,302,089   | (1,231,143)  |
| Exchange rate forwards (GBP)                | 8,700,000   | 2016     | 229,435   | -           | 229,435     | (111,082)    |
| Future purchase of CO2 licenses             | 1,622,500   | 2018     | 57,667    | -           | 57,667      | -            |
|                                             |             |          | 2,236,063 | (646,872)   | 1,589,191   | (1,342,225)  |
|                                             |             |          |           |             |             |              |
|                                             |             |          | 3,650,428 | (6,266,980) | (2,616,552) | (22,496,057) |

#### Exchange rate coverage

The Group has a currency exposure on sales invoiced in foreign currencies, namely US dollars (USD) and sterling pounds (GBP). Since the Group's financial statements are translated into Euro, it runs an economic risk on the conversion of these currency flows to the Euro. 

The Group is also obliged, albeit to a lesser degree, to make certain payments in those same currencies which, for currency exposure purposes, act as a natural hedge. Thus, the hedge is aimed at safeguarding the net value of the statement of financial position items denominated in foreign currencies against the respective currency fluctuations. 

The hedging instruments used in this operation are foreign exchange forward contracts covering the net exposure to other currencies at the time the invoices are issued, for the same maturity dates and the same amounts of these documents in such a way as to fix the exchange rate associated with the sales. The nature of the risk hedged is the change in the carrying amount of sales and purchases expressed in foreign currencies. At the end of each month customer and suppliers' balances expressed in foreign currency are updated, with the gain or loss offset against the fair value change of the forwards negotiated. 

As of 31 December 2015 the Company has in place financial foreign exchange instruments classified as trading with a notional amount of Euro 1,589,191 (31 December 2014: Euro 1,342,225 negative value). 

#### Coverage of Investment in foreign operations

The Group hedges the economic risk associated with the USD exchange rate exposure in its investment held on Portucel North America. For that purpose, the Group entered into a forward foreign exchange contract. In 31 December 2015, the Group had contracted an outstanding notional of USD 25,050,000. 

This instrument is designated as a hedge of the net investment in the Group's US subsidiary, with fair value changes being recognised in other comprehensive income. 

#### Interest Rate – Coverage of cash flows

The Group hedges a portion of future interest payments on loans, commercial paper and bond loans, by engaging in an interest rate swap, in which pays a fixed rate and receives a variable rate and in interest rate collars limiting the net financial charges to a defined range. The instrument is designated as a cash flow hedge of the interest rate risk associated with the issued debt. 

These interest rate risk hedging is associated with interest payments at a variable rate due to interest‐bearing liabilities recognised. The hedged risk is the variable rate index with which debt interest is associated. 

As at 31 December 2015, the total amount of loans with associated interest rate hedges (excluding the interest rate and exchange rate hedging described below) were Euro 415 million (2014: Euro 390 million). 

This hedge is designated until the maturity of the hedging instruments. 

#### Currency Interest Rate Swaps ‐ cash flow coverage

On 12 April 2012, Semapa Group, through its Brazilian subsidiary NSOSPE Empreendimentos e Participações S.A., issued a non‐convertible bond issue remunerated at a variable rate in the amount of Real 128.1 million, with maturity on 26 March 2017, which, as mentioned in Note 31, was repaid in advance in September 2015. 

In order to manage currency risk and interest rate inherent to the bond loan, Semapa negotiated three currency interest rate Swaps (cash flow coverage) amounting to Real 128.1 million, that were also settled as a result of the debt extinction that was linked to them. 

#### Available‐for‐sale financial assets

These amounts are recognised at fair value which corresponds to their market value, deducted from impairment losses, if any (Note 21). 

#### Loans and receivables

These amounts are recognised at fair value which corresponds to their nominal value, after deducting any impairment losses identified during the course of the credit risk analysis of the credit portfolios held (Notes 2.1.3, 22 and 24). 

#### Other financial liabilities

These items are recognised at their amortised cost, corresponding to the value of the respective cash flows discounted at the effective interest rate associated with each one of the liabilities concerned (Note 31). 

## 35. Balances and transactions with related parties

As of 31 December 2015 and 2014, related parties receivables and shareholders balances are detailed as follows: 

|                                       | 31‐12‐2015  |           |                  |             | 31‐12‐2014 |                  |  |  |
|---------------------------------------|-------------|-----------|------------------|-------------|------------|------------------|--|--|
|                                       | Other       | Other     | Interest‐bearing | Other       | Other      | Interest‐bearing |  |  |
| Amounts in Euro                       | receivables | payables  | liabilities      | receivables | payables   | liabilities      |  |  |
| Shareholders                          |             |           |                  |             |            |                  |  |  |
| Cimo SGPS, S.A.                       | -           | -         | -                | -           | -          | -                |  |  |
| Longapar, SGPS, S.A.                  | -           | -         | 16,890,763       | -           | 1,160      | -                |  |  |
| OEM SGPS, S.A.                        | -           | -         | 2,065,261        | -           | -          | 1,578,323        |  |  |
| Cimigest, SGPS, S.A.                  | -           | -         | 2,754,259        | -           | -          | -                |  |  |
| Other related entities                |             |           |                  |             |            |                  |  |  |
| Ave-Gestão Ambiental, S.A.            | 105,490     | 588,654   | -                | 96,083      | 368,405    | -                |  |  |
| Cotif Sicar                           | -           | 182,002   | -                | -           | 86,794     | -                |  |  |
| Inertogrande                          | 211,296     | -         | -                | 207,967     | -          | -                |  |  |
| J.M.J. Henriques, Lda.                | 121,275     | -         | -                | 117,959     | -          | -                |  |  |
| Secil Prebetão, S.A.                  | 385,520     | 19,670    | -                | 158,211     | 31,565     | -                |  |  |
| Secil Unicon - S.G.P.S., Lda.         | 55,444      | -         | -                | 47,533      | -          | -                |  |  |
| Seribo, S.A.                          | -           | 315,097   | -                | -           | 310,286    | -                |  |  |
| Setefrete - Soc. Tráfego Cargas, S.A. | -           | 300,942   | -                | -           | 363,410    | -                |  |  |
| Supremo Cimentos, S.A.                | -           | -         | -                | 24,493,948  | -          | -                |  |  |
| Margem - Companhia de Mineração, S.A. | -           | -         | -                | 1,303,073   | -          | -                |  |  |
| Other related parties                 | -           | 1,160     | -                | -           | 18,514     | -                |  |  |
| Other s ubsidiaries s hareholders     | -           | 2,710,746 | -                | -           | 1,328,032  | -                |  |  |
| Total                                 | 879,025     | 4,118,271 | 21,710,283       | 26,424,774  | 2,508,166  | 1,578,323        |  |  |

As of 31 December 2015 and 2014, transactions between shareholders comprised: 

|                      |                  | 2015                |                  | 2014                |
|----------------------|------------------|---------------------|------------------|---------------------|
| Amounts in Euro      | Service purchase | Net financial costs | Service purchase | Net financial costs |
| Shareholders         |                  |                     |                  |                     |
| Cimigest SGPS, S.A.  | (107,740)        | (878)               | (107,740)        | (82,006)            |
| Cimo SGPS, S.A.      | -                | (3,124)             | -                | (8,260)             |
| Longapar, SGPS, S.A. | -                | (1,683)             | -                | (210,687)           |
| OEM SGPS, S.A.       | -                | (8,584)             | -                | (46,228)            |
|                      | (107,740)        | (14,269)            | (107,740)        | (347,181)           |

As of 31 December 2015 and 2014, transactions between other related parties comprised: 

|                            | 2015             |                    |                  |                     |  |  |  |
|----------------------------|------------------|--------------------|------------------|---------------------|--|--|--|
|                            |                  | Sales and services |                  |                     |  |  |  |
| Amounts in Euro            | Service purchase | rendered           | Operating income | Net financial costs |  |  |  |
| Other related entities     |                  |                    |                  |                     |  |  |  |
| Ave-Gestão Ambiental, S.A. | (4,755,060)      | 39,379             | (64,611)         | -                   |  |  |  |
| Secil Prebetão, S.A.       | (52,697)         | 798,500            | 94,763           | -                   |  |  |  |
| Setefrete, S.A.            | (2,820,022)      | -                  | 31,330           | -                   |  |  |  |
| Others                     | -                | -                  | 3,600            | (4,432)             |  |  |  |
|                            | (7,627,779)      | 837,879            | 65,082           | (4,432)             |  |  |  |

|                                 | 2014               |            |                  |                     |  |  |  |  |
|---------------------------------|--------------------|------------|------------------|---------------------|--|--|--|--|
|                                 | Sales and services |            |                  |                     |  |  |  |  |
| Amounts in Euro                 | Service purchase   | rendered   | Operating income | Net financial costs |  |  |  |  |
| Other related entities          |                    |            |                  |                     |  |  |  |  |
| Ave-Gestão Ambiental, S.A.      | (4,266,591)        | 68,591     | 70,452           | -                   |  |  |  |  |
| Seribo, S.A.                    | -                  | -          | -                | (4,810)             |  |  |  |  |
| Secil Prebetão, S.A.            | (56,275)           | 750,329    | 2,710            | 2,817               |  |  |  |  |
| Setefrete, S.A.                 | (3,771,650)        | -          | 18,023           | -                   |  |  |  |  |
| Supremo Cimentos, S.A.          | -                  | 13,952,975 | 3,321            | 2,113,447           |  |  |  |  |
| Margem - Comp.ª Mineração, S.A. | -                  | -          | 21,544           | -                   |  |  |  |  |
| Others                          | -                  | -          | 3,600            | (334)               |  |  |  |  |
|                                 | (8,094,516)        | 14,771,895 | 119,650          | 2,111,120           |  |  |  |  |

## 36. Environmental related expenditures

As part of its business operations, the Group incurs in several environmental expenditure which, depending on their nature, are capitalised or recognised as costs in the operating results for the year. 

Environmental expenses incurred by the Group in order to preserve resources or to avoid or reduce future damage, are capitalised when they are expected to extend the useful life or to increase the capacity, safety or efficiency of other assets held by the Group. 

Expenditures capitalised and recognised as costs in the year ended 31 December 2015 and 2014, were as follows: 

|                                            | 31‐12‐2015 |                 |                |           | 31‐12‐2014      |                |
|--------------------------------------------|------------|-----------------|----------------|-----------|-----------------|----------------|
|                                            |            | Expenses of the | Capitalisation |           | Expenses of the | Capitalisation |
| Amounts in Euro                            | Revenue    | period          | of the period  | Revenue   | period          | of the period  |
| Atmospheric emissions                      | -          | 881,423         | 285,376        | -         | 859,405         | 281,390        |
| Management of residual waters              | -          | 100,409         | 1,200          | -         | 41,570          | -              |
| Residual managements                       | (743,973)  | 1,467,621       | 155,492        | (948,593) | 1,596,054       | 350,590        |
| Protection of nature                       | -          | 781,827         | 9,775          | -         | 511,908         | 21,378         |
| Protection of soils and undergroung waters | -          | -               | -              | -         | 7,058,517       | 25,859         |
| Materials recycling                        | -          | 33,493          | -              | -         | 1,487,517       | -              |
| Liquid effluent treatment                  | -          | 1,777,091       | -              | -         | 630,594         | -              |
| Expense with electrofilters                | -          | 634,252         | -              | -         | 757,940         | -              |
| Solid waste landfill                       | -          | 40,469          | -              | -         | 599,353         | -              |
| Sewerage                                   | -          | 411,108         | -              | -         | 466,013         | -              |
| Recovery boiler                            | -          | -               | 376,903        | -         | -               | 31,610         |
| Generator of the oil boiler                | -          | -               | -              | -         | -               | 75,684         |
| Security facilities improvement            | -          | -               | 56,693         | -         | -               | 129,407        |
| Other activities                           | -          | 596,979         | 553,473        | -         | 854,029         | 213,993        |
|                                            | (743,973)  | 6,724,672       | 1,438,911      | (948,593) | 14,862,900      | 1,129,911      |

## 37. Audit fees

In the years ended 31 December 2015 and 2014, expenses with statutory audit and audit services, comprised: 

| Amounts in Euro                          | 2015    | 2014    |
|------------------------------------------|---------|---------|
| Statutory audit services                 |         |         |
| Statutory auditors services              | 327,942 | 374,623 |
| Auditor services in foreign subsidiaries | 296,080 | 220,999 |
| Tax consultancy services                 | 62,962  | 67,714  |
| Other reliability assurance services     | 105,014 | 139,720 |
|                                          | 791,998 | 803,056 |

The services described as tax consultancy, mainly comprise the support in complying with tax obligations, in Portugal and abroad, as well as in services, surveys of operational business processes which did not result in any advice for redesign of existing practices, procedures or controls. 

The Board of Directors believes there are adequate procedures safeguarding the independence of auditors through the audit committee process analysis of the work proposed and careful definition of the work to be performed by the auditors. 

## 38. Number of employees

At 31 December 2015 and 2014, the number of employees in service of the Group's various companies, was as follows: 

| Segment                | 31‐12‐2015 | 31‐12‐2014 | Var. 15/14 |
|------------------------|------------|------------|------------|
| Pulp and paper         | 2.662      | 2.325      | 337        |
| Cement and derivatives | 2.647      | 2.034      | 613        |
| Environment            | 287        | 285        | 2          |
| Holdings and others    | 25         | 24         | 1          |
|                        | 5.621      | 4.668      | 953        |

The increase occurred in the cements and derivatives segment is mainly due to the incorporation of the subsidiary Supremo by the full consolidation method, with a total staff of 618 as at 31 December 2015. 

In the pulp and paper segment the increase is mainly due to Group Portucel's acquisition of AMS in the beginning of 2015 and the expansion of Mozambique's project, which as at 31 December 2015, accounted for 199 and 228 employees, respectively. 

## 39. Commitments

As of 31 December 2015 and 2014, the guarantees and other financial commitments provided by the Group were as follows: 

| Amounts in Euro                                     | 31‐12‐2015  | 31‐12‐2014  |
|-----------------------------------------------------|-------------|-------------|
| Warranties                                          |             |             |
| IAPMEI (in the perimeter of QREN)                   | 8,380,074   | 1,807,337   |
| Clearance products                                  | 2,723,960   | 2,715,419   |
| AT - Portuguese Tax Authorities                     | 1,124,184   | 2,312,169   |
| APSS - Admi. dos Portos de Setúbal e Sesimbra       | 2,593,639   | 2,633,394   |
| Direção Geral de Alfândegas                         | 800,000     | 800,000     |
| APDL - Administração do Porto de Leixões            | 704,162     | 706,062     |
| Simria                                              | 327,775     | 327,775     |
| Instituto de Conservação da Natureza - Arrábida     | 406,540     | 280,639     |
| Secretaria Regional do Ambiente e Recursos Naturais | 274,595     | 274,595     |
| IAPMEI (PEDIP scope)                                | 209,914     | 415,934     |
| Comissão de Coordenação e Des env. Regional Norte   | 236,403     | 236,403     |
| Comissão de Coordenação e Des env. Regional Centro  | 863,173     | 845,173     |
| Comissão de Coordenação e Des env. Regional LVT     | 1,118,892   | 1,134,778   |
| Comissão de Coordenação e Des env. Regional Algarve | 519,165     | 480,804     |
| Others                                              | 1,866,478   | 1,595,436   |
|                                                     | 22,148,954  | 16,565,918  |
| Other commitments                                   |             |             |
| Of purchase                                         |             |             |
| Property, plant and equipment                       | 29,603,350  | 25,459,825  |
| Others                                              | 41,036,349  | 8,226,283   |
| Fores try land rents                                | 68,339,646  | 63,308,069  |
| Mortgage loan guarantees                            | 1,356,285   | 1,495,271   |
|                                                     | 140,335,630 | 98,489,448  |
|                                                     | 162,484,584 | 115,055,366 |

#### Liabilities assumed due to operating leases

As of 31 December 2015 and 2014 debt's reimbursement plans for operating leases are as follows: 

| Amount in Euro                    | 31/12/2015 | 31/12/2014 |
|-----------------------------------|------------|------------|
| Less than 1 year                  | 445,375    | 325,685    |
| Over 1 year and less than 5 years | 4,902,934  | 4,316,595  |
|                                   | 5,348,308  | 4,642,280  |
|                                   |            |            |
| Costs incurred in the year        | 3,101,136  | 2,868,488  |

## 40. Other commitments of the Group

#### Investment in a new plant in Angola

In terms of the Memorandum of Understanding signed between the Angolan Government and the subsidiary Secil in April 2004, Secil – Companhia de Cimentos do Lobito, S.A. was incorporated in 29 November 2005 – approximately 51% held by the SECIL Group and, indirectly, 49% by the Angolan State ‐ commenced operations on 1 January 2006. Accordingly, the contract for the operation of the Encime do Lobito plant, between the Angolan State and Tecnosecil (now called Secil Angola) and which has been in force since September 2000, was terminated. 

Secil Lobito's share capital of USD 21,274,285 was paid up through the transfer of the tangible and intangible assets of Secil Angola and Encime U.E.E. respectively by the SECIL Group and by the Angolan Government at the amount resulting from the valuation carried out in October 2003 by an independent international audit firm. 

In this Memorandum of Agreement, it was estimated that within a time horizon of 36 months commencing from the date the respective share capital was paid up, Secil Lobito would erect cement and clinker factory in Lobito. 

On 26 October 2007, the Angolan Cabinet approved the Private Investment Project called the "Lobito New Cement Factory" involving an amount of USD 91,539,000, contracted on 14 December 2007, by Secil Lobito and by "ANIP – Agência Nacional para o Investimento Privado", the latter representing the Angolan state. 

Furthermore, in 2008, an electric‐power generating plant costing USD 18,000,000 was added to the investment. 

Secil Lobito is updating this project to the current Angolan reality. Accordingly, in October 2015, Secil Lobito delivered to U.T.I.P. ‐ Unidade Técnica para o Investimento Privado, set up under the new Private Investment Law, an amendment draft to the previously mentioned Private Investment Project approved in December 2007 by the Council of Ministers of Angola. This amendment was prepared following the several contacts with ANIP, and comprises the update and review of certain subjects and conditions of which the effective feasibility, development and implementation of the investment project relies on. 

#### Deposit Bail

The subsidiary Ciminpart sold, in 2012, his participation in VIROC to a Recovery Fund. In this process, Secil constituted a pledge over a bank deposit amounting to of Euro 1,250,000. 

The subsidiary NSOSPE constituted one deposit amounting to Real 12,500,000, as collateral of 25% of the loan contracted by Margem on the ITAU bank with an notional amount of Real 50 million. 

## 41. Contingent assets

#### *Non‐tax matters*

#### Infrastructure enhancement and maintenance rate

Under the licensing process nº 408/04 related to the new paper mill project, the Setubal city Council issued a settlement note to Portucel regarding an infrastructure increase and maintenance fee ("TMUE ") amounting to Euro 1,199,560, with which the company disagrees. 

This situation regards the amount collected under this levy in the licensing process mentioned above, for the construction of a new paper mill in the industrial site of Mitrena, Setubal. Portucel disagrees with the amount charged and filled an administrative claim against it on 25 February 2008 (request 2485/08), followed by an appeal in Court against the rejection of the claim on 28 October 2008. At 3 October 2012 this claim had an adverse decision, and in 13 November and appeal to the Administrative Supreme Court (STA) was performed, which has brought down the action to Central Administrative Court (TCA) on July 4, 2013. 

#### Public Debt Settlement Fund

In addition to the tax matters described below, a second request to the Public Debt Settlement Fund was submitted on 2 June 2010, which called for the reimbursement of various amounts, totalling Euro 136,243,939. These amounts related to adjustments in the financial statements of the group after its privatisation, that had not been considered in formulating the price of such privatization as they were not included in the documentation made available for consultation by the bidders. 

On 24 May, 2014, the Administrative and Fiscal Court of Almada denied the request of the Group to present testimonial proves, requesting written allegations. On 30 June 2014, the Group presented its complaint to the conference about this position, whilst presenting on the same date the written allegations requested by the Court. It agreed with the Group's complaint and hence it is expected the scheduling of the testimonial hearing. 

#### *Tax matters*

#### Public Debt Settlement Fund

According to Decree‐Law no. 36/93 of 13 February, the tax debts of privatised companies relating to periods prior to the privatisation date (in the case of Portucel, 25 November 2006) are the responsibility of the Public Debt Settlement Fund. Portucel submitted an application to the Public Debt Settlement Fund on 16 April 2008 requesting the payment by the State of the tax debts raised by the tax authorities for periods before that date. 

On 13 December 2010, Portucel presented a new application requesting the payment of debts settled by the tax authorities regarding 2006 and 2003. This application was supplemented on 13 October 2011, with the amounts already paid and uncontested regarding these debts, as well as with expenses directly related to them, pursuant to court ruling dated 24 May 2011 (Case No. 0993A/02), which confirmed the company's position regarding the enforceability of such expenses. In this context, the aforementioned Fund is liable as detailed: 

## Report and Accounts 2015

|                                    |           |                  |             | Decreases in the   | Process in favor of |             |
|------------------------------------|-----------|------------------|-------------|--------------------|---------------------|-------------|
| Amounts in Euro                    | Period    | Amonts requested | 1st refund  | perimeter of  RERD | the Group           | Outstanding |
| Portucel                           |           |                  |             |                    |                     |             |
| Value added tax - Germany          | 1998-2004 | 5,850,000        | (5,850,000) | -                  | -                   | -           |
| Corporate Income Tax               | 2002      | 625,033          | (625,033)   | -                  | -                   | -           |
| Value added tax                    | 2002      | 2,697            | (2,697)     | -                  | -                   | -           |
| Corporate Income Tax               | 2003      | 1,573,165        | (1,573,165) | -                  | -                   | -           |
| Corporate Income Tax               | 2003      | 182,230          | (157,915)   | -                  | (24,315)            | -           |
| Corporate Income Tax (RF)          | 2004      | 3,324            | -           | -                  | -                   | 3,324       |
| Corporate Income Tax               | 2004      | 766,395          | -           | -                  | (139,023)           | 627,372     |
| Corporate Income Tax (RF)          | 2005      | 1,736            | (1,736)     | -                  | -                   | -           |
| Corporate Income Tax               | 2005      | 11,754,680       | -           | (1,360,294)        | -                   | 10,394,386  |
| Corporate Income Tax               | 2006      | 11,890,071       | -           | (1,108,178)        | -                   | 10,781,893  |
| Expenses                           |           | 314,957          | -           | -                  | -                   | 314,957     |
|                                    |           | 32,964,287       | (8,210,545) | (2,468,472)        | (163,338)           | 22,121,932  |
| Soporcel                           |           |                  |             |                    |                     |             |
| Corporate Income Tax               | 2002      | 18,923           | -           | -                  | -                   | 18,923      |
| Corporate Income Tax (Replacement) | 2003      | 5,725,771        | -           | -                  | -                   | 5,725,771   |
| Value added tax                    | 2003      | 2,509,101        | -           | -                  | -                   | 2,509,101   |
| Stamp tax                          | 2004      | 497,669          | -           | -                  | (497,669)           | -           |
|                                    |           | 8,751,464        | ‐           | ‐                  | (497,669)           | 8,253,795   |
|                                    |           | 41,715,751       | (8,210,545) | (2,468,472)        | (661,007)           | 30,375,727  |

## 42. Exchange Rates

The assets and liabilities of the foreign subsidiaries and associated companies were translated to Euro at the exchange rate prevailing on 31 December 2015. 

The income statement transactions were translated at the average rate for the year. The differences arising from the application of these rates as compared with the balance prior to the conversion were reflected under the Currency translation reserve heading in shareholders' equity. 

