ANNUAL REPORT

2021

Unofficial Version - Unaudited ESEF Format

PHAROL, SGPS S.A.

ANNUAL REPORT 2021

01 MANAGEMENT REPORT	3
2 STANDALONE FINANCIAL STATEMENTS	7
03 QUALIFIED HOLDINGS	33
04 INFORMATION TO BE PRESENTED UNDER THE TERMS OF THE ARTICLE 447 OF THE

CODE FOR COMMERCIAL SOCIETIES 34

"PHAROL", "Group PHAROL", "Group" and "Company" is a reference to the companies that are part of PHAROL SGPS, S.A. or to one of them, depending on the context.

1. MANAGEMENT REPORT

INTRODUCTION

As at December 31, 2021, PHAROL main assets are composed of (1) 320,200,159 common shares of Oi, S.A. ("Oi"), representing 5,38% (excluding treasury shares held by Oi itself) of the total share capital of Oi, (2) debt securities of Rio Forte Investments S.A. ("Rio Forte") with a nominal value of 897 million Euros and currently valued at 51.9 million Euros.

As of December 31, 2014, after the capital increase of Oi, concluded on May 5, 2014 (the "Oi Capital Increase"), PHAROL held a 39.7% direct and indirect stake in Oi. This included a portion classified as a noncurrent asset held for sale, following the Exchange agreement ("Exchange") entered into on September 8, 2014 and completed on March 8, 2015, and the remaining stake of 22.8% classified as investment in joint ventures and associates and therefore accounted for using the equity method.

On March 30, 2015, the Exchange was completed, whereby PHAROL (1) transferred to Portugal Telecom International Finance, B.V. ("PT Finance"), a subsidiary of Oi, an aggregate amount of 47,434,872 common shares and 94,869,744 preferred shares of Oi, and (2) received from PT Finance debt securities of Rio Forte with a nominal value of Euro 897 million and a call option on the transferred shares ("Call Option"). After the completion of the Exchange, PHAROL held an effective stake of 27.48% in Oi corresponding to the 22.8% stake referred above plus 4.7% due to the decrease in the number of outstanding shares of Oi.

The relevant agreements for the implementation of the New Structure of Oi were signed on July 22, 2015. On September 1, 2015, a General Meeting of Shareholders of Oi was held where the New Structure was approved.

As of September 30, 2015, after the implementation of the New Structure, but prior to the voluntary conversion of preferred shares to ordinary shares of Oi, PHAROL held, directly or indirectly through wholly owned subsidiaries, 84,167,978 common shares and 108,016,749 preferred shares of Oi.

As of October 8, 2015, following the voluntary conversion of preferred shares into common shares of Oi, PHAROL now holds, directly and indirectly through wholly owned subsidiaries, 183,662,204 common shares of Oi, representing 27.18% of total share capital of Oi (excluding treasury shares held by Oi itself). PHAROL's voting rights in Oi were limited to 15% of the total common shares of Oi.

With the implementation of the New Structure on July 30, 2015, the shareholders' agreements, through which joint control of Oi was exercised, were terminated. Up to that date, PHAROL accounted for its stake in Oi as an Investment in Joint Ventures. After this date, PHAROL considered it had significant influence over Oi and classifies it as an associate company. As a result, from July 30, 2015 the investment in Oi continued to be accounted for according to the equity method, based on PHAROL's economic stake in Oi's results.

On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V.. Due to the Corporate Reorganization, BRATEL B.V. now directly holds (and PHAROL indirectly holds) 183,662,204 common shares of Oi S.A., which represented 22.24% of Oi S.A.'s entire share capital (27.18% excluding treasury shares held by Oi itself).

On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV has in Oi SA to its subsidiary BRATEL S.à.r.l., 100% owned by BRATEL B.V.

In December 2017, and after the decision by the Court of the 7th Business Court of Rio de Janeiro (which it handles the Judicial Recovery of Oi) and which decided to withdraw the rights of the members of the Board of Directors of Oi in the approval of the Judicial Recovery Plan, it was understood that PHAROL lost the significant influence it had until then on its associate Oi. Consequently, on 31 December 2017, PHAROL began to measure its investment in Oi at market value and classify it as "Financial Assets".

Oi S.A., in the disclosure of its consolidated results for 2017, announced that it had restated its Consolidated Equity on January 1, 2016 and December 31, 2016, amounting to BRL 18 billion and BRL 19 billion, respectively. Following this restatement, PHAROL's investment in Oi, being recorded under the equity method, was restated and valued at zero in the periods of January 1, 2016 and December 31, 2016.

On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, was a dilution of PHAROL's participation in Oi to less than 8%.

On January 9, 2019, as part of the capital increase due to the Entry of New Resources, Oi went from 2,340,060,505 shares to a total of 5,954,205,001 shares representing its share capital, with a dilution of PHAROL's stake in Oi to less than 4%, even though it partially accompanied the referred capital increase.

On April 2, 2019, with the approval of an agreement between PHAROL and Oi on January 8, 2019, in which Oi committed itself to reimburse PHAROL for the damages for damages suffered through Oi's actions and resources for the acquisition of Oi shares subscribed in the aforementioned capital increase, PHAROL now holds a 5.51% interest in Oi's share capital.

During 2020, PHAROL sold all of Oi's preferred shares and a small portion of common shares, resulting in a final stake of 5.37% in Oi's share capital.

In 2021, after carrying out transactions for the purchase and sale of shares in Oi, PHAROL held a position of 5.38% in Oi (without treasury shares held by Oi itself).

In 2021, PHAROL's negative results reflect only the costs of the operation during the year, being mostly costs with personnel and external supplies and services. In terms of Equity, and as a result of the implementation of the Judicial Recovery Plan also impacted by the Brazilian political and economic instability, the value of PHAROL's investment in Oi reduced to 38.6 million Euros, being responsible for the reduction of Equity PHAROL at 70.7 million Euros. Regarding the credit on Rio Forte, despite some timid advances in the legal proceedings underway in Luxembourg and Portugal, nothing very relevant affected its valuation. Reason why it was chosen not to record changes in its value in the 2021.

Net income for 2021 was negative by 2.36 million Euros and essentially reflects operating costs amounting to 2.28 million Euros.

BUSINESS OVERVIEW

Apart from managing its investments, the Company did not directly conduct any other business activity.

LEGAL INFORMATION

There are no outstanding amounts overdue to the Portuguese State and the Portuguese Social Security System.

The Company did not enter into any material businesses or transactions with the members of its Board of Directors and the Fiscal Council, except for those mentioned in Note 20 to the Financial Statements as at December 31, 2021.

EVENTS AND RECENT DEVELOPMENTS

The main events of the year ended December 31, 2021 and recent developments are described in the Consolidated Annual Report of PHAROL.

PROPOSAL FOR APPLICATION OF PROFITS

Considering that in the year ended December 31, 2021 a negative result of Euros 2,355,645 was obtained, the Board of Directors of PHAROL proposes that they be transferred to the Company's Retained Earnings.

