Annual Report • Apr 13, 2012
Annual Report
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December 31, 2011
| INTRODUCTION 2 | |
|---|---|
| MACROECONOMIC BACKGROUND 3 | |
| STOCK EXCHANGE EVOLUTION 4 | |
| GROUP'S ACTIVITY 6 | |
| FINANCIAL REVIEW 7 | |
| ACTIVITY DEVELOPED BY THE NON-EXECUTIVE MEMBERS OF THE BOARD OF DIRECTORS 10 | |
| 2012 OUTLOOK 11 | |
| PROPOSAL OF THE BOARD OF DIRECTORS FOR APPROPRIATION OF THE NON CONSOLIDATED NET PROFIT FOR THE YEAR AND RESERVES DISTRIBUTION 12 |
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| CORPORATE GOVERNANCE 13 | |
| LEGAL MATTERS 47 | |
| DECLARATION OF RESPONSIBILITY 49 | |
| FINAL CONSIDERATIONS 49 | |
| APPENDIX I 50 |
Pursuant to the legal requirements, the Board of Directors of Cofina, S.G.P.S., S.A. (Open Capital Company) hereby presents its Director's Report for the year 2011. According to number 6 of article 508 - C of the Companies Code, the Board of Directors decided to submit a single Board of Directors' Report, fulfilling all legal requirements.
The year 2011, with particular emphasis in the second semester, was characterized by a strong contraction in economic activity, particularly in segments dependent on private consumption. In this context, advertising investment recorded significant falls, with advertisers delaying and strongly reducing their investment decisions. However, control and cost rationalization measures that have been adopted by Cofina in recent years have enabled smoothing the effect of sales decrease in the Group's operating performance.
As the year 2011 progressed, the perspectives for the world economy, and with particular emphasis on mature economic areas, have become increasingly adverse. The main cause continues to focus on high debt level of these economies, public and private, resulting in external deficits with levels historically not reached.
In the European Union, the GDP growth in 2011 was about 1.6%, slightly lower than 1.9% of growth recorded in 2010. During the year 2011, the growing fear of the European debt crisis had a significant negative impact on the stock markets' performance and in the debt pricing.
The International Monetary Fund (IMF) forecasts a growth of 3.3% in world GDP in 2012, including a recession scenario for the Euro Area (0.5% decline in GDP), reflecting the impact in the real economy of the measures adopted to overcome the sovereign debt crisis and to deleverage most of the European economies. In a political and economic scenario characterized by uncertainty and volatility, investors have been demanding higher risk premiums, thus maintaining the pressure towards higher funding spreads and falling stock market indices. In the Euro Area, inflation should remain at low levels during 2012 (about 1.5% according to IMF projections) and unemployment should be around 10% (according to the same source).
The implementation of the economic adjustment program by the Portuguese government was the main factor influencing the performance of the Portuguese economy in 2011, with amplified effects in subsequent years. The economic adjustment program includes fiscal and financial measures and structural measures aiming to restore confidence in financial markets and rectify the structural deficit that has characterized the Portuguese economy in recent years. The extent of these measures and its implementation calendar will put significant pressure on disposable income, with the inevitable losses in the level of private consumption and investment.
The most recent estimates of the Portuguese Central Bank (Banco de Portugal) forecast, in the winter economic bulletin, a real fall in GDP of 3.1% in 2012, affected by the decrease of 6% in the private consumption, by 2.9% fall in public consumption and 12.8% on investment. For 2013, the same entity points to a marginal growth of 0.3% of GDP, while stressing the various risks underlying the forecast, mostly in the downward direction.
The Portuguese advertising market recorded a new contraction, which affected all media, similar to what has happened in recent years, and following the trend in general economic environment in 2011.
Considering the advertising agencies market and before rappel, the decrease of about 12% for the entire market during the year 2011 - far more pronounced, it is noted, than in the previous year, which was around 2.5 % - was again particularly penalizing for the press segment, which fell about 20%, with similar percentages break for the daily and non daily press.
Despite the successive breakdown that has been observed in advertising investment market in the past years, it is not expected that 2012 might be a year of recovery, although it is expected that the variation might record a lower magnitude than that recorded in 2011. Even so, the unfavorable economic environment expected for next year, presents risks that could aggravate market conditions and, as such, the companies' advertising investment.
(Note: in order to enable a better comparison of the stock fluctuations, the PSI 20 index has been considered as being equal in value to the opening price of Cofina shares)
The national stock exchange closed the year 2011 losing 28% towards 2010. The start of 2011 in the markets, anticipated a year with promising results, when the PSI-20 index recorded a maximum, early in February. But the final values show that the year was not good for investors, with the main index of NYSE Euronext Lisbon closing negative when comparing with the past year, that had already been negative compared to 2009.
Cofina's share price evolution was consistent with the evolution of PSI 20 throughout the year, ending the year with a price of 0.76 Euro per share, when it had begun the year of 2011 with a price of 0.69 Euro per Share.
During 2011, Cofina's shares were traded at a maximum price of 0.78 Euro per share in December, 29 and at a minimum of 0.27 Euro per share in September, 7. In total, 14,708,638 Cofina shares were traded in 2011, which corresponds to 14.3% of the shares issued.
The main events that distinguished the stock price evolution of Cofina´s shares during 2011 may be described chronologically as follows:
Cofina Group's activity is mainly focused in the media and content industry.
The key company in this business area is Cofina Media, S.G.P.S., S.A., owner of the leading publications in each respective segment. In the Group´s publications portfolio, "Correio da Manhã", daily sports newspaper "Record", daily newspaper of economy segment "Jornal de Negócios", gratuitous newspapers "Destak" and "Metro", weekly newsmagazine "Sábado" stand out, as well as other publications, such as "Máxima"; "Tv Guia", "Flash!", "Vogue" and "GQ".
Therefore, Cofina Group's complete structure of participations as of 31 December 2011 is as follows:
The year of 2011 was also characterized by a very difficult macroeconomic environment, which had consequences regarding the internal demand. Still, Cofina managed to keep, and in some cases, reinforce its market leadership in its main media products.
According to the data provided by APCT for 2011, "Correio da Manhã" is the most sold newspaper in Portugal, with an average of more than 125 thousand copies sold daily. According to the data provided by this certifying entity, "Correio da Manhã" has a market share of 43.8% (regarding the daily paid generic newspapers segment). It should be noticed that in 2010, "Correio da Manhã" had a market share of 41.9% and that, in 2011, despite the adverse market conditions, the newspaper reinforced its leadership.
The consolidated financial information of Cofina for the year 2011 was prepared in accordance with the recognition and measurement principles defined by the International Financial Reporting Standards as adopted by the European Union, and may be summarized as follows:
| (amounts in thousand Euro) | 2011 | 2010 | Var (%) 2011/2010 |
|---|---|---|---|
| Consolidated operating Revenue | 126,677 | 136,314 | -7.1% |
| Circulation | 64,682 | 65,029 | -0.5% |
| Advertising | 49,774 | 54,947 | -9.4% |
| Alternative marketing products and others | 12,221 | 16,338 | -25.2% |
| Consolidated EBITDA (b) | 19,751 | 23,108 | -14.5% |
| EBITDA margin | 15.6% | 17.0% | - 1.4 p.p. |
| EBIT | 16,388 | 19,489 | -15.9% |
| EBIT Margin | 12.9% | 14.3% | - 1.4 pp |
| Net consolidated profit / (loss) (b) | 4,812 | 5,018 | -4.1% |
(a) EBITDA = Earnings before interest, taxes, depreciation and amortisation (b) Net Profit/ (Loss) attributable to the parent company shareholders
Consolidated operating revenue reached approximately 126.7 million Euro, corresponding to a decrease of about 7% over the same period last year. This decrease was motivated by lower advertising revenues (- 9.4%), circulation revenues (-0.5%) and alternative marketing products (-25%).
As of 31 December 2011, Cofina's nominal net debt reached 79.8 million Euro, which corresponds to a decrease of 9.8 million Euro compared to the reported net debt at the end of the previous year.
In a more detailed view, the key indicators regarding the consolidated income statement of Cofina Group are as follows:
| (amounts in thousand Euro) | 2011 | 2010 | Var (%) 2011/2010 |
|---|---|---|---|
| Consolidated operating revenue | 126,677 | 136,314 | -7.1% |
| Circulation | 64,682 | 65,029 | -0.5% |
| Advertising | 49,774 | 54,947 | -9.4% |
| Alternative marketing products and others | 12,221 | 16,338 | -25.2% |
| Operating income by segments | 126,677 | 136,314 | -7.1% |
| New spapers | 96,681 | 101,485 | -4.7% |
| Magazines | 29,996 | 34,829 | -13.9% |
| Operating Expenses (a) | 106,926 | 113,206 | -5.5% |
| Impairment | 1,050 | 0 | - |
| Consolidated EBITDA (b) | 19,751 | 23,108 | -14.5% |
| EBITDA margin | 15.6% | 17.0% | - 1.4 p.p. |
| New spapers | 19,724 | 22,604 | -12.7% |
| New spapers EBITDA margin | 20.4% | 22.3% | - 1.9 p.p. |
| Magazines | 27 | 504 | - |
| Magazines EBITDA margin | 0.1% | 1.4% | - 1.4 p.p. |
| Amortisation and depreciation (-) | 3,363 | 3,619 | -7.1% |
| EBIT | 16,388 | 19,489 | -15.9% |
| EBIT Margin | 12.9% | 14.3% | - 1.4 pp |
| Net financial income / (loss) | (3,021) | (16,377) | - |
| Income before taxes and minority interests | 13,367 | 3,112 | - |
| Income taxes (-) | 8,417 | (2,138) | - |
| Minority Interests (-) | 138 | 232 | -40.5% |
| Net consolidated profit / (loss) (c) | 4,812 | 5,018 | -4.1% |
(a) Operating expenses excluding amortisation
(a) EBITDA = Earnings before interest, taxes, depreciation and amortisation
(c) Net Profit/ (Loss) attributable to the parent company shareholders
The EBITDA in 2011 was approximately 19.8 million Euro, which corresponds to a decrease of 14.5% year on year. The EBITDA margin reached 15.6%. In absolute values, revenues decreased approximately 9.6 million Euro between 2010 and 2011, while EBITDA declined by about 3.4 million Euro.
The control and cost rationalization measures that have been adopted by Cofina allowed, at the EBITDA level, to accommodate most of the decreases in revenues.
During the year 2011 an impairment loss on goodwill totaling 1.05 million Euro was recorded, which allowed adapting the valuation of the portfolio of Cofina to the current macroeconomic environment and current expectations.
Consolidated net income reached 4.8 million Euro at year-end 2011, which represents a decrease of about 4.1% over the profit in the previous year.
| 2011 | 2010 | Var (%) | |
|---|---|---|---|
| (amounts in thousand Euro) | 2011/2010 | ||
| Consolidated operating revenue | 96,681 | 101,485 | -4.7% |
| Circulation | 48,890 | 48,305 | 1.2% |
| Advertising | 38,177 | 41,006 | -6.9% |
| Alternative marketing products and others | 9,614 | 12,174 | -21.0% |
| Operating expenses (a) | 76,957 | 78,881 | -2.4% |
| Impairment costs | 850 | - | - |
| Consolidated EBITDA (b) | 19,724 | 22,604 | -12.7% |
| EBITDA margin | 20.4% | 22.3% | -1.9 p.p. |
(a) Operating expenses excluding amortisation
(b) EBITDA = earnings before interest, taxes, amortisation and depreciation
Cofina newspapers segment presented in 2011 total revenues of 97 million Euro, a decrease of 4.7% when compared with 2010. Advertising revenues presented a year-on-year decrease above 6%, while the alternative marketing products recorded a decrease of about 21%.
Circulating income increased 1.2%, reaching approximately 48.9 million Euro.
In terms of costs, an impairment loss on goodwill in the amount of 850 thousand Euro was recorded.
In this segment, EBITDA reached approximately 19.7 million Euro, which represents a decrease of 12.7%. In absolute terms, the revenues decreased about 4.8 million Euro, while EBITDA contracted around 1.9 million Euro. The EBITDA margin reached 20.4% (vs. 22.3% in 2010).
Regarding the portfolio of this segment, emphasis should be made to the performance of the generalist daily newspaper "Correio da Manhã", which during 2011, and according to the data from APCT ("Associação Portuguesa de Controlo de Tiragens"), recorded an average daily paid circulation above 125 thousand newspapers. "Correio da Manhã" has strengthened its leadership, reaching a market share of 43.8%.
| 2011 | 2010 | Var (%) | |
|---|---|---|---|
| (amounts in thousand Euro) | 2011/2010 | ||
| Consolidated operating revenue | 29,996 | 34,829 | -13.9% |
| Circulation | 15,792 | 16,724 | -5.6% |
| Advertising | 11,597 | 13,941 | -16.8% |
| Alternative marketing products and others | 2,607 | 4,164 | -37.4% |
| Operating expenses (a) | 29,969 | 34,325 | -12.7% |
| Impairment costs | 200 | - | - |
| Consolidated EBITDA (b) | 27 | 504 | -94.6% |
| EBITDA margin | 0.1% | 1.4% | -1.4 p.p. |
(a) Operating expenses excluding amortisation
(b) EBITDA = earnings before interest, taxes, amortisation and depreciation
On an annual basis, magazines segment revenues decreased approximately 14%, to 30 million Euros. EBITDA reached the breakeven, although the recorded value is affected by the recording for an impairment loss on goodwill of 200 thousand Euro.
Circulation revenues fell by 5.6%, reaching 15.8 million Euros; advertising and alternative marketing products revenues' recorded declines of 16.8% and 37.4%, respectively, when compared with 2010.
As a result of the cost reduction strategy that has been implemented, operating costs reduced 13% towards 2010.
During 2011, the non-executive directors of the Company have developed regularly and effectively the functions that they are legally entitled to and which consist in monitoring and evaluating the activities of the executive members.
During 2011, the non-executive directors regularly and actively attended the Board of Directors meetings, discussing the matters under consideration and expressing their respective opinions on the Group's strategic guidelines and specific business areas. Whenever necessary, they maintained a close contact with the directors of the Group's operating and financial units. In the year 2011, and during the Board of Directors' meetings, the executive members provided all the information required by the remaining members of the Board of Directors.
The projected expectations of contraction in domestic demand leave few doubts towards a negative trend in the advertising market. The key issue is related with its dimension.
It is anticipated that the year 2012 is characterized by a strong macroeconomic contraction, with particular impact on private consumption. Therefore, a strong decrease in advertising investment is expected. A decline in circulation revenues is also expected. Cofina´s publications, and their revenue, will be affected by this crisis scenario.
However, the Group continues to develop measures to minimize the negative impact of lower revenues, through improvement and rationalization costs policies'. These measures will make the Cofina Group more agile and competitive.
It is expected that, during the year 2012, the deepest point of the economic crisis in Portugal will be reached. Finally, it's important to stress that the uncertainties at the macroeconomic level, as well as some structural changes that the media industry is going through, make any projection more difficult.
Cofina, S.G.P.S., S.A., as holding company of the Group, recorded in its individual financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, a net loss of 16,644,304.49 Euro, for which, in accordance with the applicable legislation and the Company's articles of association, the Board of Directors proposes to the Shareholders General Meeting its transfer to the caption "Retained earnings".
The Board of Directors proposes, as well, the distribution of free reserves in the amount of 1,025,658.36 Euro, by means of dividends, which corresponds to a dividend of 0.01 Euro per share.
0.1. Location where the public may find the Corporate Governance Codes to which the issuer is subject
This report was prepared in accordance with the CMVM Regulation no. 1 / 2010, of 7 January 2010 and the Code of Corporate Governance (Código do Governo das Sociedades), available at www.cmvm.pt, and aims to be the summary of the fundamental aspects of the management of the Company as regards the Board of Directors, considering the need for transparency on this issue and the need for communication with investors and stakeholders. The reporting format adopted by the Company is laid down in article 2 and in Appendix I of that Regulation.
Also fulfilled are the duties of disclosure required by Law 28/2009, of 19 June, articles 447 and 448 of the Commercial Companies' Code (Código das Sociedades Comerciais) and the CMVM Regulation No. 5/2008, of 2 October 2008.
0.2. Detailed list of recommendations that have or have not been adopted by Cofina, SGPS, S.A., which are set out in the CMVM Corporate Governance Code.
Cofina, S.G.P.S., S.A. complies with the majority of the recommendations of the Securities Market Commission (Comissão de Mercado de Valores Mobiliários – CMVM) as follows:
| CMVM recommendations | Complies | Report |
|---|---|---|
| I. GENERAL MEETINGS | ||
| I.1 GENERAL MEETING BOARD I.1.1. The Chairman of the Board of the Shareholders' General Meeting shall be given adequate human and logistical resources, taking into consideration the financial position of the Company. |
Complies | I.1 |
| I.1.2. The remuneration of the Chairman of the Board of the Shareholders' General Meeting | ||
| shall be disclosed in the annual Corporate Governance Report. | Complies | I.3 |
| I.2. PARTICIPATION AT THE MEETING | ||
| I.2.1 The time period required for share deposit or blocking declarations for attendance at the general | ||
| meeting to be received by the board of the shareholders' general meeting shall not exceed 5 working | ||
| days. | Not applicable | I.4 |
| I.2.2 Should the Shareholders' General Meeting be suspended, the Company shall not require | ||
| share blocking during the full period until the meeting is resumed, but shall apply the same period | ||
| as for the first session. | Not applicable | I.5 |
| I.3. VOTING AND EXERCISING VOTING RIGHTS | ||
| I.3.1 Companies should not impose any statutory restriction on postal voting and whenever | ||
| adopted or admissible, on electronic voting. | Complies | I.9 e I.12 |
| I.3.2 The statutory advance deadline for receiving voting ballots by post shall not exceed | ||
| three working days. | Complies | I.11 |
| I.3.3 Companies shall ensure that voting rights and shareholder's attendance are proportional, | ||
| ideally through the statutory provision that obliges the one share-one vote principal. Companies | ||
| that: i) hold shares that do not confer voting rights; ii)establish that voting rights will not be taken into account above a certain number, when issued by a single shareholder or by shareholders |
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| related to him/her, do not comply with the proportionality principle. | Complies | I.6 e I.7 |
| I.4. RESOLUTION FIXING QUORUM | ||
| Companies shall not set a resolution-fixing quorum that is greater than that required by law. | Complies | I.8 |
| I.5. MINUTES AND INFORMATION ON RESOLUTIONS ADOPTED | ||
| Extracts from the minutes of the general meetings or documents with an equivalent content | ||
| must be made available to shareholders on the company's website within a five day period | ||
| after the General Meeting has been held, irrespective of the fact that such information may not | ||
| be classified as material information. The information disclosed shall include the resolutions passed, | ||
| the capital represented and the results of voting. Said information shall be kept on file on the company's | ||
| website for no less than a 3 year period. | Complies | I.13 e I.14 |
| I.6. MEASURES RELATING TO CHANGES IN COMPANY CONTROL | ||
| I.6.1 Measures aimed at preventing the success of takeover bids, shall respect the interests of both | ||
| the company and its shareholders. In accordance with this principle, any company that has Articles | ||
| of Association with clauses that restrict or limit the number of votes that may be held or exercised by | ||
| a single shareholder, either individually or acting in concert with other shareholders, shall also | ||
| require that, at least once every five years, the continuation of such clauses must be ratified at a | ||
| shareholders' general meeting, at which the quorum shall not exceed the legal minimum and all | ||
| votes cast shall count, without applying any restriction. I.6.2. Defensive measures that automatically lead to serious erosion in the value of the Company's assets, |
Complies | I.19 e I.21 |
| when there has been a change in control or a change in the composition of the Board management, should | ||
| not be adopted, as this prevents the free transmission of shares and the ability of shareholders to freely | ||
| assess the performance of those responsible for managing the Company. | Complies | I.20 |
| CMVM recommendations | Complies | Report |
|---|---|---|
| II. MANAGEMENT AND AUDIT BOARDS | ||
| II.1. GENERAL POINTS | ||
| II.1.1. STRUCTURE AND DUTIES | ||
| II.1.1.1 The Board of Directors in its Corporate Governance Report shall assess the governance model | ||
| adopted by the Company, by identifying any restrictions that are holding back performance | ||
| and by proposing actions to be taken that are judged to be appropriate to resolve them. | Complies | II.1 |
| II.1.1.2 The company shall set up internal control and risk management systems to protect its assets and | ||
| maintain the transparency of its corporate governance, which will allow risks to be identified and managed. | ||
| These systems should include as a minimum the following: i) establishment of the company's strategic | ||
| objectives relating to risk taking; ii) identification of the main risks related to its business and events that may | ||
| be the source of risks; iii) the analysis and measurement of the impact and probability of the occurrence of | ||
| each of the potential risks; iv) risk management, the goal of which is to align risks incurred with the | ||
| company's strategic choice of direction in dealing with these risks; v) mechanisms for controlling the | ||
| execution of the risk management measures taken and their effectiveness; vi) implementing internal | ||
| mechanisms to provide information about the various components of the system and give warning of risks; | ||
| vii) periodic assessment of the system implemented and the necessary changes introduced. | ||
| Fails | 0.4, II.5 e II.9 | |
| II.1.1.3 The board of directors shall ensure the set up and proper functioning of the internal control and risk management systems. The supervisory board shall be responsible for assessing the |
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| functioning of said systems and proposing any relevant changes in accordance with the company's | ||
| requirements. | Complies | II.6 |
| II.1.1.4 The companies shall: i) identify the main economic, financial and legal risk that the company | ||
| is exposed to during the exercise of its activity; ii) describe the performance and efficiency of the risk | ||
| management system, in its annual report on corporate governance. | Complies | II.5 e II.9 |
| II.1.1.5 The board of directors and the supervisory board shall have internal operating regulations | ||
| which must be disclosed on the company's website. | Complies | II.7 |
| II.1.2. INCOMPATIBILITY AND INDEPENDENCE | ||
| II.1.2.1 The board of directors shall include a sufficient number of non-executive members to ensure | ||
| that there is effective supervision, auditing and assessment of the activities of the members of the | ||
| executive board. | Complies | II.14 |
| II.1.2.2 Non-executive members shall include an adequate number of independent members, | ||
| taking into account the size of the company and its shareholder structure, but this shall never be less | ||
| than one quarter of the total number of board members. | Fails | 0.4 e II.14 |
| II.1.2.3 The assessment carried out by the board of directors of the independence of non-executive | ||
| members shall take into account the legal and regulatory rules in force concerning independence | ||
| requirements and the system of dealing with conflicts of interest applicable to members of other statutory | 0.4 e II.15 | |
| entities, in order to ensure timely and consistent application of independence criteria across the entire | ||
| company. An independent executive member shall not be considered as such, if, on another statutory entity | ||
| and because of the rules applying to it, he/she is not considered to be independent. II.1.3. ELIGIBILITY CRITERIA FOR APPOINTMENT |
Fails | |
| II.1.3.1 Depending on the governance model adopted, the chairman of the statutory audit board, or | ||
| of the board audit committee or of the financial matters committee shall be independent and possess | ||
| the necessary skills to perform his/her duties. | Complies | II.21 e II.22 |
| II.1.3.2 The process for selecting candidates as non-executive members shall be designed to prevent | ||
| interference by executive members. | Fails | 0.4 e II.16 |
| II.1.4. POLICY ON THE REPORTING OF IRREGULARITIES | ||
| II.1.4.1 The company shall adopt a policy on reporting irregularities that allegedly occurred within the | ||
| company, which includes the following: i) the means through which such irregularities may be reported | ||
| internally, including the persons who are entitled to receive the reports; ii) how the report is to be handled, | 0.4 e II.35 | |
| including confidential treatment, should this be requested by the reporter. | Fails | |
| II.1.4.2 General guidelines from this policy should be disclosed in the Corporate Governance Report. | Fails | 0.4 e II.35 |
| CMVM recommendations | Complies | Report |
|---|---|---|
| II.1.5. REMUNERATION | ||
| II.1.5.1 The remuneration of the members of the board of directors shall be structured so that their interests can be aligned with the long terminterests of the company. Furthermore, the remuneration shall be based on performance assessment and shall discourage excessive risk taking. Remuneration should thus be structured as follows: i) The remuneration of the board of directors carrying out executive duties shall include a variable element which is determined by a performance assessment carried out by competent bodies of the company, according to pre-established and quantifiable criteria. These criteria shall take into consideration the |
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| company's real growth and the actual return generated for shareholders, its long-term sustainability and the risks taken on, as well as compliance with the rules applicable to the company's business. ii) The variable component of the remuneration shall be reasonable overall in relation to the fixed remuneration component and maximum limits shall be set for all components. |
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| iii) A significant part of the variable remuneration shall be deferred for a period not less than three years and its payment shall depend of the company's continued positive performance during said period. (iv) Members of the Board of Directors shall not enter into contracts with the company or third parties that will have the effect of mitigating the risk inherent in the variability of the remuneration established by the company. |
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| (v) Until the end of their mandates, executive directors shall hold company shares that have been allotted to them by virtue of variable remuneration schemes up to a maximum value of twice their total annual remuneration, with the exception of those shares that are required to be sold for the payment of taxes on the |
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| gains made on said shares; (vi) When the variable remuneration includes stock options, the period for exercising same shall be deferred for a period of not less than three years; |
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| (vii) The appropriate legal framework shall be established so that in the event of a director's dismissal without due cause, the established compensation shall not be paid out, if the dismissal or termination by agreement is due to his/hers unsatisfactory performance; |
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| (viii) The remuneration of non-executive board members shall not include any component the value of which depends on the performance or the value of the company. |
Fails | 0.4, II.30, II.32 e II.33 |
| 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 of directors by mutual agreement. |
Complies | II.30 |
| II.1.5.3 The remuneration policy statement referred to in Article 2 of Law No. 28/2009 shall also include the | ||
| remuneration of directors, which contains a significant variable component, within the meaning of Article 248- B/3 of the Securities Code. The statement shall be detailed and the policy presented shall in particular take |
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| into account the long-term performance of the company, compliance with the rules applicable to its business and restraint in taking risks. |
Complies | II.29 |
| II.1.5.4 A proposal must be submitted to the shareholders' general meeting to approve plans to grant shares | ||
| and/or share options or award compensation based on variations in share prices to members of the | ||
| management and audit boards, as well as to other persons discharging managerial responsibilities | ||
| ("dirigentes") as defined in Article 248 B, paragraph 3 of the Portuguese Securities Code. The proposal shall include all information necessary for a comprehensive assessment of the plan. The proposal shall be |
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| presented together with the rules that govern the plan or if these have not yet been prepared, the general conditions that will be applied. In the same way, the main features of any retirement benefit plan that benefits |
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| the board of directors and supevisory board, as well as other persons discharging managerial | ||
| responsibilities ("dirigentes") as defined in Article 248 B, sub-paragraph 3 of the Portuguese Securities | ||
| Code, shall also be approved at the shareholders' general meeting. II.1.5.6 At least one representative of the shareholders' remuneration committee must be present at the |
Not applicable | I.17, II.33 e II.10 |
| shareholders' annual general meeting. | Complies | I.15 |
| 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 II.2. BOARD OF DIRECTORS |
Complies | II.31 |
| II.2.1 In accordance with the limits established by the Portuguese Companies Act for each board and | ||
| supervisory entity, and unless the company is of sufficiently small size, the board of directors shall delegate | ||
| the day-to-day running of the company, and the delegated powers and terms of this delegation should be set out in the corporate governance report. |
Fails | 0.4 e II.3 |
| II.2.2 The board of directors shall ensure that the company acts in accordance with its stated objectives, and | ||
| should not delegate its own responsibilities, including: i) definition of the company's strategy and general | ||
| policies; ii) definition of the corporate structure of the group; iii) decisions that are considered to be strategic | ||
| due to the amounts, risks and special circumstances involved. II.2.3 Should the chairman of the board of directors have an executive role, the board of directors shall set |
Complies | II.3 |
| up efficient mechanisms to coordinate the work of non-executive members, to ensure that they take decisions | ||
| in an independent and informed manner, and shall also explain these mechanisms to the shareholders in | ||
| the corporate governance report. | Complies | II.8 |
| CMVM recommendations | Complies | Report |
|---|---|---|
| II.2.4 The annual management report shall include a description of the activities carried out by non executive board members and shall, in particular, report any restrictions that they have encountered. |
Complies | II.17 |
| II.2.5. The company should explain its policy of portfolio rotation on the board of directors, in particular the | ||
| person responsible for financial matters, and report on same in the annual corporate governance report. | Fails | 0.4 e II.11 |
| II.3. CHIEF EXECUTIVE OFFICER ('CEO'), EXECUTIVE COMMITTEE AND EXECUTIVE | ||
| BOARD OF DIRECTORS | ||
| II.3.1 When Directors, who carry out executive duties are requested by other Board members to supply | ||
| information, they shall provideanswers in a timely manner with information that adequately responds to the | ||
| request made. | Complies | II.8 e II.13 |
| II.3.2 The chairman of the executive committee shall send notices convening meetings and minutes | Not applicable because the | |
| of the respective meetings to the chairman of the board of the directors and, when applicable, to the | Company hasn't | |
| chairman of the statutory audit board or the audit committee. | Not applicable | executive committee. |
