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Palma PicturesCalle Siurells, 407141 Marratxí, MallorcaBalearic Islands - Spainwww.palmapictures.es

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Table ofContents

Palma PicturesAnnual Report 2014

2 3 Palma PicturesAnnual Report 2014

01

02

03

04

The Basics

OurBusiness

A closerlookinside

The Figures

The Elevator Pitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Palma Pictures in five minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Annual Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Vision & Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Targets & Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Market Trends & Global Ad Spend . . . . . . . . . . . . . . . . . . . . 38

Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . 48

Local Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

TVC - Mallorca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Barcelona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Photo & Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Long Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Pathfinder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

Board & Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78


4 5 Palma PicturesAnnual Report 2014

WhERE IS ThIS?

Palma Pictures HQ, Mallorca

TheBasics

01The Elevator Pitch

Palma Pictures in five minutes

Annual Recap

SectionContents


The Basics 6 7 The Basics Palma PicturesAnnual Report 2014



What we doWe deal in content creation and capture, and have done so for over 20 years.

Whether it’s global TVCs, award-winning TV dramas, feature films, or high end Photo

& Motion, visual storytelling is our passion. We do it every day, all year round and keep

seeking to hone our expertise in order to remain at the forefront of our industry.

Where we do itThe birthplace of Palma Pictures was Mallorca, with its ideal range of locations.

Over the years we have developed into a Media Production Group, still headquartered

in Mallorca, but with offices and production capabilities stretching thousands of

kilometers from the shores of our island. We have offices on mainland Spain and

flexible production structures that enable us to operate on location far from our

Mediterranean base.

How it’s donePalma Pictures house all the resources needed to guarantee high quality content

capture. We supply everything from personnel, equipment and transportation to

casting, location services and studio facilities. Perhaps most importantly, we provide

know-how and solutions. Have a look at the next page to see what we mean.

TheElevatorPitch

I thought your crew was fantastic.They couldn’t have been harder-working.

Diane Kirk VP, Director of Broadcast Production, Y&R Canada

WhERE IS ThIS?

Palma Pictures HQ, Mallorca



PalmaPicturesin fiveminutes



Shooting days per quarterQ1

31

41

46

30 2721

25

26

41

51 43

23

Q2 Q3 Q4

2011

2012

2013

37

39

23

36

2014

Total projects

136

Pho

to: 4

4 p

roje

cts

TVC: 75 projects

Motion: 16 projects

TV M

ovies: 1 project

Clientorigin

France & Belgium: 29 clientsUK & Ireland: 28 clients

Germany, Switzerland & Austria: 24 clients

Italy: 15 clients

Japan & China: 12 clients

USA / Canada: 11 clients

Mallorca: 7 clients

Spain: 6 clients

Scandinavia: 3 clients

Eastern Europe: 2

cli e

nts



Clients from 17 territories elected to shoot their TVC spots with us across Spain.

France was our strongest performing market and contributed significant volumes of

shoot days (20%), closely followed by the UK (19%) with Germany (13%) and Italy

(11%) also performing well. We were also happy to see our first Chinese clients bring a

Mercedes campaign to our shores.

Our staff and freelance crews worked tirelessly over the course of the year to deliver

‘Picture Perfect Service’ to our varied clients. In order to more regularly recognize the

efforts of our crew we launched our values initiative, with team members’ efforts being

highlighted on a monthly basis and prizes given for the star performers, as voted for

by their colleagues.

Palma Pictures ‘Photo & Motion’ had another record year with revenues again reaching

an all time high of €2.41M (€1.83M) with Print work shot for clients such as VW,

Wrangler and Garnier, as well as Motion clients including Jack Wills, H&M and Adidas.

Pathfinder, our media creation business, had a quieter year with revenues of €1.28M

(€1.48M) due to slower board flow from our Reckitt Benckiser client, but we enjoyed

producing work in such varied locations as the UK, Spain and South Africa.

Meanwhile our long form team took on the undead for the UK feature film Generation Z

which shot for 5 weeks during Q3.

CSR activities remain a cornerstone of our company culture and we were delighted

to pass our environmental audit for the fifth year running, retaining both our ISO

14001 and EMAS certifications. Other CSR related activities included our ongoing

sponsorship of the ‘Fireflies’, as well as several other charities. We also launched

our water bottle initiative, determined to drastically reduce the plastic bottles used

on our film sets.

Our Barcelona office had another strong year delivering shoots for brands such

as Mercedes, Nivea and BMW, with our clients taking advantage of our production

service capabilities in many different locations across Spain.

2015 is already shaping up to be an action-packed year and we look forward to

sharing our news with you in the next edition of our Palma Pictures Annual Report.

Annual Recap

Dear Colleagues,Reflecting back on another year, our passion for visual storytelling in all of its many

forms saw us working with content across an ever-broadening spectrum.

The need to keep a firm eye on the horizon remained undiminished in the face of a

constant and fast-paced flow of disruptive technologies and platforms. Although rapid

change could be construed as unsettling, we have enjoyed the singularity of stripping

back our offering to its essence – providing solutions to our clients. A concept that

remains at the core of our organisation and equally relevant whether collaborating

with a 90 minute theatrical film, or a 6 second vine piece.

Due to our breadth of experience from working across many different media, we

are well used to pricing differential in segments such as broadcast television,

branded content and television spot advertising. Over the past year we have seen

an acceleration of the ongoing recalibration of advertising production budgets, as

broadcast economics have blurred the lines between online and offline.

2014 saw revenues of €14.3M (€16.44M) with EBITDA at €804K (€1.5M) for the Palma

Pictures Media Production Group.Mike DayCEO

I t’s always a pleasure working with you and your team, a first class experience.

Gerri Hamill Director of Broadcast & Content, Lux Global and Sunsilk Asia, JWT Singapore


Our Business 16 17 Our Business Palma PicturesAnnual Report 2014

WhERE IS ThIS?

Barcelona

OurBusiness

02Vision & Mission

Business Model

Targets & Strategy

Values

Organisation

Market Trends & Global Ad Spend

Corporate Social Responsibility

SectionContents



Vision

Mission

Our ambition

How to get there


Our Business 20

To createperfect pictures

for top brands

To passionately deliver creative

solutions for every challenge

21 Our Business Palma PicturesAnnual Report 2014

Business ModelThe Palma Pictures of today has characteristics more akin to a media production group than a location-based service provider.

By expanding our service portfolio and geographical coverage we are able to offer

our clients a more diverse and flexible service solution, as well as identifying synergies

throughout the value chain that promote quality as well as efficiency.

Our business model remains focused on content creation and capture. From one-man-

bands to productions with a crew of hundreds, no project is too big or small and we are

geared to cater to all types of media production.

We retain the capability to offer a truly integrated full service solution and whilst our

headquarters remain on the island of Mallorca, with its unique selection of locations and

possibilities, we also now offer a mobile solution with partnerships across the globe, a

production centre in Barcelona and a media creation capability in the form of our sister

company, Pathfinder.



Palma Pictures Mallorca

Palma Pictures Barcelona

Palma Pictures Canarias

Palma Pictures Photo & Motion

Pathfinder

Content capture& creation

Clients &Brands

Broadcasters

PhotographicAgents

TV & Filmproductioncompanies

Commercialproductioncompanies

AdvertisingAgencies

Some of our in-house resources:

Crew 45 full-time crew in key positions and a flexible staffing structure that allows for

several hundred co-workers per day through our freelance database.

Languages spoken include: English, Spanish, German, French, Italian, Icelandic,

Russian and Japanese.

Our network covers all skill sets including SFX, animal co-coordinators, food stylists,

stunt personnel and underwater camera specialists.

Locations Portfolio of locations, with more than 250,000 images, stretching from our

headquarters in Mallorca, through the Balearic islands, across the whole of mainland

Spain and down to the Canary Islands.

Strong relationships with local authorities and communities.

Equipment State of the art film, lighting and grip equipment.

In-house technicians, experts with all our equipment, to ensure fluidity of service.

Synergy effects in the budgeting and planning process for both potential and

upcoming productions.

Studio Central part of all our production activity.

4,500 m2 (including a 1,000 m2 sound stage).

Fully equipped with offices, restaurant, gym, costume, make-up, green rooms,

construction workshops, casting Studio and pack shot studios.

Casting In-house casting team.

Local database of 15,000 faces.

Extremely competitive usage fees.



VALUE CHAIN

Client Agency

Production Service

ProviderProduction

Company

Full service agencyWhat do we actually mean by full service?

“360 degree thinking” or “full service” are both terms that have been around for

some time in the world of agencies and production companies, but what does it

actually mean to us?

When we position ourselves as thought leaders and a full service production house, we

realize that these are no small claims. What we intend to communicate is that we house

the capacity to cover all aspects of the production process with the Palma Pictures

business model. With Pathfinder we can streamline our service towards clients and

agencies, whilst utilising our production package approach to offer a “one-stop-shop” that

completely controls the logistical and organisational aspects of a production.

Together, this offers our clients one of the best service solutions in the market:

One invoice from one service provider

Efficient scheduling and communications

Total flexibility

I can’t think of any areas that need improve-ment…you guys know what you are doing

and that’s why we came to Palma Pictures.

Thomas Rickert Executive Producer, Code Films



Our Business 26

WhERE IS ThIS?

Pollensa Bay, Mallorca

Targets &Strategy

Palma Pictures has been working with a strategic management tool called the Balanced

Scorecard since 2007 and it has become a cornerstone of our managerial development

process, ensuring that the organisation is consistently aligned towards a mutual goal.

The BSC helps us to harness the skills and passion of each and every member of our

team, providing them with individual annual targets and activities.

By activating all levels of our diverse organisation, Palma Pictures is able to constantly

re-appraise and assess progress, as well as formulate concrete actions based on

departmental goals.

Each year we outline five key areas with separate targets and contributions. These

areas act as supporting pillars for the business, within which we can identify individual

success factors, sub-targets and contributions down to an individual level.

This way we can engage our whole team and take a collective approach to ensuring the

future growth of our company.

CSF - Critical Success Factor

CustomerCSF: Territorial focus

TalentCSF: An aligned and motivated team

ProcessesCSF: Quality secured processes

FinanceCSF: Accurate and transparent information

New Business / GrowthCSF: Fast R .O .I .



Our values

We pride ourselves on not only hiring great professionals, but also great team-players

and we have embraced a set of values that help to promote and reinforce a certain

attitude and mindset.

However, claiming that values are important and actually actively working on

maintaining them are often two very different things.

In order to keep them front of mind we have established a values recognition program

whereby, on a monthly basis, all of our teammates highlight another colleague’s efforts.

Here are some of their comments:


Our Business 30


Fresh

The enthusiasm and interest that Morena puts into everything she does is a daily dose of inspiration. Wouldn’t it be great to see 45 smiles like Morena’s every day?

I would like to nominate Dani for being “freezing fresh” when jumping into the sea in the middle of February to check if a location was appropriate for a job. Brave Dani!

No matter how busy she is, Virginia greets every brief with positive intent; shooting one job while determined to win the next, she sends all clients home “wowed” by PP Photo & Motion.



Generous

Clear

My vote goes to Tracy. This month saw the launch of our fantastic new Water Bottle initiative. She used her usual dogged tenacity to turn an idea that was brilliant but unattainable... into a sustainable initiative, that works on so many levels, at a price that we can afford.

PJ is super organized in the running of the technical department. He seems to have a list for everything!

I nominate Lourdes... for being Generous... for putting up with my **** on every job in prep and post... (Is this kind of thing submittable?)

I’d like to nominate RICHARD WEBB - he’s the most reliable, 24/7 go to person, anytime of day or night, weekday or weekend, he’s ON IT and never fails me. He’s the MAN.

Fatima is always cheerful and pleasant and never denies you a minute of her madly busy days.

SmartI would like to nominate Mireia. Again! For everything!

Organisation



Retaining our top talent

As we often comment, people are the backbone and essence of our offering, as well

as our most important resource.

Maintaining a reputation as an attractive employer is crucial if we are to remain

competitive as a top service provider and we work hard to try and ensure that we

both attract and retain top talent.

Initiatives such as our values recognition and staff care programs (comprising of

incentives such as personal trainers, free on-site restaurant, or medi-cover), ongoing

CSR activities, or recruiting stars of the future via the Palma Pictures Academy all go

someway towards making Palma Pictures a destination for the people we need to

strengthen and grow our company.

Proof of our success can be found in the number of colleagues who have remained

with us over many years.

Lean Staffing Model vs. Loyal crew

We have also worked hard to hone our organisational model into a framework of full-time

staff, complimented by a strong pool of freelance professionals, as operating in a fast-

evolving and demanding market requires us to be an extremely dynamic organisation.

By securing our capability across key departmental positions we are able to respond

with rapidity and efficiency to our clients ever-changing needs with surety.

MarketingPhoto&MotionPathfinderLocationsCastingSalesProductionTechBarcelonaVisuals

HRSupportAdministrationCSRFinance

MissionVisionTargetsStrategyManagement

Content

A huge thanks to everyone at Palma Pictures for the wonderful job they did on the recent LV= shoot.

Everyone was such a delight to work with and extremely professional with the added bonus of Mallorca being a great place to film.All in all a flawless service.

Guy Hedger Marketing Director, LV= GI



WhERE IS ThIS?

Costa Brava, Cataluña

MarketTrends

Global Ad Spend

ProductionTrends

Palma PicturesOpportunity



Market Trends

GlobalAd Spend


Our BusinessMarket Trends

40 41 Our BusinessMarket Trends


Since a major part of Palma Pictures’ revenues derives from TVC and other

commercial production, global ad spend is an important indicator for the market

potential of our business.

Over the past years we have seen a shift from traditional media channels such as

print, TV and radio, towards more digital content orientated solutions. While this might

impose a shift in terms of where the produced content is being distributed, it also

indicates a beneficial overall increase in demand for moving image.

Advertisers worldwide will have spent $545.4 billion on paid media in 2014, with total

media ad spend having increased 5.7%, more than doubling its growth rate of 2.6%

from 2013 (eMarketer 2014).

Growth of digital

With digital driving the biggest part of the gains and accounting for more than 25% of

the total paid media spend in 2014, it has now surpassed TV for the first time.

This growth is projected to continue as the digital channels become increasingly

important platforms (desktop, mobile, tablets, etc.), with many media buyers turning to

a digital-first marketing strategy.

This might previously have been considered a threat for Palma Pictures and other

production service providers, but as a majority of the content is moving media, it

simply signifies a shift in distribution channels compared to the previously strong bias

for traditional TV.

2014% share of

advertising spend

Internet

TV

CinemaOutdoorRadio

Magazines

Newspapers

Digital Ad Spend Worldwide, 2012-2018Billions, % change and % of total media ad spend



I t was a really exceptional experience for me. I loved it all actually.

Jörn Threlfall Director, Outsider

WhERE IS ThIS?

Maspalomas, Canary Islands

Market Trends

ProductionTrends





One in which the method of capture has required smaller and more agile teams, thereby challenging the traditionally larger TVC production model. As the pattern for global ad spend shifts to digital, and ultimately mobile, it places

pressure on the content production industry to adapt and for the larger, more

established production houses to position their value offering in a new way.

An expansive network and ability to respond quickly to new requests is becoming a

critical selling point within the commercial market, where campaigns are sometimes

being launched before all of the content has been produced, in order to tweak and

adjust the final pieces depending on audience feedback.

Many clients and brands are choosing to step away from the traditional TVC-style

productions in favour of producing more bespoke branded content that can cater

to smaller niche target audiences with increased relevance. Bearing this trend in

mind it could be said that whilst, on the one hand, overall production budgets are not

necessarily getting smaller, they are certainly being distributed differently to cater to

the more dynamic digital landscape.

Perhaps the biggest trend for 2014 was the shift towards a more episodic and story-based approach to branded content.

Market Trends

Palma PicturesOpportunity





Although Palma Pictures has in the past largely been focused on traditional TVC

productions, we have also prided ourselves in constantly evolving our service offering

and challenging our business model in order to remain at the forefront of our sector.

While the production industry goes through a period where traditional production

structures are being challenged, we have already embraced these changes and

positioned ourselves to take advantage of them.

With our expertise ranging from print, through branded content and TVC, onto long

form and feature film production we are poised to help our content creation partners

deliver high-end productions at competitive prices.

Brands will always have the need to communicate and moving imagery will continue

to be a key part of their communication strategy. The channels that these media are

communicated through might change, but as long as we at Palma Pictures keep our

ear to the ground and gear our organisation to be responsive to these trends, there

will always be a demand by our clients for our services.

CSRCorporate SocialResponsibility

Our belief in acting responsibly, both as an employer and as a member of the Spanish

business community remains strong and we always look to lead by example. Over the

past years we have included CSR activity as a key focus in our annual strategy and

ensure that all members of our team are on-board in helping to achieve our annual goals.

We have also been happy to see much stronger awareness amongst our clients,

resulting in a greater willingness to cooperate with our suggested approaches to

reduce paper and plastic bottle usage.

Here are some headlines of our activity over the past year:

• We retained both our ISO 14001 and EMAS certifications for a fifth consecutive year.

• We further reduced the water, electricity and paper consumption at our Mediterranean HQ.

• We were invited by WPP to become a signatory of Sedex, a not for profit

membership organisation dedicated to driving improvements in ethical and

responsible business practices in global supply chains.

• We continued our support of several charities, including a pro-bono music video

for the Spanish star Chenoa in aid of cancer research, as well as Projecte Jove,

Operacion Kilo and the Fireflies.

• We were a headline sponsor for Mare Mostra, the Palma-based film festival, now in

its 4th year.

One initiative that made a difference

Last year over 47,000 little plastic bottles were used on our

shoot days. Ever since we made a commitment to reduce our

environmental impact at Palma Pictures, we’ve been painfully aware

of the vast quantities of these bottles that are consumed every day

on our sets. Single-use disposable plastics are so common that it’s

easy to forget what a huge source of pollution they are.

