A sociocultural perspective on classroom interaction

1.1 General information about the Group

Sky Deutschland AG and its subsidiaries (referred to as “Sky”, “Company”, “Group” or “Sky Group”) operate a pay-TV business in Germany and Austria under the Sky trademark. The Sky Group is also engaged in the purchase, sale and distribution of rights to films, series and TV productions, the acquisition, sale and distribution of broadcasting rights for public events, the arrangement of program magazine subscriptions, and other activities associ-ated with the operation of the pay-TV business.

Sky Deutschland AG’s registered office is at Medienallee 26, 85774 Unterföhring, Germany, and it is entered in the Commercial Register at the Munich Municipal Court under the number HRB 154549.

Sky Deutschland AG, as the Group holding company, manages all of the business activities of the Sky Group.

1.2 Basis of preparation of the consolidated financial statements

In accordance with § 315a (1) HGB (German Commercial Code) in conjunction with Article 4 of the Regulation No. 1606/2002 of the European Parliament and the Council dated 19 July 2002, Sky prepares its consolidated financial statements in accordance with Interna-tional Financial Reporting Standards (IFRS) as adopted by the European Union taking into account the additional disclosures required by § 315a (1) HGB.

The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards and its interpretations effective as of 31 December 2012 as adopted by the European Union.

The consolidated financial statements are prepared and published in euros (€), as the functional and the reporting currency of the Group. Amounts are generally reported in the notes to the consolidated financial statements in thousands of euros (K€), unless otherwise stated.

All Group companies prepare their financial statements for financial years ending 31 December with the financial year representing the calendar year.

The consolidated financial statements are generally prepared on the basis of the measure-ment of assets and liabilities at cost or amortised cost. Excepted from this are non-deriva-tive available-for-sale financial assets and derivanon-deriva-tive financial instruments, which are respectively recognised at fair value as of the balance sheet date.

The consolidated balance sheet presents assets and liabilities classified by their maturities.

Assets that are expected to be sold within twelve months or are consumed or settled in connection with normal operations are classified as current. Liabilities are classified as current if they are required to be settled in cash or other financial assets within twelve months of the balance sheet date.

The consolidated statement of operations as a component of the consolidated statement of total comprehensive loss is prepared in accordance with the cost of sales method.

To provide a clearer picture, certain items have been combined in the consolidated statement of total comprehensive loss and the consolidated balance sheet, with specific explanations provided in the notes.

The Management Board prepared the consolidated financial statements and authorised them for issuance within the meaning of IAS 10 on 15 February 2013.

1.3 Consolidation Subsidiaries

Sky Deutschland AG, eight (2011: eight) domestic and two (2011: two) foreign subsidiaries are consolidated in these financial statements. All subsidiaries that are under the control of Sky Deutschland AG are included in the consolidated financial statements. They are fully consolidated from the date on which control is transferred to the Group, and are deconsoli-dated from the date when the ability to control ceases. Control is presumed if the parent owns, either directly or indirectly through a subsidiary, more than one half of the voting power. Control also exists if the parent company has the power to govern the financial and operating policies of the entity under a statute or an agreement. The existence and impact of potential voting rights that can currently be exercised will be taken into consideration when determining whether a controlling influence exists.

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The assets and liabilities of the domestic and foreign entities included in the consolidated financial statements are accounted for in accordance with the uniform accounting policies applicable for the Group.

Intra-group transactions are eliminated. Receivables and liabilities and expenses and income between consolidated entities are eliminated against one another. Intra-group gains and losses did not arise during the financial year. Deferred income tax effects arising from consolidation measures are taken into account if they are expected to reverse in future financial years. Deferred tax assets and deferred tax liabilities are offset if the tax debtor and the tax creditor are identical and current taxes would be offset.