Lisbon, February 25, 2022

Luís Maria Viana Palha da Silva, Chairman of the Board of Directors and Managing Director

Ana Cristina Ferreira Dias, Board Member

Avelino Cândido Rodrigues, Board Member

Maria do Rosário Amado Pinto Correia, Board Member

Maria Leonor Martins Ribeiro Modesto, Board Member

Pedro Zañartu Gubert Morais Leitão, Board Member

2. STANDALONE FINANCIAL STATEMENTS

PHAROL, SGPS, S.A.

BALANCE SHEET 31 DECEMBER 2021 AND 2020

			Euro
	Notes	2021	2020

ASSETS
Non-Current Assets
Tangible assets		83,798	73,423
Financial investments - equity method of accounting	6	39,912,489	113,844,512
Other financial assets	7	51,906,667	51,905,456
Total non-current assets		91,902,954	165,823,391

Current Assets
State and other public entities	10	3,506	4,651
Other accounts receivable		138,246	136,749
Deferrals		2,962	2,766
Cash and bank deposits	4	16,551,837	17,112,035
Total current assets		16,696,551	17,256,201
Total assets		108,599,506	183,079,592

SHAREHOLDERS' EQUITY
Share capital	11	26,895,375	26,895,375
Treasury shares	11	(164,809,193)	(184,873,844)
Legal reserve	11	6,773,139	6,773,139
Other reserves	11	264,283,232	264,283,232
Adjustments to financial assets	11	(162,814,562)	(92,122,395)
Retained earnings	11	123,971,923	158,735,395
Net income		(2,355,645)	(14,316,500)
Total equity		91,944,268	165,374,402

LIABILITIES
Non-Current Liabilities
Loans obtained		101,826	67,503
Total non-current liabilities		101,826	67,503
Current Liabilities
Suppliers	12	54,683	235,025
Accrued expenses	13	567,507	863,141
State and other public entities	10	136,927	133,083
Other accounts payable	19	15,794,295	16,406,438
Total current liabilities		16,553,411	17,637,687
Total liabilities		16,655,237	17,705,190
Total liabilities and shareholders' equity		108,599,506	183,079,592

PHAROL, SGPS, S.A.

INCOME STATEMENT FOR THE PERIODS ENDED 31 DECEMBER 2021 AND 2020

	Notes	2021	2020



Equity in losses/(earnings) of subsidiary companies	14	(242,861)	(244,527)
Supplies and external services	15	(799,118)	(1,213,235)
Wages and salaries	16	(1,335,843)	(1,451,569)
Indirect taxes		(120,806)	(174,660)
Increases/(reductions) in fair value	17	-	(11,116,693)
Other income and gains		241,369	2,578
Other expenses and losses		(22,344)	(28,951)
INCOME BEFORE DEPRECIATION AND AMORTISATION, FINANCING EXPENSES AND TAXES		(2,279,603)	(14,227,058)

Depreciation and amortisation ((expenses)/reversals)		(35,510)	(54,290)
OPERATING INCOME (BEFORE FINANCING EXPENSES AND TAXES)		(2,315,113)	(14,281,348)

FINANCIAL LOSSES AND (GAINS)
Interest and related income		-	1,246
Interest and related expenses		(10,514)	(6,254)
INCOME BEFORE TAXES		(2,325,627)	(14,286,356)

Income taxes		(30,018)	(30,145)

Net income (loss) from continuing operations		(2,355,645)	(14,316,500)

Earnings per share
Basic and Diluted	18	-	(0.02)

PHAROL, SGPS, S.A.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY PERIODS ENDED 31 DECEMBER 2021 AND 2020

									Euro
		Share capital	Treasury shares	Legal reserve	Other reserves	Adjustments to financial assets	Retained earnings	Net income	Total shareholders' equity
Balance as at 31 December 2019	A	26,895,375	(181,842,907)	6,773,139	264,283,232	(143,295,504)	137,989,168	20,746,227	131,548,730
Changes in the period:
Foreign currency translation adjustments		-	-	-	-	(2,421,649)	-	-	(2,421,649)
Other changes recognized in shareholders' equity		-	-	-	-	53,594,758	-	-	53,594,758
	B	-	-	-	-	51,173,109	-	-	51,173,109
Net income	C	-	-	-	-	-	-	(14,316,500)	(14,316,500)
Comprehensive income	B+C	-	-	-	-		-	(14,316,500)	(14,316,500)
Operations with shareholders:									-
Application of the previous year's earnings		-	-	-	-	-	20,746,227	(20,746,227)	-
Acquisition of treasury shares		-	(3,030,937)	-	-		-	-	(3,030,937)
	D	-	(3,030,937)	-	-	-	20,746,227	(20,746,227)	(3,030,937)
Balance as at 31 December 2020	E=A+B+C+D	26,895,375	(184,873,844)	6,773,139	264,283,232	(92,122,395)	158,735,395	(14,316,500)	165,374,402
Changes in the period:
Foreign currency translation adjustments		-	-	-	-	340,866	-	-	340,866
Other changes recognized in shareholders' equity		-	-	-	-	(71,033,034)	(21,729,839)	-	(92,762,872)
	F	-	-	-	-	(70,692,167)	(21,729,839)	-	(92,422,006)
Net income	G	-	-	-	-	-	-	(2,355,645)	(2,355,645)
Comprehensive income	F+G	-	-	-	-	-	(21,729,839)	(2,355,645)	(24,085,484)
Operations with shareholders:									-
Application of the previous year's earnings		-	-	-	-	-	(14,316,500)	14,316,500	-
Acquisition of treasury shares		-	(1,282,867)	-	-	-	1,282,867	-	-
Disposal of treasury shares		-	21,347,517	-	-	-	-	-	21,347,517
	H	-	20,064,651	-	-	-	(13,033,633)	14,316,500	21,347,517
Balance as at 31 December 2021	I=E+F+G+H	26,895,375	(164,809,193)	6,773,139	264,283,232	(162,814,562)	123,971,923	(2,355,645)	91,944,268

STATEMENT OF CASH FLOWS

FOR THE PERIODS ENDED 31 DECEMBER 2021 AND 31 DECEMBER 2020

			Euro
	Notes	2021	2020

OPERATING ACTIVITIES
Payments to suppliers		(1,300,227)	(1,306,696)
Payments to employees		(1,451,531)	(1,342,528)
Payments relating to income taxes		(29,000)	(111,202)
Other cash receipts, net		(383,228)	5,308,573
Cash flows from operating activities related to continuing operation		(3,163,986)	2,548,147

INVESTING ACTIVITIES
C ash receipts resulting from:
Financial investments	4.a.	3,000,000	-
Interest and related income		-	1,246
		3,000,000	1,246
Payments resulting from:
Financial investments		-	(188,000)
Tangible and intangible assets		(45,885)	(1,815)
		(45,885)	(189,815)
Cash flows from investing activities related to continuing operations		2,954,115	(188,568)

FINANCING ACTIVITIES
C ash receipts resulting from:
Short-term financial applications		34,323	-
Disposal of Own Shares		900,545
		934,868	-

