1
Exhibits
Exhibit 1
–
PT Awards
IR and Governance Awards – Delloite and Diário Económico
2009/2011 - Best CEO in Investors Relations 2012 - Best CEO in Investors Relations 2013 - Best CEO in Investors Relations
2013 - Best Annual Report of Non-financial Sector
Sustainable Development Awards, Heidrick&Struggles
and Diário Económico 2011/2013 - Excellence Prize
Institutional Investor
2012 - Best CFO, IRO and CEO of Portugal for analysts and investors
2012 - Best IRO in Europe for analysts 2013 – Best CEO in Europe
IR Magazine UK & Continental Europe Awards 2009 - Company with best Investor Relations
Extel Pan-European Survey 2010 - Best CEO and CFO in Portugal
International Investor Ranking 2010/2011 - Best CEO in European Telecoms 2010 - Best Investor Relations in European Telecoms
World Awards 2010 - Top Ranking Performers 2010 - Silver Medal - Best Incentives Scheme Category Best Leader Awards – Leadership Business Consulting 2011 - Best Leader in Private Company Management Prizes of Information Society – APDSI 2011 - Information Society’ Personality (Zeinal Bava)
Chamber of Commerce 2011 - Businessman of the Year (Zeinal Bava)
Thomson Reuters Extel 2011/2013 - Best CEO, CEO and IRO in Portugal
World’s Most Ethical Companies 2012 - Top 5 Most Ethical Telecom Companies 2013 - Top 3 Most Ethical Telecom Companies
Source: Portugal Telecom Website
Exhibit 2
–
Class A shares
Rights
- Authorization for the acquisition of Ordinary Shares representing more than 10% of the share capital by shareholders that directly or indirectly carry out a business competing with that of the companies in a control relationship with Portugal Telecom;
- Amendments to the bylaws and share capital increases, as well as the limitation or suppression of pre-emptive rights and the determination of parameters for share capital increases as may be resolved upon by the Board of Directors;
- Issuance of bonds or other securities, determination of the value of issuance of such securities to be resolved by the Board of Directors and limitation or suppression of pre-emptive rights in the issuance of bonds convertible into shares, as well as determination of parameters for the issuance of such bonds as may be resolved upon by the Board of Directors;
- Resolutions on the application of net income and accumulated earnings, in the event of a dividend in a percentage in excess of 40% of the distributable profits;
- Election of the Board of the General Meeting of Shareholders, as well as of the Chairman of the Audit Committee and the Company’s Statutory Auditor;
- Approval of the general goals and fundamental principles of the Company’s policies;
- Definition of the general principles concerning the policy for shareholdings in companies, as well as, in cases where those principles require prior authorization by the General Meeting of Shareholders, the approval of resolutions on such acquisitions and sales;
2
0%10% 20% 30% 40% 50% 60%
1997 1998 1999 2000 2001 2002 2003 2004 2005
Mobile Operators' Market share
TMN Vodafone Optimus
In addition, the election of one third of the total number of Directors, including the Chairman of the Board of Directors, requires the votes issued by the State, in its capacity as holder of the Class A shares.
The Company’s Bylaws further determine that, among the members of the Executive Committee designated by the Board of Directors, at least one or two designated directors, according to the Executive Committee being composed of five or seven members, must be elected in accordance with the election rule that grants special rights to the State as holder of the Class A shares.