Not only are plastic bottles bad for the environment, but they’re bad

for our health too! They contain harmful chemicals such as BPA

(Bisphenol A) which has been proven to be hazardous to human

health in a variety of ways.

So, we’ve made another step (a big one) in our commitment to run

cleaner shoots - we’ve invested in re-usable BPA-free aluminium

bottles as gifts for all of our crew and incoming clients.


A closer look inside 48 49 A closer look inside Palma PicturesAnnual Report 2014

SUSTAINABILITY

Acloserlook inside

03Local Impact

TVC - Mallorca

Barcelona

Photo & Motion

Long Form

Pathfinder

Management Team

Board & Shareholders

ContentsSection



We did a shoot in Barcelona with another company and it was simply not as

good as PP. During the shoot, our art director walked up to the US production house producer and said, “I have 2 words for you… Palma Pictures.” So that sums it up!

Adele Testore Partner / Executive Content Producer, Ogilvy & Mather

WhERE IS ThIS?

Mount Teide Road, Canary Islands



Local Impact

The local community of Mallorca has always been close to our hearts, and being able

to give something back to the people and businesses that have helped us to become

what we are today is rooted in our DNA.

In previous years we have included a segment on the positive impact that our

business has for the local Mallorcan community. However as we as an organisation

expand our sphere of operations, so does our economic footprint.

We are now more a product of the whole of Spain, with commercial transactions

spanning Europe and even the world. Our expansion has created relationships with

new suppliers, as well as strengthening links with existing ones. As an example, we

used to regularly work with 20 hotels and now this number is nearer to 40, bringing

even greater choice for our visiting clients.

We have staffed offices in the UK, USA and Scandinavia, as well as experienced

producers specifically responsible for the majority of other global territories to ensure

that we have a presence in the primary media production hubs, as well as being close

to our clients.

This positioning, combined with our annual sales and marketing investment of €670K

ensures that a territorially diverse client base lands on our Mediterranean shores

each year. In 2014 alone, we welcomed clients from 16 different countries from as far

afield as Argentina, Canada, China and Russia.

Overall, however, we reached 35 countries, all of whom requested location imagery

and cost estimates from our sales teams with regards to their respective projects.





136projects

75 TVC16 Motion44 Photo1 TV Movie

We have workedwith 39 hotels

Expenditure (€) by activities/sector

Averagepriceper night

Hotel nightsbooked in 2014through PP

Principally

€1704,220(in 2013 20 hotels and €160 per night)

Industry1,600KSet construction & props

308KCostumes

540KLocal Catering

32KSecurity

52KRepairs and maintenance

Tourism591KHotels & Restaurants

168KRental Cars

179KFlights

90KCoaches

Other expenses676KLocations

83KPublic Relations

102KLocal Advisors

4KBank fees

90KCouriers

103KLocal Permits

87KInsurance

121KPetrol

Personnel1,445KIn-house Crew

308KFreelance

1.164KOn-screen Talent

TVCMallorca



Palma Pictures was founded 21 years ago in order to provide high-end production

services to the global spot advertising market.

With an unbeatable ratio of shooting locations, diversity, minimal travel times,

favourable weather and a well developed tourism infrastructure, Mallorca is still a

favourite destination for media production.

Over the years the demands of our clients within the TVC production sector have

varied and today a typical Palma Pictures production might look a little different

compared to just a few years ago.

Our mix of clients has increased considerably with work flowing from both production

and post-production houses, as well as direct from agencies and brands.

Technology continues its evolution at a breakneck speed and we are driven to

constantly re-evaluate and reinvest in the latest camera, lighting and grip equipment

to stay ahead of the curve.

As our clients seek to spread their marketing spend over an increasing number of

platforms and media, the demand for cost efficient solutions has never been greater and

we enjoy working alongside our various stakeholders in the pursuit of the most effective

solution for their specific marketing spend, in areas such as bundled productions.

Print and branded content capture teams tend to be smaller and more dynamic than their

larger TVC, television and feature film cousins, requiring different processes and skill-sets.

Due to our experience across a broad segment of content capture, we are able to

take learnings from each area and bring them to bear on the others, remaining flexible

and responsive as we go forward.

I t took me really a long time to think about all the things you have to improve in your service and…

I can’t find anything. Really scary – because we Germans love to find things that should be improved :-)

Heike GudellaProducer, Gudella & Partner

WhERE IS ThIS?

Ciudad de las Artes y las Ciencias, Valencia



2014 was a great year for our mainland Spanish office of Barcelona and reaffirmation

that our clients have responded well to our increased portfolio of locations.

During the course of the year our teams shot in the Canary Islands, Madrid, Malaga

and extensively across Cataluña.

Our extended backdrop of locations enabled us to shoot with BMW in both Ascari and

Madrid, as well as with Mercedes in Barcelona. Other top brands we have shot with

include Sony, GG Mild, Zurich, Nivea, H&M, Heineken, Norwegian, Oriflame and Liptons.

The cosmopolitan city of Barcelona is also popular with a great many celebrities.

This led to us working with the likes of Mark Marquez (the current Moto GP World

Champion), Shakira for a T-Mobile spot and with Spanish football’s legendary

player Xavi for Adidas.

While it is exciting to offer our existing clients new locations, we were also able to

entice new clients to try our production service offering, welcoming teams from as

far afield as Los Angeles (Backyard Films with P&G) and Shanghai (Filmate with

Mercedes) to our Spanish shores.

Buoyed by these successes, we plan to move things up a gear in 2015. After

spending two great years in Mallorca, in a combined role of running all German-

speaking business and heading up Production, Michael Nouri is relocating to

Barcelona as our Executive Producer.

He will be charged with overseeing an exciting period of expansion for the company,

including a move into bigger offices and recruitment. With Michael at the helm, we

intend to capitalize on the increasing demand for our services across mainland Spain,

as well as seeking opportunities further afield.



PalmaPicturesBarcelona

Photo &Motion



Palma Pictures ‘Photo & Motion’ had another record year with revenues again reaching

an all time high of €2.41M (€1.83M) with Print work shot for clients such as VW,

Wrangler and Garnier, as well as Motion clients including Jack Wills, H&M and Adidas.

We believe that the passion and skill of our team leads to enduring client relationships

and we have been delighted with the large number of returning clients over the past year.

Especially with regards to the sector we hold closest to our hearts - the fashion industry.

Such a fast-moving and demanding sector requires top tier production service

partners. And even though we work in a high pressure environment, the opportunity to

shoot with talent such as Mario Sorrenti, Erik Torstensson, RJ Shaughnessy, Andreas

Spottorno and Camila Aakrans, makes the long days and sleepless nights worth it.

We bolstered our team by welcoming two great new ladies in the form of Irene Paz

(Producer) and Lina Berg (P&M Academy).

Plans afoot for 2015 include launching our anticipated new website and finding

another producer to join the team.

2014 Shooting days

Motion18 days

Photo91 days

Motion831K €avg 46818 €/day

Photo1579K €avg 17356 €/day

2014 Turnover

Long Form



Long form activity continued in 2014 in the shape of Generation Z – our first zombie movie.

This project matched the recent trend that we have seen whereby the majority of a

feature film is shot in its host country (in this case the UK, allowing qualification for

the national government-backed tax incentive) and then a portion of the film is shot

abroad in a hot and sunny location, such as Mallorca.

However during 2015 the Spanish Government intends to introduce a new incentive

to help attract foreign filmmakers to Spain and it is our hope that this will bring more

projects to shoot here in their entirety. This new deduction on expenditure will make

15% of production monies spent in Spain reclaimable, capped at €2.5M, on minimum

local spends of €1M.

This measure, together with our ever-expanding list of long form credits, studio

facility, equipment inventory and multi-lingual crew, will certainly assist our push into

long form production in the years ahead.

Generation Z

Director: Steve Barker

Writer: Paul Gerstenberger

Stars: Dougray Scott, Jessica De Gouw, Martin McCann

Set after an almost-apocalyptic zombie outbreak, humankind finally has the upper hand,

but Melanie, who lost her family in the outbreak, is still deeply traumatised. In a bid to

overcome the demons of her past, she goes on a zombie safari retreat where every paying

guest has a licence to kill the undead. To most, it is the ultimate wild hunt and adventure,

but for Melanie, it is the ultimate in therapeutic revenge. However, unbeknownst to

guests, the resort is actually a highly controlled and monitored environment - a maze of

concealed security cameras, restraints and barriers. The eyes and ears of trained security

personnel are on the guests 24/7, ensuring a safe shooting distance between the living

and the undead. That is until the resort’s security system is hacked and a computer virus

crashes it, unleashing thousands of blood-thirsty zombies back into the wild. Shaken to

her core, Melanie must face her worst nightmare, head on and battle her way to safety.

But the clock is ticking as the government activates Brimstone, an emergency protocol to

annihilate any zombie outbreak that could threaten mankind again. 5 hours, 25 minutes and

counting until the resort is destroyed… GENERATION Z is a high concept and elevated action

movie. It is big brother. It is corruption. It is another near apocalypse. Mankind is on the edge

of extinction. The world, as we still know it, is at risk...

T his was my second experience with Palma and both were excellent. Nothing

really stood out as lacking – it was a high-end production experience on par with leading production centers around the world. I would certainly come back and recommend Palma Pictures very highly.

Jennifer McCartan Creative producer, HORTON STEPHENS

WhERE IS ThIS?

Son Sureda, Mallorca



Pathfinder is an international media creation company for all, providing broadcast, online

and offline solutions across purchased, owned and earned channels. We are delivering

added value right now to some of the world’s biggest brands and their agencies.

During 2014, Pathfinder continued to service its two key clients, Reckitt Benckiser

and Unilever. In addition to productions in Mallorca, both on location and in our

studios, we produced work in Barcelona, London and Cape Town.

Turnover was down year on year at €1.28M (€1.48M), as a result of smaller projects

being booked. However, shoot days booked were of a similar level year on year with

12 shoot days in 2014 (11 shoot days in 2013).

We also welcomed two new members to our global team. Mary Matusz joined as

our international producer based in the US, having been an Executive Producer at a

number of notable commercial, feature production and post-production companies.

She brings a unique understanding of, and ability to execute client needs on a Global

scale whilst supporting teams in an environment that delivers the highest quality

visual work obtainable.

We were delighted to have Emma Socies providing our team and our clients with vital

production support from the very heart of operations at our Mediterranean production

centre in Mallorca. A native of the island, she has also worked in the UK and has more

than 10 years experience in media and arts management.

The core of our business continued to be the production of high-end television

commercials. In addition, we have seen a number of content projects being briefed as

an extension to the main campaign.

Our model of bespoke director search, driven purely by the needs of our clients’

briefs, attracted the attentions of clients from twelve territories including those as far

ranging as Japan, the United States, China and Australia. We proposed well in excess

of 100 different directors, proving the value of our service that is Creatively Driven and

Production Minded.

We look forward to extending our reach during 2015, by taking our story to a wider audience.



Woolite

Recent Work

Knorr

Dove

ETIHAD Airlines

Nurofen

Wind Mobile

Optrex

Tresemme

Kellogg’s

I thoroughly enjoyed my Mallorquin experience with Palma Pictures. I’m not only extremely

grateful for the level of professionalism that every crew member afforded me, but also I really appreciated their generosity and kindness too.

Trevor Melvin Director, RSA

WhERE IS ThIS?

Pont Besalú , Girona



ManagementTeam



Ramón CaravacaFinancial DirectorPalma Pictures

Ramón Caravaca started working with Palma Pictures as an accountant in 1997 and was promoted to

Financial Director in 1999. Prior to that, he was a professional accountant and advisor at Montis Law Office in

Palma. He has been instrumental in controlling and developing the financial health of the company, as well as

sharing the responsibilities of the studio construction from 1998 to 2000. He became a partner in 2007.

Mike DayCEOPalma Pictures

Michael Day has over twenty years experience in the film, television and advertising industries, serving in

numerous roles from assistant director to producer. He first gained management experience when, at the

age of 20, he was promoted to General Manager for Movie Screen News Production, a company supplying

film crews and equipment to broadcasters such as the BBC, MTV, VH1 and ITV networks. In 1999, he set

up the London office of Palma Pictures before being promoted to Executive Producer and subsequently

Managing Director in 2003. He became a partner in 2007.

Trent WaltonExecutive ProducerPalma Pictures

Trent Walton has held many production positions since starting in the film and television industry in 1993

and produced several award-winning short films. He joined our London office as producer in 2001 and by

2004 was Head of Production, overseeing production from all territories. In 2005 he became Executive

Producer. Since 2007 he has been a Managing Partner, helping to lead a team of 50 film professionals and

to meet the company’s growth targets.

TheFigures

04Section

77 The Figures Palma PicturesAnnual Report 2014


A closer look inside 76

Shareholders

Board

Shareholding of Palma Pictures TMPC S.L

1,606,500Zallaz, S.A.

765,000Mike Day

510,000Trent Walton

263,500Bertil Villard

255,000 3,400,00Ramón Caravaca TOTAL SHARES

Ture Stendahl Mike DayJoachim OdqvistJuan Pablo Nicolau

Chairman

Secretary

George Entwistle

Advisors


The Figures 78 79 The Figures Palma PicturesAnnual Report 2014

FinancialsAuditor’s responsibility

Our responsibility is to express an opinion on the accompanying annual accounts

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 annual accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts

and disclosures in the annual accounts. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of material misstatement

of the annual accounts, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the entity’s preparation

of annual accounts, 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 annual accounts.

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 accompanying annual accounts give a true and fair view, in all

material respects, of the equity and financial position of PALMA PICTURES THE

MEDITERRANEAN PRODUCTION CENTER, S.L. at December 31, 2014, and its

results and cash flow for the year then ended, in accordance with the applicable

regulatory framework for financial information in Spain, and specifically the

accounting principles and criteria contained therein.

Report on other legal and regulatory requirements

The accompanying 2014 management report contains such explanations as the

directors consider appropriate concerning the situation of the Company, the

evolution of its business and other matters; however, it is not an integral part of the

annual accounts. We have checked that the accounting information included in the

aforementioned management report agrees with the 2014 annual accounts. Our work

as auditors is limited to verifying the management report in accordance with the

scope mentioned in this paragraph, and does not include the review of information.

Original signed by Juan Manuel Martín de Vidales Bennásar, ERNST & YOUNG. April 17th, 2015

Independent audit report on the Annual AccountsTo the Shareholders of PALMA PICTURES THE MEDITERRANEAN PRODUCTION CENTER, S.L.:

Translation of a report and financial statements originally issued in Spanish. In the event of discrepancy, the Spanish-language version prevails (See Note 18).

Report on the annual accounts

We have audited the accompanying annual accounts of PALMA PICTURES THE

MEDITERRANEAN PRODUCTION CENTER, S.L., which comprise the balance sheet

at December 31, 2014, the income statement, the statement of changes in equity, the

cash flow statement, and the notes thereto for the year then ended.

Directors’ responsibility for the annual accounts

The directors are responsible for the preparation of the accompanying annual

accounts, so that they give a true and fair view of the equity and financial position and

the results of PALMA PICTURES THE MEDITERRANEAN PRODUCTION CENTER,

S.L., in accordance with the regulatory framework for financial information applicable to

the Entity in Spain, identified in Note 2 to the accompanying annual accounts, and for

such internal control as they determine is necessary to enable the preparation of annual

accounts that are free from material misstatement, whether due to fraud or error.

