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Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) Auditors' Report Financial Statements for the year ended 31 December 2013 Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain and of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. AUDITORS’ REPORT ON FINANCIAL STATEMENTS To the Shareholders of Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.): We have audited the financial statements of Atresmedia Corporación de Medios de Comunicación, S.A., which comprise the balance sheet at 31 December 2013 and the related income statement, statement of changes in equity, statement of cash flows and notes to the financial statements for the year then ended. The directors are responsible for the preparation of the Company’s financial statements in accordance with the regulatory financial reporting framework applicable to the Company (identified in Note 2 to the accompanying financial statements) and, in particular, with the accounting principles and rules contained therein. Our responsibility is to express an opinion on the financial statements taken as a whole based on our audit work performed in accordance with the audit regulations in force in Spain, which require examination, by means of selective tests, of the evidence supporting the financial statements and evaluation of whether their presentation, the accounting principles and policies applied and the estimates made comply with the applicable regulatory financial reporting framework. In our opinion, the accompanying financial statements for 2013 present fairly, in all material respects, the equity and financial position of Atresmedia Corporación de Medios de Comunicación, S.A. at 31 December 2013, and the results of its operations and its cash flows for the year then ended, in conformity with the regulatory financial reporting framework applicable to the Company and, in particular, with the accounting principles and rules contained therein. The accompanying directors’ report for 2013 contains the explanations which the directors consider appropriate about the Company’s situation, the evolution of its business and other matters, but is not an integral part of the financial statements. We have checked that the accounting information in the directors’ report is consistent with that contained in the financial statements for 2013. Our work as auditors was confined to checking the directors’ report with the aforementioned scope, and did not include a review of any information other than that drawn from the Company’s accounting records. DELOITTE, S.L. Registered in ROAC under no. S0692 Jesús Mota Robledo 26 February 2014 Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) Financial Statements for the year ended 31 December 2013 Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain and of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanishlanguage version prevails. Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. BALANCE SHEET AT 31 DECEMBER 2013 (Thousands of euros) ASSETS Notes 2013 2012 EQUITY AND LIABILITIES NON-CURRENT ASSETS Intangible assets 6 Licences and trademarks 5&6 Computer software Property, plant and equipment 7 Land and buildings Plant and other items of property, plant and equipment Property, plant and equipment in the course of construction Non-current investments in Group companies and associates 9.3 & 21 Equity instruments Loans to companies Non-current financial assets 9.1 Other financial assets Deferred tax assets 18 642,733 81,285 75,496 5,789 43,492 24,866 18,390 236 201,610 76,288 125,322 10,960 10,960 305,386 661,935 82,835 76,287 6,548 47,540 26,439 20,291 810 211,746 74,445 137,301 16,385 16,385 303,429 EQUITY SHAREHOLDERS' EQUITYShare capital Registered share capital Share premium Reserves Legal and bylaw reserves Other reserves Treasury shares Other equity instruments Profit for the year Interim dividend VALUATION ADJUSTMENTSHedges CURRENT ASSETS Non-current assets held for sale Inventories Programme rights Raw and other materials Advances to suppliers Trade and other receivables Trade receivables for sales and services Receivable from Group companies and associates Sundry accounts receivable Remuneration payable Current tax assets Current investments in Group companies and associates Loans to companies Current financial assets Derivatives Other financial assets Current prepayments and accrued income Cash and cash equivalents Cash 549,150 292,502 260,305 3,016 29,181 167,831 6,148 157,843 2,050 105 1,685 31,124 31,124 1,376 698 678 372 55,945 55,945 478,016 2,000 249,151 216,937 2,921 29,293 190,184 3,986 180,797 2,187 117 3,097 30,487 30,487 2,454 1,245 1,209 3,740 3,740 NON-CURRENT LIABILITIES Long-term provisions Non-current payables Bank borrowings Derivatives Other non-current payables Non-current payables to Group companies and associates Deferred tax liabilities 12 13 21.2 18 21.2 9.2 11 TOTAL ASSETS 1,191,883 1,139,951 The accompanying Notes 1 to 24 are an integral part of the balance sheet at 31 December 2013. CURRENT LIABILITIES Short-term provisions Bank borrowings Financial derivatives Current payables to Group companies and associates Trade and other payables Payable to suppliers Payable to suppliers - Group companies and associates Sundry accounts payable Remuneration payable Other accounts payable to public authorities Customer advances Current accruals and deferred income TOTAL EQUITY AND LIABILITIES Notes 2013 2012 343,136 308,313 207,604 169,300 38,304 157,032 42,474 114,558 (99,453) 42,643 34,468 - 207,604 169,300 38,304 142,521 40,281 102,240 (99,453) 42,643 35,862 (21,352) 842 488 288,579 2,328 263,600 200,129 207 63,264 2 22,649 91,800 380 197 183 68,534 22,886 560,168 31,976 6,305 3,025 87,411 431,021 332,714 75,601 40 13,565 8,558 543 430 739,838 41,692 137,388 485 83,190 476,607 326,454 124,719 139 17,445 7,146 704 476 1,191,883 1,139,951 14 15 16.1 11 21.2 18 15 16.2 11 21.2 21.2 18 1 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. INCOME STATEMENT FOR 2013 (Thousands of euros) Notes 2013 2012 CONTINUING OPERATIONS Revenue 20.1 Advertising revenue Procurements 20.2 Programme amortisation and other 652,493 574,109 652,493 574,109 (432,033) (400,534) (625,744) Cost of raw materials and other consumables used (598,249) (1,686) (979) Inventories 195,397 198,694 Other operating income 25,616 18,194 25,616 18,194 (41,415) (58,594) (34,562) (50,611) (6,853) (7,983) Non-core and other current operating income/Other services Staff costs Wages, salaries and similar expenses Employee benefit costs 20.3 Other operating expenses 20.4 Outside services (170,485) Taxes other than income tax Excessive provisions Impairment and gains or losses on disposals of non-current assets (810) 1,363 1,115 (13,567) (12,582) 4,127 550 8 37 8 37 24,604 (6,973) 20.5 18,923 27,849 9.3 12,354 26,356 21.1 12,354 26,356 6&7 15 7 Gains or losses on disposals and other PROFIT (LOSS) FROM OPERATIONS Finance income From investments in equity instruments - Group companies and associates (128,458) (1,503) Losses on, impairment of and change in allowances for trade receivables Depreciation and amortisation charge (170,625) (128,153) From marketable securities and other financial instruments 6,569 1,493 21.1 5,943 1,289 626 204 Finance costs 20.5 (16,642) (10,014) On debts to Group companies and associates 21.1 (4,046) (2,303) (12,596) (7,711) (952) 4,932 - Group companies and associates - Third parties On debts to third parties Changes in fair value of financial instruments Held-for-trading financial assets/liabilities and other Exchange differences 19 Impairment and gains or losses on disposals of financial instruments Impairment and other losses 9.3 Gains or losses on disposals and other FINANCIAL PROFIT PROFIT BEFORE TAX Income tax PROFIT FOR THE YEAR 18.4 (952) 4,932 6,476 4,089 (1,947) (5,483) (1,949) (6,664) 2 1,181 5,858 21,373 30,462 14,400 4,006 21,462 34,468 35,862 The accompanying Notes 1 to 24 are an integral part of the income statement for 2013. 2 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. STATEMENT OF CHANGES IN EQUITY FOR 2013 A) STATEMENTS OF RECOGNISED INCOME AND EXPENSE (Thousands of euros) 2013 PROFIT PER INCOME STATEMENT (I) 2012 34,468 35,862 Income and expense recognised directly in equity: - Arising from cash flow hedges 506 (631) (152) 189 354 (442) - Arising from cash flow hedges - (10) - Tax effect - 3 TOTAL TRANSFERS TO PROFIT OR LOSS (III) - (7) 34,822 35,413 - Tax effect TOTAL INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (II) Transfers to profit or loss: TOTAL RECOGNISED INCOME AND EXPENSE (I+II+III) The accompanying Notes 1 to 24 are an integral part of the statement of recognised income and expense for 2013. 3 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. STATEMENT OF CHANGES IN EQUITY FOR 2013 B) STATEMENT OF CHANGES IN TOTAL EQUITY (Thousands of euros) Share Share Interim Treasury Profit for Reserves capital premium dividend shares the year BEGINNING BALANCE AT 01/01/12 Total recognised income/(expense) Transactions with shareholders or owners Increase in equity arising from the merger (Note 5) 158,335 - 138,309 - - - 10,965 38,304 (3,446) - Other Valuation equity adjustments instruments Total equity (87,861) 96,184 - - - 35,862 - (449) 35,413 - 7,427 - 42,643 - 95,893 - - (21,352) - - - - (21,352) - - - - (44,792) - - (44,792) - - - - (19,019) - (19,019) - - 7,658 - - (43,734) 937 262,172 Distribution of profit Interim dividends paid Prior year's dividends paid - Treasury share transactions Treasury share transactions (net) - - Other changes in equity Transfers between equity items ENDING BALANCE AT 31/12/12 Total recognised income/(expense) 169,300 43,734 - (51,392) 38,304 142,521 (21,352) (99,453) - - - - - - 35,862 42,643 34,468 - 354 34,822 - - - - - - - - - - - - - - 21,352 - - - - - - - 14,510 - - (14,510) 488 308,313 Distribution of profit Interim dividends paid Prior year's dividends paid - - (21,352) Treasury share transactions Treasury share transactions (net) - - Other changes in equity Transfers between equity items ENDING BALANCE AT 31/12/13 169,300 38,304 157,032 - (99,453) 34,468 - 42,643 842 343,136 The accompanying Notes 1 to 24 are an integral part of the statement of changes in total equity for 2013. 4 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. STATEMENT OF CASH FLOWS FOR 2013 (Thousands of euros) 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES (I) Profit for the year before tax Adjustments for: - Depreciation and amortisation charge - Impairment losses - Changes in provisions - Gains on derecognition and disposal of non-current assets - Finance income - Finance costs - Exchange differences - Changes in fair value of financial instruments Changes in working capital - Inventories - Trade and other receivables - Trade and other payables - Other current assets and liabilities Other cash flows from operating activities - Interest paid - Dividends received - Income tax recovered (paid) 27,263 30,462 10,001 13,567 1,949 2,298 (8) (18,923) 16,642 (6,476) 952 (2,102) (44,008) 817 75,393 (34,304) (11,098) (17,700) 12,353 (5,751) (21,529) 14,400 3,697 12,582 6,664 12,525 (1,218) (27,849) 10,014 (4,089) (4,932) (58,095) (18,314) 24,407 (102,214) 38,026 18,469 (5,974) 26,356 (1,913) CASH FLOWS FROM INVESTING ACTIVITIES (II) Payments due to investment - Group companies and associates - Property, plant and equipment and intangible assets Proceeds from disposal - Group companies and associates (5,822) (16,795) (8,844) (7,951) 10,973 10,973 (8,494) (10,214) (1,433) (8,781) 1,720 1,720 30,764 30,764 69,047 (38,283) - 23,971 (19,019) (19,019) 109,134 50,946 58,188 (66,144) (66,144) - - 52,205 (6,052) 3,740 55,945 7,862 1,930 3,740 CASH FLOWS FROM FINANCING ACTIVITIES (III) Proceeds and payments relating to equity instruments - Purchase of treasury shares Proceeds and payments relating to financial liability instruments - Repayment of bank borrowings - Proceeds from issue of borrowings from Group companies and associates Dividends and returns on other equity instruments paid - Dividends EFFECT OF FOREIGN EXCHANGE RATE CHANGES (IV) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) Cash and cash equivalents at beginning of year Change due to merger Cash and cash equivalents at end of year The accompanying Notes 1 to 24 are an integral part of the statement of cash flows for 2013. 5 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 2 and 24). In the event of a discrepancy, the Spanish-language version prevails. Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) Notes to the financial statements for the year ended 31 December 2013 1.- Company activities Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) ("the Company"), with registered office at Avenida Isla Graciosa, 13, San Sebastián de los Reyes (Madrid), was incorporated on 7 June 1988, and its then sole company object was the indirect management of a public television service. For this purpose, it submitted a bid in response to the call for tenders made under Article 8 of Private Television Law 10/1988, of 3 May, and, pursuant to a resolution of the Spanish Cabinet of 25 August 1989, was awarded a concession for the indirect management of the public television service, for a period of ten years, which ended on 3 April 2000. On 7 May 1996, the shareholders at the Annual General Meeting resolved to change and extend the Parent's company object, as permitted by Satellite Telecommunications Law 37/1995. On 10 March 2000, the Spanish Cabinet adopted a resolution renewing the concession for the indirect management of the public television service for a period of ten years from 3 April 2000. The terms of this renewal were the same as for the former concession, with the added obligation of commencing digital broadcasting on 3 April 2002. The Company made all the necessary investments to enable it to begin broadcasting on that date the Antena 3 de Televisión, S.A. signal pursuant to Royal Decree 2169/1998, of 9 October, approving the Spanish Technical Plan for Digital Terrestrial Television (DTT). On 3 April 2010, the National Government renewed, for a period of ten years, the concession for the indirect management of the public television service, under the same terms and conditions as the previous concession. The Company's Annual General Meeting and its Board of Directors Meeting, on 28 April 2003 and 29 July 2003, respectively, resolved to request the admission to trading of all the shares of Antena 3 de Televisión, S.A. on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges and their inclusion in the Spanish Stock Market Interconnection System. On 29 October 2003, the Company's shares commenced trading on these stock exchanges. Additional Provision One of Royal Decree 944/2005, of 29 July, approving the Spanish Technical Plan for Digital Terrestrial Television established 3 April 2010 as the date for the switch-off of analogue television broadcasting in all the transition projects defined in the National Plan for the Transition to Digital Terrestrial Television. From that date onwards, all terrestrial television was broadcast using digital technology. Following this milestone, in accordance with Additional Provision Three of Royal Decree 944/2005, of 29 July, each national terrestrial public television service concession operator would gain access to a digital multiplex with national coverage. Royal Decree 365/2010, of 26 March, governs the allocation of the Digital Terrestrial Television multiplexes following the switch-off of terrestrial television broadcasting using analogue technology. It established two phases for the allocation of the digital multiplexes. Phase 1 (transitional), in which each national terrestrial public service television concession operator would gain access to the capacity equivalent to one digital multiplex with national coverage, provided they demonstrated that they had met the terms and conditions established in relation to the drive and development of digital terrestrial television, and phase 2, in which new digital multiplexes will be planned, and adjustments will be established so that the radioelectric channels 61 to 69, which were being used by the digital multiplexes in the previous phase can be replaced by others in 1 phase 2. This will conclude before 1 January 2015 with the allocation of the definitive digital multiplexes to each qualifying company, thereby ending the shared use of digital multiplex capacity by the national terrestrial public service concession operators. On 16 July 2010, the Spanish Cabinet adopted a resolution to allocate a national digital multiplex to each national DTT concession operator: Antena 3, Gestevisión Telecinco, Sogecable, Veo Televisión, NET TV and Gestora de Inversiones Audiovisuales La Sexta. The digital multiplex is composed of four digital television channels that can be operated twenty-four hours a day. The allocation was made upon request and after the switch-off of analogue broadcasting, once it had been verified that the digital terrestrial television service concession operators had met the obligations relating to the drive and development of digital terrestrial television that they had assumed in the framework of the Spanish Technical Plan for Digital Terrestrial Television and the Royal Decree governing the specific allocation of DTT multiplexes, following the switch-off of analogue terrestrial television broadcasting. In any event, the definitive multiplex will be accessed by 1 January 2015, in accordance with the phases established in the Royal Decree. A judgment handed down on 27 November 2012 by Chamber Three of the Spanish Supreme Court rendered void the resolution of the Spanish Cabinet of 16 July 2010 which allocated to each of the Digital Terrestrial Television (DTT) licence holders, including Antena 3 de Televisión, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A., the capacity equivalent to a digital multiplex with national coverage composed of four channels. This allocation had been made pursuant to a set of rules which, since 1997, upon approval of the National Plan for Digital Terrestrial Television, and particularly upon enactment of Law 10/2005, of 14 June, governed the transition from analogue terrestrial television to DTT, which was completed in 2010. The allocation was made once the Government had verified that the licence holders had complied with all the requirements and obligations incumbent upon them to foster transition to DTT, as a condition for gaining access to the multiplex. The judgment of the Spanish Supreme Court annulling the allocation was based primarily on the fact that the allocation was made after the General Audiovisual Communications Law came into force (which had been enacted one month before the Spanish Cabinet adopted the annulled resolution), which stipulates that the licences must be granted through a tendering procedure. The Supreme Court inferred from this that "the licences must reflect the content which existed upon entry into force of the Law, with no more channels being allowed", while the General Audiovisual Communications Law does not provide for any safeguard permitting the regulations to be applied prior to their entry into force. The judgment of the Spanish Supreme Court noted at the time that the matter would have been resolved had the General Audiovisual Communications Law included a provision envisaging that the rules in force prior to its enactment should continue to be valid. The obstacle posed by the judgment of the Spanish Supreme Court is therefore basically formal, because neither the conceptual basis of DTT, nor consequently its completion through the allocation of a multiplex to each operator, have ever been questioned. On 22 March 2013, the Spanish Cabinet approved a decision to comply with the judgment of the Supreme Court handed down on 27 November 2012, indicating that the channels affected had to cease broadcasting, and linking this process with that of the liberalisation of the digital dividend. Subsequently, on 18 December 2013, the Spanish Supreme Court issued a writ of execution for the aforementioned judgment, referring, inter alia, to the channels affected by its judgment, which would include three of the channels currently being operated by Atresmedia. At present, based on the available information, the interpretation of the aforementioned resolutions and the fact that Atresmedia Corporación de Medios de Comunicación, S.A. has complied with all the commitments and obligations imposed on it, a satisfactory solution is still expected to be reached, and it was not considered necessary to make any significant adjustments or amendments to these financial statements. 2 The Company is the head of a group of subsidiaries and is obliged under current legislation to prepare, in addition to its own separate financial statements, the Atresmedia Group’s consolidated financial statements, which also include its interests in joint ventures and investments in associates. The consolidated financial statements of Atresmedia for 2013 were formally prepared by the directors at the Board of Directors Meeting held on 26 February 2014. The financial statements for 2012 were approved without any changes by the Company's shareholders at the Annual General Meeting held on 24 April 2013. The shareholders also resolved to change the Company's name from Antena 3 de Televisión, S.A. to Atresmedia Corporación de Medios de Comunicación, S.A. In addition, on 14 December 2011 following a resolution by its Board of Directors, Antena 3 de Televisión, S.A. entered into an agreement with the shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. to merge the two companies, through the merger by absorption of La Sexta into Antena 3, subject to the obtainment of the relevant authorisations from the regulatory and competition authorities. On 25 January 2012, the Board of Directors of Antena 3 de Televisión, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A. approved the draft terms for the merger of the two companies. The shareholders at the Annual General Meeting held on 25 April 2012 approved the merger involving the absorption by Antena 3 de Televisión, S.A. (absorbing company) of Gestora de Inversiones Audiovisuales La Sexta, S.A. under the draft terms of merger filed with the Madrid Mercantile Registry on 7 February 2012. The merger was authorised by the Spanish anti-trust authorities on 24 August 2012, by virtue of a resolution adopted by the Spanish Cabinet on the same date. On 5 October 2012, the Spanish Cabinet also resolved to authorise the transfer of the audiovisual communication licence held by La Sexta and the assignment for private use of the associated public radioelectric domain. From that date onwards, the operations of La Sexta are deemed to be performed for accounting purposes by Antena 3 de Televisión, S.A. The public deed of merger of Antena 3 de Televisión, S.A. with Gestora de Inversiones Audiovisuales La Sexta, S.A. was filed at the Madrid Mercantile Registry on 31 October 2012, and as a result the latter was dissolved and all its assets and liabilities were transferred en bloc to the former. In view of the business activity carried on by the Company, it does not have any environmental liability, expenses, assets, provisions or contingencies that might be material with respect to its equity, financial position or results. Therefore, no specific disclosures relating to environmental issues are included in these notes to the financial statements. 3 2.- Basis of presentation of the financial statements Regulatory financial reporting framework applicable to the Company The accompanying financial statements were formally prepared by the Company’s directors in accordance with the regulatory financial reporting framework applicable to the Company, which consists of: a) The Spanish Commercial Code and all other Spanish corporate law. b) The Spanish National Chart of Accounts approved by Royal Decree 1514/2007 and its industry adaptations, and Spanish National Securities Market Commission (CNMV) Circular 1/2008, of 30 January, on the periodic information of issuers whose securities are admitted to trading on regulated markets. c) The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement the Spanish National Chart of Accounts and the relevant secondary legislation, in addition to the mandatory rules approved by the Spanish National Securities Market Commission. d) All other applicable Spanish accounting legislation. Fair presentation The accompanying financial statements, which were obtained from the Company's accounting records, are presented in accordance with the regulatory financial reporting framework applicable to the Company and, in particular, with the accounting principles and rules contained therein and, accordingly, present fairly the Company's equity, financial position, results of operations and cash flows for 2013. These financial statements, which were formally prepared by the Company's directors, will be submitted for approval by the shareholders at the Annual General Meeting, and it is considered that they will be approved without any changes. The financial statements for 2012 were approved by the shareholders at the Annual General Meeting held on 24 April 2013. Non-obligatory accounting principles applied No non-obligatory accounting principles were applied. Also, the directors formally prepared these financial statements taking into account all the obligatory accounting principles and standards with a significant effect hereon. All obligatory accounting principles were applied. Key issues in relation to the measurement and estimation of uncertainty In preparing the accompanying financial statements estimates were made by the Company's directors in order to measure certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates relate basically to the following: - The assessment of possible impairment losses on certain assets (see Notes 4.4 and 9). The useful life of the property, plant and equipment and intangible assets (see Notes 4.1 and 4.2). The calculation of provisions (see Notes 4.9 and 15). Programme amortisation (see Notes 4.5 and 13). The calculation of income tax and recoverability of tax losses (see Notes 4.7 and 18.). The fair value of the assets acquired and liabilities assumed in a business combination (see Note 5). Although these estimates were made on the basis of the best information available at 2013 yearend, events that take place in the future might make it necessary to change these estimates (upwards or downwards) in coming years. Changes in accounting estimates would be applied prospectively. At 2013 year-end the Company had a working capital deficiency of EUR 11,017 thousand covered in full by the undrawn portion of the syndicated loan. 4 Comparative information The information relating to 2013 contained in these notes to the financial statements is presented, for comparison purposes, with the information for 2012. Grouping of items Certain items in the balance sheet, income statement, statement of changes in equity and statement of cash flows are grouped together to facilitate their understanding; however, whenever the amounts involved are material, the information is broken down in the related notes to the financial statements. Changes in accounting policies In 2013 there were no significant changes in accounting policies with respect to those applied in 2012. Correction of errors In preparing the accompanying financial statements no significant errors were detected that would have made it necessary to restate the amounts included in the financial statements for 2012. Effect of not consolidating The Company is the majority shareholder of certain companies and has ownership interests equal to or exceeding 20% in the share capital of other companies (see Note 9). The separate financial statements at 31 December 2013 do not reflect the increases in the value of the Company’s ownership interests in these companies which would arise from fully consolidating majority ownership interests and accounting for investments in associates using the equity method. Pursuant to current legislation, the Company prepared consolidated financial statements separately in accordance with International Financial Reporting Standards. In 2013 the main aggregates in the consolidated financial statements are as follows: total assets EUR 1,261 million; equity EUR 384 million; revenue EUR 796 million; and profit for the year EUR 46 million. 3.- Distribution of profit The proposed distribution of the profit for the year that the Company's directors will submit for approval by the shareholders at the Annual General Meeting is as follows (in thousands of euros): 2013 To voluntary reserves 34,468 Total 34,468 5 4.- Accounting policies The principal accounting policies used by the Company in preparing its financial statements for 2013 and 2012, in accordance with the Spanish National Chart of Accounts, were as follows: 4.1 Intangible assets As a general rule, intangible assets are recognised initially at acquisition or production cost. They are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. These assets are amortised over their years of useful life. Licences and trademarks These accounts include the amounts relating to the licence and the trademark identified in the purchase price allocation process arising from the merger with Gestora de Inversiones Audiovisuales La Sexta, S.A. The trademark is amortised on a straight-line basis over its useful life, which is estimated to be 20 years. With regard to the licence, based on an analysis of all the relevant factors, the Company considers that there is no foreseeable limit to the period over which it is expected to generate net cash inflows for the Company. As a result, the licence was classified as an intangible asset with an indefinite useful life and, therefore, it is not amortised. This indefinite useful life assessment is reviewed at each reporting date and is consistent with the Company's related business plans. The Company has reviewed the licence and trademark valuations identified in the purchase price allocation process performed within the framework of the aforementioned merger. For this review, which included the participation of an independent expert, the standard procedures for analyses of this kind were used, and it was concluded that the assigned values are within reasonable valuation ranges. Consequently, it was not necessary to modify the initial estimates or make any adjustments at 2013 year-end. Since the asset has an indefinite useful life, a recoverability assessment was performed at yearend. The key assumptions on which the cash flow projections are based relate mainly to advertising markets, audience, advertising efficiency ratios and the evolution of expenses. Except for advertising data, which is measured on the basis of external sources of information, the assumptions are based on past experience and reasonable projections approved by Company management and updated in accordance with the performance of the advertising markets. Taking the correlation between the advertising market and the evolution of domestic demand and private consumption as a reference, a retrospective analysis was conducted using the historical data of these two variables, based on market consensus. These future projections cover the next five years. The discount rate used to measure this intangible asset was between 9% and 10%. A variation of 0.5% in cumulative annual growth would give rise to a change in value of EUR 9 million, while a 0.5% increase in the discount rate would give rise to a change of EUR 13 million, and a 0.5% decrease in the discount rate would result in a change of EUR 15 million. Zero perpetual growth was used. An increase of 0.5% would give rise to an increase in value of EUR 16 million and a decrease of 0.5% would result in a decrease in value of EUR 14 million. 6 Computer software The Company recognises under “Computer Software” the costs incurred in the acquisition and development of computer programs, including website development costs. Computer software maintenance costs are recognised with a charge to the income statement for the year in which they are incurred. Computer software is amortised on a straight-line basis over three to five years. 4.2 Property, plant and equipment Property, plant and equipment are initially recognised at acquisition or production cost and are subsequently reduced by the related accumulated depreciation and by any impairment losses recognised, as indicated in this note. Property, plant and equipment upkeep and maintenance expenses are recognised in the income statement for the year in which they are incurred. However, the costs of improvements leading to increased capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised. The Company depreciates its property, plant and equipment by the straight-line method at annual rates based on the years of estimated useful life of the assets, the detail being as follows: Years of estimated useful life Buildings Plant Computer hardware 33 5 to 8 3 to 5 Other fixtures 6 to 10 Other items of property, plant and equipment 6 to 10 Impairment of intangible assets and property, plant and equipment At the end of each reporting period (for intangible assets with indefinite useful lives) or whenever there are indications of impairment (for other tangible and intangible assets), the Company tests these assets for impairment to determine whether the recoverable amount of the assets has been reduced to below their carrying amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In the case of property, plant and equipment, the impairment tests are performed individually for each asset. Where an impairment loss subsequently reverses (not permitted in the specific case of goodwill), the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised as income. 4.3 Operating leases Lease income and expenses from operating leases are recognised in income on an accrual basis. A payment made on entering into or acquiring a leasehold that is accounted for as an operating lease represents prepaid lease payments that are amortised over the lease term in accordance with the pattern of benefits provided. The leases in which the Company is a lessor consist basically of facilities which the Company has leased to companies in its Group. 7 4.4 Financial instruments 4.4.1. Financial assets Classification The financial assets held by the Company are classified in the following categories: a) Loans and receivables: financial assets arising from the sale of goods or the rendering of services in the ordinary course of the Company's business, or financial assets which, not having commercial substance, are not equity instruments or derivatives, have fixed or determinable payments and are not traded in an active market. b) Equity investments in Group companies and associates: Group companies are deemed to be those related to the Company as a result of a relationship of control and associates are companies over which the Company exercises significant influence. c) Held-to-maturity investments: debt securities with fixed maturity and determinable payments that are traded in an active market and which the Company has the positive intention and ability to hold to the date of maturity. d) Held-for-trading financial assets: assets acquired with the intention of selling them in the near term and assets that form part of a portfolio for which there is evidence of a recent actual pattern of short-term profit-taking. This category also includes financial derivatives that are not financial guarantees (e.g. suretyships) and that have not been designated as hedging instruments. Initial recognition Financial assets are initially recognised at the fair value of the consideration given, plus any directly attributable transaction costs. In the case of equity investments in Group companies affording control over the subsidiary, since 1 January 2010 the fees paid to legal advisers and other professionals relating to the acquisition of the investment have been recognised directly in profit or loss. Subsequent measurement Loans and receivables and held-to-maturity investments are measured at amortised cost. Held-for-trading financial assets are measured at fair value, based on the expected results, the estimated dividend payable, the price per share and the volatility thereof, and the risk-free rate at year-end. The result of these fair value changes is recognised in profit or loss. Investments in Group companies and associates are measured at cost net, where appropriate, of any accumulated impairment losses. These losses are calculated as the difference between the carrying amount of the investments and their recoverable amount. Recoverable amount is the higher of fair value less costs to sell and the present value of the future cash flows from the investment. Unless there is better evidence of the recoverable amount, it is based on the value of the equity of the investee, adjusted by the amount of the unrealised gains existing at the date of measurement (including any goodwill). At least at each reporting date the Company tests financial assets not measured at fair value through profit or loss for impairment. Objective evidence of impairment is considered to exist when the recoverable amount of the financial asset is lower than its carrying amount. When this occurs, the impairment loss is recognised in the income statement. The Company uses the strategic plans of the various businesses to calculate any possible impairment and discounts expected future cash flows. The Company prepares the various projections individually, taking into account the expected future cash flows of each cashgenerating unit. 8 For the radio unit, the key assumptions on which the cash flow projections are based relate mainly to advertising markets, audience, advertising efficiency ratios and the evolution of expenses. Except for advertising data, which is measured on the basis of external sources of information, the assumptions are based on past experience and reasonable projections approved by Company management and updated in accordance with the performance of the advertising markets. These future projections cover the next five years. The cash flows for the years not considered in the projections are estimated to be perpetual, with growth of 0%. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. In order to calculate the rate, the current value of money and the risk premiums generally used by analysts for the business and geographical area are taken into account, giving rise to future discount rates of 9%-10%. The most sensitive variable is the growth of the radio advertising market, for which cumulative annual growth of 2.4% was used for the projection period, which is in line a mild recovery in the coming years. A change of 0.5% would change the amount by EUR 12 million. Also, a variation of 0.5% in the discount rate would give rise to a change of EUR 8 million. Zero perpetual growth was used. An increase of 0.5% would increase the amount by EUR 6 million. In calculating such valuation adjustments as might be required for trade and other receivables, the Company takes into account the date on which the receivables are due to be settled and the equity position of related debtors. The Company derecognises a financial asset when the rights to the cash flows from the financial asset expire or have been transferred and substantially all the risks and rewards of ownership of the financial asset have also been transferred, such as in the case of firm asset sales. However, the Company does not derecognise financial assets, and recognises a financial liability for an amount equal to the consideration received, in transfers of financial assets in which substantially all the risks and rewards of ownership are retained, such as in the case of bill discounting. 4.4.2 Financial liabilities Financial liabilities include accounts payable by the Company that have arisen from the purchase of goods or services in the normal course of the Company's business and those which, not having commercial substance, cannot be classed as derivative financial instruments. Accounts payable are initially recognised at the fair value of the consideration received, adjusted by the directly attributable transaction costs. These liabilities are subsequently measured at amortised cost. The Company derecognises financial liabilities when the obligations giving rise to them cease to exist. 4.4.3 Equity instruments An equity instrument is a contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognised in equity at the proceeds received, net of issue costs. Treasury shares acquired by the Company during the year are recognised at the value of the consideration paid and are deducted directly from equity. Gains and losses on the acquisition, sale, issue or retirement of treasury shares are recognised directly in equity and in no case are they recognised in profit or loss. 9 4.4.4 Hedges The Company uses derivative financial instruments to hedge the risks to which its business activities, operations and future cash flows are exposed. Basically, these risks relate to changes in exchange rates. The Company arranges hedging financial instruments in this connection. In order for these financial instruments to qualify for hedge accounting, they are initially designated as such and the hedging relationship is documented. Also, the Company verifies, both at inception and periodically over the term of the hedge (at least at the end of each reporting period), that the hedging relationship is effective, i.e. that it is prospectively foreseeable that the changes in the fair value or cash flows of the hedged item (attributable to the hedged risk) will be almost fully offset by those of the hedging instrument and that, retrospectively, the gain or loss on the hedge was within a range of 80-125% of the gain or loss on the hedged item. In 2012 the Company used the following type of hedge, which is accounted for as described below: Cash flow hedges: in hedges of this nature, the portion of the gain or loss on the hedging instrument that has been determined to be an effective hedge is recognised temporarily in equity and is recognised in the income statement in the same period during which the hedged item affects profit or loss, unless the hedge relates to a forecast transaction that results in the recognition of a non-financial asset or a non-financial liability, in which case the amounts recognised in equity are included in the initial cost of the asset or liability when it is acquired or assumed. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the year. 4.5 Inventories Programme rights Rights and programme inventories are valued, based on their nature, as follows: Inventoriable in-house productions (programmes produced to be re-run, such as series) are measured at acquisition and/or production cost, which includes both external costs billed by third parties for programme production and for the acquisition of resources and internal production costs, which are calculated by applying pre-established internal rates on the basis of the time during which operating resources are used in production. The costs incurred in producing the programmes are recognised, based on their nature, under the appropriate headings in the income statement and are included under “Programme Rights” in the balance sheet with a credit to “Procurements – Inventories” in the income statement. Amortisation of these programmes is recognised under “Programmes Amortisation and Other” in the income statement, on the basis of the number of showings, in accordance with the rates shown below: Amortisation rate 1st showing 90% 2nd showing 10 % The maximum period for the amortisation of series is three years, after which the unamortised amount is written off. Given their special nature, the series which are broadcast daily are amortised in full when the first showing of each episode is broadcast. 10 Non-inventoriable in-house productions (programmes produced to be shown only once) are measured using the same methods and procedures as those used to measure inventoriable inhouse productions. Programmes produced and not shown are recognised at year-end under “Programme Rights - In-House Productions and Productions in Process” in the balance sheet. The cost of these programmes is recognised as an expense under “Programme Amortisation and Other” in the income statement at the time of the first showing. Rights on outside productions (films, series and other similar productions) are measured at acquisition cost. These rights are deemed to have been acquired when the term of the right commences for the Company. Payments made to outside production distributors prior to commencement of the term of the right are recorded under “Advances to Suppliers” in the balance sheet. The amortisation of the rights is recognised under “Programme Amortisation and Other” in the income statement on the basis of the number of showings, in accordance with the rates shown below, which are established on the basis of the number of showings contracted: FILMS Number of showings contracted 1 2 3 or more 1st showing 100% 50% 50% 2nd showing - 50% 30% 3rd showing - - 20% SERIES Number of showings contracted 1 2 or more 1st showing 100% 50% 2nd showing - 50% Live broadcasting rights are measured at cost. The cost of these rights is recognised as an expense under “Programme Amortisation and Other” in the income statement at the time of broadcast of the event on which the rights were acquired. Raw and other materials Dubbings, sound tracks, titles and signature tunes of outside productions are recorded at acquisition or production cost. The amortisation of rights is recorded under “Programme Amortisation and Other” in the income statement at the time of the showing, using the same methods as those used for outside productions. Other inventories are recorded at acquisition cost and are allocated to profit or loss by the effective or actual amortisation method over the production period. Write-downs The Company recognises write-downs to reduce the unamortised value of in-house productions and of the rights on outside productions which it considers will not be shown. When these rights expire, the valuation adjustments are recognised in profit or loss when the cost of the rights is derecognised. Classification of programmes In accordance with the Spanish National Chart of Accounts, programme inventories are classified as current assets on the basis of the normal business cycle and standard practice in the industry in which the Company operates. However, programmes are amortised over several years (see Note 13). 11 4.6 Foreign currency transactions The Company's functional currency is the euro. Therefore, transactions in currencies other than the euro are deemed to be “foreign currency transactions” and are recognised by applying the exchange rates prevailing at the date of the transaction. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to euros at the rates then prevailing. Any resulting gains or losses are recognised directly in the income statement in the year in which they arise. Monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. The resulting gains or losses are recognised in equity or in profit or loss by applying the same methods as those used to recognise changes in fair value, as indicated in Note 4.4 on financial instruments. 4.7 Income tax Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense (deferred tax income). The current income tax expense is the amount payable by the Company as a result of income tax settlements for a given year. Tax credits and other tax benefits, excluding tax withholdings and pre-payments, and tax loss carryforwards from prior years effectively offset in the current year reduce the current income tax expense. The deferred tax expense or income relates to the recognition and derecognition of deferred tax assets and liabilities. These include temporary differences measured at the amount expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled. Deferred tax liabilities are recognised for all taxable temporary differences, except for those arising from the initial recognition of goodwill or of other assets and liabilities in a transaction that is not a business combination and affects neither accounting profit (loss) nor taxable profit (tax loss). Deferred tax assets are recognised to the extent that it is considered probable that the Company will have taxable profits in the future against which the deferred tax assets can be utilised. Deferred tax assets and liabilities arising from transactions charged or credited directly to equity are also recognised in equity. The deferred tax assets recognised are reassessed at the end of each reporting period and the appropriate adjustments are made to the extent that there are doubts as to their future recoverability. Also, unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that they will be recovered through future taxable profits. In 2001 the Company began to be taxed on a consolidated basis with other Group companies (see Note 18). In this connection, in calculating its income tax, the Company took into consideration the corresponding Spanish Accounting and Audit Institute (ICAC) resolutions, establishing the methods for the recognition of income tax at companies that file consolidated tax returns. 12 4.8 Revenue and expense recognition Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises. Revenue is measured at the fair value of the consideration received, net of discounts and taxes. Revenue from sales is recognised when the significant risks and rewards of ownership of the goods sold have been transferred to the buyer, and the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at the end of the reporting period, provided the outcome of the transaction can be estimated reliably. At present, the Company basically obtains revenue from the sale of advertising space; this revenue is recognised in the income statement when the related advertising spot is broadcast. Interest income from financial assets is recognised using the effective interest method and dividend income is recognised when the shareholder's right to receive payment has been established. Interest and dividends from financial assets accrued after the date of acquisition are recognised as income. 4.9 Provisions and contingencies When preparing the financial statements the Company's directors made a distinction between: Provisions: credit balances covering present obligations arising from past events with respect to which it is probable that an outflow of resources embodying economic benefits that is uncertain as to its amount and/or timing will be required to settle the obligations; and Contingent liabilities: possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within the Company's control. The financial statements include all the provisions with respect to which it is considered that it is more likely than not that the obligation will have to be settled. Contingent liabilities are not recognised in the financial statements, but rather are disclosed, unless the possibility of an outflow in settlement is considered to be remote. Provisions are measured at the present value of the best possible estimate of the amount required to settle or transfer the obligation, taking into account the information available on the event and its consequences. Where discounting is used, adjustments made to provisions are recognised as interest cost on an accrual basis. The compensation to be received from a third party on settlement of the obligation is recognised as an asset, provided that there are no doubts that the reimbursement will take place, unless there is a legal relationship whereby a portion of the risk has been externalised as a result of which the Company is not liable; in this situation, the compensation will be taken into account for the purpose of estimating the amount of the related provision that should be recognised. 4.10 Termination benefits Under current legislation, the Company is required to pay termination benefits to employees terminated under certain conditions. Therefore, termination benefits that can be reasonably quantified are recognised as an expense in the year in which the decision to terminate the employment relationship is taken. The accompanying financial statements do not include any provision in this connection, since no situations of this nature are expected to arise. 13 4.11 Environmental assets and liabilities Environmental assets are deemed to be assets used on a lasting basis in the Company's operations whose main purpose is to minimise environmental impact and protect and improve the environment, including the reduction or elimination of future pollution. In view of the business activities carried on by the Company, it does not have any environmental liability, expenses, assets, provisions or contingencies that might be material with respect to its equity, financial position or results. Therefore, no specific disclosures relating to environmental issues are included in these notes to the financial statements. 4.12 Business combinations Business combinations are accounted for by applying the acquisition method, for which the acquisition date is determined and the cost of the combination is calculated, and the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair value. Goodwill or gains from a bargain purchase arising from a combination are calculated as the difference between the acquisition-date fair value of the assets acquired and liabilities assumed and the cost of the business combination at the acquisition date. The cost of a business combination is the aggregate of: The acquisition-date fair value of the assets acquired, the liabilities assumed and the equity instruments issued. The fair value of any contingent consideration that depends on future events or on the fulfilment of certain specified conditions. The costs incurred to issue equity or debt securities given up in exchange for the items acquired are not included in the cost of a business combination. Also, since 1 January 2010 the cost of a business combination does not include the fees paid to legal advisers and other professionals involved in the combination or, clearly, any costs incurred internally in this connection. Such amounts are charged directly to profit or loss. If, exceptionally, a gain from a bargain purchase arises from the business combination, it is recognised as income in the income statement. When the fair value of intangible assets cannot be determined by reference to an active market, Recognition and Measurement Standard no.19 of the Spanish National Chart of Accounts, as drafted by Royal Decree 1159/2010, limits the recognition thereof up to the amount in which the value of the net assets acquired is equal to the cost of the business combination. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete, and the provisional amounts may be adjusted in the period required to obtain the necessary information. However, the measurement period shall not exceed one year from the acquisition date. The effects of the adjustments made in that period are recognised retrospectively and comparative information for prior periods must be revised as needed. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss, unless the consideration has been classified as equity, in which case subsequent changes in its fair value are not recognised. 14 4.13 Related party transactions The Company performs all its transactions with related parties on an arm's length basis. Also, the transfer prices are adequately supported and, therefore, the Company's directors consider that there are no material risks in this connection that might give rise to significant liabilities in the future. 4.14 Non-current assets and disposal groups classified as held for sale The Company classifies a non-current asset or disposal group as held for sale when the decision to sell it has been taken and the sale is expected to occur within twelve months. These assets or disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets classified as held for sale are not depreciated, but rather at the end of each reporting period the related valuation adjustments are made to ensure that the carrying amount is not higher than fair value less costs to sell. Income and expenses arising from non-current assets and disposal groups classified as held for sale which do not qualify for classification as discontinued operations are recognised under the related heading in the income statement on the basis of their nature. 4.15 Current and non-current items Current assets are assets associated with the normal operating cycle, which in general is considered to be one year; other assets which are expected to mature, be disposed of or be realised within twelve months from the end of the reporting period, financial assets held for trading, except for financial derivatives that will be settled in a period exceeding one year; and cash and cash equivalents. Assets that do not meet these requirements are classified as noncurrent assets. Similarly, current liabilities are liabilities associated with the normal operating cycle, financial liabilities held for trading, except for financial derivatives that will be settled in a period exceeding one year; and, in general, all obligations that will mature or be extinguished at short term. All other liabilities are classified as non-current liabilities. 5.- Business combinations 5.1 Description of the transaction On 14 December 2011, following a resolution by its Board of Directors, Atresmedia Corporación de Medios de Comunicación, S.A. (Atresmedia) entered into an agreement with Gestora de Inversiones Audiovisuales La Sexta S.A. (La Sexta) and its shareholders (GAMP Audiovisual S.A., Grupo Televisa S.A.B. and Gala Desarrollos Comerciales S.L., as well as Imagina Media Audiovisual S.L.), to merge the two television companies through a merger by absorption of La Sexta into Atresmedia. La Sexta engaged mainly in the management of a licence to provide audiovisual communication services, for a period of fifteen years, pursuant to a resolution adopted by the Spanish Cabinet on 11 June 2010. 15 On 25 January 2012, the members of the Boards of Directors of Atresmedia Corporación de Medios de Comunicación, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A. signed the draft terms of merger in accordance with Articles 30, 31 and related provisions of Law 3/2009, of 3 April, on structural changes to companies, in order to merge their respective businesses through a merger transaction. The draft terms of merger were filed at the Madrid Mercantile Registry on 7 February 2012 and published in the Official Gazette of the Mercantile Registry (BORME) on 17 February 2012. The draft terms of merger consisting of the absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. into Antena 3 de Televisión, S.A. were approved by the shareholders at the Annual General Meeting of the absorbing company and the shareholders at the Universal Extraordinary General Meeting of the absorbed company on 25 April 2012. On 24 August 2012, the Spanish Cabinet approved the business combination on the grounds of general interest, but making the approval conditional upon the fulfilment of certain conditions which modify some of those included in the resolution of the Spanish Anti-Trust Commission, of 13 July 2012. On 5 October 2012, the Spanish Cabinet also authorised the transfer of La Sexta's audiovisual communication licence and the assignment for private use of the associated radioelectric public domain; thus, the last administrative authorisation established in the draft terms of merger as a condition precedent for the completion of the transaction was obtained. On this same date, effective control of La Sexta was obtained and, therefore, 5 October 2012 is taken to be the acquisition date, from which time onwards La Sexta's operations are considered to be performed for accounting purposes by Atresmedia. On 29 October 2012, the merger resolutions adopted by the shareholders of Atresmedia Corporación de Medios de Comunicación, S.A., as the absorbing company, and Gestora de Inversiones Audiovisuales La Sexta, S.A., as the absorbed company, at their respective Annual General Meetings on 25 April 2012, were executed in public deeds, as a result of which the draft terms of merger were fully approved. As a result, Atresmedia Corporación de Medios de Comunicación, S.A. acquired by universal succession all the assets and liabilities of Gestora de Inversiones Audiovisuales La Sexta, S.A. with the concomitant dissolution of the latter. Following the merger resolution approved by the shareholders at the Annual General Meetings of the two companies and the filing of the merger deed at the Madrid Mercantile Registry on 31 October 2012, the shareholders of La Sexta received, as consideration for the assets and liabilities of this company,15,801,296 shares of Atresmedia Corporación de Medios de Comunicación, S.A., which represent 7% of its share capital. For the purposes of the share exchange, Atresmedia Corporación de Medios de Comunicación, S.A. increased its share capital through the issue of 14,620,000 new shares (of which 13,438,704 were ordinary shares and a further 1,181,296 were shares with no dividend rights for a period of two years from the date on which the merger became effective), while the remaining shares corresponding to the shareholders of La Sexta were delivered with a charge to the treasury shares of Atresmedia Corporación de Medios de Comunicación, S.A. (see Note 14). Also, within the framework of the merger resolution, the parties resolved to grant the shareholders of La Sexta an additional fixed ownership interest of 15,818,704 shares of Atresmedia Corporación de Medios de Comunicación, S.A., representing 7% of its share capital, the delivery of which is conditional upon the fulfilment in 2012, 2013, 2014, 2015 and 2016 of certain objectives relating to the earnings of the Atresmedia Group. The delivery of these additional shares would be carried out in full through treasury shares of Atresmedia, provided that the related objectives are met and, in any case, these shares would be delivered in 2017 at the latest. The main advantage and economic benefit of this transaction is the synergy achieved, with an extended range of contents, greater efficiency in the use of Company resources and increased advertising efficiency. On 19 February 2014, the Company arranged the partial novation of this agreement and amended the content thereof with respect to two of the three former shareholders of La Sexta (see Note 23). 16 5.2 Consideration transferred The business combination consideration was estimated at the fair value (market price at closing on 5 October 2012) of the shares delivered to the shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. (a total of 15,801,296 shares representing 7% of the Company's share capital and delivered as a result of the capital increase described in Note 14) and at the fair value of the shares subject to deferred delivery, calculated on the basis of the forward price of the shares of Atresmedia Corporación de Medios de Comunicación, S.A. at that date, taking into account a 0.90% IRS rate and in accordance with management's estimate of the profit for 2012 to 2016 in order to estimate the time of delivery. The fair value of the consideration transferred in the business combination amounted to EUR 95,893 thousand. The breakdown of this amount is as follows: Thousands of euros 7% ownership interest in the share capital Deferred delivery of shares Total consideration transferred 53,250 42,643 95,893 In order to enable the shareholders of La Sexta to receive a number of Atresmedia shares that is proportional to their respective ownership interests in La Sexta, Atresmedia increased its share capital through the creation of newly issued shares and the delivery of treasury shares. Additionally, Atresmedia agreed to grant La Sexta shareholders an additional ownership interest of 15,818,704 Atresmedia shares representing 7% of its share capital, although the delivery thereof is conditional upon the earnings of the Atresmedia Group from 2012 to 2016. The delivery of these additional shares would be carried out in full through treasury shares of Atresmedia and, therefore, would not constitute an additional issue (see Note 14.2). On 19 February 2014, the Company arranged the partial novation of this agreement and amended the content thereof with respect to two of the three former shareholders of La Sexta (see Note 23). 17 5.3 Assets acquired and liabilities assumed at the acquisition date The assets and liabilities of Gestora de Inversiones Audiovisuales La Sexta, S.A., assumed at the acquisition date and measured at fair value, were as follows: Thousands of euros Current assets: Inventories Trade receivables Investments in Group companies Current financial assets Current prepayments and accrued income Cash and cash equivalents 62,718 21,790 24,787 13,331 696 184 1,930 Non-current assets: Intangible assets Property, plant and equipment Investments in Group companies and associates Non-current financial assets Deferred tax assets (*) Non-current trade receivables 337,937 77,201 615 9,445 8,926 241,596 154 Current liabilities: Short-term provisions Current payables Current payables to Group companies and associates Trade payables (213,282) (14,079) (6) (22,879) (176,318) Non-current liabilities: Deferred tax liabilities (*) Non-current payables to Group companies and associates (91,480) (22,945) (68,535) Total fair value of net identifiable assets acquired 95,893 (*) Under current accounting legislation, deferred tax assets and liabilities recognised in a business combination are not measured at fair value, but rather at their nominal amount. The gross contractual amount receivable in relation to the accounts receivable acquired, which related in full to trade receivables and were recognised at their fair value of EUR 24,787 thousand, is EUR 24,795 thousand. The detail, by year of acquisition, of the intangible assets and property, plant and equipment included as a result of the merger (excluding the licence and trademark) is as follows (in thousands of euros): Intangible assets Computer software Property, plant and equipment Plant Furniture Computer hardware 2006 2007 2008 2009 2010 2011 2012 Total - - - 1 54 460 201 716 716 4 293 - 15 - 20 6 - 29 2 28 20 76 22 89 11 53 358 204 615 Assets not reflected in the accounting records of Gestora de Inversiones Audiovisuales La Sexta, S.A. were included (the "La Sexta" trademark and the audiovisual communication licence granted). The fair value of intangible assets may not be determined by reference to an active market. Accordingly, Recognition and Measurement Standard no.19 of the Spanish National Chart of Accounts, as drafted by Royal Decree 1159/2010, limits the recognition thereof up to the amount in which the value of the net assets acquired is equal to the cost of the business combination. In accordance with this standard, the licence and trademark were only valued at a maximum amount of EUR 77,201 thousand since it was not possible to recognise a gain from a bargain purchase 18 arising in a business combinations in this connection. The fair value of the licence was calculated on the basis of its capacity to generate income with an indefinite useful life using the discounted cash flow method. The royalty relief method was used to calculate the fair value of the trademark, considering a useful life of 20 years. At 2012 year-end, the allocation of the fair values of the assets acquired and liabilities assumed, in particular of trademarks and licences, was subject to possible adjustments within one year from the acquisition date, as required by accounting legislation. The purpose of these adjustments is to reflect, in general, any additional information obtained during the aforementioned measurement period, and, in the Company's particular case, the information referring to the Spanish Supreme Court judgment of 27 November 2012 relating to the assignment of digital multiplexes with national coverage. Once this period had elapsed and following a review by the Company, based on a report by an independent expert, of the values initially assigned to the aforementioned assets (using various widely accepted valuation methods for this purpose), there was no change in those values. Had the business combination been performed at the beginning of 2012, revenue would have amounted to EUR 671,483 thousand and a loss of EUR 16,249 thousand would have been incurred in the year. After integration of the merged entity at the acquisition date, and in view of the fact that it was not possible to extract separate information on the revenue and net profit or loss attributable to the business combination, this information was not included. The directors consider that these pro forma figures represented a reasonable approximation of the annual performance of the new merged entity and an initial point of reference for comparison in future years. In order to determine these pro forma revenue and profit or loss figures, Company management took into account non-current asset depreciation and amortisation calculated on the basis of the acquisition-date fair values and borrowing costs calculated on the basis of the situation of the debt existing after the date of the business combination. Lastly, it should be noted that fees paid to legal advisers and other professionals involved in the transaction amounted to EUR 3,428 thousand, EUR 2,131 thousand of which related to 2012 and was recognised under "Other Operating Expenses" in the income statement. 