Payments resulting from:
Loans repaid		-	(10,040)
Interest and related expenses		(2,635)	(3,552)
Acquisition of Own Shares		(1,282,559)	(3,031,244)
		(1,285,195)	(3,044,836)
Cash flows from financing activities related to continuing operations		(350,327)	(3,044,836)


Cash and cash equivalents at the beginning of the period		17,112,035	17,797,292
Change in cash and cash equivalents (4)=(1)+(2)+(3)		(560,198)	(685,257)
Cash and cash equivalents at the end of the period	4.b.	16,551,837	17,112,035

NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS

December 31, 2021

(Amounts in Euro, otherwise it will be referred)

1. Introduction

a) Company Identification

PHAROL, SGPS, S.A. ("PHAROL", "PHAROL SGPS" or "Company") was founded on June 23, 1994 pursuant to Decree -Law No. 122/94, through the merger of the following companies: Telecom Portugal, S.A., Telefones de Lisboa e Porto (TLP), S.A. ("TLP") and Teledifusora de Portugal, S.A. ("TDP"), with reference to January 1, 1994. As a result of the privatization process, between June 1, 1995 and December 4, 2000, PHAROL's share capital is mainly owned by private shareholders. On December 12, 2000, Portugal Telecom, S.A. changed its name to Portugal Telecom, SGPS, S.A. ("PT SGPS") and its operation to a capital management company. On May 29, 2015, the company changes its name to PHAROL, SGPS S.A.

b) Oi Cash Capital Increase in 2014

On May 5, 2014, Oi underwent a capital increase amounting to 13,960 million reais, composed of: (1) 5,710 million reais (Euro 1,750 million based on the exchange rate as of February 21, 2014) corresponding to 1,045,803,934 ordinary shares and 1,720,252,731 preferred shares subscribed by PHAROL, through a contribution in kind of the PT Assets, defined as the PHAROL's 100% stake in PT Portugal, which as of that date included all operational businesses of the PHAROL Group, with the exception of the subsidiaries Bratel BV, Bratel Brasil, PTB2 and PHAROL, and of the investment in Oi, Contax and their controlling shareholders; and 8,250 million reais in cash subscribed by investors other than PHAROL. The valuation of PT Assets of 5,710 million reais was determined on the basis of the valuation of PT Portugal by Banco Santander (Brasil), SA on the date of the share capital increase. As a result of PHAROL' contribution for the capital increase of Oi, PHAROL increased its effective interest in Oi from 23.2%, previously held through Bratel Brasil, to an economic interest of 39.7%, held through a total direct interest of 35.8% (32.8% in PHAROL and 3.0% in Bratel Brasil) and an indirect interest of 3.9% held by Bratel Brasil through the controlling shareholders of Oi.

c) Initial acquisition of investment in Oi

On March 28, 2011, PHAROL completed the initial acquisition of investments in Telemar Norte Leste, S.A. ("Telemar"), which belongs to the Oi Group, and Contax, for the amount of 8,437 million reais, and entered into several agreements with the controlling shareholders of these companies. As a result of this transaction, PHAROL acquired an effective stake of 25.3% in TmarPart (parent company of the Oi Group on that date) and 14.1% in Contax. Within the scope of this acquisition, PHAROL, AG Telecom Participações ("AG") and LF Tel, SA ("LF"), two of the main shareholders of TmarPart, the controlling shareholder of Oi, entered into a shareholders' agreement with unanimous voting procedures for their representatives in the Board of Directors of TmarPart regarding the strategic, financial and operating decisions relating to the activity of the Oi Group. Whereby, in accordance with the provisions of NCRF 13 Interests in Joint Ventures and Investments in Associates ("NCRF 13"), the Company concluded that it contractually shares

the control of TmarPart, therefore the Oi investment was classified as a joint venture and thus accounted for in accordance with the equity method.

d) Investment in Rio Forte debt securities

On May 5, 2014, directly and indirectly, PHAROL held investments in debt securities issued by Rio Forte Investments, S.A. ("Rio Forte", a holding company of the Espírito Santo Group with registered address in Luxembourg essentially for their non-financial services) amounting to Euro 897 million, which formed part of the PT Assets and were contributed in the capital increase of Oi. The composition of the outstanding amount as of May 5, 2014 was as follows:

Euro 200 million subscribed by PHAROL on April 15, 2014, and transferred to PT Portugal on May 5, 2014, in connection with the corporate reorganization of the Group, the maturity of which occurred on July 15, 2014;
Euro 647 million subscribed by PT Finance on April 15, 2014, the maturity of which occurred on July 15, 2014;
Euro 50 million subscribed by PT Finance on April 17, 2014, the maturity of which occurred on July 17, 2014.

On July 15 and 17, 2014 the maturity of these instruments occurred, but the issuer did not settle its obligations.

Rio Forte requested the adoption of the controlled management regime in accordance with the Luxembourg legislation, although it was their understanding that they did not have the financial capacity to meet their financial commitments, a situation which was thought to be the most protective of their creditors' interests, and that was rejected by the Luxembourg court. As a result of that rejection, Rio Forte was declared insolvent by the Luxemburg Court on December 8, 2014 and went into liquidation on the same date.

On July 28, 2014, following the default by Rio Forte, PHAROL and Oi agreed on the main terms for the exchange of debt securities of Rio Forte held on that date by PT Finance and PT Portugal, amounting to Euro 897 million for 47,434,872 common shares and 94,869,744 preferred shares of Oi (after the reverse stock split done by Oi in December 2014) held on that date by PHAROL. On September 8, 2014, this agreement was approved in the General Shareholders' Meeting of PHAROL and following such approval the parties involved concluded the respective final contracts, the terms of which established that:

PHAROL would exchange with Oi the Rio Forte Instruments in exchange for 47,434,872 common shares plus 94,869,744 preferred shares of Oi, representing 16.9% of its share capital;
An American non-transferable purchase option ("Call Option") would be attributed to PHAROL in order to reacquire the Oi Shares that are the Object of the Exchange (with the exercise price of 20.104 reais for common shares and 18.529 reais for preferred shares after the Oi reverse stock split), which would be adjusted by CDI plus 1.5% per year;
The Call Option on the Oi Shares that are the Object of the Option would enter into effect on the date of the Exchange and would have a maturity of six years, with the possibility of exercising the

option by PHAROL terminating at 10% at the end of the first year and 18% at the end of each subsequent year;

Any amount received as a result of monetization of the Call Option through the issue of derivative instruments would have to be used for the exercise of the Call Option;
PHAROL could only acquire Oi or TmarPart shares through exercise of the Call Option;
The Call Option would be canceled if (i) the bylaws of PHAROL were to be voluntarily altered to remove the 10% vote limitation; (ii) PHAROL were to act as a competitor of Oi or (iii) PHAROL were to violate certain obligations arising from definitive documentation; and
The contracts were signed on September 8, 2014, subject to approval by the CVM Brasil and would be executed by March 31, 2015.

