Table of Contents - NOS...2010/08/31 · maintains its members, as follows: • Chairman: Rodrigo...

ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. 2/76

Table of Contents

01. ZON in Numbers ........................................................................................................................................................ 3

02. Highlights - First Half 2010 ........................................................................................................................................ 6

03. Governing Bodies ...................................................................................................................................................... 7

04. Management Report .................................................................................................................................................. 8

4.1. Events in 1H10 and Recent Developments ........................................................................................................ 8 4.2. Capital Markets .................................................................................................................................................. 10 4.3. Governing Bodies Shareholdings .................................................................................................................... 12 4.4. Qualified Shareholdings .................................................................................................................................... 14 4.5. Transactions of Own Shares ............................................................................................................................. 17 4.6. Business Review ................................................................................................................................................ 18 4.7. Consolidated Financial Review ........................................................................................................................ 23 4.8. Risks and Uncertainties for Future Periods .................................................................................................... 30

05. Consolidated Financial Statements ....................................................................................................................... 31

5.1. Report and Opinion of the Statutory Auditor .................................................................................................. 72 5.2. Limited Review Report Prepared by Auditor Registered in CMVM................................................................ 73

06. Statement under the terms of Article 246, paragraph 1, c), of the Securities Code ........................................... 75


01. ZON in Numbers

Business Indicators (in thousands):

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

391436

484537

572

2Q09 3Q09 4Q09 1Q10 2Q10

+46.3%

33%37%

41%46%

49%

2Q09 3Q09 4Q09 1Q10 2Q10

+15.9pp

RGUs: RGUs per Subscriber (units):

3.251 3.385 3.507 3.632 3.694

2Q09 3Q09 4Q09 1Q10 2Q10

+13.6%

2,022,10

2,172,26 2,31

2Q09 3Q09 4Q09 1Q10 2Q10

+14.7%

Blended ARPU (Euros): Basic Subscribers:

33,6 34,035,0 35,2 35,6

2Q09 3Q09 4Q09 1Q10 2Q10

+6.2%

1.591 1.595 1.595 1.588 1.577

2Q09 3Q09 4Q09 1Q10 2Q10

(0.9%)


BroadBand Subscribers: Voice Subscribers:

573594 611

635 650

2Q09 3Q09 4Q09 1Q10 2Q10

+13.6%

479529

584646

692

2Q09 3Q09 4Q09 1Q10 2Q10

+44.6%

Mobile: Digital “Funtastic" Subscribers:

33

54

69

81

92

2Q09 3Q09 4Q09 1Q10 2Q10

+176.8%

575613

648682 682

2Q09 3Q09 4Q09 1Q10 2Q10

+18.7%

Financial Indicators (in millions of Euros):

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

395430

1H09 1H10

+8.8%

128

150

32,5%34,8%

2 0 , 0 %

2 2 , 0 %

2 4 , 0 %

2 6 , 0 %

2 8 , 0 %

3 0 , 0 %

3 2 , 0 %

3 4 , 0 %

3 6 , 0 %

3 8 , 0 %

4 0 , 0 %

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1H09 1H10

+16.5%

* Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income.


Consolidated Net Income: CAPEX:

29

23

1H09 1H10

(21.2)%

91

110

1H09 1H10

+21.6%

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

+3.2%

616 636

2009 1H10

2,3x 2,2x

2009 1H10


02. Highlights - First Half 2010

Focus on profitable growth

o Revenues increased by 8.8% y.o.y. in 1H10 to 429.7 million euros;

o EBITDA grew by 16.5% in 1H10 to 149.5 million euros, representing an EBITDA margin of 34.8%;

o Adjusted Net Income increased by 36.2% in 1H10 to 22.9 million euros.

Almost 50% penetration of Triple Play Services, driving strong ARPU growth

o 571.9 thousand customers now buy Triple Play bundles, 49.0% of ZON’s cable customer base (+46.3% y.o.y.);

o Blended ARPU increased to 35.4 euro (+6.9% y.o.y), led by the continued strong take-up of new services and Triple Play penetration.

Leadership in Next generation services supported by investment in technological innovation, network independence and efficiency

o 100 thousand ZON fibre subscribers reached in July 2010;

o Eurodocsis 3.0 upgrade of ZON’s HFC network practically complete; Over 2.8 million

households able to receive high speed broadband of up to 200 Mbps;

o Launch of ZON data centre in 2Q10 and start of project to relocate ZON hubs onto own infrastructure.

Operational ('000)

Triple Play Customers 391.0 571.9 46.3%

Triple Play Penetration (%) 33.2% 49.0% 15.9pp

RGUs (1) 3250.8 3693.7 13.6%

Blended ARPU (Euros) 33.6 35.6 6.2%

Financial (Millions of Euros)

Operating Revenues (2) 394.8 429.7 8.8%

EBITDA (2) 128.4 149.5 16.5%

EBITDA Margin (2) 32.5% 34.8% 2.3pp

Net Income 29.1 22.9 (21.2%)

(2) Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC contentcontract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators and the fact that as from January2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of2.4 million euros in Other Expenses / (Income), thus not affecting Net Income.

Highlights of 1H10 Results

(1) Revenue Generating Units correspond to the sum of Pay TV basic customers, plus "Funtastic" Digital, Fixed Broadband, Fixed Voice andMobile customers.

1H10 1H10 / 1H091H09


03. Governing Bodies

As at the date of this report, 16 August 2010, 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 Luis João Bordallo da Silva László Istvan Hubay Cebrian Norberto Emílio Sequeira da Rosa Jorge Telmo Maria Freire Cardoso Joaquim Francisco Alves Ferreira de Oliveira João Manuel Matos Borges de Oliveira Mário Filipe Moreira Leite da Silva António da R. S. Henriques 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 1H10 and Recent Developments Shareholder remuneration in 2010

ZON is committed to delivering attractive shareholder remuneration relative to its peers. On 19 April 2010, the Shareholders’ Meeting of ZON approved a 16 cents per share dividend, 49.5 million euros in total, which was paid on 13 May 2010. With this dividend, ZON places itself at the forefront of its European peer group with one of the most significant pay-out ratio and dividend yields of the sector, 112% and 4.1% respectively.

Governing Bodies On 19 April 2010, ZON’s Annual General Shareholders’ Meeting approved the election of its Governing Bodies for the period between 2010 and 2012 as follows:

• Officials of the General Meeting of Shareholders: President: Júlio de Castro Caldas Secretary: Maria Fernanda Carqueija Alves de Ribeirinho Beato

• Board of Directors: Chairman: Daniel Proença de Carvalho Members: Rodrigo Jorge de Araújo Costa

José Pedro Faria Pereira da Costa Duarte Maria de Almeida e Vasconcelos Calheiros Luís Miguel Gonçalves Lopes Fernando Fortuny Martorell António Domingues László Istvan Hubay Cebrian Luís João Bordallo da Silva Norberto Emílio Sequeira da Rosa Jorge Telmo Maria Freire Cardoso Joaquim Francisco Alves Ferreira de Oliveira João Manuel Matos Borges de Oliveira Mário Filipe Moreira Leite da Silva


António da R. S. Henriques da Silva

• Audit Committee: Chairman: Vítor Fernando da Conceição Gonçalves Members: Paulo Cardoso Correia Mota Pinto

Nuno João Francisco Soares de Oliveira Silvério Marques

• Statutory Auditor: In Office: Oliveira, Reis & Associados, SROC, Lda., represented by José Vieira

dos Reis Alternate: Fernando Marques Oliveira.

The Company’s Board of Directors held a meeting after the afore-mentioned General Shareholders’ Meeting, and approved the creation of the Executive Committee, for the same period, which maintains its members, as follows:

• Chairman: Rodrigo Costa

• Members: José Pedro Pereira da Costa – Chief Financial Officer Luís Gonçalves Lopes Duarte Maria de Almeida e Vasconcelos Calheiros.

Corporate Developments On 29 January 2010, ZON Multimedia’s Shareholder Meeting approved the disposal of an amount of 14,006,437 own shares, representing 4.53% of the Company’s share capital, to Kento Holding Limited (a company wholly owned by Ms Isabel dos Santos), for € 5.30 per share, in a global amount of € 74,234,116.10. As a result of this resolution, the conditions precedent to the sale and purchase agreement entered into between ZON Multimédia and Kento Holding Limited and subject to public disclosure by ZON Multimédia on 20 December 2009 were verified. This disposal of own shares was completed and disclosed to the market on 5 February 2010.

Subsequent Events On 5 July 2010, ZON TV Cabo Portugal signed a contract with Liga Portuguesa de Futebol Profissional, ensuring co-sponsorship with Sociedade Central de Cervejas, for four sporting seasons (from 2010/2011 to 2013/2014) of the premier football league, named as from this contract “LIGA ZON SAGRES” (formerly “LIGA SAGRES”).


On 22 July 2010, ZON announced that its Next Generation Broadband Services had reached 100 thousand customers, thus reinforcing its position as the leading provider of high speed Internet services. It was also announced that ZON’s Fixed Voice service had overcome the 700 thousand customer mark, thereby reinforcing its leadership amongst the main challengers to the incumbent operator.

4.2. Capital Markets ZON’s Share Performance

On 30 June 2010, ZON Multimedia’s shares’ closing price was 3.182 euros, which represents a 26.65% decrease since the beginning of the year, compared with a 16.52% decrease from the main Portuguese stock market index, PSI20. In 1H10, a total of more than 70 million ZON Multimedia shares were traded, amounting to a daily average volume of 551 thousand shares per market session. This average daily volume represents 0.18% of the total number of ZON shares, and 0.68% of the free float1.

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

31-1

2-20

09

07-0

1-20

10

14-0

1-20

10

21-0

1-20

10

28-0

1-20

10

04-0

2-20

10

11-0

2-20

10

18-0

2-20

10

25-0

2-20

10

04-0

3-20

10

11-0

3-20

10

18-0

3-20

10

25-0

3-20

10

01-0

4-20

10

08-0

4-20

10

15-0

4-20

10

22-0

4-20

10

29-0

4-20

10

06-0

5-20

10

13-0

5-20

10

20-0

5-20

10

27-0

5-20

10

03-0

6-20

10

10-0

6-20

10

17-0

6-20

10

24-0

6-20

10

ZON and PSI20 Performance - 1H10

ZON Volume ZON PSI20

1 Free Float calculated according to Qualified Shareholdings Table.


Main Announcements in 1H10

Date Announcement

29-01-2010 - General Shareholders' Meeting

05-02-2010 - ZON informs on Completion of Sale of Own Shares

01-03-2010 - 2009 Earnings Announcement

19-04-2010 - General Shareholders' Meeting

10-05-2010 - ZON shares ex-div date

12-05-2010 - First Quarter 2010 Earnings Announcement

13-05-2009 - Fiscal year 2009 dividend payment

Below we present the major Investor Relation Events which took place in 1H10. 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

14 Jan ESN Mid & Small Cap Conference London

10 Feb Santander Seminar - SMC Conference Madrid

3 Mar Madrid

4 Mar Lisbon

8 Mar Frankfurt

9 Mar London

10 Mar Edinburgh

11 Mar Paris

12 Mar Milan

24 Mar Citigroup 10th Annual European and Emerging Telecom Conference London

25 Mar

26 Mar

13 May

14 May

25 May Toronto

26 May

27 May

9 Jun Crédit Suisse Cable Conference London

18 Jun XVII Annual Santander Telecommunications Conference Lisbon

Roadshow

Roadshow New York

Roadshow Lisbon

RoadshowNew York

Roadshow


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]

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 2010:


Name PositionShares held at 31-

12-2009

Shares held at 30-

06-2010Purchased Disposed Price per Share Date

Daniel Proença de Carvalho Chairman of the Board of Directors 0 - - - - 0Spouse 28 - - - - 28

3,646 - 4.02 € 21-01-2010

75,000 - 3.79 € 26-03-20102,124 - 4.02 € 29-01-2010

40,000 - 3.79 € 26-03-2010

2,124 - 4.02 € 29-01-201040,000 - 3.79 € 26-03-20101,836 - 4.02 € 29-01-2010

17,500 - 3.79 € 26-03-2010Fernando Fortuny Martorell Member of the Board of Directors 0 - - - - 0António Domingues (1) Member of the Board of Directors 0 - - - - 0

Grupo BPI 28,106,494 - 3,720,201 - - 24,386,293Luís João Bordallo da Silva (2) Member of the Board of Directors 0 - - - - 0

Grupo Cinveste 17,882,962 - 9,175,826 5.30 € 05-02-2010 8,707,136László Istvan Hubay Cebrian Member of the Board of Directors 0 - - - - 0Norberto Emílio Sequeira da Rosa (3) Member of the Board of Directors 0 - - - - 0

Grupo CGD 53,799,405 425,600 17,898,535 - - 36,326,470Jorge Telmo Maria Freire Cardoso (4) Member of the Board of Directors 0 - - - - 0

Caixa Banco de Investimento - 9,892,135 6.05 € 03-02-2010

100 - 3.75 € 01-03-2010

- 100 3.75 € 01-03-2010Joaquim Francisco Alves Ferreira de Oliveira (5) Member of the Board of Directors 0 - - - - 0

Controlinveste International, Sarl 7,965,980 - - - - 7,965,980Gripcom, SGPS, SA. 6,989,704 - - - - 6,989,704

João Manuel Matos Borges de Oliveira (6) Member of the Board of Directors 0 - - - - 0

Grupo COFINA 15,190,000 - - - - 15,190,000Vítor Fernando da Conceição Gonçalves Chairman of the Audit Committee 0 - - - - 0Nuno João Francisco Soares de Oliveira Silvério Marques Member of the Audit Committee 0 - - - - 0Paulo Cardoso Correia da Mota Pinto Member of the Audit Committee 0 - - - - 0Mário Filipe Moreira Leite da Silva(7) Member of the Board of Directors 0 - - - - 0

Kento Holding Limited 0 30,909,683 - 5.30 € 05-02-2010 30,909,683António da R.S. Henriques da Silva Member of the Board of Directors 0 0José Vieira dos Reis (8) Statutory Auditor 0 - - - - 0

Metalgest - Sociedade de Gestão, SGPS, SA 3,985,488 - - - - 3,985,488Fernando Marques Oliveira (9) Alternate Statutory Auditor 0 - - - - 0

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

1,260 - 4.02 € 21-01-2010

10,000 - 3.79 € 26-03-2010930 - 4.02 € 21-01-2010

3,075 - 3.79 € 26-03-2010865 - 4.02 € 21-01-2010

3,025 - 3.79 € 26-03-2010

588 - 4.02 € 21-01-2010

2,200 - 3.79 € 26-03-2010

1,131 - 4.02 € 21-01-201010,000 - 3.79 € 26-03-20101,704 - 4.02 € 21-01-2010

15,000 - 3.79 € 26-03-20102,562 - 2.93 € 30-06-2010974 - 4.02 € 21-01-2010

3,075 - 3.79 € 26-03-20102,562 - 2.93 € 30-06-2010

- 2,562 3.77 € 30-06-2010

(7) Mário Filipe Moreira da Silva is a member of the Board of Directors of Kento Holding Limited, which held, by 30 June 2010, 30,909,683 ZON Multimedia shares.

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

Manager in the terms of CVM Article 248-B 3,458 7,348

Tomás Maria de Morais Sarmento Pinto Gonçalves

(9) 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, by 31 December 2009, 3,985,488 ZON Multimedia shares.

(8) José Vieira dos Reis is the Alternate Statutory Sole Supervisor of Metalgest - Sociedade de Gestão, SGPS, SA, which by 30 June 2010, held 3,985,488 ZON Multimedia shares.

(6) João Manuel Matos Borges de Oliveira a member of the Board of Directors of Cofina-SGPS, S.A., which by 30 June 2010, held 15,190,000 ZON Multimedia shares.

(5) Joaquim Francisco Alves Ferreira de Oliveira indirectely controls more than half of the share capital of Controlinveste International, Sarl, which held, by 30 June 2010, a total of 7,965,980 ZON Multimedia shares. Joaquim Francisco Alves Ferreira de Oliveira indirectely controls more than half of the share capital of Gripcom - SGPS, S.A., which held, by 30 de June 2010, 6,989,704 ZON Multimedia shares.

10,876

(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 which, by 30 June 2010 held 8,707,136 ZON Multimedia shares.

Paulo Manuel Moura Ribeiro

Gonçalo João Figueira Morais Soares

Manager in the terms of CVM Article 248-B

José Antunes João

Manager in the terms of CVM Article 248-BAdriano José de Seabra Duarte Neves


Rodrigo Jorge de Araújo Costa Chief Executive Officer

(1) António Domingues is a member of the Board of Directors of companies which are part of Grupo BPI which, by 30 June 2010, held 24,386,293 ZON Multimedia shares.

63,108


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

Duarte Maria de Almeida e Vasconcelos Calheiros Member of the Executive Committee

584,959

6,827

3,628 7,633

12,257 23,388

Transactions in 1H10

506,313

Member of the Executive Committee 89,18647,062

09,892,135

(3) Norberto Emílio Sequeira da Rosa is a member of the Board of Directors of Caixa Geral de Depósitos, SA, which, by 30 de June 2010, held, directely and indirectely, 36,326,470 ZON Multimedia shares.