6.- Intangible assets The changes in “Intangible Assets” in the balance sheets in 2013 and 2012 were as follows (in thousands of euros): Balance at 01/01/13 Cost Licence Trademark Computer software Other intangible assets Total cost 60,666 15,819 33,675 304 110,464 Accumulated amortisation Trademark Computer software Other intangible assets Total accumulated amortisation 2,583 2,583 Balance at 01/01/13 Cost Accumulated amortisation Total, net (368) (368) Increase or decrease due to transfer Charge for the year (198) (27,127) (304) (27,629) Total intangible assets Increase or decrease due to transfer Additions (791) (2,989) (3,780) Balance at 01/01/13 110,464 (27,629) 82,835 15 15 Balance at 31/12/13 60,666 15,819 35,890 304 112,679 Balance at 31/12/13 (989) (30,101) (304) (31,394) Balance at 31/12/13 112,679 (31,394) 81,285 19 Cost Licence Trademark Computer software Other intangible assets Total cost Balance at 01/01/12 30,443 304 30,747 Accumulated amortisation Increase or decrease due to merger (Note 5) Additions 2,517 2,517 Balance at 01/01/12 Trademark Computer software Other intangible assets Total accumulated amortisation Total intangible assets Cost Accumulated amortisation Total, net 60,666 15,819 716 77,201 Charge for the year (24,870) (304) (25,174) Disposals or reductions 30,747 (25,174) 5,573 60,666 15,819 33,675 304 110,464 Disposals or Balance at reductions 31/12/12 (198) (2,258) (2,456) Balance at 01/01/12 (1) (1) Balance at 31/12/12 1 1 (198) (27,127) (304) (27,629) Balance at 31/12/12 110,464 (27,629) 82,835 At the end of 2013 and 2012 the Company had fully amortised intangible assets still in use, the detail being as follows (in thousands of euros): Gross carrying amount 2013 Computer software Other intangible assets Total 25,433 304 25,737 2012 24,001 304 24,305 20 7.- Property, plant and equipment The changes in 2013 and 2012 in “Property, Plant and Equipment” in the balance sheets and the most significant information affecting this heading were as follows (in thousands of euros): Balance at 01/01/13 Cost Land and buildings Plant Machinery Tools Furniture Computer hardware Transport equipment Property, plant and equipment in the course of construction Total cost 56,024 104,865 192 93 8,336 26,867 52 810 197,239 Land and buildings Plant Machinery Tools Furniture Computer hardware Transport equipment Total accumulated depreciation (29,585) (90,155) (188) (92) (7,408) (22,219) (52) (149,699) Cost Balance at 01/01/12 Land and buildings Plant Machinery Tools Furniture Computer hardware Transport equipment Property, plant and equipment in the course of construction Total cost 5,271 (5,844) - 237 5,421 368 (7,590) 195,437 Increase or decrease due to transfer Balance at 01/01/13 Cost Accumulated depreciation Total, net (569) (4,993) (315) (1,713) - Disposals or reductions (5) (8) (2) (15) 55,647 104,369 192 93 8,495 26,353 52 Balance at 31/12/13 569 (30,780) 4,966 (90,773) (189) (93) 312 (7,628) 1,709 (22,430) (52) 7,556 (151,945) Balance at 31/12/13 197,239 (149,699) 47,540 Additions Balance at 31/12/13 192 4,497 324 1,199 - (1,764) (5,579) (1) (1) (524) (1,918) (9,787) Total property, plant and equipment Disposals or reductions 150 - Charge for the year Balance at 01/01/13 Accumulated depreciation Increase or decrease due to transfer Additions 195,437 (151,945) 43,492 Increase or decrease due to transfer Increase or decrease due to merger (Note 5) Disposals or reductions Balance at 31/12/12 55,916 103,335 188 93 8,066 26,769 52 176 6,261 156 3,921 4 94 1,452 (5,627) 53 358 204 - (48) (2,444) (182) (1,558) - 56,024 104,865 192 93 8,336 26,867 52 810 194,595 6,261 - 615 (4,232) 197,239 Accumulated depreciation Land and buildings Plant Machinery Tools Furniture Computer hardware Transport equipment Total accumulated depreciation Balance at 01/01/12 (27,737) (86,780) (187) (90) (7,184) (21,760) (52) (143,790) Charge for the year (1,890) (5,811) (1) (2) (404) (2,018) (10,126) Increase or decrease due to transfer - Disposals or reductions 42 2,436 180 1,559 4,217 Balance at 31/12/12 (29,585) (90,155) (188) (92) (7,408) (22,219) (52) (149,699) 21 Total property, plant and equipment Cost Accumulated depreciation Total, net Balance at 01/01/12 194,595 (143,790) 50,805 Balance at 31/12/12 197,239 (149,699) 47,540 The Company owns buildings, the value of which, net of depreciation, and that of the land, at the end of 2013 and 2012 were as follows (in thousands of euros): Property Land Buildings Total 2013 11,517 13,350 24,867 2012 11,517 14,922 26,439 In 2013 the Company derecognised items of property, plant and equipment, giving rise to a net gain of EUR 8 thousand (2012: EUR 37 thousand). At the end of 2013 and 2012 the Company had fully depreciated items of property, plant and equipment still in use, the detail being as follows (in thousands of euros): Gross carrying amount 2013 Buildings Other assets Total 7,804 104,592 112,396 2012 5,696 101,619 107,315 The Company takes out insurance policies to cover the possible risks to which its property, plant and equipment are subject. At the end of 2013 and 2012 the property, plant and equipment were fully insured against these risks. 8.- Leases At the end of 2013 and 2012 the Company, as a lessor under operating leases, had annual lease arrangements with certain Group companies for facilities and other scantly material lease arrangements with a term of more than one year with non-Group companies. Since the leased facilities are in the same building as the Company, they are not considered to be investment property included in the Company’s assets. Income from operating leases in 2013 amounted to EUR 7,531 thousand (2012: EUR 3,023 thousand). 22 9.- Financial assets (non-current and current) 9.1 Non-current financial assets The detail of “Non-Current Financial Assets” at the end of 2013 and 2012 is as follows (in thousands of euros): 2013 Held-for-trading financial assets: Other derivatives Available-for-sale financial assets: At cost (Note 21.2) Loans and receivables: Long-term guarantees and deposits Total 2012 9,413 7,402 1,472 - 75 10,960 8,983 16,385 In relation to "Other Derivatives", in December 2012 the Company entered into various agreements with the former shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A., including one whereby, in exchange for a fixed market consideration determined at the date of the agreement and deliverable by Antena 3 de Televisión, S.A. (premium), the aforementioned counterparty undertook to pay the Company a variable cash amount to be determined on the basis of the future economic results of the Antena 3 Group and payable in 2017. The positive impact thereof was included under "Changes in the Fair Value of Financial Instruments" in the accompanying income statement. This agreement was amended in February 2014 (see Note 23). "Available-For-Sale Financial Assets" includes non-current financial investments in the equity instruments of companies over which the Company does not exercise significant influence under Rule for the Preparation of Financial Statements no. 13 since it does not participate in the process to set financial or commercial policies. At 2013 year-end, this amount related to the 45% ownership interest in El Armario de la Tele, S.L. At 31 December 2012, "Long-Term Guarantees and Deposits" included EUR 8,840 thousand relating to the amount deposited in connection with the appeal filed by La Sexta against assessments issued by the tax authorities relating to the levy on games. In 2013 this amount was transferred to current assets. 9.2 Current financial assets The detail of “Current Financial Assets” at the end of 2013 and 2012 is as follows (in thousands of euros): 2013 Derivatives: Derivatives (Note 11) Loans and receivables: Short-term guarantees and deposits Total 2012 698 1,245 678 1,376 1,209 2,454 9.3 Non-current investments in Group companies and associates The detail of “Non-Current Investments in Group Companies and Associates” at the end of 2013 and 2012 is as follows (in thousands of euros): 2013 Investments in Group companies and associates (Note 21.2) Long-term loans to Group companies and associates (Note 21.2) Total 76,288 125,322 201,610 2012 74,445 137,301 211,746 23 The most significant information in relation to investments in Group companies and associates at the end of 2013 is as follows: % of ownership Thousands of euros Profit (Loss) Company name / Location / Line of business Antena 3 Multimedia, S.L.U. Madrid/ Commercial management by television Atres Advertising, S.L.U. Madrid/ Advertising management Antena 3 Noticias, S.A.U. Madrid/ News producer Antena 3 Juegos, S.A.U. Madrid/ Games Antena 3 Eventos, S.L.U. Madrid/ Organisation of events Guadiana Producciones, S.A.U. Madrid/ Producer Música Aparte, S.A.U. Madrid/ Management of copyrights Antena 3 Films, S.L.U. Madrid/ Audiovisual productions La Sexta Editorial Musical, S.A.U. Madrid/ Management of copyrights Publiseis, Iniciativas Comerciales, S.A.U. Madrid/ Advertising management Uniprex, S.A.U. Madrid/ Radio broadcasting services I3 Televisión, S.L. Madrid/ IT services Cordina Planet, S.L. Barcelona/ Management of intellectual works Hola TV América, S.L. Madrid/ Television Atresmedia Foto Madrid/ Photography TVI Televisao Independente, S.A. Lisbon/ Television Other equity items 100% - 3 14 - 195 198 - 3 - - 100% - 3 17,338 12,322 (10,126) 2,199 11,780 3 - - 100% - 6 (420) (4,227) 2,895 (1,361) - 2,572 (2,572) (2,572) 100% - 100 223 152 325 577 - 100 - - 100% - 150 (21) (2) 1,156 1,304 - 1,623 (21) (338) 100% - 60 (3) (2) (8) 50 - 716 (2) (664) 100% - 60 4,098 2,895 3,297 6,252 - 60 - - 100% - 1,900 (7,131) 665 3,229 5,794 - 34,022 665 (28,229) 100% - 3 986 660 526 1,189 574 1,180 77 - 100% - 5,000 202 187 1,297 6,484 - 8,264 187 (1,780) 100% - 900 14,298 7,621 79,313 87,834 - 106,635 - (46,335) 50% - 300 38 26 (66) 260 - 150 45 (20) 100% - 203 (1,716) (2,018) (1,060) (2,875) - 1,004 - (503) 50% - 371 (246) (253) 584 702 - 737 (328) (386) 90% - 50 (127) (89) - (39) - 45 - - 0.001% - (a) (a) (a) - 2,016 - (2,016) 12,354 159,130 (1,949) (82,842) (a) 9,109 27,533 Net 17,937 (a) 81,557 108,603 Dividend received Accumulated impairment losses Indirect From operations Total equity Impairment losses recognised in the year Direct Total investments Share capital Carrying amount Cost (a) Information not available 24 The most significant information in relation to investments in Group companies and associates at the end of 2012 was as follows: % of ownership Thousands of euros Carrying amount Profit (Loss) Company name / Location / Line of business Antena 3 Multimedia, S.L.U. Madrid/ Commercial management by television Atres Advertising, S.L.U. Madrid/ Advertising management Antena 3 Noticias, S.A.U. Madrid/ News producer Antena 3 Eventos, S.L.U. Madrid/ Organisation of events Antena 3 Juegos, S.A.U. Madrid/ Games Cordina Planet, S.L. Barcelona/ Management of intellectual works Guadiana Producciones, S.A.U. Madrid/ Producer Hola TV América, S.L. Madrid/ Television Uniprex, S.A.U. Madrid/ Radio broadcasting services Música Aparte, S.A.U. Madrid/ Management of copyrights Antena 3 Films, S.L.U. Madrid/ Audiovisual productions La Sexta Editorial Musical, S.A.U. Madrid/ Management of copyrights Publiseis, Iniciativas Comerciales, S.A.U. Madrid/ Advertising management I3 Televisión, S.L. Madrid/ IT services Antena 3 de Televisión Colombia, S.A. Colombia/ Television Canal 3 Televisión de Colombia, S.A. Colombia/ Television TVI Televisao Independente, S.A. Lisbon/ Television Direct Indirect 100% Other equity items Total equity Dividend received Impairment Accumulated losses impairment recognised losses in the year Share capital From operations - 3 7 - 195 198 - 3 - - 100% - 3 28,938 20,251 (18,598) 1,656 20,522 3 - - 100% - 6 513 329 - 335 - 6 - - 100% - 150 (45) (31) 1,187 1,306 - 1,623 (31) (317) 100% - 100 567 391 (66) 425 - 100 - - 50% - 203 (1,860) (1,859) 799 (857) - 503 (503) (503) 100% - 60 (282) (200) 191 51 - 716 (199) (662) 50% - 31 (469) (489) (14) (472) - 58 (58) (58) 100% - 900 (17,124) (12,925) 96,583 84,558 - 106,635 - (46,335) 100% - 60 4,631 3,258 39 3,357 5,834 60 - - 100% - 1,900 (14,153) (2,937) 6,166 5,129 - 34,022 (2,937) (28,894) 100% - 3 (110) (77) 1,177 1,103 - 1,180 (77) (77) 100% - 5,000 (2,817) (1,967) 3,264 6,297 - 8,264 (1,967) (1,967) 50% - 300 (8) (9) (120) 171 - 150 28 (65) 55% - 576 (10) (10) (527) 39 - 366 (366) (366) 2% 22% 1,265 (95) (95) (1,109) 61 - 29 (29) (29) 0.001% - (a) (a) - 2,016 - (2,016) 26,356 155,734 (6,139) (81,289) Total investments (a) 10,560 (2,317) Net 3,630 (a) 89,167 (a) 103,357 Cost (a) Information not available 25 The detail of the long-term loans granted to Group companies and associates is as follows (in thousands of euros): Balance at Balance at Additions Transfers Disposals 01/01/13 31/12/13 Loans Uniprex, S.A.U. Antena 3 Films, S.L.U. Hola TV América, S.L. Total Loans Uniprex, S.A.U. Antena 3 Films, S.L.U. Hola TV América, S.L. Total 90,000 46,729 572 137,301 Balance at Additions 01/01/12 60,300 59,134 412 119,846 90,000 160 90,160 593 593 (12,000) (572) (12,572) Amount converted into capital Disposals (96,130) - (12,405) (96,130) (12,405) - 78,000 47,322 125,322 Charge for the year 35,830 35,830 Balance at 31/12/12 90,000 46,729 572 137,301 The Company had granted two participating credit facilities to Uniprex, S.A. (Sole-Shareholder Company) (formerly Publicidad 3, S.A. (Sole-Shareholder Company)), for a maximum amount of EUR 334,000 thousand, which earned interest at floating rates based on the EBITDA of the borrower. In December 2011 EUR 10,000 thousand of the participating credit facility granted on 10 September 2002 was repaid early and the related charge for the year was reversed. Additionally, at 2011 year-end, EUR 223,000 thousand were transferred to short term since the amount matured on 30 November 2012 and, as it related to a participating credit facility, it had to be either converted into capital or repaid. It was eventually converted into capital. On 18 August 2012, the other participating loan granted to Uniprex, S.A. (Sole-Shareholder Company) and maturing on 12 May 2014 was repaid early through the conversion into capital of the balance thereof at that date (EUR 96,130 thousand). Also, the charge for the year recognised in this connection, amounting to EUR 35,830 thousand, was reversed. In December 2012 the Company granted a new loan to this subsidiary for a total amount of EUR 100,000 thousand, EUR 90,000 thousand of which are non-current, mature annually between 2014 and 2018 and earn fixed interest of 4.5%, reviewable annually. In 2013 EUR 12,000 thousand were transferred to short term (see Note 21.2). Also, the participating credit facility that the Company granted to Antena 3 Films, S.L. (SoleShareholder Company) was converted into capital in 2008, and in May 2008 the Company renegotiated the short-term credit facility it had granted to this company, raising the limit to EUR 100,000 thousand and lengthening its maturity to three years. On 31 December 2010, the limit of this credit facility was raised to EUR 150,000 thousand and the maturity was extended to 31 December 2013. In December 2012 the maturity date was extended to 31 December 2016. This credit facility earns interest at a floating rate tied to Euribor. The amount drawn down at 31 December 2013 was EUR 47,322 thousand. In September 2012 the Company granted a participating loan of EUR 160 thousand to Hola Televisión América, S.L. and the balance thereof reached EUR 572 thousand. In 2013 this loan was reclassified to current assets. The most representative acquisitions and sales of ownership interests in other entities and other significant corporate transactions in 2013 were as follows: On 6 February 2013, Antena 3 de Televisión Colombia, S.A. and Canal 3 Televisión Colombia, S.A. were liquidated. On 4 July 2013, Hola Televisión América, S.L. increased its capital by EUR 679 thousand. However, this did not result in an increase in the percentage of ownership held in this company. 26 On 5 December 2013, Atresmedia Foto, S.L. was formed with Atresmedia Corporación de Medios de Comunicación, S.A. holding a 90% ownership interest therein. Its company object is the manufacture and sale of photo albums and promotional and gift items. On 12 December 2013, the Company acquired the other 50% of Cordina Planet, S.L., thereby giving the Company a full ownership interest in this company's share capital. In December 2013 a shareholder contribution of EUR 2,566 thousand was made to offset losses at Antena 3 Noticias, S.L. (Sole-Shareholder Company). The most representative acquisitions and sales of ownership interests in other entities and other significant corporate transactions in 2012 were as follows: Antena 3 Directo, S.A. (Sole-Shareholder Company) was dissolved in 2012, which was registered at the Mercantile Registry on 20 January 2012. This gave rise to a gain of EUR 704 thousand, which is recognised under "Impairment and Gains or Losses on Disposals of Financial Instruments" in the accompanying income statement. In January 2012 the Company subscribed to a EUR 500 thousand capital increase at Cordina Planet, S.L. However, this did not result in an increase in the percentage of ownership held in this company. In February 2012 the investments in Antena 3 de Televisión Colombia, S.A. and Canal 3 Televisión de Colombia were increased, with a cost of EUR 51 thousand and EUR 4 thousand, respectively, although there was no increase in the percentage of ownership interest in these companies. These investments were acquired for the purpose of participating in the invitation to tender for a television channel in Colombia. On 14 March 2012, the Company incorporated Antena 3 Noticias, S.L. (Sole-Shareholder Company), whose company object is to create audiovisual productions for their broadcast in any media. On 20 July 2012, the Company sold its full ownership interest in Movierecord Cine, S.A. (Sole-Shareholder Company) and recognised a loss of EUR 239 thousand in this connection under "Impairment and Gains or Losses on Disposals of Financial Instruments" in the accompanying income statement. The full ownership interest held in VNews Agencia de Noticias, S.L. (Sole-Shareholder Company) was sold on 30 July 2012. This transaction gave rise to a gain of EUR 722 thousand, recognised under "Impairment and Gains or Losses on Disposals of Financial Instruments" in the accompanying income statement. On 31 August 2012, the Company subscribed to a capital increase involving the issue of 4,000 new shares by Uniprex, S.A. (Sole-Shareholder Company) for EUR 240 thousand, and a share premium of EUR 95,890 thousand. In October 2012 Antena 3 Canarias, S.L. (Sole-Shareholder Company) was liquidated, which gave rise to a loss of EUR 7 thousand, recognised under "Impairment and Gains or Losses on Disposals of Financial Instruments" in the accompanying income statement. On 29 October 2012, the merger resolutions adopted by the shareholders of Antena 3 de Televisión, S.A., as the absorbing company, and Gestora de Inversiones Audiovisuales La Sexta, S.A., as the absorbed company, at their respective Annual General Meetings on 25 April 2012, were executed in public deeds, as a result of which the draft terms of merger were fully approved (see Note 5). As a result of the merger, Publiseis, S.A. and La Sexta Editorial Musical S.L. (SoleShareholder Company) joined the Antena 3 Group. In December 2012 a shareholder contribution of EUR 240 thousand was made to offset losses at Guadiana, Producciones Audiovisuales, S.A. (Sole-Shareholder Company). 27 None of the investees of Atresmedia Corporación de Medios de Comunicación, S.A. are listed on Spanish or foreign stock exchanges. At the end of each year or period the directors assess the business plans of the Company’s investees, revise them if necessary and estimate the value of the ownership interests and the recoverability of the investments made. For investments for which business plans are not available, impairment is estimated on the basis of the company’s equity and the unrealised gains at the end of the year or period. Impairment losses recognised in 2013 included EUR 2,572 thousand and EUR 328 thousand in relation to the ownership interests held in Antena 3 Noticias, S.L. (Sole-Shareholder Company) and Hola Televisión América, S.L., respectively. Also, impairment losses totalling EUR 975 thousand relating to other companies were reversed. 10.- Information on the nature and level of risk of financial instruments The Company's financial risk management is centralised in its Financial Department, which has established the mechanisms required to control exposure to interest rate and exchange rate fluctuations and credit and liquidity risk. The main financial risks affecting the Company are as follows: a) Credit risk: In general, the Company holds its cash and cash equivalents at banks with high credit ratings. The advertising contracting terms enable bank guarantees to be demanded prior to the launch of advertising campaigns. Also, it should be noted that the Company does not have a significant concentration of credit risk exposure to third parties and no significant incidents arose in 2013. At 31 December 2013, 2.7% of total borrowings were past-due. In any case, the Company estimates allowances for doubtful debts based on the age of the debt. Allowances for doubtful debts amounted to EUR 3,578 thousand at 31 December 2013 (31 December 2012: EUR 6,674 thousand) (see Note 20.4). b) Liquidity risk: The Company’s liquidity policy is to arrange credit lines and current financial assets that are sufficient to support its financial needs, on the basis of expected business performance. These are all tied to floating interest rates. The Company, for the purpose of ensuring liquidity and enabling it to meet all the payment obligations arising from its business activities, has the cash and cash equivalents disclosed in its balance sheet, together with the credit and financing facilities detailed in Note 16. c) Foreign currency risk: Foreign currency risk relates mainly to the payments to be made in international markets to acquire broadcasting rights, primarily from major production companies in the US, denominated in US dollars. In order to mitigate this risk, the Company arranges financial instruments (mainly foreign currency hedges) which reduce exchange differences on foreign currency transactions (see Note 11). d) Interest rate risk: Both the Company's cash and its bank borrowings are exposed to interest rate risk, which could have an adverse effect on financial profit or loss and cash flows. The Company's financing is arranged at interest rates tied to Euribor. To mitigate this risk, the Company has arranged interest rate swaps to reduce the finance costs arising from the pegging to floating rates (see Note 11). 28 11.- Derivative financial instruments The Company uses derivative financial instruments to hedge the risks to which its business activities, operations and future cash flows are exposed. As part of these transactions, the Company has arranged certain hedging financial instruments, the detail of which is as follows: Foreign currency hedges The Company uses currency derivatives to hedge significant future transactions and cash flows. The instruments purchased are denominated in US dollars. The Company applies hedge accounting and documents the hedging relationships and the measurement of their effectiveness as required by current legislation. In all cases, these include the cash flow hedges of firm commitments, of which the EUR/USD forward exchange rate exposures to possible variations in the cash flows payable in euros associated with broadcasting rights is hedged. For 2013, due to the commencement of the period in which the broadcasting rights being hedged come into force, EUR 52 thousand was capitalised to inventories from equity. For 2012, inventories were reduced by EUR 303 thousand with a charge to equity. The changes in the fair value of the derivatives arranged by the Company depend on the change in the EUR/USD exchange rate and on the euro yield curve. At 31 December 2013, the Company had arranged instruments to hedge its foreign currency asset and liability positions amounting to USD 89,863 thousand, at a weighted average exchange rate of EUR 1.3117/USD 1. At 31 December 2012, the Company had arranged hedging instruments amounting to USD 89,611 thousand, at a weighted average exchange rate of EUR 1.3058/USD 1. At the end of 2013 and 2012, the total amount of outstanding forward currency contracts entered into by the Group is as follows (the terms reflect the moment in which the hedged portion is recognised and in which the value of the hedging instruments is adjusted in equity as an increase in/reduction of inventories): Fair value (thousands of euros) Classification Foreign currency hedges Foreign currency hedges Foreign currency hedges Foreign currency hedge Foreign currency hedge Foreign currency hedge Amount arranged (thousands of euros) Ineffectiveness recognised in profit or loss (thousands of euros) Type Maturity Purchase of USD 2014 62,520 - 698 3,025 Purchase of USD 2015 7,313 - - 189 Purchase of USD 2016 8,053 - - 18 Assets Liabilities The information in this connection at 31 December 2012 is as follows: Fair value (thousands of euros) Classification Foreign currency hedges Foreign currency hedges Foreign currency hedge Foreign currency hedge Amount arranged (thousands of euros) Ineffectiveness recognised in profit or loss (thousands of euros) Type Maturity Purchase of USD 2013 60,575 - 1,245 485 Purchase of USD 2014 8,053 - - 197 Assets Liabilities At 31 December 2013, the fair value of the Company’s foreign currency derivatives, which are designated and are effective as cash flow hedges, was estimated to be positive by EUR 698 thousand and negative by EUR 3,232 thousand (31 December 2012: positive by EUR 1,245 thousand and negative by EUR 682 thousand). This amount was deferred and recognised in equity. 29 The derivatives were measured by estimating the present value of the future cash flows that will arise under the terms and conditions arranged by the parties in the derivative contract. The cash price is taken to be the reference exchange rates of the European Central Bank on 31 December 2013, the swap points (offer/bid) and the interest rates prevailing at the measurement date. The foreign currency derivatives have been arranged in such a way that they are fully effective at each reference date and, accordingly, are recognised in full in equity, until the inventories are recognised. The sensitivity analysis indicates that positive or negative changes of 10% in spot EUR/USD exchange rates would give rise to changes of approximately EUR 14 million in the fair value of the foreign currency derivatives (2012: EUR 9 million). Increases in the value of the euro (depreciation of the US dollar) would increase negative values while decreases in the value of the euro would increase positive values. Interest rate hedges In August 2013 the Company arranged interest rate derivatives (IRSs) in order to fix the financial cost arising from the floating interest rates applicable to each of the tranches of syndicated financing arranged at that date. These IRSs expire on August 2017 and the hedged amount is EUR 111,209 thousand with a fixed interest rate of 1.01%. At 31 December 2013, the fair value thereof amounted to EUR 5 thousand. 12.- Non-current assets classified as held for sale In 2013 the Company sold the investment in Unipublic, S.A. that was classified at 31 December 2012 under "Non-Current Assets Classified as Held for Sale". This transaction did not have any impact on the income statement for 2013. 13.- Inventories The detail of “Inventories” in the balance sheets at 31 December 2013 and 2012 is as follows: Thousands of euros 2013 2012 Programme rights, netRights on outside productions In-house productions and programmes in process Sports broadcasting rights Inventory write-downs - outside productions 254,144 189,363 36,455 43,876 3,460 3,214 (33,754) (19,516) 260,305 216,937 2,076 1,991 Consumables and other inventoriesDubbings, soundtracks and titles Other materials Advances to suppliers Total 940 930 3,016 2,921 29,181 29,293 292,502 249,151 “Advances to Suppliers” in the accompanying balance sheets at 31 December 2013 and 2012 includes basically advances paid in connection with outside production commitments. 30 The changes in the write-downs relating to “Inventories” in the accompanying balance sheets were as follows (in thousands of euros): Disposals Balance at Balance at or 31/12/11 Additions reductions 31/12/12 Additions Inventory write-downs (17,566) (1,956) 6 (19,516) (6,976) Disposals Balance at or Transfers reductions 31/12/13 (9,508) 2,246 (33,754) The write-downs recognised arose since it was decided that certain titles would not be marketable and it was not likely that they would form part of the Company’s programme schedule. These write-downs were recognised under "Programme Amortisation and Other” in the accompanying income statement. At 31 December 2013, the Company had commitments, mainly for the purchase of audiovisual property rights, amounting to EUR 116,704 thousand (31 December 2012: EUR 149,617 thousand). In addition, the Company has purchase commitments to distributors, the definitive amount and price of which will be determined once the programmes are produced and, in certain cases, by establishing the acquisition price on the basis of box-office takings. In 2013 the best estimate of these commitments amounts to EUR 80,400 thousand (2012: EUR 12,826 thousand). It is estimated that in 2014 inventoriable in-house productions will be amortised in full and approximately EUR 160,000 thousand of programme rights on outside productions (see Note 4.5). 14.- Equity and shareholders’ equity On 29 October 2012, the Company increased share capital by a nominal amount of EUR 10,965 thousand through the issue of (i) 13,438,704 shares of EUR 0.75 par value each, of the same class and series as the shares outstanding prior to the increase and without dividend rights with a charge to the profit generated before the date on which the merger was filed at the Mercantile Registry, irrespective of the payment date, and (ii) 1,181,296 shares of EUR 0.75 par value each, of a different class and carrying the same restriction on dividend rights as the aforementioned shares, applicable for 24 months following the date on which the merger was filed at the Mercantile Registry. The aforementioned capital increase, the sole purpose of which was to cater for part of the share exchange on the merger, was approved by the shareholders at the Company's Annual General Meeting held on 25 April 2012 on the terms and conditions included in the draft terms of merger and was conditional upon the obtainment of the related administrative authorisations. The new shares were issued at EUR 3.37 each, equal to the closing market price of the Atresmedia share on 5 October 2012, the date on which the capital increase resolution became effective. The difference between the issue price and the par value (i.e. EUR 2.62 per share) was treated as a share premium. The total capital increase amounted to EUR 49,269 thousand. The capital increase, including both the par value and the share premium thereof, was fully paid as a result of the transfer en bloc of the assets and liabilities of the acquired company at the date on which the merger deed was filed at the Madrid Mercantile Registry (i.e. 31 October 2012). In accordance with Article 304.2 of the Spanish Limited Liability Companies Law, approved by Legislative Royal Decree 1/2010, of 2 July, shareholder pre-emption rights were disapplied on the occasion of the increase. At 31 December 2013 and 2012, the share capital of the Company amounted to EUR 169,300 thousand and was represented by 225,732,800 fully subscribed and paid shares of EUR 0.75 par value each, with the same rights except for the restriction on dividend rights mentioned in Note 14.3. 31 The detail of the shareholder structure at the end of 2013 is as follows: 2013 % of ownership Planeta-de Agostini, S.L. Group 41.70 Ufa Film und Fernseh, GMBH 19.17 Treasury shares 7.01 Gamp Audiovisual, S.A. (*) 3.64 Imagina Media Audiovisual, S.L. Other shareholders Total 2.85 25.63 100.00 * Gamp Audiovisual, S.A. is an Imagina Group company, which is controlled, pursuant to Article 4 of the Spanish Securities Market Law, by the Imagina Group through Mediaproducción, S.L. The Company's shares are listed on the Spanish stock market interconnection system and all carry the same voting and dividend rights, except for the 1,181,296 shares mentioned above, which will be admitted to trading 24 months following the date on which the merger was filed at the Mercantile Registry in accordance with the draft terms of merger. There are agreements between the main shareholders that guarantee the Company’s shareholder stability, the grant of mutual rights of acquisition on their shares and the undertaking not to take control of the Company or to permit a third party to do so, and also include management agreements, as described in the Corporate Governance Report. 14.1 Reserves Legal reserve Under the Spanish Limited Liability Companies Law, the Company must transfer 10% of net profit for each year to the legal reserve until the balance of this reserve reaches at least 20% of the share capital. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose. At 31 December 2013, the legal reserve had reached the legally required minimum. Other reserves “Other Reserves” includes an amount of EUR 281 thousand which is restricted as to its use since it corresponds to the “Reserve for the Adjustment of Share Capital to Euros”. As a result of the capital reduction made in 2006, a reserve of EUR 8,333 thousand was established, equal to the par value of the retired shares, which may only be used if the same requirements as those for the reduction of share capital are met, pursuant to Article 335-c of the Spanish Limited Liability Companies Law. The remaining reserves recognised under “Other Reserves” are unrestricted. 14.2 Other equity instruments As indicated in Note 5, pursuant to the agreement to merge the two companies, Antena 3 de Televisión, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A. agreed to grant La Sexta shareholders an additional ownership interest of 15,818,704 Antena 3 shares representing 7% of its share capital, although the delivery thereof is conditional upon the earnings of the Antena 3 Group from 2012 to 2016. The delivery of these additional shares will be carried out in full through treasury shares of Antena 3 and, therefore, does not constitute an additional issue. "Other Equity Instruments" includes the measurement of the aforementioned consideration at the fair value of the shares whose delivery was deferred, calculated as indicated in Note 5. 32 On 19 February 2014, the Company arranged the partial novation of this agreement and amended the content thereof with respect to two of the three former shareholders of La Sexta (see Note 23). 14.3 Treasury shares The detail of the treasury shares held by the Company at the end of 2013 and 2012 is as follows: Year No. of shares 2013 2012 15,818,704 15,818,704 Par value (euros) Average Total acquisition price acquisition cost (euros) (thousands of euros) 11,864,028 11,864,028 6.29 6.29 99,453 99,453 At 31 December 2013, the Company held 15,818,704 treasury shares, representing 7.01% of its share capital. The delivery of shares in 2012 was part of the merger transaction detailed above in these financial statements. Specifically 1,181,296 of the Company's treasury shares representing 0.523% of voting rights were delivered to the former shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. to cater for the share exchange in accordance with the draft terms of merger (see Note 5). The treasury shares delivered do not carry rights to receive dividends with a charge to the profit generated before the date on which the merger deed was filed (i.e. 31 October 2012), irrespective of the payment date. The difference between the fair value of the treasury shares delivered as consideration at the effective merger date and the average acquisition price thereof gave rise to a loss recognised in the Company's equity. The shareholders at the Annual General Meeting held on 24 March 2010 adopted a resolution authorising the Company to acquire treasury shares provided that they did not exceed the maximum legal limit permitted by law at any given time. This limit was established at 10% of registered share capital by Law 3/2009, of 3 April, on structural changes to companies. The changes in “Treasury Shares” in 2013 and 2012 were as follows: Number of shares At beginning of year Purchases Delivery At end of year 2013 2012 15,818,704 12,630,728 - 4,369,272 - (1,181,296) 15,818,704 15,818,704 15.- Provisions and contingencies 33 The detail of short- and long-term provisions in 2013 and 2012 were as follows (in thousands of euros): Provisions Litigation and other provisions Total Provisions Litigation and other provisions Total Balance at Charge for 01/01/13 the year 41,692 41,692 5,044 5,044 Balance at 01/01/12 Charge for the year 31,540 31,540 6,261 6,261 Transfers (6,566) (6,566) Additions due to merger (Note 5) 14,079 14,079 Amounts used Excessive Balance at provisions 31/12/13 (1,739) (1,739) Amounts used (4,127) (4,127) 34,304 34,304 Excessive provisions Balance at 31/12/12 (550) (550) 41,692 41,692 (9,638) (9,638) The charge for the year is reflected under "Outside Services" and the excessive provisions are recognised under "Excessive Provisions” in the accompanying income statement. At 31 December 2013 and 2012, certain civil, labour, criminal and administrative lawsuits had been filed against the Company which were taken into account in estimating potential contingent liabilities. Noteworthy, in view of their amount, were the lawsuits with certain collection societies. As mentioned in Note 1, on 18 December 2013 the Supreme Court issued a writ of execution enforcing the aforementioned judgment, rendering void the resolution of the Spanish Cabinet regarding the allocation of channels. The Company does not consider it necessary to recognise a provision in this connection. In 2012 the tax authorities issued assessments relating to the levy on games of luck, betting or chance, raffles and tombolas against the absorbed company Gestora de Inversiones Audiovisuales La Sexta, S.A. for an amount of EUR 6,903 thousand. In this respect, the merger agreements established that La Sexta shareholders must indemnify Atresmedia Corporación de Medios de Comunicación, S.A. for any economic loss that could arise from these assessments. The directors of the Company and its legal advisers do not expect any material liabilities additional to those already recognised to arise from the outcome of the lawsuits in progress. 16.- Non-current and current liabilities 16.1 Non-current financial liabilities The detail of “Non-Current Payables” at the end of 2013 and 2012 is as follows (in thousands of euros): Non-current financial instruments Derivatives and other 2013 2012 Bank borrowings 2013 2012 Accounts payable Derivatives Total 200,129 200,129 - 63,264 207 63,471 183 197 380 Total 2013 263,393 207 263,600 2012 183 197 380 The detail, by maturity, of “Non-Current Payables” is as follows (in thousands of euros): 34 2015 Bank borrowings Trade payables Derivatives Other payables Total at 31/12/13 36,350 52,908 189 71 89,518 2014 Other payables Derivatives Total at 31/12/12 32 197 229 2016 62,602 9,383 18 10 72,013 2015 101 101 2017 2019 and subsequent years 2018 101,177 807 10 101,994 2016 37 33 70 2018 and subsequent years 2017 10 10 5 5 10 10 30 30 Total 200,129 63,135 207 129 263,600 Total 183 197 380 On 2 August 2013, the Company arranged syndicated financing of EUR 270,000 thousand in order to repay the existing bilateral credit facilities, meet the obligations included in the financial structure assumed as a result of the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. and to satisfy the Company's general cash needs. 74% of the total amount is a four-year loan with partial repayments and the remaining 26% is a revolving credit facility maturing at four years. Nine banks with which the Company has regular dealings participated in the transaction. The applicable interest rate is Euribor plus a market spread and the transaction is subject to compliance with financial covenants habitually used in transactions of this kind, relating to the debt to EBITDA ratio and the interest coverage ratio. This transaction was guaranteed by a security interest in all the treasury shares. Under the agreement reached with the former shareholders of La Sexta (see Note 28), this guarantee was partially released and, consequently, 1,145,594 shares of the Parent remain pledged as security. The fair value of this financing approximates its carrying amount. The balance of "Non-Current Trade Payables" relates to the maturities at more than twelve months of the amounts payable to suppliers for rights on outside productions set on the basis of the periods in which the productions become available. These payables do not bear interest and the fair value thereof amounts to approximately EUR 58 million. 16.2 Current financial liabilities At 31 December 2013, current bank borrowings amounted to EUR 6,305 thousand (2012: EUR 137,388 thousand), including the amounts drawn down (in 2012) against the credit facilities and the related interest. These facilities were repaid with the syndicated financing that was arranged (see Note 16.1) The rate of interest paid by the Company in 2013 on the loans and credit facilities arranged with banks was mainly tied to Euribor. 35 17.- Trade payables The maximum payment period applicable to the Company under Law 3/2004, of 29 December, on combating late payment in commercial transactions and pursuant to the transitional provisions contained in Law 15/2010, of 5 July, is 60 days in 2013 (2012: 75 days). The detail of the amounts paid and payable at 31 December 2013 is as follows (in thousands of euros): Amount Within the maximum payment period Other Total payments made in 2013 Weighted average period of late payment (in days) Payments at year-end not made in the maximum payment period % 189,760 359,981 549,741 47 37,084 35% 65% The detail of the amounts paid and payable at 31 December 2012 is as follows (in thousands of euros): Amount % 380,809 75,921 456,730 50 18,224 Within the maximum payment period Other Total payments made in 2012 Weighted average period of late payment (in days) Payments at year-end not made in the maximum payment period 83% 17% Weighted average period of late payment was calculated as the quotient whose numerator is the result of multiplying the payments made to suppliers outside the maximum payment period by the number of days of late payment and whose denominator is the total amount of the payments made in the year outside the maximum payment period. 18.- Tax matters 18.1 Current tax receivables and tax payables The detail of the current tax receivables and payables is as follows (in thousands of euros): Tax receivables 2013 2012 To be settled in 2014: 6,556 3,806 Deferred tax assets 1,472 2,779 Tax loss carryforwards 2,905 Unused tax credits and tax relief 2,179 1,027 298,830 299,623 To be settled from 2015: Deferred tax assets Tax loss carryforwards Unused tax credits and tax relief 14,429 19,572 218,452 221,701 65,949 58,350 305,386 303,429 Income tax refundable 911 1,188 2013 income tax refundable 647 566 Other tax receivables 128 1,343 Total non-current assets Total current assets TOTAL TAX RECEIVABLE 1,686 3,097 307,073 306,526 36 Tax payables Deferred tax liabilities Total non-current liabilities 2013 22,649 2012 22,886 22,649 22,886 2,229 2,073 Short termTax withholdings payable 696 621 5,633 4,452 Accrued social security taxes payable VAT payable Total current liabilities 8,558 7,146 TOTAL TAX PAYABLE 31,207 30,032 18.2 Reconciliation of the accounting profit to the taxable profit Pursuant to Corporation Tax Law 43/1995, of 27 December, on 26 December 2000, Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) notified the Madrid tax authorities of its decision to file income tax returns under the special regime for corporate groups. This application is considered indefinite provided that the requirements established in the current Article 67 of the Consolidated Spanish Corporation Tax Law are met and the Company does not opt to cease to apply the aforementioned regime. The companies composing the tax Group at 31 December 2013 are as follows: TAXPAYER IDENTIFICATION NUMBER SUBSIDIARY Date of inclusion in the Group B85384881 Antena 3 Eventos, S.L.U. 01/01/08 B82832841 Antena 3 Films, S.L.U. 01/01/03 A86317872 Antena 3 Juegos, S.A.U. 01/01/11 B84187335 01/01/04 01/01/06 B86424132 Antena 3 Multimedia, S.L.U. Antena 3 Televisión Digital Terrestre de Canarias, S.A.U. Antena 3 Noticias, S.L.U. B84171453 Atres Advertising, S.L.U. 01/01/04 B86885530 Atresmedia Foto, S.L. 01/01/13 A81797656 Canal Media Radio, S.A.U. 01/01/05 A50005875 Estaciones Radiofónicas de Aragón, S.A.U. 01/01/03 A80847601 Guadiana Producciones, S.A.U. 01/01/01 A20175634 B85408128 A79458535 A78683851 Ipar Onda, S.A.U. La Sexta Editorial Musical, S.L.U. Música Aparte, S.A.U. Onda Cero, S.A.U. 01/01/03 01/10/12 01/01/01 01/01/03 A84615178 Publiseis Iniciativas Comerciales, S.A.U. 01/10/12 B15609837 Radio Media Galicia, S.L.U. 01/01/05 B84196914 Uniprex Televisión, S.L.U. 01/01/04 B84405422 Uniprex Valencia TV, S.L.U. 01/01/05 A28782936 Uniprex, S.A.U. 01/01/01 A84920230 01/01/12 The filing of consolidated tax returns gives rise to reciprocal intra-Group balances, due to the offset of the losses incurred by certain companies against the profit earned by other Group companies. These balances are recognised under “Payable to Group Companies” and “Receivable from Group Companies”, as appropriate. Income tax is calculated on the basis of the accounting profit determined by application of generally accepted accounting principles, which does not necessarily coincide with the taxable profit. 37 The reconciliation of the accounting profit to the taxable profit for income tax purposes for 2013 is as follows: Increase Accounting profit after tax Income tax Permanent differences – Penalties Donations Impairment of investments Elimination of dividends Elimination of intra-Group transactions Deductible temporary differences: Arising in the year: Provision for contingencies and charges Non-current accounts payable Impairment losses Arising in prior years: Provision for contingencies and charges Non-current accounts payable Impairment losses Taxable temporary differences: Thousands of euros Decrease 7,041 1,143 809 1,949 3,140 15,145 4,006 12,353 12,353 36,803 Total 34,468 (4,006) (5,312) 1,143 809 1,949 (12,353) 3,140 (21,658) 10,723 4,422 - 10,723 4,422 791 8,765 3,184 24,854 - (8,765) (3,184) (24,854) 791 791 22,978 53,163 791 4,283 (1,143) Arising in the year: Impairment losses Gross taxable profit Offset of prior years' tax losses Tax rate 30% Gross tax payable 942 Accounts receivable from (payable to) Group companies Tax credits used in 2013 2013 tax prepayments 8,416 (3,002) (7,003) Income tax payable (refundable) (647) The reconciliation of the accounting profit to the taxable profit for income tax purposes for 2012 is as follows: Increase Accounting profit after tax Income tax Permanent differences – Penalties Donations Elimination of provisions Elimination of dividends Elimination of intra-Group transactions Deductible temporary differences: Arising in the year: Provision for litigation Non-current accounts payable Impairment losses Arising in prior years: Provisions and accounts payable Provision for contingencies and charges Impairment losses Taxable temporary differences: Thousands of euros Decrease Total 4,797 761 868 3,168 16,170 21,462 31,370 26,356 5,014 7,038 35,862 (21,462) (26,573) 761 868 3,168 (26,356) (5,014) 9,132 5,058 4,141 6,971 3,433 5,058 4,141 3,538 198 685 2,012 908 - (685) (2,012) (908) 198 198 21,165 59,870 198 (2,843) Arising in the year: Impairment losses Gross taxable profit Tax rate 30% Gross tax payable (853) Accounts receivable from (payable to) Group companies Tax credits used in 2012 2012 tax prepayments Income tax payable (refundable) 2,891 (640) (1,964) (566) 38 18.3 Tax recognised in equity The detail of the taxes recognised directly in equity in 2013 is as follows: Increase Thousands of euros Decrease Total - - - - 152 (152) - 152 (152) (152) Current taxes: Capital increase expenses Capital reduction expenses Total current taxes Deferred taxes: Arising in the year: Available-for-sale financial assets Revaluation of other financial assets Grants Effect of first-time application of New Spanish National Chart of Accounts Arising in prior years: Available-for-sale financial assets Revaluation of other financial assets Grants Total deferred taxes Total tax recognised directly in equity The detail of the taxes recognised directly in equity in 2012 is as follows: Increase Thousands of euros Decrease Total - - - 192 - 192 192 - 192 192 Current taxes: Capital increase expenses Capital reduction expenses Total current taxes Deferred taxes: Arising in the year: Available-for-sale financial assets Revaluation of other financial assets Grants Effect of first-time application of New Spanish National Chart of Accounts Arising in prior years: Available-for-sale financial assets Revaluation of other financial assets Grants Total deferred taxes Total tax recognised directly in equity 18.4 Reconciliation of the accounting profit to the income tax expense The merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. ("La Sexta") by Antena 3 de Televisión, S.A. was registered at the Madrid Mercantile Registry on 31 October 2012. As a result of the merger, Antena 3 de Televisión acquired all the assets and liabilities of La Sexta by universal succession and was subrogated to all the rights and obligations of the absorbed company. The merger became effective for accounting purposes on 5 October 2012. The Company opted to avail itself of the special tax regime for mergers, spin-offs, asset contributions, security exchanges provided in Title VII, Chapter VIII of the Consolidated Spanish Corporation Tax Law approved by Legislative Royal Decree 4/2004, of 5 March. 39 In the process of allocating the price of the business combination to assets and liabilities, certain intangible assets were identified, such as the "La Sexta" brand and its audiovisual operating licence. The brand will be amortised for accounting purpose in 20 years, while the licence is considered to be an intangible asset with an indefinite useful life. The reconciliation of the accounting profit to the income tax expense is as follows (in thousands of euros): 2013 30,462 9,139 2012 14,400 4,320 (11,273) (10,990) (283) - (17,532) (17,532) - (1,594) (3,728) (278) (278) (4,006) (7,971) (21,183) (279) (279) (21,462) Accounting profit before tax Tax charge at 30% Tax credits earned in the year: Audiovisual productions Donations to not-for-profit entities Other Offset of tax losses: Other Permanent differences (Note 18.2) Total income tax expense for the year Income tax adjustments Adjustment - difference in income tax per tax return Total income tax expense recognised in profit or loss The breakdown of the income tax expense for the year is as follows (in thousands of euros): Current tax Deferred tax Total income tax expense for the year 2013 (10,332) 6,604 (3,728) 2012 (18,385) (2,798) (21,183) 18.5 Deferred tax assets recognised The difference between the tax charge allocated to 2013 and to prior years and the tax charge already paid or payable for such years, which is recognised under “Deferred Tax Assets”, arose as a result of temporary differences derived from the following: CHANGES IN DEFERRED TAX ASSETS Contingencies and charges Accounts payable Other items Tax effect of assets at fair value Financial hedging instruments Total Thousands of euros 2012 9,609 2,148 1,320 9,483 (209) 22,351 Additions Disposals 3,217 (2,630) (955) 1,327 (611) (6,845) (152) 4,544 (11,193) Other 551 (540) 285 (97) 199 2013 10,747 653 2,321 2,541 (361) 15,901 The detail for 2012 is as follows: Thousands of euros CHANGES IN DEFERRED TAX ASSETS Contingencies and charges Accounts payable Other items Tax effect of assets at fair value Financial hedging instruments Total 2011 5,960 871 262 (401) 6,692 Additions 2,508 1,242 1,101 192 5,043 Disposals (205) (604) (272) (1,030) (2,111) Inclusion due to Other Transfers merger (215) 1,561 237 (95) 497 (81) 310 10,513 156 12,571 2012 9,609 2,148 1,320 9,483 (209) 22,351 40 At 31 December 2013, the tax effect of the valuation adjustments relating to the hedging instruments amounting to EUR (361) thousand was recognised under “Non-Current Assets”. The deferred tax assets indicated above were recognised because the Company's directors considered that, based on their best estimate of the Company's future earnings, including certain tax planning measures, it is probable that these assets will be recovered. On the basis of the estimate made by the Company’s directors of the timing of future profits for the offset and use of these deferred tax assets, EUR 14,429 thousand were considered to be recoverable in the long term while EUR 1,472 thousand were considered to be recoverable in the short term. Both amounts are recognised under “Deferred Tax Assets”. Also, on the basis of the aforementioned estimate of the timing of future profits, the directors consider that there are no reasonable doubts as to the recovery of the amounts recognised in the accompanying balance sheet within the statutory time periods and limits. Also, on the basis of the aforementioned timing estimate of future profits, the directors consider that there are no reasonable doubts as to the recovery of the amounts recognised in the accompanying balance sheet within the statutory time periods and limits on the basis of the prepared projections. The key assumptions on which the cash flow projections are based relate mainly to advertising markets, audience, advertising efficiency ratios and the evolution of expenses. Except for advertising data, which is measured on the basis of external sources of information, the assumptions are based on past experience and reasonable projections approved by Company management and updated in accordance with the performance of the advertising markets. These future projections cover the next ten years. The Company performs sensitivity analyses in the event of reasonable changes in the key assumptions used to determine the recoverability of these assets. Therefore, the sensitivity analyses are prepared under various scenarios based on the variables that are considered to be most relevant, i.e. advertising income, which mainly depends on the performance of the advertising market, the investment share reached and the operating margin achieved. The discount rate used ranges from 9% to 10%. A variation of 0.5% in cumulative annual growth would give rise to a change in value of EUR 43 million, while an increase of 0.5% in the discount rate would give rise to a change of EUR 65 million and a decrease of 0.5% in the discount rate would give rise to a change of EUR 73 million. Zero perpetual growth was used. An increase of 0.5% would give rise to an increase in value of EUR 80 million and a decrease of 0.5% would give rise to a decrease in value of EUR 71 million. The aforementioned analyses do not disclose any evidence of non-recoverability of the tax assets and tax credits recognised. The changes in deferred tax assets recognised under "Other” include the difference between the estimated tax for 2011 and the amount actually reported in the tax return, giving rise to an adjustment of EUR 199 thousand to deferred tax assets. Also, the effect of this difference, amounting to EUR 278 thousand, on the income tax expense is recognised under “Negative Adjustments to Income Tax”. Effective from 1 January 2013, the deductibility for tax purposes of impairment losses on securities representing holdings in the share capital or shareholders' equity of entities was eliminated as a result of the derogation of Article 12.3 of the Spanish Corporation Tax Law and the inclusion of Letter j) in Article 14.1 of the foregoing law, which addresses non-deductible expenses, through Sections 2.1 and 2.2, respectively, of Article 1 of Law 16/2013, of October 29, establishing certain measures on environmental taxation and adopting other tax and financial measures (Spanish Official State Gazette (BOE) of 30 October 2013). The new Article 14.1.j) stipulates that securities representing holdings in the share capital or shareholders' equity of entities cannot be considered to be tax-deductible expenses. Accordingly, impairment losses recognised on investees, irrespective of whether or not they belong to the tax group, are considered to be non-deductible items and, therefore, a permanent positive adjustment was made to taxable profit (see Note 18.2). 41 Also, the adjustments made to taxable profit since 2009 pursuant to Article 12.3 of the Spanish Corporation Tax Law will be reversed, as the equity of the investees is recovered. In 2013 the adjustments arising from the derogation of Article 12.3 of the Spanish Corporation Tax Law relating to Canal 3 de Colombia, S.A. and Antena 3 de Televisión Colombia, S.A. will be derecognised, since both companies were liquidated in 2013. The positive adjustment to taxable profit amounted to EUR 351 thousand. Also, in 2013 the investment in Unipublic, S.A. was sold and, accordingly, Atresmedia Corporación derecognised the impairment losses previously recorded with a negative adjustment to taxable profit of EUR 2,036 thousand. At 31 December 2013, the Company had recognised unused tax credits amounting to EUR 68,128 thousand (of which EUR 4,801 thousand arise from the merger with La Sexta) and tax loss carryforwards (arising from the merger with La Sexta in their entirety) amounting to EUR 220,760 thousand. Thousands of euros Amount Deducted in the year Carried forward Last year for deduction 365 365 0 2016 625 625 0 2017 1,094 1,094 0 2018 4,347 129 4,218 2019 14,415 14,415 2020 21,025 21,025 2021 17,480 17,480 2022 10,990 2023 10,990 70,342 2,213 68,128 Of the EUR 3,002 thousand of tax credits taken in 2013, EUR 2,213 thousand were deductions for audiovisual production, EUR 506 thousand for international double taxation and EUR 283 thousand for donations to not-for-profit entities. 42 As a result of the merger by universal succession, the Company assumed the right to deduct the tax credits and tax loss carryforwards of the transferor, in accordance with the following schedule of deductions: Thousands of euros at 31/12/12 Unused tax credits 2006 Deducted in the year Unused tax credits at 31/12/13 6,886 2,085 366 366 - Last year for deduction 4,801 2007 625 625 - 2008 1,094 1,094 - 2009 1,617 1,617 2019 2010 1,034 1,034 2020 2011 2,150 2,150 2021 Tax loss carryforwards 221,701 343 2005 207 207 2006 59,064 136 2007 2008 221,358 58,928 2024 45,185 45,185 2025 38,301 38,301 2026 2009 34,758 34,758 2027 2010 10,053 10,053 2028 2011 18,568 18,568 2029 2012 15,565 15,565 2030 Total deferred tax assets recognised relating to La Sexta 228,587 2,428 226,159 18.6 Deferred tax liabilities recognised The detail of “Deferred Tax Liabilities" and of the changes therein is as follows: DEFERRED TAX LIABILITIES 2011 Tax effect of identification of intangible assets Total - Additions Disposals (59) (59) Inclusion due to merger (Note 5) 22,945 22,945 2012 Additions Disposals 22,886 (237) 22,886 (237) 2013 22,649 22,649 In accordance with income tax recognition and measurement standard number 13, the Company will recognise the deferred tax liabilities relating to goodwill provided that these do not arise on the initial recognition thereof. The deferred tax liabilities relate to the identification of the "La Sexta" brand and signal transmission licence. The brand is amortised for accounting purposes at an annual rate of 5% (amortisation charge for 2012: EUR 792 thousand), while the licence is not amortised. The amortisation is not deductible for tax purposes and, therefore, gives rise to a positive adjustment to the taxable profit (tax loss) which is recognised as a deferred tax liability. 43 18.7 Years open for review and tax audits Under current legislation, taxes cannot be deemed to have been definitively settled until the tax returns filed have been reviewed by the tax authorities or until the four-year statute-of-limitations period has expired. At 31 December 2013, the Company had from 2005 onwards open for review for income tax since in 2010 it underwent a partial review in this connection. The Company has from 2009 onwards open for review for all the other taxes applicable to it. The Company's directors consider that the tax returns for the aforementioned taxes have been filed correctly and, therefore, even in the event of discrepancies in the interpretation of current tax legislation in relation to the tax treatment afforded to certain transactions, such liabilities as might arise would not have a material effect on the accompanying financial statements. 18.8. Other disclosures In 2008 the Company acquired non-current assets as required under the terms established in Article 36.ter of the Spanish Corporation Tax Law as amended in Law 24/2001, for the reinvestment of the extraordinary income obtained by the Group company Uniprex Televisión, S.L.U. on the transfer of the ownership interest in a company. This reinvestment (EUR 499,950) gave rise to a tax credit of EUR 42 thousand, which was taken in 2008. The aforementioned non-current assets continue to be held in use at Atresmedia Corporación de Medios de Comunicación, S.A. in accordance with Article 42.8 of Spanish Corporation Tax RoyalDecree Law 4/2004. Also, in 2009 the Company used the aforementioned tax credit for the reinvestment of extraordinary income deriving from the transfer of the ownership interest of Gloway Broadcasting Services, S.L., in compliance with the requirement of Article 42. In 2009 the Company acquired non-current assets amounting to EUR 6,414 thousand, under the terms and conditions established in the aforementioned Article to comply with the reinvestment and earned tax credits of EUR 46 thousand that it did not use. The Company used these tax credits in 2011. These non-current assets continue to be used and are held in the equity of Atresmedia Corporación de Medios de Comunicación, S.A. 19.- Foreign currency balances and transactions The detail of the most significant balances and transactions in foreign currency, valued at the yearend exchange rate and the average exchange rates for the year, respectively, is as follows (in thousands of euros): 2013 Accounts receivable Accounts payable Sales Purchases 2012 1,075 1,141 201,386 121,224 3,181 2,377 128,370 104,070 44 The detail, by class of financial instrument, of the exchange differences recognised in 2013 in profit or loss is as follows (in thousands of euros): Transactions settled in the year (28) (28) Trade receivables Total financial assets Trade payables Total financial liabilities Unmatured balances 348 348 Total (19) (19) (47) (47) 6,175 6,175 6,523 6,523 The detail for 2012 is as follows (in thousands of euros): Transactions settled in the year 8 8 Trade receivables Total financial assets Trade payables Total financial liabilities Unmatured balances 1,128 1,128 Total (123) (123) (115) (115) 3,076 3,076 4,204 4,204 20.- Income and expenses 20.1 Revenue The breakdown, by business line and geographical market, of the Company's revenue for 2013 and 2012 is as follows (in thousands of euros): Business activity 2013 Advertising sales Total Geographical market 574,109 652,493 574,109 2013 Spain Total 2012 652,493 2012 652,493 574,109 652,493 574,109 20.2 Procurements The detail of "Procurements" in 2013 and 2012 is as follows: Thousands of euros 2013 2012 Broadcasting of in-house productions 263,098 241,198 Outside production services 201,956 222,735 Programme broadcasting rights 151,997 123,244 48,593 43,465 Live broadcasting rights Performances and contributions of entertainers 8,223 9,776 Other amortisation 8,140 7,477 Addition to inventories Total (249,974) (247,361) 432,033 400,534 “Addition to Inventories” reflects the expenses incurred in making programmes that, in accordance with the Company’s procedures, are capitalised and subsequently amortised in accordance with the policies described in Note 4.5. In 2013 EUR 23 million of total procurements relate to purchases in other European Union countries (2012: EUR 19 million) and approximately EUR 61 million to purchases made in countries outside the European Union, mainly the United States (2012: EUR 38 million). 45 20.3 Employee benefit costs The detail of "Employee Benefit Costs" in 2013 and 2012 is as follows: Thousands of euros 2013 2012 Employer social security costs 5,201 Other employee benefit costs 1,652 1,438 6,853 7,983 Total 6,545 20.4 Other operating expenses The detail of “Other Operating Expenses” in the income statements for 2013 and 2012 is as follows: Thousands of euros 2013 Rent and royalties Work performed by other companies Communications Advertising and publicity Copyrights and other expenses Total 65,394 52,130 7,139 8,789 37,173 170,625 2012 47,530 35,409 7,018 6,260 31,936 128,153 “Rent and Royalties” includes mainly, inter alia, the amounts paid to Retevisión I, S.A. for the audiovisual signal distribution and the contribution of the television operators to the financing of Corporación RTVE. “Copyrights and Other Expenses” includes changes in the allowance for doubtful debts. In 2013 the Company used provisions amounting to EUR 3,096 thousand (2012: EUR 57 thousand recognised and EUR 1,164 thousand used). 20.5 Finance income and finance costs The detail of the finance income and finance costs calculated by applying the effective interest method is as follows (in thousands of euros): 2013 Finance income Finance costs 18,923 16,642 2012 27,849 10,014 EUR 12,354 thousand of total finance income for 2013 relate to dividends received by Atresmedia Corporación de Medios de Comunicación, S.A. from its subsidiaries (2012: EUR 26,356 thousand) (see Note 9.3). 46 21.