Semapa - Management Reports 2006 | FinancialReports.eu

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DIRECTORS’ REPORT

INDIVIDUAL ACCOUNTS

FINANCIAL YEAR OF 2005

Semapa – Sociedade de Investimento e Gestão, SGPS, SA. Sociedade Aberta Av. Fontes Pereira de Melo, 14 – 10º 1050-121 Lisboa � Tel. (351) 213 184 700 � Fax (351) 213 521 748 Reg. at the Lisbon Companies Registry under no. 2630 � Tax no. 502 593 130 � Share Capital 118.332.445 Euros

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Directors’ Report

Contents
	Page
1. Overview of Operations	1
2. Major Developments and Events in 2005	3
3. Financial	3
3.1. Financing	3
3.2. Risk Management	3
3.3. Retirement Benefits	4
3.4. Listed Share Prices	4
3.5. Dividends	5
3.6. Net Profit for the Period	5
4. Prospects for 2006	5
5. Acknowledgements	6
6. Proposal for Distribution of Profits	7

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1. Overview of Operations

The financial year of 2005 was particularly difficult for the Portuguese economy, with economic growth at practically zero. An extraordinary rise in oil prices over the last two years and the unavoidable need to contain public spending combined to keep the country at its current low point in the economic cycle. Indeed, these two situations are expected to continue and will exert a negative influence for some time to come, with far-reaching consequences for the performance of companies, and especially of those which sell most of their output on the Portuguese market, as is the case of the cement sector.

In addition to these more lasting effects, the Portuguese economy is also faced with other structural problems which will be difficult to overcome, such as those resulting from competition with new countries now entering the European and world markets. These factors are particular important for companies such as Portucel / Soporcel, which are almost exclusively geared to exports.

The deceleration in the Portuguese economy in 2005 resulted from a sharp drop in the contribution of internal demand to growth in GDP, due particularly to the drop in investment (- 3.1%) and the slowdown in public spending. Growth in exports also dropped from 5.4% in 2004 to 1.8% in 2005, further contributing to poor performance overall.

These trends in both internal demand and investment inevitably had a significant impact on the business of companies engaged in the production of industrial goods, such as cement, paper and paper pulp.

In view of these constraints, expectations for 2006 are naturally subject to a high degree of uncertainty, although we may presume that some of the more recent negative effects may start to be dispelled as from 2007, allowing the economy to return to more normal levels of growth.

Despite this particularly difficult economic situation, Semapa’s performance in 2005 may be regarded as positive.

In the field of Holdings Management, at the start of the year, the companies controlled by SEMAPA - Sociedade de Investimento e Gestão, SGPS, SA – SEINPAR INVESTMENTS BV and PORTUCEL - Empresa Produtora de Pasta de Papel, SA – disposed of their entire holdings in ENCE - Grupo Empresarial Ence, SA, corresponding to 8.00% of the respective share capital, for a total of 46 million euros, although this operation did not generate any capital gain for the Semapa Group in 2005.

In December, SEMAPA – Sociedade de Investimento e Gestão, SGPS, SA, acting throught its wholly owned subsidiary CMP Investments BV, sold to a company in the Babcock & Brown Ltd. Group, its entire holding in Enersis II – Sociedade Gestora de Participações Sociais, SA, representing 89.92% of the respective share capital, for a sum of 420.8 million euros. With this operation, the SEMAPA Group re-centred its core business in two business areas, where it is already established:

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Cement and derivatives, through the Secil Group
Paper and paper pulp, through the Portucel/ Soporcel Group

SEMAPA’s strategic thrust will continue to be in consolidating and extending its relative position in these sectors.

The Individual Accounts have been drawn up under the POC rules (Portuguese Plan of Accounts), with the derogations needed in order for the value of the Shareholders’ Funds presented to correspond to the value of the same Shareholders’ Funds in the consolidated accounts, which were drawn up under the IFRS (International Financial Reporting Standards). These derogations relate to (i) retrospective application of IFRS 3 in connection with the accounting of Business Combinations, (ii) IFRS 41 on the Fair Value of Biological Assets and (iii) application of IAS 19 to the registration of actuarial deviations in postemployment liabilities. In addition to this, the accounts reflect the harmonization of depreciation rates in the different companies in the Group.

As a result of the changes to holdings in the course of 2005, the Net Profit presented by SEMAPA includes appropriation of 51% of the Net Profit of Secil, 67.1% of the Net profit of Portucel / Soporcel and 89.92% of the Net Profit of Enersis II over the period January to November, as well as the SEMAPA’s own Net profits from its activities in the management of its corporate holdings.

Comparing the main items in the Individual Income Statements for 2004 and 2005, the main variations are found in the following accounts:

Income and Gains – A total of 441.8 million euros, in which we should point to the following significant factors:
- ⇒ the non-recurrent income from the sale of SEMAPA’s 89.92% holding in Enersis II, which led to a capital gain of 384.6 million euros;
- ⇒ appropriation of Gains on Group and Related Companies of 44.9 million euros;
- ⇒ income from the provision of services 6.6 million euros;
- ⇒ interest on loans to Group companies amounting to 5.5 million euros,

the last three items being of a recurrent nature.

Costs and Losses – In addition to normal operating costs and overheads, the following should be noted:
- ⇒ full provision was made for liabilities accepted with regard to pensions at SEMAPA – amounting to 84.3 million euros – resulting from approval by the Company’s General Meeting, on 30 March 2005, of the Directors’ Retirement Benefits Regulations; and
- ⇒ a provision was made for performance bonuses for Directors for the financial year of 2005, with an estimated value of 10.4 million euros.

Finally, it should be noted that the Company recorded a positive Net result for the period of 329.8 million euros.

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2. Major Developments and Events in 2005

In January, the company disposed of its entire holding in ENCE - Grupo Empresarial Ence, SA, corresponding to 2 037 600 shares, representing 8.00% of the respective share capital, for a sum of approximately 46 million euros. The disposal was effected through companies controlled by SEMAPA-Sociedade de Investimento e Gestão, SGPS, SA, SEINPAR INVESTMENTS BV and PORTUCEL - Empresa Produtora de Pasta de Papel, SA.

In December, SEMAPA, acting through its wholly owned subsidiary CMP Investments BV, sold to a company in the Babcock & Brown Ltd. Group, its entire holding in ENERSIS II - Sociedade Gestora de Participações Sociais, SA, representing 89.92% of the respective share capital. The transaction was based on an Enterprise Value for Enersis of approximately 1.005 billion euros, and SEMAPA obtained a sum of 420.8 million euros from the sale of this holding.

3. Financial

3.1. Financing

In March, in keeping with the respective contractual terms, the company reimbursed 20% of the nominal value of the bonds issued in the Semapa 98 programme; these repayments totalled 4.5 million euros.

In June, Semapa SGPS took out medium and long term financing from Caixa Galicia of 25 million euros and its subsidiaries made early repayments, of the same amount, on the loan obtained from the banking syndicate comprising the BES and CGD Groups for partial financing of the acquisition of Portucel. In December, a repayment of 250 million euros was made on this loan, following on from the disposal of Enersis.

In May, SEMAPA received dividends from Portucel of 16.8 million euros, relating to 2004 results, through its subsidiaries Seinpart – Participações, SGPS, S.A. and Semapa Investments BV.

In September, SEMAPA and Cimentospar (controlled by SEMAPA) received approximately 13.2 million euros from Secil, of which 5.1 related to interim dividends.

Enersis repaid in full its loans from Semapa.

3.2. Risk Management

Risk management priorities have been to detect and hedge against risks which might have a materially relevant impact on the net profits or equity, or which may create significant constraints on the pursuit of the Group’s business interests.

In view of the company’s object – the management of corporate holdings – it is subject to two types of risk:

Internal: interest rate risk: in view of the variations in Semapa’s net debt over the course of the period, it was decided to keep this borrowing, and that of its instrumental holdings, on a variable rate basis.

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External: the risks to which its subsidiaries are subject. These companies have taken out hedges to minimize or eliminate their risks (for more details, see the company’s consolidated financial statements).

3.3. Retirement Benefits

Implementation of the Directors’ Retirement Benefits Regulations, approved at the Annual General Meeting of Shareholders, on 30 March 2005, resulted in provisions being made for liabilities relating to past services, for a total of approximately 84 million euros. This was recognized in full as a cost in 2005.

3.4. Listed Share Prices

Over the course of 2005, shares in the company progressively increased in value, with accrued appreciation over the period of approximately 66%. The daily listed price varied between a minimum of EUR 4.05 and a maximum of EUR 6.85. Average daily trading stood at 70,241 shares over the year.

No adjustment in the share price took place at the session after disclosure of the 2004 results, on 15 March 2005.

Likewise, the distribution of a dividend of EUR 0.11 per share, which in net terms represented, for shareholders subject to taxation, a dividend of approximately EUR 0.0935 per share for resident shareholders, and EUR 0.0825 per share for non-resident shareholders, had no significant impact on the formation of the share price.

The following graph shows listed prices over the period, together with the main disclosures made to the market:

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----- Start of picture text ----- Euros Average listed price of SEMAPA during 20057,50 Alienation of holding in Disclosure of 2004 Announcement of dividend Payment ofdividends Disclosure of 1 [st] quarter 1Disclosure of [st] half Results7,00 ENCE Results payments for 2004 for 2004 Results. 2005 20056,506,005,50Disclosure of Sale of5,00 Results 20053 [rd] quarter holding in Enersis4,504,003,50Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec----- End of picture text -----

As already stated, listed prices of company shares performed well, especially when compared with the performance of the main Portuguese equity market index, the PSI 20, as may be seen in the following graph:

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----- Start of picture text ----- SEMAPA listed prices vs. PSI 20 in 2005----- End of picture text -----

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----- Start of picture text ----- PSI20 Semapa1701601501401301201101009031-Dec-04 31-Mar-05 30-Jun-05 30-Sep-05 31-Dec-05----- End of picture text -----

3.5. Dividends

On 28 April 2005, SEMAPA paid dividends for the financial year of 2004 totalling EUR 13 016 569, which corresponds to a dividend of EUR 0.11 euros per share in circulation. This represented an increase of 10% over the dividend paid in the previous period.

3.6. Net Profit for the Period

The Net Profit for the period was 329 817 303 euros.

4. Prospects for 2006

The Company’s object is the management of corporate holdings, and its business affairs are therefore dependent above all on those of its subsidiaries.

It should be noted that the 2006 results are unlikely to be on the scale of those recorded in 2005, given that the latter, as explained above, derived to a great extent from capital gains on the disposal of Enersis.

For the business areas of Cement and Derivatives (Secil Group) and Paper and Paper Pulp (Portucel / Soporcel Group), we may point to the following prospects for 2006:

SECIL Group

Portugal : business is expected to contract in 2006 in view of the general prospects for the construction sector;
Tunisia : the slowdown in the market observed in 2005 is expected to continue, although there are moderately positive expectations for the residential housing sector. The revenues of Société des Ciments de Gabès continue to be constrained by the attitude of the Tunisian market with regard to price deregulation;
Angola : the prospects for the cement market are favourable for the country as a whole and for the Southern region, which is Secil-Lobito’s natural market, in view of the expectations of a vast array of public works projects associated with the reconstruction of the country;

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Lebanon : growth in the market is thought to be possible in 2006, in view of the demand in neighbouring markets, especially Iraq and Syria, and the demand resulting from major construction projects being promoted by Arab investors. Whether or not this actually happens will depend greatly on the resolution of the current political crisis in the Middle East and in Lebanon itself. Possible Lebanese membership of the World Trade Organization could lead the Lebanese Government to refrain from imposing import licenses, which will naturally have an effect on the domestic cement market.

PORTUCEL / SOPORCEL Group

In the absence of any significant changes in the economic situation in the leading economies, or any sharp alterations in exchange rates, the Group’s performance is not expected to differ greatly in the near future from that recorded in 2005. The Group will continue to follow policies designed to obtain gains in business efficiency.
The Directors of the PORTUCEL / SOPORCEL Group have decided to go ahead with plans to set up a new paper plant at the Setúbal industrial complex, with nominal capacity of 500 thousand tons/year, involving an investment of approximately € 490 million. This will enable the Company to significantly enhance its competitiveness in the paper market, and to emerge as leaders in the European market for uncoated fine paper (UWF).

This project is now dependent only on obtaining a set of incentives to be agreed with the Portuguese Investment Agency.

5. Acknowledgements

Despite the particularly difficult economic situation experienced over the last year, we may regard 2005 as a year of growth and consolidation for SEMAPA and its Group, now recognized as one of the leading Portuguese business groups, and we are confident that the Company will continue to respond positively to the new challenges which lie ahead.

We would not close this report without expressing our sincere thanks:

to our employees, whose efforts and dedication have made it possible to develop one of Portugal’s most dynamic Companies/Groups;
for the support and understanding of our customers and suppliers, who have acted as partners in our project;
for the cooperation of the Financial Institutions, and the Regulatory and Supervisory Authorities;
for the cooperation of the Audit Board and the officers of the General Meeting and
to our Shareholders, who have accompanied our progress and whose trust we believe we continue to deserve.

The Board of Directors therefore wishes to express its gratitude to all who contributed to our success in 2005.

