Annual / Quarterly Financial Statement • Jul 14, 2016
Annual / Quarterly Financial Statement
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Portugal Telecom International Finance B.V. – under Judicial Reorganization Amsterdam, the Netherlands
SPECIAL PURPOSE FINANCIAL STATEMENTS 2015
| Contents | Page |
|---|---|
| Director's report | 3 |
| Status of these special purpose financial statements | 3 |
| Balance Sheet for the Financial year ended December 31, 2015 and 2014 | 13 |
| Income Statement for the Financial year ended December 31, 2015 and 2014 | 14 |
| Statement of Other Comprehensive Income for the Financial year ended December 31, 2015 and 2014 |
15 |
| Statements of Changes in Equity for the Financial year ended December 31, 2015 and 2014 |
16 |
| Cash Flow Statement for the Financial year ended December 31, 2015 and 2014 | 17 |
| Notes to the special purpose financial statements as of December 31, 2015 | 18 |
| Structure and governance corporate practice | 44 |
| Independent Auditors' Report (Appendix I) | 47 |
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
The Board of Managing Directors herewith submits the special purpose financial statements of Portugal Telecom International Finance B.V. – under judicial reorganization (the "Company" or "PTIF") for the financial year ended December 31, 2015.
The Company is engaged in holding and financing activities for the companies of Oi S.A. – under judicial reorganization (Oi) group. Its ultimate parent company is Oi, a company incorporated under the laws of Brazil. Before the sale of PT Portugal, SGPS, S.A. ("PT Portugal") in June 2015, the Company was engaged in financing activities for the PT Portugal business.
During the period under review, the Company recorded a loss of EUR 317,662,399 (2014: loss EUR 420,468,828), which is set out in detail in the attached income statement.
The Company has prepared two sets of financial statements over 2015, one based on Dutch law and GAAP and one based on the International Financial Reporting Standards as adopted by the European Union ("IFRS"). The special purpose financial statements included in this report are prepared in accordance with IFRS for Portuguese filing purposes. For Dutch statutory reporting purposes, the Company is preparing its annual accounts in accordance with Dutch law and accounting principles. The Company's unaudited 2015 Dutch statutory annual accounts dated March 3, 2016 have been filed with the Dutch trade register on May 3, 2016.
For the purposes of article 245 of the Portuguese Securities Code, the members of the Board of Managing Directors of Portugal Telecom International Finance B.V. – under judicial reorganization hereby declare, in their capacity as Managing Director, that to the best of their knowledge:
In April 2014, as part of the business combination between Oi and Pharol SGPS S.A. (former Portugal Telecom, SGPS, S.A., "Pharol"), a capital increase of Oi was approved, which was partially paid-in through the assignment, by Pharol, of all the shares issued by PT Portugal. As part of this transaction the Company became a fully subsidiary of PT Portugal, and therefore an indirect subsidiary of Oi.
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
On December 9, 2014, Oi, Altice Portugal S.A. ("Altice Portugal") and Altice S.A. executed a Share Purchase Agreement pursuant to which Oi has agreed to sell, and Altice Portugal has agreed to buy, all of the shares of PT Portugal (the "PT Portugal Sale"), the direct parent of the Company. The closing under the Share Purchase Agreement was conditional on, among other things, (a) the completion of a corporate reorganization to be implemented by Oi to spin-off the operations to be transferred as well as to spin-off PT Portugal's investments which were not to be included in the sale (including the Company), (b) the release of PT Portugal from its obligations under the EUR 400,000,000 notes issued on July 26, 2012 under the PTIF and Portugal Telecom, SGPS, S.A. EUR 7,500,000,000 Euro Medium Term Note Programme ("Program") and (c) obtaining the necessary competition and regulatory authorizations in accordance with applicable laws and regulations.
On June 2, 2015, Oi completed the sale process of PT Portugal to Altice S.A. and as part of this transaction the Company became a directly subsidiary of Oi. Following this transaction all the financial activity between the Company and PT Portugal (except Africa and Timor companies, which remained at Oi group) was settled and the main activity of the Company consist of financing Oi Group.
Since December 31, 2014, the Company entered into the main following transactions:
-On March 23, 2015, as scheduled, the Company repaid to a related party an amount of EUR 875,000,000 of notes originally issued on September 23, 2013 for an amount of EUR 2,438,000,000 a fixed interest rate of 2.16%. On the same date, PT Portugal repaid commercial paper to the Company in a total principal amount of EUR 875,000,000.
-On March 27, 2015, the Company entered into an assignment agreement with PT Portugal, under which PT Portugal has transferred to the Company, on the same date, EUR 200,000,000 securities issued by Rio Forte Investments S.A., together with all its rights and obligations under such bonds, in return for their implied market value, determined as defined under the abovementioned assignment agreement.
-On March 30, 2015, all the securities issued by Rio Forte Investments S.A. that were held by the Company were transferred to Pharol in exchange for 47,434,872 Oi common shares and 94,869,744 Oi preferred shares represented by ADSs, under an Exchange Agreement entered into by Oi, Telemar Participações S.A., PT SGPS, Pharol and the Company.
-Effective April 13, 2015: (i) the Company redeemed its 2,566 notes with principal amount of EUR 1,000,000 each and maturity date on February 15, 2016 that were held by a related party; and (ii) the 2,566 bonds with principal amount of EUR 1,000,000 each and maturity date on February 15, 2016, that were held by the Company, were redeemed.
-On June 2, 2015, as part of the PT Portugal Sale, all the debt then due to the Company by PT Portugal and any of its subsidiaries, in the total principal amount of EUR 4,724,096,177 including interest was repaid. Available cash was used to subscribe Notes issued by Oi Brasil Holdings Cöoperatief U.A. – under judicial reorganization ("Oi Coop").
-On June 3, 2015, the Company set out the right of any holder of the 2016 Notes in principal of EUR 400,000,000 to exercise the option to redeem their Notes on July 14, 2015.
-On June 22 2015, part of the Company notes maturing in February 2016, bearing interest at 5.625% and the notes maturing in March 2017, bearing interest at 5.242% were exchanged for cash or for newly issued notes of Oi Coop, bearing interest at 5.625% per annum and maturing in 2021. The Company bought back a total of EUR 56,925,000 of notes maturing in February 2016 and EUR 115,877,000 of notes maturing in March 2017.
-On July 1 and on July 14, 2015, the Company redeemed the aggregate nominal value of EUR 65,000,000 and EUR 103,793,000 of the 2016 Notes respectively upon the exercise by the noteholders of their option right.
-On October 8, 2015, the Company exchanged all Oi preferred shares for common shares at a ratio of 0.9211, under an exchange offer launched by Oi. After this transaction the Company became entitled to 26,963,878 ADSs representative of 134,819,393 Oi common shares.
-On December 4, 2015, the Company canceled EUR 11,500,000 of its notes maturing in February 2016, bearing interest at 5.625% that were bought back by Oi.
On June 20, 2016, Oi, together with its direct or indirect wholly owned subsidiaries Oi Móvel S.A. – under Judicial Reorganization ("Oi Móvel"), Telemar Norte Leste S.A. – under Judicial Reorganization ("Telemar"), Copart 4 Participações S.A – under Judicial Reorganization ("Copart 4"), Copart 5 Participações S.A. – under Judicial Reorganization ("Copart 5"), PTIF and Oi Coop (the "Oi Companies") filed a request for judicial reorganization of the Oi Companies with the Court of the 7th Corporate Court of the State of Rio de Janeiro, pursuant to Art. 51 and followings of Law No. 11,101/05 and Art. 122, unique paragraph, of the of Law No. 6,404/76 (Brazilian Corporation Law), pursuant to an urgent measure approved by the Oi's Board of Directors and the other authorized governing bodies of the other Oi Companies, which received distribution number 0203711-65.2016.8.19.0001 ("Judicial Reorganization Proceeding").
The judicial reorganization, regulated by Law No. 11,101/2005, is a process aimed at encouraging the turn-around of companies in a transitional economical and financial crisis. It has the objective of preserving the economical activity, the creation of jobs and the social function of the company whilst and seeking to foster direct collaboration and participation of creditors and judicial authorities in a company's reorganization. Under judicial supervision, the debtor company negotiates with its creditors and prepares a judicial reorganization plan, which is submitted for the approval of the creditors and the Court.
Page 5
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
Upon the granting of the request for processing of Oi's judicial reorganization, all lawsuits and execution actions against the Oi Companies that requested net amounts and that are included in the judicial reorganization remain suspended for a period of 180 days. Such suspension is intended to preserve the Oi Companies as a going concern and allow it time to reorganize themselves and renegotiate their debts without having to deal with seizure acts over their assets. Also, as of the date of the granting of the request for processing of the judicial reorganization, a judicial administrator was designated to supervise the activities of the Oi Companies; periodically submitting information to the Court before which the judicial reorganization was processed. Although under the supervision of a judicial administrator, the management, the activities and the day-to-day operations of the Oi Companies were not modified - the main objective of the judicial reorganization is to maintain the business activities of the Oi Companies. After the judicial reorganization plan is approved by the creditors and it is confirmed by the relevant Court, the Oi Companies will remain under judicial reorganization for a period of 2 years.
On June 21, 2016, the foreign representative for Oi, Telemar, Oi Coop and Oi Móvel requested that the United States Bankruptcy Court for the Southern District of New York (i) recognize those companies' judicial reorganization cases in Brazil under 11 U.S.C. § 1517 and (ii) order provisional relief under 11 U.S.C. § 362, that would prevent creditors from initiating actions against such companies or their property located within the territorial jurisdiction of the United States and parties from terminating their existing U.S. contracts with the companies. On June 22, 2016, the U.S. Court entered an order granting the provisional relief and set a hearing for the chapter 15 recognition requests for July 21, 2016.
On June 23, 2016, the High Court of Justice of England and Wales fully recognized the judicial reorganization in respect of Oi, Telemar and Oi Móvel as a "foreign main proceeding" in accordance with the UNCITRAL Model Law on Cross-Border Insolvency (as set out in Schedule 1 to the Cross-Border Insolvency Regulations 2006 (S.I. 2006 No 1030)). The effect of such recognition as a foreign main proceeding is (i) that the commencement or continuation of proceedings (including enforcement actions) in England and Wales relating to those companies' assets, rights, obligations or liabilities are stayed from 23 June 2016; and (ii) the right to transfer, encumber or otherwise dispose of any assets of those companies is suspended.
On March 9, 2016, Oi disclosed a Material Fact by which it informed the market of the engagement of PJT Partners as financial advisor to assist Oi in evaluating financial and strategic alternatives to optimize its liquidity and debt profile.
On April 25, 2016, Oi disclosed a Material Fact informing the market of, among other matters, the execution of a non-disclosure agreement with Moelis & Company, who acts as advisor for a diverse ad hoc group of holders of the bonds issued by certain Oi Companies. Oi noted in the Material Fact that it intended to complete its restructuring quickly and believed that negotiations with this single ad hoc group would best facilitate a restructuring in a timely manner.
On May 16, 2016, Oi disclosed a Notice to the Market informing that, on that date, the Oi's Board of Directors had approved the start of negotiations by Oi's management in relation to the financial indebtedness of Oi and its affiliated companies. It was noted in such Notice to the Market that Oi and its
advisors has scheduled meetings to begin formal discussions with Moelis & Company, as advisor for a diverse ad hoc committee of holders of bonds issued by Oi and its subsidiaries, PTIF and Oi Coop.
