Annual Report • Feb 28, 2019
Annual Report
Open in ViewerOpens in native device viewer
2018
ANNUAL REPORT 2018
| 01 MANAGEMENT REPORT | 3 |
|---|---|
| 02 STANDALONE FINANCIAL STATEMENTS | 7 |
| 03 QUALIFIED HOLDINGS | 31 |
| 04 INFORMATION TO BE PRESENTED UNDER THE TERMS OF THE ARTICLE 447 OF THE |
CODE FOR COMMERCIAL SOCIETIES 32
"PHAROL", "Group PHAROL", "Group" and "Company" is a reference to the companies that are part of PHAROL SGPS, S.A. or to one of them, depending on the context.
As at December 31, 2018, PHAROL had as its main assets (1) 166,710,904 common shares of Oi, S.A. ("Oi"), representing 6,8% of the total share capital of Oi, (2) debt securities of Rio Forte Investments S.A. ("Rio Forte") with a nominal value of Euro 897 million, and (3) the Call Option on 25,614,830.88 common shares and 51,229,661.76 preferred shares of Oi with an exercise price of R\$20.104 per common share and R\$18.529 per preferred share, adjusted by the Brazilian rate CDI plus 1.5% per annum, and with a 6-year maturity. The Call Option has partial expiration dates throughout the period so the option volume is reduced by 10% at the end of the first year and by 18% per year thereafter.
As of December 31, 2014, after the capital increase of Oi, concluded on May 5, 2014 (the "Oi Capital Increase"), PHAROL held a 39.7% direct and indirect stake in Oi. This included a portion classified as a noncurrent asset held for sale, following the Exchange agreement ("Exchange") entered into on September 8, 2014 and completed on March 8, 2015, and the remaining stake of 22.8% classified as investment in joint ventures and associates and therefore accounted for using the equity method.
On March 30, 2015, the Exchange was completed, whereby PHAROL (1) transferred to Portugal Telecom International Finance, B.V. ("PT Finance"), a subsidiary of Oi, an aggregate amount of 47,434,872 common shares and 94,869,744 preferred shares of Oi, and (2) received from PT Finance debt securities of Rio Forte with a nominal value of Euro 897 million and a call option on the transferred shares ("Call Option"). After the completion of the Exchange, PHAROL held an effective stake of 27.48% in Oi corresponding to the 22.8% stake referred above plus 4.7% due to the decrease in the number of outstanding shares of Oi.
The relevant agreements for the implementation of the New Structure of Oi were signed on July 22, 2015. On September 1, 2015, a General Meeting of Shareholders of Oi was held where the New Structure was approved.
As of September 30, 2015, after the implementation of the New Structure, but prior to the voluntary conversion of preferred shares to ordinary shares of Oi, PHAROL held, directly or indirectly through wholly owned subsidiaries, 84,167,978 common shares and 108,016,749 preferred shares of Oi.
As of October 8, 2015, following the voluntary conversion of preferred shares into common shares of Oi, PHAROL now holds, directly and indirectly through wholly owned subsidiaries, 183,662,204 common shares of Oi, representing 27.18% of total share capital of Oi (excluding treasury shares), that represents the present situation. PHAROL's voting rights in Oi are limited to 15% of the total common shares of Oi.
With the implementation of the New Structure on July 30, 2015, the shareholders' agreements, through which joint control of Oi was exercised, were terminated. Up to that date, PHAROL accounted for its stake in Oi as an Investment in Joint Ventures. PHAROL considered it had significant influence over Oi and classifies it as an associate company. As a result, from July 30, 2015 the investment in Oi continued to be accounted for according to the equity method, based on PHAROL's economic stake in Oi's results (27.18% as at December 31, 2016).
On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V.. Due to the Corporate Reorganization, BRATEL B.V. now directly holds (and PHAROL indirectly holds) 183,662,204 common shares of Oi S.A., which represent 22.24% of Oi S.A.'s entire share capital (27.18% excluding treasury shares).
On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV had in Oi SA to its subsidiary BRATEL S.à.r.l., 100% owned by BRATEL B.V.
In December 2017, and after the decision by the Court of the 7th Business Court of Rio de Janeiro, which it handles the Judicial Recovery of Oi and which decided to withdraw the rights of the members of the Board of Directors of Oi in the approval of the Judicial Recovery Plan, and subsequent events, it was understood that PHAROL lost the significant influence it had until then on its associate Oi. Consequently, on 31 December 2017, PHAROL started account its investment in Oi at market value, and started to be classified as "Financial Assets".
Oi S.A., in the disclosure of its consolidated results for 2017, announced that it had adjusted its Equity on January 1, 2016 and December 31, 2016, amounting to BRL 18 billion and BRL 19 billion, respectively. Following this restatement, PHAROL's investment in Oi, being recorded under the equity method, was restated and valued at zero in the periods of 1 January 2016 and 31 December 2016.
On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, a dilution of PHAROL's participation in Oi to less than 8%.
The net loss for 2018 was EUR 5.6 million, which compares with a loss of Euro 782.7 million in the same period of 2017. The net loss in 2018 mainly reflects (1) costs associated with losses in Euro 1.5 million, and (2) costs of external supplies and services and personnel costs respectively at Euro 1.7 and 1.6 million. The net result for 2017 reflects the reversal of Oi's foreign exchange reserves since the acquisition in the amount of Euro 937 million, partially offset by the appreciation of Oi's investment to the market value of Euro 167.7 million, the recoverable amount of the investment in the securities issued by Rio Forte and operating costs.
Apart from managing its investments, the Company did not directly conduct any other business activity.
There are no outstanding amounts overdue to the Portuguese State and the Portuguese Social Security System.
The Company did not enter into any material businesses or transactions with the members of its Board of Directors and the Fiscal Council, except for those mentioned in Note 21 to the Consolidated Financial Statements as at December 31, 2018.
The main events of the year ended December 31, 2018 and recent developments are described in the Consolidated Annual Report of PHAROL.
Considering that in the year ended December 31, 2018 a negative net result of Euros 5,648,443 was obtained, the Board of Directors of PHAROL proposes that they be transferred to the Company's Retained Earnings.
Lisbon, February 28, 2019
Luís Maria Viana Palha da Silva, Chairman of the Board of Directors and Managing Director
Aristóteles Luiz Menezes Vasconcellos Drummond, Board Member
Avelino Cândido Rodrigues, Board Member
Bryan Schapira, Board Member
Isabel Maria Ferreira Possantes Rodrigues Cascão, Board Member
Jorge Augusto Santiago das Neves, Board Member
Jorge Telmo Maria Freire Cardoso, Board Member
Maria do Rosário Amado Pinto Correia, Board Member
Maria Leonor Martins Ribeiro Modesto, Board Member
Nelson Sequeiros Rodriguez Tanure, Board Member
Pedro Zañartu Gubert Morais Leitão, Administrador não executivo
| Euro | |||
|---|---|---|---|
| Notes | 2018 | 2017 | |
| ASSETS | |||
| Non-Current Assets | |||
| Tangible assets | 141,188 | 119,248 | |
| Intangible assets | - | 4,948 | |
| Financial investments - equity method of accounting | 6 | 82,801,037 | 167,705,254 |
| Other financial assets | 7 | 74,637,747 | 75,790,173 |
| Total non-current assets | 157,579,972 | 243,619,622 | |
| Current Assets | |||
| State and other public entities | 10 | 9,971 | 9,718 |
| Other accounts receivable | 1,829,480 | 144,255 | |
| Deferrals | 2,029 | - | |
| C ash and bank deposits | 4 | 2,022,619 | 25,042,221 |
| Total current assets | 3,864,098 | 25,196,194 | |
| Total assets | 161,444,070 | 268,815,816 | |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 11 | 26,895,375 | 26,895,375 |
| Treasury shares | 11 | (179,675,995) | (179,675,995) |
| Legal reserve | 11 | 6,773,139 | 6,773,139 |
| Other reserves | 11 | 264,283,232 | 264,283,232 |
| Adjustments to financial assets | 11 | (110,016,409) | (163,000) |
| Retained earnings | 11 | 143,637,610 | 926,404,947 |
| Net income | (5,648,443) | (782,767,357) | |
| Total equity | 146,248,509 | 261,750,341 | |
| LIABILITIES | |||
| Non-Current Liabilities | |||
| Loans obtained | 99,955 | 51,836 | |
| Total non-current liabilities | 99,955 | 51,836 | |
| Current Liabilities | |||
| Provisions | 12 | 12,500,000 | - |
| Loans obtained | - | 3,065 | |
| Suppliers | 13 | 36,204 | 4,695,403 |
| Investment suppliers | 7,670 | 7,670 | |
| Accrued expenses | 14 | 1,538,815 | 1,291,746 |
| State and other public entities | 10 | 156,366 | 159,206 |
| Other accounts payable | 8 | 856,549 | 856,549 |
| Total current liabilities | 15,095,605 | 7,013,639 | |
| Total liabilities | 15,195,561 | 7,065,475 | |
| Total liabilities and shareholders' equity | 161,444,070 | 268,815,816 |
The accompanying notes form an integral part of these financial statements.