6. Proposal for Distribution of Profits

Considering that the Company needs to maintain a financial structure compatible with sustained growth of its Group, in the various business areas in which it operates;

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Considering that in order for the Company to remain independent from the financial system, it needs to preserve levels of consolidated short, medium and long term indebtedness which allow it to maintain sound solvency indicators; and
Considering that the disposal by the company of its holding in Enersis II generated nonrecurrent extraordinary results which fully justify the payment of a dividend significantly higher than that which would be proposed had such gain not occurred,

We propose that the balance of 329 817 303 euros in the account for Net Profits be distributed as follows:

Dividends for shares in circulation (0.42 euros/ share) 49 699 627 euros Legal reserve 1 445 412 euros Free reserves 278 672 264 euros

Lisbon, 01 March 2006

The Board of Directors

Chairman

Pedro Mendonça de Queiroz Pereira

Directors

Maria Maude Mendonça de Queiroz Pereira Lagos Carlos Eduardo Coelho Alves José Alfredo de Almeida Honório Frederico José da Cunha de Mendonça e Meneses Francisco José de Melo e Castro Guedes Luís Manuel Pego Todo Bom

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REPORT on structure and corporate governance practices

Financial year of 2005

Chapter 0 Declaration of Compliance

Recommendation nr. 1

The company stays in constant contact with the market, keeping to the principle of equal treatment for all shareholders, and taking steps to ensure that all investors enjoy uniform access to information. The company operates an investor support office, as described below.

This recommendation has therefore been adopted in full.

Recommendation nr. 2

The recommendation has been adopted with regard to postal votes, with the voting slips available on the company’s website. Postal votes are only required to arrive at the company three business days prior to the meeting, and the articles of association place no further limitation on this form of voting.

The only restriction in the articles of association on voting by proxy is that on the representation of individual shareholders, as referred to in article 380, nr. 1, of the Companies Code.

The company did not previously adopt the recommendation that the requirement for deposit or freezing of shares be for no more than five business days, and instead required that the documents proving the freezing of shares be presented 8 calendar days prior to the meeting. This was therefore a difference of merely one day, and did not therefore constitute a divergence from the principles which this recommendation seeks to preserve.

Nonetheless, the Board of Directors decided to propose to the shareholders that the period be reduced to only five days, and this motion is included in the order of business for the annual general meeting, where it will be discussed and put to the vote.

This recommendation has not therefore been adopted in full, although it is expected to be so in the near future, if the shareholders so decide.

Recommendation nr. 3

The company has adopted the recommendation that an internal system of control be created.

In addition to the specific bodies and procedures which exist in our subsidiaries, the company has an Internal Control Committee (ICC) with specific powers in the field of risk control, as described below.

Recommendation nr. 4

No measures have been adopted in order to prevent the success of takeover bids, meaning that this recommendation has been adopted in full.

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Recommendation nr. 5

The management body comprises several members, who effectively direct the management of the company and its senior staff, as described in greater detail below. The recommendation to this effect has therefore been adopted by the company.

Recommendation nr. 5-A

The company has a number of non-executive directors who are responsible for continuous monitoring and assessment of the management of the company by the executive directors.

In addition to these duties performed by non-executive directors, there is also an internal body, the Internal Control Committee, whose members may not be executive directors, and which also plays an important role in supervising and monitoring the affairs of the company, with an advisory function in relation to the choice of external auditors.

This recommendation has therefore been adopted in full.

Recommendation nr. 6

There are currently no independent members of the company’s Board of Directors, in accordance with the concept adopted in Article 1.2 of Securities Market Board Regulations 7/2001, although this situation may change at the annual general meeting which is to elect the officers for the next four years, should the shareholders so decide.

Nonetheless, this recommendation is adopted by the company, due to the existence of at least one member of the supervisory board who meets the independence requirements set in the said regulations and who effectively exercises duties equivalent to those which would be exercised by a director who could be categorized as independent. The person in question, Dr. Duarte Nuno d’Orey da Cunha, not only effectively exercises supervisory duties as established in law, with regard to general supervision of the management and monitoring compliance with the law, but is also a member of the company’s Internal Control Committee, which also plays a roles in the field of supervision and control, with an advisory function as to the choice of external auditors.

As we have already seen, therefore, this recommendation is adopted by the company.

Recommendation nr. 7

The company has a Corporate Governance Supervisory Committee (CGSC) with specific powers for assessing the structure and governance of the company, as detailed below. This recommendation has therefore now been fully adopted by the company.

Recommendation nr. 8

The structure of the directors’ remuneration, which under the articles of association may comprise a fixed and a variable component, the variable components possibly including profit sharing, makes it possible to align the directors’ interests with those of the company.

The company has not adopted the recommendation that individual directors’ remuneration be disclosed. This decision has been taken after weighing up all the interests at play, and in the opinion of the board of directors, in addition to other potentially negative effects, the gains resulting from such disclosure would not be greater than the loss to the right of privacy of each director.

Recommendation nr. 8-A

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It is recommended that the Remuneration Committee submits to the general meeting a document containing guidelines to be followed by the committee. This recommendation has not yet been adopted, which is not to say that it is regarded as undesirable. In effect, as the term of office of the existing Remuneration Committee comes to an end at the next annual general meeting, its members considered that the decision to draw up such a document and the respective content should be a matter for the members elected for the next term of office.

Recommendation nr. 9

The company’s remuneration committee comprises only corporate bodies. In the light of the concept of independence followed by the recommendation, this means that the recommendation cannot but be deemed to be fully adopted.

Recommendation nr. 10

This recommendation is not applicable because the company has not adopted any share and/or share option allocation scheme.

Recommendation nr. 10-A

The company has adopted internal rules on notification of irregularities alleged to have taken place within the company. These rules fix the means of communication, the persons to be legitimately notified, the rules on treatment and other matters detailed below.

This recommendation has therefore been adopted in full by the company.

Recommendation nr. 11

This recommendation is also not applicable, as it is aimed only at institutional investors.

Chapter I Disclosure of information

1. Organisational structure

The following diagram shows how powers are distributed with regard to business decisions:

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----- Start of picture text ----- 457----- End of picture text -----

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----- Start of picture text ----- S h areh o ld ers/ G en eral M eeting> B inding decisions> S hareholder controlS U P E R V IS IO NA udit B oardIn vesto r S u p p o rt O ffice Independent A uditorsInternal C ontrol C om m itteeD ep artm en ts E xecu tive B o ard B o ard o f D irecto rs> Legal and fiscal E xercise of powers specifically > S trategic planning> A dm inistrative services delegated by the B oard of > Investm ent policy> Financial services D irectors, for routine > H um an resources policym anagem ent > Financial policy> R isk m anagem ent> G eneral supervisionD ecisions on shareholderrelationsS u b sid iaries----- End of picture text -----

Although duties and responsibilities are not rigidly compartmentalized within the Board of Directors, four main areas may be distinguished in the way responsibilities are shared out:

1 Strategic planning and investment policy, which are the responsibility of the Chairman of the Board of Directors, Pedro Mendonça de Queiroz Pereira, and the director, Eng. Carlos Eduardo Coelho Alves.
2 Financial policy and risk management, which is the responsibility of the director Dr. José Alfredo de Almeida Honório.
3 Human resources policy and administrative control, which is the responsibility of the director Dr. Francisco José de Melo e Castro Guedes.
4 General supervision, which is the special responsibility of Eng. Frederico José da Cunha Mendonça e Meneses, the only director to sit on the Internal Control Committee.

2. Specific Committees

The company has three specific committees: the Remuneration Committee, the Internal Control Committee and the Corporate Governance Supervisory Committee.

The Remuneration Committee has specific powers to fix the remuneration of company officers, and comprises the following members, al of them corporate shareholders in the company:

Sociedade Agrícola da Quinta da Vialonga, S.A. Cimo - Gestão de Participações, SGPS, S.A. Longapar, SGPS, S.A.

The Internal Control Committee (ICC) has special responsibilities in the area of detecting and controlling all significant risks in the company’s affairs, in particular legal and financial risks, as detailed below, and comprises the following members:

Dr. Duarte Nuno D’Orey da Cunha – member of the Audit Board Dr. Henrique Reynaud Campos Trocado – Chairman of the General Meeting

Eng. Frederico José da Cunha Mendonça e Meneses – Non-executive director

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The Corporate Governance Supervisory Committee (CGSC) monitors on a continuous basis the company’s compliance with the provisions of the law, regulations and articles of association applicable to corporate governance, and is responsible for critical analysis of the company’s practices and procedures in the field of corporate governance and for proposing for debate, altering and introducing new procedures designed to improve the structure and governance of the company.

The CGSC meets at intervals appropriate to its duties, and is required to submit an annual report to the Board of Directors on corporate governance, together with any proposals for changes, as it sees fit.

The Committee comprises three to five members appointed by the Board of Directors, and must include at least one non-executive director and a person without management duties in the company. The Committee members are:

Eng. Frederico José da Cunha Mendonça e Meneses – Non-executive director Eng. Gonçalo Allen Serras Pereira – Consultant who held the office of executive director until 2005

Dr. António Duarte Serrão – General Manager of the company.

3. Risk control

Risk control activities in the company are carried on through an organizational unit with specific responsibilities in this field – the Internal Control Committee -, and also through independent audits and the work of the company bodies.

The main purpose of the ICC is to detect and control all relevant risks in the company’s affairs, in particular legal and financial risks, and the Committee enjoys full powers to pursue this aim, namely:

a) To assure compliance by the company with the entire regulatory framework applicable to it, deriving both from law and regulations;
b) To monitor the company’s business affairs, with integrated and permanent analysis of the risks associated with these affairs;
c) To monitor the quality of financial and accounting information, taking steps to ensure that it is reliable;
d) To propose the approval of specific measures and procedures for the control and reduction of risks in the company’s affairs, with a view to improving the internal risk control system;
e) To issue its opinion on the choice of external auditors and to monitor their
- independence; and
f) To oversee the system for notification of irregularities within the company, in keeping with the duties assigned to it in this area.

The ICC comprises three to five members appointed by the Board of Directors, which members cannot be executive directors. Its current members are those indicated above.

In addition to the important role played by the Audit Board in this field, internal procedures for risk control are also particularly important in each of the company’s main subsidiaries. The nature of the risks and the degree of exposure vary from company to company, and each subsidiary therefore has its own independent system for controlling the risks to which they are subject.

Independent audits of Semapa and the companies it controls are carried out by PriceWaterhouseCoopers.

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4. Listed share prices

No adjustment in the share price took place at the session after disclosure of the 2004 results, on 15 March 2005.

The following graph shows listed prices over the period, together with the main disclosures made to the market:

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----- Start of picture text ----- Euros Average listed price of SEMAPA during 20057,50 Alienation of holding in Disclosure of2004 Announcement of dividend Payment ofdividends Disclosure of 1 [st] quarter 1Disclosure of [st] half Results7,00 ENCE Results payments for 2004 for 2004 Results. 2005 20056,506,005,50Disclosure of Sale of5,00 Results 20053 [rd] quarter holding in Enersis4,504,003,50Jan Fe Mar Apr May Jun Jul Aug Sep Oct Nov Decb----- End of picture text -----

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----- Start of picture text ----- Semapa listed prices vs. PSI 20 in 2005PSI20 Semapa1701601501401301201101009031-Dec-04 31-Mar-05 30-Jun-05 30-Sep-05 31-Dec-05----- End of picture text -----

5. Dividend distribution policy

The Company has followed a policy of distributing a large amount without resorting to borrowing for this purpose and without jeopardising its sound financial position. The aim is to maintain a financial structure compatible with the sustained growth of the company and the different business areas, whilst also maintaining sound solvency indicators.

The pay-out ratio (dividends/net profit) in recent years has been high, reaching a high point of 94% in 1995, and standing at its lowest in 2001, at 26%.

In the last three years, the dividend per share in circulation has been as follows:

2003 (in relation to 2002) 0.10 € per share 2004 (in relation to 2003) 0.10 € per share 2005 (in relation to 2004) 0.11 € per share

6. Share and option allocation schemes

The Company runs no share or option allocation scheme.

7. Transactions with company officers, holders of qualifying holdings and subsidiaries

No transactions to report.

8. Investor Support Office

The investor support service is provided from an office headed by Dr. José Miguel Gens Paredes, who is also the company’s market relations representative. The office is adequately staffed and enjoys swift access to all sectors of the company, in order to ensure an effective response to requests, and also to transmit relevant information to shareholders and investors in good time and without any inequality.

In addition to the general contact details for the company, Dr. José Miguel Gens Paredes can be contacted at the address [email protected] or on the company’s general telephone numbers.

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All public information on the company can be accessed in this form. Please note, in any case, that the information most frequently requested by investors is available at the company’s website at www.semapa.pt.

9. Remuneration Committee

As indicated above, the Semapa Remuneration Committee is made up as follows:

Sociedade Agrícola da Quinta da Vialonga, S.A. Cimo – Gestão e Participações, S.A. Longapar, SGPS, S.A.

Cimo and Longapar have directors who are also directors of Semapa.

10. Remuneration of Auditors

The following costs were incurred in relation to auditors in 2005 by the company and other related companies:

Services – Audit of AccountsOther services – reliability assuranceFiscal consultancy servicesServices other than legal auditing	521 762 €32 344 €299 481 €28 120 €881 707 €	( 59,2%)( 3,7%)( 34,0%)( 3,1%)(100,0%)

NB: In relation to the Portucel Soporcel Group, it should be noted that the figures stated include 100% of the amounts paid annually by this corporate group, without taking Semapa’s proportional share into account.

In relation to fiscal consultancy services and services other than legal auditing, our auditors have set strict rules to guarantee their independence, and these rules have been adopted in the provision of these services and monitored by the company, in particular by the Internal Control Committee.

Chapter II Exercise of voting rights and representation of shareholders

1. Company rules on voting rights

There are no company rules which in any way limit voting rights or disallow postal voting. The only company rules on the exercise of voting rights by shareholders are those detailed below.

2. Postal vote form

The company provides a postal vote form. This form is available at the company’s website and may be requested from the investor support office.

3. Electronic voting

Electronic voting is still not provided for. Note that no shareholder or investors in the company have yet requested or expressed an interest in such procedures.

