MATEL HOLDINGS LIMITED

Transcription

1 MATEL HOLDINGS LIMITED ECONOMIC INTEREST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014 Page 1 of 21

2 Table of contents Balance Sheet... 3 Statement of Profit or Loss and Other Comprehensive Income... 4 Statement of Changes in Equity... 5 Cash Flow Statement Page 2 of 21

3 Balance Sheet Notes At December 31 Assets (in EUR) Non-Current Assets Investment in Associate 3 53,392,765 85,393,193 Current Assets Cash and Cash Equivalents Trade and Other Receivables 5 18,111-18,111 - Total Assets 53,410,876 85,393,193 Equity Share Capital 6 15,005 15,005 Share Premium 6 85,378,188 85,378,188 Accumulated Losses (32,026,210) (26,865) 53,366,983 85,366,328 Liabilities Current Liabilities Trade and Other Payables 8 27,384 4,257 Accrued Expenses 9 16,509 22,608 43,893 26,865 Total Liabilities 43,893 26,865 Total Equity and Liabilities 53,410,876 85,393,193 The accompanying notes form an integral part of the economic interest financial statements. Page 3 of 21

4 Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2014 Notes For the year ended December 31 (in EUR) Management fees 12 18,111 - Operating Expenses 10 (17,028) (26,865) Share of Loss of Investment in Associate after Tax 3 (8,323,630) - Impairment of Investment in Assocaite 3 (23,676,798) Loss Before Taxation (31,999,345) (26,865) Income Taxes Loss for the Year (31,999,345) (26,865) Total Comprehensive Loss (31,999,345) (26,865) The accompanying notes form an integral part of the economic interest financial statements. Page 4 of 21

5 Statement of Changes in Equity Share Share Retained Notes Capital Premium Earnings Total Equity (in EUR) Balance as of October 2, Net Loss for the Year - - (26,865) (26,865) Total Comprehensive Loss - - (26,865) (26,865) Repurchase of Shares 6 (1) - - (1) Issuance of Shares 6 15,005 85,378,188-85,393,193 Total Transactions with Owners 15,004 85,378,188-85,393,192 Balance as of December 31, ,005 85,378,188 (26,865) 85,366,328 Balance as of January 1, ,005 85,378,188 (26,865) 85,366,328 Net Loss for the Year - - (31,999,345) (31,999,345) Total Comprehensive Loss - - (31,999,345) (31,999,345) Balance 15,005 85,378,188 (32,026,210) 53,366,983 The accompanying notes form an integral part of the economic interest financial statements. Page 5 of 21

6 Cash Flow Statement for the year ended December 31, 2014 For the year ended December 31 Notes (in EUR) Cash Flows from Operating Activities Loss Before Taxation (31,999,345) (26,865) Adjustments for Share of Loss from Investment in Associate 3 8,323,630 - Impairment of Investment in Assocaite 3 23,676,798 - Working Capital Changes: Changes in Trade and Other Payables 8 23,127 4,257 Changes in Trade and Other Receivables 5 (18,111) - Changes in Accrued Expenses 9 (6,099) 22,608 Net Cash Flow Provided by /(Used in) Operating Activities - - Cash Flows from Financing Activities Repurchase of Shares - (1) Net Cash Flow Provided by /(Used in) Financing Activities - (1) Net Increase /(Decrease) in Cash and Cash Equivalents - (1) Cash and Cash Equivalents at the Beginning of the Year - 1 Cash and Cash Equivalents at the End of the Year - - The accompanying notes form an integral part of the economic interest financial statements. Page 6 of 21

