Grupo Clarín S.A.
Annual Report 2014

Plain-text annual report

ANNUAL REPORT 2014 Disclaimer Some of the information in this Annual Report (the “Annual Report”) may contain projections or other forward-looking statements regarding future events or the future financial performance of Grupo Clarín. You can identify forward-looking statements by terms such as ”expect”, ”believe”, “anticipate”, “estimate”, “intend”, ”will”, “could”, “may” or ”might”, the negative of such terms or other similar expressions. These statements are only predictions and actual events or results may differ materially. Grupo Clarín does not intend to or undertake any obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in Grupo Clarín’s projections or forward-looking statements, including, among others, general economic conditions, Grupo Clarín’s competitive environment, risks associated with operating in Argentina, a rapid technological and market change, and other factors specifically related to Grupo Clarín and its operations. The Annual Report and certain boxes and charts that include highlighted information for illustrative purposes throughout this publication, include financial information as of and for the fiscal years ended December 31, 2014 and 2013, which was extracted from the Consolidated and the Parent Only Financial Statements as of December 31, 2014, presented on a comparative basis, and their related notes. The Annual Report and the Highlights should be read in conjunction with such financial statements and related notes, the report of Grupo Clarín’s independent accountants, Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (a member firm of PriceWaterhouseCoopers) relating to such financial statements, and the report of Grupo Clarín’s Supervisory Committee. Financial and Operational Highlights 2014 Macroeconomic Environment Perspectives for the Upcoming Year The Year 2014 and the Media Sector in Argentina and the World Regulatory framework and conditions for the journalistic and media activity during 2014 The Company. Origin, Evolution and Profile Grupo Clarín and its Business Segments in 2014 Supplementary Financial Information CORPORATE GOVERNANCE, ORGANIZATION AND INTERNAL CONTROL SYSTEM Stock Information and Shareholder Structure CABLE TELEVISION AND INTERNET ACCESS Programming, Cable Television and Internet Services Commercialization and Customer Service Competition PRINTING AND PUBLISHING Arte Gráfico Editorial Argentino Diario Clarín Products Internet Other Newspapers BROADCASTING AND PROGRAMMING Artear Radio Mitre DIGITAL CONTENT AND OTHERS Digital Content Other Services Ferias y Exposiciones Argentinas CORPORATE RESPONSIBILITY AND SUSTAINABILITY Our Commitment The Voice of the People Social and Sustainability Coverage Promoting Involvement Community Engagement and Social Advertising Fostering Education and Culture Media Literacy and Protection of Young Audiences Excellence in Journalism Training Our People Environment RISK FACTORS BUSINESS PROJECTIONS AND PLANNING FINANCIAL STATEMENTS AS OF DECEMBER 31, 2014 02 04 05 06 08 12 14 16 17 19 20 22 25 25 26 27 28 30 31 32 36 39 41 42 44 46 47 48 49 51 52 53 54 55 56 57 58 62 66 74 76 1 2 3 4 5 6 ANNUAL REPORT 2014 19,616.2 Net Sales 2014 (In million of Ps.) FINANCIAL HIGHLIGHTS (In million of Ps.) Net Sales 2014 2013 YoY 19,616.2 14,100.2 39.1% Adjusted EBITDA(1) 5,024.5 3,272.8 53.5% Adjusted EBITDA Margin(2) 25.6% 23.2% 10.4% Income for the period 1,345.5 800.7 68.0% (1) We define Adjusted EBITDA as net sales minus cost of sales (excluding depreciation and amortization) and selling and administrative expenses (excluding depreciation and amortization). We believe that Adjusted EBITDA is a meaningful measure of our performance. It is commonly used to analyze and compare media companies on the basis of operating performance, leverage and liquidity. Nonetheless, Adjusted EBITDA is not a measure of net income or cash flow from operations and should not be considered as an alternative to net income, an indication of our financial performance, an alternative to cash flow from operating activities or a measure of liquidity. Other companies may compute Adjusted EBITDA in a different manner; therefore, Adjusted EBITDA as reported by other companies may not be comparable to Adjusted EBITDA as we report it. (2) We define Adjusted EBITDA Margin as Adjusted EBITDA over Net Sales. 2014 02 5,024.5 Total EBITDA 2014 (In million of Ps.) ADJUSTED EBITDA (In million of Ps.) 2014 2013 YoY Cable TV and Internet Access 4,693.7 2,850.7 64.7% Printing and Publishing (136.7) 76.2 (279.4%) Broadcasting and Programming 495.5 334.1 48.3% Digital Content and Others (13.0) 13.1 (198.9%) Subtotal Eliminations(1) 5,039.6 3,274.0 53.9% (15.1) (1.2) 1,155.5% Total 5,024.5 3,272.8 53.5% (1) Adjustments of income/loss from discontinued operations. 3,491.1 Total Consolidated Subscribers 2014 (In thousands) OPERATING RESULTS 2014 2013 YoY Total Consolidated Subscribers(1)(3) 3,491.1 3,492.5 (0.0%) Total Internet Subscribers(1) 1,837.7 1,711.6 7.4% Circulation(1) 276.5 296.7 (6.8%) Audience Share %(2) Prime Time Total Time 33.3% 35.4% (5.9%) 26.7% 28.0% (4.6%) (1) Figures in thousands. (2) Share of broadcast TV audience according to IBOPE for AMBA. Prime Time is defined as Monday through Friday from 8 pm to 12 am. Total Time is defined as Monday through Sunday from 12 pm to 12 am. (3) Total subscribers consolidated following the same consolidation methods used in the financial statements as of each year end. 03 compared to the preceding month. The decision not to return to the voluntary international debt market also contributed to this scenario, but to a lesser extent. The above-mentioned devaluation of the Argentine peso per se, together with an adjustment in interest rates aimed at stabilizing the demand for local currency, allowed the Government to stop the drain on international reserves suffered by the BCRA in spite of the implementation of foreign exchange controls. Devaluation also caused an inflationary acceleration that gave rise to a considerable drop in the purchasing power of people’s income (in pesos and especially in US dollars), and rapidly offset the competitiveness gained through such devaluation. Consequently, and despite the expansive trend of fiscal policy, in 2014 the Argentine economy registered a sharp contraction in consumption and in the level of economic activity, compared to 2013. Despite this recessive environment and the slowdown in prices recorded in the last part of the year as a consequence of BCRA’s decision to anchor the exchange rate, there was a sharp rise in inflation levels during 2014. The price index surveyed by the consulting company ECOLATINA closed the year at +37.7%, i.e. approximately 10.5 percentage points above the level of the previous year. This increase is the highest since 2002, and contrasts with the single-digit levels registered by all other countries in the region, except for Venezuela. These annual price dynamics exceeded of the increase in the official Ps./USD exchange rate (by approximately 6 percentage points). Consequently, by the end of 2014, the real Ps./USD exchange rate (taking into account the inflation rate differential between Argentina and the United States) stood below the rate registered in December 2013, a month before the devaluation. This complex scenario, marked by decreases in both consumption and economic activity coupled with high inflation, was also marked by a decrease in exports that exacerbated the scarcity of foreign currency. During 2014, export values decreased by almost 12% year-on-year, equivalent to USD9.7 billion. This new decrease of the main source of foreign currency for the Argentine economy, confirmed that it is impossible to continue to finance economic activity by depleting currency reserves, and that the size of the economy needs to be adjusted to the decrease in the availability of foreign currency. The drop in imports mitigated to a large extent the 2014 MACROECONOMIC ENVIRONMENT The growth rate of the world economy in 2014 (+3.3%) was virtually similar to the previous biennium according to recent figures published by the International Monetary Fund. This year’s general slowdown of the emerging economies, particularly and more markedly of Latin-American economies, was offset by the better performance of the main developed countries. In fact, while the group of emerging economies led by China and Russia once again registered above-average growth –though lower than in 2013 (+4.4%, i.e. 0.3 percentage points below the level of the previous year)– growth in developed countries (+1.8%) remained below average but showed a marked improvement against the previous year (0.5 percentage points above the level of 2013). Of particular note is the sharp slowdown of Latin- American economies, which during the last three years have recorded growth rates below the global average, with a growing gap. The poor growth rate registered in 2014 by this group of countries, of only 1.2% (compared to +2.8% in 2013) is the lowest in the last five years (excluding the contraction attributable to the 2008/2009 crisis) and is a consequence of the stagnation of its most important member (Brazil). In this global framework, in 2014 the Argentine economy faced its most complex year in the last decade. The contraction of exports and of economic activity, though lower in both cases than those of 2009, were in this case coupled with inflationary acceleration, the loss of purchasing power and a decrease in employment. The world economy continued to grow at two different paces, below average for developed countries and above average for emerging countries, reflecting the structural nature of the global accumulation process, centered on emerging economies. This scenario was affected to a large extent by the negative side effects of the early devaluation of the Argentine peso implemented by the end of January 2014, when the Central Bank of Argentina (“BCRA”, for its Spanish acronym) decided to adjust the official Ps./USD exchange rate by +23% 04 decrease in exports, which gave rise to a new decline in the annual trade balance surplus (USD6.7 billion, a record low since 2001), although the decline was of only USD1.3 billion, compared to 2013. In spite of this reduced trade surplus, and despite the fact that the Government lifted restrictions on the purchase of foreign currency by individuals for the purpose of saving, subject to a 20% tax advance, to be credited against future income tax (referred to in Argentina as ‘savings’ dollars), the level of BCRA’s reserves at year-end (USD31.4 billion) stood slightly above the level registered in 2013 (+USD0.8 billion), after dropping below USD27.0 billion in early April. The significant increase in the level of reserves during the last months of the year is mainly due to the fact that Argentina received the first tranches of the currency swap executed with the Central Bank of the People’s Republic of China (approximately USD2.7 billion out of an agreed aggregate of USD11.0 billion). A material portion of the imbalances faced by the Argentine economy is attributable to fiscal and monetary issues. The national public accounts have been deteriorating uninterruptedly since 2005 (when the primary fiscal surplus reached its record high, accounting for 3.9% of GDP). The national primary fiscal imbalance worsened significantly throughout 2014 and was increasingly financed with the printing of currency. In 2014, the monetary authority issued a record high amount of pesos in order to aid the National Treasury (approximately Ps.160.0 billion, a 70% increase, compared to the amount issued the previous year). However, the year-on-year growth of the monetary base (+22.5%) was lower than the increase in 2013, mainly due to the aggressive treasury bill placement policy implemented by the monetary authority. The aggregate amount of outstanding treasury bills (Ps.260.5 billion as of December 2014) more than doubled the figures recorded in 2013. Said financing in local currency was coupled with the aid to the National Treasury in foreign currency for approximately USD11 billion, which were used to honor interest payments on the country’s sovereign debt held by private creditors and international agencies. The National Treasury's debt with the Central Bank currently stands at more than USD50 billion. Without counting remittances from the National Social Security Administration (ANSES, for its Spanish acronym) and the Central Bank, the national primary deficit rose to Ps.159.7 billion (approximately 3.7% of nominal GDP) during the year, almost doubling the figure for 2013. The financial deficit (i.e. deficit after payments of interest on public debt) climbed to Ps.230.9 billion (approximately 5.3% of GDP) in the year under analysis. Both figures are record highs since 2003, both in absolute and in relative terms. Such fiscal deterioration took place in spite of the last decade’s increasing increase in the tax pressure (a current record high for the three governmental levels [(national, provincial and municipal)] on a consolidated basis). Of particular note are the results of the recently published Annual Survey of Urban Households, which reveal the magnitude of the impact of recession on employment rates in the Argentine economy. According to such survey, total employment (private and public) experienced a year-on-year drop of 2.5% as of the 3rd quarter of 2014, which accounts for almost 400,000 fewer employed workers than in 2013. Such loss of employment was not reflected in higher unemployment rates due to the drop in activity and employment rates. PERSPECTIVES FOR THE UPCOMING YEAR Latin-American emerging economies are adapting to the new global scenario marked by the strengthening of the US dollar with respect to the rest of the currencies and the fall in the prices of oil and most agricultural and non-agricultural commodities. Adjustment includes, in general, a depreciation of their currencies in real terms aimed at adjusting their imports to the lower generation of dollars (commercial and financial). This, in turn, leads to a greater or lesser extent to the slowdown of these countries’ growth rates (and decrease of their nominal GDP in US-dollar terms). In the case of the Argentine economy in particular, this new external scenario, which is clearly less favorable than that of previous years, is coupled with the fact that the stagnation of the Brazilian economy is expected to continue. In this framework, the short-term performance of the Argentine economy will depend mostly on the country's ability to generate sufficient foreign currency to honor interest payments on its foreign debt and to finance the necessary imports to recover the growth of productive activity, in order not to add more pressure on the BCRA's reserves. The new projected decline in export values, both as a result of the fall in the terms of exchange and the expected decrease in exports of industrial products, mainly to Brazil, is a factor that conditions the performance of the Argentine economy in 2015. Should the current course of the economic policies extend throughout the remainder of the term of the current administration, the country’s economic imbalances, far from being corrected, will deepen. Faced with the needs of an election year, the Government is likely to focus its economic policy, to a larger extent, on boosting the economy within the shortest term possible. To that end, the Government is likely to continue to delay the adjustment of the Ps./USD exchange rate to curb inflationary pressures, and to consider the possibility of resorting to external borrowing in an attempt to offset the projected lower real generation of foreign currency. Notwithstanding the foregoing, even if progress is made in this respect, the weight that such a boost to the economic activity level in due time and form would have in an election year as a result of the above- mentioned strategy, is uncertain. In summary, the considerations raised above reflect the complex scenario that the Argentine economy will have to face during 2015, taking into account the limited room for maneuver that the economic policy makers will have as a result of the macroeconomic imbalances brewed in the high fase of the cycle. The return of the historical external constraint on growth, has given rise to budgetary constraints to which economic policy makers are little accustomed, but with which they will necessarily have to cope during their remaining months in office. 05 THE YEAR 2014 AND THE MEDIA SECTOR IN ARGENTINA AND THE WORLD During 2014, the performance of the global media sector maintained the rate of growth registered in previous years, according to the 2014-2018 Global Perspectives Report, for the Entertainment and Media Sectors recently published by Price Waterhouse & Co. The report analyses the current situation of the main segments of the sector in 54 countries and makes five-year forecasts. This sector’s consolidated revenues closed the year under analysis with a rise similar to the one recorded in 2013 (approximately 5%), once again above that recorded by the world GDP. Argentina and Brazil are two of the nine countries which entertainment and media industries have the highest growth potential through 2018, according to such report. Driven by a growing middle class, China, Brazil, Russia, India, Mexico, South Africa, Turkey, Argentina and Indonesia will represent as a whole approximately 20% of the global media and entertainment industry’s revenues in 2018. The growth of digital revenues (+14% compared to 2013, according to this same report) again stood out among the above-mentioned revenue evolution, because they continued to increase at a rate that was significantly above average. As a result, digital revenues already account for a little less than 10% of the aggregate industry revenues (this percentage rises a little above 25% considering advertising revenues only). 06 Behind this trend there is an unprecedented digital revolution. The recurring emergence of new technologies is transforming the way in which we carry out our day-to-day activities and is leading to a deep change in the conduct of our societies, in relevant aspects, such as the ways in which we communicate, generate knowledge or consume the media. Digital natives and nomads are the key drivers of this cultural change. The flexibility, user- friendliness and above all mobility of digital devices, in particular mobile smartphones, are among the key drivers of this revolution. Lastly, the accelerated migration of content, audiences and advertisers towards the digital ecosystem represents the main consequence of this process. Hence, technological innovation allows for the generation of increasingly powerful devices with increasingly lower purchase prices. The new generations of networks, increasingly faster and with greater storage capacity, drive the growing penetration of the broadband. The foregoing promotes a growing consumption of the media, with well-defined characteristics, to wit: Mainly audiovisual and increasingly multi- platform and participative (media as producers and “socializers” of content). At the same time as this notable change in the way people use media, there is also a change in people’s purchasing patterns that is reflected in the high growth of e-commerce, based on the emergence of new channels and the possibility of customized offerings. At a corporate level, the speed of the changes in the digital ecosystem has outstripped by far companies’ capacity to adapt to such changes. The digital revolution has transformed the business ecosystems of many industries, forcing companies to reorganize themselves as fast as possible. Hence, it is increasingly important for media companies to consider digital technology in their strategic design, in the training of their resources and in the development of business plans. In this search for new business models, the data collection and subsequent intelligent data analysis is becoming increasingly important, not only as a technology to be used in audience management but also as a business generating factor in itself. The printing industry is undergoing a strong transformation and restructuring on a global basis. In the main developed countries, where there is a strong technological disruption, new business models such as paywalls, subscription plans, membership clubs, discounts, etc. are constantly being analyzed to engage new generations that are reading more content in multiple devices. One of the main sources of revenues for traditional media companies, advertising, is facing major In turn, the advertising pie of broadcast television in 2014 continued to widen the gap in terms of which sector attracts the largest share of advertising in the local market. Broadcast television advertising outperformed the printed media, mainly due to the lower dynamism that these media have been experiencing year after year as a consequence of the emergence of new trends and platforms. Finally, printed newspaper circulation has continued to show the downward structural trend specific to this segment of the industry, strongly influenced by new technologies and consumption patterns. In contrast, it is worth noting the exponential, sustained increase in the number of visits to social networks and websites that create content, mainly news sites, with newspapers at the top of the rankings. The foregoing poses a challenge for printed newspaper companies, but at the same time it represents an opportunity in a highly changing ecosystem in which consumers are increasingly interested. Within the framework of this ecosystem, deriving profitability from digital newspapers by generating revenues in line with their growing number of readers is still the main challenge faced by newspaper publishers from an economic-financial standpoint. challenges in this complex scenario. The first of those challenges is how to disseminate mass messages in an environment that is becoming increasingly customized. To this end, many of the new technologies allow companies to identify consumer preferences in detail and thus offer them only what may be of interest to them. However, there are great difficulties, many of them as a result of the great variety of devices with which consumers are in contact. This segmentation of content and audiences poses one of the greatest challenges for traditional, mass and multitarget media in this new paradigm. Another great challenge is to face the disintermediation typical of this accelerated migration, and the consequent loss of revenues for traditional businesses in favor of native and consolidated intermediaries of the digital ecosystem, such as Google and Facebook. All of the above poses a great challenge and at the same time represents an opportunity for each of the different segments of the media industry, which in the face of this changing reality are bound to reformulate their strategies and business models. For the local media industry, 2014 was marked by slow dynamics, because even though revenue generation was higher than in the previous year, the corresponding growth was lower than the average inflation rate measured by private consulting companies. In fact, as mentioned above under the heading “2014 Macroeconomic Environment”, the recession coupled with accelerated inflation that characterized the Argentine economy throughout the year was an additional source of stress for this industry. In addition to the macroeconomic trends, at a micro level, the National Government once again escalated its attacks against the press with the clear purpose of colonizing the media and weakening independent media in general, and Grupo Clarín in particular. The regulatory tools devised to increase governmental intervention and affect private media sustainability, the discrediting campaigns and attacks against journalists and directors from media that are critical of the current administration, the arbitrary allocation of official advertising, the use of publicly-owned media as promotional tools for the government, and the expansion of pro-government media (sustained only by the official advertising allocated to them) are good examples of such escalation. In this complex environment, both at a macro and microeconomic level, the figures corresponding to the main sources of revenue of the industry were modest, to say the least, and heterogeneous. In fact, the paid television segment continued to expand at above-average rates, at higher nominal rates than those observed in previous years as a consequence of the inflationary acceleration. The new subscribers gained in the months preceding the FIFA World Cup mitigated the relatively slower growth observed during the rest of the year. The incorporation of new technologies allowed the industry to offer supplementary services focused on the customization of consumption patterns, thus creating products that are more appealing to consumers. The demand for broadband maintained the same dynamics observed in the last years, although it grew at lower rates as a result of its high penetration at a local level (among the highest in Latin America). The strong growth of Internet access from mobile platforms, caused by the massification of new technologies applied to new mobile devices, is a highlight of the year under analysis. However, there is still a long way to go to in connection with the necessary investments required to improve both the networks and their speed. In this respect, we note that both at the international and local levels there is a widespread demand by consumers for higher connection speed, especially taking into consideration the growing consumption of streaming content. The emergence of new players that do not have proprietary networks and instead leverage third- party networks to reach users, creates more demand from users, but also increases the cost of infrastructure and technology necessary to meet such demand at affordable prices, thus causing new tensions in this segment of the industry. During 2014, according to the Company’s own estimates, total advertising investment recorded a year-on-year increase of approximately 25% in nominal terms, virtually similar to that observed in the previous year despite the above-mentioned inflationary acceleration. This increase was mostly driven by government advertising expenditures, directed to continue to finance a matrix with a growing share of publicly-owned and other pro- government media. Of particular note is the performance of digital advertising, which continued to increase its share in total advertising revenues and is expected to continue to grow well above average over the next years. 07 Regulatory framework and conditions for the journalistic and media activity during 2014 In addition to the above, during 2014 Grupo Clarín continued to face an escalating level of harassment. Such harassment was executed through official and para-official structures, with the clear intention of dismantling the group, compromising its sustainability, undermining its credibility, and directly and indirectly limiting its journalistic activities. The Government continued to use tools to exert pressure through abuse of bureaucratic controls or controls by public agencies that took the form of administrative persecutions, discriminatory resolutions, disproportionate tax controls, and recurring audits. In this scenario, Grupo Clarín faced administrative persecutions from several agencies of the National Government throughout 2014. In the audiovisual sector, this offensive against the media was expressed through the selective application of the Audiovisual Communication Services Law No. 26,522 (LSCA, for its Spanish acronym). Its controversial implementing regulations clearly exceed the legal framework by granting powers to the enforcement agency that are not vested in that agency by the law. When the Company was served with the Supreme Court’s decision that sections that declared of the LSCA that had been challenged by the Company were constitutional, and faced with the de facto proceedings that sought to dispossess the Company of its licenses and assets through an ex officio procedure, on November 4, 2013, the Company submitted to AFSCA and to the Supreme Court of Argentina a voluntary proposal to conform to the LSCA pursuant to section 161 of the LSCA. The proposal had been approved by Board of Directors of Grupo Clarín at a meeting held on November 1, 2013, which was adjourned and resumed on November 3, 2013. With the proposal, the Board sought to avoid the forced divestiture of the Company’s assets by AFSCA. The filing of the proposal resulted in the enactment of AFSCA Resolution No. 1,471/AFSCA/2013, whereby AFSCA suspended its first attempt to enforce the ex officio divestiture procedure, initiated pursuant to Resolution No. 2,276/ AFSCA/2012. Pursuant to Resolution No. 1,471/ AFSCA/2013, AFSCA stated its intention to refrain from pursuing any administrative proceeding under Resolution No. 2,276/AFSCA/2012. With respect to AFSCA, in 2014 the persecution against Grupo Clarín reached its peak with that agency’s new attempt (later suspended by court) to terminate arbitrarily the procedures proposed by the Company and some of its subsidiaries to conform to the provisions of the LSCA. Such proposal had been duly filed by the Company and approved by AFSCA in February 2014. However, AFSCA resumed the ex officio divestiture process, thus confirming all the red flags that pointed at the risk of arbitrary enforcement by a non-independent authority. The voluntary proposal –which does not interrupt any of the judicial actions brought by the Company and its subsidiaries, among others, to defend their rights– was submitted together with a request that the decision rendered by the Supreme Court of Argentina be complied with in full. That is, that the government guarantee that the enforcement authority will be independent and unbiased, and will have technical expertise, so as to ensure a transparent and egalitarian treatment in the application of the law. The Company’s proposal consisted in a division of Grupo Clarín's current structure into six independent corporate units, whose respective owners will be defined as the implementation process progresses. This way, each unit will conform individually to the provisions of Sections 45 and 46 of the LSCA and its implementing regulations, and will be divided according to the following detail: • Unit I: Composed by (a) ARTEAR, owner of the signal of Canal 13 of Buenos Aires and the news signal TN (Todo Noticias). ARTEAR will also maintain its interest in (i) Telecor, holder of the license of Canal 12 of Córdoba and (ii) Bariloche TV, holder of the license of Canal 6 of Bariloche. (b) Radio Mitre, which will maintain the frequencies AM 790 and FM 100 in Buenos Aires, AM 810 and FM 102.9 in Córdoba, and FM 100.3 in Mendoza; and (c) certain assets, liabilities, rights and obligations to be spun off from Cablevisión (“Cablevisión Spinoff 1”), which will include 24 local licenses for physical link subscription television services and 2 licenses for radio-electric link subscription television services, in cities where there is no incompatibility with broadcast TV. • Unit II: Composed by the surviving Cablevisión, which will continue to carry out the business activities and operations of Cablevisión with all the assets, liabilities, rights and obligations that are not spun off from Cablevisión, including the registered title of METRO as its own signal for the city of Buenos Aires and as a signal to be exploited in the provinces. It will include 24 licenses for physical link subscription television services and 10 licenses for radio-electric link subscription television services. • Unit III: Composed by Cablevisión Spinoff 2, which will include assets, rights and obligations to be spun off from Cablevisión, including 22 licenses for physical link subscription television services and 10 licenses for radio-electric link subscription television services. • Unit IV: (a) composed by IESA, owner of the signals TyC Sports and TyC Max; (b) the signals El 13 Satelital, Magazine, Volver, Quiero Música en mi Idioma, and an equity interest in Canal Rural S.A., owner of the signal Canal Rural. • Unit V: To be owned by one or more individuals or legal entities that will not maintain a corporate relationship with Radio Mitre, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which will own: (a) one sound frequency modulation broadcasting service for the city of San Miguel de Tucumán-FM 99.5, (b) one sound frequency modulation broadcasting service for the city of San Carlos de Bariloche- FM 92.1, (c) one sound frequency modulation broadcasting service for the city of Santa Fe-FM 99.3, and (d) one sound frequency modulation broadcasting service for the city of Bahía Blanca- FM 96.5. • Unit VI: To be owned by one or more individuals or legal entities that will not maintain a corporate relationship with ARTEAR, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which shall hold one broadcast television license for the city of 08 Bahía Blanca, province of Buenos Aires-LU81 TV Canal 7 –and an equity interest in Cuyo Televisión S.A., holder of one broadcast television license in Mendoza-LV83 TV Canal 9 Mendoza–. The proposal contemplates that the Company will continue to own, directly or indirectly, only one of the audiovisual communication service Units (among those defined as Unit I and Unit II) of the six that were described above. The implementation of the proposal submitted by the Company required the approval of AFSCA, the intervention of other governmental and oversight agencies and the approval of the shareholders at the respective Shareholders' Meetings in order to carry out the restructuring and the transfer of licenses, assets, liabilities and operations to third parties. On February 18, 2014, the AFSCA declared the admissibility of said proposal and granted the Company a term of 180 calendar days for its implementation. On February 18, 2014, the Company's Board of Directors decided to call for an Extraordinary Shareholders' Meeting to be held on March 20, 2014, in order to consider AFSCA Resolution No. 193/2014 and to instruct the Board of Directors to begin implementation of the proposal. As from that moment, the Company and its subsidiaries have devoted a great deal of effort to implementing in due time and form the Proposal approved by AFSCA and by their shareholders at the respective Shareholders' Meetings. On August 19, 2014, and within the 180-day term, Grupo Clarín, ARTEAR, Radio Mitre and Cablevisión made a filing with AFSCA in order to inform and certify that they had duly completed all actions required of those companies and necessary to implement the Proposal in the terms in which it had been approved pursuant to Resolution No. 193/ AFSCA/2014. The companies also requested (i) that certain inapplicable orders issued AFSCA be deemed responded, and that the agency order and carry out any prior actions necessary to complete the process, as requested in each of the filings made by the Company, including the granting of an extension of the term to implement the Proposal, for as long as it takes that Agency to analyze and instrument such prior actions, and (ii) that AFSCA compel the other government agencies that must necessarily intervene in this procedure (CNV, IGJ, AFIP, SECOM, etc.) to issue the corresponding authorizations that are required prior to the final completion of the process. Inexplicably, AFSCA intensified the persecution and hostility to which the Company and its subsidiaries had been subjected by issuing resolutions with new requirements. Even though the Company filed responses in due time and form, these resolutions were intended to lay the legal foundations for a new attempt to enforce the arbitrary and unconstitutional ex officio divestiture procedure. On October 9, 2014, AFSCA notified the Company, ARTEAR, Radio Mitre and Cablevisión of AFSCA Resolution No. 1,121/2014, whereby, on false and arbitrary grounds, AFSCA decided to reject the reorganization proposed by the Company, the reorganization proposed by Cablevisión, the formation of the foreign trusts required for the implementation of such reorganizations and the transfers proposed by the Company, ARTEAR, Radio Mitre and Cablevisión, and to resume the ex officio transfer procedures pursuant to Section 1, subsection a) of Annex I of AFSCA Resolution No. 2,206/2012. The Company understands that it has executed the Proposal that was declared formally admissible pursuant to Resolution No. 193, fully in accordance with the commitment undertaken by the Company and in compliance with the applicable regulatory framework, and considers that Resolution No. is evidently arbitrary and 1,121/AFSCA/2014 inapplicable and the constitutional infringes guarantees of due process and defense in court. The procedure to approve such Resolution had serious irregularities and gross and malicious errors relating to the interpretation and application of effective legislation, inevitably rendering such Resolution null and void. For those reasons, the affected companies requested the Resolution's nullification before an administrative court in order to implement satisfactorily the Proposal to which they had committed. In view of the serious irregularities mentioned above, upon a request made by the Company, ARTEAR and RADIO MITRE in re “GRUPO CLARÍN S.A. and Other v. National Government and Other on Merely Declarative Action on Motion for appeal” (File 7,263/2013/1), the National Court of First Instance on Federal Civil and Commercial Matters No. 1, Clerk’s Office No. 1, granted, on December 9, 2014, a preliminary injunction whereby it suspended the effects of Resolution No. 1,121/AFSCA/2014 for a term of six months. The injunction was issued within the framework of a claim brought by the Company, requesting that the ex officio divestiture procedure be declared unconstitutional. The injunction was ratified by a decision of the Court of Appeals, which was served on the Company on February 20, 2015. Finally, we refer to Resolution No. 1,329/ AFSCA/2014, which amends Resolution No. 1,047/ AFSCA/2014, whereby the AFSCA approved the National Standard for Terrestrial and Broadcast Digital Television Audiovisual Communication Services, and to Decree No. 2,456/2014, which approves the National Digital Audiovisual Communication Services Plan. Both the Resolution and the Decree are manifestly contrary to Law No. 26,522, which has higher hierarchy, because they contradict the rights of the current licensees of broadcast television services, including ARTEAR and the subsidiaries that exploit broadcast television services. Through this legal framework, which was subsequently supplemented by Resolution No. 24/AFSCA/2015, which approved the Technical Plan for Terrestrial Digital Television Frequencies for important areas of the national territory, and Resolution No. 35/AFSCA/2015 (among others), which allocated a digital television station on a permanent basis to the current licensees of analog broadcast stations in order to develop their transition to digital technology, the rights of the current broadcast television licensees are evidently infringed. These rights should be preserved intact as established in Law No. 26,522, which has higher hierarchy. The main effect of these regulations, among other identifiable technical effects, is that the rights of the current broadcast television licensees that obtained their licenses pursuant to Law No. 22,285 will be infringed by, among other things: i) the imposition of new charges and obligations, such as the obligation to multiplex and broadcast other broadcast television stations under their own responsibility, incurring liability for the costs derived from such obligation; ii) the illegal assignment of the category “licensee operator” discriminating against them with respect to “authorized licensees” and/or new licensees (non-operators) with respect to the responsibilities and obligations involved, generating a clear competitive disadvantage in the advertising market; iii) the change in their service category, which may have an impact on their broadcast coverage area; and iv) the restriction on the direct access to the exploitation of “One Seg”, which entails a restriction to exploit the mobile television service. 09 y RTA S.E. (Canal 7) on an equal and proportional basis, and that it implements allocation mechanisms with a reasonable jurisdictional equilibrium that will for an adequate judicial control of any illegality or unreasonableness in governmental action or failure to act with respect to the allocation of public funds to official advertising. Thus, the Supreme Court of Justice confirmed the existence of discriminatory conduct in the allocation of official advertising towards one of the companies of Grupo Clarín. Such discriminatory conduct was also extended to the other companies of the Group, in particular to Arte Gráfico Editorial Argentino S.A. and Radio Mitre S.A. These cases are similar to ARTEAR’s. The ARTEAR case is based on the precedents of Editorial Perfil and Editorial Río Negro, and the court held that because it had already rendered judgment about the matter of allocation of official advertising in those cases, it could not now disregard its own doctrine. This decision rendered by the Supreme Court of Argentina has not been complied with during 2014. Therefore, the Government continued to discriminate against ARTEAR in its allocation of official advertising. This situation had already worsened in the previous year, when in addition to the discretionary allocation of official advertising as an indirect censorship tool, the Secretary of Domestic Trade put unprecedented pressure on advertisers of several industries and threatened them with fines if they advertised their products or services on certain media. This virtual boycott of private advertising, which affected directly the economic sustainability of independent media, lasted approximately until May, when the situation started gradually to revert. However, the current level of private advertising is below that recorded before the boycott. The government also continued to use public funds and media on a discretionary basis to generate content and shows devoted to political propaganda and to the stigmatization of dissenting opinions; placing a number obstacles and discriminating against non-partisan media in the access to public information and escalating government attacks against such media to compromise their economic sustainability and credibility. In addition to those maneuvers, the attack against independent media also includes continued actions by several official agencies to seek control of newsprint, the basic input for newspaper production. The government's attempt to gain ARTEAR and/or its subsidiaries affected by these regulations will bring all legal, administrative and/ or judicial actions, as appropriate, to preserve their rights intact as direct or indirect licensees for the exploitation of broadcast television services. During 2014, the Company and its subsidiaries were also subject to other administrative maneuvers. The effects of Resolution No. 50/2010 of the Secretariat of Domestic Trade and subsequent resolutions issued in connection thereto, which arbitrarily and discriminatorily sought to fix Cablevisión S.A.'s monthly basic subscription price, are still suspended by the decision rendered by the Federal Court of the city of Mar del Plata in response to a claim filed by the Argentine Cable Television Association. The federal court of Bahía Blanca has recently rendered a decision ordering the nullification of such Resolution No. 50 on the grounds that there are no shortages in the cable television industry. On September 17, 2014, Congress enacted Law No. 26,991, amending Supply Law No. 20,680, which served as a basis for the issuance of Resolution No. 50/2010. The constitutionality of the new law has been challenged on grounds as the challenges against Law No. 20,680. In fact, none of the amendments introduced by Law No. 26,991 address the law’s failure to comply with the requirements of Section 76 of the Argentine National Constitution in connection with the delegation of legislative powers. The law grants wider, permanent powers to the Executive Branch, represented by the Secretariat of Domestic Trade. These powers contravene property rights, the right to trade and the right to engage in any lawful business, and also violate the right to freedom of the press when applied to media companies. Additionally, in connection with an administrative resolution issued by SECOM in 2010, whereby Fibertel's license was revoked, there are preliminary injunctions still in effect that suspend the application of the resolution and challenge its legality. In this framework, also during 2014 the government continued with the discriminatory allocation of official advertising used to create and sustain pro- government media, and to retaliate against critical media, as a tool to condition the press. In this regard, the Supreme Court of Justice confirmed that since 2009 there has been a discriminatory allocation of official advertising in connection with Arte Radiotelevisivo Argentino S.A., which in early 2012 reached the point of receiving practically no official advertising. The court confirmed the decision rendered by Chamber No. 4 of the National Court of Appeals on Federal Administrative Matters in re “Arte Radiotelevisivo Argentino S.A. (ARTEAR) vs. EN-JGM-SMC on Claim for the protection of constitutional rights ("acción de amparo", Law No. 16,986)”, and ordered the national government to allocate official advertising among América TV S.A., Telearte S.A. (Canal 9), Teledifusora Federal (Canal 11), Arte Radiotelevisivo Argentino (Canal 13) and SNMP S.E. 10 control of the paper industry has intensified, through several measures that seek to hinder the management of Papel Prensa (Papel Prensa supplies approximately 95% of the Argentine newspapers and the Company indirectly holds a 49% equity interest in that company). The government has tried to interfere with Papel Prensa's business practices and bring legal and administrative actions against it. On the legislative front, in 2011 Congress enacted Law No. 26,736 whereby the production and sale of newsprint was declared a matter of public interest. Said law is still effective and so are the limits on production and import of newsprint and the price per newsprint ton. Additionally, under the Capital Markets Law, which was regulated by the Executive in 2013, the Argentine Securities Exchange Commission was vested with additional, discretionary powers to intervene in the governance of publicly traded companies. The CNV moved forward with certain administrative proceedings concerning the companies of Grupo Clarín that may lead to the application of the most controversial aspects of the Capital Markets Law. In fact, in July 2013, the CNV issued Resolution No. 17,131 whereby the General Ordinary Shareholders' Meeting of Grupo Clarín S.A. held on April 25, 2013, was declared null and void. The effects of this decision were suspended pursuant to a decision rendered by Chamber V of the National Court on Federal Administrative Matters in re “GRUPO CLARÍN S.A. vs. CNV RESOL. 17,131/13 (FILE 737/13)” File No. 29,563/13. Grupo Clarín S.A. was also served notice of an injunction issued on August 12, 2013, by Chamber A of the Federal Court of Appeals on Commercial Matters in re "SZWARC RUBEN MARIO vs. NATIONAL GOVERNMENT AND OTHERS on Injunction", a claim brought by one of the Company's minority shareholders. The injunction provided for the suspension of the effects of Section 20 of Law No. 26,831 in connection with Grupo Clarín S.A. The regulatory framework of the Argentine telecommunications sector is undergoing a process of change. In December 2014, the Argentine Congress passed Law No. 27,078, known as the “Digital Argentina Act”, which partially repealed National Telecommunications Law No. 19,798. The new law subjects the effectiveness of Decree No. 764/00, which deregulated the telecommunications market, to the enactment of four new sets of rules that will govern the License, Interconnection, Universal Service and Radio-electric Spectrum regimes. Law No. 27,078 also repeals or amends certain key aspects of the Audiovisual Communication Services Law, in particular, it repeals or eases the restrictions on telephone companies to render audiovisual services, thus generating unfair competition with the companies in the sector. The new law maintains the single country-wide license scheme and the individual registration of the services to be rendered, but replaces the name telecommunication services with Information and Communications Technology Services (“TIC Services”, for their Spanish acronym). Notwithstanding the foregoing, the scope of the licenses originally granted to the Company’s subsidiary, its merged and related companies, and their respective registrations of services, remain unaltered. The licenses will be called “Licencia Única Argentina Digital” and will allow licensees to render any telecommunication services to the public, be they fixed or mobile, wired or wireless, national or international, with or without the licensee’s own infrastructure. The TIC Services registered with the Argentine Secretariat of Communications under the name of the Company’s subsidiary, its merged and/or related companies are the following: Data Transmission, Paging, Videoconference, Community Retransmission, Transport of Broadcast Signals, Value-Added, Radio-Electric Trunking, Internet Access, Public Telephony, Local Telephony and National and International Long-Distance Telephony. The law created a new enforcement and oversight Authority as a decentralized agency under the jurisdiction of the Executive Branch: the Information and Communications Technology Federal Enforcement Authority (AFTIC, for its Spanish acronym). The creation of this agency provided by the new law has been challenged due to the fact that it will entail its dependence on the Executive Branch and jurisdictional conflicts with other governmental agencies. The new law maintained the obligation to contribute 1% of telecommunication service revenues, net of taxes and charges, to be used for Universal Service investments (this obligation had been imposed by Decree No. 764/00 on all service providers as from January 1, 2001), but the Universal Service Trust Fund was placed under State control. Another innovation of the recently enacted legislation is the creation of a new public service under the name “Public and Strategic Infrastructure Access and Use Service for and among Providers”. The right of access includes “providers having to make available to other providers their network elements, associated facilities or services to render TIC services, even when such elements are used to render audiovisual content services.” Under this scheme, the government seeks to put private companies that were created and developed in competition on an equal footing with other companies that enjoyed privileges derived from its exclusive concessions. The foregoing applies to any provider that has its own infrastructure or networks, because the term Associated facilities is defined as physical infrastructures, systems, devices, associated services or other facilities or elements associated with a telecommunications network or with Information and Communications Technology (TIC) Services that enable or support the provision of services using that network or service, or that have the potential to do so; and will include, inter alia, buildings or building entrances, building wiring, antennas, towers and other supporting constructions, ducts, masts, manholes, and cabinets. Implementing regulations for Law No. 27,078 are still pending. Therefore, the economic and operational impact that the creation of this public service may have on licensees cannot be ascertained. The government has taken no action to apply the new law because the AFTIC has yet to be organized. 11 THE COMPANY. ORIGIN, EVOLUTION AND PROFILE Grupo Clarín is Argentina's most prominent and diversified media group and one of the most important in the Spanish-speaking world. The Company is organized and operates in Argentina and its controlling shareholders and management are Argentine. Grupo Clarín is present in the Argentine printed media, radio, broadcast and cable television, audiovisual production, the printing industry and Internet access. Its leadership in the different media is a competitive advantage that enables Grupo Clarín to generate significant synergies and expand into new markets. Substantially all of Grupo Clarín's assets, operations and clients are located in Argentina, where it generates most of its revenues. The Company also carries out operations at a regional level. The companies that comprise Grupo Clarín employ around 16,000 people and, as of year-end, reported annual net sales of Ps.19.616 billion. Grupo Clarín's history dates back to 1945, the year in which Roberto Noble founded the newspaper Clarín of Buenos Aires (“Diario Clarín”), with the goal of becoming a mass-distribution and quality newspaper, privileging information and committing to the comprehensive development of the country. Since 1969, Diario Clarín has been led by his wife, Ernestina Herrera de Noble. It became the flagship national newspaper and has consolidated its position throughout the years thanks to the work of its journalists and the loyalty of its readers. Diario Clarín is now one of the Spanish-language newspapers with the highest circulation in the world. Grupo Clarín has been one of the main actors in the changes undergone by the media worldwide. It has incorporated new and varied printing activities and decided to embrace technological developments, investing to reach its audiences through new platforms and channels and through new audiovisual and digital languages. In this way, Grupo Clarín entered the radio and television sectors. Today, it is the owner of one of the two leading broadcast television channels in Argentina (ARTEAR/El Trece) and of AM/ FM broadcast radio stations. Along with the newspaper, these media are recognized as the most credible and considered leaders of Argentine journalism in one of the most diverse media markets in the world. For example, in Buenos Aires, the Company's media compete in a market that has 5 broadcast television stations, 550 radios, and 12 national newspapers. CABLE TV & IN TE R N E T A C C E S S only sports newspaper in Argentina; the free newspaper La Razón and the magazines Ñ, Genios, Jardín de Genios, Pymes and Elle, among other publications. Through CIMECO, the Company holds equity interests in the newspapers La Voz del Interior, Día a Día and Los Andes, in a market of approximately 200 regional and local newspapers. The Company also holds an equity interest in a national news agency (DyN). In the audiovisual arena, the Company also produces one of the 5 cable news signals (Todo Noticias), and the cable television signals Volver and Magazine, among others. It also produces sports channels and events (TyC Sports), television contents and motion pictures (Pol-Ka and Patagonik Film Group). Another strength lies in its strategic stake in the content distribution sector, through cable television and Internet access. Since the beginning of Multicanal's operations in 1992 and after the recent acquisition of a majority interest in Cablevisión, Grupo Clarín has created one of the largest cable television systems in Latin America in terms of subscribers. Cablevisión is the first cable operator in Argentina among 700 operators and always competes with other cable or satellite options. Through Fibertel, it also provides high- speed Internet services and has one of the largest subscriber bases in a highly competitive market. In line with the global trend, Grupo Clarín has committed itself to expanding digital content production. Grupo Clarín's Internet portals and sites receive more than half of the visits to Argentine websites. limited liability. It gradually opened its capital to other participants and, since October 2007, it is listed on the Buenos Aires Stock Exchange and on the London Stock Exchange. It takes pride in having grown in Argentina, in being a source of influence on a local level in an increasingly transnational market with a size that enables it to compete without losing strength among large international players. Grupo Clarín's investments in Argentina in the last 20 years have been very significant, always with the same central focus: Journalism and the media. Its activities have contributed to the creation of an important Argentine cultural industry and generate qualified and genuine employment. Its vision and business model focus on investing, producing, informing and entertaining, preserving Argentine values and identity, and preserving business to ensure independence journalistic independence. in order In relation to its mission and values, since its foundation, Grupo Clarín has undertaken intense community activities. Grupo Clarín, together with the Noble Foundation, which was established in 1966, organizes and sponsors several programs and activities, particularly focused on education, culture and citizen participation. Furthermore, as an indication of its social responsibility throughout its history, Grupo Clarín focuses on the ongoing improvement of its processes, develops initiatives that arise from discussions with different stakeholders, and works for sustainability. Grupo Clarín also publishes Olé, the first and In 1999 Grupo Clarín was incorporated as an Argentine sociedad anónima, a corporation with 12 2 PRINTING & PU 100% B LI S H I N G AGEA 100% 100% 100% 100% 50% 100% 80% 81% 49% Oportunidades Tinta Fresca AGR Unir Impripost CIMECO Diario Los Andes La Voz del Interior Papel Prensa 37% 12% 1 CABLE TV & IN 60% TE R N E T A C C E S S CABLEVISIÓN THIS CHART ILLUSTRATES COMPANIES IN WHICH GRUPO CLARÍN PARTICIPATES DIRECTLY OR INDIRECTLY, ORGANIZED BY BUSINESS SEGMENT Because Argentine Corporate Law No. 19,550 (as amended, the “Argentine Corporate Law”) requires that companies have at least two shareholders, a small percentage of the capital stock of certain of our subsidiaries is held by GC Minor S.A., a company owned by Grupo Clarín (95.3%) and AGR S.A. (4.7%). This chart does not include certain intermediate holding vehicles and certain subsidiaries that do not have significant assets or business. BROADCASTIN 3 99.2% G & P R O G R A M M I N G Telecor Canal 12 Telba Canal 7 Bariloche TV Pol-Ka Producciones Patagonik Film Group ARTEAR 85.2% 100% 100% 55% 33% 100% IESA 96% 50% 50% 25% Auto Sports TSC TRISA Canal Rural Satelital 100% Radio Mitre DIGITAL CONTE 4 100% N T & O T H E R S COMPAÑÍA DE MEDIOS DIGITALES 100% 100% Gestión Compartida Ferias y Exposiciones Argentinas 13 GRUPO CLARÍN AND ITS BUSINESS SEGMENTS IN 2014 In terms of results, Grupo Clarín and its business segments grew again in 2014 in a highly challenging context. During this year the Company consolidated the positive economic and financial performance trends of the previous years in terms of revenues. Net consolidated sales increased by 39.1%, from Ps.14,100 to Ps.19.616 billion. The growth in cable modem Internet access subscribers played a key role in the performance of subscription revenues. Sales of the remainder of the Company's products and services also increased. By the end of 2014, Grupo Clarín's gross (including consolidated financial indebtedness sellers financing, accrued interest and fair value adjustments) was approximately Ps.4.593 billion, while net consolidated indebtedness was approximately Ps.2.875 billion, representing an increase of 10.9% and 15.4%, respectively, compared to the previous year. This was mostly due to the fact that approximately 85% of the Company's indebtedness as of December 31, 2014, is denominated in US dollars and that the Argentine Peso depreciated by 31.2% in 2014, from Ps.6.52 = USD1 as of December 31, 2013 to Ps.8.55 = USD1 as of December 31, 2014. The following is a description of the most significant events related to the situation and management of each of Grupo Clarín's business segments during 2014. reached Cost of sales (Excluding Depreciation and Amortization) Ps.9,638.5 million, an increase of 35.6% from Ps.7,108.9 million reported for 2013 due to higher costs in our business segments, mainly due to higher costs in the Cable TV and Internet access, Broadcasting and Programming and Printing and Publishing segments. and Administrative Selling Expenses (Excluding Depreciation and Amortization) reached Ps.4,953.3 million, an increase of 33.2% from Ps.3,718.5 million in 2013. This increase was mainly due to higher expenses in the Cable TV and Internet access and Printing and Publishing segments. SALES BREAKDOWN BY SOURCE OF REVENUE - DECEMBER 2014 vs. DECEMBER 2013 (In million of Ps.) INTERNET ACCESS & PUBLISHING & PROGRAMMING & OTHERS CABLE TV & PRINTING BROADCASTING DIGITAL CONTENT ELIMINATIONS(1) TOTAL % 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 87.2 80.3 1,407.3 1,235.9 1,898.2 1,398.0 41.7 55.4 (193.5) (147.3) 3,241.0 2,622.2 16.5% 18.6% Advertising Circulation Printing - - - - 1,288.4 1,091.0 184.7 218.5 Video Subscriptions 10,776.8 7,398.3 Internet Subscriptions 2,755.6 1,909.7 Programming - - - - - - - - Other Sales 606.6 360.8 156.3 107.4 - - - - - - - - 416.8 271.3 329.5 144.2 - - - - - - - - - - (0.0) (4.0) 1,288.3 1,086.9 (51.4) (49.2) 133.3 169.4 6.6% 0.7% 7.7% 1.2% - - 10,776.8 7,398.3 54.9% 52.5% (12.1) (8.2) 2,743.4 1,901.6 14.0% 13.5% (154.5) (108.0) 262.3 572.2 440.8 (435.3) (352.8) 1,171.2 221.5 700.3 1.3% 6.0% 1.6% 5.0% Total Sales 14,226.1 9,749.1 3,036.6 2,652.8 2,586.3 1,871.7 613.9 496.1 (846.8) (669.5) 19,616.2 14,100.2 100.0% 100.0% (1) Eliminations include Grupo Clarín’s intercompany balances and operations and also adjustments of income/loss from discontinued operations. ADJUSTED EBITDA (In million of Ps.) CABLE TV AND INTERNET ACCESS PRINTING AND PUBLISHING BROADCASTING AND PROGRAMMING DIGITAL CONTENT AND OTHERS Subtotal Eliminations(2) Total (2) Adjustments of income/loss from discontinued operations. 14 2014 4,693.7 (136.7) 495.5 (13.0) 5,039.6 (15.1) 2013 2,850.7 76.2 334.1 13.1 3,274.0 (1.2) YoY 64.7% (279.4%) 48.3% (198.9%) 53.9% 1,155.5% 5,024.5 3,272.8 53.5% Adjusted EBITDA reached Ps.5,024.5 million, an increase of 53.5% from Ps.3,272.8 million reported for 2013, driven by higher sales and margin expansion in the Cable TV and Internet access and in Broadcasting and Programming segments; although was partially offset by a negative EBITDA in the Printing and Publishing segment. Financial results net totaled Ps.(1,730.5) million compared to Ps.(1,473.8) million for 2013. The increase was mainly due to higher interest expenses and peso depreciation during 2014, which went from Ps.6.52 per dollar at the end of December 2013, to Ps.8.55 per dollar as of December 31, 2014. Equity in earnings from unconsolidated affiliates in 2014 totaled Ps.39.8 million, compared to Ps.99.5 million for 2013. Other Income (expenses), net reached Ps.2.6 million, compared to Ps.69.5 million in 2013. Income tax as of December 2014 reached Ps.(587.4) million, from Ps.(97.9) million in December 2013. Income from Discontinued Operations, reached Ps.34.7 million in 2014, compared to Ps.53.8 million for 2013. Income for the period totaled Ps.1,345.5 million, an increase of 68.0% from Ps.800.7 million reported for 2013. This was mainly a consequence of higher EBITDA in the Cable TV and Internet access and Broadcasting and Programming segments, and was partially offset by a lower EBITDA in the Printing and Publishing segment and the peso depreciation. The Equity Shareholders Income for the period amounted to Ps.804.1 million, an increase of 67.6% compared with December 2013. Cash used in acquisitions of property, plant and equipment (CAPEX) totaled Ps.2,513.7 million in 2014, an increase of 35.2% from Ps.1,859.3 million reported for 2013. Out of the total CAPEX in 2014, 94.3% was allocated to the Cable TV and Internet access segment, 3.4% to Printing and Publishing segment and the remaining 2.3% to other activities. Capex in the Cable TV and Internet Access segment pertains to subscriber growth, network upgrades and digitalization. Debt profile(1): Debt coverage ratio for the period ended December 31, 2014, was 0.79x and the Net Debt at the end of this period totaled Ps.2,912.3 million. (1) Debt Coverage Ratio is defined as Total Financial Debt divided by Adjusted EBITDA (Last Quarter Annualized). Total Financial debt is defined as financial loans and debt for acquisitions, including accrued interest. FY13 % Change DEBT AND LIQUIDITY (In million of Ps.) SHORT TERM AND LONG TERM DEBT CURRENT FINANCIAL DEBT Financial loans Negotiable obligations Accrued interest Acquisition of equipment Sellers Financing Capital Sellers Financing accrued interest Related Parties Capital Related Parties accrued interest Bank overdraft NON-CURRENT FINANCIAL DEBT Financial loans Negotiable obligations Accrued interest Acquisition of equipment Sellers Financing Capital Sellers Financing accrued interest Related Parties Capital Related Parties accrued interest Bank overdraft TOTAL FINANCIAL DEBT(A) Measurement at fair Value TOTAL SHORT TERM AND LONG TERM DEBT Cash and Cash Equivalents(B) Net Debt(A) - (B) Net Debt/Adjusted EBITDA(1) % USD Debt % Ar. Ps. Debt DEBT PROFILE AS OF DECEMBER 31, 2014(2) (USD MM, Balance Sheet) FY14 1,704.2 396.6 752.5 121.8 168.9 3.8 - 14.1 2.6 243.9 2,925.5 40.5 2,568.1 - 316.9 - - - - - 4,629.7 (36.5) 4,593.2 1,717.4 2,912.3 0.50x 84.5% 15.5% 1,295.9 49.5 924.6 120.1 90.3 3.5 - 9.9 1.1 97.0 2,890.1 247.1 2,531.9 - 104.7 - - 4.2 2.2 - 4,186.0 (43.1) 4,142.8 1,650.5 2,535.5 0.65x 90.6% 9.4% 550 500 450 400 350 300 250 200 150 100 50 0 183 195 2015 2016 103 2017 44 2018 0 2019 TOTAL DEBT PROFILE AS OF FEBRUARY 28, 2015(2) (USD MM, Balance Sheet) 600 550 500 450 400 350 300 250 200 150 100 50 0 202 185 111 2015 2016 2017 85 2018 0 2019 TOTAL 31.5% 701.2% (18.6%) 1.4% 87.0% 8.8% NA 43.0% 138.7% 151.6% 1.2% (83.6%) 1.4% NA 202.6% NA NA (100.0%) (100.0%) NA 10.6% 15.5% 10.9% 4.1% 14.9% (23.6%) (6.6%) 63.7% 525 583 (2) Exchange Rate: 8.55 ARS/USD as of December 31, 2014, and 8.72 ARS/USD as of February 28, 2015. 15 The Legal Reserve has already reached the limit established by Law No. 19,550 and CNV resolutions and, therefore, the Company is not required to appropriate net income to the legal reserve. Below is a summary of the main criteria on which the above appropriation of net income for the year to the optional reserve mentioned above proposed by the Board of Directors is based: - as mentioned above in this Annual Report and as exhaustively described in the Company's financial statements, the circumstances that gave rise to the setting up of this reserve are still prevailing. Therefore, the Board of Directors proposes to the Shareholders that, given the uncertainties related to the LSCA, the eventual implications of the implementing regulations of the Digital Argentina Act, and the contributions that are expected to be required by some subsidiaries for the reasonable management of their businesses, among other issues, it would be prudent and reasonable to appropriate net income for the year to the optional reserve. Directors’ responsibility statement The Statement of Operations as of December 31, 2014, recorded a net income of Ps.804.1 million. Such income is basically derived from the income generated by the investments in subsidiaries which amounted to Ps.731.2 million, which includes the income generated by the investment in the subsidiary Inversora de Eventos S.A., classified as Net Income from Discontinued Operations during this year. Grupo Clarín S.A. is still controlled by GC Dominio S.A., which holds 64.2% of its voting rights. Balances and transactions with related parties are detailed in Note 16 to the Consolidated Financial Statements. Proposal of the board of directors We confirm that to the best of our knowledge: Net income for the year ended on December 31, 2014, was Ps.804,101,687. In light of the situation outlined in this Annual Report in connection with the proposal to conform to the LSCA, the dividend distribution proposal presented by the Boards of Directors of each of Grupo Clarín's subsidiaries, the financial position of certain subsidiaries which are expected to require in 2015 contributions to be made using a substantial portion of the dividends receivable mentioned above, and the expected future cash flows from operating and financing activities, the Board of Directors considers that it would not be prudent to propose any dividend distribution. Hence, the Board of Directors proposes to the Shareholders' Meeting that such net income of Ps.804,101,687 be appropriated to the Optional Reserve to give financial aid to its subsidiaries and the LSCA. - the consolidated financial statements included with this annual report, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and - this annual report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. On behalf of the Board, Alejandro Urricelqui Vice Chairman Grupo Clarín SUPPLEMENTARY FINANCIAL INFORMATION The information included in the Supplementary Financial Information is part of this Annual Report and, therefore, both should be read in conjunction. Financial position and results of its operations During this year, the main changes in the Company's financial position and results of its operations were the following: Working capital (current assets minus current liabilities) at year-end decreased by Ps.41.6 million compared to the previous year, from (positive) Ps.165.4 million to (positive) Ps.123.9 million. This decrease is basically evidenced in the decrease in Company funds (the items Cash and Banks and certain Current Investments) in the amount of Ps.122.3 million, net of a net increase in balances with related parties and the placement of forward instruments. With respect to non-current items, the most significant variation was recorded under Investments in unconsolidated affiliates, mainly as a consequence of: (i) the net increase generated by the results obtained by Grupo Clarín's subsidiaries, mainly Cablevisión S.A. (indirectly), Arte Gráfico Editorial Argentino S.A., and Arte Radiotelevisivo Argentino S.A., (ii) the increase generated by new contributions made to certain subsidiaries, mainly Arte Gráfico Editorial Argentino S.A., and (iii) the decrease generated by the collection of dividends of certain subsidiaries, mainly the companies through which the Company indirectly controls Cablevisión S.A. and Arte Radiotelevisivo Argentino S.A. 16 CORPORATE GOVERNANCE, ORGANIZATION AND INTERNAL CONTROL SYSTEM CORPORATE GOVERNANCE, ORGANIZATION AND INTERNAL CONTROL SYSTEM Grupo Clarín's Board of Directors is responsible for the Company's management and approves its policies and overall strategies. Pursuant to the By- laws, the Board of Directors is comprised by ten permanent directors and ten alternate directors who are elected at the Ordinary Shareholders' Meeting on an annual basis. Four of them (two permanent and two alternate members) are required to be independent directors, appointed in accordance with the requirements provided under the CNV rules. MEMBERS OF THE BOARD OF DIRECTORS Grupo Clarín's Board of Directors is comprised by the following members, appointed at the Annual Ordinary Shareholders' Meeting and Special Meeting per Class of Shares, held on April 29, 2014: Jorge Carlos Rendo Alejandro Alberto Urricelqui Pablo César Casey Chairman Vice Chairman Director Grupo Clarín also has a Supervisory Committee comprised of 3 permanent members and 3 alternate members, who are also appointed on an annual basis at the Ordinary Shareholders' Meeting. The Board of Directors, through an Audit Committee, is in charge of the ongoing oversight of all matters related to control information systems and risk management, and issues an annual report on these topics. The members of the Company's Audit Committee may be nominated by any member of the Board of Directors and a majority of its members must meet the independence requirement provided under CNV rules. SUPERVISORY COMMITTEE Grupo Clarín's Supervisory Committee is comprised by the following members, appointed at the Annual Ordinary Shareholders' Meeting and Special Meeting per Class of Shares, held on April 29, 2014: Saturnino Lorenzo Herrero Mitjans Director Raúl Antonio Morán(2) Héctor Mario Aranda Ignacio R. Driollet Lorenzo Calcagno Director Carlos A. P. Di Candia(2) Director Pablo San Martín(2) Independent Director Hugo Ernesto López(2) Alberto César José Menzani Independent Director Rubén Suárez(2) Luis María Blaquier Jorge Ignacio Oría(1) Director Miguel Ángel Mazzei(2) Director Martín Gonzalo Etchevers Hernán Pablo Verdaguer Alternate Director Alternate Director AUDIT COMMITTEE Permanent Member Permanent Member Permanent Member Alternate Member Alternate Member Alternate Member Juan Ignacio Giglio Alternate Director The Audit Committee is comprised as follows: Francisco Iván Acevedo Alternate Director Sebastián Bardengo Alternate Director Alberto César José Menzani Horacio Eduardo Quiros Alternate Director Lorenzo Calcagno Chairman Vice Chairman Carlos Rebay Alternate Director Alejandro Alberto Urricelqui Permanent Member Luis Germán Fernández Alternate Director Pablo César Casey Sebastián Salaber Francisco Saravia Alternate Director Carlos Rebay Alternate Director Luis Germán Fernández Alternate Member Alternate Member Alternate Member (1) During the year, Jorge Oría requested leaves of absence. During those periods he was replaced by the Alternate Director Sebastián Salaber. (2) Independent members of the Supervisory Committee. 17 CORPORATE GOVERNANCE, ORGANIZATION AND INTERNAL CONTROL SYSTEM Grupo Clarín organizes its activities under an executive structure comprising: External Relations Department; Corporate Finance Department; Corporate Control Department; Corporate Strategy Department; Audiovisual Content Department; Corporate Human Resources Department; Corporate Affairs Department; Digital Content Department. The overall criteria used to appoint managers are based on the background and experience in the position and the industry, companies they have worked for, age, professional and moral aptitude, among other factors. In order to identify opportunities and streamline structures and systems with the aim of improving processes and making informed decisions, Grupo Clarín sets forth several procedures and policies for controlling the Company's operations. The areas responsible for the Company's internal controls, both at the Company level and at the level of its subsidiaries and affiliates, contribute to the safeguarding of shareholders' equity, the reliability of financial information and the compliance with laws and regulations. Compensation of the Members of the Board of Directors and Senior Management Compensation of the members of the Board of Directors is decided at the Shareholders' Meeting after the close of each fiscal year, considering the cap established by Section 261 of Law No. 19,550 and related regulations of the CNV. All of Grupo Clarín's subsidiaries have compensation arrangements with all of their officers in executive and managerial positions, which contemplate a fixed and variable remuneration scheme. Fixed compensation is tied to the level of responsibility attached to each position, prevailing market salaries and performance. The annual variable component is tied to performance during the fiscal year based on the objectives set at the beginning of the year. Grupo Clarín does not have any stock option plans in place for its personnel. As mentioned in Note 20 to the Consolidated Financial Statements, on January 1, 2008, Grupo Clarín began to implement a long-term savings plan for certain executives of Grupo Clarín and its subsidiaries. Executives who adhere to such plan will contribute regularly a limited portion of their salary to a fund that will allow them to increase their income at the retirement age. Furthermore, each company matches the sum contributed by such executives. This matching contribution will be added to the fund raised by the employees. Under certain conditions, employees may access such fund upon retirement or upon termination of their jobs with Grupo Clarín. This long-term benefit has a strong withholding component and is considered as an integral part of the employee's total compensation for comparative purposes with prevailing market salaries. During 2013, certain changes were made to the savings system, although its operation mechanism and the main characteristics with regard to the obligations undertaken by the company were essentially maintained. The parameters used in fixing compensations are in line with customary market practices followed by companies of the scale of Grupo Clarín. To this end, the Company assesses the relative weight of the several positions within the company, as well as the performance of the employee that holds the position. In order to assess positions and compare salaries in different markets, the Company uses the services and reports of prestigious HR companies at the national and international level. 18 Annual Shareholders' Meeting STOCK INFORMATION AND SHAREHOLDER STRUCTURE CORPORATE GOVERNANCE, ORGANIZATION AND INTERNAL CONTROL SYSTEM Grupo Clarín held its Annual Ordinary Shareholders' Meeting on April 29, 2014. On this occasion, the shareholders reviewed and approved the accounting records for fiscal year No. 15 ended on December 31, 2013, and the performance and compensation of the members of the Board of Directors and the Supervisory Committee. Among other things, they elected the permanent members and alternate members of the Board of Directors and the Supervisory Committee for the year 2014. In addition, the shareholders approved the distribution of cash dividends in the amount of Ps.240,000,000, payable in two installments, the first one for Ps.80,000,000 payable within 30 days following the date of the Shareholders' Meeting and the second one for Ps.160,000,000 payable on or before December 31, 2014. Dividend Policy Grupo Clarín does not have a formal dividend policy governing the amount and payment of dividends or other distributions. According to its By-laws and the Argentine Corporate Law, Grupo Clarín may lawfully pay and make declarations of dividends only out of the retained earnings stated in the Company's annual Financial Statements prepared in accordance with Argentine GAAP and CNV regulations and approved at the Shareholders' Meeting. In such case, dividends must be paid on a pro rata basis to all holders of shares of common stock as of the relevant record date. Set-up of reserves Pursuant to the Argentine Corporate Law and CNV resolutions, Grupo Clarín is required to set up a legal reserve of no less than 5% of each year's retained earnings until such reserve reaches 20% of its outstanding capital stock plus the corresponding adjustment. The legal reserve is not available for distribution to shareholders. Code of Corporate Governance to the aforementioned and in In addition conformity with the CNV's decisions concerning the filing of the report about compliance with the Code of Corporate Governance (Resolution No. 606/12), Grupo Clarín prepared the report for the year under analysis, which is attached as an exhibit to the annual report available at the company’s website. Grupo Clarín is listed in the Buenos Aires Stock Exchange where it trades its shares, and in the London Stock Exchanges, where it trades its shares in the form of GDS. GCLA GCLA Ps.47.4 USD9.5 287,418,584 143,709,292 London Stock Exchange (LSE) - Ticker: Bolsa de Comercio de Buenos Aires (BCBA) - Ticker: GCLA (BCBA) Price per share, December 31, 2014 GCLA (LSE) Price per GDS, December 31, 2014 Total Shares Total GDS Controlling Shareholders(2) Free Float GS Unidos, LLC (RB)(3) EQUITY PARTICIPATION AT IPO(1) (%) The original IPO allocation was 80% international and 20% local 70.9% 20.3% 8.8% SHAREHOLDER STRUCTURE Number of Shares(4) Controlling Shareholders GS Unidos, LLC (RB) Free Float - International - Local TOTAL 204,030,277 25,156,869 58,231,488 27,740,888 (48%) 30,490,600 (52%) 287,418,584 (1) Since the IPO, our shareholders and management acquired approximately 7.8 MM shares (13.7% of the free float). (2) Controlling Shareholders: Ernestina H. de Noble, Héctor H. Magnetto, José Antonio Aranda and Lucio Rafael Pagliaro. (3) GS Unidos, LLC, a company under the indirect control of Mr. Ralph Booth (Director). (4) As of March 10, 2015. 19 20 1 CABLE TELEVISION & INTERNET ACCESS CABLE TELEVISION AND INTERNET ACCESS Grupo Clarín operates, through Cablevisión, one of the main regional cable television and broadband systems. This segment's revenues mainly derive from monthly subscriptions to cable television service and high-speed Internet access. Its revenues also derive from connection and advertising charges, sales of premium and pay- per-view programming, digital packages, DVR, high definition (HD) signal packages, VOD (Video On Demand) services and the magazine. Out of Grupo Clarín's total sales in 2014 the Cable TV and Internet access segment was the Company's main revenue driver, with sales of Ps.14.226 billion, considering intersegment sales. In terms of geographic availability of Grupo Clarín's services, by the end of 2014, its network reached approximately 7.5 million Argentine households. Grupo Clarín provides services in the city of Buenos Aires and suburban areas, as well as in the cities of Buenos Aires, Santa Fe, Entre Ríos, Córdoba, Corrientes, Formosa, Misiones, Salta, Chaco, Neuquén and Río Negro. Regionally, Grupo Clarín also operates in Uruguay. As of December 31, 2014, it had approximately 3,359,100 paid TV subscribers in Argentina, 131,900 in Uruguay and 1,837,700 Internet subscribers in Argentina. By the end of 2014, most of the homes in Cablevisión's network were passed by its 750MHz bi-directional broadband. Cablevisión's 750MHz networks enable it to offer services and products that generate additional revenues, such as access to Internet, digital services and premium channels. CABLE TV & INTERNET A C C E S 2014 2013 S NET SALES (In millions of Ps.) 2014 2013 CABLE TV & INTERNET A C C E S 14,226.1 9,749.1 45.9% S ADJUSTED NET EBITDA SALES (In millions of Ps.) (In millions of Ps.) 4,693.7 2,850.7 64.7% 21 OPERATING STATISTICS - CABLE TV AND INTERNET ACCESS Homes Passed(1) Bidirectional Homes Passed CABLE TV Total Consolidated Subscribers(1)(3) Subscribers - Argentina Subscribers - International (Uruguay) % over Homes Passed Total Equity Subscribers(4) Churn Rate % DIGITAL VIDEO Digital Ready Pay TV Subs Total Digital Decoders - Argentina - International Penetration over Digital Ready TV Subs INTERNET SUBSCRIBERS Total Internet Subscribers(1) - Cablemodem(1) - ADSL(1) - Dial Up(1) % over Bidirectional Homes Passed Total ARPU(2) (1) Figures in thousands. 2014 7,514.1 68.9% 3,491.1 3,359.1 131.9 46.5% 3,619.8 13.6% 2,774.0 1,405.0 1,235.8 169.2 50.6% 1,837.7 1,828.1 4.5 5.1 35.5% 339.5 2013 7,509.5 66.5% 3,492.5 3,367.5 125.0 46.5% 3,618.8 12.7% 2,769.7 1,260.0 1,117.2 142.8 45.5% 1,711.6 1,699.4 5.8 6.4 34.3% 235.6 YoY 0.1% 3.6% (0.0%) (0.2%) 5.5% (0.1%) 0.0% 7.3% 0.2% 11.5% 10.6% 18.5% 11.3% 7.4% 7.6% (22.9%) (19.7%) 3.6% 44.1% (2) Net Sales / Average Pay TV Subscribers (does not include subscribers from discontinued operations in Paraguay). (3) Total subscribers consolidated following the same consolidation methods used in the financial statements as of each year end. (4) Total subscribers considering the equity share in each subsidiary. Programming, Cable Television and Internet Services Cablevisión offers subscribers a basic service plan that includes the main programming signals, depending on the capacity of local networks. It offers basic and premium programming from more than 25 providers and broadcast television stations of the city of Buenos Aires. Cablevisión's subscribers may purchase premium packages in addition to the basic service for an additional fee. These packages or services have a number of signals additional to those offered in the basic package, with a unique content differentiated by film genre, adult programming, sports or a combination of these options. Cablevisión is also offering digital services to its subscribers that include a basic digital package, as well as Premium and High Definition (HD) services and Video On Demand (“VOD”) programming. The digital service reaches the city of Buenos Aires and its surrounding areas (the “AMBA Region”), the city of La Plata and the major markets of the regions (for instance, Udn LITORAL Udn CENTRO Udn INTERNACIONAL Udn SUR Udn AMBA Udn BUENOS AIRES 22 CABLE TELEVISION AND INTERNET ACCESS residential or corporate user, providing specific solutions, such as, virtual private network or “VPN” services, traditional Internet Protocol (“IP”) connections and corporate products that include additional services. Internet Cablevisión provides high-speed services in the AMBA region, the cities of La Plata, Córdoba, Rosario, Campana, Río Cuarto, Posadas, Salta, Olavarría, Pergamino, Mar del Plata, Bahía Blanca, Santa Fe, and other cities of the provinces. Córdoba, Rosario, Santa Fe, etc.). This digital service enables to broaden the signal offering and features an on-screen programming guide. Cablevisión offers a high definition signal package (Cablevisión Digital HD) as well as the Cablevisión Max HD product in locations with the necessary technology to broadcast under this format. During 2014 and through the HD platform, Cablevisión broadcast events in 3D for customers subscribed to the Premium HD service. Since 2012, Cablevisión has been offering a Video On Demand (VOD) platform that allows subscribers to buy programs or event packages on demand through a programming library and that features video functions (pause, fast- forward, rewind). The VOD content has signals, such as, Wobi TV, HBO, Discovery, ARTEAR, among others. During 2014, Cablevisión launched “Cablevisión Play”, a service that offers subscribers access on demand to a library with 7,000 titles, from any device inside and outside the subscriber's home. The new online platform offers movies, series and live sports events. That company also launched Cablevisión Store, a new function for Cablevisión HD and Cablevisión Max HD subscribers that allows them to buy Premium packages from their remote control. Cablevisión also offers Cablevisión Flex, an optional social service of digital paid television with a reduced subscription, to approximately 500,000 neighbors of low-income areas. This service, which seeks to enhance "digital inclusion", includes the installation of digital set-top units and allows clients to buy a service with fewer signals for half the price and gradually buy additional signal packages until completing a full basic product. As to Internet access services, Cablevisión has been offering high-speed cable modem Internet access through its networks under the Fibertel brand since September 1997. Cablevisión's Internet access products are specially customized to the needs of each 23 CABLE TELEVISION AND INTERNET ACCESS 2014 2013 CABLE TV & INTERNET A C C E S S TOTAL INTERNET SUBSCRIBERS (Figures in thousands) 1,837.7 1,711.6 7.4% Fibertel is undoubtedly the broadband service that offers the best variety of speeds in the market, widely and at competitive prices. Since 2011, it has offered the Fibertel Evolution product, becoming the first Internet provider in the country in incorporating the new "Wideband" technology to its product portfolio. The launch of new products with higher speeds is one of the main objectives of the Company’s business strategy, seeking to increase speed at households in order to meet the demand for higher bandwidth consumption. As of December 31, 2014, Cablevisión provided Internet access in Argentina to 1,837,700 subscribers through its own networks. Fibertel Zone is the first Argentine WI-FI circuit. This service, which reached 900 hotspots in 2014, allows users to surf the web for free at the highest speed at bars, restaurants, movie theaters, gyms and parks, among many other spots. It is available for Fibertel customers and non- customers. However, at the time of establishing the connection, customers obtain the following benefits: Higher speed, browsing priority and connection without time In addition, Cablevisión entered into a commercial agreement that allowed customers to have 1,000 hotspots at Airports, Hotels, Malls and Beaches in the main cities of Brazil during the 2014 FIFA World Cup. limits. 24 CABLE TELEVISION AND INTERNET ACCESS Commercialization and Customer Service Cablevisión uses several market positioning mechanisms, including promotions, customer service center locations, newsletters about the company, institutional information and programming through its websites. It advertises its services in the printed media and over its own broadcasting signals. Cablevisión also publishes a free monthly guide distributed to most of its cable television service subscribers and a monthly magazine called "Miradas", which is sold to a portion of its subscriber base. Customer service is provided through an integrated service center that offers round-the-clock support, with the aim of optimizing customer relations. In this regard, it launched “Sucursal Virtual”, a website that enables its subscribers to interact with the company to follow procedures that were previously carried out through a telephone call or even in person. Even though most interactions take place over the phone, subscribers may also contact the customer service by e-mail, fax, chat, the web site and the social networks, mainly Facebook and Twitter. In 2014, Cablevisión was once again certified under the model of the COPC (Customer Operations Performance Center) standards, which foster improvements in the processing of customer's inquiries. Not only was this achieved by making changes in the procedures, but also by delivering results that boost customer's satisfaction. This high-performance management model is used by the world's leading service companies. In addition, Cablevisión included a solution called “Interaction Analytics” that provided further information to spot opportunities for improvement in customer service. The satisfaction indicators remained above the target of 85%, Top Two Box, confirming the excellence of the services provided by the Company. Competition Cablevisión competes in the cable television segment against other cable television operators and providers of other television services, including direct, satellite and broadcast services. Given the fact that licenses are granted on a non-exclusive basis, Cablevisión's systems are frequently subject to overlapping of one or multiple competing cable networks; in addition to the satellite service that is available throughout the company's entire coverage area. Free broadcasting services are currently available to the Argentine population. In the AMBA region, these services primarily include four private television signals (one of them is controlled by Grupo Clarín) and their local affiliates and a national state-owned television signal. Additionally, under a project aimed at implementing the Argentine Terrestrial Digital TV System, the National Government handed out digital set-top units among certain sectors of the population that allow free access to certain signals. industry has The Argentine cable television more than 700 operators. The most significant competitors are Telecentro S.A. located in the AMBA region and DIRECTV (satellite technology) that compete against Cablevisión nationwide. Cablevisión also considers as competitors Internet video streaming systems (Netflix, Arnet play and On Video) that compete against its services. Cablevisión can effectively compete against other cable television providers on the basis of a competitive price, a higher number of quality programs and a wide range of additional services, and mainly the customer service it renders through its “Contact Center”. Two other major competitors (Arnet and Speedy) are identified in the high-speed Internet access segment; each of them related to one of the country's two fixed-telephony providers. These companies also render 3G services through their brands Personal and Movistar, respectively. Claro –which had already been selling 3G technology, started to offer high-speed Internet services through fiber optics in certain areas of the country. During 2015, the three main mobile Internet providers are expected to start offering 4G services nationwide. Therefore, the Internet access segment faces fierce competition from several providers in an ever-growing market. 25 26 2 PRINTING & PUBLISHING PRINTING AND PUBLISHING Grupo Clarín, through Arte Gráfico Editorial Argentino S.A. (“AGEA”), is the main newspaper publisher in Argentina and one of the most prominent editorial content producers in Latin America. Out of Grupo Clarín's total sales in 2014, the Printing and Publishing segment accounted for Ps.3.037 billion, considering intersegment sales. This segment derives revenues primarily from the sale of advertising, newspaper copies and magazines and optional products. Arte Gráfico Editorial Argentino AGEA publishes Clarín, the flagship Argentine newspaper and one of the most important in terms of circulation in the Spanish-speaking world; Olé, founded in 1996, the first and only sports newspaper of its kind in the Argentine market; Diario La Razón, a pioneer in the free newspaper segment; Diario Muy; and regional supplements. It also publishes Genios, a magazine with a high penetration rate in the schoolchildren's segment; Jardín de Genios, aimed at children between 2 and 5 years of age that comes with a supplement for parents; Ñ, a cultural magazine that reflects all cultural news and trends; Revista Pymes, aimed at small and medium-sized businesses; and Diario de Arquitectura, aimed at the construction world, architects, designers and building contractors, among other products. AGEA has a strong presence in the on-line classified ads segment through vertical sites, including Autos, Inmuebles y Empleos and in the Internet content market through its websites clarin.com, ole.com.ar, entremujeres.com and biencasero.com. PRINTING & PUBLISHIN G 2014 2013 ADJUSTED EBITDA (In millions of Ps.) (136.7) 76.2 (279.4%) 27 PRINTING & PUBLISHIN G 2014 2013 NET SALES (In millions of Ps.) 3,036.6 2,652.8 14.5% PRINTING AND PUBLISHING DIARIO CLARÍN With a long-standing journalistic and commercial leadership consolidated in its 67-year track record, Clarín is the most prominent Argentine newspaper in terms of outreach, circulation and advertising. The success of its prestigious editorial line lies in its identification with the needs and emotions of its audience through a plural and independent journalistic style that includes the most diverse opinions. Clarín's approach to reality is in tune with its audience, supporting this bond with the responsibility and credibility that characterizes its journalists. Its extensive and thorough investigations, approaches and analyses are conveyed in clear and direct language, providing its readers with easy access to the different sections and issues. During the year, in terms of recognitions, the designs of Diario Clarín obtained Golden and Silver medals at the Malofiej awards. In addition, the team of the Diario Clarín section “País” received an honorable mention at the Latin American Investigative Journalism Awards organized by Transparency International and the Press and Society Institute (IPYS, for its Spanish acronym) for the report called “La ruta del dinero K”. The United Nations Correspondents Association (UNCA) recognized the journalist Marina Aizen from magazine Viva with the Prince Albert II of Monaco silver award for the best coverage of climate change for her article called “Hielo Ardiente” published in September 2013 in the magazine Viva. The award was delivered by the UN Secretary-General Ban Ki Moon, who gave special thanks to Clarín for its ongoing dedication to issues of global concern. At a national level, Clarín journalist Matías Longoni was distinguished by the Forum for Argentine Journalism (FOPEA, for its Spanish acronym) in the category “written journalism”, for his report on the inflated prices of rice exports. The Professional Council in Economic Sciences gave the 2013 economic-financial journalism award to Silvia Naishtat, editor of Clarín. In addition, four Clarín journalists received the “2014 ADEPA Journalism Awards” granted by the Association of Argentine Journalistic Entities (ADEPA, for its Spanish acronym): Gisele Sousa Dias, journalist of the “Society” section obtained the first prize in the Human Rights category for her work about gender- 28 PRINTING AND PUBLISHING based violence; Alfredo Dillon, also a journalist of the “Society” section, obtained the first prize in the Education category for his work entitled “El desafío de dar clases en escuelas hospitalarias”; Jordi Canta, editor of the regional newspaper of Avellaneda received the first prize in the Social Solidarity category for his work entitled “Unidas en el alma”, published in the magazine Viva; and Miguel Ángel Vicente, a journalist of the Sports section received a special mention for his work entitled “De esta historia también nos sentimos protagonistas”. With an average daily circulation of 240,000 copies, Clarín's circulation is 1.5 times higher than its closest competitor, while Sunday's sales exceed 528,000 daily copies, placing Clarín among the major Sunday newspapers of the world. Clarín has a 38.7% share of the newspaper market in the city of Buenos Aires and the province of Buenos Aires and a 23.3% share at a national level. Clarín 365, designed to build loyalty among readers and to reinforce its close bond with them, as well as to retain circulation, offers its over 342,000 subscribers a discount, promotion and benefit program they can use in over 1,600 brands and 5,700 stores nationwide. During 2014, the focus was on improving the service rendered to subscribers and readers, optimizing the performance of the benefits offered by the program, creating a more efficient communication channel with readers and redesigning graphic communication with new campaigns and an exclusive website. OPERATING STATISTICS - PRINTING AND PUBLISHING Circulation(1) Circulation share %(2) Advertising share %(3) 2014 276.5 38.7% 53.4% 2013 296.7 38.4% 51.7% YoY (6.8%) 0.8% 3.2% (1) Average number of copies according to IVC (including Diario Clarín and Olé). (2) Share in Buenos Aires and Greater Buenos Aires Area (AMBA) Diario Clarín. Source: AGEA and IVC. (3) Share in Buenos Aires and Greater Buenos Aires Area (AMBA) Diario Clarín. Source: Monitor de Medios Publicitarios S.A. the newsstands under a reading contract that was renewed every 24 hours. It had a direct relationship with advertisers or through agencies. In the last few years, the Company has maintained those standards and undertaken the challenge of adjusting its business environment to an increasingly complex environment for traditional media. Thanks to the proliferation of web sites, Clarín now maintains a direct link with millions of readers, where information is updated by the second, rather than every 24 hours. AGEA leads the print media market with over Ps.848 million in sales in 2014, ranking first in terms of advertising revenues and sold advertising space. AGEA also leads all advertising categories (display, special section and classified ads). During the year, on-line advertising sales rose to Ps.124 million. The Zepita facility, where Dario Clarín is printed, has a surface area of 35,000 m2 and capacity to store 12,000 tons of newsprint. It has five Goss Metrocolor rotary offset printing presses that enable it to print 300,000 copies of 80 full-color pages per hour. The entire production process is developed in accordance with leading industrial criteria –such as the "computer to plate" (CTP)– and environment preservation standards, such as, ISO 14001. Ongoing audits are conducted by companies that are engaged for that purpose. For the last few years, Clarín has been engaged in a significant business transformation process. It started with the production of a single product –Diario Clarín– that reached its readers through 29 Products The basic offer of the newspaper is comprised by the main body and its supplements: Entertainment, Sports and Classified ads. Weekly supplements, such as, Rural, Countries, iEco, Autos, Mujer, Sí, Viajes, New York Times, and Ollas, make Diario Clarín one of the most comprehensive newspapers in the market. The Company continued to offer 12 regional newspapers that maintain the concept of proximity and symmetry with readers. The product yielded considerable profitability for the fourth consecutive year and was a good support to the Thursday edition of Diario Clarín, with coverage in the following locations: Vicente López, San Isidro, Morón - Ituzaingó and Hurlingham, Lomas de Zamora, Avellaneda - Lanús, San Martín - Tres de Febrero, La Matanza, Tigre - San Fernando, San Miguel - Malvinas Argentinas - José C. Paz and Quilmes - Berazategui - Florencio Varela. The monthly supplements published for Pilar, Escobar, Zárate and Campana, and Moreno, Rodríguez and Luján are also part of the offering. Like every year, the Sports Supplement of Diario Clarín covered the most prominent sports events through its usual and its special editions, such as the Rally Dakar and the Davis Cup editions. As usual, soccer had its preferential spot. Diario Clarín made a broad editorial coverage of the 2014 FIFA World Cup through the publication of a daily special supplement, in addition to the traditional Special Supplements for the Clausura and Inicial tournaments. iEco is the economic supplement of Diario Clarín, and offers readers an in-depth economic review, leading companies, personal the secrets of finance, marketing and the labor market. The Rural supplement is a management tool for the production sector, embracing all the solutions and technologies for agricultural businesses. It is published on a weekly basis. In order to continue to provide services and add value to its readers, Diario Clarín constantly keeps up to date and offers a wide range of editorial products together with the core product, addressing the need to satisfy an increasing segmentation among the diverse demographic groups. The following are among the most prominent collectible products for the period: “Con Francisco a mi lado”, “200 ideas prácticas para mejorar tu casa”, “Los Autos que enamoran a los Argentinos”, “Mi primera enciclopedia NatGeo”, “El Gran Libro de Clarín del Crochet 2014”, “Grandes Clásicos Bilingües para Chicos”, “Libros del viajero National Geographic”, “El Gran Libro del Tejido 2014”, “A Game of Thrones”, “Pichuco: Los 100 años de Aníbal Troilo”, “Los Secretos del Gran Asador 2014”, “El Invencible Iron man”, “Las 1000 preguntas que siempre te hiciste sobre sexo”, “Intrigas que conmovieron al mundo”, “La escuela en casa”, among others. 30 PRINTING AND PUBLISHING Internet With a strong share in all major social platforms, Clarín has been employing an innovative communication, dissemination and presence strategy in websites, thus consolidating itself as the undisputed benchmark in the “social media” journalistic category. Clarín.com has been comprehensively renewed and features a new design that addresses the major changes derived from Internet in the way readers consume news and information. The website, with larger display of images, new sections and a structure that reorganizes the traditional news categories, is constantly updated through an integrated newsroom. Apart from renewing its main site, Clarin.com launched new versions for mobile devices through web applications that allow users of mobile phones and tablets with any operating system to access the site, such as the application Al Toque, to offer instant news on smartphones. These actions allowed Clarín.com to continue as the news site with the highest market share in Latin America, with 19.3 million unique visitors and more than 223 million page views per month. With its sites “Deautos”, “Argenprop” and “Empleos Clarín”; the company maintains its strong presence in the on-line classified ads for cars, real estate and jobs. The most outstanding sites in the AGEA network are Vía Restó, Clarín's online restaurant guide; Biencasero.com, a site with practical solutions to enjoy the cooking experience; Entremujeres.com, which continued to grow in terms of unique visitors and consolidated itself as one of the most visited sites, with over 4 million unique visitors; and Extrashow, a site that keeps readers updated with the best information on movies, theater plays, TV shows, music and celebrities from Argentina and the rest of the world; and TodoViajes.com which received 550,000 visits. El Gran DT is another alternative among online products. Argentina's most popular game managed to engage more than 5 million participants since its launch at the 2008 Apertura Tournament. Each online edition of Gran DT engages more than 650,000 participants who have the chance to build their fantasy teams and win outstanding prizes. 31 Tinta Fresca Founded in 2004, Tinta Fresca Ediciones S.A. is an Argentine publishing company focused on textbook publishing for all stages of the Argentine education system. Tinta Fresca seeks to place books at the heart of the teaching and learning processes and have teachers and students use them as an effective and updated learning tool. The company has been growing in many aspects over these years. In the editorial area, the company has learned from experience, and managed to improve the interaction among the different areas and to streamline the development of its products. In addition, it incorporated the participation of teams of teachers in the edition process. The editorial offering is considerably broad in publications aimed at teachers and learners, such as children and youth literature, dictionaries and reference books, and collectible products sold at newsstands. Since its foundation, Tinta Fresca has published more than 350 titles. PRINTING AND PUBLISHING Magazines Other Newspapers AGEA also continued to build upon the achievements attained by the cultural magazine Ñ. The 500th issue of magazine Ñ was published during the year. Several initiatives were carried out, aimed at engaging readers through the launching of collectible products and special editions, and the creation and sponsorship of forums comprising different cultural issues and involvement in and sponsorship of major cultural events, such as the Feria del Libro de Buenos Aires (Buenos Aires' Book Fair). Revista Elle is a high-end magazine for women mostly focused on fashion, beauty and news. In 2014, its circulation exceeded a monthly average of 24,900 copies. Revista Pymes continued to consolidate its position with a special offering that reflects the voice of entrepreneurs and the keys to their strategies. the aim of In 2014, the Company continued to publish the magazines Genios and Jardín de Genios. With children and school in mind, these magazines integrating were created with content for children, parents, school and society, combining education with entertainment. The collective product “Maravillas de mi Argentina” was the illustrated publication that accompanied the magazine Genios during most of the year, with an average circulation of more than 50,000 copies; while the monthly issue of Jardín de Genios retained in the children's magazine segment, with over 68,000 copies sold. During 2014, “Tiki Tiki”, a magazine aimed at children aged 7 through 14, continued to strengthen its position. leading position its Also in 2014 the company continued to publish the monthly magazine-catalogue, Shop & Co, which includes discount coupons on important brands. 32 La Razón, which was added to Grupo Clarín in late 2000, is the pioneer among free-distribution newspapers. It is mainly distributed in the public transportation network of the city of Buenos Aires, including trains, subways and highways. La Razón is also distributed at certain bars and among a group of opinion leaders through an exclusive mailing program. Diario Olé is the first and only sports newspaper in Argentina. Since 1996 and with an average annual historical circulation of 35,000 copies per day, Olé continues to lead the sports editorial market, and is one of the highest circulation newspapers in the city of Buenos Aires, including general interest newspapers. Among its editorial offering, it has the broadest and most comprehensive soccer and multi-sport coverage. Since its inception, it has drastically changed reading habits and managed to engage a new generation of young readers, avid for information and critical opinions. The editorial profile is fresh and complicit with an agile and informal style focused on photography, illustrations and infographics as communication tools, with a good design and modern and effective production technology. In a year marked by the FIFA World Cup, Olé published the most comprehensive guide, offering the most important information and views, together with the sports analysis. In 2011, Clarín launched Muy, a dynamic, visually designed and entertaining newspaper, which features news in addition to regional pages and sports and show business sections. With a "TV-format" design, the newspaper summarizes the most resounding police cases and breaking news on soccer clubs and celebrities. During 2014, the newspaper Muy has continued to offer promotions, optional books and free collectibles. PRINTING AND PUBLISHING In 2014, the new materials added to the catalogue were: “Descubro las Ciencias 3”, “Aprendo Matemática 4, 5, 6 y 7” and “Dame la palabra 4, 5 y 6”, completing the series launched during the year. It developed the areas of natural and social sciences for 4th, 5th and 6th grade by publishing the series “Econaturaleza” and “Socialmente”, all of them for primary education. For secondary education, it published “Mundo dos punto cero”, “Historia 2” and “Geografía 2” as part of the series. During the period, it also published: “Nuevo Colorín 1, 2 y 3”, “Descubro las Ciencias 1 y 2”, which completed the series launched during the previous year. They will all be included in the 2015 catalogue. The company developed the areas of natural and social sciences by publishing “Aprender Ciencias 4, 5 y 6". In addition, it created a new concept with the product entitled “Equipo escolar Eureka”. It includes a manual of the series Eureka, a map library (a set of maps of the world), a school dictionary, a literature book with the adaptation of two novels and a test (a set of questions and answers to review the contents of the manual at home). Tinta Fresca executed an agreement with the National Agency for the Promotion of Science and Technology and the inter-university consortium ELSE, for the publication of a catalogue of books focused on teaching Spanish as a foreign language (ELE). The project was completed during 2014 and the books will be sold during 2015. Four books were developed. The company also made headway in the Digital Development project that focuses on the several ways in which TIC services will be introduced in the education system. The special unit is in charge of updating the company's websites and it deals with the IT aspects of the editorial contents distributed online. The company started to develop a blog aimed at secondary school teachers, with digital resources to apply in the classroom, paving the way for virtual education. This unit permitted the development and launching of the first digital books for secondary education, which are sold at Bajalibros.com. The company also developed a new on-line sales channel for parents and teachers. In 2014, and in spite of the good selection of Tinta Fresca's products, the company was not awarded any contract for the procurement of material by the National Government, while it did receive contracts from the city of Salta and the city of Buenos Aires. Also during the period, the company continued to explore foreign markets, such as Chile and Uruguay. In 2014, Ríos de Tinta, the Mexican- based operation, changed the promotion team and reinforced its work at private schools. 33 PRINTING AND PUBLISHING Artes Gráficas Rioplantense AGR is a comprehensive printing production company that meets the special printing needs (magazines, optional and collectible products, among others) of Clarín and Olé, apart from producing large volumes of graphic material (books, advertising brochures, etc.) for other major editors in the region, which makes it the leading printing services company in Latin America. In 2014, AGR retained its leading position in the sector with net sales of Ps.287.3 million. In addition to the progress made in improvement and control management of its production processes, during 2014 AGR continued to streamline the logistics of processes and the volume of goods in process. AGR purchased and installed a flatbed printer in order to meet higher quality standards and reduce the turnaround time of this type of products. During the period, AGR implemented the digital printing line for books and was able to produce books for different publishing companies. At year- end, 30% of its output was fully operating in line to obtain books in boxes in just one step, with the aim to increase this level to 70% in 2015. accepted standard that allows for the establishment of an effective Environmental Management System (EMS) to achieve a balance between maintaining profitability and reducing the environmental impact. On the other hand, AGR focused on ongoing improvements to reduce waste. In May 2000, AGR entered into an agreement with the Techint Group, acquiring 50% of Impripost Tecnologías S.A. (“Impripost”). Impripost is mainly engaged in the overall production and printing of invoices, advertising brochures, forms, labels and cards. It also provides envelope-stuffing services for mass mailing. sales, with 25 branches located throughout the country; and wholesale distribution, which has approximately 1,500 customers. “Cuspide.com” leads the on-line bookstore market. During 2014, the company focused on a growth and expansion plan, whereby it opened 10 new branches in different provinces: two in the city of Buenos Aires, one in San Miguel, one in Ramos Mejía in the province of Buenos Aires, two in the city of Rosario in the province of Santa Fe, one in the city of Córdoba, one in the province of Mendoza, and two in the province of San Juan. Cúspide took part in the 2014 Buenos Aires' Book Fair and was recognized as the best stand of the Fair. During 2014, Impripost focused on business development. It was able to maintain its main customers, renew contracts and enhance its reach to new customers. It also made a significant renewal of its fleet of machines to be in line with the latest technological developments. In addition, it continued with its social investment programs and with the awareness and prevention campaigns and actions on health issues. UNIR S.A. is a company engaged in wholesale mail reception, classification, scheduling, transportation, warehouse, logistics, distribution, and delivery services. As from August 25, 2008, AGEA holds a 93.41% direct controlling interest in Unir. During 2014, Unir's total sales increased by 23%. Such increase is attributable to readjustments in rates, while the company’s sales volume decreased in line with the general decrease in activity. Also during the period, Unir expanded its logistics activities with the storage and final distribution of several products. Unir has certified its Quality Management System under ISO 9001. AGR successfully completed the implementation of the FSC standard and ISO 14000, an internationally In 2011, the Company acquired an interest in the capital stock of Cúspide Libros S.A. through AGR. Cúspide Libros has two business areas: retail 34 PRINTING AND PUBLISHING CIMECO CIMECO S.A. was organized in 1997 with the aim of acquiring equity interests in Argentine and foreign newspapers, seeking to preserve the regional journalism industry, blending experience, synergy and economies of scale, without altering its editorial principles. CIMECO holds a majority interest in two of the three largest regional newspapers in Argentina: La Voz del Interior (Córdoba) and Los Andes (Mendoza). in the country. Los Andes reporting Los Andes newspaper has been Mendoza's news since 1882. In that year, the Calle family founded one of the oldest journalistic companies is a benchmark brand in the market. In 2014, Los Andes was actively involved in all major provincial events and put special emphasis on driving the growth of the on-line version, positioning its loyalty program Los Andes Pass and subscriptions, which recorded a 17% year-on-year growth, and boosting the sale of optional products. Following the innovation trend in online products and footprint in networks, the audience of Los Andes digital version grew as compared to 2013, reaching 28 million page views and 3.5 million visitors in its best month. During the year, the newspaper's share in the provincial advertising market was 38%, despite the fact that it was not allocated any official advertising. La Voz del Interior S.A. has again maintained its leadership position in the printed press and its position as an information and entertainment digital benchmark in the central region of the country. Its two printed newspapers, La Voz del Interior and Día a Día, have continued to maintain a significant market share in the province of Córdoba. In addition to this, the sectional directories and the sustained growth in the distribution of third party and in-house editorial products have contributed to an increase in contracts with clients. Its web sites position the newspaper as a leader in unique visits and page views in the provinces of Argentina, with a 37% year-on-year increase in advertising in this segment. During the year, the operation of its multi-platform newsroom was consolidated and increased subscription sales. During 2014, Comercializadora de Medios del Interior S.A. (CMI) continued to consolidate its position as the most prominent advertising sales network in the provinces. It has relationships with 40 media companies, some of which are owned by the company and others by third parties. The company focused on key network development. Rumbos magazine, which celebrated its 11th anniversary in the market, is one of its remarkable products, and consolidated as the leading Sunday magazine in the provinces in terms of the volume and quality of units sold. In 2014, the magazine was distributed through 20 channels. In addition, as a result of the incorporation of the new optional business unit that allowed the company to achieve scale synergies, the products published in 2014 were distributed through 15 channels. Papel Prensa Papel Prensa S.A.I.C.F. y de M. is the first producer of newsprint that is wholly owned by Argentine capital. It started its operations in 1978 and is currently Argentina's major producer. As of December 31, 2014, the shareholders of Papel Prensa were AGEA (37%), CIMECO (12%), S.A. La Nación (22.5%), the Argentine federal government (27.5%), and other minor investors (1%). 35 36 3 BROADCASTING & PROGRAMMING BROADCASTING AND PROGRAMMING Grupo Clarín is also the leading company in the audiovisual broadcasting and programming segment. Through ARTEAR, it holds the license (LS85 TV Canal 13 Buenos Aires) to broadcast El Trece, one of the two largest broadcast television channels in Argentina, and segment leader in terms of advertising share and prime-time audience share. It also has a presence in broadcast television stations in Córdoba (Telecor), Bahía Blanca (Telba), and Bariloche (Bariloche TV). Grupo Clarín also produces and sells some of the most popular cable television signals. Its audiovisual broadcasting and programming array includes agreements and equity interests in the main television and film producers, such as Pol-Ka Producciones, and Patagonik Film Group. Grupo Clarín also owns prominent radio stations, such as Mitre AM 790, La 100 (FM 99.9), both in Buenos Aires, and Mitre AM 810 in the province of Córdoba. Grupo Clarín also has a strong stake in sports commercialization and broadcasting rights, directly and through joint ventures. Out of Grupo Clarín's total sales in 2014, the Broadcasting and Programming segment accounted for Ps.2.586 billion, taking into account intersegment sales. BROADCASTING & PRO G R A 2014 2013 YOY NET SALES (In millions of Ps.) 2,586.3 1,871.7 38.2% M M I N G 2014 2013 YOY BROADCASTING & PRO G R A ADJUSTED EBITDA (In millions of Ps.) 495.5 334.1 48.3% M M I N G 37 BROADCASTING AND PROGRAMMING During August 2014, and as mentioned in Note 9 to the Consolidated Financial Statements, the Company made headway in the restructuring of its businesses and media in accordance with the Proposal submitted by the Company and approved by AFSCA pursuant to Resolution No. 193/AFSCA/201. In order to concentrate in IESA all the assets and businesses in “Unit No. 4”, ARTEAR transferred to IESA the ownership of the AFSCA registrations of the signals El Trece Satelital, Quiero Música en mi Idioma, Magazine and Volver, the ownership of the trademarks, a non-exclusive license for the use of the trademarks associated with El Trece Satelital, the personnel engaged in operations, the teams of each signal, and decoders delivered to cable operators under loans for use. As consideration, IESA paid to ARTEAR Ps.50,000,000. In addition, in accordance with the Offer accepted for the transfer of shares of IESA, they agreed on the provision of some content that is currently broadcast by the above-mentioned signals so that they will maintain their current high level of programming themes and content quality under conditions similar to the current ones. To such end, an agreement was executed for the exclusive provision of contents for the signal El Trece Satelital for a term of 10 (ten) years, which will ensure the live broadcasting of Canal 13's programming as it occurred until the execution of the agreement. ARTEAR also transferred to IESA 24.99% of the capital stock and votes of Canal Rural Satelital S.A. As consideration, IESA paid to ARTEAR Ps.5,000,000. OPERATING STATISTICS - BROADCASTING AND PROGRAMMING Advertising Share %(1) Audience Share %(2) Prime Time Total Time 2014 37.4% 33.3% 26.7% 2013 33.2% 35.4% 28.0% YoY 12.7% (5.9%) (4.6%) (1) Company estimate, over ad spend in Ps. In broadcast TV for AMBA region. (2) Share of broadcast TV audience according to IBOPE for AMBA. PrimeTime is defined as Monday through Friday from 8 pm to 12 am. Total Time is defined as Monday through Sunday from 12 pm to 12 am. 38 BROADCASTING AND PROGRAMMING ARTEAR In a scenario marked by industry challenges and strong competition, ARTEAR was able to achieve its goals in 2014. The main source of revenues of ARTEAR, broadcast television, recorded a 47% year-on-year increase, mainly driven by advertising. It share of the advertising marked was 37.4%. Its professionalism, artistic quality, innovative proposals and technological developments continue to distinguish it as one of the most prominent signals in the market. El Trece ranked second in the broadcast TV audience rating with 7.6 points from 12 pm to 12 am, Mondays through Sundays. El Trece led the Prime Time with 11.3 rating points, with a very slight edge over its main competitor. Between the months of June and July, broadcast television featured the 2014 FIFA World Cup (TV Pública) with an average rating of 26.1 points. In addition, the highlights during 2014 were the return of Showmatch (El Trece) with an average rating of 20,5 points and the soap opera Avenida Brasil (Telefé) with an average rating of 17,5 points. In terms of programming, El Trece combined fiction, news and entertainment embracing a varied offering. “Showmatch”, “Guapas”, “Mis amigos de siempre”, “Los 8 escalones” and “A todo o nada” led audience ratings. “Periodismo para Todos” –a program hosted by Jorge Lanata– is a highlight in terms of journalistic and news programs. Furthermore, “Arriba Argentinos” continued to consolidate its morning audience rating. El Trece's news programs –“Noticiero Trece”, “Telenoche” and “En Síntesis”– further validated their already existing recognition and credibility with audience ratings that led their respective time slots. With respect to cable television signals, TN maintained the highest audience share in the ranking of cable signals, considering a total of 55 signals measured, with a 28% difference above the second signal in the ranking (C5N). Several programs particularly stood out, such as “El Juego Limpio”, “Palabras más, Palabras menos”, “Código Político”, “Desde el Llano”, “Argentina para Armar”, “Otro tema”, “A Dos Voces” and “TN Central”. ARTEAR further strengthened various television slots, seeking to offer diverse options in terms of information and entertainment. The Spanish language music channel “Quiero Música en mi Idioma” was quick to lead audience ratings in the music genre. ”Volver” continued to offer the best of classic and vintage Argentine films and television shows and reaffirmed its role as a 100% national channel that preserves our history with the highest technology. Magazine continued to develop its in-house programs and products with broadcast TV format and technology. It was the signal with the highest audience in the variety category. 39 During the year and as part of the strategy to produce motion pictures, several productions were launched through the Patagonik Film Group: “Aire Libre”, a drama written and directed by Anahí Berneri and starring Leonardo Sbaraglia and Celeste Cid. This international co-production between Rizoma Films S.R.L., Patagonik Film Group S.A., BD Cine and Salado Media was premiered in May 2014. “Las Insoladas”, a comedy written and directed by Gustavo Taretto also premiered in 2014. It was a co-production with Rizoma Films S.R.L., starring Carla Peterson, Luisana Lopilato, Marina Bellati, Elisa Carricajo, Maricel Álvarez and Violeta Urtizberea. “El amor y otras historias”, a romantic comedy written and directed by Alejo Flah, starring Ernesto Alterio, Mónica Antonópulos, Marta Etura, Quim Gutiérrez and Julieta Cardinali was also produced in 2014. It was a Spanish-Argentine co-production between Patagonik Film Group S.A., AZ Films, Icónica and La Zona. Patagonik Film Group also started to develop the following motion pictures: “Voley”, “Sin Hijos”, “Los Extraños” and “Me casé con un boludo”, which are expected to premier the following year. The Company also made significant efforts towards developing activities related to the commercialization, organization and broadcast of sports events through TyC Sports and Autosports, mainly football and motor racing. During 2014, the company worked on the restructuring and profitability of its sports businesses and the exploration of new local and regional businesses. BROADCASTING AND PROGRAMMING Additionally in the production section, the most prominent show business and general interest events were broadcast, such as, the concerts of Ricky Martin, Joaquín Sabina, Metallica, Hugh Laurie, Alejandro Fernández, Marc Anthony, David Bisbal, Tan Biónica, Lali Espósito, among others; as well as major events, such as, Lollapalooza, Personal Fest, Cirque du Soleil, Chantecler Tango, Martín Bossi, Piñón en Familia and Panam y Circo. ARTEAR also held a new edition of “Un Sol para los Chicos" the traditional UNICEF fund-raising event at the Luna Park stadium and broadcast the ceremony of the “Abanderados de la Argentina Solidaria 2014” awards. During 2014, ARTEAR sought to strengthen its position as technological market leader, after the successful launch of the signals El Trece HD and TN HD in 2011, when it became the first broadcast signal to produce all of its content in high definition. During the period, certain investments were made to continue on this path of innovation and technological leadership. The need to update TN's programming, including an important shift in the production style that required and increasing the size and facilities of TN’s F3 or Mirador Studio. TN added large-sized LED touch screen systems and activated and aired a virtual set system, offering a fully renewed and technological image for TN's news programs aired from the Mirador Studio. For the coverage of the 2014 FIFA World Cup, the company took unprecedented actions. It incorporated a studio inside the IBC, a studio overlooking the beach and the sea, an outside broadcast unit and acquired a flyaway unit, which can be carried in a backpack. This type of flyaway unit can be easily carried and allows the company to cover important events in any location of Argentina and the world. Within the framework of its plan to improve news coverage, it acquired an antenna that was placed in the terrace of the Mirador studio in order to optimize the reception of mobile satellite broadcast units. The company implemented the new optical disc archive (ODA) system for the management of content files used in ARTEAR's production programs. In general terms, the company continued to upgrade its facilities, adding infrastructure and acquiring equipment aimed at migrating as many signals as possible to HD. ARTEAR continued to produce fictional content for TV series and motion pictures through Pol-Ka and Patagonik Film Group. Pol-Ka continued to produce “Guapas”, a program starring several prominent actresses, such as Mercedes Morán, Araceli González, Florencia Bertotti, Carla Peterson and Isabel Macedo, and aired on El Trece during Prime Time. Towards the end of the year, Pol-Ka started to produce the daily fiction “Noche & día junto a vos”, a detective fiction starred by prominent actors and actresses, such as Facundo Arana, Romina Gaetani and Oscar Martínez, among others. In addition, during 2014 Pol-Ka continued with the production of the third season of “Violetta”. The show was a success among children and youth on a global basis. The show has become very popular among children and teens, with high audience levels both in cable and broadcast TV in Argentina and abroad. 