Source: PT Annual Report 2010
Exhibit 3
–
Commercial Transactions between PT and Its Major Shareholders
Source: PT Annual Reports 2007-2013
Exhibit 4
–
Portuguese Mobile Operator’s Market Share
3
*
* Sonaecom’s subsidiary
Exhibit 5
–
Evolution of selected share prices
Source: Bloomberg, Yahoo Finance
Exhibit 6
–
Sonaecom Financing Structure
Source:Sonaecom Presentation: Considerations on Sonaecom’s Offer on PT - March 2006, pg.3 €3
€5
€7
€9
€11
€13
Share Price Evolution
4
Exhibit 7
–
Offer premium Analysis
Source:Sonaecom Presentation: Considerations on Sonaecom’s Offer on PT - March 2006, pg. 9
Exhibit 8
–
Sonaecom/PT Project
5
Exhibit 9
–
Qualified Holdings - Evolution 2005/06/07
Entity 2005 YE 2006 YE 2007 YE
Telefónica 9.96% 9.96% 9.16%
Brandes IP 8.51% 7.41% 9.65%
BES 8.36% 7.77% 8.90%
Capital Group Companies 5.60% - 2.24%
CGD 5.04% 5.11% 6.37%
CInveste 2.58% - 2.17%
Fidelity Group 2.09% 2.09% 2.30%
Telexpress 2.04% - -
Telmex - 3.41% 3.75%
Ongoing Strategy Investments 3.01% 5.89%
Paulson&Co. - 2.34% -
UBS - 2.02% -
Barclays - 2.07% 2.26%
Fundação José Berardo - 2.07% -
Credit Suisse - - 2.21%
Visabeira Group - - 2.21%
Source: PT Annual Reports 2005-07
Exhibit 10
–
Nuno Vasconcellos and Rafael Mora Profiles
Nuno Rocha dos Santos de Almeida e Vasconcellos
Portuguese. Cousin of Bernardo Espírito Santo (Director at BES) and grandson of the founder of Sociedade Nacioinal de Sabões (SNS), once the greatest private conglomerate in Portugal. Lived in Lisbon until 11 and went to Belgium to high school. Graduated in Business Administration by the Curry College, in Boston. Manager of Andersen Consulting – nowadays Accenture – from 1987 until 1995. Responsible for the expansion of Heidrick&Struggles to Portugal, in 1995. It later founded and run (as CEO) Ongoing Strategy Investments.
Rafael Luís Mora Funes
Spanish. Graduated in Economics and Management by the University of Malaga. Partner at Andersen Consulting from 1986 until 1995. Managing Partner at Heidrick&Struggles in Portugal and Vice-CEO of the Board of Ongoing Stategy Investments. Member of the Board of Automóvel Clube Portugal (ACP), Vice-Chairman of the Board of Grupo Económica, Member of the Compensation Committee of Grupo Impresa and Grupo Privado Português.
Source: http://www.publico.pt/economia/noticia/cronica-do-fim-do-imperio-1673213, accessed December 16th, 2015; PT Annual Report 2008
Exhibit 11
–
Board Changes and Key Figures Profiles
Name Role 2005 Role 2006 Other/Former Roles(F) #PT shares 1st Appt**
Ernâni Rodrigues
Lopes* Chairman - MP at SaeR/ Minister of Finance (Socialist Party – PS)(F) 2003
Miguel Horta e Costa Vice-Chairman/
CEO -
State Secretary of External
Commerce(F)/BES and BESI Director(F) 23,395 1995
Zeinal Bava CFO Vice-Chairman Director at Merrill Lynch International(F) 63,111 2000
Carlos Vasconcellos
6
Iriarte Esteves EDi - Chairman at TMN/NED at Banco Best 8,682 2000
Paulo Fernandes EDi - Director at McKinsey(F) 100 2000
Henrique Granadeiro EDi Chairman/
CEO Ambassador of Portugal in OECD(F)/Chairman of PT Foundation 50 2003
Rodrigo Costa EDi
Vice-Chairman CEO of PT Comunicações/Director of Microsoft Brazil(F) 2005
Joaquim Goes NEDii NEDii Director at PT Multimédia/Director of
BES/ESDATA/Tranquilidade Vida (GES) 2,437 2000
Carlos Oliveira Cruz NEDii - Vice-Chairman of CGD(F) 134 2002
Jorge Tomé NEDii NEDii CEO of CaixaBI (CGD Group) 2002
Fernando
Abril-Martorell NEDii -
CEO Credit Suisse Spain/CFO at
Telefonica(F) 2001
António
Viana-Baptista NEDii NEDii Chairman of Telefónica 9,008 2000
Luís de Mello
Champalimaud* NEDii -
