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Notes to the Financial Statements - Efacec

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1<br />

2<br />

Index<br />

Consolidated <strong>Financial</strong> Statement Documents<br />

Balance sheet and profi t and loss account 4<br />

Consolidated statement of changes <strong>to</strong> shareholders´ funds 6<br />

Consolidated cash fl ow statement 8<br />

Note <strong>to</strong> <strong>the</strong> consolidated fi nancial statements 9<br />

Individual <strong>Financial</strong> Statement Documents<br />

Balance sheet and profi t and loss Account 42<br />

Individual statement of changes <strong>to</strong> Shareholders`s Funds 44<br />

Cash fl ow statement 46<br />

<strong>Notes</strong> <strong>to</strong> <strong>the</strong> individual fi nancial statements 47<br />

Report and opinion of <strong>the</strong> statu<strong>to</strong>ry audi<strong>to</strong>r 65<br />

Legal certifi cation of <strong>the</strong> consolidated and individual fi nancial statements 66<br />

3<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Non Current<br />

EFACEC Capital, SGPS, S.A. and Affiliate Companies<br />

Consolidated Balance Sheets as at 31 December 2007 and 2006<br />

Assets<br />

Responsible for Consolidation The Board of Direc<strong>to</strong>rs<br />

4<br />

<strong>Notes</strong> 2007 2006<br />

Amounts in Euro<br />

Tangible Assets 4 70.052.540 60.760.481<br />

Intangible Assets 5 4.874.864 4.222.206<br />

Goodwill 5 22.110.396 9.730.102<br />

Investments in Group and Associated Companies 6 7.560.600 7.290.641<br />

Investments in O<strong>the</strong>r Companies 7 14.483 23.461<br />

Deb<strong>to</strong>rs and Prepayments 10 27.000 27.000<br />

Deferred Tax Assets 16 4.243.415 5.159.264<br />

Derivatives 8 345.574 0<br />

Current<br />

Total non current 109.228.872 87.213.154<br />

Assets held for sale 11 1.242.908 924.881<br />

S<strong>to</strong>cks 11 47.225.497 33.825.261<br />

Trade Receivables and Accrued Income 9 218.231.846 213.008.166<br />

Deb<strong>to</strong>rs and Prepayments 10 29.895.248 12.928.853<br />

Derivatives 8 1.062.540 2.028.467<br />

O<strong>the</strong>r investments 12 1.526.260 556.814<br />

Cash and cash equivalents 12 10.213.594 7.106.645<br />

Shareholders’ Funds<br />

Shareholders’ Funds and Liabilities<br />

Total current 309.397.894 270.379.087<br />

Total Assets 418.626.766 357.592.241<br />

Share Capital 13 41.641.416 41.641.416<br />

Reserves for <strong>Financial</strong> Instruments 8 1.244.307 1.439.901<br />

Reserves and Retained Earnings 28.486.074 19.842.028<br />

Consolidated Net Profi t 17.401.185 17.075.631<br />

Anticipated Dividends 24 -12.216.000 0<br />

Minority Interests 19 2.936.936 2.626.381<br />

Non Current Liabilities<br />

Total Shareholders’ Funds 79.493.918 82.625.357<br />

Provisions 17 7.004.097 7.033.369<br />

Borrowings 15 64.340.649 68.956.834<br />

Suppliers 14 2.598.015 58.701<br />

Credi<strong>to</strong>rs and Accruals 14 3.477.160 289.121<br />

Deferred Tax Liabilities 16 6.342.351 6.968.478<br />

Derivatives 8 0 47.245<br />

Current Liabilities<br />

Total non current Liabilities 83.762.271 83.353.748<br />

Borrowings 15 46.819.426 12.603.204<br />

Shareholders’ Loans 27 7.100.000 0<br />

Suppliers 14 79.788.610 63.703.035<br />

Credi<strong>to</strong>rs and Accruals 14 27.052.078 28.900.430<br />

Deferred Income 18 94.493.036 86.406.468<br />

Deferred Tax Liabilities 16 0 0<br />

Derivatives 8 117.426 0<br />

Total current Liabilities 255.370.577 191.613.136<br />

Total Shareholders’ Funds and Liabilities 418.626.766 357.592.241<br />

The notes <strong>to</strong> <strong>the</strong> accounts are an integral part of <strong>the</strong>se consolidated balance sheets


EFACEC Capital, SGPS, S.A. and Affilate Companies<br />

Consolidated Profit and Loss Account by Nature<br />

for <strong>the</strong> years ended 31 December 2007 and 2006<br />

5<br />

<strong>Notes</strong> 2007 2006<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments<br />

Amounts in Euro<br />

Sales and Services Rendered 3 440.323.101 370.350.695<br />

Cost of Sales and Materials Consumed -204.802.346 -156.285.976<br />

Change in S<strong>to</strong>cks 11.771.333 4.303.260<br />

Third Party Supplies and Services 20 -135.012.292 -108.592.837<br />

Staff Costs -79.233.191 -79.423.070<br />

Depreciation -7.987.343 -8.291.713<br />

Provisions 9, 10, 17 -1.024.592 -1.460.122<br />

O<strong>the</strong>r Operational Costs -2.061.532 -3.412.489<br />

O<strong>the</strong>r Operational Income 3.466.397 4.246.912<br />

Operating Profi t 25.439.535 21.434.660<br />

Net <strong>Financial</strong> Costs 21 -4.865.583 -2.982.722<br />

Losses/Gains in associated companies 6 1.097.969 3.399.502<br />

Losses/Gains in o<strong>the</strong>r companies 7 13.213 -424.760<br />

Income tax - Deferred -499.589 -1.331.146<br />

Income tax - Current -3.437.482 -2.736.892<br />

Minority Interests - share of profi ts 19 -346.878 -283.011<br />

Consolidated Net Profi t 23 17.401.185 17.075.631<br />

The notes <strong>to</strong> <strong>the</strong> accounts are an integral part of <strong>the</strong>se consolidated balance sheets<br />

Responsible for Consolidation Conselho de Administração


EFACEC Capital, SGPS, S.A. and Affiliate Companies<br />

Consolidated statement of changes <strong>to</strong> Shareholders’ Funds as at 31 December 2007<br />

6<br />

<strong>Notes</strong> Share Capital Own Shares<br />

Issue<br />

Premiums<br />

Balance as at 1 January 2006<br />

Application of Profi t/Loss<br />

41.641.416 0 0<br />

Dividend distributions 24<br />

Cover of cash fl ows, net of taxes 8, 16<br />

Adjustments in Associate companies 6<br />

Exchange rate differences on foreign shareholdings 31<br />

Deferred taxes 16<br />

Disposal of subsidiaries 19<br />

Acquisition of Minority Shareholdings<br />

Transfers<br />

19<br />

Regularisations of Fixed Assets (prior <strong>to</strong> 2001)<br />

O<strong>the</strong>rs<br />

Gains / (Losses) recognised in Shareholders’ Funds<br />

Net profi t for <strong>the</strong> period<br />

4<br />

Total gains recognised in 2006 0 0 0<br />

Balance as at 31 December 2006 41.641.416 0 0<br />

Balance as at 1 January 2007<br />

Application of Profi t/Loss<br />

41.641.416 0 0<br />

Dividend distributions 24<br />

Anticipated dividend distributions 24<br />

Cover of cash fl ows net of taxes 8, 16<br />

Adjustment Associate companies<br />

Reversal of Revaluation Reserve<br />

6<br />

Exchange rate differences on foreign shareholdings 31<br />

Acquisition of Subsidiaries<br />

O<strong>the</strong>r<br />

Gains / (Losses) recognised in Shareholders’ Funds<br />

Net profi t for <strong>the</strong> period<br />

19, 31<br />

Total gains recognised in 2007 0 0 0<br />

Balance as at 31December 2007 41.641.416 0 0<br />

Responsible for consolidation


Attributable <strong>to</strong> shareholders<br />

Reserves <strong>Financial</strong><br />

Instruments<br />

Revaluation<br />

Reserves<br />

Reserves and<br />

Retained Earnings<br />

7<br />

Profit/Loss of<br />

<strong>the</strong> Period<br />

Minority<br />

Interests<br />

Total Shareholders’<br />

Funds<br />

293.679 21.207.165 5.873.270 14.503.814 4.510.206 88.029.550<br />

10.814.484 -10.814.484 0<br />

-19.056.277 -3.689.330 -79.304 -22.824.910<br />

1.146.222 1.146.222<br />

157.565 157.565<br />

-39.066 -39.066<br />

193.619 -735.486 -541.867<br />

-882.209 -882.209<br />

-1.055.720 -1.055.720<br />

-48.239 48.239 0<br />

819.894 819.894<br />

6.055 600.805 -149.603 457.257<br />

1.146.222 151.435 -7.389.841 -14.503.814 -2.166.836 -22.762.835<br />

17.075.631 283.011 17.358.642<br />

1.146.222 151.435 -7.389.841 2.571.817 -1.883.825 -5.404.193<br />

1.439.901 21.358.600 -1.516.572 17.075.631 2.626.381 82.625.357<br />

1.439.901 21.358.600 -1.516.572 17.075.631 2.626.381 82.625.357<br />

9.538.535 -9.538.535 0<br />

-7.537.096 -163.675 -7.700.771<br />

-12.216.000 -12.216.000<br />

-195.593 -195.593<br />

71.515 71.515<br />

-49.611 -49.611<br />

-226.675 -36.267 -262.942<br />

0 169.069 169.069<br />

-14.810 -674.907 -5.450 -695.168<br />

-195.593 -64.421 8.708.467 -29.291.631 -36.324 -20.879.502<br />

17.401.185 346.878 17.748.063<br />

-195.593 -64.421 8.708.467 -11.890.446 310.555 -3.131.438<br />

1.244.308 21.294.179 7.191.896 5.185.184 2.936.936 79.493.919<br />

The Board of Direc<strong>to</strong>rs<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Operating Activities<br />

EFACEC Capital, S.G.P.S., S.A. and Affiliated Companies<br />

Consolidated Cash Flow <strong>Statements</strong><br />

Responsible for Consolidation The Board of Direc<strong>to</strong>rs<br />

8<br />

<strong>Notes</strong> 2007 2006<br />

Amounts in Euro<br />

Received from cus<strong>to</strong>mers 495.451.141 425.489.747<br />

Paid <strong>to</strong> suppliers 322.491.466 272.905.734<br />

Paid <strong>to</strong> staff 76.924.353 74.834.632<br />

Flow generated by operations 96.035.322 77.749.381<br />

Payment/Receipt of corporation tax (3.171.780) (5.105.923)<br />

O<strong>the</strong>r revenue/payments in respect of operating activity (81.615.839) (55.009.511)<br />

Investment Activities<br />

Revenue provided by:<br />

Net infl ow from operating activities [1] 11.247.703 17.633.947<br />

Investments 7 23.191 2.667.375<br />

Tangible assets 4 0 38.249<br />

Investment subsidies 15.346 119.000<br />

Interest and similar income 252.527 157.528<br />

Dividends 818.549 180.000<br />

Payments in respect of:<br />

1.109.613 3.162.151<br />

Investments 7 12.089.839 2.166.055<br />

Tangible assets 4 8.918.834 7.375.600<br />

Intangible assets 0 0<br />

21.008.673 9.541.655<br />

Net outfl ow from investment [2] (19.899.060) (6.379.504)<br />

Financing Activities<br />

Revenues provided by:<br />

Non current loans obtained 15 0 11.547.208<br />

Current loans obtained/granted 15 53.940.765 31.394.811<br />

Subsidies and donations 0 0<br />

Sale of own shares 0 0<br />

Payments in respect of:<br />

53.940.765 42.942.019<br />

Non current loans obtained 15 521.406 5.342.102<br />

Current loans obtained/granted 15 16.679.772 21.546.325<br />

Amortisation of leasing contracts 16.995 22.101<br />

Interest and similar income 4.135.429 2.691.901<br />

Dividends 24 19.916.824 22.809.082<br />

41.270.425 52.411.511<br />

Flows generated by fi nancing activities [3] 12.670.340 (9.469.491)<br />

Change in cash and cash equivalents [A]-[B]+[C]-[D]+[E]=[1]+[2]+[3] 4.018.983 1.784.952<br />

Impact of exchange rate differences [A] 299.088 148.402<br />

Impact of change in consolidation perimeter [B] 356.499 (551.085)<br />

Cash and cash equivalents in discontinued units [C] 0 0<br />

Cash and cash equivalents at <strong>the</strong> beginning of <strong>the</strong> period [D] 7.663.459 6.577.994<br />

Cash and cash equivalents at <strong>the</strong> end of <strong>the</strong> period [E] 11.739.854 7.663.459


A. General Information<br />

<strong>Notes</strong> <strong>to</strong> <strong>the</strong> Consolidated <strong>Financial</strong> <strong>Statements</strong><br />

The EFACEC Group’s business activities cover an extensive range of high technology products and services.<br />

Diversity in creative and engineering capability enables us <strong>to</strong> offer technical solutions <strong>to</strong> a wide variety of activities and sec<strong>to</strong>rs<br />

in both internal and external markets. A signifi cant part of our output is in support of operational control <strong>to</strong>ols and management,<br />

developed in accordance with <strong>the</strong> most sophisticated consumer requirements. The variety of services and products which we offer<br />

include a wide range of equipment used in electricity transport and distribution, in remote control systems, ventilation, electric<br />

traction, industrial electronics, telecommunications, au<strong>to</strong>mation and robotics and in engineering projects focused on industrial<br />

plant and maintenance.<br />

The Group operates in a highly competitive market, and it is necessary <strong>to</strong> be alert <strong>to</strong> <strong>the</strong> constant developments and changes<br />

in cus<strong>to</strong>mer preferences and in new technologies. With this in mind, <strong>the</strong> Group has adapted its structure <strong>to</strong> ensure <strong>the</strong> most<br />

appropriate solution. Over <strong>the</strong> last few years, <strong>the</strong>re has been a commitment <strong>to</strong> internationalise and diversify activities that has<br />

seen branches and agents set up across more than 30 countries. Since 2000 <strong>the</strong> focus has been on analysing and evaluating<br />

<strong>the</strong> strategies followed, developing business areas with greater added value and building up <strong>the</strong> Group with <strong>the</strong> correct level of<br />

competencies for <strong>the</strong> new market and organisational challenges.<br />

EFACEC Capital, holding company of <strong>the</strong> EFACEC Group, is a publicly quoted company with its registered offi ce in Arroteia, parish<br />

of Leça do Balio, Ma<strong>to</strong>sinhos in Portugal.<br />

B. Summary of main accounting policies used<br />

The main accounting polices used <strong>to</strong> prepare <strong>the</strong>se consolidated fi nancial statements are described below. These policies have<br />

been consistently applied over <strong>the</strong> years unless o<strong>the</strong>rwise stated.<br />

1.1 Basis of Preparation<br />

The <strong>Financial</strong> <strong>Statements</strong> of EFACEC Capital, SGPS, SA were prepared in accordance with International <strong>Financial</strong> Reporting<br />

Standards (IFRS), as adopted by <strong>the</strong> European Union, as in force on 1 January 2007.<br />

The consolidated fi nancial statements were prepared using his<strong>to</strong>rical costs with <strong>the</strong> exception of land, fi nancial assets and liabilities<br />

(including derivatives) which have been valued in <strong>the</strong> accounts at <strong>the</strong>ir just value.<br />

The preparation of <strong>the</strong> fi nancial statements in accordance with <strong>the</strong> International <strong>Financial</strong> Reporting Standards requires <strong>the</strong> use of<br />

some important accounting estimates. It also requires that <strong>the</strong> management entity uses its judgement in <strong>the</strong> process of applying<br />

<strong>the</strong> accounting policies of <strong>the</strong> company. The area involving <strong>the</strong> greatest degree of judgement or complexity, or <strong>the</strong> area where <strong>the</strong><br />

assumptions and estimates are signifi cant for <strong>the</strong> fi nancial statements, relate <strong>to</strong> <strong>the</strong> estimate of goodwill impairment (Note 1.6).<br />

For <strong>the</strong> fi rst time in 2007, <strong>the</strong> International <strong>Financial</strong> reporting Standard IFRS 7 was used, which is compulsory for fi nancial years<br />

after 1 January 2007.<br />

During <strong>the</strong> period, <strong>the</strong> following Standards became manda<strong>to</strong>ry:<br />

- IFRIC 7 - Restatement approach as specifi ed in IAS 29;<br />

- IFRIC 8 - Scope of IFRS 2;<br />

- IFRIC 9 - Embedded Derivatives;<br />

- IFRIC 10 – Interim <strong>Financial</strong> Reporting and Imparity.<br />

The adoption of <strong>the</strong>se standards did not have any signifi cant impact on <strong>the</strong> accounting policies of <strong>the</strong> EFACEC Group.<br />

At <strong>the</strong> end of <strong>the</strong> year, <strong>the</strong> following standards were issued which were not manda<strong>to</strong>ry as at 31 December 2007:<br />

- IAS 23 - Cost of Borrowings – 2007 update;<br />

- IFRS 8 - Operational Segments<br />

- IFRIC 13 – Cus<strong>to</strong>mer Retention Programmes;<br />

- IFRIC 11 – Own Shares Transactions;<br />

- IFRIC 12 – Concessionary Contracts.<br />

In view of <strong>the</strong> fact that applying <strong>the</strong>se standards was not manda<strong>to</strong>ry for <strong>the</strong> year beginning 1 January 2007, <strong>the</strong> Group decided<br />

not <strong>to</strong> adopt <strong>the</strong>m immediately.<br />

It is estimated however that <strong>the</strong>re would be no signifi cant impact from applying <strong>the</strong>m <strong>to</strong> <strong>the</strong> consolidated fi nancial statements of<br />

<strong>the</strong> Group for those standards which are applicable <strong>to</strong> <strong>the</strong> group.<br />

9<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


1.2 Consolidation<br />

(a) Affi liates<br />

Affi liates are all those entities (including those Entities with Special Purposes) over which <strong>the</strong> Group has <strong>the</strong> power of decision<br />

concerning fi nancial and operational policies, generally where it holds over half of <strong>the</strong> voting rights. The existence or <strong>the</strong> impact<br />

of potential voting rights that may be currently exercisable or convertible is considered when an evaluation is made as <strong>to</strong> whe<strong>the</strong>r<br />

<strong>the</strong> Group has control over <strong>the</strong> o<strong>the</strong>r entity. Affi liates are consolidated from <strong>the</strong> date on which control is transferred <strong>to</strong> <strong>the</strong> Group,<br />

and are excluded from consolidation from <strong>the</strong> date on which that control ceases.<br />

The purchase method is used <strong>to</strong> account for <strong>the</strong> acquisition of subsidiaries. The cost of acquisition is measured by <strong>the</strong> fair value<br />

of <strong>the</strong> goods delivered, <strong>the</strong> instruments of share capital issued, <strong>the</strong> liabilities incurred or assumed on <strong>the</strong> date of acquisition, plus<br />

<strong>the</strong> directly attributable costs of acquisition. The identifi able assets acquired and <strong>the</strong> contingent liabilities taken on in a business<br />

merger are initially measured at <strong>the</strong>ir fair value on <strong>the</strong> date of acquisition, independently of <strong>the</strong> existence of minority interests.<br />

The excess of <strong>the</strong> cost of acquisition compared <strong>to</strong> <strong>the</strong> fair value of <strong>the</strong> Group’s share of <strong>the</strong> identifi able assets acquired is booked<br />

as goodwill (IFRS 3). If <strong>the</strong> cost of acquisition was less than <strong>the</strong> fair value of <strong>the</strong> net assets of <strong>the</strong> affi liate acquired, <strong>the</strong> difference<br />

is refl ected directly in <strong>the</strong> Profi t and Loss Account.<br />

The transactions, balances and unrealised gains on operations that <strong>to</strong>ok place between group companies are eliminated. Unrealised<br />

losses are also eliminated, except if <strong>the</strong> transaction shows evidence of impairment relating <strong>to</strong> a transferred asset. The accounting<br />

policies of affi liates were changed whenever necessary <strong>to</strong> ensure consistency with <strong>the</strong> policies used by <strong>the</strong> Group.<br />

The amount of Minority Interests is included in Shareholders’ Funds.<br />

The list of affi liates included in <strong>the</strong> consolidation perimeter is shown in Chapter G, as well as <strong>the</strong> respective impacts.<br />

(b) Associates<br />

Associates are all those entities over which <strong>the</strong> Group exercises a signifi cant infl uence but where <strong>the</strong> Group does not have control,<br />

generally shareholdings having between 20% and 50% of voting rights. Investments in associates are accounted for using <strong>the</strong><br />

equity method and are initially booked at cost. Investment of <strong>the</strong> Group in associates includes goodwill (from which accumulated<br />

impairment losses are deducted) that was identifi ed on acquisition (see Note 1.6).<br />

The share of <strong>the</strong> Group of gains and losses of its associates after acquisition is refl ected in <strong>the</strong> Profi t and Loss Account and its share<br />

of movements in reserves after acquisition is refl ected in reserves and in <strong>the</strong> accounting value of <strong>the</strong> investment. When <strong>the</strong> share<br />

of <strong>the</strong> Group in <strong>the</strong> losses of <strong>the</strong> associate is equal <strong>to</strong> or greater than <strong>the</strong> investment in <strong>the</strong> associate, including receivables not<br />

covered by guarantees, <strong>the</strong> Group does not recognise additional losses, unless <strong>the</strong>y have been caused by bonds or if <strong>the</strong> Group<br />

made payments in <strong>the</strong> name of <strong>the</strong> associate.<br />

If <strong>the</strong> cost of acquisition was less than <strong>the</strong> fair value of <strong>the</strong> net assets of <strong>the</strong> associates acquired, <strong>the</strong> difference is booked directly<br />

<strong>to</strong> Profi t and Loss.<br />

The goodwill identifi ed on acquisition of associates, less accumulated impairment losses, is shown in a specifi c line in <strong>the</strong> Balance<br />

Sheet.<br />

Unrealised gains on transactions with associates are eliminated when Group shareholdings are increased in associates. Unrealised<br />

losses are also eliminated, except if <strong>the</strong> transaction reveals evidence of impairment of an asset transferred. Accounting policies of<br />

associates are changed whenever necessary, <strong>to</strong> ensure consistency with <strong>the</strong> policies used by <strong>the</strong> Group.<br />

(c) Joint Ventures<br />

Interests in jointly controlled entities are booked using <strong>the</strong> proportional consolidation method.<br />

The Group adds its share of profi ts/losses, assets, liabilities and cash fl ows of joint ventures on a line by line basis with similar<br />

items of <strong>the</strong> Group Consolidated <strong>Financial</strong> <strong>Statements</strong>.<br />

The Group recognises <strong>the</strong> proportion of gains and losses on <strong>the</strong> sale of assets of assets of <strong>the</strong> Group <strong>to</strong> <strong>the</strong> Joint Venture that<br />

is attributable <strong>to</strong> o<strong>the</strong>r partners. It does not recognise its share in <strong>the</strong> gains or losses of <strong>the</strong> Joint Venture that result from <strong>the</strong><br />

purchase by <strong>the</strong> Group of assets belonging <strong>to</strong> <strong>the</strong> Joint Venture until it sells <strong>the</strong>m <strong>to</strong> an independent entity. The loss on <strong>the</strong><br />

transaction is immediately recognised if <strong>the</strong>re is evidence of a reduction in <strong>the</strong> value of <strong>the</strong> net realisable value of current assets,<br />

or of an impairment loss. The accounting policies of Joint Ventures are changed whenever necessary, <strong>to</strong> ensure consistency with<br />

<strong>the</strong> policies used by <strong>the</strong> Group.<br />

10


1.3 Reporting by segments<br />

A business segment is a group of activities and operations involved in <strong>the</strong> supply of products and services subject <strong>to</strong> risks and<br />

benefi ts that are different <strong>to</strong> o<strong>the</strong>r business segments. A geographical segment is involved in supplying products and services in a<br />

specifi c economic environment that is subject <strong>to</strong> different risks and benefi ts that those of segments that operate in o<strong>the</strong>r economic<br />

environments.<br />

1.4 Exchange Rate Conversion<br />

(a) Functional currency and that for presentation purposes<br />

The fi gures included in <strong>the</strong> <strong>Financial</strong> <strong>Statements</strong> of each of <strong>the</strong> Group entities are stated using <strong>the</strong> currency of <strong>the</strong> country in<br />

which <strong>the</strong> unit operates (“The functional currency”). The consolidated <strong>Financial</strong> <strong>Statements</strong> are presented in Euro, this being <strong>the</strong><br />

functional and presentational currency of <strong>the</strong> Group accounts.<br />

(b) Transactions and Balances<br />

Transactions in currencies o<strong>the</strong>r than <strong>the</strong> Euro are converted <strong>to</strong> <strong>the</strong> functional currency using <strong>the</strong> Exchange rate at <strong>the</strong> date of<br />

<strong>the</strong> transaction. Exchange gains and losses arising from <strong>the</strong> payment of transactions and from conversion at <strong>the</strong> rate on <strong>the</strong><br />

balance sheet date of <strong>the</strong> assets and liabilities denominated in a currency o<strong>the</strong>r than <strong>the</strong> Euro, are recognised in <strong>the</strong> Profi t and<br />

Loss account.<br />

(c) Group Companies<br />

The fi nancial results and position of all Group entities (none of which use a currency of a country suffering hyper infl ation) that<br />

have a functional currency different <strong>to</strong> that of account presentation are converted <strong>to</strong> <strong>the</strong> presentation currency as follows:<br />

(I) The assets and liabilities of each balance sheet presented are converted at <strong>the</strong><br />

exchange rate in force at <strong>the</strong> date of <strong>the</strong> <strong>Financial</strong> <strong>Statements</strong>;<br />

(II) Income and expenses of each profi t and loss account are converted at <strong>the</strong> average<br />

Exchange rate; and<br />

(III) The resulting exchange rate differences are shown in Shareholders’ Funds in <strong>the</strong> line<br />

“Reserves”.<br />

(d) Rates used <strong>to</strong> convert major foreign currencies in<strong>to</strong> Euro<br />

In Group companies with registered offi ces outside <strong>the</strong> Euro Zone, <strong>the</strong> fi gures in <strong>the</strong> fi nancial statements relating <strong>to</strong> assets and<br />

liabilities, and included in <strong>the</strong> fi nancial statements, were converted <strong>to</strong> Euro using <strong>the</strong> following Exchange rates as at 31 December<br />

2007:<br />

1.5 Tangible Fixed Assets<br />

For 1 monetary unit – Euro 31.12.2007 31.12.2006<br />

Argentina Peso ARS 4,63640 4,04517<br />

Brazil Real BRL 2,59630 2,81272<br />

China Yuan CNY 10,75240 10,34088<br />

Czech Republic Crown CZK 26,62800 27,48500<br />

Algeria Dinar DZD 98,24060 90,88288<br />

India Rupee INR 57,85500 58,29042<br />

Macau Pataca MOP 11,82440 10,54810<br />

Malaysia Ringgit MYR 4,86820 4,65509<br />

Mozambique New Metical MZN 34,81500 34,73749<br />

Singapore Dollar SGD 2,11630 2,01929<br />

Tunisia Dinar TND 1,79470 1,71408<br />

United States Dollar USD 1,47210 1,31700<br />

Venezuela Bolívar VEB 3.161,04000 2.017,60000<br />

Land and buildings basically correspond <strong>to</strong> fac<strong>to</strong>ries and offi ces. Land is shown at fair value, based on periodic valuations done at<br />

least every three years by external independent valuers. O<strong>the</strong>r tangible fi xed assets are shown at his<strong>to</strong>rical cost, less depreciation,<br />

including all expenditure directly attributable <strong>to</strong> <strong>the</strong> acquisition of <strong>the</strong> assets.<br />

Subsequent costs are included in <strong>the</strong> cost already booked for <strong>the</strong> asset, or recognised as separate assets, as appropriate, but<br />

only when it is probable that economic benefi ts will accrue <strong>to</strong> <strong>the</strong> company and that <strong>the</strong> cost can be measured reliably. O<strong>the</strong>r<br />

expenditure for repairs and maintenance are recognised as costs in <strong>the</strong> period in which <strong>the</strong>y are incurred.<br />