7 1. General Information Matel Holdings Limited (the Company ) was incorporated under the laws of Cayman Islands on October 2, On February 4, 2014 the Company was registered in the United Kingdom (the UK ) as an overseas company at the Companies House in the UK with UK establishment number BR The Company has its head office at 6 St Andrew Street, London EC4A 3AE, United Kingdom. As of December 31, 2014 the Company owns 49% of Magyar Telecom B.V. ( Matel ) a limited liability company incorporated on December 17, 1996 under the laws of the Netherlands and registered with the trade register of the Chamber of Commerce for Amsterdam with company registration number and on September 5, 2013 registered as an overseas company at Companies House in the UK with UK establishment number BR016577, having its head office at 6 St Andrew Street, London EC4A 3AE, United Kingdom. With the UK Companies House registration, the Company is also registered for corporate income tax and VAT purposes in the UK. The main business activity of the Company is holding activities. The Company, provides management services to Matel. Matel is engaged in investing in telecommunication related activities in Hungary. Matel s telecommunications service provider subsidiaries are providing telecommunications services to residential and corporate customers in Hungary. All subsidiaries are majority owned and controlled subsidiaries of Matel (collectively, the Matel Group ). As of December 31, 2014 Matel has the following subsidiaries: Invitel Távközlési Zrt. ( Invitel ) was incorporated on September 20, 1995 as a joint stock company under the laws of Hungary. The issued share capital of Invitel is HUF 16 billion (approximately EUR 51 million). Invitel Technocom Kft. ( ITC ) was incorporated on September 28, 2001 as a limited liability company under the laws of Hungary. The issued share capital of ITC is HUF 165 million (approximately EUR 524 thousand). Invitel International Holdings B.V. ( IIH ) was incorporated on March 26, 2009 in Amsterdam and has its statutory seat at Herikerbergweg 238, Luna ArenA, 1101CM Zuidoost, The Netherlands. The 100% owner of IIH is Invitel. IIH was the holding company of Matel Group s international operations, which was sold on October 7, The issued share capital of IIH is EUR 18 thousand. IIH had no operations during 2013 and Dataneum Adatközpont Zrt. ( Dataneum ) was incorporated on November 12, 2009 as a joint stock company under the laws of Hungary. Invitel acquired Dataneum on August 28, The authorized share capital of Dataneum is HUF 500 million (approximately EUR 1,588 thousand). On December 12, 2013 Matel completed a restructuring of its balance sheet as part of which its former senior secured notes in the principal amount of EUR 345,000,000 (the 2009 Notes ) were refinanced by issuing new notes and new shares (the Restructuring, as described in Note 6 Equity ). The Restructuring involved a number of steps designed to facilitate an exchange of the 2009 Notes for new notes. Under the terms of the Restructuring, EUR million of the 2009 Notes were exchanged into new notes (the 2013 Notes ). Page 7 of 21

8 The remaining EUR million of the 2009 Notes, together with all accrued interest were converted into 49% of the post-restructuring equity in Matel. The Company was set up for the purpose of holding the 49% equity interest of the Noteholders in Matel following the completion of the Restructuring. As part of the Restructuring, the Company has issued 150,051,000 ordinary shares to the Noteholders of the former 2009 Notes, a nominal value of EUR each, representing 100% of its existing issued share capital (the Shares ) in exchange for EUR 174 million of the 2009 Notes issued by Matel. Furthermore, Matel issued equity instrument to the Company in consideration for EUR 174 million of the former 2009 Notes in accordance with the terms of the Restructuring. Matel has issued EUR 150,051 thousand 7.00%/9.00% Senior Secured PIK Toggle Notes due 2018 with additional 2% compulsory PIK interest (the 2013 Notes ) at a 100% issue price to the Noteholders of the former 2009 Notes in exchange for EUR 155 million of the 2009 Notes. The 2013 Notes are stapled to the Shares of the Company for the Stapling Period, meaning that the 2013 Notes and the Shares are issued in the form of a Unit consisting of 1 Share of the Company and EUR 1 aggregate principal of the 2013 Notes issued by Matel. 150,051,000 Units has been issued on December 12, The effect of this is that the 2013 Notes and the Shares cannot be traded separately and a transfer of the Units will result in a transfer of the 2013 Notes and the Shares during the Stapling Period. The Stapling Period ends on the Separation Date, which is the earliest of the following: (i) the payment in full of all outstanding notes; (ii) ten days following the announcement of Change of Control Offer as defined in the 2013 Notes Indenture; (iii) the instruction of the holders of the majority of the Units to separate the 2013 Notes and the Shares; or (iv) December 12, 2015, which date was extended to December 12, 2016 during 2015 (see note 14 Subsequent Events ). The Units are listed on the Official List of the Luxembourg Stock Exchange. The Company must comply with the Rules and Regulations of the Luxembourg Stock Exchange. The directors of the Company are: Mark Nelson-Smith appointed on December 12, 2013 Jan Vorstermans appointed on December 12, 2013 As of December 31, 2014 and 2013, Matel was 51% owned by Hungarian Telecom B.V. which is 100% owned by Mid Europa Partners Limited ( Mid Europa ) through its holding companies, and 49% owned by the Company. The Company is ultimately owned by the Noteholders. The Company had no employees in the year ended December 31, 2014 and The Company is expected to continue as a special purpose vehicle in the future holding the investment in Matel. Page 8 of 21