40 Radio Mitre In 2014, Mitre AM 790 consolidated its leadership position in the raking of audience share of AM radios, with record-high audience shares. The morning AM radio talk show “Cada Mañana”, from 6 am to 10 am, hosted by Marcelo Longobardi and his team, has maintained its leadership since the first day and reached unprecedented peaks in audience share of 50 points. “Lanata sin Filtro”, the show hosted by Jorge Lanata and a team of journalists from 10 am to 1 pm, also surpassed the 50 point mark. The show can also be watched in high-definition at mitrehd.com.ar. “Encendidos en la tarde”, from 2 pm to 5 pm, hosted by María Isabel Sánchez, Rolo Villar and Tato Young, lead their segment with a fun afternoon show that combines humor, information, and interviews. In 2014, Magdalena Ruiz Guiñazú returned to Mitre, co-hosting the show “Lanata sin Filtro” and hosting a show called “Esta Semana con Magdalena”, which is aired on Saturdays from 10 am to 12 pm and offers a detailed and incisive summary of the political news that occurs during the week. In November, the prestigious journalist Pepe Eliaschev passed away, victim of a serious illness. During most of 2014, he hosted his show “Esto que Pasa”, which stood out for his committed editorials and a thorough analysis of reality. La 100 remained between the first and the second place in audience share of the FM market, with minimum differences, averaging 12,20 rating points. La 100 combines famous artists, and a mixture of music mix constant innovation, which consolidates its position among industry leaders. In 2014, La 100 incorporated in the first slot (from 6 am to 9 am), which had been hosted by Roberto Pettinato for the last 10 years, the show “No está todo dicho”, hosted by Guido Kaczka and Claudia Fontán, with a different proposal that combines music, news and fun. In the second morning slot, Lalo Mir continued to host his show “Lalo por Hecho” (from 9 am to 1 pm), co-hosted by Maju Lozano. In the afternoon slot, Ronnie Arias hosts “Sarasa” (from 1 pm to 5 pm), Sergio Lapegüe and Rifle Varela host “Atardecer de un día agitado”, a show that airs as listeners return home from work; and Chino Leunis with his successful show “Románticos”, at night from 8 pm to 12 am. La 100 continued to host acoustic concerts with the most renowned musicians. Cienradios offers the most prominent on-line radio and content menu in Latin America: more than 500 playlists of all the singers and genres, where users can choose their favorite music. It also recommends singers related to those chosen by users. It offers broadcast radio stations and has alliances with third parties. It offers a wide range of music, content, videos, interviews, shows, games and a premium sound quality. Mitre AM 810 consolidated itself in the province of Córdoba as the radio with the second highest audience share. With a permanent staff in the city and its own news service, also called "Mitre informa primero", Mitre AM 810 develops comprehensive coverage of news comprising Córdoba, Argentina and the world. includes prestigious hosts, such as, Jorge "Petete" Martínez, Rebeca Bortoletto, Juan A. Mateyko and Federico Tolchinsky, among others. Its programming 41 42 DIGITAL CONTENT AND OTHERS Revenues in this segment are derived from the sale of advertising on some Internet web sites and portals and the provision of administrative and corporate services by Grupo Clarín and its subsidiary GC Gestión Compartida S.A. (“GCGC”) to third parties and other subsidiaries. They also include digital content production through Compañía de Medios Digitales S.A. (“CMD”). Out of Grupo Clarín's total sales in 2014, this segment accounted for Ps.614 million, taking into account intersegment sales. 4 DIGITAL CONTENT & OTHERS 2014 2013 DIGITAL CONTENT & OTHE R S NET SALES (In millions of Ps.) 613.9 496.1 23.7% DIGITAL CONTENT & OTHE R S 2014 2013 ADJUSTED EBITDA (In millions of Ps.) (13.0) 13.1 (198.9%) 43 DIGITAL CONTENT AND OTHERS Digital Content Grupo Clarín is the leading producer of digital content. Through CMD, the Company developed the broadest network of portals and digital content in Argentina, covering news, entertainment, sports, classified advertisements, direct marketing, e-commerce, digital photography, video, blogs, chat rooms, music, mobile content (ringtones, SMS and games) and a browser. For reasons of corporate strategy, the exploitation of the websites Clarín, Olé, Club Cupón and Imagena was transferred to other companies of the same economic group. At the close of this year, the same happened with the websites Todo Noticias, Cienradios, Ciudad and ElTreceTV. In addition, the Company continued to sell contextual advertising under the brand iAvisos. The company started to exploit the brand Guías Clarín with an individual business model. The website Todo Noticias registered a constant audience share growth at year-end. It won a silver award for excellence at the W3 Awards OPERATING STATISTICS - DIGITAL CONTENT AND OTHERS Page Views(1) Unique Visitors(1) (1) In millions. Average. Source IAB and Company Estimates. 2014 752.9 44.4 2013 719.4 38.0 YoY 4.7% 16.9% 44 DIGITAL CONTENT AND OTHERS 2014 in the category news websites. Ciudad.com remained the most visited show-business web site in Argentina. CMD maintained its 80% equity interest in Interwa S.A., a company dedicated to tourism web sites. In addition, through its 51% interest in Clawi S.A., it develops Mundo Gaturro, a successful on-line game, which has become the largest on- line community of children in Argentine history with more than 11.5 million registered users and more than 1 million children playing each month. It continued with its expansion process to other countries and increased traffic in Chile, Peru, Mexico, Colombia and Spain. In addition, CMD consolidated the third year of operations of Tecnología Digital S.A. (TECDIA S.A.), a company engaged in e-business development, in which CMD owns a 95% equity interest. ArgenProp Buscainmueble Canal 13 Clasificados Clarin.com Cienradios Ciudad Clarín Blogs ClubCupón Confronte De Autos De Motos Entremujeres Espectáculos Genios Más Oportunidades Guía de la Industria Mundo Gaturro Grupo Clarín iEco Imagena Nimbuzz Mublet Olé Interpatagonia Quieromimúsica La Razón Revista Ñ Shop1 Tangocity Tipete TN TN y la Gente Toda Pasión T&C Sports Ubbi Vía Restó Yuisy VXV Welcome Argentina 45 DIGITAL CONTENT AND OTHERS CMD also owns a 95% equity interest in QB9 S.A., a company engaged in the development of on-line games for different platforms, with important local and international customers. During the period, QB9 continued with its aim to enter into agreements with entertainment companies for the joint development of new games. In this sense, it continued to work with Lego on a new mobile project and resumed, together with Mattel, the development of HTML5 games. CMD holds 100% of the capital stock of Fynbar S.A., a company domiciled in Uruguay. It is engaged in the commercialization of on-line games and the advertising intermediation between advertisers and on-line site networks. Electropuntonet S.A. is the most recent acquisition, in which CMD holds 25% of its capital stock. Its main activity is the sale of home appliances through its e-commerce platform. Other Services Through GCGC, Grupo Clarín renders specialized- process outsourcing services to medium and large companies. The services rendered, which include payroll management and processing and implementation of related processes, as well as human resources management, are oriented to optimize quality and provide innovative management tools. During 2014, total sales increased by 34.3% compared to the previous year. Business growth was basically sustained by the Payroll Management and Processing service. Risk management service revenues showed a strong growth of 54.3%, after overcoming the inconveniences that arose as a result of the new regulation of the insurance market. The company generated new businesses for the provision of Supply, Logistics and General Services; Administration and Finance; Accounting and Financial Statements; Management of Collection Means and IT Consulting services. In 2014, the company implemented changes to its structures, processes and working methodologies in the areas of IT and Improvement of Processes and Projects. Both of them are key areas for the support of several services and the creation of value for customers. 46 DIGITAL CONTENT AND OTHERS Ferias y Exposiciones Argentinas Created in August 2002, Ferias y Exposiciones Argentinas S.A. is mainly engaged in the organization of events, conferences and fairs. Since 2007, Ferias y Exposiciones Argentinas has been mainly engaged in the organization of Caminos y Sabores, a fair intended to foster Argentina's gastronomy and handicrafts and to promote the region's major tourist destinations. Caminos y Sabores has consolidated itself as one of the fastest growing fairs and has boosted the development of all of its key participants: food producers, craftsmen and representatives of tourist destinations. This year, the tenth edition was held in July at La Rural with the participation of more than 400 stands, which made up the Rutas Gourmet. There were exhibitors from all over the country, a broad regional representation in the different categories. Caminos y Sabores became a new source of support for entrepreneurs for the production and commercialization of their products in direct contact with consumers. In September 2014, Caminos y Sabores was held for the first time in the city of Córdoba. Expoagro, the annual outdoor agro-industrial fair is held through the FEASA-S.A. La Nación UTE (joint venture), gathering producers from Latin America. It is an outstanding event in which participants may engage in discussions and training, and learn about innovation and businesses in the agricultural sector. The fair is held in different agricultural areas with production potential. In the vicinity of the location at which the fair is held, hundreds of state-of-the-art agricultural machines and equipment used for different jobs are tested, such as: sowing, harvesting, spraying, grain bagging, swathing, rolling, which are extra attractions for visitors and people interested in this type of activities. In 2014, the 8th edition of this fair was organized in the city of Ramallo revalidating its position as the main Argentine agricultural exhibition in a natural environment. 47 48 5 CORPORATE RESPONSIBILITY & SUSTAINABILITY CORPORATE RESPONSIBILITY AND SUSTAINABILITY OUR COMMITMENT Since its foundation, Grupo Clarín has been aware of its social responsibility as a company and as a member of the media, and has strived to assume such responsibility abiding by the laws, honoring its active and sustained social and community involvement and, especially, fulfilling its duty to inform with honesty and accuracy. Commitment to society is an inherent and essential part of Grupo Clarín's vision and mission statement. Grupo Clarín attaches special importance to the relationship with different audiences that acknowledge and validate its activities every day and, over the years, has established multiple communication and interaction channels with its stakeholders. From the standpoint of its audiences, readers and society in general, Grupo Clarín's media and journalists work day after day towards fulfilling and consolidating the citizens' right to information, combining high credibility with a comprehensive journalistic and entertainment offering, based on a deep knowledge of the audience. Transparency, Standards and Guidelines Grupo Clarín seeks to intensify the values and principles that guide its daily work, especially insofar as labor, sustainable development, and human rights are concerned. Grupo Clarín's adherence to these principles is also outlined in the Company's Code of Ethics and in the Guía para la Acción, a document that proposes models for management, organization and roles, and outlines Grupo Clarín's policies and procedures concerning labor, the environment and human rights. During 2014, the Company put in place the main its Social Corporate Responsibility pillars of and Sustainability Policy in order to extend best practices and set common goals within the organization and its subsidiaries. The policy also embraces and fosters the adoption of related industry specific standards by its subsidiaries. Since 2004, the Company has adhered to the United Nations Global Compact in order to systematically address the 10 guiding principles to sustainable management. Grupo Clarín is also involved in several initiatives, groups and organizations that gather global, Latin American and Argentine media players and stakeholders in order to share experiences, identify best practices and foster cooperation in specific issues addressed by the media, as part of their social responsibility strategies. During 2014, through its support to the Noble Foundation, the Company also renewed its presence in the “Grupo de Fundaciones y Empresas”, a space to share strategic social investment knowledge and standards. Since 2009, Grupo Clarín contributed to the development of the Global Reporting Initiative (GRI)'s Media Sector Supplement, together with multiple stakeholders worldwide. The GRI's global guidelines for the media, published in May 2012, serve as benchmark for a comprehensive process that is currently underway that seeks to further reinforce, identify and report relevant information on social and environmental performance, as well as to set new goals with the aim of strengthening the Company's sustainability initiatives and strategies. Additionally, in 2014, the Company was engaged in the global identification and validation process of materiality standards for the cable TV and media industry, organized by the SASB (Sustainability Accounting Standards Board), an entity that gives advice to the SEC (Securities and Exchange Commission) on transparency standards. 49 CORPORATE RESPONSIBILITY AND SUSTAINABILITY relevant Freedom of speech and transparency are key values for the Company and its professionals. in Both principles are particularly areas related to news services. At Grupo Clarín, each company undertakes a commitment to information and content quality, accuracy and transparency. The coverage of news and the news programs reflect the development of journalistic criteria inherent to each specific outlet and the professionals' commitment to reporting facts and events in a balanced fashion, while allowing the necessary time and space for experts, leaders and the parties involved to express their opinions. Style guides, ethics manuals and news coverage guidelines, including internal rules and commitments to journalistic quality and journalist responsibility, are the guiding principles of the several activities developed by news and entertainment companies. In everyday practice, this does not mean that each issue is addressed as expected by audiences or in line with the stated goals. Hence, Grupo Clarín's media companies permanently work on the design of new tools and channels that enable interaction with readers and audiences in order to understand expectations, while fostering full adherence to its principles and values with the aim of reaching the highest standards of the industry. As was the case with previous years, 2014 was also particularly challenging for the press and freedom of speech in Argentina. The Company carried out several initiatives to raise awareness on the matter and showed its firm commitment to defending and fostering such essential right. Independence and Transparency Independence is a value. It is the strong foundation of the work done by journalists and the media that allows them to search for the truth without any conditioning factor. Independence is at the core of Grupo Clarín as a guarantee of the freedom to exercise the journalistic role of its media in the Argentine democracy. Independence is also an assumed responsibility, a way of exercising and guaranteeing rights, a view of sustainability from the Company's standpoint, a daily commitment. Independence requires transparency. Hence, the information about Grupo Clarín and its subsidiaries, media, shareholders, activities, revenues and investments is public and is available at its web site, at the web site of the Argentine Securities Commission, and at multiple and diverse communication channels with the public, audiences and readers. In this regard, the Company stands out as a pioneer in an environment where most Argentine media companies fail to publicly disclose their financial statements and sources of their revenues and, often times, fail to reveal the identity of their respective owners. Advertising is one of the sources of revenues of the media. Governments are major advertisers and often seek to influence media content through the allocation of official advertising. This circumstance has become commonplace in Argentina, where more than 80% of the country's audiovisual media directly or indirectly depend on the government or its advertising funds, which are managed on a discretionary basis and with little transparency. During 2014, Grupo Clarín received virtually no funds for official advertising and very little from provincial governments. Historically, due to the scale and diversity of Grupo Clarín's revenues, the significance of such funds has always been very limited so as to guarantee its media and journalists the freedom to report news without any conditioning factor. Grupo Clarín also has business policies in place concerning its advertisers that foster the existence of diverse and multiple sources of advertising investment as another way of guaranteeing the free and independent exercise of journalism. Media independence also requires responsible relationships between journalism and the Company's own business interests. Business and editorial functions are clearly separated at Grupo Clarín's media. Special emphasis is placed on the fact that journalists are completely detached from the sale of advertising so as to allow for the free exercise of journalism, free of any risk or conditioning factor. In addition, Grupo Clarín's media specifically focus on the distinction between advertising and editorial space. As mentioned above, the Company has a Code of Ethics in place applicable to its subsidiaries and employees. The code sets forth standards of conduct and procedures that govern and prevent circumstances that may affect the free exercise of their functions and the transparency of their activities. Information on Sustainability In line with its Social Corporate Responsibility and Sustainability Policy, Grupo Clarín identifies the material aspects of its activities following international social responsibility standards applicable to the media, particularly, the GRI's guidelines, and in accordance with the expectations of its multiple stakeholders. Grupo Clarín's materiality analysis serves a starting point to define its corporate sustainability goals and strategy, as well as the daily management of its performance. During 2012, the Company started to prepare its financial statements in accordance with the International Financial Reporting Standards (IFRS), thus changing the manner in which figures are presented. The deconsolidation of some of its minority interests was also reflected in the way of reporting information on sustainability, which made it difficult to perform a comparative analysis as it did before between some of the figures included in this section and the figures eventually in previous years through different reported communication channels. As to the scope of the information provided in this section, labor indicators include all of Grupo Clarín's subsidiaries, pursuant to the criteria indicated above. Environmental performance refers to production or scale operations in which disclosing this kind of information is material. Similarly, some content-related indicators are exclusively applied to subsidiaries engaged in journalistic or entertainment broadcasting and programming activities. As to other indicators, for instance, those related to certain community engagement programs of Grupo Clarín or its subsidiaries that require comprehensive and detailed impact assessments, the information provided is mostly related to the core of the activities inherent to the Metropolitan Area of Buenos Aires, due to the complexity and extension of the processes involved in reviewing and verifying periodic information. 50 "The Voice of the People" Media sustainability depends, to a large extent, on readers and audiences that are aware of their rights and are determined to demand quality journalistic and entertainment content, and on media that are willing to listen to them. Grupo Clarín's media foster the interaction with its public and audiences, creating listening and discussion channels and tools. Opinion, criticism, tastes, suggestions and comments are expressed through multiple open spaces for content created by the people and for the free expression of the entire diverse and plural society. At a corporate level, within the framework of a complex environment marked by the escalating attacks against independent media, Grupo Clarín also offered multiple communication and interaction channels to discuss specific institutional issues, such as newsletters and spaces on the Internet and social networks, in order to share the latest updates with accuracy and transparency. The proliferation of new media and technologies has drastically changed journalism and the way in which the public has access to and produces news and other content. These conditions require an open and rigorous look to determine how to face the challenges marked by the digital era, adjusting the Company's business model to meet readers' and audiences' demands, while guaranteeing the sustainability of its activities, without relegating its leadership position. Grupo Clarín's media companies have assumed a long- standing commitment to audiences and readers. Grupo Clarín's sustained leadership and its privileged position as the people's preferred choice are attributable to its ability to anticipate trends and its vast knowledge of media consumers, paired with its capacity to understand their needs and meet their requirements. Some segments of Diario Clarín, such as the traditional section entitled “Letters to the Country” and the readership surveys, are supplemented with initiatives to satisfy the people's need to participate in the process of casting news, such as, the inclusion of readers' comments and other strategies based on the social networks in virtual news platforms. Over the last years, the Company has launched an increasing number of resources and applications and fostered people's interaction with journalists. Interaction allows readers, listeners and Internet users to provide and share information. “TN y la gente”, an initiative from the news signal TN, is a good example of this, since it allows the audience to send photos or videos captured with personal cameras or mobile devices as an additional way to foster the citizens' involvement in journalism and increase the end-user participation in Grupo Clarín's several media. Grupo Clarín also intends to give a voice to small communities and to foster the development of local content. Through the program Somos, Cablevisión and ARTEAR have been working together in order to take part in the gradual renewal of TV signals and local news programs in many locations of Argentina. To date, the program has 32 Somos signals and has the aim of adding another 5 during 2015. The program is based on the concepts of access to information and cultural proximity with the people, and introduces state-of-the- art technology and ongoing training to improve local coverage and develop local talents. “Audiovisuales en la Escuela” is a similar program developed by Cablevisión to facilitate audiovisual tools to public schools with the aim of building content related to the local cultural identity. During 2014, 184 students from 8 schools of Rosario, Santa Fe, and Buenos Aires participated in the program and produced audiovisual pieces, which, together with other social programs, were broadcast by the local signals of the Somos program. After the end of the school year, participants may apply for educational practices at their local signals. In addition, for more than 30 years now and through its support to the Noble Foundation, Grupo Clarín offers free media literacy tools to thousands of children and teachers in order to foster critical thinking on journalism, while empowering people in their roles as consumers and content generators. 51 years, there has been a gradual but sustained increase in the coverage of social issues by Grupo Clarín's media as recorded by several monitoring actions carried out by third parties, particularly, independent media observatories and universities. In 2011, the NGO Periodismo Social and Universidad Austral started to prepare reports on the coverage of children-related news on television in Argentina. In that first year, Telenoche, Grupo Clarín's main news program that leads audience ratings, was identified as one of the news programs that spent more time broadcasting news and giving information on children and young people, accounting for 32.4% of total coverage. In addition, the report stated that more than 54% of the information sources were children and their families. The following edition of the report revealed that the percentage of children as sources of information increased by 60% and that the topic of violence decreased remarkably (16%) to 29% of the total coverage. Consequently, the news program was awarded the best score among privately owned signals. The report also pointed out that 41% of children-related coverage was specifically addressed to girls, while the other 47% was equally addressed to boys and girls, strengthening the news program's commitment to reflecting gender-related issues. The emphasis placed on these monitoring processes fits within the framework of an initiative launched by the Company in 2009 that included an review of specialized third party analysis, combined with an ambitious training program oriented to audiovisual journalists, focused on achieving journalistic excellence and raising awareness of the particular features of the main social topics in order to give them responsible treatment in the news. In its early stages, the project included training for journalists that work on news programs broadcast by local signals. In a second stage, Grupo Clarín, together with experts in communications and scholars from said organizations, offered in-house workshops for journalists, editors, cameramen and journalistic producers that work at all news programs produced by ARTEAR (TN and Canal Trece), in order to provide them with content development tools and to discuss the main challenges imposed by the several aspects of the coverage of social issues on TV and the editorial values that guide day-to-day decisions. This program was the first of its kind to be implemented in an Argentine signal. Social and Sustainability Coverage In order to better assess the potential influence of the media on different audiences, Grupo Clarín sets goals to guarantee the quality and diversity of its content. Grupo Clarín's newspapers and news programs have a long-standing and respected reputation for journalistic research and offer comprehensive coverage of news and relevant social and environmental issues. The ability to reflect social diversity –both through the coverage of news and entertainment content– is one of the pillars of its commitment towards the audiences and readers. Also during this period, Grupo Clarín renewed its commitment to the supplement Gestión Sustentable (Sustainable Management), published together with Diario La Razón, to make readers think about the most prominent issues of the sustainable development global agenda and to report on social and environmental responsibility actions carried out by companies and organizations of the civil society. Since 2014, the Company started to support the activities of Fundación Temaikèn, a national non- profit organization devoted to the preservation of nature and to environmental education. Special supplements, experts' and scholars' opinions, on-site news coverage, journalistic talent and the quality of the images and infographics complete the broad variety of issues addressed by Grupo Clarín, including but not limited to health, consumption and development, science, education and preservation. Weekly TV programs, such as, “TN Ciencia”, “Esta es mi villa” and “Argentina para armar” broadcast by Todo Noticias, make a valuable contribution to social and scientific issues related to sustainability in a broad sense, and have become leaders and benchmarks in their respective fields. During 2014, the Company's media continued to develop content related to climate change and the environment. Radio Mitre, Grupo Clarín's main radio station, combined the 24-hour coverage of these issues with “Planeta Mitre, Compromiso Verde”, a series of daily brief radio programs hosted by a journalist specialized in the environment aimed at raising awareness on environmental issues, recycling and what each of us can do to make the world a better place. 52 The Company continued to support and promote blogs that raise awareness on social issues from its web site, clarín.com. For example, “El Otro, el Mismo” is a blog aimed at the inclusion of people with disabilities, developed in association with the Universidad Católica Argentina and social organizations. In this regard, the Calendario del Compromiso con la Comunidad (Calendar of Commitment to the Community) was published for the ninth consecutive year in Revista Viva, a weekly section sponsored by Clarín, the Noble Foundation and Red Solidaria that provides an overview of the social challenges Argentina currently faces, with an emphasis on the potential positive effect that contributions made by individuals and the organizations of the civil society may have in addressing such challenges. the importance of Acknowledging reflecting diversity, fostering social justice, protecting the youth, encouraging minority recognition and avoiding discrimination on the basis of race and gender are key actions to create content in the media in a responsible fashion. Over the last Promoting Involvement Nevertheless, when it comes to responsibility and content quality, there is always much to be done in order to identify the potential positive effects that the media may have on a society. In this regard, Grupo Clarín seeks permanently to improve its role in the promotion of the public debate by fostering individual involvement and further describing the social, economic and environmental challenges faced by society with diversity of opinion. The several media companies that comprise Grupo Clarín also endorse several initiatives that encourage citizens' involvement in democracy and responsible citizen controls on the acts and decisions of their representatives. Aware of the need to advocate for further respect for republican principles and fundamental human and civil rights, during 2014 the Company continued to foster and raise awareness on the importance of every citizen's right to information and freedom of speech. In addition, through Diario Clarín, the Company hosted the series of debates entitled: “Democracia y Desarrollo” (Democracy and Development), which addressed issues such as agriculture, transportation, education, Vaca Muerta and the contribution of the industries to development. The series of debates were organized in five meetings open to the community, which were held at the Latin American Art Museum of Buenos Aires during 2014, with the participation of prominent speakers and visitors. The Company also sought to foster values, such as solidarity and community commitment. Through ARTEAR, in 2014 the Company launched a new edition of “Abanderados de la Argentina Solidaria”, an award that recognizes the work –that would otherwise go unnoticed– done by social entrepreneurs and community leaders, by communicating valuable initiatives, that foster social transformation and may be replicated. The initiative is supported by Ashoka and Fundación Navarro Viola and a panel of outstanding people from the social, academic and cultural sectors. In this edition, there were more than 1,500 applicants and the prize was granted to Guadalupe Colque, founder and director of H.O.Pe., a foundation that provides comprehensive care to children who suffer from cancer and their families in the province of Salta. The winner received Ps.100,000 in cash and a brand new automobile to continue her work. There was also a special prize of Ps.100,000 granted to Matías Najún to continue his work at El Buen Samaritano, a hospice that houses and accompanies homeless people that suffer from terminal illnesses. During the period, Clarín renewed its partnership with Missing Children and Red Solidaria to publish photographs of missing children in La Razón newspaper and raise awareness about the role of the community in dealing with this problem. The Company also helped to broadcast the event held to commemorate and raise awareness on the anniversary of the AMIA bombing. This year, as it was the 20th anniversary, it organized at Centro Cultural Recoleta an exhibition that featured 22 photographs taken by press photographers of Diario Clarín about the successive rallies for justice made by relatives of the victims since the year in which the bombing took place. The Company also helped to broadcast the event held to commemorate the anniversary of the Israel Embassy bombing that took place in 1992. The Company was once again a sponsor of the Holocaust Museum of Buenos Aires. In order to promote other campaigns and fund- raising events and raise awareness about Argentina's main social issues, Grupo Clarín donated advertising space to several NGOs. Among the most notable efforts in this regard were the annual Caritas collection and the Colecta Más por Menos, organized by the Argentine Episcopal Conference and the annual collection of the Food Bank Network, as well as that made by Hospital de Niños Garrahan and Fundación Manos en Acción. It also sponsored Feria de las Naciones, a fair organized by Cooperadora de Acción Social, which provides support to several Argentine public hospitals. Grupo Clarín also renewed its support for the traditional campaign “Un Sol para los Chicos”, together with ARTEAR and UNICEF. In 2014 the its 23rd anniversary and campaign celebrated raised Ps.27,152,247 for educational and social programs oriented to children and young people. The campaign is one of UNICEF's main sources of revenues in the country and also seeks to boost individual donations to social causes in Argentina, which still remain at significantly low levels compared to the US and Europe, on a relative basis. In order to deal with this issue strategically, and to bolster the impact and scale of its investments in public adds campaigns on its media, Grupo Clarín, in partnership with AEDROS, a specialized entity engaged in fostering fundraising for NGO, designed a campaign to foster civic involvement through a sustained and ongoing economic CORPORATE RESPONSIBILITY AND SUSTAINABILITY commitment with organizations of the civil society. In its third edition, the campaign Donar Ayuda was largely promoted in audiovisual and electronic media, as well as in newspapers and magazines towards the end of 2014 and early 2015. Individual contributions to NGOs that take their missions seriously are regarded as one of the most effective ways to make a drastic and sustained difference in the lives of many people in need. In addition to conveying this individual commitment message, the campaign also seeks to make a significant contribution to the organizations of the civil society as a whole, which face challenges to their sustainability and independence. 53 communication services, in spite of their reach and scale. Cablevisión's service contribution accounts for an annual in-kind contribution equivalent to Ps.89.6 million, and is supplemented by specific programs, such as Cablevisión Flex which offers reduced subscriptions to low income neighborhoods. The program Puente Digital is one of the main pillars of the work done in order to breach the digital gap. The program offers free Internet access to public schools, combined with the integration of new technologies to school teaching. Through this program, the Company seeks to create a multimedia and interactive platform built upon convergence, where TV content will be a tool to supplement the use of Internet at school. This service is also provided to hospitals, health centers and organizations of the civil society. The initiative also embraces the donation of computers through Fundación Equidad when there is an upgrade in the Company's equipment, which also favors the reutilization of these resources. The impact of donated advertising space and free Internet access services may be added to the Noble Foundation's Ps.4.5 million budget for 2014, and to the amount set aside for other social investment programs in several subsidiaries, which reached Ps.1.3 million in 2014. Hence, the amounts of cash and in-kind contributions allocated to social and community investment programs for the period account for an aggregate contributions with a value equivalent to Ps.156.6 million. This estimated figure does not include programs developed by smaller subsidiaries, whose internal information gathering systems related to community actions are under development. In addition to providing financing, resources, capacity and experience in the promotion of socially valuable initiatives, Grupo Clarín also relies upon third parties to secure regular sponsorships and donations within the framework of strategic alliances related to the sponsored initiatives. ADVERTISING SPACE DONATED IN 2014 ON GRUPO CLARÍN’S MEDIA Radio and Broadcast and Cable TV 542,000 seconds Pages in Newspapers and Magazines 110 pages The estimated impact of these in-kind contributions allocated to public adds accounts for the equivalent to a social investment of approximately Ps.61.1 million. CORPORATE RESPONSIBILITY AND SUSTAINABILITY Community Engagement and Social Advertising Grupo Clarín's impact on and relationship with the community and people goes beyond the boundaries of its editorial coverage. The support to vulnerable communities, the coordination of educational projects, and the organization of campaigns to address social issues or to help areas that were hit by natural disasters, paired with Grupo Clarín's sustained commitment evidenced by several types of donations and knowledge transfer, are just some examples of the numerous initiatives organized and fostered by Grupo Clarín's media companies, either jointly or individually. In response to the growing communication needs and demands from the organizations of the civil society, Grupo Clarín has a multiple approach program in place that combines raising and spreading active awareness of public and social interest topics, by providing advertising space, design and communication services for the NGOs in order to boost the reach of public adds. With respect to social advertising, during 2014, Grupo Clarín, through the Noble Foundation and several of its media companies, donated a significant amount of advertising time and space to foster causes related to social, civic and environmental issues, through its own social investment programs or within the framework of strategic alliances with prestigious organizations of the civil society. Among these programs, the Company supported Consejo Publicitario Argentino, which gathers contributions from media, agencies and advertisers engaged in social advertising. During 2014, the Company focused on campaigns aimed at preventing bullying (“Si no hacés nada sos parte”) and the promotion of values (Respetuosa Argentina). The Company gave continuity to Segundos para Todos, a program organized by Cablevisión, in order to donate free advertising seconds to organizations of the civil society. In 2014, this initiative donated 87,524 advertising seconds to broadcast public adds. Grupo Clarín has also undertaken a sustained and strategic commitment to breaching the digital gap and promoting the responsible use of the Internet. During 2014, Cablevisión provided free services to 22,210 schools, hospitals social organizations and other institutions. This commitment differentiates the Company from others, such as telephone companies, which include donating have policies that do not 54 CORPORATE RESPONSIBILITY AND SUSTAINABILITY Again this year, the Company sponsored the annual Maratón de Lectura (Readathon) initiative, organized by Fundación Leer with the participation of over 4.3 million children from 13,250 educational institutions from 2,625 locations. The event received the donation of 20,400 books published by Clarín for reading corners that gifted by lottery among the participating schools and the initiative was promoted through a broad advertising campaign. Grupo Clarín and its subsidiaries have also renewed their commitment to culture through several sponsorships to important events and entities, such as, Feria del Libro (Book Fair), PROA Foundation, Faena Art Center, Teatro Colón, and Ushuaia's Classical Music Festival. The Company also sponsored the 2014 season of Teatro Maipo, the presentations in Argentina of Les Luthiers, and the play “Y un día Nico se fue”. It also sponsored the films “El misterio de la felicidad”, directed by Daniel Burman, starring Guillermo Francella and Inés Estévez; the remastering in HD of “Tango Feroz” because of the 20th anniversary of its premiere, directed by Marcelo Piñeyro, starring Fernán Mirás, Cecilia Dopazo, Imanol Arias and Leonardo Sbaraglia and the multi-awarded and Oscar nominee “Relatos Salvajes”, an anthology of six black comedy and drama short films written and directed by Damián Szifrón, starring Ricardo Darín, Oscar Martínez, Darío Grandinetti, Leonardo Sbaraglia, Erica Rivas, Rita Cortese, among others. In 2014, Clarín once again held the traditional annual ceremony of the “Premio Clarín de Novela” awards. This year the award went to the Colombian writer Daniel Ferreira for his novel “Rebelión de los oficios inútiles” which reflects the armed struggle that took place in Colombia in the 1970s. The novel was published by Clarín- Alfaguara and the author won Ps.150,000. Grupo Clarín also sponsored a series of concerts organized by Buenos Aires Lírica Foundation and the IV International Ballet Gala as well as Ballet Don Quijote with the special participation of Daniil Simkin, the principal dancer of the American Ballet Theatre of New York, and María Kochetkova, nominated to the best dancer of the world by the Moscow Ballet Academy in 2013. Through its cable and broadcast TV signals, Grupo Clarín's companies make significant efforts to promote the most relevant cultural, motion picture and sports events and such efforts are an increasing contribution to cultural diversity and local identity. Of particular note are initiatives such as “Volver”, the cable TV signal that keeps Argentina's most complete programming archive. 55 Fostering Education and Culture As part of its initiatives in support of education, Grupo Clarín used its cross-segment position and its ability to communicate with society to raise awareness of the importance of education as a right and as a critical element in Argentina's future social development. In this sense, it tried to foster equal opportunities in education through its publishing company Tinta Fresca with the generation of updated, affordable and quality educational materials for students, teachers and schools throughout the country. The Company has renewed its support for the 6th Educational Quality Forum, under the motto "Improving education is an urgent priority". The forum is a massive event organized by Educar 2050, an entity that combines the fieldwork related to the instruction of principals of schools attended by low-income children with extensive public policy advocacy activities. It also promoted a campaign developed by the same organization on education topics related to the 2015 presidential elections. Together with another 40 organizations, it promoted Semana de la Educación, an initiative that seeks to bring education topics to the top of the agenda of the Argentine population. Among the main alliances to foster education, the Company developed specific initiatives, such as the program Potenciar Comunidades Rurales, with the support of several companies to provide support to local development projects in certain communities under the leadership of Emprendimientos Rurales Los Grobo. One of the most prominent initiatives resulting from a collective effort is the award “Premio Clarín- Zúrich a la Educación”. The sixth edition recognized the best practices in environmental education in primary schools. The first prize was Ps.190,000 for the winning school to be able to develop the project. Other two schools were distinguished with received Ps.55,000 each. The next edition of the award in 2015 will choose the best project on Social Sciences in high schools, in order to underscore the importance and interest of this issue and recognize the capacity to introduce critical thinking and a problem-solving approach to education. ‘mentions’ and During this period, through the Noble Foundation, the Company continued to donate bibliographical material, and renewed its long-standing support of Escuelas Roberto Noble, named after the founder of Diario Clarín, Roberto Noble. NOBLE FOUNDATION’S DONATIONS OF EDUCATIONAL MATERIAL Books 2014 49,603 2013 2012 44,219 48,900 Magazines 4,177 6,140 6,660 Manuals 310 561 500 CORPORATE RESPONSIBILITY AND SUSTAINABILITY Media Literacy and Protection of Young Audiences The media plays an increasingly important role in society, particularly, in the lives of young people. Through several programs, Grupo Clarín encourages them to develop media access tools through critical thinking and to leverage the opportunities provided by the media and technology to explore their identity, creatively express their ideas and opinions and make their voices heard. Media literacy is generally defined as the ability to access to, analyze, respond with critical thinking and benefit from, the media. Grupo Clarín's main tool to foster media literacy is its support of “La educación y los medios de comunicación”, (Education and the Media), a pioneer program widely recognized abroad that has been developed for more than 30 years by the Noble Foundation. In 2014, the Noble Foundation was mostly engaged in renewing the program that consists of classroom workshops and special educational content suited to the needs of teachers and students oriented to foster a critical approach to the media and their use as resources that supplement formal education. In order to capitalize on the information gathered at the workshops in connection with cultural consumption patterns of the young, the Noble Foundation launched the contest #sosVOSenlared aimed at boys and girls between 13 and 18 years of age. The pedagogical purpose of this initiative was to promote critical thinking about the way in which young boys and girls construct their identity in social networks and review the opportunities and limitations offered by technology in this process. During the contest, the Noble Foundation provided materials and contents for teachers and activities for students. The contents provided by the Noble Foundation through blogs and social networks are communication spaces that supplement the workshops. The most popular contents are the classroom activities and the opinion articles about several education issues. Through the Noble Foundation, Grupo Clarín renewed its presence and coordination of the media space in the “Museo de los Niños” (Children's Museum) and continued to offer visits to printing facilities and Diario Clarín's newsroom. These visits give students and teachers from schools and universities all over the country and the world the chance to experience first-hand the processes involved in news production, the design of publication supporting equipment, the newspaper distribution mechanisms, as well as the environmental approach of the production process. During 2014, 13,963 students and teachers from 260 educational institutions visited the facilities. These initiatives program are supplemented through other initiatives related to the promotion of responsible content consumption. Within the Cable Television and Internet Access segment, the Company helps to protect vulnerable audiences by providing parents with the tools to make decisions about the content their children are allowed to access. THE PROGRAM “LA EDUCACIÓN Y LOS MEDIOS DE COMUNICACIÓN” Workshops for teachers Workshops for students 2014 102 233 2013 120 2012 125 441 534 56 This includes several parental control options. For cable TV services, the on-screen guide allows parents to easily block content that is not suitable for children by introducing a PIN. The Video On Demand platform includes the identification of adults-only services with access control systems that may be enabled by the subscribers. In terms of protection of audiences in Internet, the Company developed Fibertel Security. With this tool, users may filter the access to certain web sites deemed inappropriate and customize the protection level for each family member, among other things. In addition, adults may restrict the use of Internet by setting specific days and times. Adult users have a password that enables them to turn the control off and freely access the Internet, as well as to change all of the software configuration settings. Every time the operating system is rebooted, the service returns to its active status to prevent an eventual oversight. These tools are provided with information and criteria on how to use Internet. Cablevisión launched the program “Compás para el uso de Internet” in partnership with UNICEF and Chicos.net. This project, specifically addressed to families and teachers, is intended to provide proposals to teach children and teens about the proactive, responsible and safe use of technology. The topics discussed in this program include digital citizenship, on-line security, data protection, content diversity, respect for information sources and awareness on cyber- bullying and discrimination. The initiative includes the development of an information portal (www. programacompas.com.ar), tools for journalists, relationship with elementary schools and publication of citizenship awareness information through the media. In 2014, on Internet's day, Fibertel held a Technological Festival at the CORPORATE RESPONSIBILITY AND SUSTAINABILITY Excellence in Journalistic Training In order to reaffirm the commitment to journalistic excellence, Grupo Clarín also carried out activities aimed at consolidating the training and excellence of current and future communicators. In this sense, the Company provided support to the Master’s Degree in Journalism, an international graduate course with the highest academic level, organized by Grupo Clarín and the University of San Andrés, with the participation of the School of Journalism at Columbia University and the University of Bologna, and led by renowned national and international journalists and academics. Year after year, this renowned training program gathers professionals from Argentina and other Latin American countries, and also offers scholarships linked to outstanding performance. In this same regard, the Company helped to promote and support the Graduate Program in Digital Journalism organized by Universitat Pompeu Fabra, TN.com.ar and Google. With the current edition of this state-of-the-art program underway, the Company reinforced its commitment to enhancing the quality of professionals in the 2.0 world. In connection with journalistic training and within the framework of the program Somos, developed by ARTEAR and Cablevisión, during 2014, Grupo Clarín offered five regional training sessions that reached approximately 50 local signals. Training sessions focus on the journalistic and technical training of professionals from regional signals nationwide, in which the company invests to provide state-of-the- art technology as well as top-of-the-line training opportunities to improve local coverage. 57 Educational Center of Barracas, aimed at sharing collaborative exploration and construction contents with boys and girls through the use of technology. The festival included different creative workshops about the safe and responsible use of technology for 120 students attending 5th grade of primary school. In addition, in alliance with Disney and Chicos.net, Fibertel developed an investigation about the behaviors and insights of boys and girls over the Internet and the role of adults in Argentina, Mexico and Brazil. The information gathered allows the company to work on strategies aimed at protecting and raising awareness based on sound knowledge. The findings of the investigation were published in February 2015 on the International Safer Internet Day. The Company also addresses responsibly children's artistic participation in the television and film industry; a category that was embraced by the ILO as a valid form of participation in labor activities by children in these age categories. To such end, special emphasis is placed on compliance with the applicable standards in force, while adhering to internal guidelines that set limited activity schedules, protection and promotion of school education and active involvement of parents and tutors. Also during 2014, Grupo Clarín's media contributed to the dissemination of the national awareness campaign of Consejo Publicitario Argentino about bullying: a specific form of harassment among peers, usually among boys, girls and teenagers, which takes place especially in social networks. Under the motto “Si no hacés nada, sos parte #nobullying”, the campaign was very popular and was largely covered by the media. 58 Grupo Clarín's success and leadership are mostly the result of the efforts, talent, professionalism and creativity of its employees. Grupo Clarín's media companies are among the preferred workplaces of most communication professionals. The Company strives to offer better opportunities, incentives and tools to sustain and strengthen the firm commitment of the professionals that believe in the project of Grupo Clarín. MEN WOMEN EMPLOYEES BROKEN DO W N B Y G OUR PEOPLE E N D E R 2 0 1 4 TOTAL HEADCOUNT AS OF DECEMBER 31, 2014 15,548 11,871 3,677 EMPLOYEES BROKEN DOWN BY AGE GROUPS 2014 <30 31-50 >51 3,112 10,241 2,195 EMPLOYEE TURNOVER RATE 2014 6.59% EMPLOYEE DISTRIBUTION BY CATEGORY 2014 Directors and Managers Middle management Analysts and administrative staff Technical staff Other 240 2,317 3,777 6,815 2,399 CORPORATE RESPONSIBILITY AND SUSTAINABILITY / OUR PEOPLE The Company has its own structure in terms of the age and gender diversity of its employees. With respect to gender, there is a noticeably higher proportion of male employees, mostly on account of the high number of employees required in the technical areas of printing facilities and of the cable TV and Internet access segment. In Argentina, technical specialties are predominantly elected by men, and that pattern is reflected in the payroll of this type of industry. During 2014, the Company held training sessions about diversity, focused on gender and disability. There were also specific round tables to recognize the goals attained and the opportunities to address these issues. The gender structure in the rest of the business segments of Grupo Clarín is well-balanced considering the total workforce, with a deficit in managerial positions, which are still mainly occupied by men. However, the Company has attained excellent results as far as gender equality is concerned in content-related activities, particularly in the areas related to journalism and audiovisual production, where the workforce is more diverse. At the same time, the Company seeks to foster hiring young, first-time job seekers and people in the upper age group who contribute their experience. The Professional Development Program, the guided visits to the Zepita facility and to Cablevisión, as well as the program Audiovisuales en la Escuela, are good examples of these initiatives that seek to foster the articulation between formal education and the workforce, by encouraging young people to complete their high- school studies as a necessary condition to get a job. Gestión Compartida, a company which, among other things, provides employee recruitment, selection and training services to the companies of Grupo Clarín and third parties, is engaged in promoting and developing job opportunities for people over 45 years of age, both in its daily work as well as through partnerships with social organizations that share the same focus. In terms of employee turnover, the Company and its subsidiaries maintain market ratios, particularly in connection with permanent employees. However, the consolidated media turnover ratio usually reflects certain particular features of the industry, which is influenced by factors such as seasonality and involvement of specific technical or artistic employees during certain periods. These employees do not terminate their relationship with the company; instead, they have temporary employment agreements related to special products inherent to the programming activity. 59 CORPORATE RESPONSIBILITY AND SUSTAINABILITY / OUR PEOPLE The Company fosters an open dialogue with union representatives facilitating mutual understanding and conflict resolution. Employees freely exercise their right to unionize and are currently represented by several unions related to each of the activities developed by Grupo Clarín and its subsidiaries. Out of Grupo Clarín's total employees 75.1% is covered by collective bargaining agreements. Taking care of the work environment and conditions, health and job safety and employee training to enhance their professional skills are some of the actions aimed at consolidating the sense of integration and achievement of organizational goals. The work environment survey is one of the key tools employed to gather opinions on the Company's performance in this regard. The survey is conducted periodically at Grupo Clarín's subsidiaries on a global basis and as a cross-section of the group's companies. This process serves to identify sensitive issues and opportunities for internal improvement. Based on the results of the survey, the Company designs action plans, communication channels and training programs in order to set new goals for the coming year. During 2014, the survey was conducted in the Cable Television and Internet Access segment achieving a record level of responses (98%). In a complex environment for the Company and its employees, the figures achieved in the work environment category remained strong and the figures achieved in the commitment category were above 86% on average. Leadership indicators also maintained high scores. The work environment survey is expected to be conducted in the rest of the business segments during 2015. In 2014, Grupo Clarín continued to develop its Corporate Volunteer Program, with global actions and other actions inherent to each subsidiary. Under the name “Vos también”, the program seeks to develop and consolidate in an inclusive fashion valuable initiatives for employees’ that include solidarity actions that have a positive impact on the community while contributing to the Company’s organizational climate. During 2014, the program was implemented in 7 business units, including the corporate areas, and its impact was extended to 12 provinces. According to its main indicators, volunteers devoted 6,501 hours of work, with a global engagement rate of 12.3%. All program actions were carried out in partnership with social organizations to shift the benefits derived from the experience to the civil society. During 2014, the program partnered with 55 NGOs and reached 6,418 people. Through these initiatives, volunteers had the chance to collaborate with several programs and topics. The main projects carried out during the year were the following: Donación de Sangre, a project that seeks to foster solidarity in the area of health; Vos también Jugás, a project oriented to infants; Socios por un día, a project carried out in partnership with Junior Achievement that seeks to foster entrepreneurship among young people; Give and Gain Week, Construyendo Escuelas, and the project Cuenta Cuentos with Fundación Leer, among others. A cross-cutting action was proposed to all of Grupo Clarín's business units: Fin de año en Familia, a family support program that consists of delivering Christmas gift boxes to low income families. The program Vos También had a very high satisfaction level among participants: 99.08% of the participants found it rewarding or very rewarding and a similar percentage stated that they would participate again. Grupo Clarín also put special emphasis on multiple internal communication tools, such as the magazine Nuestro Medio, the digital newsletter named Nuestro Resumen and the Corporate Training Program and the Company Climate Management newsletters, as well as internal communication spaces and notice boards. During 2014, Grupo Clarín launched a new version of the Corporate Intranet, a channel to maintain a smooth internal communication among all the employees of the Group. It also incorporated the corporate chat tool, which is a new meeting point among employees, creating a new space to share resources and streamline internal processes. Year after year, Grupo Clarín increases its efforts to implement and streamline the information channels on benefit programs, policies and relevant organizational changes, and news concerning the daily development of activities. “VOS TAMBIÉN” VOLUNTEER PROGRAM IN 2014 Volunteers Participating social organizations Direct beneficiaries Hours of volunteer work Employee's engagement Provinces included 1,528 55 6,418 6,501 12.3% 13 60 Benefits and Career Development Even though a large number of benefits are common to all employees, each Business Unit grants additional benefits, which may differ based on their respective activities. During the last quarter of 2007, the Company, together with its subsidiaries, began to implement a long-term savings plan for directors and managers, which became effective in January 2008. In 2014 the Company launched “Nuestros Beneficios”, a program aimed at all the employees of Grupo Clarín. It was an unprecedented proposal that combined the efforts of various Business Units to offer benefits and discounts for all the employees and included clothing, restaurants, education programs, entertainment and tourism. The Company held an event to launch the program and to present an exclusive portal that grants access to all the benefits. families, which their In order to build new skills and reinforce existing strengths, employees need motivation and support. During 2013, the Company made further efforts to increase the scope of and improve the performance review program of employees in several job categories. During 2014, the Company worked on the development of a Performance Management system (CEL - Crecimiento de la Efectividad Laboral), a space where bosses establish an ongoing feedback mechanism with their teams, focusing on strengths and opportunities for improvement that arise on a daily basis. It allows them to work on the expectations regarding management performance and behaviors and skills according to the role and function, conducting follow-ups of the proposals for improvement and closing the cycle with an interview to provide feedback. Training arouses the interest of the company and its employees. Employees receive training to attain results for the Company, and at the same time the Company fosters their growth, enhancing their knowledge and skills. Grupo Clarín invests in training, with two types of programs. On the one hand, the training programs of each Business Unit, focusing on the specific needs of each activity, whereby Grupo Clarín employees and professional staff can update and enhance their knowledge and skills through seminars, courses, graduate studies and master's degrees. On the other hand, Grupo Clarín offers the Corporate Training Program (PCF, for its Spanish acronym), which includes a wide range of training proposals. During the second half of 2014, the Company offered new alternatives to improve the performance of the analysts and middle management of all the companies of Grupo Clarín. During 2014, 331 employees participated in the 19 courses given as part of the Corporate Training Program. Training management is currently focused on planning new tools and technological developments in order to train employees on how to face the challenges imposed by the changes in the media industry. During this period, the course “Inducción a la Era Digital” was added to the Corporate Training Program. It seeks to shed light on the way in which technology has changed the world of business, generating big opportunities and challenges for the companies. In this sense, another highlight is the Executive Program developed together with Universidad de Palermo: “Negocios del Mundo Digital”. Employees of Grupo Clarín and Banco Santander participated in this program. The purpose of this program was to generate triggers building on premises about the organization and the integration of the digital world into the traditional world, to foster an integrated working environment among the different areas of the company, to provide methodological tools to generate digital thinking, and to achieve an interaction among all the elements seeking to improve the relationship with customers, exploring the available tools to streamline the communication process. In order to provide training to middle and upper management seeking to foster key managerial competences and skills, in 2014 the Company developed the Management Development Program together with UADE Business School. This program provided knowledge and tools that empowered participants to improve their managerial skills in their area or team and to share their best practices among the top executives of the best companies and, in turn, learn the new trends of the academic world. The Company also organized several training sessions, breakfast and lunch meetings and integration activities among different areas of the Company that work together in order to strengthen internal communication and knowledge. During the period, the Company continued to provide English courses to those employees that need language skills for their work. This year different groups were created to provide group classes in a dynamic and easy fashion so that participants may share their knowledge, grow together and boost their development. Grupo Clarín and its Business Units offered seminars and training programs about health issues and the prevention of illnesses and accidents, as well as other relevant topics, which supplemented the special campaigns about health CORPORATE RESPONSIBILITY AND SUSTAINABILITY / OUR PEOPLE issues and medical check-ups. Several initiatives were implemented to promote healthy lifestyle habits: vaccination and blood drives, meditation and yoga workshops, placement of bicycle racks and locker rooms, soccer tournaments, evacuation drills, healthy menus and talks about first aid. Relationship with the supply chain Grupo Clarín's Social Responsibility management is embedded in the relationship with its supply chain. During 2014, the Company continued to explore alternatives of interaction or joint approach to common-interest issues at the various levels of relationship with its suppliers. Grupo Clarín focused on the implementation of systems and procedures aimed at the application of best practices for purchases, employee hiring, and contracting with suppliers within a framework of supervision and transparency. During the year and through Gestión Compartida, a subsidiary engaged in managing the relationship with most of the suppliers, the Company initiated a tool redefining process, which, among other things, seeks to require that new suppliers undertake a commitment to the sustainability of their operations. Through this process, the Company expects to develop internal training sessions, introduce and develop its own record of sustainable suppliers and foster sustainability as management strategy oriented to related third parties. 61 62 ENVIRONMENT CORPORATE RESPONSIBILITY AND SUSTAINABILITY / ENVIRONMENT During 2014, the Company continued to implement measures to improve production processes in order to optimize results and react to potential impacts. identify, plan for and Progress was made in achieving the period's goals by introducing sustainable methods to obtain and use resources, developing equipment investment policies, raising active awareness on the appropriate use of supplies and technologies and promoting the adoption and certification of environmental standards. Since 2004, Grupo Clarín has adhered to the United Nations Global Compact that sets forth several environmental protection standards. The Compact requires that companies: Consumption. Newsprint and Energy Within the framework of an environmental management policy oriented to eco-efficiency, the Company and its subsidiaries mainly use energy, newsprint, cable and other technology-related elements. Use of materials in 2014 Paper Ink Aluminum plates Residential connection cables CPE (Set-top units and customer's equipment) 72,340 Tons 1,614 Tons 206 Tons 3,014 Tons 1,098 Tons (Principle 7) Adopt a preventive approach to environmental challenges; At the printing plants, the Company followed established guidelines to ensure the provision of materials at quality levels compatible with international standards for newsprint, inks and other specific inputs. (Principle 8) Take initiatives to foster increased environmental responsibility; and Papel Prensa, a subsidiary in which Grupo Clarín owns an indirect minority interest, supplies most of the newsprint used in newspaper printing. (Principle 9) Foster the development and promotion of environmentally-friendly technologies. In addition, Grupo Clarín's Social Corporate Responsibility and Sustainability Policy serves as a management guideline and drives the definition of goals for its subsidiaries. This is reflected in the environmental policies adopted by its subsidiaries, such as the one implemented by AGEA in 2012, which combines the improvement of environmental management with ISO 14001 certification and implementation for its production processes; or AGR's FSC certification, which allows that company to guarantee the certification of the chain of custody of the paper used, from its manufacture until the printing process has been completed. Papel Prensa has put in place production policies based on the procurement of strategic inputs without depleting natural resources. To this end, the paper mill recovers raw materials from the recycling of returned newspapers in order to produce more newsprint and reduce the use of virgin fiber. The type of fiber source (aspens and willows) depends on the availability of materials and economic considerations concerning freight distance minimization, a key economic and environmental issue. However, it should be noted that fresh fiber comes from sustainable plantations. In addition, ongoing research studies are conducted concerning genetic enhancement of tree species and environmental and forestry aspects. Such research is conducted through agreements with universities, research centers and specialists in order to boost productivity, cut costs and guarantee ecosystem sustainability. 63 CORPORATE RESPONSIBILITY AND SUSTAINABILITY / ENVIRONMENT Papel Prensa's forestry department conducts its activities with a sustainability strategy in mind to protect biodiversity. Birdlife has experienced a sustained increase as a result of forestry protection actions and a ban on hunting. These conditions encourage the design of several research and development programs, also in conjunction with universities, including the introduction, production and reproduction of certain endangered deer species for their adequate and safe development. The Cable Television and Internet Access segment is engaged in service activities, which essentially do not require the use of raw materials, as opposed to the industrial processes run by other segments. Nevertheless, given the scale of operations, Grupo Clarín's companies use certain materials produced by their respective value chains, such as the cable for residential services installed during the period, top-set units delivered under loan for use and poles used as part of the distribution network. As to the types of inks used at the printing facilities, the diverse variety of printed products requires a varied approach from the perspective of resources. For instance, the use of vegetable- based coldset ink at the Company's main printing facility, accounts for almost 60% of total use of the input. This type of ink, which can be used in bond paper, is environmentally friendlier due to its vegetable components and its efficiency in terms of the amount of ink required to print, which may be 10%-15% lower than other inks. As another way to reduce the environmental impact, the Company streamlines its resources through the selection of printing techniques. For instance, since 2008 AGR has successfully introduced stochastic printing at its premises, significantly reducing the number of inks required for the printing process. The Company has also specialized and qualified professional teams that work towards the goal of reducing material consumption, identifying and adopting increasingly efficient processes related to the environment. The newspaper size adjustments introduced in previous years continue to reduce the use of newsprint and other materials. Power is the main additional resource used by Grupo Clarín and its subsidiaries. Grupo Clarín uses power from direct and indirect sources. Even though the Company has alternative power generators in place for offices and industrial facilities that require fuel, the main indirect consumption is the electricity provided by the power supply network. Direct and indirect use of power by primary source in 2014 Electricity Natural gas Gasoline Gas oil CNG LP gas 107,446 MWh 88,578 GJ 114,701 GJ 133,009 GJ 129.80 GJ 0 GJ The subsidiaries engaged in printing activities are the heaviest users of power, followed by the business units that use technology in their operations, such as the cable TV and Internet access distribution services and audiovisual programming services. In this area, ARTEAR has policies in place for the ongoing development of innovation resources to reduce the use of electricity at its premises. The main initiatives in this regard include the introduction of cold lighting systems in all new and remodeled TV studios, which allows a fivefold reduction in the power ARTEAR normally used for lighting. In 2014, this concept was applied in the preparation of TN's Mirador studio, used for the program hosted by Nelson Castro. The Company also renovated its buildings in order to make better use of natural light and installed energy-efficient linings. In line with its goal of staying at the forefront of new technology, ARTEAR continued to invest in equipment manufactured under environmentally friendly standards, in order to meet the need for High-Definition programming and distribution. In addition, the Company continues to monitor the consumption and impact of ARTEAR's outside broadcast units. Since 2012, its fleet is fully composed of Diesel vehicles, which consume less fuel. At Cablevisión, energy from indirect sources is mainly used for temperature adjustment, workroom ventilation and lighting and for the operation of data transfer networks and equipment. Hence, Cablevisión introduced technologies in its main building to reduce the amount of energy used in lighting (through efficient electrical devices and motion sensors at meeting rooms) air conditioning and smart elevators. 64 CORPORATE RESPONSIBILITY AND SUSTAINABILITY / ENVIRONMENT Special care is given to effluents resulting from the printing facilities' development processes, which are subject to rigorous treatments and measurements before disposal. A water re-usage system was put in place at the Zepita facility. Under its Environmental Management System, the Company seeks to avoid discharging effluents except in exceptional cases. At La Voz del Interior's printing facilities, waste water is subject to treatment and is then reused for irrigation or as part of the production process. The water discharge figures disclosed below are mostly attributable to processed water that can be safely used for irrigation. The Company's office buildings and other facilities only discharge domestic waste water. Total waste water discharge At printing facilities in 2014 11,304 m3 Also in terms of recycling, Grupo Clarín continued to reaffirm its contribution to Fundación Garrahan through an office-paper recycling program. Such arrangement was combined with other programs to reduce the use of paper at the Company's offices, while seeking to streamline printing techniques; in addition to the Company's renewed efforts to raise sustainability awareness among employees. The Company donates technological equipment to institutions that receive free Internet connection from Fibertel and to other institutions located in highly vulnerable neighborhoods. In addition to making another contribution towards citizen connectivity and access to technological equipment, the Company seeks to contribute to environmental care by reusing equipment. During 2014, the Company also donated 748 technological equipment units to Fundación Equidad. Additionally, the Company continued to support and sponsor projects related to the care and protection of green areas by sponsoring and contributing to the preservation of the parks Plazoleta Dr. Roberto Noble in the city of Buenos Aires and Parque de la Ribera located in San Isidro. Through preservation works in both parks, the Company also sought to promote responsibility in the care of public areas by the community and constructively contribute to the protection of the environment. 65 Waste and Emissions Grupo Clarín's subsidiaries develop most of their activities in urban areas that are not in contact with natural areas and that meet effective urban planning standards. As to emissions, printing facilities have the most significant impact on the carbon footprint. Therefore, the Company is permanently exploring alternatives to improve processes and efficiency in these areas and to further deepen the analysis and inventory of Co2 emissions generated by the activities developed by the several subsidiaries. The main strategies available to reduce greenhouse gas emissions entail cutting consumption or changing power resources, for instance, by making more intensive use of renewable fuel and bio-energy. Total greenhouse gas emissions by weight in 2014 Direct emissions Indirect emissions Total emissions 60,835.62 Tons of CO2 57,056.84 Tons of CO2 120,892.45 Tons of CO2 collect and separate certain waste materials, such as ink, oil, grease and solvents, that are sent to third party facilities for their recycling, reuse or safe final disposal. Hazardous waste is subject to a rigorous treatment handled by licensed waste management companies. At the same time, the Company continues to develop strategies to reduce hazardous waste and has made significant progress. Fully reusable aluminum plates are used in the printing process. In the Cable TV and Internet access segment, waste is separated at origin in order to add social or environmental value, where practicable. With respect to recycling, the Company keeps strict control of the recovery of equipment delivered to subscribers under loans for use, such as top- set units and remote controls, in order to reuse them or ensure its safe final disposal, and also to reduce the consumption of this type of equipment. In this area, the Company's waste management substantially differs from that of other technology companies that are not involved in the final disposal of electronic waste related to equipment delivered to customers. Each subsidiary of Grupo Clarín identifies and manages waste production and disposal. Total waste weight by type in 2014 As part of the treatment of industrial waste from printing processes, the Company's subsidiaries Hazardous waste Urban or non-hazardous waste 4,250.87 Tons 438.33 Tons RISK FACTORS As an Argentine multimedia company, Grupo Clarín is exposed to a wide range of risks, related to the country and also to its operations. The Company relies on a strong internal control system. The identification of risk and its assessment is part of each unit’s business plans, and is also addressed by a corporate based control department and by the Board on a regular basis. Argentina’s economic environment Substantially all of our operations are conducted in Argentina, and are therefore affected by changes in Argentina’s economic environment. The Argentine economy has experienced significant volatility in recent decades, with periods of low or negative growth, high inflation and currency devaluation. After six years of sustained economic growth, the Argentine economy slowed down in the second half of 2008 and throughout 2009, affected by the international crisis as well as internal political developments. The trend was later reversed, with real GDP growth reaching 9.1% in 2010 and 8.6% in 2011. In 2012 real GDP growth declined to 0.9%. While real GDP grew by 2.9% in 2013, towards the fourth quarter of 2013 the economy already showed signs of decline (based on data published by the National Institute of Statistics and Census –INDEC–). In 2014, real GPD showed no growth for the first time since 2002. Sustainable economic growth depends on a variety of factors, including international demand for Argentine export commodities and their prevailing prices, stability and competitiveness of the Peso against foreign currencies, confidence of consumers and local and foreign investors and a low rate of inflation. The Argentine economy might be adversely affected by the following factors: -Exchange rate volatility and depletion of Central Bank international reserves; -Increase in current inflation affecting competitiveness and economic growth; -Recession, low economic growth or economic uncertainties affecting Argentina’s main trading partners; -Insufficient levels of investment; 66 RISK FACTORS -Poor development of the Argentine credit market and limited ability to obtain financing from international markets; -A reduction of the payment capacity of the Argentine public sector and the possibilities of procuring international financing; -Increase in current public expenditure affecting fiscal accounts; -Possible reduction or reversal in the trade balance due to significant decrease in agricultural prices in general and soy in particular or adverse climatic conditions affecting the production of agricultural commodities; -Government imposed restrictions on imports or exports; -Wage, price and foreign exchange controls; -Political and social tensions; -Continued instability of the financial systems of the main developed economies; -Abrupt changes in the monetary and fiscal policies of the main economies worldwide; and -Reversal of capital flows due to domestic and international uncertainty. A downturn in economic activity is likely to result in increased subscriber churn and bad debt, subscriber losses as well as decreased advertising revenues. We seek to address the cycles affecting the Argentine economy by diversifying the scope of our business and managing our foreign currency liabilities. Political and Economic Uncertainties Our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing in Argentina. Measures adopted by the Argentine government that impact upon the economy, including those measures related to monetary policy, inflation, interest rates, price controls, exchange controls and taxes, have affected and could continue to affect Argentine companies like ours. We have also been the target of legislation passed to regulate the Media Industry and capital markets, which has also affected our activities in recent years. See “Legislation and Regulation of the Media Industry” and “Capital Markets Regulations.” a. Inflation Argentina has confronted inflationary pressures since 2007, evidenced by significantly higher fuel, energy and food prices, among other indicators. According to inflation data published by the INDEC, from 2010 to 2014, the Argentine consumer price index increased 10.9%, 9.5%, 10.8%, 10.9% and 23.9%, respectively; and the wholesale price index increased 14.6%, 12.7%, 13.1%, 14.7% and 28.3%, respectively. However, since 2007, the INDEC has experienced a process of institutional and methodological reforms that have given rise to controversy with respect to the reliability of the information that it produces. In December 2013 the Argentine Government announced the implementation of a new methodology for the calculation of price indexes, designed in International Monetary Fund cooperation with (“IMF”) experts. The IMF had stated in previous reports that their staff used alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which had shown inflation rates considerably higher than those published by the INDEC since 2007. In a meeting held on February 1, 2013, the Executive Board of the IMF issued a declaration of censure in connection with Argentina’s failure to make sufficient progress to adopt remedial measures to address the inaccuracy of inflation and GDP data. The new methodology announced in 2013 was applied to the calculation of price indexes starting in January 2014. Even though it brought inflation statistics closer to those estimated by private sources, there is still a material difference between official inflation data and private estimates. According to figures published by members of Congress from opposition parties based on private sources, the average inflation estimate was 24.5% for 2012, 27.1% for 2013 and 35.8% for 2014. Since 2007, inflation in Argentina has contributed to a material increase in our operating costs, in particular labor costs, and negatively impacted our results of operations and financial condition. There can be no assurance that inflation rates will not escalate in the future, or of what effects the measures adopted or that may be adopted in the future by the Government to control inflation may have. In the past, inflation has materially undermined the Argentine economy and Argentina’s ability to create conditions that would permit growth. High inflation may also (i) undermine the competitiveness of Argentina’s manufacturing and service industries producing, inter alia, an increase in unemployment levels and (ii) negatively impact the country’s long- term credit markets. There can be no assurance that inflation rates will not continue to escalate in the future or that the measures adopted or that may be adopted by the Argentine government to control inflation will be effective or successful. Inflation remains a challenge for Argentina. Significant inflation could have a material adverse effect on Argentina’s economy and in turn could increase our costs of operation, in particular labor costs and access to financing, and may negatively impact our financial condition and results of operations. b. Foreign Exchange Controls, Devaluation and Central Bank Depletion During the second half of 2011 and in 2012, the increased controls on Argentine government the incurrence of foreign currency-denominated indebtedness, and the sale and acquisition of foreign currency by local residents. New regulations issued in 2012 subject foreign exchange transactions to prior approval by Argentine tax authorities. Formal and informal foreign exchange controls continued throughout 2013 and remain in place. Although in 2014 individuals who could evidence ‘economic capacity’ as determined by the Argentine tax authorities were allowed to access the official foreign exchange market to acquire foreign currency primarily for savings, since the enhancement of exchange controls in November 2011 the introduction of government measures have practically closed the foreign exchange market to retail transactions. It is widely reported that the peso/U.S. dollar exchange rate in the unofficial market and in neighboring markets where the peso is traded differs substantially from the official foreign exchange. During 2013, the Argentine peso devalued from Ps.4.92 per U.S. dollar as of December 31, 2012 to Ps.6.52 per U.S. dollar as of December 31, 2013. In early 2014 the devaluation of the Argentine peso accelerated. In the week of January 20 to January 24, the official peso/U.S. dollar exchange rate went from Ps.6.83 per U.S. dollar to Ps.8.00. In the following months, devaluation continued albeit at a slower pace, while regulatory and de facto restrictions on access to the official foreign exchange market to pay for imports of goods and services remained in place. As of December 31, 2014, the official peso/U.S. dollar exchange rate was Ps.8.55 per U.S. dollar. 67 RISK FACTORS Government intervention in the foreign currency market to sustain the value of the Argentine peso, increased energy imports and the decline in the international price of gold have resulted in a progressive depletion of Central Bank reserves. In 2013, Central Bank reserves decreased by approximately 29.3% from USD43,290 million as of December 31, 2012 to USD30,600 million as of December 31, 2012. In 2014, Central Bank reserves increased slightly, by 2.6% to USD31,408 million as of December 31, 2014, reportedly due to the assistance of the People’s Republic of China, implemented through a currency swap program agreement with the Bank of China. Additional exchange controls could have a negative effect on the economy and on private sector companies, including our business. Furthermore, in such event, the imposition of future restrictions on the transfers of funds abroad may impede the transfer of foreign currency on account of dividends to GDS holders. c. International Trade Restrictions In 2012, the Argentine government introduced a procedure pursuant to which local authorities must pre-approve the import of products and services to Argentina as a pre-condition to permit such import and the consequent access to the foreign exchange market for the payment of the imported products or services. On August 22, the World Trade Organization (“WTO”) issued a Panel Report relating to complaints brought by the United States, the European Union and Japan, where it concluded that such import pre-approval requirements were inconsistent with the 1994 General Agreement on Tariffs and Trade (“GATT 1994”) and recommended that the Dispute Settlement Body request Argentina to bring the inconsistent measures into conformity with its obligations under the GATT 1994. Argentina appealed the Panel Report on September 26, 2014. On January 15, 2015, the WTO Appellate Body issued its report in the case “Argentina - Measures Affecting the Importation of Goods” upholding the Panel Report’s main conclusions and recommendations. Repeated complaints from various countries against import restrictions implemented by Argentina, suspension of export preferences or retaliations by trading partners may have an adverse effect on Argentine exports, affect the trade balance and, consequently, adversely impact Argentina’s economy. Additionally, increased government control over foreign trade has resulted in a shortage of inputs and spare parts and in production disruptions. The continuation of these shortages may affect the growth of the economy and, consequently, could affect our business, financial condition and results of operations. d. Other forms of government intervention interventions and other direct Expropriations, involvement by the Argentine government in the economy have had an adverse impact on the level of foreign investment in Argentina, the access of Argentine companies to the international capital markets and Argentina’s commercial and diplomatic relations with other countries. The level of government intervention in the economy may continue or increase, which may adversely affect Argentina’s economy in the medium and long term and, in turn, our business, results of operations and financial condition. e. Sovereign litigation Litigation, as well as claims filed Argentine sovereign debt bondholders and foreign investors with the International Centre for Settlement of Investment Disputes (ICSID) and United Nations Commission on International Trade Law (UNCITRAL) against the Argentine government, have resulted in material judgments and may result in new material judgments against the government, and could result in attachments of or injunctions relating to assets of Argentina that the government intended for other uses. On November 21, 2012, the United States District Court for the Southern District of New York ordered Argentina to pay USD1.33 billion to certain holdout bondholders and curtailing Argentina’s ability to pay certain other external indebtedness for so long as payment of the holdout bondholders was pending. Argentina appealed the District Court’s November 21 order and requested a stay, which was granted by the Second Circuit Court of Appeals. On March 19, 2013, Argentina submitted a proposed payment plan for holdout bondholders, which was rejected by plaintiffs on April 19, 2013. On August 30, 2013, the Second Circuit Court of Appeals affirmed the District Court’s November 21, 2012 order, but stayed its decision pending an appeal to the Supreme Court of the United States. On June 16, 2014, the U.S. Supreme Court denied Argentina’s certiorari petition of the Second Circuit Court of Appeals’ ruling affirming the Southern District Court judgment of November 21, 2012. Consequently, Argentina was required to pay 100% of the amounts due to plaintiffs whenever it made 68 its next payment to restructured bondholders. Upon rejection of Argentina’s appeal to the Supreme Court, on June 18, 2014, the United States Court of Appeals for the Second Circuit lifted its stay of the District Court’s order. On June 23, 2014, Argentina requested the District Court for a new stay to allow for a reasonable period of negotiations to settle the dispute with plaintiffs. On June 26, 2014, Argentina deposited the amounts due to holders of restructured debt in accounts of the trustee –The Bank of New York Mellon (“BONY”)– in the Central Bank of Argentina. On that same date, Judge Griesa of the District Court rejected the request for a stay made by Argentina on June 23, 2014. On June 27, 2014, Judge Griesa ruled that the aforementioned funds should not be delivered to the holders of restructured debt in the absence of a prior agreement with the holdouts. As of the date of this annual report, the parties have not arrived at an agreement and BONY has invoked the decision of the District Court judge to freeze the funds deposited by Argentina. Argentina asserted that it had complied with its obligation to the holders of the restructured bonds by making the initial deposit, and that the indenture trustee had the obligation to deliver those funds to their beneficiaries. On September 11, 2014, the Argentine Congress passed Law No. 26,984, which provides for various mechanisms to pay the holders of the restructured bonds. Among other things, the new law authorized the replacement of BONY as trustee and provided for a voluntary exchange of the restructured bonds for new bonds that would have identical financial terms but be governed by Argentine law and subject to Argentine jurisdiction. On September 29, 2014, the District Court judge declared Argentina in contempt of court but did not impose sanctions on the country. On October 3, 2014, the District Court judge ordered Argentina to reinstate BONY, remove the newly appointed trustee –Nación Fideicomisos– and resolve the dispute with the holdout plaintiffs. On October 22, 2014, the Second Circuit Court of Appeals dismissed Argentina’s appeal with respect to the freezing of the funds deposited with BONY for lack of jurisdiction. On October 28, 2014, the District Court judge rejected a motion filed by plaintiffs to attach the funds deposited by Argentina and frozen at BONY. At Citibank’s request, the District Court judge has authorized the payment of US dollar denominated bonds governed by Argentine law to the extent that payments have become due, deferring a definitive decision on this question. The District Court judge has set a new hearing for March 3, 2015, on the matter. On March 12, 2015, Judge Griesa rejected Citibank’s request to make interest payments on US dollar denominated bonds governed by Argentine law, due on March 30, 2015. As of the date hereof, litigation initiated by bondholders seeking payments from Argentina continues in the United States and in courts in other jurisdictions. As a result, the Argentine government may not have all the necessary financial resources to honor its obligations, implement reforms and foster growth. The lack of access to financial markets could have a material adverse effect on the country’s economy, and consequently, our business, financial condition and results of operations. f. Government expenditure During the last few years, the Argentine government has substantially increased public expenditure. The Argentine government has sourced part of its funding requirements from the Central Bank and the National Social Security Administration (“ANSES”). For 2012, the government reported the first fiscal deficit since 2009. That trend continued in 2013, with the country’s primary deficit more than doubling to approximately Ps.82.2 billion (approximately 2.4% of INDEC nominal GDP), without taking into account transfers from ANSES and the Central Bank. In 2014, the country registered a primary deficit of approximately Ps.159.7 billion (approximately 3.7% of INDEC nominal GDP), its highest level since 2002. We cannot assure you that the government will not seek to finance its deficit by gaining access to the liquidity available in the local financial institutions. On March 22, 2012, the Argentine Congress passed Law No. 26,739, which amended the charter of the Central Bank and Law No. 23,298. Law No. 26,739 amends the objectives of the Central Bank (established in its charter) and removes certain provisions previously in force. As amended, the Central Bank Charter provides that reserves may be made available to the government for the repayment of debt or to finance public expenses. This use of Central Bank reserves for expanded purposes may render Argentina more vulnerable to external shocks, affecting the country’s capacity to overcome the effects of an external crisis, and fuel inflation as the amount of pesos in circulation increases while reserves decrease. In addition, Law No. 26,739 RISK FACTORS amends the criteria for compliance with the minimum cash requirement for banks. This amendment could affect financial institutions by forcing them to increase liquidity, with a potential adverse impact on credit supply, and therefore on the growth of the Argentine economy and on our business. Legislation and Regulation of the Media Industry In Argentina, the legal system, including the Constitution, protects the independence of the free press. As a media company, we are vigilant as to the attempts to curtail freedom of speech and the free press that might arise and widely cooperate with journalistic associations and other NGOs that advocate for the protection of these and other fundamental constitutional rights. Since 2009 the government has conducted an overt policy designed to restrict the activities of the free press. During 2013 and 2014 private media in general and Grupo Clarín in particular continued to face an escalating level of harassment, involving the use of official and para-official means and resources with the clear intention of damaging the private media’s reputation and directly and indirectly limiting its journalistic activities. a. Audiovisual Communication Services Law In October 2009, the Argentine Congress passed a new Audiovisual Communication Services Law legal (“LSCA”) to replace the general framework under which the audiovisual media industry operated in Argentina for approximately three decades. We and others challenged the 69 RISK FACTORS new LSCA on several grounds, including its encroachment upon constitutional rights, the broad and discretionary powers over media and content granted to the Executive Branch, for favoring state-owned and sponsored media and affecting the sustainability of privately- owned media, promoting the elimination of independent signals and enabling a pervasive and questionable censorship system anchored upon the discretionary power to grant licenses and the application of penalties, among other controversial aspects. On October 29, 2013, the Argentine Supreme Court, in a split decision, upheld the constitutionality of the LSCA in re “Grupo Clarín S.A. and others v. National Executive Branch and others re/ Merely declarative Action”. The Company believes that the Sections of the LSCA it had challenged in that litigation not only contradict principles of the Argentine National Constitution, but also those of the American Convention on Human Rights (Pact of San José de Costa Rica), as well as recent precedents of the Inter-American Commission on Human Rights, the Inter-American Court of Human Rights and the Special Rapporteurship for Freedom of Expression of the Organization of American States. The Company will analyze bringing an appeal before international courts to challenge those sections that entail an indirect act of censorship, silence and discriminate critical media, and violate acquired rights. In addition, as provided in the Court’s ruling, the Company will continue to litigate in local courts all the aspects related to the arbitrary and selective application of the law by the national government. On October 31, 2013, the Company and some of its subsidiaries were served with Resolution No. 2276/2012 of the LSCA Federal Enforcement Authority (“AFSCA”), providing for an ex officio proceeding force compliance by the Company and some of its subsidiaries with the requirements and limitations of the LSCA by dispossessing the Company of certain licenses, among other measures. Faced with the de facto proceedings that sought to dispossess the Company of its licenses and assets through an ex officio procedure, on November 4, 2013, the Company submitted to AFSCA and the Supreme Court of Argentina a proposal pursuant to section 161 of the LSCA, which was approved by Grupo Clarín’s Board of Directors on November 3, 2013, in an attempt to avoid the forced divestiture of its assets by AFSCA. Shortly after receipt of the proposal, AFSCA issued Resolution No. 1471/2013, whereby it suspended the ex officio transfer procedure. The proposal included the necessary disclaimers to safeguard the rights of the Company, including without limitation, the right to bring a claim for economic damages caused to the Company and its subsidiaries as a consequence of their adjustment to conform to the LSCA; the right to challenge the conformity of Sections 41, 45, 48 and 161 of the LSCA to international conventions before the Inter-American Commission on Human Rights, the Inter-American Court of Human Rights and other competent International Courts; and the right to challenge judicially the current composition of AFSCA for not conforming to the provisions of the LSCA and for not being a technical and independent agency protected against undue interferences from the State. The proposal submitted by the Company consisted in its reorganization into six independent business units, each of which would individually comply with the requirements of the LSCA, according to the following detail: • Unit I: Would include (a) ARTEAR, owner of the signal of Canal 13 of Buenos Aires and the news signal TN (Todo Noticias). ARTEAR would also maintain its interest in (i) Telecor, holder of the license of Canal 12 of Córdoba and (ii) Bariloche TV, holder of the license of Canal 6 of Bariloche; (b) Radio Mitre, which would maintain the frequencies AM 790 and FM 100 in Buenos Aires, AM 810 and FM 102.9 in Córdoba, and FM 100.3 in Mendoza; and (c) certain assets, liabilities, rights and obligations to be spun off from Cablevisión, which would include 24 local licenses for physical link subscription television services in cities where there is no incompatibility with broadcast TV, and 2 licenses for radio-electric link subscription television services. •Unit II: Would comprise the surviving Cablevisión, which would continue to carry out the business activities and operations of Cablevisión with all the assets, liabilities, rights and obligations that are not spun off from Cablevisión. Unit II would hold 24 licenses for physical link subscription television services and 10 licenses for radio- electric link subscription television services, including the signal Metro, which is also the local signal of the license exploited in the city of Buenos Aires. •Unit III: Would include certain assets, rights and obligations to be spun off from Cablevisión, including 22 licenses for physical link subscription television services and 10 licenses for radio- electric link subscription television services. •Unit IV: Would include (a) IESA, owner of the signals TyC Sports and TyC Max; (b) the signals El 13 Satelital, Magazine, Volver, Quiero Música en mi Idioma and (c) an equity interest in Canal Rural S.A., owner of the signal Canal Rural. •Unit V: Would consist of (a) one sound frequency modulation broadcasting service for the city of 70 San Miguel de Tucumán - FM 99.5, (b) one sound frequency modulation broadcasting service for the city of San Carlos de Bariloche - FM 92.1, (c) one sound frequency modulation broadcasting service for the city of Santa Fe - FM 99.3, (d) one sound frequency modulation broadcasting service for the city of Bahía Blanca - FM 96.5 and (e) one sound frequency modulation broadcasting service for the city of San Carlos de Bariloche - FM 103.1, owned by Bariloche TV. •Unit VI: Would hold one broadcast television license for the city of Bahía Blanca, province of Buenos Aires –LU81 TV Canal 7– and an equity interest in Cuyo Televisión S.A., holder of one broadcast television license in Mendoza –LV83 TV Canal 9 Mendoza. Units I and II would continue to be structured under publicly traded holding companies with different, independent controlling shareholders. Holders of Class B shares and Global Depositary Shares of Grupo Clarín S.A. –which would maintain ownership of Unit I– would additionally receive a pro rata number of Class B shares or Global Depositary Shares of a new holding company, Cablevisión Holding S.A., which would own Unit II. Units III, IV, V and VI would be divested to independent third parties. The proposal required the approval of AFSCA, the intervention of other governmental and oversight agencies and the approval of the shareholders at the respective Shareholders’ Meetings in order to carry out the restructuring and the transfer of licenses, assets, liabilities and operations to third parties. On February 18, 2014, AFSCA declared the admissibility of said proposal and granted the Company a term of 180 calendar days for its implementation. On February 18, 2014, the Company's Board of Directors decided to call an Extraordinary Shareholders’ Meeting to be held on March 20, 2014, in order to consider AFSCA Resolution No. 193/2014 and to instruct the Board of Directors to begin implementation of the proposal. On August 19, 2014, the Company, ARTEAR, Radio Mitre and Cablevisión informed AFSCA of their completion of all actions necessary on their side to implement the proposal, under the terms of Resolution No. 193/2014. The entities also requested that AFSCA consider the explanations provided in response to AFSCA’s previous observations, and compel the other intervening authorities to take the necessary action to enable the final completion of the proposal. RISK FACTORS AFSCA issued new, additional requests and requirements, which were all duly and timely responded by the Company. On October 9, 2014, AFSCA notified the Company, ARTEAR, Radio Mitre and Cablevisión of the issuance of Resolution No. 1121/2014, whereby that agency decided to (i) reject the reorganization proposed by the Company, the reorganization proposed by Cablevisión, the formation of the foreign trusts required for the implementation of such reorganizations and the transfers proposed by the Company, ARTEAR, Radio Mitre and Cablevisión and to resume the ex officio transfer procedures. and Other v. National Government on Incidental Procedure” for the application of Law No. 26,522; and, (iii) order the National Government to carry out each and every act required to implement the proposal submitted by the claimants that were identified in the Proposal. As of the date of these financial statements, the Company and its legal advisors cannot provide assurance about the effects that this situation may have on the Company and its Proposal. Notwithstanding the foregoing, the Task Force Created to Implement the Proposal continues to carry out the actions required to implement the Proposal as filed. On October 31, 2014, the Federal Civil and Commercial Court No. 1 granted an interim injunction whereby it ordered the Argentine government and AFSCA to “abstain from performing, directly or through third parties, any action in connection with the ex officio transfer procedure.” On December 9, 2014, the court confirmed the injunction for a term of six months, all subject to a bond of Ps.1,000,000, which was timely posted. Chamber No. 1 of the National Court of Appeals on Federal Civil and injunction Commercial Matters confirmed the issued by the first instance judge. Accordingly, the implementation of the proposal or the application of the ex officio divestiture procedure are again subject to litigation, with an uncertain result. Given AFSCA’s arbitrary and discriminatory decisions, on March 5, 2015, the Company broadened the scope of the claim filed in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT on Incidental Procedure” (File 7,263/2012)”, and requested the judge to: (i) declare that AFSCA’s enforcement of Sections 45, 48 and 161 of the LSCA on the claimants through AFSCA Resolution No. 1,121/14 is unconstitutional and infringes the right to freedom of the press, property, equality before the law, due process, defense in court and the principle of reasonableness with which those powers must necessarily be exercised, and that, if necessary, each and every resolution related to this unconstitutional enforcement, in particular AFSCA Resolution No. 1,121/14, is illegitimate and null and void; (ii) order claimants to comply with the legitimate legal obligation to conform to the LSCA, voluntarily applying the criteria adopted by AFSCA on other proposals and to order AFSCA to refrain from discriminating against the claimants in the consideration of their proposal to conform to the license regime provided under Section 45 of Law No. 26,522 and to comply with the conditions established in Recital 74 of the Supreme Court’s decision in re “Grupo Clarín Even if the proposal submitted by the Company and its affiliates is finally approved, its implementation may entail a strong reduction of the Company’s operating income and its profitability in the Cable Television and Internet Access segment and/or a strong reduction of its operating income and profitability of the Broadcasting and Programming segment, depending on the choices made by the Company. The above-mentioned considerations and the limits to the growth of Grupo Clarín imposed by the LSCA, inconsistent with world trends and in breach of legitimately acquired property rights, will have an impact on the equity value of Grupo Clarín. Potential changes in the implementation of the proposal, additional limitations to those contemplated thereunder and/or a forced divestiture process may give rise to different results and, eventually, adverse consequences. As of the date of these financial statements the Company cannot provide assurance about the results of that process. The decision rendered by the Supreme Court of Argentina on October 29, 2013, expressly states the claimant companies’ right to claim economic damages caused its subsidiaries as a consequence of the adjustment to conform to the LSCA, and the Company has expressly reserved its right to bring judicial actions to claim for those damages. the Company and to The situation described above generates uncertainties about the business of the Company and its subsidiaries that could materially affect the recoverability of the Company’s relevant assets, its business, results of operations and financial condition. 71 -The use of public funds and media on a discretionary basis to generate content and shows that display political propaganda, while creating hurdles and discriminating against certain media in the access to public information; -An aggressive campaign to destroy non- partisan media by compromising their economic sustainability and credibility; -Abuse of bureaucratic controls or controls by public agencies in the form of administrative persecutions, groundless arbitrary resolutions, disproportionate tax controls and recurring audits; -Banning private companies from including their advertising slots in independent media; -Blockades to printing facilities to prevent the distribution of certain newspapers and magazines; -Government interference and regulation of the newsprint industry, including a series of temporary clauses, specifically and exclusively addressed to our affiliate Papel Prensa, whereby Papel Prensa is forced to make investments to meet the total national newsprint demand –excluding from this requirement the other existing company that operates in the country with installed capacity to produce newsprint; We cannot assure that government action against independent media and against the Company in particular will not continue or intensify. Increased government action against the Company could materially affect our business, results of operations and financial condition. Capital Markets Regulations On November 29, 2012, Congress passed Capital Markets Law No. 26,831 (the “Capital Markets Law”), which was enacted by the Executive on December 27, 2012, published on December 28, 2012, and became effective on January 28, 2013. The Capital Markets Law provides for a comprehensive amendment of the public offering regime, previously governed by Law No. 17,811 and, among other things, enhances the National Government’s oversight powers over publicly traded companies. On July 29, 2013, the National Government issued Decree No. 1023/2013 to regulate partially the b. New Telecommunication Services Law On December 16, 2014, Congress passed Law No. 27,078 under the name “Digital Argentina Act”, whereby Congress partially repealed the existing National Telecommunications Law No. 19,798 and subjected the effectiveness of Decree No. 764/00 (which had deregulated the telecommunications market) to the issuance of four new regulations relating to the License Regime, Interconnection, Universal Services and Radioelectric Spectrum. The new law maintains the single country- wide license scheme and the independent registration of the services to be rendered, but telecommunication services are renamed “Information and Communication Technologies” (TIC). Notwithstanding their new denomination, TIC licenses (now called “Digital Argentina Single Licenses”) still cover all telecommunication services, and the scope of the licenses granted originally to the Company’s subsidiaries and merged companies remains unaltered. The most significant change to the former National Telecommunications regime was the creation of a new public service under the name “Public and Strategic Infrastructure Use and Access Service for and among Providers.” By characterizing this activity as a public service, providers (including audiovisual communication service providers) may be required to grant other TIC service providers access to network elements, related resources or services for such other TIC service providers to render their own services. Networks and infrastructure owners, such as the Company and its subsidiaries, may be required to grant network access to competitors that have not made investments in their own infrastructure. The regulations required to implement the new Digital Argentina Act have not been issued. Therefore, the Company cannot yet assess the economic and operational impact of the creation of this new public service. The new oversight authority (AFTIC) that is to enforce the law has not been created either, and therefore the Argentine government has not yet taken any steps to implement the new law. Enforcement of the Digital Argentina Act (particularly taking into account how the Argentine government has interpreted and applied other laws that govern the Company’s business) could have a material adverse effect on the Company’s business, financial condition and results of operations. c. Other government action relating to the Company and the media industry In addition to the government’s drive to implement the LSCA, the Argentine government has also sought to revoke the authorization granted unanimously by the National Antitrust Commission in 2007 to the transaction whereby the Company indirectly acquired 60% of Cablevisión and Cablevisión acquired all or part of the equity interests of certain of our subsidiaries. The Argentine government has also taken measures to revoke the license under which Cablevisión renders Internet services and to set the price of its pay-television service according to a pricing formula. Such measures, which we have challenged in court, if upheld would materially adversely affect our business. We have obtained preliminary injunctions that have enjoined the government’s action, and will continue to make every effort to defend ourselves by taking all actions necessary to safeguard our rights. However, we cannot assure that such efforts ultimately will prove successful. Other government or para-official actions against the Company and media in general include: -An exponential increase and discriminatory allocation of official advertising used to create and sustain pro-government media, as well as the use of such advertising to condition the press; 72 RISK FACTORS Capital Markets Law. Among other provisions, the Decree regulates Section 20 of said Law, pursuant to which the CNV may appoint an overseer with veto rights over the decisions made by the boards of directors of entities subject to the public offering regime, or otherwise remove the boards from such entities for up to 180 days until all deficiencies found by the CNV are solved, without prior judicial authorization or control. The Decree also vests with the CNV the power to appoint the administrators or co-administrators that will hold office after a board of directors of an issuer is removed. The Company is of the view that the Decree amends the Law it seeks to regulate and, therefore, is not a valid implementing regulation. false and On July 12, 2013, a few days prior to the issuance of the Decree, the Company was served notice of Resolution No. 17,131, dated July 11, 2013, whereby the CNV declared that the administrative effects of the decisions adopted at the Annual Ordinary General Shareholders’ Meeting held on April 25, 2013, were irregular and ineffective. The CNV’s Resolution was based on allegations irrelevant. that were completely These allegations, as well as the conduct of the representatives of ANSES (a shareholder of the Company) and of the CNV at the meeting, prompted certain directors of the Company –and later the Board itself– to press criminal charges against ANSES and CNV representatives (Messrs. Reposo, Kicillof, Moreno, Vanoli, Fardi and Helman) for making false statements and arguments with the sole intent of discrediting the Board of Directors and caricature the Company’s management with the ultimate purpose of creating pretexts to permit an intervention of the Company without judicial control, pursuant to the new powers vested on the CNV by the Capital Markets Law. The Company gave the CNV written notice that what the events registered at the Shareholders' Meeting could not be considered in any way as an acknowledgment of the legitimacy of the powers vested on the CNV by the Capital Markets Law, and reserved its rights to file the pertinent legal actions to challenge the constitutionality of that law. On August 20, 2013, at the request of Mr. Rubén Mario Szwarc, a shareholder of the Company, the Company was served notice of the decision rendered by Chamber A of the National Court of Appeals on Commercial Matters, whereby that Chamber decided, among other things, to enjoin the enforcement of Section 20, subsection a), second part, paragraphs I and II (or 1 and 2) of the Capital Markets Law and of all laws, rules or administrative acts issued or that may be issued pursuant to such legal provisions, with respect to Grupo Clarín S.A., until the courts decide on the merits of Mr. Szwarc’s claim. our current expectations affecting our growth. Increased competition through new technological developments may adversely affect our business if our analysis of industry trends is not accurate or if we are not able to adapt readily our operations. On October 11, 2013, Chamber 5 of the National Court of Appeals on Federal Administrative Matters issued an injunction in re "Grupo Clarín S.A. v. CNV - Resol. No. 17,131/13 (File 737/13)" File No. 29,563/2013, suspending the effects of Resolution No. 17,131/2013 until the courts reach a decision on the merits. On November 11, 2014, the same court extended the injunction for an additional six months. On March 21, 2014, the Company was served notice of a claim filed by ANSES, seeking to challenge and to render void the decisions adopted at the Shareholders’ Meeting of the Company held on April 25, 2013, and the decisions adopted by the Board of Directors at its meeting of April 26, 2013. As of December 31, 2014, the term for the Company to respond to the claim was under suspension. the Company In spite of these judicial measures that have afforded temporary protection against arbitrary and discriminatory action taken by the Government against us as part of its long- standing campaign, we cannot assure that these injunctions and measures will remain in place, that the courts will not uphold the constitutionality of Section 20 of the Capital Markets Law, or that the CNV will not attempt to apply that provision against removing the Company, effectively the Board of Directors for up to 180 days and replacing it with CNV-appointed administrators or co-administrators. Direct intervention of our management by the CNV could materially affect our business, results of operations and financial condition. Sector Development and Competition The Company devotes significant resources to analyzing emerging trends and has vast experience and a solid track record in reading consumer demands and successfully developing new products and services, adapting its business model in time. However, the media industry and certain maturing markets to which our services are catered, are dynamic and constantly undergo significant developments at a pace that may differ from Programming and Personnel We may not be able to renew our rights to certain programming and our results of operations may be adversely affected by the loss of key personnel. In addition, under the new LSCA and pursuant to our proposal to conform to it, we may divest or cease to broadcast certain signals. The production of content is part of our strategy and we dedicate significant resources to the identification of market trends and new figures and matters of public interest, to preserve the position of leadership we have acquired in the market. Liquidity and Funding is denominated We have financial debt outstanding, a significant portion of which in foreign currency. Financial markets remain practically closed for Argentine companies, and we must rely primarily on our cash flow generation to service our debt. While we have been able to access the official foreign exchange market to make debt payments to date, we cannot exclude that a further tightening of foreign exchange controls could adversely affect our ability to make payments on our debt on a timely basis. We have engaged in an active liability management policy, and improved our debt to free cashflow ratio to limit our need to access the market as a means of repayment of our financial obligations. However, the implementation of our proposal to conform our operations to the LSCA may require prepayment of certain of our indebtedness. We cannot assure that we will be able successfully to access the market in order to prepay such indebtedness under terms that will not affect our financial condition adversely. Certain of our costs, including a significant portion of our financial expenses, are dollar denominated. Currency fluctuations, such as a considerable devaluation of the Peso against the U.S. dollar are likely to affect adversely the Argentine economy and will impact negatively on our financial condition. 73 BUSINESS PROJECTIONS AND PLANNING As mentioned above and in light of the decision rendered by the Supreme Court of Justice, on November 3, 2013, the Board of Directors approved a voluntary proposal to conform to the LSCA that was filed with AFSCA on November 4, 2013, and declared formally admissible by that agency on February 18, 2014. The implementation of the proposal submitted by the Company required the approval of AFSCA, the intervention of other governmental and oversight agencies and the approval of the shareholders at the respective Shareholders' Meetings in order to carry out the restructuring and the transfer of licenses, assets, liabilities and operations to third parties. After approving the above-mentioned Proposal at their respective Shareholders' Meetings, the Company and its subsidiaries devoted considerable effort to the implementation in due time and form of the Proposal that had been declared formally admissible by AFSCA. They also made a filing with AFSCA in order to inform and certify that they had duly completed all actions required of those companies and necessary to implement the Proposal in the terms in which it had been approved pursuant to Resolution No. 193/AFSCA/2014. reorganizations and The Company understands that it has executed the Proposal that was declared formally admissible pursuant to Resolution No. 193, fully in accordance with the commitment undertaken by the Company and in compliance with the applicable regulatory framework, and considers that Resolution No. 1,121/AFSCA/2014, whereby AFSCA rejected the corporate transfers under the Proposal and ordered the initiation of an ex officio divestiture procedure with respect to the Company and its subsidiaries, is evidently arbitrary and inappropriate and infringes the constitutional guarantees of due process and defense in court. The procedure to approve such Resolution had serious irregularities and gross and malicious errors relating to the interpretation and application of effective legislation, inevitably rendering such Resolution null and void. For those reasons, the affected companies requested the Resolution’s nullification before an administrative court and will resort to all available judicial remedies to have such Resolution declared null and void in order to satisfactorily implement the Proposal to which they have committed. In this respect, it should be mentioned that the Ex Officio Forced Divestiture Procedure has been suspended by the court for a period of six (6) months. 