On December 31, 2014, as stated above, execution of the exchanges and the purchase option were pending approval by the CVM. On March 4, 2015, the CVM approved the above contracts, conditional upon their approval at Oi's General Shareholders' Meeting, which occurred on March 26, 2015. The exchange was executed on March 30, 2015. On March 24, 2015, PHAROL came to an agreement with Oi, PT Portugal, PT Finance and TmarPart for the Private Instrument of Assignment of Rights and Obligations and Other Fees ("Assignment Agreement"), by means of which PT Portugal transferred the Rio Forte Instruments to PT Finance, and conceded to PT Finance all pertaining rights and obligations in the terms of the Exchange Agreement ("Assignment").

On March 30, 2015, the Exchange was concluded, by means of which PHAROL (1) deposited Oi's shares object of the Exchange with the Depositary; and (2) instructed the Depositary to register the transfer of 47,434,872 ADSs ON and 94,896,744 ADSs PN to PT Finance, representing Oi's shares object of the Exchange. Therefore, on March 30, 2015, PHAROL transferred the ADSs Object of the Exchange to PT Finance, and PT Finance transferred to PHAROL the Rio Forte Instruments in the total main amount of Euro 897million.

Still, on March 30, 2015, the Call Option was effective.

A change ("Amendment") was signed to the Share Purchase Option Contract and Other Agreements, entered into on September 8, 2014, such as mentioned above, which allowed PHAROL to liquidate its Oi share purchase option through sale on the market, giving Oi the right of first refusal in the acquisition of the Option if PHAROL should decide to sell it to third parties without previous consent by Oi. The Amendment was subject to approval of Oi's general shareholders' meeting and, if applicable, to the CVM's approval. Oi committed to convene a general meeting to discuss the Amendment, and the reference shareholders of Oi committed to vote in approval of the Amendment.

This call option had a maturity of 6 years and expired in March 2021.

e) New model of Oi's corporate structure and governance ("New Structure")

On March 31, 2015, the Board of Directors of PHAROL concluded negotiations with the other shareholders pertaining to Oi to the extent of signing a new agreement between the parties in relation to the company structure and the administration of Oi. In view of the impossibility of implementing migration from CorpCo to the segment called Novo Mercado of the BM&FBovespa by March 31, 2015, the deadline stipulated in the agreements signed on September 8, 2014, it became essential to sign a new agreement, which allowed Oi to anticipate the principal benefits announced to shareholders at the time that Oi's capital increase was realized on May 5, 2014, without, however, failing to make every effort to migrate to the Novo Mercado. Thus, the parties agreed to a new company structure model and administration of Oi ("New Structure"), that in addition to the benefits and objectives disclosed before, are characterized by the following:

All company and corporate administration transformation will be done at Oi with elimination of the necessity of creating CorpCo.
Approval of new Corporate Bylaws for Oi, as well as signing of an amendment to the provisional voting commitment from its shareholders, in effect until implementation of the New Structure ("Vote Commitment") that will enable: (i) implementation of a voluntary conversion program for preferred shares to ordinary shares issued by Oi at a rate of 0.9211 ordinary share per each preferred share, subject to a minimum buy-in of 2/3 of the preferred shares in order to give all of the shareholders the possibility of exercising the voting right and to maximize the possibility of existence of a single class of shares; (ii) implementation of the principle of one share, one vote. However, to preserve the equilibrium between shareholders and the distribution of desired control at the time of the Capital Increase of Oi, inclusion of a 15% limit on the voting right in Oi's Corporate Bylaws, applicable to all of its shareholders was agreed upon; this limitation will cease to exist through verification of certain events, namely in the case of capital increase, operation of company reorganization or public offering of shares, in any case that results in the dilution of the current shareholder base (or acquisition of a stake, where applicable) greater than 50%; (iii) leveraging increase in liquidity, eliminating subjection to lock-up agreements of any shareholder; (iv) the election of a new Board of Directors at Oi with significant participation of independents, where the previously existing parity in CorpCo between the PHAROL representatives and those of the Brazilian shareholders will be maintained; (v) extinction of TmarPart by incorporation into Oi, which will determine the end of the TmarPart and other controlling companies' shareholders' agreements, thus ensuring-the distribution of Oi's shareholder control; (vi) possibility of using financial synergies through incorporation of Oi's controlling companies, directly and indirectly.

On July 22, the relevant documents for the implementation of the Oi's New Structure were signed and on September 1, 2015, Oi's General Assembly approved its implementation.

On September 30, 2015, after the implementation of the New Structure and prior to the voluntary conversion of preferred shares into common shares of Oi, PHAROL held, directly and through 100% subsidiaries, 84,167,978 ordinary shares and 108,016,749 preferred shares of Oi.

On October 8, 2015, following the approval of voluntary conversion of preferred shares into common shares of Oi, the PHAROL held, directly and indirectly through 100% subsidiaries owned, 183,662,204 common shares of Oi, representing 27.18% of the total share capital of Oi (excluding treasury shares held by Oi itself). PHAROL's right to vote in Oi is limited to 15% of the total common shares.

The shareholders' agreements through which joint control of Oi was exercised, ended on July 30, 2015 with the implementation of the New Structure. Until then PHAROL proceeded to recognize its participation in Oi as an investment in joint ventures. PHAROL considered that it currently has significant influence over Oi, which is considered an associate. Thus, from July 30, 2015 participation in Oi continued to be measured according to the equity method, less any impairment, reflecting the stake in Oi's financial statements (27.18% as at December 31, 2016).

On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V..

On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV has in Oi SA to its subsidiary 100% owned, BRATEL S.à.r.l., a company with its registered office in Luxembourg, at 69, Boulevard de la Pétrusse, L-2320 Luxembourg, and BRATEL BV ceased to hold a shareholding interest directly in Oi SA.

Accordingly, on December 31, 2017, PHAROL held all the shares representing the capital stock of BRATEL BV which, in turn, held all the shares representing BRATEL S.à.rl. Both PHAROL and BRATEL BV indirectly held 183,662,204 common shares of Oi SA, representing as of December 31, 2016, the direct interest of BRATEL BV (and indirectly of PHAROL, SGPS SA) is 183,662,204 common shares of Oi SA, which represent approximately 22.24 % of the total share capital of Oi SA (27.18% excluding treasury shares held by Oi itself).

On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, a dilution of PHAROL's participation in Oi to less than 8%.

On January 9, 2019, as part of the Capital Increase by the Entry of New Resources, Oi's share capital increased from 2,340,060,505 shares to a total of 5,954,205,001 shares representative of Oi's share capital, thereby diluting PHAROL's stake in Oi to less than 4%.

On April 2, 2019, with the approval of an agreement signed between PHAROL and Oi SA on January 8, 2019, in which Oi undertook to reimburse PHAROL through Oi shares and financial resources for the acquisition of Oi's shares, PHAROL now holds a 5.51% stake in Oi.

During 2020, PHAROL sold all preferred shares of Oi and a small portion of common shares, resulting in a final stake of 5.37% of Oi's share capital.