The rates used as of 31 December 2015 and 2014, against the Euro, were as follows: 

|                                   |            |            | Valuation/     |                                   |            |            | Valuations/    |
|-----------------------------------|------------|------------|----------------|-----------------------------------|------------|------------|----------------|
|                                   | 31‐12‐2015 | 31‐12‐2014 | (depreciation) |                                   | 31‐12‐2015 | 31‐12‐2014 | (depreciation) |
| TND (tunisian dinar)              |            |            |                | DKK (danish krone)                |            |            |                |
| Average exchange rate for the yea | 2,1761     | 2,2516     | 3,35%          | Average exchange rate for the yea | 7,4588     | 7,4548     | (0,05%)        |
| Exchange rate at the end of the y | 2,2116     | 2,2490     | 1,66%          | Exchange rate at the end of the y | 7,4626     | 7,4453     | (0,23%)        |
| LBN (libanese pound)              |            |            |                | HUF (hungarian florim)            |            |            |                |
| Average exchange rate for the yea | 1.672,60   | 2.000,80   | 16,40%         | Average exchange rate for the yea | 309,9458   | 308,5600   | (0,45%)        |
| Exchange rate at the end of the y | 1.641,20   | 1.830,30   | 10,33%         | Exchange rate at the end of the y | 315,9800   | 315,5400   | (0,14%)        |
| USD (american dollar)             |            |            |                | AUD (australian dollar)           |            |            |                |
| Average exchange rate for the yea | 1,1085     | 1,3285     | 16,56%         | Average exchange rate for the yea | 1,4775     | 1,4719     | (0,38%)        |
| Exchange rate at the end of the y | 1,0887     | 1,2141     | 10,33%         | Exchange rate at the end of the y | 1,4897     | 1,4829     | (0,46%)        |
| GBP (sterling pound)              |            |            |                | MZM (mozambican metical)          |            |            |                |
| Average exchange rate for the yea | 0,7259     | 0,8061     | 9,96%          | Average exchange rate for the yea | 42,5652    | 40,8981    | (4,08%)        |
| Exchange rate at the end of the y | 0,7340     | 0,7789     | 5,77%          | Exchange rate at the end of the y | 49,3400    | 38,5100    | (28,12%)       |
| PLN (polish zloty)                |            |            |                | BRL (brazilian real)              |            |            |                |
| Average exchange rate for the yea | 4,1844     | 4,1834     | (0,02%)        | Average exchange rate for the yea | 3,6959     | 3,1225     | (18,36%)       |
| Exchange rate at the end of the y | 4,2639     | 4,2732     | 0,22%          | Exchange rate at the end of the y | 4,2493     | 3,2207     | (31,94%)       |
| SEK (swedish krone)               |            |            |                | MAD (moroccan dirame)             |            |            |                |
| Average exchange rate for the yea | 9,3530     | 9,0990     | (2,79%)        | Average exchange rate for the yea | 10,8606    | 11,1712    | 2,78%          |
| Exchange rate at the end of the y | 9,1895     | 9,3930     | 2,17%          | Exchange rate at the end of the y | 10,8120    | 11,0503    | 2,16%          |
| CZK (czech krone)                 |            |            |                | NOK (norwegian krone)             |            |            |                |
| Average exchange rate for the yea | 27,2804    | 27,5355    | 0,93%          | Average exchange rate for the yea | 8,9516     | 8,3547     | (7,14%)        |
| Exchange rate at the end of the y | 27,0230    | 27,7350    | 2,57%          | Exchange rate at the end of the y | 9,6030     | 9,0420     | (6,20%)        |
| CHF (swiss franc)                 |            |            |                | AOA (angolan kwanza)              |            |            |                |
| Average exchange rate for the yea | 1,0690     | 1,2146     | 11,99%         | Average exchange rate for the yea | 135,5674   | 132,1210   | (2,61%)        |
| Exchange rate at the end of the y | 1,0835     | 1,2024     | 9,89%          | Exchange rate at the end of the y | 149,7158   | 126,3854   | (18,46%)       |
| TRY (turkish lira)                |            |            |                |                                   |            |            |                |
| Average exchange rate for the yea | 3,0275     | 2,9065     | (4,16%)        |                                   |            |            |                |
| Exchange rate at the end of the y | 3,1765     | 2,8320     | (12,16%)       |                                   |            |            |                |

## 43. Companies included in the consolidation

Instrumental companies included in consolidation 

|                                                         |                |        | Direct and indirect % of equity held by Semapa |        |
|---------------------------------------------------------|----------------|--------|------------------------------------------------|--------|
| Name                                                    | Head<br>Office | Direct | Indirect                                       | Total  |
| Parent ‐ company                                        |                |        |                                                |        |
| Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. | Lisbon         |        |                                                |        |
| Subsidiaries                                            |                |        |                                                |        |
| Seminv, SGPS, S.A.                                      | Lisbon         | 100.00 | -                                              | 100.00 |
| Seinpart, SGPS, S.A.                                    | Lisbon         | 49.00  | 51.00                                          | 100.00 |
| Seinpar Investments, B.V.                               | Amsterdam      | 100.00 | -                                              | 100.00 |
| Semapa Inversiones S.L.                                 | Madrid         | 100.00 | -                                              | 100.00 |
| Celcimo S.L.                                            | Madrid         | -      | 100.00                                         | 100.00 |
| Inspiredplace, S.A.                                     | Lisbon         | 100.00 | -                                              | 100.00 |

#### Subsidiary companies of sub‐group ETSA – under full consolidation

| Name                                                           | Head Office | Direct and indirect % of equity held in ETSA<br>Direct | Indirect | Total  | % shares held by<br>Semapa |
|----------------------------------------------------------------|-------------|--------------------------------------------------------|----------|--------|----------------------------|
| Parent ‐ company.                                              |             |                                                        |          |        |                            |
| ETSA - Investimentos, SGPS, S.A.                               | Loures      | 99.99                                                  | -        | 99.99  | 99.99                      |
| Subsidiaries                                                   |             |                                                        |          |        |                            |
| ETSA LOG,S.A.                                                  | Loures      | 100.00                                                 | -        | 100.00 | 99.99                      |
| ABAPOR – Comércio e Industria de Carnes, S.A.                  | Coruche     | 100.00                                                 | -        | 100.00 | 99.99                      |
| SEBOL – Comércio e Industria de Sebo, S.A.                     | Loures      | 100.00                                                 | -        | 100.00 | 99.99                      |
| ITS – Indústria Transformadora de Subprodutos Animais, S.A.    | Coruche     | 100.00                                                 | -        | 100.00 | 99.99                      |
| BIOLOGICAL - Gestão de Resíduos Industriais, Lda.              | Loures      | 100.00                                                 | -        | 100.00 | 99.99                      |
| AISIB – Aprovechamiento Integral de Subprodutos Ibéricos, S.A. | Mérida      | 100.00                                                 | -        | 100.00 | 99.99                      |

#### Subsidiary companies of sub‐group Portucel – under full consolidation

|                                                                                          |                     | Direct and indirect % equity held in | % of shares held<br>by Semapa |                  |                |
|------------------------------------------------------------------------------------------|---------------------|--------------------------------------|-------------------------------|------------------|----------------|
| Name                                                                                     | Head Office         | Direct                               | Indirect                      | Total            |                |
| Parent ‐ company:                                                                        |                     |                                      |                               |                  |                |
| Portucel, S.A.                                                                           | Setúbal             | 35.71                                | 33.69                         | 69.40            | 69.40          |
| Subsidiaries:                                                                            |                     |                                      |                               |                  |                |
| Soporcel - Sociedade Portuguesa de Papel, SA                                             | Figueira da Foz     | 100.00                               | -                             | 100.00           | 69.40          |
| Portucel Florestal, SA                                                                   | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| PortucelSoporcel Parques Indus triais , SA                                               | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| Aboutbalance - SGPS, SA                                                                  | Lis bon             | 100.00                               | -                             | 100.00           | 69.40          |
| AMS-BR Star Paper, SA                                                                    | Vila Velha de Ródão | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Tis sue, SA                                                             | Aveiro              | 100.00                               | -                             | 100.00           | 69.40          |
| PortucelSoporcel Internacional SGPS SA                                                   | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| Portucel Moçambique - Sociedade de Desenvolvimento Flores tal e Industrial, Lda          | Mozambique          | 20.05                                | 60.15                         | 80.20            | 55.66          |
| Portucel Flores tal Brasil - Gestão de Participações, Ltda                               | Brazil              | 25.00                                | 75.00                         | 100.00           | 69.40          |
| Colombo Energy Inc.                                                                      | USA                 | -                                    | 100.00                        | 100.00           | 69.40          |
| Portucel Finance, Zoo<br>Portucel Africa, SRL                                            | Poland<br>Italy     | 25.00<br>-                           | 75.00<br>100.00               | 100.00<br>100.00 | 69.40<br>69.40 |
| PortucelSoporcel Floresta, SGPS, SA                                                      | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| Sociedade de Vinhos da Herdade de Espirra - Produção e Comercialização de Vinhos , SA    | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Gavião - Sociedade de Caça e Turismo, S.A.                                               | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Florestal – Sociedade para o Des envolvimento Agro-Flores tal, SA       | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Afocelca - Agrupamento complementar de empresas para protecção contra incêndios ACE      | Portugal            | -                                    | 64.80                         | 64.80            | 44.97          |
| Viveiros Aliança - Empres a Produtora de Plantas, SA                                     | Palmela             | -                                    | 100.00                        | 100.00           | 69.40          |
| Atlantic Fores ts , SA                                                                   | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Raiz - Ins tituto de Inves tigação da Flores ta e Papel                                  | Aveiro              | -                                    | 94.00                         | 94.00            | 65.24          |
| Bosques do Atlantico, SL                                                                 | Spain               | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Pulp SGPS, S.A.                                                         | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| Soporcel Pulp - Sociedade Portuguesa de Celulose, SA                                     | Figueira da Foz     | -                                    | 100.00                        | 100.00           | 69.40          |
| CELSET - Celulos e de Setúbal, S.A.                                                      | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| CELCACIA - Celulos e de Cacia, S.A.                                                      | Aveiro              | -                                    | 100.00                        | 100.00           | 69.40          |
| Portucel International GmbH                                                              | Germany             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Papel, SGPS SA                                                          | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| About the Future - Empres a Produtora de Papel, SA                                       | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| SPCG – Sociedade Portugues a de Co-Geração El éctrica, SA                                | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Portucel Papel Setúbal, S.A.                                                             | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Portucel Soporcel North America Inc.<br>PortucelSoporcel Sales & Marketing NV            | USA<br>Belgium      | -<br>25.00                           | 100.00<br>75.00               | 100.00<br>100.00 | 69.40<br>69.40 |
| PortucelSoporcel Lusa, Lda                                                               | Figueira da Foz     | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Fine Paper , S.A.                                                       | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Switzerland                                                             | Switzerland         | 25.00                                | 75.00                         | 100.00           | 69.40          |
| PortucelSoporcel Afrique du Nord                                                         | Morocco             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Es paña, SA                                                             | Spain               | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Netherlands, BV                                                         | Netherlands         | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel France, EURL                                                            | France              | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel United Kingdom, Ltd                                                     | UK                  | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Italia, SRL                                                             | Italy               | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Deutschland, GmbH                                                       | Germany             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Handels , GmbH                                                          | Austria             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Poland SP Z O                                                           | Poland              | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Euras ia                                                                | Turkey              | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel International                                                           | Switzerland         | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Russ ia, LLC                                                            | Rus sia             | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Energia, SGPS SA                                                        | Setúbal             | 100.00                               | -                             | 100.00           | 69.40          |
| Enerpulp – Cogeração Energética de Pas ta, SA<br>PortucelSoporcel Participações, SGPS SA | Setúbal<br>Setúbal  | -<br>100.00                          | 100.00<br>-                   | 100.00<br>100.00 | 69.40<br>69.40 |
| Arbos er – Serviços Agro-Indus triais , SA                                               | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| EMA21 - Engenharia e Manutenção Industrial Século XXI, SA                                | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Ema Cacia - Engenharia e Manutenção Industri al, ACE                                     | Aveiro              | -                                    | 91.15                         | 91.15            | 63.26          |
| Ema Setúbal - Engenharia e Manutenção Indus trial, ACE                                   | Setúbal             | -                                    | 92.56                         | 92.56            | 64.24          |
| Ema Figueira da Foz- Engenharia e Manutenção Industrial, ACE                             | Figueira da Foz     | -                                    | 91.47                         | 91.47            | 63.48          |
| Empremédia - Corretores de Seguros, Lda                                                  | Lis bon             | -                                    | 100.00                        | 100.00           | 69.40          |
| EucaliptusLand, SA                                                                       | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Headbox - Operação e Contolo Industrial, SA                                              | Setúbal             | -                                    | 100.00                        | 100.00           | 69.40          |
| Cutpaper - Trans formação, Corte e Embalagem de Papel, ACE                               | Figueira da Foz     | -                                    | 50.00                         | 50.00            | 34.70          |
| PortucelSoporcel Serviços Partilhados , SA                                               | Figueira da Foz     | -                                    | 100.00                        | 100.00           | 69.40          |
| PortucelSoporcel Abas tecimento de Madeira, ACE                                          | Setúbal             | 33.33                                | 66.66                         | 99.99            | 69.39          |

#### Subsidiary companies of sub‐group Secil – under full consolidation

|                                                                                                 |                 |                                            |          |        | % of shares |  |
|-------------------------------------------------------------------------------------------------|-----------------|--------------------------------------------|----------|--------|-------------|--|
|                                                                                                 |                 | Direct and indirect % equity held in Secil |          |        | held by     |  |
| Name                                                                                            | Head Office     | Direct                                     | Indirect | Total  | Semapa      |  |
| Parent ‐ company:                                                                               |                 |                                            |          |        |             |  |
| Secil - Companhia Geral de Cal e Cimento, S.A.                                                  | Setúbal         | -                                          | 99.998   | 99.998 | 99.998      |  |
| Subsidiaries:                                                                                   |                 |                                            |          |        |             |  |
| Hewbol, S.G.P.S., Lda.                                                                          | Funchal         | 100.00                                     | -        | 100.00 | 99.998      |  |
| Somera Trading Inc.                                                                             | Panama          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Secil Cabo Verde Comércio e Serviços, Lda.                                                      | Praia           | -                                          | 100.00   | 100.00 | 99.998      |  |
| ICV - Inertes de Cabo Verde, Lda.                                                               | Praia           | 37.50                                      | 25.00    | 62.50  | 62.499      |  |
| Florimar- Gestão e Participações, S.G.P.S., Lda.                                                | Funchal         | 100.00                                     | -        | 100.00 | 99.998      |  |
| Sociedade de Inertes, Lda                                                                       | Nacala          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Seciment Investments, B.V.                                                                      | Amsterdam       | 100.00                                     | -        | 100.00 | 99.998      |  |
| I3 Participações e Serviços, Ltda.                                                              | Rio de Ja neiro | -                                          | 100.00   | 100.00 | 99.998      |  |
| Serife - Sociedade de Estudos e Rea lizações Industriais e de Fornecimento de Equipamento, Lda. | Lisbon          | 100.00                                     | -        | 100.00 | 99.998      |  |
| Silonor, S.A.                                                                                   | Dunkerque       | 100.00                                     | -        | 100.00 | 99.998      |  |
| Société des Ciments de Gabés                                                                    | Tunis           | 98.72                                      | -        | 98.72  | 98.716      |  |
| Sud- Béton- Société de Fabrication de Béton du Sud                                              | Tunis           | -                                          | 98.72    | 98.72  | 98.716      |  |
| Zarzis Béton                                                                                    | Tunis           | -                                          | 98.52    | 98.52  | 98.519      |  |
| Secil Angola, SARL                                                                              | Luanda          | 100.00                                     | -        | 100.00 | 99.998      |  |
| Secil - Companhia de Cimento do Lobito, S.A.                                                    | Lobito          | -                                          | 51.00    | 51.00  | 50.999      |  |
| Secil, Betões e Inertes, S.G.P.S., S.A.                                                         | Setúbal         | 100.00                                     | -        | 100.00 | 99.998      |  |
| Unibetão - Indústrias de Betão Prepa rado, S.A.                                                 | Lisbon          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Britobetão - Central de Betão, Lda.                                                             | Évora           | -                                          | 91.00    | 91.00  | 90.998      |  |
| Secil Britas, S.A.                                                                              | Lisbon          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Lusoinertes, S.A.                                                                               | Lisbon          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Secil Martinga nça - Aglomera ntes e Novos Materiais pa ra a Construção, S.A.                   | Leiria          | 51.19                                      | 48.81    | 100.00 | 99.998      |  |
| IRP - Industria de Rebocos de Portugal, S.A.                                                    | Santarém        | -                                          | 75.00    | 75.00  | 74.998      |  |
| Ciminpart - Investimentos e Participa ções, S.G.P.S., S.A.                                      | Lisbon          | 100.00                                     | -        | 100.00 | 99.998      |  |
| ALLMA - Microalgas, Lda.                                                                        | Leiria          | -                                          | 70.00    | 70.00  | 69.999      |  |
| Argibetão - Sociedade de Novos Produtos de Argila e Betão, S.A.                                 | Lisbon          | -                                          | 90.96    | 90.96  | 90.958      |  |
| Cimentos Costa Verde - Comércio de Cimentos, S.A.                                               | Lisbon          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Prescor Produção de Escórias Moídas, Lda.                                                       | Lisbon          | -                                          | 100.00   | 100.00 | 99.998      |  |
| NSOSPE - Empreendimentos e Participações, SA                                                    | Brazil          | -                                          | 100.00   | 100.00 | 99.998      |  |
| Supremo Cimentos, SA                                                                            | Brazil          |                                            | 100.00   | 100.00 | 99.998      |  |
| Margem - Compa nhia de Mineração, SA                                                            | Brazil          |                                            | 100.00   | 100.00 | 99.998      |  |
| Nacional Minera ção e Engenharia S.A.                                                           | Brazil          |                                            | 100.00   | 100.00 | 99.998      |  |
| CMP - Cimentos Ma ceira e Pataias, S.A.                                                         | Leiria          | 100.00                                     | -        | 100.00 | 99.998      |  |
| Ciments de Sibline, S.A.L.                                                                      | Beirut          | 28.64                                      | 22.41    | 51.05  | 51.049      |  |
| Soime, S.A.L.                                                                                   | Beirut          | -                                          | 51.05    | 51.05  | 51.049      |  |
| Cimentos Madeira, Lda.                                                                          | Funchal         | 57.14                                      | -        | 57.14  | 57.142      |  |
| Beto Madeira - Betões e Britas da Madeira, S.A.                                                 | Funchal         | -                                          | 57.14    | 57.14  | 57.142      |  |
| Promadeira - Sociedade Técnica de Construção da Ilha da Madeira, Lda.                           | Funchal         | -                                          | 57.14    | 57.14  | 57.142      |  |
| Brimade - Sociedade de Brita s da Madeira, S.A.                                                 | Funchal         | -                                          | 57.14    | 57.14  | 57.142      |  |
| Madebritas - Sociedade de Brita s da Madeira, Lda. (a)                                          | Funchal         | -                                          | 29.14    | 29.14  | 29.142      |  |
| Pedra Regional - Industria Transformadora de Rochas Ornamentais, S.A.                           | Funchal         | -                                          | 57.14    | 57.14  | 57.142      |  |
| Reficomb- Refinação e Comercializa ção de Combustíveis Derivados de Resíduos, S.A.              | Setúbal         | -                                          | 100.00   | 100.00 | 99.998      |  |
| Uniconcreto - Betão Pronto, S.A.                                                                | Lisbon          | 100.00                                     | -        | 100.00 | 99.998      |  |

(a)Companies owned by 51% by Brimade, SA and therefore controlled by the Group

## 44. Shareholders equity and net profit reconciliation with the individual financial statements

The separate financial statements of Semapa, SGPS, S.A. are prepared in compliance with all standards that comprised in the Portuguese GAAP (SNC). 

The reconciliation between equity and consolidated net profit for the years ended 2015 and 2014 is presented as follows: 

|                                                      |              | Net profit for the |
|------------------------------------------------------|--------------|--------------------|
| Amounts in Euro                                      | Total Equity | year               |
| Portuguese GAAP ‐ SNC                                | 838,806,193  | 235,960,575        |
| Government grants recognised in shareholders equity  | (39,340,338) | -                  |
| Differences in non-controlling interest acquisitions | (83,128,249) | (159,668,162)      |
| Hedging derivative financial instruments treatment   | -            | 5,237,628          |
| IFRS                                                 | 716,337,606  | 81,530,041         |

The amount of Euro 159,668,162 shown in the reconciliation of net profit for the year comprises the gain due to Portucel's interest held reduction as a result of the Public Exchange Offer described in Note 1.2. This amount was booked in the consolidated financial statements under the caption "Retained earnings" (Note 27) since it qualifies as a transaction with non‐controlled interests, in accordance with the International Accounting Standards (IFRS). However, in Semapa's separate financial statements, the gain was booked in the net profit for the year, in accordance with the Portuguese GAAP. 

## 45. Subsequent events

#### *Acquisition of treasury shares ‐ Semapa*

During the period between 1 January 2016 and 2 March 2016, Semapa ‐ Sociedade de Investimento e Gestão, SGPS, S.A. acquired 374,999 treasury shares, corresponding to 0.466% of its share capital. 

## 46. Note added for translation

The accompanying financial statements are a translation of financial statements originally issued in Portuguese. In the event of any discrepancies the Portuguese version prevails. 

#### **BOARD OF DIRECTORS**

**Chairman:** Pedro Mendonça de Queiroz Pereira 

#### **Members:**

João Nuno de Sottomayor Pinto de Castello Branco José Miguel Pereira Gens Paredes 

- Paulo Miguel Garcês Ventura
- Ricardo Miguel dos Santos Pacheco Pires
- António Pedro de Carvalho Viana Baptista
- Carlos Eduardo Coelho Alves
- Francisco José Melo e Castro Guedes
- Manuel Custódio de Oliveira
- Vitor Manuel Galvão Rocha Novais Gonçalves
- Vitor Paulo Paranhos Pereira

## PART 4

STATUTORY AUDITOR CERTIFICATE AND REPORT OF THE AUDIT BOARD ON THE CONSOLIDATED ACCOUNTS

### *Audit Report for Statutory and Stock Exchange Regulatory Purposes on the Consolidated Financial Information*

#### *(Free translation from the original in Portuguese)*

#### *Introduction*

1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached consolidated financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., comprising the consolidated statement of financial position as at 31 December 2015 (which shows total assets of Euro 4,068,289,745 and total shareholder's equity of Euro 1,131,627,061 including noncontrolling interests of Euro 415,289,455 and a net profit of Euro 81,530,041), the consolidated statement of income by nature, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the corresponding notes to the accounts.

#### *Responsibilities*

2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the consolidated financial statements which present fairly, in all material respects, the financial position of the Company and its subsidiaries, the consolidated results and the consolidated comprehensive income of their operations, the changes in consolidated equity and the consolidated cash flows; (ii) to prepare historic financial information in accordance with International Financial Reporting Standards as adopted by the European Union and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain appropriate systems of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company and its subsidiaries.

3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.

#### *Scope*

4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Accordingly, our audit included: (i) verification that the Company and its subsidiaries' financial statements have been appropriately examined and, for the cases where such an audit was not carried out, verification, on a sample basis, of the evidence supporting the amounts and disclosures in the consolidated financial statements and assessing the reasonableness of the estimates, based on the judgements and criteria of the Board of Directors used in the preparation of the consolidated financial statements; (ii) verification of the consolidation operations and the utilization of the equity method; (iii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iv) assessing the applicability of the going concern basis of accounting; (v) assessing the overall presentation of the consolidated financial statements; and (vi) assessing the

*PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc.com.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485*

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the consolidated financial information.

5 Our audit also covered the verification that the information included in the Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.

6 We believe that our audit provides a reasonable basis for our opinion.

#### *Opinion*

7 In our opinion, the consolidated financial statements referred to above, present fairly in all material respects, the consolidated financial position of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. as at 31 December 2015, the consolidated results and the consolidated comprehensive income of its operations, the changes in consolidated equity and the consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and the information included is complete, true, up-to-date, clear, objective and lawful.

#### *Report on other legal requirements*

8 It is also our opinion that the information included in the Directors' Report is consistent with the consolidated financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.

18 March 2016

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Registered in the Comissão do Mercado de Valores Mobiliários with no. 20161485 represented by:

José Pereira Alves, R.O.C.