Chairman of Sociedade Agrícola Belo de
Mértola/CEO and owner of Cimentos Liz 2004 Patrick Monteiro de
Barros (1) NEDii - NED of ES Holding Control/ESI/ESFG/ES Resources 23,000,000 2002
Jorge Bleck* (2) NEDii - Chairman of GSM at BSN - Banco Santander
de Negócios/Lawyer at Linklaters LLP 2002
Carlos Blanco de
Morais* NEDii - Director of Fundação D. Pedro IV 2003
João Mello Franco* NEDii NEDii Director of José de Mello Participações 13,308 1998
Gerald S. McGowan NEDii NEDii Director of Overseas Private Investment
Corporation 2003
Peter Golob* (3) NEDii - Vice Chairman of Investment Banking at
Merrill Lynch Europe 7,500 2003
Nuno Silvério
Marques* NEDii -
Managing Partner at CIDOT, Comunicação e
Imagem 2003
Thomaz Paes de
Vasconcellos* NEDii NEDii Managing Partner at TPV – Consultoria e Gestão, Lda 2003 Luís Pacheco de Melo - CFO Director of Previsão, SGFP/ED at BESI(F) 45 2006
João Pedro Baptista - EDi Vice-Chairman at Brasilcel 2006
António Caria - EDi Chairman at PT Ventures 486 2006
Rui Pedro Soares - EDi
Chairman at PT Imobiliária/Consultant to the Socialist Group in the European
Parliament(F)/Responsible for e-Marketing at the 2005 PS’ legislative campaign(F)
50 2006
Franquelim Alves* - NEDii Director at ControlInvest Group/State Secretary of Economics (Social Democratic
Party – PSD)(F) 2006
Fernando Soares
Carneiro* - NEDii
Director at BERD(F)/Chairman at Somincor and EDM(F)/Director at REN(F) nominated
by Government (PS) 2006
Nuno de Almeida e
Vasconcellos (4) - NEDii Chairman at Ongoing Strategy Investments/MD at Heidrick&Struggles(F) 2006 Luís de Azevedo
Coutinho* - NEDii Consultant of the Abrantina Group/Member of the Supervisory Board of Fundação EDP(F) 2006 Amílcar de Morais
7
1 – March 6th, 2006
Francisco Pereira
Soares* - NEDii
Chairman of the Environment Committee of CEEP/Economic Consultant at the Civil House of the 2005 President of the Republic (PS)(F)
2006
Armando Vara - NEDii Director at CGD/Assistant Minister to the
Prime Minister (PS)(F) 2006
*Independent Directors; **Appointment; i ED – Executive Director; ii NED – Non-Executive Director
(1) Shares held through Telexpress Investments Ltd; (2) Resigned on 6th February 2006; (3) Resigned on 20th February 2006;
(4) Co-opted on the BoD on September 2006 following the resignation of Henrique Chaves
Key Figures’ Profiles
Henrique Manuel Fusco Granadeiro
Portuguese, he graduated in Corporate Organization and Business Administration by the Instituto Universitário de Évora. He started his career as Technical Secretary of the Council of Ministers. After the Revolution in April 1974, he is nominated to lead a department of the Ministry of Internal Affairs until 1976, when he is elected Ambassador of Portugal in OECD. Chaired the public entity IFADAP - Financial Institute to Fishery and Agriculture Development. After two years in the Board of Directors of Impresa Group’s subsidiaries, Mr. Granadeiro started his career at PT Group as CEO of Lusomundo Media and, later, Chairman of PT Portugal. In parallel, he advises the Board of Finantia Bank since 2001.
Zeinal Abedin Mohamed Bava
Born in Mozambique, he studied Electronic Engineering at the University College of London. Prior to PT, he served as Executive Director of Warburg Dillon Read until 1996, then moving to Deutsche Morgan Grenfell as Executive Director (1998). Next, he went to Merrill Lynch International as Director for Portugal for a year. Mr. Bava entered PT as Vice-President of PT Ventures and Director of PT, accumulating various Board seats in several subsidiaries of PT Group.