ASSETS NOTES 2014 2013

A) NON-CURRENT ASSETS 11,126,975 11,637,511

I. Intangible assets 5 2,329,305 2,529,334

1. Patents, licenses, trademarks and similar 2,294,613 2,485,600

2. Software 34,692 43,733

II. Property, plant and equipment 6 8,701,462 9,075,846

1. Land and buildings 8,068,232 8,319,319

2. Plant and other PP&E items 633,230 756,527

III. Long-term investments 7 7,652 11,133

1. Loans to third parties 3,659 7,140

2. Other financial assets 3,993 3,993

IV. Deferred tax assets 11 88,556 21,198

B) CURRENT ASSETS 2,159,889 2,044,136

I. Trade and other receivables 1,146,889 988,596

1. Clients for sales and services rendered 7 675,325 674,940

2. Personnel 20 -

3. Other receivables from Public Administrations 11 471,544 313,656

II Short-term financial investments 7 13,971 13,803

1. Equity instruments 10,490 10,490

2. Loans to companies 3,481 3,313

III. Cash and cash equivalents 8 999,029 1,041,737

1. Cash 699,029 591,737

2. Cash equivalents 300,000 450,000

TOTAL ASSETS (A+B) 13,286,864 13,681,647



LIABILITIES NOTES 2014 2013

A) EQUITY 3,940,433 3,474,714

A-1) Equity 9 3,854,093 3,388,763

I. Share capital 3,400,000 3,400,000

1. Issued capital 3,400,000 3,400,000

II. Reserves 38,185 (394,441)

III. Result for the year attributable to the Parent Company 12.2 415,908 383,204

A-2) Grants, donations and legacies 9 86,340 85,951

B) NON-CURRENT LIABILITIES 6,919,783 7,920,520

I. Long-term borrowings 10 4,737,550 5,173,875

1. Bank borrowings 2,985,418 3,313,410

2. Other financial liabilities 1,752,132 1,860,465

II. Deferred tax liabilities 11 2,182,233 2,746,646

C) CURRENT LIABILITIES 2,426,648 2,286,413

I. Short-term borrowings 10 543,520 673,132

1. Bank borrowings 429,936 562,108

2. Finance lease creditors - 3,609

3. Other financial liabilities 113,584 107,415

II. Trade creditors and other accounts payable 10 1,883,128 1,613,281

1. Suppliers 1,778,082 1,105,288

2. Personnel (remuneration pending payment) 9,152 7,779

3. Current tax liabilities 11 67,611 240,974

4. Other payables to Public Administrations 11 28,283 37,891

5. Prepayments from clients - 221,350

TOTAL EQUITY AND LIABILITIES (A+B+C) 13,286,864 13,681,647

Assets (€) Liabilities (€)



Consolidated income statement (€)

Statement of income and expenses (€)

CONSOLIDATED INCOME STATEMENT NOTES 2014 2013

1. Revenue 12.1 14,265,754 16,443,763

2. Supplies 12.3 (108,560) (305,394)

3. Other operating income 48,644 65,171

4. Personnel expenses 12.4 (1,477,862) (1,667,179)

5. Other operating expenses (11,933,520) (13,032,467)

6. Amortisation and depreciation (627,736) (643,151)

7. Impairment losses and result for the sale of assets (305) (18,990)

8. Grants 7,668 7,668

9. Other results 2,360 8,057

A) OPERATING RESULT (1+2+3+4+5+6+7+8+9) 176,443 857,477

10. Finance income 6,419 3,182

11. Finance expenses (196,663) (213,386)

B) FINANCE RESULT (10+11+12) (190,244) (210,204)

C) RESULT BEFORE TAXES (A+B) (13,801) 647,273

13. Income tax 11 429,709 (264,069)

D) RESULT FOR THE YEAR (C+13) 12.1 415,908 383,204

RESULT OF THE CONSOLIDATED INCOME STATEMENT 415,908 383,204

Income and expenses carried directly to equity

For valuation of financial instruments - -

Available-for-sale financial assets - -

Other income/expenses - -

For cash flow hedges - -

Conversion differences - -

Grants, donations and legacies - -

For actuarial profit and loss and other adjustments - -

Tax effect due to change in tax rate 5,755 -

Total income and expenses carried directly to equity 5.755

Transfers to consolidated profit and loss account

For valuation of financial instruments - -

Available-for-sale financial assets - -

Other income/expenses - -

For cash flow hedges - -

Grants, donations and legacies 10.5 (7,667) (7,667)

Tax effect 2,300 2,300

Total transfers to consolidated income statement (5,367) (5,367)

TOTAL RECOGNISED INCOME AND EXPENSES 416,296 377,837



2014 SUBSCRIBED CONSOLIDATED RESULTS GRANTS TOTAL CAPITAL RESERVES FOR THE RECEIVED (NOTE 9) (NOTE 9) YEAR (NOTE 9)

BALANCE AT JANUARY 1, 2014 3,400,000 (394,441) 383,204 85,951 3,474,714

Total recognised income and expenses 415,908 389 416,297

Other variations in net equity 432,626 (383,204) 49,422

BALANCE AT DECEMBER 31, 2014 3,400,000 38,185 415,908 86,340 3,940,433

2013 SUBSCRIBED CONSOLIDATED RESULTS GRANTS TOTAL CAPITAL RESERVES FOR THE RECEIVED (NOTE 9) (NOTE 9) YEAR (NOTE 9)

BALANCE AT JANUARY 1, 2013 3,400,000 59,383 (453,824) 91,318 3,096,877

Total recognised income and expenses - - 383,204 (5,367) 377,837

Other variations in net equity - (453,824) 453,824 - -

BALANCE AT DECEMBER 31, 2013 3,400,000 (394,441) 383,204 85,951 3,474,714

Consolidated statement of changes in equity

Cash flows of operating activitiesResult for the year before tax (13,801) 647,273

Adjustments to results 824,015 853,602

Amortisation/Depreciation (+) 627,736 643,150

Impairment adjustments (+/-) 10,321 -

Grants (-) (7,668) (7,668)

Results for withdrawal and disposal of assets (+/-) 305 7,916

Finance income (-) (6,419) (3,182)

Finance expenses (+) 199,740 213,386

Changes in current capital 200,938 (238,096)

(Increase)/Decrease in Debtors and other accounts receivable (218,152) 11,457

(Increase)/Decrease in Creditors and other accounts payable 415,608 (252,866)

Other non-current assets and liabilities (+/-) 3,482 3,313

Other cash flows from operating activities (434,295) (319,040)

Interest payments (-) (199,740) (213,386)

Proceeds from interest (+) 6,419 3,182

Collections (payments) for income tax (+/-) (240,974) (108,836)

Cash flows of operating activities 576,857 943,740

Cash flows from investing activities

Payments for investments (-) (73,760) (76,879)

Intangible assets (14,054) (2,000)

Property, plant and equipment (59,706) (74,879)

Proceeds from disinvestments (+) 20,131 24,958

Property, plant and equipment 20,131 24,958

Cash flows from investing activities (53,629) (51,921)

Cash flows from financing activities

Proceeds and payments from financial liability instruments (565,936) (609,100)

Issue 85,965 -

Bank borrowings (+) 85,965 -

Return and amortisation of (651,901) (609,100)

Bank borrowings (-) (549,994) (506,696)

Other borrowings (-) (101,907) (102,404)

Cash flows from financing activities (565,936) (609,100)

NET INCREASE/DECREASE OF CASH OR CASH EQUIVALENTS (42,708) 282,719

Cash and cash equivalents at January 1 1,041,737 759,018

Cash and cash equivalents at December 31 999,029 1,041,737



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orki

ng c

apita

l defi

cit

of

266

,759

. Non

ethe

less

, the

Dire

ctor

s of

the

Par

ent

Com

pany

con

side

r th

at t

he c

ash

flow

s ge

nera

ted

by

the

busi

ness

are

suffi

cien

t to

ass

ume

the

curr

ent

liabi

litie

s. M

oreo

ver,

if ne

cess

ary,

the

Par

ent

Com

pany

has

the

finan

cial

sup

port

of

its s

hare

hold

ers.

As

a re

sult,

the

Dire

ctor

s of

the

Par

ent

Com

pany

hav

e

prep

ared

the

con

solid

ated

ann

ual a

ccou

nts

base

d on

the

goi

ng c

once

rn p

rinci

ple.

2.4

Acc

ount

ing

prin

cipl

esT

he m

ain

acco

untin

g pr

inci

ples

and

val

uatio

n st

anda

rds

rela

ted

to th

e co

nsol

idat

ion

proc

ess

are

as fo

llow

s:

Res

erve

s in

Con

solid

ated

Com

pani

es a

nd C

onso

lidat

ion

Goo

dwill

In a

ccor

danc

e w

ith t

he s

ixth

tra

nsiti

onal

Pro

visi

on o

f R

oyal

Dec

ree

1159

/20

10, d

ated

Sep

tem

ber

17,

appr

ovin

g th

e S

tand

ards

for

the

Pre

para

tion

of C

onso

lidat

ed A

nnua

l Acc

ount

s, t

he fi

rst

cons

olid

atio

n

diff

eren

ces

have

bee

n es

tabl

ishe

d at

Jan

uary

1, 2

010

, as

this

is t

he o

peni

ng d

ate

of t

he fi

rst

acco

untin

g

perio

d in

whi

ch t

he c

onso

lidat

ed a

nnua

l acc

ount

s ar

e fo

rmul

ated

.

The

firs

t co

nsol

idat

ion

diff

eren

ce a

risin

g fr

om t

he e

limin

atio

n of

inve

stm

ent-

equi

ty, h

as b

een

cons

ider

ed

as a

less

er r

eser

ve o

f th

e P

aren

t C

ompa

ny.

Min

orit

y in

tere

stM

inor

ity in

tere

st d

oes

not

exis

t.

Tem

pora

ry h

omog

enis

atio

n T

he a

ccou

ntin

g pe

riod

for

the

com

pani

es in

clud

ed in

the

con

solid

atio

n pe

rimet

er c

oinc

ides

with

the

natu

ral y

ear.

Valu

atio

n ho

mog

enis

atio

nA

sset

s an

d lia

bilit

ies

item

s, t

oget

her

with

the

inco

me

and

expe

nses

incl

uded

in c

onso

lidat

ion,

hav

e be

en

mea

sure

d us

ing

unifo

rm m

etho

ds a

nd in

acc

orda

nce

with

the

val

uatio

n st

anda

rds

esta

blis

hed

in t

he

prev

ailin

g m

erca

ntile

legi

slat

ion.

Inte

rcom

pany

tra

nsac

tion

sT

he e

ffec

ts a

risin

g fr

om in

tern

al t

rans

actio

ns, w

hich

are

und

erst

ood

to b

e th

ose

tran

sact

ions

occ

urrin

g

betw

een

two

Gro

up c

ompa

nies

, are

elim

inat

ed s

o th

at t

he c

onso

lidat

ed a

nnua

l acc

ount

s on

ly in

clud

e

tran

sact

ions

und

erta

ken

with

thi

rd p

artie

s.

Mor

eove

r, in

terc

ompa

ny c

redi

ts, d

ebits

, inc

ome

and

expe

nses

hav

e al

so b

een

elim

inat

ed f

rom

the

cons

olid

ated

ann

ual a

ccou

nts.

In t

he c

ase

that

item

s ar

isin

g fr

om in

tern

al t

rans

actio

ns d

o no

t ag

ree

or a

re s

till p

endi

ng r

ecog

nitio

n, t

he

corr

espo

ndin

g ad

just

men

ts h

ave

been

mad

e so

tha

t th

e ap

prop

riate

elim

inat

ions

can

be

perf

orm

ed.

Con

solid

atio

n pr

inci

ples

The

sub

sidi

ary

incl

uded

in t

he c

onso

lidat

ion

perim

eter

has

bee

n fu

lly in

tegr

ated

. Sub

sidi

arie

s ar

e th

ose

com

pani

es in

whi

ch t

he d

irect

or

indi

rect

par

ticip

atio

n ex

ceed

s 50

% o

r th

e P

aren

t C

ompa

ny h

as s

ome

degr

ee o

f co

ntro

l. Fo

llow

ing

hom

ogen

isat

ion,

all

the

asse

ts, l

iabi

litie

s, in

com

e an

d ex

pens

es h

ave

been

aggr

egat

ed. T

he d

etai

l of

the

com

pani

es in

tegr

atin

g th

e ec

onom

ic g

roup

Pal

ma

Pic

ture

s T.

M.P

.C.,

S.L

.

and

subs

idia

ries

is a

s fo

llow

s:

Par

tici

pate

d co

mpa

ny

Sub

sidi

ary

/ %

Dir

ect

Sha

re

Res

erve

s R

esul

t G

rant

s E

quit

y

Ass

ocia

te

part

icip

atio

n ca

pita

l(€

) (€

) (€

) (€

)

Pal

ma

Pic

ture

s T.

M.P

.C.,

S.L

. P

aren

t P

aren

t 3

,40

0,0

00

(1

1,237

) 4

65,

33

0

86

,34

0

3,9

40

,43

3

Com

pany

C

ompa

ny

Pat

hfind

er M

edia

, S.L

.U.

Sub

sidi

ary

100

%

3,0

06

(1

25,6

22)

(81,1

63

) -

(20

3,7

79)

2.5

Cri

tica

l iss

ues

conc

erni

ng th

e as

sess

men

t of

unce

rtai

nty

The

Dire

ctor

s of

the

Pare

nt C

ompa

ny h

ave

prep

ared

the

Com

pany

’s c

onso

lidat

ed a

nnua

l acc

ount

s us

ing

estim

ates

to d

eter

min

e th

e ca

rryi

ng a

mou

nt o

f cer

tain

ass

ets,

liab

ilitie

s, in

com

e an

d ex

pens

es a

nd th

e

brea

kdow

n of

con

tinge

nt li

abilit

ies.

The

se e

stim

ates

hav

e be

en m

ade

base

d on

the

best

info

rmat

ion

avai

labl

e

at y

ear-

end.

Non

ethe

less

, giv

en th

e un

cert

aint

y in

here

nt to

them

, fut

ure

even

ts m

ay o

ccur

whi

ch o

blig

e th

eir

mod

ifica

tion

in th

e fo

llow

ing

year

s. W

here

nec

essa

ry, s

aid

mod

ifica

tions

wou

ld b

e un

dert

aken

pro

spec

tivel

y.

The

key

ass

umpt

ions

reg

ardi

ng t

he f

utur

e, in

add

ition

to

othe

r re

leva

nt in

form

atio

n re

gard

ing

the

unce

r-

tain

ty e

stim

atio

n at

the

rep

ortin

g da

te, w

hich

rep

rese

nt a

con

side

rabl

e ris

k th

at t

he c

arry

ing

amou

nts

of

asse

ts a

nd li

abili

ties

may

req

uire

sig

nific

ant

adju

stm

ents

in t

he fo

llow

ing

finan

cial

yea

r, ar

e as

follo

ws:

Impa

irm

ent o

f no

n-cu

rren

t ass

ets

The

val

uatio

n of

non

-cur

rent

ass

ets,

diff

eren

t fr

om fi

nanc

ial a

sset

s, r

equi

res

estim

ates

to

be m

ade

in

orde

r to

det

erm

ine

thei

r fa

ir va

lue,

to

asse

ss p

ossi

ble

impa

irmen

t, es

peci

ally

for

good

will

and

inta

ngib

le

asse

ts w

ith a

n in

defin

ite u

sefu

l life

. In

orde

r to

det

erm

ine

the

fair

valu

e, t

he D

irect

ors

of t

he P

aren

t C

om-

pany

est

imat

e fu

ture

cas

h flo

ws

expe

cted

fro

m t

he a

sset

s or

cas

h-ge

nera

ting

units

in w

hich

the

y ar

e

incl

uded

and

use

an

appr

opria

te d

isco

unt

rate

to

calc

ulat

e th

e pr

esen

t va

lue

of t

hese

cas

h flo

ws.

Fut

ure

cash

flow

s de

pend

on

the

budg

ets

for

the

follo

win

g fiv

e ye

ars

bein

g m

et a

nd t

he d

isco

unt

rate

s de

pend

on t

he in

tere

st r

ate

and

the

risk

prem

ium

rel

ated

to

each

cas

h-ge

nera

ting

unit.

Def

erre

d ta

x as

sets

Def

erre

d ta

x as

sets

are

rec

ogni

sed

for

all t

axab

le t

empo

rary

diff

eren

ces,

car

ry-f

orw

ard

of u

nuse

d ta

x

cred

its a

nd u

nuse

d ta

x lo

sses

, to

the

exte

nt t

hat

it is

pro

babl

e th

at t

he c

ompa

nies

will

hav

e ta

xabl

e pr

of-

it av

aila

ble

whi

ch w

ill a

llow

the

app

licat

ion

of t

hese

ass

ets.

The

Dire

ctor

s of

the

Par

ent

Com

pany

mak

e

sign

ifica

nt e

stim

ates

to

dete

rmin

e th

e am

ount

of

defe

rred

tax

ass

ets

that

can

be

reco

gnis

ed, t

akin

g in

to

acco

unt

the

amou

nts

and

date

s on

whi

ch t

he f

utur

e ta

xabl

e pr

ofit

will

be

obta

ined

and

the

rev

ersi

on

perio

d of

the

tax

able

tem

pora

ry d

iffer

ence

.

3. D

IST

RIB

UT

ION

OF

RE

SU

LTS

The

app

ropr

iatio

n of

res

ults

of

the

Par

ent

Com

pany

res

ults

pro

pose

d by

the

Dire

ctor

s, p

endi

ng a

ppro

val

by t

he S

hare

hold

ers

in t

heir

Gen

eral

Mee

ting,

is a

s fo

llow

s:

Eur

os

2014

20

13

Bas

is o

f di

stri

buti

on

Con

solid

ated

pro

fit a

nd lo

ss a

ccou

nt b

alan

ce

46

5,3

30

4

08

,43

4

4

65,

33

0

40

8,4

34

Dis

trib

utio

n

To le

gal r

eser

ve

46

,53

3

-

To lo

sses

fro

m p

revi

ous

year

s 37

0,3

43

4

08

,43

4

To r

eser

ves

48

,454

-

4

65,

33

0

40

8,4

34



4. V

ALU

AT

ION

CR

ITE

RIA

The

mai

n re

cogn

ition

and

mea

sure

men

t ac

coun

ting

polic

ies

appl

ied

in t

he p

repa

ratio

n of

the

se c

onso

li-

date

d an

nual

acc

ount

s ar

e th

e fo

llow

ing.

4.1

Inta

ngib

le a

sset

sIn

tang

ible

ass

ets

are

stat

ed a

t ac

quis

ition

or

prod

uctio

n co

st, a

s ap

plic

able

, les

s an

y ac

cum

ulat

ed a

mor

-

tisat

ion

and

any

poss

ible

loss

es d

ue t

o im

pairm

ent.

An

inta

ngib

le a

sset

is o

nly

reco

gnis

ed a

s su

ch if

it is

prob

able

tha

t it

will

gen

erat

e fu

ture

pro

fit fo

r th

e G

roup

and

if it

s co

st c

an b

e re

liabl

y va

lued

.

Acq

uisi

tion

or p

rodu

ctio

n co

st in

clud

es fi

nanc

e ex

pens

es r

elat

ed t

o sp

ecifi

c or

gen

eric

fina

ncin

g ac

-

crue

d be

fore

tho

se a

sset

s w

hich

req

uire

mor

e th

an a

yea

r to

be

read

y fo

r us

e ha

ve b

een

put

into

use

.

Inta

ngib

le a

sset

s ha

ve a

fini

te u

sefu

l life

and

are

sys

tem

atic

ally

am

ortis

ed d

urin

g th

eir

estim

ated

use

ful

life

and

thei

r re

cove

rabi

lity

is a

naly

sed

in t

he c

ase

of e

vent

s or

cha

nges

whi

ch in

dica

te t

hat

the

carr

ying

valu

e m

ay n

ot b

e re

cove

rabl

e. T

he a

mor

tisat

ion

met

hods

and

per

iods

app

lied

are

revi

ewed

at

year

-end

and,

whe

re a

pplic

able

, adj

uste

d on

a p

rosp

ectiv

e ba

sis.

