Axel Springer AG
Annual Report 2009

Plain-text annual report

09Annual Report Contents Foreword Management Board Axel Springer: Multimedially integrated The Axel Springer share 2 6 8 30 Management Report of the Group and Management Report of Axel Springer AG 32 Business model, structure, and market position 33 39 Strategy and success monitoring 43 Employees 47 Social responsibility 51 Business development and performance 77 Financial situation and balance sheet 79 Economic position of Axel Springer AG 81 Profit utilization proposal 81 Risk and Opportunities Report 86 Events after the balance sheet date 87 Outlook 91 Disclosures pursuant to Sections 289 (4), 315 (4) HGB and Explanatory Report pursuant to Section 176 (1) (1) AktG Declaration on Corporate Governance pursuant to Section 289a HGB and Corporate Governance Report 94 Report of the Supervisory Board ullstein bild: Freedom 107 112 Consolidated Financial Statements Auditor’s Report Consolidated Statement of Financial Position Consolidated Statement of Comprehensive Income 137 Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity 138 132 133 134 136 Notes to the Annual Financial Statements 140 Boards Glossary 182 184 Group Key Figures Group Key Figures Group Key Figures Group Key Figures in € millions Revenues 2005 2006 2007 2008 2009 Change yoy 2,391.5 2,375.9 2,577.9 2,728.5 2,611.6 – 4.3 % International revenues 383.7 383.2 537.2 596.8 547.6 – 8.2 % International revenues as percent of total revenues 16.0 % 16.1 % 20.8 % 21.9 % 21.0 % Pro forma revenues Digital Media 543.5 569.0 4.7 % Digital Media revenues as percent of total revenues (Pro forma) 18.8 % 21.0 % EBITDA1) EBITDA-margin1) Consolidated net profit/loss Consolidated net profit/loss, adjusted2) Total assets3) Equity3) Equity ratio3) Free cash flow Net debt/liquidity Earnings per share (in €)4) Earnings per share, adjusted (in €)2)4)5) Dividend (in €)6) Year-end share price (in €) 413.6 433.9 470.0 486.2 333.7 – 31.4 % 17.3% 18.3% 18.2% 17.8% 12.8% 231.4 202.1 290.8 205.0 – 288.4 234.6 571.1 254.6 313.8 – 45.0 % 152.6 – 40.0 % 2,612.0 3,124.0 3,826.9 2,809.1 2,934.3 4.5 % 1,185.0 1,795.1 1,211.8 1,067.7 1,196.8 12.1 % 45.4% 57.5% 31.7% 38.0% 40.8% 220.2 327.2 7.33 6.79 1.70 233.9 477.4 9.13 6.88 3.50 238.7 219.7 231.3 5.3 % – 743.1 – 369.5 – 193.0 - – 9.70 18.54 10.19 – 45.0 % 7.88 4.00 8.55 4.40 5.13 – 40.0 % 4.40 0.0 % 108.00 136.45 98.00 51.39 75.05 46.0 % Average number of employees 10,166 9,733 10,348 10,666 10,740 0.7 % 1) Adjusted for non-recurring effects and effects of purchase price allocations. 2) Adjusted for significant, non-operating items. 3) The figures as of December 31, 2008 were adjusted for the effects of the changed accounting method for pension commitments. 4) Diluted. 5) The adjusted diluted earnings per share for all years presented herein were calculated on the basis of the weighted average shares outstanding (diluted) in fiscal year 2009. 6) Dividend proposal for the fiscal year 2009. Revenues 4.3 % below prior year International and Digital Share more than 20 % Double-digit EBITDA margin despite recession in € millions Circulation Advertising Other 264.7 1,248.1 296.9 1,138.5 International Revenues as Percent of Total Revenues Digital Media Revenues as Percent of Total Revenues (Pro forma) in € millions EBITDA margin in % 17.8 % 486.2 21.9 % 21.0 % 21.0 % 18.8 % 12.8 % 333.7 1,215.8 1,176.2 2,728.5 2008 2009 2,611.6 2008 2009 2008 2009 2008 2009 Axel Springer is one of the leading integrated multimedia print, online, and Web-TV companies in Europe. The core of our business is not to print on paper, but excellent journalism. Every medium, whether print or digital, is subject to different playing rules, but content quality is what always counts. Our business has always been and will always be about news, opinions and well-told stories. By our networked processes and by transcending media boundaries we are linking the different worlds together. 2 Foreword “We widened the lead over our competitors, built on the strength of our brands, and actively promoted digitization.” Dr. Mathias Döpfner Chairman and Chief Executive Officer It makes sense to weatherproof your house before the Our strategy remains unchanged too, since 2001 already. storm hits. And that is exactly what we at Axel Springer We continued to pursue our stated goals with single- have been done intensively in the last seven years, why minded resolve in 2009: The expansion of our market we have built up the digital business of the future and leadership position in the German-language core busi- reorganized our existing activities. The operating envi- ness, internationalization, and digitization. A glance at the ronment in 2009 was something of an acid test as to news, which was full of reports about emergency short- how strong Axel Springer AG really is. The degree to term measures and desperate restructuring plans in the which we passed this test is a matter for you, our share- media industry, makes it clear that such goals were holders, to decide. rather the exception than the rule in 2009. Fortunately, we at Axel Springer began to address the underlying The media industry faced strong headwinds in 2009, challenges a long time ago. For example, the disciplined especially in the advertising market. Depending on the cost management we have practiced for many years survey, net advertising revenues plummeted 10 % to 12 % made an important contribution to our bottom line in worldwide and 7 % to 13 % in Germany. The Central 2009. And yet, our cost savings and restructuring efforts Association of the German Advertising Industry has were precisely targeted. Counter to the industry trend, called it the “worst advertising slump in the history of the the size of our workforce actually increased, by 0.7 %, German Federal Republic.” And the circulation market especially in the promising future business of digital was under intense pressure, too. media. I was especially pleased that numerous employ- ees became shareholders of our company by taking Surely, it would have been easier to reach a double-digit advantage of the bonus share and share ownership profit margin under more favorable conditions. In fact, we programs. It is good to know that our employees are set this goal for ourselves seven years ago, anticipating bound to Axel Springer in an entrepreneurial partnership, an economically healthier environment. But the employ- particularly in these times, when creativity is more impor- ees of Axel Springer AG achieved this goal in the midst tant than ever. of the worst financial and media crisis to date. We gen- erated an operating profit (EBITDA) of € 333.7 million. At last year’s annual shareholders’ meeting, I announced Based on total revenues of € 2,611.6 million, that corre- that Axel Springer intended to widen the lead over its sponds to an EBITDA margin of 12.8 %. competitors, build on the strength of our brands, and actively promote digitization, even though it would not be Amid this environment, the positive development of Axel possible to match the record results of the prior year. Springer’s equity ratio sent a rare, anti-cyclical signal, A necessary prerequisite was the strict focus on our high rising from 38.0 % in 2008 to 40.8 % in 2009. The divi- reach and national brands. In light of this, it made sense dend is intended to remain unchanged from 2008. The to part with the company’s minority interests in regional Management Board and Supervisory Board will propose newspapers, sell the company’s youth magazines, and to the annual shareholders’ meeting that the company closely integrate the music titles with the WELT Group. In pay a dividend of € 4.40 per share, again the highest true anti-cyclical fashion, we launched a marketing cam- dividend that Axel Springer has ever paid. paign for BILD and WELT towards the end of 2009. The first fruits of our reach-driven strategy are directly was expanded to include women’s magazines (FORBES measurable. Based on gross market shares in the German WOMAN) and the Internet (FORBES online). advertising market, our integrated marketing unit Axel Springer Media Impact widened its lead significantly over And that brings us to digitization. With revenues of our competitors in the print media business. While the € 470.4 million, the Digital Media segment was the next-biggest print marketer generated 34 % fewer reve- Group’s third-biggest revenue contributor in fiscal year nues than Axel Springer Media Impact in 2008, that lead 2009, for the first time ever. On a pro-forma basis (in- widened to 45 % in 2009. BILD defied the general trend cluding the full-year consolidation of our acquisitions of the gross print advertising market impressively: While StepStone and Digital Window), the revenues of the the latter declined by 6.3 % in 2009, BILD's advertising Digital Media segment amounted to € 569.0 million. revenues rose by 6.5 %. Especially our strong revenue- Thus, Axel Springer generates one of every five euros in producing titles expanded their reach in their respective its online business. That is an extremely high percentage, markets, including BILD am SONNTAG (+ 4.2%), BILD compared to our competitors’ figures. der FRAU, AUTO BILD, SPORT BILD (each by + 1 % to 2 %), TV DIGITAL (+ 1.3 %), and DIE WELT (+ 2.6 %). We achieved such impressive results on the basis of a From a cross-media perspective, the WELT Group with simple, clearly defined strategy. In the digital world, when DIE WELT, WELT am SONNTAG, and WELT ONLINE starting up or acquiring a business, we focus on three jumped out ahead of other German premium newspa- kinds of businesses: pers and their online portals in terms of range. Thanks to the rapid growth of its unique visitors, Bild.de rose to the status of clear market leader, in terms of reach, among print-based German news portals for the first time in 2009. In the circulation market, our magazines in particu- lar posted significant gains. Thus, Axel Springer picked up market shares (based on revenues) in the segments of automotive titles (+ 3 %), computer titles (+ 2.4 %), and sports titles (+ 1.2%). In connection with these strong results, the profitability of our print business was unusu- ally high: The EBITDA margin of our Newspapers National segment was 20.1 %, that of our Magazines National segment 10.6 %. We also built on our strong brands in the international business. As part of a joint venture in Poland, we com- bined our newspaper DZIENNIK, known for its political reporting, with GAZETA PRAWNA, which is known es- pecially for its expertise in business and legal topics. In Russia, the prominence of the FORBES Russia brand (cid:132) Marketplaces (cid:132) Performance-based marketing platforms (cid:132) Market-leading content portals. You may recall my announcement of a year ago, when I stated that we were not contemplating any transforma- tional M&A activities, but rather a number of smaller, logical acquisitions that fit in seamlessly with our portfolio and online strategy. And that is just what we did. For example, we further extended our position in the business of marketplaces, in which idealo and immonet were already strong players, by acquiring a 100 % inter- est in StepStone ASA, the leading European provider of online job exchanges and talent-management software. In the business of online performance-based marketing, our subsidiary zanox, in which we hold a majority interest, is already the market leader on the European continent. Having acquired Digital Window, a leading affiliate net- work in Great Britain, together with our partner PubliGroupe, we have now tapped the key British market When I was recently asked to reflect on 2009, I an- for the next phase of international expansion. Finally, we swered spontaneously that it was perhaps the best year made good progress last year in monetizing the high of my professional life. Why? Because I believe that our reach of our digital content portals, as the third pillar of efforts of the last few years are paying off; and I sense our digital strategy. In consideration of the fact that ad- tremendous motivation among our employees to con- vertising revenues are volatile and insufficient in the long tinue on the path we have set. In that sense, 2009 was term, it has long been clear to us that we will need addi- indeed a happy year. On top of that, it was an especially tional revenue streams in the digital world as well. We are important and joyful year for us Germans. We at Axel convinced that users are ready to pay for attractive con- Springer were fortunate to celebrate the twentieth anni- tent in any distribution channel, whether print, online, or versary of the fall of the Berlin wall in the presence of the mobile. In 2009, therefore, we initiated a paradigm shift three great trailblazers of German unity: Helmut Kohl, by launching a premium-content initiative based on inno- George H. W. Bush, and Mikhail Gorbachev. On that vative paid offerings. We want to attract and retain users day, November 9, 1989, the vision expressed by Axel with attractive content and easy billing arrangements. It Springer thirty years earlier when the cornerstone for our thrills me to have seen how this initiative unleashed a publishing headquarters in Berlin was laid became true: veritable surge of creativity among our employees. Prod- ucts like the BILD Super Manager and the “My Club” application, as well as the subscription models for the “I believe in a Germany with its capital in Berlin. Not only do I believe in that, I yearn for it to happen.” regional online portals of HAMBURGER ABENDBLATT and BERLINER MORGENPOST, are innovative experi- Sincerely yours, ments that completely vindicate our reading of the mar- ket. Ending the year on a high note, we launched our paid iPhone applications for BILD, DIE WELT, and B.Z., which attracted more than 100 thousand paying users already by the end of the year. With regard to 2010, we anticipate stable or slightly higher consolidated revenues and a roughly 10 % in- crease in our consolidated EBITDA. In this regard, it is important to note that potential revenues from our pre- mium-content campaign are not included in the 2010 budget. Thus, if it turns out that users are prepared to pay for premium content on a sustained basis, we will reap additional gains. However, we do not wish to create overly high expectations in this regard because we view this business more as a long-term opportunity. Mathias Döpfner 6 Management Board Dr. Mathias Döpfner Chairman and Chief Executive Officer Subscription News­ papers and International Born 1963, journalist. Career milestones: Frankfurter Allgemeine Zeitung, Gruner+Jahr Chief Editor Wochenpost, Hamburger Morgenpost and DIE WELT. Member of the Management Board since 2000, Chairman since 2002. Rudolf Knepper Vice Chairman Printing, Logistics, and HR Born 1945, master’s degree in engineering and Master’s degrees in engineering and in business/engineering. Career milestones (since 1973 with Axel Springer): Head of Corporate Planning Office for Printing; Manager of the Hamburg Printing Plant; Head of Production Newspaper Printing; Member of the Management Board since 1994, Vice Chairman since 2002.  Management Board 7 Lothar Lanz Chief Operating Officer and Chief Financial Officer Born 1948, master’s degree in commerce. Career milestones: Bayerische Hypotheken­ und Wechselbank AG; Member of the Executive Board at HSB HYPO Service­Bank AG; Member of the Executive Board at Nassauische Sparkasse; Member of the Executive Board and Chief Financial Officer at ProSiebenSat.1 Media AG. Member of the Management Board since 2009. Dr. Andreas Wiele BILD Group and Magazines Born 1962, lawyer. Career milestones: Editor, Hamburger Morgenpost; Head of Publishing Capital and Geo, Gruner+Jahr, Paris/France. Executive Vice President and Chief Operating Officer of Gruner+Jahr USA Publishing, New York. Member of the Management Board since 2000. 8 Multimedially integrated Axel Springer is one of the leading integrated multimedia print, online, and Web-TV com- panies in Europe. We transfer our print brands and content to digital distribution channels and supplement our portfolio with online portals. New print titles were also launched in 2009, because at Axel Springer, multimedia means offering readers, users, and advertising custo- mers the medium which is best for them. The integrated newsroom and the advances we have made in paid content on the mobile Internet are just two of the following examples illustrating our networked and cross-media operations. Axel Springer: Multimedially integrated 9 Axel Springer unites the widest variety of media, brands, and talent. Whether they’re writers or marketers, designers of print, online, or Web-TV, the people on the following pages have one thing in common: they all want to be actively involved in shaping the future of media with passion and creativity. As do 10,730 other colleagues we can’t show here due to space constraints. “Throughout the media industry, paid online content and services have been the subject of discussion since 2009. Axel Springer is one of the first companies to look for even better economic prospects in approaching the digital world. Our apps for the iPhone provide unique added benefits for users. The ‘premium’ concept is critical— we offer our users exclusive content, services and functions they won’t find anywhere else.” Donata Hopfen, Managing Director, BILD digital Premium Initiative Axel Springer is committed to digitization, continually offering more of its content through mobile applications. The presence of new content and service elements and their striking translation into the iPhone format with all its technical possibilities has to offer a genuine incen- tive to users, one that they’re willing to pay for. The BILD and WELT applications (“apps”) for the iPhone represent the first-ever mobile service programs available exclusively under subscription models. Several creative and lucrative ideas for new, innovative iPhone apps are originating in-house, from the employees of Axel Springer AG. “ With the acquisition of StepStone A.S.A. as a leading international provider of career websites and talent management systems, Axel Springer AG became even more international and digital in 2009. After years of successful collaboration in Germany, we now can make use of our joint strength in the whole of Europe.” Ralf Baumann, Member of the Management Board, StepStone StepStone Axel Springer AG acquired an equity interest in the online job exchange StepStone Deutschland AG already back in 2004. Through this combi- nation of print and online job notices, Axel Springer extended its strategic exposure to yet another important classified ads market. In 2009, Axel Springer used its financial maneuvering room for investments, acquiring the international parent company StepStone A.S.A., in order to exploit the excellent prospects for dynamic growth in the European online job market. “Originally, we wanted to reach the top position by the summer of 2011 at the latest; but as it turned out, we already became the leading German news portal in November 2009. Naturally, I’m especially pleased that our offering of online videos has made a big contribution to this success. Our team produces 1,000 reports and features for Bild.de every month.” Daniel Durst, Head of Bild.de Web-TV The online and mobile portals of the BILD family were extraordinarily successful in 2009. Thanks to their significantly upgraded and intensively linked information and entertainment offerings, they reached significantly Bild.de more online users than in the prior year. Having increased its unique visitors – + 00:47 / 02:30 by 63.2 % to 5.8 million, Bild.de took the top rank among online portals of German print media for the first time, while also expanding its position as Germany’s biggest news and entertainment portal. “In 2009 we completely reworked the ad strategy for BILD— away from constantly changing sales-oriented themes and toward a broad-based, long-term image campaign. The goal of the ad initiative is primarily to enhance BILD’s credibility. And we succeeded in a very brief period. Just a few months later we had measurable results on the BILD image enhancement, especially among non-readers and opinion leaders.” Tanja Hackner, Head of General Advertising, BILD publishing group BILD Especially in the fourth quarter of 2009, Axel Springer successfully utilized its strong financial position to invest counter-cyclically in intensive marketing programs: the new cross-media ad campaign produced an enormous increase in the image values of BILD. Significant improve- ments were detected, particularly among opinion leaders and non-readers. The print ads are interlinked with the website www.bild.de/fakten, where more information and of course the campaign’s TV ads can be found. “The introduction of HÖRZU WISSEN demonstrated the fact that traditional print products can still be successful within a multimedia group. In this new publication, the editorial staff built on HÖRZU’s wide range of topics to produce an extremely attractive and worthwhile new publication, making full use of the great potential that already existed for knowledge magazines. Thanks to our marketing campaign, we gained numerous regular readers even before the launch.” Christian Hellmann, Editor-in-chief, program guides HÖRZU WISSEN HÖRZU, the TV program guide in Germany with the longest tradition, has been continually modernized over the years to meet the expectations of its demanding readers. Again in 2009, it successfully emphasized its prominent place as the No. 1 weekly German TV program guide in the high-price segment. “WELT KOMPAKT is the newspaper for the Internet age. For years now, it has been the innovation leader with regard to the successful linkage of print and online media. At the end of 2009, we launched a nationwide marketing campaign to instigate a debate, in a very deliberate and pointed way, on the question of how the Internet has already influenced and changed us. The starting point was a funda- mental shift of focus on our part: WELT KOMPAKT no longer sees itself as competing in the market against other daily newspapers alone. Instead it appeals to younger professionals, many of whom hardly read newspapers anymore and are turning to online news sources instead. When they see WELT KOMPAKT they can say, ‘Yes, now we’re ready for a new kind of newspaper’.” Johannes Boege, Head of Marketing, WELT Group WELT KOMPAKT WELT KOMPAKT is the only national daily newspaper to offer a daily Internet section. The newspaper is pressing forward with networking and interaction with social networks like Twitter, Facebook, YouTube and Google Wave. When it comes to the integration of print and online media, this young medium is a think tank, laboratory and trendsetter all at the same time. “ We had already introduced a performance-based model as a complement to traditional online marketing nine years ago. With zanox, advertising customers only pay when consumers don’t just click on their ads but actually buy their products. Our sophisticated statistical functions help our customers place their advertising messages in exactly the right places for producing the greatest impact. That’s how we emerged as winners from the crisis of 2009.” Christian Kleinsorge, Member of the Management Board, zanox zanox Majority-owned by Axel Springer, zanox is already the market leader in affiliate marketing on the European continent. Through its interest in Digital Window Ltd., Axel Springer also began opening up the important British market in 2009 as the next step of its international expansion. Axel Springer was the first major publishing company to position itself in this fast-growing market, which holds considerable long-term strategic importance as a complement to traditional advertising models. “ We completely modernized our editorial staff structures in 2009. The section leaders and editors are responsible for both print and online, and we have channel managers for the website and deputy editors for the newspaper. The channel managers update the content of their respective sections at abendblatt.de every half hour. At the same time, the deputy editors produce a premium-quality newspaper six days a week. We are a fully integrated multimedia editorial staff that produces online and in print.” Anika Riegert, Head of “Magazine” at HAMBURGER ABENDBLATT HAMBURGER ABENDBLATT In line with the formula “HAMBURGER ABENDBLATT 3.0,” Germany’s biggest regional newspaper has undergone a rigorous modernization process. The strategy can be formulated as follows: Go more in-depth locally, expand regionally, boost nationwide importance—and that in all distribution channels: print, online, and mobile. HAMBURGER ABENDBLATT will continue its great success story by blending tradition with innovation. “Quite a bit happenend in 2009 – our first full year as a majority-owned subsidiary of Axel Springer. For example, we now offer online games in seven languages. Naturally, being part of an internationally active media group was a big help in that regard. Our cooperation with computerbild.de was also instrumental in helping us attract more than 2.8 million new users in one year and to remain one of Europe’s fastest- growing game publishers.” Patrick Streppel, Member of the Management Board, Gamigo gamigo.de Axel Springer has held an equity interest in Gamigo AG since 2000 and a majority interest since the end of 2008. Gamigo is one of the leading German publishers and operators of online games which can be played by thousands of people at the same time and which finance themselves through the sale of virtual objects. “With FORBES WOMAN we primarily address the large number of women in Russia who are very successful in business and their careers—a very interesting and currently underdeveloped target group. We’ve started a new chapter in the FORBES success story on the Russian market with FORBES WOMAN in 2009.” Irina Mihailovskaya, Editor-in-chief, FORBES WOMAN Axel Springer Russia Axel Springer Russia has been publishing the Russian edition of the business magazine FORBES since 2004, reaching about 820,000 readers each month with an average circulation of nearly 80,000 copies. Another component of the brand’s expansion was the launch of the website www.forbesrussia.ru, also in 2009. In late 2008 the successful cooperation between Axel Springer and Forbes Inc. was extended to 2020. Furthermore, Axel Springer Russia publishes the the weekly news magazine NEWSWEEK, the Russian edition of COMPUTER BILD, and the celebrity news magazine OK! 30 Annual Report 2009 Axel Springer AG 30 The Axel Springer Share Indices outperformed The price of the Axel Springer share increased by 46.0 % in 2009. It closed the year at € 75.05 (year-end 2008: € 51.39), which was not far from its high for the year of € 78.00, reached on November 18, 2009. The share price reached its low for the year on March 19 (€ 46.94). Including the dividend paid in May 2009, Axel Springer’s shareholders earned a total shareholder return of 54.6 %. At the close of trading on the last trading day of 2009, the market capitalization of the company’s widely held shares amounted to € 580.5 million. Consequently, the Axel Springer share was by far the highest-valued share in the SDAX, with an index weighting of 7.0 %. The company’s overall market capitalization amounted to € 2.48 billion. In addition, the Axel Springer share was more actively traded in 2009, with an average daily trad- ing volume of 9.5 thousand shares, which was 17.7 % higher than the corresponding figure for 2008. Index Comparison Total Market Axel Springer MDAX DAX SDAX 160 140 120 100 80 Share Information in € Earnings per share (basic) Earnings per share (diluted) Dividend1) Year-end share price Highest price Lowest price Average price 2009 10.20 10.19 4.40 75.05 78.00 46.94 63.35 2008 Change 18.58 – 45.1 % 18.54 – 45.0 % 4.40 0.0 % 51.39 46.0 % 94.73 – 17.7 % 42.50 10.4 % 68.03 – 6.9 % 01|01|09 12|31|09 1) Dividend proposal for the fiscal year 2009. The Axel Springer share significantly outperformed its benchmark indexes. While the SDAX gained 22.6 % for the year, the DJ-EuroStoxx Media Index, which tracks the most important European media shares, achieved only a relatively moderate gain of 5.3 %. Index Comparison Media Axel Springer Prime Media DJ EuroStoxx Media 160 140 120 100 80 01|01|09 12|31|09 Record dividend resolved A total of 260 shareholders attended the annual share- holders’ meeting of Axel Springer AG in Berlin on April 23, 2009. With 83.1 % of the shares present or represented, the management proposals were adopted with majorities of more than 98 % in every case. One such proposal concerned the re-election of the Supervisory Board of Axel Springer AG. In accordance with the corresponding resolution of the annual shareholders’ meeting, a dividend of € 4.40 (PY: € 4.00) per qualifying share was paid on April 24, 2009. The dividend corresponded to a distribution of € 130,603,699.60 from the unappropriated net profit of Axel Springer AG. The balance of € 14,508,300.40 was appropriated to the other retained earnings. The com- pany’s treasury shares do not qualify for dividends. The Axel Springer Share 31 Investor Relations intensified Shareholder structure unchanged We further intensified our relations with investors and analysts in 2009. We presented Axel Springer’s business development and strategy at a total of nine conferences, each of which was followed by numerous meetings with investors, and on eleven road shows. The shareholder structure did not undergo a significant change in 2009. The free float rose from 23.1 % at the end of 2008 to 23.5 % at the end of 2009, while the proportion of treasury shares declined from 9.9 % to 9.6 %. In the first quarter, we participated in the German In- vestment Seminar of Dresdner Kleinwort in New York, the German Investment Conference of Cheuvreux in Frankfurt am Main, and the Merrill Lynch All Stars Con- ference in New York. In the second