| Euro | |||
|---|---|---|---|
| Notes | 2018 | 2017 | |
| Equity in losses/(earnings) of subsidiary companies | 15 | (1,580,689) | (770,208,368) |
| Supplies and external services | 16 | (1,774,516) | (1,577,751) |
| Wages and salaries | 17 | (1,610,238) | (1,735,463) |
| Indirect taxes | (375,529) | (271,774) | |
| Provisions ((increases)/reductions) | 12 | (12,500,000) | 75,858 |
| Increases/(reductions) in fair value | 18 | (1,026,853) | (11,275,218) |
| Other income and gains | 12 | 1,030,020 | 2,994,056 |
| Other expenses and losses | 19 | (256,436) | (672,985) |
| INCOME BEFORE DEPRECIATION AND AMORTISATION, FINANCING EXPENSES AND TAXES | (18,094,243) | (782,671,644) | |
| Depreciation and amortisation ((expenses)/reversals) | (66,786) | (79,495) | |
| OPERATING INCOME (BEFORE FINANCING EXPENSES AND TAXES) | (18,161,028) | (782,751,139) | |
| FINANCIAL LOSSES AND (GAINS) | |||
| Interest and related income | 21,424 | 30,397 | |
| Interest and related expenses | (14,184) | (16,419) | |
| INCOME BEFORE TAXES | (18,153,788) | (782,737,161) | |
| Income taxes | 9 | 12,505,345 | (30,195) |
| Net income (loss) from continuing operations | (5,648,443) | (782,767,357) | |
| Earnings per share | |||
| Basic and Diluted | 20 | (0.01) | (0.90) |
The accompanying notes form an integral part of these financial statements.
| Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Treasury | Legal | Other | Adjustments to | Retained | Net | shareholders' | ||
| capital | shares | reserve | reserves | financial assets | earnings | income | equity | ||
| Balance as at 31 December 2015 | A | 26,895,375 | (179,675,995) | 6,773,139 | 264,281,624 (1,399,430,074) | 1,450,781,532 | (61,861,982) | 107,763,642 | |
| Changes in the period: | |||||||||
| Foreign currency translation adjustments | - | - | - | - | 936,768,593 | - | - | 936,768,593 | |
| Other changes recognized in shareholders' equity | - | - | - | 1,608 | 462,498,481 | (462,514,603) | - | (14,514) | |
| B | - | - | - | 1,608 | 1,399,267,074 | (462,514,603) | - | 936,754,080 | |
| Net income | C | - | - | - | - | - | (782,767,357) | (782,767,357) | |
| Comprehensive income | B+C | - | - | - | - | - | - | - | - |
| Operations with shareholders: | |||||||||
| Application of the previous year's earnings | - | - | - | - | - | (61,861,982) | 61,861,982 | - | |
| D | (61,861,982) | 61,861,982 | - | ||||||
| Balance as at 31 December 2017 | E=A+B+C+D | 26,895,375 | (179,675,995) | 6,773,139 | 264,283,232 | (163,000) | 926,404,947 | (782,767,357) | 261,750,341 |
| Changes in the period: | |||||||||
| Foreign currency translation adjustments | - | - | - | - | (109,853,409) | 20 | - | (109,853,390) | |
| Other changes recognized in shareholders' equity | - | - | - | - | - | - | |||
| F | - | - | - | - | (109,853,409) | 20 | - | (109,853,390) | |
| Net income | G | - | - | - | - | - | (5,648,443) | (5,648,443) | |
| Comprehensive income | F+G | - | - | - | - | - | - | - | - |
| Operations with shareholders: | |||||||||
| Application of the previous year's earnings | - | - | - | - | - | (782,767,357) | 782,767,357 | - | |
| H | (782,767,357) | 782,767,356 | - | ||||||
| Balance as at 31 December 2018 | I=A+B+C+D | 26,895,375 | (179,675,995) | 6,773,139 | 264,283,232 | (110,016,410) | 143,637,610 | (5,648,444) | 146,248,509 |
The accompanying notes form an integral part of these financial statements.
Euro
FOR THE PERIODS ENDED 31 DECEMBER 2018 AND 31 DECEMBER 2017
| Notes 2018 2017 OPERATING ACTIVITIES Payments to suppliers (1,707,573) (3,614,038) Payments to employees (1,664,138) (1,609,297) Payments relating to income taxes (38,684) (25,179) Other cash receipts, net 6,915,727 2,722,612 Cash flows from operating activities related to continuing operations (1) 3,505,331 (2,525,902) INVESTING ACTIVITIES C ash receipts resulting from: Tangible and intangible assets 30,001 34,500 Interest and related income 25,858 27,471 55,859 61,971 Payments resulting from: Financial investments 4.a. (26,529,000) (720,000) Tangible and intangible assets (1,210) (723) (26,530,210) (720,723) Cash flows from investing activities related to continuing operations (2) (26,474,351) (658,752) FINANCING ACTIVITIES Payments resulting from: Loans repaid (46,419) (57,015) Interest and related expenses (4,164) (7,327) (50,583) (64,343) Cash flows from financing activities related to continuing operations (3) (50,583) (64,343) Cash and cash equivalents at the beginning of the period 25,042,221 28,291,217 Change in cash and cash equivalents (4)=(1)+(2)+(3) (23,019,602) (3,248,996) |
Euro | |||
|---|---|---|---|---|
| Cash and cash equivalents at the end of the period | 4.b. | 2,022,619 | 25,042,221 |
The accompanying notes form an integral part of these financial statements.
(Amounts in Euro, otherwise it will be referred)
PHAROL, SGPS, S.A. ("PHAROL", "PHAROL SGPS" or "Company") was founded on June 23, 1994 pursuant to Decree -Law No. 122/94, through the merger of the following companies: Telecom Portugal, S.A., Telefones de Lisboa e Porto (TLP), S.A. ("TLP") and Teledifusora de Portugal, S.A. ("TDP"), with reference to January 1, 1994. As a result of the privatization process, between June 1, 1995 and December 4, 2000, PHAROL's share capital is mainly owned by private shareholders. On December 12, 2000, Portugal Telecom, S.A. changed its name to Portugal Telecom, SGPS, S.A. ("PT SGPS") and its operation to a capital management company. On May 29, 2015, the company changes its name to PHAROL, SGPS S.A.
On May 5, 2014, Oi underwent a capital increase amounting to 13,960 million reais, composed of: (1) 5,710 million reais (Euro 1,750 million based on the exchange rate as of February 21, 2014) corresponding to 1,045,803,934 ordinary shares and 1,720,252,731 preferred shares subscribed by PHAROL, through a contribution in kind of the PT Assets, defined as the PHAROL's 100% stake in PT Portugal, which as of that date included all operational businesses of the PHAROL Group, with the exception of the subsidiaries Bratel BV, Bratel Brasil, PTB2 and PHAROL, and of the investment in Oi, Contax and their controlling shareholders; and 8,250 million reais in cash subscribed by investors other than PHAROL. The valuation of PT Assets of 5,710 million reais was determined on the basis of the valuation of PT Portugal by Banco Santander (Brasil), SA on the date of the share capital increase. As a result of PHAROL' contribution for the capital increase of Oi, PHAROL increased its effective interest in Oi from 23.2%, previously held through Bratel Brasil, to an economic interest of 39.7%, held through a total direct interest of 35.8% (32.8% in PHAROL and 3.0% in Bratel Brasil) and an indirect interest of 3.9% held by Bratel Brasil through the controlling shareholders of Oi.
On March 28, 2011, PHAROL completed the initial acquisition of investments in Telemar Norte Leste, S.A. ("Telemar"), which belongs to the Oi Group, and Contax, for the amount of 8,437 million reais, and entered into several agreements with the controlling shareholders of these companies. As a result of this transaction, PHAROL acquired an effective stake of 25.3% in TmarPart (parent company of the Oi Group on that date) and 14.1% in Contax. Within the scope of this acquisition, PHAROL, AG Telecom Participações ("AG") and LF Tel, SA ("LF"), two of the main shareholders of TmarPart, the controlling shareholder of Oi, entered into a shareholders' agreement with unanimous voting procedures for their representatives in the Board of Directors of TmarPart regarding the strategic, financial and operating decisions relating to the activity of the Oi Group. Whereby, in accordance with the provisions of NCRF 13 Interests in Joint Ventures and Investments in Associates ("NCRF 13"), the Company concluded that it contractually shares
the control of TmarPart, therefore the Oi investment was classified as a joint venture and thus accounted for in accordance with the equity method.
On May 5, 2014, directly and indirectly, PHAROL held investments in debt securities issued by Rio Forte Investments, S.A. ("Rio Forte", a holding company of the Espírito Santo Group with registered address in Luxembourg essentially for their non-financial services) amounting to Euro 897 million, which formed part of the PT Assets and were contributed in the capital increase of Oi. The composition of the outstanding amount as of May 5, 2014 was as follows:
On July 15 and 17, 2014 the maturity of these instruments occurred, but the issuer did not settle its obligations.
Rio Forte requested the adoption of the controlled management regime in accordance with the Luxembourg legislation, although it was their understanding that they did not have the financial capacity to meet their financial commitments, a situation which was thought to be the most protective of their creditors' interests, and that was rejected by the Luxembourg court. As a result of that rejection, Rio Forte was declared insolvent by the Luxemburg Court on December 8, 2014 and went into liquidation on the same date.
On July 28, 2014, following the default by Rio Forte, PHAROL and Oi agreed on the main terms for the exchange of debt securities of Rio Forte held on that date by PT Finance and PT Portugal, amounting to Euro 897 million for 47,434,872 common shares and 94,869,744 preferred shares of Oi (after the reverse stock split done by Oi in December 2014) held on that date by PHAROL. On September 8, 2014, this agreement was approved in the General Shareholders' Meeting of PHAROL and following such approval the parties involved concluded the respective final contracts, the terms of which established that:
option by PHAROL terminating at 10% at the end of the first year and 18% at the end of each subsequent year;
On December 31, 2014, as stated above, execution of the exchanges and the purchase option were pending approval by the CVM. On March 4, 2015, the CVM approved the above contracts, conditional upon their approval at Oi's General Shareholders' Meeting, which occurred on March 26, 2015. The exchange was executed on March 30, 2015. On March 24, 2015, PHAROL came to an agreement with Oi, PT Portugal, PT Finance and TmarPart for the Private Instrument of Assignment of Rights and Obligations and Other Fees ("Assignment Agreement"), by means of which PT Portugal transferred the Rio Forte Instruments to PT Finance, and conceded to PT Finance all pertaining rights and obligations in the terms of the Exchange Agreement ("Assignment").
