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ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A.

1/78 1H12 Consolidated Management Report


TABLE

OF

CONTENTS

1H12 Consolidated Management Report 3/78

01 ZON IN NUMBERS 4

02 HIGHLIGHTS - FIRST HALF 2012 7

03 GOVERNING BODIES 9

04 MANAGEMENT REPORT 10

4.1. Events in 1H12 and Recent Developments 10 4.2. Capital Markets 11 4.3. Governing Bodies Shareholdings 14 4.4. Qualified Shareholdings 15 4.5. Transactions of Own Shares 18 4.6. Business Review 19 4.7. Consolidated Financial Review 25 4.8. Risks and Uncertainties for Future Periods 33

05 CONSOLIDATED FINANCIAL STATEMENTS 34

5.1. Report and Opinion of the Statutory Auditor 73

5.2. Limited Review Report Prepared by Auditor Registered in CMVM 74

06 STATEMENT UNDER THE TERMS OF ARTICLE 246,

PARAGRAPH 1, C), OF THE SECURITIES CODE 76


01

ZON in Numbers

Business Indicators (in thousands):

Triple Play Subscribers: Triple Play Penetration in Cable Customer Base (%):

678.5 688.8708.7 715.7

730.9

2Q11 3Q11 4Q11 1Q12 2Q12

+7.7%

58.6% 59.3% 60.1% 59.4% 60.4%

2Q11 3Q11 4Q11 1Q12 2Q12

+1.8pp

RGUs: RGUs per Subscriber (units):

3,212.8 3,256.63,315.1

3,381.0 3,414.1

2Q11 3Q11 4Q11 1Q12 2Q12

+6.3%

2.31 2.33 2.36 2.37 2.39

2Q11 3Q11 4Q11 1Q12 2Q12

+3.2%

Basic Subscribers: Broadband Subscribers:

1,552.8 1,554.2 1,567.1 1,586.8 1,586.3

2Q11 3Q11 4Q11 1Q12 2Q12

+2.2%

714.8 725.0 739.2 748.6 751.5

2Q11 3Q11 4Q11 1Q12 2Q12

+5.1%


Voice Subscribers: Mobile:

826.8 844.0883.9

921.4 947.0

2Q11 3Q11 4Q11 1Q12 2Q12

+14.5%

118.4133.4

125.0 124.1 129.4

2Q11 3Q11 4Q11 1Q12 2Q12

+9.2%

Blended ARPU (Euros):

35.8 36.035.5

35.034.7

2Q11 3Q11 4Q11 1Q12 2Q12

(3.2)%


Financial Indicators (in millions of Euros):

Operating Revenues: EBITDA (EBITDA margin as % of Revenues):

425.6 428.6

1H11 1H12

+0.7%

158.0 158.5

37.1%37.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

120

140

160

180

1H11 1H12

+0.3%

Consolidated Net Income: CAPEX:

19.4 20.0

1H11 1H12

+3.3%

69.657.3

4.6

74.3

57.3

1H11 1H12

Baseline CAPEX Non Recurrent CAPEX

(22.8)%

Net Financial Debt: Net Financial Debt / EBITDA [x]:

706.8660.4

1H11 1H12

(6.6)%

2.3x2.1x

1H11 1H12


02

Highlights - First Half 2012

Operational ('000)

RGUs (1)3,212.8 3,414.1 6.3% 3,212.8 3,414.1 6.3%

Triple Play Customers 678.5 730.9 7.7% 678.5 730.9 7.7%

Basic Subscribers 1,552.8 1,586.3 2.2% 1,552.8 1,586.3 2.2%

Broadband Subscribers 714.8 751.5 5.1% 714.8 751.5 5.1%

Fixed Voice Subscribers 826.8 947.0 14.5% 826.8 947.0 14.5%

Blended ARPU (Euros) 35.8 34.7 (3.2%) 35.8 34.9 (2.5%)

Financial (Millions of Euros)

Operating Revenues 211.5 214.4 1.4% 425.6 428.6 0.7%

Pay TV, Broadband and Voice 191.6 191.0 (0.3%) 387.2 382.8 (1.1%)

EBITDA 78.5 78.8 0.4% 158.0 158.5 0.3%

EBITDA Margin 37.1% 36.8% (0.4pp) 37.1% 37.0% (0.2pp)

Net Income 9.2 9.7 5.0% 19.4 20.0 3.3%

CAPEX 35.5 27.7 (21.8%) 74.3 57.3 (22.8%)

Free Cash Flow (15.1) 33.6 n.a. (17.2) 49.9 n.a.

1H12 / 1H11

(1) Total RGUs reported ref lect the sum of Pay TV, Broadband, Fixed Voice and M obile subscribers.

Highlights of 1H12 Results 2Q11 2Q12 2Q12 / 2Q11 1H11 1H12

FINANCIAL HIGHLIGHTS

o Growth in Consolidated Revenues of 0.7% yoy to 428.6 million euros;

o Pay TV, Broadband and Voice revenues with a slight decrease (-1.1%) to 382.8 million euros

with 2Q12 representing a significant recovery in the pace of yoy performance compared with

previous quarters (-0.3%);

o Revenues from the Audiovisuals business posted a marginally negative yoy performance of

0.1% however Cinema Exhibition revenues did post a relevant fall yoy of 15.5%, reflecting the

pressures of the challenging economic environment;

o The African DTH operation “ZAP” continues to post very encouraging growth in sales every

quarter, recording 24.2 million euros (100%) in 2Q12, compared with 21.4 million euros in

1Q12, representing an accumulated figure of 45.6 million euros for 1H12;

o Pay TV, Broadband and Voice EBITDA grew by 2.0% to 150 million euros allowing for flat

Consolidated EBITDA;

o As expected, Consolidated FCF posted very strong yoy growth to 49.9 million euros, up from

negative 17.2 million in 1H11, fully covering the dividend paid in May 2012.


OPERATIONAL HIGHLIGHTS

o Solid RGU performance up 6.3% yoy to 3.4 million services:

o Stable Pay TV base with cable net adds of 6.3 thousand cable customers offset by a

decline in DTH subscribers in 2Q12. In 1H12, the Pay TV customer base posted net

growth of 19.3 thousand subscribers;

o Continued strong uptake of high-end Triple Play package “IRIS” with an additional

42.5 thousand subscribers in 2Q12;

o Voice customers grew by 63 thousand subscribers, 28.3% above the net adds

recorded in 1H11;

o Additional Broadband customers of 12.3 thousand in 1H12, taking the total customer

base to 751.5 thousand subscribers, representing penetration of 62% of the cable

TV base;

o Triple Play customers increased 7.7% y.o.y. in 1H12 to 730.9 thousand with net adds of

15.2 thousand in 2Q12. Penetration of Triple Play services stood at 60.4% by the end of

1H12;

o Blended ARPU recorded a yoy decline of 2.5% to 34.9 euros in 1H12, reflecting a

combination of entry level bundles in the customer mix, the still challenged performance

of premium channel revenues, which was somewhat offset by the very good uptake of

higher-end Triple Play bundles, “IRIS”;

o ARPU from basic Triple Play services, excluding the impact of premium channel

subscriptions decreased by 0.1% in 1H12, a reflection of the resilient nature of the basic

TV, Internet ad Voice bundles;

o Weak performance of the Cinema exhibition business with a sector-wide decline in box-

office sales and revenues, a sign of the challenging consumer environment felt in

Portugal – families are clearly cutting back on spending of a more discretionary nature.


03

Governing Bodies

As of the 30 June 2012, the Governing Bodies of ZON had the following composition:

Board of Directors

Chairman of the Board of Directors

Daniel Proença de Carvalho

Chairman of the Executive Committee

Members of the Executive Committee

Rodrigo Jorge de Araújo Costa

José Pedro Faria Pereira da Costa

Luis Miguel Gonçalves Lopes

Duarte Maria de Almeida e Vasconcelos Calheiros

Members

Chairman of the Audit Committee

Members of the Audit Committee

Fernando Fortuny Martorell António Domingues László Istvan Hubay Cebrian Jorge Telmo Maria Freire Cardoso Norberto Emílio Sequeira da Rosa Luís Bordalo Silva Joaquim Francisco Alves Ferreira de Oliveira Mário Filipe Moreira Leite da Silva

Vitor Fernando da Conceição Gonçalves

Nuno João Francisco Soares de Oliveira Sílvério Marques

Paulo Cardoso Correia da Mota Pinto

Officials of the General Meeting of Shareholders

President Júlio de Castro Caldas

Secretary Maria Fernanda Carqueija Alves de Ribeirinho Beato

Statutory Auditor

In Office Oliveira, Reis & Associados, SROC, Lda., represented by

José Vieira dos Reis

Alternate Fernando Marques Oliveira


04

Management Report

4.1. Events in 1H12 and Recent Developments

SHAREHOLDER REMUNERATION IN 2012

ZON is committed to delivering attractive shareholder remuneration relative to its peers. On 27 April

2012, the Shareholders’ Meeting of ZON approved a 16 cents per share dividend, 49.5 million euros

in total, which was paid on 25 May 2012.

GOVERNING BODIES

On 30 July 2012, ZON disclosed that Norberto Emílio Sequeira da Rosa, Luís Bordalo Silva and

Jorge Telmo Maria Freire Cardoso had resigned as Members of the ZON Multimédia’s Board of

Directors.


4.2. Capital Markets

ZON’S SHARE PERFORMANCE

On 29 June 2012, ZON Multimedia’s shares’ closing price was 2.337 euros, which represents a

0.65% increase since the beginning of the year, compared with a 14.49% decrease from the main

Portuguese stock market index, PSI20.

In May, ZON distributed a dividend in the amount of 16 cents per share, representing a Total

Shareholder Return, for 1H12, of 7.54%.

In 1H12, a total of more than 48.8 million ZON Multimedia shares were traded, amounting to a daily

average volume of 382 thousand shares per market session. This average daily volume represents

0.12% of the total number of ZON shares.

ZON Share 1H12 Performance

-8,200,000

-6,200,000

-4,200,000

-2,200,000

-200,000

1,800,000

3,800,000

5,800,000

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

30-1

2-2

01

1

06-0

1-2

01

2

13-0

1-2

01

2

20-0

1-2

01

2

27-0

1-2

01

2

03-0

2-2

01

2

10-0

2-2

01

2

17-0

2-2

01

2

24-0

2-2

01

2

02-0

3-2

01

2

09-0

3-2

01

2

16-0

3-2

01

2

23-0

3-2

01

2

30-0

3-2

01

2

06-0

4-2

01

2

13-0

4-2

01

2

20-0

4-2

01

2

27-0

4-2

01

2

04-0

5-2

01

2

11-0

5-2

01

2

18-0

5-2

01

2

25-0

5-2

01

2

01-0

6-2

01

2

08-0

6-2

01

2

15-0

6-2

01

2

22-0

6-2

01

2

29-0

6-2

01

2

ZON Volume ZON Share Price PSI20


Main Announcements in 2012

Date Announcement

30-01-2012 ZON informs on deliberations of General Shareholders Meeting

13-02-2012 ZON informs on financing

01-03-2012 ZON announces Full Year 2011 Consolidated Results

22-03-2012 ZON informs on Qualified Shareholding of Telefónica, S.A.

26-03-2012 ZON informs on dividend proposal relative to year 2011

28-03-2012 ZON informs on General Shareholders Meeting

28-03-2012 ZON informs on 2011 Consolidated Management Report

29-03-2012 ZON informs on Amendment to General Shareholders Meeting Notice to Conveene

29-03-2012

ZON informs on complementary information to the Announcement of Reduction of Qualified Shareholding by Telefónica, S.A.

30-03-2012 ZON informs on "ZON MULTIMEDIA 2009-2012" Bonds Interest Payment

27-04-2012 ZON informs on calendar for dividend payment

27-04-2012 ZON informs on deliberations of General Shareholders Meeting

08-05-2012 ZON informs on Qualified Shareholding of Jadeium,B.V.

09-05-2012 ZON informs on Qualified Shareholding of Telefónica, S.A.

10-05-2012 ZON announces 1Q12 Consolidated Results

18-05-2012 ZON informs on Qualified Shareholding of Jadeium,B.V.

19-05-2012 ZON informs on 1Q12 Consolidated Management Report

23-05-2012 ZON informs on public offering of bonds


06-06-2012 ZON informs on increase of retail bond issue

08-06-2012 ZON informs on Qualified Shareholding of Cinveste, SGPS, S.A.


12-06-2012 ZON informs on Qualified Shareholding of Banco Espírito Santo, S.A.

13-06-2012 ZON informs on Qualified Shareholding of Jadeium, BV

15-06-2012 ZON informs on Results Announcement of the Public Bond Offer

19-06-2012 ZON informs on Qualified Shareholding of Cinveste, SGPS, SA

04-07-2012 ZON announces 1H12 Consolidated Results

05-07-2012 ZON informs on the Qualified Shareholding of Jadeium, B.V.

27-07-2012 ZON informs on Qualified Shareholding of Caixa Geral de Depósitos, S.A.

30-07-2012 ZON informs on resignation of Board Member

Below we present the major Investor Relation Events which took place in 1H12. The activity

developed by the Investor Relations Office also provides permanent and updated information to the

financial community about the activities of ZON Multimedia, through regular press releases,

presentations and communications on the quarterly, half-yearly and annual results, as well as any

other relevant events that may occur. It also provides all clarifications to the financial community in

general - shareholders, investors (both institutional and retail) and analysts, also assisting and

supporting the exercise of the shareholders rights. The Investor Relations Office promotes regular

meetings of the executive management team with the financial community through the participation

in specialized conferences, roadshows, both in Portugal or in major international financial centers,

and often meets with investors who visit Portugal.


Date Event Location

17 January Espírito Santo Iberian Conference London

18 January Roadshow London

05 March Roadshow Lisbon

13 March Roadshow NY

14 March

20 March Citigroup Telecom Conference London

21 March

28 March CSFB Cable Conference London

2 April Reverse Roadshow ZON's Head Offices

10 May Roadshow Lisboa

11 May

22 May Roadshow

Frankfurt

23 May/ Paris

15 June Goldman Sachs European Cable Conference London

18 June

Roadshow London 19 June

20 June

22 June XIX Santander Annual Telecoms Conference Marbella - Malaga

26 June

Roadshow

Boston

27 June NY

28 June

ZON Multimédia’s legal representative for Capital Markets is Maria João Carrapato.

Any interested parties are invited to request information from the Investor Relations Office, using the

following contacts:

Avenida 5 de Outubro, n.º 208

1069 - 203 Lisboa (Portugal)

Tel. / Fax: +(351) 21 7824725 / +(351) 21 7824735

E-mail: [email protected]

mailto:[email protected]


4.3. Governing Bodies Shareholdings

Under the terms and for the purposes of Article 9, Paragraph a) and numbers 6 and 7 of Article 14 of

CMVM Regulation 5/2008, and according to the information provided to the Company by the

Governing Bodies, ZON Multimedia hereby informs on the shareholdings of the members of its

Governing Bodies, including the Audit Committee and the Alternate and In Office Statutory Auditors,

at 30 June 2012:

Name PositionShares held at 31-

12-2011

Shares held at 30-

06-2012Purchased Disposed Price Per Share Date

Daniel Proença de Carvalho Chairman of the Board of Directors 0 - - - - 0

Spouse 28 - - - - 28

5,469 2.438 € 31-01-2012

1,823 2.462 € 16-04-2012

3,186 2.438 € 31-01-2012

1,062 2.462 € 16-04-2012

3,186 2.438 € 31-01-2012

1,062 2.462 € 16-04-2012

3,957 1.895 € 22-06-2012

2,754 2.438 € 31-01-2012

918 2.462 € 16-04-2012

António Domingues (1)

0 - - - - 0

Grupo BPI 23,344,798 11,104 11,104 - - 23,344,798

Luís João Bordallo da Silva (2)

0 - - - - 0

Grupo Cinveste 8,707,136 - 8,707,136 - 18-06-2012 0

Norberto Emílio Sequeira da Rosa (3)

0 - - - - 0

Grupo CGD 33,621,914 499,244 236,753 - - 33,884,405

Jorge Telmo Maria Freire Cardoso (4)

0 - - - - 0

Caixa Banco de Investimento 0 - - - - 0

Joaquim Francisco Alves Ferreira de Oliveira (5) 0 - - - - 0

Controlinveste International, Sarl 7,965,980 - - - - 7,965,980

Gripcom, SGPS, SA. 6,989,704 - - - - 6,989,704

Mário Filipe Moreira Leite da Silva(6)

0 - - - - 0

Kento Holding Limited 30,909,683 - - - - 30,909,683

José Vieira dos Reis (7)

Statutory Auditor 0 - - - - 0

Metalgest - Sociedade de Gestão, SGPS, SA 3,985,488 - - - - 3,985,488

Fernando Marques Oliveira (8)

Alternate Statutory Auditor 0 - - - - 0

Metalgest - Sociedade de Gestão, SGPS, SA 3,985,488 - - - - 3,985,488

1,919 2.438 € 31-01-2012

660 2.462 € 16-04-2012

1,455 2.438 € 31-01-2012

1,500 1.895 € 25-06-2012

1,530 2.438 € 31-01-2012

600 2.462 € 16-04-2012

1,188 2.438 € 31-01-2012

600 2.462 € 16-04-2012

300 2.438 € 31-01-2012

600 2.462 € 16-04-2012

1,980 - 2.438 € 31-01-2012

660 - 2.462 € 16-04-2012

3,957 - 1.895 € 22-06-2012

- 6,520 2.290 € 22-06-2012

- 1,395 2.300 € 22-06-2012

1,574 2.44 € 31-01-2012

600 2.46 € 16-04-2012

3,957 1.90 € 22-06-2012

(6) Mário Filipe Moreira da Silva is a member of the Board of Directors of Kento Holding Limited, which held, as of 30 June 2012, 30,909,683 ZON Multimédia shares.

