Annual Report • May 23, 2013
Annual Report
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ESTORIL-SOL, SGPS, S.A. Fully paid up share capital: 59.968.420 Euros Headquartered at: Av. Dr. Stanley Ho, Edifício do Casino Estoril, 2765-190 Estoril - Cascais Tax id number: 500 101 221
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| Chairman | - Pedro Canastra de Azevedo Maia |
|---|---|
| Deputy Chairman | - Tiago Antunes da Cunha Ferreira de Lemos |
| Secretary | - Marta Horta e Costa Leitão Pinto Barbosa |
Chairman - Rui José da Cunha
| Chairman | - Stanley Hung Sun Ho |
|---|---|
| Deputy-Chairmen | - Huen Wing Ming Patrick |
| - Mário Alberto Neves Assis Ferreira | |
| Members | - Pansy Catilina Chiu King Ho |
| - Ambrose So | |
| - Choi Man Hin | |
| - Vasco Esteves Fraga | |
| - António José de Melo Vieira Coelho | |
| - Jorge Armindo Teixeira | |
| - Clavin ka Wing Chann | |
| - Miguel António Dias Urbano de Magalhães Queiroz | |
| Chairman | - Mário Pereira Pinto |
|---|---|
| Deputy-Chairmen | - António José Alves da Silva |
| - Manuel Martins Lourenço | |
| Alternates | - Armando do Carmo Gonçalves |
Carlos Alberto Francisco Farinha Alternate: Artur Alexandre Conde de Magalhães Mateus
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Dear Shareholders,
Pursuant to the legal and statutory provisions, we hereby present and submit the Annual Report and the Individual and Consolidated Accounts, referring to the year ended 31 December 2012, for your appreciation.
Estoril Sol, S.A. was incorporated on 25 June 1958 and its company object is "the operation of the gambling concession, on an exclusive basis, in the Estoril permanent area, including other related trade and industries".
On 18 March 2002, ESTORIL-SOL, SA modified its legal status to "Holding Company, SGPS", Public Corporation, thereby no longer directly conducting any business activities, and such business is now to be conducted by various associated undertakings which have been incorporated for this purpose.
On 31 December 2012, ESTORIL-SOL, S.G.P.S., S.A. had the following stakes in the following subsidiaries:
ESTORIL-SOL (III) - TURISMO ANIMAÇÃO E JOGO, S.A., incorporated on 26 July 2001, headquartered in Estoril, the social object of which is the operation of games of chance in areas where this is permitted by law and, in addition, may also operate in the tourism, hotel, restaurant and entertainment industries, as well as providing consultancy services in those areas of activity. This company operates the Estoril and Lisbon Casinos.
Its share capital of EUR 34,000,000 is 100% held by ESTORIL-SOL, S.G.P.S., S.A.
VARZIM SOL - ANIMAÇÃO, TURISMO E JOGO, S.A., headquartered in Póvoa de Varzim, has the social object, in particular, of operating the gambling concession of Póvoa de Varzim. This company operates the Póvoa de Varzim Casino.
It has a share capital of EUR 33.650.000, 100% held by ESTORIL SOL, S.G.P.S., S.A..
ESTORIL SOL E MAR - Investimentos Imobiliários, S.A. - With a share capital of EUR 1.286.000, is fully paid up by ESTORIL-SOL, S.G.P.S., S.A..
DTH - DESENVOLVIMENTO TURÍSTICO E HOTELEIRO, SA – With a share capital of EUR 2,429,146, is 100% held by ESTORIL-SOL, S.G.P.S., S.A.. It owns a plot of land in Monte Estoril, where the former Miramar Hotel stood.
ESTORIL - SOL IMOBILIÁRIA, S.A. - With a share capital of EUR 7,232,570, it is 100% owned by ESTORIL SOL, S.G.P.S., S.A.. Its social object is the construction, promotion, management and sale of tourist complexes and real estate.
ESTORIL SOL (V) - Investimentos Imobiliários, S.A. - Its share capital of EUR 50,000 is fully paid up by ESTORIL-SOL, S.G.P.S., S.A.. The Company is now idle, but owns a site located on maritime land in the parish of Ericeira.
PARQUES DO TAMARIZ - SOCIEDADE EXPLORAÇÃO DE PARQUES DE ESTACIONAMENTO, S.A. - ESTORIL- SOL S.G.P.S., S.A., through Estoril Sol Imobiliária, SA, holds a 33.3% stake in the share capital of the company, which is EUR 1 500 000. The company has a licence to build a car park on the land next to Estoril Casino.
CHÃO DO PARQUE - Sociedade de Investimentos Imobiliários, S.A. – Has a share capital of EUR 750,000, of which 90% if held directly by ESTORIL-SOL, S.G.P.S., S.A. and 10%, indirectly, through Estoril Sol - Investimentos Hoteleiros, S.A..
ESTORIL SOL - INVESTIMENTOS HOTELEIROS, S.A. - With a share capital of EUR 10,835,000 is 90% held by ESTORIL SOL, S.G.P.S., S.A., with the remaining 10% being held by the company itself.
Pursuing the measures to rationalise the Group's structure, during 2012 we will press ahead with the liquidation and dissolution of the companies Estoril Sol - Investimentos Hoteleiros, SA and Chão do Parque - Sociedade de Investimentos Imobiliários, SA.
At 31 December 2012, the share capital of ESTORIL-SOL, S.G.P.S., S.A. was represented by 11.993.684 shares with a nominal unit value of EUR 5 (five), of which 6.116.779 were registered shares and 5.876.905 bearer shares.
At the time this report was prepared, ESTORIL SOL, SGPS, S.A. held 62.565 treasury shares, with no trading taking place during the financial year.
During the year 2012, the Company, did not sold or acquired own shares.
The Company's shares are listed on the Lisbon Stock Exchange since February 14, 1986.
The price and trading volume of Estoril-Sol, SGPS, SA securities, on the dates of reporting to the market during the year 2012 were according table below:
| Date for disclosing Estoril-Sol, SGPS, S.A. , information | ||||||
|---|---|---|---|---|---|---|
| Price (Euros) | ||||||
| Disclosure | Date | Qtd | Open | High | Low | Close |
| Annual results for 2011 | 30-04-2012 | 376 | 1,80 | 1,80 | 1,80 | 1,80 |
| 2012, 1st Quarter results | 31-05-2012 | 6 0 |
1,17 | 1,17 | 1,17 | 1,17 |
| 2012, Semester results | 28-08-2012 | 3 0 |
1,41 | 1,41 | 1,41 | 1,41 |
| 2012, 3rd Quarter results | 29-11-2012 | 700 | 1,18 | 1,18 | 1,18 | 1,18 |
During 2012 the Company did not paid any dividend.
The year 2012 was characterized by a slowing global economy continually marked by the persistence of high levels of uncertainty.
Economy from the Euro Zone went on a contraction mainly as a result of the austerity policies adopted by most of its members.
In Portugal, as foreseen in the framework of the Program of Economic and Financial Assistance agreed with the International Organizations, the year 2012 was necessarily a year of economic adjustments which led to a sharp contraction of domestic demand. The Gross Domestic Product fell by 3 2% and household consumption by 5.9%.
Inflation stood at 2.77% and the financial markets witnessed a downward trend in short-term interest rates from the euro zone.
It was therefore a year of great challenges, containment and restructuring for the vast majority of organizations that operate mainly in the domestic market.
The Company does not directly exercise any economic activity and so the net income recorded in the year, basically arises from of the increased valuation of the financial investments in the subsidiary companies by the equity pick-up method.
Despite the adverse macroeconomic environment which greatly affected the activity and results of the Group's major subsidiaries, losses of 4.2 million euros in 2012 compared with 3.9 million in 2011, the Company undertook a number of measures for internal reorganization that allowed it to maintain the level of results and adjust its structure to face current and future external constraints.
It was recorded as "Gains/ Losses imputed from subsidiaries" a loss of 4.2 million Euros arising essentially from the valuation of investments in Subsidiaries using the "equity method.
The remaining operating expenses are directly related to the normal functioning of society, such as:
The "staff costs" in the amount of 1.041 million euros, 0.2 million euros less than those recorded in 2011, incorporating 0.3 million euros relating to compensation paid for termination by mutual agreement of work contracts.
Spending on "External supplies and services" in the amount of 0.45 million euros, showed a decrease of 18% compared to the figure recorded in 2011.
The "Financial result", negative in the amount of 0.8 million Euros, expresses the value of the financial burden of financing obtained to strengthen the financial structure of the subsidiary companies.
Given the facts related above the "Net result of the year" of the individual accounts was negative by 6.2 million euros, which compares to 6.6 million Euros, also negative, in the previous year.
The company reduced its financial debt liabilities by 6 million to a final debt balance of 11 million Euros in December 2012.
The financial adjustment and macroeconomic policies of austerity, to which adds the inadequate, given the current situation, high levels of taxation over the Gaming activity in Portugal, have strongly conditioned the performance of Estoril-Sol operations.
Revenues from Gambling in Portugal have been suffering successive contractions over the recent years, and in 2012 turned to fall about 11%, adding up cumulative losses of approximately 30% over the past five years.
The Estoril-Sol Group, through its subsidiaries, operates 3 of the 4 biggest casinos in Portugal, accounting for 64% of net income and taxes paid and generated by the activity in Portugal.
Revenues from Gambling in Portugal in 2012
amounted to approximately 290 million Euros. The Estoril-Sol Group maintained its market share (64%) with revenues totaling approximately 185 million Euros.
Although the Group has suffered a drop in gaming revenue on the order of 11%, the gaming taxes increased for a 52% rate over the total revenues. Nevertheless, restructuring measures in the main operating subsidiaries, Estoril-Sol (III) and Varzim-Sol, were implemented, which allowed the Group to
improve its operating results and provide it with a more flexible organizational structure thought to be able to face the future with some degree of optimism.
The Group's operating revenues, net of special gaming tax, fell to 94 million euros, a decrease of 13,7% which equates to 15 million euros less. The Group has, as in the previous year, impairment losses on goodwill and real estate assets for sale, which amounted to 5,7 million euros. Still, the measures implemented by the Group, with particular focus in the second half of the year, led to a reduction in operating costs of approximately EUR 16,2 million corresponding to 15% less than in the previous year.
0.16 million operating losses in 2012.
| 2012 | 2011 | Var % | |
|---|---|---|---|
| Gaming Revenue | 184.293.483 | 206.810.630 -10,9% | |
| Special Gaming Tax | -95.089.436 | -103.242.897 | |
| Effective Tax Rate | 52% | 50% | |
| Net Revenue | 89.204.047 | 103.567.733 -13,9% | |
| Other revenue ( F&B / Entertainment ) | 5.445.658 | 6.052.589 -10,0% | |
| 94.649.706 | 109.620.322 -13,7% | ||
| External supplies and services | -29.183.548 | -32.209.231 | -9,4% |
| Staff costs | -38.555.894 | -44.665.235 -13,7% | |
| Impairment of non-depreciable assets | -5.705.292 | -7.617.078 -25,1% | |
| Other operating costs | -21.370.241 | -26.588.160 -19,6% | |
| Operating Results (EBIT) | -165.269 | -1.459.382 | 88,7% |
| Financial Costs | -8.697.206 | -7.653.886 | 13,6% |
| Result before income taxes (EBT) | -8.862.475 | -9.113.268 | 2,8% |
| Result of discontinued operations | - | 854.440 | |
| Income tax (IRC) | -123.680 | -50.000 | |
| Consolidated net result of the year | -8.986.155 | -8.308.828 | -8,2% |
This collective consciousness of a less positive environment has allowed the Group to improve, in a year of adversity, the operating results by almost 88%, from losses of approximately -1,5 million Euros in 2011 to a nearby operations break-even of -
In a concerted effort to financial stability and less dependence on third parties, the Group reduced its bank debt at 6 million euros. This effort wasn't sufficient enough to reduce the financial cost supported with loan
interests, mainly due to an upward pricing revision by the majority of the credit institutions. Estoril-Sol supported almost 8,6 million Euros with loan interests, an increase of 13,6% over the previous year.
The Consolidated Net Profit in 2012 was negative by 8,9 million Euros compared with 8,3 million euros, also negative, in the previous year, although the latter is positively inflated by extraordinary income from discontinued operations of approximately 0,9 million Euros.
The Group's activities are mainly focused on the exploration of the Casinos: Estoril and Lisboa, conceded until 2020 to Estoril-Sol (III), and Casino da
Póvoa conceded to Varzim-Sol until 2023.
Similar to what happens with the sector in Portugal, also gaming revenues from casinos operated by the Group have successively been in decline. In the year 2012 the segment most penalized was Casino da Póvoa where gaming revenues fell 13% from 47 million Euros in 2011 to the current 40,7 million Euros. Five years ago, in 2008, these same revenues amounted to Euro 58 million Euros.
The second segment most penalized was Estoril, where gaming revenues fell by 11,25%, from 71 million Euros to 63 million Euros. In Casino de Lisboa during 2012, gaming revenues decreased by 9% from 88 million Euros in 2011 to the current 80 million Euros in 2012. Casino de Lisboa gaming revenues in 2008 were almost as much as the casinos of Estoril and Póvoa together during 2012. All these accumulated
revenue breaks, resulted in part of successive years driven by a contraction in the Portuguese and European economies.
This less positive macroeconomic environment led the Group to adopt policies of rationalization and resources optimization in order to achieve the economic and financial balance of the Concessions in which it operates
During 2012 the Board of Directors from the operating companies responsible for managing the three casinos has continued to implement measures to reduce costs and
| Estoril | Lisboa | Póvoa | Outros | |
|---|---|---|---|---|
| Gaming Revenue | 63.338.388 | 80.211.451 | 40.743.645 | |
| Special Gaming Tax | -31.669.179 | -40.105.725 | -23.314.532 | |
| Effective Tax Rate | 50% | 50% | 57% | |
| Net Revenue | 31.669.209 | 40.105.726 | 17.429.113 | |
| EBITDA | 8.498.991 | 18.760.328 | -617.073 | |
| EBITDA Margin | 13% | 23% | -2% | |
| Amortization and Depreciation | -8.023.515 | -7.701.707 | -5.586.267 | |
| EBIT | 475.477 | 11.058.622 | -6.203.340 | |
| Financial Costs | -3.250.496 | -3.238.610 | -1.383.992 | |
| Net Result of the Segment | -2.775.020 | 7.820.012 | -7.587.332 | |
| Impairment of non-depreciable assets | -5.705.292 | |||
| Other Segments Operating Results | -738.523 | |||
| Consolidated net result of the year | -8.986.155 |
levels of new investment. The costs of external supplies and services were reduced by 16%, 12% and 4.5% in the casino Estoril, Póvoa and Lisboa respectively.
Staff costs decreased 24%, 15% in the casinos of Estoril and Póvoa, and were increased by 13% in the Casino de Lisboa. The increase in staff costs in Casino Lisboa is associated with lower expression in the upward revision of wages from Casino de Lisboa gaming areas employees, continuing the policy of equity wages between casinos, including Estoril and Lisbon, which was first initiated in 2010. With greater contribution to this increase is the compensation values paid to the former employees for cancel
employment contracts by mutual agreement that occurred in 2012, which in the case of Casino de Lisboa were virtually nonexistent until this year. The Group conducted a consolidated effort of approximately 4.6 million Euros in compensation payments to former employees.
| Avg number of employees | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| Casino do Estoril | 341 | 375 | ||
| Casino de Lisboa | 292 | 334 | ||
| Casino da Póvoa | 250 | 265 |
Of the total investment (CAPEX) made by the three casinos in the total amount of approximately 9,6 million Euros, similar to last year, 6,6 million Euros were invested in Casino da Póvoa 6.6 mainly in the conclusion of the last phase of the works of reconceptualization and remodeling the building of the Casino da Póvoa. At Casino Lisboa 2,3 million were invested from which 1,3 Euros million were reimbursed at 100% by Turismo de Portugal under the acquisition of the new video surveillance solution (CCTV) for gaming rooms.
The Casinos operated by the Group have business operating margins (EBITDA) positive or very close to break-even in the case of Casino da Póvoa. These margins were then penalized by the heavy weight of the financial cost with loan interests and with assets amortization and depreciation due to heavy investments made in the past recent years. Yet the Casino de Lisboa has a net positive result unlike his counterparts in Estoril and Póvoa.
In an economic climate clearly blighted by the generalized containment of expenditure, the Group nevertheless promoted a prestigious and coherent artistic, cultural and sporting program.
The most relevant events during 2012 were:
Cultural and Artistic events:
International Magic Gala , by Luís de Matos.
Auditorium of the Casino Estoril held, the ceremony of the literary awards of Estoril-Sol - Fernando Namora and Revelation Agustina Bessa-Luís - which was chaired by His Excellency the President, Prof. Dr. Aníbal Cavaco Silva;
Cultural and Artistic events:
Cultural and Artistic events
The Companies of the Estoril Sol Group pursue a financial policy based on the preservation of its financial independence, fundamentally based on the resources released each year.
With the support of various banks, the subsidiary use a number of variable rate financial instruments, the maturities of which are negotiated according to the foreseeable ability to release funds.
In the normal course of their activities the Group Companies, as concessionaires of gaming operations, are exposed to a number of risks and uncertainties, as identified below:
The companies of the Group, aiming to prevent and minimize the risk inherent to their economic activities, have specialised technical services of supervision and control, responsible for the strict fulfilment of the standards of physical safety of customers, employees and installations and also compliance with the legislation that regulates the Gaming activity in Portugal, and it should be pointed out that Portuguese Casinos are subject to the permanent supervision by the State through the Gambling Inspection Service of the Instituto de Turismo de Portugal I.P.
Periodically, with the collaboration of an external entity, risk analyses are carried out on the procedures used and on the physical safety of the assets.
The subsidiaries Estoril Sol (III) and Varzim Sol operate gaming concessions in Casinos. In the last few years, this operating sector has been experiencing increased technological growth, particularly focused on slot machines, which requires the ongoing renewal of the product range. The Company systematically keeps up with this evolution, visiting manufacturers, taking part in international specialty trade shows and regularly investing in new equipment.
Pursuant to the concession contracts, the Portuguese State grants concessionaries exclusive rights to gambling and operations of games of chance, in exchange for high initial payments and high annual tax rates. Nevertheless, the Portuguese State has proven to be unable to regulate its citizens' access to countless online casinos that abound today and which constitute a growing factor of unfair competition,
both because they account for a significant increase in illicit supply and because they constitute a flagrant source of tax evasion.
The Group Companies continued, 2012, whether through the Portuguese Association of Casinos or directly, to call the Portuguese Government's attention to the need to take legislative measures to prevent this situation, following the example of significantly effective measures taken in the USA and in Norway, thereby ensuring compliance with commitments pertaining to the exclusive right to gaming operations, as contractually assumed by the State.
The significant investments that the Group Companies have made in recent years, among which we would draw attention to the amount paid for the extension of the concession contracts of the zone of Estoril and Póvoa de Varzim, the initial payment made relating to Lisbon Casino and the investments made pertaining to the renewal, modernization and expansion of the Casinos, have, in the recent past, involved increased indebtedness which, combined with the changes in market interest rates, resulted in increased financial costs and a potential liquidity risk.
Depending on the operating funds that are freed up, we feel the financial risk to which the associated undertakings are exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that assets guarantees are dispensed with for operations under contract.
Portuguese legislation forbids casino concessionaries from granting credit to gaming activities, and so, in this regard, Group Companies are not exposed to credit risk. Other revenue from restaurant and entertainment activities, which account for only 1,0% of revenue, therefore represents insignificant exposure.
All operations are carried out in Euros, with the exception of some current imports, which periods of no more than 45 days, which are conducted in US Dollars, and so the Company has only minimal exchange rate exposure.
Given the recessive character of the Portuguese macroeconomic environment, which has inevitably reduced people's disposable income and has led to a contraction in domestic demand, rising unemployment and the freezing of salaries, a rise in interest rates and restricted access to credit, the sector of activity in which the Group Companies operate can be expected to continue to reflect the effects of the financial and economic crisis in which our economy is plunged.
It would therefore be prudent and realistic to foresee, for an indefinite period and to an indefinite degree, the continuation of the downturn in activity of Portuguese casinos and, namely of the casinos run by the Estoril Sol Group, due to the prolonged reduction in their respective revenues, a fact which, by itself, is evidence of the flagrant economic and financial imbalance of the concession contracts negotiated with the State, all of which were based on the assumption of year-on-year growth in revenue until the end of each contract.
Within this context, the Group Companies will need to step up their efforts, both directly and through the Portuguese Association of Casinos, to make the responsible ministry and Government aware of the need to urgently review these concession contracts, aiming to restore their economic and financial balance, besides the Government's pressing intervention measures aimed at curtailing the unfair competition of online gambling, which, besides violating their operational exclusivity regarding games of fortune, has, over the last decade, led to unrecoverable losses for Portuguese Casinos and, specifically, for those of the Estoril-Sol Group.
Internally, the need for the Group Companies to continue to give priority to cost reduction measures is decisive, pursuing a very careful selection of the investments to be made in 2013, in the expectation that the effect of this, together with the savings arising from the rationalization measures in progress, will lead to a healthy economic and financial balance.
Pursuant to the provisions in article 21 of Decree Law no. 411/91, of 17 October, the Companies of the Group have no outstanding debts to the Social Security.
The members of the Board of Directors of Estoril-Sol, S.G.P.S., S.A. assume responsibility for the veracity of the information contained in this Annual Report, certifying that that there are no omissions that they are aware of, which faithfully portrays the evolution of the business, performance and position of the company and of the companies included in the consolidation perimeter, and that it contains an appropriate description of the main risks and uncertainties that face the companies of the Group. The individual and consolidated financial statements, prepared in conformity with the applicable accounting standards, reflect a true and appropriate image of the assets and liabilities and of the financial situation and results of the issuer, as well as of the companies included in the consolidation perimeter.
Between the 31st of December 2012 and the date of this report, no relevant facts occurred that could materially affect the financial position and the future results of Finansol and the other Companies of the Group.
Having the majority of board members elected by the General Meeting of April 29th, 2008, remained in functions until the appointment of new members, which occurred during an extraordinary General Meeting of February 4th, 2013. The new members were appointed to exercise the functions corresponding to a fouryear period 2013-2016.
During the first quarter of 2013, after a unanimous vote taken at the headquarters of the Portuguese Association of Casinos, the operating companies from the Group Estoril-Sol, have filed lawsuits against the State in which they seek to be restored the financial balance of Gaming Concessions. Such a claim is founded, among other reasons, because the State, through its actions and omissions has given rise to changes in circumstances that were the basis for the negotiation of the gaming concessions. Of them highlights the fact that it was assumed for tax basis a continuing and significant increase of gaming revenue throughout the concession period. Despite not having checked this proposition due to the economic climate and as a result of the State attitude in relation to online gambling and illegal gambling, among others, it continued to require them to pay very high taxes, calculated on revenue that the Concessionaires did not obtain. Thus, remained no alternative to the Concessionaires that was not to challenge with the competent
Administrative and Fiscal Courts the settlements of tax to which they were presented, and for that purpose submit the necessary judicial guarantees. However by the time of approval of this report, these lawsuits are suspended and all taxes paid.
The Board of Directors wishes to publicly express its thanks to all those who cooperated with us during the year, namely to the the Members of all the Corporate Offices and to the Workers of the Group Companies.
We should also emphasise the comprehension always present in the dialogue with the Members of the related Government Offices, as well as with the Head of Turismo de Portugal I.P., of the Gambling Inspection Service, the Town Halls of Cascais and Póvoa de Varzim, Lisbon City Hall, entities with which we have always enjoyed a systematic and profitable relationship.
We would also like to thank the cooperation from Credit Institutions and all Official Bodies we have contacted.
Estoril, 16th of April, 2013
The Board of Directors
Pursuant to Regulation no. 1/2010 of the Securities and Exchange Commission (CMVM) on the governance of listed companies, it is mandatory for these companies to prepare a governance report in order to provide information to the market on corporate governance practices.
Estoril-Sol, SGPS, SA, ("Estoril-Sol" or "Sociedade"), being a commercial company admitted for public trading, is subject, not only to the general rules of the Commercial Companies Code (CCC), but also and specifically, to the Securities Code (SC) and also the regulations issued by the supervisory authorities of regulated markets, besides all the legislation and other applicable regulations.
The Company prepares this governance report, by reference to the year ended on 31st December 2012, in fulfillment of the legal requirements of article 245-A of the SC and regulations of Regulation no. 1/2010 of the CMVM. This report on the governance of the Company represents a description of the corporate structure of Estoril-Sol and of its corporate practices, with the aim of providing information to the market on the scope of the policy of transparency that Estoril-Sol has been practising over the years.
Besides the obligatory disclosure on the site of the CMVM, Estoril-Sol keeps its institutional website (www.estoril-solsgps.com) fully operational, disclosing relevant information on corporate matters to investors and to the public in general.
In 2007 the Company adopted the model of governance commonly known as the classic model, the organic structure of which is basically centred on the existence of an executive body, the Board of Directors, a collegiate structure which is jointly responsible for the decisions that it adopts, and a supervisory structure comprising a Audit Board and by a Statutory Auditor who is not a member of the Audit Board, within the terms of line b) of no. 1 of Article 413 of the CCC.
When it opted for this model, the Company, supported by the desire of its shareholders, did so in a pondered manner which is coherent and in line with its social interests, its shareholder structure and its importance and representativity in the market, as it understood that this was the model that would most rationally and efficiently help to pursue the objectives of the Company and of the group of activities that it performs.
The consideration taken by the Company in 2007 and which has been critically analysed over time, leads the Board of Directors to reaffirm that the model chosen at that time continues to be the one that is the most efficient, appropriate and in line with the Company's activity and with the objectives that it pursues, and, during the year in question, no factors have occurred that might justify the introduction of any alteration to the model or to justify the adoption of a different organizational model.
The Company's Articles of Association incorporate the mechanisms appropriate to fulfilling the fundamental principles of good corporate governance, which include the principles of transparency, of the separation of functions, of the prevention of conflicts of interest and of the specialization of supervision and control.
As mentioned, the model adopted resulted in the definition of a system of corporate governance in which the administration and management of the company are attributed to the Board of Directors, and the
supervision and monitoring of the its activity is carried out by a Audit Board made up from persons of recognised technical competence, as well as by a Statutory Auditor, who is not a member of the Audit Board and who is responsible for auditing the financial statements of the Company.
The model created is based on an organic balance that results from the consideration of the role of the Shareholders on the choice of the Board of Directors and of the supervisory body and arises out of the need to provide the efficient and professional management that will help to develop the company's business. In this regard, the collective of the shareholders has the competence to elect the Board of Directors and the Audit Board and the Statutory Auditor.
In order to gain a better understanding of the way in which Estoril-Sol is organised and the way it operates in terms of corporate governance, the Company makes its updated Articles of Association available to the public in general on the respective website (www.estoril-solsgps.pt).
Article 2 of Regulation no. 1/2010 of the CMVM imposes the communication and disclosure of information on the structure and corporate governance practices of listed companies, in compliance with article 245-A of the SC.
Within the terms of Article 1.1 of Regulation no. 1/2010 of the CMVM on the Corporate Governance of listed companies, Companies that issue shares admitted for trading on a regulated market located or operating in Portugal should adopt the Corporate Governance Code divulged by the CMVM or an equivalent code.
Estoril-Sol adopted the Corporate Governance Code divulged by the CMVM on the Recommendation on Listed Companies of September 2007, having subsequently adopted the model disclosed in 2010.
On the other hand, Estoril-Sol, in the preparation of this document, also considered the recommendations in the Circular of the CMVM of 28 January 2013 on the sending and publication of the annual accounts documents, in particular that which is established in Point 2.13, "Corporate Governance".
The Code of Governance adopted by Estoril-Sol is available publicly at: http://www.cmvm.pt/CMVM/Recomendacao/Recomendacoes/Documents/CodigodeGovernodasSociedades CMVM2010.pdf
Besides the Corporate Governance Code divulged by the CMVM, Estoril-Sol is not subject to any other codes of governance or codes of conduct which it voluntarily abides by.
The Company fulfils most of the recommendations on governance included in the Code of Governance adopted by it. However, the Company believes that the Code of Governance divulged by the CMVM and adopted by Estoril-Sol refers to commercial public companies the dimension and social purpose of which and, mainly, the degree of dispersion of the respective capital on the market do not correspond to the concrete and stable characteristics of Estoril-Sol.
In fact, and in particular the circumstance of the free-float (capital dispersed on the market) being around 3.5 % of the share capital, necessarily has consequences in terms of the concrete appropriateness of the Company's model of governance, justifying the inappropriateness of the adoption or application of some recommendations of the Code of Governance divulged by the CMVM and adopted by Estoril-Sol which consider and use as a reference public companies with very different characteristics for those of Estoril-Sol.
Below, the recommendations stated in the Code of Governance adopted by Estoril-Sol are set out, respecting the rule comply or explain – individual indication of whether the recommendations are adoption in full / not adopted / or of their applicability, always with a reasoned justification for the non-adoption or non-applicability of the respective recommendations.
Recommendation adopted (viz. Chapter 1, I.3)
Within the terms of Article 10 nbr 6 of the Articles of Association of Estoril-Sol, the statutory deadline for receiving early voting ballots is 5 working days. Given the narrow dispersion of the share capital of Estoril-Sol, the history of the constitutive quora of the General Meeting of the Company and the fact that no shareholder used postal voting in 2012, there are no substantial reasons to alter the articles of association for this recommendation.
1.3.3 Companies shall ensure the level of voting rights and the shareholder's participation is proportional, ideally through the statutory provision that obliges the one share-one vote principal. The companies that: i) hold shares that do not confer voting right; ii) establish non-casting of voting rights above a certain number, when issued solely by a shareholder or by shareholders related to former, do not comply with the proportionality principle.
Recommendation not adopted.
Within the terms of Article 10.3 of the Articles of Association of Estoril-Sol, each hundred shares corresponds to one vote.
The concrete shareholder structure of the Company does not require the alteration of this provision. However, this is a recommendation that could be implemented in a future revision of the by-laws.
I.4.1 Companies shall not set a constitutive or deliberating quorum that outnumbers that which is prescribed by Law.
Recommendation adopted.
Justification:
In fact, article 13, no. 3 of the Articles of Association require a bigger deliberating quorum than that contemplated at law for the election of the Remuneration Committee and of the Advisory Board, given that we are dealing with deliberations concerning the election of strategic offices, which in fact are very close to the Board of Directors.
I.5.1 The minutes of the General Meetings shall be made available to shareholders on the company's website within a 5 day period, irrespective of the fact that such information may not be legally classified as material information. The list of attendees, agenda items of the minutes and resolutions passed during such meetings shall be kept on file on the company's website for a 3 year period.
Recommendation adopted.
I.6.1 Measures aimed at preventing successful takeover bids, shall respect both the company's and the shareholders' interests. The company's articles of association that by complying with said principal, provide for the restriction of the number of votes that may be held or exercised by a sole shareholder, either individually or in concert with other shareholders, shall also foresee for a resolution by the General Assembly (5 year intervals), on whether that statutory provision is to be amended or prevails – without super quorum requirements as to the one legally in force – and that in said resolution, all votes issued be counted, without applying said restriction.
Recommendation not applicable.
I.6.2 Defensive measures shall not be adopted that automatically cause a serious asset erosion in the company in the event of the transition of control or change of the composition of the Board of Directors, thereby prejudicing the free transmission of the shares and the voluntary performance assessment by the shareholders of the members of the Board of Directors.
Recommendation adopted.
The articles of association of Estoril-Sol do not allow for a limitation on the number of votes that may be held or exercised by a single shareholder.
age risk. These systems should include, at least, the following components: i) establishing the company's strategic objectives as regards risk assumption; ii) identification of the main risks related to the concrete activity undertaken and any events that might generate risks; iii) analysis and measurement of the impact and of the probability of occurrence of each of the potential risks; iv) risk management aimed at aligning the risks effectively incurred with the company's strategic option regarding the assumption of risks; v) control mechanisms for executing measures for adopted risk management and its effectiveness; vi) adoption of internal information and communication mechanisms on the diverse components of the system and on risk alerts; vii) periodic assessment of the system implemented and adoption of the modifications that are deemed necessary.