43,842

12,641 23,901

Jorge Filipe Santos Graça

José Pedro Faria Pereira da Costa Member of the Executive Committee 48,062 90,186

22,413

Manager in the terms of CVM Article 248-B 2,488 5,276

Luís Miguel Gonçalves Lopes

41,749


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 had been reported to the Company until the date of this report. The structure of ZON Multimedia’s Social Qualified Shareholdings disclosed to the company, was, in 30 June 2010, as follows:

Caixa Geral de Depósitos, SA 36,326,470 11.75%Kento Holding Limited (1)

30,909,683 10.00%

Banco BPI, SA 24,386,293 7.89%

Telefónica, SA 16,879,406 5.46%Espírito Santo Irmãos, SGPS, SA (2) 15,455,000 5.00%Cofina, SGPS, SA 15,190,000 4.91%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)10,649,750 3.45%

Banco Espírito Santo, SA 7,414,390 2.40%Cinveste, SGPS, SA 8,707,136 2.82%Grupo Visabeira, SGPS, SA (6) 6,641,930 2.15%SGC, SGPS, SA (7)

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%Credit Suisse Group AG 5,649,670 1.83%Metalgest - Sociedade de Gestão, SGPS, SA (4)

3,985,488 1.29%

Total Identified 228,552,193 73.94%

Shareholders 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 José dos Santos, in her capacity ofshareholder of Kento Holding Limited.(2) Espírito Santo Irmãos, SGPS, SA's voting rights are attributed to Espírito Santo Industrial, SA, Espírito Santo Resources Limited, andEspírito 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 controlsGRIPCOM, 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, SA are attributable to RS Holding, SGPS, SA, its holder in 50.01%. RS Holding,SGPS, SA is 99.9% held by Ms. Isabel Maria Alves Rocha dos Santos. Therefore, its voting rights are attributed to her.(6) 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 byVisabeira Serviços,SGPS,SA, which is owned by Grupo Visabeira,SGPS,SA. The latter is 74.0104% held by Mr. Fernando Campos Nunes.

(7) SGC, SGPS, SA's holding is attributed to its majority shareholder, Mr. João Pereira Coutinho.Note: The Qualified Shareholdings of Caixa Geral de Depósitos, SA, of Banco BPI, SA, and of Banco Espírito Santo, SA, have been updatedas of 30 June 2010, based on information they provided for the purposes of section 4.3 of this Management Report.

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 33,369,927 10.80%Companhia de Seguros Fidelidade-Mundial, SA 2,450,512 0.79%Fundo de Pensões da CGD e Outras Empresas do Grupo 417,901 0.14%Império Bonança - Companhia de Seguros, SA 77,934 0.03%Via Directa - Companhia de Seguros, SA 5,282 0.00%Multicare - Seguros de Saúde, SA 4,914 0.00%Total 36,326,470 11.75%

Shareholders Nr of Shares % Voting Rights

The following table presents the qualified holding of Banco Português de Investimento, SA (“BPI”) calculated under the terms of number 1 of article 20 of the Portuguese Securities Code.

Fundo de Pensões do Banco BPI 23,287,499 7.53%BPI Vida - Companhia de Seguros de Vida, SA 1,098,794 0.36%Total 24,386,293 7.89%


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.

Fundo de Pensões do BES 7,399,636 2.39%Elementos dos Órgãos Sociais 13,534 0.00%Sociedades em relação de domínio ou de grupo com o BES 1,220 0.00%Total 7,414,390 2.40%


The following table presents the qualified holding of Telefónica, SA, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code.

Telefónica, SA 14,838,497 4.80%Telesp, SA 1,196,395 0.39%Aliança Atlântica Holding BV 844,514 0.27%Total 16,879,406 5.46%


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

Insight Strategic Investments, SGPS, SA 5,688,106 1.84%Ongoing Strategy Investments, SGPS, SA 4,019,513 1.30%Investoffice - Investimentos e Consultoria Financeira, SA 925,000 0.30%James Risso-Gill 12,500 0.00%Nuno Vasconcellos 4,631 0.00%Total 10,649,750 3.45%


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 Crédit Suisse Group AG, calculated under the terms of number 1 of article 20 of the Portuguese Securities Code.

Credit Suisse AG (em nome de clientes) 5,244,557 1.70%Neue Aargauer Bank (em nome de clientes) 715 0.00%Clariden Leu AG (em nome de clientes) 1,118 0.00%Credit Suisse AG 185,141 0.06%Credit Suisse International 188 0.00%Credit Suisse Securities (USA) LLC 43,358 0.01%CS Securities (Europe) Ltd 174,593 0.06%Total 5,649,670 1.83%


A detailed record of the qualified shareholdings’ communications can be found at ZON Multimedia’s corporate website, at www.zon.pt/ir.


4.5. Transactions of Own Shares By the end of 2009, within the scope of its Share Buyback Program, ZON held 14,006,370 own shares, representing 4.53% of its share capital – 399,358 of these shares, representing 0.13% of its share capital, were directly held by ZON Multimedia and the remaining 13,607,079 shares, representing 4.4% of the share capital, were held through equity swaps. The transactions involving ZON Multimedia own shares which took place in the first half of 2010 are summed up in the following table. The acquisitions and disposals of own shares which were carried out are related to ZON’s Employee Share Plan and Share Savings Plan. The table also shows the sale of 14,006,437 own shares, representing 4.53% of ZON’s share capital, to Kento Holding, as disclosed to the market on 5 February 2010.

Number of Shares % Share Capital

Balance as of 01-01-2010 14,006,370 4.53%

Acquisitions (Employee Share Plan and Share Savings Plan)

398,566 0.13%

Disposals (Employee Share Plan and Share Savings Plan)

-392,973 0.12%

Sale of Own Shares to Kento Holding -14,006,437 4.53%

Balance as of 30-06-2010 5,526 0.01%


4.6. Business Review

Pay TV, Broadband and Voice

Homes Passed 3,074.7 3,170.0 3.1% 3,074.7 3,170.0 3.1%

RGUs (2) 3,250.8 3,693.7 13.6% 3,250.8 3,693.7 13.6%

RGUs per Subscriber (units) 2.02 2.31 14.7% 2.02 2.31 14.7%

Basic Subscribers (1) 1,591.4 1,576.9 (0.9%) 1,591.4 1,576.9 (0.9%)

o.w. Cable Subscribers 1,179.0 1,166.3 (1.1%) 1,179.0 1,166.3 (1.1%)

Triple Play Customers 391.0 571.9 46.3% 391.0 571.9 46.3%

% Triple Play Cable Customers 33.2% 49.0% 15.9pp 33.2% 49.0% 15.9pp

Double Play Customers 267.8 186.3 (30.4%) 267.8 186.3 (30.4%)

% Double Play Cable Customers 22.7% 16.0% (6.7pp) 22.7% 16.0% (6.7pp)

Single Play Customers 520.2 408.1 (21.6%) 520.2 408.1 (21.6%)

% Single Play Cable Customers 44.1% 35.0% (9.1pp) 44.1% 35.0% (9.1pp)

o.w. DTH Subscribers 412.4 410.6 (0.4%) 412.4 410.6 (0.4%)

Blended ARPU (Euros) 33.6 35.6 6.2% 33.1 35.4 6.9%

Cinema Exhibition

Revenue per Ticket (Euros) 4.4 4.6 5.0% 4.3 4.6 6.0%

Tickets Sold 1,729.6 1,716.6 (0.8%) 3,679.7 4,188.2 13.8%

Screens (units) 217 213 (1.8%) 217 213 (1.8%)

2Q09 1H10 / 1H09

(1) 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 marketsegments (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.

1H09

(2) Revenue Generating Units correspond to the sum of Pay TV basic customers, plus "Funtastic" Digital, Fixed Broadband, Fixed Voice and Mobile customers.

2Q10 2Q10 / 2Q09Business Indicators ('000) 1H10

Triple Play continues to be a key driver of growth and profitability Almost 1 out of 2 cable customers subscribe to Triple Play bundles. By the end of 1H10, 571.9 thousand customers were taking Triple Play services, 49% of the cable customer base and representing growth of 180.9 thousand (+46.3%) in comparison with 1H09. ZON’s customer base has been migrating more and more to multiple play bundles, the most relevant of which are Triple Play offers whose penetration of the cable customer base has been increasing rapidly quarter on quarter. On the contrary, Single Play penetration has been declining as a percentage of the cable base every quarter, now representing just 35% compared with over 50% just two years ago. The remaining customers are opting for Double Play solutions (TV + Voice and TV + Broadband) which today represent around 16% of the cable customer base. On average, each ZON customer is taking significantly more services, 2.31 RGUs per sub, up from 2.02 a year before and bringing the total number of RGUs to 3,693.7 (+13.6% yoy). ZON has successfully defended its customer base of almost 1.6 million pay TV subscribers. The market remains very competitive and characterized by still relatively aggressive levels of promotional activity. However, within this challenging competitive environment, ZON has focused on acquiring


and retaining higher quality customers which translate into higher levels of profitability and return on investment for the company. The marginal slowdown in subscriber growth in 2Q10 was also due to the across the board price increase of 2-3%, but has been more than compensated by a significant improvement in profitability due to higher ARPU and also to a more efficient approach to customer acquisition. Average subscriber acquisition costs are coming down, led by a more rational sales-mix between the various sales channels. In particular, the proportion of sales made through more effective and less expensive distribution channels has increased significantly and, in some instances, overtaken the weight of sales over more expensive and typically more volatile door-to-door sales channels, that also tend to generate more churn. In addition, efforts are being taken to ensure that reactive sales channels are leveraged by taking advantage of contacts made to in-coming customer-care platforms. The best HD offer with a leading position in content and at the forefront of innovation

High definition remains an important differentiating factor in the ZON Pay TV offer, which today already has 15 channels being broadcast in HD, the largest offer in the Portuguese market. Particular focus was given to ZON’s sports HD offer during the World Cup in June and July with a campaign dedicated to communicating ZON’s position as the operator with the most comprehensive and best quality HD offer in the market. An additional 3 HD channels were launched in 2Q10, one of which, a dedicated financial news channel “Económico TV HD” – exclusive to ZON, in addition to “Nat Geo Wild HD” and “Discovery Showcase HD”. In addition, further exploiting the superior technological capabilities and coverage of its HFC network, ZON launched a dedicated “true 3D” channel in 1Q10, putting itself at the forefront of TV innovation worldwide. The channel may be viewed by anyone with a 3D enabled television set at home living within the ZON cable footprint. The technology used is “True 3D” thereby enabling spectators to enjoy a seamless 3D experience, similar to that experienced in cinema theatres. In 2Q10, this channel exclusively broadcast two friendly matches of the Portuguese team in preparation for the World Cup, in 3D. Further raising the profile of ZON’s brand positioning, in the past weeks, ZON became a joint primary sponsor of the Portuguese premier football league, together with Sagres, the leading beer brand in Portugal. The premier league will now be called “Liga ZON Sagres”. With this sponsorship, ZON aims to reinforce its leadership in the Pay TV market by supporting a sport that motivates thousands to go to stadiums and always ranks at the top of TV audiences. Brand awareness is set to increase significantly with this initiative, leveraging ZON’s innovative positioning in terms of the high definition and 3D viewing experience. As regards the entry level Pay TV product launched at the beginning of the year, it has had good progress in terms of subscriber take-up, with around 20 thousand subscribers after six months, by end 2Q10. The marketing of the new tariff plans was very selective, with campaigns being directed to morning or afternoon FTA TV shows, focusing on market segments that currently do not receive Pay TV services and therefore reducing the potential for customers downgrading from higher value propositions. The proportion of customers that now receive digital services continues to increase. By the end of 1H10, 740 thousand ZON HD Boxes had been installed, thereby enabling an ever increasing number of customers to benefit from a digital HD experience and numerous functionalities launched over the Pay TV platform. Further efforts to reduce the average cost of terminal equipment installed on customer premises were taken, both through continued renegotiation of purchasing terms and through an increase in the level of equipment that is refurbished and injected back into the system. Further enhancing its offer, in 2Q10 ZON launched a number of Internet based widgets adapted for its cable TV platform, allowing customers to access useful functionalities and information with one push of a button on the TV control, whilst simultaneously watching a TV broadcast. Amongst the first widgets to be launched were “Mundial” with continuous World Cup updates, “Quiosque” with news updates and headlines, “Photo” providing access to pictures on the Picasa or Flickr platforms, in


addition to widgets with weather updates (Accuweather), TV programming guides and entertainment quizzes. The new widgets have proven extremely popular: over 270 thousand ZON Boxes accessed the service in the first month, with over 5.5 million clicks spread over 23 hours of use. ZON’s VoD platform, currently with a library of over 3 thousand titles, continues to post very interesting quarterly progress, albeit representing a relatively small proportion of total customer revenues. On average, each film downloaded represents additional revenue of 3 euros. New content and functionalities being launched and many more in the pipeline, are set to stimulate additional VoD usage and subsequently generate incremental TV revenue. The largest next generation network operator in Portugal ZON’s clear advantage in terms of next generation network coverage and widespread technological superiority is reflected in its results: as from July, 100 thousand customers, 15% of the broadband customer base, currently take offers higher than 50 Mbps. According to data published by the regulator for the end of 1Q10, ZON’s implied market share of Next Generation services was already 59% implying that all other broadband operators together had less NGN subscribers than ZON. In total, the number of broadband subscribers increased by 13.6% to 650.1 thousand, representing a 56% penetration rate of the cable base. In 2Q10, ZON launched an upgraded “ZON HUB”, its leading-edge gateway for voice and broadband connections of up to 200 Mbps, that enables high speed wireless connectivity all around the house, in addition to providing PBX-like features adaptable to the needs of small enterprises. On the WiFi front, ZON’s customer supported solution, “ZON FON” is proving to be a huge success. There are already more than 100 thousand access points across the country, providing the most extensive wireless networks in Portugal, and free access to all ZON broadband users. Customers can also access almost 2 million international access points supported by FON’s partner network as is the case of British Telecom in the UK. The next generation ZON HUB now integrates ZON FON hotspot technology, thus providing an easy platform for ZON FON’s WiFi network to expand significantly in coming quarters. Also in 1H10 ZON launched an Internet Protection system, in partnership with F-Secure, one of the leading computer safety companies in the world. For a 1.99 euros monthly fee, the service provides an integrated security solution, sharable with 3 home computers, including antivirus, anti-spyware, anti-spam, firewall and parental control functionalities. Continued growth in fixed voice uptake The number of customers taking ZON’s fixed voice services continues to increase, reaching 692 thousand by the end of 1H10 and representing 58% of the cable subscriber base. In July 2010, the 700 thousand customer mark had already been reached. Traffic profiles remain very strong, supported by the strength of attractive tariff plans that include unlimited fixed line traffic to 30 international destinations. The market power of this offer led other main competitors to also launch similar tariff plans during the quarter. Previously, the total fixed voice market was stagnant. After the ZON Fixed Voice service was launched and indeed for the past 6 quarters, the number of total subscribers has actually inverted the negative trend of previous years, with ZON being the only relevant fixed voice operator posting a significant contribution to net market growth. Progressive growth in mobile Subscribers of ZON’s mobile voice and broadband service increased to 92.3 thousand by the end of 1H10, almost three times more than at the end of 1H09. In terms of mobile broadband, a new tariff structure was introduced whereby subscribers are allowed unlimited traffic and time usage of their mobile broadband card at no additional charge, with full or reduced levels of mobility. The advantage of the new tariff plans is that they reduce the uncertainty associated with monthly bills, thus


eliminating barriers to entry for more price sensitive customer segments. In addition, a new entry level tariff of 12.90 euros per month was launched, ideal for moderate usage patterns. Strong ARPU performance reflecting strategic focus on value of customer base Blended ARPU continues to record strong growth. In 1H10, ARPU increased by 7% to 35.4 euros, reflecting the value associated with ZON’s strategy to upsell new services and Triple Play bundles. In addition, ZON led the market with its announced price increase of between 2-3% across the board which became effective as from 1 May 2010. In ZON’s higher revenue generating, multiple-play cable customer base, ARPU grew by 7.5% to 38.8 euros in 2Q10, compared with an increase of 0.8% in its DTH customer base. Upgrade of network to Eurodocis 3.0 practically complete, cell splitting and backhaul

roll-out underway ZON’s Eurodocsis 3.0 upgrade is practically complete, thus enabling delivery of very high broadband speeds of up to 200 Mbps to almost the entire cable footprint. In 2Q10, ZON successfully migrated all its systems to a single data centre, located in own infrastructure thus enabling greater systems optimization, flexibility and cost rationalization without interrupting current operations. ZON is progressing with the rollout of own network infrastructure to relocate hubs onto its own sites. Of a total of around 40 sites spread across Portugal, around 10% have already been successfully moved to own infrastructure and negotiations are underway regarding contracts with key suppliers to enable the relocation of remaining sites over the course of the next two years, while at the same time ZON is discussing the terms of a partial renewal of the current infrastructure contract with the incumbent operator which expires on 31 December 2010. The upfront investment required to develop this project is more than compensated in the medium term with the clear improvement in operational flexibility and the reduction in cash-outflow associated with telecom infrastructure costs, currently contracted from the incumbent operator. Audiovisuals and Cinemas 1H10 was the best ever semester for ZON’s cinema exhibition business. By the end of 1H10, all of ZON’s cinema screens had been digitalized and 3D projection technology was present in over 60, an average of more than 2 3D screens per theatre. Given that the number of 3D movies launched is increasing significantly, ZON is able to exhibit more than one 3D movie at a time in the same cinema theatre, putting it at a significant advantage to its main competitors. In 1H10, 26% of tickets sold by ZON were for 3D movies. The total market grew by 7.3% 1H10 compared with 1H09, representing an additional 532,450 tickets. ZON was responsible for 95% of this growth, 508,216 tickets, with the rest of the market remaining flat and main competitors losing market share. Overall, the number of cinema tickets sold at ZON in 1H10 was 13.8% higher than in 1H09, reaching almost 4.2 million, and representing an increase in market share of 3.1 pp to 53.7% from 50,6% in 1H09. 1Q10 was marked by some very successful movies in terms of box-office sales, namely “Avatar”, “Alice in Wonderland”, “It’s Complicated” and “Up in the Air”, however sales fell-off slightly in 2Q10 due to comparatively lower number of blockbuster movies. ZON’s y.o.y. increase was greater than that of the total market due to its significant head-start in terms of technological innovation, thus enabling it to show content that others players don’t have the capacity to show. As a result, ZON continues to gain market share in attendances and revenues, without the need for investment in new sites. On the Audiovisuals front, 1H10 was also very positive for revenues and share evolution as ZON was responsible for distributing many of the blockbuster movies that premiered in the period. Of the films distributed in 1H10, only 10 exceeded the 200 thousand spectator threshold and of these, 8


were distributed by ZON. Some of the main box office hits distributed by ZON in 1Q10 were “Alice in Wonderland”, “The Princess and the Frog”, “How to Train your Dragon”, “It’s Complicated” and “Shutter Island”. 2Q10 was marked by the launch of movies such as “Law Abiding Citizen”, “Iron Man 2”, “Robin Hood”, “Prince of Persia: Sands of Time” and “Eclipse, the Twilight Saga”. The new movie for the Twilight Saga, launched on 30 June, was the best opening day ever for an independent movie in Portugal, with over 50 thousand spectators. As regards own channels, a strong performance was recorded in terms of audience in 1H10 with total audience for the Dreamia channels (a JV with Chello Media for the production of two movie and series channels – Hollywood and MOV and two children’s channels – Panda and Panda Biggs) increasing to a share of 5.4% out of the total at the end of 1H10, compared with 4.7% in 1H09. As regards the children’s channels, Panda and Panda Biggs, they are clear market leaders in their segment with a 61.7% share of total children’s channel audience in 1H10, which in turn represents 13.7% of total cable audience.