11<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Increases resulting from revaluations are shown in Reserves in Shareholders’ Funds. Each year, <strong>the</strong> difference between depreciation<br />

based on <strong>the</strong> re-valued amount of <strong>the</strong> asset taken <strong>to</strong> Profi t and Loss in <strong>the</strong> period, and depreciation based on <strong>the</strong> original cost of<br />

<strong>the</strong> asset, is transferred from Fair Value Reserves <strong>to</strong> Retained Earnings.<br />

Land is not depreciated. Depreciation on o<strong>the</strong>r assets is calculated using <strong>the</strong> straight line method using <strong>the</strong> cost value or <strong>the</strong> revalued<br />

amount, in order <strong>to</strong> apportion <strong>the</strong>ir cost or re-valued amount over <strong>the</strong> useful life of <strong>the</strong> asset down <strong>to</strong> <strong>the</strong>ir residual value,<br />

as follows:<br />

Line Years<br />

Land -<br />

Buildings and O<strong>the</strong>r Construction 25 - 50<br />

Plant and Equipment 8 - 12<br />

Vehicles 4 - 5<br />

Tools and Utensils 4 - 8<br />

Offi ce Equipment 4 - 6<br />

Depreciation begins in <strong>the</strong> month following that in which <strong>the</strong> asset entered service, in accordance with its useful life, as follows:<br />

Depreciation begins in <strong>the</strong> month following that in which <strong>the</strong> asset entered service.<br />

The residual values of assets and <strong>the</strong>ir useful lives are revised and adjusted, if necessary, at <strong>the</strong> balance sheet date.<br />

If <strong>the</strong> amount booked is greater than <strong>the</strong> recoverable value of <strong>the</strong> asset, it is immediately adjusted <strong>to</strong> its estimated recoverable<br />

value (Note 1.7).<br />

Gains and/or losses on disposal or write offs are determined by calculating <strong>the</strong> difference between <strong>the</strong> net accounting value of <strong>the</strong><br />

asset, and its disposal or write off value, being in <strong>the</strong> latter case zero, and included in <strong>the</strong> Profi t or Loss of <strong>the</strong> period.<br />

1.6 Intangible Assets<br />

(a) Goodwill<br />

Goodwill represents <strong>the</strong> difference between <strong>the</strong> cost of acquisition and <strong>the</strong> fair value of identifi able assets and liabilities of <strong>the</strong><br />

affi liate/subsidiary on <strong>the</strong> date of acquisition (Note 1.2), when <strong>the</strong> acquisition cost is greater than <strong>the</strong> fair value. It is shown on<br />

a separate line in <strong>the</strong> Balance Sheet.<br />

Goodwill is subject <strong>to</strong> impairment tests on an annual basis, and is shown at cost, less accumulated impairment losses. Gains or<br />

losses resulting from <strong>the</strong> sale of an entity include <strong>the</strong> value of its respective goodwill.<br />

Goodwill is allocated cash fl ow generating units (UGC) for carrying our impairment tests (Note 1.7). The amount recoverable from<br />

a UGS is calculated based on calculations of useful value. These calculations use cash fl ow projections based on fi nancial budgets<br />

approved by <strong>the</strong> management entity, covering a period of at least 4 years.<br />

The management entity works out <strong>the</strong> budgeted gross margin based on prior performance and its expectations for <strong>the</strong> development<br />

of <strong>the</strong> market. The average weighted growth rate used is consistent with <strong>the</strong> forecasts included in sec<strong>to</strong>r reports. The discount<br />

rates used are before tax, and refl ect <strong>the</strong> specifi c risks related <strong>to</strong> <strong>the</strong> relevant sec<strong>to</strong>rs.<br />

b) Software<br />

The acquisition cost of software licences is capitalised and includes all costs incurred for its acquisition and those required <strong>to</strong> put<br />

<strong>the</strong> available software in<strong>to</strong> use. These costs are depreciated over <strong>the</strong> estimated useful life (not exceeding 5 years).<br />

Costs related <strong>to</strong> <strong>the</strong> development or maintenance of <strong>the</strong> software are recognised as costs of <strong>the</strong> period in which <strong>the</strong>y are incurred.<br />

Costs directly associated with <strong>the</strong> production of identifi able and unique software controlled by <strong>the</strong> Group, and which is probably<br />

going <strong>to</strong> generate future economic benefi ts that are superior <strong>to</strong> costs involved beyond one year, are recognised as intangible<br />

assets. Direct costs include people costs <strong>to</strong> develop <strong>the</strong> software and a share of relevant fi xed costs.<br />

Software development costs recognised as assets are amortised over its estimated useful life (not exceeding 5 years).<br />

c) Research and Development Costs<br />

Expenditure on research is recognised as a cost in <strong>the</strong> period it is incurred. Costs related <strong>to</strong> development projects (concerning <strong>the</strong><br />

design and test of new products or improvements <strong>to</strong> existing products) are recognised as intangible assets when it is probable<br />

that <strong>the</strong> project will be a success, taking in<strong>to</strong> account its technical and commercial viability and <strong>the</strong> costs that can be measured<br />

reliably. O<strong>the</strong>r development expenditure is recognised as a cost of <strong>the</strong> period in which it is incurred. Development costs previously<br />

recognised as a cost are not recognised as an asset in subsequent periods. Development costs with a fi nite useful life that have<br />

been capitalised, are amortised from <strong>the</strong> beginning of commercial production of <strong>the</strong> product on a straight line bases over <strong>the</strong> period<br />

of expected benefi t, not exceeding fi ve years.<br />

12


1.7 Asset impairment<br />

Assets that do not have a defi ned useful life are not subject <strong>to</strong> amortisation, but are <strong>the</strong> object of annual impairment tests. Assets<br />

subject <strong>to</strong> amortisation are reviewed for impairment whenever events or changes in circumstances indicate that <strong>the</strong> value at which<br />

<strong>the</strong>y were booked may not be recoverable. An impairment loss is recognised by <strong>the</strong> amount by which <strong>the</strong> booked value of <strong>the</strong><br />

asset exceeds its recoverable value. The recoverable value is <strong>the</strong> higher of <strong>the</strong> fair value of <strong>the</strong> asset, less expenses required for<br />

sale, and its use value. To carry out impairment tests, assets are grouped <strong>to</strong>ge<strong>the</strong>r at <strong>the</strong> lowest level at which cash fl ows can be<br />

identifi ed separately (cash fl ow generation units, Note 1.6).<br />

1.8 Investments<br />

Investments in group companies excluded from consolidation (Chapter G) and o<strong>the</strong>r shareholdings are shown at acquisition<br />

cost.<br />

Investments in associated companies are valued using <strong>the</strong> equity method, as described in Note 1.2 (b).<br />

The Group checks at each balance sheer date whe<strong>the</strong>r objective evidence exists of <strong>the</strong> impairment of any investment. If such<br />

evidence exists, <strong>the</strong> accumulated loss, calculated as <strong>the</strong> difference between <strong>the</strong> balance sheet value and <strong>the</strong> current fair value, is<br />

recognised in <strong>the</strong> profi t and loss account of <strong>the</strong> period in which <strong>the</strong> impairment occurred (Note 1.7).<br />

1.9 S<strong>to</strong>cks<br />

S<strong>to</strong>cks are valued at <strong>the</strong> lower of cost and realisable value. The cost is calculated using <strong>the</strong> standard cost (which does not vary<br />

signifi cantly from actual production cost).<br />

The cost of fi nished products and manufacturing work in progress includes raw material costs, direct labour, o<strong>the</strong>r direct costs and<br />

manufacturing overheads (based on normal production capacity). The costs of loans obtained are excluded.<br />

Net realisable value is equal <strong>to</strong> <strong>the</strong> estimated selling price under normal business conditions, less variable selling costs. The cost<br />

of s<strong>to</strong>cks includes <strong>the</strong> transfer from shareholders’ funds of any loss or gain classifi ed as cash fl ow cover related <strong>to</strong> <strong>the</strong> purchase<br />

of raw materials.<br />

1.10 Recognition of Income and Costs Relating <strong>to</strong> Contracts over Several Years<br />

Profi t on contracts which continue for more than one year are accounted for in accordance with <strong>the</strong> percentage of work completed<br />

by reference <strong>to</strong> partial delivery, detailed costing or o<strong>the</strong>r means which allow reliable estimation of costs <strong>to</strong> completion or <strong>the</strong><br />

invoices <strong>to</strong> be sent <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer. When it is not possible <strong>to</strong> estimate profi ts and <strong>the</strong> costs with reasonable reliability, <strong>the</strong>n <strong>the</strong>y<br />

are recognised only when <strong>the</strong> product is delivered <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer, applying <strong>the</strong> work completed criteria. In this case, <strong>the</strong> costs<br />

incurred are recorded in s<strong>to</strong>cks – Products and work in progress.<br />

Costs of contracts include raw materials and direct materials, direct labour and also allocated indirect costs, distributed as<br />

specifi ed in <strong>the</strong> contract. Selling and administration expenses are charged as costs as <strong>the</strong>y occur. Provisions are set up for any<br />

foreseen losses on completing a contract in <strong>the</strong> period in which <strong>the</strong>y are determined, and are immediately refl ected in <strong>the</strong> results.<br />

Changes <strong>to</strong> contracts or estimates and forecast costs and/or profi ts and margins, arising from renegotiations of <strong>the</strong> conditions<br />

with cus<strong>to</strong>mers or from internal productivity, are recognised in <strong>the</strong> results from <strong>the</strong> period in which <strong>the</strong>y occur and taking in<strong>to</strong><br />

account <strong>the</strong> stage of completion.<br />

When <strong>the</strong>re are materials which have not yet been used on <strong>the</strong> job or <strong>the</strong> installation, <strong>the</strong>re will be a balance on <strong>the</strong> account<br />

“Products and work in progress”. If this relates <strong>to</strong> receivables from cus<strong>to</strong>mers not yet invoiced, <strong>the</strong> resulting margin is not<br />

recognised. When <strong>the</strong> opposite situation occurs and <strong>the</strong> amount invoiced <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer is greater than <strong>the</strong> level of work<br />

completed, a deferred liability is set up representing a liability <strong>to</strong> a cus<strong>to</strong>mer for <strong>the</strong> work still <strong>to</strong> be completed.<br />

1.11 Trade deb<strong>to</strong>rs and o<strong>the</strong>r deb<strong>to</strong>rs<br />

Trade deb<strong>to</strong>rs and o<strong>the</strong>r deb<strong>to</strong>rs are initially recognised at <strong>the</strong>ir nominal or fair value, when different, less any impairment loss.<br />

The provision for deb<strong>to</strong>r impairment is set up when <strong>the</strong>re is objective evidence that <strong>the</strong> Group will not receive <strong>the</strong> entire amount<br />

outstanding, as per <strong>the</strong> original conditions established for <strong>the</strong> debt. The amount of <strong>the</strong> provision is <strong>the</strong> difference between <strong>the</strong><br />

amount presented and <strong>the</strong> estimated present value of future cash fl ows, discounted at <strong>the</strong> effective interest rate. The amount of<br />

<strong>the</strong> provision is recognised in <strong>the</strong> profi t and loss account.<br />

13<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


1.12 Cash and cash equivalents<br />

The line “Cash and cash equivalents” includes cash, bank deposits, o<strong>the</strong>r short term high liquidity investments and with initial<br />

maturities up <strong>to</strong> three months. Bank overdrafts are shown in <strong>the</strong> balance sheet under current liabilities in <strong>the</strong> line Borrowings.<br />

1.13 Share capital<br />

Ordinary shares are shown in shareholders’ funds.<br />

The incremental costs directly attributable <strong>to</strong> <strong>the</strong> issue of new shares or options are shown in shareholders’ funds as a reduction,<br />

net of taxes, of increases in share capital. The incremental costs directly attributable <strong>to</strong> <strong>the</strong> issue of new shares or options or <strong>the</strong><br />

acquisition of a new business are included in <strong>the</strong> cost of acquisition as part of <strong>the</strong> purchase price.<br />

1.14 Borrowings<br />

Borrowings are initially recognised at <strong>the</strong>ir nominal value or fair value, whenever different, less any impairment loss. Later <strong>the</strong>y are<br />

shown at <strong>the</strong>ir amortised cost; any difference between receipts (net of transaction costs) and <strong>the</strong> amortised value is recognised in<br />

<strong>the</strong> profi t and loss account throughout <strong>the</strong> loan period, using <strong>the</strong> effective rate method.<br />

Borrowings are shown in current liabilities, unless <strong>the</strong> Group has an unconditional right <strong>to</strong> defer payment of <strong>the</strong> liability until at<br />

least 12 months after <strong>the</strong> balance sheet date.<br />

1.15 Income Tax and Deferred Taxes<br />

EFACEC Capital, S.G.P.S. opted for taxation based on consolidated profi ts as from 1993, currently covered by <strong>the</strong> “Special Rules<br />

for taxation of Groups of Companies”. All Group companies whose registered offi ces are located in Portugal and are subject <strong>to</strong> <strong>the</strong><br />

Portuguese Corporate Tax Regime (IRC), and where <strong>the</strong> direct and indirect share holding is greater than 90%, have been included<br />

in <strong>the</strong> tax consolidation in accordance with <strong>the</strong> applicable legislation. The consolidated tax charge is determined on <strong>the</strong> basis of <strong>the</strong><br />

arithmetic sum of taxable profi ts and losses as derived from individual companies’ tax returns.<br />

Deferred taxes are generally recognised using <strong>the</strong> liability method concerning temporary differences arising from <strong>the</strong> carrying<br />

amounts of assets and liabilities for consolidated fi nancial reporting purposes and amounts used for income tax purposes. However,<br />

if <strong>the</strong> deferred tax arises through <strong>the</strong> initial recognition of an asset or liability in a transaction that is not a business concentration<br />

that at <strong>the</strong> date of <strong>the</strong> transaction did not affect ei<strong>the</strong>r <strong>the</strong> accounting or fi scal result, it is not booked. Deferred taxes are<br />

determined by fi scal rates (and laws) in force or substantially in force at <strong>the</strong> balance sheet date and which are expected <strong>to</strong> be<br />

applicable in <strong>the</strong> period when <strong>the</strong> deferred tax asset or <strong>the</strong> payment of <strong>the</strong> deferred tax liability takes place. The tax rate that has<br />

been used <strong>to</strong> determine deferred taxes is that in force according <strong>to</strong> current law – 26.5% including local municipal tax.<br />

Deferred tax assets are recognised <strong>to</strong> <strong>the</strong> extent that it is probable that future taxable profi ts will be available <strong>to</strong> make use of <strong>the</strong><br />

timing difference.<br />

Deferred taxes on timing differences arising from investments in affi liates and associates are recognised, except when <strong>the</strong> Group<br />

is able <strong>to</strong> control <strong>the</strong> haphazard nature of <strong>the</strong> reversal of <strong>the</strong> timing difference and when it is probable that <strong>the</strong> timing difference<br />

does not revert in <strong>the</strong> foreseeable future.<br />

Deferred taxes are classifi ed as Current or Non-Current, according <strong>to</strong> <strong>the</strong> presentation of <strong>the</strong> amounts in <strong>the</strong> balance sheet <strong>to</strong> which<br />

<strong>the</strong>y relate, or <strong>to</strong> whe<strong>the</strong>r <strong>the</strong> respective timing differences are reverted in <strong>the</strong> short or medium/long term.<br />

1.16 Provisions<br />

Provisions are booked when <strong>the</strong> Group has a legal or constructive obligation when, as a result of past events, it is probable that an<br />

outfl ow of resources will be necessary <strong>to</strong> pay an obligation, and a reliable estimate of <strong>the</strong> amount of <strong>the</strong> obligation can be made.<br />

When <strong>the</strong>re are a number of similar obligations, <strong>the</strong> probability of generating an outfl ow is worked out <strong>to</strong>ge<strong>the</strong>r. The provision<br />

is booked even when <strong>the</strong> probability of an outfl ow, relating <strong>to</strong> an element included in <strong>the</strong> same class of obligations, may be<br />

reduced.<br />

1.17 Recognition of income<br />

Income covers <strong>the</strong> fair value of <strong>the</strong> sale of goods and services, net of taxes and commercial discounts and after elimination of<br />

internal sales.<br />

14


a) Sales<br />

The income recognised, in <strong>the</strong> case of multi-year contracts, in which <strong>the</strong> percentage of completion method is used, is in accordance<br />

with <strong>the</strong> policy defi ned for <strong>the</strong> recognition of income and costs related <strong>to</strong> multi-year contracts (Note 1.10).<br />

The sale of o<strong>the</strong>r goods is recognised when <strong>the</strong> products are delivered <strong>to</strong> and accepted by <strong>the</strong> cus<strong>to</strong>mer, and when payment of <strong>the</strong><br />

related trade debts is reasonably assured.<br />

b) Services<br />

The rendering of services is recognised in <strong>the</strong> accounting period in which <strong>the</strong>y are rendered, with reference <strong>to</strong> <strong>the</strong> phase of<br />

completion of <strong>the</strong> transaction at <strong>the</strong> balance sheet date.<br />

1.18 Leases<br />

Leases are classifi ed as operational leases if a signifi cant part of <strong>the</strong> inherent risks and benefi ts at <strong>the</strong> time <strong>the</strong> lease is taken on<br />

is retained by <strong>the</strong> lessee. Payments made for operational leases are booked in <strong>the</strong> profi t and loss account on settlement.<br />

Leases of tangible assets where <strong>the</strong> Group holds substantially all <strong>the</strong> risks and benefi ts associated with <strong>the</strong> asset are classifi ed<br />

as fi nancial leases. <strong>Financial</strong> leases are capitalised at <strong>the</strong> beginning of <strong>the</strong> lease for <strong>the</strong> lower of <strong>the</strong> fair value of <strong>the</strong> asset leased<br />

and <strong>the</strong> present value of <strong>the</strong> minimum payments of <strong>the</strong> lease. Each payment made is split between <strong>the</strong> capital sum due and <strong>the</strong><br />

fi nancial costs, in order <strong>to</strong> obtain a constant rate on <strong>the</strong> debt outstanding. Lease obligations net of fi nancial charges are shown in<br />

O<strong>the</strong>r Credi<strong>to</strong>rs. The interest is booked <strong>to</strong> fi nancial costs in <strong>the</strong> lease period <strong>to</strong> a constant periodic interest rate on <strong>the</strong> remaining<br />

debt of each period. Tangible assets acquired through fi nancial leases are depreciated over <strong>the</strong> lesser of <strong>the</strong> useful life of <strong>the</strong> asset<br />

or <strong>the</strong> lease period.<br />

1.19 Dividend distribution<br />

Dividend distributions <strong>to</strong> shareholders are recognised as a liability in <strong>the</strong> Group fi nancial statements in <strong>the</strong> period in which <strong>the</strong><br />

dividends are approved in <strong>the</strong> Shareholders’ General Meeting.<br />

1.20 Subsidies<br />

Subsidies received are booked at <strong>the</strong>ir fair value when a reasonable level of comfort exists that <strong>the</strong> subsidy will be received and<br />

<strong>the</strong> Group will comply with its obligations.<br />

Subsidies relating <strong>to</strong> <strong>the</strong> purchase of tangible assets are included in long term liabilities as deferred subsidies and are credited <strong>to</strong><br />

<strong>the</strong> profi t and loss account in proportion <strong>to</strong> <strong>the</strong> useful life of <strong>the</strong> corresponding assets.<br />

1.21 Discontinued operations<br />

A discontinued operation is one component part of an entity that was ei<strong>the</strong>r written off or was classifi ed for sale or liquidation and:<br />

(a) represents a signifi cant line of business or geographical area of operation; (b) is part of a restructuring of an area of business<br />

or geographical area of operations; or (c) is a subsidiary acquired for sale.<br />

2. <strong>Financial</strong> risk management<br />

2.1 Fac<strong>to</strong>rs of financial risk<br />

The Group operates internationally and thus has exposure <strong>to</strong> <strong>the</strong> market, in particular <strong>to</strong> changes in interest rates, exchange rates<br />

and <strong>the</strong> price of raw materials. Thus Group activities are exposed <strong>to</strong> a variety of fi nancial risks: market risk (including exchange<br />

rate risk, fair value risk relating <strong>to</strong> interest rates and price risk), liquidity risk and cash fl ow risk associated with interest rates. The<br />

Group has no signifi cant concentrations of credit risk. Various fi nancial instruments are used <strong>to</strong> minimise <strong>the</strong> potential adverse<br />

effects on <strong>the</strong> fi nancial performance of <strong>the</strong> Group. However, <strong>the</strong> Group only uses such fi nancial instruments <strong>to</strong> cover risks arising<br />

from its business and activities (“hedging purposes”).<br />

a) Exchange rate risk<br />

The Group operates internationally, and as a result, is exposed <strong>to</strong> risks from exchange rates. This risk arises from commercial<br />

transactions, recognition of assets and liabilities and net investments in operations outside <strong>the</strong> Euro zone.<br />

15<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


The Group has signifi cant sales and delivery of services in countries outside <strong>the</strong> Euro zone, particularly in US Dollars (USD). Group<br />

companies are required <strong>to</strong> carefully manage exchange risk cover, considering <strong>the</strong> operational margins in <strong>the</strong>ir business. Exchange<br />

risk cover is made from <strong>the</strong> proposal date in some cases or from <strong>the</strong> order date, until cash payment is received. In this way, not<br />

only are <strong>the</strong> majority of balance sheet assets and liability values covered but also future sales linked with proposals (considering<br />

an acceptable level of success) and orders. Accordingly cover can be for several years depending on how long <strong>the</strong> project or<br />

installations take, refl ecting <strong>the</strong> possible period of several years over which <strong>the</strong> work of Group companies can take place.<br />

b) Liquidity risk<br />

The management of <strong>the</strong> risk of liquidity implies maintaining a suffi cient level of cash and bank deposits, <strong>the</strong> viability of fl oating<br />

debt through adequate credit facilities, and skill in liquidating market positions. In line with <strong>the</strong> business needs, <strong>the</strong> Group Treasury<br />

aims at maintaining <strong>the</strong> fl exibility of <strong>the</strong> fl oating debt, keeping credit lines available.<br />

c) Cash fl ow risks and fair value related <strong>to</strong> interest rates<br />

Since <strong>the</strong> Group does not have assets that earn signifi cant amounts of interest, profi ts and cash fl ows are relatively independent<br />

of changes <strong>to</strong> interest rates.<br />

Interest rate risks of <strong>the</strong> Group come from long term borrowings. Borrowings with variable rates of interest expose <strong>the</strong> Group <strong>to</strong><br />

cash fl ow risks related <strong>to</strong> interest rates.<br />

The Group manages interest rate cash fl ow risks by transforming variable interest rates in<strong>to</strong> swaps with fi xed interest rates.<br />

In <strong>the</strong>se transactions, <strong>the</strong> Group agrees <strong>to</strong> exchange with o<strong>the</strong>r parties at specifi ed intervals (mainly quarterly), <strong>the</strong> difference<br />

between amounts at contracted fi xed rates of interest and amounts at a variable rate of interest.<br />

2.2 Accounting for financial instruments – derivatives and hedging<br />

Derivatives are initially recognised at fair value and subsequently readjusted <strong>to</strong> <strong>the</strong>ir fair value. The method for recognising changes<br />

in fair value depends on whe<strong>the</strong>r <strong>the</strong> derivative is defi ned as a hedge instrument and if so, <strong>the</strong> nature of <strong>the</strong> asset/liability <strong>to</strong> be<br />

covered. The group arranges certain derivatives as: (1) fair value cover of recognised assets and liabilities or of commitments (fair<br />

value cover); (2) cover of highly probable forecast transactions (cash fl ow cover).<br />

For each transaction, <strong>the</strong> Group prepares documentation <strong>to</strong> justify <strong>the</strong> relationship between <strong>the</strong> hedge instruments and <strong>the</strong> related<br />

assets/liabilities covered, as well as <strong>the</strong> objective of risk management and <strong>the</strong> strategy for taking out cover. The Group also documents<br />

its evaluation, both at <strong>the</strong> start of <strong>the</strong> cover and on a continuous basis, as <strong>to</strong> whe<strong>the</strong>r <strong>the</strong> derivatives used for cover effectively<br />

compensate for fl uctuations in fair value or in <strong>the</strong> cash fl ows of <strong>the</strong> items covered.<br />

The fair value of derivatives used <strong>to</strong> take out cover is disclosed in Note 8, as well as <strong>the</strong> movements that <strong>to</strong>ok place in Shareholders’<br />

Funds.<br />

a) Fair value hedging<br />

Changes in <strong>the</strong> fair value of derivatives that are arranged and qualifi ed for fair value hedging are recognised in <strong>the</strong> profi t and loss<br />

account, <strong>to</strong>ge<strong>the</strong>r with changes <strong>to</strong> <strong>the</strong> fair value of <strong>the</strong> assets and liabilities covered (in <strong>the</strong> covered position) attributable <strong>to</strong> <strong>the</strong><br />

risk covered.<br />

b) Cash fl ow hedging<br />

The effective part of <strong>the</strong> change in fair value of derivatives that are arranged and qualifi ed for cash fl ow hedging is recognised in<br />

shareholders’ funds. The gain or loss related <strong>to</strong> <strong>the</strong> ineffective part is immediately recognised in <strong>the</strong> profi t and loss account.<br />

Concerning cover strategies that use options, in accordance with IAS 39 and complying with <strong>the</strong> effi ciency test, <strong>the</strong> strategy value<br />

is split in<strong>to</strong> <strong>the</strong> intrinsic value and <strong>the</strong> temporary value.<br />

The cumulative amounts in shareholders’ funds are reclassifi ed <strong>to</strong> profi t and loss in <strong>the</strong> same period in which <strong>the</strong> item covered<br />

generates gains and losses (for example, when <strong>the</strong> Sales forecast covered occurs). However, when <strong>the</strong> forecast covered transaction<br />

results in a non fi nancial asset (for example, s<strong>to</strong>cks) or non fi nancial liability being recognised, <strong>the</strong> previously deferred gains and<br />

losses in shareholders’ funds are transferred and included in <strong>the</strong> initial measurement of that asset or liability.<br />

When a hedge instrument expires or is sold, or when a hedging does not comply with <strong>the</strong> accounting and qualifi cation criteria, any<br />

cumulative gain or loss existing at that moment in shareholders’ funds, remains in shareholders’ funds and is recognised when<br />

<strong>the</strong> forecast transaction is fi nally refl ected in <strong>the</strong> profi t and loss account. When <strong>the</strong> expected occurrence of a forecast transaction<br />

is no longer highly probable, <strong>the</strong> cumulative gains or losses refl ected in shareholders’ funds are immediately transferred <strong>to</strong> profi t<br />

and loss.<br />

c) Non qualifi ed derivatives for hedging purposes<br />

Certain derivatives do not comply with hedging accounting and qualifi cation criteria. Changes in fair value of <strong>the</strong>se derivatives are<br />

immediately recognised in <strong>the</strong> profi t and loss account.<br />

16


2.3 Estimates of fair value<br />

The fair value of fi nancial instruments available on <strong>the</strong> open market (for example publicly negotiated derivatives, negotiable<br />

instruments available for sale) is determined on <strong>the</strong> basis of quoted market prices on <strong>the</strong> balance sheet date. The quoted market<br />

price used for fi nancial assets of <strong>the</strong> Group is <strong>the</strong> price received by shareholders on <strong>the</strong> open market; <strong>the</strong> quoted market price for<br />

fi nancial liabilities is <strong>the</strong> price paid on <strong>the</strong> open market.<br />

The fair value of fi nancial instruments not traded on <strong>the</strong> open market (for example unquoted derivatives) is determined using<br />

valuation techniques. The Group uses a variety of methods and reaches its conclusions based on market conditions at each balance<br />

sheet date. Quoted market prices or negotiation quotas for similar instruments are used for long term debts. O<strong>the</strong>r techniques,<br />

such as estimates of discounted cash fl ows, are used <strong>to</strong> determine <strong>the</strong> fair value of o<strong>the</strong>r fi nancial instruments. The fair value of<br />

interest rate swaps is calculated based on <strong>the</strong> present value of estimated future cash fl ows. The fair value of exchange rate futures<br />

contracts is determined using market exchange rates at <strong>the</strong> balance sheet date.<br />