Transactions in 1H12

Rodrigo Jorge de Araújo Costa Chief Executive Officer 590,428 - 597,720

José Pedro Faria Pereira da Costa Member of the Executive Committee 93,372 - 97,620

Luís Miguel Gonçalves Lopes Member of the Executive Committee 92,372 - 100,577

Duarte Maria de Almeida e Vasconcelos Calheiros Member of the Executive Committee 44,503 - 48,175

Fernando Fortuny Martorell Member of the Board of Directors 0 - - - - 0

László Istvan Hubay Cebrian Member of the Board of Directors 0 - - - - 0

Vítor Fernando da Conceição Gonçalves Chairman of the Audit Committee 0 - - - - 0

Nuno João Francisco Soares de Oliveira Silvério Marques Member of the Audit Committee 0 - - - - 0

Paulo Cardoso Correia da Mota Pinto Member of the Audit Committee 0 - - - - 0

Adriano José de Seabra Duarte Neves Manager in the terms of CVM article 248-B 25,819 - 28,398

Nuno Miguel Pereira Domingues de Figueiredo Carvalhosa Manager in the terms of CVM article 248-B 6,832 - 9,787

Paulo Manuel Moura Ribeiro Manager in the terms of CVM article 248-B 9,163 - 11,293

Jorge Filipe Santos Graça Manager in the terms of CVM article 248-B 6,464 - 8,252

12,450 - 18,581

André Nuno Malheiro dos Santos Almeida Manager in the terms of CVM article 248-B 300 -

(4) Jorge Telmo Maria Freire Cardoso is a member of the Board of Directors of Caixa Banco de Investimento, SA.

(5) Joaquim Francisco Alves Ferreira de Oliveira indirectly holds more than half of the share capital of Controlinveste International, Sarl, which held, as of 30 June 2012, a total of 7,965,980 ZON Multimédia shares. Joaquim Francisco Alves Ferreira de Oliveira indirectly holds more than half of the share capital of Gripcom - SGPS, S.A., which held, as of 30

June de 2012, a total of 6,989,704 ZON Multimédia shares.

(7) José Vieira dos Reis is the Alternate Statutory Sole Supervisor of Metalgest - Sociedade de Gestão, SGPS, SA, which held, as of 30 June 2012, 3,985,488 ZON Multimédia shares.

1,200

Tomás Maria de Morais Sarmento Pinto Gonçalves Manager in the terms of CVM article 248-B 25,179 23,861

Miguel Augusto Chambel Rodrigues Manager in the terms of CVM article 248-B

(8) Fernando Marques Oliveira is, in representation of Sociedade Oliveirea, Reis & Associados, SROC, Lda, the Statutory Sole Supervisor of Metalgest - Sociedade de Gestão, SGPS, SA, which held, as of 30 June 2012, 3,985,488 ZON Multimédia shares.

Member of the Board of Directors






(1) António Domingues is a member of the Boarsd of Directors of companies which are a part of Grupo BPI which, as of 30 June 2012, held 23,344,798 ZON Multimédia shares.

(2) Luís João Bordallo da Silva is a member of the Board of Directors and a Manager of companies which are a part of Grupo Cinveste

(3) Norberto Emílio Sequeira da Rosa is a member of the Board of Directors of Caixa Geral de Depósitos, SA, which, as of 30 June 2012, held, directly and indirectly 33.884.405 ZON Multimédia shares.


4.4. Qualified Shareholdings

Under the terms of paragraph c) of number 1 of article 9 of the Regulation 5/2008 of the Portuguese

Securities Committee (CMVM), ZON Multimedia hereby informs on its qualified shareholdings held

by third parties, which have been reported to the Company.

The structure of ZON Multimedia’s Social Qualified Shareholdings disclosed to the company, was, in

30 June 2012, as follows:

Caixa Geral de Depósitos, SA 33,884,405 10.96%

Kento Holding Limited (1)

30,909,683 10.00%

Jadeium, B.V. (1)

24,222,563 7.84%

Banco BPI, SA 23,344,798 7.55%

Espírito Santo Irmãos, SGPS, SA (2)

15,455,000 5.00%

Banco Espírito Santo, SA 15,054,254 4.87%

Joaquim Alves Ferreira de Oliveira (3)

14,955,684 4.84%

Fundação José Berardo (4)

13,408,982 4.34%

Ongoing Strategy Investments, SGPS, SA (5)

10,162,250 3.29%

Estêvão Neves - SGPS, SA (6)

9,075,782 2.94%

Grupo Visabeira, SGPS, SA (7)

6,641,930 2.15%

Norges Bank 6,379,164 2.06%

SGC, SGPS, SA (8)

6,182,000 2.00%

ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA 6,088,616 1.97%

BES Vida - Companhia de Seguros, S. A. 5,721,695 1.85%

Metalgest - Sociedade de Gestão, SGPS, SA (4)

3,985,488 1.29%

Total 225,472,294 72.95%

(7) Visabeira Investimentos Financeiros,SGPS,SA holds 0.99% of ZON Multimedia's share capital. 1.16% are held directly by Grupo Visabeira,

SGPS, SA. Visabeira Investimentos Financeiros,SGPS,SA is 100% held by Visabeira Estudos e Investimentos,SA, which is 100% held by

Visabeira Serviços,SGPS,SA, which is owned by Grupo Visabeira,SGPS,SA. The latter is 74.0104% held by Mr. Fernando Campos Nunes.

(8) SGC, SGPS, SA's holding is attributed to its majority shareholder, Mr. João Pereira Coutinho.

Note:The shareholdings of Caixa Geral de Depósitos, S.A., Banco BPI, S.A. and Banco Espírito Santo, S.A. were updated as of 30 June 2012,

based on information provided for the purposes of this Management Report.

(6) The Qualified Shareholding of Estêvão Neves - SGPS, SA is attributable to Mr. José Estêvão Fernandes Neves, who owns the majority of

Shareholders as of 30-06-2012 Nr. Of Shares % Voting Rights

(1) According to Articles 20(1)(b) and 21 of the Cód.VM the qualified holding is attributable to Ms. Isabel dos Santos, in her capacity of

shareholder of KENTO and Jadeium, B.V. The calculation of the qualified shareholding of Jadeium, B.V. includes 8,707,136 shares disposed of

by Cinveste, SGPS, SA, as disclosed to the market on 08-06-2012. On this date no announcement was made by Jadeium, B.V. given that the

aforementioned transaction did not take its shareholding above the legal threshold which would require it to do so.(2) Espírito Santo Irmãos, SGPS, SA's voting rights are attributed to Espírito Santo Industrial, SA, Espírito Santo Resources Limited, and

Espírito Santo Internacional, SA, companies which dominate Espírito Santo Irmãos, in that order.

(3) Mr. Joaquim Francisco Alves Ferreira de Oliveira is attributed the voting rights corresponding to 4.84% of the share capital since he controls

GRIPCOM, SGPS, SA, and Controlinveste International S.à.r.l., who hold respectively 2.26% and 2.58% of ZON Multimedia's share capital.

(4) Fundação José Berardo's shareholding and voting rights are reciprocal with the shareholding and voting rights of Metalgest - Sociedade de

Gestão, SGPS, SA.

(5) The voting rights of Ongoing Strategy Investments, SGPS S.A., are attributable to RS Holding, SGPS, S.A., as its majority shareholder, and

to Mrs. Isabel Maria Alves Rocha dos Santos, as majority shareholder of RS Holding, SGPS, S.A.

The following table presents the qualified holding of Caixa Geral de Depósitos, SA (“CGD”)

calculated under the terms of number 1 of article 20 of the Portuguese Securities Code.

Caixa Geral de Depósitos, SA 33,181,144 10.73%

Fidelidade - Companhia de Seguros, SA 219,874 0.07%

Fundo de Pensões da CGD 483,387 0.16%

Total 33,884,405 10.96%

Nr. Of Shares % Voting RightsShareholders


The following table presents the qualified holding of Banco Português de Investimento, SA (“BPI”)


Fundo de Pensões do Banco BPI 23,287,499 7.53%

BPI Vida - Companhia de Seguros de Vida, SA 57,299 0.02%

Total 23,344,798 7.55%

Shareholders Nr. Of Shares % Voting Rights

The following table presents the qualified holding of Joaquim Alves Ferreira de Oliveira, calculated

under the terms of number 1 of article 20 of the Portuguese Securities Code.

Gripcom, SGPS, SA 6,989,704 2.26%

Controlinveste International, S.à.r.l. 7,965,980 2.58%

Total 14,955,684 4.84%


The following table presents the qualified holding of Ongoing, Strategic Investments, SGPS, SA,


Insight Strategic Investments, SGPS, SA 5,688,106 1.84%

Ongoing Strategy Investments, SGPS, SA 4,419,513 1.43%

Investoffice - Investimentos e Consultoria Financeira, SA 50,000 0.02%

Nuno Vasconcellos 4,631 0.00%

Total 10,162,250 3.29%


The following table presents the qualified holding of Estêvão Neves – SGPS, SA, calculated under

the terms of number 1 of article 20 of the Portuguese Securities Code.

Estêvão Neves - SGPS, SA 6,991,113 2.26%

Enotel - SGPS, SA 1,785,580 0.58%

José Estêvão Fernandes Neves 299,089 0.10%

Total 9,075,782 2.94%


The following table presents the qualified holding of Grupo Visabeira, SGPS, SA, calculated under

the terms of number 1 of article 20 of the Portuguese Securities Code.

Grupo Visabeira, SGPS, SA 3,574,575 1.16%

Visabeira Investimentos Financeiros, SGPS, SA 3,067,355 0.99%

Total 6,641,930 2.15%



The following table presents the qualified holding of Banco Espírito Santo, SA (“BES”) calculated

under the terms of number 1 of article 20 of the Portuguese Securities Code.


Members of the Corporate Bodies 1,517 0.00%

Companies within a control or Group relationship with BES 12,050,000 3.90%

Total 15,054,254 4.87%

Shareholders % Voting RightsNr. Of Shares

On 4 and 5 July 2012, Jadeium, B.V. and Caixa Geral de Depósitos, S.A., have disclosed to ZON Multimédia

changes in their Qualified Shareholdings. As such, the structure of ZON Multimedia’s Social Qualified

Shareholdings disclosed to the company as of the date of this report is as follows:

Jadeium, B.V. (1)

58,102,094 18.80%

Kento Holding Limited (1)

30,909,683 10.00%

Banco BPI, SA 23,344,798 7.55%

Espírito Santo Irmãos, SGPS, SA (2)

15,455,000 5.00%


Joaquim Alves Ferreira de Oliveira (3)

14,955,684 4.84%

Fundação José Berardo (4)

13,408,982 4.34%

Ongoing Strategy Investments, SGPS, SA (5)

10,162,250 3.29%

Estêvão Neves - SGPS, SA (6)

9,075,782 2.94%

Grupo Visabeira, SGPS, SA (7)

6,641,930 2.15%

Norges Bank 6,379,164 2.06%

SGC, SGPS, SA (8)

6,182,000 2.00%

ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA 6,088,616 1.97%

BES Vida - Companhia de Seguros, S. A. 5,721,695 1.85%

Metalgest - Sociedade de Gestão, SGPS, SA (4)

3,985,488 1.29%

Total 225,467,420 72.94%

(1) According to Articles 20(1)(b) and 21 of the Cód.VM the qualified holding is attributable to Ms. Isabel dos Santos, in her capacity of

shareholder of KENTO and Jadeium, B.V.

(2) Espírito Santo Irmãos, SGPS, SA's voting rights are attributed to Espírito Santo Industrial, SA, Espírito Santo Resources Limited, and

Espírito Santo Internacional, SA, companies which dominate Espírito Santo Irmãos, in that order.

(3) Mr. Joaquim Francisco Alves Ferreira de Oliveira is attributed the voting rights corresponding to 4.84% of the share capital since he controls

GRIPCOM, SGPS, SA, and Controlinveste International S.à.r.l., who hold respectively 2.26% and 2.58% of ZON Multimedia's share capital.

(4) Fundação José Berardo's shareholding and voting rights are reciprocal with the shareholding and voting rights of Metalgest - Sociedade de

(5) The voting rights of Ongoing Strategy Investments, SGPS S.A., are attributable to RS Holding, SGPS, S.A., as its majority shareholder, and

to Mrs. Isabel Maria Alves Rocha dos Santos, as majority shareholder of RS Holding, SGPS, S.A.

(6) The Qualified Shareholding of Estêvão Neves - SGPS, SA is attributable to Mr. José Estêvão Fernandes Neves, who owns the majority of

(7) Visabeira Investimentos Financeiros,SGPS,SA holds 0.99% of ZON Multimedia's share capital. 1.16% are held directly by Grupo Visabeira,

SGPS, SA. Visabeira Investimentos Financeiros,SGPS,SA is 100% held by Visabeira Estudos e Investimentos,SA, which is 100% held by

Visabeira Serviços,SGPS,SA, which is owned by Grupo Visabeira,SGPS,SA. The latter is 74.0104% held by Mr. Fernando Campos Nunes.

(8) SGC, SGPS, SA's holding is attributed to its majority shareholder, Mr. João Pereira Coutinho.

Note:The shareholdings of Banco BPI, S.A. and Banco Espírito Santo, S.A. were updated as of 30 June 2012, based on information provided

for the purposes of this Management Report.

Shareholders as of 23-08-2012 Nr. Of Shares % Voting Rights

A detailed record of the qualified shareholdings’ communications can be found at ZON Multimedia’s

corporate website, at www.zon.pt/ir.

http://www.zon.pt/ir


4.5. Transactions of Own Shares

By the end of 1H12, within the scope of its Employee Share Plan and Share Savings Plan, aimed at

its employees, ZON Multimédia held a total of 322,683 own shares.

The table below illustrates the transactions of ZON Multimédia’s own shares which took place in

1H12, within the scope of the above mentioned Share Plans:

Description Nr. Of Shares

Balance as of 01-01-2012 265,612

Acquisitions (Employee Share Plan) 310,517

Disposals (Employee Share Plan) 253,446

Balance as of 30-06-2012 322,683


4.6. Business Review

Pay TV, Broadband and Voice

Homes Passed (1)

3,223.3 3,204.5 (0.6%) 3,223.3 3,204.5 (0.6%)

RGUs (2)

3,212.8 3,414.1 6.3% 3,212.8 3,414.1 6.3%

Cable RGUs per Subscriber (units) (3)

2.31 2.39 3.2% 2.31 2.39 3.2%

Basic Subscribers (4)1,552.8 1,586.3 2.2% 1,552.8 1,586.3 2.2%

o.w. Cable Subscribers 1,157.8 1,210.8 4.6% 1,157.8 1,210.8 4.6%

Triple Play Customers 678.5 730.9 7.7% 678.5 730.9 7.7%

% Triple Play Cable Customers 58.6% 60.4% 1.8pp 58.6% 60.4% 1.8pp

o.w. DTH Subscribers 395.0 375.5 (4.9%) 395.0 375.5 (4.9%)

Broadband Subscribers 714.8 751.5 5.1% 714.8 751.5 5.1%

Fixed Voice Subscribers 826.8 947.0 14.5% 826.8 947.0 14.5%

Mobile Subscribers 118.4 129.4 9.2% 118.4 129.4 9.2%

Blended ARPU ( Euros ) 35.8 34.7 (3.2%) 35.8 34.9 (2.5%)

Cinema (5)

Revenue per Ticket (Euros) 4.9 4.9 (1.0%) 4.8 4.8 0.4%

Tickets Sold 2,093.6 1,714.1 (18.1%) 4,110.0 3,439.0 (16.3%)

Screens (units) 217 210 (3.2%) 217 210 (3.2%)

(5) Portuguese operations.

1H12

(1) The number of homes passed was corrected in 3Q11, consisting of a database cleanup of around 86.5 thousand homes. Data for the previous quarters was not restated.

(3) Cable RGUs per Subscriber correspond to the sum of Cable Pay TV, Broadband and Voice Subscribers, divided by the number of Cable Pay TV Customers.

(4) These figures are related to the total number of Pay TV basic customers, including the cable and satellite platforms. ZON Multimedia offers several basic services, based on different technologies, directed to different market

segments (residential, real estate and corporate), with a distinct geographical scope (mainland Portugal and the Azores and Madeira islands) and with a variable number of channels.

2Q11 1H12 / 1H11

(2) Total RGUs reported reflect the sum of Pay TV, Broadband, Fixed Voice and Mobile subscribers.

1H112Q12 2Q12 / 2Q11Business Indicators ('000)

The core Triple Play business remains very sound and resilient to the general macroeconomic strain. Customers are retaining their core Triple Play bundles however efforts to manage monthly spend are still being felt, with the disconnection of more discretionary services such as add-on premium channel subscriptions. At the high end of the customer spectrum, we continue to see very enthusiastic uptake of our our high-end “IRIS” Triple Play bundles, which help offset the ARPU dilution due to the decline in premium channel subscriptions.

Solid RGU growth, +99 thousand services in 1H12

ZON recorded another good semester in terms of RGU growth with 99 thousand net adds, reaching a total of 3,414 thousand services, representing 2.39 services per cable customer.

Pay TV base stable

The Pay TV subscriber base remained stable at 1,586 thousand subscribers, with net adds of 32.5 in the cable base, more than offsetting a 13.2 thousand subscriber decline in the DTH subscriber base. The analogue switch-off was concluded in May 2012, thus leading to a decline in the pace of acquisition of entry-level bundles designed to address homes choosing to take low end Pay TV solutions rather than migrate to DTT.