As at December 31, 2021, PHAROL main assets are composed of (1) 320,200,159 common shares of Oi, S.A. ("Oi"), representing 5,38% (excluding treasury shares held by Oi itself) of the total share capital of Oi, (2) debt securities of Rio Forte Investments S.A. ("Rio Forte") with a nominal value of Euro 897 million and currently valued at 51.9 million Euros.

PHAROL considered to continue to have significant influence on Oi until December 2017, however, and after the decision by the 7th Business Court of the District of the Capital of the State of Rio de Janeiro, before which the Judicial Reorganization was being processed ("Court") , which decided to withdraw the rights of the members of the Board of Directors of Oi in the approval of the Judicial Reorganization Plan in which the company was found, it was understood that PHAROL had lost the significant influence it had until then held in its associate Oi SA .

Consequently, since December 31, 2017, PHAROL started to record its investment in Oi at market value, which is now classified as a "Financial Asset".

f) Bases of presentation

These financial statements are in respect of the Company individually and were prepared according to the generally accepted accounting principles in Portugal (Note 2). Financial investments are recorded according to the equity method, deducted of any eventual impairment losses, as referred to in Note 3.3. These individual financial statements consider the effect of the equity method, through the appropriation of the share held in the other changes in equity and in the results of the company's subsidiaries as at December 31, 2021 and 2020, in PHAROL's equity and net profit for the fiscal years ended on those dates, based on the respective financial statements, but not the effect of full consolidation of assets, liabilities, expenses and income.

In accordance with current legislation, the Company prepared consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), published separately. These consolidated financial statements include the financial statements of the companies which PHAROL controls, consolidated by the integral method.

The disclosures presented in these consolidated financial statements are complementary, with the necessary adaptations, to the disclosures presented in these financial statements.

The financial statements for the year ended December 31, 2021 were approved by the Board of Directors and authorized for issue on February 25, 2022 and are still subject of approval by the General Meeting of Shareholders under the commercial legislation in Portugal.

2. Accounting standards for preparing the financial statements

The Company's financial statements were prepared in accordance with the framework of the Accounting Standardization System (SNC), which integrates the Financial Reporting Accounting Standards (NCRF), adapted by the Accounting Standardization Committee (CNC) from the International Financial Reporting Standards (IFRS, formerly known as International Accounting Standards) issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU). The legal diplomas referring to the SNC are:

Notice nº8254/2015, of July 29 (Conceptual Structure);
Ordinance No. 220/2015, of July 24 (Model of financial statements);
Ordinance No. 2018/2015, of July 23 (Accounts Code);
Notice No. 8256/2015, of July 29 (Accounting and financial reporting standards);
Notice No. 8258/2015, of July 29 (Interpretative Rules).

PHAROL chose not to apply NCRF 27 to these financial statements, having chosen to recognize, measure and disclose its financial instruments in accordance with International Financial Reporting Standards ("IFRS"), as adopted in the European Union.

The Company adopted the NCRF for the first time in 2010, having applied for this purpose the "NCRF 3 Firsttime adoption of the NCRF" ("NCRF 3"), with January 1, 2009 being the transition date for the purposes of presenting these financial statements. financial. The Company additionally applies the International Accounting and Financial Reporting Standards ("IAS/IFRS") and the respective interpretations ("SIC/IFRIC") issued by the International Accounting Standards Board ("IASB"), in order to fill gaps or omissions. relating to specific aspects of some transactions or particular situations not provided for in the SNC.

Since January 1, 2005, PHAROL's consolidated financial statements have been prepared in accordance with IFRS as adopted in the European Union, pursuant to regulations applicable to companies listed on European Union stock exchanges.

The PHAROL Group is made up of the following companies:

				dec/21
				Effective
				100%
				100%
				100%
Head office Amsterdam São Paulo Luxembourg	Type of Subsidiaries Subsidiaries Subsidiaries	Activity Management of investments Management of investments Management of investments	Direct Pharol SGPS (100%) Bratel BV (100%) Bratel BV (100%)	dec/21 Effective 100% 100% 100%

It should be noted that PHAROL as of December 31, 2021 and 2019 had a stake in Oi of 5.38% and 5.37%, respectively.

3. Main Accounting Policies, judgments and estimates

These individual financial statements were prepared on a going concern basis of accounting. The main accounting policies used in the preparation of these individual financial statements are described below and were applied consistently.

3.1. Tangible fixed assets

Tangible fixed assets are recorded at acquisition cost, which includes the amount paid to acquire the asset and any expenses directly attributable to bringing the assets to the location and in the condition necessary for their operation.

Tangible fixed assets are depreciated on a straight-line basis from the month they are available for use. The depreciation rates reflect the useful life of each class of assets, as follows:

Asset class	Years of useful life

Transportation equipment	4
Admnistrative equipment	3 - 8
Other tangible fixed assets	4 - 8

The gains and losses resulting from any write-off or disposal are determined by the difference between the amount received and the carrying value of the asset and are recognized in the income statement when the write-off or disposal occurs.

3.2. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. The remaining lease contracts are considered operating leases. The classification of leases depends on the substance of the transaction and not on the form of the contract.

Assets acquired under finance leases and the corresponding liabilities are accounted for at the beginning of the contract as the lower amount between the fair value of the assets and the present value of minimum lease payments. Rents include the reimbursement of the liability and interest expense, with interest being recognized in the income statement based on a periodic interest rate over the remaining liability.

Under operating leases, rents are recognized on a straight-line basis during the period of thelease.

3.3. Financial investments

Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies of the entity, generally represented by the majority of the voting rights. Associate companies are entities over which the Company has a significant influence but not control, generally represented by stakes between 20% and 50% of voting rights. Joint venture is an economic activity with the engagement of two or more partners subject to joint control based on a contractual agreement.

Financial investments in subsidiaries, associate companies and joint ventures are recorded under the equity method of accounting. Under this method, financial investments are initially recorded at acquisition cost and subsequently adjusted for the changes, after the acquisition date, in the Company's share in the net assets of those entities, deducted for eventual impairment losses. PHAROL's earnings include its share in the earnings of its subsidiaries and associate companies.

Financial investments in foreign entities are translated to Euros using the exchange rates prevailing at the balance sheet date, while the Company's share in the earnings of those entities is computed based on the average exchange rates for the reported period. The effect of translation differences is recognized in shareholders' equity under the caption "Adjustments to financial assets" and is transferred to net income upon the disposal of a foreign entity or the transmission of the investment in another way. The exchange rates used in the translation of the main foreign entities (held directly or indirectly by PHAROL) are as follows:

Final
Currency	2021	2020
Real	6.3101	6.3735
USD	1.1326	1.2271

Average
Currency	2021	2020
Real	6.3779	5.8943
USD	1.1827	1.1422

Financial investments are evaluated whenever there is evidence that they may be impaired and the related impairment losses are recorded in the income statement.

Gains obtained in transactions with subsidiaries, associates companies and joint ventures are eliminated in proportion to the Company's share in those entities, against the financial investment.