The nominal value of deb<strong>to</strong>r and credi<strong>to</strong>r balances less estimated credit adjustments is assumed <strong>to</strong> be close <strong>to</strong> <strong>the</strong>ir fair value. The<br />

fair value of fi nancial liabilities is estimated by updating future contractual cash fl ows at <strong>the</strong> current market interest rate available<br />

for similar fi nancial instruments.<br />

C. Segment Information<br />

3. Reporting by activity segment<br />

Information by segments is presented for <strong>the</strong> geographical segments and businesses of <strong>the</strong> Group. The results, assets and<br />

liabilities of each segment correspond <strong>to</strong> those that are directly attributable <strong>to</strong> <strong>the</strong>m as well as those that can be attributed on a<br />

reasonable basis.<br />

Business segment<br />

A business segment is a separately identifi able part of <strong>the</strong> Group, committed <strong>to</strong> supplying a specifi c product or service, and that<br />

is subject <strong>to</strong> different risks and opportunities than those of o<strong>the</strong>r business segments.<br />

As at 31 December 2007, <strong>the</strong> Group was organised on a worldwide basis in<strong>to</strong> <strong>the</strong> following business segments:<br />

- SEN – Energy Solutions;<br />

- EES – Engineering, Environment and Services;<br />

- STL – Transport and Logistics;<br />

The information also includes a heading entitled “Various”, which groups <strong>to</strong>ge<strong>the</strong>r assets relating <strong>to</strong> corporate centres and<br />

investments in non core Group business activities.<br />

Geographical segment<br />

A geographical segment is an individual area of <strong>the</strong> Group committed <strong>to</strong> providing products or services within a specifi c economic<br />

zone, and that is subject <strong>to</strong> different risks and opportunities than those of o<strong>the</strong>r economic zones.<br />

In addition <strong>to</strong> Portugal, <strong>the</strong> relevant geographic segments are those in countries or regions which <strong>the</strong> company has chosen as<br />

EFACEC markets:<br />

3.1 Information by business segment<br />

- Spain<br />

- Central Europe<br />

- Maghreb countries<br />

- Sou<strong>the</strong>rn Africa<br />

- Latin America<br />

- United States of America<br />

17<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


3.1.1 Turnover<br />

The split of turnover between <strong>the</strong> main business and geographical areas for <strong>the</strong> years ending 31 December 2007 and 2006 was<br />

as follows:<br />

31 December 2007<br />

Energy<br />

Engineering,<br />

Environment and<br />

Services<br />

18<br />

Transport<br />

and Logistics<br />

Various Total<br />

Gross sales by segment 192.111.063 191.893.051 84.511.060 876.431 469.391.605<br />

Sales between segments 7.732.517 6.313.672 15.022.315 0 29.068.504<br />

Consolidated sales 184.378.546 185.579.380 69.488.745 876.431 440.323.101<br />

31 December 2006<br />

Gross sales by segment 156.442.644 158.741.869 101.923.272 931.025 418.038.809<br />

Sales between segments 1.600.189 24.603.688 21.029.697 454.541 47.688.115<br />

Consolidated sales 154.842.455 134.138.182 80.893.575 476.484 370.350.695<br />

3.1.2 Profit/Loss<br />

Profi t and Losses by business segment for <strong>the</strong> years ended 31 December 2007 and 31 December 2006 were as follows:<br />

31 December 2007<br />

Energy<br />

Engineering,<br />

Environment and<br />

Services<br />

Transport<br />

and Logistics<br />

Various Total<br />

Operating profi ts 13.587.774 5.027.018 3.034.272 3.790.471 25.439.536<br />

Net fi nancial charges (Note 21) -2.311.304 -367.764 -283.364 -1.903.152 -4.865.583<br />

Losses/Gains on associates and o<strong>the</strong>r holdings 94.251 729.509 98.029 189.394 1.111.182<br />

Profi t/(Loss) before tax 11.370.722 5.388.763 2.848.937 2.076.713 21.685.136<br />

Income tax -2.411.462 -1.379.710 380.037 -525.936 -3.937.072<br />

Minority Interests 0 0 0 -346.878 -346.878<br />

Net profi t for <strong>the</strong> period 8.959.260 4.009.053 3.228.974 1.203.898 17.401.186<br />

31 December 2006<br />

Operating profi ts 10.378.142 4.721.918 5.558.427 776.173 21.434.660<br />

Net fi nancial charges (Note 21) -810.216 685.507 -31.978 -2.826.035 -2.982.722<br />

Losses/Gains on associates and o<strong>the</strong>r holdings 772.582 675.622 266.385 1.260.153 2.974.742<br />

Profi t/(Loss) before tax 10.340.507 6.083.047 5.792.834 -789.709 21.426.680<br />

Income tax -1.647.120 -1.801.549 970.577 -1.589.946 -4.068.038<br />

Minority Interests 0 0 0 -283.011 -283.011<br />

Net profi t for <strong>the</strong> period 8.693.387 4.281.498 6.763.411 -2.662.665 17.075.631<br />

The transfers and transactions between segments take place under normal commercial terms and under conditions applicable <strong>to</strong><br />

independent third parties.<br />

3.1.3 O<strong>the</strong>r Information<br />

31 December 2007<br />

Energy<br />

Engineering,<br />

Environment and<br />

Services<br />

Transport<br />

and Logistics<br />

Various Total<br />

Assets 155.696.138 147.954.859 71.441.982 43.533.788 418.626.766<br />

Liabilities 106.760.696 119.161.029 47.547.070 65.664.054 339.132.848<br />

Investments (Note 4) 14.362.545 11.879.651 1.326.734 3.691.191 31.260.120<br />

31 December 2006<br />

Assets 141.834.503 105.753.555 76.594.792 33.409.392 357.592.241<br />

Liabilities 88.344.477 73.848.868 40.232.602 72.540.937 274.966.884<br />

Investments (Note 4) 7.338.176 566.985 522.023 1.710.422 10.137.607<br />

Segment assets mainly include tangible fi xed assets, s<strong>to</strong>cks, derivatives for hedging of commercial transactions, deb<strong>to</strong>rs and cash.<br />

Segment liabilities correspond <strong>to</strong> operational liabilities (including derivatives for hedging commercial transactions). Investments<br />

include additions <strong>to</strong> tangible and intangible fi xed assets, including goodwill (Note 4).


3.2 Information by geographical segment<br />

Sales and services rendered are split based on <strong>the</strong> region in which <strong>the</strong> cus<strong>to</strong>mer is located:<br />

31.12.2007 31.12.2006<br />

Sales Assets Investments Sales Assets Investments<br />

Portugal 269.124.061 353.702.044 18.430.220 249.832.568 335.276.856 9.296.094<br />

Spain 38.220.910 131.900 0 28.264.786 21.386 15.228<br />

Central Europe 5.140.612 3.697.567 55.743 2.544.875 1.226.542 0<br />

Maghreb 20.375.261 6.045.732 17.923 11.983.370 3.402.646 75.648<br />

Sou<strong>the</strong>rn Africa 16.806.998 13.507.997 1.289.277 8.143.974 3.447.234 0<br />

Latin America 14.617.667 15.034.309 1.313.399 17.502.978 10.058.967 692.862<br />

United States 24.477.929 23.378.521 10.121.766 18.738.089 1.132.768 4.025<br />

O<strong>the</strong>r Markets 51.559.663 3.128.696 31.792 33.340.055 3.025.842 53.750<br />

440.323.101 418.626.766 31.260.120 370.350.695 357.592.241 10.137.607<br />

D. <strong>Notes</strong> <strong>to</strong> <strong>the</strong> Balance Sheets as at 31 December 2007 and 31 December 2006<br />

4. Tangible fixed assets<br />

4.1 Movements that <strong>to</strong>ok place in <strong>the</strong> periods<br />

Year 2007<br />

Land and<br />

Buildings<br />

Plant and<br />

Equipment<br />

19<br />

Office Equipment O<strong>the</strong>r Total<br />

Opening net value 41.244.338 14.229.064 2.140.615 3.146.464 60.760.481<br />

Exchange Rate Differences -100.730 20.953 -6.499 -167.419 -253.695<br />

Entries in<strong>to</strong> consolidation perímeter 5.569 832.161 34.838 0 872.568<br />

Exits from <strong>the</strong> consolidation perimiter 0 0 0 0 0<br />

Revaluation -46.262 -5.473 -62 -528 -52.325<br />

Increases 1.412.018 3.787.236 676.391 11.092.956 16.968.601<br />

Decreases -239.230 -155.009 -11.723 -42.320 -448.282<br />

Depreciation charges -2.285.793 -3.973.102 -1.276.205 -312.352 -7.847.452<br />

Adjustments 320.009 590.777 105.430 -963.574 52.642<br />

Closing net value 40.309.919 15.326.608 1.662.787 12.753.227 70.052.540<br />

Cost or fair value 101.182.843 91.022.921 24.554.481 19.521.500 236.281.746<br />

Cumulative depreciation -60.872.925 -75.696.314 -22.891.694 -6.768.273 -166.229.206<br />

Net value 40.309.918 15.326.607 1.662.787 12.753.227 70.052.540<br />

Year 2006<br />

Opening net value 40.472.532 12.880.255 2.905.772 2.873.709 59.132.268<br />

Exchange Rate Differences -69.782 -17.767 -7.176 -147.233 -241.958<br />

Entries in<strong>to</strong> consolidation perímeter -66.883 -34.041 -69.573 -77.900 -248.397<br />

Exits from <strong>the</strong> consolidation perimiter 0 0 0 0 0<br />

Revaluation 0 0 0 0 0<br />

Increases 2.220.593 4.167.761 581.228 1.523.878 8.493.460<br />

Decreases -66.883 -144.067 -70.930 -77.900 -359.781<br />

Depreciation charges -2.171.117 -3.541.626 -1.241.477 -209.376 -7.163.596<br />

Adjustments 925.880 918.549 42.771 -738.715 1.148.485<br />

Closing net value 41.244.338 14.229.064 2.140.615 3.146.463 60.760.481<br />

Cost or fair value 99.665.404. 84.694.185 22.815.646 9.649.987 216.825.222<br />

Cumulative depreciation -58.421.065 -70.465.122 -20.675.031 -6.503.523 -156.064.741<br />

Net value 41.244.338 14.229.064 2.140.615 3.146.464 60.760.481<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Cerca de 75% dos investimen<strong>to</strong>s corpóreos do ano registaram-se na área de negócio de Energia, e incluem fundamentalmente o<br />

desenvolvimen<strong>to</strong> da linha de produção de transformadores de potência.<br />

4.2 Revaluations<br />

Buildings and o<strong>the</strong>r tangible fi xed assets of <strong>the</strong> Group were re-valued on 1 January 2004, using <strong>the</strong> monetary revaluation coeffi cients<br />

as part of <strong>the</strong> transition <strong>to</strong> IFRS (IFRS 1), while land was evaluated at fair value.<br />

If tangible assets were shown at his<strong>to</strong>rical cost, <strong>the</strong> values in <strong>the</strong> balance sheet would be:<br />

4.3 Leased tangible assets<br />

31.12.2007 31.12.2006<br />

Cost 132.499.495 109.153.171<br />

Cumulative depreciation -86.545.405 -73.382.842<br />

Net Value 45.954.090 35.770.329<br />

The line Tangible Assets includes <strong>the</strong> following amounts for leased assets:<br />

31.12.2007 31.12.2006<br />

Leases 195.712 193.677<br />

Cumulative depreciation -44.944 -55.754<br />

Net value 150.768 137.923<br />

The responsibilities relating <strong>to</strong> <strong>the</strong>se contracts are refl ected in Liabilities in <strong>the</strong> line Suppliers and O<strong>the</strong>r Credi<strong>to</strong>rs (Note 14).<br />

4.4 Guarantees<br />

No pledges or guarantees exist on any assets.<br />

5. Intangible Assets and Goodwill<br />

5.1 Movements that <strong>to</strong>ok place in <strong>the</strong> period<br />

Year 2007<br />

Goodwill R&D O<strong>the</strong>r Total<br />

Opening net value 9.730.101 992.933 3.229.273 13.952.307<br />

Exchange rate differences 0 0 0 0<br />

Entries in<strong>to</strong> consolidation perímeter 0 0 0 0<br />

Exits from <strong>the</strong> consolidation perimiter 0 0 0 0<br />

Revaluation 0 0 0 0<br />

Increases 12.380.295 82.786 1.828.438 14.291.519<br />

Decreases 0 0 0 0<br />

Depreciation of <strong>the</strong> period 0 -382.537 -833.887 -1.216.424<br />

Adjustments 0 1.942 -44.084 -42.142<br />

Closing net value 22.110.396 695.124 4.179.740 26.985.260<br />

Year 2006<br />

Opening net value 12.234.900 707.017 1.936.034 14.877.951<br />

Exchange rate differences 0 0 0 0<br />

Entries in<strong>to</strong> consolidation perímeter 0 0 0 0<br />

Exits from <strong>the</strong> consolidation perimiter 0 0 0 0<br />

Increases 1.216.132 344.341 83.675 1.644.148<br />

Decreases 0 0 0 0<br />

Depreciation of <strong>the</strong> period 0 -611.629 -1.011.010 -1.622.638<br />

Adjustments -3.720.930 553.204 2.220.574 -947.153<br />

Closing net value 9.730.102 992.933 3.229.273 13.952.308<br />

20


5.2 Goodwill<br />

The breakdown of goodwill by affi liate/associate company is as follows:<br />

31.12.2007 31.12.2006<br />

ATM - Assistência Total em Manutenção, SA 4.577.159 4.577.159<br />

Grupo TECH M5 3.549.415 2.556.615<br />

Engimais 1.971.508 1.971.508<br />

O&M Serviços, S.A. 207.628 207.628<br />

ENT - Empresa Nacional de Telecomunicações, SA (a) 204.736 204.736<br />

BCI - BRISA Conservação de Infra-estruturas, SA 124.211 124.211<br />

Águas da Figueira, SA 54.791 54.791<br />

Bauen <strong>Efacec</strong>, SA 33.454 33.454<br />

<strong>Efacec</strong> Moçambique, Lda. 697.116 0<br />

<strong>Efacec</strong> Energy Service, Ltda. 585.579 0<br />

Advanced Control Systems, Inc. 10.104.798 0<br />

Total 22.110.396 9.730.102<br />

(a) In 2006, a merger of <strong>the</strong> net assets of this affi liate in<strong>to</strong> EFACEC – Sistemas Electrónicos S.A <strong>to</strong>ok place.<br />

The change in Goodwill in <strong>the</strong> Tech M5 Group in 2007 <strong>to</strong>talling 992,800 Euro, was due <strong>to</strong> <strong>the</strong> last deferred payments made in<br />

accordance with <strong>the</strong> share sale and purchase contract.<br />

The remaining changes relate <strong>to</strong> acquisitions of shareholdings that <strong>to</strong>ok place during <strong>the</strong> year, in particular 51% of <strong>the</strong> share capital<br />

of EFACEC Moçambique, Lda, at <strong>the</strong> beginning of 2007, 66.7% of Energy Service, Ltda (Brazil) and 99.56% of ACS-Advanced<br />

Control Systems, Inc. (USA). In each case, <strong>the</strong> values booked are equal <strong>to</strong> <strong>the</strong> difference between <strong>the</strong> cost of acquisition, already<br />

paid or payment <strong>to</strong> be expected on future dates, compared <strong>to</strong> <strong>the</strong> accounting value of assets and liabilities. In <strong>the</strong> above cases,<br />

<strong>the</strong>re were no corrections <strong>to</strong> <strong>the</strong> related accounting values<br />

An impairment test was carried out based on discounted future cash fl ow projections, which revealed no loss in value.<br />

6. Investments in group and associate companies<br />

This line refl ects <strong>the</strong> value of investments made in associated companies, adjusted at <strong>the</strong> balance sheet date using <strong>the</strong> equity<br />

method. It includes <strong>the</strong> value of subsidiary companies, when for justifi able reasons; <strong>the</strong>y are excluded from <strong>the</strong> consolidation<br />

(Note 31.2), in which case <strong>the</strong>y are valued at acquisition cost. The line shows <strong>the</strong> value of shareholdings at <strong>the</strong> date of <strong>the</strong> balance<br />

sheet and <strong>the</strong> value of supplementary capital and borrowings granted <strong>to</strong> <strong>the</strong> entities concerned (Note 27).<br />

The movements that occurred during <strong>the</strong> period were as follows:<br />

31.12.2007 31.12.2006<br />

Opening balance 7.290.641 5.459.505<br />

Increases in shareholdings 75.222 0<br />

Decreases in shareholdings 0 0<br />

Share in profi ts/losses of Associates 1.086.098 1.446.576<br />

O<strong>the</strong>r movements in equity of Associates -725.389 246.896<br />

Exchange rate differences -89.395 55.604<br />

Closing balance 0 0<br />

Borrowings granted -76.577 82.088<br />

Closing balance 7.560.600 7.290.641<br />

The amount shown in increases in shareholdings includes 71,871 Euro concerning supplementary capital in Águas da Figueira. The<br />

remaining 3,350 Euro concern <strong>the</strong> <strong>Efacec</strong>’s shareholding in Vestiparque, a subsidiary which was recently set up but excluded from<br />

consolidation in this fi nancial year (Note 31.2).<br />

The share of associated company results relates mainly <strong>to</strong> S2M – Sociedade de Manutenção de Metropoli, S.A (689,300 Euro).<br />

The line “O<strong>the</strong>r movements in equity” includes 818,686 Euro for dividends distributed by <strong>the</strong> associate company S2M.<br />

Acquisition differences concerning shareholdings in O&M Services and in Águas da Figueira are shown in <strong>the</strong> line Goodwill (Note 5).<br />

21<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


The shareholdings of <strong>the</strong> Group in <strong>the</strong> main associate companies, none of which are quoted on s<strong>to</strong>ck exchanges, are as follows:<br />

31 December 2007<br />

Investment Head Office Assets Equity<br />

22<br />

Total<br />

Income<br />

Net Prof./<br />

Loss<br />

Shareholding<br />

% Amount<br />

EID - Emp. Invest. e Desenv. Electrónica, S.A. Lisboa 31.279.177 9.825.135 20.515.621 844.837 25,0 2.456.284<br />

Águas da Figueira, S.A. Fig. da Foz 71.313.031 2.805.354 11.650.341 -136.223 20,0 561.071<br />

S2M - Soc. de Manut. de Metropolitanos, S.A. Ma<strong>to</strong>sinhos 5.414.111 2.347.001 7.919.534 1.723.249 40,0 938.800<br />

O&M Serviços S.A. Mortágua 7.731.346 899.199 10.278.148 64.109 40,0 359.680<br />

Godrej EFACEC Au<strong>to</strong>mation & Robotics, Ltd. Índia 954.406 539.840 2.607.130 185.426 50,0 269.920<br />

SESCO EFACEC Sdn. Bhd. Malásia 5.824.264 3.569.776 3.758.229 268.400 35,2 1.256.561<br />

Liaoyang EFACEC Electrical Equip. Co (a) (b) China 28.130.554 2.153.624 n.a. n.a. 36,3 781.335<br />

31 December 2006 Shareholding<br />

Investment Head Office Assets Equity<br />

Total<br />

Income<br />

Net Prof./<br />

Loss<br />

% Amount<br />

EID - Emp. Invest. e Desenv. Electrónica, S.A. Lisboa 20.663.587 8.980.298 10.577.833 1.828.967 25,0 2.245.075<br />

Águas da Figueira, S.A. Fig. da Foz 67.286.861 1.656.234 8.829.912 -1.583.394 20,0 331.247<br />

S2M - Soc. de Manut. de Metropolitanos, S.A. Ma<strong>to</strong>sinhos 5.421.425 2.670.466 7.316.683 2.046.714 40,0 1.068.186<br />

O&M Serviços S.A. Mortágua 4.032.490 972.197 9.565.605 43.540 40,0 388.879<br />

<strong>Efacec</strong> Moçambique, Lda. (c) Moçambique 2.823.903 -1.349.017 1.985.839 -384.790 49,0 -661.018<br />

Godrej EFACEC Au<strong>to</strong>mation & Robotics, Ltd. Índia 837.873 347.419 688.744 45.952 50,0 173.710<br />

SESCO EFACEC Sdn. Bhd. Malásia 5.998.436 3.530.884 4.090.796 292.407 35,2 1.242.871<br />

Liaoyang EFACEC Electrical Equip. Co (a) (b) China 29.250.023 2.239.328 15.354.311 1.467.900 36,3 812.428<br />

(a) Up <strong>to</strong> 31 December 2004, <strong>the</strong> equity method was not considered for use for this associate company given <strong>the</strong> low probability of<br />

transfer of funds, and for which an impairment loss of 2,259,554 Euro was booked, given that future cash fl ow projections indicate<br />

a loss overall. In 2004, 13.7% of <strong>the</strong> share capital of <strong>the</strong> company was acquired, so that <strong>the</strong> group held a <strong>to</strong>tal of around 36.38%,<br />

and <strong>the</strong> Equity Method was used. This acquisition generated goodwill of 200,000 Euro, which was entirely depreciated in 2004.<br />

(b) Since up <strong>to</strong> date accounts were not available, <strong>the</strong> numbers for this company refer <strong>to</strong> those as at 30 November 2006, with<br />

exchange rates being updated as at 31 December 2007<br />

(c) As at 31 December 2006, <strong>the</strong> Group owned 49% of <strong>Efacec</strong> Moçambique and consolidated using <strong>the</strong> equity method. In 2007,<br />

after <strong>the</strong> acquisition of <strong>the</strong> entire share capital of <strong>the</strong> company, <strong>the</strong> company was fully consolidated.<br />

7. Investments in O<strong>the</strong>r Companies<br />

This is broken down as follow:<br />

31.12.2007 31.12.2006<br />

Shareholding % Shareholding Shareholding % Shareholding<br />

Portugal Space, S.A. (a) 325.000 16,25% 325.000 16,25%<br />

O<strong>the</strong>r 19.416 - 28.394 -<br />

344.416 353.394<br />

Impairment (a) -329.933 -329.933<br />

14.483 23.461<br />

(a) In view of <strong>the</strong> fi nancial situation of this investment and its probable liquidation, an impairment loss was booked in <strong>the</strong> year<br />

for <strong>the</strong> value of <strong>the</strong> investment (325,000 Euro), as well as for <strong>the</strong> loan granted in <strong>the</strong> line “Deb<strong>to</strong>rs and Prepayments” (156,271<br />

Euro).


8. Derivatives<br />

In relation <strong>to</strong> fi nancial risk management described in Note 2, <strong>the</strong> status of fi nancial instruments as at 31 December 2007 and 31<br />

December 2006 was as follows:<br />

Exchange rate risk<br />

Exchange rate risk hedging is done through options, of which at <strong>the</strong> balance sheet date 62 million USD and 1.7 million GBP were<br />

active in <strong>the</strong> Group, on which an upward adjustment of 1,062,540 Euro was made <strong>to</strong> refl ect fair value.<br />

Interest rate risk<br />

As at 31 December 2007, EFACEC had interest rate options <strong>to</strong>talling 57 million dollars for BEI loans and Commercial paper (Note<br />

15), whose market valuation was higher by 345,574 Euro.<br />

Copper “commodity” price<br />

At <strong>the</strong> end of <strong>the</strong> year, <strong>the</strong> Group had options for copper price hedging on 3,750 <strong>to</strong>ns required for consumption in 2008 and 2009,<br />

<strong>the</strong> market valuation of which was lower by <strong>the</strong> sum of 117,426 Euro.<br />

The impact of <strong>the</strong>se valuations as at 31 December 2007 can be summarised as follows:<br />

31.12.2007 31.12.2006<br />

Assets Liabilities Assets Liabilities<br />

Exchange rate option - cash fl ow cover 1.062.540 0 485.168 0<br />

Financing option - cash fl ow cover 345.574 0 0 47.245<br />

Cobber options - cash fl ow cover 0 117.426 1.543.299 0<br />

Total 1.408.114 117.426 2.028.467 47.245<br />

* Non current 345.574 0 0 47.245<br />

* Current 1.062.540 117.426 2.028.467 0<br />

The hedging option contracts were booked in Shareholders’ Funds in accordance with Note 2.2. The movements in <strong>the</strong> line<br />

<strong>Financial</strong> Instruments Reserves were <strong>the</strong> result of <strong>the</strong> change in fair value between <strong>the</strong> various reporting periods, less <strong>the</strong> related<br />

deferred tax assets/liabilities (note 16).<br />

9. Cus<strong>to</strong>mers and Accrued Income<br />

The breakdown of this line as at 31 December 2007 and 31 December 2006 was as follows:<br />

31.12.2007 31.12.2006<br />

Trade Deb<strong>to</strong>rs - Current 150.185.865 167.773.990<br />

Deb<strong>to</strong>rs - Related parties (Note 27) 1.053.310 4.872.431<br />

Trade deb<strong>to</strong>rs - Bills Receivable 429.115 719.141<br />

Trade deb<strong>to</strong>rs - Doubtful Debts 8.351.376 7.511.950<br />

Accrued Income - multi-year contracts 57.936.793 39.268.880<br />

217.956.459 220.146.393<br />

Provision for Cus<strong>to</strong>mer accounts impairment -8.422.008 -7.953.184<br />

Deb<strong>to</strong>rs - net 209.534.451 212.193.209<br />

Accrued income - not covered by IFRS 7 8.697.395 814.957<br />

Total 218.231.846 213.008.166<br />

* Non current 0 0<br />

* Current 218.231.846 213.008.166<br />

23<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


The fair value of receivables is <strong>the</strong> same as its accounting value. There is no concentration of risk concerning trade receivables and<br />

o<strong>the</strong>r deb<strong>to</strong>rs, since <strong>the</strong> Group has a large number of cus<strong>to</strong>mers all over <strong>the</strong> world. As at 31 December 2007 and 2006, <strong>the</strong> value<br />

of deb<strong>to</strong>rs, including income accruals on multi year contracts, had <strong>the</strong> following ageing analysis based on due dates for payment<br />

on balances outstanding:<br />

31.12.2007 31.12.2006<br />

Balances not due<br />

Balances due<br />

151.884.915 140.195.432<br />

Up <strong>to</strong> 90 days 25.617.407 43.791.683<br />

From 90 <strong>to</strong> 360 days 20.438.745 20.819.926<br />

Over 360 days 20.015.392 15.339.353<br />

217.956.459 220.146.393<br />

Impairment -8.422.008 -7.953.184<br />

Net Deb<strong>to</strong>rs Balance 209.534.451 212.193.209<br />

During 2007, <strong>the</strong> Group booked 529,934 Euro for impairment adjustments on cus<strong>to</strong>mer receivables while reversal of provisions<br />

<strong>to</strong>talled 94,454 Euro in <strong>the</strong> same period. It is <strong>the</strong> company’s belief that <strong>the</strong> impairment losses estimated on accounts receivable are<br />

properly refl ected in <strong>the</strong> accounts and refl ect <strong>the</strong> real risk of loss. In spite of <strong>the</strong> fact that o<strong>the</strong>r sums exist with signifi cant delays<br />

in payment, provisions were not taken for <strong>the</strong>se, since situations of impairment were not found <strong>to</strong> exist.<br />

The amounts in Income Accruals included in this line relate <strong>to</strong> income for ongoing projects and work in progress, for which <strong>the</strong><br />

stage of completion is greater than that of invoicing (Note 1.10 and 29).<br />

10. O<strong>the</strong>r Deb<strong>to</strong>rs and Prepayments<br />

The breakdown of this line as at 31 December 2007 and 31 December 2006 was as follows:<br />

31.12.2007 31.12.2006<br />

O<strong>the</strong>r Deb<strong>to</strong>rs 12.534.520 8.846.221<br />

- Impairment Losses -405.670 -405.670<br />

Trade and O<strong>the</strong>r Deb<strong>to</strong>rs - net 12.128.850 8.440.551<br />

Accounts Receivable with Related Parties 1.178.637 2.104.627<br />

State and O<strong>the</strong>r Public Entities 14.247.200 1.674.991<br />

Deferred Costs 2.367.561 735.683<br />

Total 29.922.248 12.955.853<br />

*Non Current 27.000 27.000<br />

*Current 29.895.248 12.928.853<br />

The line “State and o<strong>the</strong>r public entities” as at 31 December 2007 and 31 December 2006 was made up of active balances with<br />

<strong>the</strong> following breakdown:<br />

31.12.2007 31.12.2006<br />

Income Tax 1.849.185 1.460.316<br />

Value Added Tax <strong>to</strong> Recover 12.398.015 0<br />

O<strong>the</strong>r taxes <strong>to</strong> recover 0 214.675<br />

24<br />

14.247.200 1.674.991<br />

The increase in this line was due <strong>to</strong> a legislative change that occurred in 2007 concerning Value Added Tax in relation <strong>to</strong> construction<br />

contracts which had a signifi cant impact on some Group companies. This change means <strong>the</strong> continuous existence of VAT credit<br />

balances with <strong>the</strong> State, which are periodically subject <strong>to</strong> recovery processes.<br />

The line “O<strong>the</strong>r Deb<strong>to</strong>rs” is made up of balances with entities of various kinds, which overall are considered acceptable taking in<strong>to</strong><br />

account <strong>the</strong> operational activities of <strong>the</strong> Group.


