Compensation Report

The Compensation Report describes the main features of the compensation system for the Executive Board and Supervisory Board of ProSiebenSat.1 Media AG. It explains the structure and level of compensation of the individual members of the Executive Board and Supervisory Board. The Compensation Report is part of the audited Group Management Report and complies with the relevant legal regulations; it also takes into account the recommendations of the German Corporate Governance Code in the version from June 24, 2014.

Compensation Paid to the Executive Board

In addition to their functions as directors and officers of the Company, the members of the Executive Board of ProSiebenSat.1 Media AG have contractual relationships with the Company. The ProSiebenSat.1 Media AG Supervisory Board is responsible for making the employment agreements with the members of the Executive Board. The Executive Board employment agreements have a maximum term of five years and also regulate the compensation. After a proposal by the Compensation Committee, the structure and amount of the Executive Board compensation are defined by the full Supervisory Board and regularly reviewed. The criteria for appropriate compensation are, on the one hand, the individual Board members’ personal performance and areas of work and responsibility and, on the other hand, the amount and structure of executive board compensation in comparable companies, the Company’s business situation and the ProSiebenSat.1 Media AG compensation structure.

Compensation System for the Executive Board

The compensation system for the Executive Board of ProSiebenSat.1 Media AG aims to create an incentive for sustainable company performance. It is composed of fixed and results-based components. In the 2014 financial year, Executive Board compensation comprised the following components:

• All Executive Board members each received a fixed base salary, paid monthly, that was determined with reference to the individual Executive Board member’s areas of work and responsibility.
• In addition to this fixed base salary, the Executive Board members also received performance-based variable annual compensation in the form of an annual bonus, which cannot exceed 200 % of the contractually determined target amount. In the event that targets are missed, it is possible that there is no variable compensation at all. The terms of this annual bonus are essentially uniform among the contracts of the Executive Board members: The amount depends on the achievement of predefined performance targets, which arise on the basis of Group EBITDA and net debt as well as personal target agreements. The personal target agreement for Dr. Christian Wegner is largely based on the revenue and EBITDA targets of the Digital & Adjacent segment.
  For Executive Board members, the Supervisory Board can convert portions of the annual performance-based variable compensation into multi-year performance-based variable compensation: The level of payment then no longer depends exclusively on the achievement of one year’s performance targets, but rather on the average achievement of targets over three years.
• In addition, Executive Board members receive a long-term share-based compensation component. The stock option plan (Long Term Incentive Plan) first introduced in 2005 was replaced in 2012 by a new share-based compensation plan (Group Share Plan). The Group Share Plan is organized as a share bonus program and is served by the Company’s own common shares. Participants are issued with performance share units (PSUs), entitling them to receive common shares after the expiry of a four-year holding period from the beginning of the year of grant. The conversion factor by which the PSUs are exchanged for ProSiebenSat.1 common shares after the end of the holding period depends on the achievement of predefined annual targets during the holding period. These relate to the development of Group EBITDA. The conversion factor can vary between 0 % and 150 %. In the event of exceptional developments, the Supervisory Board can also raise or lower the conversion factor by 25 % age points under consideration of the individual performance of the Executive Board members. If the share price when the conversion factor is defined exceeds the share price when the PSUs were issued by more than 200 %, the conversion factor is further reduced so that a price increase above the threshold of 200 % does not result in a further increased value of the PSUs (price-related cap). After the end of each year of the four-year holding period, a quarter of the PSUs awarded become vested; a requirement for this is that Group net income is generated in the year in question and the ProSiebenSat.1 Group’s EBITDA does not fall below a defined minimum.
  Stock options were last issued to Executive Board members under the expired stock option plan (Long Term Incentive Plan) in 2009. Thomas Ebeling and Axel Salzmann still owned stock options from this plan that were granted to them as Executive Board members. Each option entitles the holder to acquire one ProSiebenSat.1 common share if certain exercise conditions are met. As well as an already expired two-year holding period, the exercise conditions include the achievement of a performance target linked to the price performance of the ProSiebenSat.1 common share and the advent of a vesting period staggered over five years. One fifth of the stock options issued becomes vested at the end of each financial year following the issue. As of the end of December 31, 2013, all stock options from 2009 were therefore vested. The Company repurchased the stock options of the Long Term Incentive Plan from the 2009 cycle still outstanding in the 2014 financial year from the corresponding Executive Board members.
  Further information on the Group Share Plan 2014 and the remaining stock options under the Long Term Incentive Plan (LTIP) can be found in the notes to the consolidated financial statements.
  In addition, the introduction of a mid-term incentive plan for the members of the Executive Board was approved at an extraordinary meeting of the Supervisory Board on September 2 and 3, 2014. The initial grant takes place in the financial year 2015.
• Pension agreements were signed for all members of the Executive Board: For the period of the employment relationship, the Company pays a monthly contribution into the personal pension account managed by the Company. The contribution made by the Company is equivalent to 20 % of the respective fixed monthly gross salary. Each member of the Executive Board has the right to pay any additional amount into the pension account in the context of deferred compensation. There are no further payments after the end of the employment relationship. The Company guarantees the paid-in capital and annual interest of 2 %. The amounts paid in are invested on the money and capital markets. A retirement pension is paid if the Executive Board member attains the age of 60, or 62 in the case of Heidi Stopper, and was a member for at least a full three years. This entitlement also arises in the case of permanent disability. The monthly retirement pension is derived from the actuarially calculated life-long pension as of the time of the entitlement to benefits. Instead of a life-long pension, Executive Board members can demand the payment of the guaranteed capital when the entitlement occurs.
• In addition, the Executive Board members receive other non-performance-based fringe benefits in the form of non-cash benefits through being granted company cars and taking part in group accident insurance.
• In the case of the premature termination of the employment relationship by the Company without good cause, the Executive Board agreements include a severance payment commitment amounting to two years’ total compensation according to Section 4.2.3 of the German Corporate Governance Code up to a maximum of the compensation that would have been paid up to the end of the agreement period.
• A post-contractual non-competition clause was agreed for all Executive Board members covering one year following the termination of the employment contract. If this is applied, the Executive Board members receive a monthly waiting allowance for the duration of the post-contractual non-competition clause amounting to half of the contractual benefits most recently received, for Dr. Christian Wegner amounting to the contractual annual compensation most recently received (fixed compensation and annual bonus). Sections 74 ff. of the German Commercial Code also apply.