- Related party transactions and balances 21.1 Related party transactions The detail of the transactions with related parties in 2013 and 2012 is as follows (in thousands of euros): 2013 Group companies Associates 652,498 26,186 580 5,943 5,466 12,354 Income Purchases and services received Accrued interest expense Accrued interest income Guarantees (provided and received) Dividends received 2012 Group companies Associates 8,786 77,963 3,466 - 574,182 15,140 351 1,289 6,284 26,356 3,034 32,257 1,952 182 - "Accrued Interest Expense" includes borrowing costs payable to the former shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A., totalling EUR 3,457 thousand (2012: EUR 1,942 thousand). In addition to these transactions, in 2013 the Company purchased advertising space from related companies amounting to EUR 1,188 thousand (2012: EUR 1,469 thousand) through advertising agencies. 21.2 Related party balances The detail of the on-balance sheet balances with related parties at 31 December 2013 and 2012 is as follows (in thousands of euros): 2013 Group companies Antena 3 Eventos, S.L.U. Antena 3 Films, S.L.U. Antena 3 Juegos, S.A. Antena 3 Multimedia, S.L.U. Antena 3 Noticias, S.L.U. Antena 3 TDT de Canarias, S.A. Atres Advertising, S.L.U. Atresmedia Foto, S.L. Cordina Planet, S.L. Guadiana Producciones, S.A. La Sexta Editorial Musical, S.L.U. Música Aparte, S.A.U. Publiseis Iniciativas Publicit Uniprex Televisión, S.L.U. Uniprex Valencia Telev, S.L.U. Uniprex, S.A.U. Equity instruments Non-current Trade loans to receivables companies Current financial assets Noncurrent payables Current payables Trade payables 75,807 1,285 5,794 100 3 3 45 502 50 1,180 60 6,485 60,300 125,322 47,322 78,000 155,029 16 29 25 103 154,225 8 142 56 425 28,674 3 65 505 4,328 5,282 2,270 283 1,253 80 526 14,079 2 2 52,118 111 283 409 189 1,002 33,006 38 89 592 6,928 4,387 6 5,078 9,418 49 605 21 1,482 5,844 350 111 287 669 481 130 351 - 159 26 28 105 2,450 2,450 - 607 607 - 749 749 - Financial assets El Armario de la Tele, S.L. (Note 9.1) 1,472 - - - - - 1,472 - - - - - Related companies: GAMP Audiovisual, S.A. Imagina Media Audiovisual, S.L. Gala Desarrollos Comerciales, S.L. Planeta Group RTL Group Imagina Group - - 2,655 - - - 34,686 18,029 14,141 65,434 130 - - 2,516 - 24 183 2,448 - - - 5,510 402 59,392 Associates: Fundación Atresmedia I3 Televisión, S.L. Hola Televisión América, S.L. - - - - 47 2012 Equity instruments Noncurrent Trade loans to receivables companies 29,987 168 219 6,242 8 8,688 2 Noncurrent payables Current payables 2 - 73,183 700 3,477 8 317 50,017 - Trade payables Group companies Antena 3 Canarias, S.L.U. Antena 3 Eventos, S.L.U. Antena 3 Films, S.L.U. Antena 3 Juegos, S.A. Antena 3 Multimedia, S.L.U. Antena 3 Noticias, S.L.U. Antena 3 TDT de Canarias, S.A. Atres Advertising, S.L.U. Canal Media Radio Galicia, S.L.U. Estaciones Radiofónicas de Aragón, S.A.U. Guadiana Producciones, S.A. Ipar Onda, S.A.U. La Sexta Editorial Musical, S.L.U. Música Aparte, S.A.U. Publiseis Iniciativas Publicitarias, S.A.U. Uniprex Televisión, S.L.U. Uniprex Valencia Televisión, S.L.U. Uniprex, S.A.U. 74,360 1,306 5,129 100 3 6 3 - 136,729 46,729 - - - - 3 - - - 53 1,103 60 - 3 87 29 6 1,830 1,396 - 86 3,877 120 23 - - - - - 7 - 60,300 90,000 394 10,638 2 4,221 851 Associates: Antena 3 de TV Colombia, S.A. Canal 3 Televisión Colombia, S.A. Fundación Atresmedia I3 Televisión, S.L. Organizaciones Deportivas y Culturales de Unipublic, S.A. Unipublic, S.A. Hola Televisión América, S.L. Cordina Planet, S.L. 85 85 572 - 196 22 60 500 - - 6,295 1,035 - 1,258 4 1,247 Related companies: GAMP Audiovisual, S.A. Imagina Media Audiovisual, S.L. Gala Desarrollos Comerciales, S.L. Planeta Group RTL Group Imagina Group 172,924 22 1,212 1 32 414 41 170,601 - Current financial assets 9,885 40 (1,035) 59 967 7,634 185 155 - 6,297 - 97 334 - 10,473 842 - - 20 424 - - 44 - - - - - 50 - - 572 - 26 18 70 500 - 5,210 - 7 - - - 7,677 - - 68,532 35,619 27,918 3,712 1,929 1,513 113,576 - - - - - 4,995 270 - - - 189 251 7,237 - - - 4,767 7,782 101,027 “Current Financial Assets” includes the amounts drawn down against the credit facilities granted by the Company to companies in its Group and the balances receivable from them relating to income tax. In June 2012 the Company granted Cordina Planet, S.L. a participating loan for EUR 500 thousand, paying EUR 250 thousand in June and another EUR 250 thousand in August of the same year. The loan earns interest at a floating rate equal to 5% of the borrower's annual positive EBITDA. In 2013, as a result of the acquisition of the remaining 50% of this company, Atresmedia assumed the participating loan of EUR 1,100 thousand that the former shareholder had granted to Cordina. The short-term participating loan granted by the Company to Uniprex, S.A. (Sole-Shareholder Company) for EUR 223,000 thousand was repaid at the maturity date, 30 November 2012. In December 2012, a loan was entered into with this subsidiary for a total of EUR 100,000 thousand, of which EUR 10,000 thousand mature at short term and earn interest at a fixed rate of 3%, subject to review each year. In 2013 EUR 12,000 thousand were transferred to short term and EUR 10,000 thousand were repaid (see Note 9.3). 48 "Current Payables” includes the balances relating to cash surpluses managed by the Company on behalf of its Group companies and the balances payable to them relating to income tax. The sale of television advertising services has been managed by the Group company Atres Advertising, S.L. (Sole-Shareholder Company) since its incorporation. On 1 April 2010, Atresmedia Corporación de Medios de Comunicación, S.A. decided to begin billing the aforementioned service from Atres Advertising, S.L. (Sole-Shareholder Company), in line with the most widely used sales model in the television advertising industry. Accordingly, Atresmedia Corporación de Medios de Comunicación, S.A. invoices this Group company for the sale of advertising space and Atres Advertising, S.L. (Sole-Shareholder Company) bills the end customers. The accounts receivable from and payable to the companies in which the investments held are intended to be realised or settled at short term were taken into account in order to estimate the net asset value and to consider the total risk associated with Atresmedia Corporación de Medios de Comunicación, S.A.’s investments in these companies. The Company centrally manages its cash and the cash of its subsidiaries (see Note 21.5). 21.3 Remuneration of directors and senior executives The remuneration earned in 2013 by the current and former members of the Company’s Board of Directors (composed of two women and eleven men) in the form of salaries, attendance fees and life insurance premiums amounted to EUR 5,538 thousand, EUR 680 thousand and EUR 15 thousand, respectively. In 2012 this remuneration amounted to EUR 3,447 thousand, EUR 778 thousand and EUR 16 thousand, respectively. In 2013 remuneration in the form of salaries and life insurance premiums of senior executives who are not directors amounted to EUR 6,231 thousand and EUR 27 thousand, respectively (2012: EUR 4,230 thousand and EUR 25 thousand, respectively). The Company has not granted any loans or advances to its Board members or senior executives and it does not have any supplementary pension, retirement bonus, special indemnity or life insurance obligations to them in their capacity as directors and executives. 49 21.4 Detail of investments in companies with similar activities and of the performance, as independent professionals or as employees, of similar activities by the directors Pursuant to Article 229 et seq. of the Spanish Limited Liability Companies Law (LSC), the following information is included: A) As notified by each of the directors, at 31 December 2013 none of the directors or parties related thereto held direct or indirect equity interests in the share capital of companies engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing the Group, except for the director Imagina Media Audiovisual, S.L.U., which has reported that it holds direct or indirect equity interests in the share capital of the following companies, all of which belong to the Atresmedia Group: Investee Grupo Globo Media, S.A.U. Equille Investiment, B.V. Mediaproducción, S.L. Business activity Holding company Audiovisual industry Holding company Audiovisual industry Exploitation of mobile units for broadcasting of sporting events % of direct or indirect ownership Position held in the company, where applicable 100 None 100 None 100 None POC Ventures, B.V.B.A. Audiovisual production services 100 None Xarxa Oberta, de Comunació i Tecnologia de Catalunya, S.A. Construction and exploitation of next generation networks 100 None Audiovisual production services 60 None Radio and television Audiovisual production and distribution Holding company Audiovisual industry 60 None 49 None 52.35 None 90 None 82.5 None Adisar Media, S.L. Antena Local, S.L. Asturmedia Producciones Audiovisuales, S.L. Avenida dos Aliados, S.A. Bikini Pos Produçao de Filmes, Ltda. Post-production Centroamerica TV, Llc Television CLS Audiovisuais, Lda Production services 75 None Digital Humor Distribuidora Digital de Fútbol, S.L. Imagina Media Servicios de producción audiovisual, S.L.U. Web management 67.50 None Audiovisual services 100 None Holding company Audiovisual industry 100 None Estudios Hackenbush, S.L. Full Zoom-producciones audiovisuaes, lmtda Gabinete de Estudios de la Comunicación Audiovisual, S.A.U. Advertising 100 None 50 None 100 None 72.74 Director 100 None 100 None GAMP Audiovisual, S.A. Geca Minutados, S.L. GLM Brasil Conteudos Audiovisuais, Ltda Audiovisual production Studies and reports of sporting events Holding company Audiovisual industry Studies and reports of sporting events Audiovisual content 50 Broadcasting of audiovisual signals via satellite 100 None Globo Media, S.A. Gol Televisión S.L.U. Audiovisual content 98.70 None Television 100 None GTV Estudios, Lda Multimedia services Distribution of audiovisual programmes 100 None Hostoil Produkzioak, S.L. Imagina Contenidos Audiovisuales, S.L. Audiovisual production 100 None Audiovisual content 100 None Imagina EU Audiovisual production Operation of mobile units for broadcasting of sporting events 100 None 100 None 100 None 100 None 82.5 None Globepro Telecomunicaciones, S.L. Hangin, S.A. Imagina Group France Imagina International Sales, S.L. Imagina USA, Inc. Imalatam, S.L.U. Marketing of audiovisual works Purchase and sale of audiovisual rights Audiovisual production and services 50 None Imalatam Caracas, C.A. Audiovisual production 40.43 None Imasblue Estudio, S.L. Post-production services 54.46 None Infinia, AD, S.A. Post-production services 54.46 None K 2000, S.A. Labo Productions 2007, LLC Content production Content production Television, telematic network and internet content 100 82.5 None None 100 None 82.50 None 90 None 55 None 100 None 100 None 100 None Liquid Media, S.L. LVM Mexico Audiovisual production Media 3.14, S.L. Television content production Image right management (sports) Media Base Sports, S.L. Media Burst Servicios para Empresas Audiovisuais Sociedad Unipessoal Media Cam Producción Audiovisual, S.L. Media Luso Produçoes para la Televisao, Lda Audiovisual-industry related industrial facilities Management and exploitation of marketing rights Videographic production Media World, LLC Distribution of television rights, television production and sports marketing 82.5 None Mediaconti Servicios de Continuidad, S.L. Audiovisual continuity services 100 None Mediamag Management Kft Videographic production 100 None Mediamóvil Unidad de Producción, S.L. Mediapro Middle East FZ L.L.C. Mediapropiedades, S.A. Mediarena Servicios, S.L.U. Mediasur Producciones Audiovisuales, S.L. Equipment and technical facilities for audiovisual-related fields Audiovisual production and services Audiovisual production and services Videographic production 60 None 100 None 50 None 100 None Videographic production 100 None 51 Mediatem Canales Temáticos, S.L. Molinare, S.L.U. MW Colombia LLC Nuevas Iniciativas Audiovisuales, S.L. Videographic production 100 None Purchase and sale of shares Audiovisual production and services Exploitation of radiobroadcasting companies or media 100 None 82.5 None 100 None 62.96 None 50 None Ombú Producciones, S.A. Film production Omnicamm4Sky Television services Overon America, Llc Broadcasting 100 None Overon Bulgaria EOOD Broadcasting 100 None Overon US, Inc Broadcasting 100 None 60 None 49.5 None 100 None 100 None Pro TV Global Production Services FZ-LLC. Production and editing of film and video programmes TV channel management Dormant Audiovisual communication services Audiovisual production and services Prom TV, S.A. Audiovisual production 70 None Promofilm California, L.L.C. Audiovisual production 82.5 None Promofilm Colombia, Ltda. Audiovisual production 100 None Media Producoes Basil, LTDA Audiovisual production 100 None Promofiction Llc Promofilm México S.A. de C.V. Promofilm Music, L.L.C Audiovisual production 82.50 None Audiovisual production 100 None Audiovisual production 82.5 None Promofilm US, L.L.C. Audiovisual production 82.5 None Promofilm, S.A. Revolution Broadcast Produçoes Artisticas Ltda Royal Media Internacional, S.L. Servicios Audiovisuales Overon, S.L. Audiovisual production Exploitation of mobile units for broadcasting of sporting events 100 None 65 None Videographic production 100 None Broadcasting 100 None Servicios Integrales Unitecnic, S.L. Industrial facilities related to the audiovisual industry 100 None Sociedad Europea de Unidades Móviles, S.L. Sociedad General de Producción y Explotación de Contenidos, S.L. Teleamazonas Internacional, Llc Exploitation of mobile units for broadcasting of sporting events 96.84 None 100 None 41.25 None Trivideo Tricicle Ovideo, S.L. T&M Tecnologia & Media, Consultadoria e Produçao Multimedia, Lda Audiovisual production 30 None Videographic production 50 None 82.5 None Ovideo TV, S.A. Pasiones TV, Llc Plataforma de Televisión Digital Terrestre, S.L. Television Dominicana, Llc Television content production Theme channel production and management Television channel management 52 US Imagina, Llc Audiovisual production and services 82.5 None Wisdom TV España, S.L. Production, marketing and consulting services 50 None Production, marketing and consulting services 50 None 50 None 50 None 28.05 None 50 None 41.25 None Wisdom Televisión, Sistemas Informáticos para Televisao, Lda Wtvision Sistemas Informáticos para televisao, Ltda Wtvision, INC You Whisp Company, S.L. Production, marketing and consulting services Production, marketing and consulting services Consulting and integration of technological tools for audiovisual content management Umedia Sports Advertising, S.L. Static advertising 12 Hearts, LLC Any lawful company object In addition, Imagina Media Audiovisual, S.L.U. notified the Parent that José Miguel Contreras Tejera, its designated representative to perform the duties of director of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013 held direct or indirect equity interests in the share capital of companies engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing its Group: Investee Business activity Imagina Media Audiovisual, S.L. Holding company Audiovisual industry JMC 2000, S.L. Audiovisual consulting % of ownership 3.45 50 Position held in the company, where applicable Director Sole director Gamp Audiovisual, S.A. reported that Josep María Benet Ferrán, its designated representative to perform the duties of director of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013 held direct or indirect equity interests in the share capital of the following company engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing its Group: Investee Imagina Media Audiovisual, S.L. Business activity Holding company Audiovisual industry % of ownership 14.27 Position held in the company, where applicable Individual representing the director Mediavisual Group, BV. 53 B) With regard to the performance of activities carried on by the members of the Board of Directors, as independent professionals or as employees, that are identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013, the directors or their representatives had notified the Company of the following: Nicolas Abel Bellet de Tavernost: Business activity Company through which the activity is performed Television Rtl Group, S.A. Television Bertelsmann Multimedia Radio Position held or functions discharged Member of the operations management committee Member of the Management Committee Métropole Television, S.A.* Chairman of the Board of Directors Ediradio (RTL Radio) Member of the Supervisory Board * As a result of this position, he carries on activities related to the audiovisual industry through the M6 Group in France. Josep María Benet Ferrán, representing the director Gamp Audiovisual, S.A.: Business activity Company through which the activity is performed Position held or functions discharged Holding company - Audiovisual industry Imagina Media Audiovisual, S.L. Individual representing the director Mediavisual Group, BV. Planning, development, management and operation of construction work, equipment, offices and facilities Mediacomplex, S.L. Director Editing, printing, distribution and sale of newspapers Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Holding company Gamp Audiovisual, S.A. News programme productions Medianews Canarias, S.L. Individual representing the sole director Mediaproducción, S.L.U. Individual representing the director Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Director acting jointly Creation, promotion and marketing of advertising media Umedia Sports Advertising, S.L. Director Ovideo Tv, S.A. Director Production and editing of film, video and all manner of programmes Audiovisual telecommunications services and transmission of audio and video data via all manner of technologies Holding company Servicios Audiovisuales Overon, S.L. Rilson XXI, S.L. Individual representing the director Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Individual representing the director acting severally Atas Corp, S.L.U. 54 José Miguel Contreras Tejera, representing the director Imagina Media Audiovisual, S.L.: Business activity Company through which the activity is performed Position held or functions discharged Holding company - Audiovisual industry Imagina Media Audiovisual, S.L. Director Holding company Audiovisual industry Gamp Audiovisual, S.A. Director Audiovisual production Grupo Globo Media, S.A. Representative of the director JMC 2000, S.L. Audiovisual production Globo Media, S.A. Director Holding company Audiovisual industry Distributor of audiovisual formats Imagina Contenidos Audiovisuales, S.L. Imagina International Sales, S.L.U. Audiovisual consulting JMC 2000, S.L. Director Director Sole director Silvio González Moreno: Business activity Company through which the activity is performed Advertising Atres Advertising, S.L.U. Sales Antena 3 Eventos, S.A.U. Audiovisual production Antena 3 Films, S.L.U. Gaming operations Antena 3 Juegos, S.A.U. Sales Antena 3 Multimedia, S.L.U. News production Antena 3 Noticias, S.L.U. Production advertising spots Guadiana Producciones, S.A.U. Rights management Música Aparte, S.A.U. Sales of digital print products Atresmedia Foto, S.L. Radio Uniprex, S.A.U. Position held or functions discharged Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Since 5 December 2013 Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) 55 Television Antena 3 Televisión Digital Terrestre de Canarias, S.A.U. Television Uniprex Televisión, S.L.U. Television Uniprex Valencia TV, S.L.U. Representative of the sole director (Uniprex, S.A.U.) Representative of the sole director (Uniprex, S.A.U.) Representative of the sole director (Uniprex, S.A.U.) Marco Drago: Company through which the activity is performed Business activity Holding company - Television productions Position held or functions discharged Zodiak Media, S.A. Director Elmar Heggen: Business activity Company through which the activity is performed Position held or functions discharged Financial Manager and Corporate Director of the head office of the RTL Group Holding company Audiovisual industry RTL Group, S.A. Holding company Audiovisual industry CLT–UFA, S.A. Director Holding company Radio industry Immobilière Bayard d’Antin, S.A. Director Inadi, S.A. Director French radio and advertising IP France, S.A. Director Television RTL 9, S.A. Director Belgian television RTL Belgium, S.A. Director Holding company Audiovisual industry RTL Group Central and Eastern Europe, S.A. Director Holding company Audiovisual industry RTL Group Germany, S.A. Director Holding company Audiovisual industry RTL Group Central and Eastern Europe, Gmbh Executive Chairman German radio RTL Radio Berlin, Gmbh General Manager German television RTL Television, Gmbh General Manager Belgian radio Holding company Fremantlemedia, S.A. Audiovisual industry Holding company RTL Group Deutschland, Gmbh Audiovisual industry Holding company RTL Group Vermögensverwaltung, Audiovisual industry Gmbh Production RTL Group Services, Gmbh Holding company Ufa Film und Fernseh, Gmbh Audiovisual industry Holding company RTL TV D.O.O. Audiovisual industry French radio Ediradio, S.A. Chairman of the Board of Directors General Manager General Manager General Manager General Manager Director Member of the Supervisory Committee 56 French television Métropole Television, S.A. Member of the Supervisory Committee Holding company Audiomedia Investments, S.A. Audiovisual industry Chairman of the Board of Directors Radio broadcasting Broadcasting Center Europe, S.A. Chairman of the Board of Directors Technical services Media Properties, Sàrl Chairman of the Management Committee Television and radio RTL Nederland Holding, BV holding company Chairman of the Supervisory Committee New technologies Chairman of the Board of Directors Duchy Digital, S.A. The following must be stated in relation to the activities performed by the aforementioned directors: 1.- In all cases, the proprietary directors discharge their professional activities at companies that form part of the corporate groups of their respective reference shareholders, which they represent on the Board of Directors of Atresmedia Corporación de Medios de Comunicación, S.A. 2.- At the time of their appointment by the shareholders at the Annual General Meeting, information was disclosed on the relationship existing between the aforementioned proprietary directors and the shareholders that proposed their appointment in each case and on those who were associated as non-executive proprietary directors. 3.- In the case of the Chief Executive Officer, Silvio González, executive director, all the professional activities indicated are performed at companies owned by the Atresmedia Group and, therefore, no competition is entailed. In all cases, he acts as representative of the legal entity holding the position of sole director, which may be Atresmedia Corporación de Medios de Comunicación, S.A. itself or any of its subsidiaries. Each of these subsidiaries has its own management team. 4.- The inclusion of this information in the Company’s financial statements complies with Article 230 of the Spanish Limited Liability Companies Law on notifying the shareholders at the Annual General Meeting and obtaining their express authorisation. The other directors, José Manuel Lara Bosch, Maurizio Carlotti, Mauricio Casals Aldama, Aurora Catá Salas, José Creuheras Margenat, María Entrecanales Franco and Pedro Ramón y Cajal Agüeras have notified the Company that, at 31 December 2013, they did not perform any activities as independent professionals or employees that were identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. 21.5 Financial structure As indicated in Note 1, the Company is the head of a group of subsidiaries. It holds its cash and cash equivalents at banks with high credit ratings. External financing is basically obtained by the Company, which also manages the financial transactions of the rest of the Group, including both financing activities and asset management activities (see Note 21.2). 57 22.- Other disclosures 22.1 Employees The average number of employees in 2013 was 430 (2012: 537). The detail, by professional category, is as follows: 2013 Professional category Women Senior executives Managers Line personnel Clerical staff Other Total Men 2 32 111 34 31 210 10 57 121 13 19 220 There were 441 employees at 2013 year-end. The detail, by gender and professional category, is as follows: 2013 Professional category Women Senior executives Managers Line personnel Clerical staff Other Total Men 2 31 115 36 30 214 10 59 125 13 20 227 The number of senior executives includes two directors (both men). The average number of employees in 2013 with a disability of more than 33%, by professional category, is as follows: Professional category 2013 Line personnel Other Total 2 2 22.2 Fees paid to auditors In 2013 and 2012 the fees for financial audit and other services provided by the Company's auditors, Deloitte, S.L., or by a firm in the same group or related to the auditors, were as follows (in thousands of euros): Financial audit services 2013 2012 184 210 Audit-related services 4 1 Tax advisory services Other services - 36 178 The Annual Corporate Governance Report contains a description of the work of the Audit Committee and explains how auditor objectivity and independence is guaranteed when auditors provide other non-audit services. 58 22.3 Off-balance-sheet agreements The detail of the guarantees provided by the Company to banks for third parties is as follows: Thousands of euros Group companies and associates Other guarantees Total 2013 2012 5,466 6,466 13,868 14,009 19,334 20,475 The Company's directors consider that any liabilities not foreseen at 31 December 2013 that might arise from the guarantees provided would not be material. 23.- Events after the reporting period On 19 February 2014, the Company, through a relevant event communication and subsequent to a resolution of its Board of Directors, announced a partial novation of the integration agreement entered into on 14 December 2011 with Gestora de Inversiones Audiovisuales La Sexta, S.A. ("La Sexta") and its shareholders, which set the terms and conditions for the integration of La Sexta into the Atresmedia Group through a merger by absorption. Specifically, the novation of the agreement relates to the terms and conditions regarding the "Additional Ownership Interest", whereby La Sexta shareholders were granted the right to receive an additional ownership interest of 7% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the Atresmedia Group's earnings performance from 2012 to 2016, inclusive. Under the novation, Atresmedia, with Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L., agreed to advance and permanently settle the delivery of the partial ownership interest that would correspond to both companies and, accordingly, on 24 February 2014 they were delivered, with a charge to treasury shares, an ownership interest in Atresmedia Corporación de Medios de Comunicación, S.A. equal to 2.079% and 1.631% of its share capital, respectively. As a result of the negotiation process for this agreement and forming part thereof, other agreements were reached with Gamp Audiovisual, S.A. and Imagina Media Audiovisual, S.L. consisting of the cancellation of their proportional share of the financial derivative agreement described in Note 9 and of the definitive conclusion of other matters relating to the guarantees and obligations under the integration agreement entered into for the merger with Gestora de Medios Audiovisuales la Sexta, S.A. (see Note 15). The recognition of all these transactions will give rise to an estimated reduction of EUR 13,631 thousand in the shareholders' equity of the Company in the financial statements for 2014. The terms and conditions agreed upon in the integration agreement relating to Gala Desarrollos Comerciales, S.L. remain unchanged and, accordingly, it continues to be entitled to receive an additional ownership interest of 0.508% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the earnings performance of the Atresmedia Group, as indicated above. 24.- Explanation added for translation to English These financial statements are presented on the basis of the regulatory financial reporting framework applicable to the Company (see Note 2). Certain accounting practices applied by the Company that conform with that regulatory framework may not conform with other generally accepted accounting principles and rules. 59 Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) Directors' Report 2013 Translation of a report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. DIRECTORS' REPORT FOR 2013 Business performance and situation of the Company In 2013 economic activity in Spain displayed a gradual improvement in stark contrast to events in 2012. The easing of financial tensions in Southern Europe and in Spain in particular led to less restrictive economic policies. Both of these events resulted in an improvement in investment, consumption and employment indicators, coupled with the favourable developments already witnessed in the external sector. Although the known data are far from satisfactory, they have had a positive impact on the advertising market, itself bolstered by the improved situation or expectations of the advertisers' markets. Estimates place the decline in the advertising market at 8.1% in 2013, smaller than the 16.0% drop in 2012. The quarter-by-quarter performance was of particular note, recovering from a double-digit year-on-year drop in the first quarter to slight growth in the fourth. However promising the trend may be, the fact remains that, for yet another year, advertising expenditure has dropped very significantly again this year and 2013 figures equalled those for 1998, 15 years ago. Television advertising performed better than average, with a 6.2% decline, while radio fell by 11.0%. 2013 saw the consolidation of the television model launched in 2012 with the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. into the Company. As regards audience, Atresmedia attained an average share of 28.8% in 2013, representing an increase of three points - the highest of all television groups. Our main channels, Antena 3 and La Sexta, were the fastest growing national channels, growing by 1.0 and 1.1 points, respectively. Our share of the television advertising market also grew by 1.3 points. Lastly, the synergies obtained in costs were higher than initially expected and the merger was completed with the greatest of success. Revenue stood at EUR 652 million, compared to EUR 574 million in 2012. It should be noted that in 2013 La Sexta activity was included for the entire year, while in 2012 it was only included for the last three months, since the merger took effect from October 2012. In likefor-like terms, television revenue performed better than the market as a whole and, as indicated above, the market share improved. Once again, other income increased in 2013 by 40.8% to EUR 26 million. The Company's total income was EUR 678 million, up 14% on 2012. Although the comparison of expenses is, logically, also affected by the inclusion of La Sexta in October 2012, their evolution is highly satisfactory. Total operating expenses increased by only 10%, demonstrating both the cost synergies achieved and the Company's high degree of cost discipline. Profit from operations amounted to EUR 34 million, as opposed to the loss incurred in 2012. Profit before tax stood at EUR 30 million, as compared with EUR 14 million in 2012. On 18 December 2013, the Supreme Court issued an order enforcing the judgment which rendered void the resolution of the Spanish Cabinet of 16 July 2010 regarding the allocation of channels. At present, based on the information available, the interpretation of these decisions and the fact that Atresmedia Corporación de Medios de Comunicación, S.A. has 1 met all the commitments and obligations imposed upon it, a satisfactory solution is still expected to be reached. Significant events for the Company after the reporting period On 19 February 2014 the Company, through a relevant event communication and subsequent to a resolution of its Board of Directors, announced a partial novation of the integration agreement entered into on 14 December 2011 with Gestora de Inversiones Audiovisuales La Sexta, S.A. ("La Sexta") and its shareholders, which set the terms and conditions for the integration of La Sexta into the Atresmedia Group through a merger by absorption. Specifically, the novation of the agreement relates to the terms and conditions regarding the "Additional Ownership Interest", whereby La Sexta shareholders were granted the right to receive an additional ownership interest of 7% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the Atresmedia Group's earnings performance from 2012 to 2016, inclusive. Under the novation, Atresmedia agreed, with Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L., to bring forward and definitively adjust the delivery of the additional ownership interest that would correspond to these companies. Accordingly, on 24 February 2014 they were delivered, with a charge to treasury shares, ownership interests in Atresmedia Corporación de Medios de Comunicación, S.A. equal to 2.079% and 1.631% of its share capital, respectively. As a result of the process to negotiate this agreement and forming a part thereof, other agreements were reached with Gamp Audiovisual, S.A. and Imagina Media Audiovisual, S.A. consisting of the cancellation of their proportional part in the financial derivative agreement described in Note 9 and the definitive conclusion of other matters relating to the guarantees and obligations included in the merger agreement entered into for the merger with Gestora de Medios Audiovisuales la Sexta, S.A. (see Note 15). The recognition of all these transactions will give rise to an estimated reduction of EUR 13,631 thousand in the shareholders' equity of the Company in the financial statements for 2014. The terms and conditions agreed upon in the integration agreement relating to Gala Desarrollos Comerciales, S.L. remain unchanged and, accordingly, it continues to be entitled to receive an additional ownership interest of 0.508% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the earnings performance of the Atresmedia Group, as indicated above. Outlook for the Company The main indicators suggest that the improvement in economic activity will continue in the near future. Although household consumption is not expected to make any major leap forward, it is expected to display increasingly positive growth. This is consistent with significant growth in the advertising market, whose elasticity with respect to consumption is very high, as displayed by the massive decline in recent years. Accordingly, 2014 is expected to be at least slightly positive, with the growth achieved being bolstered in the coming years. This more positive environment allows for some optimism regarding the immediate future, and will make it possible to reap all the fruits of the merger carried out in recent years. Although the outlook for the market and revenue is positive, cost discipline will remain a cornerstone of management, so as to enable the margins of the television and radio businesses to grow significantly. The high degree of quality and diversity in the content on 2 offer is expected to be maintained and, accordingly, we will be able to continue to enjoy the boost this provides. No major corporate transactions, such as the recent merger, are expected to be carried out. However, we will devote greater efforts to the objective of earning income from audiovisualworld activities other than advertising. Nubeox, the pay video-on-demand content platform, is one of the initiatives in this area, as are participation in the Hola TV channel, broadcast in South America and the United States, tualbum.es. and EnglishHouse.TV. Furthermore, the progress made in 2013 on the Internet will continue: 2013 saw 12 million unique visitors to our websites and more than 56 million videos downloaded. The recent launch of Atresplayer, an online multi-platform content viewing platform, has proven to be a great success, which will allow us to achieve greater dissemination of our content and to obtain additional revenues from both advertisers and paying spectators. The framework for all these developments will continue to be a prudent financial policy which, as has been the case to date, will couple a continued sound equity position with a dividend policy in line with that of recent years. Research and development activities The Company did not carry out any specific research and development activities. However, it updates its investments in all new technologies related to engineering, systems and content distribution on an on-going basis. In this field Atresmedia Corporación de Medios de Comunicación, S.A. has and uses state-of-the-art technology, which enables it to be at the forefront in the deployment of digital activities and in the Internet. Treasury share acquisitions No transactions involving treasury shares were performed in 2013. The Company therefore continued to hold 15,818,704 treasury shares of EUR 0.75 par value each, representing 7.01% of its share capital. Use of financial instruments by the Company and main financial risks The Company performs transactions with financial instruments mainly to hedge the foreign currency risk on the purchases of broadcasting rights in the year. At 31 December 2013, the Company had arranged instruments to hedge its foreign currency asset and liability positions amounting to USD 89,863 thousand, at a weighted average exchange rate of EUR 1.3117/USD 1. The net fair value of these hedging instruments gave rise to a financial asset of EUR 698 thousand and a financial liability of EUR 3,232 thousand at year-end. Also, interest rate swaps were arranged in order to fix the financial cost arising from the floating rates established in the syndicated financing agreement entered into in August 2013. The fair value of these swaps at 31 December 2013 gave rise to a financial asset of EUR 5 thousand. The Company has established the risk management systems required to ensure that transactions in markets are performed in accordance with its established policies, rules and procedures and within the limits approved for each case. The Company’s main financial risks are as follows: 3 a) Foreign currency risk. Foreign currency risks relate mainly to the payments to be made in international markets to acquire broadcasting rights. In order to mitigate this risk, the Company arranges hedging instruments (mainly foreign currency hedges). b) Liquidity risk. The Company’s liquidity policy is to arrange credit lines and current financial assets that are sufficient to support its financial needs, on the basis of expected business performance. c) Credit risk. The Company does not have a significant credit risk since the average customer collection period is very short and guarantees are required for deferred payment sales. Cash placements are made and derivative instruments are arranged with institutions of recognised solvency. d) Interest rate risk. Both the Company's cash and its bank borrowings are exposed to interest rate risk. The Company's financing is at interest rates tied to Euribor. To mitigate this risk, the Company has arranged interest rate swaps to limit the finance costs arising from its floating-rate borrowings. In accordance with Article 538 of the Spanish Limited Liability Companies Law, the Annual Corporate Governance Report (IAGC) forms part of this Directors' Report. The IAGC constitutes a relevant event and is communicated to the Spanish National Securities Market Commission, which publishes it on its website: www.cnmv.es. It is also available on the Company's corporate website, www.atresmediacorporacion.com. 4 Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) and Subsidiaries Auditors' Report Consolidated Financial Statements for the year ended 31 December 2013 Translation of a report originally issued in Spanish and of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain and of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS To the Shareholders of Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.): We have audited the consolidated financial statements of Atresmedia Corporación de Medios de Comunicación, S.A. (the Parent) and Subsidiaries (the Group), which comprise the consolidated balance sheet at 31 December 2013 and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and notes to the consolidated financial statements for the year then ended. As indicated in Note 2 to the accompanying consolidated financial statements, the directors are responsible for the preparation of the Group’s consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and the other provisions of the regulatory financial reporting framework applicable to the Group. Our responsibility is to express an opinion on the consolidated financial statements taken as a whole based on our audit work performed in accordance with the audit regulations in force in Spain, which require examination, by means of selective tests, of the evidence supporting the consolidated financial statements and evaluation of whether their presentation, the accounting principles and policies applied and the estimates made comply with the applicable regulatory financial reporting framework. In our opinion, the accompanying consolidated financial statements for 2013 present fairly, in all material respects, the consolidated equity and consolidated financial position of Atresmedia Corporación de Medios de Comunicación, S.A. and Subsidiaries at 31 December 2013, and the consolidated results of their operations and the consolidated cash flows for the year then ended, in conformity with International Financial Reporting Standards as adopted by the European Union and the other provisions of the regulatory financial reporting framework applicable to the Group. The accompanying consolidated directors’ report for 2013 contains the explanations which the directors of Atresmedia Corporación de Medios de Comunicación, S.A. consider appropriate about the Group’s situation, the evolution of its business and other matters, but is not an integral part of the consolidated financial statements. We have checked that the accounting information in the consolidated directors’ report is consistent with that contained in the consolidated financial statements for 2013. Our work as auditors was confined to checking the consolidated directors’ report with the aforementioned scope, and did not include a review of any information other than that drawn from the accounting records of Atresmedia Corporación de Medios de Comunicación, S.A. and Subsidiaries. DELOITTE, S.L. Registered in ROAC under no. S0692 Jesús Mota Robledo 26 February 2014 Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) and Subsidiaries Consolidated Financial Statements for the year ended 31 December 2013 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2013 Thousands of euros NOTES 31/12/13 31/12/12 ASSETS Goodwill 5 153,193 150,012 Other intangible assets 6 142,685 140,820 Property, plant and equipment 7 51,975 57,414 Investments accounted for using the equity method 8 546 86 Non-current financial assets 9 1,769 13,052 Derivative financial instruments Deferred tax assets 9 22-d NON-CURRENT ASSETS Programme rights 10 Inventories Trade receivables for sales and services 11 9,413 7,402 327,183 322,539 686,764 691,325 280,033 238,977 3,019 2,924 222,803 216,345 Other receivables 11 5,792 12,650 Current tax assets 22-d 1,558 1,755 698 1,245 Derivative financial instruments 15 Other current financial assets Other current assets Cash and cash equivalents CURRENT ASSETS NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS TOTAL ASSETS 3,658 - 389 1,595 56,282 4,973 574,232 480,464 - 2,000 1,260,996 1,173,789 EQUITY AND LIABILITIES Share capital 12-a 169,300 169,300 Share premium 12-b 38,304 38,304 Restricted reserves 12-c 42,475 40,282 189,916 165,989 Retained earnings Treasury shares 12-e (99,453) (99,453) Interim dividends 12-f - (21,352) 42,643 42,643 842 493 384,027 336,206 Other equity instruments 4 Valuation adjustments EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Non-controlling interests 12-g EQUITY (9) (4) 384,018 336,202 Provisions 13 2,328 - Bank borrowings 14 200,129 226 Derivative financial instruments 15-a 207 197 Other non-current financial liabilities 15-b 495 69,469 Deferred tax liabilities 22-d 31,345 31,488 13 63,658 - 298,162 101,380 Other non-current liabilities NON-CURRENT LIABILITIES Provisions 13 73,022 79,192 Bank borrowings 14 6,589 137,669 485 Derivative financial instruments 15-a 3,025 Other current financial liabilities 15-b 35,384 - Payable to suppliers 16 421,163 475,313 Other payables 16 37,719 39,776 Other current liabilities 13 1,914 3,772 578,816 736,207 1,260,996 1,173,789 CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES The accompanying Notes 1 to 29 are an integral part of the consolidated balance sheet at 31 December 2013. 1 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 Thousands of euros Revenue NOTES 2013 2012 19-a 795,774 34,016 28,589 Programme amortisation and other procurements 19-b (448,487) (406,468) Staff costs 19-c (110,880) (120,298) Other operating expenses 19-d (190,269) (174,911) Other income Depreciation and amortisation charge 6 and 7 712,574 (17,286) (16,645) Impairment and gains or losses on disposals of non-current assets 5 11 (25,392) Gains on bargain purchases arising on business combinations 4 - 19,536 62,879 16,985 PROFIT FROM OPERATIONS Net gain (loss) due to changes in the value of financial instruments at fair value 20 (952) 4,931 Exchange differences 20 6,416 4,077 Financial loss 20 (15,677) (9,835) Impairment of financial assets 20 (3,786) - Gains (losses) on disposals of financial assets 20 - (3,174) (1,073) (1,080) 47,807 11,904 1,753 (20,005) 46,054 31,909 10 2 46,064 31,911 Result of companies accounted for using the equity method 8 PROFIT BEFORE TAX FROM CONTINUING OPERATIONS Income tax expense/(benefit) 22-b PROFIT FOR THE YEAR Loss attributable to non-controlling interests PROFIT FOR THE YEAR ATTRIBUTABLE TO THE PARENT Earnings per share: 2013 2012 From continuing operations Basic 24 0.204 0.149 Diluted 24 0.204 0.149 The accompanying Notes 1 to 29 are an integral part of the consolidated income statement for 2013. 2 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 Thousands of euros CONSOLIDATED PROFIT FOR THE YEAR ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: 2013 2012 46,054 31,909 349 (448) 492 (630) 9 (10) (152) 192 46,403 31,461 10 2 46,413 31,463 Cash flow hedges: Amounts recognised directly in equity Amounts transferred to profit or loss Tax effect TOTAL COMPREHENSIVE INCOME Loss attributable to non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO THE PARENT The accompanying Notes 1 to 29 are an integral part of the consolidated statement of comprehensive income for 2013. 3 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 Thousands of euros Balance at 31 December 2011 Total comprehensive income Share capital Share premium Restricted reserves Treasury shares Retained earnings Interim dividend Equity Valuation attributable adjustments to the Parent Other equity instruments 158,335 - 40,282 (87,861) 226,301 (43,734) - - - - 31,909 - - - - (19,019) - - 10,965 38,304 - 7,427 (3,446) - - - - - - - - - - - Noncontrolling interests Equity 939 294,262 (2) 294,260 (446) 31,463 (2) 31,461 - - (19,019) - (19,019) - 42,643 - 95,893 - 95,893 (43,734) 43,734 - - - - - - (44,792) - - - (44,792) - (44,792) - - - (21,352) - - (21,352) - (21,352) - - - (249) - - - (249) - (249) 169,300 38,304 40,282 (99,453) 165,989 (21,352) 42,643 493 336,206 (4) 336,202 - - - - 46,064 - 349 46,413 (10) 46,403 - - - - (21,352) 21,352 - - - - - - - 2,193 - (785) - - - 1,408 5 1,413 169,300 38,304 42,475 (99,453) 189,916 - 42,643 842 384,027 (9) 384,018 - Treasury share transactions: Acquisition of treasury shares Transactions with shareholders: Increase (decrease) in equity arising from business combinations Distribution of profit: 2011 interim dividend paid in 2011 2011 final dividend paid in 2012 2012 interim dividend paid in 2012 Changes in the scope of consolidation and other Balance at 31 December 2012 Total comprehensive income - Distribution of profit: 2012 interim dividend paid in 2012 (Note 3-s) Changes in the scope of consolidation and other Balance at 31 December 2013 The accompanying Notes 1 to 29 are an integral part of the consolidated statement of changes in equity for 2013. 4 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 Thousands of euros 2013 2012 1.- CASH FLOWS FROM OPERATING ACTIVITIES Consolidated profit for the year before tax 47,807 11,904 Adjustments for: 26,952 36,958 17,286 16,645 (547) 39,022 - Depreciation and amortisation charge - Provisions and other - Provisions - Net impairment losses (+/-): - Result of companies accounted for using the equity method (5,395) 9,376 3,775 1,073 28,566 1,080 10,213 827 - (19,536) (7,800) 10,559 Cash flows from operating activities 66,959 59,421 Income tax paid (5,751) (1,913) Net cash flows from operating activities 61,208 57,508 (31,798) (28,116) - Financial result - Gains on bargain purchases arising on business combinations Changes in working capital 2.- CASH FLOWS FROM INVESTING ACTIVITIES Investments Subsidiaries, joint ventures and associates (6,771) (4,438) (25,027) (23,678) 11,050 1,620 11,050 1,620 (20,748) (26,496) Finance costs paid (17,922) (6,317) Financing - Associates and related companies (40,111) 917 - (66,144) Property, plant and equipment and intangible assets Disposals Subsidiaries, joint ventures and associates Net cash flows from investing activities 3.- CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid - (19,019) 68,823 50,644 Net cash flows from financing activities 10,790 (39,919) NET INCREASE / DECREASE IN CASH 51,250 (8,907) 4,973 8,103 59 5,777 5,032 13,880 56,282 4,973 Acquisition of treasury shares Bank borrowings Cash and cash equivalents at beginning of year Changes in the scope of consolidation/IFRSs Cash and cash equivalents at beginning of year - new scope of consolidation Cash and cash equivalents at end of year The accompanying Notes 1 to 29 are an integral part of the consolidated statement of cash flows for 2013. 5 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 2 and 29). In the event of a discrepancy, the Spanish-language version prevails. Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) and Subsidiaries Notes to the 2013 Consolidated Financial Statements 1. Group activities Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.), the Atresmedia Group's Parent, with registered office at Avenida Isla Graciosa, 13, San Sebastián de los Reyes (Madrid), was incorporated on 7 June 1988, and its then sole company object was the indirect management of a public television service. For this purpose, it submitted a bid in response to the call for tenders made under Article 8 of Private Television Law 10/1988, of 3 May, and, pursuant to a resolution of the Spanish Cabinet of 25 August 1989, was awarded a concession for the indirect management of the public television service, for a period of ten years, which ended on 3 April 2000. On 7 May 1996, the shareholders at the Annual General Meeting resolved to change and extend the Parent's company object, as permitted by Satellite Telecommunications Law 37/1995. On 10 March 2000, the Spanish Cabinet adopted a resolution renewing the concession for the indirect management of the public television service for a period of ten years from 3 April 2000. The terms of this renewal were the same as for the former concession, with the added obligation of commencing digital broadcasting on 3 April 2002. The Parent made all the necessary investments to enable it to begin broadcasting on that date the Atresmedia Corporación de Medios de Comunicación, S.A. signal pursuant to Royal Decree 2169/1998, of 9 October, which approved the Spanish Technical Plan for Digital Terrestrial Television (DTT). On 3 April 2010, the National Government renewed, for a period of ten years, the concession for the indirect management of the public television service, under the same terms and conditions as the previous concession. Additional Provision One of Royal Decree 944/2005, of 29 July, approving the Spanish Technical Plan for Digital Terrestrial Television established 3 April 2010 as the date for the switch-off of analogue television broadcasting in all the transition projects defined in the National Plan for the Transition to Digital Terrestrial Television. From that date onwards, all terrestrial television has been broadcast using digital technology. Following this milestone, in accordance with Additional Provision Three of Royal Decree 944/2005, of 29 July, each national terrestrial public television service concession operator would gain access to a digital multiplex with national coverage. Royal Decree 365/2010, of 26 March, governs the allocation of the Digital Terrestrial Television multiplexes following the switch-off of terrestrial television broadcasting using analogue technology. It established two phases for the allocation of the digital multiplexes. Phase 1 (transitional), in which each national terrestrial public television service concession operator would gain access to the capacity equivalent to one digital multiplex with national coverage, provided they demonstrated that they had met the terms and conditions established in relation to the promotion and development of digital terrestrial television, and phase 2, in which new digital 6 multiplexes will be planned, and adjustments will be established so that the radioelectric channels 61 to 69, which were being used by the digital multiplexes in the previous phase can be replaced by others in phase 2. This will conclude before 1 January 2015 with the allocation of the definitive digital multiplexes to each qualifying company, thereby ending the shared use of digital multiplex capacity by the national terrestrial public television service concession operators. On 16 July 2010, the Spanish Cabinet adopted a resolution to allocate a national digital multiplex to each national DTT concession operator: Antena 3, Gestevisión Telecinco, Sogecable, Veo Televisión, NET TV and la Sexta. The digital multiplex is composed of four digital television channels that can be operated twenty-four hours a day. The allocation was made upon request and after the switch-off of analogue broadcasting, once it had been verified that the DTT service concession operators had met the obligations relating to the promotion and development of digital terrestrial television that they had assumed in the framework of the Spanish Technical Plan for Digital Terrestrial Television and the Royal Decree governing the specific allocation of DTT multiplexes, following the switch-off of analogue terrestrial television broadcasting. In any event, the definitive multiplex will be accessed by 1 January 2015, in accordance with the phases established in the Royal Decree. A judgment handed down on 27 November 2012 by Chamber Three of the Spanish Supreme Court rendered void the resolution of the Spanish Cabinet of 16 July 2010, which allocated to each of the Digital Terrestrial Television (DTT) licence holders, including Atresmedia Corporación de Medios de Comunicación, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A., the capacity equivalent to a digital multiplex with national coverage composed of four channels. This allocation had been made pursuant to a set of rules which, since 1997, upon approval of the National Plan for Digital Terrestrial Television, and particularly upon enactment of Law 10/2005, of 14 June, governed the transition from analogue terrestrial television to DTT, which was completed in 2010. The allocation was made once the Government had verified that the licence holders had complied with all the requirements and obligations incumbent upon them to foster transition to DTT, as a condition for gaining access to the multiplex. The judgment of the Spanish Supreme Court annulling the allocation was based primarily on the fact that the allocation was made after the entry into force of the General Audiovisual Communications Law (enacted one month before the Spanish Cabinet adopted the annulled resolution), which stipulates that the licences must be granted through a tendering procedure. The Supreme Court inferred from this that "the licences must reflect the content which existed upon entry into force of the Law, with no more channels being allowed", while the General Audiovisual Communications Law does not provide for any safeguard permitting the regulations to be applied prior to their entry into force. The judgment of the Spanish Supreme Court noted at the time that the matter would have been resolved had the General Audiovisual Communications Law included a provision envisaging that the rules in force prior to its enactment should continue to be valid. The obstacle posed by the judgment of the Spanish Supreme Court is therefore basically formal, because neither the conceptual basis of DTT, nor consequently its completion through the allocation of a multiplex to each operator, have ever been questioned. 7 On 22 March 2013, the Spanish Cabinet adopted a resolution to comply with the judgment of the Spanish Supreme Court of 27 November 2012, indicating that the affected channels must cease broadcasting and associating this process with the freeing up of the digital dividend. Subsequently, on 18 December 2013, the Spanish Supreme Court issued an order enforcing the aforementioned judgment, referring, inter alia, to the channels affected by its judgment, which would include three of the channels currently being operated by Atresmedia. At present, based on the information available, the interpretation of the aforementioned decisions and the fact that Atresmedia Corporación de Medios de Comunicación, S.A. has complied with all the commitments and obligations imposed on it, a satisfactory solution is still expected to be reached, and it was not considered necessary to make any significant adjustments or amendments to these consolidated financial statements. In relation to the renewal of the public radio broadcasting service concessions operated by Uniprex, S.A. (Sole-Shareholder Company), to date, applications have been submitted to the competent authorities, in accordance with the legislation in force, for the renewal of concessions about to expire and for authorisation of a change of operator in other concessions. In certain cases the renewal of the concession was granted expressly, whereas in others it was obtained by the administrative silence route after the pertinent appeals were filed with a higher administrative body, in accordance with Article 43 of the Public Authorities and Common Administrative Procedure Law. The other Group companies engage mainly in activities relating to the production, reproduction and broadcasting of sounds and images. The Parent's Annual General Meeting and its Board of Directors Meeting, on 28 April 2003 and 29 July 2003, respectively, resolved to request the admission to trading of all the shares of Atresmedia Corporación de Medios de Comunicación, S.A. on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges, as well as their inclusion in the Spanish Stock Market Interconnection System. On 29 October 2003, the Parent's shares commenced trading on these stock exchanges. On 14 December 2011, following a resolution by its Board of Directors, Atresmedia Corporación de Medios de Comunicación, S.A. entered into an agreement with the shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. to merge the two companies, through the merger by absorption of La Sexta into Atresmedia Corporación de Medios de Comunicación, S.A., subject to the obtainment of the relevant authorisations from the regulatory and competition authorities. On 25 January 2012, the Boards of Directors of Atresmedia Corporación de Medios de Comunicación, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A. approved the draft terms of merger of the two companies. The Parent's shareholders at the Annual General Meeting held on 25 April 2012 approved the merger involving the absorption by Atresmedia Corporación de Medios de Comunicación, S.A. (absorbing company) of Gestora de Inversiones Audiovisuales La Sexta, S.A., under the draft terms of merger filed with the Madrid Mercantile Registry on 7 February 2012. The merger was authorised by the Spanish anti-trust authorities on 24 August 2012, by virtue of a resolution adopted by the Spanish Cabinet on the same date. 8 On 5 October 2012, the Spanish Cabinet also resolved to authorise the transfer of the audiovisual communication licence held by La Sexta and the assignment for private use of the associated public radioelectric domain. From that date onwards, the operations of La Sexta are deemed to be performed for accounting purposes by Atresmedia Corporación de Medios de Comunicación, S.A. The public deed of merger of Atresmedia Corporación de Medios de Comunicación, S.A. with Gestora de Inversiones Audiovisuales La Sexta, S.A. was filed with the Madrid Mercantile Registry on 31 October 2012, and as a result the latter was dissolved and all its assets and liabilities were transferred en bloc to the former. The Parent's shareholders at the Annual General Meeting held on 24 April 2013 resolved, inter alia, to change the company's name from Antena 3 de Televisión, S.A. to Atresmedia Corporación de Medios de Comunicación, S.A. The Parent is obliged to prepare, in addition to its own separate financial statements, the Group’s consolidated financial statements, which also include its interests in joint ventures and investments in associates. In view of the business activities carried on by the Group companies, they do not have any environmental liability, expenses, assets, provisions or contingencies that might be material with respect to the equity, financial position and results of operations of the corporate Group. Therefore, no specific disclosures relating to environmental issues are included in these notes to the consolidated financial statements. 2. Basis of presentation of the consolidated financial statements and basis of consolidation a) Basis of presentation These consolidated financial statements were prepared, on the basis of the accounting records kept by the Parent and by the other Group companies, in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs), in conformity with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council. The Group's consolidated financial statements were prepared taking into account all the mandatory accounting principles and rules and measurement bases with a material effect on the consolidated financial statements, as well as the alternative treatments permitted by the relevant standards in this connection, and, accordingly, they present fairly the Group's consolidated equity and financial position at 31 December 2013 and the results of its operations, the changes in consolidated equity and the consolidated cash flows in the year then ended. However, since the accounting policies and measurement bases used in preparing the Group's consolidated financial statements for 2013 (EU-IFRSs) differ from those used by the Group companies (Spanish National Chart of Accounts), the required adjustments and reclassifications were made on consolidation to unify the policies and methods used and to make them compliant with EU-IFRSs. In addition to the International Financial Reporting Standards adopted by the EU (EU-IFRSs), all the requirements included in the Spanish Commercial Code and the Spanish Limited Liability Companies Law were applied in these consolidated financial statements, as well as such other aspects of Spanish accounting regulations in force as might be applicable. 9 The 2013 consolidated financial statements of the Group and the 2013 separate financial statements of the Group companies, which were formally prepared by the companies' respective directors, will be submitted for approval at the related Annual General Meetings, and it is considered that they will be approved without any changes. The 2012 consolidated financial statements, which were approved by the shareholders at the Annual General Meeting on 24 April 2013 and are included for comparison purposes, were also prepared in accordance with EU-IFRSs applied on a basis consistent with that of 2013. Standards and interpretations effective in 2013: The standards and interpretations that came into force in 2013 and that were taken into account in preparing the accompanying consolidated financial statements are described below: New standards, amendments and interpretations: Obligatory application in annual reporting periods beginning on or after: Approved for use in the European Union Amendments to IAS 12, Income Taxes - Deferred Taxes Arising from Investment Property (issued in December 2010) IFRS 13, Fair Value Measurement (issued in May 2011) Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income (issued in June 2011) Amendments to IAS 19, Employee Benefits (issued in June 2011) Amendments to IFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (issued in December 2011) Improvements to IFRSs, 2009-2011 cycle (issued in May 2012) IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011) On the measurement of deferred taxes arising from investment property measured using the fair value model in IAS 40 Sets out a framework for measuring fair value Annual reporting periods beginning on or after 1 January 2013 (Original IASB date: 1 January 2012) Annual reporting periods beginning on or after 1 January 2013 Minor amendments relating to the presentation of items of other comprehensive income Annual reporting periods beginning on or after 1 July 2012 The amendments affect mainly defined benefit plans since one of the major changes is the elimination of the “corridor” Annual reporting periods beginning on or after 1 January 2013 Introduction of new disclosures relating to the offsetting of financial assets and financial liabilities under IAS 32. Annual reporting periods beginning on or after 1 January 2013 Minor amendments to a series of standards. Annual reporting periods beginning on or after 1 January 2013 The IFRS Interpretations Committee addresses the accounting treatment of the waste removal costs incurred in surface mining. Annual reporting periods beginning on or after 1 January 2013 New standards, amendments and interpretations mandatorily applicable on or after 1 January 2013 Amendments to IAS 12, Income Taxes – Deferred Taxes Arising From Investment Property The main change introduced by these amendments is an exception to the general principles of IAS 12 which affects deferred taxes arising from investment property that is measured using the fair value model in IAS 40, Investment Property; there is now a rebuttable presumption in relation to the measurement of the deferred taxes that the carrying amount of the investment property will be recovered entirely through sale. 10 The entry into force of these amendments did not have any impact on the consolidated financial statements. IFRS 13, Fair Value Measurement The purpose of this IFRS is to set out in a single standard a framework for measuring the fair value of assets or liabilities when other standards require that the fair value measurement model be used. IFRS 13 changes the current definition of fair value and introduces new factors to be taken into account; it also extends the disclosure requirements in this area. The Group has analysed the impacts of the new definition of fair value mainly on financial assets and liabilities relating to derivatives and, although it did not observe any significant changes in the assumptions, methods and calculations used to date, the disclosures have been adapted to the requirements of this standard. The effect of applying this standard was EUR 688 thousand. Amendments to IAS 1, Presentation of Items of Other Comprehensive Income These amendments introduce small changes to IAS 1, Presentation of Financial Statements, in relation to the items presented in “Other Comprehensive Income”, distinguishing between items that will be reclassified to profit or loss in subsequent periods and items that will not be reclassified subsequently. The Group has adopted these amendments in these consolidated financial statements. Amendments to IAS 19, Employee Benefits The main change introduced by these amendments to IAS 19 will affect the accounting treatment of defined benefit plans since it eliminates the “corridor” under which companies are currently permitted to opt for deferred recognition of a given portion of actuarial gains and losses. When the amendments come into effect, all actuarial gains and losses must be recognised immediately in other comprehensive income. The amendments also include changes in the presentation of cost components in the statement of comprehensive income, which will be aggregated and presented in a different way. The entry into force of these amendments did not have any impact for the Group. Amendments to IFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities The parallel amendments to IFRS 7 introduce a specific section of new disclosures required for all recognised financial assets and financial liabilities that are set off; these disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. The entry into force did not have any impact on the consolidated financial statements. 