11. S<strong>to</strong>cks<br />

31.12.2007 31.12.2006<br />

Raw materials 12.850.082 13.364.702<br />

Merchandise 1.484.131 1.148.995<br />

Work in progress 26.281.915 17.153.379<br />

Finished goods 6.609.368 2.158.184<br />

25<br />

47.225.497 33.825.261<br />

The line Work in Progress includes work relating <strong>to</strong> multi-year contracts (Note 1.10 and 29). Buildings held for sale by <strong>the</strong> real<br />

estate company Gemp for <strong>the</strong> amount of 1,242,908 Euro (924,881 Euro at <strong>the</strong> end of 2006) were shown in <strong>the</strong> line “Assets Held<br />

for Sale”.<br />

12. Cash and cash equivalents<br />

31.12.2007 31.12.2006<br />

Cash and cash equivalents 10.213.594 7.106.645<br />

Short term treasury applications 1.526.260 556.814<br />

11.739.854 7.663.459<br />

The treasury deposits relate mainly <strong>to</strong> deposits of <strong>the</strong> subsidiary, <strong>Efacec</strong> – Sistemas de Electrónica, S.A. (954,710 Euro), in<br />

particular at <strong>the</strong>ir branch offi ces in Spain, Algeria and Morocco.<br />

13. Share Capital<br />

The <strong>to</strong>tal authorised share capital is for 41,641,416 ordinary registered shares, each with a par value of 1 Euro and is fully paid<br />

up. The company does not hold any own shares.<br />

14. Suppliers, O<strong>the</strong>r Credi<strong>to</strong>rs and Accruals<br />

The breakdown of this line is as follows:<br />

31.12.2007 31.12.2006<br />

Suppliers - Current account 72.418.135 35.332.672<br />

Suppliers - related parties (Note 27) 2.101.381 1.066.934<br />

Suppliers - Bills payable 0 19.396<br />

Suppliers - Invoices received and being checked 5.269.094 25.864.494<br />

79.788.610 62.283.496<br />

Fixed asset suppliers - Current account 2.598.015 1.478.240<br />

Total 82.386.625 63.761.736<br />

Non Current 2.598.015 58.701<br />

Current 79.788.610 63.703.035<br />

31.12.2007 31.12.2006<br />

State and O<strong>the</strong>r Public Entities 6.700.951 10.201.954<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - related parties 590.697 482.669<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - various 11.187.112 3.028.739<br />

Accruals: 12.050.478 15.476.188<br />

Accruals - costs for work in progress 524.837 3.809.394<br />

Accruals - remuneration <strong>to</strong> pay 8.542.833 8.473.617<br />

Accruals - interest <strong>to</strong> pay 1.029.176 669.653<br />

Accruals - insurance <strong>to</strong> pay 320.852 401.946<br />

Accruals - royalties <strong>to</strong> pay 119.776 119.776<br />

Accruals - o<strong>the</strong>r 1.513.004 2.001.802<br />

Total 30.529.238 29.189.550<br />

*Non Current 3.477.160 289.121<br />

*Current 27.052.078 28.900.430<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


The non current portion mainly relates <strong>to</strong> <strong>the</strong> discounted value of future payments <strong>to</strong> be made as part of <strong>the</strong> acquisition of<br />

Advanced Control Systems, Inc.<br />

The current amount due <strong>to</strong> Suppliers, whe<strong>the</strong>r for raw materials, subcontracting and o<strong>the</strong>r services or fi xed assets, is almost<br />

entirely due within 90 days, which refl ects <strong>the</strong> normal conditions negotiated with <strong>the</strong> company’s suppliers.<br />

Suppliers<br />

26<br />

31.12.2007 31.12.2006<br />

Suppliers <strong>to</strong> pay - Current<br />

To be paid within 90 days 79.778.480 62.283.496<br />

To be paid in over 90 days 10.130 0<br />

Suppliers balance 79.788.610 62.283.496<br />

31.12.2007 31.12.2006<br />

Fixed Assets Suppliers<br />

Suppliers <strong>to</strong> pay - Current<br />

To be paid within 90 days 2.598.015 1.419.539<br />

To be paid in over 90 days 0 0<br />

Suppliers balance 2.598.015 1.419.539<br />

The credit balances with State and O<strong>the</strong>r Public Entities as at 31 December 2007 and 31 December 2006 were made up as<br />

follows:<br />

15. Bank Debt<br />

31.12.2007 31.12.2006<br />

Income tax 0 0<br />

Value added tax <strong>to</strong> pay 2.931.111 5.259.172<br />

Social security contributions 2.249.188 3.219.556<br />

Personal income tax 1.167.584 1.462.124<br />

O<strong>the</strong>rs 353.068 261.102<br />

6.700.951 10.201.954<br />

As at 31December 2007 and 31 December 2006, borrowings and bank overdrafts, <strong>the</strong>ir average annual interest rates and o<strong>the</strong>r<br />

conditions were as follows:<br />

31.12.2007 31.12.2006<br />

Non Current<br />

Bank loans 22.500.000 27.000.000<br />

Commercial paper 40.000.000 40.000.000<br />

Reimbursable subsidies 1.840.649 1.709.626<br />

O<strong>the</strong>r borrowings 0 247.208<br />

Current<br />

64.340.649 68.956.834<br />

Bank overdrafts 15.533.256 5.603.204<br />

Bank loans 7.594.589 0<br />

Commercial paper 20.000.000 7.000.000<br />

Reimbursable subsidies 389.280 0<br />

O<strong>the</strong>r borrowings 3.302.301 0<br />

46.819.426 12.603.204<br />

Total borrowings 111.160.075 81.560.038<br />

Bank finance<br />

At <strong>the</strong> end of 2007, <strong>the</strong> Group had a loan of 27,000,000 Euro from <strong>the</strong> European Investment Bank, contracted on 16 November<br />

2004. Interest is payable every six months at <strong>the</strong> Euribor rate plus a maximum spread of 0.13%. The fi rst capital repayment will<br />

be made on 15 June 2008 (4,500,000 Euro is already registered in current liabilities), with <strong>the</strong> remaining payments <strong>to</strong> be made<br />

each year up <strong>to</strong> 15 June 2013.


Commercial Paper<br />

On 8 July 2005, a Commercial Paper programme was agreed with a bank syndicate, involving fi ve banks, up <strong>to</strong> a maximum value<br />

of 40,000,000 Euro. The programme has a contract period of 5 years with a requirement in excess of one year. The companies<br />

included in <strong>the</strong> Programme can issue Commercial Paper by Direct Placement or by Auction. As far as mediation fee rates are<br />

concerned, <strong>the</strong> issues have a maximum rate equal <strong>to</strong> <strong>the</strong> Euribor rate for <strong>the</strong> period in question, plus 0.35%. The current issues<br />

fall due on 11 July 2008.<br />

In November 2006, a second Commercial Paper programme was also agreed with <strong>the</strong> Santander Totta Bank <strong>to</strong> a maximum value<br />

of 7,500,000 Euro. The programme has a contract period of 5 years with annual renewals. EFACEC Capital can issue Commercial<br />

Paper by direct placement. As far as Mediation Rates are concerned, <strong>the</strong> issues have a maximum rate equal <strong>to</strong> <strong>the</strong> Euribor rate for<br />

<strong>the</strong> period in question, plus 0.325%. The current issues fall due on 17 March 2008.<br />

A third Commercial Paper Programme was also agreed with <strong>the</strong> Santander Totta Bank <strong>to</strong> a maximum value of 12,500,000 Euro.<br />

The programme has a contract period of 6 months without renewal. As far as mediation rates are concerned, <strong>the</strong> issues have a rate<br />

equal <strong>to</strong> Euribor for <strong>the</strong> respective issue period, plus a spread of 0.375%. The current issue falls due on 10 April 2008. In November<br />

2007, a Commercial Paper Programme was also agreed with <strong>the</strong> Fortis Bank S.A. <strong>to</strong> a maximum value of 12,500,000 Euro. The<br />

programme has a contract period of 5 years, which can be extended for periods of time <strong>to</strong> be agreed between <strong>the</strong> parties. The<br />

issues have a mediation rate equal <strong>to</strong> Euribor plus a spread of 0.375% for <strong>the</strong> related issue period. To date, no use has been made<br />

of this Commercial Paper Programme.<br />

Reimbursable subsidies<br />

These arise from contracts for investment projects fi nanced by European Union and Portuguese funds under <strong>the</strong> POE scheme. As at<br />

31 December 2007, this line included 2,229,928 Euro received from AICEP – Agency for Investment and External Trade of Portugal<br />

by <strong>the</strong> subsidiary <strong>Efacec</strong> Energia, between 2005 and 2007. The contract stipulates reimbursement in 6 half yearly payments, with<br />

<strong>the</strong> fi rst falling due on 30 April 2008 and <strong>the</strong> last on 30 Oc<strong>to</strong>ber 2010.<br />

Bank overdrafts<br />

Bank overdrafts involve <strong>the</strong> use of current credit accounts according <strong>to</strong> limits and conditions previously negotiated with fi nancial<br />

institutions and without defi ned reimbursement periods, although <strong>the</strong>y are assumed <strong>to</strong> be of short duration. The average rate of<br />

<strong>the</strong>se credits is indexed <strong>to</strong> Euribor plus an average spread of 0.46%.<br />

O<strong>the</strong>r borrowings<br />

The line O<strong>the</strong>r Current Loans relates <strong>to</strong> a short term fi nancing operation of discounted cus<strong>to</strong>mer invoices, carried out from time<br />

<strong>to</strong> time by Group companies.<br />

Contractual Exposure<br />

The exposure of Group loans <strong>to</strong> changes in interest rates and <strong>the</strong>ir contractual renegotiation dates are as follows:<br />

< 1 year 1-5 years > 5 years Total<br />

As at 31 December 2007<br />

Bank loans 0 3.094.589 27.000.000 30.094.589<br />

Commercial paper 20.000.000 40.000.000 0 60.000.000<br />

Bank overdrafts 15.533.257 0 0 15.533.257<br />

Reimbursable subsidies 0 2.229.928 0 2.229.928<br />

O<strong>the</strong>r borrowings 3.302.301 0 0 3.302.301<br />

Total<br />

As at 31 December 2006<br />

38.835.558 45.324.518 27.000.000 111.160.075<br />

Bank loans 0 0 27.000.000 27.000.000<br />

Commercial paper 7.000.000 40.000.000 0 47.000.000<br />

Bank overdrafts 5.603.204 0 0 5.603.204<br />

Reimbursable subsidies 0 1.956.834 0 1.956.834<br />

O<strong>the</strong>r borrowings 0 0 0 0<br />

Total 12.603.204 41.709.626 27.000.000 81.560.038<br />

27<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Non Current Maturity Dates<br />

Non current borrowing maturity dates are as follows:<br />

28<br />

31.12.2007 31.12.2006<br />

Between 1 and 2 years 41.016.131 44.889.280<br />

Between 2 and 5 years 18.824.518 15.067.554<br />

> 5 years 4.500.000 9.000.000<br />

Total 64.340.649 68.956.834<br />

Effective Interest Rates<br />

The effective interest rates as at <strong>the</strong> balance sheet date were as follows:<br />

31.12.2007 31.12.2006<br />

Bank overdrafts<br />

EUR 4,91% 4,20%<br />

USD 13,23% 7,32%<br />

MZN 16,25% -<br />

ARS 13,94% -<br />

Commercial Paper<br />

EUR 4,74% 3,78%<br />

Medium/Long Term Loans<br />

EUR 4,92% 4,54%<br />

Reimbursable Subsídies<br />

EUR 4,62% 0,00%<br />

The above currencies correspond <strong>to</strong> those in which borrowings are denominated, and can vary from time <strong>to</strong> time from <strong>the</strong> indices<br />

used (in <strong>the</strong> case of <strong>the</strong> USD).<br />

The fair value of current and non current bank borrowings is close <strong>to</strong> <strong>the</strong> balance sheet value due <strong>to</strong> <strong>the</strong> fact that <strong>the</strong> contracted<br />

interest rate is <strong>the</strong> same as <strong>the</strong> market rate, given <strong>the</strong> fi nancing conditions in those countries in which <strong>Efacec</strong> operates.<br />

Interest Rate Risk<br />

During 2007, <strong>the</strong> net cash outfl ow of interest was 4,291 thousand Euro (Note 21).<br />

As a result of <strong>the</strong> growth of <strong>the</strong> Group and increasing fi nancing needs, borrowings as at 31 December 2007 <strong>to</strong>talled 111,160<br />

thousand Euro, an increase of around 30 million Euro compared <strong>to</strong> <strong>the</strong> previous year. At <strong>the</strong> same time, interest rates tended <strong>to</strong><br />

rise throughout <strong>the</strong> year. As at 31 December 2007, <strong>the</strong> average overall interest rate of EFACEC borrowings was 4.81%, involving<br />

several currencies, countries and fi nancing methods.<br />

Statistically, as at 31 December 2007, this rate meant an annual gross cost of 5,341 thousand Euro. On <strong>the</strong> assumption that <strong>the</strong><br />

value of borrowings as of that date will continue, <strong>the</strong> sensitivity <strong>to</strong> changes in interest rates can be calculated as follows:<br />

Final Rate Annual Cost Impact<br />

Reference fi gures (Base: 31.Dec.2007) 4,81% 5.341.447<br />

Sensitivity<br />

+0,50% 5,31% 5.897.242 555.795<br />

- 0,50% 4,31% 4.785.652 -555.795<br />

If <strong>the</strong>re were a worsening of <strong>the</strong> overall average rate of 0.5%, <strong>the</strong> annual interest cost would be 5,897 thousand Euro. If on <strong>the</strong><br />

o<strong>the</strong>r hand <strong>the</strong>re were a drop in overall average interest rates of 0.5%, <strong>the</strong> annual interest rate cost would be 4,785 thousand<br />

Euro. The gross impact would be +/- 556 thousand Euro.<br />

Although interest costs have a limited impact on <strong>the</strong> results of <strong>the</strong> Group, (around 1% of turnover), <strong>the</strong> Group manages <strong>the</strong><br />

interest rate risk through derivatives contracted on its medium and long term fi nancing, thus enabling <strong>the</strong> impact of interest<br />

changes <strong>to</strong> be mitigated. (see notes 2.1, 2.2 and 8).


Denomination of Loans<br />

The accounting value of Group loans is denominated in <strong>the</strong> following currencies:<br />

31.12.2007 31.12.2006<br />

Euro 105.532.281 81.053.463<br />

US Dollar 3.906.325 506.575<br />

New Metical 1.398.791 -<br />

Argentinian Peso 322.679 -<br />

29<br />

111.160.075 81.560.038<br />

Debt contracted by Group companies based in Portugal is wholly denominated in Euros. The o<strong>the</strong>r fi gures relate <strong>to</strong> fi nancing<br />

contracted locally by international companies.<br />

Unused Credit Lines<br />

The Group also has <strong>the</strong> following credit lines that have not yet been used:<br />

31.12.2007 31.12.2006<br />

At variable rates<br />

Due within one year 48.686.981 37.789.000<br />

48.686.981 37.789.000<br />

Those credit lines falling due within one year are au<strong>to</strong>matically renewed for <strong>the</strong> consolidation of <strong>the</strong> fi nancial liabilities of <strong>the</strong><br />

Group.<br />

The amount as at 31 December 2007, includes a Commercial Paper Programme <strong>to</strong> a <strong>to</strong>tal value of<br />

12,500,000 Euro, contracted at <strong>the</strong> end of <strong>the</strong> year and not yet used.<br />

16. Deferred taxes<br />

The value of deferred tax assets and liabilities were as follows:<br />

31.12.2007 31.12.2006<br />

Deferred tax assets:<br />

Deferred tax assets recoverable after 12 months 4.243.415 5.159.264<br />

Deferred tax assets recoverable within 12 months 0 0<br />

Deferred tax liabilities:<br />

4.243.415 5.159.264<br />

Defered tax liabilities recoverable after 12 months 6.342.351 6.968.478<br />

Defered tax liabilities recoverable within 12 months 0 0<br />

6.342.351 6.968.478<br />

-2.098.936 -1.809.214<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Deferred Tax Assets<br />

Deferred tax assets were split as follows:<br />

Impairment<br />

Losses<br />

Investments<br />

Impairment<br />

Losses<br />

Works<br />

Impairment<br />

Losses<br />

Receivables/<br />

O<strong>the</strong>r Deb<strong>to</strong>rs<br />

30<br />

Tax<br />

Losses<br />

Options<br />

Adjust.<br />

IFRS<br />

O<strong>the</strong>r Total<br />

As at 1 January 2006 676.377 389.220 3.491.641 143.002 427.918 103.884 2.497.244 7.729.286<br />

Carried <strong>to</strong> profi t and loss -112.352 130.714 -1.195.061 -100.395 -30.456 -53.299 -490.543 -1.851.392<br />

Disposal of subsidiary 0 0 0 0 0 -2.461 -22.337 -24.798<br />

Exchange rate differences 0 0 0 0 0 0 0 0<br />

Carried <strong>to</strong> shareholders’ funds 0 0 0 0 -343.499 - -2.458 -345.957<br />

O<strong>the</strong>r movements 0 0 0 0 0 - -347.875 -347.875<br />

As at 31 December 2006 564.025 519.934 2.296.580 42.607 53.963 48.124 1.634.031 5.159.264<br />

Carried <strong>to</strong> profi t and loss -295 -90.852 189.111 -40.608 144.534 5.728 -1.067.994 -860.376<br />

Entries <strong>to</strong> consolidation perimeter 0 0 0 0 0 125.086 0 125.086<br />

Exchange rate differences 0 0 0 0 0 -13.179 0 -13.179<br />

Carried <strong>to</strong> shareholders’ funds 0 0 0 0 -167.379 0 0 -167.379<br />

Exits from <strong>the</strong> consol. perimeter 0 0 0 0 0 0 0 0<br />

O<strong>the</strong>r movements -41.411 -130.175 171.389 0 0 -13.452 13.649 0<br />

As at 31 December 2007 522.319 298.907 2.657.080 1.999 31.118 152.307 579.686 4.243.416<br />

The deferred tax assets for impairment losses will be carried <strong>to</strong> profi t and loss proportionately <strong>to</strong> <strong>the</strong> use of <strong>the</strong> related<br />

provisions.<br />

The deferred tax assets concerning impairment losses for investments are for shareholdings in Liaoyang EFACEC Electric Equipment<br />

Co Ltd (Note 6) and in Portugal Space (Note 7).<br />

The deferred tax asset for tax losses refers <strong>to</strong> <strong>the</strong> rest of <strong>the</strong> Tech M5 Group acquired in 2003. Deferred tax assets on tax losses<br />

are recognised depending on <strong>the</strong> probability of taking advantage of <strong>the</strong> related tax benefi t through future taxable profi ts.<br />

The line O<strong>the</strong>rs also includes deferred tax assets for a tax credit on research and development expenses <strong>to</strong> carry forward for future<br />

periods <strong>to</strong>talling 361,602 Euro.<br />

Deferred Tax Liabilities<br />

The line Deferred Tax Liabilities is made up as follows:<br />

Revaluation (Note 1.5) Options (Note 8) O<strong>the</strong>r Total<br />

As at 1 January 2006 6.040.663 467.414 349.313 6.857.390<br />

Carried <strong>to</strong> profi t and loss -278.589 19.646 -261.304 -520.247<br />

Carried <strong>to</strong> Shareholders’ Funds -203.600 91.926 0 -111.673<br />

Acquisition of subsidiary 0 0 743.008 743.008<br />

As at 31 December 2006 5.558.475 578.987 831.016 6.968.478<br />

Carried <strong>to</strong> profi t and loss -204.693 59.673 -215.767 -360.786<br />

Entries <strong>to</strong> consolidation perimeter 0 0 0 0<br />

Exchange rate differences 0 0 0 0<br />

Carried <strong>to</strong> shareholders’ funds 0 -265.340 0 -265.340<br />

Exits from <strong>the</strong> consolidation perimeter 0 0 0 0<br />

O<strong>the</strong>r movements 0 0 0 0<br />

As at 31 December 2007 5.353.781 373.320 615.249 6.342.351<br />

The amount for revaluation of tangible assets refers <strong>to</strong> a free revaluation done in 2005, and is carried <strong>to</strong> profi t and loss through<br />

annual depreciation; <strong>the</strong> amount booked <strong>to</strong> shareholders’ funds refers <strong>to</strong> <strong>the</strong> line “Land” and is based on an update of <strong>the</strong> value<br />

using indices published by <strong>the</strong> tax authorities.<br />

The line O<strong>the</strong>rs relates mainly <strong>to</strong> deferred tax assets concerning ATM and BCI maintenance contracts <strong>to</strong>talling 610,613 Euro.


17. Provisions for risks and charges<br />

Pensions Shareholdings<br />

31<br />

O<strong>the</strong>r risks and<br />

charges<br />

As at 1 January 2006<br />

Carried <strong>to</strong> profi t and loss:<br />

1.857.698 563.171 5.035.914 7.456.783<br />

- additional provisions 0 97.847 1.594.728 1.692.575<br />

- reversal of provisions -1.323.695 0 -711.069 -2.034.764<br />

Changes in <strong>the</strong> consolidation perimeter 0 0 -81.226 -81.226<br />

Exchange rate differences 0 0 0 0<br />

As at 31 December 2006 534.003 661.018 5.838.348 7.033.369<br />

Carried <strong>to</strong> profi t and loss:<br />

- additional provisions 123.581 0 3.045.028 3.168.608<br />

- reversal of provisions -59.324 0 -2.469.668 -2.528.991<br />

Changes in <strong>the</strong> consolidation perimeter 0 -661.018 0 -661.018<br />

Exchange rate differences 0 0 -7.871 -7.871<br />

As at 31 December 2007 598.260 0 6.405.837 7.004.097<br />

No environmental contingent liability exists.<br />

O<strong>the</strong>r shareholdings<br />

This provision existing at <strong>the</strong> beginning of <strong>the</strong> period concerns <strong>the</strong> use of <strong>the</strong> Equity Method for <strong>the</strong> shareholding in <strong>Efacec</strong><br />

– Mozambique and corresponds <strong>to</strong> <strong>the</strong> share of <strong>the</strong> Group in <strong>the</strong> accumulated losses of this associate. The provision ceased <strong>to</strong><br />

be applicable as from 2007 when <strong>the</strong> Group acquired <strong>the</strong> entire share capital, at which time it was thus fully consolidated in <strong>the</strong><br />

accounts (Note 6).<br />

O<strong>the</strong>r risks and charges<br />

This line includes mainly provisions for amounts <strong>to</strong> receive from insurance companies (1,683,335 Euro), penalties, repairs and<br />

and negative variances on works in progress. The additional provisions of <strong>the</strong> period mainly relate <strong>to</strong> variances on work projects<br />

in <strong>the</strong> subsidiary <strong>Efacec</strong> Energia.<br />

These amounts relate <strong>to</strong> situations which are being constantly analysed by <strong>the</strong> management of <strong>the</strong> various companies as <strong>to</strong><br />

EFACEC’s responsibility <strong>to</strong> cus<strong>to</strong>mers, and where an unfavourable outcome seems likely during <strong>the</strong> accounting period.<br />

Over <strong>the</strong> last few fi nancial years, <strong>the</strong> Group has incurred costs of after sales service and maintenance. These costs have been<br />

analysed, and if <strong>the</strong>y are signifi cant, have been subject <strong>to</strong> provisions being set up for future losses. In this way <strong>the</strong> future potential<br />

commitments of <strong>the</strong> Group are appropriately presented.<br />

The amount shown as a reduction in provisions corresponds <strong>to</strong> <strong>the</strong> amount reversed out of <strong>the</strong> provision account as <strong>the</strong> related<br />

costs are recognised, or when <strong>the</strong> situation for which <strong>the</strong> provisions was set up, no longer exists.<br />

Total<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


18. Deferred Income<br />

32<br />

31.12.2007 31.12.2006<br />

Investment subsidies 1.722.010 1.582.493<br />

Deferred invoicing 91.199.315 84.176.321<br />

O<strong>the</strong>r 1.571.711 647.654<br />

94.493.036 86.406.468<br />

The timetable of invoicing <strong>to</strong> cus<strong>to</strong>mers is not strictly tied <strong>to</strong> <strong>the</strong> degree of completion of <strong>the</strong> related orders. The line Deferred<br />

Income thus includes invoices issued but not yet recognized in terms of <strong>the</strong> stage of completion of <strong>the</strong> orders (<strong>Notes</strong> 1.10 and<br />

29).<br />

19. Minority Interests<br />

As at 31 December 2007 and 31 December 2006, <strong>the</strong> breakdown of minority interests was as follows:<br />

Min. Int.% 31.12.2007 31.12.2006<br />

<strong>Efacec</strong> Serviços de Mnutenção e Assistência, S.A. 19,9 1.732.184 1.577.154<br />

<strong>Efacec</strong> Investimen<strong>to</strong>s e Concessões SGPS, S.A. 25,0 75.301 305.774<br />

<strong>Efacec</strong> International Financing SGPS, S.A. 45,0 571.874 511.350<br />

Bauen <strong>Efacec</strong>, S.A. 23,3 279.311 288.168<br />

<strong>Efacec</strong> Energy Service, Lda. 33,3 238.409 0<br />

O<strong>the</strong>r 39.857 -56.065<br />

2.936.936 2.626.381<br />

E. <strong>Notes</strong> <strong>to</strong> <strong>the</strong> Profit and Loss Account by nature for <strong>the</strong> years ending 31 December<br />

2007 and 31 December 2006<br />

20. Third party supplies and services<br />

During <strong>the</strong> years ended 31 December 2007 and 2006, <strong>the</strong> main third party supplies and services were as follows:<br />

31.12.2007 31.12.2006<br />

Subcontrac<strong>to</strong>rs 64.376.875 41.519.353<br />

Specialised work 25.291.042 25.764.073<br />

Travel expenses 8.698.572 6.744.786<br />

Goods transport 8.065.182 7.672.171<br />

Leasing and rentals 4.912.026 5.095.349<br />

Repairs and maintenance 3.841.323 3.513.940<br />

Insurance 2.498.360 2.591.844<br />

Fuel 2.457.174 2.481.761<br />

Electricity 1.964.027 1.347.184<br />

Communications 1.769.132 1.711.461<br />

Tools and utensils 1.435.690 1.064.958<br />

Fees 1.223.658 1.600.416<br />

Advertising and publicity 1.058.324 546.106<br />

O<strong>the</strong>r supplies and services 7.420.906 6.939.434<br />

135.012.292 108.592.837<br />

Given <strong>the</strong> business activity of <strong>the</strong> group, <strong>the</strong>re are no variances that merit special comment. The major variance occurred in <strong>the</strong><br />

line “Subcontracts”. This is a normal cost of group projects, and <strong>the</strong> level of this cost can vary according <strong>to</strong> <strong>the</strong> type of projects<br />

on hand.