The

am

ortis

atio

n of

inta

ngib

le a

sset

s is

per

form

ed a

ccor

ding

to

the

follo

win

g cr

iteria

:

- The

Bra

nd c

orre

spon

ds t

o th

e di

ffer

ence

gen

erat

ed in

the

20

07

mer

ger

betw

een

the

acqu

isiti

on c

ost

of t

he a

bsor

bed

com

pany

and

its

notio

nal b

ook

valu

e, le

ss t

he c

apita

l gai

ns r

elat

ing

to p

rope

rty,

pla

nt

& e

quip

men

t an

d in

crea

sed

by t

he a

mou

nt o

f th

e de

ferr

ed t

axes

aris

ing

from

the

mer

ger

oper

atio

n al

l

base

d on

an

appr

aisa

l per

form

ed b

y an

inde

pend

ent

expe

rt. T

he b

rand

is a

mor

tised

on

the

stra

ight

-line

met

hod

over

a t

wen

ty-y

ear

perio

d st

artin

g fr

om t

he m

erge

r da

te, J

anua

ry 1

, 20

07,

as

this

is t

he p

erio

d in

whi

ch t

he D

irect

ors

cons

ider

tha

t it

will

gen

erat

e pr

ofits

for

the

Par

ent

Com

pany

(See

Not

e 5)

.

- The

sof

twar

e ap

plic

atio

ns, w

hich

are

acq

uire

d fr

om t

hird

par

ties,

are

am

ortis

ed o

n th

e st

raig

ht-li

ne

met

hod

over

the

five

-yea

r pe

riod

in w

hich

the

y ar

e ex

pect

ed t

o be

in u

se. S

oftw

are

mai

nten

ance

cos

ts

are

carr

ied

to e

xpen

ses

whe

n in

curr

ed.

4.2

Pro

pert

y, p

lant

and

equ

ipm

ent

Pro

pert

y, p

lant

and

equ

ipm

ent

are

stat

ed a

t ac

quis

ition

or

prod

uctio

n co

st, l

ess

accu

mul

ated

dep

re-

ciat

ion

and

poss

ible

loss

es d

ue t

o im

pairm

ent

in v

alue

. Cos

ts in

curr

ed t

o re

nova

te, e

xpan

d or

impr

ove

prop

erty

, pla

nt a

nd e

quip

men

t ar

e at

trib

uted

to

the

asse

t as

gre

ater

val

ue t

o th

e ex

tent

tha

t th

ey im

ply

an in

crea

se in

cap

acity

, pro

duct

ivity

or

leng

th o

f us

eful

life

and

as

long

as

it is

pos

sibl

e to

rea

sona

bly

know

or

estim

ate

the

carr

ying

val

ue o

f th

e as

sets

, whi

ch, d

ue t

o ha

ving

bee

n su

bstit

uted

, mus

t be

with

-

draw

n fr

om t

he in

vent

ory.

Acq

uisi

tion

or p

rodu

ctio

n co

st in

clud

es fi

nanc

e ex

pens

es r

elat

ed t

o fin

anci

ng a

ccru

ed b

efor

e th

ose

asse

ts w

hich

req

uire

mor

e th

an a

yea

r to

be

read

y fo

r us

e ha

ve b

een

put

into

use

.

The

Gro

up d

epre

ciat

es p

rope

rty,

pla

nt a

nd e

quip

men

t on

the

str

aigh

t-lin

e m

etho

d, d

istr

ibut

ing

the

cost

betw

een

the

estim

ated

yea

rs o

f us

eful

life

.

Ass

ets

%

Ann

ual d

epre

ciat

ion

Bui

ldin

gs a

nd c

onst

ruct

ions

3

Mac

hine

ry

12

.5

Oth

er in

stal

latio

ns

5.

5

Furn

iture

and

fitt

ings

5.7

Dat

a pr

oces

sing

equ

ipm

ent

12

.5

Vehi

cles

12.5

Oth

er a

sset

s

5.5

At

each

fina

ncia

l yea

r en

d th

e G

roup

rev

iew

s an

d ad

just

s, w

here

nec

essa

ry, t

he r

esid

ual v

alue

s, u

sefu

l

lives

and

dep

reci

atio

n m

etho

ds a

nd if

app

ropr

iate

adj

usts

the

m o

n a

pros

pect

ive

basi

s.

4.3

Impa

irm

ent o

f no

n-fi

nanc

ial a

sset

sT

he G

roup

ass

esse

s at

eac

h ye

ar e

nd w

heth

er t

here

is a

n in

dica

tion

that

a n

on-c

urre

nt a

sset

or,

whe

re

appl

icab

le, a

cas

h-ge

nera

ting

unit

may

be

impa

ired.

If a

ny in

dica

tion

exis

ts, a

nd in

any

cas

e fo

r in

tang

i-

ble

asse

ts w

ith in

defin

ite u

sefu

l liv

es, t

he G

roup

est

imat

es t

he a

sset

’s r

ecov

erab

le a

mou

nt.

The

rec

ove

rab

le a

mo

unt

is t

he h

ighe

r o

f fa

ir v

alue

less

co

st t

o s

ell a

nd v

alue

in u

se. W

hen

the

carr

ying

am

oun

t is

hig

her

than

the

rec

ove

rab

le a

mo

unt,

the

ass

et is

co

nsid

ered

to

be

imp

aire

d.

Val

ue in

use

, is

the

pre

sent

val

ue o

f th

e ex

pec

ted

fut

ure

cash

flo

ws

usin

g r

isk

free

mar

ket

rate

s,

adju

sted

by

the

risk

s sp

ecif

ic t

o t

he a

sset

.

Impa

irmen

t lo

ss a

nd it

s re

vers

ion

are

reco

gnis

ed in

the

con

solid

ated

inco

me

stat

emen

t. Im

pairm

ent

loss

is r

ever

sed

only

if t

he c

ircum

stan

ces

givi

ng r

ise

to it

hav

e ce

ased

to

exis

t, ex

cept

tho

se r

elat

ing

to

good

will

. The

rev

ersa

l is

limite

d to

the

car

ryin

g am

ount

tha

t w

ould

hav

e be

en d

eter

min

ed h

ad n

o im

pair-

men

t lo

ss b

een

reco

gnis

ed fo

r th

e as

set.

4.4

. Lea

ses

Leas

es a

re c

onsi

dere

d to

be

finan

cial

leas

es w

hen,

bas

ed o

n th

e ec

onom

ic t

erm

s of

the

arr

ange

men

t,

all r

isks

and

rew

ards

inci

dent

al t

o ow

ners

hip

of t

he le

ased

item

are

sub

stan

tially

tra

nsfe

rred

to

the

Gro

up. A

ll ot

her

leas

e ar

rang

emen

ts a

re c

lass

ified

as

oper

atin

g le

ases

.

Com

pany

as

less

eeA

sset

s ac

qui

red

thr

oug

h fi

nanc

e le

ase

are

reco

gni

sed

in a

cco

rdan

ce w

ith

thei

r na

ture

, fo

r th

e

low

er o

f th

e as

set’s

fai

r va

lue

and

the

act

ual v

alue

at

the

beg

inni

ng o

f th

e le

ase

of

the

agre

ed

min

imum

pay

men

ts, i

nclu

din

g t

he p

urch

ase

opt

ion

and

a f

inan

cial

liab

ility

is r

eco

rded

fo

r th

e

sam

e am

oun

t. T

he c

alcu

lati

on

of

the

min

imum

ag

reed

pay

men

ts d

oes

no

t in

clud

e co

ntin

gen

t

inst

alm

ents

, the

co

st o

f th

e se

rvic

es a

nd t

axes

rec

ove

rab

le b

y th

e le

sso

r. Le

ase

pay

men

ts a

re a

p-

po

rtio

ned

bet

wee

n fi

nanc

e ch

arg

es a

nd r

educ

tio

n o

f th

e le

ase

liab

ility

. The

to

tal f

inan

cial

cha

rge

of

the

cont

ract

is c

arri

ed t

o c

ons

olid

ated

res

ults

fo

r th

e ye

ar in

whi

ch it

is a

ccru

ed, a

pp

lyin

g t

he

effe

ctiv

e in

tere

st r

ate

met

hod

. The

se a

sset

s ar

e d

epre

ciat

ed, i

mp

aire

d, a

nd d

erec

og

nise

d u

sing

the

sam

e cr

iter

ia a

pp

lied

to

ass

ets

of

a si

mila

r na

ture

. Op

erat

ing

leas

e p

aym

ents

are

rec

og

nise

d

as e

xpen

ses

in t

he c

ons

olid

ated

inco

me

stat

emen

t w

hen

accr

ued

.

4.5

Inve

ntor

ies

Inve

ntor

ies

are

valu

ed a

t ac

quis

ition

cos

t, pr

oduc

tion

cost

or

fair

valu

e. In

gen

eral

, for

tho

se g

oods

who

se a

cqui

sitio

n or

pro

duct

ion

cost

is n

ot in

divi

dual

ly id

entifi

able

, the

wei

ghte

d av

erag

e co

st w

ill b

e

used

. Irr

ever

sibl

e lo

sses

are

with

draw

n fr

om in

vent

orie

s.

4.6

Cas

h an

d ca

sh e

quiv

alen

tsT

his

head

ing

incl

udes

cas

h, c

urre

nt a

ccou

nts,

sho

rt-t

erm

dep

osits

and

tem

pora

ry p

urch

ases

of

asse

ts

whi

ch f

ulfil

all

the

follo

win

g re

quire

men

ts:

•T

hey

are

read

ily c

onve

rtib

le t

o ca

sh.

•T

hey

mat

ure

with

in le

ss t

han

thre

e m

onth

s fr

om t

he a

cqui

sitio

n da

te o

r th

ey c

an b

e ca

ncel

led

at a

ny

time

with

out

pena

lisat

ion.

•T

he r

isk

of c

hang

e in

val

ue is

insi

gnifi

cant

.

•T

hey

are

part

of

the

Gro

up’s

sta

ndar

d ca

sh m

anag

emen

t st

rate

gy.

In t

erm

s of

the

con

solid

ated

cas

h flo

w s

tate

men

t, oc

casi

onal

ban

k ov

erdr

afts

use

d as

par

t of

the

Gro

up’s

cas

h m

anag

emen

t st

rate

gy a

re r

ecog

nise

d as

a d

ecre

ase

in c

ash

and

cash

equ

ival

ents

.

4.7

Fin

anci

al a

sset

s4

.7.1

Rec

ogni

tion

and

mea

sure

men

tLo

ans

and

rece

ivab

les

The

Gro

up r

ecog

nise

s in

thi

s ca

tego

ry t

rade

and

non

-tra

de r

ecei

vabl

es, w

hich

incl

ude

finan

cial

ass

ets

with

fixe

d or

det

erm

inab

le p

aym

ents

not

quo

ted

on a

ctiv

e m

arke

ts a

nd fo

r w

hich

the

Gro

up e

xpec

ts t

o

reco

ver

the

full

initi

al in

vest

men

t, ex

cept

, whe

re a

pplic

able

, in

case

s of

cre

dit

dete

riora

tion.

Upo

n in

itial

rec

ogni

tion

in t

he c

onso

lidat

ed b

alan

ce s

heet

, the

y ar

e re

cogn

ised

at

fair

valu

e, w

hich

,

unle

ss t

here

is e

vide

nce

to t

he c

ontr

ary,

is t

he t

rans

actio

n pr

ice,

whi

ch is

equ

ival

ent

to t

he fa

ir va

lue

of

the

cons

ider

atio

n pa

id p

lus

dire

ctly

att

ribut

able

tra

nsac

tion

cost

s.

Follo

win

g in

itial

rec

ogni

tion,

the

se fi

nanc

ial a

sset

s ar

e m

easu

red

at a

mor

tised

cos

t.

Non

ethe

less

, tho

se c

redi

ts a

risin

g fr

om t

rade

ope

ratio

ns w

hich

mat

ure

in le

ss t

han

a ye

ar a

nd d

o no

t

have

a c

ontr

acte

d in

tere

st r

ate,

as

wel

l as

adva

nce

paym

ents

and

cre

dits

to

pers

onne

l, th

e di

vide

nds

rece

ivab

le a

nd c

alle

d-up

pay

men

ts o

n eq

uity

inst

rum

ents

whi

ch a

re e

xpec

ted

to b

e re

ceiv

ed in

the

shor

t-te

rm, a

re v

alue

d at

face

val

ue in

bot

h th

e in

itial

and

sub

sequ

ent

valu

atio

ns, w

hen

the

effec

t of

not

upda

ting

the

cash

flow

s is

not

sig

nific

ant.

Hel

d-to

-mat

urit

y in

vest

men

ts

Hel

d-t

o-m

atur

ity

inve

stm

ents

incl

ude

deb

t in

stru

men

ts w

ith

fixe

d m

atur

itie

s an

d f

ixed

or

det

er-

min

able

pay

men

ts t

rad

ed o

n ac

tive

mar

kets

whi

ch t

he G

roup

has

the

po

siti

ve in

tent

ion

and

the

fina

ncia

l ab

ility

to

ho

ld t

o m

atur

ity.

Upo

n in

itial

rec

ogni

tion

in t

he c

onso

lidat

ed b

alan

ce s

heet

, the

y ar

e re

cogn

ised

at

fair

valu

e, w

hich

,

unle

ss t

here

is e

vide

nce

to t

he c

ontr

ary,

is t

he t

rans

actio

n pr

ice,

whi

ch is

equ

ival

ent

to t

he fa

ir va

lue

of

the

cons

ider

atio

n pa

id p

lus

dire

ctly

att

ribut

able

tra

nsac

tion

cost

s. F

ollo

win

g in

itial

rec

ogni

tion,

the

se

finan

cial

ass

ets

are

mea

sure

d at

am

ortis

ed c

ost.

4.7

.2 D

erec

ogni

tion

of

fina

ncia

l ass

ets

The

Gro

up d

erec

ogni

ses

a fin

anci

al a

sset

, or

part

of

a fin

anci

al a

sset

, whe

n th

e co

ntra

ctua

l rig

hts

to

rela

ted

cash

flow

s ha

ve e

xpire

d or

whe

n th

e as

sets

are

tra

nsfe

rred

, pro

vide

d th

at r

elat

ed r

isks

and

rew

ards

are

sub

stan

tially

tra

nsfe

rred

.

The

diff

eren

ce b

etw

een

the

cons

ider

atio

n re

ceiv

ed, n

et o

f att

ribut

able

tran

sact

ion

cost

s, d

eter

min

es th

e ga

in

or lo

ss g

ener

ated

upo

n de

reco

gniti

on, a

nd is

incl

uded

in th

e in

com

e st

atem

ent i

n th

e ye

ar to

whi

ch it

rela

tes.

4.7

.3 Im

pair

men

t of

fina

ncia

l ass

ets

The

car

ryin

g am

ount

of

finan

cial

ass

ets

is a

djus

ted

agai

nst

the

cons

olid

ated

inco

me

stat

emen

t w

hen

ther

e is

obj

ectiv

e ev

iden

ce o

f ac

tual

impa

irmen

t.

4.8

Fin

anci

al li

abili

ties

4.8

.1 R

ecog

niti

on a

nd m

easu

rem

ent

Deb

its

and

acco

unts

pay

able

Thi

s ca

tego

ry in

clud

es fi

nanc

ial l

iabi

litie

s ge

nera

ted

by t

he p

urch

ase

of g

oods

and

ser

vice

s ar

isin

g fr

om

trad

e tr

ansa

ctio

ns, a

nd n

on-t

rade

pay

able

s th

at a

re d

efine

d as

tho

se fi

nanc

ial l

iabi

litie

s w

hich

are

not

deriv

ativ

e in

stru

men

ts a

nd t

here

fore

, are

not

of

a tr

ade

natu

re.

Follo

win

g in

itial

rec

ogni

tion,

fina

ncia

l lia

bilit

ies

are

mea

sure

d at

am

ortis

ed c

ost.

Acc

rued

inte

rest

is r

ec-

ogni

sed

in t

he c

onso

lidat

ed in

com

e st

atem

ent,

usin

g th

e eff

ectiv

e in

tere

st r

ate

met

hod.

Nev

erth

eles

s,

trad

e pa

yabl

es w

hich

mat

ure

with

in le

ss t

han

one

year

with

no

cont

ract

ual i

nter

est

rate

, as

wel

l as



calle

d-u

p p

aym

ents

on

shar

es, t

he a

mo

unt

of

whi

ch is

exp

ecte

d in

the

sho

rt t

erm

, in

bo

th t

he in

i-

tial

and

sub

seq

uent

val

uati

ons

, are

car

ried

at

the

nom

inal

val

ue w

hen

the

effe

ct o

f no

t d

isco

unti

ng

cash

flo

ws

is n

ot

sig

nifi

cant

.

4.8

.2 D

erec

ogni

tion

of

fina

ncia

l lia

bilit

ies

The

Gro

up d

erec

ogni

ses

a fin

anci

al li

abili

ty w

hen

the

oblig

atio

n un

der

the

liabi

lity

is e

xtin

guis

hed.

The

diff

eren

ce b

etw

een

the

carr

ying

am

ount

of t

he d

erec

ogni

sed

finan

cial

liab

ility

and

the

cons

ider

atio

n

paid

, inc

ludi

ng a

ny a

ttrib

utab

le tr

ansa

ctio

n co

sts,

whi

ch a

lso

incl

udes

any

new

ass

et tr

ansf

erre

d ot

her t

han

cash

or l

iabi

lity

assu

med

, is

reco

gnis

ed in

the

cons

olid

ated

inco

me

stat

emen

t in

the

year

to w

hich

it re

late

s.