11 Standards and interpretations issued but not yet in force: At the date of preparation of these consolidated financial statements, the most significant standards and interpretations that had been published by the IASB but which had not yet come into force, either because their effective date is subsequent to the date of the consolidated financial statements or because they had not yet been adopted by the European Union, were those listed below. The directors have assessed the potential impact of applying these standards in the future and consider that their entry into force will not have a material effect on the consolidated financial statements. New standards, amendments and interpretations: Obligatory application in annual reporting periods beginning on or after: Approved for use in the European Union IFRS 10, Consolidated Financial Statements (issued in May 2011) Supersedes the requirements relating to consolidated financial statements in IAS 27 Annual reporting periods beginning on or after 1 January 2014 (1) IFRS 11, Joint Arrangements (issued in May 2011) Supersedes the current IAS 31, Interests in Joint Ventures Annual reporting periods beginning on or after 1 January 2014 (1) IFRS 12, Disclosure of Interests in Other Entities (issued in May 2011) Single IFRS presenting the disclosure requirements for interests in subsidiaries, associates, joint arrangements and unconsolidated entities Annual reporting periods beginning on or after 1 January 2014 (1) IAS 27 (Revised), Separate Financial Statements (issued in May 2011) The IAS is revised, since as a result of the issue of IFRS 10 it applies only to the separate financial statements of an entity Annual reporting periods beginning on or after 1 January 2014 (1) IAS 28 (Revised), Investments in Associates and Joint Ventures (issued in May 2011) Revision in conjunction with the issue of IFRS 11, Joint Arrangements Annual reporting periods beginning on or after 1 January 2014 (1) Transition rules: Amendments to IFRS 10, 11 and 12 (issued in June 2012) Clarification of the rules for transition to these standards Annual reporting periods beginning on or after 1 January 2014 (1) Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 27 (issued in October 2012) Exception from consolidation for parent companies that meet the definition of investment entities Annual reporting periods beginning on or after 1 January 2014 Amendments to IAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (issued in December 2011) Additional clarifications to the rules for offsetting financial assets and financial liabilities under IAS 32 Annual reporting periods beginning on or after 1 January 2014 Not yet approved for use in the European Union IFRS 9, Financial Instruments: Classification and Measurement (issued in November 2009 and in October 2010) and subsequent amendments to IFRS 9 and IFRS 7 on effective date and transition disclosures (issued in December 2011) and hedge accounting and other amendments (issued in November 2013) Replaces the IAS 39 requirements relating to the classification, measurement and derecognition of financial assets and liabilities and hedge accounting Amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets (issued in May 2013) Annual reporting periods Clarifies when certain disclosures are required and extends the disclosures required when recoverable amount is based on fair value less beginning on or after 1 January 2014 costs to sell Amendments to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting (issued in June 2013) The amendments establish the cases in which -and subject to which criteria- there is no need to discontinue hedge accounting if a derivative is novated. Annual reporting periods beginning on or after 1 January 2014 Amendments to IAS 19 – Defined Benefit Plans: Employee Contributions (issued in November 2013) The amendments were issued to allow employee contributions to be deducted from the service cost in the same period in which they are paid, provided certain requirements are met Annual reporting periods beginning on or after 1 July 2014 Improvements to IFRSs, 2010-2012 cycle and 2011-2013 cycle (issued in December 2013) Minor amendments to a series of standards Annual reporting periods beginning on or after 1 July 2014 IFRIC 21, Levies (issued in May 2013) This interpretation addresses the accounting for a liability to pay a levy that is triggered by an entity undertaking an activity on a specified date. Annual reporting periods beginning on or after 1 July 2014 Not yet defined (2) (1) The European Union postponed the mandatory effective date by one year. The original IASB application date was 1 January 2013. (2) In November 2013 the IASB removed the mandatory effective date of IFRS 9 and a new date will not be set until the standard is complete. The new date is not expected to be earlier than annual reporting periods beginning on or after 1 January 2017. 12 IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of Interests in Other Entities, IAS 27 (Revised), Separate Financial Statements and IAS 28 (Revised), Investments in Associates and Joint Ventures IFRS 10 modifies the current definition of control. The new definition of control sets out the following three elements of control: power over the investee; exposure, or rights, to variable returns from involvement with the investee; and the ability to use power over the investee to affect the amount of the investor’s returns. The Group is analysing how this new definition of control will affect the consolidated group companies as a whole and it will foreseeably not have a significant impact on the composition of the Group. IFRS 11, Joint Arrangements supersedes IAS 31. The fundamental change introduced by IFRS 11 with respect to the current standard is the elimination of the option of proportionate consolidation for jointly controlled entities, which will begin to be accounted for using the equity method. This amendment will not have a material effect on the Group’s consolidated financial statements. IAS 27 and IAS 28 are revised in conjunction with the issue of the aforementioned new IFRSs. In the case of the Group, they will not have any impacts other than those discussed above. Lastly, IFRS 12 is a disclosure standard that groups together all the disclosure requirements for interests in other entities (whether these be subsidiaries, associates, joint arrangements or other interests) and includes new disclosure requirements. Accordingly, its entry into force will foreseeably give rise to an increase in the disclosures that the Group has been making, i.e., those currently required for interests in other entities and other investment vehicles. Amendments to IAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities The amendments introduce certain additional clarifications to the application guidance on the requirements of the standard for being able to offset a financial asset and a financial liability in the balance sheet, which are provided in paragraph 42 of IAS 32. IAS 32 already indicates that a financial asset and a financial liability may only be offset when an entity currently has a legally enforceable right to set off the recognised amounts. The amended application guidance states, inter alia, that in order to meet this criterion, the right of set-off must not be contingent on a future event, and must be legally enforceable in the normal course of business, in the event of default and in the event of insolvency or bankruptcy of the entity and all of the counterparties. It also clarifies in which cases a gross settlement system could be considered equivalent to net settlement. The adoption of this standard will foreseeably not have a material impact on the consolidated financial statements. 13 IFRS 9, Financial Instruments: Classification and Measurement IFRS 9 will in the future replace the current part of IAS 39 relating to classification and measurement. There are very significant differences with respect to the current standard, in relation to financial assets, including the approval of a new classification model based on only two categories, namely instruments measured at amortised cost and those measured at fair value, the disappearance of the current “held-to-maturity investments” and “available-for-sale financial assets” categories, impairment analyses only for assets measured at amortised cost and the non-separation of derivatives embedded in financial asset contracts. In relation to financial liabilities, the classification categories proposed by IFRS 9 are similar to those currently contained in IAS 39 and, therefore, there should not be any very significant differences except, in the case of the fair value option for financial liabilities, for the requirement to recognise changes in fair value attributable to own credit risk as a component of equity. There will also be major changes in relation to hedge accounting, since the approach of IFRS 9 is very different from that of the current IAS 39 in that it attempts to align hedge accounting with economic risk management. The Group is currently analysing the future impact of the adoption of this standard and foreseeably it will not have a material impact on the consolidated financial statements Amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets The IASB proposes to restrict the current disclosure of the recoverable amount of an asset or cash-generating unit to periods in which an impairment loss has been recognised or reversed, i.e. it eliminates the current requirement of disclosure when there has been no impairment or reversal. It also introduces new disclosure requirements for when the recoverable amount has been calculated as fair value less costs of disposal and an impairment loss has been recognised or reversed. The following disclosures are now required: • The level of the IFRS 13 hierarchy within which the fair value has been measured. • For fair value measurements categorised within Level 2 or Level 3, a description of the valuation techniques and key assumptions used, as well as the current and previous discount rates. The entry into force of these amendments will not have a significant impact for the Group. Amendments to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting The purpose of these amendments is to ease the requirements to discontinue hedge accounting when a derivative must be novated with a central clearing counterparty or an entity acting in a similar capacity as a consequence of legal requirements. The amendments state that the novation of a hedging instrument should not be considered an expiration or termination giving rise to the discontinuation of hedge accounting when the hedging derivative is novated: 14 • As a consequence of new laws and regulations, with one or more clearing counterparties replacing the original counterparty, and, • Any changes in terms of the novated derivative are limited to those necessary to effect the replacement of the counterparty. No specific disclosure requirements are introduced. The entry into force of these amendments will not have a significant impact for the Group. Amendments to IAS 19 – Defined Benefit Plans: Employee Contributions The amendments were issued to allow employee contributions to be deducted from the service cost in the same period in which they are paid, provided certain requirements are met, without having to perform calculations to attribute the reduction to each year of service. Contributions from employees or third parties set out in the formal terms of a defined benefit plan will be recognised as follows: • If the amount of the contributions is independent of the number of years of service, the contributions can be recognised as a reduction of the service cost in the same period in which they are paid (this is an accounting option which must be applied consistently over time). • But if the amount of the contributions is dependent on a specific number of years of service, the contributions must be attributed to those periods of service in accordance with paragraph 70 of IAS 19. The entry into force of these amendments will not have a significant impact for the Group. IFRIC 21, Levies The interpretation addressees the timing of recognition of a liability to pay a levy if that liability is based on financial data for a period other than that in which the activity that triggers the payment of the levy occurs. The interpretation states that the liability must be recognised when the obligating event giving rise to the recognition thereof occurs, which is normally identified by legislation. The recognition principles outlined above must be applied to both the annual and interim financial statements. This means that the interim financial statements will not include any prepaid expense in respect of a levy if there is no present obligation to pay the levy at the end of the interim reporting period. The Group has evaluated the effects of the entry into force of this interpretation, which will foreseeably not have an impact on the consolidated financial statements, although it is expected to have an impact on the interim financial statements. 15 Responsibility for the information and use of estimates The information contained in these consolidated financial statements is the responsibility of the Parent's directors. In the Group's consolidated financial statements for 2013 estimates were occasionally made in order to quantify certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates relate basically to the following: The impairment losses on certain assets (see Notes 6, 7, 10 and 11), The useful life of the property, plant and equipment and intangible assets (see Notes 3-c and 3-d). The measurement of goodwill arising on consolidation (see Note 5), Programme amortisation (see Note 3-f), The fair value of certain unquoted assets (see Notes 9 and 15), and Provisions (see Note 13). Although these estimates were made on the basis of the best information available at 31 December 2013 on the events analysed, events that take place in the future might make it necessary to change these estimates (upwards or downwards) in coming years. Changes in accounting estimates would be applied prospectively, recognising the effects of the change in estimates in the related consolidated income statements. At 2013 year-end, the Group had a working capital deficiency of EUR 4,584 thousand covered in full by the undrawn portion of the syndicated loan. 16 b) Basis of consolidation Subsidiaries Following are the subsidiaries included in the scope of consolidation: Registered office Year of incorporation Owner 2013 % Antena 3 Eventos, S.L.U. Madrid 2008 Organisation of events Atresmedia Corporación de Medios de Comunicación, S.A. 100 Antena 3 Films, S.L.U. (*) Madrid 2000 Audiovisual productions Atresmedia Corporación de Medios de Comunicación, S.A. 100 Antena 3 Juegos, S.A.U. Madrid 2011 Organisation, marketing and operation of Atresmedia Corporación de Medios gaming activities de Comunicación, S.A. 100 Antena 3 Multimedia, S.L.U. Madrid 2004 Commercial management by television Atresmedia Corporación de Medios de Comunicación, S.A. 100 Antena 3 Noticias, S.L.U. (*) Madrid 2012 Audiovisual productions Atresmedia Corporación de Medios de Comunicación, S.A. 100 2004 Advertising management Atresmedia Corporación de Medios de Comunicación, S.A. 100 Atresmedia Corporación de Medios de Comunicación, S.A. 90 Company name Atres Advertising, S.L.U. (*) Madrid Line of business Atresmedia Foto, S.L. Madrid 2013 Manufacture and sale of photo albums and promotional materials Cordina Planet, S.L.U. Barcelona 2010 Production, distribution, dissemination and marketing of audiovisual content Atresmedia Corporación de Medios de Comunicación, S.A. 100 Guadiana Producciones, S.A.U. Madrid 1994 Audiovisual productions Atresmedia Corporación de Medios de Comunicación, S.A. 100 La Sexta Editorial Musical, S.L.U. Madrid 2008 Management of copyrights Atresmedia Corporación de Medios de Comunicación, S.A. 100 Música Aparte, S.A.U. (*) Madrid 1990 Management of copyrights Atresmedia Corporación de Medios de Comunicación, S.A. 100 Publiseis Iniciativas Publicitarias, S.A.U. (*) Madrid 2006 Advertising management Atresmedia Corporación de Medios de Comunicación, S.A. 100 Uniprex, S.A.U. (*) Madrid 1982 Radio broadcasting services Atresmedia Corporación de Medios de Comunicación, S.A. 100 Las Palmas 2006 Local digital terrestrial television Uniprex, S.A.U. 100 Canal Media Radio, S.A.U. Madrid 1997 Radio broadcasting services Uniprex, S.A.U. 100 Uniprex Televisión Digital Terrestre de Andalucía, S.L. Seville 2006 Local digital terrestrial television Uniprex, S.A.U. 74.2 Uniprex Televisión, S.L.U. Madrid 2004 Indirect management of TV service Uniprex, S.A.U. 100 Uniprex Valencia TV, S.L.U. Valencia 2005 Local digital terrestrial television Uniprex, S.A.U. 100 Antena 3 Televisión Digital Terrestre de Canarias, S.A.U. (*) Audited companies. The subsidiaries over which the Group exercises control are fully consolidated and all their assets, liabilities, income, expenses and cash flows are included in the consolidated financial statements after making adjustments to adapt the accounting policies used to those applied by the Group and adjustments and eliminations relating to intra-Group transactions. The Group considers that it exercises control over a company when it has sufficient power to govern its financial and operating policies so as to obtain benefits from its activities. The results of subsidiaries acquired during the year are included in the consolidated income statement from the date of acquisition to year-end. 17 Associates The associates over which Atresmedia Corporación de Medios de Comunicación, S.A. or its subsidiaries do not exercise control but over which they have the capacity to exercise significant influence in their management, normally through agreements with other shareholders, were accounted for in the consolidated financial statements using the equity method. Using this accounting method, the investment is recognised at cost, including any goodwill arising on the acquisition, and is subsequently adjusted on the basis of the changes in its equity, in proportion to the percentage of ownership that corresponds to the Group. The Group’s share of the results of these companies is recognised, net of the related tax effect, under “Share of Results of Associates” in the consolidated income statement, and any dividends received from these companies are deducted from the value of the investment. These associates are as follows: Company name I3 Televisión, S.L. Registered office Year of incorporation Madrid 2005 Owner 2013 % IT services Atresmedia Corporación de Medios de Comunicación, S.A. 50 50 Line of business Hola Televisión América, S.L. Madrid 2011 Audiovisual communication services Atresmedia Corporación de Medios de Comunicación, S.A. Atlantis Global Solutions, S.L. Barcelona 2013 Development and identification of audiovisual content on various platforms Antena 3 Films, S.A.U. 33.41 The Group does not exercise control over the associates that are 50% or more owned, because under the shareholders agreements it has no powers to govern their financial and operating policies so as to obtain benefits from their activities. Changes in the scope of consolidation and main transactions in 2013 On 6 February 2013, Antena 3 de Televisión Colombia, S.A. and Canal 3 Televisión Colombia, S.A. were liquidated. This transaction did not have any impact on the consolidated financial statements. On 5 April 2013, the subsidiary Antena 3 Films, S.L. (Sole-Shareholder Company) acquired 33.41% of the share capital of Atlantis Global Solutions, S.L., the company object of which is to develop and identify audiovisual content that enables synergies between various operating platforms to be created. This company was accounted for using the equity method. On 20 June 2013, the sole directors of Estaciones Radiofónicas de Aragón, S.A. (Sole-Shareholder Company), Ipar Onda, S.A. (Sole-Shareholder Company), Onda Cero, S.A. (Sole-Shareholder Company) and Canal Media Radio Galicia, S.L. (Sole-Shareholder Company) signed the Common Draft Terms of Merger for the merger with Uniprex, S.A. (Sole-Shareholder Company) (absorbing company), in conformity with Article 49 of Law 3/2009 on structural changes to companies formed under the Spanish Commercial Code, since this merger involved the absorption of wholly-owned investees, given that the absorbing company is the sole shareholder and direct owner of all the share capital of the absorbed companies. 18 The aforementioned Common Draft Terms of Merger, drafted and signed by the sole directors of the companies involved in the merger, was filed at the relevant Mercantile Registries in July 2013. On 18 September 2013, the Parent Atresmedia Corporación de Medios de Comunicación, S.A., sole shareholder of Uniprex, S.A., resolved to approve the merger, whereby Estaciones Radiofónicas de Aragón, S.A. (Sole-Shareholder Company), Ipar Onda, S.A. (Sole-Shareholder Company), Onda Cero, S.A. (Sole-Shareholder Company) and Canal Media Radio Galicia, S.L. (Sole-Shareholder Company) were absorbed by Uniprex, S.A. (Sole-Shareholder Company) and were dissolved without liquidation. It also approved, as the merger balance sheet, the balance sheet at 31 December 2012, the most recent yearend. The absorbing company recognised the assets and liabilities of the absorbed companies in its accounts following criteria based on current consolidation rules, as well as the goodwill arising from the consolidation of these companies. On 5 December 2013, Atresmedia Foto, S.L. was incorporated in which Atresmedia Corporación de Medios de Comunicación, S.A. held a 90% ownership interest. Its company object is the manufacture and sale of photo albums and promotional materials and gifts. On 12 December 2013, the Parent acquired the other 50% of Cordina Planet, S.L., which therefore joined the group of fully consolidated subsidiaries. Other changes not affecting the scope of consolidation in 2013: On 4 July 2013, the Parent subscribed to the capital increase at Hola Televisión América, S.L., amounting to EUR 679 thousand, although this did not give rise to an increase in the ownership interest in this company. Changes in the scope of consolidation and main transactions in 2012: Antena 3 Directo, S.A. (Sole-Shareholder Company), a subsidiary of Atresmedia Corporación de Medios de Comunicación, S.A., was dissolved under a deed of liquidation of 16 December 2011, which was registered at the Mercantile Registry on 20 January 2012. This transaction had an adverse effect of EUR 20 thousand on the consolidated financial statements. On 5 March 2012, VNews Agencia de Noticias, S.L. (Sole-Shareholder Company) sold a 12% ownership interest in Videoreport Canarias, S.A. This transaction gave rise to a gain of EUR 540 thousand in the consolidated financial statements. On the same date, VNews Agencia de Noticias, S.L. (Sole-Shareholder Company) sold a 5% ownership interest in its subsidiary Gestión Audiovisual Canarias, S.L. This transaction did not have a significant effect on the Group's consolidated financial statements. On 14 March 2012, the Parent incorporated Antena 3 Noticias, S.L. (SoleShareholder Company), whose company object is to create audiovisual productions for their broadcast in any media. On 20 July 2012, Atresmedia Corporación de Medios de Comunicación, S.A. sold its full ownership interest in Movierecord Cine, S.A. (Sole-Shareholder Company), on which it recognised a loss of EUR 418 thousand in the Group's consolidated financial statements. 19 The full ownership interest held in VNews Agencia de Noticias, S.L. (SoleShareholder Company) was sold on 30 July 2012. The sale led to the exclusion of the equity-accounted companies Videoreport Canarias, S.A. and Gestión Audiovisual Canarias, S.L. from the Group's scope of consolidation. These companies were 18% and 15% owned, respectively, by VNews Agencia de Noticias, S.L. (Sole-Shareholder Company) at the date of the sale. The sale had an adverse effect of EUR 469 thousand on the consolidated financial statements. In October 2012 Antena 3 Canarias, S.L. (Sole-Shareholder Company) was liquidated by the Parent. This transaction did not have any impact on the consolidated financial statements for 2012. As a result of the merger described in Note 4 to these consolidated financial statements, Publiseis Iniciativas Publicitarias, S.A. (Sole-Shareholder Company) and La Sexta Editorial Musical, S.L. (Sole-Shareholder Company), both subsidiaries of Gestora de Inversiones Audiovisuales La Sexta, S.A., which had merged with Atresmedia Corporación de Medios de Comunicación, S.A., joined the Group on 5 October 2012. At 31 December 2012, Unipublic, S.A. and its subsidiary Organizaciones Deportivas y Culturales Unipublic, S.A. (Sole-Shareholder Company) were classified as held for sale (see Note 8). Other changes not affecting the scope of consolidation in 2012: In January 2012 the Parent subscribed to the capital increase at Cordina Planet, S.L., amounting to EUR 500 thousand, although this did not lead to an increase in the ownership interest in this company. In February 2012 the investments in Antena 3 de Televisión Colombia, S.A. and Canal 3 Televisión de Colombia, S.A. were increased, with a cost of EUR 51 thousand and EUR 4 thousand, respectively, although there was no increase in the percentage of ownership interest in these companies. These investments were acquired for the purpose of participating in the tender for a television channel in Colombia. c) Comparative information The information relating to 2012 contained in these consolidated financial statements is presented solely for comparison purposes with the information relating to the year ended 31 December 2013. In order to improve the presentation of the information in the consolidated balance sheet, the tax items other than income tax were reclassified from “Current Tax Assets” and “Current Tax Liabilities” to “Other Receivables” and “Other Payables”, respectively. Items were also reclassified from “Other Current Liabilities” to “Other Payables”. As a result, the related balances for 2012 were reclassified for comparative purposes. 20 3. Accounting policies The principal accounting policies used in preparing the Group's consolidated financial statements, in accordance with EU-IFRSs, were as follows: a) Goodwill on consolidation Goodwill arising on consolidation represents the excess of the cost of acquisition, plus the non-controlling interests and fair value of any previous investment in the acquiree, over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. The assets and liabilities acquired are measured provisionally at the date on which control of the company is obtained, and the resulting value is reviewed within a maximum period of one year from the acquisition date until the fair value of the assets and liabilities has been calculated definitively. Any difference between the acquisition cost and the fair value of the assets and liabilities acquired will be temporarily recognised as goodwill. Goodwill acquired on or after 1 January 2004 is measured at acquisition cost and that acquired earlier is recognised at the carrying amount at 31 December 2003. In both cases, at the end of each reporting period goodwill is reviewed for impairment (i.e. a reduction in its recoverable amount to below its carrying amount) and, if there is any impairment, the goodwill is written down with a charge to “Impairment and Gains or Losses on Disposals of Non-Current Assets” in the accompanying consolidated income statement. An impairment loss recognised for goodwill must not be reversed in a subsequent period. b) Business combinations Business combinations are accounted for using the acquisition method. The application of the acquisition method requires, as indicated in IFRS 3, Business Combinations, at the acquisition date, the recognition and fair value measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and the recognition and measurement of a gain from a bargain purchase made on very favourable terms. The acquirer shall identify the acquisition date, which is the date on which it obtains control of the acquiree. The cost of a business combination is the sum of the acquisition-date fair value of the consideration transferred, and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer shall measure any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. The costs incurred to issue equity or debt securities given up in exchange for the items acquired are not included in the cost of a business combination. Also, the cost of a business combination does not include the fees paid to legal advisers and other professionals involved in the combination, or any costs incurred internally in this connection. Such amounts are charged directly to the Group's consolidated profit or loss. 21 Any contingent consideration the Group transfers in exchange for the acquiree shall be recognised at the acquisition-date fair value. At the acquisition date, the acquirer shall recognise a gain or goodwill, measured as the excess of the aggregate of the consideration transferred measured at acquisition-date fair value and the amount of any non-controlling interest in the acquiree over the net of the acquisition-date fair value amounts of the identifiable assets acquired and the liabilities assumed. If consideration is lower, the resulting gain shall be recognised in profit or loss. The consideration the acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement. The acquirer shall recognise the acquisition-date fair value of contingent consideration as part of the consideration transferred in exchange for the acquiree. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete, and the provisional amounts may be adjusted in the period required to obtain the necessary information. However, in no case shall the measurement period exceed one year from the acquisition date. The effects of measurement period adjustments are recognised retrospectively against goodwill, and comparative information for prior periods must be revised as needed. Subsequent changes that are not measurement period adjustments to the fair value of the contingent consideration classified as an asset or a liability shall be recognised in accordance with IAS 39, with any resulting gain or loss recognised either in profit or loss or in other comprehensive income, unless the contingent consideration has been classified as equity, in which case it shall not be remeasured and its subsequent settlement shall be accounted for within equity. After initial recognition at cost, goodwill acquired in a business combination is measured at cost less accumulated impairment losses. The impairment tests are performed annually, or more frequently if events or changes in circumstances indicate that the asset may have become impaired. In accordance with IAS 36, goodwill acquired in a business combination is allocated, from the acquisition date, to the cash-generating units of the Group that are expected to benefit from the synergies of the business combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those cash-generating units. The impairment of goodwill is measured as the excess of its carrying amount over the recoverable amount of the cash-generating unit or units with which that goodwill is associated. An impairment loss recognised for goodwill must not be reversed in a subsequent period. 22 c) Other intangible assets Administrative concessions “Administrative Concessions” includes mainly the cost assigned to administrative concessions for radio broadcasting acquired by Uniprex, S.A. (Sole-Shareholder Company). The amount recognised in the accompanying consolidated balance sheet relates to the expenses incurred to directly obtain the concession from the State or from the related public body. This amount is amortised on a straight-line basis over the initial term of the radio licence. Licences and trademarks These accounts include the amounts relating to the licence and the trademark identified in the purchase price allocation process arising from the merger with Gestora de Inversiones Audiovisuales La Sexta, S.A. (see Note 4). The trademark is being amortised on a straight-line basis over its useful life, which is estimated to be 20 years. With regard to the licence, based on an analysis of all the relevant factors, the Group considers that there is no foreseeable limit to the period over which it is expected to generate net cash inflows for the Group. As a result, the licence was classified as an intangible asset with an indefinite useful life and, therefore, it is not amortised. This indefinite useful life assessment is reviewed at each reporting date and is consistent with the related business plans. The Parent has reviewed the licence and trademark valuations identified in the purchase price allocation process performed within the framework of the aforementioned merger. For this review, which included the participation of an independent expert, the standard procedures for analyses of this kind were used, and it was concluded that the assigned values are within reasonable valuation ranges. Consequently, it was not necessary to modify the initial estimates or make any adjustments at 2013 year-end. Since the asset has an indefinite useful life, a recoverability assessment was performed at year-end. The key assumptions on which the cash flow projections are based relate mainly to advertising markets, audience figures, advertising efficiency ratios and the evolution of expenses. Except for advertising, the data of which are measured on the basis of external sources of information, the assumptions are based on past experience and reasonable projections approved by Parent management and updated in accordance with the performance of the advertising markets. Taking the correlation between the advertising market and the evolution of domestic demand and private consumption as a reference, a retrospective analysis was conducted using the historical data of these two variables, based on market consensus. These future projections cover the next five years. The discount rate used to measure this intangible asset was between 9% and 10%. 23 A variation of 0.5% in cumulative annual growth would give rise to a change in value of EUR 9 million, while a 0.5% increase in the discount rate would give rise to a change of EUR 13 million, and a 0.5% decrease in the discount rate would result in a change of EUR 15 million. Zero perpetual growth was used. An increase of 0.5% would give rise to an increase in value of EUR 16 million and a decrease of 0.5% would result in a decrease in value of EUR 14 million. Computer software The acquisition and development costs incurred vis-à-vis third parties in relation to the basic computer systems used in the Group's management are recognised with a charge to “Other Intangible Assets” in the consolidated balance sheet. Computer system maintenance costs are recognised with a charge to the consolidated income statement for the year in which they are incurred. Computer software is amortised on a straight-line basis over a period of between three and five years from the entry into service of each application, on the basis of its estimated useful life. Audiovisual productions “Audiovisual Productions” relates to the costs incurred by the Group in relation to film productions. The carrying amount includes the production costs incurred in relation to the remuneration paid to co-producers and the launch and initial marketing costs. The Group begins to amortise the films from the date of commercial release or from the date on which the rating certificate is obtained. Each film production is amortised on an annual basis over the first commercial cycle of the film, which the Group considers to be four years. Accordingly, at each year-end the amortised percentage until that date is approximately the same as the percentage of the income generated until then with respect to the present value of the estimated total income for that period. The Group recognises the appropriate impairment losses to write down the carrying amounts of these film productions when it is considered necessary based on future marketing expectations. Since the activities relating to the acquisition, production and marketing of audiovisual productions are part of the Group's normal operations, the amortisation charges to consolidated profit or loss are included under “Programme Amortisation and Other Procurements”. Acquisitions of productions are classified as investment activities in the statement of cash flows since the related amounts are recovered over various years. d) Property, plant and equipment Land and buildings acquired for the performance of the Group's business activity or for administrative purposes are stated in the consolidated balance sheet at acquisition or production cost, less any accumulated depreciation and any recognised impairment losses. Replacements or renewals of complete items that lead to a lengthening of the useful life of the assets or to an increase in their economic capacity are recognised as additions to property, plant and equipment, and the items replaced or renewed are derecognised. Periodic maintenance, upkeep and repair expenses are recognised in the income statement on an accrual basis as incurred. 24 Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land on which the buildings and other structures stand has an indefinite useful life and, therefore, is not depreciated. The period property, plant and equipment depreciation charge is recognised in the consolidated income statement using the straight-line method at rates based on the following average years of estimated useful life of the various assets: Years of useful life Buildings Plant Machinery and tools Furniture Computer hardware Transport equipment and other items of property, plant and equipment 33 5 to 8 6 to 10 10 3 to 7 5 to 10 Assets held under finance leases are recognised in the corresponding asset category and are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. Impairment of other intangible assets and property, plant and equipment At each balance sheet date, or whenever there is any indication of impairment of other intangible assets and property, plant and equipment, the Group conducts an impairment test to determine whether the recoverable amount of these assets has been reduced to below their carrying amount. Recoverable amount is the higher of fair value less costs of disposal and value in use. In the case of property, plant and equipment and audiovisual productions, impairment is calculated item by item, on an individual basis. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. Such reversal of an impairment loss is recognised as income. e) Financial assets The financial assets held by the Group are classified in the following categories: a) Loans and receivables: financial assets arising from the sale of goods or the rendering of services in the ordinary course of the Company's business, or financial assets which, not having commercial substance, are not equity instruments or derivatives, have fixed or determinable payments and are not traded in an active market. 25 b) Held-for-trading financial assets: assets acquired with the intention of selling them in the near term and assets that form part of a portfolio for which there is evidence of a recent actual pattern of short-term profit-taking. This category also includes financial derivatives that are not financial guarantees (e.g. suretyships) and that have not been designated as hedging instruments. c) Available-for-sale financial assets: these include debt securities and equity instruments of other companies that are not classified in any of the aforementioned categories. Initial recognition Financial assets are initially recognised at the fair value of the consideration given, plus any directly attributable transaction costs. Subsequent measurement Loans and receivables and held-to-maturity investments are measured at amortised cost. Held-for-trading financial assets are measured at fair value, based on the expected results, the estimated dividend payable, the price per share and the volatility thereof, and the risk-free rate at year-end. The result of these fair value changes is recognised in profit or loss. Lastly, available-for-sale financial assets are measured at fair value and the gains and losses arising from changes in fair value are recognised in equity until the asset is disposed of or it is determined that it has become (permanently) impaired, at which time the cumulative gains or losses previously recognised in equity are recognised in the net profit or loss for the year. In this regard, (permanent) impairment is presumed to exist if the market value of the asset has fallen by more than 40% or if there has been a prolonged fall in market value over a period of 18 months without the value having recovered. At least at each reporting date the Group tests financial assets not measured at fair value through profit or loss (accounts receivable) for impairment. Objective evidence of impairment is considered to exist when the recoverable amount of the financial asset is lower than its carrying amount. When this occurs, the impairment loss is recognised in the consolidated income statement. In calculating such valuation adjustments as might be required for trade and other receivables, the Group takes into account the date on which the receivables are due to be settled and the equity position of related debtors. f) Programme rights Programme rights are measured, based on their nature, as follows: 1. Inventoriable in-house productions (programmes produced to be re-run, such as fiction series) are measured at acquisition and/or production cost, which includes both external costs billed by third parties for programme production and for the acquisition of resources, and internal production costs, which are calculated by applying preestablished internal rates on the basis of the time during which operating resources are used in production. The costs incurred in producing the programmes are recognised, based on their nature, under the appropriate headings in the consolidated 26 income statement and are included under “Programme Rights” in the consolidated balance sheet with a credit to “Additions to Programme Rights” under “Programme Amortisation and Other Procurements” in the accompanying consolidated income statement. Amortisation of these programmes is recognised under “Programme Amortisation and Other Procurements” in the consolidated income statement, on the basis of the number of showings, at the rates shown below: Amortisation rate 1st showing 90% 2nd showing 10% The maximum period for the amortisation of series is three years, after which the unamortised amount is written off. Given their special nature, the series which are broadcast daily are amortised in full when the first showing of each episode is broadcast. 2. Non-inventoriable in-house productions (programmes produced to be shown only once) are measured using the same methods and procedures as those used to measure inventoriable in-house productions. Programmes produced and not shown are recognised at year-end under “Programme Rights - In-House Productions and Productions in Process” in the consolidated balance sheet. The cost of these programmes is recognised as an expense under “Programme Amortisation and Other Procurements” in the consolidated income statement at the time of the first showing. 3. Rights on external productions (films, series and other similar productions) are measured at acquisition cost. These rights are deemed to have been acquired when the term of the right commences for the Group. When payments to external production distributors are made in foreign currency, these rights are recognised in the consolidated balance sheet by applying to the foreign currency amount the spot exchange rate prevailing when the term of the right commences. Also, the initial value of all the external productions acquired by the Group for which derivative instruments designated as cash flow hedges pursuant to IAS 39 were arranged in order to hedge foreign currency risk includes: the portion of the cumulative gain or loss recognised in equity (effective hedge) on the hedging instrument at the beginning of the term of the right. for payments made prior to the commencement of the term of the right, the accumulated exchange gains or losses on that date. The amortisation of the rights is recognised under “Programme Amortisation and Other Procurements” in the consolidated income statement, on the basis of the number of showings, at the rates shown below, which are established on the basis of the number of showings contracted: 27 FILMS 1 2 3 or more 50% 1st showing 100% 50% 2nd showing - 50% 30% 3rd showing - - 20% SERIES 4. Number of showings contracted Number of showings contracted 1 2 or more 1st showing 100% 50% 2nd showing - 50% Live broadcasting rights are measured at cost. The cost of these rights is recognised as an expense under “Programme Amortisation and Other Procurements” in the consolidated income statement at the time of broadcast of the event on which the rights were acquired. Advances on purchases of rights Payments made to external production distributors prior to the commencement of the term of the rights are recognised under “Programme Rights - Advances on Purchases of Rights” in the consolidated balance sheet and if such payments are in foreign currency they are translated to euros at the year-end exchange rate. Write-downs The Group recognises write-downs to reduce the unamortised value of in-house productions and of the rights on external productions which it considers will not be shown. When these rights expire, the valuation adjustments are recognised in profit or loss when the cost of the rights is derecognised. Classification of programme rights In accordance with standard practice in the industry in which the corporate Group operates, programme rights are classified as current assets and the portion that is amortised over more than one year is detailed in Note 10. g) Non-current assets and liabilities classified as held for sale and discontinued operations The Group classifies under this heading in the consolidated balance sheet the non-current assets and disposal groups whose carrying amount is expected to be recovered through a sale transaction or liquidation rather than through continued use. The non-current assets of discontinued operations are recognised at the lower of carrying amount and market value. The non-current liabilities of discontinued operations include the fair value of the liabilities associated with the aforementioned assets which are expected to be settled at short term. 28 At 2012 year-end, Unipublic, S.A. and its subsidiary Organizaciones Deportivas y Culturales Unipublic, S.A.U. were classified as held for sale. In 2013 the aforementioned investments were sold, although this did not have any impact on the consolidated income statement. h) Classification of financial assets and liabilities as current or non-current In the accompanying consolidated balance sheet, financial assets and liabilities are classified on the basis of the time in which it is estimated that they will be realised or settled, i.e. financial assets and liabilities that are expected to be realised or settled over the course of the company's normal business cycle or within no more than 12 months are classified as current items, and those which do not meet these requirements are classified as non-current items. Deferred tax assets and liabilities are classified as non-current regardless of when they are expected to be realised or settled. i) Hedging derivatives All the derivatives held by the Group at 31 December 2013 were OTC derivatives, whose prices are not quoted on organised futures and options markets and, therefore, it is necessary to apply generally accepted valuation techniques, based on objective market data, used in the measurement of financial instruments of this nature. Foreign currency hedging contracts are valued using the spot exchange rate and the forward interest rate curves of the related currencies. The “market” foreign currency hedge is calculated at year-end and is compared with the price of the foreign currency hedge arranged. Foreign exchange hedges The derivative financial instruments held by the Group companies are basically cash flow hedges arranged to mitigate the exposure of the cash flows associated with external production rights to fluctuations in the US dollar/euro exchange rate. Hedging instruments are recognised in the consolidated balance sheet at fair value and the changes therein are recognised directly in equity, for the effective portion, as provided for in IAS 39. When the term of the broadcasting rights designated as a hedged item commences, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset and from then on any change in the fair value of the hedging instrument is recognised directly in profit or loss for the year. The corporate Group periodically tests the effectiveness of the outstanding hedges and the ineffective portion is recognised immediately under financial profit or loss in the consolidated income statement. If a hedged transaction is no longer expected to occur, or no longer qualifies for hedge accounting, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the year. 29 The Group has established the policy of categorising its assets and liabilities at fair value in the different measurement hierarchy levels, on the basis of the availability of observable market data, and only transfers items between levels when such inputs are not available. In 2013 no transfers were made between the fair value hierarchy levels corresponding to the Group's financial instruments. j) Treasury shares All the treasury shares of the Parent at 31 December 2013 represented 7.01% of the issued share capital at that date (the treasury share transactions performed in 2013 and 2012 are summarised in Note 12-e). The amount relating to these treasury shares is recognised as a reduction of equity. Acquisitions or sales of treasury shares (see Note 12-e) are charged or credited to equity at the amount paid or received, respectively, and, therefore, the gains or losses arising from these transactions are not reflected in the income statement but are recognised as an addition to or a reduction of equity, respectively. k) Bank borrowings Interest-bearing bank loans, credit facilities and overdrafts are recorded at the amount received. Borrowing costs are recognised in the consolidated income statement on an accrual basis using the effective interest method and are added to the carrying amount of the liability to the extent that they are not settled in the period in which they arise. l) Termination benefits Under current employment legislation, the Group companies are required to pay termination benefits to employees terminated under certain conditions. The Parent’s directors do not expect any liabilities to arise other than those already recognised in this connection. m) Provisions The present obligations arising from past events which could give rise to a loss for the Group which is uncertain as to its amount and timing are recognised as provisions in the consolidated balance sheet at the present value of the most probable amount that it is considered the Group will have to disburse to settle the obligation. Provisions are quantified taking into consideration the best information available at the date of preparation of the consolidated financial statements on the consequences of the event giving rise to them and are reestimated at the end of each year. 30 n) Revenue and expense recognition Revenue and expenses are recognised on an accrual basis. Revenue is measured at the fair value of the consideration received or receivable and represents the value of the goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. The Group companies basically obtain revenue from the sale of advertising space; this revenue is recognised in the consolidated income statement when the related advertising spot is broadcast. o) Income taxes; deferred taxes The current income tax expense is calculated by aggregating the current tax arising from the application of the tax rate to the taxable profit (tax loss) for the year, after deducting the tax credits allowable for tax purposes, plus the change in deferred tax assets and liabilities. In general, deferred tax liabilities are recognised for all taxable temporary differences, whereas deferred tax assets (including those relating to temporary differences and tax loss and tax credit carryforwards) are only recognised to the extent that it is considered probable that the consolidated companies will have sufficient taxable profits in the future against which the deferred tax assets can be utilised. Deferred tax assets and liabilities are calculated by applying the tax rates that are expected to apply in the period when the asset is realised or the liability is settled. The current rate is 30% for 2013 and subsequent years. In 2001 the Group began to file consolidated tax returns. Atresmedia Corporación de Medios de Comunicación, S.A. is the Parent of this consolidated tax group (see Note 22). p) Foreign currency transactions The functional currency of the Parent and its investees is the euro. Therefore, transactions in currencies other than the euro are deemed to be “foreign currency transactions” and are recognised by applying the exchange rates prevailing at the date of the transaction. q) Consolidated statements of cash flows The following terms are used in the consolidated statements of cash flows with the meanings specified: Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value. Operating activities: the principal revenue-producing activities of the Company and other activities that are not investing or financing activities. Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. 31 Financing activities: activities that result in changes in the size and composition of equity and borrowings that are not operating activities. r) Earnings per share Basic earnings per share are calculated by dividing the net profit attributable to the Parent by the weighted average number of ordinary shares outstanding during the year, excluding the number of shares of the Parent held by the Group. The Group has not carried out transactions of any kind that have led to diluted earnings per share differing from basic earnings per share (see Note 24). s) Dividends At the Annual General Meeting held on 24 April 2013, the shareholders of the Parent approved the proposed distribution of profit for 2012 and ratified the resolutions that were adopted in this connection by the Board of Directors of the Parent and by its Executive Committee, at their meetings held on 28 November and 11 December 2012, respectively. Consequently, the 2012 gross dividend was eleven euro cents (EUR 0.11) for each of the 194,112,800 shares (with a par value of EUR 0.75) entitled to receive it. Since the dividend was paid out of the profit generated by the Parent up to 31 October 2012, in conformity with the draft terms for the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. (“La Sexta”) into Atresmedia Corporación de Medios de Comunicación, S.A., the shares delivered to the La Sexta shareholders were not entitled to receive this dividend, because the dividends were paid out of profit generated by Atresmedia Corporación de Medios de Comunicación, S.A. prior to the date on which the merger was registered at the Madrid Mercantile Registry. Pursuant to the provisions of Article 148 of the Spanish Limited Liability Companies Law, the dividend rights inherent to treasury shares are attributed proportionately to the other shares that are eligible to receive the dividend. This dividend, which was paid to the shareholders as an interim dividend on 20 December 2012, totalled EUR 21,352 thousand. 4. Business combinations Description of the merger transaction in 2012 On 14 December 2011, following a resolution by its Board of Directors, Atresmedia Corporación de Medios de Comunicación, S.A. (Atresmedia) entered into an agreement with Gestora de Inversiones Audiovisuales La Sexta S.A. (La Sexta) and its shareholders (GAMP Audiovisual S.A., Grupo Televisa S.A.B. and Gala Desarrollos Comerciales S.L., as well as Imagina Media Audiovisual S.L.), to integrate the two television companies through a merger by absorption of La Sexta into Atresmedia. 32 La Sexta engages mainly in the management of a licence to provide audiovisual communication services, for a period of 15 years, pursuant to a resolution adopted by the Spanish Cabinet on 11 June 2010. On 25 January 2012, the members of the Boards of Directors of Atresmedia Corporación de Medios de Comunicación, S.A. and Gestora de Inversiones Audiovisuales La Sexta, S.A. signed the draft terms of merger in accordance with Articles 30, 31 and related provisions of Law 3/2009, of 3 April, on structural changes to companies, in order to merge their respective businesses through a merger transaction. The draft terms of merger were filed at the Madrid Mercantile Registry on 7 February 2012 and published in the Official Gazette of the Mercantile Registry (BORME) on 17 February 2012. The draft terms for the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. into Atresmedia Corporación de Medios de Comunicación, S.A. were approved at the Annual General Meeting of the absorbing company and at the Universal Extraordinary General Meeting of the absorbed company on 25 April 2012. On 24 August 2012, the Spanish Cabinet approved the business combination on the grounds of general interest, but making the approval conditional upon the fulfilment of certain conditions which modify some of those included in the resolution of the Spanish Anti-Trust Commission, of 13 July 2012. On 5 October 2012, the Spanish Cabinet also authorised the transfer of La Sexta's audiovisual communication licence and the assignment for private use of the associated radioelectric public domain; thus, the last administrative authorisation established in the draft terms of merger as a condition precedent for the completion of the transaction was obtained. On this same date, effective control of La Sexta was obtained and, therefore, 5 October 2012 is taken to be the acquisition date, from which time onwards La Sexta's operations are considered to be performed for accounting purposes by Atresmedia. On 29 October 2012, the merger resolutions adopted by Atresmedia Corporación de Medios de Comunicación, S.A., as the absorbing company, and Gestora de Inversiones Audiovisuales La Sexta, S.A., as the absorbed company, at their respective General Meetings on 25 April 2012, were executed in public deeds, as a result of which the draft terms of merger were fully approved. As a result, Atresmedia Corporación de Medios de Comunicación, S.A. acquired by universal succession all the assets and liabilities of Gestora de Inversiones Audiovisuales La Sexta, S.A. with the concomitant dissolution of the latter. Following the merger resolution approved by the shareholders at the General Meetings of the two companies and the filing of the merger deed at the Madrid Mercantile Registry on 31 October 2012, the shareholders of La Sexta received, as consideration for the assets and liabilities of this company, 15,801,296 shares of Atresmedia Corporación de Medios de Comunicación, S.A., which represent 7% of its share capital. For the purposes of the share exchange, Atresmedia Corporación de Medios de Comunicación, S.A. increased its share capital through the issue of 14,620,000 new shares (of which 13,438,704 were ordinary shares and a further 1,181,296 were shares with no dividend rights for a period of two years from the date on which the merger became effective), while the remaining shares corresponding to the shareholders of La Sexta were delivered with a charge to the treasury shares of Atresmedia Corporación de Medios de Comunicación, S.A. (see Note 12). 33 Also, within the framework of the merger agreement, the parties resolved to grant the shareholders of La Sexta an additional fixed ownership interest of 15,818,704 shares of Atresmedia Corporación de Medios de Comunicación, S.A., representing 7% of its share capital, the delivery of which is conditional upon the fulfilment in 2012, 2013, 2014, 2015 and 2016 of certain objectives relating to the consolidated earnings of Atresmedia. The delivery of these additional shares will be carried out in full by way of treasury shares of Atresmedia Corporación de Medios de Comunicación, S.A., to the extent that the related objectives are met and, in any case, these shares will be delivered no later than in 2017. The main advantage and economic benefit of this transaction is the synergy achieved, with an extended range of contents, greater efficiency in the use of Group resources and increased advertising efficiency. On 19 February 2014, the Parent entered into a partial novation of this agreement, modifying the content thereof with respect to two of the three former shareholders of La Sexta (see Note 28). Consideration transferred The consideration for the business combination was estimated as: i) the fair value (at the date of the combination) of the shares delivered to the shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. (a total of 15,801,296 shares representing 7% of the Parent's share capital, delivered as a result of the capital increase described in Note 12-a, the fair value being the share price at the 5 October 2012 close), and ii) the fair value of the shares subject to deferred delivery, calculated on the basis of the forward price of Atresmedia Corporación de Medios de Comunicación, S.A. shares, taking into account a 0.90% IRS rate and management's estimate of the profit for 2012 to 2016, in order to estimate the delivery date. The fair value of the consideration transferred in the business combination amounted to EUR 95,893 thousand. The breakdown of this amount is as follows: Thousands of euros 7% ownership interest in the share capital 53,250 Deferred delivery of shares (additional 7%) 42,643 Total consideration transferred 95,893 In order to enable the shareholders of La Sexta to receive a number of Atresmedia Corporación de Medios de Comunicación, S.A. shares that is proportional to their respective ownership interests in La Sexta, the Parent increased its share capital through the creation of newly issued shares and the delivery of treasury shares. Also, Atresmedia agreed to grant La Sexta shareholders an additional ownership interest of 15,818,704 Atresmedia shares representing 7% of its share capital, although the delivery thereof is conditional upon Atresmedia's consolidated earnings from 2012 to 2016. The delivery of these additional shares will be carried out in full through treasury shares of the Parent and, therefore, does not constitute an additional issue. On 19 February 2014, the Parent entered into a partial novation of this agreement, modifying the content thereof with respect to two of the three former shareholders of La Sexta (see Note 28). 34 Assets acquired and liabilities assumed at the acquisition date The acquisition-date fair values of the assets and liabilities of Gestora de Inversiones Audiovisuales La Sexta, S.A. were as follows: Thousands of euros Current assets: Inventories Trade receivables Investments in Group companies Current financial assets Current prepayments and accrued income Cash and cash equivalents Non-current assets: Intangible assets Property, plant and equipment Investments in Group companies and associates Non-current financial assets Deferred tax assets (*) Non-current trade receivables Current liabilities: Short-term provisions Current payables Current payables to Group companies and associates Trade payables Non-current liabilities: Deferred tax liabilities (*) Non-current payables to Group companies and associates Total fair value of net identifiable assets acquired 62,718 21,790 24,787 13,331 696 184 1,930 365,847 105,111 615 9,445 8,926 241,596 154 (213,282) (14,079) (6) (22,879) (176,318) (99,854) (31,319) (68,535) 115,429 (*) Under current accounting legislation, deferred tax assets and liabilities recognised in a business combination are not measured at fair value, but rather at their nominal amount. The gross contractual amount receivable in relation to the accounts receivable acquired, which related in full to trade receivables and were recognised at their fair value of EUR 24,787 thousand, is EUR 24,795 thousand. The detail, by year of acquisition, of the intangible assets and property, plant and equipment included as a result of the merger (excluding the licence and trademark) is as follows (in thousands of euros): 35 2006 Intangible assets Computer software Property, plant and equipment Plant Furniture Computer hardware 2007 2008 2009 2010 2011 2012 Total - - - 1 54 460 201 716 716 4 293 - 15 - 20 6 - 29 2 28 20 76 22 89 11 53 358 204 615 Gain from a bargain purchase arising from the business combination The following gain from a bargain purchase arose from this business combination: Thousands of euros Consideration transferred 95,893 Less- fair value of the net assets acquired (115,429) Gain from a bargain purchase arising from the business combination (19,536) In the aforementioned business combination, the cost of the business combination was EUR 19,536 thousand lower than the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Therefore, as provided for in the recognition and measurement bases, this amount was recognised as income under “Gains on Bargain Purchases Arising on Business Combinations” in the 2012 consolidated income statement. Assets not reflected in the accounting records of Gestora de Inversiones Audiovisuales La Sexta, S.A. were included (i.e. the “La Sexta” trademark and the audiovisual communication licence granted). The fair value of the licence was calculated on the basis of its capacity to generate income with an indefinite useful life using the discounted cash flow method. The royalty relief method was used to calculate the fair value of the trademark, considering a useful life of 20 years. At 2012 year-end, the allocation of the fair values of the assets acquired and liabilities assumed, in particular of trademarks and licences, was subject to possible adjustments within one year from the acquisition date, as required by accounting legislation. The purpose of these adjustments is to reflect, in general, any additional information obtained during the aforementioned measurement period, and, in the Company's particular case, the information referring to the Spanish Supreme Court judgment of 27 November 2012 relating to the assignment of digital multiplexes with national coverage. Once this period had elapsed and following a review by the Parent, based on a report by an independent expert, of the values initially assigned to the aforementioned assets (using various widely accepted valuation methods for this purpose), there was no change in those values. Had the business combination been performed at the beginning of 2012, revenue would have amounted to EUR 828,475 thousand in 2012 and a loss of EUR 22,008 thousand would have been incurred in that year. 36 After integration of the merged entity at the acquisition date, and in view of the fact that it was not possible to extract separate information on the revenue and net profit or loss attributable to the business combination, this information was not included. The directors consider that these pro forma figures represented a reasonable approximation of the annual performance of the new merged entity and an initial point of reference for comparison in future years. In order to determine these pro forma revenue and profit or loss figures, management of the Parent took into account non-current asset depreciation and amortisation calculated on the basis of the acquisition-date fair values and borrowing costs calculated on the basis of the situation of the debt after the date of the business combination. Lastly, it should be noted that fees paid to legal advisers and other professionals involved in the transaction amounted to EUR 3,428 thousand, of which EUR 2,131 thousand relate to 2012, and are recognised under “Other Operating Expenses” in the consolidated income statement. 