74 BUSINESS PROJECTIONS AND PLANNING 75 Implementation of the Proposal that was declared formally admissible will entail significant changes to the Company's structure, generating an uncertain scenario about the future development of the business. Implementation of this proposal may entail a strong reduction of its operating income and its profitability in the Cable Television and Internet Access segment and/or a strong reduction of its operating income and profitability of the Broadcasting and Programming segment. The above-mentioned considerations and the limits to the growth of Grupo Clarín imposed by this law, against world trends and against legitimately acquired rights, will surely have an impact on the potential value of Grupo Clarín. The process required to implement the proposal and the results generated as a consequence thereof will depend on the outcome of the claims brought and/ or to be brought requesting the nullification of the ex officio divestiture procedure ordered by AFSCA. Potential changes in the implementation of the Proposal that was declared formally admissible, additional limitations to those contemplated thereunder and/or a forced divestiture process may give rise to different results and, eventually, adverse consequences. As of the date of these financial statements and given the current uncertainties regarding the effective evolution of the conforming process of the Company and its subsidiaries, the existing restrictions imposed by the regulatory framework and the conditions in which these processes will be effectively carried out, the Company cannot provide assurance about the results of that process. It should be noted that the decision rendered by the Supreme Court of Argentina on October 29, 2013, expressly states the claimant companies' right to claim economic damages caused to the Company and its subsidiaries as a consequence of the adjustment to conform to the law. Accordingly, under the proposal submitted to AFSCA on November 4, 2013, the Company expressly reserved its right to bring judicial actions to claim for those damages. In connection with the changes made to the regulatory framework applicable to telecommunication services, the implementing regulations for Law No. 27,078 are still pending. Therefore, the economic and operational impact that the creation of this public service may have on the subsidiaries that are within the scope of this law cannot be ascertained. The government has taken no action to apply the new law because the AFTIC has yet to be organized. However, the Company seeks to reinforce and enhance its products and services through the activities developed by Grupo Clarín and its business units, preserving their quality and fostering ongoing innovation. Grupo Clarín intends to continue to focus on optimizing the productivity and efficiency levels in all of its operating areas, seeking to develop and to apply the best practices related to each of these processes. At a corporate level, activities will be focused on the main processes that allow sustainable, healthy and efficient growth from different perspectives: financial structure, management control, business strategy, human resources, innovation and corporate social responsibility. Grupo Clarín renews its sustained commitment to regulatory compliance, while reinforcing once again its commitment towards its readers, audiences and the country. In its daily work, Grupo Clarín seeks to assume with strength and responsibility the role that the media are called to play through independent journalism and through the defense and promotion of universal and fundamental rights, such as freedom of speech, because these are pillars that extol the quality of democracy and the welfare of Argentine society as a whole. 76 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:40 PM Page 77 6 FINANCIAL STATEMENTS AS OF DECEMBER 31, 2014 Glossary of Selected Terms 78 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements 79 80 81 82 84 86 SUPPLEMENTARY FINANCIAL INFORMATION 195 INDEPENDENT AUDITOR’S REPORT 200 PARENT COMPANY ONLY FINANCIAL STATEMENTS 203 204 Parent Company only Statement of Comprehensive Income Parent Company only Balance Sheet Parent Company only Statement of Changes in Equity Parent Company only Statements of Cash Flows Notes to the Parent Company only Financial Statements Additional Information to the Notes to the Financial Statements - Section No. 68 of the Regulations issued by the Buenos Aires Stock Exchange and Section No. 12 Title IV Chapter III of General Resolution No. 622/13 of 205 206 208 210 the Argentine Securities Commission 294 INDEPENDENT AUDITOR’S REPORT 296 SUPERVISORY COMMITTEE’S REPORT 298 77 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:40 PM Page 78 ADIRA Association of Provincial Newspapers of the Republic of Argentina AEDBA Association of Newspaper Publishers of the City of Buenos Aires AFA Asociación del Fútbol Argentino (Argentine Football Association) AFIP Administración Federal de Ingresos Públicos (Argentine Federal Revenue Service) AFSCA Autoridad Federal de Servicios de Comunicación Audiovisual (Audiovisual Communication Services Law Federal Enforcement Authority) AGEA Arte Gráfico Editorial Argentino S.A. AGR Artes Gráficas Rioplatense S.A. ANA Administración Nacional de Aduanas (National Customs Administration) APE Acuerdo preventivo extrajudicial (pre-packaged insolvency plan) ARPA Association of Argentine Private Broadcasters ARTEAR Arte Radiotelevisivo Argentino S.A. Auto Sports Auto Sports S.A. Bariloche TV Bariloche TV S.A. BCBA Bolsa de Comercio de Buenos Aires (Buenos Aires Stock Exchange) Cablevisión Cablevisión S.A. Canal Rural Canal Rural Satelital S.A. CER Coeficiente de Estabilización de Referencia (Reference Stabilization Coefficient, a consumer price inflation coefficient) CIMECO Compañía Inversora en Medios de Comunicación (CIMECO) S.A. CLC Compañía Latinoamericana de Cable S.A. CMD Compañía de Medios Digitales (CMD) S.A. (former PRIMA Internacional) CMI Comercializadora de Medios del Interior S.A. CNDC Comisión Nacional de Defensa de la Competencia (National Antitrust Commission) CNV Comisión Nacional de Valores (Argentine Securities Commission) CPCECABA Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires (Professional Council in Economic Sciences of the City of Buenos Aires) COMFER Comité Federal de Radiodifusión (Federal Broadcasting Committee) CSJN Supreme Court of Argentina CUSPIDE Cúspide Libros S.A. CVB CV B Holding S.A. Dinero Mail Dinero Mail LLC Adjusted EBITDA Revenues less cost of sales and selling and administrative expenses (excluding depreciation and amortization) Editorial Atlántida Editorial Atlántida S.A. FACPCE Federación Argentina de Consejos Profesionales de Ciencias Económicas (Argentine Federation of Professional Councils in Economic Sciences) FADRA Fundación de Automovilismo Deportivo de la República Argentina (Argentine Motor Racing Foundation) Fintech Fintech Advisory, Inc. together with its affiliates GCGC GC Gestión Compartida S.A. GCSA Investments GCSA Investments, LLC GC Minor GC Minor S.A. GC Services Grupo Clarín Services, LLC GDS Global Depositary Shares Grupo Carburando Carburando S.A.P.I.C.A.F.I., Mundo Show S.A. and Mundo Show TV S.A. Grupo Clarín, or the Company Grupo Clarín S.A. Grupo Radio Noticias Grupo Radio Noticias S.R.L. Holding Teledigital Holding Teledigital Cable S.A. IASB International Accounting Standards Board Ideas del Sur Ideas del Sur S.A. IESA Inversora de Eventos S.A. IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standards IGJ Inspección General de Justicia (Argentine Superintendency of Legal Entities) Impripost Impripost Tecnologías S.A. VAT Value Added Tax La Razón Editorial La Razón S.A. La Capital Cable La Capital Cable S.A. Antitrust Law Law No. 25,156, as amended Broadcasting Law Law No. 22,285 and its regulations Audiovisual Communication Services Law Law No. 26,522 and its regulations LSE London Stock Exchange Multicanal Multicanal S.A. IAS International Accounting Standards NCP ARG Argentine Professional Accounting Standards, except for Technical Resolutions No. 26 and 29 which adopt IFRS. OSA Oportunidades S.A. Papel Prensa Papel Prensa S.A.I.C.F. y de M. Patagonik Patagonik Film Group S.A. Pol-Ka Pol-Ka Producciones S.A. PRIMA Primera Red Interactiva de Medios Argentinos (PRIMA) S.A. PRIMA Internacional Primera Red Interactiva de Medios Americanos (PRIMA) Internacional S.A. (now CMD) Radio Mitre Radio Mitre S.A. SCI Secretaría de Comercio Interior (Secretariat of Domestic Trade) SECOM Secretaría de Comunicaciones (Argentine Secretariat of Communications) SHOSA Southtel Holdings S.A. SMC Secretaría de Medios de Comunicación (Media Secretariat) Supercanal Supercanal Holding S.A. TATC Tres Arroyos Televisora Color S.A. TCM TC Marketing S.A. Telba Teledifusora Bahiense S.A. Telecor Telecor S.A.C.I. Teledigital Teledigital Cable S.A. TFN Tribunal Fiscal de la Nación (National Tax Court) Tinta Fresca Tinta Fresca Ediciones S.A. TPO Televisora Privada del Oeste S.A. TRISA Tele Red Imagen S.A. TSC Televisión Satelital Codificada S.A. TSMA Teledifusora San Miguel Arcángel S.A. UNIR Unir S.A. Vistone Vistone S.A. VLG VLG Argentina, LLC Glossary of Selected Terms Consolidated Financial Statements as of December 31, 2014 Presented on a comparative basis 78 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:40 PM Page 79 Grupo Clarín S.A. Consolidated Financial Statements as of December 31, 2014 Presented on a comparative basis In Argentine Pesos (Ps.) – Notes 2.1 and 2.12 to the consolidated financial statements and Notes 2.1 and 2.8 to the parent company only financial statements. Registered office: Piedras 1743, Buenos Aires, Argentina Main corporate business: Investing and financing Date of incorporation: July 16, 1999 Date of registration with the Public Registry of Commerce: - Of the by-laws: August 30, 1999 - Of the latest amendment: October 10, 2007 Registration number with the IGJ: 1,669,733 Expiration of articles of incorporation: August 29, 2098 Information on Parent company: Name: GC Dominio S.A. Registered office: Piedras 1743, Buenos Aires, Argentina Information on the subsidiaries in Note 2.4 to the consolidated financial statements and Note 4.3 to the parent company only financial statements. Capital structure Type Class “A” Common shares, Ps.1 par value Class “B” Common shares, Ps.1 par value Class “C” Common shares, Ps.1 par value Total as of December 31, 2014 Total as of December 31, 2013 Number of votes Subscribed, registered per share and paid-in capital 5 1 1 75,980,304 186,281,411 25,156,869 287,418,584 287,418,584 Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 79 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:40 PM Page 80 Consolidated Statement of Comprehensive Income For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Notes December 31, 2014 December 31, 2013 Continuing Operations Revenues Cost of Sales (1) Subtotal - Gross Profit Selling Expenses (1) Administrative Expenses (1) Other Income and Expense, net Financial Costs Other Financial Results, net Equity in Earnings from Affiliates and Subsidiaries Income before Income Tax and Tax on Assets Income Tax and Tax on Assets Income for the year from continuing operations Discontinued Operations Net Income from Discontinued Operations 6.1 6.2 6.3 6.3 6.6 6.4 6.5 5.4 7 13 19,616,226,117 (10,962,778,146) 8,653,447,971 (2,489,696,744) (2,577,515,163) 2,604,278 (1,719,000,651) (11,470,273) 39,801,910 1,898,171,328 (587,373,497) 1,310,797,831 14,100,214,284 (8,139,215,583) 5,960,998,701 (1,860,321,863) (1,951,038,884) 69,534,390 (1,300,062,183) (173,768,717) 99,483,386 844,824,830 (97,924,418) 746,900,412 34,663,833 53,765,362 Net Income for the Year 1,345,461,664 800,665,774 Other Comprehensive Income Items which may be reclassified to net income Variation in Translation Differences of Foreign Operations from Continuing Operations Other Comprehensive Income for the Year 359,868,325 359,868,325 312,065,021 312,065,021 Total Comprehensive Income for the Year 1,705,329,989 1,112,730,795 Profit Attributable to: Shareholders of the Parent Company Non-Controlling Interests Total Comprehensive Income Attributable to: Shareholders of the Parent Company Non-Controlling Interests Basic and Diluted Earnings per Share from Continuing Operations Basic and Diluted Earnings per Share from Discontinued Operations Basic and Diluted Earnings per Share - Total (1) Includes amortization of intangible assets and film library, and depreciation of property, plant and equipment in the amount of Ps. 1,438,216,974 and Ps. 1,123,195,741 for the years ended December 31, 2014 and 2013, respectively. The notes are an integral part of these consolidated financial statements. 804,101,687 541,359,977 998,531,029 706,798,960 2.68 0.12 2.80 479,831,556 320,834,218 639,878,193 472,852,602 1.49 0.18 1.67 Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 80 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 81 Consolidated Balance Sheet As of December 31, 2014 and 2013 In Argentine Pesos (Ps.) Notes December 31, 2014 December 31, 2013 Assets Non-Current Assets Property, Plant and Equipment Intangible Assets Goodwill Deferred Tax Assets Investments in unconsolidated affiliates Other Investments Inventories Other Assets Other Receivables Trade Receivables Total Non-Current Assets Current Assets Inventories Other Assets Other Receivables Trade Receivables Other Investments Cash and Banks Total Current Assets Assets held for sale Total Assets Equity (as per the corresponding statement) Attributable to Shareholders of the Parent Company Shareholders’ Contributions Other items Retained Earnings Total Attributable to Shareholders of the Parent Company Attributable to Non-Controlling Interests Total Shareholders’ Equity Liabilities Non-Current Liabilities Provisions and Other Debt Deferred Tax Liabilities Taxes Payable Other Liabilities Trade Payables and Other Total Non-Current Liabilities Current Liabilities Debt Seller Financings Taxes Payable Other Liabilities Trade Payables and Other Total Current Liabilities Total Liabilities 5.1 5.2 5.3 7 5.4 5.5 5.6 5.7 5.8 5.9 5.6 5.7 5.8 5.9 5.5 5.10 13 5.11 5.12 7 5.14 5.15 5.16 5.12 5.13 5.14 5.15 5.16 6,370,192,626 330,614,131 2,932,411,625 298,134,997 345,510,998 275,625,916 20,952,973 1,249,770 134,959,494 91,505,064 10,801,157,594 272,051,027 7,063,276 624,552,014 2,885,040,086 1,416,105,212 1,161,628,319 6,366,439,934 5,087,330,686 455,181,212 2,876,255,652 140,001,740 418,620,000 143,313,288 28,181,042 1,791,901 232,328,526 129,021,518 9,512,025,565 269,203,901 4,990,825 534,989,603 2,096,136,611 634,453,975 1,332,983,003 4,872,757,918 163,897,072 17,331,494,600 - 14,384,783,483 2,010,638,503 477,244,708 2,995,139,163 5,483,022,374 2,282,464,286 7,765,486,660 336,650,704 2,870,498,547 55,140,623 98,018,442 151,758,062 8,059,507 3,520,125,885 1,718,898,323 3,791,426 858,170,919 309,348,644 3,155,672,743 6,045,882,055 9,566,007,940 2,010,638,503 288,232,326 2,431,037,476 4,729,908,305 1,748,885,854 6,478,794,159 282,932,957 2,844,810,110 87,867,286 108,608,440 121,900,186 5,344,594 3,451,463,573 1,294,528,866 3,484,674 395,187,379 247,916,402 2,513,408,430 4,454,525,751 7,905,989,324 Total Equity and Liabilities 17,331,494,600 14,384,783,483 The notes are an integral part of these consolidated financial statements. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 81 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 82 Consolidated Statement of Changes in Equity For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Shareholders’ Contributions Inflation Adjustment on Additional Capital Stock Capital Stock Paid-in Capital Subtotal Balances as of January 1st, 2013 287,418,584 309,885,253 1,413,334,666 2,010,638,503 Set-up of reserves Dividends and Other Movements of Non-Controlling Interest Net Income for the Year Other Comprehensive Income: Variation in Translation Differences of Foreign Operations - - - - - - - - - - - - - - - - Balances as of December 31, 2013 287,418,584 309,885,253 1,413,334,666 2,010,638,503 Set-up of Reserves (Note 14) Dividends and Other Movements of Non-Controlling Interest Changes in Reserves for Acquisition of Investments Net Income for the Year Other Comprehensive Income: Variation in Translation Differences of Foreign Operations - - - - - - - - - - - - - - - - - - - - Balances as of December 31, 2014 287,418,584 309,885,253 1,413,334,666 2,010,638,503 (1) Broken down as follows: (i) Optional reserve for future dividends of Ps. 300,000,000; (ii) Judicial reserve for future dividend distribution of Ps. 387,028,756, (iii) Optional reserve for illiquidity of results of Ps. 694,371,899 and (iv) Optional reserve to provide financial aid to subsidiaries and in connection with the Audiovisual Communication Services Law of Ps. 690,176,054. The notes are an integral part of these consolidated financial statements. 82 - - ( - - - - - - - - - - - - - ( 2 6 - - - 1 1 - - - ( 8 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 83 D D - - - 160,046,637 283,025,052 - - - - 194,429,342 Translation of Foreign Operations Other items Other Reserves 122,978,415 5,207,274 Equity attributable to Shareholders of the Parent Company Retained Earnings Equity Total Equity Attributable to Accumulated of Controlling Non-Controlling Results Interests Interests Total Equity (1) Optional reserves 1,381,400,655 481,152,598 4,090,030,112 1,374,568,933 5,464,599,045 457,094,968 (481,152,598) - 479,831,556 479,831,556 - - - - (98,535,681) 320,834,218 (98,535,681) 800,665,774 Legal Reserve 88,652,667 24,057,630 - - - - - - - - - - - 160,046,637 152,018,384 312,065,021 5,207,274 112,710,297 1,838,495,623 479,831,556 4,729,908,305 1,748,885,854 6,478,794,159 - - (5,416,960) - - 6,750,470 233,081,086 (239,831,556) - - - - - - - - - - - (240,000,000) (240,000,000) (173,220,528) (413,220,528) - 804,101,687 (5,416,960) 804,101,687 - (5,416,960) 541,359,977 1,345,461,664 - 194,429,342 165,438,983 359,868,325 477,454,394 (209,686) 119,460,767 2,071,576,709 804,101,687 5,483,022,374 2,282,464,286 7,765,486,660 Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 83 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 84 Consolidated Statement of Cash Flows For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Cash provided by Operating Activities Net Income for the Year Income Tax and Tax on Assets Accrued Interest, net Adjustments to reconcile net income for the year to cash provided by operating activities: - Depreciation of Property, Plant and Equipment - Amortization of Intangible Assets and Film Library - Net of allowances - Financial Income, except interest - Equity in Earnings from Affiliates and Subsidiaries - Other Income and Expense - Net Income from Discontinued Operations Changes in Assets and Liabilities: - Trade Receivables - Other Receivables - Inventories - Other Assets - Trade Payables and Other - Taxes Payable - Other Liabilities - Provisions Income Tax and Tax on Assets Payments December 31, 2014 December 31, 2013 1,345,461,664 800,665,774 587,373,497 469,801,668 97,924,418 297,590,512 1,267,793,590 170,423,384 308,764,438 915,593,121 (39,801,910) (2,429,866) (34,483,424) (926,878,515) 115,199,363 (4,977,074) (8,147,338) 644,320,118 (48,887,624) 76,702,934 (60,555,564) (300,721,859) 957,009,293 166,186,448 226,185,010 902,497,887 (99,483,386) (75,260,674) (40,955,599) (607,536,008) (132,447,738) 59,694,755 2,338,777 457,050,294 56,794,037 36,393,075 (73,520,259) (422,779,473) Net Cash Flows provided by Operating Activities 4,474,550,603 2,608,347,143 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 84 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 85 Cash provided by Investment Activities - Acquisition of Property, Plant and Equipment, net - Acquisition of Intangible Assets - Acquisition of Subsidiaries, Net of Cash Acquired - Proceeds from Sale of Property, Plant and Equipment - Dividends collected - Proceeds from Disposal of Long-Term Investments - Certificates of Deposit - Loans granted - Collections of Interest - Collections of Certificates of Deposit December 31, 2014 December 31, 2013 (2,513,684,360) (52,783,723) (7,464,260) 8,084,997 37,832,586 - (1,118,495,451) - 2,330,092 556,677,572 (1,859,321,132) (59,045,040) (2,543,283) 5,966,286 99,063,267 71,244,000 (367,178,141) (7,416,658) 12,399,593 68,527,243 Net Cash Flows used in Investment Activities (3,087,502,547) (2,038,303,865) Cash provided by Financing Activities - Loans - Repayment of Loans and Issue Expenses - Payment of Interest - Partial prepayment of investments for the purchase of Notes from Subsidiaries - Collections (Settlement) on Derivatives - Payment of Seller Financings - Dividends Paid - Setup of Reserve Account / Escrow Funds - Payments to Non-Controlling Interests, net Net Cash Flows used in Financing Activities Financing Results generated by Cash and Cash Equivalents Net Increase in Cash Flow Cash and Cash Equivalents at the Beginning of the Year Effect of Decrease in Cash from Disposal of Businesses for Sale Cash and Cash Equivalents at Year-end The notes are an integral part of these consolidated financial statements. 994,580,890 (1,684,417,657) (513,545,301) - 4,242,112 - (240,000,000) (11,428,239) (172,501,105) (1,623,069,300) 325,262,065 89,240,821 1,650,463,169 (22,320,350) 1,717,383,640 378,266,001 (422,677,466) (306,870,173) 67,182,254 (4,680,000) (1,607,441) - (16,523,702) (105,952,368) (412,862,895) 188,547,121 345,727,504 1,304,735,665 - 1,650,463,169 Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 85 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 86 Notes to the Consolidated Financial Statements For the year ended December 31, 2014 Presented on a comparative basis. In Argentine Pesos (Ps.) Note 1 General Information Grupo Clarín is a holding company that operates in the Media industry. Its operating income and cash flows derive from the operations of its subsidiaries in which it participates directly or indirectly. Its operations include cable television and Internet access services, newspaper and other printing, publishing and advertising activities, broadcast television, radio operations and television content production, on-line and new media services, and other media related activities. A substantial portion of its revenues is generated in Argentina. Through its subsidiaries, it is engaged primarily in the following business segments: − Cable Television and Internet Access, consisting of the largest cable network in Latin America in terms of subscribers, operated by its subsidiary Cablevisión (surviving company after its merger with Multicanal and Teledigital), with operations in Argentina and neighboring countries. This company also provides high- speed Internet access under the brands Fibertel and Flash. − Printing and Publishing, consisting of national and regional newspapers, a sports daily, magazine publishing, editing and distribution, and commercial printing. Diario Clarín, the flagship national newspaper, is the newspaper with the second largest circulation in the Spanish-speaking world. The sports daily Olé is the only newspaper of its kind in the Argentine market. The newspaper La Razón is the first ever free newspaper in Argentina. The children’s magazine Genios is the children’s magazine with the highest circulation in Argentina. AGR is its printing company. − Broadcasting and Programming, consisting of Canal 13, one of the two broadcast television stations with the highest audience share in Argentina, AM (Amplitude Modulation) /FM (Frequency Modulation) radio broadcast stations (Radio Mitre and La 100), and the production of television, film and radio programming content, including cable television signals and organization and broadcasting of sporting events. − Digital Content and Other, consisting mainly of digital and Internet content, on-line classified ads and horizontal portals as well as its subsidiary GCGC, its shared service center. Note 2 Basis for the preparation and presentation of the consolidated financial statements 2.1 Basis for the preparation and transition to IFRS Pursuant to General Resolution No. 562 issued on December 29, 2009, entitled “Adoption of International Financial Reporting Standards” and General Resolution No. 576/10, the CNV provided for the application of Technical Resolutions No. 26 and 29 issued by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE, for its Spanish acronym). Since the Company is subject to the public offering regime governed by Law No. 26,831, it is required to apply such standards as from the year beginning January 1st, 2012. The FACPCE issues Adoption Communications for the enforcement of IASB resolutions in Argentina. These consolidated financial statements of Grupo Clarín for the year ended December 31, 2014, presented on a comparative basis, have been prepared in accordance with IFRS. Certain additional matters were included as required by the Argentine Business Associations Law and/or CNV regulations, including the supplementary information provided under the last paragraph of Section 1, Chapter III, Title IV of General Resolution No. 622/13. That information is included in the Notes to these consolidated financial statements, as provided under IFRS and CNV rules. 86 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 87 These consolidated financial statements have been prepared based on historical cost except for the valuation of financial instruments (see Note 2.21). In general, the historical cost is based on the fair value of the consideration granted in exchange for the assets. Certain figures reported in the financial statements presented on a comparative basis were reclassified in order to maintain the consistency in the disclosure of the figures corresponding to this year. The attached consolidated information, approved by the Board of Directors in the meeting held on March 10, 2015, is presented in Argentine Pesos (Ps.), the Argentine legal tender, and arises from accounting records kept by Grupo Clarín S.A. and its subsidiaries. 2.2 Standards and Interpretations issued but not adopted to date The Company has not adopted IFRS or revisions of IFRS issued as per the detail below, since their application is not required for the year ended December 31, 2014: - IFRS 9 Financial Instruments: issued in November 2009 and amended in October 2010 and July 2014. IFRS 9 introduces new requirements for the classification and measurement of financial assets and liabilities and for their derecognition. This standard is applicable to years beginning on or after January 1st, 2018. - IFRS 15 "Revenue from contracts with customers": issued in May 2014 and applicable to fiscal years beginning on or after January 1, 2017. This standard specifies how and when revenue will be recognized, as well as the additional information to be disclosed by the Company in the financial statements. It provides a single, principles based five-step model to be applied to all contracts with customers. 2.3 Standards and Interpretations issued and adopted to date - IFRIC 21 Levies: The interpretation establishes how to account for liabilities to pay levies when those liabilities are within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and when they do not arise from income taxes (IAS 12) or from fines or other penalties imposed for breach of tax legislation. The interpretation clarifies what is the obligating event that triggers the obligation to pay the levy and when an entity should recognize that obligation. This standard is applicable to years beginning on or after January 1, 2014. This standard did not have an impact on the Company’s financial statements. 2.4 Basis for Consolidation These consolidated financial statements incorporate the financial statements of the Company and of the subsidiaries and joint ventures (“Interests in Joint Operations”, Note 2.7) controlled by the Company. Control is presumed to exist when the Company has a right to variable returns from its interest in a subsidiary and has the ability to affect those returns through its power over the subsidiary. This power is presumed to exist when evidenced by the votes, be it that the Company has the majority of voting rights or potential rights currently exercised. The subsidiaries are consolidated from the date on which the Company assumes control over them and are excluded from consolidation on the date control ceases. Additionally, these consolidated financial statements incorporate the companies mentioned in 2.4.1. For consolidation purposes, the intercompany transactions and the balances between the Company and the consolidated companies have been eliminated. Unrealized income has also been eliminated. Below is a detail of the most relevant consolidated subsidiaries, together with the interest percentages held directly or indirectly in each subsidiary’s capital stock and votes, as of each date indicated below: 87 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 88 Companies Cablevisión (1) PRIMA AGEA AGR CIMECO ARTEAR (2) Pol-Ka IESA (3) Radio Mitre GCGC CMD GC Services GCSA Investments (1) Includes Multicanal and Teledigital, which were merged into Cablevisión effective as of October 1, 2008. (2) Interest in votes amounts to 99.7%. (3) See Note 13. The subsidiaries’ financial statements used for consolidation purposes bear the same closing date as these consolidated financial statements, comprise the same periods and have been prepared under exactly the same accounting policies as those used by the Company, which are described in the notes to the consolidated financial statements or, as the case may be, adjusted as applicable. 2.4.1 Consolidation of Structured Entities The Company, through one of its subsidiaries, has executed certain agreements with other companies, for the purposes of rendering on behalf of and by order of such companies certain selling and installation services, collections, administration of subscribers, marketing and technical assistance, financial and general business advising, with respect to cable television and Internet access services in Uruguay. In accordance with IFRS 10 “Consolidated Financial Statements”, these consolidated financial statements include the assets, liabilities and results of these companies. Since the Company does not hold an interest in these companies, the offsetting entry of the net effect of the consolidation of the assets, liabilities and results of these companies is disclosed in the items "Equity attributable to non-controlling interests" and "Net Income attributable to non-controlling interests", as required by IFRS. Direct or Indirect Interest in the Capital Stock and Votes (%) December 31, 2014 December 31, 2013 60.0% 60.0% 100.0% 100.0% 100.0% 99.2% 54.6% - 100.0% 100.0% 100.0% 100.0% 100.0% 59.9% 59.9% 100.0% 100.0% 100.0% 99.2% 54.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 2.4.2 Changes in the Company’s Interests in Existing Subsidiaries The changes in the Company’s interests in subsidiaries that do not generate a loss of control are recorded under equity. The book value of the Company’s interests and non- controlling interests is adjusted to reflect the changes in the relative interest in the subsidiary. Any difference between the amount for which non-controlling interests were adjusted and the fair value of the consideration paid or received is directly recognized in equity and attributed to the shareholders of the parent company. In case of loss of control, any residual interest in the issuing company is measured at its fair value at the date on which control was lost, allocating the change in the recorded value with an impact on net income. The fair value is the initial amount recognized for such investments for the purposes of its subsequent valuation for the interest retained as associate, joint operation or financial instrument. Additionally any amount previously recognized in Other Comprehensive Income regarding such investments is recognized as if Grupo Clarín had disposed of the related assets and liabilities. Consequently, the amounts previously recognized in Other Comprehensive Income may be reclassified to net income. 88 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 89 2.5 Business Combinations The Company applies the acquisition method to account for business combinations. The consideration for each acquisition is measured at fair value (on the date of exchange) of the assets acquired, the liabilities incurred or assumed and the equity instruments issued by the Company in exchange for the control of the company acquired. The costs related to the acquisition are expensed as incurred. The consideration for the acquisition, if any, includes any asset or liability arising from a contingent consideration arrangement, measured at fair value at the acquisition date. Subsequent changes to such fair value, verified within the measurement period, are adjusted against the acquisition cost. The measurement period is the actual period that begins on the acquisition date and ends as soon as the Company receives all the information it was seeking about facts and circumstances that existed as of the acquisition date. The measurement period cannot exceed one year from the acquisition date. All other changes in the fair value of the contingent consideration classified as assets or liabilities, outside the measurement period, are recognized in net income. Changes in the fair value of the contingent consideration classified as equity are not recognized. In the case of business combinations achieved in stages, the Company’s equity interest in the company acquired is remeasured at fair value at the acquisition date (i.e., the date on which the Company acquired control) and the resulting gain or loss, if any, is recognized as income/expense or in other comprehensive income, depending on the origin of the variation. In the periods preceding the reporting periods, the Company may have recognized in other comprehensive income the changes in the value of the interest in the capital stock of the acquired company. In that case, the amount recognized in other comprehensive income is recognized on the same basis that would have been required if the Company had directly disposed of the previously-held equity interest. The identifiable assets, liabilities and contingent liabilities of the acquired company that meet the conditions for recognition under IFRS 3 (2008) are recognized at fair value at the acquisition date, except for certain particular cases provided by such standard. Any excess of the acquisition cost (including the interest previously held, if any, and the non-controlling interest) over the net fair value of the subsidiary’s or associate’s identifiable assets, liabilities and contingent liabilities measured at the acquisition date is recognized as goodwill. Any excess of the net fair value of the identifiable assets, liabilities and contingent liabilities over the acquisition cost is immediately recognized in net income. The acquisition cost comprises the consideration transferred, the amount of any non-controlling interest and the acquisition- date fair value of the acquirer’s previously-held equity interest in the acquiree, if any. The Company initially recognizes any non- controlling interest as per its share in the amounts recognized for the net identifiable assets of the acquiree. 2.6 Investment in Associates An associate is an entity over which the Company has significant influence, without exerting control, generally accompanied by equity holdings of between 20% and 50% of voting rights. The associates’ net income and the assets and liabilities are disclosed in the consolidated financial statements using the equity method, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”. Under the equity method, the investment in an associate is to be initially recorded at cost and the book value will be increased or decreased to recognize the investor’s share in the comprehensive income for the year or in other comprehensive income obtained by the associate, after the acquisition date. The distributions received from the associate will reduce the book value of the investment. 89 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 90 Any excess of the acquisition cost over the Company’s share in the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities measured at the acquisition date is recognized as goodwill. Goodwill is included in the book value of the investment and tested for impairment as part of the investment. Any excess of the Company’s share in the net fair value of the identifiable assets, liabilities and contingent liabilities over the acquisition cost, after its measurement at fair value, is immediately recognized in net income. Unrealized gains or losses on transactions between the Company (and subsidiaries) and the associates are eliminated considering the Company’s interest in the associates. Adjustments were made, where necessary, to the associates’ financial statements so that their accounting policies are consistent with those used by the Company. Investments in companies in which the company does not have control or significant influence have been valued at cost, as established by IAS 39. In the cases where non-controlling shareholders hold put options whereby they may force the Company to acquire shares of subsidiaries, and the Company reasonably estimates that such put options will be duly exercised, the Company discloses the present value of the corresponding future payments under Other Liabilities. 2.7 Interests in Joint Operations A joint operation is a contractual arrangement whereby the Company and other parties undertake an economic activity that is subject to joint control, i.e., when the financial strategy and the operating decisions related to the company’s activities require the unanimous consent of the parties sharing control. Joint venture arrangements that entail the establishment of an independent entity in which each company holds an interest are called jointly controlled entities. The Company, in accordance with IFRS 11 "Joint Arrangements”, has applied the equity method to measure its holding in the jointly controlled entity and discloses its holdings in such entities under Investment in unconsolidated affiliates. In the cases of joint business arrangements executed through Uniones Transitorias de Empresas ("UTE"), considered joint operations under IFRS 11, the Company recognizes in its financial statements on a line-by-line basis the assets, liabilities and net income subject to joint control in proportion to its share in such arrangements. These consolidated financial statements include the balances of the UTEs, among them, Ertach S.A. – Prima S.A. Unión Transitoria de Empresas, FEASA – S.A. La Nación Unión Transitoria de Empresas and AGEA S.A. – S.A. La Nación – UTE, in which the Company and/or its subsidiaries hold an interest. 2.8 Goodwill Goodwill arises from the acquisition of subsidiaries and refers to the excess of the cost of acquisition over the net fair value at the date of acquisition of the identifiable assets acquired and liabilities assumed. The Company initially recognizes any non-controlling interest as per its interest percentage in the amounts recognized for the net identifiable assets of the acquired company. If, upon measurement at fair value, the Company’s share in the fair value of net identifiable assets of the acquired company exceeds the amount of the consideration transferred, the amount of any non-controlling interest in such company and the fair value of the acquirer’s previously held non-controlling interest in the acquiree (if any), such excess is immediately recognized in the statement of comprehensive income as a gain arising from a very advantageous acquisition. Goodwill is not amortized, but tested for impairment on an annual basis. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash- generating units expected to render benefits from the synergies of the respective business combination. Those cash-generating units to which goodwill is allocated are tested for impairment on an annual basis, or more frequently, when there is any indication of impairment. If the recoverable value of the cash-generating unit, i.e. the higher of the value in use or the fair value net of selling expenses, is lower than the value of the net 90 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 91 assets allocated to that unit, including goodwill, the impairment loss is first allocated to reduce the goodwill allocated to the unit and then to the other assets of the unit, on a pro rata basis, based on the valuation of each asset in the unit. The impairment loss recognized against the valuation of goodwill is not reversed under any circumstance. In case of a loss of control in the subsidiary, the amount attributable to goodwill is included in the calculation of the corresponding gain or loss. As mentioned in Notes 9.1 and 9.2, the recoverability of certain goodwill could be affected by the final outcome of the circumstances described in such note. 2.9 Revenue Recognition Revenues are recognized when the amount of revenues may be reliably estimated, when future economic benefits are likely to be obtained by the Company, and when specific criteria are met for each of Grupo Clarín’s activities, as described below. Revenues for each of the main business segments identified by the Company are recognized when the following conditions are met: - Cable Television and Internet Access Sales of cable or Internet services subscriptions are recognized as revenues for the period in which the services are rendered. Revenues from the installation of these services are accrued over the average term during which clients maintain their subscription to the service. Advertising sales revenues are recognized in the period in which advertising is published or broadcast. Revenues from transactions that include more than one item have been recognized separately to the extent they have commercial substance on their own. The amount of revenues allocated to each item is based on its fair value, which is assessed or estimated at market value. Revenues from the sale of assets are recognized only when the risks and benefits arising from the use of the disposed assets have been transferred, the amount of revenues may be fairly estimated, and the Company is likely to obtain economic benefits (see Note 19). Installment sales are recognized at the value of future income discounted at a market rate assessed at the beginning of the transaction. - Printing and Publishing Advertising sales are determined by the prices achieved per single column centimeter and the number of advertising centimeters sold in the relevant period. Circulation sales include the price received from the sale of newspapers, magazines and other publications. Printing services sales consist mainly of fees received from the printing of magazines, books, brochures and related products. Advertising sales from newspapers and magazines are recognized when advertising is published. Revenues from the sale of newspaper and magazines are recognized upon passing control to the buyers. The Company records the estimated impact of returns, calculated based on historical trends, as a deduction from revenues. Revenues from printing services are recognized upon completion of the services, delivery of the related products and customer acceptance. - Broadcasting and Programming TV and radio advertising sales revenues are recognized when advertising is broadcast. Revenues from programming and distribution of television content are recognized when the programming services are provided. 2.10 Barter Transactions The Company, through its subsidiaries, sells a small portion of its advertising spaces in exchange for goods or services received. Revenues are recorded when the advertisement is made, valued at the fair value of the goods or services received, in the case of goods and other services advertising barter transactions, or delivered, in the case of advertising-for-advertising barter transactions. Goods or services are recorded at the time goods are received or services are rendered. The goods or services to be received in consideration for the advertisements made are recorded as Trade Receivables. The 91 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 92 advertisements to be made in exchange for the goods and services received are recorded as Trade Payables and Other. 2.11 Leases Leases are classified as financial leases when the terms of the lease transfer to the lessee substantially all the risks and benefits inherent to the property. All other leases are classified as operating leases. The assets held under financial leases are recognized at the lower of the fair value of the Company’s leased assets at the beginning of the lease term, or the present value of the minimum lease payments. The liability held with the lessor is included in the balance sheet as an obligation under financial leases recorded under Debt. Lease payments are apportioned between the finance charge and the reduction of the liabilities under the lease so as to achieve a constant interest rate on the outstanding balance. The finance charge is expensed over the lease term. The assets held under financial leases are depreciated over the shorter of the useful life of the assets or the lease term. Rentals under operating leases are charged to income on a straight line basis over the corresponding lease term. 2.12 Foreign Currency and Functional Currency The financial statements of each of the entities consolidated by the Company are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). For the purposes of the consolidated financial statements, the net income and the financial position of each entity are stated in Argentine Pesos (Argentina’s legal tender for all companies domiciled in Argentina), which is the Company’s functional currency, and the reporting currency of the consolidated financial statements. The functional currency of the indirectly controlled Uruguayan and Paraguayan companies, are the Uruguayan Peso and the Guarani, respectively. In preparing the financial statements of the individual entities, the transactions in currencies other than the entity’s functional currency (foreign currency) are recorded at the exchange rates prevailing on the dates on which transactions are carried out. At the end of each reporting year, the monetary items denominated in foreign currency are retranslated at the exchange rates prevailing on such date. Exchange differences are charged to net income as incurred. In preparing the Company’s consolidated financial statements, the assets and liabilities balances of the entities which functional currencies is not the Argentine Peso, stated in their own functional currency (Uruguayan Peso and Guarani) are translated to Argentine pesos at the exchange rate prevailing at the end of the year, while the net income is translated at the exchange rate prevailing on the transaction date. Translation differences are recognized in other comprehensive income as “Variation in Translation Differences of Foreign Operations”. 2.13 Financial Costs Financial costs directly attributable to the acquisition, construction or production of assets that require a substantial period of time to prepare for their intended use or sale (“qualifying assets”), are capitalized as part of the cost of these assets until they are ready for their intended use or sale, according to IAS 23 ("Borrowing Costs"). The income, if any, on the temporary investment of the specific borrowings incurred to finance qualifying assets is deducted from the financial costs to be capitalized. All other financial costs are charged to net income as incurred. 2.14 Taxes The income tax charge reflects the sum of current income tax and deferred income tax. 2.14.1 Current and Deferred Income Tax for the year Current and deferred taxes are recognized as expense or income for the year, except when they are related to entries debited or credited to 92 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 93 other comprehensive income or equity, in which cases taxes are also recognized in other comprehensive income or directly in equity, respectively. In the case of a business combination, the tax effect is taken into consideration in the calculation of goodwill or in the determination of the excess of acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. 2.14.2 Current Income Tax Current tax payable is based on the taxable income recorded during the year. Taxable income and net income reported in the consolidated statement of comprehensive income differ due to revenue or expense items that are taxable or deductible in other fiscal years and items that are never taxable or deductible. The current tax liability is calculated using the tax rate in effect as of the date of these consolidated financial statements. Current tax charge is calculated based on the tax rules effective in the countries in which the consolidated entities operate. 2.14.3 Deferred Income Tax Deferred tax is recognized on temporary differences between the book value of the assets and liabilities included in these financial statements and the corresponding tax basis used to determine taxable income. Deferred tax liabilities are generally recognized for all temporary fiscal differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is likely that future taxable income will be available against which those deductible temporary differences can be charged. These assets and liabilities are not recognized if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income. The book value of a deferred tax asset is reviewed at each reporting year and reduced to the extent that it is no longer likely that sufficient taxable income will be available in the future to allow for the recovery of all or part of the asset. Deferred tax is recognized on temporary differences arising from investments in foreign subsidiaries. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applicable in the year in which the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the end of the reporting year, to recover or settle the book value of its assets and liabilities. Deferred tax assets are offset against deferred tax liabilities if effective regulations allow to offset, before the tax authorities, the amounts recognized in those items; and if the deferred tax assets and liabilities arise from income taxes levied by the same tax authority and the Company intends to settle its assets and liabilities on a net basis. Under the IFRS, deferred income tax assets and liabilities are classified as non-current assets and liabilities, respectively. 2.14.4 Tax on Assets In Argentina, the tax on assets (impuesto a la ganancia mínima presunta) is supplementary to income tax. The Company assesses this tax at the effective rate of 1% on the taxable assets at year-end. The Company’s tax liability for each year will be equal to the higher of the tax on assets assessment or the income tax liability assessed at the legally effective rate on the estimated taxable income for the year. However, if the tax on assets exceeds the income tax liability in any given fiscal year, the excess may be creditable against any excess of income tax liability over the tax on assets in any of the following ten fiscal years. The tax on assets balance has been capitalized in these consolidated financial statements for the amount estimated to be recoverable within the statute of limitations, based on the subsidiaries’ current business plans. 93 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 94 2.15 Property, Plant and Equipment Property, plant and equipment held for use in the production or supply of goods and services, or for administrative purposes, are recorded at cost less accumulated depreciation and any accumulated impairment loss. Depreciation of property, plant and equipment in use is recognized on a straight-line basis over its estimated useful life. The estimated useful life, residual value and depreciation method are reviewed at each year-end, with the effect of any changes in estimates accounted for on a prospective basis. Land is not depreciated. Works in process are recorded at cost less any recognized impairment loss. The cost includes professional fees and, in the case of qualifying assets, capitalized financial costs in accordance with the Company’s accounting policy (Note 2.13). Depreciation of these assets, as well as in the case of other property, plant and equipment, begins when the assets are ready for their use. Assets held under financial leases are depreciated over the shorter of their estimated useful life, which is equal to the rest of the other similar assets, or over the lease term. Repair and maintenance expenses are expensed as incurred. The gain or loss arising from the retirement or disposal of an item of property, plant and equipment is calculated as the difference between income from the sale of the asset and the asset’s book value, and recognized under “Other Income and Expense, net” in the statement of comprehensive income. The residual value of an asset is written down to its recoverable value, if the asset’s residual value exceeds its estimated recoverable value (see Note 2.17). 2.16 Intangible Assets Intangible assets include trademarks and patents, exclusivity agreements, licenses, software and other rights, the purchase value of the subscriber portfolio, projects in-progress (mainly related to software development) and other intangible assets. The accounting policies regarding the recognition and measurement of such intangible assets are described below. 2.16.1 Intangible Assets Acquired Separately Intangible assets acquired separately are valued at cost, net of the corresponding accumulated amortization and impairment losses. Amortization is calculated on a straight line basis over the estimated useful life of the intangible assets. The Company reviews the useful lives applied, the residual value and the amortization method at each year-end, and accounts the effect of any changes in estimates on a prospective basis. Assets held under financial leases are depreciated over the shorter of their estimated useful life, which is equal to the rest of the other similar assets, or over the lease term. 2.16.2 Intangible Assets Acquired in a Business Combination Intangible assets acquired in a business combination are identified and recognized separately regarding goodwill when they meet the definition of intangible assets and their fair value can be measured reliably. Such intangible assets are recognized at fair value at acquisition date. After the initial recognition, intangible assets acquired in a business combination are valued at cost net of accumulated amortization and impairment losses, with the same basis as intangible assets acquired separately. 2.16.3 Internally Generated Intangible Assets Internally generated intangible assets arising from the development phase of an internal project are recognized if certain conditions are met, among them, technical feasibility to complete the development of the intangible asset and the intent to complete such development. The amount initially recognized for internally generated intangible assets comprises all the expenses incurred as from the moment all the intangible assets meet the above-mentioned recognition criteria. Where it is not possible to recognize an internally generated intangible asset, the development expenses are recognized in the statement of comprehensive income in the year in which they are incurred. After the initial recognition, internally developed intangible assets are valued at cost 94 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 95 net of accumulated amortization and impairment losses, with the same basis as intangible assets acquired separately. Such assets are included under software and projects in-progress. 2.17 Impairment of Non-Financial Assets, Except Goodwill At the end of each financial statement, the Company reviews the book value of its non- financial assets with definite useful life to determine the existence of any evidence indicating that these assets could be impaired. If there is any indication of impairment, the recoverable value of these assets is estimated for the purposes of determining the amount of the impairment loss (in case the recoverable value is lower than the book value). Where it is not possible to estimate the recoverable value of an individual asset, the Company estimates the recoverable value of the cash-generating unit ("CGU") to which such asset belongs. Where a consistent and reasonable allocation base can be identified, corporate assets are also allocated to an individual cash-generating unit or, otherwise, to the smallest group of cash-generating units for which a consistent allocation base can be identified. The recoverable value of an asset is the higher of the fair value less selling expenses or its value in use. In measuring value in use, estimated future cash flows are discounted at their present value using a pre-tax discount rate, which reflects the current market assessments of the time value of money and, if any, the risks specific to the asset for which estimated future cash flows have not been adjusted. Assets with an indefinite useful life (for example, non-financial assets unavailable for use) are not amortized, but are tested for impairment on an annual basis. Non-financial assets, except for goodwill, for which an impairment loss was recorded, are reviewed at each closing date for a possible reversal of the impairment loss. 2.18 Inventories Inventories are valued at the lower of acquisition cost and/or production cost or the net realizable value. The cost is determined under the weighted average price method. The production cost is determined under the cost absorption method, which comprises raw materials, labor and other costs directly related to the production of goods. The net realizable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make such sale. The criterion followed to expense each of these inventory items is as follows: − Film Rights (series, soap operas and films) and programs purchased: The cost of series, soap operas and programs purchased to be shown on broadcast television is mainly expensed against the cost of sales on the exhibition date or upon expiration of exhibition rights. Rights related to these programs acquired in perpetuity, if any, are amortized over their estimated useful life (eight years, with a grace period of three years and are subsequently amortized on a straight-line basis over the next five years). Films are expensed against the cost of sales on a decreasing basis, based on the number of showings granted by the respective rights or upon expiration of exhibition rights. Film rights acquired in perpetuity are amortized over their estimated useful life (seven years, with a grace period of four years. They are subsequently amortized on a decreasing basis over the next three years). − In-house production programs and co- productions: The cost of in-house production programs and co-productions is mainly expensed against the cost of sales after broadcasting of the chapter or program. Rights related to in-house production programs and co-productions acquired in perpetuity, if any, are amortized over their estimated useful life (eight years, with a grace period of three years and are subsequently amortized on a straight-line basis over the next five years). − Events: The cost of events is fully expensed against the cost of sales at the time of broadcasting. 95 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 96 The allowance for impairment is calculated based on the recoverability analysis conducted at the closing of each year. The values thus obtained do not exceed their respective recoverable values estimated at the closing of each year. 2.19 Other Assets The assets included in this item have been valued at acquisition cost. Investments denominated in foreign currency subject to restrictions on disposition under financial covenants have been valued at face value plus interest accrued as of each year-end. 2.20 Provisions and Other Provisions for Lawsuits and Contingencies and the accrual for asset retirement are recognized when the Company has a present obligation (be it legal or constructive) as a result of a past event, when it is likely that an outflow of resources will be required to settle the obligation and when the amount of the obligation can be reliably estimated. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting year, taking into consideration the corresponding risks and uncertainties. Where a provision is measured using the estimated cash flow to settle the present obligation, its book value represents the present value of such cash flow. In estimating its obligations, the Company has taken into consideration the opinion of its legal advisors, if any. 2.21 Financial Instruments 2.21.1 Financial Assets Purchases and sales of financial assets are recognized at the transaction date when the Company undertakes to purchase or sell the asset, and is initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value with changes in the statement of income, which are initially measured at fair value. 2.21.1.1 Classification of Financial Assets Financial assets are classified within the following specific categories: “financial assets at fair value with changes in net income”, “held- to-maturity investments” and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined on initial recognition. 2.21.1.2 Recognition and Measurement of Financial Assets 2.21.1.2.1 Financial Assets at Fair Value with Changes in Net Income Financial assets at fair value with changes in net income are recorded at fair value, recognizing any gain or loss arising from the measurement in the consolidated statement of comprehensive income. The net gain or loss recognized in net income includes any gain or loss generated by the financial asset and is included in the item financial income and cost in the consolidated statement of comprehensive income. The assets designated in this category are classified as current assets if they are expected to be traded within 12 months; otherwise, they are classified as non-current assets. The fair value of these assets is calculated based on the current quoted market price of these instruments. 2.21.1.2.2 Held-to-maturity Investments Held-to-maturity investments are measured at amortized cost using the effective interest rate method less any impairment, if any. The effective interest rate method calculates the amortized cost of a financial asset or liability and the allocation of financial income or cost over the whole corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument to the net book value of the financial asset or liability on its initial recognition. Balances in foreign currency were translated at the exchange rate prevailing at the closing of year for the settlement of these transactions. Foreign exchange differences were charged to net income for each year. 2.21.1.2.3 Loans and Receivables Loans and trade receivables with fixed or determinable payments not traded in an active market are classified as “trade receivables and other”. Trade receivables and other are initially 96 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 97 measured at fair value, and subsequently measured at amortized cost using the effective interest rate method, less any impairment, if any. Interest income is recognized using the effective interest rate method, except for short- term balances for which the recognition of interest is not significant. Loans and receivables are classified as current assets, except for the maturities exceeding 12 months from the closing date. Loans in foreign currency have been valued as mentioned above, at the exchange rates prevailing as of each year-end. Foreign exchange differences were charged to net income for each year. 2.21.1.3 Impairment of Financial Assets The Company tests financial assets or a group of assets for impairment at each closing date to assess if there is any objective evidence of impairment. The value of a financial asset or a group of assets is impaired, and an impairment loss is recognized, where there is objective evidence of the impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event or events have an impact on the estimated future cash flows of the financial asset or a group of assets, which may be reliably measured. The objective evidence of impairment may include, among others, significant financial difficulties of the issuer or obligor; or breach of contractual terms, such as default or delinquency in interest or principal payments. For certain categories of financial assets, such as accounts receivable and other receivables, the assets that are not impaired on an individual basis are tested for impairment on a collective basis. The objective evidence of impairment of a receivables portfolio includes the Company’s past collection experience, an increase in the number of delinquent payments in the receivables portfolio, as well as observable changes in the local economic situation affecting the recoverability of receivables. Where there is objective evidence of an impairment loss in the value of loans granted, receivables or held-to-maturity investments recorded at amortized cost, the loss amount is measured as the difference between the book value and the present value of estimated future cash flows (without including future non-incurred losses), discounted at the original effective interest rate of the financial asset. The asset’s book value is written down under a contra asset account. The loss amount is recognized in net income for the year. If, in subsequent periods, the impairment loss amount decreases and such decrease can be objectively related to an event occurring after the impairment has been recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed. A loss reversal can only be recorded to the extent the financial asset’s book value does not exceed the amortized cost that would have been determined if the impairment loss had not been recorded at the reversal date. The reversal amount is recognized in net income for the year. 2.21.1.4 Derecognition of Financial Assets The Company derecognizes a financial asset when the contractual rights to the cash flows of such assets expire or when it transfers the financial asset and, therefore, all the risks and benefits inherent to the ownership of the financial asset are transferred to another entity. If the Company retains substantially all the risks and benefits inherent to the ownership of the transferred asset, it will continue to recognize it and will recognize a liability for the amounts received. 2.21.2 Financial Liabilities Financial liabilities, except for derivatives, are valued at amortized cost using the effective interest rate method. 2.21.2.1 Debt Debt is initially valued at fair value net of the transaction costs incurred, and subsequently valued at amortized cost using the effective interest rate method. Any difference between the initial value net of the transaction costs and the settlement value is recognized in the income statement over the term of the loan using the effective interest rate method. Interest expense has been allocated to “Financial Costs” in the consolidated statement of comprehensive 97 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 98 income, except for the portion allocated to the cost of works under construction recorded under “Property, Plant and Equipment”. Debt maturing within the 12 months preceding the closing date is classified as current and those maturing within the 12 months following the closing date are classified as non-current. Loans in foreign currency have been valued as mentioned above, at the exchange rates prevailing as of each year-end. Foreign exchange differences were charged to net income for each year. 2.21.2.2 Trade Payables and Other Trade payables with fixed or determinable payments not traded in an active market are classified as “Trade Payables and Other”. Trade Payables and Other are initially measured at fair value, and subsequently measured at amortized cost using the effective interest rate method. Interest expense is recognized using the effective interest rate method, except for short-term balances for which the recognition of interest is not significant. Trade Payables and Other are classified as current, except for the maturities exceeding 12 months from the closing date. Trade payables in foreign currency have been valued as mentioned above, at the exchange rates prevailing as of each year end. Foreign exchange differences were charged to net income for each year. 2.21.2.3 Derecognition of Financial Liabilities An entity shall derecognize a financial liability (or part of it) when it has been extinguished, i.e., when the obligation specified in the corresponding agreement is discharged, cancelled or expires. 2.21.3 Derivatives and Hedge Accounting The Company executes certain financial instruments to manage its exposure to interest rate and exchange risks, including foreign currency hedges, interest rate swaps and currency swaps. Derivatives are initially recognized at fair value at the date of execution of the related contract and subsequently measured at fair value at the end of the reporting year. The resulting gain or loss is immediately recognized in net income unless the derivate is designated as a hedging instrument, in which case the timing for its recognition will depend on the nature of the hedging relationship. The Company uses certain derivatives to hedge the fair value of its recognized liabilities (fair value hedge). The Company documents at the beginning of the transaction the existing relationship between the hedging instruments and the hedged items, as well as its objectives to manage risk and the strategy to carry out hedge transactions. The Company also documents its assessment, both at the beginning and on an ongoing basis, of the high effectiveness of its hedging transactions to offset the changes in the fair value of the hedged items. The fair value of hedging derivatives is fully classified as a non-current asset or liability if the hedged item matures in more than 12 months, and as a current asset or liability if the hedged item matures within 12 months. Fair Value Hedge Changes in the fair value of derivatives designated and classified as fair value hedges are charged to net income, together with any change in the fair value of a hedged liability attributable to the hedged risk. The Company only applies fair value hedge accounting to cover the exchange rate fluctuations of the liabilities it holds in foreign currency. The gain or loss relating to the effective portion of foreign currency forward contracts is charged to net income under Financial Costs. The loss or gain related to the ineffective portion, if any, is charged to net income under Other Income and Expense, net. Changes in the fair value of the Company’s hedged liabilities denominated in foreign currency, attributable to the risk detailed above, are charged to net income under Financial Costs. 98 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 99 2.21.4 Refinancing of Indebtedness Liabilities arising from the restructuring of financial debts have been initially valued at fair value and will be subsequently measured at amortized cost using the effective interest rate method. 2.22 Other Liabilities Advances from customers involving obligations to deliver assets that have not yet been produced have been valued at the higher of the amounts received or the share in the estimated value of the related assets. The other liabilities have been valued at nominal value. 2.23 Assets and liabilities held for sale Non-current assets and liabilities (or disposal groups) are classified as assets and liabilities held for sale where their value will be mostly Cash and Banks Other Current Investments: - Financial Instruments - Mutual Funds Cash and Cash Equivalents In the years ended December 31, 2014 and 2013, the following significant transactions were carried out, which did not have an impact on cash and cash equivalents: Dividends collected through debt settlement Settlement of Debt with Real Property Interest settlement through reserve account recovered through the sale thereof, to the extent such sale is highly likely to occur. These assets and liabilities are valued at the lower of book value and fair value less cost of sales. 2.24 Consolidated Statement of Cash Flows For the purposes of preparing the consolidated statement of cash flows, the item “Cash and Cash Equivalents” includes cash and bank balances, certain high liquidity short-term investments (with original maturities shorter than 90 days). Bank overdrafts payable on demand, if any, are deducted to the extent they are part of the Company’s cash management. Bank overdrafts are classified as “Debt” in the consolidated balance sheet. Cash and cash equivalents at each year-end, as disclosed in the consolidated statement of cash flows, may be reconciled against the items related to the consolidated balance sheet as follows: December 31, 2014 December 31, 2013 1,161,628,319 1,332,983,003 68,091,849 487,663,472 1,717,383,640 188,311,397 129,168,769 1,650,463,169 December 31, 2014 December 31, 2013 7,650,000 - 11,428,239 10,117,429 4,069,868 16,684,105 99 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 100 2.25 Distribution of Dividends The distribution of dividends to the Company’s shareholders is recognized as a liability in the financial statements for the year in which the distribution of dividends is approved by the Shareholders’ Meeting. Note 3 Accounting estimates and judgments In applying the accounting policies described in Note 2, the Company has to make judgments and prepare accounting estimates of the value of the assets and liabilities which may not be otherwise obtained. The estimates and related assumptions are based on historical experience and other pertinent factors. Actual results may differ from these estimates. The underlying estimates and assumptions are continually reviewed. The effects of the reviews of accounting estimates are recognized for the year in which estimates are reviewed. These estimates basically refer to: Allowance for Bad Debts The Company calculates the allowance for bad debts for debt instruments that are not valued at fair value, taking into account the uncollectibility history, the opinion of its legal advisors, if any, and other circumstances known at the time of calculation. Impairment of Goodwill The Company assesses goodwill for impairment on an annual basis. In determining if there is impairment of goodwill, the Company calculates the value in use of the cash generating units to which it has been allocated. The calculation of the value in use requires the determination by the entity of the future cash flows that should arise from the cash generating units and an appropriate discount rate to calculate the present value. During this year, no impairment losses have been recorded for goodwill. Recognition and Measurement of Deferred Income Tax Items Deferred tax assets are only recognized for temporary differences to the extent that it is likely that each entity, on an individual basis, will have enough future taxable income against which the deferred tax assets can be used. Tax loss carryforwards from prior years are only recognized when it is likely that each entity will have enough future taxable income against which they can be used. Pursuant to effective regulations, the use of the subsidiaries’ tax credits is based on a projection analysis of future income. The Company examines the recoverable value of deferred tax assets based on its business plans and books a valuation allowance, if appropriate, so that the net position of the deferred tax asset will reflect the probable recoverable value. Provisions for Lawsuits and Contingencies The elements taken into consideration for the calculation of the Provision for Lawsuits and Contingencies are determined based on the present value of the estimated costs arising from the lawsuits brought against the Company, taking into consideration the opinion of its legal advisors. Determination of the Useful Lives of Property, Plant and Equipment and Intangible Assets The Company reviews the estimated useful life of property, plant and equipment and intangible assets at each year-end. Measurement of the fair value of certain financial instruments The fair value of a financial instrument is the amount at which the instrument could be purchased or sold between knowledgeable, willing parties in an arm’s length transaction. If there is a quoted market price available for an instrument in an active market, the fair value is calculated based on that price. If there is no quoted market price available for a financial instrument, its fair value is estimated based on the price established in recent transactions involving the same or 100 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 101 similar instruments and, otherwise, based on valuation techniques regularly used in financial markets. The Company uses its judgment to select a variety of methods and makes assumptions based on market conditions at closing. Impairment losses of certain assets other than accounts receivable (including property, plant and equipment and intangible assets) Certain assets, including property, plant and equipment and intangible assets are subject to impairment testing. The Company records impairment losses when it estimates that there is objective evidence of such losses or when the cost of such losses will not be recovered through future cash flows. The evaluation of what constitutes impairment is a matter of significant judgment. The impairment of non-financial assets is dealt with in more depth in Note 2.17. Additionally, as mentioned in Notes 9.1 and 9.2, these estimates could be affected by the final outcome of the circumstances described in such note. Note 4 Segment information The Company is mainly engaged in media and entertainment activities, which are carried out through the companies in which it holds a participating interest. Based on the nature, clients, and risks involved, the following business segments have been identified, which are directly related to the way in which the Company assesses its business performance: − Cable Television & Internet Access: mainly comprises the operations of its subsidiary Cablevisión and its subsidiaries, notably PRIMA. − Printing & Publishing: mainly comprises the operations of its subsidiary AGEA and its subsidiaries AGR, Cúspide, Tinta Fresca, CIMECO and their respective subsidiaries. − Broadcasting and Programming: mainly comprises the operations of its subsidiaries ARTEAR, IESA and Radio Mitre, and their respective subsidiaries, including Telecor, Telba, Pol-Ka, Auto Sports, Grupo Carburando. − Digital Content and Other: mainly comprises the operations of its controlled companies CMD and subsidiaries, OSA, FEASA and AGEA S.A. – S.A. La Nación - UTE. Additionally, this segment includes the Company’s own operations (typical of a holding company) and those carried out by its controlled company GCGC. The Company has adopted IFRS 8 - Segment Information, which defines operating segments as those identified based on internal reports with respect to the components of the company regularly reviewed by the Board of Directors, the main operating decisions maker, to allocate resources and assess their performance. The Company uses adjusted EBITDA to measure its performance. The Company believes that adjusted EBITDA is a significant performance measure of its businesses, since it is commonly used in the industry to analyze and compare media companies based on operating performance, indebtedness and liquidity. However, adjusted EBITDA does not measure net income or cash flows generated by operations and should not be considered as an alternative to net income, an indication of the Company’s financial performance, an alternative to cash flows generated by operating activities or a measure of liquidity. Since adjusted EBITDA is not defined by IFRS, it is possible that other companies may calculate it differently. Therefore, the adjusted EBITDA reported by other companies may not be comparable to the Company’s reported adjusted EBITDA. The following tables include the information as of December 31, 2014 and 2013, prepared on the basis of IFRS, for the business segments identified by the Company. Note 1 to these consolidated financial statements includes additional information about the Company’s businesses. 101 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 102 Cable Television and Internet Printing Broadcasting and and Digital Content Access Publishing Programming and Other (1) Deletions (2) Adjustments Consolidated Information arising from consolidated income statements as of December 31, 2014 Net Sales to Third Parties (3) Intersegment Sales 14,188,272,650 2,787,211,015 2,401,273,165 25,274,906 249,435,720 185,074,125 Net Sales 14,213,547,556 3,036,646,735 2,586,347,290 320,265,281 293,635,860 613,901,141 - (80,795,994) 19,616,226,117 (714,471,047) (714,471,047) (38,949,564) - (119,745,558) 19,616,226,117 Cost of sales (excluding depreciation and amortization) (5,848,721,170) (1,983,630,364) (1,600,187,185) (345,552,476) 308,332,943 (168,730,026) (9,638,488,278) Subtotal 8,364,826,386 1,053,016,371 986,160,105 268,348,665 (406,138,104) (288,475,584) 9,977,737,839 Expenses - excluding depreciation and amortization - Selling Expenses - Administrative Expenses Adjusted EBITDA Depreciation of Property, Plant and Equipment Amortization of Intangible Assets and Film Library (4) Financial Costs Other Financial Results, net Equity in Earnings from Affiliates and Subsidiaries Other Income and Expense, net Income Tax and Tax on Assets Income for the year from continuing operations Net Income from Discontinued Operations Net Income for the Year Additional consolidated information as of December 31, 2014 Acquisition of Property, Plant and Equipment Acquisition of Intangible Assets Ordinary Income from Foreign Operations Non-Current Assets Held Abroad (1,739,679,879) (1,701,444,524) 4,923,701,983 (625,360,231) (564,352,602) (136,696,462) (149,764,980) (340,906,812) 495,488,313 (83,414,563) (197,886,045) (12,951,943) 153,944,526 252,193,578 25,510,857 (2,418,764,270) 17,875,874 (2,534,520,531) - (245,088,853) 5,024,453,038 (1,267,793,590) (170,423,384) (1,719,000,651) (11,470,273) 39,801,910 2,604,278 (587,373,497) 1,310,797,831 34,663,833 1,345,461,664 2,370,672,307 8,044,237 85,466,007 22,479,731 47,313,995 10,568,833 10,232,051 11,690,922 639,586,424 653,759,434 - 9,940,835 - - - - - - - - - - - - 2,513,684,360 52,783,723 639,586,424 663,700,269 (1) Deletions are related to Grupo Clarín’s intercompany operations. (2) Recognition of revenues from cable TV and Internet installation services and transactions including separate items and the non-Consolidation of structured entities and the results of discontinued operations. (3) Includes also sales to unconsolidated companies. (4) Amortization of film rights acquired in perpetuity, mentioned in Note 2.18. 102 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 103 Cable Television and Internet Printing Broadcasting and and Digital Content Access Publishing Programming and Other (1) Deletions (2) Adjustments Consolidated 9,763,448,669 2,438,284,992 1,744,263,153 18,885,289 214,523,276 127,428,451 9,782,333,958 2,652,808,268 1,871,691,604 271,505,461 224,642,359 496,147,820 - (117,287,991) 14,100,214,284 (581,197,608) (581,197,608) (4,281,767) - (121,569,758) 14,100,214,284 Information arising from consolidated income statements as of December 31, 2013 Net Sales to Third Parties (3) Intersegment Sales Net Sales Cost of sales (excluding depreciation and amortization) (4,229,419,227) (1,640,056,203) (1,135,659,633) (243,911,226) 224,887,639 (84,733,175) (7,108,891,825) Subtotal 5,552,914,731 1,012,752,065 736,031,971 252,236,594 (356,309,969) (206,302,933) 6,991,322,459 Expenses - excluding depreciation and amortization - Selling Expenses - Administrative Expenses Adjusted EBITDA Depreciation of Property, Plant and Equipment Amortization of Intangible Assets and Film Library (4) Financial Costs Other Financial Results, net Equity in Earnings from Affiliates and Subsidiaries Other Income and Expense, net Income Tax and Tax on Assets Income for the year from continuing operations Net Income from Discontinued Operations Net Income for the Year Additional consolidated information as of December 31, 2013 Acquisition of Property, Plant and Equipment Acquisition of Intangible Assets Ordinary Income from Foreign Operations Non-Current Assets Held Abroad (1,264,819,273) (1,265,103,452) 3,022,992,006 (477,751,530) (458,793,259) 76,207,276 (134,800,605) (267,148,949) 334,082,417 (87,029,454) (152,110,908) 13,096,232 143,992,475 212,317,494 16,870,507 (1,803,537,880) 15,888,190 (1,914,950,884) - (173,544,236) 3,272,833,695 (957,009,293) (166,186,448) (1,300,062,183) (173,768,717) 99,483,386 69,534,390 (97,924,418) 746,900,412 53,765,362 800,665,774 1,775,741,862 24,429,110 28,943,873 21,320,588 19,126,363 2,187,242 35,509,034 11,108,100 437,085,127 511,637,306 - 7,245,419 - 22,819 - - - - - - - - - 1,859,321,132 59,045,040 437,085,127 518,905,544 (1) Deletions are related to Grupo Clarín’s intercompany operations. (2) Recognition of revenues from cable TV and Internet installation services and transactions including separate items and the non-consolidation of structured entities and income/loss from discontinued operations. (3) Includes also sales to unconsolidated companies. (4) Amortization of film rights acquired in perpetuity, mentioned in Note 2.18.- 103 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 104 Note 5 Breakdown of the main items of the Balance Sheet 5.1 Property, Plant and Equipment Balance at the Beginning Cumulative Translation Adjustment (1)Deconsolidation of Historical value Balances as of December 31, Additions Subsidiaries Retirements Transfers 2014 647,034,020 111,824,512 233,335 4,246,325 4,903,585 5,829,791 (2,821,934) (564,507) (4,217,786) (108,668) 12,926,255 154,614 658,057,475 121,382,067 229,470,319 (32,810) 13,927,114 (3,020,956) (1,558,111) 360,769 239,146,325 Main Account Real Property Furniture and Fixtures Telecommunication, Audio and Video Equipment External Network and Broadcasting Equipment 4,758,347,443 105,173,876 974,143,861 - (745,972,205) 821,231,006 5,912,923,981 Computer Equipment Technical Equipment Workshop Machinery Tools Spare Parts Installations Vehicles Plots Materials in Warehouse Works-In-Progress Leasehold Improvements Allowance for Impairment of Property, Plant and Equipment 548,734,772 110,547,970 583,703,084 86,394,729 51,638,877 460,682,963 200,560,150 17,219,818 756,832,376 490,123,231 43,550,811 2,593,355 - - 687,676 - (80,383) 1,723,776 - 4,904,016 4,901,574 - 94,451,812 39,285,047 27,172,137 977,402 6,483,302 17,040,270 20,199,230 308,782 1,390,743,543 216,596,637 10,539,170 (783,992) (14,566,154) (23,146,532) (331,101) - (543,735) (1,564,971) (1,479,990) (1,938,793) (415,823) (963,800) (4,153,679) (7,399) (96,087) (63,216) - (5,941,438) (991,929) - 70,606,970 (30,224,272) 22,727,200 24,972,224 - 14,925,947 - - (290,128,022) (895,456,935) (30,885) (527,264) (43,750,107) 1,526,329 711,449,238 105,035,192 610,359,802 112,637,714 58,122,179 486,083,624 219,926,256 16,048,610 964,956,185 667,424,627 54,125,246 and Obsolescence of Materials (17,514,571) (284,797) - - - Total as of December 31, 2014 9,079,150,504 124,065,943 2,822,601,683 (52,142,288) (1,053,796,689) - - (17,799,368) 10,919,879,153 104 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 105 Main Account the Beginning Subsidiaries Balance at (1)Deconsolidation of Cumulative Translation Adjustment Accumulated Depreciation Balances as of Net Book Value as of December 31, December 31, Retirements For the year 2014 2014 Real Property Furniture and Fixtures Telecommunication, Audio and Video Equipment External Network and 251,100,533 90,108,561 (334,536) (414,975) (176,824) 3,252,241 (477,742) (108,668) 12,704,407 4,920,534 262,815,838 97,757,693 395,241,637 23,624,374 194,724,230 (2,417,692) (29,671) (1,268,167) 11,504,697 202,513,397 36,632,928 Broadcasting Equipment 1,697,665,206 Computer Equipment Technical Equipment Workshop Machinery Tools Spare Parts Installations Vehicles Plots Materials in Warehouse Works-In-Progress Leasehold Improvements Allowance for Impairment of Property, Plant and Equipment 468,175,275 71,701,424 535,353,621 68,113,844 39,816,947 375,137,286 148,606,028 16,196,020 1,938,793 114,383 33,325,179 - (689,146) (5,457,266) (19,994,563) (273,980) - (385,590) (765,574) (1,479,990) (1,938,793) (114,383) (96,293) and Obsolescence of Materials (257,512) - 76,433,064 2,481,075 - - 422,730 - (3,154) 1,513,669 - - - - - (745,807,261) 1,090,375,417 2,118,666,426 3,794,257,555 (4,367,764) (7,399) (79,272) (63,216) - (5,941,438) (818,074) - - - (527,265) 54,391,973 5,212,800 9,085,890 19,363,917 5,659,308 26,315,603 20,880,784 891,432 - 390,796 6,105,068 519,991,413 71,449,559 524,365,676 87,563,295 45,476,255 395,122,707 169,416,833 15,607,462 - 390,796 38,806,689 191,457,825 33,585,633 85,994,126 25,074,419 12,645,924 90,960,917 50,509,423 441,148 964,956,185 667,033,831 15,318,557 - - (257,512) (17,541,856) Total as of December 31, 2014 3,991,819,818 (34,362,781) 83,893,130 (759,466,266) 1,267,802,626 4,549,686,527 6,370,192,626 (1) See Note 13. 105 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 106 Balance at the Beginning Cumulative Translation Adjustment Acquisitions Historical value Balances as of December 31, Additions of Businesses Retirements Transfers 2013 Main Account Real Property Furniture and Fixtures Telecommunication, Audio and Video Equipment External Network and 560,544,485 101,202,214 1,864,604 5,702,510 1,019,419 4,113,015 222,836,608 - 7,341,896 Broadcasting Equipment 3,783,789,084 134,586,421 Computer Equipment Technical Equipment Workshop Machinery Tools Spare Parts Installations Vehicles Plots Materials in Warehouse Works-In-Progress Leasehold Improvements Allowance for Impairment of Property, Plant and Equipment 495,125,231 104,483,287 581,994,082 67,434,572 44,242,643 439,480,905 178,828,193 16,777,024 579,754,696 433,729,041 36,764,316 3,290,934 - - 773,331 - - 2,399,678 - 5,736,322 5,870,461 - 685,436,740 34,695,733 2,521,443 2,588,307 274,420 7,431,729 10,001,039 22,249,145 442,794 1,002,342,206 238,967,723 1,210,538 and Obsolescence of Materials (17,122,150) (392,421) - 20,622,121 - - - - - - - - 187,663 - - - - - - (5,342,204) (20,553) 68,325,595 827,326 647,034,020 111,824,512 (1,207,756) 499,571 229,470,319 (566,680,003) 721,215,201 4,758,347,443 (158,097) (658,451) (879,305) 15,780,971 4,201,691 - - 17,912,406 - 11,110,353 (38,827) - (659,757,118) (188,195,845) 8,118,676 (35,495) (96,997) (2,878,039) - (171,243,730) (248,149) (2,542,719) - 548,734,772 110,547,970 583,703,084 86,394,729 51,638,877 460,682,963 200,560,150 17,219,818 756,832,376 490,123,231 43,550,811 - - (17,514,571) 9,079,150,504 Total as of December 31, 2013 7,629,864,231 159,831,840 2,020,636,147 20,809,784 (751,991,498) 106 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 107 Balance at Acquisitions the Beginning of Businesses Cumulative Translation Adjustment Accumulated Depreciation Balances as of Net Book Value as of December 31, December 31, Retirements For the year 2013 2013 1,146,777 4,137,294 (267,603) (14,684) 11,357,356 5,012,446 251,100,533 90,108,561 395,933,487 21,715,951 - (1,267,440) 11,654,363 194,724,230 34,746,089 100,163,263 (567,402,520) 811,418,897 1,697,665,206 3,060,682,237 Main Account Real Property Furniture and Fixtures Telecommunication, Audio and Video Equipment External Network and 238,011,622 80,973,505 184,337,307 Broadcasting Equipment 1,353,485,566 Computer Equipment Technical Equipment Workshop Machinery Tools Spare Parts Installations Vehicles Plots Materials in Warehouse Works-In-Progress Leasehold Improvements Allowance for Impairment of Property, Plant and Equipment 422,484,494 65,535,490 528,198,996 52,796,511 34,945,019 354,643,843 129,264,489 15,472,459 1,938,793 114,383 30,177,663 and Obsolescence of Materials (257,512) 852,381 - - - - - - - - 161,601 - - - - - - 3,053,895 - - 459,984 - - (112,377) (357,349) (879,305) - (35,495) (88,248) 2,017,860 (2,804,639) - - - - - - - - - (2,406,655) 5,554,171 Total as of December 31, 2013 3,492,122,628 1,013,982 110,979,073 (575,636,315) (1) Includes Ps. 6.3 million from discontinued operations. 42,749,263 6,523,283 8,033,930 14,857,349 4,907,423 20,420,090 20,128,318 723,561 - - 468,175,275 71,701,424 535,353,621 68,113,844 39,816,947 375,137,286 148,606,028 16,196,020 1,938,793 114,383 33,325,179 80,559,497 38,846,546 48,349,463 18,280,885 11,821,930 85,545,677 51,954,122 1,023,798 754,893,583 490,008,848 10,225,632 - (1) 963,340,450 (257,512) (17,257,059) 3,991,819,818 5,087,330,686 107 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 108 The following table details the average years of useful life of the items comprising Property, Plant and Equipment: Item Real Property Furniture and Fixtures Telecommunication, Audio and Video Equipment External Network and Broadcasting Equipment Computer Equipment Technical Equipment Workshop Machinery Tools Spare Parts Installations Vehicles Plots Leasehold Improvements 5.2 Intangible Assets Average Useful Life (in years) 50 10 between 3 and 4 between 3 and 20 3 between 4 and 10 10 5 5 between 3 and 10 5 5 between 3 and 10 Main Account Exploitation Rights and Licenses Exclusivity Agreements Other Rights Acquisition Value of Subscriber Portfolio Software Trademarks and Patents Projects in-Progress Deferred Charges and Other Total as of December 31, 2014 Balance at the Beginning 31,325,943 17,091,041 15,121,687 1,074,011,174 209,756,912 5,880,214 8,528,654 109,800,458 1,471,516,083 Cumulative Translation Adjustment - - - - 19,430 - - 43,971 63,401 (1)Deconsolidation of Historical value Balances as of December 31, Additions Subsidiaries Retirements Transfers 2014 2,658,033 (85,945) - 55,204 - 29,070,793 871,852 3,289,085 16,838,760 52,783,727 - - - (57,853) (12,791) - (33,905,447) (34,062,036) - - - - - - (122,495) 33,898,031 17,091,041 15,054,396 - 1,074,011,174 (35,011) 16,791,339 255,545,612 - - - - (4,427,796) (12,241,048) 6,739,272 7,389,943 80,536,694 (35,011) - 1,490,266,163 108 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 109 Balance at Cumulative (1)Deconsolidation of Translation Accumulated Amortization Balances as of Net Book Value as of December 31, December 31, Main Account the Beginning Adjustment Subsidiaries Retirements For the year 2014 2014 Exploitation Rights and Licenses Exclusivity Agreements Other Rights Acquisition Value of Subscriber Portfolio Software Trademarks and Patents Projects in-Progress Other Total as of December 31, 2014 (1) See Note 13. Main Account Exploitation Rights and Licenses Exclusivity Agreements Other Rights Acquisition Value of Subscriber Portfolio Software Trademarks and Patents Projects in-Progress Deferred Charges and Other Total as of December 31, 2013 25,493,841 10,090,248 12,672,942 806,062,162 82,120,593 4,927,971 - 74,967,114 1,016,334,871 Balance at the Beginning 27,792,030 17,091,041 15,456,255 1,074,011,174 163,149,270 5,678,065 - 103,444,972 1,406,622,807 Main Account Exploitation Rights and Licenses Exclusivity Agreements Other Rights Acquisition Value of Subscriber Portfolio Software Trademarks and Patents Projects in-Progress Other Total as of December 31, 2013 (1) Includes Ps. 0.8 million from discontinued operations. - - - - 339,106 - - (85,945) - - - (40,175) (7,501) - 27,786 366,892 (23,159,031) (23,292,652) - - - - (7,002) - - - 2,919,965 1,036,774 672,878 97,436,004 56,230,661 387,880 - 28,327,861 11,127,022 13,345,820 903,498,166 138,643,183 5,308,350 - 7,565,761 59,401,630 (7,002) 166,249,923 1,159,652,032 5,570,170 5,964,019 1,708,577 170,513,008 116,902,429 1,430,921 7,389,943 21,135,064 330,614,131 Cumulative Translation Adjustment - - - - - - - 54,146 54,146 Acquisition of Historical value Balances as of December 31, Additions Businesses Retirements Transfers 2013 3,533,913 - 112,495 - 28,130,259 453,149 8,528,654 24,331,660 65,090,130 - - - - - - - - - - - - - - (251,000) - - - - (447,063) 31,325,943 17,091,041 15,121,687 - 1,074,011,174 18,477,383 209,756,912 - - 5,880,214 8,528,654 (18,030,320) 109,800,458 (251,000) - 1,471,516,083 Balance at the Beginning Cumulative Translation Adjustment Accumulated Amortization Balances as of Net Book Value as of December 31, December 31, Retirements For the year 2013 2013 22,686,617 9,051,010 11,905,487 698,982,184 36,626,819 3,962,239 - 68,627,290 851,841,646 - - - - - - - 131,458 131,458 - - - - - - - - - 2,807,224 1,039,238 767,455 25,493,841 10,090,248 12,672,942 107,079,978 806,062,162 45,493774 965,732 - 6,208,366 (1) 164,361,767 82,120,593 4,927,971 - 74,967,114 5,832,102 7,000,793 2,448,745 267,949,012 127,636,319 952,243 8,528,654 34,833,344 1,016,334,871 455,181,212 109 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 110 The following is a detail of the average number of years over which intangible assets items are amortized: Item Exploitation Rights and Licenses Exclusivity Agreements Other Rights Acquisition Value of Subscriber Portfolio Software Trademarks and Patents 5.3 Goodwill Company assesses the recoverability of goodwill considering each company for which it records goodwill as a different cash generating unit (“CGU”). The recoverable amount of each CGU has been determined as per its value in use, calculated based on operating cash flows estimated in the financial budgets approved by Management, which comprise a period ranging from one to three years. Cash flows not included in those periods are projected using a growth rate, assessed based on statistical data and historical indicators of Argentina, which does not exceed the long-term average growth of each business. Amortization Period (in years) between 2 and 20 between 5 and 15 between 5 and 20 10 between 3 and 5 between 3 and 10 The gross margin used in each case for the calculation of the value in use allocated to each CGU arises from budgets prepared by each business for the period under consideration, which are in line with the historical data and the expectations regarding market development and evolution of the respective businesses. The discount rate used in each case for the calculation of the value in use allocated to each CGU takes into account the risk-free rate, the country risk premium and the premium for risks specific to each business, and the indebtedness structure of each CGU. In particular, the annual discount rate applied to the projections of Cablevisión’s cash flows is of approximately 10%. Main Account Cablevisión and subsidiaries (1) PRIMA CIMECO and related companies Cúspide and subsidiaries Telecor Pol-Ka Telba Bariloche TV Other Total Net balances Net balances Net Book Allowance as of as of Value before for Goodwill December 31, December 31, Impairment impairment 2014 2013 3,244,483,568 (594,075,234) 2,650,408,334 2,595,405,814 2,272,319 235,982,248 19,059,775 39,173,062 16,130,769 - 1,844,621 29,561,66 - (54,637,313) - - (6,850,727) - - (533,130) 2,272,319 181,344,935 19,059,775 39,173,062 9,280,042 - 1,844,621 29,028,537 2,272,319 181,344,935 19,059,775 39,173,062 9,280,042 3,774,071 1,844,621 24,101,013 3,588,508,029 (656,096,404) 2,932,411,625 2,876,255,652 (1) Includes goodwill of Multicanal and Teledigital, merged into Cablevisión (see Note 8.1.d). 110 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 111 5.4 Investment in Unconsolidated Affiliates Main business activity Country (1) Interest (%) 2014 2013 Value Recorded as of Value Recorded as of December 31, December 31, Manufacturing of Newsprint Cable Television Station Closed-Circuit Television Cable Television Station Closed-Circuit Television Cable Television Station Argentina Argentina Argentina Argentina Argentina Argentina Exploitation of events television broadcasting rights Argentina Production and exploitation of sports events, advertising agency and financial and investing operations Argentina Variable printing Printing Editorial activities Film producer Audiovisual production and sale of advertising Argentina Argentina Mexico Argentina Argentina 49.00 49.00 47.00 49.99 49.00 49.10 50.00 50.00 50.00 50.00 50.00 33.33 24.99 Investing and financing USA 50.00 178,848,195 177,926,621 62,124,867 10,822,223 5,375,735 14,954,214 20,778,579 4,226,412 - - 11,429,817 12,484,788 9,940,835 14,525,333 52,168,147 10,822,223 6,227,066 11,517,871 20,417,145 6,131,683 5,449,406 78,221,674 12,743,779 12,808,904 7,245,419 12,757,924 - 4,182,138 345,510,998 418,620,000 8,649,170 3,100,720 11,749,890 6,148,845 - 6,148,845 Included in assets Interest in Associates Papel Prensa Ver TV S.A. TPO TATC La Capital Cable TSMA Other Investments Interests in Joint Operations TSC (2) TRISA (2) Impripost AGL Ríos de Tinta Patagonik Canal Rural (2) Included in liabilities Interests in Joint Operations VLG Other Investments (1) Interest in capital stock and votes. (2) Subsidiaries of IESA as of December 31, 2014, see Note 13. Equity in Earnings from Affiliates and Subsidiaries December 31, 2014 December 31, 2013 Papel Prensa La Capital Cable AGL Canal Rural Ríos de Tinta Impripost VLG Ver TV S.A. TSMA Other Companies 921,574 13,395,564 (324,116) 791,014 1,576,757 (1,313,962) (19,177,349) 34,385,489 10,300,490 (753,551) 39,801,910 (8,656,680) 10,380,459 (84,982) 1,043,921 1,555,834 1,191,156 (5,506,701) 82,391,089 35,091,915 (17,922,625) 99,483,386 111 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 112 The following is a detail of certain supplementary information required by IFRS about interests in associates (amounts stated in millions of Argentine pesos): Dividends received Summarized financial information: Current assets Non-current assets Current liabilities Non-current liabilities Revenues Net Income from Continuing Operations Total Comprehensive Income The following is a detail of certain supplementary information required by IFRS about interests in joint operations (amounts stated in millions of Argentine pesos): Dividends received Summarized financial information: Assets Cash and Cash Equivalents Other Current Assets Current assets Non-current assets Liabilities Current Debt Other Current Liabilities Current liabilities Non-Current Debt Other Non-Current Liabilities Non-current liabilities Revenues Depreciation and Amortization Interest Income Interest Expense Income Tax and Tax on Assets Net Income from Continuing Operations Other Comprehensive Income Total Comprehensive Income December 31, 2014 December 31, 2013 44 317 649 310 48 1,533 129 129 81 382 530 110 224 1,069 25 25 December 31, 2014 December 31, 2013 - 43 107 150 59 38 73 111 6 3 9 254 (8) 5 (9) (4) 6 2 8 28 128 325 454 109 20 277 297 4 13 17 767 (12) 4 (7) (50) 84 3 87 112 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 113 5.5 Other Investments Non-Current Financial Instruments Current Financial Instruments Securities Mutual Funds 5.6 Inventories Non-Current Film Products and Rights Current Raw Materials and Supplies Products-in-Process Finished Goods Film Products and Rights Other Subtotal Less: Allowance for Impairment of Inventories 5.7 Other Assets Non-Current Works of Art Other Current Other December 31, 2014 December 31, 2013 275,625,916 275,625,916 270,196,472 379,189,263 766,719,477 1,416,105,212 143,313,288 143,313,288 450,820,527 20,672,115 162,961,333 634,453,975 December 31, 2014 December 31, 2013 20,952,973 20,952,973 164,400,071 2,999,326 32,995,217 75,901,936 649,197 276,945,747 (4,894,720) 272,051,027 28,181,042 28,181,042 180,842,196 528,581 47,702,122 42,361,775 900,956 272,335,630 (3,131,729) 269,203,901 December 31, 2014 December 31, 2013 461,696 788,074 1,249,770 7,063,276 7,063,276 461,696 1,330,205 1,791,901 4,990,825 4,990,825 113 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 114 5.8 Other Receivables Non-Current Tax Credits Guarantee Deposits Prepaid Expenses Advances Related Parties (Note 16) Other Allowance for Other Bad Debts Current Tax Credits Court-ordered and Guarantee Deposits Prepaid Expenses Advances Related Parties (Note 16) Sundry Receivables Other Allowance for Other Bad Debts 5.9 Trade Receivables Non-Current Trade Receivables Current Trade Receivables Related Parties (Note 16) Allowance for Bad Debts 5.10 Cash and Banks Cash and Imprest Funds Cash at Banks December 31, 2014 December 31, 2013 53,815,218 1,861,437 19,504,515 42,781,617 - 18,564,287 (1,567,580) 134,959,494 218,167,837 14,753,391 180,936,011 88,734,265 18,471,303 15,023,356 89,612,703 (1,146,852) 624,552,014 47,796,827 1,761,007 22,445,045 129,045,302 18,520,453 15,984,632 (3,224,740) 232,328,526 220,537,625 17,580,011 97,869,277 72,306,970 23,455,901 15,037,655 89,821,606 (1,619,442) 534,989,603 December 31, 2014 December 31, 2013 91,505,064 91,505,064 2,983,817,121 81,121,045 (179,898,080) 2,885,040,086 129,021,518 129,021,518 2,220,732,674 24,602,899 (149,198,962) 2,096,136,611 December 31, 2014 December 31, 2013 41,597,037 1,120,031,282 1,161,628,319 18,447,604 1,314,535,399 1,332,983,003 114 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 115 5.11 Provisions and Other Non-Current Provisions for Lawsuits and Contingencies Accrual for Asset Retirement 5.12 Debt Non-Current Financial Loans Notes Acquisition of equipment Related Parties (Note 16) Measurement at Fair Value Current Bank Overdraft Financial Loans Notes Acquisition of equipment Related Parties (Note 16) Interest and Restatement Measurement at Fair Value The following table details the changes in loans and indebtedness for the year ended December 31, 2014 and the prior year: Balances as of January 1st New Loans and Indebtedness (1) Accrued Interest Exchange rate fluctuations and other financial effects Early Collection of investment for the purchase of Notes Reclassified to assets held for sale Payment of Interest Payment of Principal Balances as of December 31 (1) Mostly loans for the payment of debt with upcoming maturity and for the purchase of capital assets and inventories. December 31, 2014 December 31, 2013 324,549,885 12,100,819 336,650,704 272,194,321 10,738,636 282,932,957 December 31, 2014 December 31, 2013 40,522,969 2,568,079,074 316,869,747 - (54,973,243) 2,870,498,547 243,933,142 396,575,883 752,488,000 168,886,421 16,701,274 121,810,582 18,503,021 247,113,661 2,531,879,000 104,703,748 6,410,285 (45,296,584) 2,844,810,110 96,951,925 49,498,515 924,556,818 90,337,547 10,948,588 120,076,738 2,158,735 1,718,898,323 1,294,528,866 2014 2013 4,139,338,976 994,580,890 546,126,005 1,103,440,183 - (11,774,226) (511,163,308) (1,671,151,650) 4,589,396,870 3,187,378,891 378,266,001 317,518,620 935,235,777 67,182,254 - (313,730,483) (432,512,084) 4,139,338,976 115 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 116 The following table summarizes the maturities of consolidated loans (undiscounted values) at year-end: Non-Current Debt years years years years Non-Current From 1 to 2 From 2 to 3 From 3 to 4 From 4 to 5 Total Due Financial Loans Notes 30,119,258 1,439,347,075 Acquisition of equipment 198,117,443 10,403,711 752,488,000 113,062,004 - 376,243,999 3,196,871 - - 40,522,969 2,568,079,074 2,493,429 316,869,747 Total as of December 31, 2014 1,667,583,776 875,953,715 379,440,870 2,493,429 2,925,471,790 Current Debt Bank Overdraft Financial Loans Notes Acquisition of equipment Related Parties Up to 3 months 243,933,142 108,070,560 - 54,133,493 10,646,580 Interest and Restatement 119,550,030 Total as of From 3 to 6 From 6 to 9 From 9 months months months to 1 year Total Current Due - 92,980,290 376,244,000 26,989,660 3,441,309 4,139,326 - 56,663,173 376,244,000 45,144,398 - 725,774 - 138,861,860 - 42,618,870 - 8,837 243,933,142 396,575,883 752,488,000 168,886,421 14,087,889 124,423,967 December 31, 2014 536,333,805 503,794,585 478,777,345 181,489,567 1,700,395,302 Consolidated loans mainly include the following: 5.12.1 Cablevisión The most significant bank and financial loans borrowed by Cablevisión and its subsidiaries are the following: Balances as of Balances as of Principal December 31, December 31, Amount 2014 2013 Annual Date Issued Borrower In millions of USD Final Maturity Interest Rate February 2011 February 2011 February 2011 February 2011 May 2011 May 2011 December 2003 (1) Cablevisión (1) Cablevisión (1) Cablevisión (2) Cablevisión (2) Cablevisión (2) Prima Multicanal 88.2 71.3 223.3 17.2 50.0 70.0 80.3 67.9 54.9 172 13.3 - - 80.3 87.4 70.6 February 2018 February 2018 221.0 February 2018 17.1 12.5 10.7 80.3 February 2018 May 2014 May 2014 July 2016 (3) 8.75% (3) 9.375% (3) 9.625% (3) 9.375% Libor + 7.5% Libor + 7.5% (3) 3.5% to 4.5% (1) Use of funds: Refinancing of Notes. (2) Use of funds: Acquisition of non-financial assets and financing of imports (Note 23). (3) Fixed rate. 116 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 117 As a result of the Notes issued by Cablevisión, it has undertaken certain covenants, including: (i) limitation on the issuance of guarantees by subsidiaries; (ii) mergers, consolidations, and sale of assets under certain conditions, (iii) limitation on incurring debt above certain approved ratios, (iv) limitation on capital investments exceeding certain amount, (v) limitation on transactions with shareholders and affiliates under certain conditions, (vi) limitation on the issuance and sale of significant subsidiaries’ shares with certain exceptions. On January 31, 2014, Cablevisión entered into a syndicated loan agreement with the Industrial and Commercial Bank of China (Argentina) S.A. (“ICBC”) and Banco Itaú Argentina S.A. for Ps. 100 million, at a variable rate of adjusted BADLAR + 5.25%; and with final maturity in July 2015, for the purpose of paying a portion of the USD 59 million principal amount due on Cablevisión notes which were paid by Cablevisión in February 2014. As of December 31, 2014, Cablevisión cancelled Ps. 40 million principal amount under the syndicated loan. On March 12, 2014, Banco de la Ciudad de Buenos Aires (“Banco Ciudad”) joined the syndicated loan agreement executed by Cablevisión on January 31, 2014 with ICBC and Banco Itaú Argentina S.A. as lender, thereby agreeing to make a disbursement of Ps. 50 million in favor of Cablevisión at a variable rate of adjusted BADLAR + 5.25% with final maturity in the month of July 2015. To that end, Banco Ciudad executed an amendment to that agreement whereby it irrevocably accepted and agreed to each and every one of its terms and conditions. As of December 31, 2014, that company cancelled Ps. 20 million principal amount under the syndicated loan. On April 21, 2014, within the framework of the syndicated loan agreement executed on January 31, 2014, the banks ICBC and Banco Itaú Argentina S.A. made new disbursements for an aggregate amount of Ps. 100 million at a variable rate of adjusted BADLAR + 5.25%. Final maturity is in July 2015. As of December 31, 2014, Cablevisión cancelled Ps. 40 million principal amount under the syndicated loan. As a result of the execution of the syndicated loan agreement, Cablevisión has undertaken certain covenants, including: (i) limitation on the issuance of guarantees by subsidiaries and encumbrances; (ii) reorganization, change of control, and sale of assets under certain conditions, (iii) limitation on incurring debt above certain approved ratios, (iv) limitation on capital investment exceeding certain amount, and (v) limitation on transactions with shareholders and affiliates under certain conditions. On January 30, 2015, the Company entered into a syndicated loan agreement with ICBC, Itaú, Banco Ciudad, Banco Santander Río S.A. (“Santander”) and Banco Macro S.A. (“Macro”) for Ps. 700 million, at a variable rate of adjusted BADLAR + 4.85%, with final maturity in July 2016, for the purpose of making a prepayment of principal and interest owed to ICBC, Itaú and Banco Ciudad under the syndicated loan agreement executed on January 31, 2014, and in order to finance working capital and capital investments. On April 28, 2014, at the Annual General Ordinary and Extraordinary Shareholders’ Meeting of Cablevisión, the shareholders of Cablevisión approved, among other matters: i) The creation of a Global Program for the issuance of simple, non-convertible, medium or long-term notes, to be authorized by the CNV, to be issued in one or more classes and/or series for an aggregate principal amount including all classes and/or series outstanding under the Program of up to USD 500,000,000, pursuant to the provisions of the Notes Law No. 23,576, as amended. The shareholders delegated on the Board of Directors of Cablevisión the power to determine and establish all the other terms for each class and/or series of notes to be issued under this Program. The shareholders also delegated on the Board of Directors of Cablevisión the power to approve the terms of the agreements related to the issuance and placement of the notes to be issued under the Program. The Board of Directors of Cablevisión may subdelegate all or some powers interchangeably to one or more directors or managers of such company; and ii) the creation of a global program for the issuance of Short-Term Debt Securities of up to USD 100,000,000 (or its equivalent in other currencies, as determined by the Board of Directors) (Valores Representativos de Deuda de Corto Plazo, “VCPs”, for its Spanish acronym), and the related registration of Cablevisión before the special registry created 117 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 118 by the CNV for such purpose. The VCPs will have maturities of up to one year and are to be issued in one or more classes and/or series, under the form of promissory notes subject to the Notes Law No. 23,576, as amended. The shareholders delegated on that company’s Board of Directors the power to determine and establish all the other terms of the VCP Program and the classes and/or series of VCPs to be issued within the authorized amount. They also delegated on the Board of Directors the power to request the CNV to register Cablevisión in the Special Registry for VCP Programs and to authorize the VCP Program. The Board of Directors of Cablevisión may subdelegate all or some powers interchangeably to one or more directors or managers of such company. As of the date of these financial statements, the Company has not made any filings with the CNV to make such placement. On August 26, 2014, Cablevisión executed a financial loan agreement with Nuevo Banco de Santa Fe S.A. for Ps. 50 million at an annual fixed nominal interest rate of 28% with final maturity in January 2015, for the purpose of increasing its working capital to finance the development of its main corporate business. On January 5, 2015, the Board of Directors of Cablevisión decided to call an Ordinary Shareholders’ Meeting to be held on January 23, 2015. At the Shareholders’ Meeting, the shareholders approved the issuance of non- convertible notes for an aggregate nominal value of up to USD 400,000,000 to be placed privately (without public offering) and to be issued in one or more series pursuant to the provisions of the Notes Law No. 23,576, as amended and regulated (the “Notes Law”). The notes will be used both to offer them in exchange for the currently outstanding Notes and to receive funds in cash. The shareholders of Cablevisión delegated on the Board of Directors of Cablevisión the power to establish all the terms governing the issuance of the above-mentioned notes within the authorized maximum amount, including, without limitation, time and price of the issuance, form, payment terms, use of proceeds, applicable law. On February 9, 2015, pursuant to its delegated powers, the Board of Directors of Cablevisión approved the issuance of Class V notes for a nominal value of USD 286,377,785.96 (the “Class V Notes”), at a fixed annual nominal rate of 9.375%, payable semiannually as from August 2016, with final maturity in February 2018, to be used in the refinancing of a portion of the debt represented by the outstanding Notes, which will be refinanced pursuant to the Trust Agreement executed between Cablevisión, as issuer, and Deutsche Bank Trust Company Americas as trustee, co-registrar and paying agent. 5.12.2 AGEA and subsidiaries On January 28, 2014, AGEA repaid all of the USD 30.6 million aggregate principal amount outstanding and interest accrued as of such date on the Series C Notes issued by that company under the Global Program. See Note 24. As of December 31, 2014, AGEA had executed overdraft facility agreements with banks for a maximum of Ps. 170 million for a maximum term of 30 days. Those overdraft facilities accrue interest at a fixed annual rate of approximately 27% - 31%. In addition, as of December 31, 2014, AGR had executed overdraft facility agreements with banks for a maximum of Ps. 29 million. As of December 31, 2014, AGR is the borrower under a loan with Banco Ciudad in the amount of Ps. 20 million that accrues interest at an annual fixed rate of 15.25%. Principal is repaid on a quarterly basis as from February 2015, and interest is paid on a quarterly basis as from February 2014. During this year, AGR executed two leasing agreements for an aggregate of Ps. 19.6 million (including Ps. 2 million of nationalization expenses that were subsequently added) to acquire machinery and equipment. Those loans accrue interest at an annual rate of 15.25%. 5.12.3 GCGC As of December 31, 2014 GCGC was the borrower under a loan with Banco de la Ciudad de Buenos Aires executed to finance the repair, recycling and improvement of the building for a principal amount of up to Ps. 30 million. Such loan will be repaid in 60 months, as from October 2012, with a 24-month grace period, i.e. in 36 monthly consecutive installments, accruing interest at the average Badlar rate for Private Banks plus 100 basic points. The aggregate amount of the loan will be advanced to the company in several stages, after having obtained the required professional certifications. 118 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:41 PM Page 119 As of the date of these financial statements, GCGC received the full amount of the loan for a total of Ps. 30 million. As of December 31, 2014, GCGC repaid Ps.1.12 million under the loan agreement executed with Banco de la Ciudad de Buenos Aires. GCGC was the borrower under a loan agreement with Industrial and Commercial Bank of China (Argentina) S.A. for a principal amount of Ps. 7.5 million to finance the repair, recycling and improvement of the building. The loan will be repaid in 36 months, as from October 2012, with an 18-month grace period. Principal will be repaid in 7 quarterly decreasing installments as from the 18th month. The loan accrues interest at a 15% fixed nominal annual rate. As of December 31, 2014, GCGC repaid Ps. 5 million under the loan executed with Industrial and Commercial Bank of China (Argentina) S.A. 5.12.4 ARTEAR On December 6, 2013 ARTEAR and Banco Itaú Argentina S.A. executed an agreement whereby ARTEAR is the borrower under a bilateral loan, within the framework of Communication “A” 5449 issued by the BCRA relating to Productive Investment Credit Facilities, for a principal amount of Ps. 12.9 million, payable within a term of 36 months in equal consecutive monthly installments. The first installment is due on month 12, counted as from disbursement. The funds will be used to finance a project for the acquisition of capital assets and manpower to adapt the production and broadcasting of contents to the entertainment and news standards of the television industry. Principal accrues interest at an annual nominal fixed rate of 15.25% payable on a monthly basis as from disbursement. On December 20, 2013 ARTEAR executed a syndicated loan with Banco Itaú Argentina S.A. and the Industrial and Commercial Bank of China (Argentina) S.A. for a principal amount of Ps. 200 million to be repaid in 2 years in the following installments: Ps. 35 million due 12 months after disbursement, Ps. 35 million due 18 months after disbursement and Ps. 130 million due 24 months after disbursement. Each of the banks has a 50% pro rata participation in the loan. The funds will be used to finance working capital, to make capital expenditures and/or to distribute dividends. Principal accrues interest at an annual variable rate based on BADLAR for private banks plus a 4.25% margin, payable on a monthly basis as from disbursement. As security for the loan, Itaú Unibanco S.A., New York Branch, has issued in favor of each of the two banks acting as lenders under this agreement an irrevocable independent guarantee, payable on first demand (“Stand By Letter of Credit” or “SBLC”) to secure all the obligations undertaken by ARTEAR until the repayment of the loans. These SBLCs were issued in US dollars for an amount that, converted into Argentine pesos, covers at least 100% of the principal amount owed by the borrower to each of the banks under the loan. On July 21, 2014, ARTEAR made a partial prepayment of Ps. 35 million on the outstanding principal under the syndicated loan mentioned above, allocating this amount to the installment due in December 2014. 5.12.5 CMD As of December 31, 2014 CMD was the borrower under a loan with Banco de la Ciudad de Buenos Aires for a balance of Ps. 2.5 million principal amount. Proceeds were used to finance partially the acquisition and renovation of a building. Such loan will be repaid in 60 months, with a 24-month grace period, i.e. in 36 monthly consecutive installments, accruing interest at the average Badlar rate for Private Banks plus 100 basic points. The first installment was due on June 27, 2010. 5.13 Sellers Financing The following table summarizes the consolidated debt maturities in connection with the acquisition of companies: Current Sellers Financing Without any established term Up to 3 months From 3 to 6 months From 6 to 9 months December 31, 2014 December 31, 2013 Due Total as of Total as of Principal 1,401,675 1,281,662 1,014,339 93,750 3,791,426 3,484,674 119 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 120 5.14 Taxes Payable Non-Current Taxes Payable on a National Level Current Taxes Payable on a National Level Taxes Payable on a Provincial Level Taxes Payable on a Municipal Level 5.15 Other Liabilities Non-Current Guarantee Deposits Unearned Revenue Call Options (Note 10) Investment in Unconsolidated Affiliates (Note 5,4) Other Current Advances from Customers Dividends Payable Related Parties (Note 16) Call Options (Note 10) Unearned Revenue Derivatives (Note 22) Other 5.16 Trade Payables and Other Non-Current Suppliers and Trade Provisions Employer’s Contributions Current Suppliers and Trade Provisions Related Parties (Note 16) Employer’s Contributions December 31, 2014 December 31, 2013 98,018,442 98,018,442 798,250,268 28,849,381 31,071,270 858,170,919 108,608,440 108,608,440 362,330,129 6,733,650 26,123,600 395,187,379 December 31, 2014 December 31, 2013 139,415 105,947,119 27,469,815 11,749,890 6,451,823 151,758,062 82,026,829 1,547,100 300,933 1,816,816 155,847,247 4,718,000 63,091,719 309,348,644 106,919 90,639,758 19,560,000 6,148,845 5,444,664 121,900,186 72,422,931 1,419,351 439,276 5,154,721 113,082,533 - 55,397,590 247,916,402 December 31, 2014 December 31, 2013 885,555 7,173,952 8,059,507 1,900,205,540 80,536,650 1,174,930,553 3,155,672,743 2,859,522 2,485,072 5,344,594 1,555,999,401 68,248,540 889,160,489 2,513,408,430 120 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 121 5.17 Changes in provisions and allowances Balance at Deconsolidation of Balances as of Balances as of December 31, December 31, Items the Beginning Increases Subsidiaries Decreases 2014 2013 Deducted from Assets Allowance for Bad Debts Allowance for Impairment of Inventories Allowance for Impairment of Property, Plant and Equipment and Obsolescence of Materials Allowance for Goodwill impairment Valuation Allowance (5) Total Included in liabilities Provisions for Lawsuits and Contingencies Accrual for Asset Retirements Total 154,043,144 (1) 180,176,040 (5,758,663) (1) (145,848,009) 182,612,512 154,043,144 (192,195) 4,894,720 3,131,729 3,131,729 (2) 1,955,186 17,257,059 (6) 284,797 668,149,977 78,616,953 921,198,862 - (3) 12,936,374 195,352,397 - - (12,053,573) - - 17,541,856 17,257,059 656,096,404 47,484,932 908,630,424 668,149,977 78,616,953 921,198,862 - (44,068,395) (17,812,236) (190,108,599) 272,194,321 (4) 130,042,488 (4,380,561) (4) (73,306,363) 324,549,885 272,194,321 10,738,636 282,932,957 (4) 1,362,183 131,404,671 - (4,380,561) (4) - (73,306,363) 12,100,819 336,650,704 10,738,636 282,932,957 (1) Includes net increases of Ps. 179,738,901 which have been charged to Selling expenses (see Note 6.3). (2) Charged to Impairment of Inventories and Obsolescence of Materials under Production and Services Expenses (see Note 6.3). (3) Charged to Income Tax and Tax on Assets (4) Includes net increases of Ps. 121,908,817, which have been charged to Contingencies (see Note 6.3) and Ps. 4,274,190, which have been charged to Other Financial Income, Net. (5) Includes Valuation Allowance for Net Deferred Tax Assets and Valuation Allowance for tax on assets. (6) Corresponds to Cumulative Translation Adjustment Note 6 Breakdown of the main items of the statement of comprehensive income 6.1 Revenues Sales of Cable TV Subscriptions Advertising Sales Sales of Internet Subscriptions Circulation Sales Printing Services Sales TV Signals Sales Other Sales Total (1) (1) Includes sales executed through barter transactions as of December 31, 2014 and 2013 for Ps. 132.5 million and Ps. 129.8 million, respectively. December 31, 2014 December 31, 2013 10,776,791,214 3,240,972,118 2,743,435,905 1,288,340,160 133,259,553 262,260,140 1,171,167,027 19,616,226,117 7,379,144,029 2,641,370,918 1,901,569,174 1,086,942,594 169,362,149 221,534,863 700,290,557 14,100,214,284 121 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 122 6.2 Cost of Sales Inventories at the beginning of the year Reclassification of inventories as assets held for sale Purchases for the year Production and Services Expenses (Note 6.3) Less: Inventories at year-end Cost of Sales December 31, 2014 December 31, 2013 300,516,672 (3,374,862) 1,038,824,640 9,924,710,416 (297,898,720) 10,962,778,146 362,814,970 - 710,968,036 7,365,949,249 (300,516,672) 8,139,215,583 6.3 Production and Services, Selling and Administrative Expenses Item Expenses Expenses Expenses 2014 2013 Production and Services Selling Administrative December 31, December 31, Total as of Total as of Fees for Services 283,723,264 146,744,220 631,055,487 1,061,522,971 796,531,443 Salaries, Social Security and Benefits to Personnel (1) Advertising and Promotion Expenses Taxes, Duties and Contributions Bad Debts Travel Expenses Maintenance Expenses Distribution Expenses Communication Expenses Contingencies Stationery and Office Supplies Commissions Productions and Co-Productions Printing Expenses Rights Services and Satellites Severance Payments Non-Computable VAT Rentals Amortization of Intangible Assets Amortization of Film Library Depreciation of Property, Plant and Equipment Impairment of Inventories and Obsolescence of Materials Other Expenses Total as of December 31, 2014 Total as of December 31, 2013 3,818,937,140 - 314,063,819 - 83,282,439 633,874,898 50,055,189 12,002,298 64,898,487 6,805,691 - 275,618,174 144,132,327 2,090,311,185 340,208,775 41,470,778 28,406,155 234,929,413 156,813,679 4,173,461 721,485,954 459,687,454 636,158,663 179,738,901 41,927,995 60,278,737 64,928,125 3,773,131 - 4,255,607 30,752,279 - - - 992,020 13,517,212 - 12,906,247 5,495,149 - 1,026,232,510 5,566,655,604 4,268,525,288 1,040,997 33,325,601 - 18,490,203 214,847,083 - 10,050,980 57,059,417 28,350,603 379,950,655 - - - 26,540,433 13,973,951 - 43,012,513 3,941,095 - 460,728,451 983,548,083 179,738,901 143,700,637 909,000,718 114,983,314 25,826,409 121,957,904 39,411,901 410,702,934 275,618,174 144,132,327 391,834,931 684,685,579 134,388,878 104,562,791 617,870,866 93,549,535 19,188,999 90,548,260 30,796,532 284,998,043 185,422,897 162,228,640 2,090,311,185 1,447,781,092 367,741,228 247,825,029 68,961,941 28,406,155 290,848,173 166,249,923 4,173,461 55,859,592 26,766,393 219,937,267 163,592,675 2,593,773 1,163,302,728 65,437,325 39,053,537 1,267,793,590 957,009,293 7,067,633 170,632,883 - - 7,067,633 1,247,872 41,617,725 50,590,098 262,840,706 189,564,328 9,924,710,416 2,489,696,744 2,577,515,163 14,991,922,323 7,365,949,249 1,860,321,863 1,951,038,884 11,177,309,996 (1) As of December 31, 2014, it includes a recovery of Ps. 26.4 million from the calculation of employer’s contributions as tax credit on VAT (Decree No. 746/2003 issued by the Executive Branch), according to Note 8.3.i. 122 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 123 6.4 Financial Costs Financial Discounts on Liabilities Interest Exchange Differences Other Financial Costs Total 6.5 Other Financial Results, net Exchange Differences Interest Financial Discounts on Assets and Liabilities Other Taxes and Expenses Results from transactions with securities and bonds CER Restatement Income from Changes in the Fair Value of Financial Instruments Total 6.6 Other Income and Expense, net Income from Sale of Property, Plant and Equipment Disposal of Unconsolidated Affiliates Other Total December 31, 2014 December 31, 2013 (19,082,570) (548,497,426) (1,145,376,073) (6,044,582) (1,719,000,651) (19,694,131) (319,364,145) (958,296,785) (2,707,122) (1,300,062,183) December 31, 2014 December 31, 2013 216,784,458 78,695,758 8,095,195 (282,093,541) (29,680,391) (2,795,864) (475,888) (11,470,273) 162,010,022 21,773,633 10,513,408 (203,575,654) (161,437,074) (2,383,052) (670,000) (173,768,717) December 31, 2014 December 31, 2013 2,567,830 - 36,448 2,604,278 4,448,084 71,518,844 (6,432,538) 69,534,390 123 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 124 Note 7 Income tax The following table shows the reconciliation between the consolidated income tax charged to net income for the years ended December 31, 2014 and 2013 and the income tax liability that would result from applying the current tax rate on consolidated income before income tax and tax on assets and the income tax liability assessed for each year (amounts stated in thousands of Argentine Pesos): Income before Income Tax Current Rate Income Tax Assessed at the Current Tax Rate on Income before Income Tax Permanent Differences: Equity in Earnings from Affiliates and Subsidiaries Non-Taxable Income Other Subtotal Valuation Allowance for Net Deferred Tax Assets Charged to Income Total Income Tax Deferred Tax Current Tax Income Tax Assessed for the Year Tax on assets Total December 31, 2014 December 31, 2013 1,898,171 35% (664,360) 13,931 (20,780) 56,251 (614,958) 26,407 (588,551) 195,133 (783,684) (588,551) 1,177 (587,374) 844,825 35% (295,689) 34,820 138,257 28,143 (94,469) (3,331) (97,800) 250,776 (348,576) (97,800) (124) (97,924) 124 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 125 Breakdown of Consolidated Deferred Tax (in thousands of Argentine pesos): December 31, December 31, Changes Year Changes Year 2014 2013 2014 2013 Deferred Assets Tax Loss Carryforwards Specific Tax Loss Carryforward Inventories Other Investments Provisions and Other Trade Receivables Other Liabilities Trade Payables and Other Deferred Tax Liabilities Property, Plant and Equipment Intangible Assets Trade Receivables Other Assets Other Liabilities Debt Subtotal Valuation Allowance on Tax Loss Carryforwards 212,528 - 16,001 24,895 101,044 20,067 11,393 107,686 493,614 (162,321) (61,690) - (1,471) - (12,765) (238,247) 154,819 934 14,799 2,980 79,330 - 11,231 84,460 348,553 (130,865) (96,077) (14,789) (808) - (15,098) (257,637) (12,373) (250,620) (38,780) (296,417) 57,709 (934) 1,202 21,915 21,714 20,067 162 23,226 145,061 59,754 (74) 7,704 (4,483) 12,902 - 11,231 64,547 151,581 (31,456) (20,964) 34,387 14,789 (663) - 2,333 19,390 26,407 45,797 23,195 11,095 1,104 88,756 2,701 105,887 1,112 106,999 Total Net Deferred Tax Assets / (Liabilities) (1) 242,994 52,136 (2) 190,858 (2) 258,580 (1) Comprises Deferred Tax Assets in the amount of Ps. 298,134,997 and Deferred Tax Liabilities in the amount of Ps. 55,140,623 as of December 31, 2014, disclosed in the Consolidated Balance Sheet. (2) Includes Ps. 4.3 million and Ps. 7.8 million as of December 31, 2014 and 2013, respectively, related to the Deconsolidation of subsidiaries. See Note 13. As of December 31, 2014, the Company’s and its subsidiaries’ accumulated consolidated tax loss carryforwards amounted to approximately Ps. 607,225 thousand, which calculated at the current tax rate, represent deferred tax assets in the amount of approximately Ps. 212,528 thousand. The following table shows the expiration date of the accumulated tax loss carryforwards pursuant to statutes of limitations (amounts stated in thousands of Argentine Pesos): Expiration year Amount of Tax Loss Carryforward 2014 2015 2016 2017 2018 2019 3,787 6,444 22,305 14,838 181,394 378,457 The Company estimates that the tax loss carryforwards are recoverable for the net amounts disclosed. 