4.7. Consolidated Financial Review

Operating Revenues 199.1 216.2 8.6% 400.6 429.7 7.3%

Pay TV, Broadband and Voice 180.9 197.6 9.2% 362.7 390.2 7.6%

Audiovisuals 13.1 19.0 44.6% 27.4 34.5 25.9%

Cinema 11.8 12.1 2.3% 24.4 27.8 13.6%

Others and Eliminations (6.8) (12.4) 83.2% (14.0) (22.8) 63.4%

Operating Costs Excluding D&A 132.5 140.0 5.6% 269.8 280.1 3.8%

W&S 12.9 14.5 12.5% 27.5 28.8 5.0%

Direct Costs 53.7 62.3 16.0% 109.9 123.8 12.7%

Commercial Costs (1) 20.4 17.9 (12.4%) 39.1 34.6 (11.4%)

Other Operating Costs 45.6 45.3 (0.6%) 93.4 92.9 (0.6%)

EBITDA (2) 66.5 76.2 14.6% 130.8 149.5 14.3%

EBITDA Margin 33.4% 35.3% 1.8pp 32.7% 34.8% 2.2pp

Depreciation and Amortization 39.8 52.1 30.9% 85.8 105.2 22.6%

Income From Operations (3) 26.7 24.1 (9.8%) 45.0 44.3 (1.5%)

Other Expenses / (Income) 1.7 0.4 (74.3%) 1.6 0.4 (72.9%)

Operating Profit (EBIT) (4) 25.0 23.6 (5.5%) 43.4 43.9 1.1%

Financial Expenses (Income) 8.7 8.0 (7.5%) (0.0) 16.2 n.a.

Income Before Income Taxes 16.4 15.6 (4.5%) 43.4 27.7 (36.1%)

Income Taxes (6.2) (1.5) (75.6%) (13.3) (3.9) (70.4%)

Income From Continued Operations 10.2 14.1 39.0% 30.2 23.8 (21.0%)

o.w. Attributable to Minority Shareholders (0.5) (0.5) (10.3%) (1.1) (0.9) (17.3%)

Net Income 9.6 13.6 41.7% 29.1 22.9 (21.2%)

(1) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold;(2) EBITDA = Income From Operations + Depreciation and Amortization;

(4) EBIT = Income Before Financials and Income Taxes

1H10 / 1H09

Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channelsto other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income.

(3) Income From Operations = Income Before Financials and Income Taxes + work force reduction programme costs + impairment of goodwill + Losses/Gains on disposal of fixed assets + Other costs/income.

Profit and Loss Statement

(Millions of Euros)2Q09 2Q10 2Q10 / 2Q09 1H09 1H10

In order to make comparisons with previous periods, the 2009 figures presented below were adjusted to better explain the ongoing performance. Therefore, adjustments have been made to 2009 operating revenue and cost lines in the table “Profit and Loss Statement – Pro-Forma”, to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels to other operators, and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income. As such, all comparisons and explanations were based on the 2009 pro-forma figures you will find on the table “Profit and Loss Statement – Pro-Forma”, below.


Above, you may find the table “Profit and Loss Statement”, which presents 2009 numbers without any sort of adjustment.

Operating Revenues 197.4 216.2 9.5% 394.8 429.7 8.8%

Pay TV, Broadband and Voice 179.2 197.6 10.2% 356.9 390.2 9.3%

Audiovisuals 13.1 19.0 44.6% 27.4 34.5 25.9%

Cinema 11.8 12.1 2.3% 24.4 27.8 13.6%

Others and Eliminations (6.8) (12.4) 83.2% (14.0) (22.8) 63.4%

Operating Costs Excluding D&A 131.6 140.0 6.4% 266.4 280.1 5.2%

W&S 12.9 14.5 12.5% 27.5 28.8 5.0%

Direct Costs 52.7 62.3 18.1% 106.4 123.8 16.4%

Commercial Costs (1) 20.4 17.9 (12.4%) 39.1 34.6 (11.4%)

Other Operating Costs 45.6 45.3 (0.6%) 93.4 92.9 (0.6%)

EBITDA (2) 65.8 76.2 15.9% 128.4 149.5 16.5%

EBITDA Margin 33.3% 35.3% 1.9pp 32.5% 34.8% 2.3pp

Depreciation and Amortization 39.8 52.1 30.9% 85.8 105.2 22.6%

Income From Operations (3) 25.9 24.1 (7.2%) 42.6 44.3 4.1%

Other Expenses / (Income) 0.9 0.4 (52.2%) (0.8) 0.4 (154.0%)

Operating Profit (EBIT) (4) 25.0 23.6 (5.5%) 43.4 43.9 1.1%

Financial Expenses (Income) 8.7 8.0 (7.5%) (0.0) 16.2 n.a.

Income Before Income Taxes 16.4 15.6 (4.5%) 43.4 27.7 (36.1%)

Income Taxes (6.2) (1.5) (75.6%) (13.3) (3.9) (70.4%)

Income From Continued Operations 10.2 14.1 39.0% 30.2 23.8 (21.0%)

o.w. Attributable to Minority Shareholders (0.5) (0.5) (10.3%) (1.1) (0.9) (17.3%)

Net Income 9.6 13.6 41.7% 29.1 22.9 (21.2%)

Adjusted Net Income (5) 9.6 13.6 41.7% 16.8 22.9 36.2%

(1) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold;

(2) EBITDA = Income From Operations + Depreciation and Amortization;

(4) EBIT = Income Before Financials and Income Taxes (5) Adjusted Net Income is adjusted for the impact of the pre-tax capital gain of 16.9 million euros due to the sale in 1Q09 of a 40% stake in Lisboa TV.

(3) Income From Operations = Income Before Financials and Income Taxes + work force reduction programme costs + impairment of goodwill + Losses/Gains on disposal of fixed assets + Other costs/income.

Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channelsto other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction in revenues of 5.8million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income.

1H102Q10 / 2Q09Profit and Loss Statement - Pro-Forma

(Millions of Euros)2Q09 2Q10 1H10 / 1H091H09

Operating Revenues Operating Revenues posted an 8.8% y.o.y. increase in 1H10, to 429.7 million euros, with progressive acceleration in revenue growth quarter on quarter. Whereas in 1Q10, Operating Revenues grew by 8.2% yoy, growth in 2Q10 accelerated to 9.5% y.o.y.. The increase in revenues was led by a 9.3% increase in core Pay TV, Broadband and Voice revenues to 390.2 million euros in 1H10, resulting from a 15.9pp increase in Triple Play penetration, a 13.6% increase in RGUs and a 6.9% increase in Blended ARPU.


The Audiovisuals and Cinema businesses also posted significant improvement in 1H10, increasing y.o.y. 25.9% to 34.5 million euros and 13.6% to 27.8 million euros respectively. ZON’s strong performance in these areas was driven by its important share of cinema exhibition and movie distribution, in particular stimulated by consumer enthusiasm for 3D content. The revenues from the Audiovisuals division are also positively impacted by the consolidation, in 2Q10, of the revenues from the new Dreamia joint-venture (50 / 50). EBITDA EBITDA increased 16.5% on a comparable basis in 1H10 to 149.5 million euros, generating a 34.8% margin as a percentage of revenues, compared with 32.5% in 1H09 and also recording very positive quarterly trends. In 1Q10, EBITDA posted y.o.y. growth of 17% and of 15.9% in 2Q10. This continued improvement in profitability is the result of a company wide effort to be more efficient and optimize the overall cost structure. Some measures were discussed previously in the operating review, in particular the effort to promote a more efficient sales channel mix. Consolidated Operating Costs Wages and Salaries increased by 5% y.o.y. in 1H10 to 28.8 million euros, albeit keeping a relatively stable quarterly trend. Direct Costs increased 16.4% in 1H10 to 123.8 million euros, due to the combination of higher fixed and particularly mobile traffic driving increased interconnection charges and telecom capacity requirements. In addition, programming costs increased due to the introduction of new channels such as TVI24 and some of the new HD channels. Direct costs are also impacted by the increased operating activity in the cinema and audiovisuals area of the business which dictated a higher level of royalty charges payable to producers in 1H10 compared with the previous year. Commercial Costs fell by 11.4% in 1H10 to 34.6 million euros. The most significant contribution to the decline in commercial costs was the lower level of sales commissions recorded, due namely to the focus on rationalizing sales distribution channels, thus reducing the weight of more expensive and typically more volatile door-to-door sales channels. Other Operating Costs were relatively flat y.o.y. posting a 0.6% decline to 92.9 million euros, a clear sign of cost discipline in general and administrative areas. Net Income

Net Income was 22.9 million euros in 1H10. Quarterly Net Income performance was very positive, posting acceleration from y.o.y growth in 1Q10 of 28.8% (adjusted for the sale in February 2009 of ZON’s 40% stake in Lisboa TV) to y.o.y. growth of 41.7% in 2Q10. Depreciation and Amortization, as witnessed in previous periods, recorded a significant y.o.y. increase. In 1H10, D&A increased 22.6% y.o.y. to 105.2 million euros due to the higher operational investment in customer terminal equipment. On a quarterly basis, D&A remained relatively flat in 2Q10 when compared with 1Q10. Net Financial Expenses in 1H10 amounted to 16.2 million euros, compared with zero net financial results in 1H09. These two periods are not directly comparable due to the capital gain recorded in 1Q09 from the sale of ZON’s stake in Lisboa TV, which generated a pre-tax capital gain of 16.9


million euros. Net interest charges fell by 21% y.o.y. to 11.6 million euros due to a reduction in the average level of gross debt over the period and to the generally lower interest rate environment. It is also worth highlighting that the equity consolidation of the Net Income from our participation in an Angolan operation is negatively impacting this cost line by approximately 2.3 million euros in 1H10. Income Taxes amounted to 3.9 million euros in 1H10, down significantly from the 13.3 million euros recorded in 1H09 which was impacted by the pre-tax capital gain of 16.9 million euros due to the sale of ZON’s 40% stake in Lisboa TV as mentioned above. Income tax charge on the P&L was positively affected by the impact of the increase in corporate tax rate on deferred taxes and by a tax benefit for research and development and Next Generation Networks. CAPEX

Pay TV, Broadband and Voice Infrastructure 23.0 21.1 (8.4%) 40.7 41.4 1.7%

Terminal Equipment 20.9 16.8 (19.8%) 44.2 44.7 1.1%

Other 0.9 3.6 282.8% 4.8 5.4 12.9%

"Baseline" CAPEX 44.9 41.5 (7.6%) 89.7 91.5 2.0%

Long Term Contracts 0.0 1.0 n.a. 0.6 2.1 219.5%

Other Non-Recurrent Items 0.0 13.8 n.a. 0.3 16.6 n.a.

Total CAPEX 44.9 56.3 25.4% 90.6 110.2 21.6%

CAPEX (Millions of Euros) 2Q09 2Q10 2Q10 / 2Q09 1H10 / 1H091H09 1H10

Total CAPEX in 1H10 was 110.2 million euros, representing a 21.6% increase in comparison with 1H09. Baseline CAPEX was relatively flat in 1H10 when compared with the previous year and was in fact 7.6% lower y.o.y. in 2Q10, and 17.2% lower than in 1Q10. The more contained levels of baseline CAPEX are primarily a result of efforts to reduce the cost of terminal equipment installed, which is capitalized and then depreciated over their average lifetime, and also of a higher level of refurbishment of equipment injected back into the logistic chain. Higher levels of Other Non-recurrent CAPEX of 16.6 million euros in 1H10, compared with 0.3 million euros in 1H09, was the result primarily of a one-off investment in the new ZON data centre which became operational in 2Q10 and investment made to relocate hubs onto own sites, a project that will extend throughout 2010 and into 2011, and will partially replace the current infrastructure contract with the incumbent that will expire in December 2010.


EBITDA minus CAPEX 21.6 19.9 (7.9%) 40.2 39.4 (2.0%)

Adjustment made to EBITDA 0.8 0.0 (100.0%) 2.4 0.0 (100.0%)

Non-Cash Items Included in EBITDA minus CAPEX(1) 4.0 1.1 (73.5%) 7.5 5.6 (26.3%)

Change in Working Capital (70.4) (1.5) (97.9%) (52.2) (24.1) (53.8%)

Operating Cash-Flow (44.7) 19.5 (143.7%) (4.5) 20.8 n.a.

Net Interest Paid (14.3) (10.4) (27.2%) (14.8) (12.8) (13.7%)

Income Taxes Paid (1.3) (2.9) 116.5% (2.2) (3.2) 46.6%

Long Term Contracts (10.0) (14.2) 41.5% (24.8) (54.0) 117.5%

Sale / (Acquisition) of Own Shares 0.0 0.0 n.a. 0.0 72.7 n.a.

Dividends (47.7) (49.8) 4.4% (45.5) (49.9) 9.6%

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

Other Cash Movements 4.2 (0.7) (116.6%) (1.2) (0.3) (76.2%)

Free Cash-Flow (113.9) (58.5) (48.6%) (86.2) (19.9) (77.0%)

Note: Adjustments have been made to 2009 operating revenue and cost lines to reflect the impact of the renegotiation, in 1Q09, of the SIC content contract, whereby ZON is no longer responsible for the wholesale of the SIC Pay TV channels toother operatorsto other operators and the fact that as from January 2010, ZON no longer received a share of the advertising revenues from SIC Pay TV channels. The cumulative pro-forma adjustments made in 1H09 resulted in a reduction inrevenues of 5.8 million euros, in costs of 3.4 million euros and in EBITDA of 2.4 million euros, and an increase of 2.4 million euros in Other Expenses / (Income), thus not affecting Net Income.

Cash Flow (Millions of Euros) 2Q09 2Q10 2Q10 / 2Q09 1H10 / 1H09

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

1H09 1H10

Operating Cash Flow Operating Cash Flow posted a strong improvement in 1H10 to 20.8 million euros, which compares with negative Operating Cash Flow of 4.5 million euros in 1H09, an improvement explained by the higher levels of EBITDA-CAPEX and by a marked improvement in working capital levels, which posted a marked q.o.q. improvement from a negative contribution of 22.6 million euros in 1Q10 to negative 1.5 million euros in 2Q10. The turnaround in performance between quarters was mostly due to the anticipated reversal of a non-recurrent increase in VAT of approximately 17 million euros which had impacted working capital in 1Q10. Free Cash Flow Free Cash Flow generation improved by 77% in 1H10 to negative 19.9 million euros, compared with negative 86.2 million euros in 1H09, on the back of improved Operating Cash Flow performance as explained above, lower interest payments and a cash intake of 72.7 million euros related with the sale of own shares to Kento in 1Q10. Items contributing negatively to cash flow generation were an increase in payments for long terms contracts to 54 million euros, the majority of which a front-ended payment related with the Sport TV extension of the Portuguese football broadcasting rights for a further year, thus locking in the contract until the end of 2013, in addition to a 9.6% increase in dividend payments to 49.9 million euros.