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4. Period for freezing shares

The company’s articles of association require that shareholders submit a document proving ownership of the shares no less than eight days prior to the date of the general meeting.

The same document must also state that the shareholder has owned the shares in the company since at least 30 days prior to the date of the meeting, and that the shares will be frozen until the end of the meeting. As stated in this report, this 30 day period may be certified by the party making the deposit, without any requirement that shares be blocked for any part of this period in excess of the 8 calendar day period required for notice.

As stated above, the Board of Directors has tabled a motion for the nest annual general meeting for reduction of the period for freezing shares to 5 days.

5. Deadline for receipt of postal votes

Postal votes must be received no less than three business days prior the date of the general meeting.

6. Number of shares corresponding to one vote

There is one vote for each 385 shares in the company.

Chapter III Company Rules

1. Codes of Conduct

The Company has a set of “Principles of Professional Conduct”, approved by the Board of Directors. This document establishes ethical principles and rules applicable to company staff and officers.

In particular, this document establishes the duty of diligence, requiring professionalism, zeal and responsibility, the duty of loyalty, which in relation to the principles of honesty and integrity is especially geared to guard against conflict of interest situations, and the duty of confidentiality, in relation to the treatment of relevant information.

The document also establishes duties of environmental conservation and protection of all shareholders, namely minority shareholders, ensuring that information is fairly disclosed, and all shareholders treated equally and fairly.

The company also has a set of “Regulations on Notification of Irregularities”, which govern the procedure whereby company employees give notice of irregularities allegedly taking place within the company.

These regulations enshrine the general duty to give notice of alleged irregularities, indicating the person to be informed, who is designated by the Board of Directors, and also providing for an alternative solution in the event of there being a conflict of interests on the part of this person as regards the irregularity to be reported.

The person receiving the information has powers to conduct a preliminary investigation and is required to propose to the Internal Control Committee, which has supervisory powers in this area, that the notification be filed immediately or else that a full enquiry be undertaken. This full process ends with filing or with a submission to the Board of Directors or the

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Executive Board, depending on whether a company officer is involved, of a proposal for appropriate measures in the light of the irregularity in question.

The regulations also contain other provisions designed to safeguard the confidentiality of disclosure and non-prejudicial treatment of the employee reporting the irregularity, as well as rules on providing information on the regulations throughout the company.

Access to the “Principles of Professional Conduct” and to the “Regulations on Notification of Irregularities” is reserved.

2. Control of operating risks

The company has an internal unit with powers to control the risks of the company’s business activities. This is the Internal Control Committee, whose responsibilities were described in item 3 of chapter I.

3. Measures capable of interfering with takeover bids

There are no provisions in the articles of association or measures adopted by the company such as may interfere with the success of takeover bids, and the company has no knowledge of any shareholders’ agreements which might have this effect, without prejudice to the open co-ordination of voting rights by the shareholders holding more than half the share capital, on the terms indicated in the respective annex to the Directors’ Report.

Chapter IV Management Body

1. Details of Board of Directors

The company’s Board of Directors comprises seven members: Pedro Mendonça de Queiroz Pereira, Maria Maude Mendonça de Queiroz Pereira Lagos, Eng. Carlos Eduardo Coelho Alves, Dr. José Alfredo de Almeida Honório, Dr. Francisco José Melo e Castro Guedes, Eng. Frederico José da Cunha Mendonça e Meneses and Eng. Luís Manuel Pego Todo Bom. As stated above, none of the members of the Board of Directors is independent in accordance with the concept as defined in Securities Market Commission Regulations 11/2003.

Below we detail, for each of the members, the nature of their duties, their professional qualifications, the number of shares held, the date when first appointed and term of office, office held in other companies, identifying those belonging to the Semapa Group (identified with the initials “SG”), and other professional activities carried on in the last 5 years.

Pedro Mendonça de Queiroz Pereira

Nature of duties on board of director: Executive
Number of shares held in the company: holds no shares in the company 3. Professional qualifications: General High School Certificate (Lisbon), studies at the Instituto Superior de Administração
Date of first appointment and term of office: 1991 - 2005

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5. Office held in other companies:

CIMENTOSPAR Participações Sociais,SGPS, Lda (SG). ........................... Manager CIMIANTO - Gestão de Participações, SA, ................................................. Chairman Board of Directors CIMINPART - Investimentos e Participações, SGPS, S.A. (SG) ................ Chairman Board of Directors CIMO - Gestão de Participações, SGPS, SA............................................... Chairman Board of Directors CMPartin - Inversiones y Participaciones Empresariales SL (SG)............... Chairman Board of Directors CMP - Cimentos Maceira e Pataias, SA (SG).............................................. Chairman Board of Directors ECOLUA - Actividades Desportivas, Lda..................................................... Manager LONGAPAR, SGPS, SA .............................................................................. Chairman Board of Directors O E M - Organização de Empresas, SGPS, SA .......................................... Chairman Board of Directors PARSECIL, SL (SG).................................................................................... Chairman Board of Directors PARSEINGES - Gestão de Investimentos, SGPS, S.A. (SG)...................... Chairman Board of Directors PORTUCEL - Empresa Produtora de Pasta e Papel, S.A. (SG).................. Chairman Board of Directors SECIL - Companhia Geral de Cal e Cimento, SA (SG) ............................... Chairman Board of Directors SECILPAR, SL (SG).................................................................................... Chairman Board of Directors SEINPART Participações, SGPS, S.A (SG) ............................................... Chairman Board of Directors SEMAPA Inversiones, SL (SG).................................................................... Chairman Board of Directors SEMINV - Investimentos, SGPS, S.A (SG).................................................. Chairman Board of Directors SODIM SGPS, SA ....................................................................................... Chairman Board of Directors SOPORCEL - Sociedade Portuguesa de Papel, S.A. (SG) ......................... Chairman Board of Directors VÉRTICE-Gestão de Participações, SGPS, SA .......................................... Chairman Board of Directors

Other professional activities over the last 5 years:

BANCO ESPÍRITO SANTO, S.A. ............................................................... Director GOLIATUR – Sociedade de Investimentos Imobiliários, S.A. ..................... Chairman of Board of Directors HOTEL RITZ, S.A. ...................................................................................... Director IMOCIPAR – Imobiliária, S.A....................................................................... Director LAGUM – Sociedade Imobiliária, Lda. ................................................. Manager Sociedade Agrícola da QUINTA DA VIALONGA, S.A. ................................ Chairman of Board of Directors SOREL, SGPS, S.A. ................................................................................... Director

Maria Maude Mendonça de Queiroz Pereira Lagos

Nature of duties on board of director: Non-executive
Number of shares held in the company: holds no shares in the company
Professional qualifications: General High School Certificate (Lisbon).
Date of first appointment and term of office: 1994 - 2005
Office held in other companies:

CIMIANTO-Gestão de Participações, SA .................................................... Director O E M - Organização de Empresas, SGPS, SA .......................................... Director SODIM, SGPS, SA ...................................................................................... Director Hotel RITZ, SA............................................................................................. Chairman Board of Directors LONGAVIA-Imobiliária, SA .......................................................................... Director

Other professional activities over the last 5 years:

IDEIAS INTERACTIVAS – Informática, S.A................................................. Director VÉRTICE – Gestão de Participações, SGPS, S.A....................................... Director

Carlos Eduardo Coelho Alves

Nature of duties on board of director: Executive
Number of shares held in the company: holds no shares in the company
Professional qualifications: Degree in Mechanical Engineering, from the Instituto Superior
- Técnico (1971).
Date of first appointment and term of office: 1991 - 2005
Office held in other companies:

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SONACA – Sociedade Nacional de Canalizações, S.A............................... Director SODIM, SGPS, SA ...................................................................................... Director SECIL - Companhia Geral de Cal e Cimento, SA (SG) ............................... Chairman of Executive Board CMP - Cimentos Maceira e Pataias, SA (SG).............................................. Chairman of Executive Board CIMO - Gestão de Participações, SGPS, SA............................................... Director SCG – Société des Ciments de Gabès, SA (SG) ........................................ Chairman Board of Directors SEMINV - Investimentos, SGPS, S.A (SG).................................................. Director SECILPAR, SL (SG).................................................................................... Director CIMINPART - Investimentos e Participações, SGPS, S.A. (SG) ................ Director PARCIM – Investments B.V. (SG) ............................................................... Director PARSEINGES - Gestão de Investimentos, SGPS, S.A. (SG)...................... Director SEINPART Participações, SGPS, S.A (SG) ............................................... Director LONGAPAR, SGPS, SA .............................................................................. Director BETOPAL, S.L. (SG) ................................................................................... Director CMPartin-Inversiones y Participaciones Empresariales SL (SG)................. Director PARSECIL, SL (SG).................................................................................... Director SEMAPA Inversiones, SL (SG).................................................................... Director CIMENTOSPAR - Participações Sociais, Lda. (SG).................................... Manager FLORIMAR – Gestão e Participações, SGPS, Soc. Unipessoal, Lda. (SG) Manager PORTUCEL – Empresa Produtora de Pasta e Papel, SA (SG)................... Director SOPORCEL – Sociedade Portuguesa de Papel, SA (SG) .......................... Director

Other professional activities over the last 5 years:

CIMIANTO - Gestão de Participações, S.A. ................................................ Director ENERSIS - Sociedade Gestora de Participações Sociais, S.A.................... Chairman of Board of Directors FESPECT – Serviço de Consultadoria, S.A................................................. Director GOLIATUR - Sociedade de Investimentos Imobiliários, S.A........................ Director

José Alfredo de Almeida Honório

Nature of duties on board of director: Executive
Number of shares held in the company: 20,000 shares
Professional qualifications: Degree in Economics from the Faculty of Economics, University of Coimbra (1980)
Date of first appointment and term of office: 1994 - 2005
Office held in other companies:

PORTUCEL – Empresa Produtora de Pasta e Papel, SA (SG)................... Chairman of Executive Board SOPORCEL – Sociedade Portuguesa de Papel, SA (SG) .......................... Chairman of Executive Board PORTUCEL FLORESTAL – Empresa de Desenv. Agro-Florestal, SA (SG) Chairman of Board of Directors ALIANÇA FLORESTAL – Sociedade para o Des. Agro-Florestal, SA (SG) Chairman of Board of Directors SEMINV - Investimentos, SGPS, S.A (SG).................................................. Director CMPartin-Inversiones y Participaciones Empresariales SL (SG)................. Director PARSECIL, SL (SG).................................................................................... Director SEMAPA Inversiones, SL (SG).................................................................... Director CIMENTOSPAR - Participações Sociais, SGPS, Lda. (SG)........................ Manager FLORIMAR – Gestão e Participações, SGPS, Soc. Unipessoal, Lda. (SG) Manager BETOPAL, S.L. (SG) ................................................................................... Director LONGAPAR, SGPS, S.A.. ........................................................................... Director CIMINPART-Investimentos e Participações, SGPS, S.A. (SG) ................... Director PARSEINGES-Gestão de Investimentos, SGPS, S.A. (SG)........................ Director SEINPART Participações, SGPS, S.A. (SG) .............................................. Director CIMO-Gestão de Participações, SGPS, S.A................................................ Director CMP-Cimentos Maceira e Pataias, S.A (SG)............................................... Director SECIL-Companhia Geral de Cal e Cimento, S.A. (SG) ............................... Director Hewbol-SGPS, Lda. (GS) ............................................................................ Manager

Other professional activities over the last 5 years:

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PARCIM Investment B.V. (SG).................................................................... Director CIMIANTO-Gestão de Participações, SGPS, S.A. ...................................... Director CIMPOR – Cimentos de Portugal, SGPS, S.A ............................................ Director SECILPAR, SL............................................................................................. Director

Frederico José da Cunha Mendonça e Meneses

Nature of duties on board of director: Non-executive
Number of shares held in the company: holds no shares in the company
Professional qualifications: Degree in Chemical and Industrial Engineering, IST (1959); PMD Harvard Business School (1970)
Date of first appointment and term of office: 1994 - 2005
Office held in other companies:

CIMILONGA – Imobiliária S.A...................................................................... Chairman Board of Directors LONGAVIA – Imobiliária, S.A. ..................................................................... Chairman Board of Directors IMOCIPAR – Imobiliária, S.A....................................................................... Chairman Board of Directors SONAGI, SGPS, S.A................................................................................... Chairman Board of Directors SONAGI – Imobiliária S.A............................................................................ Chairman Board of Directors Sociedade Imobiliária de Baldio de Paula, S.A............................................ Chairman Board of Directors SAIVANE Imobiliária, S.A. ........................................................................... Chairman Board of Directors Hotel RITZ, SA............................................................................................. Director SCG – Société des Ciments de Gabès, SA (SG) ........................................ Director Goliatur – Sociedade Investimentos Imobiliários SA ................................... Chairman Board of Directors Cunha e Meneses, Lda................................................................................ Manager

6. Other professional activities over the last 5 years:

CIMIANTO-Gestão de Participações, S.A. .................................................. Director PVQ – Produção de Vinho da Quinta, Lda .................................................. Manager SCG – Société dês Ciments de Gabès, S.A. (GS) ...................................... Director DIMO – Desenvolvimento Imobiliário e Construção, S.A............................. Chairman Board of Directors ALELUIA – Cerâmica Comércio e Indústria, S.A......................................... Director SECLA – Sociedade de Exportação de Cerâmica, S.A. .............................. Chairman Board of Directors

Francisco José Melo e Castro Guedes

Nature of duties on board of director: Executive
Number of shares held in the company: holds no shares in the company
Professional qualifications: Degree in Finance from the Instituto Superior de Ciências Económicas e Financeiras; MBA Insead.
Date of first appointment and term of office: 2001 - 2005
Office held in other companies:

CMP- Cimentos Maceira e Pataias, S.A (SG).............................................. Director PARSEINGES-Gestão de Investimentos, SGPS, S.A. (SG)........................ Director SECIL – Companhia Geral de Cal e Cimento, S.A. (SG) ............................ Director SEINPART Participações, SGPS, S.A. (SG) ............................................... Director SEMINV – Investimentos, SGPS, S.A. (SG)................................................ Director SCG – Société des Ciments de Gabès, S.A. (SG) ..................................... Director CDS- Ciments de Sibline, SGPS, S.A. (SG)................................................ Director CIMINPART-Investimentos e Participações, SGPS, S.A. (SG) ................... Director SEMAPA Inversiones, SL (SG).................................................................... Director SILONOR, S.A. (SG) ................................................................................... Director

6. Other professional activities over the last 5 years:

Enersis II, SGPS, S.A. ................................................................................. Director

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Luís Manuel Pego Todo Bom

Nature of duties on board of director: Non-executive
Number of shares held in the company: holds no shares in the company
Professional qualifications: Degree in Chemical and Industrial Engineering - Instituto Superior Técnico (1971); M.B.A. – from Univ. Nova de Lisboa/Wharton School of Pennsylvania (1982); Stanford Executive Program (1997) & Executive Program on Strategy and Organization (1998) – University of Stanford; Concluded first year of DBA – Doctor of Business Administration Program – Cranfield University (2000) and currently preparing for doctorate in Business Strategy, at ISCTE.
Date of first appointment and term of office: 2003 - 2005
Office held in other companies:

Amorim Imobiliária, SGPS, S.A. .................................................................. Director Celulose do Caima, SGPS, S.A................................................................... Director Companhia de Seguros Sagres, S.A........................................................... Director Portugal Telecom Investimentos Internacionais, S.A................................... Director

Other professional activities over the last 5 years:

Banco Finantia, S.A..................................................................................... Director Ambelis, S.A. ............................................................................................... Director ParaRede, SGPS, S.A................................................................................. Director

2. Executive Board

The only board with management powers is the Executive Board, which comprises, as already stated, Messrs. Pedro Mendonça de Queiroz Pereira, Eng. Carlos Eduardo Coelho Alves, Dr. José Alfredo de Almeida Honório and Dr. Francisco José Melo e Castro Guedes.

The Executive Board has been granted the widest management powers, largely detailed in the respective act of delegation, and only limited with regard to the matters indicated in article 407, nr. 4, of the Companies Code.

3. Workings of the Management Body

The management of the company is centred on the relationship between the Board of Directors and the Executive Board.

The two bodies are co-ordinated and kept in contact by the fact that they have a common chairman, and through regular transmission of all relevant information on the day-to-day management of the company to the non-executive directors, in order to keep them abreast of the company’s life at all times. In addition, meetings of the Board of Directors are called for all decisions regarded as especially important, even if they fall within the scope of the powers delegated to the Executive Board.

It is relevant to note in this regard that the members of the Executive Board are available at all times to provide the information requested by the other members of the Board of Directors. It is standard practice for this information to be transmitted immediately when the importance or urgency of the matter so requires.

The Executive Board cannot resolve on the following:

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i) Selection of the chairman of the Board of Directors; ii) Co-opting of directors;

iii) Requests for the call of a general meeting;

iv) Annual reports and financial statements;

v) Provision of bonds and personal or real guarantees by the company;
vi) Change in registered offices and increases in share capital; and vii) Plans for merger, break-up or transformation of the company.

There are no internal rules on incompatibility or on the maximum number of offices which directors can hold in the management bodies of other companies.

The Board of Directors met seven times in 2005.

4. Remuneration Policy

Remuneration policy is not set by the Board of Directors, and aligns the interests of the directors with those of the company, dividing remuneration into a fixed component and a variable component.

The fixed component is determined in line with the usual criteria in directorships, taking special account of responsibilities, the size and capacity of the company, the remuneration paid in the market for equivalent posts and the fact of the director being executive or nonexecutive. The variable component consisted in the previous period in a share in profits approved by the General meeting and limited by the articles of association to 5% of the net profits.

There are no formal rules on distinguishing between the remuneration of executive and nonexecutive directors, and this factor is taken into account in a general way when setting remuneration, both fixed and variable.

The company has no policy on compensation or other payments on departure from office, other than the retirement benefits approved by the general meeting and detailed below.

5. Remuneration and retirement benefits

The total remuneration earned by the company’s directors is indicated in the following table, which provides a breakdown between executive and non-executive directors, and between fixed and variable components.

	Executive directors	Non-exec. directors	Total
Fixed remuneration	1.252.416,77€	641.537,70€	1.893.954,47€
Variable remuneration	11.435.500,00€	864.500,00€	12.300.000,00€
Total	12.687.916,77€	1.506.037,70€	14.193.954,47€

(Figures for the 9 Directors, including therefore those who left office in the course of the year)

The figures indicated as variable remuneration result essentially from the resolution by the general meeting on the distribution of profits which, under the terms of Article 17.3 of the Articles of Association, provided for profit sharing by the directors. As already indicated, is limited by the articles to 5% of profits. In addition to this, the variable remuneration includes performance bonuses to some of the executive directors, totalling 3,200,000 €, fixed by the Remuneration Committee; these are exceptional, and relate to the disposal of Enersis.

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The variable remuneration system is therefore based on results and on the respective resolution of the general meeting, and may also include a performance bonus component set by the Remuneration Committee. It is also the Remuneration Committee which resolves on the distribution between the directors of the profit sharing approved by the general meeting; there are no pre-set mandatory criteria for these decisions.

In addition to these amounts, the company’s executive directors also earned remuneration for their management duties in controlled companies totalling 4,934,292.22€.

The company does not allocate any non-pecuniary benefits or other pecuniary benefits other than the remuneration indicated. There is also no share allocation or share option scheme in operation, and no compensation was paid or due to former executive directors leaving office in the course of the year.

There is a retirement benefits system for directors approved by the general meeting, under which the directors are entitled to a monthly life pension, paid 12 times a year, as from the age of 55, if they have served as directors of the company for a minimum of 8 years, consecutively or non-consecutively. In the event of invalidity, the entitlement is not subject to an age requirement.

The value of the pension is fixed at between 80% and 27.2% of the result of dividing by 12 the fixed annual remuneration earned by the director at the date of leaving office as director of Semapa or any other controlled company. The percentage is determined by the total length of service, in this case including service in Semapa or controlled companies, as director or in another capacity. The percentage of 80% applies to service of 20 years or more, and there is a sliding scale with 27.2% being applied to those with 8 years’ service.

It is relevant to note that the regulations also allow for half the value of the pension to be transferred to the surviving spouse or underage or handicapped children of the director. In addition, any sums earned for services subsequently rendered to Semapa or controlled companies, together with the value of any pensions which the beneficiary is entitled to receive from public social security systems in relation to the same period of service, must be deducted from the pension paid.

6. Policy on Notification of Irregularities

The general thrust of the policy for notification of irregularities has been broadly described in item 3 of Chapter 3 of this Report, to which we refer.

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Disclosures required by Articles 447 and 448 of the Companies Code and Article 8.1 e) of Stock Market Commission Regulations 04/2004 (Financial year of 2005)

1. Securities issued by the company and held by company officers: José Alfredo de Almeida Honório – 20,000 shares; Duarte Nuno d’Orey da Cunha – 1,130 shares

2. The company officers hold no securities issued by companies controlled by or related to Semapa.

3. Securities issued by the company held by companies in which directors and auditors hold corporate office: Cimianto – Gestão de Participaçõs, S.A. – 100 shares; Cimo - Gestão de Participações, SGPS, S.A. – 14,592,300 shares; Longapar, SGPS, S.A. – 20,000,000 shares; Sodim SGPS, SA – 26,115,000 shares; Sociedade Agrícola da Quinta da Vialonga, SA – 642,535 shares; Sonaca - Sociedade Nacional de Canalizações, SA – 1,250,000 shares; OEM - Organização de Empresas, SGPS, SA – 500,000 shares; Cunha e Meneses, Lda – 8,000 shares; Secil Investimentos, SGPS, S.A. – 2,727,975 shares.

4. Acquisition, disposal or encumbrance of securities issued by the company or companies controlled by or related to the group by company officers and the companies referred to in 3: Duarte Nuno d’Orey da Cunha acquired 1,130 shares in Semapa on 14-7-2005 for a unit price of 4.67 € ; Banco Espírito Santo de Investimento, S.A. carried out the following operations:

Date	Description	Quantity	Price(€)
27-1-2005	Purchase	735	4,50
27-1-2005	Sale	735	4,50
17-6-2005	Purchase	1.000	4,65
20-6-2005	Sale	1.000	4,60
29-9-2005	Purchase	1.467	5,45
29-9-2005	Sale	1.467	5,60
4-10-2005	Purchase	35.000	5,93
6-10-2005	Purchase	10.475	5,98
7-10-2005	Sale	10.475	5,90
28-10-2005	Purchase	3.474	5,64
28-10-2005	Purchase	1.000	5,70
28-10-2005	Sale	1.000	5,65
2-11-2005	Purchase	1.526	5,74
19-12-2005	Sale	40.000	6,77

5. Qualifying holdings calculated under the terms of article 20 of the Securities Code:

	HolderNo. shares% shares% of non-suspendedvotingrights
A-B-C-D-E -
	Cimianto - Gestão de Participações, S.A.1000,00%0,00%
	Cimo - Gestão de Participações,SGPS,S.A.14.592.30012,33%12,62%
	Longapar,SGPS,S.A.20.000.00016,90%17,30%
	Sonaca - Sociedade Nacional de Canalizações,S.A.1.250.0001,06%1,08%
	OEM - Organização de Empresas,SGPS,S.A.500.0000,42%0,43%
	Sociedade Agrícola daQuinta da Vialonga,S.A.642.5350,54%0,56%
	Sodim,SGPS,S.A.26.115.00022,07%22,59%
	José Alfredo Almeida Honório20.0000,02%0,02%
	Subtotal: 63.119.93553,34%54,60%
	Banco BPI, S.A.---
	Banco Português de Investimento, S.A.–own portfolio150.6800,13%0,13%
	BPI Vida-Companhia de Seguros de Vida, S.A.105.3880,09%0,09%
	Pension Funds managed by BPI Pensões - SociedadeGestora de Fundos de Pensões, S.A.10.362.3888,76%8,96%
	Investment Funds managed by BPI Fundos – Gestão deFundos de Investimento Mobiliário, S.A.1.237.5181,05%1,07%
	Subtotal: 11.855.97410,02%10,26%
	Banco Espírito Santo, S.A.-- -
	BES Pension Fund managed by ESAF - Espírito SantoFundo de Pensões,S.A.4.982.3104,21%4,31%
	Other Funds managed by ESAF - Espírito Santo Fundo dePensões, S.A.1.279.0051,08%1,11%
	Funds managed by ESAF - Espírito Santo Fundos deInvestimento Imobiliário,S.A.748.1910,63%0,65%
	Clients under management of ESAF - Espírito Santo Gestãode Patrimónios, S.A.2.5000,00%0,00%
	Subtotal:7.012.0065,93%6,07%
	Espírito Santo International---
	Companhia de Seguros Tranquilidade Vida,S.A.2.529.2482,14%2,19%
	Subtotal:2.529.2482,14%2,19%
	Credit Suisse---
	Credit Suisse First Boston International23.095.80019,52%19,98%
	Subtotal: 23.095.80019,52%19,98%

Note that the 2,727,975 shares in the company held by Secil Investimentos, SGPS, S.A., and corresponding to 2.305% of the share capital, are subject to the rules on treasury shares.

SEMAPA- SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

INCOME STATEMENT BY NATURE FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

(Amounts stated in €)

EXPENSES	Notes	31-12	-2005	31-12	INCOME	Notes	31-12	-2005	31-12	-2004
External supplies and servicesPayroll expenses:SalariesSocial charges:PensionsOthersDepreciation and amortisationAdjustmentsProvisionsTaxesOther operating costs(A)Loss on affiliated companiesDepreciation and adjustments for investments1Others financial expensesRelated to group companiesOther(C)Extraordinary expenses(E)Income tax(G)Net profit for the year	311021 and 233416 and 456, 21 and 445 and 5345466 and 48	4.066.86584.295.795464.368	1.906.32788.827.02818.018.616451.437	3.142.518-352.916	Services renderedSupplementary incomeOther operating income(B)Gains on group and affiliated companiesGains on other companiesOther interest and similar income:Income relating to group and affiliated companiesOther(D)Extraordinary income(F)Operating results:Net financial results:Current results:Profit before tax:Net profit for the year:	44 and 5316 and 454545 end 534546(B)(D-B)(D)(F)(F)	3.0292.590	6.573.8005.619	537.0962.590	1.041.188539.686
							429.651.28310.7045.458.779132.217	6.579.419435.252.983	50.887.963316.395.02659.492	1.580.87457.342.512
		138.451 7.451.00010.429.165		99.600-1.186.262
		346.298105.139		793.6405.071
							- (A)- (C-A)- (C)- (E)- (G)	441.832.4021.299		58.923.386144.458.587
		56.901468.2381.218.692	109.203.4081.041.7981.693.831	3.809.9871.543.371
			111.939.0375.061
			111.944.09872.300
			112.016.398329.817.303
			441.833.701					441.833.701		203.381.973
								(102.623.989)432.517.354329.893.365329.889.603329.817.303		(5.908.815)43.574.86537.666.050182.084.905182.073.722

The accompanying notes form an integral part of the income statement by nature for the year ended December 31, 2005.