| II.3.3 The chairman of the executive board of directors shall send the notices convening meetings | Not applicable because the | |
| and minutes of the respective meetings to the chairman of the general and supervisory board and to the chairman of the financial matters committee. |
Not applicable | Company has adopted the reinforced latin model. |
| II.4. GENERAL AND SUPERVISORY BOARD, FINANCIAL MATTERS COMMITTEE, AUDIT | ||
| COMMITTEE AND STATUTORY AUDIT BOARD | ||
| II.4.1 In addition to fulfilling its audit role, the general and supervisory board shall perform an advisory | ||
| role, as well as monitor and continually assess the management of the company by the executive | ||
| board of directors. among the other matters on which the general and supervisory board should | ||
| give their opinion, are the following: i) definition of the strategy and general policies of the company; | Not applicable because the | |
| ii) the corporate structure of the group; and iii) decisions that are considered to be strategic due | Company hasn't general | |
| to the amounts, risks and special circumstances involved. | Not applicable | and supervisory board. |
| II.4.2 The annual reports on the activity of the general and supervisory board, the financial matters | ||
| committee, the audit committee and the statutory audit board shall be disclosed on the company's website | ||
| together with the financial statements. | Complies | II.4 |
| II.4.3 The annual reports on the activity of the general and supervisory board, the financial matters | ||
| committee, the audit committee and the statutory audit board shall include a description of the supervisory | ||
| and audit work completed and shall, in particular, report any restrictions that they encountered. | Complies | II.4 |
| II.4.4 The general and supervisory board, the audit committee or the statutory audit board (depending on | ||
| the governance model adopted) shall represent the company, for all purposes, in dealings with the external | ||
| auditor. this shall include proposing who will provide this service, their respective remuneration, ensuring | ||
| that the company provides adequate conditions to allow them to provide their services, acting as the point of contact with the company and being the first recipient of their reports. |
Complies | II.4 |
| II.4.5 The general and supervisory board, the audit committee or the statutory audit board (depending on | ||
| the governance model adopted), shall assess the external auditor on an annual basis and propose to the | ||
| shareholders' general meeting that the external auditor should be discharged, should justifiable grounds | ||
| exist. | Complies | II.24 |
| II.4.6 the internal audit services and those that ensure compliance with the rules applicable to the company | ||
| (compliance services) should functionally report to the audit committee, the general and supervisory board | ||
| or in the case of companies adopting the latin model, to an independent director or to the supervisory board, | ||
| regardless of the hierarchical relationship that these services have with the executive management of the | ||
| company. | Fails | 0.4 e II.5 |
| II.5. SPECIALISED COMMITTEES | ||
| II.5.1 Unless the company is restricted by its size, the board of directors and the general and supervisory | ||
| board, depending on the governance model adopted, shall set up the necessary committees in order to: i) | ||
| ensure that a robust and independent assessment of the performance of the executive directors is carried | ||
| out, as well as of its own overall performance and including the performance of all existing committees; ii) | ||
| consider the governance system adopted and assess its efficiency and propose to the respective bodies, | ||
| measures to be implemented to make improvements; iii) and identify in a timely manner potential candidates | ||
| with the high level profile necessary to carry out the duties of a board director. | ||
| Complies | II.36 | |
| II.5.2 Members of the Remuneration Committee or alike 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. | Complies | II.38 e II.39 |
| II.5.3. Any person or company which provides or has provided over the last three years services to any | ||
| organization reporting to the board of directors, to the board of directors itself or which has a relationship | ||
| currently existing with the consultant to the company, shall not be recruited to assist the remuneration | ||
| committee. This recommendation also applies to any person or company who is connected to the company | ||
| through an employment contract or as a provider of services. | Complies | II.39 |
| II.5.4 All Committees shall draw up minutes of the meetings held. | Complies | II.37 |
| CMVM recommendations | Complies | Report |
|---|---|---|
| III. INFORMATION AND AUDITING | ||
| III.1. GENERAL DISCLOSURE REQUIREMENTS | ||
| III.1.1 companies shall ensure that permanent contact is maintained with the market, upholding the principle | ||
| of equal treatment for all shareholders and avoiding any asymmetry in the access to information by | ||
| investors. to achieve this, the company shall set up an investor relations office. | Complies | III.16 |
| III.1.2 The following information disclosed on the company's internet website, shall be available in english: | ||
| a) the company's name, its listed company status, the registered office and the remaining information set out | ||
| in article 171 of Portuguese Companies Act; | ||
| b) articles of association; | ||
| c) identification of the members of the statutory governing bodies and of the representative for relations with | ||
| the market; | ||
| d) investor relations office — its functions and contact details; | ||
| e) financial statements; f) half-yearly calendar of company events; |
||
| g) proposals presented to shareholders' general meetings; | ||
| h) notices convening shareholders' general meetings. | ||
| Complies | III.16 | |
| III.1.3. Companies shall rotate auditors after two or three mandates of four or three years respectively. If | ||
| they are to continue beyond this period, the reasoning behind this decision should be written in a specific | ||
| report prepared by the company's supervisory board in which is expressly considered the degree of | ||
| independence of the auditors and the advantages and costs of replacing them. III.1.4.The external auditor must, within its powers, verify the implementation of remuneration policies and |
Fails | 0.4 e III.18 |
| systems, the efficiency and functioning of internal control mechanisms and report any shortcomings to the | ||
| company's Supervisory Board. | Complies | II.4 |
| III.1.5. The company shall not recruit the external auditor, nor any related company or other entity that is | ||
| part of the same network, for services other than audit services. Where recruiting such services is called for, | ||
| the services involved 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 explained | ||
| in the annual Corporate Governance Report. | Complies | III.17 |
| IV. CONFLICTS OF INTEREST | ||
| IV.1. SHAREHOLDER RELATIONS | ||
| IV.1.1 In relation to business conducted between the company and shareholders with qualified | ||
| shareholdings, or entities with which these are related, in accordance with Article 20 of the Securities Code, | ||
| such business should be conducted on an arm's length basis. | Not applicable | III.11 e III.12 |
| IV.1.2 Significant business conducted between the company and shareholders with qualified shareholdings, | ||
| or entities with which theseare related, in accordance with Article 20 of the Securities Code, should be | ||
| subject to prior comment and opinion by the audit board. This entity must establish the necessary criteria to | ||
| define the relevant level of significance of the business involved and the scope of its involvement. | Not applicable | 0.4 e III.13 |
0.3. Overall assessment on the degree of adoption of recommendation groups related to each other by topics
Cofina considers that, notwithstanding the failure to fully comply with all the recommendations of CMVM, as explained in detail in the following chapters, the degree of adoption of the recommendations is very broad and complete.
0.4. Explanation of the differences between the corporate governance practices and the CMVM's recommendations.
The recommendations II.1.1.2, II.1.2.2, II.1.2.3, II.1.3.2, II.1.4.1, II.1.4.2, II.1.5.1, II.2.1, II.2.5, II.4.6, III.1.3 and IV.1.2 are not completely adopted by Cofina, as explained below.
Recommendation II.4.6: Cofina has no independent internal audit and compliance services, so the recommendation is not fully adopted.
Recommendation III.1.3: Regarding the rotation period of the External Auditor, Cofina has no defined fixed rotation policy implemented. The Board of Directors considers that the rotation of the partner that is responsible for the Audit services, together with the powers provided to the Statutory Board is sufficient to guarantee the independence of the External Auditor.
The General Meeting, is made up of all the shareholders with voting rights, who are responsible for approving changes in the articles of association, making a general assessment of the Management and supervision of the Company, approving the Directors' Report and financial statements for the year, electing the members of the corporate bodies of its competence and, in general, considering all the matters submitted by the Board of Directors.
The President of the General Meeting is Dr. Pedro Nuno Fernandes de Sá Pessanha da Costa and the secretary is Dr. Fernando Eugénio Cerqueira Magro Ferreira.
The President of the Shareholders' General Meeting has the manpower and logistical support that are appropriate to his needs and to fulfill his duties, including the support and collaboration provided by the secretariat of the Company and the Secretary of the Company.
The current members of the Presiding Board of Cofina´s General Meeting were elected at the General Meeting held on 26 May 2011 for the period 2011/2013.
The remuneration of the Chairman of the Presiding Board of the General Meeting in the year ended as of 31 December 2011 was 5,000 Euro.
I.4 Indication of the prior notice required for the blocking of shares for participation in the General Meeting
Considering the publication of the Decree Law no. 49/2010, of 19 May, this recommendation is no longer applicable.
I.5 Indication of the rules for blocking shares in the event of the General Meeting being suspended
Considering the publication of the Decree Law no. 49/2010, of 19 May, this recommendation is no longer applicable.
I.6. Number of shares corresponding to one vote
The General Meeting is composed by all shareholders with voting right, corresponding one vote to each share.
I.7. Indication of the articles of association rules which envisage the existence of shares that do not confer voting rights or which enable voting rights over a certain number not to be counted, when issued by a single shareholder or shareholders related thereto
There are no articles of association which envisage the existence of shares that do not confer voting rights or which enable voting rights over a certain number not to be counted, when issued by a single shareholder or shareholders related thereto.
I.8. The existence of articles of association on the exercise of voting rights, including constitutive and decision-making quorums or systems for equity rights
Individual shareholders with voting rights and legal persons who are shareholders of the Company may be represented by the person that is designated for that purpose. The representation should be communicated to the President of the General Meeting, in writing, until 5 p.m. of the fifth working day prior to the day assigned for the meeting of the General Meeting. The Company makes available at its headquarters and at its website before the date of each General Meeting, a draft of the appropriate form.
Cofina's articles do not contemplate any constituent or deliberative quorum higher than that considered by law.
I.9. The existence of articles of association rules on the exercise of voting rights via postal voting
The association rules on the exercise of voting rights by correspondence are as follows:
the vote by correspondence should be exercised through a written declaration, with a signature recognized by a public notary or an attorney and accompanied by a document supporting the registration of the shares on behalf of the shareholder;
the declaration of intent to exercise the vote by correspondence and the supporting document of the quality of shareholder must be delivered in the Company's headquarters, until 5 p.m. of the fifth working day prior to the day assigned for the meeting, with identification of the remittent, addressed to the Chairman of the General Shareholders' Meeting;
there must be a declaration of vote for each point of the Order of the Day for which the vote by correspondence is admitted and each declaration of vote will have to be sent in a closed and sealed envelope, inside the mentioned letter, which can only be opened by the Chairman of the General Shareholders' Meeting at the moment of the counting of the votes, for what each envelope will have to indicate in its exterior the point of the Order of the Day that it respects to;
the votes by correspondence will be valid as negative votes in relation to the proposals of deliberation presented after the issuance of the vote;
the presence of the shareholder in the General Meeting, or its representative, will be understood as revocation of its vote by correspondence.
I.10. Providing a model for the right to vote by correspondence
To exercise voting rights by correspondence, ballots are made available to shareholders at the Company´s headquarters. These may also be obtained through the Company's website.
I.11. Deadline requirement for the receipt of the postal ballots and the date on which the General Meeting is held
According with the articles of association, the declaration of intent to exercise the vote by correspondence and the supporting document of the quality of shareholder must be delivered in the Company's headquarters, until 5 p.m. of the fifth working day prior to the day assigned for the meeting, with identification of the remittent, addressed to the Chairman of the General Shareholders' Meeting.
I.12. The exercise of voting rights by electronic means
It is still not possible to exercise voting rights by electronic means.
I.13. Possibility of shareholders gaining access to excerpts of the Minutes of the General Meetings in the company's website within five days after the general meeting was held
Extracts of the minutes of general meetings are made available to shareholders on the Cofina' website within five days after the meeting.
I.14. Existence of a historical record on the company's website with the resolutions passed at the company's General Meetings, share capital and voting results referring to the previous three years.
The minutes of the General Meeting are made available to shareholders in Cofina' website, being available there a historical record for at least three years, the main information regarding these meetings, including resolutions, the capital represented and the voting results.
I.15. Indication of the representative(s) from the remuneration committee present at General Meetings
It is the practice of the Remuneration Committee to be represented in the General Meeting by its President and one of its members.
I.16. Information of the intervention of the General Meeting on matters concerning the company's remuneration policy and the assessment of the performance of the members of the Board of Directors and other Directors
According to the articles of association, the board members will have remunerations that will be set by the Remuneration Committee, composed by three elements, one of whom will be the president and will have casting vote, all elected by resolution of shareholders under Article 21 of the articles of association. The Remuneration Committee submits this proposal for approval at the Annual General Meeting.
The remuneration policy is reviewed on an annual basis and submitted for approval at the Annual General Meeting where, at least, one representative of the Remuneration Committee is present.
At the General Meeting held in 26 May 2011, a statement of the Remuneration Committee about the remuneration policy of Cofina and remaining group subsidiaries administration and supervision boards was submitted for appreciation to the Shareholders of the Company.
I.17. Information of the intervention of the General Meeting on matters concerning the proposal on the share allocation plan, and/or stock option plans, or based on share price fluctuations, the members of the Board of Directors, Supervisory Board and other Directors, within the meaning of Article 248-B/3 of the Securities Code together with the details provided to the General Meeting for the purposes of correctly assessing said plans
Cofina, S.G.P.S., S.A. does not have any plan to grant shares or stock option plans to members of Corporate Bodies, or employees.
I.18. Information of the intervention of the General Meeting on matters concerning the approval of the main features of the retirement benefit system as enjoyed by the members of the Board of Directors, Supervisory Board and other Directors, within the meaning of Article 248-B/3 of the Securities Code
Cofina, S.G.P.S., S.A. does not have any complementary pension plan/scheme or early pension plans for the benefit of the members of the administrative, supervisory boards and other leaders, nor has any other relevant non-monetary benefit.
I.19. Existence of statutory provision that envisages for a duty to be subject, at least every five years, to a resolution by the General Meeting, for the maintenance or withdrawal of the statutory provision providing for the limitation of the number of votes capable of being held or exercised by a single shareholder individually or together with other shareholders
There are no association rules that provide the limitation of the number of votes capable of holding or exercising by a single shareholder in an individually or in concert with other shareholders.
I.20. Indication of the defensive measures that have the effect of automatically causing a serious asset erosion of company´s assets in case of transfer of control or changes to the composition of the Board of
Cofina has not adopted any defensive measures that intended to provoke automatically serious erosion in the Company's assets in case of change of control or of the composition of the Management Board.
I.21. Important agreements to which the company is a party and that come into force, are changed or terminated in cases such as a change in company control, and also related outcome, unless the disclosure of same, due to its nature, is highly damaging to the company and except when the company is specifically obliged to disclose said information by virtue of other legal requirements
There are no significant agreements concluded by Cofina that include any clauses of control change (including following a takeover bid), that is, which take effect, be changed or finished, well as their effects. There are also no specific conditions that limit the exercise of voting rights by shareholders of the Company or other matters that may interfere with the success of takeover bids.
I.22. Agreements between the company and the Board of Directors, within the meaning of Article 248-B/3 of the Securities Code, that provide for compensation in cases of dismissal, unfair dismissal or termination of employment following a change in company control
There are no agreements between the Company and members of the board of directors or other directors, in what relates to the meaning of paragraph 3 of Article 248. º-B of the Securities Code, which provide compensations in case of resignation, dismissal without cause or termination of employment contract following a change in company´s control. There aren't also planned agreements with directors to ensure any compensation in case of non-renewal of the mandate.
II. Management and Audit Boards
The structure of the Company's Corporate Governance is based on the Latin model and is composed by the Board of Directors, Statutory Audit Board and by the Statutory Auditors, all elected by the Shareholders General Meeting.
The corporate bodies of Cofina, S.G.P.S., S.A. are:
As of 31 December 2011 this corporate body was composed of the following members:
All current members of the Board of Directors were appointed at the General Meeting held on 26 May 2011, were reelected for the period 2011/2013.
Of the current members of the Board of Directors, of Cofina S.G.P.S., S.A., only two perform executive functions.
Evaluation of the Board of Directors on corporate governance model
Cofina's Board of Directors considers that the governance model adopted is fully and effectively implemented, as well as rooted in the Company's culture, and there are no constraints in its operation.
In addition, the current governance model has proved to be balanced and permeable to the adoption of national and international best practices on corporate governance.
Finally, it is also understood that this structure of corporate governance has allowed the smooth operation of the Company, allowing also an appropriate and clear dialogue between the various corporate bodies and, as well as between the Company, its shareholders and other stakeholders
II.2. Identification and composition of specialized committees established with responsibilities in administration or supervision of the company.
The Board of Directors believes that the only committee to meet the essential needs of the Company, considering its size, is the Remuneration Committee.
Cofina, SGPS, S.A. has set a Remuneration Committee for the period 2011/2013, whose composition is as follows:
II.3. Organizational structure and functional chart relating to the division of powers among the various boards, committees and/or departments within the company, including information on the scope of the delegation of powers, particularly with regard to the delegation of day-to-day management of the company, or distribution of functions among the members of the Board of Directors or Supervisory Board, and a list of non-delegable matters and powers actually delegated
The Board of Directors, elected in the Shareholders' General Meeting, develops its tasks on a collective basis with the functions of management and coordination of the Group companies and is currently made up of a president and fiver members, four of them being non-executive.
Two of the current six members of Cofina's Board of Directors play executive functions.
The Board has been exercising its activity in constant dialogue with the Statutory Audit Board and the Statutory Auditor, providing the requested assistance with transparency and rigor, in compliance with the operating regulations and the best practices of corporate governance.
The structure and Cofina's governance practices did not reveal any constraints on the normal functioning of the Board of Directors or committees constituted under it, nor did this Board was aware of any constraints on the functioning of other corporate bodies.
Because Cofina is an Open Society, the Board of Directors and its employees have a great deal of attention in fulfilling the duties of confidentiality in dealings with third parties, protecting Cofina´s position in conflict of interest situations.
There is no limit to the maximum number of duties/functions that the Board members can accumulate in the administration bodies of other companies. The members of Cofina's Board of Directors are part of the administration of the most significant group companies, so as to enable their activities to be more closely accompanied.
In terms of internal control, operating companies of Cofina Group have management control bodies that are active at all levels of the affiliated companies, preparing monthly reports to each Board of Directors.
The distribution of functions among the several members of the Board of Directors may be presented as follows:
Paulo Fernandes Chairman João Borges de Oliveira Chief Financial Officer
Pedro Mendonça Non-executive member of the Board of Directors Domingos Matos Non-executive member of the Board of Directors Pedro Borges de Oliveira Non-executive member of the Board of Directors Ana Rebelo Fernandes Non-executive member of the Board of Directors
Generically, Cofina SGPS directors focus their activities in managing the Group's participations and defining the strategic development milestones. Cofina has not designated a Board of Directors' Executive Committee. The decisions regarding strategic decisions are adopted by the Board of Directors as a collegial organ composed by all its members, executive and non-executive, in their normal duties prosecution.
The daily management of each operating company is a responsibility of each respective Board of Directors, which includes some of Cofina's directors but also some other members with defined duties and competencies.
Thus, and taking into consideration the activities developed by the Board Members, both in Cofina SGPS and in the several group companies, the functional organization chart can be presented as follows:
The qualifications, experience and positions held in other Companies by the members of the Board of Directors are presented in Appendix I.
II.4. Reference to the annual reports on the activities undertaken by the General and Supervisory Board, the Financial Board, the Audit Board and the Supervisory Board including the description of the supervisory activity and indicating any restraints found, and being subject to disclosure on the website of the company, together with the financial statements
The supervision of the Company is the competence of the Statutory Audit Board and of the Statutory Auditors, being the Statutory Audit Board composed by three members and one substitute. Under proposal of the Statutory Audit Board, the General Meeting appoints the Statutory Auditor to examine the Company´s accounts.
The Statutory Audit Board should also represent the Company for all purposes with the External Auditor and Statutory Auditor, being responsible for proposing the provider of these services, the respective remuneration and ensuring that, within the company, suitable conditions to provide these services are guaranteed.
In 2011, the Statutory Audit Board has exercised its supervisory powers, having received the appropriate support from the Board of Directors for that purpose, namely to the preparation of its annual report on the supervision of the Company and an opinion on the Board of Directors report and proposals. The annual reports on the supervisory activity by the Statutory Audit Board are disclosed in the Company's website, together with the Company's accounts.
During 2011, the Statutory Auditors monitored the development of the company´s activity and carried out the tests and inspections deemed necessary to review and issue the legal certification of accounts, in interaction with the Statutory Audit Board and with full cooperation of the Board of Directors.
In addition, the Statutory Auditor pronounced itself over the work carried out in 2011 under its annual audit report, subject to assessment of the Annual General Shareholders Meeting.
II.5. Description of the systems of internal control and risk management implemented in the company, particularly as regards the process of financial reporting, to the operation of this system and its effectiveness
Cofina's businesses are affected by a large number of risk factors. Some of them are out of control of the management, others should be proactively managed, in order to positively influence the performance of the Group. These will affect the operations, revenue, income, assets, liquidity and the Group´s resources, and, consequently, the shareholder value of the Company.
Cofina has no autonomous internal audit services and compliance. Risk management is ensured by the several Cofina's operating units, based on a preliminary identification and prioritization of critical risks, by developing risk management strategies in order to implement control procedures considered appropriate to reduce the risk to an acceptable level. The administration believes it is essential to implement systems to:
The risk management strategies adopted are intended to ensure that:
correct issues reported.
The methodology of risk management includes different stages:
In what refers to risk control in the process of disclosure of financial information, a form of control is the involvement of a very limited number of Group employees in the process.
All involved in financial analysis are considered as having access to privileged information, and is especially knowledgeable about the content of their obligations as well as the sanctions resulting from the misuse of such information.
The internal rules of disclosure of financial information are designed to ensure its timeliness and prevent the asymmetry of market knowledge.
The existence of an effective internal control environment, particularly in the financial reporting process is an objective and commitment of the Board of Directors, looking to identify and improve the most relevant processes in terms of preparation and dissemination of financial information, with the objectives of transparency, reliability and materiality. The purpose of the internal control system is to ensure the reliability of the preparation of financial statements in accordance with the accounting principles used and the quality of financial reporting result.
The reliability of the financial information is ensured by the separation between those who prepare it and those who use it, and through various control procedures throughout the preparation and disclosure process.
The system of internal control in areas of accounting and preparation and disclosure of financial information is based in the following key elements:
the Statutory Audit Board and by the Board of Directors. Each quarter, these corporate bodies gather and analyze the Company's consolidated financial statements.
As regards to risk factors that could materially affect the accounting and financial reporting, we highlight the use of accounting estimates that are based on the best available information during the preparation of the financial statements as well as the knowledge and experience of past or present events. We also stress the balances and transactions with related parties: within Cofina Group, balances and transactions with related parties relate essentially to normal operating activities of the group companies, as well as to granting and obtaining loans at market rates.
II.6. Responsibility of the board and the supervisory body in the creation and operation of internal control and risk management of the company, as well as evaluating the functioning and adjustment to company's needs
The Statutory Audit Board is responsible for preparing an annual report on its activity and to give an opinion on the annual report and proposals presented by management and to monitor the effectiveness of risk management and internal control.
The Board of Directors decides the level of exposure assumed by the group in its various activities and, without prejudice to the delegation of tasks and responsibilities, sets overall limits of risk and ensures that policies and procedures for risk management are followed.
In monitoring the risk management process, the Board of Directors, as a body responsible for the Cofina's strategy, has the following objectives and responsibilities framework:
The subsidiaries manage their own risks, within the established criteria and delegations.
The Board of Directors, in articulation with the Statutory Audit Board, regularly reviews and oversees the preparation and disclosure of financial information, in order to prevent improper and untimely access of relevant information to other persons.
II.7. Indication of the existence of regulations on the functioning of the companies' bodies, or other rules relating to incompatibility and the maximum number of positions and the place where they can be consulted
The Board of Directors and the Statutory Audit Board approved the respective regulations that are available in Cofina's website.
The rules governing the appointment and replacement of members of the administration and supervision bodies are the ones established by the Commercial Companies Code ("Código das Sociedades Comerciais"), there being no specific statutory rules on this matter. Additionally, there is no specific rule regarding the maximum number of cumulative duties.
II.8. In the event of the Board of Directors' Chairman carrying out an executive role, an indication of the mechanisms coordinating the tasks of non-executive members in order to ensure independence and notification of decisions
To allow the non-executive directors an independent and informed decision, the Company has the following mechanisms:
The Board of Directors considers that the Group is exposed to the normal risks associated with its operations, namely in its operating units. Therefore, the main risks considered by the Group are:
Like every activity involving a commercial component, credit risk is one key factor that is considered by the Board of Directors on operating units. This risk is firstly monitored and controlled through a system for collecting financial and qualitative information, provided by entities that provide credible risk information, which allows customers to evaluate the feasibility of the fulfillment of their obligations, in order to minimize the risk associated with granting credit. Credit risk evaluation is done on a regular basis, by analyzing the current economic environment conditions, in particular the credit situation of each company and, when necessary, adopting the corrective measures.