125 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 126 Note 8 Provisions and other contingencies 8.1 Regulatory Framework a. SCI Resolution No. 50/10 approved certain rules for the sale of pay television services. These rules provide that cable television operators must apply a formula to estimate their monthly subscription prices. The price arising from the application of the formula was to be informed to the Office of Business Loyalty (Dirección de Lealtad Comercial) between March 8 and March 22, 2010. Cable television operators must adjust such amount semi- annually and inform the result of such adjustment to said Office. Even though as of the date of these financial statements the subsidiary Cablevisión cannot assure the actual impact of the application of this formula, given the vagueness of the variables provided by the Resolution to calculate the monthly subscription prices, Cablevisión believes that Resolution No. 50/10 is arbitrary and bluntly disregards its freedom to contract, which is part of the right to freedom of industry and trade. Therefore, it has filed the pertinent administrative claims and has brought the necessary legal actions requesting the suspension of the Resolution’s effects and ultimately requesting its nullification. Even though Cablevisión, like other companies in the industry, has strong constitutional arguments to support its position, it cannot be assured that the final outcome of this issue will be favorable. Therefore, Cablevisión and/or some of its subsidiaries may be forced to modify the price of their pay television subscription, a situation that could significantly affect the revenues of their core business. This creates a general framework of uncertainty over the business of Cablevisión and/or some of its subsidiaries that could significantly affect the recoverability of their relevant assets included in these consolidated financial statements and Grupo Clarín S.A.’s assets related to its investment in Cablevisión. Notwithstanding the foregoing, as of the date of these financial statements, in accordance with the decision rendered on August 1, 2011 in re "LA CAPITAL CABLE S.A. v/ Ministry of Economy-Secretary of Domestic Trade", the Federal Court of Appeals of the City of Mar del Plata has ordered the SCI to suspend the application of Resolution No. 50/10 with respect to all cable television licensees represented by the Argentine Cable Television Association ("ATVC", for its Spanish acronym). Upon being served on the SCI and the Ministry of Economy on September 12, 2011, such decision became fully effective and may not be disregarded by the SCI. On June 1, 2010, the SCI imposed a Ps. 5 million fine on Cablevisión alleging that it had failed to comply with the information regime set forth by Resolution No. 50/10, and invoking the Antitrust Law to impose such penalty. The fine was appealed and submitted to the National Court of Appeals on Federal Administrative Matters, Chamber No. 5, which decided to reduce the fine to Ps. 300,000. Cablevisión appealed this decision by filing an extraordinary appeal with the Supreme Court of Argentina. On March 10, 2011 SCI Resolution No. 36/11 was published in the Official Gazette. This Resolution falls within the framework of SCI Resolution No. 50/10. Resolution No. 36/11 sets forth the parameters to be applied to the services rendered by Cablevisión to its subscribers from January through April 2011. These parameters are as follows: 1) the monthly basic subscription price shall be Ps. 109 for that period; 2) the price of other services rendered by Cablevisión should remain unchanged as of the date of publication of the resolution; and 3) the promotional benefits, existing rebates and/or discounts already granted as of that same date shall be maintained. The resolution also provides that Cablevisión shall reimburse users for any amount collected above the price set for that period. Cablevisión believes that Resolution No. 36/10 is illegal and arbitrary, since it is grounded on Resolution No. 50/2010, which is absolutely null and void. Since the application of Resolution No. 50/10 has been suspended, the application of Resolution No. 36/2011, which falls within the framework of the former, is also suspended. The claim filed by Cablevisión seeking the nullification of Resolution No. 50/2010 is currently pending before the Federal Administrative Court of First Instance No. 7 of the City of Buenos Aires. Subsequently, the SCI issued Resolutions Nos. 65/11, 92/11, 123/11, 141/11, 10/11, 25/12, 126 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 127 97/12, 161/12, 29/13, 61/13, 104/13, 1/14, 43/14 and 93/14 pursuant to which the SCI extended the effectiveness of Resolution No. 36/11 up to and including September 2014, and adjusted the cable television subscription price to Ps.152. Cablevisión believes, however, that given the terms under which the Federal Court of the City of the City of Mar del Plata granted the preliminary injunction, that is, ordering the SCI to suspend the application of Resolution No. 50/97 with respect to all cable television licensees represented by ATVC (among them, Cablevisión and its subsidiaries), and also given the fact that Resolutions No. 36/11, 65/11, 92/11, 123/11, 141/11, 10/11, 25/12, 97/12, 161/12, 29/13, 61/13, 104/13, 1/14 , 43/14 and 93/14 merely extend the effectiveness of Resolution No. 50/10, Cablevisión continues to be protected by said preliminary injunction, and, therefore, the ordinary course of its business will not be affected. On January 13, 2012, the Secretariat of Domestic Trade issued Resolution No. 2/2012 granting Cablevisión 24 hours to resume service to those subscribers who had duly paid their subscription fee in the amount established by the National Government. In its sixth section, the Resolution provides that if the company does not comply with its obligations thereunder, penalties may be imposed as provided by Law 20,680. On February 10, 2012, Cablevisión received a fine of Ps. 1 million for alleged non- compliance with such Resolution. Such fine has been appealed but no decision has been rendered on the matter yet. On April 23, 2013, Cablevisión was served notice of a decision rendered in re “Ombudsman of Buenos Aires v. Cablevisión S.A. on Complaint for the protection of constitutional rights Law 16,986 (Motion for Preliminary Injunction)” pending before Federal Court No. 2, Civil Clerk’s Office No. 4 of the City of La Plata in connection with the price of cable television subscriptions, whereby the court imposed a cumulative daily fine of Ps. 100,000 per day on Cablevisión. Cablevisión appealed the fine on the grounds that Resolution No. 50/10 issued by Mr. Moreno, as well as its extensions and/or amendments were suspended, as mentioned above, by an injunction with respect to Cablevisión and its branches and subsidiaries prior to the imposition of the fine; pursuant to the collective injunction issued by the Federal Court of the City of Mar del Plata on August 1, 2011 in re “La Capital Cable and Others v. National Government and Others on Preliminary Injunction”. That injunction suspended the application of all the criteria set by the Secretary of Domestic Trade under Mr. Guillermo Moreno. The Federal Court of Appeals of the City of La Plata reduced the fine to Ps. 10,000 per day. Cablevisión filed an appeal against that decision in due time and form against that decision. On October 16, 2013, the Court of Appeals dismissed the appeal filed by Cablevisión. As of the date of these financial statements, Cablevisión had settled the fine in the amount of Ps. 1,260,000 and compliance was recorded in the file. On June 11, 2013, Cablevisión was served notice of a resolution rendered in the abovementioned case; whereby the court ordered the appointment of an expert overseer (perito interventor) specialized in economic sciences to: (i) verify whether or not the invoices corresponding to the basic cable television subscription issued by the Company to subscribers domiciled in the Province of Buenos Aires, are actually prepared at the headquarters located at Gral. Hornos 690, and/or at the Company’s branch offices, precisely detailing that process, (ii) identify the individuals responsible for that area, (iii) determine whether or not the administrative actions tending towards the effective compliance with the injunction issued on that case are underway, and (iv) identify the senior staff of the Company that must order the invoice issuance area to prepare the invoices as decided under that injunction. Cablevisión timely appealed the appointment of said expert on the same grounds stated above. This appeal is also pending before the Federal Court of Appeals of the City of La Plata. For the purposes of enforcing the injunction, the court issued letters rogatory to the competent judge of the City of Buenos Aires. Upon the initiation of that proceeding, both the National Court on Federal Administrative Matters and the National Court on Federal Civil and Commercial Matters declined jurisdiction to enforce the injunction ordered 127 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 128 by the Federal Judge of La Plata. Cablevisión has appealed the decision in connection with the lack of jurisdiction in due time and form. Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters confirmed the appealed decision. Accordingly, Cablevisión will file an extraordinary appeal in due time and form to have the case decided by the Supreme Court of Argentina. It should be noted that, in light of the corporate reorganization of Cablevisión, both parties requested the suspension of the procedural periods for 180 days. The judge granted such request. Therefore, the procedural terms are suspended until December 11, 2014. Given the decision rendered by the Supreme Court of Argentina in re “Municipality of Berazategui v. Cablevisión” mentioned below, the procedural periods remain suspended until the Federal Court of Mar del Plata renders a decision thereon. After the Federal Court of the City of Mar del Plata issued its injunction, several Municipal Offices of Consumer Information (“OMIC”, for its Spanish acronym) and several individuals filed claims requesting that Cablevisión comply with Resolution No. 50/10 and the subsequent resolutions that extended its effectiveness. In some cases, preliminary injunctions were granted. In every case, Cablevisión appealed such preliminary injunctions alleging that Resolution No. 50/10, as amended, and/or the subsequent resolutions that extended its effectiveness, had been suspended with respect to Cablevisión, its branches and subsidiaries prior to the issuance of such preliminary injunctions. On September 23, 2014, the Supreme Court of Argentina rendered a decision in re "Application for judicial review brought by the defendant in the case Municipality of Berazategui v. Cablevisión S.A. on claim for the protection of constitutional rights (acción de amparo)" and ordered that the cases related to these resolutions continue under the jurisdiction of the Federal Court of Mar del Plata that had issued the decision on the collective action in favor of ATVC. Decisions made on the basis of these consolidated financial statements should consider the eventual impact that the above-mentioned resolutions might have on Cablevisión and its subsidiaries, and the Company’s consolidated financial statements should be read in light of such uncertainty. b. On August 19, 2010 the Media Secretariat issued Resolution No. 100/2010, whereby it revoked the license that had been granted to Fibertel. Cablevisión believes that this resolution is an absolutely null and void administrative act. Its language contradicts express provisions of the National Constitution, of Law No. 19,550 (Argentine Business Associations Law), Decrees Nos. 1,185/90 and 764/00 and Law No. 19,549 of Administrative Procedures, among others. The Resolution disregards the several filings made by Cablevisión with the Media Secretariat requesting such agency to issue an administrative act evidencing that Cablevisión, pursuant to section 82 of the Argentine Business Associations Law, is the successor of Fibertel and, therefore, the holder of the exclusive telecommunication service license and of the registrations that had been previously granted to Fibertel. More than eight years after that request, in spite of the existence of a draft of a favorable decision in the case file, with a completely arbitrary attitude that contradicts other precedents of the same agency and without prior notice that would have allowed Cablevisión to exercise its defense right, the SECOM ordered that the license be revoked and that the users migrate within 90 days of the resolution’s notification. On August 26, 2010 Cablevisión filed an appeal requesting the reversal of the resolutions, and if such appeal is rejected, a subsidiary appeal against that Resolution before the highest administrative authority. The appeal was dismissed pursuant to SECOM Resolution No. 132/2010 dated October 7, 2010. However, since Cablevisión had filed a subsidiary appeal to have the case heard by the highest administrative authority, the file was submitted to the Ministry of Federal Planning, Public Investment and Utilities. As of the date of these financial statements, this appeal is pending resolution. On February 24, 2011, Chamber No. 3 of the Federal Court of Appeals on Civil and Commercial Matters of the City of Buenos Aires, in re “ANTITRUST ASSOCIATION V. NATIONAL GOVERNMENT MEDIA SECRETARIAT ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS” confirmed 128 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 129 the decision rendered in the first instance, stating that the National Government, Media Secretariat, shall refrain from disrupting or limiting in any way the Internet access services offered by Cablevisión. It also partially amended the above decision by broadening its effects, ordering the National Government to refrain from enforcing Resolution No. 100/10, thus allowing new customers to subscribe to the Internet access services offered by Cablevisión. On December 16, 2011, Federal Civil and Commercial Court No. 3, Clerk’s Office No. 5 issued a related injunction in re “CABLEVISION S.A. v. NATIONAL GOVERNMENT ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS”, ordering the suspension of the effects of SECOM Resolution No. 100/10 and also guaranteeing new subscribers the possibility to subscribe to the Internet Access service offered by Cablevisión. On December 20, 2011, at the request of Cablevisión, a new preliminary injunction was issued in re “CABLEVISION S.A. v. National Government – Argentine Secretariat of Communications on COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS”. On the basis of the above-mentioned precedent, and on the existing connection between the subject matters of both cases, as alleged by Cablevisión, the injunction ordered the suspension of the effects of SECOM Resolution No. 100/10. The National Government filed an appeal with Chamber No. 3 of the National Court of Appeals on Federal Civil and Commercial Matters. Subsequently, on October 23, 2014, the preliminary injunction was ratified by the National Court of Appeals. Due to the imminent possibility that the application of Law No. 26,522 will affect the assets used to provide Internet access services, within the framework of this same file Cablevisión requested the extension of the scope of the effective injunction, which was granted on December 6, 2012. Such extension entailed notifying AFSCA of the injunction that prevents it from affecting in any way the Internet access services offered by Cablevisión. That decision was subsequently revoked by Chamber No. 3 of the National Court of Appeals on Federal Civil and Commercial Matters. Based on the decisions rendered by Chamber No. 3 on the above-mentioned preliminary injunctions, Cablevisión is authorized to continue to render the telecommunication services granted to Fibertel. Cablevisión will resort to all available administrative and judicial remedies in order to have SECOM Resolution No. 100/2010 declared null and void. Even though Cablevisión has strong grounds that support its position, it cannot be assured that the final outcome of this issue will be favorable. On September 10, 2010, the National Administration of Domestic Trade notified Cablevisión that a Ps. 5 million fine had been imposed for promoting the Fibertel service without being the holder of the license (Section 7 of Law No. 24,240), for the impossibility of honoring the promotion offered to undetermined potential consumers (Section 7 of Law No. 24,240), for providing wrong information to the customers (Section 4 of Law No. 24,240), and for the impossibility of honoring promotions because Cablevisión was not the holder of the Fibertel license (Section 19 of Law No. 24,240). Cablevisión appealed such decision in due course, since it believes it has sufficient arguments in its favor. The file was assigned No. 1,276 and is pending before Chamber No. 2 of the Court of Appeals on Administrative Matters. On April 17, 2012 the appeal was partially granted, reducing the fine to Ps. 380,000. Notwithstanding the foregoing, Cablevisión filed an appeal with the Supreme Court of Argentina in due time and form against such decision. On July 12, 2012, Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters decided to dismiss the appeals filed by both parties. Cablevisión filed an appeal against the above- mentioned dismissal since it believes it has sufficient grounds to have the fine revoked. However, Cablevisión cannot assure that the outcome of the appeal will be favorable. Since the appeal does not have staying effects, on October 18, 2012 the National Administration of Domestic Trade ordered Cablevisión to pay within ten (10) business days the fine reduced by Chamber No. 2. On October 29, 2012 Cablevisión settled the fine 129 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 130 in the amount of Ps. 380,000 and compliance was recorded in the file. filed its response, which is pending analysis by such agency. c. Pursuant to the Antitrust Law and to Broadcasting Law No. 22,285, the transactions carried out on September 26, 2006 that resulted in an increase in the indirect interest the Company held in Cablevisión to 60%, Cablevisión’s acquisition of 98.5% of Multicanal and 100% of Holding Teledigital, and Multicanal’s acquisition of PRIMA (from PRIMA Internacional (now CMD)), required the authorization of the CNDC (validated by the SCI), and the COMFER. On October 4, 2006, the Company, Vistone, Fintech, VLG and Cablevisión, as purchasers, and AMI CV Holdings LLC, AMI Cable Holdings Ltd. and HMTF-LA Teledigital Cable Partners LP, as sellers, filed for the approval of the acquisition. After several requests for information, the SCI issued Resolution No. 257/07, with a prior opinion of the CNDC in favor of the approval of the above-mentioned transactions and after consulting the COMFER and the SECOM, which did not raise any objections. The Company was served notice in this respect on December 7, 2007. Such Resolution was appealed by five entities. As of the date of these financial statements, the CNDC has dismissed the five appeals filed against the above-mentioned resolution. Four of the entities filed direct appeals before the judicial branch. Three of those appeals were dismissed and one is still pending resolution. Cablevisión believes that if the CNDC acts as it did in the case of the three dismissed direct appeals, the fourth appeal is unlikely to be admitted. On June 11, 2008, Cablevisión was served with a decision of the National Court of Appeals on Federal Civil and Commercial Matters revoking a decision rendered by the CNDC on September 13, 2007, whereby such agency had dismissed a claim filed by Gigacable S.A. prior to the December 7, 2007 decision referred to above. The Court of Appeals revoked CNDC’s decision only with respect to matters relating to the conduct of Cablevisión and Multicanal prior to CNDC’s authorization of the transactions on December 7, 2007, and ordered an investigation to determine whether a fine should be imposed on Cablevisión and Multicanal due to such conduct. As of the date of these financial statements, Cablevisión has d. On December 15, 2008, the shareholders of Cablevisión approved the merger of Multicanal, Delta Cable S.A., Holding Teledigital, Teledigital, Televisora La Plata Sociedad Anónima, Pampa TV S.A., Construred S.A. and Cablepost S.A. into Cablevisión, whereby, effective as of October 1, 2008, Cablevisión, as surviving company, became the universal successor to all of the assets, rights and obligations of the merged companies. The merger commitment was executed on February 12, 2009 and was filed with the CNV pursuant to applicable regulations that require administrative approval. As of the date of these financial statements, such merger is pending administrative approval by the CNV and registration with the IGJ. On September 3, 2009, the COMFER issued Resolution No. 577/09 whereby it withheld approval of Cablevisión’s merger with Multicanal S.A. On September 8, 2009, Multicanal was served with CNDC Resolution No. 106/09, dated September 4, 2009, whereby the CNDC ordered an audit to articulate and harmonize the several aspects of Resolution No. 577/09 issued by the COMFER with Resolution No. 257/07 issued by the Secretariat of Domestic Trade. Resolution No. 106/09 also sets forth that the notifying companies shall not, from the enactment thereof and until the end of the audit and / or resolution of the CNDC, be able to remove or replace physical or legal assets. On September 17, 2009 Judge Dr. Esteban Furnari of the National Court on Federal Administrative Matters No. 2, in re “Multicanal and Other v. Conadeco- Decree 527/05 and other on Proceeding leading to a declaratory judgment”, ordered the suspension of the effects of COMFER Resolution No. 577/09, of CNDC Resolution No. 106/09, and any other act resulting therefrom, until a final decision was rendered in the case. On October 23, 2009, the court decision that had suspended the effects of COMFER Resolution No. 577/09 and CNDC Resolution No. 106/09 was revoked by Chamber No. 3 of 130 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 131 the National Court of Appeals on Federal Administrative Matters, in re “Multicanal and Other v. Conadeco- Decree 527/05 and other on Proceeding leading to a declaratory judgment”. Therefore, the calculation of the suspended terms was automatically resumed. On that basis, on December 1, 2009, Cablevisión ratified the filing it had made with the COMFER at the time of the merger, and specified the licenses to which it had decided to maintain title. On December 16, 2009, the Chamber No. 3 of the National Court of Appeals on Federal Administrative Matters, in re "Multicanal and other v. CONADECO Decree 527/05 and other on Proceeding leading to a declaratory judgment" File No. 14,024/08, granted the extraordinary appeal filed by Multicanal and Grupo Clarín against the decision rendered by that same court on October 23, 2009. With the granting of that appeal, Cablevisión’s preliminary injunction regained full force and effect. Accordingly, on January 8, 2010 Cablevisión notified such circumstance to the COMFER. Subsequently, on March 9, 2011, the Supreme Court of Argentina in re “MULTICANAL and Other v./ CONADECO - Decree 527/05 and other on/Proceeding leading to a declaratory judgment”, granted the appeal by right and the extraordinary appeal filed by the National Government and revoked the decision rendered by Chamber No. 3 of the National Court of Appeals on Federal Administrative Matters, which had confirmed the preliminary injunction requested by Cablevisión in the first instance. Notwithstanding the foregoing, Cablevisión believes that this matter does not have a material impact on the merits of the case. Notwithstanding the required filings made by Cablevisión and its shareholders to prove that they were complying with the commitment agreed with the CNDC on December 7, 2007 (date on which the SCI granted authorization), on September 23, 2009, the SCI issued Resolution No. 641, whereby it ordered the CNDC to verify compliance with the parties’ proposed commitment by visiting the parties’ premises, requesting reports, reviewing documents and information and carrying out hearings, among other things. On December 11, 2009, Cablevisión notified the CNDC of the completion and corresponding verification of the fulfillment of the voluntary undertakings made by Cablevisión at the time of the enactment of SCI Resolution No. 257/07. On December 15, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions” (case 10,506/09), partially acknowledging the preliminary injunction requested by Grupo Clarín, and instructing the CNDC and the SCI to notify Grupo Clarín whenever their own verification of Cablevisión’s fulfillment of its undertakings had been concluded, regardless of the result. Should such agencies have any observations, they should notify Grupo Clarín within a term of 10 days. On the same date, the CNDC issued Resolution No. 1,011/09 whereby it deemed Cablevisión’s voluntary undertakings unfulfilled and declared the rescission of the authorization granted under Resolution No. 257/07. On December 17, 2009, the National Court of Appeals on Federal Commercial-Criminal Matters, Chamber A, decided to suspend the term to appeal Resolution No. 1,011/09 until the main case was transferred back to the CNDC, considering it had been in such court since December 16, 2009. On December 17, 2009, the CNDC notified Cablevisión of the initiation of the motion for execution of Resolution No. 1,011/09. On December 18, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued an injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions”, which suspended the effects of Resolution No. 1,011/09 until the notice set forth in the injunction of December 15, 2009 was served. Accordingly, the CNDC served notice to Cablevisión by means of Resolution No. 1,101/09. On December 30, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions”, partially acknowledging Grupo Clarín’s request and suspending the term for Grupo Clarín to respond to Resolution No. 1,101/09 until Grupo Clarín is granted access to the 131 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 132 administrative proceedings related to the charges brought by the CNDC in its Opinion No. 770/09 (on which Resolution No. 1,011/09 was based). On February 19, 2010, Cablevisión requested the nullification of the notice, and as a default argument, submitted the response requested under Resolution No. 1,101/09. On February 26, 2010, the National Court of Appeals on Federal Commercial-Criminal Matters approved the recusation filed by Cablevisión and excluded the Secretary of Domestic Trade from the proceedings. On March 3, 2010, the Argentine Ministry of Economy and Public Finance issued Resolution No. 113 (subscribed by the Minister of Economy, Dr Amado Boudou) rejecting the request for the nullification of Resolution No. 1,011/09, the requests for abstention and excusation of certain officials, and all the evidence produced in connection with such request for nullification. The voluntary undertakings made by Cablevisión under Resolution No. 257/07 were deemed unfulfilled, thus declaring the rescission of the authorization granted under such resolution. The parties involved were ordered to take all necessary actions to comply with such rescission within a term of nine months, and to inform the CNDC about the progress made in that respect on a monthly basis. Such resolution was appealed in due time and form. The appeal was granted without staying the execution of judgment. The appeal is currently pending before Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters in re “AMI CABLE HOLDING and other on/ Appeal of the National Antitrust Commission Resolution” (File No. 2,054/2010). Chamber No. 1 has to render a decision on various excusations and recusations of the judges of Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters. Once a decision has been rendered in that regard, the Court of Appeals will have to render a decision on the appeal. On March 3, 2010, the Company brought a claim seeking to nullify COMFER Resolution No. 577/09. Upon being served with this claim, the COMFER filed an exception, which was responded by Cablevisión. On September 4, 2012 the Judge decided to dismiss the exception filed by the COMFER, which shall bear the legal costs incurred. On December 13, 2012 the draft notice of such decision was submitted to the Court, which then issued the official notice on December 26, 2012. Together with the draft notice, a request was submitted to set the preliminary hearing (before the discovery proceedings). Such dismissal was appealed by the COMFER and ratified by the Court of Appeals. Subsequently, the judge ordered discovery proceedings. As of the date of these financial statements, the proceeding was at the discovery stage. The COMFER reported a new fact (AFSCA Resolution No. 193/2014). The new fact report was responded by Cablevisión and admitted by the court. In its decision, the Court held that the parties have different criteria about the interpretation of such resolution. On April 20, 2010, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters granted the appeal filed by Grupo Clarín S.A. in re “Grupo Clarín on delay in the appeal of the proceedings”, and decided that the appeal granted by the CNDC to Grupo Clarín S.A. against Resolution No. 113/10 had the effect of staying such resolution. The National Government filed an appeal asking that the Court of Appeals revoke its own decision with respect to the effect granted to the April 20 decision, and that it decline its jurisdiction. It also filed an extraordinary appeal. Both appeals were dismissed. Chamber No. 2 requested the administrative file and the Court’s decision is pending. Cablevisión considers that it has strong grounds to have the effects of the above Resolution suspended and therefore has brought the relevant legal actions. However, it cannot assure that the outcome will be favorable. Decisions made on the basis of these financial statements should consider the eventual impact that the above-mentioned resolutions might have on Cablevisión and its subsidiaries, and these financial statements should be read in light of such uncertainty. e. Under Proceeding File No. 21,788/08 dated November 17, 2008, Cablevisión informed the COMFER about the corporate business reorganization process effective as of October 1, 2008. In that same act, Cablevisión informed the COMFER about: i) all the licenses to which 132 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 133 it became universal successor under the corporate business reorganization process; ii) the exercise of an option for one of the licenses in each of the locations where it held multiple licenses, and iii) the relinquishment of original licenses and extensions so as to eliminate the multiple licenses accumulated in each of the locations where it held multiple licenses. As a result of such corporate business reorganization process, Cablevisión became the universal successor of 158 licenses to exploit Supplementary Services in several locations (pursuant to section 44, subsection b) of Law 22,285. To avoid having multiple licenses, Cablevisión informed the COMFER about its irrevocable intention to relinquish a total of 78 licenses (including original licenses and extensions) so as to eliminate all the supplementary service licenses that exceeded the limit set for supplementary services in each location (which was one license per designated area). Notwithstanding the foregoing, through Resolution No. 577/COMFER/09, the COMFER illegitimately decided to withhold approval of the merger requested by Cablevisión, requesting Cablevisión to submit a divestiture plan on the grounds that the license relinquishments spontaneously communicated by that company were not sufficient. (See Note 8.1.d). f. On May 23, 2011, Supercanal S.A. filed a claim for the protection of constitutional rights (acción de amparo) before the Federal Court of Mendoza against Cablevisión, Grupo Clarín and other co-defendants, requesting that they refrain from exercising alleged anti-competitive practices and that the assets, liabilities and businesses that used to belong to Multicanal and that were subsequently merged into Cablevisión (see Note 8.1.d.) be separated from the other assets, liabilities and businesses of Cablevisión and transferred to third parties. Together with the claim for the protection of constitutional rights, Supercanal S.A. requested a preliminary injunction (for the same purposes); which was granted on December 16, 2011. The injunction ordered the separation of the assets, liabilities and businesses that used to belong to Multicanal and that were subsequently merged into Cablevisión within a term of 60 days. The court also appointed a supervisor (interventor) and co-administrator for a term of twelve months, who shall enforce the injunction, order the changes to such company’s management required for the effective enforcement of the duties to be fulfilled by the Board of Directors, and also report on a monthly basis to the court about his/her performance. Such court-appointed supervisor (interventor) and co-administrator shall have the obligation to perform the necessary functions aimed at fulfilling the actions ordered pursuant to the injunction. Cablevisión filed an appeal against such injunction and presented the grounds for its defense in due time and form. Cablevisión also requested the replacement of such injunction with another less burdensome one that could largely cover the risks alleged by Supercanal in its claim. On April 26, 2012, the Federal Court of Appeals of Mendoza, Chamber A, dismissed the appeal filed by Cablevisión against the decision of December 16, 2011, but extended the term to divest the assets, liabilities and businesses of Multicanal that had been merged into Cablevisión to 120 days. The court also dismissed the request to replace the injunction. Cablevisión believes it has strong grounds to defend its position. Therefore, it has already informed the Court that it will file an appeal with the Supreme Court of Argentina against such decisions. Notwithstanding the foregoing, Cablevisión cannot assure the outcome of this appeal. On August 14, 2012, Cablevisión was served notice of a decision rendered by Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters of the City of Buenos Aires (“the Court of Appeals”) on August 13, 2012; whereby that court declared the existence of a connection between the case brought by Supercanal S.A. in the Province of Mendoza and the appeal of MECON Resolution No. 113/10 (“Ami Cable Holding LTD and other on/ Appeal of the National Antitrust Commission Resolution). The Court of Appeals stated that the hearing of the case in the Province of Mendoza gives rise to an atypical jurisdictional issue that affects the correct rendering of justice in the case and the powers of said Court of Appeals. The Court of Appeals therefore ordered Federal Court No. 2 of Mendoza to send the file so that the case could continue under the jurisdiction of the Federal Courts on Civil and Commercial 133 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 134 Matters of the City of Buenos Aires. Federal Court No. 2 of Mendoza and the Federal Court of Appeals of Mendoza were served notice of said order on the same date and both of them rejected it, giving rise to a jurisdictional conflict between Chamber No. 2 of the Court of Appeals and Federal Court No. 2 of Mendoza. Pursuant to Section 24, subsection 7 of Decree/Law No. 1285/58, if a jurisdictional conflict arises between a federal judge of a given jurisdiction and a Federal Court of Appeals of a different jurisdiction, said conflict must be resolved by the Argentine Supreme Court. After having been served notice of the decision of Chamber No. 2 of the Court of Appeals, on August 17, 2012, Judge Walter Bento of Federal Court Nº 2 of Mendoza issued an order to notify Cablevisión of an extension of the scope of the injunction issued in re “Supercanal S.A. v. Cablevisión S.A. and other on Claim for the protection of constitutional rights (acción de amparo)”. Under this injunction, the judge ordered the removal of the Board of Directors of Cablevisión and its replacement with a court-appointed administrator (interventor) whose role was to fulfill court orders. However, in response to the claim brought by Cablevisión on August 21, 2012 with the Argentine Supreme Court in connection with the abovementioned jurisdictional conflict, the Supreme Court ordered the immediate suspension of the proceedings until a decision is rendered on the jurisdictional conflict. Notwithstanding this, Cablevisión and its legal advisors believe that the order issued on August 17, 2012 is irregular and that it may not be deemed a valid notice, because it should have been issued within the framework of the proceedings pending with the Federal Court on Civil and Commercial Matters of the City of Buenos Aires, rather than being served at a domicile established in the city of Mendoza. All these proceedings are suspended and were sent to the Argentine Supreme Court for it to render a decision on the jurisdictional conflict. On February 25, 2014, the Supreme Court of Argentina revoked all the decisions rendered by Judge Walter Bento of Federal Court No. 2 of Mendoza relating to the claim brought by Supercanal S.A. against Cablevisión for anti-competitive practices and in respect of which the judge had ordered, among other things, the appointment of a court-appointed supervisor (interventor) and co-administrator in that company and the separation of that company’s assets. g. On October 21, 2010, the National Administration of Domestic Trade served notice to Cablevisión of (i) a fine of Ps. 5 million for failing to comply with the duty to inform (Section 4 of Law 24,240) concerning one of its promotions and (ii) a fine of Ps. 500,000 for infringing Section 2, subsection c) of Decree 1153/95 of the regulations to Section 10 of Law 22,802. Cablevisión appealed the fine because it believed it had strong arguments in its favor. The file was assigned No. 1281 and submitted to Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters. On October 4, 2011, the Court of Appeals partially affirmed Resolution 739/10 and reduced the fine to Ps. 2.2 million, imposing 75% of the legal costs on Cablevisión. On October 13, 2011 Cablevisión filed a Federal Ordinary appeal with the Supreme Court of Argentina and on October 20, 2011 it filed a federal extraordinary appeal with that same court in the event that the ordinary appeal may be dismissed. On October 21, 2011, Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters granted the ordinary appeal and the legal brief was submitted in due time and form. On August 7, 2012 the Supreme Court of Argentina decided that the Ordinary Appeal had been wrongly granted. On December 13, 2012 the Court of Appeals dismissed the appeal filed by Cablevisión, and imposed court costs on Cablevisión. On December 20, 2012 Cablevisión filed an appeal against the above-mentioned dismissal since it believed it had sufficient grounds to have the fine revoked. However, Cablevisión cannot assure that the outcome of the appeal will be favorable. On July 29, 2013 Cablevisión settled the fine in the amount of Ps. 2.2 million and its compliance was recorded in the file. 134 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 135 h. On May 31, 2012, Cablevisión was served notice of Resolution No. 16,819 dated May 23, 2012 whereby the Argentine Securities Commission (CNV, for its Spanish acronym) ordered the initiation of summary proceedings against Cablevisión and its directors, members of the Supervisory Committee and the Head of Market Relations for an alleged failure to comply with the duty to inform. The CNV considers that Cablevisión failed to comply with its duty to inform because the investor community was deprived of its right to become fully aware of the grounds of a decision rendered by the Federal Court of Mendoza and the scope of the powers granted by that court to the co-administrator appointed in re “Supercanal S.A. v. Cablevisión S.A. on protection of constitutional rights”, in addition to the fact that other self-regulated authorities were allegedly not notified of the information furnished by Cablevisión. On June 25, 2012, Cablevisión filed a response requesting that its defenses be sustained and all charges dismissed. On February 6, 2014 Cablevisión submitted the legal brief for the purpose of discussing the evidence submitted under File No. 171/2012. Now the CNV’s Board of Directors has to render its decision. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the outcome of the said summary proceedings will be favorable. i. Pursuant to CNV Resolution No. 16,834 dated June 14, 2012 notified to the Company on June 27, 2012, the CNV ordered the initiation of summary proceedings against the Company and the members of its Board of Directors, Supervisory Committee and Audit Committee in office at the time of the occurrence of the events that motivated the proceedings (September 19, 2008) for alleged failure to comply with the duty to inform. Under said Resolution, the CNV argues that the Company allegedly failed to comply with the duty to disclose the filing of a claim against it entitled “Consumidores Financieros Asociación Civil para su defensa and other v. Grupo Clarín on/Ordinary”, which the CNV considers relevant. On July 25, 2012, Cablevisión filed a response petitioning that its defenses be sustained and that all charges against it be dismissed. The Company and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure the outcome of said summary proceedings. j. The Executive Branch of Uruguay issued Decree No. 73/012, published in the Official Gazette on March 16, 2012, whereby it expressly repealed Decree No. 231/011, which had revoked certain signals’ broadcast frequencies. However, the new decree ratified and repeated – virtually in identical terms - the decree that was being repealed, and added certain provisions that caused further detriment to the two affected companies with which a subsidiary of Cablevisión has contractual arrangements in place. Consequently, on March 23, 2012 the affected companies filed an appeal requesting that Decree No. 73/012 be revoked. The appeal is still pending resolution. In May 2012, the aforesaid companies brought a legal action with the Court in Administrative Litigation Matters requesting the nullification of the resolution and the suspension of its execution. This motion to suspend the execution of the challenged resolution was brought as a separate case, and progressed through the corresponding instances. The Office of the Attorney General for Administrative Litigation Matters, in its opinion No. 412/013 advised the Court on Administrative Litigation Matters to grant the motion to suspend the execution of the challenged resolution for formal reasons, but the Court dismissed the motion of suspension. Notwithstanding the foregoing, as of the date of these financial statements, the government authority has not yet enforced the decree. On September 30, 2014, the Court on Administrative Litigation Matters through its decisions No. 416/2014 and No. 446/2014 revoked for formal reasons Decrees No. 73/012 and No. 231/011, respectively. On March 9, 2015, Decree No. 82/015 was published in the Official Gazette, whereby the Executive Branch 1) repealed Decree No. 73/012; 2) 16 common stations are awarded to be held in common (the same stations) by BERSABEL S.A. and VISION SATELITAL S.A. for a term of 15 years: Two of the 16 stations are awarded on a secondary basis, which means that they may be exposed to interferences 135 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 136 with no possibility to bring any claim in connection thereto; 3) use of existing stations must cease within 18 months of their award to mobile service operators; 4) both companies are expressly authorized to increase the number of TV signals (stations) included in their respective services making use of digitization techniques; 5) both companies shall submit before the Communication Services Regulatory Agency (“URSEC”, for its Spanish acronym), within a fixed term of 60 calendar days as from the date of publication of the Decree, a technical plan for the migration and release of stations, which plan shall be assessed and approved by such agency; 6) the Bidding Terms governing the bid for frequency bands that were owned by both companies shall include an economic compensation mechanism for both companies to cover the expenses incurred in adapting their systems to the new stations awarded to them, in the amount of USD 7,000,000. k. On June 4, 2012, the Federal Court of Appeals of Rosario partially confirmed SCI Resolution No. 219/2010, whereby the Secretary of Domestic Trade found that Cablevisión and Multicanal had engaged in market sharing practices in connection with the paid-television service in the City of Santa Fe and reduced the fine imposed on each of the companies involved from Ps. 2.5 million to Ps. 2 million. However, this decision is not yet final, because Cablevisión and Multicanal and the Ministry of Economy filed appeals with the Argentine Supreme Court, which are still pending. On October 21, 2014, the Argentine Supreme Court dismissed the appeals; therefore, Resolution No. 219/10 became final. The case is currently pending with the Court of Appeals of Rosario, which shall order its referral to the SCI. The SCI, in turn, shall serve notice to the companies involved in order for them to pay the fine. l. On March 1, 2011, the SCI served notice to Multicanal and Cablevisión of Resolution No. 19/11 whereby the Secretary of Domestic Trade found that both companies had engaged in market sharing practices in connection with the paid-television service in the City of Paraná and imposed a fine of Ps. 2.5 million on each of them. Cablevisión filed an appeal in due time and form. This appeal was dismissed by the Federal Court of Appeals of Paraná. Therefore, Cablevisión filed an appeal with the Argentine Supreme Court. On November 4, 2011, the appeal of SCI Resolution No. 19/11 filed by Cablevisión with the Supreme Court was partially granted by the Federal Court of Appeals of Paraná. On August 30, 2012, the Argentine Supreme Court dismissed the appeal filed by Cablevisión; therefore, Resolution No. 19/11 became final. The case is currently pending with the Court of Appeals of Paraná, which shall order its referral to the SCI. The SCI, in turn, shall serve notice to the companies involved in order for them to pay the fine. m. Cablevisión, by itself and as successor of Multicanal’s operations after the merger, is a party to several administrative proceedings under the Antitrust Law, facing charges of anticompetitive conduct, including territorial division of markets, price discrimination, abuse of dominant position, refusal to deal and predatory pricing, as well as a proceeding filed by the Cámara de Cableoperadores Independientes (Chamber of Independent Cable Operators), challenging the transactions consummated on September 26, 2006. While Cablevisión believes that its conduct and that of Multicanal have always been within the bounds of the Argentine Antitrust Law and regulations and that their positions in each of these proceedings are reasonably grounded, it can give no assurance that any of these cases will be resolved in its favor. n. On January 22, 2010, Cablevisión was served notice of CNDC Resolution No. 8/10 issued within the framework of file No. 0021390/2010 entitled “Official Investigation of Cable Television Subscriptions (C1321)”. Pursuant to this Resolution, Cablevisión, among other companies, was ordered to refrain from conducting collusive practices and, particularly, from increasing the price of cable television subscriptions for a term of 60 days, counted as from the date compliance with all required notices is certified in the records of the case. As established by that Resolution, companies that have already increased the price of the subscriptions shall return to the price applicable in November 2009 and maintain such price for the abovementioned term. On February 2, 2010, by means of Resolution No. 13/10, the CNDC ordered Cablevisión to refund to its subscribers in the March 2012 136 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 137 invoices the amount of any price increase made after the date of CNDC Resolution No. 8/10. Cablevisión appealed both resolutions in due time and form and their effects were suspended by an injunction issued by Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters at the request of Cablevisión. The National Government filed an appeal with the Supreme Court against this decision, and the appeal has been dismissed. On October 4, 2011, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters granted the appeal filed against both decisions in re “Cablevisión and Other on Appeal against the Decision rendered by the National Antitrust Commission” (File 1,473/2010), declaring Resolution No. 8/10 moot and nullifying Resolution No. 13/10. The National Government filed an appeal with the Supreme Court of Argentina against the decision rendered by Chamber No. 2, which was granted and is now pending before the Supreme Court of Argentina. o. On August 5, 2010, Cablevisión was served with CNC Resolution No. 2,936/2010 within the framework of Administrative Proceeding File No. 2,940/2010, pursuant to which Cablevisión and/or any other individual or entity through which the services relating to the licenses and registrations granted to FIBERTEL S.A. ("Fibertel") may be rendered shall refrain from adding new subscribers and from altering the conditions under which the services are currently rendered. To decide as it did, the Argentine Communications Commission disregarded the corporate reorganization that was completed and registered before the IGJ, whereby Fibertel merged into Cablevisión effective as of April 1, 2003. By virtue of that merger process, Cablevisión became the universal successor to all of the assets, rights and obligations of Fibertel as the merged company, among them, the Exclusive License awarded through SECOM Resolutions No. 100/96, 2375/97, 168/02 and 83/03. Therefore, Fibertel did not transfer or divest of its rights and obligations to third parties – among them, those derived from the above-mentioned Exclusive License. Fibertel continued to carry out its activities through Cablevisión as surviving company. In order to implement the above-mentioned corporate business reorganization, on March 5, 2003, the Argentine Communications Commission and the SECOM were notified of the corporate business reorganization for its acknowledgement. The technical and legal areas of the Argentine Communications Commission issued a favorable resolution with respect to the compliance with the requirements of current regulations to register Fibertel’s license under the name of Cablevisión. SECOM had a term of 60 days to decide on the corporate business reorganization. However, such agency failed to render a decision as required by the applicable regulations. Not until August 19, 2010 did SECOM issue Resolution No. 100/2010, revoking Fibertel’s license. Cablevisión believes that the Resolution is arbitrary and that it flagrantly violates due process and its defense right. Therefore, Cablevisión has appealed such resolution. No decision has been rendered on the matter yet. p. On October 28, 2010, Cablevisión was served notice of the National Administration of Domestic Trade’s resolutions imposing two fines of Ps. 5 million each, for allegedly failing to observe the typographic character requirements under applicable regulations (Resolution 906/98) when informing its subscribers of the increase in the price of their cable television subscriptions. Cablevisión appealed the fines on November 12, 2010 because it believes it has strong grounds in its favor. However, it cannot assure that the outcome will be favorable. One of the files was assigned No. 1280 and is pending before Chamber No. 1 of the Federal Administrative Court of Appeals, and the other one was assigned No. 1,278 and is pending before Chamber No. 5 of the Federal Administrative Court of Appeals. q. The litigation brought before the Civil, Commercial, Mining and Labor Court of the City of Concarán, Province of San Luis, in early 2007 in re “Grupo Radio Noticias SRL v. Cablevisión and others”, is still pending before the Federal Court in Administrative Matters No. 2. The purpose of that claim was to challenge the share transfers mentioned in Note 8.1.c. and to request the revocation of Cablevisión’s broadcasting licenses. Cablevisión has responded to such claim and believes it is very unlikely 137 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 138 that it will be admitted. The claimant has abandoned the claim it had brought, and the claimant’s attorney must provide evidence of his attorney powers. r. The Government of the City of Mar del Plata enacted Ordinance No. 9163, governing the installation of cable television networks. Such ordinance was amended and restated by Ordinance No. 15,981 dated February 26, 2004, giving cable companies until December 31, 2007 to adapt their cable networks to the new municipal requirements. The ordinance sets forth that in those areas where street lighting has underground wiring, cable television networks are to be placed underground. In this sense, the Executive Department of the Municipality of General Pueyrredón has submitted to the Municipal Council a proposed ordinance extending the term provided until December 31, 2015. Such ordinance is ready for discussion by legislators. Even though the ordinance provides for certain penalties that may be imposed, the City has not imposed such penalties to cable systems that are not in compliance with such ordinance. s. On November 27, 2012 the National Administration of Domestic Trade served Cablevisión with Resolution No. 308/2012, whereby it imposed a Ps. 5 million fine on that company alleging that it had failed to comply with Section No. 4 of the Antitrust Law (increase in the subscription price of cable television services/wrongful information provided by Customer Service, which informed by mail that SCI Resolution No. 50/10 and the supplementing resolutions are suspended on grounds of unconstitutionality, when in fact they have been suspended by an injunction). On December 11, 2012 Cablevisión appealed Resolution No. 308/2012. The administrative file No. S01:0312056/2011 was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 1 in re “Cablevisión SA v. DNCI Res. 308/12 and Other” (File 140/13). A decision has not been rendered yet. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the revocation of the fine will be resolved in its favor. t. On July 5, 2013, the National Administration of Domestic Trade served notice to Cablevisión of Resolution No. 134/2013, whereby it imposed a fine of Ps. 500,000 for breach of Section 2 of Resolution ex S.I.C. y M. No. 789/98, which regulates the Business Loyalty Law No. 22,802. Cablevisión appealed that resolution on July 16, 2013. The administrative file was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 3 in re “Cablevisión SA v. DNCI Res. 134/13 and Other” (File 36044/13). On May 20, 2014, Chamber No. 3 partially granted the appeal filed by Cablevisión and reduced the fine to Ps. 300,000 and ordered that each party shall bear its own legal costs. On June 9, 2014, Cablevisión filed an appeal with the Argentine Supreme Court. On September 18, 2014, Cablevisión was served notice of the extraordinary appeal filed by the National Government, and on October 2, 2014 that company filed a response. On October 9, 2014, the Chamber dismissed both appeals. On October 8, 2010, the National Administration of Domestic Trade served notice to Cablevisión of Resolution No. 697/2010, whereby it imposed a fine of Ps. 500,000 for breach of Section 21 of the Business Loyalty Law No. 22,802. Cablevisión appealed that resolution on October 26, 2010. The administrative file was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 3 in re “Cablevisión SA v. DNCI Res. 697/2010 (File S01:80822/10) and Other” (File 1,277/2011). On December 29, 2011 the Court of Appeals dismissed the appeal filed by Cablevisión, and imposed court costs on Cablevisión. On February 22, 2012, Cablevisión filed an appeal with the Argentine Supreme Court. The appeal was dismissed by the Chamber on April 10, 2012. On April 26, 2012, Cablevisión filed an appeal against the above-mentioned dismissal. The Supreme Court of Argentina granted the appeal and revoked the decision against which Cablevisión had filed the appeal with legal costs to be borne by the National Administration of Domestic Trade, and ordered that the case be sent back to the court of 138 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 139 first instance for it to render a new decision based on the precedent indicated in its ruling. u. On March 16, 2012, CNV issued Resolution No. 16,765 whereby it ordered the initiation of summary proceedings against Cablevisión, its directors and members of the Supervisory Committee for an alleged failure to comply with the duty to inform. The CNV considers that Cablevisión failed to comply with its duty to inform because the investor community was deprived of its right to become fully aware of the Decision rendered by the Supreme Court of Argentina in re "Application for judicial review brought by the National Government Ministry of Economy and Production of the case Multicanal S.A. and other v/CONADECO Decree No. 527/05” and other, and also considers that Cablevisión did not disclose certain issues related to the information required by the CNV in connection with its Class 1 and 2 Noteholders’ Extraordinary Meetings held on April 23, 2010. On April 04, 2012, that company filed a response requesting that its defenses be sustained and that all charges against it be dismissed. The proceeding is now in the discovery stage. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the outcome of said summary proceedings will be favorable. 8.2 Claims and Disputes with Governmental Agencies a. In connection with the decisions made at the Company’s Annual Ordinary Shareholders’ Meeting held on April 28, 2011, on September 1, 2011 the Company was served with a preliminary injunction in re “National Social Security Administration v. Grupo Clarín S.A. re ordinary proceeding” whereby the Company may not in any way dispose, in part or in whole, of the Ps. 387,028,756 currently recorded under the retained earnings account, other than to distribute dividends to the shareholders. On the same date, the Company was served with a claim brought by Argentina’s National Social Security Administration requesting the nullity of the decision made on point 7 (Appropriation of Retained Earnings) of the agenda of the Annual Ordinary Shareholders’ Meeting held on April 22, 2010. As of the date of these financial statements, the Company has duly answered the complaint and the intervening judge has ordered discovery proceedings. On November 1, 2011, the CNV issued Resolution No. 593, which provides that at shareholders’ meetings in which financial statements are considered shareholders must expressly decide to, either distribute as dividends any retained earnings that are not subject to distribution restrictions and that may be disposed of pursuant to applicable law or capitalize such retained earnings and issue shares, or appropriate them to set up reserves other than legal reserves, or a combination of the above. On July 12, 2013 the Company was served notice of Resolution No. 17,131; dated as of July 11, 2013 whereby the CNV declared that the administrative effects of the decisions adopted at the Annual Ordinary General Shareholders’ Meeting held on April 25, 2013 were irregular and ineffective, based on allegations that are absolutely false and irrelevant. According to the Company and its legal advisors, Resolution No. 17,131 is, among other things, null and void, because it lacks sufficient grounds and its enactment is a clear abuse of authority and a further step in the National Government’s attempt to intervene in the Company. On October 11, 2013 Chamber No. 5 of the National Court of Appeals on Federal Administrative Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. CNV – Resol No. 17.131/13 (File 737/13)” File No. 29,563/2013, whereby it suspended the effects of Resolution No. 17.131/2013 dated July 11, 2013 which had rendered irregular and with no effect for administrative purposes the Company’s Annual Ordinary Shareholders’ Meeting held on April 25, 2013. As of the date of these financial statements, the preliminary injunction is still in effect. In August 2013 the Company was served with a nullification claim brought by Argentina’s National Social Security Administration relating to the Annual Ordinary Shareholders’ Meeting held on April 28, 2011 whereby it requested the nullity of all the decisions made at such meeting and, as a default argument, the nullity of the decisions made on points 2, 4 and 7 of that meeting’s agenda, as well as the nullity 139 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 140 \of the decisions made at the Extraordinary Meetings of Class A, B and A and B Shareholders. As of the date of these financial statements, the Company has filed a response in due time and form. On September 17, 2013 the Company was served with a nullification claim brought by Argentina’s National Social Security Administration relating to the Annual Ordinary Shareholders’ Meeting held on April 26, 2012 whereby it requested the nullity of all the decisions made at such meeting and, as a default argument, the nullity of the decisions made on points 8 and 4 of that meeting’s agenda, as well as the nullity of the decisions made at the Extraordinary Meetings of Class A, B and A and B Shareholders. As of the date of these financial statements, the Company has filed a response in due time and form. On March 21, 2014, the Company was served notice of a claim brought by Argentina’s National Social Security Administration in re “National Social Security Administration v. GRUPO CLARÍN S.A. on Ordinary Proceeding” File No. 74,429, pending before the National Court of First Instance on Commercial Matters No. 17, Clerk’s Office No. 34. This claim seeks to nullify and challenge the corporate decisions made at the Shareholders’ Meeting held on April 25, 2013 and those made at the Board of Directors’ Meeting held on April 26, 2013. As of the date of these financial statements, the term for filing a response to the claim has been suspended. On September 16, 2014, the Company received a communication from its controlling shareholder, GC Dominio S.A., whereby that company informed that it had been summoned to court as a third party in re “National Social Security Administration v. Grupo Clarín S.A. on Ordinary Proceeding”, pending before the National Court of First Instance on Commercial Matters No. 17, Clerk’s Office No. 33. As of the date of these financial statements and as informed by GC Dominio S.A., that company has filed a response to the above- mentioned claim. b. The Argentine Federal Revenue Service (“AFIP”) served the subsidiary CIMECO with a notice challenging its income tax assessment for fiscal years 2000, 2001 and 2002. In such notice, the AFIP challenged mainly the deduction of interest and exchange differences in the tax returns filed for those years. If AFIP’s position prevails, CIMECO’s maximum contingency as of December 31, 2014 would amount to approximately Ps. 12.3 million for taxes and Ps. 33.8 million for interest. CIMECO filed a response, which was dismissed by the tax authorities. The tax authorities issued their own official assessment and imposed penalties. CIMECO appealed the tax authorities’ resolution before the National Tax Court on August 15, 2007. During the year ended December 31, 2010, CIMECO received a pro forma income tax assessment from the AFIP for fiscal periods 2003 through 2007, as a consequence of AFIP’s challenge to CIMECO’s income tax assessments for the periods 2000 through 2002 mentioned above. CIMECO filed a response before AFIP, rejecting such assessment and requesting the suspension of administrative proceedings until the Federal Tax Court renders its decision on the merits. During 2011, the AFIP served CIMECO with a notice stating the income tax charges assessed for years 2003 through 2007 and ordering the initiation of summary proceedings. The AFIP’s assessment shows a difference in its favor in the Income Tax liability for the periods indicated above for an amount in excess of the amount that had been estimated originally, as a result of the method used to calculate certain deductions. CIMECO responded to the assessment rejecting all of the adjustments and requesting that the proceedings be rendered without effect and filed, with no further actions to be taken. On April 26, 2012, the AFIP issued a new official assessment comprising the fiscal years 2003 through 2007, in which it applied the same method for the calculation as that used for the administrative settlement, claiming a total liability of Ps. 120 million. On May 21, 2012, an appeal was filed with the Federal Tax Court. CIMECO and its legal and tax advisors believe CIMECO has strong grounds to defend the criteria adopted in their tax returns and that AFIP’s challenges will not be admitted by the Federal Tax Court. Accordingly, CIMECO 140 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 141 has not booked an allowance in connection with the effects such challenges may have. c. Since 2005, the ANA has brought several claims against the holders of broadcasting and cable TV licenses for the payment of customs duties applicable to the import of films documented between 2000 and 2005. According to the ANA, holders of TV licenses are liable to pay customs duties, VAT and income tax not only on the customs value of the physical supports, but also on the reproduction rights agreed upon in the related contracts. ARTEAR filed objections against these claims on the basis of international agreements, doctrine and case law on the subject. As a consequence of the criteria followed by ARTEAR, during the period covered by the claim, it paid other taxes that would not have been payable if ANA’s interpretation had been applied. ARTEAR had to pay in full the differences claimed by ANA in a few isolated cases because the appeals filed with the Federal Court of Appeals against the National Tax Court’s decisions did not have staying effects. In the first unfavorable decision rendered by Chamber No. 4 of the Federal Court of Appeals, which was appealed by ARTEAR, the Argentine Supreme Court refrained from rendering judgment on the merits of the case. Subsequently, all other Chambers of the Federal Court of Appeals have rendered decisions against ARTEAR’s position. Therefore, as of the date of these financial statements, that company has booked an allowance to account for the estimated losses that may result from such claims. On March 25, 2013 the AFIP published General Resolution No. 3451 in the Official Gazette. Pursuant to such Resolution, AFIP established an installment plan for the payment of overdue taxes, customs duties and social security debts. With respect to customs duties, this special installment plan allows for the cancellation of fines imposed or supplementary charges brought by the Customs Administration up to and including February 28, 2013 in connection with import or export duties, as well as interest and restatements thereon, within a term of up to 120 months with a monthly rate of 1.35%. Given that all chambers of the National Tax Court and the Federal Court of Appeals have rendered judgments on the merits of the case against ARTEAR’s position and the Supreme Court of Argentina refrained from rendering judgment, the Company decided to adhere to the installment plan for a large portion of the existing claims, leaving out only those claims in which the ANA has interpreted that ARTEAR committed an infringement. On July 30, 2013, ARTEAR submitted an installment plan, within the framework of General Resolution No. 3451, for the payment of a large portion of the tax component of these claims, notwithstanding the fact that ARTEAR still considers that its interpretation of the customs law is based on reasonable legal grounds. d. On September 10, 2010, the AFIP served TRISA with a notice with objections to its income tax assessment, with respect to the application of the withholding regime set forth under the section following section 69 of the Income Tax law, for fiscal years 2004, 2005 and 2006. If AFIP’s position prevails, TRISA’s contingency would amount to approximately Ps. 28.9 million, out of which Ps. 9.3 million would correspond to taxes on dividend payments made during those years, Ps. 6.5 million to a 70% fine on the omitted tax, and Ps. 13.1 million to late-payment interest. TRISA filed a response, which was dismissed by the tax authorities. On December 20, the tax authorities issued their own official assessment and imposed penalties. TRISA appealed the tax authorities’ resolution before the National Tax Court on February 8, 2011. TRISA and its legal and tax advisors believe that TRISA has strong grounds to defend its position and that AFIP’s challenges will not be admitted by the Federal Tax Court. Accordingly, TRISA has not booked a provision in connection with the effects such challenges may have. e. On August 13, 2012, the parent company GC Dominio S.A. was served notice of a claim brought by the Argentine Superintendency of Legal Entities (IGJ) whereby that agency seeks to annul the registration with the Public Registry of Commerce of the appointment of GC Dominio S.A.’s authorities, approved at the Shareholders’ Meeting held on May 17, 2011. The claim is pending before the Federal Court of First Instance on Commercial Matters No. 25, Clerk’s Office No. 49 (“Inspección General de Justicia v. Dominio S.A. on/Ordinary”, File No. 58652). The claim brought by the IGJ 141 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 142 seeks to annul the registration with IGJ of the appointment of GC Dominio S.A.’s authorities, approved at the Annual Ordinary General Shareholders’ Meeting of GC Dominio held on May 17, 2011. The appointment was registered with the IGJ on April 23, 2012 under No. 7147, Book No. 59 of Share Companies. According to the IGJ and as the case file is said to show, GC Dominio has allegedly failed to comply with certain regulations applicable to foreign shareholders upon registration of the appointment of authorities. Also within the framework of this claim, the Court issued an injunction in favor of the IGJ ordering that the existence of this claim be duly noted. The Court of Appeals has confirmed the decision to order that the existence of this claim be duly noted. GC Dominio S.A.’s legal advisors have strong grounds to argue that the resolution of IGJ’s claim seeking the de-registration of the appointment of authorities has serious defects and infringes the guarantees of reasonableness and due process; a principle that derives from the constitutional guarantee of defense in court, which entails the right to be heard and to produce evidence to contradict a claim. GC Dominio S.A. has appealed such injunction because it considers that the IGJ has not shown that its legal arguments are, at least, plausible. f. As a result of a report on suspicious activities reported by the Argentine Federal Revenue Service (“AFIP”) concerning transactions carried out between the Company and some subsidiaries, the Financial Information Unit (“FIU”) pressed criminal charges for alleged money laundering. The action is now pending before Federal Court No. 9, under Dr. Luis Rodriguez. The FIU has pressed charges against the Company and its directors for alleged money laundering activities related to the trading of shares between the Company and some of its subsidiaries. The Company has appointed defense attorneys and has requested a copy of the file to understand the details of the charges. The FIU is acting as plaintiff in this case. One of the Company’s directors made a spontaneous appearance and filed a response and produced documentary evidence. Certain charges pressed by Representative Di Tullio were also added to the case. In addition, the Prosecutor requested that the charges be investigated and that certain evidentiary measures be taken which have not yet been fulfilled as of the date of these financial statements. On February 25, 2014, the Supreme Court of Argentina revoked all the decisions rendered by Judge Walter Bento of Federal Court No. 2 of Mendoza relating to the claim brought by Supercanal S.A. against Cablevisión for anti- competitive practices and in respect of which the judge had ordered, among other things, the appointment of a court-appointed supervisor (interventor) and co-administrator in that company and the separation of that company’s assets. It should be noted that Cablevisión has still not been served with that decision. In March 2014, the intervening prosecutor Miguel Angel Osorio broadened the request for evidence with regard to intercompany movements between Cablevisión and certain subsidiaries, all of which were regular and had been duly recorded. The Company and its legal advisors consider that there are strong arguments in the Company’s favor, and have gathered evidence that supports the lack of involvement of anyone in any such unlawful maneuvers. However, they cannot assure that the outcome of this action will be favorable. g. By means of Resolution 16,364/2010, dated and notified to AGEA as of July 15, 2010, the CNV’s Board of Directors decided to initiate summary proceedings against AGEA and certain current and past members of its board of directors and supervisory commission, for alleged infringement of the Argentine Business Associations Law, Decree No. 677/01 and Law No, 22,315. AGEA, as well as the current and past members of the board of directors and supervisory commission who are subject to the summary proceedings, duly filed their respective responses. h. The subsidiary AGEA received several inspections from the AFIP aimed at verifying compliance with the so-called competitiveness plans implemented by the National Executive Branch. After several reports issued by the AFIP and the corresponding Resolutions issued by the Ministry of Economy, such agencies allege that certain acts performed by AGEA during 2002 lead to the nullity of some of the 142 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 143 benefits granted under said plans, including adjustments, for an estimated total amount of Ps. 57 million. In April 2013, AGEA was served with AFIP Resolution No. 03/13, whereby such agency decided to exclude AGEA from the Registry of Beneficiaries of the Competitiveness and Employment Generation Agreements under the Cultural Sector Agreement, as from March 4, 2002. The AFIP ordered the restatement of the tax returns and the remittance of the corresponding amounts. AGEA filed an appeal against such resolution. Notwithstanding the foregoing, in re “AEDBA and Other v. Ministry of Economy Resolution No. 58/10”, the Federal Court on Administrative Matters No. 6 issued an injunction ordering AFIP to refrain from initiating and/or continuing with the administrative proceeding/s and/or any act that would entail the enforcement of the amounts payable under Resolution No. 3/13, until a final decision is rendered. Notwithstanding the foregoing, AGEA cannot assure that the appeal will be resolved in its favor. i. On April 9, 2013, Cablevisión was served notice of AFIP Resolution No. 45/13 dated April 3, 2013, whereby such agency imposed penalties in a summary proceeding against that company with respect to compliance with General Resolution No. 3,260/12. Cablevisión filed an appeal, which has staying effects on the execution of those penalties. j. Pursuant to Resolution No. 17,522 issued on September 18, 2014 and notified to AGEA on September 24, 2014, the Board of Directors of the CNV decided to initiate summary proceedings against AGEA, certain current and past members of its Board of Directors and supervisory commission –who occupied those positions between September 19, 2008 and the present date- and against that company’s Head of Market Relations, for an alleged failure to comply with the duty to inform that AGEA was a co-defendant in re “CONSUMIDORES FINANCIEROS ASOCIACION CIVIL PARA SU DEFENSA AND OTHER V. GRUPO CLARIN S.A. AND OTHER on EXPEDITED SUMMARY PROCEEDING” (File No. 065441/08). The summary proceeding is grounded on an alleged failure to comply with Article 5, subsection a), the first part of Article 6 and Article 8, subsection a) part V) of the Annex to Decree No. 677/01; with Articles 1, 2 and 3, subsection 9) of Chapter XXI of the REGULATIONS (T.R. 2001 as amended) –now Article 1 of Section I, Chapter I, Title XII of the REGULATIONS (T.R. 2013 as amended); with Articles 2 and 3 subsection 9) of Section II, Chapter I, Title XII of the REGULATIONS (T.R. 2013 as amended); with Article 11 subsection a.12) of Chapter XXVI of the REGULATIONS (T.R. 2001 as amended) –now Article 11 subsection 13) of Section IV, Chapter I, Title XV of the REGULATIONS (T.R. 2013 as amended); with Article 99 and 100 of Law No. 26,831; and with Articles 59 and 294 subsection 9) of Law No. 19,550. AGEA, and the current and past members of the Board of Directors and supervisory commission who are subject to the summary proceedings, duly filed their respective responses. See Note 25.c. k. On February 27, 2013, the AFIP served IESA with a notice stating the income tax and value added tax charges assessed for fiscal period 2008 and ordering the initiation of summary proceedings for alleged omitted taxes. The AFIP mainly challenged the deduction of certain expenses and fees, as well as the calculation of the corresponding tax credit. IESA filed an appeal in connection thereto, which is currently pending before the National Tax Court. The official assessment amounts to Ps. 1.4 million for income tax and Ps. 2.5 million for late-payment interest, calculated as of December 31, 2014. The official value-added tax assessment amounts to Ps. 0.8 million for tax differences and Ps. 1.6 million for late-payment interest, calculated as of December 31, 2014. On October 21, the AFIP served IESA with a notice stating the income tax and value added tax charges assessed for fiscal period 2009 and ordered the initiation of summary proceedings for alleged omitted taxes. In this case, the AFIP mainly challenged the deduction of fees, as well as the calculation of the corresponding tax credit. The official income tax assessment amounts to Ps. 1.2 million for tax differences and Ps. 1.9 million for late-payment interest, calculated as of December 31, 2014. The official value-added tax assessment amounts to Ps. 0.4 million for tax differences and Ps. 0.9 143 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 144 million for late-payment interest, calculated as of December 31, 2014. IESA and its legal and tax advisors believe that it has strong arguments in its favor to defend the criterion adopted in its tax returns. 8.3 Other Claims and Disputes a. On December 12, 2001, Supercanal filed a claim for damages against Multicanal as a result of the enforcement of a preliminary injunction brought by Multicanal against Supercanal. Multicanal responded to such claim denying any liability. Based on legal and factual precedents of the case, Cablevisión, as successor of Multicanal’s operations, believes that the claim filed should be rejected in its entirety, and that the legal costs should be borne by the plaintiff. As of the date of these financial statements, the proceeding was at the discovery stage. The court of first instance dismissed Supercanal’s request that it be allowed to sue without paying court fees or costs. This decision has been ratified by the Federal Court of Appeals. b. On June 22, 2007 TRISA and TSC executed several documents with AFA, applicable from the 2007/2008 until the 2013/2014 soccer seasons, governing the broadcasting by TRISA of all of the National “B” soccer tournament matches and by TSC of ten of the Argentine soccer first division official tournament matches played each week. Out of those ten matches, TRISA broadcast five through TyC Sports. Those agreements set the price to be paid by TRISA for these products and clearly stated its right to sell such products and, additionally, had AFA’s express consent. On August 12, 2009 AFA notified TSC of its decision to terminate unilaterally the above- mentioned agreement. TSC challenged AFA’s unilateral termination of the agreement and, in order to safeguard its rights, on June 15, 2010 it brought a legal action against AFA before a commercial court for contractual breach and damages. AFA summoned the National Government as a third party, and the National Government was incorporated to the proceedings. The National Government requested that the case be submitted to the Court on Federal Administrative Matters. The request was dismissed by the Commercial Court of Appeals, which ratified the jurisdiction of the Commercial Court. The National Government filed an appeal against that decision with the Supreme Court of Argentina. On July 27, 2011, AFA unilaterally terminated the agreement that bound AFA and TRISA until the 2013/2014 soccer season for the broadcasting of all Argentine National “B” soccer tournament matches. AFA’s decision was totally arbitrary and illegitimate, since TRISA had not breached any provision of the agreement, which does not expressly allow voluntary unilateral termination by either party. Therefore, TRISA has challenged AFA’s unilateral termination of the agreement. In light of the events and until the situation is remedied, TRISA will not be able to broadcast the five weekly matches of the first division tournament or any of the National “B” soccer tournament matches that it used to broadcast on its signal TyC Sports. The broadcasting rights for the matches of Metropolitan First "B" category are not governed by the above-mentioned agreements, but by an agreement that is in full force and effect as of the date of these financial statements. The situation described above had a significant impact on TRISA’s revenues and costs. Therefore, it had to adjust its signal to these new circumstances. In light of the circumstances described in the above paragraphs, as from August 2009, TRISA has recorded a portion of its revenues based on the progress of negotiations with each client and the new content of the signal. During the year ended December 31, 2012, TRISA completed those negotiations. As a result, no significant differences arose between the actual results and the original estimates. c. On January 31, 2012, FADRA informed Grupo Carburando’s subsidiary Mundo Show S.A. of the unilateral rescission of the agreement executed in 2006 whereby FADRA assigned to that company the rights comprising image, sound and static advertising of motor racing at the road racing events Turismo Carretera and TC Pista until December 31, 2015. Mundo Show S.A. has challenged and rejected FADRA’s 144 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 145 unilateral rescission of the agreement. In light of the events, Mundo Show S.A. will not be able to sell or export the audiovisual and static advertising rights of the above-mentioned motor racing events. Therefore, in 2012 an allowance was set up for impairment of goodwill and other assets related to such agreement of approximately Ps. 17 million. On July 17, 2013, some of the Company’s subsidiaries executed an agreement in order to settle the legal actions brought as a consequence of the termination of TV broadcasting rights and sponsorship agreements relating to the Turismo Carretera and TC Pista road racing events, whereby FADRA undertook to pay damages for an aggregate and final amount of Ps. 16.5 million in 23 monthly and consecutive installments. In addition, it assigned all of its equity interest in TCM, which represents 20% of its capital stock and votes. The parties also settled the claims brought against FADRA in re "Mundo Show v. FADRA on pending cash collection, File No. 10041/2012", whereby FADRA paid Ps. 1.5 million in exchange for the dismissal of the legal actions. d. Pursuant to a notarial certificate issued on September 19, 2008, AGEA and the Company were served with a legal action brought by an entity representing consumers and alleged financial victims (and by six other individuals). Claimants are Multicanal noteholders who claim to be allegedly affected by Multicanal’s APE. The claim is grounded on a Consumer Defense Law that, in general terms, provides for an ambiguous procedure that is very strict against the defendant. The Company, AGEA and certain directors and members of the supervisory committee and shareholders have been served with the claim. After rejecting certain preliminary defenses presented by the defendants, such as the application of statutes of limitation and the failure to comply with prior mediation procedures, the claim followed ordinary procedure and the above-mentioned persons duly filed their respective responses. e. On September 16, 2010 the Company was served with a claim brought against it by Consumidores Financieros Asociación Civil para su Defensa. The plaintiff claims a reimbursement of the difference between the value of the shares of the Company purchased at their initial public offering and the value of the shares at the time a decision is rendered in the case. The Company has duly responded to the claim and the intervening Court has deemed the claim responded. f. On April 25, 2013 Grupo Clarín S.A. held its Annual Ordinary Shareholders’ Meeting. As a result of the issues raised at this Meeting, some of the permanent directors informed the Company that they had pressed criminal charges against the representatives of the shareholder ANSES and of the CNV (Messrs. Reposo, Kicillof, Moreno, Vanoli, Fardi and Helman) for making statements and intellectual constructions which, under the appearance of being included in the new regulations of the Argentine Capital Markets Law, only sought to discredit the Board of Directors and caricature its management, creating pretexts that may lead to an intervention of the Company without judicial control pursuant to the new powers vested on the CNV by Capital Markets Law No. 26,831. On April 26, 2013, the Board of Directors decided to press charges on the same grounds. Consequently, the Company sent a letter to the CNV, in which it clearly stated that what had happened at that Meeting could not be considered in any way as an acknowledgment of the legitimacy of the powers vested on the CNV by Law No. 26,831 and/or the regulations that may be issued in the future. The letter also stated that the Company reserved its right to file the pertinent legal actions at any time to request the declaration of the evident unconstitutionality of that law. It also requested the CNV to refrain from performing any act or issuing any resolution that would lead to the execution of the plan of which they had been accused before the courts. g. On May 30, 2013, Pem S.A. was served notice of a claim in re “TELEVISORA PRIVADA DEL OESTE S.A. v. GRUPO CLARÍN S.A. AND OTHERS on ORDINARY” File No. 99078/2011, which is pending before the Federal Commercial Court No. 16 of First Instance, Clerk’s Office No. 32. The claim seeks damages resulting from certain decisions made with respect to Televisora Privada del Oeste S.A. Cablevisión and the Company, among others, are defendants in such lawsuit. Cablevisión was served with the claim and filed a response in due time and form. Notice of the claim is being served on the other 145 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 146 co-defendants. According to the Company’s legal advisors, the chances of success of the claim are low because the damages claimed are clearly overstated, the actual damage invoked does not exist and the claim is procedurally inappropriate, both on a factual and legal basis. h. In March 2012, ARTEAR brought a summary action for the protection of constitutional rights against the National Government (Chief of the Cabinet of Ministers and Secretariat of Public Communication) and against Messrs. Juan Manuel Abal Medina and Alfredo Scoccimarro, in order to request that the National Government cease in the arbitrary and discriminatory allocation of official advertising with respect to Arte Radiotelevisivo Argentino S.A. ARTEAR requested (i) that the court order the maintenance of a balanced allocation with respect to the amount of official advertising received in previous years, and in particular prior to 2008, and with respect to the amount of official advertising allocated to other broadcasters of similar characteristics, and (ii) that the conduct of the above-mentioned officials be declared illegitimate, on account of their having abusively exercised their discretional power to manage public funds destined to official advertising, discriminating against Canal 13, which is owned by ARTEAR. On February 11, 2014, the Supreme Court of Argentina decided in re “Arte Radiotelevisivo Argentino S.A. v. National Government - Chief of the Cabinet of Ministers and Media Secretariat on summary action for the protection of constitutional rights (acción de amparo) Law No. 16,980” to confirm the decision rendered in that respect by Chamber No. 4 of the National Court of Appeals on Federal Administrative Matters. This Court admitted the summary action brought by ARTEAR and ordered the National Government to provide for the drafting and submission to the first instance court of a scheme for the allocation of official advertising that included the broadcasters with characteristics analogous to those of ARTEAR. Among those broadcasters, the Court of Appeals included América TV S.A. (Canal 2), Telearte S.A. (Canal 9), Televisión Federal S.A. (Canal 11), ARTEAR (Canal 13) and SNMP S.A. and RTA S.E. (Canal 7). The allocation scheme must faithfully conform to the guidelines of proportionality and equity set forth in the ruling. The term for submitting the allocation scheme was set at thirty days after that decision became final. As of the date of these financial statements, ARTEAR has brought two claims for non-compliance with that decision before the National Court of First Instance on Federal Administrative Matters No. 12, Clerk’s Office No. 23. A decision has not yet been rendered on those claims. i. The claimants representing media companies in re “AEDBA and Other v. National Government – Decree No. 746/03 – AFIP on Incidental Procedure” pending before the Court on Federal Administrative Matters No. 4 requested that media companies represented by the claimants be granted the right to have a differential VAT regime as undertaken by the National Government under Decree No. 746/03 and the rules and regulations issued in connection thereto. On October 30, 2003, a preliminary injunction was issued in connection with the above- mentioned file, ordering the National Government to maintain the effectiveness of the benefit granted under Decree No. 746/03. The National Government filed an appeal against that decision and on November 6, 2008, the Court of Appeals granted the request to have the injunction revoked, among other things. On November 27, 2008, the claimants filed an appeal with the Supreme Court of Argentina requesting the suspension of the enforcement of such ruling. On October 28, 2014, the Supreme Court of Argentina issued a ruling in connection with the above-mentioned file, whereby it declared the appeal formally admissible and thus confirmed the effectiveness of the above-mentioned preliminary injunction. The Supreme Court held the following in the recitals of its ruling: (i) as of the date of the decision, the Executive Branch had not yet established any regime to replace the so- called competitiveness and employment generation agreements; (ii) the differential VAT regime provided under Law No. 26,982 was only applicable to small media companies, not to all media companies; (iii) the tax policy must not be biased and cannot be used as a way to curtail freedom of speech; (iv) the alternative solution that had to be sought 146 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 147 ruled out, on principle, the application of the general regime; (v) even though a decision on the merits (having a differential VAT regime) is not being anticipated, the injunction that had been timely issued in connection thereof shall remain effective until such a solution to the matter is reached; (vi) the legal entities that met the obligations within the scope of the injunction shall not be deemed delinquent; and (vii) the judge of the first instance court shall render an urgent decision on the merits. On December 10, 2014, the Federal Court on Administrative Matters No. 4 rendered a decision on the merits in re AEDBA and other v. National Government Decree No. 746/03 and other on Proceeding leading to a declaratory judgment” ordering, among other things, that: The claimants (media companies) have the standing to sue; that it is not up to the Judicial Branch to legislate because only the Legislative Branch is empowered to do so; that, pursuant to the enactment of Law No. 26,982, the obligation undertaken by the Executive branch has already been met since the differential VAT rates have already been set and, therefore, the claim is moot; that, based on the decision rendered by the Supreme Court of Argentina, the companies cannot be deemed delinquent. Given the fact that the above-mentioned decision opposes and contradicts the grounds stated by the Supreme Court, the claimants (AEDBA, ARPA, ADIRA, as well as other associations) have filed an appeal against the decision rendered by the above-mentioned court of first instance with the corresponding Court of Appeals. The subsidiaries of Grupo Clarín involved (AGEA and some of its subsidiaries, and Radio Mitre) have started to calculate employer’s contributions as tax credit on VAT as from November 2014, taking into consideration that: i) the preliminary injunction is still in effect, ii) the decision rendered by the court of first instance contradicts the considerations stated in the recitals of the Supreme Court’s decision due to the fact that the Executive Branch must grant a regime applicable to all the companies, iii) an appeal has been filed against the above-mentioned decision with the corresponding Court of Appeals, and based on its legal advisors’ opinion about the decision to be rendered on the merits, they believe that the claimants and the companies represented by them are likely to obtain a favorable ruling. 8.4 Matters concerning Papel Prensa I. Papel Prensa has several disputes pending before the Commercial Court of Appeals of the City of Buenos Aires as a consequence of CNV Resolution No. 16,222. Pursuant to said Resolution, the CNV declared that certain decisions of Papel Prensa’s Board of Directors were irregular and with no effect for administrative purposes. The Resolution challenged the Board’s fulfillment of the formalities required in the preparation, transcription and execution of meeting minutes on the relevant corporate books. On June 24, 2010, in File No. 75,479/09, the Commercial Court of Appeals of the City of Buenos Aires, Chamber C, decided to nullify CNV Resolution No. 16,222. On the basis of Resolution No. 16,222, the CNV has questioned subsequent decisions of Papel Prensa’s Board and of its Shareholders. In response, Papel Prensa has brought several administrative claims against the CNV, questioning its position. All of such claims were decided in Papel Prensa’s favor by the Commercial Court of Appeals of the City of Buenos Aires. Consequently, the CNV’s decisions were nullified. Furthermore, the Commercial Court of Appeals, Chamber C, dismissed the appeals filed by the CNV before the Supreme Court of Argentina against the Court of Appeals’ decisions. The CNV filed a direct appeal before the Supreme Court. As a consequence of the above, Papel Prensa has continued with the criminal proceedings brought against certain public officials. On February 1 and 4, 2010 the Secretary of Domestic Trade, Mario G. Moreno, and the CNV, respectively, requested the judicial intervention of Papel Prensa before the commercial justice. Such claims were pending before the Federal Commercial Court of First Instance No. 2, Clerk’s Office No. 4, temporarily under judge Dr. Eduardo Malde, who, on March 8, 2010, issued an injunction whereby he suspended certain decisions adopted at meetings of the Board of Directors and at Shareholders Meetings held on or after November 4, 2009. Judge Malde also appointed a co-administrator without removing the members of the previous corporate bodies. Papel Prensa filed an appeal, which the Commercial 147 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 148 Court of Appeals, Chamber C, resolved in Papel Prensa’s favor, by revoking the injunction on August 31, 2010. On December 7, 2010 the same Chamber C dismissed the appeals filed by the CNV and the National Government before the Supreme Court of Argentina against the Court of Appeals’ decision. Both the CNV and the National Government filed direct appeals against such decision. On March 26, 2014, the Supreme Court of Argentina dismissed the appeal that had been filed by the CNV. Therefore, the decision rendered by the Court of Appeals that nullified Resolution No. 16,222 became final, with full force and effect. Also on the same date, the Supreme Court of Argentina dismissed the appeals brought by CNV and the National Government. Therefore, the decision rendered by the Court of Appeals that revoked the corporate intervention of Papel Prensa became final, with full force and effect. None of the claims mentioned in the above paragraphs had a material effect on AGEA’s financial and economic condition as of December 31, 2014. II. On January 6, 2010, the SCI issued Resolution 1/2010, whereby certain business practices were imposed on Papel Prensa. Papel Prensa brought a legal action against such resolution on grounds of unconstitutionality before the Federal Court on Administrative Matters and requested an injunction which was granted by the intervening judge. Pursuant to the injunction, the effects of such Resolution were suspended. On May 7, 2010, the Federal Court on Administrative Matters revoked the injunction. Papel Prensa appealed such decision, which was affirmed by the Federal Court of Appeals on Administrative Matters. Papel Prensa filed an appeal against the Court of Appeals’ decision. The appeal was denied and Papel Prensa was served notice of that denial on September 1, 2010. III. Papel Prensa suspended its operations with related parties between March 9 and April 21, 2010 pursuant to an injunction issued on March 8, 2010 by Judge Malde. In his ruling, Judge Malde decided to suspend the Board of Directors’ resolution of December 23, 2009, which had approved the terms and conditions of transactions with related parties for the year 2010. On April 21, 2010, the Board of Directors of Papel Prensa, following a proposal made by the court-appointed supervisor (interventor) and co-administrator, approved the resumption of such company’s transactions with related parties under provisional conditions for as long as the decision rendered by the Board on December 23, 2009 remained suspended and/or until Papel Prensa’s corporate bodies established a business practice to follow with related parties. Such approval involved suspending the application of volume discounts in connection with purchases made by related parties, which could be recognized in their favor, subject to the court’s decision on the appeal filed by Papel Prensa against Judge Malde’s injunction of March 8, 2010. As from April 21, 2010, transactions with related parties were resumed under the provisional conditions approved by the Board on April 21, 2010. At a meeting held on December 23, 2010, Papel Prensa’s Board of Directors approved new conditions that must be fulfilled for the recognition and payment of volume discounts that may be applicable to related parties in connection with purchases of paper made as from April 21, 2010. These new conditions are as follows: (i) the lifting of the provisional suspension of the resolutions adopted by the Board at the meeting of December 23, 2009, as explained in the previous paragraph, and (ii) the resolution or end, by any means, of any state of uncertainty that may eventually exist about the conditions approved by Papel Prensa’s Board in the first item of the agenda of the meeting held on April 21, 2010, as a consequence of the claim brought by the National Government in re “National Government – Secretariat of Domestic Trade – v./ Papel Prensa S.A.I.C.F. y de M. on/ Ordinary”, File No. 97,564, currently pending before Federal Commercial Court of First Instance No. 26, Clerk’s Office No. 52. Under this proceeding, the National Government seeks to obtain, among other things, a declaratory judgment of nullity of the provisional conditions for the resumption of transactions with related parties in connection with the purchase and sale of paper that was approved by the Board of Papel Prensa in the first item of the agenda of the above mentioned meeting held on April 21, 2010. 148 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 149 Furthermore, at this meeting held on December 23, 2010, Papel Prensa’s Board decided to maintain the originally approved sales policy, but to subject the accrual and enforceability, and, consequently, the recognition and payment to the clients, of the eventual volume discounts that may be applicable to them with respect to paper purchases made between January 1st, 2011 and December 31, 2011, to a final favorable ruling in the claim brought by Papel Prensa against the constitutionality of SCI Resolution No. 1/2010, or to the final nullification of such Resolution No. 1/2010 in any other way or by any other legal means, whichever occurs first. In connection with related parties, the Board approved the same policies and conditions as those approved for the other clients in general. In a meeting held on December 27, 2011 Papel Prensa’s Board of Directors decided to maintain for 2012 the same commercial policies that had been approved for 2011 – under the same terms and conditions mentioned in the previous paragraph – for all of its customers in general (including related parties). The commercial policy approved by Papel Prensa was affected by Law 26,736 –effective as from January 5, 2012– which declared that the production, sale and distribution of wood pulp and newsprint were matters of public interest and set forth the regulatory framework to be adopted by the producers, sellers, distributors and buyers of such inputs. Among other things, the Law set limits and established conditions applicable to Papel Prensa for the production, distribution and sale of newsprint (including a formula to determine the price of paper), and created the National Registry of Producers, Distributors and Sellers of Wood Pulp and Newsprint where all producers, sellers, distributors and buyers shall be registered as a mandatory requirement in order to produce, sell, distribute, and/or purchase newsprint and wood pulp as from the enactment of the Law. It also contains a series of temporary clauses, specifically and exclusively addressed to Papel Prensa, whereby Papel Prensa is forced to make investments to meet the total national demand for newsprint – excluding from this requirement the other existing company that operates in the country with installed capacity to produce this input. The Law also provides for the capitalization of the funds eventually contributed by the National Government to finance these investments for the purposes of increasing the equity interest and the political rights of the National Government in Papel Prensa, contravening public order regulations contained in Law 19,550 and disregarding several constitutional rights and guarantees of Papel Prensa and its private shareholders. On February 10, 2012, AGEA registered with the National Registry of Producers, Distributors and Sellers of Wood Pulp and Newsprint (Record No. 63 in File No. S01:0052528/12), clearly stating that the decision to register shall not be construed as an acknowledgment or conformity with the legitimacy of Law 26,736, Resolution No. 9/2012 issued by the Ministry of Economy and Public Finance and SCI Resolution No. 4/2012 issued in connection with such Law and/or any other issued in the future, since they seriously affect several rights and guarantees of AGEA which are recognized and protected by the Argentine National Constitution. IV. On September 12, 2011, the CNV issued Resolution No. 16,647 whereby it rendered irregular and with no effect for administrative purposes the decisions made by Papel Prensa’s Board of Directors at the meetings held on July 20, 2011 and August 5, 2011. At those meetings, the Board of Directors had called two shareholders’ meetings, to be held on September 27, 2011 and September 15, 2011, respectively. Notwithstanding the fact that Resolution No. 16,647 was appealed by Papel Prensa and is therefore not final, on September 15, 2011, Commercial Court No. 5, Clerk’s Office No. 9, issued an injunction with respect to the Board of Directors’ decisions to call the two shareholders’ meetings. The injunction had been requested by the shareholders Arte Gráfico Editorial Argentino S.A., Compañía Inversora en Medios de Comunicación (CIMECO) S.A., and S.A. La Nación. Given that the issuance of the injunction validated Papel Prensa’s decision to call the two shareholders’ meetings, both were held as originally scheduled. Nevertheless, and based on the above Resolution No. 16,647, on October 13, 2011 the CNV issued Resolution No. 16,671 rendering irregular and with no effect for administrative purposes all of the decisions made at Papel Prensa’s Shareholders’ Meetings held on 149 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 150 September 15, 2011 and September 27, 2011. Papel Prensa filed an appeal against Resolution No. 16,671, which is, therefore, not final. Also based on Resolution No. 16,647, on November 16, 2011, the CNV issued Resolution No. 16,691 whereby the CNV rendered irregular and with no effect for administrative purposes the decisions made at the Board of Directors’ Meeting held on October 3, 2011 and the call for the Board of Directors’ meeting on November 17, 2011. Such Resolution is not to be deemed final since Papel Prensa filed an appeal and requested its nullification. In this sense, of particular note is that: (i) at the hearing held before Federal Commercial Court No. 26 of First Instance, Clerk’s Office No. 52, the National Government, Papel Prensa, AGEA, Compañía Inversora en Medios de Comunicación (CIMECO) S.A. and S.A. La Nación, agreed, among other things, on the composition of the company’s corporate bodies, and in particular on the recognition of the authorities appointed by the private shareholders at Papel Prensa’s Shareholders’ meeting held on September 27, 2011, as well as on the agenda to be addressed at the meeting of Papel Prensa’s Board of Directors of October 3, 2011, which had been the subject matter of Resolution No. 16,691; and (ii) at the hearing held in April 2012 before the same Commercial Court the National Government, Papel Prensa, AGEA, Compañía Inversora en Medios de Comunicación (CIMECO) S.A. and S.A. La Nación, with the assistance of the Argentine Securities Commission, agreed to request the court to order a shareholders’ meeting with an agenda substantially similar to that of Papel Prensa’s Shareholders’ Meeting held on September 27, 2011. The request was granted by the intervening judge and the meeting was scheduled for August 29, 2012. The meeting began on that date but, as a consequence of certain disturbances provoked by the representative of the National Government, the private shareholders that were present at the meeting decided to adjourn it for 48 hours without addressing the agenda. After that, and notwithstanding the resolution adopted at the meeting, on August 31, 2012 Judge O’Reilly decided to order that the adjourned meeting would resume on September 25, 2012. However, the meeting was not held because the Judge subsequently held that the appeals filed against other points of her decision resulted in the suspension of every point of the decision she had rendered, including the new date scheduled for the meeting, even though all appellants had consented to that point. On June 12, 2014, the Court of Appeals decided to postpone rendering a decision on the appeals filed until the court-convened shareholders’ meeting that began on August 29, 2012 had resumed and closed, ordering Judge O’Reilly to decide on the pending issues and to order the shareholders to resume that meeting. On December 4, 2014, the Judge called Papel Prensa, the CNV, and the shareholders of AGEA, the National Government, SA La Nación and CIMECO to a hearing to be held on May 6, 2015, in order to proceed as ordered by the Court of Appeals. In light of the above, the new date to resume that meeting may not be set until Judge O’Reilly has complied with the decision rendered by the Court of Appeals. V. On June 6, 2013, the Board of Directors of the CNV issued CNV Resolution No. 17,102, within the framework of the Administrative File No. 1032/10, whereby it required that: (i) certain members of Papel Prensa’s Supervisory Committee and statutory auditors be imposed a fine of Ps. 150,000 each; and (ii) Papel Prensa, certain members of its Board of Directors, one member of its Supervisory Committee and the members of its Oversight Board (all of them representatives of Papel Prensa’s private shareholders) be imposed a joint and several fine of Ps. 800,000. Papel Prensa and its other current and former officers appealed the fine in due time and form. In the same appeal, they requested an injunction to change the effect of their appeal and suspend the application of the fine. On October 11, 2013, Chamber No. 5 of the Federal Court on Administrative Matters denied this request, which was considered unnecessary in the light of the settlement of the fine by the claimants, as informed below. Notwithstanding the above, on June 19, 2013, the Company asked the CNV to suspend the application of the fine until a decision was rendered by the Court of Appeals with respect to the injunction. The request was denied. On June 28, 2013, the fine was paid under protest in order to prevent its coercive enforcement by the CNV; given that, under the new Capital Markets Law No. 26,831, appeals may be admitted without suspension of judgment. VI. AGEA has not recorded any impact in connection with the foregoing, since its effects 150 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 151 shall depend on the final outcome. Such effects are not expected to be material to these financial statements. Note 9 Regulatory framework 9.1 Audiovisual Communication Services a) Until the enactment of Audiovisual Communication Services Law No. 26,522, the installation, operation and acquisition of audiovisual communication services in Argentina were governed by Broadcasting Law No. 22,285. Cable TV activities were regulated and overseen mainly by the COMFER. Under Law No. 22,285 broadcasting service companies in Argentina required a non- exclusive license from the COMFER in order to operate. Other approvals were also required, including, for some services, authorization by municipal agencies. Broadcasting licenses were granted for an initial period of 15 years, allowing for a one-time extension of 10 years. The extension of the license was subject to the approval of the COMFER, which would determine whether or not the licensee had met the terms and conditions under which the license had been granted. All the subsidiaries of Grupo Clarín that render broadcasting services, hold licenses granted by the COMFER under such Law. Some of the licenses exploited by the subsidiaries, including the license that had been originally granted to Cablevisión (with an extended term that originally expired on March 31, 2006), have already been extended for the above-mentioned 10-year term. On May 24, 2005, Decree No. 527/05 provided for a 10-year-suspension of the terms then effective of broadcasting licenses or their extensions. Calculation of the terms shall be automatically resumed upon expiration of the suspension term, subject to certain conditions. The Decree required that companies seeking to benefit from the extension submit to the COMFER’s approval, within two years from the date of the Decree, programming proposals that would contribute to the preservation of the national culture and the education of the population and a technology investment project to be implemented during the suspension term. COMFER Resolution No. 214/07 regulated the obligations established by Decree No. 527/05 in order to benefit from such suspension. The proposals then submitted were approved and, accordingly, the terms of the licenses originally awarded to the subsidiaries of Grupo Clarín, as well as the terms of the licenses to which Cablevisión became the universal successor, are currently suspended for ten years. COMFER Resolution No. 275/09 lifted a suspension of license grants that had been ordered by COMFER Resolution No. 726/00 and approved the Rules governing the licensing of Broadcasting and Supplementary Services by means of a physical link, and set a term to apply for licenses under an abbreviated procedure. Therefore, Cablevisión and certain subsidiaries purchased bidding forms to apply for new licenses through this option in such locations where they had not obtained the suspension of the term ordered by Decree No. 527/05, since the terms of those licenses had expired. Cablevisión has requested the COMFER’s approval of several transactions, including certain company reorganizations and share transfers. The request for approval of the merger of Cablevisión and its subsidiaries (see Note 8.1.d.) is still pending. b) The Audiovisual Communication Services Law (Law No. 26,522) was passed and enacted on October 10, 2009, subject to strong concerns over its content and enactment procedure. Even though the new Law became effective on October 19, 2009, not all of the implementing regulations provided by the law have been enacted. Therefore, Law No. 22,285 still applies with respect to those matters that to date have not been regulated, until all terms and procedures for the regulation of the new law are defined. The law provides for the replacement of the COMFER with the Audiovisual Communication Services Law Federal Enforcement Authority (AFSCA, for its Spanish acronym) as a decentralized and autarchic agency under the jurisdiction of the Executive Branch, and vests the new agency with authority to enforce the law. The new law, which governs the audiovisual communication service activities conducted 151 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 152 by the Company through its subsidiaries, establishes, among other things: • A license award and review scheme that grants wide discretion to the Executive Branch and to an Enforcement Authority with questionable composition and powers, • A 10-year limitation to the terms of licenses, with a one-time non-renewable extension, • The non-transferability of authorizations and licenses, • A regulatory framework and registration requirements for signals, production companies and advertising agencies, • A multiple license scheme that: i) restricts to 10 the number of Audiovisual Communication Service licenses, plus a single broadcasting signal for radio, broadcast TV and subscription cable TV services that make use of the radio spectrum; ii) restricts the licensing of subscription broadcasting services rendered by means of a physical link (cable), limiting the number of licenses to 24; iii) sets forth a further restriction on these services, which may not be provided to more than 35% of all inhabitants or subscribers nationwide; iv) establishes that a broadcast TV signal and a cable TV signal may not be simultaneously exploited in the same location, and v) establishes that broadcast TV networks may only own one cable TV signal. The same applies to cable TV networks, which may only own the so-called “local channel”, which is mandatory for every license • Mandatory quotas for certain types of content. Also controversially, the law sets forth retroactive effects by requiring holders of current broadcasting licenses – which were legitimately acquired rights under Law No. 22,285 as amended - to conform to the new law within the term of one year counted as from the time certain mechanisms required for implementation are set in place. The Executive Branch has regulated most sections of Law No. 26,522 by means of Decree No. 1,225/2010. The most notably arbitrary provision of this decree is the highly discretionary mandatory divestiture system created to implement Section 50 of the Audiovisual Communication Services Law. This system has evident confiscatory effects. It is publicly known that several concerns have been expressed about this law, since it has defects that render it unconstitutional; it seriously damages the development of the audiovisual industry and restricts fundamental freedoms. Grupo Clarín and its main subsidiaries made court filings on that basis, which led to the provisional suspension of section 161 of the Audiovisual Communication Services Law until a final decision was rendered. On December 14, 2012 the Company was served notice of the decision rendered by the Court of First Instance on the merits of the case in re “Grupo Clarín S.A. and Other v. the Executive Branch on Declaratory Action” (File 119/10). The judge recognized the legal standing to sue of the plaintiffs as license holders, but rejected the unconstitutionality claim with legal costs imposed on claimants. An appeal was filed against that decision before the National Court of Appeals on Federal Civil and Commercial Matters. On April 17, 2013, Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters rendered a decision on the merits of the case, whereby it: i) Confirmed the dismissal of the exception of lack of standing brought in connection with Grupo Clarín and Teledigital. ii) Dismissed the claim of unconstitutionality brought by the claimants against: a. Section 41 of the Audiovisual Communication Services Law, which provides that licenses are not transferable, with an exceptional procedure for the transfer of shares or quotas of licensees; b. Section 161 of the Audiovisual Communication Services Law, which requires existing licensees to conform to the new Law; c. Section 45, point 1, subsection a), which limits subscription television licenses on satellite support to one license per holder, nationwide; d. Section 45, point 1, subsection b), which limits audiovisual communication services licenses that make use of the radio spectrum to 10 licenses per holder, nationwide, except for the provision that limits content signals to one per holder, which was deemed unconstitutional; e. Section 45, point 2, subsection a), which limits AM broadcast radio licenses to one license per holder per locality; and f. Section 45, point 2, subsection b) which limits FM broadcast radio licenses to 152 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 153 one license per holder per locality, except for localities with more than eight FM stations, where holders are entitled to two licenses. The Court of Appeals also declared that the claimant had a right to be compensated for damages that may result from the mandatory divestment as a consequence of the limitations set forth under point ii. c), d), e) and f ); iii) Declared the unconstitutionality of the following provisions: a. Section 45, point 1, subsection c), which limits licenses for the exploitation of audiovisual communication services by subscription with physical link to 24 licenses per holder, nationwide; b. Section 45, final paragraph, which provides that services provided by one licensee may not reach more than 35% of the aggregate national population or nationwide subscribers; c. Section 45, point 2, subsections c) and d), which provides that holders of a broadcast television license may not simultaneously hold a subscription television service license in the same locality; d. Section 45, final paragraph, which limits licenses granted in the same primary service area or group of overlapping primary service areas to three licenses per holder; and e. Section 45, point 3, which provides that broadcast television licensees may only own one cable television signal and cable television service licensees may only own a single signal generated by such providers themselves. The Court ordered the inapplicability of the provisions detailed under iii. a), b), c), d) and e), above, to the licenses exploited by claimant. iv) Declared the unconstitutionality of section 48, second paragraph, which provides that the multiple license regime set forth under the Audiovisual Communication Services Law may not be alleged as an acquired right in light of any future amendments relating to deregulation, demonopolization or antitrust. v) Rejected the claim for damages as claimed under this case-file. vi) Revoked the decision rendered in the first instance regarding the repeal of the injunction granted in favor of the claimants until a final decision is rendered. Both parties appealed the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters, and the case was submitted to the Supreme Court of Argentina. On December 17, 2012, the Company was served notice of AFSCA Resolution No. 2276/2012 (File No. 1395-AFSCA/2012), whereby AFSCA decided to initiate the ex officio transfer procedure, ordered the appraisal by Court of Appraisals of Argentina of the licenses and the essential assets related to the various broadcasting services and ordered the Company to respond, within the framework of that procedure, to a request for information about the licenses and/or services it owned directly or indirectly. The Company appeared before AFSCA and challenged its resolution because it violates the injunction granted and extended by Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters. The Company also made a presentation in re “Grupo Clarín S.A. and Others on preliminary injunctions" to report these circumstances. Consequently, on June 27, 2013, Chamber No. 1 of the Court of Appeals ordered in re “Grupo Clarín S.A. and other v. National Executive Branch and others on failure to comply with injunction” (File No. 4777/2012) that AFSCA suspend its proceedings (File No. 1395-AFSCA/2012) and refrain from taking any action or initiating any similar or identical proceeding based on Section 161 and/or its regulations during the effectiveness of said injunction. On October 29, 2013 the Company was served with a decision rendered by the Supreme Court of Argentina which ordered (i) to revoke the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters on April 17, 2013 (the "Decision”) to the extent that it declared the unconstitutionality of Section 45, part 1, subsection “c” and final paragraph; part 2, subsections “c” and “d” and final paragraph; part 3 in its entirety; and part 1, subsection “b”, with respect to the limitation to holding registered title to a single content signal, and Section 48, second paragraph, Law No. 26,522 and (ii) to confirm the Decision to the extent it rejected the claim for damages as brought under the case file. The Company believes that the challenged Sections -as held by the three dissenting opinions- not only contradict the principles 153 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 154 of the Argentine National Constitution, but also those of the American Convention on Human Rights (Pact of San José de Costa Rica), as well as recent precedents of the Inter- American Commission on Human Rights, the Inter-American Court of Human Rights and the Special Rapporteurship for Freedom of Expression of the Organization of American States. The claimant companies will analyze bringing an appeal before international courts to challenge those sections that entail an indirect act of censorship that silence and discriminate against critical media, and violate acquired rights. In addition, as provided in the Court’s decision, the Company will continue to litigate in local courts all the aspects related to the discretionary and selective application of the law by the national government. On October 31, 2013, even before the deadline to enforce the decision rendered by the Supreme Court of Argentina in re “Grupo Clarín S.A. and Others v. National Executive Branch and other re: Merely Declarative Action” (File 119/10), the Company and some of its subsidiaries were again served with AFSCA Resolution No. 2276/2012 issued by the president of that agency on December 17, 2012 within the framework of File No. 