Recommendation not adopted.
The size of the Company, on the one hand, the fact that risk in the sector of activity in which Estoril-Sol operates is not as relevant as in other sectors, on the other hand, and, lastly, the absence of any historic records of situations of effective risk, leads Estoril-Sol to conclude that no risk has ever materialised, and therefore, the mechanisms of risk identification, control and management that have always existed in the Company are maintained. It is therefore understood that there are no reasons to justify this recommendation being adopted in the exact terms in which it is put here.
II.1.1.3 The The Board of Directors shall ensure the establishment and functioning of the internal control and risk management systems, with the Audit Board being responsible for assessing the functioning of these systems and proposing the respective adjustment to the company's needs.
Recommendation adopted.
II.1.1.4. Companies shall, in the annual report on Corporate Governance: i) identify the main economic, financial and legal risks that the company is exposed to in the exercise of its activity; ii) describe the operation and efficacy of the risk management system.
Recommendation adopted.
II.1.1.5. The Board of Directors and the Audit Board should have regulations for their operation which should be disclosed on the company's website.
Recommendation not adopted.
Justification:
The Board of Directors and the Audit Board follow the best operating practices based on criteria of responsibility and professionalism, even though they have not adopted formal operating regulations, the preparation of these regulations is planned for the near future.
II.1.2.1 The Board of Directors shall include a number of non-executive members that ensure the efficient supervision, auditing and assessment of the executive members' activity.
Recommendation not applicable.
Justification:
This recommendation is not adopted in as much as it is not applicable to the model of governance adopted by Estoril-Sol. Although the Articles of Association allow for the possibility of setting up an Executive Committee, Estoril-Sol has not delegated, until 31st December 2012, the current management of the Company to an Executive Committee.
However, the appointment of an Executive Committee, in accordance with Estoril-Sol Articles of Association, is listed as one of the objectives of the Board of Directors, set up for the year 2013.
II.1.2.2 Non-executive members must include an adequate number of independent members. The size of the company and its shareholder structure must be taken into account when devising this number and may never be less than a fourth of the total number of Directors.
Recommendation not applicable.
Justification:
This recommendation is not adopted in as much as is not applicable to the model of governance adopted by Estoril-Sol. Although the Articles of Association allow for the possibility of setting up an Executive Committee, Estoril-Sol has not delegated the current management of the Company to an Executive Committee until 31st December 2012.
II.1.2.3. The assessment of the independence of its non-executive members performed by the Board of Directors shall take into account the legal and regulatory rules in force concerning the independency requirements and the regime of incompatibilities applicable to the members of the other corporate offices, ensuring orderly and sequential coherence in the application of the criteria of independence to the whole company. A director who, in another corporate office, cannot assume this capacity owing to the applicable standards, shall not be considered independent.
Recommendation not adopted.
Justification:
This recommendation is not adopted in as much as it is not applicable to the model of governance adopted by Estoril-Sol. Although the Articles of Association allow for the possibility of setting up an Executive Committee, Estoril-Sol has not delegated the current management of the Company to an Executive Committee until 31st December 2012.
II.1.3.1 Depending on the applicable model, the Chair of the Audit Board, the Audit Committee or the Financial Affairs Committees shall be independent and be adequately capable to carry out its duties. Recommendation adopted.
II.1.3.2 The selection process of candidates for non-executive directors shall be conceived so as to prevent interference from executive directors.
Recommendation not adopted.
Justification:
This recommendation is not adopted in as much as is not applicable to the model of governance adopted by Estoril-Sol. Although the Articles of Association allow for the possibility of setting up an Executive Committee, Estoril-Sol has not delegated the current management of the Company to an Executive Committee, which for this reason, means that there is no "process of selection of candidates for nonexecutive directors". However, the appointment of an Executive Committee, in accordance with Estoril-Sol Articles of Association, is listed as one of the objectives of the Board of Directors, set up for the year 2013.
II.1.4.1 The company shall adopt a policy whereby irregularities occurring within the company, are reported. Such reports should contain the following information: i) the means through which such irregularities may be reported internally, including the persons that are entitled to receive the reports; ii) how the report is to be handled, including confidential treatment, should it be required by the reporter.
Recommendation not adopted.
Justification:
Although the Company has an internal audit board that analyses the reporting of irregularities that come to the knowledge of the Board of Directors with total confidentiality, the Company has not yet formalised a policy on the reporting of irregularities, but intends to do so in the near future.
II.1.4.2 The general guidelines on this policy should be disclosed in the corporate governance report.
Recommendation not adopted (viz. previous justification).
Recommendation partially adopted.
Justification:
This recommendation is considered to be only partially adopted, in general, given that some of its lines are not applicable, namely:
(i) the remuneration of the members of the Board of Directors is fixed only, not contemplating a variable part; and (ii) the Company did not delegate powers to an Executive Committee, which is why all of the references to executive / non-executive directors do not apply.
Recommendation partially adopted.
This recommendation is considered to be only partially adopted, in general, given that some of its lines are not applicable, namely:
(i) the remuneration of the members of the Board of Directors is fixed only, not contemplating a variable part; and (ii) the Company did not delegate powers to an Executive Committee, which is why all of the references to executive / non-executive directors do not apply.
II.1.5.2 A statement on the remuneration policy of the Board of Directors and Supervisory Board referred to in Article 2 of Law No. 28/2009 of 19 June, shall contain, in addition to the content therein stated, adequate information on: i) which groups of companies the remuneration policy and practices of which were taken as a baseline for setting the remuneration ii) the payments for the dismissal or termination by agreement of the Directors' duties.
Recommendation partially adopted
Justification:
This recommendation is considered to be only partially adopted, given that the remuneration policy in force in Estoril-Sol does not contemplate any specific aspects in respect of payments relating to the dismissal or cessation by agreement of directors, and therefore for all due purposes, the suppletive legal regime shall be understood to be applicable.
II.1.5.3 The remuneration policy statement referred to in Article 2 of Law No. 28/2009 shall also include the directors' remunerations which contain an important variable component, within the meaning of Article 248-B/3 of the Securities Code. The statement shall be detailed and the policy presented shall particularly take the long-term performance of the company, compliance with the rules applicable to its business and restraint in taking risks into account.
Recommendation not applicable.
The remuneration of senior management within the meaning of article 248-B/3 of the Securities Code is fixed. Nevertheless, the declaration on the policy of remuneration of the directors is detailed and takes into account the long term performance of the company, compliance with the standards applicable to the company's activity and contention in the taking of risks.
II.1.5.4 A proposal shall be submitted at the General Meeting on the approval of plans for the allotment of shares and/or options for share purchase or further yet on the variations in share prices, to members of the Board of Directors, the Audit Board and other senior management, within the context of Article 248/3/B of the Securities Code. The proposal shall mention all the necessary information for its correct assessment. The proposal shall be accompanied by the regulations of the plan or, if these have not yet been drawn up, by the general conditions that this should follow. Similarly, the main characteristics of the system of retirement benefits for members of the Board of Directors, the Audit Board and other senior management, within the context of Article 248/3/B of the Securities Code, shall also be approved in a General Meeting.
Recommendation not applicable.
There is no plan to award shares, and/or options for the acquisition of shares to members of the Board of Directors, the Audit Board and other senior management, within the context of Article 248/3/B of the Securities Code. In 2012 no new systems of benefits of retirement were set up, under which the members of the Board of Directors, the Audit Board and other senior management, within the context of Article 248/3/B of the Securities Code, would benefit.
Recommendation adopted.
II.1.5.7 The amount of remuneration received, as a whole and individually, in other companies of the group and the pension rights acquired during the financial year in question shall be disclosed in the Annual Report on Corporate Governance.
Recommendation adopted.
Note: The recommendation was considered to be adopted, even though no disclosure has been made: during 2012 no pension rights were acquired. Even though a provision has been set up for the respective amount, in compliance with the applicable accounting rules, the "provision for retirements under contract" that was disclosed to the market by Estoril-Sol does not confer any effective or provisional right to a
pension, because upon decease they do not pass on to the potential future office holders. In respect of this point we would also refer to Point II.33 below.
II.2.1 Within the limits established by Law for each Management and Supervisory structure, and unless the company is of a reduced size, the Board of Directors shall delegate the day-to-day running and the delegated duties should be identified in the Annual Report on Corporate Governance of the Company.
Recommendation not applicable.
Justification:
Even though it may be admitted that Estoril-Sol is a company with a substantial turnover, bearing in mind the characteristics of the Company, the company's social object, the organizational structure of the group of companies whose shareholdings are managed by it and the composition of its Board of Directors, the delegation of its day-to-day management is not justified.
II.2.2 The Board of Directors shall ensure that the company acts in accordance with its goals, and should not delegate its duties, namely in what concerns: i) definition of the company's strategy and general policies; ii) definition of the corporate structure of the group; iii) decisions taken that are considered to be strategic due to the amounts, risk and particular characteristics involved.
Recommendation adopted.
II.2.3 Should the Chair of the Board of Directors carry out executive duties, the Board of Directors shall set up efficient mechanisms for coordinating non-executive members that can ensure that these may decide upon, in an independent and informed manner, and furthermore shall explain these mechanisms to the shareholders in the corporate governance report of the Company.
Recommendation not applicable.
There is no differentiation between executive and non-executive directors in Estoril-Sol.
II.2.4 The annual management report shall include a description of the activity carried out by the nonexecutive Board Members and shall mention any restraints encountered.
Recommendation not applicable.
This recommendation is not adopted in as much as is not applicable to the concrete case of Estoril-Sol, as there is no differentiation between executive directors and non-executive directors in Estoril-Sol.
II.2.5. The company shall expound its policy of portfolio rotation on the Board of Directors, including the person responsible for the financial portfolio, and report on this in the Annual Corporate Governance Report.
Recommendation not applicable.
This recommendation is not adopted in as much as is not applicable to the concrete case of Estoril-Sol, as the areas of responsibility are not distributed among the members of the Board of Directors of Estoril-Sol and, for this reason, there is no rotation.
II.3.1 When Directors that carry out executive duties are requested by other Board Members to supply information, the former shall do so in a timely manner and the information supplied must adequately suffice the request made.
Recommendation adopted.
Note: The members of the Board of Directors all provide the information that is required of them, in good time and adequately. Never has any other corporate office, or any of the respective members, noted otherwise, namely saying that they were not provided with the required information in good time and adequately.
Recommendation not applicable.
Justification:
This recommendation is not adopted, in as much as is not applicable, given that Estoril-Sol has not delegated the day-to-day management of the Company to an Executive Committee.
Recommendation not applicable.
Justification:
The Estoril-Sol's model of governance is based on the traditional Portuguese model (also known as the "Latin model"), which comprises a Board of Directors and an Audit Board.
II.4.1 Besides fulfilling its supervisory duties, the General and Supervisory Board shall advise, follow-up and carry out on an on-going basis, the assessment on the management of the company by the Executive Board of Directors. Besides other subject matters, the General and Supervisory Board shall decide on: i) definition of the strategy and general policies of the company; ii) the corporate structure of the group; and iii) decisions taken that are considered to be strategic due to the amounts, risk and particular characteristics involved.
Recommendation not applicable.
Justification: The model of governance adopted by the Company is based on the "Latin model" which comprises a Board of Directors and an Audit Board.
II.4.2 The annual reports and financial information on the activity carried out by the General and Supervisory Committee, the Financial Affairs Committee, the Audit Committee and the Audit Board shall be disclosed on the company's website together with the financial statements.
Recommendation adopted.
Recommendation adopted.
Note: The Audit Board proposes the Statutory Auditor to be appointed in this regard and performs all of the "liaison" between the Statutory Auditor and Estoril-Sol, and so it is understood that the conditions of hiring and all of the care taken so as to provide the right conditions for the provision of the services are ensured, in fact and as recommended, by the Audit Board.
II.4.5 According to the applicable model, the general and supervisory board, the audit committee and the audit board, shall assess the external auditor on an annual basis and advise the General Meeting that he/she be discharged whenever there are justifiable grounds for this purpose.
Recommendation adopted.
Note: The Audit board has, in fact, this competence and naturally fulfils it. The recommendation is considered to be adopted in as much as the Audit board makes its annual assessment and has never proposed the dismissal of the Statutory Auditor to the General Meeting of Estoril-Sol merely because there has never been just cause for this purpose.
II.4.6 The internal audit services and those who ensure compliance with the rules applicable to the company (compliance services) should functionally report to the audit committee, to the general and supervisory board or, in the case of companies that adopt the Latin model, to that ensure compliance with the rules applicable or to the audit board, regardless of the hierarchical relationship that these services have with the executive management of the company.
Recommendation adopted.
Note: The internal audit services and those who ensure compliance with the rules applicable to Estoril-Sol report on its activity and conclusions to the Audit board.
II.5.1 Unless the company is of a reduced size and depending on the adopted model, the Board of Directors and the general and supervisory board, shall set up the necessary Committees in order to: i) ensure that a competent and independent assessment of the Executive Directors' performance is carried out, as well as its own overall performance and further yet, the performance of all existing committees; ii) study the adopted governance system and verify its efficiency and propose to the competent bodies, measures to be carried out with a view to its improvements; iii) in due time identify potential candidates with the high profile required for the performance of director's duties.
Recommendation not applicable.
Even though it may be admitted that Estoril-Sol is a company with a substantial turnover, bearing in mind the characteristics of the Company, the company's social object, the organizational structure of the group of companies whose shareholdings are managed by it and the composition of its Board of Directors, the
delegation of its day-to-day management is not justified. This recommendation is not adopted in as much as is not applicable to the concrete case of Estoril-Sol, as there is no differentiation between executive directors and non-executive directors in Estoril-Sol.
II.5.2 Members of the Remuneration Committee or equivalent shall be independent from the Members of the Board of Directors and include at least one member with knowledge and experience in matters of remuneration policy.
Recommendation partially adopted.
Estoril-Sol's Remuneration Committee actually comprises three members who are shareholders elected by the General Meeting, two of whom are members of the Board of Directors comprising 9 members. Given the structure of the company and given that the percentage of the free-float is clearly small, the Company believes that the said formal independence does not exist, but considers it to be partially adopted in as much as the members of the Remuneration Committee have knowledge and experience in matters of remuneration policy.
II.5.3 Any natural or legal person which provides or has provided, over the past three years, services to any structure reporting to the Board of Directors, to the Board of Directors of the company itself or that has to do with the current consultant to the company shall not be recruited to assist the Remuneration committee in the performance of its functions. This recommendation also applies to any natural or legal person who has an employment contract or provides services.
Recommendation adopted.
Note: Notwithstanding the information already provided that some of the members of the Remuneration Committee are shareholders and members of the Board of Directors, it is understood that this recommendation was adopted in as much as the Remuneration Committee did not hire, to assist it in the performance of its functions, any natural or legal person that provides or has provided, in the last three years, services to any structure reporting to the Board of Directors, to the Board of Directors of the company itself or which has an actual relationship with the company's consultant.
Recommendation adopted.
Note: The only committee set up in Estoril-Sol is the Remuneration Committee – which prepares minutes of its meetings -, there being no specialised committees.
III.1.1 Companies shall maintain permanent contact with the market thus upholding the principle of equality for shareholders and ensure that investors are able to access information in a uniform fashion. To this end, the company shall create an Investor Assistance Unit.
Recommendation adopted.
d) Investor Assistance Unit – its functions and access tools;
e) Accounts Reporting documents;
Recommendation not adopted.
Estoril-Sol discloses all of its information in the Portuguese language, but only part is available in English. In every case, the Company is planning, in the near future, to also make all information available in the English language.
III.1.3 Companies shall advocate the rotation of auditors after two or three terms in accordance with four or three years respectively. Their continuance beyond this period must be based on a specific opinion for the Supervisory Board to formally consider the conditions of auditor independence and the benefits and costs of replacement.
Recommendation adopted.
Note: Even though it may be admitted that the same Statutory Auditor has provided services for more than two or three mandates, it is understood that this fact does not mean that we cannot consider the recommendation to be adopted, taking into consideration that the Statutory Auditor's representative who provides the services of Estoril-Sol is the person responsible for the powers of auditing Estoril-Sol, and was elected for four years in the General Meeting of 29 April 2008, upon the proposal of the Audit board
Recommendation adopted.
III.1.5 The company shall not recruit the external auditor for services other than audit services, nor any entities with which same takes part or incorporates the same network. Where recruiting such services is called for, said services should not be greater than 30% of the total value of services rendered to the company. The hiring of these services must be approved by the Supervisory Board and must be expounded in the Annual Corporate Governance Report.
Recommendation adopted.
IV.1.1. Where deals are concluded between the company and shareholders with qualifying holdings, or entities with which same are linked in accordance with Article 20 of the Securities Code, such deals shall be carried out in normal market conditions.
Recommendation adopted.
IV.1.2. Where deals of significant importance are undertaken with holders of qualifying holdings, or entities with which same are linked in accordance with Article 20 of the Securities Code, such deals shall be subject to a preliminary opinion from the Supervisory Board. The procedures and criteria required to define the relevant level of significance of these deals and other conditions of its intervention shall be established by the Supervisory Board.
Recommendation not adopted.
Justification:
There being no materially relevant deals with holders of qualifying holdings, or entities with which they have any relationship, there was clearly no need to obtain any prior opinion from the supervisory body for this purpose. With regard to the procedures and criteria necessary for the definition of the relevant level of significance of these deals and the other terms of their intervention, taking into consideration the specific aspects of Estoril-Sol, namely its shareholder structure, to date there has been no formalization of these procedures and conditions, even though all and any deals of the company, regardless of the respective relevance, assume the necessary safeguard of the interests of all the shareholders of Estoril-Sol.
As mentioned above, the Code of Governance recommended by the CMVM and adopted by the Company relates to public companies with very different characteristics to those of Estoril-Sol. The specific characteristics of Estoril-Sol - in particular with regard to the concentration of 96.1% of its capital into two shareholders - naturally condition the basis of justification of the CMVM's recommendations and therefore also its application.
In fact, the recommendations in the Code of Governance were conceived for large companies, with a reasonable dispersion of capital and liquidity associated to the securities.
The dimension of Estoril-Sol, with a staff of 16 people, of which 9 are directors and 3 are members of the Audit Board, its concrete and stable shareholder structure, among other factors, mean that some of these recommendations are not applicable or that their implementation is effectively conditioned by the shareholders that hold around 96.1% of the capital of the Company.
In any case, and always within this context, Estoril-Sol has been and will continue to strive to improve the implementation of the recommendations of the Code of Governance divulged by the CMVM, so as to maximise the transparency of its information to the market, taking into account not only the interests of the shareholders but also the interests of other investors and the interests of the Company itself.
In this way, and considering its particular characteristics, the Company considers that the degree of adoption of the recommendations of the CMVM is appropriate.
0.4. When the structure or the corporate governance practices deviate from the CMVM's Recommendations or from other Corporate Governance Codes that the company is subject to or had voluntarily applied to, the company shall explain which parts of each code have not been complied with and the reasons therefore, and other relevant observations, as well as the clear part of the Report where that description can be found.
Viz. justifications given in relation to point 0.2 above.
Nevertheless, it is understood that the "comply or explain" rule, together with other factors, also serves to contribute not only to the preparation of rankings, statistics, economic or other studies, but also to help verify the understanding of Companies concerning the models of governance and recommendations of "best current practices".
It is within this framework that Estoril-Sol's contribution is to call attention to the fact that the CMVM's Code of Governance does not take public companies with a special concentration of capital and a very small freefloat into account, as is the case here.
The General Meeting is the highest office of the Company, representing the will of the shareholders with voting rights, within the terms of the Articles of Association.
The election, composition, competence and the operation of the General Meeting of Estoril-Sol, SGPS, SA, is governed by the its Articles of Association and by the provisions of the CCC and of the SC.
The shareholders who attend the General Meeting are responsible, on an organic level, for electing and removing the Chairman and the Deputy Chairman of the Board, the members of the Board of Directors and the Audit Board, the Statutory Auditor, the members of the Remuneration Committee and the Advisory Board, as well as, on a material level, approving the annual report and accounts, the proposal for the application of profits and the opinion of the Audit Board, deciding on the alterations to the Articles of Association, among others.
The General Meeting also takes decisions on any matter for which it has been convened and on all issues that are especially attributed to it at law or by the Articles of Association, as well as on issues that are not included in the duties of other offices of the Company.
The calls to meeting and the operation of the General Meetings of the Company will always fully comply with the provisions of the Articles of Association of the Company as well as the legal imperatives applicable.
The Board of the General Meeting, pursuant to Article 11 of the Articles of Association, comprises a Chairman, a Deputy Chairman and a Secretary, or only a Chairman and a Secretary, as decided by the General Meeting, who may or may not be shareholders. If there is a Deputy Chairman, he will replace the Chairman in his absence and impediment.
By reference to 31st December 2012, The composition of the Board of the General Meeting is currently as follows:
Chairman: …… Dr. Daniel Proença de Carvalho Deputy Chairman: Dr. Jorge Manuel Rodrigues Vultos Sequeira Secretary:……… Dr. Tiago Valada Rosa Mendes
The Chairman of the Board of the General Meeting, in performing its duties, receives the collaboration of the other members of the Board and of the services of the Company that are at his entire disposal to attend to his requests and to help him in the preparation and the practice of all the acts within his power.
We would draw attention to the collaboration provided in the preparation and realization of the General Meetings, and especially, the very close collaboration of the Administrative and Financial Board and of the Legal Services Board.
The Chairman, the Deputy Chairman and the Secretary of the Board were elected in the General Meeting of 20 April 2007, to complete the time remaining from the previous mandate that was still in hand, and were re-elected in the General Meeting of 29 April 2008.
The annual remuneration of the Chairman of the Board of the General Meeting is € 5,000.00, and was set by the Remuneration Committee as per Minutes no. 24 of 6 June 2007.
Following the transposition into Portuguese Law of Directive 2007/36CE, of the European Parliament and of the Council, of 11 July 2007, through Decree Law no. 49/2010, of 19 May, which, inter alia, amended the SC, companies that issue shares admitted for public trading were no longer allowed to require their shareholders to block the respective shares in order to check the ownership of the voting rights (viz. article 23-C of the SC, in its current wording).
In this regard, given that the capacity to take part and to vote in General Meetings depends on the "date of register" which should correspond to 0h (GMT) of the 5th day of trading prior to the holding of the meeting, one can no longer strictly speak of "share-blocking", given that it is now possible to sell shares in the five days before the General Meeting without losing voting rights.
According to the provisions in article 10.1 of the Articles of Association of Estoril-Sol, SGPS, SA, it was established, in accordance with and with respect for the legal provisions applicable, that: "The General Meeting is constituted by the shareholders that hold, at least, one hundred shares, provided that these shares have been registered or deposited in the Company's safes up to five days before the date booked for the General Meeting, or the shares have been deposited with a financial intermediary, if they are nominal shares, or registered in registered securities accounts, if they are nominal or registered shares, and the declaration that this is so is received in the Company by that date."
Viz. reply to the previous point.
Within the terms of Article 10.3 of the Articles of Association, every hundred shares correspond to one vote.
I.7. Indication of the existence of statutory rules which provide for the existence of shares that do not confer voting rights or stating that no voting rights are counted over a certain number when issued by a single shareholder or shareholders related to it
Within the terms of Article 10.3 of the Articles of Association, each hundred shares correspond to one vote. There is no clause in the Articles of Association of the Estoril-Sol that limits the exercise of voting rights.
Shareholders may vote in General Meetings in person or by representation, or also by correspondence, within the terms of the law and of the Articles of Association.
Shareholders owning a number of shares that is less than that which grants them voting rights may group themselves so as to reach the number required for exercising the right to vote (one vote for each hundred shares) and they may be represented by one of the members of that group (article 10.4 of the Articles of Association).
The General Meeting meets and decides, upon first call, when shareholders in attendance or represented shall account for over 50% of the share capita (article 13.1 of the Articles of Association). Upon second call to meeting, the General Meeting may decide with any number of shareholders in attendance (article 13.2 of the Articles of Association).
A shareholder's representative may only vote on the decisions taken unanimously, if expressly authorised to do so in writing,; or in a General Meeting, without the observance of prior formalities, provided that everyone is present and everyone manifests the desire for the General Meeting to be constituted and to decide on a given matter (article 12.2 of the Articles of Association).
The instruments of representation of shareholders in General Meeting should be delivered to the registered office of the Company, addressed to the Chairman of the Board, three working days before the date booked for the meeting, otherwise they may not be accepted and, consequently, the voting rights may not be able to be exercised by the representative. If the instruments of representation are sent by telefax, the original should also be delivered to the Company three days before the date booked for the meeting, otherwise they may not be accepted (article 12.3 of the Articles of Association).
Whether upon the first or second call, decisions on statutory changes, merger, division, transformation or winding-up of the company, election of the Remuneration Committee and of the Advisory Board, suppression or limitation of the pre-emptive right in share capital increases and the appointment of company liquidators have to be approved by the majority of the votes corresponding to the share capital (article 13.3 of the Articles of Association).
Shareholders without voting rights may attend the General Meeting, but may not speak or otherwise intervene in the deliberations (article 14 of the Articles of Association).
The usufructuary of shares may exercise the voting rights corresponding to their ownership in General Meetings that are not called with the purpose of changing the Articles of Association or dissolving the Company. In these matters, the owner of the shares or the usufructuary, duly authorised by the former, will have voting rights (article 15 of the Articles of Association).
To assist the shareholders and within the terms of the law, the company has placed a proxy form on its website, which does not constitute a request for representation.
The presence of the represented party at the General Meeting, and until it starts, implies the annulment of the powers of representation.
Postal voting is allowed within the terms of Article 10.5 of the Articles of Association.
Shareholders who wish to exercise their right to a postal vote should deliver a statement signed by them, where they unequivocally state how they wish to vote with regard to each of the items on the agenda of the General Meeting.
Postal votes shall be counted at the end of the voting by those shareholders in attendance, with regard to each of the items on the Agenda, and shall be added to the votes cast at the General Meeting, and, in the event of a grouped vote, the votes shall be considered with regard to which the various shareholders make their will known with regard to grouping themselves, provided they meet the requisites for such a grouping, and they shall be considered negative votes concerning deliberation proposals put forth after these are issued (article 10.9 of the Articles of Association).
The vote declaration, a sample of which is also available at the company's website, should be provided together with a legible photocopy of the shareholder's Identity Card; if the shareholder is a legal body, the vote declaration should be signed by the representative of the said legal body, bearing the legally notarized signature of the said representative in this capacity (article 10.6 and 10.7).
Vote declarations, provided together with the documents referred to in the previous paragraph, should be placed in a sealed envelope, addressed to the Chairman of the Board of the General Meeting, handed in personally at the head office of the company, or sent there, via registered mail, no later than 5 (five) days prior to the date set for the General Meeting (article 10.6).
The company has placed a sample form of the ballot sheet on its website, at www.estoril-solsgps.com, which may be used by the shareholders who so desire.
Vote declarations should be placed in a sealed envelope, addressed to the Chairman of the Board of the General Meeting, handed in personally at the company's facilities, located at Casino Estoril, at Av. Dr. Stanley Ho, Estoril, or sent there, via registered mail, no later than 5 (five) days prior to the date set for the General Meeting (article 10.6 of the Articles of Association).
The Articles of Association do not provide for the possibility of votes being cast via electronic means.
In compliance with Recommendation of the CMVM no. 1.5., the Company will make the extracts of the minutes of General Meetings available on its website – www.estoril-solsgps.com within five days after the meeting is held for consultation by shareholders and the public in general.
Within the terms of the provisions in article 23-D of the SC (with the wording introduced by Decree Law no. 49/2010), the Company provides a history of the resolutions taken in the General Meetings, the share capital represented and the voting results with reference to the previous three years on its website – www.estoril-solsgps.com for consultation by shareholders and the public in general.
At the annual General Meeting held on 21 May 2012, the member of the Remuneration Committee, Dr João de Sousa Ventura, was present. The Annual General Meeting for the year ended December 31st, 2012 will be held in May 21st, 2013.
Within the terms of Article 34 of the Articles of Association, the Remuneration Committee of the Estoril-Sol comprises three members (shareholders or not), elected by the General Meeting. The remuneration of the members of the corporate offices will be established by the Remuneration Committee, which shall consist of fixed amounts and/or percentages on profits from the fiscal year not occurring on distributions of reserves or on any non-distributable part of such profits, and, overall, such percentages may not exceed eleven percent for the Board of Directors.
At December 31st, 2012, the Remuneration Committee comprises the following shareholders:
The Remuneration Committee establishes the fixed remuneration of the members of the Board of Directors as a way of compensating them for their current individual and collective effort each year, and it may also assign a variable remuneration, taking into account the fulfillment of pre-set strategic objectives expressed via the EBITDA and the net results, as well as the creation of value for shareholders.
In any case, it should be noted that the amount of the fixed remunerations of the members of the Board of Directors was not revised during the year ended on 31 December 2012, with the level in 2012 remaining the same as in previous years. On the other hand, and even if this possibility were remotely admissible, it is hereby clarified that, during the whole mandate, no variable remuneration was awarded to the members of the Board of Directors.
I.17. Information upon the General's Meeting intervention over the proposal concerning plans to allot shares and / or options to acquire shares, or based on price changes for the shares, to members of the board, supervisory and other directors, within the meaning of paragraph 3 of Article 248 B of the Securities Code, and on the evidence provided to the General Meeting with a view to their correct evaluating of those plans
There is no plan for assigning shares, and/or options for purchasing shares or based on changes in share prices, to members of the administrative and supervisory bodies and other officials, pursuant to sec. 3 of article 248-B of the SC.
I.18. Information upon the General's Meeting intervention on the approval of the main characteristic of the retirement benefits that Board of Directors members, supervisory and other directors may benefit, within the meaning of paragraph 3 of Article 248 B of the Securities Code
The General Meeting will act as it thinks appropriate with regard to the approval of the main characteristics of the system of retirement benefits that Board of Directors members, supervisory and other directors may benefit, within the meaning of paragraph 3 of Article 248 B of the SC.
There is no provision in the Articles of Association that obliges the General Meeting to intervene in these matters. In 2012 there was no intervention by the General Meeting on the main characteristics of the systems of retirement benefits.
I.19. Existence of a statutory rule which provides for the duty to impose at least every five years, the resolution of the general assembly, maintenance and removal of statutory rule which provides for limiting the number of votes capable of holding or exercise by a single shareholder individually or in concert with other shareholders
The Articles of Association of the Estoril-Sol do not provide for the limitation on the number of votes that may be held or exercised by a single shareholder, either individually or jointly with other shareholders.
I.20. Indication of the defensive measures that are intended to immediately instigate asset erosion in cases such as changes in the control or to the composition of the Board of Directors
There are no defensive measures that may automatically cause a serious erosion of the assets of the Company in the event of a transition or change in the composition of the Board of Directors.
I.21. Main agreements to which the company is a part of and that come into force, are changed or end in cases such as change in company control, as well as related outcome, unless the disclosure of same, due to its nature, is highly damaging to the company, except the company is specifically obliged to disclose such information by force of legal imperatives
There are no agreements the existence, alteration or cessation of which depends on a change in the control of the Company.
I.22. Agreements between the company and the Board of Directors, within the meaning of article 248-B no.3 of the Securities Code, that provide for compensation if they resign or are discharged without a valid cause or if their employment ceases following a change in company control
There are no agreements or policies defined between the company and the members of the Board of Directors, within the meaning of article 248-B no.3 of the SC which allow for indemnities in the event of a request for dismissal, unfair dismissal or cessation of the employment relationship following a change in the control of the Company.
Within the terms of the Articles of Association of Estoril-Sol, the administration of the Company is the responsibility of a Board of Directors comprising three to eleven directors, with an odd number thereof, shareholders or not, elected by the General Meeting.
The supervision of Estoril-Sol is the responsibility of a Audit Board comprising three to five effective members and one or two alternates, respectively, shareholders or not, and to a Statutory Auditor or Firm of Statutory Auditors which is not a member of the Audit Board.