Capital gains resulting from the disposal of subsidiaries and associated companies within the Group are deferred or reversed until the date these investments are disposed of to a third party. Whenever these gains are deferred, their recognition in earnings is made under the caption "Gains/(losses) of affiliated companies", in the proportion that goodwill or assets and liabilities identified in the allocation of the purchase price recorded by the acquirer is recognized in earnings.

Additional capital contributions and loans granted to subsidiaries, associates companies and joint ventures are recorded at nominal value, reduced by adjustments for estimated losses, ifapplicable.

3.4. Accrual basis of accouting

The Company records its revenue and expenses as they are generated or incurred, regardless of when they are received or paid, respectively.

With regard to the recognition of expenses with taxes on the purchase of external services (e.g. nondeductible value added tax), the amounts are classified as indirect taxes.

3.5. Income tax

Income tax expense corresponds to the sum of current and deferred taxes. Deferred taxes are recognized in earnings except when they relate to items recorded directly in shareholders' equity, in which case they are also recorded in shareholders' equity.

The current income tax is computed based on the estimated taxable income for corporate income tax purposes, based on the statutory tax rate in Portugal, which is increased by a municipal tax and/or by an additional state surcharge depending on the taxable profit of the year (Note 10).

The income tax expense recorded in the financial statements was determined in accordance with "NCRF 25 Income Taxes". In determining income tax expense for the year, besides the current tax based on profit before-tax adjusted in accordance with the tax legislation, it is also considered the effects of temporary differences between income before tax and taxable income originated in the year or in preceding years.

Deferred taxes correspond to the temporary differences between assets and liabilities for accounting purposes and the related amounts for taxable purposes. Deferred tax assets and liabilities are computed and evaluated annually, using the tax rates which are expected to be in force at the date of reversal of these temporary differences.

Deferred tax assets are recorded only when there is a reasonable expectation of sufficient future tax profits which allow for their use. As at the balance sheet date the Company conducts a reassessment of the temporary differences originating deferred tax assets, in order to record deferred tax assets not recognized previously and/or to reduce the amount of deferred tax assets that are recognized, based on the current estimate of its recoverable amount.

3.6. Accounts receivable

Accounts receivable are initially recognized at fair value, and subsequently measured at amortized cost, based on the effective interest rate method, reduced by impairment losses.

Impairment losses for doubtful accounts receivable are computed based on the evaluation of the estimated risks resulting from the non-collection of receivables and are recorded in the income statement.

3.7. Provisions and contingent liabilities

The Company recognizes provisions when there is a present obligation arising from past events provided that there will be it is probable as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where any of the above-mentioned criteria is not accomplished, the Company discloses the event as a contingent liability, unless the cash outflow is remote.

Provisions are recognized for an amount corresponding to the present value of the best estimate, at the reporting date, of the resources needed to settle the obligation. That estimate is determined considering the risks and uncertainties associated with the obligation. Provisions are reviewed at the end of each year and adjusted for in order to reflect the best estimate as of that date.

3.8. Loans obtained

Loans obtained are initially recognized at fair value, net of transaction costs incurred, and subsequently presented at amortized cost, based on the effective interest method.

3.9. Treasury shares

Own shares are accounted for at their acquisition value as a reduction of shareholders' equity in the caption "Own shares", and the gains or losses inherent to their disposal are recorded in "Retained earnings"

3.10. Balance sheet classification

Realizable assets and liabilities due over a period greater than one year from the balance sheet date are classified under non-current assets and non-current liabilities, respectively, at present value.

3.11. Foreign currency transactions and balances

Transactions denominated in foreign currencies (different from the Company´s domestic currency, "Euro") are translated to Euros at the exchange rates prevailing at the time the transactions are made. Assets and liabilities in foreign currency for which there is no agreement for fixing an exchange rate are translated to Euros using the exchange rates prevailing at the balance sheet date. Favorable or unfavorable exchange rate differences arising from the differences between exchange rates in force at the date of the respective transactions and those applying on the date of collection or payment or at the balance sheet date are recorded as gains and losses in the income statement.

Assets and liabilities as at December 31, 2021 and 2020 were translated into Euros using the following exchange rates to the Euro reported by the Portuguese Central Bank:

Final
Currency	2021	2020
Real	6.3101	6.3735
USD	1.1326	1.2271

3.12. Financial Assets and Liabilities

Financial assets and liabilities are recognized in the balance sheet when the Company becomes part of the corresponding contractual terms, and are classified in the following categories: (a) at cost or amortized cost; and (b) at fair value, with the respective changes being recorded in the income statement.

a) Financial assets and liabilities at cost or amortized cost

Assets and liabilities are classified at cost or amortized cost if they: (a) have a defined maturity; (b) have a fixed or determined income; and (c) do not represent or include a derivative financial instrument.

Assets and liabilities classified in this category are measured at amortized cost reduced by accumulated impairment losses (for financial assets) and correspond primarily to the following asset and liability captions included in the Company's balance sheet:

Loans obtained
Other Accounts receivable and payable
Other financial assets and liabilities
Cash and cash equivalents
Accrued expenses
Suppliers

Amortized cost is determined through the effective interest method. The effective interest rate is the one that discounts the estimated future payments and receipts, during the term of the financial instrument, to the carrying value of the financial asset or liability.

b) Financial assets and liabilities at fair value

All remaining financial assets and liabilities not included in the category "cost or amortized cost" are recognized at fair value. These financial assets and liabilities correspond primarily to interest and exchange rate derivative financial instruments.

The changes in the fair value of these derivatives are recognized through shareholders' equity or profit and loss, depending on whether those derivatives meet or not the criteria for hedge accounting, respectively. These changes in fair value are recorded under the caption "Increases/(reductions) in fair value" (Note 17).

c) Impairment of financial assets

Financial assets accounted as "cost or amortized cost" are subject to impairment tests at the end of each year. Such assets are impaired when there is clear evidence that, as a result of one or more events occurred after their initial recognition, their future estimated cash flows will be affected.

For assets measured at amortized cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the present value of the revised future estimated cash flows discounted using the initial effective interest rate. For financial assets measured at cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the best estimate of the asset's fairvalue.

Subsequently, if there is a reduction in the impairment loss as a result of an event occurred after the initial recognition of the loss, the impairment should be reversed through earnings. The reversal is recognized up to the limit of the amount that would be recorded (at amortized cost) if the loss had not been initially recognized.

d) Derecognition of financial assets and liabilities

The Company derecognizes financial assets when its contractual rights to obtain the asset's cash flows expire, or when it transfers to another entity all the significant risks and rewards associated with the ownership of those assets. The Company derecognizes financial liabilities only when the corresponding obligation is settled, cancelled or expires.