4.9

Pro

visi

ons

for

risk

s an

d ex

pens

es

Liab

ilitie

s w

ith u

ndet

erm

ined

am

ount

s an

d ca

ncel

latio

n da

tes

are

reco

gnis

ed in

the

con

solid

ated

bala

nce

shee

t as

pro

visi

ons

whe

n th

e G

roup

has

a p

rese

nt o

blig

atio

n (d

eriv

ed f

rom

a c

ontr

act

thro

ugh

its e

xplic

it or

impl

icit

term

s, le

gisl

atio

n or

oth

er o

pera

tion

of la

w),

as a

res

ult

of p

ast

even

ts a

nd it

is

prob

able

tha

t a

quan

tifiab

le o

utflo

w o

f re

sour

ces

will

be

requ

ired

to s

ettle

the

obl

igat

ion.

Pro

visi

ons

are

mea

sure

d at

the

pre

sent

val

ue o

f th

e be

st e

stim

ate

of t

he a

mou

nt t

hat

an e

ntity

wou

ld

ratio

nally

pay

to

sett

le t

he o

blig

atio

n or

to

tran

sfer

it t

o a

third

par

ty, r

ecog

nisi

ng p

rovi

sion

dis

coun

t

adju

stm

ents

as

a fin

ance

cos

t as

the

y ac

crue

. No

disc

ount

s ar

e m

ade

on t

hose

pro

visi

ons

falli

ng d

ue

with

in t

wel

ve m

onth

s th

at d

o no

t ha

ve a

sig

nific

ant

finan

cial

eff

ect.

Pro

visi

ons

are

revi

ewed

at

each

cons

olid

ated

bal

ance

she

et d

ate

and

are

adju

sted

to

refle

ct t

he c

urre

nt b

est

estim

ate

of t

he li

abili

ty

corr

espo

ndin

g to

eac

h m

omen

t.

4.10

Inc

ome

tax

Inco

me

tax

expe

nse

for

the

year

is c

alcu

late

d as

the

sum

of c

urre

nt ta

x re

sulti

ng fr

om a

pply

ing

the

corr

espo

ndin

g ta

x ra

te to

taxa

ble

profi

t for

the

year

, les

s an

y ap

plic

able

reba

tes

and

tax

cred

its, t

akin

g

into

acc

ount

cha

nges

dur

ing

the

year

in re

cogn

ised

def

erre

d ta

x as

sets

and

liab

ilitie

s. T

he c

orre

spon

ding

tax

expe

nse

is re

cogn

ised

in th

e co

nsol

idat

ed in

com

e st

atem

ent,

exce

pt w

hen

it re

late

s to

tran

sact

ions

reco

gnis

ed d

irect

ly in

equ

ity, i

n w

hich

cas

e th

e co

rres

pond

ing

tax

expe

nse

is li

kew

ise

reco

gnis

ed in

equ

ity.

Def

erre

d in

com

e ta

x is

rec

ogni

sed

for

the

tem

pora

ry d

iffer

ence

s at

the

con

solid

ated

bal

ance

she

et d

ate

betw

een

the

tax

base

s of

ass

ets

and

liabi

litie

s an

d th

eir

carr

ying

am

ount

s. T

he t

ax b

ase

of a

n as

set

or

liabi

lity

is t

he a

mou

nt a

ttrib

uted

to

it fo

r ta

x pu

rpos

es.

The

tax

eff

ect

of t

empo

rary

diff

eren

ces

is in

clud

ed in

“D

efer

red

tax

asse

ts”

or “

Def

erre

d ta

x lia

bilit

ies”

on t

he c

onso

lidat

ed b

alan

ce s

heet

, as

appl

icab

le.

Def

erre

d t

ax li

abili

ties

are

rec

og

nise

d f

or

all t

emp

ora

ry d

iffe

renc

es, e

xcep

t w

here

dis

allo

wed

by

pre

vaili

ng t

ax le

gis

lati

on.

The

Gro

up re

cogn

ises

def

erre

d ta

x as

sets

for

all d

educ

tible

tem

pora

ry d

iffer

ence

s, u

nuse

d ta

x cr

edits

and

unus

ed ta

x lo

ss c

arry

forw

ards

, to

the

exte

nt th

at it

is p

roba

ble

that

futu

re ta

xabl

e pr

ofit w

ill b

e av

ail-

able

aga

inst

whi

ch th

ese

asse

ts m

ay b

e ut

ilise

d, e

xcep

t whe

re d

isal

low

ed b

y pr

evai

ling

tax

legi

slat

ion.

At

each

fina

ncia

l yea

r en

d, t

he G

roup

ass

esse

s th

e de

ferr

ed t

ax a

sset

s re

cogn

ised

and

tho

se t

hat

have

not

yet

been

rec

ogni

sed.

Bas

ed o

n th

is a

naly

sis,

the

Gro

up d

erec

ogni

ses

the

asse

t re

cogn

ised

pre

vi-

ousl

y if

it is

no

long

er p

roba

ble

that

it w

ill b

e re

cove

red,

or

it re

cogn

ises

any

def

erre

d ta

x as

set

that

had

not

been

rec

ogni

sed

prev

ious

ly, p

rovi

ded

that

it is

pro

babl

e th

at f

utur

e ta

xabl

e pr

ofit

will

be

avai

labl

e

agai

nst

whi

ch t

hese

ass

ets

may

be

utili

sed.

Def

erre

d ta

x as

sets

and

liab

ilitie

s ar

e m

easu

red

at t

he t

ax r

ate

expe

cted

to

appl

y to

the

per

iod

in w

hich

they

rev

erse

, as

requ

ired

by e

nact

ed t

ax la

ws

and

in t

he m

anne

r in

whi

ch it

rea

sona

bly

expe

cts

to

reco

ver

or s

ettle

the

def

erre

d ta

x as

set

or li

abili

ty.

Def

erre

d ta

x as

sets

and

liab

ilitie

s ar

e no

t di

scou

nted

and

are

cla

ssifi

ed a

s no

n-cu

rren

t as

sets

or

non-

curr

ent

liabi

litie

s irr

espe

ctiv

e of

the

dat

e of

the

ir ex

pect

ed r

ealis

atio

n or

set

tlem

ent.

4.11

Inco

me

and

expe

nses

In a

ccor

danc

e w

ith t

he a

ccru

als

prin

cipl

e, in

com

e an

d ex

pens

es a

re r

ecog

nise

d w

hen

they

are

incu

rred

,

rega

rdle

ss o

f w

hen

actu

al p

aym

ent

or c

olle

ctio

n oc

curs

.

Inco

me

for

sale

s or

ser

vice

s re

nder

edIn

com

e is

reco

gnis

ed w

hen

it is

pro

babl

e th

at th

e pr

ofit o

r ec

onom

ic b

enefi

ts fr

om th

e tr

ansa

ctio

n w

ill

flow

to th

e en

tity

and

the

amou

nt o

f inc

ome

and

cost

s in

curr

ed o

r to

be

incu

rred

can

be

relia

bly

mea

sure

d.

Rev

enue

is m

easu

red

at th

e fa

ir va

lue

of th

e co

nsid

erat

ion

rece

ived

or

rece

ivab

le, l

ess

any

disc

ount

s,

reba

tes,

and

oth

er s

imila

r ite

ms

give

n by

the

Gro

up, a

nd a

ny in

tere

st in

clud

ed in

the

nom

inal

am

ount

of

loan

s. A

pplic

able

indi

rect

taxe

s on

tran

sact

ions

whi

ch a

re re

imbu

rsed

by

third

par

ties

are

not i

nclu

ded.

Oth

er in

com

e an

d ex

pens

esIn

gen

eral

, inc

ome

and

expe

nses

are

rec

ogni

sed

appl

ying

the

acc

rual

s pr

inci

ple,

tha

t is

, whe

n th

e go

ods

or s

ervi

ces

they

rep

rese

nt t

ake

plac

e, r

egar

dles

s of

whe

n ac

tual

pay

men

t or

col

lect

ion

occu

rs.

4.12

Tra

nsac

tion

s in

fore

ign

curr

ency

Tran

sact

ions

in fo

reig

n cu

rren

cy a

re in

itial

ly t

rans

late

d at

the

spo

t ra

te p

reva

iling

at

the

date

of

the

tran

sact

ion.

Mon

etar

y as

sets

and

liab

ilitie

s de

nom

inat

ed in

fore

ign

curr

ency

are

tra

nsla

ted

at t

he s

pot

rate

pre

vaili

ng a

t th

e co

nsol

idat

ed b

alan

ce s

heet

dat

e. A

ll ex

chan

ge g

ains

or

loss

es a

risin

g fr

om t

rans

la-

tion

as w

ell a

s th

ose

resu

lting

on

sett

lem

ent

of b

alan

ce s

heet

item

s ar

e re

cogn

ised

in t

he c

onso

lidat

ed

inco

me

stat

emen

t of

the

yea

r in

whi

ch t

hey

occu

r.

4.13

Env

iron

men

tal a

sset

s an

d lia

bilit

ies

Cos

ts in

curr

ed in

the

acq

uisi

tion

of s

yste

ms,

equ

ipm

ent

and

inst

alla

tions

who

se a

im is

the

elim

inat

ion,

limita

tion

or c

ontr

ol o

f th

e po

ssib

le im

pact

of

the

norm

al d

evel

opm

ent

of t

he G

roup

’s a

ctiv

ity o

n th

e

envi

ronm

ent,

are

cons

ider

ed t

o be

inve

stm

ents

. Oth

er e

xpen

ses

rela

ted

to t

he e

nviro

nmen

t w

hich

are

not

rela

ted

to t

he a

cqui

sitio

n of

ass

ets

are

cons

ider

ed t

o be

exp

ense

s fo

r th

e ye

ar.

4.14

Tra

nsac

tion

s w

ith

rela

ted

part

ies

Tran

sact

ions

with

rela

ted

part

ies

are

reco

rded

in a

ccor

danc

e w

ith th

e ab

ovem

entio

ned

valu

atio

n cr

iteria

.

Sin

ce t

he c

ost

of t

rans

actio

ns w

ith r

elat

ed p

artie

s ar

e ad

equa

tely

bor

ne, t

he C

ompa

nies

’ Dire

ctor

s

cons

ider

tha

t th

ere

is n

o ris

k of

sig

nific

ant

tax

liabi

litie

s ar

isin

g.

4.15

Inde

mni

ties

for

dism

issa

lIn

acc

orda

nce

with

pre

vaili

ng la

bour

legi

slat

ion,

the

Gro

up is

obl

iged

to

pay

inde

mni

ties

to t

hose

empl

oyee

s w

ho t

erm

inat

e th

eir

cont

ract

s un

der

cert

ain

cond

ition

s. In

dem

nitie

s fo

r di

smis

sal s

ubje

ct t

o

reas

onab

le q

uant

ifica

tion

are

reco

gnis

ed a

s an

exp

ense

for

the

year

in w

hich

a v

alid

exp

ecta

tion

exis

ts,

crea

ted

by t

he G

roup

bef

ore

the

affec

ted

third

-par

ties.

4.16

Gra

nts

Gra

nts

are

reco

gnis

ed a

s no

n-re

paya

ble

whe

n th

e re

quire

men

ts e

stab

lishe

d fo

r re

ceiv

ing

them

are

met

and

are

reco

gnis

ed d

irect

ly in

equ

ity, n

et o

f th

e co

rres

pond

ing

tax

effec

t.

Gra

nts

rece

ived

to

finan

ce s

peci

fic e

xpen

ses

are

rele

ased

to

the

cons

olid

ated

inco

me

stat

emen

t in

the

year

in w

hich

the

fina

nced

exp

ense

s ar

e in

curr

ed.

Gra

nts

rece

ived

to

acqu

ire p

rope

rty,

pla

nt a

nd e

quip

men

t ar

e re

leas

ed t

o in

com

e in

pro

port

ion

to t

he

depr

ecia

tion

char

ged

for

the

rela

ted

asse

ts.

4.17

Cla

ssifi

cati

on o

f cu

rren

t and

non

-cur

rent

ass

ets

and

liabi

litie

sA

sset

s an

d li

abili

ties

are

cla

ssifi

ed in

the

co

nso

lidat

ed b

alan

ce s

heet

as

curr

ent

and

no

n-cu

rren

t.

Acc

ord

ing

ly, a

sset

s an

d li

abili

ties

are

cla

ssifi

ed a

s cu

rren

t w

hen

they

are

ass

oci

ated

wit

h th

e

Gro

up’s

no

rmal

op

erat

ing

cyc

le a

nd it

is e

xpec

ted

tha

t th

ey w

ill b

e so

ld, c

ons

umed

, rea

lised

or

sett

led

wit

hin

the

norm

al c

our

se o

f th

at c

ycle

; if

they

diff

er f

rom

the

afo

rem

enti

one

d a

sset

s, a

nd a

re

exp

ecte

d t

o m

atur

e, t

o b

e so

ld o

r se

ttle

d w

ithi

n o

ne y

ear;

if t

hey

are

held

fo

r tr

adin

g o

r ar

e ca

sh a

nd

cash

eq

uiva

lent

s th

e us

e of

whi

ch is

not

res

tric

ted

fo

r m

ore

tha

n o

ne y

ear.

The

no

rmal

op

erat

ing

cycl

e fo

r al

l act

ivit

ies

is le

ss t

han

one

yea

r.

5. IN

TAN

GIB

LE F

IXE

D A

SS

ET

S

The

bre

akdo

wn

and

mov

emen

t of

inta

ngib

le fi

xed

asse

ts d

urin

g 20

14 a

nd 2

013

are

as

follo

ws:

EU

RO

S

BA

LAN

CE

AT

A

DD

ITIO

NS

&

TR

AN

SF

ER

S

BA

LAN

CE

AT

JA

NU

AR

Y 1

ST

P

RO

VIS

ION

DE

CE

MB

ER

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T

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t

Sof

twar

e 15

6,0

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nds

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Acc

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Bra

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190

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4

The

bal

ance

incl

uded

und

er t

he s

ubhe

adin

g “B

rand

” re

late

s to

the

diff

eren

ce b

etw

een

the

notio

nal

book

val

ue o

f th

e ac

quire

d co

mpa

ny d

ecre

ased

by

the

capi

tal g

ains

on

prop

erty

, pla

nt &

equ

ipm

ent

and

incr

ease

d by

the

am

ount

of

defe

rred

tax

es d

eriv

ing

from

the

Par

ent

Com

pany

’s m

erge

r tr

ansa

ctio

n



men

tione

d in

Not

e 1.

Sai

d am

ount

, whi

ch is

not

tax

ded

uctib

le, i

s am

ortis

ed o

n th

e st

raig

ht-li

ne m

etho

d

over

a t

wen

ty-y

ear

perio

d st

artin

g on

Jan

uary

1, 2

00

7, w

hich

is t

he m

erge

r da

te, a

s th

e D

irect

ors

of t

he

Par

ent

Com

pany

con

side

r th

at t

his

is t

he p

erio

d in

whi

ch it

will

gen

erat

e pr

ofits

.

The

cos

t an

d ac

cum

ulat

ed a

mor

tisat

ion

of t

he b

rand

at

Janu

ary

1, 20

08

incl

ude

a to

tal o

f 77

2,75

3 e

uros

and

38

,63

8 e

uros

, res

pect

ivel

y, r

elat

ing

to d

efer

red

taxe

s w

hich

, in

acco

rdan

ce t

o th

e 20

07

Gen

eral

Ac-

coun

ting

Pla

n, m

ust

be r

ecog

nise

d on

the

tra

nsiti

on d

ate.

Sai

d de

ferr

ed t

axes

are

rel

ated

to

the

capi

tal

gain

whi

ch, f

ollo

win

g th

e m

erge

r m

entio

ned

in N

ote

1 w

as a

ssig

ned

to “

Land

” in

20

07.

In a

ccor

danc

e

with

the

val

uatio

ns p

erfo

rmed

, sai

d de

ferr

ed t

ax h

as b

een

reco

rded

as

a gr

eate

r va

lue

of t

he b

rand

,

as t

he la

nd w

as r

ecor

ded

at it

s fa

ir va

lue.

The

bra

nd is

ple

dged

in g

uara

ntee

of

the

loan

men

tione

d in

Not

e 10

.2 o

f th

ese

note

s to

the

Con

solid

ated

Acc

ount

s. F

ully

am

ortis

ed it

ems

amou

nt t

o 16

6,17

7 eu

ros

(79,

98

4 e

uros

at

Dec

embe

r 3

1, 20

13).

6. P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

The

bre

akdo

wn

and

mov

emen

t of

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acc

ount

s un

der

this

hea

ding

are

as

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ws:

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ION

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ems

549,

03

1 6

3,4

05

- -

612

,43

6

Vehi

cles

6

15,2

16

27,6

59

(41,6

99

) -

60

1,176

Dat

a pr

oces

sing

equ

ipm

ent

163

,09

1 13

,83

0

- -

176

,921

Oth

er t

angi

bles

16

0,6

52

9,4

33

-

- 17

0,0

85

5,

793

,60

6

422

,358

(4

1,69

9)

- 6

,174

,26

5

CA

RR

YIN

G V

ALU

E

9,4

56

,20

0

9

,075

,84

6

At

Dec

embe

r 3

1, 20

14, t

he la

nd a

nd b

uild

ing

bala

nces

incl

ude

capi

tal g

ains

am

ount

ing

to 2

,075

.813

and

3,9

12,19

3 e

uros

, res

pect

ivel

y (2

,075

,813

and

4,0

66

,622

eur

os in

20

13),

resu

lting

fro

m t

he m

erge

r of

the

Par

ent

Com

pany

men

tione

d in

Not

e 1,

and

base

d on

tw

o in

depe

nden

t ap

prai

sals

car

ried

out

in 2

00

6.

