Mondo TV S.p.A. Registered Office Via Brenta 11 Rome (Italy) Other offices Via Montenero Guidonia (RM), (Italy)

Transcription

1 Companies' Register and Tax Code Economic and Administrative Repository (R.E.A.) of Rome Mondo TV S.p.A. Share Capital 13,212,404.- fully paid-in Registered Office Via Brenta 11 Rome (Italy) Other offices Via Montenero Guidonia (RM), (Italy) Separate Financial Statements as at 31 December 2013 Draft: Board of Directors' Meeting of 25 March 2014 Approved: General Meetings of 29 April

2 CONTENTS 1.MANAGEMENT COMMENTARY 1.1 HIGHLIGHTS GENERAL COMMENTARY DESCRIPTION OF THE COMPANY'S OPERATING CONDITIONS PRODUCTIONS OF THE YEAR INFORMATION ON SHAREHOLDERS AND THE SHARE PRICE BUSINESS OUTLOOK, MAIN RELEVANT RISKS HUMAN RESOURCES AND RESEARCH AND DEVELOPMENT ACTIVITIES SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD RELATED PARTY AND INTRAGROUP TRANSACTIONS PROPOSAL FOR THE ALLOCATION OF PROFIT (LOSS) FOR THE YEAR FINANCIAL STATEMENTS AND NOTES 2.1 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER FINANCIAL STATEMENTS PROVIDING RELATED PARTY DISCLOSURES NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER Introduction 24 2 Accounting policies and measurement bases 24 3 Operating segments 34 4 Intangible assets, property, plant and equipment and financial assets 35 5 Tax assets and liabilities 40 6 Trade receivables and financial receivables 41 7 Other assets 42 8 Cash and cash equivalents 42 9 Provisions for risks and charges and Post-employment benefits Current and non-current payables Other liabilities Equity Tax position Contingent liabilities Commitments Revenue from sales and other income Capitalisation of internally produced animated series Raw materials, consumables and goods Personnel costs Depreciation, amortisation and impairment Other operating costs Finance income and costs Taxes Dividends Earnings per share (basic and diluted) Financial risk management Remuneration to corporate bodies and executives Remuneration of the independent auditor Information on the fair value of financial assets and liabilities Atypical or unusual transactions Certification of the separate financial statements as at 31 December 2013 in compliance with art. 154-bis, para. 5 of Italian Legislative Decree 58/1998 as subsequently amended and supplemented ANNEXES Annex 1: Corporate bodies of the Company 56 Annex 2: Powers and Corporate Governance 56 Annex 3: Corporate bodies of the Subsidiaries 59 Annex 4: List of equity investments 60 Annex 5: List of related parties 61 2

3 1. MANAGEMENT COMMENTARY 1.1 HIGHLIGHTS Mondo TV S.p.A. (hereinafter also Mondo TV or the Company )'s reclassified financial position, financial performance and cash flows are shown below in comparison with the data of the previous year: Condensed statement of financial position (in thousands of Euro) 31 Dec Dec Non-current fixed assets 17,756 24,021 Current assets 21,406 23,729 Current liabilities 8,381 8,149 Net working capital 13,025 15,580 Non-current liabilities 1, Invested capital 29,633 38,614 Net financial position (3,049) (1,508) Equity 26,584 37,106 Condensed statement of comprehensive income (in thousands of Euro) Revenue 5,830 8,947 Capitalisation of internally produced animated series 771 1,217 Operating costs (5,245) (6,764) EBITDA 1,356 3,400 Amortisation and depreciation, impairment, and provisions (13,758) (2,782) EBIT (12,402) 619 Net finance income (costs) (692) (608) Profit (loss) before tax (13,093) 11 Income tax expense 5,484 1,965 Profit (loss) for the year (7,609) 1,976 Earnings per share (basic and diluted) (0.29)

4 Net financial position (in thousands of Euro) 31 Dec Dec Cash and cash equivalents 673 1,331 Short-term financial receivables Short-term financial payables (3,224) (3,490) Net short-term financial position (2,552) (1,275) Long-term financial receivables Medium/long-term portion of loans payable (573) (308) Net medium/long-term financial position (498) (233) Net financial position (3,049) (1,508) Financial ratios ROI (EBIT/invested capital) (41.85%) 1.60% ROS (EBIT/revenue) (212.72%) 6.91% ROE (profit for the year/equity) (28.62%) 5.32% Equity to non-current assets ratio (cons. equity+equity/nca) NFP/equity Management uses the items indicated in the above reclassified statements in assessing the Company's performance. These measures are in part taken from the statutory financial statements and reported further on in this document, and are in part the result of aggregations; as required by recommendation CESR/ b, the composition of each measure and the references to the items in the statutory financial statements are shown below. Current assets: the sum of trade receivables, tax assets, and other assets. Current liabilities: the sum of trade payables, tax liabilities, and other short-term liabilities and provisions. Non-current liabilities: the sum of provisions for risks and charges, deferred tax liabilities, and the provision for post-employment benefits. Net financial position: the sum of financial receivables, cash and cash equivalents, current and non-current financial payables. Revenue: the sum of Revenue from sales and services and Other income. Operating costs: the sum of Raw materials, consumables and goods, Personnel costs and Other operating costs. Amortisation and depreciation, impairment and provisions: the sum of Amortisation and impairment of intangible assets, Depreciation and impairment of property, plant and equipment, and the Allowance for doubtful debts. Short-term financial payables and Short-term payables due to shareholders: these two items are shown as an aggregate in the statutory financial statements; their composition is detailed in the notes at para Long-term financial payables and Long-term payables due to shareholders: these two items are shown as an aggregate in the statutory financial statements; their composition is detailed in the notes at para The items mentioned above, such as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), EBIT, and net financial position are usually identified without having a consistent definition in the accounting standards or in the Italian Civil Code, and therefore may not be comparable with items of the same name reported by other companies. Please refer to the general commentary for more details on the net financial position. 4

