PHAROL SGPS S A : informs about 2021 Annual Report - Unofficial Version - Unaudited ESEF Format

TÍTULO DA APRESENTAÇÃO | 25.05.2015

PHAROL, SGPS S.A. - 2021 RESULTS

• The company's net income in 2021 was negative by 2.36 million euros, essentially justified by the recurring operating costs of 2.41 million euros.
• PHAROL equity ended 2021 at 91.9 million euros, a decrease of 73.43 million euros compared to December 2020, reflecting (1) the devaluation of the stake in Oi by 70.7 million euros and (2) the negative net result in the amount of 2.4 million Euros.
• PHAROL's stake in Oi ended 2021 valued at 38.6 million euros, as a result of the drop in the price of Oi's ordinary shares (a decrease of 70.7 million euros), equivalent to a 5.38% stake (excluding treasury shares held by Oi itself).
• In the Rio Forte chapter, despite some timid advances in legal proceedings in Luxembourg and Portugal, nothing very relevant has affected its valuation, with no change in its expected recovery value in 2021

MESSAGE FROM CEO

Luís Palha da Silva

• After strong growth in 2020, in counter-cycle with market trends marked by the Covid-19 pandemic, in 2021 there was a sharp drop in Pharol's price, the first factor responsible for this volatility being the evolution recorded in the share price. of Oi, our company's main asset.
  Oi has been implementing its programs to exit the judicial recovery process and strategic restructuring. However, delays in the execution of asset sales, in the definition of new business models, in cost control and the lack of arbitration with a view to drawing up a new model of relationship with the Brazilian State resulted in the company being penalized by the markets.
  The credit on Rio Forte, despite some timid advances in the legal proceedings in Luxembourg and Portugal, did not register noteworthy advances, having chosen not to consider changes to its valuation in the company's accounts.
  Pharol's downward trend in operating expenses was maintained, with strong contention in the two main cost lines, litigation and personnel.
  In the short term, Pharol will be faced with the challenge of redefining its strategic reorientation, so it will have to consider, in particular, solutions for rotating the assets held, according to the appreciation potential of each one of them."

Highlights

PHAROL
(Euro million)	2021	2020
Recurring EBITDA	(2.4)	(3.0)
Net Income	(2.4)	(14.3)
(Euro million)	2021	2020
Assets	108.8	183.3
Liabilities	16.8	18.0
Equity	91.9	165.4

Contactos

Luís Sousa de Macedo Investor Relations

Tel: [phone] - Fax: [phone]

E-mail: [e-mail]

CONSOLIDATED ANNUAL REPORT

2021

Unofficial Version - Unaudited ESEF Format

PHAROL, SGPS S.A.

CONSOLIDATED ANNUAL REPORT

2021

01.	MESSAGE FROM THE CHAIRMAN	3
02.	FINANCIAL REVIEW	4
03.	BUSINESS PERFORMANCE	10
04.	MAIN RISKS AND UNCERTAINTIES	18
05.	QUALIFIED HOLDINGS	20
06.	STRATEGIC PROFILE AND FUTURE OUTLOOK	22
07.	STATEMENT FROM THE BOARD OF DIRECTORS	25
08.	ACTIVITIES OF THE NON-EXECUTIVE DIRECTORS	26
09.	CONSOLIDATED FINANCIAL STATEMENTS	29

"PHAROL", "Group PHAROL", "Group" and "Company" is a reference to the companies that are part of PHAROL, SGPS S.A. or to one of them, depending on the context.

Consolidated Report │ 2021

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01. MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN

As has been the case in all markets, sectors and geographies, the value of the Pharol share has been characterized by high volatility in recent years. After the strong growth recorded in 2020, in counter-cycle with market trends marked by the Covid-19 pandemic, 2021 saw a sharp drop. The main factor responsible for these variations is, unequivocally, the volatility also recorded by our company's main asset, the stake in Oi. There, we have to consider the cumulative effects of the price on the Brazilian Bovespa market and the price of the Real itself.

During the last year, Oi continued its program of strategic restructuring and exit from the Judicial Recovery process in which it is still involved. In each of the pillars on which this turn of the page is based, it was possible to verify some progress, but one cannot fail to recognize that the slowness imposed by the technical and legal complexity of different procedures created a certain apathy and discouragement in some investors. Despite everything, it was possible to conclude negotiations for the sale of Assets that became non-core for the company - mobile telephony and network infrastructures, in particular -, at the same time that investment was reinforced in the company's new priority, the FTTH (Fiber to the Home). The delays in the execution of the sale of assets, in the definition of new business models, in the control of costs, the delay in arbitration with a view to the elaboration of a new model of relationship with the Brazilian State and the postponement of the end of the Judicial Recovery process were the most negative aspects of the evolution over the last year and the main responsible for the various fluctuations in value observed during this last year.

Pharol's Board of Directors kept a close eye on the evolution of Oi's price, being convinced that, once the main difficulties mentioned above are overcome, there is an interesting growth potential (confirmed even by the target prices presented by the main analyst houses that follow the title). However, although it is expected that part of the problems will be resolved in the first half of 2022 - sale of the main assets and exit from Judicial Recovery -, it should be noted that Brazil has already entered a pre-election period that may determine some volatility. and unpredictability of the Real quotation.

As for the second of Pharol's assets, credit on Rio Forte, in bankruptcy, despite some timid advances in legal proceedings in Luxembourg and Portugal, nothing very relevant affected its valuation. This is why it was decided not to record changes in value in this chapter in the 2021 accounts.

The downward trend in Pharol's operating expenses, year after year, was maintained, with strong containment in the two main cost lines, litigation and personnel.

In the short-term future, as a holding company, Pharol will be faced with the challenge of diversifying its holdings. That is to say, Pharol must decide on a rotation schedule for the assets held, depending on the appreciation potential of each one of them.

To the Shareholders, on behalf of the Board of Directors, I thank all the support received during the year.

Consolidated Report │ 2021

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