Sai

d ca

pita

l gai

ns a

re n

ot t

ax d

educ

tible

. For

thi

s re

ason

, the

cor

resp

ondi

ng a

mor

tisat

ion

char

ge h

as

been

incr

ease

d in

the

tax

able

bas

is fo

r ea

ch y

ear.

The

bre

akdo

wn

of t

he le

ase

cont

ract

s in

clud

ed u

nder

the

“Ve

hicl

es”

capt

ion

is a

s fo

llow

s:

ITE

M

CO

NT

RA

CT

S

TAR

TIN

G

TE

RM

INA

TIO

N

AC

QU

ISIT

ION

M

ON

TH

LY

CA

PIT

AL

DA

TE

D

AT

E

PR

ICE

IN

STA

LME

NT

S

PE

ND

ING

AT

31.

12.2

014

Ford

Tra

nsit

Ban

ca M

arch

13

.11.2

00

9

13.12

.20

14

18,5

86

3

27

3,7

93

T

OTA

L C

OS

T

18,5

86

-

3,7

93

A

ccum

ulat

ed d

epre

ciat

ion

(9,5

99

)

C

arry

ing

valu

e 8

,98

8

The

onl

y fin

ance

leas

e co

ntra

ct h

eld

by t

he C

ompa

ny e

nded

in 2

014

.

At

Dec

emb

er 3

1, 2

014

tot

ally

dep

reci

ated

item

s am

oun

t to

2,4

81,

279

eur

os

(2,2

99

,817

eur

os

at

Dec

emb

er 3

1, 2

013

).

The

Par

ent

Com

pany

’s p

lots

and

pro

pert

ies

are

mor

tgag

ed w

ith t

he g

uara

ntee

of

two

sim

ilar

loan

s

whi

ch a

re d

etai

led

in N

ote

10. M

achi

nery

and

too

ls a

re m

ortg

aged

tog

ethe

r w

ith t

he b

rand

ple

dge

for

a

tota

l of

2.2

mill

ion

euro

s, in

gua

rant

ee o

f th

e lo

an m

entio

ned

in N

ote

10.2

.

The

Par

ent

Co

mp

any

has

cont

ract

ed in

sura

nce

po

licie

s w

hich

co

ver

the

carr

ying

val

ue o

f th

e

pro

per

ty, p

lant

& e

qui

pm

ent.

In p

revi

ous

year

s th

e P

aren

t C

ompa

ny r

ecei

ved

two

gran

ts, a

s is

men

tione

d in

Not

e 9.

5 of

the

acc

ompa

-

nyin

g co

nsol

idat

ed a

nnua

l acc

ount

s.

7. F

INA

NC

IAL

AS

SE

TS

T

he b

reak

dow

n of

thi

s ca

ptio

n at

Dec

embe

r 3

1 is

as

follo

ws:

E

QU

ITY

C

RE

DIT

S, D

ER

IVA

TIV

ES

T

OTA

L

INS

TR

UM

EN

TS

A

ND

OT

HE

RS

EU

RO

S

20

14

20

13

20

14

20

13

20

14

20

13

Non

-cur

rent

fina

ncia

l ass

ets

Inve

stm

ents

in G

roup

com

pani

es

- -

7,6

52

11,13

3

7,6

52

11,13

3

-

- 7,

652

11

,133

7,

652

11

,133

Cur

rent

fina

ncia

l ass

ets

Trad

e an

d ot

her

rece

ivab

les

- -

675,

325

67

4,9

40

67

5,3

25

674

,94

0

Sho

rt-t

erm

fina

ncia

l inv

estm

ents

10

,49

0

10,4

90

3

,48

1 3

,313

13

,971

13

,80

3

10

,49

0

10,4

90

67

8,8

06

67

8,2

53

68

9,29

6

68

8,7

43

TO

TAL

10,4

90

10

,49

0

68

6,4

58

6

89

,38

6

69

6,9

48

6

99

,876

7.1

Tra

de a

nd o

ther

rec

eiva

bles

The

bre

akdo

wn

at D

ecem

ber

31

is a

s fo

llow

s:

EU

RO

S

20

14

20

13

Clie

nts

for

sale

s an

d se

rvic

es r

ende

red

675,

325

67

4,9

40

TO

TAL

675

,32

5

674

,94

0

Valu

e ad

just

men

tsT

he “

Clie

nts

for

sale

s an

d se

rvic

es r

ende

red”

bal

ance

is p

rese

nted

net

of

impa

irmen

t ad

just

men

ts.

Mov

emen

t fo

r sa

id a

djus

tmen

ts h

as b

een

as fo

llow

s:

EU

RO

S

20

14

20

13

Ope

ning

bal

ance

-

35.

237

Net

cha

rges

10

.321

-

Writ

e-off

s -

(35.

237)

Clo

sing

bal

ance

10

.321

-

8. C

AS

H A

ND

CA

SH

EQ

UIV

ALE

NT

S

The

bre

akdo

wn

and

mov

emen

t of

thi

s ca

ptio

n at

Dec

embe

r 3

1 ar

e th

e fo

llow

ing:

EU

RO

S

20

14

20

13

Cas

h 9,

83

5 12

,44

7

Cur

rent

acc

ount

s 6

89,

194

57

9,29

0

Oth

er c

ash

equi

vale

nts

30

0,0

00

4

50,0

00

TO

TAL

99

9,0

29

1,

04

1,73

7

Cur

rent

acc

oun

ts a

nd o

ther

cas

h eq

uiva

lent

s b

ear

the

mar

ket

inte

rest

rat

es f

or

this

typ

e o

f ac

-

coun

ts a

nd a

sset

s.

In 2

014

and

20

13, o

ther

cas

h eq

uiva

lent

s re

late

to

bank

dep

osits

whi

ch a

re a

vaila

ble

at a

ll tim

es w

ithou

t

any

loss

in v

alue

and

whi

ch a

re u

sed

as p

art

of t

he G

roup

’s c

ash

man

agem

ent

tran

sact

ions

.

Cas

h an

d ca

sh e

quiv

alen

ts a

re u

nres

tric

ted.



9. E

QU

ITY

9.1

Sub

scri

bed

capi

tal

The

sha

re c

apita

l of

the

Par

ent

Com

pany

at

Dec

embe

r 3

1, 20

14 c

onsi

sts

of 3

,40

0,0

00

reg

iste

red

shar

es w

ith a

par

val

ue o

f 1

euro

eac

h, f

ully

sub

scrib

ed a

nd p

aid

up. A

ll th

e sh

ares

hav

e th

e sa

me

polit

i-

cal a

nd e

cono

mic

rig

hts.

The

Par

ent

Com

pany

is n

ot li

sted

.

The

onl

y sh

areh

olde

r w

hich

is n

ot a

n in

divi

dual

and

hol

ds m

ore

than

10

% o

f th

e P

aren

t C

ompa

ny’s

sha

re

capi

tal i

s Z

alla

z, S

.A.,

with

a 4

7.24

% p

artic

ipat

ion,

whi

ch is

the

sam

e as

in 2

013

.

9.2

Leg

al r

eser

veA

s pe

r S

pani

sh m

erca

ntile

legi

slat

ion,

the

Com

pany

is r

equi

red

to t

rans

fer

10%

of

the

profi

ts fo

r th

e ye

ar

to a

lega

l res

erve

unt

il sa

id r

eser

ve r

each

es a

n am

ount

equ

al t

o at

leas

t 20

% o

f th

e sh

are

capi

tal.

Thi

s

rese

rve

is n

on-d

istr

ibut

able

and

may

onl

y be

use

d to

off

set

loss

es s

houl

d no

oth

er r

eser

ves

be a

vaila

ble.

9.3

Oth

er r

eser

ves

The

am

ount

rec

orde

d in

thi

s ca

ptio

n is

fre

ely

dist

ribut

able

, sub

sequ

ent

to t

he o

ffse

t of

loss

es.

9.4

Con

solid

atio

n re

serv

es

The

bre

akdo

wn

of r

esul

ts c

ontr

ibut

ed a

t D

ecem

ber

31

and

the

mov

emen

t of

con

solid

atio

n re

serv

es a

t

the

sam

e da

te a

re a

s fo

llow

s:

20

14 (

EU

RO

S)

BA

LAN

CE

AT

R

ES

ULT

AT

B

ALA

NC

E A

T

3

1.12

.20

13

31.

12.2

013

3

1.12

.20

14

Pal

ma

Pic

ture

s T.

P.M

.C.,

S.L

. (4

19,6

70)

583

,478

16

3,8

08

Pat

hfind

er M

edia

, S.L

. 25

,23

0

(150

,853

) (*)

(1

25,6

23)

(Sol

e S

hare

hold

er C

ompa

ny)

TO

TAL

(39

4,4

40

) 4

32

,62

5

38

,18

5

(*) I

nclu

des

49,

422

eur

os le

ss lo

sses

tha

n in

Not

e 12

.2 d

ue t

o th

e fin

al C

orpo

rate

Tax

cal

cula

tion

for

2013

whi

ch r

ecog

nise

d de

ferr

ed t

ax a

sset

s fo

r sa

id a

mou

nt.

20

13 (

EU

RO

S)

BA

LA

NC

E A

T

RE

SU

LT A

T

BA

LAN

CE

AT

31.

12.2

013

3

1.12

.20

13

31.

12.2

014

Pal

ma

Pic

ture

s T.

P.M

.C.,

S.L

. 8

4,9

02

(50

4,5

72)

(419

,670

)

Pat

hfind

er M

edia

, S.L

. (2

5,51

8)

50,7

48

25

,23

0(S

ole

Sha

reho

lder

Com

pany

)

TO

TAL

59

,38

4

(45

3,8

24

) (3

94

,44

0)

9.5

Gra

nts

The

bre

akdo

wn

is a

s fo

llow

s:

20

14 (

EU

RO

S)

BA

LAN

CE

AT

T

RA

NS

FE

RS

TO

C

HA

NG

E IN

B

ALA

NC

E A

T

JA

NU

AR

Y 1

ST

P

RO

FIT

& L

OS

S

TAX

RA

TE

D

EC

EM

BE

R 3

1ST

Cos

t

Gra

nts

for

purc

hase

of

asse

ts

73,4

04

(3

,423

) 4

,99

9

74,9

80

Gra

nts

for

purc

hase

of

asse

ts 2

010

4

,90

1 (8

52)

289

4

,33

8

Gra

nts

for

purc

hase

of

asse

ts 2

011

7,

64

6

(1,0

92)

4

68

7,

022

TO

TAL

85

,95

1 (5

,36

7)

5,7

56

8

6,3

40

20

13 (

EU

RO

S)

BA

LAN

CE

AT

T

RA

NS

FE

RS

TO

C

HA

NG

E IN

B

ALA

NC

E A

T

JA

NU

AR

Y 1

ST

P

RO

FIT

& L

OS

S

TAX

RA

TE

D

EC

EM

BE

R 3

1

Cos

t

Gra

nts

for

purc

hase

of

asse

ts

76,8

27

- (3

,423

) 73

,40

4

Gra

nts

for

purc

hase

of

asse

ts 2

010

5,

753

-

(852

) 4

,90

1

Gra

nts

for

purc

hase

of

asse

ts 2

011

8

,73

8

- (1

,09

2)

7,6

46

TO

TAL

91,

318

-

(5,3

67)

8

5,9

51

In p

revi

ous

year

s th

e C

ompa

ny r

ecei

ved

a no

n-re

fund

able

gra

nt fo

r an

initi

al a

mou

nt o

f 16

3,0

00

eur

os

whi

ch is

rel

ease

d to

res

ults

at

3%

on

a ye

arly

bas

is a

s it

was

inte

nded

for

the

acqu

isiti

on o

f P

rope

rty,

Pla

nt a

nd E

quip

men

t ite

ms.

At

Dec

embe

r 3

1, 20

14 t

he a

mou

nt r

ecog

nise

d un

der

“Gra

nts”

on

the

bal-

ance

she

et is

of

74,9

80

eur

os.

In 2

010

and

20

11, g

rant

s w

ere

obt

aine

d a

mo

unti

ng t

o 1

2,17

6 e

uro

s an

d 1

5,6

02

eur

os,

res

pec

tive

ly,

for

the

acq

uisi

tio

n o

f p

rop

erty

, pla

nt a

nd e

qui

pm

ent.

Bo

th a

re c

arri

ed t

o in

com

e b

y th

e st

raig

ht-

line

met

hod

ove

r 10

yea

rs, a

s th

is is

the

dep

reci

atio

n p

erio

d o

f th

e el

emen

ts a

cqui

red

wit

h th

e

gra

nt. A

t D

ecem

ber

31,

20

14, t

he a

mo

unt

reco

gni

sed

und

er “

Gra

nts”

on

the

bal

ance

she

et is

of

4,3

38

and

7,0

22

eur

os,

res

pec

tive

ly.

10. F

INA

NC

IAL

LIA

BIL

ITIE

S

The

bre

akdo

wn

of fi

nanc

ial l

iabi

litie

s at

Dec

embe

r 3

1 is

as

follo

ws:

B

AN

K

DE

RIV

AT

IVE

S

TO

TAL

B

OR

RO

WIN

GS

A

ND

OT

HE

RS

EU

RO

S

20

14

20

13

20

14

20

13

20

14

20

13

Long

-ter

m fi

nanc

ial l

iabi

litie

s:

Deb

its a

nd a

ccou

nts

paya

ble

2,9

85,

418

3

,313

,410

1,7

52,13

2 1,8

60

,46

5 4

,737

,550

5,

173

,876

2,

98

5,41

8

3,3

13,4

10

1,752

,132

1,86

0,4

65

4,7

37,5

50

5,17

3,8

76

Cur

rent

fina

ncia

l lia

bilit

ies:

Deb

its a

nd a

ccou

nts

paya

ble

429

,93

6

565,

717

113

,58

4

107,1

58

543

,520

67

2,87

5

Trad

e cr

edito

rs a

nd o

ther

acc

ount

s pa

yabl

e -

- 1,7

87,2

34

1,3

34

,416

1,7

87,2

34

1,3

34

,416

4

29,9

36

,01

565,

717

1,90

0,8

18

1,441

,574

2,

33

0,7

54

2,0

07,

291

TO

TAL

3,4

15,3

54 3

,879

,127

3,6

52,9

50

3,3

02,

296

7,

06

8,3

04

7,

181,1

67

The

bre

akdo

wn

of t

he fi

nanc

ial l

iabi

litie

s ba

lanc

es a

t D

ecem

ber

31

is a

s fo

llow

s:

EU

RO

S

20

14

20

13

Non

-cur

rent

liab

iliti

es

Ban

k bo

rrow

ings

2,

98

5,41

8

3,3

13,4

10

Oth

er fi

nanc

e lia

bilit

ies

1,752

,132

1,86

0,4

65

4

,737

,550

5,

173

,875

Cur

rent

liab

iliti

es

Ban

k bo

rrow

ings

4

29,9

36

56

2,10

8

Fin

ance

leas

e cr

edito

rs

- 3

,60

9

Oth

er fi

nanc

ial l

iabi

litie

s 11

3,5

84

10

7,158

Sup

plie

rs

1,778

,08

2 1,1

05,

288

Deb

ts w

ith p

erso

nnel

9,

152

7,77

9

Pre

paym

ents

fro

m c

lient

s -

221,3

50

2,

33

0,7

54

2,0

07,

292

10.1

Ban

k bo

rrow

ings

The

bre

akdo

wn

of b

ank

borr

owin

gs is

as

follo

ws:

IN

ITIA

L B

ALA

NC

E

BA

LAN

CE

FO

RM

ALI

SA

TIO

N

MA

TU

RIT

Y

AM

OU

NT

A

T 3

1.12

.14

A

T 3

1.12

.13

D

AT

E

Mor

tgag

e lo

an B

MN

- S

a N

ostr

a 2,

700

,00

0

- 1,4

22,6

42

13.12

.20

06

3

1.12.

2021

Mor

tgag

e lo

an B

MN

- S

a N

ostr

a 1,4

38

,524

1,3

57,8

63

-

30

.12.2

014

3

1.12.

2029

Mor

tgag

e lo

an B

. Mar

ch

2,75

0,0

00

-

1,470

,137

13.12

.20

06

0

1.12.

2022

Mor

tgag

e lo

an B

. Mar

ch

1,470

,23

5 1,3

94

,43

5 -

30

.12.2

014

0

1.01.2

03

0

Loan

Sa

Nos

tra

350

,00

0

194

,258

26

2,56

3

18.0

7.20

11

02.

08

.20

18

Loan

B. M

arch

-IC

O L

iqui

dity

3

50,0

00

24

,86

2 12

0,0

68

11

.03

.20

11

25.0

3.2

016

Sab

adel

l loa

n -

ICO

Inve

stm

ent

120

,00

0

14,0

00

3

8,0

00

22

.07.

2011

25

.07.

2016

TO

TAL

LON

G-T

ER

M D

EB

T

2

,98

5,4

18

3,3

13,4

10

Sho

rt-t

erm

mor

tgag

e lo

ans

- 15

6,4

60

3

83

,378

Sho

rt-t

erm

loan

s -

187,

511

178

,73

0

Cre

dito

rs fo

r fin

anci

al le

ases

-

- 3

,60

9

La C

aixa

cre

dit

line

8

5,9

65

-

TO

TAL

SH

OR

T-T

ER

M D

EB

T

4

29

,93

6

56

5,7

16

TO

TAL

BA

NK

BO

RR

OW

ING

S

3

,415

,35

4

3,8

79,1

26

The

inte

rest

rat

e of

loan

s is

ref

eren

ced

to t

he E

urib

or r

ate.