The Group's exposure to credit risk is mainly attributable to the accounts receivable resulting from the Group's operating activity, which is mitigated by the financial discounts policy from advanced payments or prompt payments in cash. This risk is monitored on a regular basis by each of the Group companies, which intend to:
Considering the Group's debt, possible variations on the interest rate may have an unwanted impact on the results. Therefore, the Group adopts a balanced position between the cost of the debt and its exposure to the interest rate variability. When the reasonable risk is exceeded, the Group engages in interest rate swap contracts in order to reduce its exposure to risk and to restrict the potential volatility of results.
The interest rate risk is mainly related to interest costs of commercial paper and bonds at a variable interest rate. In order to reduce the level of risk that the Group is exposed, Cofina hired hedging products which fixed the interest rate.
The Group's sensitivity to variations in the interest rate is limited by the existence of hedging derivatives, as referred above, which are recorded at their market value. This is obtained as a reference to external valuations performed by independent entities.
Liquidity risk can occur if the sources of financing, such as operating cash flows of disinvestment, credit lines and cash flows from operations obtained do not meet the financing needs, such as cash outputs for operating activities and financing, investment, return on shareholders and reimbursement of debt.
As a means to mitigate this risk, the Group aims to maintain a net position and an average debt maturity that allows its reimbursement in adequate terms.
The Company is subject to national and activity laws and rules of the market where it works, which aim to ensure: the security and protection of consumers, employees´ rights and the maintenance of an open and competitive market. This way, Cofina is naturally exposed to the risk of several changes in law, which may affect the business rules and, consequently, harm or prevent them from reaching their strategic goals. The Company's behavior is of permanent cooperation with the authorities regarding the respect and observance of the law.
Competition
Risk related to the entrance of new competitors or repositioning of the current ones and with the actions that they may take in order to increase their market share (introducing new concepts, innovation, etc.). The inability of competing in areas such as the price, product portfolio, quality and service may have adverse effects on the financial results of the Group. In order to minimize this risk, Cofina performs constant benchmarking of its competition actions and invests in new products and formats in order to always offer to its customers innovative proposals.
A fundamental risk factor in the media business is the consumers' tendency to change their consumption patterns, depending mostly of social and economic factors.
Consumers frequently change their preferences and expectations, which demand a continuous adaptation and supply improvement. In order to anticipate the market and consumer tendencies, the Group regularly analyzes the information regarding the readers' behavior, based on market studies and independent entities opinion which have high reputation in the market.
The Board of Directors has broad powers to manage and represent the company and to carry out all operations relating to the implementation of its social object, namely:
II.11. The information on the rotation policy of the Board of Directors' functions, namely as to the financial responsibility division and the rules applicable to the appointment and replacement of members of the board of directors and of the supervisory board
The Members of the Board of Directors of the Company are elected by the General Shareholders Meeting for a three years mandate, and may be re-elected once or more.
The Board is composed of three to nine members, shareholders or not, elected by the General Shareholders Meeting.
Cofina promotes, whenever necessary or appropriate in view of developments in business and strategy of the Company, a reflection on the distribution of functions within its Board of Directors.
However, Cofina has not set a general policy of fixed rotation of functions of the members of the Board of Directors since it understands that this policy does not allow to best serve their interests and shareholders, so that the functions are determined and assigned at the beginning of each mandate according to the abilities, qualifications and experience of each member and it is not admissible that all directors may
exercise all the functions with equal ability and level of performance.
II.12. The number of meetings held by the board of directors and the supervisory board as well as reference to the minutes of said meetings.
The Board of Directors meets regularly, and their deliberations are only valid with the presence of the majority of its members. During 2011 the Board of Directors met twelve times with the corresponding records recorded in the minute book of the Board of Directors.
In what concerns the meetings of the Boards of Directors of subsidiaries of which Cofina´s Directors are also part, they occur as often as necessary to the proper monitoring of its operations.
During 2011 the Statutory Audit Board of the Company met five times, and the corresponding decisions are recorded in the minute's book of the Statutory Audit Board.
II.13. The number of meetings held by the Executive Committee or by the Executive Board of Directors, as well as reference to the drawing up of the minutes of those meetings and whenever applicable, the submission of same with the convening notices to the Chair of the Board of Directors, the Chair of the Supervisory Board or of the Audit Committee, the Chair of the General and Supervisory Board and to the Chair of the Financial Matters Committee
The Company's Board of Directors meets regularly and the Boards of Directors of subsidiaries of which Cofina's directors are also part, meet as often as necessary to the proper monitoring of its operations. Additionally, the Board of Directors meets periodically with the Statutory Audit Board providing the necessary support, including for the preparation of its annual report on the supervision of the Company and for the opinion on the report and proposals by the Board.
The meetings of the Board shall be scheduled and prepared in advance, and timely documentation relating to the matters contained in its agenda, to ensure all members of the Board the conditions for the exercise of their functions, shall be made available. Similarly, minutes of meetings, once approved, and their calls are forwarded to the President of the Statutory Audit Board.
During 2011 the Board of Directors met twelve times with the corresponding records recorded in the minute´s book of the Board.
II.14. Distinction between executive and non-executive members and among these, differentiating those members that would comply if the incompatibility rules were to be applied (Article 414-A/1 of the Commercial Companies Code, except for item /b and the independency criteria provided for in article 414/5, both of the Commercial Companies Code).
As of 31 December 2011, the Board was composed of six members, of whom four were non-executive directors (Domingos Matos, Pedro Mendonça, Ana Fernandes and Pedro Oliveira). Cofina understands that this composition ensures an effective supervision, monitoring and evaluation ability of the activity of executive members.
The Board of Directors does not include any member who complies with the incompatibility rules within the meaning of paragraph 1 of Article 414º - A and the independence rules set out in paragraph 5 of Article 414 of the Commercial Companies Code, as its members hold stakes above 2% of the company's voting rights or were reelected for more than two mandates, or are members of the Board of Directors of companies which are Group related or members in the Board of Directors in more than five companies.
II.15. A description of the legal and regulatory rules and other criteria that have been used as a basis for assessing the independency of its members carried out by the board of directors.
There are no members of the Board of Directors which may be regarded as independent as referred above and, therefore, the recommendation II.1.2.3 is not fulfilled.
II.16. A description of the selection rules for candidates for non-executive member positions and the way in which executive members refrain from interfering in the selection process.
Taking into account the size of the Company, it is considered unnecessary to have a formal process for selecting candidates for non-executive directors. Candidates for non-executive management are elected by the General Shareholders Meeting. In elective General meetings being held, the names included in the lists for the election of governing bodies, in particular with regard to the board and its executive members, have been proposed by shareholders who tender in question.
II.17. Reference to the fact that the company's annual management report includes a description on the activity carried out by non-executive members and possible obstacles that may be detected
The consolidated Director's report includes in its chapter "Activity developed by the non-executive members of the Board," a description of the activity of the non-executive directors during the year 2011.
II.18. The professional qualifications of the members of the board of directors, the professional activities carried out by same during the last five years at least, the number of company shares they hold, the date of the first appointment and the date of the end of mandate
The mandate of the current members of the Board corresponds to the period 2011/2013. The Directors Paulo Jorge dos Santos Fernandes, João Manuel Matos Borges de Oliveira, Pedro Macedo de Pinto Mendonça and Domingos José Vieira de Matos were elected, for the first time, in February 1990. The remaining two members were elected in May 2009.
Appendix I presents the qualifications and professional activities by members of the Board over the past years.
Pursuant to and for the purposes of art. 447 of the Companies Code, we inform that as of 31 December 2011, the Directors of the Company held the following shares:
| Paulo Jorge dos Santos Fernandes | 7,165,746 |
|---|---|
| João Manuel Matos Borges de Oliveira (a) | 10,264,014 |
| Domingos José Vieira de Matos | 7,296,112 |
| Pedro Macedo Pinto de Mendonça | 854,500 |
| Pedro Miguel Matos Borges de Oliveira | 4,928,291 |
| Ana Rebelo Mendonça Fernandes (b) | 15,385,276 |
(a) – the 10,264,014 shares correspond to the total shares of COFINA, SGPS, S.A. held by Caderno Azul – SGPS, S.A., from which the director João Manuel Matos Borges de Oliveira is a director and shareholder, holding 50% of their capital.
(b) – besides the 6,377,840 shares of Cofina that are personally held, the 9,007,436 shares of Cofina that are held by PROMENDO – SGPS, S.A. are regarded as attributable to Ana Rebelo Mendonça Fernandes, since she is director and shareholder of this company, holding 59.6% of its share capital. Therefore, legally, it is considered that Ana Rebelo Mendonça Fernandes owns a total of 15,385,276 shares, which corresponds to 15% of the share capital and 15% of the voting rights of Cofina.
II.19. Duties that the members of the board of directors carry out in other companies and a description of duties carried out in other group companies
Appendix I shows the functions that members of the Board of Directors in other companies carry out, including group companies.
There is no limit on the maximum number of cumulative duties of directors in the management bodies of
other companies, with the members of Cofina's Board of Directors trying to be part of the boards of the most relevant subsidiaries of the Group, to allow a closer monitoring of their activities.
II.21. Identification of the members of the supervisory board and statement indicating that same comply with the incompatibility rules provided for in article 414-A/1, and whether they comply with the independency criteria in article 414/5, both of the Commercial Companies Code. For said purpose, the audit board carries out the relevant self-assessment
The Statutory Audit Board is composed by three members and one substitute. As of 31 December 2011 this corporate body was composed by the following members:
As a collegiate body, the assessment of independence of the supervisory board is made to all those who compose it, given the application of Article 414/6 of the Commercial Companies' Code, considering independence in accordance with the definition that is given pursuant to the number 5 of article 414 and incompatibility according to definition of the number 1 of article 414-A, both of the Commercial Companies' Code. The three members that compose the Statutory Audit Board comply the rules of incompatibility and independence identified above.
II.22. Professional qualifications of supervisory board members, indication of the professional activities held by themselves, least the last five years, the number of company shares that they hold, date of the first appointment and date of the expiry of the mandate
The Statutory Audit Board members were elected for the first time in March 2007 for the remainder period of the three year period 2005/2007. Currently, Statutory Audit Board members are completing their third mandate corresponding to the period 2011/2013, for which they were elected in May 2011.
As regards the skills and competence to exercise these functions, all members have appropriate skills to fulfill their duties and the chairman is adequately supported by the other members of the Statutory Audit Board. Appendix I presents the qualifications and professional activities of the members of the Statutory Audit Board.
As of 31 December 2011, the members of the Statutory Audit Board had no representative shares in Cofina's share capital.
II.23. Duties that the members of the supervisory board carry out in other companies and describing those which are carried out in other group companies
Appendix I shows the functions that the Statutory Audit Board members have in other companies. The members of the Statutory Audit Board do not currently carry out duties in other companies of the Cofina Group.
II.24. Reference to the fact that the supervisory board assesses the external auditor on an annual basis and the possibility of proposing to the general meeting that the auditor be discharged whenever justifiable grounds are present
As part of their powers and in compliance of their duties, the Statutory Audit Board proposes to the General Shareholders Meeting the appointment of the Statutory Auditor and External Auditor, oversees its independence, namely in what refers to the provision of additional services, the scope of their services and the review of the Company' financial statements. The Statutory Audit Board meets whenever necessary with the Statutory Auditor / External Auditor in accordance with its responsibilities.
Annually, the Statutory Audit Board shall evaluate the work of the Statutory Auditor / External Auditor, also overseeing the implementation of Article 54 of Decree-Law no. 487/99, of 16 November (amended by Decree-Law no. 224/2008, of 20 November) in relation to the rotation of the partner responsible to execute the work.
II.29. Description of the remuneration policy including that of the managers within the concept of article 248-B/3 of the Securities Code and of the other workers whose professional activity might have a relevant impact on the risk profile of the company and whose remuneration contains an important variable component
The remuneration policy applicable to persons who are, under the law, considered leaders is equivalent to that adopted for the remuneration of other employees at the same level of duties and responsibilities, followed by the guiding principles of the declaration submitted by the Remuneration Committee for consideration of the General Shareholders Meeting and which is detailed in the paragraph below.
II.30. Description of the remuneration policy of the board of directors and the supervisory board, as provided for in article 2 of Law 28/2009, of 19 June
As provided in Law 28/2009, of 19 June, a statement on the remuneration policy of the management and supervision boards is submitted annually for consideration by the General Shareholders Meeting.
The policy on remuneration and compensation of the corporate bodies of Cofina, adopted at the General Meeting of 26 May 2011, respects the following principles:
In order to establish the value of individual remuneration of each director, the following should be taken into account:
The remuneration in companies within the same sector and in other companies listed on NYSE Euronext Lisbon.
The total remuneration for all the members of the Board of Directors may not exceed 1.25 million Euro per year.
Fixed component, amount paid monthly, 14 times a year:
Intended to more strongly align the interests of executive directors with those of shareholders and will be calculated covering years 2010, 2011 and 2012, based on:
The total medium term component cannot exceed 50% of fixed remuneration earned during the period of the three years.
At the Annual General Meeting 2011, the Remuneration Committee will propose an amendment to the remuneration policy above in order to adapt it to the term of the Board of Directors' mandate.
The individual remuneration of any non-executive director may not exceed 100,000 Euro per year, being exclusively fixed.
The remuneration of Members of the Statutory Audit Board will be based on yearly fixed amounts at levels considered adequate for similar functions.
The remuneration of the members of the General Shareholders Meeting will be exclusively fixed and will follow market practices.
The Statutory Auditor will have a fixed payment appropriate to the respective functions and in accordance with market practice, under the supervision of the Statutory Audit Board.
The principles that follow remuneration policies and compensation specified in this policy include not only the salaries paid by the company but also the salaries that are paid to members of the Board of Directors for companies controlled directly or indirectly by it.
The remuneration policy maintains the principle of not contemplating a compensation to directors, or members of other bodies associated with the early termination of functions or at the end of their mandate, according to legal parameters.
II.31. Indication on the amount concerning the annual remuneration paid individually to members of the board of directors and of the supervisory board of the company, including fixed and variable remuneration and as to the latter, mentioning the different components that gave rise to same, the parts that has been deferred and paid
The compensation received by the Board of Directors of Cofina during 2011, in the exercise of their functions in Cofina and other Group companies, includes only fixed remuneration and amounted to 743,820 Euro allocated as follows: Paulo Fernandes - 265,860 Euro; João Borges de Oliveira - 265,860 Euro, Domingos Matos - 70,700 Euro; Ana Mendonça Fernandes - 70,700 Euro; Pedro Borges de Oliveira - 70,700 Euro. The non-executive director Pedro Mendonça did not receive any compensation in 2011.
The remuneration received by the two executive members of the Board of Directors (Paulo Fernandes and João Borges de Oliveira) were fully paid by the Group's subsidiaries where they perform administration functions. The non-executive members that received compensation in 2011 were directly paid by Cofina SGPS.
The remuneration of the Statutory Audit Board is composed of a fixed annual amount based on the Cofina's situation and in the current market practices. In the year ended as of 31 December 2011, the remuneration of Statutory Audit Board members amounted to 32,970 Euro, distributed as follows: João Natária – 16,350 Euro; Cristina Linhares – 8,310 Euro; Manuel Tiago Fernandes – 8,310 Euro.
II.32. Information on the way the remuneration is structured so as to allow aligning the interests of the members of the board of directors with the long-term interests of the company as well as how it is based on the performance assessment and how it discourages excessive risk assumption
The remuneration policy for executive directors aims to ensure a proper and thorough hand of the performance and contribution of each director for the success of the organization, aligning the interests of the executive directors with those of the shareholders and of the company. Additionally, the remuneration policy provides for a variable component of deferred payment, aiming to more strongly align the interests of the executive directors with those of the shareholders and the long-term interests of the company.
The proposal for remuneration of executive directors is drawn up taking into account the functions performed in Cofina, SGPS, S.A. and in its subsidiaries, the responsibility and value added by individual performance, the knowledge and the cumulative experience on the job, the economic situation of the Company, the remuneration earned in other companies from the same sector and other companies listed on NYSE Euronext Lisbon.
II.33. As regards the remuneration of the executive members: a) Reference to the fact that the executive members' remuneration includes a variable component and information on the way said component relies of the assessment performance;
According to the Company's articles of association, the corporate bodies members receive remuneration that was set by the Remuneration Committee composed by three elements, one of whom will be president and will have the casting vote. In the General Shareholders Meeting held in 26 May 2011, the remuneration policy as detailed in paragraph II.30 above was approved, which provides a variable component depending on performance during the period between 2010 and 2012.The remuneration policy will be, again, appreciated in the accounts approving Annual General Meeting for 2011 where the adequacy of the clearance period of variable pay to the term of office of the board will be proposed.
b) The corporate bodies responsible for assessing the performance of executive members;
The performance assessment of executive directors belongs to the Remuneration Committee and is based on the functions performed by them in Cofina and in companies at the same group as well as the responsibility and the value added by each one of the directors and the accumulated and experience knowledge on the job.
c) The pre-established criteria for assessing the performance of executive members;
The remuneration of executive members of the Board of Directors includes a variable component of medium term (2010 to 2012) calculated based on total shareholder return, on the sum of the net income of that period and on the evolution in the Company's business.
d) The relative importance of the variable and fixed components of the members' remuneration, as well as the maximum limits for each component;
The total fixed remuneration of the Board of Directors cannot exceed 1.25 million Euro per year and the total value of the variable component of medium-term (applicable only to executive members) may not exceed 50% of fixed remuneration earned during the three years period (2010-2012). During 2011, the members of the Board of Directors did not receive any variable remuneration.
e) The deferred payment of the remuneration's variable component and the relevant deferral period;
There is currently no variable compensation, whose payment was deferred in time.
f) An account of the way whereby the payment of the variable remuneration is subject to the company's continual positive performance during the deferral period
The variable remuneration depends, among others, on the sum of net income for the period (2010-2012).
g) Sufficient information on the criteria whereon the allocation of variable remuneration on shares is based, as well as on maintaining company shares that the executive members have had access to, on the possible share contracts, namely hedging contracts or risk transfer, the relevant limit and its relation apropos the value of the total annual remuneration;
Cofina doesn´t have, neither plans to have, any form of compensation that may be due to the allocation of shares or other share incentive scheme.
h) Sufficient information on the criteria whereon the allocation of variable remuneration on options is based as well as its deferral period and exercising price;
i) The main factors and reasons for any annual bonus scheme and any other non-financial benefits;
j) Remuneration paid in the form of a share in the profits and/or the payment of bonuses and the rationale behind the act of awarding such bonuses and/or share in profits;
l) Compensation paid or owed to former executive directors in relation to early contract termination;
During the year, no amounts relating to compensation to directors whose functions have ceased have been paid or owed.
m) Reference to the envisaged contractual restraints for compensation owed for undue dismissal of executive directors and its relation apropos the remunerations' variable component;
No policy is defined regarding any compensation attributable to members of the Board of Directors in case of dismissal.
n) Amounts paid on any basis by other companies in a group relationship or exercising control over the company;
o) A description of the main characteristics of the supplementary pensions or early retirement schemes set up for executive directors and whether said schemes were subject or not to the approval of the general meeting;
p) An estimate of the non-financial benefits considered as remuneration which do not fall under the categories listed above;
q) Mechanisms for prevent executive directors from having employment contracts that questions the grounds of the variable remuneration;
No mechanisms to prevent executive directors from having employment contracts that question the grounds of the variable remuneration are implemented. However, the Remuneration Committee takes into account these factors in the criteria for determining the variable remuneration.
II.34. Reference to the fact that remuneration of non-executive members of the Board of Directors is not included in the variable component.
The individual remuneration of any non-executive director may not exceed 100,000 euro per year, being exclusively fixed, as defined in the remuneration policy that was approved in the General Shareholders Meeting of 26 May 2011.
II.35. Information on the reporting of irregularities adopted by the company (reporting means, persons entitled to receive said reports, how the reports are to be handled and the names of the persons or bodies that have access to the information and the relevant involvement in the procedure)
DIRECTORS' REPORT 2011
Although the communication policy for internal irregularities is not formally defined, considering the proximity of the members of the Board of Directors to the activities of the several Group companies and their workers, Cofina considers that this proximity allows that, whenever irregularities are detected, these will be promptly communicated to the Board of Directors, which ensures the implementation of procedures that will effectively and fairly deal with eventual irregularities that are detected. Regarding evaluation competences concerning ethical issues, these duties are directly performed by the Board of Directors, which keeps a constant debate of this issue.
II.36. Identification of members of those committees that have been constituted for the purposes of individual and overall performance assessment of the executive members, consideration on the governance system that has been adopted by the company and the identification of potential candidates with the professional profile fitting the member position
Cofina, taking into account the size of the Company, has no committees specifically designed to identify candidates for directors and to consider the governance system that has been adopted. Candidates for the Board of Directors have been proposed by shareholders who submitted proposals at elective General Meetings. The reflection and the evaluation of the adopted corporate governance model by the Company have been made regularly by the Board of Directors.
The Board of Directors believes that the only specialized committee essential to meet the company' needs, taking into account its size, is the Remuneration Committee.
Some of the members of the Board of Directors are not remunerated by Cofina, SGPS, S.A., but directly by the subsidiaries where they have functions, so that the existing powers of the Remuneration Committee also focus on setting on the remunerations of the members of the Board of Directors of the company earned in other group companies.
The performance assessment of executive belongs to the Remuneration Committee and is based on the functions performed by them in Cofina and in Group companies, as well as the responsibility and value added by each director and the accumulated knowledge and experience on the job.
II.37. Number of meetings held by the committees that have been constituted for management and supervision during the period concerned, as well as reference to the minutes of said meetings that have been held
During 2011, the Company's Remuneration Committee met three times, and the corresponding minutes were recorded in the minute book of that body.
II.38. Reference to the fact that one member of the remuneration committee has knowledge and experience in remuneration policy issues
Cofina believes that the experience and professional careers of the members of the Remuneration Committee allows them to perform their duties accurately and effectively. In particular, Dr. João da Silva Natária has extensive experience and specific knowledge in matters of remuneration policy. Additionally, and whenever necessary, this committee uses specialized resources, internal or external, to support its deliberations.
II.39. Reference to the independency of natural or legal persons with an employment contract or providing services to the remuneration committee, as regards the Board of Directors as well as, when applicable, to the fact that these persons have an existing relation with the company consultant
All members of the Remuneration Committee are independent members of the Board of Directors.
III.1. The capital structure including those shares that are not admitted to trading, the different category of shares, rights and duties of these shares and the equity percentage that each category represents
As of 31 December 2011, the Company's share capital was fully subscribed and paid up and was composed by 102,565,836 shares with a nominal value of 25 Euro cents each, which entitle them to dividends. Pursuant to and for the purposes of the article 66 of the Commercial Companies Code, we inform that as of that date, Cofina, SGPS, S.A. and its subsidiaries did not hold own shares, and did not acquir or soell own shares during 2011.
Pursuant to the requirements of articles 16 and 20 of the Securities Code ("Código de Valores Mobiliários") and article 448 of the Commercial Companies Code, we inform that, in accordance with the notifications received, the companies and/or individuals that hold qualified participations exceeding 2%, 5%, 10%, 20%, 33% and 50% of the voting rights, are as follows:
| Shares held at | Direct % of the | |
|---|---|---|
| Exceeding 2% of the voting rights | 31.12.2011 | voting rights |
| Pedro Miguel Matos Borges de Oliveira | 4,928,291 | 4.81% |
| Shares held at | Direct % of the | |
|---|---|---|
| Exceeding 5% of the voting rights | 31.12.2011 | voting rights |
| Promendo – SGPS, S.A. (a) | 9,007,436 | 8.78% |
| Domingos José Vieira de Matos | 7,296,112 | 7.11% |
| Paulo Jorge dos Santos Fernandes | 7,165,746 | 6.99% |
| Ana Rebelo Mendonça Fernandes (b) | 6,377,840 | 6.22% |
(a) – the 9,007,436 shares of Cofina held by PROMENDO – SGPS, S.A., are attributable to Ana Rebelo Mendonça Fernandes, manager and shareholder, holder of 59.6% of the capital;
(b) – 9,007,436 shares of Cofina held by PROMENDO – SGPS, S.A are equally attributable to Ana Rebelo Mendonça Fernandes, as referred in (a). Therefore, in legal terms, a total of 15,385,276 shares are attributable to Ana Rebelo Mendonça Fernandes, which corresponds to 15% of the share capital and voting rights of Cofina.
| Shares held at | Direct % of the | |
|---|---|---|
| Exceeding 10% of the voting rights | 31.12.2011 | voting rights |
| Newshold, SGPS, S.A. | 15,464,528 | 15.08% |
| Caderno Azul – SGPS, S.A. (a) | 10,264,014 | 10.01% |
(a) – the 10,264,014 shares correspond to the total amount of Cofina shares that are held by CADERNO AZUL – SGPS, S.A., from which João Manuel Matos Borges de Oliveira is a Director and shareholder, holding 50% of the share capital.
III.3. Identification of the shareholders that hold special rights and a description of those rights
III.4. Possible restrictions on share-transfer i.e. consent clauses for their disposal or restrictions on shareownership
There are no restrictions on transferability or restrictions on the ownership of the shares.
III.5. Shareholder agreements that the company may be aware of and that may restrict the transfer of securities or voting rights.
As far as Cofina is concerned, no agreement was concluded regarding the exercise of social rights or the transfer of shares. Additionally, as far as is knowledgeable, there are no agreements aiming to ensure or frustrate the success of takeover bids.
III.6. Rules applicable to the amendment of the articles of association
There are no statutory rules relating to the amendment of the articles of association. This matter is regulated by the regime included in the Commercial Companies Code.
III.7. Control mechanisms for a possible employee-shareholder system inasmuch as the voting rights are not directly exercised by them
There is no system of employee participation in the capital of the Company.
III.8. Description concerning the evolution of the issuer's share price, taking the following into account:
The share price of Cofina closed the year 2011 at 0.76 Euro/per share, representing an appreciation of 10.1% over 2010.
The evolution of the share price of Cofina throughout the year is illustrated in the following chart, where the major events of the year, such as the presentation of results and the payment of dividends are also marked:
During 2011, Cofina' shares were traded at a maximum price of 0.78 Euro per share, and a minimum of 0.27 Euro per share. In total, 14,708,638 Cofina's shares were traded in 2011, which corresponds to 14.34% of the issued shares.
The chapter "Stock Evolution" of the Directors report includes more detailed information about the main events that marked the evolution of the share price of the Company in 2011.
III.9. Description of the dividend distribution policy adopted by the company, including the dividend value per share distributed during the last three periods
The proposal of dividends distribution, made by the Board of Directors to the General Meeting, is intended to provide an adequate return on invested capital to shareholders, without ever losing sight the needs of expansion / investment of the Group.
In accordance with this policy, the distributed gross dividends in the most recent years had the following evolution:
| Year to which the | Distributed dividends | Dividends per |
|---|---|---|
| dividends refer to | share (in Euro) (a) | |
| 2005 (b) | 2,564,146 | 0.050 |
| 2006 | 3,589,804 | 0.035 |
| 2007 | 3,589,804 | 0.035 |
| 2009 | 1,025,658 | 0.010 |
| 2010 | 1,025,658 | 0.010 |
(a) – Should be noticed that, upon dividends distribution in 2005, the number of shares was 51,282,918. On December 2006, the number of shares reached 102,565,836.