Consolidated Balance Sheet

Current Assets 436.4 357.4

Cash and Equivalents 177.0 127.2

Accounts Receivable, Net 185.0 170.4

Inventories, Net 39.9 34.8

Taxes Receivable 21.6 4.9

Prepaid Expenses and Other Current Assets 13.0 20.0

Non-current Assets 1,042.8 1,074.6

Investments in Group Companies 1.3 1.0

Intangible Assets, Net 353.8 318.1

Fixed Assets, Net 554.6 592.9

Deferred Taxes 47.9 50.9

Other Non-current Assets 85.3 111.7

Total Assets 1,479.2 1,432.0

Current Liabilities 544.5 346.2

Short Term Debt 246.5 73.1

Accounts Payable 175.9 169.5

Accrued Expenses 74.7 74.7

Deferred Income 3.7 5.0

Taxes Payable 29.8 13.4

Current Provisions and Other Liabilities 13.9 10.6

Non-current Liabilities 745.0 850.0

Medium and Long Term Debt 722.7 821.5

Non-current Provisions and Other Liabilities 22.3 28.5

Total Liabilities 1,289.5 1,196.2

Equity Before Minority Interests 180.4 226.3

Share Capital 3.1 3.1

Own Shares (87.2) 0.1

Reserves, Retained Earnings and Other 220.5 200.2

Net Income 44.0 22.9

Minority Interests 9.2 9.4

Total Shareholders' Equity 189.7 235.7

Total Liabilities and Shareholders' Equity 1,479.2 1,432.0

Balance Sheet (Millions of Euros) 2009 1H10


Capital Structure At the end of June 2010, Net Financial Debt stood at 635.7 million euros, representing a 3.2% increase in comparison with the end of 2009, as a result of the negative Free Cash Flow explained above. ZON’s gross bank debt is represented primarily by commercial paper lines, by the loan from the European Investment Bank described in previous announcements and by bond issues secured in 2009. The equity swap agreements in place at the end of 2009 amounting to 84 million euros were unwound with the completion of the sale of own shares to Kento in 1Q10. The commercial paper lines are all negotiated at floating interest rates. To protect against future interest rate fluctuations, ZON has negotiated interest rate hedging operations of 515.8 million euros (approximately 81.1% of total Net Financial Debt) with maturities between 2 and 3 years. The hedging operations are booked at fair value on the Balance Sheet. With these funds in place, ZON today has a very solid debt position, under very good financial terms. The funds from the European Investment Bank loan and the bond issues were drawn down in 4Q09, thereby increasing significantly the average maturity of ZON’s financial debt and eliminating any foreseeable re-financing needs until mid 2011. ZON’s total Net Financial Debt has an average maturity of 2.39 years with an all-in average cost of around 3.46%. Net Financial Gearing reduced to 72.9% compared with 76.5% at the end of 2009, and Net

Financial Debt / EBITDA (last 4 quarters) stands at 2.2x, well below the average of ZON’s peer group. Total Net Debt of 763.6 million euros also includes commitments with Long Term contracts recorded as liabilities on the Balance Sheet, of which the most relevant are long-term telecom, transponder and content contracts.

Short Term 218.2 49.0 (77.6%)

Bank and Other Loans 212.8 44.8 (79.0%)

Financial Leases 5.4 4.2 (22.0%)

Medium and Long Term 609.2 714.6 17.3%

Bank Loans 596.5 701.2 17.5%

Financial Leases 12.7 13.4 5.7%

Total Debt 827.5 763.6 (7.7%)

Cash, Short Term Investments and Intercompany Loans 211.6 127.9 (39.6%)

Net Financial Debt 615.8 635.7 3.2%

Net Financial Gearing (1) 76.5% 72.9% (3.5pp)

Net Financial Debt / EBITDA 2.3x 2.2x n.a.(1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).

Net Financial Debt (Millions of Euros) 2009 1H10 / 20091H10


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 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 arousal 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; the technological changes; the competition effects; the outlook of the telecommunications sector; the changes in regulation and the economical outlook. Lisbon, 16 August 2010

The Board of Directors


05. Consolidated Financial Statements


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

Consolidated Statement of Comprehensive Income for the Half Years ended on 30 June 2010 and 2009

(Amounts stated in euros)

Notes 30-06-2010 2nd Quarter 10 30-06-2009 2nd Quarter 09

(Unaudit) (a) (Unaudit ) (a)

REVENUES:

Services rendered 411 330 540 207 541 063 382 641 612 190 014 104Sales 16 031 094 7 357 819 15 270 616 7 665 938Other operating revenues 2 310 760 1 281 394 2 671 734 1 401 840

6 429 672 394 216 180 276 400 583 962 199 081 882

COSTS, EXPENSES, LOSSES AND INCOME:

Wages and salaries 28 838 344 14 510 368 27 466 208 12 901 620Direct costs 7 123 844 444 62 266 673 109 856 635 53 673 317Costs of products sold 5 673 652 3 424 912 8 529 088 5 398 880Marketing and advertising 11 452 320 6 159 484 10 382 759 5 947 905Support services 35 407 736 17 743 783 30 998 414 15 080 322Supplies and external services 68 224 151 34 633 268 72 155 183 34 560 293Other operational costs 492 322 280 925 364 957 ( 253 631)Taxes 2 027 307 1 378 120 1 418 093 387 446Provisions and adjustments 8 and 19 4 168 093 ( 440 839) 8 605 525 4 850 893Depreciation and amortization 16 and 17 103 011 901 52 629 458 85 961 275 41 641 400Impairment of assets 16 and 17 2 201 917 ( 481 912) ( 151 291) ( 1 813 093)Reestructuring costs 720 000 720 000 891 484 873 484

Losses/(gains) on sale of assets, net ( 507 733) ( 390 540) 476 776 654 150Other losses/(gains), net 221 081 99 492 229 055 143 868

385 775 535 192 533 192 357 184 161 174 046 855

Income before financial results and taxes 43 896 859 23 647 084 43 399 801 25 035 027

Financial costs 9 11 560 184 5 863 466 14 661 441 6 561 948Net foreign exchange losses/(gains), net ( 395 785) ( 253 925) 153 116 ( 259 305)Net losses/(gains) on financial assets, net 6 271 2 800 68 851 68 851Equity in earnings of affiliated companies, net 10 2 239 727 1 291 310 ( 16 954 174) 580 926Net other financial expenses/(income) 9 2 742 645 1 107 249 2 045 365 1 708 626

16 153 042 8 010 900 ( 25 401) 8 661 045

Income before taxes 27 743 817 15 636 184 43 425 202 16 373 983

Income taxes 11 3 920 595 1 517 432 13 251 242 6 214 918

Net consolidated income 23 823 222 14 118 752 30 173 960 10 159 064

Attributable to:

Minority interests 892 086 479 986 1 078 553 534 948Zon Multimédia Group shareholders 22 931 136 13 638 766 29 095 407 9 624 116

Earnings per shareBasic 13 0,07 0,04 0,10 0,03Diluted 13 0,07 0,04 0,10 0,03

(a) As standard practice, only the half year accounts are reviewed; the quarterly results are not reviewed 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 2010.

Accountant The Board of Directors



Consolidated Statement of Comprehensive Income for the Half Years ended on 30 June 2010 and 2009


30-06-2010 30-06-2009

Net income 23 823 222 30 173 960

Share incentive scheme 2 162 161 ( 297 793)Fair value of interest rate swap (Note 21) ( 3 723 221) 1 132 910Fair value of exchage rate forward (Note 21) 1 266 980 -Currency translation differences ( 77 576) ( 15 088)Other movements 36 169 ( 26 894)

Other comprehensive income ( 335 486) 793 135

Total comprehensive income for the period 23 487 736 30 967 095

Attributable to:

Share owners of the company 22 595 650 29 888 542Minority interests 892 086 1 078 553

23 487 736 30 967 095

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 2010.




Consolidated Statement of Financial Position at 30 June 2010 and 31 December 2009


Notes 30-06-2010 31-12-2009

Assets

Current assets:Cash and cash equivalents 14 127 238 721 176 988 410Accounts receivable - trade 122 087 569 114 003 190Accounts receivable - other 48 340 722 70 962 521Inventories 34 802 855 39 906 212Taxes receivable 15 4 931 095 21 553 864Non-current assets held-for-sale 678 218 -Prepaid expenses 19 324 636 12 990 976

Total current assets 357 403 816 436 405 173

Non-current assets:Accounts receivable - other 87 460 443 62 407 027Investments in participated companies 1 049 168 1 274 970Available-for-sale financial assets 21 777 351 21 777 351Intangible assets 16 318 055 033 353 759 291Tangible assets 17 592 895 079 554 572 281Investment property 166 567 -Deferred income tax assets 11 50 893 051 47 913 336Other non-current assets 1 002 126 1 073 855

Derivative financial instruments 21 1 266 980 -Total non-current assets 1 074 565 798 1 042 778 111

Total assets 1 431 969 614 1 479 183 284

Liabilities

Current liabilities:Borrowings 18 73 076 213 246 539 399Accounts payable-trade 109 956 374 138 271 322Accounts payable-other 59 540 772 37 638 158Accrued expenses 74 742 704 74 734 297Deferred income 4 951 165 3 734 642Taxes payable 15 13 370 404 29 757 711Provisions for other liabilities and charges 19 10 565 423 13 883 093Other liabilities 930 -

Total current liabilities 346 203 985 544 558 622

Non-current liabilities:Borrowings 18 821 532 935 722 717 780Accounts payable-other 7 744 596 7 240 829Accrued expenses 21 139 -Defered income 3 211 005 3 476 745Provisions for other liabilities and charges 19 6 827 369 4 446 323Deferred income tax liabilities 11 5 944 499 6 075 949Derivative financial instruments 21 4 745 454 1 032 109

Total non-current liabilities 850 026 997 744 989 735

Total liabilities 1 196 230 982 1 289 548 357

Shareholder's equity

Share capital 20.1 3 090 968 3 090 968Treasury shares 20.2 ( 22 750) ( 87 236 629)Legal reserve 20.3 3 556 300 3 556 300Other reserves 20.3 160 319 887 197 195 421Retained earnings 59 364 440 63 779 018

Equity before minority interests 226 308 845 180 385 078

Minority interests 9 429 787 9 249 849Total equity 235 738 632 189 634 927

Total liabilities and shareholder's equity 1 431 969 614 1 479 183 284

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

ended on 30 June 2010.




Consolidated Statement of Changes in Shareholders' Equity for the Half Years ended on 30 June 2010 and 2009


Notes Share capitalCapital issued

premium Treasury shares Legal reserve Other reservesAccumulated

earningsMinority interests Total

Balance as at 1 January 2009 3 090 968 ( 5 503 855) ( 84 129 768) 3 556 300 191 236 711 74 466 874 9 030 717 191 747 946Dividends attributed to minority interests - - - - - - ( 1 430 818) ( 1 430 818)Dividends attributed - - - - - ( 47 217 369) - ( 47 217 369)Undistributed profit - - - - 5 068 714 ( 5 068 714) - -Distribuition of treasury shares 20.3 - 2 904 302 3 030 - ( 1 634 182) - - 1 273 149Comprehensive income for the period - - - - 793 135 29 095 407 1 078 553 30 967 095Consolidation differences - - - - 69 717 7 364 ( 19 526) 57 555- -

Balance as at 30 June 2009 3 090 968 ( 2 599 553) ( 84 126 738) 3 556 300 195 534 095 51 283 562 8 658 926 175 397 559

Balance as at 1 January 2010 3 090 968 ( 87 096 566) ( 140 064) 3 556 300 197 195 421 63 779 018 9 249 849 189 634 926Dividends attributed to minority interests - - - - - - ( 714 864) ( 714 864)Dividends attributed - - - - ( 10 123 224) ( 39 332 268) - ( 49 455 492)Undistributed profit - - - - ( 13 781 844) 13 781 844 - -Acquisition of treasury shares - ( 1 560 632) ( 3 987) - - - - ( 1 564 617)Distribuition of treasury shares 20.3 - 1 791 623 3 667 - - ( 1 795 290) - -Sale of treasury shares 20.3 - 2 771 245 4 257 - ( 659 700) - - 2 115 802Sale of treasury shares - Equity swap 20.3 - 84 071 634 136 071 - ( 11 970 731) - - 72 236 974Comprehensive income for the period - - - - ( 335 486) 22 931 136 892 086 23 487 736Consolidation differences - - - - ( 4 549) - 2 716 ( 1 833)- - - - - - - -

Balance as at 30 June 2010 3 090 968 ( 22 695) ( 55) 3 556 300 160 319 887 59 364 440 9 429 787 235 738 632

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

the half year ended on 30 June 2010.




Consolidated Statement of Cash Flows for the half Years ended on 30 June 2010 and 2009


Notes 30-06-2010 30-06-2009

OPERATING ACTIVITIESCollections from clients 502 787 486 467 835 894Payments to suppliers ( 356 367 623) ( 329 855 287)Payments to employees ( 31 067 751) ( 28 193 926)Payments relating to income taxes ( 3 241 848) ( 1 674 443)Payments relating to indirect taxes and other ( 10 813 469) ( 10 970 729)

Cash flow from operating activities (1) 101 296 795 97 141 509

INVESTING ACTIVITIESCash receipts resulting from

Financial investments 6 666 666 6 666 666Tangible fixed assets 1 676 147 331 341Loans granted 33 300 000 18 900 000Interest and related income 3 268 885 1 402 677Dividends 298 956 2 155 893

45 210 654 29 456 577

Payments resulting from

Tangible fixed assets ( 89 112 992) ( 85 256 530)Intangible assets ( 1 598 095) ( 3 969 162)

( 90 761 088) ( 89 321 463)Cash flow from investing activi ties (2) ( 45 550 434) ( 59 864 886)

FINANCING ACTIVITIESCash receipts resulting from

Loans obtained 862 916 667 1 473 750 000Distribution of treasury shares 74 196 999 -

937 113 666 1 473 750 000Payments resulting from

Loans obtained ( 958 751 868) (1 446 030 000)Lease rentals (principal) ( 12 507 180) ( 18 393 055)Interest and related expenses ( 19 969 085) ( 18 749 995)Dividends ( 50 177 166) ( 48 648 187)Acquisition of treasury shares ( 1 479 349) -

(1 042 884 649) (1 531 821 237)Cash flow from financing activities (3) ( 105 770 983) ( 58 071 237)

Change in cash and cash equivalents (4)=(1)+(2)+(3) ( 50 024 621) ( 20 794 614)Effect of exchange differences 274 932 121 327Cash and cash equivalents at the beginning of the period 176 988 410 63 439 713Changes in the consolidated scope - ( 500)Cash and cash equivalents at the end of the period 14 127 238 721 42 765 926

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 2010.



Notes to the Consolidated Financial Statements at 30 June 2010

Index of notes to the consolidated financial statements

1. Introductory Note ......................................................................................................................................................... 38 2. Accounting Policies ..................................................................................................................................................... 39 3. Judgements and estimates .......................................................................................................................................... 39 4. Changes in the consolidation perimeter ...................................................................................................................... 39 5. Segment Reporting...................................................................................................................................................... 40 6. Operating Revenue ..................................................................................................................................................... 42 7. Direct costs of services ................................................................................................................................................ 43 8. Provisions and adjustments ......................................................................................................................................... 43 9. Finance costs and other net financial charges ............................................................................................................ 44 10. Losses/(gains) in associated companies ................................................................................................................... 44 11. Income tax expense .................................................................................................................................................. 44 12. Dividends ................................................................................................................................................................... 48 13. Earnings per share .................................................................................................................................................... 48 14. Cash and cash equivalents ....................................................................................................................................... 48 15. Taxes payable and receivable ................................................................................................................................... 49 16. Intangible assets........................................................................................................................................................ 50 17. Tangible assets ......................................................................................................................................................... 51 18. Borrowings and loans ................................................................................................................................................ 52 19. Provisions for other risks and contingencies ............................................................................................................. 54 20. Shareholder's equity .................................................................................................................................................. 55 21. Derivative financial instruments ................................................................................................................................. 57 22. Guarantees and financial commitments .................................................................................................................... 58 23. Related Parties .......................................................................................................................................................... 60 24. Legal actions ............................................................................................................................................................. 63 25. Share incentive scheme ............................................................................................................................................ 67 26. Subsequent events .................................................................................................................................................... 68



Notes to the Interim Consolidated Financial Statements at 30 June 2010


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 with the

distribution 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”) include cable and satellite television services, voice and

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

distribution, and the production of channels for Pay TV platforms.

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 associated companies. The activities of these companies include: a) television signal cable and satellite

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) virtual mobile 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 and its associated companies is

regulated by Law 5/2004 (Electronic Communications Law), which establishes the legal regime governing

electronic communications networks and services.

ZON Conteúdos – Actividade 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”) manage the television and content production business, and currently

produce movie, television series, sports and children’s channels which are distributed to other operators by

ZON TV Cabo and its associated companies. 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 Interim Consolidated Financial Statements follow the order in which the

items are shown in the consolidated financial statements.


The consolidated financial statements for the half year ended on 30 June 2010 were approved by the Board

of Directors and their publication authorised on 29 July 2010.

2. Accounting Policies

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

and records of the companies included in the consolidation (Annex I.1), 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 2009.

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 2010, and in accordance with IAS 34 - Interim Financial Reporting.

In 2010 the ZON Group started to apply IAS 40 – Investment Property.