Over 161 thousand IRIS customers, 13% of cable base

At the other extreme of the customer mix, take-up of our high-end IRIS bundles remains high with 161.4 thousand subscribers at the end of 1H12, 13% of the cable customer base. The continued consumer enthusiasm with our IRIS service is related both to the very appealing combination of high-end TV, fibre Broadband and Fixed Voice offers and to the continuous innovation of the features offered. In 4Q11, ZON launched a very successful feature, Restart TV, whereby users of IRIS could go back to the beginning of a programme that was being broadcast. The new software version released to the market in July 2012 enables the viewer to go back to any programme that finished in the last two hours. Given the success of the service and the technical feasibility, the tendency is for this window of time to increase further. In addition, the IRIS user interface has been expanded and fine-tuned based on the users’ feedback. It now offers an even faster navigation experience and both a vertical and an horizontal electronic programming guide. Additional features have been rolled out, the most unique and innovative being the full integration of Facebook with the user interface. With Facebook on IRIS, customers can share likes, recommendations, view opinions, make status posts, amongst others, all within the IRIS interface, without accessing an external app. The ZON Online platform, which replicates the IRIS interface over laptops and tablets, was extended to smartphones, with the launch of its iPhone app in May. It has become a major incentive for customers to upgrade to the IRIS bundle. Finally the IRIS bundles’ value proposition has been reinforced with an upgrade of broadband speeds offered to 100 Mbps.

Continued growth in Broadband

ZON had a solid semester in terms of Broadband and Voice net adds. The proportion of cable customers that now take Broadband services was 62.1% at the end of 1H12, 751 thousand customers. Of these, the proportion of customers that are subscribing to speeds equal to or higher than 30 Mbps services continues to grow, having increased from 29% at the end of 2011 to 35% in 2Q12, bearing witness to ZON’s superior competitive position in the Broadband market, both in terms of speed offered (up to 360 Mbps) and coverage (3.2 million homes).

The largest WiFi network in Portugal: around 500 thousand hotspots, 971 million minutes of use

An additional feature that is providing a very strong anchor for ZON’s Double and Triple Play offers is the free access provided to the largest WiFi network in Portugal, “ZON@FON”, which by the end of 1H12 had already reached around 500 thousand hotspots with very high coverage density in the main urban centres, providing almost seamless online connectivity whilst on the go. To leverage the very strong value proposition of ZON@FON, ZON launched a campaign leading up to the summer months, not only promoting free access for ZON customers, but also promoting the network to other users and visitors to Portugal, at very competitive prices. In addition, hotspots were deployed on some of the most popular beach resorts in Portugal, to further raise awareness to this very appealing service.

Solid Fixed Voice Performance


Growth in Fixed Voice services remained very positive with net-adds of 63 thousand in 1H12. Total Fixed Voice customers are now 947.0 thousand, representing 76.2% of the cable customer base. The ZON Phone application, which allows customers to use their smartphones to make calls using their home phone number and tariffs wherever they are, is proving to be a huge success, providing customers with a unique way to save on their monthly telecom spend by replacing spend on mobile communications, domestic and roaming, with an IP based voice service. The customer only needs to secure access to a WiFi network, another of the advantages of having free access to the ZON@FON network as explained above.

731 thousand Triple Play customers

Triple Play customers across ZON’s customer base grew to 730.9 thousand in 1H12, up 7.7% yoy. Penetration of Triple Play customers as a percentage of the cable base increased again to 60.4%, and the proportion of customers taking two services, TV+BB or TV+Voice increased by 3.4 percentage points yoy to 17.6%.

Resilience of Basic Triple Play ARPU

Adjusting for the effect of lower discretionary premium channel revenues, basic ARPU continued to show resilience with a yoy decrease of 0.1% in 1H12 (-1% in 2Q12), supported by the stability of Triple Play services and growth in RGUs, the price increase which took place in January 2012 albeit with some dilution felt from entry level bundles. Adjusting for this dilution effect, basic ARPU would have grown by 0.9% in 2Q12 and by 1.6% in 1H12. Blended ARPU continued to be affected by pressure on premium channel revenues, and also by the dilution effect of entry level bundles, posting a decline of 2.5% to 34.9 euros.

Basic, Premium and Blended ARPU evolution (2Q11 = Base 1)

-3.2%

-1.0%

-14.2%

0.80

0.85

0.90

0.95

1.00

1.05

1.10

2Q11 3Q11 4Q11 1Q12 2Q12

Blended ARPU Basic ARPU Premium ARPU

#1 in TV Customer Satisfaction

ZON was recognized #1 in customer service satisfaction for TV in the Customer Satisfaction Survey run by leading market research agencies in Portugal. In all relevant indicators, ZON came out first. The results achieved have been improving every year which is particularly relevant given the much higher level of sophistication of the services provided, both in terms of user interface, features and set top boxes. This award is the result of all the hard work in this area to achieve excellence in customer service at all levels, whilst at the same time improving support systems and processes. Some of the key action areas have been the unification of customer support software platforms, innovative training and incentive based programmes for operators in addition to a strong focus on the quality of the facilities


and work-tools provided. These have led not only to easier and more efficient work flows, but to significant reductions in terms of the time taken to respond to customers and much higher success rates in first line calls. In addition to the obvious benefits in terms of customer satisfaction and loyalty, improvements in customer related support and technical processes translated into significant cost savings materialized in the need for less staffing of call centres, technical installation and repair teams.

Cinemas and Audiovisuals

In 1H12, ZON’s Cinema ticket sales declined by 16.3%, however the average revenue per ticket sold remained practically flat at 4.8 euros, with a marginal increase of 0.4%. Total Cinema revenues declined by 15.5% yoy in 1H12. In addition to the difficult macroeconomic environment, cinema box-office sales were negatively impacted by the increase in VAT on Cinema ticket sales from 6% to 13%, which came into effect as from the beginning of 2012. Revenues were also affected by comparatively lower 3D movie releases and subsequently box-office sales. Revenues from the sale of 3D movie tickets represented 23% of total box-office sales in 1H12, whereas they had represented around 29% in 1H11.

However, this represented a slightly better performance than the remainder of the market. As a whole, the market experienced a drop in tickets sold of 17.4% in 1H12, according to recently published data from the Portuguese Institute for Cinema and Audiovisuals, ICA. ZON’s share of tickets sold therefore increased to 56.1% during 1H12. As regards Cinema gross revenues performance, ZON’s relative performance was also stronger in comparison with the rest of the market, posting a 10.4% decrease in 1H12 whilst the total market’s gross revenues fell by 12.5%. The most successful films shown in 1H12 were “American Reunion”, “The Avengers”, “Sherlock Holmes: A Game of Shadows”, “Dr Seuss’ The Lorax”, and “The Descendants”. In 1H12, revenues in the Audiovisuals division slightly declined yoy by 0.1%. ZON Audiovisuais maintained its leading position in the distribution of movies for cinema exhibition, content and VoD distribution and sale of homevideo content in Portugal. Also affected by the downturn in cinema exhibition revenues in the market, ZON Audiovisuais was also affected by the decline in revenues from the sale of content rights to FTA channels that, due to the significantly lower level of advertising activity, are cutting back on the number of films exhibited in their programming grid. As regards movie distribution in 1H12, from the top 10 movies, ZON Lusomundo distributed 8, “American Reunion”, “The Avengers”, “Dr Seuss’ The Lorax”, “Hugo”, “The Dictator”, “Intouchables” “Snow White and the Huntsman” and “The Muppets”. According to ICA, in 1H12, ZON’s gross revenues in terms of Cinema Distribution declined by 8.9%, while the market as a whole experienced a drop of 12.5%. Reflecting this outperformance, ZON’s share of gross revenues in terms of cinema distribution in 1H12 stood at 52.7%.

International Growth - Africa

The operational performance of “ZAP”, ZON’s Pay TV Joint Venture in Angola and Mozambique, continues to be very strong and well above expectations in terms of subscriber growth. ZAP continues to be one of the top 5 advertisers in Angola, alongside Angola’s largest companies, transforming it into one of the most recognized brands in the territories where it is present. Backed by a very strong distribution and sales network with 13 own stores, over 700 other points of sale and a door-to-door sales force of 200, ZAP continued its successful marketing strategy, with results well above expectations in terms of customer uptake.


As from 1Q12, ZON started to proportionately consolidate its 30% stake in ZAP. In 2Q12, ZAP generated 24.2 million euros of revenues (7.3 million representing ZON’s stake in 2Q12 and 13.7 million euros in 1H12) and, having achieved EBITDA breakeven in 1Q12, in 2Q12 the company generated 1.9 million euros of EBITDA (of which ZON’s share was 0.6 million euros in 2Q12 and 0.7 million euros in 1H12). Although ZAP’s contribution to Net Income is still negative, it is rapidly coming close to breakeven, coming down from (2.3) million euros in 2Q11 to (0.6) million euros in 2Q12, with a cumulative effect of (1.9) million euros in 1H12.


4.7. Consolidated Financial Review

As from 1Q12, ZON’s 30% stake in its Angolan Pay TV joint-venture is being consolidated proportionately. Previously the operation was being consolidated through the equity method in financial results.

Operating Revenues 211.5 214.4 1.4% 425.6 428.6 0.7%

Pay TV, Broadband and Voice 191.6 191.0 (0.3%) 387.2 382.8 (1.1%)

Audiovisuals 17.7 17.6 (0.6%) 34.7 34.7 (0.1%)

Cinema 14.4 11.9 (17.2%) 28.0 23.7 (15.5%)

International 0.0 7.3 n.a. 0.0 13.7 n.a.

Others and Eliminations (12.2) (13.3) 8.8% (24.3) (26.3) 8.1%

Operating Costs Excluding D&A (132.9) (135.6) 2.0% (267.5) (270.1) 1.0%

W&S (14.4) (15.1) 4.9% (29.1) (29.4) 0.9%

Direct Costs (60.9) (59.3) (2.5%) (121.9) (117.7) (3.4%)

Commercial Costs (1) (12.1) (17.0) 40.1% (27.4) (33.2) 21.2%

Other Operating Costs (45.5) (44.1) (3.0%) (89.1) (89.8) 0.8%

EBITDA (2) 78.5 78.8 0.4% 158.0 158.5 0.3%


Pay TV, Broadband and Voice 73.7 74.5 1.1% 147.1 150.0 2.0%

EBITDA Margin 38.5% 39.0% 0.5pp 38.0% 39.2% 1.2pp

Audiovisuals and Cinema Exhibition 4.8 3.8 (21.0%) 10.9 7.8 (29.1%)


International 0.0 0.6 n.a. 0.0 0.7 n.a.

EBITDA Margin n.a. 7.8% n.a. n.a. 5.4% n.a.

Depreciation and Amortization (53.3) (51.5) (3.3%) (108.8) (107.5) (1.3%)

Income From Operations (3) 25.3 27.3 8.2% 49.2 51.0 3.7%

(Other Expenses) / Income (0.9) (0.9) (7.3%) (0.6) (0.9) 52.2%

Operating Profit (EBIT) (4) 24.3 26.5 8.8% 48.6 50.1 3.1%

(Financial Expenses) / Income (10.5) (10.7) 2.1% (20.8) (19.0) (8.4%)

Income Before Income Taxes 13.9 15.8 13.8% 27.8 31.1 11.7%

Income Taxes (4.6) (5.8) 25.7% (8.2) (10.5) 27.3%

Income From Continued Operations 9.2 10.0 7.8% 19.6 20.7 5.2%

o.w. Attributable to Non-Controlling Interests (0.0) (0.3) n.a. (0.2) (0.6) 175.7%

Net Income 9.2 9.7 5.0% 19.4 20.0 3.3%(1) Commercial costs include commissions, market ing and publicity expenses and costs of equipment sold.

(2) EBITDA = Income From Operat ions + Depreciat ion and Amort izat ion.

(4) EBIT = Income Before Financials and Income Taxes.

1H122Q12 / 2Q11Profit and Loss Statement

(Millions of Euros)2Q11 2Q12 1H12 / 1H111H11

(3) Income From Operat ions = Income Before Financials and Income Taxes + work force reduct ion programme costs + impairment of goodwill + Losses/Gains on disposal of f ixed assets + Other costs/ income.

Operating Revenues

Consolidated Operating Revenues increased in 1H12 yoy by 0.7% to 428.6 million euros. Performance of core Pay TV, BB and Voice Revenues was almost flat (-1.1%) reaching 382.8 million


euros. 2Q12 marked a significant improvement in the yoy pace of decline of these revenues, in comparison with previous quarters, as can be seen in the chart below.

Pay TV, Broadband and Voice Revenue YoY growth (%)

-3.0%-2.5%

-2.8%

-1.9%

-0.3%

-4%

-3%

-2%

-1%

0%

2Q11 3Q11 4Q11 1Q12 2Q12

Although the basic monthly ARPU revenues remain solid, subscription to add-on premium channels is still a source of pressure to revenues. Total ARPU revenues declined by 1% in 1H12 yoy, whereas ARPU revenues excluding premium channel revenues increased by 1.5%, thus offsetting a decline in premium channel revenues of 13.4%.

ARPU Revenues YoY growth (%)

+1.0%

-12.5%

0.80

0.85

0.90

0.95

1.00

1.05

2Q11 3Q11 4Q11 1Q12 2Q12

ARPU Revenues ex Premium Premium ARPU Revenues

Revenues from the Audiovisuals business posted a marginal decline of 0.1% however the Cinema exhibition business suffered a relevant decline of 15.5% yoy, explained by the weak attendance already described. As in previous quarters, this reduction was in fact slightly lower than the decline felt in global market revenues for cinema box office sale. It is becoming clear that the economic environment is taking its toll on cinema going as a form of entertainment, together with increase in VAT at the beginning of the year. ZON’s 30% stake in its international Pay TV operation in Angola and Mozambique rendered sales of 13.7 million euros in 1H12, with 2Q12 up to 7.3 million euros, from 6.4 million euros in 1Q12. The business is going extremely well with continued strong expansion of the subscriber base every month whilst maintaining a healthy level of ARPU.


EBITDA

Consolidated EBITDA grew by 0.3% in 1H12 to 158.5 million euros, generating an EBITDA margin of 37%. Core Pay TV, BB and Voice EBITDA reached 150 million euros in 1H12, representing an increase of 2% yoy. EBITDA margin measured as a percentage of revenues increased by 1.2 percentage points to 39.2%.

EBITDA Margins (%)

35.4%

39.0%

34.3%

36.8%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

Pay TV, Broadband and Voice Group

The Audiovisuals and Cinema business generated in 1H12 a lower EBITDA Margin of 13.3% (7.8 million euros), down 4.2pp from 17.4% in 1H1, and therefore contributed to a dilution in consolidated margin. Finally, the African JV is going very well, with EBITDA breakeven being achieved in 1Q12 after just 18 months of commercial operations, already contributing with EBITDA of 0.6 million euros in 2Q12 (7.8% EBITDA Margin). In 1H12, the African operation posted an EBITDA contribution of 0.7 million euros, with an EBITDA Margin of 5.4%.

Consolidated Operating Costs

Consolidated Operating Costs increased by 1% yoy to 270.1 million euros, however they are not directly comparable due to the consolidation of the African operation as from 1Q12. Excluding the impact of the African operation, total operating costs would have fallen by around 3% to 259.5 million euros. Wages and Salaries increased by 0.9% in 1H12 to 29.4 million euros when compared with 1H11, an increase yoy explained almost entirely by the proportionate consolidation of the operation of ZAP as from 1Q12. Excluding this effect, Wages and Salaries like for like would have decreased by 3.5%.

Direct Costs declined by 3.4% to 117.7 million euros, reflecting a combination of lower programming costs due to the lower level of premium channel subscriptions, which was somewhat offset by higher traffic related costs due to higher Broadband and Voice activity than last year. Excluding the impact of the consolidation of the African Operation, like for like direct costs would have fallen by 4.9%. Commercial Costs were up 21.2% yoy to 33.2 million euros, an increase explained mostly by the increase in COGS (Cost of Goods Sold) due to the fact that set top boxes at the ZAP operation are sold to customers, rather than rented as they are in the Portuguese operation, and therefore are expensed in the period they are sold. Excluding the impact of the African Operation, commercial costs would have decreased by 0.4%, on the back of stronger commercial activity for the entry level segment.


Other Operating Costs recorded a 0.8% increase yoy to 89.8 million euros in comparison with 1H11. Excluding the costs from consolidation of the African JV, other operating costs fell by 1.2% yoy. Relevant savings were achieved in core areas of the domestic business such as support services, as a result of the implementation of a number of efficiency improvement measures at the contact center level, maintenance and repairs and other SGA.

Net Income

Net Income was 20 million euros in 1H12, 3.3% higher than in 1H11. Depreciation and Amortization was somewhat lower at 107.5 million euros, compared with 108.8 million euros in 1H11 although D&A is still relatively high due to the significant accelerated CAPEX of the 2008-2010 investment cycle. Other Expenses in 1H12 were 0.9 million euros, reflecting mainly curtailment charges incurred in related to the implementation of redundancy programmes affecting 24 employees that will enable savings in W&S of 1 million euros on an annual basis. Net Financial Expenses decreased by 8.4% to 19 million euros in 1H12 however the two figures are not directly comparable given the change in consolidation method of the African operation expressed at the beginning of this section. Net Interest costs and other financial charges registered an increase of 16.5% led by a combination of higher average cost of debt and financing charges as a result of refinancing secured. This aggregate was also impacted by one-off effects relating to an impairment charge of the audiovisuals and cinema fund ”FICA”. In 1H11 ZON had a negative contribution from the consolidation of the African Operation of 5.1 million euros, which does not appear in this line anymore. For comparative purposes, the equivalent impact for 1H12 was a negative contribution at the EBT level of 1.8 million euros, therefore reflecting a considerable reduction from the negative impact in 2011. Income Taxes in 1H12 were 10.5 million euros representing an effective P&L tax rate of 34%, well above the general corporate tax rate of 29.5%. In 2Q12, the tax line reflected a couple of one-off effects, namely a correction in prior year tax incentive schemes accounted for and the aforementioned impairment charge which is not deducted for tax purposes.