The Company also has an Advisory Board as well as a Secretary.
The mandate of the members of administration is for four years, where an election year is deemed to be a complete calendar year, and there is no restriction to directors' re-election.
The Board of Directors decides with a simple majority of its members, who all have equal voting rights, and decisions are taken by a majority of the votes issued.
The 9 members of the Board of Directors, in functions at December 31st, 2012, were elected in the General Meeting of 29 April 2008, with the exception of MRS. Pansy Catalina Chiu King Ho who on 30 May 2010, was appointed by cooptation to perform the duties of Member of the Board of Directors, in replacement of Sr. António José Pereira upon his decease.
Composition of the Board of Directors:
The members of the Audit Board, in functions at December 31st, 2012, were elected in the General Meeting of 29 April 2008. The mandate of the members of the Audit Board is for four years, where an election year is deemed to be a complete calendar year, and there is no restriction to their re-election.
The Audit Board decides with a simple majority of its members, who all have equal voting rights, and decisions are taken by a majority of the votes.
Composition of the Audit Board:
| Chairman: | Dr. Mário Pereira Pinto |
|---|---|
| Members: | Dr. António José Alves da Silva |
| Dr. Manuel Martins Lourenço | |
| Alternate: | Dr. Armando do Carmo Gonçalves |
Lampreia & Viçoso, SROC. No. 157 - Represented by Donato João Lourenço Viçoso, Statutory Auditor no. 334. The external auditor was elected for four years in the General Meeting of 29 April 2008, upon the proposal of the Audit Board.
The Advisory Board, in functions at December 31st, 2012, has only one member, Dr. Rui José da Cunha, elected in the General Meeting of April 29th, 2008.
The Company Secretary and his/her alternate are appointed by the Board of Directors and cease their functions with the end of the term in office of the Board of Directors which appointed them.
The current Secretary and Alternate Secretary were appointed by the Board of Directors in the meeting held on 15 May 2008, minutes of the Board of Directors no. 1,086.
| Company Secretary: | Dr. Carlos Alberto Francisco Farinha |
|---|---|
| Alternate Secretary: | Dr. Artur Alexandre Conde de Magalhães Mateus |
The Articles of Association allow for the possibility of the creation of an Executive Committee by the Board of Directors. By reference to December 31st, 2012, an Executive Committee has not been created.
The Company's sole activity consists of shareholding operations, in compliance with the scope of its social purpose, with all the legal limitations resulting from this.
The Board of Directors regularly and systematically monitors the boards of directors of all of its investee companies, principally in order to (i) ensure the strict compliance with contracts for gaming concessions in Estoril and Póvoa de Varzim and the legislation that governs gaming operations in Portuguese casinos and (ii) execute business plans and in the study and development of new projects. Taking this monitoring into account, to this day, the setup of specific committees has not been necessary.
scope of delegating responsibilities or distributing duties among the members of the Management or Supervisory bodies, as well as a list of non-delegable subject matters and delegable subject matters Taking into consideration the reduced size of the Company, there is no division of duties between the members of the corporate offices and departments of the Company, specifically the distribution of areas of responsibility among the members of the Company's Board of Directors.
The competences of the management and Audit Boards, as well as of the committees and/or departments of the Company are those that are defined in the Articles of Association, there being no complex model of internal organization with regard to the day-to-day management of Estoril-Sol, neither is there any distribution of areas of responsibility by the members of the Board of Directors.
Within the scope of its activity of managing of shareholdings, the Board of Directors has a small Administrative Support Service and an Internal Audit Board.
II.4. Reference to the fact that the annual reports on the activities of the General Council and Audit Board, the Commission for financial matters, the Audit Committee and the Audit Committee include a description of the supervisory activity detected indicating any constraints, and be subject to disclosure on the website of the company, together with the accounts submission documents
The Annual Reports on the activity of the Audit Board include a description of the supervisory activity undertaken and are available in www.estoril-solsgps.com.
The company has an Internal Auditing Office which, whether in the company or in the associated companies, has the mission of independently and systematically assessing the established internal control system, examining internal operational procedures, checking for compliance with standards, as well as proposing measures deemed necessary for mitigating any shortcomings in the internal control system.
The management of the economic and financial risk of the business of the Company and of its Associated Companies is permanently monitored by the members of the Board of Directors of the Company in collaboration with the Internal Audit Office.
The Board of Directors has been promoting the necessary and appropriate conditions to bring about the effective control of the management of risks inherent to the activity of the Company and of the Companies of the Estoril-Sol Group, as well as of the system of internal control, and regularly monitors the work of the Internal Audit Office.
In turn, within the scope of its functions, the Audit Board assesses the efficacy of the systems of internal control and risk management
II.7. Indication on the existence of regulations on the functioning of the corporate bodies or any internally defined rules on incompatibility and the maximum number of positions that a member is entitled to hold and the place where these rules may be consulted
The Board of Directors and the Audit Board have still not formally adopted a regulation of operations. Notwithstanding this, both the Board of Directors and the Audit Board follow the best operating practices, based on criteria of responsibility and professionalism and intend to formalise and disclose the respective operating regulations in the near future.
II.8. If the Chairman of the Board performs executive duties, indicate the mechanisms for coordinating the work of non-executive members to ensure the independent and informed nature of their decisions
This is not applicable to Estoril-Sol. There is no distinction in the Company between executive directors and non-executive directors.
The management of the Company is performed collegiately, by all the directors.
II.9. Identification of main risks to economic, financial and legal matters that society is exposed to in the pursuit of it´s activity
Within the scope of its activity of managing of shareholdings, Estoril-Sol, as the holding company of the Estoril-Sol Group, assumes various kinds of risk that arise namely from the gaming concessions, these being the following: Business risks, Contractual risks, Physical risks, Financial and currency exchange risks.
The associated companies Estoril Sol (III) – Turismo, Animação e Jogo, S.A. and Varzim Sol – Turismo, Jogo e Animação, S.A. operate gaming concessions in Casinos. In the last few years, this Sector of activity has been experiencing increased technological growth, particularly focused on slot machines, which requires the ongoing renewal of the product range. The Group's concessionaries systematically keep up with this growth, by visiting manufacturers, taking part in international specialty trade shows and regularly investing in new equipment under the close watch of the Board of Directors of Estoril-Sol.
Pursuant to the concession contracts, the Portuguese State grants concessionaries exclusive rights to gambling and operations of games of chance, in exchange for high initial payments and high annual tax rates. Nevertheless, the Portuguese State has proven to be unable to regulate its citizens' access to countless online casinos that abound today and which constitute a growing factor of unfair competition, both because they account for a significant increase in illicit supply and because they constitute a flagrant source of tax evasion.
The Estoril Sol Group will continue to call the Portuguese Government's attention, both directly and through the Portuguese Association of Casinos, to the need to take legislative measures to prevent this situation, following the example of significantly effective measures taken in the USA and in Norway, thereby ensuring compliance with commitments pertaining to the exclusive right to gaming operations, as contractually assumed between the State and the concessionaires.
These commitments, with regards to the subsidiaries Estoril-Sol (III) and Varzim-Sol, are imposed on us and are interpreted far beyond strict compliance with the regulatory framework of gaming concessions, as they are reflected in a broader framework of preventive initiatives of a social nature.
Concessions for operations in gambling and games of chance in the gaming areas of Estoril and Póvoa de Varzim are operated within the normative context of the contractual and legal framework of the corresponding concession contracts and of the specific legislation governing the sector of gaming activities at casinos, as they are subject to permanent inspection by the State, via the Serviço de Inspecção de Jogo do Turismo de Portugal, I.P..
For its part, the Estoril Sol Group constantly monitors all of its operations in order to guarantee strict compliance with the law.
Physical Risks:
The Group's Companies, which aim to prevent and minimize the risk inherent to its economic activities, have specialized technical surveillance services that are responsible for strict compliance with standards that govern the physical safety of clients, employees and facilities.
With cooperation from an external body, we periodically conduct risk analyses of instituted procedures and of the physical safety of assets, with the implementation of corrective actions for the risks identified.
The significant investments that the Group companies have made in the last few years as a result of the extension of concession contracts, with an initial payment pertaining to Lisbon Casino as well as investments which are regularly made for reasons pertaining to renewal, modernization and expansion of the Casinos, have involved increased indebtedness which, combined with the changes in market interest rates, resulted in increased financial costs and a potential liquidity risk.
Depending on the operating funds that are freed up, it is felt that the financial risk to which the associated undertakings are exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that assets guarantees are dispensed with for operations under contract.
Portuguese legislation forbids casino concessionaries from granting credit to gaming activities, and so, in this regard, Group Companies are not exposed to credit risk. Other revenue from restaurant and entertainment activities, which account for only 1.0% of revenue, therefore represents insignificant exposure.
Every medium-term operation is carried out in Euros, and a few imports with 30-day credit are exceptionally conducted in US Dollars, and so the Company has only minimal exchange rate exposure.
Within the terms of Article 23 of the Articles of Association of the Company, the Board of Directors enjoys the broadest management powers, as it can decide on any matter pertaining to company management, namely regarding:
a. The election of its Chairman and Deputy Chairman, if the General Meeting itself has not made such an appointment;
f. Proposals to the General Meeting for the provision of warranties and personal or real guarantees by the Company;
l. Deliberation on increases in share capital, on one or more occasions, up to an absolute maximum increase of one million six hundred thousand and twenty-one thousand and ninety-three Euros and seventeen cents, for contributions in cash, provided that, in compliance with imperative legal standards, the increase is intended to be subscribed by directors, company employees and other people or entities providing services pertaining to the same, to be identified under the terms and conditions decided in the General Meeting [article 5.2 of the Articles of Association, ex vi of line l) of Article 23.1 of the same document];
m. The appointment and dismissal of employees, and setting their salary or compensation, if applicable;
n. The constitution of representatives or attorneys and the revocation of mandates granted;
o. Representing the company, either directly or via representatives, either in or out of court, actively and passively, namely proposing, contesting and pursuing lawsuits, giving evidence, acquiescing or desisting, as well as assuming commitments in voluntary arbitration;
p. The exercise of company rights corresponding to its holdings in the capital of other companies;
q. The execution and bringing about of compliance with legal and statutory precepts and the decisions of the General Meeting;
r. Any other matter on which any director requests the deliberation of the Board.
Given the size of Estoril-Sol and the organizational model of the Group (of the companies) the holding of which are managed by Estoril-Sol there is no assignment/distribution of areas of responsibility in the Board of Directors.
The rules applicable to the appointment and replacement of the members of the Board of Directors follow the imperative standards applicable, as well as the provisions in the Articles of Association.
Within the terms of the Articles of Association of the Estoril-Sol, the administration of the Company is the responsibility of a Board of Directors comprising three to eleven directors, with an odd number thereof, shareholders or not, elected by the General Meeting.
The Articles of Association of the Estoril-Sol allow, within the terms of Article 392 of the CCC, for a minority that represents, at least, 10% of the share capital of the Company and that has voted against a winning proposal in the election of the Board of Directors, has the right to appoint a Director.
The General Meeting that elects the Board of Directors may appoint one of its members to perform the duties of the Chairman of the Board and one or two for Deputy Chairmen. If these are not appointed by the General Meeting, it is up to the directors to choose the Chairman of the Board of Directors and the Deputy Chairman/Chairmen from among themselves, and may replace them at any time.
Within the terms of the law, when the number of directors is increased during a mandate, or when a director is appointed by cooptation, the mandate of the new directors ends at the same time as those who are in office.
The rules applicable to the appointment and replacement of the members of the Audit Board of the Estoril-Sol follow the imperative standards applicable, as well as the provisions in the Articles of Association.
The Audit Board comprises three or five effective members and one or two alternates, respectively, shareholders or not.
The Audit Board and the Statutory Auditor are elected by the General Meeting which may appoint one of the members of the Audit Board to perform the duties of Chairman. If the Chairman is not appointed by the shareholders, it is up to the members of the Audit Board to appoint its Chairman.
If it is not possible to fill the vacancy of an effective member due to a lack of elected alternates, the vacant positions, both of effective member and alternates, will be filled upon a new election.
The Board of Directors meets on a regular basis, and that regularity is, in principle, once monthly, and always whenever there are issues that justify convening it.
Boards occur in conformity with a previously set schedule and their work agendas are previously given out to all members of the Board, as well as their minutes and supporting documents.
Given the specific composition of the Board of Directors of the Company, meetings of the Board of Directors have been held by telematic means.
The Board of Directors met 11 times in 2012.
The Audit Board meets whenever it is considered that there is an issue that warrants a meeting, with meetings being held at least once per quarter.
Meetings occur in conformity with the decision of the Chairman with minutes being drawn up of all the meetings.
The Audit Board met 8 times during 2012.
II.13. Indication about the number of meetings of the Executive Committee or the Board of Directors, as well as the holding of minutes of these meetings and it´s sent, together with the calls, as appropriate, to the Chairman of the Board of Directors, the Chairman of the Audit or the Audit Corporate Governance Report Committee, the Chairman of the Audit Board and the Chairman's Commission for financial issues
Not applicable to the Company, in as much as, within the scope of the corporate offices, an Executive Committee has not been set up by reference to December 31st, 2012.
II.14. Distinction of the executive members of the non - executives, and among these, discrimination of members that would meet if they were to apply the rules of incompatibility provided for in paragraph 1 of Article 414-A of the Companies Code, other than that specified in subparagraph b) and the independence criteria set out in paragraph 5 of article 414, both of the Commercial Companies Code
As mentioned, in Estoril-Sol there is no distinction between executive directors and non-executive directors, by reference to December 31st, 2012.
II.15. Indication of legal rules, regulations and other criteria that have been based on the evaluation of the independence of its members made by the Board of Directors
Not applicable, for the reasons stated in II.14.
II.16. Indication of the rules of the selection process of candidates for non-executive directors and how to ensure non-interference in the process of executive directors
Not applicable, for the reasons stated in II.14.
Has a long professional career as an entrepreneur linked to the Tourism, Gaming, Shipping and Real Estate sectors.
His main professional activities over the last five years in Portugal, Hong Kong and Macao, include the post of Chairman of the Board of Directors in the following companies: STDM, SA, Seng Heng Bank, Nam Van Development Company, Shun Tak-China ShippingInvestments Ltd., Melco International Development, Ltd., Aberdeen Restaurant Enterprises, Ltd., SJM - Sociedade de Jogos de Macau, SA, STDM - Investimentos
Imobiliários, SA, FINANSOL, SGPS, SA, SGAL - Sociedade Gestora da Alta de Lisboa. SA and Estoril Sol, SGPS, SA.
He currently holds the post of Chairman of the Board of Directors of Estoril-Sol, SGPS, to which he was elected for the first time on 2 May 2006.
On 31 December 2012 he held 135,662 shares in the share capital of Estoril-Sol, SGPS, SA.
Has a graduate degree in accounting from the British Banking Institute.
His main professional activities over the last five years in China, Hong Kong, Macau and Portugal, include the post of Voting Member of the Board of Directors in the companies Industrial and Commercial Bank of China Ltd., CAM – Sociedade do Aeroporto Internacional de Macau, SARL, King Power Lojas Francas (Macau) SARL, MACAUPORT - Sociedade de Administração de Portos, SARL, FINANSOL, SGPS, SA, Estoril -Sol, SGPS, SA, Estoril Sol, (III) Turismo, Animação e Jogo, SA and Varzim Sol – Turismo, Jogo e Animação, SA.
He currently holds the post of Deputy Chairman of the Board of Directors of Estoril-Sol, SGPS, to which he was first elected on 31 March 1995.
On 31 December 2012 he held 50,000 shares in the share capital of Estoril-Sol, SGPS, SA.
Has a graduate degree in law from Universidade Clássica of Lisbon as well as a degree in business administration from the Gestúlio Vargas Foundation in Rio de Janeiro. He is a Member of the Advisory Board of ISEG - Instituto Superior de Economia e Gestão (Institute of Higher Education in Economics and Management), Member of the Advisory Board of the Faculty of Economics and Business Sciences of Universidade Lusíada in Lisbon, as well as Member of the Advisory Board of the Graduate Degree in Tourism of the Universidade Lusófona de Humanidades e Tecnologias and Member of the Board of the School of the Faculty of Human Mobility.
In the last five years he has developed his professional activity as Chairman of Board of Directors in companies of the Estoril-Sol Group.
He currently holds the post of Deputy Chairman of the Board of Directors of Estoril-Sol, SGPS.
On 31 December 2012 he held 601 shares in the share capital of Estoril-Sol, SGPS, SA.
Has specific training in International Management, Marketing and International Studies from the University of Santa Clara and has a PhD in Business Management from the University of Johnson & Wales.
Her main professional activity in recent years, specifically in Portugal, Hong Kong and Macau, includes the position as Director of MGM Grand Paradise, SA, of Shun Tak Holdings Limited, of STDM – Sociedade de Turismo e Diversões de Macau, SA., of Macau Tower Convention & Entertainment Centre, of Air Macau Company Limites, of Estoril Sol, SGPS, SA, of SGAL – Sociedade gestora da Alta de Lisboa, SA and Posse – SGPS, SA.
She currently holds the position of Member of the Board of Directors of Estoril-Sol, SGPS to which she was appointed on 31 May 2010, by cooptation, in replacement and upon the decease of Sr. António José Pereira.
On 31 December 2012 she held no shares in the share capital of Estoril-Sol, SGPS, SA.
Has a P.H.D. in Management from the University of Hong Kong.
His professional activities over the last five years in China, Hong Kong, Macau and Portugal, most notably include the post of Chairman of the Board of Directors in Tianjin Hexin Development Co., Ltd., MACAUPORT - Sociedade de Administração de Portos, SARL and Voting Member of the Board of Directors in Tonic Industries Holdings Ltd, SJM Holdings Ltd, Shanghai Hongyi Real Estate Development Co. Ltd, Sociedade de Empreendimentos NAM VAN, SARL, Sociedade de Jogos de Macau, SA, STDM - Investimentos Imobiliários, S.A., Finansol, SGPS, SAand Estoril-Sol, SGPS, SA.
He currently serves as a Voting Member of the Board of Directors of Estoril-Sol, SGPS, to which he was first elected on 10 March 1998.
On 31 December 2012 he held 50,000 shares in the share capital of Estoril -Sol, SGPS, SA.
Has specific training in Casino management, Las Vegas.
In the last five years he has developed his professional activity as Voting Member of the Board of Directors in companies of the Estoril Sol Group.
He currently serves as a Voting Member of the Board of Directors of Estoril-Sol, SGPS, to which he was first elected on 31 March 1995.
On 31 December 2012 he held 527 shares in the share capital of Estoril-Sol, SGPS, SA.
Has a graduate degree in Finance from the Instituto Superior de Economia (Higher Institute of Economics). In the last five years he has developed his professional activity as Voting Member of the Board of Directors in companies of the Estoril Sol Group, and as a member of the General Audit Board of the Banco Comercial Português (Millennium BCP). He is currently director of SGAL – Sociedade Gestora da Alta de Lisboa, SA.
He currently serves as a Voting Member of the Board of Directors of Estoril-Sol, SGPS, to which he was first elected on 2 May 2006.
On 31 December 2012 he held 608 shares in the share capital of Estoril- Sol, SGPS, SA.
Has a graduate degree in Radiotechnology from Escola Náutica Infante D. Henrique (Shipping School).
In the last five years he has developed his professional activity as Voting Member of the Board of Directors in companies of the Estoril Sol Group.
He currently serves as a Voting Member of the Board of Directors of Estoril-Sol, SGPS, to which he was first elected on 24 April 2000.
On 31 December 2012 he did not hold any shares in the share capital of Estoril-Sol, SGPS, SA.
Has a graduate degree in economics from the Faculty of Economics of the University of Porto, where he lectured from 1976 to 1992.
His professional activities over the last five years include the post of Chairman of the Board of Directors in several companies, among them Amorim – Entertainment e Gaming International, SGPS,SA, Amorim Turismo, Serviços Gestão, SA, Edifer Angola, SA, Iberpartners – Gestão e Reestruturação de Empresas, SA, Troia Peninsula Investimentos, SGPS, SA and Estoril Sol, SGPS, SA.
He has been a Voting Member of the Board of Directors of Estoril-Sol, SGPS, SA since 31 January 2006. At the end of 2012 he did not hold any shares in the share capital of Estoril-Sol, SGPS, SA
Guinor - Companhia de Desenvolvimento Imobiliário, SGPS, S.A.
Industrial and Commercial Bank of China ( Macau), Ltd
CAM Sociedade do Aeroporto Internacional de Macau, SARL
Chairman of the Board of Directors:
In Portugal:
Member of the Board of Directors:
II.21. Identification of the members of the Audit Board, by listing those members that comply with the incompatibility rules provided for in article 414-A no.1 and the criteria of independence provided for in article 414.5, both from the Commercial Company Code. For this purpose, the Audit Board performs its own assessment
As at the reference date of 31 December 2012, the Audit Board of the Estoril-Sol comprises the following members:
Chairman: Dr. Mário Pereira Pinto Members: Dr. António José Alves da Silva Dr. Manuel Martins Lourenço Alternate: Dr. Armando do Carmo Gonçalves
The members of the Audit Board of the Estoril-Sol comply with the rules of incompatibility set out in paragraph 1 of Article 414.-A and meet the criteria of independence set out in Article 414.5, both of the CCC.
The Audit Board has the powers and is subject to the duties established at law and in the Articles of Association of Estoril-Sol, and may perform all the acts of verification and inspection that it considers convenient for the fulfilment of its obligations of supervision, and is particularly responsible for:
supervising the administration of the Company and checking on the observance of the law and the Articles of Association of the Company;
verifying the precision of the accounting documents prepared by the Board of Directors and supervising the respective review;
proposing the appointment of the Statutory Auditor to the General Meeting;
calling the General Meeting whenever the Chairman of the respective Board does not do so when he should;
preparing the annual report on its activity and presenting an opinion on the Board of Directors' Report.
Has a graduate degree in Economics from the Faculty of Economics of the University of Porto 1970/75; completed the "Advanced Management Program" from the INSEAD-Fontainebleau, France – 1989.
Was elected as a member of the Audit Board of the Company in the Annual General Meeting of 2004 and was re-elected in the General Meeting of 2008.
On 31 December 2012 he held no shares of the share capital of Estoril-Sol, SGPS, SA.
Has a graduate degree in Finance from the Instituto Superior de Economia de Lisboa (Lisbon Higher Institute of Economics); has a master's degree in Economics and Management in Sc. & Technology from the ISEG in Lisbon; a Chartered Accountant since 1988.
Elected as member of the company's Audit Board in the Special Meeting in 2007, and re-elected in the General Meeting in 2008.
On 31 December 2012 he held no shares of the share capital of Estoril-Sol, SGPS, SA.
Has a Baccalaureate in Accounting. A Chartered Accountant since 1974.
Elected as member of the company's Audit Board in the Special Meeting in 2007, and re-elected in the General Meeting in 2008.
In the last 5 years, he served as the Chartered Accountant for the following companies: BJH, S.A; Bonafarma, S.A.; Bruno Janz, S.A.; Equiconsulte, S.A.; Jaba Farma, S.A.; Jaba Farmacêutica, S.A.; Jaba SGPS, S.A.; Monte da Pouca Farinha, S.A.; Novamed, S.A.; Proemba, S.A.; Sociedade Imobiliária – Qtª da Barreta, S.A.
On 31 December 2012 he held no shares of the share capital of Estoril-Sol, SGPS, SA.
GOVERNANCE REPORT
Has a graduate degree from the Lisbon Faculty of Law, 1983/84. Holds a graduate degree in Finance from the ISCEF-Lisbon, in 1967/68. Has a master's degree in Company Management in the field of Accounting and Financial Control from the Universidade Autónoma de Lisboa. Took part in several international congresses and meetings on auditing, accounting and management. A Chartered Accountant since 1997. Since 1990, an accounting professor at the ISCAL, with the category of Associate Professor. University Professor.
Elected as member of the company's Supervisory Board in the Special Meeting in 2007, and re-elected in the General Meeting in 2008.
On 31 December 2012 he held no shares of the share capital of Estoril-Sol, SGPS, SA.
None of the members of the Audit Board exercise any other functions in companies of the Estoril Sol Group
Chairman of the Board of Change Partners, SCR, SA Chairman of the Board of Change Partners, SGPS, SA Chairman of the Board of Hottrade, S.A. Chairman of the Board of Fluidinova, S.A. Non-executive director of BA - Glass, SA Director of CEV - Consumo em Verde, S.A.
Statutory Auditor of the Company Sogapal - Sociedade Gráfica da Paiâ, S.A. Statutory Auditor of the Company Octapharma - Distribuição de produtos farmacêuticos. S.A. Statutory Auditor of the Company Salsicharia Estromocense, Ld.ª Statutory Auditor of the company PREBUILD, S.A.
Statutory Auditor in Equiconsulte, S.A Statutory Auditor in Interlago, S.A Statutory Auditor in L.D.R., S.A. Statutory Auditor in LMGL, S.A Statutory Auditor in LMGT, S.A Statutory Auditor in Monte da Espinheira, S.A. Statutory Auditor in Neves Tavares & Irmãos, S.A. Statutory Auditor in Predial da Avessada, S.A. Statutory Auditor in Simares, S.A. Statutory Auditor in Soc. Agrícola - Qt.ª da Barreta, S.A. Statutory Auditor in Tavares & Cº - Cortiças, S.A.
Statutory Auditor in Egor Portugal, S.A. Statutory Auditor in Matur - Empreendimentos TS.A. Statutory Auditor in Limpac Corporation Statutory Auditor in Tecnovia, S.A. Statutory Auditor in Iconomatro - Madeiras e Derivados, S.A.
The Company has an external auditor. Every year the Audit Board assesses the independence and performance of the Statutory Auditor.
(Not applicable owing to the model of governance of the Company)
The remuneration policy of the management and supervisory bodies was subject to approval in the General Meeting of 31 May 2010. The proposal on the policy of remuneration was unanimously approved by those present (shareholders who owned 90.6% of the share capital were present or duly represented).
The text that was subject to shareholder approval in the said General Meeting, which was point 6 on the agenda, is transcribed below.
"The policy of remuneration, general criteria and guiding principles
The policy of remuneration of the members of the management and supervisory bodies of Estoril Sol, SGPS, S.A. seek to promote the long term alignment of the interests of the members of these bodies with the interests of the Company. The principles to be observed in setting the remunerations are the following:
The functions actually performed by each of the members and the responsibilities that are associated to them in a substantive and not merely formal sense should be taken into consideration.
The appraisal of the functions effectively performed should be based on a variety of criteria including responsibility, experience required, technical requirements of the functions, availability, institutional representation, time dedicated, value added of certain kinds of intervention.
Within the framework of the assessment and classification of functions to establish remuneration, the functions performed in companies controlled by Estoril Sol SGPS, S.A. and any remuneration received from them are also analysed.
b) Economic situation of the Company
The economic situation of the Company should be taken into consideration, as well as the long-term interests and real growth of the Company and the creation of value for shareholders.
c) General market conditions for comparable situations
The setting of the remuneration of the members of the management and supervisory bodies of the Company should take into consideration the competitiveness of the framework of remuneration proposed. In fact, only within this framework is it possible to attract and retain competent professionals, with a level of performance appropriate to the complexity and responsibility of the duties assumed.
The setting of the remuneration of the members of the management and supervisory bodies should use the remuneration on offer in companies of the gaming sector and companies listed on the EuronextLisboa, of an equivalent size to that of Estoril Sol, SGPS, S.A. as a reference.
1. The concrete options for the remuneration policy that we submitted to the appreciation of the shareholders of the Company are the following:
1.1. Board of Directors
The remuneration of the remunerated members of the Board of Directors of Estoril Sol, SGPS, SA comprises a fixed amount paid 14 times per year.
1.2. Audit Board
The remuneration of the members of the Audit Board of Estoril Sol, SGPS, SA also comprises a fixed amount established in accordance with the normal market practice and prices for this type of service, paid 14 times per year.
1.3. Statutory Auditor
The Statutory Auditor of the Company has an annual remuneration that is also fixed, established in accordance with the normal market level of fees for this type of service.
Estoril, 14 May 2010 The Remuneration Committee"
II.31. Indication of the annual amount of remuneration received by individual members of the administration and supervision of the company, including fixed and variable remuneration, and for this, mention the different components that originated it, what portion is deferred and installment that has already been paid
The members of the Board of Directors and of the Audit Board only received fixed remuneration in 2012, for the global amount of 216,857 Euros, and 56,000 Euros, respectively, broken down as follows:
BOARD OF DIRECTORS - Stanley Hun Sun Ho 59,357.06 Euros; Huen Wing Ming Patrick 52,500.00 Euros; Ambrose So 52,500.00 Euros; Jorge Armindo de Carvalho Teixeira 52,500.00 Euros;.
AUDIT BOARD - Mário Pereira Pinto 21,000 Euros; António José Alves da Silva 14,000 Euros; Manuel Martins Lourenço 14,000 Euros; Armando do Carmo Gonçalves 7,000 Euros.
II.32. Information on how remuneration is structured to allow the alignment of interests of members of the Board of Directors with the long term interests of the Company as well as on how it is based on performance evaluation and how it discourages excessive risk taking
Viz. text subject to the approval of the General Meeting of 31 May 2010 and transcribed in point II.30 above.
No differentiation is made in Estoril-Sol between executive directors and non-executive directors. Nevertheless, the Company will interpret this point so that it applies to the members of the Board of Directors, provided that this interpretation makes sense in each line.
In order to facilitate an understanding of the information provided in respect of this point, a global analysis will be made to provide a single reply.
The remuneration of the executive directors may include, but this has not been the case, a variable component, within the terms of Article 34 of the Articles of Association of the Company. The variable component depends on the desire manifested in the General Meeting by the shareholders.
There are no competent bodies in the Company to perform an appraisal of the directors' performance.
In 2012 there were no payments of variable remuneration to the directors. Similarly no compensation was paid, nor is any due, to former executive directors in relation to the cessation of their functions during the year.
The members who comprise the boards of various operational companies of the Estoril Sol Group received overall remunerations paid by other companies in a control or group relationship amounting to a total of 2,466,597.00 Euros, broken down individually as follows: Ambrose So 32,669.00 Euros; António José de Melo Vieira Coelho 407,536.00 Euros; Choi Man Hin 252,462.00 Euros; Huen Wing Ming Patrick 257,128.00 Euros; Mário Alberto Neves Assis Ferreira 1,066,014.00 Euros; Vasco Esteves Fraga 450,788.00 Euros.
There is no contractual arrangement for compensation payable for the dismissal of a director without just cause and its relationship with a variable component of the remuneration.
By the Articles of Association approved in the General Meeting of 29 May 1998, Estoril Sol, SGPS, SA again confirmed, in article 36, the right to a retirement pension paid by the company to the former directors who had already retired, based on the previous article 25 of the Articles of Association that were then altered, and the same rights and benefits as those of directors, in office at that time, who had or would have then completed ten years of service – after entering retirement - rights and benefits to be regulated in a contract to be agreed between the Company and these directors.
As already mentioned above (viz. Point II.1.5.7 supra), besides the pensions that arise from commitments assumed with retired directors, with regard to the others, cautious accounting requires provisions to be set up, notwithstanding the fact that this is not a constituted right, whether this be definitive or provisional. On this basis, Estoril Sol, based on an actuarial study updated each year, has reflected a provision in its accounts which on 31 December 2012 was 1,158,000 Euros, equal to the liabilities assumed in the case of the directors who had already retired, who receive an annual retirement pension broken down individually as follows: José Teodoro Telles 52,374.00 Euros and João Carlos Mendes 52,374.00 Euros. An identical provision is set up for 2,369,000.00 Euros to cover the future retirement pensions already contracted with Mário Assis Ferreira, Patrick Huen, Ambrose So, Choi Man Hin and Rui José da Cunha, who, when they retire, will receive an annual pension amount equivalent to that of the retired directors mentioned above.