Luis Pacheco de Melo
Portuguese, Luis Pacheco de Melo graduated in Civil Engineering by the Instituto Superior Técnico and later taken an MBA in IESE. After a short experience as a civil engineer at Construtora do Tâmega, Mr. Pacheco de Melo worked in M&A and Corporate Finance, first at BESI and then at UBS. Later, he returned to BESI as Director of Emerging Markets and Member of the Executive Committee. In 2002, he started his career at PT as an Executive Member, accumulating Board positions at several PT subsidiaries.
Source: PT Annual Reports 2005/2006; Bloomberg; https://www.cisco.com/web/PT/ciscoexpo2009/bios/LuisPachecoMelo.html, accessed December 10th, 2015
Exhibit 12
–
Track of Remuneration Packages and Spin-off Proposal
Source: Letter to the shareholders
of Portugal Telecom, 6th March 2006, pg. xix and 20th February 2007, pg. 15
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Exhibit 13
–
PT Corporate Governance Structure
Source: PT Corporate Governance Report 2008
Exhibit 14
–
Key Corporate Bodies’ Responsibilities
Board of Directors
- Managing the Company’s businesses and to practice all acts regarding the corporate purpose that are not within the powers of other corporate bodies;
- Establishing the strategic orientation of the Group and monitoring the day-to-day management performed by the Executive Committee;
- Ensuring the Company has effective internal control, risk management and internal auditing systems implemented;
- May not approve resolutions on matters that must be resolved upon by the General Meeting of Shareholders, as established in the law or the Company’s Bylaws;
-May increase the share capital, following an opinion in favour issued by the Audit Committee and a resolution approved by the General Meeting of Shareholders.
Executive Committee
- Providing information to the remaining directors about the most relevant facts concerning the execution of the delegated powers, notably about the implementation of the strategic policies and options which general goals have been defined by the Board of Directors, as well as on the implementation of the business plans, budgets and annual investment plans approved by this management body;
- Execute the actions required by any indications received from the Board of Directors as a result of any information provided;
- The CEO shall send to the Chairman of the Board of Directors and of the Audit Committee all notices and minutes of the meetings of the Executive Committee in order to allow such officers to be informed as appropriate.
Audit Committee
- Approve and disclose the annual report of the supervisory activity, expressly mentioning any constraints faced and an annual action plan contemplating, inter alia, the measures required for compliance with its powers and duties in the following year;
- Inform and discuss with the Board of Directors and the Executive Committee, within their respective powers and duties, any situations identified in the exercise of their powers and duties;
9
- Adopt procedures to ensure compliance by PT with the legally and regulatory provisions applicable to the Company;- Check the accuracy of financial statements, generally supervise the quality and integrity of the financial information contained in the Company’s financial statements and control the preparation and disclosure of financial information;
- Analyse and issue its opinion on relevant matters connected to accounting and auditing aspects and impact on financial statements of changes to the accounting rules applicable tothe Company and to its accounting policies as well as controlling the auditing to the Company’s financial statements performed by the Chartered Accountant and the auditors, as well as to supervise and assess internal procedures on accounting and auditing matters; - Propose the appointment and control the independence of the Chartered Accountant to the General Meeting of Shareholders;
- Appointment, hiring, confirmation or termination of duties and determination of remuneration of the
Company’s external auditors, as well as to the control over their qualifications and independence, and approval of audit and/or other services to be rendered by such external auditors or by persons associated to the same; the External Auditors of the Company must report and be subject to the direct and exclusive supervision of the Audit Committee, which each year shall obtain from and review with the external auditors an External Audit Report; - Settle any differences between the Executive Committee and the abovementioned external auditors in respect of the financial information to be included in the financial statements to be reported to the competent authorities, as well as in respect of the procedure of preparation of the audit reports to be issued by the said external auditors; - Control the quality, integrity and efficiency of the risk management system, internal control system and internal audit system, including an annual review of their adequacy and efficiency, and generally to supervise the
execution of the functions performed within the framework of the Company’s internal audit and internal control system;
- Receive reports of irregularities, claims and/or complaints submitted by shareholders, Company employees or others, and to implement procedures aimed at receiving, recording and processing the same when related to accounting and auditing aspects, and internal control procedures on such matters;
Corporate Governance Committee
- Adoption, review and permanent evaluation of the corporate governance model, of internal rules and procedures on the Company’s structure and governance, as well as of the Group’s conduct principles and practices in compliance with the bylaws and the legal and regulatory provisions, and furthermore of national and international recommendations, standards and best practices on this matter – the Corporate Governance
Committee sends to the Board of Directors, until the date of approval of the annual report and accounts, a written declaration on the level of compliance with such rules by the Company;
Evaluation Committee
- Evaluation of the overall performance of the Board of Directors;
- Evaluation of the performance of the members of the Executive Committee, based on a criteria approved by the Compensation Committee that is, by its turn, appointed by the General Meeting of Shareholders.