21. Net financial charges<br />

22. Income Tax<br />

31.12.2007 31.12.2006<br />

Interest payable:<br />

Bank loans (Note 15) 4.291.270 2.856.517<br />

33<br />

4.291.270 2.856.517<br />

Net foreign exchange gains /(losses)<br />

Gains/losses in fair value on derivatives:<br />

Transfer from Shareholders’ funds (Note 8):<br />

-57.834 686.581<br />

Foreign exchange options: cash fl ow hedging 344.278 -632.887<br />

O<strong>the</strong>r 287.869 72.511<br />

4.865.583 2.982.722<br />

31.12.2007 31.12.2006<br />

Current tax 3.540.141 2.863.876<br />

Deferred tax (Note 16) 499.589 1.331.146<br />

Tax estimate 4.039.730 4.195.022<br />

Tax from previous years -102.658 -126.984<br />

The reconciliation of consolidated corporation tax is as follows:<br />

23. Profit per share<br />

3.937.072 4.068.038<br />

Profi ts before Tax 21.685.135<br />

Tax Rate 26,50%<br />

Tax at rate of 26.5% 5.746.561<br />

Tax Rate Difference Foreign Affi liates -32.127<br />

Permanent Differences:<br />

Costs not accepted fi scally 462.051<br />

Income not subject <strong>to</strong> tax 141.842<br />

Consolidation adjustments -287.816<br />

R&D Fiscal Credit Deducted Not Deferred in 2007 -1.924.250<br />

O<strong>the</strong>r -66.530<br />

Income tax for <strong>the</strong> period 4.039.730<br />

Effective tax rate 18,63%<br />

Basic<br />

The basic profi t per share is calculated by dividing shareholders’ profi t by <strong>the</strong> average weighted number of ordinary shares issued<br />

during <strong>the</strong> year, excluding possible own shares acquired by <strong>the</strong> company (Note 13).<br />

31.12.2007 31.12.2006<br />

Profi t attributable <strong>to</strong> shareholders 17.401.185 17.075.631<br />

Average weighted number of ordinary shares issued 41.641.416 41.641.416<br />

Basic profi t per share (euro per share) 0,42 0,41<br />

Diluted<br />

The diluted profi t per share is calculated adjusting <strong>the</strong> average weighted number of shares in circulation by including <strong>the</strong> impact<br />

of <strong>the</strong> conversion of all potentially diluting ordinary shares. In view of <strong>the</strong> fact that nei<strong>the</strong>r options nor any convertible obligation<br />

exists on shares, <strong>the</strong> diluted profi t per share is equal <strong>to</strong> <strong>the</strong> basic profi t per share.<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


24. Dividend per share<br />

The dividends paid by <strong>Efacec</strong> Capital, SGPS in 2007 were 19,753,096 Euro (0.474 Euro per share). Of this fi gure, 7,537,096 Euro<br />

relate <strong>to</strong> retained earnings of 2006 and 12,216,000 Euro are anticipated dividends for <strong>the</strong> year ending 31 December 2007. During<br />

<strong>the</strong> previous year, 22.745,607 Euro were paid (0.546 Euro per share). Dividends for minority interest were 163,674 Euro (79,304<br />

Euro in 2006) and relate entirely <strong>to</strong> <strong>the</strong> subsidiary company EFACEC – Serviços de Manutenção e Assistência, S.A.<br />

F. O<strong>the</strong>r notes<br />

25. Contingencies<br />

The Group has contingent liabilities for bank guarantees and o<strong>the</strong>r contingencies related <strong>to</strong> its business. No signifi cant liabilities<br />

are thought <strong>to</strong> exist due <strong>to</strong> contingent liabilities.<br />

31.12.2007 31.12.2006<br />

Bills and o<strong>the</strong>r discounted securities 289.697 24.696<br />

Guarantees and performance bonds 217.140.025 163.684.507<br />

217.429.722 163.709.202<br />

26. Commitments<br />

26.1 Commitments for investments<br />

No materially relevant commitments made by <strong>the</strong> Group exist <strong>to</strong> acquire tangible or intangible fi xed assets.<br />

26.2 Commitments for operational leases, where <strong>the</strong> Group is lessee<br />

The Group leases a number of vehicles through irrevocable leasing contracts. The contracts have various lease periods, readjustment<br />

clauses and renewal rights. At <strong>the</strong> date of <strong>the</strong> balance sheet, <strong>the</strong> Group continued <strong>to</strong> have Long Term Rental contracts (“Renting”)<br />

considered as operational leases, for which future rental payments due <strong>to</strong>talled 3,903,052 Euro, with <strong>the</strong> following maturity<br />

dates:<br />

31.12.2007 31.12.2006<br />

Within 1 year 1.580.054 1.405.185<br />

Between 1 and 5 years 2.322.998 1.642.575<br />

Over 5 years 0 0<br />

27. Related party transactions/balances<br />

34<br />

3.903.052 3.047.760<br />

The scope of this note concerns <strong>the</strong> disclosure of transactions that <strong>to</strong>ok place during <strong>the</strong> period under consideration, and debit and<br />

credit balances between <strong>the</strong> <strong>Efacec</strong> Group and entities which can be considered as related parties, taking in<strong>to</strong> consideration <strong>the</strong><br />

decision making infl uence involved. Related parties are unders<strong>to</strong>od as Associated companies, Shareholders and Board Direc<strong>to</strong>rs.<br />

Transactions and balances between Group companies are not disclosed, which were eliminated on consolidation.<br />

Those entities which have a qualifi ed shareholding in excess of 20% in <strong>the</strong> group are:<br />

- <strong>Efacec</strong> Sistemas de Gestão, S.A 49,2%<br />

- Grupo José de Mello 25,4%<br />

- Grupo Têxtil Manuel Gonçalves 25,4%


27.1 Transactions that <strong>to</strong>ok place in 2007 and 2006<br />

31.12.2007 31.12.2006<br />

<strong>Financial</strong> transactions<br />

Associate companies<br />

Shareholders’ Loans 71.871 82.088<br />

Loans granted 35.871 91.206<br />

Loans obtained<br />

Shareholders<br />

0 0<br />

Loans granted -1.070.000 1.070.000<br />

Loans obtained<br />

O<strong>the</strong>r entities<br />

7.100.000 0<br />

Loans granted -108.073 -41.360<br />

Loans obtained 0 0<br />

Current transactions<br />

Associate companies<br />

-8.170.330 1.201.934<br />

Operational income and gains 2.127.887 1.424.088<br />

Operational costs and losses 383 95.456<br />

<strong>Financial</strong> income and gains 899.662 244.369<br />

<strong>Financial</strong> costs and losses 0 0<br />

Shareholders<br />

Operational income and gains 227.574 128.395<br />

Operational costs and losses 10.393.092 671.733<br />

<strong>Financial</strong> income and gains 0 0<br />

<strong>Financial</strong> costs and losses 52.079 0<br />

35<br />

-7.190.431 1.029.663<br />

The commercial conditions under which <strong>the</strong>se transactions and services <strong>to</strong>ok place were under <strong>the</strong> same conditions as independent<br />

third parties. <strong>Financial</strong> income refers mainly <strong>to</strong> dividends received from <strong>the</strong> associate company S2M – Sociedade de Manutenção de<br />

Metropolitanos, SA (818,686 Euro in 2007 and 180,000 Euro in 2006). <strong>Efacec</strong> Sistemas de Gestão, in addition <strong>to</strong> being <strong>the</strong> main<br />

shareholder, also includes <strong>the</strong> <strong>Efacec</strong> Group shared services unit, which means that it has <strong>the</strong> role of a service provider <strong>to</strong> all Group<br />

companies. In this capacity, <strong>the</strong> Group had operational costs <strong>to</strong>talling 10,392,994 Euro.<br />

The value of borrowings made and received also refers <strong>to</strong> <strong>Efacec</strong> Sistemas de Gestão, S.A.<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


27.2 Final balances resulting from commercial balances<br />

36<br />

31.12.2007 31.12.2006<br />

Debts owed from related parties<br />

Associate companies<br />

Loans Made 901.765 978.341<br />

Cus<strong>to</strong>mers and Income Accruals (Note 9) 1.008.932 4.872.430<br />

O<strong>the</strong>rs Deb<strong>to</strong>rs and Deferred Costs (Note 10)<br />

Shareholders<br />

633.265 388.843<br />

Loans Made 0 1.070.000<br />

Cus<strong>to</strong>mers and Income Accruals (Note 9) 44.379 0<br />

O<strong>the</strong>rs Deb<strong>to</strong>rs and Deferred Costs (Note 10)<br />

O<strong>the</strong>r entities<br />

545.372 143.453<br />

Loans Made 0 108.073<br />

O<strong>the</strong>rs Deb<strong>to</strong>rs and Deferred Costs (Note 10) 0 394.258<br />

Debts owed <strong>to</strong> related parties<br />

Associate companies<br />

3.133.712 7.955.399<br />

Loans received 0 0<br />

Suppliers (Note 14) 383 125.247<br />

O<strong>the</strong>r Credi<strong>to</strong>rs (Note 14) 44.536 0<br />

Shareholders<br />

Loans received 7.100.000 0<br />

Suppliers (Note 14) 2.100.998 941.687<br />

O<strong>the</strong>r Credi<strong>to</strong>rs (Note 14) 546.161 482.669<br />

9.792.078 1.549.603<br />

The change in <strong>the</strong> balance of Cus<strong>to</strong>mers – Associates compared <strong>to</strong> 31.12.2006 is due mainly <strong>to</strong> <strong>the</strong> integration of <strong>Efacec</strong> Moçambique<br />

in 2007 (3,273,030 in 2006). Debts owing <strong>to</strong> shareholders are mainly related <strong>to</strong> <strong>Efacec</strong> Sistemas de Gestão, both in <strong>the</strong> line Suppliers,<br />

and in O<strong>the</strong>r Credi<strong>to</strong>rs, and are connected with contracted shared services with that company. The Group had a loan of 7,100,000 Euro<br />

as at 31 December 2007 from its main shareholder <strong>Efacec</strong> Sistemas de Gestão, S.A.<br />

27.3 Detail by entity of balances with related parties<br />

The sums in Group assets and liabilities, which relate <strong>to</strong> related parties, can be broken down in<strong>to</strong> <strong>the</strong> following entities:<br />

31.12.2007 31.12.2006<br />

Associated companies:<br />

Águas da Figueira - Loans 901.765 865.893<br />

Águas da Figueira - Current 775.559 565.179<br />

O&M Serviços - Current 458.636 796.578<br />

S2M - Soc. Manutenção Metropolitanos - Current 225.261 223.030<br />

Liaoyang <strong>Efacec</strong> Electrical Equipment - Current 4.807.949 4.807.519<br />

<strong>Efacec</strong> Moçambique - Loans 0 112.448<br />

<strong>Efacec</strong> Moçambique - Current 0 3.400.025<br />

O<strong>the</strong>r -1.379 12.444<br />

7.167.791 10.783.116<br />

Impairment -4.668.748 -4.668.748<br />

Shareholders<br />

2.499.043 6.114.368<br />

<strong>Efacec</strong> Sistemas de Gestão - Loans -7.100.000 1.070.000<br />

<strong>Efacec</strong> Sistemas de Gestão - Current -2.068.796 -798.234<br />

O<strong>the</strong>r 11.387 0<br />

O<strong>the</strong>r entities<br />

-9.157.408 271.766<br />

Efafl u - Bombas e Ventiladores - Loans 0 108.073<br />

O<strong>the</strong>r 0 -88.411<br />

The impairment booked relates <strong>to</strong> <strong>the</strong> debt owing from Liaoyang <strong>Efacec</strong> Electrical Equipment..<br />

0 19.662


27.4 Commitments and contingencies<br />

No purchase commitments or contingent liabilities exist in relation <strong>to</strong> related parties.<br />

27.5 Remuneration of <strong>the</strong> Board of Direc<strong>to</strong>rs<br />

31.12.2007 31.12.2006<br />

Remunerations 1.906.063 1.465.004<br />

Life insurance 88.060 180.000<br />

Business expenses 25.838 13.820<br />

28. Interests in joint ventures<br />

37<br />

2.019.961 1.658.824<br />

The Group has various shareholdings in joint ventures, “ACE”s (Note 31), which mainly supply services <strong>to</strong> <strong>the</strong> Maintenance,<br />

Environment and Electronic business areas. The following amounts represent <strong>the</strong> shares of <strong>the</strong> Group of <strong>the</strong> assets and liabilities,<br />

sales and profi ts/losses of <strong>the</strong> joint ventures and are included in <strong>the</strong> fi nancial statements:<br />

31.12.2007 31.12.2006<br />

Assets<br />

Non current 74.747 44.085<br />

Current 4.223.759 2.265.725<br />

4.298.506 2.309.810<br />

Liabilities<br />

Non current 120.356 94.843<br />

Current 3.664.247 1.991.019<br />

3.784.603 2.085.861<br />

Shareholders’ funds 513.903 223.949<br />

Income 7.894.728 5.184.130<br />

Costs 7.737.153 4.948.314<br />

Profi t after tax 157.575 235.816<br />

No contingent liabilities exist for <strong>the</strong> shareholdings of <strong>the</strong> Group in ACEs (joint ventures), and in <strong>the</strong>ir turn, <strong>the</strong> joint ventures do<br />

not have contingent liabilities.<br />

29. Multi-year contracts<br />

Amounts relating <strong>to</strong> multi-year contracts (un-consolidated) for <strong>the</strong> year ending 31 December 2007 were as follows:<br />

Note 31.12.2007 31.12.2006<br />

Income recognised in <strong>the</strong> period (Closed and Open Contracts) 29.1 277.156.087 253.454.907<br />

Multi-Year Contracts still open as at 31.12.2007<br />

Costs incurred <strong>to</strong> date (a) 744.245.214 674.054.161<br />

Margins recognised <strong>to</strong> date (a) 140.897.511 183.172.775<br />

Inven<strong>to</strong>ry in progress 29.2 8.096.899 5.607.659<br />

Income accruals 29.2 57.936.793 39.268.880<br />

Deferred income 29.2 51.423.942 61.196.209<br />

a) Non consolidated values, which include those for previous years for multi year contracts still open as at 31.12.2007.<br />

29.1 The reconciliation of <strong>the</strong> amount shown in <strong>the</strong> line Income recognised in <strong>the</strong> year concerning multi year contracts closed or<br />

still open with <strong>the</strong> <strong>to</strong>tal of sales and services rendered, can be shown as follows:<br />

31.12.2007 31.12.2006<br />

Income recognised concerning Multi Year Contracts 277.156.087 253.454.907<br />

Income relating <strong>to</strong> Standard Manufactured Products 46.340.012 28.433.884<br />

Income relating <strong>to</strong> Maintenance and Assistance Services 70.673.766 58.357.299<br />

O<strong>the</strong>r Income 46.153.236 30.104.605<br />

Total Consolidated Sales and Services 440.323.101 370.350.695<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


29.2 Multi year contracts for s<strong>to</strong>cks relate <strong>to</strong> costs incurred, for that inven<strong>to</strong>ry which has not yet been used in a construction work<br />

or installation, and thus <strong>the</strong> difference compared <strong>to</strong> <strong>the</strong> amounts actually invoiced has not yet been booked.The accrued income<br />

represents situations in which <strong>the</strong> stage of invoicing is less than <strong>the</strong> stage of completion of <strong>the</strong> project involved, with sales income<br />

being booked for <strong>the</strong> difference. This situation involves a booking of a debit <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer and a credit <strong>to</strong> <strong>the</strong> project involved<br />

(note 9 – Accrued Income). When <strong>the</strong> opposite situation occurs, when <strong>the</strong> level of invoicing is greater than that of completion,<br />

<strong>the</strong>re is deferred income, which represent a credit <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer’s account for <strong>the</strong> project being worked on (Note 18 – Deferred<br />

Invoicing), <strong>the</strong> value of which will only be recognised in future years.<br />

30. Subsequent events<br />

In February 2008, <strong>Efacec</strong> <strong>to</strong>ok <strong>the</strong> fi rst steps <strong>to</strong> invest in a power transformer plant in Effi ngham, in <strong>the</strong> State of Georgia (USA)<br />

by setting up a company <strong>to</strong> that end with an authorised share capital of up <strong>to</strong> 25,000,000 US dollars, wholly controlled by <strong>the</strong><br />

Group.<br />

G. List of companies consolidated<br />

31. Consolidation perimeter<br />

31.1 Companies included in consolidation<br />

Companies included in <strong>the</strong> consolidation, <strong>the</strong>ir registered offi ces, <strong>the</strong> shareholding held by EFACEC Capital SGPS, directly or<br />

indirectly, and <strong>the</strong> method of consolidation are as follows:<br />

Portuguese companies<br />

Company Name Head Office % Control Consol. Method<br />

<strong>Efacec</strong> Capital, SGPS, S.A. Ma<strong>to</strong>sinhos H INT<br />

<strong>Efacec</strong> Investimen<strong>to</strong>s e Concessões, SGPS, S.A. (a) Oeiras 75,0 INT<br />

<strong>Efacec</strong> International Financing, SGPS, S.A. (b) Ma<strong>to</strong>sinhos 55,0 INT<br />

TECH M5 Capital, SGPS, S.A. (c) Maia 100,0 INT<br />

<strong>Efacec</strong> Energia, Máquinas e Equipamen<strong>to</strong>s Eléctricos, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

<strong>Efacec</strong> DT, Transformadores de Distribuição de Energia, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

<strong>Efacec</strong> AMT, Aparelhagem de Média Tensão, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

<strong>Efacec</strong> Engenharia, S.A. Oeiras 100,0 INT<br />

<strong>Efacec</strong> Ambiente, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

<strong>Efacec</strong> Serviços de Manutenção e Assistência, S.A. Ma<strong>to</strong>sinhos 80,1 INT<br />

ATM – Assistência Total em Manutenção, S.A. Barreiro 100,0 INT<br />

BCI – BRISA Conservação de Infra-estruturas, S.A. Oeiras 100,0 INT<br />

<strong>Efacec</strong> Sistemas de Electrónica, S.A. Maia 100,0 INT<br />

<strong>Efacec</strong> Au<strong>to</strong>mação e Robótica, S.A. Maia 100,0 INT<br />

TECH M5 Tecnologia para Operadores de Redes, S.A. (c) Maia 100,0 INT<br />

<strong>Efacec</strong> Marketing Internacional, S.A. (c) Maia 100,0 INT<br />

MAP Consul<strong>to</strong>ria e Gestão, Lda. (c) Maia 100,0 INT<br />

GEMP – Empreendimen<strong>to</strong>s Imobiliários, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

Empovar, S.A. Ma<strong>to</strong>sinhos 100,0 INT<br />

SVEP – Segurança e Vigilância Electrónica de Pessoas, Lda. Oeiras 92,0 INT<br />

S2M – Sociedade de Manutenção de Metropolitanos (Instal. Fixas), S.A. Ma<strong>to</strong>sinhos 40,0 MEP<br />

O&M Serviços – Operação e Manutenção Industrial, S.A. Mortágua 40,0 MEP<br />

EID – Empresa de Investigação e Desenvolvimen<strong>to</strong> de Electrónica, S.A. Lisboa 25,0 MEP<br />

Águas da Figueira, S.A. (d) Figueira da Foz 20,0 MEP<br />

SMA - Serv. Manut. Centrais Termoeléctricas, ACE Oeiras 100,0 PRO<br />

SPORTSER - Serv. Manut. Electromecânica, ACE Oeiras 90,0 PRO<br />

OMAP - Operação e Manut. do Sec<strong>to</strong>r de Adubos, ACE Oeiras 90,0 PRO<br />

SMIQ - Serv. Manut. da Indústria Química, ACE Oeiras 60,0 PRO<br />

ASIQUIM - Assist. e Serviços p/ Indústria Química, ACE Estarreja 50,0 PRO<br />

Etarlima - Tratamen<strong>to</strong> de Efl uentes, ACE Viana do Castelo 50,0 PRO<br />

Ecobarcelos - Tratamen<strong>to</strong> de Efl uentes, ACE Barcelos 49,0 PRO<br />

Siemens, Setal, Dégremont e <strong>Efacec</strong> - Serv. Manut., ACE Amadora 33,0 PRO<br />

Siemens e <strong>Efacec</strong>, ACE Amadora 5,0 PRO<br />

MCT - Manut. em Centrais Térmicas ACE Oeiras 90,0 PRO<br />

ASMI - Alverca Serv. Manut. Inst. Electromecânicas, ACE Oeiras 60,0 PRO<br />

38


Foreign companies<br />

Company Name Head Office % Control Consol. Method<br />

<strong>Efacec</strong> Praha, s.r.o. Praga / Rep. Checa 100,0 INT<br />

<strong>Efacec</strong> Sistemas España, SL Madrid / Espanha 100,0 INT<br />

<strong>Efacec</strong> Angola, Lda. Luanda / Angola 100,0 INT<br />

<strong>Efacec</strong> Moçambique, Lda. (e) Mapu<strong>to</strong> / Moçam- 100,0 INT<br />

<strong>Efacec</strong> Algérie, EURL Argel / Argélia 100,0 INT<br />

BAUEN <strong>Efacec</strong>, S.A. Córdoba / Argentina 76,7 INT<br />

<strong>Efacec</strong> do Brasil, Lda. S.Paulo / Brasil 100,0 INT<br />

<strong>Efacec</strong> Energy Service, Ltda. Recife / Brasil 66,7 INT<br />

<strong>Efacec</strong> Sistemas Venezuela, CA Caracas / Venezuela 65,0 INT<br />

<strong>Efacec</strong> Florida, Inc. Miami / EUA 100,0 INT<br />

Advanced Control Systems, Inc. Atlanta / EUA 99,6 INT<br />

<strong>Efacec</strong> Asia-Pacifi c, Ltd. Macau 100,0 INT<br />

<strong>Efacec</strong> Singapore Pte Ltd Singapura 100,0 INT<br />

<strong>Efacec</strong> Malaysia Sdn.Bhd. (f) Kuching / Malásia 61,0 INT<br />

SESCO <strong>Efacec</strong> Sdn.Bhd. (g) Kuching / Malásia 35,2 MEP<br />

GODREJ <strong>Efacec</strong> Au<strong>to</strong>mation and Robotics, Ltd. Mumbai / Índia 50,0 MEP<br />

LEEEC - Liaoyang <strong>Efacec</strong> Electrical Equipment Co. Ltd. Liaoyang / China 36,3 MEP<br />

<strong>Efacec</strong> Ikusi UTE Tenerife / Espanha 50,0 PRO<br />

Legend:<br />

INT – Integral Method of consolidation;<br />

MEP – Equity Method of consolidation;<br />

PRO – Proportional Method of consolidation;<br />

(a) This company was set up as a holding company but can also provide administrative and management services as defi ned by<br />

law, in particular for concessionary rights. The remaining 25% of this company is owned by Caixa Investimen<strong>to</strong>s – Sociedade de<br />

Investimen<strong>to</strong>s, S.A.<br />

(b) This company was set up in 1999 in a partnership between <strong>Efacec</strong> and IPE, whose goal was <strong>to</strong> manage certain shareholdings<br />

in <strong>the</strong> Far East. As at 31 December 2007, it held 60% of EFACEC Malaysia SDN. BHD which in turn owned 23% of Sesco EFACEC,<br />

a company also based in Malaysia. With <strong>the</strong> disappearance of IPE, <strong>the</strong> shareholding of this entity is currently split between AICEP<br />

Capital with 40% and <strong>the</strong> Portuguese General Treasury Department with 5%.<br />

(c) The share capital of EFACEC Marketing Internacional (previously known as Tec M5 GT) was acquired in July 2003 from its<br />

founder owners for 260.500. 49.7% of <strong>the</strong> share capital of Tech M5 Capital was acquired from PME Capital – Sociedade de Capital<br />

de Risco, SA and FRIE PME CAPITAL GLOBAL for 750,000 in exchange for shares in <strong>Efacec</strong> – Sistemas de Electrónica, SA (3.11%)<br />

and ENT – Empresa Nacional de Telecomunicações, SA (0.97%). In 2006, <strong>the</strong> remaining share capital of PME Capital and FRIE PME<br />

not already in <strong>the</strong> group’s hands was acquired, so that 100% of <strong>the</strong> share capital of <strong>the</strong>se companies is now owned by <strong>the</strong> group.<br />

(d) This company’s purpose is <strong>to</strong> use concessionary rights <strong>to</strong> s<strong>to</strong>re, treat and distribute water for public consumption, as well as<br />

collection and disposal of effl uents in <strong>the</strong> Figueira da Foz municipality.<br />

(e) In January 2007, <strong>the</strong> Group acquired 51% of <strong>Efacec</strong> Moçambique, Lda, thus becoming <strong>the</strong> owner of <strong>the</strong> entire share capital of<br />

this company. Shareholdings with a nominal value of MZN 1,593,750 were acquired from various shareholders for <strong>the</strong> overall sum<br />

of 9,117 Euro.<br />

(f) This company is held by <strong>the</strong> group through EFACEC International Financing, S.G.P.S., S.A., which holds 60% and by EFACEC<br />

Capital, S.G.P.S., S.A., which holds 1%. Since EFACEC Capital, S.G.P.S., S.A. owns 55% of EFACEC International Financing, S.G.P.S.,<br />

S.A., control is <strong>the</strong>refore exercised over EFACEC Malaysia;<br />

(g) 12.2% of this company is held directly by EFACEC Energia. The remaining shareholding is held indirectly through <strong>the</strong> direct<br />

shareholding in EFACEC International Financing SGPS, which has control of EFACEC Malaysia, which in its turn holds 23% of Sesco<br />

EFACEC.<br />

31.2 Companies excluded from consolidation<br />

Company name Head Office % Control<br />

Reason for<br />

Exclusion<br />

Vestiparque, Lda. Oeiras 67,0 (A)<br />

BAUEN <strong>Efacec</strong> Chile, S.A. Santiago / Chile 96,9 (B)<br />

(A) This company was set up on 30 August 2007 in partnership with Mota – Engil as part of <strong>the</strong> winning consortium for <strong>the</strong><br />

construction and operation of wind farms. Since it was in <strong>the</strong> start up phase at <strong>the</strong> end of <strong>the</strong> year, it had not yet done any business.<br />

It is booked in Investments at acquisition cost.<br />

39<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


(B) Excluded on <strong>the</strong> grounds of immateriality.<br />

31.3 Changes <strong>to</strong> <strong>the</strong> consolidation perimeter<br />

With <strong>the</strong> acquisition of <strong>the</strong> entire share capital of <strong>Efacec</strong> Moçambique, Lda, this company ceased <strong>to</strong> be consolidated using <strong>the</strong><br />

equity method and was consolidated using <strong>the</strong> integral method.<br />

During 2007, <strong>Efacec</strong> acquired majority shareholdings in two companies: in June, it bought 66.7% of <strong>the</strong> shares in Energy Service,<br />

Ltda, whose registered offi ce is in S.Paulo, Brazil, which carries out maintenance on energy equipment (transformers, mo<strong>to</strong>rs,<br />

genera<strong>to</strong>rs and alterna<strong>to</strong>rs); at <strong>the</strong> beginning of <strong>the</strong> 4th quarter of <strong>the</strong> year, it acquired 99.56% of Advanced Control Systems, a<br />

company in <strong>the</strong> au<strong>to</strong>mation and systems engineering sec<strong>to</strong>r based in Atlanta, in <strong>the</strong> State of Georgia (USA). Both <strong>the</strong>se companies<br />

were included in <strong>the</strong> consolidation perimeter using <strong>the</strong> integral method.<br />

Also in 2007, <strong>the</strong> Complementary Group of Companies (ACE) called “ASIP – Assistência e Serviços para Indústria de Pasta de<br />

Papel, ACE” was removed from <strong>the</strong> consolidation perimeter, since <strong>the</strong> contract which led <strong>to</strong> its set up, was terminated.<br />