Capital is consolidated by eliminating the carrying amount of the investments against the proportionate share of equity held in the subsidiary. In accordance with IFRS 3, all business combinations shall be accounted for using the acquisition method. The purchase price of the acquired subsidiary is allocated to the acquired assets, liabilities and contingent liabilities. Incidental acquisition costs will be directly expensed to profit and loss. This allocation is based on the fair values of the assets, liabilities and contingent liabilities prevailing at the time at which control over the subsidiary is obtained. Assets held for sale within the meaning of IFRS 5 are measured at fair value less costs to sell. Any remaining excess of the purchase price over the fair value of the net assets is recognised as goodwill.

Subsequent measurement of the fair values is carried out according to the nature of the assets and liabilities. Sky exercises the option to account for non-controlling interests individually for each business combination.

1.4 Acquisition of companies

In the financial year 2012, no acquisitions of companies were carried out.

In the previous financial year, Sky acquired the remaining 24.1 percent interest in Premium Media Solutions GmbH, Unterföhring with effect as of 1 October 2011, by exercising the granted option rights. In accordance with the relevant IFRS accounting regulations, these interests had already been considered as acquired on 1 August 2010 in the consolidated financial statements.

1.5 Translation of foreign currencies

Foreign-currency transactions are translated at the relevant middle rate of selling and buying rate of the foreign currencies at the transaction date. On the balance sheet financial assets and liabilities in foreign currencies are translated at the middle rate as of the balance sheet date and are revalued accordingly in subsequent periods. The resulting gains or losses are recognised in profit or loss.

The following table shows the most significant applicable exchange rates for currency translations:

Name Registered office Investment holding on 31/12/2012 Investment holding on 31/12/2011

Sky Deutschland Fernsehen GmbH & Co. KG (Sky Deutschland KG) Unterföhring 100.0% 100.0%

Sky Deutschland Verwaltungs-GmbH (Sky Deutschland Verwaltung) Unterföhring 100.0% 100.0%

Sky Österreich GmbH (Sky Österreich) Vienna, Austria 100.0% 100.0%

Sky Deutschland Service Center GmbH (Sky Deutschland Service Center Schwerin) Schwerin 100.0% 100.0%

SCAS Satellite CA Services GmbH (SCAS) Unterföhring 100.0% 100.0%

Premiere WIN Fernsehen GmbH (Premiere WIN Fernsehen) Unterföhring 100.0% 100.0%

GIGA Digital Television GmbH (GIGA), i. L. Unterföhring 100.0% 100.0%

Premiere Star Österreich GmbH (Premiere Star Österreich) Vienna, Austria 100.0% 100.0%

Sky Media Network GmbH* Unterföhring 100.0% 100.0%

Sky Hotel Entertainment GmbH (Sky Hotel Entertainment) Unterföhring 97.5% 97.5%

Middle rate of selling and buying rate

Exchange rate: 1 Euro equals 2012 2011

US-Dollar USD 1.32 1.29

Pound sterling GBP 0.82 0.84

*In the financial year 2012, Premium Media Solutions GmbH was renamed Sky Media Network GmbH.

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1.6 Accounting policies 1.6.1 Financial instruments 1.6.1.1 Summary

Purchases and sales of financial instruments are recognised on the trade date, i.e. on the date on which the Group commits to buy or sell an asset or liability.

The Company holds financial instruments in the form of cash and cash equivalents, receivables, available-for-sale financial assets, financial liabilities and loans, and derivatives in the form of foreign exchange forward contracts.

Financial assets are initially recognised at their fair values including directly attributable transaction costs. They are measured subsequently at fair value or at amortised cost, applying the effective interest method.

Fair value corresponds to the market or quoted prices, where available. A market or quoted price can be identified in particular for available-for-sale financial assets. If a market or quoted price is not available, fair value is determined in accordance with recognised valuation procedures.

In the case of current receivables and liabilities, amortised cost corresponds to the notional value or the settlement amount.

The Company derecognises financial assets either if the contractual rights to the cash flows cease or these rights are transferred by the Company to a third party in such a way that the criteria for derecognition pursuant to IAS 39 are fulfilled.

