MEDIASET ESPAÑA COMUNICACIÓN, S.A. AND SUBSIDIARIES Consolidated Financial Statements for the year ended December 31, 2016, prepared in accordance with International Financial Reporting Standards (IFRS-EU) as adopted by the European Union, and Consolidated Management Report 2 CONSOLIDATED FINANCIAL STATEMENTS Ernst & Young, S.L. Tel: 915 727 200 Torre Picasso Fax: 915 727 238 Plaza Pablo Ruiz Picasso, 1 ey.com 28020 Madrid España Translation of a report and consolidated financial statements originally issued in Spanish. In the event of discrepancy, the Spanish-language version prevails (See Note 27) INDEPENDENT AUDIT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS To the Shareholders of MEDIASET ESPAÑA COMUNICACIÓN, S.A.: Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of MEDIASET ESPAÑA COMUNICACIÓN, S.A. (the parent company) and its subsidiaries (the Group), which comprise consolidated statement of financial position at December 31, 2016, the consolidated separate income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flow, and the notes thereto for the year then ended. Directors' responsibility for the consolidated financial statements The directors of the parent company are responsible for the preparation of the accompanying consolidated financial statements so that they give a true and fair view of the consolidated equity and consolidated financial position and the consolidated results of MEDIASET ESPAÑA COMUNICACIÓN, S.A. and its subsidiaries, in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, and other provisions in the regulatory framework applicable to the Group in Spain, and for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on the accompanying consolidated financial statements based on our audit. We conducted our audit in accordance with prevailing audit regulations in Spain. Those standards 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 of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation of consolidated financial statements by the directors of the parent company 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. Domicilio Social: Pl. Pablo Ruiz Picasso, 1. 28020 Madrid - Inscrita en el Registro Mercantil de Madrid al Tomo 12749, Libro 0, Folio 215, Sección 8, Hoja M-23123, Inscripción 116. C.I.F. B-78970506. A member firm of Ernst & Young Global Limited. 3 CONSOLIDATED FINANCIAL STATEMENTS Opinion In our opinion, the accompanying consolidated financial statements give a true and fair view, in all material respects, of the consolidated equity and consolidated financial position of MEDIASET ESPAÑA COMUNICACIÓN, S.A. and its subsidiaries at December 31, 2016, and its consolidated results and consolidated cash flow for the year then ended, in accordance with IFRS, as adopted by the EU, and other provisions in the regulatory framework for financial information applicable in Spain. Report on other legal and regulatory requirements The accompanying consolidated 2016 management report contains such explanations as the directors of the parent company consider appropriate concerning the situation of the Group, the evolution of its business and other matters; however, it is not an integral part of the consolidated financial statements. We have checked that the accounting information included in the aforementioned consolidated management report agrees with the 2016 consolidated financial statements. Our work as auditors is limited to verifying the consolidated management report in accordance with the scope mentioned in this paragraph, and does not include the review of information other than that obtained from the accounting records of MEDIASET ESPAÑA COMUNICACIÓN, S.A. and its subsidiaries. ERNST & YOUNG, S.L. (Signed on the original in Spanish) ___________________ Carlos Hidalgo Andrés February 23, 2017 A member firm of Ernst & Young Global Limited. 