In this scenario, Oi and its advisors had been discussing alternatives and proposals so as to achieve their proposed objectives. In parallel, Oi's Board of Directors has been following status of the discussions with the ad Hoc committee of creditors.
Pursuant to a Material Fact disclosed before the opening of the trading session on June 17, 2016, Oi announced relevant information about the status of the negotiations with creditors related to Oi Companies' financial debt, up to that date. As informed on such Material Fact, up to the date of the Material Fact, no agreement concerning the terms of a potential transaction had been reached, and although negotiations between the ad hoc creditors' committee and the Company were continuing, it was not possible to assure that such negotiations would continue in the future or that they would result in an agreement regarding the terms of a transaction.
On June 20, 2016, the Board of Directors of the Company met and, after considering the challenges which prevent the conclusion of the negotiations with the ad hoc group of creditors, as well as the challenges arising from the economical and financial situation of the Oi Companies (and in light of the maturity schedule of its financial debts) decided by unanimous voting to approve, as a matter of urgency, the filing of the request for judicial restructuring of the Oi Companies, as authorized by the sole paragraph of article 122 of Law No. 6,404/76.
On the same date, Oi disclosed a Material Fact informing that the request for judicial reorganization was the most appropriate course of action at that time to (i) preserve the continuity of its offering of quality services to its customers, within the rules and commitments undertaken with the Brazilian National Telecommunications Agency - ANATEL, (ii) preserve the value of the Oi Companies, (iii) maintain the continuity of operations and corporate activities in an organized manner that protects the interests of the Oi Companies and their subsidiaries, their customers, shareholders and other stakeholders, and (iv) protect the Oi Companies' cash and cash equivalents. The request for judicial reorganization also intended to adequately protect the Oi Companies against creditors while preserving the continuity of the Oi Companies' operations.
Oi also informed the market that the filing of the judicial reorganization was another step towards Oi's financial restructuring, and that the Company would continue working to secure new customers while maintaining its service and product sales to all market segments, in all of its distribution and customer service channels.
On June 21, 2016, the Office of the Public Prosecutor in Rio de Janeiro, Brazil issued an opinion on the judicial recovery proceeding requested by the Oi Companies, requesting that the relevant Brazilian Court grant the proceeding for court-supervised reorganization for all of the Oi Companies, order the secrecy of all personal information of the administrators and grant the petition for urgent relief.
On June 21, 2016, the Court of the 7th Corporate Court of the State of Rio de Janeiro, Brazil granted, in the judicial recovery proceeding requested by the Oi Companies, a request for injunctive relief to determine: (a) the suspension of all lawsuits and execution actions relating to claims included in the judicial reorganization against the Oi Companies, for a period of 180 days, in order to avoid the
imposition of judicial constraints during the period between the filing of the request for judicial recovery and the granting of its processing; and (b) an exemption from the requirement to present clearance certificates under any circumstance related to the Oi Companies, including for the exercise of their activities (including any debt clearance certificate regarding revenues managed by ANATEL and clearance certificate of distribution of bankruptcy and judicial claims).
On June 22, 2016, Oi announced that the United States Bankruptcy Court for the Southern District of New York entered an order granting the provisional relief requested by the foreign representative of Oi, Telemar, Oi Coop and Oi Móvel in their U.S. chapter 15 cases that were filed on June 21, 2016.
On June 23, 2016, Oi announced that the High Court of Justice of England and Wales granted recognition orders in respect of Oi, Telemar and Oi Móvel providing that (i) the commencement or continuation of proceedings (including any enforcement actions) in England and Wales relating to the assets, rights, obligations and liabilities of such companies are stayed from 23 June 2016; and (ii) the right to transfer, encumber or otherwise dispose of any assets of those companies is suspended.
On June 27, 2016, Syzygy Capital Management Ltd. filed with Dutch Courts an insolvency (involuntary bankruptcy) proceeding against Oi Coop, based on the contractual default, by Oi Coop, related to the bonds issued in the aggregate principal of US\$800,000.
On June 29, 2016, the Judgment of the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro granted the processing of the request for the judicial reorganization of the Oi Companies, determining, among other measures, in particular:
a) To request that ANATEL present, within five days, up to 5 names of legal entities with competence and expertise on the subject to be evaluated for appointment as trustee;
b) The ratification of the decision to grant an emergency measure to exempt the Oi Companies from the requirement to present clearance certificates for the exercise of their activities;
c) The ratification of the decision to grant an emergency measure in regards to the suspension of all lawsuit and execution actions for 180 business days;
d) the suspension of the effectiveness of clauses inserted in contracts signed by the Oi Companies that cause the termination of such agreements due to the request for judicial reorganization;
e) permission for the Oi Companies to participate in all forms of bidding processes;
f) that the Oi Companies add "in judicial reorganization" after their respective business names, pursuant to Law No. 11,101 / 05;
g) the suspension of publicity surrounding protests and enrollment in the credit protection agencies, with respect to the Oi Companies, for a period of 180 business days;
h) the presentation by the Oi Companies of monthly statements of accounts throughout the judicial reorganization process, under penalty of dismissal of its officers;
i) that all Presidencies and General Internal Affairs of Justice of Brazil (Superior, State and Federal Courts), and Internal Affairs of the Regional Courts and Superior Labor Court are officiated, and inform of the suspension of lawsuits, in accordance with the terms described in the decision, and requesting notice from the lower courts, in the sense that:
i) the eligibility of loans subject to judicial reorganization shall be formalized in accordance with Law No. 11,101 / 05, not through an Official Letter, but rather by formal request of the creditor itself, as instructed in the appropriate debt clearance certificate, and
ii) the ongoing lawsuits, as plaintiffs or defendants, that demand a gross amount, as provided in Art.6, paragraph 1 of Law No. 11,101 / 05, shall continue the judgment in which they are being processed until execution; and the jurisdictional provisions reflecting asset constriction or in connection with a decision to block or pledge gross amounts that involve any kind of asset loss of the applicants or that interferes with the ownership of goods related to their business activity shall also be suspended, with the court processing the judicial reorganization being response for analyzing the specific case; and
j) the creditors may at any time request the convening of a General Meeting to establish a creditors committee or replace its members, subject to the provisions of Law No. 11,101 / 05.
The Court also ruled that the Oi Companies shall present their recovery plan within 60 business days of publication of the decision, which shall comply with the requirements of Law No. 11,101/05.
Finally, the Company informed that the petition where the request for a judicial reorganization was made and the whole of the decisions that approved (i) the Emergency Measure, by the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro, (ii) the Provisional Relief, by the United States Bankruptcy Court for the Southern District of New York, and also (iii) the processing of the request for the judicial reorganization filed with the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro, are available on Oi's website (www.oi.com.br/ri), in the IPE Module of the CVM's Empresas.NET system (www.cvm.gov.br), and on BM&FBovespa website (www.bmfbovespa.com.br), and such documents were filed with the Securities and Exchange Commission, as stated in Form 6-K.
The Company's special purpose financial statements for the year ended December 31, 2015 have been prepared assuming that the Company will continue as a going concern, based on management's assessment of (i) the achievement of reaching an agreement with a certain majority of the creditors of the Oi group in the judicial reorganization procedure (ii) the approval of a judicial reorganization plan by a certain majority of its creditors and the confirmation of such plan by the Court, (iii) Oi's declaration to
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Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
maintain its financial interest in and support to the Company in the foreseeable future, and (iv) other forecasts for the Oi group.
The judicial reorganization is aimed at the continuation of Oi and the Oi group (including the Company), as a going concern. Based upon the information available to it, the Company has no reason to believe that it will not be possible to reach agreement with a certain majority of the creditors of the Oi group. Furthermore, the Board of Directors have a reasonable expectation that the Oi group can carry on their business and that their contracts will remain in force throughout the duration of the judicial reorganization. The going concern of the Company is ultimately depending on the successful outcome of the judicial reorganization procedure in relation to the financial indebtedness (restructuring), the continued financial support of Oi to the Company, and the realization of other forecasts of the Oi group. These conditions and circumstances indicate that a material uncertainty exists that may cast significant doubts as to the Company's ability to continue as a going concern.
Since December 31, 2015, the Company entered into the following main transactions:
On February 5, 2016, as scheduled, the Company repaid the amount of EUR 561,476,093.75 of notes, being EUR 531,575,000 of principal and EUR 29,901,093.75 of interest. The notes were issued by the Company in February 2011, in the original amount of EUR 600,000,000 at a fixed interest rate of 5.625%, for a 5-year period. The amount repaid represents 100% of the outstanding value, as the Company prepaid EUR 68,425,000.00 of principal during 2015.
On March 3, 2016, pursuant to the terms of paragraph a), number 1 of article 4 of the Portuguese Securities Commission ("CMVM") Regulation no. 5/2008, the Company resolved by its sole shareholder (i) the termination of the office of Trust International Management (T.I.M.) B.V, Wilhelmus Joseph Langeveld and Johannes Petrus Vincentius Gerardus Visser as Managing Director B; (ii) the termination of the office of Bayard de Paoli Gontijo and Flavio Nicolay Guimarães as Managing Director A; and (iii) the appointment of Cristina Mocellin as Managing Director B of the Company.
On March 9, 2016, Oi announced that it had retained PJT Partners as financial advisor to assist the Oi Group, including PTIF) in assessing financial and strategic alternatives to optimize the Oi Group's liquidity and debt profile. On April 25, 2016, Oi announced that it has entered into a customary nondisclosure agreement with an advisor to a diverse ad hoc group of holders of the bonds issued by Oi and certain of its affiliated companies, including PTIF, as an initial step toward discussions regarding the potential terms of a restructuring. On May, 16 2016, Oi announced that its Board of Directors approved the start of negotiations in relation to the financial indebtedness (restructuring) of the Oi Group with Moelis&Company as representative of the ad hoc group of bondholders. Finally, on June 17, 2016 Oi announced that it had presented on June 6, 2016 to the representative of the bondholders a term sheet of a potential debt restructuring and received a counterproposal by June 11, 2016, to which Oi did not responded until that date.
On June 20, 2016, Oi announced that, along with some of its wholly owned direct and indirect subsidiaries, including the Company, have filed a request for judicial reorganization with the Court of the State of Rio de Janeiro, pursuant to Art. 51 of Law No. 11,101/05 and Art. 122 of the Brazilian
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
Corporations Law, pursuant to an urgent measure approved by the Oi's Board of Directors and the other authorized governing bodies of the Oi Companies at meetings held on that date.
On June 22, 2016, PTIF was notified by the trustee under the trust deed dated 17 December 1998 between PTIF, Oi and the trustee (as amended or supplemented from time to time) that the request for judicial reorganization (filed with the Court of the State of Rio de Janeiro on June 20, 2016) constitutes an event of default under the trust deed. Further that the request for judicial reorganization is, in the trustee's opinion, materially prejudicial to the interests of the noteholders and, accordingly, an event of default has occurred under the trust deed. For accounting and disclosure purposes, the long-term portion of bonds and loans were reclassified to current liabilities under the balance sheet as of December 31, 2015.
On June 27, 2016, Syzygy Capital Management Ltd. filed with Dutch Courts an insolvency (involuntary bankruptcy) proceeding against Oi Coop, based on the contractual default, by Oi Coop, related to the bonds issued in the aggregate principal of US\$800,000. Financial risk management
There are no concentrations of foreign currency risk at the balance sheet date.