CAPEX

In line with the trend of previous periods, CAPEX is consistently at lower levels than in previous years. In 1H12, CAPEX was 57.3 million euros, down 22.8% from 1H11. Terminal equipment still represented 29% of total CAPEX in 1H12, 16.8 million euros, albeit much lower than levels recorded in previous years. The decline is due to a combination of lower commercial activity and subsequent need for customer CAPEX and to the success of the equipment refurbishment process. Total CAPEX represented 15% of Pay TV, BB and Voice revenues, similar to the run-rate investment level of the sector, reflecting necessary maintenance investments and still some growth related investment. Excluding the impact of the consolidation of the African Operation, Total CAPEX would have been 23.4% lower than in 1H11.


Total CAPEX (Millions of Euros)

41.5 41.6 45.235.9 33.8 31.7

39.229.6 27.7

14.917.8

33.3

2.91.7 3.4

1.3

56.3 59.4

78.5

38.8 35.5 35.140.5

29.6 27.7

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

Baseline CAPEX Non-Recurrent CAPEX

Operating Cash Flow

EBITDA 78.5 78.8 0.4% 158.0 158.5 0.3%

CAPEX (35.5) (27.7) (21.8%) (74.3) (57.3) (22.8%)

Baseline CAPEX (33.8) (27.7) (17.9%) (69.6) (57.3) (17.7%)

Non-Recurrent CAPEX (1.7) 0.0 (100.0%) (4.6) 0.0 (100.0%)

Non-Cash Items Included in EBITDA-CAPEX(1)

and Change in Working Capital (13.9) 0.0 n.a. (48.9) (12.7) (74.1%)

Operating Cash Flow After Investment 29.2 51.1 75.4% 34.9 88.5 153.8%

Long Term Contracts (27.6) (5.4) (80.6%) (41.8) (18.2) (56.3%)

Net Interest Paid and Other Financial Charges (12.1) (8.8) (27.7%) (10.2) (16.3) 59.7%

Income Taxes Paid (3.9) (2.4) (36.5%) (4.5) (4.8) 6.5%

Disposals 0.0 0.0 n.a. 6.7 0.8 (88.0%)

Other Cash Movements (0.7) (1.0) n.a. (2.2) (0.1) (97.2%)

Free Cash-Flow (15.1) 33.6 n.a. (17.2) 49.9 n.a.

1H12 / 1H11

(1) This capt ion includes non-cash provisions included in EBITDA and non-cash CAPEX related to the upfront capitalizat ion of long term contracts.

Cash Flow (Millions of Euros) 2Q11 2Q12 2Q12 / 2Q11 1H11 1H12

EBITDA-CAPEX increased by 20.8% in 1H12 to 101.2 million euros primarily as a result of the aforementioned reduction in CAPEX and the stable yoy performance of EBITDA. Operating Cash Flow after Investment recorded a very strong increase yoy from 34.9 million euros in 1H11 to 88.5 million euros in 1H12. In 2Q12, Net Working Capital investment and other EBITDA non-cash adjustments were flat, therefore the strong Operating Cash Flow performance in 2Q12, in addition to the 8 million euros increase in EBITDA-CAPEX, reflects a significant yoy reduction in investment in working capital.


EBITDA - Total CAPEX and OCF After Investment (Millions of Euros)

51.1

51.1

-100

1020304050607080

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

EBITDA- Total CAPEX OCF After Investment

Free Cash Flow

Total FCF in 1H12 increased to 49.9 million euros, compared with negative 17.2 million euros in 1H11. In addition to the strong operating FCF momentum discussed above, the main item affecting FCF performance was a 56% decrease in Long Term Contract payments (-23.5 million euros). The accumulated FCF generated in 1H12 of 49.9 million euros is already fully covering the yearly dividend paid in 2012 of 49.5 million euros.

Free Cash Flow (Millions of Euros)

(8.7)

3.4

(7.0)(2.0)

(15.1)

37.930.8

16.3

33.6

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12


Consolidated Balance Sheet

Current Assets 708.9 733.3

Cash and Equivalents 407.4 438.4

Accounts Receivable, Net 237.8 226.3

Inventories, Net 46.7 49.0

Taxes Receivable 5.1 4.5

Prepaid Expenses and Other Current Assets 11.9 15.0

Non-current Assets 1,076.7 1,038.2

Investments in Group Companies 0.5 0.3

Intangible Assets, Net 314.7 279.3

Fixed Assets, Net 647.1 639.5

Deferred Taxes 49.9 50.3

Other Non-current Assets 64.5 68.9

Total Assets 1,785.6 1,771.5

Current Liabilities 789.1 683.2

Short Term Debt 500.0 398.2

Accounts Payable 207.1 200.3

Accrued Expenses 56.5 57.1

Deferred Income 3.8 6.2

Taxes Payable 17.2 21.4

Current Provisions and Other Liabilities 4.6 0.1

Non-current Liabilities 761.5 884.4

Medium and Long Term Debt 729.4 864.6

Non-current Provisions and Other Liabilities 32.1 19.8

Total Liabilities 1,550.6 1,567.6

Equity Before Non-Controlling Interests 225.0 193.6

Share Capital 3.1 3.1

Own Shares (0.6) (0.7)

Reserves, Retained Earnings and Other 188.3 171.2

Net Income 34.2 20.0

Non-Controlling Interests 10.0 10.3

Total Shareholders' Equity 235.0 203.9

Total Liabilities and Shareholders' Equity 1,785.6 1,771.5

Balance Sheet (Millions of Euros) 2011 1H12


Capital Structure

At the end of June 2012, Net Financial Debt stood at 660.4 million euros, an increase of 22.8 million compared with the end of 2011. The increase in Net Debt is explained primarily by the positive FCF generation of 49.9 million euros previously explained, which was more than offset by the dividend payment of 49.5 million euros, which took place in 2Q12, and by the proportional consolidation in 2Q12 of the Net Debt of the International Business in the amount of 23.4 million euros. In 28 May 2012, ZON launched a public offering of fixed-rate bonds for the Portuguese retail market, with an initial amount of up to 100 million euros. The bonds bear interest at a fixed rate of 6.85%, with half-yearly interest payments in arrears, with a 3 year maturity. On 6 June, ZON announced that it had doubled the original size of the aforementioned bond issue from 100 to 200 million euros, due to overwhelming demand. This bond offer therefore met with great success from retail investors, the results being announced on 15 June showing a demand / issued bonds ratio of 158.83%, one of the highest in recent retail bond deals announced in the Portuguese market. The bonds were listed for trading on 19 June 2012. This success is a demonstration of ZON’s leading position and solid reputation in Portugal, and ensures that the company is fully financed until the end of 2014, having increased the average maturity of its Net Financial Debt to 2.26 years. The total interest rate hedging operations in place at the end of 1H12 was 257.5 million euros. Taking into account the aforementioned bonds of 200 million euros that bear interest at a fixed rate of 6.85%, the proportion of ZON’s Net Financial Debt that is protected against variations in interest rates is 69%. Total financial debt at the end of 1H12 amounted to 1,155.6 million euros, which was offset with a cash and short-term investments position on the balance sheet of 495.3 million euros. The all-in average cost of ZON’s Net Financial Debt was 4.56% for 1H12. Net Financial Gearing increased to 76.4% at the end of 1H12 compared with 73.1% at the end of 2011, and Net Financial Debt / EBITDA (last 4 quarters) stands at 2.1x. Total Net Debt of 768.3 million euros also includes commitments with Long Term Contracts recorded as liabilities on the Balance Sheet, of which the most relevant are long-term transponder, telecoms and content contracts.

Short Term 467.4 370.6 (20.7%)

Bank and Other Loans 462.4 364.1 (21.3%)

Financial Leases 5.0 6.5 30.8%

Medium and Long Term 640.4 785.0 22.6%

Bank Loans 628.6 775.6 23.4%

Financial Leases 11.7 9.4 (19.8%)

Total Debt 1,107.8 1,155.6 4.3%

Cash, Short Term Investments and Intercompany Loans 470.3 495.3 5.3%

Net Financial Debt 637.5 660.4 3.6%

Net Financial Gearing (1) 73.1% 76.4% 3.3pp

Net Financial Debt / EBITDA 2.0x 2.1x n.a.(1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).

Net Financial Debt (Millions of Euros) 2011 1H12 / 20111H12


4.8. Risks and Uncertainties for Future Periods

The implementation of ZON’s strategy is subject to the normal risks of a company which is operating

in a very competitive industry and which is exposed to the rapid pace of technological development.

ZON’s success depends on its ability to respond to the competitive market challenges; to continue to

innovate in its offer and in the technological development of its communications network and to

continue to deserve the preference of its subscribers, as the best and most stable Pay TV,

telecommunications and entertainment services operator.

An excessive increase in the market’s commercial aggressiveness may adversely affect ZON’s

ability to achieve its business objectives, particularly with regard to the subsidization and promotion

levels carried out by the market in order to capture new customers and, to the possible reduction of

the pricing level of services sold.

Operating in a sector with a strong technological nature it’s very important that ZON maintains its

innovative ability to launch new products and services and also the technological development of its

telecommunications network, supporting the development of these new offers and, at the same time,

ensuring excellence in customer service quality.

ZON has been investing in the technological development of its HFC network and has currently a

state-of-the-art platform, allowing it to successfully implement its future strategy. Naturally, it will

have to take into consideration competing technologies, which may provide Pay TV services like

IPTV and DTH. The emergence of large scale investment projects in fibre optic networks, may also

present itself as an alternative to offer integrated services: TV, Internet and Voice.

ZON defends the development of a competitive market, however safeguarding profitability levels

necessary to ensure continued investment of the operators in the quality of their telecommunications

network; development of new services and new content functionalities, thus providing subscribers

the best telecommunications and multimedia experiences, whilst guaranteeing an adequate return to

shareholders.

These risks and uncertainties include, among others, the continued and increasing customer use of

the Company’s services; technological changes; impacts of competition; outlook for the

telecommunications sector; changes in regulation and macroeconomic outlook.

Besides offering Pay TV, Broadband and Voice services in Portugal, through its HFC and DTH

network, ZON is also a partner (holds 30%) in a satellite Pay TV operation, “ZAP”, for the Angolan

and Mozambican markets.

Lisbon, 23 August 2012

The Board of Directors


05

Consolidated Financial Statements



Consolidated Statement of Comprehensive Income for the Half Years ended on 30 June 2011 and 2012

(Amounts stated in thousands of euros)

Notes 2º Quarter 11 6M 11 2º Quarter 12 6M 12

( U naud it ) ( a) ( U naud it ) ( a)

REVENUES:

Services rendered 204 818 411 326 204 718 410 054

Sales 5 559 12 072 8 142 15 664

Other operating revenues 1 075 2 167 1 562 2 877

5 211 453 425 565 214 422 428 595

COSTS, LOSSES AND GAINS:

Wages and salaries 14 416 29 127 15 129 29 389

Direct costs 60 855 121 923 59 310 117 725

Costs of products sold ( 101) 2 123 4 098 8 179

Marketing and advertising 4 822 9 748 6 426 11 490

Support services 16 029 34 971 15 171 30 689

Supplies and external services 33 810 67 447 31 717 64 569

Other operational costs 131 376 142 584

Taxes 1 260 2 679 1 136 2 886

Provisions and adjustments 6 1 713 ( 866) 2 460 4 579

Depreciation, amortisation and impairment losses 7 53 261 108 827 51 509 107 455

Reestructuring costs 888 1 039 896 981

Losses/(gains) on sale of assets, net 32 ( 526) ( 156) ( 229)

Other losses/(gains), net ( 3) 93 110 171

187 112 376 962 187 948 378 469

Income before financial results and taxes 24 341 48 604 26 474 50 126

Financial costs 8 6 065 12 122 5 675 11 719

Net foreign exchange losses/(gains), net ( 136) ( 157) ( 19) ( 128)

Net losses/(gains) on financial assets, net - - 1 192 601

Equity in earnings of affiliated companies, net 9 2 318 5 148 80 165

Net other financial expenses/(income) 8 2 213 3 655 3 750 6 663

10 460 20 767 10 679 19 020

Income before taxes 13 881 27 837 15 795 31 106

Income taxes 10 4 635 8 212 5 827 10 451

Net consolidated income 9 246 19 625 9 968 20 654

Attributable to:

Non-controlled interests 3 223 266 615

Zon Multimédia Group shareholders 9 243 19 402 9 702 20 039

Earnings per share

Basic - euros 11 0,03 0,06 0,03 0,06

Diluted - euros 11 0,03 0,06 0,03 0,06

(a) As standard practice, only the half-year and annual accounts are audited; the half-yearly results are not audited separately.

The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the

half year ended on 30 June 2012.

Accountant The Board of Directors



Consolidated Statement of Comprehensive Income for the Half Years ended on 30 June 2011 and 2012


6M 11 6M 12

Net income for the year 19 625 20 654

Fair value of interest rate swap (Note 17) 1 625 ( 1 606)

Fair value of exchange rate forward (Note 17) ( 41) ( 242)

Currency translation differences ( 1) ( 142)

Other movements 47 -

Other comprehensive income 1 630 ( 1 991)

Total comprehensive income for the year 21 255 18 664

Attributable to:

Share owners of the company 21 033 18 049

Non-controlling interests 223 615

21 256 18 664

The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the

half year ended on 30 June 2012.




Consolidated Statement of Financial Position at 31 December 2011 and 30 June 2012


Notes 31-12-2011 30-06-2012

Assets

Current assets:

Cash and cash equivalents 13 407 362 438 419

Accounts receivable - trade 124 757 122 628

Accounts receivable - other 113 060 103 707

Inventories 46 741 49 015

Taxes receivable 5 081 4 506

Non-current assets held-for-sale 876 678

Prepaid expenses 10 530 14 121

Derivative financial instruments 17 532 190

Total current assets 708 939 733 264

Non-current assets:

Accounts receivable - other 21 317 25 399

Investments in participated companies 470 286

Investments held-to-matutrity 20 489 21 959

Available-for-sale financial assets 21 823 20 629

Intangible assets 314 666 279 281

Tangible assets 647 126 639 505

Investment property 886 863

Deferred income tax assets 10 49 895 50 286

Total non-current assets 1 076 672 1 038 207

Total assets 1 785 611 1 771 472

Liabilities

Current liabilities:

Borrowings 14 499 961 398 149

Accounts payable-trade 153 108 157 510

Accounts payable-other 54 005 42 793

Accrued expenses 56 477 57 130

Deferred income 3 775 6 166

Taxes payable 17 156 21 351

Provisions for other liabilities and charges 15 4 234 120

Derivative financial instruments 17 350 -

Total current liabilities 789 066 683 219

Non-current liabilities:

Borrowings 14 729 424 864 606

Accounts payable-other 786 831

Defered income 1 881 1 617

Provisions for other liabilities and charges 15 23 006 9 055

Deferred income tax liabilities 10 4 207 3 522

Derivative financial instruments 17 2 227 4 761

Total non-current liabilities 761 531 884 392

Total liabilities 1 550 597 1 567 611

Shareholder's equity

Share capital 16.1 3 091 3 091

Treasury shares 16.2 ( 554) ( 730)

Legal reserve 16.3 3 556 3 556

Other reserves 16.3 162 919 164 340

Retained earnings 56 018 23 334

Equity before non-controlled interests 225 030 193 591

Non-controlled interests 9 984 10 269

Total equity 235 014 203 860

Total liabilities and shareholder's equity 1 785 611 1 771 472

The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as at 30 June

2012.




Consolidated Statement of Changes in Shareholders' Equity for the Half Years ended on 30 June 2011 and 2012


Notes Share capital

Capital

issued

premium

Treasury

shares

Legal

reserve

Other

reserves

Accumulated

earnings

Non-controlled

interests Total

Balance as at 1 January 2011 3 091 ( 17) ( 0) 3 556 155 146 78 517 9 891 250 183

Dividends attributed to non-controlled interests 12 - - - - - - ( 542) ( 542)

Dividends paid 12 - - - - ( 14 277) ( 35 178) - ( 49 455)

Aquisition of treasury shares 16.3 - ( 677) ( 2) - - - - ( 679)

Distribuition of treasury shares 16.3 - 652 2 - ( 653) - - -

Share Plan 16.3 - - - - 2 282 ( 1 372) - 910

Comprehensive income for the period - - - - 1 630 19 402 223 21 256

Consolidation differences - - - - ( 324) ( 78) ( 9) ( 412)

Balance as at 30 June 2011 3 091 ( 43) - 3 556 143 804 61 291 9 562 221 261

Balance as at 1 January 2012 3 091 ( 552) ( 3) 3 556 162 919 56 018 9 984 235 014

Dividends attributed to minority interests 12 - - - - - - ( 329) ( 329)

Dividends paid 12 - - - - ( 14 730) ( 34 708) - ( 49 438)

Undistributed profit - - - - 18 016 ( 18 016) - -

Aquisition of treasury shares 16.3 - ( 713) ( 3) - - - - ( 716)

Distribuition of treasury shares 16.3 - 538 3 - ( 540) - - -

Share Plan 16.3 - - - - 1 005 - - 1 005

Comprehensive income for the period - - - - ( 1 991) 20 039 615 18 664

Consolidation differences - - - - ( 339) - - ( 339)

Balance as at 30 June 2012 3 091 ( 727) ( 3) 3 556 164 340 23 334 10 269 203 860

The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity

for the half year ended on 30 June 2012.