quarter, we partici- pated in the Société Générale European Mid & Small Caps Conference in Nice, the LBBW German Telco & Media Forums in Zurich, and the Deutsche Bank German & Austrian Corporate Conference in Frankfurt. Among the notable events in the third quarter, we participated in the JP Morgan Media CEO Conference in London, the Société Générale 3rd Pan European Conference in New York, and a road show of Deutsche Bank in London. In the fourth quarter, finally, we presented the company at the Morgan Stanley TMT Conference in Barcelona. Road shows were held in the financial centers of Frankfurt am Main, New York, London, Paris, and Dublin. Our presen- tations were consistently met with great interest by insti- tutional investors and analysts. We held telephone conferences on the occasion of the publication of all our financial reports. These tele-confer- ences were broadcast live on our website, where they are additionally available as an audio webcast. The pres- entations used at the investor conferences and road shows are also available for download on the company’s website. Shareholder Structure Axel Springer Gesellschaft für Publizistik Dr. h. c. Friede Springer Axel Springer AG Deutsche Bank Free float 23.5 % 8.4 % 9.6 % 7.0 % 51.5 % Information on Listing Share type Registered share with restricted transferability Stock exchange Frankfurt (official market) Stock exchange segment Security Identification Number Prime Standard 550 135, 575 423 At the end of 2009, Axel Springer was regularly covered by eight research firms. Landesbank Baden-Württemberg and Commerzbank initiated coverage of Axel Springer with buy recommendations in 2009. On the other hand, Dresdner Kleinwort and Main First discontinued their coverage. ISIN Reuters Bloomberg DE0005501357, DE0005754238 SPRGn.F SPR GY 32 Annual Report 2009 Axel Springer AG 32 Management Report of the Group and Management Report of Axel Springer AG General assessment of the Group’s business performance and results in 2009 The Group’s business performance in 2009 basically confirmed our muted expectations for the year. In line with the forecast we published in the spring of last year, the Group’s total revenues for 2009 were lower than the prior-year figure as a result of the for- midable market stresses in Germany and abroad. Despite the stabilization of the overall economy in the second half of 2009, the press distribution and adver- tising markets still showed no clear signs of economic revival. Considering the difficult market environment, the 4.3 % decrease in consolidated revenues can be seen as a success. By continuing to pursue its cross-media business model with unabated commitment, Axel Springer performed much better than the overall market. Having sustained only relatively modest revenue declines in the German market (while gen- erating slightly higher circulation revenues in the Newspapers National segment), Axel Springer rein- forced its dominant market position and proved that a company with high-reach media can generate sta- ble revenues even in times of economic crisis. Despite substantial revenue declines, Axel Springer generated positive results on its international print media as well; a testament to the successful cost management exer- cised in the international business units. The Digital Media segment again generated strong growth and underscored its importance for the Group by doubling its net income contribution over the previous year. At ¤ 333.7 million, Axel Springer’s earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2009 was well below the record prior- year figure (PY: ¤ 486.2 million) – as expected and projected. The Group incurred significantly higher restructuring and marketing expenses in 2009 in its efforts to make the organization even more efficient, enhance competitiveness, and boost profitability. The EBITDA margin came to 12.8 % (PY: 17.8 %). The consolidated net income amounted to ¤ 313.8 million as compared with ¤ 571.1 million in the previous year. The figures for both years included significant non-operating effects, such as the sale of regional newspaper investments in 2009 and the sale of the ProSiebenSat.1 Media AG in- vestment in 2008. Adjusted for these and other non-operating effects, the consolidated net income amounted to ¤ 152.6 million (PY: ¤ 254.6 mil- lion). The earnings per share came to ¤ 10.19 (PY: ¤ 18.54). Adjusted for significant non-operating effects, it was ¤ 5.13 (PY: ¤ 8.55). At the annual shareholders’ meeting to be held on April 23, 2010, the Management Board and Supervisory Board will propose distributing a dividend of ¤ 4.40 per quali- fying share (PY: ¤ 4.40). Outlook for 2010 In 2010, Axel Springer will continue to pursue its three- fold strategy of expanding the market leadership position in the German-language core business, and advancing the process of internationalization and digitization. The consequential effects of the global recession will still be felt in the press distribution and advertising markets in 2010, especially considering the fact that the markets have begun to stabilize on a comparatively low level. For the full year 2010, we anticipate stable to slightly higher revenues, with revenue growth in the low single- digit percentage range. While we expect lower circula- tion revenues, advertising and other revenues should be higher. We expect the decline in the print business to be offset by rising revenues in the digital business. As a result of operational improvements, positive effects from restructuring measures, and the continued prac- tice of strict cost discipline in all areas of the Group, the consolidated EBITDA for the full year 2010 is expected to be around 10 % higher than the corresponding prior- year figure. Management Report of the Group and Management Report of Axel Springer AG 33 Business model, structure, and market position Introductory remarks The following combined management report for Axel Springer AG and for the Group contains statements about the economic situation and business performance of the Axel Springer Group. These statements are also largely applicable to the development of Axel Springer AG. Additional information on the economic situation of the parent company Axel Springer AG is provided in a sepa- rate chapter. For the sake of enhanced comparability, the operating earnings indicator EBITDA has been adjusted for non- recurring effects and for the effects of purchase price allocations. Business activities Founded in 1946 by the publisher of the same name, Axel Springer today is the biggest newspaper publisher and the third-biggest magazine publisher in Germany. It is also one of Europe’s leading media companies. The core competence of Axel Springer is excellent journalism – up-to-date, informative, and entertaining – in newspa- pers, magazines, and digital media. Axel Springer operates across all media. The broad spectrum of media encompasses established multimedia brand families like the BILD Group and the WELT Group along with high-circulation regional newspapers, TV program guides, computer magazines, automotive magazines, sports magazines, and women’s magazines, online portals, and offerings, up to TV and radio stations. In the Digital Media segment, our core competence also extends to online marketplaces and performance-based online marketing. Thus, the Group’s portfolio covers the information needs of a wide range of interest groups. Axel Springer’s business is international. We reach large portions of Europe’s population through our cross- media activities. Our market position is especially strong in Germany, where our roughly 70 newspapers and maga- zines reach about 53.1 % of the population aged 14 years and over. Based on all the titles tracked by the German circulation research institution IVW, Axel Springer holds 19.0 % of the German market. In addition, the Group pub- lishes more than 160 publications outside of Germany. On top of that, the Group operates more than 80 online sites, and holds investments in TV and radio broadcast compa- nies in Germany and abroad. All together, Axel Springer maintains a presence in 36 countries. Thanks to their high quality and extraordinary reach, Axel Springer’s informa- tion and entertainment products also provide attractive, cross-media advertising spaces. Axel Springer is value-oriented and responsible. Its core values are creativity, entrepreneurship, and integrity. These values represent the basis of Axel Springer’s corporate culture. They provide guidance to the Group’s highly motivated and highly qualified employees as they pursue the Group’s business strategy. The strategic priorities are to extend the Group’s leadership position in the German-language core business and advance the process of internationalization and digitization, making Axel Springer one of the leading integrated multimedia companies in Europe, offering print, online, and web-TV products. Business locations, equity holdings The Group’s headquarters is located in Berlin. It oper- ates publishing locations in other German cities like Hamburg and Munich, for example, as well as numer- ous other business locations in large metropolitan cen- ters of Europe. At December 31, 2009, the Group com- prised some 129 fully consolidated companies, including about 76 companies outside of Germany. The consoli- dated shareholdings of the Group are listed in Section (44) of the notes to the financial statements. Segments Axel Springer’s business activities are assigned to one of the following five segments: Newspapers National, Magazines National, Print International, Digital Media, and Services/Holding. Thus, the principal elements of the Group’s business strategy (market leadership in the core business of German-language media, internationalization, and digitization) are presented without overlaps in the most transparent way possible. 34 Annual Report 2009 Axel Springer AG Segments Axel Springer Group Newspapers National Magazines National Print International Digital Media Services/ Holding Newspapers National German newspapers published in Germany (along with the free advertising papers) are combined in the Newspapers National segment. They are classified as newsstand and subscription newspapers on the one hand, and as regional and national newspapers on the other (see graph). Newsstand newspapers: Based on paid circulation, Europe’s biggest daily newspaper BILD together with the Berlin B.Z. holds 80.6 % of the market for German news- stand papers, making it the market leader by a wide margin. Furthermore, B.Z. is the No. 1 newspaper in the Berlin market. Portfolio Newspapers National (Selection) Newsstand Newspapers Subscription Newspapers National Regional National Regional BILD BILD am SONNTAG B.Z. B.Z. am SONNTAG DIE WELT WELT KOMPAKT WELT am SONNTAG HAMBURGER ABENDBLATT BERLINER MORGENPOST Subscription newspapers: With a market share of 17.0 % based on paid circulation, the daily newspaper DIE WELT (including the tabloid-format WELT KOMPAKT) is the third-biggest premium newspaper in Germany. With a market share of 38.8 %, the regional subscription newspaper HAMBURGER ABENDBLATT is the biggest subscription newspaper in Hamburg and the surrounding area, while BERLINER MORGENPOST is the second- biggest subscription newspaper in Berlin. In the segment of national Sunday newspapers, BILD am SONNTAG and WELT am SONNTAG are the clear lead- ers, with an 85.7 % share of the circulation market. Magazines National With a portfolio comprising almost 40 titles, Axel Springer is the third-biggest magazine publisher in Germany, both in terms of average paid circulation and advertising mar- ket share. Axel Springer holds leading positions in all key segments of the market. Portfolio Magazines National (Selection) TV Program Guides and Womens’ Magazines Computer, Automotive, and Sports Magazines Axel Springer Financial Media TV Program Guides Automotive Finance HÖRZU TV DIGITAL FUNK UHR AUTO BILD AUTO TEST AUTO BILD ALLRAD EURO EURO am SONNTAG Women Computer BILD der FRAU FRAU von HEUTE COMPUTER BILD COMPUTER BILD SPIELE Sports SPORT BILD TV program guides and women’s magazines: The biweekly TV DIGITAL is the highest-circulation TV program guide in the high-price segment. HÖRZU is Germany’s No. 1 weekly TV program guide in the high- price segment. With a 30.6 % share of the circulation market, BILD der FRAU is the leading German women’s magazine. Nearly all the Group’s computer, automotive, and sports magazines are part of the BILD family of brands. COMPUTER BILD, AUTO BILD, and SPORT BILD are the leading publications of their kind in Europe. Axel Springer also publishes numerous specialty titles, which are likewise market leaders in their respective segments. The Group’s main business magazines are the monthly magazine EURO and the weekly EURO am SONNTAG. Management Report of the Group and Management Report of Axel Springer AG 35 Print International Internationally, Axel Springer publishes more than 160 newspapers and magazines through its own subsidiaries and joint ventures, and through granting licenses. The Group’s international activities are focused on the mar- kets of eastern Europe. In western Europe, the Group’s publishing activities are concentrated in the countries of Switzerland, Spain, and France. AUTO BILD is the Group’s biggest international brand family. Portfolio Print International (Selection) Poland Switzerland Hungary France 4 Newspapers 1 Newspaper 10 Newspapers 10 Magazines 14 Magazines 14 Magazines 38 Magazines Further Markets: Spain, Russia, Czech Republic, Romania Axel Springer is represented in Poland with 14 maga- zines and four newspapers. The most important of these are the leading newsstand paper FAKT, the country’s only daily sports newspaper PRZEGLAD SPORTOWY, and the newspaper DZIENNIK GAZETA PRAWNA, which is published by a joint venture (see page 55). With a market share approaching 36.6 % of national daily news- papers based on paid circulation, Axel Springer Polska is the biggest newspaper publisher in Poland with its titles FAKT and PRZEGLAD SPORTOWY. In Switzerland, Axel Springer publishes the business newspaper HANDELSZEITUNG and 14 magazines. It is the market leader in the categories of business and financial magazines, and TV program guides. The busi- ness magazine BILANZ and the newspaper HANDELS- ZEITUNG are among the most-read business publica- tions in Switzerland. Axel Springer is very well posi- tioned in the category of general-interest magazines through its title BEOBACHTER, and also in the cate- gory of TV program guides through the titles TELE and TV STAR. In Hungary, Axel Springer publishes 38 magazines and ten daily newspapers. Based on paid circulation, Axel Springer is the country’s second-biggest publishing company, with a market share of 20.9 %. Axel Springer is also the market leader in the categories of TV program guides, regional newspapers, and business newspapers, as well as living, automotive, cooking, and puzzle maga- zines. In France, Axel Springer publishes a total of ten TV program guides, women’s magazines, lifestyle maga- zines, and automotive magazines; of that number, five titles are published in a joint venture with the Mondadori Group. The most important titles are the TV program guide TELEMAGAZINE, the cooking magazine VIE PRATIQUE GOURMAND, and the automotive magazine AUTO PLUS. In Spain, where the Group publishes a total of twelve magazines, Axel Springer is the market leader in the categories of video game and computer magazines. Furthermore, AUTO BILD ESPAÑA and AUTO BILD 4x4 are the leading publications in the category of automotive magazines. In Russia, Axel Springer publishes four magazines, including the business magazine FORBES, NEWSWEEK, and the computer magazine COMPUTER BILD. In No- vember 2009, moreover, we purchased the G+J portfolio in Russia, including the titles GEO, GALA BIOGRAFIA, GEO TRAVELLER, and GEOLENOK (see page 55). In the Czech Republic, Axel Springer publishes seven magazines and is the market leader in the category of automotive magazines. In Romania, Axel Springer holds a 40 % equity interest in Edipresse AS Romania and publishes a total of 13 maga- zines. Digital Media The Digital Media segment comprises the Group’s online activities in Germany and abroad, as well as its activities and investments in the TV and radio sector. With an average of 28.7 million users per month (gross reach, unique visitors according to comScore), Axel Springer is a leading player in the digital media business. 36 Annual Report 2009 Axel Springer AG Portfolio Digital Media (Selection) Content portals Marketplaces Bild.de auFeminin.com gamigo.de autobild.de welt.de computerbild.de wallstreet:online Amiado Group transfermarkt.de abendblatt.de stepstone.de (Jobs) immonet.de (Real estate) idealo.de (Price comparison) autohaus24.de (Cars) buecher.de (Books, audio, photo) Marketing Financial Media zanox Digital Window eprofessional Content portals: Bild.de is the highest-reach informa- tion and entertainment portal in the German web, and its video portal is one of the leading moving-image plat- forms in Germany. BILDmobil, the biggest mobile infor- mation portal in Germany, is visited more than 4.5 million times a month on average. WELT ONLINE is the leading online news site of all the German premium newspapers. The Digital Media segment also includes the highly fre- quented online sites of the Group’s regional newspapers and magazines in Germany, as well as those of the inter- national print titles. The online and mobile activities of the print brands are complemented by digital brands such as auFeminin.com, the first choice for online information on the subject of fashion, beauty, and lifestyle in Europe. Other digital brands include the soccer community trans- fermarkt.de, the online games provider gamigo.de, the finance portals finanzen.net and wallstreet:online, the Group’s student and leisure portals, and its investment in Motor-Talk, the biggest European community for auto- mobile and motor fans. Marketplaces: StepStone is one of the leading opera- tors of online job exchanges in Europe (see page 74). immonet.de is the second-biggest provider in the online real estate market and the market leader when it comes to cross-media real estate marketing. The website idealo.de is one of the most-used search engines in Germany for price and product comparisons. Further- more, Axel Springer holds a minority interest in the multi- brand new-car portal autohaus24.de and the driver community carmondo.de (see page 73). Axel Springer also holds an investment in buecher.de, an online re- tailer of books, music, and movies. Marketing: With zanox and Digital Window, which was acquired in 2009 (see page 55), Axel Springer is one of the world’s leading service providers in the area of per- formance-based online marketing. These two compa- nies assist advertising customers in the implementation and optimization of their online advertising campaigns. In the TV/radio sector, the Group holds a minority interest in Turkey’s biggest TV and radio company, the Dogan TV Group. This company is the market leader both in terms of viewer market shares and advertising market shares. Schwartzkopff TV is a successful produc- tion company specializing in TV entertainment formats. Furthermore, Axel Springer holds investments in regional TV stations in the key markets of Hamburg and Berlin. The Group also holds minority interests in Germany’s biggest radio stations. Services/Holding The Services/Holding segment comprises the Group’s own newspaper printing plants, the investment in the rotogravure printing company PRINOVIS, and the internal departments of Logistics and Distribution as well as service and holding company functions. Business model and value chain Axel Springer’s business model is organized on a consis- tently cross-media basis. As a media company, our fundamental goal is to increase the number of readers and users of our media offerings, and keep them coming back on a permanent basis. We generate circulation revenues and other revenues by selling our print titles and by offering paid access to our digital offerings. And we generate advertising revenues as a one-stop source of multimedia reach marketing. Cross-media concept We are constantly developing and refining our concepts for the presentation of information and entertainment. Besides improving formats, (as in the form of revised editorial concepts or graphic relaunches, for example), we are always seeking to introduce new media products. The development of new content is a crucial aspect of our operating business, especially in the Digital Media segment. Whenever possible, such new content is linked Management Report of the Group and Management Report of Axel Springer AG 37 intensively with our high-reach print media, also in order to make shared use of editorial talent. To gauge the chances of new products and technology trends, we conduct intensive market research and initiate targeted innovation projects. Editorial content Axel Springer is active in every stage of the value chain for the production and cross-media exploitation of edito- rial content. In order to optimize the production of jour- nalistic content for the various media, we have created integrated newsrooms for print, online, and moving im- age media of the BILD Group, the WELT Group/ BERLINER MORGENPOST, B.Z., and HAMBURGER ABENDBLATT, among others. All journalistic content for the various print and online media is produced on a joint basis in these editorial centers of competence. In some cases, content production is combined in the Group’s international operations as well. Production The newspaper production process is subdivided into the phases of plate production, printing, and post-press. The plate production department receives the data for the newspaper pages produced in the editorial depart- ments and transfers it directly to the printing plates. In the newspaper rotation, the paper webs are printed, folded, cut, and then forwarded to the post-press de- partment, where various product inputs and supple- ments are added and the newspapers are packed. From there, they are sent to the delivery logistics department. Axel Springer’s German newspapers are produced in the Group’s three offset printing plants in Hamburg- Ahrensburg, Essen-Kettwig, and Berlin-Spandau, among others. For digital media, the production process usually entails the processing and aggregation of information in data- bases, and the provision of such information on websites or other digital resources. Computer hardware (in the form of server capacities) and appropriate software are used to assure the flow of data and information between the different components. Distribution Axel Springer employs a sophisticated logistical and transport system to deliver the printed newspapers and magazines to approximately 120 thousand retail sales outlets, such as newsstands, magazine shops, and discount stores. The Group’s print products are also distributed worldwide by way of wholesale press com- panies and press import companies. The digital media content is delivered to users by way of various electronic channels, such as the Internet, mobile distribution chan- nels, and download platforms such as the Apple App Store. Marketing The business model of media companies relies on circu- lation revenues from newsstand sales and subscription sales as well as advertising revenues. To this end, jour- nalistic content is produced with the aim of reaching the relevant target groups of interest to advertising custom- ers so as to offer them attractive ad placements. In the print titles, reach-based marketing essentially consists of placing advertisements of different formats in advertising supplements and in topically organized classified ads. In the digital media, a wide variety of advertising formats is available, including banners, layer ads, wallpaper, and video formats. The marketing value chain is structured by brand and market segments. The brand-oriented de- partments prepare the standardized print and online content as well as cross-media content designed for specific customers, and the regional offices of the mar- ket-oriented departments market these products to customers and their agencies. Aside from conventional reach marketing, other business models and market- place models are pursued in the Digital Media segment, as in the case of zanox and idealo.de, for example. The Group’s German newspapers, magazines, and brand-derived digital media are marketed centrally by Axel Springer Media Impact. Based on gross market shares, Axel Springer Media Impact is the leading cross- media media marketer in Germany. As of the first quar- ter of 2010, Axel Springer Media Impact is also respon- sible for the telephone-supported acquisition of small to mid-sized advertising customers and related services (see page 56). 38 Annual Report 2009 Axel Springer AG Organization, management, and supervision Management principles The management principles, the development of corpo- rate governance in the past fiscal year, and the compen- sation of the Management Board and Supervisory Board are presented in detail in the Declaration on Corporate Governance on pages 94 to 106. Personnel changes On March 10, 2009, the Supervisory Board of Axel Springer AG appointed Lothar Lanz as a new member of the Management Board responsible for the Management Board division “Finance and Services,” effective May 1, 2009. He took the place of Steffen Naumann, who left Axel Springer after more than seven years of successful service with the company. Management Board divisions For the sake of efficient management, the Group’s activities are assigned to one of four Management Board divisions. Axel Springer Management Board Divisions Management Board Divisions Subscription Newspapers and International Printing, Logistics, and HR Chief Operating Officer and Chief Financial Officer BILD Group and Magazines Dr. Mathias Döpfner Rudolf Knepper Lothar Lanz Dr. Andreas Wiele Management Board Chairman Dr. Mathias Döpfner is responsible for the Management Board division “Sub- scription Newspapers and International.” This division covers the newspapers, online, and mobile offerings of the WELT Group, the cross-media offerings of our re- gional newspapers, and the Group’s multimedia brands in fast-growing international markets. Dr. Mathias Döpfner is also responsible for the corporate staff functions of Information & Public Relations, and the staff departments of Executive Personnel, Security, Public Affairs, Axel Springer Customer Loyalty Reinforcement, and the Axel Springer Academy. Vice Chairman Rudolf Knepper is responsible for the Management Board division of “Printing, Logistics, and HR” which covers the offset printing plants, logistics, and services, and the Group’s investment in the rotogravure joint venture PRINOVIS. In addition, he oversees Corpo- rate Purchasing and Personnel. The Management Board division “Finance and Services” headed by Lothar Lanz is responsible for the corporate staff and service functions of Corporate Finance, Con- trolling, Mergers & Acquisitions, Legal, and Internal Audit, as well as Axel Springer Services & Immobilien GmbH, IT, Insurance Sales, and Customer Service. The Management Board division “BILD Group and Magazines” headed by Dr. Andreas Wiele covers the cross-media offerings of the BILD family of brands and the Group’s magazines. This portfolio is divided into the following publishing groups: “BILD and BILD am SONNTAG,” “Computer, Automotive, and Sports Me- dia,” and “TV Program Guides and Women’s Media.” This Management Board division also covers the busi- ness media of Axel Springer Financial Media. As company-wide functions, the Electronic Media man- agement group and the Corporate Organization and Development Department report directly to the full Man- agement Board. The division represented by Axel Springer Media Impact reports directly to the two Man- agement Board members in charge of “Subscription Newspapers and International” and “BILD Group and Magazines.” Management Report of the Group and Management Report of Axel Springer AG 39 Strategy and success monitoring Corporate values Group’s leading market position needs to be strength- ened and extended. The Group’s ongoing strategic and operational develop- ment is guided by its corporate values. These values represent the basis of our corporate culture and are applicable to every employee of the company. The three corporate values are: (cid:132) Creativity, as the indispensable prerequisite for suc- cess in journalism and business (cid:132) Entrepreneurialism, as expressed by the ingenuity, individual responsibility, and goal-directed actions of the company’s employees and managers (cid:132) Integrity in all dealings with the company, its readers, customers, employees, business partners, and share- holders. Axel Springer’s management principles are likewise derived from these corporate values. These principles concretize our values so they can be applied in our day- to-day activities. Core elements and implementation of the business strategy Axel Springer is a leading European multimedia company with integrated print, online, and web-TV offerings. The Group’s business strategy is based on three core elements: extending Axel Springer’s market leadership position in the core business of German-language media, internationaliza- tion, and digitization. These core elements of the Group’s business strategy are managed on a comprehensive basis and are intensively linked whenever possible, in order to exploit synergies and cross-selling potential. Market leadership in the German-language core business The Group’s leading market position in the German- language core business provides a strong foundation for widening the business model. After all, both internation- alization and digitization largely consist of transferring existing print brands and contents to digital distribution channels and new market regions. Therefore, the Market leadership in German- language core business Strategy Internationalization Digitization Profitable Organic Growth Focused Acquisition Strategy Creativity Entrepreneurship Integrity Corporate values The following steps, among others, serve to extend the Group’s market position: (cid:132) The ongoing development, implementation, and suc- cessful market introduction of creative journalistic concepts (cid:132) Periodic relaunches of existing print media with the goal of further improving the concepts, journalistic quality, and graphical presentation of content, or adapting them to suit the changing needs of readers (cid:132) Measures to bolster reader loyalty (cid:132) Targeted marketing campaigns (cid:132) Cross-media reach marketing via Axel Springer Media Impact. Internationalization The Group’s internationalization efforts are focused in particular on the markets of eastern Europe. Depending on the situation in every regional market, Axel Springer either launches or purchases new titles or acts as a licensor or licensee in the core business of newspapers and magazines. To minimize risks and costs, the interna- tionalization strategy is pursued in part through joint ventures with local publishing partners. The interlinking of print media with digital media is also a significant growth engine in the Group’s international operations in Europe. 