Financial liabilities are derecognised when they have been redeemed, i.e. when the contrac-tual obligations have been settled or cancelled or have expired or the criteria for derecogni-tion in accordance with IAS 39 have been fulfilled. Financial liabilities are also derecognised if the amendment of significant conditions causes a significant change in the cash flows associated with the redemptions or interest. When the change becomes effective, a new financial liability is recognised at fair value. If an exchange of debt instruments or modifica-tion of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the earnings of the period on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

If, in the case of revolving credit lines, a reduction in the amount or an adjustment of the terms results in a reduction in the available credit capacity, the transaction costs related to the revolving credit line are released to profit or loss in proportion to the reduction in the credit capacity.

1.6.1.2 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, cash balances and term deposits with a total maturity of less than three months from the date of acquisition. They are recognised at notional value, with foreign currencies being translated at the middle rate of selling and buying rate as of the balance sheet date.

As of the reporting date 30 June 2012 restricted cash has been reclassified by the Company to other assets. These primarily consist of accounts pledged to suppliers, rental guarantees and guarantees for payment obligations lodged with banks and other accounts (please refer to 2.1 cash and cash equivalents and 2.5 Other assets).

1.6.1.3 Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, such as trade receivables. After initial recognition at fair value, loans and receivables are subsequently carried at amortised cost using the effective interest method less any impairment losses.

Impairments of trade receivables are largely reflected by applying allowance accounts. The decision as to whether a credit risk shall be taken into account by means of an allowance account or a direct reduction of a receivable depends on how reliably the risk situation can be assessed.

An allowance is recorded if there is objective evidence that the receivable is impaired. A significant indication of impairment is that the receivable is included in dunning proce-dures. The allowance represents the difference between the carrying amount and the present value of the expected cash receipts.

1.6.1.4 Financial assets

Financial assets are initially recognised at their fair value, which normally corresponds to their acquisition cost. Subsequent measurement is at amortised cost, using the effective interest method. Identified specific risks are reflected by corresponding valuation allow-ances (specific allowallow-ances).

Reimbursement rights relating to liabilities incurred by the Sky Group are only recognised when it is virtually certain that the reimbursement will be received.

1.6.1.5 Available-for-sale financial assets

The available-for-sale financial assets category includes financial assets that cannot be allocated to any other measurement category. Mainly, securities and investments are reported here.

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Unquoted equity instruments are measured at cost, since no market for these assets exists and a fair value cannot be determined by other reliable measurement methods. Interests in companies over which Sky is unable to exert control, joint control or significant influence are accounted for as equity instruments.

Changes in fair value of other available-for-sale financial assets are recognised directly in other comprehensive income. In the cases in which fair value is significant and other than temporarily below cost, the impairment is recognised in profit or loss. If fair value adjust-ments were previously recognised directly in equity and the written-down fair value is lower than the original cost of the asset, the portion of the impairment loss corresponding to the fair value gain previously recognised in equity is reversed through equity. Any further decrease in value is recognised in profit or loss as an expense for the period.

If the circumstances that resulted in impairment cease to exist in subsequent periods, the impairment loss on debt securities previously charged to profit or loss is reversed through profit and loss. The reversal of the impairment of equity investments is recognised in equity.

1.6.1.6 Financial liabilities

Financial liabilities are initially recognised at fair value less directly attributable transaction costs. Subsequent measurement is at amortised cost using the effective interest method.

1.6.1.7 Derivative financial instruments

The derivatives used by the Company are foreign exchange forward contracts. Foreign exchange forward contracts are used to economically hedge the risks of fluctuations in the exchange rates of the US dollar and the pound sterling, since the Company has material payment obligations denominated in those currencies to be met in connection with operating activities.

All financial derivatives used in the Group are measured at their fair values and are recognised as assets or liabilities. The fair values of the foreign exchange forward contracts are reported under other financial assets or other financial liabilities. Their classification as current and non-current is based on the maturities of the expected cash flows or the maturities of the corresponding derivatives.