These changes did not have any signifi cant impact on <strong>the</strong> accounts, which might affect <strong>the</strong>ir comparability with <strong>the</strong> previous<br />

year.<br />

Leça do Balio, 1 April 2008<br />

Responsible for Consolidation<br />

José Carlos Oliveira<br />

The Board of Direc<strong>to</strong>rs<br />

Francisco de La Fuente Sánchez - Chairman of <strong>the</strong> Board of Direc<strong>to</strong>rs<br />

Luís Filipe da Conceição Pereira - Vice - Chairman<br />

Guilherme Ricca Gonçalves - Vice - Chairman<br />

Maria do Rosário Mayoral Robles Machado Simões Ventura - Board Direc<strong>to</strong>r<br />

Alber<strong>to</strong> de Freitas Martins - Board Direc<strong>to</strong>r<br />

Alber<strong>to</strong> Joaquim Milheiro Barbosa - Board Direc<strong>to</strong>r<br />

Artur Fuchs - Board Direc<strong>to</strong>r<br />

Daniel Bessa Fernandes Coelho - Board Direc<strong>to</strong>r<br />

António do Prado Nogueira Leite - Board Direc<strong>to</strong>r<br />

João Afonso Ramalho Sopas Pereira Ben<strong>to</strong> - Board Direc<strong>to</strong>r<br />

Luís Miguel Nogueira Freire Cortes Martins - Board Direc<strong>to</strong>r<br />

40


41<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Non Current<br />

EFACEC Capital, SGPS, S.A.<br />

Balance Sheets as at 31 December 2007 and 2006<br />

Assets<br />

The Accountant The Board of Direc<strong>to</strong>rs<br />

42<br />

<strong>Notes</strong> 2007 2006<br />

Amounts in Euro<br />

Tangible Assets 3 22.490.611 21.433.119<br />

Intangible Assets 4.229 4.147<br />

Investments in Group and Associated Companies 4 124.446.805 129.965.394<br />

Investments in O<strong>the</strong>r Companies 11.517 15.365<br />

Derivatives 5 345.574 0<br />

Deb<strong>to</strong>rs and Prepayments 7 27.000 27.000<br />

Deferred Tax Assets 12 598.579 606.903<br />

Current<br />

Total Non Currrent 147.924.316 152.051.928<br />

Trade Receivables and Accrued Income 6 261.594 0<br />

Deb<strong>to</strong>rs and Prepayments 7 23.475.987 11.072.370<br />

Cash and cash equivalents 8 113.267 31.800<br />

Shareholders’ Funds<br />

Shareholders’ Funds<br />

Total Current 23.850.849 11.104.170<br />

Total Assets 171.775.165 163.156.097<br />

Share capital 9 41.641.416 41.641.416<br />

Reserves for <strong>Financial</strong> Instruments 253.997 -34.725<br />

Reserves and Retained Earnings 19.633.473 19.226.070<br />

Net Profi t 26.776.666 7.944.500<br />

Anticipated Dividends -12.216.000 0<br />

Non Current Liabilities<br />

Total Shareholders’ Funds 76.089.552 68.777.261<br />

Provisions for Risks and Charges 13 1.661.837 1.637.812<br />

Borrowings from <strong>Financial</strong> Institutions 11 48.500.000 53.000.000<br />

Derivatives 5 0 47.245<br />

Deferred Tax Liabilities 12 3.513.491 3.461.021<br />

Current Liabilities<br />

Total Non Current Liabilities 53.675.328 58.146.077<br />

Borrowings from <strong>Financial</strong> Institutions 11 18.156.341 7.222.342<br />

Suppliers 10 422.942 62.889<br />

Credi<strong>to</strong>rs and Accruals 10 23.431.001 28.947.529<br />

Total Current Liabilities 42.010.284 36.232.760<br />

Total Shareholders’ Funds and Liabilities 171.775.165 163.156.097<br />

The notes <strong>to</strong> <strong>the</strong> accounts are integral part of <strong>the</strong>se consolidated balance sheets


EFACEC Capital, SGPS, S.A.<br />

Profit and Loss Account by Nature<br />

for <strong>the</strong> years ended 31 December 2007 and 2006<br />

43<br />

<strong>Notes</strong> 2007 2006<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments<br />

Amounts in Euro<br />

Sales and Services Rendered 4.950.012 6.476.000<br />

Third Part Supplies and Services -1.568.872 -1.446.021<br />

Staff Costs -1.261.790 -4.260.518<br />

Depreciation -871.768 -906.770<br />

Provisions -37.359 -94.971<br />

O<strong>the</strong>r Operational Costs -259.854 -222.285<br />

O<strong>the</strong>r Operational Income 1.418.860 1.827.863<br />

Operating Profi t 2.369.229 1.373.298<br />

Net <strong>Financial</strong> Costs 14 -1.936.699 -2.816.664<br />

Losses/Gains in associated companies 15 26.469.663 10.971.896<br />

Losses/Gains in o<strong>the</strong>r companies 5.429 0<br />

Income Tax 16 -130.956 -1.584.030<br />

The notes <strong>to</strong> <strong>the</strong> accounts are an integral part of <strong>the</strong>se consolidated balance sheets<br />

Net Profi t 26.776.666 7.944.500<br />

The Accountant The Board of Direc<strong>to</strong>rs


The Accountant<br />

EFACEC Capital, SGPS, S.A.<br />

Statement of changes <strong>to</strong> Shareholders’ Funds as at 31 December 2007 and 2006<br />

44<br />

<strong>Notes</strong> Share Capital Own Shares<br />

Balance as at 1 January 2006 41.641.416 0<br />

Increase in Free and Legal Reserve<br />

Dividend distributions<br />

Update of Deferred Taxes on Land<br />

Merger <strong>Efacec</strong> Sgps<br />

18<br />

Cover of cash fl ows, net of taxes<br />

O<strong>the</strong>rs<br />

5<br />

Gains / (Losses) recognised directly in Shareholders’ Funds<br />

Net Profi t for <strong>the</strong> Year<br />

0 0<br />

Total gains recognised in 2006 0 0<br />

Balance as at 31 December 2006 41.641.416 0<br />

Balance as at 1 January 2007 41.641.416 0<br />

Increase in Free and Legal Reserve<br />

Dividend distributions 18<br />

Cover of cash fl ows, net of taxes<br />

O<strong>the</strong>rs<br />

5<br />

Gains / (Losses) recognised directly in Shareholders’ Funds<br />

Net Profi t for <strong>the</strong> Year<br />

Anticipated dividends<br />

0 0<br />

Total gains recognised in 2007 0 0<br />

Balance as at 31 December 2007 41.641.416 0


Reserves <strong>Financial</strong><br />

Instruments<br />

Merger Reserve O<strong>the</strong>r Reserves Retained Profits Total Shareholders’ Funds<br />

-479.752 0 24.385.169 13.425.691 78.972.524<br />

3.689.330 -3.689.330 0<br />

-19.056.277 -3.689.330 -22.745.607<br />

132.756 132.756<br />

4.026.949 4.026.949<br />

445.027 445.027<br />

1.112 1.112<br />

445.027 4.026.949 -15.233.079 -7.378.660 -18.139.763<br />

7.944.500 7.944.500<br />

445.027 4.026.949 -15.233.079 565.840 -10.195.263<br />

-34.725 4.026.949 9.152.090 13.991.531 68.777.261<br />

-34.725 4.026.949 9.152.090 13.991.531 68.777.261<br />

407.404 -407.404 0<br />

-7.537.096 -7.537.096<br />

288.721 288.721<br />

0<br />

288.721 0 407.404 -7.944.500 -7.248.375<br />

26.776.666 26.776.666<br />

-12.216.000 -12.216.000<br />

0 0 0 14.560.666 14.560.666<br />

253.996 4.026.949 9.559.494 20.607.697 76.089.552<br />

45<br />

The Board of Direc<strong>to</strong>rs<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Operational Activities<br />

EFACEC Capital, SGPS, S.A.<br />

Cash Flow <strong>Statements</strong> for <strong>the</strong> periods ending 31 December 2007 e 2006<br />

The Accountant The Board of Direc<strong>to</strong>rs<br />

46<br />

<strong>Notes</strong> 2007 2006<br />

Amounts in Euro<br />

Paid <strong>to</strong> suppliers 2.989.939 2.075.041<br />

Paid <strong>to</strong> staff 1.765.972 3.830.744<br />

Flow generated by operations (4.755.911) (5.905.785)<br />

Payment/Receipt of corporation tax 1.227.864 (623.786)<br />

O<strong>the</strong>r revenue/payments in respect of operating activity 10.272.430 8.851.804<br />

Investment Activities<br />

Revenue provided by:<br />

Net infl ow from operating activities [1] 6.744.383 2.322.234<br />

Investments 4 509.277 1.423.577<br />

Interest and similar income 422.767 112.283<br />

Dividends 26.469.663 10.411.798<br />

Payments in respect of:<br />

27.401.707 11.947.658<br />

Investments 4 2.261.966 2.123.188<br />

Tangible assets 3 1.182.846 198.462<br />

3.444.812 2.321.649<br />

Net outfl ow from investment [2] 23.956.894 9.626.009<br />

Financing Activities<br />

Revenues provided by:<br />

Non current loans obtained 11 0 6.000.000<br />

Current loans obtained/granted 11 102.865.595 34.830.354<br />

Sale of own shares 0 0<br />

Payments in respect of:<br />

102.865.595 40.830.354<br />

Non current loans obtained 0 0<br />

Current loans obtained/granted 11 110.341.450 27.534.028<br />

Amortisation of leasing contracts 0 0<br />

Interest and similar income 3.390.806 2.691.227<br />

Dividends 18 19.753.150 22.745.638<br />

133.485.406 52.970.893<br />

Flows generated by fi nancing activities [3] (30.619.811) (12.140.538)<br />

Change in cash and cash equivalents [C]-[B]+[A]=[1]+[2]+[3] 81.467 (192.295)<br />

Merger impact [A] 0 189<br />

Cash and cash equivalents at <strong>the</strong> beginning of <strong>the</strong> period [B] 31.800 223.906<br />

Cash and cash equivalents at <strong>the</strong> end of <strong>the</strong> period [C] 113.267 31.800


A. General Information<br />

<strong>Notes</strong> <strong>to</strong> <strong>the</strong> <strong>Financial</strong> <strong>Statements</strong><br />

The activity of EFACEC Capital, S.G.P.S, as a holding company, cannot be studied separately from <strong>the</strong> group that it leads through<br />

<strong>the</strong> management of its subsidiary and associated companies, and <strong>the</strong> businesses run by each of <strong>the</strong>m. The diversity in terms of<br />

production and engineering competencies has left its mark on <strong>the</strong> management of this company and is demonstrated by <strong>the</strong> range<br />

of shareholdings held. The variety of services and products include a wide range of equipment used in electricity transport and<br />

distribution, in remote control systems, ventilation, electric traction, industrial electronics, telecommunications, au<strong>to</strong>mation and<br />

robotics and in engineering projects focused on industrial plant and maintenance.<br />

The company, and <strong>the</strong> group it represents operate in a highly competitive market, and it is necessary <strong>to</strong> be alert <strong>to</strong> <strong>the</strong> constant<br />

developments and changes in cus<strong>to</strong>mer preferences and in new technologies. With this in mind, <strong>the</strong> company has adapted its<br />

structure <strong>to</strong> ensure <strong>the</strong> most appropriate solution. During <strong>the</strong> last few years, in which <strong>the</strong>re has been a focus on internationalising<br />

and diversifying activities that has seen branches and agents set up across more than 30 countries, it has carried projects and studies<br />

with <strong>the</strong> aim of streng<strong>the</strong>ning and consolidating its position, and rethinking its development strategy for <strong>the</strong> entire group.<br />

<strong>Efacec</strong> Capital, Holding company of <strong>the</strong> <strong>Efacec</strong> Group is a public liability company with its registered Offi ce at Arroteia, parish of<br />

Leça do Balio, Ma<strong>to</strong>sinhos in Portugal.<br />

B. Summary of main accounting policies used<br />

The main accounting polices used <strong>to</strong> prepare <strong>the</strong>se consolidated fi nancial statements are described below. These policies have<br />

been consistently applied over <strong>the</strong> years unless o<strong>the</strong>rwise stated.<br />

1.1 Basis of Preparation<br />

The consolidated fi nancial statements were prepared using his<strong>to</strong>rical costs with <strong>the</strong> exception of land, fi nancial assets and liabilities<br />

(including derivatives) which have been valued in <strong>the</strong> accounts at <strong>the</strong>ir just value.<br />

For <strong>the</strong> fi rst time in 2007, <strong>the</strong> International <strong>Financial</strong> reporting Standard IFRS 7 was used, which is compulsory for fi nancial years<br />

after 1 January 2007.<br />

During <strong>the</strong> period, <strong>the</strong> following Standards became manda<strong>to</strong>ry:<br />

- IFRIC 7- Restatement approach as specifi ed in IAS 29;<br />

- IFRIC 8- Scope of IFRS 2;<br />

- IFRIC 9 – Embedded Derivatives;<br />

- IFRIC 10 – Interim <strong>Financial</strong> Reporting and Imparity.<br />

The adoption of <strong>the</strong>se standards did not have any signifi cant impact on <strong>the</strong> accounting policies of <strong>the</strong> company.<br />

At <strong>the</strong> end of <strong>the</strong> year, <strong>the</strong> following standards were issued which were not manda<strong>to</strong>ry as at 31 December 2007:<br />

- IAS 23 – Cost of Borrowings – 2007 update;<br />

- IFRS 8 – Operational Segments<br />

- IFRIC 13 – Cus<strong>to</strong>mer Retention Programmes;<br />

- IFRIC 11 – Own Shares Transactions<br />

- IFRIC 12 – Concessionary Contracts<br />

In view of <strong>the</strong> fact that applying <strong>the</strong>se standards was not manda<strong>to</strong>ry for <strong>the</strong> year beginning 1 January 2007, <strong>the</strong> company decided<br />

not <strong>to</strong> adopt <strong>the</strong>m immediately.<br />

It is estimated however that <strong>the</strong>re would be no signifi cant impact from applying <strong>the</strong>m <strong>to</strong> <strong>the</strong> fi nancial statements of <strong>the</strong> company.<br />

The preparation of <strong>the</strong> fi nancial statements in accordance with <strong>the</strong> International <strong>Financial</strong> Reporting Standards requires <strong>the</strong> use of<br />

some important accounting estimates. It also requires that <strong>the</strong> management entity uses its judgement in <strong>the</strong> process of applying<br />

<strong>the</strong> accounting policies of <strong>the</strong> company.<br />

47<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


1.2 Tangible Fixed Assets<br />

Land and buildings basically correspond <strong>to</strong> fac<strong>to</strong>ries and offi ces. Land is shown at fair value, based on periodic valuations done at<br />

least every three years by external independent valuers. O<strong>the</strong>r tangible fi xed assets are shown at his<strong>to</strong>rical cost, less depreciation,<br />

including all expenditure directly attributable <strong>to</strong> <strong>the</strong> acquisition of <strong>the</strong> assets.<br />

Subsequent costs are included in <strong>the</strong> cost already booked for <strong>the</strong> asset, or recognised as separate assets, as appropriate, but only<br />

when it is probable that economic benefi ts will accrue <strong>to</strong> <strong>the</strong> company and that <strong>the</strong> cost can be measured reliably. O<strong>the</strong>r expenditure<br />

for repairs and maintenance are recognised as costs in <strong>the</strong> period in which <strong>the</strong>y are incurred.<br />

Increases resulting from revaluations are shown in Reserves in Shareholders’ Funds. Each year, <strong>the</strong> difference between depreciation<br />

based on <strong>the</strong> re-valued amount of <strong>the</strong> asset taken <strong>to</strong> Profi t and Loss in <strong>the</strong> period, and depreciation based on <strong>the</strong> original cost<br />

of <strong>the</strong> asset, is transferred from Fair Value Reserves <strong>to</strong> Retained Earnings.<br />

Land is not depreciated. Depreciation on o<strong>the</strong>r assets is calculated using <strong>the</strong> straight line method using <strong>the</strong> cost value or <strong>the</strong> revalued<br />

amount, in order <strong>to</strong> apportion <strong>the</strong>ir cost or re-valued amount over <strong>the</strong> useful life of <strong>the</strong> asset down <strong>to</strong> <strong>the</strong>ir residual value,<br />

as follows:<br />

Depreciation begins in <strong>the</strong> month following that in which <strong>the</strong> asset entered service, in accordance with its useful life, as follows:<br />

Line Years<br />

Land -<br />

Buildings and O<strong>the</strong>r Construction 25 - 50<br />

Plant and Equipment 8 - 12<br />

Vehicles 4 - 5<br />

Tools and Utensils 4 - 8<br />

Offi ce Equipment 4 - 6<br />

The residual values of assets and <strong>the</strong>ir useful lives are revised and adjusted, if necessary, at <strong>the</strong> balance sheet date.<br />

If <strong>the</strong> amount booked is greater than <strong>the</strong> recoverable value of <strong>the</strong> asset, it is immediately adjusted <strong>to</strong> its estimated recoverable<br />

value (Note 1.3).<br />

Gains and/or losses on disposal or write offs are determined by calculating <strong>the</strong> difference between <strong>the</strong> net accounting value of <strong>the</strong><br />

asset, and its disposal or write off value, being in <strong>the</strong> latter case zero, and included in <strong>the</strong> Profi t or Loss of <strong>the</strong> period.<br />

1.3 Intangible Assets<br />

Software<br />

The acquisition cost of software licences is capitalised and includes all costs incurred for its acquisition and those required <strong>to</strong> put<br />

<strong>the</strong> available software in<strong>to</strong> use. These costs are depreciated over <strong>the</strong> estimated useful life (not exceeding 5 years).<br />

Costs related <strong>to</strong> <strong>the</strong> development or maintenance of <strong>the</strong> software are recognised as costs of <strong>the</strong> period in which <strong>the</strong>y are incurred.<br />

Costs directly associated with <strong>the</strong> production of identifi able and unique software controlled by <strong>the</strong> company, and which is probably<br />

going <strong>to</strong> generate future economic benefi ts that are superior <strong>to</strong> costs involved beyond one year, are recognised as intangible assets.<br />

Direct costs include people costs <strong>to</strong> develop <strong>the</strong> software and a share of relevant fi xed costs.<br />

Software development costs recognised as assets are amortised over its estimated useful life (not exceeding 5 years).<br />

1.4 Asset impairment<br />

Assets that do not have a defi ned useful life are not subject <strong>to</strong> amortisation, but are <strong>the</strong> object of annual impairment tests. Assets<br />

subject <strong>to</strong> amortisation are reviewed for impairment whenever events or changes in circumstances indicate that <strong>the</strong> value at which<br />

<strong>the</strong>y were booked may not be recoverable. Na impairment loss is recognised by <strong>the</strong> amount by which <strong>the</strong> booked value of <strong>the</strong><br />

asset exceeds its recoverable value. The recoverable value is <strong>the</strong> higher of <strong>the</strong> fair value of <strong>the</strong> asset, less expenses required for<br />

sale, and its use value. To carry out impairment tests, assets are grouped <strong>to</strong>ge<strong>the</strong>r at <strong>the</strong> lowest level at which cash fl ows can be<br />

identifi ed separately (cash fl ow generation units or UGCs).<br />

The amount recoverable from a UGC is calculated based on calculations of useful value. These calculations use cash fl ow projections<br />

based on fi nancial budgets approved by <strong>the</strong> management entity, covering a period of at least 5 years.<br />

Assumptions have been used for <strong>the</strong> analysis of each UGC of <strong>the</strong> business segment. The management entity works out <strong>the</strong> budgeted<br />

gross margin based on prior performance and its expectations for <strong>the</strong> development of <strong>the</strong> market. The average weighted<br />

growth rate used is consistent with <strong>the</strong> forecasts included in sec<strong>to</strong>r reports. The discount rates used are before tax, and refl ect <strong>the</strong><br />

specifi c risks related <strong>to</strong> <strong>the</strong> relevant sec<strong>to</strong>rs.<br />

48


1.5 Investments<br />

Investments in group, associated and o<strong>the</strong>r companies shown at acquisition cost.<br />

The Group checks at each balance sheer date whe<strong>the</strong>r object evidence exists of <strong>the</strong> impairment of any investment. If such evidence<br />

exists, <strong>the</strong> accumulated loss, calculated as <strong>the</strong> difference between <strong>the</strong> balance sheet value and <strong>the</strong> current fair value, is<br />

recognised in <strong>the</strong> profi t and loss account of <strong>the</strong> period in which <strong>the</strong> impairment occurred (Note 1.4).<br />

The company only recognises income <strong>to</strong> <strong>the</strong> extent that it receives distributions from cumulative net profi ts of <strong>the</strong> shareholding<br />

held, following <strong>the</strong> date of its acquisition. Distributions received in excess of <strong>the</strong>se profi ts are considered as a recovery of <strong>the</strong><br />

investment, and as such are booked as a reduction in <strong>the</strong> cost of <strong>the</strong> investment.<br />

1.6 Trade deb<strong>to</strong>rs and o<strong>the</strong>r deb<strong>to</strong>rs<br />

Trade deb<strong>to</strong>rs and o<strong>the</strong>r deb<strong>to</strong>rs are initially recognised at <strong>the</strong>ir nominal or fair value, when different, less any impairment loss.<br />

The provision for deb<strong>to</strong>r impairment is set up when <strong>the</strong>re is objective evidence that <strong>the</strong> Group will not receive <strong>the</strong> entire amount<br />

outstanding, as per <strong>the</strong> original conditions established for <strong>the</strong> debt. The amount of <strong>the</strong> provision is <strong>the</strong> difference between <strong>the</strong><br />

amount presented and <strong>the</strong> estimated present value of future cash fl ows, discounted at <strong>the</strong> effective interest rate. The amount of<br />

<strong>the</strong> provision is recognised in <strong>the</strong> profi t and loss account.<br />

1.7 Cash and cash equivalents<br />

The line “Cash and cash equivalents” includes cash, bank deposits, o<strong>the</strong>r short term high liquidity investments and with initial<br />

maturities up <strong>to</strong> three months. Bank overdrafts are shown in <strong>the</strong> balance sheet under current liabilities in <strong>the</strong> line Borrowings.<br />

1.8 Share capital<br />

Ordinary shares are shown in shareholders’ funds.<br />

The incremental costs directly attributable <strong>to</strong> <strong>the</strong> issue of new shares or options are shown in shareholders’ funds as a reduction,<br />

net of taxes, of cash from increases in share capital. The incremental costs directly attributable <strong>to</strong> <strong>the</strong> issue of new shares or options<br />

or <strong>the</strong> acquisition of a new business are included in <strong>the</strong> cost of acquisition as part of <strong>the</strong> purchase price.<br />

1.9 Borrowings<br />

Borrowings are initially recognised at <strong>the</strong>ir nominal value or fair value, whenever different, less any impairment loss. Later <strong>the</strong>y<br />

are shown at <strong>the</strong>ir amortised cost; any difference between receipts (net of transaction costs) and <strong>the</strong> amortised value is recognised<br />

in <strong>the</strong> profi t and loss account throughout <strong>the</strong> loan period, using <strong>the</strong> effective rate method.<br />

Borrowings are shown in current liabilities, unless <strong>the</strong> company has an unconditional right <strong>to</strong> defer payment of <strong>the</strong> liability until at<br />

least 12 months after <strong>the</strong> balance sheet date.<br />

1.10 Income tax and deferred taxes<br />

EFACEC Capital, S.G.P.S. opted for taxation based on consolidated profi ts as from 1993, currently covered by <strong>the</strong> “Special Rules<br />

for taxation of Groups of Companies”). All Group companies whose registered offi ces are located in Portugal and are subject <strong>to</strong> <strong>the</strong><br />

Portuguese Corporate Tax Regime (IRC), and where <strong>the</strong> direct and indirect share holding is greater than 90%, have been included<br />

in <strong>the</strong> tax consolidation in accordance with <strong>the</strong> applicable legislation. The consolidated tax charge is determined on <strong>the</strong> basis of<br />

<strong>the</strong> arithmetic sum of taxable profi ts and losses as derived from individual companies’ tax returns.<br />

Deferred taxes are generally recognised using <strong>the</strong> liability method concerning temporary differences arising from <strong>the</strong> carrying<br />

amounts of assets and liabilities for consolidated fi nancial reporting purposes and amounts used for income tax purposes. However,<br />

if <strong>the</strong> deferred tax arises through <strong>the</strong> initial recognition of an asset or liability in a transaction that is not a business concentration<br />

that at <strong>the</strong> date of <strong>the</strong> transaction did not affect ei<strong>the</strong>r <strong>the</strong> accounting or fi scal result, it is not booked. Deferred taxes are determined<br />

by fi scal rates (and laws) in force or substantially in force at <strong>the</strong> balance sheet date and which are expected <strong>to</strong> be applicable<br />

in <strong>the</strong> period when <strong>the</strong> deferred tax asset or <strong>the</strong> payment of <strong>the</strong> deferred tax liability takes place. The tax rate that has been used<br />

<strong>to</strong> determine deferred taxes is that of current legislation - 25%, plus <strong>the</strong> maximum local tax possible - 1.5% of taxable profi t.<br />

Deferred tax assets are recognised <strong>to</strong> <strong>the</strong> extent that it is probable that future taxable profi ts will be available <strong>to</strong> make use of <strong>the</strong><br />

timing difference.<br />

Deferred taxes on timing differences arising from investments in affi liates and associates are recognised, except when <strong>the</strong> Group<br />

is able <strong>to</strong> control <strong>the</strong> haphazard nature of <strong>the</strong> reversal of <strong>the</strong> timing difference and when it is probable that <strong>the</strong> timing difference<br />

does not revert in <strong>the</strong> foreseeable future.<br />

49<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


1.11 Provisions<br />

Provisions are booked when <strong>the</strong> Group has a legal or constructive obligation when, as a result of past events, it is probable that an<br />

outfl ow of resources will be necessary <strong>to</strong> pay an obligation, and a reliable estimate of <strong>the</strong> amount of <strong>the</strong> obligation can be made.<br />

When <strong>the</strong>re are a number of similar obligations, <strong>the</strong> probability of generating an outfl ow is worked out <strong>to</strong>ge<strong>the</strong>r. The provision is<br />

booked even when <strong>the</strong> probability of an outfl ow, relating <strong>to</strong> an element included in <strong>the</strong> same class of obligations, may be reduced.<br />

1.12 Recognition of income<br />

Income covers <strong>the</strong> fair value of <strong>the</strong> sale of goods and services, net of taxes and commercial discounts and after elimination of<br />

internal sales.<br />

Services rendered<br />

The rendering of services is recognised in <strong>the</strong> accounting period in which <strong>the</strong>y are rendered, with reference <strong>to</strong> <strong>the</strong> phase of completion<br />

of <strong>the</strong> transaction at <strong>the</strong> balance sheet date.<br />

1.13 Dividend distributions<br />

Dividend distributions <strong>to</strong> shareholders are recognised as a liability in <strong>the</strong> company’s fi nancial statements in <strong>the</strong> period in which <strong>the</strong><br />

dividends are approved in <strong>the</strong> Shareholders’ General Meeting.<br />

2. <strong>Financial</strong> risk management<br />

2.1 Fac<strong>to</strong>rs of financial risk<br />

The Group operates internationally and thus has exposure <strong>to</strong> <strong>the</strong> market, in particular <strong>to</strong> changes in interest rates, exchange rates<br />

and <strong>the</strong> price of raw materials. Thus Group activities are exposed <strong>to</strong> a variety of fi nancial risks: market risk (including exchange<br />

rate risk, fair value risk relating <strong>to</strong> interest rates and price risk), liquidity risk and cash fl ow risk associated with interest rates. The<br />

Group has no signifi cant concentrations of credit risk. Various fi nancial instruments are used <strong>to</strong> minimise <strong>the</strong> potential adverse<br />

effects on <strong>the</strong> fi nancial performance of <strong>the</strong> Group. However, <strong>the</strong> Group only uses such fi nancial instruments <strong>to</strong> cover risks arising<br />

from its business and activities (“hedging purposes”).<br />

Exchange rate risk<br />

The Group operates internationally, and as a result, is exposed <strong>to</strong> risks from exchange rates. This risk arises from commercial<br />

transactions, recognition of assets and liabilities and net investments in operations outside <strong>the</strong> Euro zone.<br />