40 Annual Report 2009 Axel Springer AG Axel Springer is also represented in countries outside of Europe, such as Mexico, India, and China, especially in the form of licensed editions of AUTO BILD and related specialty titles. Digitization Information and entertainment are being used both on the Internet and (thanks to the introduction of advanced technologies) also increasingly via mobile terminal de- vices. Axel Springer was not slow to tackle the chal- lenges presented by changing media usage patterns. The transformation from a print publisher to an integrated multimedia company is in full swing. At the same time, however, the digitization of Axel Springer’s business is being pursued in close reliance upon the Group’s estab- lished core competencies. In other words, our activities are primarily geared to the distribution of useful or enter- taining information via digital channels and to the com- mercial exploitation of the reach created by this means. Our organic growth projects are complemented by the acquisition of additional content portals, online market- places, and platform solutions. Our stated strategic goal is to generate one half of our total revenues in our digital media operations. To that end, we are pursuing three specific expansion paths, which are described below. Content portals The journalistic quality and brand-specific know-how inherent in our existing print titles are being transferred to content portals in Germany and abroad. This effort is supported by integrated newsrooms operating on a cross-media basis. Through the ongoing development of editorial content, our content portals tap new target groups and so increase their reach. As another means of achieving this goal, we pursue intensive links with social networking sites and other online communities. In addi- tion, Axel Springer acquires content portals that are not derived from print brands, upgrades them, and interlinks them with the online issues of our print media. An important issue for our content portals in the future will be the step-by-step introduction of paid premium content and applications. The first applications and for- mats were successfully placed in the market in 2009 (see page 58). The paid content offerings complement the existing business model of our content portals, which has been geared primarily to generating advertising revenues. Marketplaces Axel Springer offers attractive platforms for online pur- chases and classified ad markets through its Internet marketplaces such as immonet.de, idealo.de, and Step- Stone. Whenever possible, we seek to exploit the syner- gies inherent in the combination of content portals and marketplaces. Marketing Through zanox and Digital Window, Axel Springer is the leader in performance-based online marketing. The plat- forms operated by these two companies bring advertis- ers and partner websites (affiliates) together. Both sides benefit from this networking arrangement. The affiliates can attract advertising customers and offer them adver- tising spaces. For this service, they are remunerated on a contingency basis, depending on the quality of contacts and transactions. The advertisers, for their part, can address the users they want to reach in a precise and efficient manner, thereby avoiding scatter losses. The platforms ensure the secure processing and recording of data, transactions, and the commissions generated on sales. In addition, their comprehensive services and innovative applications improve the chances of advertis- ing success. In this business, Axel Springer is pursuing a strategy of accelerated international growth and joint further development of the services offered. Management Report of the Group and Management Report of Axel Springer AG 41 Value-driven management The business strategy of Axel Springer and the three core elements of that strategy serve the overriding goal of sustainably increasing the company’s value. That goal is achieved by means of profitable organic growth, as well as a focused acquisition strategy. The Group’s controlling system has been designed on the basis of these goals. By tracking the development of financial and non-financial performance indicators, Axel Springer closely monitors the implementation of the Group’s busi- ness strategy. Non-financial performance indicators The non-financial performance indicators make it possi- ble to measure the success of Axel Springer’s work in the areas of customers, offerings, processes, employees, and sustainability. Though not reflected in the company’s income statement, these indicators are nonetheless key drivers of Axel Springer’s value-driven development. They provide an early indication of whether strategic measures are producing the desired effects, making it possible to quickly initiate appropriate countermeasures when necessary. Furthermore, the non-financial per- formance indicators are seen as a kind of early indicator for the development of the financial performance indica- tors, as the former will eventually be reflected in the latter. In the category of performance indicators pertaining to customers, markets, and products, the following are particularly important: (cid:132) Paid circulation and reach (meaning the number of readers reached) of print media and the correspond- ing competitive position. We disclose the average paid circulation of all our major newspapers and magazines and utilize up-to-date reach surveys (cid:132) Inique visitors, visits, and case-by-case performance indicators for online media; and the market positions measured on that basis. The main performance indi- cator for this purpose is that of unique visitors, which we disclose together with the visits in the form of av- erage monthly values (cid:132) The reach of the Group’s media in the advertising market, and indicators of brand and advertisement familiarity generated through market research. Axel Springer AG has also set itself the goal of becoming Europe’s most customer-friendly media company by the year 2010. For this purpose, we have developed a differ- entiated measurement and evaluation system known as the customer-retention index. The data is collected and analyzed by TNS-Infratest. The customer-retention index is an important indicator of customer satisfaction and loyalty. It is determined on the basis of the perceived quality of our publications, the brand loyalty of our cus- tomers, repeat purchase rates, and the respective com- petitive advantage, among other factors. Over the last four years, the customer loyalty reinforcement program has spearheaded a cultural transformation in our com- pany and redoubled our commitment to customers. Axel Springer employs the same techniques to measure the quality of internal cooperation and service orientation, with the goal of identifying and promoting efficient pro- cedures in the Group. The results of this analysis point the way to new ways of improving the Group’s internal service quality. These results are aggregated to form an internal customer-retention index. By measuring the external and internal customer-retention and the effec- tiveness of the measures taken based on them, every year, we have established a continuous improvement process, as a valuable contribution to the long-term enhancement of the Group’s profitability. Axel Springer also counts ecological and social perfor- mance indicators among its non-financial indicators. For this purpose, the Group relies on the sustainability criteria of the Global Reporting Initiative (GRI). The ecological effi- ciency indicators tracked by Axel Springer mainly include the quantity of wastewater, solid waste, climate-affecting emissions, and energy consumption. (see page 49). 42 Annual Report 2009 Axel Springer AG Financial performance indicators The key financial performance indicators used by Axel Springer in the reporting period on the level of the overall Group and the individual segments are: (cid:132) Revenues, as the sum of circulation, advertising, and other revenues (cid:132) Earnings before interest, taxes and depreciation (EBITDA), and the corresponding EBITDA margin. These financial performance indicators are anchored in the Group-wide planning and controlling system and form the basis for the performance-oriented compensa- tion of the Management Board and managers, as well as for the profit-sharing program for all permanent employ- ees of the Group (see page 46). A capitalized value method based on weighted capital costs is employed to assess the profitability of capital investments in new or existing business lines. The weighted average capital costs are determined on the basis of a target capital structure. The risk of a capital investment project is generally represented by means of a capital markets equilibrium model, applying a beta factor (for the business-specific, systemic risk) and a market premium (for the country-specific, non-systemic market risk). As a basic rule, it is assumed that the company’s systemic risk is equivalent, on average, to that of compa- rable companies. For this purpose, Axel Springer’s peer group consists of European media companies. In addition, specific risks are reflected in the weighted average capital costs, which are updated every year. Financial Performance Indicators In addition to absolute figures, we also analyze various relative indicators on a regular basis in order to measure the success of strategic implementation processes. These include the following, among others: Selected financial performance indicators on the Group level, in € millions Consolidated revenues 2009 2008 2,611.6 2,728.5 Proportion of international revenues 21.0 % 21.9 % (cid:132) The proportion of total Group revenues represented by international revenues, as an indicator of the suc- cess of the Group’s internationalization strategy Proportion of digital media1) EBITDA EBITDA margin 21.0 % 18.8 % 333.7 486.2 12.8 % 17.8 % (cid:132) The proportion of total revenues represented by the revenues of the Digital Media segment, as an indicator of the success of the Group’s digitization strategy. 1) Basis: Pro forma revenues in the Digital Media segment and pro forma revenues total. Management Report of the Group and Management Report of Axel Springer AG 43 Employees Axel Springer’s personnel policies are guided by the core values of responsibility and sustainability. They are fo- cused on systematic employee development. We regard vocational training and continuing education as an im- portant investment in the future success of our company. In accordance with our corporate culture, which empha- sizes transparency, values, and performance, we pro- mote an active dialogue between employees and man- agers, as well as diversity and equal opportunity in the work place and compensation geared to performance and success. Workforce Excluding vocational trainees, journalism students, and interns, Axel Springer had an average of 10,740 (PY: 10,666) employees in 2009. The total workforce in- creased over the previous year, primarily as a result of the new digital media acquisitions and start-ups in Ger- many and abroad. At year-end 2009, 21.7 % of all em- ployees were working in this area. On average during the year 2009, 2,640 employees worked in the Newspapers National segment, 1,225 in the Magazines National segment, 2,729 in the interna- tional print business (Print International), 1,607 in the digital business (Digital Media), and 2,539 in the Ser- vices/Holding segment. The number of reporters and editors declined by 188 to 3,378, primarily in connection with the Group’s activities in Germany and Poland, while the number of salaried employees increased by a total of 324 to 6,436, due to the expanded activities and acqui- sitions in the Digital Media segment. At December 31, 2009, the average length of service with Axel Springer was 12.5 (PY: 12.3) years; 52.0 % (PY: 47.0 %) of the total workforce have been with the company for more than ten years. The average yearly percentage of the total workforce represented by severely disabled em- ployees in the German companies was 4.3 % in 2009 (PY: 4.3 %), thus essentially meeting the requirements of the Severely Disabled Persons Act again in 2009. At € 791.9 million, the personnel expenses for fiscal year 2009 were 9.6 % higher than the corresponding prior-year figure (PY: € 722.5 million). Above all, this increase re- sulted from the business expansion associated with com- pany acquisitions. For 2009, collective agreements were concluded both for the wage-earning employees (term of effect: April 1, 2009 to March 31, 2011) and the salaried employees (term of effect: April 1, 2009 to June 30, 2011) of the printing industry and the newspaper and magazine publishers. Under the terms of the collective agreements, these employees are to receive one-time payments of between € 250 and € 280 per employee for 2009/2010. These amounts were paid in September/October 2009 and in January 2010, respectively. For 2010, linear collec- tive pay increases of 2 % and 1.6 %, respectively, were agreed effective April 1/May 1 and August 1, 2010, re- spectively. The linear collective pay agreement for the newspaper and magazine reporters and editors called for a 1.6 % pay increase effective October 1, 2009. This col- lective pay agreement will expire on July 31, 2010 and must therefore be renegotiated in 2010. Professional training Based on the conviction that the success of print and online media products hinges on their quality and credibil- ity above all other things, we go to great lengths to pro- vide high-quality professional training to the next genera- tion of journalists. Since 2007, we have operated Ger- many’s most modern journalism school, the Axel Springer Academy. This school of journalism, which Axel Springer had originally founded in 1986, follows a consistently 44 Annual Report 2009 Axel Springer AG cross-media approach to journalism training. As a crea- tive workshop for ideas, the Axel Springer Academy has already developed quite a few media projects, some of which have been award-winning. Aside from the close collaboration with WELT KOMPAKT, the Axel Springer Academy also entered into a cooperation agreement with the renowned Columbia School of Journalism in 2009. In 2009, the Axel Springer Academy once again accepted 40 applicants for the two-year professional training pro- gram. Nearly all the 37 graduates have taken on perma- nent positions in the Group’s various media units. In addition to professional training in journalism, we also provide vocational training programs for Digital and Print Media Managers, Office Communications Managers, Digital and Print Media Designers, a Bachelor of Arts in Business Administration, and Marketing Communication Managers. With 153 vocational trainees at year-end 2009, we made it clear that Axel Springer will stand by its commitment as an employer that provides vocational training even in times of financial and economic crisis. Continuing education Axel Springer offers an extensive continuing education program to help its employees and functional depart- ments master the challenges associated with the strate- gic further development of the Group. The continuing education program is designed to satisfy the individual learning needs of every employee, as de- termined by means of a process we call the “develop- ment dialog,” among other measures. Every year, we offer about 600 events such as seminars, networks, foreign language courses, and presentations as part of our continuing education program. The various functional departments focus on providing specific training measures to exactly meet the individual needs of their employees. We provide tailored, needs-based training programs for employees working in the sales and distribution organi- zations. Under a supplementary program, every em- ployee is entitled to pursue work-concurrent continuing education programs culminating in their certification as an Online Marketing Specialist, Dialog Marketing Special- ist, Certified Media Specialist, or State-Certified Commu- nications Specialist, among other certifications. Recruiting and promoting key talents As in the preceding year, Axel Springer intensively pur- sued college graduate marketing in 2009. In that regard, we presented the Axel Springer Group and the many career opportunities it offers to college students at uni- versity job fairs, among other events. Our support of student initiatives and the maintenance of cooperation arrangements with universities and professorships such as the European School of Management and Technology (ESMT) in Berlin, the Hamburg Media School, and other universities were also important outreach tools. Among the measures we undertake to promote the career development of college students, we offer an internship program and then make systematic efforts to retain especially talented students by means of follow-up internships and master’s degree thesis projects. We also provide university scholarships to vocational trainees who have exhibited outstanding performance. Finally, college graduates undergo a trainee program upon join- ing the company. At year-end 2009, a total of 17 college graduates were participating in this trainee program, which is designed to convey professional and methodo- logical knowledge. We also emphasize the importance of networking within the Group, and especially with the journalistic departments. Managers in dialog with employees The creativity of our managers and their ability to com- municate with others are key prerequisites for motivating employees and bringing out their best performance. The management principles already adopted by Axel Springer in 2008 concretize the Group’s core values and clearly define the requirements and expectations by which our managers are evaluated. A series of manage- ment workshops was held to firmly instill the new princi- ples within the organization. By the end of 2009, more than 600 managers from all management levels of the company had participated in more than 70 workshops associated with the adoption of the management princi- Management Report of the Group and Management Report of Axel Springer AG 45 ples. In addition, a comprehensive continuing education and training concept geared both to young talents and experienced managers was implemented. The “development dialog” (a structured goal-setting and appraisal meeting between the manager and employee) that had also been introduced in 2008 was continued in 2009. Under the terms of an agreement reached with the Group’s Central Works Council, the development dialog will be continued for the next four years. This manage- ment instrument is designed to promote the career de- velopment of our employees in a targeted manner, ac- cording to their specific needs, in the context of the strategic goals of the company and its various divisions. The development dialog will be implemented throughout the company on a step-by-step basis. During the pilot phase in 2008, about 600 employees from eight divi- sions of the company participated in the development dialogs; in 2009, about 1,200 employees in 18 divisions of Axel Springer AG and about 200 employees in three subsidiaries additionally took part. Before the process begins, both managers and employees receive extensive training to prepare them for this new instrument. More- over, since mid-2009, every member of the Management Board regularly invites randomly selected employees to have breakfast and exchange ideas. In the autumn of 2009, the Group’s existing manage- ment development activities were supplemented by two multi-day leadership programs entitled “Leadership in Times of Change.” This seminar was developed in coop- eration with leading business schools specifically for the Management Board and other top-level executives. The seminar is designed to promote an active examination of their personal management styles, upgrade their leader- ship skills, and reinforce their teamwork, reflection, and feedback abilities. These leadership programs are highly instrumental in establishing a new management culture at Axel Springer. Idea management protection, and technological advances in the company. In 2009, the number of submitted proposals jumped from 1,632 to 2,373; of that number, 845 (PY: 671) proposals were implemented, generating savings of € 1.2 million (PY: € 1.0 million). In exchange, Axel Springer paid bonuses totaling € 264 thousand (PY: € 277 thousand) to the employees who submitted the implemented proposals. Axel Springer held its first “Idea Days” in Berlin and Hamburg in August and September of 2009. At these events, every employee was given the chance to present his or her idea to the members of the Management Board without prior notice. Numerous proposals were collected, including the idea of a new digital magazine for WELT am SONNTAG. This idea was developed and introduced to market in only two months; thus, the new WELT am SONNTAG e-mag is the latest addition to the Group’s broad line-up of premium online offerings. Health promotion Promoting the health of our employees is a crucial as- pect of our personnel policy. Axel Springer’s health man- agement program focuses on the topics of exercise, nutrition, and illness prevention. The topics of exercise and nutrition are addressed in particular by the full-year program known as “On your Marks – Get Set – Get Fit!” This program comprises alter- nating sports and fitness programs, as well as cooking seminars to teach the principles of a well-balanced diet rich in vitamins (accompanied by suitable menu items in the employee restaurants) and expert presentations on subjects such as managing stress at the workplace. Again in 2009, Axel Springer’s company health insurance carrier offered vaccinations against the seasonal flu and provided information on health topics such as colon cancer prevention. In connection with the new flu (H1N1), all required preventive measures were immediately taken at all of Axel Springer’s main locations. At Axel Springer, we actively solicit and act on the ideas of our employees. The idea management program offers bonus incentives to employees who develop proposals to enhance cost efficiency, work safety, environmental Our special commitment to the health and well-being of our employees was highlighted by the fact that Axel Springer was among the companies honored with the 46 Annual Report 2009 Axel Springer AG Bonus share and share ownership program Under a voluntary, one-time employee share ownership program, all employees who had entered into goal agree- ments were given the chance to convert half or all of their bonus for the year 2008 into Axel Springer shares. An extra bonus on the converted bonus was also granted. In addition, four bonus shares were offered on a one-time basis to all qualifying employees who did not receive a performance-dependent salary component and to those employees who did not participate in the bonus conver- sion plan. The holding period is one year for the bonus share program and two years for the employee share ownership program. The shares were issued from the treasury share reserve of Axel Springer AG. Company pension plan Axel Springer’s employees are entitled to participate in the forward-looking deferred-compensation plan known as “VarioRente.” By participating in this plan, employees can accumulate a sizable balance in their pension ac- count by the time they enter retirement. In June 2009, the Management Board and the Central Works Council of Axel Springer AG reached an agreement on the con- tinuation of this voluntary pension agreement and made the terms of participation even more attractive. The 6 % rate of interest paid on contributions to this plan will be continued for another three years; in addition, Axel Springer will continue to pay an annual grant for another five years. This plan was again very well received by the employees, as evidenced by the average participation rate of nearly 35 % in 2009 (PY: 36 %). Corporate Health Award 2009. This award is a joint initiative of Handelsblatt, TÜV Süd Life Service, and EuPD Research and is granted under the auspices of the German Federal Ministry of Labor and Social Affairs. Equal opportunity Axel Springer offers all employees equal career devel- opment opportunities, regardless of nationality, culture, gender, ethnic background, or other individual character- istics. In line with this fundamental philosophy, the Group joined the Charter of Diversity. Moreover, we instituted a separate working group, composed of equal numbers of employer and employee representatives, to ensure that equal opportunity is a reality at Axel Springer. This work- ing group deals with issues such as the compatibility of work and family, the further development of work-time models, and the support of employees on parental leave, among other issues. In October 2009, moreover, a pro- ject was initiated to advance the promotion of women to senior management positions. Following the opening of a day care center for the children of Axel Springer employees in Berlin (“Wolkenzwerge”) in April 2008, a comparable day care center will be opened in Hamburg in the second quarter of 2010. These day care centers are an important means of promoting the compatibility of work and family at both operating loca- tions. Compensation geared to success and performance Axel Springer compensates employees and managers on the basis of their performance and success. The variable compensation system introduced in 2007, which is based on goal agreements, has worked extremely well. The targets set for the fiscal year include corporate goals, division goals, and individual goals. In addition, qualifying salaried employees of Axel Springer participate directly in the company’s success. In fiscal year 2009, a bonus of € 1,000 was paid to every qualify- ing employee. Management Report of the Group and Management Report of Axel Springer AG 47 Social responsibility Axel Springer is genuinely committed to social responsi- bility, as a matter of fundamental conviction. That com- mitment encompasses the adherence to social and ecological standards, the promotion of education and culture, and the advocacy of peace, freedom, and un- derstanding among peoples. Commitment to social responsibility Axel Springer is the only media company to have a cor- porate constitution; it dates back to 1967. In accordance with the terms of this constitutive document, we are bound to uphold the following principles, which are also anchored in the company’s Articles of Incorporation: 1. The unconditional support of liberty and the rule of law in Germany, as a member of the western com- munity of nations, and of the efforts to unify the peo- ples of Europe 2. Reconciliation between Jews and Germans; this also includes supporting the vital rights of the Israeli people 3. Support of the trans-Atlantic alliance, and solidarity with the United States of America and the values it shares with free nations 4. Rejection of all forms of political totalitarianism 5. Defense of the free social market economy. Both Axel Springer and its employees were actively involved in the commemoration of two highly significant anniversaries in 2009: The 60th anniversary of the Fed- eral Republic of Germany and the 20th anniversary of the fall of the Berlin Wall. Axel Springer’s newspapers ac- companied these important historical events with special editions and media campaigns. BILD was the co-initiator of a highly visited art exhibit in Berlin’s Gropius Building, showcasing the works of Ger- man artists over the last 60 years. In August of last year, BILD presented Israeli Prime Minister Benjamin Netanyahu with the original construction blueprints for the Auschwitz concentration and extermination camp in a ceremony at the Axel Springer Building in Berlin. These historical documents, which had been acquired by BILD, were only discovered in the autumn of 2008. In Septem- ber of 2009, Mr. Netanyahu held up these documents in a speech before the United Nations General Assembly in New York. In January 2010, they were put on display as part of a special exhibition at the Yad Vashem Holocaust Memorial. At the end of October, 20 years after the fall of the Berlin Wall, the “Fathers of Unity” Helmut Kohl, George H. W. Bush, and Mikhail Gorbachev accepted BILD’s invitation to speak at the Axel Springer House in Berlin, where they shared their memories of German reunification. Shortly thereafter, a bust of Mikhail Gorbachev was ceremoni- ously unveiled in the Axel Springer Passage in Berlin. Another important event commemorated in May of 2009 was the 50th anniversary of laying the cornerstone for Axel Springer’s publishing headquarters in Berlin, which in those days was located directly at