Consolidated Statement of Cash Flows for the Half Years ended on 30 June 2011 and 2012


Notes 6M 11 6M 12

OPERATING ACTIVITIES

Collections from clients 513 423 530 768

Payments to suppliers ( 331 981) ( 309 213)

Payments to employees ( 30 369) ( 29 302)

Payments relating to income taxes ( 4 531) ( 4 825)

Other cash receipts / payments related with operating activities ( 13 999) ( 48 923)

Cash flow from operating activities (1) 132 544 138 504

INVESTING ACTIVITIES

Cash receipts resulting from

Financial investments 6 667 -

Tangible fixed assets 32 1 269

Loans granted 3 450 2 415

Interest and related income 8 100 9 053

18 250 12 737

Payments resulting from

Financial investments ( 10) ( 6)

Tangible fixed assets ( 100 030) ( 48 642)

Intangible assets ( 989) ( 2 089)

Loans granted ( 15 448) ( 6 313)

( 116 478) ( 57 049)

Cash flow from investing activities (2) ( 98 228) ( 44 312)

FINANCING ACTIVITIES

Cash receipts resulting from

Loans obtained 736 500 1 521 737

736 500 1 521 737

Payments resulting from

Loans obtained ( 541 000) ( 1 479 783)

Lease rentals (principal) ( 42 689) ( 23 230)

Interest and related expenses ( 21 935) ( 36 807)

Dividends ( 49 996) ( 49 767)

Acquisition of treasury shares ( 679) ( 716)

Other ivestment activities - ( 100)

( 656 299) ( 1 590 403)

Cash flow from financing activities (3) 80 201 ( 68 666)

Change in cash and cash equivalents (4)=(1)+(2)+(3) 114 517 25 527

Effect of exchange differences ( 742) 188

Cash and cash equivalents at the beginning of the period 264 646 407 362

Changes in the consolidated scope - 2 491

Cash and cash equivalents at the end of the period 13 378 421 435 569

The Notes to the Financial Statements form an integral part of the consolidated statement of cash flows for the half year

ended on 30 June 2012.





Notes to the Consolidated Financial Statements at 30 June 2012

Index of notes to the consolidated financial statements

1. Introductory Note 41

2. Accounting Policies 42

3. Judgements and estimates 42

4. Changes in the consolidation perimeter 42

5. Segment Reporting 43

6. Provisions and adjustments 45

7. Depreciation, amortisation and impairment losses 46

8. Finance costs and other net financial costs/(income) 46

9. Losses/(gains) in associated companies 47

10. Income tax expense 47

11. Earnings per share 50

12. Dividends 51

13. Cash and cash equivalents 51

14. Borrowings and loans 52

15. Provisions 54

16. Shareholder's equity 56

17. Derivative financial instruments 58

18. Guarantees and financial undertakings 59

19. Related Parties 61

20. Legal actions 65

21. Share incentive scheme 68

22. Subsequent events 69




Notes to the Consolidated Financial Statements at 30 June 2012


1. Introductory Note

ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. (“ZON Multimédia” or “the

Company”) was set up by Portugal Telecom, SGPS, S.A. (“Portugal Telecom”) on 15 July 1999 with the

purpose of developing its strategy for the multimedia business.

During the 2007 financial year, Portugal Telecom proceeded with the spin-off of ZON Multimédia through

the attribution of its shares in this company to its shareholders, which then became fully independent from

Portugal Telecom.

The multimedia business operated by ZON Multimédia and the associated companies comprising its

portfolio of companies (“ZON Group” or “Group”) includes cable and satellite television services, voice and

internet access services, video production and sale, Pay TV channel advertising, cinema exhibition and

distribution, and the production of channels for Pay TV.

ZON Multimédia shares are listed on the Euronext Lisbon market.

The cable and satellite television service is supplied by ZON TV Cabo Portugal, S.A. (“ZON TV Cabo”) and

its subsidiaries ZON TV Cabo Açoreana, S.A. (“ZON TV Cabo Açoreana”), ZON TV Cabo Madeirense, S.A.

(“ZON TV Cabo Madeirense”) and also by Finstar - Sociedade de Investimentos e Participações S.A.

(“Finstar”) and Mstar, S.A. (“Mstar”). The activities of these companies include: a) cable and satellite

television distribution; b) the operation of electronic communications services, including data and

multimedia communication services in general; c) IP voice services (“VOIP” – Voice over IP); d) mobile

virtual network operator (MVNO); and e) the provision of consultancy and similar services directly or

indirectly related to the above mentioned activities and services. The business of ZON TV Cabo, ZON TV

Cabo Açoreana and ZON TV Cabo Madeirense is regulated by Law 5/2004 (Electronic Communications

Law), which establishes the legal regime governing electronic communications networks and services.

ZON Conteúdos – Atividade de Televisão e de Produção de Conteúdos, S.A. (“ZON Conteúdos”), ZON

Lusomundo TV, Lda. (“ZON Lusomundo TV”), Sport TV Portugal, S.A. (“Sport TV”) and Dreamia – Serviços

de Televisão, S.A. (“Dreamia SA”) operate in the television and content production business, and currently

produce movie, series, sport and children’s channels which are distributed by ZON TV Cabo and its

subsidiaries, as well as by other operators. ZON Conteúdos also manages the advertising space on Pay TV

channels and in the cinemas of ZON Lusomundo Cinemas, S.A. (“ZON LM Cinemas”).

ZON Lusomundo Audiovisuais, S.A. (“ZON LM Audiovisuais”) and ZON LM Cinemas and their subsidiaries

operate in the audiovisual sector, which includes video production and sale, cinema distribution and

exhibition, and the acquisition/negotiation of Pay TV and VOD (video-on-demand) rights.



The notes in these Notes to the Consolidated Financial Statements follow the order in which the items are

shown in the consolidated financial statements.

The consolidated financial statements for the financial year ended on 30 June 2012 were approved by the

Board of Directors and their issue authorised on 23 August 2012.

2. Accounting Policies

The consolidated financial statements were prepared on a going concern basis from the books and

accounting records of the companies included in the consolidation (Annex I), using the historical cost

convention, adjusted where applicable by the valuation of financial assets and liabilities (including

derivatives) at fair value.

The accounting policies adopted, including the financial risk management policies, are consistent with those

used in the preparation of the financial statements for the financial year ended on 31 December 2011.

2.1. Principles of presentation

The consolidated financial statements of ZON Multimédia were prepared using accounting policies

consistent with International Financial Reporting Standards (“IAS/IFRS”), as adopted in the European Union

on 1 January 2012, and in accordance with IAS 34 - Interim Financial Reporting.

3. Judgements and estimates

During the half year ended on 30 June 2012, no significant changes occurred in the accounting estimates

compared with those used in the preparation of the financial statements for the year ended on 31 December

2011, nor were any material errors relating to previous financial years recognised.

4. Changes in the consolidation perimeter

In the fourth quarter of 2011, ZON Finance B.V. (“ZON Finance”), 100% owned by the Group, was included

in the consolidation perimeter.

In 2012 two new companies were included in the consolidation perimeter: Finstar, which is 30% owned by

Teliz, and Upstar Comunicações S.A. (“Upstar”), which is 30% owned by ZON Multimédia (see Annex I c)).

The holdings in these two companies were stated in 2011 by the equity method (Note 9).



The impact on the statement of comprehensive income and on the financial position at 30 June 2012 is

shown below:

Statement of Comprehensive Income Finstar Upstar ZON Finance BV Total

Revenue 12 942 ( 1 580) - 11 362

Costs 8 353 2 893 7 11 252

Operating income 4 589 ( 4 473) ( 7) 110

Financial results 1 189 ( 786) ( 4) 399

Other (intercompany) ( 5 779) 5 261 - ( 518)

Income before taxes ( 0) 3 ( 11) ( 8)

Income taxes - ( 3) - ( 3)

Net income ( 0) ( 0) ( 11) ( 11)

Statement of Financial Position Mstar Upstar ZON Finance BV Total

Asset 6 605 ( 7 572) 27 ( 939)

Liability 10 996 13 325 9 24 330

( 4 391) ( 20 897) 18 ( 25 269)

5. Segment Reporting

5.1. Main report format – business segments

The business segments are as follows:

Pay TV, broadband and voice relates mainly to the supply of TV, Internet (fixed and mobile) and

voice (fixed and mobile) services and includes the following companies: ZON Multimédia, ZON

Televisão por Cabo, SGPS, S.A. (“ZON Televisão por Cabo”), ZON TV Cabo, ZON TV Cabo

Açoreana, ZON TV Cabo Madeirense, ZON Conteúdos, ZON Lusomundo TV, Teliz Holding B.V.,

ZON Finance and the joint ventures in Sport TV, Mstar, Upstar and Finstar.

Audiovisuals relates to the supply of video production services and video sales, cinema distribution

and cinema exhibition services and the acquisition/negotiation of Pay TV and VOD (video-on-

demand) rights and includes the following companies: ZON Audiovisuais, SGPS, S.A. (“ZON

Audivisuais SGPS”), ZON Cinemas, SGPS, S.A. (“ZON Cinemas SGPS”), ZON LM Audiovisuais,

ZON LM Cinemas, Lusomundo Moçambique, Lda. (“Lusomundo Moçambique”), Lusomundo

España, SL (“Lusomundo España”), Grafilme – Sociedade Impressora de Legendas, Lda.

(“Grafilme”), Lusomundo Imobiliária 2, S.A. (“Lusomundo Imobiliária 2“), Lusomundo Sociedade de

Investimentos Imobiliários, SGPS, S.A. (“Lusomundo SII”), Empracine – Empresa Promotora de

Actividades Cinematográficas, Lda. (“Empracine”) and the joint venture in Dreamia B.V. and

Dreamia S.A.



The results by segment for the half years ended on 30 June 2011 and 2012 are shown below:

2º Quarter 11 6M 11 2º Quarter 11 6M 11 2º Quarter 11 6M 11

Total segment revenue 192 520 389 001 29 230 57 737 221 750 446 737

Inter-segment revenue ( 4 321) ( 8 871) ( 5 975) ( 12 301) ( 10 297) ( 21 172)

Sales and services rendered 188 198 380 129 23 255 45 436 211 453 425 565

Operational income by segment 22 405 42 481 1 936 6 122 24 341 48 604

Net interest expense and other 7 661 14 735 482 884 8 143 15 619

Loss / (Gains) in financial assets - - - - - -

Share of loss/(profit) from associates 2 302 5 109 16 39 2 318 5 148

Income before taxes 12 442 22 637 1 438 5 200 13 881 27 837

Income tax expense 4 141 6 795 494 1 417 4 635 8 212

Net income 8 301 15 842 945 3 783 9 246 19 625

Other costs:

Depreciation, amortisation and impairment 51 898 105 980 1 363 2 847 53 261 108 827

Provisions and adjustments 1 736 ( 946) ( 23) 80 1 713 ( 866)

Costs / (revenues) non-recurrent 244 ( 68) 673 675 917 607

GroupPay TV, broadband and voice Audiovisuals

2º Quarter 12 6M 12 2º Quarter 12 6M 12 2º Quarter 12 6M 12

Total segment revenue 197 924 396 126 27 021 54 041 224 945 450 167

Inter-segment revenue ( 4 721) ( 9 632) ( 5 804) ( 11 941) ( 10 524) ( 21 572)

Sales and services rendered 193 203 386 494 21 217 42 101 214 422 428 595

Operational income by segment 24 318 45 647 2 157 4 478 26 475 50 126

Net interest expense and other 9 380 17 724 27 531 9 407 18 254

Loss / (Gains) in financial assets 1 182 1 182 10 ( 582) 1 192 601

Share of loss/(profit) from associates - - 80 165 80 165

Income before taxes 13 755 26 741 2 040 4 365 15 795 31 106

Income tax expense 5 419 9 309 408 1 143 5 827 10 451

Net income 8 336 17 432 1 632 3 222 9 968 20 654

Other costs:

Depreciation, amortisation and impairment 50 236 104 858 1 272 2 598 51 508 107 455

Provisions and adjustments 2 220 4 126 240 453 2 460 4 579

Costs / (revenues) non-recurrent 801 868 49 55 850 923

GroupPay TV, broadband and voice Audiovisuals

Inter-segment transactions are effected on market terms and conditions in a comparable way to

transactions effected with third parties.

Assets and liabilities by segment, and investments in tangible fixed assets at 31 December 2011, are

shown below:

Pay TV, broadband

and voice Audiovisuals Eliminations Not allocated Group

Assets 1 671 101 148 062 ( 128 057) 94 035 1 785 141

Investment in associated companies 132 338 - - 470

Total assets 1 671 233 148 400 ( 128 057) 94 035 1 785 611

Liabilities 326 930 117 210 ( 128 057) 1 234 514 1 550 597

Investment in tangible assets 142 922 3 173 - - 146 095

Investment in intangible assets 54 103 3 - - 54 106

Assets and liabilities not allocated to segments are reconciled with total assets and liabilities as follows:

Assets Liabilities

Not allocated:

Deferred tax (Note 10) 49 895 4 207

Income tax expense 66 922

Borrowings - current (Note 14) - 499 961

Borrowings - non current (Note 14) - 729 424

Available-for-sale financial assets 21 823 -

Non-current assets held-for-sale 876 -

Investments held-to-maturity 20 489 -

Investment property 886 -

94 035 1 234 514



Assets and liabilities by segment, and investments in tangible fixed assets at 30 June 2012, are shown

below:

Pay TV, broadband

and voice Audiovisuals Eliminations Not allocated Group

Assets 1 666 884 152 331 ( 142 878) 94 848 1 771 186

Investment in associated companies 105 181 - - 286

Total assets 1 666 989 152 512 ( 142 878) 94 848 1 771 472

Liabilities 309 699 127 205 ( 142 878) 1 273 585 1 567 611

Investment in tangible assets 54 527 1 437 - - 55 964

Investment in intangible assets 716 - - - 717

Assets and liabilities not allocated to segments are reconciled with total assets and liabilities as follows:

Assets Liabilities

Not allocated:

Deferred tax (Note 10) 50 286 3 522

Income tax expense 433 7 308

Borrowings - current (Note 14) - 398 149

Borrowings - non current (Note 14) - 864 606

Available-for-sale financial assets 20 629 -

Non-current assets held-for-sale 678 -

Investments held-to-maturity 21 959 -

Investment property 863 -

94 848 1 273 585

6. Provisions and adjustments

In the half years ended on 30 June 2011 and 2012, provisions and adjustments were composed as follows:

2º Quarter 11 6M 11 2º Quarter 12 6M 12

Provisions (Note 15) ( 456) ( 5 975) - -

Provision for impairment of trade receivable 2 175 5 117 2 462 4 583

Provision for impairment of other receivable - - - -

Debts recovery ( 7) ( 7) ( 1) ( 4)

1 713 ( 866) 2 460 4 579



7. Depreciation, amortisation and impairment losses

In the half years ended on 30 June 2011 and 2012, depreciation, amortisation and impairment losses were

composed as follows:


Intangible assets:

Industrial property and other rights 17 322 36 004 18 642 37 865

Other intangible assets 572 1 173 496 994

17 894 37 177 19 138 38 860

Tangible assets:

Buildings and other constructions 930 1 887 817 1 714

Basic equipment 28 657 58 536 24 014 53 131

Transportation equipment 487 958 436 896

Tools and dies 2 4 1 2

Administrative equipment 4 714 8 994 3 324 7 729

Other tangible assets 529 1 100 609 1 286

35 318 71 480 29 201 64 758

Depreciation and amortisation 53 212 108 657 48 339 103 617

Impairment losses 49 170 3 170 3 838

53 261 108 827 51 509 107 455

The variation in depreciation, amortisation and impairment losses is attributable to the impact of

approximately 4.8 million euros resulting from the review of the useful lives of tangible assets undertaken in

2012.

8. Finance costs and other net financial costs/(income)

In the half years ended on 30 June 2011 and 2012, finance costs and other financial costs/ (income) were



Interest expense:

Borrowings 9 770 17 445 9 686 20 179

Finance leases 1 161 2 695 834 1 906

Other 100 200 69 138

11 032 20 340 10 590 22 224

Interest earned ( 4 967) ( 8 218) ( 4 914) ( 10 504)

6 065 12 122 5 675 11 719

Other financial costs:

Comissions and guarantees 2 836 4 905 2 797 6 054

Prompt payment discount 1 3 1 2

Other 226 384 1 594 2 106

3 063 5 292 4 391 8 162

Other financial income:

Prompt payment discount ( 849) ( 1 638) ( 641) ( 1 499)

2 213 3 655 3 750 6 663



9. Losses/(gains) in associated companies

In the half years ended on 30 June 2011 and 2012 this item was composed as follows:


Equity accounting:

Distodo 16 39 72 158

Canal 20 TV 1 1 - -

Upstar (note 4) 8 ( 5) - -

Finstar (note 4) 2 293 5 112 - -

Big Picture 2 Films - - 8 7

2 318 5 148 80 165

10. Income tax expense

ZON Multimédia and its associated companies are subject to IRC - Corporate Income Tax - at the rate of

25% (17.5% in the case of ZON TV Cabo Açoreana), plus IRC surcharge at the maximum rate of 1.5% on

taxable profit, giving an aggregate rate of approximately 26.5%. Following the introduction of the austerity

measures approved by Law 12-A/2010 of 30 September and subsequently in the 2012 State Budget,

approved by Law 64-B/2011 of 30 December, this rate was raised to 3% on the amount of a company’s

taxable profit between 1.5 million euros and 10 million euros, and to 5% on the amount of a company’s

taxable profit exceeding 10 million euros. In the calculation of taxable income, to which the above tax rates

apply, amounts which are not fiscally allowable are added to and subtracted from the book results. These

differences between accounting income and taxable income may be of a temporary or permanent nature.

ZON Multimédia is taxed in accordance with the special taxation regime for groups of companies (RETGS),

which covers the companies in which it directly or indirectly holds at least 90% of their share capital and

which fulfil the requirements of Article 69 of the IRC Code.

The companies covered by the RETGS in 2012 are:

ZON Multimédia

ZON Lusomundo TV

Empracine

Lusomundo SII

ZON Cinemas SGPS

ZON Audiovisuais SGPS

ZON TV Cabo

ZON Televisão por Cabo

Lusomundo Imobiliária 2

ZON LM Audiovisuais



ZON LM Cinemas

ZON Conteúdos

Upstar

Under current legislation, tax declarations are subject to review and correction by the tax authorities for a

period of four years (five years in the case of Social Security), except where tax losses have occurred

(where the period is five or six years) or tax benefits have been obtained or inspections, appeals or disputes

are in progress, in which case, depending on the circumstances, the periods are extended or suspended.