On March 30, 2015, the Exchange was concluded, by means of which PHAROL (1) deposited Oi's shares object of the Exchange with the Depositary; and (2) instructed the Depositary to register the transfer of 47,434,872 ADSs ON and 94,896,744 ADSs PN to PT Finance, representing Oi's shares object of the Exchange. Therefore, on March 30, 2015, PHAROL transferred the ADSs Object of the Exchange to PT Finance, and PT Finance transferred to PHAROL the Rio Forte Instruments in the total main amount of Euro 897million.
Still, on March 30, 2015, the Call Option was effective.
A change ("Amendment") was signed to the Share Purchase Option Contract and Other Agreements, entered into on September 8, 2014, such as mentioned above, which will enable PHAROL to liquidate its Oi share purchase option through sale on the market, giving Oi the right of first refusal in the acquisition of the Option if PHAROL should decide to sell it to third parties without previous consent by Oi. The Amendment is subject to approval of Oi's general shareholders' meeting and, if applicable, to the CVM's approval. Oi committed to convene a general meeting to discuss the Amendment, and the reference shareholders of Oi committed to vote in approval of the Amendment.
On March 31, 2015, the Board of Directors of PHAROL concluded negotiations with the other shareholders pertaining to Oi to the extent of signing a new agreement between the parties in relation to the company structure and the administration of Oi. In view of the impossibility of implementing migration from CorpCo to the segment called Novo Mercado of the BM&FBovespa by March 31, 2015, the deadline stipulated in the agreements signed on September 8, 2014, it became essential to sign a new agreement, which allowed Oi to anticipate the principal benefits announced to shareholders at the time that Oi's capital increase was realized on May 5, 2014, without, however, failing to make every effort to migrate to the Novo Mercado. Thus, the parties agreed to a new company structure model and administration of Oi ("New Structure"), that in addition to the benefits and objectives disclosed before, are characterized by the following:
On July 22, the relevant documents for the implementation of the Oi's New Structure were signed and on September 1, 2015, Oi's General Assembly approved its implementation.
On September 30, 2015, after the implementation of the New Structure and prior to the voluntary conversion of preferred shares into common shares of Oi, PHAROL held, directly and through 100% subsidiaries, 84,167,978 ordinary shares and 108,016,749 preferred shares of Oi.
On October 8, 2015, following the approval of voluntary conversion of preferred shares into common shares of Oi, the PHAROL held, directly and indirectly through 100% subsidiaries owned, 183,662,204 common shares of Oi, representing 27.18% of the total share capital of Oi (excluding treasury shares). PHAROL's right to vote in Oi is limited to 15% of the total common shares.
The shareholders' agreements through which joint control of Oi was exercised, ended on July 30, 2015 with the implementation of the New Structure. Until then PHAROL proceeded to recognize its participation in Oi as an investment in joint ventures. PHAROL considered that it currently has significant influence over Oi, which is considered an associate. Thus, from July 30, 2015 participation in Oi continued to be measured according to the equity method, less any impairment, reflecting the stake in Oi's financial statements (27.18% as at December 31, 2016).
On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V..
On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV has in Oi SA to its subsidiary 100% owned, BRATEL S.à.r.l., a company with its registered office in Luxembourg, at 69, Boulevard de la Pétrusse, L-2320 Luxembourg, and BRATEL BV ceased to hold a shareholding interest directly in Oi SA.
Accordingly, on December 31, 2018, PHAROL holds all the shares representing the capital stock of BRATEL BV which, in turn, holds all the shares representing BRATEL S.à.rl. Both PHAROL and BRATEL BV indirectly own 183,662,204 common shares of Oi SA, representing as of December 31, 2016, the direct interest of BRATEL BV (and indirectly of PHAROL, SGPS SA) is 183,662,204 common shares of Oi SA, which represent approximately 22.24 % of the total share capital of Oi SA (27.18% excluding treasury shares).
On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, a dilution of PHAROL's participation in Oi to less than 8%.
As at December 31, 2018, PHAROL had as its main assets (1) 166,710,904 common shares of Oi, S.A. ("Oi"), representing 6.8% of the total share capital of Oi holding by Bratel S.a.r.l., (2) debt securities of Rio Forte Investments S.A. ("Rio Forte") with a nominal value of Euro 897 million, and (3) the Call Option on 25,614,830.88 common shares and 51,229,661.76 preferred shares of Oi with an exercise price of R\$20.104 per common share and R\$18.529 per preferred share, adjusted by the Brazilian rate CDI plus 1.5% per annum, and with a 6-year maturity. The Call Option has partial expiration dates throughout the period so the option volume is reduced by 10% at the end of the first year and by 18% per year thereafter.
These financial statements are in respect of the Company individually and were prepared according to the generally accepted accounting principles in Portugal (Note 2). Financial investments are recorded according to the equity method, deducted of any eventual impairment losses, as referred to in Note 3.3. These individual financial statements consider the effect of the equity method, through the appropriation of the share held in the other changes in equity and in the results of the company's subsidiaries as at December 31, 2018 and 2017, in PHAROL's equity and net profit for the fiscal years ended on those dates, based on the respective financial statements, but not the effect of full consolidation of assets, liabilities, expenses and income.
In accordance with current legislation, the Company prepared consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), published separately. These consolidated financial statements include the financial statements of the companies which PHAROL controls.
The disclosures presented in these consolidated financial statements are complementary, with the necessary adaptations, to the disclosures presented in these financial statements.
The financial statements for the year ended December 31, 2018 were approved by the Board of Directors and authorized for issue on February 28, 2019 and are still subject of approval by the General Meeting of Shareholders under the commercial legislation in Portugal.
These financial statements were prepared based on Decree-law nº. 158/2009, dated July 13, and in accordance with the Conceptual Framework, Accounting and Financial Reporting Standards ("NCRF") and Interpretative Standards, as approved by Notices nº 15652/2009, 15653/2009 and 15655/2009 of the General- Secretarat of the Ministry of Finance, dated August 27, which make up the New Portuguese accounting system, named "Sistema de Normalização Contabilística" ("SNC").
PHAROL chose not to apply the NCRF 27 to these financial statements and has chosen to recognize, measure and disclose its financial instruments in accordance with International Financial Reporting Standards (IFRS), as adopted in the European Union .
The Company adopted NCRF for the first time in 2010 and applied for this purpose the "NCRF 3 Adoption For The First Time of NCRF" ("NCRF 3"), with the transition date being January 1, 2009 for the purposes of the presentation of these financial statements. As permitted by Decree-Law nº. 158/2009, the Company also applies the International Financial Reporting Standards ("IAS/IFRS") and related interpretations ("SIC/IFRIC") issued by the International Accounting Standards Board ("IASB"), in order to fill in the gaps or omissions in SNC regarding specific situations of certain transactions.
SNC was amended on July 29, 2015, with the publication of the Notice No. 8256/2015, applicable to periods beginning on January 1, 2016, which based on available information will not have significant impacts effects on the Company's financial statements.
The consolidated financial statements of PHAROL are prepared, since January 1, 2005, in accordance with IFRS as adopted by the European Union, which are applicable to listed companies in the EuropeanUnion.
The PHAROL Group consists of the following companies:
| Empresa | Head office | Type of Company | Activity | Direct | dez/18 Effective |
dez/17 Effective |
|---|---|---|---|---|---|---|
| Bratel BV | Amsterdam | Subsidiaries | Management of investments | Pharol SGPS (100%) | 100% | 100% |
| PT Brasil | São Paulo | Subsidiaries | Management of investments | Bratel BV (100%) | 100% | 100% |
| Bratel S.a.r.l. | Luxembourg | Subsidiaries | Management of investments | Bratel BV (100%) | 100% | 100% |
It should be noted that PHAROL as of December 31, 2018 and 2017 had a stake in Oi of 6.8% and 22.24%, respectively.
These individual financial statements were prepared on a going concern basis of accounting. The main accounting policies used in the preparation of these individual financial statements are described below and were applied consistently.
Tangible fixed assets are recorded at acquisition cost, which includes the amount paid to acquire the asset and any expenses directly attributable to bringing the assets to the location and in the condition necessary for their operation.
Tangible fixed assets are depreciated on a straight-line basis from the month they are available for use. The depreciation rates reflect the useful life of each class of assets, as follows:
| Asset class | Years of useful life |
|---|---|
| Transportation equipment | 4 |
| Admnistrative equipment | 3 - 8 |
| Other tangible fixed assets | 4 - 8 |
The gains and losses resulting from any write-off or disposal are determined by the difference between the amount received and the carrying value of the asset and are recognized in the income statement when the write-off or disposal occurs.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. The remaining lease contracts are considered operating leases. The classification of leases depends on the substance of the transaction and not on the form of the contract.
Assets acquired under finance leases and the corresponding liabilities are accounted for at the beginning of the contract as the lower amount between the fair value of the assets and the present value of minimum lease payments. Rents include the reimbursement of the liability and interest expense, with interest being recognized in the income statement based on a periodic interest rate over the remaining liability.
Under operating leases, rents are recognized on a straight-line basis during the period of thelease.
Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies of the entity, generally represented by the majority of the voting rights. Associate companies are entities over which the Company has a significant influence but not control, generally represented by stakes between 20% and 50% of voting rights. Joint venture is an economic activity with the engagement of two or more partners subject to joint control based on a contractual agreement.
Financial investments in subsidiaries, associate companies and joint ventures are recorded under the equity method of accounting. Under this method, financial investments are initially recorded at acquisition cost and subsequently adjusted for the changes, after the acquisition date, in the Company's share in the net assets of those entities, deducted for eventual impairment losses. PHAROL's earnings include its share in the earnings of its subsidiaries and associate companies.