the old sector line. On this occasion, artist Stephan Balkenhol’s sculpture “Balanceakt,” which symbolizes triumph over Germany’s division, was unveiled in the forecourt of the Axel Sprin- ger House in Berlin. Apart from the activities described above, Axel Springer’s various media publications engaged in the actions described below as a means of heightening public awareness of other socially relevant topics: (cid:132) In October 2009, B.Z. instigated a long-term cam- paign known as “Heroes of Berlin” in support of vol- unteerism in the capital city. Persons interested in vol- unteering their time can find just the right projects for them at the media platform berliner-helden.com; at the same time, B.Z. publishes daily reports on its website to motivate potential volunteers. (cid:132) Since 1997, the Swiss magazine BEOBACHTER has awarded the Prix Courage to “every-day heroes” who are quick to help others or who selflessly advocate for an open, solidary, and just Switzerland. (cid:132) Under the slogan “How to save our planet,” HÖRZU also tackled the issue of environmental protection by providing information to readers on concrete actions 48 Annual Report 2009 Axel Springer AG how they themselves can work towards climate pro- tection. Again in September 2009, the weekly TV pro- gram guide FUNK UHR awarded the German Animal Protection Award in conjunction with the German animal protection association Deutscher Tierschutz- bund e.V. (cid:132) As part of its “Person to person” campaign, HAMBURGER ABENDBLATT reports on people in need of assistance and collects donations for them. Donations of only € 2 per vacation subscription raised more than € 20 thousand for the association “Kinder helfen Kindern e. V.” (cid:132) The newspapers and magazines of the BILD family campaigned energetically in the interest of consumer protection. Among other things, in cooperation with technical-service provider TÜV Rheineland, they re- ported on consumer scams and Internet frauds, and uncovered safety deficiencies in German playgrounds. Active support of social, educational, and cultural causes Not only Axel Springer as a company, but also its em- ployees, are actively committed to social, educational, and cultural causes as demonstrated by their actions in 2009 and in prior years. Social projects In 2009, the aid organization “BILD hilft e.V.” (also known as “A Heart for Children”) collected total donations of € 15.2 million, which were applied directly and without deductions to help children and families. The funds were used to support soup kitchens, day care centers, and schools, as well as medical procedures, such as opera- tions and other types of therapies for children. Most of the money is used in Germany. Internationally, “A Heart for Children” provides international disaster relief, as it did in Haiti, but for the most part invests in education and funds life-saving medical treatment for children. Some of the exemplary campaigns of Axel Springer’s various newspapers and magazines are mentioned be- low. (cid:132) The BERLINER MORGENPOST initiative known as “Berliner helfen e.V.” provides assistance to people in dire straits so that they can help themselves. This ini- tiative is supported by reader donations and is ac- companied by extensive reporting in the print edition and on the website. (cid:132) In 2009, the “Hand in Hand for Africa” campaign of FUNK UHR raised € 30 thousand for medical supplies and equipment for inhabitants of southwestern Tan- zania. (cid:132) BILD am SONNTAG and the health insurance carrier, Techniker Krankenkasse, sponsor the PULSUS health-care award. The prize money is awarded to physicians and therapists who volunteer their services to help others. Again in 2009, many Axel Springer employees supported the German hunger relief association Deutsche Welthun- gerhilfe by participating in the “Small Change Campaign.” Participating employees donate the cent amounts of their monthly salary payments and the company provides generous matching funds. Educational and cultural projects Axel Springer endowed the “Ernst Cramer Fellowship,” which provides stipends to enable young German jour- nalists to live and work in Israel, and young Israeli jour- nalists to live and work in Germany for a period of two months, in both cases. In cooperation with the Interna- tional Journalist Program (IJP), applications for this sti- pend were solicited for the sixth year in a row in 2009. Aimed at future opinion leaders, this program is designed to heighten the awareness of German-Israeli relations. The participants gather first-hand impressions of the mentality, culture, and day-to-day lives of people in the other country. As a member of the innovation initiative known as “Young People Thinking about the Future,” Axel Springer’s offset printing plant in Ahrensburg organized a workshop for 25 Hamburg secondary school students in October 2009. The participating students learned about the work of a printing plant, and discussed various social trends and technological innovations of interest to the media industry. Management Report of the Group and Management Report of Axel Springer AG 49 Sustainable business practices Axel Springer undertakes a wide variety of measures to assure sustainable business practices in all areas of the Group. These measures are guided by the International Social Policy and the Group’s Environmental Protection Guideline. Furthermore, Axel Springer voluntarily submits to regular audits of the organizational measures related to environmental protection at its printing plants in Ger- many. These audits are conducted by outside experts in accordance with the EC Eco-Audit process. Every two years, Axel Springer voluntarily publishes an extensive Sustainability Report, which is audited by an independent institution. The Sustainability Report fulfils the more than 120 economic, social, and ecological performance criteria of the Global Reporting Initiative (GRI). The most recent report, published in 2008, was the first such report by a media company to receive GRI’s highest-level completeness certification, “LEVEL A+.” As part of our international business strategy, international subsidiaries were more closely integrated into the Group- wide sustainability management program in 2009. Based on their particular circumstances, national subsidiaries in Poland, France, and Switzerland developed sustainability reports of their own that meet the requirements of the Global Reporting Initiative. Numerous improvement measures have been initiated on the basis of GRI criteria. In addition to the printing plants, the Group-owned catering company PACE Paparazzi Catering & Event GmbH also instituted a comprehensive sustainability management program in the current year. It is now in the process of preparing a GRI-conformant sustainability report. Environmental management at Axel Springer The Environmental Protection Guideline imposes the obligation on all operating locations and companies of the Group to avoid creating environmental burdens whenever possible, and to continuously optimize their resource efficiency. Environmental Indicators of the Printing Plants % change from previous year 13 Wastewater volume per m2 of printed paper 5 Waste per m2 of printed paper 6 Energy per m2 of printed paper 5 Greenhouse gas emissions per m2 of printed paper Unlike the case in previous years, Axel Springer was not able to further improve the specific environmental per- formance indicators of its printing plants in Germany and Hungary in 2009 due to the lower volume of print runs last year. Compared to the corresponding figure for 2008, the volume of wastewater per square meter of printed paper released into the public drainage system increased by 13 %. The reasons for this increase include problems encountered with the settings for the re-cooling system at the printing plant in Spandau and damage incurred at the printing plant in Essen-Kettwig. Due to the higher number of single-batch print runs, which necessitated additional set-ups of production equipment, the propor- tion of unsellable output (printer’s waste) was higher. Consequently, the solid waste produced per square meter of printed paper was 5 % higher in 2009. Although the total energy consumption of the printing plants was 3 % lower in 2009 than in 2008, the energy consumption per square meter of printed paper was 6 % higher due to the fact that the base load for the equipment and build- ings is largely unaffected by the size of the print runs. 50 Annual Report 2009 Axel Springer AG The direct and indirect greenhouse gas emissions fol- lowed the trend of energy consumption. Although the overall emissions were lower, the emissions per square meter of printed paper were 5 % higher in 2009. In collaboration with the German Printing and Media Industries Federation and the Sustainability Working Group in the National Association of German Magazine Publishers (VDZ), Axel Springer developed a CO2 calcula- tor in 2009. This model is used to analyze and track the typical processes involved in the production of newspa- pers and magazines. It is already being tested extensively in Axel Springer’s printing plants in order to assess its practical suitability. The direct, climate-affecting green- house gas emissions result from the combustion of natu- ral gas in the Group’s printing plants, and the indirect CO2 emissions result from the generation and delivery of pur- chased electricity and the externally purchased district heating for the operating locations of Axel Springer. Sustainability management of suppliers Aside from assuring sustainable business practices in its own operating locations, Axel Springer also exerts its influence on suppliers (primarily those active in the wood, paper, and recycling chain) so that they will engage in environmentally compatible practices with regard to the exploitation of natural resources in accordance with the Group’s Environmental Protection Guideline. Axel Springer also imposes on its suppliers the social criteria set forth in the Group’s International Social Policy (see page 96). In 2009, the Group purchased about 440 thousand metric tons of printing paper from roughly 50 papermaking factories in about 15 countries. About half the printing paper used by Axel Springer contains recy- cled paper. Axel Springer conducts on-site inspections to verify compliance with its sustainability standards. Having already paid information visits to forestry enterprises in Russia and to suppliers of promotional materials in China, we inspected a manufacturer of short-fiber pulps made from eucalyptus wood in Fray Bentos, Uruguay, in 2009. This raw material is used in printing paper for magazine covers. As part of this inspection, we toured plantations and pulp production facilities, held talks with employees on the subject of social standards, and shared views with environmental protection and anti-corruption organi- zations. The inspection concluded with a positive as- sessment. Participation in international initiatives In 2009, Axel Springer again supplied data about its own greenhouse gas emissions (CO2 equivalents) to be used in the German report of the Carbon Disclosure Project (CDP). The CDP is the world’s largest joint project of institutional investors devoted to measuring the eco- nomic impacts of climate change. As a member of the “Business & Biodiversity” initiative created by the German federal government in 2008, Axel Springer accepted the obligation to analyze the conse- quential effects of its activities on biological diversity, and to adjust its sustainability management program accord- ingly. One of the projects undertaken in this regard in- volves the formulation of biodiversity criteria to be applied in purchasing office paper and environmental advertising brochures. The Business and Biodiversity Initiative (B&B) is an international project conducted under the aegis of Germany’s chairmanship of the UN Convention on Bio- logical Diversity (CBD). Management Report of the Group and Management Report of Axel Springer AG 51 Business development and performance General economic conditions The economic environment was extremely challenging for all media companies in 2009. The worldwide reces- sion adversely impacted their business throughout the year; in the second half, the economic situation stabilized on a low level. The advertising market in particular came under considerable pressure. General economic environment Following the worst economic downturn since the Sec- ond World War, the global economy picked up consid- erable momentum in the second half of 2009. Supported by massive economic stimulus programs and expansive monetary policies, the trend reversal occurred much faster than had been widely feared. According to calcula- tions of the IMF, worldwide economic output contracted by 0.8 % in 2009. The recovery was driven in large part by the dynamic growth of emerging economies. In the summer of 2009, for example, China’s economy resumed growing at a rate almost matching its growth rate prior to the financial markets and economic crisis. Economic growth in the industrialized nations was more subdued, but they too were able to arrest the economic decline in the second half of 2009. The U.S. economy was buoyed by a strong jump in consumer spending, fueled in large part by the “cash for clunkers” program, which boosted automobile sales. On the other hand, investment on plant and equipment increased only slightly. The Japanese econ- omy recovered somewhat, as foreign trade revived and consumer spending rose. The German economy contracted in 2009 for the first time in six years. According to preliminary calculations of the German Federal Statistical Office, German gross domestic product decreased by 5.0 % in real terms. Most of the economic contraction occurred in the winter months of 2008/2009, as the economy stabilized in the later course of 2009. The German economy was weighed down by the performance of exports, which had served as an important growth engine in earlier years. Exports declined at a real rate of 14.2 %, and imports at a real rate of 8.9 % in 2009. On the other hand, consumer spending provided a positive boost to the economy. Benefiting very much from the government subsidization of car sales, consumer spending increased at a real rate of 0.2 % in 2009; excluding automobile purchases, however, private households actually re- duced their spending. The reason behind this was the 0.9 % decrease in take-home pay. According to the consumer research institute Gesellschaft für Konsumfor- schung (GfK), consumer sentiment improved steadily during the course of 2009, although a slight retrench- ment was observed in December. Consumer spending was bolstered by the historically low inflation rate of only 0.4 %, the lowest reading since the reunification of Ger- many. Lower food and energy prices were key factors contributing to the low inflation rate. Despite the deep recession, unemployment increased only slightly in 2009 as companies sought to protect jobs and resorted to shortened working hours to a substantial degree. According to the German Federal Employment Agency, 1.1 million employees were working fewer-than- normal hours in September 2009. On average, 3.4 million people were unemployed in 2009. In our international markets the eastern European Member States of the European Union were especially hard hit by the global economic crisis in 2009. With the exception of Poland and the Czech Republic, none of the countries in this region were in a position to under- take significant economic support measures. On average, eastern European Member States saw their gross do- mestic products contract at a rate of 3.9 %. Poland was the only EU nation in eastern Europe to achieve positive economic growth in 2009 at a real growth rate of 1.3 %. The Czech Republic saw its GDP decline at a rate of 4.3 %, while Hungary was even greater of 6.6 %. As a result of the lower global demand for commodities and a drastic decline in investment expenditures, the Russian economy suffered a real con- traction of 8.0 % in 2009. All the western European nations were adversely af- fected by the economic crisis in 2009. Supported by government spending, the French economy contracted by only 2.3 %. Compared with other European countries, Switzerland experienced a relatively mild GDP contrac- 52 Annual Report 2009 Axel Springer AG tion of only 2.0 %. The Spanish economy contracted at a rate of 3.7 % in 2009. Thanks to extensive economic stimulus measures and a revival of exports, Spain recov- ered somewhat over the course of the year. Industry environment Press distribution market The reduced level of consumer spending (excluding automobile purchases) was clearly evidenced in the development of the German press distribution market. Weighted for their respective publication frequencies, the total paid circulation of newspapers and magazines tracked by IVW was 2.4 % less than the corresponding prior-year figure. Thanks to price increases implemented in the last four quarters, however, circulation revenues were only 0.8 % less than the respective prior-year figure. All together, the 373 daily and Sunday newspapers tracked by the IVW generated total sales of 23.2 million units per issue, indicative of a 2.2 % decrease from the prior year. Newsstand sales suffered a much worse de- cline (– 3.9 %) than subscription sales (– 1.8 %) in 2009 in a continuation of the trend observed in the previous year. Within the press distribution market, the demand for daily and Sunday newspapers (weighted for their respective publication frequencies) declined by 2.4 % in 2009. At 115.1 million units per issue, the total sales of general-interest magazines (including membership and club magazines) declined by 1.0 % from the prior year. Having sustained a 0.2 % decrease from the prior year, newsstand sales experienced an almost identical development as subscription sales (– 0.1 %). Weighted for their respective publication frequencies, the demand for general-interest magazines in 2009 was 2.3 % lower than in 2008. Whereas the circulation of print media continued to fall, online media continued to gain readers in 2009. Accord- ing to a study entitled “Internet facts 2009-III” published by the online research association Arbeitsgemeinschaft Online Forschung (AGOF), 43.5 million people in Germany used the Internet (Internet users over the last three months). This number represents 67.1 % of the German resident population over the age of 14. As the Internet has become established in all segments of the population, the demographic structure of Internet users has drawn increasingly closer to that of the overall population. Of the 43.5 million people who use the Internet on a regular basis, 64.5 % use it to obtain news about world events, and 57.3 % use it for regional or local news. Thus, along with retrieving and sending e-mails, weather information, online shopping, and online research, news is one of the most important reasons for using the Internet. More than one-third of users turn to the Internet for information on movies, show times, and sporting events either frequently or occasionally. Another one of the 20 most-used online categories is jobs and real estate listings. Based on the data published by IVW, content portals of the German print media were visited much more fre- quently in 2009 than in 2008. Thus, the 20 most-visited portals of German premium newspapers registered an average 34 % increase, and magazine portals a 31 % increase in the number of visits. Furthermore, nearly all the portals that are geared primarily to entertainment attracted higher numbers of visitors. According to com- Score, the number of unique visitors to the most-visited portals increased at a double-digit rate. Advertising market The advertising market was also hard hit by the eco- nomic crisis in 2009, as businesses reduced their adver- tising budgets across the board. However, this trend is not fully reflected in the available data on the state of the advertising market, including the data provided by Nielsen Media Research, among others. That is because this data only refers to advertising for branded products and services, and that of large-scale retailers, and does not include classified ads and brochure supplements. It should also be remembered that considerably intensi- fied competition in the media industry is putting pressure on advertising rates, so that figures based on standard rates, which disregard any discounts allowed, do not truly reflect the actual situation. Therefore, the trend of net advertising revenues, which is economically more important, was considerably more unfavorable. At € 18.9 billion, the total advertising market (includ- ing conventional online advertising, but excluding search- term marketing and affiliates, as well as media advertis- ing) was nearly unchanged from the prior-year level, Management Report of the Group and Management Report of Axel Springer AG 53 having increased by only 0.3 % in 2009 (Nielsen Media Research). Based on preliminary estimates of the Central Association of the German Advertising Industry (ZAW), however, net advertising revenues declined by 8 % across all media categories. At € 6.6 billion, the gross advertising revenues of print media (excluding classified ads and advertising supplements as well as media ad- vertising) were considerably lower (– 6.4 %) than the corresponding prior-year figure. According to Nielsen Media Research, the volume of newspaper ads for brand-name products (excluding media advertising) was slightly higher (+ 0.7 %) than the prior-year figure. While advertisers in the sectors of fi- nance, automobiles, energy, other transportation, and telecommunications reduced their newspaper advertising expenditures, advertisers in the sectors of textiles and clothing, retail, tourism, art and culture, and food in- creased their newspaper advertising expenditures. Dis- count stores in particular increased their advertising expenditures substantially again. However, because Nielsen tracks only a relatively small portion of newspa- per advertisements, namely those for branded products and services and the advertising supplements of large- scale retailers, this data does not fully reflect the actual business performance in this segment. According to ZMG-Statistik, for example, the net advertising volume of regional subscription newspapers (including classified ads) declined by 12.1 %, while the ad volumes of national newspapers (including classified ads) actually declined at an average rate of 30.0 % in 2009 (Ulrich + Partner). In the group of regional subscription newspapers, the vol- ume of all classified ads was lower in 2009; this trend was most pronounced with regard to the volume of job ads, real estate ads, automobile ads, and event ads. In 2009, the volume of job ads was 39.3 % lower than the corresponding prior-year figure. At € 2.6 billion, gross advertising revenues in the German general-interest magazine market (excluding media advertising) were 14.8 % less than the corresponding prior-year figure. Nearly all categories of general-interest magazines were affected by declines in advertising reve- nues, but the declines were most pronounced in the categories of illustrated current-interest magazines (– 19.0 %), business magazines (– 35.6 %), IT/telecom magazines (– 26.0 %), monthly women’s magazines (– 13.9 %), and automotive magazines (– 15.0 %). Only health and parenting magazines experienced an increase in advertising revenues (+ 0.5 %). In the case of general- interest magazines, net advertising revenues also fared much worse than gross advertising revenues. According to Nielsen Media Research, gross advertising revenues (excluding media advertising) in the German online market (conventional banner advertising, exclud- ing search-term marketing and affiliates) increased by 10.4 % in 2009, reaching € 1.5 billion. Also in this seg- ment, data does not include any form of revenue-reducing discounts so that the actual development was significantly less favorable. According to estimates of OVK, the online advertising market experienced net growth of 2 %–3 % in 2009. Again in 2009, the online services sector accounted for the highest volume of advertising, with gross adver- tising revenues of € 234.3 million (– 10.9 %). The in- crease in the advertising revenues of conventional online banner formats was driven mainly by the retail, personal care products, automobiles, tourism, textiles and clothing, and data processing sectors. Nonetheless, the growth of conventional online advertising slowed from the rates observed in prior years. For the first time since online advertising revenues were first recorded in 2003, advertising expenditures actually declined in the months of June (– 1.7 %) and August 2009 (– 7.2 %). The online marketers association OVK calculated total online gross advertising revenues (including affiliate networks and search-term marketing) of € 4.1 billion (+ 12 %) for the full year 2009. According to Nielsen Media Research, advertising- financed television in Germany experienced a 2.6 % increase in gross advertising revenues (excluding media advertising) in 2009 to reach € 8.74 billion. Whereas private-sector TV stations expanded their gross advertis- ing revenues by 3.2 % to € 8.39 billion, state-owned TV stations saw their advertising revenues decline by 10.3 % to € 342.1 million. In the German radio market, gross advertising revenues (excluding media advertising) increased by 2.1 % to € 1.16 billion in 2009. Whereas state-owned radio sta- tions saw their gross advertising revenues increase by 54 Annual Report 2009 Axel Springer AG 8.3 %, the gross advertising revenues of private-sector radio stations were nearly unchanged from the prior year (– 0.1 %). Also in the case of electronic media, the grow- ing divide between gross advertising revenues and net advertising revenues is not reflected in these figures. According to the current forecast of ZenithOptimedia, the net advertising expenditures on newspapers and magazines (including classified ads) in the international markets in which Axel Springer is represented with its own print media declined across the board in 2009. In some cases, double-digit declines were registered. Print Advertising Demand 2009 (Selection) Change in net ad volume compared to prior year Newspapers Magazines Germany Poland1) Switzerland2) Hungary France Spain1) Russia3) – 6.0 % – 19.3 % – 20.5 % – 14.3 % – 7.1 % – 9.0 % – 18.5 % – 13.5 % – 8.0 % – 19.1 % – 25.0 % – 28.5 % – 54.3 % Czech Republic2) – 14.0 % – 11.7 % Source: Forecast according to ZenithOptimedia, Advertising Expenditure Forecasts 2009. 