Investment property mainly includes buildings held to generate rents rather than for use in the production or

supply of goods or services, or for administrative purposes, or for sale in the ordinary course of business.

These are valued initially at cost and subsequently the standards allow to choose between: i) fair value

model and ii) the depreciated cost method (less any accumulated impairment losses).

The Group opted for the cost method for the valuation of investment property since use of the fair value

model would not have resulted in significant differences. An investment property is eliminated from the

balance sheet on disposal or when the investment property is taken permanently out of use and no financial

benefit is expected from its disposal.

3. Judgements and estimates

During the half year ended on 30 June 2010, 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

2009, nor were any material errors relating to previous financial years recognised.

4. Changes in the consolidation perimeter

In 2009 the following changes took place in the consolidation perimeter which have an impact on the

consolidated statement of comprehensive income: i) liquidation of ZON Serviços de Gestão Partilhados,

S.A. (“ZON Serviços”); ii) acquisition of 100% of the Dutch company Teliz Holding B.V. (“Teliz”), which owns

30% of the Angolan company FINSTAR – Sociedade de Investimentos e Participações, S.A. (“FINSTAR”);

iii) formation of ZON Cinemas, SGPS, S.A. (“ZON Cinemas SGPS”); iv) formation of ZON Audiovisuais,

SGPS, S.A. .(“ZON Audiovisuais SGPS”).


In 2010, two new companies were included in the consolidation perimeter: Dreamia Holding BV (“Dreamia

BV”), 50% owned by ZON Audiovisuais SGPS, and Dreamia SA, 100% owned by Dreamia BV (see Annex I

c)).

The impact on the statement of comprehensive income and on the financial position at 30 June 2010 is

shown below:

Statement of Comprehensive IncomeDreamia BV Dreamia SA Zon Serviços Teliz

Zon Audiovisuais SGPS

Zon Cinemas SGPS

Total

Revenue 60.433 3.402.542 - - - - 3.462.975Costs (397.361) (2.048.039) 390 8.180 (2.077) (2.077) (2.440.984)

Operating income/(loss) (336.928) 1.354.503 390 8.180 (2.077) (2.077) 1.021.991Financial results (15.242) 63.884 825 (2.310.661) 19.060 (87) (2.242.221)Other - - (193) - - - (193)

Income before taxes (352.170) 1.418.387 1.022 (2.302.481) 16.983 (2.164) (1.220.423)Income taxes - - 120 - (8.028) - (7.908)

Net income (352.170) 1.418.387 1.142 (2.302.481) 8.955 (2.164) (1.228.331)

Statement of Financial Position

Asset 8.845 4.402.246

Liability 1.090.120 1.109.506

(1.081.275) 3.292.740

The companies Teliz, ZON Audiovisuais SGPS and ZON Cinemas SGPS were already included in the

consolidation perimeter at 31 December 2009, with the result that no impact on the financial position is

shown. ZON Serviços was wound up in 2009, with the result that no impact on the financial position is

shown.

5. Segment Reporting

5.1. Main report format – Business segments

At 30 June 2009 the ZON Group was organised into three business segments: “Pay TV, broadband and

voice”, “Audiovisuals” and “Others”. In 2010 all the companies in the “Others” segment were allocated to the

other segments, with the result that the June 2009 amounts have been restated for comparative purposes.

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 Portugal, ZON TV

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

Madeirense”), ZON Conteúdos, ZON Lusomundo TV, Teliz Holding B.V. (“Teliz”) and the Sport TV

joint venture.

� Audiovisuals relates to the supply of video production and sale, 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 Audiovisuais 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 BV and Dreamia SA.

The results by segment for the half years ended on 30 June 2010 and 2009 are shown below:

30-06-2010 2nd Quarter 30-06-2010 2nd Quarter 30-06-2010 2nd Quarter

Total segment revenue 391 915 851 198 265 909 57 315 741 28 729 770 449 231 592 226 995 679Inter-segment revenue ( 7 555 101) ( 4 421 423) ( 12 004 097) ( 6 393 980) ( 19 559 198) ( 10 815 403)

Sales and services rendered 384 360 750 193 844 486 45 311 644 22 335 790 429 672 394 216 180 276

Operational income by segment 38 938 143 21 393 544 4 958 716 2 253 540 43 896 859 23 647 084Net interest expense and other 12 962 136 6 173 032 944 908 543 758 13 907 044 6 716 790Gains in financial assets ( 670) ( 670) 6 941 3 470 6 271 2 800Share of profit/(loss) from associates 2 291 169 1 308 739 ( 51 442) ( 17 429) 2 239 727 1 291 310

Income before taxes 23 685 508 13 912 443 4 058 309 1 723 741 27 743 817 15 636 184

Income tax expense 2 807 998 1 099 188 1 112 597 418 244 3 920 595 1 517 432

Net income 20 877 510 12 813 255 2 945 712 1 305 497 23 823 222 14 118 752

Other costs:

Depreciation, amortisation and impairment 102 145 002 50 697 395 3 068 816 1 450 151 105 213 818 52 147 546Provisions and adjustments 3 680 526 ( 602 446) 487 567 161 607 4 168 093 ( 440 839)Costs / (revenues) non-recurrent 178 179 165 389 255 168 263 563 433 347 428 952

Pay TV, broadband and voice Audiovisuals Group

30-06-2009 2nd Quarter 30-06-2009 2nd Quarter 30-06-2009 2nd Quarter

Total segment revenue 364 450 124 181 833 602 47 941 886 23 044 008 412 392 010 204 877 610Inter-segment revenue ( 1 949 378) ( 1 002 357) ( 9 858 670) ( 4 793 371) ( 11 808 048) ( 5 795 728)

Sales and services rendered 362 500 746 180 831 245 38 083 216 18 250 637 400 583 962 199 081 882

Operational income by segment 42 133 328 25 308 697 1 266 473 ( 273 670) 43 399 801 25 035 027Net interest expense and other 15 923 758 7 754 262 936 164 257 005 16 859 922 8 011 267Gains in financ ial assets 68 851 68 851 - - 68 851 68 851Share of profit/(loss) from associates ( 16 889 860) 624 658 ( 64 314) ( 43 732) ( 16 954 174) 580 926

Income before taxes 43 030 579 16 860 926 394 623 ( 486 943) 43 425 202 16 373 983

Income tax expense 13 125 296 6 480 881 125 946 ( 265 963) 13 251 242 6 214 918

Net income 29 905 283 10 380 045 268 677 ( 220 980) 30 173 960 10 159 065

Other costs:

Depreciation, amortisation and impairment 82 838 210 38 306 411 2 971 774 1 521 896 85 809 984 39 828 307Provisions and adjustments 7 492 971 3 812 020 1 112 554 1 038 873 8 605 525 4 850 893Costs / (revenues) non-recurrent 1 540 171 1 619 816 57 144 51 686 1 597 315 1 671 502

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 fixed assets for the period ended on 30 June 2010

financial are shown below:

Pay TV, broadband

and voiceAudiovisuals Eliminations Not allocated Group

Assets 1 334 209 529 129 654 465 ( 106 711 603) 73 768 055 1 430 920 446

Investment in associated companies and joint ventures 89 507 959 661 - - 1 049 168

Total assets 1 334 299 036 130 614 126 ( 106 711 603) 73 768 055 1 431 969 614

Liabilities 300 981 959 97 159 968 ( 106 711 603) 904 800 658 1 196 230 982

Investment in tangible assets 104 257 571 1 494 750 - - 105 752 321

Investment in intangible assets 4 400 844 - - - 4 400 844


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

Assets Liabilities

Not allocated: Deferred tax (Note 11) 50 893 051 5 944 499 Income tax expense (Note 15) 252 868 4 247 011 Borrowings - current (Note 18) - 73 076 213 Borrowings - non current (Note 18) - 821 532 935 Available-for-sale financial assets 21 777 351 - Non-current assets held-for-sale 678 218 - Investment property 166 567 -

73 768 055 904 800 658

Assets and liabilities by segment, and investments in fixed assets for the 2009 financial year are shown

below:

Pay TV, broadband

and voiceAudiovisuals Eliminations Not allocated Group

Assets 1 376 209 764 117 789 663 ( 86 108 885) 70 017 772 1 477 908 314

Investment in associated companies and joint ventures 59 464 1 215 506 - - 1 274 970

Total assets 1 376 269 228 119 005 169 ( 86 108 885) 70 017 772 1 479 183 284

Liabilities 300 414 932 98 283 495 ( 86 108 885) 976 958 815 1 289 548 357

Investment in tangible assets 196 246 144 6 368 409 - - 202 614 553

Investment in intangible assets 10 676 410 3 736 - - 10 680 146

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

Assets Liabilities

Not allocated: Deferred tax (Note 11) 47 913 336 6 075 949 Income tax expense (Note 15) 327 086 1 625 687 Borrowings - current (Note 18) - 246 539 399 Borrowings - non current (Note 18) - 722 717 780 Available-for-sale financial assets 21 777 351 -

70 017 772 976 958 815

6. Operating Revenue

Consolidated operating revenue in the half years ended on 30 June 2010 and 2009 is composed as follows:

30-06-2010 2nd Quarter 30-06-2009 2nd Quarter

Services rendered

Pay TV, Broadband and voice i) 378.051.992 190.568.818 356.655.593 177.633.866Cinema exhibition i i) 19.238.903 8.105.151 17.282.849 8.497.240Audiovisuals iii) 14.039.645 8.867.094 8.703.170 3.882.998

411.330.540 207.541.063 382.641.612 190.014.104

Sales

Pay TV, Broadband and voice iv) 4.458.729 2.267.523 4.379.698 2.459.483Cinema exhibition v) 5.186.222 2.213.833 4.348.908 2.157.043Audiovisuals vi) 6.386.143 2.876.463 6.542.010 3.049.412

16.031.094 7.357.819 15.270.616 7.665.938

Other operating revenues

Pay TV, Broadband and voice 1.850.030 1.008.145 1.465.456 737.897Cinema exhibition 117.490 55.490 172.035 25.819Audiovisuals 343.240 217.759 1.034.243 638.124

2.310.760 1.281.394 2.671.734 1.401.840

429.672.394 216.180.276 400.583.962 199.081.882

These operating revenues are shown net of IC eliminations.


i) This item mainly includes revenue relating to: (a) subscriptions to basic and premium Pay TV

services (cable and satellite); (b) broadband Internet access services (Netcabo); (c) IP voice

service (VOIP – Voice over Internet); (d) rental of terminal equipment, including set top boxes (Pay

TV) and MVNO; and (e) advertising on Pay TV channels.

ii) This item mainly includes box office revenue at the cinemas of ZON LM Cinemas.

iii) This item mainly includes revenue relating to film distribution to other cinema exhibitors in Portugal

and the production and sale of audiovisual content.

iv) This item mainly includes revenue relating to the sale of terminal equipment, including set top

boxes (Pay TV), telephones and MVNO equipment.

v) This item mainly includes sales of bar products by ZON LM Cinemas.

vi) This item mainly includes DVD sales.

7. Direct costs of services

In the half years ended on 30 June 2010 and 2009 this item was composed as follows:


Programming and exhibition costs i) 93.392.007 47.114.527 86.486.590 41.653.457Telecommunications costs ii) 22.488.628 10.869.597 16.245.984 7.958.211Shared advertising revenues ii i) 6.037.819 3.464.610 5.135.621 3.107.429Others 1.925.990 817.938 1.988.440 954.220

123.844.444 62.266.673 109.856.635 53.673.317

i) Content costs include the costs of programming, exhibition rights and film distribution and the

commercialisation of TV channels.

ii) The variation in telecommunications costs is mainly attributable to the growth in MVNO

subscribers and ducts leasing (ORAC) associated with the acquired companies and the expansion

of the network.

iii) Revenues from advertising on Pay TV channels are shared with content producers on the basis of

the contractual terms agreed with those entities. This cost item corresponds to the proportion of

those revenues attributable to content providers.

8. Provisions and adjustments


Provisions for other liabilities and charges (see note 19) (3.819.438) (5.202.251) 1.495.138 1.113.585

Provision for impairment of trade receivable 7.977.324 4.749.431 7.103.875 3.726.197

Provision for impairment of other receivable 12.188 12.188 11.804 11.786

Debts recovery (1.983) (207) (5.292) (675)

4.168.093 (440.839) 8.605.525 4.850.893


9. Finance costs and other net financial charges

In the half years ended on 30 June 2010 and 2009 finance costs were composed as follows:


Interest expense: Borrowings 10 833 455 5 418 628 12 899 254 5 637 793 Finance leases 2 932 729 1 501 169 3 039 755 1 444 557 Other 250 354 96 318 125 109 89 098

14 016 538 7 016 115 16 064 118 7 171 448Interest earned ( 2 456 354) ( 1 152 649) ( 1 402 677) ( 609 500)

11 560 184 5 863 466 14 661 441 6 561 948

Other financial costs:Comissions and guarantees 3 705 809 1 830 629 2 041 310 1 530 470Prompt payment discount 2 233 672 8 649 2 279Other 409 860 173 640 50 823 175 877

4 117 902 2 004 941 2 100 782 1 708 626Other financial income:

Prompt payment discount ( 1 375 257) ( 897 692) ( 55 417) - 2 742 645 1 107 249 2 045 365 1 708 626

The decrease in interest expense is mainly attributable to the reduction in the average financing cost and in

the average level of debt.

The increase in interest earned was mainly attributable to the average increase in fixed term investments,

which totalled approximately 17 million euros and 161 million euros in the first half of 2009 and 2010

respectively.

10. Losses/(gains) in associated companies



Equity accounting:Lisboa TV - - ( 581 571) -Distodo ( 51 442) ( 17 428) ( 64 314) ( 43 732)Canal 20 TV 1 396 1 396 4 859 4 859Upstar ( 20 912) ( 9 564) - -Finstar i) 2 310 685 1 316 906 - -

2 239 727 1 291 310 ( 641 026) ( 38 873)Gain on sale of Lisboa TV ii) - - ( 16 313 148) 619 799

2 239 727 1 291 310 ( 16 954 174) 580 926

i) 30% financial shareholding in Finstar - Sociedade de Investimentos e Participações, S.A. (held by

Teliz Holding BV).

ii) In 2009, a gain was realised on the disposal by ZON Conteúdos of 40% of the shareholding in

Lisboa TV.

11. Income tax expense

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

25% (20% in the case of ZON TV Cabo Madeirense and 17.5% in the case of ZON TV Cabo Açoreana),

plus municipal IRC surcharge at the maximum rate of 1.5% on taxable profit, giving an aggregate rate of


approximately 26.5%. With the introduction of the austerity measures in Law 12-A/2010 of 30 June, the

latter tax increased to 2.5% on that part of a company’s taxable profit in excess of 2 million euros. In the

calculation of taxable income, to which the above tax rate applies, amounts which are not fiscally allowable

are added to and subtracted from the book results. These differences between book income and taxable

income may be temporary or permanent.

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

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

which fulfil the requirements of Article 63 of the IRC Code.

The companies which are included in the RETGS are:

� ZON Multimédia

� ZON Lusomundo TV

� Empracine

� Lusomundo SII

� ZON Cinemas SGPS

� ZON Audiovisuais SGPS

� ZON TV Cabo

� ZON Televisão por cabo SGPS

� Lusomundo Imobiliária 2

� ZON LM Audiovisuais

� ZON LM Cinemas

� ZON Conteúdos

In accordance with 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; ten years in the case of

contributions relating to financial years prior to 2001), except where tax losses have occurred or tax benefits

have been obtained or inspections, appeals or disputes are in progress, in which cases, 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 any

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 2010, except for the

situations which were the subject of provisions.


1) 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 income tax assets and liabilities in the half years ended on 30 June 2010 and

2009 were as follows:

Equity

31-12-2009Deferred taxes of

the periodChanges in the income tax rate

Deferred taxes of the period Other movements 30-06-2010

Deferred income tax assets:Provisions and adjustments:

Doubtful accounts receivable 6 638 511 273 886 474 511 - 876 985 8 263 893Inventories 1 454 932 14 941 100 666 - - 1 570 539Other provisions and adjustments 15 761 044 1 440 433 1 243 381 593 922 ( 489 643) 18 549 137

Intergroup gains 23 240 500 ( 1 162 025) - - ( 387 342) 21 691 133Tax losses carried forward 818 349 - - - - 818 349

47 913 336 567 235 1 818 558 593 922 - 50 893 051

Deferred income tax liabilities:Reavaluation of fixed assets 6 075 949 ( 642 807) 511 357 - - 5 944 499- - - - -

Net deferred tax 41 837 387 1 210 042 1 307 201 593 922 - 44 948 552

Result (see note 11 b))

Equity

31-12-2008Deferred taxes of

the period Use of tax lossesDeferred taxes of

the period Other movements 30-06-2009Deferred income tax assets:

Provisions and adjustments:Doubtful accounts receivable 6 738 439 22 429 - - ( 191 730) 6 569 138Inventories 1 336 914 120 534 - - - 1 457 448Other 12 780 610 511 841 - 106 286 272 159 13 670 896

Tax losses carried forward 36 798 910 2 412 ( 12 228 104) - ( 80 429) 24 492 789 57 654 873 657 215 ( 12 228 104) 106 286 - 46 190 271

Deferred income tax liabilities:

Reavaluation of fixed assets 6 984 447 ( 742 189) - - - 6 242 258

Net deferred tax 50 670 426 1 399 404 ( 12 228 104) 106 286 - 39 948 013

Result (see note 11 b))

The revaluation of fixed assets at 30 June 2010 includes approximately 5.932 million euros (2009: 6.224

million euros) of deferred tax liabilities resulting from the difference on the acquisition at fair value of the

assets (client portfolio and network) of TVTel and of 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 may be carried forward for a period of four

years after they occur (six years for tax losses generated up to 2009) and may be deducted from taxable

profits generated during that period.