The Company applies hedge accounting with respect to its US dollar and pound sterling exposure. The overall objective of Sky’s hedging strategy is to mitigate the risk of having to settle payment obligations denominated in US dollars and pound sterling for the purchase of sports programming and movie licenses as well as for other licenses by using forward exchange transactions.

The majority of these derivatives is designated as hedging instruments in qualifying cash flow hedges in accordance with IAS 39 to hedge the exposure to variability in cash flows denominated in foreign currencies. The valuation result of these derivatives is broken down into an effective and an ineffective portion. Until realisation of the underlying transaction, the effective portion of changes in the fair value of these derivatives is recognised directly in other comprehensive income, net of income tax. The ineffective portion is reported in profit and loss immediately. Upon realisation of the underlying transaction, the accumu-lated changes in the fair values of the derivatives recognised in other comprehensive income as part of equity is then capitalised as part of the carrying amount of advanced payments for sport and film rights and will be released to profit and loss based on the contractual conditions of the underlying transactions

If the hedge no longer meets the criteria for hedge accounting, the gain or loss on the hedging instrument that has been recognised in equity from the period when the hedge was effective shall remain separately in equity until the forecasted transaction occurs.

When the forecasted transaction occurs, the cumulative gain or loss on the hedging instrument is reclassified to profit and loss.

If the hedge relationships in which the derivatives are used do not fulfill the criteria of IAS 39 for hedge accounting, changes in fair value are recognised directly in profit or loss.

Hedging instruments in qualifying cash flow hedges currently have a maximum term of twelve months.

1.6.2 Inventories

Inventories are measured at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to sell.

Rebates, bonuses and cash discounts are deducted from cost. Measurement is based on moving average prices.

1.6.3 Property, plant and equipment

Property, plant and equipment is measured at cost, less depreciation and, to the extent necessary, impairment losses. Cost comprises the purchase price, including any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operation in a manner intended by management. Rebates, bonuses and cash discounts are deducted from the purchase price.

Subsequent expenditure relating to an item of property, plant and equipment that has already been taken to use is added to the carrying amount of the asset or, where appropri-ate, recognised as a separate asset, if it is probable that future economic benefits will flow to

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the entity and the purchase costs of the asset can be reliably determined. All other subse-quent expenditure is recognised as an expense in the period in which it is incurred. Subse-quent expenditure that would otherwise be capitalised, which exceeds the recoverable amount of the respective asset, is recognised immediately in profit or loss.

Expenditure on repairs and maintenance which does not include any replacement or spare parts is recognised immediately in profit or loss. Replacement or spare parts are capitalised at the time of operational readiness, while the replaced parts are derecognised.

Property, plant and equipment are depreciated over their expected useful lives using the straight-line pro rata temporis method.

Depreciation is based on the following useful lives:

1.6.4 Intangible assets

1.6.4.1 Film assets and advance payments for sport and film rights

Film assets comprise broadcasting licenses acquired from film studios and TV program providers, advance payments on sport and film rights and a film library that was acquired in 2006. Licenses are recognised at their cost at the time they become available or with the license start respectively. In the case of purchases of licenses from film studios, cost includes minimum guarantees and expected additional payments that depend on the number of subscribers (“overages”), which are estimated at the time of initial recognition, plus other directly attributable costs. In the case of purchases of licenses from TV program providers, acquisition costs are capitalised at the fixed, contractually agreed costs. The program library was capitalised at its purchase price.

Utilisation of the broadcasting licenses is based on the actual transmissions during the financial year in relation to the expected total number of transmissions during the license period. If it is expected that unused transmissions will be outstanding at the end of the license period, an impairment loss is recognised immediately in full for such transmissions.

The licences of the program library are amortised straight-line over a useful life of between two and fifteen years.

With respect to the live pay-TV rights for all Fußball-Bundesliga and 2nd Fußball-Bundesliga matches in Germany, Austria and Switzerland from the season 2009/2010 to 2012/2013,

With respect to the live pay-TV rights for all Fußball-Bundesliga and 2nd Fußball-Bundesliga matches in Germany, Austria and Switzerland from the season 2009/2010 to 2012/2013,