The Board of Directors

The accountant

SEMAPA- SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

BALANCE SHEET AS OF DECEMBER 2005 AND 2004

(Amounts stated in €)

ASSETS	Notes		31-12-2005		EQUITY AND LIABILITIES	Notes	31-12-2005	31-12-2004
		Gross	Depreciationand adjustments	Net
FIXED ASSETS:Intangible assets:Incorporation expensesTangible assets:Buildings and other constructionsTransport equipmentAdministrative equipmentOther tangible fixed assetsTangible assets in progressInvestments:Investments in subsidiariesSecurities and other investmentsMEDIUM AND LONG TERM RECEIVABLES:Third-party debtGroup companiesCCURRENT ASSETS:Accounts receivable - Short term:Group companiesAccounts receivable from state entitiesOther debtors2Marketable securities:Other marketable securitiesBanks and cash:Bank depositsCashACCRUALS AND DEFERRALS:Accrued incomeDeferred costsTotal depreciationTotal adjustmentsTotal assetsThe acc	1010101010 and 165353481, 23 and 4545450ountant	-	-	-	EQUITY:Share capital3Share PremiumAdjustments in investments in subsidiaries and affiliated companiesReserves:Legal reservesOther reservesRetained earningsNet profit for the yearTotal equityLIABILITIES:PROVISIONS:Provisions for pensionsOther provisionsMEDIUM AND LONG TERM LIABILITIES:Debenture loansBank loansSHORT TERM LIABILITIES:Debenture loansBank loansAccounts payable to suppliersAccounts payable to group companiesShareholdersAccounts payable to state entitiesOther creditorsACCRUALS AND DEFERRALS:Accrued costsDeferred incomeTotal equity and liabilitiesThe Boards of December 31, 2005.	6, 37 and 440 4040404040313451515151 and 545352484950of Directors	0118.332.4453.923.459(21.080.486)22.221.077249.619.367442.568329.817.303	118.332.4453.923.459(32.230.787)13.117.391101.765.900(2.557.432)182.073.722
		674.581135.175189.84528.92574.557	(67.458)(109.409)(111.179)(3.866)	607.12325.76678.66625.05974.557
							703.275.733	384.424.698
		1.103.083	(291.912)	811.171			84.295.79511.259.810	-4.587.844
		349.265.4741.229	--	349.265.4741.229
		349.266.703	-	349.266.703			95.555.605	4.587.844
		422.661.650	-	422.661.650			7.856.06725.000.000	13.467.543-
		768.967651.01999.493.125	-(7.853.000)	768.967651.0191.640.125
							32.856.067	13.467.543
							5.611.476-179.2859.458.6526.965.1252.414.684115.346	4.489.18123.002.167112.570361.8166.883.458161.727234.253
		10.913.111	(7.853.000)	3.060.111
		391.932	-	391.932
		80.802.7001.715		80.802.7001.715
							24.744.568	35.245.172
							778.675-	774.544518
		80.804.415		80.804.415
		21.817192.849		21.817192.849
							778.675	775.062

		214.666		214.666

			(291.912)
			(7.853.000)
		865.355.560	(8.144.912)	857.210.648			857.210.648	438.500.319
		Th	e accompanying not	es form an integral p

SEMAPA- SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

INCOME STATEMENT BY FUNCTIONS

FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

(Amounts expressed in €)

Sales and services renderedCost of sales and services renderedGross incomeOther operating incomeAdministrative costOther operating costsOperating incomeFinancing net costIncome/(expenses) with affiliated companiesIncome/(expenses) with other investmentsNon usual or non frequent incomeCurrent incomeIncome taxNet income for the yearEarnings per share	Notes	31-12-20056.573.800(6.330.735)243.0656.918(453.123)(102.424.611)(102.627.751)3.904.066428.602.58410.704-329.889.603(72.300)329.817.3032,79	31-12-2004
	44 and 534545466 and 48		1.041.188(4.937.051)
			(3.895.863)539.686(468.065)(2.084.573)
			(5.908.815)4.911.14738.663.718-144.418.855
			182.084.905(11.183)182.073.722
			1,54

The accompanying notes form an integral part of the income statement by functions for the year ended December 31, 2005.

The accountant

The Board of Directors

SEMAPA- SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

CASH FLOW STATEMENT

FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

(Amounts stated in €)

OPERATING ACTIVITIES:Paid to suppliersPaid to personnelFlows from operations:(Payments)/Receipts of income taxOther (payments)/receipts relating to operating activitiesFlows before extraordinary captionsFlows from operating activities (1)INVESTING ACTIVITIES:Receipts relating to:InvestmentsTangible fixed assetsInterest and similar incomeDividendsPayments relating to:InvestmentsTangible fixed assetsFlows from investing activities (2)FINANCING ACTIVITIES:Receipts relating to:Loans obtainedLoans grantedPayments relating to:Loans obtainedLoans grantedInterest and similar expensesDividendsFlows from financing activities (3)VARIATION IN CASH AND CASH EQUIVALENTS (4) = (1) + (2) + (3)CASH AND EQUIVALENTS AT THE BEGINNING OF THE YEARADJUSTMENTS OF TRADING SECURITIESREVERSAL OF ADJUSTMENTS OF TRADING SECURITIESCASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	Notes1010104054212154	31-12-2005(2.804.267)(18.579.403)(21.383.670)836.9575.542.189(15.004.524)(15.004.524)41.090.0001.000848.460404.846.475446.785.935(66.665.000)(678.705)(67.343.705)379.442.23050.463.46353.641.448	31-12-2004
			(4.401.000)(5.482.864)
			(9.883.864)(18.881)(2.189.494)
			(12.092.239)
			(12.092.239)
			329.688.66338.410369.67490.194.963
			420.291.710
			(67.512.284)(71.298)
			(67.583.582)
			352.708.128
			165.389.25797.837.611
		104.104.911	263.226.868
		(45.843.228)(328.023.049)(1.130.853)(13.016.569)(388.013.699)(283.908.788)80.528.918661.024-6.40581.196.347	(170.242.705)(420.011.844)(1.159.200)(11.833.245)
			(603.246.994)
			(340.020.126)
			595.76371.666(6.405)-
			661.024

The accompanying notes form an integral part of the cash flow statement for the year ended December 31, 2005.

The Board of Directors

The Accountant

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

INTRODUCTION

Semapa — Sociedade de Investimento e Gestão, SGPS, S.A. ("The Company") was incorporated in June 21, 1991 and its main object consists in holding positions in other companies, namely in the production of cement & derivatives and pulp and paper, through its subsidiaries, Secil – Companhia Geral de Cal e Cimento, S.A. and Portucel – Empresa Produtora de Pasta e Papel, S.A. Until December 2005, the Group still engaged in the generation of electric energy from renewable sources through Enersis II - Sociedade Gestora de Participações Sociais, S.A.

The numbering of the notes, which follow, is as defined in the Official Chart of Accounts (“Plano Oficial de Contabilidade - POC”). The numbers not included relate to notes that are either not applicable to the Company, or their presentation is not material to the financial statements.

1. DEROGATIONS TO THE OFFICIAL CHART OF ACCOUNTS

Semapa’s individual financial statements were prepared in accordance with the accounting principles generally accepted in Portugal, with the following derogations:

accounting principle of the historical cost in growing forests, through the application of fair value method as foreseen in IAS 41, in some Group subsidiaries, with influence in Semapa’s individual financial statements through the application of the equity method;
the subsidiaries changed the methodology of subsequent recognition of goodwill, namely ceasing its systematic amortization and replacing it by impairment tests, in accordance with IFRS 3;
application of the methodology regarding the direct recognition of actuarial gains and losses under equity, effective retrospectively from January 1, 2004, in accordance with IAS 19.

2. COMPARATIVE AMOUNTS

The comparative analysis of the amounts presented in the balance sheet captions with the ones related to December 31, 2004 must consider the above-mentioned situations, the effects of which are described in the following notes.

In 2005 the company decided for the first time to discriminate variable remuneration of its board members, constituting a provision in the respective accounts against income of the same period. If the same would have been applied in 2004, the net income for this year would decrease by €9,100,000 (Note 34)

The subsidiary Secil – Companhia Geral de Cal e Cimento, SA and Portucel and its subsidiaries valued their derivative financial instruments, no matter if they are for trading or hedging purposes, and the available-forsale financial assets, at fair value, in accordance with the directive nº 88/2004, of April 20, with implications in Semapa’s financial statements through application of the equity method, although the impact in 2004 is not significant.

The amounts related to the year ended on December 31, 2004 (comparative) included in the actual financial statements, are presented in accordance with the changes originated by the directive nº35/2005, of February 17, to the accounting principles generally accepted in Portugal

3. BASIS OF PRESENTATION AND MAIN ACCOUNTING POLICIES

The accompanying financial statements have been prepared on a going concern basis from the accounting records of the Company maintained in accordance with generally accepted accounting principles in Portugal with the exceptions referred in Note 1.

These financial statements reflect only the Company’s individual accounts. The Company also prepared consolidated financial statements, in accordance with IFRS, which reflect the following differences to the

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

individual financial statements, as of December 31, 2005. However, the individual shareholder’s equity, resulting from the application of the equity method to subsidiaries equals consolidated shareholders equity:

Total Assets, netTotal liabilitiesTotal incomeNet profit for the year	Increase
	2,616,435,0412,073,157,9361,535,578,1924,367,163

The most relevant accounting policies used in the preparation of the financial statements are as follows:

a) Tangible fixed assets

Tangible fixed assets which comprises transport equipment and administrative equipment and other tangible assets, are recorded at cost and depreciated on a straight-line basis over periods from three to eight years:

Buildings and other constructionsTransport EquipmentAdministrative EquipmentOther Tangible Assets	Useful life(years)
	1043 to 84 to 10

b) Investments

Investments in group companies (and subsidiaries of group companies) and affiliated companies are recorded in accordance with the equity method, thus absorbing the impacts of the changes in the accounting policies of its infra exposed subsidiaries.

In accordance with the equity method, investments are increased or reduced annually by the amount corresponding to the Company’s proportion in the net result of the subsidiaries, by corresponding entry in the income statement (Note 45). Additionally, dividends received from group companies resulting from distribution of profits or reserves are deducted from the amount of the investments in the year in which they are received.

Semapa’s subsidiaries started to apply in 2005, with effects at January 1, 2004, the valuation method of goodwill subsequent to initial recognition foreseen in International Financial Reporting Standards n[er] 3 "Business Combinations". In accordance with this standard goodwill is not amortized and is subject to impairment tests, in an annual minimum basis. Impairment losses of goodwill can not be reversed.

Still during the year ended on December 31, 2004, some subsidiaries of Portucel subgroup changed their accounting policies on recognition of biological assets (growing forests), starting to apply the International Accounting Standard n[er] 41 "Agriculture".

The subsidiary Secil – Companhia Geral de Cal e Cimento, SA and Portucel and its subsidiaries valued their derivative financial instruments, no matter if they are for trading or hedging purposes, and the available-for-sale financial assets, at fair value, in accordance with the directive nº 88/2004, of April 20. This way, the changes in fair value of their derivative financial instruments regarded as hedge and

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

their available-for-sale financial assets are directly recognised under equity of these affiliates. The change in fair value of the financial instruments considered as trading are booked in the respective income statements.

Additionally, the subsidiaries applied the methodology regarding the direct recognition of actuarial gains and losses under equity, with retrospective impacts from January 1, 2004 on, in accordance with IAS 19 (revised).

Other financial investments, namely the ones registered under the caption securities and other investments are recorded at the lowest of the acquisition cost or the net realisable value.

c) Receivables adjustments

The adjustment for doubtful credits is calculated considering the collection risk expected at the end of each period.

d) Accrual basis

The Company records revenue and expenses on an accrual basis. Under this basis, revenue and expenses are recorded in the period at which they are generated or incurred, regardless of the time at which they are received or paid. Differences between the amounts received and paid and the corresponding revenue and expenses are recorded in accruals and deferrals captions (Note 50).

e) Corporate income tax

The income tax includes current and deferred tax, when applicable. Income tax is recognised in the income statement except when relating to gains and losses recorded directly in reserves, in which case the income tax is also recorded directly in reserves, namely, that relating to the impact of asset revaluations.

Current income tax is determined based on the net profit, adjusted in accordance with tax legislation in force as of the balance sheet date.

Deferred income tax is computed in accordance with the liability method, based on the temporary differences between recognition of assets and liabilities for accounting and for taxes purposes. Deferred taxes are computed in accordance with the income tax rates expected to be in force when the temporary differences revert.

The Company recognizes deferred tax assets when there is a reasonable expectation that future profits will be generated, against which the assets can be used. Deferred tax assets are reviewed annually and decreased whenever it becomes probable that they will not be able to be used.

f) Retirement benefit complements

The Company has undertake the commitment to pay to members of Board of directors a retirement benefit complement, in terms described in Note 31.

The responsibilities for the payment of retirement benefits are recorded in accordance with IAS19.

g) Provisions

The provisions are registered at the values effectively necessary to face estimated economic losses.

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

h) Use of estimates

The preparation of the financial statements requires that management applies its judgment in the calculation of estimates affecting revenue, expenses, assets, liabilities and disclosures on balance sheet date. These estimates are determined by judgement of the Group's management based on: i) best information and knowledge of present events, which are supplemented, in some cases, with independent opinions from third parties and ii) the specific steps which the Company considers that may undertake in the future. Nonetheless, at the closing date of operations the result may differ from the estimates included in the financial statements.

6. INCOME TAX

In accordance with current legislation, tax losses are carried forward for a period of six years and may be deducted to tax profits during that period. The Company is subject to corporate income tax on an individual basis, having tax losses not used since 2000, which amount to €21,425,514. As mentioned in Note 3.e), and since the Company has been generating operating losses, there is no reasonable assurance that future tax profits will be generated so, the deferred tax asset generated by the referred tax losses has not been recorded.