- Perform consulting functions in respect of criteria for selection of the members of the management bodies of some PT subsidiaries and of any special committees created within the Board of Directors.
Source: PT Annual Report 2008
Exhibit 15
–
PT Revenues by Segment
Source: PT Annual Report 2006
Exhibit 16
–
Evolution of PT Multimedia Shareholder Structure
Entity March 2007 2007 YE 2008 YE 2009 YE (…) 2012YE
Unitel International Holdings, B.V. - - - - 18.81%
CGD 13.93% 13.93% 13.93% 15.09% -
10
BPI 7.74% 7.74% 7.74% 9.09% 7.55%
CInveste 6.06% 6.06% 5.79% 5.79% -
Telefonica 5.46% 5.46% 5.46% 5.46% -
Espírito Santo Irmãos 5.00% 5.00% 5.00% 5.00% 5.00%
Fundação José Berardo 5.00% 2.00% 4.34% 4.34% 4.34%
BES 4.34% 3.97% 3.98% 2.92% 3.45%
Joaquim Oliveira 3.97% 3.71% 3.71% 4.84% 4.84%
Ongoing Strategy Investments 3.16% 3.16% 3.16% 3.16% 3.29%
Cofina 2.23% 2.23% 4.91% 4.91% -
Visabeira Group 2.15% 2.15% 2.15% 2.15% 2.15%
SGC Group 2.00% 2.00% 2.00% 2.00% 2.00%
Metalgest 1.29% 1.29% 1.29% 1.29% 1.29%
ESAF (GES) - - 2.10% 1.97% 1.97%
BES Vida (GES) - - 1.90% 1.85% 1.85%
Estêvão Neves - - - - 2.94%
Norges Bank - - - - 2.06%
Zadig Gestion (Luxembourg) - - - - 2.04%
Source: PT Multimedia Annual Reports 2007-2012; ICP - ANACOM - Report of its understanding over the spin-off of ZON Multimedia
and its impact at market analysis-level and obligations arising from it, April 2008
11
Source: Telefonica Presentation: Offer for PT’s stake in Brasilcel, May 2010, pg. 11; PT Investors Presentation, Sale of Brasilcel and strategic partnership with Oi, July 28th, 2010, pgs. 3, 5Exhibit 18
–
Telesp + Vivo Synergies and Analysts’ Opinion
Source: Telefonica Presentation: Offer for PT’s stake in Brasilcel, May 2010, pg. 8
Analysts’ Opinion
Bank Statement
Citigroup Telefónica can still raise its offer to €7.5Bn 1
Banif “A fairbetween €7.5Bn and €8.2Bn” value of potential synergies should lead Telefonica to a price increase 2
ING “Telefónica can pay up to €7.5Bn without destroying value”3
1
http://www.eleconomista.es/telecomunicaciones-tecnologia/noticias/2202557/06/10/-Telefonica-podria-volver-a-subir-su-oferta-por-Vivo-hasta-los-7500-millones.html, accessed December 17th, 2015
2 http://economico.sapo.pt/noticias/zeinal-diz-que-oferta-subavalia-vivo-analistas-falam-em-8-mil-milhoes_91797.html,
accessed December 1st, 2015
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Exhibit 19
–
PT Dividends
’
History
“Since the dividends paid relative to the year of 2000, when Bava entered the company,[until 2014] PT
distributed among the shareholders around €11.6Bn between dividends, shares buyback and PT Multimédia spin-off (…) Of the €11.6Bn distributed to shareholders, €9.5Bn were distributed since Sonaecom’s takeover
announcement in early 2006”
Source: PT Annual Report 2013; http://economico.sapo.pt/noticias/pt-pagou-115-mil-milhoes- em-dividendos-desde-2000_203313.html, accessed December 17th, 2015
Exhibit 20
–
