Grupo Clarín S A : Financial Statements - FY2020

GRUPO CLARÍN S.A.

Annual Report and Consolidated Financial Statements

For the year ended December 31, 2020,

presented on a comparative basis

English free translation of the Financial Statements and Reports originally issued in Spanish.

GRUPO CLARÍN S.A.

2020 ANNUAL REPORT

To the Shareholders of

Grupo Clarín S.A.

We hereby submit for your consideration the Annual Report and Exhibit, the Separate Statement of Financial Position, the Separate Statement of Comprehensive Income, the Separate Statement of Changes in Shareholders' Equity and the Separate Statement of Cash Flows and Notes of Grupo Clarín S.A. (hereinafter, "the Company" or "Grupo Clarín") for fiscal year No. 22 ended December 31, 2020 and the Consolidated Financial Statements as of December 31, 2020.

The main subsidiaries in which Grupo Clarín S.A. has a direct or indirect controlling interest are: Arte Gráfico Editorial Argentino S.A. (AGEA), Compañía Inversora en Medios de Comunicación S.A. (CIMECO), Arte Radiotelevisivo Argentino S.A.(ARTEAR), GC Gestión Compartida S.A., Inversora de Eventos S.A.(IESA) and Radio Mitre S.A.

2020 MACROECONOMIC ENVIRONMENT

The Argentine economy closes the year 2020 amid an unprecedented crisis on a global scale, which significantly hindered the performance of the incoming administration in its first year. Indeed, the outbreak of COVID-19 worsened the fragile situation of an economy which, in the first months of the year, was restructuring its sovereign debt issued in foreign currency, seeking to normalize its performance and to stabilize its fundamental variables.

In this highly uncertain and complex environment, local public policies were focused on flattening the infection curve and minimizing the negative effects of the pandemic on the population and on businesses. To that end, in March 20, the National Government ordered the Mandatory and Preventive Social Isolation (hereinafter, ASPO, for its Spanish acronym), which was implemented in different phases according to the particular situation of each province.

Even though this strategy allowed the government to achieve an initial success in terms of the infection level, it generated an unprecedented collapse in private consumption and economic activity, which was significantly more severe than in other countries in the region. In order to avoid social collapse and the massive bankruptcy of businesses, several containment measures were implemented, both at productive and social levels, among which the following stand out:

1. The Emergency Family Income, which provided social allowance in three stages to approximately 9 million people (many more people than what the government had initially estimated); and
2. The Emergency Assistance Program for Work and Production, which assisted companies in the epicenter of the crisis with the payment of 50% of the net salaries of slightly over 2.0 million employees (about one-third of the slightly over 6 million registered employees of the private sector).

As a result of these assistance programs for people and businesses and the collapse of revenue collection resulting from the severe contraction of the GDP, the sharp deterioration of the fiscal accounts was a common denominator for the world's economies.

The difference between Argentina and almost all the countries in the world was the source of financing of these high fiscal deficits. In the absence of voluntary financing from the National Treasury, the exponential increase of public spending and the significant deterioration of the primary fiscal deficit of approximately 8.5% of GDP (~6.5% excluding interest payments on the

country's sovereign debt) was almost wholly financed through an unprecedented currency issue. In historical terms, the fiscal deficit of the country for 2020 was the highest of the last 45 years.

In a dual currency economy such as Argentina, where there is a low real demand for the currency it issues and stringent foreign currency restrictions, the excess of pesos often rapidly translates into an excess demand for US dollars. Under foreign exchange control regimes, this additional demand for foreign currency generates increases in the different exchange rates of the US dollar existing in Argentina and, therefore, widens the gaps between the unofficial rates and the "official" ARS/USD exchange rate.

While these unsustainable growing gaps have an impact on the margin over prices, they also feed expectations of devaluation, even when the currently prevailing official exchange rate is above the historical average and exports exceed imports. This widespread perception that the value of the US dollar is cheap erodes both the flows on the external front and the Central Bank's reserves. In an extreme situation (which was fortunately avoided in the year under analysis), the monetary authority could end up with its reserve position being decimated, which would lead to the acceleration of discreet increases in official exchange rate, exacerbating the crisis.