5. Goodwill The changes in “Goodwill” in the consolidated balance sheets in 2013 and 2012 were as follows: Thousands of euros Balance at Additions/ Balance at Additions/ Balance at Impairment Transfers 31/12/11 Disposals 31/12/12 Disposals 31/12/13 TELEVISION BUSINESS: VNews Agencia de Noticias, S.L.U. 475 (475) - - - - - 172,950 - (25,392) 147,558 - 555 148,113 1,899 - - 1,899 - - 1,899 Canal Media Radio Galicia, S.A.U. 295 - - 295 - (295) - Ipar Onda, S.A.U. 260 - - 260 - (260) - RADIO BUSINESS: Uniprex, S.A.U. Canal Media Radio, S.L.U. OTHER BUSINESSES: Cordina Planet, S.L.U. TOTAL - - - - 3,181 - 3,181 175,879 (475) (25,392) 150,012 3,181 - 153,193 The change in the goodwill of the Radio business in 2013 is due to the merger by absorption into the Group company Uniprex, S.A. (Sole-Shareholder Company) of several of its subsidiaries, as described in Note 2-b on changes in the scope of consolidation. Also, the Parent's acquisition of control over Cordina Planet, S.L.U. gave rise to goodwill of EUR 3,181 thousand (see Note 2-b). The Group periodically assesses the recoverability of the goodwill described in the foregoing table, considering the cash-generating units on the basis of the business activities of its subsidiaries, which at year-end were the radio business and other businesses. 37 The Group uses the strategic plans of the various businesses to calculate any possible impairment losses and discounts expected future cash flows. The Group prepares the various projections individually, taking into account the expected future cash flows of each cashgenerating unit. For the radio cash-generating unit (which coincides with the radio segment), the key assumptions on which the cash flow projections are based relate mainly to advertising markets, audience figures, advertising efficiency ratios and cost forecasts. Except for advertising, which is measured on the basis of external sources of information, the data assumptions are based on past experience and reasonable projections approved by management of the Parent and updated in accordance with the performance of the advertising markets. These future projections cover the next five years. The cash flows for the years not considered in the projections are estimated to be perpetual, with growth of 0%. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. In order to calculate the rate, the current time value of money and the risk premiums generally used by analysts for the business and geographical area (Spain) are taken into account, giving rise to future discount rates of 9%-10% in 2012 and 2013. Based on the methods used and the estimates, projections and valuations of value in use available to the Parent's directors, at the date of presentation of these consolidated financial statements, it was determined that the goodwill recognised by the Group represents its recoverable amount and, therefore, it was not necessary to recognise any impairment losses. In 2012 an impairment loss of EUR 25,392 thousand was calculated on the goodwill relating to the Radio cash-generating unit, the impact of which was recognised under “Impairment and Gains or Losses on Disposals of Non-Current Assets” in the consolidated income statement. This impairment loss arose as a result of the accelerated decline of the advertising market in 2013, placing it, in nominal terms, at the levels of 1998/1999. The Group also performs sensitivity analyses when there are reasonably possible changes in the key assumptions used to calculate the recoverable amount of the radio cash-generating unit. In this respect, the sensitivity analyses are prepared under various scenarios on the basis of the variables deemed most significant, i.e. advertising revenue, which depends mainly on the performance of the advertising market and the investment share, and the discount rate. The most sensitive variable is the growth of the radio advertising market, for which cumulative annual growth of 2.4% was used for the projection period, which is in line with a moderate recovery over the next few years. A variation of 0.5% would give rise to a change in value of EUR 12 million. Similarly, a variation of 0.5% in the discount rate would give rise to a change of EUR 8 million. Zero perpetual growth was used. An increase of 0.5% would give rise to an increase in value of EUR 6 million. 38 6. Other intangible assets The breakdown of the balances and transactions recognised under “Other Intangible Assets” in the consolidated balance sheets in 2013 and 2012 is as follows: Thousands of euros Additions or charge for the year Balance at 01/01/13 Disposals or reductions Additions/dis posals due to Balance at Transfers changes in 31/12/13 the scope of consolidation Cost: Administrative concessions 40,802 - - 180 - 40,982 Licences 82,804 - - - - 82,804 Trademarks 21,591 - - - - 21,591 1,096 - - 112 - 1,208 42,306 - - 2,333 156 44,795 190,542 2,228 - 12,336 - 205,106 647 - - - 923 1,570 14,283 16,850 - (15,329) - 15,804 394,071 19,078 - (368) 1,079 413,860 Intellectual property Computer software Audiovisual productions Other intangible assets Intangible assets in progress Accumulated amortisation: Administrative concessions (39,290) (912) - - - (40,202) Trademarks (270) (1,080) - - - (1,350) Intellectual property (807) (133) - - - (940) (35,562) (3,138) - 16 (191) (38,876) (162,120) (11,565) - (7,490) - (181,175) (647) - - - (61) (708) (238,696) (16,828) - (7,474) (252) (263,250 (14,555) (645) - 7,490 (215) (7,925) 140,820 1,605 - (353) 612 142,685 Computer software Audiovisual productions Other intangible assets Net impairment losses: Total Thousands of euros Inclusions Additions or due to charge for merger the year (Note 4) Balance at 01/01/12 Disposals or reductions Additions/ disposals due Balance at to changes in 31/12/12 the scope of consolidation Transfers Cost: Administrative concessions 40,802 - - - - - 40,802 Licences - 82,804 - - - - 82,804 Trademarks - 21,591 - - - - 21,591 - - - (10) 1,096 2,555 - - (188) 42,306 857 (138) 7,797 - 190,542 Intellectual property Computer software Audiovisual productions Other intangible assets Intangible assets in progress 1,106 39,223 716 182,026 - 647 - 8,474 - - - - - 647 13,606 - (7,797) - 14,283 272,278 105,111 17,018 (138) - (198) 394,071 (38,276) - (1,014) - - - (39,290) (270) - - - (270) Accumulated amortisation: Administrative concessions Trademarks Intellectual property Computer software Audiovisual productions Other intangible assets Net impairment losses: Total (672) - (139) - - 4 (807) (33,224) - (2,518) - - 180 (35,562) (138,049) - (14,948) - (9,123) - (162,120) (647) - - - - - (647) (210,868) - (18,889) - (9,123) 184 (238,696 (23,257) - (421) - 9,123 - (14,555) 38,153 105,111 (2,292) (138) - (14) 140,820 39 Fully amortised intangible assets in use and in progress at 31 December 2013 amounted to EUR 183,744 thousand (31 December 2012: EUR 151,715 thousand). The impairment of intangible assets amounting to EUR 645 thousand in 2013 (2012: EUR 421 thousand) relates to the impairment of audiovisual cinema productions detected as a result of analysing the recoverability of the related investment through a case-by-case analysis of the value in use of each film. This analysis takes into account up-to-date estimates of the income produced in each of the commercial exploitation windows and, if necessary, an impairment loss is recognised under “Programme Amortisation and Other Procurements” since the impairment relates to cinema productions shown on television channels. 7. Property, plant and equipment The breakdown of the balances and transactions recognised under “Property, Plant and Equipment” in the consolidated balance sheets in 2013 and 2012 is as follows: Thousands of euros Additions/ Additions disposals due Balance at Disposals or or charge Transfers to changes in 01/01/13 reductions for the year the scope of consolidation Balance at 31/12/13 Cost: Land and buildings 65,865 - (569) 202 - 65,498 Plant and machinery 89,563 - (4,743) 4,507 - 89,327 Other fixtures and tools 52,627 - (612) 658 - 52,673 Furniture 13,124 149 (368) 329 - 13,234 Computer hardware 35,897 - (1,736) 1,330 270 35,761 2,358 - (40) - 1 2,319 990 5,925 - (6,660) - 255 260,424 6,074 (8,068) 366 271 259,067 Land and buildings (31,886) (1,938) 569 - - (33,255) Plant and machinery (76,271) (5,309) 4,735 - - (76,845) Other fixtures and tools (47,314) (1,798) 592 (5) - (48,525) Furniture (11,877) (623) 366 (8) - (12,142) Computer hardware (30,772) (2,237) 1,731 - (118) (31,396) (2,203) (79) 40 - - (2,242) (200,323) (11,984) 8,033 (13) (118) (204,405) (2,687) - - - - (2,687) 57,414 (5,910) (35) 353 153 51,975 Transport equipment and other items of property, plant and equipment Property, plant and equipment in the course of construction Accumulated depreciation: Transport equipment and other items of property, plant and equipment Net impairment losses: Total 40 Thousands of euros Inclusions Additions Disposals or Balance at due to Transfers or charge reductions 01/01/12 merger for the year (Note 4) Additions/ disposals due to changes in the scope of consolidation Balance at 31/12/12 Cost: Land and buildings 65,749 - - (49) 165 - 65,865 Plant and machinery 89,420 53 - (2,400) 3,021 (531) 89,563 Other fixtures and tools 51,753 - - (60) 1,115 (181) 52,627 Furniture 12,876 358 - (184) 103 (29) 13,124 Computer hardware 36,014 204 - (1,575) 1,473 (219) 35,897 2,362 - - - - (4) 2,358 178 - 6,660 - (5,877) 29 990 258,352 615 6,660 (4,268) - (935) 260,424 Land and buildings (29,860) - (2,066) 40 - - (31,886) Plant and machinery (73,665) - (5,503) 2,418 - 479 (76,271) Other fixtures and tools (45,501) - (2,047) 52 - 182 (47,314) Furniture (11,546) - (539) 182 - 26 (11,877) Computer hardware (30,104) - (2,436) 1,572 - 196 (30,772) (2,094) - (113) - - 4 (2,203) (192,770) - (12,704) 4,264 (2,687) - 62,895 615 Transport equipment and other items of property, plant and equipment Property, plant and equipment in the course of construction Accumulated depreciation: Transport equipment and other items of property, plant and equipment Net impairment losses: Total (6,044) (4) - 887 (200,323) - - (2,687) - (48) 57,414 At 31 December 2013, fully depreciated property, plant and equipment amounted to EUR 152,544 thousand (2012: EUR 143,939 thousand). The Group does not have any temporarily idle items. The Group has taken out insurance policies to cover the possible risks to which its property, plant and equipment are subject and the claims that might be filed against it for carrying on its business activities. These policies are considered to adequately cover the related risks. 8. Investments accounted for using the equity method The changes in the investments accounted for using the equity method in 2013 and 2012 were as follows: Balance at Changes in Additions Disposals the scope of or charge or Transfers 01/01/13 consolidation for the year reductions 31/12/13 Balance at Thousands of euros Investments accounted for using the equity method I3 Televisión, S.L.U. 86 - 44 - - Cordina Planet, S.L. - - - (912) 912 - Hola TV América, S.L. - - 478 (126) - 352 Atlantis Global Solutions, S.L. - 112 - (48) - 64 86 112 522 (1,086) 912 546 Investments accounted for using the equity method 130 41 Thousands of euros Additions Disposals Balance at Balance at Changes in the scope of or charge or Transfers 01/01/12 consolidation for the year reductions 31/12/12 Investments accounted for using the equity method Unipublic, S.A. (*) (2,000) 3,359 - 126 (1,485) 437 - - (437) - - 90 - - (4) - 86 1,509 (1,509) - - - - 35 (35) - - - - Antena 3 de Televisión Colombia, S.A. 287 - 85 (372) - - Canal 3 Televisión de Colombia, S.A. 297 - 54 (351) - - 3 - 500 (503) - - 16 - - (16) - - 6,033 (1,544) 765 (3,168) (2,000) 86 Organizaciones Deportivas y Culturales de Unipublic, S.A. I3 Televisión, S.L.U. Videoreport Canarias, S.A. (*) Gestión Audiovisual de Canarias, S.L. Cordina Planet, S.L. Hola TV América, S.L. Investments accounted for using the equity method - (*) Audited companies In February 2013 Antena 3 de Televisión Colombia, S.A. and Canal 3 Televisión Colombia, S.A. were liquidated. This transaction did not have any impact on the consolidated financial statements. As discussed in Note 2-b in the section on changes in the scope of consolidation, in December 2013 Cordina Planet, S.L. changed from being accounted for using the equity method to being a fully consolidated subsidiary of the Group. At 31 December 2012, Unipublic, S.A. and its subsidiary Organizaciones Deportivas y Culturales de Unipublic, S.A. (Sole-Shareholder Company) were transferred to “Non-Current Assets Held for Sale”. The decrease in value of the investments in the two companies was a result of their remeasurement at fair value at 2012 year-end, the impact of which on the consolidated income statement was recognised under “Gains (Losses) on Disposals of Financial Assets”. In April 2013 the agreement to reduce the share capital of Unipublic, S.A. was executed in a public deed and the company was effectively excluded from the consolidated Group, although this did not have any impact on these consolidated financial statements. None of the Group's investees are listed on Spanish or foreign stock exchanges. The detail of the main financial aggregates of the companies accounted for using the equity method for 2013 and 2012 is as follows: 2013 Thousands of euros Assets Equity Liabilities Profit (Loss) Income I3 Televisión, S.L. 3,156 261 2,896 6,821 26 Hola TV América, S.L. 3,222 702 2,520 - (253) 142 83 59 - (145) Atlantis Global Solutions, S.L. 42 2012 Thousands of euros Assets Equity Liabilities Income Loss I3 Televisión, S.L. 2,399 171 2,228 6,812 (9) Cordina Planet, S.L. 1,533 (857) 2,390 120 (1,859) Hola TV América, S.L. 150 (472) 621 - (489) Antena 3 de Televisión Colombia, S.A. 39 39 - - (10) Canal 3 Televisión de Colombia, S.A. 64 61 3 - (95) 9. Financial assets and other non-current assets The detail of “Non-Current Financial Assets” and “Derivative Financial Instruments” in the consolidated balance sheets at 31 December 2013 and 2012 is as follows: Non-current financial instruments Thousands of euros Equity instruments 2013 Loans and receivables Loans, derivatives and other 2012 2013 Total 2012 2013 2012 - - 297 9,694 297 9,694 Available-for-sale financial assets 1,472 3,358 - - 1,472 3,358 Non-current financial assets 1,472 3,358 297 9,694 1,769 13,052 - - 9,413 7,402 9,413 7,402 - - 9,413 7,402 9,413 7,402 1,472 3,358 9,710 17,096 11,182 20,454 Other derivatives Derivative financial instruments Total “Non-Current Financial Assets - Available-For-Sale Financial Assets” includes non-current financial investments in the equity instruments of companies over which the Group does not exercise significant influence either because its ownership interest is below 20% or because it does not participate in the setting of financial or commercial policies. At 2013 year-end, the balance of this item related to the 45% ownership interest in El Armario de la Tele, S.L., measured at the cost incurred; the Group's 15% ownership interest in Audiovisual Española 2000, S.A. was fully impaired. The impact of this impairment was included under “Impairment of Financial Assets” in the consolidated income statement. At 2012 year-end, “Loans and Receivables” included EUR 8,840 thousand relating to the amount deposited in connection with the appeal filed by La Sexta against assessments issued by the tax authorities relating to the levy on games. At 2013 year-end, this amount had been transferred to “Current Assets”. In relation to “Other Derivatives”, in December 2012 the Parent entered into several agreements with the former shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A., including one whereby, in exchange for a fixed market consideration determined at the date of the agreement and deliverable by Atresmedia Corporación de Medios de Comunicación, S.A. (premium), the aforementioned counterparty undertook to pay the Parent a variable cash amount to be determined on the basis of the future economic results of Atresmedia and payable in 2017. This agreement was amended in February 2014 (see Note 28). 43 At 2013 year-end, the balance of “Other Derivatives” represented the fair value (Level 2) of the financial instrument at that date. The positive impact thereof amounted to EUR 2,011 thousand and was included under “Net Gain (Loss) due to Changes in the Value of Financial Instruments at Fair Value” in the consolidated income statement. The market variables that influence the value of this asset are the market price of the Parent's share, its volatility and its dividend yield. The Group's estimated results also have an influence. The market price and historical volatility at 31 December 2013 were used to measure the value of the asset at that date, and the market consensus at year-end and credit risk (due to application of IFRS 13) were used to estimate results and the dividend yield. 10. Programme rights The detail of “Programme Rights” is as follows: Thousands of euros 2013 2012 Programme rights, net Rights on external productions In-house productions and productions in process Sports broadcasting rights Write-down of external productions Advances to suppliers Total 242,329 178,050 36,456 43,876 3,460 3,214 (33,755) (19,516) 248,490 205,624 31,543 33,353 280,033 238,977 At 31 December 2013, the Parent had commitments, mainly for the purchase of audiovisual property rights, amounting to EUR 114,342 thousand (2012: EUR 149,617 thousand). In addition, the Parent has purchase commitments to distributors, the definitive amount and price of which will be determined once the programmes are produced and, in certain cases, by establishing the acquisition price on the basis of box-office takings. In 2013 the best estimate of these commitments amounted to EUR 80,400 thousand (2012: EUR 12,826 thousand). It is estimated that inventoriable in-house productions will be amortised in full and approximately EUR 160,000 thousand of external production rights will be amortised in 2014. The changes in the write-downs included under “Programme Rights” in the consolidated balance sheet were as follows (in thousands of euros): Balance at 31/12/11 Write-downs (17,801) Additions (1,956) Disposals or reductions 241 Balance at 31/12/12 (19,516) Additions (6,976) Transfers (9,509) Disposals or reductions Balance at 2,246 (33,755) 31/12/13 The write-downs recognised arose since it was decided that certain titles would not be marketable and it was not likely that they would form part of the Parent’s programme schedule. These write-downs were recognised under “Programme Amortisation and Other Procurements” in the consolidated income statement. 44 11. Trade and other receivables The detail of trade and other receivables in the consolidated balance sheets at 31 December 2013 and 2012 is as follows: Thousands of euros Trade receivables 2013 2012 184,608 169,908 Receivable from associates and related companies 38,195 46,437 Total trade receivables for sales and services 222,803 216,345 5,792 12,650 5,792 12,650 Other receivables Total other receivables The estimated amounts are recognised in the consolidated balance sheet, net of allowances for estimated bad and doubtful debts, on the basis of prior years' experience and of the Group's assessment of the current economic climate. At 31 December 2013, the allowance for doubtful debts amounted to EUR 22,541 thousand (2012: EUR 30,632 thousand). The provision recognised in 2013 amounted to EUR 797 thousand (2012: EUR 5,429 thousand), and EUR 8,889 thousand of the allowance were used in the year (2012: EUR 5,626 thousand). As provided for in the measurement bases disclosed in Note 3 to these consolidated financial statements, impairment losses are recognised or reversed as a result of valuation adjustments of trade and other receivables based on their due dates and the equity position of the debtors. The related write downs and amounts charged to profit or loss are recognised under “Other Operating Expenses” in the consolidated income statement. 12. Equity a) Share capital On 29 October 2012, the Parent Atresmedia Corporación de Medios de Comunicación, S.A. increased share capital by a nominal amount of EUR 10,965 thousand through the issue of (i) 13,438,704 shares of EUR 0.75 par value each, of the same class and series as the shares outstanding prior to the increase but without entitlement to dividends paid out of the profits generated prior to the date of registration of the merger at the Mercantile Registry, irrespective of the dividend payment date, and (ii) 1,181,296 shares of EUR 0.75 par value each, of a different class and carrying the same restriction on dividend rights as the aforementioned shares, although in this case the restriction shall continue to apply for 24 months following the date on which the merger was registered at the Mercantile Registry. The aforementioned capital increase, the sole purpose of which was to cater for part of the share exchange on the merger, was approved by the shareholders at the Company's Annual General Meeting held on 25 April 2012 on the terms and conditions included in the draft terms of merger and was conditional upon the obtainment of the related administrative authorisations. The new shares were issued at EUR 3.37 each, equal to the closing market price of the Atresmedia share on 5 October 2012, the date on which the capital increase resolution became effective. The difference between the issue price and the par value (i.e. EUR 2.62 per share) was treated as a share premium. The total capital increase amounted to EUR 45 49,269 thousand. The capital increase, including both the par value and the share premium, was fully paid as a result of the transfer en bloc of the assets and liabilities of the acquiree on the date on which the merger deed was filed at the Madrid Mercantile Registry (i.e. 31 October 2012). In accordance with Article 304.2 of the Spanish Limited Liability Companies Law, approved by Legislative Royal Decree 1/2010, of 2 July, shareholder pre-emption rights were disapplied on the occasion of this increase. At 31 December 2013 and 2012, the share capital of the Parent amounted to EUR 169,300 thousand and was represented by 225,732,800 fully subscribed and paid shares of EUR 0.75 par value each, with the same rights except for the restriction on dividend rights mentioned in Notes 12-a and 12-e. At the end of 2013 the Parent's shareholder structure was as follows: % of ownership 2013 Grupo Planeta-de Agostini, S.L. 41.70 Ufa Film und Fernseh, GMBH 19.17 Treasury shares 7.01 Gamp Audiovisual, S.A.* 3.64 Imagina Media Audiovisual, S.L. Other shareholders 2.85 25.63 Total 100.00 * Gamp Audiovisual, S.A. is an Imagina Group company, which is controlled, within the meaning of Article 4 of the Spanish Securities Market Law, by the Imagina Group through MEDIAPRODUCCIÓN, S.L. The Parent's shares are listed on the Spanish stock market interconnection system and all carry the same voting and dividend rights, except for the 1,181,296 shares mentioned above, which will be admitted to trading once 24 months have elapsed following the date on which the merger was registered at the Mercantile Registry, in accordance with the draft terms of merger. There are agreements among the main shareholders that guarantee the Parent’s shareholder stability, the grant of mutual rights of acquisition on their shares, the undertaking not to take control of the Parent or to permit a third party to do so, and also include Group management agreements, as described in the consolidated directors’ report. For management purposes, the Group treats the equity attributable to the Parent as capital. The only external requirements to which this capital for management purposes is subject are those contained in current Spanish corporate law, and there are no other legal restrictions thereon. The Group determines the financial resources required with the two-fold objective of ensuring the Group companies’ capacity to continue operating and maximising profitability by optimising Group debt and equity. The Group’s financial structure taken as a whole consists of the equity attributable to the Parent’s shareholders (comprising share capital, share premium, retained earnings and other items), bank borrowings and cash and cash equivalents. The Group reviews this structure regularly and, taking into account the costs and risks associated with each type of funding (debt or equity), takes the appropriate decisions to achieve the aforementioned objectives. 46 b) Share premium As indicated in Note 12-a to the consolidated financial statements for 2012, the difference between the issue price and the par value of the new shares (i.e. EUR 2.62 per share) was treated as a share premium, amounting to EUR 38,304 thousand, which was fully paid as a result of the transfer en bloc of the assets and liabilities of Gestora de Inversiones Audiovisuales La Sexta, S.A. (see Note 12-a). c) Restricted reserves Legal reserve Under the Spanish Limited Liability Companies Law, the Company must transfer 10% of net profit for each year to the legal reserve until the balance of this reserve reaches at least 20% of the share capital. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be used to offset losses, provided that sufficient other reserves are not available for this purpose. The shareholders at the Annual General Meeting of the Parent held on 24 April 2013 approved, among other resolutions, the proposed distribution of the profit for 2012, whereby EUR 2,193 thousand were transferred to the legal reserve. With this contribution the Parent’s legal reserve reached the legally stipulated level. Reserve for retired capital As a result of the capital reduction made in 2006, a reserve of EUR 8,333 thousand was established, equal to the par value of the retired shares, which may only be used if the same requirements as those for the reduction of share capital are met, pursuant to Article 335-c of the Spanish Limited Liability Companies Law. Other restricted reserves Restricted reserves include an amount of EUR 281 thousand which is restricted as to its use since it corresponds to the “Reserve for the Adjustment of Share Capital to Euros”. “Equity - Retained Earnings” in the consolidated balance sheet includes a restricted reserve arising from the subsidiary Uniprex, S.A. (Sole-Shareholder Company). This is a reserve for goodwill, amounting to EUR 19,079 thousand, recognised by appropriating from profit for the year an amount equal to 5% of the goodwill on the asset side of the subsidiary's balance sheet until the full amount of the reserve is reached, as required by Spanish corporate legislation. d) Contributions to consolidated profit by company The detail of the contributions to the consolidated profit for the year of the fully consolidated companies and the companies accounted for using the equity method at 31 December 2013 and 2012 is as follows: 47 Thousands of euros 2013 Atresmedia Corporación de Medios de Comunicación subgroup 33,655 47,950 8,412 (12,855) Uniprex subgroup Other TOTAL 2012 3,987 (3,186) 46,054 31,909 The method used to determine the contribution to consolidated profit maintains the transactions between Group companies that are necessary for the conduct of their business activities under normal market conditions. e) Treasury shares The changes in “Treasury Shares” in 2013 and 2012 were as follows: Number of shares At beginning of year Purchases Delivery of shares (Note 4) At end of year 2013 2012 15,818,704 12,630,728 - 4,369,272 - (1,181,296) 15,818,704 15,818,704 At 31 December 2013, the shares of the Parent held by it represented 7.01% of the Parent's share capital and totalled 15,818,704 shares, with a value of EUR 99,453 thousand and an average acquisition price of EUR 6.29 per share. f) The Annual General Meeting held on 24 March 2010 approved a resolution authorising the Parent to acquire treasury shares provided that they did not exceed the maximum legal limit permitted by law at any given time. This limit was established at 10% of subscribed share capital by Law 3/2009, of 3 April, on structural changes to companies. Dividends At the Annual General Meeting held on 24 April 2013, the shareholders of the Parent approved the proposed distribution of profit for 2012, whereby EUR 21,352 thousand, relating to the interim dividend paid out of 2012 profit on 10 December 2012, were allocated to the payment of dividends (see Note 3-s). g) Non-controlling interests “Non-Controlling Interests” relates to the non-controlling interests of Uniprex Televisión Digital Terrestre de Andalucía, S.L. and Atresmedia Foto, S.L., which at 31 December 2013 held 25.8% and 10%, respectively, of the shares of these companies, the amounts of which are not significant. 48 h) Other equity instruments As indicated in Note 4, pursuant to the agreement to merge the two companies, the Parent (Atresmedia Corporación de Medios de Comunicación, S.A.) and Gestora de Inversiones Audiovisuales La Sexta, S.A. agreed to grant La Sexta shareholders an additional ownership interest of 15,818,704 Atresmedia Corporación de Medios de Comunicación, S.A. shares representing 7% of its share capital, although the delivery thereof is conditional upon the consolidated earnings of Atresmedia from 2012 to 2016. The delivery of these additional shares will be carried out in full through treasury shares of the Parent and, therefore, does not constitute an additional issue. “Other Equity Instruments” includes the measurement of the aforementioned consideration at the fair value of the shares whose delivery was deferred, as discussed in Note 4. On 19 February 2014 the Parent entered into a partial novation of this agreement, modifying the content thereof with respect to two of the three former shareholders of La Sexta (see Note 28). 13. Provisions and other liabilities The changes in the short- and long-term provisions in 2013 and 2012 were as follows: Thousands of euros Balance at 31/12/12 Amounts used and payments Provisions Excessive provisions Balance at 31/12/13 Transfers Operating provisions 35,715 49,928 (50,437) (1,000) - 34,206 Provisions for litigation 24,809 6,556 (1,651) (2,212) - 27,502 Other provisions 18,668 3,985 (514) (1,915) (6,582) 13,642 79,192 60,469 (52,602) (5,127) (6,582) 75,350 Total provisions Thousands of euros Inclusions Balance at due to merger Provisions 31/12/11 (Note 4) Amounts used and payments Excessive provisions Changes in Balance at the scope of 31/12/12 consolidation Operating provisions 40,262 - 35,676 (33,776) (6,447) - 35,715 Provisions for litigation 31,258 - 3,447 (9,512) (344) (40) 24,809 2,081 14,079 3,664 (1,302) (206) 352 18,668 73,601 14,079 42,787 (44,590) (6,997) 312 79,192 Other provisions Total provisions Short- and long-term provisions in the consolidated balance sheet include, inter alia, operating provisions relating basically to volume rebates paid yearly which accrue over the course of the year, the period additions, use and excessive amounts of which are recognised under “Revenue” in the consolidated income statement. 49 “Provisions for litigation” relates mainly to the best estimate in this connection. The payment schedule related to litigation is based on court judgments and is therefore difficult to estimate. “Other Provisions” relates mainly to estimated future payments. The period additions, use and excessive amounts of both these types of provisions are recognised under “Other Operating Expenses” in the consolidated income statement. As regards the changes in provisions in 2012, the inclusions due to merger related to the recognition of the liabilities assumed at the acquisition date as a result of the business combination described in Note 4. In 2012 the tax authorities issued assessments amounting to EUR 6,903 thousand, in relation to the levy on games of luck, betting or chance, raffles and tombolas, against the absorbed company Gestora de Inversiones Audiovisuales La Sexta, S.A. In this respect, the merger agreements established that La Sexta shareholders must indemnify Atresmedia Corporación de Medios de Comunicación, S.A. for any economic loss that could arise from these assessments. Also, “Other Non-Current Liabilities” relates mainly to the amounts maturing at more than twelve months of the payables to suppliers of external production rights; these maturities are set on the basis of the availability periods of those rights. These payables do not bear interest and their fair value amounts to approximately EUR 58 million. The detail, by maturity, of the items included under “Other Non-Current Liabilities” is as follows: Thousands of euros Trade payables Other non-current payables Other non-current liabilities 2015 2016 52,908 807 2019 and subsequent years 37 523 63,658 2017 9,383 2018 465 10 10 33 5 53,373 9,393 817 70 5 Total 63,135 14. Bank borrowings On 2 August 2013, the Parent Atresmedia Corporación de Medios de Comunicación, S.A. arranged syndicated financing of EUR 270,000 thousand in order to repay the existing bilateral credit facilities, meet the obligations included in the financial structure assumed as a result of the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. and to satisfy the Parent's general cash needs. 74% of the total amount is a four-year loan with partial repayments and the remaining 26% is a revolving credit facility maturing at four years. Nine banks with which the Parent has regular dealings participated in the transaction. The applicable interest rate is Euribor plus a market spread and the transaction is subject to compliance with financial covenants habitually used in transactions of this kind, relating to the debt to EBITDA ratio and the interest coverage ratio. This transaction was guaranteed by a security interest in all the treasury shares. Under the agreement reached with the former shareholders of La Sexta (see Note 28), this guarantee was partially released and, consequently, 1,145,594 shares of the Parent remain pledged as security. The fair value of this financing approximates its carrying amount. The detail of the items included under “Bank Borrowings” at 31 December 2013 and 2012 is as follows: 50 2013 Thousands of euros 2012 Short-term Long-term balance balance drawn down drawn down Limit Short-term Long-term balance balance drawn down drawn Limit 270,000 2,671 200,129 - - - Bank loans - - - 6,452 6,226 226 Credit facilities - - - 256,300 130,479 - Interest payable - 3,918 - - 964 - 270,000 6,589 200,129 262,752 137,669 226 Syndicated financing Total The detail, by maturity, of the long-term balances drawn down is as follows: Thousands of euros Syndicated financing 2015 36,350 2016 2017 62,602 101,177 Total 200,129 15. Derivative financial instruments and other financial liabilities a) Hedging derivatives Foreign currency hedges The Group uses currency derivatives to hedge significant future transactions and cash flows. The instruments purchased are denominated in US dollars. The Group applies hedge accounting and documents the hedging relationships and measures their effectiveness as required by IAS 39. All these relationships are cash flow hedges of firm commitments, in which the risk hedged is the exposure to the EUR/USD forward exchange rate, which results in variability in the cash flows payable in euros for broadcasting rights. For 2013, due to the commencement of the period in which the broadcasting rights underlying the hedge will be in force, EUR 52 thousand were capitalised to inventories from equity. For 2012 the amount deducted from equity and recognised as a deduction from inventories was EUR 303 thousand. The changes in the fair value of the derivatives arranged by the Group depend on the changes in the EUR/USD exchange rate and on the euro interest rate curves. At 31 December 2013, the Group had arranged instruments to hedge its foreign currency asset and liability positions amounting to USD 89,863 thousand, at a weighted average exchange rate of EUR 1.3117/USD 1. At 31 December 2012, the Group had arranged hedging instruments amounting to USD 89,611 thousand, at a weighted average exchange rate of EUR 1.3058/USD 1. At the end of 2013 and 2012, the total amounts of the outstanding forward currency purchase contracts entered into by the Group were as follows (the maturity dates reflect the time when the hedged items will be recognised and when the value of the hedging derivatives in equity will be adjusted as an increase in/reduction of inventories): 51 Fair value (thousands of euros) 2013 Currency forwards Currency forwards Currency forwards Classification Type Foreign currency hedge Foreign currency hedge Foreign currency hedge Purchase of USD Purchase of USD Purchase of USD Maturity Amount arranged (thousands of euros) Ineffective portion recognised in profit or loss (thousands of euros) Assets Liabilities 2014 62,520 - 698 3,025 2015 7,313 - - 189 2016 8,053 - - 18 Fair value (thousands of euros) 2012 Currency forwards Currency forwards Classification Type Foreign currency hedge Foreign currency hedge Purchase of USD Purchase of USD Maturity Amount arranged (thousands of euros) Ineffective portion recognised in profit or loss (thousands of euros) Assets Liabilities 2013 60,575 - 1,245 485 2014 8,053 - - 197 At 31 December 2013, the estimated fair value of the Group's foreign currency derivatives, which are designated and effective as cash flow hedges, represented a financial asset of EUR 698 thousand and a financial liability of EUR 3,232 thousand (2012: asset of EUR 1,245 thousand and liability of EUR 682 thousand). This amount was deferred and recognised in equity, taking into account the tax effect. The valuation method consists of estimating the present value of the future cash flows that will arise under the terms and conditions arranged by the parties for the derivative instrument. The spot price is taken to be the reference exchange rate of the European Central Bank on 31 December 2013, the swap points (offer/bid) and the interest rates prevailing at the valuation date. The foreign currency derivatives have been arranged in such a way that they are totally effective and, therefore, they are recognised in full in equity until inventories are recognised. The sensitivity analysis indicates that positive or negative changes of 10% in the spot EUR/USD exchange rate would give rise to changes of approximately EUR 14 million in the fair value of the foreign currency derivatives in 2013 (2012: EUR 9 million). Increases in the value of the euro (depreciation of the US dollar) would increase negative values while decreases in the value of the euro would increase positive values. Financial instruments measured at fair value must be classified as levels 1 to 3, based on the degree of verification of their fair value. Therefore, fair values derived from quoted prices on active markets will be classified as level 1. Those derived from external information other than quoted prices will be classified as level 2. And values obtained using valuation techniques including data that are not observable in active markets will be classified as level 3. The Group’s derivative instruments detailed in this section on “Foreign Currency Hedges” would be classified as level 2. 52 Interest rate hedges In August 2013 the Parent arranged interest rate swaps in order to fix the finance cost arising from the floating rates applicable to each of the tranches of the syndicated financing arranged at that date. These swaps expire in August 2017 and the hedged amount is EUR 111,209 thousand, with an fixed interest rate of 1.01%. At 31 December 2013, the fair value of the swaps amounted to EUR 5 thousand and was recognised as a financial asset. b) Other current and non-current financial liabilities The main item under “Other Current Financial Liabilities” relates mainly to the account payable by Gestora de Inversiones Audiovisuales La Sexta, S.A. to its shareholders, which was assumed by the Parent in the merger transaction carried out in 2012. This account payable amounted to EUR 34,687 thousand at 31 December 2013 and bears interest a floating rate tied to Euribor plus a market spread (see Note 23). At 31 December 2012, a portion of this debt was included under “Non-Current Financial Liabilities”. 16. Trade and other payables The detail of trade and other payables in the consolidated balance sheets at 31 December 2013 and 2012 is as follows: Thousands of euros Payable to suppliers Payable to associates and related parties (Note 23) Total payable to suppliers 2013 2012 353,236 348,250 67,927 127,063 421,163 475,313 Other accounts payable to public authorities (Note 22-d) 15,740 13,598 Other non-trade payables 18,330 22,272 Customer advances Total other payables 3,649 3,906 37,719 39,776 The maximum payment period applicable to the Parent under Law 3/2004, of 29 December, on combating late payment in commercial transactions and pursuant to the transitional provisions contained in Law 15/2010, of 5 July, was 60 days in 2013 (2012: 75 days). The detail of the amounts paid and payable at 31 December 2013 is as follows (in thousands of euros): Amount Within the maximum payment period Remainder Total payments made in 2013 Weighted average period of late payment (in days) Payments at year-end not made in the maximum payment period 230,546 371,564 602,110 47 38,355 % 38% 62% 53 The detail of the amounts paid and payable at 31 December 2012 is as follows (in thousands of euros): Amount Within the maximum payment period Remainder Total payments made in 2012 Weighted average period of late payment (in days) Payments at year-end not made in the maximum payment period 426,283 78,232 504,515 50 18,838 % 84% 16% Weighted average period of late payment was calculated as the quotient whose numerator is the result of multiplying the payments made to suppliers outside the maximum payment period by the number of days of late payment and whose denominator is the total amount of the payments made in the year outside the maximum payment period. 17. Other guarantee commitments to third parties and contingent assets and liabilities a) Guarantee commitments to third parties The detail of the guarantees provided by the Group to banks for third- and related parties is as follows: Thousands of euros Group companies and associates Other guarantees Total 2013 2012 5,466 6,465 13,868 14,009 19,334 20,474 The Parent’s directors consider that any liabilities not foreseen at 31 December 2013 that might arise from the guarantees provided would not be material. b) Contingent liabilities At 31 December 2013, certain civil, labour, criminal and administrative lawsuits had been filed against the Group companies, which were taken into account in estimating potential contingent liabilities. Noteworthy, in view of their amount, were the lawsuits with certain collection societies. The directors of the Parent and its legal advisers do not expect any material liabilities additional to those already recorded to arise from the outcome of the lawsuits in progress. c) Litigation In 2013 there were no significant changes in lawsuits and no new litigation proceedings deemed significant were brought against the Group, except as indicated in Note 1 in respect of the decision of the Supreme Court. 54 18. Risk management policy The Group’s financial risk management is centralised in its Financial Department, which has established the mechanisms required to control exposure to interest rate and exchange rate fluctuations and credit and liquidity risk. The main financial risks affecting the Group are as follows: a) Credit risk The Group does not have significant credit risk since the average customer collection period is very short and guarantees are required for deferred payment sales. Cash placements are made and derivative instruments are arranged with institutions of recognised solvency. The advertising contract terms enable bank guarantees to be demanded prior to the launch of advertising campaigns. Also, it should be noted that the Group does not have a significant concentration of credit risk exposure to third parties and no noteworthy incidents arose in 2013. The percentage of past-due receivables at 31 December 2013 was 6.6%. The Corporate Governance Report includes an extensive summary of the risk control systems. b) Liquidity risk The Group’s liquidity policy is to arrange credit lines and short-term investments that are sufficient to support its financing needs, on the basis of expected business performance. All of the foregoing are tied to floating interest rates (see Note 14). c) Market risk (including interest rate and foreign currency risk) Both the Group’s cash and its bank borrowings are exposed to interest rate risk, which could have an adverse effect on financial profit or loss and cash flows. The Group's financing is arranged at interest rates tied to Euribor. In view of the bank borrowings at 31 December 2013, changes of 100 basis points in the total cost borne would give rise to a +/- EUR 2 million change in the debt at that date. To mitigate this risk, the Parent has arranged interest rate swaps to limit the finance costs arising from its floating-rate borrowings (see Note 15). Foreign currency risk is concentrated at the Parent and relates basically to the payments to be made in international markets to acquire broadcasting rights. In order to mitigate foreign currency risk, the Parent arranges hedging instruments, mainly currency forwards, to hedge its exposure to the EUR/USD forward exchange rate. Sensitivity to changes in the exchange rate is described in Note 15. 19. Income and expenses a) Operating income The breakdown, by line of business and geographical market, of the Group's revenue for 2013 and 2012 is as follows: 55 Thousands of euros Advertising sales 2013 2012 800,482 Other sales 717,745 28,116 21,864 Trade and other discounts (32,824) (27,035) Total 795,774 712,574 In 2013 and 2012 transactions exceeding 10% of total operating income were performed with three customers (media buyers grouping together advertising orders of various advertisers), which represented 17%, 16% and 13% (individually) and 46% (as an aggregate) of total advertising sales. The breakdown, by geographical market, of the Group's revenue for 2013 and 2012 is as follows: Thousands of euros 2013 Spain 2012 791,772 710,283 Other EU countries 2,345 1,495 Other non-EU countries 1,657 796 795,774 712,574 Total b) Programme amortisation and other procurements The detail of “Programme Amortisation and Other Procurements” is as follows: Thousands of euros 2013 2012 External production services 221,961 225,051 Broadcasting of in-house productions 208,767 241,199 Programme broadcasting rights 163,338 140,271 Live broadcasting rights 48,513 43,589 Performances and contributions of entertainers 11,378 11,073 6,102 6,480 Other amortisation - 347 (211,572) (261,542) 448,487 406,468 Other purchases Addition to programme rights Total “Addition to Programme Rights” reflects the expenses incurred in making programmes. In accordance with the Parent’s procedures, these expenses are capitalised and subsequently amortised in accordance with the policies described in Note 3-f. c) Staff costs The detail of “Staff Costs” is as follows: Thousands of euros 2013 2012 Wages and salaries 90,236 100,467 Social security costs 17,805 17,400 2,839 2,431 110,880 120,298 Other staff costs Total 56 In 2013 remuneration in the form of salaries and life insurance premiums of senior executives who are not directors amounted to EUR 6,957 thousand and EUR 31 thousand, respectively (2012: EUR 5,376 thousand and EUR 29 thousand, respectively). The Parent has not granted any loans or advances to its senior executives and it does not have any supplementary pension, retirement bonus or special indemnity obligations to them in their capacity as executives. The average number of Group employees in 2013, by gender and professional category, was as follows: 2013 Professional category Women Senior executives Managers Men 2 12 74 165 Line personnel 525 601 Clerical staff 119 25 Other 120 80 Total 840 883 The number of Group employees at 2013 year-end, by gender and professional category, was as follows: 2013 Professional category Women Senior executives Managers Men 2 12 72 171 Line personnel 537 615 Clerical staff 121 24 Other 134 89 Total 866 911 The number of senior executives includes two directors (both men). The detail, by professional category, of the average number of employees in 2013 with a disability of more than 33% is as follows: Professional category Managers 2013 2 Line personnel 17 Clerical staff 14 Other 3 Total 36 57 d) Other operating expenses The detail of “Other Operating Expenses” in the consolidated income statement is as follows: Thousands of euros 2013 2012 Operating leases and charges 71,042 54,081 Work performed by other companies 41,179 50,484 Copyrights 30,990 16,883 Communications 10,765 8,224 Advertising and publicity Other overheads Total 6,386 5,838 29,907 39,401 190,269 174,911 “Operating Leases and Charges” in the accompanying consolidated income statement includes mainly the charge for the distribution of the audiovisual signal and the television operators’ contribution to the financing of Corporación RTVE. e) Other disclosures The fees for audit services provided to the various companies composing the Atresmedia Corporación de Medios de Comunicación, S.A. and Subsidiaries Group by the principal auditor, Deloitte, S.L., and by other entities related thereto in 2013 amounted to EUR 247 thousand (2012: EUR 281 thousand). The fees for audit-related services in 2013 amounted to EUR 4 thousand (2012: EUR 1 thousand). Also, the fees for other professional services provided to the various Group companies by the principal auditor and by other entities related thereto amounted to EUR 36 thousand (2012: EUR 178 thousand). No tax advisory services were provided in 2013 or in 2012. The fees for the audit services provided by the auditor of the subsidiaries included in the merger amounted to EUR 10 thousand in 2012. The Annual Corporate Governance Report includes a description of the work of the Audit Committee and an explanation of the manner in which the objectivity and independence of the auditor is guaranteed when the auditors provide non-audit services. 20. Other gains/losses a) Net gain (loss) due to changes in the value of financial instruments at fair value “Net Gain (Loss) due to Changes in the Value of Financial Instruments at Fair Value” in the consolidated income statement includes mainly the net gain (loss) due to the change in fair value of the hedging instruments detailed in Note 15 to these consolidated financial statements and the gain on the held-for-trading financial asset at year-end (see Note 9). 58 b) Exchange differences “Exchange Differences” includes the exchange differences arising from the Group's commercial transactions, relating mainly to the purchase of audiovisual productions in foreign currencies. c) Financial loss “Financial Loss” in the consolidated income statement for 2013 includes mainly the interest expense on bank borrowings and on the debt payable to the former shareholders of Gestora de Inversiones Audiovisuales La Sexta, S.A. At 31 December 2013, finance costs amounted to EUR 16,436 thousand and finance income amounted to EUR 759 thousand (31 December 2012: EUR 10,078 thousand and EUR 243 thousand, respectively). d) Impairment and gains or losses on disposals of financial assets “Impairment of Financial Assets” and “Gains (Losses) on Disposals of Financial Assets” in the consolidated income statement include, on the one hand, the impairment losses recognised in the year on financial assets, which were determined on the basis of an analysis of the recoverability of these investments, including investments in companies accounted for using the equity method, and, on the other hand, the net gains or losses arising from the disposal of these assets and assets held for sale. At 31 December 2013, the amount included under “Impairment of Financial Assets” related to the impairment of the investment in Audiovisual Española 2000, S.A. In 2012 the net losses on disposals of financial assets included the impact of the transfer, to financial assets classified as held for sale, of the investments in Unipublic, S.A. and its subsidiary Organizaciones Deportivas y Culturales de Unipublic, S.A. (Sole-Shareholder Company) and other exclusions from the scope of consolidation (see Notes 2-b and 8). 21. Business and geographical segments Basis of segmentation Segment reporting is structured on the basis of the Group's various business lines at the end of 2013 and 2012, taking into account, on the one hand, the nature of the services provided and, on the other, the customer segments targeted by them. In 2013 and 2012 the Group focused its business activities on the following major business lines in Spain: Television Radio Other businesses, the most noteworthy of which are event management and audiovisual production 59 Thousands of euros INCOME STATEMENT Television 2013 Radio 2012 2013 Adjustments and eliminations between segments Other businesses 2012 2013 2012 2013 2012 Atresmedia consolidated 2013 2012 Revenue and other income, net 728,699 638,813 80,549 82,773 28,289 28,008 (7,747) (8,431) 829,790 741,163 Operating expenses (excluding depreciation and amortisation 676,605 611,432 63,588 71,763 17,190 26,913 (7,747) (8,431) 749,636 701,677 GROSS PROFIT FROM OPERATIONS 52,094 27,381 16,961 11,010 11,099 1,095 - - 80,154 39,486 14,434 13,469 2,651 28,383 190 185 - - 17,275 42,037 - 19,536 - - - - - - - 19,536 37,660 33,448 14,310 (17,373) 10,909 910 - - 62,879 16,985 Net gain (loss) due to changes in the value of financial instruments at fair value (952) 4,931 - - - - - - (952) 4,931 Exchange differences 6,475 4,089 - - (59) (12) - - 6,416 4,077 Financial profit (loss) (10,268) (8,643) (4,209) 4 (1,200) (1,196) - - (15,677) (9,835) Impairment of financial assets - - - - (3,786) - - - (3,786) - Gains (losses) on disposals of financial assets - (832) - (3) - (2,339) - - - (3,174) 13 (32) - - (1,086) (1,048) - - (1,073) (1,080) 32,928 32,961 10,101 (17,372) 4,778 (3,685) - - 47,807 11,904 (744) (16,122) 1,814 (4,444) 683 561 - - 1,753 (20,005) 33,672 49,083 8,287 (12,928) 4,095 (4,246) - - 46,054 31,909 Depreciation and amortisation charge, impairment and gains or losses on disposals of non-current Gains on bargain purchases arising on business combinations PROFIT (LOSS) FROM OPERATIONS Share of results of associates and joint ventures accounted for using the equity method PROFIT (LOSS) BEFORE TAX Income tax PROFIT (LOSS) AFTER TAX Thousands of euros BALANCE SHEET Television 2013 Radio 2012 Adjustments and eliminations between segments Other businesses 2013 2012 2013 2012 2013 2012 Atresmedia consolidated 2013 2012 ASSETS Segment assets Investments accounted for using the equity method TOTAL ASSETS 1,381,177 1,306,271 222,838 229,199 111,601 166,078 (455,166) (527,846) 1,260,450 1,173,703 130 86 - - 416 - - - 546 86 1,381,307 1,306,357 222,838 229,199 112,017 166,079 (455,166) (527,846) 1,260,996 1,173,789 1,381,307 1,306,357 222,838 229,199 112,017 166,079 (455,166) (527,846) 1,260,996 1,173,789 1,381,307 1,306,357 222,838 229,199 112,017 166,079 (455,166) (527,846) 1,260,996 1,173,789 EQUITY AND LIABILITIES Segment liabilities TOTAL EQUITY AND LIABILITIES 60 22. Tax matters a) Consolidated tax group Pursuant to current legislation, the consolidated tax group includes Atresmedia Corporación de Medios de Comunicación, S.A., as the Parent, and the Spanish subsidiaries that meet the requirements provided for in Spanish legislation regulating the taxation of the consolidated profits of corporate groups (in which an ownership interest of more than 75% is held). The Group's other subsidiaries file individual tax returns in accordance with the tax legislation in force in each country. Pursuant to Spanish Corporation Tax Law 43/1995, of 27 December, on 26 December 2000, Atresmedia Corporación de Medios de Comunicación, S.A. notified the Madrid tax authorities of its decision to file consolidated income tax returns. Application of the consolidated tax regime shall be considered indefinite provided that the requirements established in the current Article 67 of the Consolidated Spanish Corporation Tax Law are met and the Group does not opt to cease to apply the regime. The filing of consolidated tax returns gives rise to reciprocal intraGroup balances, due to the offset of the losses incurred by certain companies against the profit earned by other Group companies. On 16 December 2011, the joint merger agreement entered into on 30 June 2011 was executed in a public deed; under this agreement, Publicidad 3, S.A.U. absorbed Antena de Radiodifusión, S.A.U., Medipress Valencia, S.A.U., Canal Radio Baleares, S.L.U., Radio Media Aragón, S.L.U., Canal Radio Madrid, S.L.U., Canal Radio Valencia, S.L.U. and Uniprex, S.A.U., which simultaneously and in the same act absorbed Radio Noticias Noventa, S.A.U., Radio Sistemas Radiofónicos Cinco, S.L.U. and Rkor Radio, S.L.U. in a preliminary phase. The resolution to change the resulting company's name to Uniprex, S.A.U. is contained in the aforementioned deed. Consequently, the new company Uniprex, S.A.U. acquired the assets and liabilities of the absorbed companies, which were dissolved without liquidation, in accordance with their balance sheets, whose assets and liabilities were transferred en bloc to the absorbing company. The merger goodwill, which at 16 December 2011 amounted to EUR 99,137 thousand for tax purposes (comprising EUR 5,599 thousand of Rkor Radio, EUR 1,360 thousand of Medipress Valencia, EUR 8,591 thousand of Antena de Radiodifusión and EUR 83,587 thousand of Uniprex) may be amortised at an annual rate of 1% in 2012 and 2013, as defined in Article 26.1.3. of Royal Decree-Law 20/2012, of 13 July, introducing measures to ensure budgetary stability and foster competitiveness, and at a rate of 5% from 2014 onwards, regardless of its recognition for accounting purposes. This amortisation is deductible for tax purposes. The merger goodwill for tax purposes does not coincide with that recognised for accounting purposes (see Note 5). On 5 June 2009, the public deed was executed of the agreement for the merger by absorption of Radio Tormes, S.A. (Sole-Shareholder Company), Radio Alamedilla, S.A. (Sole-Shareholder Company), Compañía Tres Mil Ochocientos, S.L. (Sole-Shareholder Company), La Veu de LLeida, S.L. (Sole-Shareholder Company), Grupo Universal de Emisoras Radio Amanecer, S.A. (Sole-Shareholder Company), Ondadit, S.L. (Sole-Shareholder Company) and Unión Ibérica de Radio, S.A. (Sole-Shareholder Company) into the sole shareholder Uniprex, S.A. (SoleShareholder Company) through the dissolution without liquidation of the absorbed companies 61 and the transfer en bloc of their assets and liabilities to Uniprex, S.A. (Sole-Shareholder Company), the absorbing company, which acquired them by universal succession and was subrogated to all the rights and obligations of the absorbed companies, as stipulated in Article 233 of the Spanish Public Limited Liability Companies Law. The date from which the transactions of the absorbed companies are considered to have been performed for accounting and tax purposes by the absorbing company was taken to be 1 January 2009. The merger gave rise to the merger goodwill shown in Note 5, which differs from the merger goodwill for tax purposes calculated and amortised as provided for in Article 89.3 of the Consolidated Spanish Corporation Tax Law. On 31 October 2012, the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta ("La Sexta") into Antena 3 de Televisión was registered at the Mercantile Registry of Madrid. As a result of the merger, Antena 3 de Televisión acquired all the assets and liabilities of La Sexta by universal succession and was subrogated to all the rights and obligations of the absorbed company. The merger became effective for accounting purposes on 5 October 2012. The Company opted to avail itself of the special tax regime for mergers, spin-offs, asset contributions and security exchanges provided in Title VII, Chapter VIII of the Consolidated Spanish Corporation Tax Law approved by Legislative Royal Decree 4/2004, of 5 March. In the process of allocating the price of the business combination to assets and liabilities, the La Sexta trademark and the La Sexta multiplex operating licence were identified. The trademark will be amortised for accounting purposes over 20 years and the licence is considered to have an indefinite useful life. On 8 November 2013 the merger, whereby Estaciones Radiofónicas de Aragón, S.A. (SoleShareholder Company), Ipar Onda, S.A. (Sole-Shareholder Company), Onda Cero, S.A. (SoleShareholder Company) and Radio Media Galicia, S.L. (Sole-Shareholder Company) were absorbed by Uniprex, S.A. (Sole-Shareholder Company) and dissolved without liquidation, was executed in a public deed, which also reflected the approval of the balance sheet for the year ended 31 December 2012 as the merger balance sheet. Merger goodwill for tax purposes amounted to EUR 555 thousand (EUR 260 thousand of Ipar Onda, S.A. and EUR 295 thousand of Radio Media Galicia, S.L.) and is being amortised at an annual rate of 5%, regardless of the rate at which the related amortisation is charged to profit or loss for accounting purposes. This amortisation is deductible for tax purposes (see Note 5). 62 b) Reconciliation of the accounting profit to the income tax expense The reconciliation of the accounting profit to the income tax expense is as follows: Thousands of euros Consolidated profit before tax 2013 2012 47,807 11,904 7,312 (13,179) (4,029) (15) Adjusted profit (loss) 51,090 (1,290) Tax rate 30.00% 30.00% Permanent differences Tax losses incurred prior to the formation of the tax group used in 2013 Adjusted profit (loss) multiplied by tax rate Tax credits Current income tax expense (benefit) Deferred tax expense Income tax adjustment Total tax expense (benefit) Effective tax rate 15,327 (387) (13,198) (18,944) 2,129 (19,331) (87) (22) (289) (652) 1,753 (20,005) 3.67% (168.05%) The 2013 permanent differences include mainly negative consolidation differences (EUR 1,038 thousand) and, with a positive sign, non-deductible impairment losses on equity instruments (EUR 6,388 thousand), other non-deductible expenses (EUR 1,153 thousand) and donations (EUR 809 thousand). The negative consolidation differences arise from changes in the scope of consolidation (- EUR 202 thousand), the share of results of companies accounted for using the equity method (EUR 1,073 thousand), increased amortisation of the trademark under IFRSs (- EUR 289 thousand) and accounting elimination differences (+ EUR 2,602 thousand). The tax credits indicated in the table above were earned by the Group in 2013 for investment in audiovisual production and donations to not-for-profit organisations (EUR 12,915 thousand and EUR 283 thousand, respectively). “Income Tax Adjustment” includes the difference between the projected income tax expense recognised in 2012 and the effective tax return filed. The deferred tax expense relates to the tax effect of the deferred tax liability under IFRSs (see Note 22-e). 63 c) Reconciliation of the accounting profit to the taxable profit The reconciliation of the accounting profit to the taxable profit for income tax purposes for 2013 and 2012 is as follows: Thousands of euros Accounting profit after tax 2013 2012 46,054 31,887 Income tax 1,753 (19,983) Permanent differences – 7,312 (13,179) Temporary differences – (18,751) 8,083 Offset of prior years' tax losses (5,172) (15) Taxable profit 31,196 6,793 Tax rate 30.00% 30.00% 9,359 2,038 Gross tax payable Tax credits used in 2013 (3,002) (640) 2013 tax prepayments (7,004) (1,964) (647) (566) Tax payable (refundable) The 2013 temporary differences include additions of EUR 24,038 thousand and reductions of EUR 42,789 thousand (see Note 22-e). Additions break down into deferred tax assets of EUR 23,247 thousand and deferred tax liabilities of EUR 791 thousand, while reductions include deferred tax assets of EUR 41,550 thousand and deferred tax liabilities of EUR 1,239 thousand. d) Tax receivables and payables The detail of the tax receivables and payables at 31 December 2013 and 2012 is as follows: Thousands of euros 2013 2012 NON-CURRENT ASSETS Deferred tax assets (Note 22-e) Tax loss carryforwards (Note 22-g) Unused tax credits and tax relief 20,456 26,043 221,363 221,793 85,364 74,703 327,183 322,539 Income tax refundable 911 1,188 2013 income tax refundable (Note 22-c) 647 566 CURRENT ASSETS Other tax receivables VAT refundable Total tax receivables 26 4 2,906 7,107 4,490 8,865 331,673 331,404 31,345 31,488 OTHER NON-CURRENT LIABILITIES Deferred tax liabilities (Note 22-e) CURRENT LIABILITIES Tax withholdings payable 4,044 4,236 Accrued social security taxes payable 1,881 1,681 VAT payable Total tax payables 9,815 7,681 15,740 13,598 47,085 45,086 64 On the basis of the timing estimate of future profits made by the Parent’s directors for the offset and use of these tax items, only EUR 7,332 thousand were considered to be recoverable in the tax return for the coming year, EUR 2,248 thousand of which relate to deferred taxes, EUR 2,179 thousand to unused tax credits and tax relief and EUR 2,905 thousand to tax loss carryforwards. “Other Tax Receivables” and “VAT Refundable” are included in the consolidated balance sheet under “Other Receivables”. Also, the items composing “Current Liabilities” are included in the consolidated balance sheet under “Other Payables”. At 31 December 2013, the Group had recognised unused tax credits amounting to EUR 85,364 thousand, of which EUR 4,801 thousand relate to La Sexta. Amount Limit 7,908 2019 19,482 2020 26,167 2021 18,892 2022 12,915 2023 85,364 e) Deferred tax assets recognised The difference between the tax charge allocated to the current year and to prior years and the tax charge already paid or payable for such years, which is recognised under deferred tax assets, arose as a result of temporary differences derived from the following items: CHANGES IN DEFERRED TAX ASSETS Thousands of euros Contingencies and charges Non-current accounts payable Hedging instruments Tax effect of assets at fair value Balance at Transfers at 31/12/11 Additions Disposals Other 31/12/11 Inclusions due to merger Inclusions in/exclusions from scope of consolidation Balance at 31/12/12 Balance at Additions Disposals Other 31/12/13 6,061 2,554 (1,985) 24 4,024 1,561 35 12,275 3,620 (4,027) 521 12,389 1,131 1,250 (690) 135 (95) 498 - 2,228 5 (982) (644) 607 (401) 192 - - - - - (209) - (152) - (361) 2,541 - - (1,030) - - 10,513 - 9,483 - (6,845) (97) Other 4,873 1,299 (362) 251 (3,929) - 134 2,266 3,349 (611) 276 5,280 Total 11,664 5,295 (4,067) 410 - 12,572 169 26,043 6,974 (12,617) 56 20,456 The changes in deferred tax assets, included in the “Other” column, include most notably the difference between the projected income tax expense for 2012 and the tax return actually filed. 