The Board of Directors of ZON Multimédia, based on information from its tax advisers, believes that these

and any other revisions and corrections to these tax declarations, as well as other contingencies of a fiscal

nature, will not have a significant effect on the consolidated financial statements as at 30 June 2012, except

for situations which were the subject of provisions (Note 15).

a) Deferred tax

ZON Multimédia and its associated companies have reported deferred tax relating to temporary differences

between the taxable basis and the book amounts of assets and liabilities, and tax losses carried forward at

the date of the statement of financial position.

The movements in deferred tax assets and liabilities for the half years ended on 30 June 2011 and 2012

were as follows:

Equity

31-12-2010

Deferred taxes of

the period

Deferred taxes of

the period Other movements 30-06-2011

Deferred income tax assets:

Provisions and impairments:

Doubtful accounts receivable 7 696 ( 225) - ( 392) 7 080

Inventories 1 443 ( 45) - - 1 398

Other 19 890 1 461 - 97 21 448

Intragroup gains 20 529 ( 1 162) - - 19 367

Derivatives 660 - ( 560) - 100

Tax losses carried forward 818 - - - 818

51 037 28 ( 560) ( 295) 50 211

Deferred income tax liabilities:

Reavaluation of fixed assets 5 259 (607) - - 4.652

Derivatives - - 15 - 15

Other provision and adjustments - 1 998 - - 1 998

5 259 1 391 15 - 6 665

Net deferred tax 45 778 ( 1 363) ( 575) ( 295) 43 546

Income (note b))



Equity

31-12-2011

Deferred taxes of

the period

Deferred taxes of

the period 30-06-2012

Deferred income tax assets:

Provisions and impairments:

Doubtful accounts receivable 7 096 ( 127) - 6 969

Inventories 1 508 22 - 1 530

Other provisions and adjustments 21 584 1 080 - 22 664

Intragroup gains 18 205 ( 1 162) - 17 043

Derivatives 683 - 578 1 262

Tax losses carried forward 818 - - 818

49 895 ( 188) 578 50 286

Deferred income tax liabilities:

Reavaluation of fixed assets 4 052 ( 585) - 3 467

Derivatives 154 - ( 99) 55

4 207 ( 585) ( 99) 3 522

Net deferred tax 45 689 397 677 46 764

Income (note b))

At 30 June 2012, the deferred tax liability relating to the revaluation of tangible fixed assets results from the

difference in the acquisition at fair value of the assets (customer portfolio and network) of TVTel and the

companies of the Parfitel Group (Bragatel, Pluricanal Leiria and Pluricanal Santarém).

Deferred tax assets were recognised where it is probable that taxable profits will occur in future that may be

used to absorb tax losses or deductible tax differences. This assessment was based on the business plans

of the Group’s companies, which are regularly revised and updated.

Under the terms of current legislation in Portugal, tax losses generated up to 2009, or in 2010 and 2011,

and from 2012 onwards may be carried forward for a period of six years, four years and five years,

respectively, after their occurrence and may be deducted from taxable profits generated during that period.

At 30 June 2012 and 30 June 2011, ZON Multimédia’s tax losses carried forward, totalling 3.273 million

euros, expire in 2014. This amount derives from the companies acquired in 2008 or the subject of mergers

in 2009.

The Company reported deferred income tax assets and requested permission from the Tax Authorities to

use them in the tax consolidation.



b) Tax rate reconciliation

In the half years ended on 30 June 2011 and 2012, the reconciliation between the nominal and effective tax

rates was as follows:

6M 11 6M 12

Income before taxes 27 837 31 106

Statutory tax rate 26,5% 26,50%

Estimated tax 7 377 8 243

Permanent differences i) 400 131

Differences in tax rate of Açores and Madeira ( 368) ( 78)

Underestimated/ (Overestimated) corporate tax 274 107

Fiscal benefits ( 1 292) ( 947)

Changes in the deferred income tax rate 371 946

Autonomous taxation 388 438

Effective Income tax rate adjusment (IAS 34) 765 1 689

Others 296 ( 80)

Income tax 8 212 10 451

Effective Income tax rate for the period 29,50% 33,60%

Income tax 6 849 10 849

Deferred tax 1 363 ( 397)

8 212 10 451

i) At 30 June 2011 and 2012 the permanent differences were composed as follows:

6M 11 6M 12

Provisions ( 5 352) -

Depreciations and amortizations 927 962

Equity method (Note 9) 5 148 165

Other 785 ( 633)

1 508 494

26,50% 26,50%

400 131

11. Earnings per share

Earnings per share in the half years ended on 30 June 2011 and 2012 were calculated as follows:


Net income attributable to equity holders of the parent 9 243 19 402 9 702 20 039

Weighted average number of ordinary shares in issue 309 085 004 309 084 760 308 906 528 308 914 794

Basic earnings per share - euros 0,03 0,06 0,03 0,06

Diluted earnings per share - euros 0,03 0,06 0,03 0,06

At 30 June 2011 and 2012, as there were no diluting effects on the net earnings per share, the diluted

earnings per share is equal to the basic earnings per share.



12. Dividends

The General Meeting of Shareholders held on 27 April 2012 approved a proposal by the Board of Directors

for payment of an ordinary dividend per share of 0.16 euros, totalling 49.455 million euros, relating to the

net profit for the year ended on 31 December 2011 of 34.726 million euros plus free reserves totalling

14.730 million euros. The dividend attributable to own shares, totalling 17 000 Euros, was transferred to

retained earnings.

Dividends paid ( 49 455)

Dividends paid to treasury shares 17

( 49 438)

Dividends totalling 329 000 euros were also paid in the first half of 2012 to the minority shareholders of TV

Cabo Madeirense.

The General Meeting of Shareholders held on 15 April 2011 approved a proposal by the Board of Directors

for payment of an ordinary dividend per share of 0.16 euros, totalling 49.455 million euros, relating to the

net profit for the year ended on 31 December 2010 of 35.178 million euros plus free reserves totalling

14.277 million euros.

Dividends totalling 542 000 euros were also paid in the first half of 2011 to the minority shareholders of

ZON TV Cabo Madeirense, ZON TV Cabo Açoreana and Grafilme.

13. Cash and cash equivalents

At 31 December 2011 and 30 June 2012, this item was composed as follows:

31-12-2011 30-06-2012

Cash 1 691 2 113

Deposits 77 301 27 127

Term deposits i) 328 370 409 179

407 362 438 419

i) At 30 June 2012, term deposits have short-term maturities, with approximately 307 million euros

maturing in the second quarter of 2012 and the balance in the first quarter of 2013. The term deposits

bear interest at normal market rates.

The difference between the amounts of Cash and Cash Equivalents stated in the Consolidated Statement

of Financial Position and the Statement of Cash Flows is 2.850 million euros relating to bank overdrafts

(see Note 14).



14. Borrowings and loans

At 31 December 2011 and 30 June 2012, the composition of borrowings was as follows:

Current Non Current Current Non Current

Loans:

Internal loans 41 305 18 453 58 423 -

Bank overdrafts - - 2 850 -

Foreign loans - 97 694 7 356 98 003

Commercial paper 350 760 354 821 226 743 324 279

Debenture loan 70 341 156 891 68 727 352 492

Financial Leases:

Long Term Contracts 32 568 89 818 27 526 80 417

Other 4 987 11 747 6 524 9 415

499 961 729 424 398 149 864 606

30-06-201231-12-2011

14.1. Internal loans

These include the Group’s share of the loan obtained by Sport TV in the amount of 48.500 million euros,

with quarterly repayments and maturing in 2013, and Upstar’s secured current account totalling 6.000

million euros.

These loans also include the amount of 3.568 million euros relating to the request by Sport TV, as a

supplier of the Group, for advance payment of invoices under the suppliers’ confirmed payments contract

with ZON Multimédia.

The net amount of 355 000 euros, corresponding to interest and commissions, was added to this amount.

14.2. Foreign loans

In September 2009 ZON Multimédia and ZON TV Cabo signed a Next Generation Network Project Finance

Contract with the European Investment Bank totalling 100 million euros. This contract matures in

September 2015 and is intended for investments relating to the implementation of the next generation

network. An amount of 1.958 million euros was deducted from this finance, corresponding to the benefit

associated with the fact that the loan is at a subsidised rate, constituting an investment subsidy, and is

therefore stated as deferred income.

FINSTAR obtained finance totalling 7.387 million euros from Banco Caixa Totta and Banco BIC.

MSTAR obtained finance totalling 105 000 euros from Banco Internacional de Moçambique.

An amount of 174 000 euros, corresponding to interest and commissions, was deducted from this amount.

14.3. Commercial Paper

The Company has borrowings of 555 million euros in the form of commercial paper contracted with seven

banks, corresponding to seven programmes bearing interest at market rates. Four grouped programmes of

commercial paper with maturities over 1 year totalling 325 million euros are classed as non-current since

the Company has the ability to unilaterally renew the current issues on or before the programmes’ maturity



dates and because they are underwritten by the organiser. The amount concerned, although having current

maturity, is therefore classified as non-current for the purposes of presentation in the statement of financial

position. The remaining programmes are classified as current.

An amount of 3.978 million euros, corresponding to interest and commissions, was deducted from this

amount.

14.4. Debenture loans

The Company has bonds issued via three banks totalling 227.5 million euros with an average maturity of 2

years, half-yearly payment of interest and repayment at par at the end of the contracts.

In June 2012, ZON Multimédia launched a Public Offer for Subscription of Bonds for the general public,

called "ZON Multimédia Bonds 2012-2015”, under which it issued 200 million euros with a maturity of three

years and half yearly payment at a fixed rate.

An amount of 6.281 million euros, corresponding to interest and commissions, was deducted from this

amount.

14.5. Finance Leases

At 31 December 2011 and 30 June 2012, the item “Long Term Contracts” relates to contracts entered into

by ZON TV Cabo and Upstar for the exclusive acquisition of satellite capacity and the acquisition of

distribution network capacity utilisation rights, and the acquisition of broadcasting rights for the current

season’s professional football matches of the Liga ZON Sagres and Liga Orangina by Sport TV, and the

purchase of digital equipment for the cinemas of ZON LM Cinemas.

Finance Leases

31-12-2011 30-06-2012

Financial leases - payments:

Until 1 year 43 925 39 704

Between 1 and 5 years 103 562 91 180

Over 5 years 8 860 8 667

156 347 139 551

Future financial costs ( 17 229) ( 15 669)

Present value of finance lease liabilities 139 119 123 882

31-12-2011 30-06-2012

The present value of the finance lease liabilities:

Until 1 year 37 555 34 050

Between 1 and 5 years 93 972 82 400

Over 5 years 7 591 7 432

139 119 123 882



Maturity of loans

The maturities of the loans obtained are as follows:

Until 1 year

Between 1 and 5

years Over 5 years Until 1 year

Between 1 and 5

years Over 5 years

Internal loans 41 305 18 453 - 58 423 - -

Foreign loans - 97 694 - 7 356 98 003 -

Commercial paper 350 760 354 821 - 226 743 324 279 -

Debenture loan 70 341 156 891 - 68 727 352 492 -

Financial Leases 37 555 93 972 7 591 34 050 82 400 7 432

499 961 721 832 7 591 398 149 857 174 7 432

30-06-201231-12-2011

Management regularly monitors the forecasts of the Group’s liquidity reserves, including the amounts of

unused credit lines and the amounts of cash and cash equivalents, on the basis of estimated cash flows

and compliance with any covenants normally associated with borrowings.

Of the loans obtained (excluding finance leases), in addition to being subject to the Group complying with its

operating, legal and fiscal obligations, 91.57% are subject to cross-default clauses, 54.74% to pari passu

clauses, 49.85% to ownership clauses, and 62.92% to negative pledge clauses.

In addition, approximately 42.77% of the total loans obtained require that the consolidated net financial debt

does not exceed 4 times consolidated EBITDA, respectively, and approximately 8.43% of the total loans

obtained require that net interest does not exceed 20% of consolidated EBITDA.

15. Provisions

At 31 December 2011 and 30 June 2012, the breakdown of provisions between current and non-current

was as follows:

31-12-2011 30-06-2012

Current provision

Taxes 563 -

Litigation 2 258 120

Other 1 413 -

4 234 120

Non-current provision

Taxes - 563

Litigation - 2 138

Other 23 006 6 354

23 006 9 055

27 240 9 175



During the half years ended on 30 June 2011 and 30 June 2012, the movements in provisions were as

follows:

31-12-2010 Increases Decreases Other 30-06-2011

Taxes 563 - - - 563

Legal actions 2 258 - - - 2 258

Other risks 20 176 5 190 ( 5 975) ( 95) 19 295

22 997 5 190 ( 5 975) ( 95) 22 116

31-12-2011 Increases Decreases Other 30-06-2012

Taxes 563 - - - 563

Legal actions 2 258 - - - 2 258

Other risks 24 419 190 ( 10) ( 18 245) 6 354

27 240 190 ( 10) ( 18 245) 9 175

The net movements for the half years ended on 30 June 2011 and 30 June 2012 reflected in the statement

of comprehensive income under “Provisions” are composed as follows:

6M 11 6M 12

Other liabilities and charges ( 5 975) -

Provisions (Note 6) ( 5 975) -

Interest paid 78 82

Investments in participated companies (Note 9) 5 112 7

Other - 91

5 190 180

Provision for other liabilities and charges ( 785) 180

The balance in the item “Other risks and contingencies” at 31 December 2011 and 30 June 2012 is


31-12-2011 30-06-2012

Investments in participated companies i) 18 249 11

Asset retirement obligation 4 758 4 839

Contigencies - other ii) 1 412 1 504

24 419 6 354

i) The variation in the item “Financial investments” is attributable to the fact that in 2011 the

shareholding in Finstar was stated by the equity method and in 2012 it was included in the

consolidation perimeter of the Group (see Note 4).

ii) The amount shown under “Miscellaneous contingencies” relates to provisions for risks and

contingencies relating to miscellaneous events/disputes, mainly of a fiscal nature with the exception

of income taxes, the settlement of which could result in outflows of cash.



16. Shareholder's equity

16.1. Share capital

At 30 June 2012, the share capital of ZON Multimédia was 3 090 968 euros, represented by 309 096 828

registered book-entry shares with a nominal value of 1 Euro cent per share.

The principal shareholders at 31 December 2011 and 30 June 2012 are:

NO.Of Shares

% Voting

Rights NO.Of Shares

% Voting

Rights

Caixa Geral de Depósitos, SA 33 621 426 10,88% 33 884 405 10,96%

Kento Holding Limited i) 30 909 683 10,00% 30 909 683 10,00%

Jadeium, B.V.i) - - 24 222 563 7,84%

Banco BPI, SA 23 344 798 7,55% 23 344 798 7,55%

Telefónica, SA 16 879 406 5,46% - -

Espírito Santo Irmãos, SGPS, SA ii) 15 455 000 5,00% 15 455 000 5,00%

Joaquim Alves Ferreira de Oliveira iii) 14 955 684 4,84% 14 955 684 4,84%

Fundação José Berardo iv) 13 408 982 4,34% 13 408 982 4,34%

Ongoing Strategy Investments, SGPS, SA v) 10 162 250 3,29% 10 162 250 3,29%

Estêvão Neves - SGPS, SA vi) 9 075 782 2,94% 9 075 782 2,94%

Cinveste, SGPS, SA 8 707 136 2,82% - -

Grupo Visabeira, SGPS, SA vii) 6 641 930 2,15% 6 641 930 2,15%

Norges Bank 6 379 164 2,06% 6 379 164 2,06%

Banco Espírito Santo, SA 11 861 240 3,84% 15 054 254 4,87%

SGC, SGPS, SA viii) 6 182 000 2,00% 6 182 000 2,00%

ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA 6 088 616 1,97% 6 088 616 1,97%

BES Vida - Companhia de Seguros, S. A. 5 721 695 1,85% 5 721 695 1,85%

Metalgest - Sociedade de Gestão, SGPS, SA iv) 3 985 488 1,29% 3 985 488 1,29%

ZON Multimédia (Own Shares) 265 612 0,09% 322 683 0,10%

Total 223 645 892 72,35% 225 794 977 73,05%

31.12.2011 30.06.2012

Shareholder

i) Under the terms of Article 20, paragraph 1 b) and Article 21 of the Securities Code, the above

qualifying shareholding is attributable to Isabel José dos Santos, in her capacity as a shareholder of

Kento Holding Limited and controlling shareholder of Jadeium B.V.

ii) The voting rights corresponding to Espírito Santo Irmãos, SGPS, SA are attributable to Espírito Santo

Industrial, SA, Espírito Santo Resources Limited, and Espírito Santo Internacional, SA, companies

that control Espírito Santo Irmãos in that order.

iii) The voting rights corresponding to 4.84% of the share capital are attributed to Joaquim Francisco

Alves Ferreira de Oliveira, as he controls GRIPCOM, SGPS, S.A., and Controlinveste International

SARL, which own, respectively, 2.26% and 2.58% of the share capital of ZON Multimédia.

iv) The position of the Fundação José Berardo is reciprocally attributed to Metalgest - Sociedade de

Gestão, SGPS, S.A.

v) The voting rights of Ongoing Strategy Investments, SGPS, S.A. are attributable to RS Holding,

SGPS, S.A. as its majority shareholder and to Isabel Maria Alves Rocha dos Santos as the majority

shareholder of RS Holding, SGPS, S.A.

vi) The qualifying shareholding of Estêvão Neves – SGPS, SA is attributable to its majority shareholder,

José Estêvão Fernandes Neves.

vii) Visabeira Investimentos Financeiros, SGPS, S.A. holds 0.99% of the share capital and voting rights

in ZON Multimédia, with 1.16% being directly held by Grupo Visabeira, SGPS, SA. Visabeira



Investimentos Financeiros, SGPS, S.A. is 100% owned by Visabeira Estudos e Investimentos, SA,

which is 100% owned by Visabeira Serviços, SGPS, SA, which in turn is owned by Grupo Visabeira,

SGPS, SA. 74.0104% of the latter is held by Fernando Campos Nunes.

viii) The shareholding of SGC, SGPS, S.A. is attributed to its majority shareholder, Dr. João Pereira

Coutinho.