On

Dec

embe

r 30

, 20

14, t

he m

ortg

age

loan

s he

ld b

y th

e C

ompa

ny w

ith B

MN

– S

a N

ostr

a an

d B

anca

Mar

ch w

ere

rene

wed

, ext

endi

ng th

e m

atur

ity d

ate

until

Dec

embe

r 31

, 20

29 a

nd J

anua

ry 1

, 20

30, r

espe

c-

tivel

y. F

or a

ccou

ntin

g pu

rpos

es, t

he re

new

al h

as b

een

trea

ted

as n

ew lo

ans

sinc

e th

ey h

ave

mod

ified

the

inte

rest

rate

s to

pric

es c

onsi

dere

d to

be

in li

ne w

ith c

urre

nt m

arke

t pric

es. S

aid

trea

tmen

t has

had

no

effec

t on

the

inco

me

stat

emen

t sin

ce n

o de

ferr

ed e

xpen

ses

from

sai

d fin

anci

ng w

ere

pend

ing

allo

catio

n.

The

bre

akdo

wn

of m

atur

ities

is a

s fo

llow

s:

AT

31.

12.1

4

20

15

20

16

20

17

20

18

20

19

RE

MA

IND

ER

T

OTA

L LO

NG

-TE

RM

Ban

k lo

ans

34

3,9

71

281,3

48

23

9,70

2 22

4,9

18

155,

625

2,

08

3,8

25

2,9

85,

418

Cre

dit

lines

8

5,9

65

- -

- -

- -

TO

TAL

4

29

.93

6

28

1.3

48

2

39

.70

2

22

4.9

18

155

.62

5

2.0

83

.82

5

2.9

85

.418

AT

31.

12.1

3

20

15

20

16

20

17

20

18

20

19

RE

MA

IND

ER

T

OTA

L LO

NG

-TE

RM

Ban

k lo

ans

562,

107

570

,98

9

510

,160

4

71,6

24

467

,84

5 1,2

92,

792

3,3

13,4

10

Deb

ts fo

r fina

nce

leas

es 3

,60

9

- -

- -

- -

TO

TAL

5

65

,716

5

70,9

89

5

10,1

60

4

71,6

24

4

67,

84

5

1,2

92

,79

2

3,3

13,4

10



The

info

rmat

ion

rega

rdin

g th

e na

ture

and

ext

ent

of r

isks

aris

ing

from

fina

ncia

l ins

trum

ents

is a

s fo

llow

s:

•A

s a

resu

lt of

the

deve

lopm

ent o

f its

act

ivity

and

ope

ratio

ns, t

he G

roup

is e

xpos

ed to

fina

ncia

l ris

ks, m

ain-

ly a

risin

g fr

om in

tere

st ra

tes,

sin

ce th

e ris

k fr

om e

xcha

nge

rate

s is

min

imum

. To

be s

peci

fic, t

he G

roup

is

expo

sed

to a

n in

tere

st ra

te ri

sk a

risin

g fr

om fi

nanc

ing

in e

uros

, bas

ical

ly a

t a v

aria

ble

inte

rest

rate

.

•T

he G

roup

is b

asic

ally

fina

nced

by

loan

s w

ith a

var

iabl

e in

tere

st r

ate.

The

Gro

up d

oes

not

use

deriv

ativ

e fin

anci

al in

stru

men

ts s

ince

it c

onsi

ders

tha

t th

e eff

ect

and

fluct

uatio

ns a

risin

g fr

om o

ther

curr

enci

es d

iffer

ent

from

the

eur

o ar

e no

t si

gnifi

cant

.

•T

he G

roup

man

ages

the

ris

k of

a t

empo

rary

cas

h sh

orta

ge t

hrou

gh t

he s

uper

visi

on o

f its

cas

h

budg

et, w

hich

tak

es in

to a

ccou

nt t

he m

atur

ity o

f fin

anci

al in

vest

men

ts, a

sset

s, li

abili

ties

and

the

oper

atio

ns’ c

ash

flow

pro

ject

ions

.

10.2

Oth

er fi

nanc

e de

btT

he b

alan

ce o

f th

is h

eadi

ng r

elat

es t

o th

e lo

an g

rant

ed o

n Ju

ly 1

, 20

11, b

y a

form

er D

irect

or t

o a

third

part

y fo

r an

am

ount

of

2,16

4,19

9 e

uros

.

Thi

s lo

an h

as a

dur

atio

n of

15

year

s, is

am

ortis

ed b

y co

nsta

nt in

stal

men

ts a

s of

Jan

uary

31,

2012

and

ther

efor

e ha

s a

grac

e pe

riod

of 6

mon

ths.

Unt

il O

ctob

er 2

013

, the

nom

inal

ann

ual i

nter

est

rate

had

bee

n

5%. A

fter

sai

d da

te t

he r

ate

rose

to

6.13

%.

The

bre

akdo

wn

of t

he m

atur

ity o

f ot

her

finan

ce d

ebts

is a

s fo

llow

s:

AT

31.

12.1

4

20

15

20

16

20

17

20

18

20

19

RE

MA

IND

ER

T

OTA

L LO

NG

-TE

RM

Loan

10

8,3

33

11

5,16

5 12

2,4

24

130

,144

13

8,3

50

1,24

6,0

49

1,7

52,13

2

AT

31.

12.1

3

20

15

20

16

20

17

20

18

20

19

RE

MA

IND

ER

T

OTA

L LO

NG

-TE

RM

Loan

10

7,158

10

8,3

33

11

5,16

4

122,

425

13

0,14

4

1,38

4,3

99

1,8

60

,46

5

The

sho

rt-t

erm

bal

ance

is in

clud

ed u

nder

the

“O

ther

fina

ncia

l lia

bilit

ies”

hea

ding

on

the

liabi

litie

s si

de o

f

the

acco

mpa

nyin

g co

nsol

idat

ed b

alan

ce s

heet

.

The

loan

is g

uara

ntee

d by

the

ple

dge

of t

he b

rand

(Not

e 5)

and

the

Pro

pert

y, P

lant

and

Equ

ipm

ent

item

s, m

achi

nery

and

too

ls (N

ote

6),

for

a gl

obal

bal

ance

of

2.2

mill

ion

euro

s.

Mor

eove

r, th

e C

ompa

ny h

as a

com

mitm

ent

with

the

lend

er n

ot t

o di

spos

e of

any

sig

nific

ant

asse

t,

if it

is n

ot in

the

nor

mal

cou

rse

of b

usin

ess.

Nei

ther

can

the

Com

pany

gra

nt a

ny g

uara

ntee

, acq

uire

com

mitm

ents

, dis

trib

ute

divi

dend

s or

gra

nt a

ny lo

ans

to s

hare

hold

ers

with

out

the

prev

ious

con

sent

of

the

lend

er.

10.3

Info

rmat

ion

on a

vera

ge p

aym

ent p

erio

d to

sup

plie

rsD

urin

g 20

14, t

he a

vera

ge p

aym

ent

perio

d to

sup

plie

rs h

as b

een

36

day

s (3

8 d

ays

in 2

013

).

11. T

AX

The

bre

akdo

wn

of a

ccou

nts

rela

ting

to t

ax a

sset

s an

d lia

bilit

ies

at D

ecem

ber

31

is a

s fo

llow

s:

EU

RO

S

20

14

20

13

Def

erre

d ta

x as

sets

8

8,5

56

21,19

8

Oth

er r

ecei

vabl

es f

rom

Pub

lic A

dmin

istr

atio

ns

471

,54

4

313

,656

Valu

e A

dded

Tax

8

53,5

35

641

,274

Per

sona

l Inc

ome

Tax

(254

,59

4)

(222

,710

)

Oth

ers

(127

,397

) (1

04

,90

8)

5

60

,10

0

33

4,8

54

Def

erre

d ta

x lia

bilit

ies

2,18

2,23

3

2,74

6,6

46

Cur

rent

tax

liab

ilitie

s 67

,611

24

0,9

74

Oth

er p

ayab

les

to P

ublic

Adm

inis

trat

ions

28

,28

3

37,8

91

Soc

ial S

ecur

ity

1,78

6

21,17

0

Oth

ers

26,4

97

16,7

21

2

,278

,12

7 3

,02

5,5

10

As

of J

anua

ry 1

, 20

14, P

alm

a P

ictu

res

T.M

.P.C

., S

.L t

oget

her

with

its

subs

idia

ry, P

athfi

nder

Med

ia, S

.L.U

.,

will

be

subj

ect

to t

he s

peci

al c

onso

lidat

ed t

ax r

egim

e. T

he C

orpo

rate

Tax

pay

er w

ill b

e th

e gr

oup

of

com

pani

es. A

s th

e P

aren

t C

ompa

ny o

f th

e ta

x gr

oup,

Pal

ma

Pic

ture

s T.

M.P

.C.,

S.L

. will

file

a c

onso

lidat

ed

tax

decl

arat

ion

incl

udin

g th

e in

divi

dual

tax

bas

es, w

ith t

he c

orre

spon

ding

dis

posa

ls a

nd a

dditi

ons

cal-

cula

ted

acco

rdin

g to

the

pre

vaili

ng t

ax a

nd m

erca

ntile

legi

slat

ion.

Pro

fit, w

hich

is d

eter

min

ed a

ccor

ding

to t

ax le

gisl

atio

n, is

sub

ject

to

a 3

0%

tax

rat

e on

the

con

solid

ated

tax

bas

e. C

erta

in d

educ

tions

can

be

perf

orm

ed o

n th

e re

sulti

ng q

uota

.

Und

er p

reva

iling

Spa

nish

tax

law

, tax

ret

urns

may

not

be

cons

ider

ed fi

nal u

ntil

they

hav

e ei

ther

bee

n in

-

spec

ted

by t

ax a

utho

ritie

s or

unt

il th

e in

spec

tion

perio

d ha

s ex

pire

d. T

he C

ompa

ny is

ope

n to

insp

ectio

n

for

the

appl

icab

le t

axes

for

the

last

four

yea

rs.

On

Nov

embe

r 27

, Law

27/

2014

on

Cor

pora

te T

ax m

odifi

ed t

he g

ener

al t

ax r

ate,

red

ucin

g it

from

the

curr

ent

rate

of

30

% t

o 28

% in

20

15 a

nd 2

5% in

sub

sequ

ent

year

s. A

s a

resu

lt, t

he G

roup

has

adj

uste

d

its p

revi

ous

defe

rred

ass

ets

and

liabi

litie

s de

pend

ing

on t

he t

ax r

ate

prev

ailin

g on

the

est

imat

ed r

ever

sal

date

. The

eff

ect

of s

aid

adju

stm

ent

has

resu

lted

in t

he r

ecog

nitio

n of

43

1,615

eur

os r

even

ue in

the

inco

me

stat

emen

t an

d of

5,7

56 e

uros

in e

quity

.

The

Dire

ctor

s of

the

Par

ent

Com

pany

con

side

r th

at, i

n th

e ca

se o

f an

insp

ectio

n, n

o si

gnifi

cant

tax

cont

inge

ncie

s co

uld

aris

e fr

om p

ossi

ble

diff

erin

g in

terp

reta

tions

of

the

tax

regu

latio

ns a

pplic

able

to

the

tran

sact

ions

und

erta

ken

by t

he G

roup

.

11.1

Cor

pora

te In

com

e Ta

x ca

lcul

atio

nT

he re

conc

iliat

ion

of n

et in

com

e an

d ex

pens

es fo

r th

e ye

ar w

ith ta

x re

sults

for

the

year

20

13 is

as

follo

ws:

C

ON

SO

LID

AT

ED

INC

OM

E S

TAT

EM

EN

T

INC

OM

E A

ND

EX

PE

NS

ES

DIR

EC

TLY

CH

AR

GE

D T

O E

QU

ITY

EU

RO

S

INC

RE

AS

ES

D

EC

RE

AS

ES

T

OTA

L IN

CR

EA

SE

S D

EC

RE

AS

ES

TO

TAL

TO

TAL

2014

Con

solid

ated

inco

me

and

(13

,80

1)

(1

3,8

01)

expe

nses

bal

ance

bef

ore

taxe

s

Per

man

ent d

iffer

ence

s:

Non

-ded

uctib

le e

xpen

ses

3,8

69

3,8

69

-

3,8

69

Am

ortis

atio

n as

sets

’ cap

ital g

ains

3

43

,929

34

3,9

29

- 3

43

,929

Tem

pora

ry d

iffer

ence

s

Ari

sing

in p

revi

ous

year

s

Am

ortis

atio

n of

ass

ets

(20

01-

200

7)

35,

36

5

35,

36

5

-

35,

36

5

Rev

ersa

l fre

e am

ort.

3

6,5

10

3

6,5

10

- 3

6,5

10em

ploy

men

t m

aint

enan

ce

TD

Rev

ersa

l am

ortis

atio

n (3

,58

5)

(3

,58

5)

(3

,58

5)lim

itatio

n 20

13 w

ithdr

awn

asse

ts

Ari

sing

in c

urre

nt y

ear

Am

ortis

atio

n lim

itatio

n fo

r 20

13 a

nd 2

014

6

3,3

72

6

3,3

72

- 6

3,3

72

Neg

ativ

e eq

uity

pro

visi

on

203

,779

203

,779

203

,779

and

Pat

hfind

er p

ortf

olio

Neg

ativ

e eq

uity

pro

visi

on

(172

,03

8)

(17

2,0

38

)

(172

,03

8)

and

Pat

hfind

er p

ortf

olio

20

13

Taxa

ble

inco

me

(pri

or)

4

97,

40

0

4

97,

40

0

C

ON

SO

LID

AT

ED

INC

OM

E S

TAT

EM

EN

T

INC

OM

E A

ND

EX

PE

NS

ES

DIR

EC

TLY

CH

AR

GE

D T

O E

QU

ITY

EU

RO

S

INC

RE

AS

ES

D

EC

RE

AS

ES

T

OTA

L IN

CR

EA

SE

S D

EC

RE

AS

ES

TO

TAL

TO

TAL

2013

Con

solid

ated

inco

me

and

64

7,27

3

- 6

47,

273

expe

nses

bal

ance

bef

ore

taxe

s

Per

man

ent

diff

eren

ces:

Non

-ded

uctib

le e

xpen

ses

31,8

65

3

1,86

5

-

31,8

65

Am

ortis

atio

n as

sets

’ cap

ital g

ains

3

43

,929

34

3,9

29

- 3

43

,929

Non

-cap

italis

ed t

ax b

ases

(2

00

,30

5)

(20

0,3

05)

-

(20

0,3

05)

Tem

pora

ry d

iffer

ence

s

Ari

sing

in p

revi

ous

year

s

Am

ortis

atio

n of

ass

ets

(20

01-

200

7)

33

,716

33

,716

-

33

,716

Rev

ersa

l fre

e am

ort.

28

,06

9

28

,06

9

- 28

,06

9em

ploy

men

t m

aint

enan

ce 2

010

and

20

11

Ari

sing

in c

urre

nt y

ear

Am

ortis

atio

n lim

itatio

n 70

,659

70,6

59

- 70

,659

for

2013

and

20

14

Pat

hfind

er n

egat

ive

equi

ty

175,

04

4

17

5,0

44

-

175,

04

4an

d po

rtfo

lio p

rovi

sion

Prio

r ta

xabl

e in

com

e

1,1

30

,251

1,13

0,2

51

Off

sett

ing

of c

arry

(2

29,4

81)

(

229,

48

1)

(2

29,4

81)

forw

ard

loss

es f

rom

pre

viou

s ye

ars

Taxa

ble

base

(tax

res

ult)

1,10

1,0

74

1,1

01,

074

Am

orti

sati

on o

f as

sets

’ cas

h su

rplu

ses

In 2

014

and

20

13, t

his

acco

unt

rela

tes

to t

he a

mor

tisat

ion

of s

urpl

uses

in t

he P

aren

t C

ompa

ny r

elat

ed t

o

the

vario

us a

sset

s w

hich

, by

thei

r na

ture

, are

not

tax

-ded

uctib

le a

nd a

re d

etai

led

in N

otes

5 a

nd 6

.

Am

orti

sati

on/D

epre

ciat

ion

In 2

014

and

20

13, t

his

bala

nce

rela

tes

to t

he r

ever

sal a

nd n

ew a

ccel

erat

ed d

epre

ciat

ion

of p

rope

rty,

plan

t &

equ

ipm

ent

in t

he P

aren

t co

mpa

ny fo

r ta

x pu

rpos

es.