5 1.2 GENERAL COMMENTARY The Separate Financial Statements (the Financial Statements ) of Mondo TV S.p.A. (hereafter also the Company or the Parent ) have been prepared on a going concern basis, as the Directors have verified that no financial, operating or other indicators of issues concerning the Company's ability to meet its obligations in the foreseeable future, and in particular within the 12 months from the end of the reporting period, exist. How the Company manages financial risks, including liquidity risk and capital risk, is described in the paragraph Financial Risk Management. The Financial Statements, composed of the Statement of financial position, the Income statement, the Statement of comprehensive income, the Statement of cash flows, the Statement of changes in equity, and the relevant notes, have been prepared in conformity with EU-IFRSs. The acronym EU-IFRS refers to the International Financial Reporting Standards, the International Accounting Standards (IAS), all interpretations of the International Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC), which, on the date of approval of these Financial Statements, have been endorsed by the European Union pursuant to Regulation (EC) 1606/2002 of the European Parliament and of the Council of 19 July In particular, it should be noted that EU-IFRSs were applied consistently to all the years examined in this Report. Furthermore, these Financial Statements were drafted based on the best knowledge of EU-IFRSs and the best interpretations on the issue; any future interpretations and revisions will be taken into account in the next years, in accordance with the provisions included from time to time in the relevant accounting standards. The Financial Statements are prepared and presented in Euro, which is the functional currency of the Company. The amounts reported in the tables included in the notes are expressed in thousands of Euro, unless otherwise indicated. The Financial Statements have been prepared on the historical cost basis, except for the measurement of financial assets and liabilities, in the cases in which fair value measurement is required. Compared to the previous year, the decrease in revenue, equal to Euro 3.1 million in absolute terms and approximately 35% in percentage terms, is due mainly to lower production volumes during the year. The decrease in production volumes (with revenue amounting to Euro 0.5 million in 2013 compared with Euro 3 million in 2012) is primarily due to the fact that some customers have suspended for the year 2013 some new projects that were underway, and in some cases, already under contract. In 2014, productions by the Parent are expected to increase because, in addition to already acquired productions such as Drakers, Isola del Tesoro, Modhesh, Pap Music and Cat Leo, several proposals for animated series are already being developed with two of them at an advanced stage. Capitalised costs relating to the series produced amounted to Euro 0.8 million in 2013, compared with Euro 1.2 million in 2012; the decrease is due to lower production volumes during the year. Operating costs decreased by Euro 1.5 million in absolute terms, and 22% in percentage terms, due to lower production volumes in 2013 compared to 2012 and to the reduction in overheads. EBITDA dropped by Euro 2.0 million in absolute terms and 60% in percentage terms from 2012, as a result of lower revenue and capitalisations. Also in 2013, Mondo TV operated in a context of global economic slowdown: GDP dropped by 1.9% in Italy and was substantially stagnant in most of Europe. In particular, the animation business has been hard hit by the economic downturn due to decreased advertising expenditure by companies which has forced TV broadcasters to drastically reduce their investment budget; therefore, the purchase price of new licences fell and a considerably stricter purchase selection process was implemented that increasingly favours products with a licensing potential capable of attracting investments, including toy manufacturers, and licensing in the form of TV advertising. This trend was evident especially in the last part of 2013 and, in particular, in December, when the TV 5

6 broadcasters allocate their residual budget, and producers and licensees are in a better position to determine the advertisements to be broadcast based on forecasts for the Christmas season. In this context, it has been quite difficult to generate sales and even to collect trade receivables; in addition, some major competitors of Mondo TV, at an international level, have gone out of business including Moonscoop, a French company considered one of the international leaders in the animation industry, which went bankrupt in the second half of The entire Moonscoop library was sold by the receiver to third parties for approximately Euro 0.6 million, significantly below its net carrying amount. Since Moonscoop was one of the main players in the sector, the sale of its library indirectly affects the market value of the other players' libraries. In this context, Mondo TV has adjusted its own production and sale strategy by focusing its efforts and investments primarily on new productions with a high licensing potential (co-produced with third parties) and on the distribution of third parties' libraries; this new business model has already been successfully tested by the Company in the last two years and the results already obtained as well as those expected have led Mondo TV to focus its production and marketing efforts, as well as its investments, on this model. Therefore, given the strategic repositioning of the Company toward this new business model, the Directors have assessed the residual value of the library and the value of those titles that are no longer consistent with this new strategy, that have been most affected by market difficulties and whose value is no longer recoverable on the basis of current business forecasts and expected future sales, has been impaired. This analysis has shown an impairment loss of the library of Euro 9.7 million. In addition, in 2013, Euro 2.4 million in Mondo TV s receivables due from customers were impaired, because, also in consideration of the economic downturn, they are considered as bad debts based on the information available at the date of preparation of these Financial Statements. Amortisation and depreciation, impairment and provisions amounted to Euro 13.8 million in 2013, compared with Euro 2.8 million in In light of the above, EBIT was negative to the tune of Euro 12.4 million, compared with the break-even levels recorded in EBIT, net of non-recurring impairment and listing charges of Mondo TV France, amounting to approximately Euro 0.4 million, would have substantially broken even. Net finance costs amounted to Euro 0.7 million compared with Euro 0.6 million in 2012, and include impairment of equity investments of approximately Euro 0.4 million. In 2013, the Parent recognised Euro 5.5 million in deferred tax assets, compared with Euro 2.0 million in Deferred tax assets have been recognised in financial statements to the extent they are likely to be recovered; in particular the recognition of deferred tax assets reflects the assessments made by the Board of Directors and approved on 25 March 2014 with regards to expected taxable income generated by Company s operations in the near future so as to allow the recovery, based on the Parent's ten-year Business Plan. In the month of March 2013, the merger of Doro TV Merchandising S.r.l., Mondo TV Consumer Product S.r.l and Mondo Distribution S.r.l., wholly-owned subsidiaries of the Parent, into Mondo TV S.p.A. was finalised. 1.3 DESCRIPTION OF THE COMPANY'S OPERATING CONDITIONS The Company has historically been operating in the business of producing and marketing television series and full-length animated movies. For more than five years now, the Company has been focusing on sectors related with its core business, chief among them, especially in perspective, the publishing industry and the exploitation of its rights for merchandising purposes. 6