In accordance with current legislation, gains and losses in subsidiaries and affiliated companies resulting from application of the equity method are deducted from or added to, respectively, the profit for the year when computing taxable income.

Income tax for the year ended December 31, 2005 amounting to €72,300 relates to current income tax - autonomous taxation.

The reconciliation of effective income tax rate is as follows:

Profit before income taxNominal rate of income taxEstimated income taxPermanent differences (a)Adjustments to taxable incomeNon recoverable tax lossesRecovered tax lossesEffective rate of income tax	31-12-2005329,889,60327.50%90,719,641(89,740,762)72,300-(978,879)72,3000.02%	31-12-2004
		182,084,90527.50%
		50,073,349(49,999,697)11,183-(73,652)
		11,183
		0.01%

(a) This amount is made up essentially of :

Effects arising from the application of the equity method (Note 16)Adjustments and taxable provisions (Notes 21 and 34)Responsabilities related to pension benefits (Note 31)Non-taxable realized gainsGains for tax purposesOtherTax effect (27,5%)	31-12-2005(428,609,485)17,887,06684,295,795(939)1,00096,518(326,330,045)(89,740,762)	31-12-2004
		(42,473,674)4,996,249-(144,423,547)60,86523,026
		(181,817,081)
		(49,999,697)

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

In accordance with current tax legislation, tax returns are subject to review and adjustment by the tax authorities during a period of four years and ten years for Social Security. Consequently, the Company’s tax returns for the years from 2002 to 2005 are still subject to review.

The Company’s Management believes that any possible adjustments that may result from tax authorities reviews will not have a significant effect on the financial statements as of December 31, 2005.

7. AVERAGE NUMBER OF EMPLOYEES

The average number of employees as of December 31, 2005 and 2004 was 23 and 13 persons, respectively.

10. MOVEMENT IN FIXED ASSETS

During the year ended December 31, 2005, the movement in intangible, tangible assets and investments, and in the related amortisation, depreciation and adjustments, was as follows:

		Fixed Assets
Openingbalance	Increases	Decreases	Disposals andothers	Closingbalance
236,233	-	-	(236,233)	-
-164,418136,0632,349-	-21,50049,4262,381777,689	-(50,743)---	674,581-4,35624,195(703,132)	674,581135,175189,84528,92574,557
302,830	850,996	(50,743)	-	1,103,083
292,530,5571,229	66,665,000-	--	(9,930,083)-	349,265,4741,229
292,531,786	66,665,000	-	(9,930,083)	349,266,703
293,070,849	67,515,996	(50,743)	(10,166,316)	350,369,786
	Accumulated amortisationand depreciation
Openingbalance	Increases	Decreases	Disposals andothers	Closingbalance
214,664	-	-	(214,664)	-
-121,93981,971294	67,45838,21329,2083,572	-(50,743)--	----	67,458109,409111,1793,866
204,204	138,451	(50,743)	-	291,912
418,868	138,451	(50,743)	(214,664)	291,912

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

The movement in the caption “Investments in subsidiaries” for the year ended December 31, 2005 was as follows:

Opening BalanceResults of subsidiaries and affiliated companiesrecorded by the equity method (Notes 6, 16 and 45):- Profits- LossesDividends distributed to company by subsidiaries- Secil - Companhia Geral de Cal e Cimento, SA- Seinpar Investments BV- CMP Investments BVReimbursement of suplementary capital contributions- Seinpar Investments BV- Seminv - Investimentos, SGPS, SA- CMP Investments BVSuplementary capital contributions in Semapa Inversiones SLProvision for negative shareholders equity:- Semapa Inversiones, SL- Semapa Investments, BVAdjustments due to the reversal of goodwill amortization inprevious year in subsidiaries:- Cimentospar - Participações Sociais, SGPS, Lda- Seinpart, SGPS, SA- Seminv - Investimentos, SGPS, SA- Semapa Investments, BVAdjustments in the retained earnings of the subsidiaries:- Semapa Investments, BV- Seminv - Investimentos, SGPS, SA- Seinpart, SGPS, SA- Semapa Inversiones, SLOther changes in subgroups equity:- Enersis II - Gestão de Participações, SGPS, SA- Portucel - Empresa Produtora de Pasta e Papel, SA- Secil - Companhia Geral de Cal e Cimento, SADividends distributed by Semapa to Seminv, SGPS, S.A.Closing Balance	Subsidiaries
	292,530,557429,651,283(1,041,798)(1,660,771)(11,175,000)(392,000,000)(6,500,000)(12,090,000)(22,500,000)66,665,000(625,260)(3,138,838)520,5291,766,0264,278,7863,515,7683(167)6703,6441,233,951(3,174,420)2,705,434300,077
	349,265,474

Opening BalanceResults of subsidiaries and affiliated companiesrecorded by the equity method (Notes 6, 16 and 45):- Profits- LossesDividends distributed to company by subsidiaries- Secil - Companhia Geral de Cal e Cimento, SA- Seinpar Investments BV- CMP Investments BVReimbursement of suplementary capital contributions- Seinpar Investments BV- Seminv - Investimentos, SGPS, SA- CMP Investments BVSuplementary capital contributions in Semapa Inversiones SLProvision for negative shareholders equity:- Semapa Inversiones, SL- Semapa Investments, BVAdjustments due to the reversal of goodwill amortization inprevious year in subsidiaries:- Cimentospar - Participações Sociais, SGPS, Lda- Seinpart, SGPS, SA- Seminv - Investimentos, SGPS, SA- Semapa Investments, BVAdjustments in the retained earnings of the subsidiaries:- Semapa Investments, BV- Seminv - Investimentos, SGPS, SA- Seinpart, SGPS, SA- Semapa Inversiones, SLOther changes in subgroups equity:- Enersis II - Gestão de Participações, SGPS, SA- Portucel - Empresa Produtora de Pasta e Papel, SA- Secil - Companhia Geral de Cal e Cimento, SADividends distributed by Semapa to Seminv, SGPS, S.A.Closing Balance

Subsidiaries

292,530,557429,651,283(1,041,798)(1,660,771)(11,175,000)(392,000,000)(6,500,000)(12,090,000)(22,500,000)66,665,000(625,260)(3,138,838)520,5291,766,0264,278,7863,515,7683(167)6703,6441,233,951(3,174,420)2,705,434300,077

349,265,474

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

16. SUBSIDIARIES AND AFFILIATED COMPANIES

As of December 31, 2005, investments in subsidiaries and affiliated companies were as follows:

D	ecember 31,2005			Participation
			%	Net BookValue(Note 10)	Proportional sharein net results(Notes 10 and 45)
ShareCapital	Equity	Netresults
3,00550,000264,600,00018,0003,00618,0007,500,000	(6,901)427,888391,537,801986,49965,836,194(39,483)256,895,967	(27,638)388,126,61979,594,935278,633(1,021,061)1,844,66234,294,993	100.00%100.00%6.42%100.00%100.00%100.00%100.00%	-427,88825,118,926986,49965,836,194-256,895,967	(27,638)388,126,6195,106,376278,633(1,021,061)1,844,66234,294,993
				349,265,474	428,602,584

(a) During the year ended on December 31, 2005 Betobal, SL presents negative shareholders equity of €6,901, thus explaining the null value of the respective financial investment in the balance sheet of the company. Semapa accounted for the negative net income of this subsidiary, in the amount of €27,638, in the following captions of the income statement: (i) in “Losses in group companies and affiliates” up to the book value of the participation, in the amount of €20,737 (Note 45) and (ii) in “Amortizations and adjustments of applications and financial investments”, for the negative shareholders equity in the amount of €6,901 (Notes 21 and 45).
(b) During the year ended on December 31, 2005, the subsidiary CMP Investments B.V. disposed of the total stake held in Enersis II, SGPS, S.A. share capital, holding for the renewable energies. Therefore, its results reflect a capital gain in the amount of €384,607,117.
(c) As at December 31, 2004, and after consolidation adjustments, Semapa Inversiones, SL shareholder’s equity was negative. Therefore, during the year ended December 31, 2005, Semapa SGPS, SA made supplementary capital contributions amounting to €66,665,000 (Note 10) to the subsidiary, and reversed the negative equity provision, appropriated by the equity method, in the caption “Other Provisions”, amounting to €625,260 (Note 34).
(d) After consolidation adjustments, shareholder’s equity of Srmapa Investments subsidiary becomes negative. Consequently, the related investments is registered at zero cost in the Semapa SGPS, SA balance sheet, and the negative shareholder’s equity, appropriated trough the equity method, is provided for in the caption “Other Provisions” in liabilities, by an amount of €39,483 (Note 34).

Semapa Investments, BV and Semapa Inversiones, SL indirectly control 15.3% and 14.7% of Portucel, S.A., through Seinpart, SGPS, SA, that holds 30% of the share capital of Portucel SA, with Semapa Investments B.V. having a direct participation of 37.1% in Portucel’s share capital.

The subsidiary Seminv, SGPS, SA holds 100% of Cimentospar, SGPS, Lda., which holds a participation of 41,06% in the share capital of Secil – Companhia Geral de Cal e Cimento, SA. Therefore, Semapa controls, directly and indirectly, 46,97% of Secil, SA share capital, corresponding to 51% of the voting rights.

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

21. MOVEMENT IN ASSETS ADJUSTMENTS

During the year ended December 31, 2005, the movement in caption adjustments was as follows:

Caption	Openingbalance	Increase	Decrease	Closingbalance
Accounts receivable:Other debtorsTrade securities:Other trade securities	402,0006,405	7,451,000-	-(6,405)	7,853,000-
	408,405	7,451,000	(6,405)	7,853,000

23. DOUBTFUL RECEIVABLES

As of December 31, 2005, the doubtful receivables amounted to €7,853,000 and were recorded in the caption “Other Debtors”, being null the receivable balance net of adjustments (Note 21).

25. RECEIVABLE AND PAYABLE BALANCES WITH PERSONNEL

As of December 31, 2005, the Company liabilities related to personnel were €24,741 (Note 49). As of December 31, 2004 the Company receivable balances from personnel amounted to €245 (Note 49).

31. FINANCIAL COMMITMENTS

Retirement benefits complement

Defined benefit plan assumed by the Company

The Shareholders’ General Meeting, held in March 30, 2005, approved the retirement directors’ regulation, as foreseen in the article 17º of the Company’s statutes. As per the terms of the referred regulation, Semapa directors are entitled to a lifetime allowance, paid 12 times per year, from the 55 years on, if they have, generally, worked for the Company a minimum of 8 years, followed or interpolated, as directors. These rights can only be exercised when each director ceased functions.

In accordance with the actuarial valuation, reported to December 31, 2005, the responsibilities for past services amount to €84,295,795, being fully provided for in liabilities’ caption "Provisions for pensions" (Note 34), in accordance with IAS 19.

The actuarial valuation considers the following financial and the demographic assumptions:

Mortality tableDisability TableGrowth rate of pensionsTechnical interest rateDirectors interest rateGrowth rate of salariesPensions reversability rateNumber of annual payments of Semapa complementSocial Security benefits formula	31-12-2005
	TV 88/90EKV 802,25%4,50%4,50%2,50%50%12Decree-Law nº 35/2002February 19

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

32. GUARANTEES GRANTED

During the year ended December 31, 2004, the subsidiaries Semapa Inversiones S.L. and Semapa Investments B.V. have contracted, together with Semapa next to a banking syndicate a borrowing (December 31, 2005: outstanding balance amounts to €326,090,563), for the acquisition, through Seinpart – Participações, SGPS, S.A., subsidiary jointly owned, of a 67,1% participation in the share capital of Portucel – Empresa Produtora de Pasta e Papel, S.A..

Within the scope of this finance , the companies made pledges over share capital and paid-in capital direct and indirectly owned by Semapa, in the subsidiaries Semapa Inversiones, S.L., Semapa Investments, B.V., Seinpart – Participações, SGPS, S.A., Portucel – Empresa Produtora de Pasta e Papel, S.A. and CMP Investments B.V.

34. MOVEMENTS IN PROVISIONS

During the year ended on December 31, 2005, movements in provisions was as follows:

Captions	Openingbalance	Increases	Decreases	Closingbalance
Provisions for risks and costs:Pensions (Note 31)Appropriation of results of subsidiariesand affiliated companies by the equity method (Note 16)Other provisions	-3,803,582784,262	84,295,7956,90110,429,165	-(3,764,100)-	84,295,79546,38311,213,427
	4,587,844	94,731,861	(3,764,100)	95,555,605

As of December 31, 2004 Semapa Inversiones, S.L. shareholders equity was negative by some €625,260 (Note 16). Therefore, a provision in the same amount was registered against the caption “Depreciation and provisions for investments”. During the year ended December 31, 2005 this provision was reversed as Semapa appropriated, through the equity method, an amount of €65,836,194 from positive shareholders equity of the participated Company (Notes 10 and 16).

Shareholders equity of the subsidiary Semapa Investments B.V. was negative as of December 31, 2004 by €3,178,322. Therefore, a provision of the same amount was constituted. During the year ended December 31, 2005, Semapa reduced this provision by €3,138,839, as Semapa absorbed through the equity method, the positive fluctuation of this participated Company shareholders equity in the same amount (Notes 10 and 16).

Additionally, as of December 31, 2005, the value of shareholders equity of the subsidiary Betopal, SL presented a negative amount of €6,901 (Notes 16 and 45), having been constituted a provision in the same amount.

The increase occurred under the caption “Other provisions” includes an amount of €10,360,652 related to the estimate of variable remuneration of board members in accordance with the statutes of the company (Note 2).