#### **(This is a translation, not to be signed)**

## **SEMAPA – Sociedade de Investimento e Gestão, SGPS, S.A.**

### **Report and Opinion of the Audit Board Consolidated Accounts**

#### **Year 2015**

#### **Shareholders,**

- 1. As laid down by law, established in the articles of association and in carrying out the mandate entrusted to us, we hereby deliver our report on the audit activities performed in 2015 and issue our opinion on the Management Report and the Consolidated Financial Statements submitted by the Board of Directors of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., for the year ended 31 December 2015.
- 2. During the year, we monitored the company's activity and that of its main subsidiaries and affiliated companies on a regularly basis, with the frequency and to the extent that we deemed appropriate, namely through regular meetings with the Company's Management and Directors. We oversaw the reviewing of the accounting records and the supporting documentation, and the efficacy of the risk management, internal control and audit systems. We ensured compliance with the law and the Articles of Association. We did not run up against any constraints in the exercise of our duties.
- 3. We met several times with the statutory auditor and the external auditor, PricewaterhouseCoopers & Associados, SROC, Lda. to monitor the audits conducted and supervise their independence. We have analysed the legal Accounts Certificate and Audit Report, which merit our agreement.
- 4. Within the scope of our competences, we found that:
- a) the Consolidated Income Statement, the Consolidated Financial Statement, the Statement of Comprehensive Income, the Statement of Consolidated Changes in Equity, the Consolidated Cash Flow Statement and its Notes give a true and fair view of the financial position of the company, in respect of its results, comprehensive income, changes in equity and cash flow;
- b) the accounting policies and valuation criteria applied are in conformity with the International Financial Reporting Standards (IFRS),as adopted in the European Union, and ensure that a true and fair assessment of the company's assets and results is given, and the findings and recommendations of the external auditor have been followed through;
- c) the Management Report clearly shows the development of the business and the situation of the company and its subsidiaries included in the consolidation, highlighting key aspects of the activity;
- d) the Corporate Governance Report covers all of the points required under the terms of Article 245 A of the Securities Code.
- 5. Consequently, taking into account the information delivered by the Company's Board of Directors and Company Departments, and the conclusions of the Legal Accounts Certificate and Audit Report, we are of the opinion that:

- a) the Management Report should be approved;
- b) the Consolidated Financial Statements should be approved.

6. Finally, the members of the Audit Board are grateful to the Board of Directors, the senior managers and other company staff for their collaboration.

Lisbon, 21 March 2016

The Chairman of the Audit Board

Miguel Camargo de Sousa Eiró

Member of the Audit Board

Gonçalo Nuno Palha Gaio Picão Caldeira

Member of the Audit Board

José Manuel Oliveira Vitorino

## PART 5

## SEPARATE FINANCIAL STATEMENTS

#### SEPARATE INCOME STATEMENT BY NATURE FOR THE PERIOD ENDED AS OF 31 DECEMBER 2015 and 2014

| Amounts	in	Euro                                                 | Note | 2015         | 2014         |
|-----------------------------------------------------------------|------|--------------|--------------|
| REVENUES AND COSTS                                              |      |              |              |
| Sales	and	services	rendered                                     | 5    | 10,840,690   | 13,337,721   |
| Gains	/	(losses)	of	subsidiaries,	associates	and	joint	ventures | 6    | 278,862,657  | 146,141,225  |
| Cost	of	materials	and	services	consumed                         | 7    | (3,377,134)  | (3,354,078)  |
| Payroll	costs                                                   | 8    | (11,917,694) | (5,480,416)  |
| Provisions	[increase	/	(decrease)]                              | 9    | (2,632,589)  | (5,539,798)  |
| Fair	value	[increase	/	(decrease)]                              | 10   | (7,240,176)  | (246,715)    |
| Other	operating	income                                          | 11   | 1,272        | 17,563       |
| Other	costs	and	losses                                          | 11   | (439,721)    | (852,650)    |
| Profit before depreciation, net finance costs and taxes         |      | 264,097,305  | 144,022,852  |
|                                                                 |      |              |              |
| (Expenses)	/	reversals	of	depreciation	and	amortisation         | 12   | (225,492)    | (358,379)    |
| Operating profit (before net finance costs and taxes)           |      | 263,871,813  | 143,664,473  |
|                                                                 |      |              |              |
| Interest	and	similar	income                                     | 13   | 2,238,108    | 1,332,585    |
| Interest	and	similar	expense                                    | 13   | (31,027,720) | (48,912,413) |
| Profit before tax                                               |      | 235,082,201  | 96,084,645   |
|                                                                 |      |              |              |
| Income	tax	expense                                              | 14   | 878,374      | 16,423,608   |
| Profit for the year                                             |      | 235,960,575  | 112,508,253  |
|                                                                 |      |              |              |
| Earnings per share                                              |      |              |              |
| Basic	earnings	per	share,	EUR                                   | 15   | 2.46         | 1.01         |
| Diluted	earnings	per	share,	EUR                                 | 15   | 2.46         | 1.01         |

## SEPARATE BALANCE SHEET

AS OF 31 DECEMBER 2015 and 2014 

| Amounts in Euro                             | Note | 31/12/2015    | 31/12/2014    |
|---------------------------------------------|------|---------------|---------------|
| ASSETS                                      |      |               |               |
| Non‐current assets                          |      |               |               |
| Property, plant and equipment               | 16   | 801,090       | 952,197       |
| Goodwill                                    | 17   | 223,692,546   | 237,577,174   |
| Financial investments - equity method       | 6    | 1,226,573,677 | 1,650,369,364 |
| Other financial assets                      |      | 4,233         | -             |
| Deferred tax assets                         | 27   | -             | 24,461,315    |
|                                             |      | 1,451,071,546 | 1,913,360,050 |
| Current assets                              |      |               |               |
| State and other public entities             | 18   | -             | 4,661,700     |
| Receivables and other current assets        | 19   | 36,139,492    | 25,513,452    |
| Deferred assets                             | 20   | 81,120        | 226,068       |
| Financial assets held for trading           | 21   | 294,710       | 404,062       |
| Other financial assets                      | 22   | 5,186,474     | 8,234,474     |
| Cash and cash equivalents                   | 4    | 31,125        | 306,952       |
|                                             |      | 41,732,921    | 39,346,708    |
| Total Assets                                |      | 1,492,804,467 | 1,952,706,758 |
| EQUITY AND LIABILITIES                      |      |               |               |
| Equity                                      |      |               |               |
| Share capital                               | 23   | 81,645,523    | 118,332,445   |
| Treasury shares                             | 23   | (53,116)      | (108,444,835) |
| Share premiums                              | 24   | 3,923,459     | 3,923,459     |
| Legal reserves                              | 24   | 23,666,489    | 23,666,489    |
| Other reserves                              | 24   | 554,130,419   | 1,000,223,596 |
| Retained earnings                           | 24   | 3,025,331     | (78,037,726)  |
| Adjustments on financial assets             | 24   | (71,517,929)  | (31,951,021)  |
| Other changes in equity                     | 24   | (1,384,625)   | (27,451,644)  |
|                                             |      | 593,435,551   | 900,260,763   |
| Profit for the year                         |      | 235,960,575   | 112,508,253   |
| Total Equity                                |      | 829,396,126   | 1,012,769,016 |
|                                             |      |               |               |
| Liabilities                                 |      |               |               |
| Non‐current liabilities                     |      |               |               |
| Provisions                                  | 9    | 12,800,000    | 10,258,910    |
| Interest-bearing liabilities                | 25   | 272,068,365   | 538,605,710   |
| Pensions and other post-employment benefits | 26   | 1,296,605     | 1,360,557     |
| Deferred tax liabilities                    | 27   | 981,732       | 1,357,372     |
|                                             |      | 287,146,702   | 551,582,549   |
| Current liabilities                         |      |               |               |
| Payables and other current liabilities      | 28   | 65,789        | 137,296       |
| State and other public entities             | 18   | 2,057,217     | 1,205,873     |
| Interest-bearing liabilities                | 25   | 357,896,166   | 341,139,510   |
| Other current liabilities                   | 29   | 16,234,095    | 45,864,162    |
| Deferred liabilities                        | 20   | 8,372         | 8,352         |
|                                             |      | 376,261,639   | 388,355,193   |
| Total liabilities                           |      | 663,408,341   | 939,937,742   |
| Total equity and liabilities                |      | 1,492,804,467 | 1,952,706,758 |

### SEPARATE STATEMENT OF CHANGES IN EQUITY FROM 1 JANUARY 2014 TO 31 DECEMBER 2015

| Amo<br>in E<br>unts<br>uro                                                                               |                   | Note | Shar<br>e<br>Cap<br>ital | Trea<br>sury<br>shar<br>es | Sha<br>re<br>iums<br>prem | Lega<br>l<br>rese<br>rves | Oth<br>er<br>rese<br>rves | Reta<br>ined<br>ings<br>earn | Adju<br>stme<br>nts<br>on f<br>inan<br>cial<br>ts<br>asse | Oth<br>er ch<br>ange<br>s<br>in e<br>quity | Prof<br>it<br>for t<br>he y<br>ear | Tot<br>al                 |
|----------------------------------------------------------------------------------------------------------|-------------------|------|--------------------------|----------------------------|---------------------------|---------------------------|---------------------------|------------------------------|-----------------------------------------------------------|--------------------------------------------|------------------------------------|---------------------------|
| Equi<br>s of<br>1 Jan<br>201<br>4<br>ty a<br>uary                                                        | 1                 |      | 118,<br>332,<br>445      | (47,<br>986)<br>164,       | 3,92<br>3,45<br>9         | 23,6<br>66,4<br>89        | 902,<br>720,<br>150       | (77,<br>159)<br>969,         | (38,<br>974)<br>718,                                      | (25,<br>225)<br>080,                       | 134,<br>981,<br>089                | 994,<br>690,<br>288       |
| Chan<br>in th<br>riod<br>ges<br>e pe                                                                     |                   |      |                          |                            |                           |                           |                           |                              |                                                           |                                            |                                    |                           |
| slat<br>ion<br>diff<br>Curr<br>tran<br>ency<br>eren<br>ces                                               |                   |      | -                        | -                          | -                         | -                         | -                         | -                            | -                                                         | (8,7<br>17)<br>17,6                        | -                                  | (8,7<br>17)<br>17,6       |
| and<br>d di<br>ly in<br>Inco<br>nis e<br>rect<br>ity<br>me<br>exp<br>ens<br>es r<br>ecog<br>equ          |                   |      |                          |                            |                           |                           |                           |                              |                                                           |                                            |                                    |                           |
| hare<br>of o<br>ther<br>preh<br>of s<br>ubs<br>idia<br>S<br>ive<br>inco<br>ries<br>com<br>ens<br>me      |                   |      | -                        | -                          | -                         | -                         | -                         | -                            | 6,76<br>7,95<br>3                                         | -                                          | -                                  | 6,76<br>7,95<br>3         |
| F<br>air v<br>alue<br>cha<br>der<br>ivat<br>ives<br>fina<br>ncia<br>l ins<br>trum<br>ents<br>nge<br>s on |                   |      | -                        | -                          | -                         | -                         | -                         | -                            | -                                                         | 6,34<br>6,19<br>9                          | -                                  | 6,34<br>6,19<br>9         |
| s / (<br>A<br>rial<br>gain<br>los s<br>es)<br>ctua                                                       |                   |      | -                        | -                          | -                         | -                         | -                         | (68,<br>567)                 | -                                                         | -                                          | -                                  | (68,<br>567)              |
| T<br>fer t<br>nd r<br>etai<br>ned<br>ning<br>rans<br>o re<br>serv<br>es a<br>ear<br>s                    |                   |      | -                        | -                          | -                         | -                         | 97,5<br>03,4<br>45        | -                            | -                                                         | -                                          | (97,<br>503,<br>445)               | -                         |
|                                                                                                          | 2                 |      | ‐                        | ‐                          | ‐                         | ‐                         | 97,5<br>03,4<br>46        | (68,<br>567)                 | 6,76<br>7,95<br>3                                         | (2,3<br>19)<br>71,4                        | (97,<br>503,<br>445)               | 4,32<br>7,96<br>8         |
| Prof<br>it fo<br>r the<br>yea<br>r                                                                       | 3                 |      |                          |                            |                           |                           |                           |                              |                                                           |                                            | 112,<br>508,<br>253                | 112,<br>508,<br>253       |
| preh<br>Com<br>ensi<br>ve in<br>com<br>e                                                                 | 4=2+<br>3         |      |                          |                            |                           |                           |                           |                              |                                                           |                                            | 15,0<br>04,8<br>08                 | 116,<br>836,<br>221       |
| Ope<br>rati<br>with<br>shar<br>eho<br>lder<br>s in<br>the<br>iod<br>ons<br>per                           |                   |      |                          |                            |                           |                           |                           |                              |                                                           |                                            |                                    |                           |
| Trea<br>s ha<br>uisi<br>tion<br>sury<br>res<br>acq<br>s                                                  |                   |      | -                        | (61,<br>279,<br>849)       | -                         | -                         | -                         | -                            | -                                                         | -                                          | -                                  | (61,<br>279,<br>849)      |
| Dis t<br>ribu<br>tion<br>s                                                                               |                   |      | -                        | -                          | -                         | -                         | -                         | -                            | -                                                         | -                                          | (37,<br>644)<br>477,               | (37,<br>644)<br>477,      |
|                                                                                                          | 5                 |      | ‐                        | (61,<br>849)<br>279,       | ‐                         | ‐                         | ‐                         | ‐                            | ‐                                                         | ‐                                          | (37,<br>644)<br>477,               | (98,<br>493)<br>757,      |
| s of<br>ber<br>Equ<br>ity a<br>31 D<br>201<br>4<br>ecem                                                  | 6=1+<br>2+3+<br>5 |      | 118,<br>332,<br>445      | (108<br>,444<br>,835<br>)  | 3,92<br>3,45<br>9         | 23,6<br>66,4<br>89        | 1,00<br>0,22<br>3,59<br>6 | (78,<br>037,<br>726)         | (31,<br>951,<br>021)                                      | (27,<br>451,<br>644)                       | 112,<br>508,<br>253                | 1,01<br>2,76<br>9,01<br>6 |

|                                                                                                                                                    |                    |              |                          |                            |                           |                           |                           |                              | Adju<br>stme<br>nts                |                                            |                                    |                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------------|--------------------------|----------------------------|---------------------------|---------------------------|---------------------------|------------------------------|------------------------------------|--------------------------------------------|------------------------------------|---------------------------|
| Amo<br>in E<br>unts<br>uro                                                                                                                         |                    | Note         | Shar<br>e<br>Cap<br>ital | Trea<br>sury<br>shar<br>es | Sha<br>re<br>iums<br>prem | Lega<br>l<br>rese<br>rves | Oth<br>er<br>rese<br>rves | Reta<br>ined<br>ings<br>earn | on f<br>inan<br>cial<br>ts<br>asse | Oth<br>er ch<br>ange<br>s<br>in e<br>quity | Prof<br>it<br>for t<br>he y<br>ear | Tota<br>l                 |
| Equi<br>s of<br>ty a<br>1 Jan<br>201<br>5                                                                                                          | 6                  |              | 118,<br>332,<br>445      | (108<br>)<br>,444<br>,835  | 3,92<br>3,45<br>9         | 23,6<br>66,4<br>89        | 1,00<br>0,22<br>3,59<br>6 | (78,<br>726)<br>037,         | (31,<br>021)<br>951,               | (27,<br>644)<br>451,                       | 112,<br>508,<br>253                | 1,01<br>2,76<br>9,01<br>6 |
| uary                                                                                                                                               |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| Chan<br>in th<br>riod<br>ges<br>e pe                                                                                                               |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| diff<br>Curr<br>slat<br>ion<br>tran<br>ency<br>eren<br>ces                                                                                         |                    | 6            | -                        | -                          | -                         | -                         | -                         | -                            | -                                  | (2,4<br>49)<br>22,7                        | -                                  | (2,4<br>49)<br>22,7       |
| Curr<br>slat<br>ion<br>diff<br>cled<br>he i<br>tran<br>to t<br>s tat<br>nt<br>ency<br>eren<br>ces<br>recy<br>nco<br>me<br>eme                      |                    |              | -                        | -                          | -                         | -                         | -                         | -                            | -                                  | 19,3<br>31,3<br>64                         | -                                  | 19,3<br>31,3<br>64        |
| Inco<br>and<br>nis e<br>d di<br>ly in<br>ity<br>rect<br>me<br>exp<br>ens<br>es r<br>ecog<br>equ                                                    |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| Sha<br>f oth<br>rehe<br>nsiv<br>e in<br>e of<br>sub<br>s idi<br>arie<br>re o<br>er c<br>omp<br>com<br>s                                            |                    |              | -                        | -                          | -                         | -                         | -                         | -                            | (38,<br>378,<br>380)               | -                                          | -                                  | (38,<br>378,<br>380)      |
| val<br>han<br>on d<br>es f<br>cial<br>Fair<br>eriv<br>ativ<br>inan<br>ins<br>trum<br>ents<br>ue c<br>ges                                           |                    | 30           | -                        | -                          | -                         | -                         | -                         | -                            | -                                  | 3,59<br>9,08<br>2                          | -                                  | 3,59<br>9,08<br>2         |
| fina<br>l ins<br>fai<br>r val<br>led<br>to th<br>Deri<br>vati<br>ncia<br>trum<br>ents<br>e in<br>e st<br>atem<br>ent<br>ves<br>ue r<br>ecyc<br>com |                    | 30           | -                        | -                          | -                         | -                         | -                         | -                            | -                                  | 5,55<br>9,32<br>2                          | -                                  | 5,55<br>9,32<br>2         |
| sfer<br>and<br>ined<br>Tran<br>ning<br>to r<br>reta<br>ese<br>rves<br>ear<br>s                                                                     |                    |              | -                        | -                          | -                         | -                         | (8,0<br>52)<br>71,2       | 78,0<br>37,7<br>27           | -                                  | -                                          | (69,<br>475)<br>966,               | -                         |
| Prof<br>it-sh<br>arin<br>g bo<br>nus<br>es                                                                                                         |                    | 24           | -                        | -                          | -                         | -                         | -                         | 2,60<br>2,60<br>2            | -                                  | -                                          | (2,6<br>02)<br>02,6                | -                         |
| Oth<br>ts<br>er m<br>ove<br>men                                                                                                                    |                    |              | -                        | -                          | -                         | -                         | -                         | 1,18<br>8,52<br>8            | (1,1<br>88,5<br>28)                | -                                          | -                                  | -                         |
|                                                                                                                                                    | 7                  |              | ‐                        | ‐                          | ‐                         | ‐                         | (8,0<br>71,2<br>52)       | 81,8<br>28,8<br>57           | (39,<br>566,<br>908)               | 26,0<br>67,0<br>19                         | (72,<br>569,<br>077)               | (12,<br>311,<br>361)      |
| Prof<br>it fo<br>r the<br>yea<br>r                                                                                                                 | 8                  |              |                          |                            |                           |                           |                           |                              |                                    |                                            | 235,<br>960,<br>575                | 235,<br>960,<br>575       |
| preh<br>ensi<br>ve in<br>Com<br>com<br>e                                                                                                           | 9=7+<br>8          |              |                          |                            |                           |                           |                           |                              |                                    |                                            | 163,<br>391,<br>498                | 223,<br>649,<br>214       |
|                                                                                                                                                    |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| ith s<br>hare<br>hold<br>n the<br>Ope<br>ratio<br>ers i<br>iod<br>ns w<br>per                                                                      |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| Sha<br>pita<br>l red<br>ucti<br>re ca<br>on                                                                                                        |                    | 24           | (36,6<br>22)<br>86,9     | 413,<br>478,<br>852        | -                         | -                         | (376<br>)<br>,791<br>,930 | -                            | -                                  | -                                          | -                                  | -                         |
| Trea<br>s ha<br>uisi<br>tion<br>sury<br>res<br>acq<br>s                                                                                            |                    | 24           | -                        | (305<br>,087<br>,133<br>)  | -                         | -                         | -                         | (765<br>,800<br>)            | -                                  | -                                          | -                                  | (305<br>,852<br>,933<br>) |
| Divi<br>den<br>ds p<br>aid                                                                                                                         |                    |              | -                        | -                          | -                         | -                         | (61,<br>229,<br>995)      | -                            | -                                  | -                                          | (39,<br>939,<br>176)               | (101<br>,169<br>,171<br>) |
|                                                                                                                                                    | 10                 |              | (36,<br>922)<br>686,     | 108,<br>391,<br>719        | ‐                         | ‐                         | (438<br>)<br>,021<br>,925 | (765<br>)<br>,800            | ‐                                  | ‐                                          | (39,<br>176)<br>939,               | (407<br>)<br>,022<br>,104 |
|                                                                                                                                                    |                    |              |                          |                            |                           |                           |                           |                              |                                    |                                            |                                    |                           |
| Equi<br>s of<br>ber 2<br>ty a<br>31 D<br>015<br>ecem                                                                                               | 6+7<br>+8+1<br>0 2 | d 24<br>3 an | 81,6<br>45,5<br>23       | (53,<br>116)               | 3,92<br>3,45<br>9         | 23,6<br>66,4<br>89        | 554,<br>130,<br>419       | 3,02<br>5,33<br>1            | (71,<br>929)<br>517,               | (1,3<br>25)<br>84,6                        | 235,<br>960,<br>575                | 829,<br>396,<br>126       |

#### SEPARATE CASH FLOW STATEMENT FOR THE PERIOD ENDED AS OF 31 DECEMBER 2015 and 2014

| Amounts in Euro                                          | Note | 2015            | 2014            |
|----------------------------------------------------------|------|-----------------|-----------------|
| OPERATING ACTIVITIES ‐ Direct Method                     |      |                 |                 |
| Payments to suppliers                                    |      | (4,909,090)     | (4,241,679)     |
| Payments to personnel                                    |      | (7,924,106)     | (23,147,435)    |
| Cash flow from operations                                |      | (12,833,196)    | (27,389,114)    |
| Income tax received / (paid)                             |      | (1,591,418)     | (9,052,407)     |
| Other receipts / (payments)                              |      | 46,269,454      | 50,938,245      |
| Cash flow from operating activities (1)                  |      | 31,844,840      | 14,496,724      |
| INVESTING ACTIVITIES                                     |      |                 |                 |
| Outflows                                                 |      |                 |                 |
| Property, plant and equipment                            |      | (1,757)         | (3,328)         |
| Financial investments                                    | 6    | (45,526,337)    | (34,360,115)    |
| Inflows                                                  |      |                 |                 |
| Property, plant and equipment                            |      | 100             | (2,103)         |
| Financial investments                                    | 6    | 211,284,229     | 67,605,000      |
| Interest and similar income                              |      | 94,127          | 1,146,839       |
| Dividends                                                | 6    | 193,886,680     | 95,360,270      |
| Cash flow from investing activities (2)                  |      | 359,737,042     | 129,746,563     |
| FINANCING ACTIVITIES                                     |      |                 |                 |
| Inflows                                                  |      |                 |                 |
| Proceeds from borrowings                                 |      | 3,090,444,084   | 1,918,251,500   |
| Other financing transactions                             |      | 5,801,700       | 6,375,072       |
| Outflows                                                 |      |                 |                 |
| Repayments of borrowings                                 |      | (3,341,560,629) | (1,913,826,245) |
| Interest and similar expense                             |      | (42,614,993)    | (47,469,576)    |
| Dividends                                                | 24   | (101,169,171)   | (37,477,644)    |
| Treasury shares acquisitions                             |      | -               | (61,279,849)    |
| Other financing transactions                             |      | (2,758,700)     | (8,899,500)     |
| Cash flow from financing activities (3)                  |      | (391,857,709)   | (144,326,242)   |
|                                                          |      |                 |                 |
| CHANGE IN CASH AND CASH EQUIVALENTS (1)+(2)+(3)          |      | (275,827)       | (82,955)        |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 4    | 306,952         | 389,907         |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD       | 4    | 31,125          | 306,952         |

| 1. |        | Company identification8                                                         |  |
|----|--------|---------------------------------------------------------------------------------|--|
| 2. |        | Applicable accounting standards in the preparation of the financial statements8 |  |
| 3. |        | Summary of the principal accounting policies9                                   |  |
|    | 3.1    | Property, plant and equipment 9                                                 |  |
|    | 3.2    | Goodwill 9                                                                      |  |
|    | 3.3    | Financial investments – equity method 9                                         |  |
|    | 3.3.1  | Subsidiaries 10                                                                 |  |
|    | 3.4    | Foreign currency translation10                                                  |  |
|    | 3.4.1  | Functional and reporting currency10                                             |  |
|    | 3.4.2  | Balances and transactions expressed in foreign currencies 10                    |  |
|    | 3.4.3  | Subsidiaries 10                                                                 |  |
|    | 3.5    | Impairment of non‐current assets 11                                             |  |
|    | 3.6    | Financial assets11                                                              |  |
|    | 3.7    | Derivative financial instruments12                                              |  |
|    | 3.8    | Corporate income tax 12                                                         |  |
|    | 3.9    | Receivables and other current assets 13                                         |  |
|    | 3.10   | Cash and cash equivalents 13                                                    |  |
|    | 3.11   | Share capital and treasury shares13                                             |  |
|    | 3.12   | Interest‐bearing liabilities14                                                  |  |
|    | 3.13   | Borrowing costs14                                                               |  |
|    | 3.14   | Provisions14                                                                    |  |
|    | 3.15   | Pensions and other post‐employment benefits14                                   |  |
|    | 3.15.1 | Pension obligations – defined benefit plans 14                                  |  |
|    | 3.15.2 | Holiday pay, allowance and bonuses15                                            |  |
|    | 3.16   | Payables and other current liabilities 15                                       |  |
|    | 3.17   | Leases15                                                                        |  |
|    | 3.18   | Dividends distribution15                                                        |  |
|    | 3.19   | Revenue recognition and accrual basis 15                                        |  |
|    | 3.20   | Contingent assets and liabilities 16                                            |  |
|    | 3.21   | Subsequent events16                                                             |  |
|    | 3.22   | Risk Management 16                                                              |  |
|    | 3.22.1 | Financial risk factors 16                                                       |  |
|    | 3.22.2 | Operational risk factors18                                                      |  |
|    | 3.23   | Important accounting estimates and judgments18                                  |  |
|    | 3.23.1 | Impairment of Goodwill18                                                        |  |
|    | 3.23.2 | Actuarial assumptions18                                                         |  |
| 4. |        | Cash and cash equivalents 18                                                    |  |
| 5. |        | Sales and services rendered  19                                                 |  |

| 6.  | Financial investments – equity method 19                |  |
|-----|---------------------------------------------------------|--|
| 7.  | Consumed materials and services 21                      |  |
| 8.  | Payroll expenses 21                                     |  |
| 9.  | Provisions  22                                          |  |
| 10. | Changes in fair value  22                               |  |
| 11. | Other operating income and other operating expenses  22 |  |
| 12. | Depreciation, amortisation and impairment losses  23    |  |
| 13. | Net financial results  23                               |  |
| 14. | Income tax  24                                          |  |
| 15. | Earnings per share  25                                  |  |
| 16. | Property, plant and equipment 25                        |  |
| 17. | Goodwill 26                                             |  |
| 18. | State and other public entities 27                      |  |
| 19. | Receivables and other current assets  27                |  |
| 20. | Deferrals  28                                           |  |
| 21. | Financial assets held for trading 28                    |  |
| 22. | Other financial assets  28                              |  |
| 23. | Share capital and treasury shares  28                   |  |
| 24. | Reserves and retained earnings  29                      |  |
| 25. | Interest‐bearing liabilities 31                         |  |
| 26. | Pensions and other post‐employment benefits 34          |  |
| 27. | Deferred Taxes  34                                      |  |
| 28. | Accounts Payable  35                                    |  |
| 29. | Payables and other current liabilities  35              |  |
| 30. | Derivative financial instruments 36                     |  |
| 31. | Balances and transactions with related parties  37      |  |
| 32. | Audit Fees 40                                           |  |
| 33. | Commitments 41                                          |  |
| 34. | Shareholders equity and net profit reconciliation 41    |  |
| 35. | Subsequent events  41                                   |  |
| 36. | Note added for translation 42                           |  |