In relation to Varzim-Sol, S.A., a company fully owned by Estoril-Sol, the following pension rights of some Directors were reinforced, resulting from the execution of the retirement insurance policies taken out for the purpose: Mário Alberto Assis Ferreira 1,401,742.20 Euros and Vasco Esteves Fraga 245,094.07 Euros
During 2012 no complementary systems of pensions or early retirement were set up.
Viz. the remuneration policy – which only has a fixed component – approved in 2010. As mentioned above, the directors of the Company did not receive any variable component of remuneration in 2012.
II.35. Information over the policy adopted for reporting irregularities in the Company (media, people who are entitled to receive communications, treatment applicable and indication of the persons and bodies with access to information and their intervention in the procedure)
Subsidiary companies that are gaming concessionaries are subject to supervision by the Serviço de Inspecção de Jogo do Turismo de Portugal, I.P., to which it is mandatory to notify any irregularities found, as part of their operations. However the Company intends to formalise a policy for the reporting of irregularities that it will disclose in good time.
II.36. Identification of the committee´s members constituted for the purpose of assessing individual and overall performance of the executive directors, reflection on the governance system adopted by the Company and identification of potential candidates for the job of director
For the reasons already stated, the Company has no specialised committees set up at a Board of Directors level.
The Remuneration Committee of Estoril-Sol has three members (shareholders or not), elected by the General Meeting. The remuneration of the members of the governing bodies will be set by the Remuneration Committee, where such remuneration may consist of fixed amounts and/or percentages on profits from the fiscal year not occurring on distributions of reserves or on any non-distributable part of such profits, and, overall, such percentages may not exceed eleven percent for the Board of Directors.
The Remuneration Committee, in functions at December 31st, 2012, (elected in the General Meeting of 29 April 2008 - Minutes no. 81) comprises the following shareholders:
The current shareholder structure of the Company means that this point does not apply.
The share capital of the Company is €59,968,420.00, which is fully paid-up, and is represented by 11,993,684 shares with a nominal value of €5.00 each.
The Company holds 62,565 treasury shares.
All the shares representing the share capital of the Company - ordinary, registered and bearer shares - are admitted for trading, and there are no categories of shares with special rights or duties.
The Company has two shareholders of reference which, together, control, directly and indirectly, around 96.5% of the share capital and of the respective voting rights:
Holds, directly and indirectly, a qualifying shareholding of 60.2% in the capital of ESTORIL-SOL, SGPS, SA, which corresponds to the same percentage of votes;
Holds, directly and indirectly, a qualifying shareholding of 35.9% in the capital of ESTORIL-SOL, SGPS, SA, which corresponds to the same percentage of votes.
There are no shareholders in the Company who have special rights.
There are restrictions as to the transferability of shares resulting from the provisions under Council of Ministers Resolution no. 115/99 (2nd series), as published in the D.R. II series no. 184, dated 9 August 1999, which obliges the company to observe the requirements provided for under art. 17 of Decree Law no. 422/89, of 2 December, within the following terms:
" 1 - The equity of concessionary companies must not be less than 30% of the total net assets, and the percentage should be raised to 40% of such assets as of the sixth year after concluding the concession contract, without prejudice to the corresponding minimum share capital to be set, for each one, under the regulatory decree, to which article 11 pertains.
2 – At least 60% of the share capital shall always be represented by either registered shares or bearer shares, under a registration system, and it is mandatory for concessionary companies to notify the Inspectorate-General for Gaming with regard to all transfers of property or the usufruct of these, within 30 days after registration in the company's appropriate book or via an equivalent formality.
3 – The purchase, in any capacity, of the holding or ownership of shares representing more than 10% of the capital or as a direct or indirect result of which there is a change in the control of the concessionaries by others, whether natural or legal persons, shall require permission from the member of the Government in charge of tourism, lest the purchasing parties be prevented from exercising their respective social rights.
4 - If the said party purchasing the shares is a legal person, authorization may condition the transfer in subjecting the purchasing party to the system set forth under this article.
5 – The regulatory decree to which article 11 pertains may prevent or limit direct or indirect participation in the share capital on the part of a concessionary by (an)other concessionary(ies), and any purchases that violate the provisions of the said regulatory decree shall become null and void."
III.5. Shareholder agreements which the company may be aware of and that may restrict the transfer of securities or voting rights
The Company is not aware of shareholder agreements that may restrict the transfer of securities or voting rights.
The alteration of the Articles of Association of the Company is subject to the imperative rules of the law such as those set out in the Articles of Association.
Besides the specific rules in the Articles of Association of the Company with regard to special reserves for the incorporation and increase of capital – article 31 – there are no other specific rules that relate to the alteration of the Articles of Association, where the general regime of the CCC applies.
III.7. Control mechanisms for a possible employees-shareholder system in as much as the voting rights are not directly exercised by them.
At this time there are no plans for any system for employees to participate in the capital of the Company.
In the Company's understanding the periodic disclosure of the results has had no impact either on the quantities of shares traded or on the evolution of the list price of the shares, as can be seen in the following tables:
| Number of shares trading hands during 2012 fiscal year | |||
|---|---|---|---|
| Price (Euros) | |||
| Qtd | High | Low | |
| January | 85 | 2,21 | 1,80 |
| February | 1046 | 2,13 | 1,50 |
| March | 1015 | 2,00 | 1,50 |
| April | 355 | 2,18 | 1,81 |
| May | 2545 | 1,80 | 1,17 |
| June | 5128 | 1,43 | 1,03 |
| July | 343 | 1,55 | 1,03 |
| August | 1921 | 2,00 | 1,03 |
| September | 563 | 1,95 | 1,29 |
| October | 325 | 1,31 | 1,27 |
| November | 795 | 1,70 | 1,17 |
| December | 3186 | 1,19 | 1,17 |
| Price (Euros) | ||||||
|---|---|---|---|---|---|---|
| Disclosure | Date | Qtd | Open | High | Low | Close |
| Annual results for 2011 | 30-04-2012 | 376 | 1,80 | 1,80 | 1,80 | 1,80 |
| 2012, 1st Quarter results | 31-05-2012 | 6 0 |
1,17 | 1,17 | 1,17 | 1,17 |
| 2012, Semester results | 28-08-2012 | 3 0 |
1,41 | 1,41 | 1,41 | 1,41 |
| 2012, 3rd Quarter results | 29-11-2012 | 700 | 1,18 | 1,18 | 1,18 | 1,18 |
During 2012 the Company did not issue any new shares or other securities that grant the right to the subscription of shares.
III.9. Description of the dividend distribution policy adopted by the company, including the dividend value per share distributed during the last three years.
The financial effort arising from the materialization of the investments made in the companies subcompanies, associated to a policy of safeguarding the financial solidity the Group Companies has shaped the Company's policy of dividends.
Aware that the sustained creation of value for the shareholders is one of the management objectives, the Board of Directors has been committed, with regard to the financial autonomy of the Company, to allocate at least 30% of the Net Profit per year to dividends.
However, in years in which the Associate Companies, gaming concessionaires, made significant investments without requiring any financial contribution from the shareholders, it has now been considered necessary to suspend this policy of dividend distribution.
Below we provide an indication of the dividends distributed in the last three years:
In the year in question, there were no plans for the attribution of shares or plans for the attribution of options for the acquisition of shares.
III.11. A description of the main business data and transactions carried out between the company and the members of the Management and Supervisory Bodies, the owners of qualifying holdings or parent companies, affiliates or group companies in an amount that is economically significant for any of the parties involved, except for those businesses or transactions that are cumulatively considered within the bounds of normal market conditions for similar transactions and are part of the company's current business
During 2012, no business was conducted between the company and the members of its administrative and supervisory bodies, holders of qualifying holdings or companies that are controlled by or grouped under the company, where such holdings have not been fully paid up under normal market conditions for similar operations and which are part of the company's current activities.
III.12. Description of the key elements of business and operations between the Company and holders of qualifying holdings or entities with whom they are in any relationship, in accordance with article 20 of the Securities Code outside of normal market conditions
During 2012, no business was conducted between the company and holders of qualifying holdings or entities that are in any group or control relationship with them, within the terms of Article 20 of the SC, outside of normal market conditions.
III.13. Description of the procedures and criteria for intervention by the supervisory body for the purpose of preliminary assessment of the business to be held between the company and holders of qualifying holdings or entities with whom they are in any relationship, in accordance with article 20 of the Securities Code
No business of this nature was performed.
III.14. Description of statistical information (number, mean and maximum value) relating to the business subject to the prior intervention of the Supervisory Board.
No business of this nature was performed.
III.15. Indicating the release on the website of the company, annual reports on the activities of the General Council and Supervisory Commission for financial issues, the Audit Committee and the Supervisory Board, including information on any pained faced together with the documents of accountability
The annual reports on the activity undertaken by the Audit Board, including an indication of any constraints encountered, together with the documents showing the accounts submitted are available on the Company's website (www.estoril-solsgps.com).
The company has an Internet website (www.estoril-solsgps.com) available to investors in which it publishes financial information regarding its individual and consolidated operations, as well as links to commercial sites of its associated companies Estoril Sol III and Varzim Sol.
In addition, to answer the information requests regarding the life of the company – even though they are very few in number – the Company created an Investor Support Service which promptly answers all information requests asked of it.
By reference to December 31st, 2012, the company representative for market relations was Dr. José Luís Silva Pimentel de Carvalho, whose contacts are:
Av. Clotilde, no. 331 2765-237 Estoril Tel. 214667871 Fax. 214667963 Email: [email protected]
Since January 2013 the company representative for market relations is Dr. Luís Pedro Matos Lopes, whose contacts are:
Av. Clotilde, no. 331 2765-237 Estoril Tel. 214667873 Fax. 214667963 Email: [email protected]
The effective Statutory Auditor of the Company is Lampreia & Viçoso, SROC registered with the Order of Chartered Accountants under no. 157 and registered with the CMVM under no. 7873, represented by José martins Lampreia (Statutory Auditor no. 334). The Statutory Auditor was elected, as proposed by the Audit Board in the General Meeting of 2008.
In 2012, the said Statutory Auditor earned 75,500 Euros from the Companies of the Group, by way of fees relating to the legal auditing of accounts, and did not provide services of any other kind.
The Company has not established periods of rotation of the external auditor in the Articles of Association or in other legal instruments.
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Pursuant to the Commercial Companies Code and the Company's Articles of Association, it is proposed that the Net Profit, recorded by the individual accounts of the year, amounting to 6,285,442 Euros in the red, be applied in the caption of:
Other Reserves and Retained Earnings ………………………… 6,285,442 Euros
Estoril, 16 th of April 2013
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Information regarding the securities issued by ESTORIL-SOL, S.G.P.S., and by companies with which the Company is in controlling or group relationship, which are owned by the members of the Corporate Offices of the Company on 31 December 2012.
Stanley Hung Sun Ho – Chairman of the Board of Directors
Patrick Huen – Vice-Chairman of the Board of Directors
Mário Alberto Neves Assis Ferreira – Vice-Chairman of the Board of Directors - On 31.12.2012 he held 601 shares of Estoril-Sol, S.G.P.S., S.A.; He neither purchased nor sold shares of this company during the year;
Choi Man Hin – Member of the Board of Directors
Vasco Esteves Fraga – Member of the Board of Directors
Rui José da Cunha – Director of the Advisory Board
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On 31 December 2012, ESTORIL SOL, S.G.P.S., S.A. held 62,565 treasury shares, and as FINANSOL - SOCIEDADE DE CONTROLO, S.G.P.S., S.A., on 31 December 2012, held 6,930,604 shares of ESTORIL-SOL, S.G.P.S., S.A., it was a direct holder of 58.1% of the share capital and of the voting rights.
The members of the Board of Directors and of the Advisory Board of the Companies which are controlled by or grouped under ESTORIL-SOL, held 246,698 shares of ESTORIL-SOL, S.G.P.S., S.A., corresponding to 2.49% of the share capital and voting rights.
Therefore, in overall terms, the direct and indirect stake of FINANSOL in the capital of ESTORIL-SOL is 60.6%, which is identical to the percentage of votes.
On 31 December 2012, ESTORIL-SOL, S.G.P.S., S.A. held 62,565 treasury shares, and, as AMORIM – ENTERTAINMENT E GAMING INTERNATIONAL, S.G.P.S., S.A. held 3,917,793 shares, this company was a direct holder of 32.8% of the share capital and of the voting rights of ESTORIL SOL, S.G.P.S., S.A..
The Companies Briargrove Limited and Nyland Limited as well as the respective "beneficial owners", Srs. Joaquim Ferreira de Amorim, José Américo Amorim Coelho and António Ferreira de Amorim, held 361,500 shares of ESTORIL-SOL, S.G.P.S., S.A., corresponding to 3.0% of the share capital and voting rights.
Therefore, in overall terms, the direct and indirect stake of AMORIM - ENTERTAINMENT E GAMING INTERNATIONAL, S.G.P.S., SA in the share capital of ESTORIL-SOL, S.G.P.S., S.A. was, on 31 December 2012, 35.9% which is identical to the percentage of votes.
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| ASSETS | Notes | 2012 | 2011 |
|---|---|---|---|
| NON - CURRENT ASSETS: Tangible fixed assets |
6 | 45.344 | 61.955 |
| Financial investments | 7 | 139.654.071 | 142.599.714 |
| Other non-current assets | 8 | 169.423 | 264.340 |
| Total non-current assets | 139.868.838 | 142.926.010 | |
| CURRENT ASSETS: | |||
| State and Public Sector | 1 9 |
14.000 | 28.325 |
| Debts of group companies | 2 1 |
1.237.587 | 1.886.992 |
| Other accounts receivable | 29.488 | - | |
| Deferrals | 1 0 |
5.227 | 7.367 |
| Cash and bank deposits | 4 | 12.522 | 5.453 |
| Total current assets | 1.298.824 | 1.928.137 | |
| Total assets | 141.167.663 | 144.854.147 | |
| EQUITY AND LIABILITIES | |||
| EQUITY: | |||
| Paid-up Capital | 1 1 |
59.968.420 | 59.968.420 |
| Treasuru shares | 1 1 |
(708.306) | (708.306) |
| Issue premiums | 1 1 |
7.820.769 | 7.820.769 |
| Legal reserve | 1 2 |
6.614.782 | 6.614.782 |
| Outras reserves and Retained earnings | 1 2 |
3.077.224 | 29.241.830 |
| Other variations in equity | 1 2 |
20.706.185 | (594.686) |
| Net profit of the year | 1 3 |
(6.285.442) | (6.656.383) |
| Total equity | 91.193.632 | 95.686.426 | |
| LIABILITIES: | |||
| NON - CURRENT LIABILITIES : | |||
| Provisions | 1 4 |
4.032.388 | 4.307.071 |
| Financial debt | 15/16 | 29.864 | 5.046.180 |
| Total do passivo não corrente | 4.062.252 | 9.353.251 | |
| CURRENT LIABILITIES: | |||
| Suppliers | 1 8 |
30.946 | 50.337 |
| State and Public Sector | 1 9 |
112.522 | 78.859 |
| Financial debt | 15/16 | 11.053.505 | 11.837.332 |
| Debts to group companies | 2 1 |
34.447.583 | 27.388.114 |
| Other accounts payable | 1 7 |
267.223 | 459.829 |
| Total current liabilities | 45.911.779 | 39.814.470 | |
| Total liabilities | 49.974.031 | 49.167.721 | |
| Total equity and liabilities | 141.167.663 | 144.854.147 |
The notes form part of the balance sheet on 31 December 2012
| INCOME AND COSTS | Notes | 2012 | 2011 |
|---|---|---|---|
| Gains / Losses imputed from subsidiaries | 7 | (4.238.290) | (3.896.121) |
| External supplies and services | 2 2 |
(450.500) | (549.685) |
| Staff costs | 2 3 |
(1.041.248) | (1.263.469) |
| Impairment of debs receivable ((losses) / reversals) | 150.951 | (4.943) | |
| Provisions (increases / (reductions)) | 1 4 |
273.685 | 467.062 |
| Other income and gains | 2 5 |
182 | 139.827 |
| Other costs and losses | 2 6 |
(79.571) | (213.380) |
| Result before depreciation, financing costs and taxation | (5.384.790) | (5.320.709) | |
| Depreciation costs | 2 7 |
(16.611) | (17.048) |
| Operational result (before financing costs and income tax) | (5.401.401) | (5.337.757) | |
| Interest and similar income obtained | 2 8 |
- | 557 |
| interest and similar cots borne | 2 9 |
(824.041) | (1.269.184) |
| Net result before income tax | (6.225.442) | (6.606.384) | |
| Income tax of the year | 9 | (60.000) | (50.000) |
| net profit of the year | (6.285.442) | (6.656.383) | |
| Result per basic share | (0,53) | (0,56) |
The notes form part of the income statement of the year ended on 31 December 2012
| Notes | 2012 | 2011 | |
|---|---|---|---|
| OPERATIONS ACTIVITIES: | |||
| Payments to suppliers | (437.454) | (700.881) | |
| Payments to staff | (1.065.021) | (1.231.174) | |
| Cash flow generated by operations | (1.502.475) | (1.932.055) | |
| Payment of income tax | (66.299) | (26.159) | |
| Other receipts (payments) relating to the operating activity | 69.816 | (279.307) | |
| Cash flow generated by operating activities (1) | (1.498.959) | (2.237.521) | |
| INVESTMENT ACTIVITIES: | |||
| Receipts from: | |||
| Repayment of additional capital payments | 5.000.000 | 5.000.000 | |
| Dividends | 5.000.000 | 5.500.000 | |
| 10.000.000 | 10.500.000 | ||
| Payments in respect of: | |||
| Tangible fixed assets | (9.500.000) | - | |
| Financial holdings | - | (5.425.000) | |
| (9.500.000) | (5.425.000) | ||
| Cash flow from investment activities (2) | 500.000 | 5.075.000 | |
| FINANCING ACTIVITIES: | |||
| Receipts from: | |||
| Financing obtained from credit institutions | - | 821.016 | |
| Financing obtained from related parties | 7.708.873 | 11.884.238 | |
| 7.708.873 | 12.705.254 | ||
| Payments in respect of: | |||
| Financing obtained from credit institutions | (5.000.000) | (12.150.000) | |
| Interests and similar cots | (902.704) | (1.255.646) | |
| Dividends | - | (2.982.779) | |
| Amortization of finance leasing contracts | (16.316) | (17.652) | |
| (5.919.020) | (16.406.077) | ||
| cash flow from financing activities (3) | 1.789.854 | (3.700.823) | |
| Variation in cash and cash equivalents (4)=(1)+(2)+(3) | 790.895 | (863.344) | |
| Cash and cash equivalents at the start of the period | (815.563) | 47.781 | |
| Cash and cash equivalents at the end of the period | 4 | (24.667) | (815.563) |
The notes form an integral part of these financial statements
Estoril Sol, SGPS, S.A.
(Amounts in Euros)
| Paid-up | Treasury | Issue | Legal | Outras Reserves and Retained |
Other variatons | Net result of the | |||
|---|---|---|---|---|---|---|---|---|---|
| Capital | shares | premiums | reserve | Earnings | in equity | year | Total Equity | ||
| Balance on 1st January 2011 | 59.968.420 | (708.306) | 7.820.769 | 6.411.391 | 28.360.183 | 281.903 | 4.067.818 | 106.202.178 | |
| ended on 31st December 2010 (Nota 13) Application of the net profit of the year |
- | - | - | 203.391 | 881.647 | - | (4.067.818) | (2.982.780) | |
| 71 | ended on 31st December 2011 Net profit of the year |
- | - | - | - | - | - | (6.656.383) | (6.656.383) |
| Adjustments related with financial assets with the equity pick-up method |
- | - | - | - | - | (876.589) | - | (876.589) | |
| Balance on 1st January 2012 | 59.968.420 | (708.306) | 7.820.769 | 6.614.782 | 29.241.830 | (594.686) | (6.656.383) | 95.686.426 | |
| ended on 31st December 2011 (Nota 13) Application of the net profit of the year |
- | - | - | - | (6.656.383) | - | 6.656.383 | - | |
| ended on 31st December 2012 Net profit of the year |
- | - | - | - | - | - | (6.285.442) | (6.285.442) | |
| Adjustments / Transfers | - | - | - | - | (19.508.223) | 19.508.223 | - | - | |
| Adjustments related with financial assets with the equity pick-up method |
- | - | - | - | - | 1.792.648 | - | 1.792.648 | |
| Balance on 31st December 2012 | 59.968.420 | (708.306) | 7.820.769 | 6.614.782 | 3.077.224 | 20.706.185 | (6.285.442) | 91.193.632 |
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Estoril Sol, SGPS, S.A., ("Company") is a public limited-liability company, which resulted from a change, on 18 March 2002, to the legal status of Estoril Sol, S.A. which was constituted on 25 June 1958 and has its registered office in Estoril. The a result, all operations that had been carried out were transferred to companies incorporated for this purpose, assuming the status of its subsidiaries. In turn, the parent company's main operations involved holdings management with its shares listed on the Euronext Lisbon.
The Company's social object is the management of shareholdings.
The attached financial statements are presented in Euros, given that this is the currency preferentially used in the economic environment in which the Company operates, and refer to the Company in individual terms. The Company prepared and presented separate consolidated financial statements which include the financial statements of the companies in which it has management control or which it jointly controls.
The financial statements were approved by the Board of Directors on 16th April 2013.
The attached financial statements were prepared in accordance with the legal provisions in force in Portugal, in conformity with Decree Law no. 158/2009, of 13 July and, in accordance with the conceptual structure, the national Accounting Standards and Financial Reporting ("NCRF") and Interpretative Standards ("IS") issued, respectively, in notifications 15652/2009, 15655/2009 and 15653/2009, of 27 August 2009, which, as a whole, form the Accounting Standards System ("SNC"). Henceforce, this set of standards and interpretations will be generically called "NCRF".
Since 1 January 2005, the consolidated financial statements of Estoril Sol, S.G.P.S. S.A. have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted in the European Union. For this reason, the equity on 31 December 2012 and 2011, as well as the net profits of the years ended on these dates that appear in the consolidated financial statements of the Estoril Sol Group differ from the figures presented in the individual financial statements.
The attached financial statements were prepared on the basis of the continuity of operations, based on the books and accounting records of the Company kept in accordance with the NCRF.
Investments in subsidiaries are stated using the equity pick-up method. In accordance with the equity pickup method, the shareholdings are initially stated at their acquisition cost and subsequently adjusted according to the changes verified, after the acquisition, by the quota-part of the Company in the net assets of the corresponding entities. The results of the Company include the part that corresponds to it in the results of these entities.
The excess of the acquisition cost over the fair value of identifiable assets and liabilities of each entity acquired on the acquisition date is recognised as goodwill and is kept at the financial investment value. If the difference between the acquisition cost and the fair value of the net assets and liabilities acquired is negative, this is recognised as income of the year.
An assessment is made of the financial investments when there is an indication that an asset could be impaired, with any impairment losses being stated as costs in the income statement.
When the Company's proportion in the accumulated losses of the subsidiary company, jointly controlled entity or associate company exceeds the value at which the investment is recorded, the investment is reported at zero, except when the Company has assumed a commitment to cover the losses of the associate company, in which cases the additional losses determine the recognition of a liability. If the associate company subsequently reports profits, the Company resumes the recognition of its quota-part in these profits only after its part in the profits equals the unrecognised part of the losses.
Unrealised gains in transactions with subsidiaries, jointly controlled companies and associate companies are eliminated proportionally to the Company's interest in them, against the corresponding investment caption. Unrealised losses are similarly eliminated, but only up to the point in which the loss does not arise from a situation in which the asset transferred is impaired.
Tangible fixed assets are initially stated at acquisition cost, which includes the purchase cost and any costs directly attributable to putting the assets in the place and in the condition necessary for them to operate as intended, less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated, after the asset is ready to be used, in accordance with the straight line method, with duodecimal imputation, according to the estimated useful life for each class of assets.
The useful lives and method of depreciation of the various assets are reviewed annually. The effect of any alteration to these estimates is recognised prospectively in the income statement.
Tangible fixed assets are depreciated in accordance with the straight line method with duodecimal imputation over\ the following estimated useful lives:
| Homogenous Class | Years |
|---|---|
| Vehicles | 3 - 4 |
| Office equipment | 3 - 10 |
Maintenance and repair expenses (subsequent expenditure) that are not likely to generate additional future economic benefits are stated as costs in the year in which they are incurred.
The gain (or loss) resulting from the sale or write-off of a tangible fixed asset is determined as the difference between the amount received in the transaction and the net book value of the asset and is recognised in results in the year in which the write-off or sale occurs.
Leasing contracts are classified as finance leasing whenever their terms substantially transfer all the risks and rewards associated to the ownership of the asset to the lessee. Other leasing contracts are classified as operating leases. Leasing is classified according to the substance and not the form of the contract.
Assets acquired under finance lease contracts, as well as the corresponding responsibilities, are recorded at the start of the leasing for the lower value of either the fair value of the assets or the present value of the minimum leasing payments. Finance lease instalment payments are split between financial charges and reducing the liability, so that a constant interest rate is obtained on the outstanding balance of the liability.
In the case of operating leases, the lease instalments due are recognised as costs on a straight-line basis over the period of the lease contract. The incentives received are stated as a liability, with the aggregate amount thereof being recognised as a reduction in the expense with the lease, also on a straight-line basis.
Contingent income is recognised as an expense of the year in which it is incurred.
Whenever there is any indication that the tangible and intangible fixed assets of the Company could be impaired, an estimate is made of their recoverable value in order to determine the extent of the impairment loss (if that is the case). When it is not possible to determine the recoverable value of an individual asset, the recoverable amount is estimated for the cash generating unit to which the asset belongs.
The recoverable value of the asset or of the cash generating unit is the higher of (i) the fair value less sale costs and (ii) the current use value. In determining the current use value, the estimated future cash flows are discounted using a discount rate that reflects the market expectations regarding the temporal value of the money and with regard to the specific risks of the asset or of the cash generating unit in relation to which the estimates of future cash flows have not been adjusted.
Whenever the net book value of the asset or of the cash generating unit is higher than its recoverable value, an impairment loss is recognised. The impairment loss is immediately entered in the income statement, except if this loss compensates a revaluation surplus recorded in equity. In the latter case, this loss will be treated as a decrease in that revaluation.
The reversal of impairment losses recognised in previous years is recorded when there is evidence that the previously recognised impairment losses no longer exist or have reduced. The reversal of impairment losses is recognised in the income statement in the respective caption of "Reversals of impairment losses". Impairment losses are reversed up to the limit of the amount that would be recognised (net of amortization) if the loss had not been recorded.
Expenses and income are recognised in the year they relate to, in accordance with the principle of accrual accounting, irrespective of when the transactions are invoiced. Expenses and income for which the real value is not known are estimated.
Expenses and income imputable to the current year where the expense and revenue will only occur in future periods, together with the expenses and revenue that have already occurred, but which are in respect of future periods and which will be imputed to the results of each of these periods, are stated in the deferrals captions at the value corresponding to them.
Income tax corresponds to the sum of current tax and deferred tax. Current tax and deferred tax are entered in results, except when the deferred tax is related with items recorded directly in equity. In these cases the deferred tax is also stated in equity.
The current tax on income is calculated based on the taxable profit of the year of the various entities included in the consolidation perimeter. The taxable profit differs from the book result as it excludes diverse expenses and income that will only be deductible or taxable in subsequent years, as well as expenses and income that will never be deductible or taxable in accordance with the tax rules in force.
Deferred tax relates to temporary differences between the amounts of the assets and liabilities for the purpose of the reporting of accounts and the respective amounts for the purpose of taxation, as well as the results of tax benefits obtained and of temporary differences between the fiscal result and the book result.
Deferred tax liabilities are generally recognised for all temporary taxable differences.
Deferred tax assets are recognised for deductible temporary differences, although this recognition only occurs when there is a reasonable expectation of sufficient future taxable profits to use these deferred tax assets. On each reporting date these deferred tax assets are re-assessed and are adjusted according to the expectations regarding their future use.
Deferred tax assets and liabilities are measured using the tax rates that are expected to be in force on the date of the reversal of the corresponding temporary differences, based on the tax rates (and fiscal legislation) that are formally issued on the reporting date.
Compensation between deferred tax assets and liabilities is only permitted when: (i) the Company has a legal right to perform compensation between such assets and liabilities for the purpose of settlement; (ii) these assets and liabilities are related with taxation on income raised by the same fiscal authority (i) and (iii) the Company has the intention to perform the compensation for the purpose of settlement.
The Estoril Sol is covered by the Special System for Taxation of Groups of Companies ("SSTGC"), as established in articles 69 of the Portuguese Corporate Income Tax Code (CIRC) and covers all the companies in which it has a direct or indirect holding of at least 90% of the respective capital and which
are, at the same time, resident in Portugal and taxed under Corporation Tax (IRC). Under this regime the taxable profit of the group relating to each tax period is calculated by the controlling company (Estoril Sol, SGPS, SA), through the algebraic sum of taxable profits and tax losses obtained in the individual periodic statements for each of the companies belonging to the group. The amount obtained is adjusted for part of the profits distributed among group companies that is included in the individual taxable bases.
The following companies are part of this system:
Financial assets and liabilities are recognised in the balance sheet when the Company becomes party to the corresponding contractual provisions.
Financial assets and liabilities are measured at cost or at amortised cost less any accumulated impairment losses (in the case of financial assets), when:
The amortised cost corresponds to the value at which a financial asset or a financial liability is measured when initially recognised, less the repayments of capital, plus or minus the cumulative depreciation, using the effective interest rate method, of any difference between this amount at maturity. The effective interest rate is the rate that exactly discounts the estimated future payments or receipts in the net book value of the financial asset or liability.
Financial assets and liabilities at cost or at amortised cost include: Other accounts receivable Cash and bank deposits Financial debt Suppliers Other accounts payable
Contracts to grant or take out loans that cannot be settled on a net basis and which, when executed, have the conditions described above, are also classified in the category "at cost or amortised cost", being measured at cost less accumulated impairment losses.
The amortised cost is determined using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future payments or receipts during the expected life of the financial instrument in the net book value of the financial asset or liability.
The caption of cash and bank deposits includes cash and bank deposits which can be moved immediately (in a period of less than or equal to three months) net of bank overdrafts.
Financial assets classified in the category "at cost or amortised cost" are subject to impairment tests on each reporting date. These financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after their initial recognition, their estimated future cash flows are affected.
For financial assets measured at amortised cost, the impairment loss to be recognised corresponds to the difference between the net book value of the asset and the present value of the new estimated future cash flows discounted at the respective original effective interest rate.
For financial assets measured at cost, the impairment loss to be recognised corresponds to the difference between the net book value of the asset and the best estimate of the fair value of the asset.
Impairment losses are stated in results in the caption "Impairment losses" in the year in which they are determined.
Subsequently, if the amount of the impairment loss reduces and this reduction can be objectively related with an event that took place after the recognition of the loss, this should be reversed in results. The reversal should be carried out up to the limit of the amount that would be recognised (amortised cost) if the loss had not been initially recorded. The reversal of impairment losses is entered in results in the caption "Reversals of impairment losses". The reversal of impairment losses stated in investments in equity instruments (measured at cost) is not permitted.
The Company only derecognizes financial assets when its contractual rights to the cash flow arising from of these assets expire, or when the financial assets and all the significant risks and benefits associated to their ownership are transferred to another entity. Financial assets transferred in relation to which the Company retained some significant risks and benefits are derecognised, provided that control over them has been ceded.
The Company only derecognizes financial liabilities when the corresponding obligation is settled, cancelled or expires.
Provisions are acknowledged by the Company when and only when there is a present obligation (legal or implied) resulting from a past event, for the resolution of which it will likely become necessary to spend internal resources, the amount of which may be reasonably estimated.
The recognised amount of the provisions consists in the present value of the best estimate on the reporting date of the resources necessary to settle the obligation. This estimate is determined taking into consideration the risks and uncertainties associated to the obligation.
Provisions are revised on the reporting date and are adjusted so as to reflect the best estimate on this date.
With regard to the defined benefit plans, the corresponding cost is determined using the projected unit credit method, where the respective liabilities are determined based on actuarial studies carried out on each reporting date by independent actuaries.