36. SHARE CAPITAL

As of December 31, 2005 the Company’s share capital, totally subscribed and paid in, consisted of 118,332,445 shares with the nominal value of €1 each (Note 40).

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

37. ENTITIES HOLDING THE SHARE CAPITAL

In accordance with the most recent shareholder’s meeting, held on March 30, 2005, and the qualified participations mentioned, the Company’s share capital as of December 31, 2005 is held by:

Name	Number ofshares	%
Sodim, SGPS, S.A.Credit SuisseLongapar, SGPS, S.A.Cimo - Gestão de Participações, SGPS, S.A.Banco BPI, SABanco Espírito Santo, SASeminv - Investimentos, SGPS, S.ACompanhia de Seguros Tranquilidade Vida, SAAF Investimentos - Fundo Imobiliários, SASonaca - Sociedade Nacional de Canalizações, SAOther shareholders with a participation lower than 2%	26,115,00023,820,38720,000,00014,592,3007,926,8007,012,0062,727,9752,529,2482,468,9001,250,0009,889,829	22.0720.1316.9012.336.705.932.312.142.091.068.36
	118,332,445	100.00

After December 31, 2005 and in the course of the qualified participations already communicated to the company, share capital as of December 31, 2005 is held by:

Name	Number ofshares	%
Sodim, SGPS, SACredit SuisseLongapar, SGPS, SACimo - Gestão de Participações, SGPS, SABanco BPI, SABanco Espírito Santo, SASeminv - Investimentos, SGPS, SACompanhia de Seguros Tranquilidade Vida, SAAF Investimentos - Fundo Imobiliários, SASonaca - Sociedade Nacional de Canalizações, SAOther shareholders with a participation lower than 2%	26,115,00023,095,80020,000,00014,592,30011,855,9747,012,0062,727,9752,529,2482,468,9001,250,0006,685,242	22.0719.5216.9012.3310.025.932.312.142.091.065.65
	118,332,445	100.00

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

40. CHANGES IN SHAREHOLDER’S EQUITY

During the year ended December 31, 2005, the movement in the equity accounts was as follows:

Captions	Openingbalance	Increases	Decreases	Transfers	ClosingBalance
CapitalShare premiumsAdjustments in investments in subsidiariesand associated companies (Note 10)Reserves:Legal reservesOther reservesRetained earningsNet income for the year	118.332.4453.923.459(32.230.787)13.117.391101.765.900(2.557.432)182.073.722	--14.324.888---329.817.303	--(3.174.587)---(22.116.569)	---9.103.686147.853.4673.000.000(159.957.153)	118.332.4453.923.459(21.080.486)22.221.077249.619.367442.568329.817.303
	384.424.698	344.142.191	(25.291.156)	-	703.275.733

As decided by the shareholders’ General Meeting held on March 30, 2005, the 2004 net income was appropriated as follows:

Distribution of dividends (0,11 euros per share)Legal reservesOther reservesGratification of balance under statutory termsRetained earnings	13,016,5699,103,686147,853,4679,100,0003,000,000
	182,073,722

Adjustments in investments in subsidiaries and affiliated companies relates to the difference between the net book value of the financial investments in Group companies and the proportion of equity held in that companies as of the date of the first application of the equity method, as well as adjustments made after that date directly to their equity.

During the year ended December 31, 2005, movement in this caption was as follows:

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

Opening BalanceAdjustments in subsidiaries and affiliates companies as a result of the reversal ofgoodwill's prior year amortization, in subsidiaries:- Cimentospar - Participações Sociais, SGPS, Lda- Seinpart, SGPS, SA- Seminv - Investimentos, SGPS, SA- Semapa Investments, BVAdjustments in subsidiaries and affiliates companies as a result of movementsin retained earnings of subsidiaries:- Semapa Investments, BV- Seminv - Investimentos, SGPS, SA- Seinpart, SGPS, SA- Semapa Inversiones, SLOther changes in subgroups equity:- Enersis II - Gestão de Participações, SGPS, SA- Portucel - Empresa Produtora de Pasta e Papel, SA- Secil - Companhia Geral de Cal e Cimento, SADividends distributed by Semapa to subsidiary Seminv, SGPS, SAClosing balance	Adjustments ininvestments insubsidiaries andaffiliatedcompanies
	(32,230,787)520,5291,766,0264,278,7863,515,7683(167)6703,6441,233,951(3,174,420)2,705,434300,077
	(21,080,486)

Opening BalanceAdjustments in subsidiaries and affiliates companies as a result of the reversal ofgoodwill's prior year amortization, in subsidiaries:- Cimentospar - Participações Sociais, SGPS, Lda- Seinpart, SGPS, SA- Seminv - Investimentos, SGPS, SA- Semapa Investments, BVAdjustments in subsidiaries and affiliates companies as a result of movementsin retained earnings of subsidiaries:- Semapa Investments, BV- Seminv - Investimentos, SGPS, SA- Seinpart, SGPS, SA- Semapa Inversiones, SLOther changes in subgroups equity:- Enersis II - Gestão de Participações, SGPS, SA- Portucel - Empresa Produtora de Pasta e Papel, SA- Secil - Companhia Geral de Cal e Cimento, SADividends distributed by Semapa to subsidiary Seminv, SGPS, SAClosing balance

Adjustments ininvestments insubsidiaries andaffiliatedcompanies

(32,230,787)520,5291,766,0264,278,7863,515,7683(167)6703,6441,233,951(3,174,420)2,705,434300,077

(21,080,486)

Legal reserve: In accordance with current legislation, the Company must transfer a minimum of 5% of its annual net profit to a legal reserve until the reserve reaches 20% of share capital. This reserve cannot be distributed to the shareholders but may be used to absorb losses after all other reserves have been used up or to increase capital.

43. STATUTORY BOARD MEMBERS REMUNERATION

Remuneration attributed to statutory board members, including participation on the results of 2004 (Note 40) and 2003, during the year ended December 31, 2005 and 2004, was as follows:

Board of Directors - RemunerationBoard of Directors - Participation in results (Note 40)Statutory Auditor	31-12-20055,093,9549,100,0004,78814,198,742	31-12-2004
		1,828,2222,000,0004,090
		3,832,312

In addition, the board members of Semapa profited from a pension plan as described in Note 31.

The estimate for variable remunerations of board members related to 2005, was provisioned under the caption “Provisions – other provisions” (Note 34).

44. SALES AND SERVICES RENDERED BY GEOGRAPHIC MARKET

Sales and services rendered by geographic market during the year ended December 31, 2005 and 2004 were as follows:

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

	31-12-2005	31-12-2004
Domestic Market (Note 53)	6,372,800	450,938
Foreign Market (Note 53)	201,000	590,250
	6,573,800	1,041,188

45. FINANCIAL RESULTS

Net financial results during the year ended December 31, 2005 and 2004 were made up as follows:

Expenses:Interest expense with loansobtained from shareholders (Note 52)Interest expense with loansobtained from group companies (Note 53)Interest expense with other loans obtainedLosses on subsidiaries and affiliated companies (Note 16)Adjustments on investments (Notes 16 and 34)Other financial expenses (Note 49)Net financial resultsIncome:Interest income on loansgranted to group companies (Note 53)Other interest incomeGains on subsidiaries and affiliated companies (Note 16)Capital gains on treasury applicationsIncome from other equity investmentsReversals and other income and financial gains (Note 21)	31-12-2005	31-12-2004250,259389,182840,5858,414,2893,809,98763,34513,767,64743,574,86557,342,5126,395,02649,48050,887,96310,0123157,342,512	31-12-2004250,259389,182840,5858,414,2893,809,98763,34513,767,64743,574,86557,342,5126,395,02649,48050,887,96310,0123157,342,512
m shareholders (Note 52)nse with loansom group companies (Note 53)nse with other loans obtainedbsidiaries and affiliated companies (Note 16)on investments (Notes 16 and 34)al expenses (Note 49)resultse on loans	287,226468,238900,4531,041,7986,90131,0132,735,629432,517,354435,252,983	250,25389,18840,588,414,283,809,9863,3413,767,6443,574,8657,342,51
	5,458,779125,812429,651,283-10,704
d other income and financial gains (Note 21)	6,405435,252,983	57,342,51
			2
INARY RESULTSy results during the year ended December 31, 2005 and 2004 were made

46. EXTRAORDINARY RESULTS

Extraordinary results during the year ended December 31, 2005 and 2004 were made up as follows:

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

Extraordinary expenses:DonationsUncollectable debtLosses in investmentsOther extraordinary costs and losses (Note 31)Extraordinary incomeIncome and gains:Gains in investmentsOther extraordinary income and gains	31-12-20055,000-61-5,061(3,762)6,3601,0002991,299	31-12-2004
		150127-39,455
		39,732144,418,855
		144,498,319
		144,423,54835,039
		144,458,587

As of December 31, 2004 the caption “gains in investments” includes an amount of €144,303,341 related to the realised capital gain on the sale of 45.125% of Secil’s – Companhia Geral de Cal e Cimento, S.A. share capital (49% of the voting rights).

48. STATE AND OTHER PUBLIC ENTITIES

As of December 31, 2005 the Company was up-to-date with its payments to the State and other public entities. The balances payable to these entities as of December 31, 2005 and 2004, were made up as follows:

DebtorsCreditors651.019--2.170.913-203.244-40.527651.0192.414.68431-12-2005	31-12-2004	31-12-2004
Debtors651.019---651.019	Debtors875.523---875.523	Creditors
		-76.39144.53240.804
		161.727

As of December 31, 2005 the caption “Corporate income tax” was made up as follows:

Corporate income tax for the year (Note 6)Special payments on accountWithholdings at source	(72.300)16.385706.934
	651.019

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

49. OTHER DEBTORS AND CREDITORS

As of December 31, 2005 and 2004, these captions were made up as follows:

Other debtors:Suppliers, c/cPersonnelOther debtors:Group companies (Note 53)OthersAdjustments (note 21)Other creditors:Fixed assets suppliersPersonnelConsultants	31-12-2005155-8.452.5731.040.3979.493.125(7.853.000)1.640.12541.92424.74148.681115.346	31-12-2004
		-24554.7894.225.873
		4.280.907(402.000)
		3.878.907
		--234.253
		234.253

50. ACCRUALS AND DEFERRALS

As of December 31, 2005 and 2004, these captions were made up as follows:

Accrued incomeInterest from bank depositsDeferred costs:RentalsInsurance costsExpenses incurred to open credit linesOther deferred costsAccrued costs:Other accrued interestVacation pay, vacation subsidy and other personnel costsAccrued insuranceOther accrued costs	31-12-2005	31-12-2004
	21.817	-
	40.3403.678147.7631.068	17.153--4.587
	192.849	21.740
	164.105579.161-35.409	194.868524.98114.00840.687
	778.675	774.544

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

51. LOANS

As of December 31, 2005 and 2004, these captions were made up as follows:

	31-12-2005		31-12-2004
Short term	Medium andlong term	Total	Total
5,611,476-	7,856,06725,000,000	13,467,54325,000,000	17,956,72423,002,167
5,611,476	32,856,067	38,467,543	40,958,891

On March 9, 1998 the Company issued 4,800,000 bonds with the nominal value of mEsc 1 each, redeemable in ten years. During the year ended December 31, 2001, the bonds were redenominated to euros, totalling €23,942,299, corresponding to 2,394,229,906 bonds, with a nominal value of €0.01 each. After the anticipated reimbursement and the previewed settlement of 20% initial capital in the 12º and 14º coupons as of March 9, 2004 and 2005, bond loan amounts to €13,467,543 corresponding to 2,244,590,447 bonds, with a nominal value of €0.006 each.

The coupon interests are paid each semester and the reimbursement will occur 25% in the 16[th] (09/03/2006) and 18[th ] (09/03/2007) and 10% in the 20[th] and last coupon (09/03/2008), being impossible its anticipated reimbursement in all or part after the changes introduced to the technical note by General Assembly as of March 5, 2004. The bonds were fully subscribed for and paid upon subscription and are represented by dematerialized securities listed in Euronext Lisbon.

As of December 31, 2005 the medium and long-term bond loan is redeemable as follows:

2007200820092010	5,611,4762,244,591-25,000,000
	32,856,067

As of December 31, 2005 and 2004, there were available bank credits granted and undrawn facilities of €12,244,591 and €2,094,591, respectively.

52. SHAREHOLDERS

As of December 31, 2005 and 2004, the amount payable to shareholders related to treasury operations were as follows:

Cimo - Gestão de Participações, SGPS, SALongapar, SGPS, SASonaca - Sociedade Nacional de Canalizações, SA	31-12-20053,835,9592,176,148953,0186,965,125	31-12-2004
		3,888,7772,026,737967,944
		6,883,458

These balances bear interest at current market rates.

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

As of December 31, 2005 and December 31, 2004, transactions with shareholders, were as follows:

Cimianto - Gestão de Participações, SGPS, SACimo - Gestão de Participações, SGPS, SALongapar, SGPS, SASonaca - Sociedade Nacional de Canalizações, SA	31-12-2005ExternalFinancialsuppliesexpensesand services(Note 45)107,740--153,682-97,411-36,133107,740287,226	31-12-2004
	Externalsuppliesand services	ExternalFinancialsuppliesexpensesand services(Note 45)185,000--153,166-62,093-35,000185,000250,259
	107,740---
	107,740

53. GROUP COMPANIES

As of December 31, 2005, balances with Group companies were as follows:

	Assets	Liabilities
Groupcompanies-short term	Groupcompanies- medium andlong term	Groupcompanies-short termSuppliers----9,030,117-428,535----1,571------------9,458,6521,571
10,36534,540------707,893-16,169-	-------102,040,284-320,621,366--
768,967	422,661,650

The amount of €768,967, to be received from Group companies refers to short-term loan facilities bearing interest quarterly at current market rates.