7 The reference industry was stagnant during Weak advertising sales as a matter of fact negatively affected the volume of new investments by the mainstream broadcasters as well as licensing and merchandising sales. Here below is a brief description of the business of the Company and of the main companies of the Mondo TV Group, as well as of the relevant strategic missions. The Parent Mondo TV S.p.A. emphasised its vocation as a strongbox, dedicated to the creation and, to a lesser extent, the acquisition of rights that could be exploited in both the television sector and in the diversified field of ancillary and related rights. Mondo TV France S.A. produces and coproduces animated television series for French broadcasters and, from a strategic point of view, allows the Mondo TV Group to expand its operations to France and Frenchspeaking countries. It should be noted that, subsequent to Mondo TV France S.A.'s listing in March 2013 on the AIM Italia/Mercato Alternativo del Capitale [Alternative Capital Market] (hereafter, AIM Italia ) organised and managed by Borsa Italiana S.p.A., Mondo TV S.p.A. owns a 67% interest in the company. As the German market is continental Europe's main market, the natural mission of M.I.M. Mondo IGEL Media A.G., a 56.11%-owned subsidiary listed on the Hamburg start up market, was to establish a foothold for the Mondo TV Group in German-speaking countries. The Company was put into liquidation on 29 January 2013, and negotiations are currently underway for selling the equity investment to third parties. Mondo TV Spain S.L.'s mission is to sell the television rights of the Group's Library in Spain, Portugal, and South America, and to produce and coproduce animated television series in Spanish and Portuguese for TV broadcasters. On 11 February 2013, the merger of Doro TV Merchandising S.r.l., Mondo TV Distribution S.r.l., and Mondo TV Consumer Products S.r.l, wholly-owned subsidiaries of the Parent, into Mondo TV S.p.A., was finalised. The merger's effective date was 1 March The table below summarises the sectors into which Mondo TV Group's business is broken down, indicating the relevant companies: Company Mondo TV S.p.A. MIM Mondo Igel Media A.G. Mondo France S.A. Mondo TV Spain S.L. The Mondo TV Group Sectors Production, Distribution, Licensing Production, Distribution Production Distribution The television distribution business consists in the selling and/or licensing of television rights relating to the series and full-length animated movies in the Company's Library. The main buyers are coproducers, distributors, and over-the-air, cable, and satellite TV broadcasters, either public or private, in Italy and abroad. The Company carries out production on its own behalf or, as customary in this business, in partnership with third-party companies that participate in production, bearing part of the costs and/or organisational and production expenses, while the Company is responsible for creative development and governs, de facto, the entire production process. Production is carried out under the direction and supervision of the Company's management, which uses, in whole or in part and as per standard industry practice, external artists, screenwriters and directors as well as animation studios entrusted with the production of the series and of the full-length animated movies. 7

8 In short, the steps in producing a television series are as follows: Pre-production Production Post-production Story and characters Screenplay Basic drawings Storyboard Drawings Direction Editing and modifications Final editing Dialogue track and sound track Synchronisation and mixing The line of strategic development already traced out is that of a gradual growth of the Library accompanied by an increasingly intense and widespread exploitation, both in the conventional sector of the granting of TV rights and in the newer (for the Company) field of related sectors. The cornerstones of the new strategic plan are the production of high quality and marketable titles, with potential for exploitation through licensing and merchandising. During 2013 the production of three titles, Drakers, Modhesh and Pap Music, started. 1.4 PRODUCTIONS OF THE YEAR INVESTMENTS IN THE LIBRARY Mondo TV S.p.A.'s typical production activities continued in 2013; in particular, the most significant investments relate to the production of the animated series Drakers ACQUISITION AND ESTABLISHMENT OF NEW COMPANIES No new companies were acquired or established in SIGNIFICANT EVENTS OF 2013 On 31 January 2013, Mondo TV S.p.A.'s Board of Directors decided to proceed with the listing of the ordinary shares of the subsidiary Mondo TV France S.A. on the AIM Italia/Mercato Alternativo del Capitale [Alternative Capital Market] (hereafter, AIM Italia ) organised and managed by Borsa Italiana S.p.A. The shares went public on 25 March 2013 through the free grant of shares, representing about 25% of Mondo TV France S.A.'s share capital, by the Parent Mondo TV S.p.A. to its shareholders. The transaction allows to: i) benefiting from the investment in Mondo TV France S.A., creating value also for the shareholders; ii) give Mondo TV France S.A. a higher profile to attract new managers in view of a future generational turnover at the top of the subsidiary, also through the possibility of awarding more interesting share-based incentives; iii) facilitate the potential entry, in the medium term, of institutional and/or industrial shareholders, or in any case be able to use more easily forms of capitalisation to raise new funding whenever necessary to finance any extraordinary future plans not currently anticipated. On 11 February 2013, the merger of Doro TV Merchandising S.r.l., Mondo TV Distribution S.r.l., and Mondo TV Consumer Products S.r.l, wholly-owned subsidiaries of the Parent, into Mondo TV S.p.A., was finalised. The merger's effective date was 1 March