(Translation of a report originally issued in Portuguese) 

(In these notes, unless indicated otherwise, all amounts are expressed in euro) 

## 1. Company identification

| Entity:             | Semapa	—	Sociedade	de	Investimento	e	Gestão,	SGPS,	S.A. |
|---------------------|---------------------------------------------------------|
| Head office:        | Av.	Fontes	Pereira	de	Melo,	14,	10th	floor	Lisbon       |
| Share capital:      | Euro	81,645,523                                         |
| Corporate body no.: | 502	593	130                                             |

Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. ("The Company") was incorporated on 21 June 1991 and has as its main business object the management of financial investments in other companies as an indirect form of carrying out economic activity, namely in the production of cement and derivatives, pulp and paper and environment through its subsidiaries, Secil – Companhia Geral de Cal e Cimento, S.A., Portucel, S.A. (since February 2016 Group Portucel changed its social designation to The Navigator Company) and ETSA Investimentos, SGPS, S.A.. 

These financial statements where approved by the Board of Directors on 3th March 2016. 

## 2. Applicable accounting standards in the preparation of the financial statements

The accompanying financial statements have been prepared in accordance to all standards present in the Portuguese GAAP ("Sistema de Normalização Contabilística – SNC"). These standards include the Basis for the Presentation of the Financial Statements, the Financial Statements' Template, the Code of Accounts, the Accounting and Financial Reporting Standards (NCRF) and the Interpretations Standards (NI). 

Whenever SNC does not address to particular transactions or situations, the Company applies the following standards by the presented order, International Accounting Standards, as adopted under regulation (EU) n.1606/2002 from the European Parliament and European Counsel as at 19 July, the International Accounting Standards (IAS) and the International Financing Reporting Standards (IFRS) issued by IASB and the corresponding interpretations SIC‐IFRIC. 

The accounting policies and measurement criteria adopted at 31 December 2015 are comparable to those used on the financial statements as of 31 December 2014. 

These financial statements reflect only the Company's separate financial statements. The Company has also prepared a set of consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), which as at 31 December 2015 and 2014 present the following differences between these two sets of financial statements: 

| Amounts	in	Euro                                 | 31‐12‐2015    | 31‐12‐2014    |
|-------------------------------------------------|---------------|---------------|
|                                                 |               |               |
| Total assets                                    | 2,574,741,560 | 2,151,937,729 |
| Total liabilities                               | 2,272,964,037 | 1,927,883,892 |
| Total equity (before non-controlling interests) | (113,058,522) | (112,370,577) |
| Total revenues                                  | 2,121,495,000 | 1,984,818,173 |
|                                                 |               |               |

With the publication of Notice No. 8256/2015 of 29 July 2015, mandatory amendments, effective after 1 January, 2016, were made to the Portuguese GAAP ("Sistema de Normalização Contabilística – SNC"). 

The Company is still assessing the potential impacts on its separate financial statements arising from such amendments. Additionally, it is also under review, the possibility of preparing separate financial statements in accordance with International Accounting Standards (IAS / IFRS) instead of the Portuguese GAAP ("Sistema de Normalização Contabilística – SNC"). 

## *3.* Summary of the principal accounting policies

The principal accounting policies applied in the preparation of these financial statements are described below. 

#### **3.1 Property, plant and equipment**

Property, plant and equipment are recorded at acquisition cost less depreciation and accumulated impairment losses (Note 16). 

Depreciation is calculated over the acquisition cost, using the straight‐line method since the asset is available for use and using the rates that best reflect their estimated useful life, as follows: 

|                                                 | Average<br>useful life |
|-------------------------------------------------|------------------------|
| Buildings	and	other	constructions<br>Equipment: | 8	–	10                 |
| Administrative	equipment                        | 3	‐	10                 |
| Other	property,	plant	and	equipment             | 8	‐	10                 |

The residual values of the assets and respective useful lives are reviewed and adjusted where necessary, at the balance sheet date. When the carrying amount of the asset exceed the realisable value the asset is written down to the estimated recoverable amount, and an impairment charged is booked (Note 3.5). 

Gains or losses arising on the write off or disposal represent the difference between the proceeds received on disposal less cost to sell and the asset's carrying amount, and are recognised in the income statement as other operating income or expenses (operational). 

#### *3.2 Goodwill*

Goodwill represents the excess of the consideration paid over the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiaries at the acquisition date (Note 17). 

Goodwill is not amortised and is subject to impairment tests at least once a year. Impairment losses relating to Goodwill cannot be reversed. Gains or losses arising from the sale of an entity include the amount of the corresponding Goodwill. 

#### **3.3 Financial investments – equity method**

The caption "Financial Investments – equity method" comprises investments in other entities where the Company has control (when the Company has directly or indirectly more than 50% of the voting rights on General Meetings or has the right to determine their financial and operating policies) or has significant influence (when the company participates on the financial or operating decisions, generally applied in the case of investments representing between 20% and 50% of the share capital of the investments). 

Financial investments are accounted for using the equity method less accumulated impairment losses (Note 6). 

#### **3.3.1 Subsidiaries**

Subsidiaries are all the entities over which the Group has the right to determine their financial and operating policies, generally where the Group's interest is represented by more than half of the voting rights. The existence and the effect of the potential voting rights which are currently exercisable or convertible are taken into account when the Group assesses whether it has control over another entity. Investments in subsidiaries are accounted for using the equity accounting method. 

In conformity with the equity accounting method, financial investments are recorded at their acquisition cost, adjusted by the amount corresponding to the Group's share of changes in the subsidiaries' shareholders' equity (including net profit) and by dividends received. 

The difference between the acquisition cost and the fair value of the subsidiaries' identifiable assets, liabilities and contingent liabilities on the acquisition date, if positive, are recognised as Goodwill. If these differences are negative, they are recorded as income for the period under the caption "Gains of subsidiaries, associates and joint ventures". 

An evaluation of investments in subsidiaries occurs when there are signs that the asset could be impaired, and any identified impairment losses are recorded under the same caption. With the exception of goodwill, when the impairment losses recognised in prior years no longer exist, they are reversed. 

When the Company's share in the subsidiaries' losses is equal to or exceeds its investment in the subsidiary, the Company ceases to recognise additional losses, except where it has assumed liability or made payments in the subsidiaries' name. Unrealised gains on transactions with subsidiaries are eliminated to the extent of the Company's share in the subsidiary. Unrealised losses are also eliminated, except if the transaction reveals evidence of impairment of a transferred asset. 

Subsidiaries' accounting policies have been changed whenever necessary so as to ensure consistency with the policies adopted by the Company. Investments in subsidiaries are disclosed in Note 6. 

#### **3.4 Foreign currency translation**

#### **3.4.1 Functional and reporting currency**

The items included in the financial statements of each subsidiary are measured using the currency of the economic environment in which the entity operates (functional currency) (Note 34). The individual financial statements are presented in Euros, which is the Company's functional and reporting currency. 

#### **3.4.2 Balances and transactions expressed in foreign currencies**

All the Company's assets and liabilities denominated in foreign currencies were converted into Euro using the exchange rates ruling at the balance sheet date. 

The currency differences, favourable and unfavourable, arising from the differences between the exchange rates ruling at the transaction date and those ruling on collection, payment or balance sheet dates, were recorded as income and costs in the individual income statement for the year. 

#### **3.4.3 Subsidiaries**

For the application of the equity method, the results and the balance sheet of the subsidiaries which have a different functional currency from the Company's reporting currency are converted into the reporting currency as follows: 

(i) The assets and liabilities of each balance sheet are translated at the exchange rates ruling at the date of the financial statements; 

The resulting exchange rate differences are recognised as a separate component of Equity, under the caption "Other changes in equity"; and 

(ii) The income and costs of each income statement are translated using the average exchange rate of the reporting period, except where the average exchange rate is not a reasonable approximation of the cumulative effect of the rates ruling on the transaction dates, in which case the income and costs are converted at the exchange rate ruling on the transaction dates. 

#### **3.5 Impairment of non‐current assets**

Non‐current assets which do not have a defined useful life are not subject to depreciation, but are subject to annual impairment tests. Assets subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 

Impairment losses are recognised as the amount of the excess of the asset's carrying value over its recoverable amount. The recoverable amount is the higher of the fair value less cost to sell amount and the value in use. 

For the purpose of conducting impairment tests, the assets are grouped at the lowest level for which cash flows can be identified separately (cash generating units that the assets belong to), when it is not possible to do so individually for each asset. 

The reversal of impairment losses recognised in previous periods is recorded when it can be concluded that the recognized impairment losses no longer exist or have decreased (with the exception of impairment losses relating to Goodwill – see Note 3.2). 

The reversal of impairment losses is recognised in the income statement as operating income. However, the reversal of the impairment loss is reversed only up to the limit of the amount that would have been recognised (net of depreciation) had the impairment loss not been recorded in previous years. 

#### **3.6 Financial assets**

The Company classifies its financial assets in the following categories: financial assets at amortized cost or at fair value with changes in fair value recognised in the income statement. The classification depends on the intention motivating the investment's acquisition. Management determines the classification at the moment of initial recognition of the investments and reappraises this classification on each reporting date. 

All acquisitions and disposals of these investments are recognised at the signature date of the respective purchase and sale contracts, irrespective of the financial settlement date. 

Financial assets are initially recorded at the acquisition cost, being the fair value equal to the price paid, including transaction expenses. The subsequent measurement depends on the category the investment falls under, as follows: 

#### **Financial assets at amortized cost**

Loans granted and accounts receivable are non‐derivative financial assets with fixed or determinable payments and which are not quoted in an active market. They are originated when the Group advances money, goods or services directly to a debtor without any intention of negotiating the debt. 

These investments are included in current assets, except when their maturity exceeds 12 months after the balance sheet date, in which case they are classified as non‐current assets. 

Loans granted and accounts receivable are reported in the balance sheet under the captions "Other financial assets" and "Receivables and other current assets". 

#### **Financial assets held for trading**

A financial asset is classified under this category if primarily acquired for the purpose of being sold in the short term or if so designated by management, and whose fair value can be reliably measured. These investments are measured at fair value through profit and loss. 

At each reporting date the Company assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. If a prolonged decline in fair value of the financial assets held for trading, measured as the difference between acquisition cost and current fair value, takes place, the loss is recognised in the income statement. 

#### **3.7 Derivative financial instruments**

The Company uses derivative financial instruments to manage the financial risks to which it is exposed. 

Although the derivative financial instruments contracted represent effective economic hedging instruments, not all of them qualify as hedging instruments. Derivative financial instruments are stated on the balance sheet at its fair value, and changes are recognised in equity or in gains and losses in financial instruments, whether are effective or not in its coverage. 

Whenever possible, the fair value of derivatives is estimated based on quoted instruments. In the absence of market prices, the fair value of derivatives is estimated based on the discounted cash flow method and option valuation models, in accordance with the assumptions generally used in the market. The fair value of derivative financial instruments is mainly included in the captions "Receivables and other‐current assets" and "Payables and other‐current liabilities". 

The derivative financial instruments used for hedge purposes may be classified as hedge instruments whether they fulfil all of the following conditions: 

- i) At acquisition date, there is formal designation and documentation of the hedging relationship, namely regarding the hedged item, the hedging instrument and the company's evaluation of the hedging effectiveness;
- ii) There is an expectation that the hedge will be highly effective, at the inception of the hedging relation and along its duration;
- iii) The effectiveness of the hedge may be measured at the beginning of the operation and while it is running;
- iv) For cash flow hedges, the realization of the cash flows must be highly probable.

#### **3.8 Corporate income tax**

Since 1 January 2006, the Company is subject to the special regime governing business groups ("RETGS") comprising companies in which the shareholding is equal to or more than 75% and which meet the conditions laid down in articles 69 and following of the Corporate Income Tax Code (IRC). Until 30 June, 2015, the subsidiary Portucel S.A., Secil S.A. and ETSA Investimentos, SGPS S.A. and the respective subsidiaries meet the conditions to be part of the tax business group. 

On 1 July, 2015, all companies included in Semapa's tax business group changed their tax reporting period, which previously corresponded to the accounting year end (calendar year), to the period starting 1 July of each year and ending 30 June of the following year. 

Companies included within the consolidation scope of the group of companies subject to this regime, calculate and recognise income tax (CIT) as though they were taxed on an individual basis. However the liabilities are recognised as due to the dominant entity of the tax business group. which is responsible for the Group's overall clearance and payment of the corporate income tax. Where there are gains on the use of this regime, these are recorded in the dominant entity financial statements. 

Pursuant to prevailing legislation, the gains and losses relating to subsidiaries and joint‐ventures resulting from the application of the equity method are deducted from or added to, respectively, to the net profit of the year for the purpose of calculating taxable income. 

Corporate income tax includes current and deferred tax. Current income tax is calculated based on net income, adjusted in conformity with tax legislation in force at the balance sheet date (Note 14). 

Deferred tax is calculated using the liability method, based on the temporary differences between the book values of the assets and liabilities and their respective tax base. The income tax rate expected to be in force in the period in which the temporary differences will reverse is used in calculating deferred tax. 

Deferred tax assets are recognised whenever there is a reasonable likelihood that future taxable profits will be generated against which they can be offset. Deferred tax assets are revised periodically and decreased whenever it is likely that tax losses will not be utilised. 

Deferred taxes are recorded as a cost or income for the year, except when they result from amounts recorded directly in equity, situation in which deferred tax is also recorded under the same caption. 

#### **3.9 Receivables and other current assets**

Other current assets are recorded at fair value, being subsequently recognised at their amortised cost, net of impairment losses, so as to state them at their expected net realisable value (Note 19). 

Impairment losses are recorded when there is objective evidence that the Company will not receive the full amount outstanding in accordance with the original conditions of the accounts receivable. 

#### **3.10 Cash and cash equivalents**

Cash and cash equivalents comprises cash, bank accounts and other short‐term investments with an initial maturity of up to 3 months which can be mobilised immediately without any significant risk in value fluctuations (Note 4). 

#### **3.11 Share capital and treasury shares**

Ordinary shares are classified in shareholders' equity (Note 23). 

Costs directly attributable to the issue of new shares or other equity instruments are reported as a deduction, net of taxes, at the amount receivable resulting from the issue. 

Costs directly attributable to the issue of new shares or options towards the acquisition of a new business are included in the acquisition cost as part of the purchase consideration. 

Treasury shares are recorded at their acquisition amount, as a decrease in shareholders' equity, in the caption "Other reserves" 

Treasury shares, while the gains or losses inherent in their disposal are recorded under Other reserves. When any subsidiary company acquires shares of the parent company (treasury shares), the payment, which includes directly‐attributable incremental costs, is deducted from the shareholders' equity attributable to the holders of the parent company's capital until such time the shares are cancelled, redeemed or sold. 

When such shares are subsequently sold or repurchased, any proceeds, net of the directly attributable transaction costs and taxes, is reflected in the shareholders' equity of the company's shareholders, under other reserves. 

#### **3.12 Interest‐bearing liabilities**

Interest‐bearing liabilities are initially recognised at fair value, net of the transaction costs incurred, and are subsequently stated at their amortised cost. Any difference between the amounts received (net of transaction costs) and the repayment amount is recognised in the income statement over the term of the debt, using the effective interest rate method. 

Interest‐bearing debt is classified as a current liability, except when the Company has an unconditional right to defer the settlement of the liability for at least 12 months after the balance sheet date (Note 25). 

#### **3.13 Borrowing costs**

Borrowing costs relating to loans are generally recognised as financial costs, in accordance with the accrual accounting principle (Note 13). 

Borrowing costs directly related to the acquisition, construction (when their construction period exceeds one year) or production of fixed assets are capitalised, and form part of the asset's cost. 

Capitalisation of these charges commences after the start of the asset's preparation or development activities and ceases when substantially all the activities necessary to prepare the qualifying assets for their intended use or sale are completed or when the relevant project is suspended or substantially concluded. 

Any financial income directly related to a specific investment is deducted from the borrowing costs of the referred asset. 

#### **3.14 Provisions**

Provisions are recognised whenever the Company has a legal or constructive obligation, as a result of past events, in which it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. 

Provisions for future operating losses are not recognised. Provisions are reviewed on balance sheet date and are adjusted so as to reflect the best estimate at that date (Note 9). 

#### **3.15 Pensions and other post‐employment benefits**

#### **3.15.1 Pension obligations – defined benefit plans**

The responsibilities for the payment of retirement benefits are recorded in accordance with NCRF 28. 

In accordance with NCRF 28, companies with pension plans recognise the costs with the granting of these benefits as and when the services are rendered by the beneficiary employees. In this manner, the Company's total liability is estimated at least every six months at the date of the interim and annual financial statements for each plan separately by an independent and specialised entity in conformity with the projected unit credit method. 

Thus the liability determined is recognised in the balance sheet and pension costs are recognised under the caption "Payroll cost". Actuarial gains and losses resulting from differences between the assumptions used for purposes of calculating the liabilities and what effectively occurred, as well as the impacts resulting from changes in assumptions, are recognised directly in equity, under the caption "Retained Earnings" (Note 24). 

The costs relating to past liabilities, which result from the implementation of a new plan or additional benefits granted, are recognised immediately in situations in which the benefits are being paid or are overdue. 

The calculated liability is presented in the Balance sheet under the caption "Pensions and post‐employment benefits" included in non‐current liabilities. 

Actuarial gains and losses resulting from differences between the assumptions used for purposes of calculating the liabilities and what effectively occurred (as well as from changes made thereto and from the difference between the expected amount of the return on the funds' assets and the actual return) are recognised, when incurred, directly in equity (Note 26). 

The gains and losses generated by a curtailment or a settlement of a defined‐benefit plan are recognised in the income statement when the curtailment or settlement occurs. A curtailment occurs when there is a material reduction in the number of employees or the plan is altered in such a way that the benefits awarded are reduced with a material impact. 

#### **3.15.2 Holiday pay, allowance and bonuses**

Under the terms of the prevailing legislation, employees are entitled annually to 22 working days leave, as well as to a month's holiday allowance, entitlement to which is acquired in the year preceding its payment. 

According to the current Performance Management System ("Sistema de Gestão de Desempenho"), employees can receive a bonus based on annually‐defined objectives. 

Accordingly, these liabilities are recorded in the period in which the employees acquire the respective right, irrespective of the date of payment, whilst the balance payable at the date of the balance sheet is shown under the caption "Payables and other current liabilities". 

#### **3.16 Payables and other current liabilities**

Trade creditors and current accounts payable are recorded at its nominal value, namely its cost. 

#### **3.17 Leases**

Leases, under which a significant part of the risks and benefits of the property is assumed by the lessor, with the Company being the lessee, are classified as operating leases. Payments made under operating leases, net of any incentives received by the lessee, are recorded in the income statement during the period of the lease. 

#### **3.18 Dividends distribution**

The distribution of dividends to shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the shareholders and up until the time of their payment. 

#### **3.19 Revenue recognition and accrual basis**

The income derived from the services rendered is recognized in the income statement with reference to the stage of completion of the services rendered at the balance sheet date, at the fair value of the amount received or receivable. 

Interest received is recognised in accordance with the principle of accrual accounting, taking into consideration the amount of debt and the effective rate of interest during the period to maturity. 

The Company record their costs and income in accordance with the accrual accounting principle, in terms of which costs and income are recognised as and when generated, irrespective of the moment in which they are received or paid. 

The differences between the amounts received and paid and the respective costs and income are recognised in the Receivables and other current assets and Payables and other current liabilities headings (Notes 19 and 29, respectively). 

#### **3.20 Contingent assets and liabilities**

Contingent assets are possible assets resulting from past events and which occurrence is dependent on future uncertain events not totally subject to the company's control. 

Contingent assets are not recognised in the financial statements but are disclosed in the notes when it is probable that a future economic benefit will arise from them. 

Contingent liabilities are defined as: (i) possible liabilities resulting from past events and which occurrence is dependent on future uncertain events not totally subject to the company's control; or (ii) current liabilities from past events that are not recognised because it is no likely that an outflow of resources affecting economic benefits will be required to settle the liability or the amounts cannot be reliably measured. 

Contingent liabilities are not recognised in the financial statements, and are disclosed in the notes, unless the probability of the outflow of funds affecting future economic benefits is remote, in which case they are not disclosed. 

#### **3.21 Subsequent events**

Events after balance sheet date which provide additional information about the conditions prevailing at the date of the balance sheet are reflected in the separate financial statements. 

Subsequent events which provide information about conditions which occur after the balance sheet date are disclosed in the notes to the separate financial statements, if material. 

#### **3.22 Risk Management**

#### **3.22.1 Financial risk factors**

Semapa, as a holding company develops direct and indirect managing activities over its subsidiaries. Therefore the fulfilment of the assumed obligations depends on the cash flow generated by its subsidiaries. Thus, the company depends on the eventual dividends distribution by subsidiaries, interests' payment, loans reimbursement and other cash‐flows generated by those companies. 