1) Excluding classified ads. 2) Gross advertising volume, excluding classified ads. 3) Print media in total. Business developments and operating performance of the Group Acquisitions, divestitures, and strategic partnerships Axel Springer took additional steps to bolster the cross- media orientation of its media portfolio in 2009. In the business of domestic newspapers and magazines, the Group sold various peripheral activities; in the interna- tional print business, the Group reorganized its activities in Poland and expanded its business in Russia; and in the digital media business, the Group particularly made significant investments in marketplaces and perform- ance-based online marketing and expanded its activities to the key British market. Newspapers National In the first half of 2009, we sold minority investments and streamlined our regional newspaper portfolio to focus on the markets of Hamburg and Berlin. In the spring of 2009, Axel Springer AG already sold its investments in the re- gional newspapers Leipziger Volkszeitung (50 %), Lübecker Nachrichten (49 %), and Kieler Nachrichten (24.5 %), as well as its equity interest in the north German publishing holding company Hanseatische Verlags-Beteiligung (23 %), to Verlagsgruppe Madsack, Hanover. The total purchase price for this transaction was € 275 million. Of this amount, € 125 million was paid at the start of the second quarter and the balance was deferred. It will be paid with interest in regular installments over the period from 2011 to 2016. Concurrently with the sale of the regional newspaper investments to Verlagsgruppe Madsack, Lübecker Nachrichten also purchased Axel Springer’s equity inter- est in Ostsee-Zeitung in Rostock (50 %) for a purchase price of € 35 million. The sale of the newspaper Elmshorner Nachrichten to the newspaper publisher Schleswig-Holsteinischer Zeitungsverlag was finalized in August 2009. The same buyer also purchased Axel Springer’s minority interest (23.44 %) in Pinneberger Tageblatt in April 2009. Last, in December, Axel Springer sold its minority inter- est (14.5 %) in the regional newspaper Westfalen-Blatt to the Dr. Ippen newspaper group. The sale was final- ized in January 2010. Magazines National In the Magazines National segment, Axel Springer reor- ganized its women’s and music titles in July 2009. As part of this reorganization, the youth titles of Axel Springer Mediahouse München (Popcorn and Mädchen) and the women’s magazine Jolie were sold to Vision Media GmbH, with its head office in Munich, and the 50 % interest in Family Media GmbH & Co KG was sold to 2ME Holding AG, Basle/Switzerland. Yam! had already been posi- tioned as a purely online youth brand in January 2009 and the print edition was discontinued. In the future, the two remaining major women’s maga- zines BILD der FRAU and FRAU von HEUTE will be managed along with the TV program guides in the new Management Report of the Group and Management Report of Axel Springer AG 55 publishing group for TV program guides and women’s magazines. The music titles ROLLING STONE, MUSIKEXPRESS, and METAL HAMMER have been assigned to the WELT Group and their editorial depart- ments relocated from Munich to Berlin. In May 2009, Axel Springer Financial Media GmbH sold its monthly entrepreneur’s magazine MARKT und MITTELSTAND in order to focus its print activities on EURO and EURO am SONNTAG. Print International The most important change affecting the Group’s inter- national print media was the purchase of a 49 %-equity interest in Infor Biznes Sp. z o.o., a subsidiary of the Polish publishing house Infor PL. This acquisition was finalized in October 2009. In September, the daily news- paper DZIENNIK had been combined with Gazeta Prawna, a newspaper published by Infor Biznes, in order to create a new premium newspaper with an accompa- nying online presence. The new DZIENNIK GAZETA PRAWNA improves Axel Springer’s market chances in Poland’s highly competitive environment. Axel Springer Russia further extended its market position in that country by purchasing all the shares of G+J Russia. In the future, the entire portfolio of G+J Russia, including the established print titles GEO, GALA BIOGRAFIA, GEO TRAVELLER, and GEOLENOK, will be operated under license. The acquisition also covered various online sites, including the parents’ portal moiroditeli.ru and the life- style website moizvezdi.ru. This transaction is pending, subject to the approval of the cartel authority. Digital Media Axel Springer expanded its market position in the seg- ment of online marketplaces. In early September 2009, Axel Springer increased its investment in StepStone ASA, Oslo/Norway, from 33.26 % to 52.77 %, through the purchase of additional shares. After further purchases, mainly in connection with a public takeover bid and the initiation of a squeeze-out process, Axel Springer held 100 % of this company’s equity as of the balance sheet date. StepStone operates online job exchanges in 13 countries of Europe and is therefore one of the leading providers in this segment. StepStone is also one of the world’s leading providers of talent management software. Axel Springer also stepped up its activities in the area of performance-based online marketing significantly in 2009. Effective in October 2009, Axel Springer and PubliGroupe together purchased 50.1 % of the equity in Digital Window Ltd., London/Great Britain, one of Britain’s leading pro- viders of performance-based online marketing services, by way of a joint intermediate holding company (Axel Springer share: 52.5 %). By means of exercising the call and put options stipulated in the corresponding agree- ment, the remaining equity still held by the founders can be purchased on a step-by-step basis in the future. Digital Window ideally complements the activities of zanox, especially from a regional perspective. The acqui- sition in Great Britain, the biggest European market for such services, creates an opportunity to accelerate the company’s international growth and further develop the offered services on a joint basis. Moreover, Axel Springer and PubliGroupe, Lausanne, established the framework conditions for the strategic further development of zanox. This company will remain under the joint management of the shareholders Axel Springer and PubliGroupe (47.5 %), with Axel Springer holding a majority interest of 52.5 %. Therefore, the reve- nues and results of zanox will be completely consoli- dated in the financial statements of the Axel Springer Group in the future as well. In consideration of the various tax and regulatory pro- ceedings that have been brought against companies of the Dogan Group, Axel Springer entered into an agree- ment with Dogan Sirketler Grubu Holding A.S. (DH), the parent company of the Dogan Group, in November 2009. This agreement enhances the guarantees and protected rights of Axel Springer with regard to its investment in the TV subsidiary Dogan TV Holding A.S. (DTV), Istanbul/- Turkey. Among other things, DH has guaranteed pay- ment of all claims against Dogan Yayin Holding A.S. (DYH), Istanbul/Turkey, as part of the stable-value clause, which was extended to 2016. The judicial proceeding against DTV for tax claims and penalties of approxi- mately € 2.2 billion is still pending in the first instance. On the other hand, the regulatory proceeding brought by the 56 Annual Report 2009 Axel Springer AG media oversight authority RTÜK against DTV and various subsidiaries was suspended indefinitely in January 2010. In a recent ruling, the court of first instance declared that about 90 % of the claims being pursued against DYH by the Turkish tax authorities in the total amount of approxi- mately € 425 million were unjustified. As part of this proceeding, moreover, in early February 2010 a court ordered the release of assets that had been frozen by the Turkish tax authorities as security for its claims. Based on the agreement made in November 2009, DYH conducted a capital increase of approximately € 196.4 million for DTV in January 2010. As a result, Axel Springer’s investment was reduced from 25.0 % to initially 22.1 %. The agreement calls for another capital increase of about € 188.0 million, which will further re- duce Axel Springer’s investment in DTV to 19.9 %. The contracts concluded in November 2008 for the purchase of shares representing at least 9.1 % of DYH’s equity and the reduction of Axel Springer’s investment in DTV to 19.9 % have not yet been finalized, due to the above-mentioned judicial proceedings. Nonetheless, the agreement of November 2009 stipulated that Axel Springer will purchase an equity interest of 29 % in DYH. One of the preconditions for this acquisition is the suc- cessful out-of-court settlement of the tax proceeding against DTV. Because the proceeding is still pending before the court, one precondition for the obligation to finalize the agreement was not met. Nonetheless, DH and Axel Springer continue to discuss the possible ac- quisition of an investment in DYH by Axel Springer. Consolidation of competencies Along with the active management of the media portfolio, particular emphasis was given also to the creation of consolidated editorial competence centersin the Maga- zines National segment and to the centralization of reach marketing. In April 2009, our six TV program guides were placed under the control of a joint editorial department in Ham- burg; in May 2009, the women’s magazines BILD der FRAU and FRAU von HEUTE were likewise placed under the control of a central editorial department and in the following month the editorial departments of COMPUTER BILD, COMPUTER BILD SPIELE, and AUDIO VIDEO FOTO BILD were combined. The combined usage of editorial capabilities will make it possible to sharpen the profiles of the individual titles, exploit content-related synergies and optimize costs. In the first quarter of 2009, the central marketing unit Axel Springer Media Impact broadened its portfolio by also assuming responsibility for the marketing of computerbild.de and sportbild.de. Thus, all the Group’s newspapers, magazines, and related digital media, both national and international, are now marketed centrally. This move solidified Axel Springer Media Impact’s posi- tion as Germany’s biggest cross-media media marketer and as the first choice for online brand advertising. Ac- cording to market studies, Axel Springer Media Impact has widened its lead over competitors, based on gross market shares. Towards the end of 2009, the Group’s central marketing unit reached more than 75 million newspaper and magazine readers in Germany and unique users of content portals. Furthermore, the pro- cess of integrating the national media properties under the roof of a comprehensive and consistent marketing concept was completed. In the first quarter of 2010, Axel Springer Media Im- pact will take over the telephone-supported acquisi- tion of small to mid-sized advertising customers and ad service from ASV Direktmarketing GmbH (asdirekt), a wholly owned subsidiary of Axel Springer. Conse- quently, asdirekt, which will be assigned to the WELT Group, BERLINER MORGENPOST, and HAMBURGER ABENDBLATT, will mainly be left with subscriber service and support. The closer connection with market units resulting from this move will enhance the effectiveness of direct marketing in all distribution channels and generate efficiency and quality advantages in subscriber service and support. Innovation and product development Axel Springer upgraded its business model by further expanding its spectrum of products and services in 2009. Highlights included the development of new advertising formats, the intensive linkage of print and online media, and the conception of paid digital content. Management Report of the Group and Management Report of Axel Springer AG 57 Innovative advertising formats Building on the extremely successful advertising format known as “people’s products,” which was conducted in November 2009 for the 100th time, Axel Springer Media Impact introduced a new advertising format, “family products,” at the start of 2010. Under this joint market- ing concept, selected products are promoted on a cross-media basis in BILD am SONNTAG and in other high-reach publications of the BILD family. The new marketing service has been very well received by ad- vertising customers. In addition, a performance-based remuneration system for manufacturers of fast-moving consumer goods, the first of its kind, was already presented in the first half of 2009. From the outset, this new system encountered a high level of acceptance in the market. Under this ser- vice, the cost is determined on the basis of the mea- surable sales impact of the ad placements. In close cooperation with BILD and Bild.de, moreover, Axel Springer Media Impact created the innovative for- mat of “user-generated advertising,” which is highly regarded in the trade community. Under the campaign known as “Make Your Own Ads in BILD,” readers, artists, and advertising professionals were invited to design the next advertising campaign for BILD. The quality of the more than 10 thousand submissions received by the editorial department exceeded every- one’s expectations. Prizes were awarded to the best ideas, which were then quickly implemented in the marketing area. This format will be pursued and offered to selected advertising customers in the future as well. In the segment of performance-based online marketing, zanox launched its “Web Services” in 2010. These services provide improved access to the partner net- work and web infrastructure so that customers can implement innovative models to monetarize their web- sites. zanox organized two contests to promote the development of innovative applications and tools for the Web Services interface. The response was extraordi- nary and numerous ideas have since been imple- mented. In the zanox Application Store, a B2B innova- tion platform that opened in June, developers can pre- sent their applications live and advertisers can make use of new, highly promising tools. Further development of media formats Seizing upon the latest trends in reader and user behav- ior, Axel Springer developed new formats and made adjustments to existing publications with the support of in-depth market research. In the print media, the follow- ing projects were especially noteworthy: (cid:132) A pilot project for distributing BILD in a handy tabloid format. When tested in Munich’s commuter rail sys- tem, the new format met with strong interest among readers, retailers, and the trade press. Aimed primarily at young readers and commuters, the new tabloid- format BILD will be optimized in 2010. (cid:132) The market introduction of HÖRZU WISSEN, a high- quality, bimonthly magazine that presents topics in the areas of nature and the environment, health, his- tory, and science in a reputable, interesting, and credible manner. Axel Springer also extended its strategic partnerships in areas such as moving-image and regional marketing, and boosted its gross market shares. Furthermore, Axel Springer Media Impact has been using the “Smart AdServer” technology developed by auFeminin.com since mid-2009. Using this technology, we can help our customers design their advertising campaigns on a quick, intuitive basis using innovative video and rich-media formats. (cid:132) In response to strong reader interest, our specialist publication for classic cars both old and young, AUTO BILD KLASSIK, will now appear every two months, in- stead of four times a year, starting in 2010. (cid:132) The launch of BEOBACHTER Natur, a quarterly maga- zine aimed at nature-loving readers in Switzerland. Due to the positive response of readers and advertis- ing customers, this title will now appear on a nearly monthly basis (ten issues a year), starting in 2010. 58 Annual Report 2009 Axel Springer AG Axel Springer also came out with numerous innovations in its digital media business, particularly: (cid:132) Expanded, personalized content settings on Bild.de. As of May 2009, users can configure the news ap- pearing on Bild.de to suit their own particular interests and link it to their own homepage, in line with the slo- gan “Make Your Own Bild.de.” Also, the web-TV of- fering was expanded, in that every major news story is now accompanied by an internally produced news video. Furthermore, Bild.de further expanded its of- fering of innovative video formats by adding a new movie portal, among other things. In cooperation with computerbild.de and autobild.de, Bild.de offers soft- ware downloads and a video channel for automobiles. (cid:132) Intensive linkage with social networks in the German- language Internet. Since the third quarter, for in- stance, Axel Springer’s portals present news stories on Facebook, Twitter, and XING, along with a daily newsletter. (cid:132) The first-ever print edition of a soccer guide by transfermarkt.de, timed to coincide with the start of the German soccer season in September 2009. This voluminous reference work covering almost 300 pages demonstrates the fact that “cross-media” at Axel Springer is not a one-way street: besides trans- ferring print content to online media, we also transfer web content to print media. (cid:132) The introduction of new content portals in the Group’s international markets. In Poland, Axel Springer launched the college student portal and online career center students.pl, plus a Polish version of auFeminin.com, known as oFeminin.pl. In Switzerland, Axel Springer on the basis of finanzen.net completely overhauled and relaunched its investors’ portal stocks.ch, and the electronic program guide tele.ch launched in the sec- ond quarter, offering convenient search functions, plus all the program tips contained in the print edition. Establishment of paid premium-content offers When it comes to the development and introduction of paid premium-content offers on the Internet, Axel Springer has played a pioneering role in the publishing industry. As part of our premium initiative, several of our German newspapers introduced innovative paid-content subscriptions for the iPhone and Internet in the second half of 2009. Subscribers of these services benefit from attractive content, easy-to-use functions and services, and simple billing options. As of December 2009, various newly developed iPhone applications for BILD and WELT are available for download under exclusive subscription plans. Their unri- valled navigation features optimally exploit the capabilities of these mobile communication devices. Furthermore, subscribers receive much more than what is available under the existing, no-cost mobile services of BILD.de and WELT ONLINE. For example, they can read pdf versions of the print editions of BILD and WELT KOMPAKT on the evening before the newspapers are distributed. These apps have gotten off to a very successful start. Since the beginning of 2010, in fact, we have registered more than 100 thousand downloads. Furthermore, the paid mobile subscription service known as “My Club Premium” has been available to users since the third quarter of last year. With this service, soccer fans receive personalized, up-to- date news from the First and Second National Soccer Leagues via their iPhones. Another service that went live in the third quarter of 2009 was the new “Bild.de Super- Manager,” a fantasy league in which more than 100 thousand soccer teams have been created by users. As a complement to its advertising-financed movie portal, Bild.de now also offers a paid movie service under video- thek.bild.de. Another paid content service is the WELT am SONNTAG e-mag, the new digital magazine produced by Germany’s biggest premium Sunday newspaper. The e-mag features news stories from all departments, in an optically rich multimedia presentation. Finally, the premium newsletter WELT LAGE provides a digital news survey with direct links to news stories and commentary from media outlets and blogs. Management Report of the Group and Management Report of Axel Springer AG 59 As of December 2009, the websites of BERLINER MORGENPOST and HAMBURGER ABENDBLATT offer both free content and paid premium content. Since that time, non-subscribers can access the primarily local and regional news stories and the online archive only by paying a fee. Since the fourth quarter of 2009, a premium application of the news portal bz-berlin.de is offered in the iTunes Store. Subscribers of this new mobile service can access all the news, reports, and photo galleries of Berlin’s big- gest newspaper anywhere and at any time. The “floating navigation” feature allows the application to determine the user’s exact location, so that he or she can navigate through the various districts in a targeted manner and find just the right local stories twenty-four hours a day. Cross-media linkage Axel Springer continued its intensive efforts to link its newspapers and magazines with its digital media in 2009. For example, BILD and BILD am SONNTAG spatially integrated their editorial teams on a cross-media basis across all departments. Furthermore, 250 BILD reporters were equipped with mini-cameras so they can record online video content. In July, the online portal of BERLINER MORGENPOST launched a newsletter “Berlin in the Morning,” produced in the integrated newsroom, which provides an overview of life in the capital city every work day. In cooperation with immonet.de, moreover, BERLINER MORGENPOST and HAMBURGER ABENDBLATT initiated the cross- media marketing of real estate ads in the third quarter of 2009. Consequently, online ads and newspaper ads can now be booked together, in a high-reach and also low- cost combination. Axel Springer also seeks to network its digital media together. As an example, the cooperation between sportbild.de and transfermarkt.de and between computerbild.de and the online games provider gamigo.de was intensified in 2009. Finally, we achieved a milestone also with regard to the intensive linkage of TV program guides with digital TV navigation. The new self-learning software program watchmi.tv by Axel Springer Digital TV, which operates as a plug-in for the Windows Media Center, records TV shows according to the users’ individual preferences and organizes them into personal TV channels. Because it allows for highly personalized advertising, this service has opened up new revenue sources as well. In coop- eration with Axel Springer Digital TV, the TV program guides published in Switzerland overhauled their com- mon website and added a new electronic program guide. Awards The innovation capacity and the excellent journalistic quality of our media were again recognized in 2009 by means of numerous distinctions and awards. In this year’s Best of Newspaper Design contest spon- sored by the U.S. Society of News Design, WELT am SONNTAG was honored as the World’s Best Designed Newspaper for its outstanding design, graphics, and photos. In addition, Germany’s leading premium Sunday newspaper received this year’s Herbert Quandt Media Prize for its “Kinderleicht” series, which presents com- plex economic and financial topics in a way that children can understand. Also, WELT KOMPAKT received the World Young Reader Prize 2009 of the World Associa- tion of Newspapers for its trailblazing editorial strategies. In another distinction, the integrated newsroom of WELT Group/BERLINER MORGENPOST was chosen as one of the “selected places” as part of the location initiative “Land of Ideas” in February 2009, in recognition of its trendsetting contributions to the media landscape. Fur- thermore, the WELT Group received the Cross-Media Award 2009 of the World Association of Newspapers and News Publishers (WAN-IFRA) for having run the best international cross-media campaign of any newspaper publishing house in the world. BERLINER MORGENPOST also placed very well in the Best of Newspaper Design contest, winning six Awards of Excellence, especially for the layout and design of the weekly supplement BERLINER ILLUSTRIERTE. And the editorial team of BERLINER MORGENPOST received two awards: the coveted Theodor Wolff Award of the Federation of German Newspaper Publishers for out- standing reporting and the German Local Journalist 60 Annual Report 2009 Axel Springer AG Award of the Konrad Adenauer Foundation for a series of articles. Furthermore, Die WELT received the Media Award of the insurance company AachenMünchener Versicherung for its consumer section. Finally, various reporters and editors of the Axel Springer Group re- ceived individual journalist awards. HAMBURGER ABENDBLATT received the World Young Reader Prize 2009 for its youth project “Leseecke,” under which schools receive free subscriptions from so- called subscription mentors. Furthermore, an exemplary local news report was honored with the “German Re- porter Award 2009” of the Reporter Forum. Our magazines in Germany and abroad also received various important awards in 2009. In late March 2009, for example, Germany’s top athletes again chose SPORT BILD as the best sports magazine. Consequently, SPORT BILD received the prestigious gold-medal HER- BERT Award for the third year in a row. In France, the biweekly cooking magazine VIE PRATIQUE GOURMAND was honored by the French Publishers’ Association and in Russia, our publications FORBES, NEWSWEEK, and COMPUTER BILD were selected as Press Leaders 2009 in their respective market segments by the Russian Press Association. In the Digital Media segment, our online properties im- monet.de, StepStone, zanox, and Digital Window all won awards in 2009. At the biggest Internet User Award in the German-speaking world, immonet.de was named the “Online Star 2009” as the most popular website in the category of “Money and Career.” The real estate marketplace was also singled out for its innovative radio campaign and was named the best real estate portal in the vote for the Website of the Year. In the ranking of the 500 best software-as-a-service (SaaS) providers, StepStone’s Solutions Division re- markably achieved sixth place, making it the most highly ranked company in Europe. For the second year in a row, the German website StepStone.de was elected as hav- ing the best career services offering in connection with the audience award Website of the Year. The industry association iBusiness awarded the title of Best Affiliate Network to zanox. Furthermore, zanox was named one of Europe’s ten most innovative Internet companies for its TechCrunch technology portal. The international success of zanox is reflected in its top ten placement in the U.S. affiliate networks ranking of the U.S. Website Magazine, among other distinctions. As part of a comparative test conducted by Internet World, zanox’s website achieved the top mark. Among the factors cited for this decision was the high quality of the contacts and transactions generated for advertising companies. As part of the a4u Awards 2009, Digital Window was named Innovative Network of the Year for the third year in a row, as well as the Publisher’s Choice of Network. Business development and performance – Group Despite the recessionary environment, Axel Springer performed well in its principal sales markets, especially compared with its competitors. At € 2,611.6 million, total revenues were 4.3 % less than the corresponding prior- year figure (PY: € 2,728.5 million); adjusted for consoli- dation effects, they were down 5.6 %. Adjusted for for- eign exchange effects, consolidated revenues were only 3.1 % less than the corresponding prior-year figure. Total revenues were weighed down especially by the depre- ciation of eastern European currencies. Revenues in € millions Circulation Advertising Other 264.7 1,248.1 1,215.8 296.9 1,138.5 1,176.2 2,728.5 2008 2009 2,611.6 Management Report of the Group and Management Report of Axel Springer AG 61 At € 1,176.2 million, circulation revenues were 3.3 % less than the prior-year figure (PY: € 1,215.8 million) and accounted for 45.0 % of total revenues. Thanks to the strong market position of our print media, the circulation declines were partially offset by selective copy price increases. The circulation revenues of the Group’s Ger- man newspapers were actually slightly higher than the corresponding figure for 2008, while the international print media suffered a substantial decrease in circulation revenues. At € 1,138.5 million (PY: € 1,248.1 million), the advertising revenues for 2009 were 8.8 % less than the corresponding figure for 2008 and accounted for 43.6 % of total revenues. As expected, the advertising revenues of the print media experienced an even weaker development, declining by 17.9 % in 2009, in a reflection of the extreme restraint exhibited by advertising custom- ers in the Group’s national and international markets. On the other hand, the advertising revenues of the Digital Media segment exhibited strong growth of 24.1 %. At € 296.9 million, the other revenues were 12.2 % higher than the corresponding prior-year figure (PY: € 264.7 million). Aside from moderate organic growth of 1.9 %, this increase resulted mainly from consolidation effects, including in particular the first-time consolidation of StepStone and the first full-year consolidation of gamigo. Comparing the revenue performance of the different segments, the national print media fared better than the international print media, with national newspapers posting a 5.0 % decrease and national magazines posting an 8.2 % decrease in revenues, while the revenues of the international print media were down 23.9 % in 2009. Ac- counting for 46.5 % of total revenues, nearly unchanged from the prior year (PY: 46.8 %), the Newspapers National segment was again the biggest contributor of Group-wide revenues by a wide margin. The revenues of the Digital Media segment posted strong growth of 24.4 %. Pro-forma digital media revenues amounted to € 569.0 million (PY: € 543.5 million). Consequently, the proportion of total revenues represented by digital media revenues rose to 21.0 % (PY: 18.8 %). This figure in- cludes the revenues of the companies acquired during the course of 2008 and 2009, especially StepStone, Digital Window, and gamigo, on the basis of unaudited financial information. International and Digital Media Revenues International Revenues as Percent of Total Revenues Digital Media Revenues as Percent of Total Revenues (Pro forma) 21.9 % 21.0 % 21.0 % 18.8 % Segment Revenues 2009 Newspapers National Magazines National Print International Digital Media Services/Holding 18.0 % 11.9 % 19.8 % 3.8 % 46.5 % 2008 2009 2008 2009 As a result of unfavorable foreign exchange effects and the particularly difficult market conditions in eastern Europe, the international revenues suffered a dispro- portionately large decline of 8.2 % to € 547.6 million (PY: € 596.8 million). Consequently, the proportion of total consolidated revenues represented by international reve- nues declined from 21.9 % in 2008 to 21.0 % in 2009. 