At 30 June 2010 and 31 December 2009, ZON Multimédia’s tax losses carried forward, totalling 3.273

million euros, expire in 2014. This amount derives from the companies acquired in 2008 and 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.

2) Tax rate reconciliation

In the half years ended on 30 June 2009 and 2010, the reconciliation between the nominal rates and the

effective tax rate is as follows:

30-06-2010 30-06-2009

Income before taxes 27 743 817 43 425 202Statutory tax rate 26,5% 26,5%Estimated tax 7 352 112 11 507 679

Permanent differences i) 99 677 2 981 596Deferred tax assets created before the integration for consolidated purpose ii) - ( 549 270)Differences in tax rate of the Açores and Madeira ( 387 640) ( 399 542)Estimated corparate tax corrections 316 752 117 968Fiscal benefits iii) ( 2 787 857) -Changes in the income tax rate iv) ( 1 307 201) -Others 634 752 ( 407 190)

Income tax 3 920 595 13 251 242

Effective Income tax rate for the period 14,1% 30,5%

Income tax 6 437 838 2 422 542Deferred tax ( 2 517 243) 10 828 700

3 920 595 13 251 242

i) At 30 June 2010 and 2009 the permanent differences were composed as follows:

30-06-2010 30-06-2009

Financial costs not accepted for fiscal purposes 1 654 179 2 973 317Provisions ( 3 747 404) 1 602 737Depreciations and amortizations 1 437 051 5 769 108Equity method (Note 10) 2 239 727 ( 641 026)Other ( 1 207 412) 1 547 171

376 141 11 251 30726,5% 26,5%

99 677 2 981 596

ii) In 2009 this amount corresponded to the use of tax losses which had not been recognised as

deferred tax in previous financial years.

iii) The reduction in tax results from the use by ZON TV Cabo of the SIFIDE (Business Research and

Development Incentives System) tax benefit introduced by Law 40/2005 of 3 August and of the

RFAI (Investment Tax Incentive Regime) introduced by Law 10/2009 of 10 March. This figure

corresponds to the amount of the tax benefit calculated for the years 2006 to 2010 to be deducted

from taxable income in 2010.

iv) Application of the new tax rate of 2.5% for the IRC surcharge, which had an impact of 1.307 million

euros on the revision of the amounts of deferred tax assets and liabilities.

The variation in the effective tax rate is mainly due to: i) the fact that in 2009 the gain realised on the

disposal of the shareholding in Lisboa TV was taxed on the total amount (from September 2009 only, it was


taxed on 50%); ii) deductions from taxable income relating to SIFIDE and RFAI; iii) the income from the

reduction in the provision for miscellaneous contingencies (see note 19); and iv) the application of the IRC

surcharge.

12. Dividends

The General Meeting of Shareholders held on 19 April 2010 approved a proposal by the Board of Directors

for payment of an ordinary dividend per share of 0.16 euros, totalling 49 455 492 euros, relating to the net

profit for the year ended on 31 December 2009 of 39 332 268 euros plus free reserves totalling 10 123 224

euros.

Up to June 2010, dividends totalling 714 865 euros (2009: 1 430 818 euros) were also paid to minority

shareholders of the companies ZON TV Cabo Madeirense, ZON TV Cabo Açoreana and Grafilme.

The General Meeting of Shareholders held on 28 April 2009 approved a proposal by the Board of Directors

for payment of an ordinary dividend per share of 0.16 euros, totalling 49 455 492 euros, relating to the net

profit for the year ended on 31 December 2008 of 46 749 904 Euros plus retained earnings totalling 2 705

588 Euros. The dividend attributable to own shares, totalling 2 238 123 Euros, was transferred to retained

earnings.

13. Earnings per share

Earnings per share for the half years ended on 30 June 2010 and 2009 were calculated taking into account

the following amounts:


Net income attributable to equity holders of the parent 22 931 136 13 638 766 29 095 407 9 624 116

Weighted average number of ordinary shares in issue 307 045 002 309 490 513 294 912 439 294 967 641

Basic earnings per share 0,07 0,04 0,10 0,03

Diluted earnings per share 0,07 0,04 0,10 0,03

Since, in the half years ended on 30 June 2010 and 2009, there were no diluting effects on the earnings per

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

14. Cash and cash equivalents


30-06-2010 31-12-2009

Cash 1 240 666 2 372 992Deposits 13 591 055 24 948 642Term deposits i) 112 407 000 149 666 776

127 238 721 176 988 410


i) At 30 June 2010, term deposits had short-term maturities, with approximately 111 million euros in

July 2010. The balance of 1.4 million euros matures in August and September 2010. The term

deposits bear interest at normal market rates.

15. Taxes payable and receivable

At 30 June 2010 and 2009, this item was composed as follows:

Receivable Payable Receivable Payable

Value-added tax 4 474 330 6 588 381 19 704 896 25 806 325

Income taxes 252 868 4 247 011 327 086 1 625 687Social Security contributions - 1 111 910 - 963 502Personnel income tax witholdings - 1 266 658 - 1 143 063Taxes in foreign countries - 3 830 - 7 879Other 203 897 152 614 1 521 882 211 255

4 931 095 13 370 404 21 553 864 29 757 711

31-12-200930-06-2010

At 30 June 2010, the amounts of IRC (Corporate Income Tax) receivable and payable were composed as

follows:

30-06-2010 31-12-2009

Receivable taxes 252 868 327 086Payable taxes ( 4 247 011) ( 1 625 687)

( 3 994 143) ( 1 298 601)

Current income taxes estimative i) ( 9 135 115) ( 7 515 070)Payments on account 3 213 107 4 007 227Witholding income taxes 1 674 997 1 882 156Income tax receivable 252 868 327 086

( 3 994 143) ( 1 298 601)

i) The amount relating to the estimated current tax on income was recorded as a contra entry in the

following items:

30-06-2010 31-12-2009

Income taxes (Note 11) ( 6 437 838) ( 7 403 836)Other ( 2 697 277) ( 111 234)

( 9 135 115) ( 7 515 070)

The item “Others” at June 2010 includes the current tax for 2009.


16. Intangible assets

During the half year ended on 30 June 2010, the movements in acquisition costs and accumulated

depreciation in this item were as follows:

31-12-2009 Increases Impairment

Foreign currency translation

adjustments Other 30-06-2010Cost:

Industrial property and other rights 417.783.360 3.439.597 - 562 (934.695) 420.288.824Goodwill 175.497.342 - - - - 175.497.342

Other intangible assets 5.191.442 961.247 - - - 6.152.689Intangible assets in-progress 338.493 - - - - 338.493

598.810.637 4.400.844 - 562 (934.695) 602.277.348

Accumulated amortization:

Industrial property and other rights 242.961.135 38.124.281 - 531 78.333 281.164.280Other intangible assets 2.090.211 967.824 - - - 3.058.035

245.051.346 39.092.105 - 531 78.333 284.222.315353.759.291 (34.691.261) - 31 (1.013.028) 318.055.033

At 30 June 2010, the item “Industrial property and other rights” mainly comprises a net amount of 97.354

million euros (104.807 million euros at 31 December 2009) relating to exclusive satellite capacity acquisition

contracts between ZON TV Cabo Portugal and Hispasat, which are recorded as finance leases.

The balance mainly relates to i) contracts for the purchase of exclusive distribution network capacity

utilisation rights; ii) the contract entered into with PPTV - PUBLICIDADE DE PORTUGAL E TELEVISAO,

S.A. for the acquisition of broadcasting rights for the professional football matches of the Liga Sagres and

the Liga Vitalis. This contract relates to the broadcasting rights for four football seasons, but only the

amount which relates to the 2009/2010 season is recorded in “Intangible Assets”, as the rights are being

depreciated over the entire length of the football season.

At 30 June 2010 and 31 December 2009, Goodwill relating to controlled companies was distributed as

follows:

30-06-2010 31-12-2009

TVTEL 78 334 505 78 334 505ZON LM Audiovisuais 52 164 339 52 164 339ZON LM Cinemas 24 436 167 24 436 167Bragatel 10 198 608 10 198 608Pluricanal Santarém 5 065 438 5 065 438ZON TV Cabo Madeirense 3 928 957 3 928 957

Pluricanal Leiria 1 361 828 1 361 828

Teliz 7 500 7 500

175 497 342 175 497 342

In 2009 impairment tests were performed based on assessments of the current use value and in

accordance with the discounted cash flow method. The amounts in these assessments are based on the

historical performances and forecast growth of the businesses and their markets, incorporated in medium to

long term plans approved by the Board. These estimates are based on the following assumptions:


Pay TV, broadband and voice

ZON LM Audiovisuais ZON LM Cinemas

Discount rate 8,0% 8,0% 8,0%Assessment period 8 years 8 years 3 yearsEBITDA* growth 9,80% 1,00% 2,30%Perpetuity Growth rate 2,0% 2,0% 2,0%

* EBITDA = Operating Income + Depreciation and Amortisation

The number of years specified in the impairment tests depend on the degree of maturity of the various

businesses and markets, and were determined on the basis of the most appropriate criterion for the

valuation of each cash-generating unit. Where the forecast market growth, revenue and cash flow are

higher than the perpetuity growth rate after 2014, the assessments are performed for periods longer than 5

years, which is normal market practice in valuing telecommunications and Pay TV businesses.

17. Tangible assets

In the first half of 2010, the movements in acquisition costs and accumulated depreciation in this item were

as follows:

31-12-2009 Increases Impairment

Foreign currency translation

adjustments

Transfers, write-off and

other 30-06-2010Cost

Land 2 547 666 - - - ( 453 673) 2 093 993Buildings and other constructions 53 454 397 549 557 - 7 712 ( 1 101 410) 52 910 256Basic equipment 1 000 279 349 92 968 767 - 544 1 398 956 1 094 647 616

Transportation equipment 9 902 859 1 788 967 - 60 ( 1 045 017) 10 646 869Tools and dies 351 122 - - 70 ( 122) 351 070Administrative equipment 122 632 659 5 429 044 - 1 350 240 832 128 303 885Other tangible assets 26 863 343 818 505 - - 129 104 27 810 952Tangible assets in-progress 14 641 795 4 197 481 - - ( 3 569 350) 15 269 926

1 230 673 190 105 752 321 - 9 736 ( 4 400 680) 1 332 034 567

Accumulated depreciation

Buildings and other constructions 24 653 495 1 953 073 - 1 642 ( 759 882) 25 848 328Basic equipment 547 360 871 51 665 853 2 201 917 326 ( 687 435) 600 541 532Transportation equipment 5 317 641 1 039 937 - 60 ( 973 906) 5 383 732Tools and dies 321 791 8 620 - 68 ( 91) 330 388

Administrative equipment 75 455 346 8 024 265 - 1 148 ( 663 589) 82 817 170Other tangible assets 22 991 765 1 228 048 - - ( 1 475) 24 218 338

676 100 909 63 919 796 2 201 917 3 244 ( 3 086 378) 739 139 488 554 572 281 41 832 525 ( 2 201 917) 6 492 ( 1 314 302) 592 895 079

The 2 million euros of impairment increases relate mainly to equipment (set-top boxes and other customer

terminal equipment) which is not generating revenue because of deactivation of the service by the

customer.

Tangible assets also include basic equipment related to customer networks and distribution networks

installed on third party property or in the public domain, representing a net value of 413 million euros (2009:

361 million euros). This equipment includes network terminal equipment which, including major investment

in the first half of 2010 totalling 49 million euros (2009:109 million euros), corresponded to a net total of 221

million euros at the end of the period.


18. Borrowings and loans

At 30 June 2010 and 31 December 2009, the details of bank loans obtained were as follows:

Current Non Current Current Non Current

Bank loans:National bank loans 14 769 770 58 699 960 15 000 500 -Foreign bank loans - 96 836 402 - 96 535 106Commercial paper 30 000 000 475 000 000 113 712 500 430 000 000Bond issue - 70 000 000 - 70 000 000Equity swaps over own shares - - 84 122 701 -

Other loans: - - - -Financial Leases - capacity and contents uti lisation rights 24 086 477 107 580 508 28 294 473 113 489 761Financial Leases - other 4 219 966 13 416 065 5 409 224 12 692 913

73 076 213 821 532 935 246 539 399 722 717 780

31-12-200930-06-2010

18.1. Internal loans

At 30 June 2010, the current and non-current parcels relate to the Group's share of the loans contracted by

Sport TV, comprising 3.500 million euros relating to a loan maturing in 2010, and the balance relates to a

loan of 69.970 million euros with quarterly repayments maturing in 2013.

18.2. Foreign loans

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

Contract totalling 100 000 000 euros with the European Investment Bank. This contract matures in

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

network.

An amount of 3.164 million euros was deducted from this finance, corresponding to the benefit associated

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

therefore stated as deferred income.

18.3. Commercial paper

The Company has borrowings of 505.000 million euros in the form of commercial paper contracted with

nine banks, corresponding to nine programmes. All the issues to date have payment scheduled for 2010

and bear interest at market rates. Of these, the Company has contracted five grouped commercial paper

programmes with maturities of over 1 year, totalling 475.000 million euros (issues of which totalled 475.000

million euros at 30 June 2010). In view of the fact that the Company has the capacity to unilaterally renew

the current issues on or before the programmes’ maturity dates and that they are underwritten by the

organiser, the amount concerned, although having current maturity, is classified as non-current for the

purposes of presentation in the statement of financial position. The remaining programmes are classified as

current.


18.4. Debenture loans

Between October and November 2009, ZON Multimédia issued bonds for private and direct placement

totalling 70.000 million euros via two banks. Both bonds have maturities of 3 years, half-yearly interest

payments and repayment at par at the end of the contracts.

18.5. Equity Swaps on own shares

On 4 February 2010, the two equity swap programmes were settled, under which ZON acquired 13,607,079

shares, representing 4.4% of the share capital, for the amount of 84.123 million euros (see Note 20.3).

18.6. Finance Leases

At 30 June 2010 and 31 December 2009, the item “Financial leasing – Capacity and Content Utilisation

Rights”, relates to contracts entered into by ZON TV Cabo for the exclusive acquisition of satellite capacity,

the acquisition of distribution network capacity utilisation rights and the acquisition by Sport TV of

broadcasting rights for the professional football matches of the Liga Sagres and Liga Vitalis.

Finance Leases

30-06-2010 31-12-2009

Financial leases - payments:Unti l 1 year 33 333 061 38 498 705Between 1 and 5 years 96 569 595 94 281 995Over 5 years 39 112 823 48 166 187

169 015 479 180 946 887

Future financial costs ( 19 712 463) ( 21 060 515)

Present value of finance lease liabilities 149 303 016 159 886 372

30-06-2010 31-12-2009

The present value of the finance lease liabili ties:Unti l 1 year 28 306 443 33 703 698Between 1 and 5 years 84 200 975 80 807 747Over 5 years 36 795 598 45 374 927

149 303 016 159 886 372

All bank loans obtained and finance leases contracted are negotiated at variable short term interest rates

and their book value is therefore broadly similar to their fair value.

The maturity of the loans obtained is as follows:

Until 1 yearBetween 1 and 5

years Over 5 years Until 1 yearBetween 1 and 5

years Over 5 years

National bank loans 14 769 770 58 699 960 - 15 000 500 - -Foreign bank loans - - 96 836 402 - - 96 535 106Commercial paper 30 000 000 475 000 000 - 113 712 500 430 000 000 -Bond issue - 70 000 000 - - 70 000 000 -Equity swaps over own shares - - - 84 122 701 - -Financial Leases 28 306 443 84 200 975 36 795 598 33 703 698 80 807 747 45 374 927

73 076 213 687 900 935 133 632 000 246 539 399 580 807 747 141 910 033- - - - - -

31-12-200930-06-2010

Of the above loans obtained (excluding finance leases and equity swaps), in addition to being subject to the

Group complying with its obligations (operating, legal and fiscal), 73,9% are subject to cross-default


clauses, 93% to pari passu clauses, 59,13% to change of control clauses and retention of control of the

subsidiary ZON TV Cabo, and 93% to negative pledge clauses.

In addition, approximately 43,48% and 26,1% of the total loans obtained require that the consolidated net

financial debt does not exceed 3 times and 4 times the consolidated EBITDA, respectively, and

approximately 17,39% of the total loans obtained require that net interest does not exceed 20% of

consolidated EBITDA.