The ability of Semapa subsidiaries to make funds available will depend, partly, of their ability to generate positive cash flows and, on the other hand, of the respective earnings, available reserves and financial structure. 

The Semapa Group has a risk‐management programme which focuses its analysis on the financial markets in order to mitigate the potential adverse effects on the Semapa financial performance. Risk management is undertaken by the Financial Department, in accordance with the policies approved by the Board of Directors. An Internal Control Commission with specific functions over the operations risk control is established at Semapa level. 

#### **Currency risk**

Variations in the euro's exchange rate against other currencies can affect the Company's revenue, mainly through its subsidiaries. 

#### **Interest rate risk**

Whenever expectations of changes in interest rates justify it, the Company seeks to hedge against adverse movements through derivative instruments namely interest rate collars. In the selection of derivative financial instruments, it is their economic aspects that are the main focus of assessment. The management also evaluates the impact of each additional derivative financial instruments to its portfolio, namely in earnings' volatility. 

In order to manage the risk of interest rates, the Company only enters into cash flow hedge. Those transactions are recorded in the balance sheets at their fair value and, to the extent that they are considered effective hedging's, 

changes in fair value are initially recorded in shareholder's equity and recycled to financial results under the caption gains / (losses) in derivative financial instruments at the settlement date. 

If the hedge instruments present ineffectiveness, that inefficiency is immediately recognised in profit and loss. As so, net expenses associated to the hedged interest‐bearing liabilities are deferred in accordance with the hired hedging instrument inherent rate. 

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is recycled to the income statement when the hedge instrument is also recognised in the income statement. 

A significant share of the Company's financial liabilities cost are indexed to short‐term reference interest rates, which are reviewed more than once a year (generally every six months for medium and long‐term debt). Hence, changes in interest rates can have an impact on the Company's earnings. Where the Board considers appropriate, the Group relies on the use of derivative financial instruments, namely interest rate collars to manage the interest rate risk. These tools aim to fix the interest rate on loans it obtains, within certain parameters. 

During 2009 Semapa SGPS, S.A. contracted three interest rate collar structures over two bond loans maturing in 2016 in order to fix the interest costs within a certain limit of payments. 

Semapa uses the sensibility analysis technique to measure impacts on earnings and equity of increase or decrease on interest rates maintaining the other variables constant. This analysis is only for theoretical reasons since changes in interest rates rarely occur in isolation from changes in other market factors. The sensitivity analysis is based on the following assumptions: 

- 1 Changes in market interest rates affect interest income and expenses arising from financial instruments subject to floating rates;
- 2 Changes in market interest rates only lead to interest income and expenses regarding fixed rate financial instruments if those are measured at their fair value;
- 3 Changes in market interest rates affect the fair value of derivative financial instruments as well as other financial assets or liabilities;
- 4 Changes in fair value of derivative financial instruments and other financial assets and liabilities are measured using the discounted cash flows method, with market interest rates at year end.

#### **Credit risk**

The deterioration in global economic conditions or adverse situations which only affect economies at the local level could give rise to situations in which customers are unable to meet their commitments stemming from the sales of products. 

Credit insurance has been one of the instruments adopted by the Company to mitigate the negative impact of this type of risk. 

Sales that are not covered by credit insurance are subject to rules which ensure that sales are made to customers with a satisfactory credit history and are within reasonable exposure limits and approved for each costumer. 

#### **Liquidity risk**

The Company manages liquidity risk in two ways: (i) ensuring that its interest‐bearing debt has a large medium and long‐term component with maturities in harmony with the characteristics of the industry in which it operates, and (ii) having access to credit facilities available at any moment, for an amount that ensures an adequate liquidity. 

#### **3.22.2 Operational risk factors**

Operational risk factors mainly exist at subsidiaries and jointly controlled entities' level and are as follows: 

- • Supply of raw materials
- • Market price
- • Demand for Company's products
- • Competition
- • Environmental legislation
- • Energy costs
- • Context costs

#### **3.23 Important accounting estimates and judgments**

The preparation of financial statements requires that Company's management make judgments and estimates that affect the amount of assets, liabilities, revenue and costs. All estimates and assumptions made by the management were based on the best information and knowledge as of the date of the financial statements' approval, of events and transactions in progress. 

The most relevant accounting estimates used on the financial statements include: i) estimated useful life of tangible and intangible assets; ii) impairment analysis, namely Goodwill and receivables; and iii) provisions. 

Estimates were determined on the best available information at the financial statements' date based on the best knowledge and experience of past and current events. However, events may take place in subsequent periods which are not predictable at this time and therefore not included in the current estimates. Changes to current estimates on subsequent periods will be corrected on the income statement. 

The estimates and assumptions which present a significant risk of generating a material adjustment to the book value of assets and liabilities in the following financial period are presented below: 

#### **3.23.1 Impairment of Goodwill**

The Company tests the goodwill carried in the balance sheet for impairment losses annually, in accordance with the accounting policy described in Note 3.2. The recoverable amounts of the cash generating units are ascertained based on the calculation of their value‐in‐use and fair value less cost to sell. These calculations require the use of estimates and assumptions that if different may have an impact in the estimated recoverable value. 

#### **3.23.2 Actuarial assumptions**

Liabilities relating to defined‐benefit plans are calculated based on certain actuarial assumptions. Changes to those assumptions can have a material impact on the aforesaid liabilities. 

## *4. Cash and cash equivalents*

As of 31 December 2015 and 2014 Cash and cash equivalents were as follows: 

| Amounts	in	Euro          | 31‐12‐2015 | 31‐12‐2014 |
|--------------------------|------------|------------|
| Cash                     | 4,426      | 4,300      |
| Short	term	bank	deposits | 26,699     | 302,652    |
|                          | 31,125     | 306,952    |

## *5. Sales and services rendered*

The amount of Euro 10,840,690 and Euro 13,337,721 recognised in Services rendered for the periods ended 31 December 2015 and 2014 respectively, refer to management services provided by Semapa to its subsidiaries in financial, accounting, tax and IT areas, among others, provided in the domestic market (Note 31). 

## *6. Financial investments – equity method*

As of 31 December 2015 and 2014, financial investments accounted for using the equity accounting method were as follows: 

|                                                       |         |               | 31‐12‐2015    |               |         |               | 31‐12‐2014    |               |
|-------------------------------------------------------|---------|---------------|---------------|---------------|---------|---------------|---------------|---------------|
| Amounts	in	Euro                                       | % held  | Investments   | Share premium | Total         | % held  | Investments   | Share premium | Total         |
| Aboutbalance, SGPS, S.A.                              | 100.00% | -             | -             | ‐             | 100.00% | 45,510        | -             | 45,510        |
| ETSA Investimentos, SGPS, S.A.                        | 99.99%  | 62,511,166    | -             | 62,511,166    | 99.99%  | 58,770,565    | -             | 58,770,565    |
| Inspiredplace, S.A.                                   | 100.00% | 44,151        | -             | 44,151        | 100.00% | 46,827        | -             | 46,827        |
| N.S.O.S.P.E. - Empreendimentos e Participações , S.A. | 79.32%  | -             | -             | ‐             | 54.42%  | 28,787,237    | -             | 28,787,237    |
| Portucel, S.A.                                        | 47.50%  | 383,233,648   | -             | 383,233,648   | 47.29%  | 630,637,024   | -             | 630,637,024   |
| Secil - Companhia Geral de Cal e Cimento, S.A.        | 100.00% | 334,716,607   | -             | 334,716,607   | -       | 400,304,315   | -             | 400,304,315   |
| Seinpar Investments , B.V.                            | 100.00% | 275,106,173   | 168,743,500   | 443,849,673   | 100.00% | 212,487,548   | 317,056,500   | 529,544,048   |
| Seinpart - Participações , SGPS, S.A.                 | 49.00%  | 25,834        | -             | 25,834        | 49.00%  | 26,632        | -             | 26,632        |
| Semapa Invers iones, S.L.                             | 100.00% | 175,069       | -             | 175,069       | 100.00% | 187,338       | -             | 187,338       |
| Seminv - Inves timentos , SGPS, S.A.                  | 100.00% | 2,017,529     | -             | 2,017,529     | 100.00% | 2,019,868     | -             | 2,019,868     |
|                                                       |         | 1,057,830,177 | 168,743,500   | 1,226,573,677 |         | 1,333,312,864 | 317,056,500   | 1,650,369,364 |

The movement in the caption "Financial investments – equity method", in the years ended 31 December 2015 and 2014 were as follows: 

| Amounts	in	Euro                                                 | 31‐12‐2015    | 31‐12‐2014    |
|-----------------------------------------------------------------|---------------|---------------|
| Opening Balance                                                 | 1,650,369,364 | 1,365,690,197 |
| Incorporations and share capital increases                      | 45,434,374    | 485,091,540   |
| Acquisitions (Note 31)                                          | -             | 3,202         |
| Goodwill (Note 17)                                              | -             | (181,641,866) |
| Translation	differences                                         | (2,422,749)   | (8,717,617)   |
| Disposals                                                       | (205,423,743) | -             |
| Gains	/	(losses)	of	subsidiaries,	associates	and	joint	ventures | 119,194,491   | 146,141,225   |
| Dividends	paid                                                  | (193,886,680) | (95,360,270)  |
| Reimbursements:                                                 |               |               |
| Share premium                                                   | (148,313,000) | (67,605,000)  |
| Adjustments on financial assets                                 | (38,378,380)  | 6,767,953     |
| Closing Balance                                                 | 1,226,573,677 | 1,650,369,364 |

In 2015, Semapa performed share capital increases in the subsidiarie NSOSPE ‐ Empreendimentos e Participações, SA, amounting to Euros 45,434,374 and later sold all of this participation to Ciminpart, SGPS, S.A. (Notes 19 and 31). 

Additionally, in 2015, the caption Disposals amounting to Euro 205,423,743 comprises the disposal of N.S.O.S.P.E. ‐ Empreendimentos e Participações S.A. and Aboutbalance, SGPS, S.A. and the interest held reduction in Portucel, S.A. due to the Public Exchange Offer (OPT) (Note 23). 

| Amounts in Euro                                       | 2015         | 2014        |
|-------------------------------------------------------|--------------|-------------|
| Appropriated results                                  |              |             |
| Aboutbalance, SGPS, S.A.                              | 881          | (1,480)     |
| ETSA Investimentos, SGPS, S.A.                        | 3,754,816    | 561,173     |
| Great Earth - Projectos, S.A.                         | -            | (138,330)   |
| Inspiredplace, S.A.                                   | (2,676)      | (161)       |
| N.S.O.S.P.E. - Empreendimentos e Participações, S.A.  | (2,265,590)  | (5,703,394) |
| Portucel, S.A.                                        | 77,370,616   | 84,004,008  |
| Secil - Companhia Geral de Cal e Cimento, S.A.        | (22,040,903) | 7,912,378   |
| Seinpar Investments, B.V.                             | 62,392,754   | 59,508,298  |
| Seinpart - Participações, SGPS, S.A.                  | (798)        | (1,353)     |
| Semapa Inversiones, S.L.                              | (12,269)     | (16,928)    |
| Seminv - Investimentos, SGPS, S.A.                    | (2,340)      | 17,014      |
|                                                       | 119,194,491  | 146,141,225 |
| Gains / (losses) on disposal of financial investments |              |             |
| Aboutbalance, SGPS, S.A.                              | 4            | -           |
| N.S.O.S.P.E. - Empreendimentos e Participações, S.A.  | (1,597,945)  | -           |
| Portucel, S.A.                                        | 161,266,107  | -           |
|                                                       | 159,668,166  | ‐           |
|                                                       | 278,862,657  | 146,141,225 |

The Gains / (losses) of financial investments accounted for using the equity method, in the years ended 31 December 2015 and 2014 were as follows: 

Additionally in 2015 and following the 84,539,108 shares given in exchange under the Public Exchange Offer, Semapa reduced its interest held in Portucel from 47.5% to 35.71% of the non‐suspended voting rights. The gain resulting from this transaction (Euro 161,266,107) was fully recorded in the income statement. 

As of 31 December 2015, financial information of the investments held by the Group, after adjustments related to the harmonisation of accounting principles, was as follows: 

|                                                | 31 December 2015 |                      |               |                        |               |
|------------------------------------------------|------------------|----------------------|---------------|------------------------|---------------|
| Amounts in Euro                                | Total<br>assets  | Total<br>liabilities | Equity        | Profit for<br>the year | Revenue       |
| ETSA Inves timentos, SGPS, S.A.                | 93,865,227       | 31,347,073           | 62,518,154    | 3,755,236              | 27,614,589    |
| Ins piredplace, S.A.                           | 44,951           | 799                  | 44,152        | (2,676)                | -             |
| Portucel, S.A.                                 | 2,346,662,894    | 1,273,433,803        | 1,073,229,091 | 185,332,347            | 1,628,023,107 |
| Secil - Companhia Geral de Cal e Cimento, S.A. | 1,513,931,367    | 1,179,207,892        | 334,723,475   | (22,040,903)           | 476,697,994   |
| Seinpar Inves tments , B.V.                    | 443,862,181      | 12,508               | 443,849,673   | 62,392,754             | -             |
| Seinpart - Participações, SGPS, S.A.           | 53,579           | 859                  | 52,720        | (1,628)                | -             |
| Semapa Inversiones , S.L.                      | 180,141          | 5,072                | 175,069       | (12,269)               | -             |
| Seminv - Inves timentos, SGPS, S.A.            | 2,018,327        | 799                  | 2,017,528     | (2,340)                | -             |

As of 31 December 2014, financial information of the investments held by the Group, after adjustments related to the harmonisation of accounting principles, was as follows: 

|                                                      | 31 December 2014 |                      |               |                        |               |
|------------------------------------------------------|------------------|----------------------|---------------|------------------------|---------------|
| Amounts	in	Euro                                      | Total<br>assets  | Total<br>liabilities | Equity        | Profit for<br>the year | Revenue       |
| Aboutbalance, SGPS, S.A.                             | 53,589           | 8,079                | 45,510        | (1,479)                | 841           |
| ETSA Investimentos, SGPS, S.A.                       | 91,643,716       | 32,866,582           | 58,777,134    | 2,560,217              | 29,134,978    |
| Inspiredplace, S.A.                                  | 49,907           | 3,079                | 46,828        | (161)                  | 2,060         |
| Interholding Investments, B.V.                       | 2,233            | 51,143               | (48,910)      | (29,798)               | -             |
| N.S.O.S.P.E. - Empreendimentos e Participações, S.A. | 83,935,973       | 47,644,012           | 36,291,961    | (7,190,247)            | 1,033,400     |
| Portucel, S.A.                                       | 2,640,342,954    | 1,312,657,326        | 1,327,685,628 | 176,876,406            | 1,542,279,415 |
| Secil - Companhia Geral de Cal e Cimento, S.A.       | 1,194,801,758    | 794,489,229          | 400,312,529   | 7,912,540              | 429,556,788   |
| Seinpar Investments, B.V.                            | 529,592,002      | 47,954               | 529,544,048   | 59,508,298             | 59,587,751    |
| Seinpart - Participações, SGPS, S.A.                 | 57,665           | 3,317                | 54,348        | (2,762)                | 495           |
| Semapa Inversiones, S.L.                             | 2,429,668        | 2,242,330            | 187,338       | (16,928)               | 79,760        |
| Seminv - Investimentos, SGPS, S.A.                   | 2,023,154        | 3,287                | 2,019,867     | 17,014                 | 247           |

## *7. Consumed materials and services*

The caption "Consumed materials and services" is detailed as follows for the years ended 31 December 2015 and 2014: 

| Amounts	in	Euro                    | 2015      | 2014      |
|------------------------------------|-----------|-----------|
| Professional	fees                  | 1,943,371 | 1,921,587 |
| Materials                          | 50,343    | 40,280    |
| Energy	and	fluids                  | 80,024    | 67,355    |
| Travel,	lodging	and	transportation | 228,903   | 292,209   |
| Other	services                     | 1,197,683 | 1,154,074 |
| External	services	re‐charge        | (123,190) | (121,427) |
|                                    | 3,377,134 | 3,354,078 |

## *8. Payroll expenses*

As of 31 December 2015 and 2014 payroll expenses, were made up as follows: 

| Amounts in Euro                    | 2015       | 2014      |
|------------------------------------|------------|-----------|
| Statutory bodies (Note 31)         | 8,716,322  | 2,455,375 |
| Other remunerations                | 1,997,416  | 1,811,553 |
| Post-employment benefits (Note 26) | 58,228     | 58,228    |
| Indemnities                        | -          | 79,403    |
| Other payroll costs                | 1,145,728  | 1,075,857 |
|                                    | 11,917,694 | 5,480,416 |

The number of employees working for the Company as at 31 December 2015 and 2014 was 25 and 24, respectively. 

In 2015 the caption Statutory bodies comprises Euro 2,377,075 of Profit‐sharing bonuses reclassified to Payroll costs related with the profit‐sharing deliberated at the Annual General Meeting of the 2014 financial statements approval that took place on 30 April 2015. According with the applicable accounting standards, and taking into account that the deliberation of the profit‐sharing bonuses occurred after the the financial statements were approved for issue, the bonuses were reclassified to the 2015 income statement. The comparability of the two presented periods is therefore diminished by this fact (Note 31). 

Additionally, the number of members of the Board increased, namely the new CEO nomination in the beginning of July 2015. 

## *9. Provisions*

As of 31 December 2015 and 2014, the provisions amounted to Euro 12,800,000 and Euro 10,258,910, respectively, are related with provisions for risks of different natures, which may originate cash outflows in the future. 

During the course of the years ended 31 December 2015 and 2014, the following movements took place in the caption "Provisions increase / (decrease)": 

| Amounts in Euro                | Negative<br>equity | Others      | Total       |
|--------------------------------|--------------------|-------------|-------------|
| Balance as of 1 January 2014   | 19,112             | 4,700,000   | 4,719,112   |
| Increases                      | 29,798             | 5,510,000   | 5,539,798   |
| Balance as of 31 December 2014 | 48,910             | 10,210,000  | 10,258,910  |
| Increases                      | 42,589             | 8,100,000   | 8,142,589   |
| Reversals                      | -                  | (5,510,000) | (5,510,000) |
| Direct Utilizations            | (91,500)           | -           | (91,500)    |
| Transfers and adjustments      | 1                  | -           | 1           |
| Balance as of 31 December 2015 | ‐                  | 12,800,000  | 12,800,000  |

## *10. Changes in fair value*

In the years ended 31 December 2015 and 2014, changes in fair value were as follows: 

| Amounts in Euro                                                    | 2015        | 2014      |
|--------------------------------------------------------------------|-------------|-----------|
| Financial assets held for trading - Gains / (losses) (Note 21)     | (109,352)   | (178,032) |
| Derivative financial instruments - Losses (Note 30)                | (7,273,783) | (68,683)  |
| Derivative financial instruments - Gains (Note 30)                 | 142,861     | -         |
| Financial investments - Labor Compensation Fund - Gains / (losses) | 98          | -         |
|                                                                    | (7,240,176) | (246,715) |

The change in the caption "Financial assets held for trading" is due to fair value gains and losses recorded in listed securities held by Semapa as described in Note 21. 

Gains / (losses) under the caption "Derivative financial instruments – Gains / (losses)" comprise the results from the instruments detailed in Note 30. 

## *11. Other operating income and other operating expenses*

The caption "Other operating income" is detailed as follows for the years ended 31 December 2015 and 2014: 

| Amounts	in	Euro                             | 2015  | 2014   |
|---------------------------------------------|-------|--------|
| Gains	on	disposals	of	tangible	fixed	assets | 81    | 17     |
| Others                                      | 1,191 | 17,546 |
|                                             | 1,272 | 17,563 |

| Amounts in Euro | 2015      | 2014      |
|-----------------|-----------|-----------|
| Indirect taxes  | (309,674) | (632,346) |
| Donations       | (77,717)  | (172,000) |
| Membership fees | (48,746)  | (45,246)  |
| Others          | (3,584)   | (3,058)   |
|                 | (439,721) | (852,650) |

The caption "Other operating expenses" is detailed as follows for the years ended 31 December 2015 and 2014: 

## *12. Depreciation, amortisation and impairment losses*

As of 31 December 2015 and 2014 changes in depreciation, amortisation and impairment losses were as follows: 

| Amounts in Euro                                         | 2015      | 2014      |
|---------------------------------------------------------|-----------|-----------|
| Depreciation of property, plant and equipment           |           |           |
| Buildings and other constructions (Note 16)             | (116,966) | (190,974) |
| Equipment and other tangible assets (Note 16)           | (108,526) | (167,405) |
| (Expenses) / reversals of depreciation and amortisation | (225,492) | (358,379) |

## *13. Net financial results*

As of 31 December 2015 and 2014 Net financial results were detailed as follows: 

| Amounts in Euro                                             | 2015         | 2014         |
|-------------------------------------------------------------|--------------|--------------|
| Interest and similar income:                                |              |              |
| Interest income from bank deposits                          | -            | 13,226       |
| Interest income on loans to subsidiaries (Note 31)          | 2,144,956    | 260,327      |
| Interest income on loans to other related parties (Note 31) | -            | 1,162        |
| Compensatory Interests                                      | 34,025       | 43,659       |
| Gains on derivative financial instruments (Note 30)         | 59,127       | 1,013,194    |
| Other financial income                                      | -            | 1,017        |
|                                                             | 2,238,108    | 1,332,585    |
| Interest and similar expenses:                              |              |              |
| Interest paid on borrowings                                 | (3,175,957)  | (6,590,243)  |
| Interest paid on loans from shareholders (Note 31)          | (14,269)     | (347,181)    |
| Interest paid on loans from subsidiaries (Note 31)          | (820)        | (1,001)      |
| Losses on derivative financial instruments (Note 30)        | (7,006,571)  | (5,627,108)  |
| Interest paid from other loans                              | (16,270,888) | (32,114,621) |
| Other financial expenses                                    | (4,559,215)  | (4,232,259)  |
|                                                             | (31,027,720) | (48,912,413) |

The amounts stated in "Losses on derivative financial instruments" and "Gains on derivative financial instruments" comprises the results from the financial instruments detailed in Note 30. 

The amounts stated in "Other financial expenses" is mainly related with the interest bearing liabilites issuing costs, recognised according with the accounting policy described in Notes 3.12 and 3.13. 

## *14. Income tax*

As of 1 January 2014, and in accordance with the legislative changes introduced by the reform of the CIT code , the relevant percentage to the appliance of the special regime governing business groups was changed to 75% (until 31 December 2013 this percentage was 90%). 

As of 31 December 2015, the tax business group led by Semapa as the dominant society comprises Group Secil and ETSA, as well as all the subsidiaries that meet the legal requirements of the Corporate Income Tax Code. The companies that integrate the Portucel Group also integrated the tax business group led by Semapa as from 2014 until 30 June 2015. After 1 July 2015 a new taxation group led by Portucel S.A. was created. This change occurred in July 2015 and took place because of the Public ExchangeOffer that decreased the direct and indirect interest held in this subsidiary to a percentage below the legal requirement of 75%. 