Oi Profile
Source: PT Presentation, Sale of Brasilcel and strategic partnership with Oi, July 28th, 2010, pgs. 10, 11
13
Oi shareholding structure post capital increase
Proforma 2010 Financial Highlights (€M)
Source: PT Presentation, Strategic investment and partnership with Oi, March 28th, 2011, pgs. 2, 3, 5
Exhibit 22
–
PT/Oi Merger Details and Board of Directors’ Proposal
The M&A has four key transaction terms:
1. Merger of Oi and Portugal Telecom: Through a capital increase in Oi, which PT will contribute in kind its assets and liabilities (excluding its direct and indirect holdings in Oi and Contax), at the same price as the cash capital increase. PT may elect not to consummate the subscription of the capital increase if independent appraiser values PT’s assets below BRL 5.8Bn. PT estimated the equity value of its assets to be c. BRL 6.1Bn (excluding Brazilian assets);
2. Simplification of the shareholding structure: After a BRL 4.5Bn recapitalization of Oi’s holdings (AG Tel, LF Tel and TPart) by Portugal Telecom (without need to raise cash, PT had a cash position of EUR 2.6Bn as 5/09/2013) and consolidation of all entities post capital increase, resulting in one listed company and one class of shares;
3. Cash capital increase: Minimum BRL 7.0Bn cash capital increase with a target of BRL 8.0Bn at Oi. BRL 2.0Bn subscription by TPart shareholders and BTG Pactual (or an investment vehicle managed by BTG Pactual); 4. Migration to Novo Mercado: Listing of the CorpCo shares on the Novo Mercado segment of the
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The proposed exchange ratios are:
- 1 Oi ON* share will be exchanged into 1 CorpCo share; - 1 Oi PN** share will be exchanged into 0.9211 CorpCo shares;
- 1 PT share will be exchanged into the equivalent of EUR 2.2911 of CorpCo shares (to be issued at the price of Oi’s capital increase) plus 0.6330 CorpCo shares.
Assuming the targeted cash capital increase of BRL 8.0Bn at Oi’s last 30 calendar days VWAP (BRL 4.36 per share), the PT shareholders will own 38.1% of the votes and outstanding capital of CorpCo.
The merger will be conditional to, inter alia, approvals by the shareholders of Oi and PT, the successful completion of the capital increase, the successful completion of the liability management of the PT and Tpart debt, as well as approvals by relevant regulatory authorities.
According to the announcement made by the companies the merge is expected to generate synergies with a net present value of approximately BRL 5.5Bn (EUR 1.8Bn). These synergies come from operating and financing efficiency gains, of which BRL 2.1Bn and BRL 1.2Bn will come from OPEX and CAPEX, synergies, while the remaining BRL 2.2Bn will come from financial synergies. The most relevant operational synergies will come from: (i) 39.3% organizational; (ii) 11.6% procurement OpEx; and (iii) procurement capex. Synergies from “other” capex and OpEx amount to 27.9%.