62 Annual Report 2009 Axel Springer AG Under the assumption of constant exchange rates, the revenues generated in our international markets experi- enced a more moderate decline of 2.7 % in 2009. At € 2,383.5 million, the total expenses contained in the earnings before interest, taxes, depreciation, and amortization (EBITDA) were 0.8 % higher than the corre- sponding prior-year figure (PY: € 2,365.2 million). This increase resulted mainly from the consolidation of Step- Stone (especially personnel expenses) and Digital Window (especially purchased goods and services). Excluding acquisition effects, the total expenses were less than the corresponding prior-year figure. This development is a reflection of the efficient cost management practiced by Axel Springer again in 2009. The total expenses included restructuring expenses of € 74.9 million (PY: € 29.2 million). Furthermore, we made additional investments in our BILD and WELT brands in the fourth quarter of 2009. The purchased goods and services declined from € 945.4 million in 2008 to € 886.4 million in 2009. The 6.2 % decrease resulted primarily from the lower print circulation runs, which led to lower production costs and paper consumption. A countervailing effect emanated from the organic growth and acquisitions in the business of performance-based online marketing. At 33.9 %, the ratio of purchased goods and services was slightly less than the corresponding ratio for 2008 (34.6 %). At € 791.9 million, the personnel expenses were 9.6 % higher than the corresponding prior-year figure (PY: € 722.5 million). The significant increase was due in part to the non-recurring effect of the substantial expenses incurred for lay-off mitigation plans and partial early re- tirement schemes (known as Altersteilzeit in Germany) and in part to the first-time consolidation of new subsidi- aries. In the course of these, the average workforce rose from 10,666 in 2008 to 10,740 in 2009. and impairments were slightly higher in 2009, particularly due to purchase price allocation effects associated with the companies included in the consolidated financial statements for the first time in 2009. The other operating income/expenses was negative, at € – 634.5 million (PY: € – 611.8 million). Aside from a large number of minor items, the other operating income/ expenses for 2009 also contained income from the dis- posal of non-current assets (€ 9.1 million) and income from the Kirch insolvency (€ 7.6 million). At € 705.1 million, the other operating expenses were slightly higher, also due to consolidation effects, than the prior-year figure of € 697.3 million. The largest constituent items of other operating expenses were mailing and postage expenses and advertising expenses. The income from investments in the amount of € 212.1 million was mainly composed of the profit on the sale of regional newspaper investments and impairment losses in non-current financial assets. The prior-year value of € 407.8 million had been composed primarily of the profit on the sale of shares in ProSiebenSat.1 Media AG and impairment losses in non-current financial assets. Adjusted for these non-recurring effects, the investment income amounted to € 21.7 million (PY: € 33.1 million). The net financial income/expenses improved mark- edly from € – 61.5 million in 2008 to € – 25.0 million in 2009. The most significant component was an income item of € 9.4 million (PY: expenses of € 27.8 million) from the fair value measurement of the call options for the purchase of shares in Axel Springer AG that had been granted by the shareholders H&F Rose Partners, L.P. and H&F International Rose Partners, L.P. Further- more, we paid down financial liabilities and borrowed a smaller amount under the available credit facilities, on average, than in 2008 (see page 77). At € 92.4 million, the depreciation, amortization, and impairments were 17.6 % less than the corresponding prior-year figure (PY: € 112.1 million). The comparison figure for 2008 had been influenced by impairment losses of € 25.7 million in the item of other intangible assets (title rights) in the Magazines National segment. Disregarding this effect, the depreciation, amortization, The income taxes for 2009 amounted to € 83.8 million (PY: € 117.2 million). That corresponds to a tax rate of 21.1 % (PY: 17.0 %). Earnings before interest, taxes, depreciation, and amorti- zation (EBITDA) adjusted for non-recurring effects and effects from purchase price allocations, which is the central Management Report of the Group and Management Report of Axel Springer AG 63 financial performance indicator used by Axel Springer, amounted to € 333.7 million in 2009. As expected, that was markedly less than the corresponding prior-year figure (PY: € 486.2 million). This figure included restructur- ing expenses of € 74.9 million (PY: € 29.2 million), as well as higher marketing expenses compared to the prior year. EBITDA in € millions EBITDA margin in % 17.8 % 486.2 12.8 % 333.7 2008 2009 The consolidated net income amounted to € 313.8 million (PY: € 571.1 million). That corresponds to diluted earnings per share of € 10.19 (PY: € 18.54). Both figures contained significant non-operating effects. The figure for 2009 included the profit on the sale of regional newspaper investments (€ 214.4 million) and the figure for 2008 included the profit on the sale of shares in ProSiebenSat.1 Media AG (€ 438.3 million). Other non-operating factors were impairment losses in non-current financial assets (2009: € – 20.5 million; PY: € – 63.5 million), effects of purchase price allocations (2009: € – 26.7 million; PY: € – 46.5 million), income from the Kirch insolvency (2009: € 7.6 million; PY: € 6.2 million), the restatement of H&F options (2009: € 9.4 million; PY: € – 27.8 million), and other effects (2009: € – 13.5 million; PY: € – 0.5 million). The taxes attributable to these effects amounted to € 9.5 million (PY: € – 10.4 million). Adjusted for non-operating effects, the consolidated net income was € 152.6 million (PY: € 254.5 million). Based on the weighted average shares outstanding in 2009, adjusted diluted earnings per share declined from € 8.55 in 2008 to € 5.13 in 2009. Business development and performance – Segments Newspapers National Axel Springer’s newspapers performed well on the whole, considering the very difficult advertising and press distribu- tion market. Despite the reduced marketing budgets of advertisers, the Group’s newspapers managed to limit the declines in their operating business, with the exception of classified ads. Considering the tough market environment, the development of their circulation and reach numbers was relatively stable. Thus, Axel Springer reinforced its leading position in the German newspaper market. Europe’s biggest daily newspaper BILD impressively demonstrated its economic and journalistic strength amid the economic and financial crisis. With an average paid circulation of 3.2 million, BILD kept its reach on the high prior-year level of 11.6 million readers (all reach data according to ma 2010 Pressemedien I, unless otherwise indicated). BILD’s operating performance was supported by the image campaign launched in March 2009, in which well-known figures from the worlds of politics, sports, culture, and entertainment express their uncen- sored opinions of BILD. According to our internal market research, the image campaign has boosted the brand image of BILD with regard to acceptance and likeability. Mainly as a result of the successful clearance-oriented marketing campaigns of retail companies, BILD ex- tended its leading position among print media in the advertising market. Furthermore, several major advertis- ing customers were acquired on the basis of the per- formance-based remuneration system developed by Axel Springer Media Impact. BILD also posted gains on the distribution side, as the moderate circulation declines were more than made up by the positive effect of the copy price increase implemented in May 2008. With an average paid circulation of 1.7 million copies, BILD am SONNTAG successfully defended its position as Germany’s highest-reach weekly newspaper. Also in the case of BILD am SONNTAG, the circulation decline was offset by the positive effect of the copy price in- crease implemented in May 2008. 64 Annual Report 2009 Axel Springer AG Circulation Newspapers National Average paid circulation, IVW data 2009 Change yoy BILD 3,179,796 – 3.7 % BILD am SONNTAG 1,655,212 – 3.7 % DIE WELT/WELT KOMPAKT 266,140 – 3.3 % WELT am SONNTAG 402,541 0.1 % HAMBURGER ABENDBLATT 238,568 – 4.3 % BERLINER MORGENPOST 144,214 – 2.0 % B.Z./B.Z. am SONNTAG 188,835 – 4.6 % Our premium newspaper DIE WELT, along with the tab- loid format WELT KOMPAKT, suffered only moderate circulation declines in 2009, while improving its reach among the most important target groups. According to Leseranalyse Entscheidungsträger (LAE 2009), DIE WELT and WELT KOMPAKT together reach 200 thousand decision-makers in business and government. Including WELT ONLINE and WELT am SONNTAG, the WELT Group had more readers than any other premium news- paper in Germany. According to Verbraucher-Analyse 2009-III, the cross-media net reach of the WELT Group was 2.4 million readers and users. By means of the inno- vation campaign launched in November 2009, WELT KOMPAKT is seeking to further enhance its appeal for young readers in German cities; to that end, the innova- tion campaign is being accompanied by a marketing campaign. In addition, WELT KOMPAKT is now available for subscription in even more regions of Germany. Like B.Z. am SONNTAG, the newsstand newspaper B.Z. sustained circulation losses in 2009. Nonetheless, it successfully defended its strong market position in the Berlin-Brandenburg distribution area, with an average paid circulation of 188.8 thousand copies. Furthermore, it kept its reach stable and picked up a large number of new users with its completely overhauled news and city portal bz-berlin.de. Due to its lesser dependence on classified ads, its ad volume was more stable than that of other regionally oriented newspapers. Having sustained a decrease of only 2.0 % in its average paid circulation, BERLINER MORGENPOST performed better than the field of competitors in the past year. Due to the high quality of its journalism, coupled with its re- gional expertise, for which it won numerous awards again in the current year, the newspaper’s readers tend to be very loyal. In line with the general market trend of classified ads, BERLINER MORGENPOST experienced significant declines in its advertising business, particu- larly in its extensive section of classified ads for real estate, jobs, and travel offers. The situation was similar for HAMBURGER ABENDBLATT, which is being pro- duced in one of Europe’s most modern newsrooms; following the relocation in July 2009, the print and online editorial teams work directly together on a multimedia basis. Initiated in the third quarter of 2009, the coopera- tion between the newspapers BERLINER MORGENPOST and HAMBURGER ABENDBLATT and the online portal immonet.de has gotten off to a successful start: In the fourth quarter, already 15 % of real estate ads placed were ordered as part of a high-reach, cross-media combination. Key Figures Newspapers National in € millions 2009 2008 Change External revenues 1,213.7 1,277.6 – 5.0 % Share in cons. revenues 46.5 % 46.8 % Circulation revenues Advertising revenues Other revenues 631.8 548.0 33.9 625.8 623.4 28.3 1.0 % – 12.1 % 19.6 % EBITDA 243.8 348.9 – 30.1 % EBITDA margin 20.1 % 27.3 % At € 1,213.7 million, the revenues of the Newspapers Na- tional segment were only 5.0 % less than the corresponding figure for 2008 (PY: € 1,277.6 million). At € 631.8 million, the circulation revenues were 1.0 % higher than the prior- year figure (PY: € 625.8 million). This increase resulted mainly from the positive effects of the copy price increases implemented in 2008 for BILD, BILD am SONNTAG and B.Z., and from the copy price and subscription rate in- creases implemented in 2009 for the titles of the WELT Management Report of the Group and Management Report of Axel Springer AG 65 Group and the regional media HAMBURGER ABENDBLATT and BERLINER MORGENPOST. Adversely impacted as they were by the extreme restraint exhibited by advertising customers, the advertising revenues of € 548.0 million were 12.1 % less than the prior-year figure (PY: € 623.4 million). Regional newspapers, which are more dependent on classi- fied ads, suffered an above-average decline; this market segment has been especially hard hit by the recession. On the other hand, BILD was among the winners with respect to advertising revenues, thanks to the success of clearance sale-oriented advertising formats in the current market environment: Its advertising revenues were nearly as high as the corresponding prior-year figure. At € 243.8 million, EBITDA of the Newspapers National segment was substantially less than the prior-year figure of € 348.9 million, as expected. Lower advertising reve- nues were mainly responsible for this 30.1 % decrease. Another factor was represented by restructuring ex- penses in the amount of € 50.4 million (PY: € 18.7 million). At € 4.8 million, the income from investments was like- wise substantially lower than the corresponding prior-year figure (PY: € 19.9 million), due to the non-recurrence of the net income contributions of the minority investments in regional newspapers sold. Another factor weighing on EBITDA was the higher expenses associated with the intensified marketing for BILD and WELT in the fourth quarter. Despite the higher level of charges, the EBITDA margin was 20.1 % in 2009 (PY: 27.3 %). Magazines National Overall, the circulation and reach numbers of our maga- zines exhibited a more stable development than those of competing titles, so that market shares were gained in nearly every major segment. Having suffered only a slight decrease in the number of copies sold, our magazines reached more readers than in the prior year. Thus, Axel Springer reinforced its market position as the third-biggest magazine publisher in Germany. On the other hand, our magazines were not unaffected by the substantial declines in the German market for general-interest magazines. Furthermore, the restraint exercised by advertising cus- tomers led to reduced ad sales in almost all categories. In response to the lower revenues, we implemented various efficiency enhancement measures, including the consoli- dation of editorial departments, in particular (see page 56). Such measures have significantly improved the competi- tiveness of the Magazines National segment, an advan- tage that will come to bear in future years. Circulation Magazines National Average paid circulation, IVW data 2009 Change yoy TV DIGITAL HÖRZU FUNK UHR BILDWOCHE TV NEU 1,760,054 – 13.6 % 1,431,060 632,828 – 1.4 % – 6.5 % 179,205 – 10.2 % 128,987 – 12.6 % BILD der FRAU FRAU von HEUTE 1,017,192 – 0.4 % 194,683 – 19.4 % COMPUTER BILD COMPUTER BILD SPIELE 683,048 260,561 – 5.3 % – 6.9 % AUDIO VIDEO FOTO BILD 169,080 – 15.6 % AUTO BILD AUTO TESTS AUTO BILD ALLRAD AUTO BILD SPORTSCARS 617,175 217,663 64,134 65,574 0.2 % 0.6 % – 2.6 % 1.3 % SPORT BILD 473,831 – 1.5 % EURO 152,362 – 12.5 % EURO am SONNTAG 98,888 – 11.3 % ROLLING STONE MUSIKEXPRESS METAL HAMMER 56,378 53,558 46,997 5.9 % 5.0 % 2.7 % Axel Springer’s TV program guides and women’s magazines extended their respective market positions in the high-price segment. At 3.1 million readers, the reach of the biweekly TV DIGITAL was slightly higher than it was in the prior year; this gain was achieved in spite of the change of encryption system by the leading provider of German pay-TV at the end of 2008. TV DIGITAL is still 66 Annual Report 2009 Axel Springer AG the highest-circulation TV program guide in the high- price segment and the No. 1 for digital TV. Having sustained a circulation decrease of only 1.4 %, HÖRZU, the No. 1 weekly TV program guide in Germany, fared much better than other competing high-price titles. Notwithstanding a slight decrease in its reach, HÖRZU still reaches more readers than any other weekly TV program guide in Germany. The stable development was aided by the supplement HÖRZU DIGITAL, which con- tains the program listings of 58 digital broadcasters. Furthermore, the recently launched knowledge magazine HÖRZU WISSEN performed very well from the outset. Having sustained only a bare decrease of 0.4 %, the paid circulation of BILD der FRAU remained above the level of 1 million copies, which was a remarkable success con- sidering the tough predatory competition that still charac- terizes the women’s media segment. Thus, BILD der FRAU further extended its lead over the competition. Also with respect to reach, BILD der FRAU successfully de- fended its unchallenged market leadership position: ac- cording to ma 2010 Pressemedien I, it reached 5.8 million female readers, almost as many as in the prior year. FRAU von HEUTE benefited from the editorial team inte- gration with BILD der FRAU and especially from the new content and graphic concept developed there. Though much lower than the prior-year figure, the paid circulation managed to recover during the course of the year. For the year as a whole, the performance of Axel Springer’s computer, automotive, and sports magazines was mixed. While the big automotive magazines actually managed to increase their average paid circulation slightly, the circulation numbers of the sports magazines did not quite match the respective prior-year levels; within this group, computer magazines experienced the worst declines. Despite its lower circulation, COMPUTER BILD main- tained its leading market position by a wide margin. COMPUTER BILD SPIELE and the completely over- hauled AUDIO VIDEO FOTO BILD likewise held on to No. 1 positions in their respective specialty segments. Axel Springer’s automotive magazines performed relatively well and actually achieved a slight circulation increase, counter to the market trend. AUTO BILD, which is Ger- many’s most-popular and best-known automotive maga- zine according to a study conducted by TNS Emnid, achieved a 0.2 % increase in its circulation. Readers re- sponded well to the expanded length of the magazine, which has included eight more pages for a slightly higher copy price since March 2009, and to the new supplement AUTO BILD MOTORSPORT. With an average paid circula- tion of 617.2 thousand copies, AUTO BILD increased its circulation market share to 57.7 % and so reaffirmed its status as Europe’s biggest automotive magazine, with a wide lead over the second-biggest competitor. Produced in cooperation with autobild.tv and timed to coincide with the International Automobile Show in September, the multimedia edition of AUTO BILD generated especially high circulation numbers and ad volumes, as did the re- porting on the subject of the “The Golden Steering Wheel” Award in November 2009, which was awarded in coop- eration with BILD am SONNTAG and with sister titles from 25 countries of Europe for the first time. AUTO TEST, the buyer’s guide published by AUTO BILD and Germany’s leading monthly automotive magazine, increased its circulation and market share, as did AUTO BILD SPORTSCARS, the monthly magazine for lifestyle and sports cars. AUTO BILD ALLRAD, Europe’s biggest magazine devoted to all-wheel drive vehicles, managed to extend its market leadership position despite its slightly lower circulation. In response to strong reader interest, AUTO BILD KLASSIK, our specialty title for classic cars both young and old, will appear on a bimonthly basis, instead of four times a year, starting in 2010. After suffering significant declines in the first six months of 2009, SPORT BILD stabilized its circulation numbers in the second half of the year by means of a new special edition concept. For example, the popular special edi- tions published in conjunction with the start of the na- tional soccer league and the Champions League gener- ated strong sales. At 473.8 thousand, the full-year aver- age paid circulation of Europe’s biggest sports magazine was 1.5 % less than the corresponding prior-year figure. Management Report of the Group and Management Report of Axel Springer AG 67 As a result of the negative developments in the financial and capital markets, the operating environment for Axel Springer’s business publications was especially diffi- cult. The monthly magazine EURO and the weekly busi- ness and finance newspaper EURO am SONNTAG each sustained circulation losses of more than 10 %, while competing titles suffered similar declines. The advertising revenues of our finance and stock mar- ket portals were held down by the strained condition of the capital markets. Axel Springer Financial Media re- sponded immediately to the shortfall by making struc- tural adjustments designed to lower costs. Among the measures taken, an agreement was reached with em- ployees of the print titles to accept shortened work hours for a period of four months. Axel Springer’s music magazines all performed well in 2009. ROLLING STONE, MUSIKEXPRESS, and METAL HAMMER each sold more copies than in the prior year. The relocation of ROLLING STONE’s editorial staff to Berlin and their proximity to the WELT Group provided fresh editorial impetus. Pleased by the magazine’s exclu- sive supplements, among other things, ROLLING STONE’s readers rewarded the publication with a 5.9 % circulation increase. Key Figures Magazines National in € millions External revenues 2009 517.8 2008 564.1 Change – 8.2 % Share in cons. revenues 19.8 % 20.7 % Circulation revenues Advertising revenues Other revenues 358.8 140.2 18.8 373.6 176.0 14.5 – 4.0 % – 20.3 % 29.5 % EBITDA 55.0 88.8 – 38.1 % EBITDA margin 10.6 % 15.7 % At € 517.8 million, the total revenues of the Magazines National segment were 8.2 % less than the correspond- ing prior-year figure (€ 564.1 million). The circulation revenues of € 358.8 million were 4.0 % less than the prior-year figure (PY: € 373.6 million). Adjusted for de- consolidation effects in connection with the sale of Jolie and the youth magazines Mädchen and Popcorn, and for the non-recurring effect associated with the discon- tinuation of Yam!, the decrease amounted to 2.4 %. The declines in TV program guides and computer magazines were partially made up by higher revenues in the auto- motive and sports media, which resulted in part from copy price increases. At € 140.2 million, the advertising revenues were 20.3 % less than the prior-year figure (PY: € 176.0 million). Axel Springer’s business publications suffered the worst percentage drop, with their ad busi- ness revenues for 2009 being only about half the corre- sponding figure for 2008. But the Group’s computer and sports magazines also sustained above-average de- creases, while the TV program guides and women’s media fared somewhat better. A large part of the € 46.3 million decrease in revenues was offset by the practice of strict cost management. Another key factor was represented by the focused efficiency enhancement measures, which led to higher restructuring expenses in the amount of € 16.9 million (PY: € 5.3 million). At € 55.0 million, segment EBITDA was 38.1 % less than the prior-year figure (PY: € 88.8 million). The EBITDA margin came to 10.6 % (PY: 15.7 %). Print International For the most part, Axel Springer’s international print titles had to contend with very difficult conditions in the press distribution and advertising markets of the Euro- pean countries in which they operate. The extreme restraint exhibited by advertising customers, especially in central and eastern Europe and in Spain, was re- flected in the sharply lower advertising revenues. Axel Springer’s print titles were likewise affected by these declines, which were exacerbated by negative foreign exchange effects, and responded with comprehensive cost reduction measures. 68 Annual Report 2009 Axel Springer AG Circulation Poland (Selection) Average paid circulation, ZKDP data FAKT NEWSWEEK1) DZIENNIK GAZETA PRAWNA2) 2009 Change yoy 466,563 112,020 107,760 – 5.8 % – 8.9 % - 1) Source: ZKDP, January to November 2009 vs. January to November 2008. 2) Source: ZKDP, September to December 2009. Joint Venture with Infor Biznes. The advertising market in Poland felt the full force of the economic crisis in 2009; circulation numbers were also lower, both in newsstand sales and subscriptions. The Polish daily newspapers were particularly hard hit by these trends. Our premium newspaper DZIENNIK sus- tained substantial declines in the first half of 2009, before launching the new DZIENNIK GAZETA PRAWNA, pub- lished by the joint venture Infor Biznes, in September. Thanks to the strong emphasis placed on commentary, analysis, and expert opinions, this new title instantly achieved an average circulation of 107.8 thousand copies (September through December 2009), making it the third- biggest opinion-leading newspaper in Poland (all data on the Polish market according to ZKPD). The newsstand newspaper FAKT kept its market share, measured by paid circulation, above the level of 30 %, and so it re- mained the biggest daily newspaper in Poland. The Polish computer, automotive, and sports magazines of Axel Springer also maintained their circulation market shares on roughly the level of the prior year. Despite deep circulation losses, KOMPUTER SWIAT (the Polish edition of COMPUTER BILD) successfully defended its position as Poland’s highest-reach computer magazine. With an average paid circulation of 106.7 thousand (– 3.8 %), AUTO SWIAT (the Polish counterpart of AUTO BILD) continued to be the best-selling weekly automotive magazine in Poland. Launched in March 2009, the li- censed edition of AUTO BILD ALLRAD quickly brought its average paid circulation to 23.3 thousand copies. Our sports newspaper PRZEGLAD SPORTOWY stabilized its circulation at 57.6 thousand and generated the best performance of all Polish daily newspapers with regard to advertising pages. The licensed edition of FORBES was one of the few newspapers in Poland to increase its circulation in 2009. With an average paid circulation of 45.3 thousand, FORBES is the biggest business maga- zine in the Polish market. Circulation Switzerland (Selection) Average paid circulation, WEMF data BEOBACHTER TELE HANDELSZEITUNG 2009 Change yoy 308,527 144,214 43,940 – 0.5 % – 0.3 % – 2.8 % The advertising market in Switzerland was likewise dampened by the economic crisis, but the associated declines were not as severe as in neighboring countries of Europe. Amid this comparatively stable environment, Axel Springer continued to chart a successful course. Although advertising revenues for the full year 2009 were not quite as high as the corresponding figure for 2008, they recovered somewhat in the fourth quarter, at least for the Group’s business media. Switzerland’s biggest general-interest magazine, the bi- weekly BEOBACHTER, reached a total of 933.0 thousand readers, 2.5 % more than in the first half of 2009 (MACH- Basic 2009-2). At 308.5 thousand copies, the circulation according to WEMF was only 0.5 % less than the corre- sponding prior-year figure. Numerous new readers were attracted to this magazine as a result of its revised content and optics, so that circulation losses were limited. Thanks to the introduction of BEOBACHTER NATUR, moreover, advertising revenues were stable, in contrast to the market trend. Furthermore, the consumer advice magazine gen- erated revenues from marketing finance and insurance products in excess of the prior-year figure. Most notably, more than one-quarter of the magazine’s subscribers purchased the insurance product known as “Beobachter Assistance.” Due to strong interest on the part of readers and advertisers, the new specialty title BEOBACHTER NATUR launched in 2009, which is printed by means of a climate-neutral process, will now be published ten times a year, instead of four times a year, starting in 2010. It is also available by subscription. Management Report of the Group and Management Report of Axel Springer AG 69 than 65.8 % in 2009. Thanks to copy price increases, the regional newspapers managed to make up a large por- tion of the decline in their circulation revenues. Circulation France (Selection) Average paid circulation, company data TELE MAGAZINE VIE PRATIQUE GOURMAND AUTO PLUS1) 1) EMAS: Joint Venture with Mondadori. 