Financial investments in foreign entities are translated to Euros using the exchange rates prevailing at the balance sheet date, while the Company's share in the earnings of those entities is computed based on the average exchange rates for the reported period. The effect of translation differences is recognized in shareholders' equity under the caption "Adjustments to financial assets" and is transferred to net income upon the disposal of a foreign entity or the transmission of the investment in another way. The exchange rates used in the translation of the main foreign entities (held directly or indirectly by PHAROL) are as follows:
| Final | ||
|---|---|---|
| Currency | 2018 | 2017 |
| Real | 4.4440 | 3.9729 |
| USD | 1.1450 | 1.1993 |
| Average | ||
| Currency | 2018 | 2017 |
| Real | 4.3085 | 3.6028 |
| USD | 1.1810 | 1.1293 |
Financial investments are evaluated whenever there is evidence that they may be impaired and the related impairment losses are recorded in the income statement.
Gains obtained in transactions with subsidiaries, associates companies and joint ventures are eliminated in proportion to the Company's share in those entities, against the financial investment.
Capital gains resulting from the disposal of subsidiaries and associated companies within the Group are deferred or reversed until the date these investments are disposed of to a third party. Whenever these gains are deferred, their recognition in earnings is made under the caption "Gains/(losses) of affiliated companies", in the proportion that goodwill or assets and liabilities identified in the allocation of the purchase price recorded by the acquirer is recognized in earnings.
Additional capital contributions and loans granted to subsidiaries, associates companies and joint ventures are recorded at nominal value, reduced by adjustments for estimated losses, ifapplicable.
The Company records its revenue and expenses as they are generated or incurred, regardless of when they are received or paid, respectively.
With regard to the recognition of expenses with taxes on the purchase of external services (e.g. nondeductible value added tax), the amounts are classified as indirect taxes.
Income tax expense corresponds to the sum of current and deferred taxes. Deferred taxes are recognized in earnings except when they relate to items recorded directly in shareholders' equity, in which case they are also recorded in shareholders' equity.
The current income tax is computed based on the estimated taxable income for corporate income tax purposes, based on the statutory tax rate in Portugal, which is increased by a municipal tax and/or by an additional state surcharge depending on the taxable profit of the year (Note 9).
The income tax expense recorded in the financial statements was determined in accordance with "NCRF 25 Income Taxes". In determining income tax expense for the year, besides the current tax based on profit before-tax adjusted in accordance with the tax legislation, it is also considered the effects of temporary differences between income before tax and taxable income originated in the year or in preceding years.
Deferred taxes correspond to the temporary differences between assets and liabilities for accounting purposes and the related amounts for taxable purposes. Deferred tax assets and liabilities are computed and evaluated annually, using the tax rates which are expected to be in force at the date of reversal of these temporary differences.
Deferred tax assets are recorded only when there is a reasonable expectation of sufficient future tax profits which allow for their use. As at the balance sheet date the Company conducts a reassessment of the temporary differences originating deferred tax assets, in order to record deferred tax assets not recognized previously and/or to reduce the amount of deferred tax assets that are recognized, based on the current estimate of its recoverable amount.
Accounts receivable are initially recognized at fair value, and subsequently measured at amortized cost, based on the effective interest rate method, reduced by impairment losses.
Impairment losses for doubtful accounts receivable are computed based on the evaluation of the estimated risks resulting from the non-collection of receivables and are recorded in the income statement.
The Company recognizes provisions when there is a present obligation arising from past events provided that there will be it is probable as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where any of the above mentioned criteria is not accomplished, the Company discloses the event as a contingent liability, unless the cash outflow is remote.
Provisions are recognized for an amount corresponding to the present value of the best estimate, at the reporting date, of the resources needed to settle the obligation. That estimate is determined considering the risks and uncertainties associated with the obligation. Provisions are reviewed at the end of each year and adjusted for in order to reflect the best estimate as of that date.
Loans obtained are initially recognized at fair value, net of transaction costs incurred, and subsequently presented at amortized cost, based on the effective interest method.
Own shares are accounted for at their acquisition value as a reduction of shareholders' equity in the caption "Own shares", and the gains or losses inherent to their disposal are recorded in "Retained earnings"
Realizable assets and liabilities due over a period greater than one year from the balance sheet date are classified under non-current assets and non-current liabilities, respectively, at present value.
Transactions denominated in foreign currencies (different from the Company´s domestic currency, "Euro") are translated to Euros at the exchange rates prevailing at the time the transactions are made. Assets and liabilities in foreign currency for which there is no agreement for fixing an exchange rate are translated to Euros using the exchange rates prevailing at the balance sheet date. Favourable or unfavourable exchange rate differences arising from the differences between exchange rates in force at the date of the respective transactions and those applying on the date of collection or payment or at the balance sheet date are recorded as gains and losses in the income statement.
Assets and liabilities as at December 31, 2018 and 2017 were translated into Euros using the following exchange rates to the Euro reported by the Portuguese Central Bank:
| Final | ||
|---|---|---|
| Currency | 2018 | 2017 |
| Real | 4.4440 | 3.9729 |
| USD | 1.1450 | 1.1993 |
Financial assets and liabilities are recognized in the balance sheet when the Company becomes part of the corresponding contractual terms, and are classified in the following categories: (a) at cost or amortized cost; and (b) at fair value, with the respective changes being recorded in the income statement.
Assets and liabilities are classified at cost or amortized cost if they: (a) have a defined maturity; (b) have a fixed or determined income; and (c) do not represent or include a derivative financial instrument.
Assets and liabilities classified in this category are measured at amortized cost reduced by accumulated impairment losses (for financial assets) and correspond primarily to the following asset and liability captions included in the Company's balance sheet:
Amortized cost is determined through the effective interest method. The effective interest rate is the one that discounts the estimated future payments and receipts, during the term of the financial instrument, to the carrying value of the financial asset or liability.
All remaining financial assets and liabilities not included in the category "cost or amortized cost" are recognized at fair value. These financial assets and liabilities correspond primarily to interest and exchange rate derivative financial instruments.
The changes in the fair value of these derivatives are recognized through shareholders' equity or profit and loss, depending on whether those derivatives meet or not the criteria for hedge accounting, respectively. These changes in fair value are recorded under the caption "Increases/(reductions) in fair value" (Note 18).
Financial assets accounted as "cost or amortized cost" are subject to impairment tests at the end of each year. Such assets are impaired when there is clear evidence that, as a result of one or more events occurred after their initial recognition, their future estimated cash flows will be affected.
For assets measured at amortized cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the present value of the revised future estimated cash flows discounted using the initial effective interest rate. For financial assets measured at cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the best estimate of the asset's fairvalue.
Subsequently, if there is a reduction in the impairment loss as a result of an event occurred after the initial recognition of the loss, the impairment should be reversed through earnings. The reversal is recognized up to the limit of the amount that would be recorded (at amortized cost) if the loss had not been initially recognized.
The Company derecognizes financial assets when its contractual rights to obtain the asset's cash flows expire, or when it transfers to another entity all the significant risks and rewards associated with the ownership of those assets. The Company derecognizes financial liabilities only when the corresponding obligation is settled, cancelled or expires.
When preparing the financial statements in accordance with the NCRF, the Company's Board of Directors uses estimates and assumptions that affect the application of accounting policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are considered probable under the circumstances on which the estimates are based, or as a result of new information or more experience. The most significant accounting estimates reflected in the financial statements are as follows:
Estimates used are based on the best information available during the preparation of financial statements, although future events, neither controlled nor foreseeable by the Company, could occur and have an impact on those estimates. In accordance with "NCRF 4 Accounting Policies, Changes in Estimates and Errors" ("NCRF 4"), changes to these estimates that occur after the date of the financial statements are recognized in net income, using a prospective methodology.
Events occurred after the balance sheet date that provide additional information about conditions existing at the balance sheet date are reflected in the financial statements. Events occurred after the balance sheet date that provide information about conditions that occur after the balance sheet date are not reflected in the financial statements but are disclosed in the notes to the financial statements, if material.
The caption "Cash and cash equivalents" of the statement of cash flows includes cash on hand and bank deposits readily convertible to cash.
The Company is exposed to a liquidity risk if its sources of funding, including cash balances, operating cash inflows, divestments, credit lines and cash flows obtained from financing operations, do not match its financing needs, such as operating and financing outflows, investments, shareholder remuneration and debt repayments. The Company understands that it has the ability to fulfill its obligations.
The cash flow statement was prepared in accordance with "NCRF 2 Statement of Cash Flows", with the following aspects worth mentioning.
In 2018 and 2017, this caption relates to capital increases made at Bratel BV. In December 2018, in order to be able to exercise the Oi's Capital Increase due to the entry of New Funds with an exercise deadline on January 4, 2019, PHAROL, SGPS S.A. made a capital increase in its subsidiary Bratel BV in the amount of Euro 26,5 million.
As at December 31, 2018 and 2017, this caption is made up as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Cash | 1,630 | 3,786 |
| Bank deposits immediately available | 2,020,988 | 25,038,435 |
| 2,022,619 | 25,042,221 |
The Company did not adopt any new or revised standard or interpretation during the year ended December 31, 2018 and did not voluntarily change other accounting policies or accounting estimates.
During the year ended December 31, 2018, the Company did not adjust its financial statements for any material errors from previous years.