(b) – In practice, although it is not visible, the distributed dividend doubled between 2004 and 2005, as a consequence of the division of the industrial operations that occurred in that year, since Altri, S.G.P.S., S.A. also distributed a dividend of 0.05 Euro per share.
III.10. A description of the main characteristics of the share and stock-option plans adopted or valid for the financial year in question, the reason for adopting said scheme and details of the category and number of persons included in the scheme, share-assignment conditions, non-transfer of share clauses, criteria on share-pricing and the exercising option price, the period during which the options may be exercised, the characteristics of the shares to be allocated, the existence of incentives to purchase and/or exercise options, and the responsibilities of the Board of Directors for executing and/or changing the plan. Details shall also include the following: a) The number of shares required for the share allotment and the number of shares required for the exercise of the exercisable options at the start and end of the year in question; b) The number of allotted, exercisable and extinct shares during the year; c) The general meetings' appraisal of the plans adopted or in force during the period in question.
III.11. A description of the main data on business deals and transactions carried out between the company and between the members of the Management and Supervisory Board or companies in a control or group relationship, provided the amount is economically significant for any of the parties involved, except for those business deals 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.
There were no businesses or significant transactions between the Company and members of its corporate bodies (administration and supervision), owners of qualifying holdings or companies in a relation of domain or group, except those that, as part of current activity, were performed in normal market conditions for similar transactions.
III.12. A description of the vital data on business deals and transactions carried out in the absence of normal market conditions between companies and owners of qualifying holdings or entity-relationships with the former, as envisaged in article 20 of the Securities Code
During 2011, there were no businesses or significant transactions between the Company and members of its corporate bodies (administration and supervision), owners of qualifying holdings or entities with whom they are in any relationship, under Article 20 of the Securities Code, outside normal market conditions.
III.13. A description of the procedures and criteria applicable to the supervisory body when same provides preliminary assessment of the business deals to be carried out between the company and the owners of qualifying holdings or entity-relationships with the former, as envisaged in article 20 of the Securities Code
During the year 2011, there were no businesses between the Company and owners of qualifying holdings or entities with who they are in any domain or group relationship.
Currently, no procedures or criteria for defining the relevant level of significance of businesses between the Company and owners of qualifying holdings or entities with whom they are in any relationship or group are established, from which the intervention of the supervisory board is necessary. However, transactions with Cofina directors or with companies that are in relationship with that group or area in which the actor is a director, regardless of amount, are subject to prior approval of the Board of Directors with a favorable opinion of the Statutory Audit Board, under Article 397 of the Commercial Companies Code.
III.14. Description of the statistical data (number, average and maximum amounts) on the business deals subject to preliminary opinion by the supervisory board
During 2011, there were no transactions between the Company and owners of qualifying holdings or entities with whom they are in any domain or group relationship.
III.15. Indication of the availability on the company's website, of annual activity reports drawn up by the general and supervisory board, by the financial matters committee, the audit committee and the supervisory board, including constraints that might be encountered, as well as financial information documents
The annual reports on the activities of the Statutory Audit Board are disclosed in the Company's website, together with the documents of presentation of accounts.
III.16. Reference to an Investor Support Cabinet or a similar service, describing: a) The role of said office; b) Type of information made available; c) Access means to said Office; d) The company's website; e) The market liaison officer's credentials.
The Company has an Investor Support Cabinet. The Group´s representative for the relations with the market are performed by Laurentina da Silva Martins, advisor of the Company's Board of Directors and the investor relations functions are performed by Ricardo Ferreira Mendes.
The contact for investors to obtain information is as follows:
Arruamento D à Rua José Maria Nicolau, nº3 1549-023 Lisboa Tel: (351) 21 049 42 46 Fax: (351) 21 049 31 55 Email: [email protected]
Whenever necessary, the investor relations provides all relevant information regarding the events, facts considered relevant, disclosure of quarterly results and answers to any requests for clarification by the investors or the general public on public financial information.
Cofina provides financial information relating to its individual and consolidated operations, as well as that of its participated companies, through its official website (www.cofina.pt). This website is also used by Cofina to provide information on press releases, as well as any relevant facts occurring in the life of the Company. This page also includes Cofina Group's documents of account related to the previous years. All information is available in the website in Portuguese and in English.
III.17. Indication of the annual compensation paid to the auditor and to other individuals or groups that belong to the same network supported by the company and/or by any group that bears with it a control or group relationship and the percentage of the total amount paid for the following services: a) Statutory account review services; b) Other audit reliability services; c) Tax consulting services; d) Other nonstatutory auditing services. A description of the auditor's independency safeguarding measures is required, should the auditor provide any of the services described in items c/ and d/. For the purposes of this text, the 'network' concept derives from the EC Recommendation No. C (2002) 1873 of 16 May.
Compensation paid to Cofina auditors and other single persons or companies belonging to the same network, by the companies in a control or group relationship, for the year 2011, amounted to 225,313 Euro and include 217,313 Euro relative to statutory audit and 8,000 Euro for tax consulting services.
In 2011, the fees charged by Deloitte to Cofina group represented less than 1% of the total annual turnover of Deloitte in Portugal. The quality system of the External Auditor controls and monitors the potential risks of loss of independence and possible conflicts of interest with Cofina.
The Statutory Audit Board, carrying its duties, performs an annual evaluation of the overall performance of the External Auditor, as well as regarding its independence. Additionally, the Statutory Audit Board receives, annually, the declaration of independence from the auditor where the services rendered by him and by other entities of the same network are described, their fees, and possible threats to independence and safeguard measures. All threats to the independence of the Auditor are evaluated and discussed with him as well as the respective measures.
The Board of Directors, on the request of projects assigned to the group companies' auditors, ensures, before its award, that to them and to their network no services are hired that could threaten its independence, in accordance with the recommendation of the European Commission no. C (2002) 1873 of 16 May.
The monitoring of the External Auditor's activity is ensured by the Statutory Audit Board. Additionally, the Statutory Audit Board also proposes to the General Meeting the election of that body. Additionally, the Statutory Audit Board is also responsible to review and supervise the External Auditor's independence, particularly with respect to the rendering of additional services. The Statutory Audit Board approves the services to be performed by the External Auditor and the corresponding remuneration.
In what concerns the rotation period of the External Auditor, Cofina has not defined a fixed rotation policy regarding the External Auditor. The Company adopted, since 2007, the current corporate governance model, in which the Statutory Auditor is not part of the Statutory Audit Board. According to this model, the election for each mandate of the Statutory Auditor / External Auditor is made in the General Shareholders Meeting upon proposal of the Statutory Audit Board. Additionally, the Statutory Audit Board undertakes an annual assessment of the work of the External Auditor, verifying if the provisions of Article 54 of Decree-Law No. 487/99, of 16 November (amended by Decree-Law No. 224/2008, of 20 November), concerning the rotation of the partner responsible to execute the work is completed.
The functions of the External Auditor and Statutory Auditor of Cofina are currently performed by Deloitte & Associados, SROC S.A., represented by António Manuel Martins Amaral since 2007, being the current mandate the period 2011/2013.
The Statutory Audit Board, in exercising its functions, carries out an annual assessment of the independence of the External Auditor. Additionally, the Statutory Audit Board promotes, whenever
necessary or appropriate in light of the developments in the Company's business or the configuration of the market in general, a reflection on the appropriateness of the External Auditor to carry out its duties
Pursuant to the requirements of article 66 of the Commercial Companies' Code ("Código das Sociedades Comerciais"), the Directors inform that as of 31 December 2011 Cofina had no own shares and did not acquire or sell any own shares during the year.
Pursuant to the requirements of article 447 of the Commercial Companies' Code, the Directors inform that, as of 31 December 2011, they held the following shares:
| Paulo Jorge dos Santos Fernandes | 7,165,746 |
|---|---|
| João Manuel Matos Borges de Oliveira (a) | 10,264,014 |
| Domingos José Vieira de Matos | 7,296,112 |
| Ana Rebelo Mendonça Fernandes (b) | 15,385,276 |
| Pedro Macedo Pinto de Mendonça | 854,500 |
| Pedro Miguel Matos Borges de Oliveira | 4,928,291 |
(a) – the 10,264,014 shares correspond to the total shares of COFINA – SGPS, S.A. held by CADERNO AZUL – SGPS, S.A., from which the Director João Manuel Matos Borges de Oliveira is a Director and shareholder, currently holding 50% of the respective share capital.
(b) – besides the 6,377,840 shares of COFINA, SGPS, S.A., personally held, the 9,007,436 shares of COFINA – SGPS, S.A. held by PROMENDO – SGPS, S.A. are considered, in legal terms, as attributed to Ana Rebelo Mendonça Fernandes, since she is this company's Director and shareholder, holding 59.6% of its share capital. Therefore, in legal terms, a total of 15,385,276 shares, which correspond to 15% of the share capital and voting rights of COFINA – SGPS, S.A., are attributable to Ana Rebelo Mendonça Fernandes.
As of 31 December 2011, the Statutory Auditor, the members of the Statutory Audit Board and the members of the Board of the General Shareholders' Meeting held no shares of the Company.
Pursuant to the requirements of articles 16 and 20 of the Securities Code ("Código de Valores Mobiliários") and article 448 of the Commercial Companies Code, the Directors inform that, in accordance with the notifications received, the companies and/or individuals that hold qualified participations exceeding 2%, 5%, 10%, 20%, 33% and 50% of the voting rights, and in accordance with the notifications received in the Company's headquarters, are as follows:
| Shares held as of | Direct % of the | |
|---|---|---|
| Exceeding 2% of the voting rights | 31.12.2011 | voting rights |
| Pedro Miguel Matos Borges de Oliveira | 4,928,291 | 4.81% |
| Shares held at | Direct % of the | |
|---|---|---|
| Exceeding 5% of the voting rights | 31.12.2011 | voting rights |
| Promendo – SGPS, S.A. (a) | 9,007,436 | 8.78% |
| Domingos José Vieira de Matos | 7,296,112 | 7.11% |
| Paulo Jorge dos Santos Fernandes | 7,165,746 | 6.99% |
| Ana Rebelo Mendonça Fernandes (b) | 6,377,840 | 6.22% |
(a) – the 9,007,436 shares of COFINA – SGPS, S.A. held by PROMENDO – SGPS, S.A., are, in legal terms, attributable to Ana Rebelo Mendonça Fernandes, shareholder and Director of the company, holding 59.6% of its share capital.
(b) – 9,007,436 shares of Cofina held by PROMENDO – SGPS, S.A are equally attributable to Ana Rebelo Mendonça Fernandes, as referred in (a). Therefore, in legal terms, a total of 15,385,276 shares are attributable to Ana Rebelo Mendonça Fernandes, which corresponds to 15% of the share capital and voting rights of Cofina.
| Shares held at | Direct % of the | |
|---|---|---|
| Exceeding 10% of the voting rights | 31.12.2011 | voting rights |
| Newshold, SGPS, S.A. | 15,464,528 | 15.08% |
| Caderno Azul – SGPS, S.A. (a) | 10,264,014 | 10.01% |
(a) – the 10,264,014 shares correspond to the total amount of Cofina shares that are held by CADERNO AZUL – SGPS, S.A., from which João Manuel Matos Borges de Oliveira is a Director and shareholder, holding 50% of the share capital.
Cofina was not informed of any participation exceeding 20% of the voting rights.
The members of the Board of Directors of Cofina, S.G.P.S., S.A. declare that they assume responsibility for this information and assure that the items included herein are true and that, to the best of their knowledge, there are no omissions.
As required by article 21 of Decree-Law 411/91, of 17 October, the Board of Directors informs that there are no overdue debts to the State, namely with respect to Social Security.
We don't want to conclude without thanking the External Auditor for the advice and assistance provided during 2011 and to the Statutory Audit Board by the continued monitoring of our operations. We would also like to thank our suppliers, financial institutions and other partners in the group for their trust in our organization.
Finally, we would like to express our gratitude to all our employees, who demonstrated a remarkable capacity of flexibility and dedication.
Oporto, 15 March 2012
Paulo Jorge dos Santos Fernandes – President
João Manuel Matos Borges de Oliveira
Pedro Macedo Pinto de Mendonça
Domingos José Vieira de Matos
Pedro Miguel Matos Borges de Oliveira
Ana Rebelo Mendonça Fernandes
Qualifications, experience and positions held in other companies by members of the Board of Directors:
He was one of the founders of Cofina, and has been directly involved in the Group's management since its incorporation. He is graduated from Oporto University with a degree in Electronic Engineering, and has also an MBA at the University of Lisbon.
He works in the media and industry departments, as well as in the definition of the Group´s strategy. He is shareholder of the Company since 1990, having also been appointed as Director at the same date.
In addition to the Companies where he currently exercises functions of administration, his professional experience includes:
| 1982/1984 | Assistant Director of Production at CORTAL |
|---|---|
| 1986/1989 | General Director at CORTAL |
| 1989/1994 | President of the Board of Directors at CORTAL |
| 1995 | Director at CRISAL – CRISTAIS DE ALCOBAÇA, S.A. |
| 1997 | Director at Group Vista Alegre, S.A. |
| 1997 | Chairman of the Board of Directors at ATLANTIS - Cristais de Alcobaça, S.A. |
| 2000/2001 | Director at SIC |
| 2001 | Director at V.A.A. |
Throughout his career, he also played roles in several associations:
| 1989/1994 | President of FEMB (Fédération Européene de Mobilier de Bureau) for Portugal |
|---|---|
| 1989/1990 | President of General Assembly at Assoc. Industr. Águeda |
| 1991/1993 | Member of Advisory Board at Assoc. Ind. Portuense |
The other companies where he carries out management functions as of 31 December 2011, are as follows:
F. Ramada, Aços e Indústrias, S.A. (a)
Invescaima, S.G.P.S., S.A. (a)
Mediafin S.G.P.S., S.A.
Presselivre Imprensa Livre, S.A.
Being also one of the founders of Cofina, he has been involved in the Group's management since its incorporation. Graduated from the Porto University with a degree in Chemical Engineering, holds an MBA at INSEAD. Develops his activity in the media and industrial operations, as well as in the strategic definition of the Group. Is a shareholder of the Company since 1990 and has also been appointed Director as from the same date.
In addition to the Companies where he currently exercises functions of administration, his professional experience includes:
| 1982/1983 | Assistant Director of Production at Cortal |
|---|---|
| 1984/1985 | Production Director at Cortal |
| 1987/1989 | Marketing Director at Cortal |
| 1989/1994 | General Director at Cortal |
| 1989/1995 | Vice President of the Board at Cortal |
| 1989/1994 | Director at Seldex |
| 1996/2000 | Non-executive Director at Atlantis, S.A. |
| 1997/2000 | Non-executive Director at Vista Alegre, S.A. |
| 1998/1999 | Director at Efacec Capital, SGPS, S.A. |
The other companies where he carries out management functions as of 31 December 2011 are as follows:
F. Ramada, Aços e Indústrias, S.A. (a)
Grafedisport Impressão e Artes Gráficas, S.A.
Mediafin, SGPS, S.A.
Presselivre Imprensa Livre, S.A.
a) – Companies that, as of 31 December 2011 cannot be considered to be part of Cofina, S.G.P.S., S.A. Group.
He was one of the founders of Cofina, and has been directly involved in the Group's management since its incorporation. Attended the Faculty of Medicine in Porto for two years, and holds a degree in Mechanics from the École Superiore de L'Etat in Brussels. He is shareholder of the Company since 1990 and has been appointed as Director since that date.
In addition to the Companies where he currently exercises functions of administration, his professional experience includes:
| 1959 | Director of Supply of Empresa de Metalurgia Artística Lisboa |
|---|---|
| 1965 | Production Director of Empresa de Metalurgia Artística Lisboa |
| 1970 | Director and sales responsible of Seldex |
| 1986 | Founding Partner of Euroseel |
| 1986/1990 | Director at Euroseel |
| 1986 | Chairman of the Board of Directors at Seldex |
| 1989 | Director at Cortal |
The other companies where he carries out functions of administration as of 31 December 2011 are:
Sociedade Imobiliária Porto Seguro Investimentos Imobiliários, S.A. (a)
Torres da Luz Investimentos imobiliários, S.A. (a)
a) – Companies that, as of 31 December 2011 cannot be considered to be part of Cofina, S.G.P.S., S.A. Group.
He was one of the founders of Cofina, and has been directly involved in the Group's management since its incorporation. Holds a degree in Economics from the Faculty of Economy of the University of Oporto. He initiated his career in management in 1978. He is shareholder of the Company since 1990 and has been Director since that date.
In addition to the Companies where he currently exercises his duties as Director, his professional experience includes:
| 1978/1994 | Director at CORTAL, S.A. |
|---|---|
| 1983 | Founding Partner of PROMEDE – Produtos Médicos, S.A. |
| 1998/2000 | Director at ELECTRO CERÂMICA, S.A. |
The other companies where he carries out management functions as of 31 December 2011 are as follows:
(a) – Companies that, as of 31 December 2011 cannot be considered to be part of Cofina, S.G.P.S., S.A. Group.
He holds a degree in Financial Management by Instituto Superior de Administração e Gestão do Porto. In 2000 he concluded the MBA Executive at the Instituto Empresarial Portuense in partnership with ESADE – Business School of Barcelona, currently Católica Porto Business School. In 2009, he attended the Course of Business Valuation at EGE – Escola de Gestão Empresarial. He is director of the Company since May 2009.
Besides other companies where he currently exercises duties of Director, his professional experience includes:
| 1986/2000 | Management advisor of FERÁGUEDA, Lda. | |
|---|---|---|
| 1997/2000 | Assistant manager of GALAN, Lda. | |
| 2000 | Director of the Department of Saws and Tools of F. Ramada, Aços e | |
| Indústrias, S.A. | ||
| 2006 | Director of Universal Afir, Aços Especiais e Ferramentas, S.A. | |
| 2009 | Director of F. Ramada Investimentos, S.G.P.S., S.A. | |
The other companies where he carries out management functions as of 31 December 2011 are as follows:
(a) – Companies that, as of 31 December 2011 cannot be considered to be part of Cofina, S.G.P.S., S.A. Group.
Has a Degree in Economics by Universidade Católica Portuguesa in Lisbon, having been appointed as Director of the Company since May 2009.
Besides other companies where she currently exercises duties of Director, her professional experience includes:
| 1995 | Journalist in the economic segment of the newspaper Semanário Económico |
|---|---|
| 1996 | Commercial department of Citibank |
| 1996 | Director at Promendo, S.A. |
| 1999 | Managing partner of Farrajota & Mendonça, Lda. |
2009 Director at PROMENDO, SGPS, S.A.
The other companies where she carries out management functions as of 31 December 2011 are as follows:
(a) – Companies that, as of 31 December 2011 cannot be considered to be part of Cofina, S.G.P.S., S.A. Group.
Qualifications, experience and positions held in other companies by members of the Statutory Audit Board:
Academic curriculum:
Degree in Law by the University of Lisbon
Professional Experience:
| 1979 | General Manager at Branch Luanda / Viana of F. Ramada, appointed jointly by the |
|---|---|
| Administration and the Ministry of Industry of Angola | |
| 1983 | Director of the Department of Polyester and Buttons of F. Ramada, Aços e Indústrias, |
| S.A. | |
| 1984/2000 | Human Resources' Director at F. Ramada, Aços e Indústrias, S.A. |
| 1993/1995 | Director at Universal – Aços, Máquinas e Ferramentas, S.A. |
| Since 2000 | Lawyer specialized in Labor Law and Family Law. |
President of the Statutory Audit Board of Altri SGPS, S.A. (a) President of the Statutory Audit Board of F. Ramada Investimentos, SGPS, S.A. (a) President of the Statutory Audit Board of Celulose do Caima, S.G.P.S., S.A. (a) Member of the Remuneration Committee of Altri SGPS S.A. (a) Member of the Remuneration Committee of F. Ramada Investimentos, SGPS, S.A. (a)
(a) - companies that, as of 31 December 2011, cannot be considered as part of the group Cofina, SGPS, S.A.
Academic curriculum:
| 1996 | Degree in Economics - Faculty of Economics, University of Coimbra |
|---|---|
| 2000 | Postgraduate in Taxation – Instituto Superior de Administração e Gestão do Porto |
| 2006 | External Auditor (nº 1262) certified by the Portuguese Association of Auditors |
| 2007 | Executive MBA at EGP - Escola de Gestão do Porto |
Professional Experience:
| 1996/1998 | Assistant in the audit division of Arthur Andersen in Porto |
|---|---|
| 1999/2001 | Senior of the audit division of Arthur Andersen in Porto |
| 2002/2005 | Manager of the audit division of Deloitte office in Porto |
| 2006 | Senior Manager of Deloitte's audit division in Luanda |
| Since 2007 | External Auditor certified by the Portuguese Association of Auditors and consultant |
Other positions:
Member of the Statutory Audit Board of Altri SGPS, S.A. (a) Member of the Statutory Audit Board of F. Ramada Investimentos, SGPS, S.A. (a) Member of the Statutory Audit Board of Celulose do Caima, SGPS, S.A. (a) Statutory Auditor of Sociedade Comercial de Plásticos Chemieuro Unipessoal Lda. (a) Statutory Auditor of Stemmatters – Biotecnologia e Medicina Regenerativa, S.A. (a) Statutory Auditor of JCPA 5, S.A. (a)
(a) - companies that, as of 31 December 2011, cannot be considered as part of the group Cofina, SGPS, S.A.
Other past positions:
Member of the Statutory Audit Board of Tertir – Terminais de Portugal, S.A.
Academic curriculum:
| 1992 | Degree in Business Administration and Management provided by the Faculty of |
|---|---|
| Economics and Management of the Regional Centre of Porto, Portuguese Catholic | |
| University | |
| 2000 | Postgraduate in Human Resource Management, taught by Catholic University |
| 2002 | Masters in Finance, taught by Catholic University |
| 2007 | International MBA taught by the School of Business Management / ESADE |
| 2010 | Postgraduate in Management Services, administered by the Portuguese Catholic |
| University | |
Professional Experience:
| 1992 | Auditor at Arthur Andersen, S.A. |
|---|---|
| 1995 | Management Controller at Group SIPMA, S.A. (Saludães, S.A.; Lorisa, S.A. and |
| SOTPA, S.A.) | |
| Since 1998 | Financial and Human Resources Director at Regional Centre of Porto, Portuguese |
| Catholic University Professional Experience: |
Member of the Statutory Audit Board of Altri SGPS, S.A. (a) Member of the Statutory Audit Board of F. Ramada Investimentos, SGPS, S.A. (a) Member of the Statutory Audit Board of Celulose do Caima, SGPS, S.A. (a)
(a) - companies that, as of 31 December 2011, cannot be considered as part of the Group Cofina, SGPS, S.A.
Board Member of Financial Management Committee, Portuguese Catholic University President of the Statutory Audit Board of Tertir - Terminal de Portugal, S.A. Non-executive Director of Investvar Comercial, SGPS, S.A.
Disclosure of shares and other securities held by members of the Board of Directors and by those discharging managerial responsibilities, as well as by people closely connected with them (article 248 B of the Securities Code), and disclosure of the respective transactions during the year involving such shares and other securities
| No. of sahres 31, | No. of sahres 31, | |||
|---|---|---|---|---|
| Member of the Board of Directors | Dec 2010 | Acquisitions | Disposals | Dec 2011 |
| Paulo Jorge dos Santos Fernandes | 7,165,746 | - | - | 7,165,746 |
| João Manuel Matos Borges de Oliveira (imputation trough CADERNO AZUL - SGPS, S.A.) | 10,264,014 | - | - | 10,264,014 |
| Domingos José Vieira de Matos | 7,296,112 | - | - | 7,296,112 |
| Pedro Miguel Matos Borges de Oliveira | 4,928,291 | - | - | 4,928,291 |
| Ana Rebelo Mendonça Fernandes | 6,377,840 | - | - | 6,377,840 |
| Ana Rebelo Mendonça Fernandes (imputation trough PROMENDO - SGPS, S.A.) | 9,007,436 | - | - | 9,007,436 |
| Pedro Macedo Pinto de Mendonça | 854,500 | - | - | 854,500 |
The signatories individually declare that, to their knowledge, the Board of Directors Report, the Individual and Consolidated Financial Statements were prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union, and the other accounting documents required by law or regulation, give a truthful (fairly) and appropriate image, in all material respects, of the assets and liabilities, financial position and the consolidated and individual results of Cofina, SGPS, S.A. ("Cofina") and of the companies included in the consolidation perimeter, and contains a description of the major risks and uncertainties that they face.