19. Provisions for other risks and contingencies

At 30 June 2010 and 31 December 2009, the breakdown of provisions between current and non-current

was as follows:

30-06-2010 31-12-2009

Current provisionTaxes 563 074 579 064Litigation 137 000 137 000Other 9 865 349 13 167 029

10 565 423 13 883 093

Non-current provisionOther 6 827 369 4 446 323

6 827 369 4 446 323 17 392 792 18 329 416

During the first half of 2010, the movements in provisions were as follows:

31-12-2009 Increases Decreases Other 30-06-2010

Taxes 579 064 - ( 15 990) - 563 074Legal actions 137 000 - - - 137 000Other risks 17 613 353 5 835 463 ( 6 756 099) - 16 692 718

18 329 417 5 835 463 ( 6 772 089) - 17 392 792

Movements in 2010 in "Provisions for other risks and contingencies" are composed as follows:

2010

Taxes ( 15 990)Other liabilities and charges ( 3 803 448)Provisions (see Note 8) ( 3 819 438)

Interest paid 74 822Investments in participated companies 2 306 224Other 501 767

2 882 813Provision for other liabilities and charges ( 936 625)


The balance in the item "Provisions for other risks and contingencies" at 30 June 2010 and 31 December

2009 is composed as follows:

30-06-2010 31-12-2009

Contigencies - other i) 5 918 580 10 248 967Asset retirement obligation 4 521 145 4 446 323Investments in participated companies ii) 2 306 224 -Other risks 3 946 769 2 918 061

16 692 718 17 613 352

i) The amount shown under “Contingencies - other” relates to provisions for risks and contingencies

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

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

ii) Amount resulting from the application of the equity method to FINSTAR (see Note 10).

20. Shareholder's equity

20.1. Share capital

At 30 June 2010, 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 main shareholders at 30 June 2010 are:

Caixa Geral de Depósitos, SA 36 326 470 11,75% 54 079 610 17,50%

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

Banco BPI, SA 24 386 293 7,89% 27 642 554 8,94%

Telefónica, SA 16 879 406 5,46% 16 879 406 5,46%

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

Cofina, SGPS, SA 15 190 000 4,91% 15 190 000 4,91%

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) 10 649 750 3,45% 9 762 452 3,16%

Cinveste, SGPS, SA 8 707 136 2,82% 17 882 962 5,79%

Banco Espírito Santo, SA 7 414 390 2,40% 9 020 171 2,92%

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

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

ESAF - Espírito Santo Fundos de Investimento Mobiliário, SA 6 088 616 1,97% 6 488 219 2,10%

BES Vida - Companhia de Seguros, S. A. 5 721 695 1,85% 6 707 220 2,17%

Credit Suisse Group AG 5 649 670 1,83% n/a -

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

ZON Multimédia (Own Shares) 5 526 0,00% 14 010 787 4,53%

Total 228 557 719 73,94% 238 292 465 77,10%

Shareholder

2010 2009

NO.Of Shares % Voting Rights% Voting RightsNO.Of Shares

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.

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) 4.84% of the voting rights are attributable to Joaquim Francisco Alves Ferreira de Oliveira, as he

controls GRIPCOM, SGPS, SA, and to 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, SA are attributable to RS Holding,

SGPS, SA, which owns 50.01% of Ongoing Strategy Investments. 99.9% of RS Holding, SGPS, SA

is owned by Isabel Maria Alves Rocha dos Santos, to whom its voting rights are therefore

attributed.

vi) Visabeira Investimentos Financeiros, SGPS, SA 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, SA 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.

vii) The shareholding of SGC, SGPS, SA is attributed to its majority shareholder, Dr. João Pereira

Coutinho.

The Qualified Shareholdings of Caixa Geral de Depósitos, SA, of Banco BPI, SA, and of Banco Espírito

Santo, SA, have been updated as of 30 June 2010, on the basis of information supplied for the purpose of

updating the shareholdings of directors.

20.2. Own shares

Company law regarding own shares requires the establishment of a free reserve in an amount equal to the

purchase price of such shares, which becomes frozen until the shares are disposed of. In addition, the

applicable accounting rules determine that gains or losses on the disposal of own shares are stated in

reserves.

At 30 June 2009, there were 14,010,787 own shares, representing 4.53% of the share capital, of which

13,607,079 shares were stated as resulting from equity swap contracts and the remaining 403,708 shares

were not covered by equity swap contracts.

At 30 June 2010 there were 5526 own shares, representing 0.00179% of the share capital.

Movements in the periods ended on 30 June 2010 and 2009 were as follows:

Quantity Value

Balance as at 1 January 2009 14 313 730 89 633 623Distribuition of treasury shares ( 302 943) ( 2 907 332)

Balance as at 30 June 2009 14 010 787 86 726 291

Balance as at 1 January 2010 14 006 370 87 236 630Acquisition of treasury shares 398 566 1 564 617Sale of treasury shares ( 14 032 765) ( 86 983 207)

Distribution of treasury shares ( 366 645) ( 1 795 290)Balance as at 30 June 2010 5 526 22 750


20.3. 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 periods ended on 30 June 2010 and 2009 and the composition of “Other reserves” are as

follows:

Free reserves Other reserves Total

Balance as at 1 January 2009 149 037 491 42 199 220 191 236 711Distribuition of treasury shares 2 907 333 ( 4 541 514) ( 1 634 181)Undistributed profit - 5 068 714 5 068 714Share plan - ( 404 079) ( 404 079)Share plan - deferred tax - 106 286 106 286Derivative financial instruments (see note 21) - 1 132 910 1 132 910Other - 27 735 27 735

Balance as at 30 June 2009 151 944 824 43 589 272 195 534 096

Free reserves Other reserves Total

Balance as at 1 January 2010 151 434 485 45 760 936 197 195 421Distribuition of treasury shares 1 795 290 ( 1 795 290) -Acquisition of treasury shares ( 1 564 617) 1 564 617 -Sale of treasury shares i) 2 860 506 ( 15 490 936) ( 12 630 430)Dividends (see Note 12) ( 10 123 224) - ( 10 123 224)Undistributed profit - ( 13 781 844) ( 13 781 844)Share plan - 2 162 161 2 162 161Derivative financial instruments - interest rate derivatives (Note 21) - ( 3 723 221) ( 3 723 221)

Derivative financial instruments - exchange rate derivatives (Note 21) - 1 266 980 1 266 980Other - ( 45 956) ( 45 956)

Balance as at 30 June 2010 144 402 440 15 917 447 160 319 887

i) On 29 January 2010 the General Meeting of Shareholders of ZON Multimédia approved the sale of

14,006,437 own shares, representing 4.53% of the Company’s share capital, to Kento Holding

Limited at a unit price of 5.30 euros per share, giving a total price of 74 196 999 euros. These

shares were registered for the amount of 86 897 940 euros (see Note 20.2).

21. Derivative financial instruments

21.1. Exchange rate derivatives

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

audiovisual content and equipment for the Pay TV business. Business transactions between the ZON

Group and these producers are mainly denominated in US dollars.

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

different from the Group’s operating currency, the ZON Group may contract financial instruments, namely

short-term foreign currency futures, 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 15.620 million dollars (31

December 2009: 8.126 million dollars), the fair value of which is approximately 1.266 million euros (31

December 2009: 83 million euros) which is stated in assets as a contra entry in shareholder’s equity.

21.2. Interest rate derivatives

At 30 June 2010, ZON had contracted seven interest rate swaps totalling 515.750 million euros, six with

maturity dates at two years and one at three years, to hedge future interest payments. The fair value of the

interest rate swaps, totalling -4.580 million euros, is stated in liabilities as a contra entry in shareholders'

equity, and the amount of 166 000 euros, relating to accrued interest payable on this financial instrument, is

stated in results.

At 31 December 2009, the 1 032 000 euros stated in liabilities included approximately 856 000 euros

relating to the fair value and 175 000 euros relating to accrued interest.

Nocional Current Non Current Current Non Current

Derivative Financial instruments

Interest rate swaps 515 750 000 - - - 4 745 454

Exchange rate forward 12 729 624 1 266 980 - -

528 479 624 - 1 266 980 - 4 745 454

LiabilityAsset30-06-2010

Nocional Current Non Current Current Non Current

Derivative Financial instruments

Interest rate swaps 480 000 000 - - - 1 032 109

480 000 000 - - - 1 032 109

31-12-2009

Asset Liability

22. Guarantees and financial commitments

22.1. Guarantees

At 30 June 2010 and 2009, the Group had furnished sureties, guarantees and comfort letters in favour of

third parties corresponding to the following situations:

30-06-2010 31-12-2009Bank guarantees given to other entities:Suppliers i) 9 120 023 7 019 560Tax authorities ii) 22 720 596 20 088 473Financial instituitions iii) 100 000 000 -Other iv) 8 032 445 7 958 354

139 873 063 35 066 387

Promissories Sport TV v) - 15 000 000

i) At 30 June 2010, this amount mainly comprises 4 724 435 euros relating to bank guarantees

furnished to cinema lessors.


ii) At 30 June 2010, this amount relates to guarantees sought by the Tax Authorities in connection with

tax proceedings contested by the Company and its associated companies.

iii) At 30 June 2010, this amount relates mainly to guarantees furnished by ZON Multimédia in

connection with the loan from the EIB.

iv) At 30 June 2010, this amount mainly relates to guarantees provided in connection with Municipal

Wayleave Tax proceedings.

v) At 31 December 2009 there was a promissory note by Sport TV relating to bank finance, which was

redeemed in 2010.

The following guarantees were furnished in connection with the finance obtained by Sport TV totalling 143

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

ZON Conteúdos 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.

22.2. Operating leases

The rentals due on operating leases have the following maturities:

Less than 1 year Between 1 and 5 years More than 5 yearsVehicles 181.164,85 232.257,74 0,00

Equipment 131.594,67 164.286,60 0,00Stores, movie theatre and other buildings 18.634.378,18 62.856.795,01 60.506.398,99

18.947.137,70 63.253.339,35 60.506.398,99

30-06-2010

22.3. Other undertakings

At 30 June of 2010 the value of open orders for equipment acquisition is of 58.500 million euros.

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:

a) 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 above undertaking, or that have

not been disposed of under the terms of the above undertaking;

b) A commitment 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 6 years is intended exclusively to finance the new

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

cost of the project.


23. Related Parties

23.1. Summary list of Related Parties

Detailed summary of Related Parties as at 30 June 2010:

Related Parties

Caixa Geral de Depósitos, SA

Kento Holding Limited Banco BPI, SATelefónica, SAEspírito Santo Irmãos, SGPS, SACofina, SGPS, SAJoaquim Alves Ferreira de OliveiraFundação José BerardoOngoing Strategy Investments, SGPS, SABanco Espírito Santo, SACinveste, SGPS, SAGrupo Visabeira, SGPS, SA

SGC, SGPS, SAESAF - Espírito Santo Fundos de Investimento Mobiliário, SABES Vida - Companhia de Seguros, SACredit Suisse Group AGMetalgest - Sociedade de Gestão, SGPS, SASport TVDreamia Holding BVDreamia - Serviços de Televisão, SAUpstar Comunicações SAFINSTAR - Sociedade de Investimentos e Partic ipações, SA

ZON II - Serviços de Televisão SADistodo, LdaFundo Investimento para Cinema e AudiovisualCanal 20 TVGesgráfica - Projectos Gráficos, LdaCaixanet – Telecomunicações e Telemática, SAApor - Agência para a Modernização do PortoLusitânia Vida - Companhia de Seguros, SALusitânia - Companhia de Seguros, SATurismo da Samba (Tusal), SARL

Filmes Mundáfrica, SARLCompanhia de Pesca e Comércio de Angola (Cosal), SARL

23.2. 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.

Balances and transactions in the half years ended on 30 June 2010 and 30 June 2009 between the ZON

Multimédia Group and its associated companies, joint ventures and other related parties, were as follows:


2010:

Transactions

Sales and services rendered

Expenses and services obtained Interest income

Interest expenses

Caixa Geral de Depósitos 18 049 21 665 6 569 4 559 776

Banco BPI 886 474 767 3 393 2 092 169

Banco Espírito Santo 2 228 - 1 284 825 3 300 280

Sport TV - 19 670 133 90 937 -

Dreamia Holding BV 78 839 - 19 152 -

Dreamia SA 1 121 292 - - -

Upstar Comunicações 501 399 - - -

Distodo - 655 966 - -

Fundo Investimento para Cinema e Audiov isual - - - 213 129

Canal 20 TV, SA - 2 947 - -

1 722 693 20 825 478 1 398 307 10 165 354

Balances

Accounts receivable -

trade

Accounts receivable -

otherAccounts

payable - tradeAccounts

payable - otherAccruals and

deferred assets

Accruals and deferred liabilities

Banco Espírito Santo - - - 8 563 251 3 618 584 8 709

Caixa Geral de Depósitos - 18 000 - 32 607 998 548 149 980

Banco BPI - 295 - 1 466 922 200 339 288 867

Metalgest - 1 969 067 - - - -

Sport TV - - 3 205 062 - - 3 151 635

Dreamia Holding BV 113 112 675 000 - - - -

Dreamia SA 1 473 605 403 116 9 000 - - 106 386

Upstar Comunicações 782 550 7 333 901 - - - -

Finstar 2 799 881 - - - - -

Distodo 669 - - - - -

Fundo Investimento para Cinema e Audiovisual - - - 17 123 273 - -

Canal 20 TV, SA - - 7 417 - - -

5 169 817 10 399 379 3 221 479 27 186 053 4 817 471 3 705 577

BalancesLoan obtained Other financial

aplicationsDerivatives

assetsDerivative Liabili ties

Banco Espírito Santo 175 834 136 106 000 000 641 808 106 668

Caixa Geral de Depósitos 150 834 136 - - 2 472 392

Banco BPI 40 000 000 307 000 - 858 150

366 668 272 106 307 000 641 808 3 437 210

2009:

Transactions

Sales and services rendered

Expenses and services obtained Interest income

Interest expenses

Banco Espírito Santo 997 1 785 30 302 2 675 439

Caixa Geral de Depósitos 25 265 3 051 4 653 1 458 061

Banco BPI 1 477 661 354 - 970 458

Lisboa TV 66 800 4 174 414 - -

Sport TV - 20 411 935 849 950 -

Distodo 1 301 919 176 - -

SGPICE, SA 623 - - -

Fundo Investimento para Cinema e Audiovisual - - - 413 374

Canal 20 TV, SA - 3 645 - -

Empresa Recreios Artisticos - - - 2 834

96 463 26 175 360 884 905 5 520 167


BalancesAccounts receivable

Accounts payable Loans obtained

Other financial

aplicationsAccruals expense

Banco Espírito Santo - ( 90 635) ( 150 800 000) 3 850 000 -

Caixa Geral de Depósitos - ( 62 250) ( 136 112 230) - -

Banco BPI 147 ( 103 964) ( 55 978 000) - -

Sport TV 41 913 656 ( 4 116 841) - - ( 2 923 168)

Distodo 669 ( 152 967) - - ( 126 105)

Fundo Investimento para Cinema e Audiovisual - ( 16 651 328) - - -

Canal 20 TV, SA - ( 3 880) - - -

Empresa Recreios Artisticos 8 014 ( 37 730) ( 485 000) - ( 774)

Pluricanal Gondomar 2 500 - - - -

41 924 986 ( 21 219 595) ( 343 375 230) 3 850 000 ( 3 050 047)

The Company regularly performs transactions and enters into contracts with various entities 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, SGPS in the half years ended on 30 June

2010 and 2009 was as follows:

Fixed Remuneration

BonusShare-based compensation

plansFixed Remuneration Bonus

Share-based compensation

plans

Executive management 795 006 900 000 693 264 795 006 900 000 758 903

Non executive management 339 104 - - 335 434 - -

1 134 110 900 000 693 264 1 130 440 900 000 758 903

30-06-2010 30-06-2009

The remuneration paid to senior executives of the Group in the half years ended on 30 June 2010 and 2009

was as follows:

30-06-2010 30-06-2009

Fixed Remunerations 3 183 135 3 266 447Bonus 709 755 597 161Share-based compensation plans 612 565 500 821

4 505 455 4 364 429

The average number of senior executives of the Group is 38 (2009:40).

The variable remuneration mentioned above corresponds to performance bonuses awarded in 2010 and

2009.

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

term amount of 118 000 euros.


23.3. 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 BV, a holding company; and Dreamia SA, whose

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

As the result of the consolidation of those associated companies by the proportional method, the following

amounts were included in the consolidated statements of financial position at 30 June 2010 and 2009 and

in the consolidated statements of comprehensive income for the half years ended on 30 June 2010 and

2009.

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

Current assets 39 836 628 ( 6 841 570) 32 995 058 25 812 066 ( 6 863 881) 18 948 185Non-current assets 81 445 521 ( 1 392 701) 80 052 820 70 123 354 - 70 123 354

Tangible assets 8 315 270 - 8 315 270 8 521 963 - 8 521 963Intangible assets 3 688 571 - 3 688 571 25 781 140 - 25 781 140Deferred tax assets 60 732 - 60 732 258 017 - 258 017Accounts receivable - trade 67 988 247 - 67 988 247 35 562 233 - 35 562 233Accounts receivable - other 1 367 701 ( 1 367 701) - - - -Financial assets 25 000 ( 25 000) - - - -Total assets 121 282 149 ( 8 234 271) 113 047 878 95 935 420 ( 6 863 881) 89 071 539

Current liabili ties 32 653 249 ( 1 979 121) 30 674 128 55 832 039 ( 16 954 718) 38 877 321Non- current liabilities 62 378 004 ( 2 042 583) 60 335 421 16 749 575 ( 16 700 000) 49 575

Loans obtained 59 660 422 - 59 660 422 49 576 - 49 576Accounts payable - other 2 717 583 ( 2 042 583) 675 000 16 700 000 ( 16 700 000) 0Total liabilities 95 031 253 ( 4 021 704) 91 009 549 72 581 614 ( 33 654 718) 38 926 896

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

Total revenue 42 396 543 ( 20 081 639) 22 314 904 37 569 821 ( 20 409 400) 17 160 421Total expense 38 667 642 ( 1 558 874) 37 108 768 31 102 912 ( 849 856) 30 253 056

Net income 3 728 901 ( 18 522 765) ( 14 793 864) 6 466 909 ( 19 559 544) ( 13 092 635)

30-06-2010 31-12-2009

30-06-2010 30-06-2009

a) 50% of the individual accounts of the companies at the stated date;

b) Inter-company eliminations;

c) Amounts included in the consolidated statements of financial position at 30 June 2010 and 31

December 2009 and in the consolidated statements of comprehensive income for the periods ended on

30 June 2010 and 2009 as a result of consolidation by the proportional method.

24. Legal actions

24.1. 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 clients within the respective municipality", and is

calculated as a maximum percentage of 0.25% of the amount of each invoice. Some municipalities, despite

the approval of 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 should be added that a decision has already been made by some municipalities

in connection with internal appeals, which have either subscribed to the Group's interpretation or decided

that they may only opt for one tax or the other, accepting that it is not possible to levy both the TMDP and

the public highway Occupancy Tax.