1395-AFSCA/2012. Resolution No. 2276/2012 provides for an ex officio proceeding to conform the Company and some of its subsidiaries to the provisions of the Audiovisual Communication Services Law. The Company and its legal advisors believe that this resolution is absolutely null and void and have filed an appeal to have it revoked. Faced with the de-facto proceedings that sought to dispossess the Company of its licenses and assets through an ex officio procedure, on November 4, 2013 the Company submitted to AFSCA and to the Supreme Court of Argentina a voluntary proposal to conform to the Audiovisual Communication Services Law pursuant to section 161 of the LSCA, approved by Grupo Clarín’s Board of Directors on November 3, 2013, in an attempt to avoid the forced divestiture of its assets by AFSCA. This was also the least desirable decision, because it contradicts Grupo Clarín’s historical strategy of maintaining the necessary integration and strength. The voluntary proposal -which does not interrupt any of the judicial actions brought by the Company to defend its rights- was submitted together with a request that the decision rendered by the Supreme Court of Argentina be complied in full. That is, requesting the involvement of an independent, unbiased enforcement authority with technical expertise, which may ensure a transparent and egalitarian treatment in the enforcement of the law. Upon review of the voluntary proposal, AFSCA issued Resolution No. 1471/2013 whereby it suspended the Ex Officio Transfer Procedure commenced through AFSCA Resolution No. 2276/2012 and stated that it would refrain from pursuing any administrative proceedings in that regard. The voluntary proposal presented by the Company is summarized as follows: The assets of the Company and its group of companies governed by Law No. 26,522 will be divided into six units of audiovisual communication services. Each of the units of audiovisual communication services will have no corporate relationship with the others. This way, each unit will conform individually to the provisions of Sections 45 and 46 of the LSCA and its implementing regulations, and will be divided according to the following detail: (i) Unit I: composed by (a) ARTEAR, owner of the signal of Canal 13 of Buenos Aires and the news signal TN (Todo Noticias). ARTEAR will also maintain its interest in (i) Telecor, holder of the license of Canal 12 of Córdoba and (ii) Bariloche TV, holder of the license of Canal 6 of Bariloche. (b) Radio Mitre, which will maintain the frequencies AM 790 and FM 100 in Buenos Aires, AM 810 and FM 102.9 in Córdoba, and FM 100.3 in Mendoza; and (c) certain assets, liabilities, rights and obligations to be spun off from Cablevisión (“Cablevisión Spinoff 1”), which will include 24 local licenses for physical link subscription television services in cities where there is no incompatibility with broadcast TV, and 2 licenses for radio-electric link subscription television services. (ii) Unit II: composed by the surviving Cablevisión, which will continue to carry out the business activities and operations of Cablevisión with all the assets, liabilities, rights and obligations that are not spun off from Cablevisión. It will include 24 licenses for physical link subscription television services and 10 licenses for radio-electric link subscription television services, including the signal Metro, which is also the local signal of the license exploited in the City of Buenos Aires. (iii) Unit III: composed by Cablevisión Spinoff 2, 154 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 155 which will include assets, rights and obligations to be spun off from Cablevisión, including 22 licenses for physical link subscription television services and 10 licenses for radio- electric link subscription television services. (iv) Unit IV: (a) composed by IESA, owner of the signals TyC Sports and TyC Max; (b) the signals El 13 Satelital, Magazine, Volver, Quiero Música en mi Idioma and (c) an equity interest in Canal Rural S.A., owner of the signal Canal Rural. (v) Unit V: to be owned by one or more individuals or legal entities that will not maintain a corporate relationship with Radio Mitre, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which will own: (a) one sound frequency modulation broadcasting service for the City of San Miguel de Tucumán-FM 99.5, (b) one sound frequency modulation broadcasting service for the City of San Carlos de Bariloche- FM 92.1, (c) one sound frequency modulation broadcasting service for the City of Santa Fe- FM 99.3, (d) one sound frequency modulation broadcasting service for the City of Bahía Blanca-FM 96.5 and (e) one sound frequency modulation broadcasting service for the City of San Carlos de Bariloche -FM 103.1, owned by Bariloche TV (vi) Unit VI: to be owned by one or more individuals or legal entities that will not maintain a corporate relationship with ARTEAR, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which shall hold one broadcast television license for the City of Bahía Blanca, Province of Buenos Aires-LU81 TV Canal 7-and an equity interest in Cuyo Televisión S.A., holder of one broadcast television license in Mendoza-LV83 TV Canal 9 Mendoza-. Said proposal contemplates that the Company will continue to own, directly or indirectly, only one of the audiovisual communication service Units (among those defined as Unit I and Unit II) of the six that were described above. The implementation of this proposal may entail a reduction of the Company’s operating income and its profitability in the Cable Television and Internet Access segment and/or a reduction of its operating income and profitability of the Broadcasting and Programming segment. The above-mentioned considerations and the limits to the growth of Grupo Clarín imposed by this law, against world trends and against legitimately acquired rights, will surely have an impact on the potential value of Grupo Clarín. The proposal will contemplate the necessary reservations to safeguard the rights of the Company, among which we may mention the following: the reservation to bring the judicial actions that may correspond in connection with the claim for economic damages caused to the Company and its subsidiaries as a consequence of their adjustment to conform to the law; the reservation to challenge the conformity of Sections 41, 45, 48 and 161 of Law No. 26,522 to international conventions before the Inter- American Commission on Human Rights, the Inter-American Court of Human Rights and other competent International Courts; the reservation to challenge judicially the composition of AFSCA for the period during which it did not conform to the provisions of the LSCA and for not being a technical and independent agency protected against undue interferences from the State. In order to consolidate the number of subscription television licenses for the purposes of conforming Cablevisión to the Audiovisual Communication Services Law, the Company applied the coverage area extension mechanism provided under section 45 of Decree No. 1225/2010 in accordance with the criterion approved by AFSCA in the Minutes of its Board of Directors’ Meeting No. 32/2012. The implementation of the proposal will necessarily involve a series of transactions that will require in some cases a statement of intention from the shareholders that are not related to Grupo Clarín. It should be noted that the proposal provides that the three units that will result from the adjustment of Cablevisión (Surviving Cablevisión, Cablevisión Spinoff 1 and Cablevisión Spinoff 2) will each have a market share lower than the limit established by the law. The proposal also includes other regulatory authorizations required for its implementation (CNV, IGJ, AFIP, SECOM, CNDC, among others) as well as the request to be excluded from the scope of the taxes applicable to the transactions required to implement the proposal. The Company and its subsidiaries have always abided by the laws and respected the decisions of the judiciary: all of the judicial claims brought by the Company since the enactment 155 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 156 of Law No. 26,522 had the purpose of preserving the assets of the Company and of its shareholders under the firm conviction that the current structure of Grupo Clarín is the most efficient, both from the operational and the economic perspective, for its shareholders, employees, customers, suppliers and the community as a whole. The Board understands that the Company has presented the alternative that most mitigates the damages caused by having to comply with the Supreme Court decision, taking into consideration what the Board believes to arise clearly from the multiple license regime and the admissibility conditions provided by Law No. 26,522. On February 18, 2014, the Company was served with AFSCA Resolution No. 193/2014 whereby AFSCA’s Board of Directors declared that the proposal submitted by Grupo Clarín S.A., Arte Radiotelevisivo Argentino S.A., Radio Mitre S.A. and Cablevisión S.A. was formally admissible. Pursuant to the same Resolution, AFSCA provided that the term of one hundred eighty (180) calendar days set forth under Section 8 of the Rules for the Management and Procedures Relating to Voluntary Proposals established by Resolution No. 2,205/AFSCA/12 would be counted as from the moment the parties were served notice of this Resolution. On that same date, the Company’s Board of Directors took notice of AFSCA Resolution No. 193/2014. In the recitals of AFSCA Resolution No. 193/2014 which declared the proposal submitted formally admissible, AFSCA stated that the withdrawal of claims made under File No. 21,788/08, as well as those made under the proposal submitted by Cablevisión, were now embedded in the process provided under Section 161 of Law No. 26,522. Accordingly, they are deemed to be approved within the framework of the proposal that was declared formally admissible. On February 18, 2014 the Company’s Board of Directors called an Extraordinary Shareholders’ Meeting to be held on March 20, 2014 in order to consider the following points of the agenda: 1) Appointment of two (2) shareholders to draft and sign the meeting minutes; 2) Consider AFSCA Resolution No. 193/2014; 3) Instruction to the Board of Directors to begin with the implementation of the Proposal, including the proposal of those transactions and corporate reorganizations required to such end; 4) Approval of the work done by the Task Force created to conform the Company to the Audiovisual Communication Services Law. Granting of attorney powers to act before Courts of Justice and the relevant oversight agencies; 5) Appointment of representatives of the Company to vote in favor of the Proposal at the subsidiaries’ Shareholders’ Meetings. On March 20, 2014, the Company’s Shareholders held a General Extraordinary Shareholders’ Meeting at which they decided (i) to approve formally in its entirety the Proposal submitted by the Company, which was declared formally admissible under AFSCA Resolution No. 193/2014, (ii) to authorize and instruct the Board of Directors to begin with the tasks for the implementation of the Proposal so that they can implement it within the 180-day term set by AFSCA Resolution No. 193/2014, or, if possible, before the end of such term, (iii) to grant the Board of Directors the broadest powers to consider, manage and submit to competent authorities all the required authorizations for the operations and/or corporate reorganizations as the Board may deem most appropriate and/or convenient according to the circumstances for the implementation of the Proposal and, (iv) to appoint representatives of the Company to vote in favor of the Proposal at the subsidiaries’ Shareholders’ Meetings with the broadest powers. On April 16, 2014, Grupo Clarín made a filing before AFSCA to request the suspension and/or extension of the 180-day term set under AFSCA Resolution No. 193/2014 to implement the Proposal until the conditions precedent described in the Proposal (including the repeal of MEyFP Resolution No. 113/10 and SCI Resolution No. 1011/09 by the Ministry of Economy and the Secretariat of Domestic Trade and the approval of the merger between Cablevisión and Multicanal by the CNV) have been met, and until the proposals filed by TELEFE, PRISA and TELECENTRO have been reviewed and decided upon. Pursuant to Note No. 263/AFSCA/DGAJyR/SGAJ/2014, AFSCA notified the Company and Cablevisión that based on the report issued by the Compliance and Transfer Division and on the opinion issued by the Permanent Legal Service AFSCA 156 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 157 had rejected the request for the suspension and/or extension of the term established for the implementation of the Proposal, which had been filed on April 16, 2014. At the meeting held on April 25, 2014, the Board of Directors of Grupo Clarín took notice of the letters sent by ELHN Grupo Clarín New York Trust, HHM Grupo Clarín New York Trust, LRP Grupo Clarín New York Trust, Aranlú S.A. and José Antonio Aranda, whereby they requested the Company to analyze the feasibility of a spinoff of Grupo Clarín into two public entities, one that would maintain Unit I and the other would maintain Unit II, as defined in the Proposal. As decided at that Board Meeting, if this transaction should be selected as the alternative to consummate the Proposal, Grupo Clarín would also have to proceed with the sale of Units III, IV, V and VI, thus mitigating the negative effects of the Company conforming to the Audiovisual Communication Services Law for minority shareholders. On May 13, 2014, the Company’s Board of Directors approved the spinoff of the Company under the terms described in the spinoff prospectus. The spinoff is one of the alternatives that the Company was forced to analyze and project to eventually submit to its shareholders for the purpose of complying with the Proposal considered by the shareholders at the Shareholders’ Meeting of Grupo Clarín S.A. held on March 20, 2014, and declared formally admissible by AFSCA on February 18, 2014. The spinoff is subject to the Prior Regulatory Authorizations, as defined in the above- mentioned prospectus. The main premises of the spinoff financial statements prepared by the Company in accordance with the spinoff described in the Proposal were the following: (A) Grupo Clarín S.A. will be the surviving company and, as such, it will retain all the assets, liabilities, equity, rights and obligations that are not allocated to other units; Grupo Clarín will continue to make public offering of its shares although as a result of the spinoff it will reduce its capital stock to reflect the equity impact of the spun-off assets, liabilities and equity. This will not entail any changes in terms of pro rata interest for any of the holders of the shares traded on stock exchanges. Grupo Clarín will retain its interest in the Business Units that are outside the scope of the Audiovisual Communication Services Law; (B) Unit II will receive, as a result of the spinoff of Grupo Clarín S.A., the assets identified to that effect in the Proposal (in summary, an indirect interest in Cablevisión S.A. with all the assets, liabilities, rights and obligations that are not spun off from that company). It will request authorization to be admitted to the public offering regime and authorization for the trading of the shares that will be received by the current holders of shares issued by Grupo Clarín that are traded on stock exchanges; (C) once (i) the Company has obtained the Prior Regulatory Authorizations (as defined in Grupo Clarín S.A.’s spinoff prospectus), (ii) the spinoff has been registered, (iii) the Spun-off Company has been registered with the IGJ and, (iv) the spun-off company has been admitted to the public offering regime, Grupo Clarín will reduce its capital stock affecting all shareholders in each class of shares, and the spun-off company will issue in exchange a set of new shares of the same classes as those issued by Grupo Clarín according to the following “exchange ratio”: 1 current share of Grupo Clarín S.A. will be equivalent to 0.3896 shares of Grupo Clarín S.A. (post spinoff ), and (ii) 0.6104 new shares of the spun-off company. (D) The other Units (III, IV, V and VI) identified in the Proposal will not be spun off, but will be offered for sale to third parties by Grupo Clarín or a subsidiary that is the direct holder of the equity that makes up the respective unit. As stated in the Company’s spinoff prospectus, the “Spinoff Date” will be the date on which the last of the following authorizations and/or filings has been obtained and/or made (as appropriate): (i) Prior Regulatory Authorizations (as defined in the Section “Regulatory Authorizations” of the Prospectus), (ii) registration of the spinoff before the IGJ, or (iii) registration of Cablevisión Holding S.A.’s incorporation before the IGJ. Cablevisión Holding S.A. will begin to operate on its own on the first day of the month following the expiration of the 30-day term counted as from the Spinoff Date (the “Operations Transfer Date”). The Spinoff will produce accounting effects as from the Operations Transfer Date. The Board of Directors of Cablevisión S.A. moved forward with the tasks for the 157 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 158 implementation of the Proposal submitted by that company and decided on May 13, 2014 to approve the spinoff proposal and formally request the CNV’s administrative approval of its spinoff into three different independent companies, the consequent reduction of its equity and the amendment of its bylaws. The Board of Directors of Cablevisión also approved the special spinoff balance sheet and the spinoff prospectus prepared for such purpose. The spinoff is subject to the Prior Regulatory Authorizations, as defined in the spinoff prospectus. On May 14, 2014, the Company requested from the CNV, within the above-mentioned scope, the administrative approval of its spinoff and submitted the spinoff prospectus, which had been approved by its Directors at the meeting held on the previous day. The Company decided to send a letter to all the shareholders who had signed the letters detailed in the Minutes of the Board of Directors’ Meeting dated April 25, 2014, as well as to the holder of the Class C shares, requesting that they expressly inform the Company how they will comply fully with the Audiovisual Communication Services Law (with respect to Unit 1 and Unit 2) if the Proposal should be implemented through the spinoff described above. On May 15, 2014, the Company’s Board of Directors took notice of the letters sent by the shareholders ELHN Grupo Clarín New York Trust, HHM Grupo Clarín New York Trust, LRP Grupo Clarín New York Trust, José Antonio Aranda and Aranlú S.A. According to those letters, if the Proposal were to be implemented using the spinoff option, said shareholders would carry out the necessary transactions so that (i) the direct and indirect shareholders of Grupo Clarín S.A. (post spinoff ) will be Aranlú S.A., José Antonio Aranda and LRP Grupo Clarín New York Trust, and (ii) the direct and indirect shareholders of the spun-off company, Cablevisión Holding S.A., will be HHM Grupo Clarín New York Trust and ELHN Grupo Clarín New York Trust. In their respective letters, GS Unidos LLC and its owner, Mr. Ralph H. Booth II, have stated their intention to cooperate with the Company in the implementation of the Proposal and, particularly, in the possible spinoff. To that end, if the Proposal were to be implemented using the spinoff option and subject to the approval of the regulatory authorities that may eventually correspond, Mr. Ralph H. Booth II has undertaken to reach an agreement with an unrelated third party so that they may carry out the transactions that may be necessary to cause the split of GS Unidos LLC and reach the following shareholder structure for all of the Class C shares of Grupo Clarín (post Spinoff ) and of the spun-off company: (i) the holder of all of the Class C shares of Grupo Clarín (post spinoff ) shall be the existing company GS Unidos LLC, which by that time will be owned by an unrelated third party assignee; (ii) the holder of all of the Class C shares of Cablevisión Holding S.A., the company spun- off from Grupo Clarín S.A., shall be a new limited liability company incorporated in the United States of America, which will be owned directly or indirectly by Ralph H. Booth II. On May 15, 2014, the Company notified AFSCA that on May 14, 2014 it had made a filing with the CNV requesting the CNV’s administrative approval of the Company’s spinoff process. Also on May 15, 2014, Cablevisión made a filing before AFSCA in order to: i) prove before such Agency that on May 14, 2014 it had made a filing before the CNV requesting the administrative approval of the spinoff process required for the implementation of the Proposal; and ii) request its authorization for the amendment of the Bylaws of Cablevisión, pursuant to Section 25 of Law No. 26,522. On May 16, 2014 and on June 15, 2014, and pursuant to Section 27 of the Audiovisual Communication Services Law, the Company made a filing before AFSCA in order to notify that agency of the new shareholder structure of (i) the Company, (ii) its controlling company, GC Dominio S.A., (iii) Cablevisión Holding S.A., the company to be spun off from Grupo Clarín S.A. and (iv) the controlling company of the latter, and indirect controlling company of Cablevisión, CV Dominio S.A., which will result if the spinoff informed on May 15, 2014 were to occur. On May 28, 2014, the Company made a filing before AFSCA in order to notify that agency that it had received an Irrevocable Offer from Messrs. Gerardo Martí Casadevall and Christophe DiFalco for the acquisition of 158 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 159 a given number of shares of Cablevisión such that, upon consummation of the spin-off of Cablevisión, the offerors will be entitled to receive sixty percent (60%) of the shares to be issued by Cablevisión Spinoff 2 (Unit III under the Proposal). On June 25, 2014, the Company, ARTEAR, Radio Mitre and Cablevisión received a Note from AFSCA communicating a series of considerations about: a) the administrative approval requested from the CNV of the spinoff process of the Company and Cablevisión, and b) the authorization requested for the amendment of the Bylaws of Cablevisión. In such note, AFSCA: i) informed that it had taken notice of the request for administrative approval filed with the CNV of both spinoff processes; ii) made certain observations regarding the proposal to amend Cablevisión’s Bylaws; iii) stated that it understood that Cablevisión would be liable for any and all acts and any contingency arising from those acts until the date of the approval to be granted by AFSCA for the transfers in favor of the spun-off companies and not as from the date of consummation of those transfers; iv) stated that it would review the bylaws of the spun-off companies; v) stated that it would consider the requested approval once the Company and Cablevisión had informed: v.1.) whether the shareholders had approved the proposed spinoffs and v.2.) the names of the final shareholders of those companies, as well as those of the spun-off companies. It also stated that at such time, it would also analyze the Filings made in connection with the possible composition of the proposed Audiovisual Communication Service Units; and vi) mentioned that the Company, Cablevisión and the companies to be created under the spinoff must be absolutely independent and unrelated among each other, without any common shareholders of any type. On June 30, 2014, the Company and Cablevisión, made a filing before AFSCA in order to respond to the note dated June 25, 2014. The companies informed AFSCA that: i) Cablevisión would comply with the observations made on some of the proposed changes to its bylaws, and that it would reformulate the proposed bylaws subject to the approval of the shareholders; ii) once approved by the shareholders of Cablevisión, it would file the proposed bylaws for each of the companies to be spun off from Cablevisión, which must necessarily be identical to Cablevisión’s own bylaws, iii) once the companies to be spun off, which will have new shareholders subject to AFSCA’s prior approval, as appropriate, have been registered, Cablevisión cannot continue to be held liable for the acts of the spun off companies and/or related contingencies, because Cablevisión had undertaken before AFSCA to comply with the requirement of absolute independence among Cablevisión and the spun-off companies; iv) the Company and Cablevisión had undertaken to inform within the shortest possible time the decisions rendered by their shareholders at Shareholders’ Meetings; and v) compliance with approval conditions to be met by the Company had been acknowledged by that Agency. The Company and Cablevisión reaffirmed their commitment under the Proposal in connection with the independence between the Company and its spun-off company and among Cablevisión and its spun-off companies, except with respect to the Company’s minority holders of Class B shares that are listed and traded on the Buenos Aires Stock Exchange (BCBA, for its Spanish acronym) and on the London Stock Exchange (LSE) in the understanding that the shares that trade freely on stock exchanges are outside the scope of the restrictions imposed under the new legal framework. Once the Proposal has been declared formally admissible by AFSCA, which occurred on February 18, 2014, its implementation requires the intervention of other governmental and oversight agencies and the approval of the shareholders at the respective Shareholders’ Meetings in order to carry out the reorganization and the transfer of licenses, assets, liabilities and operations to third parties, which must then receive final approval from AFSCA by means of an act that declares that the process has been duly completed. For that reason, the Company made various fillings before the different entities/ governmental agencies that must intervene in the implementation of the proposal, according to the following detail: • Ministry of Economy; • Secretariat of Trade; • Comisión Nacional de Defensa de la Competencia (National Antitrust Commission); • Argentine Securities Commission; 159 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 160 • Argentine Secretariat of Communications; • Before AFSCA, informing the above- mentioned filings. The Company made new filings requesting AFSCA to grant service authorization for subscription television services that, as a result of the reorganization, will not change their conformation and are still pending resolution to date. Within the framework of the process to conform the Company to the Audiovisual Communication Services Law, the Company also requested that agency to grant service authorization and the extension of the licenses held by Radio Mitre S.A. corresponding to: AM Córdoba, FM Mendoza, FM Tucumán, and FM Santa Fe. Cablevisión made filings before AFSCA in which it reserved its rights and made statements in connection with the interpretation of certain recitals of Resolution No. 193/AFSCA/2014 regarding the decisions rendered on: • The radio-electric link subscription television services that will be discontinued as a result of the reorganization; • The portion of radio-electric spectrum that will be accumulated provisionally to the radio- electric services selected in certain locations. • The statement about the maintenance of the registration of the signal METRO by Cablevisión S.A. • Rectification of the proposal originally submitted regarding the services rendered in Necochea, La Dulce, Lobería, Monte de los Gauchos, Godoy and Rawson, in Cablevisión S.A. Pursuant to Note No. 263/AFSCA/DGAJyR/SGAJ/2014, AFSCA informed Cablevisión that AFSCA’s Board had approved the amendments proposed by that company to the Proposal with respect to Necochea, La Dulce, Lobería, Monte de los Gauchos, Godoy and Rawson. The Company obtained from the subsidiaries of Cablevisión S.A. a confirmation of Cablevisión’s proposal filed by the Company, and provided evidence of such circumstance to AFSCA pursuant to AFSCA Resolution No. 193/2014. The ratifications reported as of the closing date of these financial statements correspond to the following companies: • Tres Arroyos Televisora Color S.A.; • Indio Rico Cable Color S.A.; • Copetonas Video Cable S.A.; • Cable Video Sur S.A. (under reorganization); • Dorrego Televisión S.A.; • Wolves Televisión S.A. The proposal submitted by Cablevisión was approved by La Capital Cable S.A. and Otamendi Cable Color S.A. As of the date of these financial statements, no filing was made in connection with these approvals before AFSCA. Cablevisión has carried out all necessary proceedings in order to obtain the approval of the Proposal from Teledifusora San Miguel Arcángel S.A. and Ver TV S.A. On June 30, 2014, the shareholders of Cablevisión approved that company’s partial spinoff under the terms described in the spinoff prospectus submitted by Cablevisión before the CNV in compliance with applicable legislation for (i) the creation with a portion of the equity subject to the spinoff, of two companies whose corporate names will be Compañía Argentina de Cable S.A. and Compañía Inversora de Redes S.A.; (ii) the merger of a portion of the spun-off equity with La Capital Cable S.A. and (iii) the merger of a portion of the spun-off equity with Tres Arroyos Televisora Color S.A. On June 30, 2014 the Company’s shareholders at the General Extraordinary Shareholders’ Meeting approved (i) the partial spinoff of Grupo Clarín, (ii) the creation of a new sociedad anónima (a corporation with limited liability) with the equity subject to the spinoff under the name CABLEVISIÓN HOLDING S.A., which will request admission to the public offering regime, under the terms set forth in the spinoff prospectus filed by Grupo Clarín with the CNV in accordance with applicable legislation and which was published in the BCBA’s Daily Bulletin and in the CNV’s Financial Information Highway, (iii) the reduction of the Company’s capital stock as a consequence of the approved partial spinoff, (iv) the reduction in the amount of the capital stock that is authorized for public offering and listing on the Buenos Aires Stock Exchange and the London Stock Exchange, (v) the amendment of Articles 4, 5, 16, 21 and 24 of the Company’s Bylaws under the terms established in the spinoff prospectus, (vi) the deletion of Article 27 of the Company’s current Bylaws, and (vii) the performance of the 160 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 161 Task Force Created to Implement the Proposal as from the Extraordinary Shareholders’ Meeting held on March 20, 2014 and up to that date, and granted such Task Force the broadest powers to consider, manage and submit to competent authorities all the required authorizations for the implementation of the Proposal. As of the date of these financial statements, the Company has published the corresponding spinoff notices pursuant to Section 88 of the Argentine Business Associations Law. Two objections were filed against the spinoff, which were duly dismissed. Notwithstanding the foregoing, as of the date of these financial statements, the Company has not yet issued the public deeds relating to the spinoff and to the creation of the spun-off companies because the prior regulatory authorizations have not been granted as provided under its spinoff prospectus. In addition, at the above-mentioned General Extraordinary Shareholders’ Meeting of June 30, 2014, the Shareholders approved (i) the irrevocable offer received for the acquisition of Unit III under the Proposal, (ii) the irrevocable offers received for the acquisition of the assets that make up Unit V under the Proposal, (iii) the irrevocable offer for the acquisition of the shares of Telba, and (iv) the motion to adjourn the meeting until July 11, 2014 so that the Company may make a filing requesting AFSCA to ratify the existence of certain precedents decided by AFSCA in other companies’ procedures to conform to the Audiovisual Communication Services Law, in connection with the limitations applicable to the ownership of registered cable television signals and, if any such precedents exist, that AFSCA consider the proposal submitted by the Company as if it had been reformulated. The Company would then submit the matter to the shareholders so that, with AFSCA’s answer, they may consider the irrevocable offers received for the sale of shares and/or assets that make up Unit IV under the Proposal, and the irrevocable offer for the acquisition of the shares of Cuyo Televisión S.A., if any shall exist as of the date on which the shareholders’ meeting is scheduled to resume. The main terms and conditions of the offers approved by the shareholders at the Extraordinary Shareholders’ Meeting held on June 30, 2014 are the following: • The irrevocable offer received for the acquisition of Unit III under the Proposal. The irrevocable offer approved by the shareholders for the acquisition of Unit III under the Proposal was made by Messrs. Gerardo Martí Casadevall and Christophe DiFalco (the Investors). The offer contemplated the acquisition, on the Closing Date, defined as the date that occurs 10 business days immediately after the date on which all of the conditions precedent have been fulfilled and until December 31, 2014 unless such deadline should be extended by both investors and/or by Grupo Clarín and Fintech until no later than March 31, 2015, from one or more companies controlled by the Company, of a given number of shares of Cablevisión S.A. such that, upon consummation of the spin-off of Cablevisión S.A., the Investors will be entitled to receive 60% of the shares to be issued by Cablevisión Spinoff 2. The Offer is subject to the condition that it also include minority equity interests in La Capital Cable S.A., Tres Arroyos Televisora Color S.A., Teledifusora San Miguel Arcángel S.A. and AVC Continente Audiovisual S.A., and Televisora Privada del Oeste S.A. Simultaneously with this Irrevocable Offer, the Investors have sent Fintech Advisory Inc. an irrevocable offer in terms substantially similar to those of the Offer, for the Investors to acquire all of the capital stock of a new limited liability company to be incorporated in the State of Delaware, United States of America, that will own approximately 40% of the shares to be issued by Cablevisión Spinoff 2. The implementation and effective closing of the transaction described under the Irrevocable Offer -including the payment of the offered price and the transfer of the shares of Cablevisión S.A. to the Investors- is subject to the following Conditions Precedent set forth under the Offer, including the final approval to be granted by AFSCA. The purchase price established in the Irrevocable Offer is of a) USD 28,200,000, for the 60% participation owned by the Company. The price will be paid as follows: a) USD 8,460,000 on the Closing Date, in United States Dollars, and b) the balance shall be paid by means of a promissory note to be issued by the Investors and to be delivered on the Closing Date for USD 19,740,000 under the terms described in Exhibit III to the Offer. The conditions that were negotiated include: A purchase option, transferrable to third parties, over the assets sold for a term of 7 years, a percentage of the sale price upon the occurrence 161 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 162 of any liquidity event, also in favor of the seller, and a transferrable right of first refusal, which will allow the Company to match any offer that the purchasers might receive in the future - conditions that will allow the current shareholders to recover a portion of the future value. • The irrevocable offers received for the acquisition of the assets that make up Unit V under the Proposal. The main terms of the offers received by Radio Mitre S.A. are the following: (A) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in San Miguel de Tucumán: The offer letter was sent by Mr. Facundo Soler Valls for the acquisition of the sound frequency modulation broadcasting service in the frequency 99.5 Mhz, Channel 258, Category “C” of the City of San Miguel de Tucumán, Province of Tucumán, awarded in favor of RMSA under Resolution No. 1,325- CFR/99 (the “Tucumán Broadcasting Service”). The assignment, sale and transfer of the Tucumán Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among others, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Tucumán Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Tucumán Broadcasting Service is of Ps. 1,000,000 (One Million Pesos), payable as follows: (i) Ps. 100,000 (One Hundred Thousand Pesos) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer; (ii) Ps. 75,000 (Seventy Five Thousand Pesos) on the Closing date, and (iii) the balance of Ps. 825,000 (Eight Hundred Twenty Five Thousand Pesos) shall be payable with 11 (eleven) equal, monthly and consecutive checks. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. (B) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in Santa Fe: Its main terms and conditions are the following: (I) Offeror: PRENSA Y MEDIOS SANTAFESINOS DEL SUR S.A. The assignment, sale and transfer of the Santa Fe Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among others, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Santa Fe Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Santa Fe Broadcasting Service is of USD 150,000 (One Hundred Fifty Thousand US Dollars), payable as follows: (i) USD37,500 (Thirty Seven Thousand Five Hundred US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of notice of pre- acceptance of the Offer, and (ii) the balance of USD112,500 (One Hundred Twelve Thousand Five Hundred US Dollars) on the Closing date. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. (C) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in San Carlos de Bariloche; the main terms and conditions are the following: (I) the offer letter was sent by SALTAVIOLETA S.R.L. The assignment, sale and transfer of the Bariloche Broadcasting Service will be subject to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among them, that AFSCA and the other oversight agencies that may correspond, approve the assignment, 162 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 163 sale and transfer of the Bariloche Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Bariloche Broadcasting Service is of USD 75,000 (Seventy Five Thousand US Dollars) (the “Price”), payable as follows: (i) USD18,750 (Eighteen Thousand Seven Hundred Fifty US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer, and (ii) the balance of USD56,250 (Fifty Six Thousand Two Hundred Fifty US Dollars) on the Closing date. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer and (D) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in Bahía Blanca. Its main terms and conditions are the following: The offer letter was sent by Mr. Marcelo González, who made a binding, firm and irrevocable offer for the acquisition of the Sound Frequency Modulation Broadcasting Service identified with the distinctive signal “LRI436”, Category “D” to operate in the frequency 96.5 Mhz, Channel 243, in the city of Bahía Blanca, Province of Buenos Aires, the ownership of which in favor of RMSA was confirmed under Resolution No. 0741-COMFER/00. The assignment, sale and transfer of the Bahía Blanca Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among them, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Bahía Blanca Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Bahía Blanca Broadcasting Service is of USD 50,000 (Fifty Thousand US Dollars), payable as follows: (i) USD12,500 (Twelve Thousand Five Hundred US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer, and (ii) the balance of USD37,500 (Thirty Seven Thousand Five Hundred US Dollars) on the Closing date. On June 30, 2014, Radio Mitre S.A. sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre S.A. and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. With regard to the above-mentioned offers, in July 2014 the offerors paid Radio Mitre the advances that were agreed in connection with the transfers of the frequencies of San Miguel de Tucumán, Bahía Blanca and Santa Fe. • Irrevocable Offer for the acquisition of the Sound Broadcasting Service owned by Bariloche TV. The main terms and conditions of the Offer received are the following: (I) the offer letter was sent by Mr. Francisco Alejo Quiñonero (the “Offeror”), who made a binding, firm and irrevocable offer (the “Offer”) for the acquisition of the sound frequency modulation broadcasting service, identified with the distinctive signal LGR346. Category D, to operate in the frequency 103.1MHz, Channel 276, in the city of San Carlos de Bariloche, Province of Río Negro, awarded to Bariloche TV pursuant to Resolution 154- COMFER/2001 (the “Bariloche Broadcasting Service”). (II) The assignment, sale and transfer of the Bariloche Broadcasting Service will be subject (as condition precedent) to the fulfillment on or before December 31, 2014-or upon expiration of any extension of this term, should Bariloche TV extend it for up to 180 days-of all of the following Conditions Precedent: (i) that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Bariloche Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offeror; and (ii) that as of the Closing Date there are no laws and/or administrative and/or court orders restraining, 163 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 164 prohibiting, amending, altering, conditioning or rendering illegal the assignment, sale and transfer of the Bariloche Broadcasting Service under the conditions set forth in the Offer. (III) The Offer shall remain effective from June 24, 2014 through August 20, 2014 (the "Offer Period"), notwithstanding which, if on or before that date Bariloche TV should communicate to the Offeror that the Offer has been considered admissible by the Board of Directors of Grupo Clarín S.A. and pre-accepted for the purpose of its subsequent treatment at the shareholders’ meeting of Grupo Clarín S.A. that will consider and decide on the manner, form and conditions for the implementation of the Proposal (the "Pre-Acceptance"), the Offer shall be automatically extended for an additional period that will expire 10 (ten) business days after the close of the above-mentioned Shareholders’ Meeting of Grupo Clarín S.A. (IV) The Offer shall be deemed accepted by Bariloche TV if the shareholders of Grupo Clarín S.A., at the abovementioned shareholders’ meeting, should decide within the Offer Period to accept the Offer definitively, and Bariloche TV should send the Offeror written notice stating unequivocally its intention to assign, sell and transfer to the Offeror the Bariloche Broadcasting Service under the terms and conditions of the Offer (the "Acceptance"). As from Acceptance, this Offer will be binding on both Bariloche TV and the Offeror and its execution will only be subject to the effective occurrence of the Conditions Precedent. At closing, the parties shall execute all the final instruments required to consummate the assignment, sale and transfer of the Bariloche Broadcasting Service. (V) Within 10 (ten) days as from the Acceptance, the Offeror undertakes to create a company for the purpose of acquiring the Bariloche Broadcasting Service. (VI) If the Offer should be accepted as of the Closing Date, Bariloche TV and the Offeror shall perform the acts required to execute a firm agreement on the assignment, sale and transfer of the Bariloche Broadcasting Service in favor of the Offeror in accordance with the terms and conditions of the Offer (the “Assignment”). (VII) The Price offered for the Assignment of the Bariloche Broadcasting Service is of Ps. 450,000 (Four Hundred Fifty Thousand Pesos) (the “Price”), payable as follows: (i) Ps. 149,985 (One Hundred Forty Nine Thousand Nine Hundred Eighty Five Pesos) as initial price, on the Closing date, and (ii) Ps. 300,015 (Three Hundred Thousand Fifteen Pesos), which shall be converted into US Dollars at the official offer exchange rate quoted by Banco Nación on the day immediately preceding the Closing date (the "Price Balance"), and shall be paid in 2 (two) equal installments of Ps. 115,007.50 each -with no interest- which shall be payable upon 12 (twelve) and 18 (eighteen) months as from Closing date. The Offeror may cancel such installments in Pesos, at the official offer exchange rate quoted by Banco Nación on the day immediately preceding the payment date. The Price Balance shall be guaranteed by the Offeror by the issuance and delivery to Bariloche TV, on the Closing date, of 2 (two) promissory notes. (VIII) The Offer sets as closing date the tenth business day as from the fulfillment of the last of all Conditions Precedent (the "Closing"), at the time and place that Bariloche TV shall notify the Offeror in writing, to carry out the acts necessary to execute the Assignment of the Bariloche Broadcasting Service. (IX) The Assignment of the Bariloche Broadcasting Service shall be executed in the economic, financial, equity, tax, legal and regulatory conditions in which such service is at Closing Date. (X) The Offeror undertakes to carry out at its own risk, within applicable terms, all the notices and/or filings with the authorities or governmental agencies that may be necessary (especially with AFSCA) on account of or in connection with the Offer. On July 1, 2014, Bariloche TV notified Mr. Francisco Alejo Quiñonero of the acceptance of the Offer, stating that as from the Acceptance, the Offer was binding both on the company and the Offeror, and its execution was only subject to the effective occurrence of the conditions precedent indicated in the Offer. The parties shall, at Closing, execute all the final instruments required to consummate the assignment, sale and transfer of the sound broadcasting service subject matter of the Offer. • The terms and conditions of the Irrevocable Offer for the acquisition of the shares of TELBA are the following: (I) the letter was sent to ARTEAR and GC Minor S.A. by Mr. Francisco Alejo Quiñonero, who made a binding, firm and irrevocable Offer to acquire the following equity interests in TELBA: (i) 156,624 registered, non endorsable, common shares with a nominal value of Ps. 0.0001 and entitled to one vote per share, representing 99.9994% 164 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 165 of the capital stock and votes of TELBA owned by ARTEAR, and in the same proportion the political and economic rights inherent to such shares (the “ARTEAR Shares”), and (ii) 1 (one) registered, non endorsable, common share with a nominal value of Ps. 0.0001 and entitled to one vote per share, representing 0.0006% of the capital stock and votes of TELBA owned by GC Minor, and in the same proportion the political and economic rights inherent to such shares. The assignment, sale and transfer of the Shares shall be subject to the approval by AFSCA and by other oversight agencies that may correspond on or before December 31, 2014 of the transfer of the Shares subject matter of the Offer; and to the absence as of the Closing Date of any laws and/or administrative and/or court orders restraining, prohibiting or rendering illegal the transfer of the Shares under the conditions set forth under the Offer (the “Conditions Precedent”). On July 1, 2014, ARTEAR and GC Minor notified Mr. Francisco Alejo Quiñonero of the acceptance of the Offer, stating that as from the Acceptance, the Offer was binding on ARTEAR, GC Minor and the Offeror, and its execution was only subject to the effective occurrence of the conditions precedent indicated in the Offer. The parties shall, at Closing, execute all the final instruments required to consummate the assignment, sale and transfer of the Shares of TELBA. The Price offered for the Purchase of the Shares of TELBA is of Ps. 5,000,000 (Five Million Pesos) (the “Price”), payable as follows: (i) Ps. 1,666,500 (One Million Six Hundred Sixty Six Thousand Five Hundred Pesos), at Closing; and (ii) the balance of Ps. 3,333,500 (Three Million Three Hundred Thirty Three Thousand Five Hundred Pesos) shall be converted into US Dollars at the official offer exchange rate quoted by Banco de la Nación Argentina on the Closing date (the “Purchase Price Balance”), and shall be settled as follows: (i) 50% (fifty per cent) of the Purchase Price Balance shall be settled upon 12 (twelve) months as from Closing date, and (ii) the remaining 50% (fifty per cent) of the Purchase Price Balance shall be settled upon 18 (eighteen) months as from Closing date. Although the Purchase Price Balance has been agreed in US Dollars, the Offeror may settle the Purchase Price Balance in pesos, or any currency that may replace the Argentine peso, at the official offer exchange quoted by Banco de la Nación Argentina. The Purchase Price Balance shall be guaranteed by the Offeror by the issuance and delivery to ARTEAR and GC Minor, on the Closing date, of 2 (two) promissory notes. The Purchase of the Shares of TELBA shall be executed in the economic, financial, equity, tax, legal and regulatory conditions in which such shares and TELBA are at Closing. Additionally, the Purchase shall be, with respect to ARTEAR and GC Minor, free and clear of any responsibility arising from the existence of any liabilities arising prior to the Closing date and not disclosed in the Financial Statements of TELBA. Also, at Closing, the Offeror shall grant ARTEAR and GC Minor and/or a designee of ARTEAR and GC Minor, irrevocably and firmly: the exclusive, firm and irrevocable right, but not the obligation, to opt for the purchase of the Shares of TELBA (the “Right of Option”); and the right of first refusal to acquire, exclusively and with priority the Shares of TELBA with respect to any third party (the "Right of First Refusal"), subject to the terms and conditions established in the Offer. As decided by the shareholders, on July 1, 2014 (Filing No. 13,291-AFSCA/14), the Company appeared before AFSCA and requested that agency to ratify that the limitations under Subsection 3 of Section 45 apply only to audiovisual communication service licensees that are holders of the registered title of cable television signals and not to its shareholders and/or holders of the registered title of cable television signals (when the latter are not licensees). The Company also stated that if that agency were to confirm the Company’s interpretation, then the Proposal should be deemed reformulated and/or partially amended based on any such precedents and on the principle of equality taking into account the reservation of rights under the Company’s Proposal. On July 10, 2014, AFSCA served the Company and ARTEAR with Notice 130 AFSCA/14 whereby, in response to the note submitted by both companies on July 1, 2014, that agency stated that in the opinion of AFSCA’s Permanent Legal Service, the request made by both companies entailed a material amendment of the Proposal, and therefore AFSCA rejected the requested reformulation and/or amendment of the Proposal because it considered that the procedural stage for such amendments had concluded. That agency also stated, prima facie, 165 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 166 that the precedents mentioned by both companies regarding the signals were not applicable to the case under review. On July 11, 2014, when the shareholders of the Company resumed the Shareholders’ Meeting that had been adjourned on June 30, 2014, the shareholders approved (i) the firm and irrevocable Alternative Offer of 34 South Media LLC for Unit IV under the Proposal, which was considered by the Company’s Board of Directors on the same date, and instructed the Board of Directors, in light of the response received from AFSCA, to carry out all the necessary steps to comply with the Proposal and to bring the administrative and legal actions required to best safeguard the interests of the Company and (ii) the Irrevocable Offer for the acquisition of the shares of Cuyo Televisión S.A. (which make up Unit VI under the Proposal) owned by Diario Los Andes Hermanos Calle S.A., which had been considered by the Company’s Board of Directors on the same date. The main terms and conditions of the offers approved by the shareholders at the meeting held on July 11, 2014 to resume the Extraordinary Shareholders’ Meeting that had been adjourned until that date on June 30, 2014 are the following: • The terms and conditions of the firm and irrevocable Alternative Offer of 34 South Media LLC for Unit IV under the Proposal approved by the shareholders are the following: The offer consists in the transfer of ownership of the assets that make up Unit IV under the Proposal to a trust in which Grupo Clarín S.A. and GC Minor S.A. will be the Settlors, by contributing all the shares issued by Inversora de Eventos S.A. representing 100% of the capital stock and votes of that company, together with the political and economic rights inherent to such shares, once IESA has exercised its call options on the signals and the shares representing 24.999613% of the capital stock and votes of Canal Rural Satelital S.A, currently owned by ARTEAR. The trust will be managed by an independent trustee, which will be appointed by Grupo Clarín S.A., GC Minor S.A. and 34 South Media LLC by mutual agreement. The trustee will carry out its duties based on management and administration rules or a manual to be defined by mutual agreement among Grupo Clarín S.A., GC Minor S.A. and 34 South Media LLC at the creation of the Trust. The main purpose of the trust will be to preserve the value of the assets held in trust in case the Company decides to bring legal actions to safeguard its rights. The beneficiaries of the trust will be Grupo Clarín S.A., GC Minor S.A. or 34 South Media LLC, to which the trustee will transfer as appropriate the ownership of the property held in trust. The trustee will transfer all the Shares of IESA applying the following criteria: 1st) in favor of 34 South Media LLC if Grupo Clarín S.A. should be forced to divest of Unit IV, within 10 days as from the fulfillment of the Conditions Precedent (as defined below) or the setting of the Price, whichever occurs last (the “Closing”), or 2nd) in favor of Grupo Clarín S.A. and GC Minor S.A. if Grupo Clarín S.A. should not be forced to divest of Unit IV, within 10 days as from the final decision rendered in any actions brought by the Company. Prior to Closing, the parties will set the price that the offerors shall pay to the assignors for the Shares of IESA according to the following procedure: The offerors will offer the assignors an aggregate price for the Shares of IESA (hereinafter, the “Offered Price”). If the assignors do not accept the Offered Price, they may entrust Banco Santander or Banco Itaú, at the sole discretion of the assignors, with the valuation of the Shares of IESA, or they may appoint any other appraiser by mutual agreement among the parties at the request of the assignors. The appraiser will carry out its duty within thirty calendar days as from its designation and shall notify by certifiable means the result of the valuation to all the parties involved. The valuation method will be determined by the designated appraiser. Once the parties have been notified by certifiable means of the price resulting from the valuation under the stipulated procedure (hereinafter, the “Appraised Price”), the following procedure will be followed: 1) If the Offered Price should be lower than the Appraised Price, the offerors will acquire the Shares of IESA at the Offered Price + [(Appraised Price – Offered Price) / 2]). 2) If the Offered Price should be higher than the Appraised Price, the Price to be paid by the offerors to the assignors for the Shares of IESA shall be: Appraised Price + [(Offered Price – Appraised Price ) / 2]). The costs and expenses incurred as a result of the valuation stipulated in this clause will be exclusively and equally borne by the assignors and the offerors. After 166 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 167 the final Sale Price has been agreed upon or set, the transaction will be implemented at Closing, which will take place on the date and at the place indicated by the assignors. The price to be paid by the offerors will be paid as follows: 30% at Closing and the balance in three equal, annual and consecutive installments counted as from Closing. The fulfillment of the obligations undertaken by the parties at Closing, including the payment of the Price by the offerors to the assignors and the transfer of the Shares of IESA by the trust to the offerors, will be subject to the fulfillment of all of the following conditions (individually and collectively, hereinafter the “Conditions Precedent”): 1) That –where necessary- AFSCA and other oversight agencies that may correspond approve the transfer of Shares of IESA and other assets subject matter of this agreement in favor of the offerors; and 2) that there are no laws and/or administrative and/or court orders restraining, prohibiting, amending, altering, conditioning or rendering illegal the transfer of the Shares of IESA and other assets subject matter of this agreement. • The main terms and conditions of the Irrevocable Offer for the acquisition of the shares of Cuyo Televisión S.A. (CUTESA) owned by Diario Los Andes Hermanos Calle S.A. are the following: The offer was sent by Messrs. Silvina Claudia Alonso, Mariano Germán Alonso and Gabriela Cecilia Alonso (the “Assignees”) to acquire from Diario Los Andes, all the rights and actions it has over 36,000 shares representing 9% of the capital stock and votes of CUTESA. As from the notice of acceptance of the offer, it will be binding on both Diario Los Andes and on the Assignors and its execution will only be subject to the effective occurrence of the conditions precedent mentioned in the offer. At closing, the parties shall execute all the final instruments required to consummate the assignment of the rights over the shares of CUTESA. The price offered for the assignment, sale and transfer of the rights over the shares of CUTESA is Ps. 17,000,000 payable by the Assignees to Diario Los Andes as follows: Ps. 15,000,000 on the closing date, Ps. 2,000,000 equal to 6,000 seconds of prime time advertising in CUTESA provided that such advertising seconds may be used by Diario Los Andes or the members of the same economic group within 5 years as from Closing. Notwithstanding the foregoing, the Assignees will pay to Diario Los Andes an additional Ps. 5,000,000 (the “Contingent Price Balance”), subject to the condition precedent that upon the expiration of the current term of the license -which would expire on November 24, 2017-, CUTESA be legally authorized to continue exploiting the television broadcast service in the City of Mendoza on account of an extension or renewal of the license under any title or cause, or that CUTESA continue to exploit the service, in which case the Assignees shall pay to Diario Los Andes the Contingent Price Balance under the conditions mentioned in the Offer. If exploitation of the service was maintained during only part of a given period, the Assignees shall pay to Diario Los Andes the Contingent Price Balance pro rata, based on the duration of the service. In order to guarantee the payment of the price (and if applicable the Contingent Price Balance) to Diario Los Andes, the Assignees shall be jointly and severally liable for, and shall be unrestricted guarantors of all the obligations undertaken by the Assignees with respect to the payment of the price balance. The profits generated by CUTESA during the years 2013 and 2014 (in this case on a pro rata basis until the closing date) will be approved by the Assignees as dividends in favor of Diario Los Andes within the legal terms and payable by CUTESA to Diario Los Andes within ten working days as from their approval. On July 22, 2014, the Company and ARTEAR made a filing with AFSCA in order to request that agency to disregard the erroneous considerations contained in Opinion No. 001028-AFSCA/DGAJ and dismiss all the decisions rendered by the areas of AFSCA stated in Minutes No. 51 of AFSCA, which were served on the Company and ARTEAR on July 11, 2014, and to consider the Proposal reformulated and/or amended under the terms indicated by the Company and ARTEAR in their note dated July 1, 2014 (Proceeding No. 13291-AFSCA/14). On July 24, 2014, Grupo Clarín S.A. made a filing before AFSCA in order to notify that agency that the shareholders of the Company, in connection with the implementation of the Proposal that was declared formally admissible pursuant to Resolution No. 193/AFSCA/2014, had approved: i) the proposal for the partial spinoff of Grupo Clarín S.A. and the consequent creation of a new company; ii) the irrevocable 167 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 168 offer received by Grupo Clarín S.A. for the acquisition of a given number of shares of Cablevisión such that its acquirer will become holder of Cablevisión Spinoff 2, i.e. Unit III under the Proposal; iii) the transfer of the assets owned by ARTEAR allocated to Unit IV in favor of IESA and the irrevocable offer to transfer the equity interests owned by Grupo Clarín S.A. and GC Minor S.A. in IESA in favor of a trust to be created; iv) the irrevocable offers received by Radio Mitre S.A. for the sale of the assets that make up Unit V; and v) the irrevocable offers received by ARTEAR and Diario Los Andes Hermanos Calle S.A. for the sale of the assets that make up Unit VI. Also on July 24, 2014, Cablevisión made a filing with AFSCA in order to notify that agency that on June 30, 2014, the shareholders of Cablevisión, at that Company’s Extraordinary Shareholders’ Meeting, had unanimously approved: i) the proposal for the partial spinoff of that company that had been duly informed to AFSCA; ii) the partial amendment of Cablevisión’s bylaws, which contemplates the observations made by AFSCA; iii) the creation of two new companies with a portion of the equity subject to the spinoff; iv) the merger of a portion of the equity subject to the spinoff with Tres Arroyos Televisora Color S.A., Indio Rico Cable Color S.A., Copetonas Video Cable S.A., Dorrego Televisión S.A., Cable Video Sur S.A. (under reorganization), and v) the merger of a portion of the equity subject to the spinoff with La Capital Cable S.A. and Otamendi Cable Color S.A. In the same filing, the Company attached the Bylaws of the companies to be spun off. On July 25, 2014, the Company made a filing with AFSCA in order to notify that agency that its shareholders at the Extraordinary Shareholders’ Meeting held on June 30, 2014, its shareholders had approved the irrevocable offer received from Messrs. Martí Casadevall and Christophe DiFalco for the acquisition of a number of shares of Cablevisión such that, upon consummation of the spin-off of Cablevisión, the offerors will be entitled to receive sixty percent (60%) of the shares to be issued by Cablevisión Spinoff 2 (Unit III under the Proposal). On August 11, 2014, Cablevisión requested the SECOM to register the telecommunications licenses directly or indirectly owned by Cablevisión under the name of the surviving company in accordance with the procedure to conform the Company to the Audiovisual Communication Services Law No. 26,522. On August 13, 2014, AFSCA notified Grupo Clarín, Cablevisión, ARTEAR and Radio Mitre of Resolution No. 902/AFSCA/2014. The Resolution rejects a request for the partial amendment of the proposal filed by Grupo Clarín and ARTEAR, relating to the divestment of assets owned directly by the latter. The Resolution also compels Grupo Clarín, ARTEAR, Radio Mitre and Cablevisión to ratify their intention to fulfill, with no changes, the Proposal that was declared formally admissible pursuant to Resolution No. 193/AFSCA/2014 in the terms in which it was admitted. That agency also stated that failure to do so would be sanctioned pursuant to Section 21 of Law No. 19,549, which provides that the Administration may declare unilaterally the lapsing of an administrative act when the interested party does not fulfill the conditions set forth under such act, provided that the Administration shall have previously declared the interested party delinquent and granted a reasonable supplementary term to remedy its non-compliance. On August 15, 2014, 34 South Media LLC requested Grupo Clarín and GC Minor to reconsider the Original Offer submitted on June 26, 2014, i.e. the transfer of the shares representing 100% of IESA’s capital stock in favor of 34 South Media LLC, including all of the assets that make up Unit IV. 34 South Media LLC also stated that in the event of acceptance of the Original Offer, Mr. Miguel El Haiek would acquire the minority interest in IESA that may be necessary for regulatory purposes in order to comply with the requirement of a plurality of shareholders established under Law No. 19,550. Therefore, on August 15, 2014, the Board of Directors of Grupo Clarín held a meeting to take note of Resolution No. 902/AFSCA/2014 and to consider the note sent by 34 South Media LLC, whereby the latter offered Grupo Clarín and GC Minor the possibility of reconsidering and accepting the Original Offer submitted on June 26, 2014. At such meeting of the Board of Directors, taking into consideration the evident arbitrariness with which AFSCA decides 168 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 169 and behaves in connection with Grupo Clarín and its subsidiaries, the Board decided to accept the Original Offer submitted by 34 South Media LLC, stating its acceptance in writing in order to, in this way, transfer Unit IV under the Proposal to 34 South Media LLC. Consequently, the Alternative Offer that had been approved by the shareholders at the Shareholders’ Meeting of Grupo Clarín that had been resumed after its adjournment, was rendered without effect. At the same Meeting, the Board decided to call a new Extraordinary Shareholders’ Meeting of Grupo Clarín in order for the shareholders to ratify the decision of the Board of Directors in connection with the acceptance of the original Offer. Also on August 15, 2014, the Board of Directors of GC Minor decided to approve the Original Offer submitted by 34 South Media LLC. Finally, also on August 15, 2014, Grupo Clarín and GC Minor notified 34 South Media LLC and Mr. Miguel El Haiek of the acceptance of the Original Offer, which therefore became binding on all the parties involved. On August 15, 2014, ARTEAR and Grupo Clarín S.A. made a filing with AFSCA in order to inform and certify: (i) the acceptance of the offer for the 100% equity interest held by ARTEAR and GC Minor S.A. in Teledifusora Bahiense S.A., owner of LU 81 TV Canal 7 of Bahía Blanca. They requested AFSCA to render a preliminary decision about the admissibility conditions of the Offerors to proceed without further delay with its effective transfer, and (ii) the transfer by ARTEAR of 24.999613% of the shares of Canal Rural Satelital S.A. in favor of IESA. They also requested that agency to acknowledge the new shareholder structure of Canal Rural Satelital S.A. in conformity with Decree No. 904/2010. On August 19, 2014, ARTEAR and Grupo Clarín S.A. made a filing with AFSCA in order to inform and certify the transfer of the signals El Trece Satelital, Volver, Quiero mi Música en mi Idioma and Magazine by ARTEAR in favor of IESA and requested that agency to acknowledge the new ownership of those registered signals. The accepted Offer also provides for the execution of content supply agreements whereby the parties agreed on a consideration that is calculated in every case based on a percentage of the revenues generated by the commercialization of the transferred cable television signals, with an established minimum consideration. On August 19, 2014, the Board of Directors of Cablevisión took note of Resolution No. 902/AFSCA/2014, highlighting the threat contained in that Resolution to apply the ex officio implementation of the Proposal even though the term granted by Resolution No. 193/AFSCA/2014 for its execution had not yet expired, in addition to being legally inapplicable. On August 19, 2014, Grupo Clarín, ARTEAR, Radio Mitre and Cablevisión made a filing with AFSCA in order to inform and certify that they had duly completed all actions required of those companies and necessary to implement the Proposal in the terms in which it had been approved pursuant to Resolution No. 193/AFSCA/2014. Consequently, the Company deemed that AFSCA’s inapplicable order issued pursuant to Resolution No. 902/AFSCA/2014 had been responded. In that same filing, they also requested AFSCA (i) to order and decide on the prior acts that are necessary to complete the process and that were requested in each of the filings made by the Company, including an extension of the term granted for the implementation of the Proposal for as long as it takes that Agency to analyze and instrument such prior acts, and (ii) to compel the other government agencies that must necessarily intervene in this procedure, to issue the corresponding authorizations that are required prior to its final implementation to enable the final completion of the process. On September 2, 2014 the term for the Company’s creditors to exercise their rights to object to the spinoff expired. Notwithstanding the above, as of the date of these financial statements, the Company has not yet issued the public deeds relating to the spinoff and to the creation of the spun-off companies because the prior regulatory authorizations have not been granted as provided under its spinoff prospectus. On September 19, 2014, the Company, Cablevisión, ARTEAR and Radio Mitre were served with Note No. 640 AFSCA/DGAJyR/ SGAJ/DAyT/14, which stated that the analysis of the Company’s filings yielded prima facie evidence of the existence of corporate relationships between Audiovisual Communication Service Units No. 1 and 169 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 170 No. 2 due to the fact that some of the proposed trustees are individuals who are related to each other through companies, thus verifying relationships among them that could generate undue concentration practices, which would lead to a joint management of Units No. 1 and No. 2. Therefore, AFSCA granted those companies a term of 10 (ten) days to allege and provide evidence of the factual and legal circumstances that may disprove the existence of the above-mentioned relationships, the joint management of the trusts and, therefore, the breach of the antitrust and deconcentration principles provided under Law No. 26,522. On September 22, 2014, at the General Extraordinary Shareholders’ Meeting, the shareholders of the Company decided to ratify all the decisions adopted by the Board of Directors of the Company on August 15, 2014 in connection with the acceptance of the firm and irrevocable offer to purchase the shares and signals that make up Unit IV under the Proposal received from 34 South Media LLC, and consequently, to revoke the decision approved under point 5 of the Agenda of the General Extraordinary Shareholders’ Meeting held on June 30, 2014 and resumed on July 11, 2014 after its adjournment. On October 6, 2014, the Company made a filing with AFSCA in response to the request made by that agency. The Company requested that agency to dismiss without further formalities Notes No. 640/AFSCA/DGAJyR/ SGAJ/DAyT/2014 and DAEYP No. 92 for being premature and manifestly inappropriate and therefore absolutely null and void. The Company also requested that AFSCA consider the explanations provided in response to its observations and compel the other intervening authorities to carry out the necessary administrative acts to enable the final completion of the procedure to conform the Company to the Audiovisual Communication Services Law. The Company also informed that agency of the decision of the controlling shareholders to change the proposed trustees who had been challenged by that agency, reiterating that, in the Company’s understanding, the trustees proposed in the event that the spinoff of Grupo Clarín should be finally approved and implemented, would largely comply with the Audiovisual Communication Services Law. On October 9, 2014, AFSCA notified the Company, ARTEAR, Radio Mitre and Cablevisión of AFSCA Resolution No. 1,121/2014 whereby it decided to (i) reject the spinoff project of the Company, the spinoff project of Cablevisión, the formation of the foreign trusts and the transfers proposed by the Company, ARTEAR, Radio Mitre and Cablevisión, (ii) initiate the Ex Officio Transfer procedure pursuant to Section 1, subsection a) of Annex I of AFSCA Resolution No. 2206/2012, (iii) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit -attaching the corresponding supporting and evidentiary documentation- within a term of fifteen (15) days, whether all of the services and registrations detailed in the list disclosed under Annex III of Action No. 22,253 AFSCA/13 are owned and/or exploited by said companies, indicating, where appropriate, which of those services and registrations are not owned by them and/or are not exploited by them; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012; (iv) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit—attaching the supporting and evidentiary documentation—within a term of fifteen (15) days, the detail of any licenses owned or exploited by such companies that may not have been included under Annex III of Action No. 22,253-AFSCA/13; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012; (v) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit, within a term of fifteen (15) days, the assets related to each license and/or services that do not appear on the list identified as “list of assets related to the service”, also indicating whether or not the inclusion of any such assets may not be appropriate; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012 and (vi) request in due time the intervention of the Court of Appraisals of Argentina, submitting to that Agency the information related to the services, detailed registrations and the essential assets related to them, and especially the agreements and assets contributed by the Company, for the purposes provided under Section 3, Subsection c), Annex I of AFSCA Resolution No. 2206/2012. 170 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 171 AFSCA Resolution No. 1121/2014 is absolutely null and void because it was issued in manifest and public violation of the due process of law and inaudita parte, without notifying the Company, ARTEAR, Cablevisión and Radio Mitre of the alleged facts and/or non- compliances that grounded such resolution. AFSCA seeks to ground its Resolution No. 1121/2014 in two alleged failures to comply with the Proposal: i) the corporate relationship and/or joint management of the business units to be created and ii) the alleged failure to comply with the committed divestitures. The companies mentioned by AFSCA as companies whose ownership and/or management would generate, in the Enforcement Authority’s judgment, corporate relationships with the companies that submitted the proposal, i.e. the Company, ARTEAR, Radio Mitre and Cablevisión, (a) do not have any corporate relationship with any of those companies and, pursuant to Section 27 of the Audiovisual Communication Services Law, do not control and are not controlled by any of those companies, (b) therefore, neither the Company, nor ARTEAR, Radio Mitre or Cablevisión was ever required to disclose those companies in the Proposal. No such obligation arises from the application of the law or from the application of the regulations issued by AFSCA itself. Moreover, the companies mentioned by AFSCA do not result in the creation vertical or horizontal integration processes with any of the companies involved in the proposal, and do not infringe the multiple license regime provided under Section 45 of the Audiovisual Communication Services Law. Under the application of the Audiovisual Communication Services Law or its regulations, the Company, ARTEAR, Radio Mitre and Cablevisión are not required to identify and/or disclose information about any other company and/or venture that is not directly or indirectly related to the exploitation of audiovisual communication services identified at the time the Proposal was submitted. The AFSCA also states in its Resolution that the transactions proposed to divest of certain assets in Units 3, 4, 5 and 6 include provisions that would allow the Company to “recover its companies” and would prevent the prospective buyers from exercising their full ownership rights over such companies. AFSCA has allowed in other precedents identical rights, without considering them as events of non-compliance with the Audiovisual Communication Services Law. The transfer of the full ownership over the transferred assets may not be doubted, because the transfer agreement specifically provides for the acquisition of those assets by a third party in exchange for the payment of a sum of money, and in addition to the transfer of the equity interests, the Company loses its exposure, or right, over the variable returns generated by those assets as well as the ability to affect those returns. Given the evident infringement of the guarantees of due process and defense in court, the Company, ARTEAR, Radio Mitre and Cablevisión requested the recusation of the AFSCA Directors who, without having read the internal opinions issued in this regard and even when this was not an item of the agenda, approved AFSCA Resolution No. 1121/2014, as well as the public officials who were actively involved in the process. By means of Decree No. 1942/2014, the National Executive Branch decided to dismiss the recusation requested by the Company. Subsequently, on October 28, 2014, the Company, Cablevisión, ARTEAR and Radio Mitre made a filing with AFSCA in order to request that agency to dismiss all the decisions rendered by the intervening Areas within the framework of Opinion No. 001488-DGAJyR/14 and to declare the nullity of AFSCA Resolution No. 1121/2014. As of the date of these financial statements, AFSCA has not rendered a decision on the above-mentioned filing. On October 31, 2014, Federal Civil and Commercial Court No. 1 granted an interim injunction (medida precautelar) in re "GRUPO CLARÍN v. NATIONAL GOVERNMENT re/ Incidental procedure relating to appeal", whereby the court ordered the National Government and AFSCA “to abstain from performing, directly or through third parties, any action in connection with the ex officio transfer procedure until a decision is rendered with respect to the injunction requested by the Company”. The Company informed AFSCA of such decision through a Notarial Certificate on the very same date, October 31, 2014. Therefore, the Company is not under an obligation to respond to the requests provided under Sections 3, 4 and 5 of 171 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 172 Resolution No. 1,121/AFSCA/2014 as long as the interim injunction is in effect. After being served with AFSCA Resolution No. 2,276/AFSCA/2012, the claimants had requested an injunction in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT re/ Incidental procedure relating to appeal" ordering the suspension of the application of point b), Subsection 3, Section 161 of Decree No. 1,225/2010, of Section C “Ex officio transfer”, of Chapter III, Annex I, of AFSCA Resolution No. 297/2010, and of the ex officio transfer procedure provided under Annex I, of AFSCA Resolution No. 2,206/2012, and ordering AFSCA to abstain from: i) transferring ex officio the broadcasting licenses exploited by the claimants, ii) declaring the expiration of their licenses as a consequence of the failure to transfer such licenses ex officio and/or the breach of the challenged laws and iii) ordering the intervention and/or any other measure that may prevent the Company’s normal management and the rendering of the audiovisual and internet access services until a final decision is rendered in the case. The purpose of the incidental procedure relating to appeal was to request the declaration of unconstitutionality of: 1) point b), Subsection 3, Section 161 of Decree No. 1,225/2010; 2) point 1 of Chapter 1 of AFSCA Resolution No. 297/2010, which provides for a term of thirty days to submit a proposal to conform the Company to the Audiovisual Communication Services Law; 3) Section C “Ex officio transfer”, of Chapter III, Annex I, of AFSCA Resolution No. 297/2010; 4) the first paragraph of Section 43 of Decree No. 1,225/2010; and 5) AFSCA Resolution No. 2,206/2012 to the extent it amends and regulates, in its Annex I, the ex officio transfer procedure for licenses and the essential assets related thereto. Given the fact that Resolution No. 2,276/12, which had also ordered the ex-officio forced divestiture procedure, was revoked by AFSCA after the Proposal had been submitted, the interim injunction was granted only after the claimants were served notice of AFSCA Resolution No. 1,121/2014. In view of the serious irregularities mentioned above, upon a request made by Grupo Clarín, ARTEAR and Radio Mitre in re “GRUPO CLARÍN S.A. and Other v. National Government and Other on Merely Declarative Action on Motion for appeal” (File 7,263/2013/1), on December 9, 2014, the National Court of First Instance on Federal Civil and Commercial Matters No. 1, Clerk’s Office No. 1, granted an injunction that suspended the effects of Resolution No. 1,121/AFSCA/2014 for a term of six months. This injunction has the same purpose as the above-mentioned interim injunction. Both AFSCA and the National Government were served with this decision and they both filed an appeal. The appeals were substantiated and the file is now pending before Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters, which shall render a decision on the appeals. On February 20, 2015, the Company was served notice of the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters, Chamber No. 1, whereby, on February 19, 2015, it confirmed the decision rendered by the Court of Federal Civil and Commercial Matters No. 1 in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT re Incidental Procedure.” The Company, Radio Mitre, ARTEAR and Cablevisión believe that they have executed the Proposal that was declared formally admissible pursuant to Resolution No. 193, fully in accordance with the commitment undertaken by them and in compliance with the applicable regulatory framework, and consider that Resolution No. 1,121/AFSCA/2014 is evidently arbitrary and inappropriate and infringes the constitutional guarantees of due process and defense in court. The procedure to approve such Resolution had serious irregularities and gross and malicious errors relating to the interpretation and application of effective legislation, inevitably rendering such Resolution null and void. For those reasons, the affected companies requested the Resolution’s nullification before an administrative court and will resort to all available judicial remedies to have such Resolution declared null and void in order to satisfactorily implement the Proposal to which they have committed. In view of the foregoing, and taking into account that, in accordance with Resolution No. 1,121/AFSCA-2014 and the Ex-Officio Forced Divestiture Procedure - currently suspended by the court-, one of the conditions 172 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 173 precedent of the Offers was not satisfied before December 31, 2014, and also considering the effectiveness of all the Irrevocable Offers for the acquisition of Units No. 3, 4, 5 and 6 under the Proposal approved by the shareholders, the Board of Directors of Grupo Clarín instructed the members of the Task Force Created to Implement the Proposal to make their best efforts to extend the accepted Offers until a final and firm decision is rendered on the claim brought by the Company. Therefore—and given AFSCA’s arbitrary and discriminatory decisions and the Company’s understanding that AFSCA made an unconstitutional application of Sections 45, 48 and 161 of Law No. 26,522, of Decree No. 1,225/10 and of the implementing regulations issued pursuant to AFSCA Resolutions Nos. 297/2010 and 2,206/2012—on March 5, 2015, the Company broadened the scope of the claim filed in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT on Incidental Procedure” (File 7,263/2012)”, and requested the judge to: (i) declare that AFSCA’s enforcement of Sections 45, 48 and 161 of the LSCA on the claimants through AFSCA Resolution No. 1,121/14 is unconstitutional and infringes the right to freedom of the press, property, equality before the law, due process, defense in court and the principle of reasonableness with which those powers must necessarily be exercised, and that, if necessary, each and every resolution related to this unconstitutional enforcement, in particular AFSCA Resolution No. 1,121/14, is illegitimate and null and void; (ii) order claimants to comply with the legitimate legal obligation to conform to the LSCA, voluntarily applying the criteria adopted by AFSCA on other proposals and to order AFSCA to refrain from discriminating against the claimants in the consideration of their proposal to conform to the license regime provided under Section 45 of Law No. 26,522 and to comply with the conditions established in Recital 74 of the Supreme Court’s decision in re “Grupo Clarín and Other v. National Government on Incidental Procedure” for the application of Law No. 26,522; and, (iii) order the National Government to carry out each and every act required to implement the proposal submitted by the claimants that were identified in the Proposal. As of the date of these financial statements, the Company and its legal advisors cannot provide assurance about the effects that this situation may have on the Company and its Proposal. Notwithstanding the foregoing, the Task Force Created to Implement the Proposal continues to carry out the actions required to implement the Proposal as duly filed. c) Pursuant to Resolution No. 432/2011, AFSCA approved new bidding terms and conditions for the granting of licenses for physical link television services. As a consequence of the issuance of AFSCA Resolution No. 193/2014, on March 12, 2014, Cablevisión purchased Bidding Forms to apply for certain licenses, in cases in which, as a consequence of the license consolidation process that was implemented, locations that used to be authorized as area extensions must now become license headends as a result of the reorganization, and also in the cases in which the original term had fully expired. d) It should be noted that Cablevisión complied with AFSCA Resolution No. 296/2010, as amended and/or supplemented. This resolution provides guidelines for the organization of the programming grids that must be followed by the owners of pay TV audiovisual services. This resolution regulates section 65, subsections a) and b) of Law No. 26,522. The Resolution supplements the provisions of the regulations to the same section of Decree No. 1,225/2010. Cablevisión believes that both the provisions of Decree No. 1,225/2010 and AFSCA Resolution No. 296/2010, as amended and/or supplemented, are regulatory abuses and violate the right to freedom of the press, guaranteed by the National Constitution. In spite of Cablevisión’s efforts to organize its programming grids in accordance with the provisions of section 65 of Law No. 26,522, AFSCA has initiated multiple summary proceedings in connection with the cable television licenses of which Cablevisión is the lawful successor. AFSCA contends that Cablevisión failed to comply with the regulations set forth by AFSCA Resolution No. 296/2010. Cablevisión submitted the responses set forth under section 1, Exhibit II of AFSCA Resolution No. 224/2010 in connection with such accusations. A decision has been rendered on some of the summary proceedings and, as a result, a fine was imposed on Cablevisión. Cablevisión has appealed 173 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 174 these decisions. Some of the appeals filed by Cablevisión have been decided against it and have again been appealed. Insofar as Cablevisión is concerned, as of the date of these financial statements, an injunction issued in re “CABLEVISIÓN S.A. v. NATIONAL GOVERNMENT AND OTHERS ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS” by the Federal Court of Appeals of the City of Mar del Plata, whereby that Court revoked the decision rendered in the First Instance, remains in full force and effect. The decision rendered in the First Instance had ordered the dismissal of Cablevisión’s request. The Court of Appeals ordered AFSCA to suspend – until a final decision was rendered on the matter – the application of the penalties derived from the alleged non-compliance with section 65 of Law No. 26,522 and Decree No. 1,225/2010. It also suspended the application of section 6 of AFSCA Resolution No. 296/2010 on the grounds that Cablevisión’s alleged serious non-compliance was not contemplated in the Law or in the Decree. The National Government filed an appeal with the Supreme Court against this decision. Such appeal is still pending resolution. In re “AFSCA v. CABLEVISION SA Decree 1225/10 – RES. 296/10 on/ Proceeding leading to a declaratory judgment” currently pending before the Federal Court of First Instance on Administrative Matters No. 9, on May 16, 2012 the Court granted an injunction that had been requested by AFSCA, ordering Cablevisión and/or the pay television audiovisual services it exploits, to conform to Section 65, paragraph 3 b) of Decree No. 1225/2010 and Sections 1, 2, 3, 4 and 5 of AFSCA Resolution No. 296/2010, until a final judgment is rendered on the merits of the case. Cablevisión has appealed such injunction. On August 6, 2012, Cablevisión was served notice of a decision rendered by the Federal Court of First Instance on Administrative Matters No. 9 of the City of Buenos Aires, whereby that court imposed a fine on Cablevisión of Ps. 20,000 per day for each day of delay in complying with the injunction that ordered Cablevisión to comply with Section 65 of Decree No. 1225/2010 and AFSCA Resolution No. 296/2010. Cablevisión filed an appeal against that decision in due time and form. However, the Court of Appeals ignored the strong grounds asserted by Cablevisión; partially confirmed the decision rendered in the first instance; and reduced the fine to Ps. 2,000 per day for each day of delay, to be calculated as from the date the decision is deemed final. An appeal was filed to have the case heard by the Supreme Court of Argentina, which was dismissed by the intervening Chamber. Cablevisión filed a direct appeal with the Supreme Court, which was also dismissed. On October 21, 2013 Cablevisión was served with new charges brought for alleged breach of AFSCA Resolution No. 296/2010. These charges are in clear breach of the above- mentioned injunction. Cablevisión filed a response, but no decision has been rendered on the matter yet. On December 23, 2013, Cablevisión informed AFSCA of its new programming grid in digital and analogical systems, expressly maintaining the reserves brought to continue challenging the legality and constitutionality of section 65 of Decree No. 1,225/2010 and AFSCA Resolution No. 296/2010, as amended. e) Between September and October 2011, AFSCA brought 46 charges of delegation of the exploitation of several licenses of which Cablevisión is currently the legal successor. The charges were brought within the framework of COMFER file No. 2,005/08, relating to the registration of the corporate reorganization whereby Multicanal and Teledigital, among other subsidiaries, merged into Cablevisión. Cablevisión has submitted the appropriate responses on behalf of the merged licensees charged as indicated above. To date, such responses have not been decided upon. Cablevisión believes it has strong grounds to reverse the charges brought by administrative and/or judicial means. As of the date of these financial statements, the responses submitted are still pending resolution. f ) On August 21, 2013, AFSCA issued Resolution No. 979/AFSCA/2013 whereby it partially regulated Section 67 of the Audiovisual Communication Services Law, ordering the licensees governed by such provision, including broadcast television signals and subscription television signals, to report in the form of an affidavit the list of national feature films and telefilms for which they have acquired 174 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 175 broadcasting rights, and ordering that these films be broadcast in conformity with Section 67 of the Audiovisual Communication Services Law. For that purpose, AFSCA created a form of affidavit that must be filed during the first quarter of each calendar year with respect to the preceding calendar year, so that the affidavits may be used to keep a record, together with an on-line record, of each company’s compliance with that provision. Even though Section 67 of the Audiovisual Communication Services Law which sets screen quotas may be deemed unreasonable and, therefore, unconstitutional, and that the online form that AFSCA must make available to licensees has not yet been created, the Company has started to acquire the rights required by this law to broadcast such films and telefilms. g) Finally, we refer to Resolution No. 1,329/AFSCA/2014, which amends Resolution No. 1,047/AFSCA/2014, whereby the AFSCA approved the National Standard for Terrestrial and Broadcast Digital Television Audiovisual Communication Services, and to Decree No. 2,456/2014, which approves the National Digital Audiovisual Communication Services Plan. Both the Resolution and the Decree are manifestly contrary to Law No. 26,522, which has higher hierarchy, because they contradict the rights of the current licensees of broadcast television services, including ARTEAR and the subsidiaries that exploit broadcast television services. Through this legal framework, which was subsequently supplemented by Resolution No. 24/AFSCA/2015, which approved the Technical Plan for Terrestrial Digital Television Frequencies for important areas of the national territory, and Resolution No. 35/AFSCA/2015 (among others) which allocated a digital television station on a permanent basis to the current licensees of analog broadcast stations in order to develop their transition to digital technology, the rights of the current broadcast television licensees are infringed. These rights should be preserved intact as established under Law No. 26,522, which has higher hierarchy. The main effect of these regulations, among their identifiable technical effects, is that the current broadcast television licensees that obtained their licenses pursuant to Law No. 22,285 will have to bear additional charges and obligations which include, among other things, multiplexing and broadcasting on their own responsibility other broadcast television stations. Since the changes introduced under this regulatory framework have an impact on the responsibilities and rights of the companies involved, those companies are considering the possibility of bringing legal, administrative and/or judicial actions to preserve their rights intact as direct or indirect broadcast television service licensees. A scenario different from the one considered by the Company and its subsidiaries, additional limitations to those contemplated in its voluntary proposal to conform the Company to the Audiovisual Communication Services Law, the evolution of the legal and administrative actions brought or that may be brought and/or a forced divestiture process, may give rise to different results and, eventually, adverse consequences. As of the date of these financial statements and given the current uncertainties regarding the effective evolution of the process of conforming the Company and its subsidiaries to the Audiovisual Communication Services Law, the existing restrictions imposed by the regulatory framework, the outcome of the legal and administrative actions brought or that may be brought and the conditions in which these processes will be effectively carried out, the Company cannot provide assurance about the results of that process. Therefore, at present this situation generates uncertainties about the Company’s business, which could significantly affect the recoverability of the Company’s relevant assets and therefore, the consolidated financial statements taken as a whole. It should be noted that the decision rendered by the Supreme Court of Argentina on October 29, 2013 expressly states the claimant companies’ right to claim economic damages caused to the Company and its subsidiaries as a consequence of the reorganization required to conform to the law. Accordingly, under the proposal submitted to AFSCA on November 4, 2013 the Company expressly reserved its right to bring judicial actions to claim for those damages. The decisions made on the basis of these financial statements should consider the eventual impact of the above-mentioned situations described in points a) through g). The financial statements of the Company and 175 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 176 its subsidiaries should be read in light of these uncertain circumstances. The Company will bring the legal actions in each instance to safeguard its rights, those of its subsidiaries and those of its shareholders; as well as to protect the fundamental principles infringed by the above-mentioned uncertain circumstances. Other Matters Related to COMFER, now AFSCA. Cablevisión As from November 1, 2002 and until December 31, 2014, COMFER and AFSCA have initiated summary administrative proceedings against Cablevisión and Multicanal (merged into Cablevisión) for infringements of regulations relating to programming content. Accordingly, a provision has been set up in this regard. ARTEAR As of December 31, 2014, ARTEAR recorded a provision in the amount of approximately Ps. 10.7 million for fines imposed by COMFER and AFSCA, some of which have been appealed and are pending resolution. 9.2 Telecommunication Services The regulatory framework of the Argentine telecommunications sector is undergoing a process of change. In December 2014, the Argentine Congress passed Law No. 27,078, known as the “Digital Argentina Act”, which partially repealed National Telecommunications Law No. 19,798. The new law subjects the effectiveness of Decree No. 764/00, which deregulated the telecommunications market, to the enactment of four new sets of rules that will govern the License, Interconnection, Universal Service and Radio-electric Spectrum regimes. The new law maintains the single country-wide license scheme and the individual registration of the services to be rendered, but replaces the name telecommunication services with Information and Communications Technology Services (“TIC Services”, for their Spanish acronym). Notwithstanding this, the scope of the licenses originally granted to Cablevisión, its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses and their respective registrations of services, remain unaltered. The licenses will be called “Licencia Única Argentina Digital” and will allow licensees to render any telecommunication services to the public, be they fixed or mobile, wired or wireless, national or international, with or without the licensee’s own infrastructure. The TIC Services registered with the Argentine Secretariat of Communications under the name of Cablevisión, its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses are the following: Data Transmission, Paging, Videoconference, Community Retransmission, Transport of Broadcast Signals, Value-Added, Radio-Electric Trunking, Internet Access, Public Telephony, Local Telephony and National and International Long-Distance Telephony. The law created a new enforcement and oversight Authority as a decentralized agency under the jurisdiction of the Executive Branch: the Information and Communications Technology Federal Enforcement Authority (“AFTIC”, for its Spanish acronym). The new law maintained the obligation to contribute 1% of telecommunication service revenues, net of taxes and charges, to be used for Universal Service investments (this obligation had been imposed by Decree No. 764/00 on all service providers as from January 1, 2001), but the Universal Service Trust Fund was placed under State control. The current manager of such trust fund is Banco Itaú Argentina S.A., which received the requests from Cablevisión and its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses to join the Trust Agreement. The Argentine Secretariat of Communications has yet to decide on the approval of the Project submitted by Cablevisión on June 21, 2011, within the framework of SECOM Resolution No. 9/2011 which created the program “Infrastructure and Equipment”, whereby telecommunication service providers were allowed to submit projects aimed at developing new infrastructure, updating existing infrastructure and/or acquiring equipment for areas without coverage or with unmet needs, in order to meet the obligation to make contributions to the Universal Service Trust Fund for the amounts accrued as from January 176 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 177 2001 until the entry into force of Decree No. 558/08. Another innovation of the recently enacted legislation is the creation of a new public service under the name “Public and Strategic Infrastructure Access and Use Service for and among Providers”. The right of access includes “providers having to make available to other providers their network elements, associated facilities or services to render TIC services, even when such elements are used to render audiovisual content services.” Under this scheme, the government seeks to make private companies that were created and developed in competition share their networks with other companies that have not made any investments. The foregoing applies to any provider that has its own infrastructure or networks, because the term “Associated facilities” is defined as physical infrastructures, systems, devices, associated services or other facilities or elements associated with a telecommunications network or with TIC Services that enable or support the provision of services using that network or service, or that have the potential to do so; and will include, inter alia, buildings or building entrances, building wiring, antennas, towers and other supporting constructions, ducts, masts, manholes, and cabinets. Implementing regulations for Law No. 27,078 are still pending. Therefore, the economic and operational impact that the creation of this public service may have on Cablevisión, its merged companies and/or subsidiaries and related companies cannot be ascertained. The government has taken no action to apply the new law because the AFTIC has yet to be organized. These financial statements should be read in the light of these circumstances. Note 10 Call options ARTEAR Pursuant to ARTEAR’s acquisition of 85.2% of its subsidiary Telecor’s capital stock in 2000, Telecor’s sellers have an irrevocable put option of the remaining 755,565 common, registered, non-endorsable shares, representing 14.8% of the capital stock and votes of Telecor, for a 16-year term as from March 16, 2010 at a price of USD3 million and ARTEAR has an irrevocable call option for such shares for a term of 26 years as from March 16, 2000 at a price of approximately USD4.8 million, which will be adjusted at a 5% nominal annual rate as from April 16, 2016. Subsequently, under an addendum to the original agreements, the beginning of the effectiveness of the irrevocable put option was changed from March 16, 2010 to March 16, 2013. On March 15, 2013 an additional addendum to the agreement was signed whereby the beginning of the effectiveness of the irrevocable put option was changed once again from March 16, 2013 to March 16, 2016. CMD Pursuant to CMD’s acquisition of 60.0% of Interpatagonia S.A.’s (now Interwa S.A.) capital stock in 2007, CMD and the sellers granted each other reciprocal call and put options on all of the shares owned by each of the parties, effective from August 1, 2011 to July 31, 2012. In connection with the acquisition mentioned in Note 12.e., on August 17, 2011, CMD and the seller executed a new agreement whereby they granted each new reciprocal call and put options on all of the shares owned by each of the parties. The price of the shares varies depending on who exercises the option, which is effective from August 1, 2014 to December 31, 2014. As of the date of these consolidated financial statements, as mentioned in Note 12.e, CMD holds a reciprocal call and put option for 13.32% of the shares of Interwa S.A. which is effective until December 2017. See Note 25.d. The balances arising from the put options mentioned above are disclosed in the item Other Current and Non-Current Liabilities of the Balance Sheet, with an offsetting entry in Other Reserves and Non-Controlling Interest under Equity. 177 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 178 11.1.1 Capital Risk Management Grupo Clarín manages its capital structure seeking to ensure its ability to continue as an ongoing concern, while maximizing the return to its shareholders through the optimization of debt and equity balances. As part of this process, Grupo Clarín monitors its capital structure through the debt-to-equity ratio, which is equal to the quotient of its net debt (Debt less Cash and Cash Equivalents) divided by its adjusted EBITDA. The debt-to-equity ratio for the reporting years is as follows: December 31, 2014 December 31, 2013 4,589 (1,162) (556) 2,871 5,024 0.57 4,139 (1,333) (317) 2,489 3,274 0.76 Note 11 Financial instruments 11.1 Financial Risks Management (*) (*) The amounts included in this note are stated in millions of Argentine pesos. Grupo Clarín is a party to transactions involving financial instruments, which entail exposure to market, currency and interest rate risks. The management of these risks is based on the particular analysis of each situation, taking into account its own estimates and those made by third parties of the evolution of the respective factors. Loans (i) Less: Cash and Cash Equivalents Cash and Banks Other Current Investments Net Debt Adjusted EBITDA Debt-to-Equity Ratio (i) Long-term and short-term loans, including derivatives and financial guarantee agreements. The debt-to-equity ratio is reasonable compared to other industry players and considering the particular situation of Argentina and of the companies that make up Grupo Clarín. 178 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 179 11.1.2 Categories of Financial Instruments Financial Assets Loans and Receivables (1) - Cash and Banks - Current Investments - Receivables (2) At fair value with an impact on net income - Current Investments Total Financial Assets Financial Liabilities At amortized cost - Debt (3) - Accounts Payable and Other Liabilities (4) At fair value with an impact on net income - Derivatives Total Financial Liabilities (1) Net of the allowance for doubtful accounts of approximately Ps. 183 million and Ps. 154 million, respectively. (2) Includes receivables with related parties of approximately Ps. 99 and Ps. 67 million, respectively. (3) Includes loans with related parties of approximately Ps. 17 million and Ps. 17 million, respectively. (4) Includes debts with related parties of approximately Ps. 81 million and Ps. 69 million, respectively. 11.1.3 Objectives of Financial Risk Management Grupo Clarín monitors and manages the financial risks related to its operations; these risks include market risk (including exchange risk, interest rate risk and equity price risk), credit risk and liquidity risk. Grupo Clarín does not enter into financial instruments for speculative purposes as common practice. December 31, 2014 December 31, 2013 1,162 505 3,591 1,181 6,439 4,589 3,447 5 8,041 1,333 463 2,829 312 4,937 4,139 2,534 - 6,673 11.1.4 Exchange Risk Management Grupo Clarín enters into certain foreign currency transactions; therefore, it is exposed to exchange rate fluctuations. During the year, certain subsidiaries of Grupo Clarín entered into foreign currency forward transactions. The following table shows the monetary assets and liabilities denominated in US dollars, the main foreign currency involved in Grupo Clarín’s transactions, at the closing of the years ended December 31, 2014 and 2013: 179 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 180 Assets Other Receivables Trade Receivables Other Investments Cash and Banks Total Assets Liabilities Debt Seller financings Other Liabilities Trade Payables and Other Total Liabilities Bid/offered exchange rates as of December 31, 2014 and 2013 were of Ps. 8.451 and Ps. 6.48; and Ps. 8.551 and Ps. 6.52; respectively. The Central Bank of Argentina and the Argentine Federal Revenue Service issued certain resolutions related to the exchange market, establishing regulations on the requirements for accessing such market. These financial statements have been prepared based on the assumption that the Company will be able to access such market in order to purchase the foreign currency needed to meet its obligations. 11.1.4.1 Foreign Exchange Sensitivity Analysis Grupo Clarín is exposed to exchange risk, mainly with respect to the US dollar. Taking into consideration the balances disclosed above, Grupo Clarín estimates that the impact of a 20% favorable/unfavorable fluctuation of the US dollar exchange rate would generate an income/loss before taxes of approximately Ps. 381 million and Ps. 420 million as of December 31, 2014 and 2013, respectively. Income from foreign exchange agreements in case of a 20% favorable/unfavorable fluctuation of the US dollar exchange rate would generate a gain/loss before taxes of approximately Ps. 21 million as of December 31, 2014. The sensitivity analysis presented above is hypothetical since the quantified impact is not December 31, 2014 December 31, 2013 78 523 786 823 2,210 3,847 1 43 222 4,113 75 418 537 807 1,837 3,724 3 32 177 3,936 necessarily an indicator of the actual impact, because exposure levels may vary over time. Additionally, even though Grupo Clarín conducts its operations in Argentine pesos, an eventual devaluation of that currency may have an indirect impact on its operations, depending on the ability of the suppliers involved to adjust their prices to such effect. 11.1.5 Interest Rate Risk Management Grupo Clarín is exposed to interest rate risk basically through Cablevisión, certain of its subsidiaries and ARTEAR. This is due to the fact that these companies have taken loans at fixed and variable interest rates and have not entered into hedge agreements to mitigate these risks. If interest rates had eventually been 100 basic points higher and all the variables had remained constant, the additional estimated loss before taxes would have been of approximately Ps. 3.0 million and Ps. 3.8 million as of December 31, 2014 and 2013, respectively. 11.1.6 Equity Price Risk Management Grupo Clarín is exposed to equity price risk in connection with its holdings of mutual funds, securities and bonds and foreign exchange agreements. Its sensitivity to the variation in the price of these instruments is detailed below: December 31, 2014 December 31, 2013 Investments valued at quoted prices at closing (Level 1) Other debt instruments valued at quoted prices at closing 767 5 163 - 180 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 181 The estimated impact of an eventual 10% favorable/unfavorable fluctuation of the quoted price of mutual funds, assuming that all the other variables remain constant, would generate an income/loss before taxes of approximately Ps. 77 million and Ps. 16 million as of December 31, 2014 and 2013, respectively. Income from foreign exchange agreements in case of a 10% favorable/unfavorable fluctuation of the US dollar exchange rate would generate a gain/loss before taxes of approximately Ps. 21 million as of December 31, 2014. A potential 10% favorable/unfavorable fluctuation of the quoted price of investments valued as Level 2 would generate an income/loss before taxes of approximately Ps. 41 million and Ps. 15 million as of December 31, 2014 and 2013, respectively. 11.1.7 Credit Risk Management Credit risk is defined as the risk that one of the parties may breach its contractual obligations, generating an eventual financial loss for Grupo Clarín. Credits involving the Cable Television and Internet Access Segment The credit risk affects cash and cash equivalents, deposits held at banks and financial institutions, and credit exposures with clients, including other remaining credits and transactions involved. The companies that operate in this segment actively monitor the credit worthiness of their treasury instruments and the counterparties related to derivatives in order to minimize credit risk. Upon expiration of invoices issued, if they are still outstanding, these companies file several claims for collection purposes. Bank deposits are held in renowned institutions. No significant credit risk concentration is observed concerning clients, due to the atomization of the subscriber base. As of December 31, 2014 and 2013, non- impaired past due trade receivables amounted to approximately Ps. 398.5 million and Ps. 238.6 million, respectively. These trade receivables are mainly from Cablevisión, they are in most cases up to 3 months overdue and involve subscribers with no recent insolvency record. As of the same dates, the allowance for bad debts amounted to Ps. 119.7 million and Ps. 92.6 million, respectively. This allowance for trade receivables is sufficient to cover the past due doubtful receivables. Credits of the Printing and Publishing Segment The companies that operate in this segment conduct an analysis of the clients’ financial position at the beginning of the business relationship, through a credit risk report requested from several credit rating agencies. The credit amount granted to each client is monitored on a daily basis, with reports being submitted to the financial management. The credit risk affects cash and cash equivalents, deposits held at banks and financial institutions, as well as credit granted to clients. The maximum theoretical credit risk exposure of the companies operating in this segment is represented by the book value of net financial assets, disclosed in the consolidated balance sheet. For the purposes of conducting an analysis of the suitability of the allowance for bad debts, these companies consider each client on a case by case basis, verifying, among other factors, if there is any record of delinquency, risk of bankruptcy, insolvency proceeding or other judicial proceeding. Trade receivables comprise a significant number of clients and are internally classified among the following categories: Advertising, Official, Distribution, Internet and Subscriptions, among others. The companies that operate in this segment have recorded an allowance for doubtful accounts accounting for 4% and 5% of accounts receivable as of December 31, 2014 and 2013, respectively. The companies that operate in this segment did not set up an allowance for bad debts for those amounts in which no significant change was recorded in the credit rating, considering such amounts as recoverable. The companies that operate in this segment have a wide range of clients, including individuals, businesses - medium-and-large-sized companies - and governmental agencies. Therefore, these companies’ receivables are not subject to credit risk concentration. 181 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 182 Credits from the Broadcasting and Programming Segment Credit risk represents for the companies that operate in this segment the risk of incurring in losses arising from possible breaches of the contractual obligations assumed by business or financial counterparties. This risk may be due to economic or financial factors, or to particular circumstances of the counterparty, or to other economic, commercial or administrative factors. Credit risk affects cash and cash equivalents, deposits held at banks and financial institutions in a wide sense, and every form of credit granted to the companies that operate in this segment. The maximum exposure to credit risk is represented by the value of financial assets considered as a whole, recorded in the Consolidated Balance Sheet under Cash and Banks, Other Investments, Trade Receivables and Other Receivables. Financial instruments are executed with creditworthy banks and financial institutions renowned in the market and for terms not longer than three months. In this sense, the companies that operate in this segment have a policy of diversifying their investments among different banks and financial institutions, thus reducing the concentration risk in only one counterparty. As to the credit risk related to financial credit, the companies that operate in this segment evaluate the credit standing of the different counterparties to define their investment levels, based on their equity and credit rating. As to Trade Receivables, such companies have a wide range of clients, categorized depending on the type of business. These categories are: Advertising, Signals, Programming and other. Information as of December 31, 2014: Maturities Matured Without any established term First Quarter 2015 Second Quarter 2015 Third Quarter 2015 Fourth Quarter 2015 More than 1 year Within this classification, clients can also be classified as advertising agencies, direct advertisers, distributors of cable TV, broadcast TV stations and other, each of them of a different magnitude. Due to this diversity of clients, there is not a significant credit risk concentration in this respect. The allowance for bad debts is set up upon conducting an analysis of the debtor portfolio, which is recorded as follows: − In the case of individual risks identified (risks of bankruptcy, insolvency proceedings or judicial proceedings pending with the company), for its total value. − The rest of the cases is decided based on the aging of the past due debt, the progress of the collection procedures, the solvency conditions and the variations observed in the clients’ settlement periods. 11.1.8 Liquidity Risk Management Liquidity risk is the risk that Grupo Clarín may not be able to fulfill its financial obligations at maturity. Grupo Clarín manages liquidity risk through the management of its capital structure and, if possible, the access to different capital markets. It also manages liquidity risk through a constant review of the estimated cash flows to ensure that it will have enough liquidity to fulfill its obligations. 11.1.8.1 Interest Rate Risk and Liquidity Risk Table The following table shows the breakdown of financial liabilities by relevant groups of maturities based on the remaining period as from the date of the balance sheet through the contractual maturity date. The amounts disclosed in this table represent undiscounted cash flows (principal plus contractual interest). Debt Other Debts - 2 704 564 595 203 3,169 5,237 713 102 1,961 230 372 27 221 3,626 182 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 183 Information as of December 31, 2013: Maturities Matured Without any established term First Quarter 2014 Second Quarter 2014 Third Quarter 2014 Fourth Quarter 2014 More than 1 year 11.1.9 Financial Instruments at Fair Value The following table shows Grupo Clarín’s financial assets and liabilities measured at fair value at the closing of the reporting year: Debt Other Debts - 8 859 252 468 112 3,343 5,042 608 166 1,414 180 20 22 238 2,648 December 31, 2014 Quoted Prices (Level 1) Other Significant Observable Items (Level 2) Assets Current Investments Liabilities Financial Instruments 1,181 5 767 - 414 5 December 31, 2013 Quoted Prices (Level 1) Other Significant Observable Items (Level 2) Assets Current Investments 312 163 149 Financial assets and liabilities are valued using quoted prices for identical assets and liabilities (Level 1), and the prices of similar instruments arising from sources of information available in the market (Level 2). At the closing of the reporting years, Grupo Clarín did not have any financial asset or liability for which a comparison had not been conducted against observable market data to determine their fair value (Level 3). 11.1.10 Fair Value of Financial Instruments The book value of cash, accounts receivable and current liabilities is similar to their fair value, due to the short-term maturities of these instruments. The fair value of non-current financial liabilities (Level 2) is measured based on the future cash flows of those liabilities, discounted at a representative market rate available to Grupo Clarín for liabilities with similar terms (currency and remaining term) prevailing at the time of measurement. The following table shows the estimated fair value of non-current financial liabilities: 183 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 184 December 31, 2014 December 31, 2013 Book Value Fair Value Book Value Fair Value Non-Current Debt 2,870 2,675 2,845 2,658 11.1.11 Evolution of the economic environment in which the Company operates The holders of certain discount and par bonds issued abroad by the Argentine government - as a consequence of its debt restructurings of 2005 and 2010 - during the second half of 2014- have not been able yet to collect the payment of principal and interest due to a claim brought in the State of New York (jurisdiction established in the terms of issuance of those bonds) by certain bondholders who decided not to participate in said debt restructurings. Even though this situation has not yet had a direct relevant impact on the businesses of the Company and its related companies, the Company’s management will continue to monitor closely this situation, the evolution of the fundamental economic variables, and the potential impact on its businesses. Therefore, these financial statements should be read in the light of this circumstance. Note 12 Interests in subsidiaries and affiliates a. During 2007, AGEA increased its interest in CIMECO from 33.3% to 50.0%, and executed call and put options on an additional interest in CIMECO’s capital stock. During 2008, AGEA partially assigned the rights and obligations arising from such options to its subsidiary AGR and to the Company. Subsequently, in 2008, AGEA, AGR and the Company exercised such call option, increasing, directly and indirectly, the Company’s equity interest in CIMECO and Papel Prensa to 100% and 49%, respectively. On April 10, 2008, the Company and the parties to the above-mentioned transaction notified CNDC of such transaction and on May 12, 2008 filed form F-1. After such notice and as of the date of these financial statements, the Company submitted additional information requested by the CNDC. As of the date of these financial statements, the above transaction is subject to administrative approvals. b. On January 11, 2008, IESA acquired the controlling interest of a group of companies mainly engaged in sports journalism, production and commercialization of shows, and the production of motor racing television broadcasting. The share purchase agreement sets forth certain objectives to be met by such group of companies. In case of breach of such provision, the sellers shall have to pay an indemnification. These transactions are subject to administrative approvals. c. On September 2, 2008, ARTEAR increased its equity interest in Pol-Ka and SB Producciones S.A. to 55% of such companies’ capital stock and votes, thus acquiring a controlling interest in both companies, in which it previously exercised common control. These transactions are subject to administrative approvals. 184 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 185 d. On February 10, 2011, CMD sold to a third party all of its shares of Dinero Mail, for approximately USD 4.4 million in cash; part of the price was withheld as guarantee. e. On August 17, 2011, CMD executed a stock purchase agreement, whereby it increased by 20% its interest in Interpatagonia S.A. (now Interwa S.A.), where it now holds 80% of the capital stock. CMD paid approximately Ps. 4.3 million in consideration for the shares. On November 25, 2014, one of the sellers of Interwa S.A.’s shares, as mentioned in Note 10 to these consolidated financial statements, exercised its put option for 6.66% of the shares of that company for approximately Ps. 1.5 million, payable in six monthly installments as from December 2014. f. On October 3, 2011 the Company’s subsidiary AGR acquired 65.46% of the capital stock and votes of Cúspide Libros S.A. and 2.40% of the capital stock and votes of Librerías Fausto S.A.C.E.I. (controlled by Cúspide Libros S.A., and subsequently dissolved). The transaction amounted to USD 2.8 million and Ps. 3.8 million. During 2014, the direct and indirect equity interest of AGEA in Cúspide increased to approximately 93.5%, mainly as a result of AGR’s purchase of shares of Cúspide on April 26, 2014 and the capital increase approved by the shareholders of Cúspide at that company’s General Extraordinary Shareholders’ Meeting held on June 30, 2014, which was fully subscribed by AGR. The total cost of these transactions amounted to approximately Ps. 21 million. g. On November 14, 2013 ARTEAR assigned, sold and transferred to South Media Investments S.A. all of its equity interest in Ideas del Sur S.A. (“IDS”), accounting for 30% of the capital stock IESA Telba Cuyo Televisión and votes of that company, together with all the political and economic rights inherent to the shares. The sale price was set at USD 12 million, which was collected in full a as of December 31, 2013. The assignment, sale and transfer of those shares was carried out “as is” under the economic, financial, equity, tax and legal conditions of the shares and of IDS at the time, considered as a whole. Accordingly, ARTEAR was held harmless from any and all responsibility regarding the existence of any “certain”, “contingent” or “hidden” liabilities (current or non-current) of IDS, that may have existed or originated prior to the closing date of the transaction, regardless of whether those liabilities were or were not disclosed in IDS’ financial statements. Based on the above, South Media Investments S.A. assumed the risk of the existence and/or emergence of liabilities in connection with IDS that may have existed or originated prior to the closing date of the transaction, regardless of whether such liabilities already existed or may become evident or enforceable in the future, South Media Investments S.A. firmly and irrevocably waived its right to bring any claim to which it may be deemed entitled against ARTEAR in this respect, holding it harmless - also firmly and irrevocably- from any and all liabilities for such cause and in that respect. Note 13 Assets held for sale and discontinued operations Based on the situations described in Note 9.1 to the consolidated financial statements as of December 31, 2014, certain assets have been classified as Assets held for sale as of such date, as required by IFRS. The following balances of Investments in unconsolidated affiliates were classified as Assets held for sale (in millions of Argentine pesos): December 31, 2014 158.8 3.9 1.1 163.8 185 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 186 The following balances of Property, Plant and Equipment were classified as Assets held for sale (in millions of Argentine pesos): Property, Plant and Equipment Detail of net income for the years ended December 31, 2014 and 2013 classified as Discontinued operations in these consolidated financial statements (in millions of Argentine pesos): Revenues Cost of Sales Subtotal - Gross Profit Selling Expenses Administrative Expenses Other Income and Expense, net Financial Results, net Equity in Earnings from Affiliates and Subsidiaries Income before Income Tax and Tax on Assets Income Tax and Tax on Assets Net Income from Discontinued Operations Note 14 Reserves, retained earnings and dividends Balances at the beginning of the year: Legal Reserve Accumulated Results Other Reserves Optional Reserves Total Net Income Attributable to the Parent Company Dividend Distribution Changes in Reserves for Acquisition of Minority Interests Balance at the end of the year December 31, 2014 0.1 0.1 December 31, 2014 December 31, 2013 93.4 (51.0) 42.4 (20.7) (13.2) (3.2) 0.1 32.1 37.5 (2.7) 34.7 84.1 (61.5) 22.6 (13.8) (14.7) 15.9 (2.0) 40.6 48.5 5.2 53.8 December 31, 2014 December 31, 2013 112,710,297 479,831,556 5,207,274 1,838,495,623 2,436,244,750 804,101,687 (240,000,000) (5,416,960) 2,994,929,477 88,652,667 481,152,598 5,207,274 1,381,400,655 1,956,413,194 479,831,556 - - 2,436,244,750 a. Grupo Clarín On April 29, 2014, at the Annual Ordinary Shareholders’ Meeting of Grupo Clarín, the shareholders decided, among other things, to appropriate the net income for the fiscal year 2013, which amounted to Ps. 479,831,556, as follows: (i) Ps. 240,000,000 to the distribution of cash dividends, (ii) Ps. 6,750,470 to the legal reserve, and (iii) Ps. 233,081,086 to an optional reserve to provide financial aid to subsidiaries and in connection with the Audiovisual Communication Services Law. As of December 31, 2014, the Company paid all of the distributed dividends. 