The Company incurs interest rate risk on interest bearing receivables (in particular those included in financial assets, securities and cash) and on interest bearing non-current and current liabilities (including borrowings).
With respect to floating-interest rate loans and receivables, the Company incurs risks regarding future cash flows. In addition, the Company incurs risks on fixed interest loans obtained, notes issued and receivables with respect to the fair value due to changes in market interest rates. No financial derivatives for interest rate risk have been contracted with regard to the receivables or debt instruments.
The Company incurs credit risks on loans granted to group companies, as well as to the shareholder. These counterparties do not have a history of non-performance incidents. Please refer to Note 1 – Judicial Reorganization.
The Company holds shares of Oi, which are listed on BM&FBovespa and are subject to market fluctuation (refer to note 14).
Please refer to Note 1 - Judicial Reorganization.
In accordance with Article 14 of the Articles of Association, profit shall be at the disposal of the Annual General meeting of Shareholders. Profit distribution can only be made to the extent that Shareholder's Equity exceeds the issued and paid-up share capital and legal reserves. Dutch law stipulates that distributions may only be made to the extent the Company's equity is in excess of the reserves it is required to maintain by law and its Articles of Association. Moreover, no distributions may be made if
the Management Board is of the opinion that, by such distribution, the Company will not be able to fulfill its financial obligations in the foreseeable future. Any appropriation of result will be based on the Company's Dutch statutory annual accounts.
The loss sustained by the Company during the year under review will be debited to the other reserve. This proposed appropriation of the result has not been reflected in these financial.
No audit committee was appointed for the Company. The Company shares the same audit committee of the shareholder Oi.
C. Mocellin M.N. Schroeder
Amsterdam, July 14, 2016
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Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
(in EUR)
| Notes | December 31, 2015 |
December 31, 2014 |
|
|---|---|---|---|
| ASSETS | |||
| Financial fixed assets Commercial paper, loans and notes to group |
5 | ||
| companies | 5.1 | 3,703,452,932 | 4,312,840,000 |
| Prepaid issuance costs | 5.2 | 10,713,074 | 14,623,813 |
| 3,714,166,006 | 4,327,463,813 | ||
| Current assets | |||
| Commercial paper, loans and notes to group | |||
| companies | 6 | 113,438,391 | 3,927,150,000 |
| Receivables | 7 | 631,279,097 | 318,635,403 |
| Available for sale financial assets Cash and cash equivalents |
8 | 76,126,141 3,700,780 |
-- 13,640,403 |
| 9 | 824,544,409 | 4,259,425,806 | |
| TOTAL ASSETS | 4,538,710,415 | 8,586,889,619 | |
| EQUITY AND LIABILITIES | |||
| Shareholders' Equity | 10 | ||
| Issued and paid--up capital | 21,000 | 21,000 | |
| Share premium | 752,090,368 | 252,090,368 | |
| Other reserves | (420,468,828) | -- | |
| Result for the year | (317,662,399) | (420,468,828) | |
| 13,980,141 | (168,357,460) | ||
| Non-current Liabilities | |||
| Euro Medium Term Note Programme | 11 | -- | 4,350,000,000 |
| Revolving credit facilities / loan | 12 | -- | 54,983,665 |
| -- | 4,404,983,665 | ||
| Current Liabilities | |||
| Euro Medium Term Note Programme | 11 | 4,396,905,000 | -- |
| Revolving credit facilities / loans | 12 | -- | 4,168,331,156 |
| Interest received in advance | -- | 38,106,770 | |
| Interest EMTN / credit facilities / loans | 11 | 126,849,702 | 141,499,365 |
| Corporate income tax | 811,173 | 415,674 | |
| Other debts and accruals | 164,399 | 1,910,449 | |
| TOTAL EQUITY AND LIABILITIES | 4,524,730,274 4,538,710,415 |
4,350,263,414 8,586,889,619 |
|
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
| Notes | 2015 | 2014 | |
|---|---|---|---|
| Interest income on commercial papers / loans | 5 | 240,110,834 | 312,970,294 |
| Other interest income | 570,735 | 18,364,203 | |
| Financial expenses | 11 | (262,997,392) | (310,544,871) |
| Withholding tax on interest on deposits | (24,149) | (806,759) | |
| Exchange differences | 613,431 | 449 | |
| Amortization of prepaid issuance costs | 5 | (4,326,739) | (4,680,286) |
| Financial income and expenses | (26,053,280) | 15,303,030 | |
| General and administrative expenses | 13 | 10,222,997 | 31,282,222 |
| Operating expenses | 10,222,997 | 31,282,222 | |
| OPERATING RESULT | (36,276,277) | (15,979,192) | |
| Result on investments | 14 | (277,036,471) | (402,410,957) |
| RESULT BEFORE TAXATION | (313,312,748) | (418,390,149) | |
| Income tax expense | 16 | (4,349,651) | (2,078,679) |
| NET RESULT AFTER TAXATION | (317,662,399) | (420,468,828) |
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Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
| 2015 | 2014 | |
|---|---|---|
| Loss for the period | (317,662,399) | (420,468,828) |
| TOTAL COMPREHENSIVE LOSS FOR THE PERIOD | (317,662,399) | (420,468,828) |
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
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| Sha re C apit al 2 1.00 0,00 eur os |
Mar co N orci Sch roed er |
|---|---|
| red he N ethe rlan ds C ham ber of Reg iste at T |
Rel ffice Inve atio ns O stor r |
| Com ce C erci al mer omm |
il: in @o i.ne t.br Ema vest |
| Reg iste r wi th t he n umb er 3 410 806 0 |
Tel. : +5 5 21 313 1-29 18 |
| umb Port Tax er N er: 7 10 2 22 1 49 ugu ese pay |
Fax: +55 21 313 1-11 55 |
| Note | 2015 | 2014 | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Loss before income tax and social contribution | (313,312,748) | (418,390,149) | |
| Non-cash items | |||
| Charges, interest income and inflation adjustments | (168,505,093) | 2,228,563 | |
| (481,817,841) | (416,161,585) | ||
| Changes in assets and liabilities | |||
| Taxes | (4,349,651) | (2,078,679) | |
| Available for sale financial assets | 294,589,043 | (294,589,043) | |
| Other assets and liabilities | (64,386,030) | (6,389,441) | |
| 225,853,362 | (303,057,163) | ||
| Net cash generated by operating activities | (255,964,749) | (719,218,748) | |
| Cash flows from investing activities | |||
| Due from related parties - disbursements | (4,901,115,391) | (12,467,700,000 ) | |
| Due from related parties - receipts | 9,324,214,068 | 11,272,700,000 | |
| Net cash used in investing activities | 4,423,098,677 | 1,195,000,000 | |
| Cash flows from financing activities | |||
| Repayment of principal of borrowings, financing and leases |
(4,176,409,821) | 514,226,713 | |
| Net cash used in financing activities | (4,176,409,821) | 514,226,713 | |
| Foreign exchange differences on cash equivalents | (664,000) | -- | |
| Cash flows for the year | (9,939,623) | (1,399,992,035) | |
| Closing balance | 9 | 3,700,780 | 13,640,403 |
| Opening balance | 9 | 13,640,403 | 1,413,632,438 |
| (9,939,623) | (1,399,992,035) |
| Registered at The Netherlands Chamber of Commerce Commercial |
Investor Relations Officer |
|---|---|
| Email: [email protected] | |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
Portugal Telecom international Finance B.V. – under judicial reorganization (the "Company" or "PTIF"), having its statutory seat in Amsterdam and registered office at Naritaweg 165, 1043 BW, Amsterdam, the Netherlands, is engaged in holding and financing activities for the companies of the group of its ultimate parent company Oi S.A. – under judicial ("Oi"), a company incorporated under the laws of Brazil.
The Company was incorporated on November 26, 1998.
On June 20, 2016, Oi, together with its direct or indirect wholly owned subsidiaries Oi Móvel S.A. – under Judicial Reorganization ("Oi Móvel"), Telemar Norte Leste S.A. – under Judicial Reorganization ("Telemar"), Copart 4 Participações S.A – under Judicial Reorganization ("Copart 4"), Copart 5 Participações S.A. – under Judicial Reorganization ("Copart 5"), PTIF and Oi Coop (the "Oi Companies") filed a request for judicial reorganization of the Oi Companies with the Court of the 7th Corporate Court of the State of Rio de Janeiro, pursuant to Art. 51 and followings of Law No. 11,101/05 and Art. 122, unique paragraph, of the of Law No. 6,404/76 (Brazilian Corporation Law), pursuant to an urgent measure approved by the Oi's Board of Directors and the other authorized governing bodies of the other Oi Companies, which received distribution number 0203711-65.2016.8.19.0001 ("Judicial Reorganization Proceeding").
The judicial reorganization, regulated by Law No. 11,101/2005, is a process aimed at encouraging the turnaround of companies in a transitional economical and financial crisis. It has the objective of preserving the economical activity, the creation of jobs and the social function of the company whilst and seeking to foster direct collaboration and participation of creditors and judicial authorities in a company's reorganization. Under judicial supervision, the debtor company negotiates with its creditors and prepares a judicial reorganization plan, which is submitted for the approval of the creditors and the Court.
Upon the granting of the request for processing of Oi's judicial reorganization, all lawsuits and execution actions against the Oi Companies that requested net amounts and that are included in the judicial reorganization remain suspended for a period of 180 days. Such suspension is intended to preserve the Oi Companies as a going concern and allow it time to reorganize themselves and renegotiate their debts without having to deal with seizure acts over their assets. Also, as of the date of the granting of the request for processing of the judicial reorganization, a judicial administrator was designated to supervise the activities of the Oi Companies; periodically submitting information to the Court before which the judicial reorganization was processed. Although under the supervision of a judicial administrator, the management, the activities and the day-to-day operations of the Oi Companies were not modified - the main objective of the judicial reorganization is to maintain the business activities of the Oi Companies. After the judicial reorganization plan is approved by the creditors and it is confirmed by the relevant Court, the Oi Companies will remain under judicial reorganization for a period of 2 years.
On June 21, 2016, the foreign representative for Oi, Telemar, Oi Coop and Oi Móvel requested that the United States Bankruptcy Court for the Southern District of New York (i) recognize those companies' judicial reorganization cases in Brazil under 11 U.S.C. § 1517 and (ii) order provisional relief under 11 U.S.C. § 362,
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
that would prevent creditors from initiating actions against such companies or their property located within the territorial jurisdiction of the United States and parties from terminating their existing U.S. contracts with the companies. On June 22, 2016, the U.S. Court entered an order granting the provisional relief and set a hearing for the chapter 15 recognition requests for July 21, 2016.
On June 23, 2016, the High Court of Justice of England and Wales fully recognized the judicial reorganization in respect of Oi, Telemar and Oi Móvel as a "foreign main proceeding" in accordance with the UNCITRAL Model Law on Cross-Border Insolvency (as set out in Schedule 1 to the Cross-Border Insolvency Regulations 2006 (S.I. 2006 No 1030)). The effect of such recognition as a foreign main proceeding is (i) that the commencement or continuation of proceedings (including enforcement actions) in England and Wales relating to those companies' assets, rights, obligations or liabilities are stayed from 23 June 2016; and (ii) the right to transfer, encumber or otherwise dispose of any assets of those companies is suspended.