The costs of past services is recognised in results on a linear basis during the period until the corresponding benefits are acquired. They are recognised immediately as the benefits have been totally acquired.
The liability associated to the benefits guaranteed recognised in the balance sheet represents the present value of the corresponding obligation, adjusted by actuarial gains and losses and by the cost of unrecognised past services.
Contingent liabilities are not recognised in the financial statements, being disclosed whenever the possibility of there being an outflow of resources including economic benefits is not remote nor probable.
Contingent assets are not recognised in the financial statements, being disclosed when the existence of a future economic influx of resources is probable.
Financial charges related with loans obtained are generally recognised as expenses as they are incurred.
In the preparation of the attached financial statements judgments of value and estimates were made and diverse assumptions used that affect the book value of the assets and liabilities, as well as the income and expenses of the year.
The underlying estimates and assumptions were determined based on the best knowledge of the events and transactions in hand existing on the date of approval of the financial statements, as well as on the experience of past and/or current events. Nevertheless, situations can occur in subsequent periods that, not being foreseeable on the date of approval of the financial statements, were not considered in these estimates. Changes to the estimates that occur after the date of the financial statements will be corrected prospectively. For this reason and given the degree of associated uncertainty, the real results of the transactions in question may differ from the corresponding estimates.
The main judgments of value and estimates made in the preparation of the attached financial statements were the following:
Events which occur after the of balance sheet date and which provide additional information regarding conditions that existed on the of balance sheet date (events after the balance sheet date that give rise to adjustments) are reflected in the financial statements. Events which occur after the balance sheet date which provide information on conditions that may occur after the balance sheet date (that do not give rise to adjustments) are disclosed in the financial statements, if they are considered material.
For the purposes of the cash flow statement, cash and cash equivalents includes cash, immediately available bank deposits (of less than or equal to three months) net of bank overdrafts. On 31 December 2012 and 31 of December 2011 the caption Cash and bank deposits is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Cash | 1.223 | 381 |
| Immediately avaiable bank deposits | 11.299 | 5.072 |
| Cash and cash equivalents | 12.522 | 5.453 |
| Bank overdrafts (Note 15) | (37.189) | (821.016) |
| Cash and bank deposits | (24.667) | (815.563) |
During the year ended on 31 December of 2012, there were no changes in accounting policies in relation to those used in the preparation and presentation of the financial statements of the year ended on 31 December 2011, nor were any material errors recognised relating to previous periods. However, due to the changes that have occurred in the macroeconomic environment and in the increase in discount rates, there have been significant changes in estimates and in the assumptions used in the impairment tests of certain assets, namely those relating to shareholdings (Note 7).
During the years ended on 31 December 2012 and 31 December 2011 the movement in tangible fixed assets, as well as in the respective depreciation and accumulated impairment losses, was the following:
| 2012 | ||||
|---|---|---|---|---|
| Vehicles | Office equipment |
Advances on tangible fixed assets |
Total | |
| Gross asets: | ||||
| Opening balance | 86.621 | 1.745 | - | 88.366 |
| Transfers / Adjustments | - | - | - | - |
| Closing balance | 86.621 | 1.745 | - | 88.366 |
| Depreciation and accumulated impairment losses: | ||||
| Opening balance | 25.413 | 998 | - | 26.411 |
| Depreciation of the year (Note 27) | 16.050 | 561 | - | 16.611 |
| Closing balance | 41.463 | 1.559 | - | 43.022 |
| Net asstes | 45.158 | 186 | - | 45.344 |
2011
| Vehicles | Office equipment |
Advances on tangible fixed assets |
Total | |
|---|---|---|---|---|
| Gross assets: | ||||
| Opening balance | 86.621 | 1.745 | 1.227.325 | 1.315.691 |
| Transfers /Adjustments | - | - | (1.227.325) | (1.227.325) |
| 86.621 | 1.745 | - | 88.366 | |
| Depreciation and accumulated imparment losses: | ||||
| Opening balance | 9.363 | - | - | 9.363 |
| Depreciation of the year (Note 27) | 16.050 | 998 | - | 17.048 |
| Closing balance | 25.413 | 998 | - | 26.411 |
| Net assets | 61.208 | 747 | - | 61.955 |
On 31 December 2012 and on 31 December 2011 the Company had the following shareholdings stated using the equity pick-up method:
| 2012 | 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| % | Net | % | Net | ||||||
| Subsidiaries | Head Office | Assets | Liabilities | held | Equity | Profit | held | Equity | Profit |
| Estoril Sol (III) - Turismo, Animação e Jogo, S.A. | Estoril | 199.140.484 | 114.091.467 | 100% | 85.049.017 | 5.044.991 | 100% | 90.229.497 | 5.854.663 |
| Varzim Sol - Turismo, Jogo e Animação, S.A. | Póvoa de Varzim | 70.603.845 | 33.226.553 | 100% | 37.377.292 | (7.641.998) | 100% | 33.501.168 | (4.861.532) |
| Estoril Sol V - Investimentos Imobiliários, S.A. | Estoril | 5 0 |
18.455 | 100% | (18.405) | (1.315) | 100% | (17.090) | (2.100) |
| DTH - Desenvolvimento Turistico e Hoteleiro, S.A. Estoril | 3.176.352 | 1.225.686 | 100% | 1.950.666 | (19.718) | 100% | 1.970.384 | (8.499) | |
| Estoril Sol Imobiliária, S.A. | Estoril | 5.236.101 | 477.949 | 100% | 4.758.152 | (1.575.790) | 100% | 6.333.943 | (31.193) |
| Chão do Parque, Investimentos imobiliários, S.A. | Estoril | 3.469 | 43.380 | 90% | (39.911) | 998 | 90% | (40.909) | (4.413) |
| Estoril Sol - Investimentos Hoteleiros, S.A. | Estoril | 9.067.480 | 3.075 | 90% | 9.064.405 | (23.940) | 90% | 9.088.345 | 900.645 |
| Estoril Sol e Mar - Investimentos Imobiliários, S.A. Estoril | 1.462.255 | 7.716 | 100% | 1.454.539 | (21.838) | 100% | 1.476.377 | (20.641) |
The movement in the caption "Shareholdings", as well as of the respective accumulated impairment losses, was the following:
| 2012 | |
|---|---|
| Holdings in subsidiary companies | |
| Opening balance | 142.599.714 |
| Gains / Losses imputed from subsidiaries | (4.238.290) |
| Acquisitions / Capital increases / Repayments (1) | 4.500.000 |
| Dividens Distribution | (5.000.000) |
| Other variations in equity | 1.792.647 |
| Closing balance | 139.654.071 |
| 2011 | |
| Holdings in subsidiary companies | |
| Opening balance | 156.579.675 |
| Gains / Losses imputed from subsidiaries | (3.896.121) |
| Acquisitions / Capital increases / Repayments | (3.707.251) |
| Dividens Distribution | (5.500.000) |
| Other variations in equity | (876.589) |
| Closing balance | 142.599.714 |
During 2012 the Company made capital increases in its subsidiaries and received additional capital payments that had been made in the past from its subsidiaries, as follows:
| Capital increase in Varzim-Sol: | 9.500.000 |
|---|---|
| Repaid additional capital payments by Estoril-Sol (III) | (5.000.000) |
| Total (1) | 4.500.000 |
Estoril Sol (III) – Turismo, Animação e Jogo, S.A distributed dividends to the Company amounting to 5,000,000 Euros related to the year ended 31st December 2011.
On 31 December 2012 and on 31 December 2011 this caption was made up as follows:
| 2012 | 2011 | |
|---|---|---|
| State and Public Sector | 169.423 | 264.340 |
| 169.423 | 264.340 |
These amounts relate to IRC (Corporate Income Tax) and VAT (Value Added Tax) which is recoverable, or the subject of complaint or litigation.
The Company is subject to corporation income tax at the rate of 25% plus a Municipal Surcharge of 1.5% of taxable income, resulting in a maximum aggregate tax rate of 26.5%. In addition, taxable income for the year ended 31 December 2012 in excess of 1.500.000 Euros is subject to a State Surcharge under the terms of article 87-A of the Corporation Income Tax Code at the following rates:
3% for taxable profit between 1.500.000 Euros and 10.000.000 Euros;
5% for taxable profit exceeding 10.000.000 Euros.
Taxable income for 2013 is subject to State Surcharge at the following rates:
In addition, net finance costs for 2013 and following years are deductible for determining annual taxable income of each company progressively up to 2017 of the greater of the following limits:
In accordance with legislation in force, the tax declarations are subject to revision and correction by the tax authorities during a period of four years (five years for the Social Security), except when there have been tax losses, tax benefits have been granted, or inspections, complaints or objections are under way, in which cases, depending on the circumstances, deadlines for filing such statements are extended or suspended. In this way, the Company's tax declarations of the years from 2009 to 2012 could still be subject to revision.
The Company is covered by the Special System for Taxation of Groups of Companies ("SSTGC"), which is defined in article 69 of the Corporate Income Tax Code and covers all the companies in which it has a direct or indirect holding of at least 90% of the respective capital and which are, at the same time, resident in Portugal and taxed under Corporation Tax (IRC). Under this regime the taxable profit of the group relating to each tax period is calculated by the controlling company (Estoril Sol, SGPS, SA), through the algebraic sum of taxable profits and tax losses obtained in the individual periodic statements for each of the companies belonging to the group. The amount obtained is adjusted for part of the profits distributed among group companies that is included in the individual taxable bases.
The following companies are part of this system:
The cost with taxation on income on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Pre-tax profit | (6.225.442) | (6.606.383) |
| Other companies included in the SSTGC | (1.641.603) | 833.800 |
| (7.867.045) | (5.772.583) | |
| Non-deductible expenses | ||
| Losses in subsidiaries, equity pick-up | 9.284.599 | 10.651.429 |
| Impairment of non-depreciable assets | 2.769.510 | - |
| Other non-deductible expenses | 25.039 | 309.919 |
| 12.079.148 | 10.961.348 | |
| Non-taxable income | ||
| Gains in subsidiaries, equity pick-up | (5.045.989) | (6.755.308) |
| Other non-taxable income | (275.000) | - |
| (5.320.989) | (6.755.308) | |
| Result for tax purposes | (1.108.886) | (1.566.543) |
| Cost of income tax calculated at the rate of 26,5% | - | - |
| Autonomous taxation | 60.000 | 50.000 |
| Income tax - current | 60.000 | 50.000 |
| Income tax - deferred | - | - |
| Income tax of the year | 60.000 | 50.000 |
Deferred tax assets generated by the Company in its activity are not required to be included in the accounts from the point of view of prudence.
In accordance with current legislation tax losses can be carried forward during a period five years (six years for losses incurred up to 2009 and four years for losses incurred in 2010 and 2011) after their occurrence for deduction from taxable income generated in that period, limited to 75% of the Group's taxable income in each year, applicable also to tax losses incurred in prior years.
On 31 December 2012 the reportable tax losses amounted to 15.942.045 Euros, which was generated as follows:
| Amount | |
|---|---|
| Generated in : | |
| - year 2007 | 3.433.622 |
| - year 2008 | 3.725.766 |
| - year 2009 | 1.909.671 |
| - year 2010 | 4.197.557 |
| - year 2011 | 1.566.543 |
| - year 2012 | 1.108.886 |
| 15.942.045 |
On 31 December 2012 and on 31 December 2011 the caption "Deferrals" is broken down as follows:
| Deferred assets | 2012 | 2011 |
|---|---|---|
| Insurance | 3.386 | 5.572 |
| Other | 1.841 | 1.795 |
| 5.227 | 7.367 |
On 31 December of 2012 and 2011, the share capital of the Company was represented by 11,993,684 shares, of which 6,116,779 is in registered shares and 5,876,905 in bearer shares, with a nominal unit value of 5 Euros, which grant the right to a dividend.
The share capital issued by the Company on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Paid-up capital | 59.968.420 | 59.968.420 |
| Treasury shares | (708.306) | (708.306) |
| Issue premiums | 7.820.769 | 7.820.769 |
| 67.080.883 | 67.080.883 |
The share capital is represented by the following categories of shares:
| Date | Nominal value | No. of shares |
|---|---|---|
| 31st December de 2012 | ||
| Registered | 5 | 6.116.779 |
| Bearer | 5 | 5.876.905 |
| 11.993.684 | ||
| 31st December de 2011 | ||
| Registered | 5 | 6.116.779 |
| Bearer | 5 | 5.876.905 |
| 11.993.684 |
| Year of Acquisition | No. of shares | Nominal value | Total nominal | Total premiums | Total |
|---|---|---|---|---|---|
| 2001 | 34.900 | 5 | 174.500 | 280.945 | 455.445 |
| 2002 | 43 | 5 | 215 | 184 | 399 |
| 2007 | 22 | 5 | 110 | 88 5 |
198 |
| 2008 | 27.600 | 5 | 138.000 | 114.264 4 |
252.264 |
| Total | 62.565 | 312.825 | 395.481 4 |
708.306 |
The treasury shares were acquired by the Company as follows:
Legal persons with a stake of over 20% in the share capital on 31 December of 2012 and 2011:
Finansol, Sociedade de Controlo, S.G.P.S, S.A., with 60.2%
Amorim – Entertainment e Gaming International, S.G.P.S., S.A., with 35.87%.
During the years ended on 31 December of 2012 and on 31 December of 2011, the movement in reserves was as follows:
| Legal reserve | Other reserves | Other variations on Equity |
|
|---|---|---|---|
| Amount on 1-1-2011 Application of the net profit of the year |
6.411.391 | 28.360.183 | 281.903 |
| ended on 31 de Dezembro de 2010 | 203.391 | 881.647 | - |
| Adjustments related with financial assets with the equity pick-up method |
- | - | (876.589) |
| Amount on 31-12-2011 | 6.614.782 | 29.241.830 | (594.686) |
| Adjustments / Tranfers | - | (19.508.223) | 19.508.223 |
| Application of the net profit of the year ended on 31 de Dezembro de 2011 |
- | (6.656.383) | - |
| Adjustments related with financial assets with the equity pick-up method |
- | - | 1.792.648 |
| Amount on 31-12-2012 | 6.614.782 | 3.077.224 | 20.706.185 |
Legal reserve: Pursuant to commercial legislation in force, at least 5% of the annual net profit if positive, has to be used to reinforce the Legal Reserve until it accounts for at least 20% of the share capital. This reserve may not be distributed except in the event of the liquidation of the company, but may be used for absorbing losses after other reserves run out or are included in the capital.
Other reserves: The other reserves are available for use.
During fiscal year 2012 19.508.223 Euros were transferred from item "Other reserves" for the item "Other changes in equity." This amount corresponds to the exact value of tax deductions for investment from the Group subsidiaries Estoril-Sol (III) and Varzim-Sol with reference to December 2012.
The application of the results of the years ended on 31 December of 2012 and 2011 was as follows:
| 2012 | 2011 | |
|---|---|---|
| Legal reserve Other reserves Dividends |
- (6.656.383) - |
203.391 881.647 2.982.779 |
| (6.656.383) | 4.067.817 |
The dividends referring to the year ended on 31 December 2010 attributed to the shareholders, in accordance with the decision of the General Meeting of Shareholders on 23 May 2011, amounted to 2.982.779 Euros, payment of which was made on 06 June 2011.
The results for the year ended December 31st, 2011 has been fully transferred to "Other reserves" as decided by the General Meeting of Shareholders dated May 21st, 2012.
The movement in provisions in the years ended on 31 December 2012 and on 31 December 2011 was as follows:
| 2012 | ||||
|---|---|---|---|---|
| Opening | Closing | |||
| balance | Increases | Reversals | balance | |
| Provisions for pensions | 3.802.000 | - | (275.000) | 3.527.000 |
| Provisions for other risks and charges | 447.072 | - | - | 447.072 |
| Losses in subsidiaries | 57.999 | 317 | - | 58.316 |
| 4.307.071 | 317 | (275.000) | 4.032.388 | |
| 2011 | ||||
| Opening | Closing | |||
| balance | Increases | Reversals | balance | |
| Provisions for pensions | 4.555.000 | - | (753.000) | 3.802.000 |
| Provisions for other risks and charges | 167.647 | 279.425 | - | 447.072 |
| Losses in subsidiaries | 51.486 | 6.513 | - | 57.999 |
The provision for other risks and charges is intended to cover estimated liabilities based on information from juridical and legal consultants, arising from lawsuits filed against the Company.
4.774.133 285.938 (753.000) 4.307.071
During the year 2012 there were no new situation requiring strengthening this provision, there has also been no significant developments in existing processes to justify the revision of amounts accrued in the past.
The Company set up the following provisions during 2011:
A provision of 279,425 Euros to cover any contingencies arising from um a civil lawsuit which is being heard in the 4th Civil Court of Lisbon,
A provision of 6,513 Euros to cover debts taken out by subsidiaries.
By the Articles of Association approved in the General Meeting of 29 May 1998, Estoril Sol, SGPS, SA confirmed, in article 36, the right to a retirement pension paid by the company to the former directors who had already retired, based on the previous article 25 of the Articles of Association that were then altered, and the same rights and benefits as those of directors, in office at that time, who had or would have then completed ten years of service – after entering retirement - rights and benefits to be regulated in a contract to be agreed between the Company and these directors.
In order to estimate its liabilities for these payments, the Group follows the procedure of annually obtaining actuarial calculations of the liabilities, calculated using the technical standards of the Insurance Institute of Portugal.
The most recent actuarial study of the assets of the plan and of the present value of the defined benefit obligations was carried out in December of 2012 by a specialised entity accredited for the purpose. The present value of the obligation concerning defined benefits and the cost of current services and of related past services were measured using the projected unit credit method.
The main assumptions made in the actuarial evaluation mentioned above were the following:
| 2012 | 2011 | |
|---|---|---|
| Discount rate | 3% | 4,75% |
| Rate of growth of pensions | 0,00% p.a. | 0,00% p.a. |
| Mortality table | ||
| - Before retirement | n.a. | n.a. |
| - After retirement | GKF95 | GKF95 |
| Invalidity table | n.a. | n.a. |
| Table of departures | n.a. | n.a. |
| Retirement age | Age on 1st januery 2013 |
During 2012 the Company decided to change the discount rate from 4,75% to 3%, in accordance with the current evolution of the financial markets. If the previous discount rate had been kept the liabilities assumed by the Company as at 31st December 2012 should be 2.779.000 Euros against the actual 3.527.000 Euros.
The actuarial study resulted in a reduction in the liabilities assumed by the Company amounting to 275.000 Euros, arising from the decease of two of the beneficiaries.
The financial debt on 31 December of 2011 and on 32 December of 2011 is broken down as follows:
| 2012 | |||||
|---|---|---|---|---|---|
| Nature of the financing | Opening | Closing | |||
| balance | Issues | Repayments | Transfer | balance | |
| Non-Current financing: | |||||
| - Bank loans | 5.000.000 | - | - | (5.000.000) | - |
| - Finance leasing (Nota 16) | 46.180 | - | - | (16.316) | 29.864 |
| 5.046.180 | - | - | (5.016.316) | 29.864 | |
| Current financing: | |||||
| - Bank loans | 5.000.000 | - | 5.000.000 | 5.000.000 | 5.000.000 |
| - Current accounts | 6.000.000 | - | - | - | 6.000.000 |
| - Bank overdrafts (Nota 4) | 821.016 | 37.189 | 821.016 | - | 37.189 |
| - Finance leasing (Nota 16) | 16.316 | - | 16.316 | 16.316 | 16.316 |
| 11.837.332 | 37.189 | 5.837.332 | 5.016.316 | 11.053.505 | |
| 16.883.512 | 37.189 | 5.837.332 | - | 11.083.369 |
| 2011 | |||||
|---|---|---|---|---|---|
| Nature of the financing | Opening | Closing | |||
| Balance | Issues | Repayments | Transfer | Balance | |
| Non-Current financing: | |||||
| - Bank loans | 10.000.000 | - | - | (5.000.000) | 5.000.000 |
| - Finance Leasing (Note 16) | 62.495 | - | - | (16.315) | 46.180 |
| 10.062.495 | - | - | (5.016.315) | 5.046.180 | |
| Current financing: | |||||
| - Bank loans | - | 5.000.000 | 5.000.000 | ||
| - Current accounts | 18.150.000 | - | 12.150.000 | 6.000.000 | |
| - Bank overdrafs (Note 4) | - | 821.016 | - | - | 821.016 |
| - Finance Leasing (Note 16) | 17.653 | - | 17.652 | 16.315 | 16.316 |
| 18.167.653 | 821.016 | 12.167.652 | 5.016.315 | 11.837.332 | |
| 28.230.148 | 821.016 | 12.167.652 | - | 16.883.512 |
The average interest rates for financing, borne by the Group, including commissions and other charges, come within an interval of between 6% and 7,5% during 2012 and 5,5% and 7% during 2011.
Some of the financing operations, mainly bank loans, include commitments to maintain certain financial ratios based on contractually negotiated limits (financial covenants). These ratios are:
Net Debt / Ebitda;
Financial autonomy.
On the 31st December 2012 and 31st December 2011, these ratios were according the contractually negotiated limits.
The Company is the lessee in financial and operational leasing contracts related with motor vehicles, which are denominated in Euros.
These contracts produce the following future liabilities for the Company:
| (Note 15) Finance Leasing |
Operational Leasing |
Total | |
|---|---|---|---|
| Up to 1 year | 16.316 | 17.753 | 34.069 |
| Between 1 year and 5 years | 29.864 | 28.721 | 58.585 |
| 46.180 | 46.474 | 92.654 |
On 31 December 2012 and on 31 December 2011 the caption "Other accounts payable" is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Charges with holidays to be paid | 55.045 | 92.819 |
| Financial charges to be paid | 50.977 | 129.640 |
| Other | 161.201 | 237.370 |
| 267.223 | 459.829 |
On 31 December 2012 and on 31 December 2011 the caption of "Suppliers" is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Suppliers, current account | 30.946 | 50.337 |
| 30.946 | 50.337 |
On 31 December 2012 and on 31 December 2011 the caption of "State and Public Sector" is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Current assets: | ||
| Withholding tax (IRC) | - | 21.325 |
| Special Payment on Account (IRC) | 14.000 | 7.000 |
| 14.000 | 28.325 | |
| Current Liabilities: | ||
| Corporate Income Tax | 60.000 | 50.000 |
| Social Security Contributions | 16.265 | 11.779 |
| Other taxation | 36.257 | 17.080 |
| 112.522 | 78.859 |
On 31 December 2012 and 31 December 2011 the Company had presented the following guarantees:
| 2012 | 2011 | |
|---|---|---|
| For tax demands in hand / litigation | 39.970 | 39.970 |
| To current suppliers | 1.225 | 1.225 |
| 41.195 | 41.195 |
On 31 December 2012 and 31 December 2011 the Company had the following balances with related parties:
| 2012 | 2011 | |||
|---|---|---|---|---|
| Current | Current | Current | Current | |
| accounts | accounts | accounts | accounts | |
| Related party | receivable | payable | receivable | payable |
| Holding company | ||||
| - Finansol - Sociedade de Controlo, SGPS, S.A. | 1.942 | - | 1.858 | - |
| Subsidiaries | ||||
| - Estoril Sol (III) - Turismo, Animação e Jogo, S.A. | - | 22.029.444 | - | 14.944.275 |
| - DTH - Desenvolvimento Turistico e Hoteleiro, S.A. - Estoril Sol Imobiliária, S.A. |
1.224.456 - |
- 3.351.418 |
1.205.968 - |
- 3.356.252 |
| - Estoril Sol - Investimentos Hoteleiros, S.A. | - | 9.066.721 | - | 9.087.587 |
| - Estoril Sol V - Investimentos Imobiliários, S.A. | 17.019 | - | 16.934 | - |
| - Estoril Sol e Mar - Investimentos Imobiliários, S.A. | 6.293 | - | 675.596 | - |
| - Chão do Parque, Investimentos imobiliários, S.A. | 42.065 | - | 40.824 | - |
| Impairment: | ||||
| - Estoril Sol V - Investimentos Imobiliários, S.A. | (15.149) | - | (15.149) | - |
| - Chão do Parque, Investimentos imobiliários, S.A. | (39.039) | - | (39.039) | - |
| 1.237.587 | 34.447.583 | 1.886.992 | 27.388.114 |
In the years ended on 31 December 2012 and 2011 there were no transactions between related parties
The caption "External supplies and services" in the years ended on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Specialised work | 285.598 | 324.325 |
| Representation expenses | 45.616 | 60.269 |
| Fees | 6.321 | 12.077 |
| Conservation and repairs | 6.494 | 5.755 |
| Energy and other fluids | 20.742 | 41.494 |
| Rents | 58.332 | 89.045 |
| Communication | 15.248 | 14.122 |
| Travel and hotels | 5.101 | 1.655 |
| Insurance | 6.451 | - |
| Other | 597 | 943 |
| 450.500 | 549.685 |
The caption "Staff Costs" in the years ended on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Remuneration of the Corporate Offices (Note 24 ) | 325.358 | 325.358 |
| Remunerations of staff | 233.094 | 324.715 |
| Indemnities | 265.705 | 304.271 |
| Charges on remuneration | 99.920 | 138.150 |
| Estimate for pensions | 104.734 | 150.620 |
| Insurance | 4.887 | 4.977 |
| Cost osf social action | 2.552 | 11.143 |
| Other | 4.998 | 4.235 |
| 1.041.248 | 1.263.469 |
In the years ended on 31 December 2012 and 2011, the average number of employees was 18 and 20 employees, respectively.
The remuneration of the Corporate Offices of the Company in the years ended on 31 December 2012 and 31 December 2011 is broken down as follows (Note 23):
| Remuneration | 2012 | 2011 |
|---|---|---|
| Board of Directors | 216.858 | 216.858 |
| Audit Board | 56.000 | 56.000 |
| Advisory Board | 52.500 | 52.500 |
| 325.358 | 325.358 |
The caption "Other income and gains" in the years ended on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Other income and gains: | ||
| - Other supplementary income | 182 | 104.814 |
| - Excess of Tax Estimate | - | 33.841 |
| - Other | - | 1.172 |
| 182 | 139.827 |
The caption "Other expenses and losses" in the years ended on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Other taxation and rates | 21.950 | 71.752 |
| Membership fees | 2.000 | 2.000 |
| Other taxation and rates | 55.621 | 139.628 |
| 79.571 | 213.380 |
The caption "Expenses / reversals of depreciation and of amortization" in the years ended on 31 December 2012 and on 31 December and 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Tangible fixed assets (Note 6) | 16.611 | 17.048 |
| 16.611 | 17.048 |
The interest and other similar income recognised in the years ended on 31 December 2012 and 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Other | - | 557 |
| - | 557 |
The costs and losses of financing recognised in the years ended on 31 December 2012 and 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Interest borne: | ||
| Bank financing | 774.915 | 1.219.134 |
| Finance and operational leasing | 16.211 | 20.822 |
| 791.126 | 1.239.956 | |
| Other financing costs: | ||
| Comissions and similar charges | 29.729 | 3.775 |
| Other financial costs | 3.186 | 25.453 |
| 824.041 | 1.269.184 |
In the normal course of its activity the Company is exposed to a variety of financial risks that can change its asset value. Financial risk is understood to be the probability of obtaining results other than those expected, whether these be positive or negative, materially and unexpectedly changing the asset value of the Company.
In order to minimise the potential impact of these risks, the Company adopts a strict and consistent financial policy based on two vitally important instruments:
The financial risks which can possibly impact on the activities undertaken by the Company are those presented below:
The management of the liquidity risk is based on maintaining an adequate level of available cash and on the contracting of credit limits that help not only to ensure the normal development of the Company's activities but also to cater for any operations of an extraordinary nature.
According to the monetary resources freed up by the subsidiary companies over which the Company has control, we feel the financial risk to which the Company is exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that asset guarantees are dispensed with for operations under contract.
The Company's exposure to the interest rate risk stems from the existence, in its balance sheet, of financial assets and liabilities, taken out at variable rates. A change in the market rates has a direct impact on the value of the interest received and/or paid, causing consequent variations in cash.
A significant part of the financing obtained by the Company is classified as current, and so the interest rate is frequently revised, which means a greater exposure to fluctuations in market interest rates, whether in the Company's favour or not.
If the market interest rates had been 1% higher during the years ended on 31 December 2012 and 2011, the financial costs of those years would have increased by approximately 140,000 Euros and 224,000 Euros, respectively.
The result per basic share of the years ended on 31 December 2012 and on 31 December 2011 was determined as follows:
| 2012 | 2011 | |
|---|---|---|
| Net profit of the year | (6.285.442) | (6.656.383) |
| Average weighted number of shares in circulation | 11.931.119 | 11.931.119 |
| Result per basic share | (0,53) | (0,56) |
Due to the fact that there are no situations that cause dilution, the net result per diluted share is the same as the net result per basic share.
The Official Auditor's fees in 2012 and 2011 were 22,500 Euros in both periods and relate exclusively to the work of the legal review and audit of accounts.
Having the majority of board members elected by the General Meeting of April 29th, 2008, remained in functions until the appointment of new members, which occurred during an extraordinary General Meeting of February 4th, 2013. The new members were appointed to exercise the functions corresponding to a fouryear period 2013-2016.