Compensation of Executive Board Members for the 2014 Financial Year According to GAS 17

The following total compensation was determined for the Executive Board members active in the 2014 financial year in accordance with German Accounting Standard (GAS) 17:

Heidi Stopper left the Executive Board effective September 30, 2014; her employment contract ends effective March 31, 2015. In addition to Heidi Stopper’s total compensation as member of the Executive Board, she received the following compensation for the 2014 financial year in the months from October to December: Fixed compensation of EUR 125,000, fringe benefits of EUR 3,049 and pro rata variable annual compensation of EUR 104,250. In accordance with her severance agreement, Heidi Stopper will receive the following compensation for the months from January to March 2015: Fixed compensation of EUR 125,000, fringe benefits of EUR 4,809, pro rata variable compensation on the basis of average target attainment for 2012 to 2014 (163 %) of EUR 102,875 and pension contributions of EUR 25,000. In addition, she will receive a severance payment comprised as follows: Fixed compensation for April to December 2015 (EUR 375,000), pro rata variable compensation on the basis of average target attainment for 2012 to 2014 (163 %) of EUR 305,625, fringe benefits already granted of EUR 14,427, and pension contributions of EUR 75,000 for April to December 2015. If no performance share units for 2015 are granted from the Group Share Plan by the severance date, Heidi Stopper will receive EUR 200,000 as a supplement to the severance payment.

Axel Salzmann will leave the Executive Board as of March 31, 2015; his employment contract ends effective March 31, 2015. In accordance with his severance agreement, Axel Salzmann will receive a severance payment comprising the fixed compensation for April to December 2015 (EUR 506,250) and the pro rata variable compensation on the basis of average target attainment for the years 2012 (150.5 %), 2013 (178 %) und 2014. As the final degree of target attainment for the 2014 financial year had not been established at the Compensation Report’s copy deadline, the calculation was based on the 2014 provision of 150 % (EUR 538,313), for the minimum 0 % (EUR 369,563) and the maximum 200 % (EUR 594,563). In addition, Axel Salzmann’s severance payment includes a waiting allowance for a post-contractual non-competition clause of EUR 337,500, fringe benefits already granted of EUR 14,886 and pension contributions of EUR 101,250 for April to December 2015. If no performance share units for 2015 are granted from the Group Share Plan by the severance date, Axel Salzmann will receive EUR 200,000 as a supplement to the severance payment.

Additional Disclosures on Share-based Compensation Instruments
(Stock Option Plan and Group Share Plan)

The stock options and performance share units granted to and held by active members of the Executive Board for their activity as members of the Executive Board developed as follows in the 2014 financial year:

Since the 2010 financial year, no stock options have been granted to members of the Executive Board.