The

rec

onci

liatio

n be

twee

n th

e ex

pens

e/(in

com

e) fo

r th

e ag

greg

ate

Cor

pora

te In

com

e Ta

x an

d th

e

resu

lt of

mul

tiply

ing

the

appl

icab

le t

ax r

ates

to

the

tota

l rec

ogni

sed

inco

me

and

expe

nses

as

follo

ws:



2

014

2

013

EU

RO

S

CO

NS

OLI

DA

TE

D

EQ

UIT

Y

TO

TAL

CO

NS

OLI

DA

TE

D

EQ

UIT

Y

TO

TAL

IN

CO

ME

20

14

INC

OM

E

2

013

S

TAT

EM

EN

T

STA

TE

ME

NT

Inco

me

and

expe

nses

for

the

year

bef

ore

tax

(13

,80

1)

- (1

3,8

01)

6

47,

273

-

64

7,27

3

Not

iona

l tax

cha

rge

(tax

rat

e 3

0%

) (4

,140

) -

(4,14

0)

194

,182

- 19

4,18

2

Diff

eren

ce a

risin

g fr

om t

ax r

ate

(43

1,615

) (5

,756

) (4

37,3

70)

- -

-

Non

-ded

uctib

le e

xpen

ses

1,16

1 -

1,16

1 9,

560

-

9,56

0

Oth

er c

once

pts

5,4

40

-

5,4

40

-

- -

Non

-cap

italis

ed t

ax lo

sses

of

the

subs

idia

ry

- -

- 6

0,0

91

- 6

0,0

91

Quo

ta d

educ

tions

(5

55)

- (5

55)

245

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5

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hfind

er n

egat

ive

equi

ty a

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ortf

olio

pro

visi

on

9,55

2 -

9,55

2 52

,513

-

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13

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solid

atio

n ad

just

men

ts

(9,5

52)

- (9

,552

) (5

2,51

3)

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2,51

3)

EF

FE

CT

IVE

TA

X E

XP

EN

SE

/(IN

CO

ME

) (4

29

,70

9)

(5,7

56

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35

,66

4)

26

4,0

69

-

26

4,0

69

The

bre

akdo

wn

of t

he a

ggre

gate

Cor

pora

te In

com

e Ta

x ex

pens

e/(in

com

e) is

as

follo

ws:

EU

RO

S

CO

NS

OLI

DA

TE

D

EQ

UIT

Y

TO

TAL

CO

NS

OLI

DA

TE

D

EQ

UIT

Y

TO

TAL

IN

CO

ME

20

14

INC

OM

E

2

013

S

TAT

EM

EN

T

STA

TE

ME

NT

Tota

l Inc

ome

Tax

liabi

lity

144

.58

3

- 14

4.5

83

3

37.15

6

- 3

37.15

6

Tem

pora

ry d

iffer

ence

s

(14

2.67

7)

- (1

42.

677)

(1

42.

912

) -

(14

2.9

12)

Cre

dits

for

tax

loss

es

- -

- 6

8.8

44

-

68

.84

4

Exp

ense

s ch

arge

d to

equ

ity

(43

1.615

) (5

.756

) (4

37.3

70)

- -

-

Quo

ta d

educ

tions

-

- -

98

0

- 9

80

TO

TAL

(42

9.7

09

) (5

.75

5)

(42

1.6

64

) 2

64

.06

9

- 2

64

.06

9

The

bre

akdo

wn

of t

he a

ggre

gate

Cor

pora

te In

com

e Ta

x ex

pens

e/(in

com

e) is

as

follo

ws:

EU

RO

S

20

14

20

13

Cur

rent

tax

14

4,5

83

3

37,15

6

With

hold

ings

(4

97)

(96

,011

)

Pre

paym

ents

(7

6,4

75)

(172

)

TO

TAL

INC

OM

E T

AX

PA

YAB

LE (

RE

CE

IVA

BLE

) 6

7,6

11

24

0,9

74

11.2

Def

erre

d ta

x as

sets

and

liab

iliti

esT

he b

reak

dow

n an

d m

ovem

ent

of t

he v

ario

us it

ems

whi

ch m

ake

up d

efer

red

tax

asse

ts a

nd li

abili

ties

are

as fo

llow

s:

20

14

BA

LAN

CE

AT

T

RA

NS

FE

RS

C

ON

SO

LID

AT

ED

E

QU

ITY

B

ALA

NC

E A

T

JA

NU

AR

Y,

IN

CO

ME

DE

CE

MB

ER

1S

T 2

014

STA

TE

ME

NT

31S

T, 2

014

Def

erre

d ta

x as

sets

Lim

itatio

n am

ortis

atio

n 21

,198

4

9,4

22

17,9

36

-

88

,556

2013

and

20

14 a

nd t

ax lo

sses

21,19

8

49,

422

17

,93

6

88

,556

Def

erre

d ta

x lia

bilit

ies

Dep

reci

atio

n pr

oper

ty, p

lant

& e

quip

men

t 28

,478

-

(7,3

21)

- 21

,157

Fr

ee a

mor

tisat

ion

- jo

b cr

eatio

n 76

,43

6

- (2

2,6

37)

- 53

,79

8

Cas

h ga

ins

on a

sset

s 2,

60

4,8

96

-

(526

,39

8)

- 2,

078

,49

8

Non

-ref

unda

ble

gran

ts

36

,83

6

- (2

,30

0)

(5,7

56)

28,7

80

2,

746

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6

- (5

58

,65

6)

(5,7

56

) 2,

182,

233

20

13

BA

LAN

CE

AT

T

RA

NS

FE

RS

C

ON

SO

LID

AT

ED

E

QU

ITY

B

ALA

NC

E A

T

JA

NU

AR

Y,

IN

CO

ME

DE

CE

MB

ER

1S

T 2

014

STA

TE

ME

NT

31S

T, 2

014

Def

erre

d ta

x lia

bilit

ies

Ta

x lo

sses

6

8,8

44

(68

,84

4)

-

D

educ

tions

in q

uota

9

80

(98

0)

-

A

mor

tisat

ion

limita

tion

for

2013

and

20

14

-

21,19

8

21

,198

6

9,8

24

- (4

8,6

26)

- 21

,198

Def

erre

d ta

x lia

bilit

ies

Dep

reci

atio

n pr

oper

ty, p

lant

& e

quip

men

t 3

1,073

(2,5

95)

28,4

78

Free

am

ortis

atio

n -

job

crea

tion

84

,857

(8,4

21)

76

,43

6

Cas

h ga

ins

on a

sset

s 2,

715,

595

(1

10,6

98

)

2,6

04

,897

Non

-ref

unda

ble

gran

ts

39,

136

(2,3

00

)

36

,83

6

2,

870

,66

0

- (1

24,0

15)

- 2,

746

,64

6

12. I

NC

OM

E A

ND

EX

PE

NS

ES

12.1

Inco

me

The

dis

trib

utio

n of

the

Com

pany

’s t

urno

ver

corr

espo

ndin

g to

nor

mal

act

iviti

es, b

y ca

tego

ry, i

s as

follo

ws:

EU

RO

S

20

14

20

13

Inco

me

from

film

sal

es

- 5,

220

Inco

me

from

ren

derin

g of

ser

vice

s 12

,68

6,3

97

15,4

78,15

2

Inco

me

from

pho

to s

hoot

s 1,5

79,3

57

96

0,3

91

TO

TAL

14,2

65

,75

4

16,4

43

,76

3

12.2

Con

solid

ated

res

ults

The

bre

akdo

wn

of c

onso

lidat

ed r

esul

ts, b

y co

mpa

ny, i

s as

follo

ws:

2

014

2

013

Pal

ma

Pic

ture

s T.

P.M

.C.S

.L.

497

,071

58

3,4

78

Pat

hfind

er M

edia

, S.L

. (S

ocie

dad

Uni

pers

onal

) (8

1,16

3)

(20

0,2

74)

TO

TAL

415

,90

8

38

3,2

04

12.3

Sup

plie

sT

he b

reak

dow

n of

con

sum

ptio

n of

goo

ds in

the

con

solid

ated

inco

me

stat

emen

t is

as

follo

ws:

EU

RO

S

20

14

20

13

Pur

chas

e of

goo

ds a

nd s

uppl

ies

108

,56

0

30

5,3

94

Varia

tion

in in

vent

orie

s -

-

TO

TAL

10

8,5

60

3

05

,39

4

12.4

Per

sonn

el e

xpen

ses

The

bre

akdo

wn

of p

erso

nnel

exp

ense

s st

ated

in t

he c

onso

lidat

ed in

com

e st

atem

ent

is a

s fo

llow

s:

EU

RO

S

20

14

20

13

Wag

es, s

alar

ies

and

sim

ilar

1,18

6,6

72

1,357

,06

0

Soc

ial S

ecur

ity

264

,615

28

6,17

9

Oth

er w

elfa

re e

xpen

ses

26,5

75

23,9

40

TO

TAL

1,

47

7,8

62

1,

66

7,17

9

13. I

NFO

RM

AT

ION

ON

EN

VIR

ON

ME

NTA

L IS

SU

ES

The

Dire

ctor

s co

nsid

er t

hat

pote

ntia

l con

tinge

ncie

s th

at m

ay a

rise

with

res

pect

to

envi

ronm

enta

l iss

ues

are

suffi

cien

tly c

over

ed b

y th

e in

sura

nce

polic

ies

subs

crib

ed.

No

expe

nses

for

this

con

cept

hav

e be

en in

curr

ed d

urin

g in

eith

er 2

014

or

2013

.

14. P

OS

T-B

ALA

NC

E S

HE

ET

EV

EN

TS

On

Janu

ary

29, 2

015

, a lo

an h

as b

een

obta

ined

for a

n am

ount

of 2

50,0

00

eur

os a

nd m

atur

ing

on A

pril

29, 2

015

.

The

re a

re n

o fu

rthe

r po

st-b

alan

ce s

heet

eve

nts.

15. T

RA

NS

AC

TIO

NS

WIT

H R

ELA

TE

D P

AR

TIE

S

No

rem

uner

atio

n w

as a

ccru

ed b

y B

oard

Mem

bers

who

do

not h

old

exec

utiv

e po

sitio

ns in

20

14 a

nd 2

013

.

Rem

uner

atio

n ac

crue

d in

the

yea

r by

top

man

agem

ent,

incl

udin

g a

Boa

rd M

embe

r of

the

Par

ent

Com

pa-

ny a

nd t

he s

ubsi

diar

y’s

Sol

e di

rect

or, a

mou

nts

to 2

73,19

6 e

uros

(259

,841

eur

os in

20

13).

In a

ccor

danc

e w

ith A

rtic

le 2

29 o

f th

e S

pani

sh C

orpo

ratio

n La

w, t

he D

irect

ors

have

dec

lare

d th

at t

hey

hold

no

posi

tions

whi

ch w

ould

impl

y a

confl

ict

of in

tere

st w

ith t

he C

ompa

ny.

At

Dec

emb

er 3

1, 2

014

and

20

13, t

he G

roup

had

no

pen

sio

n p

lans

or

life

insu

ranc

e p

olic

ies

for

pre

vio

us o

r p

rese

nt B

oar

d m

emb

ers.

Mo

reo

ver,

at D

ecem

ber

31,

20

14 a

nd 2

013

, no

ad

vanc

es o

r

cred

its

wer

e g

rant

ed t

o t

op

man

agem

ent

or

to B

oar

d m

emb

ers

and

no

ob

ligat

ions

wer

e as

sum

ed

on

thei

r b

ehal

f as

sec

urit

y.


The Figures 100

16. O

TH

ER

DIS

CLO

SU

RE

S

a) A

vera

ge n

umbe

r of

em

ploy

ees

in 2

014

and

20

13:

The

ave

rage

num

ber

of e

mpo

yees

in 2

014

by

cate

gory

is s

how

n be

low

:

2

014

2

013

CA

TE

GO

RIE

S

MA

LE

FE

MA

LE

TO

TAL

MA

LE

FE

MA

LE

TO

TAL

Top

man

agem

ent

3.0

0

- 3

.00

3

.00

-

3.0

0

Hea

ds o

f D

epar

tmen

t 3

.17

6.0

9

9.26

0

.75

5.24

5.

99

Cle

rks

4.4

9

2.51

7.

00

6

.61

3.0

6

9.67

Aux

iliar

y st

aff

5.53

2.

96

8

.49

4

.77

2.6

3

7.4

TO

TAL

16.1

9

12.5

6

27.

75

15.1

3

10.9

3

26

.06

At

Dec

embe

r 3

1, 20

14 a

nd 2

013

, the

bre

akdo

wn

of e

mpl

oyee

s by

cat

egor

y do

es n

ot s

igni

fican

tly d

iffer

from

the

abo

ve.

b) A

udit

fees

The

fees

for

the

2014

indi

vidu

al a

nd c

onso

lidat

ed a

udits

hav

e am

ount

ed t

o 13

,60

0 e

uros

(16

,73

0 e

uros

in 2

013

). M

oreo

ver,

the

fees

pai

d fo

r ot

her

serv

ices

ren

dere

d by

the

Par

ent

Com

pany

aud

itors

and

oth

er

com

pani

es w

hich

are

par

t of

the

Firm

, am

ount

to

2,20

0 e

uros

(2,9

74 e

uros

in 2

013

).

17. E

XP

LAN

AT

ION

AD

DE

D F

OR

TR

AN

SLA

TIO

N T

O E

NG

LIS

H

The

se a

nnua

l acc

ount

s ar

e pr

esen

ted

on t

he b

asis

of

acco

untin

g pr

inci

ples

gen

eral

ly a

ccep

ted

in S

pain

.

Cer

tain

acc

ount

ing

prac

tices

app

lied

by t

he C

ompa

ny t

hat

conf

orm

with

gen

eral

ly a

ccep

ted

acco

untin

g

prin

cipl

es in

Spa

in m

ay n

ot c

onfo

rm w

ith g

ener

ally

acc

epte

d ac

coun

ting

prin

cipl

es in

oth

er c

ount

ries.

Con

solid

ated

man

agem

ent r

epor

t

1.- B

usin

ess

tren

d an

d G

roup

’s s

itua

tion

, tog

ethe

r w

ith

a de

scri

ptio

n of

the

mai

n ri

sks

and

unce

rtai

ntie

s aff

ecti

ng th

e C

ompa

nyT

he y

ear

2014

has

bee

n a

posi

tive

year

for

the

Pal

ma

Pic

ture

s gr

oup.

It h

as b

een

a ye

ar in

whi

ch w

e

have

obs

erve

d th

at t

he C

ompa

ny’s

pol

icy

of d

iver

sify

ing

both

in t

erm

s of

geo

grap

hica

l loc

atio

ns a

nd

activ

ities

und

erta

ken

over

the

last

7 y

ears

is a

sol

id b

asis

for

us t

o m

ove

forw

ard.

Pal

ma

Pic

ture

s ha

s

mai

ntai

ned

a he

alth

y tu

rnov

er, a

lthou

gh d

ue t

o lo

w t

urno

ver

in t

he s

umm

er m

onth

s th

e fin

al fi

gure

s ha

ve

been

aff

ecte

d an

d pr

ofita

bilit

y ha

s su

ffer

ed.

In th

e ad

vert

isin

g m

arke

t, th

e va

riety

of o

ur c

lient

s’ n

atio

nalit

ies

has

been

con

solid

ated

and

the

profi

tabi

lity

by p

roje

ct h

as b

een

as e

xpec

ted.

We

wou

ld e

spec

ially

like

to h

ighl

ight

the

bala

nce

betw

een

our

mar

kets

,

whi

ch is

a v

ery

posi

tive

fact

or, s

ince

we

do n

ot d

epen

d on

a s

ole

mar

ket,

whi

ch e

ntai

ls c

erta

in r

isks

.

The

Bar

celo

na o

ffice

con

tinue

s to

gro

w a

nd a

lread

y re

pres

ents

20

% o

f th

e an

nual

tur

nove

r. W

e co

n-

side

r th

e B

arce

lona

offi

ce a

key

par

t of

fut

ure

grow

th. P

hoto

& M

otio

n de

part

men

t co

ntin

ues

to g

row

and

has

been

add

ing

mor

e im

port

ant

clie

nts

to it

s po

rtfo

lio e

very

yea

r. T

hese

clie

nts

retu

rn t

o P

alm

a

Pic

ture

s fo

r ea

ch a

nd e

very

one

of

thei

r ca

mpa

igns

. The

rep

eat

rate

is v

ery

high

and

for

this

rea

son

we

are

very

kee

n to

boo

st t

his

bran

ch o

f ac

tivity

.

Alth

ough

Pat

hfind

er h

as s

uffer

ed a

lack

of

cont

ract

s, w

e ho

pe t

hat

the

chan

ges

impl

emen

ted

at t

he e

nd

of 2

014

will

cha

nge

this

ten

denc

y in

20

15. I

n or

der

to c

ompe

nsat

e th

e dr

op in

figu

res,

the

am

ount

ow

ed

to t

he P

aren

t C

ompa

ny h

as b

een

conv

erte

d to

a p

artic

ipat

ive

loan

.

2.- P

ost-

bala

nce

shee

t eve

nts

We

are

in c

onta

ct w

ith t

wo

prod

uctio

n co

mpa

nies

in o

rder

to

unde

rtak

e tw

o m

ajor

pro

ject

s du

ring

the

sum

mer

per

iod.

The

neg

otia

tions

are

at

an a

dvan

ced

stag

e.

3.-

Com

pany

’s fo

rese

eabl

e ev

olut

ion

In 2

015

we

inte

nd t

o co

ntin

ue w

ith o

ur p

olic

y of

incr

easi

ng s

ales

, pos

ition

ing

ours

elve

s in

the

Am

eric

an

and

Asi

an m

arke

ts a

nd c

onso

lidat

ing

our

posi

tion

in t

he E

urop

ean

mar

kets

. Mor

eove

r, w

e ai

m t

o pr

o-

mot

e th

e ac

tiviti

es o

f ou

r B

arce

lona

offi

ce, g

iven

its

cons

tant

gro

wth

sin

ce o

peni

ng.

4.-

Res

earc

h an

d de

velo

pmen

t act

ivit

ies

carr

ied

out b

y th

e C

ompa

nyA

part

fro

m t

he a

ctiv

ities

alre

ady

impl

emen

ted

in p

revi

ous

year

s no

new

act

iviti

es h

ave

been

und

erta

ken.

5.- A

cqui

siti

on o

f ow

n sh

ares

The

Com

pany

has

not

acq

uire

d an

y ow

n sh

ares

dur

ing

the

year

Credits

Copy

Jacob Odqvist Mike Day

Design

fundicion .es

Photo

Dani SampedroXisco FusterPalma Pictures ArchiveStock Images

Palma Pictures TMPC S.L.U.

Calle Siurells, 4 - 07141 Marratxi - Mallorca - Balearic Islands - Spain

T +34 971 226 232 - F +34 971 226 282

mailbox@palmapictures .es

www .palmapictures .es

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Palma PicturesCalle Siurells, 407141 Marratxí, MallorcaBalearic Islands - Spainwww.palmapictures.es

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