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(Amounts in Euros)
| ASSETS | Notes | Dec - 12 | Dec - 11 | |
|---|---|---|---|---|
| NON-CURRENT ASSETS: | ||||
| Tangible fixed assets | ||||
| Reversible to the State | 1 4 |
63.707.981 | 63.349.772 | |
| Not reversible to the State | 1 4 |
65.875.535 | 68.593.260 | |
| Tax deductions on investments | 1 5 |
(20.706.185) | (18.913.537) | |
| Total non-current assets | 108.877.331 | 113.029.495 | ||
| Intangible assets | 1 6 |
101.028.956 | 112.668.510 | |
| Goodwill | 1 7 |
(0) | 2.935.782 | |
| Investment properties | 1 8 |
221.000 | 226.551 | |
| Other non current assets | 2 0 |
2.497.757 | 2.207.384 | |
| 212.625.043 | 231.067.722 | |||
| CURRENT ASSETS: | ||||
| Inventories | 2 1 |
4.901.032 | 4.989.262 | |
| Accounts receivable - trade | 2 2 |
273.398 | 446.016 | |
| Other accounts receivable | 2 3 |
1.762.139 | 2.406.219 | |
| Cash and cash equivalents | 2 4 |
9.780.790 | 12.797.169 | |
| Total current assets | 16.717.359 | 20.638.666 | ||
| Non-current assets held for sale | 1 9 |
1.878.000 | 4.647.510 | |
| Total assets | 231.220.403 | 256.353.898 | ||
| EQUITY and LIABILITIES | ||||
| EQUITY: | ||||
| Capital | 2 5 |
59.968.420 | 59.968.420 | |
| Treasury shares | 2 5 |
(708.306) | (708.306) | |
| Issue premiuns | 2 5 |
7.820.769 | 7.820.769 | |
| Legal Reserves | 6.614.782 | 6.614.782 | ||
| Other Reserves and Retained earnings | 3.897.386 | 12.010.198 | ||
| Consolidated net profit | (8.986.155) | (8.308.827) | ||
| Equity excluding non-controling interests | 68.606.896 | 77.397.037 | ||
| Income after taxes | - | - | ||
| Total equity | 68.606.896 | 77.397.037 | ||
| LIABILITIES: | ||||
| NON-CURRENT LIABITIES: CONSOLIDATED NET INCOME |
||||
| Financial debt | 2 6 |
10.177.262 | 12.589.265 | |
| Provisions | 2 8 |
9.550.871 | 6.560.768 | |
| Total non-current liabilities | 19.728.133 | 19.150.033 | ||
| CURRENT LIABILITIES: | ||||
| Financial debt | 2 6 |
109.696.918 | 113.813.381 | |
| Other accounts payable | 2 9 |
33.188.456 | 45.993.448 | |
| Total current liabilities | 142.885.374 | 159.806.829 | ||
| Total liabilities | 162.613.507 | 178.956.862 | ||
| Total equity and liabilities | 231.220.403 | 256.353.898 |
The notes form an integral part of these financial statements
| Notes | 2012 | 2011 | |
|---|---|---|---|
| REVENUE: | |||
| Sales and services rendered | 6 | 189.739.142 | 212.863.219 |
| Other revenue | 6 | 6.839.659 | 8.983.944 |
| Total revenue | 196.578.801 | 221.847.163 | |
| OPERATING EXPENSES: | |||
| Cost of sales | 7 | (2.153.862) | (2.581.905) |
| Supplies and external services | 8 | (29.183.548) | (32.209.231) |
| Wages and salaries | 9 | (38.555.894) | (44.665.235) |
| Depreciation and amortization | 14 / 16 e 18 | (23.334.801) | (28.519.114) |
| Impairments - accounts receivable | 60.845 | (135.645) | |
| Provisons ( (increases) / reversals ) | 2 8 |
(3.043.153) | 933.873 |
| Impairment of non-depreciable / amortizable investments | 1 0 |
(5.705.292) | (7.617.078) |
| Other taxes (includes Special Gaming Tax) | 1 1 |
(92.621.975) | (103.474.285) |
| Other operating expenses | 1 1 |
(2.206.391) | (5.037.925) |
| Total operating expenses | (196.744.070) | (223.306.545) | |
| Income before financial results and taxes | (165.269) | (1.459.382) | |
| FINANCIAL (LOSSES) AND GAINS: | |||
| Financial losses | 1 2 |
(8.734.389) | (7.684.573) |
| Financial gains | 1 2 |
37.182 | 30.687 |
| (8.697.206) | (7.653.886) | ||
| Income before taxes | (8.862.475) | (9.113.267) | |
| Income taxes | 1 3 |
(123.680) | (50.000) |
| Income after taxes | (8.986.155) | (9.163.267) | |
| Net income from discontinued operations | 5 | - | 854.440 |
| CONSOLIDATED NET INCOME | (8.986.155) | (8.308.827) | |
| Attributable to: | |||
| Equity holders of the parent Acionistas da empresa mãe |
(8.986.155) | (8.308.827) | |
| Net result per share | (0,75) | (0,70) |
The notes form an integral part of these financial statements
(Amounts in Euros)
| Share Capital |
Treasury Shares |
Premiums Issue |
Reserve Legal |
Other Reserves and Retained Earnings |
Consolidated net result |
Equity Total |
|
|---|---|---|---|---|---|---|---|
| Balance at 01 January 2011 | 59.968.420 | (708.306) | 7.820.769 | 6.411.391 | 10.893.484 | 4.302.886 | 88.688.644 |
| Application of the net profit of the year ended 31 December 2010 |
1.116.714 | ||||||
| - | - | - | 203.391 | (4.302.886) | (2.982.781) | ||
| Consolidated net profit of the period | |||||||
| ended 31 st December 2011 | - | - | - | - | - | (8.308.827) | (8.308.827) |
| Balance at 31 December 2011 | 59.968.420 | (708.306) | 7.820.769 | 6.614.782 | 12.010.198 | (8.308.827) | 77.397.037 |
| Balance at 01 January 2012 | 59.968.420 | (708.306) | 7.820.769 | 6.614.782 | 12.010.198 | (8.308.827) | 77.397.037 |
| Application of the net profit of the year | |||||||
| ended 31 December 2011 | - | - | - | - | (8.308.827) | 8.308.827 | - |
| Other adjustments | - | - | - | - | 196.014 | - | 196.014 |
| Consolidated net profit of the period ended 31 st December 2012 |
- | - | - | - | - | (8.986.155) | (8.986.155) |
| Balance at 31 December 2012 | 59.968.420 | (708.306) | 7.820.769 | 6.614.782 | 3.897.386 | (8.986.155) | 68.606.896 |
| Notes | 2012 | 2011 | |
|---|---|---|---|
| OPERATING ACTIVITIES: | |||
| Receipts from clients | 189.525.379 | 212.616.790 | |
| Payments to suppliers | (30.687.925) | (34.110.474) | |
| Payments to staff | (34.349.194) | (42.046.676) | |
| Cash flow generated by operations | 124.488.260 | 136.459.640 | |
| Payment of income tax Payment of Special Gaming tax |
(66.299) (92.944.696) |
(26.159) (102.456.443) |
|
| Other payments relating to the operating activity | (8.050.911) | (8.766.764) | |
| Cash flow from operating activities (1) | 23.426.354 | 25.210.274 | |
| INVESTING ACTIVITIES: | |||
| Receipts from: | |||
| Non-current assets for sale | - | 600.000 | |
| Interest and similar income | 37.182 | 30.129 | |
| 37.182 | 630.129 | ||
| Payments in respect of: | |||
| Tangible fixed assets | (11.242.709) | (6.205.677) | |
| (11.242.709) | (6.205.677) | ||
| Cash flow from investment activities (2) | (11.205.526) | (5.575.548) | |
| FINANCING ACTIVITIES: | |||
| Receipts from: | |||
| Bank loans obtained | 658.008.001 | 461.359.153 | |
| 658.008.001 | 461.359.153 | ||
| Payments in respect of: | |||
| Bank loans repaid | (663.583.701) | (468.949.015) | |
| Interest and similar costs | (8.645.008) | (8.055.188) | |
| Dividens | - | (2.982.780) | |
| Amortization of finance leasing contracts | (51.403) | (185.312) | |
| (672.280.112) | (480.172.295) | ||
| Cash flow from financing activities (3) | (14.272.111) | (18.813.142) | |
| Variation in cash and cash equivalents (4)=(1)+(2)+(3) | (2.051.283) | 821.584 | |
| Cash and cash equivalents at the start of the period | 2 4 |
11.708.472 | 10.886.888 |
| Cash and cash equivalents at the end of the period | 2 4 |
9.657.189 | 11.708.472 |
The notes form an integral part of these financial statements
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The Estoril Sol Group, through its subsidiary and associated companies, conducts business in gaming, the restaurant sector, entertainment and also real estate.
Estoril Sol, S.G.P.S, S.A. is the Holding Company of the Estoril Sol Group ("Group") and the shares representing its share capital are admitted for trading on a regulated market - the Euronext – as such, on 1 January 2005 it was obliged to prepare Consolidated Accounts pursuant to article 3 of Regulation (EC) no. 1606/2002, of the European Parliament and of the Council, of 19 July, following the Portuguese government's publication of Decree Law no. 35/2005, article 11.
The individual accounts of each company of the group reported at 31 December 2012 were prepared within the framework of the provisions in force in Portugal, effective for years starting on 1 January 2010, in conformity with Decree-Law no. 158/2009, of 13 July, and in accordance with the conceptual structure, Accounting Standards and Financial Reporting ("NCRF") and Interpretative Standards (IS) issued, respectively, in notifications 15652/2009, 15655/2009 and 15653/2009, of 27 August 2009, which, as a whole, form the Accounting Standards System ("SNC"), although the consolidated accounts relating to the same period were prepared in accordance with the "International Accounting Standards (IAS)" / "International Financial Reporting Standards" (IFRS).
The attached financial statements were prepared on the assumption of the continuity of operations, based on the books and accounting records of the companies included in the consolidation (Note 4), adjusted to comply with the provisions of the IAS/IFRS as adopted in the European Union, which include the International Accounting Standards ("IAS") issued by the International Standards Committee ("IASC"), the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), and respective interpretations "IFRIC" issued by the International Financial Reporting Interpretation Committee ("IFRIC") and Standing Interpretation Committee ("SIC"). Hereinafter, this set of standards and interpretations will be generally termed "IFRS".
The Group adopted the IFRS in the elaboration of its consolidated financial statements for the first time in 2005, and so, pursuant to the provisions in IFRS 1 – First Time Adoption of the International Financial Reporting Standards ("IFRS 1"), it is deemed that the transition of the Portuguese accounting principles to the international standards relates to 1 January 2004.
Consequently, in compliance with the provisions of IAS 1, the Group declares that these consolidated financial statements and respective notes comply with the provisions of the IAS/IFRS as adopted by the European Union, in force for economic years starting on 1 January 2012.
The accounting policies adopted in the year ended on 31 December 2012 are consistent with those followed in the preparation of the Group's consolidated financial statements of the year ended on 31 December 2011 and referred to in the respective Notes.
The following amendment endorsed by the European Union is of mandatory application in the year ended 31 December 2012:
| Standard | Applicable to years starting on or after |
Comments |
|---|---|---|
| IFRS 7 – Amendment (Transfer of financial assets) | after 30th June 2011 | No major impacts |
The adoption of the above amendment did not have a significant effect on the Group's consolidated financial statements for the year ended 31 December 2012.
The following standards, interpretations, amendments and revisions with mandatory application in future years were endorsed by the European Union at the time of approval of these financial statements:
| Standard | Applicable to years starting on or after |
Comments |
|---|---|---|
| IFRS 10 – Consolidated financial statements | after 31st December 2013 | No major impacts |
| IFRS 11 – Joint agreements | after 31st December 2013 | Not applicable |
| IFRS 12 – Disclosures relating to participations in other entities |
after 31st December 2013 | Not applicable |
| IFRS 13 – Measurement of fair value | after 31st December 2012 | Not applicable |
| IAS 27 – Separate financial statements (2011) | after 31st December 2013 | Not applicable |
| IAS 28 – Investments in Associates and Jointly Controlled Entities (2011) |
after 31st December 2013 | Not applicable |
| IAS 12 – Amendment (recovery of deferred tax assets) | after 31st December 2012 | Not applicable |
| IFRS 1 – Amendment (Hyper-inflation) | after 31st December 2012 | Not applicable |
| IAS 1 – – Amendment (Other Recognized Income) | after 31st December 2012 | No major impacts |
| IAS 19 – Amendment (defined benefit pension plans) (2011) |
after 1st de January 2013 | No major impacts |
| IFRS 7 – Amendment (2011) | after 31st December 2012 | No major impacts |
| IAS 32 –Amendment (2011) | after 31st December 2013 | No major impacts |
| IFRIC 20 - Recognition of certain costs in the production phase of an open pit mine (2011) |
after 31st December 2012 | Not applicable |
The following standards, interpretations, amendments and revisions applicable to future years have, to the date of approval of the accompanying financial statements, not been endorsed by the European Union:
| Standard | Applicable to years starting on or after |
|---|---|
| IFRS 9 – Financial instruments (2010) | after 31st December 2014 |
| Improvements to international financial statement standards (May 2012) |
after 31st December 2012 |
| IFRS 1 – Amendment (government subsidies) | after 31st December 2012 |
| IFRS 10, IFRS 11 and IFRS 12 – Amendments (transition rules) |
after 31st December 2012 |
| IFRS 10, IFRS 12 and IAS 27 –Amendments (Investment entities) |
after 31st December 2013 |
The Group did not apply any of these standards early in its consolidated financial statements for the year ended 31 December 2012. However, significant impact on the consolidated financial statements is not expected on the future adoption of the standards.
The consolidation methods adopted by the Group are the following:
a) Controlled companies
Shareholdings in controlled companies, or rather, in which the Group holds, directly or indirectly more than 50% of the voting rights in a General Meeting of Shareholders or has the power to control their financial and operational policies (definition of control used by the Group), were included in these consolidated financial statements by the purchase method of consolidation. The equity and net result of these companies corresponding to the participation of third parties therein, is presented separately in the consolidated statement of the financial position and in the consolidated income statement, respectively, in the "Minority interests" caption, which on the date of these financial statements had no value.
Companies included in the consolidation are indicated in Note 4.
When losses attributable to shareholders without control exceed the respective interest in the equity of the controlled company, the Group absorbs this excess and any additional losses, except when those shareholders have an obligation or have manifested an intention to do so and are able to cover these losses. If the controlled company subsequently reports profits, the Group appropriates all the profits until the part of the losses absorbed by the Group relating to those shareholders has been recovered.
The assets, liabilities and contingent liabilities of controlled companies are measured by their respective fair value on the acquisition date. Any excess of the acquisition cost over the fair value of the net assets acquired is recognised as goodwill (Note 2.4). If the difference between the acquisition cost and the fair value of the net assets acquired is negative, this is recognised as a result of the period. The interests of share-
holders without control are presented by the respective proportion of the fair value of the assets and liabilities identified.
Whenever necessary, adjustments are made to the financial statements of sub-companies to adapt their accounting policies to those used by the Group. The transactions, balances and dividends distributed between Group companies are eliminated in the consolidation process.
Goodwill represents an excess of the purchase price over the fair value of identifiable assets and liabilities for a controlled company, on the respective acquisition date, in conformity with IFRS 3 – Concentrations of business activities. Arising from the exception allowed for in IFRS 1, the Group only applied the provisions of IFRS 3 to acquisitions made after 1 January 2004. The amount of goodwill corresponding to acquisitions prior to this date were maintained at their net values presented on that date, instead of being recalculated in accordance with IFRS 3, being subject to annual impairment tests since that date.
In accordance with IFRS 3, goodwill is not subject to amortization, being presented autonomously in the statement of the financial position. Annually, or whenever there are indications of a possible loss of value, goodwill is subject to impairment tests. The impairment losses identified are stated in the income statement of the year in the "Impairment of non-depreciable / amortizable investments" caption. These impairment losses cannot be reversed.
For the purposes of the analysis of impairment, goodwill is allocated to cash generating units, in which benefits can be expected from the synergies created with the acquisition of the investments. The analysis of impairment is carried out annually, or whenever it is felt necessary, for each cash generating unit. If the recoverable value of the cash generating unit is lower than its book value, the difference is attributed first to goodwill and then to the book value of the assets of the unit, in proportion to their respective value.
An associate company is an entity in which the Group exercises significant influence, but does not have control or joint control, through participation in the decisions relating to its financial and operational policies.
Financial investments in associate companies (Note 4) are recorded using the equity pick-up method, except when they are classified as held for sale, with the participations being initially stated at acquisition cost, to which the difference between this cost and the value proportional to the participation in the equity of these companies, reported on the acquisition date or on the first application of this method, is added or subtracted.
In accordance with the equity pick-up method, shareholdings are adjusted periodically by the value corresponding to the participation in the net results of the associate companies, by other variations in their equity, as well as by the recognition of impairment losses, against financial gains or losses.
Furthermore, dividends received from these companies are stated as a reduction in the value of the financial investments.
The Group suspends the application of the equity pick-up method when the investment in the associate company is reduced to zero and a liability is only recognised if there are legal or constructive obligations before associate companies or their creditors. If the associate company subsequently produces profits, the equity pick-up method is resumed after its part in the profits is equal to the part of the unrecognised losses.
Each year an assessment is made of the investments in associate companies and, when there are indications that the asset could be impaired, the impairment losses that are demonstrated to exist are stated as a cost. When impairment losses recognised in previous periods cease to exist they are reversed up to the limit of the impairment recorded.
Whenever necessary, adjustments are made to the financial statements of associate companies to adapt their accounting policies to those used by the Group.
Tangible fixed assets are initially recorded at acquisition cost, which includes the cost of purchase, any costs directly attributable to the activities necessary to place the assets in the location and condition necessary for them to operate as intended. Arising from the exception allowed for in IFRS 1, revaluations made to tangible assets, in years prior to 01 January 2004, were maintained, with this reassessed value being designated at cost value for the purposes of the IFRS.
Other tangible fixed assets are stated at acquisition cost, less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated, after the time when the asset is ready to be used, in accordance with the straight line method with duodecimal imputation, in conformity with the estimated useful life for each group of assets.
The useful lives and method of depreciation of the various assets are revised annually. The effect of any change in these estimates is recognised prospectively in the income statement.
Tangible fixed assets allocated to the gaming concessions are revertible to the State at the end of the respective concessions ("reversible tangible fixed assets"), being depreciated in accordance with the straight line method according to their useful lives, always paying attention to the number of years remaining until the end of the respective concessions, as follows:
| Concession | End of the concession |
|---|---|
| Estoril and Lisbon Casino | 2020 |
| Póvoa Casino | 2023 |
Other tangible fixed assets ("Tangible fixed assets non-revertible to the State") are depreciated using the straight line method with duodecimal imputation during the following estimated useful lives:
| Homogenous class | Years |
|---|---|
| Buildings and other constructions | 20 - 50 |
| Basic equipment | 3 - 10 |
| Vehicles | 3 - 4 |
| Office equipment | 3 - 10 |
| Other tangible fixed assets | 3 - 10 |
Current maintenance and repair costs are recorded as a cost when incurred. Improvements are recorded as assets only in those cases concerning increased future economic benefits and which correspond to the replacement of goods, which are written down.
The gain (or loss) resulting from the sale or write-off of a tangible fixed asset is determined as the difference between the amount received in the transaction and the net book value of the asset and is recognised in results in the year in which the write-off or sale takes place.
Leasing contracts are classified as finance leasing if, through these, all the risks and benefits inherent to ownership of the corresponding assets are substantially transferred to the lessee. Other leasing contracts are classified as operating leases. Leasing is classified according to the substance and not the form of the contract.
Leasing in which the Company acts as lessee
Assets acquired under finance lease contracts, as well as the corresponding responsibilities, are recorded at the start of the leasing for the lower value of either the fair value of the assets or the present value of the minimum leasing payments. The instalments include the financial cost and amortization of the capital, with financial costs being imputed in accordance with a constant periodic interest rate on the outstanding balance of the liability.
In the case of operating leases, the lease instalments due are recognised as costs on a straight-line basis over the period of the lease contract. The incentives received are stated as a liability, with the aggregate amount thereof being recognised as a reduction in the costs with the lease, also on a straight-line basis.
Contingent payments are recognised as expenses of the year in which they are incurred.
Intangible assets essentially correspond to the premiums paid for the operating rights in the gaming areas of Estoril and Póvoa during the period that was negotiated with the Portuguese Government. The Estoril gaming area includes Estoril Casino and Lisbon Casino, with operations at the latter having begun on 19 April 2006. These premiums are stated at acquisition cost less amortization and any accumulated impairment losses. Intangible assets are acknowledged only when it is likely that the Group will derive future economic benefits from them, and that they are both controllable and reliably measured.
Amortization is calculated using the straight line method, from the moment that the assets are available for use, according to the estimated useful life, with the end of the respective concessions being considered as follows:
| Concession | End date of the concession |
|---|---|
| Estoril and Lisbon Casinos | 2020 |
| Póvoa Casino | 2023 |
Whenever there is any indicator that the Company's tangible fixed assets, intangible assets and investment properties could be impaired, an estimate is made of its recoverable value in order to determine the extent of the impairment loss (according to the case). When the recoverable value of an individual asset cannot be determine, the recoverable value of the cash generating unit to which this asset belongs is estimated.
The recoverable value of the asset or of the cash generating unit is the higher between (i) the fair value less sale costs and (ii) the usage value. In the determination of the usage value, the estimated future cash flows are discounted using a discount rate that reflects the expectations of the market concerning the temporal value of the money and regarding the specific risks of the asset or of the cash generating unit in relation to which the estimates of future cash flows have not been adjusted.
Whenever the net book value of the asset or of the cash generating unit is higher than its recoverable value, an impairment loss is recognised. An impairment loss is immediately entered in the income statement, except if this loss compensates a surplus revaluation recorded in equity. In this latter case, this loss will be treated as a decrease in that revaluation.
The reversal of impairment losses recognised in previous years is recorded when there is evidence that the impairment losses recognised previously no longer exist are have reduced. The reversal of impairment losses is recognised in the income statement in the respective caption of "Reversals of impairment losses". Impairment losses are reversed up to the limit of the amount that would be recognised (net of amortization) if the loss had not been recorded.
Under the Gaming Concession Contracts, the Group has the right to annually deduct the following expenses from the gaming tax:
Tax deductions representing the loses referred to under 1) and to the expenses mentioned under 2) are fully recorded in the Income Statement for the period to which they relate (Note 2.6);
Investment properties essentially consist of buildings held to obtain rents or for appreciation of the capital (or both), and are not intended for use in the production or supply of goods or services or for administrative purposes or for sale in the ordinary course of the business.
Investment properties are initially measured at cost (which includes transaction costs). Subsequently, investment properties are measured in accordance with the cost model.
Costs incurred related with investment properties in use, namely, maintenance, repairs, insurance and taxation on properties are recognised as a cost in the period that they relate to. Improvements in investment properties in relation to which there are expectations that they will generate additional future economic benefits are capitalised in the "Investment properties" caption.
Investment properties are depreciated in accordance with the straight line method with duodecimal imputation during the following estimated useful lives:
| Homogenous class | Years |
|---|---|
| Buildings and other constructions (apartment) | 50 |
| Basic equipment (contents) | 8 |
Inventories are recorded at cost or net realizable value, whichever is lower. The net realizable value represents the estimated sale price less all the costs estimated and necessary to conclude the inventories and to make the sale.
The costing method of inventories adopted by the Company is the average cost.
Expenses and income are recognised in the year they relate to, in accordance with the principle of accrual accounting, irrespective of when the transactions are invoiced. Expenses and income for which the real value is not known are estimated.
Expenses and income imputable to the current year where the expense and income on which will only take place in future periods, together with the expenses and income that have already occurred, but which relate to future periods and which will be imputed to the results of each of these periods, for the value corresponding to them, are stated in the deferrals captions.
Financial interest and income are recognised in accordance with the principle of accrual accounting and in accordance with the effective interest rate applicable.
Income tax corresponds to the sum of current taxation and deferred taxation. Current tax and deferred tax are recorded in the Income Statement except when the deferred tax is related with items entered directly in equity. In these cases the deferred tax is also stated in equity.
Current tax on income is calculated based on the taxable profit of the year of the various entities included in the consolidation perimeter. The taxable profit differs from the accounting result as it excludes diverse expenses and income that will only be deductible or taxable in subsequent years, as well as expenses and income that will never be deductible or taxable in accordance with the tax rules in force.
Deferred tax relates to the temporary differences between the amounts of the assets and liabilities for accounts reporting purposes and the respective amounts for the purposes of taxation, as well as the results of tax benefits obtained and of temporary differences between the fiscal and accounting results.
Deferred tax liabilities are generally recognised for all temporary taxable differences.
Deferred tax assets are recognised for temporary deductible differences, although this recognition only occurs when there are reasonable expectations of future tax profits that are sufficient for these deferred tax assets to be used. These deferred tax assets are revised on each reporting date, these being adjusted according to expectations regarding their future use.
Deferred tax assets and liabilities are measured using the tax rates that are expected to be in force on the date of the reversal of the corresponding temporary differences, based on the tax rates (and fiscal legislation) that are formally issued on the reporting date.
Compensation between assets and deferred tax liabilities is only permitted when: (i) the Company has a legal right to compensate between these assets and liabilities for the purposes of liquidation; (ii) these assets and liabilities are related with income taxation raised by the same tax authority (i) and (iii) the Company intends to perform this compensation for the purposes of liquidation.
The Company is covered by the Special System for Taxation of Groups of Companies ("SSTGC"), as established in article 69 of the Portuguese Corporate Income Tax Code (CIRC) and covers all the companies in which it has a direct or indirect holding of at least 90% of the respective capital and which are, at the same time, resident in Portugal and taxed under Corporation Tax (IRC). Under this regime the taxable profit of the Group relating to each tax period is calculated by the controlling company (Estoril Sol, SGPS, SA), through the algebraic sum of taxable profits and tax losses obtained in the individual periodic statements for each of the companies belonging to the group. The amount obtained is adjusted for part of the profits distributed among group companies that is included in the individual taxable bases.
The following companies are part of this system:
For other companies also included in the consolidation perimeter (Note 4), and whose main activity is the operation of games of fortune, namely: Estoril Sol (III) – Turismo, Animação e Jogo, S.A and Varzim Sol – Turismo, Jogo e Animação, S.A, there is no Corporate Tax (IRC). The activity of these two companies, in accordance with clause 7 of the Notice of the Ministry of the Economy, represented by the Inspectorate-General for Gaming, of 14 December 2001, published in the III Series of the Diário da República no. 27 of 01 February 2002, the concessionaire is obliged to pay a special tax for operating gaming activities, with no other general or local tax being payable relating to the exercise of this activity or any other which it is required to under this contract, with the respective collection and payment being performed pursuant to articles 84 and following of Decree Law no. 422/89.
The debts of customers and of other third parties are entered at their nominal value less any impairment losses. Impairment losses correspond to the difference between the amount initially stated and the recoverable value, and are recognised in the statement of comprehensive income of the period in which they are estimated.
The amounts included in the caption of cash and cash equivalents correspond to the amounts in cash, bank deposits and that which can be immediately moved with an insignificant risk of a change in value.
For the purposes of the cash flow statement, the caption of cash and cash equivalents also includes bank overdrafts included in the caption "Financing obtained".
Accounts payable are entered at their nominal value, discounted by any interest calculated and recognised in accordance with the effective interest rate method.
Loans are recognised initially for the value received, net of issuing expenses. In subsequent periods, loans are carried at amortised cost; any difference between the amounts received (net of issuing costs) and the value payable is recognised in the statement of comprehensive income during the period of the loans using the effective interest rate method.
Loans which fall due in less than twelve months are classified as current liabilities, unless the Group has the unconditional right to defer the settlement of the liabilities for more than twelve months after the date of the statement of the financial position.
Provisions are only recognised when the Company has a present obligation (legal or implied) resulting from a past event, for the resolution of which it will likely become necessary to spend internal resources, the amount of which may be reasonably estimated.
The amount of provisions recognised consists of the present value of the best estimate on the reporting date of the resources necessary to settle the obligation. This estimate is determined taking the risks and uncertainties associated to the obligation into consideration.
Provisions are revised on the reporting date and are adjusted in order to reflect the best estimate on that date.
With regard to the defined benefit plans, the corresponding cost is determined using the projected unit credit method, with the respective liabilities being determined based on actuarial studies carried out on each reporting date by independent actuaries.
The cost of the past services is recognised in results on a linear basis during the period until the corresponding benefits are acquired. They are recognised immediately in as the benefits are fully acquired.
The liability associated to the guaranteed benefits recognised in the balance sheet represents the present value of the corresponding obligation, adjusted for actuarial gains and losses and for the cost of unrecognised past services.
Contingent liabilities are not recognised in the financial statements, being disclosed whenever the possibility of there being an outflow of resources including economic benefits is not remote.
Contingent assets are not recognised in the financial statements, being disclosed when the existence of a future economic influx of resources is probable.
Income is measured by the fair value of the counter-payment received or receivable.
Income from the provision of services is recognised with reference to the stage of completion of the transaction/service on the reporting date, provided that all the following conditions are met:
Income arising from the sale of assets is recognised when all the following conditions are met:
Financial charges related with loans obtained are generally recognised as expenses as they are incurred.
Assets and liabilities held for sale (or discontinued operations and related groups of assets and liabilities) are measured at the lesser of the book value or respective sale value, less sale costs and are classified as being held for sale if the respective value is realizable through a sale transaction instead of through their continued use.
This situation is only considered to happen when: (i) the sale is highly probable and the asset is available for immediate sale in its current conditions; (ii) management is committed to a sale plan; and (iii) the sale is expected to take place within a period of 12 months.
Assets realizable and liabilities required for payment within one year from the date of the statement of the financial position are classified, respectively, in assets and liabilities as current.
Events which occur after the close date of the year and which provide additional information regarding conditions that existed on the close date of the year are reflected in the consolidated financial statements.
Events which occur after the close date of the year and which provide additional information regarding conditions that occur after the close date of the year are disclosed in the Notes to the consolidated financial statements, if material.
In the preparation of the attached financial statements judgments of value and estimates were made and diverse assumptions used that affect the book value of the assets and liabilities, as well as the income and expenses of the year.
The underlying estimates and assumptions were determined based on the best knowledge of the events and transactions in hand existing on the date of approval of the financial statements, as well as on the experience of past and/or current events. Nevertheless, situations can occur in subsequent periods that, not being foreseeable on the date of approval of the financial statements, were not considered in these estimates. Changes to the estimates that occur after the date of the financial statements will be corrected prospectively. For this reason and given the degree of associated uncertainty, the real results of the transactions in question may differ from the corresponding estimates.
During the year ended on 31 December 2012, there were no changes in accounting policies in relation to those used in the preparation and presentation of the financial statements of the year ended on 31 December 2011, nor were any material errors recognised relating to previous periods. However, due to the changes that have occurred in the macroeconomic environment and in the increase in discount rates, there have been significant changes in estimates and in the assumptions used in the impairment tests of certain assets, namely those relating to goodwill (Note 17).
During the year ended December 31st, 2012 the Group changed the estimated useful lives of the equipment assigned to the activity of game (machines) from five years for the period remaining until the end of the concession, since it is not expected that relevant investments are made during this period. This change resulted in a positive impact on the consolidated net income of the year of approximately 1.072.217 Euros.
Except as noted above, there were no other changes in accounting policies or estimates used in relation to those used in the preparation and presentation of the financial statements for the year ended December 31st, 2011.
The main judgments of value and estimates made in the preparation of the attached financial statements were the following:
The companies included in the consolidation, their registered offices, the method of consolidation adopted and the proportion of the capital effectively held on 31 December 2012 and 2011 are the following:
| Method of | Effective percentage of the capital held |
|||
|---|---|---|---|---|
| Name | Head office | Consolidation | Dec-12 | Dec-11 |
| Estoril-Sol, S.G.P.S., S.A. | Estoril | Integral | Holding. Co. Holding. Co. | |
| Estoril-Sol (III) - Turismo, Animação e Jogo, S.A. | Estoril | Integral | 100 | 100 |
| Varzim Sol - Turismo, Jogo e Animação, S.A. | Póvoa de Varzim | Integral | 100 | 100 |
| Estoril-Sol V - Investimentos Imobiliários, S.A. | Estoril | Integral | 100 | 100 |
| DTH - Desenvolvimento Turistico e Hoteleiro, S.A. | Estoril | Integral | 100 | 100 |
| Estoril-Sol Imobiliária, S.A. | Estoril | Integral | 100 | 100 |
| Chão do Parque, Investimentos imobiliários, S.A. | Estoril | Integral | 100 | 100 |
| Estoril-Sol - Investimentos Hoteleiros, S.A. | Estoril | Integral | 100 | 100 |
| Estoril Sol e Mar - Investimentos Imobiliários, S.A. | Estoril | Integral | 100 | 100 |
Estoril-Sol, SGPS, S.A. indirectly holds 33.33% of the company Parques do Tamariz, S.A., through Estoril Sol Imobiliária, S.A.
These holdings are presented at the value resulting from the equity pick-up method. Using this method, the financial statements include the part attributable to the Estoril Sol Group of the results recognised from the date on which the significant influence starts up to the date on which it effectively ends. Associate companies are entities in which the Estoril Sol Group has between 20% and 50% of the voting rights, or in which the Group has significant influence.
The segments reportable by the Group are based on the identification of segments in line with the financial information that is reported internally to the Board of Directors and which supports the Board in its evaluation of the performance of the businesses and in taking decisions with regard to the allocation of the resources to be used. The segments identified by the Group for reporting by segments, are therefore consistent with the way in which the Board of Directors analyses its business, corresponding to Estoril Casino, Lisbon Casino, Póvoa Casino and Others (essentially including the effect of the holding companies and of the other operating activities of the Group).