The Group has signifi cant sales and delivery of services in countries outside <strong>the</strong> Euro zone, particularly in US Dollars (USD). Group<br />

companies are required <strong>to</strong> carefully manage exchange risk cover, considering <strong>the</strong> operational margins in <strong>the</strong>ir business. Exchange<br />

risk cover is made from <strong>the</strong> proposal date in some cases or from <strong>the</strong> order date, until cash payment is received. In this way, not<br />

only are <strong>the</strong> majority of balance sheet assets and liability values covered but also future sales linked with proposals (considering<br />

an acceptable level of success) and orders. Accordingly cover can be for several years depending on how long <strong>the</strong> project or installations<br />

take, refl ecting <strong>the</strong> possible period over several years which <strong>the</strong> work of Group companies can take place.<br />

Liquidity risk<br />

The management of <strong>the</strong> risk of liquidity implies maintaining a suffi cient level of cash and bank deposits, <strong>the</strong> viability of fl oating<br />

debt through adequate credit facilities, and skill in liquidating market positions. In line with <strong>the</strong> business needs, <strong>the</strong> Group Treasury<br />

aims at maintaining <strong>the</strong> fl exibility of <strong>the</strong> fl oating debt, keeping credit lines available.<br />

Cash fl ow risks and fair value related <strong>to</strong> interest rates<br />

Since <strong>the</strong> Group does not have assets that earn signifi cant amounts of interest, profi ts and cash fl ows are relatively independent<br />

of changes <strong>to</strong> interest rates.<br />

Interest rate risks of <strong>the</strong> Group come from long term borrowings. Borrowings with variable rates of interest expose <strong>the</strong> Group <strong>to</strong><br />

cash fl ow risks related <strong>to</strong> interest rates.<br />

The Group manages interest rate cash fl ow risks by transforming variable interest rates in<strong>to</strong> swaps with fi xed interest rates. In <strong>the</strong>se<br />

transactions, <strong>the</strong> Group agrees <strong>to</strong> exchange with o<strong>the</strong>r parties at specifi ed intervals (mainly quarterly), <strong>the</strong> difference between<br />

amounts at contracted fi xed rates of interest and amounts at a variable rate of interest.<br />

50


2.2 Accounting for financial instruments – derivatives and hedging<br />

Derivatives are initially recognised at fair value and subsequently readjusted <strong>to</strong> <strong>the</strong>ir fair value. The method for recognising changes<br />

in fair value depend on whe<strong>the</strong>r <strong>the</strong> derivative is defi ned as a hedge instrument and if so, <strong>the</strong> nature of <strong>the</strong> asset/liability <strong>to</strong><br />

be covered. The group arranges certain derivatives as: (1) fair value cover of recognised assets and liabilities or of commitments<br />

(fair value cover); (2) cover of highly probable forecast transactions (cash fl ow cover).<br />

For each transaction, <strong>the</strong> Group prepares documentation <strong>to</strong> justify <strong>the</strong> relationship between <strong>the</strong> hedge instruments and <strong>the</strong> related<br />

assets/liabilities covered, as well as <strong>the</strong> objective of risk management and <strong>the</strong> strategy for taking out cover. The Group also<br />

documents its evaluation, both at <strong>the</strong> start of <strong>the</strong> cover and on a continuous basis, as <strong>to</strong> whe<strong>the</strong>r <strong>the</strong> derivatives used for cover<br />

effectively compensate for fl uctuations in fair value or in <strong>the</strong> cash fl ows of <strong>the</strong> items covered.<br />

The fair value of derivatives used <strong>to</strong> take out cover is disclosed in Note 5, as well as <strong>the</strong> movements that <strong>to</strong>ok place in Shareholders’<br />

Funds.<br />

a) Fair value hedging<br />

Changes in <strong>the</strong> fair value of derivatives that are arranged and qualifi ed for fair value hedging are recognised in <strong>the</strong> profi t and loss<br />

account, <strong>to</strong>ge<strong>the</strong>r with changes <strong>to</strong> <strong>the</strong> fair value of <strong>the</strong> assets and liabilities covered (in <strong>the</strong> covered position) attributable <strong>to</strong> <strong>the</strong><br />

risk covered.<br />

b) Cash fl ow hedging<br />

The effective part of <strong>the</strong> change in fair value of derivatives that are arranged and qualifi ed for cash fl ow hedging is recognised in<br />

shareholders’ funds. The gain or loss related <strong>to</strong> <strong>the</strong> ineffective part is immediately recognised in <strong>the</strong> profi t and loss account.<br />

Concerning cover strategies that use options, in accordance with IAS 39 and complying with <strong>the</strong> effi ciency test, <strong>the</strong> strategy value<br />

is split in<strong>to</strong> <strong>the</strong> intrinsic value and <strong>the</strong> temporary value.<br />

In accordance with <strong>the</strong> treatment referred above, <strong>the</strong> intrinsic value should be presented in shareholders’ funds (assuming <strong>the</strong><br />

strategy is effi cient), while <strong>the</strong> temporal value should be booked <strong>to</strong> <strong>the</strong> profi t and loss account.<br />

The cumulative amounts in shareholders’ funds are reclassifi ed <strong>to</strong> profi t and loss in <strong>the</strong> same period in which <strong>the</strong> item covered generates<br />

gains and losses (for example, when <strong>the</strong> Sales forecast covered occurs). However, when <strong>the</strong> forecast covered transaction<br />

results in a non fi nancial asset (for example, s<strong>to</strong>cks) or non fi nancial liability being recognised, <strong>the</strong> previously deferred gains and<br />

losses in shareholders’ funds are transferred and included in <strong>the</strong> initial measurement of that asset or liability.<br />

When a hedge instrument expires or is sold, or when a hedging does not comply with <strong>the</strong> accounting and qualifi cation criteria, any<br />

cumulative gain or loss existing at that moment in shareholders’ funds, remains in shareholders’ funds and is recognised when<br />

<strong>the</strong> forecast transaction is fi nally refl ected in <strong>the</strong> profi t and loss account. When <strong>the</strong> expected occurrence of a forecast transaction<br />

is no longer highly probable, <strong>the</strong> cumulative gains or losses refl ected in shareholders’ funds are immediately transferred <strong>to</strong> profi t<br />

and loss.<br />

c) Non qualifi ed derivatives for hedging purposes<br />

Certain derivatives do not comply with hedging accounting and qualifi cation criteria. Changes in fair value of <strong>the</strong>se derivatives are<br />

immediately recognised in <strong>the</strong> profi t and loss account.<br />

2.3 Estimates of fair value<br />

The fair value of fi nancial instruments available on <strong>the</strong> open market (for example publicly negotiated derivatives, negotiable instruments<br />

available for sale) is determined on <strong>the</strong> basis of quoted market prices on <strong>the</strong> balance sheet date. The quoted market<br />

price used for fi nancial assets of <strong>the</strong> Group is <strong>the</strong> price received by shareholders on <strong>the</strong> open market; <strong>the</strong> quoted market price for<br />

fi nancial liabilities is <strong>the</strong> price paid on <strong>the</strong> open market.<br />

The fair value of fi nancial instruments not traded on <strong>the</strong> open market (for example unquoted derivatives) is determined using valuation<br />

techniques. The Group uses a variety of methods and reaches its conclusions based on market conditions at each balance<br />

sheet date. Quoted market prices or negotiation quotas for similar instruments are used for long term debts. O<strong>the</strong>r techniques,<br />

such as estimates of discounted cash fl ows, are used <strong>to</strong> determine <strong>the</strong> fair value of o<strong>the</strong>r fi nancial instruments. The fair value of<br />

interest rate swaps is calculated based on <strong>the</strong> present value of estimated future cash fl ows. The fair value of exchange rate futures<br />

contracts is determined using market exchange rates at <strong>the</strong> balance sheet date.<br />

The nominal value of deb<strong>to</strong>r and credi<strong>to</strong>r balances less estimated credit adjustments is assumed <strong>to</strong> be close <strong>to</strong> <strong>the</strong>ir fair value. The<br />

fair value of fi nancial liabilities is estimated by updating future contractual cash fl ows at <strong>the</strong> current market interest rate available<br />

for similar fi nancial instruments.<br />

51<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


C. <strong>Notes</strong> on <strong>the</strong> Balance Sheets as at 31 December 2007 and 2006<br />

3. Tangible fixed assets<br />

3.1 Movements that <strong>to</strong>ok place in <strong>the</strong> period<br />

As at 31 December 2006<br />

Land and<br />

Buildings<br />

Plant and<br />

Equipment<br />

52<br />

Office<br />

Equipment<br />

O<strong>the</strong>r Total<br />

Opening balance 22.117.305 11.356 52.928 26.558 22.208.147<br />

Additions 119.019 0 13.005 1.605 133.629<br />

Transfers 26.558 0 0 -26.558 0<br />

Disposals 0 -1.887 0 0 -1.887<br />

Depreciation for <strong>the</strong> period -875.831 -7.938 -23.001 0 -906.770<br />

Closing balance 21.387.051 1.531 42.932 1.605 21.433.119<br />

Acquisition or revalued cost 56.573.017 258.390 938.221 38.128 57.807.756<br />

Cumulative depreciation -35.185.966 -256.859 -895.289 -36.523 -36.374.637<br />

Net value 21.387.051 1.531 42.932 1.605 21.433.119<br />

As at 31 December 2007<br />

Opening balance 21.387.051 1.531 42.932 1.605 21.433.119<br />

Additions 0 0 4.371 1.920.742 1.925.113<br />

Transfers 0 0 1.605 -1.605 0<br />

Disposals 0 0 0 0 0<br />

Depreciation for <strong>the</strong> period -844.077 -1.330 -22.214 0 -867.621<br />

Closing balance 20.542.974<br />

767<br />

201 26.694 1.920.742 22.490.611<br />

Acquisition or revalued cost 56.573.017 258.390 938.221 38.128 57.807.756<br />

Cumulative depreciation -36.030.043 -258.189 -911.527 1.882.614 -35.317.145<br />

Net value 20.542.974 201 26.694 1.920.742 22.490.611<br />

3.2 Revaluations<br />

Buildings and o<strong>the</strong>r tangible fi xed assets of <strong>the</strong> Group were re-valued on 1 January 2004, using <strong>the</strong> monetary revaluation coeffi -<br />

cients as part of <strong>the</strong> transition <strong>to</strong> IFRS (IFRS 1). Land is valued at fair value, a new adjustment having been made during 2005<br />

that resulted in shareholders’ funds and land asset values increasing by 3,056,590 Euro.<br />

If tangible assets were shown at his<strong>to</strong>rical cost, <strong>the</strong> values in <strong>the</strong> balance sheet would be lower by 15,286,513 Euro (16,011,185<br />

Euro in 2006).<br />

3.3 Guarantees<br />

No pledges or guarantees exist on any assets.


4. Investments in group and associated companies<br />

This line includes <strong>the</strong> value of <strong>the</strong> shareholdings involved and loans granted.<br />

The movements during <strong>the</strong> year were as follows:<br />

31.12.2007 31.12.2006<br />

Opening balance 129.965.394 110.751.666<br />

Acquisition of investments 1.269.165 2.336.410<br />

Merger 0 16.521.298<br />

Disposal of investment 0 -1.170.196<br />

Change in borrowings -7.280.555 712.676<br />

Repayment of supplementary capital -500.000 0<br />

Reversal of impairment 0 813.540<br />

O<strong>the</strong>r 992.801 0<br />

Closing balance 124.446.805 129.965.394<br />

The acquisition of fi nancial investments relate <strong>to</strong> <strong>the</strong> increase in <strong>the</strong> share capital of <strong>Efacec</strong> Angola made by conversion of debts<br />

outstanding.<br />

The line “O<strong>the</strong>rs” includes <strong>the</strong> last deferred payment for purchase of <strong>the</strong> shares of <strong>the</strong> subsidiary company Tech M5, in accordance<br />

with <strong>the</strong> share purchase and sale contract.<br />

The shareholdings of <strong>the</strong> company in <strong>the</strong> main group and associate companies, none of which are quoted on s<strong>to</strong>ck exchanges,<br />

were as follows:<br />

31.12.2007 31.12.2006<br />

Value % Holding Equity Value % Holding Equity<br />

Group companies<br />

<strong>Efacec</strong> RO, S.A. 6.572.918 100,0% 4.336.310 6.572.918 100,0% 4.363.720<br />

<strong>Efacec</strong> SMA, S.A. 2.849.772 38,0% 7.498.994 2.849.772 38,0% 7.160.384<br />

<strong>Efacec</strong> Sistemas de Electrónica, S.A. 8.203.618 100,0% 20.970.724 8.203.618 100,0% 31.684.743<br />

<strong>Efacec</strong> Angola, Lda. 1.269.165 80,0% 539.540 0 80,0% -785.952<br />

<strong>Efacec</strong> Energia, Máq. Quip. Elect. S.A 34.882.194 100,0% 41.652.659 34.882.194 100,0% 38.025.586<br />

<strong>Efacec</strong> Engenharia, S.A. 7.481.968 100,0% 11.817.985 7.481.968 100,0% 13.117.299<br />

<strong>Efacec</strong> Sist. Venezuela, C.A. 88.721 65,0% 2.583 88.721 65,0% 4.047<br />

<strong>Efacec</strong> International Financing, SGPS 419.738 55,0% 736.335 419.738 55,0% 738.741<br />

<strong>Efacec</strong> Investimen<strong>to</strong>s & Cons. 1.350.000 75,0% 849.152 1.350.000 75,0% 833.493<br />

<strong>Efacec</strong> Malasya SDN. BHD. (a) 12.097 1,0% 658.736 12.097 1,0% 688.893<br />

Gemp - Emprendim. Imobiliário 142.157 100,0% 810.859 142.157 100,0% 821.833<br />

<strong>Efacec</strong> Brasil 521.813 3,9% 3.089.311 521.813 3,9% 2.808.491<br />

Bauen, S.A. 679.796 76,6% 1.197.045 679.796 76,6% 1.235.184<br />

Empovar, S.A. 15.844.886 100,0% 4.695.752 15.844.886 100,0% 7.402.402<br />

Tech M5 Capital, SGPS 250.000 49,7% 1.438.875 250.000 49,7% 2.093.916<br />

<strong>Efacec</strong> Marketing Internacional 3.307.628 100,0% 1.827.662 2.314.827 100,0% -1.984<br />

<strong>Efacec</strong> Ambiente 1.246.996 100,0% 7.830.747 1.246.995 100,0% 9.838.067<br />

<strong>Efacec</strong> Praga 263.223 100,0% 979.817 263.223 100,0% 763.358<br />

<strong>Efacec</strong> Moçambique (c) 0 49,0% -1.697.601 - - -<br />

Associate companies<br />

85.386.690 83.124.723<br />

EFACEC Moçambique 0 49,0% -1.349.017<br />

O&M Serviços (Sefl or) 10.000 2,0% 899.199 10.000 2,0% 972.197<br />

Liaoyang EFACEC Elect. Equip. Corp. (b) 812.428 36,3% 2.153.624 812.428 36,3% 2.239.928<br />

E.I.D. - Emp. Invest. Desenvolv. 2.319.737 25,0% 9.825.135 2.319.737 25,0% 8.980.298<br />

3.142.165 3.142.165<br />

Total Inv. in Group and Assoc. companies 88.528.855 86.266.888<br />

a) The last accounts available were as at December 2003<br />

b) The last accounts available were as at November 2006<br />

c) Additional shareholding of 51% acquired in 2007, with <strong>the</strong> <strong>Efacec</strong> Group holding <strong>the</strong> entire share capital at <strong>the</strong> end of <strong>the</strong><br />

year. The value shown is that of <strong>the</strong> cost of acquisition of <strong>the</strong> holdings, except in those cases where an impairment loss had been<br />

recorded.<br />

53<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


The acquisition cost of shareholdings in companies in which impairment losses were recognised was as follows:<br />

54<br />

Acquisition Cost Impairment Loss Net Value<br />

Liaoyang EFACEC Elect. Equip. Corp. 2.459.554 -1.647.126 812.428<br />

EFACEC Moçambique 118.177 -118.177 0<br />

EFACEC Angola, Lda. 1.370.544 -101.379 1.269.165<br />

2.679.110 -1.866.862 2.081.593<br />

This line also includes loans and supplementary capital <strong>to</strong> <strong>the</strong> following subsidiaries and associated companies:<br />

5. Derivatives<br />

2007 2006<br />

Supplementary Capital<br />

<strong>Efacec</strong> Ambiente 4.000.000 4.000.000<br />

<strong>Efacec</strong> Energia, Máq. Equip. Elect. S.A. 14.000.000 14.000.000<br />

<strong>Efacec</strong> Engenharia, S.A. 1.000.000 1.000.000<br />

Gemp - Emprendim. Imobiliário 600.000 600.000<br />

Tech M5 Capital, SGPS 0 500.000<br />

<strong>Efacec</strong> RO, S.A. 600.000 600.000<br />

<strong>Efacec</strong> Sistemas de Electrónica, S.A. 3.900.000 3.900.000<br />

Financing Loans<br />

24.100.000 24.600.000<br />

<strong>Efacec</strong> Mo<strong>to</strong>res Electricos, S.A. 1.997.596 2.897.596<br />

<strong>Efacec</strong> Sistemas de Informação 0 1.070.000<br />

<strong>Efacec</strong> Marketing Internacional 0 860.706<br />

<strong>Efacec</strong> SMA, S.A. 8.038.315 10.391.300<br />

<strong>Efacec</strong> Angola 350.171 350.171<br />

<strong>Efacec</strong> Ro, S.A. 0 2.096.865<br />

<strong>Efacec</strong> Investim. e Concessões 1.319.420 1.319.420<br />

<strong>Efacec</strong> Moçambique 112.448 112.448<br />

11.817.950 19.098.506<br />

Total Loans 35.917.950 43.698.506<br />

In relation <strong>to</strong> fi nancial risk management described in Note 2, <strong>the</strong> status of fi nancial instruments as at 31 December 2007 and 31<br />

December 2006 was as follows:<br />

Interest rate risk<br />

As at 31 December 2007, EFACEC had interest rate options <strong>to</strong>talling 57 million dollars for BEI loans and Commercial paper (Note<br />

11) , whose market valuation was higher by 345,574 Euro.<br />

2007 2006<br />

Assets Liabilities Assets Liabilities<br />

Financing options - cash fl ow hedging 345.574 0 0 47.245<br />

Total 345.574 0 0 47.245<br />

Non current 345.574 0 0 47.245<br />

Current 0 0 0 0<br />

The hedging option contracts were booked in Shareholders’ Funds as described in Note 2.2. The movement in <strong>the</strong> line <strong>Financial</strong><br />

Instruments Reserves was <strong>the</strong> result of <strong>the</strong> change in fair value between <strong>the</strong> various reporting periods, less <strong>the</strong> related deferred<br />

tax assets/liabilities (note 12).


6. Cus<strong>to</strong>mers and Accrued Income<br />

2007 2006<br />

Cus<strong>to</strong>mers 22.224 0<br />

Related parties (Note 21.3) 239.371 0<br />

261.594 0<br />

7. O<strong>the</strong>r Deb<strong>to</strong>rs and Prepayments<br />

2007 2006<br />

O<strong>the</strong>r deb<strong>to</strong>rs 665.565 105.575<br />

Impairment Loss - O<strong>the</strong>r deb<strong>to</strong>rs -249.399 0<br />

416.166 105.575<br />

Shareholders - O<strong>the</strong>r Deb<strong>to</strong>rs (Note 21.3)<br />

Loans and o<strong>the</strong>r operations - Related parties:<br />

313.195 135.073<br />

Associates and Investments - O<strong>the</strong>r Operations (note 21.4) 194.140 322.450<br />

Group companies - O<strong>the</strong>r Operations (Note 21.4) 3.566.024 4.205.618<br />

Group and associate companies (Note 21.4) 17.479.207 3.085.370<br />

Impairment Loss - Related parties -156.271 -156.271<br />

21.396.294 7.592.240<br />

O<strong>the</strong>r deb<strong>to</strong>rs - <strong>Financial</strong> Assets IFRS 7 21.812.460 7.697.815<br />

O<strong>the</strong>r Deb<strong>to</strong>rs 28.257 0<br />

Prepayments 12.342 217.444<br />

State and o<strong>the</strong>r entities 1.649.928 3.184.111<br />

O<strong>the</strong>r Deb<strong>to</strong>rs - not covevred by IFRS7 1.690.527 3.401.555<br />

Total O<strong>the</strong>r Deb<strong>to</strong>rs 23.502.987 11.099.370<br />

Non current: O<strong>the</strong>r Deb<strong>to</strong>rs 27.000 27.000<br />

Current: O<strong>the</strong>r Deb<strong>to</strong>rs 23.475.987 11.072.370<br />

All third party non current debts are due within fi ve years of <strong>the</strong> balance sheet date.<br />

8. Cash and cash equivalents<br />

9. Share Capital<br />

55<br />

2007 2006<br />

Cash 0 6.112<br />

Bank balances 113.267 25.688<br />

113.267 31.800<br />

The authorised capital is made up 41,641,416 ordinary registered shares each having a par value of 1 Euro, and is entirely paid<br />

up. The company does not hold any own shares.<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


10. Suppliers, credi<strong>to</strong>rs and accruals<br />

56<br />

2007 2006<br />

Suppliers - Current account 10.331 75.198<br />

Fixed asset suppliers - Current account 412.611 -12.309<br />

Suppliers 422.942 62.889<br />

2007 2006<br />

O<strong>the</strong>r Credi<strong>to</strong>rs<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - Related Entities<br />

53.545 59.017<br />

Group companies - O<strong>the</strong>r Credi<strong>to</strong>rs (note 21.3) 0 133.923<br />

Shareholders - O<strong>the</strong>r Credi<strong>to</strong>rs (note 21.3) 101.625 11.629<br />

Group companies - Loans obtained (note 21.4) 19.420.472 24.694.311<br />

Group companies - O<strong>the</strong>r operations (note 21.4) 3.025.134 448.898<br />

Associate companies - O<strong>the</strong>r operations (note 21.4) 3.316 3.316<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - Related parties 22.550.546 25.292.077<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - IFRS 7 22.604.091 25.351.094<br />

Accruals 545.616 580.549<br />

Subscription Credi<strong>to</strong>rs 0 122.325<br />

State and o<strong>the</strong>r public entities 281.294 2.893.561<br />

O<strong>the</strong>r Credi<strong>to</strong>rs - not covered by IFRS 7 826.910 3.596.434<br />

Credi<strong>to</strong>rs and Accruals 23.431.001 28.947.528<br />

The current amount due <strong>to</strong> Suppliers, whe<strong>the</strong>r for services or fi xed assets, is almost entirely due within 90 days, which refl ects <strong>the</strong><br />

normal conditions negotiated with <strong>the</strong> company’s suppliers.<br />

11. Borrowings<br />

As at 31December 2007 and 31 December 2006, borrowings and bank overdrafts, <strong>the</strong>ir average annual interest rates and o<strong>the</strong>r<br />

conditions were as follows:<br />

2007 2006<br />

Non current<br />

Bank borrowings 22.500.000 27.000.000<br />

Commercial Paper 26.000.000 26.000.000<br />

Current<br />

48.500.000 53.000.000<br />

Bank borrowings 4.500.000 0<br />

Commercial Paper 7.500.000 7.000.000<br />

Current bank accounts 6.156.341 222.342<br />

18.156.341 7.222.342<br />

Total borrowings 66.656.341 60.222.342<br />

Bank finance<br />

At <strong>the</strong> end of 2007, <strong>the</strong> Group had a loan of 27,000,000 Euro from <strong>the</strong> European Investment Bank, contracted on 16 November<br />

2004. Interest is payable every six months at <strong>the</strong> Euribor rate plus a maximum spread of 0.13%. The fi rst capital repayment will<br />

be made on 15 June 2008 (4,500,000 Euro is already registered in current liabilities), with <strong>the</strong> remaining payments <strong>to</strong> be made<br />

each year up <strong>to</strong> 15 June 2013.<br />

Commercial Paper<br />

On 8 July 2005, a Commercial Paper programme was agreed with a bank syndicate, involving fi ve banks, of 26 million Euro. The<br />

programme has a contract period of 5 years with a requirement in excess of one year. The companies included in <strong>the</strong> Programme,<br />

<strong>Efacec</strong> Capital SGPS and its subsidiary <strong>Efacec</strong> Energia, can issue Commercial Paper by Direct Placement or by Auction. As far as<br />

mediation fee rates are concerned, <strong>the</strong> issues have a maximum rate equal <strong>to</strong> <strong>the</strong> Euribor rate for <strong>the</strong> period in question, plus<br />

0.35%. The current issues fall due on 11 July 2008.