65 The changes in “Deferred Tax Liabilities” were as follows: DEFERRED TAX LIABILITIES Thousands of euros Recognition of intangible assets at fair value Grants Amortisation of merger goodwill Total Balance at 31/12/11 Additions Disposals Inclusions Balance at Balance at Additions Disposals due to merger 31/12/12 31/12/13 - - (81) 31,319 31,238 - (324) 136 114 - - - - - - 136 114 (81) 31,319 30,914 250 - (191) 59 - 372 - 372 31,488 372 (515) 31,345 “Hedging Instruments” in the “Deferred Tax Assets” table is not included in the temporary differences or deferred tax assets in the tables in Note 22-c) since for tax purposes they are recognised directly in equity. The “Recognition of Intangible Assets at Fair Value” deferred tax liability relates to the temporary difference arising as a result of the difference between the carrying amount and the tax base of the identified trademark and signal broadcasting licence (IAS 12). The trademark is amortised for accounting purposes at a rate of 5%, the amortisation charge in 2013 being EUR 1,079 thousand. The amortisation is not deductible for tax purposes and, therefore, gives rise to a positive adjustment to the taxable profit which is recognised as a deferred tax liability. The different interpretation provided under International Financial Reporting Standards, as compared with local accounting standards, in relation to the recognition of intangible assets at fair value, gives rise to a greater deferred tax liability under IFRSs than that recognised in accordance with the Spanish National Chart of Accounts, to which the income tax legislation is not applicable. On the basis of the timing estimate of future profits made by the Parent’s directors for the offset and use of these deferred tax assets, EUR 18,208 thousand were considered to be recoverable in the long term while EUR 2,248 thousand were considered to be recoverable in the short term. Both amounts are recognised under “Deferred Tax Assets”. Also, on the basis of the aforementioned timing estimate of future profits, the directors consider that there are no reasonable doubts as to the recovery of the amounts recognised in the accompanying balance sheet within the statutory time periods and limits on the basis of the projections prepared. The key assumptions on which these projections are based relate mainly to advertising markets, audience, advertising efficiency ratios and the evolution of expenses. Except for advertising, the data of which are measured on the basis of external sources of information, the assumptions are based on past experience and reasonable projections approved by Parent management and updated in accordance with the performance of the advertising markets. These future projections cover the next ten years. The Group analyses the sensitivity of the projections to reasonable changes in the key assumptions used to determine the recoverability of these assets. Therefore, the sensitivity analyses are prepared under various scenarios based on the variables that are considered to be most relevant, i.e. advertising income, which depends mainly on the performance of the advertising market, the investment share reached and the operating margin achieved. The discount rate used ranges from 9% to 10%. 66 A variation of 0.5% in cumulative annual growth would give rise to a change in value of EUR 43 million, while an increase of 0.5% in the discount rate would give rise to a change of EUR 65 million and a decrease of 0.5% in the discount rate would give rise to a change of EUR 73 million. Zero perpetual growth was used. An increase of 0.5% would give rise to an increase in value of EUR 80 million and a decrease of 0.5% would give rise to a decrease in value of EUR 71 million. The aforementioned analyses do not disclose any evidence of non-recoverability of the tax assets and tax credits recognised. f) Tax recognised in equity In addition to the income tax recognised in the consolidated income statement, in 2013 and 2012 the Group recognised the following amounts in consolidated equity: Thousands of euros Hedging instruments Total 2013 2012 (361) (209) (361) (209) g) Other information At 31 December 2013, the Group had from 2005 onwards open for review for income tax, since in 2010 it underwent a partial review in this connection. The Group has the years from 2009 onwards open for review for all the other taxes applicable to it. In 2008 the Parent (Antena 3 de Televisión, S.A.) acquired non-current assets as required under the terms established in Article 36 ter. of the Spanish Corporation Tax Law, as worded in Law 24/2001, for the reinvestment of the extraordinary income obtained by the Group company Uniprex Televisión, S.L. (Sole-Shareholder Company) on the transfer of the ownership interest in a company. This reinvestment (EUR 499,950) gave rise to a tax credit of EUR 41,793, which was taken in 2008. The aforementioned non-current assets continue in use and are held by Atresmedia Corporación de Medios de Comunicación, S.A. in accordance with Article 36 of Spanish Corporation Tax Royal-Decree Law 4/2004. Also, in 2009 the Parent reported a tax credit for the reinvestment of extraordinary income deriving from the transfer of the ownership interest in Gloway Broadcasting Services, S.L., in compliance with the requirements of Article 36. In 2009 the Parent acquired non-current assets for EUR 6,414 thousand, under the terms and conditions established in the aforementioned Article to comply with the reinvestment requirement, and earned tax credits of EUR 46 thousand that it did not use. These non-current assets continue in use and are held by Atresmedia Corporación de Medios de Comunicación, S.A. Following is a detail of the last years for offset of prior years' tax loss carryforwards at 31 December 2013. EUR 221,363 thousand of these carryforwards have been recognised, of which EUR 221,358 thousand were transferred to Antena 3 de Televisión from the absorbed company, Gestora de Inversiones Audiovisuales La Sexta, as a result of the universal succession of the former to the rights and obligations of the transferor arising from the application of the special tax regime for mergers, spin-offs, asset contributions and security exchanges provided for in Title VII, Chapter VIII of the Consolidated Spanish Corporation Tax Law approved by Legislative Royal Decree 4/2004, of 5 March. 67 LAST YEAR FOR OFFSET Thousands of euros 2019 46 2021 15 2022 10 2023 1 2024 58,935 2025 45,185 2026 38,301 2027 34,758 2028 10,053 2029 18,568 2030 15,565 TOTAL 221,437 23. Related party transactions Transactions between the Parent and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note. Balances and transactions between the Group and its associates and other related companies are disclosed below: Thousands of euros Balances at 31/12/13 Trade receivables (Note 11) Current trade payables (Note 16) Current Non-current receivables payables Current payables (Note 15-b) Associates: Atlantis Global Solutions, S.L. 25 - - - Fundación Antena3 60 - - - - 119 - 2,450 - - 28 784 - - - 232 784 2,450 - 607 Gamp Audiovisual, S.A. - - - - 18,029 Gala Desarrollos Comerciales, S.L. - - - - 2,516 Imagina Media Audiovisual, S.L. - 130 - - 14,142 34,963 59,550 - 7 - 2,799 7,011 44 - - 201 406 - - - - 46 - - - 37,963 67,143 44 7 34,687 Hola Televisión América, S.L. I3 Televisión, S.L. Total associates 607 Related companies: Imagina Group Planeta - De Agostini Group RTL Group PCsoporte Consultores, S.L. Total related companies 68 Thousands of euros Balances at 31/12/12 Current trade payables (Note 16) Trade receivables (Note 11) Non-current payables Current payables Associates: Cordina Planet, S.L. 76 - - 73 Fundación A3 33 1,039 - - Hola Televisión América, S.L. 32 - 336 - I3 Televisión, S.L. 60 1,287 - - - 50 - - 59 5,217 - - 260 7,593 336 73 Gamp Audiovisual, S.A. - - 35,619 1,929 Gala Desarrollos Comerciales, S.L. - - 4,994 270 Imagina Media Audiovisual, S.L. - 1,499 27,918 1,513 40,811 103,263 52 - 4,712 6,926 - - 771 7,782 - - 46,294 119,470 68,584 3,712 Organiz. Deport. y Culturales de Unipublic, S.A.U. Unipublic, S.A. Total associates Related companies: Imagina Group Planeta Group RTL Group Total related companies Thousands of euros Transactions at 31/12/13 Purchases, acquisition of rights and other services Sales Finance costs Associates: Atlantis Global Solutions, S.L. 21 - - 37 - Fundación Antena3 75 230 9 Hola Televisión América, S.L. 72 - - - 3,755 - 168 4,022 9 Gamp Audiovisual, S.A. - - 1,797 Gala Desarrollos Comerciales, S.L. - - 251 Imagina Media Audiovisual, S.L. - 95 1,413 Cordina Planet, S.L. I3 Televisión, S.L. Total associates - Related companies: Imagina Group 141,921 76,284 - Planeta - De Agostini Group 860 2,610 - RTL Group 671 291 - - 33 - 143,452 79,313 3,461 PCsoporte Consultores, S.L. Total related companies In addition to these transactions, in 2013 the Group sold and purchased advertising space to and from related companies, amounting to EUR 3,298 thousand and EUR 1,309 thousand, respectively, through advertising agencies. 69 Thousands of euros Transactions at 31/12/12 Purchases, acquisition of rights and other services Sales Finance costs Associates: Cordina Planet, S.L. Fundación A3 89 - - 114 - 4 - Hola Televisión América, S.L. 34 - I3 Televisión, S.L. 273 6,378 - Unipublic, S.A. 188 6 7 Total associates 698 6,384 11 Gamp Audiovisual, S.A. - - 1,009 Gala Desarrollos Comerciales, S.L. - - 141 Imagina Media Audiovisual, S.L. - 75 791 37,212 19,784 - 2,273 7,228 - 419 9,855 - 39,904 36,242 1,941 Related companies: Imagina Group Planeta Group RTL Group Total related companies In addition to these transactions, in 2012 the Group sold and purchased advertising space to and from related companies, amounting to EUR 2,413 thousand and EUR 1,352 thousand, respectively, through advertising agencies. In 2012 the Group acquired a 15% ownership interest in Audiovisual Española 2000, S.A., a company related to the main shareholder (see Note 9). 24. Earnings per share Basic earnings per share Basic earnings per share are calculated by dividing the net profit or loss attributable to the Group by the weighted average number of ordinary shares outstanding during the year, excluding the average number of treasury shares held in the year. Accordingly: 2013 2012 Net profit for the year (thousands of euros) 46,054 31,909 Weighted average number of shares outstanding (thousands of shares) 225,733 213,636 0.204 0.149 Basic earnings per share (euros) The diluted earnings per share coincide with basic earnings per share since there are no equity instruments with a dilutive effect. 25. Proposed distribution of profit The Parent's directors will propose to the shareholders at the Annual General Meeting that the profit for 2013 be distributed as follows: 70 Thousands of euros 2013 To voluntary reserves 34,468 Total 34,468 26. Remuneration of the Board of Directors In 2013 the remuneration earned by the current and former members of the Parent’s Board of Directors (composed of two women and eleven men) in the form of salaries, attendance fees and life insurance premiums amounted to EUR 5,538 thousand, EUR 680 thousand and EUR 15 thousand, respectively. In 2012 these remuneration items amounted to EUR 3,447 thousand, EUR 778 thousand and EUR 16 thousand, respectively. The Parent has not granted any loans or advances to its Board members and it does not have any supplementary pension, retirement bonus or special indemnity obligations to them in their capacity as directors. 27. Other disclosures concerning the Board of Directors Pursuant to Article 229 et seq. of the Consolidated Spanish Limited Liability Companies Law (LSC), the following information is included: A) Based on the notifications made by each of the directors, at 31 December 2013 none of the directors or any persons related to them held direct or indirect ownership interests in the share capital of companies engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing its Group, except for the director Imagina Media Audiovisual, S.L.U., which has notified that it holds direct or indirect equity interests in the following companies, all of which belong its group of companies: Investee Activity engaged in % of direct or indirect ownership Position held in the company, where applicable Grupo Globo Media, S.A.U. Ownership of securities - Audiovisual industry 100 None Equille Investiment, B.V. Ownership of securities - Audiovisual industry 100 None Mediaproducción, S.L. Exploitation of mobile units for broadcasting of sporting events 100 None POC Ventures, B.V.B.A. Audiovisual production services 100 None Xarxa Oberta, de Comunació i Tecnologia de Catalunya, S.A. Construction and exploitation of new generation networks 100 None Adisar Media, S.L. Audiovisual production services 60 None Antena Local, S.L. Radio and television 60 None Asturmedia Producciones Audiovisuales, S.L. Audiovisual production and distribution 49 None Avenida dos Aliados, S.A. Ownership of securities - Audiovisual industry 52.35 None Bikini Pos Produçao de Filmes, Ltda. Post-production 90 None Centroamerica TV, Llc Television 82.5 None CLS Audiovisuais, Lda Production services 75 None Digital Humor Web management 67.50 None 71 Distribuidora Digital de Fútbol, S.L. Audiovisual services 100 None Imagina Media Servicios de Producción Audiovisual, S.L.U. Ownership of securities - Audiovisual industry 100 None Estudios Hackenbush, S.L. Advertising 100 None Full Zoom-Producciones Audiovisuaes, lmtda Audiovisual production 50 None Gabinete de Estudios de la Comunicación Audiovisual, S.A.U. Sporting event surveys and reports 100 None GAMP Audiovisual, S.A. Ownership of securities - Audiovisual industry 72.74 Director Geca Minutados, S.L. Sporting event surveys and reports 100 None GLM Brasil Conteudos Audiovisuais, Ltda Audiovisual content 100 None Globepro Telecomunicaciones, S.L. Broadcasting of audiovisual signals via satellite 100 None Globo Media, S.A. Audiovisual content 98.70 None Gol Televisión, S.L.U. Television 100 None GTV Estudios, Lda Multimedia services 100 None Hangin, S.A. Distribution of audiovisual programmes 50 None Hostoil Produkzioak, S.L. Audiovisual production 100 None Imagina Contenidos Audiovisuales, S.L. Audiovisual content 100 None Imagina EU Audiovisual production 100 None Imagina Group France Exploitation of mobile units for broadcasting of sporting events 100 None Imagina International Sales, S.L. Marketing of audiovisual works 100 None Imagina USA, Inc. Purchase and sale of audiovisual rights 100 None Imalatam, S.L.U. Audiovisual production and services 82.5 None Imalatam Caracas, C.A. Audiovisual production 40.43 None Imasblue Estudio, S.L. Postproduction services 54.46 None Infinia, AD, S.A. Postproduction services 54.46 None K 2000, S.A. Content production 100 None Labo Productions 2007, LLC Content production 82.5 None Liquid Media, S.L. Television, telematic network and internet content 100 None LVM Mexico Audiovisual production 82.50 None Media 3.14, S.L. Television content production 90 None Media Base Sports, S.L. Image right management (sports) 55 None Media Burst Servicios para Empresas Audiovisuais Sociedad Unipessoal Audiovisual-industry related industrial facilities 100 None Media Cam Producción Audiovisual, S.L. Management and exploitation of marketing rights 100 None Media Luso Produçoes para la Televisao, Lda Videographic production 100 None Media World, LLC Distribution of television rights, television production and sports marketing 82.5 None Mediaconti Servicios de Continuidad, S.L. Audiovisual continuity services 100 None Mediamag Management Kft Videographic production 100 None Mediamóvil Unidad de Producción, S.L. Equipment and technical facilities for audiovisual production-related fields 60 None Mediapro Middle East FZ L.L.C. Audiovisual production and services 100 None Mediapropiedades, S.A. Audiovisual production and services 50 None Mediarena Servicios, S.L.U. Videographic production 100 None Mediasur Producciones Audiovisuales, S.L. Videographic production 100 None 72 Mediatem Canales Temáticos, S.L. Videographic production 100 None Molinare, S.L.U. Purchase and sale of shares 100 None MW Colombia LLC Audiovisual production and services 82.5 None Nuevas Iniciativas Audiovisuales, S.L. Exploitation of radio broadcasting companies or media 100 None Ombú Producciones, S.A. Film production 62.96 None Omnicamm4Sky Television services 50 None Overon America, Llc Broadcasting 100 None Overon Bulgaria EOOD Broadcasting 100 None Overon US, Inc. Broadcasting 100 None Ovideo TV, S.A. Production and editing of films and video programmes 60 None Pasiones TV, Llc TV channel management 49.5 None Plataforma de Televisión Digital Terrestre, S.L. Dormant Company - Audiovisual communication services 100 None Pro TV Global Production Services FZ-LLC. Audiovisual production and services 100 None Prom TV, S.A. Audiovisual production 70 None Promofilm California, L.L.C. Audiovisual production 82.5 None Promofilm Colombia, Ltda. Audiovisual production 100 None Media Producoes Brasil, LTDA Audiovisual production 100 None Promofiction Llc Audiovisual production 82.50 None Promofilm México S.A. de C.V. Audiovisual production 100 None Promofilm Music, L.L.C. Audiovisual production 82.5 None Promofilm US, L.L.C. Audiovisual production 82.5 None Promofilm, S.A. Audiovisual production 100 None Revolution Broadcast Produçoes Artisticas Ltda Exploitation of mobile units for broadcasting of sporting events 65 None Royal Media Internacional, S.L. Videographic production 100 None Servicios Audiovisuales Overon, S.L. Broadcasting 100 None Servicios Integrales Unitecnic, S.L. Audiovisual-industry related industrial facilities 100 None Sociedad Europea de Unidades Móviles, S.L. Exploitation of mobile units for broadcasting of sporting events 96.84 None Sociedad General de Producción y Explotación de Contenidos, S.L. Television content production 100 None Teleamazonas Internacional, Llc Theme channel production and management 41.25 None Trivideo Tricicle Ovideo, S.L. Audiovisual production 30 None T&M Tecnologia & Media, Consultadoria e Produçao Multimedia, Lda Videographic production 50 None Television Dominicana, Llc Television channel management 82.5 None US Imagina, Llc Audiovisual production and services 82.5 None Wisdom TV España, S.L. Production, marketing and consulting services 50 None Wisdom Televisión, Sistemas Informáticos para Televisao, Lda Production, marketing and consulting services 50 None Wtvision Sistemas Informáticos para Televisao, Ltda Production, marketing and consulting services 50 None Wtvision, INC. Production, marketing and consulting services 50 None You Whisp Company, S.L. Consulting and integration of technological tools for audiovisual content management 28.05 None Umedia Sports Advertising, S.L. Static advertising 12 Hearts, LLC Any lawful company object 50 41.25 None None 73 In addition, Imagina Media Audiovisual, S.L.U. notified the Parent that José Miguel Contreras Tejera, the representative designated by it to perform the duties of director of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013 held direct or indirect equity interests in the following companies engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing its Group: Investee Activity engaged in Imagina Media Audiovisual, S.L. Ownership of securities Audiovisual industry JMC 2000, S.L. Audiovisual consulting % of ownership 3.45 50 Position held in the company, where applicable Director Sole director The director Gamp Audiovisual, S.A. notified the Parent that Josep María Benet Ferrán, the representative designated by it to perform the duties of director of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013 held a direct or indirect equity interest in the following company engaging in an activity that is identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. and the companies composing its Group: Investee Imagina Media Audiovisual, S.L. Activity engaged in Ownership of securities Audiovisual industry % of ownership 14.27 Position held in the company, where applicable Individual representing the director Mediavisual Group, BV B) With regard to the activities performed by the directors, as independent professionals or as employees, that are identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A., at 31 December 2013, the directors or their representatives had notified the Parent of the following: Nicolás Abel Bellet de Tavernost: Company through which the activity is performed Position held or functions performed Television Rtl Group, S.A. Member of the Operations Management Committee Television Bertelsmann Member of the Management Committee Multimedia Métropole Television, S.A.* Chairman of the Board of Directors Radio Ediradio (RTL Radio) Member of the Supervisory Board Activity * As a result of this position, he carries on activities related to the audiovisual industry through Groupe M6 in France. 74 Josep María Benet Ferrán, representing the director Gamp Audiovisual, S.A.: Activity Company through which the activity is performed Position held or functions performed Ownership of securities - Audiovisual industry Imagina Media Audiovisual, S.L. Individual representing the director Mediavisual Group, BV Planning, development, management and operation of construction work, equipment, offices and facilities Mediacomplex, S.L. Director Editing, printing, distribution and sale of newspapers Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Holding company Gamp Audiovisual, S.A. News programme productions Medianews Canarias, S.L. Director acting jointly Creation, promotion and marketing of advertising media Umedia Sports Advertising, S.L. Director Production and editing of film, video and all manner of programmes Ovideo Tv, S.A. Director Audiovisual telecommunications services and audio and video data transmission services using all manner of technologies Servicios Audiovisuales Overon, S.L. Holding company Rilson XXI, S.L. José Miguel Contreras Audiovisual, S.L.: Activity Tejera, representing the Individual representing the sole director Mediaproducción, S.L.U. Individual representing the director Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Individual representing the director Imagina Media Inversiones en Comunicación Audiovisual, S.L.U. Individual representing the director acting severally Atas Corp, S.L.U. director Company through which the activity is performed Imagina Media Position held or functions performed Ownership of securities - Audiovisual industry Imagina Media Audiovisual, S.L. Director Ownership of securities Audiovisual industry Gamp Audiovisual, S.A. Director Audiovisual production Grupo Globo Media, S.A. Representative of the director JMC 2000, S.L. Audiovisual production Globo Media, S.A. Director Ownership of securities Audiovisual industry Imagina Contenidos Audiovisuales, S.L. Director Distributor of audiovisual formats Imagina International Sales, S.L.U. Director Audiovisual consulting JMC 2000, S.L. Sole director 75 Silvio González Moreno: Activity Company through which the activity is performed Position held or functions performed Advertising Atres Advertising, S.L.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Sales Antena 3 Eventos, S.A.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Audiovisual production Antena 3 Films, S.L.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Gaming operations Antena 3 Juegos, S.A.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Sales Antena 3 Multimedia, S.L.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) News production Antena 3 Noticias, S.L.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Production of TV commercials Guadiana Producciones, S.A.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Management of rights Música Aparte, S.A.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Sale of digital print products Atresmedia Foto, S.L. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) since 5 December 2013 Radio Uniprex, S.A.U. Representative of the sole director (Atresmedia Corporación de Medios de Comunicación, S.A.) Television Antena 3 Televisión Digital Terrestre de Canarias, S.A.U. Representative of the sole director (Uniprex, S.A.U.) Television Uniprex Televisión, S.L.U. Representative of the sole director (Uniprex, S.A.U.) Television Uniprex Valencia TV, S.L.U. Representative of the sole director (Uniprex, S.A.U.) Marco Drago: Activity Holding company - Television production companies Company through which the activity is performed Position held or functions performed Zodiak Media, S.A. Director Elmar Heggen: Activity Company through which the activity is performed Position held or functions performed Ownership of securities Audiovisual industry RTL Group, S.A. Chief Financial Officer and Head of the Corporate Centre of the RTL Group Ownership of securities Audiovisual industry CLT–UFA, S.A. Director Ownership of securities Radio industry Immobilière Bayard d’Antin, S.A. Director Radio in Belgium Inadi, S.A. Director 76 Radio and advertising in France IP France, S.A. Director Television RTL 9, S.A. Director Television in Belgium RTL Belgium, S.A. Director Ownership of securities Audiovisual industry RTL Group Central and Eastern Europe, S.A. Director Ownership of securities Audiovisual industry RTL Group Germany, S.A. Director Ownership of securities Audiovisual industry RTL Group Central and Eastern Europe, GmbH Executive chairman Radio in Germany RTL Radio Berlin, GmbH General Manager Television in Germany RTL Television, GmbH General Manager Ownership of securities - Audiovisual industry Fremantlemedia, S.A. Chairman of the Board of Directors Ownership of securities - Audiovisual industry RTL Group Deutschland, GmbH General Manager Ownership of securities - Audiovisual industry RTL Group Vermögensverwaltung, GmbH General Manager Production RTL Group Services, GmbH General Manager Ownership of securities Audiovisual industry Ufa Film und Fernseh, GmbH General Manager Ownership of securities - Audiovisual industry RTL TV D.O.O. Director Radio in France Ediradio, S.A. Member of the Supervisory Committee Television in France Métropole Television, S.A. Member of the Supervisory Committee Ownership of securities - Audiovisual industry Audiomedia Investments, S.A. Chairman of the Board of Directors Radio broadcasting Broadcasting Center Europe, S.A. Chairman of the Board of Directors Technical services Media Properties, Sàrl Chairman of Management Committee Television and radio holding company RTL Nederland Holding, BV Chairman of the Supervisory Committee New technologies Duchy Digital, S.A. Chairman of the Board of Directors The following must be stated in relation to the activities performed by the aforementioned directors: 1.- In all cases, the proprietary directors discharge their professional activities at companies that form part of the corporate groups of their respective reference shareholders, which they represent on the Board of Directors of Atresmedia Corporación de Medios de Comunicación, S.A. 2.- At the time of their appointment by the shareholders at the Annual General Meeting, information was disclosed on the relationship existing between the aforementioned proprietary directors and the shareholders that proposed their appointment in each case, to whom they were therefore associated as non-executive proprietary directors. 77 3.- In the case of the Chief Executive Officer, Silvio González, executive director, all the professional activities indicated are performed at companies owned by the Atresmedia Group and, therefore, no situation of competition arises. In all cases, he acts as representative of the legal entity holding the position of sole director, which may be Atresmedia Corporación de Medios de Comunicación, S.A. itself or any of its subsidiaries. Each of these subsidiaries has its own management team. 4.- The inclusion of this information in the Company’s consolidated financial statements complies with the provisions of Article 230 of the Spanish Limited Liability Companies Law on the notification of activities to the Annual General Meeting and the obtainment of its express authorisation. The other directors, José Manuel Lara Bosch, Maurizio Carlotti, Mauricio Casals Aldama, Aurora Catá Salas, José Creuheras Margenat, María Entrecanales Franco and Pedro Ramón y Cajal Agüeras have notified the Company that, at 31 December 2013, they did not perform any activities as independent professionals or employees that were identical, similar or complementary to the activity that constitutes the company object of Atresmedia Corporación de Medios de Comunicación, S.A. 28. Events after the reporting period On 19 February 2014, the Parent, through a relevant event communication and subsequent to a resolution of its Board of Directors, announced a partial novation of the integration agreement entered into on 14 December 2011 with Gestora de Inversiones Audiovisuales La Sexta, S.A. ("La Sexta") and its shareholders, which set the terms and conditions for the integration of La Sexta into the Atresmedia Group through a merger by absorption. Specifically, the novation of the agreement relates to the terms and conditions regarding the "Additional Ownership Interest", whereby La Sexta shareholders were granted the right to receive an additional ownership interest of 7% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the Atresmedia Group's earnings performance from 2012 to 2016, inclusive. Under the novation, Atresmedia Corporación agreed, with Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L., to bring forward and definitively adjust the delivery of the additional ownership interest that would correspond to these companies. Accordingly, on 24 February 2014 they were delivered, with a charge to treasury shares, ownership interests in Atresmedia Corporación de Medios de Comunicación, S.A. equal to 2.079% and 1.631% of its share capital, respectively. As a result of the negotiation process for this agreement and forming part thereof, other agreements were reached with Gamp Audiovisual, S.A. and Imagina Media Audiovisual, S.L. consisting of the cancellation of their proportional share of the financial derivative agreement described in Note 9 and of the definitive conclusion of other matters relating to the guarantees and obligations under the integration agreement entered into for the merger with Gestora de Medios Audiovisuales la Sexta, S.A. (see Note 13). The recognition of all these transactions will give rise to an estimated reduction of EUR 13,631 thousand in the shareholders' equity of the Parent in the financial statements for 2014. 78 The terms and conditions agreed upon in the integration agreement relating to Gala Desarrollos Comerciales, S.L. remain unchanged and, accordingly, it continues to be entitled to receive an additional ownership interest of 0.508% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the earnings performance of the Atresmedia Group, as indicated above. 29. Explanation added for translation to English These consolidated financial statements are presented on the basis of the regulatory financial reporting framework applicable to the Group (see Note 2-a). Certain accounting practices applied by the Group that conform with that regulatory framework may not conform with other generally accepted accounting principles and rules. 79 Atresmedia Corporación de Medios de Comunicación, S.A. (formerly Antena 3 de Televisión, S.A.) and Subsidiaries Consolidated directors' report 2013 Translation of a report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails. ATRESMEDIA AND SUBSIDIARIES GROUP (CONSOLIDATED GROUP) DIRECTORS' REPORT FOR 2013 Business performance and situation of the Group In 2013 economic activity in Spain displayed a gradual improvement in stark contrast to events in 2012. The easing of financial tensions in Southern Europe and in Spain in particular led to less restrictive economic policies. Both of these events resulted in an improvement in investment, consumption and employment indicators, coupled with the favourable developments already witnessed in the external sector. Although the known data are far from satisfactory, they have had a positive impact on the advertising market, itself bolstered by the improved situation or expectations of the advertisers' markets. Estimates place the decline in the advertising market at 8.1% in 2013, smaller than the 16.0% drop in 2012. The quarter-by-quarter performance was of particular note, recovering from a double-digit year-on-year drop in the first quarter to slight growth in the fourth. However promising the trend may be, the fact remains that, for yet another year, advertising expenditure has dropped very significantly again this year and 2013 figures equalled those for 1998, 15 years ago. Television advertising performed better than average, with a 6.2% decline, while radio fell by 11.0%. 2013 saw the consolidation of the television model launched in 2012 with the merger by absorption of Gestora de Inversiones Audiovisuales La Sexta, S.A. into the Parent. As regards audience, Atresmedia attained an average share of 28.8% in 2013, representing an increase of three points - the highest of all television groups. Our main channels, Antena 3 and La Sexta, were the fastest growing national channels, growing by 1.0 and 1.1 points, respectively. Our share of the television advertising market also grew by 1.3 points. Lastly, the synergies obtained in costs were higher than initially expected and the merger was completed with the greatest of success. Consolidated revenue amounted to EUR 796 million, up from EUR 713 million in 2012. It should be noted that in 2013 La Sexta activity was included for the entire year, while in 2012 it was only included for the last three months, since the merger took effect from October 2012. In like-for-like terms, television revenue performed better than the market as a whole and, as indicated above, the market share improved. Once again in 2013, other income increased by 18.9% to EUR 34 million. The Group's total income was EUR 830 million, up 12% on 2012. The radio business, operated via Uniprex, S.A.U., consolidated its positive trend in listener numbers, which reached 4.8 million. 2.6 million of these listeners related to Onda Cero while 2.1 million related to the music station Europa FM. 1 Although the comparison of expenses is, logically, also affected by the inclusion of La Sexta in October 2012, their evolution is highly satisfactory. Total operating expenses fell by 5.9%, evidencing both the cost synergies achieved and the Group's high degree of cost discipline. In addition, these lower expenses have not entailed a decline in the ability to compete in the market. As mentioned, audience and market share in both television and radio have increased simultaneously. Profit from operations amounted to EUR 63 million, 3.7 times greater than the figure for 2012. Lastly, profit for the year after tax stood at EUR 46 million, as compared with EUR 32 million in 2012. On 18 December 2013, the Supreme Court issued an order enforcing the judgment which rendered void the resolution of the Spanish Cabinet of 16 July 2010 regarding the allocation of channels. At present, based on the information available, the interpretation of these decisions and the fact that Atresmedia Corporación de Medios de Comunicación, S.A. has met all the commitments and obligations imposed upon it, a satisfactory solution is still expected to be reached. Significant events for the Group after the reporting period On 19 February 2014 the Parent, through a relevant event communication and subsequent to a resolution of its Board of Directors, announced a partial novation of the integration agreement entered into on 14 December 2011 with Gestora de Inversiones Audiovisuales La Sexta, S.A. ("La Sexta") and its shareholders, which set the terms and conditions for the integration of La Sexta into the Atresmedia Group through a merger by absorption. Specifically, the novation of the agreement relates to the terms and conditions regarding the "Additional Ownership Interest", whereby La Sexta shareholders were granted the right to receive an additional ownership interest of 7% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the Atresmedia Group's earnings performance from 2012 to 2016, inclusive. Under the novation, Atresmedia Corporación agreed, with Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L., to bring forward and definitively adjust the delivery of the additional ownership interest that would correspond to these companies. Accordingly, on 24 February 2014 they were delivered, with a charge to treasury shares, ownership interests in Atresmedia Corporación de Medios de Comunicación, S.A. equal to 2.079% and 1.631% of its share capital, respectively. As a result of the negotiation process for this agreement and forming part thereof, other agreements were reached with Gamp Audiovisual, S.A. and Imagina Media Audiovisual, S.L. consisting of the cancellation of their proportional share of the financial derivative agreement described in Note 9 and of the definitive conclusion of other matters relating to the guarantees and obligations under the integration agreement entered into for the merger with Gestora de Medios Audiovisuales la Sexta, S.A. 2 The recognition of all these transactions will give rise to an estimated reduction of EUR 13,631 thousand in the shareholders' equity of the Parent in the financial statements for 2014. The terms and conditions agreed upon in the integration agreement relating to Gala Desarrollos Comerciales, S.L. remain unchanged and, accordingly, it continues to be entitled to receive an additional ownership interest of 0.508% of the share capital of Atresmedia Corporación de Medios de Comunicación, S.A., conditional upon the earnings performance of the Atresmedia Group, as indicated above. Outlook for the Group The main indicators suggest that the improvement in economic activity will continue in the near future. Although household consumption is not expected to make any major leap forward, it is expected to display increasingly positive growth. This is consistent with significant growth in the advertising market, whose elasticity with respect to consumption is very high, as displayed by the massive decline in recent years. Accordingly, 2014 is expected to be at least slightly positive, with the growth achieved being bolstered in the coming years. This more positive environment allows for some optimism regarding the immediate future, and will make it possible to reap all the fruits of the merger carried out in recent years. Although the outlook for the market and revenue is positive, cost discipline will remain a cornerstone of management, so as to enable the margins of the television and radio businesses to grow significantly. The high degree of quality and diversity in the content on offer is expected to be maintained and, accordingly, we will be able to continue to enjoy the boost this provides. No major corporate transactions, such as the recent merger, are expected to be carried out. However, we will devote greater efforts to the objective of earning income from audiovisualworld activities other than advertising. Nubeox, the pay video-on-demand content platform, is one of the initiatives in this area, as are participation in the Hola TV channel, broadcast in South America and the United States, tualbum.es. and EnglishHouse.TV. Furthermore, the progress made on the Internet will continue: 2013 saw 12 million different visitors to our websites and a 28% increase in pageviews. The recent launch of Atresplayer, an online multi-platform content viewing platform, has proven to be a great success, which will allow us to achieve greater dissemination of our content and to obtain additional revenues from both advertisers and paying spectators. The framework for all these developments will continue to be a prudent financial policy which, as has been the case to date, will couple a continued sound equity position with a dividend policy in line with that of recent years. 3 Research and development activities The Group does not itself carry on any specific research and development activities. However, it invests, on an ongoing basis, in all new technologies related to engineering, systems and content distribution. In this field Atresmedia Corporación de Medios de Comunicación, S.A. has and uses state-of-the-art technology, which enables it to be at the forefront in the roll-out of digital activities and in the Internet. Treasury share acquisitions No transactions involving treasury shares were performed in 2013. The Parent therefore continued to hold 15,818,704 treasury shares of EUR 0.75 par value each, representing 7.01% of its share capital. Use of financial instruments by the Group and main financial risks The Group performs transactions with financial instruments to hedge the foreign currency risk on the purchases of broadcasting rights in the year. At 31 December 2013, the Parent had arranged instruments to hedge its foreign currency asset and liability positions amounting to USD 89,863 thousand, at a weighted average exchange rate of EUR 1.3117/USD 1. The net fair value of these hedging instruments gave rise to a financial asset of EUR 698 thousand and a financial liability of EUR 3,232 thousand at year-end. Also, interest rate swaps were arranged in order to fix the financial cost arising from the floating rates established in the syndicated financing agreement entered into in August 2013. The fair value of these swaps at 31 December 2013 gave rise to a financial asset of EUR 5 thousand. The Group has established the risk management systems required to ensure that transactions in markets are performed in accordance with its established policies, rules and procedures and within the limits approved for each case. The Group’s main financial risks are as follows: a) Foreign currency risk. The Group’s foreign currency risks relate mainly to the payments to be made in international markets to acquire broadcasting rights. In order to mitigate foreign currency risk, the Group arranges hedging instruments, mainly currency forwards. 4 b) Liquidity risk. The Group’s liquidity policy is to arrange credit lines and short-term investments that are sufficient to support its financial needs, on the basis of expected business performance. c) Credit risk. The Group does not have significant credit risk since the average customer collection period is very short and guarantees are required for deferred payment sales. Cash placements are made and derivative instruments are arranged with institutions of recognised solvency. d) Interest rate risk. Both the Group's cash and its bank borrowings are exposed to interest rate risk. The Group's financing is arranged at interest rates tied to Euribor. To mitigate this risk, the Parent has arranged interest rate swaps to limit the finance costs arising from its floating-rate borrowings. In accordance with Article 538 of the Spanish Limited Liability Companies Law, the Annual Corporate Governance Report (IAGC) forms part of this Directors' Report. The IAGC constitutes a relevant event and is communicated to the Spanish National Securities Market Commission, which publishes it on its website: www.cnmv.es. It is also available on the Parent's corporate website, www.atresmediacorporacion.com. 5 ANNUAL CORPORATE GOVERNANCE REPORT OF LISTED CORPORATIONS A OWNERSHIP STRUCTURE A.1 Complete the following table on the Company's share capital: Date last modified Share capital (€) Number of shares 31/10/2012 169,299,600 225,732,800 Number of voting rights 225,732,800 If there are different classes of shares with different associated rights, indicate as follows: Yes X No Class A B A.2 Number of shares Par value each Number of voting rights per share Different rights 0.75 0.75 Ordinary shares 0.75 Such shares do not grant entitlement to dividends with a charge to profit generated during the 24 months following the registration in the Madrid Mercantile Register of the merger of Atresmedia Corporación and La Sexta (that is, until 31/10/14). 224,551,504 1,181,296 0.75 Detail the direct and indirect owners of significant holdings, of their Company at year‐end, excluding directors: Name or company name of shareholders Number of direct voting rights GRUPO PLANETA‐ DE AGOSTINI, S.L. UFA FILM UND FERNSEH, GMBH Indirect voting rights Direct owner of the Number of shareholding voting rights % of total voting rights 94,123,471 0 0 41.697 43,264,558 0 0 19.166 Indicate the most significant movements in the shareholder structure occurring during the year: Name or company name of shareholders A.3 Transaction date Description of the transaction Complete the following tables on members of the Company’s Board of Directors who own voting rights on company shares: Name or company name of director Number of direct rights Indirect rights Direct owner IMAGINA MEDIA 6,442,188 GAMP AUDIOVISUAL, S.A. AUDIOVISUAL, S.L. Mr. Nicolás Abel 82 Bellet de Tavernost Total % of voting rights held by the Board of Directors. Number of equivalent shares % of total voting rights 8,213,514 6.492 0 Number of voting rights 6.492 1 Complete the following tables on members of the Company’s Board of Directors who own rights on Company shares: Name or company Number of direct name of director voting rights Indirect voting rights Direct owner of Number of voting the shareholding rights % of total voting rights Total % of voting rights held by the Board of Directors. A.4 Indicate, if appropriate, relationships of a family, commercial, contractual or corporate nature existing between the owners of significant holdings, to the extent they are known by the Company, unless they are of little significance or arise from the ordinary course of business or trade: Related name or company name Type of relationship Brief description Corporate GAMP AUDIOVISUAL, S.A. is an IMAGINA GROUP company and is controlled by IMAGINA MEDIA AUDIOVISUAL, S.L. in accordance with article 4 of the Securities Market Law, through the company MEDIAPRODUCCIÓN, S.L. GAMP AUDIOVISUAL, S.A. IMAGINA MEDIA AUDIOVISUAL, S.L. A.5 Indicate, if appropriate, relationships of a commercial, contractual or corporate nature existing between the owners of significant holdings, and the Company and/or its Group, unless they are of little significance or arise from the ordinary course of business or trade: A.6 Related name or company name Type of relationship Brief description Indicate whether side agreements concerning the Company have been notified to it under articles 530 and 531 of the Spanish Companies Law ("Ley de Sociedades de Capital"). Where applicable, briefly describe them and list the shareholders bound by such agreement: Yes X No % of share capital involved 41.697 Brief description of the agreement On 25 May 2005, Kort Geding, S.L. granted notification of the agreement entered into by its shareholders regarding the absorption of Grupo Planeta‐ De Agostini, S.L. and DeA Multicom, S.L. by Kort Geding, S.L., and of its intention to change the latter's company name to the current name of Grupo Planeta de Agostini, S.L. On that same date, the shareholders of Kort Geding, S.L. granted notification of the full wording of the agreement entered into by Planeta Corporación, S.R.L., De Agostini Invest, S.A., De Agostini International, B.V. and DeA Multicom, S.L. in relation to the Group's business restructuring in Spain. In this agreement the Parties: − Ratify the agreements that they had entered into in May 2003 with the shareholder RTL (now UFA Film). 2 − State their intention not to alter their representation on the Board of Directors of Atresmedia Corporación and not to individually acquire new holdings therein. − Establish certain rules to adopt decisions relating to Atresmedia Corporación: proposals for the appointment of employees and representatives, non‐compete covenants, measures to be adopted in the event of disagreements among the parties, etc. On 20 December, 2005, De Agostini Communications, S.A. stated, in relation to the agreement signed on 25 May of the same year (mentioned above), that De Agostini Invest, S.A. had been spun off and dissolved and that, as a result, the shares of Grupo Planeta‐ De Agostini, S.L. (direct holder of the Atresmedia Corporación shares owned by De Agostini Invest, S.A.), were allocated to the Luxembourg‐based company, De Agostini Communication, S.A. Participants in the side agreement PLANETA CORPORACIÓN, S.R.L. DE AGOSTINI COMMUNICATION, S.A. % of share capital involved 60.863 The agreement described in this section in relation to the shareholder RTL Group Communication, S.L.U. now relates to the company UFA FILM UND FERNSEH GMBH SOLE‐SHAREHOLDER COMPANY. RTL Group Communication, S.L.U., which was the previous owner of the holding in Atresmedia Corporación, was absorbed in 2009 through a merger by absorption by UFA FILM UND FERNSEH GMBH SOLE‐SHAREHOLDER COMPANY. As a result of this operation, UFA FILM UND FERNSEH GMBH SOLE‐SHAREHOLDER COMPANY became the owner of the shares of Atresmedia Corporación. Brief description of the agreement Following the admission to listing of the Company's shares, on 29 October 2003, Grupo Planeta ‐ de Agostini, S.L (then called Kort Geding, S.L.) granted notification of the agreements entered into by it, Planeta Corporación, S.R.L. and DeA Multicom, S.L. with RTL Group Communications, S.R.L. and RTL Group, S.A. on 30 June 2003, under which the parties adopted, in relation to Atresmedia Corporación, agreements relating to: − The Company's shareholder stability and the granting of reciprocal acquisition rights on its holdings. − Non‐control commitment or control by a third party of Atresmedia Corporación. − Company management agreements, variable remuneration program and loyalty‐building of executives. On 27 June 2007, the signatories of the aforesaid agreement signed an extension supplement, granting the agreement an indefinite duration, with the possibility of cancellation by any one of the parties from 30 June 2009 onwards, and they ratified its content, except for clauses which had become invalid due to the time elapsed or because the circumstances which prompted their inclusion had changed. Participants in the side agreement UFA FILM UND FERNSEH, GMBH SOLE‐SHAREHOLDER COMPANY GRUPO PLANETA‐ DE AGOSTINI, S.L. Indicate whether the Company knows of the existence of concerted actions amongst its shareholders. If so, describe them briefly: 3 Yes No X Participants in concerted action % of share capital involved Brief description of the agreement If, during the year, there have been any amendments to or rupture of such pacts, agreements or concerted actions, please expressly indicate them: Indicate whether any individual or legal entity exercises or may exercise control over the Company pursuant to article 4 of the Securities Market Law. If so, identify them: A.7 Yes No X Name or company name Observations A.8 Fill in the following tables regarding the Company’s treasury shares: At year‐end: Number of direct shares Number of indirect shares (*) Total % of share capital 15,818,704 7.008 (*) Through: Name or company name of direct shareholder Number of direct shares Total Detail of the significant changes occurring during the year, pursuant to Royal Decree 1362/2007: Notification date Total direct shares acquired Total indirect shares acquired Total % of share capital A.9 Detail the conditions and duration of the current mandate of the Shareholders' Meeting to the Board of Directors to issue, re‐purchase or transfer treasury shares. The resolution in force in this area was that adopted by the 2010 General Shareholders’ Meeting, applicable until 2015, which is transcribed as follows: The Company is authorised, directly or through any of its Group companies, to acquire own shares, and such shares may subsequently be disposed of, establishing the limits and requirements of these transactions, while granting the Board of Directors the powers necessary to execute the resolutions reached by the Shareholders' Meeting in this regard. 4 Consequently, the Company is authorised, directly or through any of its subsidiaries, to acquire shares by any means allowed by Law, even with a charge to profits for the year and/or unrestricted reserves, and such shares may subsequently be disposed of, in accordance the legislation in force, while granting the Board of Directors the powers necessary to execute the resolutions reached by the GSM in this regard. The following system is established for the acquisition of own shares: − The par value of the acquired shares, which will be added to those already owned by the Company and its subsidiaries, should not exceed the authorised legal limit at any given time. − The acquisition, including all the shares that the Company or anyone acting in its representation may have previously acquired or held in a portfolio, should not cause the Company's equity to be less than its share capital plus the restricted legal and by‐law reserves. For this purpose, equity is considered to be the amount deemed as such in accordance with the criteria used to prepare the annual accounts, minus the profits allocated directly to said equity, plus the amount of uncalled share capital, and the par value and the share premium of the subscribed share capital that is being recorded as a liability for accounting purposes. − The shares acquired must be paid in full. − The acquisition price will neither be less than the par value nor exceed the quoted market value by 20 per cent (20%), and the acquisition transactions must abide by the regulations and customs of the stock markets. It is expressly authorised that the shares acquired by the Company or its subsidiaries by virtue of this authorisation may be allocated, wholly or partially, for their delivery to beneficiaries of future remuneration schemes, or that they are the consequence of the exercise of share options in favour of Company workers, employees or directors. The Board of Directors is empowered, in the broadest sense, to use the authorisation forming the subject matter of this resolution and to fully execute and develop it. Furthermore, the Board of Directors is authorised to delegate such powers to the Executive Committee, the Chief Executive Officer or any other person expressly empowered by the Board in this respect and to the extent considered appropriate. This authorisation will be granted for five (5) years from the date on which it was approved at this General Meeting, and any unexecuted authorisation granted to the Board of Directors by the General Shareholders’ Meeting held on 25 March 2009 will have no effect. A.10 Indicate whether there are any restrictions on the transferability of securities and/or any restrictions on voting rights. In particular, the existence of any type of restrictions which may hinder the taking of control of the Company through the acquisition of its shares on the market will be notified. Yes No X Description of the restrictions In the current Articles of Association there are no restrictions of this kind. However, article 36 on Pluralism in the Television Audiovisual Market of the Audiovisual Media Law (Law 7/2010 of 31 March) stipulates: 1. Natural or legal persons may hold shares or voting rights simultaneously in different television audiovisual media service providers. 2. 2. However, no natural or legal person may acquire significant holdings in more than one national television audiovisual media service provider when the average audience of all the channels of the national providers considered exceeds 27% of the total audience for the twelve consecutive months prior to the acquisition. 3. 3. If the average audience exceeds 27% of the total audience after the acquisition of new significant holdings, this shall have no effect on the holder. 5 A.11 4. 4. The shares or voting rights of natural or legal persons from countries that are not members of the European Economic Area are subject to compliance with the principle of reciprocity. In the event of an increase in the shares held by natural and legal persons from countries that are not members of the European Economic Area, on the entry into force of this Law, the total percentage held in the share capital of the television audiovisual media service provider must be less than 50% at all times. 5. No natural or legal person may acquire significant holdings or voting rights in more than one television audiovisual media service provider: a) When national audiovisual media service providers accumulate rights of use over the radioelectric public domain which, as a whole, are greater than the technical capacity of two multiplex channels. b) When autonomous community audiovisual media service providers accumulate rights of use over the radioelectric public domain which, as a whole, are greater than the technical capacity of a multiplex channel. c) No natural or legal person or participant in the share capital of a national television audiovisual media service provider may acquire significant holdings or voting rights in the capital of another provider of the same service, where this would prevent the existence of at least three different private national television audiovisual media service providers, thus ensuring respect for pluralism of information. Indicate whether the Shareholders' Meeting has resolved to adopt neutralization measures with regard to a takeover bid under Law 6/2007. Yes No X A.12 If so, explain the measures approved and the terms under which the restrictions would become inefficient: Indicate whether the Company has issued securities which are not traded on regulated EU markets. Yes X No Where appropriate, indicate the different classes of shares and, for each class of shares, the rights and obligations conferred. The class B shares identified in section A.1 do not generate entitlement to receive dividends with a charge to the profits earned by the Company in the 24 months following the date of registration of the merger of Atresmedia Corporación and La Sexta in the Madrid Mercantile Register, regardless of the date on which they are distributed, that is, the profits earned until 31 October 2014. These shares are not traded on any regulated market. At the appropriate time, the admission to listing of these shares on the same markets as the remaining shares forming the share capital of Atresmedia Corporación will be requested. SHAREHOLDERS' MEETING B.1 Indicate and, where applicable, give details as to whether there are any differences with respect to the minimum standards established under the Spanish Companies Law with respect to the constitution quorum of the Shareholders' Meeting. B Yes No X 6 % quorum different to that stipulated in article 193 of the Spanish Companies Law for general cases Quorum required on first summons Quorum required on second summons % quorum different to that stipulated in article 194 of the Spanish Companies Law for the special cases of article 194 of the Spanish Companies Law 0 0 0 0 Description of the differences B.2 Indicate and, where applicable, give details on any differences with respect to the system established under the Spanish Companies Law regarding the adoption of corporate resolutions: Yes No X Describe the differences which arise with respect to the system established under the Spanish Companies Law. Reinforced majority other than that established in article 201.2 of the Spanish Companies Law for matters regulated under article 194.1 of the Spanish Companies Law Other cases of reinforced majority % established by the Entity to adopt resolutions Describe the differences B.3 Indicate the regulations governing changes in the Company's Articles of Association. In particular, the majorities envisaged to amend the Articles of Association and, where appropriate, the regulations foreseen to protect the rights of shareholders in the amendment of the Articles of Association will be notified . Changing the Company’s Articles of Association is the exclusive competency of the General Shareholders’ Meeting (article 16.6 of the Company's Articles of Association), governed by articles 285 to 345 of the Spanish Companies Law, with no specialisation. The following requirements are established by Law: − That the directors, or, when appropriate, the shareholders who drafted the proposal, prepare a written report justifying such proposal. − That the scope of the changes that must be made are clearly explained at the General Shareholders’ Meeting. − That in the announcement of the General Meeting, all shareholders are notified of their right to examine the entire text relating to the proposed change at the Company's registered offices, as well as the report on such change, and to request the handing over or free delivery of said documents. − That the resolution be adopted at the General Shareholders’ Meeting, in accordance with articles 194 and 201 of the Spanish Companies Law. In all cases, the resolution will be recorded in a public deed that will be filed in the Mercantile Register, and it will be published, once filed, in the Official Bulletin of the Mercantile Register. B.4 Provide attendance data on the Shareholders' Meetings held during the year to which this report refers, and that of the preceding year's meetings: 7 Attendance data Date of GSM 24/04/2013 B.5 % shareholders present % attending by proxy E‐voting Others 0.056 67.691 0.003 8.026 % voting remotely Total 75.776 Indicate whether any restrictions exist regarding the Articles of Association establishing a minimum number of shares required to be able to attend the Shareholders' Meeting: Yes X No No. of shares required to attend the Shareholders' Meeting 400 B.6 Indicate whether it has been resolved that certain decisions leading to a structural modification of the Company (“subsidiarisation”, purchase and sale of essential operating assets, operations equivalent to Company liquidation, etc.) must be submitted for the approval of the Shareholders' Meeting, although such approval is not expressly required under the Mercantile Laws. Yes X No B.7 Indicate the address and means of access to the Company's web page, to information on corporate governance and other disclosures on the Shareholders' Meetings which must be placed at the disposal of shareholders through the Company's web page. www.atresmediacorporacion.com The web page may be accessed through the url www.atresmediacorporación.com, or indirectly through the television contents web page www.antena3.com or the portal www.atresmedia.com. C COMPANY MANAGEMENT STRUCTURE Board of Directors C.1 Detail the maximum and minimum number of directors stipulated in the Articles of C.1.1 Association: C.1.2 Maximum number of directors 15 Minimum number of directors 5 Fill in the following table on the Board members: 8 Name or company Representativ name of director e Mr. José Manuel Lara Bosch Mr. Maurizio Carlotti Position held on the Board Date of first Date of last appointment appointment Executive 16/06/2003 25/03/2009 General Shareholders’ Meeting Deputy Chairman 16/06/2003 25/03/2009 General Shareholders’ Meeting General Shareholders’ Meeting IMAGINA MEDIA AUDIOVISUAL, S.L. Mr. José M. Contreras Tejera Deputy Chairman 25/04/2012 ‐ Mr. Silvio González Moreno Chief Executive Officer 25/04/2007 24/04/2013 Mr. Nicolás Abel Bellet de Tavernost Executive 29/10/2003 25/03/2009 GAMP AUDIOVISUAL, S.A. Executive 25/04/2012 ‐ Mr. Josep M. Benet Ferrán Mr. Mauricio Casals Aldama Executive 25/03/2009 ‐ Ms. Aurora Catá Sala Executive 25/03/2009 ‐ Mr. José Creuheras Margenat Executive 16/06/2003 25/03/2009 Executive 16/06/2003 25/03/2009 Mr. Marco Drago Election procedure General Shareholders’ Meeting General Shareholders’ Meeting General Shareholders’ Meeting General Shareholders’ Meeting General Shareholders’ Meeting General Shareholders’ Meeting General Shareholders’ Meeting Ms. María Entrecanales Franco Executive 25/03/2009 ‐ General Shareholders’ Meeting Mr. Elmar Heggen Executive 21/12/2005 25/03/2012 General Shareholders’ Meeting Mr. Pedro Ramón y Cajal Agüeras Executive 29/08/2003 25/03/2009 Total number of directors General Shareholders’ Meeting 13 Indicate the resignations/dismissals from the Board of Directors during the period subject to reporting: Name or company name of director Status of the director at the date of resignation/dismissal Resignation/dismissal date C.1.3 Fill in the following tables on the Board members and their different statuses: 9 EXECUTIVE DIRECTORS Name or company name of the director Committee informing on his/her appointment Post within company organisation Mr. José Manuel Lara Bosch Appointments and Remuneration Committee Executive Mr. Maurizio Carlotti Appointments and Remuneration Committee Deputy Chairman IMAGINA MEDIA AUDIOVISUAL, S.L. represented by Mr. José Miguel Contreras Tejera Appointments and Remuneration Committee Deputy Chairman Mr. Silvio González Moreno Appointments and Remuneration Committee CEO 4 Total number of executive directors 30.769 % of Board members SIGNIFICANT‐SHAREHOLDER APPOINTED NON‐EXECUTIVE DIRECTORS Name or company name of director Mr. Nicolás Abel Bellet de Tavernost GAMP AUDIOVISUAL, S.A., represented by Mr. Josep M. Benet Ferrán Committee informing on his/her appointment Appointments and Remuneration Committee Appointments and Remuneration Committee Mr. Mauricio Casals Aldama Appointments and Remuneration Committee Mr. José Creuheras Margenat Appointments and Remuneration Committee Mr. Marco Drago Mr. Elmar Heggen Appointments and Remuneration Committee Appointments and Remuneration Committee Name or company name of significant shareholder being represented or which has proposed his/her appointment UFA FILM UND FERNSEH GMBH IMAGINA MEDIA AUDIOVISUAL, S.L. GRUPO PLANETA‐ DE AGOSTINI, S.L. GRUPO PLANETA‐ DE AGOSTINI, S.L. GRUPO PLANETA‐ DE AGOSTINI, S.L. UFA FILM UND FERNSEH GMBH Total number of significant‐ shareholder appointed directors % of Board members 6 46.153 10 Name or company name of director Aurora Catá Sala Profile Aurora is an Industrial Engineer and has an MBA from the Institute of Higher Business Studies (IESE). She began her professional career in the financial sector, first at Bank of America and, subsequently, as Financial Director at Nissan Motor Ibérica until 1996, when she assumed the General Management of RTVE in Catalonia. Following this stage, she occupied the post of Chief Executive Officer of Planeta 2010, and was the Director General of Recoletos Grupo de Comunicación from 2003 until the acquisition of Recoletos by RCS, at which time she assumed the General Management of Unidad Editorial Sociedad de Revistas and the Development Area of the RCS Group in Latam. She has been a member of various Boards of Directors of companies linked to the telecommunications and audiovisual industries. She joined Seeliger & Conde in 2008 as a Partner responsible for Media Practice. She is currently an independent Director at ABANTIA. She has had a seat on the Executive Committees of various institutions in economic and social fields, the Institute of Higher Business Studies (IESE) and the Círculo de Economía, among others. Name or company name of director Ms. María Entrecanales Franco Profile Chairwoman and co‐founder of the Balia Foundation for Infancy formed in 2001, which was awarded the IMPULSA prize in 2011, granted by the Girona Prince Foundation, and the UNICEF Spain 2010 prize for its volunteer network. María has a Law degree from the Complutense University, a Master's Degree in International Law from the London School of Economics (with Honours) and a Master's Degree in the functional management of NGOs from ESADE obtained in 2000. She worked for four years in the law firm 'Araoz Rueda' and has experience in the business field. She currently combines her work in the Balia Foundation with business initiatives. She is the co‐founder of the Lateral chain. She is a member of the Advisory Committee of the Barcelona Contemporary Art Museum and of the Advisory Board of SOS Kinderdorf Spain. She was on the Jury for the Codespa Foundation awards in 2005, 2006, 2007, 2008, 2009 and 2010 , on the Jury for the Fundación Empresa y Sociedad awards in 2007 and on the Jury for the Infancy awards of the Madrid Autonomous Community in 2008. She is a patron of the Antonio Nebrija University. She frequently takes part in round tables and conferences related with the world of the third sector in institutions such as La Caixa, Esade, Carrefour, the Eduardo Baneiros Foundation, etc. En 2011, she received the Spanish national executive woman's prize in the category of Solidarity and Humanitarian Action delivered by Estrategia Directiva. Name or company name of director Mr. Pedro Ramón y Cajal Agüeras Profile Chairman of the Partners' Board of the Ramón y Cajal law firm. He is a State Attorney on leave of absence, and is currently the Secretary to the Board of Directors of Indra Sistemas, S.A. and Renta 4 Banco, S.A. Total number of independent directors % of total directors 3 23.077 Indicate whether any independent director receives from the Company, or from its own Group, any amount or benefit other than directors' remuneration, or any director who maintains or has maintained, during the last year, a business relationship with the Company or with any Group company, be it in his/her own name or as a significant shareholder, director or senior executive of an entity which maintains or which has maintained such relationship. 