16.2. Own shares

Company law regarding own shares requires the establishment of a non-distributable reserve in an amount

equal to the purchase price of such shares, which is frozen while the shares continue to be owned by the

company. In addition, the applicable accounting rules determine that gains or losses on the disposal of own

shares are stated in reserves.

At 30 June 2012 there were 322 683 own shares, representing 0.1044% of the share capital (30 June 2011:

11 502 own shares, representing 0.00372% of the share capital).

The transactions which occurred during the half years ended 30 June 2011 and 2012 were as follows:

Quantity Value

Balance as at 1 January 2011 5 486 17

Acquisition of treasury shares 206 321 679

Distribution of treasury shares ( 200 305) ( 653)

Balance as at 30 June 2011 11 502 43

Balance as at 1 January 2012 265 612 554

Acquisition of treasury shares 310 517 716

Distribution of treasury shares ( 253 446) ( 540)

Balance as at 30 June 2012 322 683 730

16.3. Reserves

Legal reserve

Company law and ZON Multimédia’s Articles of Association establish that at least 5% of the Company’s

annual net profit must be used to build up the legal reserve until it corresponds to 20% of the share capital.

This reserve cannot be distributed except in the event of liquidation of the Company, but it may be used to

absorb losses after all other reserves have been exhausted, or for incorporation in the share capital.

Other reserves

Movements in the half years ended on 30 June 2011 and 2012 and the composition of “Other reserves” are

as follows:



Free reserves Other reserves Total

Balance as at 1 January 2011 144 408 10 738 155 146

Distribuition of treasury shares 653 ( 1 307) ( 653)

Aquisition of treasury shares ( 679) 679 -

Dividends (Note 12) ( 14 277) - ( 14 277)

Share plan 1 372 910 2 282

Interest rate derivatives - 1 625 1 625

Exchange rate derivatives - ( 41) ( 41)

Other - ( 278) ( 278)

Balance as at 30 June 2011 131 477 12 327 143 803

Balance as at 1 January 2012 134 621 28 298 162 919

Distribuition of treasury shares 540 ( 1 080) ( 540)

Aquisition of treasury shares ( 716) 716 -

Dividends (Note 12) ( 14 730) - ( 14 730)

Undistributed profit - 18 016 18 016

Share plan - 1 005 1 005

Interest rate derivatives - ( 1 606) ( 1 606)

Exchange rate derivatives - ( 242) ( 242)

Other - ( 482) ( 482)

Balance as at 30 June 2012 119 716 44 624 164 340

17. Derivative financial instruments

17.1. Exchange rate derivatives

Exchange rate risk is mainly related to exposure resulting from payments made to certain producers of

audiovisual content and suppliers of equipment for the Pay TV, broadband and voice business. Business

transactions between the ZON Group and these organisations are mainly denominated in US dollars.

Depending on the balance of accounts payable resulting from transactions denominated in a currency other

than the Group’s operating currency, the ZON Group may contract financial instruments, namely short-term

foreign currency forwards, in order to hedge the risk associated with these balances. At the date of the

statement of financial position there were foreign currency forwards open for 5.317 million dollars (31

December 2011: 10.724 million dollars), the fair value of which is approximately 190 000 euros (31

December 2011: 532 000 euros) which is stated in assets with a contra entry in shareholders’ equity.

17.2. Interest rate derivatives

At 30 June 2012, ZON had contracted three interest rate swaps totalling 257.500 million euros (31

December 2011: 407.500 million euros), with maturities at two years from the reference date. The fair value

of the interest rate swaps, totalling -4.761 million euros (31 December 2011: -2.577 million euros) is stated

in liabilities, with a contra entry for this amount stated in shareholders’ equity.

Notional Current Non Current Current Non Current

Derivative Financial instruments

Interest rate swaps 434 250 - - 350 2 227

Exchange rate forward 8 288 532 - - -

442 538 532 - 350 2 227

31-12-2011

Asset Liability



Notional Current Non Current Current Non Current

Derivative Financial instruments

Interest rate swaps 257 500 - - - 4 761

Exchange rate forward 4 223 190 - - -

261 723 190 - - 4 761

LiabilityAsset

30-06-2012

Movements during the first half of 2012 were as follows:

31-12-2011 Result Equity 30-06-2012

Fair value interest rate swaps ( 2 577) - ( 2 184) ( 4 761)

Fair value exchange rate forward 532 - ( 341) 190

Cashflow hedge derivatives ( 2 045) - ( 2 526) ( 4 571)

Deferred income tax liabilities (Note 10a)) ( 154) - 99 ( 55)

Deferred income tax assets (Note 10a)) 683 - 578 1 262

529 - 677 ( 55)

( 1 516) - ( 1 848) ( 4 626)

18. Guarantees and financial undertakings

18.1. Guarantees

At 31 December 2011 and 30 June 2012, the Group had furnished sureties, guarantees and comfort letters

in favour of third parties corresponding to the following situations:

31-12-2011 30-06-2012

Bank guarantees given to other entities:

Financial instituitions i) 100 492 100 300

Tax authorities ii) 23 076 25 795

Suppliers iii) 13 362 13 007

Other iv) 11 897 11 271

148 827 150 373

Promissories v) 20 000 20 000

Confort letters vi) 8 811 9 055

i) At 30 June 2012, this amount relates mainly to guarantees furnished by ZON Multimédia in

connection with the loan from the EIB (Note 14).

ii) At 30 June 2012, this amount relates to guarantees sought by the Tax Authorities in connection with

tax proceedings contested by the Company and its associated companies (Note 20).

iii) At 30 June 2012, this amount mainly includes 3.891 million euros relating to bank guarantees

provided to cinema lessors and 5.128 million euros relating to a bank guarantee provided to Multi38

under the terms of a promissory lease for the new building.

iv) At 30 June 2012, this amount mainly relates to guarantees provided in connection with Municipal

Wayleave Tax proceedings (Note 20).

v) At 30 June 2012, in connection with the finance obtained by Upstar from BES, totalling 20 million

euros, ZON Multimédia signed a promissory note for the total amount of the loan.



vi) In connection with the finance obtained by Finstar from Banco Caixa Totta and Banco BIC, totalling

38 million USD, ZON Multimédia signed two comfort letters accepting liability for up to 30% of the

total amount of the loan.

The following guarantees were furnished in connection with the finance obtained by Sport TV totalling 97

million euros: a security financial collateral arrangement in respect of the shares and new shares held by

ZON Multimédia and Sportinveste, SGPS, S.A., a mortgage on the Sport TV building, a lien on rights arising

from Sport TV contracts, 5 promissory notes and assignment of credits in guarantee.

18.2. Operating leases

The rentals due on operating leases have the following maturities:

Less than 1

year

Between 1 and

5 years

More than 5

years

Less than 1

year

Between 1 and

5 years

More than 5

years

Stores, movie theatre and other buildings 25 361 72 065 53 313 24 546 78 280 74 137

Equipment 77 179 - 100 131 -

Vehicles 123 145 - 87 38 -

25 561 72 389 53 313 24 734 78 449 74 137

30-06-201230-06-2011

18.3. Other undertakings

In July 2010, ZON TV Cabo Portugal signed a contract with the Portuguese Professional Football League

as co-sponsor with the brewing company Sociedade Central de Cervejas, covering four football seasons

(2010/2011 to 2013/2014) of the first and second division competitions, to be known henceforth as the

“LIGA ZON SAGRES” [ZON SAGRES LEAGUE] (formerly the “LIGA SAGRES”) and the “LIGA

ORANGINA” [ORANGINA LEAGUE] (formerly the “LIGA VITALIS”).

At 30 June 2012, Sport TV had secured television broadcasting rights for various sporting events in future

seasons. These rights include matches of the Portuguese Football League, the major European Football

Leagues, the UEFA Champions League and Europa League, and the Formula 1 World Championship.

On 21 November 2008, the Competition Authority approved the acquisition by ZON TV Cabo of exclusive

control of TVTel, Bragatel, Pluricanal Leiria and Pluricanal Santarém, subject to a series of undertakings, of

which the following are the most significant:

An undertaking to vacate the areas in secondary and tertiary network infrastructures by removing or

selling integrated cables in network cells that are not included in the previous undertaking, or that

have not been disposed of under the terms of the previous undertaking;

An undertaking to provide a wholesale national coverage satellite television offer by means of which

any third party can offer Pay TV services nationwide via satellite platforms without the need for

network infrastructures.

The EIB loan totalling 100 million euros with a maturity of 5 years is intended exclusively to finance the next

generation network investment project. This amount may not in any circumstances exceed 50% of the total

cost of the project.



19. Related Parties

19.1. Summary list of Related Parties

Detailed summary of Related Parties as at 30 June 2012:

Related Parties

Caixa Geral de Depósitos, SA

Kento Holding Limited

Jadeium, B.V.

Banco BPI, SA

Telefónica, SA

Espírito Santo Irmãos, SGPS, SA

Joaquim Alves Ferreira de Oliveira

Fundação José Berardo

Ongoing Strategy Investments, SGPS, SA

Estêvão Neves - SGPS, SA

Cinveste, SGPS, SA

Grupo Visabeira, SGPS, SA

Norges Bank

Banco Espírito Santo, SA

SGC, SGPS, SA

ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA

BES Vida - Companhia de Seguros, S. A.

Metalgest - Sociedade de Gestão, SGPS, SA

Sport TV

Dreamia Holding BV

Dreamia - Serviços de Televisão, SA

Mstar, SA

Upstar Comunicações SA

FINSTAR - Sociedade de Investimentos e Participações, SA

ZON II - Serviços de Televisão SA

ZON III - Comunicações electrónicas S.A.

Big Picture 2 Films, SA

Distodo, Lda

Canal 20 TV

Fundo Investimento para Cinema e Audiovisual

Gesgráfica - Projectos Gráficos, Lda

Caixanet – Telecomunicações e Telemática, SA

Apor - Agência para a Modernização do Porto

Lusitânia Vida - Companhia de Seguros, SA

Lusitânia - Companhia de Seguros, SA

Turismo da Samba (Tusal), SARL

Filmes Mundáfrica, SARL

Companhia de Pesca e Comércio de Angola (Cosal), SARL



19.2. Balances and transactions between related parties

a) Transactions and balances between ZON Multimédia and companies of the ZON Group were

eliminated in the consolidation process and are not the subject of disclosure in this Note.

The balances at 31 December 2011 and 30 June 2012 and the transactions in the half years ended on 30

June 2011 and 30 June 2012 between the ZON Multimédia Group and its associated companies, joint

ventures and other related parties were as follows:

2011:

Balances

Accounts

receivable -

trade

Accounts

receivable -

other

Accounts

payable - trade

Accounts

payable - other

Accruals and

deferred assets

Accruals and

deferred

liabilities

Caixa Geral de Depósitos - - 1 - - -

Metalgest 451 - - - - -

Sport TV 3 176 7 477 - 18 2 445

Dreamia Holding BV 292 808 - - - -

Dreamia SA 387 269 266 - 8 12

Mstar SA 96 599 - - - -

Upstar Comunicações 1 403 41 643 1 091 - - 315

Finstar 3 023 - 33 - - -

Distodo 1 - 20 - - -

Big Picture 2 Films, SA - - 144 - - 333

Fundo Investimento para Cinema e Audiovisual - - - 17 479 - -

Canal 20 TV, SA - - 1 - - -

5 656 43 495 9 033 17 479 26 3 105

Balances Loan obtained

Other financial

aplications

Derivatives

assets

Derivative

Liabilities

Financial

Leases

Caixa Geral de Depósitos 145 585 - - 586 3

Banco Espírito Santo 372 663 256 362 332 6 5 183

Banco BPI 139 951 1 050 - 222 569

658 199 257 412 332 814 5 755

Transactions

Sales and

services

rendered

Expenses and

services

obtained Interest income

Interest

expenses

Caixa Geral de Depósitos 15 - 1 3 613

Banco Espírito Santo 1 1 125 5 038 7 271

Banco BPI - 369 1 211 4 763

Sport TV 4 18 046 - -

Dreamia Holding BV 101 - 33 -

Dreamia SA 1 144 212 - -

Mstar SA - - 3 -

Upstar Comunicações 4 170 - 352 -

Finstar 354 - - -

Distodo 1 381 - -

Canal 20 TV, SA - 1 - -

Fundo Investimento para Cinema e Audiovisual - - - 119

5 789 20 134 6 637 15 766



2012:

Balances

Accounts

receivable -

trade

Accounts

receivable -

other

Accounts

payable - trade

Accounts

payable - other

Accruals and

deferred assets

Accruals and

deferred

liabilities

Caixa Geral de Depósitos - - 1 - - -

Metalgest 451 - - - - -

Sport TV 31 ( 14) 7 233 ( 8) - 2 093

Dreamia Holding BV 387 869 - - - -

Dreamia SA 495 814 589 - - 129

Upstar 2 187 34 237 493 - - 172

Finstar 3 862 - 0 - - -

Distodo 1 0 148 - - -

Fundo Investimento para Cinema e Audiovisual - - - 17 500 - -

Mstar 78 601 - - - -

Big Picture 2 Films 5 - 208 - - 188

Canal 20 TV - - 1 - - -

7 495 36 509 8 673 17 492 - 2 582

Balances Loan obtained

Other financial

aplications

Derivatives

assets

Derivative

Liabilities Financial leases

Banco Espírito Santo 270 061 210 416 190 - 4 182

Caixa Geral de Depósitos 115 546 - - 721 5

Banco BPI 134 606 31 531 - 712 283

520 213 241 947 190 1 433 4 470

Transactions

Sales and

services

rendered

Expenses and

services

obtained Interest income

Interest

expenses

Caixa Geral de Depósitos 15 - 31 3 817

Banco BPI 1 221 46 3 455

Banco Espírito Santo - 912 5 684 10 089

Sport TV 32 16 586 - -

Dreamia Holding BV 111 - 45 -

Dreamia SA 1 103 388 - -

Upstar 3 108 - 1 014 -

Distodo 1 305 - -

Fundo Investimento para Cinema e Audiovisual - - - 21

Big Picture 2 Films 9 1 291 - -

4 380 19 703 6 819 17 382

The Company regularly performs transactions and signs contracts with several parties within the ZON

Group. Such transactions were performed on normal market terms for similar transactions, as part of the

current business of the contracting companies.

The Company also regularly performs transactions and enters into financial contracts with various credit

institutions which hold qualifying shareholdings in the Company. However, these are performed on normal

market terms for similar transactions, as part of the current business of the contracting companies.

b) The remuneration paid to the directors of ZON Multimédia in the half years ended on 30 June 2011

and 2012 was as follows:

Fixed

RemunerationBonus

Share-based

compensation

plans

Fixed

RemunerationBonus

Share-based

compensation

plans

Executive management 928 450 227 928 405 298

Non executive management 413 - - 391 - -

1 340 450 227 1 319 405 298

06M11 06M 12



The remuneration paid to senior executives of the Group in the years ended on 30 June 2011 and 2012

was as follows:

06M2011 06M2012

Fixed Remunerations 3 164 2 848

Bonus 665 667

Share-based compensation plans 460 582

4 290 4 097

The average number of senior executives of the Group is 36 (06M2011:44).

The variable remuneration stated above corresponds to the value of accrued performance bonuses for

2012 which are payable in 2013.

All remuneration and bonuses are short term. The share incentive scheme includes a medium and long

term amount of 350 000 euros.

19.3. Joint Ventures

The ZON Group has a 50% interest in the following joint ventures: Sport TV, whose business is the

television broadcasting of the Sport TV channels; Dreamia B.V., a holding company; and Dreamia S.A.,

whose business is the television broadcasting of the MOV, Hollywood, Panda and Panda Biggs channels.

It also has a 30% stake in the Mstar and Finstar joint ventures whose business is the distribution of satellite

TV and the operation and supply of telecommunications services, and in Upstar whose business is

electronic communications services and the production, commercialisation, broadcasting and distribution of

audiovisual content and consultancy.

The consolidation of these subsidiaries by the proportional consolidation method had the following impact

on the consolidated statement of financial position at 30 June 2012 and on the consolidated statement of

comprehensive income for the half year ended on 30 June 2012:



Company (a) Eliminations(b) Contribution (c)

Current assets 126 742 ( 51 976) 74 766

Non-current assets 25 762 ( 1 523) 24 239

Accounts receivable - trade 21 - 21

Accounts receivable - other 1 498 ( 1 498) -

Investments in group companies 25 ( 25) -

Intangible assets 9 997 - 9 997

Tangible assets 14 085 - 14 085

Deferred tax assets 136 - 136

Total assets 152 504 ( 53 498) 99 005

Current liabilities 128 485 ( 51 169) 77 317

Non- current liabilities 8 136 ( 2 330) 5 806

Borrowings 4 263 - 4 263

Accounts payable-other 3 115 ( 2 285) 831

Accrued expenses 45 ( 45) -

Provisions for other liabilities and charges 713 - 713

Total liabilities 136 621 ( 53 498) 83 123

Company (a) Eliminations(b) Contribution (c)

Total revenue 61 329 ( 26 728) 34 601

Total expense 60 472 ( 26 728) 33 744

Net income 857 ( 1) 857

30-06-2012

30-06-2012

a) Percentage interest in the individual accounts of the companies at the date stated;

b) Inter-company eliminations;

c) Amounts included in the consolidated statement of financial position at 30 June 2012, and in the

consolidated statement of comprehensive income for the half year ended on 30 June 2012 as a

result of consolidation by the proportional method.