On March 9, 2016, Oi disclosed a Material Fact by which it informed the market of the engagement of PJT Partners as financial advisor to assist Oi in evaluating financial and strategic alternatives to optimize its liquidity and debt profile.
On April 25, 2016, Oi disclosed a Material Fact informing the market of, among other matters, the execution of a non-disclosure agreement with Moelis & Company, who acts as advisor for a diverse ad hoc group of holders of the bonds issued by certain Oi Companies. Oi noted in the Material Fact that it intended to complete its restructuring quickly and believed that negotiations with this single ad hoc group would best facilitate a restructuring in a timely manner.
On May 16, 2016, Oi disclosed a Notice to the Market informing that, on that date, Oi's Board of Directors had approved the start of negotiations by Oi's management in relation to the financial indebtedness of Oi and its affiliated companies. It was noted in such Notice to the Market that Oi and its advisors has scheduled meetings to begin formal discussions with Moelis & Company, as advisor for a diverse ad hoc committee of holders of bonds issued by Oi and its subsidiaries, PTIF and Oi Coop.
In this scenario, Oi and its advisors had been discussing alternatives and proposals so as to achieve their proposed objectives. In parallel, Oi's Board of Directors has been following status of the discussions with the ad Hoc committee of creditors.
Pursuant to a Material Fact disclosed before the opening of the trading session on June 17, 2016, Oi announced relevant information about the status of the negotiations with creditors related to Oi Companies' financial debt, up to that date. As informed on such Material Fact, up to the date of the Material Fact, no agreement concerning the terms of a potential transaction had been reached, and although negotiations between the ad hoc creditors' committee and Oi were continuing, it was not possible to assure that such negotiations would continue in the future or that they would result in an agreement regarding the terms of a transaction.
On June 20, 2016, the Board of Directors of the Company met and, after considering the challenges which prevent the conclusion of the negotiations with the ad hoc group of creditors, as well as the challenges
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149 Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155
(in EUR)
arising from the economical and financial situation of the Oi Companies (and in light of the maturity schedule of its financial debts) decided by unanimous voting to approve, as a matter of urgency, the filing of the request for judicial restructuring of the Oi Companies, as authorized by the sole paragraph of article 122 of Law No. 6,404/76.
On the same date, Oi disclosed a Material Fact informing that the request for judicial reorganization was the most appropriate course of action at that time to (i) preserve the continuity of its offering of quality services to its customers, within the rules and commitments undertaken with the Brazilian National Telecommunications Agency - ANATEL, (ii) preserve the value of the Oi Companies, (iii) maintain the continuity of operations and corporate activities in an organized manner that protects the interests of the Oi Companies and their subsidiaries, their customers, shareholders and other stakeholders, and (iv) protect the Oi Companies' cash and cash equivalents. The request for judicial reorganization also intended to adequately protect the Oi Companies against creditors while preserving the continuity of the Oi Companies' operations.
Oi also informed the market that the filing of the judicial reorganization was another step towards the Company's financial restructuring, and that Oi would continue working to secure new customers while maintaining its service and product sales to all market segments, in all of its distribution and customer service channels.
On June 21, 2016, the Office of the Public Prosecutor in Rio de Janeiro, Brazil issued an opinion on the judicial recovery proceeding requested by the Oi Companies, requesting that the relevant Brazilian Court grant the proceeding for court-supervised reorganization for all of the Oi Companies, order the secrecy of all personal information of the administrators and grant the petition for urgent relief.
On June 21, 2016, the Court of the 7th Corporate Court of the State of Rio de Janeiro, Brazil granted, in the judicial recovery proceeding requested by the Oi Companies, a request for injunctive relief to determine: (a) the suspension of all lawsuits and execution actions relating to claims included in the judicial reorganization against the Oi Companies, for a period of 180 days, in order to avoid the imposition of judicial constraints during the period between the filing of the request for judicial recovery and the granting of its processing; and (b) an exemption from the requirement to present clearance certificates under any circumstance related to the Oi Companies, including for the exercise of their activities (including any debt clearance certificate regarding revenues managed by ANATEL and clearance certificate of distribution of bankruptcy and judicial claims).
On June 22, 2016, Oi announced that the United States Bankruptcy Court for the Southern District of New York entered an order granting the provisional relief requested by the foreign representative of Oi, Telemar, Oi Coop and Oi Móvel in their U.S. chapter 15 cases that were filed on June 21, 2016.
On June 23, 2016, Oi announced that the High Court of Justice of England and Wales granted recognition orders in respect of Oi, Telemar and Oi Móvel providing that (i) the commencement or continuation of proceedings (including any enforcement actions) in England and Wales relating to the assets, rights, obligations and liabilities of such companies are stayed from 23 June 2016; and (ii) the right to transfer, encumber or otherwise dispose of any assets of those companies is suspended.
On June 27, 2016, Syzygy Capital Management Ltd. filed with Dutch Courts an insolvency (involuntary bankruptcy) proceeding against Oi Coop, based on the contractual default, by Oi Coop, related to the bonds
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
issued in the aggregate principal of US\$800,000.On June 29, 2016, the Judgment of the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro granted the processing of the request for the judicial reorganization of the Oi Companies, determining, among other measures, in particular:
a) To request that ANATEL present, within five days, up to 5 names of legal entities with competence and expertise on the subject to be evaluated for appointment as trustee;
b) The ratification of the decision to grant an emergency measure to exempt the Oi Companies from the requirement to present clearance certificates for the exercise of their activities;
c) The ratification of the decision to grant an emergency measure in regards to the suspension of all lawsuit and execution actions for 180 business days;
d) the suspension of the effectiveness of clauses inserted in contracts signed by the Oi Companies that cause the termination of such agreements due to the request for judicial reorganization;
e) permission for the Oi Companies to participate in all forms of bidding processes;
f) that the Oi Companies add "in judicial reorganization" after their respective business names, pursuant to Law No. 11,101 / 05;
g) the suspension of publicity surrounding protests and enrollment in the credit protection agencies, with respect to the Oi Companies, for a period of 180 business days;
h) the presentation by the Oi Companies of monthly statements of accounts throughout the judicial reorganization process, under penalty of dismissal of its officers;
i) that all Presidencies and General Internal Affairs of Justice of Brazil (Superior, State and Federal Courts), and Internal Affairs of the Regional Courts and Superior Labor Court are officiated, and inform of the suspension of lawsuits, in accordance with the terms described in the decision, and requesting notice from the lower courts, in the sense that:
j) the creditors may at any time request the convening of a General Meeting to establish a creditors committee or replace its members, subject to the provisions of Law No. 11,101 / 05. The Court also ruled
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149 Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155
(in EUR)
that the Oi Companies shall present their recovery plan within 60 business days of publication of the decision, which shall comply with the requirements of Law No. 11,101/05.
Finally, the Company informed that the petition where the request for a judicial reorganization was made and the whole of the decisions that approved (i) the Emergency Measure, by the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro, (ii) the Provisional Relief, by the United States Bankruptcy Court for the Southern District of New York, and also (iii) the processing of the request for the judicial reorganization filed with the 7th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro, are available on Oi's website (www.oi.com.br/ri), in the IPE Module of the CVM's Empresas.NET system (www.cvm.gov.br), and on BM&FBovespa website (www.bmfbovespa.com.br), and such documents were filed with the Securities and Exchange Commission, as stated in Form 6-K.
The Company's special purpose financial statements for the year ended December 31, 2015 have been prepared assuming that the Company will continue as a going concern, based on management's assessment of (i) the achievement of reaching an agreement with a certain majority of the creditors of the Oi group in the judicial reorganization procedure (ii) the approval of a judicial reorganization plan by a certain majority of its creditors and the confirmation of such plan by the Court, (iii) Oi's declaration to maintain its financial interest in and support to the Company in the foreseeable future, and (iv) other forecasts for the Oi group.
The judicial reorganization is aimed at the continuation of Oi and the Oi group (including the Company), as a going concern. Based upon the information available to it, the Company has no reason to believe that it will not be possible to reach agreement with a certain majority of the creditors of the Oi group. Furthermore, the Board of Directors have a reasonable expectation that the Oi group can carry on their business and that their contracts will remain in force throughout the duration of the judicial reorganization. The going concern of the Company is ultimately depending on the successful outcome of the judicial reorganization procedure in relation to the financial indebtedness (restructuring), the continued financial support of Oi to the Company, and the realization of other forecasts of the Oi group. These conditions and circumstances indicate that a material uncertainty exists that may cast significant doubts as to the Company's ability to continue as a going concern.
No audit committee was appointed for the Company. The Company shares the same audit committee of the shareholder Oi.
The Company is a member of Oi group. The ultimate parent company of this group is Oi. The Company's financial statements are included in the consolidated financial statements of Oi.
Up to June 2015, the Company has subscribed Notes issued by PT Portugal SGPS, S.A. ("PT Portugal"). The Company has also subscribed commercial papers made available /by financial institutions. The commercial
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
papers have been issued by related parties for the financing of their activities. The conditions for the commercial papers are at arms' length. The Company issued Notes subscribed by CVTEL, which were sold to PT Portugal on 30 December, 2014.
Following the sale of PT Portugal to Altice, all financial transactions between the Company and PT Portugal, its subsidiaries (except Africa and Timor companies, which remained at Oi group) and CVTEL were settled/paid/received and the Company subscribed Notes issued by Oi Coop with a portion of the net cash received.
In applying the accounting policies and guidelines for preparing the financial statements, management makes a range of estimates and judgments that might be essential for the amounts disclosed in the financial statements. If necessary, the nature of these estimates and judgments, including the related assumptions, is disclosed in the notes to the Financial Statement items in question. Actual amounts may differ from these estimates. During 2015 management did not change any relevant criteria or judgment.
The Company's special purpose financial statements were prepared for Portuguese regulatory purposes, in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRS"), including all interpretations of the International Financial Reporting Interpretation Committee ("IFRIC") that were in effect on December 31, 2015, approved by the European Union. For Dutch statutory reporting purposes, the Company is preparing its annual accounts in accordance with Dutch law and accounting principles. The Company's unaudited 2015 Dutch statutory annual accounts dated March 3, 2016 have been filed with the Dutch trade register on May 3, 2016.
Assets and liabilities are stated at amortized cost, unless indicated otherwise.
The accounting policies have been consistently applied to all the years presented.
The special purpose financial statements are presented in Euros, which is the functional and presentation currency.
Receivables, liabilities and obligations denominated in foreign currency are translated at the exchange rates prevailing at balance sheet date. Transactions in foreign currency during the financial year are recognized in the special purpose financial statements at the exchange rates prevailing at transaction date. The exchange differences resulting from the translation as of balance sheet date, taking into account possible hedge transactions, are recorded in the profit and loss account.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155
(in EUR)
The commercial papers, bonds and notes stated under the financial fixed assets are initially recorded at fair value and subsequently at amortized cost, net of impairment.
Issuance costs of Euro Medium Term Notes and Exchangeable Bonds are capitalized and amortized on a straight-line basis, based on the term of the related Euro Medium Term Notes and Exchangeable Bond (refer to note 5).
At each balance sheet date, the Company tests whether there are any indications of assets being subject to impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An asset is subject to impairment if its carrying amount exceeds its recoverable amount; the recoverable amount is the higher of an asset's fair value less costs to sell and value in use. An impairment loss is recognized immediately in the income statement.