2009 Change yoy 350,685 198,805 296,059 – 2.7 % 7.7 % – 5.5 % In France, Axel Springer publishes ten magazines in the segments of TV program guides, women’s magazines and automotive magazines. Thanks to this specialization, Axel Springer France continued on a course of growth in the circulation market, in spite of the difficult market envi- ronment. The biweekly food magazine VIE PRATIQUE GOURMAND increased its readership by 21.0 % (July 2008 to June 2009) to surpass the level of 1 million. The weekly TV program guide TELE MAGAZINE likewise reached more than 1 million readers. Axel Springer also expanded its portfolio of automotive magazines. The joint venture Editions Mondadori Axel Springer (EMAS) S.E.N.C., in which Axel Springer France holds a 50 % interest, introduced the new title AUTO PLUS OCCASIONS in January 2009. Specializing in content related to the used car market, this new magazine complements the editorial content of the market leader AUTO PLUS, the French version of AUTO BILD. In October, the joint ven- ture acquired the biweekly AUTO JOURNAL and the monthly SPORT AUTO, thereby bolstering its position as the leading publisher of automotive media in France. With its TV program guides TELE, TV STAR, TV2, and TV4, Axel Springer Schweiz is the undisputed market leader in this segment as well. Although circulation num- bers were slightly lower overall, the leading Swiss illus- trated TV program guide TELE maintained its paid circu- lation on the prior-year level. As for business titles, both BILANZ and HANDELSZEITUNG reach by far the highest number of decision-making executives in Switzerland, according to MA-Leader 2009. Circulation Hungary (Selection) Average paid circulation, MATESZ data KISKEGYED TVR-HÉT GLAMOUR 2009 Change yoy 198,260 – 2.1 % 182,783 – 14.3 % 56,998 – 0.4 % The print media market was especially weak in Hungary. Due to the extreme purchasing restraint exhibited by consumers, the advertising market was particularly hard hit. As the biggest publishing house in Hungary, Axel Springer was naturally affected by these trends. The regional advertising business in particular was significantly weaker, while the decreases were less pronounced in the nationwide reach marketing and circulation market. Axel Springer continues to hold an outstanding market position in the segment of women’s media. KISKEGYED, the highest-reach traditional women’s magazine in Hun- gary, held its circulation at 198.3 thousand copies, for a decrease of only 2.1 % (all reach data according to Szonda Ipsos/GFKHungária and circulation data accord- ing to MATESZ). Aside from the positive effect of a new graphic concept, the advertising campaign launched in September 2009 generated a significant boost in news- stand sales. The pocket-format style guide magazine GLAMOUR also sustained below-average circulation declines. Despite a 14.3 % decrease in its circulation, TVR-HÉT is still one of Hungary’s two biggest TV pro- gram guides. Axel Springer’s total circulation market share in the segment of TV program guides was more 70 Annual Report 2009 Axel Springer AG Circulation Spain (Selection) Average paid circulation, OJD data COMPUTER HOY HOBBY CONSOLAS 20091) Change yoy 75,888 – 17.1 % 67,065 – 14.4 % PERSONAL COMPUTER 62,751 – 18.1 % 1) Source: OJD, April 2008 to March 2009 vs. April 2007 to March 2008. In Spain, Axel Springer’s publications were hard hit by the significantly worsened operating environment for media companies. The Group’s magazines suffered significant circulation losses and their circulation reve- nues for the full year were not even close to the corre- sponding prior-year figures, despite a moderate stabiliza- tion in the second half of 2009. Nonetheless, Axel Springer España successfully defended its leading mar- ket position in the segments of computer magazines and weekly automotive magazines. COMPUTER HOY, the Spanish version of COMPUTER BILD, held on to its position as the highest-circulation PC magazine in the Spanish market. Furthermore, Axel Springer’s computer and video game magazines still have the highest overall circulation in Spain. As part of a portfolio adjustment, publication of the gaming magazine Computer Hoy Juegos and the computer magazine PC Today was discontinued at the end of 2009. AUTO BILD ESPAÑA solidified its leading market position in the segment of weekly automotive magazines. AUTO BILD CLASSIC and AUTO BILD SPORTSCARS, launched in the first quarter of 2009, likewise achieved top positions in their respective specialty markets. Circulation Russia (Selection) Average paid circulation, company data FORBES COMPUTER BILD NEWSWEEK 2009 Change yoy 78,678 73,191 33,399 – 9.2 % – 1.7 % – 4.7 % In Russia, the circulation and reach of our magazines showed a very positive development on the whole, despite the extremely difficult market environment. Notwithstand- ing minor circulation losses, COMPUTER BILD increased its reach (TNS Media, NRS). FORBES, too, was able to reach significantly more readers, despite its lower circula- tion numbers, and is now the most-quoted business magazine in Russia. In the period from May to October 2009, FORBES reached an average of 820 thousand readers, about 15 % more than in the prior year. The new supplement FORBES WOMAN, which appeared for the first time in September 2009 and will be published four times a year in the future, sold a very high volume of ads from the outset. NEWSWEEK’s paid circulation was only 4.7 % less than the prior-year figure. Starting in the sec- ond quarter of 2009, the lifestyle magazine OK! has been published with 16 additional pages of content; its aver- age paid circulation declined by 6 %, in the fourth quarter. Circulation Czech Republic (Selection) Average paid circulation, ABC data SVET MOTORU TOP DIVKY AUTO TIP 2009 Change yoy 32,806 – 4.3 % 31,507 – 13.7 % 22,686 – 3.3 % The circulation and ad volumes of the magazines pub- lished by Axel Springer in the Czech Republic de- creased in line with the market trend. With its titles SVET MOTORU and AUTO TIP, we were still the big- gest publisher of automotive magazines. Launched in November 2008, the specialty title for all-wheel drive vehicles AUTO TIP 4x4 was successfully established in the market in 2009. As part of a portfolio adjustment, we gave up the licensed edition of Playboy. Management Report of the Group and Management Report of Axel Springer AG 71 Key Figures Print International in € millions External revenues 2009 311.7 2008 409.8 Change – 23.9 % Share in cons. revenues 11.9 % 15.0 % Circulation revenues Advertising revenues Other revenues 185.7 113.5 12.5 216.4 177.4 16.0 – 14.2 % – 36.0 % – 21.8 % EBITDA 12.3 27.8 – 55.8 % EBITDA margin 3.9 % 6.8 % The Print International segment felt the brunt of the eco- nomic consequences of the economic and financial crisis. At € 311.7 million, total revenues were 23.9 % less than the corresponding prior-year figure (PY: € 409.8 million), due to market conditions and exchange rate factors. Assuming constant exchange rates, the decline from the previous year was 16.3 %. The drop in revenues was most pronounced in Poland, our most important interna- tional market. The revenues generated in the markets of Hungary, Russia, and Spain were also lower, while those generated in France and Switzerland were nearly as high as the respective prior-year figures. At € 185.7 million, the circulation revenues were 14.2 % less than the corre- sponding figure for 2008; adjusted for exchange rate effects, the decline was 6.3 %. At € 113.5 million, the advertising revenues were 36.0 % less than the corre- sponding prior-year figure (PY: € 177.4 million). This substantial decline was a reflection of the extreme re- straint exhibited by advertising customers, particularly in the Group’s European markets besides Germany, due to the extraordinarily tough economic conditions in those markets. Assuming constant exchange rates, the decline was only 29.3 %. Despite the substantially lower revenues, the segment EBITDA was positive, at € 12.3 million (PY: € 27.8 million). Thus, most of the revenue decreases were offset by strict cost management in the national subsidiaries. Cost sav- ings were achieved in nearly all functional departments. Another positive factor impacting EBITDA was the de- consolidation of DZIENNIK. Furthermore, the expenses of the Print International segment was favorably influenced by foreign exchange effects. The EBITDA margin was 3.9 % (PY: 6.8 %). Digital Media Axel Springer’s digital media generated strong growth amidst the financial and economic crisis, thereby offset- ting a portion of the revenue declines experienced by the Group’s print media. Substantial revenue growth was registered especially by the Group’s marketplaces (in- cluding idealo.de and immonet.de) and by its marketing activities (including zanox). The Group’s content portals also continued on a course of growth, increasing both their reach and user numbers. All together, Axel Springer’s online brands reached a gross total of 28.7 million users (unique visitors) in 2009, 43.4 % more than the prior-year figure (unique visitors mainly accord- ing to comScore and visits according to IVW, unless otherwise indicated). Unique Visitors/Visits of Editorial Online- Offerings (Selection) in thousands Unique Visitors 20091) Change yoy Visits 20092) Change yoy Bild.de 5,821.2 63.2 % 99,682.0 58.4 % computerbild.de 3,407.8 > 100 % 15,338.9 71.7 % welt.de 3,300.6 6.2 % 22,093.5 12.0 % goFeminin.de 2,987.1 54.6 % 8,946.1 54.2 % transfermarkt.de 1,424.8 41.9 % 16,562.1 52.5 % abendblatt.de 949.1 29.0 % 5,242.8 39.4 % onmeda.de autobild.de 905.2 94.3 % 2,574.5 57.6 % 794.5 20.5 % 5,064.6 16.5 % morgenpost.de 659.6 39.2 % 2,929.8 28.9 % hamburg.de 503.9 – 3.1 % 2,396.8 10.4 % finanzen.net sportbild.de3) 383.5 > 100 % 7,328.2 81.3 % 301.2 20.3 % 3,254.6 30.5 % bz-berlin.de 253.5 > 100 % 1,209.9 81.0 % bildderfrau.de3) 162.1 > 100 % 477.8 25.9 % 1) Source: comScore. 2) Source: IVW. 3) Visits: Company data for Q1/2008, IVW-data as of Q2/2008. 72 Annual Report 2009 Axel Springer AG Content portals The online and mobile portals of the BILD family were extraordinarily successful in 2009. Thanks to their signifi- cantly upgraded and intensively linked information and entertainment offerings, they reached significantly more online users than in the prior year. Furthermore, BILD’s paid premium applications rose to the top of the German market from the time they were introduced. Having in- creased its unique visitors by 63.2 % to 5.8 million, Bild.de took the top rank among online portals of German print media for the first time, while also expanding its position as Germany’s biggest news and entertainment portal. An important growth factor was the expansion of the web-TV offering. In cooperation with the pay-TV broad- caster Sky, Bild.de presented videos of all German soc- cer league matches on its sports websites right after the weekend. These videos were widely viewed, as was the movie channel launched in the fourth quarter. Bild.de attracted additional users also by way of the regional portals set up in the first quarter, the total number of which rose from three to twelve. The cooperation with the local editorial departments of the print issues worked perfectly and was further intensified during the course of the year. The linkage with social networks like Facebook and Twitter further supported the growth in the reach of Bild.de. In only the first week after being introduced in December 2009, the BILD iPhone app rose to the top spot in the iTunes Store; at the start of 2010, the BILD app and the WELT app together had generated more than 100 thousand paid downloads. The mobile portal BILDmobil demonstrated accelerating growth during the course of the year. The number of visits rose from 2.7 million visits in the first quarter of 2009 to 6.4 million in the fourth quarter. The average number of visits for the full year 2009 was nearly three times the corresponding figure for 2008. This success can be credited in part to the expanded editorial content (in cooperation with wallstreet:online and immonet.de, among others) and also in part to the attractive billing rate, which convinced more and more mobile phone users to sign up; a net total of about 160 thousand cus- tomers were acquired in 2009. The BILDmobil Speed- stick, introduced in October, helped make this success possible. With this pay-for-service UMTS stick, users can surf the web on their mobile phones at an affordable cost. The news portal WELT ONLINE extended its position as the most-visited online site of all German premium newspapers, having generated a 6.2 % increase in unique visitors and a 12.0 % increase in visits. WELT ONLINE continued to hold the third rank among news portals in terms of unique visitors. The portal attracted new users by introducing four highly frequented blogs and by means of networking with Facebook, Twitter, and XING, among other steps. Two new paid-content services, the WELT LAGE newsletter and the WELT am SONNTAG e-mag, were successfully launched in the fourth quarter. The WELT app, which was introduced concurrently with the BILD app in December 2009, likewise instantly rose to a top-selling spot in the iTunes Store. The content portals of our two regional newspapers BERLINER MORGENPOST and HAMBURGER ABEND- BLATT were placed under joint management in October 2009. As a result, their business models can be further developed under one roof. On its website and mobile portal, MORGENPOST ONLINE expanded its offering of information and navigation features related to life in the capital city of Berlin and boosted the number of unique visitors by 39.2 %. Having been completely redesigned in terms of technology, structure, and editorial content in the first half of 2009, abendblatt.de also experienced substantial 29.0 % growth in its unique visitors and is now one of the ten most-visited news portals in Germany. The news and city portal of B.Z., which was completely overhauled already in January 2009, continuously in- creased its user numbers during the course of the year, nearly doubling them by the end of 2009. Having been launched at the end of October 2009, the innovative B.Z. app for the iPhone was very well received by users, as demonstrated by the strong sales performance. Nearly all the portals of Axel Springer’s German maga- zines increased their user figures over the prior year. The portal computerbild.de more than doubled (+ 104.6 %) its unique visitors over the prior year and reinforced its position as the second-biggest technology portal for computers, telecommunications, and consumer elec- Management Report of the Group and Management Report of Axel Springer AG 73 tronics. Key factors contributing to this growth were the intensified cooperation with Bild.de in the area of online games and downloads and the price comparisons of- fered in cooperation with idealo.de. The portal autobild.de extended its market leadership position in the segment of German automotive portals with editorial content. The number of unique visitors rose by 20.5 % and the number of visits by 16.5 % to 5.1 million. This growth was supported by the portal’s own premium channel on YouTube, which was intro- duced in May 2009. The cooperation with the multi- brand new car portal autohaus24.de and the car drivers’ community carmondo.de got off to a good start in the third quarter. Through Axel Springer Auto Verlag, auto- bild.de purchased a 19.9 % equity interest in the opera- tor of both these sites, autohaus24 GmbH; this invest- ment can be increased to 50 % by the year 2012. As a result of this cooperation, autobild.de holds an interest in this attractive distribution channel for new cars and can reach more users with its editorial content. Axel Springer’s online sports portals also generated growth in 2009. Most notable was the success of the soccer portal transfermarkt.de, which increased its visits by 52.5 % to 16.6 million and expanded its market share. The sports editorial team of Bild.de assumed responsibil- ity for the content on sportbild.de in November 2009. This portal was used by an average of 301.2 thousand unique visitors per month, about one-fifth more than in the prior year. sportbild.de also increased its visits, thanks in large part to the expanded web-TV offering and the paid service known as “National League Manager.” Taken together, Axel Springer’s sports-related online sites occupy the top position in the German market. Again in 2009, gamigo.de was one of the fastest- growing providers of online games (or more precisely, massively multiplayer online games) in Europe. The port- folio was expanded to more than ten games in seven languages through the introduction of new language versions and the acquisition of additional Europe-wide game licenses; gamigo.de received more than 2.8 million new registrations during the course of 2009. Europe’s biggest online portal for women, auFeminin.com, reached an average of 26.7 million unique visitors per month last year (comScore), indicative of a 52.1 % in- crease over 2008. The German subsidiary goFeminin.de logged 54.2 % more visits in 2009 than in 2008, thanks in part to the intensive linkage with the equally fast- growing health portal onmeda.de. The content was upgraded further with new features such as the cosmet- ics product finder MyBeautyCase.de, which was intro- duced in the second quarter. Since the beginning of 2010, moreover, goFeminin.de has also been responsi- ble for operating and marketing bildderfrau.de; by this means, we can take advantage of synergies in marketing, technology, and editorial production. Cooperation was also intensified on the technology side: Since the begin- ning of July, for example, Axel Springer Media Impact has been using Smart AdServer technology for market- ing its online portfolio. Despite the weak market environment, the premium portals finanzen.net and wallstreet:online managed to substantially increase their unique visitors and visits, thanks in part to expanded cooperation with the print titles EURO and EURO am SONNTAG. For the full year 2009, wallstreet:online increased its unique visitors by 73.0 %, while finanzen.net generated enough growth to become the highest-reach finance platform in Germany. Due to the improved reach, Axel Springer Financial Me- dia further extended its position as the biggest marketer of online advertising in the financial market. SmarthouseMedia, one of the world’s leading providers of Web-based financial applications for online brokers, financial service providers, and mutual fund companies, besides being the operator of finanzen.net, acquired attractive customers again in 2009. Axel Springer content portals also generated strong growth in the other markets of Europe in 2009; nearly all of them increased their unique visitors and visits signifi- cantly over the prior-year comparison values. In Poland, the online portfolio was expanded to 30 web- sites through the launch of new offerings. Especially important was the launch of the Polish portal of the online jobs exchange StepStone, which by the end of 74 Annual Report 2009 Axel Springer AG 2009 was already reaching 676 thousand users (unique visitors for Poland according to Gemius Traffic). The automotive portals roadlook.pl and autofun.pl that had been acquired in the summer and the newly launched website autoporadnik.pl built up a large base of users within a very short time. In the fourth quarter of 2009, the average monthly number of unique visitors to all our automotive portals was 1.1 million. The centerpiece of our campaign to expand the Group’s Polish women’s and lifestyle portals was the introduction of oFeminin.pl in December 2009. Together with the already well estab- lished portals koktajl24 and w-spodnicy.pl, the Polish edition of auFeminin reached more 1.4 million unique visitors per month in December. In the men’s segment, two new sports portals went online. produced by an integrated print/online editorial team. It reached 1.5 million unique visitors (AT Internet) already at the end of 2009. In Spain, the new portal autobild.es added to our extensive line-up of automotive sites. In the Czech Republic, auto.cz successfully asserted its posi- tion as that country’s leading automotive portal. In China, the online portal of the Chinese licensed edition of AUTO BILD already reached about 1.0 million unique visitors in 2009 (own data, based on Google Analytics). Marketplaces Axel Springer’s online classified ad exchanges and mar- ketplaces generated strong growth in both revenues and results, and therefore made an important contribution to the success of the Digital Media segment in 2009. Also in Switzerland, Axel Springer’s digital media per- formed predominantly well. Following a complete over- haul of content and graphics, the website beobachter.ch more than doubled its user numbers, according to WEMF. The redesigned online site of the investor magazine STOCKS reached an average of about 75.0 thousand unique visitors per month in 2009. The electronic pro- gram guide tele.ch launched in the second quarter also met with a positive reception. Following the addition of a new gaming platform playbay.ch, the portfolio of the Amiado Group, an entity of the Group operating in the digital markets, reached an annual average of 33.4 % of persons aged 16 to 34, according to internal surveys. Acquired by Axel Springer in 2009, StepStone ASA continues to be one of the leading operators of online job exchanges, with around 35 jobs portals throughout Europe. It is also a worldwide provider of talent man- agement software. With 1.1 million unique visitors (in- dicative of a 11.3 % increase over the prior year), the overhauled German portal stepstone.de was the highest- reach website of all German job exchanges for the first time. At the end of 2009, almost 30 thousand job offers were posted in Germany via this platform; furthermore, more than 1.0 million (PY: 0.7 million) registered users signed up to have the StepStone JobAgent automatically send them the latest job offers by e-mail. In Hungary, Axel Springer’s six online portals for female Internet users increased their unique visitors by nearly 50 %, according to webaudit. As the current No. 2 in the market, Axel Springer is close on the heels of the market leader for online women’s media. The Group’s content portals were successful in other international markets as well. For example, one of the paid iPhone apps of VIE PRATIQUE GOURMAND held the status of best newcomer, at times, among the ten- leading paid applications in France. In the Russian mar- ket, we launched the website forbes.ru, which is In the segment of classified ad markets, immonet.de held its property listings steady at 950 thousand proper- ties amid a tough market environment, and so defended its second-place ranking among German real estate sites. The mobile portal launched in May was instrumen- tal in that success, as was the highly regarded market- ing campaign of our online real estate specialist (see page 60). In addition, Axel Springer’s leading position in cross-media real estate marketing received an additional boost by means of the cooperation with BERLINER MORGENPOST and HAMBURGER ABENDBLATT, which was initiated in 2009. Since August of 2009, real estate offerings have been centrally marketed and closely interlinked under an integrated brand concept. Management Report of the Group and Management Report of Axel Springer AG 75 The portal idealo.de, one of Germany’s leading search engines for price and product comparisons, increased the number of brokered retailer queries by 20.7 % over the prior year. This growth was aided in particular by the introduction of new product categories. In the European markets outside of Germany, Axel Springer further ex- panded its activities by launching a travel price compari- son service in Portugal and Poland, among other steps. Since August 2009, users can also find the lowest natu- ral gas rates available to them on idealo.de. In addition, idealo.de expanded the search options to include prod- ucts that are not contained in idealo’s extensive open database, which led to a significant further expansion in the available product range. TV/radio activities Schwartzkopff TV expanded its business especially in the area of docutainment, confirming its market position as one of the leading producers of entertainment and talk-show formats. The exclusive partnership with the Sparks Network, an international federation of 19 lead- ing, independent TV production companies, improves the company’s access to internationally successful formats and licenses for the German market. The local TV and radio stations in which Axel Springer holds in- vestments had to contend with a difficult market envi- ronment; due in particular to the shrinking advertising market, their business performance was below the level of the prior year. Marketing zanox charted a successful course in 2009. All together, more than 2,000 advertising customers utilized a net- work of more than 1 million partner websites (affiliates) in 2009. As a result of the attractive, performance-based model, zanox’s business model was unaffected by the worldwide slump in advertising markets; zanox’s reve- nues were substantially higher than the prior-year figure. Advertisers made intensive use of the zanox Web Ser- vices introduced in the first quarter, as well as the appli- cations and tools developed for that purpose, to access the partner network even more efficiently. The exclusive service program for successful publishers supported the monetarization of the network. In the fourth quarter, zanox expanded its offerings by adding the new program, “Partners Recruit Partners.” Digital Window, in which Axel Springer acquired a ma- jority interest in 2009, further extended its market posi- tion as the second-biggest affiliate network in Great Britain by acquiring prestigious customers in the fourth quarter. The company also enhanced communications in the partner network by means of technological inno- vations and the newly launched publisher-advertiser interface “Darwin.” Key Figures Digital Media in € millions External revenues 2009 470.4 2008 378.2 Change 24.4 % Share in cons. revenues 18.0 % 13.9 % Advertising revenues Other revenues 336.7 133.7 271.2 107.0 24.1 % 25.0 % EBITDA 43.2 20.9 > 100 % EBITDA margin 9.2 % 5.5 % Partially as a result of the first-time consolidation of the companies acquired in 2009, the total revenues of the Digital Media segment amounted to € 470.4 million, indicative of a 24.4 % increase over the prior year (PY: € 378.2 million). Adjusted for consolidation effects such as the acquisitions of StepStone and Digital Window in 2009, and gamigo in 2008, total revenues were 9.1 % higher than the corresponding prior-year figure. The online properties zanox, idealo, and auFeminin were major contributors to the organic growth generated in 2009. The pro-forma revenues of the Digital Media seg- ment came to € 569.0 million (PY: € 543.5 million), bringing their share of total pro-forma revenues to 21.0 % (PY: 18.8 %). 76 Annual Report 2009 Axel Springer AG At € 336.7 million, the advertising revenues of the Digital Media segment were 24.1 % higher than the corresponding prior-year figure of € 271.2 million. This increase was largely influenced by gains at zanox, im- monet, and idealo, in addition to consolidation effects. At € 133.7 million, the other revenues were 25.0 % higher than the corresponding prior-year figure (PY: € 107.0 million), largely due to consolidation effects. At € 43.2 million, segment EBITDA was more than twice as high as the prior-year figure (PY: € 20.9 million). Much of this increase resulted from earnings improvements at immonet, idealo, and Bild.de. Furthermore, the compari- son figure from 2008 included charges related to foreign exchange effects and start-up costs for new businesses at Dogan TV. Services/Holding The Services/Holding segment comprises the three Group-owned newspaper printing plants, the income or expenses from the investment in the rotogravure printing company PRINOVIS, the internal departments of Distri- bution and Logistics, and the service and holding com- pany functions. Due to the economic crisis, our printing plants operated with lower paper throughputs and generated lower reve- nues from job printing. Most of this decline was offset by cost savings. PRINOVIS was adversely affected by sur- plus capacities and strong price pressures in the roto- gravure printing market. Key Figures Services/Holding in € millions External revenues 2009 98.1 2008 99.0 Change – 0.9 % Share in cons. revenues 3.8 % 3.6 % EBITDA1) – 20.5 – 0.2 - 1) This figure contains investment income of € 4.1 millions (PY: € 2.7 millions). At € 98.1 million, the external revenues of the Services/ Holding segment were close to the prior-year level (PY: € 99.0 million). Lower revenues from offset printing were offset by higher revenue contributions from the service divisions. At € – 20.5 million (PY: € – 0.2 million), EBITDA was negative, as expected, a continuation of a trend that has lasted for many years. The change from the prior year can be attributed to the non-recurrence of positive ef- fects related to transactions and provisions for litigation expenses. Other factors affecting the segment EBITDA in 2009 were the non-recurring expenses associated with the bonus share and employee share ownership program, higher contributions to the pension insurance fund, and tax effects from prior years. A positive effect on segment EBITDA compared to the prior year resulted from by the improved investment expenses of PRINOVIS even though affected by the economical crises. The prior-year figure, had included restructuring expenses for the closure of the printing plant in Darmstadt. As in the prior year, the segment EBITDA for 2009 also included income from the Kirch insolvency (2009: € 7.6 million, 2008: € 6.2 million). Management Report of the Group and Management Report of Axel Springer AG 77 Financial situation and balance sheet Financial situation Financial management As a rule, Axel Springer AG provides all financing for the Axel Springer Group. This arrangement ensures that the Group companies have sufficient liquidity at all times. The overriding goal of financial management is to provide cost-effective liquidity by means of structurally appropri- ate financing. Liquid assets are invested with the aim of earning an appropriate return. The Axel Springer Group does not engage in off-balance sheet financing measures. Net liquidity in € millions Cash and cash equivalents Financial liabilities Net liquidity 2009 197.3 390.3 2008 154.5 524.0 – 193.0 – 369.5 As of December 31, 2009, Axel Springer had a net debt of € 193.0 million (PY: € 369.5 million). The cash and cash equivalents increased by € 42.8 million, while the financial liabilities decreased by € 133.7 million, mainly due to the cash flows generated in operating activities and the receipt of the purchase prices from the sale of the regional newspaper investments. At the balance sheet date, Axel Springer had access to short-term and long-term credit facilities in the amount of € 1,220.0 million (PY: € 1,095.0 million), which were not utilized. The credit facilities can be used both for general business purposes and for the financing of acquisitions. Cash flow development and investments Consolidated Cash Flow Statement (Condensed) in € millions Cash flow from continuing operations Cash flow from investing activities 2009 270.0 55.0 2008 265.1 300.6 Cash flow from financing activities – 283.9 – 612.2 Change in cash and cash equivalents 41.2 Cash and cash equivalents at December 31 197.3 – 46.4 154.5 Despite the fact that EBITDA for 2009 was € 152.5 million lower than the corresponding prior-year figure, the cash flow from operating activities was little changed from the previous year, at € 270.0 million. This circumstance resulted mainly from a decrease (PY: increase) in working capital. Also, the decrease in EBITDA was influenced by non-cash effects, especially the fact that higher amounts were appropriated to provisions than in the prior year. The cash flow from investing activities amounted to € 55.0 million (PY: € 300.6 million). This amount was mainly composed of the purchase prices collected in connection with the sale of the regional newspaper in- vestments. The total purchase price paid for the remain- ing shares in StepStone ASA, the investment in Digital Window Ltd., and the investment in Infor Biznes amounted to € 113.9 million. This amount was reflected in the cash flow from investing activities after deduction of the acquired cash and cash equivalents in the amount of € 38.8 million. In the prior year, the high cash inflow amount resulted mainly from the receipt of the purchase price for the shares sold in ProSiebenSat.1 Media AG, and was partially offset by the payments made for the acquisition of minority interests in BILD digital GmbH & Co. KG, for the exercise of the put options granted in connection with the acquisition of equity shares in auFeminin.com S.A., and for the acquisition of 33.3 % of the equity shares in StepStone ASA. The cash flow from financing activities was negative, at € – 283.9 million in 2009 (PY: € – 612.2 million). It was influenced primarily by the repayment of financial liabili- ties. The substantially higher cash outflows in the prior year resulted from repayments of financial liabilities after receipt of the purchase price for the shares sold in ProSiebenSat.1 Media AG, and from the purchase of treasury shares. The net balance of cash flows from operating, investing and financing activities amounted to € 41.2 million (PY: € – 46.4 million). As of December 31, 2009, the cash and cash equivalents (cash, term deposits, and securi- ties with short-term maturities) amounted to € 197.3 million (PY: € 154.5 million). 