Oporto, 15 March 2012
Paulo Jorge dos Santos Fernandes President of the Board of Directors
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
João Manuel Matos Borges de Oliveira Member of the Board of Directors
Pedro Macedo Pinto de Mendonça Member of the Board of Directors
Domingos José Vieira de Matos Member of the Board of Directors
Pedro Miguel Matos Borges de Oliveira Member of the Board of Directors
Ana Rebelo Mendonça Fernandes Member of the Board of Directors
| ASSETS | Notes | 31.12.2011 | 31.12.2010 |
|---|---|---|---|
| NON CURRENT ASSETS: | |||
| Tangible assets | 7 | 9,561,732 | 10,755,915 |
| Goodwill | 6 | 93,699,609 | 94,992,223 |
| Intangible assets | 8 | 537,120 | 512,688 |
| Investments in associated companies | 4 | 3,438,343 | 3,393,399 |
| Investments available for sale | 4 | 8,570 | 5,000 |
| Deferred tax assets | 10 | 7,512,008 | 8,782,149 |
| Total non current assets | 114,757,382 | 118,441,374 | |
| CURRENT ASSETS: | |||
| Inventories | 11 | 4,093,352 | 3,983,702 |
| Customers | 9 and 12 | 9,184,783 | 12,596,832 |
| State and other public entities | 9 and 13 | 135,820 | 283,439 |
| Other current debtors | 9 and 14 | 304,429 | 1,574,833 |
| Other current assets | 9 and 15 | 6,452,603 | 6,181,610 |
| Investments measured at fair value through profit and loss | 9 and 16 | 8,583 | 51,501,598 |
| Cash and cash equivalents Total current assets |
9 and 17 | 39,167,961 59,347,531 |
25,179,147 101,301,161 |
| TOTAL ASSETS | 174,104,913 | 219,742,535 | |
| EQUITY AND LIABILITIES | |||
| SHAREHOLDERS' FUNDS: | |||
| Share capital | 18 | 25,641,459 | 25,641,459 |
| Share premium | 18 | 15,874,835 | 15,874,835 |
| Legal reserve | 18 | 5,409,144 | 5,409,144 |
| Other reserves | (40,629,854) | (44,757,422) | |
| Consolidated net profit for the year | 4,812,155 | 5,018,193 | |
| Equity attributable to equity holder of the parent | 11,107,739 | 7,186,209 | |
| Non-controlling interests | 787,811 | 735,909 | |
| TOTAL EQUITY | 11,895,550 | 7,922,118 | |
| LIABILITIES: | |||
| NON CURRENT LIABILITIES: Other loans |
9 and 19 | - | 19,985,593 |
| Pension liabilities | 20 | 443,646 | 701,190 |
| Other non current creditors | 9 and 25 | 1,273,064 | 2,456,506 |
| Provisions | 22 | 5,860,560 | 2,547,778 |
| Total non current liabilities | 7,577,270 | 25,691,067 | |
| CURRENT LIABILITIES: | |||
| Bank loans | 9,17 and 19 | 26,964,828 | 21,309,474 |
| Other loans | 9 and 19 | 92,086,702 | 123,996,995 |
| Derivative financial instruments | 9 and 23 | 1,001,831 | 930,601 |
| Suppliers | 9 and 24 | 9,440,522 | 11,523,113 |
| State and other public entities | 9 and 13 | 4,549,322 | 3,677,939 |
| Other current creditors | 9, 21 and 25 | 8,699,403 | 9,746,715 |
| Other current liabilities | 9 and 26 | 11,889,485 | 14,944,513 |
| Total current liabilities | 154,632,093 | 186,129,350 | |
| TOTAL LIABILITIES | 162,209,363 | 211,820,417 | |
| TOTAL EQUITY AND LIABILITIES | 174,104,913 | 219,742,535 |
The accompanying Notes form an integral part of the consolidated financial statements.
| Notes | 31.12.2011 | 31.12.2010 | |
|---|---|---|---|
| Sales | 27 and 29 | 64,681,562 | 65,152,320 |
| Services rendered | 27 and 29 | 49,773,548 | 54,862,849 |
| Other income | 27 | 12,222,091 | 16,298,835 |
| Cost of sales | 11 | (19,560,889) | (18,696,228) |
| External supplies and services | (47,516,639) | (52,064,775) | |
| Payroll expenses | (36,405,037) | (40,054,510) | |
| Amortisation and depreciation | 7 and 8 | (3,362,787) | (3,618,866) |
| Provisions and impairment losses | 22 | (3,052,111) | (670,682) |
| Other expenses | (391,993) | (1,719,944) | |
| Gains and losses in derivatives | 23 | (534,647) | (385,235) |
| Gains and losses in associated companies | 28 and 33 | 141,846 | 64,686 |
| Gains and losses in other investments | 28 | 1,624,964 | (11,969,720) |
| Financial expenses | 28 | (5,644,950) | (5,434,575) |
| Financial income | 28 | 1,392,494 | 1,347,414 |
| Profit before income tax | 13,367,452 | 3,111,569 | |
| Income tax | 10 | (8,417,398) | 2,138,778 |
| Net profit for the year | 4,950,054 | 5,250,347 | |
| Attributable to: | |||
| Shareholders' of the Parent Company | 4,812,155 | 5,018,193 | |
| Non-controlling interests | 137,899 | 232,154 | |
| Earnings per share | |||
| Basic | 31 | 0.05 | 0.05 |
| Diluted | 31 | 0.05 | 0.05 |
The accompanying Notes form an integral part of the consolidated financial statements.
| Notes | 31.12.2011 | 31.12.2010 | |
|---|---|---|---|
| Net consolidated profit for the year | 4,950,054 | 5,250,347 | |
| Exchange differences on translation of foreign operations | 158,357 | - | |
| Variation in fair value of cash flow hedge derivative instruments | 10 and 23 | 24,419 | (503,594) |
| Total comprehensive income for the year | 5,132,830 | 4,746,753 | |
| Attributable to: | |||
| Shareholders' of the Parent Company | 4,994,931 | 4,514,599 | |
| Non-controlling interests | 137,899 | 232,154 |
The accompanying Notes form an integral part of the consolidated financial statements.
| Att ribu tab le t ity hol der f th e P nt o e qu s o are |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Not es |
Sha re ital cap |
Sh are miu pre m |
Leg al res erv e |
Oth er res erv es |
Ne t fit/l pro oss |
Tot al |
No roll ing ont n-c inte ts res |
Tot al Eq uity |
|
| Bal f 1 Jan 201 0 anc e a s o uar y Ap iatio f co lida ted ofit for 20 09: t pr pro pr n o nso ne |
25, 641 ,45 9 |
15, 874 ,83 5 |
5,4 09, 144 |
( 3) 60, 362 ,75 |
17, 091 ,52 9 |
3,6 54, 214 |
591 ,83 5 |
4,2 46, 049 |
|
| nsf Tra er t o le l re and ret ain ed nin ga ser ve ear gs |
- | - | - | 16, 065 ,87 0 |
( 0) 16, 065 ,87 |
- | - | - | |
| Div ide nd dis trib utio n Ch e in and ont roll ing int sts ang res erv es no n-c ere : |
- | - | - | - | ( 1,0 25, 659 ) |
( 1,0 25, 659 ) |
( 69, 660 ) |
( 1,0 95, 319 ) |
|
| Oth han er c ges |
- | - | - | 43, 055 |
- | 43, 055 |
( 18, 420 ) |
24, 635 |
|
| Tot al c hen sive inc e fo r th om pre om e y ear |
- | - | - | ( 4) 503 ,59 |
5,0 18, 193 |
4,5 14, 599 |
232 ,15 4 |
4,7 46, 753 |
|
| Bal f 31 De ber 20 10 anc e a s o cem |
25, 641 ,45 9 |
15, 874 ,83 5 |
5,4 09, 144 |
( 2) 44, 757 ,42 |
5,0 18, 193 |
7,1 86, 209 |
735 ,90 9 |
7,9 22, 118 |
|
| Bal f 1 Jan 201 1 anc e a s o uar y Ap iatio f co lida ted ofit for t pr 20 10: pro pr n o nso ne |
25, 641 ,45 9 |
15, 874 ,83 5 |
5,4 09, 144 |
( 44, 757 ,42 2) |
5,0 18, 193 |
7,1 86, 209 |
735 ,90 9 |
7,9 22, 118 |
|
| Tra nsf o le l re and ain ed nin er t ret ga ser ve ear gs |
- | - | - | 3,9 92, 534 |
( 3,9 92, 534 ) |
- | - | - | |
| Div ide nd dis trib utio n Ch e in and roll ing int ont sts ang res erv es no n-c ere : |
32 | - | - | - | - | ( ) 1,0 25, 659 |
( ) 1,0 25, 659 |
( ) 88, 500 |
( ) 1,1 14, 159 |
| Oth han er c ges |
- | - | - | ( ) 47, 742 |
- | ( ) 47, 742 |
2,5 03 |
( ) 45, 239 |
|
| Tot al c hen sive inc e fo r th om pre om e y ear |
- | - | - | 182 6 ,77 |
4,8 12, 155 |
4,9 94, 931 |
137 ,89 9 |
5,1 32, 830 |
|
| Bal f 31 De ber 20 11 anc e a s o cem |
25, 641 ,45 9 |
15, 874 ,83 5 |
5,4 09, 144 |
( 40, 629 ,85 4) |
4,8 12, 155 |
11, 107 ,73 9 |
787 ,81 1 |
11, 895 ,55 0 |
The accompanying Notes form an integral part of the consolidated financial statements.
The Chartered Accountant
The Board of Directors
(Translation of financial statements originally issued in Portuguese - Note 36)
(Amounts expressed in Euro)
| Notes | 2011 | 2010 | |||
|---|---|---|---|---|---|
| Operating activities: | |||||
| Collections from customers | 147,462,634 | 154,840,242 | |||
| Payments to suppliers | (85,970,985) | (90,969,954) | |||
| Payments to personnel | (41,387,644) | (40,817,805) | |||
| Other collections/payments relating to operating activities | (1,296,814) | (976,674) | |||
| Corporate Income Tax | (1,283,351) | 17,523,840 | (4,139,960) | 17,935,849 | |
| Cash flow from operating activities (1) | 17,523,840 | 17,935,849 | |||
| Investment activities: | |||||
| Collections relating to: | |||||
| Financial investments | 16 and 17 | 51,627,640 | - | ||
| Tangible assets | 25,884 | 28,250 | |||
| Interest and similar income | 1,370,565 | 1,414,714 | |||
| Dividends | 16 | 1,486,400 | 54,510,489 | 2,430,400 | 3,873,364 |
| Payments relating to: | |||||
| Financial investments | 17 | (160,000) | (125,000) | ||
| Intangible assets | (869,404) | (1,128,883) | |||
| Tangible assets | (1,862,612) | (2,892,016) | (2,768,737) | (4,022,620) | |
| Cash flow from investment activities (2) | 51,618,473 | (149,256) | |||
| Financing activities: | |||||
| Collections relating to: | |||||
| Loans obtained | - | - | - | - | |
| Payments relating to: | |||||
| Lease contracts | (1,504,206) | (2,385,732) | |||
| Interest and similar costs | (5,275,418) | (5,420,976) | |||
| Dividends | 32 | (1,025,659) | (1,026,659) | ||
| Supplementary capital | (3,570) | - | |||
| Loans obtained | (53,000,000) | (60,808,853) | (49,000,000) | (57,833,367) | |
| Cash flow from financing activities (3) | (60,808,853) | (57,833,367) | |||
| Cash and cash equivalents in companies consolidated for the first time (Note 5) | - | 17,872 | |||
| Cash and cash equivalents at the beginning of the year | 3,869,673 | 43,897,575 | |||
| Cash and cash equivalents variation: (1)+(2)+(3) | 8,333,460 | (40,046,774) | |||
| Cash and cash equivalents at the end of the year | 17 | 12,203,133 | 3,869,673 | ||
The accompanying Notes form an integral part of the consolidated financial statements.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
Cofina, SGPS, S.A. ("Cofina" or "Company") is a public capital company, with headquarters located at Rua General Norton de Matos, 68, r/c in Porto and has its shares listed in the Lisbon Euronext Stock Exchange. Cofina is the Parent company of a group of companies detailed in Note 4, commonly designated as Cofina Group, and its main activity is the management of investments in the Media sector (written press).
The Cofina Group owns headings of reference in the respective segments, editing titles like newspapers "Correio da Manhã", "Record", "Jornal de Negócios", "Destak" and "Metro", as well as the magazines "Sábado", "Automotor", "TV Guia", "Flash!" and "GQ", among others.
During the year ended as of 31 December 2011, the Cofina Group developed its activity mainly in Portugal, having also some interests in Brazil, through the investments in the associated company Destak Brasil and in the subsidiary Adcom Media (Note 4).
Cofina´s consolidated financial statements are expressed in Euro (rounded to the nearest unit). This is the currency used by the Group in its operations and as such, considered its functional currency. The operations of the foreign group companies whose functional currency is not the Euro are included in the consolidated financial statements in accordance with the policy established in Note 2.2.d).
The accompanying consolidated financial statements have been prepared under the going concern assumption, although as of 31 December 2011 the Group's total equity is less than half of its share capital. This situation is due solely to the Group's exposure to ZON Multimédia - Serviços de Telecomunicações e Multimedia, SGPS, S.A. ("Zon Multimedia") until July 2011, through the holding of 15,190,000 shares, which were fully disposed during the year ended as of 31 December 2011 (Note 16).
It is the Board of Directors' belief that the consolidated equity will no longer be less than half of its share capital as a consequence of the results that will be generated by the operations of the Group during the next financial years.
The basis of presentation and main accounting policies adopted in the preparation of the consolidated financial statements are as follows:
The accompanying consolidated financial statements have been prepared on a going concern basis from the books and accounting records of the companies included in the consolidation, maintained in accordance with the International Financial Reporting Standards ("IFRS"), as adopted by the European Union for financial years started as from 1 January 2011. These standards include the International Financial Reporting Standards issued by the International Accounting Standards Board ("IASB"), the International Accounting Standards ("IAS") issued by the International Accounting Standards Committee ("IASC") and respective interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and by the Standing Interpretations Committee ("SIC"), as adopted by the European Union. The standards and interpretations mentioned above will generally be presented as "IAS/IFRS".
The Interim financial statements were presented quarterly, in accordance with IAS 34 – "Interim Financial Report".
During the year 2011, no changes occurred in relation to the accounting policies presented in the consolidated financial statements as of 31 December 2010.
The following standards, interpretations, amendments and endorsed revisions by the European Union and with mandatory application in financial years started on or after 1 January 2011, were adopted for the first time in the year ended as of 31 December 2011:
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
| Standard | Effective date (annual periods beginning on or after) |
Observations |
|---|---|---|
| Amendments to IAS 24 - Related Party Disclosures and IFRS 8 - Operating Segments |
31-12-2010 | IAS 24 (as revised in 2009) as been revised on the follow ing tw o aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. Amendments to IFRS 8 arise from the IAS 24 amendment above referred. |
| Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement |
31-12-2010 | IFRIC 14 addresses w hen refunds or reductions in future contributions should be regarded as available in accordance w ith paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and w hen minimum funding requirements might rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contribution. |
| IFRIC 19 - Extinguishing Financial Liabilities w ith Equity Instruments and amendments to IFRS 1 - First-time Adoption of International Financial Reporting Standards |
30-06-2010 | The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement w ill be measured at fair value, and any difference betw een the carrying amount of the financial liability extinguished and the consideration paid w ill be recognised in profit or loss. The First-time adopters can apply the transitory dispositions contained in IFRIC 19. |
| Amendments to IFRS 1 - First-time Adoption of International Financial Reporting Standards and IFRS 7 - Financial Instruments: Disclosures |
30-06-2010 | Comparative disclosures obligation's limited exemption in accordance w ith IFRS 7 for the first time adopters. |
| Amendments to several IFRS: IFRS 1, IFRS 3 and IFRS 7 IAS 1, 32, 34, 39 and IFRIC 13 |
IFRS 1, 3 and IAS 32, 39: 30-06-2010 and IFRS 7, IAS 1, 34 and IFRIC 13: 31- 12-2010 |
Amendments in several international financial reporting standards, in order to simplify and clarify the international accounting standards. |
| IAS 32 - Financial instruments | 31-01-2010 | The presentation is modified accordingly to the regulation's appendix. |
The effect in the consolidated financial statements of the Group for the year ended as of 31 December 2011, due to the adoption of the standards, interpretations, amendments and revisions mentioned above has not been significant.
This process included the review of 8 standards end interpretations. The effect in the consolidated financial statements of the Group for the year ended as of 31 December 2011, due to the adoption of the standards and interpretations has not been significant.
The following changes, with mandatory application after 1 July 2011, were, until the approval date of the accompanying financial statements, endorsed by the European Union:
| Standard | Effective date (annual periods beginning on or after) |
Observations |
|---|---|---|
| Amendments to IFRS 7 - Financial Instruments: Disclosures |
01-07-2011 | The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures w hen a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures w here transfers of financial assets are not evenly distributed throughout the period. |
These standards, although endorsed by the European Union, were not adopted by the Group in the year ended as of 31 December 2011, because its application is not yet mandatory. No significant impacts are expected to arise in the financial statements as a result of the adoption of these standards.
The accounting policies and measurement criteria adopted by the Group as of 31 December 2011 are consistent with those used in the preparation of the consolidated financial statements as of 31 December 2010.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
In the preparation of the consolidated financial statements, in accordance with the IAS/IFRS, the Board of Directors adopted certain assumptions and estimates that affect the reported assets and liabilities, as well as the income and expenses in relation to the reported periods. All the estimates and assumptions made by the Board of Directors were made on the basis of its better existing knowledge, with reference to the date of approval of the financial statements, of the events and transactions in progress.
The accompanying consolidated financial statements have been prepared for appreciation and approval by the General Shareholders Meeting. The Group's Board of Directors believes that they will be approved without changes.
The consolidation policies adopted by Cofina Group in the preparation of its consolidated financial statements are as follows:
Investments in companies in which the Group owns, directly or indirectly, more than 50% of the voting rights at the Shareholders' General Meeting or is able to control the financial and operating policies so as to benefit from its activities (definition of control normally used by the Group), are included in the consolidated financial statements by the full consolidation method. The equity and net result of those investments attributable to non-controlling shareholders are presented separately, under the caption "Noncontrolling interests", in the consolidated statement of financial position and in the consolidated statement of profit and loss. Companies included in the consolidated financial statements by the full consolidation method are listed in Note 4.
When losses attributable to the non-controlling interests exceed the non-controlling interest in the equity of the subsidiary, the excess and any further losses attributable to the non-controlling interests are charged against the majority interests, except to the extent that the non-controlling shareholders have a binding obligation and are able to cover such losses. If the subsidiary subsequently reports profits, such profits are allocated to the majority interests until the minority's share of losses previously absorbed by the Group has been recovered.
In business combinations occurred after the date of transition to the International Financial Reporting Standards as adopted by the European Union – IFRS (1 January 2004), the assets and liabilities of each subsidiary are measured at fair value at the date of acquisition in accordance with IFRS 3 - "Business Combinations", with this measurement able to be concluded until 12 months after acquisition date. Any excess on the cost of acquisition over the fair value of the identifiable net assets acquired (including contingent liabilities) is recognised as goodwill. Any excess of the fair value of the identifiable net assets and liabilities acquired over its cost is recognised as an income in the profit and loss statement of the period of acquisition, after reassessment of the estimated fair value attributed to the net assets acquired. Non-controlling interests are presented according to their share in the fair value of the acquired identifiable assets and liabilities.
The results of the subsidiaries acquired or disposed during the year are included in the consolidated income statement as from the effective date of acquisition or up to the effective date of disposal, respectively.
Adjustments to the financial statements of the affiliates are performed, whenever necessary, in order to adapt its accounting policies to those used by the Group. All intercompany transactions, balances and distributed dividends are eliminated during the consolidation process.
Whenever the Group has, in substance, control over other entities created for a specific purpose ("Special Purpose Entities – SPE´s"), even if no share capital interest is directly or indirectly held in those entities, these are consolidated by the full consolidation method. As of 31 December 2011, there are no special purpose entities within the Group perimeter.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
Investments in associated companies (companies where the Group has significant influence but has no control over the financial and operating decisions - usually corresponding to holdings between 20% and 50% in a company's share capital) are accounted for in accordance with the equity method.
According to the equity method, the investments in associated companies are initially recorded at acquisition cost, which is adjusted proportionally to the Group's corresponding share capital, as at the acquisition date or as at the date of the first adoption of the equity method. On a yearly basis, investments are subsequently adjusted in accordance with the Group's participation in the associated company's net result. Additionally, the dividends of the subsidiary are recorded as a reduction in the investment's book value, and the Group's proportion in the changes occurred in the associated company's equity are recorded as a change in the Group's equity.
Any excess of the cost of acquisition over the Group's share in the fair value of the identifiable net assets acquired is recognised as goodwill, which is included in the caption "Investments in associated companies". If that difference is negative, it is recorded as a gain in the caption "Gains and losses in associated companies" after reassessment of the fair value of the identifiable assets and liabilities acquired.
An evaluation of investments held (and loans conceded) in associated companies is performed whenever there are signs of impairment in those investments. Impairment losses are recorded in the statement of profit and loss for the period in the caption "Gains and losses in associated companies". When those losses recorded in previous periods are no longer applicable, they are reverted in the statement of profit and loss for the period.
When the Group's share of losses in the associated company exceeds the investment's book value, the investment is recorded at null value, except to the extent of the Group's commitments to the associate. In such case, the Group records a provision to cover those commitments.
Unrealised gains arising from transactions with associated companies are eliminated proportionally to the extent of the Group's interest in the associated company against the investment held. Unrealised losses are also eliminated, but only to the extent that there is no evidence of impairment of the transferred asset.
The financial investments in associated companies are detailed in Note 4.
The difference between the acquisition cost of financial investments in Group companies (subsidiaries), added by the amount of the non-controlling interests, and the attributable amount to the fair value of the identifiable assets and liabilities of those companies, as of the acquisition date, when positive, is recorded under the caption "Goodwill" and, when negative, after reassessing its computation, is directly recorded in the statement of income. The differences between the acquisition cost of financial investments in associated companies and in jointly controlled entities and the amount attributable to the fair value of the identifiable assets and liabilities of those companies, as of the acquisition date, when positive, are maintained in the caption "Investments in associated companies" and, when negative, after a reassessment of its computation, are directly recorded in the statement of income.
Additionally, the excess of the cost of acquisition of investments in foreign companies over the fair value of their identifiable assets and liabilities as at the date of acquisition is calculated using the local currency of each of those companies. Translation to the Group's currency (Euro) is performed using the exchange rate as at the balance sheet date. Exchange rate differences arising from this translation are recorded under the equity caption "Conversion reserves", included in the equity caption "Other reserves".
Goodwill arising from acquisitions made prior to the date of transition to IFRS (1 January 2004) is stated using the carrying amounts in accordance with generally accepted accounting principles in Portugal as of that date, and was then subject to impairment tests. The impact of these adjustments was recorded in the caption "Retained earnings", in accordance with IFRS 1. Goodwill arising from the acquisition of foreign companies was recomputed retrospectively using the local currency of each subsidiary.
Cofina Group, on a transaction by transaction basis (for each business combination), will opt to measure any non-controlling interest in the acquired company either at fair value or by the proportional part of the non-controlling interest of the identifiable net assets of the acquired company. Until 1 January 2010, non-
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
controlling interests were measured exclusively in accordance with the proportion of the fair value of the assets and liabilities acquired.
The amount of contingent future payments is recognised as a liability as at the date of the business combination in accordance with its fair value. Any change to the initially recognised amount is recorded against goodwill, but only if it occurs within the measurement period (12 months after acquisition date) and if it relates with events before the acquisition date. In any other situation, these changes are recorded against the income statement.
Transactions involving acquisitions or disposals of interests in already controlled entities, as long as they do not represent loss of control, are treated as transactions between shareholders, thus only affecting equity captions, without any impact in goodwill or results.
Whenever a disposal transaction determines a loss of control, all assets and liabilities of the entity should be derecognised, and any remaining interest in the disposed entity should be re-measured at fair value, being the resulting loss or gain recorded in the income statement.
Goodwill is not amortised, but is subject to impairment tests on an annual basis. The recoverable amounts of cash generating units are determined based on the estimation of its value in use. The recovery amount is estimated to individual assets or, if not possible, for the cash-generating unit to which the asset belongs. These estimations require the use of assumptions based on estimates of future circumstances, which may be different from the expected outcomes. Impairment losses identified in the period are recorded in the statement of profit and loss under the caption "Provisions and impairment losses", and may not be reversed.
Assets and liabilities in the financial statements of foreign entities are translated to Euro using the exchange rates in force at the balance sheet date. Profit and loss and cash flows are converted to Euro using the average exchange rate for the period. The resulting exchange rate differences are recorded in equity captions.
Goodwill and adjustments to the fair value arising from the acquisition of foreign subsidiaries are recorded as assets and liabilities of those companies and translated to Euro at the balance sheet date exchange rate.
Whenever a foreign company is disposed, the accumulated exchange rate differences are recorded in the statement of profit and loss as a gain or loss associated with the disposal.
Exchange rates used in the translation of foreign group associated companies are listed below:
| 31 December 2011 | 31 December 2010 | |||
|---|---|---|---|---|
| Year end | Year | Year end | Year | |
| average | average | |||
| Brazilian Real | 0.4139 | 0.4298 | 0.4501 | 0.4289 |
The main accounting policies used by Cofina Group in the preparation of its consolidated financial statements are as follows:
a) Intangible assets
Intangible assets are recorded at cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognised if it is likely that future economic benefits will flow to the Group, are controlled by the Group and if its cost can be reliably measured.
Research costs incurred with new technical knowledge are recognised in the statement of profit and loss when incurred.
Development costs are recognised as an intangible asset if the Group has proven technical feasibility and ability to finish the development and to sell/use such assets and it is likely that those assets will generate
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
future economic benefits. Development costs which do not fulfil these conditions are recorded as an expense in the period in which they are incurred.
Internal costs related with maintenance and development of software are recorded as expenses in the statement of profit and loss for the period in which they are incurred, except when these costs are directly attributable to projects for which the existence of future economic benefits is likely. Being this the case, they are capitalized as intangible assets.
Amortisation is calculated on a straight line basis, as from the date the asset is first used, over its expected useful life (usually 3 to 5 years).
Tangible assets acquired until 1 January 2004 (IFRS transition date), are recorded at their respective deemed cost, which corresponds to its acquisition cost, or its acquisition cost restated in accordance with generally accepted accounting principles in Portugal until that date, net of accumulated amortisation and accumulated impairment losses.
Tangible assets acquired after that date are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset is available for use, over the expected useful life for each group of assets.
The depreciation rates used correspond to the following estimated useful lives:
| Years | |
|---|---|
| Buildings and other constructions | 10 |
| Plant and machinery | 2 to 15 |
| Vehicles | 2 to 10 |
| Tools | 4 to 14 |
| Office equipment | 2 to 10 |
| Other tangible assets | 3 to 10 |
Maintenance and repair costs related to tangible assets which do not increase the useful life or result in significant benefits or improvements in tangible fixed assets are recorded as expenses in the period they are incurred.
Tangible assets in progress correspond to fixed assets still in construction and are stated at acquisition cost, net of impairment losses. These assets are depreciated from the date they are concluded or ready to be used.
Gains or losses arising from the sale or disposal of tangible assets are calculated as the difference between the selling price and the asset's net book value as at the date of its sale/disposal, and are recorded in the statement of profit and loss under the captions "Other income" or "Other expenses", respectively.
c) Lease contracts
Lease contracts are classified as (i) a financial lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
Tangible fixed assets acquired under financial lease contracts and the corresponding liabilities are recorded in accordance with the financial method. Under this method, the cost of the fixed assets and the corresponding liability are reflected in the statement of financial position. In addition, interests included in the lease instalments and depreciation of the fixed assets, calculated as explained in Note 2.3.b), are recorded in the statement of profit and loss of the period to which they apply.
Classifying a lease as financial or as operational depends on the substance of the transaction rather than on the form of the contract.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The operational lease instalments on assets acquired under long-term rental contracts are recognised in full as expenses in the period to which they refer to.
Assets are assessed for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the statement of profit and loss under the caption "Provisions and impairment losses".
The recoverable amount is the higher of an asset's net selling price and its value of use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of the disposal. The value of use is the present value of estimated future cash flows expected to arise from the continued use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognised in prior years is recorded when the Company concludes that the impairment losses previously recognised for the asset no longer exist or have decreased. The reversal is recorded in the statement of profit and loss as "Other income". However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation and amortisation) had no impairment loss been recognised for that asset in prior years.
Borrowing costs (interests) related with loans obtained are usually recognised as expenses in the statement of profit and loss for the period in which they are incurred, on an accrual basis.
When the Company becomes part of a loan agreement to specifically finance capital assets, the corresponding interests are capitalized, being part of the cost of the asset. The capitalization of these interests starts after the beginning of the preparation of the activities of construction, and ceases when the asset is ready for use or in case the project is suspended.
Raw, subsidiary and consumable materials are stated at average acquisition cost, deducted from quantity discounts (rappel) granted by suppliers, which is lower than its market value.
Differences between the cost and the net realisable value of inventories, if negative, are shown as operating expenses under the caption "Provisions and impairment losses".
g) Provisions
Provisions are recognised when, and only when, (i) the Group has an obligation (legal or constructive) arising from a past event, (ii) it is probable that an outflow of resources will be required to settle the obligation, and (iii) a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at each balance sheet date to reflect the best estimate of the Board of Directors as of that date.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and has been communicated to the affected parties.