11 Where appropriate, a reasoned statement of the Board will be included on the reasons for which it is considered that this director may perform his/her functions as independent director. Name or company name of director Description of relationship Reasoned statement OTHER NON‐EXECUTIVE DIRECTORS Committee informing on or proposing his/her appointment Name or company name of director Total number of other non‐executive directors % of total directors Detail the reasons why they cannot be considered to be significant shareholder‐appointed or independent directors, and their affiliations with the Company, its management or its shareholders: Company, executive or Name or company name Motives shareholder to which he/she is of director affiliated Indicate the changes, if any, which may have occurred during the period in the type of directorship of each director: Name or company name of director IMAGINA MEDIA AUDIOVISUAL, S.L. represented by Mr. José M. Contreras Tejera C.1.4 Former status Current status 24/04/2013 Significant‐ shareholder appointed non‐ executive director Internal or executive director Fill in the following table with the information relating to the number of directors in the last four years, and the type of such directors: % of Board members Number of directors of each type C.1.5 Date of the change Year t Year t‐ 1 Year t‐ 2 Year t‐ 3 Year t Year t‐ 1 Year t‐ 2 Year t‐ 3 Executif Significant. Shareholder appointed 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Independent 2 2 2 2 66,6 66,6 66,6 66,6 Other Total 2 2 2 2 15,38 15,38 18,18 18,18 Explain the measures which, where appropriate, were adopted to endeavour to include a number of women on the Board of Directors, thereby enabling a balanced presence of men and women. 12 Explanation of the measures No specific measure was adopted for this purpose. On filling vacancies on the Board or on appointing new directors to the Appointments and Remuneration Committee, assess the competences and knowledge of the persons proposed for the position, and the functions and aptitudes required by the candidates. C.1.6 Explain the measures which, where appropriate, were adopted by the Appointments Committee in order that the selection procedures do not suffer from implicit bias hindering the selection of female directors, and that the Company deliberately seeks to include women which meet the sought‐after professional profile amongst its potential candidates: Explanation of the measures The Appointments and Remuneration Committee guarantees that the selection procedures do not suffer from implicit bias which may give rise to any type of discrimination and, in particular, that they do not hinder the selection of female directors. This Committee informs the Board of Directors of the matters of gender diversity which may arise during the selection processes of new directors. When, despite the measures adopted, where appropriate, the number of female directors is scant or nil, explain the reasons justifying such decision. Explanation of the reasons C.1.7 C.1.8 Explain the form of representation on the Board of the shareholders with significant shareholdings. The significant shareholders are represented on the Board of Directors by directors who have been proposed thereby to the General Shareholders' Meeting and whose appointment was informed upon favourably by the Appointments and Remuneration Committee. Explain, where applicable, the reasons why significant‐shareholder appointed directors have been appointed at the behest of the shareholder whose holding is less than 5% of the capital: Name or company name of shareholders IMAGINA MEDIA AUDIOVISUAL, S.L. Justification IMAGINA MEDIA AUDIOVISUAL, S.L. (IMAGINA) and GAMP AUDIOVISUAL, S.A. (GAMP) were appointed directors at the request of IMAGINA, which is the direct holder of 2.85%, and the indirect holder, through GAMP, of 3.63%, giving rise to a shareholding of 6.49%. Indicate whether formal petitions for presence on the Board have been ignored from shareholders whose holding is equal to or higher than that of others at whose behest significant‐shareholder appointed directors were nominated. Where applicable, explain why these petitions have been ignored. Yes No X 13 Name or company name of shareholders Explanation C.1.9 Indicate if any director has stood down before the end of his/her term in office, if the director has explained his/her reasons to the Board and through which channels, and if the director sent a letter of explanation to the entire Board, explain below at least the reasons that he/she gave: C.1.10 Name of the director Reason for the resignation Indicate the powers, if any, delegated to the chief executive officer(s): Name or company name of director Mr. Silvio González Moreno Brief description All the powers of the Board of Directors, except those which may not be delegated under legal or by‐law regulations. C.1.11 Identify, where appropriate, the members of the Board who assume director or executive posts in other companies forming part of the listed company's group: Name or company name of director Company name of the group entity Mr. Silvio González Moreno ANTENA 3 EVENTOS, S.L.U. Mr. Silvio González Moreno ANTENA 3 FILMS, S.L.U. Mr. Silvio González Moreno ANTENA 3 JUEGOS, S.A.U Mr. Silvio González Moreno ANTENA 3 MULTIMEDIA, S.L.U.. Mr. Silvio González Moreno ANTENA 3 NOTICIAS, S.L.U. Mr. Silvio González Moreno ATRES ADVERTISING, S.L.U. Mr. Silvio González Moreno GUADIANA PRODUCCIONES, S.A.U. Mr. Silvio González Moreno MÚSICA APARTE, S.A.U. Mr. Silvio González Moreno ATRESMEDIA FOTO, S.L.U. Position Representative of the Sole Director (Atresmedia Corporación de Medios de Comunicación, S.A. hereinafter Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Atresmedia Corporación) 14 Mr. Silvio González Moreno UNIPREX, S.A.U. Mr. Silvio González Moreno ANTENA 3 TELEVISION DIGITAL TERRESTRE DE CANARIAS, S.A.U. Mr. Silvio González Moreno Mr. Silvio González Moreno C.1.12 UNIPREX TELEVISION, S.L.U. UNIPREX VALENCIA TV, S.L.U. Representative of the Sole Director (Atresmedia Corporación) Representative of the Sole Director (Uniprex, S.A.U., hereinafter Uniprex) Representative of the Sole Director (Uniprex) Representative of the Sole Director (Uniprex) Detail, where appropriate, the directors of your company who are members of the Board of Directors of other companies listed on official securities markets in Spain other than your Group, which have been notified to the Company: Name or company name of director Company name of the listed Position company Mr. José Manuel Lara Bosch C.1.13 BANCO DE SABADELL, S.A. Director Indicate and, where applicable, explain whether the Company has established rules on the number of boards on which its directors may sit: Yes No X Explanation of the rules C.1.14 Indicate the Company's general policies and strategies which the plenary session of the Board has resolved to approve: Yes No The investment and funding policy x The definition of the structure of the group of companies x The corporate governance policy The corporate social responsibility policy x x The strategic or business plan, and the annual management and budgetary targets; x The policy for the remuneration and performance assessment of senior management x The policy for controlling and managing risks, and the periodic monitoring of the internal control and reporting systems. x The dividend and treasury shares policy, especially their limits. x C.1.15 Indicate the global remuneration of the Board of Directors:: Remuneration of the Board of Directors (thousands of Euros) Amount of global remuneration corresponding to the rights accumulated by the directors in the area of pensions (thousands of Euros) Global remuneration of the Board of Directors (thousands of Euros) 6,218 0 6,218 15 Identify the members of the senior management that are not in turn executive directors, and indicate the total remuneration accrued to them during the year: C.1.16 Name or company name MR. FRANCISCO JAVIER BARDAJÍ HERNANDO MR. FERNANDO COSTI PÉREZ Position(s) Director General of Atresmedia Televisión Director of Auditing and Process Control MS. GLORIA FERNÁNDEZ LOMANA Director General of Antena 3 Noticias MR. JOSÉ MANUEL GONZÁLEZ PACHECO Director General of Atresmedia Digital MR. MIKEL LEJARZA ORTIZ Director General of Atresmedia Cine MR. ANTONIO MANSO MARCOS Financial Director MR. JAVIER NUCHE SANZ MR. EDUARDO OLANO CODESIDO MS. PATRICIA PÉREZ GONZÁLEZ Director General of Atresmedia Diversificación Director General of Atresmedia Publicidad Corporate Director General MR. MANUEL DE LA VIUDA FDEZ. DE HEREDIA Legal Advisory Services Director Total remuneration of senior management (in thousands of Euros) C.1.17 6,258 Indicate, where applicable, the identity of Board members who also sit on the Board of Directors of companies that hold significant shareholdings and/or in its Group companies: Name or company name of director Name of significant shareholder Position MR. JOSÉ MANUEL LARA BOSCH GRUPO PLANETA‐DE AGOSTINI, S.L. Chairman of the Board of Directors of GRUPO PLANETA‐DE AGOSTINI, S.L. MR. JOSÉ CREUHERAS MARGENAT GRUPO PLANETA‐DE AGOSTINI, S.L. Director of GRUPO PLANETA‐ DE AGOSTINI, S.L. Mr. MARCO DRAGO GRUPO PLANETA‐DE AGOSTINI, S.L. Deputy Chairman of the Board of Directors of GRUPO PLANETA‐ DE AGOSTINI, S.L. UFA FILM UND FERNSEH, MR. ELMAR HEGGEN GMBH SOLE‐SHAREHOLDER COMPANY IMAGINA MEDIA IMAGINA MEDIA AUDIOVISUAL, S.L. AUDIOVISUAL, S.L. Director of RTL GROUP, S.A. Director of GAMP AUDIOVISUAL, S.A. Detail, where appropriate, the relevant affiliations other than those considered in the above paragraph, which link Board members to significant shareholders and/or companies in their Group: 16 Name or company name of related director Name or company name of the related significant shareholder MR. ELMAR HEGGEN UFA FILM UND FERNSEH, GMBH SOLE‐SHAREHOLDER COMPANY Mr. NICOLAS ABEL BELLET DE TAVERNOST UFA FILM UND FERNSEH, GMBH SOLE‐SHAREHOLDER COMPANY Description of the relationship Financial Director and Director of the Corporate Centre of RTL GROUP, S.A. Director General of UFA FILM UND FERNSEH, GMBH SOLE‐ SHAREHOLDER COMPANY Member of the Operations Management Committee and member of the Management Committee (BERTELSMANN RTL) C.1.18 Indicate whether during the year there has been any change in the Board Rules:. Yes No X Description of changes C.1.19 Indicate procedures for the selection, appointment, re‐election, evaluation and removal of directors. List the competent bodies, the procedures to be followed and the criteria to be employed in each procedure. Selection (article 13 of the Board of Directors' Regulations): The persons proposed to hold the office of Director will have to meet the requisites set out at all times by the legal provisions in force and the Articles of Association, as well as enjoy recognized solvency, competence and professional prestige and possess the appropriate knowledge and experience to hold such office. In order to be appointed a director, it is not necessary to be a shareholder, with the exception of that legally envisaged for the co‐optation system. Any persons affected by any prohibitions or by the incompatibilities established by the applicable legislation and this Regulation will not be able to hold the office of directors of the Company. Appointment (article 13 of the Board of Directors' Regulations): The members of the Board of Directors will be appointed by the General Shareholders’ Meeting, in accordance with the Spanish Companies Law and the Articles of Association. In the case of vacancies, the Board may appoint, through the system of co‐optation, from among the shareholders, those persons who will fill such vacancies until the first General Meeting. In the event a legal person is named director, it will be necessary to appoint a single natural person to permanently exercise the functions inherent to the position, who will be subject to the solvency, competence and experience requirements and to the system of prohibitions and incompatibilities indicated in this article, and the directors' duties stipulated in this Regulation will be personally claimable from him/her. The revocation of his/her representative by the legal person‐director will not take effect until the person substituting him/her has been appointed. The proposal for the appointment or re‐election of directors submitted by the Board to the Shareholders’ General Meeting, as well as the provisional appointment by co‐ option, 17 will require the prior relevant report and, in the case of the independent directors, a preliminary proposal from the Appointments and Remuneration Committee. From the moment of the publication of the announcement of the Shareholders' Meeting, the Board of Directors will publish through its web page the following information on those persons proposed to be appointed or ratified as directors: (i) the professional and biographical profile; (ii) other Boards of Directors to which he/she belongs, be they listed companies or otherwise; (iii) indication of the type of directorship, where appropriate, indicating, in the event of significant‐shareholder appointed directors, the shareholder at whose request they have been appointed, re‐elected or ratified or with whom they have links; (iv) the date of his/her first appointment as Company director as well as subsequent appointments; (v) Company shares and derivative financial instruments whose underlying is Company shares, whose owner is either the director whose post is going to be ratified or re‐elected, or the candidate to occupy the post of director for the first time. Such information will be kept up to date. Re‐election (article 14.1 of the Board of Directors' Regulations): The directors will exercise their duties during the period established in the Articles of Association (six years), and may be re‐elected one or more times for periods of equal duration. Assessment (article 16 of the Board of Directors' Regulations) The Chairman of the Board of Directors is responsible for organizing and coordinating with the chairpersons of the related Committees, the periodic assessment of the Board, and, where appropriate, that of the Chief Executive Officer or of the first executive. Removal (article 15 of the Board of Directors' Regulations) Directors will no longer hold their offices when so decided by the General Shareholders' Meeting, when they notify their resignation to the Company and once their term of office has elapsed. The directors must offer their resignation to the Board of Directors and execute the related resignation in the cases detailed in the following section C.1.21 of this Report. The Board of Directors will refrain from proposing the dismissal of any independent director before the end of the statutory term for which he/she was appointed, unless there are justified reasons, in the opinion of the Board and subject to a prior report from the Appointments and Remuneration Committee. A justified reason will be deemed to exist when the Director has not complied with the duties inherent to his/her position or has committed any of the actions preventing his/her classification as independent director. The removal of independent directors may also be proposed when a takeover bid, merger or similar corporate operation produces changes in the Company’s shareholder structure, in order to meet the proportionality criterion set out in article 12.1 of the Board of Directors' Regulations. When, as a result of resignation or for other reasons, a director, Secretary or Deputy Secretary to the Board of Directors leaves his/her post before the end of his/her term of office, he/she must explain the reasons in a letter submitted to all the Board members, without prejudice to the fact that this cessation is notified as a Significant Event to the Spanish National Securities Market Commission and that the reason for the cessation is explained in the Annual Corporate Governance Report. In particular, in the event that the resignation is due to the fact that the Board has adopted significant or reiterated decisions with respect to which the director has evidenced serious reservations which have led him/her to resign, such circumstances will be expressly stated in the resignation letter addressed to the remaining members. C.1.20 Indicate whether the Board of Directors assessed their activity in the year: Yes X No 18 Where appropriate, explain to what extent the self‐assessment gave rise to significant changes in internal organisation and in the procedures applicable to their activities: Description of changes The Board performed its self‐assessment for the first time in 2013 and, consequently, no changes have yet taken place, since the analysis was aimed at the whole of that year and the related report will be approved by the Board of Directors on the same date on which this Corporate Governance Report will be approved, and then the measures to be adopted will be decided upon. C.1.21 Indicate the cases in which directors are obliged to resign. According to article 15 of the Board of Directors' Regulations, directors will offer their resignation to the Board of Directors and execute the relevant dismissal in the following cases, if considered appropriate by the Board: a) When internal or executive directors no longer hold the executive or management offices to which their appointment as directors was linked. b) When the shareholder represented by the significant‐shareholder appointed directors sells its whole shareholding or when such shareholder reduces its shareholding up to a limit that requires a reduction in the number of its significant‐shareholder appointed directors. c) When an independent director unexpectedly commits any of the actions preventing his/her classification as an independent director. d) When they are subject to any of the incompatibilities or prohibitions set out by the legislation in force. e) When they are seriously reprimanded by the Appointments and Remuneration Committee for having infringed their obligations as directors. f) When the circumstances of the directors might damage the creditworthiness and reputation of the Company. In such cases, the director must immediately inform the Board about the criminal proceedings in which he/she is involved as defendant, as well as the subsequent outcome. g) When a director is indicted or tried for any of the crimes stated in article 213 of the Spanish Companies Law, the Board will examine the matter as soon as possible and, in view of the particular circumstances, decide whether or not he or she should continue in his post. Accordingly, the Board should reasonably disclose all such information in the Annual Corporate Governance Report. C.1.22 Exceptionally, that previously indicated in the resignation causes envisaged in letters a), b) and c) will not apply when the Board of Director considers, subject to a report by the Appointments and Remuneration Committee, that causes exist justifying the director's non‐dismissal, without affecting the impact new unexpected circumstances may have on the director's rating. Explain whether the function of Chief Executive Officer in the Company is met by the Chairman of the Board. If so, indicate the measures taken to limit the risks of accumulating powers in a single person: Yes No X 19 Measures to limit risks Indicate and, where applicable, explain whether rules have been established to empower one of the independent directors to request a Board meeting be called or new points to be included on the Agenda, to coordinate and give voice to the concerns of non‐executive directors and to direct the assessment by the Board of Directors. Yes No X Explanation of the rules C.1.23 Are reinforced majorities required, other than the legal majorities, for any type of resolution?: Yes No X Where appropriate, describe the differences. Description of the differences C.1.24 Explain whether there are specific requirements, other than those regarding directors, to be appointed Chairman of the Board of Directors. Yes No X Description of the requirements C.1.25 Indicate whether the Chairman has the casting vote: Yes No X Areas in which a casting vote applies: C.1.26 Indicate whether the Articles of Association or Board of Directors' Regulations set any age limit for directors: Yes No X Indicate whether the Articles of Association or Board of Directors' Regulations set any limit regarding the term of office of independent directors, other than that established in the regulations: C.1.27 Yes No X C.1.28 Maximum term of office Indicate whether the Articles of Association or Board of Directors' Regulations establish specific regulations to delegate voting to the Board of Directors, the means of such delegation and, in particular, the maximum delegation per director, as well as whether the obligation has been established to delegate in one director of the same type. Where appropriate, details these regulations briefly. 20 In conformity with that established in article 29 of the Board of Directors' Regulations, all the directors must attend the meetings held, except when just cause exists to the contrary. When non‐attendance is unavoidable, the director may grant proxy to another director. Such delegation must be made in writing for each meeting, addressed to the Chairman or the Secretary, with the related voting instructions, and which may be notified by any adequate technological procedure (fax, email or letter). Any given Board member can represent more than one of the other members. The directors' absences at Board meetings are included in the Annual Corporate Governance Report for each year. C.1.29 Indicate the number of meetings the Board of Directors has held during the year. Where applicable, indicate how many times the Board has met without the Chairman in attendance: In calculating this number, proxies granted without specific instructions shall be considered non‐attendance: I suppose that it is the session‐less meeting. Number of Board meetings 9 Number of Board meetings not attended by the Chairman 0 Indicate how many meetings have been held by the various Board committees throughout the year: Number of Executive Committee meetings 9 Number of Audit Committee meetings 4 Number of Appointments and Remuneration Committee meetings 4 Indicate the number of meetings the Board of Directors has held during the year with the attendance of all its members. In calculating this number, proxies granted without specific instructions shall be considered non‐attendance: C.1.30 C.1.31 Attendance of directors 8 % of attendances to total votes during the year 88.8 Indicate whether the individual and consolidated financial statements submitted to the Board for its approval have been previously certified: Yes No X Where applicable, identify the person(s) who has (have) certified the Company's individual and consolidated financial statements to be prepared by the Board: C.1.32 Name Position ‐ ‐ Explain the mechanisms, if any, established by the Board of Directors to prevent the individual and consolidated financial statements prepared by it from being presented to the Shareholders' Meeting with a qualified auditors' report. The Board of Directors' Regulations (article 24.i) entrusts the Audit and Control Committee with the duty of ensuring that the Board submits the accounts to the Shareholders’ Meeting without reservations or qualifications in the auditors' report. In exceptional cases in which said reservations or qualifications may arise, both the Chairman of the Audit and Control Committee and the auditors will have to provide shareholders with a clear explanation of the content and scope thereof. 21 C.1.33 The Audit and Control Committee foresees the participation of the external auditors in certain of the meetings envisaged in each year, as a consequence of the half‐yearly review and of the conclusions of the final audit work. At these meetings, the conclusions reached by the external auditors as a consequence of their work are anticipated and analysed, in order to avoid the need to include any potential reservation, mention or qualification in the auditors' report. Does the Secretary to the Board have the status of director? Yes No X C.1.34 Explain the procedures to appoint and remove the Secretary to the Board, indicating whether his/her appointment or removal has been reported by the Appointments Committee and approved by the plenary Board meeting. Procedure for appointment and removal. The Board of Directors appoints the Secretary to the Board, which may or may not be a Board Member. As many Deputy Secretaries as necessary may be appointed, either members or non‐members, to assist the Secretary, or substitute him/her in the event of absence or inability to attend, or should the Office of Secretary not be filled. The appointment or removal of the Secretary or Deputy Secretary must be reported by the Appointments and Remuneration Committee and approved by the plenary Board meeting. Both the Appointments and Remuneration Committee and the Board of Directors will be responsible for ensuring that the Secretary and the Deputy Secretary(ies) are chosen from among prestigious professionals with the ideal qualifications to perform their functions, and for also guaranteeing their independence and impartiality. Yes No Did the Appointments Committee report the appointment? X Did the Appointments Committee report the removal? X Did the plenary Board meeting approve the appointment? X Did the plenary Board meeting approve the removal? X Is the Secretary to the Board particularly in charge of ensuring that the good governance recommendations are followed? Yes X No Observations Articles 19.5‐e and 19.6‐c of the Board of Directors' Regulations establish that the Secretary to the Board of Directors must provide special supervision to guarantee the legal and by‐law regularity of the Board's procedures, also verifying compliance with the provisions of the regulatory bodies, together with their recommendations, and it will guarantee that the Company's corporate governance procedures and rules are respected. C.1.35 Indicate what mechanisms the Company has established, if any, to preserve the independence of the external auditors, the financial analysts, the investment banks and the rating agencies. 22 The Audit and Control Committee is responsible for ensuring the independence and efficiency of audits; for proposing the selection, appointment, re‐election and dismissal of the internal audit head; for receiving regular information regarding his/her activities; and for verifying that senior management takes into account the conclusions and recommendations of its reports. In this connection, in accordance with the Audit Law approved by Legislative Royal‐Decree 1/2011 of 1 July and its enacting Regulation, approved by Royal Decree 1517/2011 of 31 October, as well as the consolidated Spanish Companies Law, approved by Legislative Royal‐ Decree 1/2010 of 2 July, the Audit and Control Committee establishes the appropriate relations with the external auditor to receive information on matters that may jeopardize its independence. C.1.36 For this purpose: a) On an annual basis, the Company receives written confirmation from the external auditors of its independence vis‐à‐vis the entities directly or indirectly related to it, together with information on additional services of any kind provided to these entities by the aforementioned auditors, or by persons or entities related thereto, in accordance with the audit legislation. b) The Company must inform the Spanish National Securities Market Commission, as a Significant Event, of a change of auditor, attaching thereto, where appropriate, a statement regarding the possible disagreements with the outgoing auditor and, if any, with the content thereof. c) The Company has established the appropriate measures to ensure that the Company and the auditor comply with the applicable laws regarding the provision of services other than auditing services, with the restrictions on the concentration of the auditor’s business, and, in general, with other laws stipulated to safeguard the independence of auditors. d) The Audit and Control Committee has competency to examine the circumstances which motivated the external auditor to resign, in the event this occurs. The Audit and Control Committee is obliged to issue a report each year expressing an opinion on the independence of the auditors, including a statement on the provision of its additional services of any kind (Additional Provision Eighteen of Securities Market Law 24/1988). The notes to the financial statements and this Corporate Governance Report contribute information on the audit and other services provided by the external auditor in the year. Indicate whether the Company has changed its external auditor during the year. If so, identify the incoming and outgoing auditors: Yes No X Outgoing auditor Incoming auditor If there were disagreements with the outgoing auditor, explain their grounds: Yes No X Explanation for disagreements 23 C.1.37 Indicate whether the audit firm performs other engagements for the Company and/or its Group other than the audit. If so, declare the amount of fees received for such work and the percentage of such fees with respect to the total fees charged to the Company and/or its Group: Yes X No Amount for engagements other than audit work (thousands of Euros). Amount of engagements other than audit work/ total amount billed by the audit firm (in %) Company Group Total 36 0 36 16.071 0 12.544 C.1.38 Indicate if the auditors' report on the financial statements for the preceding year contains any reservations or qualifications. If so, indicate the reasons given by the Chairman of the Audit Committee to explain the content and scope of said reservations or qualifications. Yes No X Explanation of the reasons C.1.39 Indicate the number of years during which the current audit firm has been performing the audit of the financial statements for the Company and/or its Group without interruption. Likewise, indicate the percentage of the number of years audited by the current audit firm with respect to the total number of years in which the financial statements have been audited: Company Group Number of consecutive years 12 12 Number of years audited by current audit firm/number of years the Company has been audited (%) Company Group 66.7 66.7 C.1.40 Indicate and, where appropriate, detail whether a procedure exists for the directors to rely on an external advisor: Yes X No Details of the procedure The procedure is envisaged in article 34.6 of the Board of Directors' Regulations. In order to help directors to exercise their functions, the Board, at the request of the directors, may arrange with a charge to the Company, the counselling of legal, accounting, financial or other experts. Such appointment must necessarily relate to specific problems of certain significance and complexity arising in the performance of the related functions. 24 The arrangement request must be made to the Chairman and may be denied by the Board of Directors if it is accredited that: a) it is not necessary for the strict performance of the functions entrusted to the directors; b) its cost is not reasonable in comparison with the scale of the problem and of the Company's assets and income; c) the technical assistance obtained may be adequately dispensed by Company experts and technical staff; d) from a confidentiality standpoint, the information which may be provided to the expert may constitute a risk. C.1.41 Indicate and, where appropriate, detail whether a process exists for directors to obtain the information required in order to be able to prepare Board meetings in sufficient time: Yes X No Details of the procedure Together with the announcement of the Board meetings, in conformity with the procedure stipulated in article 28.4 of the Board of Directors' Regulations, each director receives the Agenda proposed by the Chairman, which should sufficiently explain the matters to be dealt with. The announcement should be accompanied by the information to be submitted at the Board meeting, except when, in the Chairman's opinion, in exceptional cases and for security reasons, it is more appropriate that such documentation be examined only at Company headquarters. Furthermore, article 34.3 of the Board of Directors' Regulations stipulates that it is each director's obligation to obtain all the information that it deems necessary at all times for the sound performance of his/her duties. In particular, each of the directors is obliged to diligently inform upon the Company's performance. For such purpose, each director is invested with the most extensive powers to furnish information on any aspect of the Company, to the extent he/she deems necessary or advisable in order to diligently exercise his/her functions. This duty of disclosure also extends to the various subsidiaries integrating the Atresmedia Group, and it must always be exercised in accordance with the requirements of good faith. For these purposes, the Company will provide the specific support in order that the new directors may acquire speedy and sufficient knowledge of the Company, and of its corporate governance rules, and may establish guidance programmes in this connection. Likewise, the Company may establish, when the circumstances so advise, programmes to update knowledge aimed at directors. In order not to adversely affect the Company's ordinary management, the duty of disclosure will be channelled through the Chairman, or the Secretary to the Board of Directors, who will deal with the director's requests, directly providing them with information or offering them the Company delegates considered appropriate for each case. In the event that the Chairman or the Secretary to the Board of Directors are absent or cannot channel such disclosure, such task will be performed by one of the Deputy Chairmen or by a Deputy Chairman of the Board of Directors, respectively. Likewise, the functions performed by the Secretary to the Board include that of adopting the measures required in order that the Board is always up to date with the matters dealt with and the decisions adopted by the Executive Committee and the remaining Committees. Accordingly, he/she must guarantee that all the Board members receive a copy of the minutes of the Executive Committee and remaining Committee meetings. 25 C.1.42 Indicate and, where appropriate, detail whether the Company has established rules obliging the directors to inform upon and, where appropriate, resign in those cases which may harm the Company's proceeds and reputation: Yes X No Explain the rules In accordance with article 15.2.f) of the Board of Directors' Regulations, the directors must offer their resignation to the Board of Directors and resign accordingly should the Board deem it advisable when, in the figure of director, circumstances arise which may adversely affect the Company's proceeds and reputation. In such cases, the director must immediately inform the Board about the criminal proceedings in which he/she is involved as defendant, as well as the subsequent outcome. C.1.43 Indicate whether any Board member has informed the Company of being sued or having any court proceedings initiated against him or her for any of the offences listed in article 213 of the Spanish Companies Law: Yes No X Name of the director Criminal case Observations Indicate whether the Board of Directors has analysed the case. If the response is affirmative explain in a reasoned manner the decision taken on whether it is appropriate or otherwise for the director to continue in his/her position or, where appropriate, set forth the procedures performed by the Board of Directors up to the date of this report or which are envisaged. Yes No Decision taken/procedure performed Reasoned explanation C.1.44 C.1.45 Detail the significant agreements entered into by the Company which take effect, alter or terminate if there is a change of control in the Company following a takeover bid, and their effects. Identify on an aggregate and detailed basis the agreements reached between the Company and its administration and management posts or employees which have indemnity payments, guarantee or lock‐in clauses, when such employees resign or are unfairly dismissed, or whether the contractual relationship comes to an end as a result of a takeover bid or other type of transaction. Number of beneficiaries Type of beneficiary 2 Description of the resolution 26 DIRECTORS When executive or internal directors are hired, indemnity clauses may be stipulated, applicable only during the first two years in which the contract is in force and only in the event of a unilateral termination by the Company. The maximum limit of the amount of this indemnity payment will be one year's salary. Indemnity clauses may also be stipulated in the event of a change in the Group's controlling shareholder, with a maximum indemnity payment equivalent to an annual payment of the director's full remuneration, including the variable and fixed component. This type of clause is not common. EXECUTIVES EMPLOYEES In certain exceptional cases, following individual negotiation and motivated by the special interest the business might have in contracting a specific professional, a special compensation regime may be established, that can be temporary or permanent, and in which the particular circumstances of this contract and its future termination are taken into account. The general rule is that under no circumstance would a takeover bid itself be grounds for the termination of an employment contract or the payment of indemnity. Indicate whether these contracts must be disclosed and/or approved by the Company or Group bodies: Board of Directors Shareholders’ Meeting X Body authorising the clauses Was the Shareholders’ Meeting informed of the clauses? C.2 YES NO X Board of Directors' Committees C.2.1 Detail all the Board of Directors' Committees, their members and the proportion of significant‐shareholder appointed and independent directors integrating them: EXECUTIVE COMMITTEE Name Mr. José Manuel Lara Bosch Position Chairman Mr. Silvio González Moreno Director Mr. Maurizio Carlotti Director Imagina Media Audiovisual, S.L. (represented by Mr. José Miguel Director Contreras Tejera) Mr. Nicolás Abel Bellet de Tavernost Director Mr. Marco Drago Director Type Executive Executive Executive Executive Significant‐shareholder appointed non‐executive director Significant‐shareholder appointed non‐executive director % of executive directors 66.67 27 % of significant‐shareholder appointed directors 33.33 % of independent directors 0 % of other non‐executive directors 0 AUDIT AND CONTROL COMMITTEE Name Mr. Pedro Ramón y Cajal Position Type Chairman Independent Significant‐shareholder Mr. Elmar Heggen Deputy Chairman Ms. Aurora Catá Director Mr. José Creuheras Director appointed non‐executive director Independent Significant‐shareholder appointed non‐executive director GAMP AUDIOVISUAL, S.A., represented by Mr. Josep María Benet Significant‐shareholder Director appointed non‐executive director % of executive directors 0 % of significant‐shareholder appointed directors 60 % of independent directors 40 % of other non‐executive directors 0 APPOINTMENTS AND REMUNERATION COMMITTEE Name Position Type Ms. María Entrecanales Franco Chairwoman Mr. Nicolás Abel Bellet de Tavernost Deputy Chairman Mr. Mauricio Casals Aldama Director Mr. José Creuheras Margenat Director Mr. Pedro Ramón y Cajal Agüeras Director Independent Significant‐ shareholder appointed non‐ executive director Significant‐ shareholder appointed non‐ executive director Significant‐ shareholder appointed non‐ executive director Independent % of executive directors 0 % of significant‐shareholder appointed directors 60 % of independent directors 40 % of other non‐executive directors 0 C.2.2 Fill out the following table with the information relating to the number of female directors forming the Board of Directors' committees in the last four years: 28 Number of directors Year t % number Executive Committee Audit Committee Appointments and Remuneration Committee Year t‐1 % number Year t‐2 % number Year t‐3 % number 0 0 0 0 20% 25% 25% 25% 20% 20% 20% 20% C.2.3 Mark with a cross the duties assigned to the Audit Committee (formerly B.2.2): Supervision of the process of preparing and integrating the financial information relating to the Company and, where appropriate, to the Group, reviewing compliance with the regulatory requirements, the adequate definition of the consolidation scope and the correct application of accounting policies. Yes No YES Periodical review of the internal control and risk management systems, in order that the main risks are suitably identified, managed and notified. Oversight of the independence and effectiveness of the internal audit function; proposing the selection, appointment, re‐election and removal of the internal audit service head, and the estimate for that service; receiving periodic information on its activities; and verifying whether senior management has taken into account the conclusions and recommendations of its reports. Establishment and supervision of a mechanism enabling the employees to confidentially and, if deemed appropriate, anonymously, notify the irregularities of potential importance, especially financial and accounting irregularities, communicated within the Company. Submission to the Board of the selection, appointment, re‐election and substitution proposals for the external auditor, together with the recruitment conditions. Regular receipt from the external auditor of information on the audit plan and on the results of its implementation, and verify whether senior management takes into account his/her recommendations. Assurance of the external auditor's independence. YES YES YES YES YES YES C.2.4 Provide a description of the organisation and functioning rules, together with the responsibilities attributed to each of the Board's Committees. Committee name AUDIT AND CONTROL COMMITTEE Brief description (Article 42 of the Articles of Association and article 23 of the Board of Directors' Regulations). The Audit and Control Committee is formed by no less than three (3) and no more than five (5) directors. All the directors are non‐executive and are appointed by the Board from among its members, taking into account the knowledge, aptitudes and experience of the directors and the tasks of the Committee. 29 The Committee itself appoints its Chairman from among its members for a maximum period of four (4) years, and he/she may be re‐elected after the period of one (1) year following his/her removal. The Secretary of the Audit and Control Committee is the Secretary to the Board of Directors or a Deputy Secretary. In the event that the Secretary of the Committee is absent or cannot exercise his/her role, the Committee member appointed by him/her from among the attendees at the meeting in question will act as Secretary. The Committee meets following an announcement by the Chairman, once every quarter, and as requested by at least three of its members, by the Executive Committee or the Chief Executive Officer. The Audit and Control Committee is validly constituted when the number of directors present or duly represented exceeds the number of absent directors, and it adopts its resolutions by absolute majority of the attendees. In the event of a tie, the Chairman has the casting vote. The Committee meetings may be attended by executive directors, when expressly agreed by the Committee members. Likewise, the Committee may convene any Company employee or director, and even arrange from them to appear without the presence of any other director. As a general and consolidated rule with regard to this Committee's activity, both the Financial Director and the Internal Audit and Process Control Director attend all its meetings and occasionally other directors. The external auditor also attends on a regular basis. The Audit and Control Committee may seek the counselling of external professionals, under article 34.6 of the Board of Directors' Regulations. Minutes will be prepared after each meeting of the Committee and the Secretary will forward a copy to all the members of the Board. The Board deliberates on the Committee's proposals and reports. The Committee will report its activities and the work performed on the occasion of the first plenary meeting of the Board held after each one of the meetings of the Committee. Committee name APPOINTMENTS AND REMUNERATION COMMITTEE Brief description (Article 43 of the Articles of Association and article 25 of the Board of Directors' Regulations). The Appointments and Remuneration Committee is formed by no less than three (3) and no more than five (5) non‐executive directors, appointed by the Board from among its members, taking into account the knowledge, aptitudes and experience of the directors and the tasks of the Committee. The Chairman of the Appointments and Remuneration Committee is appointed by the Committee itself from among its independent members for a maximum period of four (4) years, and he/she may be successively re‐elected. The Secretary of the Appointments and Remuneration Committee is the Secretary to the Board of Directors or a Deputy Secretary. In the event that the Secretary of the Committee 30 is absent or cannot exercise his/her role, the Committee member appointed by him/her from among the attendees at the meeting in question will act as Secretary. The Committee meets following an announcement by the Chairman, when he/she deems it appropriate, and as requested by at least three of its members, by the Executive Committee or the Chief Executive Officer. The Appointments and Remuneration Committee is validly constituted when the number of directors present or duly represented exceeds the number of absent directors, and it adopts its resolutions by absolute majority of the attendees. In case of tie, the Chairman will have the casting vote. The Committee meetings may be attended by executive directors, when expressly agreed by the Committee members. Likewise, the Committee may convene any Company employee or director, and even arrange from them to appear without the presence of any other director. For enhanced compliance with its functions, the Appointments and Remuneration Committee may seek the counselling of outside professionals, under article 34.6 of the Board of Directors' Regulations. Minutes will be prepared after each meeting of the Committee and the Secretary will forward a copy to all the members of the Board. The Board deliberates on the Committee's proposals and reports. The Committee will report its activities and the work performed on the occasion of the first plenary meeting of the Board held after each one of the meetings of the Committee. Committee name EXECUTIVE COMMITTEE Brief description (Article 39 of the Articles of Association and articles 21 and 22 of the Board of Directors' Regulations). Composed of no less than three (3) and no more than nine (9) directors, preferably five (5). The exact number of members integrating this Committee at each moment will be determined by the Board, considering its size, the optimum operability and maximum effectiveness of the Executive Committee and the number of members of the remaining Committees regulated under the Board of Directors' Regulations. They are appointed with the favourable vote of at least two thirds of the Board of Directors. In any case, the following are members of the Executive Committee as a result of their position: the Chairman of the Board of Directors, who will also be Chairman of the Committee once he/she has been appointed member thereof, and the Chief Executive Officer. The Chairman of the Executive Committee is the director who holds this post on the Board of Director once he/she has been appointed a member of the Committee and, in his/her absence, it would be the Deputy Chairman and, should there be various, he/she corresponding by order, provided that he/she is a member thereof. In the event that the Chairman of the Executive Committee is absent or cannot exercise his/her role, the Committee member appointed by him/her from among the attendees at the meeting will act as Chairman. 31 C.2.5 The Secretary of the Executive Committee will be that of the Board of Directors and, in his/her absence, the Deputy Secretary, and, should there be various, he/she corresponding by order. In the event that all of the foregoing are absent or cannot exercise their role, the Committee member appointed by him/her from among the attendees at the meeting in question will act as Secretary. The Secretary of the Committee will only be entitled to vote if she/he also performs the function of director and member of the Executive Committee. The delegation of powers to the Executive Committee requires the favourable vote of two thirds of the members of the Board of Directors, and may include all or a part of the Board's powers, except those not delegable by law, by‐laws or regulations. It may have an undefined nature, while its revocation is not agreed upon by an equal majority. The Executive Committee meets subject to an announcement by the Chairman, provided that it is requested in the Company's interest, on a regular basis, once a month, unless not deemed necessary by the Chairman. The Committee is validly constituted with the direct assistance or by means of representation of, at least, the majority of its members, and adopts its resolutions by the absolute majority of its members present or duly represented, always by another director member of the Executive Committee. In case of tie, the Chairman will have the casting vote. The Secretary will be in charge of drafting the Minutes of each meeting of the Executive Committee. The Board of Directors must always have knowledge of the matters dealt with and of the decisions adopted by the Executive Committee. With this objective, the Secretary to the Board ensures that all Board members receive a copy of the Minutes of the Executive Committee meetings. Indicate, where appropriate, the existence of regulation of the Board committees, the place in which they are available for consultation and the amendments made in the year. In turn, indicate if any annual report on the activities of each committee has been prepared voluntarily. No specific regulations exist with respect to Board Committees. Such rules are included in the Board of Directors' Regulations, which establish the competences, breakdown, etc. of such committees, and which are available for consultation on the Spanish National Securities Market Commission (CNMV) web page and on the corporate web page. It is envisaged that each Committee of the Board of Directors will approve, on the same date of approval of this Report by the Board, a report on the activity carried on by each of them in 2013. C.2.6 Indicate if the composition of the Executive Committee reflects the participation on the Board of the different directors based on their status: Yes No X 32 If no, explain the breakdown of its Executive Committee The Executive Committee is formed by executive directors and by significant‐shareholder appointed directors: − The Chairman of the Board, executive director. − The two Deputy Chairmen, executive directors. − The CEO, who is an executive director. − A significant‐shareholder appointed director of GRUPO PLANETA‐DE AGOSTINI, S.L. the largest shareholder with the largest stake (41.70%). − A significant‐shareholder appointed director of the second most significant shareholder (UFA FILM UND FERNSEH GMBH), which owns 19.17% of the share capital. The Secretary of the Executive Committee is the Secretary to the Board of Directors. D RELATED PARTY AND INTRA‐GROUP TRANSACTIONS D.1 Identify the competent body and explain, where appropriate, the procedure to approve related‐party and intra‐group transactions. Competent body to approve the related‐party transactions Subject to a favourable report issued by the Audit and Control Committee, the Board of Directors is responsible for approving the related‐party and intra‐group transactions. Procedure to approve the related‐party transactions The Audit and Control Committee is responsible for reporting to the Board of Directors, prior to the adoption by the latter of the respective decisions on related‐party transactions, except those performed under contracts whose conditions are standardised and which are applied en mass to many customers and, furthermore, at prices or rates generally established by whomever acts as supplier of the good or service in question, provided that its amount does not exceed one per cent (1%) of the Company's annual income. Explain whether the approval of related‐party transactions has been delegated, indicating, where appropriate, the body or persons to which it has been delegated. No. D.2 List the relevant transactions in terms of their amount or area between the Company or its Group companies, and the Company’s significant shareholders: Name or company name of significant shareholder Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Name or company name of the Company or Group company Nature of the relationship ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual ANTENA 3 NOTICIAS, S.L.U. Contractual ATRES ADVERTISING, S.L.U. Contractual ANTENA 3 MULTIMEDIA, S.L.U.. Contractual CORDINA PLANET, S.L.U. Contractual ANTENA 3 FILMS, S.L.U. Contractual Type of transaction Receipt of services Receipt of services Receipt of services Receipt of services Receipt of services Receipt of services Amount (thousands of Euros) 3,024 900 474 400 38 25 33 Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Grupo Planeta de Agostini, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Imagina Media Audiovisual, S.L. Ufa Films und Fernseh Gmbh Ufa Films und Fernseh Gmbh D.3 Receipt of services Provision of services Provision of services Provision of services Provision of services Provision of services Receipt of services Receipt of services Receipt of services Receipt of services Receipt of services Provision of services Provision of services Provision of services Provision of services Provision of services FUNDACION ATRESMEDIA Contractual 8 ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual ATRES ADVERTISING, S.L.U. Contractual ANTENA 3 FILMS, S.L.U. Contractual ANTENA 3 EVENTOS, S.L.U. Contractual UNIPREX, S.A.U. Contractual ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual ANTENA 3 FILMS, S.L.U. Contractual ATRES ADVERTISING, S.L.U. Contractual PUBLISEIS INICIATIVAS PUBLICITARIAS, S.A.U. Contractual UNIPREX TELEVISION, S.L.U. Contractual ATRES ADVERTISING, S.L.U. Commercial ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual UNIPREX, S.A.U. Commercial ANTENA 3 FILMS, S.L.U. Contractual MÚSICA APARTE, S.A.U. Contractual ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual Finance costs ATRESMEDIA CORPORACIÓN DE MEDIOS DE COMUNICACIÓN, S.A. Contractual Receipt of services 4,265 ATRES ADVERTISING, S.L.U. Contractual Receipt of services 1 543 259 65 28 4 111,275 1,971 664 195 76 124,332 7,622 4,615 3,905 2 3,207 Ufa Films und ATRESMEDIA CORPORACIÓN DE Provision of Contractual 644 Fernseh Gmbh MEDIOS DE COMUNICACIÓN, S.A. services Ufa Films und Provision of ANTENA 3 FILMS, S.L.U. Contractual 17 Fernseh Gmbh services Ufa Films und Provision of ANTENA 3 EVENTOS, S.L.U. Contractual 9 Fernseh Gmbh services List the relevant transactions in terms of their amount or area between the Company or its Group companies, and the Company’s directors or executives: Name or company name of the directors or executives Name or company name of the related party Amount Nature of the transaction Link (Thousands of Euros) D.4 List the relevant transactions in which the Company has engaged with other companies belonging to the same group, except those that are eliminated in the process of drawing up the 34 consolidated financial statements and that do not form part of the Company's ordinary activities with respect to its object and conditions. In any case, all intra‐group transactions performed with entities located in countries or territories considered to be tax havens will be disclosed: Company name of the Group entity D.5 D.6 Brief description of the transaction Amount (Thousands of Euros) Indicate the amount of the transactions performed with other related parties. List the mechanisms established to detect, determine and resolve possible conflicts of interest between the Company and/or its Group, and its directors, managers and/or significant shareholders. The mechanisms relating to conflicts of interest of the Board members are regulated in the Board of Directors' Regulations, specifically in its article 35.3 e). Such article stipulates that the directors must notify the Board of Directors of any direct or indirect conflict with Company interests. Should such conflict be the consequence of a transaction between the director and the Company, this transaction may only be performed with the prior authorisation of the Board itself which, in turn, will have required a decision to have been handed down in this connection by the Appointments and Remuneration Committee. In the event of conflict, the director involved will abstain from intervening in the deliberation and decision‐making process on the transaction generating the conflict. The directors affected by the conflict of interests may not delegate their vote to the Board of Directors and must be absent from the meeting room when the Board votes and deliberates in this regard. The Annual Corporate Governance Report will include all the conflicts of interest in which the Company's directors are immersed. The directors must also notify the direct and indirect holdings which, both they and the persons related thereto under the terms of this article, owned in the capital of a company with an identical, similar or complementary activity to that constituting the company object of Atresmedia Corporación, together with the positions or functions exercised thereat. This information must be included in the notes to the financial statements of each year. Likewise, the directors must inform the Company of all the posts they hold, and of all the activities they perform at other companies or entities and, in general, of any event or situation which may be relevant in their role as Company directors. If a director or any other person affected by the Internal Rule of Conduct in the area of Security Markets is involved in a possible conflict of interest, the mechanism is disclosed therein. The affected party must inform the Regulatory Compliance Committee as soon as possible, through a computer system installed for this purpose, of any situations which may potentially give rise to conflicts of interest as a result of his/her activities outside the ATRESMEDIA Group, his/her family relationships, his/her personal assets or any other circumstances with: a) Financial intermediaries operating with the ATRESMEDIA Group. b) Professional or institutional investors which have a significant relationship with the ATRESMEDIA Group. c) Significant equipment or material suppliers. 35 d) D.7 Providers of professional services or external advisors, including those which provide legal, consulting or audit services. With regard to the significant shareholders, article 9.2 c) of the Board of Directors' Regulations reserves for the Board the approval of the Company transactions with directors, significant shareholders or representatives on the Board, or with persons related thereto (related‐party transactions), except in those related‐party transactions performed under contracts whose conditions are standardised and which are applied en mass to many customers and, furthermore, at prices or rates generally established by whomever acts as supplier of the good or service in question, provided that its amount does not exceed one per cent (1%) of the Company's annual income. The approval of the Board with respect to related transactions must first have the favourable report of the Audit and Control Committee, which must assess the transaction from the standpoint of equality in dealings with the shareholders and the market conditions thereof. The annual public disclosures include a summary of the significant transactions performed by the Company with its directors and significant shareholders. Is more than one Group company listed in Spain? Yes No X Identify the listed subsidiaries in Spain: Listed subsidiaries Indicate whether they have accurately and publicly disclosed the respective areas of activity they engage in, and any possible business dealings between them, as well as between the listed subsidiary and other Group companies; Yes No Define the possible business relations between the Parent and the listed subsidiary, and between the latter and the other Group companies Identify the mechanisms envisaged to resolve the possible conflicts of interest between the listed subsidiary and the other Group companies: Mechanisms to resolve the possible conflicts of interest E RISK MANAGEMENT AND CONTROL SYSTEMS E.1 Explain the scope of the Company's Risk Management System. The Risk Management Model implemented at the Atresmedia Group is a tool to assist in Management decision‐making and to efficiently address the risks through the identification and implementation of the controls and corrective measures required for all the risks identified, if any, thereby improving the capacity for generating value. The Atresmedia Group’s Risk Management Model has the following goals: 36 1. 2. 3. 4. 5. ‐ Consistency and Uniformity in the Application of the Model: Assuring uniformity in the definition, identification and measurement of risks at all the Group companies. Internal Control Environment: Updating existing controls and measuring their degree of efficiency on a permanent basis. Assessment and Continuous Improvement: Continuous improvement in the model through tools and indicators which enable assessment, identifying new potential risks and identifying and introducing the necessary controls over new potential risks. Policies, Standards and Performance Procedures: Means of communication and management tool for the business areas of the different Group companies. Compliance with Laws and Regulations: Ensuring compliance with all regulations and laws applicable in the field of all Company businesses and operations. Risk management in the Atresmedia Group consists of a series of interrelated components, as a multi‐directional and interactive process in which all the components influence each other: 1). Internal control environment Periodically, the control environment of each area of organisation will be assessed, analysing on the one hand how the Company's personnel perceive the risks, establishing the controls which mitigate the risks and developing the actions plans and, on the other hand, the environment in which the Company acts. 2). Setting of targets Targets are reviewed and set annually Consequently, with said targets the level of acceptable risk is established, depending on the Group's global strategy and on the internal and external events identified during the prior period. 3). Identification of events In the process of identifying events, we decide which events can affect the Group, which of these offer opportunities, and which could have a negative impact on the Company’s capacity to implement the strategy and accomplish its goals. Events with a negative impact pose risks, and require assessment and response. Events with a positive impact offer opportunities, which are redirected towards the strategy of the target setting process. The Group applies a combination of techniques to identify events, simultaneously using past events (for example, historical series in the evolution of macroeconomic indicators) and future potential events (for example, new market conditions and actions of rivals). Events are identified at process level, thus helping to focus risk evaluation on the main business units or functions. Accordingly, the Atresmedia Group has a reference process chart in which all the processes of the Group’s companies and businesses are identified, classified and described. The main processes identified are as follows: ‐ Knowledge of the advertising market, its audience and its trends. ‐ Development of the corporate strategy. ‐ Designing of a programming grid. ‐ Marketing and sale of advertising slots. ‐ Contracting and production of programs and the buying of rights. ‐ Broadcasting and distribution of programs. ‐ Human resources management. ‐ Information and technology management. ‐ Administration and finance. ‐ General infrastructure management. ‐ Management of external relations and communication. 37 ‐ Management of risks, transparency and compliance with regulations. 4). Assessment and classification of risks The system assesses the level of exposure to risks assigned to strategic targets and processes. Risks have been divided into the following categories: 1. 1 Risks associated with strategy 2. Risks associated with internal processes 2.1. Risks associated with operations and processes: 2.1.1.‐ Operating risks 2.1.2.‐ Technological risks 2.1.3.‐ Integrity risks 2.1.4.‐ Financial risks 2.1.5.‐ Management risks 2.2. Information risks for decision‐making: 2.2.1. ‐ Operational 2.2.2. ‐ Financial 2.2.3. ‐ Strategic 2.2.4. ‐ Risks associated with compliance. 3. Corporate and reputational risks Risks are evaluated taking into account both: − The inherent risk, understood to be the risk existing in the absence of actions to modify its probability and impact. − The residual risk, understood to be the risk which remains once the responses to the risks have been adopted and implemented. Subsequently, they are prioritised in line with importance and probability following the identified controls, in accordance with two criteria: − Importance: Classified in accordance with the negative impact of the occurrence of the risk on results or on business continuity. − Probability: That the risk becomes apparent regardless of whether the controls are sufficient and reduce the risk to acceptable levels. E.2 Identify the Company bodies responsible for the preparation and execution of the Risk Management System. The Internal Audit and Process Control Department is the internal body in charge of assessing Group risks. This area is responsible for identifying, assessing, controlling and monitoring the risks of the Group's different businesses, and for evaluating the existence and functioning of the existing controls on the different areas and businesses of the Atresmedia Group. In this connection, the Internal Audit and Process Control area prepares an annual Audit Plan based on the evaluation of the most significant risks existing. This Audit Plan includes both the periodic activity performed by area, together with those activities that are going to be carried out each year in order to mitigate the potential risks existing in the Group's main business processes (process reviews, area audits, implementations of procedures, launch of new controls, specific reviews, etc.). This Audit Plan is submitted and approved by the Audit and Control Committee. Likewise, the degree of progress and the most significant results of those activities carried on to date are submitted regularly during the periodic meetings held by the Audit and Control Committee over the year. The Audit and Control Committee, based on the work of the Audit Department, guarantees the supervision of the Risk Model through the assessment, control and performance of risk monitoring of the Group's business. 