9 The company M.I.M. Mondo IGEL Media A.G. was put into liquidation on 29 January 2013, and negotiations are currently underway for selling the equity investment to third parties. A new license agreement was entered into in 2013 with Rai Cinema to broadcast in Italy the third series of the live teen programme Grachi. The series will consist of 50 new 60-minute episodes. The development of acquisition and resale activities of teen soap operas, through the subsidiary Mondo TV Spain, is successfully continuing. 1.5 INFORMATION ON SHAREHOLDERS AND THE SHARE PRICE Mondo TV S.p.A.'s shareholding structure as at 31 December 2013 was as follows: Largest shareholders no. of shares % Orlando Corradi 14,459, % Kabouter Management LLC 1,333, % Sub-total 15,792, % Other shareholders 10,632, % 26,424, % The issuer is unaware of the existence of shareholders' agreements as described in art. 122 of the Consolidated Law on Finance (TUF, Testo Unico sulla Finanza); the general meeting did not delegate any powers to increase the share capital, issue bonds, or purchase treasury shares. No agreements exist between the Company and the directors regarding any severance pay for the corporate bodies in case of resignation or dismissal without just cause or termination of employment following a takeover bid. As for the Company's share price performance, it remained substantially stable in the first months of the year, then it constantly rose from Euro 0.44 in September to around Euro 0.80 at the end of the reporting period. The statement below shows the shareholdings of the members of the Company's Administration and Control bodies and key management personnel: first and last name Directors' and Statutory Auditors' Shareholdings shares as at 31 Dec shares purchased shares sold shares as at 31 Dec Orlando Corradi 15,637,710 (1,178,435) 14,459,275 Matteo Corradi 7,845 - (7,845) - Carlo Marchetti 15,000 - (7,100) 7, BUSINESS OUTLOOK, MAIN RELEVANT RISKS Mondo TV Group approved, on 25 March 2014, a new strategic approach involving the following: 1. relaunching the animated cartoon production business through the acquisition of new highly marketable co-productions; 2. expanding the range of third parties' products, both in the historical business of cartoons and in relation to the so-called live action products for the young audience; 3. strengthening the foreign markets where the Group already operates, and developing new markets, in particular the Chinese and, more in general, the East Asian markets in order to increase their sales; 9

10 4. optimising synergies in the audiovisual, licensing and merchandising businesses for the acquisition of new property and for product sales; 5. reorganising internal work, in particular in the production business, for cost reduction and efficiency purposes. Mondo TV Group intends to promote and undertake different actions in order to achieve strategic objectives as well as the financial results expected on the basis of the new approved Business Plan. These actions may be summarised into the following categories: a) broadening the range of potential co-producers through an expansion strategy based on product categories and geographical areas; b) acquiring new property with a strong impact on the related businesses in order to expand the so-called New Library; c) strengthening the structure responsible for the purchase of third party distribution rights, focusing our attention on cartoons, live action series and products intended for the development of quality licensing and merchandising; d) implementing a new internal organisational model applicable, in particular, to the production business. The economic and financial objectives pursued by the new Business Plan include a substantial doubling, at a consolidated level, of production value over the next three years, with EBITDA between 45% and 55% of the production value, EBIT between 10% and 23% of the production value and a positive NFP. Thanks to the new strategy, positive results and dividend distribution are expected as early as In conformity with art. 154-ter para. 4 of the Consolidated Law on Finance, it should be noted that the main risks associated with the Company's business that could affect its outlook are as follows: Credit risk Credit risk represents the Company's exposure to potential losses arising from the non-fulfilment of the obligations assumed by the counterparties. During the year, the Company adopted appropriate procedures, such as the verification of debtors' solvency, to minimise the exposure to this risk. The management of this risk consists, first of all, in the selection of customers based on reliability and solvency and in limiting exposure to individual customers. If significant, the positions, for which a risk of partial or total noncollectability is noted, are subject to individual impairment. A provision is set aside on a collective basis for the receivables that are not subject to individual impairment, taking into account past experience and statistical data. As at 31 December 2013, trade receivables amounted to Euro 14,358 thousand, Euro 5,428 thousand of which past due by more than 12 months. An allowance for doubtful debts of Euro 5,013 thousand was recognised in relation to these receivables. Performing trade receivables have not been impaired since no significant indication of impairment emerged, based on an analysis conducted that took into account both the reliability of the individual customers, and the high distribution of credit risk. Liquidity risk Liquidity risk represents the risk that the financial resources might not be available or may be available at a cost so high that profit (loss) for the year may be affected. This risk decreased significantly with the capital increase transaction effective from April The following table shows the breakdown of Mondo TV S.p.A.'s credit lines made available by banks as at 31 December 2013: 10

11 Credit lines (in millions of Euro) Cash Trade Loans Total Banca Sella S.p.A Unicredit BNL CREDEM CREDEM FACTORING Credemleasing Veneto Banca Total Exchange rate risk Mondo TV S.p.A. is exposed to the exchange rate risk due to the recognition of currency transactions (in United States dollars). This exposure is generated by investments and sales. The exchange rate risk is managed by keeping part of cash in US dollars, normally enough to settle the debts and commitments in dollars. Sensitivity analysis As at 31 December 2013, Mondo TV S.p.A. had net assets denominated in US dollars totalling USD 1,012 thousand; if the Euro/Dollar exchange rate as at 31 December 2013 had been 10% lower, foreign currency gains of Euro 74 thousand would have been recorded, while if the exchange rate had been 10% higher, a foreign currency loss of Euro 74 thousand would have been recorded. Interest rate risk The interest rate fluctuations influence the cash flows, the market value of the company's financial assets and liabilities, and the level of the net finance income (costs). Sensitivity analysis Mondo TV S.p.A.'s loans are index-linked to the Euribor rate; an increase of the Euribor rate by 1% would result in an increase in finance costs of approximately Euro 38 thousand for the Company. Risks associated with dependency on key managers The departure from the Company of Orlando Corradi, the Chairman of the Board of Directors and the controlling shareholder of Mondo TV S.p.A., and of Eve Baron Charlton, the Chief Executive Officer of Mondo TV France S.A., which accounts for a significant proportion of the Mondo TV Group's total revenue, could compromise the Mondo TV Group's competitive capability and negatively affect its performance, financial position and cash flows. Orlando Corradi holds a key position: since the Company's foundation, his role in the creation and development of products has been crucial. Eve Baron Charlton has a key role within Mondo TV France S.A.'s operations, as she is a highly professional manager with a proven track record as an executive at national French TV broadcasters. The wealth of experience acquired in the television business, as well as the broad network of contacts she developed in this industry, has allowed and still allows Mondo TV France S.A. to produce TV animated series with an educational and informative content, as well as a high level of quality, thus helping to broaden the Mondo TV Group's product offerings. Neither Orlando Corradi nor Eve Baron Charlton have entered into sole-agency or non-compete agreements with the Mondo TV Group's companies. 11