Meanwhile, various judicial judgments have been issued on the substantive issue that uphold the position

and understanding of ZON TV Cabo, with the result that there are good prospects that this issue will be

definitively resolved in favour of ZON TV Cabo in the majority of the Courts.

With the entry into force of Decree-Law 123/2009, this matter has been 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 is due.

24.2. Legal actions with regulators

ZON Multimédia and TV Cabo Portugal were the object of a Notification for alleged prohibited practices,

under the terms of Article 4 of Law 18/2003 of 11 June, arising from alleged preference and exclusivity

clauses in a "Partnership Agreement" signed between ZON Multimédia, ZON TV Cabo Portugal and SIC –

Sociedade Independente da Comunicação, S.A. (SIC), on 27 June 2000 in connection with a concentration

subject to prior notification relating to the acquisition of Lisboa TV – Informação e Multimédia, S.A. by SIC.

Following this Notification, in August 2006 the Competition Authority decided to impose a fine on ZON

Multimédia and ZON TV Cabo of 2.5 million euros. ZON Multimédia and ZON TV Cabo Portugal contested

the decision in the Lisbon Commercial Court on 8 September 2006. Following this challenge, the

Commercial Court, in its judgment of 10 August 2007, declared the administrative offence proceedings

partially extinct in relation to the alleged preference clause due to the expiry of the limitation period. The

entire proceedings were declared null and void with effect from 1 September 2005, including the

Competition Authority’s decision of 8 August 2006. Appeals were lodged against this judgment in the Lisbon

Appeal Court by the Competition Authority, ZON Multimédia and TV Cabo Portugal. The Lisbon Appeal

Court upheld the decision of the Lisbon Commercial Court. At present, it is not known whether the

Competition Authority will re-open proceedings and whether it will decide to impose some sort of fine on

ZON Multimédia or ZON TV Cabo. ZON Multimédia believes, based on information from its legal advisers,


that these proceedings will not result in any materially relevant impact which could affect its financial

statements as at 30 June 2010.

In a decision on 5 January 2009, the Competition Authority ordered the suspension for three months of the

promotional offer of Lusomundo cinema tickets to ZON TV Cabo customers linked to the MyZonCard. This

suspension period elapsed without being renewed or extended, with the result that it has expired. ZON

appealed to the Courts against the suspension decision, and the outcome of the proceedings is awaited.

Regarding the substantive issue, there has as yet been no decision by the Competition Authority.

ZON submitted a bid, via a company to be set up, in a public tender for the licensing of a nationwide

freeview general programme service, to be broadcast via terrestrial Hertzian channels. The Regulator of

Social Communication decided on 23 June 2009 to disqualify ZON's bid, along with that of another bidder, a

decision against which ZON has legally appealed. The outcome of these proceedings is awaited.

By decision notified on 1 September 2009, the Competition Authority (“AdC”) fined ZON Multimédia and

ZON TV Cabo Portugal 8 046 243 euros, corresponding to 2% of turnover in 2003 for the alleged

commission of the administrative offence of “abuse of dominant position” in a case which also involves

Portugal Telecom, SGPS and PT Comunicações, SA and which relates to events that occurred while ZON

Multimédia and ZON TV Cabo Portugal were part of the Portugal Telecom Group. ZON Multimédia and

ZON TV Cabo Portugal appealed to the Courts against the decision. As that appeal has been lodged, there

is no need to pay the fine until there is a final court ruling on the legality of the AdC’s decision.

On 8 July 2009, ZON TV Cabo was notified by the 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 still under investigation by the AdC; should it conclude

that an infringement has occurred, it may levy a fine not exceeding 10% of the company’s turnover in last

year of infringement.

On 6 April 2010, ZON TV Cabo Portugal, ZON TV Cabo Açoreana and ZON TV Cabo Madeirense brought

an action for judicial review of ICP-ANACOM’s decision to charge 1 086 705 euros, 41 966 euros and 55

161 euros, respectively, by way of Electronic Communications Services Networks Supplier’s Annual Fee,

and seeking reimbursement of the amounts 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: ⅓ in the first year, ⅔ in the second

year and 100% in the third year. ZON TV Cabo Portugal, 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 revenues from

television content should be excluded.

24.3. Tax authorities

During the course of the 2005 financial year, certain companies of the ZON Group were the subject of a tax

inspection for the 2002 financial year. Following this inspection, 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 in June 2007

lodged an internal appeal against the corrections.

Additionally, during the course of the 2007 financial year, ZON Multimédia was the subject of a tax

inspection for the 2004 and 2005 financial years. Following this inspection, ZON Multimédia was notified to

pay 97 308 euros and 408 748 euros, corresponding to the corrections made by the Tax Inspection Service

to the 2004 and 2005 financial years, respectively. The Company considered that the corrections were

unfounded, and contested the amounts mentioned.

Also during the course of the 2007 financial year, ZON TV Cabo was the subject of a tax inspection for the

2004 and 2005 financial years. Following this inspection, ZON TV Cabo was notified of the corrections

made by the Tax Inspection Service regarding Stamp Duty and Corporate Income Tax for those financial

years. However, as it disagreed with the corrections made by the Tax Inspection Service, ZON TV Cabo did

not pay the corrected values, and has lodged an internal appeal against them. Additionally, ZON TV Cabo

was notified of the corresponding Tax Execution Processes. Due to the fact that there are internal appeals

pending on these matters, ZON TV Cabo has provided a bank guarantee for the amount of 13 256 994

euros, to suspend those execution proceedings.

In relation to those proceedings, ZON TV Cabo was notified during 2009 of the partial annulment of the

corrected amounts, and is legally contesting the remaining amounts.

During the course of the 2008 financial year, ZON TV Cabo Portugal was the subject of a tax inspection for

the 2006 financial year. Following this inspection, ZON TV Cabo Portugal was notified to pay 1 875 152

euros, corresponding to corrections made by the Tax Inspection Service to the 2006 financial year. ZON TV

Cabo considered that the corrections were unfounded, and in January 2009 lodged an internal appeal

against the amounts mentioned. It should also be mentioned that during the course of that inspection other

corrections were made to the Tax Group's taxable income for the financial years mentioned, specifically to

the amounts of the tax losses carried forward. ZON Multimédia considers that the corrections are

unfounded.

During the course of the 2009 financial year, ZON TV Cabo Portugal was the subject of a tax inspection for

the 2007 financial year. Following this inspection, ZON TV Cabo Portugal was notified to pay 1 870 884

euros, corresponding to corrections made by the Tax Inspection Service to the 2007 financial year. ZON TV

Cabo considered that the corrections were unfounded, and in November 2009 lodged an internal appeal

against the amounts mentioned.

During the course of the 2009 financial year, ZON Multimédia was the subject of a tax inspection for the

2006 and 2007 financial years. Following that inspection, 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 is contesting the amounts mentioned.


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

and any other revisions and corrections to the tax declarations for the financial years in the review period,

as well as other contingencies of a fiscal nature, will not have a significant effect on the consolidated

financial statements as at 30 June 2010, except for those situations which have been the subject of

provisions.

24.4. Actions brought by PT against ZON TV Cabo Madeirense and ZON TV Cabo Açoreana

PT brought an action in Funchal Judicial Court (Criminal and Civil Circuits, 2nd Section, Case no.

35/10.5CFUN) against ZON TV Cabo Madeirense, claiming payment of 1 608 464 euros, plus accrued

interest until the date of full settlement, for the alleged use of ducts, supply of the MID service, supply of

video and audio channels, the operation, maintenance and management costs of the Madeira/Porto Santo

submarine cable and the use of two fibre optic circuits.

ZON TV Cabo Madeirense 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.

PT brought an action in Ponta Delgada Judicial Court (1st Judicature, Case no. 97/10.5TBPDL) against

ZON TV Cabo Açoreana, claiming payment of 924 641 euros, plus accrued interest until the date of full

settlement, for the alleged use of ducts and masts, supply of the MID service and supply of video and audio

channels.

ZON TV Cabo Açoreana contested the action, in particular the prices concerned, the services and PT’s

legal capacity in respect of the ducts and masts. The outcome of the proceedings is awaited.

25. 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 approved by both the General Meeting and the Board of

Directors.

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% per annum. The Senior Executive Plan is aimed at eligible

members classed as Senior Executives, also selected by the responsible bodies. The Senior Executive

Plan, approved in the current year General Meeting, is different from the one is use by changing the vesting

period to three years after the share attribution.


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 individual performance.

Under the Share Plans approved in 2008 and 2009, the number of shares vested in 2010 was 366,712

shares.

In addition, the Group recognised liabilities in respect of the 2008, 2009 and 2010 Plans, which extend until

2014, totalling 4 610 313 euros – 1 950 854 euros in 2008, 1 591 669 euros in 2009 and 1 067 791 euros in

2010.

In addition, in the first half of 2010 ZON implemented the Share Savings Plan, also established in the By-

Law approved by the General Meeting of Shareholders. This plan is aimed at all staff, who may subscribe to

it without the need for any prior assessment. Employees who meet the internal criteria may invest up to

10% of their annual salary in this plan, up to a maximum of € 7 500 per annum, with the benefit of

purchasing shares at a 10% discount.

Under the Share Savings Plan launched in 2009, ZON employees bought 26,328 shares.

26. Subsequent events

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 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”).


ANNEX I

1) Companies included in the consolidation by the full consolidation method

2) Associated companies

3) Jointly controlled companies

4) Companies stated at cost


ANNEXED TABLES

1) Companies included in the consolidation by the full consolidation method

Percentage of Ownership

Company Head Office Activity Direct Effective Effective30.06.2010 30.06.2010 31.12.2009

ZON Multimédia - Serviços de Telecomunicações e Multimédia, SGPS,

Lisbon Management of investments in the multimedia business

ZON Televisão por Cabo, SGPS, S.A. Lisbon Management of investment in television by cable market. TV Cabo Portugal (100%) 100,00% 100,00%

ZON TV Cabo Portugal, S.A. Lisbon Distribution of television by cable and satell ite, conception, realization, production and broadcasting of televis ion and programs, operation of

ZON Multimédia (100%) 100,00% 100,00%

ZON Conteúdos - Actividade de Televisão e de Produção de Conteúdos, S.A.

Lisbon Production and sale of television programs and advertis ing management. ZON Televisão Por Cabo (100%) 100,00% 100,00%

ZON TV Cabo Açoreana, S.A. Ponta Delgada

Distribution of television signals by cable and satellite in the Azores area. TV Cabo Portugal (83,82%) 83,82% 83,82%

ZON TV Cabo Madeirense, S.A. Funchal Distribution of television signals by cable and satellite in the Madeira area. TV Cabo Portugal (77,95%) 77,95% 77,95%

ZON Lusomundo Audiovisuais, S.A. Lisbon Import, distribution, commercialization and production of audiovisual products ZON Multimédia (100%) 100,00% 100,00%

ZON Lusomundo Cinemas , S.A. Lisbon Cinematic exhibition. ZON Multimédia (100%) 100,00% 100,00%

Lusomundo Moçambique, Lda. Maputo Cinematic exhibition. ZON LM Cinemas (100%) 100,00% 100,00%

Lusomundo España, SL Madrid Management of investments relating to activi ties in Spain in the audiovisuals business.

ZON Multimédia (100%) 100,00% 100,00%

Grafi lme - Sociedade Impressora de Legendas, Lda.

Lisbon Providing services on audiovisual subtitling. Lusomundo Audiovisuais (55,56%)

55,56% 55,56%

ZON Lusomundo TV, Lda. Lisbon Movies distribution. ZON Audiovisuais SGPS S.A. (100%)

100,00% 100,00%

Lusomundo - Sociedade de investimentos imobiliários SGPS, SA

Lisbon Management of Real Estate. ZON Multimédia (99,87%) 99,87% 99,87%

Empracine - Empresa Promotora de Activ idades Cinematográficas, Lda.

Lisbon Developing activities on movies exhibition. Lusomundo SII (100%) 99,87% 99,87%

Lusomundo Imobiliária 2, S.A. Lisbon Management of Real Estate. Lusomundo SII (99,80%) 99,68% 99,68%

Teliz Holding B.V. Amstelveen Management of investment ZON Multimédia (100%) 100,00% 100,00%

ZON Audiovisuais, SGPS S.A. Lisbon Management of investment ZON Multimédia (100%) 100,00% 100,00%

ZON Cinemas, SGPS S.A. Lisbon Management of investment ZON LM Cinemas (100%) 100,00% 100,00%

2) Associated companies



Upstar Comunicações S.A. Vendas Novas

Electronic comunication services, production, commercialization and distribuition of contents

ZON Multimédia (30%) 30,00% 100,00%

FINSTAR - Sociedade de Investimentos e Participações, S.A.

Luanda Distribution of television by cable and satellite, conception, realization, production and broadcasting of television and programs, operation of telecommunications services.

Teliz Holding B.V. (30%) 30,00% 30,00%

Distodo - Distribuição e Logística, Lda. ("Distodo")

Lisbon Stocking, sale and distribution of audiovisual material. Lusomundo Audiovisuais (50,00%)

50,00% 50,00%

Canal 20 TV, S.A. Madrid Distribution of televised products ZON Multimédia (50,00%) 50,00% 50,00%

Pluricanal Gondomar - Televisão por Cabo, S.A. (a)

Gondomar Distribution of television by cable and satellite, operation of telecommunications services.

ZON TVCabo (100%) - 100,00%

ZON II - Serviços de Televisão S.A. Lisbon Conception, production, realization and commercialization of audiovisual contents and provision of publicity services

ZON Multimédia (100,00%) 100,00% -

(a) Companies wound up during the first half of 2010.


3) Jointly controlled companies



Sport TV Portugal Lisbon Conception, production, real ization and commercialization of sports programs for telebroadcasting, purchase and resale of the rights to broadcast sports programs for television and provision of publ icity services

ZON Conteúdos (50,00%) 50,00% 50,00%

Dreamia - Serviços de Televisão, S.A.

Lisbon Conception, production, real ization and commercialization of audiovisual contents and provis ion of publicity services

Dreamia Holding BV (100%) 50,00% 50,00%

Dreamia Holding B.V. Amsterdam Management of investment ZON Audiovisuais SGPS (50%)

50,00% 50,00%

4) Companies stated at cost



Turismo da Samba (Tusal), SARL (a) Luanda n.a. ZON Multimédia (30,00%) 30,00% 30,00%

Filmes Mundáfrica, SARL (a) Luanda Cinematic exhibition ZON Multimédia (23,91%) 23,91% 23,91%

Gesgráfica - Projectos Gráficos, Lda. (a) Porto Graphic production Empresa Recreios Artísticos (20,00%)

18,36% 18,36%

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

Luanda n.a. ZON Multimédia (15,78%) 15,76% 15,76%

Caixanet – Telecomunicações e Telemática, S.A.

Lisbon Telecommunication services ZON Multimédia (5,00%) 5,00% 5,00%

Apor - Agência para a Modernização do Porto

Porto Development of moderniz ing projects in Oporto ZON Multimédia (3,30%) 2,04% 2,04%

Lusitânia Vida - Companhia de Seguros, S.A ("Lusitânia Seguros")

Lisbon Insurance serv ices ZON Multimédia (0,06%) 0,06% 0,06%

Lusitânia - Companhia de Seguros, S.A ("Lusitânia Vida")

Lisbon Insurance serv ices ZON Multimédia (0,04%) 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 2010 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 2010 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 (Executive Member of the Board of Directors)

Luís Miguel Gonçalves Lopes (Executive Member of the Board of Directors)

António Domingues (Member of the Board of Directors)

Fernando Fortuny Martorell (Member of the Board of Directors)

László Hubay Cebrian (Member of the Board of Directors)


Luís João Bordallo da Silva

(Member of the Board of Directors)

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 (Member of the Board of Directors)

Jorge Telmo Maria Freire Cardoso (Member of the Board of Directors)

Joaquim Francisco Alves Ferreira de Oliveira (Member of the Board of Directors)

João Manuel Matos Borges de Oliveira (Member of the Board of Directors)

Mário Filipe Moreira Leite da Silva (Member of the Board of Directors)

António da R.S. Henriques da Silva (Member of the Board of Directors)

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