9 2. Significant Accounting Policies The significant accounting policies applied in the preparation of the economic interest financial statements are set out below. 2.1 Statement of Compliance The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union ( EU ). These financial statements for the year ended December 31, 2014 were approved for issue on March 23, 2016 by the Directors of the Company. 2.2 Basis of Preparation The financial statements are presented in euro ( EUR ). The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires Management to exercise its judgment in the process of applying the accounting policies. There are no areas in the financial statements with higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial statements other than the fair value of the investment upon initial recognition (see Note 3 Investment in Associate ) New Accounting Pronouncements a) New standards, amendments and interpretations adopted by the Company The following standards have been adopted by the Company for the first time for the financial year beginning on or after January 1, 2014 and have a material impact on the Company: Amendment to IAS 32 Financial instruments: Presentation on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Company s financial statements. Amendments to IAS 36 Impairment of assets, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. Amendment to IAS 39 Financial instruments: Recognition and measurement on the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to over-thecounter derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument meets specified criteria. The Company has applied the amendment and there has been no significant impact on the Company s financial statements as a result. Other standards, amendments and interpretations which are effective for the financial year beginning on January 1, 2014 are not material to the Company. Page 9 of 21

10 b) New standards, amendments and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 1, 2014, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company, except the following set out below: IFRS 9 Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through Other Comprehensive Income ( OCI ) and fair value through profit or loss. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to Notes to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in OCI, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after January 1, The new standard will not have a significant effect on the Company s financial statements. IFRS 15 Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. In May 2014 the IASB and the US FASB jointly issued a converged Standard on the recognition of revenue from contracts with customers. The core principle of the new Standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new Standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and new guidance for multiple-element arrangements. The application of the new standard is required for annual periods beginning on or after January 1, Earlier application is permitted. The new standard will not have any effect on the Company s financial statements. The European Union has not yet endorsed the new standard. IFRIC 21 Levies, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 Provisions. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognized. The Company is not currently subjected to significant levies so the impact on the Company is not material. It is effective for annual periods beginning after June 17, There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company. Page 10 of 21

11 2.3 Foreign Currency Functional currency The functional currency of the Company depends on the primary economic environment to which it is exposed. This is the currency in which funds are obtained and invested in. Main transactions of the Company are denominated in EUR as the investment in associate and the Company s equity are denominated in EUR. The functional currency of the Company is EUR Transactions and balances Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate in effect at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate in effect at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Foreign currency differences arising on translation are recognized in the Profit or Loss statement as net foreign exchange gain / (loss) in financial expenses. Non-monetary assets and liabilities denominated in foreign currencies other than the functional currency that are stated at historical cost are translated using the exchange rate at the date of the transaction. 2.4 Cash and Cash Equivalents Cash and cash equivalents are comprised of cash in bank balances and highly liquid call deposits with original maturities of three months or less and exclude all overdrafts which are shown within borrowings in current liabilities on the face of the balance sheet. 2.5 Financial Assets Financial assets are classified in one category only: loans and receivable. The classification depends on the purpose for which the financial asset was acquired. The classification of financial assets is determined at initial recognition. Regular sales and purchases of financial assets are recognized on the trade date, the date on which the Company commits to sell or purchase the financial asset. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows from that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Page 11 of 21

12 2.6 Investment in Associate Associates are entities over which the Company has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in Company s share of net assets of an associate are recognised as follows: (i) the Company s share of profits or losses of associates is recorded in the profit or loss for the year as share of result of associates, (ii) the Company s share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii); all other changes in the Company s share of the carrying value of net assets of associates are recognised in profit or loss within the share of result of associates. However, when the Company s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. 2.7 Trade and Other Payables Trade and other payables are initially recognized at fair value and subsequently at amortized cost. 2.8 Financial Income and Expenses Financial income includes dividend income, foreign exchange gains. Dividend income is recognized in the income statement on the date that the Company s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. 2.9 Share Capital Ordinary shares are classified as equity. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognized as a deduction from equity. Page 12 of 21