During 2018 and 2017, the movements occurred in this caption were as follows:
| Euro 2018 |
||||||
|---|---|---|---|---|---|---|
| Investments in subsidiary |
Additional paid in capital contributions in subsidiary |
Investments in associated |
Investments in joint |
|||
| companies | companies | companies | Goodwill | ventures | Total | |
| Opening balance | 165,985,254 | 1,720,000 | - | - | - | 167,705,254 |
| Increases | 26,529,000 | - | - | - | 26,529,000 | |
| Reductions | 11,064,825 | - | - | - | - | 11,064,825 |
| Transfer of shares to associates | - | - | - | - | - | - |
| Equity method | (122,498,042) | - | - | - | - | (122,498,042) |
| Closing balance | 54,552,037 | 28,249,000 | - | - | - | 82,801,037 |
| Euro | ||||||
|---|---|---|---|---|---|---|
| 2017 | ||||||
| Additional | ||||||
| paid in capital | ||||||
| Investments | contributions | Investments in | Investments | |||
| in subsidiary | in subsidiary | associated | in joint | |||
| companies | companies | companies | Goodwill | ventures | Total | |
| Opening balance | (560,455) | 1,000,000 | - | - | - | 439,545 |
| Increases | - | 720,000 | - | - | - | 720,000 |
| Reductions | - | - | - | - | - | - |
| Transfer of shares to associates | - | - | - | - | - | - |
| Equity method | 166,545,709 | - | - | - | - | 166,545,709 |
| Closing balance | 165,985,254 | 1,720,000 | - | - | - | 167,705,254 |
In the fiscal years 2018 and 2017, the movements occurred in adkustments to financial assets are the result from the use of the equity method of subsidiaries.
The composition of this caption mainly comprises (1) an estimated future recovery of Euro 74.6 related to the debt securities issued by Rio Forte on December 31, 2018 and 2017, and (2) Euro 1.1 million related to the value of the Call Option on December 31, 2017. On December 31, 2018, the Call Option has value of zero.
Regarding the debt securities issued by Rio Forte, after having been made aware of the Report of the Judicial Administrators in the Rio Forte insolvency case (Rapport nº 4 des Curateurs), dated August 31, 2016, available at www.espiritosantoinsolvencies.lu , PHAROL began procedures to assess the financial, accounting and legal implications of the information contained in section 2.1.6., which is transcribed in a free translation as follows:
The information currently available to the Judicial Administrators does not allow an estimate of either the total recovery or the recovery to be made by the company currently in bankruptcy proceedings.
It cannot be excluded that judicial seizing and the eventual rights of third parties involved will prolong or even definitively prevent the bankrupt estate from recovering and distributing certain assets. In fact, it is not excluded that the judicial authorities have the objective of confiscating the assets now seized."
The Board of Directors of PHAROL, after taking appropriate measures and supported by the analysis of its advisers, concluded, based on the principle of prudence, that the expected recoverability of the insolvent estate and, consequently, PHAROL's expected recoverability of its debt instruments of Rio Forte, have reduced. PHAROL's investment in the Rio Forte securities was initially valued at fair value upon initial recognition on March 30, 2015 and subsequently measured at amortized cost less any impairment losses. Based on the principles of IAS 39, taking into account available information, Management used its judgment in the definition of assumptions that culminated in a valuation of the amount due from Rio Forte at 85.7 million euros at December 31, 2016. This reflects an appraisal of around 9.5% of the nominal value, against approximately 15% of the nominal value at December 31, 2015, which resulted in the accounting for an impairment of € 48.8 million.
On December 2017, after updating the amount of credit claims considered in the last report of the Judicial Administrators, that was higher than previously considered, the debt recovery valuation was again revised downwards, registering a recovery of 8.32% recovery, equivalent to a reduction of Euro 11.1 million to the amount of Euro 74.6 million. On December 31, 2018, the debt recovery value remains at 8.32%.
It should be noted that, as evidenced by the last available report of the Judicial Administrators, in the insolvency proceeding of Rio Forte, the administrative analysis of debt declarations is still in progress, and therefore confirmation by the Judicial Administrators of the qualification of the credits claimed is pending.
Additionally, as part of the Rio Forte, in December 2017, PHAROL was informed of a statement from the trustees of Espírito Santo International, SA ("Insolvency") stating that the insolvent company will sue PHAROL, requesting that the latter be ordered to reimburse EUR 750 million, without specifying the grounds of that request.
Following this announcement, as of January 2019, PHAROL was summoned by the curator of Espírito Santo International, SA, as a precautionary measure to interrupt any limitation period, with a view to canceling ESI Notes payments during the month of January, 2014.
After analyzing the abovementioned summons, PHAROL considers a very low probability, based on the alleged facts, obtain any conviction of PHAROL in the terms provided. Accordingly, PHAROL has not recorded any provision in its financial statements.
During 2016 and as described above, the shareholding that PHAROL held directly in Oi, due to corporate reorganization, was transferred to Bratel BV, with Bratel BV holding on December 31, 2018 and 2017 the entire direct and/or indirect participation in Oi, since this participation was transferred to Bratel Sarl in September 2017. Therefore all results of associates' interests in 2017 and 2018 refer exclusively to direct participation in Bratel BV.
For the fiscal years ended December 31, 2018 and 2017, fixed remuneration of Board members, which were established by the Remuneration Committee, amounted to Euro 605 thousand and Euro 708 thousand, respectively.
At December 31, 2018 and 2017 no share-based program or termination benefit program were in place.
For the year ended December 31, 2018, the fees paid to the Statutory Auditor of PHAROL amounted to Euro 80 thousand, corresponding to audit fees of PHAROL.
For additional information related to the remuneration of members of the Board of Directors and key employees, we refer readers to the Corporate Governance Report included in the Annual Report.
In 2018, the companies located in mainland Portugal were subject to Corporate Income Tax at a base rate of 21%, with an additional (1) Municipal Surtax of up to 1.5% levied on taxable income, and (2) a State Surtax of 3.0% levied on taxable profit between Euro 1.5 million and Euro 7.5 million, of 5.0% levied on taxable profit between Euro 7.5 million and Euro 35 million and of 9% levied on taxable profit in excess of Euro 35 million, resulting in a maximum aggregate tax rate of approximately 31.5%, for taxable profit in excess of Euro 7.5 million. In the calculating of taxable income, to which is applied above mentioned tax rate, income and expenses not deductible for tax purposes are added to or deducted from the accounting results.
According to the applicable legislation, the tax statements are subject to revision and correction by the fiscal authorities during a period of four years (five for Social Security) except if there have been fiscal losses, or if fiscal benefits have been granted, or if audits, claims or impeachments are being performed, in which case, depending on the circumstances, those periods may be extended or suspended. The Company's Board of Directors, supported by the information given by their fiscal consultants, understands that possible fiscal contingencies should not have a significant impact on the financial statements of December 31, 2018, considering the provisions and the existing expectations at this time, regarding the resolution of the fiscal contingencies described in Note 12.
In 2018, this caption essentially reflects the reimbursements received from the Tax Authority relating to IRC from previous years, amounting to EUR 12,542,510.
On December 31, 2018 and 2017, the debtor and creditor balances in respect of State and Other Public Entities are as follows:
| Euro | ||||
|---|---|---|---|---|
| 2018 | 2017 | |||
| Receivable | Payable | Receivable | Payable | |
| Current taxes | ||||
| Operations in Portugal | ||||
| Value-added tax | - | 8,379 | - | 2,102 |
| Income taxes | 9,971 | - | 9,718 | - |
| Personnel income tax witholdings | - | 70,624 | - | 64,764 |
| Social Security Contributions | - | 77,166 | - | 92,164 |
| Other | - | 196 | - | 175 |
| 9,971 | 156,366 | 9,718 | 159,206 |
As at December 31, 2018, the Company's share capital was fully paid and amounted to Euro 26,895,375, and was represented by 896,512,500 common shares with a nominal value of 3 cents of Euro each.
As of December 31, 2018, and 2017, the detail of this caption is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Shares held by PHAROL | 179,675,995 | 179,675,995 |
| 179,675,995 | 179,675,995 |
PHAROL, held 30,865,000 treasury shares, corresponding to 3.44% of the share capital PHAROL.
Portuguese law establish that at least 5% of each annual profit must be allocated to a legal reserve until this reserve equals the minimum requirement of 20% of share capital. This reserve is not available for distribution to shareholders but may be capitalized or used to absorb losses, once all other reserves and retained earnings have been exhausted.
As at December 31, 2018, the legal reserve was already fully incorporated in accordance with Portuguese law and amounted to Euro 6,773,139.00.
The composition and the movements effected in this item during the years of 2018 and 2017 are asfollows:
| Euro | ||||
|---|---|---|---|---|
| Reserves for treasury shares |
||||
| Free reserve | cancelled | Own shares | Total | |
| Balance as at 1 January 2017 | 77,635,309 | 6,970,320 | 179,675,995 | 264,281,624 |
| Transfer to reserves for use in own shares | 1,608 | - | - | 1,608 |
| Transfer to retained earnings | - | - | - | - |
| Balance as at 31 December 2017 | 77,636,917 | 6,970,320 | 179,675,995 | 264,283,232 |
| Transfer to reserves for use in own shares | - | - | - | - |
| Transfer to retained earnings | - | - | - | - |
| Balance as at 31 December 2018 | 77,636,917 | 6,970,320 | 179,675,995 | 264,283,232 |
During the fiscal years of 2018 and 2017 the movements under this item were as follows:
| Euro | |||
|---|---|---|---|
| Currency | Other changes | ||
| translation | in shareholders' | Total | |
| adjustments | equity | ||
| Balance as at 31 December 2016 | (937,179,670) | (462,250,404) | (1,399,430,074) |
| Equity method (Note 6) | 936,768,593 | 462,498,481 | 1,399,267,074 |
| Balance as at 31 December 2017 | (411,077) | 248,077 | (163,000) |
| Equity method (Note 6) | (109,853,409) | - | (109,853,409) |
| Balance as at 31 December 2018 | (110,264,486) | 248,077 | (110,016,409) |
Considering that in the year ended December 31, 2018 was obtained a negative net result of Euros 5,648,443, the Board of Directors of PHAROL proposes that they be transferred to the Company's Retained Earnings.