186 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 187 b. Cablevisión On April 28, 2014, at the Annual General Ordinary and Extraordinary Shareholders’ Meeting of Cablevisión, its shareholders decided to distribute cash dividends in the amount of Ps. 394 million payable in three installments. The first installment of Ps. 80 million was to be paid in pesos on May 28, 2014 or on an earlier date as determined by Cablevisión’s Board of Directors, the second and third installments of Ps. 157 million each were also to be paid in pesos on December 31, 2014 or on an earlier date as determined by Cablevisión’s Board of Directors. Of that amount, approximately Ps. 158 million corresponds to the non-controlling interest in that company. As of the date of these financial statements, Cablevisión paid Ps. 393.9 million of distributed dividends, a portion of which was settled in US dollars. Note 15 Non-controlling interest December 31, 2014 December 31, 2013 Balances as of January 1st Equity in the Earnings of Other Companies for the year Dividends and Other Movements of Non-Controlling Interest Variation in Translation Differences of Foreign Operations Balance at the end of the year 1,748,885,854 541,359,977 (173,220,528) 165,438,983 2,282,464,286 1,374,568,933 320,834,218 (98,535,681) 152,018,384 1,748,885,854 The following is a detail of certain supplementary information required by IFRS about the non-controlling interest in Cablevisión. The information corresponds to the subsidiary’s identifiable assets and liabilities on which the Company values its investment. The amounts are stated in millions of pesos and do not take into consideration intercompany deletions. Country Non-controlling interest percentage Comprehensive income for the year allocated to non-controlling interest Accumulated non-controlling interest at year-end Summarized financial information: - Dividends distributed to Non-Controlling Interests - Current assets - Non-current assets - Current liabilities - Non-current liabilities - Revenues - Net Income from Continuing Operations - Other Comprehensive Income - Total Comprehensive Income - Cash and Cash Equivalents at Year-end December 31, 2014 December 31, 2013 Argentina 40.0% Argentina 40.1% 490 1,948 158 3,337 9,607 3,692 3,184 14,226 1,264 355 1,619 1,333 377 1,492 100 2,095 7,386 2,639 2,949 9,749 713 309 1,022 1,013 187 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 188 Note 16 Balances and transactions with related parties The following table contains the outstanding balances with related parties: Other Receivables Non-Current Under Joint Control Current Under Joint Control Other Related Parties Trade Receivables Current Under Joint Control Other Related Parties Trade Payables and Other Current Under Joint Control Other Related Parties Debt Non-Current Under Joint Control Current Other Related Parties Other Liabilities Current Under Joint Control Other Related Parties The following table shows the operations with related parties for the years ended December 31, 2014 and 2013: December 31, 2014 December 31, 2013 - - 1,330,662 17,140,641 18,471,303 19,889,308 61,231,737 81,121,045 41,796,587 38,740,063 80,536,650 - - 16,701,274 16,701,274 1,417 299,516 300,933 18,520,453 18,520,453 2,953,528 20,502,373 23,455,901 22,442,531 2,160,368 24,602,899 56,726,060 11,522,480 68,248,540 6,410,285 6,410,285 10,948,588 10,948,588 - 439,276 439,276 188 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 189 Item December 31, 2014 December 31, 2013 Under Joint Control Advertising Sales Circulation Sales Printing Services Sales Sales of Internet Subscriptions TV Signals Sales Other Sales Interest Income Fees for Services Productions and Co-Productions Printing and Distribution Costs Rights Advertising and Promotion Expenses Other Related Parties Advertising Sales TV Signals Sales Other Sales Other Income Interest Income Rights Rentals Interest Expense Advertising and Promotion Expenses Other Purchases The fees paid to the Board of Directors and the Upper Management of Grupo Clarín for the years ended December 31, 2014 and 2013 amounted to approximately Ps. 175 and Ps. 160 million, respectively. Note 17 Earnings per share The following table shows the net income and the weighted average of the number of common shares used in the calculation of basic earnings per share: Net Income used in the Calculation of Basic Earnings per Share (gain): From Continuing Operations From Discontinued Operations Weighted Average of the Number of Common Shares used in the Calculation of Basic Earnings per Share Earnings per Share 11,641,276 - 931,364 355,012 69,785 9,879,607 - (51,829) (472,244) (26,852,007) (247,685,438) 13,614,401 1,800 583,231 307,724 - 5,477,879 714,747 - (2,976,789) (28,866,841) (176,570,270) (2,705,492) (3,820,745) 3,772,072 93,073,293 23,150,826 - - (31,577,873) (486,665) (1,358,239) (1,434,572) (236,938,535) 2,768,980 4,457,943 14,786,944 30,330 111,781 - (422,943) (1,467,988) (1,650,816) (160,546,534) December 31, 2014 December 31, 2013 769,528,760 34,572,927 804,101,687 287,418,584 2.80 426,779,411 53,052,145 479,831,556 287,418,584 1.67 189 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 190 The weighted average of the number of outstanding shares was 287,418,584. Since no debt securities convertible into shares were recorded, the same weighted average should be used for the calculation of diluted earnings per share. Basic and Diluted Earnings per Share From Continuing Operations From Discontinued Operations Total Earnings per Share Dividends paid for the year 2014 amounted to Ps. 240,000,000 (Ps. 0.84 per share). Note 18 Covenants, sureties and guarantees provided a. Note 5.12 sets forth certain restrictions to which Cablevisión (by itself and as the surviving company and successor to Multicanal’s operations after the merger), PRIMA and AGEA are subject under their respective financial obligations described in such note. b. IESA is subject to contractual restrictions on the transfer of its equity interest in TRISA and Tele Net Image Corp. c. During the year 2009, AGR purchased a binding machine on credit. To secure the transaction, AGR granted the supplier a pledge over the machine. AGR granted joint and several guarantees for the loans granted by Banco de Inversión y Comercio Exterior and Standard Bank Argentina S.A. to Artes Gráficas del Litoral S.A. d. On May 27, 2010, CMD executed a mortgage agreement on a building of its property securing the payment of the obligations under the loan with Banco de la Ciudad de Buenos Aires mentioned in Note 5.12.6. e. On September 25, 2012, GCGC executed a mortgage agreement on a building of its property securing the payment of the obligations under the loan with Banco de la Ciudad de Buenos Aires mentioned in Note 5.12.3. Grupo Clarín acts as guarantor of said financing. December 31, 2014 December 31, 2013 2.68 0.12 2.80 1.49 0.18 1.67 f. On October 12, 2012, the Company executed an agreement securing the payment of the obligations under a loan taken by GCGC with Standard Bank Argentina mentioned in Note 5.12.3. g. GCSA Investments executed an agreement with Itaú Unibanco S.A., New York branch, to secure a financing transaction of a subsidiary of the Group by creating a security interest on a term deposit held in escrow at the above- mentioned bank in the aggregate amount of USD 20.2 million, which matures in July 2015. h. During 2014, AGR financed the acquisition of machinery and equipment through leasing agreements mentioned in Note 5.7.2 to these consolidated financial statements. Grupo Clarín and AGEA are joint debtors of said financing. i. In September 2014, Grupo Clarín executed an agreement with Itaú Unibanco S.A., New York branch, to secure a financing transaction of a subsidiary of the Group by creating a security interest on term deposits held in escrow at the above-mentioned bank in the aggregate amount of USD 3.7 million, which mature in January 2015. Subsequent to closing, these transactions were extended until March 2015. j. In December 2014, CLC granted Banco Mariva S.A. a pledge over two fixed-term deposits at this bank for Ps. 1.5 million and Ps. 4 million, with maturity date in January 2015, to secure financing transactions of Tinta Fresca and Cúspide, respectively. Subsequent to closing, these transactions were extended until March 2015. 190 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 191 k. In November 2014, the Company became the guarantor for up to Ps. 30 million for a term of one year to secure financing transactions carried out between AGEA and Banco Santander Rio S.A. Additionally, in February 2015, the Company became the guarantor for up to Ps. 5 million and Ps. 35 million for a term of 100 days to secure financing transactions of AGR and AGEA, respectively, with Banco Santander Rio S.A. Note 19 Award of a BID of the city of Buenos Aires On June 7, 2011, the Government of the City of Buenos Aires issued Decree No. 316 whereby it approved a public bidding process to contract comprehensive digital services for educational purposes for elementary school students in the City of Buenos Aires. Such services include, but are not limited to, the delivery of one netbook per student and one notebook per teacher under a gratuitous bailment agreement, connectivity, first and second level support, content access control, replacement in case of theft or damage and new license, both with certain limitations. The bid was awarded to PRIMA for a five-year term, which will start after certain requirements have been met. As consideration, PRIMA would receive an amount per student, teacher and school. As of December 31, 2011 the initial requirements had been met in order to bring the agreement into effect and to begin its billing. The agreement has been in effect during the year. The services have been rendered on a regular basis without any inconveniences and the Government of the City of Buenos Aires has been honoring the payments in accordance with the bidding terms. Note 20 Long-term savings plan for employees During the last quarter of 2007, the Company, together with its subsidiaries, began to implement a long-term savings plan for certain executives (directors and managers comprising the “executive payroll”), which became effective in January 2008. Executives who adhere to such plan undertake to contribute regularly a portion of their salary (variable within a certain range, at the employee’s option) to a fund that will allow them to strengthen their savings capacity. Each company of the Group where those executives render services will match the sum contributed by such executives. This matching contribution will be added to the fund raised by the employees. Under certain conditions, the employees may access such funds upon termination of their participation in the long- term savings plan. Said plan provides for certain special conditions for those managers who were in the “executive payroll” before January 1st, 2007. Such conditions consist of supplementary contributions made by each company to the plan related to the executive’s years of service with the Group. As of December 31, 2014, such supplementary contributions made by the Company on a consolidated basis amount to approximately Ps. 51 million, and the charge to income is deferred until the retirement of each executive. During 2013, certain changes were made to the savings system, although its operation mechanism and the main characteristics with regard to the obligations undertaken by the company were essentially maintained. Pursuant to IAS No. 19, the above-mentioned savings plan qualifies as a Defined Contribution Plan, which means that the companies’ contributions shall be charged to income on a monthly basis as from the date the plan becomes effective. Note 21 Operating Leases Lease Agreements As of December 31, 2014 and 2013, the Company is a party to non-cancellable operating leases, which are currently effective and have different terms and renewal rights. The total amount of minimum future payments for non-cancellable operating leases is the following (in millions of Ps.): 191 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 192 December 31, 2014 December 31, 2013 165 163 27 355 120 162 17 299 December 31, 2014 December 31, 2013 Assets Liabilities Assets Liabilities - - - - - 4.7 4.7 - - 4.7 - - - - - - - - - - 1 year Between 1 and 5 years 5 years or more Note 22 Derivatives The following is a detail of the derivatives held by the Company (amounts stated in millions of Argentine pesos): Foreign Currency Forward Contracts – Fair Value Hedge Total Less non-current portion: Foreign Currency Forward Contracts – Fair Value Hedge Total Current portion No ineffectiveness has been recorded in connection with fair value hedges. Note 23 Law No. 26,831 Capital Markets On December 28, 2012, Capital Markets Law No. 26,831 (the "Capital Markets Law"), passed on November 29, 2012 and enacted on December 27, 2012, was published in the Official Gazette. The Law provides for a comprehensive amendment of the public offering regime, previously governed by Law No. 17,811. Among other things, this law enhances the National Government’s oversight powers and changes the authorization, control and oversight mechanisms of all stages of the public offering process and the role of all the entities and individuals involved. The Law became effective on January 28, 2013. On July 29, 2013, the National Government issued Decree No. 1023/2013 to regulate partially the Capital Markets Law that had been passed on November 29, 2012. Among other provisions, the Decree regulates Section 20 of said Law, pursuant to which the CNV may appoint an overseer with veto rights over the decisions made by the boards of directors of entities subject to the public offering regime, or otherwise remove the boards from such entities for up to 180 days until all deficiencies found by the CNV are solved. Said Decree amends the Law it seeks to regulate and, therefore, constitutes a regulatory abuse. Thus, whereas the Law vests on the CNV the power to appoint an overseer or to remove the board of directors, the Decree allows the CNV to exercise 192 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 193 Note 24 Extinction of the notes issued by AGEA As mentioned in Note 5.7.2 to the consolidated financial statements, on January 28, 2014, AGEA repaid all of the USD 30.6 million aggregate principal amount outstanding and interest accrued as of such date on the Series C Notes issued by that company under the Global Program. Pursuant to Article 16, Section V of Chapter I of Title III of the Restated Rules issued by the CNV, which governs the delisting due to non-existence of outstanding securities, upon the extinction of the Series C Notes AGEA filed the required documentation with the CNV. On August 5, 2014, the CNV served AGEA with a notice requesting the latter to submit information to prove the extinction of Series A, B and D Notes, issued by that company under the Global Program for the Issuance of Notes. On August 12, 2014, AGEA submitted the information requested by the CNV, providing evidence of the extinction of the notes. On October 8, 2014, the CNV requested AGEA to make a filing in connection with the delisting. On October 16, 2014, AGEA submitted a Note to the CNV whereby it requested delisting due to the extinction of its notes. As of the date of these financial statements, the CNV has not rendered a decision on this matter. Once the authorization for public offering is cancelled due to the non-existence of outstanding securities, AGEA shall no longer be subject to the applicable regulations and legislation issued by the CNV, and shall become subject to the jurisdiction of the IGJ, and, therefore, to that agency’s regulations. that power if the shareholders and/or noteholders with a two percent (2%) interest in the company’s capital stock or outstanding debt securities claim that they have suffered actual and certain damages or if they believe their rights may be seriously jeopardized in the future. The Decree also vests on the CNV the power to appoint the administrators or co-administrators that will hold office as a consequence of the removal of the boards of directors. Thus, the Decree amends the Law by granting the CNV powers that were not provided therein. By doing so, the Executive Branch is assuming strictly legislative functions in breach of constitutional provisions. On September 5, 2013 within the framework of the Capital Markets Law and its Decree, the CNV issued Resolution No. 622/2013 (the “Rules”), whereby it approved the applicable Rules that repeal the Rules that had been effective until that date (as restated in 2001). The new Rules have introduced several changes in connection with CNV’s powers over the companies under that agency’s oversight, and also in connection with the information that these companies must disclose. On August 20, 2013, at the request of Mr. Rubén Mario Szwarc, a minority shareholder of the Company, and by means of public deed number two hundred forty five, the Company was served notice of the decision rendered by Chamber A of the National Court of Appeals on Commercial Matters on August 12, 2013, in re “SZWARC, Rubén Mario v. National Government and Others on Preliminary Injunction” File No. 011419/2013. That Chamber decided, among other things, (i) to declare the unconstitutionality of Sections 2, 4, 5, 9, 10, 11, 13, 15 and 16 of Law No. 26,854, and (ii) to order the provisional, injunctive suspension of Section 20, subsection a), second part, paragraphs I and II (or 1 and 2) of Law No. 26,831 and of all laws, rules or administrative acts issued or that may be issued pursuant to such legal provisions, with respect to Grupo Clarín S.A., until the judge that is finally declared competent to render a decision on the merits assumes full jurisdiction of the case and renders a final decision relating to the injunction. 193 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:42 PM Page 194 Note 25 Subsequent events a. The events that took place subsequent to the closing of this year related to the Proposal are described in Note 9.1. b. The events that took place subsequent to the closing of this year related to Cablevisión’s debt are described in Note 5.12.1. c. In connection with Note 8.2.j to these consolidated financial statements, on February 11, 2015, the preliminary hearing was held pursuant to Article 8, subsection b.1.), Title XIII, Chapter II, Section II of the Regulations (T.R. 2013, as amended). d. On January 8, 2015, CMD exercised the call option for an additional 6.66% of the equity interest in Interwa S.A. as mentioned in Note 10 to these consolidated financial statements, at a price of approximately Ps. 1.5 million, payable in five monthly installments as from January 2015. e. Law No. 19,307 was published in the Official Gazette of the Republic of Uruguay on January 14, 2015. This Law governs radio, television, and other audiovisual communication services (hereinafter, the “Audiovisual Communications Law”). Section 202 of this law provides that the Executive Branch shall issue the implementing regulations for this law within a 120-day term as from the day following the publication of this law in the Official Gazette. As of the date of the financial statements, only Decree No. 45/015 has been issued, but the implementing regulations for most of the sections of this law are still pending. Such Decree provides that the concession for the use and allocation of the radio-electric spectrum for non-satellite audiovisual communication services shall be granted for a term of 15 years. Section 54 of the Audiovisual Communications Law provides that an individual or legal entity cannot be allocated the full or partial ownership of more than 6 authorizations or licenses to render television services to subscribers throughout the national territory of Uruguay. Such limit is reduced to 3 if one of the authorizations or licenses includes the department of Montevideo. Section 189 of this law provides that in case the above- mentioned limits were exceeded as of the entry into force of the Law, the owners of those audiovisual communication services shall transfer the necessary authorizations or licenses so as not to exceed the limits mentioned above within a term of 4 years as from the date of entry into force of the Audiovisual Communications Law. The subsidiaries of Cablevisión in the Uruguay are analyzing the possible impact on their business that could be derived from the change in the regulatory framework and the eventual legal actions they may bring to safeguard their rights and those of their shareholders. The decisions to be made based on these consolidated financial statements should contemplate the eventual impact that these changes in the regulatory framework may have on Cablevisión and its subsidiaries in the Republic of Uruguay. The Company’s consolidated financial statements should be read in the light of these uncertain circumstances. f. Note 8.1.j describes the main events that took place after December 31, 2014 in connection with the re-allocation of frequencies in the Republic of Uruguay. Note 26 Approval of financial statements Grupo Clarín’s Board of Directors has approved the consolidated financial statements and authorized their issue for March 10, 2015. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 194 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 195 SUPPLEMENTARY FINANCIAL INFORMATION 195 195 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 196 1. Company activities Grupo Clarín is the most prominent and diversified media group in Argentina and one of the most important in the Spanish-speaking world. It has presence in the printed media, radio, broadcast and cable television, audiovisual content production, the printing industry and Internet. Its leadership in the different media is a competitive advantage that enables Grupo Clarín to generate significant synergies and expand into new markets. Its activities are grouped into four main segments: Cable television and Internet access, Printing and publishing, Broadcasting and Programming, and Digital content and other. The Company carried out its activities in the challenging context of constant harassment of the media in general and of Grupo Clarín in particular. Among the main activities carried out during the year, the following were the most significant: In the Printing and Publishing segment, during the year, the Company continued to publish its traditional newspapers and magazines, focusing on strengthening its editorial offering through the launch of new collectible and optional products. Advertising sales began to fall starting in February 2013, as a consequence of a substantial decrease in printed media advertising sales to supermarket and home appliance chains. This circumstance has a negative impact on the finances of news companies and, in particular, on this segment; which has also suffered from an ever-decreasing allocation of government advertising. In the Broadcasting and Programming Segment, El Trece maintained the highest audience share. This leading position is mostly attributable to the good performance of its programming grid both during the Prime Time, and at other times. In Prime Time, the most outstanding features were the fiction shows Solamente Vos, Farsantes, Mis Amigos de Siempre, Guapas and Noche y Día, along with Telenoche, the leading newscast in broadcast TV, and in the first quarter, the entertainment show Los 8 Escalones, which was subsequently moved to weekends. By the end of April, ShowMatch returned to the screen with very good ratings. Noticiero Trece, El Diario de Mariana and A Todo o Nada delivered good results in afternoon programming. Periodismo Para Todos and the incorporation of the shows Lunch and Dinner with Mirtha Legrand and the above-mentioned show Los 8 Escalones contributed to a good performance during weekends. In the Cable Television and Internet Access segment, the Company focused on subscriber loyalty initiatives, as well as on boosting penetration of its premium services, such as, Cablevisión HD, Pay Per View (PPV), Video On Demand (VoD) and Digital Video Recording (DVR) and expanding its broadband Internet access subscriber base. Progress was also made in the optimization of the reach of digital and premium services to cities and towns in the provinces. 2. Consolidated financial structure Note: the amounts are rounded and stated in thousands of Argentine Pesos. The figures under total amounts may not represent the exact arithmetic sum of the other figures in the table. Pursuant to CNV regulations, the following table shows the balances and results for the period, on a comparative basis with the prior periods, prepared under IFRS. Supplementary Financial Information As of December 31, 2014 196 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 197 Non-current assets Current assets Assets held for sale Total Assets Equity of the Parent Company Equity of Non-Controlling Interests Total Equity Non-current liabilities Current liabilities Total Liabilities December 31, December 31, December 31, December 31, 2014 2013 2012 2011 10,801,158 6,366,440 163,897 17,331,495 5,483,022 2,282,464 7,765,487 3,520,126 6,045,882 9,566,008 9,512,026 4,872,758 - 8,303,639 3,699,980 - 7,791,866 2,855,978 - 14,384,783 12,003,619 10,647,844 4,729,908 1,748,886 6,478,794 3,451,464 4,454,526 7,905,989 4,090,030 1,374,569 5,464,599 3,378,694 3,160,327 6,539,020 3,634,142 1,063,646 4,697,788 3,319,250 2,630,806 5,950,056 Total Equity and Liabilities 17,331,495 14,384,783 12,003,619 10,647,844 3. Consolidated comprehensive income structure Note: the amounts are rounded and stated in thousands of Argentine Pesos. The figures under total amounts may not represent the exact arithmetic sum of the other figures in the table. Pursuant to CNV regulations, the following table shows the balances and results for the period, on a comparative basis with the prior periods, prepared under IFRS. Operating income/loss from continuing operations (1) Financial Results Equity in Earnings from Affiliates and Subsidiaries Other Income and Expense, net Net Income from continuing operations December 31, December 31, December 31, December 31, 2014 2013 2012 2011 3,586,236 (1,730,471) 2,149,638 (1,473,831) 1,900,321 (916,154) 1,710,140 (582,086) 39,802 2,604 99,483 69,534 13,683 639 33,654 1,507 before income tax and tax on assets 1,898,171 844,825 998,490 1,163,215 Income tax and tax on assets (587,373) (97,924) (524,876) (425,032) Income for the year from continuing operations 1,370,798 746,900 473,614 738,183 Net Income from Discontinued Operations Net Income for the Year 34,664 1,345,462 53,765 800,666 498,717 972,331 47,426 785,610 Other Comprehensive Income for the Year 359,868 312,065 180,169 81,154 Total Comprehensive Income for the Year 1,705,330 1,112,731 1,152,500 866,764 (1) Defined as net sales less cost of sales and expenses. 197 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 198 4. Cash flow structure Note: the amounts are rounded and stated in thousands of Argentine Pesos. The figures under total amounts may not represent the exact arithmetic sum of the other figures in the table. Pursuant to CNV regulations, the following table shows the balances and results for the period, on a comparative basis with the prior periods, prepared under IFRS. December 31, December 31, December 31, December 31, 2014 2013 2012 2011 Cash provided by (used in) Operating Activities Cash provided by (used in) Investment Activities Cash provided by (used in) Financing Activities Total Cash provided (used) for the Year 4,474,551 (3,087,503) (1,623,069) (236,021) 2,608,347 (2,038,304) (412,863) 157,180 2,291,944 (819,887) (1,110,017) 362,040 1,577,219 (1,527,311) 187,633 237,541 Financial Results Generated By Cash and Cash Equivalents 325,262 188,547 77,116 42,090 Total Changes in Cash 89,241 345,727 439,156 279,632 5. Statistical data Cable TV subscribers (1) (5) Cable TV homes passed (2) (5) Cable TV churn ratio Internet access subscribers (1) Newspaper circulation (3) Canal 13 audience share Prime Time (4) Total Time (4) December 31, December 31, December 31, December 31, December 31, 2014 2013 2012 2011 2010 3,491,068 3,492,480 3,404,698 3,490,320 3,357,853 7,514,104 13.6 1,837,672 276,466 33.3 26.7 7,509,525 12.7 1,711,587 296,704 35.4 28.0 7,455,898 12.8 1,504,380 311,699 35.9 29.4 7,586,506 12.5 1,351,107 331,238 42.2 33.0 7,485,595 11.7 1,128,171 360,816 42.2 31.0 (1) Includes companies controlled, directly and indirectly, by Cablevisión (Argentina, Uruguay and Paraguay). (2) Contemplates the elimination of the overlapping of networks between Cablevisión and subsidiaries (including Multicanal and Teledigital). (3) Average quantity of newspapers per day (Diario Clarín and Olé), pursuant to the Instituto Verificador de Circulaciones (this figure represents sales in Argentina and abroad). (4) Share of prime time audience of broadcast television stations in the Metropolitan Area of Buenos Aires, as reported by IBOPE. Prime time is defined as 8:00 PM to 12:00 AM, Monday through Friday. Total time is defined as 12:00 PM to 12:00 AM, Monday through Sunday. (5) As of December 31, 2014, 2013 and 2012 it does not include the data corresponding to Cablevisión’s subsidiaries in Paraguay. 198 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 199 6. Ratios Liquidity (current assets / current liabilities) Solvency (equity / total liabilities) Capital assets (non-current assets / total assets) Return on equity (net income for the year / average shareholders’ equity) December 31, December 31, December 31, December 31, 2014 1.05 0.81 0.62 0.19 2013 1.09 0.82 0.66 0.13 2012 1.17 0.84 0.69 0.19 2011 1.09 0.79 0.73 0.18 7. Outlook As mentioned in the notes to the financial statements (see Note 9 to the consolidated financial statements), there are uncertainties about the business of the Company and its subsidiaries that could significantly affect the recoverability of the Company’s relevant assets. The decisions made on the basis of these financial statements should consider the eventual impact of the above-mentioned situations. The financial statements of the Company and its subsidiaries should be read in light of these uncertain circumstances. The Company remains committed to informing with independence, to reaching all sectors of society and to supporting the quality and credibility values of its media. It will assess the implications of the laws related to its activities; while bringing the pertinent legal actions to safeguard its rights and those of its readers, audiences and clients. The Company will keep focusing on the core processes that allow for a sustainable and efficient growth from different perspectives: financial structure, management control, business strategy, human resources, innovation and corporate social responsibility. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 199 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 200 Independent Auditor’s Report Free translation from the original prepared in Spanish To the Shareholders, President and Directors of Grupo Clarín S.A. Legal domicile: Piedras 1743 Autonomous City of Buenos Aires CUIT No 30-70700173-5 Report on the Consolidated Financial Statements We have audited the attached consolidated financial statements of Grupo Clarín S.A. and its controlled subsidiaries (the “Company”) which comprise the consolidated balance sheet at December 31, 2014, the consolidated statements of comprehensive income, of changes in equity and of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. The balances and other information for the fiscal year 2013 are an integral part of the above- mentioned audited financial statements, so they are to be considered in the light of those financial statements. Board of Directors’ responsibility The Board of Directors is responsible for the reasonable preparation and presentation of these consolidated financial statements in accordance with International Financial Reporting Standards adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE, for its Spanish acronym) as professional accounting standards and incorporated by the Argentine Securities Commission (CNV, for its Spanish acronym) to its regulations, as adopted by the International Accounting Standards Board (IASB). Further, the Board of Directors is responsible for the internal control it may deem necessary to enable preparing consolidated financial statements free of material misstatements caused by errors or irregularities. Our responsibility is to express an opinion on the consolidated financial statements based on the audit we performed with the scope detailed in paragraph “Auditor’s responsibility”. 200 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 201 Auditor’s responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards were adopted as auditing standards in Argentina by Technical Resolution No. 32 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE, for its Spanish acronym) as they were approved by the International Auditing and Assurance Standards Board (IAASB) and require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements mentioned in the first paragraph of this report present fairly, in all material respects, the consolidated financial statements mentioned in paragraph 1 present fairly, in all material respects, the consolidated financial position of Grupo Clarín S.A. as of December 31, 2014 and the consolidated comprehensive income and consolidated cash flows for the fiscal year then ended, in accordance with International Financial Reporting Standards. Emphasis of Matter We draw attention to Notes 8.1.a., 8.1.b., 8.1.c., 8.1.d., 8.1.e., 9, 25.a. and 25.e. to the consolidated only financial statements, which describe the uncertainties related to the eventual effects on the activities of the Company and certain subsidiaries of: (i) the resolutions issued by several regulators on matters associated with the acquisition of Cablevisión S.A. and other companies and their subsequent merge with Multicanal S.A. and other companies; and related with the revocation of the License that had been originally granted to FIBERTEL S.A.; (ii) the change in the Audiovisual Communication Services regulatory framework and the final outcome of the voluntary conforming proposal filed with the Audiovisual Communication Services Law Federal Enforcement Authority and the Supreme Court of Argentina and of the legal and administrative actions that are bringing and will bring the Company to safeguard its rights and those of its shareholders; (iii) the resolution issued by the regulator to calculate the monthly fee payable by the users of cable television services, whose decisions cannot be foreseen to date; (iv) the change in the regulatory framework of the telecommunications sector that results from the passing of the Digital Argentina Act, which implementing regulation is pending as 201 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:44 PM Page 202 of this date; and (v) the enactment of Law No. 19307 in the Eastern Republic of Uruguay that regulates the main activities of Adesol S.A., a Cablevisión S.A. subsidiary, which implementing regulation is pending as of this date. Our opinion is not qualified in respect of these matters. Report on compliance with current regulations In accordance with current regulations in respect to Grupo Clarín S.A., we report that: a) The consolidated financial statements of Grupo Clarín S.A. have been transcribed to the “Inventory and Balance Sheet” book and comply with the Corporations Law and pertinent resolutions of the Argentine Securities Commission, as regards those matters within our competence; b) The parent company only financial statements of Grupo Clarín S.A. arise from accounting records kept in all formal respects in conformity with legal provisions which maintain the security and integrity conditions based on which they were authorized by the Argentine Securities Commission; c) We have read the supplementary financial information, on which, as regards those matters that are within our competence, we have no observations to make; d) At December 31, 2014 the debt accrued in favor of the (Argentine) Integrated Social Security System according to the Company’s accounting records and calculations amounted to $2.002.610, none of which was claimable at that date; e) In accordance with the requirements of Article 21°, Subsection e), Chapter III, Section VI, Title II of the regulations of the Argentine Securities Commission, we report that the total fees for audit services and related billed the Company in the year ended December 31, 2014 represent: e.1) 88% on the total fees for services invoiced to the Company for all concepts in that year; e.2) 17% on the total fees for audit and related services invoiced to the Company, its parent companies, subsidiaries and affiliates in that year; e.3) 16% on the total fees for services invoiced to the Company, its parent companies, subsidiaries and affiliates for all concepts in that year. f) We have applied the procedures on prevention of asset laundering and terrorism funding set forth in the relevant professional rules issued by the Professional Council for Economic Sciences of the Autonomous City of Buenos Aires. Autonomous City of Buenos Aires, March 10, 2015 Price Waterhouse & Co. S.R.L. by Teresita M. Amor (Partner) 202 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 203 PARENT COMPANY ONLY FINANCIAL STATEMENTS 203 203 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 204 Parent Company only Statement of Comprehensive Income For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Notes December 31, 2014 December 31, 2013 Equity in Earnings from Affiliates and Subsidiaries Management fees Administrative Expenses (1) Other Income and Expense, net Financial Costs Other Financial Results, net Income before Income Tax and Tax on Assets Income Tax and Tax on Assets Income for the Year from Continuing Operations 4.3 5.1 5.2 5.3 6 699,025,584 116,160,000 (152,344,041) (16,446,377) (785,000) 111,026,610 756,636,776 15,308,541 771,945,317 454,277,709 105,493,573 (125,073,655) (14,834,785) (4,166,484) 15,384,592 431,080,950 (2,634,519) 428,446,431 Net Income from Discontinued Operations 4.12 32,156,370 51,385,125 Net Income for the Year 804,101,687 479,831,556 Other Comprehensive Income Variation in Translation Differences of Foreign Operations Other Comprehensive Income for the year net of income tax 194,429,342 194,429,342 160,046,637 160,046,637 Comprehensive Income for the Year 998,531,029 639,878,193 (1) Includes depreciation of property, plant and equipment and amortization of intangible assets in the amount of Ps. 784,183 and Ps. 647,164 for the years ended December 31, 2014 and 2013, respectively. The notes are an integral part of these parent company only financial statements. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 204 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 205 Parent Company only Balance Sheet As of December 31, 2014, and 2013 In Argentine Pesos (Ps.) Assets Non-Current Assets Property, Plant and Equipment Intangible Assets Deferred Tax Assets Investments in unconsolidated affiliates Other Receivables Total Non-Current Assets Current Assets Other Receivables Other Investments Cash and Banks Total Current Assets Notes December 31, 2014 December 31, 2013 4.1 4.2 6 4.3 4.4 4.4 4.5 4.6 1,421,956 197,602 30,528,358 5,294,496,135 30,000 5,326,674,051 119,952,371 60,603,314 5,755,391 186,311,076 1,170,211 256,861 12,073,066 4,616,128,529 30,000 4,629,658,667 69,104,459 149,294,148 7,959,791 226,358,398 Assets held for sale 4.12 152,378,791 - Total Assets 5,665,363,918 4,856,017,065 Equity (as per the corresponding statement) Shareholders’ Contributions Other items Retained Earnings Total Equity Liabilities Non-Current Liabilities Other Liabilities Total Non-Current Liabilities Current Liabilities Debt Taxes Payable Other Liabilities Trade Payables and Other Total Current Liabilities 2,010,638,503 477,244,708 2,995,139,163 5,483,022,374 2,010,638,503 288,232,326 2,431,037,476 4,729,908,305 4.3 4.7 4.8 4.9 119,904,077 119,904,077 231,387 3,614,046 25,101,396 33,490,638 62,437,467 65,188,295 65,188,295 691,884 5,219,357 17,915,000 37,094,224 60,920,465 Total Liabilities 182,341,544 126,108,760 Total Equity and Liabilities 5,665,363,918 4,856,017,065 The notes are an integral part of these parent company only financial statements. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 205 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 206 Parent Company only Statement of Changes in Equity For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Balances as of January 1st, 2013 Set-up of reserves (Note 7.a) Net Income for the Year Other Comprehensive Income: Variation in Translation Differences of Foreign Operations Adjustment on Additional Capital Stock Capital Stock Paid-in Capital 287,418,584 309,885,253 1,413,334,666 - - - - - - - - - Balances as of December 31, 2013 287,418,584 309,885,253 1,413,334,666 Set-up of reserves (Note 7.a) Dividend Distribution (Note 7.a) Changes in Reserves for Acquisition of Investments Net Income for the Year Other Comprehensive Income: Variation in Translation Differences of Foreign Operations - - - - - - - - - - - - - - - Balances as of December 31, 2014 287,418,584 309,885,253 1,413,334,666 (1) Broken down as follows: (i) Optional reserve for future dividends of Ps. 300,000,000; (ii) Judicial reserve for future dividend distribution of Ps. 387,028,756, (iii) Optional reserve for illiquidity of results of Ps. 694,371,899 and (iv) Optional reserve to provide financial aid to subsidiaries and in connection with the Audiovisual Communication Services Law of Ps. 690,176,054. The notes are an integral part of these parent company only financial statements. - - - - - - - - - - - - - ( 1 - - - - - 2 6 - - - - - - 4 ( 8 206 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 207 Shareholders’ Contributions Translation of Other items Subtotal Foreign Operations Other Reserves Legal Reserve (1) Optional reserves Retained Earnings Accumulated Results Total Equity 4,090,030,112 - 479,831,556 160,046,637 4,729,908,305 - (240,000,000) (5,416,960) 804,101,687 2,010,638,503 122,978,415 5,207,274 - - - 2,010,638,503 - - 160,046,637 283,025,052 - - - 88,652,667 24,057,630 1,381,400,655 457,094,968 - - - - 481,152,598 (481,152,598) 479,831,556 - 5,207,274 112,710,297 1,838,495,623 479,831,556 - - - - - - - - - 194,429,342 - - (5,416,960) - - 6,750,470 233,081,086 - - - - - - - - (239,831,556) (240,000,000) - 804,101,687 - 194,429,342 2,010,638,503 477,454,394 (209,686) 119,460,767 2,071,576,709 804,101,687 5,483,022,374 Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 207 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 208 Parent Company only Statements of Cash Flows For the years ended December 31, 2014 and 2013 In Argentine Pesos (Ps.) Cash provided by Operating Activities Net Income for the Year Income Tax and Tax on Assets Accrued Interest, net Adjustments to reconcile net income for the year to cash used in operating activities: - Depreciation of Property, Plant and Equipment and Amortization of Intangible Assets - Financial Income, except interest - Equity in Earnings from Affiliates and Subsidiaries Changes in Assets and Liabilities: - Other Receivables - Trade Payables and Other - Taxes Payable - Other Liabilities Income Tax and Tax on Assets Payments December 31, 2014 December 31, 2013 804,101,687 479,831,556 (15,308,541) (2,834,839) 2,634,519 2,322,978 784,183 (113,491,817) (731,181,954) (47,742,299) (3,603,586) (1,618,518) 7,186,396 (1,249,492) 647,164 (16,433,639) (505,662,834) (41,579,729) 8,456,719 1,482,417 3,477,326 (795,850) Net Cash Flows used in Operating Activities (104,958,780) (65,619,373) Cash provided by Investment Activities Dividends collected Capital contributions in subsidiaries Acquisition of Property, Plant and Equipment, net Acquisition of Intangible Assets Loans and interest collected Loans granted Placements of Forward Instruments Net Cash Flows provided by Investment Activities 592,098,242 (479,985,500) (923,693) (52,976) 9,200,646 (14,200,000) (30,793,000) 75,343,719 159,061,458 (9,000,000) (519,673) (179,860) 5,000,000 (7,968,000) - 146,393,925 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 208 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 209 Cash provided by Financing Activities Loans Payment of Debts Payment of Interest Dividends Paid Net Cash Flows (used in) / provided by Financing Activities Financing Results generated by Cash and Cash Equivalents (Decrease) / Increase in cash flow, net Cash and Cash Equivalents at the Beginning of the Year December 31, 2014 December 31, 2013 30,815,000 - - (240,000,000) (209,185,000) 116,522,354 (122,277,707) 157,253,939 45,400,000 (126,515) (66,370) - 45,207,115 18,278,037 144,259,704 12,994,235 Cash and Cash Equivalents at Year-end 34,976,232 157,253,939 The notes are an integral part of these parent company only financial statements. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 209 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 210 Note 1 General Information Grupo Clarín is a holding company that operates in the Media industry. Its operating income and cash flows derive from the operations of its subsidiaries in which it participates directly or indirectly. The operations of its subsidiaries include cable television and Internet access services, newspaper and other printing, publishing and advertising activities, broadcast television, radio operations and television content production, on-line and new media services, and other media related activities. A substantial portion of its revenues is generated in Argentina. Note 2 Basis for the Preparation and Presentation of the Parent Company only Financial Statements 2.1 Basis for the preparation and transition to IFRS Pursuant to General Resolution No. 562 issued on December 29, 2009, entitled “Adoption of International Financial Reporting Standards” and General Resolution No. 576/10, the CNV provided for the application of Technical Resolutions No. 26 (TR 26) and 29 issued by the Argentine Federation of Professional Councils of Economic Sciences (FACPCE, for its Spanish acronym). Since the Company is subject to the public offering regime governed by Law No. 26,831, it is required to apply such standards as from the year beginning January 1st, 2012. The FACPCE issues Adoption Communications for the enforcement of IASB resolutions in Argentina. TR 26 provides that parent company only financial statements must be prepared under IFRS approved to date in Argentina by the “FACPCE”, except for the valuation of investments in subsidiaries, which are valued under the equity method. statements have been prepared in accordance with IFRS, except for the above-mentioned valuation of investments in subsidiaries. Certain additional matters were included as required by the Argentine Business Associations Law and/or CNV regulations, including the supplementary information provided under the last paragraph of Section 1, Chapter III, Title IV of General Resolution No. 622/13. That information is included in the Notes to these parent company only financial statements, as provided under IFRS and CNV rules. The interim condensed parent company only financial statements have been prepared based on historical cost, except for the measurement at fair value of certain non-current assets and financial instruments. In general, the historical cost is based on the fair value of the consideration granted in exchange for the assets. Certain figures reported in the financial statements presented on a comparative basis were reclassified in order to maintain the consistency in the disclosure of the figures corresponding to this year. The attached information, approved by the Board of Directors at the meeting held on March 10, 2015, is presented in Argentine Pesos (Ps.), the Argentine legal tender, and arises from accounting records kept by Grupo Clarín S.A. 2.2 Standards and Interpretations issued but not adopted to date The Company has not adopted IFRS or revisions of IFRS issued as per the detail below, since their application is not required for the year ended December 31, 2014: - IFRS 9 Financial Instruments: issued in November 2009 and amended in October 2010 and July 2014. IFRS 9 introduces new requirements for the classification and measurement of financial assets and liabilities and for their derecognition. This standard is applicable to years beginning on or after January 1st, 2018. In preparing these parent company only financial statements for the year ended December 31, 2014, presented on a comparative basis, the Company has followed the guidelines provided by TR 26, and, therefore, these financial - IFRS 15 "Revenue from contracts with customers": issued in May 2014 and applicable to fiscal years beginning on or after January 1, 2017. This standard specifies how and when revenue will be recognized, as well as the Notes to the Parent Company only Financial Statements For the year ended December 31, 2014 Presented on a comparative basis In Argentine Pesos (Ps.) - 210 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 211 additional information to be disclosed by the Company in the financial statements. It provides a single, principles based five-step model to be applied to all contracts with customers. 2.3 Standards and Interpretations issued and adopted to date - IFRIC 21 Levies: The interpretation establishes how to account for liabilities to pay levies when those liabilities are within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and when they do not arise from income taxes (IAS 12) or from fines or other penalties imposed for breach of tax legislation. The interpretation clarifies what is the obligating event that triggers the obligation to pay the levy and when an entity should recognize that obligation. This standard is applicable to years beginning on or after January 1, 2014. This standard did not have an impact on the Company’s financial statements. 2.4 Equity Interests The Company records the interest in its subsidiaries and associates using the equity method, as established by TR 26. A subsidiary is an entity over which the Company exercises control. Control is presumed to exist when the Company has a right to variable returns from its interest in a subsidiary and has the ability to affect those returns through its power over the subsidiary. This power is presumed to exist when evidenced by the votes, be it that the Company has the majority of voting rights or potential rights currently exercised. An associate is an entity over which the Company has significant influence, without exerting control, generally accompanied by equity holdings of between 20% and 50% of voting rights. The subsidiaries’ and associates’ net income and the assets and liabilities are disclosed in the financial statements using the equity method, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”. Under the equity method, the investment in a subsidiary or associate is to be initially recorded at cost and the book value will be increased or decreased to recognize the investor’s share in the comprehensive income for the year or in other comprehensive income obtained by the subsidiary or associate, after the acquisition date. The distributions received from the subsidiary or associate will reduce the book value of the investment. The losses incurred by an associate in excess of the Company’s interest in such company are recognized to the extent the Company has undertaken any legal or implicit obligation or has made payments on behalf of the associate. Any excess of the acquisition cost over the Company’s share in the net fair value of the subsidiary’s or associate’s identifiable assets, liabilities and contingent liabilities measured at the acquisition date is recognized as goodwill. Goodwill is included in the book value of the investment and tested for impairment as part of the investment. Any excess of the Company’s share in the net fair value of the identifiable assets, liabilities and contingent liabilities over the acquisition cost, after its measurement at fair value, is immediately recognized in the statement of income. Unrealized gains or losses on transactions between the Company and its subsidiaries and the associates are eliminated considering the Company’s interest in those companies. Adjustments were made, where necessary, to the subsidiaries’ and associates’ financial statements so that their accounting policies are in line with those used by the Company. 2.4.1 Changes in the Company’s Interests in Existing Subsidiaries The changes in the Company’s interests in subsidiaries that do not generate a loss of control are recorded under equity. The book value of the Company’s interests is adjusted to reflect the changes in the relative interest in the subsidiary. Any difference between the amount for which an additional investment is recorded and the fair value of the consideration paid or received is directly recognized in equity. In case of loss of control and significant influence, any residual interest in the issuing company is measured at its fair value at such date, allocating the change in the recorded 211 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 212 value with an impact on net income. The fair value is the initial amount recognized for such investments for the purposes of its subsequent valuation for the interest retained as associate, joint operation or financial instrument. Additionally any amount previously recognized in Other Comprehensive Income regarding such investments is recognized as if the Company had disposed of the related assets and liabilities. Consequently, the amounts previously recognized in Other Comprehensive Income may be reclassified to net income. 2.5 Business Combinations The Company applies the acquisition method to account for business combinations. The consideration for each acquisition is measured at fair value (on the date of exchange) of the assets acquired, the liabilities incurred or assumed and the equity instruments issued by the Company in exchange for the control of the company acquired. The costs related to the acquisition are expensed as incurred. The consideration for the acquisition, if any, includes any asset or liability arising from a contingent consideration arrangement, measured at fair value at the acquisition date. Subsequent changes to such fair value, verified within the measurement period, are adjusted against the acquisition cost. The measurement period is the actual period that begins on the acquisition date and ends as soon as the Company receives all the information it was seeking about facts and circumstances that existed as of the acquisition date. The measurement period cannot exceed one year from the acquisition date. All other changes in the fair value of the contingent consideration classified as assets or liabilities, outside the measurement period, are recognized in net income. Changes in the fair value of the contingent consideration classified as equity are not recognized. In the case of business combinations achieved in stages, the Company’s equity interest in the company acquired is remeasured at fair value at the acquisition date (i.e., the date on which the Company acquired control) and the resulting gain or loss, if any, is recognized as income/expense or in other comprehensive income, depending on the origin of the variation. In the periods preceding the reporting periods, the Company may have recognized in other comprehensive income the changes in the value of the interest in the capital stock of the acquired company. In that case, the amount recognized in other comprehensive income is recognized on the same basis that would have been required if the Company had directly disposed of the previously-held equity interest. The identifiable assets, liabilities and contingent liabilities of the acquired company that meet the conditions for recognition under IFRS 3 (2008) are recognized at fair value at the acquisition date, except for certain particular cases provided by such standard. Any excess of the acquisition cost (including the interest previously held, if any, and the non-controlling interest) over the Company’s share in the net fair value of the subsidiary’s or associate’s identifiable assets, liabilities and contingent liabilities measured at the acquisition date is recognized as goodwill. Any excess of the Company’s share in the net fair value of the identifiable assets, liabilities and contingent liabilities over the acquisition cost, after its measurement at fair value, is immediately recognized in net income. The acquisition cost comprises the consideration transferred and the acquisition- date fair value of the acquirer’s previously- held equity interest in the acquiree, if any. 2.6 Goodwill Goodwill arises from the acquisition of subsidiaries and associates and refers to the excess of the sum of the consideration transferred, the fair value of the acquirer’s previously-held equity interest (if any) in the acquiree over the interest acquired in the net amount of the fair value at the date of acquisition of the identifiable assets acquired and liabilities assumed. If, upon measurement at fair value, the Company’s share in the fair value of net identifiable assets of the acquired company exceeds the amount of the consideration transferred, the amount of any non-controlling interest in such company and the fair value of the acquirer’s previous equity interest in the acquiree (if any), such excess is immediately 212 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 213 recognized in the statement of comprehensive income as a gain arising from a very profitable acquisition. Goodwill is not amortized, but tested for impairment on an annual basis. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash- generating units expected to render benefits from the synergies of the respective business combination. Those cash-generating units to which goodwill is allocated are tested for impairment on an annual basis, or more frequently, when there is any indication of impairment. If the recoverable value of the cash-generating unit, i.e. the higher of the value in use or the fair value net of selling expenses, is lower than the value of the net assets allocated to that unit, including goodwill, the impairment loss is first allocated to reduce the goodwill allocated to the unit and then to the other assets of the unit, on a pro rata basis, based on the valuation of each asset in the unit. The impairment loss recognized against the valuation of goodwill is not reversed under any circumstance. In preparing the financial statements of the individual entities, the transactions in currencies other than the entity’s functional currency (foreign currency) are recorded at the exchange rates prevailing on the dates on which transactions are carried out. At the end of each reporting year, the monetary items denominated in foreign currency are retranslated at the exchange rates prevailing on such date. Exchange differences are charged to net income as incurred. In preparing the Company’s parent company only financial statements, in order to measure, under the equity method, the Company’s interest in the entities which functional currencies is different from the Argentine Peso, the assets and liabilities of such companies are translated to Argentine pesos at the exchange rate prevailing at the end of the year, while the net income is translated at the exchange rate prevailing on the transaction date. Translation differences are recognized in other comprehensive income as “Variation in Translation Differences of Foreign Operations”. In case of a loss of control in the subsidiary, the amount attributable to goodwill is included in the calculation of the corresponding gain or loss. 2.9 Taxes The income tax charge reflects the sum of current income tax and deferred income tax. As mentioned in Notes 11.1 and 11.2, the recoverability of certain goodwill could be affected by the final outcome of the circumstances described in such note. 2.7 Revenue recognition Management fees are recognized when such services are rendered at the fair value of the consideration received or to be received. 2.8 Foreign Currency and Functional Currency The financial statements of each of the Company’s subsidiaries or associates are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). For the purposes of the Company’s parent company only financial statements, the net income and the financial position of each entity are stated in Argentine Pesos (Argentina’s legal tender for all companies domiciled in Argentina), which is the Company’s functional currency. 2.9.1 Current and Deferred Income Tax for the year Current and deferred taxes are recognized as expense or income for the year, except when they are related to entries debited or credited to other comprehensive income or directly to equity, in which cases taxes are also recognized in other comprehensive income or directly in equity, respectively. In the case of a business combination, the tax effect is taken into consideration in the calculation of goodwill or in the determination of the excess of acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. 2.9.2 Current Income Tax Current tax payable is based on the taxable income recorded during the year. Taxable income and net income reported in the parent company only statement of comprehensive income differ due to revenue or expense items that are taxable or deductible in other fiscal 213 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 214 years and items that are never taxable or deductible. The current tax liability is calculated using the tax rate in effect as of the date of these parent company only financial statements. 2.9.3 Deferred Income Tax Deferred tax is recognized on temporary differences between the book value of the assets and liabilities included in these financial statements and the corresponding tax basis used to determine taxable income. Deferred tax liabilities are generally recognized for all temporary fiscal differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is likely that future taxable income will be available against which those deductible temporary differences can be charged. These assets and liabilities are not recognized if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income. The book value of a deferred tax asset is reviewed at each reporting year and reduced to the extent that it is no longer likely that sufficient taxable income will be available in the future to allow for the recovery of all or part of the asset. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applicable in the year in which the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the end of the reporting year, to recover or settle the book value of its assets and liabilities. Deferred tax assets are offset against deferred tax liabilities if effective regulations allow to offset, before the tax authorities, the amounts recognized in those items; and if the deferred tax assets and liabilities arise from income taxes levied by the same tax authority and the Company intends to settle its assets and liabilities on a net basis. Under the IFRS, deferred income tax assets and liabilities are classified as non-current assets and liabilities, respectively. 2.9.4 Tax on Assets In Argentina, the tax on assets (impuesto a la ganancia mínima presunta) is supplementary to income tax. The Company assesses this tax at the effective rate of 1% on the taxable assets at year-end. The Company’s tax liability for each year will be equal to the higher of the tax on assets assessment or the income tax liability assessed at the legally effective rate on the estimated taxable income for the year. However, if the tax on assets exceeds the income tax liability in any given fiscal year, the excess may be creditable against any excess of income tax liability over the tax on assets in any of the following ten fiscal years. The tax on assets balance has been capitalized in the parent company only financial statements, net of a valuation allowance, based on the Company’s current business plans. 2.10 Property, Plant and Equipment and Intangible Assets Property, plant and equipment held for use in the supply of services, or for administrative purposes, are recorded at cost less accumulated depreciation and any accumulated impairment loss. Depreciation of property, plant and equipment is recognized on a straight-line basis over its estimated useful life. The estimated useful life, residual value and depreciation method are reviewed at each year-end, with the effect of any changes in estimates accounted for on a prospective basis. Repair and maintenance expenses are expensed as incurred. The gain or loss arising from the retirement or disposal of an item of property, plant and equipment is calculated as the difference between income from the sale of the asset and the asset’s book value, and recognized under “Other Income and Expense, net” in the parent company only statement of comprehensive income. 214 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 215 The residual value of an asset is written down to its recoverable value, if the asset’s residual value exceeds its estimated recoverable value (see Note 2.11). Intangible assets comprise software and are valued at cost, net of the corresponding accumulated amortization and impairment losses. Amortization is calculated on a straight line basis over the estimated useful life of the intangible assets. The Company reviews the useful lives applied, the residual value and the amortization method at each year-end, and accounts the effect of any changes in estimates on a prospective basis. 2.11 Impairment of Non-Financial Assets, Except Goodwill At the end of each financial statement, the Company reviews the book value of its non-financial assets with definite useful life to determine the existence of any evidence indicating that these assets could be impaired. If there is any indication of impairment, the recoverable value of these assets is estimated for the purposes of determining the amount of the impairment loss (in case the recoverable value is lower than the book value). Where it is not possible to estimate the recoverable value of an individual asset, the Company estimates the recoverable value of the cash-generating unit ("CGU") to which such asset belongs. Where a consistent and reasonable allocation base can be identified, corporate assets are also allocated to an individual cash-generating unit or, otherwise, to the smallest group of cash-generating units for which a consistent allocation base can be identified. The recoverable value of an asset is the higher of the fair value less selling expenses or its value in use. In measuring value in use, estimated future cash flows are discounted at their present value using a pre-tax discount rate, which reflects the current market assessments of the time value of money and, if any, the risks specific to the asset for which estimated future cash flows have not been adjusted. Assets with an indefinite useful life (for example, non-financial assets unavailable for use) are not amortized, but are tested for impairment on an annual basis. During this year, no impairment losses have been recorded for these assets. 2.12 Financial Instruments 2.12.1 Financial Assets Purchases and sales of financial assets are recognized at the transaction date when the Company undertakes to purchase or sell the asset, and is initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value with changes in the statement of income, which are initially measured at fair value. 2.12.1.1 Classification of Financial Assets Financial assets are classified within the following specific categories: “financial assets at fair value with changes in net income”, “held-to-maturity investments” and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined on initial recognition. 2.12.1.2 Recognition and Measurement of Financial Assets 2.12.1.2.1 Financial Assets at Fair Value with Changes in Net Income Financial assets at fair value with changes in net income are recorded at fair value, recognizing any gain or loss arising from the measurement in the parent company only statement of comprehensive income. The net gain or loss recognized in net income includes any gain or loss generated by the financial asset and is included in the item financial income and cost in the parent company only statement of comprehensive income. The assets designated in this category are classified as current assets if they are expected to be traded within 12 months; otherwise, they are classified as non-current assets. The fair value of these assets is calculated based on the current quoted market price of these securities. 2.12.1.2.2 Held-to-maturity Investments Held-to-maturity investments are measured at amortized cost using the effective interest rate method less any impairment, if any. 215 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 216 The effective interest rate method calculates the amortized cost of a financial asset or liability and the allocation of financial income or cost over the whole corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument to the net book value of the financial asset or liability on its initial recognition. Balances in foreign currency were translated at the exchange rate prevailing at the closing of year for the settlement of these transactions. Foreign exchange differences were charged to net income for each year. 2.12.1.2.3 Loans and Receivables Loans and trade receivables with fixed or determinable payments not traded in an active market are classified as “trade receivables and other”. Trade receivables and other are initially measured at fair value, and subsequently measured at amortized cost using the effective interest rate method, less any impairment, if any. Interest income is recognized using the effective interest rate method, except for short-term balances for which the recognition of interest is not significant. Loans and receivables are classified as current assets, except for the maturities exceeding 12 months from the closing date. Loans in foreign currency have been valued as mentioned above, at the exchange rates prevailing as of each year-end. Foreign exchange differences were charged to net income for each year. 2.12.1.3 Impairment of Financial Assets The Company tests financial assets or a group of assets for impairment at each closing date to assess if there is any objective evidence of impairment. The value of a financial asset or a group of assets is impaired, and an impairment loss is recognized, where there is objective evidence of the impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event or events have an impact on the estimated future cash flows of the financial asset or a group of assets, which may be reliably measured. The objective evidence of impairment may include, among others, significant financial difficulties of the issuer or obligor; or breach of contractual terms, such as default or delinquency in interest or principal payments. The Company tests for impairment financial assets disclosed under Other Receivables on a case by case basis. Where there is objective evidence of an impairment loss in the value of loans granted, receivables or held-to-maturity investments recorded at amortized cost, the loss amount is measured as the difference between the book value and the present value of estimated future cash flows (without including future non-incurred losses), discounted at the original effective interest rate of the financial asset. The asset’s book value is written down under a contra asset account. The loss amount is recognized in net income for the year. If, in subsequent periods, the impairment loss amount decreases and such decrease can be objectively related to an event occurring after the impairment has been recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed. A loss reversal can only be recorded to the extent the financial asset’s book value does not exceed the amortized cost that would have been determined if the impairment loss had not been recorded at the reversal date. The reversal amount is recognized in net income for the year. 2.12.1.4 Derecognition of Financial Assets The Company derecognizes a financial asset when the contractual rights to the cash flows of such assets expire or when it transfers the financial asset and, therefore, all the risks and benefits inherent to the ownership of the financial asset are transferred to another entity. If the Company retains substantially all the risks and benefits inherent to the ownership of the transferred asset, it will continue to recognize it and will recognize a liability for the amounts received. 2.12.2 Financial Liabilities Financial liabilities are valued at amortized cost using the effective interest rate method. 216 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 217 2.12.2.1 Debts Debt is initially valued at fair value net of the transaction costs incurred, and subsequently valued at amortized cost using the effective interest rate method. Any difference between the initial value net of the transaction costs and the settlement value is recognized in the income statement over the term of the loan using the effective interest rate method. Interest expense has been charged to the parent company only statement of comprehensive income under “Financial Costs”. 2.12.2.2 Trade Payables and Other Trade payables with fixed or determinable payments not traded in an active market are classified as “Trade Payables and Other”. Trade Payables and Other are initially measured at fair value, and subsequently measured at amortized cost using the effective interest rate method. Interest expense is recognized using the effective interest rate method, except for short-term balances for which the recognition of interest is not significant. Trade Payables and Other are classified as current, except for the maturities exceeding 12 months from the closing date. Trade payables in foreign currency have been valued as mentioned above, at the exchange rates prevailing as of each year end. Foreign Cash and Banks Short-Term Investments Cash and Cash Equivalents In the years ended December 31, 2014 and 2013, the following significant transactions were carried out, which did not have an impact on cash and cash equivalents: exchange differences were charged to net income for each year. 2.12.2.3 Derecognition of Financial Liabilities An entity shall derecognize a financial liability (or part of it) when, and only when, it has been extinguished, i.e., when the obligation specified in the corresponding agreement is discharged, cancelled or expires. 2.13 Other Liabilities The other liabilities have been valued at nominal value. 2.14 Parent Company Only Statement of Cash Flows For the purposes of preparing the parent company only statement of cash flows, the item “Cash and Cash Equivalents” includes cash and bank balances, high liquidity short-term investments (with original maturities shorter than 90 days), and bank overdrafts payable on demand, if any, are deducted to the extent they are part of the Company’s cash management. Bank overdrafts are classified as “Debt” in the parent company only balance sheet. Cash and cash equivalents at each year-end, as disclosed in the parent company only statement of cash flows, may be reconciled against the items related to the parent company only balance sheet as follows: December 31, 2014 December 31, 2013 5,755,391 29,220,841 34,976,232 7,959,791 149,294,148 157,253,939 Dividends collected through debt settlement 31,600,000 110,748,330 December 31, 2014 December 31, 2013 217 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 218 2.15 Distribution of Dividends The distribution of dividends to the Company’s shareholders is recognized as a liability in the financial statements for the year in which the distribution of dividends is approved by the Shareholders. 2.16 Assets held for sale Non-current assets (or disposal groups) are classified as assets held for sale where their value will be mostly recovered through their sale, to the extent such sale is highly likely to occur. Note 3 Accounting Estimates and Judgments In applying the accounting policies described in Note 2, the Company has to make judgments and prepare accounting estimates of the value of the assets and liabilities which may not be otherwise obtained. The estimates and related assumptions are based on historical experience and other pertinent factors. Actual results may differ from these estimates. The underlying estimates and assumptions are continually reviewed. The effects of the reviews of accounting estimates are recognized for the year in which estimates are reviewed. These estimates basically refer to: Impairment of Goodwill The Company assesses goodwill for impairment on an annual basis. In determining if there is impairment of goodwill, the Company calculates the value in use of the cash generating units to which it has been allocated. The calculation of the value in use requires the determination by the entity of the future cash flows that should arise from the cash generating units and an appropriate discount rate to calculate the present value. During this year, no impairment losses have been recorded for goodwill. Recognition and Measurement of Deferred Tax Items As disclosed in Note 2.9, deferred tax assets are only recognized for temporary differences to the extent that it is likely that the entity will have enough future taxable income against which the deferred tax assets can be used. Tax loss carryforwards from prior years are only recognized when it is likely that the entity will have enough future taxable income against which they can be used. The Company examines the recoverable value of deferred tax assets based on its business plans and books a valuation allowance, if appropriate, so that the net position of the deferred tax asset will reflect the probable recoverable value. Determination of the Useful Lives of Property, Plant and Equipment The Company reviews the reasonableness of the estimated useful life of property, plant and equipment at each year-end. Measurement of the fair value of certain financial instruments The fair value of a financial instrument is the amount at which the instrument could be purchased or sold between knowledgeable, willing parties in an arm’s length transaction. If there is a quoted market price available for an instrument in an active market, the fair value is calculated based on that price. If there is no quoted market price available for a financial instrument, its fair value is estimated based on the price established in recent transactions involving the same or similar instruments and, otherwise, based on valuation techniques regularly used in financial markets. The Company uses its judgment to select a variety of methods and makes assumptions based on market conditions at closing. 218 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 219 Note 4 Breakdown of the Main Items of the Parent Company only Balance Sheet 4.1 Property, Plant and Equipment Balance at Historical value Balances as of December 31, Main Account the Beginning Additions Retirements 2014 Furniture and Fixtures Audio and Video Equipment Telecommunication Equipment Computer Equipment Total as of December 31, 2014 443,518 122,179 193,123 5,532,765 6,291,585 - - 24,968 898,725 923,693 - - - - - 443,518 122,179 218,091 6,431,490 7,215,278 Useful Life Balance at the Depreciation Balances Net Book as of Value as of December December Main Account (in years) Beginning Retirements For the year 31, 2014 31, 2014 Furniture and Fixtures Audio and Video Equipment Telecommunication Equipment Computer Equipment Total as of December 31, 2014 10 5 5 3 229,073 105,978 105,160 4,681,163 5,121,374 - - - - - 41,235 8,714 270,308 114,692 173,210 7,487 32,734 589,265 137,894 5,270,428 80,197 1,161,062 671,948 5,793,322 1,421,956 219 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 220 Balance at Historical value Balances as of December 31, Main Account the Beginning Additions Retirements 2013 Furniture and Fixtures Audio and Video Equipment Telecommunication Equipment Computer Equipment Total as of December 31, 2013 436,420 122,179 151,697 5,061,616 5,771,912 7,098 - 41,426 471,149 519,673 - - - - - 443,518 122,179 193,123 5,532,765 6,291,585 Useful Life Balance at the Depreciation Balances Net Book as of Value as of December December Main Account (in years) Beginning Retirements For the year 31, 2013 31, 2013 Furniture and Fixtures Audio and Video Equipment Telecommunication Equipment Computer Equipment Total as of December 31, 2013 10 5 5 3 187,700 96,161 79,232 4,174,372 4,537,465 - - - - - 41,373 9,817 229,073 105,978 25,928 506,791 105,160 4,681,163 214,445 16,201 87,963 851,602 583,909 5,121,374 1,170,211 220 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 221 4.2 Intangible Assets Balance at Historical value Balances as of December 31, Main Account Software Total as of December 31, 2014 the Beginning Additions Retirements 2014 353,492 353,492 52,976 52,976 - - 406,468 406,468 Amortization Period Balance at the Amortization Balances Net Book as of Value as of December December Main Account (in years) Beginning Retirements For the year 31, 2014 31, 2014 Software Total as of December 31, 2014 3 96,631 96,631 - - 112,235 208,866 197,602 112,235 208,866 197,602 Balance at Historical value Balances as of December 31, Main Account Software Total as of December 31, 2013 the Beginning Additions Retirements 2013 173,632 173,632 179,860 179,860 - - 353,492 353,492 Amortization Period Balance at the Amortization Balances Net Book as of Value as of December December Main Account (in years) Beginning Retirements For the year 31, 2013 31, 2013 Software Total as of December 31, 2013 3 33,376 33,376 - - 63,255 96,631 256,861 63,255 96,631 256,861 221 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 222 4.3 Investment in Unconsolidated Affiliates Class Nominal Value Quantity Value recorded as of December 31, 2014 (1) Non-Current Investments SHOSA (3) - Goodwill Vistone (3) VLG (3) - Goodwill CVB (3) CLC (3) Pem S.A. AGEA AGR CIMECO - Goodwill CMI ARTEAR IESA (4) Radio Mitre GC Services GCGC CMD GC Minor Total Common Common - Common Common Common Common Common Common Common Common Common Common - Common Common Common Ps. 1.00 123,341,081 1,367,165,063 Ps. 1.00 322,528,386 1,289,942,653 495,735,087 - - Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 Ps. 1.00 - Ps. 1.00 Ps. 1.00 Ps. 1.00 63,298,286 19,188,422 1 366,199,126 1,254,128 37,412,958 98 53,186,347 52,812,454 51,755,121 - 15,605,979 63,595,147 3,478,808 2 I 268,951,367 100,503,301 295,897,131 80,864,561 2 739,781,268 2,931,914 41,598,029 58,837,707 262,999 383,794,121 - 55,150,490 19,348,196 21,594,262 47,520,493 24,617,491 5,294,496,135 119,904,077 119,904,077 Other Non-Current Liabilities GCSA Investments Total - - - (1) In certain cases, the equity value does not correspond to the related shareholders’ equity due to: (i) the adjustment of the equity value to the Company’s accounting policies, as required by professional accounting standards, (ii) the elimination of goodwill generated by transactions between companies under the Company’s common control, (iii) the existence of irrevocable contributions, and (iv) adjustments to fair market value of net assets for acquisitions made by the Company. (2) Interest in votes amounts to 98.8%. (3) Companies through which an interest is held in Cablevisión S.A. (4) See Note 4.12 222 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 223 Value recorded as of December 31, Information about the issuer - Latest financial statements 2013 (1) Main business activity Date Capital Stock Net Income Equity Interest (%) 1,098,425,497 Investing and financing Dec. 31, 2014 127,153,997 389,264,688 1,816,494,706 495,735,087 1,092,332,346 Investing and financing 204,555,629 Investing and financing 100,503,301 248,988,172 Investing and financing 65,534,396 Investing and financing 2 Investing 588,820,369 Publishing and Printing 1,361,825 Printing 40,392,629 Investing and financing 58,837,707 222,684 Advertising 379,724,086 Broadcasting Services 147,693,817 Investing and financing 36,383,803 Broadcasting Services 14,845,174 Investing and financing 9,173,206 Services 25,370,467 Investing and services 7,228,332 Investing and financing 4,616,128,529 Dec. 31, 2014 Dec. 31, 2014 339,365,203 2,576,763,258 266,826,031 617,349,329 1,287,203,710 3,187,786,990 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 66,628,353 19,189,422 13,558,511 366,199,151 138,865,295 180,479,453 12,000 54,859,553 55,012,857 53,613,136 19,075,942 16,006,285 74,295,301 3,637,879 64,990,388 15,355,162 13,841,975 (217,980,053) (63,102,161) 22,064,496 4,936,404 256,812,059 34,392,518 19,976,620 4,503,022 (1,911,755) (2,539,502) 2,976,780 293,779,901 76,864,347 46,002,083 773,603,137 122,560,196 336,769,057 32,203,925 428,701,622 209,697,711 58,912,883 19,348,196 21,781,751 108,034,789 29,120,216 97.0% 95.0% 11% 95.0% 99.9% 0.00001% 99.9% 0.9% 20.7% 0.8% (2) 97.0% 96% 96.5% 100% 97.5% 85.6% 95.6% 65,188,295 Investing and financing Dec. 31, 2014 306 (55,095,735) (126,764,659) 100% 65,188,295 223 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 224 Equity in Earnings from Affiliates and Subsidiaries December 31, 2014 December 31, 2013 SHOSA Vistone VLG CVB CLC AGEA CIMECO GCSA Investments ARTEAR Radio Mitre GCGC CMD GC Services Other 4.4 Other Receivables Non-Current Guarantee Deposits Tax on assets Valuation Allowance for Tax on Assets Current Related Parties (Note 8) Tax Credits Advances Dividend Receivable (Note 8) Other 4.5 Other Investments Financial Instruments Money Market Mutual Funds 4.6 Cash and Banks Cash and Imprest Funds Cash at Banks 359,778,823 254,053,806 65,091,555 61,764,281 14,804,885 (218,749,418) 4,314,864 (54,715,782) 191,441,816 18,766,687 (1,863,944) (2,852,683) 4,503,022 2,687,672 699,025,584 200,748,393 146,255,081 36,949,104 35,310,149 8,215,809 (95,582,561) 8,802,719 (36,563,508) 141,662,007 264,436 1,142,933 1,625,485 3,662,481 1,785,181 454,277,709 December 31, 2014 December 31, 2013 30,000 31,303,410 (31,303,410) 30,000 114,541,873 4,175,721 1,082,527 11,311 140,939 119,952,371 30,000 28,860,490 (28,860,490) 30,000 66,619,406 599,092 1,842,906 11,311 31,744 69,104,459 December 31, 2014 December 31, 2013 31,382,473 20,090,769 9,130,072 60,603,314 6,774,979 129,949,690 12,569,479 149,294,148 December 31, 2014 December 31, 2013 282,380 5,473,011 5,755,391 145,927 7,813,864 7,959,791 224 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 225 4.7 Debt Current Related Parties (Note 8) The following table details the changes in loans and indebtedness for the years ended December 31, 2014 and 2013: Balances as of January 1st New Loans and Indebtedness Accrued Interest Exchange Differences Settlement of principal and interest Balances as of December 31 4.8 Taxes Payable Current Taxes Payable on a National Level Taxes Payable on a Provincial Level 4.9 Trade Payables and Other Current Suppliers and Trade Provisions Related Parties (Note 8) Employer’s Contributions December 31, 2014 December 31, 2013 231,387 231,387 691,884 691,884 2014 2013 691,884 30,815,000 - 785,000 (32,060,497) 231,387 62,084,479 45,400,000 4,166,484 - (110,959,079) 691,884 December 31, 2014 December 31, 2013 3,614,046 - 3,614,046 4,937,019 282,338 5,219,357 December 31, 2014 December 31, 2013 8,301,127 1,767,399 23,422,112 33,490,638 4,010,690 1,037,397 32,046,137 37,094,224 4.10 Assets and Liabilities in Foreign Currency December 31, 2014 December 31, 2013 Type and Amount of Foreign Prevailing Currency Exchange Rate Amount in Local Currency Type and Amount of Foreign Currency USD 395 USD 6,090,787 USD 79,743 8.451 8.451 8.451 3,338 - 51,473,242 USD 20,167,320 USD 61,169 673,882 52,150,462 52,150,462 Items Assets Current Assets Other Receivables Other Investments Cash and Banks Total Current Assets Total Assets USD - US Dollars Amount in Local Currency - 130,684,231 396,376 131,080,607 131,080,607 225 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 226 4.11 Changes in Allowances Balance at Balances as of Balances as of December 31, December 31, Items the Beginning Increases Decreases 2014 2013 Deducted from Assets Valuation Allowance for Net Deferred Tax Assets 27,423,695 - (1) (27,096,200) 327,495 27,423,695 Valuation Allowance for Tax on Assets Allowance for Goodwill Impairment Total 28,860,490 (1) 3,146,751 (703,831) 31,303,410 28,860,490 28,432,495 84,716,680 - - 3,146,751 (27,800,031) 28,432,495 60,063,400 28,432,495 84,716,680 (1) Charged to Income Tax and Tax on Assets 4.12 Assets held-for-sale and discontinued operations Based on the situations described in Note 11.1 to the parent company only financial statements as of December 31, 2014, the Company’s investment in IESA for Ps. 152.4 million has been classified as Assets held for sale as of such date, as required by IFRS. In addition, the income generated by that investment has been classified as Net Income from Discontinued Operations in the Parent Company Only Comprehensive Statement of Income as of December 31, 2014 and 2013. Note 5 Breakdown of the Main Items of the Parent Company only Statement of Comprehensive Income 5.1 Information Required under Section 64, Subsection b) of Law No. 19,550 Item Salaries, Social Security and Benefits to Personnel (1) Supervisory Committee’s fees Fees for services (2) Taxes, Duties and Contributions Other personnel expenses General expenses IT expenses Maintenance Expenses Communication expenses Advertising expenses Travel Expenses Stationery and Office Supplies Depreciation of Property, Plant and Equipment Amortization of Intangible Assets Other expenses Total (1) Includes fees for technical and administrative services to Directors in the amount of Ps. 22,087,911 as of December 31, 2014. Additionally, they include the effect of the long-term savings plan for employees mentioned in Note 13. Administrative Expenses December 31, 2014 December 31, 2013 78,926,025 900,000 49,371,237 6,225,974 1,475,382 148,910 1,676,817 1,827,543 1,117,303 1,040,997 4,627,116 104,542 671,948 112,235 4,118,012 152,344,041 78,155,036 760,000 29,093,027 5,631,617 1,151,324 93,022 538,123 1,145,100 679,605 625,425 2,836,292 161,027 583,909 63,255 3,556,893 125,073,655 (2) Includes Directors’ fees for they year 2014 in the amount Ps. 7,306,854. 226 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 227 5.2 Financial Costs Exchange Differences Interest 5.3 Other Financial Results, net Exchange Differences and Other Financial Results Results from transactions with securities and bonds Interest Other Taxes and Expenses Note 6 Income tax The following table shows the breakdown of net deferred tax assets (amounts stated in thousands of Argentine Pesos): Assets Tax Loss Carryforwards Other Investments Employer’s Contributions Other Subtotal Valuation Allowance for Deferred Tax Assets Net Deferred Tax Assets December 31, 2014 December 31, 2013 (785,000) - (785,000) - (4,166,484) (4,166,484) December 31, 2014 December 31, 2013 8,991,008 105,168,208 2,834,839 (5,967,445) 111,026,610 15,656,080 - 1,843,506 (2,114,994) 15,384,592 December 31, 2014 December 31, 2013 327 24,431 6,088 9 30,855 (327) 30,528 27,424 7,280 4,785 8 39,497 (27,424) 12,073 227 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:45 PM Page 228 December 31, 2014 December 31, 2013 (276,078) (150,878) 255,914 (6,525) 18,048 (8,641) 27,096 18,455 18,455 18,455 (3,146) 15,309 158,997 (5,574) 1,696 4,241 (3,331) 910 910 910 (3,545) (2,635) The following table shows the reconciliation between the income tax and tax on assets charged to net income for the years ended December 31, 2014 and 2013 and the income tax liability that would result from applying the current tax rate on income before income tax and tax on assets and the income tax liability assessed for each year (amounts stated in thousands of Argentine Pesos): Income Tax Assessed at the Current Tax Rate (35%) on Income before Income Tax Permanent Differences: Gain/Loss on Investments in Subsidiaries Non-Taxable Income Other Subtotal Valuation Allowance for Net Deferred Tax Assets Charged to Income Income Tax Deferred Taxes for the Year Income Tax Tax on assets Total As of December 31, 2014, the Company’s accumulated tax loss carryforwards amounted to approximately Ps. 1.1 million, which calculated at the current tax rate, represent deferred tax assets in the amount of approximately Ps. 0.3 million. The following table shows the expiration date of the accumulated tax loss carryforwards pursuant to statutes of limitations (amounts stated in thousands of Argentine Pesos): Expiration year 2019 Tax Loss Carryforwards 1,078 1,078 228 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 229 Note 7 Reserves, Retained Earnings and Dividens Balances at the beginning of the year: Legal Reserve Accumulated Results Other Reserves Optional Reserves Total Net Income Attributable to the Parent Company Dividend Distribution Changes in Reserves for Acquisition of Investments Balance at the end of the year a. Grupo Clarín The Company’s bylaws set forth that retained earnings shall be appropriated as follows: (i) 5% to the Company’s legal reserve until such reserve equals 20% of the Company’s capital stock; and (ii) the balance, in whole or in part, to the payment of the fees of the members of the Board of Directors and the Supervisory Committee, to dividends on common shares, or reserve accounts, or as otherwise determined by the Shareholders, among other situations. On April 25, 2013, at the Annual Ordinary Shareholders’ Meeting of Grupo Clarín, the shareholders decided, among other things, to appropriate the net income for the fiscal year 2012, which amounted to Ps. 482,310,720, as follows: (i) Ps. 24,057,630 to the legal reserve, (ii) Ps. 1,158,122 to absorb accumulated deficit and (iii) Ps. 457,094,968 to an optional reserve to provide financial aid to subsidiaries and in connection with the Audiovisual Communication Services Law. On April 29, 2014, at the Annual Ordinary Shareholders’ Meeting of Grupo Clarín, the shareholders decided, among other issues, to appropriate the net income for the fiscal year 2013, which amounted to Ps. 479,831,556, as follows: (i) Ps. 240,000,000 to the distribution of cash dividends, (ii) Ps. 6,750,470 to the legal reserve, and (iii) Ps. 233,081,086 to an optional reserve to provide financial aid to subsidiaries and in connection with the December 31, 2014 December 31, 2013 112,710,297 479,831,556 5,207,274 1,838,495,623 2,436,244,750 804,101,687 (240,000,000) (5,416,960) 2,994,929,477 88,652,667 481,152,598 5,207,274 1,381,400,655 1,956,413,194 479,831,556 - - 2,436,244,750 Audiovisual Communication Services Law. As of December 31, 2014, the Company paid all of the distributed dividends. b. Cablevisión On April 28, 2014, at the Annual General Ordinary and Extraordinary Shareholders’ Meeting of Cablevisión, its shareholders decided to distribute cash dividends in the amount of Ps. 394 million payable in three installments. The first installment of Ps. 80 million was to be paid in pesos on May 28, 2014 or on an earlier date as determined by Cablevisión’s Board of Directors, the second and third installments of Ps. 157 million each were also to be paid in pesos on December 31, 2014 or on an earlier date as determined by Cablevisión’s Board of Directors. Of that amount, approximately Ps. 158 million corresponds to the non-controlling interest in that company. As of the date of these financial statements, Cablevisión paid Ps. 393.9 million of distributed dividends, a portion of which was settled in US dollars. c. Other companies On September 5, 2014 certain subsidiaries of the Company, through which it holds an equity interest in Cablevisión, decided to distribute advanced dividends for an approximate total of Ps. 184 million, out of which approximately Ps. 177 million belong to the Company from its equity interest in those subsidiaries. 229 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 230 Note 8 Balances and Transactions with Related Parties The following table shows the breakdown of the Company’s balances with its related parties: Company Item December 31, 2014 December 31, 2013 Subsidiaries SHOSA CLC AGEA Other Receivables Debt Dividends Receivable Other Receivables Trade Payables and Other ARTEAR Other Receivables IESA Radio Mitre GCGC Trade Payables and Other Trade Payables and Other Other Receivables Other Receivables Trade Payables and Other GC Services Other Receivables Indirectly controlled Cablevisión PRIMA AGR UNIR Impripost Ferias y Trade Payables and Other Trade Payables and Other Other Receivables Trade Payables and Other Other Receivables Other Receivables Exposiciones S.A. Auto Sports Other Receivables Other Receivables TRISA CIMECO Cúspide Trade Payables and Other Other Receivables Trade Payables and Other 2,432 (231,387) 11,311 83,813,483 (372,005) 181,835 (201,838) (29,975) 11,587,534 428,440 (6,570) 3,338 (3,379) (487,516) 17,424,000 (1,683) 1,158 1,087,874 128 - (664,433) 11,651 - - (691,884) 11,311 54,372,094 (44,167) 2,698,374 (193,158) (29,975) 3,903,756 428,440 (27,622) - (33,758) (498,681) 4,356,000 (2,425) 1,158 835,875 128 23,291 (205,238) 290 (2,373) 230 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 231 The following table details the transactions carried out by the Company with related parties for the years ended December 31, 2014 and 2013: Company Item December 31, 2014 December 31, 2013 Subsidiaries AGEA ARTEAR Vistone CLC SHOSA CVB Radio Mitre GCGC Management fees Advertising Management fees Interest Expense Interest Expense Interest Expense Interest Income Interest Expense Management fees Interest Income Services Interest Income Indirectly controlled Cablevisión Management fees PRIMA AGR Impripost Auto Sports Cúspide Services Services Management fees Services Management fees Management fees Other Expenses The fees paid to the Board of Directors and the Upper Management of the Company for the years ended December 31, 2014 and 2013 amounted to approximately Ps. 55 and Ps. 50 million, respectively. 24,000,000 (273,485) 33,600,000 - - - 7,134 - 960,000 1,292,543 (8,307,999) - 40,800,000 (90,160) (561,051) 14,400,000 (10,571) 2,400,000 - - 36,000,000 (13,438) 25,200,000 (1,468,675) (217,865) (2,099,630) - (380,314) 240,000 535,801 (6,643,439) 343,562 31,200,000 (64,184) (387,723) 10,800,000 (5,025) 1,800,000 253,573 (1,961) 231 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 232 Note 9 Terms and Interest Rates of Investments, Receivables and Liabilities December 31, 2014 Other Investments Without any established term (1) Due Within three months (4) Receivables Without any established term (2) Due Within three months (5) Liabilities (2) (3) Without any established term Due Within three months More than three months and up to six months Debts (2) Without any established term (1) Bearing interest at floating rate. (2) Non-interest bearing. (3) Do not include equity interests in the amount of Ps. 119.9 million (see Note 4.3). (4) Bearing interest at fixed rate. (5) Includes Ps. 8 million which bears interest at a fixed rate, the remaining balance does not bear any interest. 29,220,841 31,382,473 60,603,314 106,684,537 13,297,834 119,982,371 2,763,747 33,706,984 25,735,349 62,206,080 231,387 231,387 232 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 233 Note 10 Provisions and Other Contingencies 10.1 Regulatory Framework a. SCI Resolution No. 50/10 approved certain rules for the sale of pay television services. These rules provide that cable television operators must apply a formula to estimate their monthly subscription prices. The price arising from the application of the formula was to be informed to the Office of Business Loyalty (Dirección de Lealtad Comercial) between March 8 and March 22, 2010. Cable television operators must adjust such amount semi-annually and inform the result of such adjustment to said Office. Even though as of the date of these financial statements the subsidiary Cablevisión cannot assure the actual impact of the application of this formula, given the vagueness of the variables provided by the Resolution to calculate the monthly subscription prices, Cablevisión believes that Resolution No. 50/10 is arbitrary and bluntly disregards its freedom to contract, which is part of the right to freedom of industry and trade. Therefore, it has filed the pertinent administrative claims and has brought the necessary legal actions requesting the suspension of the Resolution’s effects and ultimately requesting its nullification. Even though Cablevisión, like other companies in the industry, has strong constitutional arguments to support its position, it cannot be assured that the final outcome of this issue will be favorable. Therefore, Cablevisión and/or some of its subsidiaries may be forced to modify the price of their pay television subscription, a situation that could significantly affect the revenues of their core business. This creates a general framework of uncertainty over the businesses of Cablevisión and/or some of its subsidiaries that could significantly affect the recoverability of its relevant assets and Grupo Clarín S.A.’s assets related to its investment in Cablevisión. Notwithstanding the foregoing, as of the date of these financial statements, in accordance with the decision rendered on August 1, 2011 in re "LA CAPITAL CABLE S.A. v/ Ministry of Economy-Secretary of Domestic Trade", the Federal Court of Appeals of the City of Mar del Plata has ordered the SCI to suspend the application of Resolution No. 50/10 with respect to all cable television licensees represented by the Argentine Cable Television Association ("ATVC", for its Spanish acronym). Upon being served on the SCI and the Ministry of Economy on September 12, 2011, such decision became fully effective and may not be disregarded by the SCI. On June 1, 2010, the SCI imposed a Ps. 5 million fine on Cablevisión alleging that it had failed to comply with the information regime set forth by Resolution No. 50/10, and invoking the Antitrust Law to impose such penalty. The fine was appealed and submitted to the National Court of Appeals on Federal Administrative Matters, Chamber No. 5, which decided to reduce the fine to Ps. 300,000. Cablevisión appealed this decision by filing an extraordinary appeal with the Supreme Court of Argentina. On March 10, 2011 SCI Resolution No. 36/11 was published in the Official Gazette. This Resolution falls within the framework of SCI Resolution No. 50/10. Resolution No. 36/11 sets forth the parameters to be applied to the services rendered by Cablevisión to its subscribers from January through April 2011. These parameters are as follows: 1) the monthly basic subscription price shall be Ps. 109 for that period; 2) the price of other services rendered by Cablevisión should remain unchanged as of the date of publication of the resolution; and 3) the promotional benefits, existing rebates and/or discounts already granted as of that same date shall be maintained. The resolution also provides that Cablevisión shall reimburse users for any amount collected above the price set for that period. Cablevisión believes that Resolution No. 36/10 is illegal and arbitrary, since it is grounded on Resolution No. 50/2010, which is absolutely null and void. Since the application of Resolution No. 50/10 has been suspended, the application of Resolution No. 36/2011, which falls within the framework of the former, is also suspended. The claim filed by Cablevisión seeking the nullification of Resolution No. 50/2010 is currently pending before the Federal Administrative Court of First Instance No. 7 of the City of Buenos Aires. 233 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 234 Subsequently, the SCI issued Resolutions Nos. 65/11, 92/11, 123/11, 141/11, 10/11, 25/12, 97/12, 161/12, 29/13, 61/13, 104/13, 1/14, 43/14 and 93/14 pursuant to which the SCI extended the effectiveness of Resolution No. 36/11 up to and including September 2014, and adjusted the cable television subscription price to Ps. 152. Cablevisión believes, however, that given the terms under which the Federal Court of the City of the City of Mar del Plata granted the preliminary injunction, that is, ordering the SCI to suspend the application of Resolution No. 50/97 with respect to all cable television licensees represented by ATVC (among them, Cablevisión and its subsidiaries), and also given the fact that Resolutions No. 36/11, 65/11, 92/11, 123/11, 141/11, 10/11, 25/12, 97/12, 161/12, 29/13, 61/13, 104/13, 1/14 , 43/14 and 93/14 merely extend the effectiveness of Resolution No. 50/10, Cablevisión continues to be protected by said preliminary injunction, and, therefore, the ordinary course of its business will not be affected. On January 13, 2012, the Secretariat of Domestic Trade issued Resolution No. 2/2012 granting Cablevisión 24 hours to resume service to those subscribers who had duly paid their subscription fee in the amount established by the National Government. In its sixth section, the Resolution provides that if the company does not comply with its obligations thereunder, penalties may be imposed as provided by Law 20,680. On February 10, 2012, Cablevisión received a fine of Ps. 1 million for alleged non-compliance with such Resolution. Such fine has been appealed but no decision has been rendered on the matter yet. On April 23, 2013, Cablevisión was served notice of a decision rendered in re “Ombudsman of Buenos Aires v. Cablevisión S.A. on Complaint for the protection of constitutional rights Law 16,986 (Motion for Preliminary Injunction)” pending before Federal Court No. 2, Civil Clerk’s Office No. 4 of the City of La Plata in connection with the price of cable television subscriptions, whereby the court imposed a cumulative daily fine of Ps. 100,000 per day on Cablevisión. Cablevisión appealed the fine on the grounds that Resolution No. 50/10 issued by Mr. Moreno, as well as its extensions and/or amendments were suspended, as mentioned above, by an injunction with respect to Cablevisión and its branches and subsidiaries prior to the imposition of the fine; pursuant to the collective injunction issued by the Federal Court of the City of Mar del Plata on August 1, 2011 in re “La Capital Cable and Others v. National Government and Others on Preliminary Injunction”. That injunction suspended the application of all the criteria set by the Secretary of Domestic Trade under Mr. Guillermo Moreno. The Federal Court of Appeals of the City of La Plata reduced the fine to Ps. 10,000 per day. Cablevisión filed an appeal against that decision in due time and form against that decision. On October 16, 2013, the Court of Appeals dismissed the appeal filed by Cablevisión. As of the date of these financial statements, Cablevisión had settled the fine in the amount of Ps. 1,260,000 and compliance was recorded in the file. On June 11, 2013, Cablevisión was served notice of a resolution rendered in the abovementioned case; whereby the court ordered the appointment of an expert overseer (perito interventor) specialized in economic sciences to: (i) verify whether or not the invoices corresponding to the basic cable television subscription issued by the Company to subscribers domiciled in the Province of Buenos Aires, are actually prepared at the headquarters located at Gral. Hornos 690, and/or at the Company’s branch offices, precisely detailing that process, (ii) identify the individuals responsible for that area, (iii) determine whether or not the administrative actions tending towards the effective compliance with the injunction issued on that case are underway, and (iv) identify the senior staff of the Company that must order the invoice issuance area to prepare the invoices as decided under that injunction. The Company appealed the appointment of said expert on the same grounds stated above. This appeal is also pending before the Federal Court of Appeals of the City of La Plata. For the purposes of enforcing the injunction, the court issued letters rogatory to the competent judge of the City of Buenos Aires. Upon the initiation of that proceeding, both the National Court on Federal Administrative Matters and the National Court on Federal Civil and Commercial Matters declined 234 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 235 jurisdiction to enforce the injunction ordered by the Federal Judge of La Plata. Cablevisión has appealed the decision in connection with the lack of jurisdiction in due time and form. Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters confirmed the appealed decision. Accordingly, Cablevisión will file an extraordinary appeal in due time and form to have the case decided by the Supreme Court of Argentina. It should be noted that, in light of the corporate reorganization of Cablevisión, both parties requested the suspension of the procedural periods for 180 days. The judge granted such request. Therefore, the procedural terms are suspended until December 11, 2014. Given the decision rendered by the Supreme Court of Argentina in re “Municipality of Berazategui v. Cablevisión” mentioned below, the procedural periods are still suspended until the Federal Court of Mar del Plata renders a decision thereon. After the Federal Court of the City of Mar del Plata issued its injunction, several Municipal Offices of Consumer Information (“OMIC”, for its Spanish acronym) and several individuals filed claims requesting that Cablevisión comply with Resolution No. 50/10 and the subsequent resolutions that extended its effectiveness. In some cases, preliminary injunctions were granted. In every case, Cablevisión appealed such preliminary injunctions alleging that Resolution No. 50/10, as amended, and/or the subsequent resolutions that extended its effectiveness, had been suspended with respect to Cablevisión, its branches and subsidiaries prior to the issuance of such preliminary injunctions. On September 23, 2014, the Supreme Court of Argentina rendered a decision in re "Application for judicial review brought by the defendant in the case Municipality of Berazategui v. Cablevisión S.A. on claim for the protection of constitutional rights (acción de amparo)" and ordered that the cases related to these resolutions continue under the jurisdiction of the Federal Court of Mar del Plata that had issued the decision on the collective action in favor of ATVC. Decisions made on the basis of these parent company only financial statements should consider the eventual impact that the above-mentioned resolutions might have on Cablevisión and its subsidiaries, and the Company’s parent company only financial statements should be read in light of such uncertainty. b. On August 19, 2010 the Media Secretariat issued Resolution No. 100/2010, whereby it revoked the license that had been granted to Fibertel. Cablevisión believes that this resolution is an absolutely null and void administrative act. Its language contradicts express provisions of the National Constitution, of Law No. 19,550 (Argentine Business Associations Law), Decrees Nos. 1,185/90 and 764/00 and Law No. 19,549 of Administrative Procedures, among others. The Resolution disregards the several filings made by Cablevisión with the Media Secretariat requesting such agency to issue an administrative act evidencing that Cablevisión, pursuant to section 82 of the Argentine Business Associations Law, is the successor of Fibertel and, therefore, the holder of the exclusive telecommunication service license and of the registrations that had been previously granted to Fibertel. More than eight years after that request, in spite of the existence of a draft of a favorable decision in the case file, with a completely arbitrary attitude that contradicts other precedents of the same agency and without prior notice that would have allowed Cablevisión to exercise its defense right, the SECOM ordered that the license be revoked and that the users migrate within 90 days of the resolution’s notification. On August 26, 2010 Cablevisión filed an appeal requesting the reversal of the resolutions, and if such appeal is rejected, a subsidiary appeal against that Resolution before the highest administrative authority. The appeal was dismissed pursuant to SECOM Resolution No. 132/2010 dated October 7, 2010. However, since Cablevisión had filed a subsidiary appeal to have the case heard by the highest administrative authority, the file was submitted to the Ministry of Federal Planning, Public Investment and Utilities. As of the date of these financial statements, this appeal is pending resolution. On February 24, 2011, Chamber No. 3 of the Federal Court of Appeals on Civil and Commercial Matters of the City of Buenos Aires, in re “ANTITRUST ASSOCIATION V. NATIONAL GOVERNMENT MEDIA SECRETARIAT ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS” confirmed the decision rendered in 235 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 236 the first instance, stating that the National Government, Media Secretariat, shall refrain from disrupting or limiting in any way the Internet access services offered by Cablevisión. It also partially amended the above decision by broadening its effects, ordering the National Government to refrain from enforcing Resolution No. 100/10, thus allowing new customers to subscribe to the Internet access services offered by Cablevisión. On December 16, 2011, Federal Civil and Commercial Court No. 3, Clerk’s Office No. 5 issued a related injunction in re “CABLEVISION S.A. v. NATIONAL GOVERNMENT ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS”, ordering the suspension of the effects of SECOM Resolution No. 100/10 and also guaranteeing new subscribers the possibility to subscribe to the Internet Access service offered by Cablevisión. On December 20, 2011, at the request of Cablevisión, a new preliminary injunction was issued in re “CABLEVISION S.A. v. National Government – Argentine Secretariat of Communications on COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS”. On the basis of the above-mentioned precedent, and on the existing connection between the subject matters of both cases, as alleged by Cablevisión, the injunction ordered the suspension of the effects of SECOM Resolution No. 100/10. The National Government filed an appeal with Chamber No. 3 of the National Court of Appeals on Federal Civil and Commercial Matters. Subsequently, on October 23, 2014, the preliminary injunction was ratified by the National Court of Appeals. Due to the imminent possibility that the application of Law No. 26,522 will affect the assets used to provide Internet access services, within the framework of this same file Cablevisión requested the extension of the scope of the effective injunction, which was granted on December 6, 2012. Such extension entailed notifying AFSCA of the injunction that prevents it from affecting in any way the Internet access services offered by Cablevisión. That decision was subsequently revoked by Chamber No. 3 of the National Court of Appeals on Federal Civil and Commercial Matters. Based on the decisions rendered by Chamber No. 3 on the above-mentioned preliminary injunctions, Cablevisión is authorized to continue to render the telecommunication services granted to Fibertel. Cablevisión will resort to all available administrative and judicial remedies in order to have SECOM Resolution No. 100/2010 declared null and void. Even though Cablevisión has strong grounds that support its position, it cannot be assured that the final outcome of this issue will be favorable. On September 10, 2010, the National Administration of Domestic Trade notified Cablevisión that a Ps. 5 million fine had been imposed for promoting the Fibertel service without being the holder of the license (Section 7 of Law No. 24,240), for the impossibility of honoring the promotion offered to undetermined potential consumers (Section 7 of Law No. 24,240), for providing wrong information to the customers (Section 4 of Law No. 24,240), and for the impossibility of honoring promotions because Cablevisión was not the holder of the Fibertel license (Section 19 of Law No. 24,240). Cablevisión appealed such decision in due course, since it believes it has sufficient arguments in its favor. The file was assigned No. 1,276 and is pending before Chamber No. 2 of the Court of Appeals on Administrative Matters. On April 17, 2012 the appeal was partially granted, reducing the fine to Ps. 380,000. Notwithstanding the foregoing, Cablevisión filed an appeal with the Supreme Court of Argentina in due time and form against such decision. On July 12, 2012, Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters decided to dismiss the appeals filed by both parties. Cablevisión filed an appeal against the above- mentioned dismissal since it believes it has sufficient grounds to have the fine revoked. However, Cablevisión cannot assure that the outcome of the appeal will be favorable. Since the appeal does not have staying effects, on October 18, 2012 the National Administration of Domestic Trade ordered Cablevisión to pay within ten (10) business days the fine reduced by Chamber No. 2. On October 29, 2012 Cablevisión settled the fine in the amount of Ps. 380,000 and compliance was recorded in the file. 236 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 237 c. Pursuant to the Antitrust Law and to Broadcasting Law No. 22,285, the transactions carried out on September 26, 2006 that resulted in an increase in the indirect interest the Company held in Cablevisión to 60%, Cablevisión’s acquisition of 98.5% of Multicanal and 100% of Holding Teledigital, and Multicanal’s acquisition of PRIMA (from PRIMA Internacional (now CMD)), required the authorization of the CNDC (validated by the SCI), and the COMFER. On October 4, 2006, the Company, Vistone, Fintech, VLG and Cablevisión, as purchasers, and AMI CV Holdings LLC, AMI Cable Holdings Ltd. and HMTF-LA Teledigital Cable Partners LP, as sellers, filed for the approval of the acquisition. After several requests for information, the SCI issued Resolution No. 257/07, with a prior opinion of the CNDC in favor of the approval of the above-mentioned transactions and after consulting the COMFER and the SECOM, which did not raise any objections. The Company was served notice in this respect on December 7, 2007. Such Resolution was appealed by five entities. As of the date of these financial statements, the CNDC has dismissed the five appeals filed against the above- mentioned resolution. Four of the entities filed direct appeals before the judicial branch. Three of those appeals were dismissed and one is still pending resolution. Cablevisión believes that if the CNDC acts as it did in the case of the three dismissed direct appeals, the fourth appeal is unlikely to be admitted. On June 11, 2008, Cablevisión was served with a decision of the National Court of Appeals on Federal Civil and Commercial Matters revoking a decision rendered by the CNDC on September 13, 2007, whereby such agency had dismissed a claim filed by Gigacable S.A. prior to the December 7, 2007 decision referred to above. The Court of Appeals revoked CNDC’s decision only with respect to matters relating to the conduct of Cablevisión and Multicanal prior to CNDC’s authorization of the transactions on December 7, 2007, and ordered an investigation to determine whether a fine should be imposed on Cablevisión and Multicanal due to such conduct. As of the date of these financial statements, Cablevisión has filed its response, which is pending analysis by such agency. d. On December 15, 2008, the shareholders of Cablevisión approved the merger of Multicanal, Delta Cable S.A., Holding Teledigital, Teledigital, Televisora La Plata Sociedad Anónima, Pampa TV S.A., Construred S.A. and Cablepost S.A. into Cablevisión, whereby, effective as of October 1, 2008, Cablevisión, as surviving company, became the universal successor to all of the assets, rights and obligations of the merged companies. The merger commitment was executed on February 12, 2009 and was filed with the CNV pursuant to applicable regulations that require administrative approval. As of the date of these financial statements, such merger is pending administrative approval by the CNV and registration with the IGJ. On September 3, 2009, the COMFER issued Resolution No. 577/09 whereby it withheld approval of Cablevisión’s merger with Multicanal S.A. On September 8, 2009, Multicanal was served with CNDC Resolution No. 106/09, dated September 4, 2009, whereby the CNDC ordered an audit to articulate and harmonize the several aspects of Resolution No. 577/09 issued by the COMFER with Resolution No. 257/07 issued by the Secretariat of Domestic Trade. Resolution No. 106/09 also sets forth that the notifying companies shall not, from the enactment thereof and until the end of the audit and / or resolution of the CNDC, be able to remove or replace physical or legal assets. On September 17, 2009 Judge Dr. Esteban Furnari of the National Court on Federal Administrative Matters No. 2, in re “Multicanal and Other v. Conadeco- Decree 527/05 and other on Proceeding leading to a declaratory judgment”, ordered the suspension of the effects of COMFER Resolution No. 577/09, of CNDC Resolution No. 106/09, and any other act resulting therefrom, until a final decision was rendered in the case. On October 23, 2009, the court decision that had suspended the effects of COMFER Resolution No. 577/09 and CNDC Resolution No. 106/09 was revoked by Chamber No. 3 of the National Court of Appeals on Federal Administrative Matters, in re “Multicanal and Other v. Conadeco- Decree 527/05 and other on 237 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 238 Proceeding leading to a declaratory judgment”. Therefore, the calculation of the suspended terms was automatically resumed. On that basis, on December 1, 2009, Cablevisión ratified the filing it had made with the COMFER at the time of the merger, and specified the licenses to which it had decided to maintain title. On December 16, 2009, the Chamber No. 3 of the National Court of Appeals on Federal Administrative Matters, in re "Multicanal and other v. CONADECO Decree 527/05 and other on Proceeding leading to a declaratory judgment" File No. 14,024/08, granted the extraordinary appeal filed by Multicanal and Grupo Clarín against the decision rendered by that same court on October 23, 2009. With the granting of that appeal, Cablevisión’s preliminary injunction regained full force and effect. Accordingly, on January 8, 2010 Cablevisión notified such circumstance to the COMFER. Subsequently, on March 9, 2011, the Supreme Court of Argentina in re “MULTICANAL and Other v./ CONADECO - Decree 527/05 and other on/Proceeding leading to a declaratory judgment”, granted the appeal by right and the extraordinary appeal filed by the National Government and revoked the decision rendered by Chamber No. 3 of the National Court of Appeals on Federal Administrative Matters, which had confirmed the preliminary injunction requested by Cablevisión in the first instance. Notwithstanding the foregoing, Cablevisión believes that this matter does not have a material impact on the merits of the case. Notwithstanding the required filings made by Cablevisión and its shareholders to prove that they were complying with the commitment agreed with the CNDC on December 7, 2007 (date on which the SCI granted authorization), on September 23, 2009, the SCI issued Resolution No. 641, whereby it ordered the CNDC to verify compliance with the parties’ proposed commitment by visiting the parties’ premises, requesting reports, reviewing documents and information and carrying out hearings, among other things. On December 11, 2009, Cablevisión notified the CNDC of the completion and corresponding verification of the fulfillment of the voluntary undertakings made by Cablevisión at the time of the enactment of SCI Resolution No. 257/07. On December 15, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions” (case 10,506/09), partially acknowledging the preliminary injunction requested by Grupo Clarín, and instructing the CNDC and the SCI to notify Grupo Clarín whenever their own verification of Cablevisión’s fulfillment of its undertakings had been concluded, regardless of the result. Should such agencies have any observations, they should notify Grupo Clarín within a term of 10 days. On the same date, the CNDC issued Resolution No. 1,011/09 whereby it deemed Cablevisión’s voluntary undertakings unfulfilled and declared the rescission of the authorization granted under Resolution No. 257/07. On December 17, 2009, the National Court of Appeals on Federal Commercial-Criminal Matters, Chamber A, decided to suspend the term to appeal Resolution No. 1,011/09 until the main case was transferred back to the CNDC, considering it had been in such court since December 16, 2009. On December 17, 2009, the CNDC notified Cablevisión of the initiation of the motion for execution of Resolution No. 1,011/09. On December 18, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued an injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions”, which suspended the effects of Resolution No. 1,011/09 until the notice set forth in the injunction of December 15, 2009 was served. Accordingly, the CNDC served notice to Cablevisión by means of Resolution No. 1,101/09. On December 30, 2009, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. Secretariat of Domestic Trade and other on preliminary injunctions”, partially acknowledging Grupo Clarín’s request and suspending the term for Grupo Clarín to respond to Resolution No. 1,101/09 until Grupo Clarín is granted access to the administrative proceedings related to the charges brought by the CNDC in its Opinion No. 770/09 (on which Resolution No. 1,011/09 was based). 