If it is established that a previously recognized impairment loss no longer applies or has declined, the increased carrying amount of the assets in question is not set any higher than the carrying amount that would have been determined had no asset impairment been recognized. A reversal of an impairment loss is recognized immediately in the income statement.
Receivables are recorded at fair value and then valued at amortized costs, net of allowances for doubtful accounts, determined individually. On initial recognition the fair value and the amortized cost equal the face value.
Available for sale financial assets relates to securities.
Securities that are held for trading are carried at fair value after initial recognition. Changes in the fair value are recognized directly in profit or loss.
Cash and cash equivalents include cash in hand, bank balances and deposits held at call with maturities of less than 12 months. Bank overdrafts, if any, are shown within borrowings in current liabilities on the balance sheet. Cash and cash equivalents are stated at face value.
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
The notes issued under the EMTN Programme are valued at nominal value and the amortized issuance costs have been accounted for as prepaid issuance costs and are presented under note 5 Financial Fixed Assets.
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost, being the amount received taking account of any premium or discount, less transaction costs.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest in the income statement over the period of the borrowings using the applicable interest method.
Short term liabilities are liabilities due within one year or less.
Profits or transactions are recognized in the year they are realized. Losses are recognized when foreseen.
Exchange rate differences arising upon the settlement or conversion of monetary items are recognized in the income statement in the period that they arise.
Costs are taken into account under the historical cost convention and allocated to the year concerned.
Amortization expenses are taken on issuance costs and compensated on the interest receipts.
Interest paid and received is recognized on a time-weighted basis, taking account of the effective interest rate of the assets and liabilities concerned.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
(in EUR)
Income tax is calculated on the profit/loss before tax in the income statement, taking into account any losses carried forward from previous financial years (where not included in deferred income tax assets) and tax‑exempt items, and plus non‑deductible expenses. Changes in deferred income tax assets and liabilities due to changes in the applicable tax rates are also taken into account.
The following new and revised standard and interpretation could be relevant for the Company and will become effective for annual financial periods beginning on and after January 1, 2016 and were not adopted in the preparation of these special purpose financial statements. The Company does not plan to early adopt these standards.
IFRS 9 Financial Instruments replaces the guidance existing in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance in the classification and measurement of financial instruments, including a new expected credit loss model for the calculation to calculate the impairment loss on financial assets and the new requirements on hedge accounting. The standard maintains the existing guidance on the recognition and derecognition of financial instruments of IAS 39. This standard is effective for years beginning on or after January 1, 2018, with early adoption permitted. The Company is assessing the impact of IFRS 9 on its set of financial statements.
Market risk arises from the Company's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). Furthermore, the Company has shares of Oi, which are listed on BM&FBovespa and are subject to market fluctuation.
The Company mainly operates in the European Union. Consequently, the Euro is its functional currency and reporting currency. The Company does not hold any material positions other than its functional currency, reason why it does not incur in any currency risk. Therefore, the Company does not have any hedge positions.
The financial statements are presented in Euros, which is the functional and presentation currency. Therefore, there are no concentrations of foreign currency risk at balance sheet date.
Receivables, liabilities and obligations denominated in foreign currency are translated at the exchange rates prevailing at balance sheet date. Transactions in foreign currency during the financial year are recognized in the financial statements at the exchange rates prevailing at transaction date. The exchange differences
| Portuguese Taxpayer Number: 710 222 149 | Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155 |
|---|---|
(in EUR)
resulting from the translation as of balance sheet date, taking into account possible hedge transactions, are recorded in the profit and loss account. This consists of trade payables and Timor Telecom loan in USD and USD denominated bank accounts (2015: EUR 613,430, 2014: EUR 449).
The Company incurs interest rate risk on interest‑bearing receivables (in particular those included in financial assets, securities and cash) and on interest bearing non-current and current liabilities (including borrowings). At the end of 2015, all of the company's borrowings, namely EMTN Bonds, were at fixed interest rates, therefore, with no risk interest rate risks.
Where floating-interest receivables are concerned, the Company incurs risk regarding future cash flows. In addition, the Company incurs risks on fixed‑interest loans and receivables with respect to the fair value due to changes in the market rate of interest. No financial derivatives for interest rate risk are contracted with regard to the receivables or debt instruments.
The Company incurs credit risks on loans granted to Oi group companies. These counterparties do not have a history of non-performance.
The table below summarizes our financial assets and financial liabilities carried at fair value at December 31, 2015 and 2014.
| 2015 | 2014 | ||||
|---|---|---|---|---|---|
| Accounting measurement |
Carrying amount |
Fair value | Carrying amount |
Fair value | |
| Assets | |||||
| Cash and banks | Fair value | 3,700,780 | 3,700,780 | 13,640,403 | 13,640,403 |
| Due from related parties | Amortized cost | 3,827,604,397 3,827,604,397 | 4,374,557,813 4,374,557,813 | ||
| Available for sale financial asset | Fair value | 76,126,141 | 76,126,141 | -- | -- |
| Receivables | Amortized cost | 631,279,097 | 631,279,097 | 318,635,403 | 318,635,403 |
| Liabilities | |||||
| Trade payables (iv) | Amortized cost | 164,399 | 164,399 | 1,910,449 | 1,910,449 |
| Borrowings and financing | Amortized cost | 4,523,754,702 2,778,894,981 | 8,752,920,956 8,923,732,456 |
| Share Capital 21.000,00 euros |
|---|
| Registered at The Netherlands Chamber of |
| Commerce Commercial |
| Register with the number 34108060 |
| Portuguese Taxpayer Number: 710 222 149 |
(in EUR)
5.1. Commercial paper loans and notes to group companies
Movements in commercial paper, loans and notes to group companies can be broken down as follows:
| Commercial paper, loans and notes to PT Portugal |
Commercial paper, loans and notes to Oi Group Companies |
Total | |
|---|---|---|---|
| Opening balance January 2015 | 4,303,550,000 | 9,290,000 | 4,312,840,000 |
| Additions | 59,800,000 | 4,728,877,000 | 4,788,677,000 |
| Repayments | (4,363,350,000) | (937,938,704) | (5,301,288,704) |
| Reclassification to short-term | -- | (96,775,364) | (96,775,364) |
| Closing balance December 2015 | -- | 3,703,452,932 | 3,703,452,932 |
As of December 31, 2015 the Company recorded EUR 124,339,142 (refer to Note 7) related with accrued interests receivable from group companies and total interests gains during 2015 amounted to EUR 240,110,834.
The Company's commercial paper, loans and notes to Portugal Telecom SGPS S.A. ("PT SGPS" or "Pharol") group companies can be specified as follows:
Commercial papers issued by PT SGPS can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | -- | 1,209,000,000 |
| Repayment in financial year | -- | (1,209,000,000) |
| Closing balance | -- | -- |
The Company's commercial paper, loans and notes to PT Portugal and Oi group companies can be specified as follows:
| Name | 2015 | 2014 |
|---|---|---|
| Commercial papers issued by PT Portugal | -- | 3,490,150,000 |
| Commercial papers issued by MEO,Serviços de Comunicações e | ||
| Multimédia,SA (MEO)(ex-PTC) | -- | 813,400,000 |
| Loan to Timor Telecom S.A. | 500,000 | 9,290,000 |
| Loan to Oi Coop | 3,702,952,932 | -- |
| 3,703,452,932 | 4,312,840,000 | |
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
Commercial Papers issued by PT Portugal Commercial papers issued by PT Portugal can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | 3,490,150,000 | 1,737,950,000 |
| Issued in financial year | 59,800,000 | 8,919,500,000 |
| Reclassification to short term (-) / long term (+) | -- | (1,360,150,000) |
| Repayment in financial year | (3,549,950,000) | (5,807,150,000) |
| Closing balance | -- | 3,490,150,000 |
The commercial papers issued by MEO can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | 813,400,000 | 3,086,750,000 |
| Issued in financial year | -- | 982,200,000 |
| Repayment in financial year | (813,400,000) | (3,255,550,000) |
| Closing balance | -- | 813,400,000 |
The commercial papers issued by MEO can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | -- | 230,000,000 |
| Repayment in financial year | -- | (230,000,000) |
| Closing balance | -- | -- |
The loan to Timor Telecom S.A. can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | 9,290,000 | 10,290,000 |
| Issued in financial year | -- | -- |
| Reclassification to short term (-) / long term (+) | (7,790,000) | -- |
| Repayment in financial year | (1,000,000) | (1,000,000) |
| Closing balance | 500,000 | 9,290,000 |
| Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 |
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 |
|---|---|
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
Intercompany receivable loan from Timor Telecom S.A. in the amount of EUR 1,500,000 bears interest at 3M EURIBOR + 9.25% per annum (2014: 3M EURIBOR + 9.25%). The amount will be repaid in 6 installments of EUR 250,000 each, payable quarterly, beginning on 19 March 2016 and ending on 19 June 2017 as final maturity date. Repayment obligation within 12 months in the amount of EUR 1,000,000 as at balance sheet date are included in current assets (refer to note 6).
The loan to Oi Coop can be specified as follows:
| 2015 | 2014 |
|---|---|
| -- | -- |
| 4,728,877,000 | -- |
| (88,985,364) | -- |
| (936,938,704) | |
| 3,702,952,932 | -- |
On March 17, 2016 credit agreement with Oi Coop was amended by refinancing and opening the credit line with seven separate tranches up to EUR 3,723,236,983. Intercompany receivable loan from Oi Coop in the amount of EUR 3,702,952,932 bears interest at 5.26375% per annum with the maturity date varying from July 24, 2016 to June 14, 2025 depending on different tranches. Repayment obligation within 12 months in the amount of EUR 88,985,364 as at balance sheet date are included in current assets (refer to note 6).
The Company's notes can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | -- | -- |
| Issued in financial year | -- | 2,566,000,000 |
| Reclassification to short term | - | (2,566,000,000) |
| Closing balance | -- | -- |
On December 23, 2008, PT SGPS issued convertible bonds in the amount of EUR 750,000,000 due on August 28, 2014. These convertible bonds aim to support the exchangeable bonds issued by the company in 2007, replicating their main terms and conditions. The exchangeable bonds were redeemed in May, 2014.
The notes in the amount of EUR 2,566,000,000 were issued by PT Portugal on May 13, 2014 . The notes bear interest at a rate of 1.54075%. Effective April 13, 2015, the Company redeemed its 2,566 notes with principal amount of EUR 1,000,000 each and maturity date on February 15, 2016 that were held by a related party.
| Share Capital 21.000,00 euros |
|---|
| Registered at The Netherlands Chamber of |
| Commerce Commercial |
| Register with the number 34108060 |
| Portuguese Taxpayer Number: 710 222 149 |
(in EUR)
The Company's prepaid issuance costs can be specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Opening balance | 14,623,813 | 19,304,099 |
| Additions | 416,000 | -- |
| Amortization | (4,326,739) | (4,680,286) |
| Closing balance | 10,713,074 | 14,623,813 |
Cost of issuance of each note is deferred and recognized in net income until the maturity of each note on a straight line basis.