20. Legal actions

20.1. Municipal Wayleave Tax (TMDP) Proceedings

In February 2004, pursuant to Article 13 of the Authorisation Directive (Directive 2002/20/EC of 7 June),

Law 5/2004 of 10 February (Electronic Communications Law) established in its Article 106 the Municipal

Wayleave Tax (TMDP) as consideration for the “rights and costs of the installation, passage and crossing,

in a determined area, of the public and private municipal domain" by the systems, equipment and other

resources of companies offering public electronic communications networks and services. The TMDP

charge is levied on “each invoice issued by the companies offering public electronic communications

networks and services at a fixed location to all end customers within the respective municipality", and is

calculated as a maximum percentage of 0.25% of the amount of each invoice. Some municipalities, despite

approving the TMDP, have continued to collect Occupancy Taxes, while others have opted to maintain the

latter taxes rather than approving the TMDP.



In the light of legal advice on the matter, the Group is of the view that the TMDP is the only tax that should

be collected as consideration for the above mentioned rights, namely the right of installation, for which

reason it has challenged the public highway Occupancy Taxes charged to it by municipalities, since it

deems such taxes illegal. It must also be highlighted that under the scope of an administrative complaint, a

decision has been made by some municipalities, which have either subscribed to the Group's interpretation

or decided that they may only opt for one rate or the other, as it is not possible for the TMDP and public

road Occupancy Rates to overlap.

Meanwhile, various judicial judgments have been issued on the substantive issue, including by the

Supreme Administrative Court, that uphold the position and understanding of ZON TV Cabo, with the result

that there are good prospects that this dispute will be definitively resolved in favour of ZON TV Cabo by the

majority of municipalities.

With the entry into force of Decree-Law 123/2009, this matter has been definitively resolved for the future.

This law clearly states (in line with ZON’s interpretation of the previous legislation) that the TMDP is payable

for the use and usufruct of property in the public or private municipal domain which involves the

construction or installation, by companies that offer public electronic communications networks and

services, of infrastructures for housing electronic communications in accordance with the terms of the

Electronic Communications Law, and that no other taxes, official fees or consideration are due.

20.2. Legal actions with regulators

On 8 July 2009, ZON TV Cabo was notified by the Competition Authority (AdC) in connection with

administrative offence proceedings relating to the ZON triple-play offer, requesting ZON TV Cabo to

comment on the content of the notification, which it did in good time. The case is currently at the

fact-finding stage in AdC and various information has been requested, to which ZON has

responded. If it is concluded that an infringement has occurred, the AdC may levy a fine not

exceeding 10% of the company’s turnover in last year of infringement.

ICP-ANACOM instituted regulatory infringement proceedings against ZON TV Cabo, as it did

against the majority of Portuguese electronic communications operators, for infringement of the

portability regulations. ZON TV Cabo brought an action for judicial review of a decision by Anacom

ordering it to pay a fine, and the court ruled that Anacom’s decision was null and void.

ZON TV Cabo Portugal, ZON TV Cabo Açoreana and ZON TV Cabo Madeirense brought actions

for judicial review of ICP-ANACOM’s decisions in respect of the payment of the Annual Fee (for

2009, 2010 and 2011) for carrying on the business of Electronic Communications Services

Networks Supplier in the amounts, respectively, of 1.087 million euros, 2.325 million euros, and

3.580 million euros; 42 000 euros, 79 000 euros, and 123 000 euros; 55 euros, 109 000 euros and

169 000 euros, and seeking reimbursement of the amounts meanwhile paid in connection with the

enforcement proceedings. This fee is a percentage decided annually by ANACOM (in 2009 it was

0.5826%) of operators’ electronic communications revenues. The scheme is being introduced

gradually: 1/3rd in the first year, 2/3rds in the second year and 100% in the third year. ZON TV



Cabo, ZON TV Cabo Açoreana and ZON TV Cabo Madeirense claim, in addition to defects of

unconstitutionality and illegality, that only revenues from the electronic communications business

per se, subject to regulation by ANACOM, should be considered for the purposes of the application

of the percentage and the calculation of the fee payable, and that revenues from television content

should be excluded.

ZON tendered in an auction for licences for a nationwide freeview generalist programme service, to

be broadcast via terrestrial television. The Regulator of Social Communication decided on 23 March

2009 to disqualify ZON’s bid, along with that of another bidder. ZON has applied for judicial review

of the decision. The outcome of these proceedings is awaited.

20.3. Tax authorities

During the course of the 2005 to 2010 financial years, certain companies of the ZON Group were the

subject of tax inspections for the 2002 and 2005 to 2009 financial years. Following these inspections, ZON

Multimédia, as the controlling company of the Tax Group, was notified of the corrections made to the

Group's tax losses by the Tax Inspection Service. The Company considered that the corrections were

unfounded, and appealed against the amounts mentioned. ZON Multimédia brought an action for judicial

review of those corrections.

During the course of the 2007 to 2011 financial years, ZON Multimédia, ZON TV Cabo, ZON Conteúdos

and ZON TV Cabo SGPS were the subject of tax inspections for the 2004 to 2010 financial years. Following

these inspections, the companies were notified to make payments corresponding to the corrections made

by the Tax Inspection Service to those financial years. The Company considered that the corrections were

unfounded, and contested the amounts mentioned. The Group provided the bank guarantees demanded by

the Tax Authorities in connection with these proceedings, as stated in Note 18.

The following proceedings are in progress:

Year Company Revised Years Notification Value

2007 ZON Multimédia 2004 109




2007 ZON TV Cabo 2004 2 024

2007 ZON TV Cabo 2005 1 694

2008 ZON TV Cabo 2006 2 048

2009 ZON TV Cabo 2007 4 012

2010 ZON TV Cabo 2008 2 062

2010 ZON TV Cabo 2009 2 077

2011 ZON Conteúdos 2009 141

2011 ZON TV Cabo SGPS 2009 407

2011 ZON TV Cabo SGPS 2010 1 022

17 554

The Board of Directors of ZON Multimédia, based on information from its tax advisers, believes that these

and any other revisions and corrections to the tax declarations for the financial years in the period under

review, as well as any other contingencies of a fiscal nature, will not have a significant effect on the



consolidated financial statements as at 30 June 2012, except for those situations which have been the

subject of provisions (Note 15).

20.4. Actions brought by PT against ZON TV Cabo Madeirense and ZON TV Cabo Açoreana

PT brought two actions in Funchal Judicial Court and Ponta Delgada Judicial Court, one against ZON TV

Cabo Madeirense and the other against ZON TV Cabo Açoreana, claiming payment of 1.608 million euros

and 925 000 euros, respectively, plus accrued interest until the date of full settlement, for the alleged use of

ducts, supply of the MID service and supply of video and audio channels. In the case of ZON TV Cabo

Madeirense, the suit also involves the operating, maintenance and management costs of the Madeira/Porto

Santo undersea cable and the use of two fibre optic circuits.

The two companies contested the action, in particular the prices concerned, the services and PT’s legal

capacity in respect of the ducts. The outcome of the proceedings is awaited.

In a decision handed down on 19 July, the court found for ZON TV Cabo Açoreana. PT has not appealed

the decision.

However, following that decision, in April 2012 PT brought two new actions against ZON Açoreana, one

relating to the MID service and the other to the supply of video and audio channels, claiming payment of

222 000 euros and 316 000 euros respectively, plus interest. The time limit for contesting the claim in both

actions has not yet expired.

The action against ZON TV Cabo Madeirense is currently at the judgment stage.

21. Share incentive scheme

The Share Incentive Schemes approved by the General Meetings of Shareholders on 27 April 2008 and 19

April 2010 with the aim of promoting employee loyalty, aligning their interests with the Company’s objectives

and creating more favourable conditions for the recruitment of staff of high strategic value, have been

implemented in accordance with the principles agreed at those meetings.

These incentives plans comprise a Standard Plan and a Senior Executive Plan. The Standard Plan is aimed

at eligible members selected by the responsible bodies, regardless of the roles they perform. In this plan the

vesting period for the assigned shares is five years, starting twelve months after the period to which the

respective assignment relates, at a rate of 20% a year. The Senior Executive Plan is aimed at eligible

members classed as Senior Executives, also selected by the responsible bodies. The Senior Executive

Plan, implemented following approval by the General Meeting of Shareholders in April 2010, has a vesting

period of 3 years following the attribution of the shares.

The maximum number of shares assigned each year to these plans is approved by the Board of Directors

and depends exclusively on fulfilment of the performance objectives established for ZON and on the

assessment of the individual’s performance.



The number of shares vested in 2012 under the Share Plans approved in 2008, 2009, 2010 and 2011 was

253 446 shares.

In addition, the Group recognised liabilities in respect of the 2008, 2009, 2010, 2011 and 2012 Plans, which

extend until 2016, totalling 7.830 million euros – 1.951 million euros in 2008, 1.592 million euros in 2009,

1.401 million euros in 2010, 1.862 million euros in 2011 and 1.005 million euros in 2012.

In addition, in the first half of 2012 ZON implemented the Share Savings Plan, also established in the By-

Law approved by the General Meeting of Shareholders. This plan is open to all employees who, if they

meet internally decided criteria, may invest up to 10% of their annual salary in this plan, up to a maximum of

€7500 per annum, with the benefit of purchasing shares at a 10% discount.

Under the Share Savings Plan, which was launched in 2012, ZON employees bought 45 493 shares.

22. Subsequent events

On 2 July 2012 and following the conclusion of a fixed-term sale and purchase agreement disclosed on 12

June 2012, Jadeium B.V., a Dutch company headquartered in Amsterdam, has completed the acquisition of

title of 33,879,531 shares, owned by Caixa Geral de Depósitos, S.A. (“CGD”), representing 10.96% of the

share capital and the voting rights of ZON Multimédia.

After this operation, the qualified participation in ZON share capital and voting rights of Jadeium B.V. is

18.18% and of CGD is 0.0016%.



ANNEX I

a) Companies included in the consolidation by the full consolidation method

b) Associated companies

c) Jointly controlled companies

d) Companies recorded at cost



ANNEXED TABLES

a) Companies included in the consolidation by the full consolidation method

Effective Direct Effective

31-12-2011 30-06-2012 30-06-2012

ZON Multimédia - Serviços de

Telecomunicações e Multimédia, SGPS, S.A.

Lisbon Management of investments

ZON TV Cabo Portugal, S.A. Lisbon Distribution of television by cable and satellite and operation of

telecommunications services

100,00% ZON Multimédia (100%) 100,00%

ZON TV Cabo Açoreana, S.A. Ponta

Delgada

Distribution of television by cable and satellite and operation of

telecommunications services in the Azores area

83,82% ZON TV Cabo (83,82%) 83,82%

ZON TV Cabo Madeirense, S.A. Funchal Distribution of television by cable and satellite and operation of

telecommunications services in the Madeira area

77,95% ZON TV Cabo (77,95%) 77,95%

ZON Televisão por Cabo, SGPS, S.A. Lisbon Management of investments 100,00% ZON TV Cabo (100%) 100,00%

ZON Conteúdos - Actividade de Televisão e de

Produção de Conteúdos, S.A.

Lisbon Comercialization of cable tv contents 100,00% ZON Televisão por Cabo

(100%)

100,00%

ZON Lusomundo Audiovisuais, S.A. Lisbon Import, distribution, commercialization and production of audiovisual products 100,00% ZON Multimédia (100%) 100,00%

Grafilme - Sociedade Impressora de Legendas,

Lda.

Lisbon Providing services on audiovisual subtitling 55,56% ZON LM Audiovisuais

(55,56%)

55,56%

ZON Audiovisuais, SGPS S.A. Lisbon Management of investments 100,00% ZON LM Audiovisuais

(100%)

100,00%

ZON Lusomundo TV, Lda. Lisbon Movies distribution, editing, distribution, commercialization and production of

audiovisual products

100,00% ZON Audiovisuais SGPS

S.A. (100%)

100,00%

ZON Lusomundo Cinemas , S.A. Lisbon Movies exhibition and commercialization of other public events 100,00% ZON Multimédia (100%) 100,00%

Lusomundo Moçambique, Lda. Maputo Movies exhibition and commercialization of other public events 100,00% ZON LM Cinemas (100%) 100,00%

ZON Cinemas, SGPS S.A. Lisbon Management of investments 100,00% ZON LM Cinemas (100%) 100,00%

Lusomundo - Sociedade de investimentos

imobiliários SGPS, SA

Lisbon Management of Real Estate 99,87% ZON Multimédia (99,87%) 99,87%

Empracine - Empresa Promotora de Atividades

Cinematográficas, Lda.

Lisbon Movies exhibition 99,87% Lusomundo SII (100%) 99,87%

Lusomundo Imobiliária 2, S.A. Lisbon Management of Real Estate 99,68% Lusomundo SII (99,8%) 99,68%

Lusomundo España, SL Madrid Management of investments relating to activities in Spain in the audiovisuals

business

100,00% ZON Multimédia (100%) 100,00%

Teliz Holding B.V. Amstelveen Management of investments 100,00% ZON Multimédia (100%) 100,00%

ZON FINANCE B.V. Amsterdam Management of group financing activities 100,00% ZON Multimédia (50%);

ZON TV Cabo (50%)

100,00%

Company Head Office Activity

Percentage of Ownership

b) Associated companies


31-12-2011 30-06-2012 30-06-2012

Distodo - Distribuição e Logística, Lda.

("Distodo")

Lisbon Stocking, sale and distribution of audiovisual material 50,00% ZON LM Audiovisuais (50%) 50,00%

Canal 20 TV, S.A. Madrid Production, distribution and sale of contens rights for television films 50,00% ZON Multimédia (50%) 50,00%

ZON II - Serviços de Televisão S.A. (a) Lisbon Conception, production, realization and commercialization of audiovisual

contents and provision of publicity services

100,00% ZON Multimédia (100%) 100,00%

Big Picture 2 Films, S.A. Lisbon Import, distribution, commercialization and production of audiovisual

products

20,00% ZON Audiovisuais SGPS

S.A. (20%)

20,00%

ZON III - Comunicações electrónicas S.A.

(a)

Lisbon Network operator and provider of electronic communications services 100,00% ZON Multimédia (100%) 100,00%



(a) Inactive company.

c) Jointly controlled companies


31-12-2011 30-06-2012 30-06-2012

Sport TV Portugal Lisbon Conception, production, realization and commercialization of sports

programs for telebroadcasting, purchase and resale of the rights to

broadcast sports programs for television and provision of publicity

services

50,00% ZON Multimédia (50%) 50,00%

Dreamia - Serviços de Televisão, S.A. Lisbon Conception, production, realization and commercialization of audiovisual

contents and provision of publicity services

50,00% Dreamia Holding BV

(100%)

50,00%

Dreamia Holding B.V. Amsterdam Management of investments 50,00% ZON Audiovisuais SGPS

S.A. (50%)

50,00%

MSTAR, SA Maputo Distribution of television by satellite, operation of telecommunications

services

30,00% ZON Multimédia (30%) 30,00%

Upstar Comunicações S.A. Vendas

Novas

Electronic communications services provider, production,

commercialization, broadcasting and distribution of audiovisual contents

30,00% ZON Multimédia (30%) 30,00%

FINSTAR - Sociedade de Investimentos e

Participações, S.A.

Luanda Distribution of television by satellite, operation of telecommunications

services

30,00% Teliz Holding B.V. (30%) 30,00%





d) Companies recorded at cost


31-12-2011 30-06-2012 30-06-2012

Turismo da Samba (Tusal), SARL (a) Luanda n.a. 30,00% ZON Multimédia (30%) 30,00%

Filmes Mundáfrica, SARL (a) Luanda Movies exhibition 23,91% ZON Multimédia (23,91%) 23,91%

Companhia de Pesca e Comércio de

Angola (Cosal), SARL (a)

Luanda n.a. 15,76% ZON Multimédia (15,76%) 15,76%

Caixanet – Telecomunicações e

Telemática, S.A.

Lisbon Telecommunication services 5,00% ZON Multimédia (5%) 5,00%

Apor - Agência para a Modernização do

Porto

Porto Development of modernizing projects in Oporto 3,98% ZON Multimédia (3,98%) 3,98%

Lusitânia Vida - Companhia de Seguros,

S.A ("Lusitânia Vida")

Lisbon Insurance services 0,03% ZON Multimédia (0,03%) 0,03%

Lusitânia - Companhia de Seguros, S.A

("Lusitânia Seguros")

Lisbon Insurance services 0,04% ZON Multimédia (0,04%) 0,04%



(a) The financial investments in these companies are fully provisioned.



5.1. Report and Opinion of the Statutory Auditor



5.2. Limited Review Report Prepared by Auditor Registered in CMVM





06

Statement under the terms of Article 246,

paragraph 1, c), of the Securities Code

In accordance with Article 246, paragraph 1, c) of the Securities Code, the Board of Directors of ZON

Multimédia - Serviços de Telecomunicações e Multimédia, SGPS, SA, whose name and roles are listed

below, declare that, to their knowledge:

a) The first half 2012 accounts, were elaborated in compliance with the applicable accounting standards,

accurately and truthfully portraying the assets and liabilities, the company’s financial situation and results,

as well as those of the companies included in its consolidation perimeter;

b) The management report faithfully portrays the important events occurred in First Half 2012 and its impact

on the accounts and, when applicable, contains a description of the main risks and uncertainties for the

following six months.

Daniel Proença de Carvalho

(Chairman of the Board of Directors)

Rodrigo Jorge de Araújo Costa

(Chief Executive Officer)

José Pedro Faria Pereira da Costa

(Executive Member of the Board of Directors)

Duarte Maria de Almeida e Vasconcelos Calheiros


Luís Miguel Gonçalves Lopes


António Domingues

(Member of the Board of Directors)



Fernando Fortuny Martorell


László Hubay Cebrian


Vítor Fernando da Conceição Gonçalves

(Chairman of the Audit Committee)

Nuno João Francisco Soares de Oliveira Silvério Marques

(Member of the Audit Committee)

Paulo Cardoso Correia da Mota Pinto

(Member of the Audit Committee)

Norberto Emílio Sequeira da Rosa


Luís Bordalo Silva


Jorge Telmo Maria Freire Cardoso


Joaquim Francisco Alves Ferreira de Oliveira


Mário Filipe Moreira Leite da Silva




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