When a provision is computed taking into consideration the cash flows necessary to eliminate such obligation, it is recorded by its net present value.
h) Pension complements
Whenever there are commitments to provide pension complements to employees retiring due to age or disability, the Group Companies record provisions to face such commitments, based in actuarial calculations prepared by specialized entities. These actuarial liabilities are calculated in accordance with the "Projected Unit Credit" method, using the actuarial financial assumptions considered to be the most adequate (Note 20).
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
i) Investments
Investments held by the Group are classified in the following categories:
Financial investments at fair value through profit or loss: this category is divided into two subcategories: "Financial assets classified as held for trading" and "Financial assets designated by the Group at fair value through profit or loss". A financial asset is classified under this category if it is acquired principally for the purpose of selling it in the short term or its performance or investment strategy are analyzed and defined by the Board of Directors based on the fair value of the financial asset. Derivatives are also classified as instruments held for trading, except if designated as an effective hedging instrument. Financial instruments in this category are classified as current assets if they are held for trading or if it is expected that they will be realized within twelve months of the balance sheet date.
Held-to-maturity investments: this category includes non-derivative financial assets with fixed or variable reimbursements with fixed maturity, and for which the intention of the Board of Directors is to maintain them till its maturity.
Available-for-sale investments: this category includes the financial assets, non-derivatives, that are designated as available-for-sale and those that are not classified in the previous categories. This category is classified as non-current, unless the Board of Directors has the intention to sell the investment within 12 months from the balance sheet date.
Investments are initially measured at their acquisition cost, which is the fair value of the price paid, including transaction costs, if related with held to maturity and available for sale investments.
Investments available for sale and investments measured at fair value through profit and loss are subsequently measured at fair value by reference to its market value at the balance sheet date, without any deduction for transaction costs which may be incurred until its sale. Investments in equity instruments which are not listed on a stock exchange market and whose fair value cannot be reliably measured are stated at cost net of impairment losses. Investments held to maturity are recorded at amortised cost, using the effective interest method.
Gains or losses arising from a change in the fair value of available for sale investments are recognised under the equity caption "Fair value reserves" included in the caption "Other reserves", until the investment is sold or disposed, or until it is determined to be impaired, at which time the cumulative loss previously recognised in equity is transferred to profit or loss captions.
All purchases and sales of investments are recorded on its trade date, independently of the settlement date.
The debts from customers and other debtors are recorded at their nominal amount and presented in the consolidated statement of financial position deduced from impairment losses recognised in the caption "Accumulated impairment losses", in order to reflect their net realizable value. The accounts receivable, when current, do not include interests given the immaterial impact of discounting the cash flows.
Impairment losses are recorded following events that indicate, objectively and in a quantifiable manner, that the whole or part of the balance in debt will not be received. For such, each company takes into consideration market information that demonstrates that:
The recognized impairment losses correspond to the difference between the recorded receivable balance and the correspondent current value from the estimated future cash flows, discounted at the initial effective interest rate that, in the cases where collection is expected to occur within one year, is considered null, given the immaterial effect of the discount.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
Loans are recorded as liabilities at the respective nominal value net of up-front fees and commissions directly related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the statement of profit and loss on an accrual basis.
Assets and liabilities are compensated and presented by their net amount as long as there is the right for compulsory fulfilment of their compensation and the Board of Directors intends to realise them on a net basis or realise the asset and simultaneously settle the liability.
Non interest bearing accounts payable are stated at their nominal value, which is roughly equivalent to their fair value.
The Group may use derivative instruments to manage its exposure to financial risks. Derivative instruments are only used for hedge accounting purposes. Derivative instruments are not used for speculation purposes.
The criteria used by the Group to classify the derivative instruments as cash flow hedges are as follows:
At the inception of the hedge and in subsequent periods, the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated;
Hedge effectiveness can be reliably measured;
Cash flow hedges are initially recorded at cost, if any, and subsequently revaluated at their fair value. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity in the caption "Hedging reserves", included in the caption "Other reserves". The gain or loss relating to the ineffective portion is recognized immediately in the income statement, when calculated.
In cases when the derivative instruments do not comply with the above mentioned requirements to be considered as a cash-flow hedge, although initially engaged for that purpose, the changes in its fair value are recognized directly in the profit and loss statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised. When a hedging instrument no longer qualifies for hedge accounting, the cumulative gain or loss that was deferred in equity is transferred immediately to the profit and loss of the year and the subsequent revaluations of the derivative are recorded in the income statement, or added to the carrying amount of the hedged asset. Subsequent revaluations are recorded directly in the income statement.
In the case of derivatives embedded in other financial instruments or contracts, these are treated as separate derivatives when the risks and characteristics are not closely related with the host contracts and when the contracts are not reflected by its fair value with unrealised gains and losses recognised in the income statement.
vi) Classification of financial liabilities and equity instruments
Financial liabilities and equity instruments are classified and accounted for based upon its contractual substance, regardless of its legal form. Equity instruments are those that represent a residual interest upon the Group's net assets and are recorded by the amount received, net of the costs incurred with its issuance.
vii) Own shares
Own shares are recorded at acquisition cost as a deduction to equity. Gains and losses arising on its sale are recorded in the equity caption "Other reserves".
AS OF 31 DECEMBER 2011
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The Group derecognizes financial assets from its financial statements only when contractual entitlement to the cash flows inherent to such assets expire or when the Group substantially transfers all the risks and benefits inherent to the possession of such assets to a third party. If the Group substantially retains all risks and benefits inherent to the possession of such assets, these are recognised in the financial statements, and the monetary compensation received for the cession of such assets is recognized as a liability under the caption "Bank loans" or "Other loans".
Consequently, customer balances secured by bills discounted not yet fallen due and accounts receivable assigned under factoring arrangements as of the date of each balance sheet are recognized in the financial statements up to such a time as they are received.
Cash and cash equivalents include cash on hand, cash at banks on demand and term deposits and other treasury applications which reach its maturity within less than three months and may be mobilized without significant risk of change in value.
For purposes of the consolidated statement of cash flows, "Cash and cash equivalents" caption also includes bank overdrafts, which are included in the balance sheet caption "Bank loans".
Contingent liabilities are defined by the Company as (i) possible obligations that arise from past events and which existence will be confirmed, or not, by one or more occurrences of uncertain future events not controlled by the Company, or (ii) present obligations that arise from past events but that are not recorded because it is unlikely that an outflow of resources will occur to settle the obligation or the obligation amount cannot be reliably measured.
Contingent liabilities are not recorded in the consolidated financial statements, being disclosed, unless the probability of a cash outflow is remote, in which case no disclosure is made.
Contingent assets are possible assets arising from past events and whose existence will be confirmed, or not, by uncertain future events not controlled by the Company.
Contingent assets are not recorded in the consolidated financial statements but only disclosed when the existence of future economic benefits is likely.
Income tax for the period is determined based on the taxable results of the companies included in the consolidation and takes into consideration deferred taxation.
Current taxes are computed based on the taxable profit of the consolidated companies, in accordance with the tax legislation in force in each company´s jurisdiction.
The majority of the companies included in the consolidation by the full consolidation method are taxed in accordance with the special regime for taxation of groups of companies ("Regime Especial de Tributação de Grupos de Sociedades" – "RETGS"), in accordance with article 69º of the Corporate Income Tax Code (Código do Imposto sobre o Rendimento das Pessoas Colectivas). Cofina, SGPS, S.A. is the dominant company of this group of companies.
Deferred taxes are computed using the balance sheet liability method and reflect the timing differences between the amount of assets and liabilities for accounting purposes and the correspondent amounts for tax purposes. Deferred taxes are computed and reassessed on a yearly basis using the tax rate that is expected to be in force at the time these temporary differences are reversed.
Deferred tax assets are only recorded when there is reasonable expectation that sufficient taxable profits will arise in the future to allow such deferred tax assets to be used. At the end of each period the Company reviews its recorded and unrecorded deferred tax assets which are reduced whenever its recoverability ceases to be likely, or recorded if it is likely that taxable profits will be generated in the future to enable them to be recovered.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
Deferred tax assets and liabilities are recorded in the statement of profit and loss, except if related to items directly recorded in equity. In these cases the corresponding deferred tax is also recorded in equity captions.
Revenue arising from the sale of goods is recognised in the consolidated income statement when (i) the risks and benefits have been transferred to the buyer, (ii) the Company retains neither continued management involvement in a degree usually associated with ownership nor effective control over the goods sold, (iii) the amount of the revenue can be measured reasonably, (iv) it is likely that the economic benefits associated with the transaction will flow to the Company, and (v) the costs incurred or to be incurred related with the transaction can be reliably measured. Sales are recorded net of taxes, discounts and other expenses arising from the sale, and are measured at the fair value of the amount received or receivable.
Sales of magazines and newspapers are recorded in the period they are distributed; the newspapers distribution is performed on a daily basis, and the magazines on a weekly, monthly or bi-monthly basis. Returns of unsold publications are recorded in the corresponding period, as a decrease of previously recorded income. Income arising from magazine and newspaper subscriptions is recognised over the subscription period (usually 1 year).
Services rendered regarding the sale of advertising space are recorded in the period in which the advertising is published. Quantity discounts relating to the sale of advertising space are recorded in the period to which they relate as a deduction of the caption "Services rendered".
Services rendered regarding printing activities are recognized in the period in which the services are rendered.
Dividends are recognised as income in the period its distribution is approved.
All other income and expenses are recognised in the period to which they relate, independently of when the amounts are received or paid. Differences between the amounts received and paid and the corresponding income and expenses are recorded in the captions of accrued and deferred expenses and income included in the captions "Other current assets" and "Other current liabilities".
m) Balances and transactions expressed in foreign currencies
All assets and liabilities expressed in foreign currencies were translated to Euro using the exchange rates in force as of the balance sheet date. Favourable and unfavourable exchange differences arising from changes in the exchange rates between those prevailing on the dates of the transactions and those in force on the dates of payment, collection or as of the balance sheet date are recorded in the consolidated statement of profit and loss.
n) Subsequent events
Post balance sheet date events that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Post balance sheet date events that provide information about conditions that have only arisen after the balance sheet date ("non adjusting events") are disclosed in the notes to the financial statements, if material.
In each period, the Company identifies the most adequate segment division taking into consideration the business areas in which the Group is represented and managed.
Information regarding the business segments identified is included in Note 33.
p) Cash flows statement
Consolidated cash flow statement is prepared, using the direct method, in accordance with IAS 7. The Group classifies as "Cash and cash equivalents" applications which mature in less than three months and which are subject to insignificant risk of change in value.
Consolidated cash flow statement is classified by operating, investing and financing activities. Operating activities include cash receipts from customers, cash payments to suppliers, cash payments to and on
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
behalf of employees and other operating activities payments and receipts. Investing activities cash flows include, essentially, payments and receipts related with acquisitions and sales of tangible assets and investments. Financing activities cash flows include, essentially, payments and receipts of loans and borrowings, financial lease contracts and dividend payments.
In the preparation of the Group's financial statements judgments and estimates have been made and different assumptions were used that affect the reported amounts of assets and liabilities, as well as the reported amounts of profits and losses of the year.
The estimates and underlying assumptions were determined based on the best existing knowledge as of the date of approval of the financial statements of the events and transactions in progress, as well as the experience of past and / or current events. However, situations may occur in subsequent periods which are not foreseeable at the date of approval of the financial statements, and 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 uncertainty, actual results of the transactions in question may differ from the corresponding estimates.
The most significant accounting estimates reflected in the consolidated financial statements include:
Cofina Group is exposed basically to (i) market risks, (ii) credit risks and (iii) liquidity risks. The main objective of Cofina's risk management is to reduce these risks to an acceptable level.
The Group's main risk management principles are approved by the Board of Directors of Cofina, SGPS, S.A., while its implementation is supervised by the directors of each of its subsidiaries.
Within market risk, the exchange rate, interest rate and price risks assume particular relevance.
a. Exchange rate
The impact in the Company's consolidated financial statements arising from changes in the exchange rates is reduced, given the fact that most of the operational cash flows are contracted in Euro. The Group is only exposed to the risk of exchange rate in transactions in Brazilian Real, in relation to the stake held in the associated company Destak Brazil - Empreendimentos e Participações, S.A. (company included in the consolidated financial statements by the equity method) and in Adcom Media . Anúncios e Publicidade, S.A. (company included in the consolidated financial statements by the full consolidation method). Therefore, the Company's Board of Directors considers that potential changes in the exchange rates will not have a significant effect on the consolidated financial statements.
In the event of transactions with non resident entities and settled in a currency other than Euro where the variation of exchange rate may have a significant impact on its performance, the Group aims to hedge its position by entering into financial derivative contracts whenever applicable and considered necessary to reduce the volatility of its results.
The risk of interest rate mainly arises from the indebtedness indexed to variable rates, thus leading the cost of debt to be quite volatile.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The Group uses derivative instruments or similar transactions for hedging interest rate considered significant. Three principles are used in the selection and determination of the hedging instruments of interest rate:
Since the entire indebtedness of Cofina is indexed to floating rates, interest rate swaps are used when it is considered necessary as a mean of protection against changes in future cash flows associated with interest payments. The interest rate swaps agreed have the economic effect of converting the loans linked to variable rates to fixed rates. Under these contracts the Group agrees with other parties (banks) to exchange, in predetermined periods of time, the difference between the amount of interest calculated at the fixed rate and variable rate contracted at that time, with reference to the respective amounts previously agreed.
The counterparts of the hedging instruments are limited to high credit quality financial institutions, since the Group policy priority is the hiring of these instruments with banks that are part of its financing operations. For purposes of determining the counterpart of specific operations, Cofina requests proposals and indicative prices from a representative number of banks to ensure adequate competitiveness of these operations.
In determining the fair value of hedging transactions, the Group uses certain methods, such as valuation models of options and discounted future cash flows, as well as certain assumptions that are based on the interest rate market conditions prevailing at the date of the consolidated financial statement position. Quotes of comparative financial institutions, for specific instruments, are used as reference for evaluation.
The Board of Directors approves the terms and conditions of the relevant funding of the Group, analyzing the structure of such debt, the risks and the different options available in the market, particularly regarding the type of interest rate (fixed / variable).
c. Price
The price risk resulted, mainly, from the exposure of the Group, until July 2011, to listed shares. Until that date Cofina Group held 15,190,000 shares of ZON Multimédia - Serviços de Telecomunicações e Multimedia, SGPS, S.A. which were fully disposed during the year ended as of 31 December 2011. The impact in the income statement of this detention and disposal amounted to 133.540 Euro (Note 16).
The Group's exposure to credit risk is mainly related with accounts receivable arising from its operating and treasury activities. The credit risk relates to the risk of the counterparty not fulfilling its contractual obligations, resulting in a loss to the Group.
The evaluation of credit risk is made on a regular basis, taking into consideration the current conditions of economic conjuncture and the specific situation of credit rating of each debtor, adopting corrective measures whenever necessary.
The Group's credit risk is not concentrated in any particular customer or group of customers with similar characteristics; the accounts receivable are distributed through a high number of customers, different areas of business and geographic areas.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The adjustments to accounts receivable are calculated taking into consideration (i) the risk profile of the customer, (ii) the average collection period, and (iii) the customer's financial conditions.
The amounts included in the face of the consolidated statement of financial position are presented net of accumulated impairment losses, and therefore, at its fair value.
The aim of liquidity risk management is to assure that the Group has the ability to meet its responsibilities and pursue the defined strategic goals, complying with all the commitments set with third parties within the established deadlines.
The Group defines as active politics (i) to keep an adequate level of immediately available resources to face to the necessary payments in its due date, (ii) reduce the probability of default in the reimbursement of loans, negotiating the amplitude of its contractual clauses and (iii) minimize the cost of opportunity of excessive short term liquidity.
The Group additionally aims to make compatible the due dates of assets and liabilities through an active management of its maturities.
During the year, there were no changes in accounting policies and no material errors related with prior years occurred.
The companies included in consolidation by the full consolidation method, its headquarters, percentage participation held and activity as of 31 December 2011, are as follows:
| Designation | Headquarters | Percentage participation held |
Activity |
|---|---|---|---|
| Parent Company: Cofina, SGPS, S.A. |
Porto | Investment management | |
| Amesterdam | Investment management | ||
| Cofina B.V. ("Cofina BV") | (The Netherlands) |
100.00% | Investment management |
| Efe Erre Participações, SGPS, S.A. ("FR") | Ovar | 100.00% | Investment management |
| Cofina Media Group Cofina Media, SGPS, S.A. ("Cofina Media") Presselivre – Imprensa Livre, S.A. ("Presselivre") Edisport – Sociedade de Publicações, S.A. ("Edisport") Edirevistas – Sociedade Editorial, S.A. ("Edirevistas") Mediafin, SGPS, S.A. ("Mediafin") |
Lisbon Lisbon Lisbon Lisbon Lisbon |
100.00% 99.44% 100.00% 99.46% 100.00% |
Investment management Newspapers and magazine publication Newspapers publication Magazines publication Investment management |
| Metronews – Publicações, S.A. ("Metronews") Grafedisport – Impressão e Artes Gráficas, S.A. |
Carnaxide Queluz |
59.00% 100.00% |
Newspapers publication Newspapers print |
| ("Grafedisport") Web Works – Desenvolvimento de Aplicações· para Internet, S.A. ("Web Works") |
Lisbon | 51% | Production and creation of websites for online business development |
| Transjornal – Edição de Publicações, S.A. ("Transjornal") |
Lisbon | 59% | Newspapers publication |
| Cofina - Eventos e Comunicação S.A. ("Cofina Eventos") |
Lisbon | 70% | Events promotion and organization |
| Adcom Media – Anúncios e Publicidade S.A. ("Adcom Media") (a) |
São Paulo, Brazil |
94.05% | Communication and advertising services |
(a) – Group's previously associated company which control was acquired during the year ended as of 31 December 2010 (Note 5).
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
All the above companies were included in the consolidated financial statements of Cofina Group by the full consolidation method, as established in Note 2.2.a).
The associated companies, its headquarters, the percentage participation held, and activity as of 31 December 2011 are as follows:
| Designation | Headquarters | Percentage Participation held |
Activity | |
|---|---|---|---|---|
| Direct | Indirect | |||
| VASP – Sociedade de Transportes e Distribuições, Lda. | Lisbon | 33.33% | - | Publications distribution |
| Destak Brasil – Empreendimentos e Participações, S.A. | São Paulo, Brazil |
23.96% | - | Investment management |
| Mercados Globais – Publicação de Conteúdos, Lda. | V.N.Gaia | 50% | - | Management services and promotion of a financial forum on the internet |
The associated company VASP was included in the consolidated financial statements of Cofina Group by the equity method, as referred to in Note 2.2.b). The remaining companies were recorded at acquisition cost deducted from impairment losses.
The acquisition cost of the associated companies, its book value, equity and net profit, as of 31 December 2011, are as follows:
| Acquisition cost |
Book value |
Equity | Net result |
|---|---|---|---|
| € 6,234 | € 3,244,498 | € 9,733,495 | €244,378 |
| - | - | R\$ ( 681,165 ) | R\$ 457,390 |
| € 299,064 | - | R\$ 1,101,715 | R\$ 152,541 |
| € 72,000 | - | (c) | (c) |
(a) – Provisional financial information
(b) – Investment held by the subsidiary Destak Brasil – Empreendimentos e Participações, S.A.
(c) – Non-available financial information
As of 31 December 2011 and 2010 the caption "Investments in associated companies" can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Investment | ||
| VASP – Sociedade de Transportes e Distribuições, Lda. | 3,244,498 | 3,193,500 |
| Destak Brasil – Empreendimentos e Participações, S.A. | 299,064 | 299,064 |
| Mercados Globais - Publicação de Conteúdos, Lda. | 72,000 | 72,000 |
| 3,615,562 | 3,564,564 | |
| Accumulated impairment losses on investments in associates (Note 22) | (371,064) | (371,064) |
| Loans to associated companies | ||
| Gross amount | 193,845 | 290,746 |
| Accumulated impairment losses (Note 22) | - | (90,847) |
| 3,438,343 | 3,393,399 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011 and 2010 the Group has available for sale investments corresponding to noncontrolling investments in unlisted companies. The Group has recorded impairment losses to face differences to the realisable amount, presenting this caption a net book value of 8,570 and 5,000 Euro, respectively. As of 31 December 2011 and 2010 the total value of investments for which adjustments were made in the same value, amount to 1,064,044 Euro (Note 22).
No changes in the consolidation perimeter occurred during the year ended as of 31 December 2011.
The triggering events of changes in the consolidation perimeter of Cofina Group during the year ended as of 31 December 2010 are as follows:
I. As of 31 December 2010, the Cofina Group, through its subsidiary Cofina Media, SGPS, SA acquired an additional stake in the share capital of Adcom Media - Anúncios e Publicidade S.A., thus holding 94.05% of the equity of this entity. The Group thus holds control of this subsidiary and, as such, it was included in the consolidation using the full consolidation method with reference to that date.
The fair value of the assets and liabilities as of the entry date of this subsidiary (31 December 2010), as well as the computation of the resulting goodwill, are as follows:
| Adcom Media | |
|---|---|
| Assets | |
| Intangible Assets (Note 8) | 3,517 |
| Tangible Fixed Assets (Note 7) | 28,984 |
| Accounts Receivable | 957,630 |
| Cash and cash equivalents | 17,872 |
| Other Assets | 12,356 |
| Liabilities | |
| Provisions (Note 22) | (772,218) |
| Suppliers | (175,154) |
| Group companies | (1,283,941) |
| Current Liabilities | (1,349,630) |
| Net Assets | (2,560,584) |
| Percentage Acquired | 76.04% |
| Value of equity acquired | (1,947,068) |
| Acquisition value | 459,149 |
| Acquired non-controlling interests | 613,516 |
| Acquisition cost | 1,072,665 |
| Consolidation Differences in acquisitions (Note 6) | 3,019,733 |
| Net cash flows attributable to changes in perimeter | |
| Payments (a) | 259,149 |
| Cash and cash equivalent | 17,872 |
| 277,021 |
(a) - payment plan includes deferred payments (259,149 Euro in 2010; 100,000 Euro until June 2011 and 100,000 Euro until June 2012).
The Adcom Media goodwill resulting from the acquisition was determined based on the financial statements of the acquired company as of 31 December 2010. When allocating the fair value of the acquired assets and liabilities, no differences were identified towards the book value, so the difference between these and the participation cost was recorded as Goodwill.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
If this acquisition had been reported with effects as of 1 January 2010, the Group income would have increased by, approximately, 3,087,000 Euro and the net profit would have increased by, approximately, 314,000 Euro.
During 2010, the computation of the goodwill of Transjornal and Webworks was concluded, thus being reduced by 24,504 Euro (Note 6) in relation to the latter company.
Additionally, during 2010 the subsidiary Holdimédia was dissolved.
The movement occurred in goodwill and related impairment losses during the years ended as of 31 December 2011 and 2010 was as follows:
| 31.12.2011 | 31.12.2010 |
|---|---|
| 94,992,223 | 91,996,994 |
| - | 3,019,733 |
| - | (24,504) |
| (1,050,000) | - |
| (242,614) | - |
| 93,699,609 | 94,992,223 |
During the year ended as of 31 December 2011 the variation occurred in the caption "Goodwill" is due exclusively to (i) the exchange rate variation in the year ended as of that date in the computed goodwill of the subsidiary Adcom Media and to (ii) impairment losses recorded in three subsidiaries' goodwill.
As of 31 December 2011 and 2010, the Goodwill by company was as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Presselivre – Imprensa Livre, S.A. | 79,146,285 | 79,146,285 |
| Edirevistas – Sociedade Editorial, S.A. | 6,097,606 | 6,297,606 |
| Adcom Media – Anúncios e Publicidade S.A. (Note 5) | 2,777,119 | 3,019,733 |
| Grafedisport – Impressão e Artes Gráficas, S.A. | 1,906,459 | 1,906,459 |
| Metronews – Publicações, S.A. | 1,703,373 | 1,703,373 |
| Web Works – Desenvolvimento de Aplicações para Internet, S.A. | 1,020,460 | 1,520,460 |
| Transjornal – Edição de Publicações, S.A. | 1,048,307 | 1,398,307 |
| 93,699,609 | 94,992,223 |
Goodwill is tested for impairment on an annual basis and whenever events or changes in circumstances indicate that the amount by which the asset is recorded may not be recovered. When the amount by which the asset is recorded is greater than its recoverable amount, an impairment loss is recorded. The recoverable amount is the higher of the net selling price and the value of use. During the year ended as of 31 December 2011 impairment losses were recorded in the subsidiaries Edirevistas, Web Works and Transjornal.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
During the fiscal year 2011, the methods and assumptions used for the impairment tests of goodwill, which according to the Board of Directors understanding most suit the current economic environment, in the assessment of the existence, or not, of impairment for the main goodwill amounts, are as follows:
| Method | Free discounted cash flows |
|---|---|
| Basis | Business plan |
| Explicit projection period | 5 years |
| Weighted average cost of capital (WACC) during valuation period | 11% |
| Weighted average cost of capital (WACC) during perpetuity | 11% |
| Growth in perpetuity | 1.5% |
If the Group had considered a raise of 0.25 p.p. in the weighted average cost of capital, the referred impairment loss would increase by, approximately, 300,000 Euro.
Subsidiary companies were valuated using the methodology of discounted free cash flows, based on business plans, covering a period of 5 years, developed by the companies' Directors and approved by the Group's Board of Directors.
As result of the impairment tests of goodwill performed, based in the methodologies and assumptions above referred, the Group concluded that there were no impairment losses left to recognize. It is the Board of Directors´ conviction that the effect of eventual deviations that might occur in the main assumptions in which cash-generating units recoverable value was based, will not imply, in all relevant material aspects, the impairment of the respective goodwill.