As agreed in the Advance Pricing Agreement with the Dutch Tax Authorities, the Company will be compensated by PT Portugal and/or other group companies for the annual portion of issuance costs that is amortized in connection with the bonds it issued and for any interest expenses relating to the financing of these expenditures.
| Amount | ||||
|---|---|---|---|---|
| CCY | in CCY | 2015 | 2014 | |
| Commercial Papers issued by PTP (refer to note 5) | -- | 1,360,150,000 | ||
| Loan to Timor Telecom S.A. (refer to note 5) | 8,790,000 | 1,000,000 | ||
| Loan to Timor Telecom S.A. | USD | 15,000,000 | 13,780,350 | -- |
| Loan to PT Participações SGPS S.A. | 1,882,677 | -- | ||
| Loan to Oi Coop (refer to note 5) | 88,985,364 | -- | ||
| Notes issued by PT Portugal (refer to note 5) | -- | 2,566,000,000 | ||
| 113,438,391 | 3,927,150,000 |
All commercial paper and loans to PT Portugal Group and Oi companies stated under the current assets fall due in less than one year, was paid within 12 months.
Intercompany receivable loan from Timor Telecom S.A. in the amount of EUR 4,000,000 bears interest at 12% per annum (2014: 12%) with the maturity date on September 24, 2016.
Intercompany receivable loan from Timor Telecom S.A. in the amount of EUR 3,790,000 bears interest at 10% per annum (2014: 10%) with the maturity date on April 22, 2016.
Intercompany receivable loan from Timor Telecom S.A. in the amount of USD 15,000,000 bears interest at 10% per annum with the maturity date on September 24, 2016.
Intercompany receivable loan from PT Participações SGPS S.A. in the amount of EUR 1,882,677 bears interest at 5.26375% per annum with the maturity date on May 28, 2016.
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
Intercompany receivable loan from Oi Coop in the amount of EUR 88,985,364 bears interest at 5.26375% per annum with the maturity date on July 24, 2016.
As at December 31, 2015, this item can be detailed as follows:
| 2015 | 2014 | |
|---|---|---|
| Amounts due by shareholders | 500,000,000 | -- |
| Interest loan receivable | 123,320,190 | 5,366,294 |
| Interest receivable from commercial papers | 1,018,952 | -- |
| Accrued upfront fees | 1,562,178 | 3,732,227 |
| Corporate income tax 2013 | -- | 1,219,396 |
| Corporate income tax 2014 | 2,087,645 | 2,087,645 |
| Witholding taxes | 3,206,355 | 5,015,415 |
| Rio Forte Note | -- | 294,589,043 |
| Interest on Rio Forte Notes | -- | 6,606,980 |
| Other receivables | 83,776 | 18,403 |
| 631,279,097 | 318,635,403 |
Amounts due from shareholder are specified as follows:
| Name | Ownership | 2015 | 2014 | |
|---|---|---|---|---|
| Oi | 100.00% | 500,000,000 | -- | |
| 500,000,000 | -- |
All receivables fall due in less than one year. The fair value of the receivables approximates the book value.
The corporate income tax receivable relates to the refund of year 2014.
The withholding tax receivable relates to 15% reduction of paid withholding taxes that the Company is entitled to. Part of witholding taxes is expected to be settled after one year.
Short-term investments ("Rio Forte notes", with a nominal value of EUR 697 million in total) in the table above include the following:
• EUR 647 million (nominal value) commercial paper of Rio Forte Investments S.A. ("Rio Forte") subscribed for by the Company on 15 April 2014, paid up in cash hence leading to an outflow of EUR 647 million, the maturity of which occurred on 15 July 2014;
| Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 |
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 |
|---|---|
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
• EUR 50 million (nominal value) commercial paper of Rio Forte subscribed for by the Company on 17 April 2014, paid up in cash hence leading to an outflow of EUR 50 million, the maturity of which occurred on 17 July 2014.
The background to these Rio Forte Notes can be described as follows.
At the time of these investments in April 2014, the Company was still part of the group of PT SGPS. At that time, a merger between PT SGPS and Oi was still envisaged. In May 2014 PT SGPS, as part of this merger contributed amongst others all shares in the Company to Oi.
Subsequent to the acquisition of PT Portugal on May 5, 2014, Oi discovered on June 30, 2014 that (1) PT Portugal had subscribed to EUR 200 million principal amount of commercial paper of Rio Forte Investments S.A. ("Rio Forte"), that matured in July 2014, and (2) the Company had subscribed to EUR 697 million principal amount of commercial paper of Rio Forte that matured in July 2014. On July 15 and 17, 2014, Rio Forte defaulted on the commercial paper held by PT Portugal and the Company. Rio Forte was ultimately insolvent by the Luxemburg Court on 8 December 2014, and went into liquidation on the same date.
Upon becoming aware of the subscription for the Rio Forte Notes, it was clear to Oi that there were serious concerns concerning the legality and appropriateness of such subscription by PTIF, as well as being aware of the anticipated negative financial effects thereof. Oi and the Company have therefore since explored how to mitigate the effects of the investments made in the Rio Forte Notes prior to the merger with Oi, also in light of the default of Rio Forte under the Rio Forte Notes on July 15 and 17, 2014. On September 8, 2014, Oi, TmarPart (the controller of Oi), PT SGPS, PT Portugal and the Company entered into an Exchange Agreement, and a stock option agreement. The main purpose of these agreements was to reverse to the greatest extent possible the potential economic effects and risks associated with the Rio Forte Notes for the Company and Oi and its group as a whole (the "Exchange"). For the Company, the main element of the Exchange was the transfer of the Rio Forte Notes held by it to PT SGPS in exchange for Oi shares (as described in more detail below). Based upon the information that has become available to the Company, the possible background, business rationale and commercial purposes of, and the decision making process concerning the subscription to the Rio Forte notes by the Company in April 2014 could not be determined and remain questionable. The Exchange consisted of the following:
| Share Capital 21.000,00 euros |
|---|
| Registered at The Netherlands Chamber of |
| Commerce Commercial |
| Register with the number 34108060 |
| Portuguese Taxpayer Number: 710 222 149 |
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155
(in EUR)
On 31 December 2014, as stated above, execution of the exchanges and the purchase option were pending approval by the CVM in Brazil. On 4 March 2015, the CVM approved the above contracts, conditional upon approval of them at Oi's General Shareholders' Meeting, which occurred on 26 March 2015. On 24 March 2015, PT SGPS, Oi, PT Portugal, the Company and TmarPart concluded a Private Instrument of Assignment of Rights and Obligations and Other Fees ("Assignment Agreement"), by means of which PT Portugal transferred its Rio Forte notes to the Company, and ceded to the Company all pertaining rights and obligations in the terms of the Exchange Agreement ("Assignment").
On 30 March 2015, the Exchange was concluded, by means of which PT SGPS (1) deposited Exchange Shares with the Depositary; and (2) instructed the Depositary to register the transfer of 47,434,872 common shares and 94,896,744 preferred shares to the Company, representing the Exchange Shares. Therefore, on 30 March 2015, PT SGPS transferred the Exchange Shares to the Company, and the Company transferred to PT SGPS the Rio Forte notes. Still on 30 March 2015, the Purchase Option was in force and effective.
As of 31 December 2014, the Company still held the Rio Forte Notes pending consummation of the Exchange described above. In light of the agreed upon exchange of the Rio Forte Notes for Oi Shares, in the balance sheet the Company recognized the Rio Forte Notes at their fair value based on the market value as per 31 December 2014 of the Exchange Shares that would be received upon the conclusion of the Exchange and recorded an impairment loss of EUR 402,410,957 in net income. Accrued interests were fully writtenoff.
Upon acquisition of the Exchange Shares, and given their listing, the Company is exposed to any subsequent movements in the market value of the Exchange Shares (refer to note 8).
None of the current directors of the Company was a director at the time of the investments in the Rio Forte notes. The Company is not involved in any litigation in relation to the investments in the Rio Forte Notes. Based on publicly available sources, the Company understands that in connection with the subscriptions in Rio Forte Notes and the involvement of former directors of PT SGPS there have been information requests by the U.S. SEC and Brazilian CVM, and authorities in Portugal and Luxembourg are conducting investigations. As far as the Company is aware, the Company is not a subject or target of such investigations. The Company is not aware of the current status of such investigations.
On March 30, 2015, all securities issued by Rio Forte Investments SA held by the Company were transferred to Pharol in exchange of 474,348,720 common shares (ON) and 948,697,440 preferred shares (PN) of Oi, as provided in the Exchange Agreement entered into between the Oi, Telemar Participações SA, Pharol, PT Portugal and the Company. In October, 2015 Oi executed an exchange program whereby each PN was
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
exchanged by 0.9211 ON. The Company exchanged all preferred shares for common shares and has become entitled to 134,819,393 Oi common shares considering a reverse split from 10 to 1 shares implemented during 2015. On December 31, 2015 the market value of Oi shares held by the Company is EUR 76,126,140. On December 31, 2015 the Company recorded an impairment loss of EUR (163,321,544) relating to changes in the market value of the shares of Oi (refer to Note 14).
| 2015 | 2014 | |
|---|---|---|
| Oi shares | 76,126,140 | -- |
| 76,126,140 | -- |
On March 30, 2015, all securities issued by Rio Forte Investments SA held by the Company were transferred to Pharol in exchange of 47,434,872 common shares (ON) and 94,869,744 preferred shares (PN) of Oi, as provided in the Exchange Agreement entered into between the Oi, Telemar Participações SA, Pharol, PT Portugal and the Company. On December 31, 2015 the market value of Oi shares held by the Company is EUR 76,126,140. In 2015 the Company recorded an impairment loss of EUR (163,321,544) relating to changes in the market value of the shares of Oi. In this respect, it is noted that after 31 December 2015 the market value of the Exchange Shares further increased and as of July 13, 2016 the Market value of Oi shares was EUR 125,389,372 million (refer to note 14). The fair value of Oi Shares corresponds to the market price observed in the BOVESPA Stock Exchange, which corresponds to a level 1 measurement in accordance with IFRS 13.
| 2015 | 2014 | |
|---|---|---|
| Current account balances | 3,700,780 | 1,140,403 |
| Fixed deposits | -- | 12,500,000 |
| 3,700,780 | 13,640,403 |
The fixed deposits expire within one year after balance sheet date. No other restrictions on usage exist. In order to dilute the credit risk related to fixed deposits, the Company's policy is to invest its cash for short term periods, entering in agreements with reputable financial institutions and diversifying counterparties. The total of the current account balances is at the Company's free disposal.
The Company's authorized share capital amounts to EUR 100,000 and consists of 200 ordinary shares with a nominal value of EUR 500 each. As at December 31, 2015, 42 shares were issued and fully paid-up.
On December 30, 2015, Oi, the sole shareholder of the Company, has resolved an irrevocable share premium contribution into the Company in the amount of EUR 500,000,000. This capital contribution
| Investor Relations Officer |
|---|
| Marco Norci Schroeder Email: [email protected] |
(in EUR)
merely determined the increase of the Company's assets, without any change in the nominal amount of its share capital, being recorded as a non-stipulated share premium in the books of the Company. This Contribution was fully paid on February 4, 2016.
In accordance with Article 14 of the Articles of Association, profit shall be at the disposal of the Annual General meeting of Shareholders. Profit distribution can only be made to the extent that Shareholder's Equity exceeds the issued and paid-up share capital and legal reserves. Dutch law stipulates that distributions may only be made to the extent the Company's equity is in excess of the reserves it is required to maintain by law and its Articles of Association. Moreover, no distributions may be made if the Management Board is of the opinion that, by such distribution, the Company will not be able to fulfill its financial obligations in the foreseeable future.