The foregoing is a broad description of the performance of the economy during 2020. There is currently a 70% gap between the blue-chip swap and the official exchange rate. At the beginning of the year, that gap was of 25/30% and it increased uninterruptedly through mid-October when it reached a record high of 130%.

The external surplus showed a severe decline. In fact, the "cash" current account balance reported by the Central Bank, which by the end of 2019 stood at slightly above USD6.0 Bn, closes 2020 virtually in equilibrium. This decline was coupled with the decrease of the Central Bank's gross reserves, which accumulated until the beginning of December a loss of slightly over USD6.0 Bn, leading to critical levels of net reserves.

In general, Argentine history shows that the impact of unbacked currency issue on the prices of the economy is often reflected with a lag that can span several months, which mainly depends on the degree of trust in the course and expertise of the administration.

Due to several factors, among which the most relevant are the strict lockdown ordered by the National Government in mid-March and the collapse of activity / private consumption, the impact on prices of the mega-currency issue carried out in 2020 was unprecedentedly low in the months following its implementation.

As a consequence, the Argentine economy closed 2020 with a 36.1% inflation rate in retail prices. The inflation rates observed in 2020 are mostly accounted for by the linear and less volatile official ARS/USD exchange rate (+40.5% point-to-point vs +58.4% in 2019), and, to a lesser extent, by the virtual freezing of most of the utility tariffs (with fiscal cost) and the continuity of the price agreement program ("Precios Cuidados").

Compared to the +53.8% inflation rate recorded in 2019, there was a decrease of almost 18 percentage points in 2020. However, it should be noted that the figures of the general price index and the core inflation rate for the last month of the year (+4.0% and +4.9%, respectively) were the highest of the year and contrast with the decrease observed on a point-to-point basis. On an annualized basis, the general index and the core inflation rate were of 60% and 77%, respectively.

PERSPECTIVES FOR THE UPCOMING YEAR

The emergency currency issues implemented by the main developed economies in response to the outbreak of COVID-19 have shaped, a priori, a favorable scenario for Argentina with ample liquidity, low performance of sovereign/corporate bonds, and high prices for agricultural commodities on a global level, as well as the expected strong recovery of our two main trading partners (China and Brazil.)

After the collapse in 2020, and as long as the health situation goes back to normal, the fundamental variables of Argentine economy are expected to improve. Notwithstanding the foregoing, the performance will depend on two factors mainly: The extent to which public spending will be normalized (and, hence, the imbalance of public accounts) and the estimated currency issue for its financing.

With 2021 being a year of legislative elections in which the course of the economic policies will be subordinated to political needs towards the election day, the focus will be on recovering part of the lost ground in terms of activity/consumption, employment, and the purchasing power of wages/pensions. The exchange stability is a necessary condition (though not enough) for the accomplishment of this goal.

Since the lowest figures reported in April 2020, the economic activity has considerably improved, showing a recovery of approximately 30% by December (last available data) in just eight months. As a result of the statistical carryover, as long as the activity remains at current levels throughout 2021, the GDP would register an annual increase of around 6%. If such were the case, the economy would recover slightly below 60% of the significant decline experienced in 2020 (~10.0%). Even though the GDP showed one of the most severe declines on a global level, the degree of recovery expected for the Argentine economy compared to other comparable countries in the region would be one of the lowest.

The economic authorities project for 2021 a fiscal deficit at national level of around 6.0% of GDP (~$2.5 trillion), i.e., 2.5 percentage points below that recorded in 2020. The National Treasury expects to continue to finance a large portion of the fiscal deficit with currency issue, which will have to be closely monitored considering the worrying signs of inflationary acceleration mentioned above.

In an economy with an excess of pesos, a shortage of liquid reserves, and lack of voluntary financing, there is little margin for applying expansionary macroeconomic policies to shore up demand. Indeed, the inflationary acceleration of recent months and the current size of exchange gaps are symptoms of the economy's current imbalances.

The rich vast history of Argentine economy teaches us that the mere presence of high and sustained levels of fiscal deficits, whatever its source of financing, always represents a potential source of imbalances for the rest of the fundamental economic variables. The option to finance chronic fiscal deficits with currency issue, although it may avoid, at first, a crisis in the balance of payments, it usually leads to periods of secular stagflation characterized by increasingly stringent exchange controls.