38 E.3 Indicate the main risks which may affect the attainment of the business objectives. The Group’s most significant risks are found in the following areas: 1. Risks associated with strategy These risks are taken to be those arising from external factors and which could cause changes to the Company’s strategy and targets. In this connection, the following have been identified: • regulatory changes • changes in competency • changes in the relationships with shareholders and investors • changes in the financial markets and others The Strategic Plan of the Atresmedia Group includes the assessment of these risks, and this is one of the bases when defining measures to be taken to offset said risks and minimize the possible impact on value creation for shareholders. 2. Operating risks The most significant risks have been identified for the main business processes: − Sale of advertising spaces and commercial policy: The Group avails itself of significant and reliable information for analysing changes in industry demand, and anticipates such changes by developing integral communication plans for customers which make it possible to constantly improve on the attraction of advertising investment, in both traditional and more innovative forms. Ongoing analyses are performed on the environment and on the audiovisual industry, which include information on competition, legal aspects, economic trends, demographic or socio‐cultural changes, changes in viewer habits, audience ratings, etc., which make it possible to define a commercial strategy based on ongoing interrelation with the market and with the programming and content objectives included on the broadcasting grid. On the other hand, all control procedures were established with respect to negotiating processes, burden of the advertising purchase on the systems, verification of broadcasting, valuation of advertising slots and billing and collection, with a view to avoiding a loss of revenue and ensuring compliance with the policies and standards of the sales and financial area. − Programme production: All the production projects are analysed, approved and developed in accordance with a programming strategy, based on an exhaustive analysis of expectations, audience objectives and commercial retakes. In order to minimize the negative impact of the possibility of programs not functioning satisfactorily in terms of audience and commercials, inherent in the programming activity, pilot programs are produced and viewer and advertiser expectations are studied with a view to tailoring the final product as much as possible to these needs. Standards are also established for contracting terms and conditions to be used by those in charge with a view to avoiding unforeseen losses and contingencies. In this connection, procedures exist with an adequate segregation of functions in negotiation, approval of contracts with producers and production orders, in the economic terms associated therewith with authorisation levels in the contract processes. − Acquisition of broadcasting rights: Broadcasting rights, which generally have a multi‐year projection and validity, are acquired after the required studies have been made of general trends and specific programming projections, product suitability, broadcasting capacity, audience estimates, consistency with television channel targets, pricing trends and authorised budgets. 39 This entails specific rules and a suitable segregation of functions in negotiation, the approval of acquisitions and framework agreements with distributors and the management of this type of product. − Purchases and contracts in general: The Group has designed a corporate system for processing contracting and investment proposals, which permits the electronic organisation and documentation of procedures for filling out contracting applications, their estimates and their authorisation, making them more transparent and clearer, eliminating the circulation of hard copy with confidential and sensitive information, anticipating knowledge regarding purchases and investments so as to prepare a better plan, quantifying undertakings assumed in contracting processes more quickly, classifying in an orderly manner all purchase processes and contracts still to be authorised or executed and, in short, have the work flow followed by the documents and the controls applied thereto. Likewise, a procedure has been established to approve any purchase/investment made within the Group. − Occupational health and safety risks: The company has an occupational risk prevention service which covers not only risks deriving from facilities but also those deriving from the various jobs. The prevention service depends on the Prevention and Medical Services Department, which is in charge of defining occupational risks, classifying them by position and establishing the control measures necessary for reducing them. It also performs periodic evaluations to determine whether the control measures defined are being applied. − ‐ Risks relating to technology and information systems Technological risks include most notably those relating to information systems (since the various activities of the Atresmedia Group are highly dependent on IT systems and on the technical elements associated with the production and broadcasting of the audiovisual content), and those relating to the broadcasting of the signal (guaranteeing that the technical conditions of the signal comply with the parameters established in the technical provisions applicable to the broadcasting medium). As in the case of other audiovisual communication service providers, a single company has been contracted to provide the services of carrying, supporting and broadcasting the television signal. Any failure in these services could have a negative impact on the Company’s activity. Nonetheless, regardless of the guarantees provided under the contract for services, no lasting incidences with significant adverse effects have been recorded to date throughout the years of the relationship. With respect to risks deriving from information systems and broadcasting process infrastructure, strict hardware and software security measures, as well as contingency and business continuity plans, have been established with a view to facing unforeseen events of a varied source and nature. Likewise, redundancies exist in key systems and applications to mitigate any potential risks regarding such systems. There is an IT security department in charge of defining the applicable procedures, which periodically performs various security audits with a view to verifying compliance with the Model. Security measures have also been stipulated for the technical means of broadcasting the signal to ensure its compliance with the established parameters. For this reason redundant equipment exists and preventive tests are carried out on both sets of equipment on a monthly basis. There are also maintenance contracts for all the necessary broadcasting equipment, as well as for other production and information systems equipment. − Financial risks One of the main financial risks of the Group is that of the evolution of the exchange rate, since a significant percentage of the purchase of broadcasting rights is made in US dollars. 40 The currency exchange risk is managed from the Cash area of the Atresmedia Group. Depending on the payment schedule drawn up on the basis of the information furnished by the different areas involved and by the rights management systems, the relevant hedging is established through forward currency purchases or by using transactions with derivatives which lead to closed risk scenarios. − Integrity risks Atresmedia has sufficient and effective control procedures to minimise the probability of fraud, illegal conduct and unauthorised uses of assets, as well as to avoid the quantitative and qualitative effect they could have on resources, the reputation and the image of the Group’s trademarks. − Information risks in the decision‐making process These risks may be classified as operational, financial and strategic depending on the impact that could arise from using incomplete, distorted or erroneous information when making decisions in relation to those aspects. The Atresmedia Group has mechanisms for measuring the most significant indicators and magnitudes of the business, with a view to making quick and efficient decisions on all business processes and on quantifiable aspects relating to its strategy and to its financial structure and capacity. With respect to the protection of assets, the Group’s policy is to take out insurance policies to provide sufficient coverage for the possible risks to which the various assets are subject. Transportation, business interruption, civil liability in various areas, life, accident and health risks are also covered by insurance. 3. Reputational risks Furthermore, the risk system includes, due to its special impact, the reputational risks that basically refer to the two most important aspects of Corporate Responsibility: respect for the law and voluntary compliance with the Atresmedia Group’s principles and values: − Risks associated with regulatory compliance, such as the General Audiovisual Communication Law, the Advertising Law, the environmental compliance laws, those relating to the securities market, Competence regulations, etc., as well as those contained in the self‐regulation Codes entered into by the Group. − Risks associated with programming broadcasting which infringes the Group's ethical values. E.4 E.5 Identify whether the Entity has a risk tolerance level. Atresmedia has defined its risk tolerance level based on two main criteria: − Process or target potentially affected by the risk − Level of operations/results affected Indicate the risks which have arisen in the year. Regulatory risk: On 27 November 2012, the Supreme Court Room Three handed down a Ruling dismissing the Council of Minster's Resolution of 16 July 2010, which had assigned to each of the digital terrestrial television (DTT) service licence holders, including Antena 3 de Televisión, S.A. (now Atresmedia Corporación de Medios de Comunicación, S.A.) and Gestora de Inversiones Audiovisuales La Sexta, S.A., the capacity equivalent to a multiple state digital coverage integrated by four channels. Such assignment was made in line with the group of rules which, since 1997, with the approval of the Spanish National Digital Terrestrial Television Plan, and, especially, under Law 10/2005, of 14 June, 41 regulated the transition of analogue terrestrial television to DTT, culminating in 2010. Such assignment was made subject to verification by the Government of the strict compliance by the licence holders with all the requirements and obligations imposed to boost the transition to DTT, as a condition to access the multiple. On 22 March 2013, the Council of Ministers adopted a resolution for the enforcement of the aforementioned Supreme Court Ruling. This resolution stipulated the obligation to cease to broadcast the channels which had been affected by the previous rejection of the Council of Minister's Resolution of 16 July 2010, but likewise the continuity of the broadcasts was authorised on a transitory basis, in order to safeguard the general interests arising from the release of the digital dividend up to the culmination of this process. Subsequently, on 18 December 2013, the Supreme Court handed down an Order to enforce this Ruling which, among other matters, partially dismissed the aforementioned Council of Minster's Resolution and, furthermore, determined the channels affected by the Ruling arising from this Order, which includes three of those which are currently operated by Atresmedia. In the light of the appearance of this regulatory risk, the Atresmedia Group applied the corresponding controls and performed: ‐ An internal and external legal analysis of the related legal aspects. ‐ An economic analysis of the potential impact of the effective materialisation of the aforementioned risk. ‐ A risk analysis, of its potential consequences and of the existing controls to reduce it by the Audit Committee and the Board of Directors. Based on these analyses, the Atresmedia Group's interpretation is based on the fact that all the commitments and obligations imposed by it have been met and accordingly, its estimate is based on reaching a satisfactory solution, and it does not consider it necessary to make any adjustment or significant modification to the financial statements. E.6 Explain the response and supervision plans for the Entity's main risks. The responses to the existing risks are classified into 4 sections: − Prevent − Accept − Reduce − Share In accordance with the selected response, action plans are developed to bring the preliminary evaluation of the risk in line with the accepted risk and the Group's tolerance to risk. The aforesaid action plans are designed with the heads of the Group’s business areas and divisions and are supervised by the Internal Audit and Process Control Department within the framework of the Annual Auditing Plan, which the Audit and Control Committee approves and supervises regularly. In order to ensure that responses to risks effectively carry out control activities: Tests are performed to verify the degree of efficacy of the controls. New control and monitoring procedures are designed. Improvements to established control procedures are implemented. Periodically review the existing risks and controls. In addition to its adequate separation of functions and authorisation levels for operations, the Group avails itself of tools to carry out control activities, such as: Regulations and procedures applying to employees. Internal rule of conduct in securities market matters. 42 Ethical code Code of Conduct Whistleblower channel Procedures relating to the acquisition of products and services. Procedures relating to negotiating and selling advertising. IT tools: Risk management system Sales management system Purchasing management system Contracting proposals management system: authorisations for all contracting of services in the Group Quality System F INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN RELATION WITH THE ISSUANCE OF THE INTERNAL CONTROL OVER FINANCIAL REPORTING (ICFR) SYSTEM . Description of the mechanisms of the control and risk management systems in relation to the process of the issuance of the Internal Control over Financial Reporting (ICFR) system of its Entity. The Entity's control environment F.1 Report highlighting its main characteristics regarding at least: F.1.1. Which bodies and/or functions are responsible for: (i) the existence and maintenance of an adequate and effective Internal Control over Financial Reporting (ICFR) system; (ii) its implementation; and (iii) its supervision. The Atresmedia Group’s current internal control model is applied in a homogeneous manner in the entire organisation and encompasses a duly documented regulatory environment. The Internal Audit area is the unit responsible for supporting and ensuring its functioning and compliance with the established requirements, combined with the oversight of the model by the Audit and Control Committee. This internal control model has been adapted to fully comply with the current requirements of the CNMV with regard to the ICFR. The Audit and Control Committee is the body responsible for oversight of the ICFR, and it receives assistance from the Internal Audit and Process Control department with regard to its implementation and maintenance. On 22 February 2012, a new Board of Directors' regulation was approved, which also establishes the rules regarding the competences and functions of the Board Committees. The new Regulations were approved in order to adapt their content to the legal reforms introduced by Law 2/2011 on the Sustainable Economy, by Law 12/2010, of 30 June, amending, among others, the Audit Law, and by the consolidated Spanish Companies Law, with the amendments introduced therein by Law 25/2011. This area encompasses the adaptation of the competence system and structure of the Audit and Control Committee, in relation with the internal control and reporting systems in order to ensure the independence of the external auditor. Without prejudice to the functions that the Regulatory Compliance Committee has been attributed in the Internal Rules of Conduct in Security Market Matters, the Committee exclusively assumes, among others, the function of supporting and coordinating with Internal Audit in the monitoring and supervision of the rules regarding the Internal Control over Financial Reporting (ICFR) system. 43 F.1.2. The following elements if they exist, especially with respect to that relating to the process of preparing financing information: • Departments and/or mechanisms entrusted: (i) design and review of the organisational structure; (ii) clear definition of the lines of responsibility and authority, with an adequate distribution of tasks and functions; and (iii) whether sufficient procedures exist for their correct implementation at the Entity. • Code of conduct, approval body, degree of implementation and instruction, principles and values included (indicating whether specific mention is made to the register of transactions and the preparation of financial information), body entrusted with analysing breaches and proposing remedial and penalty measures. • Whistleblower channel, which enables disclosure to the Audit Committee of irregularities of a financial and accounting nature, in addition to possible breaches of the code of conduct and irregular activities in the organisation notifying, where appropriate, whether the latter is of a confidential nature. • Training programmes and periodic update for the personnel involved in the preparation and review of the financial information, and in the assessment of the Internal Control over Financial Reporting (ICFR) system, which cover at least accounting rules, audit, internal control and risk management. The organisational structure of the Atresmedia Group is defined by the CEO when it affects the senior management level, and by the managers in charge of each organisational unit when it corresponds to the rest of the resource levels. The lines of responsibility of the Atresmedia Group in the different processes for the preparation of financial information are shown in the organisation chart of the Group and of the different organisational areas. The Internal Audit and Process Control department is the area responsible for defining the main processes and lines of action at the Atresmedia Group. The Atresmedia Group’s Code of Conduct, which was approved by the Board of Directors, provides a general description of the policies, principles, objectives and values of the Atresmedia Group. In this connection, the Board of Directors is responsible for directing and supervising all matters related to effective compliance with this code, as well as the obligation to adopt and implement the appropriate measures to align the Code with the rest of the regulatory and procedural elements of corporate governance, with which it shares the same values and objectives. The Code of Conduct contains the general guidelines that should be followed by all the employees in the Atresmedia Group relating to basic principles of behaviour, relations with and between employees, internal control and prevention of fraud and commitment with the market, the company and the community. The ultimate responsibility with regard to the interpretation and application of this Code of Conduct corresponds to the Regulatory Compliance Committee. Currently, the Atresmedia Group's code of conduct has been communicated to all Group employees through a specific notification for this purpose, in which all the main aspects thereof and the obligations which must be met by all the Group 44 employees in relation to this Code were specified. Likewise, this Code of Conduct was published on the corporate web page www.atresmediacorporacion.com and on the Group's Intranet in order to be consulted by any employee or third party related with the Group. The Atresmedia Group has set up a “Whistleblower Channel” that allows its employees to communicate, in a simple and confidential manner, those actions which, to their understanding, constitute conduct or actions that do not comply with the Code of Conduct or other applicable regulations. Likewise, this is the communication channel which may also be used to detect irregularities in the preparation of financial reporting; or to ascertain significant weaknesses in the Internal Control over Financial Reporting (ICFR) system; or in the prevention of situations of discrimination, harassment at work and sexual harassment, and the prevention of any other illegal conduct or any conduct which goes against Atresmedia's policies and values. The Regulatory Compliance Committee is the body responsible for its management, composed of executive posts which are identified in the Code of Conduct itself, all related with areas and procedures regulated in the Code. The “Whistleblower Channel" will be monitored by the Internal Audit area and by General Corporate Management. The Regulatory Compliance Committee will report regularly to the Audit Committee regarding those matters which have been identified and investigated via the “Whistleblower Channel" set up. At present, the Atresmedia Group provides all employees involved in the preparation and review of the financial information the necessary training to carry out their functions. Said training is carried out through a series of specifically designed courses; all integrated within the Atresmedia Group's Training Plan. F.2 Evaluation of risks in financial reporting Report regarding at least: F.2.1. The main characteristics of the risk identification process, including those relating to errors or fraud, with regard to: • Whether the process exists and is documented. • Whether the process covers all the financial reporting objectives (existence and occurrence; integrity, assessment, presentation, breakdown and comparability; and rights and obligations), whether they are updated and with what frequency. • The existence of an identification process of the scope of consolidation, taking into account, among other aspects, the possible existence of complex corporate structures, holding companies or special purpose vehicles. • Whether the process takes into account the effects of other types of risks (operating, technological, financial, legal, reputational, environmental, etc.) to the extent that they affect the financial statements. • Whether the Entity's governing body supervises the process. 45 The Atresmedia Group uses a risk management tool that allows it to identify risks through the identification and implementation of corrective controls and measures. The Risk Map of the Atresmedia Group considers the following types of risks: ‐ Strategy and Environment ‐ Internal Processes: ‐ • Risks related to operations and processes • Information risks in the decision‐making process • Risks associated with financial reporting Corporate and Reputational: • • Risks related to regulatory compliance Risks related to external image The Group currently has review mechanisms in place that reduce the risk that erroneous financial information is reported to the market. To determine the importance and probability of the risk of releasing incorrect information, the Atresmedia Group evaluates the following parameters: − − The complexity of the transactions and of the applicable rules. The volume of transactions and the quantitative importance of the items affected. − The complexity of the calculations − The need to use estimates or projections − The enforcement of judgements − The qualitative importance of the information All the processes have been analysed and based on a risk and control model, areas for improvement have been identified related to the contribution of evidence that formally accredits the communications concerning changes in the consolidation scope of the Group, confirmations of the reception of the information and the issuance of the consolidated financial statements and the formal documentation of the revisions that have been carried out. F.3 Control activities Report highlighting their main characteristics, if they have at least: F.3.1. Review and authorisation procedures regarding financial reporting and description of the Internal Control over Financial Reporting (ICFR) system, to be published in the securities markets, indicating the persons in charge, and descriptive documentation of the activity and control flows (including those relating to fraud risk) of the different types of transactions which may materially affect the financial statements, including the accounting close procedure and the specific review of the significant opinions, estimates, assessments and projections. The Atresmedia Group has controls in place to reduce potential risks existing in the Group’s main operating processes. However, it intends to adapt and introduce, if necessary, new documented controls in response to the risks connected with the achievement of the objectives relating to the reliability of the financial information defined in the ICFR. The Atresmedia Group has established a series of procedures for the preparation and review of the financial statements and the accounting close. These processes describe the current activity flows, and a series of controls and reviews are identified to ensure 46 that the financial information published is correct. The review of the financial information is carried out by both senior management and by external and internal auditors and, in the last instance, by the Audit and Control Committee. In addition, the control activities are mainly aimed at preventing, detecting, mitigating, compensating and correcting the potential errors or errors that have been discovered adequately in advance of the reporting of the financial information. F.3.2. Internal control policies and procedures on the information systems (among others, on access security, change control, the operation thereof, operating continuity and unbundling) which support the Entity's relevant processes in relation to the preparation and publication of financial information. The Atresmedia Group's controls are partly carried out through people and partly through IT systems. Many of the processes that support the relevant steps in the preparation of the financial information are automated in the management systems – mainly SAP – implemented at the Group. Controls have been designed and put in place regarding access and user profiles for the IT and communication systems that have an impact on the financial information and the accounting closes, which guarantee the security of access to data and programs, and control over changes, the correct operation of the changes and their continuity. F.3.3. Internal control policies and procedures in place to supervise the management of activities subcontracted to third parties, and to monitor the evaluation, calculation and valuation activities of independent experts, which may have a material effect on the financial statements. Similarly, the Atresmedia Group has internal control policies and procedures in place to supervise the management of the activities subcontracted to third parties, and to monitor the evaluation, calculation and appraisal matters entrusted to independent experts, which may have a material effect on the financial statements. F.4 Information and communication Report highlighting their main characteristics, if they have at least: F.4.1. A specific function charged with defining, keeping accounting policies up to date (accounting policies area or department) and resolving doubts or conflicts arising from their interpretation, maintaining smooth communication with the Organisation's heads of operations, and an updated accounting policies manual notified to the units through those operated by the Entity. All organisational levels of the Atresmedia Group have access to the information they may require at any time through the corporate intranet. At the Atresmedia Group, smooth communication exists between the Board of Directors and Senior Management, thereby ensuring the adequate performance of the functions and responsibilities, especially through the Chairman, Deputy Chairmen and CEO. In addition, the Board of Directors, through the Audit and Control Committee, with the support of the Audit and Process Control Department and the Financial Department, assess the action plans and the approval of the Strategic Plan, and also analyse the financial results prior to their presentation to the markets. The Board of Directors of Atresmedia Corporación maintains a proactive approach to the preparation of the financial information and is open to discussions concerning important matters related to financial reporting, through the participation of Senior Management (Chairman, Deputy Chairmen and CEO) at all the Board of Directors' Meetings, as well as 47 through an information feedback loop between the Financial Department, the Audit and Process Control Department, the Audit and Control Committee and the Board itself. Furthermore, all the regulatory changes relating to accounting, auditing and corporate risk management are communicated to the Audit and Control Committee by the Audit and Process Control Department and the Financial Department. F.4.2. Mechanisms to capture and prepare financial information with homogeneous formats, applied and used by all the Entity or Group units, which support the main financial statements and notes, as well as the information provided on the Internal Control over Financial Reporting (ICFR) system. The data underpinning the financial information contains, in a complete, precise and relevant manner, all the transactions, significant events and other events that affect the Group, and therefore the information reported. All this information is identified, collected and communicated with sufficient time and in a form that allows the people responsible for preparing the financial information to carry out their functions in an effective and efficient manner. The Atresmedia Group has at its disposal the mechanisms to capture and prepare its financial information using homogeneous formats and applications, such as the SAP‐R3 and FRANGO applications that are used by all the units and subsidiaries of the Group. Furthermore, the different business units use management systems that are integrated in SAP R3, in such a way that the dumping of information is automatic; the necessary controls are in place and the supervisory and review processes are carried out by the Group’s Financial Department. F.5 Supervision of the functioning of the system Report highlighting its main characteristics regarding at least: F.5.1. The Internal Control over Financial Reporting (ICFR) supervision activities performed by the Audit Committee, and whether the Entity has an internal audit function which includes among its competences that of supporting the committee in its task of supervising the internal control system, including the Internal Control over Financial Reporting (ICFR) system. Likewise, information will be provided on the scope of the evaluation of the Internal Control over Financial Reporting (ICFR) system performed in the year and of the procedure whereby the person in charge of executing the assessment notifies his/her results, if the Entity has an action plan detailing the possible remedial measures, and if their impact on financial reporting has been considered. The Audit and Control Committee is the body responsible for the supervision of the policies and procedures, the preparation and integrity of the financial information, as well as for the adequate definition of the consolidation scope and the correct application of accounting principles. The Internal Audit area has been delegated the function of supervising the internal control model by the Audit and Control Committee. This area carries out periodic reviews of business cycles at Group and subsidiary level, and proposes corrective action plans that are communicated to the Atresmedia Group's Senior Management and to the Audit and Control Committee. The Atresmedia Group implemented a project with a third party to assess the degree of compliance of the Group, in relation to the ICFR, with the guidelines indicated in the reference framework of the CNMV, regarding the level of compliance of the Atresmedia Group with respect to the 16 basic indicators defined by the Internal Control Working 48 Group in its "Guide for the preparation of the description of the Internal Control over Financial Reporting System", in the indicators relating to the Environment of Control, Information and Communication and Supervision of the functioning of the System. The results of this project were submitted to the Audit and Control Committee, defining an action plan to analyse the improvement recommendations that arose in the diagnostic project. F.5.2. Whether it has a discussion procedure whereby the auditor (in line with that established in the Technical Audit Rules), the internal audit function and other experts may notify the Entity's senior management and the Audit Committee or the directors of the significant internal control weaknesses identified during the revision processes of the financial statements or those others entrusted. Likewise, information will be provided as to whether an action plan exists to endeavour to correct or mitigate the weaknesses observed. The external accounts auditor and the Internal Audit Department meet periodically, in accordance with the meetings' schedule established, with the Audit and Control Committee and informs it of the main weaknesses detected in the review area and of the functions commissioned to each of the parties. The Audit and Process Control department has periodically informed the Audit and Control Committee about the evolution and progress of the action plans to be implemented progressively in relation to the ICFR. F.6 Other significant information F.7 External auditors' report Report on: F.7.1. Whether the information on the ICFR submitted to the markets was presented for review by the external auditor, in which case the Entity should include the corresponding report as an appendix. Otherwise, it should state why. The ICFR information has not been submitted with respect to the external auditor's report. Once the diagnostic project of the ICFR has been concluded, and once all the action plans arising from the recommendations of the preceding engagement have been implemented, in the future, where appropriate, the external auditor will be requested to issue a report. G DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS Indicate the extent to which the Company follows the recommendations of the Unified Code of Good Governance. In the event a recommendation is not followed or is only followed partially, a detailed explanation should be included of the motives in order that the shareholders, investors and the market in general have sufficient information to assess the Company's line of action. Explanations of a general nature will not be acceptable. 1. The Articles of Association of the listed companies do not limit the maximum number of votes that may be issued by the same shareholder, nor do they contain other restrictions which hinder the taking of control of the Company through the acquisition of its shares on the market. 49 See headings: A.10, B.1, B.2, C.1.23 and C.1.24. Complies 2. 2. When a parent and a subsidiary are publicly traded, the two should provide detailed disclosures on: a) The type of activity they engage in, and any possible business dealings between them, as well as between the listed subsidiary and the other Group companies; b) The mechanisms in place to resolve possible conflicts of interest. See headings: D.4 and D.7 Not applicable 3. 3. Even when not expressly required under Mercantile Law, any transactions involving a structural change to the Company should be submitted to the General Shareholders' Meeting for approval. In particular: a) The transformation of listed companies into holding companies through the process of subsidiarisation, i.e., reallocating core activities to subsidiaries that were previously carried out by the holding company, even though the holding company retains full control of the subsidiaries; b) Any acquisition or disposal of key operating assets that would effectively alter the Company's object; c) Operations that would entail the Company's liquidation. See heading: B.6 Complies 4. 4. Detailed proposals of the resolutions to be adopted at the Shareholders' Meeting, including the information stated in Recommendation 27, should be made available at the same time as the publication of the meeting announcement. Complies 5. 5. Separate votes should be cast at the Shareholders' Meeting on substantially independent matters, so shareholders can separately express their voting preferences in each case. This rule shall apply in particular to: a) The appointment or ratification of directors, who should be voted for individually; b) Amendments to the Articles of Association, to all articles or groups of articles that are substantially independent. Complies 6. Companies should allow split votes, so financial intermediaries legally appearing as shareholders, but acting on behalf of different clients, can issue their votes according to the instructions thereof. Complies 7. The Board of Directors should perform its duties with unity of purpose and independent judgement, according all shareholders the same treatment. It should be guided at all times by the Company's best interests and, as such, strive to maximize its economic value over time on a sustained basis. It should likewise ensure that the Company abides by the laws and regulations in its dealings with the groups of interest (stakeholders); fulfils its obligations and contracts in good faith; respects the customs and good practices of the sectors and territories where it performs its activities; and upholds any additional social responsibility principles it has subscribed to voluntarily. 50 Complies 8. The Board should assume as its core mission to approve the Company's strategy and the organisation required to execute it, and to supervise and control that management meets the objectives set and respects the Company's interests and object. As such, the plenary Board meeting reserves the competence to approve: a) The Company’s general strategies and policies and, in particular: i) The strategic or business plan, and the annual management and budgetary targets; ii) The investment and funding policy; iii) The definition of the structure of the group of companies; iv) The corporate governance policy; v) The corporate social responsibility policy; vi) The policy for senior managers’ remuneration and performance assessment; vii) The policy for controlling and managing risks, and the periodic monitoring of the internal control and reporting systems. viii) The dividend and treasury shares policy, especially their limits. See headings: C.1.14, C.1.16 and E.2 b) c) The following decisions: i) At the proposal of the Company’s chief executive officer, the appointment and possible removal/resignation of senior managers from their posts, as well as their compensation clauses. ii) Directors’ remuneration and any additional remuneration to executive directors for executive responsibilities and other terms and conditions which must be respected in their contracts. iii) a) The financial information that the Company, as a publicly traded company, must disclose periodically. iv) Investments or transactions of any kind, whose high value or special characteristics make them strategic, unless the GSM is charged with approving them; v) The creation or acquisition of shares in special‐purpose entities or entities domiciled in countries or territories considered tax havens, and any other transactions or operations of an analogous nature whose complexity could undermine the Group’s transparency. Transactions between the Company and its directors, its significant shareholders or shareholders represented on the Board, or parties related to them ("related‐party transactions"). However, Board authorisation need not be required for related‐party transactions that simultaneously meet the following three conditions: 1. They are carried out under contracts with standard terms and conditions, applicable en masse to a large number of customers; 2. They are performed at rates set in general by the supplier of the goods or services in question; 3. The amount thereof does not exceed 1% of the Company’s annual revenues. 51 Related‐party transactions should only be approved on the basis of a favourable report from the Audit Committee or any other committee entrusted with such a report; and the directors involved should neither exercise nor delegate their voting rights, and should withdraw from the meeting room while the Board deliberates and votes. It is recommended that the competences attributed here to the Board should not be delegated, with the exception of those mentioned in b) and c), which may be adopted by the Executive Committee in urgent cases and later ratified by the plenary Board meeting. See headings: D.1 and D.6 Complies 9. In the interests of maximum effectiveness and participation, the Board of Directors should ideally comprise no fewer than five and no more than fifteen members. See heading: C.1.2 Complies 10. Non‐executive significant‐shareholder appointed and independent directors should occupy an ample majority of Board places, while the number of executive directors should be the minimum required to deal with the complexity of the corporate Group and to reflect the ownership interests they hold. See headings: A.3 and C.1.3. Complies 11. Amongst non‐executive directors, the ratio between the number of significant‐shareholder appointed and independent directors should reflect the percentage of shares held by the Company that the significant‐shareholder appointed directors represent and the remaining share capital. These strict proportionality criteria can be relaxed so the percentage of significant‐shareholder appointed directors is greater than that which would correspond to the total percentage of capital they represent: 1. In large capitalization companies where few or no equity stakes attain the legal threshold to be considered significant shareholdings, but shareholders exist with shareholder packages of high absolute value. 2. In companies with a plurality of shareholders represented on the Board but not otherwise related to each other. See headings: A.2, A.3 and C.1.3 Complies 12. Independent directors should account for at least one third of total directors. See heading: C.1.3 Explain Of the total Board members, three are independent. The percentage represented by the number of independent directors over the total directors is similar to the percentage of share capital not linked to a significant shareholding. 13. The Board should explain the type of each directorship to the GSM, which should appoint the director or ratify his/her appointment. This should be confirmed or reviewed each year in the Annual Corporate Governance Report, after verification by the Appointments Committee. Said report should also disclose the reasons for the appointment of significant‐shareholder appointed directors at the behest of 52 shareholders controlling less than 5% of capital; and it should explain any rejection of a formal request for a Board position from shareholders whose equity stake is equal to or greater than that of others at whose request significant‐shareholder appointed directors would have been nominated. See headings: C.1.3 and C.1.8 Complies 14. When the number of female directors is scant or nil, the Appointments Committee oversees that, on providing new vacancies: a) The selection procedures do not suffer any implicit bias which hinders the selection of female directors. b) The Company makes a conscious effort to include women with the target profile among the candidates for Board positions. See headings: C.1.2, C.1.4, C.1.5, C.1.6, C.2.2 and C.2.4. Complies 15. The Chairman, who is responsible for the efficient running of the Board, should at all times ensure that the directors receive sufficient prior information for the meetings; encourage directors to debate and participate actively in the meetings, safeguarding their freedom to take their own stance and express their own opinion. He/she should organise and coordinate periodic assessment of the Board with the chairs of the relevant committees and with the Managing Director or Chief Executive, when this is not also the Chairman. See headings: C.1.19 and C.1 41 Complies 16. When the Company's Chairman is also its Chief Executive, an independent director should be empowered to request a Board meeting be called or that new business be included on the Agenda; to coordinate and give voice to the concerns of non‐executive directors; and to lead the Board’s evaluation of the Chairman. See heading: C.1.22 Not applicable 17. The Secretary should take care to ensure that the Board's actions: a) Adhere to the spirit and letter of laws and their regulations, including those approved by regulators; b) Comply with the Company's Articles of Association and the Regulations of the Shareholders' and Board of Directors' Meetings and other Company regulations; c) Take into account those good governance recommendations of the Unified Code to which the Company has agreed. In order to safeguard the independence, impartiality and professionalism of the Secretary, his or her appointment and removal should be informed upon by the Appointments Committee and approved by a full Board meeting; the relevant appointment and removal procedures should be indicated in the Board's regulations. See heading: C.1.34 Complies 18. The Board should meet with the necessary frequency to properly perform its functions, in accordance with a calendar and agenda set at the beginning of the year, to which each director may propose the addition of other unforeseen items. See heading: C.1.29 53 Complies 19. Directors should keep their absences to the bare minimum. Absences should be quantified in the Annual Corporate Governance Report. When directors have no choice but to delegate their vote, they should provide instructions. See headings: C.1.28, C.1.29 and C.1.30 Complies 20. When directors or the Company Secretary express concerns about proposals or, in the case of directors, about the Company's performance, and such concerns are not resolved at the meeting, the person expressing them may request they be recorded in the minutes. Complies 21. The plenary Board meeting should evaluate the following points on a yearly basis: a) The quality and efficient functioning of the Board; b) Based on a report submitted by the Appointments Committee, the performance of their functions by the Chairman of the Board and the Company's CEO; c) The functioning of its Committees on the basis of the reports furnished by such Committees. See headings: C.1.19 and C.1.20 Complies 22. All directors should be able to exercise their right to receive any additional information they require on matters within the Board's competence. Unless the Articles of Association or Board of Directors' Regulations indicate otherwise, such requests should be addressed to the Chairman or Secretary to the Board. See heading: C.1.41 Complies 23. All directors should be entitled to obtain from the Company the exact advice they need to perform their duties. The Company should provide suitable channels for the exercise of this right. Under special circumstances, it could include external assistance at the Company's expense. See heading: C.1.40 Complies 24. Companies should organize induction programs for new directors to acquaint them rapidly and adequately with the workings of the Company and its corporate governance rules. Directors should also be offered refresher programs when circumstances so advise. Complies 25. Companies should require their directors to devote sufficient time and effort to performing their duties effectively, and, as such: a) The directors must inform the Appointments Committee of their other professional obligations, in case these interfere with the dedication required to perform their duties; b) Companies should lay down rules about the number of directorships their Board members can hold. See headings: C.1.12, C.1.13 and C.1.17 Complies partially The Board Members assume, upon accepting their posts, the inherent duties and obligations thereof, under the terms established in the regulations in force and in the Company's internal corporate 54 governance rules, which include the personal responsibility to inform the Appointments and Remuneration Committee of any circumstance that could affect the normal performance of their activities or their degree of dedication. The Company considers that the number of boards on which each director sits is not in itself a significant indicator to measure his/her dedication, bearing in mind that it is possible to sit on a wide array of boards, and that in each case, a different degree of attention and work may be required. Therefore, under these same criteria, it has been deemed unnecessary to place a limit on the number of boards of which directors can be members. This question should be decided by each director on its own responsibility, and has no bearing on the supervisory tasks of the Appointments and Remuneration Committee. 26. The proposal for the appointment or renewal of directors which the Board submits to the General Shareholders' Meeting, as well as provisional appointments by co‐optation, should be approved by the Board: a) At the proposal of the Appointments Committee for independent directors. b) On the basis of a report by the Appointments Committee for all other directors. See heading: C.1.3 Complies 27. Companies should publish the following director particulars on their website and keep them permanently updated: a) b) c) d) e) Professional experience and background; Directorships held in other companies, listed or otherwise; An indication of the category of directorship; in the case of significant‐shareholder appointed directors, state the shareholder they represent or to whom they are affiliated. The date of their first and subsequent appointments as a Company director, and; Shares and share options held in the Company. Complies 28. Significant‐shareholder appointed directors must resign when the shareholders they represent dispose of their ownership interest in its entirety. If such shareholders reduce their stakes, thereby losing some of their entitlement to significant‐shareholder appointed directors, the number of such significant‐shareholder appointed directors should be reduced accordingly. See headings: A.2 , A.3 and C.1.2 Complies 29. The Board of Directors must not propose the removal of independent directors before the expiry of their term in office pursuant to the Articles of Association, except where due cause is found by the Board, based on a report from the Appointments Committee. In particular, due cause will be presumed when a director is in breach of his or her fiduciary duties or comes under one of the disqualifying grounds causing him/her to lose his/her independent status, enumerated in the Order ECC/461/2013. The removal of independent directors may also be proposed when a takeover bid, merger or similar corporate operation produces changes in the Company’s capital structure, in order to meet the proportionality criterion set out in Recommendation 11. See headings: C.1.2, C.1.9, C.1.19 and C.1.27 Complies 55 30. Companies should establish rules obliging directors to inform the Board of any circumstance that might undermine the organization's name or reputation, tendering their resignation as the case may be, with particular mention of any criminal charges brought against them and the progress of any subsequent proceedings. If a director is indicted or tried for any of the crimes stated in art. 213 of the Spanish Companies Law, the Board should examine the matter as soon as possible and, in view of the particular circumstances, decide whether or not he or she should continue in his/her position. The Board should also disclose all such determinations in the Annual Corporate Governance Report. See headings: C.1.42, C.1.43 Complies 31. The directors should clearly express their opposition when they consider that a decision proposal submitted to the Board may not be in the Company’s best interest. In particular, independent directors and other directors unaffected by the potential conflict of interest should challenge any decision that could go against the interests of shareholders lacking Board representation. When the Board adopts material or reiterated resolutions on issues about which a director has expressed serious reservations, said director must draw the pertinent conclusions. Directors resigning for such causes should set out their reasons in the letter referred to in the next Recommendation. This Recommendation should also apply to the Company Secretary, even if the Secretary is not a director. Complies 32. If leaving office before the end of his/her term, be it due to resignation or to other motives, the director should explain the reasons in a letter sent to all Board members. Whether or not such resignation is filed as a significant event, the reasons behind the cessation must be explained in the Annual Corporate Governance Report. See heading: C.1.9 Complies 33. Remuneration comprising the delivery of shares in the company or other companies in the group, share options or other share‐indexed instruments, payments indexed to the Company’s performance or membership of pension schemes should be confined to executive directors. The delivery of shares is excluded from this Recommendation when directors are conditioned to retain them until the end of their term of office. Complies 34. Non‐executive directors' remuneration should sufficiently compensate them for the dedication, abilities and responsibilities that the post entails, but should not be so high as to compromise their independence. Complies 35. Deductions should be made to remuneration linked to Company earnings, for any qualifications stated in the external auditors' report that reduce such earnings. Complies 36. In the case of variable payments, remuneration policies should include the limits and technical safeguards required to ensure they reflect the professional performance of the beneficiaries and not simply the general progress of the markets or the Company’s sector, or other similar circumstances. 56 Complies 37. When the Company has an Executive Committee, the breakdown of its members by director category should be similar to that of the Board itself. The Secretary to the Board should also act as secretary to the Executive Committee. See headings: C.2.1 and C.2.6 Complies partially This Recommendation is not complied with insofar as the composition of the Executive Committee complies with the proportionality rule, given that there are no independent Board members. In accordance with the Recommendation, the Board's Secretary holds the same post on the Executive Committee. 38. The Board should always be kept fully informed of the business transacted and the resolutions adopted by the Executive Committee. To this end, all Board members should receive a copy of the Committee’s minutes. Complies 39. In addition to the Audit Committee mandatory under the Securities Market Law, the Board of Directors should form a Committee, or two separate committees, for Appointments and Remuneration. The rules governing the composition and functioning of the Audit Committee and the Appointments and Remuneration Committee(s) should be set forth in the Board's Regulations, and include the following: a) The Board of Directors should appoint the members of such Committees taking into account the knowledge, skills and experience of its directors and the tasks of each Committee; discuss their proposals and reports; and must notify it, in the first plenary Board meeting following each meeting, of its activity and be answerable for the work performed; b) These Committees should be formed exclusively by non‐executive directors and have a minimum of three members. Executive directors or senior management may also attend meetings at the Committee members’ express invitation. c) Committees should be chaired by independent directors. d) They may engage external advisers, when they feel this is necessary for the discharge of their duties. e) Meeting proceedings should include minutes and a copy sent to all Board members. See headings: C.2.1 and C.2.4 Complies 40. The job of supervising compliance with internal codes of conduct and corporate governance rules should be entrusted to the Audit Committee, the Appointments Committee or, as the case may be, separate Compliance or Corporate Governance Committees. See headings: C.2.3 and C.2.4 Complies 41. All members of the Audit Committee, particularly its Chairman, should be appointed with regard to their knowledge and background in accounting, auditing or risk management. Complies 42. Listed companies should have an internal audit function, under the supervision of the Audit Committee, to ensure the sound functioning of the internal control and reporting systems. See heading: C.2.3 Complies 57 43. The head of internal audit should present an annual work program to the Audit Committee; inform it directly of any incidents arising during its implementation; and submit an activities report at the end of each year. Complies 44. The risk management and control policy should specify at least: a) The different types of risk (operational, technological, financial, legal, reputational, etc.) to which the Company is exposed, with the inclusion under financial or economic risks of contingent liabilities and other off‐balance‐sheet risks; b) Setting the level of risk considered acceptable by the Company; c) The measures established to mitigate the impact of the risks identified, should they materialize; d) The internal control and reporting systems used to control and manage the aforesaid risks, including contingent liabilities and off‐balance sheet risks. See heading: E Complies 45. The Audit Committee’s role should be: With respect to internal control and reporting systems: 1 a) Management and adequate notification of the main risks identified as a result of the supervision of the effectiveness of the Company's internal control and internal audit, where appropriate. b) Oversight of the independence and effectiveness of the internal audit function; proposing the selection, appointment, re‐election and removal of the internal audit service head, and the estimate for that service; receiving periodic information on its activities; and verifying whether senior management has taken into account the conclusions and recommendations of its reports. c) Establishment and supervision of a mechanism enabling the employees to confidentially and, if deemed appropriate, anonymously, notify the irregularities of potential importance, especially financial and accounting irregularities, communicated within the Company. 2 With respect to the external auditor: a) b) To receive regular information from the external auditor on the audit plan and the outcome of its execution, verifying that senior management takes due note of its recommendations; b) To ensure the independence of the external auditor, to which end: i) The Company should notify any change of auditor to the CNMV as a significant event, accompanied by a statement of any disagreements arising with the outgoing auditor and, if any, from its content. ii) iii) Should the external auditor resign, examine the circumstances leading to the resignation. See headings: C.1.36, C.2.3, C.2.4 and E.2 Complies 46. The Audit Committee should be empowered to meet with any Company employee or manager, even ordering their appearance without the presence of another senior officer. Complies 47. The Audit Committee should inform the Board, prior to the adoption by it of the related decisions, of the following matters indicated in Recommendation 8: a) The financial information that the Company, as a publicly traded company, must disclose periodically. The Committee should ensure that interim statements are drawn up under the same accounting principles as the annual statements and, to this end, may ask the external auditor to conduct a limited review; b) The creation or acquisition of shares in special‐purpose entities or entities domiciled in countries or territories considered tax havens, and any other transactions or operations of an analogous nature whose complexity could undermine the Group’s transparency. 58 c) Related‐party transactions, except when that report function has been previously attributed to another supervision and control Committee. See headings: C.2.3 and C.2.4 Complies 48. The Board of Directors shall try to avoid the accounts being presented to the GSM with reservations and qualifications in the auditors' report. When this is not possible, both the Chair of the Audit Committee and the auditors must clearly explain the content and scope of such reservations and qualifications to the shareholders. See heading: C.1.38 Complies 49. The majority of Appointments Committee members – or Appointments and Remuneration Committee members as the case may be – should be independent directors. See heading: C.2.1 Explain The Appointments and Remuneration Committee comprises five members, two of which are independent and the remaining three are significant‐shareholder appointed non‐executive directors. Although the independent directors do not represent the majority, it is considered that their participation in this associated board is sufficient to guarantee the correct functioning of this Committee in the exercise of its corresponding powers. Also, the proportion represented by them is in line with the Company's capital structure and is equivalent to that also applied in all the remaining director bodies. 50. The Appointments Committee should have the following duties in addition to those stated in the earlier recommendations: a) Evaluate the competences, knowledge and experience required on the Board, define the functions and capabilities required of the candidates to fill each vacancy accordingly, and decide the time and dedication necessary for them to properly perform their duties. b) To examine or organize, in the manner it deems suitable, the succession of the Chairman and the Chief Executive Officer and, where appropriate, make corresponding proposals to the Board for an orderly, well‐planned succession. c) Report on the senior officer appointments and removals that the Chief Executive Officer proposes to the Board; d) Report to the Board on the gender diversity issues discussed in Recommendation 14 of this Code. See heading: C.2.4 Complies 51. The Appointments Committee shall consult with the Company Chairman and the Chief Executive Officer with respect to matters related to Executive Directors. Any Board Member may suggest directorship candidates to the Appointments Committee, if he/she considers them suitable. Complies 52. The Remuneration Committee should have the following duties in addition to those stated in the earlier Recommendations: a) To propose to the Board of Directors: i) The remuneration policy of directors and senior executives; 59 ii) The individual remuneration of the executive directors and the remaining terms and conditions of their contracts. iii) The basic terms and conditions of the contracts executed with senior executives. b) Oversee compliance with the remuneration policy set by the Company. See headings: C.2.4 Complies 53. The Remuneration Committee shall consult with the Company Chairman and the Chief Executive Officer, especially with respect to matters related to Executive Directors and senior executives. Complies OTHER INFORMATION OF INTEREST H 1. Please briefly detail any significant matter existing with respect to corporate governance at the Company or at Group entities not included in the other sections of this report, but which is required to include more complete, founded information on the Entity or Group's governance practices and structure. 2. This section may include any other disclosure, clarification or qualification in relation with the previous sections of the report, insofar as they are significant and not repeated. Specifically, indicate whether the Company is subject to legislation other than Spanish legislation in the area of corporate governance and, where appropriate, include the information that must be provided and is different from that required in this report. In relation to the information provided on ownership structure in sections A.3 and A.8, it is stated that the information is at 31 December 2013. On 19 February 2014, the Company notified, as a significant event, the partial novation of the integration agreement entered into on 14 December 2011 with Gestora de Inversiones Audiovisuales La Sexta S.A. ("La Sexta") and its shareholders, under which Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L. received, with a charge to treasury shares, a holding in Atresmedia Corporación de Medios de Comunicación, S.A. equivalent, respectively, to 2.079% and 1.631% of its share capital. Consequently, at the date of approval of this report, the voting rights owned by the directors Gamp Audiovisual S.A. and Imagina Media Audiovisual, S.L jointly represent 10.202% of the Company's total voting rights and treasury shares represent 3.298%. 3. It is reported in section C.1.29 that in 2013, nine Board of Directors' meetings were held. It should be added that in 2013 the Board adopted written resolutions without convening a meeting, on 20 December 2013; such agreements were included in the Company's Minutes Book. In relation to the information included in section C.1.39, the audit firm is indicated to be Arthur Andersen, S.L. ‐which merged with Deloitte, S.L.‐, it had previously performed the audit work for five years. The Company may also indicate whether it has voluntarily adhered to other codes of ethical principles or good practices, be they international, sectoral or of another scope. Where appropriate, the code in question will be identified, together with the adhesion date. The Company has voluntarily adhered to various sectoral self‐regulation codes. The main codes adhered to include most notably: − Radio Self‐Regulation Code (January 2013) − Code of Conduct on Gaming Activity Commercial Communication (2012) 60 − − − − − − PAOS: Self‐regulation Code on the Advertising of Foodstuffs Aimed at Minors, prevention of Obesity and Health (inclusion of television operators in 2010) Self‐Regulation Code on the Advertising of Children's Toys (modified in 2010) Self‐Regulation Code on the Advertising of Brewers in Spain (2009) Self‐Regulation Code on Wine (2009) Self‐Regulation Code on SMSs (2009) Spanish Federation on Spirit Drinks (FEBE): Self‐Regulation Code of the Spanish Federation on Spirit Drinks (FEBE) (2006) This Annual Corporate Governance Report was approved by the Company’s Board of Directors at its meeting on 26 February 2014. Indicate whether any directors have voted against or abstained with respect to the approval of this Report. Yes No X Reasons (opposition, Name or company name of the director who has not voted in favour of approving this report abstention, non‐ attendance) Explain the reasons 61