The loss sustained by the Company during the year under review will be debited to the other reserve. This proposed appropriation of the result has not been reflected in these financial statements and is subject to the approval of the General Meeting of Shareholders.
| Less than one year |
Total current liabilities 2015 |
|
|---|---|---|
| EMTN notes | 4,396,905,000 | 4,396,905,000 |
| 4,396,905,000 | 4,396,905,000 |
Repayment obligations within 12 months as at balance sheet date are included in current liabilities.
The Company's EMTN notes are specified as follows:
| 2015 | 2014 |
|---|---|
| 4,350,000,000 | 4,350,000,000 |
| 400,000,000 | -- |
| (353,095,000) | -- |
| 4,396,905,000 | 4,350,000,000 |
The Company entered into a Global Medium Term Note Programme signed on December 17, 1998, which was changed and renamed Euro Medium Term Note Programme on April 23, 2010 (EMTN). The notes
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
issued by the Company under the EMTN are listed on the London Stock Exchange, Euronext Lisbon and are guaranteed by Oi.
The fair value of the notes issued by the Company under the EMTN Program, determined based on market information, amounted to EUR 4,520,811,500 on December 31, 2014 and to EUR 2,652,045,279 on December 31, 2015. The fair value of the Notes corresponds to the market price observed in Lisbon and London Stock Exchange, which corresponds to a level 1 measurement in accordance with IFRS 13.
As of December 31, 2015 the Company recorded EUR 126,849,702 related with accrued interest payable under the EMTN and total interest expenses incurred during 2015 amounted to EUR 262,997,392.
The following table provides detailed information about the bonds issued under the EMTN and the exchangeable bonds outstanding as at December 31, 2015, which were issued by the company:
| Description | Notional (EUR) | Issue Date | Maturity Date | Coupon |
|---|---|---|---|---|
| Eurobond | 384,123,000 | 24-Mar-05 | 24-Mar-17 | 4.375% |
| Eurobond | 500,000,000 | 16-Jun-05 | 16-Jun-25 | 4.500% |
| Fixed rate notes | 250,000,000 | 30-Jul-09 | 6-Nov-17 | 5.242% |
| Eurobond | 750,000,000 | 2-Nov-09 | 4-Nov-19 | 5.000% |
| Eurobond | 531,575,000 | 8-Feb-11 | 8-Feb-16 | 5.625% |
| Eurobond | 750,000,000 | 17-Oct-12 | 17-Apr-18 | 5.875% |
| Eurobond | 1,000,000,000 | 10-May-13 | 8-May-20 | 4.625% |
| Retail bond | 231,207,000 | 26-Jul-12 | 26-Jul-16 | 6.250% |
| 4,396,905,000 |
On June 22, 2016, PTIF was notified by the trustee under the trust deed dated 17 December 1998 between PTIF, Oi and the trustee (as amended or supplemented from time to time) that the request for judicial reorganization (filed with the Court of the State of Rio de Janeiro on June 20, 2016) constitutes an event of default under the trust deed. Further that the request for judicial reorganization is, in the trustee's opinion, materially prejudicial to the interests of the noteholders and, accordingly, an event of default has occurred under the trust deed. For accounting and disclosure purposes, the long-term portion of bonds and loans were reclassified to current liabilities under the balance sheet as of December 31, 2015.
The Company's revolving credit facilities / loan are specified as follows:
| 2015 | 2014 | |
|---|---|---|
| Export credit facility | -- | 54,983,665 |
| -- | 54,983,665 |
The fair value of the revolving credit facilities / loan approximates the book value.
| Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 |
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 |
|---|---|
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
Export credit facility with Bank of China Limited, London branch payable loan in the amount of EUR 62,314,821 bears interest at 12 % per annum (2014: 12%) with the maturity date on September 24, 2016. On September 25, 2015 the Company prepaid the total long term portion in the amount of EUR 54,649,243.
The Company's loans from group companies comprise the following:
| 2015 | 2014 | |
|---|---|---|
| Note PT Portugal | -- | 2,566,000,000 |
| Reclassification to short term | -- | (2,566,000,000) |
| -- | -- |
On April 14, 2014 the note for an amount of EUR 2,438,000,000 was redeemed at an amount EUR 1,603,000,000 and remaining balance of EUR 835,000,000 was transferred to PT Portugal.
On May 13, 2014 the Company issued a note for an amount of EUR 2,566,000,000 at a fixed interest rate of 1,417%, which maturity date is on February 15, 2016. The fair value of the note, based on discounted cash flows, amounts to EUR 2,546,467,941. Effective April 13, 2015, the 2,566 bonds with principal amount of EUR 1,000,000 each and maturity date on February 15, 2016, that were held by the Company, were redeemed.
The remaining term of the current liabilities is less than one year.
The Company's revolving credit facilities / loans are specified as follows:
| Description | 2015 | 2014 |
|---|---|---|
| Notes PT Portugal (N11) | -- | 3,401,000,000 |
| Note Oi | -- | 750,000,000 |
| Export credit facility (Note 11) | -- | 7,331,156 |
| Credit Facility KFW | -- | 10,000,000 |
| -- | 4,168,331,156 |
On August 26, 2014, the Company issued notes to Oi for an amount of EUR 750,000,000 at a floating interest rate of 6M Euribor + 2.5% and maturity date on August 27, 2015. On the maturity date the note was repaid.
On May 26,2015, the Company repaid amount of EUR 10,000,000 with respect to the loan obtained from KFW IPEX-Bank GmbH.
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
| 2015 | 2014 | |
|---|---|---|
| Bank expenses | 1,135,221 | 6,380 |
| General expenses | 20,825 | 18,423 |
| Legal expenses | 140,375 | 81,184 |
| Audit expenses | 37,510 | 14,520 |
| Accounting expenses | 33,275 | 33,275 |
| Tax advisory expenses | 227,322 | 38,663 |
| Professional services* | 240,710 | 2,906,509 |
| Management expenses | 62,616 | 132,025 |
| Stock listing fees | 701 | 8,712 |
| Non-refundable VAT cost | 601,658 | 4,772 |
| Bank fees related to credit facilities* | 7,688,821 | 27,862,657 |
| Advanced interest payments fees | 33,964 | 175,102 |
| 10,222,997 | 31,282,222 |
* In 2014 the amounts mainly relate to the fees paid in connection with the consent solicitation to note holders executed in 2014 related to the business combination between Oi and Pharol.
The result on investments can be broken down as follows:
| 2015 | 2014 | |
|---|---|---|
| Impairment of Rio Forte Investments, SA (refer to note 7) | -- | (402,410,957) |
| Reversal of impairment of Rio Forte Investments, SA | 402,410,957 | -- |
| Loss on exchange Rio Forte notes for Oi shares | (516,125,884) | -- |
| Impairment of Oi shares (refer to note 8) | (163,321,544) | -- |
| (277,036,471) | (402,410,957) |
In 2014, BDO Audit& Assurance B.V was the Statutory Auditor of PTIF B.V and the fees related to these services provided amounted EUR 37,510. In 2015, KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A. was engaged as auditors of the Company's special purpose financial statements and the fees related to these services provided amounted EUR 145,000.
No tax advisory or other non-audit services have been rendered by BDO Audit & Assurance B.V. nor KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A..
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(in EUR)
| 2015 | 2014 | |
|---|---|---|
| Corporate Income Tax 2009 | 797 | -- |
| Corporate Income Tax 2012 | -- | 184,169 |
| Corporate Income Tax 2013 | 202 | -- |
| Corporate Income Tax 2014 | -- | (2,262,848) |
| Corporate Income Tax 2015 | (4,350,650) | -- |
| (4,349,651) | (2,078,679) |
The company is subject to Dutch taxation and tax calculations are made in accordance with the Advance Pricing Agreement entered into with the Dutch tax authorities. Any relevant difference that may occur between the year-end estimate and the actual Corporate Tax payment is recorded on the following year.
Commitments and contingencies not included in the balance sheet
On March 16, 2016, an holder of notes issued by the Company, commenced a legal proceedings before the Amsterdam district court against, amongst others, the Company, Oi Coop and another Oi Group company. The bondholder, mainly, challenged the loan granted by the Company to Oi Coop and claimed damages. The initial Court date for the first appearance in the proceedings is 27 July 2016. The Company intends to defend itself against the claims brought.
The Company understands that in connection with the subscriptions in Rio Forte Notes and the involvement of former directors of PT SGPS there have been information requests by the U.S. SEC and Brazilian CVM, and authorities in Portugal and Luxembourg are conducting investigations. As far as the Company is aware, the Company is not a subject or target of such investigations. The Company is not aware of the current status of such investigations.
There are no other commitments and contingencies to be disclosed that were not included in the balance sheet.
Neither during the year under review nor in the previous year did the Company have any employees. Hence, it did not pay any wages and related social security.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
(in EUR)
During the year under review, the Company had seven Managing Directors, who received no remuneration during the current or the previous financial year. The Company has no Board of Supervisory Directors.
As per March 3, 2016, Trust International Management (T.I.M.) B.V., Wilhelmus Joseph Langeveld and Johannes Petrus Vincentius Gerardus Visser resigned as Managing Director B and as per same date Cristina Mocellin was appointed as Managing Director.
Since December 31, 2015, the Company entered into the main following transactions:
On February 5, 2016, as scheduled, the Company repaid the amount of EUR 561,476,093.75 of notes, being EUR 531,575,000 of principal and EUR 29,901,093.75 of interest. The notes were issued by the Company in February 2011, in the original amount of EUR 600,000,000 at a fixed interest rate of 5.625%, for a 5-year period. The amount repaid represents 100% of the outstanding value, as the Company prepaid EUR 68,425,000.00 of principal during 2015.
On March 3, 2016, pursuant to the terms of paragraph a), number 1 of article 4 of the Portuguese Securities Commission ("CMVM") Regulation no. 5/2008, the Company resolved by its sole shareholder (i) the termination of the office of Trust International Management (T.I.M.) B.V, Wilhelmus Joseph Langeveld and Johannes Petrus Vincentius Gerardus Visser as Managing Director B; (ii) the termination of the office of Bayard de Paoli Gontijo and Flavio Nicolay Guimarães as Managing Director A; and (iii) the appointment of Cristina Mocellin as Managing Director B of the Company.
On March 9, 2016, Oi announced that it had retained PJT Partners as financial advisor to assist the Oi Group, including PTIF) in assessing financial and strategic alternatives to optimize the Oi Group's liquidity and debt profile. On April 25, 2016, Oi announced that it has entered into a customary non-disclosure agreement with an advisor to a diverse ad hoc group of holders of the bonds issued by Oi and certain of its affiliated companies, including PTIF, as an initial step toward discussions regarding the potential terms of a restructuring. On May, 16 2016, Oi announced that its Board of Directors approved the start of negotiations in relation to the financial indebtedness (restructuring) of the Oi Group with Moelis&Company as representative of the ad hoc group of bondholders. Finally, on June 17, 2016 Oi announced that it had presented on June 6, 2016 to the representative of the bondholders a term sheet of a potential debt restructuring and received a counterproposal by June 11, 2016, to which Oi did not responded until that date.