On 31 December 2012 and 2011, the information by business segment, is as follows:
| 2012 | |||||||
|---|---|---|---|---|---|---|---|
| Estoril | Lisboa | Póvoa | Discontinued | ||||
| Casino | Casino | Casino | Other | Sub-Total | Operatoions | Total | |
| Net assets | 68.031.549 | 96.609.860 | 62.033.937 | 4.545.057 | 231.220.403 | - | 231.220.403 |
| Net liabilities | 100.586.751 | 13.171.971 | 33.226.553 | 15.628.232 | 162.613.507 | - | 162.613.507 |
| Result of the segment | (2.775.020) | 7.820.012 | (7.641.998) | (6.389.148) | (8.986.155) | - | (8.986.155) |
| Investment assets: | |||||||
| - tangible fixed | 626.573 | 2.362.873 | 6.627.509 | - | 9.616.955 | - | 9.616.955 |
| - intangible | - | - | - | - | - | - | - |
| Average no. of staff | 341 | 292 | 250 | 18 | 901 | - | 901 |
| 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Estoril | Lisboa | Póvoa | Discontinued | ||||
| Casino | Casino | Casino | Other | Sub-Total | Operatoions | Total | |
| Net assets | 84.523.032 | 95.297.747 | 63.287.924 | 5.414.384 | 248.523.087 | 7.830.811 | 256.353.898 |
| Net liabilities | 100.967.811 | 17.588.048 | 36.338.544 | 3.236.346 | 158.130.749 | 1.676.080 | 159.806.829 |
| Result of the segment Investment assets: |
(7.627.810) | 13.482.474 | (4.861.532) | (10.156.399) | (9.163.267) | 854.440 | (8.308.827) |
| - tangible fixed | 408.445 | 189.566 | 9.086.862 | - | 9.684.873 | - | 9.684.873 |
| - intangible | - | - | - | - | - | - | - |
| Average no. of staff | 375 | 334 | 265 | 20 | 994 | - | 994 |
The consolidated operating income, in the years ended on 31 December 2012 and 2011, is split in the following manner:
| 2012 | |||||
|---|---|---|---|---|---|
| Estoril | Lisboa | Póvoa | |||
| Nature | Casino | Casino | Casino | Other | Total |
| Sales and services rendered | |||||
| - Gaming | 63.338.388 | 80.211.451 | 40.743.645 | - | 184.293.483 |
| - Restaurants and entertainment | 2.365.517 | 348.104 | 505.212 | - | 3.218.834 |
| - Other sales and services rendered | 1.609.375 | 616.134 | 1.316 | - | 2.226.825 |
| 67.313.280 | 81.175.689 | 41.250.173 | - | 189.739.142 | |
| Other income and gains: | |||||
| - Tax deductions on Investments | 1.376.764 | 865.006 | 487.878 | - | 2.729.648 |
| - Tax deductions - Entertainment | 1.167.455 | 802.115 | 407.569 | - | 2.377.139 |
| - Supplementary income | 250.421 | 27.617 | 65.791 | 182 | 344.011 |
| - Other | 178.847 | 1.455 | 8.560 | 1.200.000 | 1.388.862 |
| 2.973.487 | 1.696.192 | 969.798 | 1.200.182 | 6.839.659 | |
| 70.286.767 | 82.871.881 | 42.219.971 | 1.200.182 | 196.578.801 | |
| 2011 | |||||
| Estoril | Lisboa | Póvoa | Other | ||
| Nature | Casino | Casino | Casino | Total | |
| Sales and services rendered | |||||
| - Gaming | 71.711.456 | 88.132.457 | 46.966.717 | - | 206.810.630 |
| - Restaurants and entertainment | 3.437.654 | 393.971 | 476.454 | - | 4.308.079 |
| - Other sales and services rendered | 1.019.033 | 721.690 | 3.787 | - | 1.744.510 |
| 76.168.143 | 89.248.118 | 47.446.958 | - | 212.863.219 | |
| Other income and gains: | |||||
| - Tax deductions on Investments | 2.497.073 | 1.688.170 | 1.079.134 | - | 5.264.377 |
| - Tax deductions - Entertainment | 1.246.124 | 881.324 | 469.883 | - | 2.597.331 |
| - Supplementary income | 350.968 | 36.469 | 71.455 | 104.814 | 563.706 |
| - Other | 72.811 | 346.165 | 104.540 | 35.014 | 558.530 |
| 4.166.976 | 2.952.128 | 1.725.012 | 139.828 | 8.983.944 | |
Income from the segments comes from transactions with external customers. There are no transactions between segments. The accounting policies of each segment are the same as those of the Group.
In the years ended on 31 December 2012 and 2011, this caption is broken down as follows:
| 2012 | ||||
|---|---|---|---|---|
| Finished and | Raw materials | |||
| intermediate | and | |||
| Goods | products | consumables | Total | |
| Opening balance | 1.461.149 | 3.176.352 | 351.761 | 4.989.262 |
| Purchases | 73.140 | - | 2.230.070 | 2.303.210 |
| Adjustments | - | - | (237.578) | (237.578) |
| Closing balance | 1.386.197 | 3.176.352 | 338.483 | 4.901.032 |
| Cost of goods sold and materials consumed |
148.092 | - | 2.005.770 | 2.153.862 |
| 2011 | ||||
|---|---|---|---|---|
| Finished and | Raw materials | |||
| intermediate | and | |||
| Goods | products | consumables | Total | |
| Opening balance | 421 | 3.176.352 | 389.094 | 3.565.867 |
| Purchases | 1.628.189 | - | 2.539.460 | 4.167.649 |
| Adjustments | (18.551) | - | (143.798) | (162.349) |
| Closing balance | 1.461.149 | 3.176.352 | 351.761 | 4.989.262 |
| Cost of goods sold and materials consumed |
148.910 | - | 2.432.995 | 2.581.905 |
In the years ended on 31 December 2012 and 2011, external supplies and services were as follows:
| 2012 | 2011 | |
|---|---|---|
| Subcontracts | 6.102.181 | 7.324.290 |
| Gifts to customers | 3.755.323 | 3.309.063 |
| Royalties | 2.312.626 | 2.474.933 |
| Energy and other fluids | 2.985.970 | 2.733.526 |
| Conservation and repairs | 1.938.620 | 2.427.753 |
| Advertising | 2.334.803 | 2.448.961 |
| Surveillance and security | 1.705.316 | 1.767.589 |
| Rents | 1.434.766 | 1.670.134 |
| Specialized work | 1.884.440 | 1.850.155 |
| Fees | 801.197 | 713.893 |
| Communication | 358.895 | 641.526 |
| Insurance | 2.743.854 | 3.714.148 |
| Travel and hotels | 229.101 | 319.157 |
| Other | 596.455 | 814.103 |
| 29.183.548 | 32.209.231 |
In the years ended on 31 December 2012 and 2011, staff costs were as follows:
| 2012 | 2011 | |
|---|---|---|
| Remuneration of corporate offices | 4.137.583 | 4.079.872 |
| Remuneration of staff | 22.807.747 | 25.045.733 |
| Indemnities | 4.629.292 | 7.418.512 |
| Charges on remuneration | 5.163.884 | 5.984.205 |
| Insurance | 127.957 | 208.438 |
| Social charges | 1.006.449 | 1.056.195 |
| Premiums for pensions | 104.734 | 150.620 |
| Other | 578.247 | 721.660 |
| 38.555.894 | 44.665.235 |
During the years ended on 31 December 2012 and 2011, the average number of staff in the service of the Group was 901 and 994 employees, respectively.
The fees of the Official Auditor exclusively referring to the legal revision and audit services of the accounts amounted to 75,500 Euros, during 2012 and 2011, respectively.
In the years ended on 31ST December 2012 and 2011, the Group booked the following impairments over its non-depreciable/amortizable investments:
| 2012 | 2011 | |
|---|---|---|
| Goodwill (Note 17) | 2.935.782 | 7.617.078 |
| Non-current assets held for sale (Note 19) | 2.769.510 | - |
| 5.705.292 | 7.617.078 |
In the years ended on 31 December 2012 and 2011, the captions of other taxation and other operating expenses were as follows:
| 2012 | 2011 | |
|---|---|---|
| Special Gaming Tax | 92.153.369 | 103.242.897 |
| Other taxation and rates | 468.606 | 231.388 |
| Sub-total I (other taxation) | 92.621.975 | 103.474.285 |
| Diverse expenses | 145.636 | 2.740.721 |
| Offer of own goods and services | 1.431.140 | 1.386.021 |
| write-off of tangible fixed assets | 3.643 | 158.568 |
| Quotas | 115.117 | 118.333 |
| Losses in inventories | 52.945 | 2.423 |
| Donations | 76.730 | 65.882 |
| Other | 381.181 | 565.977 |
| Sub-total II (Other operating costs) | 2.206.391 | 5.037.925 |
| 94.828.366 | 108.512.210 |
The Special Gaming Tax is applied to the net income from the gaming activity carried out by Estoril Sol (III) – Turismo, Animação e Jogo, S.A which currently runs the Estoril Casino and Lisbon Casino, and by Varzim Sol – Turismo, Jogo e Animação, S.A. which runs the Póvoa de Varzim Casino.
In accordance with clause 7 of the Notice of the Ministry of the Economy, represented by the Inspectorate-General for Gaming, of 14 December 2001, published in the III Series of the Diário da República no. 27 of 01 February 2002, the concessionaire is obliged to pay a special tax for operating gaming activities, with no other general or local tax being payable relating to the exercise of this activity or any other which it is required to under this contract, with the respective collection and payment being performed pursuant to articles 84 and following of Decree Law no. 422/89
In this regard, the activities undertaken by these companies are not subject to Corporate Tax (IRC).
Financial costs and income for the years ended on 31 December 2012 and 2011 is broken down as follows:
| Financial Costs | 2012 | 2011 |
|---|---|---|
| Interest borne: | ||
| Financing from banks | (6.663.439) | (6.134.495) |
| Finance and operating leasing | (136.605) | (143.600) |
| (6.800.045) | (6.278.095) | |
| Other financing costs: | ||
| Comissions and similar charges | (1.311.551) | (733.457) |
| Other financial costs | (622.793) | (673.021) |
| (8.734.389) | (7.684.573) | |
| Financial Income | 2012 | 2011 |
| Interests from bank deposits | - | - |
| Exchange gains | 13.872 | 13.390 |
| Other | 23.310 | 17.297 |
| 37.182 | 30.687 | |
| Net financial costs | (8.697.207) | (7.653.886) |
The Company is subject to corporation income tax at the rate of 25% plus a Municipal Surcharge of 1.5% of taxable income, resulting in a maximum aggregate tax rate of 26.5%. In addition, taxable income for the year ended 31 December 2012 in excess of 1.500.000 Euros is subject to a State Surcharge under the terms of article 87-A of the Corporation Income Tax Code at the following rates:
Taxable income for 2013 is subject to State Surcharge at the following rates:
In addition, net finance costs for 2013 and following years are deductible for determining annual taxable income of each company progressively up to 2017 of the greater of the following limits:
In accordance with legislation in force, the tax declarations are subject to revision and correction by the tax authorities during a period of four years (five years for the Social Security), except when there have been tax losses, tax benefits have been granted, or inspections, complaints or objections are under way, in which cases, depending on the circumstances, deadlines for filing such statements are extended or suspended. In this way, the Company's tax declarations of the years from 2009 to 2012 could still be subject to revision.
The Company is covered by the Special System for Taxation of Groups of Companies ("SSTGC"), which is defined in article 69 of the Corporate Income Tax Code and covers all the companies in which it has a direct or indirect holding of at least 90% of the respective capital and which are, at the same time, resident in Portugal and taxed under Corporation Tax (IRC). Under this regime the taxable profit of the group relating to each tax period is calculated by the controlling company (Estoril Sol, SGPS, SA), through the algebraic sum of taxable profits and tax losses obtained in the individual periodic statements for each of the companies belonging to the group. The amount obtained is adjusted for part of the profits distributed among group companies that is included in the individual taxable bases.
The following companies are part of this system:
The cost of taxation on income on 31 December 2012 and 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Pre-Tax Profit | (8.862.475) | (8.258.827) |
| Cancellation of the Result of Companies exempt from IRC and subject to the Special Gaming Tax |
2.542.342 | (993.131) |
| Pre-Tax Profit of the Companies (SSTGC) | (6.320.133) | (9.251.958) |
| Non-deductible costs | ||
| Impairment of Goodwill | 2.935.782 | 7.617.078 |
| Impairment of Non-current assets held for sale | 2.769.510 | - |
| Other non-deductible costs | 16.025 | 309.919 |
| 5.721.317 | 7.926.997 | |
| Non-taxable income | ||
| Other non-taxable income | (510.070) | (235.070) |
| (510.070) | (235.070) | |
| Result for tax purposes | (1.108.886) | (1.560.031) |
| Costs with taxation on income calculated at the rate of 26.5% |
- | - |
| Autonomous taxation | 123.680 | 50.000 |
| Income tax - current | 123.680 | 50.000 |
| Income tax - deferred | - | - |
| Income tax of the year | 123.680 | 50.000 |
No deferred tax assets were reported in relation to the tax losses reportable, given that no tax profits are expected from the activities that generate these results and which would allow the such assets to be recovered.
In accordance with current legislation tax losses can be carried forward during a period five years (six years for losses incurred up to 2009 and four years for losses incurred in 2010 and 2011) after their occurrence for deduction from taxable income generated in that period, limited to 75% of the Group's taxable income in each year, applicable also to tax losses incurred in prior years.
On 31 December 2012 the tax losses reportable amounted to 15.942.045 Euros and were generated as follows:
| Amount | |
|---|---|
| Generated in : | |
| - year 2007 | 3.433.622 |
| - year 2008 | 3.725.766 |
| - year 2009 | 1.909.671 |
| - year 2010 | 4.197.557 |
| - year 2011 | 1.566.543 |
| - year 2012 | 1.108.886 |
| 15.942.045 |
During the years ended on 31 December 2012 and 2011, the movement in tangible assets, as well as in the respective depreciation and accumulated impairment losses, was as follows:
| respective depreciation and accumulated impairment losses, was as follows: | 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
i n progress |
Fixed assets Advance payments on tangible fixed assets |
Total | |
| Gross amount: | |||||||||
| Opening balance | 16.513.836 | 185.794.946 | 108.615.104 | 272.669 | 3.692.828 | 79.679 | 7.844.237 | 10.174 | 322.823.473 |
| Acquisitions | - | - | 3.418.558 | 4.403 | 228.088 | 3.032 | 5.962.873 | - | 9.616.955 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments / Transfers | - | (96) | 152.061 | - | 1.050 | (418) | (165.626) | (10.174) | (23.203) |
| Write-off | - | (521.565) | (284.632) | (60.761) | (22.500) | - | - | - | (889.458) |
| Closing balance | 16.513.836 | 185.273.285 | 111.901.091 | 216.311 | 3.899.466 | 82.293 | 13.641.484 | - | 331.527.767 |
| Depreciation and accumulated impairment losses: |
|||||||||
| Opening balance | - | 100.805.903 | 86.966.648 | 152.780 | 2.874.720 | 80.391 | - | - | 190.880.442 |
| Depreciation of the year | - | 7.089.216 | 4.634.412 | 47.554 | 201.034 | 662 | - | - | 11.972.878 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments / Transfers | - | 65.766 | (198.662) | (24.569) | 126.900 | (2.430) | - | - | (32.995) |
| Write-off | - | (521.565) | (281.459) | (50.715) | (22.336) | - | - | - | (876.074) |
| Closing balance | - | 107.439.320 | 91.120.940 | 125.050 | 3.180.318 | 78.623 | - | - | 201.944.250 |
| Net amount | 16.513.836 | 77.833.965 | 20.780.152 | 91.262 | 719.148 | 3.670 | 13.641.484 | - | 129.583.516 |
| 2011 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
Fixed assets i n progress |
Advance payments on tangible fixed assets |
Total | |
| Gross amount: | |||||||||
| Opening balance | 16.513.836 | 185.785.220 | 109.061.631 | 618.658 | 3.661.029 | 79.679 | 1.494.962 | 1.237.499 | 318.452.514 |
| Acquisitions | - | 18.343 | 2.238.327 | 69.758 | 51.086 | - | 7.307.359 | - | 9.684.873 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | 865.785 | - | - | - | (958.084) | (1.227.325) | (1.319.624) |
| Write-off | - | (8.616) | (3.550.639) | (415.747) | (19.287) | - | - | - | (3.994.289) |
| Closing balance | 16.513.836 | 185.794.947 | 108.615.104 | 272.669 | 3.692.828 | 79.679 | 7.844.237 | 10.174 | 322.823.474 |
| Depreciation and accumulated | |||||||||
| impairment losses: | |||||||||
| Opening balance | - | 93.172.382 | 81.179.558 | 342.178 | 2.662.087 | 78.556 | - | - | 177.434.761 |
| Depreciation of the year | - | 7.641.070 | 9.217.810 | 53.731 | 242.124 | 1.835 | - | - | 17.156.570 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | - | - | (10.559) | - | - | - | (10.559) |
| Write-off | - | (7.549) | (3.430.720) | (243.129) | (18.932) | - | - | - | (3.700.330) |
| Closing balance | - | 100.805.903 | 86.966.648 | 152.780 | 2.874.720 | 80.391 | - | - | 190.880.442 |
| Net amount | 16.513.836 | 84.989.044 | 21.648.456 | 119.889 | 818.108 | (712) | 7.844.237 | 10.174 | 131.943.032 |
From total purchases for the year 2012 in the amount of 9.616.955 Euros, 5.962.873 Euros are still stated as "fixed assets in progress". Of these approximately 4.600.000 Euros relate to the work of re-designing and remodelling the Casino da Póvoa (Note 20) and 1.250.000 Euros refer to the acquisition of a new
video surveillance system (CCTV) for the gaming areas of Casino de Lisboa which will begin operating in 2013.
The acquisition of "Basic equipment" totalling 3.418.558 Euros, refer mostly to acquisition of new gaming machines, as detailed below:
From the disposals that occurred during the year 2012 in the total amount of 889.458 Euros, approximately 500.000 euros are related to equipment and infrastructure replaced during the work of reconceptualization Casino da Póvoa, and the remain value related to gaming equipment replaced by the new acquisitions during 2012 as detailed above.
The caption "Land and natural resources" includes the land on which the Lisbon Casino is based. The caption "Buildings and other constructions" comprises mostly the amounts of the buildings where Estoril Casino, Lisbon Casino and Póvoa de Varzim Casino operate. The caption "Basic equipment" essentially reflects gaming equipment.
Under the concession contract for gambling or games of chance in the permanent gaming areas of Estoril part of the Company's tangible fixed assets are revertible to the Portuguese State.
In the case of Lisbon Casino only the tangible fixed assets referring to gaming equipment and which are therefore entered in the caption "Basic equipment" are revertible to the State. With regard to Estoril Casino and Póvoa de Varzim Casino, both the buildings and the gaming equipment are revertible to the State.
During the year ended December 31st, 2012 the Group changed the estimated useful lives of the equipment assigned to the activity of game (machines) from five years for the period remaining until the end of the concession, since it is not expected that relevant investments are made during this period. (Note 3)
The division between tangible fixed assets that are non-revertible and revertible to the State in the years ended on 31 December 2012 and 31 December 2011 is presented below:
| Year 2012 - Tangible fixed assets revertible to the State | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
i n progress |
Fixed assets Advance payments on tangible fixed assets |
Total | ||
| Gross amount: | ||||||||||
| Opening balance | - | 124.216.558 | 101.283.987 | - | 2.650.445 | 57.642 | 7.844.237 | 10.174 | 236.063.043 | |
| Acquisitions | - | - | 3.062.453 | - | 113.177 | 3.032 | 5.946.534 | - | 9.125.196 | |
| Disposals | - | - | - | - | - | - | - | - | - | |
| Adjustments / Transfers | - | 4 | (13.586) | - | 1.050 | - | (165.626) | (10.174) | (188.332) | |
| Write-off | - | (521.565) | (262.309) | - | (21.823) | - | - | - | (805.697) | |
| Closing balance | - | 123.694.997 | 104.070.545 | - | 2.742.849 | 60.674 | 13.625.145 | - | 244.194.209 | |
| Depreciation and accumulated impairment losses: |
||||||||||
| Opening balance | - | 87.470.270 | 82.806.386 | - | 2.379.247 | 57.369 | - | - | 172.713.272 | |
| Depreciation of the year | - | 4.636.945 | 3.973.200 | - | 93.082 | 604 | - | - | 8.703.831 | |
| Disposals | - | - | - | - | - | - | - | - | - | |
| Adjustments / Transfers | - | 2.687 | (142.657) | - | 11.559 | 103 | - | - | (128.308) | |
| Write-off | - | (521.565) | (259.343) | - | (21.659) | - | - | - | (802.567) | |
| Closing balance | - | 91.588.337 | 86.377.586 | - | 2.462.229 | 58.076 | - | - | 180.486.228 | |
| Net amount | - | 32.106.660 | 17.692.959 | - | 280.620 | 2.598 | 13.625.145 | - | 63.707.981 |
| Year 2011 - Tangible fixed asstes revertible to the State | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
Fixed assets i n progress |
Advance payments on tangible fixed assets |
Total | |
| Gross amount: | |||||||||
| Opening balance | - | 124.221.825 | 101.699.420 | - | 2.917.073 | 57.642 | 1.494.962 | 10.174 | 230.401.096 |
| Acquisitions | - | 3.350 | 2.111.882 | - | 15.562 | - | 7.307.359 | - | 9.438.153 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | 949.377 | - | (263.397) | - | (958.084) | - | (272.104) |
| Write-off | - | (8.616) | (3.476.692) | - | (18.793) | - | - | - | (3.504.101) |
| Closing balance | - | 124.216.559 | 101.283.987 | - | 2.650.445 | 57.642 | 7.844.237 | 10.174 | 236.063.044 |
| Depreciation and accumulated impairment losses: |
|||||||||
| Opening balance | - | 82.402.143 | 77.611.349 | - | 2.325.108 | 56.886 | - | - | 162.395.486 |
| Depreciation of the year | - | 5.075.676 | 8.572.823 | - | 103.924 | 483 | - | - | 13.752.906 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | 16.802 | - | (31.347) | - | - | - | (14.545) |
| Write-off | - | (7.549) | (3.394.588) | - | (18.438) | - | - | (3.420.575) | |
| Closing balance | - | 87.470.270 | 82.806.386 | - | 2.379.247 | 57.369 | - | - | 172.713.272 |
| Net amount | - | 36.746.289 | 18.477.601 | - | 271.198 | 273 | 7.844.237 | 10.174 | 63.349.772 |
| Year 2012 - Tangible fixed assets non-revertible to the State | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
i n progress |
Fixed assets Advance payments on tangible fixed assets |
Total | |
| Gross amount: | |||||||||
| Opening balance | 16.513.836 | 61.578.388 | 7.331.117 | 272.669 | 1.042.383 | 22.037 | - | - | 86.760.430 |
| Acquisitions | - | 356.106 | 4.403 | 114.911 | - | 16.339 | - | 491.759 | |
| Disposals | - | - | - | - | - | - | - | - | |
| Adjustments / Transfers | (100) | 165.647 | - | - | (418) | - | - | 165.129 | |
| Write-off Closing balance |
16.513.836 | - 61.578.288 |
(22.323) 7.830.547 |
(60.761) 216.311 |
(677) 1.156.617 |
- 21.619 |
- 16.339 |
- - |
(83.761) 87.333.557 |
| Depreciation and accumulated impairment losses: |
|||||||||
| Opening balance | - | 13.335.633 | 4.160.262 | 152.780 | 495.473 | 23.022 | - | - | 18.167.170 |
| Depreciation of the year | 2.452.271 | 661.212 | 47.554 | 107.952 | 5 8 |
- | - | 3.269.047 | |
| Disposals | - | - | - | - | - | - | - | - | |
| Adjustments / Transfers | 63.079 | (56.005) | (24.569) | 115.341 | (2.533) | - | - | 95.313 | |
| Write-off | - | (22.115) | (50.715) | (677) | - | - | - | (73.507) | |
| Closing balance Net amount |
- 16.513.836 |
15.850.983 45.727.305 |
4.743.354 3.087.193 |
125.050 91.262 |
718.089 438.528 |
20.547 1.072 |
- 16.339 |
- - |
21.458.022 65.875.535 |
| Closing balance | - | 15.850.983 4.743.354 |
125.050 | 718.089 | 20.547 | - - |
21.458.022 | ||
|---|---|---|---|---|---|---|---|---|---|
| Net amount | 16.513.836 | 45.727.305 3.087.193 |
91.262 | 438.528 | 1.072 | 16.339 | - | 65.875.535 | |
| Year 2011 - Tangible fixed asstes non-revertible to the State | |||||||||
| Land | Buildings and other constructions |
Basic equipment |
Vehicles | Office equipment |
Other tangible fixed assets |
Fixed assets i n progress |
Advance payments on tangible fixed assets |
Total | |
| Gross amount: | |||||||||
| Opening balance | 16.513.836 | 61.563.395 | 7.362.211 | 618.658 | 743.956 | 22.037 | - | 1.227.325 | 88.051.418 |
| Acquisitions | - | 14.993 | 126.445 | 69.758 | 35.524 | - | - | - | 246.720 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | (83.592) | 263.397 | - | - | (1.227.325) | (1.047.520) | |
| Write-off | - | - | (73.947) | (415.747) | (494) | - | - | - | (490.188) |
| Closing balance | 16.513.836 | 61.578.388 | 7.331.117 | 272.669 | 1.042.383 | 22.037 | - | - | 86.760.430 |
| Depreciation and accumulated | |||||||||
| impairment losses: | |||||||||
| Opening balance | - | 10.770.239 | 3.568.209 | 342.178 | 336.979 | 21.670 | - | - | 15.039.275 |
| Depreciation of the year | - | 2.565.394 | 644.987 | 53.731 | 138.200 | 1.352 | - | - | 3.403.664 |
| Disposals | - | - | - | - | - | - | - | - | - |
| Adjustments | - | - | (16.802) | - | 20.788 | - | - | - | 3.986 |
| Write-off | - | - | (36.132) | (243.129) | (494) | - | - | (279.755) | |
| Closing balance | - | 13.335.633 | 4.160.262 | 152.780 | 495.473 | 23.022 | - | - | 18.167.170 |
| Net amount | 16.513.836 | 48.242.755 | 3.170.855 | 119.889 | 546.910 | (985) | - | - | 68.593.260 |
During the year ended on 31 December 2012 and 2011, the Company benefited from the following tax deductions on investments:
| 2012 | |||||||
|---|---|---|---|---|---|---|---|
| Opening | Investment | Income | Closing | ||||
| Tax deductions on investments | Balance | year | of the year | Balance | |||
| Estoril Casino | 9.152.360 | 231.834 | (1.376.764) | 8.007.430 | |||
| Lisboa Casino | 3.209.390 | 1.784.463 | (865.006) | 4.128.847 | |||
| Póvoa de Varzim Casino | 6.551.787 | 2.506.000 | (487.878) | 8.569.909 | |||
| 18.913.537 | 4.522.297 | (2.729.648) | 20.706.185 | ||||
| 2011 | |||||||
| Opening | Investment | Income | Closing | ||||
| Tax deductions on investments | Balance | year | of the year | Balance | |||
| Estoril Casino | 11.600.684 | 48.749 | (2.497.073) | 9.152.360 | |||
| Lisboa Casino | 4.830.956 | 66.604 | (1.688.170) | 3.209.390 | |||
| Póvoa de Varzim Casino | 3.358.486 | 4.272.435 | (1.079.134) | 6.551.787 | |||
| 19.790.126 | 4.387.788 | (5.264.377) | 18.913.537 |
The attribution of these tax deductions against the Special Gaming Tax payable is exclusively related with the acquisition of gaming equipment with the prior authorization of the Gambling Inspection Service.
During the years ended on 31 December 2012 and 2011, the movement in intangible assets, as well as in the respective amortization and accumulated impairment losses, was as follows:
| 2012 | 2011 | |
|---|---|---|
| Gaming Concession | Gaming Concession | |
| Rights | Rights | |
| Gross amount | ||
| Opening balance | 260.610.564 | 260.610.564 |
| Acquisitions | - | - |
| Disposals | - | - |
| Tranfers amd write-offs | - | - |
| Closing balance | 260.610.564 | 260.610.564 |
| Amortization and accumulated impairment losses: | ||
| Opening balance | 147.942.054 | 136.585.682 |
| Other adjustments | 283.182 | - |
| Amortization of the year | 11.356.372 | 11.356.372 |
| Closing balance | 159.581.608 | 147.942.054 |
| Net assets | 101.028.956 | 112.668.510 |
| 2012 | |||
|---|---|---|---|
| Gross | Accumulated | Net | |
| Assets | Amortization | Assets | |
| Gaming concesion premium, Estoril | 153.576.455 | (105.864.773) | 47.711.682 |
| Gaming concesion premium, Lisbon | 30.000.000 | (13.536.040) | 16.463.960 |
| Gaming concesion premium, Póvoa de Varzim | 77.034.109 | (40.180.795) | 36.853.314 |
| 260.610.564 | (159.581.608) | 101.028.956 | |
| 2011 | |||
| Activo | Amortizações | Activo | |
| Bruto | Acumuladas | Liquido | |
| Gaming concesion premium, Estoril | 153.576.455 | (99.631.671) | 53.944.784 |
| Gaming concesion premium, Lisbon | 30.000.000 | (11.478.897) | 18.521.103 |
| Gaming concesion premium, Póvoa de Varzim | 77.034.109 | (36.831.486) | 40.202.623 |
| 260.610.564 | (147.942.054) | 112.668.510 |
The breakdown of intangible assets on 31 December 2012 and 2011 is as follows:
The concession in Estoril carried over from the then Estoril Sol, S.A. (now known as Estoril Sol, S.G.P.S, S.A.) to Estoril Sol III, Turismo, Animação and Jogo, S.A., in the last quarter of 2001. In this transaction process, an asset was produced between group companies with the concession premium in 1987, for the amount of 4,701,376 Euros which is eliminated in the consolidated accounts.
On the other hand, it negotiated an extension of the concession for Estoril until 2020, as it assumed a financial obligation toward the State amounting to 98,759,889 Euros, payment of which began in 2001 with the amount of 57,641,085 Euros and ended in July 2006 with the payment of the last of the ten instalments with a base value equal to 4,111,880 Euros, plus monetary updates as defined in the concession extension contract. It should be pointed out that in 2001 we estimated and capitalized the monetary updates for the ten instalments, as agreed to, however, these were corrected from the moment when the international accounting standards were applied.
The same procedure was assumed with regard to Póvoa Casino, the concession for which runs up to the year 2023, and, in this case, the Group paid the Government the amount of 58,359,353.97 Euros in instalments also occurring in the period from 2001 to 2006, which were also the subject of monetary correction. These assets have a finite useful life, and they shall be fully depreciated by late 2020 in relation to the gaming concession for Estoril Casino and Lisbon Casino, and by late 2023 in the case of Póvoa Casino. There are no assets with an indefinite useful life or contractual commitments for the purchase of intangible assets.
In order to examine the impairment of the value of each of these concessions, as recorded in the financial statements, a technical estimate was given for the value of each of these concessions, in accordance with International Accounting Standards. To this end, we carried out the work of arriving at a reasonable value of the concessions operated by the Group, based on the characteristics and nature of the business being conducted, using the updated cash flow method, considering the duration of the concessions.
Use of this method is based on the principle that the estimated value of an organization or a business is represented by its potential for generating financial resources in the future that are liable to be withdrawn from the business and distributed to shareholders without jeopardizing its continuity.
Arising from the analyses carried out an impairment loss was recorded referring to Varzim Sol - Turismo, Jogo e Animação, S.A. (Note 17).
During the years ended on 31 December 2012 and 2011, the movement in goodwill was as follows:
| 2012 | 2011 | |
|---|---|---|
| Gross assets: | ||
| Opening balance | 10.552.860 | 10.552.860 |
| Write-offs / Adjustments | - | - |
| Closing balance | 10.552.860 | 10.552.860 |
| Accumulated impairment losses: Opening balance |
7.617.078 | - |
| Impairment losses of the year | 2.935.782 | 7.617.078 |
| Closing balance | 10.552.860 | 7.617.078 |
| Net value | - | 2.935.782 |
Goodwill on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |||
|---|---|---|---|---|
| Entity | Book value 01-Jan-2012 |
Impairment losses of the year |
Book value 31-Dec-2012 |
Book value 31-Dec-2011 |
| Varzim Sol - Turismo, Jogo e Animação, S.A. |
2.935.782 | (2.935.782) | - | 2.935.782 |
In compliance with the provisions under IFRS 3, the Group conducts annual impairment analyses of goodwill, reported on 31 December each year, or whenever there are indications of impairment.
The impairment tests are carried out by independent and certified entities for this purpose, to the different Gaming Concessions: Estoril Gaming Concession, including casino do Estoril and Casino de Lisboa and Póvoa Gaming Concession which includes the Casino da Póvoa de Varzim.