3.13. Main accounting estimates and judgments

When preparing the financial statements in accordance with the NCRF, the Company's Board of Directors uses estimates and assumptions that affect the application of accounting policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are considered probable under the circumstances on which the estimates are based, or as a result of new information or more experience. The most significant accounting estimates reflected in the financial statements are as follows:

(a) Valuation of the investment in Oi On May 5, 2014, the Company valued its new stake in Oi based on Oi's reference share price in the capital increase on that date, having as of that date, appropriated its stake in Oi's income using the equity method. Additionally, from September 8, 2014, onwards, the portion of the investment to be delivered within the scope of the Exchange Agreement was classified as a non-current asset held for sale, and measured at fair value up till the execution of the Exchange Agreement on March 30, 2015. Until December 2017, this investment was valued using the equity method. From that date and namely on 31 December 2021 and 2020, the valuation of the investment held in Oi was based on its market value, namely the stock price, as PHAROL lost the significant influence it held.
(b) Valuation of the Rio Forte instruments On March 30, 2015, the Rio Forte instruments were obtained, following the execution of the Exchange Agreement, over Oi's shares. As of that date, subsequent to a market consultation, the Company valued the instruments at 15% of their notional value. This valuation was reviewed as at September 30, 2016, having reduced to 9.56% of the notional amount and on December 31, 2017 and 2019, to 8.32% and 7.02%, respectively. On December 31, 2020, the debt recovery valuation was again revised downwards, registering in 5,79% recovery, equivalent to a reduction of Euro 11.1 million to the amount of Euro 51.9 million. As at 31 December 2021, this amount remained unchanged (see Note 7).
(c) Recognition of provisions and adjustments PHAROL is party to various ongoing legal claims for which, based on the opinion of its legal advisors, a judgment was made to determine the recognition of a possible provision for these contingencies. Adjustments for accounts receivable are calculated based primarily on the aging of the accounts receivable, the risk profile of the customers and their financial situation.

Estimates used are based on the best information available during the preparation of financial statements, although future events, neither controlled nor foreseeable by the Company, could occur and have an impact on those estimates. In accordance with "NCRF 4 Accounting Policies, Changes in Estimates and Errors" ("NCRF 4"), changes to these estimates that occur after the date of the financial statements are recognized in net income, using a prospective methodology.

3.14. Events that occurred after the balance sheet date

Events occurred after the balance sheet date that provide additional information about conditions existing at the balance sheet date are reflected in the financial statements. Events occurred after the balance sheet date that provide information about conditions that occur after the balance sheet date are not reflected in the financial statements but are disclosed in the notes to the financial statements, if material.

4. Cash Flows

The caption "Cash and cash equivalents" of the statement of cash flows includes cash on hand and bank deposits readily convertible to cash.

The Company is exposed to a liquidity risk if its sources of funding, including cash balances, operating cash inflows, divestments, credit lines and cash flows obtained from financing operations, do not match its financing needs, such as operating and financing outflows, investments, shareholder remuneration and debt repayments. The Company understands that it has the ability to fulfill its obligations.

The cash flow statement was prepared in accordance with "NCRF 2 Statement of Cash Flows", with the following aspects worth mentioning.

a) Receives resulting from financial investments

In 2021, other net receipts refer to a capital reduction of one of PHAROL's subsidiaries.

b) Cash and cash equivalents

As at December 31, 2021 and 2020, this caption is made up as follows:

		Euro
	2021	2020

Cash	2,399	2,809
Bank deposits immediately available	16,549,438	17,109,226
	16,551,837	17,112,035

5. Changes to accounting policies and estimates, and mistakes

The Company did not adopt any new or revised standard or interpretation during the year ended December 31, 2021 and did not voluntarily change other accounting policies or accounting estimates.

During the year ended December 31, 2021, the Company did not adjust its financial statements for any material errors from previous years.

6. Equity Investments

6.1. Equity method

During 2021 and 2020, the movements occurred in this caption were as follows:

			Euro
			2021
	Investments in subsidiary	Additional paid in capital contributions
	companies	in subsidiary companies	Total
Opening balance	108,152,037	5,692,473	113,844,510
Reductions	-	(3,000,000)	(3,000,000)
Equity method	(70,932,022)	-	(70,932,022)
Closing balance	37,220,014	2,692,473	39,912,489

			Euro
			2020
	Investments in subsidiary companies	Additional paid in capital contributions in subsidiary companies	Tota

Opening balance	56,978,928	5,749,000	62,727,929
Increases
Reductions		(56,527)	(56,527)
Equity method	51,173,109		51,173,109
Closing balance	108,152,037	5,692,473	113,844,512

a) Equity

In the fiscal years 2021 and 2020, the movements occurred in adjustments to financial assets are the result from the use of the equity method of subsidiaries, and essentially result from the evolution of the quotation of the indirect participation of 5.38% in the capital of Oi, as mentioned in notes 1. e), 2. and 3.13 a).

In 2021, the amount of 70,932,022 euros includes: (i) 70,692,167 euros arising from changes in the fair value of OI shares – see Note 11.5; and (ii) 239 856 euros arising from the application of the equity method to the results for the year of its subsidiary Bratel BV included in Note 14.

7. Other financial assets

On 31 December 2021, this caption includes an estimated future recovery of 51.9 million Euros related to the debt instruments issued by Rio Forte.

Regarding the debt instruments issued by Rio Forte, after having learned the Report of Judicial Administrators in the Rio Forte insolvency process (Rapport nº 4 des Curateurs), dated August 31, 2016, available at 40Twww.espiritosantoinsolvencies.lu40T , PHAROL initiated efforts to analyze the financial, accounting and legal implications of what is contained in point 2.1.6., which is transcribed in free translation:

"Predictable recovery

The information currently available to the Judicial Administrators does not allow an estimate to be made, either of the total recovery, or of the recovery to be made by the company in bankruptcy.

It cannot be ruled out that judicial foreclosure and the possible rights of third parties involved will prevent for a prolonged period, or even definitively, the bankruptcy estate from recovering and distributing certain assets. In fact, it is not excluded that the judicial authorities have the objective of confiscating the assets now being held."

PHAROL's Management, after due diligence and supported by the analysis of its advisors, concluded, on that date, by a principle of prudence, that the expected values of recovery of assets by the mass of the insolvent and, consequently, by PHAROL, with Rio Forte had reduced. PHAROL's investment in Rio Forte's securities was initially valued at fair value upon its initial recognition on March 30, 2015, and subsequently measured at amortized cost less any impairment losses. Based on the basic principles set out in IAS 39 (currently IFRS 9), Management, based on the information available, used its judgment in the definition of assumptions that culminated in a credit appreciation of Rio Forte by 85.7 million Euros at 31 December 2016. This reflects a value of about 9.5% of the nominal value, against approximately 15% of the nominal value at 31 December 2015, which determined the accounting of an impairment in the amount of € 48.8M.

Additionally, in December 2017, after the update of the amount of credit complaints considered in the last report of the Judicial Administrators was higher than previously considered, the debt recovery valuation was revised downwards again, having registered at 8.32 % of recovery, which is equivalent to a reduction of 11.1 million Euros to the amount of 74.6 million Euros. At 31 December 2018, the debt recovery amount remained at 8.32%.