4 CONSOLIDATED FINANCIAL STATEMENTS 5 CONSOLIDATED FINANCIAL STATEMENTS tabLE OF CONTENTS Consolidated statements of financial position at December 31, 2016 and December 31, 2015 6 Consolidated separate income statement at December 31, 2016 and December 31, 2015 8 Consolidated statement of comprehensive income at December 31, 2016 and December 31, 2015 9 Consolidated statement of changes in equity at December 31, 2016 and December 31, 2015 10 Consolidated statement of cash flow at December 31, 2016 and December 31, 2015 12 Notes to the consolidated financial statements at December 31, 2015 13 Management report for the year ended December 31, 2016 82 Annual corporate governance report 99 6 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT DECEMBER 31, 2016 AND DECEMBER 31, 2015 (Expressed in thousand of euros) ASSETS 12/31/2016 12/31/2015 NON-CURRENT ASSETS Property, plant, and equipment (Note 6) 57,644 54,449 Intangible assets (Note 7) 202,213 208,841 Audiovisual property rights (Note 8) 171,903 201,244 Goodwill (Note 9) 288,124 288,124 Equity method investments (Note 10) 16,245 14,882 Non-current financial assets (Note 11) 16,690 14,813 Deferred tax assets (Note 20.5) 112,953 134,507 Total non-current assets 865,772 916,860 CURRENT ASSETS Inventories 6,732 6,575 Accounts receivable 229,733 243,471 Trade receivables for sales and services (Note 13.2) 213,882 224,732 Trade receivables from related parties (Note 13.2) 1,387 1,089 Sundry receivables (Note 13.2) 53 453 Employee receivables (Note 13.2) 57 133 Other receivable from public authorities (Note 20.3) 799 7,640 Income tax current assets (Note 20.3) 13,555 9,424 Other current assets (Note 12) 6,573 6,823 Other current financial assets (Note 13.2) 3,103 1,019 Cash and cash equivalents (Note 14) 190,790 211,397 Total current assets 436,931 469,285 TOTAL ASSETS 1,302,703 1,386,145 The accompanying Notes 1 to 26 are an integral part of this consolidated financial statement at December 31, 2016 077 CONSOLIDATEDCONSOLidated FINANFINANCIACIALL STATEMENTStatements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT DECEMBER 31, 2016 AND DECEMBER 31, 2015 (Expressed in thousand of euros) EQUITY AND LIABILITIES 12/31/2016 12/31/2015 EQUITY (Note 15) Share capital 168,359 183,088 Share premium 409,040 697,597 Share-based payment reserves - 353 Other reserves 226,998 229,367 Treasury shares - (214,838) Profit for the year attributable to the parent 170,997 166,167 Total equity of the parent 975,394 1,061,734 Non-controlling interests 7,897 8,169 Total equity 983,291 1,069,903 NON-CURRENT LIABILITIES Non-current provisions (Note 16) 9,151 10,386 Borrowings from related parties (Note 17) 7,549 - Borrowings from third parties (Note 18) 6,105 7,380 Other non-current liabilities (Note 13.2) 67 324 Deferred tax liabilities (Note 20.5) 11,784 8,316 Total non-current liabilities 34,656 26,406 CURRENT LIABILITIES Payable to related parties (Note 13.2) 22,124 25,034 Accounts payable for purchases and services (Note 13.2) 121,366 110,869 Accounts payable for audiovisual property rights (Note 13.2) 62,862 71,657 Other non-trade payables 38,402 41,918 Bank borrowings (Note 13.2) 924 478 Borrowings from third parties (Note 18) 1,238 1,061 Payables to public authorities (Note 20.3) 20,809 22,508 Payables for non-current asset acquisitions (Note 13.2) 3,358 6,058 Remuneration payable (Note 13.2) 11,796 11,414 Other borrowings (Note 13.2) 277 399 Current provisions (Note 19) 35,771 34,937 Other current liabilities 4,231 5,421 Total current liabilities 284,756 289,836 TOTAL EQUITY AND LIABILITIES 1,302,703 1,386,145 The accompanying Notes 1 to 26 are an integral part of this consolidated financial statement at December 31, 2016 8 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED SEPARATE INCOME STATEMENT AT DECEMBER 31, 2016 AND DECEMBER 31, 2015 (Expressed in thousand of euros) 12/31/2016 12/31/2015 INCOME Revenue (Note 23.1) 985,038 957,891 Sales 973,479 944,369 Discount and volume rebates (36,019) (35,302) Revenue from the rendering of services 47,578 48,824 Other operating income 6,945 14,040 Total operating income 991,983 971,931 EXPENSES Decrease in inventories of finished goods and work in progress (164) (4,832) Procurements 240,917 236,276 Staff costs (Note 23.2) 105,872 105,041