12 Risks associated with the commercial exploitation of intellectual property rights of third parties Mondo TV S.p.A.'s revenue may be influenced by factors, independent of the Company, that affect the availability and the commercial exploitation of third-parties' property, the subject of the series. Should these factors occur, they could cause earnings expectations to be revised down, negatively affecting Mondo TV S.p.A. s performance, financial position and cash flows. Risks associated with litigation A potential defeat in the lawsuit brought by R.G. Holding S.r.l. Unipersonale and Finanziaria Cinema S.r.l. Unipersonale against, among others, Mondo TV S.p.A., could produce adverse effects on the Company's operations and/or on its performance, financial position and cash flows. The plaintiff companies brought action against Mondo TV S.p.A., pursuant to art of the Italian Civil Code, as former non-controlling interests in Moviemax S.r.l., a de jure subsidiary of Mondo Home Entertainment, in turn subject to direction and coordination of Mondo TV S.p.A. until April 2009, seeking from approximately Euro seventeen million up to approximately Euro thirty million in damages. Deeming the claim to be "possible", also based on what the law firm assisting the Company in the dispute had stated, no risk provisioning was carried out in relation to the aforementioned litigation. It should also be noted that, also based on current appraisals, the Company should pay only a portion of the amount claimed by the plaintiff in case of defeat. As for the other ongoing disputes, it should be noted that: - as for the Pegasus Distribuzione S.r.l. lawsuit regarding claims for damages filed by the plaintiff due to an alleged breach of contract by Mondo TV S.p.A. in relation to two sales contracts, no events whatsoever occurred in Therefore the ruling on the appeal brought by Pegasus on 11 October 2010 against the ruling of the court of first instance of 21 January 2010, in which its case was rejected, is still scheduled for 23 April The Directors of Mondo TV deem the risk of losing to be remote also based on the outcome of the first-instance ruling; therefore no risk provisioning has been carried out; - as for the dispute with Clan Celentano S.r.l., which summoned Mondo TV S.p.A. to appear before the Court of Milan for alleged breaches and the termination of a contract entered into between the parties for the production of an animated TV series with the tentative name of Adrian, during the first hearing held in 2012, the judge adjourned the case until the hearing of 2013, during which, in the absence of an agreement between the Parties, the Judge received the materials entered into evidence by Mondo TV S.p.A., adjourning the case until 9 April 2013 for the appointment of an expert witness; on 16 April 2013, the expert witness was appointed and the technical report was filed at the end of Since, to date, the preliminary investigation phase is not yet concluded and based on the information currently available, it is believed that a negative outcome of the Mondo TV lawsuit is only possible and therefore no risk provisioning was carried out in relation to the aforementioned litigation. For additional information on pending litigation, reference should be made to the specific paragraph in the notes to the separate financial statements as at 31 December HUMAN RESOURCES AND RESEARCH AND DEVELOPMENT ACTIVITIES As at 31 December 2013, the Company had 20 employees, of which 3 executives, and 17 employees, up 7 units compared to 31 December 2012, due to investees' employees being transferred to Mondo TV S.p.A. The Company executed a job security agreement for all employees with a duration of 12 months up until October No serious work accidents occurred and no charges for occupational illness or mobbing were reported during the year. The Company conducts research and development activities for the purpose of launching new products, selecting and developing stories and characters also by means of tests carried out in partnership with childhood sociologists. 12

13 1.8 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD After the end of the year, no significant events have occurred that would require adjustments to the entries in the Financial Statements as at 31 December RELATED PARTY AND INTRAGROUP TRANSACTIONS RELATED PARTIES The Company engages in significant transactions with related parties, the complete list of which is reported in Annex 3.5. These transactions are at arm's length, are carried out to benefit the Company and substantially have three different origins: payment of consideration for service rendered; payments for leases and other services; sundry transactions with shareholders. In detail: Orlando Corradi, Chairman of the Board of Directors; other members of the Corradi family, such as Matteo Corradi, Chief Executive Officer and Investor Relator, Monica Corradi, Member of the Board of Directors; Trilateral Land S.r.l., a company directed by Matteo Corradi, the owner of the buildings located in Rome, Milan, and Guidonia used by the Mondo TV Group's companies. The main transactions with the above related parties are as follows: Orlando Corradi, founder of the Company and Chairman of the Board of Directors; Matteo Corradi, the son of Orlando, provides managerial services as part of his job with Mondo TV; Monica Corradi, the daughter of Orlando, provides managerial services as part of his job with Mondo TV; the transactions with Trilateral Land S.r.l. refer to the payments for the lease of the buildings where the Company's operations are based to Trilateral Land S.r.l. The table below shows the costs and financial payables associated with the above-mentioned transactions: Remuneration of directors (in thousands of Euro) Receivables Payables Costs Orlando Corradi - 77,000 77,000 Monica Corradi ,167 Matteo Corradi ,625 Francesco Figliuzzi - 29,440 18,200 Carlo Marchetti - 10,400 99,700 Fabrizio Balassone - 9,880 - Laura Rosati - 20,933 12,500 Total for directors - 147, ,192 Other related parties (in thousands of Euro) Receivables Payables Costs Trilateral Land S.r.l. 173, ,580 TOTAL 173, , ,772 13