On 1 July, 2015, all companies included in Semapa's tax business group changed their tax reporting period, which previously corresponded to the accounting year end (calendar year), to the period starting 1 July of each year and ending 30 June of the following year 

As of 31 December 2015 and 2014, income tax expense comprises: 

| Amounts	in	Euro        | 2015         | 2014         |
|------------------------|--------------|--------------|
| Current	tax            | 24,964,048   | 32,807,775   |
| Deferred	tax	(Note	27) | (24,085,674) | (16,384,167) |
|                        | 878,374      | 16,423,608   |

The reconciliation of the effective tax rate in the years ended 31 December 2015 and 2014 is as follows: 

| Amounts in Euro                              | 2015         | 2014          |
|----------------------------------------------|--------------|---------------|
| Profit before tax                            | 235,082,201  | 96,084,645    |
| Expected income tax                          | 52,893,495   | 23,540,738    |
| Differences (a)                              | (98,073,221) | (113,065,397) |
| Prior year Corporate Income tax              | (915,898)    | (29,866)      |
| Non-Recoverable tax losses carried forward   | 69,264,410   | 103,455,545   |
| Recoverable tax losses carried forward       | (26,879,115) | (33,141,576)  |
| Tax rate change effect                       | -            | 2,453,281     |
| Autonomous taxation                          | 2,831,955    | 363,667       |
|                                              | (878,374)    | (16,423,608)  |
| Effective tax rate                           | (0.37%)      | (17.09%)      |
| Effective tax rate without the equity method | (5.82%)      | (94.06%)      |

(a) This amount is made up essentially of:

| Amounts	in	Euro                                                                    | 2015                     | 2014           |
|------------------------------------------------------------------------------------|--------------------------|----------------|
| Effects	arising	from	the	application	of	the	equity	method	‐	Equity	Method	(Note	6) | (278,862,657)            | (146,141,225)  |
| Non-deductible depreciations                                                       | -                        | 37,648         |
| Adjustments	and	taxed	provisions	(Note	9)<br>Reversal of taxed provisions (Note 9) | 8,142,589<br>(5,510,000) | 5,539,798<br>- |
| Post‐employment	benefits	(Note	8	and	26)                                           | 58,228                   | 58,228         |
| Pensions	paid	(Note	26)                                                            | (122,180)                | (122,181)      |
| Capital gains / (losses) for tax purposes                                          | -                        | (321,448,174)  |
| Capital gains / (losses) for accounting purposes (Note 6)                          | (159,668,166)            | (17)           |
| Other                                                                              | 81,204                   | 584,507        |
|                                                                                    | (435,880,982)            | (461,491,416)  |
| Tax effect (22.50%) (2014: 24.50%)                                                 | (98,073,221)             | (113,065,397)  |

The annual tax returns in Portugal are subject to review and possible adjustment on the part of the tax authorities during a period of 4 years (5 years for Social Security). However, where there are tax losses, these may be subject to review and additional assessment by the tax authorities for a higher period. 

The Board of Directors is of the opinion that any corrections to those tax returns as a result of assessments by the tax authorities will not have a material impact on the financial statements at 31 December 2015. Additionally, the periods until 2012 have already been reviewed. 

## *15. Earnings per share*

There are no convertible financial instruments over Semapa' shares, so there is no dilution of earnings. 

| Amounts	in	Euro                                     | 2015        | 2014        |
|-----------------------------------------------------|-------------|-------------|
| Profit	attributable	to	Semapa's	shareholders        | 235,960,575 | 112,508,253 |
| Weighted	average	number	of	ordinary	shares	in	issue | 95,945,583  | 111,241,402 |
| Basic	earnings	per	share                            | 2.46        | 1.01        |
| Diluted	earnings	per	share                          | 2.46        | 1.01        |

The weighted average number of ordinary shares, presented in the table above is weighted by the treasury shares held by Semapa SGPS, S.A., which on 31 December 2015 amounted to 5,530 shares. On 30 July 2015, Semapa acquired 24,864,477 shares following the Public Exchange Offer (Note 23) which were cancelled after proper settlement of the tender offer. 

## *16. Property, plant and equipment*

The following movements were registered in the years ended 31 December 2015 and 2014 under the caption Property, plant and equipment, as well as on the respective depreciation and impairment losses accounts: 

| Amounts in Euro                                                                                         | Buildings and other<br>constructions | Equipments and<br>others tangibles | Work in progress | Total                    |
|---------------------------------------------------------------------------------------------------------|--------------------------------------|------------------------------------|------------------|--------------------------|
| Acquisition cost                                                                                        |                                      |                                    |                  |                          |
| Amount as of 1 January 2014                                                                             | 1,784,221                            | 1,148,469                          | 194,724          | 3,127,414                |
| Acquisitions                                                                                            | 2,353                                | 35,795                             | 65,777           | 103,925                  |
| Dis posals                                                                                              | -                                    | (348)                              | -                | (348)                    |
| Transfers                                                                                               | 85,602                               | 72,607                             | (158,209)        | -                        |
| Amount as of 31 December 2014                                                                           | 1,872,176                            | 1,256,523                          | 102,292          | 3,230,991                |
| Acquisitions                                                                                            | -                                    | 70,001                             | 4,383            | 74,384                   |
| Dis posals                                                                                              | -                                    | (1,600)                            | -                | (1,600)                  |
| Amount as of 31 December 2015                                                                           | 1,872,176                            | 1,324,924                          | 106,675          | 3,303,775                |
| Accumulated depreciation and impairment losses<br>Amount as of 1 January 2014<br>Acquisitions (Note 12) | (985,252)<br>(190,974)               | (833,217)<br>(167,405)             | (102,292)<br>-   | (1,920,761)<br>(358,379) |
| Dis posals                                                                                              | -                                    | 348                                | -                | 348                      |
| Write-off's and Regularisations<br>Amount as of 31 December 2014                                        | -<br>(1,176,226)                     | (2)<br>(1,000,276)                 | -<br>(102,292)   | (2)<br>(2,278,794)       |
| Acquisitions (Note 12)                                                                                  | (116,966)                            | (108,526)                          | -                | (225,492)                |
| Dis posals                                                                                              | -                                    | 1,600                              | -                | 1,600                    |
| Write-off's and Regularisations                                                                         | -                                    | 1                                  | -                | 1                        |
| Amount as of 31 December 2015                                                                           | (1,293,192)                          | (1,107,201)                        | (102,292)        | (2,502,685)              |
| Net book value as of 1 January 2014<br>Net book value as of 31 December 2014                            | 798,969<br>695,950                   | 315,252<br>256,247                 | 92,432<br>-      | 1,206,653<br>952,197     |
| Net book value as of 31 December 2015                                                                   | 578,984                              | 217,723                            | 4,383            | 801,090                  |

## *17. Goodwill*

As of 31 December 2015 and 2014 Goodwill is made up as follows:

| Entity                                       | Acq Year | 31‐12‐2015  | 31‐12‐2014  |
|----------------------------------------------|----------|-------------|-------------|
| Portucel, S.A.                               | 2010     | 42,050,680  | 55,935,308  |
| Secil - Companhia Geral de Cal e Cimento, SA | 2014     | 181,641,866 | 181,641,866 |
|                                              |          | 223,692,546 | 237,577,174 |

The following movements were registered in the caption Goodwill during 2015 and 2014: 

| Amounts in Euro | 31‐12‐2015   | 31‐12‐2014  |
|-----------------|--------------|-------------|
| Opening balance | 237,577,174  | 55,935,308  |
| Acquisitions    | -            | 181,641,866 |
| Disposals       | (13,884,628) | -           |
| Closing Balance | 223,692,546  | 237,577,174 |

Portucel's goodwill reduction corresponds to the amount of goodwill derecognised as a result of public exhange offer that occurred in July, as described in Note 23. 

In accordance with NCRF 6, Goodwill is subject to impairment tests performed on an annual basis or when there are indications of impairment, in accordance to the accounting policy described in Note 3.2. 

As a result of the performed CGU's impairment tests, the recoverable value was determined based on value in use, according to the discounted cash flows method. The impairment tests were based on the historical performance of these units as well as the development of their business expectations with the actual production structure, using the budgets for the following year and an estimate of cash flows for the next period of 4 years. 

The main assumptions used for impairment testing, for UGC's were as follow: 

| Operating Segment                          | Risk‐free<br>interest rate | WACC   | Growth rate | Tax rate |
|--------------------------------------------|----------------------------|--------|-------------|----------|
| Pulp and paper                             |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 6.79%  | -           | 29.50%   |
| Perpetuity                                 | 0.65%                      | 6.79%  | 1.75%       | 29.50%   |
| Cement and derivatives                     |                            |        |             |          |
| Portugal                                   |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 6.41%  | -           | 27.50%   |
| Perpetuity                                 | 0.65%                      | 6.41%  | 1.75%       | 27.50%   |
| Madeira                                    |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 6.88%  | -           | 21.50%   |
| Perpetuity                                 | 0.65%                      | 6.88%  | 1.75%       | 21.50%   |
| Tunisia                                    |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 11.57% | -           | 25.00%   |
| Perpetuity                                 | 0.65%                      | 11.57% | 3.84%       | 25.00%   |
| Lebanon                                    |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 11.00% | -           | 15.00%   |
| Perpetuity                                 | 0.65%                      | 11.00% | 3.00%       | 15.00%   |
| Angola                                     |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 10.54% | -           | 30.00%   |
| Perpetuity                                 | 0.65%                      | 10.54% | 2.60%       | 30.00%   |
| Brazil                                     |                            |        |             |          |
| Explicit planning period                   | 0.65%                      | 16.41% | -           | 34.00%   |
| Perpetuity                                 | 0.65%                      | 16.41% | 5.05%       | 34.00%   |
| Environmet                                 |                            |        |             |          |
| Explicit planning period - ITS e Sebol     | 1.20%                      | 7.45%  | -           | 25.50%   |
| Explicit planning period - other companies | 1.20%                      | 7.55%  | -           | 22.50%   |
| Perpetuity                                 | 3.02%                      | 8.80%  | 2.25%       | 22.50%   |

As a result of the impairment tests performed and respective sensitive analysis to its main assumptions, no impairment losses have been identified on the goodwill of the CGU´s. 

## 18. State and other public entities

As at 31 December 2015 and 2014, there were no arrear debts to the State and other public entities. 

As mentioned in Note 14, as of 1 January, 2014 the tax group dominated by Semapa, SGPS, S.A. , comprises the Portuguese entities that comply with the conditions laid down in Article 69 of the CIT Code. Thus, although those companies ascertain and record the income tax as if they were taxed on an individual basis, the overall corporate income tax as well as the overall clearance/payment is performed by the parent company, in this case Semapa SGPS, S.A.. 

The balances relating to these entities were as follows: 

#### **Current Liabilities**

| Amounts in Euro                            | 31‐12‐2015 | 31‐12‐2014 |
|--------------------------------------------|------------|------------|
| Corporate Income Tax - CIT                 | 1,241,406  | -          |
| Personnel income tax - witheld on salaries | 131,687    | 137,260    |
| Value added tax - VAT                      | 562,375    | 955,874    |
| Social security                            | 118,935    | 108,883    |
| Other                                      | 2,814      | 3,856      |
|                                            | 2,057,217  | 1,205,873  |

As of 31 December 2015 and 2014, the caption "Corporate Income tax ‐ IRC" comprise: 

| Amounts in Euro                                                       | 31‐12‐2015  | 31‐12‐2014   |
|-----------------------------------------------------------------------|-------------|--------------|
| Corporate Income Tax - Semapa, SGPS, S.A.                             | (672,738)   | 32,777,909   |
| Corporate Income Tax - Special Tax Regime for Group Companies (RETGS) | (1,265,479) | (36,779,478) |
| Payments on account                                                   | -           | 2,470        |
| Special payments on account                                           | 464,393     | 774,735      |
| Additional payments on account                                        | -           | 6,401,695    |
| Withholding tax                                                       | 47,165      | 1,339,709    |
| Prior years Corporate Income Tax                                      | 185,253     | 144,660      |
|                                                                       | (1,241,406) | 4,661,700    |

### *19. Receivables and other current assets*

At 31 December 2015 and 2014, "Other receivables and other current assets" comprised: 

| Amounts in Euro                                | 31‐12‐2015 | 31‐12‐2014 |
|------------------------------------------------|------------|------------|
| Other receivables                              |            |            |
| Accounts Payable (debtor balances)             | 19,984     | 6,741      |
| Related Parties (Note 31)                      |            |            |
| Current Operations Accounts                    | 35,046,263 | 8,983,980  |
| Special Tax Regime for Group Companies (RETGS) | 1,047,033  | 16,483,228 |
| Other receivables                              | 26,212     | 39,503     |
|                                                | 36,139,492 | 25,513,452 |

The caption "Current operations accounts" comprises Euro 30,248,720 to be received from Ciminpart, SGPS, S.A. (Note 19) related with the outstanding amount to be paid to Semapa, due to the acquisition of the Brazilian entity N.S.O.S.P.E. – Empreendimentos e Participações, S.A. (Note 6). 

## *20. Deferrals*

As of 31 December 2015 and 2014, this caption comprised: 

| Amounts in Euro                 | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------------|------------|------------|
| Deferred assets                 |            |            |
| Consumed materials and services | 64,037     | 208,791    |
| Interests                       | 17,083     | 17,277     |
|                                 | 81,120     | 226,068    |
| Deferred liabilities            |            |            |
| Others                          | 8,372      | 8,352      |
|                                 | 8,372      | 8,352      |

## *21. Financial assets held for trading*

As of 31 December 2015 and 2014 the "Financial assets held for trading" comprises: 

|                 |            | Fair Value         |  |
|-----------------|------------|--------------------|--|
| Amounts in Euro | 31‐12‐2015 | 31‐12‐2014         |  |
| CEMG fund       |            | 294,710<br>404,062 |  |
|                 |            | 294,710<br>404,062 |  |

The following movements were registered in this caption during the years ended 31 December 2015 and 2014: 

| Amounts in Euro                 | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------------|------------|------------|
| Fair value Opening Balance      | 404,062    | 552,786    |
| Acquisitions                    | -          | 29,308     |
| Changes in fair value (Note 10) | (109,352)  | (178,032)  |
| Fair value Closing Balance      | 294,710    | 404,062    |

## *22. Other financial assets*

As of 31 December 2015 and 2014 the captions "Other financial assets", current, were essentially comprised by receivables from subsidiaries (Note 31) amounting to Euro 5,186,474 and Euro 8,234,474, respectively. Current receivables are related with short term cash operations, with market interest rates, which are collected every three months. 

## *23. Share capital and treasury shares*

As of 31 December 2015 and 2014, Semapa share capital was fully subscribed and paid up, being represented by, respectively, 81,645,523 and 118,332,445 shares with a unit nominal value of 1 Euro each. 

During the year of 2015, the company performed two reductions of its share capital, both by extinction of treasury shares. 

The first resulted of the approval by the Annual General Meeting of Semapa that took place on 30 April 2015, of the proposal of share capital reduction by the extintion of 11,822,445 treasury shares. This reduction amounted to Euro 11,822,445 and share capital decreased from Euro 118,332,445 to Euro 106,510,000. 

Additionally and as already mentioned, following the closure of the Public Exhange Offer that occurred late July 2015, Semapa acquired 24,864,477 shares, which were cancelled through a share capital decrease after proper settlement of the tender offer. Thus, Semapa reduced its share capital to Euro 81,645,523 represented by 81,645,523 shares of nominal value of Euro 1. 

At 31 December 2015 and 2014 the following entities had substantial holdings in the company's capital: 

|                                                    | 31‐12‐2015       |        | 31‐12‐2014       |        |
|----------------------------------------------------|------------------|--------|------------------|--------|
| Name                                               | Number of Shares | %      | Number of Shares | %      |
| Longapar, SGPS, S.A.                               | 22,225,400       | 27.22  | 22,225,400       | 18.78  |
| Cimo - Gestão de Participações, SGPS, S.A.         | 16,199,031       | 19.84  | 16,199,031       | 13.69  |
| Sodim, SGPS, S.A.                                  | 15,252,726       | 18.68  | 15,657,505       | 13.23  |
| Banco BPI, S.A.                                    | -                | -      | 12,009,004       | 10.15  |
| Bestinver Gestión, SGIIC, S.A.                     | 7,166,756        | 8.78   | 8,437,349        | 7.13   |
| Norges Bank (Norway Central Bank)                  | -                | -      | 5,649,215        | 4.77   |
| Cimigest, SGPS, S.A.                               | 3,185,019        | 3.90   | 3,185,019        | 2.69   |
| Santander Asset Management España, SA              | 2,268,346        | 2.78   | -                | -      |
| Sociedade Agrícola da Quinta da Vialonga, S.A.     | 625,199          | 0.77   | 625,199          | 0.53   |
| OEM - Organização de Empresas, SGPS, S.A.          | 535,000          | 0.66   | 535,000          | 0.45   |
| Treasury shares                                    | 5,530            | 0.01   | 11,827,975       | 10.00  |
| Other shareholders with less than 2% participation | 14,182,516       | 17.37  | 21,981,748       | 18.58  |
|                                                    | 81,645,523       | 100.00 | 118,332,445      | 100.00 |

As of 31 December 2015, Semapa ‐ Sociedade de Investimento e Gestão, SGPS, SA holds 5,530 treasury shares. 

## 24. Reserves and retained earnings

#### **Share Premium**

This value cannot be distributed unless in the event of the company's winding up. However, it may be used to absorb losses after the other reserves have been exhausted or it can be incorporated into the issued capital. 

#### **Legal Reserve**

Commercial Company law prescribes that at least 5% of annual net profit must be transferred to the legal reserve until this is equal to at least 20% of the issued capital, which is verified as of 31 December 2015. 

This reserve cannot be distributed unless in the event of the company's winding up. However, it may be used to absorb losses after the other reserves have been exhausted or it can be incorporated into the issued capital. 

#### **Other Reserves**

This caption corresponds to available reserves for distribution to shareholders, constituted through the appropriation of prior year's earnings. 

At the Extraordinary General Meeting of the company, which took place on 18 December 2015, the distribution of reserves corresponding to Euro 0.75 per share, amounting to Euro 61,229,995 was approved. 

In 2015 the reduction of Euro 376,791,932 in other reserves is due to the aforementioned extinctions of treasury shares and corresponds to the difference between the nominal value of the canceled shares (which reduced the share capital) and the acquisition value for which they were initially recorded. 

#### **Retained earnings**

#### *Actuarial gains or losses*

The differences between the assumptions used for the purpose of determining liabilities related to post‐ employment benefits and what effectively occurred are equally recorded under this caption as well as changes made to those assumptions as described in Note 3.15.1. 

Previous year's net profit was distributed as follows: 

|                        |             | Application of year's net profit |  |  |
|------------------------|-------------|----------------------------------|--|--|
| Amounts in Euro        | 2014        | 2013                             |  |  |
| Dividends paid         | 39,939,176  | 37,477,644                       |  |  |
| Profit-sharing bonuses | 2,602,602   | -                                |  |  |
| Others reserves        | 69,966,475  | 97,503,445                       |  |  |
| Profit for the year    | 112,508,253 | 134,981,089                      |  |  |
| Dividend per share     | 0.3750      | 0.3320                           |  |  |

At the Annual General Meeting of the company, which took place on 30 April 2015, the distribution of dividends corresponding to Euro 0.375 per share, amounting to Euro 39,939,176 was approved. 

It was also approved that an amount up to Euro 2,800,000 of the 2014 net profit would correspond to Board members and other employees profit‐sharing bonuses. Thus, an amount of Euro 2,377,075 (Note 31) was paid to the Company's Board of Directors and Euro 225,527 to other employees. 

#### **Adjustments on financial assets**

This caption comprises the adjustments due to the equity accounting method application to the Company's subsidiaries. 

Adjustments on financial assets were as follows in the years ended 31 December 2015 and 2014: 

| Amounts in Euro                                      | 31‐12‐2015   | 31‐12‐2014   |
|------------------------------------------------------|--------------|--------------|
| ETSA Investimentos, SGPS, S.A.                       | (773,483)    | (759,269)    |
| N.S.O.S.P.E. - Empreendimentos e Participações, S.A. | -            | (1,169,606)  |
| Portucel, S.A.                                       | (6,905,799)  | (9,504,432)  |
| Secil - Companhia Geral de Cal e Cimento, S.A.       | (63,918,811) | (20,372,006) |
| Seinpar Investments, B.V.                            | (8,429,933)  | (8,655,804)  |
| Seinpart - Participações, SGPS, S.A.                 | 35,857,480   | 35,857,480   |
| Semapa Inversiones, S.L.                             | (36,764,962) | (36,764,962) |
| Seminv - Investimentos, SGPS, S.A.                   | 9,417,579    | 9,417,578    |
|                                                      | (71,517,929) | (31,951,021) |

The following movements were registered in the caption "Adjustments on Financial Assets" in the years ended 31 December 2015 and 2014: 

| Amounts in Euro                                                  | 31‐12‐2015   | 31‐12‐2014   |
|------------------------------------------------------------------|--------------|--------------|
| Opening balance                                                  | (31,951,021) | (38,718,974) |
| Investment grants recognised directly in the subsidiaries equity | 4,174,318    | (1,596,126)  |
| Actuarial gains / (losses)                                       | (10,039,686) | 104,968      |
| Fair value of derivative financial instruments                   | (1,748,381)  | (1,889,975)  |
| Translation reserve                                              | (30,761,809) | 11,016,541   |
| Treasury shares acquired by subsidiaries                         | -            | (863,378)    |
| Transfer to retained earnings                                    | (1,188,528)  | -            |
| Other	movements                                                  | (2,822)      | (4,077)      |
| Closing balance                                                  | (71,517,929) | (31,951,021) |

#### **Others changes in equity**

As of 31 December 2015 and 2014, this caption is detailed as follows: 

| Amounts in Euro                                | 31‐12‐2015  | 31‐12‐2014   |
|------------------------------------------------|-------------|--------------|
| Fair value of derivative financial instruments | (1,384,625) | (10,543,029) |
| Financial statements translation differences   | -           | (16,908,615) |
|                                                | (1,384,625) | (27,451,644) |

During 2015 and following the disposal of the Company's entire interest held in the subsidiary N.S.O.S.P.E. ‐ Empreendimentos e Participacoes S.A., the cumulative amount under the caption "Financial statements translation differences" as at the transaction date (Euro 19,331,364) was recycled to the income statement as a negative component of the calculated net loss. 

The negative figures of Euro 1,384,625 and Euro 10,543,029 shown under the caption "Fair value of derivative financial instruments" relates to the appropriation of the financial instruments fair value changes classified as hedging, which Mark to Market, in 31 December 2015 and 2014, was negative and amounted to Euro 2,282,117 and Euro 11,709,019 (Note 29), respectively. Additionally, the intrinsic value of the referred derivative financial instruments amounted to Euro 2,282,025 and Euro 6,553,475, respectively. All of these amounts are recorded according to the policy described on Note 3.7. 

## *25.* Interest‐bearing liabilities

As of 31 December 2015 and 2014, Company's net debt was as follows: 

| Amounts in Euro                          | 31/12/2015  | 31/12/2014  |
|------------------------------------------|-------------|-------------|
| Interest‐bearing liabilities             |             |             |
| Non-current                              | 272,068,365 | 538,605,710 |
| Current                                  | 357,896,166 | 341,139,510 |
|                                          | 629,964,531 | 879,745,220 |
| Cash and cash equivalents                |             |             |
| Cas h                                    | 4,426       | 4,300       |
| Short term bank deposits                 | 26,699      | 302,652     |
|                                          | 31,125      | 306,952     |
| Market value of shares held by the Group | 70,203      | 118,575,449 |
| Interest‐bearing net debt                | 629,863,203 | 760,862,819 |

#### *Bank credit facilities granted and not drawn*

At 31 December 2015 and 2014, bank credit facilities granted and not drawn amounted to Euro 355,539,416 and Euro 411,600,000 respectively. 

#### **Non‐current interest‐bearing liabilities**

As of 31 December 2015 and 2014, current and non‐current interest‐bearing liabilities were as follows: 

| Amounts in Euro                          | 31‐12‐2015  | 31‐12‐2014  |
|------------------------------------------|-------------|-------------|
| Non Current                              |             |             |
| Bonds loans                              | 230,000,000 | 406,087,000 |
| Commercial paper                         | 25,000,000  | 113,150,000 |
| Bank loans                               | 20,357,143  | 23,071,429  |
| Expenses with loans issuing              | (3,288,778) | (3,702,719) |
| Non‐current interest‐bearing liabilities | 272,068,365 | 538,605,710 |

#### *Bond Loans*

As of 31 December 2015 and 2014, current and non‐current bond loans were as follows: 

| Amounts in Euro    | 31‐12‐2015  | 31‐12‐2014  |
|--------------------|-------------|-------------|
| Bond loans         |             |             |
| Semapa 2006 / 2016 | 175,000,000 | 175,000,000 |
| Semapa 2006 / 2016 | 1,087,000   | 1,087,000   |
| Semapa 2012 / 2015 | -           | 300,000,000 |
| Semapa 2014 / 2019 | 150,000,000 | 150,000,000 |
| Semapa 2014 / 2020 | 80,000,000  | 80,000,000  |
|                    | 406,087,000 | 706,087,000 |

In April 2014 Semapa issued a bond loan amounting to Euro 150 million with maturity of 5 years (2019). On 31 December 2015 the unit market value of these bonds was Euro 103.01. 

In November 2014 Semapa issued a bond loan amounting to Euro 80 million with maturity of 6 years (2020) and repurchased Euro 48.9 million of "Obrigações Semapa 2006/2016 – 2ª emissão", which were first issued by Euro 50 million. On 31 December 2015 the unit market value of these bonds was Euro 102.14. 