THE YEAR 2020 AND THE MEDIA SECTOR IN ARGENTINA AND THE WORLD

The complex reconversion and convergence process in the media industry, coupled with the strong impact of the outbreak of COVID-19 and the lockdown, continues to force companies engaged in these activities to reformulate their business models to adapt to the digital era and to the changes in consumption derived from new technologies. In addition, the sustained migration of advertising towards the digital environment is concentrated in a few fully digital global players, especially Facebook, Google and Amazon.

Faced with this context, the sustainability challenges and certain negative side effects inherent to the expansion of the Internet (such as the chaotic dissemination of news - true and fake - or the worrying news biases created by the algorithms of social media and platforms that reinforce their users' own beliefs), the media continue to focus on gaining strength. To this end, they emphasize differential assets such as the credibility of their brands, they bet on incorporating new technologies into their newsrooms (content, commercial, marketing, and big data), and highlight the institutional role they have historically played in democratic societies.

Over the past few years, the multimedia paradigm has been fully consolidated. The multiplatform is the norm and, without exception, traditional media are exploring other languages. In this way,

the consumption of contents is simultaneous, overlapped and through multiple windows. In 2020, this was worsened by the crisis caused by the COVID-19 pandemic and social distancing measures. There was a sharp increase in the consumption of multimedia content on all available screens, especially through OTT formats. Therefore, the main challenge was to attract and retain the attention of those audiences in all formats possible.

Due to the unusual context generated by the pandemic, the media industry suffered a severe impact on its economic indicators. According to PWC's most recent annual Global Entertainment

• Media Outlook, industry revenues fell in 2020 at a rate of around 4.7% (a sharpest decline than the one observed in global GDP) mostly driven by the fall of traditional advertising and the decrease in the consumption of media and entertainment outside the home (printed newspapers, magazines, movies, live events, etc.). OTT subscription segments, virtual reality platforms and Internet advertising (especially for mobile devices) showed a substantial growth during the period, but it was not enough to offset the fall at aggregate level. In this way, digital content continued to increase its share in the revenue structure of these companies and has consolidated itself, in many cases, as the main source of revenues.

It is evident that more and more users are selecting the contents they consume prioritizing preferences, quality, convenience and truthful information. Therefore, the companies in this industry want to have direct contact with the user to build loyalty through the added value of their brands and the personalization of content and services that they may develop in the future.

While audiences continue to migrate to the digital world, users increasingly prefer mobile devices to search for the contents that best suit their preferences. According to Chartbeat: Approximately 80% of the visits to news sites are made from a mobile phone. This phenomenon poses big challenges for an industry forced to constantly change and adapt the contents and the ads to mobile screens.

During 2020, there was an increase in the number of users willing to pay for viewing the contents that they consume the most, especially in the case of platforms or media that they already visited.

Thus, the process of consolidating subscriptions as the main source of revenues in the industry continued and deepened during 2020, largely driven by the consumption of video streaming (mainly OTTs), digital music, podcasts, video games and several digital newspapers that launched and boosted their paywall models. In fact, Deloitte and PWC estimate that in 2020 there were more consumers subscribed to at least one video streaming service than to a traditional TV service.

At the same time, the main analyzes carried out by media consultants showed that the pandemic accelerated and broadened changes in consumer behavior. This forced turning points in the industry that would have otherwise been seen at a later time.

However, the industry's long-term perspective remains strong, which shows the agility and dynamism of the ecosystem. In the years before the pandemic, global media and entertainment growth outpaced GDP growth, as media experiences became increasingly central to consumer's lives.

In the local context, just like in 2019, the complex macroeconomic environment, also affected by the coronavirus, generated an inflationary acceleration, a decline in private consumption and in the GDP, which had a considerable impact on the performance of this industry.

This performance is mostly accounted for by the sensitivity of Argentine media companies' revenue structure to the economic cycles. In this sense, media companies' advertising revenues are still especially sensitive to recessive cycles due to the moderate xxx development still shown by paid subscription models in the domestic market.

In this sense, it should be noted that advertising investment in real terms also shrank significantly during 2020 in line with the further downturn of the economy, coupled with the effect of the lockdown. This contraction of advertising revenues, markedly in analog media (mostly printed