13 2.10 Current and Deferred Income Taxes The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date in the country where the Company operates and generates income and any adjustment to tax payable in respect of previous years. Management periodically evaluates positions taken in tax returns with respect to situations in which the applicable tax regulations are subject to interpretations. It establishes provisions where amounts are expected to be paid to the tax authorities. These provisions are classified as other payables in the balance sheet. Deferred tax is provided for using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using the appropriate tax rate enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention or permissibility by a tax authority to settle balances on a net basis. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realized. Page 13 of 21

14 3. Investment in Associate At December 31 (in EUR) At Beginning of the Year 85,393,193 - Investment in associate - 85,393,193 Share of loss of investment after tax (8,323,630) - Impairment of investment (23,676,798) - At End of the Year 53,392,765 85,393,193 Investment in Associate includes the investment in the 49% share capital of Matel. The consideration by the Company for its shares in Matel was made by a contribution and assignment of EUR 173,956,000 of the 2009 Notes to Matel (at nominal value) pursuant to the terms of the Restructuring that was recorded at fair value upon initial recognition in the amount of EUR 85,393 thousand. In consideration of the assignment of EUR 173,956,000 of the 2009 Notes by the Noteholders, the Company issued shares to the Noteholders (see Note 6 Equity ). The Investment in Associate was initially recognized at fair value in the amount of EUR 85,393 thousand during the Restructuring on December 12, For determining the fair value of the initial investment in Matel, the Company used the EBITDA multiples method. Based on publicly available transaction data, two different multiples were used in the model that correspond to the acquisitions of European telecommunications companies in the period between September 1, 2009 to November 30, One of the multiples takes the average of the EBITDA multiples with respect to the recent acquisitions of European incumbent telecommunication companies, and another multiple, specifically based on acquisitions of European cable companies. The latter multiple was applied to the cable segment of Matel Group and the former one was used for the remaining segments of Matel Group in the model. EBITDA was determined based on Matel Group s financial performance at date of acquisition. The gain recognized on the Restructuring dated December 12, 2013 by Matel was eliminated from the Company's Share of Profit of Investment in Associate after Tax and from the carrying value of the Investment in Associate. The effect of the Restructuring has already been considered in the initial value of the investment recorded upon the completion of the Restructuring. Furthermore, the Share of Profit of Investment in Associate after Tax attributable to the normal activity of Matel is not significant for the period from the completion of the Restructuring and up to December 31, Consequently, the carrying value of the investment as at December 31, 2013 using the equity method from the date of acquisition was not materially different from the initial fair value of the investment measured upon initially recognition. For the year ended December 31, 2014 a loss from investment after tax in the amount of EUR 8,324 thousand was recorded in the financial statements by the application of the equity method. For the year ended December 31, 2014 an impairment loss on Investment in Associate of EUR 23,677 thousand was recognized. An impairment loss is recognized for the amount by which the investment carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the investment fair value less cost to sell and value in use. Based on the Company s assessment the recoverable amount of the investment equals to the fair value less cost to sell. Page 14 of 21

15 For determining fair value less cost to sell, the Company used the EBITDA multiples method. Based on publicly available transaction data, two different multiples were used in the model that correspond to the acquisitions of European telecommunications companies in the period September 1, 2009 to November 30, One of the multiples takes the average of the EBITDA multiples with respect to the recent acquisitions of European incumbent telecommunication companies, and another multiple, specifically based on acquisitions of European cable companies. The latter multiple was applied to the cable segment of Matel and the former one was used for the remaining segments of Matel in the model. EBITDA was determined based on Matel s budgeted financial performance and amounted to EUR 41,937 thousand in the impairment assessment for the year ended December 31, 2014 and EUR 48,327 thousand for the year ended December 31, If the Company used one time lower EIBTDA multiple for each segments of Matel in its impairment calculation, this would resulted in additional impairment charge of EUR 20,630 thousand for the year ended December 31, Summarised financial information of Matel and its subsidiaries and 2013 and for the years than ended in EUR is the following: December 31, 2014 Total Assets Total Equity Profit/(Loss) for year Matel - Consolidated 254,940,467 54,258,342 (16,989,960) Matel - Standalone 210,335,662 54,245,816 (16,987,000) Invitel 293,675,115 79,761,860 (27,816,118) ITC 4,644,298 3,511,036 49,498 Dataneum* 2,694,766 1,728, ,805 IIH 10,697 (691) (26,084) December 31, 2013 Total Assets Total Equity Profit/(Loss) for year Matel - Consolidated 290,521,311 83,718,593 53,967,857 Matel - Standalone 237,203,109 83,705,000 53,964,000 Invitel 329,464, ,508,925 39,861,131 ITC 6,200,344 3,672, ,833 Dataneum* 3,423,617 1,684, ,400 IIH 154,519 25,391 (36,732) *Invitel acquired 100% of the share capital of Dataneum on August 28, Page 15 of 21