In the first quarter of 2015, Semapa fully reimbursed the bond loan contracted in the year 2012, a totaling Euro 300,000,000, which was listed in Euronext Lisbon under the designation "Obrigações Semapa 2012/2015". 

Semapa has one bond loan amounting to Euro 175,000,000 with 10 years maturity. This last is listed in Euronext Lisbon under the designation "Obrigações Semapa 2006/2016". On 31 December 2015 the unit market value of these bonds was Euro 98.947. 

#### *Commercial Paper*

In 2015, Semapa contracted a commercial paper amounting Euro 25,000,000 with 4 years maturity, fully issued on 31 December 2015. 

In 2014, Semapa contracted a commercial paper program amounting to Euro 120 million for a period of four years. As at 31December 2015 no issues were in place. 

In 2013, Semapa contracted a commercial paper amounting Euro 100,000,000 with 7 years maturity. As at 31December 2015 no issues were in place. 

In 2008, Semapa and ETSA – Investimentos SGPS S.A. contracted a commercial paper program amounting Euro 70,000,000, for a period of 5 years (September 2020) increased to a maximum amount of Euro 100 million, after renegotiation. As at 31 December 2015 no issues were in place. 

In 2006, Semapa contracted a commercial paper amounting Euro 175,000,000 with 10 years maturity which amounts Euro 153,750,000 as at 31 December 2015. 

#### *Repayment terms of loans*

The repayment terms for the loans recorded in bonds, bank loans and other loans, non‐current, are detailed as follows: 

| Amounts in Euro   | 31‐12‐2015  | 31‐12‐2014  |
|-------------------|-------------|-------------|
| 1 to 2 years      | 2,857,143   | 181,801,286 |
| 2 to 3 years      | 17,500,000  | 96,007,143  |
| 3 to 4 years      | 175,000,000 | -           |
| 4 to 5 years      | 80,000,000  | 14,500,000  |
| More than 5 years | -           | 250,000,000 |
|                   | 275,357,143 | 542,308,429 |

#### **Current interest‐bearing debt**

As of 31 December 2015 and 2014, the current interest bearing debt was as follows: 

| Amounts in Euro                         | 31‐12‐2015  | 31‐12‐2014  |
|-----------------------------------------|-------------|-------------|
| Current                                 |             |             |
| Bond Loans                              | 176,087,000 | 300,000,000 |
| Commercial Paper                        | 153,750,000 | 34,750,000  |
| Bank loans                              | 6,174,869   | 5,714,286   |
| Expenses with loans issuing             | -           | (915,878)   |
| Interest‐bearing bank debt              | 336,011,869 | 339,548,408 |
| Shareholders short-term loans (Note 31) | 21,710,283  | 1,578,323   |
| Subsidiaries short-term loans (Note 31) | 174,014     | 12,779      |
| Other interest‐bearing debts            | 21,884,297  | 1,591,102   |
|                                         |             |             |
| Current interest‐bearing liabilities    | 357,896,166 | 341,139,510 |

*Liabilities assumed due to Operating Leases*

As of 31 December 2015 and 2014 debt's reimbursement plans for operating leases are as follows: 

| Amounts in Euro     | 31‐12‐2015 | 31‐12‐2014 |
|---------------------|------------|------------|
| Less than 1 year    | 142,788    | 98,988     |
| 1 to 2 years        | 132,806    | 75,681     |
| 2 to 3 years        | 106,273    | 65,699     |
| 3 to 4 years        | 69,846     | 44,445     |
| 4 to 5 years        | 13,376     | 15,151     |
| Total liabilities   | 465,089    | 299,964    |
| Costs for the year* | 880,060    | 818,840    |

*\* Property rentals included*

## *26.* Pensions and other post‐employment benefits

As at 31 December 2015 and 2014, the amount of liabilities presented in the balance sheet under the caption "Pension and other post‐employment benefits" (Euro 1,296,605 and 1,360,557 respectively), corresponds to the liability of Semapa to one beneficiary who chose not to join the deliberation held in December 2012. 

During the periods ended 31 December 2015 and 2014, changes in Company's liabilities were as follows: 

| Amounts in Euro                                      | 31‐12‐2015 | 31‐12‐2014 |
|------------------------------------------------------|------------|------------|
| Opening Balance                                      | 1,360,557  | 1,355,943  |
| Movements in the year:                               |            |            |
| Expenses recognised in the income statement (Note 8) | 58,228     | 58,228     |
| Actuarial losses / (gains)                           | -          | 68,567     |
| Pensions paid                                        | (122,180)  | (122,181)  |
| Liabilities at year end                              | 1,296,605  | 1,360,557  |

The actuarial studies were based on the following financial and demographic assumptions: 

|                                             | 31/12/2015              | 31/12/2014              |
|---------------------------------------------|-------------------------|-------------------------|
| Mortality table                             | TV 88/90                | TV 88/90                |
| Disability table                            | EKV 80                  | EKV 80                  |
| Pensions growth rate                        | 2.25%                   | 2.25%                   |
| Technical interest rate                     | 2.50%                   | 3.50%                   |
| Wage growth rate                            | 2.00%                   | 2.00%                   |
| Pensions reversability rate                 | 50%                     | 50%                     |
| Number of Semapa complement annual payments | 12                      | 12                      |
| Social Benefits formula                     | Decree-Law no. 187/2007 | Decree-Law no. 187/2009 |
|                                             | of 10 May               | of 10 May               |

## *27. Deferred Taxes*

In the year 2015, the changes in deferred taxes were as follows: 

|                                                            | As 1 January | Income statement | As of 31 December<br>2015 |  |
|------------------------------------------------------------|--------------|------------------|---------------------------|--|
| Amounts in Euro                                            | 2015         | Decrease         |                           |  |
| Temporary differences originating deferred tax assets      |              |                  |                           |  |
| Tax loss es carried forward                                | 116,482,452  | (116,482,452)    | -                         |  |
| Temporary differences originating deferred tax liabilities |              |                  |                           |  |
| Tax loss es carried forward - inter-group                  | (6,463,678)  | 1,788,764        | (4,674,914)               |  |
| Deferred tax assets                                        | 24,461,315   | (24,461,315)     | ‐                         |  |
| Deferred tax liabilities                                   | (1,357,372)  | 375,640          | (981,732)                 |  |

In the year 2014, the changes in deferred taxes were as follows: 

|                                                            | As 1 January | Income statement | As of 31 December |             |  |
|------------------------------------------------------------|--------------|------------------|-------------------|-------------|--|
| Amounts in Euro                                            | 2014         | Increase         | Decrease          | 2014        |  |
| Temporary differences originating deferred tax assets      |              |                  |                   |             |  |
| Tax losses carried forward                                 | 171,687,431  | -                | (55,204,979)      | 116,482,452 |  |
| Temporary differences originating deferred tax liabilities |              |                  |                   |             |  |
| Tax losses carried forward - inter-group                   | -            | (6,463,678)      | -                 | (6,463,678) |  |
|                                                            |              |                  |                   |             |  |
| Deferred tax assets                                        | 39,488,109   | ‐                | (15,026,794)      | 24,461,315  |  |
| Deferred tax liabilities                                   | ‐            | (1,357,372)      | ‐                 | (1,357,372) |  |

The Company recognises deferred tax assets when there is a reasonable likelihood that future taxable profits will be generated to which the existent tax losses can be offset, in accordance with the accounting policies described in note 3.8. 

The deferred tax liabilities refer to amounts that must be returned to the companies within the tax group, in the event of the recoverability of their tax losses under the Special Tax Regime for Group Companies (RETGS). 

## *28. Accounts Payable*

As of 31 December 2015 and 2014 the Accounts Payable comprises:

| Amounts in Euro                 | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------------|------------|------------|
| Related Parties (Note 31)       | 1,958      | 38,100     |
| Other Payable - national market | 62,297     | 69,855     |
| Other Payable - other markets   | 1,534      | 29,341     |
|                                 | 65,789     | 137,296    |

## 29. Payables and other current liabilities

As of 31 December 2015 and 2014 the caption "Payables and other current liabilities" comprises: 

| Amounts in Euro                                   | 31‐12‐2015 | 31‐12‐2014 |
|---------------------------------------------------|------------|------------|
| Related parties (Note 31)                         |            |            |
| Current Operations Accounts                       | 4,190,934  | 1,847,902  |
| Special Tax Regime for Group Companies (RETGS)    | 78,158     | 21,561,364 |
| Accounts payable - fixed assets suplliers         | 27,076     | 41,462     |
| Consultants and advisers                          | 49,396     | 101,565    |
| Derivative financial instruments (Note 24 and 30) | 2,282,117  | 11,709,019 |
| Other creditors                                   | 2,256,364  | 2,256,895  |
| Accrued expenses                                  | 7,350,050  | 8,345,955  |
|                                                   | 16,234,095 | 45,864,162 |

#### At 31 December 2015 and 2014, the caption "Accrued expenses" comprised:

| Amounts in Euro  | 31‐12‐2015 | 31‐12‐2014 |
|------------------|------------|------------|
| Accrued expenses |            |            |
| Payroll costs    | 4,657,749  | 781,651    |
| Interest payable | 1,921,269  | 7,160,193  |
| Others           | 771,032    | 404,111    |
|                  | 7,350,050  | 8,345,955  |

## 30. Derivative financial instruments

As of 31 December 2015 and 2014 details of the fair value of derivative financial instruments shown in the balance sheet were as follows: 

|                                 |          | Nominal     |                        | Fair Value  |              |
|---------------------------------|----------|-------------|------------------------|-------------|--------------|
| Amounts in Euro                 | Currency | Value       | Maturity               | 31/12/2015  | 31/12/2014   |
| Financial instruments ‐ hedging |          |             |                        |             |              |
| Interest rate collar            | EUR      | 175,000,000 | 20/Apr/2016            | (2,282,117) | (6,426,150)  |
| Interest rate collar            | EUR      | 25,000,000  | 30/Nov/2015            | -           | (607,580)    |
| Interest rate collar            | EUR      | 25,000,000  | 30/Nov/2015            | -           | (613,198)    |
| Currency Interest Rate Swap     | BRL      |             | 32,000,000 27/Mar/2017 | -           | (2,751,191)  |
| Currency Interest Rate Swap     | BRL      |             | 64,075,000 26/Mar/2017 | -           | (1,310,900)  |
| Ending balance                  |          |             |                        | (2,282,117) | (11,709,019) |
|                                 |          |             |                        |             |              |
| Total financial instruments     |          |             |                        | (2,282,117) | (11,709,019) |

During the year ended 31 December 2009 and in order to hedge interest rate risk of its bond loans, Semapa contracted three interest rate collar structures: (i) Euro 175,000,000 with Caixa BI; (ii) Euro 25,000,000 with BPI and (iii) Euro 25,000,000 with NB. These instruments allow Semapa to establish a minimum and maximum rate to cash outflows related to the above mentioned loans. During 2015 Semapa repaid the two Collars amounting to Euro 25,000,000 each, in the maturity of the instruments. 

In 2012 the Brazilian subsidiary N.S.O.S.P.E. ‐ Empreendimentos e Participações S.A. held a non‐convertible bond issue, remunerated at a variable rate in the amount of 128.1 million reais, with maturity on 26 March 2017, which was repaid in advance in September 2015. In order to manage currency risk and interest rate inherent to the bond loan, Semapa negotiated two Currency Interest Rate Swaps (cash flow coverage), which were also settled as a result of the debt extinction that was linked to them. The cost recognised in the income statement for these two instruments was Euro 7,273,783 (Note 10), including Euro 1,615,843 for the anticipated settle. 

According to NCRF 27, these instruments are recorded in the financial statement as described in Note 3.7. 

Fair value of derivative financial instruments is included under the caption "Payables and other current liabilities" (Note 29), if negative, and in the caption "Receivable and other current assets" (Note 19), if positive. 

Changes in fair value of derivative financial instruments for the years 2015 and 2014 were as follows: 

|                                                         | Changes in fair |              |
|---------------------------------------------------------|-----------------|--------------|
|                                                         | value           | Total        |
| Amounts in Euro                                         | (Hedging)       |              |
| As of 1 January 2014                                    | (17,910,561)    | (17,910,561) |
| Maturity/settlement                                     | 4,537,940       | 4,537,940    |
| Change in fair value through profit and los s (Note 10) | (68,683)        | (68,683)     |
| Reclassification to the income statement (Note 13)      | (4,613,914)     | (4,613,914)  |
| Change in fair value recognised in equity               | 6,346,199       | 6,346,199    |
| As of 31 December 2014                                  | (11,709,019)    | (11,709,019) |
| Maturity/settlement                                     | 14,346,864      | 14,346,864   |
| Change in fair value through profit and los s (Note 10) | (7,130,922)     | (7,130,922)  |
| Reclassification to the income statement (Note 13)      | (6,947,444)     | (6,947,444)  |
| Change in fair value recognised in equity               | 9,158,404       | 9,158,404    |
| As of 31 December 2015                                  | (2,282,117)     | (2,282,117)  |

## *31.* Balances and transactions with related parties

As at 31 December 2015, balances with related parties were as follows: 

|                                                                               | Assets              |            |                 |                  | Liabilities |           |                                     |
|-------------------------------------------------------------------------------|---------------------|------------|-----------------|------------------|-------------|-----------|-------------------------------------|
|                                                                               | RETGS               |            | Other financial |                  |             | RETGS     | Other                               |
|                                                                               | Accounts Receivable | Other      | assets          | Accounts Payable | Loans       |           | Acounts Payable current liabilities |
| Amounts in Euro                                                               | (Note 19)           | (Note 19)  | (Note 22)       | (Note 28)        | (Note 25)   | (Note 29) | (Note 29)                           |
| Shareholders                                                                  |                     |            |                 |                  |             |           |                                     |
| Cimigest, SGPS, S.A.                                                          | -                   | -          | -               | -                | 2,754,259   | -         | -                                   |
| Longapar, SGPS, S.A.                                                          | -                   | -          | -               | -                | 16,890,763  | -         | -                                   |
| OEM - Organização de Empresas, SGPS, S.A.                                     | -                   | -          | -               | -                | 2,065,261   | -         | -                                   |
|                                                                               | ‐                   | ‐          | ‐               | ‐                | 21,710,283  | ‐         | ‐                                   |
| Subsidiaries                                                                  |                     |            |                 |                  |             |           |                                     |
| Abapor - Comércio e Indústria de Carnes, S.A.                                 | 146,850             | 67,830     | -               | -                | -           | -         | -                                   |
| About The Future - Empresa Produtora de Papel, S.A.                           | -                   | 32,871     | -               | -                | -           | -         | -                                   |
| Aboutbalance, SGPS, S.A.                                                      | -                   | 500        | -               | -                | -           | 500       | -                                   |
| Arboser - Serviços Agro-Indus triais , S.A.                                   | -                   | -          | -               | -                | -           | 4,989     | 52,234                              |
| Argibetão - Soc. de Novos Prod. de Argila e Betão, S.A.                       | 1,497               | 270        |                 | -                | -           | -         | -                                   |
| Biological - Gestão de Resíduos Industriais, Lda.                             | 2,293               | 380        | -               | -                | -           | -         | -                                   |
| Britobetão - Central de Betão, Lda.                                           | 20,987              | -          | -               | -                | -           | -         | 27                                  |
| CelCacia - Celulose de Cacia, S.A.                                            | -                   | 138,436    | -               | -                | -           | -         | -                                   |
| CelSet - Celulose de Setúbal, S.A.                                            | -                   | 484        | -               | -                | -           | 484       | -                                   |
|                                                                               |                     |            |                 |                  |             |           |                                     |
| Cimentos Cos ta Verde - Comércio de Cimentos, S.A.                            | -                   | 19,211     | -               | -                | -           | 92        | -                                   |
| Ciminpart - Inves timentos e Participações, SGPS, S.A.                        | 572,014             | 30,248,720 | -               | -                | -           | -         | -                                   |
| CMP - Cimentos Maceira e Pataias, S.A.                                        | 42,389              | 50,035     | -               | -                | -           | -         | -                                   |
| ETSA Investimentos, SGPS, S.A.                                                | 27,882              | 1,421,453  | 5,151,623       | -                | -           | -         | 3,669                               |
| Ets a Log, S.A.                                                               | 36,830              | 21,001     | -               | -                | -           | -         | -                                   |
| Headbox - Operação e Controlo Industrial, S.A.                                | -                   | 31,059     | -               | -                | -           | -         | -                                   |
| Ins piredplace, S.A.                                                          | -                   | -          | -               | -                | 43,293      | 1,011     | 337                                 |
| ITS - Indústria Transformadora de Subprodutos, S.A.                           | 144,922             | 935        | -               | -                | -           | -         | -                                   |
| Lus oinertes , S.A.                                                           | 5,274               | 3,775      | -               | -                | -           | -         | -                                   |
| Portucel, S.A.                                                                | -                   | 547,594    | -               | -                | -           | -         | -                                   |
| PortucelSoporcel Floresta, SGPS, S.A.                                         | -                   | 500        | -               | -                | -           | 500       | -                                   |
| PortucelSoporcel Florestal - Sociedade de Desenvolvimento Agro-Florestal, S.A | -                   | 44,786     | -               | -                | -           | -         | -                                   |
| PortucelSoporcel Pulp, SGPS, S.A.                                             | -                   | 500        | -               | -                | -           | 500       | -                                   |
| Prescor Produção de Escórias Moídas, Lda.                                     | -                   | -          | -               | -                | -           | 527       | 22                                  |
| \ Reficomb-Refinação e Comerc. De Combustiveis Derivados de Res iduos, S.A.   | -                   | -          | -               | -                | -           | 1,015     | -                                   |
| Sebol - Comércio e Indústria de Sebo, S.A.                                    | -                   | 9,539      | -               | -                | -           | 1,030     | -                                   |
| Secil - Britas, S.A.                                                          | 6,716               | -          | -               | -                | -           | -         | 125                                 |
| Secil - Companhia Geral de Cal e Cimento, S.A.                                | 36,240              | 972,015    | -               | -                | -           | -         | -                                   |
| Secil Martingança - Aglomerantes e Novos Materiais para a Construção, S.A.    | 3,139               | 4,150      | -               | -                | -           | -         | -                                   |
| Secil, Betões e Inertes , S.G.P.S., S.A.                                      | -                   | -          | -               | -                | -           | 1,051     | 17                                  |
| Seinpart - Participações , SGPS, S.A.                                         | -                   | 60         | -               | -                | 10,553      | 1,000     | -                                   |
| Semapa Inversiones , S.L.                                                     | -                   | -          | -               | -                | 120,168     | -         | -                                   |
| Seminv, Inves timentos - SGPS, S.A.                                           | -                   | -          | -               | -                | -           | 45        | 1,959,565                           |
| Serife - Sociedade de Es tudos e Realizações Industriais e de Fornecimento de | -                   | -          | -               | -                | -           | 1,000     | -                                   |
| Sociedade de Vinhos da Herdade de Es pirra - Produção e Comercialização de    | -                   | 610        | -               | -                | -           | 610       | -                                   |
| Soporcel - Sociedade Portuguesa de Papel, S.A.                                | -                   | 1,427,235  | -               | -                | -           | -         | -                                   |
| Soporcel Pulp - Sociedade Portugues a de Celulose, S.A.                       | -                   | -          | -               | -                | -           | 35,000    | 1,830,683                           |
| Unibetão - Indús trias de Betão Preparado, S.A.                               | -                   | -          | -               | -                | -           | 27,791    | 2,367                               |
| Uniconcreto - Betão Pronto, S.A.                                              | -                   | 500        | -               | -                | -           | 1,013     | -                                   |
| Viveiros Aliança - Empres a Produtora de Plantas , S.A.                       | -                   | -          | -               | -                | -           | -         | 341,888                             |
|                                                                               | 1,047,033           | 35,044,449 | 5,151,623       |                  | 174,014     | 78,158    | 4,190,934                           |
| Other related parties                                                         |                     |            |                 |                  |             |           |                                     |
| Hotel Ritz, S.A.                                                              | -                   | -          | -               | 1,958            | -           | -         | -                                   |
| YD Invisible, S.A.                                                            | -                   | 1,814      | 34,851          | -                | -           | -         | -                                   |
|                                                                               | ‐                   | 1,814      | 34,851          | 1,958            | ‐           | ‐         | ‐                                   |
|                                                                               |                     |            |                 |                  |             |           |                                     |
| Total                                                                         | 1,047,033           | 35,046,263 | 5,186,474       | 1,958            | 21,884,297  | 78,158    | 4,190,934                           |

As at 31 December 2015, accounts receivable and payable to subsidiaries included in the tax group, related to RETGS operations, are as follows: 

|                                      | 31‐12‐2015 |          |  |
|--------------------------------------|------------|----------|--|
| Amounts in Euro                      | Debt       | Credit   |  |
| RETGS                                |            |          |  |
| Corporate Income Tax of subsidiaries | 1,207,624  | (57,855) |  |
| Receivables Corporate Income Tax     | (21,232)   | 37,809   |  |
| Withholding tax                      | (44,517)   | 2,648    |  |
| Prior year corporate income tax      | (94,842)   | 95,556   |  |
|                                      | 1,047,033  | 78,158   |  |