The movement occurred in tangible assets and in its accumulated depreciation and impairment losses during the years ended as of 31 December 2011 and 2010 was as follows: 2011
| Gross Assets | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land | Buildings and other constructions |
Machinery and equipment |
Transport equipment |
Office Equipment | Other Tangible Assets |
Work in progress | Total | |
| Opening Balance | 165,970 | 467,570 | 22,659,857 | 892,997 | 10,912,449 | 1,436,815 | 2,070,841 | 38,606,499 |
| Additions | - | 827,536 | 260,389 | 67,200 | 491,187 | - | 20,918 | 1,667,230 |
| Disposals | - | - | (15,000) | (113,999) | - | - | - | (128,999) |
| Transfers and write-offs | - | 2,115,552 | (7,002) | 4,222 | (63,806) | (92,447) | (2,070,841) | (114,322) |
| Exchange rate variation | - | (36) | - | - | (10,046) | - | - | (10,082) |
| Closing Balance | 165,970 | 3,410,622 | 22,898,244 | 850,420 | 11,329,784 | 1,344,368 | 20,918 | 40,020,326 |
| 2011 | ||||||||
| Accumulated depreciation and impairment losses | ||||||||
| Buildings and other | Machinery and | Transport | Other Tangible | |||||
| Land | constructions | equipment | equipment | Office Equipment | Assets | Work in progress | Total | |
| Opening Balance | - | 257,671 | 15,544,505 | 687,928 | 10,404,345 | 956,135 | - | 27,850,584 |
| Additions | - | 313,085 | 1,970,567 | 110,055 | 326,567 | 113,265 | - | 2,833,539 |
| Disposals | - | - | (15,990) | (100,138) | - | - | - | (116,128) |
| Transfers and write-offs | - | 60,389 | (101,897) | 4,220 | 34,902 | (99,482) | - | (101,868) |
| Exchange rate variation | - | (17) | - | - | (7,516) | - | - | (7,533) |
| Closing Balance | - | 631,128 | 17,397,185 | 702,065 | 10,758,298 | 969,918 | - | 30,458,594 |
| 165,970 | 2,779,494 | 5,501,059 | 148,355 | 571,486 | 374,450 | 20,918 | 9,561,732 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
| 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gross Assets | |||||||||
| Land | Buildings and other constructions |
Machinery and equipment |
Transport equipment |
Tools and utensils |
Office Equipment |
Other Intangible Assets |
Work in progress |
Total | |
| Opening Balance Additions |
165,970 - |
467,120 - |
21,834,335 825,522 |
833,795 168,867 |
102,553 - |
10,634,631 179,257 |
1,067,733 268,621 |
5,440 2,069,744 |
35,111,577 3,512,011 |
| Changes in consolidation perimeter (Note 5) Disposals Transfers and write-offs |
- - - |
450 - - |
- - - |
- (109,665) - |
- - (102,553) |
117,850 (19,289) - |
- - 100,461 |
- - (4,343) |
118,300 (128,954) (6,435) |
| Closing Balance | 165,970 | 467,570 | 22,659,857 | 892,997 | - | 10,912,449 | 1,436,815 | 2,070,841 | 38,606,499 |
| 2010 | |||||||||
| Accumulated depreciation and impairment losses | |||||||||
| Land | Buildings and other constructions |
Machinery and equipment |
Transport equipment |
Tools and utensils |
Office Equipment |
Other Intangible Assets |
Work in progress |
Total | |
| Opening Balance Additions |
- - |
245,265 12,200 |
13,397,865 1,976,967 |
684,694 111,879 |
99,481 - |
10,137,831 345,724 |
619,284 114,607 |
- - |
25,184,420 2,561,377 |
| Changes in consolidation perimeter (Note 5) Disposals |
- - |
206 - |
- - |
- (108,645) |
- - |
89,110 (11,728) |
- - |
- - |
89,316 (120,373) |
| Transfers and write-offs | - | - | 169,673 | - | (99,481) | (156,592) | 222,244 | - | 135,844 |
| Closing Balance | - | 257,671 | 15,544,505 | 687,928 | - | 10,404,345 | 956,135 | - | 27,850,584 |
| 165,970 | 209,899 | 7,115,352 | 205,069 | - | 508,104 | 480,680 | 2,070,841 | 10,755,915 |
As of 31 December 2010, the amount recorded under the caption "Work in progress" referred, mainly, to adaptation works of the new Cofina Group's headquarters, in Lisbon, which entered in operation in the end of 2011.
As of 31 December 2011 and 2010, the net value of tangible fixed assets acquired under leasing can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |||||||
|---|---|---|---|---|---|---|---|---|
| Accumulated | Accumulated | |||||||
| Gross | depreciation and | Gross | depreciation and | |||||
| Assets | impairment losses | Net Assets | Assets | impairment losses | Net Assets | |||
| Machinery and equipment | 12,198,666 | 7,535,976 | 4,662,690 | 12,197,082 | 6,112,483 | 6,084,599 | ||
| Office Equipment | 234,494 | 97,863 | 136,631 | 96,922 | 19,384 | 77,538 | ||
| Transport equipment | 92,888 | 79,733 | 13,155 | 92,888 | 56,511 | 36,377 | ||
| 12,526,048 | 7,713,572 | 4,812,476 | 12,386,892 | 6,188,378 | 6,198,514 |
As of 31 December 2011 and 2010 there were no tangible assets pledged as guarantee for loans, nor were capitalized any interest to fixed assets.
During the year ended as of 31 December 2011 and 2010, the movement in intangible assets, as well as in the corresponding accumulated depreciation and impairment losses, was as follows:
| 2011 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross Assets | ||||||||||
| Research and Development Expenses |
Patents, royalties and other rights |
Other Intangible assets |
Software | Work in progress |
Total | |||||
| Opening Balance Additions Transfers and write-offs Exchange rate variation |
25,800 - (25,800) - |
760,559 - - - |
25,200 - 317,524 - |
2,780,685 456,462 (227,918) (64) |
- 100,000 - - |
3,592,244 556,462 63,806 (64) |
||||
| Closing Balance | - | 760,559 | 342,724 | 3,009,165 | 100,000 | 4,212,448 | ||||
| 2011 | ||||||||||
| Accumulated depreciation and impairment losses | ||||||||||
| Research and Development Expenses |
Patents, royalties and other rights |
Other Intangible assets |
Software | Work in progress |
Total | |||||
| Opening Balance Additions Transfers and write-offs Exchange rate variation |
25,800 - (25,800) - |
760,559 - - - |
25,200 90,661 223,698 - |
2,267,997 438,587 (131,374) - |
- - - - |
3,079,556 529,248 66,524 - |
||||
| Closing Balance | - | 760,559 | 339,559 | 2,575,210 | - | 3,675,328 | ||||
| - | - | 3,165 | 433,955 | 100,000 | 537,120 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
| 2010 Gross Assets |
|||||
|---|---|---|---|---|---|
| Research and Development Expenses |
Patents, royalties and other rights |
Other Intangible assets |
Software | Total | |
| Opening Balance Additions Changes in consolidation perimeter (Note 5) Transfers and write-offs |
25,800 - - - |
760,559 - - - |
25,200 - - - |
1,913,636 1,036,259 7,861 (177,071) |
2,725,195 1,036,259 7,861 (177,071) |
| Closing Balance | 25,800 | 760,559 | 25,200 | 2,780,685 | 3,592,244 |
| 2010 Accumulated depreciation and impairment losses |
|||||
| Research and Development Expenses |
Patents, royalties and other rights |
Other Intangible assets |
Software | Total | |
| Opening Balance Additions Changes in consolidation perimeter (Note 5) |
25,800 - |
686,737 73,822 - |
16,800 8,400 - |
1,468,820 975,267 4,344 |
2,198,157 1,057,489 4,344 |
| Transfers and write-offs Closing Balance |
- 25,800 |
- 760,559 |
- 25,200 |
(180,434) 2,267,997 |
(180,434) 3,079,556 |
| - | - | - | 512,688 | 512,688 |
The financial instruments in accordance with the policies described in Note 2, were classified as follows:
| 31 December 2011 | Loans and Accounts Receivable |
Assets recorded at fair value through profits and losses |
Sub-total | Assets not covered by IFRS 7 |
Total |
|---|---|---|---|---|---|
| Current Assets | |||||
| Customers | 9,184,783 | - | 9,184,783 | - | 9,184,783 |
| State and other public bodies | - | - | - | 135,820 | 135,820 |
| Other current debtors | 304,429 | - | 304,429 | - | 304,429 |
| Other current assets | - | - | - | 6,452,603 | 6,452,603 |
| Investments measured at fair value through profits and losses | - | 8,583 | 8,583 | - | 8,583 |
| Cash and cash equivalents | 39,167,961 | - | 39,167,961 | - | 39,167,961 |
| 48,657,173 | 8,583 | 48,665,756 | 6,588,423 | 55,254,179 | |
| 31 December 2010 | Loans and Accounts Receivable |
Assets recorded at fair value through profits and losses |
Sub-total | Assets not covered by IFRS 7 |
Total |
| Current Assets | |||||
| Customers | 12,596,832 | - | 12,596,832 | - | 12,596,832 |
| State and other public bodies | - | - | - | 283,439 | 283,439 |
| Other current debtors | 1,574,833 | - | 1,574,833 | - | 1,574,833 |
| Other current assets | - | - | - | 6,181,610 | 6,181,610 |
| Investments measured at fair value through profits and losses | - | 51,501,598 | 51,501,598 | - | 51,501,598 |
| Cash and cash equivalents | 25,179,147 | - | 25,179,147 | - | 25,179,147 |
| 39,350,812 | 51,501,598 | 90,852,410 | 6,465,049 | 97,317,459 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
31 December 2010
| 31 December 2011 | Other financial | Liabilities not covered by |
|||
|---|---|---|---|---|---|
| Derivatives | liabilities | Sub-total | IFRS 7 | Total | |
| Non-current liabilities | |||||
| Other loans | - | - | - | - | - |
| Other non current creditors | - | 1,273,064 | 1,273,064 | - | 1,273,064 |
| - | 1,273,064 | 1,273,064 | - | 1,273,064 | |
| Current Liabilities | |||||
| Bank loans | - | 26,964,828 | 26,964,828 | - | 26,964,828 |
| Other loans - short term | - | 92,086,702 | 92,086,702 | - | 92,086,702 |
| Derivative Financial Instruments | 1,001,831 | - | 1,001,831 | - | 1,001,831 |
| Suppliers | - | 9,440,522 | 9,440,522 | - | 9,440,522 |
| State and other public bodies | - | - | - | 4,549,322 | 4,549,322 |
| Other current creditors | - | 8,699,403 | 8,699,403 | - | 8,699,403 |
| Other current liabilities | - | - | - | 11,889,485 | 11,889,485 |
| 1,001,831 | 137,191,455 | 138,193,286 | 16,438,807 | 154,632,093 | |
| 1,001,831 | 138,464,519 | 139,466,350 | 16,438,807 | 155,905,157 | |
| Liabilities not |
| Derivatives | liabilities | Sub-total | IFRS 7 | Total | |
|---|---|---|---|---|---|
| Non-current liabilities | |||||
| Other loans | - | 19,985,593 | 19,985,593 | - | 19,985,593 |
| Other non current creditors | - | 2,456,506 | 2,456,506 | - | 2,456,506 |
| - | 22,442,099 | 22,442,099 | - | 22,442,099 | |
| Current Liabilities | |||||
| Bank loans | - | 21,309,474 | 21,309,474 | - | 21,309,474 |
| Other loans - short term | - | 123,996,995 | 123,996,995 | - | 123,996,995 |
| Derivative Financial Instruments | 930,601 | - | 930,601 | - | 930,601 |
| Suppliers | - | 11,523,113 | 11,523,113 | - | 11,523,113 |
| State and other public bodies | - | - | - | 3,677,939 | 3,677,939 |
| Other current creditors | - | 9,746,715 | 9,746,715 | - | 9,746,715 |
| Other current liabilities | - | - | - | 14,944,513 | 14,944,513 |
| 930,601 | 166,576,297 | 167,506,898 | 18,622,452 | 186,129,350 | |
| 930,601 | 189,018,396 | 189,948,997 | 18,622,452 | 208,571,449 |
Other financial
covered by
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The table below details the financial instruments measured at fair value after initial recognition, grouped into three levels according to the possibility of observing its fair market value:
Level 1: fair value is determined based on current active market prices;
Level 2: fair value is determined based on valuation techniques. The main inputs of the valuation models are observable in the market;
Level 3: fair value is determined based on valuation models, whose main inputs are not observable in the market.
| 31.12.2011 | 31.12.2010 | |||||
|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |
| Financial assets measured at fair value | ||||||
| Investments measured at fair value through profits and losses (Note 16) | 8,583 | - | - | 51,501,598 | - | - |
| Financial liabilities measured at fair value | ||||||
| Derivative financial instruments (Note 23) | - | 1,001,831 | - | - | 930,601 | - |
In accordance with the current legislation, the tax returns are subject to review and correction by the tax authorities over a period of four years (five years for Social Security), except when tax losses have occurred, tax benefits have been granted, or tax inspections, complaints or disputes are in progress. In these cases, depending on the circumstances, the deadlines can be extended or suspended. Therefore, the tax returns of Cofina, its subsidiaries and associated companies for the years 2008 to 2011 may still be subject to review.
The Board of Directors of Cofina believes that any potential corrections resulting from reviews/inspections of these tax returns by the tax authorities will not have a significant effect on the consolidated financial statements as of 31 December 2011 and 2010.
Cofina, S.G.P.S. is the dominant society of the group of companies that are subject to the special regime of taxation of groups of companies ("Regime Especial de Tributação de Grupos de Sociedades - RETGS").
The movement occurred in deferred tax assets and liabilities in the years ended as of 31 December 2011 and 2010 was as follows:
| Deferred tax assets | ||
|---|---|---|
| 2011 | 2010 | |
| Opening Balance | 8,782,149 | 3,723,053 |
| Effects on the income statement: | ||
| Increase/(Decrease) in tax losses carried forward | (162,654) | (1,612,767) |
| Increase/(Decrease) in provisions not accepted for tax purposes | 444,146 | 318,978 |
| Prior year tax correction | (1,542,829) | 6,171,317 |
| Effects on equity: | ||
| Fair value of derivative financial instruments: | (8,804) | 181,568 |
| Closing Balance | 7,512,008 | 8,782,149 |
As of 31 December 2011 and 2010, there are no deferred tax liabilities' generating situations.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The detail of the deferred tax assets and liabilities as of 31 December 2011 and 2010, in accordance with the nature of timing differences that generated them, is as follow:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Temporary differences between the accounting value and the taxable value | 777 | 777 |
| Fair value of derivative financial instruments | 237,805 | 246,609 |
| Provision and impairment losses not accepted for tax purposes | 2,632,168 | 2,188,022 |
| Prior year tax correction | 4,628,488 | 6,171,317 |
| Tax losses carried forward | 12,770 | 175,424 |
| 7,512,008 | 8,782,149 |
During the year ended as of 31 December 2010, due to changes in tax legislation, deferred tax assets were recorded: 6,171,317 Euro (gross amount of 7,714,146 Euro net of the year effect of 1,542,829 Euro) relating to the change in the accounting policy of the individual accounts (from the cost model to the fair value model) regarding the valuation of financial instruments recorded at fair value through profit and loss. These amounts can be recognized on a straight line and continuous basis for five years and the amount used in the year ended as of 31 December 2011 amounted to 1,542,829 Euros.
In accordance with the tax returns of the companies that record deferred tax assets related with tax losses carried forward, as of 31 December 2011 these may be detailed as follows:
| Tax | Deferred | Expiry | |
|---|---|---|---|
| losses | tax assets | date | |
| Generated in 2011 | 51,080 | 12,770 | 2015 |
Income taxes recorded in the income statement during the years ended as of 31 December 2011 and 2010 are detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Current Tax Income tax for the year |
4,060,855 | 1,287,693 |
| (Excess)/Insufficiency of prior years income tax Additional payment of tax Provision for tax processes (Note 22) |
(404,794) - 3,500,000 |
(52,455) 1,503,512 - |
| Deferred taxes | 1,261,337 | (4,877,528) |
| 8,417,398 | (2,138,778) |
The reconciliation of profit/loss before income tax and the income tax for the years ended as of 31 December 2011 and 2010 is as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Profit/loss before income tax | 13,367,452 | 3,111,569 |
| Income tax rate (including the maximum tax and municipal income tax) | 26.50% | 26.50% |
| 3,542,375 | 824,566 | |
| Financial costs not accepted for tax purposes | 893,692 | 923,348 |
| Prior year tax correction | - | (7,714,146) |
| Losses in financial instruments not accepted for tax purposes | - | 1,800,015 |
| Correction of previous years income tax estimates | (404,794) | (52,455) |
| Additional payment of tax | - | 1,503,512 |
| Provision for tax processes (Note 22) | 3,500,000 | |
| State taxation | 350,515 | 454,112 |
| Autonomous taxation | 403,782 | 311,001 |
| Other effects | 131,829 | (188,730) |
| Income tax | 8,417,398 | (2,138,778) |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011, a dispute with the Portuguese tax authorities ("Direcção Geral de Contribuições e Impostos") was still in progress, following a Corporate Income Tax inspection regarding year 2007, with an amount of, approximately, 12 million Euro being challenged by the tax authorities.
As of 31 December 2010 the amount recorded in the caption "Additional payment of Tax" refers to a correction to the tax basis of the Income Tax for the year ended as of 31 December 2006.
As of 31 December 2011 and 2010 the caption "Inventories" was made up as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Raw, Subsidiary and consumable material | 4,195,634 | 4,222,985 |
| Impairment losses in inventories (Note 22) | (102,282) | (239,283) |
| 4,093,352 | 3,983,702 |
The cost of sales for the years ended as of 31 December 2011 and 2010 can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Opening balance | 4,222,985 | 3,377,843 |
| Purchases | 19,533,538 | 19,541,370 |
| Closing balance | (4,195,634) | (4,222,985) |
| 19,560,889 | 18,696,228 |
As of 31 December 2011 and 2010 this caption can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Customers, current acounts | 9,184,783 | 12,596,832 |
| Customers, doubtful acounts | 5,608,574 | 6,777,090 |
| 14,793,357 | 19,373,922 | |
| Accumulated impairment losses (Note 22) | (5,608,574) | (6,777,090) |
| 9,184,783 | 12,596,832 |
The Group's exposure to credit risk is mainly attributable to the accounts receivable resulting from the Group's operating activity. The amounts presented in the face of the statement of financial position are presented net of accumulated impairment losses, which were estimated by the Group in accordance with its experience and based on an economic environment evaluation. The Group records impairment losses for customer balances due over 180 days. The Board of Directors believes that the net carrying amount of accounts receivable from customers is close to its fair value.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011 and 2010, the customers ageing of balances can be detailed (by business segment) as follows:
| Costumers | |||||||
|---|---|---|---|---|---|---|---|
| 31.12.2011 | 31.12.2010 | ||||||
| Newspapers | Magazines | Total | Newspapers | Magazines | Total | ||
| Not due | 1,969,525 | 2,043,118 | 4,012,643 | 4,384,808 | 1,626,396 | 6,011,204 | |
| Due with no impairment recorded | |||||||
| 0 - 90 days | 3,345,976 | 780,136 | 4,126,112 | 3,648,123 | 1,186,157 | 4,834,280 | |
| 90 - 180 days | 482,811 | 195,526 | 678,337 | 1,183,406 | 161,578 | 1,344,984 | |
| 180 - 360 days | 7,300 | - | 7,300 | 183,128 | - | 183,128 | |
| + 360 days | - | - | - | 17,908 | - | 17,908 | |
| 3,836,087 | 975,662 | 4,811,749 | 5,032,565 | 1,347,735 | 6,380,300 | ||
| Swap Accounts receivable | |||||||
| No impairment | 283,175 | 77,216 | 360,391 | 201,920 | 3,408 | 205,328 | |
| Total | 6,088,787 | 3,095,996 | 9,184,783 | 9,619,293 | 2,977,539 | 12,596,832 |
The amounts recorded as "Swap accounts receivable" relate to balances receivable from exchange (swap) operations (amounts arising from the sale of advertising space in exchange for other goods and services provided by the counterparty), for which there are also accounts payable under the caption "Suppliers" (Note 24).
For the overdue amounts for which there is no impairment loss recorded, the Group considers that there has been no loss in the credit quality of the counterparty, and therefore there is no credit risk.
The average credit period granted to customers depends on the type of sale/service. In accordance with procedure agreed with the distribution company, the amounts related to sale of publications are collected in the day the invoice is issued. In relation to services rendered (mainly the sale of advertising space), the Company grants a credit period between 15 to 60 days (the same period as in 2010). The Group charges no interests for not due invoices. After that period, the Company charges the interests defined contractually, and in accordance with the applicable legislation, which usually only occurs under extreme conditions.
As of 31 December 2011 and 2010 these assets and liabilities had the following composition:
| Debtor balances: | 31.12.2011 | 31.12.2010 |
|---|---|---|
| Corporate income tax Value added tax Other |
96,608 32,986 6,226 |
176,412 100,801 6,226 |
| 135,820 | 283,439 | |
| Credittor balances: | 31.12.2011 | 31.12.2010 |
| Corporate income tax | 1,797,190 | 75,063 |
| Value added tax | 1,413,750 | 1,949,592 |
| Personal income tax | 577,966 | 814,177 |
| Social security contributions | 734,254 | 685,268 |
| Other | 26,162 | 153,839 |
| 4,549,322 | 3,677,939 |
The assets caption "Corporate income tax" includes payments on account and withholdings performed by third parties, net of the estimated income tax for the period (Note 10).
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011 and 2010 this caption can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Advances to trade creditors | 84,877 | 599,205 |
| Other debtors | 299,669 | 1,220,745 |
| 384,546 | 1,819,950 | |
| Accumulated impairment losses in other debtors (Note 22) | (80,117) | (245,117) |
| 304,429 | 1,574,833 |
As of 31 December 2011 and 2010, the ageing of balances of "Other debtors" can be detailed as follows:
| 31.12.2011 | 31.12.2010 | ||||||
|---|---|---|---|---|---|---|---|
| Advances to trade creditors |
Other debtors | Total | Advances to trade creditors |
Other debtors | Total | ||
| Not due | 84,877 | 219,552 | 304,429 | 599,205 | 975,628 | 1,574,833 | |
| Due with no impairment recorded | |||||||
| 0 - 90 days | - | - | - | - | - | - | |
| 90 - 180 days | - | - | - | - | - | - | |
| 180 - 360 days | - | - | - | - | - | - | |
| + 360 days | - | - | - | - | - | - | |
| - | - | - | - | - | - | ||
| Total | 84,877 | 219,552 | 304,429 | 599,205 | 975,628 | 1,574,833 |
The amounts presented are net of accumulated impairment losses estimated by the Group, in accordance with its experience and based on an economic environment evaluation. The Group records impairment losses for other debtors' balances due over 180 days.
As of 31 December 2011 and 2010 this caption can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Accrued Income: | ||
| Newspapers and magazines to invoice | 5,283,317 | 5,315,091 |
| Interests receivable | 153,930 | 14,433 |
| Rappel | 192,967 | 9,376 |
| Other | 55,535 | 94,101 |
| Deferred costs: | ||
| Charges related to subsequent year editions | 152,527 | 376,772 |
| Operating expenses paid in advance | 216,454 | 135,354 |
| Insurances | 39,833 | 60,870 |
| Other | 358,040 | 175,613 |
| 6,452,603 | 6,181,610 |
Sales of magazines and newspapers are recorded in the period in which the publications are distributed. The newspapers are distributed on a daily basis and the magazines are distributed on a weekly, monthly or bimonthly basis. Those not yet charged are included in the caption "Newspapers and magazines to invoice".
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The amounts included in the caption "Investments measured at fair value through profit and loss" as of 31 December 2011 and 2010 relate to shares traded and not traded in stock markets, which, in the applicable situations, are recorded at their market value as of those dates.
At the date of its initial recognition, this financial instrument was classified as measured at fair value through profit and loss, once the analysis of its performance and corresponding investment strategy was based in the respective fair value. The investment decision was made with the perspective of maximizing the financial return, through both the dividends obtained and the changes in the shares quotation. The information provided to the Board of Directors regarding the performance of this shares is done based on the respective fair value as of the date of the analysis and the decision and investment strategy defined by the Board of Directors over these shares is made on that basis.
As of 31 December 2011 and 2010 the caption "Investments measured at fair value through profit and loss" can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| ZON Multimédia shares | - | 51,494,100 |
| Other | 8,583 | 7,498 |
| 8,583 | 51,501,598 |
During the year ended as of 31 December 2011 the Goup disposed all of the shares held in ZON Multimédia. The movement associated to this share in the years ended as of 31 December 2011 and 2010 was as follows:
| 31.12.2011 | |||||
|---|---|---|---|---|---|
| Description | Date | Quantity | Price | Amount | Impact |
| Opening balance | 31/12/2010 | 15,190,000 | 3.39 | 51,494,100 | |
| Sale | Abr/11 | (5,900,000) | 3.65 (21,535,000) | 1,534,000 | |
| Sale | Jun/11 | (5,292,000) | 3.42 (18,098,640) | 158,760 | |
| Sale | Jul/11 | (3,998,000) | 3.00 (11,994,000) | (1,559,220) | |
| Closing balance | 31/12/2011 | - | - | - | - |
| Total (Note 28) | 133,540 | ||||
| Dividends received ZON Multimédia 2011 (Note 28) | 1,486,400 | ||||
| Gains and losses in other investments | 1,619,940 | ||||
| Collections with the disposal of shares (Note 17) | 51,627,640 |
| 31.12.2010 | |||||
|---|---|---|---|---|---|
| Description | Date | Quantity | Price | Amount | Impact |
| Opening balance Closing balance |
31/12/2009 31/12/2010 |
15,190,000 15,190,000 |
4.338 3.390 |
65,894,220 51,494,100 |
(14,400,120) |
| Total (Note 28) | (14,400,120) | ||||
| 2,430,400 | |||||
| (11,969,720) |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011 and 2010, the caption "Cash and cash equivalents" can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Cash | 76,977 | 90,289 |
| Bank deposits repayable on demand | 23,720,922 | 7,438,858 |
| Bank deposits repayable in less than 3 months | 15,370,062 | 17,650,000 |
| 39,167,961 | 25,179,147 | |
| Bank overdrafts | (26,964,828) | (21,309,474) |
| Cash and cash equivalents in accordance with the balance sheet | 12,203,133 | 3,869,673 |
During the year ended as of 31 December 2011 the payments and collections relating to financial investments were as follows:
| Acquisitions | Transaction amount |
Amount paid |
|---|---|---|
| Presselivre – Imprensa Livre, S.A. Adcom Media – Anúncios e Publicidade S.A. (*) |
60,000 300,000 360,000 |
60,000 100,000 160,000 |
| Disposals | Transaction amount |
Amount received |
| ZON Multimédia | 51,627,640 | 51,627,640 |
(*) acquired in previous years
During the year ended as of 31 December 2010 the payments relating to financial investments were as follows:
| Acquisitions | Transaction amount |
Amount paid |
|---|---|---|
| Adcom Media – Anúncios e Publicidade S.A. | 300,000 | 100,000 |
| Visapress – Gestão de Conteúdos dos Media, CRL | 5,000 | 5,000 |
| Mercados Globais – Publicação de Conteúdos, Lda. (*) | 72,000 | 20,000 |
| 377,000 | 125,000 |
(*) acquired in previous years
As of 31 December 2011, the Company's fully subscribed and paid up capital consisted of 102,565,836 shares with a nominal value of 25 cents of a Euro each. As of that date, Cofina and the Group companies did not hold own shares.
Share issue premiums are related with premiums obtained with share capital issuance or share capital increases. In accordance with the Portuguese commercial legislation, the amounts included in this caption follow the same regime as the "Legal reserve", i.e., the amounts are not distributable, unless in situations of
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
insolvency, but can be used to absorb losses after the other reserves have been used, and for inclusion in the share capital.
The Portuguese commercial legislation provides that at least 5% of the annual net profit must be used to reinforce the "Legal reserve" until this caption represents at least 20% of the share capital. This reserve is not distributable but can be used to absorb losses after every other reserves have been used, and for inclusion in the share capital.
Under Portuguese legislation, the amount of distributable reserves is determined based on the non-consolidated financial statements of the Company, prepared in accordance with the International Financial Reporting Standards (IAS/IFRS), as adopted by the European Union.