14 1.9.2 INTRAGROUP TRANSACTIONS As for the transactions between the Parent and the other companies of the Mondo TV Group, and also those between the latter without the involvement of the Parent, first it should be noted that the various subsidiaries' operations tend to be integrated, as in this industry companies belonging to the same media Group typically pursue common policies in terms of production, acquisition, and exploitation of rights. These groups, indeed, tend to structure themselves into separate entities specialised in the exploitation of different rights, and, at the same time, they attempt to pursue common strategies for the procurement and marketing of rights, in order to exploit the synergies and greater contractual strength deriving from acting in concert. All transactions between the various Mondo TV Group companies were at arm's length, and involved Governance procedures specific for the relevant implementing decision. The main transactions which became effective during 2013 are described below: Transactions with Mondo Spain During the year, the Company acquired from the subsidiary the television rights relating to the second series of the animated series Grachi for Italy, and charged royalties for the use of Mondo TV S.p.A.'s titles in the Iberian peninsula and in South America. (in thousands of Euro) Transactions with subsidiaries Fixed Trade assets Loans receivables Payables Costs Revenue Mondo Tv France , ,765 - MIM Ag ,489 10,659 - Mondo TV Spain 455,000-1,631, ,738-23,822 TOTAL 455,000-1,631,084 1,203, ,424 23,822 (in thousands of Euro) Transactions with subsidiaries and related parties Fixed Trade assets Loans receivables Payables Costs Revenue Transactions with directors , ,192 - Transactions with other related parties , ,580 - Transactions with subsidiaries 455,000-1,631,084 1,203, ,424 23,822 Total 455,000 1,804,143 1,351, ,196 23,822 The table shows total transactions with directors, related parties and subsidiaries in

15 1.10 PROPOSAL FOR THE ALLOCATION OF PROFIT (LOSS) FOR THE YEAR As for the loss for the year, equal to Euro 7,609,106, the Directors propose to hedge it through available reserves. Rome, 25 March 2014 On behalf of the Board of Directors Chief Executive Officer Matteo Corradi 15

16 FINANCIAL STATEMENTS AND NOTES AS AT 31 DECEMBER

17 2.1 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 Values in Euro Notes 31 Dec Dec Non-current assets - Intangible rights 5,497,819 13,491,172 - Other intangible assets 50,850 56,460 Intangible assets 4 5,548,669 13,547,632 Property, plant and equipment 4 346, ,189 Equity investments 4 1,338,271 2,080,898 Deferred tax assets 5 10,522,517 7,954,000 Financial receivables 6 75,000 75,000 Current assets 17,831,168 24,095,719 Trade and other receivables 6 12,975,763 16,713,981 Financial receivables 6-883,786 Tax assets 5 8,224,505 6,666,100 Other assets 7 206, ,010 Cash and cash equivalents 8 672,520 1,331,438 22,079,650 25,944,315 Total assets 39,910,818 50,040,034 Non-current liabilities Post-employment benefits 9 252, ,033 Provisions for risks and charges 9 684, ,709 Deferred tax liabilities 5 211, ,114 Financial payables , ,439 Current liabilities 1,721,402 1,295,295 Provisions for risks and charges 9 275,869 15,869 Trade and other payables 10 7,030,917 6,948,549 Financial payables 10 3,224,030 3,490,075 Tax liabilities 5 38,209 34,978 Other liabilities 11 1,036,126 1,149,592 11,605,151 11,639,063 Total liabilities 13,326,553 12,934,358 - Share capital 13,212,414 13,212,414 - Share premium 19,231,848 57,717,378 - Legal reserve 2,642, ,414 - Other reserves (2,868,923) (206,618) - Retained earnings (accumulated losses) 1,975,549 (36,023,461) - Profit (loss) for the year (7,609,106) 1,975,549 Total equity 12 26,584,265 37,105,676 Total liabilities and equity 39,910,818 50,040,034 17

18 2.2 INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 Values in Euro Notes Revenue from sales and services 16 5,576,037 8,408,003 Other income , ,100 Capitalisation of internally produced animated series ,701 1,217,152 Raw materials, consumables and goods 18 (67,665) (67,902) Personnel costs 19 ( 1,571,250) (920,043) Amortisation and impairment of intangible assets 20 (11,257,324) (2,249,079) Depreciation and impairment of property, plant and 20 (134,670) (132,715) equipment Allowance for doubtful debts 6 (2,365,627) (400,000) Other operating costs 21 (3,605,602) (5,775,948) EBIT (12,401,512) 618,568 Finance income , ,656 Finance costs 22 (834,986) (735,708) Net finance income (costs) 22 (691,747) (608,052) Profit (loss) before tax (13,093,259) 10,516 Income tax expense 23 5,484,153 1,965,033 Profit (loss) for the year (7,609,106) 1,975,549 Earnings (loss) per share (basic and diluted) 25 (0.29) STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 Statement of comprehensive income Values in Euro Profit (loss) for the year (7,609,106) 1,975,549 Other comprehensive income: - - Items that may be recognised in profit or loss in future years Items that will not be recognised in profit or loss in future years Total other comprehensive income /(loss) net of tax effect (B) Total comprehensive income (loss) (A)+(B) (7,609,106) 1,975,549 18