16 4. Cash and Cash Equivalents At December 31 (in EUR) Cash on hand and in banks - - Total Cash and Cash Equivalents - - The Company keeps its free cash at the following banks rated by Moody s as follows: At December 31 BNP Paribas A1 A2 5. Trade and Other Receivables At December 31 (in EUR) Receivables from related parties 18,111 - Trade and Other Receivables 18,111 - Receivables from related parties include management fees received from Matel in the amount of EUR 18,111 thousand (see Note 12 Related Party Transactions ). Page 16 of 21

17 6. Equity The Company was incorporated on October 2, 3013 in the Cayman Islands under the provisions of the Companies Law as a company with limited liability. As of October 2, 2013 the Company was owned by Mourant Ozannes Cayman Nominees Limited ( MOCS ). The issued share capital at that date was USD 1 (1 ordinary share with a par value of USD 1). On December 4, 2013 the share has been redenominated as 1 share of EUR 1 par value. The 49,999 authorised but unissued shares of USD 1 in the capital of the Company have been redenominated as 49,999 shares of EUR 1 par value each. Furthermore the shares were subdivided into 10,000 issued shares of EUR each and 499,990,000 authorised but unissued shares of EUR each. On July 15, 2013 the Company s associate, Matel entered into an agreement to implement a Restructuring of its balance sheet with the Noteholders of its net outstanding EUR 329 million 2009 Notes due Under the terms of the Restructuring, EUR million of the 2009 Notes were exchanged into new notes (the 2013 Notes ). The 2013 Notes were issued by Matel on December 12, 2013, in the principal amount of EUR 150,051,000 at 100% issue price. The EUR million of the 2009 Notes out of the total of EUR 329 million, together with all accrued interest, was converted into 49% of the post- Restructuring equity in Matel, which is held by the Company. In consideration for the assignment of the 2009 Notes by the Noteholders, the Company issued 150,051,000 shares, with a par value of EUR each to the Noteholders. The Company repurchased its shares from MOCS in exchange for the payment of EUR 1. As of December 31, 2013 and 2014 the authorized share capital of the Company was EUR 50,000 divided into 500,000,000 shares with a par value of EUR each. As of December 31, 2013 and 2014 the issued share capital of the Company was EUR 15,005 being 150,051,000 issued shares. During the Restructuring of Matel, 20,308,640 of Matel s shares were split and converted into 9,220,122,560 A shares with a nominal value of EUR 0.01 each, leaving the total issued share capital of Matel unchanged with respect to A shares. Immediately after the Restructuring 20,494,639,650 B shares were issued by Matel with a nominal value of EUR 0.01 each, amounting to a total issued capital of B shares of EUR 204,947 thousand. As of December 31, 2013 and 2014 all B shares of Matel are owned by the Company, representing 49% of the total share capital of Matel (see Note 3 Investment in Associate ). The Company shares are stapled to the 2013 Notes, each issued as 150,051,000 Units consisting of 1 Share and EUR 1 aggregate principal of 2013 Notes co-issued by Matel and the Company on December 12, The 2013 Notes are stapled to the Shares for the stapling period, the effect of which is that the 2013 Notes and the Shares cannot be traded separately and a transfer of the Units will result in a transfer of the 2013 Notes and the Shares. The balance of share premium includes the excess of the fair value of the contribution received over the par value of the shares issued by the Company. Page 17 of 21

18 7. Financial Instruments and Financial Risk Management Financial instruments carried on the balance sheet include cash and cash equivalents, trade and other payables. The maturity date of the financial liabilities of the Company is payable within 1 year in the amount of EUR 27,834. The amounts are contractual undiscounted cash flows. The maturity date of the financial assets of the Company is receivable within 1 year in the amount of EUR 18,111. The amounts are contractual undiscounted cash flows. The carrying amounts of financial assets and liabilities including cash and cash equivalents and trade and other payables reflect reasonable estimates of fair value due to the relatively short period to maturity of the instruments. 8. Trade and Other Payables At December 31 (in EUR) Payables to related parties 27,384 4,257 Total Trade and Other Payables 27,384 4,257 Payables to related parties at December 31, 2014 and 2013 include professional fees paid by Matel and charged to the Company as these expenses incurred by the Company. 9. Accrued Expenses At December 31 (in EUR) Accrued expenses 16,509 22,608 Accrued Expenses 16,509 22,608 Accrued expenses at December 31, 2014 include fees of EUR 10,000 for annual audit services related to financial statements of 2014 and EUR 3,622 related to management services contract with Invitel (see Note 12 Related Party Transactions ) and other professional fees amounting to EUR 2,887. Accrued expenses at December 31, 2013 include fees of EUR 21,500 for annual audit services and EUR 1,108 of administrative expenses. Page 18 of 21