As of 31 December 2011 and 2010, the caption "Bank loans" was made up as follows:
| 31.12.2011 | 31.12.2010 | |||||||
|---|---|---|---|---|---|---|---|---|
| Book value Nominal value |
Book value | Nominal value | ||||||
| Current | Non Current | Current | Non Current | Current | Non Current | Current | Non Current | |
| Bank overdrafts (Note 17) | 26,964,828 | - | 26,964,828 | - | 21,309,474 | - | 21,309,474 | - |
| 26,964,828 | - | 26,964,828 | - | 21,309,474 | - | 21,309,474 | - |
As of 31 December 2011 and 2010, the caption "Other loans" was made up as follows:
| 31.12.2011 | 31.12.2010 | |||||||
|---|---|---|---|---|---|---|---|---|
| Book value | Nominal value | Book value | Nominal value | |||||
| Current | Non Current | Current | Non Current | Current | Non Current | Current | Non Current | |
| Bond loans | 50,026,158 | - | 50,000,000 | - | 49,601,908 | - | 50,000,000 | - |
| Commercial paper | 42,060,544 | - | 42,000,000 | - | 74,395,087 | 19,985,593 | 75,000,000 | 20,000,000 |
| 92,086,702 | - | 92,000,000 | - | 123,996,995 | 19,985,593 | 125,000,000 | 20,000,000 |
As of 31 December 2011, the current liability caption "Bond Loans" refers to a bond loan denominated "Obrigações Cofina SGPS – 2007/2015", amounting to 50,000,000 Euro, issued by Cofina SGPS, S.A. stated in accordance with the effective interest rate method, with a book value of 50,026,158 Euro. This loan has its final redemption on 28 September 2015. However, in accordance with the initial contract, the bond holders may request, without any penalty, the anticipated repayment. Thus, although the Board of Directors believes the bond holders will not demand for an anticipated repayment and the redemption date will remain the same (28 September 2015), the Company had to consider this loan as current, in accordance with the applicable accounting standards. Furthermore, the ability for an early redemption is exclusive of the bond holders and the issuer does not control it.
The most relevant characteristics of the bond loan are:
ii) Cofina, SGPS, S.A.:
On 16 August 2010, the loan issued by Cofina BV reached its maturity. As of the reimbursement date, the nominal value of this loan amounted to 44,000,000 Euro (net of 6,000,000 bonds subscribed by the Group company Cofina Media SGPS. With the full reimbursement of this bond loan, the "call warrants" that granted the bond holders the right to subscribe shares of Cofina SGPS, became extinct.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The liabilitiy caption "Commercial Paper" relates to two commercial paper programs. The first, with guaranteed subscription by the bank responsible for its placement, amounting to 20,000,000 Euro, will be reimbursed until October 2012. This loan bears interests at Euribor 6M plus a spread of 0.85%.
The second commercial paper program, amounting to 22.000.000 Euro had reached its maturity in January 2012. This loan bears interests at Euribor 6M plus a spread of 4%. At the date of these financial statements' approval the commercial paper program which reached its maturity on January 5, 2012 was extended for six more months until July 5, 2012 (with an option of a renewal, after that date, through an agreement between the two parties, with maturity to be defined).
As of 31 December 2011, the credit facilities used by the Group and the corresponding maximum amounts authorized were as follows:
| Authorized | Used | Available | ||
|---|---|---|---|---|
| Nature | Maturity | amount | amount | amount |
| Cash pooling/Overdraft | n/a | 41,000,000 | 26,618,412 | 14,381,588 |
| Pledged account | n/a | 5,500,000 | 346,416 | 5,153,584 |
| Authorized overdraft | n/a | 8,000,000 | - | 8,000,000 |
| Commercial paper | 05/01/2012 | 22,000,000 | 22,000,000 | - |
| Commercial paper | 15/10/2012 | 20,000,000 | 20,000,000 | - |
| Bond loan 2007/2015 | 28/09/2015 | 50,000,000 | 50,000,000 | - |
| 146,500,000 | 118,964,828 | 27,535,172 |
Regarding the commercial paper program with maturity as of 15 October 2012, and as of the date of these consolidated financial statements approval, negotiations towards a renewal of its maturity were taking place. It's conviction of the Board of Directors that this renewal will be approved.
During the year ended as of 31 December 2011, these loans borne interest indexed to Euribor, plus spreads ranging between 0.85% and 6%, depending on the nature and term of the credit obtained.
The nominal value of the bond loans (capital and interests) is repayable in accordance with the following plan:
| Year | Principal | Interest |
|---|---|---|
| 2012 | - | 1,246,000 |
| 2013 | - | 1,246,000 |
| 2014 | - | 1,246,000 |
| 2015 | 50,000,000 | 1,246,000 |
| Total | 50,000,000 | 4,984,000 |
As mentioned above, the loan with estimated maturity in 2015 may be repaid earlier by initiative of the bond holders. Therefore, the Group has classified this loan as current in the accompanying consolidated statement of financial position.
During the years ended as of 31 December 2011 and 2010 the Group did not enter into any loan default.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
In the years ended as of 31 December 2011 and 2010 the Group's sensitivity to changes in the interest rate of plus or minus 1 percentage point, measured as the change in financial results, can be analyzed as follows:
| 31.12.2011 | 31.12.2010 | |||
|---|---|---|---|---|
| Without the hedging derivative financial instruments effect |
With the hedging derivative financial instruments effect |
Without the hedging derivative financial instruments effect |
With the hedging derivative financial instruments effect |
|
| Interest (Note 28) | 4,462,081 | 4,462,081 | 4,642,364 | 4,642,364 |
| Decrease of 1 p.p. interest rate applied to the entire indebtedness |
(1,189,648) | (645,195) | (1,663,095) | (736,040) |
| Increase of 1 p.p. interest rate applied to the entire indebtedness |
1,189,648 | 634,458 | 1,663,095 | 742,533 |
The sensitivity analysis above was calculated based on the exposure to the interest rate existing as of the statement of financial position date. This analysis considered as a basic assumption that the structure of financing (remunerated assets and liabilities) has remained stable throughout the year and similar to that presented as of 31 December 2011.
Based on labour legislation interpretations, responsibilities related to retirement pensions granted to some of its employees were recorded. In accordance with actuarial calculations performed by an expert and independent entity, the present value of the Company's responsibilities, as of 31 December 2011, amounted to 443,646 Euro (701,190 Euro as of 31 December 2010). These responsibilities were fully provided for and were computed using the "Projected Unit Credit" method, based in the GRF 80 mortality tables and EKV-80 handicapped tables. In addition to the technical parameters referred to above, the valuation was performed assuming real long term profitability of 2.0% when compared with salary increases, 3.0% regarding pension increases and a discount rate of 5.0%. The variation in the responsibilities in the year ended as of 31 December 2011 was recorded in the income statement caption "Payroll Expenses" and amounted to -257,544 Euro (9,833 Euro in 2010).
As of 31 December 2011 and 2010, the amounts payable to fixed asset suppliers in relation to financial lease contracts were classified in the captions "Other non-current creditors" and "Other current creditors" and had the following reimbursement plan:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| 2012 | - | 1,112,573 |
| 2013 | 838,114 | 749,853 |
| 2014 | 396,404 | 455,102 |
| 2015 | 9,889 | 9,776 |
| 2016 | 9,889 | 9,776 |
| 2017 and following years | 18,768 | 19,426 |
| 1,273,064 | 2,356,506 | |
| Short term (Note 25) | 1,195,743 | 1,497,881 |
| 2,468,807 | 3,854,387 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The movements occurred in provisions and impairment losses for the years ended as of 31 December 2011 and 2010 may be detailed as follows:
| 31.12.2011 | ||||||
|---|---|---|---|---|---|---|
| Provisions | Impairment losses in investments (Note 4) |
Impairment losses in inventories (Note 11) |
Impairment losses in accounts receivable (Note 12 and 14) |
|||
| Opening balance | 2,547,778 | 2,162,732 | 239,283 | 7,022,207 | ||
| Increases | 5,485,186 | - | - | 370,392 | ||
| Reversals | (54,999) | (90,847) | (137,001) | (161,467) | ||
| Utilisations | (2,117,405) | (636,777) | - | (1,542,441) | ||
| Closing balance | 5,860,560 | 1,435,108 | 102,282 | 5,688,691 |
| 31.12.2010 | ||||
|---|---|---|---|---|
| Provisions | Impairment losses in investments (Note 4) |
Impairment losses in inventories (Note 11) |
Impairment losses in accounts receivable (Note 12 and 14) |
|
| Opening balance | 1,076,423 | 4,130,379 | 248,185 | 7,580,412 |
| Increases | 700,000 | 34,084 | - | 372,608 |
| Changes in perimeter (Note 5) | 772,218 | (2,001,731) | - | 123,387 |
| Reversals | - | - | (8,902) | (393,024) |
| Utilisations | (863) | - | - | (661,176) |
| Closing balance | 2,547,778 | 2,162,732 | 239,283 | 7,022,207 |
As of 31 December 2011 and 2010 the caption "Provisions and impairment losses" in the income statement can be detailed as follow:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Increase/(decrease) in impairment losses in account receivables (Notes 12 and 14) | 208,925 | (20,416) |
| Increase/(decrease) in impairment losses in inventories (Note 11) | (137,001) | (8,902) |
| Increase/(decrease) of provisions | 1,930,187 | 700,000 |
| Goodwill impairment losses (Note 6) | 1,050,000 | - |
| 3,052,111 | 670,682 |
Additionally, the liability's caption "Provisions" includes the constitution of a provision for future taxes in the amount of 3,500,000 Euro, recorded against the income statement "Income Tax" (Note 10), which corresponds to the best estimate made by the Board of Directors, supported by their legal and tax consultants, of the impact that might outcome from the ongoing tax processes.
At last, the decrease of the asset's caption "Impairment losses in investments" (90,847 Euro) refers to the reversion of the impairment losses in loans granted to associated companies (Note 28).
The utilization of impairment losses in accounts receivable relates to the write-off of amounts that were fully provided for.
The amount recorded in the caption "Provisions" as of 31 December 2011 relates to the Board of Directors' best estimate to cover possible losses arising from legal actions in progress. The provision's utilizations mainly respect to indemnities paid to workers.
Derivative financial instruments recorded in the financial statements as of 31 December 2011 correspond to interest rate swaps related with loans to finance the Group. Since these derivative instruments comply with the requirements set by IAS 39 - Financial Instruments: Recognition and Measurement, to be classified as hedging instruments, the respective fair value was recorded under the equity caption "Other reserves", net of deferred taxes.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The movement in these derivative instruments for the years ended as of 31 December 2011 and 2010 can be presented as follows:
| 31.12.2011 | |||||
|---|---|---|---|---|---|
| "Market-to | |||||
| "Market-to | Accrued | market", net of | Deferred tax | ||
| market" | interest | accrued interest | assets | Net amount | |
| Opening balance | 1,129,176 | (198,575) | 930,601 | 246,609 | 683,992 |
| Increases / (decreases) | (127,345) | N/A | (33,223) | (8,804) | (24,419) |
| Closing balance | 1,001,831 | (104,453) | 897,378 | 237,805 | 659,573 |
| 31.12.2010 | |||||
| "Market-to | |||||
| "Market-to | Accrued | market", net of | Deferred tax | ||
| market" | interest | accrued interest | assets | Net amount | |
| Opening balance | 245,439 | - | 245,439 | 65,041 | 180,398 |
| Increases / (decreases) | 883,737 | N/A | 685,162 | 181,568 | 503,594 |
| Closing balance | 1,129,176 | (198,575) | 930,601 | 246,609 | 683,992 |
As of 31 December 2011 the Company had engaged in financial instruments contracts for hedging interest rates whose fair value, calculated by the discounted future cash flows method, was as follows:
| Notional | Financial instruments' | ||||
|---|---|---|---|---|---|
| Company | Funding covered | End date | Floating rate | amount | fair value |
| Cofina SGPS, S.A. | Bond | 28/03/2012 | Euribor 6M | 10,000,000 | (29,633) |
| Cofina SGPS, S.A. | Bond | 29/09/2014 | Euribor 6M | 20,000,000 | (870,510) |
| Cofina SGPS, S.A. | Bond | 28/09/2012 | Euribor 6M | 10,000,000 | (101,688) |
| 40,000,000 | (1,001,831) |
During the year ended as of 31 December 2011 the amount of 534,647 Euro (385.235 Euro as of 31 December 2010) related with accrued interests that result from the difference between the hedged fixed interest rate and the index base engaged were recorded under the caption "Results related with derivative instruments".
As of 31 December 2011 and 2010 this caption could be presented, taking into consideration its maturity, as follows:
| Payable in | |||||
|---|---|---|---|---|---|
| 31.12.2011 | No deadline (a) | Less than 3 months |
3 to 6 months | More than 6 months |
|
| Trade creditors and other commercial | |||||
| liabilities - current account | |||||
| Newspapers segment | 7,930,525 | 497,893 | 7,432,632 | - | - |
| Magazines segment | 1,509,997 | 19,242 | 1,490,755 | - | - |
| 9,440,522 | 517,135 | 8,923,387 | - | - | |
| Payable in | |||||
| 31.12.2010 | No deadline (a) | Less than 3 months |
3 to 6 months | More than 6 months |
|
| Trade creditors and other commercial liabilities - current account |
|||||
| Newspapers segment | 8,904,117 | 630,655 | 8,273,462 | - | - |
| Magazines segment | 2,618,996 | 62,636 | 2,556,360 | - | - |
| 11,523,113 | 693,291 | 10,829,822 | - | - |
(a) – amounts included in the column "No deadline" relate to exchange transactions with entities that are also customers (Note 12). As such, there is no pre-determined settlement date.
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011 and 2010 this caption was made up as follows:
| Other non-current creditors | 31.12.2011 | 31.12.2010 |
|---|---|---|
| Investments Suppliers (Note 21) Creditors for acquisitions of financial investments |
1,273,064 - |
2,356,506 100,000 |
| 1,273,064 | 2,456,506 | |
| Other current creditors | 31.12.2011 | 31.12.2010 |
| Creditors by leasing responsibilities (Note 21) Other creditors: |
1,195,743 | 1,497,881 |
| Creditors for acquisitions of financial investments | 100,000 | 100,000 |
| Payroll | 108,596 | 97,603 |
| Exchanges with public entities | 262,661 | 289,735 |
| Subscriptions | 347,465 | 439,249 |
| Loans from related entities (Note 29) | 1,030,602 | 1,176,630 |
| Others | 5,654,336 | 6,145,617 |
| 8,699,403 | 9,746,715 |
With the exception of the amounts related with leasing responsibilities, whose reimbursement plan is presented in Note 21, the remaining amounts under the caption "Other current creditors" as of 31 December 2011 and 2010 have its maturity in less than 6 months. The amount included in the caption "Loans from related entities" refers to a loan from Destak Brasil – Empreendimentos e Participações S.A. to Adcom Media – Anúncios e Publicidade, S.A..
The amount of the caption "Creditors for acquisitions of financial investments" refers to an outstanding amount related to the acquisition of Adcom Media – Anúncios e Publicidade, S.A. (Note 5).
As of 31 December 2011 and 2010, this caption was made up as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Accrued costs: | ||
| Accrued payroll | 4,651,776 | 6,391,406 |
| Commissions payable | 1,704,832 | 2,288,027 |
| Quantity discount bonus | 1,494,459 | 1,688,675 |
| Supplies and external services | 861,597 | 857,376 |
| Interests payable | 76,139 | 647,715 |
| Other | 2,812,590 | 2,597,168 |
| Deferred income: | ||
| Deferred income from alternative marketing | 256,604 | 255,039 |
| Other | 31,488 | 219,107 |
| 11,889,485 | 14,944,513 |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
"Sales" for the years ended as of 31 December 2011 and 2010 are mainly related to newspaper and magazines sales, including a small portion of income related to the sale of printing paper.
The caption "Services rendered" relates to sales of advertising space in the Group's publications, net of the discounts granted.
The amounts arising from alternative marketing products sold with the Group's publications are recorded in the caption "Other income".
The financial income and expenses for the years ended as of 31 December 2011 and 2010 are made up as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Financial expenses | ||
| Interest paid (Note 19) | 4,462,081 | 4,642,364 |
| Commissions | 822,309 | 750,333 |
| Financial loans' exchange rate variations | 314,618 | - |
| Other financial expenses | 45,942 | 41,878 |
| 5,644,950 | 5,434,575 | |
| Financial income | ||
| Interest received | 1,391,334 | 1,347,414 |
| Other financial income | 1,160 | - |
| 1,392,494 | 1,347,414 |
The caption "Gains and losses in associated companies" as of 31 December 2011 and 2010 is made up as follow:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Gains/(losses) arising from the aplication of the equity method | 50,999 | 98,770 |
| Reversions/impairment losses in associated companies' financial loans (Note 22) | 90,847 | (34,084) |
| 141,846 | 64,686 |
The caption "Gains and losses in other investments" as of 31 December 2011 and 2010 can be detailed as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Gains/(losses) in the sale of other financial investments | 5,024 | - |
| Gains in investments measured at fair value through profit and loss (Note 16) | 133,540 | (14,400,120) |
| Dividends (Note 16) | 1,486,400 | 2,430,400 |
| 1,624,964 | (11,969,720) |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The Group companies have relations with each other that are qualified as transactions with related parties. All of these transactions are made at market prices.
During the consolidating procedures, these transactions are eliminated, since the consolidated financial statements disclose information regarding the holding company and its subsidiaries as one single company.
The main balances with related parties as of 31 December 2011 and 2010 and the main transactions with related entities during the years then ended may be detailed as follows:
| 31.12.2011 | |||
|---|---|---|---|
| Transactions | Sales and other income |
Services rendered | Acquisition of goods and services |
| VASP – Sociedade de Transportes e Distribuições, Lda. | 68,405,379 | - | 93,292 |
| Destak Brasil Editora, S.A. | - | 2,608,091 | - |
| 68,405,379 | 2,608,091 | 93,292 | |
| Balances | Accounts Receivable |
Accounts Payable | Sales to invoice |
| VASP – Sociedade de Transportes e Distribuições, Lda. | 235,313 | 140,366 | 5,283,317 |
| Destak Brasil Editora, S.A. | 630,647 | 1,030,602 | - |
| 865,960 | 1,170,968 | 5,283,317 | |
| 31.12.2010 | |||
| Transactions | Sales and other income |
Acquisition of goods and services |
|
| VASP – Sociedade de Transportes e Distribuições, Lda. | 73,478,918 | 98,476 |
| Accounts | Sales to | |||
|---|---|---|---|---|
| Balances | Receivable | Accounts Payable | invoice | |
| VASP – Sociedade de Transportes e Distribuições, Lda. | 134,524 | 114,776 | 5,149,423 |
Sales and other income carried out with associated companies during the years ended as of 31 December 2011 and 2010 relate to sales of publications (newspapers and magazines) and marketing alternative products to VASP (Note 4), which handles the corresponding distribution to the points of sale. These transactions are carried out under the normal activity of the Group.
Services rendered to associated companies during the year ended as of 31 December 2011 relate to sales of advertising of the subsidiary Adcom Media (Note 4).
Compensations paid to members of Cofina SGPS, S.A. Board of Directors during the year ended as of 31 December 2011 by the companies included in the consolidation by the full method, include only fixed remunerations and amount to 743,820 Euro.
Under article 3º of Law No. 28/2009, of June 19, it is reported that the non-executive Directors Domingos José Vieira de Matos, Pedro Miguel Matos Borges de Oliveira and Ana Rebelo Fernandes Mendonça Fernandes earned each, during the year 2011, 70,700 Euro as a fixed compensation directly through Cofina SGPS,S.A..
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
There are no:
Apart from the companies included in consolidation (Note 4), the entities considered to be related companies as of 31 December 2011, can be presented as follows:
Cofina SGPS, S.A. Board of Directors was composed as follows as of 31 December 2011:
Paulo Jorge dos Santos Fernandes João Manuel Matos Borges de Oliveira Pedro Macedo Pinto de Mendonça Domingos José Vieira de Matos Ana Rebelo Mendonça Fernandes Pedro Miguel Matos Borges de Oliveira
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
As of 31 December 2011, Cofina had provided guarantees as follows:
As of 31 December 2011 Cofina Media group companies had assumed responsibilities for guarantees granted amounting to 1,600,000 Euro in relation to advertising contests. These companies had also given promissory notes to guarantee credit facilities amounting to 41,000,000 Euro.
Earnings per share for the years ended as of 31 December 2011 and 2010 were calculated as follows:
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Net profit considered for the computation of basic and diluted earning | 4,812,155 | 5,018,193 |
| Weighted average number of shares used to compute the basic earnings per share | 102,565,836 | 102,565,836 |
| Earnings per share Basic Diluted |
0.05 0.05 |
0.05 0.05 |
In the year 2011 the Company distributed dividends amounting to 1,025,659 Euro relating to the year ended as of 31 December 2010.
In relation to year 2011, the Board of Directors proposes to pay a gross dividend of 0.01 Euro per share. This dividend is subject to shareholder's approval in the General Shareholders Meeting.
The net operating income, indicating those related to transactions with other segments and those resulting from transactions with external entities may be presented as follows:
| 31.12.2011 | Newspapers | Magazines | Total |
|---|---|---|---|
| Net operating income | |||
| Resulting from operations with external customers | 96,681,413 | 29,995,788 | 126,677,201 |
| Resulting from operations with other segments | 4,875,588 | (4,875,588) | - |
| 31.12.2010 | Newspapers | Magazines | Total |
| Net operating income | |||
| Resulting from operations with external customers | 101,485,204 | 34,828,800 | 136,314,004 |
| Resulting from operations with other segments | 2,613,066 | (2,613,066) | - |
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
The amounts related to operating cash-flow, amortisation and depreciation and income before taxes and financial results by segment, may be presented as follows:
| 31.12.2011 | Newspapers Magazines |
Total | ||
|---|---|---|---|---|
| Operating Cash-flow - EBITDA (a) | 19,723,658 | 26,874 | 19,750,532 | |
| Amortisation and depreciation | 3,290,911 | 71,876 | 3,362,787 | |
| Operating profit | 16,432,747 | (45,002) | 16,387,745 |
(a) - Operating profit + amortisation and depreciation
| 31.12.2010 | Newspapers | Magazines | Total |
|---|---|---|---|
| Operating Cash-flow - EBITDA (a) | 22,604,254 | 503,611 | 23,107,865 |
| Amortisation and depreciation | 3,446,472 | 172,394 | 3,618,866 |
| Operating profit | 19,157,782 | 331,217 | 19,488,999 |
(a) - Operating profit + amortisation and depreciation
The total assets and total liabilities, the investment performed during the year in tangible and intangible assets and the gains in associated companies may be presented, by segment, as follows:
| 31.12.2011 | Newspapers | Magazines | Holdings and others | Eliminations and consolidations adjustments |
Total |
|---|---|---|---|---|---|
| Total assets | 63,557,116 | 11,191,243 | 429,886,895 | (330,530,341) | 174,104,913 |
| Total liabilities | 40,834,003 | 6,223,710 | 148,622,211 | (33,470,561) | 162,209,363 |
| Investments for the year (a) | 2,121,480 | 59,660 | 42,552 | - | 2,223,692 |
| Gains / (losses) in associated companies | 50,999 | - | 90,847 | - | 141,846 |
(a) - increases in tangible and intangible assets
| 31.12.2010 | Newspapers | Magazines | Holdings and others | Eliminations and consolidations adjustments |
Total |
|---|---|---|---|---|---|
| Total assets | 83,366,973 | 13,712,531 | 558,979,722 | (436,316,691) | 219,742,535 |
| Total liabilities | 51,769,647 | 8,673,281 | 220,809,750 | (69,432,261) | 211,820,417 |
| Investments for the year (a) | 4,078,982 | 109,496 | 63,016 | - | 4,251,494 |
| Gains / (losses) in associated companies | 64,686 | - | - | - | 64,686 |
(a) - increases in tangible and intangible assets
Given the reduced importance of Cofina Groups' activity in foreign markets (Brazil), no geographical segments are reported.
During the years ended as of 31 December 2011 and 2010, the average number of employees of the companies included in the consolidated financial statements by the full consolidation method was of 872 and 900, respectively.
The financial statements were approved by the Board of Directors and authorized for issuance on 15 March 2012. Its final approval is dependent on the agreement of the General Shareholders' Meeting.
AS OF 31 DECEMBER 2011
(Translation of a report originally issued in Portuguese – Note 36) (Amounts expressed in Euro)
These consolidated financial statements are a translation of financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards (IFRS/IAS) as adopted by the European Union, some of which may not conform or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.
(This is a translation of a report originally issued in Portuguese – Note 36)
Page 2 of 2
Porto, 15 March 2012
Deloitte & Associados, SROC S.A. Represented by António Manuel Martins Amaral
____________________________________________
(Translation of a report originally issued in Portuguese – Note 36)
Cofina, S.G.P.S., S.A.
In compliance with the applicable legislation and our mandate, we hereby submit our Report and Opinion, which covers the Board of Director's Report and individual and consolidated Financial Statements of Cofina, S.G.P.S., S.A. ("Company") for the year ended 31 December 2011, which are the responsibility of the Company's Board of Directors.
During the year under analysis, the Statutory Audit Board accompanied the operations of the Company and its affiliates, the regularity of the accounting records, the compliance with statutory and legal requirements and the effectiveness and integrity of the risk management and internal control systems, having held meetings with the periodicity and length considered appropriate and having always obtained, from the Board of Directors and Company´s and its affiliates personnel, all the information and explanations required.
As part of its duties, the Statutory Audit Board examined the individual and consolidated statement of financial position as of 31 December 2011, the individual and consolidated statements of profit and loss, of comprehensive income, of cash flows, and of changes in Equity for the year then ended, and the corresponding notes. Additionally, the Statutory Audit Board examined the Board of Directors ´Report for the year 2011, and fulfilled its duties concerning the review of the qualifications, independence and work of the Statutory and External Auditor, and reviewed the Statutory Audit and Auditor's Report and was in agreement with its content.
Considering the above, it is the Statutory Audit Board´s opinion, that the Board of Director's Report and the individual and consolidated Financial Statements are in accordance with the accounting, legal and statutory requirements and, consequently, may be approved by the General Shareholders' Meeting.
In accordance with paragraph a), number 1 of article 8 of the Regulation of CMVM 5/2008, the members of the Statutory Audit Board declare that, to their knowledge, the information contained in the Board of Directors' Report and the individual and consolidated financial statements were prepared in accordance with the International Financial Reporting Standards as adopted by the European Union, as well as the remaining documents of presentation of accounts required by law or regulation giving a true and fair view, in all material aspects, of the assets and liabilities, financial position and the individual and consolidated statement of profit and loss of the Company as of 31 December 2011 and that the Board of Directors' Report faithfully describes the business evolution, performance and financial position of Cofina, SGPS, S.A. and of the companies included in the consolidation perimeter, and contains a description of the major risks and uncertainties that they face.
We wish to manifest our esteem to the Company's Board of Directors and to the departments of the Company and its affiliates for the assistance provided to us.
Porto, 15 March 2012
The Statutory Audit Board
João da Silva Natária President of the Statutory Audit Board
Manuel Tiago Alves Baldaque de Marinho Fernandes Member of the Statutory Audit Board
Cristina Isabel Linhares Fernandes Member of the Statutory Audit Board
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