In April 2019 and 5 years after the filing of the Rio Forte credit claim, a new report by the Judicial Administrators was published on 30 April 2019, which essentially points to: 1) postponement of the results of the conclusion of the analysis. debt declarations; and 2) downward revision of Rio Forte's asset value in Latin America; Accordingly, and based on these new factors, the recovery in debt recovery was once again revised downwards to 7.19% of nominal value recovery, equivalent to a reduction of 10.1 million euros. Euro to the amount of Euro 64.5 million. At the end of 2019 and after the analysis of the last report issued by the Judicial Administrators, with effect on December 31, 2019, it was once again revised downwards, with the face value recovery set at 7.02 %, which is equivalent to an additional reduction of 1.5 million Euros to a total recovery amount of 63 million Euros. On December 31, 2020, a new downward revision of the nominal value recovery was carried out to 5.79%, essentially justified by the depreciation of assets held by Rio Forte in Latin America, which is equivalent to a reduction of 11.1 million of Euros to the amount of 51.9 million Euros.

As at 31 December 2021, considering the maintenance of the main valuation factors of Rio Forte's Assets, and, with no evolution in the amount of claimed debts, the expected recovery value of Rio Forte's nominal debt remained unchanged at 5 .79% equivalent to 51.9 million Euros.

Additionally, and still within the scope of the credit on Rio Forte, PHAROL in December 2017 learned of a statement from the curators of Espírito Santo International, SA, ("ESI") in which they declare that this bankrupt company will evaluate the possibility to sue PHAROL, asking for the latter to be ordered to reimburse 750 million Euros, without specifying the grounds for that request.

Following this statement, already in January 2019, PHAROL was notified by ESI's curatorship, as a precautionary measure to interrupt any limitation period, with a view to an eventual cancellation of Notes payments made by ESI during January 2014.

After analyzing the aforementioned subpoena, Pharol considers the probability, on the basis of the alleged facts, of obtaining any conviction of Pharol under the subpoenaed terms, to be highly remote, being the judicial process yet to be started until the present date. Accordingly, PHAROL has not made any provision in its financial statements.

8. Related parties

8.1. Financial investments in subsidiaries and joint ventures

In 2021 and 2020, the financial investments in subsidiaries and joint ventures refer exclusively to direct participation in Bratel BV.

8.2. Other information

For the fiscal years ended December 31, 2021 and 2020, fixed remuneration of Board members, which were established by the Remuneration Committee, amounted to Euro 473 thousand and Euro 504 thousand, respectively.

At December 31, 2021 and 2020 no share-based program or termination benefit program were in place.

For the year ended December 31, 2021, the fees paid to the Statutory Auditor of PHAROL amounted to Euro 38,1 thousand, corresponding to audit fees of PHAROL.

For additional information related to the remuneration of members of the Board of Directors and key employees, we refer readers to the Corporate Governance Report included in the Annual Report.

9. Income tax

In 2021, the companies located in mainland Portugal were subject to Corporate Income Tax at a base rate of 21%, with an additional (1) Municipal Surtax of up to 1.5% levied on taxable income, and (2) a State Surtax of 3.0% levied on taxable profit between Euro 1.5 million and Euro 7.5 million, of 5.0% levied on taxable profit between Euro 7.5 million and Euro 35 million and of 9% levied on taxable profit in excess of Euro 35 million, resulting in a maximum aggregate tax rate of approximately 31.5%, for taxable profit with surpass Euro 35 million. In the calculating of taxable income, to which is applied above mentioned tax rate, income and expenses not deductible for tax purposes are added to or deducted from the accounting results.

According to the applicable legislation, the tax statements are subject to revision and correction by the fiscal authorities during a period of four years (five for Social Security) except if there have been fiscal losses, or if fiscal benefits have been granted, or if audits, claims or impeachments are being performed, in which case, depending on the circumstances, those periods may be extended or suspended.

10. State and other public entities

On December 31, 2021 and 2020, the debtor and creditor balances in respect of State and Other Public Entities are as follows:

				Euro
	2021			2020
	Receivable	Payable	Receivable	Payable

Current taxes
Operations in Portugal
Value-added tax	-	7,197	-	10,309
Income taxes	3,506	30,018	4,651	30,145
Personnel income tax witholdings	-	27,979	-	24,082
Social Security Contributions	-	71,734	-	68,429
Other	-	-	-	119
	3,506	136,927	4,651	133,083

As a tax loss was calculated for the years 2020 and 2021, the current tax above only reflects the autonomous taxation that is levied on expenses with light vehicles and representation expenses.

11. Shareholders' equity

11.1. Share Capital

As at December 31, 2021, the Company's share capital was fully paid and amounted to Euro 26,895,375 and was represented by 896,512,500 common shares with a nominal value of 3 cents of Euro each.

11.2. Own shares

As of December 31, 2021 and 2020, the detail of this caption is as follows:

		Euro
	2021	2020

Shares held by PHAROL	164,809,193	184,873,844
	164,809,193	184,873,844

As of December 31, 2021 and 2020, PHAROL held 74,689,552 and 74,822,140 treasury shares, respectively, corresponding to 8.33% and 8.35% of the share capital PHAROL.

11.3. Legal reserve

Portuguese law establishes that at least 5% of each annual profit must be allocated to a legal reserve until this reserve equals the minimum requirement of 20% of share capital. This reserve is not available for distribution to shareholders but may be capitalized or used to absorb losses, once all other reserves and retained earnings have been exhausted.

As at December 31, 2021, the legal reserve was already fully incorporated in accordance with Portuguese law and amounted to Euro 6,773,139.00.

11.4. Other reserves

The composition and the movements effected in this item during the years of 2021 and 2020 are asfollows:

				Euro

		Reserves
		for treasury
		shares
	Free reserve	cancelled	Own shares	Total
Balance as at 1 January 2020	75,470,005	6,970,320	181,842,907	264,283,232
Transfer to reserves for use in own shares	(3,030,937)		3,030,937	-
Transfer to retained earnings	-	-	-	-
Balance as at 31 December 2020	72,439,068	6,970,320	184,873,844	264,283,232
Transfer to reserves for use in own shares	20,064,651	-	(20,064,651)	-
Transfer to retained earnings	-	-	-	-
Balance as at 31 December 2021	92,503,718	6,970,320	164,809,194	264,283,232

11.5. Adjustments to financial assets

During the fiscal years of 2021 and 2020 the movements under this item were as follows:

			Euro
	Currency translation adjustments	Other changes in shareholders' equity	Total
Balance as at 1 January 2020	(110,264,486)	(66,310,111)	(143,295,504)
Equity method (Note 6)	(25,322,817)	76,495,926	51,173,109
Balance as at 31 December 2020	(135,587,303)	10,185,815	(92,122,395)

Equity method (Note 6)	340,866	(71,033,034)	(70,692,167)
Balance as at 31 December 2021	(135,246,437)	(60,847,219)	(162,814,562)

11.6. Application of earnings

Considering that in the year ended December 31, 2021 a negative result of Euros 2.355.645 was obtained, the Board of Directors of PHAROL proposes that it be transferred to the Company's Retained Earnings.

The negative result of Euros 14,316,500 obtained on 2020 was transferred to the Company's Retained Earnings.