19 10. Operating Expenses For the year ended December 31 (in EUR) Professional fees and administrative expenses (17,028) (26,865) Total Operating Expenses (17,028) (26,865) Professional fees for the year ended December 31, 2014 include audit fee of EUR 10,000, management services fee of EUR 3,622 and other professional fees amounting to EUR 3,406. Professional fees for the year ended December 31, 2013 include audit fee of EUR 21,500 (refer to Note 12 Related Party Transactions ) and other professional fees amounting to EUR 5,365. The Company does not have any employees. 11. Taxation For the year ended December 31 (in EUR) Corporate tax - - Total income tax benefit / (expense) - - Loss before taxation (31,999,345) (26,865) Income tax using main tax rate (20%) 6,399,869 6,179 Tax losses for which no deferred tax asset was recognized (6,399,869) (6,179) Total income tax benefit / (expense) - - The Company is registered for taxation purposes in the United Kingdom. In the UK, effective from April 1, 2014, the corporation tax main rate is 21% (23% from April 2013 to March 2014), applicable for companies whose profits exceed GBP 1.5 million, whereas a marginal relief is deducted from the main rate for companies whose profits range between GBP 300,000 and GBP 1.5 million. Below GBP 300,000 the applicable tax rate is 20%. Tax losses for which no deferred tax was recognized include the current year s tax loss made by the Company as there is uncertainty if the Company will be able to generate taxable income in the future against which these tax losses could be utilized. Page 19 of 21

20 12. Related Party Transactions As of December 31, 2014 and 2013 related parties of the Company include Matel, its subsidiaries and directors of the Company. The Company provides management services to Matel based on the contract dated February 4, Invitel provides management services to the Company based on the contract dated February 4, Transactions with related parties are included in Note 5 Trade and Other Receivables and Note 8 Trade and Other Payables of the financial statements. There were no other transactions with related parties during the period. 13. Contingencies The Company is not involved in any legal proceedings nor have any other contingencies. 14. Subsequent Events Changes in the composition of the Board of Directors of Matel In January 2015 Mr David McGowan resigned as the Chief Executive Officer of Invitel, the main operating subsidiary of the Matel Group and Executive Board Member of Matel and Mr David Blunck, became the Chief Executive Officer of Invitel and Board Member of Matel. Mr Robert Chmelar resigned as non-executive Board Member from the Board of Directors of Matel and was replaced by Mr Tas Tóbiás. On October 15, 2015 Matel announced several changes to its Board of Directors. Matel Holdings Limited, which holds 49% of the Matel shares, has appointed Mr András Piller as a new Director of the Company. Mr Mark Nelson-Smith is succeeding Mr Nikolaus Bethlen as Chairman of the Matel Board of Directors. Mr Thierry Baudon and Mr David Blunck have both stepped down from the Matel Board. Mr David Blunck remained Chief Executive Officer of Invitel. Mr Nikolaus Bethlen continued to serve on the Matel Board as director, alongside Mr Tas Tóbiás and Mr Jan Vorstermans. Change in Auditor During 2015, the Company initiated a review of its audit arrangements and during July and August the Company conducted a tender process for the provision of audit services. The incumbent auditor and other auditors participated in the competitive process. EY was selected as the Company s new auditor beginning with the audit of the financial year Extension of stapling of Notes and Shares as Units In October 2015 the Company requested and received the written consent of a majority of the Company s Unitholders (holders of the Company s Notes and Shares) to require the directors of the Company to request the extension of the de-stapling date from December 12, 2015, to December 12, 2016 (unless an earlier de-stapling event occurs). The extension of the de-stapling date did occur, and is now December 12, 2016 (unless an earlier de-stapling event occurs). Page 20 of 21

21 Signed: London, March 23, 2016 Directors: Jan Vorstermans Mark Nelson-Smith