19 2.4 STATEMENT OF CHANGES IN EQUITY Statement of changes in equity (Values in Euro) Share capital Legal reserve Retained earnings (Accumulated losses) Share premium Other reserves Profit (loss) for the year Equity Balance as at 31 Dec ,202, ,414 (36,812,476) 57,325, ,012 23,934,059 Allocation of profit (loss) for the year , (789,012) - Capital increase 11,010, , ,402,683 Other changes Capital increase expense (206,618) - (206,618) recognised in equity Profit (loss) for ,975,549 1,975,549 Balance as at 31 Dec ,212, ,414 (36,023,461) 57,717,378 (206,618) 1,975,549 37,105,676 Other changes ( 1 ) - - 2,212,069 36,023,461 (38,235,530) Allocation of profit (loss) for the year 2012 Dividend distribution as Mondo France shares Sale of Mondo Tv France shares ,975, (1,975,549) (250,000) - - (250,000) , ,760 Merger ( 2 ) (3,154,065) - (3,154,065) Loss for the year (7,609,106) (7,609,106) Balance as at 31 Dec ,212,414 2,642,483 1,975,549 19,231,848 (2,868,923) (7,609,106) 26,584,265 For further information on equity, reference should be made to note no Shareholders' Meeting of 4 March 2013 which resolved to cover accumulated losses and to increase the legal reserve up to 20% of the share capital. 2 Merger of Doro TV Merchandising S.r.l., Mondo TV Consumer Products S.r.l. and Mondo TV Distribution S.r.l. 19

20 2.5 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 Values in Euro A. CASH AND CASH EQUIVALENTS AT 1 JANUARY 1,331, ,858 Profit (loss) for the year (7,609,106) 1,975,549 Depreciation, amortisation and impairment 13,757,621 2,896,641 Net change in provisions 463,885 (85,576) Change in deferred taxes (5,484,153) (1,996,176) Cash flow from (used in) operating activities before changes in working capital 1,128,247 2,790,438 (Increase) / decrease in trade and other receivables 1,372,591 (1,914,619) (Increase) / decrease in tax assets 1,314,984 2,292,895 (Increase) /decrease in other assets 142,148 (25,811) Increase / (decrease) in trade payables 82,368 (1,827,572) Increase / (decrease) in tax liabilities 3,231 28,465 Income tax expense - - Increase / (decrease) in other liabilities (113,466) (552,400) B. NET CASH FROM (USED IN) OPERATING ACTIVITIES 3,930, ,396 (Acquisition) / disposal of: - Intangible assets (3,258,361) (2,311,977) - Property, plant and equipment (43,192) (23,939) - Financial assets 742,627 (562,243) C. NET CASH FROM (USED IN) INVESTING ACTIVITIES (2,558,926) (2,898,159) Changes in capital (2,912,305) 11,196,068 (Increase) / decrease in financial receivables and securities 883, ,665 Increase / (decrease) in financial payables 309,940 (8,131,213) Interest paid (311,516) (328,177) D. NET CASH FROM (USED IN) FINANCING ACTIVITIES (2,030,095) 3,023,343 E. NET INCREASE (DECREASE) OF CASH AND CASH EQUIVALENTS (B+C+D) (658,918) 916,580 F. CASH AND CASH EQUIVALENTS AT 31 DECEMBER 672,520 1,331,438 20

21 2.6 FINANCIAL STATEMENTS PROVIDING RELATED PARTY DISCLOSURES PURSUANT TO CONSOB RESOLUTION OF 28/07/2006 In compliance with Consob Resolution of 28 July 2006 Provisions on financial statements, in addition to mandatory disclosure, the income statement and statement of financial position have been provided with the significant transactions with related parties shown separately from the relevant item. Statement of financial position as at 31 December 2013 Values in Euro 31 Dec related parties 31 Dec related parties Non-current assets - Intangible rights 5,497,819-13,491, Other intangible assets 50,850-56,460 - Intangible assets 5,548,669-13,547,632 - Property, plant and equipment 346, ,189 - Equity investments 1,338,271 1,338,271 2,080,898 2,080,898 Deferred tax assets 10,522,517-7,954,000 - Receivables 75,000-75,000-17,831,168 1,338,271 24,095,719 2,080,898 Current assets Trade receivables 12,975,763 1,804,143 16,713,981 3,003,775 Financial receivables , ,581 Tax assets 8,224,505-6,666,100 - Other assets 206, ,010 17,222 Cash and cash equivalents 672,520-1,331,438-22,079,650 1,804,143 25,944,315 3,903,578 Total assets 39,910,818 3,142,414 50,040,034 5,984,476 Non-current liabilities Post-employment benefits 252, ,033 - Provisions for risks and charges 684, ,709 - Deferred tax liabilities 211, ,114 - Financial payables 572, ,439-1,721,402-1,295,295 - Current liabilities Provisions for risks and charges 275,869-15,869 - Trade payables 7,030,917 1,351,267 6,948,549 1,430,800 Financial payables 3,224,030-3,490,075 - Tax liabilities 38,209-34,978 - Other liabilities 1,036,126-1,149,592-11,605,151 1,351,267 11,639,063 1,430,800 Total liabilities 13,326,553 1,351,267 12,934,358 1,430,800 - Share capital 13,212,414-13,212, Share premium 19,231,848-57,717, Legal reserve 2,642, ,414 - Other reserves (2,868,923) - (206,618) - - Retained earnings (Accumulated losses) 1,975,549 - (36,023,461) - - Profit (loss) for the year (7,609,106) - 1,975,549 - Total equity 26,584,265-37,105,676 - Total liabilities and equity 39,910,818 1,351,267 50,040,034 1,430,800 21