On 30 November 2006, a second Commercial Paper programme was also agreed with <strong>the</strong> Santander Totta Bank <strong>to</strong> a maximum<br />

value of 7,500,000 Euro. The programme has a contract period of 5 years with annual renewals. EFACEC Capital can issue<br />

Commercial Paper by direct placement. As far as Mediation Rates are concerned, <strong>the</strong> issues have a maximum rate equal <strong>to</strong> <strong>the</strong><br />

Euribor rate for <strong>the</strong> period in question, plus 0.325%. The current issues fall due on 17 March 2008.<br />

Bank overdrafts<br />

These overdrafts do not have a defi ned reimbursement date, and can be renewed at various times and are short term in nature.<br />

The average interest rate on <strong>the</strong>m is based on Euribor plus an average spread of around 0.4%.<br />

Contractual exposure<br />

The exposure of Group loans <strong>to</strong> changes in interest rates and <strong>the</strong>ir contractual renegotiation dates are as follows:<br />

< 1 year 1-5 years > 5 years Total<br />

As at 31 December 2007<br />

Bank overdrafts 6.156.341 0 0 6.156.341<br />

Commercial paper 7.500.000 26.000.000 0 33.500.000<br />

Bank loans 4.500.000 18.000.000 4.500.000 27.000.000<br />

O<strong>the</strong>r 0 0 0 0<br />

As at 31 December 2006<br />

18.156.341 44.000.000 4.500.000 66.656.341<br />

Bank overdrafts 222.342 0 0 222.342<br />

Commercial paper 7.000.000 26.000.000 0 33.000.000<br />

Bank loans 0 0 27.000.000 27.000.000<br />

O<strong>the</strong>r 0 0 0 0<br />

7.222.342 26.000.000 27.000.000 60.222.342<br />

Non Current Maturity Dates<br />

Non current borrowing maturity dates are as follows:<br />

2007 2006<br />

Up <strong>to</strong> 3 years 26.000.000 30.500.000<br />

Between 3 and 5 years 18.000.000 13.500.000<br />

Over 5 years 4.500.000 9.000.000<br />

Total 48.500.000 53.000.000<br />

Effective Interest Rates<br />

The effective interest rates as at <strong>the</strong> balance sheet date were as follows:<br />

2007 2006<br />

Euros Euros<br />

Bank overdrafts 4,91% 4,15%<br />

Commercial paper 4,74% 3,82%<br />

Bank loans 4,92% 4,54%<br />

The fair value of current and non current bank borrowings is close <strong>to</strong> that of <strong>the</strong> balance sheet, in view of <strong>the</strong> fact that <strong>the</strong> contracted<br />

interest rate is <strong>the</strong> same as that of <strong>the</strong> market.<br />

Interest Rate Risk<br />

Final Rate Annual Cost Impact<br />

Reference fi gures (base 31 Dec.2007) 4,81% 3.587.829<br />

Sensitivity<br />

0,50% 5,31% 3.960.785 372.955<br />

- 0,50% 4,31% 3.214.874 -372.955<br />

During 2007, <strong>the</strong> net cash outfl ow of interest was 3,587 thousand Euro (Note 14). As at 31 December 2007, <strong>the</strong> average overall<br />

interest rate of EFACEC Capital’s borrowings was 4.81%.<br />

57<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Statistically, as of that date, this rate meant an annual gross cost of 3,206 thousand Euro.<br />

If <strong>the</strong>re were a worsening of <strong>the</strong> overall average rate of 0.5%, <strong>the</strong> annual interest cost would be 3,961<br />

thousand Euro. If on <strong>the</strong> o<strong>the</strong>r hand <strong>the</strong>re were a drop in overall average interest rates of 0.5%, <strong>the</strong><br />

annual interest rate cost would be 3,215 thousand Euro. The gross impact would be +/- 373 thousand<br />

Euro.<br />

<strong>Efacec</strong> Capital Group manages <strong>the</strong> interest rate risk through derivatives contracted on its medium and long term fi nancing, thus<br />

enabling <strong>the</strong> impact of interest changes <strong>to</strong> be mitigated (Note 5).<br />

Denomination of Loans<br />

The accounting value of Group loans is entirely denominated in Euro.<br />

Unused Credit Lines<br />

The Group also has <strong>the</strong> following credit lines that have not yet been used:<br />

2007 2006<br />

At variable rates<br />

Due within one year 15.155.000 12.128.000<br />

Due after 1 year 12.500.000 0<br />

27.655.000 12.128.000<br />

Those credit lines falling due within one year are au<strong>to</strong>matically renewed for <strong>the</strong> consolidation of <strong>the</strong> fi nancial liabilities of <strong>the</strong><br />

Group.<br />

12. Deferred taxes<br />

Deferred tax assets and liabilities are set off against each o<strong>the</strong>r if <strong>the</strong> company has a legally executable right <strong>to</strong> set off current tax<br />

assets against current tax liabilities, and when <strong>the</strong> deferred taxes concern <strong>the</strong> same tax authority.<br />

The deferred tax assets and liabilities are as follows:<br />

2007 2006<br />

Deferred tax assets:<br />

Deferred tax assets recoverable after 12 months 598.579 606.903<br />

Deferred tax assets recoverable within 12 months 0 0<br />

Deferred tax liabilities:<br />

598.579 606.903<br />

Defered tax liabilities recoverable after 12 months 3.513.491 3.461.021<br />

Defered tax liabilities recoverable within 12 months 0 0<br />

3.513.491 3.461.021<br />

-2.914.912 -2.854.117<br />

The movements on deferred tax assets and liabilities during <strong>the</strong> year were as follows:<br />

Provisions for<br />

Investments<br />

58<br />

Receivables/O<strong>the</strong>r<br />

Deb<strong>to</strong>r Provisions<br />

Adjust.<br />

IFRS<br />

O<strong>the</strong>r Total<br />

As at 1 January 2006 676.377 825.000 184.902 1.978.340 3.664.619<br />

Carried <strong>to</strong> profi t and loss -112.353 -825.000 - -1.950.907 -2.888.260<br />

Carried <strong>to</strong> profi t and loss - Fin Instrs. -169.455 -169.455<br />

As at 31 December 2006 564.024 0 15.447 27.433 606.904<br />

Carried <strong>to</strong> profi t and loss -295 0 -1.876 6.366 4.195<br />

Carried <strong>to</strong> profi t and loss - Fin Instrs. 0 0 -12.520 0 -12.520<br />

O<strong>the</strong>r movements/reclassifi cations -41.411 41.411 0 0 0<br />

As at 31 December 2007 522.318 41.411 1.051 33.799 598.579<br />

Deferred tax assets for provisions will be written off proportionately <strong>to</strong> <strong>the</strong> use of <strong>the</strong> related provisions.<br />

Deferred tax assets for provisions on investments correspond <strong>to</strong> shareholdings in Liaoyang EFACEC Electric Equipment Corp and<br />

Portugal Space.<br />

In 2006, <strong>the</strong> reversal of provisions on Trade and O<strong>the</strong>r deb<strong>to</strong>rs concerns <strong>the</strong> cancellation of <strong>the</strong> provision set up for Universal<br />

Mo<strong>to</strong>rs, after <strong>the</strong> write off of <strong>the</strong> debt.


Deferred tax booked in shareholders’ funds during <strong>the</strong> period concerns hedging operations for fi nancing (note 5).<br />

59<br />

Revaluation Total<br />

Deferred tax liabilities<br />

As at 1 January 2006 3.649.971 3.649.971<br />

Charge (credit) in <strong>the</strong> profi t and loss account -56.194 -56.194<br />

Carried <strong>to</strong> equity -132.756 -132.756<br />

As at 31 December 2006 3.461.021 3.461.021<br />

Charge (credit) in <strong>the</strong> profi t and loss account -39.106 -39.106<br />

Carried <strong>to</strong> equity 91.576 91.576<br />

Exchange rate differences 0<br />

As at 31 December 2007 3.513.491 3.513.491<br />

The deferred tax liabilities booked in Shareholders’ Equity relate <strong>to</strong> <strong>the</strong> update of <strong>the</strong> tax base for land (year 2006) and its revaluation<br />

<strong>to</strong> fair value (year 2005).<br />

All deferred tax assets booked are based on a corporation tax rate of 26.5%.<br />

13. Provisions for risks and charges<br />

Pensions Shareholdings Total<br />

As at 1 January 2007<br />

Carried <strong>to</strong> profi t and loss:<br />

103.515 1.534.297 1.637.812<br />

Additional provisions 24.025 0 24.025<br />

Reversal of provisions 0 0 0<br />

As at 31 December 2007 127.540 1.534.297 1.661.837<br />

As at 1 January 2006<br />

Carried <strong>to</strong> profi t and loss:<br />

117.219 1.534.297 1.651.516<br />

Additional provisions 0 0 0<br />

Reversal of provisions -13.704 0 -13.704<br />

As at 31 December 2006 103.515 1.534.297 1.637.812<br />

No provision exists for <strong>the</strong> costs of reversing possible environmental damage No environmental contingent liability exists.<br />

<strong>Financial</strong> shareholdings<br />

This provision relates <strong>to</strong> fi nancial shareholdings that have impairment losses (<strong>Efacec</strong> Angola and <strong>Efacec</strong> Moçambique), <strong>the</strong> investment<br />

value of which is wholly provisioned.<br />

D. <strong>Notes</strong> <strong>to</strong> <strong>the</strong> Profit and Loss Account for <strong>the</strong> year ending 31 December 2007 and 2006<br />

14. Net financial costs<br />

2007 2006<br />

Interest on bank loans -3.587.829 -3.196.621<br />

O<strong>the</strong>r Costs/<strong>Financial</strong> Income -9.106 -2.092<br />

Interest on loans granted 1.660.236 382.050<br />

Gains in fair value on fi nancial instruments<br />

-1.936.699 -2.816.664<br />

Cash fl ow hedging, transfer <strong>to</strong> equity 0 0<br />

-1.936.699 -2.816.664<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


15. Losses/Gains on group and associate companies<br />

60<br />

2007 2006<br />

Dividends Received 26.469.663 10.411.798<br />

Impairment Loss Investments 0 -424.760<br />

Reversal Impairment Investments 0 812.428<br />

Capital gain on disposal of Investments 0 172.430<br />

O<strong>the</strong>r 0 0<br />

26.469.663 10.971.896<br />

In 2006, <strong>the</strong> impairment loss on <strong>Financial</strong> Shareholdings relates <strong>to</strong> Portugália and Portugal Space (Note 4), and has been booked<br />

in accordance with <strong>the</strong> policy described in note 1.5.<br />

The dividends received by <strong>the</strong> company were as follows:<br />

2007 2006<br />

Dividends Received:<br />

<strong>Efacec</strong> Electrónica 13.500.000 0<br />

<strong>Efacec</strong> Energia 5.300.000 4.190.200<br />

<strong>Efacec</strong> Ambiente 3.360.000 0<br />

<strong>Efacec</strong> Engenharia 3.092.000 720.000<br />

Tech M5 Capital, SGPS 905.037 0<br />

<strong>Efacec</strong> Serv. Manutenção e Assistência 312.626 151.476<br />

<strong>Efacec</strong> SGPS (a) 0 4.593.200<br />

ENT - Empresa Nac. de Telecomunicações (b) 0 756.922<br />

26.469.663 10.411.798<br />

a) Merger in 2006 with <strong>Efacec</strong> Capital SGPS<br />

b) Merger in 2006 with <strong>Efacec</strong> – Sistemas Electrónica, SA<br />

16. Income Tax<br />

The reconciliation of Income Tax is as follows:<br />

2007 2006<br />

Current tax -220.588 1.163.965<br />

Deferred tax (Note 12) 43.302 -2.747.995<br />

Tax from previous years 46.331 0<br />

-130.956 -1.584.030<br />

2007 2006<br />

Profi t before tax 26.907.621 9.528.530<br />

Theoretical rate 26,5% 27,5%<br />

Theoretical tax 7.130.520 2.620.346<br />

Dividends received -7.014.461 -2.602.949<br />

Permanent differences 89.265 -260.295<br />

Tax Credit Research and Development 0 1.808.605<br />

O<strong>the</strong>r -28.038 18.324<br />

Tax charge for <strong>the</strong> period 177.286 1.584.030<br />

Effective rate 0,7% 16,6%


17. Profit per share<br />

Basic<br />

The basic profi t per share is calculated by dividing shareholders’ profi t by <strong>the</strong> average weighted number of ordinary shares issued<br />

during <strong>the</strong> year, excluding ordinary shares acquired by <strong>the</strong> company and held as own shares.<br />

2007 2006<br />

Profi t attributable <strong>to</strong> shareholders 26.776.666 7.944.500<br />

Average weighted number of ordinary shares issued 41.641.416 41.641.416<br />

Basic profi t per share (euro per share) 0,64 0,19<br />

Diluted<br />

The diluted profi t per share is calculated adjusting <strong>the</strong> average weighted number of shares in circulation by including <strong>the</strong> impact<br />

of <strong>the</strong> conversion of all potentially diluting ordinary shares. In view of <strong>the</strong> fact that nei<strong>the</strong>r options nor any convertible obligation<br />

exists on shares, <strong>the</strong> diluted profi t per share is equal <strong>to</strong> <strong>the</strong> basic profi t per share.<br />

18. Dividend per share<br />

The dividends paid by <strong>Efacec</strong> Capital SGPS in 2007 were 19,753,096 Euro, including 12,216,000 Euro of anticipated dividends<br />

(0.474 Euro per share). In <strong>the</strong> previous year, 22,745,607 Euro were paid (0.546 Euro per share).<br />

E. O<strong>the</strong>r <strong>Notes</strong><br />

19. Contingencies<br />

19.1 Guarantees<br />

The company has contingent liabilities for bank guarantees and o<strong>the</strong>rs, and o<strong>the</strong>r contingencies connected with its business. It is<br />

not believed that any signifi cant liabilities will arise from <strong>the</strong> contingent liabilities.<br />

20. Commitments<br />

20.1 Commitments for investments<br />

61<br />

2007 2006<br />

Bank Guarantees 36.135.702 27.025.883<br />

No commitments of <strong>the</strong> Group exist <strong>to</strong> acquire tangible or intangible fi xed assets.<br />

20.2 Commitments for operational leases – where <strong>the</strong> Group is lessee<br />

The company leases a number of vehicles through irrevocable leasing contracts. The contracts have various lease periods, readjustment<br />

clauses and renewal rights. At <strong>the</strong> date of <strong>the</strong> balance sheet, <strong>the</strong> Group continued <strong>to</strong> have Long Term Rental contracts<br />

(“Renting”) considered as operational leases, for which future rental payments due <strong>to</strong>talled 199,798 Euro, with <strong>the</strong> following<br />

maturity dates:<br />

2007 2006<br />

Within 1 year 74.801 74.531<br />

Between 1 and 5 years 124.997 130.080<br />

Over 5 years 0 0<br />

199.798 204.611<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


21. Transactions with related parties<br />

Those entities which have a qualifi ed shareholding in <strong>the</strong> group are:<br />

<strong>Efacec</strong> Sistemas de Gestão, S.A. 49,20%<br />

Têxtil Manuel Gonçalves, S.A. 25,40%<br />

José de Mello - SGPS, S.A. 25,40%<br />

The following transactions <strong>to</strong>ok place with related parties (Shareholders, Associates and Direc<strong>to</strong>rs):<br />

21.1 Transactions in 2007 and 2006<br />

2007 2006<br />

Services rendered<br />

Group companies<br />

O<strong>the</strong>r operational Incomeutros<br />

4.950.012 6.476.000<br />

Group companies 1.289.796 1.263.455<br />

Shareholders<br />

<strong>Financial</strong> Income<br />

30.000 0<br />

Group companies 1.653.563 382.050<br />

Purchases of Services<br />

7.923.371 8.121.505<br />

Group companies 399.109 374.292<br />

Shareholders<br />

<strong>Financial</strong> Cus<strong>to</strong>s Costs<br />

350.963 0<br />

Group companies 981.718 796.296<br />

Shareholders 52.079 0<br />

1.731.790 1.170.588<br />

The commercial conditions under which <strong>the</strong>se transactions and services <strong>to</strong>ok place were under <strong>the</strong> same conditions as independent<br />

third parties.<br />

21.2 Remuneration of <strong>the</strong> Board of Direc<strong>to</strong>rs<br />

2007 2006<br />

Remunerations 667.103 1.465.004<br />

Life insurance 28.700 180.000<br />

Business expenses 0 13.820<br />

695.803 1.658.824<br />

21.3 Final balances resulting from commercial transactions<br />

2007 2006<br />

Cus<strong>to</strong>mers (Note 6)<br />

Group companies 205.589 0<br />

Shareholders 22.781 0<br />

O<strong>the</strong>r Deb<strong>to</strong>rs (Note 7)<br />

239.371 0<br />

Shareholders 313.195 135.073<br />

Total amounts owing from related parties 552.565 135.073<br />

62<br />

%


21.4 Loans <strong>to</strong> related parties<br />

2007 2006<br />

O<strong>the</strong>r Credi<strong>to</strong>rs (Note 10)<br />

Group companies 0 133.923<br />

Shareholders 101.625 11.629<br />

Amounts owing <strong>to</strong> related parties 101.625 145.552<br />

2007 2006<br />

Loans <strong>to</strong> group companies and current debt<br />

Loans<br />

Opening balance 3.085.370 1.250.000<br />

Movements during <strong>the</strong> year 14.393.837 1.835.370<br />

Closing balance (Note 7)<br />

O<strong>the</strong>r Operations<br />

17.479.207 3.085.370<br />

Opening balance 4.205.618 176.433<br />

Movements during <strong>the</strong> year -639.594 4.029.185<br />

Closing balance (Note 7)<br />

O<strong>the</strong>r Operations - Associates<br />

3.566.024 4.205.618<br />

Opening balance 322.450 0<br />

Loans of <strong>the</strong> year -128.310 322.450<br />

Closing balance (Note 7) 194.140 322.450<br />

Provision -156.271 -156.271<br />

Closing balance 21.083.100 7.134.717<br />

2007 2006<br />

Loans from group companies and o<strong>the</strong>r operations<br />

Loans<br />

Opening balance 24.694.311 9.641.315<br />

Movements during <strong>the</strong> year -12.373.840 15.052.995<br />

Closing balance (Note 10)<br />

O<strong>the</strong>r Operations<br />

12.320.471 24.694.311<br />

Opening balance 448.898 1.191.731<br />

Movements during <strong>the</strong> year 2.576.235 -742.833<br />

Closing balance (Note 10)<br />

Shareholders’ Loans<br />

3.025.133 448.898<br />

Opening balance 0 0<br />

Movements during <strong>the</strong> year 7.100.000 0<br />

Closing balance (Note 10)<br />

O<strong>the</strong>r operations - Associates<br />

7.100.000 0<br />

Opening balance 3.316 0<br />

Movements during <strong>the</strong> year 0 3.316<br />

Closing balance (Note 10) 3.316 3.316<br />

Provision 0 0<br />

Closing balance 22.448.921 25.146.525<br />

63<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


(a) The amounts relating <strong>to</strong> loans made and obtained, and o<strong>the</strong>r third party operations are as follows:<br />

Loans Granted and<br />

O<strong>the</strong>r Operations<br />

64<br />

2007 2006<br />

Loans Obtained and<br />

O<strong>the</strong>r Operations<br />

Loans Granted and<br />

O<strong>the</strong>r Operations<br />

Loans Obtained and<br />

O<strong>the</strong>r Operations<br />

<strong>Efacec</strong> - Sistemas de Electrónica 13.677.051<br />

Current<br />

1.921.219 326.653 1.100.000<br />

<strong>Efacec</strong> - Serviços de Manutenção e Assistências 3.408.685 0 130.089 0<br />

<strong>Efacec</strong> - Energia, Máquinas e Equip. Eléctrico 1.753.325 621.895 3.745.889 12.061<br />

<strong>Efacec</strong> - Angola, Lda. 450.359 0 1.199.369 0<br />

Tech M5 Tecnologia para Operad. de Redes 0 0 416.159 0<br />

<strong>Efacec</strong> DT - Transformadores de Distrib. de Energia 0 0 360.476 0<br />

<strong>Efacec</strong> Engenharia 0 4.218.454 701.770 8.809.830<br />

<strong>Efacec</strong> - Sistemas de Gestão 0 7.100.000 0 0<br />

<strong>Efacec</strong> - Ambiente 0 5.738.947 0 12.108.481<br />

Tech M5 Capital, SGPS 0 1.186.000 0 2.676.00<br />

<strong>Efacec</strong> - Marketing Internacional 0 627.070 0 0<br />

O<strong>the</strong>r 1.949.951 1.035.335 254.313 440.154<br />

21.239.371 22.448.920 7.134.718 25.146.525<br />

Impairment Loss -156.271 0 -156.271 0<br />

Total Loans and O<strong>the</strong>r Operations 21.083.100 - 6.978.447 25.146.525<br />

21.5 Commitments and contingencies<br />

No purchase commitments or contingent liabilities exist with related parties.<br />

22. Subsequent events<br />

Mergers and acquisitions<br />

No acquisition was made after 31 December 2007.<br />

Share transactions<br />

No share transaction <strong>to</strong>ok place after 31 December 2007.<br />

Leça do Balio, 1 April 2007<br />

The Accountant<br />

Maria Alda Cunha Baptista Rodrigues Carvalho<br />

The Board of Direc<strong>to</strong>rs<br />

Francisco de La Fuente Sánchez - Chairman of <strong>the</strong> Board of Direc<strong>to</strong>rs<br />

Luís Filipe da Conceição Pereira - Vice - Chairman<br />

Guilherme Ricca Gonçalves - Vice - Chairman<br />

Maria do Rosário Mayoral Robles Machado Simões Ventura - Board Direc<strong>to</strong>r<br />

Alber<strong>to</strong> de Freitas Martins - Board Direc<strong>to</strong>r<br />

Alber<strong>to</strong> Joaquim Milheiro Barbosa - Board Direc<strong>to</strong>r<br />

Artur Fuchs - Board Direc<strong>to</strong>r<br />

Daniel Bessa Fernandes Coelho - Board Direc<strong>to</strong>r<br />

António do Prado Nogueira Leite - Board Direc<strong>to</strong>r<br />

João Afonso Ramalho Sopas Pereira Ben<strong>to</strong> - Board Direc<strong>to</strong>r<br />

Luís Miguel Nogueira Freire Cortes Martins - Board Direc<strong>to</strong>r


To <strong>the</strong> Shareholders,<br />

Report and Opinion of <strong>the</strong> Statu<strong>to</strong>ry Audi<strong>to</strong>r<br />

1. In accordance with <strong>the</strong> law and <strong>the</strong> mandate conferred upon us, we herewith present <strong>the</strong> report on our audit work and our<br />

opinion on <strong>the</strong> Board of Direc<strong>to</strong>rs’ Report and <strong>the</strong> Consolidated and Individual <strong>Financial</strong> <strong>Statements</strong> of EFACEC Capital, S.G.P.S.,<br />

S.A., presented by <strong>the</strong> Board of Direc<strong>to</strong>rs for <strong>the</strong> year ended 31st December 2007.<br />

2. During <strong>the</strong> course of <strong>the</strong> year we have accompanied <strong>the</strong> activity of <strong>the</strong> company, its affi liates and its more signifi cant associated<br />

undertakings, on a periodic basis, and <strong>to</strong> <strong>the</strong> extent deemed necessary. We have verifi ed <strong>the</strong> timeliness and adequacy of <strong>the</strong><br />

respective accounting records and supporting documentation as well as ensuring that <strong>the</strong> law and <strong>the</strong> statutes have been complied<br />

with.<br />

3. As a result of <strong>the</strong> legal audit work undertaken, we hereby issue <strong>the</strong> Legal Certifi cation of <strong>the</strong> Consolidated and Individual<br />

Accounts, appended here<strong>to</strong>, that is addressed <strong>to</strong> <strong>the</strong> Board of Direc<strong>to</strong>rs.<br />

4. Within <strong>the</strong> scope of our mandate, we have verifi ed that:<br />

I) <strong>the</strong> Consolidated and Individual Balance Sheets, Profi t and Loss Accounts by nature, <strong>Statements</strong> of Changes <strong>to</strong><br />

Shareholders’ Funds, Cash Flow <strong>Statements</strong> and corresponding <strong>Notes</strong> <strong>to</strong> <strong>the</strong> Accounts, permit an adequate understanding<br />

of <strong>the</strong> fi nancial position, <strong>the</strong> results, changes <strong>to</strong> Shareholders’ funds and <strong>the</strong> cash fl ow of <strong>the</strong> company;<br />

II) <strong>the</strong> accounting policies and calculation methods applied are appropriate;<br />

III) <strong>the</strong> Report of <strong>the</strong> Board of Direc<strong>to</strong>rs is suffi ciently clear as <strong>to</strong> <strong>the</strong> evolution of <strong>the</strong> business and <strong>the</strong> position of <strong>the</strong><br />

company and <strong>the</strong> affi liated entities included in <strong>the</strong> consolidation, and highlights <strong>the</strong> more signifi cant aspects;<br />

5. On this basis, and taking in<strong>to</strong> account <strong>the</strong> information received from Board of Direc<strong>to</strong>rs and <strong>the</strong> company’s services, <strong>to</strong>ge<strong>the</strong>r<br />

with <strong>the</strong> conclusions detailed in Legal Certifi cation of <strong>the</strong> Consolidated and Individual Accounts, we are of <strong>the</strong> opinion that:<br />

I) <strong>the</strong> Report of <strong>the</strong> Board of Direc<strong>to</strong>rs be approved;<br />

II) <strong>the</strong> Consolidated and Individual <strong>Financial</strong> <strong>Statements</strong> be approved,<br />

III)<strong>the</strong> proposal for profi t appropriation be approved.<br />

Por<strong>to</strong>, 2 April 2008<br />

PricewaterhouseCoopers & Associados, S.R.O.C., Lda.<br />

Represented by:<br />

António Joaquim Brochado Correia, R.O.C.<br />

65<br />

2007 Consolidated and<br />

Individual <strong>Financial</strong> Statments


Introduction<br />

Legal Certification of <strong>the</strong> Consolidated and Individual <strong>Financial</strong> <strong>Statements</strong><br />

1. We have examined <strong>the</strong> consolidated and individual fi nancial statements of EFACEC Capital, S.G.P.S. which comprise <strong>the</strong> consolidated<br />

and individual balance sheets as at 31st December 2007, (showing <strong>to</strong>tal assets of 418,626,766 Euro and 171,775,165<br />

Euro respectively, and <strong>to</strong>tal consolidated shareholders’ funds of 79,493,918 Euro, including minority interests of 2,936,936<br />

Euro and individual company shareholders funds of 76,089,552 Euro, and consolidated and individual net profi ts of 17,401,185<br />

Euro and 26,776,666 Euro respectively), <strong>the</strong> consolidated and individual profi t and loss statements by nature, <strong>the</strong> statements<br />

of changes <strong>to</strong> consolidated and individual shareholders’ funds, and <strong>the</strong> consolidated and individual cash fl ow statements for <strong>the</strong><br />

year, and corresponding <strong>Notes</strong>.<br />

Responsibilities<br />

2. The Board of Direc<strong>to</strong>rs is responsible for <strong>the</strong> preparation of <strong>the</strong> consolidated and individual fi nancial statements which present<br />

fairly, in all material respects, <strong>the</strong> fi nancial position of <strong>the</strong> company and its affi liates included in <strong>the</strong> consolidation, <strong>the</strong> consolidated<br />

and individual profi t/loss of its operations, changes <strong>to</strong> consolidated and individual shareholders’ funds and consolidated and<br />

individual cash fl ow, as well as <strong>the</strong> adoption of appropriate accounting policies and criteria and <strong>the</strong> maintenance of adequate<br />

systems of internal accounting controls.<br />

3. Our responsibility is <strong>to</strong> express an independent and professional opinion, based on our examination of <strong>the</strong>se consolidated and<br />

individual fi nancial statements.<br />

Scope<br />

4. 4 We conducted our examination in accordance with <strong>the</strong> Standards and Technical Recommendations approved by <strong>the</strong> Institute<br />

of Statu<strong>to</strong>ry Audi<strong>to</strong>rs which require that we plan and perform <strong>the</strong> examination <strong>to</strong> obtain reasonable assurance about whe<strong>the</strong>r<br />

<strong>the</strong> consolidated and individual fi nancial statements are free of material misstatement. Accordingly, our examination included:<br />

(i) verifi cation that <strong>the</strong> subsidiary’s fi nancial statements have been examined and for <strong>the</strong> cases where such an examination was<br />

not carried out, verifi cation, on a test basis, of <strong>the</strong> evidence supporting <strong>the</strong> amounts and disclosures in <strong>the</strong> consolidated fi nancial<br />

statements, and assessing <strong>the</strong> reasonableness of <strong>the</strong> estimates, based on <strong>the</strong> judgements and criteria of Management, used in<br />

<strong>the</strong> preparation of <strong>the</strong> consolidated fi nancial statements; (ii) verifi cation of <strong>the</strong> consolidation operations and of <strong>the</strong> use of <strong>the</strong><br />

equity method; (iii) assessing <strong>the</strong> appropriateness of <strong>the</strong> accounting principles used and <strong>the</strong>ir disclosure, as applicable; (iv)<br />

assessing <strong>the</strong> applicability of <strong>the</strong> going concern basis of accounting; (v) evaluating <strong>the</strong> overall presentation of <strong>the</strong> consolidated<br />

and individual fi nancial statements.<br />

5. Our audit also included <strong>the</strong> verifi cation of <strong>the</strong> consistency of information contained in <strong>the</strong> Board of Direc<strong>to</strong>rs’ Report with that of<br />

<strong>the</strong> fi nancial statements.<br />

6. We believe that our examination provides a reasonable basis for our opinion.<br />

Opinion<br />

7. In our opinion, <strong>the</strong> consolidated and individual fi nancial statements referred <strong>to</strong> above, present fairly in all material respects,<br />

<strong>the</strong> consolidated and individual fi nancial position of EFACEC Capital, S.G.P.S., S.A. as at 31st December 2007 and <strong>the</strong> consolidated<br />

and individual results of <strong>the</strong>ir operations and <strong>the</strong>ir cash fl ows for <strong>the</strong> year <strong>the</strong>n ended in accordance with international<br />

fi nancial reporting standards (IFRS) as adopted by <strong>the</strong> European Union.<br />

Emphasis<br />

8. Although it does not any impact on our opinion expressed above, we would point out that our Legal Certifi cation of <strong>the</strong><br />

Consolidated and Individual Accounts, issued on 22 March 2007, concerning <strong>the</strong> consolidated fi nancial statements for <strong>the</strong> period<br />

ending 31 December 2006, included a qualifi cation concerning <strong>the</strong> fact that at <strong>the</strong> end of that year <strong>the</strong> fair value of options used<br />

for hedging <strong>the</strong> price of copper had not been updated. The impact of this was an undervaluation of Shareholders’ Funds and<br />

Profi ts for that year of 550,360 Euro and 999,114 Euro. This situation was regularised during 2007.<br />

Por<strong>to</strong>, 2 April 2008<br />

PricewaterhouseCoopers & Associados, S.R.O.C., Lda.<br />

Represented by:<br />

António Joaquim Brochado Correia, R.O.C.<br />

66


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