For the purposes of the analysis of impairment, goodwill was attributed to the diverse cash generating units identified, a cash generating unit being considered to be the smallest identifiable group of assets that generates a cash influx and which is largely independent of the cash influx from other assets or groups of assets. For these purposes, the cash generating units identified to which goodwill was imputed corresponds to the activity generated by Póvoa de Varzim Casino.
On 31 December 20112 the Group, as in 2011, hired a specialised independent entity to perform the analysis of impairment of goodwill.
Impairment analyses of goodwill are carried out using the discounted cash-flow method, based on the financial projections of cash-flow up to the end of the period of the concession. The discount rates used reflect the level of indebtedness and the cost of third party capital of each cash generating unit, as well as the level of risk and profitability expected by the market.
The financial projections are prepared based on assumptions of how the activity of the cash generating unit and their markets will evolve, which are in line with historic trends, reasonable and prudent in their preparation regarding the behaviour of the main market variables and performance of the activities compared with the strategic plans defined.
As a result of the impairment analysis performed on 31 December 2012, the Company recognised impairment losses of part of the goodwill referring to Varzim-Sol, Turismo, Jogo e Animação, S.A, essentially arising from changes in the key assumptions related with gaming revenue. These changes are due to the degradation of the Portuguese economy compared with the expectations of the previous year and together with the continued increase in interest rates.
The main assumptions and estimates made for the application of the updated cash flow method of evaluation, were the following:
The time horizon corresponds to the estimated duration of the business. In this regard, and for the purpose of this analysis, the duration of the concession period for Póvoa Casino, December of 2023, was considered.
Taking into account the nature of any activity undertaken under concession, the value residual corresponds to the liquidation of the operating assets and liabilities of the companies at the end of the concession period.
The objective financial structure considered in the projection period (determined by the ratio between indebtedness and the total resources invested at market values) was approximately 20.7%, which assumes a stable and sustainable level of indebtedness in the long term.
The rate of actualization corresponds, conceptually, to the capital cost of the resources (own and third party) used in the financing of the operations and is based on the weighted average of these sources of capital.
From a theoretical point of view, the cost of equity corresponds to a rate of remuneration equivalent to the profitability of the assets without long term risk (Treasury Bonds), plus a premium according to the systemic risk of the business (operational and financial). The analysis carried out in relation to the determination of the parameters mentioned previously, produced a cost of equity of 11% (11,8% in 2011) for the gaming business under concession.
The cost of third party capital corresponds to cost in the long term, net of fiscal effects, of the Company's external financing. In this regard, and considering that the companies that run the gaming activity under concession are not subject to the payment of income tax, the value of approximately 6,5% (7,5% in 2011) is assumed as the cost of third party capital.
According to the costs of the financial resources indicated above and considering the long term objective financial structure, at market values, the resulting average cost of capital for the companies comes to approximately 10,1% (10,6% in 2011).
During the years ended on 31 December 2012 and on 31 December 2011, the movement in investment properties, as well as in the respective depreciation and accumulated impairment losses, was the following
| 2012 | 2011 | |
|---|---|---|
| Gross amount: | ||
| Opening balance | 282.509 | 282.509 |
| Additions | - | - |
| Write-offs | - | - |
| Disposals | - | - |
| Clising balance | 282.509 | 282.509 |
| Depreciation and impairment losses: | ||
| Opening balance | 55.958 | 49.788 |
| Depreciation of the year | 5.551 | 6.170 |
| Closing balance | 61.509 | 55.958 |
| Net value | 221.000 | 226.551 |
Investment properties is made up principally from an apartment and respective contents held by Estoril-Sol (III) – Turismo, Animação e Jogo, S.A., in Monte Estoril.
During the year ending on 31 December 2009, the Group asked an independent entity to evaluate these assets, according to which their market value is higher than their book value. In the years ended on 31 December 2012 and 2011 there was no indication of any impairment of these assets.
The Group holds a building for sale located in Alcoitão stated for the amount of 4.647.510 Euros. There is a preliminary purchase and sale contract on this building, signed on 11th March 2010, which sets its sale at the total value of 5.725.000 Euros. Not having the promissory purchaser met the conditions necessary to comply with the preliminary purchase and sale contract, the subsidiary company, according to the law and contract previously signed, made her the down payments paid by the promissory purchaser in the total amount of 1.200.000 Euros. (Note 6).
About this same property, and in compliance with the provisions under IFRS 5, the Group makes annual impairment tests, reported on 31 December of each year, or whenever there are indications of impairment.
During the year ended December 31st, 2012, the Group has used an independent and specialized duly authorized and certified to do so with the CMVM (Securities and Exchange Commission), to perform an evaluation study of the value market for the property located in Alcoitão, Cascais.
The evaluation study consisted in determining the market value of the property as of December 31st , 2012, in its current shape on the assumption that the property is free and available, respecting the requirements of the provisions of IFRS. The criteria used to perform the evaluation study were the "Direct market comparison" and "Yield return" considering the "Discounted Cash Flows" method.
From the evaluation study the following results and impairments were booked in the 2012 profit and losses account:
| Opening balance 31-Dec-2011 | 4.647.510 |
|---|---|
| Property market value at 31-Dec-2012 | |
| - Building value | 810.000 |
| - Land value | 1.068.000 |
| 1.878.000 | |
| Impairment at 31-Dec-2012 (Note 10) | 2.769.510 |
On 31 December 2012 and 31 December 2011 other non-current assets were made up as follows:
| 2012 | 2011 | |
|---|---|---|
| Participation in the remodelling of Póvoa de Varzim Casino | 2.328.334 | 1.943.044 |
| Other non-current assets | 169.423 | 264.340 |
| 2.497.757 | 2.207.384 |
The amount referring to participation in the remodelling work of Póvoa de Varzim Casino, will be realizable after 2012 by deduction from the value payable by Varzim Sol – Turismo, Jogo e Animação, S.A., by way of the annual payment of the Special Gaming Tax.
Other non-current assets essentially relate to amounts receivable from the Tax Administration.
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| Gross Amount |
Impairment Losses |
Net Amount |
Gross Amount |
Impairment Losses |
Net Amount |
|
| Goods | 1.386.198 | - | 1.386.198 | 1.461.149 | - | 1.461.149 |
| Finished and intermediate products |
3.176.352 - |
- - |
3.176.352 | 3.176.352 | - | 3.176.352 |
| Raw materials, secondary materials and consumables |
338.482 - |
- - |
338.482 | 351.761 | - | 351.761 |
| 4.901.032 | - | 4.901.032 | 4.989.262 | - | 4.989.262 |
The caption "Goods" essentially comprises a fraction of offices held by a company of the Group which is intended for resale.
Through one of its companies the Group owns a plot of land where the old ruins of the Hotel Miramar stand. This asset is entered in the caption "Finished and intermediate products",
The caption "Raw materials, secondary materials and consumables" is almost totally made up from food and drink products intended for sale in the diverse bares and restaurant areas of Estoril and Póvoa de Varzim Casinos.
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Customers current account | 288.678 | 625.194 |
| Impairment | (15.280) | (179.178) |
| 273.398 | 446.016 | |
| Customers doubtful debts | 2.509.649 | 2.865.580 |
| Impairment | (2.509.649) | (2.865.580) |
| - | - | |
| 273.398 | 446.016 |
Current account customers' debts are related with the activities of entertainment and restaurants. These are subject to evaluation by the credit control debts, and all debts that are overdue for periods of six months or more are subject to an entry of impairment for an amount equal to that of the debt (100%). On 31 December 2012 and 2011 there were no outstanding balances receivable for periods of 6 months or more that did not have a provision.
The Group does not grant credit in its gaming activity, although there are situations where amounts cannot be received, related with the means of payment used. Whenever an unfunded cheque is detected related with the gaming activity, a provision is immediately set up for the full amount, irrespective of the effort made for its collection that may be made in the future in order to effectively receive the amounts in cash.
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Advance payments to suppliers | 240.601 | 288.650 |
| State and Public Sector | 325.682 | 452.904 |
| Deferrals: | ||
| Expenses with entertainment shows to be held | - | 648.799 |
| Insurance | 523.793 | 476.110 |
| Fees with maintenance, techical assistance and licences | 143.798 | 79.055 |
| Other deferrals | 6.841 | 43.210 |
| Commercial areas renters | 356.310 | 356.310 |
| Other accounts receivable | 165.114 | 61.181 |
| 1.762.139 | 2.406.219 |
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Immediately avaiable bank deposits | 1.875.886 | 3.188.282 |
| Cash | 7.904.904 | 9.608.887 |
| Cash and cash equivalents | 9.780.790 | 12.797.169 |
| Bank overdrafts (Note 26) | (123.602) | (1.088.697) |
| Cash and bank deposits | 9.657.188 | 11.708.472 |
On 31 December 2012, the share capital of the Company is represented by 11,993,684 shares, of which 6,116,779 are registered shares and 5,876,905 bearer shares, of a nominal unit value of 5 Euros, which confer the right to a dividend.
The share capital issued by the Company on 31 December 2012 and on 31 December 2011 is broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Paid-up capital | 59.968.420 | 59.968.420 |
| Treasury shares | (708.306) | (708.306) |
| Issue premiums | 7.820.769 | 7.820.769 |
| 67.080.883 | 67.080.883 |
| Date | Nominal value | No. of shares |
|---|---|---|
| 31 of December 2012 | ||
| Registered | 5 | 6.116.779 |
| Bearer | 5 | 5.876.905 |
| 11.993.684 9 |
||
| 5 | ||
| 31 of December 2011 | ||
| Registered | 5 | 6.116.779 |
| Bearer | 5 | 5.876.905 |
| 11.993.684 9 |
Treasury shares were acquired by the Company as follows:
| Year of Acquisition | No. shares | Nominal value | Total nominal | Total premiums | Total |
|---|---|---|---|---|---|
| 2001 | 34.900 | 5 | 174.500 | 280.945 | 455.445 |
| 2002 | 43 | 5 | 215 | 184 | 399 |
| 2007 | 22 0 |
5 | 110 | 88 | 198 5 |
| 2008 | 27.600 | 5 | 138.000 | 114.264 | 252.264 |
| Total | 62.565 0 |
312.825 | 395.481 | 708.306 4 |
Legal persons with more than a 20% holding in the share capital:
Finansol, Sociedade de Controlo, S.G.P.S, S.A., with 60.2%
Amorim – Entertainment e Gaming International, S.G.P.S., S.A., with 35.87%.
The application of the net result of the year is according to the proposal for the application of results of individual accounts. The difference between the results of the individual accounts and the consolidated accounts is recorded in the caption "Other reserves and retained earnings."
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |||
|---|---|---|---|---|
| Nature of the financing | Nominal | Balance sheet | Nominal | Balance sheet |
| Value | Value | Value | Value | |
| Non-current financing: | ||||
| - Bank loans | 10.125.000 | 10.125.000 | 12.500.000 | 12.500.000 |
| - Commercial paper | - | - | - | - |
| - Current accounts | - | - | - | - |
| - Financial leasing | 52.262 | 52.262 | 89.265 | 89.265 |
| 10.177.262 | 10.177.262 | 12.589.265 | 12.589.265 | |
| Current financing: | ||||
| - Bank loans | 15.875.000 | 16.064.964 | 19.500.000 | 19.833.611 |
| - Commercial paper | 74.250.000 | 73.995.605 | 54.500.000 | 54.100.342 |
| - Current accounts | 19.715.500 | 19.475.282 | 39.085.262 | 38.732.392 |
| - Bank overdrafts (Note 16) | 123.602 | 123.602 | 1.088.697 | 1.088.697 |
| - Financial leasing | 37.465 | 37.465 | 58.339 | 58.339 |
| 110.001.567 | 109.696.918 | 114.232.298 | 113.813.381 | |
| 120.178.829 | 119.874.180 | 126.821.563 | 126.402.646 |
The average interest rates for financing, borne by the Group, including commissions and other charges, come within an interval of between 6% and 7,5% during 2012 and 5,5% and 7% during 2011.
Some of the financing operations, mainly bank loans, include commitments to maintain certain financial ratios based on contractually negotiated limits (financial covenants). These ratios are:
Net Debt / Ebitda;
Financial autonomy.
On the 31st December 2012 and 31st December 2011, these ratios were according the contractually negotiated limits.
The amount classified as non-current bank loans, for a total amount of 10.125.000 Euros, falls due in accordance with the following schedule:
Depending on the operating funds that are freed up, we feel the financial risk to which the associated undertakings are exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that assets guarantees are dispensed with for operations under contract.
The amount included in the column "Nominal value" corresponds to the contracted value that is still owing. The column "Balance sheet value" is added to the nominal value of financial charges already incurred but still not due, less interest and or commissions paid in advance.
The companies that comprise the Group are lessees in financial and operational leasing contracts related with motor vehicles, which are denominated in Euros.
These contracts produce the following future liabilities for the Group:
| Finance Leasing |
Operational Leasing |
Total | |
|---|---|---|---|
| Up to 1 year | 37.465 | 356.032 | 393.497 |
| Between 1 year and 5 years | 52.262 | 553.839 | 606.101 |
| 89.727 | 909.871 | 999.598 |
The movement in the provisions accounts in the years ended on 31 December 2012 and 2011 is as follows:
| 2012 | ||||
|---|---|---|---|---|
| Opening | Closing | |||
| Balance | Increases | Reversals | Balance | |
| Provisions for pensions | 3.802.000 | - | (275.000) | 3.527.000 |
| Legal proceedings in hand | 2.044.625 | 469.686 | (66.262) | 2.448.049 |
| Other risks and charges | 714.143 | 2.945.301 | (83.622) | 3.575.822 |
| 6.560.768 | 3.414.987 | (424.884) | 9.550.871 | |
| 2011 | ||||
| Opening | Closing | |||
| Balance | Increases | Reversals | Balance | |
| Provisions for pensions | 4.555.000 | - | (753.000) | 3.802.000 |
| Legal proceedings in hand | 1.374.559 | 745.562 | (75.496) | 2.044.625 |
| Other risks and charges | 1.565.082 | 45.551 | (896.490) | 714.143 0 |
| 7.494.641 | 791.113 | (1.724.986) | 6.560.768 5 |
By the Articles of Association approved in the General Meeting of 29 May 1998, Estoril Sol, SGPS, SA confirmed, in article 36, the right to a retirement pension paid by the company to the former directors who had already retired, based on the previous article 25 of the Articles of Association that were then altered, and the same rights and benefits as those of directors, in office at that time, who had or would have then completed ten years of service – after entering retirement - rights and benefits to be regulated in a contract to be agreed between the Company and these directors.
In order to estimate its liabilities for these payments, the Group follows the procedure of annually obtaining actuarial calculations of the liabilities, calculated using the technical standards of the Insurance Institute of Portugal.
The most recent actuarial study of the assets of the plan and of the present value of the defined benefit obligations was carried out in December of 2012 by a specialised entity accredited for the purpose. The present value of the obligation concerning defined benefits and the cost of current services and of related past services were measured using the projected unit credit method.
| 2012 | 2011 | |
|---|---|---|
| Discount rate | 3% | 4,75% |
| Rate of growth of pensions | 0,00% p.a. | 0,00% p.a. |
| Mortality table | ||
| - Before retirement | n.a. | n.a. |
| - After retirement | GKF95 | GKF95 |
| Invalidity table | n.a. | n.a. |
| Table of departures | n.a. | n.a. |
| Retirement age | Age on 1st januery 2013 |
The main assumptions made in the actuarial evaluation mentioned above were the following:
During 2012 the Company decided to change the discount rate from 4,75% to 3%, in accordance with the current evolution of the financial markets. If the previous discount rate had been kept the liabilities assumed by the Company as at 31st December 2012 should be 2.779.000 Euros against the actual 3.527.000 Euros.
The actuarial study resulted in a reduction in the liabilities assumed by the Company amounting to 275.000 Euros, arising from the decease of two of the beneficiaries.
The provision for legal proceedings in hand is intended to cover estimated liabilities based on information from legal advisors, arising from lawsuits filed against the Group.
During 2012 the Group set up provisions amounting to approximately 340.000 Euros to address new lawsuits of a commercial nature, and 125.000 Euros for employment litigation.
One of the subsidiaries of the Group made a collective dismissal in 2010 within the terms established in the Law, which affected 112 employees. Some of these contested this procedure and filed a lawsuit in Court trying to have this overturned and for their reintegration as Company staff. The Company and the legal consultants responsible for the case consider that there is a high probability of the Company winning and, therefore, it has set up a provision corresponding only to the legal obligations allowed for in labour legislation in cases of collective dismissal which it will have to pay to the former employees by way of indemnity evens if it wins the case. During 2012 two former employees decided to accept to Company offer and received compensations in accordance with the Portuguese labor law in total amount of 53.000 Euros. The remaining provision for the other 110 employees is as at 31st December 2012 of 1.171.000 Euros.
These provisions mostly contemplate questions of divergence in fiscal matters between the Group and the Tax Administration.
During the year ended December 2012 the Group's subsidiary, Varzim-Sol set up a provision in the amount of 2.936.067 Euros to cover the annual payment of the Special Gaming Tax for the year 2012. The payment occurred in March 2013.
During the year ending in 2011 the Group reversed a provision of approximately 890,000 Euros relating to a divergence relating to Value Added Tax (VAT) as a result of a decision against the Group.
On 31 December 2012 and 2011, this caption was broken down as follows:
| 2012 | 2011 | |
|---|---|---|
| Current suppliers | 4.260.863 | 4.724.466 |
| Suppliers of investments | 1.592.947 | 3.672.196 |
| State and Public Sector | ||
| Annual gaming payment | 12.313.709 | 19.427.960 |
| Special Gaming Tax ( to be paid next month) | 6.446.069 | 7.272.234 |
| Social Security contribuitons | 648.834 | 636.181 |
| Other in favour of the State | 1.178.999 | 1.536.455 |
| Charges with holidays payable | 3.494.656 | 4.160.204 |
| Responsabilities for accumulated gaming premiums | 1.424.514 | 1.134.492 |
| Other | 1.827.865 | 3.429.260 |
| 33.188.456 | 45.993.448 |
In the normal course of its activity, the Group is involved in diverse legal proceedings. Given the nature of these and the provisions set up, in accordance with studies and opinions of legal consultants, the current expectation is that the respective outcome will not lead to any material effects in terms of the activity undertaken, the asset position and the result of the operations.
The main situations are the following:
Differences in understanding between the Group and the Tax Authorities over Corporation Tax (IRC), relating to the years 2007, 2008, 2009 and 2010, with regard to the taxation of diverse expenses incurred in the course of the gaming activity of subsidiaries that form part of the Group and which operate games of fortune as their main activity. On the date of these financial statements there are legal decisions that are in the Group's favour, as well as judicial jurisprudence which is favourable to the Group on this matter. Even so, on this date the Group has bank guarantees provided in favour of the Finance Office of Cascais amounting to 7.197.635 Euros, of which 1.041.811 Euros were provided in January of 2013.
One of the subsidiaries of the Group made a collective dismissal in 2010 within the terms established in the Law, which affected 112 employees. Some of these contested this procedure and filed a lawsuit in Court trying to have this overturned and for their reintegration as Company staff. The Company and the legal consultants responsible for the case consider that there is a high probability of the Company winning and, therefore, it has set up a provision corresponding only to the legal obligations allowed for in labour legislation in cases of collective dismissal which it will have to pay to the former employees by way of indemnity evens if it wins the case. This amounts to 1.171.000 Euros.
During the year 2012 two employees gave up the action brought against the Group subsidiary. It has been used 53.000 Euros to cover the payment of their allowances, paid according to the amounts accrued by the Group and provided for in accordance with Portuguese labor legislation.
The Group also sets up diverse technical provisions related with the normal functioning of its main activity, the operation of games of fortune. Among the more significant ones we should highlight:
In the normal course of its activity the Group assumes commitments related, essentially, with the remodelling and equipment of the Casinos that it runs. On 31 December 2011 the main ones were the following:
On 31 December 2012 and 2011 the guarantees provided by the Group were as follows:
| Dec - 2012 | Dec - 2011 | |
|---|---|---|
| Obligations related with the Special Gaming Tax | 20.350.000 | 26.650.000 |
| Tax lawsuits in hand / litigation | 6.388.179 | 1.787.259 |
| Current suppliers | 46.225 | 108.625 |
| 26.784.403 | 28.545.883 |
In the normal course of its activity the Estoril-Sol Group is exposed to a variety of financial risks that can change its asset value. Financial risk is understood to be the probability of obtaining results other than those expected, whether these be positive or negative, materially and unexpectedly changing the asset value of the Group.
In order to minimise the potential impact of these risks, the Group adopts a strict and consistent financial policy based on two vitally important instruments:
The financial risks which can possibly impact on the activities undertaken by the Group are those presented below:
The credit risk is related with the balances receivable from customers and other debtors, classified in balance sheet in the captions, "Customers" and "Other accounts receivable", respectively.
Portuguese legislation forbids casino concessionaires from granting credit to gaming activities, and so, in this regard, Group Companies are not exposed to credit risk.
Other revenue from restaurant and entertainment activities, which account for around only 1,6% of revenue, therefore represents insignificant exposure.
The management of the liquidity risk is based on maintaining an adequate level of available cash and on the contracting of credit limits that help not only to ensure the normal development of the Group's activities but also to cater for any operations of an extraordinary nature.
According to the monetary resources freed up by the companies that comprise the Group, we feel the financial risk to which the Group is exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that asset guarantees are dispensed with for operations under contract, further reinforced by the no less relevant fact that over the years the Group has been successively reducing its financial liabilities, thereby complying with the commitments assumed.
The Group's exposure to the interest rate risk stems from the existence, in its balance sheet, of financial assets and liabilities, taken out at variable rates. A change in the market rates has a direct impact on the value of the interest received and/or paid, causing consequent variations in cash.
A significant part of the financing obtained by the Group is classified as current, and so the interest rate is frequently revised, which means a greater exposure to fluctuations in market interest rates, whether in the Company's favour or not.
If the market interest rates had been 1% higher during the years ended on 31 December 2012 and 2011, the financial costs of those years would have increased by approximately 1,233,000 Euros and 1,300,000 Euros, respectively.
All operations are carried out in Euros, with the exception of some current imports, which periods of no more than 45 days, which are conducted in US Dollars, and so the Group has only minimal exchange rate exposure.
During the first quarter of 2013 the Group paid 15.220.938 Euros referring to the annual payment of the Special Gaming Tax and 6.446.069 Euros referring to the Special Gaming Tax relating to the period of December of 2012 (Note 29). It has been canceled bank guarantees issued by the Group in the total amount of 13.700.000 Euros related with these payments.
DONATO JOÃO LOURENÇO VIÇOSO – ROC N.º 334 JOSÉ MARTINS LAMPREIA – ROC N.º 149
JOSÉ ALBERTO CAMPOS DIAS – ROC N.º 365
RUA DA CONCEIÇÃO, 85 – 1º ESQ. –1100-152 LISBOA TEL. 21 321 95 30 FAX. 21 321 95 39 E-mail: [email protected] Site: www.lampreiavicoso.com
(Individual accounts)
CAPITAL SOCIAL 50.000 EUROS – NIPC: 504 176 544 INSCRITA NA LISTA DOS REVISORES OFICIAIS DE CONTAS SOB O N.º 157 REGISTADA COMO AUDITOR EXTERNO NA C.M.V.M. SOB O N.º 7873
DONATO JOÃO LOURENÇO VIÇOSO – ROC N.º 334 JOSÉ MARTINS LAMPREIA – ROC N.º 149
JOSÉ ALBERTO CAMPOS DIAS – ROC N.º 365
RUA DA CONCEIÇÃO, 85 – 1º ESQ. –1100-152 LISBOA TEL. 21 321 95 30 FAX. 21 321 95 39 E-mail: [email protected] Site: www.lampreiavicoso.com
Lisbon, 19 April 2013
Lampreia & Viçoso, SROC Registered in the CMVM no. 7873 represented by José Martins Lampreia(ROC no. 149)
(Individual accounts)
To the Shareholders,
Pursuant to the applicable legal provisions and the Company's Memorandum and Articles of Association, it is our duty to submit to your appreciation the Report and Opinion of the Audit Board on the Management Report and on the Corporate Governance Report and individual financial statements, presented by the Board of Directors of ESTORIL SOL, S.G.P.S., S.A. - Public Company - in relation to the year ended on 31 December 2012.
1.1- The Audit Board has monitored the company's management and operations during the year. It remained in regular contact with the Board of Directors and with other company officials, who were always available to provide due explanations. It also had access to all documentation requested for performing its duties.
1.2- The Audit Board performed the tests and checks it is entrusted with, and deemed necessary, under the circumstances. It monitored the procedures for controlling risks and the internal control system implemented. The process of preparation and disclosure of financial information was also supervised.
1.3- The Management Report and the Corporate Governance Report describe the policies followed, the economic and financial operations, the conditioning factors involved, with regard to the fiscal year under evaluation, and the prospects for progress, given the economic climate.
1.4- The individual accounts, comprising the balance sheet, the income statement by natures, the statement of the changes in equity and the cash flow statement and the corresponding Notes, are all in agreement with the accounting records and with the accounting policies and practices.
1.5- In compliance with the legal provisions the Board certified the independence of the Statutory Auditors noting their professionalism and technical capacity, supervising their activity, at appropriate intervals, through meetings and the observation of the checks made by it.
1.6- We evaluated the Legal Certification of Accounts and the Audit Report as prepared by the Chartered Accountants, which warranted our agreement.
1.7- The Audit Board considered the proposal for the application of results presented by the Board of Directors.
In view of the above, we evaluated the Management Report and Corporate Governance Report, the balance sheet and individual accounts relating to the year 2012, as well as the proposal for the application of results, it being our opinion that these are in a condition to be discussed and voted on in a General Meeting of Shareholders.
The Audit Board declares within the terms and for the purposes of the provisions in line c) of no.1 of article 245 of the Securities and Exchange Commission's Code that, to the best of its knowledge, the information contained in the individual financial statements was prepared in accordance with the generally accepted accounting principles in Portugal, giving a true and appropriate image of the financial position, the result of the operations, the changes in equity and the cash flow of ESTORIL SOL, S.G.P.S., S.A. - Public Company -, and that the management and corporate governance reports faithfully portray the evolution of the businesses, of the performance and of the financial position of the company and contain a description of the main risks and uncertainties that it is faced with.
Estoril, 22 April 2013
The Audit Board
Chairman - Mário Pereira Pinto
Director – António José Alves da Silva
Director – Manuel Martins Lourenço
SOCIEDADE DE REVISORES OFICIAIS DE CONTAS
DONATO JOÃO LOURENÇO VIÇOSO – ROC N.º 334 JOSÉ MARTINS LAMPREIA – ROC N.º 149
JOSÉ ALBERTO CAMPOS DIAS – ROC N.º 365
RUA DA CONCEIÇÃO, 85 – 1º ESQ. –1100-152 LISBOA TEL. 21 321 95 30 FAX. 21 321 95 39 E-mail: [email protected] Site: www.lampreiavicoso.com
CAPITAL SOCIAL 50.000 EUROS – NIPC: 504 176 544
INSCRITA NA LISTA DOS REVISORES OFICIAIS DE CONTAS SOB O N.º 157
REGISTADA COMO AUDITOR EXTERNO NA C.M.V.M. SOB O N.º 7873
DONATO JOÃO LOURENÇO VIÇOSO – ROC N.º 334 JOSÉ MARTINS LAMPREIA – ROC N.º 149
JOSÉ ALBERTO CAMPOS DIAS – ROC N.º 365
RUA DA CONCEIÇÃO, 85 – 1º ESQ. –1100-152 LISBOA TEL. 21 321 95 30 FAX. 21 321 95 39 E-mail: [email protected] Site: www.lampreiavicoso.com
Notwithstanding the opinion expressed in paragraph 7, we would like to draw your attention to the following situations:
DONATO JOÃO LOURENÇO VIÇOSO – ROC N.º 334 JOSÉ MARTINS LAMPREIA – ROC N.º 149
JOSÉ ALBERTO CAMPOS DIAS – ROC N.º 365
RUA DA CONCEIÇÃO, 85 – 1º ESQ. –1100-152 LISBOA TEL. 21 321 95 30 FAX. 21 321 95 39 E-mail: [email protected] Site: www.lampreiavicoso.com
Lisbon, 19 April 2013
Lampreia & Viçoso, SROC Registered in the CMVM no. 7873 represented by José Martins Lampreia (ROC no. 149)
CAPITAL SOCIAL 50.000 EUROS – NIPC: 504 176 544 INSCRITA NA LISTA DOS REVISORES OFICIAIS DE CONTAS SOB O N.º 157 REGISTADA COMO AUDITOR EXTERNO NA C.M.V.M. SOB O N.º 7873
(Consolidated accounts)
To the Shareholders,
Pursuant to the applicable legal provisions, it is our duty to submit to your appreciation the Report and Opinion of the Audit Board on the Management Report and on the Corporate Governance Report and other consolidated financial statements, presented by the Board of Directors of ESTORIL SOL, S.G.P.S., S.A. - Public Company - in relation to the year ended on 31 December 2012.
1.1- We examined the operations conducted by the consolidating company and monitored the operations of the Group of companies headed by the said consolidating company, both directly and via explanations collected from Management and services. The Audit board also performed those checks deemed necessary, under the circumstances.
1.2- The Audit board performed the tests and checks it is entrusted with and that it deemed necessary in the circumstances. It monitored the procedures for controlling risks and the implemented internal control system. It also supervised the process of preparation and disclosure of the financial information.
1.3- The management and corporate governance reports describe the policies followed, the economic and financial operations, the conditioning factors involved relating to the year under evaluation, and the future prospects in the current economic climate.
1.4- The consolidated accounts, comprising the Consolidated Balance Sheet, the Income Statement, the Statement of Changes in Equity, the Cash Flow Statement and respective notes, are all in agreement with the accounting records and with the accounting policies and practices of the International Financial Reporting Standards (IFRS) as adopted in the European Union.
1.5- In compliance with the legal provisions, the Board verified the independence of the Statutory Auditors noting their professionalism and technical capacity, and supervised, with appropriate frequency, their activity, through meetings and observing the checks carried out by them.
1.6- We have evaluated the Legal Certification of Accounts and Audit Report – Consolidated Accounts – prepared by the Statutory Auditors, which warranted our agreement.
In view of the above, we have evaluated the management and corporate governance reports and the consolidated financial statements of ESTORIL SOL, S.G.P.S., S.A. - Public Company -, for 2012, as well as the proposal for the application of consolidated profits, and it is our opinion that these are in a position to be discussed and voted on in a General Meeting.
The Audit Board, pursuant to and for the purposes of the provisions under line c) of no.1 of article 245 of the Portuguese Securities Code, declares that, to the best of its knowledge, the information appearing in the consolidated financial statements was prepared in conformity with the International Financial Reporting Standards (IFRS) as adopted in the European Union, showing a true and appropriate image of the financial position, the operating result, the changes in equity and the cash flow of ESTORIL SOL, S.G.P.S., S.A. - Public Company -, and that the management and corporate governance reports faithfully shows the progress of the business, the performance and financial position of the company, and contains a description of the main risks and uncertainties they are faced with.
Estoril, 22 April 2013
The Audit Board
Chairman - Mário Pereira Pinto
Director – António José Alves da Silva
Director – Manuel Martins Lourenço
| Companies of the Estoril-Sol Group | 1 |
|---|---|
| Corporate offices | 3 |
| Management Report | 5 |
| Corporate Governance Report | 15 |
| Proposal for the application of profits | 61 |
| Notes to the Board of Directors Report | 63 |
| Holders of qualified shareholdings | 65 |
| Financial statements and Notes – Individual accounts | 67 |
| Financial statements and Notes - Consolidated accounts | 97 |
| Legal Certification of Accounts – Individual accounts | 142 |
| Report and Opinion of the Audit Board – Individual accounts | 144 |
| Legal Certification of Accounts – Consolidated accounts | 146 |
| Report and Opinion of the Audit Board – Consolidated accounts | 149 |
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