22 Income statement for the year ended 31 December 2013 Values in Euro 2013 Related parties 2012 Related parties Revenue from sales and services 5,576,037 23,822 8,408, ,802 Other income 253, ,100 - Capitalisation of internally produced animated series 770,701-1,217,152 - Raw materials, consumables and goods (67,665) - (67,902) - Personnel costs (1,571,250) (89,700) (920,043) (92,000) Amortisation and impairment of intangible assets (11,257,324) - (2,249,079) - Depreciation and impairment of property, plant and equipment (134,670) - (132,715) - Allowance for doubtful debts (2,365,627) - (400,000) - Other operating costs (3,605,602) (873,496) (5, ) (680,473) EBIT (12,401,512) (939,374) 618,568 (273,671) Finance income 143, ,656 - Finance costs (834,986) - (735,708) - Net finance income (costs) (691,747) - (608,052) - Profit (loss) before tax (13,093,259) (939,374) 10,516 (273,671) Income tax expense 5,484,153-1,965,033 - Profit (loss) for the year (7,609,106) (939,374) 1,975,549 (273,671) 22

23 Statement of cash flows providing related party disclosures Values in Euro 2013 related parties 2012 related parties A. CASH AND CASH EQUIVALENTS AT 1 JANUARY 1,331, ,858 - Profit (loss) for the year (7,609,106) (939,374) 1,975,549 (273,671) Depreciation, amortisation and impairment 13,757,621-2,896, ,847 Net change in provisions 463,885 - (85,576) 64,855 Change in deferred taxes (5,484,153) - (1,996,176) - Cash flow from (used in) operating activities before changes in working capital 1,128,247 (939,374) 2,790,438 (93,969) (Increase) / decrease in trade and other receivables 1,372,591 1,199,632 (1,914,619) (590,736) (Increase) / decrease in tax assets 1,314,984-2,292,895 - (Increase) /decrease in other assets 142,148 17,222 (25,811) - Increase / (decrease) in trade payables 82,368 (79,533) (1,827,572) (106,654) Increase / (decrease) in tax liabilities 3,231-28,465 - Increase / (decrease) in other liabilities (113,466) - (552,400) - B. NET CASH FROM (USED IN) OPERATING ACTIVITIES 3,930, , ,396 (791,359) - Intangible assets (3,258,361) (455,000) (2.311,977) (552,500) - Property, plant and equipment (43,192) - (23,939) - - Financial assets 742, ,627 (562,243) (562,243) C. NET CASH FROM (USED IN) INVESTING ACTIVITIES (2,558,926) 287,627 (2,898,159) (1,114,743) Changes in capital (2,912,305) - 11,196,068 - (Increase) / decrease in financial receivables and securities 883, , , ,904 Increase / (decrease) in financial payables 309,940 - (8,131,213) (6,535,050) Interest paid (311,516) - (328,177) - D. NET CASH FROM (USED IN) FINANCING ACTIVITIES (2,030,095) 882,581 3,023,343 (6,173,146) E. NET INCREASE (DECREASE) OF CASH AND CASH EQUIVALENTS (B+C+D) (658,918) 1,368, ,580 (8,079,248) F. CASH AND CASH EQUIVALENTS AT 31 DECEMBER 672,520 1,331,438 23

24 2.7 NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER INTRODUCTION Mondo TV S.p.A. is a joint-stock company registered under the Rome Companies Register. The Company is incorporated under Italian law, its registered office is located in Rome, Via Brenta 11 and it is listed on the Italian stock exchange (Borsa Italiana s STAR market). The subsidiaries listed on the regulated market also include M.I.M. Mondo IGEL Media A.G. (Hamburg stock exchange). In addition to this, on 31 January 2013, Mondo TV S.p.A.'s Board of Directors decided to proceed with the listing of the ordinary shares of the subsidiary Mondo TV France S.A. on the AIM Italia/Mercato Alternativo del Capitale [Alternative Capital Market] (hereafter, AIM Italia ) organised and managed by Borsa Italiana S.p.A. The shares went public on 25 March 2013 through the free grant of shares, representing about 25% of Mondo TV France S.A.'s share capital, by the Parent Mondo TV S.p.A. to its shareholders. The Financial Statements as at 31 December 2013 were approved by the Board of Directors meeting of 25 March 2013 which authorised their publication on that same date and convened the General Meeting for relevant approval on 29 April 2014 and 30 April 2014, on first and second call, respectively. These Financial Statements are subject to audit by PricewaterhouseCoopers S.p.A. pursuant to Italian Legislative Decree 39/2010. The main activities of the Company and its subsidiaries are described in the Management Commentary. Amounts included in these Financial Statements are denominated in Euro being the currency in which most of the Company s transactions are made. Operations abroad are included in these Financial Statements in compliance with the standards indicated in the following notes. All the amounts included in these Financial Statements are expressed in thousands of Euro, unless otherwise indicated ACCOUNTING POLICIES AND MEASUREMENT BASES The Company's Financial Statements as at 31 December 2013 consist of the statement of financial position, the income statement, the statement of comprehensive income, the statement of cash flows, the statement of changes in equity and relevant notes, and are drafted pursuant to EU-IFRSs. The acronym EU-IFRS refers to the International Financial Reporting Standards, the International Accounting Standards (IAS), all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC), which, on the date of approval of these Financial Statements, have been endorsed by the European Union pursuant to Regulation (EC) 1606/2002 of the European Parliament and of the Council of 19 July In particular, it should be noted that EU-IFRSs were applied consistently to all the years examined in this Report. Furthermore, these Financial Statements were drafted based on the best knowledge of EU-IFRSs and the best interpretations on the issue; any future interpretations and revisions will be taken into account in the next years, in accordance with the provisions included from time to time in the relevant accounting standards. The accounting standards and policies applied to these Financial Statements are consistent with those used in preparing the financial statements as at 31 December Starting on 1 January 2013, some amendments to international accounting standards have been applied. The main amendments are shown in the next paragraph Recently issued accounting standards. In preparing these Financial Statements the cost method was applied, except for the derivative instruments and some financial assets for which IAS 39 requires or, limited to financial assets, allows measurement as at fair value. These Financial Statements provide a true and fair view of the financial position, financial performance and cash flows. They are consistent with the company accounts, which fully reflects the transactions carried out in the year, and comply with the applicable accounting standards. Specifically, they are prepared: 24