#### As at 31 December 2014, balances with related parties were as follows:

|                                                                                                                     | Assets<br>Liabilities            |                    |                     |                               |                    |                                                  |            |
|---------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------|---------------------|-------------------------------|--------------------|--------------------------------------------------|------------|
|                                                                                                                     | RETGS                            |                    | Other financial     |                               |                    | RETGS                                            | Other      |
| Amounts	in	Euro                                                                                                     | Accounts Receivable<br>(Note 19) | Other<br>(Note 19) | assets<br>(Note 22) | Accounts Payable<br>(Note 28) | Loans<br>(Note 25) | Acounts Payable current liabilities<br>(Note 29) | (Note 29)  |
|                                                                                                                     |                                  |                    |                     |                               |                    |                                                  |            |
| Shareholders<br>Cimigest, SGPS, S.A.                                                                                | -                                | 2,820              | -                   | 14,674                        | -                  | -                                                | -          |
| OEM - Organizaçã o de Empresa s, SGPS, S.A.                                                                         | -                                | -                  | -                   | -                             | 1,578,323          | -                                                | -          |
|                                                                                                                     | ‐                                | 2,820              | ‐                   | 14,674                        | 1,578,323          | ‐                                                | ‐          |
| Subsidiaries                                                                                                        |                                  |                    |                     |                               |                    |                                                  |            |
| Abapor - Comércio e Indústria de Carnes , S.A.                                                                      | 6,948                            | -                  | -                   | -                             | -                  | -                                                | -          |
| About The Future - Empresa Produtora de Papel, S.A.                                                                 | 3,720,392                        | -                  | -                   | -                             | -                  | -                                                | -          |
| Aboutba la nce, SGPS, S.A.                                                                                          | -                                | 1,480              | 5,000               | -                             | -                  | 1,541                                            | -          |
| Arbos er - Serviços Agro-Industriais, S.A.                                                                          | 636                              | -                  | -                   | -                             | -                  | -                                                | -          |
| Argibetã o - Soc. de Novos Prod. de Argila e Betão, S.A.                                                            | 2,420                            |                    |                     | -                             | -                  | -                                                | -          |
| Atlantic Fores ts - Comercio de Madeiras, S.A.                                                                      | -                                | -                  | -                   | -                             | -                  | 7,176                                            | -          |
| Biological - Ges tão de Resíduos Indus tria is, Lda.                                                                | 358                              | -                  | -                   | -                             | -                  | -                                                | -          |
| Britobetão - Central de Betão, Lda.<br>CelCacia - Celulos e de Cacia , S.A.                                         | 5,237<br>1,635,855               | -<br>-             | -<br>-              | -<br>-                        | -<br>-             | -<br>-                                           | -<br>-     |
| CelSet - Celulose de Setúbal, S.A.                                                                                  | -                                | -                  | -                   | -                             | -                  | 1,000                                            | -          |
| Cimentos Costa Verde - Comércio de Cimentos, S.A.                                                                   | -                                | -                  | -                   | -                             | -                  | 61,956                                           | -          |
| Ciminpart - Investimentos e Participações , SGPS, S.A.                                                              | -                                | -                  | -                   | -                             | -                  | 12,598                                           | -          |
| CMP - Cimentos Maceira e Pataias, S.A.                                                                              | 60,966                           | -                  | -                   | -                             | -                  | -                                                | -          |
| CountryTarget, SGPS, S.A.                                                                                           | -                                | -                  | -                   | -                             | -                  | 1,163                                            | -          |
| EMA XXI - Eng. e Manutenção Indus trial Século XXI, S.A.                                                            | -                                | -                  | -                   | -                             | -                  | 30,989                                           | -          |
| Empremédia - Corretores de Seguros, S.A.                                                                            | 52,802                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Enerforest - Empresa de Biomassa para Energia, S.A.                                                                 | -                                | -                  | -                   | -                             | -                  | 6,285                                            | -          |
| Enerpulp - Cogeração Energética de Pasta, S.A.                                                                      | -                                | -                  | -                   | -                             | -                  | 93,573                                           | -          |
| ETSA Inves timentos, SGPS, S.A.<br>Ets a Log, S.A.                                                                  | 1,109,788<br>22,986              | 1,548,494<br>4,701 | 8,151,623<br>-      | -<br>-                        | -<br>-             | -<br>-                                           | 3,669<br>- |
| Eucaliptus land - Soc. de Gestão de Património Flores tal,                                                          | 116,180                          | -                  | -                   | -                             | -                  | -                                                | -          |
| Headbox - Operação e Controlo Industrial, S.A.                                                                      | -                                | -                  | -                   | -                             | -                  | 47,620                                           | -          |
| Inspiredplace, S.A.                                                                                                 | -                                | 1,480              | -                   | -                             | -                  | 1,656                                            | -          |
| Interholding Investments , B.V.                                                                                     | -                                | 644                | 43,000              | -                             | -                  | -                                                | -          |
| ITS - Indús tria Transformadora de Subprodutos, S.A.                                                                | 7,206                            | 2,675              | -                   | -                             | -                  | -                                                | -          |
| Lusoinertes , S.A.                                                                                                  | -                                | -                  | -                   | -                             | -                  | 294,030                                          | -          |
| Portucel Florestal - Empresa de Des envolvimento Agro-Fl                                                            | 10,796                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Portucel Papel Setúbal, S.A.                                                                                        | 4,745,892                        | -                  | -                   | -                             | -                  | -                                                | -          |
| Portucel, S.A.<br>PortucelSoporcel Cogeração de Energia, S.A.                                                       | -<br>-                           | 1,956<br>-         | -<br>-              | -<br>-                        | -<br>-             | 673,698<br>148,589                               | -<br>-     |
| PortucelSoporcel Energia, SGPS, S.A.                                                                                | -                                | -                  | -                   | -                             | -                  | 3,589                                            | -          |
| PortucelSoporcel Fine Paper, S.A.                                                                                   | 2,941,584                        | -                  | -                   | -                             | -                  | -                                                | -          |
| PortucelSoporcel Florestal - Sociedade de Desenvolvime                                                              | 1,286,496                        | -                  | -                   | -                             | -                  | -                                                | -          |
| PortucelSoporcel Internacional, SGPS, S.A.                                                                          | -                                | -                  | -                   | -                             | -                  | 484,857                                          | -          |
| PortucelSoporcel Lus a - Sociedade Unipess oal, Lda.                                                                | -                                | -                  | -                   | -                             | -                  | 19,512                                           | -          |
| PortucelSoporcel Papel SGPS, S.A.                                                                                   | -                                | -                  | -                   | -                             | -                  | 208                                              | -          |
| PortucelSoporcel Parques Industriais , S.A.                                                                         | 428,519                          | -                  | -                   | -                             | -                  | -                                                | -          |
| PortucelSoporcel Participações , SGPS, S.A.                                                                         | -                                | -                  | -                   | -                             | -                  | 480,324                                          | -          |
| PortucelSoporcel Pulp, SGPS, S.A.                                                                                   | -                                | -                  | -                   | -                             | -                  | 1,001                                            | -          |
| PortucelSoporcel Serviços Partilhados , S.A.                                                                        | 10,893                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Pres cor Produção de Escórias Moída s, Lda.<br>Reficomb-Refinação e Comerc. De Combustiveis Derivado                | -<br>-                           | -<br>-             | -<br>-              | -<br>-                        | -<br>-             | 5,807<br>1,000                                   | -<br>-     |
| Sebol - Comércio e Indústria de Sebo, S.A.                                                                          | 14,228                           | 15                 | -                   | -                             | -                  | -                                                | -          |
| Secil - Britas , S.A.                                                                                               | 11,944                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Secil - Companhia Geral de Cal e Cimento, S.A.                                                                      | 137,327                          | 4,842,295          | -                   | -                             | -                  | -                                                | -          |
| Secil Martingança - Aglomerantes e Novos Materiais para                                                             | 15,162                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Secil, Betões e Inertes, S.G.P.S., S.A.                                                                             | -                                | -                  | -                   | -                             | -                  | 211                                              | -          |
| Seinpart - Participações, SGPS, S.A.                                                                                | -                                | 1,718              | -                   | -                             | 12,779             | 1,000                                            | -          |
| Seminv, Investimentos - SGPS, S.A.                                                                                  | -                                | 1,688              | -                   | -                             | -                  | 114,952                                          | 1,844,233  |
| Sociedade de Vinhos da Herda de de Espirra - Produção e                                                             | -                                | -                  | -                   | -                             | -                  | 771                                              | -          |
| Solenreco - Produção e Comercialização de Combus tíveis                                                             | -                                | 1,017              | -                   | -                             | -                  | 1,017                                            | -          |
| Soporcel - Sociedade Portugues a de Papel, S.A.                                                                     | -                                | 2,571,183          | -                   | -                             | -                  | 18,460,706                                       | -          |
| Soporcel Pulp - Sociedade Portuguesa de Celulose, S.A.<br>SPCG - Socieda de Portuguesa de Co-Geração Eléctrica, S.A | 78,156<br>-                      | -<br>-             | -<br>-              | -<br>-                        | -<br>-             | -<br>587,484                                     | -<br>-     |
| Unibetão - Indústrias de Betão Preparado, S.A.                                                                      | 60,457                           | -                  | -                   | -                             | -                  | -                                                | -          |
| Uniconcreto - Betão Pronto, S.A.                                                                                    | -                                | -                  | -                   | -                             | -                  | 2,000                                            | -          |
| Viveiros Aliança - Empres a Produtora de Plantas, S.A.                                                              | -                                | -                  | -                   | -                             | -                  | 15,051                                           | -          |
|                                                                                                                     | 16,483,228                       | 8,979,346          | 8,199,623           |                               | 12,779             | 21,561,364                                       | 1,847,902  |
| Other related parties                                                                                               |                                  |                    |                     |                               |                    |                                                  |            |
| Cimilonga - Imobiliária, S.A.                                                                                       | -                                | -                  | -                   | 17,531                        | -                  | -                                                | -          |
| Hotel Ritz, S.A.                                                                                                    | -                                | -                  | -                   | 5,895                         | -                  | -                                                | -          |
| YD Invisible, S.A.                                                                                                  | -                                | 1,814              | 34,851              | -                             | -                  | -                                                | -          |
|                                                                                                                     | ‐                                | 1,814              | 34,851              | 23,426                        | ‐                  | ‐                                                | ‐          |
|                                                                                                                     |                                  |                    |                     |                               |                    |                                                  |            |
| Total                                                                                                               | 16,483,228                       | 8,983,980          | 8,234,474           | 38,100                        | 1,591,102          | 21,561,364                                       | 1,847,902  |

As at 31 December 2014, accounts receivable and payable to subsidiaries included in the tax group, related to RETGS operations, are as follows: 

|                                      | 31‐12‐2014   |             |
|--------------------------------------|--------------|-------------|
| Amounts in Euro                      | Debt         | Credit      |
| RETGS                                |              |             |
| Corporate Income Tax of subsidiaries | 26,933,053   | (9,846,425) |
| Receivables Corporate Income Tax     | (11,174,312) | 30,572,568  |
| Withholding tax                      | (367,676)    | 715,428     |
| Prior year corporate income tax      | 1,092,163    | 119,793     |
|                                      | 16,483,228   | 21,561,364  |

During the year ended 31 December 2015, transactions with related parties were as follows: 

|                                                        | Sales<br>and services | Supplementary | Interest and | Financial | Acquisition | Sales         |
|--------------------------------------------------------|-----------------------|---------------|--------------|-----------|-------------|---------------|
|                                                        | rendered              | income        | other income | costs     | of goods    | of investment |
| Amounts in Euro                                        | (Note 5)              |               | (Note 13)    | (Note 13) |             |               |
| Shareholders                                           |                       |               |              |           |             |               |
| Cimigest, SGPS, S.A.                                   | -                     | 1,798         | -            | (878)     | (107,740)   | -             |
| Cimo - Ges tão de Participações, SGPS, S.A.            | -                     | -             | -            | (3,125)   | -           | -             |
| Longapar, SGPS, S.A.                                   | -                     | -             | -            | (1,683)   | -           | -             |
| OEM - Organização de Empresas, SGPS, S.A.              | -                     | -             | -            | (8,584)   | -           | -             |
| Sodim, SGPS, S.A.                                      | -                     | 120           | -            | -         | -           | -             |
|                                                        | ‐                     | 1,918         | ‐            | (14,270)  | (107,740)   | ‐             |
| Subsidiaries                                           |                       |               |              |           |             |               |
| Abapor - Comércio e Indústria de Carnes , S.A.         | -                     | -             | 47           | -         | -           | -             |
| Biological - Gestão de Resíduos Industriais , Lda.     | -                     | -             | 4            | -         | -           | -             |
| Ciminpart - Inves timentos e Participações , SGPS, S.A | -                     | -             | 2,012,337    | -         | -           | 93,174,834    |
| ETSA Inves timentos , SGPS, S.A.                       | 251,726               | -             | 131,941      | -         | -           | -             |
| Etsa Log, S.A.                                         | -                     | -             | 163          | -         | -           | -             |
| Inspiredplace, S.A.                                    | -                     | -             | -            | (293)     | -           | -             |
| ITS - Indús tria Transformadora de Subprodutos, S.A    | -                     | -             | -            | (84)      | -           | -             |
| Portucel, S.A.                                         | -                     | 19,950        | -            | -         | -           | 43,395        |
| Secil - Companhia Geral de Cal e Cimento, S.A.         | 2,963,570             | 6,609         | 375          | -         | -           | -             |
| Seinpar Investments, B.V.                              | -                     | -             | 89           | -         | -           | -             |
| Seinpart - Participações, SGPS, S.A.                   | -                     | -             | -            | (274)     | -           | -             |
| Semapa Invers iones, S.L.                              | -                     | -             | -            | (168)     | -           | -             |
| Soporcel - Soc. Portuguesa de Papel, S.A.              | 7,625,394             | 92,240        | -            | -         | -           | -             |
|                                                        | 10,840,690            | 118,799       | 2,144,956    | (819)     | ‐           | 93,218,229    |
| Other                                                  |                       |               |              |           |             |               |
| Cimilonga - Imobiliária, S.A.                          | -                     | 180           | -            | -         | (816,791)   | -             |
| Hotel Ritz, S.A.                                       | -                     | -             | -            | -         | (30,563)    | -             |
|                                                        | ‐                     | 180           | ‐            | ‐         | (847,354)   | ‐             |
| Total                                                  | 10,840,690            | 120,897       | 2,144,956    | (15,089)  | (955,094)   | 93,218,229    |
|                                                        |                       |               |              |           |             |               |

| Amounts	in	Euro                                | Sales<br>rendered<br>(Note 5) | and services Supplementary Interest and<br>income | other income<br>(Note 13) | Financial<br>costs<br>(Note 13) | Acquisition<br>of goods | Sales<br>of investment |
|------------------------------------------------|-------------------------------|---------------------------------------------------|---------------------------|---------------------------------|-------------------------|------------------------|
| Shareholders                                   |                               |                                                   |                           |                                 |                         |                        |
| Cimigest, SGPS, S.A.                           | -                             | 157                                               | -                         | (82,006)                        | (107,740)               | -                      |
| Cimo - Gestão de Participações, SGPS, S.A.     | -                             | -                                                 | -                         | (8,260)                         | -                       | -                      |
| Longapar, SGPS, S.A.                           | -                             | -                                                 | -                         | (210,687)                       | -                       | -                      |
| OEM - Organização de Empresas, SGPS, S.A.      | -                             | -                                                 | -                         | (46,228)                        | -                       | -                      |
|                                                | ‐                             | 157                                               | ‐                         | (347,181)                       | (107,740)               | ‐                      |
| Subsidiaries                                   |                               |                                                   |                           |                                 |                         |                        |
| ETSA Investimentos, SGPS, S.A.                 | 327,212                       | 120                                               | 260,104                   | -                               | -                       | -                      |
| Great Earth - Projectos, S.A.                  | -                             | -                                                 | -                         | -                               | -                       | (3,202)                |
| Portucel, S.A.                                 | 7,443                         | 13,602                                            | -                         | -                               | -                       | -                      |
| Seinpart - Participações, SGPS, S.A.           | -                             | -                                                 | -                         | (495)                           | -                       | -                      |
| Semapa Inversiones, S.L.                       | -                             | -                                                 | 223                       | -                               | -                       | -                      |
| Soporcel - Soc. Portuguesa de Papel, S.A.      | 9,036,951                     | 103,709                                           | -                         | -                               | -                       | -                      |
| Secil - Companhia Geral de Cal e Cimento, S.A. | 3,966,115                     | -                                                 | -                         | (506)                           | -                       | -                      |
|                                                | 13,337,721                    | 117,431                                           | 260,327                   | (1,001)                         | ‐                       | (3,202)                |
| Other                                          |                               |                                                   |                           |                                 |                         |                        |
| Cimilonga - Imobiliária, S.A.                  | -                             | -                                                 | -                         | -                               | (810,755)               | -                      |
| Hotel Ritz, S.A.                               | -                             | -                                                 | -                         | -                               | (39,220)                | -                      |
| YD Invisible, S.A.                             | -                             | -                                                 | 1,162                     | -                               | -                       | -                      |
|                                                | ‐                             | ‐                                                 | 1,162                     | ‐                               | (849,975)               | ‐                      |
| Total                                          | 13,337,721                    | 117,588                                           | 261,489                   | (348,182)                       | (957,715)               | (3,202)                |

During the year ended 31 December 2014, transactions with related parties were as follows:

Remunerations to member of the corporate bodies, including management bonuses accrual, for the years ended 31 December 2015 and 2014 were as follows: 

| Amounts	in	Euro                                              | 2015      | 2014      |
|--------------------------------------------------------------|-----------|-----------|
| Board of directors                                           |           |           |
| Remuneration                                                 | 2,405,316 | 1,902,904 |
| Balance bonuses reclassified to personnel expenses (Note 24) | 2,377,075 | -         |
| Management premium for the previous year                     | 200,000   | 500,000   |
| Management premium estimate for the year                     | 3,650,000 | -         |
| Governance Board and other corporate entities                | 83,931    | 52,471    |
| Impact on Net profit (Note 8)                                | 8,716,322 | 2,455,375 |

In 2015 the amount of Euro 2,377,075 of Profit‐sharing bonuses reclassified to Payroll costs (Note 8) corresponds to the profit‐sharing deliberated at the Annual Genral Meeting of the 2014 financial statements approval that took place on 30 April 2015 (Note 24). 

Additionally, the number of members of the Board increased, namely the new CEO nomination in the beginning of July 2015. 

## *32. Audit Fees*

In the years ended 31 December 2015 and 2014, expenses with statutory audit and audit services, comprised: 

| Amounts in Euro                       | 2015   | %    | 2014   | %    |
|---------------------------------------|--------|------|--------|------|
| Statutory auditors services           | 34,765 | 100% | 94,765 | 98%  |
| Other reliability assurance s ervices | -      | -    | 1,500  | 2%   |
| Total audit services                  | 34,765 | 100% | 96,265 | 100% |

The Board of Directors believes there are adequate procedures safeguarding the independence of auditors through the audit committee process analysis of the work proposed and careful definition of the work to be performed by the auditors. 

## *33. Commitments*

During the year ended 31 December 2015 and 2014, Semapa presented guarantees to Tax Authorities and Customs amounting to Euro 1,124,184 and Euro 780,998, intended to endorse the suspension of enforcement proceedings installed by the additional VAT settlement, for fiscal years 2012 e 2011, respectively. 

N.S.O.S.P.E. (Brazilian subsidiary owned by Semapa) issued a bond loan (in the form of debentures), amounting to Brazilian Real 128,100,000, having Semapa assumed as commitments and guarantees related to that issue, a pledge of shares representing the total share capital of NSOSPE, equity support agreement and a promissory note. During 2015, N.S.O.S.P.E. anticipated the repayment of the bond loan, thus the commitments and guarantees ceased on that date. 

## *34.* Shareholders equity and net profit reconciliation

The reconciliation between the consolidated net profit and individual net profit for the yearsof 2015 and 2014 is presented as follows: 

| Amounts in Euro                                                                  | 31/12/2015    | 31/12/2014  |
|----------------------------------------------------------------------------------|---------------|-------------|
| Net profit for the year ‐ SNC                                                    | 235,960,575   | 112,508,253 |
| Fair Value difference in subsidiaries and non-controlling interests acquisitions | (159,668,162) | -           |
| Hedging derivative financial instruments treatment                               | 5,237,629     | 289,629     |
| Other                                                                            | -             | (36)        |
| Net profit for the year ‐ IFRS                                                   | 81,530,042    | 112,797,846 |

The reconciliation between the consolidated and individual shareholders' equity as at 31 December 2015 and 2014 presents itself as follows: 

| Amounts in Euro                                                                  | 31‐12‐2015   | 31‐12‐2014    |
|----------------------------------------------------------------------------------|--------------|---------------|
| Total Equity ‐ Portuguese GAAP ‐ SNC                                             | 838,806,193  | 1,012,769,016 |
| Government grants directly recognised in Equity                                  | (39,340,340) | (19,606,311)  |
| Fair Value difference in subsidiaries and non-controlling interests acquisitions | (83,128,248) | (92,764,266)  |
| Net profit for the year ‐ IFRS                                                   | 716,337,605  | 900,398,439   |

The amount of Euro 159,668,162 shown in the reconciliation of net profit for the year comprises the gain due to Portucel's interest held reduction (Euro 161,266,107) as result of the Public Exchange Offer described in Note 23. This amount, was booked in the consolidated financial statements under the caption "Retained earnings" since it qualifies as a transaction with non‐controlled interests, in accordance with the international accounting standards (IFRS) . However, in Semapa's separate financial statements, the gain was booked in the net profit for the year, in accordance with the Portuguese GAAP. 

## *35. Subsequent events*

During the period between 1 January 2016 and 2 March 2016, Semapa ‐ Sociedade de Investimento e Gestão, SGPS, S.A. acquired 374,999 treasury shares, corresponding to 0.466% of its share capital. 

## *36. Note added for translation*

The accompanying financial statements are a translation of financial statements originally issued in Portuguese. In the event of any discrepancies the Portuguese version prevails. 

Paulo Jorge Morais Costa The Accountant 

#### **BOARD OF DIRECTORS**

#### **Chairman:**

Pedro Mendonça de Queiroz Pereira 

#### **Members:**

João Nuno de Sottomayor Pinto de Castello Branco José Miguel Pereira Gens Paredes Paulo Miguel Garcês Ventura Ricardo Miguel dos Santos Pacheco Pires António Pedro de Carvalho Viana Baptista Carlos Eduarod Coelho Alves Francisco José Melo e Castro Guedes Manuel Custódio de Oliveira Vitor Manuel Galvão Rocha Novais Gonçalves Vitor Paulo Paranhos Pereira 

## PART 6

STATUTORY AUDITOR CERTIFICATE AND REPORT OF THE AUDIT BOARD ON THE SEPARATE ACCOUNTS

## *Audit Report for Statutory and Stock Exchange Regulatory Purposes on the Individual Financial Information*

#### *(Free translation from the original in Portuguese)*

#### *Introduction*

1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached financial statements of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., comprising the balance sheet as at 31 December 2015 (which shows total assets of Euro 1,492,804,467 and total shareholder's equity of Euro 829,396,126 including a net profit of Euro 235,960,575), the statement of income by nature, the statement of changes in equity and the statement of cash flows for the year then ended, and the corresponding notes to the accounts.

#### *Responsibilities*

2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the financial statements which present fairly, in all material respects, the financial position of the Company, the results of its operations, the changes in equity and the cash flows; (ii) to prepare historic financial information in accordance with generally accepted accounting principles in Portugal and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain an appropriate system of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company.

3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.

#### *Scope*

4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Accordingly, our audit included: (i) verification, on a sample basis, of the evidence supporting the amounts and disclosures in the financial statements, and assessing the reasonableness of the estimates, based on the judgements and criteria of the Board of Directors used in the preparation of the financial statements; (ii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iii) assessing the applicability of the going concern basis of accounting; (iv) assessing the overall presentation of the financial statements; and (v) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.

5 Our audit also covered the verification that the information included in the Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.

*PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc.com.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485*

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. 6 We believe that our audit provides a reasonable basis for our opinion.

#### *Opinion*

7 In our opinion, the financial statements referred to above, present fairly in all material respects, the financial position of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A. as at 31 December 2015, the results of its operations, the changes in equity and the cash flows for the year then ended, in accordance with generally accepted accounting principles in Portugal and the information included is complete, true, up-to-date, clear, objective and lawful.

#### *Report on other legal requirements*

8 It is also our opinion that the information included in the Directors' Report is consistent with the financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.

18 March 2016

PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda Registered in the Comissão do Mercado de Valores Mobiliários with no. 20161485 represented by:

José Pereira Alves, R.O.C.

#### **(This is a translation, not to be signed)**

### **SEMAPA – Sociedade de Investimento e Gestão, SGPS, S.A. Report and Opinion of the Audit Board Separate Accounts**

### **Year 2015**

#### **Shareholders,**

- 1. As laid down by law, as established in the articles of association and in carrying out the mandate entrusted to us, we hereby deliver our report on the audit activities performed in 2015 and issue our opinion on the Management Report and the Separate Financial Statements submitted by the Board of Directors of Semapa – Sociedade de Investimento e Gestão, SGPS, S.A., for the year ended 31 December 2015.
- 2. During the year, we monitored the company's activity on a regularly basis, with the frequency and to the extent that we deemed appropriate, namely through regular meetings with the Company's Management and Directors. We oversaw the reviewing of the accounting records and the supporting documentation, and the efficacy of the risk management, internal control and audit systems. We have ensured compliance with the law and Articles of Association. We did not run up against any constraints in the exercise of our duties.
- 3. We met several times with the statutory auditor and the external auditor, PricewaterhouseCoopers & Associados, SROC, Lda. to monitor the audits conducted and supervise their independence. We have analysed the legal Accounts Certificate and Audit Report, which merit our agreement.
- 4. Within the scope of our competences, we find that:
- a) the Balance Sheet, the Income Statement by nature, the Statement of Changes in Equity, the Cash Flow Statement and its Notes give a true and fair view of the financial position of the company, in respect of its results, changes in equity and cash flow;
- b) the accounting policies and valuation criteria applied are in conformity with the accounting principles generally accepted in Portugal and ensure that a true and fair assessment of the company's assets and results is given, and that the findings and recommendations of the external auditor have been followed through;
- c) the Management Report clearly shows the development of the business and the situation of the company, highlighting key aspects of the activity;
- d) the Corporate Governance Report covers all of the points required under the terms of Article 245 A of the Securities Code.
- 5. We are of the opinion that the allocation of results as proposed by the Board of Directors does not run counter to the applicable legal or statutory provisions.
- 6. Consequently, taking into account the information delivered by the company's Board of Directors and Departments, and the conclusions of the legal Accounts Certificate and Audit Report, we are of the opinion that:
- a) the Management Report should be approved;
- b) the Consolidated Financial Statements should be approved;

c) the allocation of results as proposed by the Board of Directors should be approved.

7. Finally, the members of the Audit Board are grateful to the Board of Directors, the senior managers and other company staff for their collaboration.

Lisbon, 21 March 2016

The Chairman of the Audit Board

Miguel Camargo de Sousa Eiró

Member of the Audit Board

Gonçalo Nuno Palha Gaio Picão Caldeira

Member of the Audit Board

José Manuel Oliveira Vitorino