---

 

---

---

A free translation from Portuguese into English of Valuation report of Net Assets at Book Value prepared in accordance with the accounting practices adopted in Brazil and with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), in conjunction with the Brazilian Association of State Boards of Accountancy (CFC)

 

VALUATION REPORT OF NET ASSETS AT BOOK VALUE

 

The
Board of Directors and Shareholders
TELEMIG CELULAR S.A.

 

1.   Ernst & Young Auditores Independentes S/S., a company located in the city of São Paulo, at Av. Pres. Juscelino Kubitschek, 1830, - Torre I – 5° e 6º andares, Itaim Bibi, CEP: 04543-900, registered with the National Corporate Entities’ Registry under CNPJ/MF No. 61.366.936/0001-25, originally enrolled with the São Paulo State Regional Accounting Council under CRC-2-SP 015199/O-6, with its Articles of Organization filed with the 1st Registry of Deeds and Documents and Civil Registry of Legal Entities of São Paulo under No. 122.272 on August 9, 1989, the last amendment of which, dated June 27, 2008, is registered in microfilm under No. 343572, on May 5, 2009, represented by the undersigned partners, Mr. LUIZ CARLOS PASSETTI, Brazilian, married, accountant, bearer of Identity Card RG No. 10.809.747-SSP/SP, enrolled with the São Paulo Regional Accounting Council under CRC No. 1SP 144.343/O-3 and with the Individual Taxpayers’ Registry under CPF/MF No. 001.625.898-32, and Mr. DRAYTON TEIXEIRA DE MELO, Brazilian, married, accountant, bearer of Identity Card RG No. 2.974.800 SSP/PE, enrolled with the São Paulo Regional Accounting Council under CRC No. 1SP 236947/O-3 and with the Individual Taxpayers’ Registry under CPF/MF No. 515.710.054-04, both domiciled in the city of São Paulo-SP, at Av. Juscelino Kubitschek, 1830, - Torre I – 5° e 6º andares, with same office address as the represented party, hereby designated as valuation expert by TELEMIG CELULAR S.A. (“Company”) to conduct the valuation of net assets at book value of as of March 31, 2010, in accordance with accounting practices adopted in Brazil, presents the following results of the work performed.

Valuation objective

2.   The objective of the valuation of net assets at book value as of March 31, 2010 of TELEMIG CELULAR S.A. is the merger of the direct Company into its controlling entity Vivo Participações S.A.

Work scope

3.   The valuation report of net assets at book value is being issued in connection with the audit of the balance sheet as of March 31, 2010, prepared under the responsibility of the Company management.

4.   We conducted our examination in accordance with generally accepted auditing standards in Brazil which comprised, among other procedures: (a) the planning of our work, taking into consideration the materiality of balances, the volume of transactions and the accounting and internal control systems of the Company; (b) the examination, on a test basis, of documentary evidence and accounting records supporting the amounts disclosed; and (c) an assessment of the accounting practices used and significant estimates made by the Company management.

Conclusion

5.   Based on the work performed, we conclude that the value of assets, rights and obligations that comprise the net assets at book value of TELEMIG CELULAR S.A., as per balance sheet as of March 31, 2010, summarized in the Attachment, amounts to R$1,003,766,791.00 (one billion, three million, seven hundred and sixty-six thousand, seven hundred and ninety-one reais), accounted for in the book records, in accordance with the accounting practices adopted in Brazil.

Information and clarification regarding professional independence and conflicts of interest

6.   In compliance with the requirements of the Brazilian Securities Commission (CVM), we inform the following:

(a)  according to professional standards established by the National Association of State Boards of Accountancy (CFC), we are not aware of any conflicts of interest, whether direct or indirect, or of any other circumstances that could represent a conflict of interest in connection with the services provided by us, described above; and

(b)  we are not aware of any action by the Parent Company or by the Company management with the objective of biasing, restricting, hampering or committing any acts that have or could have impaired access, use or knowledge related to information, assets, documents or work methodologies that are significant to the quality of the respective conclusions.

São Paulo, May 11, 2010.

ERNST & YOUNG
Auditores Independentes S.S.
CRC-2-SP 015199/O-6-F-MG

 

Luiz Carlos Passetti                                             Drayton Teixeira de Melo
Accountant CRC-1-SP-144.343/O-3-S-MG      Accountant CRC-1-SP-236947/O-3-S-MG

 

ATTACHMENT TO VALUATION REPORT OF NET ASSETS AT BOOK VALUE OF TELEMIG CELULAR S.A. AS OF 03/31/2010

	Amounts as of March 31, 2010, in Reais
ASSETS
Current assets:
Cash and cash equivalents	116,272,520.92
Short term investments pledged as collaterals	2,167,178.35
Accounts receivable, net	290,275,594.06
Inventories	27,539,409.09
Deferred and recoverable taxes	103,327,977.70
Prepaid expenses	74,479,774.47
Escrow deposits	7,205,631.35
Other	6,197,054.45
	627,465,140.39
Noncurrent assets
Long-term receivables
Deferred and recoverable taxes	243,378,139.25
Prepaid expenses	2,998,895.32
Escrow deposits	558,652,923.40
Other	14,929.86
Property and equipment. net	629,777,249.83
Intangible assets. net	184,211,212.58
	1,619,033,350.24
Total assets	2,246,498,490.63

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Payroll and benefits	20,156,187.07
Trade accounts payable	338,746,797.65
Tax payable	109,475,396.45
Interest on shareholders’ equity and dividends	19,589,936.59
Provision for contingencies	13,678,151.87
Deferred revenue	49,196,082.25
Other	17,479,397.18
	568,321,949.06
Noncurrent liabilities
Long-term liabilities
Tax payable	560,967,548.17
Debentures	60,885,916.04
Provision for contingencies	14,716,631.86
Provision for asset retirement obligation	28,393,902.30
Other	9,445,752.20
	674,409,750.57
Total liabilities	1,242,731,699.63
Net assets	1,003,766,791.00
Net assets. composed by:
Capital stock	528,000,000.00
Capital reserves	63,056,874.08
Income reserves	375,764,508.86
Retained earnings	41,984,595.49
Other comprehensive income	(64,446,514.71)
Net profit for the period	59,407,327.28