The amount of €422,661,650 to be received from Group companies refers to medium and long-term loan facilities bearing interest quarterly at current market rates.

During the year ended December 31, 2005, transactions with Group companies were as follows:

Betopal, SLCimenpar Investments, BVCimentospar - Participações, SGPS, LdaCMP Investments, BVEnersis II, SGPS, SAPortucel - EmprestoProdutortode Pasttoe Papel, SASecil - CompanhitoGeral de Cal e Cimento, SASeinpar Investments, BVSeinpart - Participações, SGPS, SASemaptoInversiones, SLSemaptoInvestments, BVSeminv - Investimentos, SGPS, SASilonor, SA	Sales andservicesrendered--1.979.040--4.393.760------201.0006.573.800	ExternalSuppliersand services	Financialincome(Note 45)	Financialexpenses(Note 45)
		------1.873------	235494--740.905--58.5033.582.49356.8781.000.70018.571-	--287.0093.291---174.396--3.542--
		1.873	5.458.779	468.238

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

The amount of €6,573,800 in “Sales and services rendered” caption, refers to management services provided by the Company in financial, administrative, fiscal and IT areas, among others.

54. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of December 31, 2005 and 2004, were made up as follows:

Marketable securitiesShort-term bank depositsBank depositsCash in handBank overdrafts	31-12-200531-12-2004391,932385,5273,310,000420,66077,492,7005,7891,7151,215-(152,167)81,196,347661,024

55. AUDIT FEES AND OTHER SERVICES

During the year ended December 31, 2005 and 2004, the costs incurred with Auditors, Statutory auditors and other consultants were as follows:

Audit feesTax advisory servicesOther consultancy services	31-12-200531-12-200444,44156,378-86,42311,00070,14555,441212,946

56. RECONCILIATION OF THE CAPTION “EXTRAORDINARY RESULTS” DISCLOSED IN THE INCOME STATEMENT BY NATURE AND IN THE INCOME STATEMENT BY FUNCTION

The income statement by function presents a concept of extraordinary results that differ from the one foreseen by the accounting principles generally accepted in Portugal for the preparation of the income statement by nature. Thus, the amounts of extraordinary income presented in the income statement by nature (Note 46) for the year ended December 31, 2005 and 2004 of €3,762 and €144,418,855, respectively, have been reclassified to current income, as follows:

		Income Statement	Income Statement
	2005	ByFunctions(102,627,751)329,889,603-329,817,303		2004
ByNature(102,623,989)329,893,365(3,762)329,817,303	Reclassi-fications(3,762)(3,762)3,762-		ByNature(5,908,815)37,666,050144,418,855182,073,722	Reclassi-fications-144,418,855(144,418,855)-	ByFunctions
					(5,908,815)182,084,905-182,073,722

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

57. NOTE ADDED FOR TRANSLATION

The accompanying financial statements are a translation of financial statements originally issued in Portuguese. In the event of discrepancies the Portuguese language version prevails.

SEMAPA — SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005 AND 2004

(Translation of a report originally issued in Portuguese – Note 57)

(Amounts stated in €)

BOARD OF DIRECTORS

Pedro Mendonça de Queiroz Pereira President

Maria Maude Mendonça de Queiroz Pereira Lagos Member

Carlos Eduardo Coelho Alves Member

José Alfredo de Almeida Honório Member

Frederico José da Cunha de Mendonça e Meneses Member

Francisco José de Melo e Castro Guedes Member

Paulo Jorge Morais Costa The Accountant

Luís Manuel Pego Todo Bom Member

PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda Palácio Sottomayor Rua Sousa Martins, 1 – 3º 1050-217 Lisboa Portugal Telephone +351 2135 99 000 Facsimile +351 2135 99 999

Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect of the Individual Financial Information

(Free translation from the original version in Portuguese)

Introduction

1 As required by law, we present the Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect of the Individual Financial Information included in the Management Report and the financial statements of SEMAPA – Sociedade de Investimento e Gestão, SGPS, SA, comprising the balance sheet as at December 31, 2005, (which shows total assets of €857,210,648 and a total of shareholder's equity of €703,275,733, including a net profit of €329,817,303), the income statements by nature and by functions, the cash flow statement for the year then ended and the corresponding notes to the accounts.

Responsibilities

2 It is the responsibility of the Company’s Board of Directors (i) to prepare financial statements which present fairly, in all material respects, the financial position of the company, the results of its operations and cash flows; (ii) to prepare the historic financial information in accordance with generally accepted accounting principles while also meeting the principles of completeness, truthfulness, accuracy, clarity, objectivity and lawfulness, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain an adequate system of internal control; and (v) to disclose any relevant matters which have influenced the activity and the financial position or results of the company.

3 Our responsibility is to verify the financial information included in the financial statements referred to above, particularly as to whether it is complete, truthful, accurate, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of expressing an independent and professional opinion on that financial information, based on our audit.

Scope

4 We conducted our audit in accordance with the Standards and Technical Recommendations approved by the Institute of Statutory Auditors which require that we plan and perform the examination to obtain reasonable assurance about whether the financial statements are free of material misstatement. Accordingly, our examination included: (i)

SEMAPA – Sociedade de Investimento e Gestão, SGPS, SA

verification, on a test basis, of the evidence supporting the amounts and disclosures in the financial statements, and assessing the reasonableness of the estimates, based on the judgements and criteria of Management used in the preparation of the financial statements; (ii) assessing the appropriateness and consistency of the accounting principles used and their disclosure, as applicable; (iii) assessing the applicability of the going concern basis of accounting; (iv) assessing the overall presentation of the financial statements; and (v) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.

5 Our audit also covered the verification that the financial information included in the Management Report is in agreement with the financial statements.

6 We believe that our examination provides a reasonable basis for our opinion.

Opinion

7 In our opinion, the financial statements referred to above, present fairly in all material respects, the financial position of SEMAPA – Sociedade de Investimento e Gestão, SGPS, SA as at December 31, 2005, the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in Portugal, derogated by the application of International Financial Reporting Standards (IFRS) as mentioned in note 1 and duly comply with principles of completeness, truthfulness, accuracy, clarity, objectivity and lawfulness.

Lisbon, March 10, 2006

PricewaterhouseCoopers & Associados, SROC, Lda represented by:

____________________________ Abdul Nasser Abdul Sattar, R.O.C.

Report and Opinion of the Supervisory Board

(Free Translation from the original version in Portuguese)

To the Shareholders

1 In accordance with the law and our mandate, we herewith present the report on our supervisory activity and our opinion on the Management Report and the corresponding Financial Statements presented by the Board of Directors of SEMAPA – Sociedade de Investimento e Gestão, SGPS, S.A. with respect to the year ended December 31, 2005.

2 During the course of the year, we have accompanied the evolution of the company’s activities, as and when deemed necessary, and have verified the timeliness and adequacy of the accounting records and supporting documentation. We have also ensured that the law and the company’s statutes have been complied with.

3 We have also accompanied the work performed by PricewaterhouseCoopers & Associados, SROC, Lda, have reviewed their Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect to Individual Financial Information and concur with their conclusions. Furthermore we have considered the Statutory Auditors’ Report sent to the Board of Directors in which the audit procedures undertaken are described, as required by Article 451º of the Commercial Companies Code.

4 Within the scope of our mandate, we have verified that:

i) the Balance Sheet, the Income Statements by nature and by functions, the cash flow statement and the notes to the accounts present adequately the financial position and the results and cash flows of the company;

ii) the accounting policies and valuation methods applied are appropriate;

iii) the Management Report is sufficiently clear as to the evolution of the business and the position of the company and highlights the more significant aspects;

iv) the proposed appropriation of profits is adequately supported.

5 On this basis, and taking into account the information obtained from Board of Directors and the company’s employees, together with the conclusions in the Report of the Auditors for Statutory and Stock Exchange Regulatory Purposes in respect to Individual Financial Information, we are of the opinion that:

i) the Management Report be approved;

ii) the Financial Statements be approved;

iii) the proposed appropriation of profits be approved.

Lisbon, March 10, 2006

The Supervisor Board

The President PricewaterhouseCoopers & Associados, SROC, Lda represented by:

________________________________________ Abdul Nasser Abdul Sattar, R.O.C.

Member

____________________________________ Dr. Rafael Caldeira Castel-Branco Valverde

Member

____________________________________ Dr. Duarte Nuno D´Orey da Cunha

Semapa General Meeting Minutes no. 23

On 3 April 2006, at 11 o’clock, a General Meeting of Semapa – Sociedade de Investimento e Gestão, SGPS, SA, public limited company, was held in Lisbon, at the Hotel Ritz, […] […]

As the meeting had been duly convened and was able to transact valid business, the Chairman opened the proceedings, thanking all the shareholders for attending and reading out the order of business.

[…]

As no one else wished to take the floor, the Chairman called a vote on the Management Report, Balance Sheet and Accounts for the period, together with the Report and Opinion of the Audit Board, and a separate vote on the consolidated financial statements for the same period, and in both cases the documents were approved with abstention by shareholders representing 57 votes and the votes in favour of all the other shareholders present. […]

The meeting then moved on to the third item on the order of business, and the Chairman began by reading the only motion, which had been tabled by the Board of Directors, as transcribed below:

“- Considering that the Company needs to maintain a financial structure compatible with sustained growth of its Group, in the various business areas in which it operates; - Considering that in order for the Company to remain independent from the financial system, it needs to preserve levels of consolidated short, medium and long term indebtedness which allow it to maintain sound solvency indicators; and

- Considering that the disposal by the company of its holding in Enersis II generated non-recurrent extraordinary results which fully justify the payment of a dividend significantly higher than that which would be proposed had such gain not occurred,

We propose that the balance of 329 817 303 euros in the account for Net Profits be distributed as follows:

Dividends for shares in circulation (0.42 euros/ share) 49 699 627 euros Legal reserve 1 445 412 euros Free reserves 278 672 264 euros”

As no one else wished to take the floor, the Chairman considered the discussion closed and called a vote on the motion, which was carried unanimously.

[…]

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Semapa - Sociedade de Investimento e Gestão, SGPS, S.A. Sociedade Aberta

Registered Offices: Av. Fontes Pereira de Melo, 14 – 10º -1050-121 Lisboa Share Capital: 118.332.445 Euros – Reg. at the Lisbon Companies Registry under no. 2630 Corporate person no. 502593130

DISCLOSURE

We are pleased to announce that the Annual General Meeting of Shareholders of this company, held on 3 April 2006, approved the individual and consolidated report and financial statements for the financial year of 2005, resolved to distribute a dividend of 42 cents per share, elected the Company Officers for the period 2006-2009 and approved the amendment of paragraphs 5 and 8 of Article 9 of the Articles of Association, in order to permit proof of ownership of shares and proxy letters to be submitted up to five days prior to the date of general meetings.

Lisbon, 03 April 2006

The Directors

AI assistant

Semapa — Management Reports 2006

1902_10-k_2006-04-18_bed7d1f6-c01e-4835-953e-ba4d1752c95f.pdf

DIRECTORS’ REPORT

INDIVIDUAL ACCOUNTS

FINANCIAL YEAR OF 2005

Directors’ Report

1. Overview of Operations

2. Major Developments and Events in 2005

3. Financial

3.1. Financing

3.2. Risk Management

3.3. Retirement Benefits

3.4. Listed Share Prices

3.5. Dividends

3.6. Net Profit for the Period

4. Prospects for 2006

SECIL Group

PORTUCEL / SOPORCEL Group

5. Acknowledgements

6. Proposal for Distribution of Profits

The Board of Directors

Chairman

Directors

REPORT on structure and corporate governance practices

Financial year of 2005

Chapter 0 Declaration of Compliance

Recommendation nr. 1

Recommendation nr. 2

Recommendation nr. 3

Recommendation nr. 4

Recommendation nr. 5

Recommendation nr. 5-A

Recommendation nr. 6

Recommendation nr. 7

Recommendation nr. 8

Recommendation nr. 9

Recommendation nr. 10

Recommendation nr. 10-A

Recommendation nr. 11

Chapter I Disclosure of information

1. Organisational structure

2. Specific Committees

3. Risk control

4. Listed share prices

5. Dividend distribution policy

6. Share and option allocation schemes

7. Transactions with company officers, holders of qualifying holdings and subsidiaries

8. Investor Support Office

9. Remuneration Committee

10. Remuneration of Auditors

Chapter II Exercise of voting rights and representation of shareholders

1. Company rules on voting rights

2. Postal vote form

3. Electronic voting

4. Period for freezing shares

5. Deadline for receipt of postal votes

6. Number of shares corresponding to one vote

Chapter III Company Rules

1. Codes of Conduct

2. Control of operating risks

3. Measures capable of interfering with takeover bids

Chapter IV Management Body

1. Details of Board of Directors

Pedro Mendonça de Queiroz Pereira

5. Office held in other companies:

Maria Maude Mendonça de Queiroz Pereira Lagos

Carlos Eduardo Coelho Alves

José Alfredo de Almeida Honório

Frederico José da Cunha Mendonça e Meneses

6. Other professional activities over the last 5 years:

Francisco José Melo e Castro Guedes

6. Other professional activities over the last 5 years:

Luís Manuel Pego Todo Bom

2. Executive Board

3. Workings of the Management Body

4. Remuneration Policy

5. Remuneration and retirement benefits

6. Policy on Notification of Irregularities

Disclosures required by Articles 447 and 448 of the Companies Code and Article 8.1 e) of Stock Market Commission Regulations 04/2004 (Financial year of 2005)

Semapa Management Reports 2006