The negative net result of Euros 782,767,357 obtained on 2017 was transferred to the Company's Retained Earnings.
No movement in provisions occurred during the 2018 financial year were as follows:
| Euro | |
|---|---|
| 2018 | |
| Opening balance | - |
| Increases | 12,500,000 |
| Reductions | - |
| Closing balance | 12,500,000 |
The provision made in 2018 takes into account an eventual liability resulting from the position assumed by the company with respect to tax refunds and tax benefits from previous years.
The detail of this caption as at December 31, 2018 and 2017 is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Suppliers | 36,204 | 4,695,403 |
| 36,204 | 4,695,403 |
The detail of this caption as at December 31, 2018 and 2017 is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Supplies and external services | 1,151,045 | 861,583 |
| Vacation pay and bonuses | 345,261 | 430,162 |
| Others | 42,510 | - |
| 1,538,815 | 1,291,746 |
The detail of this caption as at December 31, 2018 and 2017 is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Gains and losses in affiliated companies - equity method | (1,580,689) | (770,208,368) |
| (1,580,689) | (770,208,368) |
The detail of this caption as at December 31, 2018 and 2017 is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Specialized work | 1,086,619 | 942,774 |
| Insurance | 274,643 | 348,794 |
| Travel | 162,787 | 87,214 |
| Other | 250,466 | 198,969 |
| 1,774,516 | 1,577,751 |
The detail of this caption as at December 31, 2018 and 2017 is as follows:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Fixed and variable remuneration | 1,290,535 | 1,364,323 |
| Social security | 273,759 | 306,506 |
| Other | 45,945 | 64,633 |
| 1,610,238 | 1,735,463 |
This caption reflects the change in fair value of derivative financial instruments entered into by the Company and has the following composition in the years ended December 31, 2018 and 2017:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Losses on non-current assets held for sale | - | (11,121,580) |
| C all option over Oi Shares (Note 7) | (1,026,853) | (153,638) |
| (1,026,853) | (11,275,218) |
Other expenses and losses, in the amounts of Euro 256,436 in 2018 and Euro 672,985 in 2017 essentially include unfavorable exchange rates related to the Call Options devaluation and legal advisory services paid in foreign currency.
The net result per share for the years 2018 and 2017 was calculated as follows:
| 2018 | Euro 2017 |
|
|---|---|---|
| Loss from continuing operations | (5,648,443) | (782,767,357) |
| Net loss considered in the computation of the diluted earnings per share |
(5,648,443) | (782,767,357) |
| Weighted average common shares outstanding in the period |
865,647,500 | 865,647,500 |
| Basic and Diluted | (0.01) | (0.90) |
As of December 31, 2018, and 2017, the Company had presented the following guarantees and comfort letters to third parties:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Bank and other guarantees presented tax authorities and other public entities | 84,617,476 | 376,715,726 |
| 84,617,476 | 376,715,726 |
The bank and other guarantees presented to the fiscal authorities essentially include Euro 85 and 377 million, on December 31, 2018 and 2017, respectively; related to the tax assessments received by PHAROL. The Company presented legal challenges to these assessments and, in accordance with Portuguese law, provided collateral in order to avoid the initiation of enforcement proceedings, which, in the absence of guarantee or payment of the contested tax, would continue until the request of a pledge of sufficient assets to cover the request tax. Portuguese law, while always allowing for the appeal of taxes liquidited by the tax authorities, only suspends enforcement proceedings upon payment of the tax or the provision of a guarantee. Thereby, Providing a guarantee of security avoids the payment of tax before the appeal decision or attachment of assets in enforcement proceedings.
The change in the value of the guarantees provided in 2018 occurred due to cancellation due to the expiration of part of the guarantees.
These guarantees were presented by PHAROL as a controlling company of the consolidated tax in the years in question, even though as at December 31, 2018, the contingencies associated to these guarantees are not the Company's responsibility, having been transferred to Oi, while PHAROL remains jointly and responsible.
Notwithstanding the expiration and consequent cancellation of part of the Guarantees, the tax proceedings are still ongoing and Oi is responsible for them that might arising to Euro 378 million. Under the agreements entered into with Oi, Oi has to substitute the bank guarantees provided by PHAROL to the Tax Authority and to the European Commission for guarantees provided by Oi. Where this substitution is not possible due to demands of the counterparty, Oi has undertaken to provide equivalent guarantees in favor of PHAROL. As such, as of December 31, 2017, a Pledge Agreement for shares of Telemar Norte Leste is in force with a maximum amount up to the limit of the potential liabilities currently in existence.
The Company believes that the disclosure of the outstanding debts and transactions performed with its main shareholders, notably those with a qualified holding of more than 2% in PHAROL's share capital and with all the entities reported by these shareholders as being their related parties. The tables below present the balances as at December 31, 2018, and December 31, 2017, and the transactions that took place in the fiscal years ending December 31, 2018 and 2017, between the PHAROL Group and these entities identified as shareholders with qualified holdings and their related parties:
| Euro | ||
|---|---|---|
| 2018 | 2017 | |
| Cash and bank deposits |
||
| Banco Comercial Português (i) | 4,608,058 | 6,824,345 |
| Novo Banco | 1,094,507 | 11,058,551 |
| 1,094,507 | 11,058,551 |
| - | ||||
|---|---|---|---|---|
| 2018 | 2017 | |||
| Costs and | Net interest | Costs and | Net interest | |
| losses | income | losses | income | |
| Banco Comercial Português (i) | NA | NA | 1,876 | 11,814 |
| Novo Banco | 613 | 9,584 | 376 | 19,595 |
| 613 | 9,584 | 2,251 | 31,409 |
(i) BCP loss its qualified participation
Oi's stock price evolution between December 31, 2018, and February 27, 2019, can be found below:
| 31 dec 18 | 27 feb 19 | |
|---|---|---|
| Oi ON share price (Reais) | 1.25 | 1.72 |
| Oi PN share price (Reais) | 1.26 | 1.72 |
| Exchange rate Real/Euro | 4.444 | 4.245 |
| Oi ON share price (Euro) | 0.28 | 0.41 |
| Oi PN share price (Euros) | 0.28 | 0.41 |
As at December 31, 2018, qualified holdings represented over 41.21% of PHAROL share capital, as follows:
| ENTITIES | NO. OF SHARES |
% OF CAPITAL |
% OF VOTING RIGHTS |
|---|---|---|---|
| Adar Macro Fund LTD | 92,202,302 | 10.28% | 10.00% |
| Adar Capital Partners Ltd. | 92,202,302 | 10.28% | 10.00% |
| Adar Macro Fund Ltd. | 92,202,302 | 10.28% | 10.00% |
| Total attributable | 92,202,302 | 10.28% | 10.00% |
| Telemar Norte Leste S.A. | 89,651,205 | 10.00% | 10.00% |
| Telemar's sole shareholder is OI S.A | |||
| Total attributable | 89,651,205 | 10.00% | 10.00% |
| Novo Banco S.A. | 85,665,125 | 9.56% | 9.56% |
| Directly | 85,665,125 | 9.56% | |
| Shares held by companies in a controlling or group relationship with |
916 | 0.00% | |
| Shares held by directors and members of the Corporate Bodies |
595 | 0.00% | |
| Total attributable | 85,666,636 | 9.56% | 0.00% |
| High Bridge Unipessoal, Lda. | 55,304,969 | 6.17% | 6.17% |
| Novo Banco, S.A. |
Full chain of controlled undertakings through which the voting rights and/or the financial instruments are effectively held starting with the ultimate controlling natural person or legal entity is formed Atlantis Global Investments, LLC. Total attributable 55,304,969 6.17% 6.17%
| 05/12/2016 | High Seas Investments LLC | 46,657,016 | 5.20% | 5.20% | |
|---|---|---|---|---|---|
| Full chain of controlled undertakings through which the voting rights and/or the financial instruments | |||||
| are effectively held starting with the ultimate controlling natural person or legal entity is formed Angra | |||||
| Capital Management LTD. | |||||
| Total attributable | 46,657,016 | 5.20% | 5.20% |
After December 31, 2018, there were changes in qualifying holdings as follows:
• Jan 3, 2019 | Blackhill Holding Limited, LLC. holds a qualifying holding of 43,311,406 shares, representing 4.83% of PHAROL's share capital and voting rights.
• Jan 3, 2019 | High Seas Investments, LLC has decreased its stake to 2.41% of PHAROL's share capital and voting rights.
• Jan 10, 2019 | Blackhill Holding Limited, LLC reported that are attributable to Nelson Tanure 43,311,406 shares representing 4.83% of the capital and voting rights of PHAROL acquired by Blackhill Holding Limited LLC, of which he is a beneficial owner, and further informed that Nelson Tanure holds a personal title of 10,000 shares representing 0.00111%. In total, 43,321,406 shares are attributable to Nelson Tanure, corresponding to 4.83% of PHAROL's share capital and voting rights.
1. Number of shares and bonds issued by PHAROL and by companies that are in a controlling or group relationsip held by the members of the management and supervisory bodies of PHAROL, as of December 31, 2018:
As early as 2019, the following changes occurred:
• Nelson Sequeiros Rodriguez Tanure: on January 3, 2019, 43,321,406 shares, corresponding to 4.83% of PHAROL's capital and voting rights, were attributed to him through 43,311,406 shares representing 4,83% acquired by Blackhill Holding Limited LLC, of which it is an effective beneficiary and still of 10,000 shares representing 0.00111% held in a personal capacity.
The fiscal council does not own any shares of PHAROL.
The managing-director Luís Maria Viana Palha da Silva is also member of the Board of Directors.
The Statutory Auditor does not own any shares of PHAROL.