The Company reacquired the 165,000 stock options of the Long Term Incentive Plan (LTIP) from the 2009 cycle still outstanding in the 2014 financial year from the corresponding Executive Board members on the basis of a Supervisory Board resolution. The weighted average strike price was EUR 0.00 per option; the weighted average share price amounted to EUR 34.70 per option, whereby the exercise cap of EUR 20.00 applying to the stock options from the 2009 cycle took effect.

In the 2014 financial year, as in the previous year, no performance share units were exercised or expired. For more information on the performance share units granted for the 2014 financial year, refer to Note 37 in the notes to the consolidated financial statements.

Other Compensation Components

The Company has granted neither loans nor provided guaranties or warranties to the members of the Executive Board.

Third-party Compensation

Following the sale of all of its indirectly held common shares in ProSiebenSat.1 Media AG, Lavena 3 S.á r.l, ProSiebenSat.1 Media AG’s former indirect majority shareholder, made a voluntary one-off special payment to the Executive Board members of ProSiebenSat.1 Media AG of EUR 59.7 million at the end of June 2014, which was allocated as follows: Thomas Ebeling EUR 23.4 million, Conrad Albert EUR 8.5 million, Axel Salzmann EUR 12.8 million, Heidi Stopper EUR 4.3 million and Dr. Christian Wegner EUR 10.7 million. The payment was processed via ProSiebenSat.1 Media AG in order to simplify the withholding and payment of the wage tax incurred. This was not recognized as an expense for ProSiebenSat.1 Media AG or the Group companies, as the special payment was not a payment by the Company or the Group and ProSiebenSat.1 Media AG had been provided with the full gross amount of the special payment by Lavena 3 S.á r.l. for the purposes of processing the payment.

Compensation of Executive Board Members for the 2014 Financial Year According to the German Corporate Governance Code (GCGC)

The GCGC recommends the individual disclosure of specific compensation components for each Executive Board member according to certain criteria. It further recommends the use of the template tables included in the GCGC for their presentation — in some cases deviating from GAS 17.

Grants Granted According to GCGC

The table below shows the grants granted for the 2014 financial year including the fringe benefits and the minimum and maximum compensation achievable in the 2014 financial year. In deviation from the presentation of total compensation according to GAS 17, to comply with the GCGC the annual variable compensation must be given as the target value, i.e. the value granted to the Executive Board member in the event of 100 % target attainment. Furthermore, the pension cost, i.e. the service cost according to IAS 19, must be included in total compensation according to the GCGC.

For more information on the compensation of Heidi Stopper for October to December 2014 and the severance agreements of Heidi Stopper and Axel Salzmann, refer to the section beneath the table “Compensation of Executive Board members for the 2014 financial year according to GAS 17.”

Receipt According to GCGC

As the compensation granted to members of the Executive Board for the financial year is not always accompanied by a payment in the respective financial year, a separate table – in accordance with the relevant recommendation of the GCGC – shows what amount they received in or for the financial year.

In line with GCGC recommendations, the fixed compensation and annual variable compensation must be recognized as receipts for the respective financial year. According to the GCGC, share-based compensation is considered received at the date and value relevant to German tax law. In the 2014 financial year, the Executive Board received share-based compensation from the 2009 cycle of the Long Term Incentive Plan (LTIP).

Following the recommendations of the GCGC, when disclosing receipts the pension cost in the sense of service cost according to IAS 19 equates to the contributions made, even though it is not an actual receipt in the narrower sense.

Heidi Stopper left the Executive Board effective September 30, 2014; her employment contract ends effective March 31, 2015. In addition to Heidi Stopper’s total compensation as member of the Executive Board, she received the following compensation for the 2014 financial year in the months from October to December: Fixed compensation of EUR 125,000, fringe benefits of EUR 3,049 and pro rata variable annual compensation of EUR 104,250.

Total Compensation of Former Executive Board Members

Heidi Stopper left the Executive Board effective September 30, 2014; her employment contract ends effective March 31, 2015. In addition to Heidi Stopper’s total compensation as member of the Executive Board, she received the following compensation for the 2014 financial year in the months from October to December: Fixed compensation of EUR 125,000, fringe benefits of EUR 3,049 and pro rata variable annual compensation of EUR 104,250.

In addition, total compensation (pensions) was paid to former Executive Board members amounting to EUR 0.3 million in the 2014 financial year (previous year: EUR 0.3 million). As of December 31, 2014, pension provisions for former members of the Executive Board according to IFRS amounted to EUR 11.2 million (previous year: EUR 10.0 million). The provisions for Heidi Stopper are shown in the table “Compensation of the Executive Board members for the 2014 financial year according to GAS 17.”