On June 20, 2016, Oi announced that, along with some of its wholly owned direct and indirect subsidiaries, including the Company, have filed a request for judicial reorganization with the Court of the State of Rio de Janeiro, pursuant to Art. 51 of Law No. 11,101/05 and Art. 122 of the Brazilian Corporations Law, pursuant to an urgent measure approved by the Oi's Board of Directors and the other authorized governing bodies of the Oi Companies at meetings held on that date.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
Marco Norci Schroeder Investor Relations Officer Email: [email protected] Tel.: +55 21 3131-2918 Fax: +55 21 3131-1155
(in EUR)
On June 22, 2016, PTIF was notified by the trustee under the trust deed dated 17 December 1998 between PTIF, Oi and the trustee (as amended or supplemented from time to time) that the request for judicial reorganization (filed with the Court of the State of Rio de Janeiro on June 20, 2016) constitutes an event of default under the trust deed. Further that the request for judicial reorganization is, in the trustee's opinion, materially prejudicial to the interests of the noteholders and, accordingly, an event of default has occurred under the trust deed. For accounting and disclosure purposes, the long-term portion of bonds and loans were reclassified to current liabilities under the balance sheet as of December 31, 2015.
On June 27, 2016, Syzygy Capital Management Ltd. filed with Dutch Courts an insolvency (involuntary bankruptcy) proceeding against Oi Coop, based on the contractual default, by Oi Coop, related to the bonds issued in the aggregate principal of US\$800,000.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
Notes to the special purpose financial statements as of December 31, 2015 (in EUR)
The Board of Managing Directors,
C. Mocellin M.N. Schroeder
Amsterdam, July 14, 2016
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
(Paragraph 4 of Article 245 A of the Portuguese Securities Code)
Portugal Telecom International Finance B.V. – under judicial reorganization ("Company" or "PTIF"), a company incorporated in the Netherlands, is a wholly owned subsidiary of Oi S.A. – under judicial reorganization ("Oi"), a company incorporated in Brazil that holds the entire share capital of PTIF.
The capital of PTIF is fully represented by shares registered in the name of their respective holders and are not allowed to issue share certificate.
Any restrictions on voting maters, such as limitations on voting exercise depending on the ownership of a number or percentage of shares, time limits imposed for the exercise of voting rights or emphasized systems of equity rights.
Each share confers the right to cast one vote. Owned shares (acquired by PTIF), shall not exercise voting rights.
According to the Social Contract of PTIF, the company shall have a Managing Board, consisting of one or more members A and one or more members B. The General Meeting shall appoint the members A and B of the Managing Board and shall be competent to dismiss or to suspend them at any time.
In the case of a proposal for amendment of the Articles of Association is submitted to the General PTIF Meeting, simultaneously a copy of that proposal which the verbatim text of the proposed amendment is embodied has to be deposited at the company's office for inspection by those who are entitled thereto by law, until the end of the Meeting concerned.
The issue of shares shall be effected pursuant to a resolution of a PTIF's general meeting of shareholders, insofar as it has not designated another organ of this company in this respect, according to the relevant legal rules. Currently, the Managing Board does not hold powers regarding the issuance of new shares conferred by the General Meeting.
The Internal Control System of PTIF is managed by the corporate areas of Oi Group, being assigned by the Accounting and Financial Reporting Officers in coordination with the Compliance Officers of Oi Group the maintenance of the Internal Control System drawn in terms with the COSO 2013. The Internal Control System is audited under the terms and criteria of the Internal Audit Department of Oi Group.
| Share Capital 21.000,00 euros | Marco Norci Schroeder |
|---|---|
| Registered at The Netherlands Chamber of | Investor Relations Officer |
| Commerce Commercial | Email: [email protected] |
| Register with the number 34108060 | Tel.: +55 21 3131-2918 |
| Portuguese Taxpayer Number: 710 222 149 | Fax: +55 21 3131-1155 |
(Paragraph 4 of Article 245 A of the Portuguese Securities Code)
The Accounting and Financial Reporting Officers establishes together with the heads of each process of controls allowing to assure the reliability of PTIF's financial reporting and the prevention of inherent risks. The controls are periodic and timely documented within a proper Oi Group's electronic tool.
The Accounting and Financial Reporting Officers in conjunction with third party responsible for the accounting information preparation in the Netherlands is also responsible for implementing reporting procedures and internal and external controls of the financial information of PTIF.
The risk control system of PTIF is inserted in the risk management policy of Oi Group approved and published internally by Oi's management on August, 19, 2015.
This policy and its accessory documents, annually reviewed and updated, designed to ensure the identification and prioritization of critical risks of Oi Group, including PTIF and other companies in the Oi Group, developing specific risk management strategies, in order to implement actions and controls to mitigate risks. This policy is extended to all companies in the Oi Group and is adherent to the best market practices.
Considering the need to PTIF and other companies of the Oi Group dispose of clear mechanisms for assessment and management of risks affecting their business, the following components have been implemented for the risk management process:
Risk management policy applied in PTIF aims to establish the strategic direction necessary for the identification, evaluation, monitoring and treatment of corporate and their activities risks, control to ensure the efficiency of PTIF control environment.
At all levels of management, PTIF understands how the risk occurrence of any event that may somehow impact the achievement of goals established or that could compromise the proper compliance of our operations.
On a systematic way, identified risks on a business management level are monitored and the risks considered relevant that could adversely affect the PTIF or the scope of the defined strategic objectives are aligned with the Administration.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
(Paragraph 4 of Article 245 A of the Portuguese Securities Code)
Risks related to compliance execution of internal processes, such as fraud, corruption and reliability of financial reporting, are annually assessed by the evaluation process of our internal controls.
Share Capital 21.000,00 euros Registered at The Netherlands Chamber of Commerce Commercial Register with the number 34108060 Portuguese Taxpayer Number: 710 222 149
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Edifício Monumental Av. Praia da Vitória, 71 - A, 11º 1069-006 Lisboa Portugal
Telephone: +351 210 110 000 Fax: +351 210 110 121 Internet: www.kpmg.pt
We were engaged to audit the accompanying special purpose financial statements of Portugal Telecom International Finance B.V. – under Judicial Reorganization ("PTIF" or "the Company"), which comprise the balance sheet as of 31 December 2015 (which shows total assets of Euro 4,538,710,415 and a total equity of Euro 13,980,141, including a net loss of Euro 317,662,399), the statements of income, other comprehensive income, changes in equity and cash flows for the year then ended, and the corresponding notes, comprising a summary of significant accounting policies and other explanatory information. The special purpose financial statements have been prepared for Portuguese regulatory purposes by management based on International Financial Reporting Standards as adopted by the European Union ("IFRS").
Management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these special purpose financial statements based on conducting the audit in accordance with International Standards on Auditing. Because of the matters described in paragraph 1 to 4 of the Basis for Disclaimer of Opinion, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
1 As referred on the Directors' Report and disclosed in note 1(a) of the Notes to the special purpose financial statements, on 20 June 2016, Oi S.A. – under Judicial Reorganization ("Oi"), together with its direct or indirect wholly owned subsidiaries Oi Móvel S.A. – under Judicial Reorganization, Telemar Norte Leste S.A. – under Judicial Reorganization, Copart 4 Participações S.A. – under Judicial Reorganization, Copart 5 Participações S.A. – under Judicial Reorganization, Oi Brasil Holdings Coöperatief U.A. – under Judicial Reorganization ("Oi Coop") and PTIF (together the "Oi Companies") filed a request for judicial reorganization of the Oi Companies with the Court of the 7th Corporate Court of the State of Rio de Janeiro, pursuant to Art. 51 and followings of Law No. 11,101/05 and Art. 122, unique paragraph of Law No. 6,404/76, pursuant to an urgent measure approved by the Company's Board of Directors and the authorized governing bodies of the other Oi Companies.
In addition to the comments made in the previous paragraph, and as referred on the Directors' Report and disclosed on notes 11 and 19 of the Notes to the special purpose financial statements, on 22 June 2016, PTIF was notified by the trustee under the trust deed dated 17 December 1998 between PTIF, Oi and the trustee that the request for judicial reorganization constitutes an event of default under the trust deed. Further that the request for judicial reorganization is, in the trustee's opinion, materially prejudicial to the interests of the noteholders and, accordingly, an event of default has occurred under the trust deed.
To the date of this Report, the Company has not yet presented the judicial reorganization plan and due to that apart from reclassifying to current liabilities the long-term portion of bonds and loans, as at 31 December 2015, PTIF has not measured the possible effects of the situations above described on these special purpose financial statements.
2 As referred on the Directors' Report and disclosed in note 1(a) of the Notes to the special purpose financial statements, the Company's special purpose financial statements for the year ended 31 December 2015 have been prepared assuming that the Company will continue as a going concern, based on management's assessment of (i) the achievement of reaching an agreement with a certain majority of the creditors of the Oi group in the judicial reorganization procedure (ii) the approval of a judicial reorganization plan by a certain majority of its creditors and the confirmation of such plan by the Court, (iii) Oi's declaration to maintain its financial interest in and support to the Company in the foreseeable future, and (iv) other forecasts for the Oi group.
Given that the Company depends on the approval or not of the judicial reorganization plan by the creditors, its confirmation or not by the relevant Court and the successful outcome, as mentioned in paragraph 1 above, we were unable to conclude on whether these special purpose financial statements should have been prepared on a going concern basis or on a liquidation basis.
3 As disclosed in note 17 of the Notes to the special purpose financial statements, on 16 March 2016, an holder of notes issued by the Company, commenced a legal proceedings before the Amsterdam district court against, amongst others, the Company, Oi Coop and another Oi group company. The bondholder, mainly, challenged the loan, amounting to Euro 3,702,952,932 as at 31 December 2015, granted by the Company to Oi Coop and claimed damages. The initial Court date for the first appearance in the proceedings is 27 July 2016.
In addition to the comments made in the previous paragraph, and as referred on the Directors' Report and disclosed on note 19 of the Notes to the special purpose financial statements, on 27 June 2016, Syzygy Capital Management, Ltd. submitted a petition to the Amsterdam District Court to declare Oi Coop insolvent.
Based on the information available about these legal proceedings we were not able to determine the possible effects to these special purpose financial statements.
4 The significant uncertainties and the matters described in paragraphs 1 to 3 above do not allow us to conclude on how, when and for how much the assets will be realized and the liabilities will be paid. Future significant events, the outcome of which we cannot anticipate, may have a material impact on the Company's special purpose financial statements. These impacts may significantly affect how and for how much these assets will be realized and these liabilities will be settled.
Because of the significance of the matters described in paragraphs 1 to 4 of the Basis for Disclaimer of Opinion, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the special purpose financial statements.
Without affecting our disclaimer of opinion expressed in the previous paragraph, we would like to draw your attention to the following situations:
These special purpose financial statements were prepared for Portuguese regulatory purposes, and PTIF adopted for the first time in the preparation of these special purpose financial statements, the IFRS as adopted by the European Union, applying for that purpose IFRS 1 – First-time Adoption of International Financial Reporting Standards. The transition date is 1 January 2014, having PTIF prepared its opening balances at that date. For Dutch statutory reporting purposes, the Company prepares its annual accounts in accordance with Dutch law and accounting principles.
We were engaged as Auditors of the Company's special purpose financial statements on 31 May 2016, to perform the audit of the special purpose financial statements for the year ended as at 31 December 2015.
It is our opinion that the financial information included in the Directors' Report is consistent with the special purpose financial statements and that includes the information required by article 245.º-A of the Portuguese Securities Market Code.
Lisbon, 14 July 2016
KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. (nr 189) represented by Paulo Alexandre Martins Quintas Paixão (ROC nr 1427)
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