*ON – Ordinary Nominative (with voting rights embedded); **PN – Preferred Nominative (no voting rights, priority dividends)
Oi/CorpCo Shareholder Structure
CorpCo Board of Directors Proposed Members List
Name Previous Role(s) BoD’s Role
Zeinal Bava CEO at Oi CEO
José Mauro Mettrau Carneiro da
Cunha Chairman at Oi Chairman
Henrique Manuel Fusco Granadeiro Chairman at PT Vice-Chairman
Amilcar Morais Pires Board member at PT/Vida/BESI/Chairman of ESI Director if BES/BES- Member
Fernando Magalhães Portella Board member at Oi/Vice-Chairman at LF Tel SA Member Fernando Marques dos Santos Board member at Oi/Officer at BNDES Member Alexandre Jereissati Legey Board member at Oi/CFO and IRO at LF Tel SA Member José Maria Ricciardi Board member at BES/Chairman at BESI Member Nuno Rocha dos Santos de Almeida
e Vasconcellos Board member at PT/CEO at Ongoing Strategy Investment Member
15
€0.0
€0.5
€1.0
€1.5
€2.0
€2.5
€3.0
€3.5 Share Price Evolution
PT Oi BES
Renato Torres de Faria Board member at Oi/IRO at Andrade Gutierrez Participações, SA Member
Sergio Franklin Quintella Board member at Oi/Director at Tele Norte Leste Participações, SA Member
Source: CaixaBI – ESN - Investment Research, October 2nd, 2013; Bloomberg Profiles; Memorandum of Understanding for Oi/PT Business Combination
Exhibit 23
–
Espírito Santo Group (GES) Simplified Structure*
*As of June, 2014
Source: http://observador.pt/explicadores/bes/02-quem-manda-no-grupo/, accessed November 29th, 2015
Exhibit 24
–
PT, Oi and BES Shares Evolution
Source: Bloomberg, Yahoo Finance 100%
51%
Rio Forte
Espírito Santo International (ESI)
Espírito Santo Family
Espírito Santo Control
88.36%
Non-Financial Area 100% 100%
Banco Espírito Santo (BES) Tranquilidade
25.1% 100%
Espírito Santo Irmãos
49.3%
Espírito Santo Financial Group
16
Exhibit 25
–
PwC Report Highlights
2001 – Beginning of the exposure of PT Group to GES debt. As of 31st December 2001, the exposure ascended to €600.2m. Throughout the years this exposure attained the maximum value of €1,218m in 2005, being of €897m in July 2014.
2003 –Creation of the Tableaux de Bord which reflected the financial position of PT Group in a given moment.
Until the Tableaux de Bord that was presented at the Executive Committee on July 2nd, 2014 by the CFO Eng. Luís Pacheco de Melo, this controlling tool had never evidenced the debt issuers’ correct description (ESI/Rio Forte). The Tableaux de Bord was approved in the Executive Committee, although its presentation was not made regularly.
1st December 2004 – Implementation of the Job Order 2504 that stipulates the delegation of competencies
attributed to the Executive Committee by the Board of Directors in members designated individually. According to the point 206 of the Annex II of this Job Order, the CEO, the Director responsible for the financial area and the CFO have competencies to invest the treasury surpluses through any means legally admitted, for terms not superior to 180 days and with no value restrictions.
23rd December 2004 – (…) the Executive Committee approved the implementation of a centralised model of
treasury management of PT Group in Portugal.
22nd July 2007 –Introduction of the Audit Committee in the Corporate Governance structure of PT.
February 2008 until September 2010 –There were not made any investments by PT Group in debt issued by
GES (…).
17th December 2010 – Implementation of Job Order 409, which defines procedures and internal control
mechanisms that seek to guarantee the correct identification, approval and disclosure of transactions with related parties. Except for the situations set in the Job Order, when there are at stake transactions with related parties, those must be approved by the Board of Directors, based on an opinion expressed by the Audit Committee. The financial investments are not covered by the described procedure due to a non-subjection explicit in the Job Order. In 23 February 2011 is implemented the Job Order 111, still effective [at the date of the report] (that overwrites Job Order 409), that maintains the exemption of the previous approval requirement by the Audit Committee for financial investments with related parties, since made in market conditions.