Pension Provisions

In the 2014 financial year, there were additions to pension provisions for active and former Executive Board members in line with IFRS totaling EUR 4.7 million (previous year: EUR 3.1 million). EUR 0.5 million of this related to service cost (previous year: EUR 0.5 million), EUR 0.6 million to interest expenses (previous year: EUR 0.5 million) and EUR 1.8 million to actuarial losses (previous year: EUR 0.9 million). Furthermore, in the past financial year deferred compensation in the amount of EUR 1.8 million (previous year: EUR 1.2 million) have been made. These relate to conversions of bonus entitlements earned in previous years into pension provisions. As of December 31, 2014, pension provisions for active and former Executive Board members totaled EUR 19.8 million (previous year: EUR 15.5 million).

D&O Insurance

The Executive Board members are involved in group liability insurance (D&O insurance). This D&O insurance covers the personal liability risk should Executive Board members be made liable for financial losses when exercising their professional functions for the Company. The insurance includes a deductible according to which an Executive Board member against whom a claim is made pays a total of 10 % of the claim in each insured event, but not more than 150 % of the respective fixed annual compensation for all insurance events in one insurance year. The relevant figure for calculating the deductible is the fixed remuneration in the calendar year in which the infringement of duty occurred.

Compensation Paid to the Supervisory Board

Compensation System for the Supervisory Board

The compensation of the Supervisory Board is set in the articles of incorporation of ProSiebenSat.1 Media AG. On the basis of the Company’s articles of incorporation in the version adopted by the Annual General Meeting on June 4, 2009, the members of the Supervisory Board received fixed annual compensation. It amounted to EUR 50,000 for the ordinary Supervisory Board members and EUR 100,000 each for the Chairman and the Vice Chairman. In addition, meeting honoraria were paid for contributing to the committees. This amounted to EUR 3,000 per meeting attended for ordinary members of the Audit and Finance Committee, and EUR 1,500 per meeting attended for ordinary members of any other Committee. Committee Chairmen received twice the standard meeting honorarium. No performance-based variable compensation was granted.

The Supervisory Board compensation was changed at the Annual General Meeting on June 26, 2014, and incorporated into the articles of association of ProSiebenSat.1 Media AG. The new compensation system for the Supervisory Board will apply for the first time for the tenures of the Supervisory Board members elected at the Annual General Meeting on June 26, 2014, and comprises as follows:

Members of the Supervisory Board receive fixed annual compensation for each full financial year of their membership of the Supervisory Board. The fixed compensation amounts to EUR 250,000 for the Chairman of the Supervisory Board, EUR 150,000 for the Vice Chairman and EUR 100,000 for all other members of the Supervisory Board. The Chairman of a Supervisory Board committee receives additional fixed annual compensation of EUR 30,000; the additional fixed annual compensation for the Chairman of the Audit and Finance Committee amounts to EUR 50,000. Members of the Supervisory Board also receive fixed annual compensation of EUR 7,500 for membership in a Supervisory Board committee. In addition, members of the Supervisory Board receive a meeting honorarium of EUR 2,000 for each meeting attended in person. For the Chairman of the Supervisory Board, the meeting honorarium amounts to EUR 3,000 for each meeting attended in person. In the event of multiple meetings held on one day, the meeting honorarium is only paid once. No performance-based variable compensation is granted.

The current members of the Supervisory Board guaranteed the Supervisory Board in a “Self-Commitment” to use each 20% of their annually fixed compensation, in accordance with §12 Article 1 and 2 of the Articles of Association (before tax deduction), to annually buy common shares of the ProSiebenSat.1 Media AG and hold them for a period of four years, but for the period of their membership in the Supervisory Board of the ProSiebenSat.1 Media AG at the longest; in case of reelection, the obligations to hold common shares applies to the single terms of office. With this Self-Commitment to invest in and hold ProSiebenSat.1 common shares, the members of the Supervisory Board want to underline their interest in a long-term, sustainable company success.

Compensation of Supervisory Board Members for the 2014 Financial Year

Supervisory Board members received the following compensation for the 2014 financial year:

In addition to this fixed annual compensation or meeting honoraria, the members of the Supervisory Board were reimbursed for all out-of-pocket expenses and the sales tax levied on their compensation and out-of-pocket expenses.

D&O insurance covers the personal liability risk should Board members be made liable for financial losses when exercising their functions. No deductible has been agreed for members of the Supervisory Board.

Members of the Supervisory Board received no remuneration or other consideration for personal services, especially consulting and mediation services, during the 2014 financial year. Members of the Supervisory Board do not receive loans from the Company.

1 This section is part of the audited Group management report.