31/Jan/2018 | Grupo Visabeira SGPS, S.A. reported that it sold a total of 1,630,001 shares, representing 0.1818% of the share capital and voting rights of PHAROL. As a result of these sales, Grupo Visabeira SGPS, S.A. held 9,893,212 shares, representing 1.1035% of the share capital and voting rights of PHAROL. Furthermore, pursuant to article 20 of the Portuguese Companies Code, Fernando Campos Nunes (Portuguese Tax ID: 175,776,083) is deemed to be responsible for the total of 16,067,041 shares representing the share capital of PHAROL SGPS, SA, corresponding to 1.7922% of the share capital and voting rights.
31/Jan/2018 | PHAROL informed that Grupo Visabeira SGPS, SA and Visabeira PRO - Estudos e Investimentos, SA sold a total of 7,575,844 shares, representing 0.846% of the share capital and voting rights of PHAROL. Because of the sales, Grupo Visabeira SGPS, SA became the holder of 9,893,212 shares representing 1.1035% of the share capital and voting rights of PHAROL, SGPS, SA, and Visabeira PRO - Estudos e Investimentos, SA now holds 6,173,829 shares representing 0.6886% of the share capital and voting rights of the company. The shareholders identified above have thus jointly held a total of 16,067,041 shares, representing 1.7922% of the share capital and voting rights of PHAROL, SGPS, SA, with the sale of 2,000,000 shares on 28-12- 2017, reduced their joint participation to less than 2% of the voting rights corresponding to the capital stock of PHAROL.
25/Apr/2018 | Adar Capital Partners Ltd. informed that it holds a 7.01% qualifying holding of PHAROL's share capital and voting rights.
27/Apr/2018 | Adar Capital Partners Ltd. informed that it holds a 10.28% qualifying holding of PHAROL's share capital and voting rights, divided into 76,444,022 indirectly owned shares and 15,758,280 shares through a swap agreement.
03/Jan/2019 | Blackhill Holding Limited, LLC. informed that it holds a qualifying holding of 43,311,406 shares, representing 4.83% of PHAROL's share capital and voting rights.
04/Jan/2019 | Grupo Visabeira SGPS, S.A. reported that it sold a total of 1,000,000 shares, representing 0.1115% of the share capital and voting rights of PHAROL.
As a result of the sales, Grupo Visabeira SGPS, S.A. became the holder of 15,067,041 shares, representing 1.6806% of the share capital and voting rights of PHAROL.
Furthermore, pursuant to the provisions of article 20 of the Portuguese Securities Code, in view of the existing holdings, Fernando Campos Nunes (NIF: 175,776,083) is deemed to be responsible for the total of 15,067,041 shares representing the share capital of PHAROL SGPS, SA, corresponding to 1.6806% of the share capital and voting rights.
10/Jan/2019 | Blackhill Holding Limited, LLC reported that are attributable to Nelson Tanure 43,311,406 shares representing 4.83% of the capital and voting rights of PHAROL acquired by Blackhill Holding Limited LLC, of which he is a beneficial owner, and further informed that Nelson Tanure holds a personal title of 10,000 shares representing 0.00111%. In total, 43,321,406 shares are attributable to Nelson Tanure, corresponding to 4.83% of PHAROL's share capital and voting rights.
REPORT AND OPINION OF THE FISCAL COUNCIL
To the Shareholders of PHAROL, SGPS S.A.
As required by Article 420.1 g) of the Portuguese Companies Code, it falls to us, as the members of the Fiscal Council of "PHAROL, SGPS, S.A." (referred to below as PHAROL) to issue our annual report on our audit activities and to issue our opinion on the management report and standalone financial statements and the proposal for the application of profits presented by the Board of Directors for the year ended December 31, 2018, as well as our assessment of the respective legal certification of the accounts and the audit report issued by the audit firm.
It should be mentioned, as a supervisory body, that we must mention, as Fiscal Council, that:
It also took note of the results of the audit and external audit work on the individual financial statements for the year 2018, which comprise the balance sheet, the income statement, the statement of changes in equity, the cashflow statement and the annexes related.
The statutory auditor and external auditor monitored the preparation of PHAROL's standalone financial statements and informed the Fiscal Council of its conclusions and its agreement on the documents prepared by the Board of Directors.
Through the report to the Fiscal Council, the statutory auditor and external auditor communicated the relevant aspects of the work carried out and their conclusions.
The Fiscal Council took note of the legal certification of the accounts on the standalone financial information for the year 2018, issued with a reservation and an emphasis, by the auditor and external auditor, which document was approved.
It is the understanding of the statutory auditor and external auditor that consist of relevant audit matters:
In these areas, audit procedures and tests considered relevant under the circumstances have been developed.
The Statutory Audit Board declares that, to the best of its knowledge, the information provided for in paragraph 1 a) of article 245 of the Securities Code, for the standalone accounts for the year ended December 31, 2018:
On the basis of the above report, the measures taken and the conclusions drawn from the legal certification of accounts and audit report and the additional report to the supervisory body on standalone financial information and taking into account the information received from the Board of Directors, of the services of PHAROL and of the statutory auditor and external auditor, the Fiscal Council is of the opinion that the General Meeting approve:
Lastly, the members of the Supervisory Board express their appreciation to the Board of Directors, principals and other employees of PHAROL for their cooperation in the performance of their duties.
Lisbon, February 28, 2019
FISCAL COUNCIL
_____________________________________________ José Maria Ribeiro da Cunha — Chairman
_____________________________________________ Isabel Maria Beja Gonçalves Novo — Member
_____________________________________________ João Manuel Pisco de Castro - Member
STATUTORY AUDITORS' CERTIFICATION AND AUDIT REPORT
(Free transiation from a report originally issued in Portuguese language. In case of doubt the Portuguese version wiL( aíways prevail)
We have audited the accompanying financial statements of Pharol, SGPS, SÃ (Pharol), which comprise the balance sheet as at December 31, 2018 (showing a total of 161 444 070 euro and a total net equity of 146 248 509 euro, including a net loss of 5 648 443 euro) and the income statement, the statement of changes in equity and the statement of cash fLows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the "Basis for quatified opinion" section of our report, the accompanying financial statements give a true and fair view, in alI material respects, of the financiaL position of Pharol, SGPS, SÃ as at December 31, 2018, and of its financial performance and its cash flows for the year then ended in accordance with Accounting and Financial Reporting Standards adopted in PortugaL under the Portuguese Ãccounting System.
The Independent auditor's report on the individual and consolidated financiaL statements for the year ended December 31, 2017 of Ci, SA, dated April 12, 2018, incLuded a "MateriaL uncertainty as to going concern" of Ci, SÃ. Bearing in mmd the Independent auditor's review report on the interim individual and consotidated financial statements for the period ended September 30, 2018 of Ci, SÃ, dated November 13, 2018, we highlight the foLlowing paragraph of the Emphasis titLed "Going concern", taking atso into account the note 13 to the consolidated financial statements: "We draw attention to Note 1 to the individual and consolidated interim financial information, on the section about going concern, that informs that the individual and consolidated interim financial information has been prepared assuming the continuity of the Company as a oing concern, which consider the success of the implementation of the approved
Judicial Reorganization Plan ("PRJ") including, among other matters, the satisfaction of specific "Condition Precedents" informed in attachment 4.3.3.5 (c) of the PRJ, at times satisfied andior dismissed, as well as the capital increase with new funds in the amount of R54.000.000 thousand, which sha(l occur up to February 28, 2019. These events or conditions indicate that there are significant uncertainties that may cast significant doubt on the Company's ability to continue as a going concern. (...)". In January 28, 2019, Pharol. communicated a ReLevant Fact disctosed in the sarne date by Oi, SÃ, according to which "(...) the Company concluded the Capital Increase -New Resources, provided for in Clause 6 of the Judicial Reorganization Plan, with the subscription and payment for 3,225,806,45 1 new common shares issued in the Capital Increase -New Resources ("Shares of the Capital Increase -New Resources"), representing the contribution of new funds to the Company for a total of R54.0 biltion." Up to the present date, neither the individuaL and conso[idated financiaL statements for the year ended December 31, 2018 of Oi, SÃ, nor the corresponding Independent auditor's report, are yet avai[able. As referred in the note 13 to the conso[idated financiaL staternents, the indirect investment in Oi, SÃ, as at Decernber 31, 2018 is measured by the market vatue at that date, determined using the ctosing stock exchange Listed rnarket price. As presented in note 23 to the present financiaL statements, the Listed market price of the shares of Oi, SÃ evoLved frorn R\$ 1,25 (€ 0,28) as at Decernber 31, 2018 to R\$ 1,72 (€0,41) as at February 27, 2019.
We conducted our audit in accordance with Internationat Standards on Ãuditing (ISÃ5) and further technical and ethicaL standards and guidetines as issued by Ordern dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Ãuditors). Our responsibitities under those standards are further described in the "Ãuditor's ResponsibiLities for the Ãudit of the FinanciaL Staternents" section beLow. We are independent of PharoL in accordance with the Law and we have futfiLted other ethicaL requirernents in accordance with the Ordern dos Revisores Oficiais de Contas code of ethics.
We betieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qua[ified opinion.