238 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 239 On February 19, 2010, Cablevisión requested the nullification of the notice, and as a default argument, submitted the response requested under Resolution No. 1,101/09. On February 26, 2010, the National Court of Appeals on Federal Commercial-Criminal Matters approved the recusation filed by Cablevisión and excluded the Secretary of Domestic Trade from the proceedings. On March 3, 2010, the Argentine Ministry of Economy and Public Finance issued Resolution No. 113 (subscribed by the Minister of Economy, Dr Amado Boudou) rejecting the request for the nullification of Resolution No. 1,011/09, the requests for abstention and excusation of certain officials, and all the evidence produced in connection with such request for nullification. The voluntary undertakings made by Cablevisión under Resolution No. 257/07 were deemed unfulfilled, thus declaring the rescission of the authorization granted under such resolution. The parties involved were ordered to take all necessary actions to comply with such rescission within a term of nine months, and to inform the CNDC about the progress made in that respect on a monthly basis. Such resolution was appealed in due time and form. The appeal was granted without staying the execution of judgment. The appeal is currently pending before Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters in re “AMI CABLE HOLDING and other on/ Appeal of the National Antitrust Commission Resolution” (File No. 2,054/2010). Chamber No. 1 has to render a decision on various excusations and recusations of the judges of Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters. Once a decision has been rendered in that regard, the Court of Appeals will have to render a decision on the appeal. On March 3, 2010, the Company brought a claim seeking to nullify COMFER Resolution No. 577/09. Upon being served with this claim, the COMFER filed an exception, which was responded by Cablevisión. On September 4, 2012 the Judge decided to dismiss the exception filed by the COMFER, which shall bear the legal costs incurred. On December 13, 2012 the draft notice of such decision was submitted to the Court, which then issued the official notice on December 26, 2012. Together with the draft notice, a request was submitted to set the preliminary hearing (before the discovery proceedings). Such dismissal was appealed by the COMFER and ratified by the Court of Appeals. Subsequently, the judge ordered discovery proceedings. As of the date of these financial statements, the proceeding was at the discovery stage. The COMFER reported a new fact (AFSCA Resolution No. 193/2014). The new fact report was responded by Cablevisión and admitted by the court. In its decision, the Court held that the parties have different criteria about the interpretation of such resolution. On April 20, 2010, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters granted the appeal filed by Grupo Clarín S.A. in re “Grupo Clarín on delay in the appeal of the proceedings”, and decided that the appeal granted by the CNDC to Grupo Clarín S.A. against Resolution No. 113/10 had the effect of staying such resolution. The National Government filed an appeal asking that the Court of Appeals revoke its own decision with respect to the effect granted to the April 20 decision, and that it decline its jurisdiction. It also filed an extraordinary appeal. Both appeals were dismissed. Chamber No. 2 requested the administrative file and the Court’s decision is pending. Cablevisión considers that it has strong grounds to have the effects of the above Resolution suspended and therefore has brought the relevant legal actions. However, it cannot assure that the outcome will be favorable. Decisions made on the basis of these financial statements should consider the eventual impact that the above-mentioned resolutions might have on Cablevisión and its subsidiaries, and these financial statements should be read in light of such uncertainty. e. Under Proceeding File No. 21,788/08 dated November 17, 2008, Cablevisión informed the COMFER about the corporate business reorganization process effective as of October 1, 2008. In that same act, Cablevisión informed the COMFER about: i) all the licenses to which it became universal successor under the corporate business reorganization process; ii) the exercise of an option for one of the licenses in each of the locations where it held multiple licenses, and iii) the relinquishment of original licenses and extensions so as to eliminate the multiple licenses accumulated in 239 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 240 each of the locations where it held multiple licenses. As a result of such corporate business reorganization process, Cablevisión became the universal successor of 158 licenses to exploit Supplementary Services in several locations (pursuant to section 44, subsection b) of Law 22,285. To avoid having multiple licenses, Cablevisión informed the COMFER about its irrevocable intention to relinquish a total of 78 licenses (including original licenses and extensions) so as to eliminate all the supplementary service licenses that exceeded the limit set for supplementary services in each location (which was one license per designated area). Notwithstanding the foregoing, through Resolution No. 577/COMFER/09, the COMFER illegitimately decided to withhold approval of the merger requested by Cablevisión, requesting Cablevisión to submit a divestiture plan on the grounds that the license relinquishments spontaneously communicated by that company were not sufficient. (See Note 10.1.d). f. On May 23, 2011, Supercanal S.A. filed a claim for the protection of constitutional rights (acción de amparo) before the Federal Court of Mendoza against Cablevisión, Grupo Clarín and other co-defendants, requesting that they refrain from exercising alleged anti-competitive practices and that the assets, liabilities and businesses that used to belong to Multicanal and that were subsequently merged into Cablevisión (see Note 10.1.d.) be separated from the other assets, liabilities and businesses of Cablevisión and transferred to third parties. Together with the claim for the protection of constitutional rights, Supercanal S.A. requested a preliminary injunction (for the same purposes); which was granted on December 16, 2011. The injunction ordered the separation of the assets, liabilities and businesses that used to belong to Multicanal and that were subsequently merged into Cablevisión within a term of 60 days. The court also appointed a supervisor (interventor) and co-administrator for a term of twelve months, who shall enforce the injunction, order the changes to such company’s management required for the effective enforcement of the duties to be fulfilled by the Board of Directors, and also report on a monthly basis to the court about his/her performance. Such court- appointed supervisor (interventor) and co-administrator shall have the obligation to perform the necessary functions aimed at fulfilling the actions ordered pursuant to the injunction. Cablevisión filed an appeal against such injunction and presented the grounds for its defense in due time and form. Cablevisión also requested the replacement of such injunction with another less burdensome one that could largely cover the risks alleged by Supercanal in its claim. On April 26, 2012, the Federal Court of Appeals of Mendoza, Chamber A, dismissed the appeal filed by Cablevisión against the decision of December 16, 2011, but extended the term to divest the assets, liabilities and businesses of Multicanal that had been merged into Cablevisión to 120 days. The court also dismissed the request to replace the injunction. Cablevisión believes it has strong grounds to defend its position. Therefore, it has already informed the Court that it will file an appeal with the Supreme Court of Argentina against such decisions. Notwithstanding the foregoing, Cablevisión cannot assure the outcome of this appeal. On August 14, 2012, Cablevisión was served notice of a decision rendered by Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters of the City of Buenos Aires (“the Court of Appeals”) on August 13, 2012; whereby that court declared the existence of a connection between the case brought by Supercanal S.A. in the Province of Mendoza and the appeal of MECON Resolution No. 113/10 (“Ami Cable Holding LTD and other on/ Appeal of the National Antitrust Commission Resolution). The Court of Appeals stated that the hearing of the case in the Province of Mendoza gives rise to an atypical jurisdictional issue that affects the correct rendering of justice in the case and the powers of said Court of Appeals. The Court of Appeals therefore ordered Federal Court No. 2 of Mendoza to send the file so that the case could continue under the jurisdiction of the Federal Courts on Civil and Commercial Matters of the City of Buenos Aires. Federal Court No. 2 of Mendoza and the Federal Court of Appeals of Mendoza were served notice of said order on the same date and both of them rejected it, giving rise to a jurisdictional conflict between Chamber No. 2 of the Court of Appeals and Federal Court No. 2 of Mendoza. 240 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 241 Pursuant to Section 24, subsection 7 of Decree/Law No. 1285/58, if a jurisdictional conflict arises between a federal judge of a given jurisdiction and a Federal Court of Appeals of a different jurisdiction, said conflict must be resolved by the Argentine Supreme Court. After having been served notice of the decision of Chamber No. 2 of the Court of Appeals, on August 17, 2012, Judge Walter Bento of Federal Court Nº 2 of Mendoza issued an order to notify Cablevisión of an extension of the scope of the injunction issued in re “Supercanal S.A. v. Cablevisión S.A. and other on Claim for the protection of constitutional rights (acción de amparo)”. Under this injunction, the judge ordered the removal of the Board of Directors of Cablevisión and its replacement with a court- appointed administrator (interventor) whose role was to fulfill court orders. However, in response to the claim brought by Cablevisión on August 21, 2012 with the Argentine Supreme Court in connection with the abovementioned jurisdictional conflict, the Supreme Court ordered the immediate suspension of the proceedings until a decision is rendered on the jurisdictional conflict. Notwithstanding this, Cablevisión and its legal advisors believe that the order issued on August 17, 2012 is irregular and that it may not be deemed a valid notice, because it should have been issued within the framework of the proceedings pending with the Federal Court on Civil and Commercial Matters of the City of Buenos Aires, rather than being served at a domicile established in the city of Mendoza. All these proceedings are suspended and were sent to the Argentine Supreme Court for it to render a decision on the jurisdictional conflict. On February 25, 2014, the Supreme Court of Argentina revoked all the decisions rendered by Judge Walter Bento of Federal Court No. 2 of Mendoza relating to the claim brought by Supercanal S.A. against Cablevisión for anti-competitive practices and in respect of which the judge had ordered, among other things, the appointment of a court-appointed supervisor (interventor) and co-administrator in that company and the separation of that company’s assets. g. On October 21, 2010, the National Administration of Domestic Trade served notice to Cablevisión of (i) a fine of Ps. 5 million for failing to comply with the duty to inform (Section 4 of Law 24,240) concerning one of its promotions and (ii) a fine of Ps. 500,000 for infringing Section 2, subsection c) of Decree 1153/95 of the regulations to Section 10 of Law 22,802. Cablevisión appealed the fine because it believed it had strong arguments in its favor. The file was assigned No. 1281 and submitted to Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters. On October 4, 2011, the Court of Appeals partially affirmed Resolution 739/10 and reduced the fine to Ps. 2.2 million, imposing 75% of the legal costs on Cablevisión. On October 13, 2011 Cablevisión filed a Federal Ordinary appeal with the Supreme Court of Argentina and on October 20, 2011 it filed a federal extraordinary appeal with that same court in the event that the ordinary appeal may be dismissed. On October 21, 2011, Chamber No. 2 of the National Court of Appeals on Federal Administrative Matters granted the ordinary appeal and the legal brief was submitted in due time and form. On August 7, 2012 the Supreme Court of Argentina decided that the Ordinary Appeal had been wrongly granted. On December 13, 2012 the Court of Appeals dismissed the appeal filed by Cablevisión, and imposed court costs on Cablevisión. On December 20, 2012 Cablevisión filed an appeal against the above-mentioned dismissal since it believed it had sufficient grounds to have the fine revoked. However, Cablevisión cannot assure that the outcome of the appeal will be favorable. On July 29, 2013 Cablevisión settled the fine in the amount of Ps. 2.2 million and its compliance was recorded in the file. h. On May 31, 2012, Cablevisión was served notice of Resolution No. 16,819 dated May 23, 2012 whereby the Argentine Securities Commission (CNV, for its Spanish acronym) ordered the initiation of summary proceedings against Cablevisión and its directors, members of the Supervisory Committee and the Head of Market Relations for an alleged failure to comply with the duty to inform. The CNV considers that Cablevisión failed to comply with its duty 241 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 242 to inform because the investor community was deprived of its right to become fully aware of the grounds of a decision rendered by the Federal Court of Mendoza and the scope of the powers granted by that court to the co-administrator appointed in re “Supercanal S.A. v. Cablevisión S.A. on protection of constitutional rights”, in addition to the fact that other self-regulated authorities were allegedly not notified of the information furnished by Cablevisión. On June 25, 2012, Cablevisión filed a response requesting that its defenses be sustained and all charges dismissed. On February 6, 2014 Cablevisión submitted the legal brief for the purpose of discussing the evidence submitted under File No. 171/2012. Now the CNV’s Board of Directors has to render its decision. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the outcome of the said summary proceedings will be favorable to Cablevisión. i. Pursuant to CNV Resolution No. 16,834 dated June 14, 2012 notified to the Company on June 27, 2012, the CNV ordered the initiation of summary proceedings against the Company and the members of its Board of Directors, Supervisory Committee and Audit Committee in office at the time of the occurrence of the events that motivated the proceedings (September 19, 2008) for alleged failure to comply with the duty to inform. Under said Resolution, the CNV argues that the Company allegedly failed to comply with the duty to disclose the filing of a claim against it entitled “Consumidores Financieros Asociación Civil para su defensa and other v. Grupo Clarín on/Ordinary”, which the CNV considers relevant. On July 25, 2012, Cablevisión filed a response petitioning that its defenses be sustained and that all charges against it be dismissed. The Company and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure the outcome of said summary proceedings. j. The Executive Branch of Uruguay issued Decree No. 73/012, published in the Official Gazette on March 16, 2012, whereby it expressly repealed Decree No. 231/011, which had revoked certain signals’ broadcast frequencies. However, the new decree ratified and repeated - virtually in identical terms - the decree that was being repealed, and added certain provisions that caused further detriment to the two affected companies with which a subsidiary of Cablevisión has contractual arrangements in place. Consequently, on March 23, 2012 the affected companies filed an appeal requesting that Decree No. 73/012 be revoked. The appeal is still pending resolution. In May 2012, the aforesaid companies brought a legal action with the Court in Administrative Litigation Matters requesting the nullification of the resolution and the suspension of its execution. This motion to suspend the execution of the challenged resolution was brought as a separate case, and progressed through the corresponding instances. The Office of the Attorney General for Administrative Litigation Matters, in its opinion No. 412/013 advised the Court on Administrative Litigation Matters to grant the motion to suspend the execution of the challenged resolution for formal reasons, but the Court dismissed the motion of suspension. Notwithstanding the foregoing, as of the date of these financial statements, the government authority has not yet enforced the decree. On September 30, 2014, the Court on Administrative Litigation Matters through its decisions No. 416/2014 and No. 446/2014 revoked for formal reasons Decrees No. 73/012 and No. 231/011, respectively. On March 9, 2015, Decree No. 82/015 was published in the Official Gazette, whereby the Executive Branch 1) repealed Decree No. 73/012; 2) 16 common stations are awarded to be held in common (the same stations) by BERSABEL S.A. and VISION SATELITAL S.A. for a term of 15 years: Two of the 16 stations are awarded on a secondary basis, which means that they may be exposed to interferences with no possibility to bring any claim in connection thereto; 3) use of existing stations must cease within 18 months of their award to mobile service operators; 4) both companies are expressly authorized to increase the number of TV signals (stations) included in their respective services making use of digitization techniques; 5) both companies shall submit before the Communication Services Regulatory Agency (“URSEC”, for its Spanish acronym), within a fixed term of 60 calendar days as from the date of publication of the Decree, a technical plan for the migration and release of stations, which plan shall be assessed and approved by such agency; 6) the Bidding Terms governing 242 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 243 the bid for frequency bands that were owned by both companies shall include an economic compensation mechanism for both companies to cover the expenses incurred in adapting their systems to the new stations awarded to them, in the amount of USD 7,000,000. k. On June 4, 2012, the Federal Court of Appeals of Rosario partially confirmed SCI Resolution No. 219/2010, whereby the Secretary of Domestic Trade found that Cablevisión and Multicanal had engaged in market sharing practices in connection with the paid-television service in the City of Santa Fe and reduced the fine imposed on each of the companies involved from Ps. 2.5 million to Ps. 2 million. However, this decision is not yet final, because Cablevisión and Multicanal and the Ministry of Economy filed appeals with the Argentine Supreme Court, which are still pending. On October 21, 2014, the Argentine Supreme Court dismissed the appeals; therefore, Resolution No. 219/10 became final. The case is currently pending with the Court of Appeals of Rosario, which shall order its referral to the SCI. The SCI, in turn, shall serve notice to the companies involved in order for them to pay the fine. l. On March 1, 2011, the SCI served notice to Multicanal and Cablevisión of Resolution No. 19/11 whereby the Secretary of Domestic Trade found that both companies had engaged in market sharing practices in connection with the paid-television service in the City of Paraná and imposed a fine of Ps. 2.5 million on each of them. Cablevisión filed an appeal in due time and form. This appeal was dismissed by the Federal Court of Appeals of Paraná. Therefore, Cablevisión filed an appeal with the Argentine Supreme Court. On November 4, 2011, the appeal of SCI Resolution No. 19/11 filed by Cablevisión with the Supreme Court was partially granted by the Federal Court of Appeals of Paraná. On August 30, 2012, the Argentine Supreme Court dismissed the appeal filed by Cablevisión; therefore, Resolution No. 19/11 became final. The case is currently pending with the Court of Appeals of Paraná, which shall order its referral to the SCI. The SCI, in turn, shall serve notice to the companies involved in order for them to pay the fine. m. Cablevisión, by itself and as successor of Multicanal’s operations after the merger, is a party to several administrative proceedings under the Antitrust Law, facing charges of anticompetitive conduct, including territorial division of markets, price discrimination, abuse of dominant position, refusal to deal and predatory pricing, as well as a proceeding filed by the Cámara de Cableoperadores Independientes (Chamber of Independent Cable Operators), challenging the transactions consummated on September 26, 2006. While Cablevisión believes that its conduct and that of Multicanal have always been within the bounds of the Argentine Antitrust Law and regulations and that their positions in each of these proceedings are reasonably grounded, it can give no assurance that any of these cases will be resolved in its favor. n. On January 22, 2010, Cablevisión was served notice of CNDC Resolution No. 8/10 issued within the framework of file No. 0021390/2010 entitled “Official Investigation of Cable Television Subscriptions (C1321)”. Pursuant to this Resolution, Cablevisión, among other companies, was ordered to refrain from conducting collusive practices and, particularly, from increasing the price of cable television subscriptions for a term of 60 days, counted as from the date compliance with all required notices is certified in the records of the case. As established by that Resolution, companies that have already increased the price of the subscriptions shall return to the price applicable in November 2009 and maintain such price for the abovementioned term. On February 2, 2010, by means of Resolution No. 13/10, the CNDC ordered Cablevisión to refund to its subscribers in the March 2012 invoices the amount of any price increase made after the date of CNDC Resolution No. 8/10. Cablevisión appealed both resolutions in due time and form and their effects were suspended by an injunction issued by Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters at the request of Cablevisión. The National Government filed an appeal with the Supreme Court against this decision, and the appeal has been dismissed. On October 4, 2011, Chamber No. 2 of the National Court of Appeals on Federal Civil and Commercial Matters granted the appeal filed against both decisions in re “Cablevisión 243 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 244 and Other on Appeal against the Decision rendered by the National Antitrust Commission” (File 1,473/2010), declaring Resolution No. 8/10 moot and nullifying Resolution No. 13/10. The National Government filed an appeal with the Supreme Court of Argentina against the decision rendered by Chamber No. 2, which was granted and is now pending before the Supreme Court of Argentina. o. On August 5, 2010, Cablevisión was served with CNC Resolution No. 2,936/2010 within the framework of Administrative Proceeding File No. 2,940/2010, pursuant to which Cablevisión and/or any other individual or entity through which the services relating to the licenses and registrations granted to FIBERTEL S.A. ("Fibertel") may be rendered shall refrain from adding new subscribers and from altering the conditions under which the services are currently rendered. To decide as it did, the Argentine Communications Commission disregarded the corporate reorganization that was completed and registered before the IGJ, whereby Fibertel merged into Cablevisión effective as of April 1, 2003. By virtue of that merger process, Cablevisión became the universal successor to all of the assets, rights and obligations of Fibertel as the merged company, among them, the Exclusive License awarded through SECOM Resolutions No. 100/96, 2375/97, 168/02 and 83/03. Therefore, Fibertel did not transfer or divest of its rights and obligations to third parties – among them, those derived from the above-mentioned Exclusive License. Fibertel continued to carry out its activities through Cablevisión as surviving company. In order to implement the above-mentioned corporate business reorganization, on March 5, 2003, the Argentine Communications Commission and the SECOM were notified of the corporate business reorganization for its acknowledgement. The technical and legal areas of the Argentine Communications Commission issued a favorable resolution with respect to the compliance with the requirements of current regulations to register Fibertel’s license under the name of Cablevisión. SECOM had a term of 60 days to decide on the corporate business reorganization. However, such agency failed to render a decision as required by the applicable regulations. Not until August 19, 2010 did SECOM issue Resolution No. 100/2010, revoking Fibertel’s license. Cablevisión believes that the Resolution is arbitrary and that it flagrantly violates due process and its defense right. Therefore, Cablevisión has appealed such resolution. No decision has been rendered on the matter yet. p. On October 28, 2010, Cablevisión was served notice of the National Administration of Domestic Trade’s resolutions imposing two fines of Ps. 5 million each, for allegedly failing to observe the typographic character requirements under applicable regulations (Resolution 906/98) when informing its subscribers of the increase in the price of their cable television subscriptions. Cablevisión appealed the fines on November 12, 2010 because it believes it has strong grounds in its favor. However, it cannot assure that the outcome will be favorable. One of the files was assigned No. 1280 and is pending before Chamber No. 1 of the Federal Administrative Court of Appeals, and the other one was assigned No. 1,278 and is pending before Chamber No. 5 of the Federal Administrative Court of Appeals. q. The litigation brought before the Civil, Commercial, Mining and Labor Court of the City of Concarán, Province of San Luis, in early 2007 in re “Grupo Radio Noticias SRL v. Cablevisión and others”, is still pending before the Federal Court in Administrative Matters No. 2. The purpose of that claim was to challenge the share transfers mentioned in Note 10.1.c. and to request the revocation of Cablevisión’s broadcasting licenses. Cablevisión has responded to such claim and believes it is very unlikely that it will be admitted. The claimant has abandoned the claim it had brought, and the claimant’s attorney must provide evidence of his attorney powers. r. The Government of the City of Mar del Plata enacted Ordinance No. 9163, governing the installation of cable television networks. Such ordinance was amended and restated by Ordinance No. 15,981 dated February 26, 2004, giving cable companies until December 31, 2007 to adapt their cable networks to the new municipal requirements. The ordinance sets forth that in those areas where street lighting has underground wiring, cable television networks are to be placed underground. In this sense, the Executive Department of the Municipality of General Pueyrredón has submitted to the 244 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 245 Municipal Council a proposed ordinance extending the term provided until December 31, 2015. Such ordinance is ready for discussion by legislators. Even though the ordinance provides for certain penalties that may be imposed, the City has not imposed such penalties to cable systems that are not in compliance with such ordinance. s. On November 27, 2012 the National Administration of Domestic Trade served Cablevisión with Resolution No. 308/2012, whereby it imposed a Ps. 5 million fine on that company alleging that it had failed to comply with Section No. 4 of the Antitrust Law (increase in the subscription price of cable television services/wrongful information provided by Customer Service, which informed by mail that SCI Resolution No. 50/10 and the supplementing resolutions are suspended on grounds of unconstitutionality, when in fact they have been suspended by an injunction). On December 11, 2012 Cablevisión appealed Resolution No. 308/2012. The administrative file No. S01:0312056/2011 was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 1 in re “Cablevisión SA v. DNCI Res. 308/12 and Other” (File 140/13). A decision has not been rendered yet. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the revocation of the fine will be resolved in its favor. t. On July 5, 2013, the National Administration of Domestic Trade served notice to Cablevisión of Resolution No. 134/2013, whereby it imposed a fine of Ps. 500,000 for breach of Section 2 of Resolution ex S.I.C. y M. No. 789/98, which regulates the Business Loyalty Law No. 22,802. Cablevisión appealed that resolution on July 16, 2013. The administrative file was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 3 in re “Cablevisión SA v. DNCI Res. 134/13 and Other” (File 36044/13). On May 20, 2014, Chamber No. 3 partially granted the appeal filed by Cablevisión and reduced the fine to Ps. 300,000 and ordered that each party shall bear its own legal costs. On June 9, 2014, Cablevisión filed an appeal with the Argentine Supreme Court. On September 18, 2014, Cablevisión was served notice of the extraordinary appeal filed by the National Government, and on October 2, 2014 that company filed a response. On October 9, 2014, the Chamber dismissed both appeals. On October 8, 2010, the National Administration of Domestic Trade served notice to Cablevisión of Resolution No. 697/2010, whereby it imposed a fine of Ps. 500,000 for breach of Section 21 of the Business Loyalty Law No. 22,802. Cablevisión appealed that resolution on October 26, 2010. The administrative file was sent by the National Administration of Domestic Trade to the National Court of Appeals on Federal Administrative Matters. It is now pending before Chamber No. 3 in re “Cablevisión SA v. DNCI Res. 697/2010 (File S01:80822/10) and Other” (File 1,277/2011). On December 29, 2011 the Court of Appeals dismissed the appeal filed by Cablevisión, and imposed court costs on Cablevisión. On February 22, 2012, Cablevisión filed an appeal with the Argentine Supreme Court. The appeal was dismissed by the Chamber on April 10, 2012. On April 26, 2012, Cablevisión filed an appeal against the above-mentioned dismissal. The Supreme Court of Argentina granted the appeal and revoked the decision against which Cablevisión had filed the appeal with legal costs to be borne by the National Administration of Domestic Trade, and ordered that the case be sent back to the court of first instance for it to render a new decision based on the precedent indicated in its ruling. u. On March 16, 2012, CNV issued Resolution No. 16,765 whereby it ordered the initiation of summary proceedings against Cablevisión, its directors and members of the Supervisory Committee for an alleged failure to comply with the duty to inform. The CNV considers that Cablevisión failed to comply with its duty to inform because the investor community was deprived of its right to become fully aware of the Decision rendered by the Supreme Court of Argentina in re "Application for judicial review brought by the National Government Ministry of Economy and Production of the case Multicanal S.A. and other v/CONADECO Decree No. 527/05” and other, and also considers that Cablevisión did not disclose certain issues related to the information required by the CNV in connection with its Class 1 and 2 Noteholders’ Extraordinary Meetings held 245 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 246 on April 23, 2010. On April 04, 2012, that company filed a response requesting that its defenses be sustained and that all charges against it be dismissed. The proceeding is now in the discovery stage. Cablevisión and its legal advisors believe that the company has strong arguments in its favor. Nevertheless, Cablevisión cannot assure that the outcome of said summary proceedings will be favorable. 10.2 Claims and Disputes with Governmental Agencies a. In connection with the decisions made at the Company’s Annual Ordinary Shareholders’ Meeting held on April 28, 2011, on September 1, 2011 the Company was served with a preliminary injunction in re “National Social Security Administration v. Grupo Clarín S.A. re ordinary proceeding” whereby the Company may not in any way dispose, in part or in whole, of the Ps. 387,028,756 currently recorded under the retained earnings account, other than to distribute dividends to the shareholders. On the same date, the Company was served with a claim brought by Argentina’s National Social Security Administration requesting the nullity of the decision made on point 7 (Appropriation of Retained Earnings) of the agenda of the Annual Ordinary Shareholders’ Meeting held on April 22, 2010. As of the date of these financial statements, the Company has duly answered the complaint and the intervening judge has ordered discovery proceedings. On November 1, 2011, the CNV issued Resolution No. 593, which provides that at shareholders’ meetings in which financial statements are considered shareholders must expressly decide to, either distribute as dividends any retained earnings that are not subject to distribution restrictions and that may be disposed of pursuant to applicable law or capitalize such retained earnings and issue shares, or appropriate them to set up reserves other than legal reserves, or a combination of the above. On July 12, 2013 the Company was served notice of Resolution No. 17,131; dated as of July 11, 2013 whereby the CNV declared that the administrative effects of the decisions adopted at the Annual Ordinary General Shareholders’ Meeting held on April 25, 2013 were irregular and ineffective, based on allegations that are absolutely false and irrelevant. According to the Company and its legal advisors, Resolution No. 17,131 is, among other things, null and void, because it lacks sufficient grounds and its enactment is a clear abuse of authority and a further step in the National Government’s attempt to intervene in the Company. On October 11, 2013 Chamber 5 of the National Court of Appeals on Federal Administrative Matters issued a preliminary injunction in re “Grupo Clarín S.A. v. CNV – Resol No. 17.131/13 (File 737/13)” File No. 29,563/2013, whereby it suspended the effects of Resolution No. 17.131/2013 dated July 11, 2013 which had rendered irregular and with no effect for administrative purposes the Company’s Annual Ordinary Shareholders’ Meeting held on April 25, 2013. As of the date of these financial statements, the preliminary injunction is still in effect. In August 2013 the Company was served with a nullification claim brought by Argentina’s National Social Security Administration relating to the Annual Ordinary Shareholders’ Meeting held on April 28, 2011 whereby it requested the nullity of all the decisions made at such meeting and, as a default argument, the nullity of the decisions made on points 2, 4 and 7 of that meeting’s agenda, as well as the nullity of the decisions made at the Extraordinary Meetings of Class A, B and A and B Shareholders. As of the date of these financial statements, the Company has filed a response in due time and form. On September 17, 2013 the Company was served with a nullification claim brought by Argentina’s National Social Security Administration relating to the Annual Ordinary Shareholders’ Meeting held on April 26, 2012 whereby it requested the nullity of all the decisions made at such meeting and, as a default argument, the nullity of the decisions made on points 8 and 4 of that meeting’s agenda, as well as the nullity of the decisions made at the Extraordinary Meetings of Class A, B and A and B Shareholders. As of the date of these financial statements, the Company has filed a response in due time and form. On March 21, 2014, the Company was served notice of a claim brought by Argentina’s National Social Security Administration in re “National Social Security Administration v. GRUPO CLARÍN S.A. on Ordinary Proceeding” File No. 74,429, pending before 246 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 247 the National Court of First Instance on Commercial Matters No. 17, Clerk’s Office No. 34. This claim seeks to nullify and challenge the corporate decisions made at the Shareholders’ Meeting held on April 25, 2013 and those made at the Board of Directors’ Meeting held on April 26, 2013. As of the date of these financial statements, the term for filing a response to the claim has been suspended. On September 16, 2014, the Company received a communication from its controlling shareholder, GC Dominio S.A., whereby that company informed that it had been summoned to court as a third party in re “National Social Security Administration v. Grupo Clarín S.A. on Ordinary Proceeding”, pending before the National Court of First Instance on Commercial Matters No. 17, Clerk’s Office No. 33. As of the date of these financial statements and as informed by GC Dominio S.A., that company has filed a response to the above-mentioned claim. b. The Argentine Federal Revenue Service (“AFIP”) served the subsidiary CIMECO with a notice challenging its income tax assessment for fiscal years 2000, 2001 and 2002. In such notice, the AFIP challenged mainly the deduction of interest and exchange differences in the tax returns filed for those years. If AFIP’s position prevails, CIMECO’s maximum contingency as of December 31, 2014 would amount to approximately Ps. 12.3 million for taxes and Ps. 33.8 million for interest. CIMECO filed a response, which was dismissed by the tax authorities. The tax authorities issued their own official assessment and imposed penalties. CIMECO appealed the tax authorities’ resolution before the National Tax Court on August 15, 2007. During the year ended December 31, 2010, CIMECO received a pro forma income tax assessment from the AFIP for fiscal periods 2003 through 2007, as a consequence of AFIP’s challenge to CIMECO’s income tax assessments for the periods 2000 through 2002 mentioned above. CIMECO filed a response before AFIP, rejecting such assessment and requesting the suspension of administrative proceedings until the Federal Tax Court renders its decision on the merits. During 2011, the AFIP served CIMECO with a notice stating the income tax charges assessed for years 2003 through 2007 and ordering the initiation of summary proceedings. The AFIP’s assessment shows a difference in its favor in the Income Tax liability for the periods indicated above for an amount in excess of the amount that had been estimated originally, as a result of the method used to calculate certain deductions. CIMECO responded to the assessment rejecting all of the adjustments and requesting that the proceedings be rendered without effect and filed, with no further actions to be taken. On April 26, 2012, the AFIP issued a new official assessment comprising the fiscal years 2003 through 2007, in which it applied the same method for the calculation as that used for the administrative settlement, claiming a total liability of Ps. 120 million. On May 21, 2012, an appeal was filed with the Federal Tax Court. CIMECO and its legal and tax advisors believe CIMECO has strong grounds to defend the criteria adopted in their tax returns and that AFIP’s challenges will not be admitted by the Federal Tax Court. Accordingly, CIMECO has not booked an allowance in connection with the effects such challenges may have. c. Since 2005, the ANA has brought several claims against the holders of broadcasting and cable TV licenses for the payment of customs duties applicable to the import of films documented between 2000 and 2005. According to the ANA, holders of TV licenses are liable to pay customs duties, VAT and income tax not only on the customs value of the physical supports, but also on the reproduction rights agreed upon in the related contracts. ARTEAR filed objections against these claims on the basis of international agreements, doctrine and case law on the subject. As a consequence of the criteria followed by ARTEAR, during the period covered by the claim, it paid other taxes that would not have been payable if ANA’s interpretation had been applied. ARTEAR had to pay in full the differences claimed by ANA in a few isolated cases because the appeals filed with the Federal Court of Appeals against the National Tax Court’s decisions did not have staying effects. In the first unfavorable decision rendered by Chamber No. 4 of the Federal Court of Appeals, which was appealed by ARTEAR, the Argentine Supreme Court 247 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 248 refrained from rendering judgment on the merits of the case. Subsequently, all other Chambers of the Federal Court of Appeals have rendered decisions against ARTEAR’s position. Therefore, as of the date of these financial statements, that company has booked an allowance to account for the estimated losses that may result from such claims. On March 25, 2013 the AFIP published General Resolution No. 3451 in the Official Gazette. Pursuant to such Resolution, AFIP established an installment plan for the payment of overdue taxes, customs duties and social security debts. With respect to customs duties, this special installment plan allows for the cancellation of fines imposed or supplementary charges brought by the Customs Administration up to and including February 28, 2013 in connection with import or export duties, as well as interest and restatements thereon, within a term of up to 120 months with a monthly rate of 1.35%. Given that all chambers of the National Tax Court and the Federal Court of Appeals have rendered judgments on the merits of the case against ARTEAR’s position and the Supreme Court of Argentina refrained from rendering judgment, the Company decided to adhere to the installment plan for a large portion of the existing claims, leaving out only those claims in which the ANA has interpreted that ARTEAR committed an infringement. On July 30, 2013, ARTEAR submitted an installment plan, within the framework of General Resolution No. 3451, for the payment of a large portion of the tax component of these claims, notwithstanding the fact that ARTEAR still considers that its interpretation of the customs law is based on reasonable legal grounds. d. On September 10, 2010, the AFIP served TRISA with a notice with objections to its income tax assessment, with respect to the application of the withholding regime set forth under the section following section 69 of the Income Tax law, for fiscal years 2004, 2005 and 2006. If AFIP’s position prevails, TRISA’s contingency would amount to approximately Ps. 28.9 million, out of which Ps. 9.3 million would correspond to taxes on dividend payments made during those years, Ps. 6.5 million to a 70% fine on the omitted tax, and Ps. 13.1 million to late-payment interest. TRISA filed a response, which was dismissed by the tax authorities. On December 20, the tax authorities issued their own official assessment and imposed penalties. TRISA appealed the tax authorities’ resolution before the National Tax Court on February 8, 2011. TRISA and its legal and tax advisors believe that TRISA has strong grounds to defend its position and that AFIP’s challenges will not be admitted by the Federal Tax Court. Accordingly, TRISA has not booked a provision in connection with the effects such challenges may have. e. On August 13, 2012, the parent company GC Dominio S.A. was served notice of a claim brought by the Argentine Superintendency of Legal Entities (IGJ) whereby that agency seeks to annul the registration with the Public Registry of Commerce of the appointment of GC Dominio S.A.’s authorities, approved at the Shareholders’ Meeting held on May 17, 2011. The claim is pending before the Federal Court of First Instance on Commercial Matters No. 25, Clerk’s Office No. 49 (“Inspección General de Justicia v. Dominio S.A. on/Ordinary”, File No. 58652). The claim brought by the IGJ seeks to annul the registration with IGJ of the appointment of GC Dominio S.A.’s authorities, approved at the Annual Ordinary General Shareholders’ Meeting of GC Dominio held on May 17, 2011. The appointment was registered with the IGJ on April 23, 2012 under No. 7147, Book No. 59 of Share Companies. According to the IGJ and as the case file is said to show, GC Dominio has allegedly failed to comply with certain regulations applicable to foreign shareholders upon registration of the appointment of authorities. Also within the framework of this claim, the Court issued an injunction in favor of the IGJ ordering that the existence of this claim be duly noted. The Court of Appeals has confirmed the decision to order that the existence of this claim be duly noted. GC Dominio S.A.’s legal advisors have strong grounds to argue that the resolution of IGJ’s claim seeking the de-registration of the appointment of authorities has serious defects and infringes the guarantees of reasonableness and due process; a principle that derives from the constitutional guarantee of defense in court, which entails the right to be heard and to produce evidence to contradict a claim. GC Dominio S.A. has appealed such injunction because it considers that the IGJ has not shown that its legal arguments are, at least, plausible. 248 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 249 f. As a result of a report on suspicious activities reported by the Argentine Federal Revenue Service (“AFIP”) concerning transactions carried out between the Company and some subsidiaries, the Financial Information Unit (“FIU”) pressed criminal charges for alleged money laundering. The action is now pending before Federal Court No. 9, under Dr. Luis Rodriguez. The FIU has pressed charges against the Company and its directors for alleged money laundering activities related to the trading of shares between the Company and some of its subsidiaries. The Company has appointed defense attorneys and has requested a copy of the file to understand the details of the charges. The FIU is acting as plaintiff in this case. One of the Company’s directors made a spontaneous appearance and filed a response and produced documentary evidence. Certain charges pressed by Representative Di Tullio were also added to the case. In addition, the Prosecutor requested that the charges be investigated and that certain evidentiary measures be taken which have not yet been fulfilled as of the date of these financial statements. On February 25, 2014, the Supreme Court of Argentina revoked all the decisions rendered by Judge Walter Bento of Federal Court No. 2 of Mendoza relating to the claim brought by Supercanal S.A. against Cablevisión for anti- competitive practices and in respect of which the judge had ordered, among other things, the appointment of a court-appointed supervisor (interventor) and co-administrator in that company and the separation of that company’s assets. It should be noted that Cablevisión has still not been served with that decision. In March 2014, the intervening prosecutor Miguel Angel Osorio broadened the request for evidence with regard to intercompany movements between Cablevisión and certain subsidiaries, all of which were regular and had been duly recorded. The Company and its legal advisors consider that there are strong arguments in the Company’s favor, and have gathered evidence that supports the lack of involvement of anyone in any such unlawful maneuvers. However, they cannot assure that the outcome of this action will be favorable. g. By means of Resolution 16,364/2010, dated and notified to AGEA as of July 15, 2010, the CNV’s Board of Directors decided to initiate summary proceedings against AGEA and certain current and past members of its board of directors and supervisory commission, for alleged infringement of the Argentine Business Associations Law, Decree No. 677/01 and Law No, 22,315. AGEA, as well as the current and past members of the board of directors and supervisory commission who are subject to the summary proceedings, duly filed their respective responses. h. The subsidiary AGEA received several inspections from the AFIP aimed at verifying compliance with the so-called competitiveness plans implemented by the National Executive Branch. After several reports issued by the AFIP and the corresponding Resolutions issued by the Ministry of Economy, such agencies allege that certain acts performed by AGEA during 2002 lead to the nullity of some of the benefits granted under said plans, including adjustments, for an estimated total amount of Ps. 57 million. In April 2013, AGEA was served with AFIP Resolution No. 03/13, whereby such agency decided to exclude AGEA from the Registry of Beneficiaries of the Competitiveness and Employment Generation Agreements under the Cultural Sector Agreement, as from March 4, 2002. The AFIP ordered the restatement of the tax returns and the remittance of the corresponding amounts. AGEA filed an appeal against such resolution. Notwithstanding the foregoing, in re “AEDBA and Other v. Ministry of Economy Resolution No. 58/10”, the Federal Court on Administrative Matters No. 6 issued an injunction ordering AFIP to refrain from initiating and/or continuing with the administrative proceeding/s and/or any act that would entail the enforcement of the amounts payable under Resolution No. 3/13, until a final decision is rendered. Notwithstanding the foregoing, AGEA cannot assure that the appeal will be resolved in its favor. i. On April 9, 2013, Cablevisión was served notice of AFIP Resolution No. 45/13 dated April 3, 2013, whereby such agency imposed penalties in a summary proceeding against that company with respect to compliance with General Resolution No. 3,260/12. Cablevisión filed an appeal, which has staying effects on the execution of those penalties. 249 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 250 j. Pursuant to Resolution No. 17,522 issued on September 18, 2014 and notified to AGEA on September 24, 2014, the Board of Directors of the CNV decided to initiate summary proceedings against AGEA, certain current and past members of its Board of Directors and supervisory commission –who occupied those positions between September 19, 2008 and the present date- and against that company’s Head of Market Relations, for an alleged failure to comply with the duty to inform that AGEA was a co-defendant in re “CONSUMIDORES FINANCIEROS ASOCIACION CIVIL PARA SU DEFENSA AND OTHER V. GRUPO CLARIN S.A. AND OTHER on EXPEDITED SUMMARY PROCEEDING” (File No. 065441/08). The summary proceeding is grounded on an alleged failure to comply with Article 5, subsection a), the first part of Article 6 and Article 8, subsection a) part V) of the Annex to Decree No. 677/01; with Articles 1, 2 and 3, subsection 9) of Chapter XXI of the REGULATIONS (T.R. 2001 as amended) –now Article 1 of Section I, Chapter I, Title XII of the REGULATIONS (T.R. 2013 as amended); with Articles 2 and 3 subsection 9) of Section II, Chapter I, Title XII of the REGULATIONS (T.R. 2013 as amended); with Article 11 subsection a.12) of Chapter XXVI of the REGULATIONS (T.R. 2001 as amended) –now Article 11 subsection 13) of Section IV, Chapter I, Title XV of the REGULATIONS (T.R. 2013 as amended); with Article 99 and 100 of Law No. 26,831; and with Articles 59 and 294 subsection 9) of Law No. 19,550. AGEA, and the current and past members of the Board of Directors and supervisory commission who are subject to the summary proceedings, duly filed their respective responses. See Note 20.b. k. On February 27, 2013, the AFIP served IESA with a notice stating the income tax and value added tax charges assessed for fiscal period 2008 and ordering the initiation of summary proceedings for alleged omitted taxes. The AFIP mainly challenged the deduction of certain expenses and fees, as well as the calculation of the corresponding tax credit. IESA filed an appeal in connection thereto, which is currently pending before the National Tax Court. The official assessment amounts to Ps. 1.4 million for income tax and Ps. 2.5 million for late-payment interest, calculated as of December 31, 2014. The official value-added tax assessment amounts to Ps. 0.8 million for tax differences and Ps. 1.6 million for late-payment interest, calculated as of December 31, 2014. On October 21, the AFIP served IESA with a notice stating the income tax and value added tax charges assessed for fiscal period 2009 and ordered the initiation of summary proceedings for alleged omitted taxes. In this case, the AFIP mainly challenged the deduction of fees, as well as the calculation of the corresponding tax credit. The official assessment for value-added tax amounts to Ps. 1.2 million for income tax and Ps. 1.9 million for late-payment interest, calculated as of December 31, 2014. The official assessment for value-added tax amounts to Ps. 0.4 million for tax differences and Ps. 0.9 million for late-payment interest, calculated as of December 31, 2014. IESA and its legal and tax advisors believe that it has strong arguments in its favor to defend the criterion adopted in its tax returns. 10.3 Other Claims and Disputes a. On December 12, 2001, Supercanal filed a claim for damages against Multicanal as a result of the enforcement of a preliminary injunction brought by Multicanal against Supercanal. Multicanal responded to such claim denying any liability. Based on legal and factual precedents of the case, Cablevisión, as successor of Multicanal’s operations, believes that the claim filed should be rejected in its entirety, and that the legal costs should be borne by the plaintiff. As of the date of these financial statements, the proceeding was at the discovery stage. The court of first instance dismissed Supercanal’s request that it be allowed to sue without paying court fees or costs. This decision has been ratified by the Federal Court of Appeals. b. On June 22, 2007 TRISA and TSC executed several documents with AFA, applicable from the 2007/2008 until the 2013/2014 soccer seasons, governing the broadcasting by TRISA of all of the National “B” soccer tournament matches and by TSC of ten of the Argentine soccer first division official tournament matches played each week. Out of those ten matches, TRISA broadcast five through TyC Sports. 250 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 251 Those agreements set the price to be paid by TRISA for these products and clearly stated its right to sell such products and, additionally, had AFA’s express consent. On August 12, 2009 AFA notified TSC of its decision to terminate unilaterally the above- mentioned agreement. TSC challenged AFA’s unilateral termination of the agreement and, in order to safeguard its rights, on June 15, 2010 it brought a legal action against AFA before a commercial court for contractual breach and damages. AFA summoned the National Government as a third party, and the National Government was incorporated to the proceedings. The National Government requested that the case be submitted to the Court on Federal Administrative Matters. The request was dismissed by the Commercial Court of Appeals, which ratified the jurisdiction of the Commercial Court. The National Government filed an appeal against that decision with the Supreme Court of Argentina. On July 27, 2011, AFA unilaterally terminated the agreement that bound AFA and TRISA until the 2013/2014 soccer season for the broadcasting of all Argentine National “B” soccer tournament matches. AFA’s decision was totally arbitrary and illegitimate, since TRISA had not breached any provision of the agreement, which does not expressly allow voluntary unilateral termination by either party. Therefore, TRISA has challenged AFA’s unilateral termination of the agreement. In light of the events and until the situation is remedied, TRISA will not be able to broadcast the five weekly matches of the first division tournament or any of the National “B” soccer tournament matches that it used to broadcast on its signal TyC Sports. The broadcasting rights for the matches of Metropolitan First "B" category are not governed by the above-mentioned agreements, but by an agreement that is in full force and effect as of the date of these financial statements. The situation described above had a significant impact on TRISA’s revenues and costs. Therefore, it had to adjust its signal to these new circumstances. In light of the circumstances described in the above paragraphs, as from August 2009, TRISA has recorded a portion of its revenues based on the progress of negotiations with each client and the new content of the signal. During the year ended December 31, 2012, TRISA completed those negotiations. As a result, no significant differences arose between the actual results and the original estimates. c. On January 31, 2012, FADRA informed Grupo Carburando’s subsidiary Mundo Show S.A. of the unilateral rescission of the agreement executed in 2006 whereby FADRA assigned to that company the rights comprising image, sound and static advertising of motor racing at the road racing events Turismo Carretera and TC Pista until December 31, 2015. Mundo Show S.A. has challenged and rejected FADRA’s unilateral rescission of the agreement. In light of the events, Mundo Show S.A. will not be able to sell or export the audiovisual and static advertising rights of the above-mentioned motor racing events. Therefore, in 2012 an allowance was set up for impairment of goodwill and other assets related to such agreement of approximately Ps. 17 million. On July 17, 2013, some of the Company’s subsidiaries executed an agreement in order to settle the legal actions brought as a consequence of the termination of TV broadcasting rights and sponsorship agreements relating to the Turismo Carretera and TC Pista road racing events, whereby FADRA undertook to pay damages for an aggregate and final amount of Ps. 16.5 million in 23 monthly and consecutive installments. In addition, it assigned all of its equity interest in TCM, which represents 20% of its capital stock and votes. The parties also settled the claims brought against FADRA in re "Mundo Show v. FADRA on pending cash collection, File No. 10041/2012", whereby FADRA paid Ps. 1.5 million in exchange for the dismissal of the legal actions. d. Pursuant to a notarial certificate issued on September 19, 2008, AGEA and the Company were served with a legal action brought by an entity representing consumers and alleged financial victims (and by six other individuals). Claimants are Multicanal noteholders who claim to be allegedly affected by Multicanal’s APE. The claim is grounded on a Consumer Defense Law that, in general terms, provides for an 251 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 252 ambiguous procedure that is very strict against the defendant. The Company, AGEA and certain directors and members of the supervisory committee and shareholders have been served with the claim. After rejecting certain preliminary defenses presented by the defendants, such as the application of statutes of limitation and the failure to comply with prior mediation procedures, the claim followed ordinary procedure and the above-mentioned persons duly filed their respective responses. e. On September 16, 2010 the Company was served with a claim brought against it by Consumidores Financieros Asociación Civil para su Defensa. The plaintiff claims a reimbursement of the difference between the value of the shares of the Company purchased at their initial public offering and the value of the shares at the time a decision is rendered in the case. The Company has duly responded to the claim and the intervening Court has deemed the claim responded. f. On April 25, 2013 Grupo Clarín S.A. held its Annual Ordinary Shareholders’ Meeting. As a result of the issues raised at this Meeting, some of the permanent directors informed the Company that they had pressed criminal charges against the representatives of the shareholder ANSES and of the CNV (Messrs. Reposo, Kicillof, Moreno, Vanoli, Fardi and Helman) for making statements and intellectual constructions which, under the appearance of being included in the new regulations of the Argentine Capital Markets Law, only sought to discredit the Board of Directors and caricature its management, creating pretexts that may lead to an intervention of the Company without judicial control pursuant to the new powers vested on the CNV by Capital Markets Law No. 26,831. On April 26, 2013, the Board of Directors decided to press charges on the same grounds. Consequently, the Company sent a letter to the CNV, in which it clearly stated that what had happened at that Meeting could not be considered in any way as an acknowledgment of the legitimacy of the powers vested on the CNV by Law No. 26,831 and/or the regulations that may be issued in the future. The letter also stated that the Company reserved its right to file the pertinent legal actions at any time to request the declaration of the evident unconstitutionality of that law. It also requested the CNV to refrain from performing any act or issuing any resolution that would lead to the execution of the plan of which they had been accused before the courts. g. On May 30, 2013, Pem S.A. was served notice of a claim in re “TELEVISORA PRIVADA DEL OESTE S.A. v. GRUPO CLARÍN S.A. AND OTHERS on ORDINARY” File No. 99078/2011, which is pending before the Federal Commercial Court No. 16 of First Instance, Clerk’s Office No. 32. The claim seeks damages resulting from certain decisions made with respect to Televisora Privada del Oeste S.A. Cablevisión and the Company, among others, are defendants in such lawsuit. Cablevisión was served with the claim and filed a response in due time and form. Notice of the claim is being served on the other co-defendants. According to the Company’s legal advisors, the chances of success of the claim are low because the damages claimed are clearly overstated, the actual damage invoked does not exist and the claim is procedurally inappropriate, both on a factual and legal basis. h. In March 2012, ARTEAR brought a summary action for the protection of constitutional rights against the National Government (Chief of the Cabinet of Ministers and Secretariat of Public Communication) and against Messrs. Juan Manuel Abal Medina and Alfredo Scoccimarro, in order to request that the National Government cease in the arbitrary and discriminatory allocation of official advertising with respect to Arte Radiotelevisivo Argentino S.A. ARTEAR requested (i) that the court order the maintenance of a balanced allocation with respect to the amount of official advertising received in previous years, and in particular prior to 2008, and with respect to the amount of official advertising allocated to other broadcasters of similar characteristics, and (ii) that the conduct of the above-mentioned officials be declared illegitimate, on account of their having abusively exercised their discretional power to manage public funds destined to official advertising, discriminating against Canal 13, which is owned by ARTEAR. On February 11, 2014, the Supreme Court of Argentina decided in re “Arte Radiotelevisivo Argentino S.A. v. National Government - 252 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 253 Chief of the Cabinet of Ministers and Media Secretariat on summary action for the protection of constitutional rights (acción de amparo) Law No. 16,980” to confirm the decision rendered in that respect by Chamber No. 4 of the National Court of Appeals on Federal Administrative Matters. This Court admitted the summary action brought by ARTEAR and ordered the National Government to provide for the drafting and submission to the first instance court of a scheme for the allocation of official advertising that included the broadcasters with characteristics analogous to those of ARTEAR. Among those broadcasters, the Court of Appeals included América TV S.A. (Canal 2), Telearte S.A. (Canal 9), Televisión Federal S.A. (Canal 11), ARTEAR (Canal 13) and SNMP S.A. and RTA S.E. (Canal 7). The allocation scheme must faithfully conform to the guidelines of proportionality and equity set forth in the ruling. The term for submitting the allocation scheme was set at thirty days after that decision became final. As of the date of these financial statements, ARTEAR has brought two claims for non-compliance with that decision before the National Court of First Instance on Federal Administrative Matters No. 12, Clerk’s Office No. 23. A decision has not yet been rendered on those claims. i. The claimants representing media companies in re “AEDBA and Other v. National Government – Decree No. 746/03 – AFIP on Incidental Procedure” pending before the Court on Federal Administrative Matters No. 4 requested that media companies represented by the claimants be granted the right to have a differential VAT regime as undertaken by the National Government under Decree No. 746/03 and the rules and regulations issued in connection thereto. On October 30, 2003, a preliminary injunction was issued in connection with the above-mentioned file, ordering the National Government to maintain the effectiveness of the benefit granted under Decree No. 746/03. The National Government filed an appeal against that decision and on November 6, 2008, the Court of Appeals granted the request to have the injunction revoked, among other things. On November 27, 2008, the claimants filed an appeal with the Supreme Court of Argentina requesting the suspension of the enforcement of such ruling. On October 28, 2014, the Supreme Court of Argentina issued a ruling in connection with the above-mentioned file, whereby it declared the appeal formally admissible and thus confirmed the effectiveness of the above-mentioned preliminary injunction. The Supreme Court held the following in the recitals of its ruling: (i) as of the date of the decision, the Executive Branch had not yet established any regime to replace the so-called competitiveness and employment generation agreements; (ii) the differential VAT regime provided under Law No. 26,982 was only applicable to small media companies, not to all media companies; (iii) the tax policy must not be biased and cannot be used as a way to curtail freedom of speech; (iv) the alternative solution that had to be sought ruled out, on principle, the application of the general regime; (v) even though a decision on the merits (having a differential VAT regime) is not being anticipated, the injunction that had been timely issued in connection thereof shall remain effective until such a solution to the matter is reached; (vi) the legal entities that met the obligations within the scope of the injunction shall not be deemed delinquent; and (vii) the judge of the first instance court shall render an urgent decision on the merits. On December 10, 2014, the Federal Court on Administrative Matters No. 4 rendered a decision on the merits in re AEDBA and other v. National Government Decree No. 746/03 and other on Proceeding leading to a declaratory judgment” ordering, among other things, that: The claimants (media companies) have the standing to sue; that it is not up to the Judicial Branch to legislate because only the Legislative Branch is empowered to do so; that, pursuant to the enactment of Law No. 26,982, the obligation undertaken by the Executive branch has already been met since the differential VAT rates have already been set and, therefore, the claim is moot; that, based on the decision rendered by the Supreme Court of Argentina, the companies cannot be deemed delinquent. Given the fact that the above-mentioned decision opposes and contradicts the grounds stated by the Supreme Court, the claimants (AEDBA, ARPA, ADIRA, as well as other associations) have filed an appeal against the decision rendered by the above-mentioned court of first instance with the corresponding Court of Appeals. 253 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 254 The subsidiaries of Grupo Clarín involved (AGEA and some of its subsidiaries, and Radio Mitre) have started to calculate employer’s contributions as tax credit on VAT as from November 2014, taking into consideration that: i) the preliminary injunction is still in effect, ii) the decision rendered by the court of first instance contradicts the considerations stated in the recitals of the Supreme Court’s decision due to the fact that the Executive Branch must grant a regime applicable to all the companies, iii) an appeal has been filed against the above- mentioned decision with the corresponding Court of Appeals, and based on its legal advisors’ opinion about the decision to be rendered on the merits, they believe that the claimants and the companies represented by them are likely to obtain a favorable ruling. 10.4 Matters concerning Papel Prensa I. Papel Prensa has several disputes pending before the Commercial Court of Appeals of the City of Buenos Aires as a consequence of CNV Resolution No. 16,222. Pursuant to said Resolution, the CNV declared that certain decisions of Papel Prensa’s Board of Directors were irregular and with no effect for administrative purposes. The Resolution challenged the Board’s fulfillment of the formalities required in the preparation, transcription and execution of meeting minutes on the relevant corporate books. On June 24, 2010, in File No. 75,479/09, the Commercial Court of Appeals of the City of Buenos Aires, Chamber C, decided to nullify CNV Resolution No. 16,222. On the basis of Resolution No. 16,222, the CNV has questioned subsequent decisions of Papel Prensa’s Board and of its Shareholders. In response, Papel Prensa has brought several administrative claims against the CNV, questioning its position. All of such claims were decided in Papel Prensa’s favor by the Commercial Court of Appeals of the City of Buenos Aires. Consequently, the CNV’s decisions were nullified. Furthermore, the Commercial Court of Appeals, Chamber C, dismissed the appeals filed by the CNV before the Supreme Court of Argentina against the Court of Appeals’ decisions. The CNV filed a direct appeal before the Supreme Court. As a consequence of the above, Papel Prensa has continued with the criminal proceedings brought against certain public officials. On February 1 and 4, 2010 the Secretary of Domestic Trade, Mario G. Moreno, and the CNV, respectively, requested the judicial intervention of Papel Prensa before the commercial justice. Such claims were pending before the Federal Commercial Court of First Instance No. 2, Clerk’s Office No. 4, temporarily under judge Dr. Eduardo Malde, who, on March 8, 2010, issued an injunction whereby he suspended certain decisions adopted at meetings of the Board of Directors and at Shareholders Meetings held on or after November 4, 2009. Judge Malde also appointed a co-administrator without removing the members of the previous corporate bodies. Papel Prensa filed an appeal, which the Commercial Court of Appeals, Chamber C, resolved in Papel Prensa’s favor, by revoking the injunction on August 31, 2010. On December 7, 2010 the same Chamber C dismissed the appeals filed by the CNV and the National Government before the Supreme Court of Argentina against the Court of Appeals’ decision. Both the CNV and the National Government filed direct appeals against such decision. On March 26, 2014, the Supreme Court of Argentina dismissed the appeal that had been filed by the CNV. Therefore, the decision rendered by the Court of Appeals that nullified Resolution No. 16,222 became final, with full force and effect. Also on the same date, the Supreme Court of Argentina dismissed the appeals brought by CNV and the National Government. Therefore, the decision rendered by the Court of Appeals that revoked the corporate intervention of Papel Prensa became final, with full force and effect. None of the claims mentioned in the above paragraphs had a material effect on AGEA’s financial and economic condition as of December 31, 2014. II. On January 6, 2010, the SCI issued Resolution 1/2010, whereby certain business practices were imposed on Papel Prensa. Papel Prensa brought a legal action against such resolution on grounds of unconstitutionality before the Federal Court on Administrative Matters and requested an injunction which was granted by the intervening judge. Pursuant to the injunction, the effects of such Resolution were suspended. On May 7, 2010, the Federal Court on Administrative Matters revoked the 254 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 255 injunction. Papel Prensa appealed such decision, which was affirmed by the Federal Court of Appeals on Administrative Matters. Papel Prensa filed an appeal against the Court of Appeals’ decision. The appeal was denied and Papel Prensa was served notice of that denial on September 1, 2010. III. Papel Prensa suspended its operations with related parties between March 9 and April 21, 2010 pursuant to an injunction issued on March 8, 2010 by Judge Malde. In his ruling, Judge Malde decided to suspend the Board of Directors’ resolution of December 23, 2009, which had approved the terms and conditions of transactions with related parties for the year 2010. On April 21, 2010, the Board of Directors of Papel Prensa, following a proposal made by the court-appointed supervisor (interventor) and co-administrator, approved the resumption of such company’s transactions with related parties under provisional conditions for as long as the decision rendered by the Board on December 23, 2009 remained suspended and/or until Papel Prensa’s corporate bodies established a business practice to follow with related parties. Such approval involved suspending the application of volume discounts in connection with purchases made by related parties, which could be recognized in their favor, subject to the court’s decision on the appeal filed by Papel Prensa against Judge Malde’s injunction of March 8, 2010. As from April 21, 2010, transactions with related parties were resumed under the provisional conditions approved by the Board on April 21, 2010. At a meeting held on December 23, 2010, Papel Prensa’s Board of Directors approved new conditions that must be fulfilled for the recognition and payment of volume discounts that may be applicable to related parties in connection with purchases of paper made as from April 21, 2010. These new conditions are as follows: (i) the lifting of the provisional suspension of the resolutions adopted by the Board at the meeting of December 23, 2009, as explained in the previous paragraph, and (ii) the resolution or end, by any means, of any state of uncertainty that may eventually exist about the conditions approved by Papel Prensa’s Board in the first item of the agenda of the meeting held on April 21, 2010, as a consequence of the claim brought by the National Government in re “National Government – Secretariat of Domestic Trade – v./ Papel Prensa S.A.I.C.F. y de M. on/ Ordinary”, File No. 97,564, currently pending before Federal Commercial Court of First Instance No. 26, Clerk’s Office No. 52. Under this proceeding, the National Government seeks to obtain, among other things, a declaratory judgment of nullity of the provisional conditions for the resumption of transactions with related parties in connection with the purchase and sale of paper that was approved by the Board of Papel Prensa in the first item of the agenda of the above mentioned meeting held on April 21, 2010. Furthermore, at this meeting held on December 23, 2010, Papel Prensa’s Board decided to maintain the originally approved sales policy, but to subject the accrual and enforceability, and, consequently, the recognition and payment to the clients, of the eventual volume discounts that may be applicable to them with respect to paper purchases made between January 1st, 2011 and December 31, 2011, to a final favorable ruling in the claim brought by Papel Prensa against the constitutionality of SCI Resolution No. 1/2010, or to the final nullification of such Resolution No. 1/2010 in any other way or by any other legal means, whichever occurs first. In connection with related parties, the Board approved the same policies and conditions as those approved for the other clients in general. In a meeting held on December 27, 2011 Papel Prensa’s Board of Directors decided to maintain for 2012 the same commercial policies that had been approved for 2011 – under the same terms and conditions mentioned in the previous paragraph – for all of its customers in general (including related parties). The commercial policy approved by Papel Prensa was affected by Law 26,736 –effective as from January 5, 2012– which declared that the production, sale and distribution of wood pulp and newsprint were matters of public interest and set forth the regulatory framework to be adopted by the producers, sellers, distributors and buyers of such inputs. Among other things, the Law set limits and established conditions applicable to Papel Prensa for the production, distribution and sale of newsprint (including a formula to determine the price of paper), and created the National Registry of 255 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 256 Producers, Distributors and Sellers of Wood Pulp and Newsprint where all producers, sellers, distributors and buyers shall be registered as a mandatory requirement in order to produce, sell, distribute, and/or purchase newsprint and wood pulp as from the enactment of the Law. It also contains a series of temporary clauses, specifically and exclusively addressed to Papel Prensa, whereby Papel Prensa is forced to make investments to meet the total national demand for newsprint – excluding from this requirement the other existing company that operates in the country with installed capacity to produce this input. The Law also provides for the capitalization of the funds eventually contributed by the National Government to finance these investments for the purposes of increasing the equity interest and the political rights of the National Government in Papel Prensa, contravening public order regulations contained in Law 19,550 and disregarding several constitutional rights and guarantees of Papel Prensa and its private shareholders. On February 10, 2012 AGEA registered with the National Registry of Producers, Distributors and Sellers of Wood Pulp and Newsprint (Record No. 63 in File No. S01:0052528/12), clearly stating that the decision to register shall not be construed as an acknowledgment or conformity with the legitimacy of Law 26,736, Resolution No. 9/2012 issued by the Ministry of Economy and Public Finance and SCI Resolution No. 4/2012 issued in connection with such Law and/or any other issued in the future, since they seriously affect several rights and guarantees of AGEA which are recognized and protected by the Argentine National Constitution. IV. On September 12, 2011, the CNV issued Resolution No. 16,647 whereby it rendered irregular and with no effect for administrative purposes the decisions made by Papel Prensa’s Board of Directors at the meetings held on July 20, 2011 and August 5, 2011. At those meetings, the Board of Directors had called two shareholders’ meetings, to be held on September 27, 2011 and September 15, 2011, respectively. Notwithstanding the fact that Resolution No. 16,647 was appealed by Papel Prensa and is therefore not final, on September 15, 2011, Commercial Court No. 5, Clerk’s Office No. 9, issued an injunction with respect to the Board of Directors’ decisions to call the two shareholders’ meetings. The injunction had been requested by the shareholders Arte Gráfico Editorial Argentino S.A., Compañía Inversora en Medios de Comunicación (CIMECO) S.A., and S.A. La Nación. Given that the issuance of the injunction validated Papel Prensa’s decision to call the two shareholders’ meetings, both were held as originally scheduled. Nevertheless, and based on the above Resolution No. 16,647, on October 13, 2011 the CNV issued Resolution No. 16,671 rendering irregular and with no effect for administrative purposes all of the decisions made at Papel Prensa’s Shareholders’ Meetings held on September 15, 2011 and September 27, 2011. Papel Prensa filed an appeal against Resolution No. 16,671, which is, therefore, not final. Also based on Resolution No. 16,647, on November 16, 2011, the CNV issued Resolution No. 16,691 whereby the CNV rendered irregular and with no effect for administrative purposes the decisions made at the Board of Directors’ Meeting held on October 3, 2011 and the call for the Board of Directors’ meeting on November 17, 2011. Such Resolution is not to be deemed final since Papel Prensa filed an appeal and requested its nullification. In this sense, of particular note is that: (i) at the hearing held before Federal Commercial Court No. 26 of First Instance, Clerk’s Office No. 52, the National Government, Papel Prensa, AGEA, Compañía Inversora en Medios de Comunicación (CIMECO) S.A. and S.A. La Nación, agreed, among other things, on the composition of the company’s corporate bodies, and in particular on the recognition of the authorities appointed by the private shareholders at Papel Prensa’s Shareholders’ meeting held on September 27, 2011, as well as on the agenda to be addressed at the meeting of Papel Prensa’s Board of Directors of October 3, 2011, which had been the subject matter of Resolution No. 16,691; and (ii) at the hearing held in April 2012 before the same Commercial Court the National Government, Papel Prensa, AGEA, Compañía Inversora en Medios de Comunicación (CIMECO) S.A. and S.A. La Nación, with the assistance of the Argentine Securities Commission, agreed to request the court to order a shareholders’ meeting with an agenda substantially similar to that of Papel Prensa’s Shareholders’ Meeting held on September 27, 2011. The request was granted by the intervening judge and the meeting was scheduled for August 29, 2012. 256 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 257 The meeting began on that date but, as a consequence of certain disturbances provoked by the representative of the National Government, the private shareholders that were present at the meeting decided to adjourn it for 48 hours without addressing the agenda. After that, and notwithstanding the resolution adopted at the meeting, on August 31, 2012 Judge O’Reilly decided to order that the adjourned meeting would resume on September 25, 2012. However, the meeting was not held because the Judge subsequently held that the appeals filed against other points of her decision resulted in the suspension of every point of the decision she had rendered, including the new date scheduled for the meeting, even though all appellants had consented to that point. On June 12, 2014, the Court of Appeals decided to postpone rendering a decision on the appeals filed until the court-convened shareholders’ meeting that began on August 29, 2012 had resumed and closed, ordering Judge O’Reilly to decide on the pending issues and to order the shareholders to resume that meeting. On December 4, 2014, the Judge called Papel Prensa, the CNV, and the shareholders of AGEA, the National Government, SA La Nación and CIMECO to a hearing to be held on May 6, 2015, in order to proceed as ordered by the Court of Appeals. In light of the above, the new date to resume that meeting may not be set until Judge O’Reilly has complied with the decision rendered by the Court of Appeals. V. On June 6, 2013, the Board of Directors of the CNV issued CNV Resolution No. 17,102, within the framework of the Administrative File No. 1032/10, whereby it required that: (i) certain members of Papel Prensa’s Supervisory Committee and statutory auditors be imposed a fine of Ps. 150,000 each; and (ii) Papel Prensa, certain members of its Board of Directors, one member of its Supervisory Committee and the members of its Oversight Board (all of them representatives of Papel Prensa’s private shareholders) be imposed a joint and several fine of Ps. 800,000. Papel Prensa and its other current and former officers appealed the fine in due time and form. In the same appeal, they requested an injunction to change the effect of their appeal and suspend the application of the fine. On October 11, 2013, Chamber 5 of the Federal Court on Administrative Matters denied this request, which was considered unnecessary in the light of the settlement of the fine by the claimants, as informed below. Notwithstanding the above, on June 19, 2013, the Company asked the CNV to suspend the application of the fine until a decision was rendered by the Court of Appeals with respect to the injunction. The request was denied. On June 28, 2013, the fine was paid under protest in order to prevent its coercive enforcement by the CNV; given that, under the new Capital Markets Law No. 26,831, appeals may be admitted without suspension of judgment. VI. AGEA has not recorded any impact in connection with the foregoing, since its effects shall depend on the final outcome. Such effects are not expected to be material to these financial statements. Note 11 Regulatory Framework 11.1 Audiovisual Communication Services a) Until the enactment of Audiovisual Communication Services Law No. 26,522, the installation, operation and acquisition of audiovisual communication services in Argentina were governed by Broadcasting Law No. 22,285. Cable TV activities were regulated and overseen mainly by the COMFER. Under Law No. 22,285 broadcasting service companies in Argentina required a non-exclusive license from the COMFER in order to operate. Other approvals were also required, including, for some services, authorization by municipal agencies. Broadcasting licenses were granted for an initial period of 15 years, allowing for a one-time extension of 10 years. The extension of the license was subject to the approval of the COMFER, which would determine whether or not the licensee had met the terms and conditions under which the license had been granted. All the subsidiaries of Grupo Clarín that render broadcasting services, hold licenses granted by the COMFER under such Law. Some of the licenses exploited by the subsidiaries, including the license that had been originally granted to Cablevisión (with an extended term that originally expired on March 31, 2006), have already been extended for the above-mentioned 10-year term. 257 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 258 On May 24, 2005, Decree No. 527/05 provided for a 10-year-suspension of the terms then effective of broadcasting licenses or their extensions. Calculation of the terms shall be automatically resumed upon expiration of the suspension term, subject to certain conditions. The Decree required that companies seeking to benefit from the extension submit to the COMFER’s approval, within two years from the date of the Decree, programming proposals that would contribute to the preservation of the national culture and the education of the population and a technology investment project to be implemented during the suspension term. COMFER Resolution No. 214/07 regulated the obligations established by Decree No. 527/05 in order to benefit from such suspension. The proposals then submitted were approved and, accordingly, the terms of the licenses originally awarded to the subsidiaries of Grupo Clarín, as well as the terms of the licenses to which Cablevisión became the universal successor, are currently suspended for ten years. COMFER Resolution No. 275/09 lifted a suspension of license grants that had been ordered by COMFER Resolution No. 726/00 and approved the Rules governing the licensing of Broadcasting and Supplementary Services by means of a physical link, and set a term to apply for licenses under an abbreviated procedure. Therefore, Cablevisión and certain subsidiaries purchased bidding forms to apply for new licenses through this option in such locations where they had not obtained the suspension of the term ordered by Decree No. 527/05, since the terms of those licenses had expired. Cablevisión has requested the COMFER’s approval of several transactions, including certain company reorganizations and share transfers. The request for approval of the merger of Cablevisión and its subsidiaries (see Note 10.1.d.) is still pending. b) The Audiovisual Communication Services Law (Law No. 26,522) was passed and enacted on October 10, 2009, subject to strong concerns over its content and enactment procedure. Even though the new Law became effective on October 19, 2009, not all of the implementing regulations provided by the law have been enacted. Therefore, Law No. 22,285 still applies with respect to those matters that to date have not been regulated, until all terms and procedures for the regulation of the new law are defined. The law provides for the replacement of the COMFER with the Audiovisual Communication Services Law Federal Enforcement Authority (AFSCA, for its Spanish acronym) as a decentralized and autarchic agency under the jurisdiction of the Executive Branch, and vests the new agency with authority to enforce the law. The new law, which governs the audiovisual communication service activities conducted by the Company through its subsidiaries, establishes, among other things: • A license award and review scheme that grants wide discretion to the Executive Branch and to an Enforcement Authority with questionable composition and powers, • A 10-year limitation to the terms of licenses, with a one-time non-renewable extension, • The non-transferability of authorizations and licenses, • A regulatory framework and registration requirements for signals, production companies and advertising agencies, • A multiple license scheme that: i) restricts to 10 the number of Audiovisual Communication Service licenses, plus a single broadcasting signal for radio, broadcast TV and subscription cable TV services that make use of the radio spectrum; ii) restricts the licensing of subscription broadcasting services rendered by means of a physical link (cable), limiting the number of licenses to 24; iii) sets forth a further restriction on these services, which may not be provided to more than 35% of all inhabitants or subscribers nationwide; iv) establishes that a broadcast TV signal and a cable TV signal may not be simultaneously exploited in the same location, and v) establishes that broadcast TV networks may only own one cable TV signal. The same applies to cable TV networks, which may only own the so-called “local channel”, which is mandatory for every license • Mandatory quotas for certain types of content. Also controversially, the law sets forth retroactive effects by requiring holders of current broadcasting licenses – which were legitimately acquired rights under Law No. 22,285 as amended - to conform to the new law within the term of one year counted as from 258 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 259 the time certain mechanisms required for implementation are set in place. The Executive Branch has regulated most sections of Law No. 26,522 by means of Decree No. 1,225/2010. The most notably arbitrary provision of this decree is the highly discretionary mandatory divestiture system created to implement Section 50 of the Audiovisual Communication Services Law. This system has evident confiscatory effects. It is publicly known that several concerns have been expressed about this law, since it has defects that render it unconstitutional; it seriously damages the development of the audiovisual industry and restricts fundamental freedoms. Grupo Clarín and its main subsidiaries made court filings on that basis, which led to the provisional suspension of section 161 of the Audiovisual Communication Services Law until a final decision was rendered. On December 14, 2012 the Company was served notice of the decision rendered by the Court of First Instance on the merits of the case in re “Grupo Clarín S.A. and Other v. the Executive Branch on Declaratory Action” (File 119/10). The judge recognized the legal standing to sue of the plaintiffs as license holders, but rejected the unconstitutionality claim with legal costs imposed on claimants. An appeal was filed against that decision before the National Court of Appeals on Federal Civil and Commercial Matters. On April 17, 2013, Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters rendered a decision on the merits of the case, whereby it: i) Confirmed the dismissal of the exception of lack of standing brought in connection with Grupo Clarín and Teledigital. ii) Dismissed the claim of unconstitutionality brought by the claimants against: a. Section 41 of the Audiovisual Communication Services Law, which provides that licenses are not transferable, with an exceptional procedure for the transfer of shares or quotas of licensees; b. Section 161 of the Audiovisual Communication Services Law, which requires existing licensees to conform to the new Law; c. Section 45, point 1, subsection a), which limits subscription television licenses on satellite support to one license per holder, nationwide; d. Section 45, point 1, subsection b), which limits audiovisual communication services licenses that make use of the radio spectrum to 10 licenses per holder, nationwide, except for the provision that limits content signals to one per holder, which was deemed unconstitutional; e. Section 45, point 2, subsection a), which limits AM broadcast radio licenses to one license per holder per locality; and f. Section 45, point 2, subsection b) which limits FM broadcast radio licenses to one license per holder per locality, except for localities with more than eight FM stations, where holders are entitled to two licenses. The Court of Appeals also declared that the claimant had a right to be compensated for damages that may result from the mandatory divestment as a consequence of the limitations set forth under point ii. c), d), e) and f ); iii) Declared the unconstitutionality of the following provisions: a. Section 45, point 1, subsection c), which limits licenses for the exploitation of audiovisual communication services by subscription with physical link to 24 licenses per holder, nationwide; b. Section 45, final paragraph, which provides that services provided by one licensee may not reach more than 35% of the aggregate national population or nationwide subscribers; c. Section 45, point 2, subsections c) and d), which provides that holders of a broadcast television license may not simultaneously hold a subscription television service license in the same locality; d. Section 45, final paragraph, which limits licenses granted in the same primary service area or group of overlapping primary service areas to three licenses per holder; and e. Section 45, point 3, which provides that broadcast television licensees may only own one cable television signal and cable television service licensees may only own a single signal generated by such providers themselves. The Court ordered the inapplicability of the provisions detailed under iii. a), b), c), d) and e), above, to the licenses exploited by claimant. 259 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 260 iv) Declared the unconstitutionality of section 48, second paragraph, which provides that the multiple license regime set forth under the Audiovisual Communication Services Law may not be alleged as an acquired right in light of any future amendments relating to deregulation, demonopolization or antitrust. v) Rejected the claim for damages as claimed under this case-file. vi) Revoked the decision rendered in the first instance regarding the repeal of the injunction granted in favor of the claimants until a final decision is rendered. Both parties appealed the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters, and the case was submitted to the Supreme Court of Argentina. On December 17, 2012, the Company was served notice of AFSCA Resolution No. 2276/2012 (File No. 1395-AFSCA/2012), whereby AFSCA decided to initiate the ex officio transfer procedure, ordered the appraisal by Court of Appraisals of Argentina of the licenses and the essential assets related to the various broadcasting services and ordered the Company to respond, within the framework of that procedure, to a request for information about the licenses and/or services it owned directly or indirectly. The Company appeared before AFSCA and challenged its resolution because it violates the injunction granted and extended by Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters. The Company also made a presentation in re “Grupo Clarín S.A. and Others on preliminary injunctions” to report these circumstances. Consequently, on June 27, 2013, Chamber No. 1 of the Court of Appeals ordered in re “Grupo Clarín S.A. and other v. National Executive Branch and others on failure to comply with injunction” (File No. 4777/2012) that AFSCA suspend its proceedings (File No. 1395-AFSCA/2012) and refrain from taking any action or initiating any similar or identical proceeding based on Section 161 and/or its regulations during the effectiveness of said injunction. On October 29, 2013 the Company was served with a decision rendered by the Supreme Court of Argentina which ordered (i) to revoke the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters on April 17, 2013 (the "Decision”) to the extent that it declared the unconstitutionality of Section 45, part 1, subsection “c” and final paragraph; part 2, subsections “c” and “d” and final paragraph; part 3 in its entirety; and part 1, subsection “b”, with respect to the limitation to holding registered title to a single content signal, and Section 48, second paragraph, Law No. 26,522 and (ii) to confirm the Decision to the extent it rejected the claim for damages as brought under the case file. The Company believes that the challenged Sections -as held by the three dissenting opinions- not only contradict the principles of the Argentine National Constitution, but also those of the American Convention on Human Rights (Pact of San José de Costa Rica), as well as recent precedents of the Inter-American Commission on Human Rights, the Inter-American Court of Human Rights and the Special Rapporteurship for Freedom of Expression of the Organization of American States. The claimant companies will analyze bringing an appeal before international courts to challenge those sections that entail an indirect act of censorship that silence and discriminate against critical media, and violate acquired rights. In addition, as provided in the Court’s decision, the Company will continue to litigate in local courts all the aspects related to the discretionary and selective application of the law by the national government. On October 31, 2013, even before the deadline to enforce the decision rendered by the Supreme Court of Argentina in re “Grupo Clarín S.A. and Others v. National Executive Branch and other re: Merely Declarative Action” (File 119/10), the Company and some of its subsidiaries were again served with AFSCA Resolution No. 2276/2012 issued by the president of that agency on December 17, 2012 within the framework of File No. 1395-AFSCA/2012. Resolution No. 2276/2012 provides for an ex officio proceeding to conform the Company and some of its subsidiaries to the provisions of the Audiovisual Communication Services Law. The Company and its legal advisors believe that this resolution is absolutely null and void and have filed an appeal to have it revoked. 260 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 261 Faced with the de-facto proceedings that sought to dispossess the Company of its licenses and assets through an ex officio procedure, on November 4, 2013 the Company submitted to AFSCA and to the Supreme Court of Argentina a voluntary proposal to conform to the Audiovisual Communication Services Law pursuant to section 161 of the LSCA, approved by Grupo Clarín’s Board of Directors on November 3, 2013, in an attempt to avoid the forced divestiture of its assets by AFSCA. This was also the least desirable decision, because it contradicts Grupo Clarín’s historical strategy of maintaining the necessary integration and strength. The voluntary proposal -which does not interrupt any of the judicial actions brought by the Company to defend its rights- was submitted together with a request that the decision rendered by the Supreme Court of Argentina be complied in full. That is, requesting the involvement of an independent, unbiased enforcement authority with technical expertise, which may ensure a transparent and egalitarian treatment in the enforcement of the law. Upon review of the voluntary proposal, AFSCA issued Resolution No. 1471/2013 whereby it suspended the Ex Officio Transfer Procedure commenced through AFSCA Resolution No. 2276/2012 and stated that it would refrain from pursuing any administrative proceedings in that regard. The voluntary proposal presented by the Company is summarized as follows: The assets of the Company and its group of companies governed by Law No. 26,522 will be divided into six units of audiovisual communication services. Each of the units of audiovisual communication services will have no corporate relationship with the others. This way, each unit will conform individually to the provisions of Sections 45 and 46 of the LSCA and its implementing regulations, and will be divided according to the following detail: (i) Unit I: composed by (a) ARTEAR, owner of the signal of Canal 13 of Buenos Aires and the news signal TN (Todo Noticias). ARTEAR will also maintain its interest in (i) Telecor, holder of the license of Canal 12 of Córdoba and (ii) Bariloche TV, holder of the license of Canal 6 of Bariloche. (b) Radio Mitre, which will maintain the frequencies AM 790 and FM 100 in Buenos Aires, AM 810 and FM 102.9 in Córdoba, and FM 100.3 in Mendoza; and (c) certain assets, liabilities, rights and obligations to be spun off from Cablevisión (“Cablevisión Spinoff 1”), which will include 24 local licenses for physical link subscription television services in cities where there is no incompatibility with broadcast TV, and 2 licenses for radio-electric link subscription television services. (ii) Unit II: composed by the surviving Cablevisión, which will continue to carry out the business activities and operations of Cablevisión with all the assets, liabilities, rights and obligations that are not spun off from Cablevisión. It will include 24 licenses for physical link subscription television services and 10 licenses for radio-electric link subscription television services, including the signal Metro, which is also the local signal of the license exploited in the City of Buenos Aires. (iii) Unit III: composed by Cablevisión Spinoff 2, which will include assets, rights and obligations to be spun off from Cablevisión, including 22 licenses for physical link subscription television services and 10 licenses for radio-electric link subscription television services. (iv) Unit IV: (a) composed by IESA, owner of the signals TyC Sports and TyC Max; (b) the signals El 13 Satelital, Magazine, Volver, Quiero Música en mi Idioma and (c) an equity interest in Canal Rural S.A., owner of the signal Canal Rural. (v) Unit V: to be owned by one or more individuals or legal entities that will not maintain a corporate relationship with Radio Mitre, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which will own: (a) one sound frequency modulation broadcasting service for the City of San Miguel de Tucumán-FM 99.5, (b) one sound frequency modulation broadcasting service for the City of San Carlos de Bariloche- FM 92.1, (c) one sound frequency modulation broadcasting service for the City of Santa Fe- FM 99.3, (d) one sound frequency modulation broadcasting service for the City of Bahía Blanca-FM 96.5 and (e) one sound frequency modulation broadcasting service for the City of San Carlos de Bariloche -FM 103.1, owned by Bariloche TV (vi) Unit VI: to be owned by one or more individuals or legal entities that will not maintain a corporate relationship with ARTEAR, its controlling companies, subsidiaries and/or controlled companies in order not to infringe the current multiple license regime, and which shall hold one broadcast television license for the City of Bahía Blanca, Province of Buenos 261 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 262 Aires-LU81 TV Canal 7-and an equity interest in Cuyo Televisión S.A., holder of one broadcast television license in Mendoza-LV83 TV Canal 9 Mendoza-. Said proposal contemplates that the Company will continue to own, directly or indirectly, only one of the audiovisual communication service Units (among those defined as Unit I and Unit II) of the six that were described above. The implementation of this proposal may entail a reduction of the Company’s operating income and its profitability in the Cable Television and Internet Access segment and/or a reduction of its operating income and profitability of the Broadcasting and Programming segment. The above-mentioned considerations and the limits to the growth of Grupo Clarín imposed by this law, against world trends and against legitimately acquired rights, will surely have an impact on the potential value of Grupo Clarín. The proposal will contemplate the necessary reservations to safeguard the rights of the Company, among which we may mention the following: the reservation to bring the judicial actions that may correspond in connection with the claim for economic damages caused to the Company and its subsidiaries as a consequence of their adjustment to conform to the law; the reservation to challenge the conformity of Sections 41, 45, 48 and 161 of Law No. 26,522 to international conventions before the Inter-American Commission on Human Rights, the Inter-American Court of Human Rights and other competent International Courts; the reservation to challenge judicially the composition of AFSCA for the period during which it did not conform to the provisions of the LSCA and for not being a technical and independent agency protected against undue interferences from the State. In order to consolidate the number of subscription television licenses for the purposes of conforming Cablevisión to the Audiovisual Communication Services Law, the Company applied the coverage area extension mechanism provided under section 45 of Decree No. 1225/2010 in accordance with the criterion approved by AFSCA in the Minutes of its Board of Directors’ Meeting No. 32/2012. The implementation of the proposal will necessarily involve a series of transactions that will require in some cases a statement of intention from the shareholders that are not related to Grupo Clarín. It should be noted that the proposal provides that the three units that will result from the adjustment of Cablevisión (Surviving Cablevisión, Cablevisión Spinoff 1 and Cablevisión Spinoff 2) will each have a market share lower than the limit established by the law. The proposal also includes other regulatory authorizations required for its implementation (CNV, IGJ, AFIP, SECOM, CNDC, among others) as well as the request to be excluded from the scope of the taxes applicable to the transactions required to implement the proposal. The Company and its subsidiaries have always abided by the laws and respected the decisions of the judiciary: all of the judicial claims brought by the Company since the enactment of Law No. 26,522 had the purpose of preserving the assets of the Company and of its shareholders under the firm conviction that the current structure of Grupo Clarín is the most efficient, both from the operational and the economic perspective, for its shareholders, employees, customers, suppliers and the community as a whole. The Board understands that the Company has presented the alternative that most mitigates the damages caused by having to comply with the Supreme Court decision, taking into consideration what the Board believes to arise clearly from the multiple license regime and the admissibility conditions provided by Law No. 26,522. On February 18, 2014, the Company was served with AFSCA Resolution No. 193/2014 whereby AFSCA’s Board of Directors declared that the proposal submitted by Grupo Clarín S.A., Arte Radiotelevisivo Argentino S.A., Radio Mitre S.A. and Cablevisión S.A. was formally admissible. Pursuant to the same Resolution, AFSCA provided that the term of one hundred eighty (180) calendar days set forth under Section 8 of the Rules for the Management and Procedures Relating to Voluntary Proposals established by Resolution No. 2,205/AFSCA/12 would be counted as from the moment the parties were served notice of this Resolution. On that same date, the Company’s Board of Directors took notice of AFSCA Resolution No. 193/2014. 262 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 263 In the recitals of AFSCA Resolution No. 193/2014 which declared the proposal submitted formally admissible, AFSCA stated that the withdrawal of claims made under File No. 21,788/08, as well as those made under the proposal submitted by Cablevisión, were now embedded in the process provided under Section 161 of Law No. 26,522. Accordingly, they are deemed to be approved within the framework of the proposal that was declared formally admissible. On February 18, 2014 the Company’s Board of Directors called an Extraordinary Shareholders’ Meeting to be held on March 20, 2014 in order to consider the following points of the agenda: 1) Appointment of two (2) shareholders to draft and sign the meeting minutes; 2) Consider AFSCA Resolution No. 193/2014; 3) Instruction to the Board of Directors to begin with the implementation of the Proposal, including the proposal of those transactions and corporate reorganizations required to such end; 4) Approval of the work done by the Task Force created to conform the Company to the Audiovisual Communication Services Law. Granting of attorney powers to act before Courts of Justice and the relevant oversight agencies; 5) Appointment of representatives of the Company to vote in favor of the Proposal at the subsidiaries’ Shareholders’ Meetings. On March 20, 2014, the Company’s Shareholders held a General Extraordinary Shareholders’ Meeting at which they decided (i) to approve formally in its entirety the Proposal submitted by the Company, which was declared formally admissible under AFSCA Resolution No. 193/2014, (ii) to authorize and instruct the Board of Directors to begin with the tasks for the implementation of the Proposal so that they can implement it within the 180-day term set by AFSCA Resolution No. 193/2014, or, if possible, before the end of such term, (iii) to grant the Board of Directors the broadest powers to consider, manage and submit to competent authorities all the required authorizations for the operations and/or corporate reorganizations as the Board may deem most appropriate and/or convenient according to the circumstances for the implementation of the Proposal and, (iv) to appoint representatives of the Company to vote in favor of the Proposal at the subsidiaries’ Shareholders’ Meetings with the broadest powers. On April 16, 2014, Grupo Clarín made a filing before AFSCA to request the suspension and/or extension of the 180-day term set under AFSCA Resolution No. 193/2014 to implement the Proposal until the conditions precedent described in the Proposal (including the repeal of MEyFP Resolution No. 113/10 and SCI Resolution No. 1011/09 by the Ministry of Economy and the Secretariat of Domestic Trade and the approval of the merger between Cablevisión and Multicanal by the CNV) have been met, and until the proposals filed by TELEFE, PRISA and TELECENTRO have been reviewed and decided upon. Pursuant to Note No. 263/AFSCA/DGAJyR/SGAJ/2014, AFSCA notified the Company and Cablevisión that based on the report issued by the Compliance and Transfer Division and on the opinion issued by the Permanent Legal Service AFSCA had rejected the request for the suspension and/or extension of the term established for the implementation of the Proposal, which had been filed on April 16, 2014. At the meeting held on April 25, 2014, the Board of Directors of Grupo Clarín took notice of the letters sent by ELHN Grupo Clarín New York Trust, HHM Grupo Clarín New York Trust, LRP Grupo Clarín New York Trust, Aranlú S.A. and José Antonio Aranda, whereby they requested the Company to analyze the feasibility of a spinoff of Grupo Clarín into two public entities, one that would maintain Unit I and the other would maintain Unit II, as defined in the Proposal. As decided at that Board Meeting, if this transaction should be selected as the alternative to consummate the Proposal, Grupo Clarín would also have to proceed with the sale of Units III, IV, V and VI, thus mitigating the negative effects of the Company conforming to the Audiovisual Communication Services Law for minority shareholders. On May 13, 2014, the Company’s Board of Directors approved the spinoff of the Company under the terms described in the spinoff prospectus. The spinoff is one of the alternatives that the Company was forced to analyze and project to eventually submit to its shareholders for the purpose of complying with the Proposal considered by the shareholders at the Shareholders’ Meeting of Grupo Clarín S.A. held on March 20, 2014, and declared formally 263 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 264 admissible by AFSCA on February 18, 2014. The spinoff is subject to the Prior Regulatory Authorizations, as defined in the above- mentioned prospectus. The main premises of the spinoff financial statements prepared by the Company in accordance with the spinoff described in the Proposal were the following: (A) Grupo Clarín S.A. will be the surviving company and, as such, it will retain all the assets, liabilities, equity, rights and obligations that are not allocated to other units; Grupo Clarín will continue to make public offering of its shares although as a result of the spinoff it will reduce its capital stock to reflect the equity impact of the spun-off assets, liabilities and equity. This will not entail any changes in terms of pro rata interest for any of the holders of the shares traded on stock exchanges. Grupo Clarín will retain its interest in the Business Units that are outside the scope of the Audiovisual Communication Services Law; (B) Unit II will receive, as a result of the spinoff of Grupo Clarín S.A., the assets identified to that effect in the Proposal (in summary, an indirect interest in Cablevisión S.A. with all the assets, liabilities, rights and obligations that are not spun off from that company). It will request authorization to be admitted to the public offering regime and authorization for the trading of the shares that will be received by the current holders of shares issued by Grupo Clarín that are traded on stock exchanges; (C) once (i) the Company has obtained the Prior Regulatory Authorizations (as defined in Grupo Clarín S.A.’s spinoff prospectus), (ii) the spinoff has been registered, (iii) the Spun-off Company has been registered with the IGJ and, (iv) the spun-off company has been admitted to the public offering regime, Grupo Clarín will reduce its capital stock affecting all shareholders in each class of shares, and the spun-off company will issue in exchange a set of new shares of the same classes as those issued by Grupo Clarín according to the following “exchange ratio”: 1 current share of Grupo Clarín S.A. will be equivalent to 0.3896 shares of Grupo Clarín S.A. (post spinoff ), and (ii) 0.6104 new shares of the spun-off company. (D) The other Units (III, IV, V and VI) identified in the Proposal will not be spun off, but will be offered for sale to third parties by Grupo Clarín or a subsidiary that is the direct holder of the equity that makes up the respective unit. As stated in the Company’s spinoff prospectus, the “Spinoff Date” will be the date on which the last of the following authorizations and/or filings has been obtained and/or made (as appropriate): (i) Prior Regulatory Authorizations (as defined in the Section “Regulatory Authorizations” of the Prospectus), (ii) registration of the spinoff before the IGJ, or (iii) registration of Cablevisión Holding S.A.’s incorporation before the IGJ. Cablevisión Holding S.A. will begin to operate on its own on the first day of the month following the expiration of the 30-day term counted as from the Spinoff Date (the “Operations Transfer Date”). The Spinoff will produce accounting effects as from the Operations Transfer Date. The Board of Directors of Cablevisión S.A. moved forward with the tasks for the implementation of the Proposal submitted by that company and decided on May 13, 2014 to approve the spinoff proposal and formally request the CNV’s administrative approval of its spinoff into three different independent companies, the consequent reduction of its equity and the amendment of its bylaws. The Board of Directors of Cablevisión also approved the special spinoff balance sheet and the spinoff prospectus prepared for such purpose. The spinoff is subject to the Prior Regulatory Authorizations, as defined in the spinoff prospectus. On May 14, 2014, the Company requested from the CNV, within the above-mentioned scope, the administrative approval of its spinoff and submitted the spinoff prospectus, which had been approved by its Directors at the meeting held on the previous day. The Company decided to send a letter to all the shareholders who had signed the letters detailed in the Minutes of the Board of Directors’ Meeting dated April 25, 2014, as well as to the holder of the Class C shares, requesting that they expressly inform the Company how they will comply fully with the Audiovisual Communication Services Law (with respect to Unit 1 and Unit 2) if the Proposal should be implemented through the spinoff described above. On May 15, 2014, the Company’s Board of Directors took notice of the letters sent by the shareholders ELHN Grupo Clarín New York Trust, HHM Grupo Clarín New York Trust, LRP Grupo Clarín New York Trust, José Antonio Aranda and Aranlú S.A. 264 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 265 According to those letters, if the Proposal were to be implemented using the spinoff option, said shareholders would carry out the necessary transactions so that (i) the direct and indirect shareholders of Grupo Clarín S.A. (post spinoff ) will be Aranlú S.A., José Antonio Aranda and LRP Grupo Clarín New York Trust, and (ii) the direct and indirect shareholders of the spun-off company, Cablevisión Holding S.A., will be HHM Grupo Clarín New York Trust and ELHN Grupo Clarín New York Trust. In their respective letters, GS Unidos LLC and its owner, Mr. Ralph H. Booth II, have stated their intention to cooperate with the Company in the implementation of the Proposal and, particularly, in the possible spinoff. To that end, if the Proposal were to be implemented using the spinoff option and subject to the approval of the regulatory authorities that may eventually correspond, Mr. Ralph H. Booth II has undertaken to reach an agreement with an unrelated third party so that they may carry out the transactions that may be necessary to cause the split of GS Unidos LLC and reach the following shareholder structure for all of the Class C shares of Grupo Clarín (post Spinoff ) and of the spun-off company: (i) the holder of all of the Class C shares of Grupo Clarín (post spinoff ) shall be the existing company GS Unidos LLC, which by that time will be owned by an unrelated third party assignee; (ii) the holder of all of the Class C shares of Cablevisión Holding S.A., the company spun-off from Grupo Clarín S.A., shall be a new limited liability company incorporated in the United States of America, which will be owned directly or indirectly by Ralph H. Booth II. On May 15, 2014, the Company notified AFSCA that on May 14, 2014 it had made a filing with the CNV requesting the CNV’s administrative approval of the Company’s spinoff process. Also on May 15, 2014, Cablevisión made a filing before AFSCA in order to: i) prove before such Agency that on May 14, 2014 it had made a filing before the CNV requesting the administrative approval of the spinoff process required for the implementation of the Proposal; and ii) request its authorization for the amendment of the Bylaws of Cablevisión, pursuant to Section 25 of Law No. 26,522. On May 16, 2014 and on June 15, 2014, and pursuant to Section 27 of the Audiovisual Communication Services Law, the Company made a filing before AFSCA in order to notify that agency of the new shareholder structure of (i) the Company, (ii) its controlling company, GC Dominio S.A., (iii) Cablevisión Holding S.A., the company to be spun off from Grupo Clarín S.A. and (iv) the controlling company of the latter, and indirect controlling company of Cablevisión, CV Dominio S.A., which will result if the spinoff informed on May 15, 2014 were to occur. On May 28, 2014, the Company made a filing before AFSCA in order to notify that agency that it had received an Irrevocable Offer from Messrs. Gerardo Martí Casadevall and Christophe DiFalco for the acquisition of a given number of shares of Cablevisión such that, upon consummation of the spin-off of Cablevisión, the offerors will be entitled to receive sixty percent (60%) of the shares to be issued by Cablevisión Spinoff 2 (Unit III under the Proposal). On June 25, 2014, the Company, ARTEAR, Radio Mitre and Cablevisión received a Note from AFSCA communicating a series of considerations about: a) the administrative approval requested from the CNV of the spinoff process of the Company and Cablevisión, and b) the authorization requested for the amendment of the Bylaws of Cablevisión. In such note, AFSCA: i) informed that it had taken notice of the request for administrative approval filed with the CNV of both spinoff processes; ii) made certain observations regarding the proposal to amend Cablevisión’s Bylaws; iii) stated that it understood that Cablevisión would be liable for any and all acts and any contingency arising from those acts until the date of the approval to be granted by AFSCA for the transfers in favor of the spun-off companies and not as from the date of consummation of those transfers; iv) stated that it would review the bylaws of the spun-off companies; v) stated that it would consider the requested approval once the Company and Cablevisión had informed: v.1.) whether the shareholders had approved the proposed spinoffs and v.2.) the names of the final shareholders of those companies, as well as those of the spun-off companies. It also stated that at such time, it would also analyze the Filings made in connection with the possible composition of the proposed 265 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 266 Audiovisual Communication Service Units; and vi) mentioned that the Company, Cablevisión and the companies to be created under the spinoff must be absolutely independent and unrelated among each other, without any common shareholders of any type. On June 30, 2014, the Company and Cablevisión, made a filing before AFSCA in order to respond to the note dated June 25, 2014. The companies informed AFSCA that: i) Cablevisión would comply with the observations made on some of the proposed changes to its bylaws, and that it would reformulate the proposed bylaws subject to the approval of the shareholders; ii) once approved by the shareholders of Cablevisión, it would file the proposed bylaws for each of the companies to be spun off from Cablevisión, which must necessarily be identical to Cablevisión’s own bylaws, iii) once the companies to be spun off, which will have new shareholders subject to AFSCA’s prior approval, as appropriate, have been registered, Cablevisión cannot continue to be held liable for the acts of the spun off companies and/or related contingencies, because Cablevisión had undertaken before AFSCA to comply with the requirement of absolute independence among Cablevisión and the spun- off companies; iv) the Company and Cablevisión had undertaken to inform within the shortest possible time the decisions rendered by their shareholders at Shareholders’ Meetings; and v) compliance with approval conditions to be met by the Company had been acknowledged by that Agency. The Company and Cablevisión reaffirmed their commitment under the Proposal in connection with the independence between the Company and its spun-off company and among Cablevisión and its spun-off companies, except with respect to the Company’s minority holders of Class B shares that are listed and traded on the Buenos Aires Stock Exchange (BCBA, for its Spanish acronym) and on the London Stock Exchange (LSE) in the understanding that the shares that trade freely on stock exchanges are outside the scope of the restrictions imposed under the new legal framework. Once the Proposal has been declared formally admissible by AFSCA, which occurred on February 18, 2014, its implementation requires the intervention of other governmental and oversight agencies and the approval of the shareholders at the respective Shareholders’ Meetings in order to carry out the reorganization and the transfer of licenses, assets, liabilities and operations to third parties, which must then receive final approval from AFSCA by means of an act that declares that the process has been duly completed. For that reason, the Company made various fillings before the different entities/ governmental agencies that must intervene in the implementation of the proposal, according to the following detail: • Ministry of Economy; • Secretariat of Trade; • Comisión Nacional de Defensa de la Competencia (National Antitrust Commission); • Argentine Securities Commission; • Argentine Secretariat of Communications; • Before AFSCA, informing the above- mentioned filings. The Company made new filings requesting AFSCA to grant service authorization for subscription television services that, as a result of the reorganization, will not change their conformation and are still pending resolution to date. Within the framework of the process to conform the Company to the Audiovisual Communication Services Law, the Company also requested that agency to grant service authorization and the extension of the licenses held by Radio Mitre S.A. corresponding to: AM Córdoba, FM Mendoza, FM Tucumán, and FM Santa Fe. Cablevisión made filings before AFSCA in which it reserved its rights and made statements in connection with the interpretation of certain recitals of Resolution No. 193/AFSCA/2014 regarding the decisions rendered on: • The radio-electric link subscription television services that will be discontinued as a result of the reorganization; • The portion of radio-electric spectrum that will be accumulated provisionally to the radio- electric services selected in certain locations. • The statement about the maintenance of the registration of the signal METRO by Cablevisión S.A. • Rectification of the proposal originally submitted regarding the services rendered in Necochea, La Dulce, Lobería, Monte de los Gauchos, Godoy and Rawson, in Cablevisión S.A. 266 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 267 Pursuant to Note No. 263/AFSCA/DGAJyR/SGAJ/2014, AFSCA informed Cablevisión that AFSCA’s Board had approved the amendments proposed by that company to the Proposal with respect to Necochea, La Dulce, Lobería, Monte de los Gauchos, Godoy and Rawson. The Company obtained from the subsidiaries of Cablevisión S.A. a confirmation of Cablevisión’s proposal filed by the Company, and provided evidence of such circumstance to AFSCA pursuant to AFSCA Resolution No. 193/2014. The ratifications reported as of the closing date of these financial statements correspond to the following companies: • Tres Arroyos Televisora Color S.A.; • Indio Rico Cable Color S.A.; • Copetonas Video Cable S.A.; • Cable Video Sur S.A. (under reorganization); • Dorrego Televisión S.A.; • Wolves Televisión S.A. The proposal submitted by Cablevisión was approved by La Capital Cable S.A. and Otamendi Cable Color S.A. As of the date of these financial statements, no filing was made in connection with these approvals before AFSCA. Cablevisión has carried out all necessary proceedings in order to obtain the approval of the Proposal from Teledifusora San Miguel Arcángel S.A. and Ver TV S.A. On June 30, 2014, the shareholders of Cablevisión approved that company’s partial spinoff under the terms described in the spinoff prospectus submitted by Cablevisión before the CNV in compliance with applicable legislation for (i) the creation with a portion of the equity subject to the spinoff, of two companies whose corporate names will be Compañía Argentina de Cable S.A. and Compañía Inversora de Redes S.A.; (ii) the merger of a portion of the spun-off equity with La Capital Cable S.A. and (iii) the merger of a portion of the spun-off equity with Tres Arroyos Televisora Color S.A. On June 30, 2014 the Company’s shareholders at the General Extraordinary Shareholders’ Meeting approved (i) the partial spinoff of Grupo Clarín, (ii) the creation of a new sociedad anónima (a corporation with limited liability) with the equity subject to the spinoff under the name CABLEVISIÓN HOLDING S.A., which will request admission to the public offering regime, under the terms set forth in the spinoff prospectus filed by Grupo Clarín with the CNV in accordance with applicable legislation and which was published in the BCBA’s Daily Bulletin and in the CNV’s Financial Information Highway, (iii) the reduction of the Company’s capital stock as a consequence of the approved partial spinoff, (iv) the reduction in the amount of the capital stock that is authorized for public offering and listing on the Buenos Aires Stock Exchange and the London Stock Exchange, (v) the amendment of Articles 4, 5, 16, 21 and 24 of the Company’s Bylaws under the terms established in the spinoff prospectus, (vi) the deletion of Article 27 of the Company’s current Bylaws, and (vii) the performance of the Task Force Created to Implement the Proposal as from the Extraordinary Shareholders’ Meeting held on March 20, 2014 and up to that date, and granted such Task Force the broadest powers to consider, manage and submit to competent authorities all the required authorizations for the implementation of the Proposal. As of the date of these financial statements, the Company has published the corresponding spinoff notices pursuant to Section 88 of the Argentine Business Associations Law. Two objections were filed against the spinoff, which were duly dismissed. Notwithstanding the foregoing, as of the date of these financial statements, the Company has not yet issued the public deeds relating to the spinoff and to the creation of the spun-off companies because the prior regulatory authorizations have not been granted as provided under its spinoff prospectus. In addition, at the above-mentioned General Extraordinary Shareholders’ Meeting of June 30, 2014, the Shareholders approved (i) the irrevocable offer received for the acquisition of Unit III under the Proposal, (ii) the irrevocable offers received for the acquisition of the assets that make up Unit V under the Proposal, (iii) the irrevocable offer for the acquisition of the shares of Telba, and (iv) the motion to adjourn the meeting until July 11, 2014 so that the Company may make a filing requesting AFSCA to ratify the existence of certain precedents decided by AFSCA in other companies’ procedures to conform to the Audiovisual Communication Services Law, in connection with the limitations applicable to the ownership of registered cable television signals and, if any such precedents exist, that AFSCA consider the proposal submitted by 267 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 268 the Company as if it had been reformulated. The Company would then submit the matter to the shareholders so that, with AFSCA’s answer, they may consider the irrevocable offers received for the sale of shares and/or assets that make up Unit IV under the Proposal, and the irrevocable offer for the acquisition of the shares of Cuyo Televisión S.A., if any shall exist as of the date on which the shareholders’ meeting is scheduled to resume. The main terms and conditions of the offers approved by the shareholders at the Extraordinary Shareholders’ Meeting held on June 30, 2014 are the following: • The irrevocable offer received for the acquisition of Unit III under the Proposal. The irrevocable offer approved by the shareholders for the acquisition of Unit III under the Proposal was made by Messrs. Gerardo Martí Casadevall and Christophe DiFalco (the Investors). The offer contemplated the acquisition, on the Closing Date, defined as the date that occurs 10 business days immediately after the date on which all of the conditions precedent have been fulfilled and until December 31, 2014 unless such deadline should be extended by both investors and/or by Grupo Clarín and Fintech until no later than March 31, 2015, from one or more companies controlled by the Company, of a given number of shares of Cablevisión S.A. such that, upon consummation of the spin-off of Cablevisión S.A., the Investors will be entitled to receive 60% of the shares to be issued by Cablevisión Spinoff 2. The Offer is subject to the condition that it also include minority equity interests in La Capital Cable S.A., Tres Arroyos Televisora Color S.A., Teledifusora San Miguel Arcángel S.A. and AVC Continente Audiovisual S.A., and Televisora Privada del Oeste S.A. Simultaneously with this Irrevocable Offer, the Investors have sent Fintech Advisory Inc. an irrevocable offer in terms substantially similar to those of the Offer, for the Investors to acquire all of the capital stock of a new limited liability company to be incorporated in the State of Delaware, United States of America, that will own approximately 40% of the shares to be issued by Cablevisión Spinoff 2. The implementation and effective closing of the transaction described under the Irrevocable Offer -including the payment of the offered price and the transfer of the shares of Cablevisión S.A. to the Investors- is subject to the following Conditions Precedent set forth under the Offer, including the final approval to be granted by AFSCA. The purchase price established in the Irrevocable Offer is of a) USD 28,200,000, for the 60% participation owned by the Company. The price will be paid as follows: a) USD 8,460,000 on the Closing Date, in United States Dollars, and b) the balance shall be paid by means of a promissory note to be issued by the Investors and to be delivered on the Closing Date for USD 19,740,000 under the terms described in Exhibit III to the Offer. The conditions that were negotiated include: A purchase option, transferrable to third parties, over the assets sold for a term of 7 years, a percentage of the sale price upon the occurrence of any liquidity event, also in favor of the seller, and a transferrable right of first refusal, which will allow the Company to match any offer that the purchasers might receive in the future -conditions that will allow the current shareholders to recover a portion of the future value. • The irrevocable offers received for the acquisition of the assets that make up Unit V under the Proposal. The main terms of the offers received by Radio Mitre S.A. are the following: (A) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in San Miguel de Tucumán: The offer letter was sent by Mr. Facundo Soler Valls for the acquisition of the sound frequency modulation broadcasting service in the frequency 99.5 Mhz, Channel 258, Category “C” of the City of San Miguel de Tucumán, Province of Tucumán, awarded in favor of RMSA under Resolution No. 1,325-CFR/99 (the “Tucumán Broadcasting Service”). The assignment, sale and transfer of the Tucumán Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among others, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Tucumán Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Tucumán Broadcasting 268 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 269 Service is of Ps. 1,000,000 (One Million Pesos), payable as follows: (i) Ps. 100,000 (One Hundred Thousand Pesos) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer; (ii) Ps. 75,000 (Seventy Five Thousand Pesos) on the Closing date, and (iii) the balance of Ps. 825,000 (Eight Hundred Twenty Five Thousand Pesos) shall be payable with 11 (eleven) equal, monthly and consecutive checks. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. (B) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in Santa Fe: Its main terms and conditions are the following: (I) Offeror: PRENSA Y MEDIOS SANTAFESINOS DEL SUR S.A. The assignment, sale and transfer of the Santa Fe Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among others, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Santa Fe Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Santa Fe Broadcasting Service is of USD 150,000 (One Hundred Fifty Thousand US Dollars), payable as follows: (i) USD37,500 (Thirty Seven Thousand Five Hundred US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of notice of pre-acceptance of the Offer, and (ii) the balance of USD112,500 (One Hundred Twelve Thousand Five Hundred US Dollars) on the Closing date. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. (C) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in San Carlos de Bariloche; the main terms and conditions are the following: (I) the offer letter was sent by SALTAVIOLETA S.R.L. The assignment, sale and transfer of the Bariloche Broadcasting Service will be subject to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among them, that AFSCA and the other oversight agencies that may correspond, approve the assignment, sale and transfer of the Bariloche Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Bariloche Broadcasting Service is of USD 75,000 (Seventy Five Thousand US Dollars) (the “Price”), payable as follows: (i) USD18,750 (Eighteen Thousand Seven Hundred Fifty US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer, and (ii) the balance of USD56,250 (Fifty Six Thousand Two Hundred Fifty US Dollars) on the Closing date. On June 30, 2014, Radio Mitre sent to the Offeror the notice of pre-acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer and (D) Firm and Irrevocable Offer for the acquisition of the Sound Frequency Modulation Broadcasting Service in Bahía Blanca. Its main terms and conditions are the following: The offer letter was sent by Mr. Marcelo González, who made a binding, firm and irrevocable offer for the acquisition of the Sound Frequency Modulation Broadcasting Service identified with the distinctive signal “LRI436”, Category “D” to operate in the frequency 96.5 Mhz, Channel 243, in the city of Bahía Blanca, Province of Buenos Aires, the ownership of which in favor of RMSA was confirmed under Resolution No. 0741-COMFER/00. The assignment, sale 269 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 270 and transfer of the Bahía Blanca Broadcasting Service will be subject (condition precedent) to the fulfillment on or before December 31, 2014 -or upon expiration of any extension of this term- of all of the conditions precedent contained in the offer, among them, that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Bahía Blanca Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offerors required by the Audiovisual Communication Services Law to be a licensee of the audiovisual communication service that is the subject matter of the Offer. The Price offered for the Assignment of the Bahía Blanca Broadcasting Service is of USD 50,000 (Fifty Thousand US Dollars), payable as follows: (i) USD12,500 (Twelve Thousand Five Hundred US Dollars) as Advance Payment, within 5 (five) business days after receipt by the Offeror of the notice of pre-acceptance of the Offer, and (ii) the balance of USD37,500 (Thirty Seven Thousand Five Hundred US Dollars) on the Closing date. On June 30, 2014, Radio Mitre S.A. sent to the Offeror the notice of pre- acceptance of the Offer. Finally, on July 1, 2014 Radio Mitre S.A. notified the Offeror of the acceptance of the Offer, stating that even though its acceptance of the Offer was binding both on Radio Mitre S.A. and the Offeror, its execution was subject to the effective occurrence of the conditions precedent indicated in the Offer. With regard to the above-mentioned offers, in July 2014 the offerors paid Radio Mitre the advances that were agreed in connection with the transfers of the frequencies of San Miguel de Tucumán, Bahía Blanca and Santa Fe. • Irrevocable Offer for the acquisition of the Sound Broadcasting Service owned by Bariloche TV. The main terms and conditions of the Offer received are the following: (I) the offer letter was sent by Mr. Francisco Alejo Quiñonero (the “Offeror”), who made a binding, firm and irrevocable offer (the “Offer”) for the acquisition of the sound frequency modulation broadcasting service, identified with the distinctive signal LGR346. Category D, to operate in the frequency 103.1MHz, Channel 276, in the city of San Carlos de Bariloche, Province of Río Negro, awarded to Bariloche TV pursuant to Resolution 154-COMFER/2001 (the “Bariloche Broadcasting Service”). (II) The assignment, sale and transfer of the Bariloche Broadcasting Service will be subject (as condition precedent) to the fulfillment on or before December 31, 2014-or upon expiration of any extension of this term, should Bariloche TV extend it for up to 180 days-of all of the following Conditions Precedent: (i) that AFSCA and the other oversight agencies that may correspond approve the assignment, sale and transfer of the Bariloche Broadcasting Service, including but not limited to the approval of the admissibility conditions of the Offeror; and (ii) that as of the Closing Date there are no laws and/or administrative and/or court orders restraining, prohibiting, amending, altering, conditioning or rendering illegal the assignment, sale and transfer of the Bariloche Broadcasting Service under the conditions set forth in the Offer. (III) The Offer shall remain effective from June 24, 2014 through August 20, 2014 (the "Offer Period"), notwithstanding which, if on or before that date Bariloche TV should communicate to the Offeror that the Offer has been considered admissible by the Board of Directors of Grupo Clarín S.A. and pre-accepted for the purpose of its subsequent treatment at the shareholders’ meeting of Grupo Clarín S.A. that will consider and decide on the manner, form and conditions for the implementation of the Proposal (the "Pre-Acceptance"), the Offer shall be automatically extended for an additional period that will expire 10 (ten) business days after the close of the above-mentioned Shareholders’ Meeting of Grupo Clarín S.A. (IV) The Offer shall be deemed accepted by Bariloche TV if the shareholders of Grupo Clarín S.A., at the abovementioned shareholders’ meeting, should decide within the Offer Period to accept the Offer definitively, and Bariloche TV should send the Offeror written notice stating unequivocally its intention to assign, sell and transfer to the Offeror the Bariloche Broadcasting Service under the terms and conditions of the Offer (the "Acceptance"). As from Acceptance, this Offer will be binding on both Bariloche TV and the Offeror and its execution will only be subject to the effective occurrence of the Conditions Precedent. At closing, the parties shall execute all the final instruments required to consummate the assignment, sale and transfer of the Bariloche Broadcasting Service. (V) Within 10 (ten) days as from the Acceptance, the Offeror undertakes to create a company for the purpose of acquiring the Bariloche Broadcasting Service. (VI) If the Offer should be accepted as of the Closing Date, 270 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 271 Bariloche TV and the Offeror shall perform the acts required to execute a firm agreement on the assignment, sale and transfer of the Bariloche Broadcasting Service in favor of the Offeror in accordance with the terms and conditions of the Offer (the “Assignment”). (VII) The Price offered for the Assignment of the Bariloche Broadcasting Service is of Ps. 450,000 (Four Hundred Fifty Thousand Pesos) (the “Price”), payable as follows: (i) Ps. 149,985 (One Hundred Forty Nine Thousand Nine Hundred Eighty Five Pesos) as initial price, on the Closing date, and (ii) Ps. 300,015 (Three Hundred Thousand Fifteen Pesos), which shall be converted into US Dollars at the official offer exchange rate quoted by Banco Nación on the day immediately preceding the Closing date (the "Price Balance"), and shall be paid in 2 (two) equal installments of Ps. 115,007.50 each -with no interest- which shall be payable upon 12 (twelve) and 18 (eighteen) months as from Closing date. The Offeror may cancel such installments in Pesos, at the official offer exchange rate quoted by Banco Nación on the day immediately preceding the payment date. The Price Balance shall be guaranteed by the Offeror by the issuance and delivery to Bariloche TV, on the Closing date, of 2 (two) promissory notes. (VIII) The Offer sets as closing date the tenth business day as from the fulfillment of the last of all Conditions Precedent (the "Closing"), at the time and place that Bariloche TV shall notify the Offeror in writing, to carry out the acts necessary to execute the Assignment of the Bariloche Broadcasting Service. (IX) The Assignment of the Bariloche Broadcasting Service shall be executed in the economic, financial, equity, tax, legal and regulatory conditions in which such service is at Closing Date. (X) The Offeror undertakes to carry out at its own risk, within applicable terms, all the notices and/or filings with the authorities or governmental agencies that may be necessary (especially with AFSCA) on account of or in connection with the Offer. On July 1, 2014, Bariloche TV notified Mr. Francisco Alejo Quiñonero of the acceptance of the Offer, stating that as from the Acceptance, the Offer was binding both on the company and the Offeror, and its execution was only subject to the effective occurrence of the conditions precedent indicated in the Offer. The parties shall, at Closing, execute all the final instruments required to consummate the assignment, sale and transfer of the sound broadcasting service subject matter of the Offer. • The terms and conditions of the Irrevocable Offer for the acquisition of the shares of TELBA are the following: (I) the letter was sent to ARTEAR and GC Minor S.A. by Mr. Francisco Alejo Quiñonero, who made a binding, firm and irrevocable Offer to acquire the following equity interests in TELBA: (i) 156,624 registered, non endorsable, common shares with a nominal value of Ps. 0.0001 and entitled to one vote per share, representing 99.9994% of the capital stock and votes of TELBA owned by ARTEAR, and in the same proportion the political and economic rights inherent to such shares (the “ARTEAR Shares”), and (ii) 1 (one) registered, non endorsable, common share with a nominal value of Ps. 0.0001 and entitled to one vote per share, representing 0.0006% of the capital stock and votes of TELBA owned by GC Minor, and in the same proportion the political and economic rights inherent to such shares. The assignment, sale and transfer of the Shares shall be subject to the approval by AFSCA and by other oversight agencies that may correspond on or before December 31, 2014 of the transfer of the Shares subject matter of the Offer; and to the absence as of the Closing Date of any laws and/or administrative and/or court orders restraining, prohibiting or rendering illegal the transfer of the Shares under the conditions set forth under the Offer (the “Conditions Precedent”). On July 1, 2014, ARTEAR and GC Minor notified Mr. Francisco Alejo Quiñonero of the acceptance of the Offer, stating that as from the Acceptance, the Offer was binding on ARTEAR, GC Minor and the Offeror, and its execution was only subject to the effective occurrence of the conditions precedent indicated in the Offer. The parties shall, at Closing, execute all the final instruments required to consummate the assignment, sale and transfer of the Shares of TELBA. The Price offered for the Purchase of the Shares of TELBA is of Ps. 5,000,000 (Five Million Pesos) (the “Price”), payable as follows: (i) Ps. 1,666,500 (One Million Six Hundred Sixty Six Thousand Five Hundred Pesos), at Closing; and (ii) the balance of Ps. 3,333,500 (Three Million Three Hundred Thirty Three Thousand Five Hundred Pesos) shall be converted into US Dollars at the official offer exchange rate quoted by Banco de la Nación Argentina on the Closing date (the “Purchase Price Balance”), and shall be settled as follows: (i) 50% (fifty per cent) of the Purchase Price Balance shall be settled upon 12 (twelve) months as from Closing date, and (ii) the 271 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 272 remaining 50% (fifty per cent) of the Purchase Price Balance shall be settled upon 18 (eighteen) months as from Closing date. Although the Purchase Price Balance has been agreed in US Dollars, the Offeror may settle the Purchase Price Balance in pesos, or any currency that may replace the Argentine peso, at the official offer exchange quoted by Banco de la Nación Argentina. The Purchase Price Balance shall be guaranteed by the Offeror by the issuance and delivery to ARTEAR and GC Minor, on the Closing date, of 2 (two) promissory notes. The Purchase of the Shares of TELBA shall be executed in the economic, financial, equity, tax, legal and regulatory conditions in which such shares and TELBA are at Closing. Additionally, the Purchase shall be, with respect to ARTEAR and GC Minor, free and clear of any responsibility arising from the existence of any liabilities arising prior to the Closing date and not disclosed in the Financial Statements of TELBA. Also, at Closing, the Offeror shall grant ARTEAR and GC Minor and/or a designee of ARTEAR and GC Minor, irrevocably and firmly: the exclusive, firm and irrevocable right, but not the obligation, to opt for the purchase of the Shares of TELBA (the “Right of Option”); and the right of first refusal to acquire, exclusively and with priority the Shares of TELBA with respect to any third party (the "Right of First Refusal"), subject to the terms and conditions established in the Offer. As decided by the shareholders, on July 1, 2014 (Filing No. 13,291-AFSCA/14), the Company appeared before AFSCA and requested that agency to ratify that the limitations under Subsection 3 of Section 45 apply only to audiovisual communication service licensees that are holders of the registered title of cable television signals and not to its shareholders and/or holders of the registered title of cable television signals (when the latter are not licensees). The Company also stated that if that agency were to confirm the Company’s interpretation, then the Proposal should be deemed reformulated and/or partially amended based on any such precedents and on the principle of equality taking into account the reservation of rights under the Company’s Proposal. On July 10, 2014, AFSCA served the Company and ARTEAR with Notice 130 AFSCA/14 whereby, in response to the note submitted by both companies on July 1, 2014, that agency stated that in the opinion of AFSCA’s Permanent Legal Service, the request made by both companies entailed a material amendment of the Proposal, and therefore AFSCA rejected the requested reformulation and/or amendment of the Proposal because it considered that the procedural stage for such amendments had concluded. That agency also stated, prima facie, that the precedents mentioned by both companies regarding the signals were not applicable to the case under review. On July 11, 2014, when the shareholders of the Company resumed the Shareholders’ Meeting that had been adjourned on June 30, 2014, the shareholders approved (i) the firm and irrevocable Alternative Offer of 34 South Media LLC for Unit IV under the Proposal, which was considered by the Company’s Board of Directors on the same date, and instructed the Board of Directors, in light of the response received from AFSCA, to carry out all the necessary steps to comply with the Proposal and to bring the administrative and legal actions required to best safeguard the interests of the Company and (ii) the Irrevocable Offer for the acquisition of the shares of Cuyo Televisión S.A. (which make up Unit VI under the Proposal) owned by Diario Los Andes Hermanos Calle S.A., which had been considered by the Company’s Board of Directors on the same date. The main terms and conditions of the offers approved by the shareholders at the meeting held on July 11, 2014 to resume the Extraordinary Shareholders’ Meeting that had been adjourned until that date on June 30, 2014 are the following: • The terms and conditions of the firm and irrevocable Alternative Offer of 34 South Media LLC for Unit IV under the Proposal approved by the shareholders are the following: The offer consists in the transfer of ownership of the assets that make up Unit IV under the Proposal to a trust in which Grupo Clarín S.A. and GC Minor S.A. will be the Settlors, by contributing all the shares issued by Inversora de Eventos S.A. representing 100% of the capital stock and votes of that company, together with the political and economic rights inherent to such shares, once IESA has exercised its call options on the signals and the shares representing 24.999613% of the capital stock and votes of Canal Rural 272 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 273 Satelital S.A, currently owned by ARTEAR. The trust will be managed by an independent trustee, which will be appointed by Grupo Clarín S.A., GC Minor S.A. and 34 South Media LLC by mutual agreement. The trustee will carry out its duties based on management and administration rules or a manual to be defined by mutual agreement among Grupo Clarín S.A., GC Minor S.A. and 34 South Media LLC at the creation of the Trust. The main purpose of the trust will be to preserve the value of the assets held in trust in case the Company decides to bring legal actions to safeguard its rights. The beneficiaries of the trust will be Grupo Clarín S.A., GC Minor S.A. or 34 South Media LLC, to which the trustee will transfer as appropriate the ownership of the property held in trust. The trustee will transfer all the Shares of IESA applying the following criteria: 1st) in favor of 34 South Media LLC if Grupo Clarín S.A. should be forced to divest of Unit IV, within 10 days as from the fulfillment of the Conditions Precedent (as defined below) or the setting of the Price, whichever occurs last (the “Closing”), or 2nd) in favor of Grupo Clarín S.A. and GC Minor S.A. if Grupo Clarín S.A. should not be forced to divest of Unit IV, within 10 days as from the final decision rendered in any actions brought by the Company. Prior to Closing, the parties will set the price that the offerors shall pay to the assignors for the Shares of IESA according to the following procedure: The offerors will offer the assignors an aggregate price for the Shares of IESA (hereinafter, the “Offered Price”). If the assignors do not accept the Offered Price, they may entrust Banco Santander or Banco Itaú, at the sole discretion of the assignors, with the valuation of the Shares of IESA, or they may appoint any other appraiser by mutual agreement among the parties at the request of the assignors. The appraiser will carry out its duty within thirty calendar days as from its designation and shall notify by certifiable means the result of the valuation to all the parties involved. The valuation method will be determined by the designated appraiser. Once the parties have been notified by certifiable means of the price resulting from the valuation under the stipulated procedure (hereinafter, the “Appraised Price”), the following procedure will be followed: 1) If the Offered Price should be lower than the Appraised Price, the offerors will acquire the Shares of IESA at the Offered Price + [(Appraised Price – Offered Price) / 2]). 2) If the Offered Price should be higher than the Appraised Price, the Price to be paid by the offerors to the assignors for the Shares of IESA shall be: Appraised Price + [(Offered Price – Appraised Price ) / 2]). The costs and expenses incurred as a result of the valuation stipulated in this clause will be exclusively and equally borne by the assignors and the offerors. After the final Sale Price has been agreed upon or set, the transaction will be implemented at Closing, which will take place on the date and at the place indicated by the assignors. The price to be paid by the offerors will be paid as follows: 30% at Closing and the balance in three equal, annual and consecutive installments counted as from Closing. The fulfillment of the obligations undertaken by the parties at Closing, including the payment of the Price by the offerors to the assignors and the transfer of the Shares of IESA by the trust to the offerors, will be subject to the fulfillment of all of the following conditions (individually and collectively, hereinafter the “Conditions Precedent”): 1) That –where necessary- AFSCA and other oversight agencies that may correspond approve the transfer of Shares of IESA and other assets subject matter of this agreement in favor of the offerors; and 2) that there are no laws and/or administrative and/or court orders restraining, prohibiting, amending, altering, conditioning or rendering illegal the transfer of the Shares of IESA and other assets subject matter of this agreement. • The main terms and conditions of the Irrevocable Offer for the acquisition of the shares of Cuyo Televisión S.A. (CUTESA) owned by Diario Los Andes Hermanos Calle S.A. are the following: The offer was sent by Messrs. Silvina Claudia Alonso, Mariano Germán Alonso and Gabriela Cecilia Alonso (the “Assignees”) to acquire from Diario Los Andes, all the rights and actions it has over 36,000 shares representing 9% of the capital stock and votes of CUTESA. As from the notice of acceptance of the offer, it will be binding on both Diario Los Andes and on the Assignors and its execution will only be subject to the effective occurrence of the conditions precedent mentioned in the offer. At closing, the parties shall execute all the final instruments required to consummate the assignment of the rights over the shares of CUTESA. The price offered for the assignment, sale and transfer of the rights over the shares of CUTESA is Ps. 17,000,000 payable by the Assignees to Diario Los Andes as follows: Ps. 15,000,000 on the closing date, 273 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 274 Ps. 2,000,000 equal to 6,000 seconds of prime time advertising in CUTESA provided that such advertising seconds may be used by Diario Los Andes or the members of the same economic group within 5 years as from Closing. Notwithstanding the foregoing, the Assignees will pay to Diario Los Andes an additional Ps. 5,000,000 (the “Contingent Price Balance”), subject to the condition precedent that upon the expiration of the current term of the license -which would expire on November 24, 2017-, CUTESA be legally authorized to continue exploiting the television broadcast service in the City of Mendoza on account of an extension or renewal of the license under any title or cause, or that CUTESA continue to exploit the service, in which case the Assignees shall pay to Diario Los Andes the Contingent Price Balance under the conditions mentioned in the Offer. If exploitation of the service was maintained during only part of a given period, the Assignees shall pay to Diario Los Andes the Contingent Price Balance pro rata, based on the duration of the service. In order to guarantee the payment of the price (and if applicable the Contingent Price Balance) to Diario Los Andes, the Assignees shall be jointly and severally liable for, and shall be unrestricted guarantors of all the obligations undertaken by the Assignees with respect to the payment of the price balance. The profits generated by CUTESA during the years 2013 and 2014 (in this case on a pro rata basis until the closing date) will be approved by the Assignees as dividends in favor of Diario Los Andes within the legal terms and payable by CUTESA to Diario Los Andes within ten working days as from their approval. On July 22, 2014, the Company and ARTEAR made a filing with AFSCA in order to request that agency to disregard the erroneous considerations contained in Opinion No. 001028-AFSCA/DGAJ and dismiss all the decisions rendered by the areas of AFSCA stated in Minutes No. 51 of AFSCA, which were served on the Company and ARTEAR on July 11, 2014, and to consider the Proposal reformulated and/or amended under the terms indicated by the Company and ARTEAR in their note dated July 1, 2014 (Proceeding No. 13291-AFSCA/14). On July 24, 2014, Grupo Clarín S.A. made a filing before AFSCA in order to notify that agency that the shareholders of the Company, in connection with the implementation of the Proposal that was declared formally admissible pursuant to Resolution No. 193/AFSCA/2014, had approved: i) the proposal for the partial spinoff of Grupo Clarín S.A. and the consequent creation of a new company; ii) the irrevocable offer received by Grupo Clarín S.A. for the acquisition of a given number of shares of Cablevisión such that its acquirer will become holder of Cablevisión Spinoff 2, i.e. Unit III under the Proposal; iii) the transfer of the assets owned by ARTEAR allocated to Unit IV in favor of IESA and the irrevocable offer to transfer the equity interests owned by Grupo Clarín S.A. and GC Minor S.A. in IESA in favor of a trust to be created; iv) the irrevocable offers received by Radio Mitre S.A. for the sale of the assets that make up Unit V; and v) the irrevocable offers received by ARTEAR and Diario Los Andes Hermanos Calle S.A. for the sale of the assets that make up Unit VI. Also on July 24, 2014, Cablevisión made a filing with AFSCA in order to notify that agency that on June 30, 2014, the shareholders of Cablevisión, at that Company’s Extraordinary Shareholders’ Meeting, had unanimously approved: i) the proposal for the partial spinoff of that company that had been duly informed to AFSCA; ii) the partial amendment of Cablevisión’s bylaws, which contemplates the observations made by AFSCA; iii) the creation of two new companies with a portion of the equity subject to the spinoff; iv) the merger of a portion of the equity subject to the spinoff with Tres Arroyos Televisora Color S.A., Indio Rico Cable Color S.A., Copetonas Video Cable S.A., Dorrego Televisión S.A., Cable Video Sur S.A. (under reorganization), and v) the merger of a portion of the equity subject to the spinoff with La Capital Cable S.A. and Otamendi Cable Color S.A. In the same filing, the Company attached the Bylaws of the companies to be spun off. On July 25, 2014, the Company made a filing with AFSCA in order to notify that agency that its shareholders at the Extraordinary Shareholders’ Meeting held on June 30, 2014, its shareholders had approved the irrevocable offer received from Messrs. Martí Casadevall and Christophe DiFalco for the acquisition of a number of shares of Cablevisión such that, upon consummation of the spin-off of Cablevisión, the offerors will be entitled to receive sixty percent (60%) of the shares to be issued by Cablevisión Spinoff 2 (Unit III under the Proposal). 274 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 275 On August 11, 2014, Cablevisión requested the SECOM to register the telecommunications licenses directly or indirectly owned by Cablevisión under the name of the surviving company in accordance with the procedure to conform the Company to the Audiovisual Communication Services Law No. 26,522. On August 13, 2014, AFSCA notified Grupo Clarín, Cablevisión, ARTEAR and Radio Mitre of Resolution No. 902/AFSCA/2014. The Resolution rejects a request for the partial amendment of the proposal filed by Grupo Clarín and ARTEAR, relating to the divestment of assets owned directly by the latter. The Resolution also compels Grupo Clarín, ARTEAR, Radio Mitre and Cablevisión to ratify their intention to fulfill, with no changes, the Proposal that was declared formally admissible pursuant to Resolution No. 193/AFSCA/2014 in the terms in which it was admitted. That agency also stated that failure to do so would be sanctioned pursuant to Section 21 of Law No. 19,549, which provides that the Administration may declare unilaterally the lapsing of an administrative act when the interested party does not fulfill the conditions set forth under such act, provided that the Administration shall have previously declared the interested party delinquent and granted a reasonable supplementary term to remedy its non-compliance. On August 15, 2014, 34 South Media LLC requested Grupo Clarín and GC Minor to reconsider the Original Offer submitted on June 26, 2014, i.e. the transfer of the shares representing 100% of IESA’s capital stock in favor of 34 South Media LLC, including all of the assets that make up Unit IV. 34 South Media LLC also stated that in the event of acceptance of the Original Offer, Mr. Miguel El Haiek would acquire the minority interest in IESA that may be necessary for regulatory purposes in order to comply with the requirement of a plurality of shareholders established under Law No. 19,550. Therefore, on August 15, 2014, the Board of Directors of Grupo Clarín held a meeting to take note of Resolution No. 902/AFSCA/2014 and to consider the note sent by 34 South Media LLC, whereby the latter offered Grupo Clarín and GC Minor the possibility of reconsidering and accepting the Original Offer submitted on June 26, 2014. At such meeting of the Board of Directors, taking into consideration the evident arbitrariness with which AFSCA decides and behaves in connection with Grupo Clarín and its subsidiaries, the Board decided to accept the Original Offer submitted by 34 South Media LLC, stating its acceptance in writing in order to, in this way, transfer Unit IV under the Proposal to 34 South Media LLC. Consequently, the Alternative Offer that had been approved by the shareholders at the Shareholders’ Meeting of Grupo Clarín that had been resumed after its adjournment, was rendered without effect. At the same Meeting, the Board decided to call a new Extraordinary Shareholders’ Meeting of Grupo Clarín in order for the shareholders to ratify the decision of the Board of Directors in connection with the acceptance of the original Offer. Also on August 15, 2014, the Board of Directors of GC Minor decided to approve the Original Offer submitted by 34 South Media LLC. Finally, also on August 15, 2014, Grupo Clarín and GC Minor notified 34 South Media LLC and Mr. Miguel El Haiek of the acceptance of the Original Offer, which therefore became binding on all the parties involved. On August 15, 2014, ARTEAR and Grupo Clarín S.A. made a filing with AFSCA in order to inform and certify: (i) the acceptance of the offer for the 100% equity interest held by ARTEAR and GC Minor S.A. in Teledifusora Bahiense S.A., owner of LU 81 TV Canal 7 of Bahía Blanca. They requested AFSCA to render a preliminary decision about the admissibility conditions of the Offerors to proceed without further delay with its effective transfer, and (ii) the transfer by ARTEAR of 24.999613% of the shares of Canal Rural Satelital S.A. in favor of IESA. They also requested that agency to acknowledge the new shareholder structure of Canal Rural Satelital S.A. in conformity with Decree No. 904/2010. On August 19, 2014, ARTEAR and Grupo Clarín S.A. made a filing with AFSCA in order to inform and certify the transfer of the signals El Trece Satelital, Volver, Quiero mi Música en mi Idioma and Magazine by ARTEAR in favor of IESA and requested that agency to acknowledge the new ownership of those registered signals. The accepted Offer also provides for the execution of content supply agreements whereby the parties agreed on a consideration that is calculated in every case based on a percentage of the revenues generated 275 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 276 by the commercialization of the transferred cable television signals, with an established minimum consideration. On August 19, 2014, the Board of Directors of Cablevisión took note of Resolution No. 902/AFSCA/2014, highlighting the threat contained in that Resolution to apply the ex officio implementation of the Proposal even though the term granted by Resolution No. 193/AFSCA/2014 for its execution had not yet expired, in addition to being legally inapplicable. On August 19, 2014, Grupo Clarín, ARTEAR, Radio Mitre and Cablevisión made a filing with AFSCA in order to inform and certify that they had duly completed all actions required of those companies and necessary to implement the Proposal in the terms in which it had been approved pursuant to Resolution No. 193/AFSCA/2014. Consequently, the Company deemed that AFSCA’s inapplicable order issued pursuant to Resolution No. 902/AFSCA/2014 had been responded. In that same filing, they also requested AFSCA (i) to order and decide on the prior acts that are necessary to complete the process and that were requested in each of the filings made by the Company, including an extension of the term granted for the implementation of the Proposal for as long as it takes that Agency to analyze and instrument such prior acts, and (ii) to compel the other government agencies that must necessarily intervene in this procedure, to issue the corresponding authorizations that are required prior to its final implementation to enable the final completion of the process. On September 2, 2014 the term for the Company’s creditors to exercise their rights to object to the spinoff expired. Notwithstanding the above, as of the date of these financial statements, the Company has not yet issued the public deeds relating to the spinoff and to the creation of the spun-off companies because the prior regulatory authorizations have not been granted as provided under its spinoff prospectus. On September 19, 2014, the Company, Cablevisión, ARTEAR and Radio Mitre were served with Note No. 640 AFSCA/DGAJyR/SGAJ/DAyT/14, which stated that the analysis of the Company’s filings yielded prima facie evidence of the existence of corporate relationships between Audiovisual Communication Service Units No. 1 and No. 2 due to the fact that some of the proposed trustees are individuals who are related to each other through companies, thus verifying relationships among them that could generate undue concentration practices, which would lead to a joint management of Units No. 1 and No. 2. Therefore, AFSCA granted those companies a term of 10 (ten) days to allege and provide evidence of the factual and legal circumstances that may disprove the existence of the above- mentioned relationships, the joint management of the trusts and, therefore, the breach of the antitrust and deconcentration principles provided under Law No. 26,522. On September 22, 2014, at the General Extraordinary Shareholders’ Meeting, the shareholders of the Company decided to ratify all the decisions adopted by the Board of Directors of the Company on August 15, 2014 in connection with the acceptance of the firm and irrevocable offer to purchase the shares and signals that make up Unit IV under the Proposal received from 34 South Media LLC, and consequently, to revoke the decision approved under point 5 of the Agenda of the General Extraordinary Shareholders’ Meeting held on June 30, 2014 and resumed on July 11, 2014 after its adjournment. On October 6, 2014, the Company made a filing with AFSCA in response to the request made by that agency. The Company requested that agency to dismiss without further formalities Notes No. 640/AFSCA/DGAJ yR/SGAJ/DAyT/2014 and DAEYP No. 92 for being premature and manifestly inappropriate and therefore absolutely null and void. The Company also requested that AFSCA consider the explanations provided in response to its observations and compel the other intervening authorities to carry out the necessary administrative acts to enable the final completion of the procedure to conform the Company to the Audiovisual Communication Services Law. The Company also informed that agency of the decision of the controlling shareholders to change the proposed trustees who had been challenged by that agency, reiterating that, in the Company’s understanding, the trustees proposed in the event that the spinoff of Grupo Clarín should be finally approved and implemented, would largely comply with the Audiovisual Communication Services Law. 276 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 277 On October 9, 2014, AFSCA notified the Company, ARTEAR, Radio Mitre and Cablevisión of AFSCA Resolution No. 1,121/2014 whereby it decided to (i) reject the spinoff project of the Company, the spinoff project of Cablevisión, the formation of the foreign trusts and the transfers proposed by the Company, ARTEAR, Radio Mitre and Cablevisión, (ii) initiate the Ex Officio Transfer procedure pursuant to Section 1, subsection a) of Annex I of AFSCA Resolution No. 2206/2012, (iii) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit— attaching the corresponding supporting and evidentiary documentation—within a term of fifteen (15) days, whether all of the services and registrations detailed in the list disclosed under Annex III of Action No. 22,253 AFSCA/13 are owned and/or exploited by said companies, indicating, where appropriate, which of those services and registrations are not owned by them and/or are not exploited by them; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012; (iv) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit—attaching the supporting and evidentiary documentation— within a term of fifteen (15) days, the detail of any licenses owned or exploited by such companies that may not have been included under Annex III of Action No. 22,253-AFSCA/13; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012; (v) compel the Company, ARTEAR, Radio Mitre and Cablevisión to expressly inform, in the form of an affidavit, within a term of fifteen (15) days, the assets related to each license and/or services that do not appear on the list identified as “list of assets related to the service”, also indicating whether or not the inclusion of any such assets may not be appropriate; failure to do so will be sanctioned pursuant to Section 5 of Annex I of AFSCA Resolution No. 2206/2012 and (vi) request in due time the intervention of the Court of Appraisals of Argentina, submitting to that Agency the information related to the services, detailed registrations and the essential assets related to them, and especially the agreements and assets contributed by the Company, for the purposes provided under Section 3, Subsection c), Annex I of AFSCA Resolution No. 2206/2012. AFSCA Resolution No. 1121/2014 is absolutely null and void because it was issued in manifest and public violation of the due process of law and inaudita parte, without notifying the Company, ARTEAR, Cablevisión and Radio Mitre of the alleged facts and/or non-compliances that grounded such resolution. AFSCA seeks to ground its Resolution No. 1121/2014 in two alleged failures to comply with the Proposal: i) the corporate relationship and/or joint management of the business units to be created and ii) the alleged failure to comply with the committed divestitures. The companies mentioned by AFSCA as companies whose ownership and/or management would generate, in the Enforcement Authority’s judgment, corporate relationships with the companies that submitted the proposal, i.e. the Company, ARTEAR, Radio Mitre and Cablevisión, (a) do not have any corporate relationship with any of those companies and, pursuant to Section 27 of the Audiovisual Communication Services Law, do not control and are not controlled by any of those companies, (b) therefore, neither the Company, nor ARTEAR, Radio Mitre or Cablevisión was ever required to disclose those companies in the Proposal. No such obligation arises from the application of the law or from the application of the regulations issued by AFSCA itself. Moreover, the companies mentioned by AFSCA do not result in the creation vertical or horizontal integration processes with any of the companies involved in the proposal, and do not infringe the multiple license regime provided under Section 45 of the Audiovisual Communication Services Law. Under the application of the Audiovisual Communication Services Law or its regulations, the Company, ARTEAR, Radio Mitre and Cablevisión are not required to identify and/or disclose information about any other company and/or venture that is not directly or indirectly related to the exploitation of audiovisual communication services identified at the time the Proposal was submitted. The AFSCA also states in its Resolution that the transactions proposed to divest of certain assets in Units 3, 4, 5 and 6 include provisions that would allow the Company to “recover its companies” and would prevent the prospective buyers from exercising their full ownership rights over such companies. AFSCA has allowed in other precedents identical rights, without considering them as 277 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 278 events of non-compliance with the Audiovisual Communication Services Law. The transfer of the full ownership over the transferred assets may not be doubted, because the transfer agreement specifically provides for the acquisition of those assets by a third party in exchange for the payment of a sum of money, and in addition to the transfer of the equity interests, the Company loses its exposure, or right, over the variable returns generated by those assets as well as the ability to affect those returns. Given the evident infringement of the guarantees of due process and defense in court, the Company, ARTEAR, Radio Mitre and Cablevisión requested the recusation of the AFSCA Directors who, without having read the internal opinions issued in this regard and even when this was not an item of the agenda, approved AFSCA Resolution No. 1121/2014, as well as the public officials who were actively involved in the process. By means of Decree No. 1942/2014, the National Executive Branch decided to dismiss the recusation requested by the Company. Subsequently, on October 28, 2014, the Company, Cablevisión, ARTEAR and Radio Mitre made a filing with AFSCA in order to request that agency to dismiss all the decisions rendered by the intervening Areas within the framework of Opinion No. 001488-DGAJyR/14 and to declare the nullity of AFSCA Resolution No. 1121/2014. As of the date of these financial statements, AFSCA has not rendered a decision on the above-mentioned filing. On October 31, 2014, Federal Civil and Commercial Court No. 1 granted an interim injunction (medida precautelar) in re "GRUPO CLARÍN v. NATIONAL GOVERNMENT re/ Incidental procedure relating to appeal", whereby the court ordered the National Government and AFSCA “to abstain from performing, directly or through third parties, any action in connection with the ex officio transfer procedure until a decision is rendered with respect to the injunction requested by the Company”. The Company informed AFSCA of such decision through a Notarial Certificate on the very same date, October 31, 2014. Therefore, the Company is not under an obligation to respond to the requests provided under Sections 3, 4 and 5 of Resolution No. 1,121/AFSCA/2014 as long as the interim injunction is in effect. After being served with AFSCA Resolution No. 2,276/AFSCA/2012, the claimants had requested an injunction in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT re/ Incidental procedure relating to appeal" ordering the suspension of the application of point b), Subsection 3, Section 161 of Decree No. 1,225/2010, of Section C “Ex officio transfer”, of Chapter III, Annex I, of AFSCA Resolution No. 297/2010, and of the ex officio transfer procedure provided under Annex I, of AFSCA Resolution No. 2,206/2012, and ordering AFSCA to abstain from: i) transferring ex officio the broadcasting licenses exploited by the claimants, ii) declaring the expiration of their licenses as a consequence of the failure to transfer such licenses ex officio and/or the breach of the challenged laws and iii) ordering the intervention and/or any other measure that may prevent the Company’s normal management and the rendering of the audiovisual and internet access services until a final decision is rendered in the case. The purpose of the incidental procedure relating to appeal was to request the declaration of unconstitutionality of: 1) point b), Subsection 3, Section 161 of Decree No. 1,225/2010; 2) point 1 of Chapter 1 of AFSCA Resolution No. 297/2010, which provides for a term of thirty days to submit a proposal to conform the Company to the Audiovisual Communication Services Law; 3) Section C “Ex officio transfer”, of Chapter III, Annex I, of AFSCA Resolution No. 297/2010; 4) the first paragraph of Section 43 of Decree No. 1,225/2010; and 5) AFSCA Resolution No. 2,206/2012 to the extent it amends and regulates, in its Annex I, the ex officio transfer procedure for licenses and the essential assets related thereto. Given the fact that Resolution No. 2,276/12, which had also ordered the ex-officio forced divestiture procedure, was revoked by AFSCA after the Proposal had been submitted, an interim injunction was granted only after the claimants were served notice of AFSCA Resolution No. 1,121/2014. In view of the serious irregularities mentioned above, upon a request made by Grupo Clarín, ARTEAR and Radio Mitre in re “GRUPO CLARÍN S.A. and Other v. National Government and Other on Merely Declarative Action on Motion for appeal” 278 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 279 (File 7,263/2013/1), on December 9, 2014, the National Court of First Instance on Federal Civil and Commercial Matters No. 1, Clerk’s Office No. 1, granted, an injunction that suspended the effects of Resolution No. 1,121/AFSCA/2014 for a term of six months. This injunction has the same purpose as the above-mentioned interim injunction. Both AFSCA and the National Government were served with this decision and they both filed an appeal. The appeals were substantiated and the file is now pending before Chamber No. 1 of the National Court of Appeals on Federal Civil and Commercial Matters, which shall render a decision on the appeals. On February 20, 2015, the Company was served notice of the decision rendered by the National Court of Appeals on Federal Civil and Commercial Matters, Chamber No. 1, whereby, on February 19, 2015, it confirmed the decision rendered by the Court of Federal Civil and Commercial Matters No. 1 in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT re Incidental Procedure.” The Company, Radio Mitre, ARTEAR and Cablevisión believe that they have executed the Proposal that was declared formally admissible pursuant to Resolution No. 193, fully in accordance with the commitment undertaken by them and in compliance with the applicable regulatory framework, and consider that Resolution No. 1,121/AFSCA/2014 is evidently arbitrary and inappropriate and infringes the constitutional guarantees of due process and defense in court. The procedure to approve such Resolution had serious irregularities and gross and malicious errors relating to the interpretation and application of effective legislation, inevitably rendering such Resolution null and void. For those reasons, the affected companies requested the Resolution’s nullification before an administrative court and will resort to all available judicial remedies to have such Resolution declared null and void in order to satisfactorily implement the Proposal to which they have committed. In view of the foregoing, and taking into account that, in accordance with Resolution No. 1,121/AFSCA-2014 and the Ex-Officio Forced Divestiture Procedure - currently suspended by the court-, one of the conditions precedent of the Offers was not satisfied before December 31, 2014, and also considering the effectiveness of all the Irrevocable Offers for the acquisition of Units No. 3, 4, 5 and 6 under the Proposal approved by the shareholders, the Board of Directors of Grupo Clarín instructed the members of the Task Force Created to Implement the Proposal to make their best efforts to extend the accepted Offers until a final and firm decision is rendered on the claim brought by the Company. Therefore—and given AFSCA’s arbitrary and discriminatory decisions and the Company’s understanding that AFSCA made an unconstitutional application of Sections 45, 48 and 161 of Law No. 26,522, of Decree No. 1,225/10 and of the implementing regulations issued pursuant to AFSCA Resolutions Nos. 297/2010 and 2,206/2012—on March 5, 2015, the Company broadened the scope of the claim filed in re “GRUPO CLARÍN v. NATIONAL GOVERNMENT on Incidental Procedure” (File 7,263/2012)”, and requested the judge to: (i) declare that AFSCA’s enforcement of Sections 45, 48 and 161 of the LSCA on the claimants through AFSCA Resolution No. 1,121/14 is unconstitutional and infringes the right to freedom of the press, property, equality before the law, due process, defense in court and the principle of reasonableness with which those powers must necessarily be exercised, and that, if necessary, each and every resolution related to this unconstitutional enforcement, in particular AFSCA Resolution No. 1,121/14, is illegitimate and null and void; (ii) order claimants to comply with the legitimate legal obligation to conform to the LSCA, voluntarily applying the criteria adopted by AFSCA on other proposals and to order AFSCA to refrain from discriminating against the claimants in the consideration of their proposal to conform to the license regime provided under Section 45 of Law No. 26,522 and to comply with the conditions established in Recital 74 of the Supreme Court’s decision in re “Grupo Clarín and Other v. National Government on Incidental Procedure” for the application of Law No. 26,522; and, (iii) order the National Government to carry out each and every act required to implement the proposal submitted by the claimants that were identified in the Proposal. As of the date of these financial statements, the Company and its legal advisors cannot provide assurance about the effects that this situation may have on the Company and its Proposal. Notwithstanding the 279 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 280 foregoing, the Task Force Created to Implement the Proposal continues to carry out the actions required to implement the Proposal as duly filed. c) Pursuant to Resolution No. 432/2011, AFSCA approved new bidding terms and conditions for the granting of licenses for physical link television services. As a consequence of the issuance of AFSCA Resolution No. 193/2014, on March 12, 2014, Cablevisión purchased Bidding Forms to apply for certain licenses, in cases in which, as a consequence of the license consolidation process that was implemented, locations that used to be authorized as area extensions must now become license headends as a result of the reorganization, and also in the cases in which the original term had fully expired. d) It should be noted that Cablevisión complied with AFSCA Resolution No. 296/2010, as amended and/or supplemented. This resolution provides guidelines for the organization of the programming grids that must be followed by the owners of pay TV audiovisual services. This resolution regulates section 65, subsections a) and b) of Law No. 26,522. The Resolution supplements the provisions of the regulations to the same section of Decree No. 1,225/2010. Cablevisión believes that both the provisions of Decree No. 1,225/2010 and AFSCA Resolution No. 296/2010, as amended and/or supplemented, are regulatory abuses and violate the right to freedom of the press, guaranteed by the National Constitution. In spite of Cablevisión’s efforts to organize its programming grids in accordance with the provisions of section 65 of Law No. 26,522, AFSCA has initiated multiple summary proceedings in connection with the cable television licenses of which Cablevisión is the lawful successor. AFSCA contends that Cablevisión failed to comply with the regulations set forth by AFSCA Resolution No. 296/2010. Cablevisión submitted the responses set forth under section 1, Exhibit II of AFSCA Resolution No. 224/2010 in connection with such accusations. A decision has been rendered on some of the summary proceedings and, as a result, a fine was imposed on Cablevisión. Cablevisión has appealed these decisions. Some of the appeals filed by Cablevisión have been decided against it and have again been appealed. Insofar as Cablevisión is concerned, as of the date of these financial statements, an injunction issued in re “CABLEVISIÓN S.A. v. NATIONAL GOVERNMENT AND OTHERS ON COMPLAINT FOR THE PROTECTION OF CONSTITUTIONAL RIGHTS” by the Federal Court of Appeals of the City of Mar del Plata, whereby that Court revoked the decision rendered in the First Instance, remains in full force and effect. The decision rendered in the First Instance had ordered the dismissal of Cablevisión’s request. The Court of Appeals ordered AFSCA to suspend – until a final decision was rendered on the matter – the application of the penalties derived from the alleged non-compliance with section 65 of Law No. 26,522 and Decree No. 1,225/2010. It also suspended the application of section 6 of AFSCA Resolution No. 296/2010 on the grounds that Cablevisión’s alleged serious non-compliance was not contemplated in the Law or in the Decree. The National Government filed an appeal with the Supreme Court against this decision. Such appeal is still pending resolution. In re “AFSCA v. CABLEVISION SA Decree 1225/10 – RES. 296/10 on/ Proceeding leading to a declaratory judgment” currently pending before the Federal Court of First Instance on Administrative Matters No. 9, on May 16, 2012 the Court granted an injunction that had been requested by AFSCA, ordering Cablevisión and/or the pay television audiovisual services it exploits, to conform to Section 65, paragraph 3 b) of Decree No. 1225/2010 and Sections 1, 2, 3, 4 and 5 of AFSCA Resolution No. 296/2010, until a final judgment is rendered on the merits of the case. Cablevisión has appealed such injunction. On August 6, 2012, Cablevisión was served notice of a decision rendered by the Federal Court of First Instance on Administrative Matters No. 9 of the City of Buenos Aires, whereby that court imposed a fine on Cablevisión of Ps. 20,000 per day for each day of delay in complying with the injunction that ordered Cablevisión to comply with Section 65 of Decree No. 1225/2010 and AFSCA Resolution No. 296/2010. Cablevisión filed an appeal against that decision in due time and form. However, the Court of Appeals ignored the strong grounds asserted by Cablevisión; partially confirmed the decision 280 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 281 rendered in the first instance; and reduced the fine to Ps. 2,000 per day for each day of delay, to be calculated as from the date the decision is deemed final. An appeal was filed to have the case heard by the Supreme Court of Argentina, which was dismissed by the intervening Chamber. Cablevisión filed a direct appeal with the Supreme Court, which was also dismissed. On October 21, 2013 Cablevisión was served with new charges brought for alleged breach of AFSCA Resolution No. 296/2010. These charges are in clear breach of the above- mentioned injunction. Cablevisión filed a response, but no decision has been rendered on the matter yet. On December 23, 2013, Cablevisión informed AFSCA of its new programming grid in digital and analogical systems, expressly maintaining the reserves brought to continue challenging the legality and constitutionality of section 65 of Decree No. 1,225/2010 and AFSCA Resolution No. 296/2010, as amended. e) Between September and October 2011, AFSCA brought 46 charges of delegation of the exploitation of several licenses of which Cablevisión is currently the legal successor. The charges were brought within the framework of COMFER file No. 2,005/08, relating to the registration of the corporate reorganization whereby Multicanal and Teledigital, among other subsidiaries, merged into Cablevisión. Cablevisión has submitted the appropriate responses on behalf of the merged licensees charged as indicated above. To date, such responses have not been decided upon. Cablevisión believes it has strong grounds to reverse the charges brought by administrative and/or judicial means. As of the date of these financial statements, the responses submitted are still pending resolution. f) On August 21, 2013, AFSCA issued Resolution No. 979/AFSCA/2013 whereby it partially regulated Section 67 of the Audiovisual Communication Services Law, ordering the licensees governed by such provision, including broadcast television signals and subscription television signals, to report in the form of an affidavit the list of national feature films and telefilms for which they have acquired broadcasting rights, and ordering that these films be broadcast in conformity with Section 67 of the Audiovisual Communication Services Law. For that purpose, AFSCA created a form of affidavit that must be filed during the first quarter of each calendar year with respect to the preceding calendar year, so that the affidavits may be used to keep a record, together with an on-line record, of each company’s compliance with that provision. Even though Section 67 of the Audiovisual Communication Services Law which sets screen quotas may be deemed unreasonable and, therefore, unconstitutional, and that the online form that AFSCA must make available to licensees has not yet been created, the Company has started to acquire the rights required by this law to broadcast such films and telefilms. g) Finally, we refer to Resolution No. 1,329/AFSCA/2014, which amends Resolution No. 1,047/AFSCA/2014, whereby the AFSCA approved the National Standard for Terrestrial and Broadcast Digital Television Audiovisual Communication Services, and to Decree No. 2,456/2014, which approves the National Digital Audiovisual Communication Services Plan. Both the Resolution and the Decree are manifestly contrary to Law No. 26,522, which has higher hierarchy, because they contradict the rights of the current licensees of broadcast television services, including ARTEAR and the subsidiaries that exploit broadcast television services. Through this legal framework, which was subsequently supplemented by Resolution No. 24/AFSCA/2015, which approved the Technical Plan for Terrestrial Digital Television Frequencies for important areas of the national territory, and Resolution No. 35/AFSCA/2015 (among others) which allocated a digital television station on a permanent basis to the current licensees of analog broadcast stations in order to develop their transition to digital technology, the rights of the current broadcast television licensees are infringed. These rights should be preserved intact as established under Law No. 26,522, which has higher hierarchy. The main effect of these regulations, among their identifiable technical effects, is that the current broadcast television licensees that obtained their licenses pursuant to Law No. 22,285 will have to bear additional charges and obligations which include, among other things, multiplexing and broadcasting on their own responsibility other broadcast television stations. 281 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 282 Since the changes introduced under this regulatory framework have an impact on the responsibilities and rights of the companies involved, those companies are considering the possibility of bringing legal, administrative and/or judicial actions to preserve their rights intact as direct or indirect broadcast television service licensees. A scenario different from the one considered by the Company and its subsidiaries, additional limitations to those contemplated in its voluntary proposal to conform the Company to the Audiovisual Communication Services Law, the evolution of the legal and administrative actions brought or that may be brought and/or a forced divestiture process, may give rise to different results and, eventually, adverse consequences. As of the date of these financial statements and given the current uncertainties regarding the effective evolution of the process of conforming the Company and its subsidiaries to the Audiovisual Communication Services Law, the existing restrictions imposed by the regulatory framework, the outcome of the legal and administrative actions brought or that may be brought and the conditions in which these processes will be effectively carried out, the Company cannot provide assurance about the results of that process. Therefore, at present this situation generates uncertainties about the Company’s business, which could significantly affect the recoverability of the Company’s relevant assets and therefore, the parent company only financial statements taken as a whole. It should be noted that the decision rendered by the Supreme Court of Argentina on October 29, 2013 expressly states the claimant companies’ right to claim economic damages caused to the Company and its subsidiaries as a consequence of the reorganization required to conform to the law. Accordingly, under the proposal submitted to AFSCA on November 4, 2013 the Company expressly reserved its right to bring judicial actions to claim for those damages. The decisions made on the basis of these financial statements should consider the eventual impact of the above-mentioned situations described in points a) through g). The financial statements of the Company and its subsidiaries should be read in light of these uncertain circumstances. The Company will bring the legal actions in each instance to safeguard its rights, those of its subsidiaries and those of its shareholders; as well as to protect the fundamental principles infringed by the above-mentioned uncertain circumstances. Other Matters Related to COMFER, now AFSCA. Cablevisión As from November 1, 2002 and until December 31, 2014, COMFER and AFSCA have initiated summary administrative proceedings against Cablevisión and Multicanal (merged into Cablevisión) for infringements of regulations relating to programming content. Accordingly, a provision has been set up in this regard. ARTEAR As of December 31, 2014, ARTEAR recorded a provision in the amount of approximately Ps. 10.7 million for fines imposed by COMFER and AFSCA, some of which have been appealed and are pending resolution. 11.2 Telecommunication Services The regulatory framework of the Argentine telecommunications sector is undergoing a process of change. In December 2014, the Argentine Congress passed Law No. 27,078, known as the “Digital Argentina Act”, which partially repealed National Telecommunications Law No. 19,798. The new law subjects the effectiveness of Decree No. 764/00, which deregulated the telecommunications market, to the enactment of four new sets of rules that will govern the License, Interconnection, Universal Service and Radio-electric Spectrum regimes. The new law maintains the single country-wide license scheme and the individual registration of the services to be rendered, but replaces the name telecommunication services with Information and Communications Technology Services (“TIC Services”, for their Spanish acronym). Notwithstanding this, the scope of the licenses originally granted to Cablevisión, its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses and their respective registrations of services, remain unaltered. 282 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 283 The licenses will be called “Licencia Única Argentina Digital” and will allow licensees to render any telecommunication services to the public, be they fixed or mobile, wired or wireless, national or international, with or without the licensee’s own infrastructure. The TIC Services registered with the Argentine Secretariat of Communications under the name of Cablevisión, its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses are the following: Data Transmission, Paging, Videoconference, Community Retransmission, Transport of Broadcast Signals, Value-Added, Radio-Electric Trunking, Internet Access, Public Telephony, Local Telephony and National and International Long-Distance Telephony. The law created a new enforcement and oversight Authority as a decentralized agency under the jurisdiction of the Executive Branch: the Information and Communications Technology Federal Enforcement Authority (“AFTIC”, for its Spanish acronym). The new law maintained the obligation to contribute 1% of telecommunication service revenues, net of taxes and charges, to be used for Universal Service investments (this obligation had been imposed by Decree No. 764/00 on all service providers as from January 1, 2001), but the Universal Service Trust Fund was placed under State control. The current manager of such trust fund is Banco Itaú Argentina S.A., which received the requests from Cablevisión and its merged companies and/or subsidiaries and related companies that exploit telecommunication licenses to join the Trust Agreement. The Argentine Secretariat of Communications has yet to decide on the approval of the Project submitted by Cablevisión on June 21, 2011, within the framework of SECOM Resolution No. 9/2011 which created the program “Infrastructure and Equipment”, whereby telecommunication service providers were allowed to submit projects aimed at developing new infrastructure, updating existing infrastructure and/or acquiring equipment for areas without coverage or with unmet needs, in order to meet the obligation to make contributions to the Universal Service Trust Fund for the amounts accrued as from January 2001 until the entry into force of Decree No. 558/08. Another innovation of the recently enacted legislation is the creation of a new public service under the name “Public and Strategic Infrastructure Access and Use Service for and among Providers”. The right of access includes “providers having to make available to other providers their network elements, associated facilities or services to render TIC services, even when such elements are used to render audiovisual content services.” Under this scheme, the government seeks to make private companies that were created and developed in competition share their networks with other companies that have not made any investments. The foregoing applies to any provider that has its own infrastructure or networks, because the term “Associated facilities” is defined as physical infrastructures, systems, devices, associated services or other facilities or elements associated with a telecommunications network or with TIC Services that enable or support the provision of services using that network or service, or that have the potential to do so; and will include, inter alia, buildings or building entrances, building wiring, antennas, towers and other supporting constructions, ducts, masts, manholes, and cabinets. Implementing regulations for Law No. 27,078 are still pending. Therefore, the economic and operational impact that the creation of this public service may have on Cablevisión, its merged companies and/or subsidiaries and related companies cannot be ascertained. The government has taken no action to apply the new law because the AFTIC has yet to be organized. These financial statements should be read in the light of these circumstances. Note 12 Capital Stock Structure Upon the Company’s public offering during 2007, the capital stock amounted to Ps. 287,418,584, represented by: - 75.980.304 Class A common, registered, non-endorsable shares, with nominal value of Ps. 1 each and entitled to 5 votes per share. 283 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 284 - 186,281,411 Class B book-entry common shares, with nominal value of Ps. 1 each and entitled to 1 vote per share. - 25,156,869 Class C common, registered, non-endorsable shares, with nominal value of Ps. 1 each and entitled to 1 vote per share. On October 5 and 11, 2007, the CNV and BCBA, respectively, granted authorization for the Company’s admission to the initial public offering of its capital stock. Said authorizations contemplated (i) the public offering of its Class B book-entry common shares, (ii) the listing of its Class B book-entry common shares, and (iii) the listing of its registered non-endorsable Class C common shares, trading of which was suspended due to restrictions on transfers set forth by the Bylaws. Also in the last quarter of 2007, the Company was granted authorization for the listing of its GDSs in the LSE. Each GDS represents two of the Company’s Class B common shares. Note 13 Long-Term Savings Plan for Employees During the last quarter of 2007, the Company, together with its subsidiaries, began to implement a long-term savings plan for certain executives (directors and managers comprising the “executive payroll”), which became effective in January 2008. Executives who adhere to such plan undertake to contribute regularly a portion of their salary (variable within a certain range, at the employee’s option) to a fund that will allow them to strengthen their savings capacity. Each company of the Group where those executives render services will match the sum contributed by such executives. This matching contribution will be added to the fund raised by the employees. Under certain conditions, the employees may access such funds upon termination of their participation in the long-term savings plan. Said plan provides for certain special conditions for those managers who were in the “executive payroll” before January 1st, 2007. Such conditions consist of supplementary contributions made by each company to the plan related to the executive’s years of service with the Group. As of December 31, 2014, such supplementary contributions made by the Company on a parent company only basis amount to approximately Ps. 9 million, and the charge to income is deferred until the retirement of each executive. During 2013, and in view of the current environment, certain changes were made to the savings system, though maintaining in its essence the operation mechanism and the main characteristics with regard to the obligations undertaken by the company. Pursuant to IAS No. 19, the above-mentioned savings plan qualifies as a Defined Contribution Plan, which means that the companies’ contributions shall be charged to income on a monthly basis as from the date the plan becomes effective. Note 14 Financial Instruments 14.1 Financial Risks Management Grupo Clarín is a party to transactions involving financial instruments, which entail exposure to market, currency and interest rate risks. The management of these risks is based on the particular analysis of each situation, taking into account its own estimates and those made by third parties of the evolution of the respective factors. 14.1.1 Capital Risk Management Grupo Clarín manages its capital structure seeking to ensure its ability to continue as an ongoing concern, while maximizing the return to its shareholders through the optimization of debt and equity balances. As part of this process, Grupo Clarín monitors its capital structure through the debt-to-equity ratio, which is equal to the quotient of its net debt (Debt less Cash and Cash Equivalents) divided by shareholders’ equity. The debt-to-equity ratio for the years ended December 31, 2014 and 2013 is as follows: 284 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 285 Loans (i) Less: Cash and Cash Equivalents - Cash and Banks - Other Current Investments Net Debt Equity December 31, 2014 December 31, 2013 231,387 691,884 (5,755,391) (60,603,314) (66,127,318) (7,959,791)- (149,294,148) (156,562,055) 5,483,022,374 4,729,908,305 Debt-to-Equity Ratio (0.01) (0.03) (i) Long-term and short-term loans, including derivatives and financial guarantee agreements. Since Grupo Clarín is a holding company, the measurement of this ratio on the Company’s parent company only balances is not relevant. 14.1.2 Categories of Financial Instruments Financial Assets Loans and Receivables (1) (2) - Cash and Banks - Current Investments - Other Receivables At fair value with an impact on net income - Current Investments Total Financial Assets Financial Liabilities At amortized cost - Debt (3) - Accounts Payable and Other Liabilities (4) Total Financial Liabilities (1) Net of the allowance for doubtful accounts of Ps. 31.3 million and Ps. 28.9 million, as of December 31, 2014 and 2013, respectively. (2) Includes receivables with related parties of Ps. 114.5 million and Ps. 66.6 million, as of December 31, 2014 and 2013, respectively. (3) Debts with related parties. (4) Includes debts with related parties of Ps. 1.8 million and Ps. 1.0 million, respectively, as of December 31, 2014 and 2013. December 31, 2014 December 31, 2013 5,755,391 31,382,473 118,899,844 29,220,841 185,258,549 7,959,791 6,774,979 67,291,553 142,519,169 224,545,492 December 31, 2014 December 31, 2013 231,387 38,746,237 38,977,624 691,884 37,471,192 38,163,076 285 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 286 14.1.3 Objectives of Financial Risk Management Grupo Clarín monitors and manages the financial risks related to its operations; these risks include market risk (including exchange risk, interest rate risk and equity price risk), credit risk and liquidity risk. Grupo Clarín does not enter into financial instruments for speculative purposes as common practice. As of December 31, 2014 and 2013, the Company was not a party to agreements involving derivatives. Assets Current assets Cash and Banks Other Investments Other Receivables Total Current Assets Total Assets 14.1.4 Exchange Risk Management Grupo Clarín enters into foreign currency transactions; therefore, it is exposed to fluctuations of exchange rates. The Company does not currently enter into foreign exchange hedging transactions to manage foreign currency fluctuation risk. In case the Company enters into such transactions, it cannot assure that those operations will protect its financial position from the eventual negative effect of exchange rate fluctuations. The following table shows the monetary assets and liabilities denominated in foreign currency (US dollars) at the closing of the years ended December 31, 2014 and 2013: USD USD December 31, 2014 December 31, 2013 79,743 6,090,787 395 6,170,925 6,170,925 61,169 20,167,320 - 20,228,489 20,228,489 Bid/offered exchange rates as of December 31, 2014 and 2013 were of Ps. 8,451 and Ps. 8,551; and Ps. 6.52 and Ps. 4.92; respectively. 14.1.4.1 Foreign Exchange Sensitivity Analysis Grupo Clarín is exposed to exchange risk, mainly with respect to the US dollar. The Central Bank of Argentina and the Argentine Federal Revenue Service issued certain resolutions related to the exchange market, establishing regulations on the requirements for accessing such market. These financial statements have been prepared based on the assumption that the Company will be able to access such market in order to purchase the foreign currency needed to meet its obligations. The following table shows the Company’s sensitivity to an increase in the exchange rate of the US dollar. The sensitivity rate represents Management’s assessment of the possible reasonable changes in exchange rates. The sensitivity analysis only includes the outstanding monetary items denominated in foreign currency and adjusts its translation at the end of the year with a 20% increase in the exchange rate, assuming that all the remaining variables remain constant. Effect in Ps. Effect in Ps. December 31, 2014 December 31, 2013 Net Income 10,428,864 26,216,121 286 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 287 14.1.6 Credit Risk Management Credit risk is defined as the risk that one of the parties may breach its contractual obligations, generating an eventual financial loss for Grupo Clarín. The Company renders services solely to companies of the same economic group. The credit risk on liquid funds is limited due to the fact that the counterparties are banks with high credit ratings issued by credit rating agencies. The following table details the maturities of the Company’s financial assets as from the closing of the reporting year. The amounts disclosed in the table are the undiscounted contractual cash flows. December 31, 2014 December 31, 2013 34,976,232 106,684,537 43,597,780 185,258,549 151,213,501 64,039,382 9,292,609 224,545,492 14.1.8 Interest Rate Risk and Liquidity Risk Table The following table details the maturities of the Company’s financial liabilities as from the closing of the reporting year. The amounts disclosed in the table are the undiscounted contractual cash flows. The sensitivity analysis presented above is hypothetical since the quantified impact is not necessarily an indicator of the actual impact, because exposure levels may vary over time. Additionally, even though Grupo Clarín conducts its operations in Argentine pesos, an eventual devaluation of that currency may have an indirect impact on its operations, depending on the ability of the suppliers involved to adjust their prices to such effect. 14.1.5 Interest Rate Risk Management At the closing of the year, the Company does not have any financial liabilities with variable interest rates. However, a substantial increase in interest rates may limit the Company’s ability to access financing. Payable on Demand Without any established term Due Up to three months 14.1.7 Liquidity Risk Management The Board of Directors is ultimately responsible for liquidity management. Accordingly, it has established an adequate framework to manage liquidity so that Management can meet short, medium and long-term financing requirements, as well as the Company’s liquidity management. The Company manages liquidity risk maintaining an adequate level of reserves, financial facilities and loans, monitoring on an ongoing basis projected cash flows against actual cash flows and reconciling the maturity profiles of financial assets and liabilities. Accounts Payable Total as of Debt and Other Liabilities December 31, 2014 Without any established term 231,387 2,763,747 2,995,134 Due Up to three months More than three months and up to six months - - 231,387 10,247,141 10,247,141 25,735,349 38,746,237 25,735,349 38,977,624 287 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 288 14.1.9 Financial Instruments at Fair Value The following table shows Grupo Clarín’s financial assets and liabilities measured at fair value at the closing of the reporting year: December 31, 2014 Quoted Prices (Level 1) Other Significant Observable Items (Level 2) Assets Current Investments 29,220,841 9,130,072 20,090,769 December 31, 2013 Quoted Prices (Level 1) Other Significant Observable Items (Level 2) Assets Current Investments 142,519,169 12,569,479 129,949,690 Financial assets are valued using quoted prices for identical assets and liabilities (Level 1), or the prices of similar instruments arising from sources of information available in the market (Level 2). As of December 31, 2014 and 2013, the Company did not have any asset or liability for which a comparison had not been conducted against observable market data to determine their fair value (Level 3). 14.1.10 Fair Value of Financial Instruments The book value of cash and banks, accounts receivable and short-term liabilities is similar to the fair value because these are instruments with short-term maturities. As of December 31, 2014 and 2013, the Company did not have long-term financial liabilities. 14.1.11 Evolution of the economic environment in which the Company operates The holders of certain discount and par bonds issued abroad by the Argentine government - as a consequence of its debt restructurings of 2005 and 2010 during the second half of 2014 have not been able yet to collect the payment of principal and interest due to a claim brought in the State of New York (jurisdiction established in the terms of issuance of those bonds) by certain bondholders who decided not to participate in said debt restructurings. Even though this situation has not yet had a direct relevant impact on the businesses of the Company and its related companies, the Company’s management will continue to monitor closely this situation, the evolution of the fundamental economic variables, and the potential impact on its businesses. Therefore, these financial statements should be read in light of these circumstances. Note 15 Covenants, Sureties and Guarantees provided a. Note 5.12 to the consolidated financial statements sets forth certain restrictions to which Cablevisión (by itself and as the surviving company and successor to Multicanal’s operations after the merger), PRIMA and AGEA are subject under their respective financial obligations described in such note. b. IESA is subject to contractual restrictions on the transfer of its equity interest in TRISA and Tele Net Image Corp. c. During the year 2009, AGR purchased a binding machine on credit. To secure the transaction, AGR granted the supplier a pledge over the machine. AGR granted joint and several guarantees for the loans granted by Banco de Inversión y Comercio Exterior and Standard Bank Argentina S.A. to Artes Gráficas del Litoral S.A. d. On May 27, 2010, the subsidiary CMD executed a mortgage agreement on a building 288 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 289 of its property securing the payment of the obligations under the loan with Banco de la Ciudad de Buenos Aires mentioned in Note 5.12.6 to the consolidated financial statements. became the guarantor for up to Ps. 5 million and Ps. 35 million for a term of 100 days to secure financing transactions of AGR and AGEA, respectively, with Banco Santander Rio S.A. e. On September 25, 2012, GCGC executed a mortgage agreement on a building of its property securing the payment of the obligations under the loan with Banco de la Ciudad de Buenos Aires mentioned in Note 5.12.3 to the consolidated financial statements. Grupo Clarín acts as guarantor of said financing. f. On October 12, 2012, the Company executed an agreement securing the payment of the obligations under a loan taken by GCGC with Standard Bank Argentina mentioned in Note 5.12.3 to the consolidated financial statements. g. GCSA Investments executed an agreement with Itaú Unibanco S.A., New York branch, to secure a financing transaction of a subsidiary of the Group by creating a security interest on a term deposit held in escrow at the above- mentioned bank in the aggregate amount of USD 20.2 million, which matures in July 2015. h. During 2014, AGR financed the acquisition of machinery and equipment through leasing agreements mentioned in Note 5.7.2 to consolidated financial statements. Grupo Clarín and AGEA are joint debtors of said financing. i. In September 2014, Grupo Clarín executed an agreement with Itaú Unibanco S.A., New York branch, to secure a financing transaction of a subsidiary of the Group by creating a security interest on term deposits held in escrow at the above-mentioned bank in the aggregate amount of USD 3.7 million, which mature in January 2015. In January 2015, this guarantee was extended until February 2015. j. In December 2014, CLC granted Banco Mariva S.A. a pledge over two fixed-term deposits at this bank for Ps. 1.5 million and Ps. 4 million, with maturity date in January 2015, to secure financing transactions of Tinta Fresca and Cúspide, respectively. In January 2015, these guarantees were extended until February 2015. k. In November 2014, the Company became the guarantor for up to Ps. 30 million for a term of one year to secure financing transactions carried out between AGEA and Banco Santander Rio S.A. In addition, in February 2015, the Company Note 16 Changes in the Company’s Interests a. In April 2008, AGEA assigned to the Company 54.5% of its rights and obligations derived from the call option described in Note 16.b. On that date, the Company exercised such call option, acquiring shares that accounted for 27.3% of CIMECO’s capital stock. b. During 2007, AGEA increased its interest in CIMECO from 33.3% to 50.0%, and executed call and put options on an additional interest in CIMECO’s capital stock. During 2008, AGEA partially assigned the rights and obligations arising from such options to its subsidiary AGR and to the Company. Subsequently, in 2008, AGEA, AGR and the Company exercised such call option, increasing, directly and indirectly, the Company’s equity interest in CIMECO and Papel Prensa to 100% and 49%, respectively. On April 10, 2008, the Company and the parties to the above-mentioned transaction notified CNDC of such transaction and on May 12, 2008 filed form F-1. After such notice and as of the date of these financial statements, the Company submitted additional information requested by the CNDC. As of the date of these financial statements, the above transaction is subject to administrative approvals. c. On January 11, 2008, IESA acquired the controlling interest of a group of companies mainly engaged in sports journalism, production and commercialization of shows, and the production of motor racing television broadcasting. The share purchase agreement sets forth certain objectives to be met by such group of companies. In case of breach of such provision, the sellers shall have to pay an indemnification. These transactions are subject to administrative approvals. d. On September 2, 2008, ARTEAR increased its equity interest in Pol-Ka and SB Producciones S.A. to 55% of such companies’ capital stock and votes, thus acquiring a controlling interest 289 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 290 in both companies, in which it previously exercised common control. These transactions are subject to administrative approvals. e. On February 10, 2011, CMD sold to a third party all of its shares of Dinero Mail, for approximately USD 4.4 million in cash; part of the price was withheld as guarantee. On August 17, 2011, CMD executed a stock purchase agreement, whereby it increased by 20% its interest in Interpatagonia S.A. (now Interwa S.A.), where it now holds 80% of the capital stock. CMD paid approximately Ps. 4.3 million in consideration for the shares. On November 25, 2014, one of the sellers of Interwa S.A.’s shares, as mentioned in Note 10 to consolidated financial statements, exercised its put option for 6.66% of the shares of that company for approximately Ps. 1.5 million, payable in six monthly installments as from December 2014. f. On October 3, 2011 the Company’s subsidiary AGR acquired 65.46% of the capital stock and votes of Cúspide Libros S.A. and 2.40% of the capital stock and votes of Librerías Fausto S.A.C.E.I. (controlled by Cúspide Libros S.A., and subsequently dissolved). The transaction amounted to USD 2.8 million and Ps. 3.8 million. During 2014, the direct and indirect equity interest of AGEA in Cúspide increased to approximately 93.5%, mainly as a result of AGR’s purchase of shares of Cúspide on April 26, 2014 and the capital increase approved by the shareholders of Cúspide at that company’s General Extraordinary Shareholders’ Meeting held on June 30, 2014, which was fully subscribed by AGR. The total cost of these transactions amounted to approximately Ps. 21 million. h. On November 14, 2013 ARTEAR assigned, sold and transferred to South Media Investments S.A. all of its equity interest in Ideas del Sur S.A. (“IDS”), accounting for 30% of the capital stock and votes of that company, together with all the political and economic rights inherent to the shares. The sale price was set at USD 12 million, which was collected in full a as of December 31, 2013. The assignment, sale and transfer of those shares was carried out “as is” under the economic, financial, equity, tax and legal conditions of the shares and of IDS at the time, considered as a whole. Accordingly, ARTEAR was held harmless from any and all responsibility regarding the existence of any “certain”, “contingent” or “hidden” liabilities (current or non-current) of IDS, that may have existed or originated prior to the closing date of the transaction, regardless of whether those liabilities were or were not disclosed in IDS’ financial statements. Based on the above, South Media Investments S.A. assumed the risk of the existence and/or emergence of liabilities in connection with IDS that may have existed or originated prior to the closing date of the transaction, regardless of whether such liabilities already existed or may become evident or enforceable in the future, South Media Investments S.A. firmly and irrevocably waived its right to bring any claim to which it may be deemed entitled against ARTEAR in this respect, holding it harmless -also firmly and irrevocably- from any and all liabilities for such cause and in that respect. i. On January 14, 2014, the Company and AGEA executed an Agreement Relating to Irrevocable Contributions on Account of Future Share Subscriptions whereby the Company undertakes to make a Ps. 225 million contribution in AGEA. Subsequently, on January 28, 2014 the Company’s Board of Directors approved the contributions made in AGEA under the above-mentioned agreement. On April 28, 2014, at the Annual General Ordinary and Extraordinary Shareholders’ Meeting of AGEA, the shareholders of that company approved those contributions. On June 24, 2014, the Company and AGEA executed an Agreement Relating to Irrevocable Contributions on Account of Future Share Subscriptions whereby the Company undertakes to make a USD 18 million contribution in AGEA, equivalent to approximately Ps. 145 million. j. On August 12, 2014, the Company and IESA executed an Agreement Relating to Irrevocable Contributions on Account of Future Share Subscriptions whereby the Company undertakes to make a Ps. 52.8 million contribution to IESA. 290 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 291 Note 17 Law No. 26,831 Capital Markets On December 28, 2012, Capital Markets Law No. 26,831 (the "Capital Markets Law"), passed on November 29, 2012 and enacted on December 27, 2012, was published in the Official Gazette. The Law provides for a comprehensive amendment of the public offering regime, previously governed by Law No. 17,811. Among other things, this law enhances the National Government’s oversight powers and changes the authorization, control and oversight mechanisms of all stages of the public offering process and the role of all the entities and individuals involved. The Law became effective on January 28, 2013. On July 29, 2013, the National Government issued Decree No. 1023/2013 to regulate partially the Capital Markets Law that had been passed on November 29, 2012. Among other provisions, the Decree regulates Section 20 of said Law, pursuant to which the CNV may appoint an overseer with veto rights over the decisions made by the boards of directors of entities subject to the public offering regime, or otherwise remove the boards from such entities for up to 180 days until all deficiencies found by the CNV are solved. Said Decree amends the Law it seeks to regulate and, therefore, constitutes a regulatory abuse. Thus, whereas the Law vests on the CNV the power to appoint an overseer or to remove the board of directors, the Decree allows the CNV to exercise that power if the shareholders and/or noteholders with a two percent (2%) interest in the company’s capital stock or outstanding debt securities claim that they have suffered actual and certain damages or if they believe their rights may be seriously jeopardized in the future. The Decree also vests on the CNV the power to appoint the administrators or co-administrators that will hold office as a consequence of the removal of the boards of directors. Thus, the Decree amends the Law by granting the CNV powers that were not provided therein. By doing so, the Executive Branch is assuming strictly legislative functions in breach of constitutional provisions. On September 5, 2013 within the framework of the Capital Markets Law and its Decree, the CNV issued Resolution No. 622/2013 (the “Rules”), whereby it approved the applicable Rules that repeal the Rules that had been effective until that date (as restated in 2001). The new Rules have introduced several changes in connection with CNV’s powers over the companies under that agency’s oversight, and also in connection with the information that these companies must disclose. On August 20, 2013, at the request of Mr. Rubén Mario Szwarc, a minority shareholder of the Company, and by means of public deed number two hundred forty five, the Company was served notice of the decision rendered by Chamber A of the National Court of Appeals on Commercial Matters on August 12, 2013, in re “SZWARC, Rubén Mario v. National Government and Others on Preliminary Injunction” File No. 011419/2013. That Chamber decided, among other things, (i) to declare the unconstitutionality of Sections 2, 4, 5, 9, 10, 11, 13, 15 and 16 of Law No. 26,854, and (ii) to order the provisional, injunctive suspension of Section 20, subsection a), second part, paragraphs I and II (or 1 and 2) of Law No. 26,831 and of all laws, rules or administrative acts issued or that may be issued pursuant to such legal provisions, with respect to Grupo Clarín S.A., until the judge that is finally declared competent to render a decision on the merits assumes full jurisdiction of the case and renders a final decision relating to the injunction. On July 29, 2013, the National Government issued Decree No. 1023/2013 to regulate partially the Capital Markets Law that had been passed on November 29, 2012. Among other provisions, the Decree regulates Section 20 of said Law, pursuant to which the CNV may appoint an overseer with veto rights over the decisions made by the boards of directors of entities subject to the public offering regime, or otherwise remove the boards from such entities for up to 180 days until all deficiencies found by the CNV are solved. Said Decree amends the Law it seeks to regulate and, therefore, constitutes a regulatory abuse. Thus, whereas the Law vests on the CNV the power to appoint an overseer or to remove the board of directors, the Decree allows the CNV to exercise that power if the shareholders and/or noteholders with a two percent (2%) interest in the company’s capital stock or outstanding debt securities claim that they have suffered actual and certain damages or if they believe their rights may be seriously jeopardized in the future. The Decree also vests on the CNV 291 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 292 the power to appoint the administrators or co-administrators that will hold office as a consequence of the removal of the boards of directors. Thus, the Decree amends the Law by granting the CNV powers that were not provided therein. By doing so, the Executive Branch is assuming strictly legislative functions in breach of constitutional provisions. On September 5, 2013 within the framework of the Capital Markets Law and its Decree, the CNV issued Resolution No. 622/2013 (the “Rules”), whereby it approved the applicable Rules that repeal the Rules that had been effective until that date (as restated in 2001). The new Rules have introduced several changes in connection with CNV’s powers over the companies under that agency’s oversight, and also in connection with the information that these companies must disclose. On August 20, 2013, at the request of Mr. Rubén Mario Szwarc, a minority shareholder of the Company, and by means of public deed number two hundred forty five, the Company was served notice of the decision rendered by Chamber A of the National Court of Appeals on Commercial Matters on August 12, 2013, in re “SZWARC, Rubén Mario v. National Government and Others on Preliminary Injunction” File No. 011419/2013. That Chamber decided, among other things, (i) to declare the unconstitutionality of Sections 2, 4, 5, 9, 10, 11, 13, 15 and 16 of Law No. 26,854, and (ii) to order the provisional, injunctive suspension of Section 20, subsection a), second part, paragraphs I and II (or 1 and 2) of Law No. 26,831 and of all laws, rules or administrative acts issued or that may be issued pursuant to such legal provisions, with respect to Grupo Clarín S.A., until the judge that is finally declared competent to render a decision on the merits assumes full jurisdiction of the case and renders a final decision relating to the injunction. Note 18 Information required under CNV Resolution No. 629 - Record Keeping On August 14, 2014, the Argentine Securities Commission issued General Resolution No. 629, which provides for record keeping regulations. The Company keeps certain supporting documentation related to the record of its operations and economic-financial events at GCGC located at Patagones 2550, City of Buenos Aires, and at the warehouse located at Ruta 36 Km 31.500, Florencio Varela, of the supplier AdeA - Administración de Archivos S.A., during the periods established by effective laws. Note 19 Extinction of the notes issued by AGEA As mentioned in Note 5.7.2 to the consolidated financial statements, on January 28, 2014, AGEA repaid all of the USD 30.6 million aggregate principal amount outstanding and interest accrued as of such date on the Series C Notes issued by that company under the Global Program. Pursuant to Article 16, Section V of Chapter I of Title III of the Restated Rules issued by the CNV, which governs the delisting due to non-existence of outstanding securities, upon the extinction of the Series C Notes AGEA filed the required documentation with the CNV. On August 5, 2014, the CNV served AGEA with a notice requesting the latter to submit information to prove the extinction of Series A, B and D Notes, issued by that company under the Global Program for the Issuance of Notes. On August 12, 2014, AGEA submitted the information requested by the CNV, providing evidence of the extinction of the notes. On October 8, 2014, the CNV requested AGEA to make a filing in connection with the delisting. On October 16, 2014, AGEA submitted a Note to the CNV whereby it requested delisting due to the extinction of its notes. As of the date of these financial statements, the CNV has not rendered a decision on this matter. Once the authorization for public offering is cancelled due to the non-existence of outstanding securities, AGEA shall no longer be subject to the applicable regulations and legislation issued by the CNV, and shall become subject to the jurisdiction of the IGJ, and, therefore, to that agency’s regulations. 292 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 293 Note 20 Subsequent Events a. The events that took place subsequent to the closing of this year related to the Proposal are described in Note 11.1. b. In connection with Note 10.2.j to these parent company only financial statements, on February 11, 2015, the preliminary hearing was held pursuant to Article 8, subsection b.1.), Title XIII, Chapter II, Section II of the Regulations (T.R. 2013, as amended). c. On January 8, 2015, CMD exercised the call option for an additional 6.66% of the equity interest in Interwa S.A. as mentioned in Note 10 to the consolidated financial statements, at a price of approximately Ps. 1.5 million, payable in five monthly installments as from January 2015. d. Law No. 19,307 was published in the Official Gazette of the Republic of Uruguay on January 14, 2015. This Law governs radio, television, and other audiovisual communication services (hereinafter, the “Audiovisual Communications Law”). Section 202 of this law provides that the Executive Branch shall issue the implementing regulations for this law within a 120-day term as from the day following the publication of this law in the Official Gazette. As of the date of the financial statements, only Decree No. 45/015 has been issued, but the implementing regulations for most of the sections of this law are still pending. Such Decree provides that the concession for the use and award of the radio-electric spectrum for non-satellite audiovisual communication services shall be granted for a term of 15 years. Section 54 of the Audiovisual Communications Law provides that an individual or legal entity cannot be awarded the full or partial ownership of more than 6 authorizations or licenses to render television services to subscribers throughout the national territory of Uruguay. Such limit is reduced to 3 if one of the authorizations or licenses includes the department of Montevideo. Section 189 of this law provides that in case the above-mentioned limits were exceeded as of the entry into force of the Law, the owners of those audiovisual communication services shall transfer the necessary authorizations or licenses so as not to exceed the limits mentioned above within a term of 4 years as from the date of entry into force of the Audiovisual Communications Law. The subsidiaries of Cablevisión in the Republic of Uruguay are analyzing the possible impact on their business that could be derived from the change in the regulatory framework and the eventual legal actions they may bring to safeguard their rights and those of their shareholders. The decisions to be made based on these parent company only financial statements should contemplate the eventual impact that these changes in the regulatory framework may have on Cablevisión and its subsidiaries in the Republic of Uruguay. The Company’s parent company only financial statements should be read in the light of these uncertain circumstances. e. Note 10.1.j describes the main events that took place after December 31, 2014 in connection with the re-allocation of frequencies in the Republic of Uruguay. Note 21 Approval of Parent Company only Financial Statements The Board of Directors has approved the parent company only financial statements and authorized their issue for March 10, 2015. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 293 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 294 Additional Information to the Notes to the Financial Statements - Section No. 68 of the Regulations issued by the Buenos Aires Stock Exchange and Section No. 12 Title IV Chapter III of General Resolution No. 622/13 of the Argentine Securities Commission Balance Sheet as of December 31, 2014 1. There are no specific material regulatory regimes currently applicable to the Company that may entail the contingent loss or acquisition of legal benefits. 4. The classification of receivables and liabilities according to their related financial effects is detailed in Note 9 to the parent company only financial statements. 2. As mentioned in Note 16.a) to the parent company only financial statements, during 2008 the Company carried out transactions that resulted in the acquisition of an equity interest in CIMECO. See also the issues mentioned in Note 11.1. 3. The classification of receivables and liabilities by maturity is detailed in Note 9 to the parent company only financial statements. 5. Equity interest under Section 33 of Law No. 19,550 is detailed in Note 4.3 of the parent company only financial statements. Accounts receivable from and payable to related parties are disclosed under Note 8 to the parent company only financial statements. The following table summarizes the breakdown of such accounts payable and receivable as per the above points 3) and 4). Without any established term Due -Within three months Receivables Liabilities (1) 106,307,873 1,998,786 (2) 8,245,311 - Total 114,553,184 1,998,786 (1) Balances are denominated in local currency and do not accrue any interest. (2) The balances are denominated in local currency and accrue interest at a fixed rate. 6. There are no trade receivables or loans to directors, members of the Supervisory Committee and their relatives up to, and including, the second degree of kinship and no such trade receivables or loans existed during the fiscal year. 7. The Company does not have any inventories. 8. The Company has used current values for the valuation of assets and liabilities acquired from Cablevisión, taking into account, mainly, the following criteria: − Subscriber portfolio: valued based on, among other things, an analysis of the acquired subscriber portfolio’s cash flow generation, considering the subscriber turnover of such portfolio, discounted at a market rate. − Financial debt: since the acquired companies were not listed at the time of the acquisition, the financial debt was valued based on cash flow discounted at a market rate. − Fixed assets: valued based on internal estimates made by the subsidiaries according to available information (kilometers and technical 294 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 295 14. Booked provisions for contingencies do not exceed, either individually or as a whole, two percent (2%) of the Company’s shareholders’ equity. 15. As of the date of these financial statements, the Company does not have any contingent situations, the financial effects of which, if any, have not been booked (see Note 11.1 to the parent company only financial statements). 16. The Company does not have any irrevocable contributions on account of future share subscriptions. 17. The Company does not have any unpaid cumulative dividends on preferred shares 18. In Notes 7.a. and 10.2.a to the parent company only financial statements reference is made to the treatment given to retained earnings. characteristics of the network, replacement value per kilometer and type of network based on business knowledge and purchase price of the resources needed, state of the network at the time of acquisition, real estate appraisals of the most significant real property, among others). Similarly, the Company has recorded the net acquired assets of CIMECO at fair value. 9. The Company does not have any property, plant and equipment subject to appraisal write-up. 10. The Company does not have any obsolete property, plant and equipment. 11. The Company is not subject to the restrictions under section 31 of Law No. 19,550, since its main corporate purposes are investment and finance. 12. The Company assesses the recoverable value of its long-term investments each time it prepares its financial statements. In the case of investments for which the Company does not book goodwill with an indefinite useful life, it assesses their recoverable value when there is any indication of impairment. In the case of investments for which the Company books goodwill with an indefinite useful life, it assesses their recoverable value by comparing the book value with cash flows discounted at the corresponding discount rate, considering the weighted average capital cost, and taking into consideration the projected performance of the main operating variables of the respective companies. 13. As of December 31, 2014, the Company does not have any relevant tangible property, plant and equipment requiring efficient insurance coverage. Signed for identification purposes with the report dated March 10, 2015 See our report dated March 10, 2015 Price Waterhouse & Co. S.R.L. C.P.C.E.C.A.B.A. VOL. 1 - FOL. 17 Carlos Alberto Pedro Di Candia Chairman of the Supervisory Committee Dra. Teresita M. Amor (Partner) Certified Public Accountant (UBA) C.P.C.E.C.A.B.A. VOL. 145 - FOL. 150 Alejandro A. Urricelqui Vice Chairman and acting Chairman 295 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 296 To the Shareholders, President and Directors of Grupo Clarín S.A. Legal domicile: Piedras 1743 Autonomous City of Buenos Aires CUIT No 30-70700173-5 Report on the Parent Company Only Financial Statements We have audited the attached parent company only financial statements of Grupo Clarín S.A. (the “Company”) which comprise the parent company only balance sheet at December 31, 2014, the parent company only statements of comprehensive income, of changes in equity and of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. The balances and other information for the fiscal year 2013 are an integral part of the above- mentioned audited financial statements, so they are to be considered in the light of those financial statements. Board of Directors’ responsibility The Board of Directors of the Company is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with Professional Accounting Standards of Technical Resolution No. 26 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE, for its Spanish acronym) incorporated by the Argentine Securities Commission (CNV, for its Spanish acronym) to its regulations. Further, the Board of Directors is responsible for the internal control it may deem necessary to enable preparing the parent company only financial statements free of material misstatements caused by errors or irregularities. Our responsibility is to express an opinion on the parent company only financial statements based on the audit we performed with the scope detailed in paragraph “Auditor’s responsibility”. Auditor’s responsibility Our responsibility is to express an opinion on the parent company only financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards were adopted as auditing standards in Argentina by Technical Resolution No. 32 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE, for its Spanish acronym) as they were approved by the International Auditing and Assurance Standards Board (IAASB) and require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the parent company only financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the parent company only financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the parent company only financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the parent company only financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the parent company only financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the parent company only financial statements mentioned in the first paragraph of this report present fairly, in all material respects, the parent company only financial statements mentioned in paragraph 1 present fairly, in all material respects, the parent company only financial position of Grupo Clarín S.A. as of December 31, 2014 and the parent company only comprehensive income and parent company only cash flows for the fiscal year then ended, in accordance with the rules of Technical Resolution No. 26 of the Argentine Federation of Professional Councils in Economic Sciences for the parent company only financial statements of a controlling entity. Emphasis of Matter We draw attention to Notes 10.1.a., 10.1.b., 10.1.c., 10.1.d., 10.1.e., 11, 20.a. and 20.b. to the parent company only financial statements, which describe the uncertainties related to the eventual effects on the activities of the Company and certain subsidiaries of: (i) the resolutions issued by several regulators on matters associated with the acquisition of Cablevisión S.A. and other companies and their Independent Auditor’s Report Free translation from the original prepared in Spanish 296 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 297 subsequent merge with Multicanal S.A. and other companies; and related with the revocation of the License that had been originally granted to FIBERTEL S.A.; (ii) the change in the Audiovisual Communication Services regulatory framework and the final outcome of the voluntary conforming proposal filed with the Audiovisual Communication Services Law Federal Enforcement Authority and the Supreme Court of Argentina and of the legal and administrative actions that are bringing and will bring the Company to safeguard its rights and those of its shareholders; (iii) the resolution issued by the regulator to calculate the monthly fee payable by the users of cable television services, whose decisions cannot be foreseen to date; (iv) the change in the regulatory framework of the telecommunications sector that results from the passing of the Digital Argentina Act, which implementing regulation is pending as of this date; and (v) the enactment of Law No. 19307 in the Eastern Republic of Uruguay that regulates the main activities of Adesol S.A., a Cablevisión S.A. subsidiary, which implementing regulation is pending as of this date. Our opinion is not qualified in respect of these matters. and calculations amounted to $2.002.610, none of which was claimable at that date; e) In accordance with the requirements of Article 21°, Subsection e), Chapter III, Section VI, Title II of the regulations of the Argentine Securities Commission, we report that the total fees for audit services and related billed the Company in the year ended December 31, 2014 represent: e.1) 88% on the total fees for services invoiced to the Company for all concepts in that year; e.2) 17% on the total fees for audit and related services invoiced to the Company, its parent companies, subsidiaries and affiliates in that year; e.3) 16% on the total fees for services invoiced to the Company, its parent companies, subsidiaries and affiliates for all concepts in that year. f) We have applied the procedures on prevention of asset laundering and terrorism funding set forth in the relevant professional rules issued by the Professional Council for Economic Sciences of the Autonomous City of Buenos Aires. Report on compliance with current regulations In accordance with current regulations in respect to Grupo Clarín S.A., we report that: Autonomous City of Buenos Aires, March 10, 2015 a) The parent company only financial statements of Grupo Clarín S.A. have been transcribed to the “Inventory and Balance Sheet” book and comply with the Corporations Law and pertinent resolutions of the Argentine Securities Commission, as regards those matters within our competence; b) The parent company only financial statements of Grupo Clarín S.A. arise from accounting records kept in all formal respects in conformity with legal provisions which maintain the security and integrity conditions based on which they were authorized by the Argentine Securities Commission; c) We have read the additional information to the Notes to the parent company only financial statements required by section 68 of the listing regulations of the Buenos Aires Stock Exchange and Article 12°, Chapter III, Title IV of the regulations of the Argentine Securities Commission, on which, as regards those matters that are within our competence, we have no observations to make; d) At December 31, 2014 the debt accrued in favor of the (Argentine) Integrated Social Security System according to the Company’s accounting records Price Waterhouse & Co. S.R.L. by Teresita M. Amor (Partner) 297 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 298 Supervisory Committee’s Report English translation of the Report originally issued in Spanish To the Shareholders of: Grupo Clarín S.A. TAX ID No. 30-70700173-5 Registered office: Piedras 1743 City of Buenos Aires I. REPORT ON THE FINANCIAL STATEMENTS In our capacity as members of Grupo Clarín S.A.’s Supervisory Committee and pursuant to subsection 5, section 294, of the Argentine Business Associations Law No. 19,550, the regulations of the Argentine Securities Commission (CNV, for its Spanish acronym) and of the Buenos Aires Stock Exchange, we have performed a review of the documents mentioned below: Documents subject to review: a) The Parent Company Only Financial Statements of Grupo Clarín S.A. comprising the Parent Company Only Balance Sheet as of December 31, 2014, the Parent Company Only Statement of Comprehensive Income, the Parent Company Only Statement of Changes in Equity and the Parent Company Only Statement of Cash Flows for the year then ended. b) The Consolidated Financial Statements of Grupo Clarín S.A. and its subsidiaries comprising the Consolidated Balance Sheet as of December 31, 2014, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended. c) A summary of the material accounting policies and other explanatory information. The balances and other relevant information for the year 2013 are an integral part of the audited financial statements mentioned above and shall be considered in connection with said financial statements. 298 II. RESPONSIBILITY OF THE BOARD OF DIRECTORS The Company’s Board of Directors is responsible for the preparation and fair presentation of: (i) the Parent Company Only Financial Statements indicated in paragraph I. in accordance with the professional accounting standards established by Technical Resolution No. 26 issued by the Argentine Federation of Professional Councils of Economic Sciences (“FACPCE”, for its Spanish acronym) incorporated by the CNV to its regulations. Such standards differ from the International Financial Reporting Standards (IFRS) approved by the International Accounting Standards Board (IASB) and used in the preparation of the consolidated financial statements of GRUPO CLARÍN S.A. and its subsidiaries in the aspects mentioned in Note 2.1 to the attached parent company only financial statements; and (ii) the consolidated financial statements mentioned in paragraph I. in accordance with IFRS, adopted as professional accounting standards in Argentina by the FACPCE and incorporated by the CNV to its regulations, as approved by the IASB. The Board of Directors is also responsible for an adequate internal control as deemed necessary so that the consolidated and parent company only financial statements are free from material misstatements arising from errors or irregularities. III. RESPONSIBILITY OF THE SUPERVISORY COMMITTEE Our responsibility is to report on the documents indicated in paragraph I. based on our statutory audit and the audit work carried out by the Company’s external auditors. Our work was performed in accordance with effective statutory auditing standards. Said standards require that the review of the financial statements be conducted in accordance with effective auditing standards for the review of financial statements; that the documents be checked for consistency with the information on corporate decisions stated in minutes and that such decisions conform to the law and the by-laws, in all formal and documentary aspects. In order to conduct our professional work on the documents detailed in paragraph I., we have reviewed the work performed by the Company’s GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 299 external auditor Teresita M. Amor, a partner of Price Waterhouse & Co. S.R.L., who issued her audit reports on March 10, 2015. She conducted her audit in accordance with International Standards on Auditing (IAS). Our work included the review of the work plan, the nature, scope and timeliness of the procedures applied and the results of the audit carried out by the external auditor. IAS were adopted as auditing standards in Argentina through Technical Resolution No. 32 issued by the FACPCE as approved by the International Auditing and Assurance Standards Board (IAASB) and require that the auditor comply with ethical requirements, plan and perform the audit in order to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain evidence supporting the amounts and other information disclosed in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the financial statements due to fraud or error. In making those risk assessments, the auditor must consider the internal control related to the preparation and fair presentation by the Company of the financial statements, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used, the reasonableness of significant estimates made by the Company’s management, and the overall presentation of the financial statements. We believe that our work and that of the Company’s external auditors, detailed in their respective reports, provides a sufficient and appropriate basis to support our opinion. We have not performed any management control and, therefore, we have not assessed the business criteria and decisions on administrative, financing, commercialization and production matters, since these issues are the exclusive responsibility of the Company’s Board of Directors. IV. OPINION Based on our review, within the scope described in Section III. of this report: (i) the parent company only financial statements mentioned in paragraph I., present fairly, in all material respects, the parent company only financial position of Grupo Clarín S.A. as of December 31, 2014, the results disclosed in the parent company only statement of comprehensive income and in the parent company only statement of cash flows for the year then ended, in accordance Technical Resolution No. 26 issued by the FACPCE for parent company only financial statements of controlling companies; and (ii) the consolidated financial statements mentioned in paragraph I., present fairly, in all material respects, the consolidated financial position of Grupo Clarín S.A. and its subsidiaries as of December 31, 2014, and the results disclosed in the consolidated statement of comprehensive Income and in the consolidated statement of cash flows for the year then ended in accordance with the International Financial Reporting Standards. V. EMPHASIS OF MATTER We would like to draw attention to Notes 10.1.a., 10.1.b., 10.1.c., 10.1.d., 10.1.e., 11., 20.a. and 20.d. to the parent company only financial statements and to Notes 8.1.a., 8.1.b., 8.1.c., 8.1.d., 8.1.e., 9., 25.a. and 25.e. to the consolidated financial statements, which describe the uncertainties related to the eventual effects on the activities of the Company and certain subsidiaries of: (i) the resolutions issued by several regulatory agencies related to certain aspects of the acquisition of Cablevisión S.A. and other companies and the subsequent merger with Multicanal S.A. and other companies; and related to the revocation of the license that had been originally granted to FIBERTEL S.A.; (ii) the changes in the regulatory framework of the Audiovisual Communication Services and the final outcome of the voluntary proposal to conform the Company to the Audiovisual Communication Services Law filed with the Audiovisual Communication Services Law Federal Enforcement Authority and the Supreme Court of Argentina and the legal and administrative actions brought and that will be brought to safeguard its rights and those 299 GC balance INGLES 2014 21_09sinfirmas_Layout 1 9/29/15 5:46 PM Page 300 d) We have reviewed the information included in the Exhibit to the Annual Report about the degree of compliance with the Code of Corporate Governance required by CNV Regulations and we have no observations to make in that regard. e) As required by CNV regulations, regarding the independence of the external auditors and the quality of the audit policies applied by them and the accounting polices applied by the Company, the above-mentioned external auditor’s report includes the representation concerning the application of the auditing standards effective in Argentina which provide for independence requirements, and was issued without qualifications as to the application of such regulations or discrepancies as to the professional accounting standards applied. f ) We have applied the asset laundering and terrorist financing crimes prevention procedures provided under the professional standards issued by Consejo Profesional de Ciencias Económicas de la Ciudad de Buenos Aires (Professional Council in Economic Sciences of the City of Buenos Aires). City of Buenos Aires, March 10, 2015 of its shareholders; (iii) the resolution issued by the regulatory agency for the calculation of the monthly fee payable by the users of cable television services, whose decisions cannot be foreseen to date; (iv) the changes in the regulatory framework of the telecommunications sector as a result of the enactment of the law known as the "Digital Argentina Act", which implementing regulations have not been issued to date; and (v) the enactment of Law No. 19,307 in the Republic of Uruguay, which regulates the main activities of Adesol S.A., subsidiary of Cablevisión S.A., which implementing regulations have not been issued to date. Our opinion is not qualified with regard to these matters. VI. REPORT ON COMPLIANCE WITH EFFECTIVE REGULATIONS In accordance with effective regulations, we report with respect to Grupo Clarín S.A. that: a) The financial statements detailed in paragraph I. comply with the provisions of the Argentine Business Associations Law and the regulations concerning accounting documentation issued by the CNV, and have been transcribed to the “Inventory and Balance Sheet” book and arise from the Company’s accounting records kept, in all formal aspects, in accordance with effective legislation. b) We have reviewed the Inventory and the Board of Directors’ Annual Report for the year ended December 31, 2014. In this regard, within the scope of our competence, we have no observations to make. The representations about future events included in the Annual Report are the Board of Directors’ exclusive responsibility. c) Furthermore, we report that in exercise of the legality control within our field of competence, during the year ended December 31, 2014 we have applied the procedures set forth in Section 294 of Argentine Business Associations Law No. 19,550, as deemed necessary based on the circumstances and we have no observations to make in that regard. Supervisory Committee Carlos Alberto Pedro Di Candia Chairman 300 Grupo Clarín S.A. Piedras 1743 C1140ABK Ciudad de Buenos Aires Argentina www.grupoclarin.com Investor Relations Grupo Clarín Alfredo Marín / Agustín Medina Manson + 54 11 4309 7215 investors@grupoclarin.com www.grupoclarin.com/ir Design and production Chiappini + Becker Visual Communication Telephone: (54 11) 4314 7774 www.ch-b.com www.grupoclarin.com 

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