3rd May 2013 –PT SGPS, as sole shareholder of PT Finance, approves the issuance of “notes” totalling €1,000m
with a 4.625% fixed rate and maturity at the 8th May, 2020. Part of this financing, €500m, was used to acquire ESI
“notes”.
May 2013 –Increase of [PT] exposure to ESI debt, from €510m to €750m, in the same day that the €1,000 issuance
(…) were deposited in the current account.
31st December 2013 – Acquisition by Rioforte of ES Irmãos, that by its turn concentrates 10.03% of ESFG.
Operation that was not disclosed by involved parts, namely with respect to the pricing.
28th January 2014 –Meeting at BES between PT CFO, Eng. Luís Pacheco de Melo and BES CEO, Mr. Ricardo
Salgado, by the latter’s initiative to present Rio Forte. It will have been explained that PT Group should now invest in commercial paper issued by Rio Forte instead of those issued by ESI. It had been delivered a presentation about GES restructuring that omitted the effects of the operations described in “31 December 2013” (…) in the financial situation of Rio Forte.
Between 10th and 21st February 2014 –Reimbursement of ESI debt issuance totalling €750m. Underwriting of
commercial paper issued by Rio Forte amounting to €897m. The increase (…) was made recurring to demobilization of term deposits at BES by the difference (€147m).
20th February 2014 – The Consolidated Annual Report of PT SGPS was published (…) Note 24 – Short-term
investments included debt instruments amounting €750M, with the following note: “This item includes essentially debt instruments issued by PT Finance and PT SGPS (…). This note included an inaccuracy as the debt instruments were not “issued” by PT SGPS but rather subscribed. (…) it did not identified the debt’s issuer. It is clarified that [the debt] was issued by ESI.
25th March 2014 – Deliberation by the Executive Committee about the transferal of centralized treasury
management from PT SGPS to PT Portugal following the ongoing business consolidation process (…).
26 March 2014 – Meeting at BES between PT SGPS’ CFO, Eng. Luís Pacheco de Melo, Mr. Carlos Cruz, financial
17
15 and 17 April 2014 –Rollover, at PT SGPS and PT Finance, of the investments in commercial paper of Rio
Forte amounting to €897m.
17 April 2014 –Issuance of €400m pursuant to “Contrato de Organização, Colocação e Tomada Firme de Papel
Comercial” signed between PT SGPS, BESI and BES beginning 23 April 2014 and reimbursement at 15 March 2014 (…) in order to “increase the short-term financial flexibility of PT Group”. (…)
27 June 2014 – BES delivered to PT SGPS Rio Forte 2013 Annual Report, dated 21 March 2014, where the
Auditor’s opinion includes an emphasis as follows:
“(…) we draw attention to the acquisition of a significant stake in Espírito Santo Financial Group, financed through short-term debt instruments, resulting in an excess of short-term debt over short-term assets. (…) The
success of this process is, at this point, uncertain as it is encountered in an initial phase”
10 July 2014 – Presentation to PT SGPS’ Board of Directors of the first report of the Audit Committee about
treasury surpluses’ investment in GES.
2010 to 2014 –The underwriting of debt issued by GES within the period analysed was always made under the
Job Orders 2504 and 111 and, as such, has never been subject of approval or previous appraisal by the Board of Directors, the Executive Committee and/or the Audit Committee.
(…)
Significant features about the scope
PwC highlights that its work has been subject to certain restrictions and limitations, namely: (…)
- Evidences of risk analysis prior to the investments in ESI/Rio Forte debt were not made available; - Evidences of market analysis (…) were not made available;
- In some situations, information given by the interviewees was contradictory (…); - Lack of access to many relevant documents and other information.
(…) PT considered that ESI, BES shareholder and its related entities did not constitute PT Group’s related parties (…).
Source: Synthesis of PwC’sanalysis about all the relevant aspects related with the treasury surpluses’