2
The chapter 3 of the Consotidated Ãnnua[ Report 2018 and the notes 3 and 7 to the present financial statements and note 23 to the conso[idated financial statements, disclose, on one hand, that the measurement of the debt securities issued by Rio Forte Investments, SÃ reflects the management's best estimate concerning the recoverable amount of those securities and, on the other hand, that the Group was summoned by the curators of Espírito Santo International SÃ (ESI), in view of a possible cancellation of Notes payments, made by ESI, during the month of January 2014. Pharol considers a very Low probabiLity, based on alleged facts, of obtaining any conviction of Pharol under the terms provided. Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whote, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
| K di t at te ey au m rs |
Sy he si of di nt t au re sp on se s |
|||
|---|---|---|---|---|
| SÃ of Q i, in M t st t ea su re m en ve m en |
||||
| SÃ Th in di ui in in 01 (v in st t ot ct ty g e re eq ve m en , ri gh of 36 ) is d fin ci al 7, % ts te ts an pr es en as as se d b th ke lu t va e. m ea su re y e m ar SÃ tit ith hi gh bl ic d 01 is La a rg e en y w pu an , ed ia of ile be in hi gh l (e th nt to m pr g y re va e , SÃ Ph fin ci al 01 is de st at ts ot un r ar an em en a , ju di ci al ni tio si Ju 20 16 re or ga za n pr oc es s nc e ne Th tiv fin ci al di d st at ts te ar e au e re sp ec e an em en b he di ot to y r au rs 2, 3 d 13 th R ed di lo N et at ot to sc su re s: es an e ol id ed fin ci al at st at ts em en co ns an |
in lv ed in he si th Th di nt t au re sp on se vo sy s, e e , rf of th fo [lo in ed pr oc ur es : pe or m an ce e w g |
|||
| th G C fir io of th sh he ld b at at on m n e ar es y e ro up as th h th ri fi tio of th D be 31 20 18 ro ug e ve ca n e ec em r , , th od ia ba nk he do tio fr st ta om e cu n s w re cu m en n de si d. th sh te ar es ar e po es e |
||||
| fo of cl si fi tio V ifi tio of th ad te rm as ca n er ca n e eq ua in be in in d of th is st t, t ve m en ar g an m ea su re m en is io th pl ic ab le IF RS d th of pr ov ns e ap m m e |
||||
| di O bt ai ni d al in th in de nd r' t to an ys g e pe en au s ng an ai bl vi th La nt rt t re po on e m os re ce av e re ew fin ci in di vi du al d ol id ed aL (a at st at ts an co ns an em en s SÃ of Se be 30 20 18 ) 01 pt at ; em r , , |
||||
| Ãn th lc ul io in he aL is d lid io of at at nt va n e ca ns re ys an th b ke lu t t to m ar va e; e m ea su re m en y |
||||
| of th ab le of th fin ci al Ev aL tio an ua n e re as on ne ss e di lo ' st at ts em en sc su re s. |
| di K t at te ey au m rs |
Sy he si of di nt t re sp on se s au |
|||
|---|---|---|---|---|
| SÃ ri ti is ed by R io In M of th in in de bt F te st ts t st t su or ve m en ea su re m en e ve m en se cu es , |
||||
| Ã 30 20 15 ri tie is ed by t M ch th de bt su ar e se cu s , SÃ Ri In (R io Fo ) Fo rt st ts rte ve m en o e w er e , |
in he si th Th di in Lv ed nt t e e au re sp on se vo sy s, , rf of th fo llo in ed pr oc ur es : pe or m an ce e w g |
|||
| of ed Ph ol fo tlo in th rf tu to re rn g e pe or m an ce ar w , th ch si ed Se be 8, nt ct pt co ra gn on em r e ex an ge 20 14 be Oi G d Ph ol tw ee n ro up an ar |
à th ly sis of th in fo io in rt at t e rm n pr es en e re po s na Ri d is ed by th Fo rt ts an an no un ce m en su e o e in tv to so en cy cu ra rs ; |
|||
| de in lv ki Ri Fo is ta rt un r o e an so en cy pr oc es s ng hi gh b( ic d ed ia pl in Lu bo ith an m ac e xe m ur g, w pu is (e ith in th of i(e Th is in nt st t re va w e pr ve m en Ph ol fin ci al d th of st at ts em en e sc op e ar an an tiv in lv si ifi t nt gn ca re sp ec e m ea su re m en vo es j u dg ts em en d th R el ed di lo N 3 7 ot t at to sc su re s: es an e pr es en 23 th fin ci al d N st at ts ot to an em en an e e ol id ed fin ci al at st at ts co ns an em en |
à ly sis of th ju dg ad by th ts na em en e e m e in de in in th bl t te nt rm g e re co ve ra e am ou m an ag em en of th de bt ri tie D be 31 20 18 at e se cu s ec em r ; , th ba nk th de bt C irc ul iz io of he at e ar n e s w re de si d; ri tie te se cu s ar e po |
|||
| is in fr M ito rin of ib de (o te ts ar g an on g po ss ve pm en om in lv of is ed by th to t cu ra rs an no un ce m en su e so en cy SÃ in be E íri Sa In io l, is ed N to nt te at sp o rn na su ov em r nd in bp in th 14 20 17 d th e an e co rr es po g su oe na , al ad in 20 19 hi le iv ed m ea nw re ce re y ; , |
||||
| in io ab th A ly sis d ai ( of th le l t e na an ap pr sa e ga op n ou ed fo Ph ol of th bp ct tc ex pe ou om e r ar e su oe na iv ed fr ES I fe ed be fo ed by re ce om re rr re pr ep ar , fo in Ph oL 's Le l uL th L[ th is ta nt at ar ga co ns s ar e ow g pr oc es s. |
||||
| la M tin d ci iz io of th th ut at at ee gs an rc ar n e w ye rs ha nd le th in lv e so en cy pr oc es s; |
||||
| tio of th ab le of th fin ci al Ev aL re as on ne ss e an ua n e ' di Lo st at ts em en sc su re s. |
||||
| M of th li ti O i sh t ea su re m en e ca op on ov er ar es |
||||
| lto in th io ly tio d rf Fo m en ne pe or m an ce w g e pr ev us of ch Ph ol le ft ith th nt ct co ra as w e ex an ge ar w , SÃ th ri gh ha sh of Oi fo t to re pu rc se ar es r a e , ri od of ai rik ic 6 at rt st pe ye ar s, ce n e pr es Th of th is is pl d t t an e m ea su re m en as se co m ex th of sin it is ir ia lis ts ce a re qu es e us e sp ec , de ri tiv fin ci al in st t. an va e ru m en th R el ed di lo N 7 to t at ot sc su re s: e e pr es en fin ci al st at ts an em en |
in lv ed in he si th Th di nt t vo sy s, e e au re sp on se , th fo llo in ed rf of w g pe or m an ce e pr oc ur es : Ã of tio tiv ly sis d fo (lo th Li na an w -u p e ca op n re sp ec e l nt ct te co ra ua rm s; |
|||
| In lv of ia lis rf t ts to vo em en sp ec pe or m an in de nd ai l of th IL tio t ap pr sa e ca op n; pe en |
||||
| Ã of th in de nd ai d ly sis t t pe en an na e ap pr sa ri of th ith th yi tts nt e re su w e ca rr ng am ou co m pa so n de in ed by Ph ol te rm ar ; |
||||
| of ab le of th fin ci al Ev aL tio th e an ua n e re as on ne ss di lo ' st at ts em en sc su re s. |
Management is responsible for:
The supervisory body is responsible for overseeing Pharol's financial reporting process.
Our responsibi[ity is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that incLudes our opinion. Reasonable assurance is a high Levei of assurance, but is not a guarantee that an audit conducted in accordance with ISÁs wiLl aLways detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individual[y or in the aggregate, they cou(d reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Ás part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
(i) identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resuLting from fraud is
higher than for one resutting from error, as fraud may invoLve colLusion, forgery, intentional omissions, misrepresentations, or the override of internaL controL;
Our responsibi[ity atso incLudes the verification that the information contained in the management report is consistent with the financiaL statements, and the verification of the requirements as provided in numbers 4 and 5 of articLe 451 •0 of the Portuguese Companies' Code.
Pursuant to artidte 451 •0, n.° 3, aL. (e) of the Portuguese Companies' Code, it is our opinion that the management report was prepared in accordance with the appticabte LegaL and regutatory requirements and the information contained therein is consistent with the audited financial. statements and, having regard to our knowtedge and assessment over Pharot, we have not identified any material. misstatements.
Comp[ying with articte 451 •0, n.° 4, of the Portuguese Companies' Code, in our opinion, the corporate governance report inctudes the information required to Pharo[ to provide under articte 245.°-A of the Securities Code, and we have not identified materiaL misstatements on the information provided therein in comptiance with paragraphs c), d), f), h), 1) and m) of that articLe.
Pursuant to artidle 10.0 of the Regulation (EU) n.° 537/2014 of the European ParLiament and of the Councit, of 16 Ápril. 2014, in addition to the key audit matters mentioned above, we also report the fot[owing:
design audit procedures to respond to the possibiLity of materiaL misstatement in the financiaL statements due to fraud. As a resuLt of our work we have not identified any materiaL misstatement on the financiaL statements due to fraud.
Lisbon, February 28, 2019
Rui Lourenço HeLena, as representative of BDO & Associados - SROC
Investor Relations
Luís Sousa de Macedo Investor Relations Director PHAROL, SGPS S.A. Rua Joshua Benoliel, 1, 2c Edifício Amoreiras Square 1250-133 Lisboa, Portugal Tel: +351 21 269 7698 Fax: +351 21 269 7949 E-mail: [email protected]
Shareholders, investors, analysts and other interested parties should send their requests for information and clarifications (annual, half year, and quarter reports, press releases, etc.).
Depositary bank Deutsche Bank Trust Company Americas ADR Division Floor 27 60 Wall Street New York 10005-2836 Fax: +1(732)544-6346
Holders of ADRs may also request additional information directly from PHAROL's depositary bank for ADRs in New York.
All publications and communications, as well as information regarding the businesses performed by the Company, are available on PHAROL's Internet page, at the following address: www.pharol.pt
Rua Joshua Benoliel, 1, 2c Edifício Amoreiras Square 1250-133 Lisboa, Portugal Tel: +351 21 269 7690 Registered With The Commercial Registry Office Of Lisbon Under No. 503 215 058
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.