78 Annual Report 2009 Axel Springer AG Balance Sheet Consolidated Balance Sheet (Condensed) in € millions Non-current assets Current assets Assets Equity Non-current liabilities Current liabilities 12/31/2009 12/31/20081) 1,874.6 1,715.7 1,059.7 1,093.3 2,934.3 2,809.1 1,196.8 1,067.7 966.1 771.4 1,041.9 699.5 Equity and liabilities 2,934.3 2,809.1 1) Adjusted due to the change of the accounting policy for pension obligations. At € 2,934.3 million, the consolidated balance sheet total at December 31, 2009 was € 125.2 million or 4.5 % higher than the corresponding figure at the end of 2008 (PY: € 2,809.1 million). This development was influenced in particular by the sale of the regional news- paper investments and the first-time consolidation of StepStone ASA and Digital Window Ltd. Of the purchase prices for the regional newspaper in- vestments in the total amount of € 324.0 million, an amount of € 150 million was recognized as non-current receivables because it will be successively due and pay- able only starting in 2011. Investment carrying amounts and financial receivables in the amount of € 109.2 million were disposed. Due to the first-time consolidation of subsidiaries, total assets increased by € 67.4 million and total liabilities increased by € 99.4 million. At € 55.9 million, the current income tax receivables were € 18.4 million higher than the prior-year figure, mainly as a result of the higher advance tax payments made for 2009 and the tax refund claims for prior years arising from completed tax audits. At € 70.4 million, the current other assets were € 8.4 million higher than the prior-year figure, mainly as a result of the higher values for H&F options due to the higher share price of Axel Springer AG in 2009. At € 1,196.8 million, the equity was € 129.1 million (12.1 %) higher than the corresponding figure at the end of 2008. This increase resulted mainly from the consoli- dated net income generated; countervailing effects were the dividend payment for fiscal year 2008 in the amount of € 130.6 million and the recognition of the balance from with the increase in the Group’s shareholding in StepStone ASA from 52.8 % to 100 % (€ 36.2 million). The equity ratio rose to 40.8 % (PY: 38.0 %). At € 966.1 million, the non-current provisions and liabili- ties were lower than the prior-year figure by € 75.8 million (7.3 %). The decrease resulted in particular from the reduction of financial liabilities (€ – 128.6 million) and from the reversal of deferred taxes in connection with the sale of regional newspaper investments (€ – 8.3 million). On the other hand, the pension provisions were higher (€ 14.4 million), due in particular to the lowering of the discount factor from 5.8 % to 5.3 % for pension obliga- tions in Germany. The € 25.3 million increase in other non-current provisions resulted mainly from structural measures. In addition, deferred tax liabilities were recog- nized in connection with the purchase price allocation for the acquisition of StepStone ASA and Digital Window Ltd. (€ 28.1 million). At € 771.4 million, the current provisions and liabilities were € 71.9 million million (10.3 %) higher than the cor- responding prior-year figure. This increase resulted mainly from the first-time consolidation of StepStone ASA and Digital Window Ltd. It was also affected by increases in the provisions for structural measures, trade payables, financial liabilities under interest rate derivatives, and current income tax liabilities. Management Report of the Group and Management Report of Axel Springer AG 79 Economic position of Axel Springer AG Key Figures for Axel Springer AG in € millions Revenues Net income Transfer to other retained earnings1) Total dividends Dividend per share (in €)1) 2009 2008 2007 2006 2005 1,588.3 1,673.3 1,669.1 1,710.1 1,697.2 323.1 165.4 131.1 4.40 196.4 103.6 130.6 4.40 147.8 25.3 122.4 4.00 245.9 138.5 107.3 3.50 143.2 91.0 52.1 1.70 1) The amount of the dividend for 2009 and the appropriation to other retained earnings (after deduction of the advance appropriation of € 151.4 million) are provisional, subject to the approval of the annual shareholders’ meeting. Overview Financial performance Axel Springer AG, based in Berlin, is the parent company of the Axel Springer Group. The Management Board of Axel Springer AG is also the managing body of the Group. The Group’s major print publications such as the BILD Group, the WELT Group, HAMBURGER ABENDBLATT, TV DIGITAL, and HÖRZU, as well as other newspaper and magazine titles, are produced and distributed by Axel Springer AG. The newspapers are printed in Axel Springer’s own printing plants at the locations Ahrens- burg, Berlin, and Essen, and in third-party printing plants. In addition, Axel Springer AG maintains numerous sup- plier and service relationships with subsidiaries and as- sociates. Purchased services mainly include printing services, administrative services, property management, direct marketing, editorial services, circulation, and insur- ance services. Services rendered include the supply of publishing products, paper deliveries, as well as general administrative and IT services. As a rule, Axel Springer AG provides all financing for the Group companies. A number of German Group compa- nies have entered into profit transfer agreements with Axel Springer AG. The following disclosures pertain to the separate finan- cial statements of Axel Springer AG, which were pre- pared in accordance with the applicable regulations of the German Commercial Code and the German Stock Corporations Act. Income Statement of Axel Springer AG (Condensed) in € millions Revenues Other operating income 2009 2008 1,588.3 1,673.3 417.0 178.4 Purchased goods and services – 458.1 – 484.8 Gross profit Personnel expenses Amortization, depreciation and impairments of intangible assets and property, plant and equipment 1,547.3 1,366.9 – 482.9 – 452.4 – 40.0 – 45.3 Other operating expenses – 530.9 – 542.6 Income from non-current financial assets Expenses from transfer of losses Impairments of non-current financial assets and current securities Net interest income Profit from ordinary activities Taxes Net income Transfer to retained earnings Distributable profit 45.2 – 66.1 – 38.3 – 33.6 400.8 – 77.7 323.1 – 178.0 145.1 76.9 – 49.7 – 50.4 – 18.5 284.9 – 88.6 196.4 – 51.2 145.1 In fiscal year 2009, Axel Springer AG generated revenues of € 1,588.3 million, 5.1 % less than the corresponding prior-year figure, due in particular to the lower advertising revenues. However, the gross operating profit of € 1,547.3 million was € 180.4 million higher than the corresponding prior-year figure. This increase was caused mainly by the realized gain of € 251.9 million on 80 Annual Report 2009 Axel Springer AG the sale of the regional newspaper investments in 2009, which was also reflected in the substantially higher fiscal year net income of € 323.1 million (PY: € 196.4 million). Balance sheet Balance Sheet of Axel Springer AG (Condensed) in € millions Intangible assets Property, plant and equipment 12/31/2009 12/31/2008 34.4 218.7 35.6 238.4 Non-current financial assets 1,470.0 1,351.3 Fixed assets Inventories Receivables and other assets and prepaid expenses Treasury shares Cash and cash equivalents Current assets Total assets Equity Provisions 1,723.0 1,625.3 26.0 34.4 592.5 196.0 83.2 897.7 524.3 169.5 68.7 796.8 2,620.7 2,422.0 1,105.6 483.8 913.1 451.6 Liabilities and deferred income 1,031.3 1,057.3 Total equity and liabilities 2,620.7 2,422.0 At € 2,620.7 million, the balance sheet total was 8.2 % (€ 198.7 million) higher than the corresponding prior-year figure. The proportion of total assets represented by non-current assets was nearly unchanged at 65.7 %. Non-current assets were backed by equity at the rate of 64.2 % (PY: 56.2 %). Non-current financial assets repre- sented 85.3 % of total non-current assets (PY: 83.1 %). At € 1,470.0 million, the non-current financial assets were € 118.7 million higher than the corresponding prior-year figure, mainly due to the acquisition of equity shares in StepStone ASA. At € 897.7 million, the current assets were € 100.9 million higher than the correspond- ing prior-year figure. This increase was influenced by the deferral of a portion of the purchase price from the sale of the regional newspaper investments and by the write- up of treasury shares to the original acquisition cost or stock market value at the balance sheet date. At € 1,105.6 million, the equity was € 192.5 million higher than the corresponding prior-year figure. The equity ratio rose from 37.7 % to 42.2 % as of Decem- ber 31, 2009. The total amount appropriated to provi- sions was € 32.2 million higher than the prior-year figure. This increase was caused in particular by the higher amount of pension obligations resulting from the reduced discount factor and the higher provision for structural measures. At € 1,031.3 million, the liabilities and de- ferred income were € 26.0 million lower than the corre- sponding prior-year figure. Whereas the liabilities to banks were € 128.5 million lower than the prior-year figure, the liabilities to affiliated companies increased by € 88.6 million, mainly in connection with the centralized cash management program. Financial situation The net debt (liabilities due to banks minus cash and cash equivalents) was reduced by € 143.0 million to € 235.0 million in 2009. As of December 31, 2009, the company had access to unutilized short-term and long- term credit facilities in the amount of € 1,220.0 million (PY: € 1,095.0 million). The credit facilities can be used both for general business purposes and for the financing of acquisitions. Management Report of the Group and Management Report of Axel Springer AG 81 Profit utilization proposal Risk and Opportunities Report The annual financial statements of Axel Springer AG, which were prepared in accordance with German com- mercial law and German laws applicable to stock corpo- rations, show a fiscal year distributable profit of € 145.1 million (PY: € 145.1 million). With the consent of the Supervisory Board, the Man- agement Board will propose distributing a dividend of € 4.40 (PY: € 4.40) per qualifying share at the annual shareholders’ meeting to be held on April 23, 2010. This dividend corresponds to a profit distribution of € 131.1 million from the distributable profit. The remain- ing amount of € 14.0 million will be allocated to other retained earnings. The treasury shares held by the com- pany do not qualify for dividends. The number of shares qualifying for dividends can change in the time remaining until the annual shareholders’ meeting. In this case, an appropriately adjusted profit utilization proposal will be made to the annual shareholders’ meeting, while retain- ing the proposal to distribute a dividend of € 4.40 per qualifying share. Risk assessment The Axel Springer Group’s fundamental risk policy dic- tates that risks may only be incurred if they enable the company to take advantage of additional income oppor- tunities and thereby increase its company value. Appro- priate measures are taken to reduce every risk to an acceptable level or transfer it to third parties if economi- cally feasible. Axel Springer’s risk policy principles are set forth in a corporate directive that applies to all compa- nies of the Group. Risks are monitored and managed with the aid of various interconnected systems: (cid:132) Production and unit sales quantities, income, and expenses are monitored as part of the overall man- agement process. In this connection, general market and income risks are identified and managed as part of the budget planning and end-of-year forecast process and in the reporting system. (cid:132) Risks related to capital expenditures and acquisitions are identified and assessed in advance as part of in- vestment planning; thereafter, they are monitored as part of the reporting system. (cid:132) In addition, Axel Springer has implemented a risk management program within the meaning of Section 91 (2) of the German Stock Corporation Act (AktG) that identifies all other risks. The overall responsibility for risk management lies with the Management Board, whereas the respective divi- sions or Group companies are responsible for the oper- ating processes of early detection, assessment, man- agement, and documentation of risks, as well as the adoption and execution of suitable countermeasures and the related communication activities. Furthermore, a central risk manager coordinates all risk management activities, aggregates the risks at the Group level, reviews the plausibility and completeness of the reported risks, and assumes responsibility for continuously improving 82 Annual Report 2009 Axel Springer AG the risk management system. In addition, the Internal Audit Department and the independent auditor (in the context of the annual audit) review the completeness and adequacy of the risk management system as indepen- dent control instances. A comprehensive survey of risks is conducted once a year, at which time the risk inventory is updated. In addi- tion, risks to the company as a going concern as well as risks identified as significant or worthy of monitoring, and the corresponding countermeasures, are reviewed dur- ing the course of the year in connection with ad hoc risk surveys, and their assessment is adjusted to the current risk situation. Any potential risks to the company as a going concern are reviewed by Axel Springer AG and the individual subsidiaries applying the criterion of net loss and its effect on the Group’s financial position and liquid- ity situation. Risks are classified as significant, worthy of monitoring, or as other risks based on the net expected loss, with due consideration given to the effect of risk- mitigating countermeasures on the potential loss and the risk-related expected value. The following risks could pose a threat to the company as a going concern or significantly influence the company’s financial position, financial performance, and liquidity situation: Market and competition risks In view of the limited functioning of the international financial markets, the expiration of economic stimulus programs, and the need to consolidate public-sector budgets (see page 87), a renewed economic downturn cannot be ruled out. Such a development would lead to a significant deterioration of the revenue situation, espe- cially in the form of lower advertising revenues. Despite the “Growth Acceleration Act” announced in December of 2009, consumer spending could take a significantly negative turn, not least of all as a result of the projected rise in unemployment. Consumer spending is the deter- mining factor for the performance of the press distribu- tion market and the classified ads business, and is there- fore highly significant for Axel Springer’s business suc- cess. Furthermore, the general market situation is still characterized by intense competition pressure. The possible entry of new competitive titles and formats into the market, especially also in the form of free newspa- pers and magazines, exposes the Axel Springer Group to the risk of lost revenues and market shares in the circulation and advertising business. Changing con- sumption and reading habits, especially due to demo- graphic shifts, exacerbate this risk even further. In addi- tion, the increased competition of traditional print media with other types of media pose uncertainties. For exam- ple, the continuing expansion of the Internet could lead to further shifts in customer preferences and to additional structural changes in the advertising market. Such a development could lead to further reductions in newspa- per and magazine revenues. In this context, the high proportion of total Group-wide revenues contributed by BILD and the BILD family also poses a particular risk. The paid circulation of BILD and BILD am SONNTAG has been declining overall in re- cent years. Furthermore, a significant portion of Axel Springer AG’s high-revenue magazine titles are sup- ported by the strong recognition and brand familiarity of the BILD family. It cannot be ruled out that the success of the BILD titles could permanently suffer due to long- term negative impact from external factors, which would also impact Axel Springer’s financial position, liquidity, and financial performance. These general market risks are monitored and managed above all by the operational management of the com- pany. In order to counter these market risks, in 2009 Axel Springer AG continued to pursue its strategy of market leadership in the core business of German- language print media as well as its strategy of interna- tionalization and digitization, and will continue to pursue these strategies consistently in the future. Therefore, it is extremely important for Axel Springer to expand its exist- ing activities in Germany in a targeted manner and adapt its business to suit changing customer demands by means of product innovations, among other measures. In addition, Axel Springer offers various price incentives and other product-related measures including, for exam- ple, sales-promoting give-aways and special inserts offered at an extra cost, such as DVDs, CD-ROMs, and audiobooks, for example. Management Report of the Group and Management Report of Axel Springer AG 83 To further reduce its market risks, Axel Springer contin- ues to consistently pursue its strategies of internationali- zation and digitization. Axel Springer responds to the changes affecting the media business and promotes the cross-media networking and integration of its brands by means of acquisitions, business start-ups, and the ex- pansion of existing digital media whenever possible. (See also the discussion of the segments Newspapers National, Magazines National, Print International, and Digital Media on pages 63, 65, 67, and 71). Political and legal risks The business of Axel Springer AG continues to be ex- posed to the competition-distorting effects of state- owned media operations and the regulatory pressure of lawmakers on all relevant levels of government. The three-stage test introduced as a regulatory requirement in 2009 has proven to be largely ineffective because the broadcasting councils do not give adequate considera- tion to the consequential effects of their expansion course on the online market. That represents an addi- tional hindrance to the monetarization of mobile Internet services by private-sector providers. State-owned TV stations financed by government fees continue to offer electronic press on their websites without restriction, and it has been announced that news videos will be made available to users free of charge on the strategically important Apple AppStore platform. As the new legislative periods begin in Germany and on the European level, a push for new regulatory measures can be expected. There are already indications of new initiatives to impose advertising conditions and restric- tions. Furthermore, the possible regulation of behavior- directed advertising from the aspect of data protection law is being discussed. Reputation risks In view of its growing international presence, the Axel Springer Group has adopted a catalog of social stan- dards, known as the International Social Policy, as a binding guideline for social integrity, applicable to all of the Group’s activities throughout the world. Inadequate compliance with the International Social Policy, whether in connection with the procurement of advertisements, product supplements, merchandising, or the sale of title licenses, could potentially cause great harm to the com- pany’s reputation. The Axel Springer Group has instituted a sustainability management program that meets international standards. The delayed identification of critical developments rela- tive to possible ecological and social conflicts in the procurement of resources in all phases of the wood, pulp, paper, and recycling chain could harm the Group’s repu- tation. To reduce this risk, Axel Springer works closely with experts in the wood, pulp, and paper industry, and with numerous environmental protection organizations. The Group also conducts monitoring measures across the value chain, as well as eco-audits, in order to limit the associated risks. Furthermore, the Group communicates these measures through internal and external reporting characterized by openness and transparency. IT risks IT risks arise from the possible failure of IT systems, data centers, editing systems, databases, and the like. Such IT risks could lead to data losses and, in the worst case, business interruptions. Extensive IT security measures (such as back-up systems, firewalls, emergency data centers) are taken to avoid or mitigate such risks. Strategic and other risks Strategic risks arise primarily from the possibility that the Group would invest in concepts and companies that are not sustainably successful, which could cause financial losses as well as intangible losses. Investment risks are especially relevant here. If the revenue and net income performance of the companies in which the Group holds investments are worse than planned due to a renewed worsening of the financial markets and economic crisis, it could become necessary to recognize impairment losses after an impairment test. In the worst case, the complete write-off of the assets of all companies in which Axel Springer holds investments could pose a risk to the survival of the Axel Springer Group as a going concern. Such risks are minimized in particular through the active management and constant monitoring of equity invest- ments. These measures also minimize the risk of possi- ble losses on loans to such companies. 84 Annual Report 2009 Axel Springer AG Based on a tax audit in September 2009, the Turkish tax authorities imposed various subsequent tax claims and incidental costs in the total amount of TRY 4.8 billion (approximately € 2.2 billion) against our investment Dogan TV Holding and three subsidiaries of Dogan TV Holding. The management of Dogan TV Holding consid- ers the subsequent tax claims to be unjustified and the affected companies filed an action with the tax court. Depending on the further developments and any possi- ble adjustments to the business plan by the manage- ment of Dogan TV Holding, the risk of an impairment loss cannot be ruled out. In assessing the value of our in- vestment in this associate, due consideration is given to the existing contractual agreements aimed at protecting the value of our investment. Also, the loss of major customers could have an adverse impact on the Group’s business success and activities. Measures are taken to reinforce customer loyalty, among other things, as a means of avoiding this risk. Additionally, breaches of confidentiality agreements or insider trading regulations, as well as the publication of incorrect infor- mation, could entail financial and legal consequences and/or damage the reputation of the Group or its proper- ties. Inspection mechanisms and coordination rules have been instituted, among other measures, as a means of minimizing such risks. Also, violations of data protection laws and regulations could entail negative economic and legal consequences and/or harm the Group’s reputation. To avert any such violations, Axel Springer has expanded its data protection organization and initiated comprehen- sive training measures; we plan to intensify such activi- ties in the future. Risks in the distribution sector, includ- ing the risk of liquidity problems affecting distribution partners, are countered by clearly defined payment terms and conditions. To limit its exposure to interest rate risk, the Group has established principles that serve to regulate and ensure compliance with loss limits on its capital investments. In addition, these risks are hedged by employing various kinds of interest rate derivatives. Significant financing risks as a result of the global financial crisis are not evi- dent for the Axel Springer Group, because the credit line totaling € 1.5 billion granted for liquidity protection pur- poses has been approved by the participating banks until 2012/2013 and does not include unilateral termina- tion rights. Currently, the Axel Springer Group is not exposed to any price change or default risks, nor risks arising from cash flow fluctuations. Overall risk assessment With the exception of the rather theoretical risk of a complete write-off of all assets related to companies in which the Group holds investments, no further risks that could endanger the company’s survival as a going con- cern can be discerned. This risk has a very low probabil- ity of occurrence. Currently, no risk concentrations or interdependencies that could have a significant influence on the Group’s financial position, financial performance, and liquidity situation are discernible, with the exception of the threat of renewed drastic worsening of the world economy. Because the Axel Springer Group has been covered by new insurance since 2009, its exposure to terrorism risks is not the same as in prior years. Although such risks are still significant, they can no longer endan- ger the company’s survival as a going concern or exert a significant influence on the Group’s financial position, financial performance, and liquidity situation. Aside from this change, the risk assessment of the Axel Springer Group has not changed significantly from the prior year. Assessment of opportunities Financial risks The financial risks especially relevant to the Axel Springer Group are interest rate risk and currency risk. Interest rate risk can arise from financial liabilities with variable interest rates and from investments in fixed-income securities. Currency risks arise in connection with reve- nues and net investment income in foreign currencies. Market opportunities If the economy were to perform better than currently projected by leading economic institutions, that would have a positive effect on the Axel Springer Group’s circu- lation and advertising revenues. An overall negative de- velopment would present the possibility of competitors withdrawing from the market in connection with a market Management Report of the Group and Management Report of Axel Springer AG 85 adjustment, thereby improving the market position of our properties and operations in the long term. Furthermore, there is the possibility of acquiring companies at lower fair value measurements. Especially in sports-connected media, additional circulation and advertising revenues could be generated in connection with the major events of 2010, such as the Winter Olympics in Vancouver and the World Soccer Cup in South Africa. Political opportunities The strengthening of intellectual property rights by means of the introduction of a publisher’s ancillary copy- right could have a positive effect in Germany. Strategic opportunities The successful internationalization of Axel Springer through the development and expansion of its presence in robustly growing foreign markets offers opportunities to increase revenues and net profits. In implementing its internationalization strategy, the company has the crucial advantage over its competitors of having already attained strong market positions in many countries, even leading positions in numerous segments. The digitization strat- egy offers particularly great opportunities for generating additional revenues via the dynamic development of revenues in the online advertising market. Axel Springer is taking advantage of this market trend through the swift and consistent combination of print and online offerings, and by investing in companies, entering into cooperation agreements, and continually expanding its existing and newly acquired activities. Marketing opportunities Due to the fact that Axel Springer Media Impact, the Group’s central marketing unit, is one of the highest- reach cross-media marketers in Europe, Axel Springer is in a good position to compete for large TV advertis- ing budgets. Description of the key characteristics of the internal control and risk manage- ment system as it relates to the financial accounting process of the company and the Group (Section 289 (5) and Section 315 (2) (5) HGB) including the accom- panying report of the Management Board The risk management system of the Axel Springer AG as well as of the Axel Springer Group comprises all the organizational regulations and measures required to assure the detection and management of risks arising from business activity. With regard to the financial ac- counting process both of the Axel Springer AG and of the Group, the internal control system is designed to ensure that the financial reporting system presents a true and fair view of the financial position, liquidity, and finan- cial performance of the Axel Springer AG and of the Axel Springer Group, in accordance with the applicable laws and standards. The Management Board bears the overall responsibility for the internal control and risk management system as it relates to the financial accounting process of the Axel Springer AG and of the Group. All the companies in- cluded in the consolidated financial statements are inte- grated with the Group by means of a clearly defined management and reporting organization. We consider the following elements of Axel Springer’s internal control and risk management system to be sig- nificant with regard to the financial accounting process of the Axel Springer AG and of the Group: (cid:132) Processes for identifying, assessing, and documenting all significant businesses processes and risk areas that are relevant to the financial accounting system, includ- ing the related key controls. Such processes include financial reporting and accounting processes, as well as administrative and operational processes that gen- erate significant information for the preparation of the consolidated financial statements and management report of the Axel Springer AG and the Group. 86 Annual Report 2009 Axel Springer AG Events after the balance sheet date (cid:132) Process-integrated controls (computer-aided controls and access restrictions, dual control principle, separa- tion of functions, analytical controls) No significant events or developments of particular im- portance have occurred since the balance sheet date for 2009. (cid:132) Standardized financial accounting processes through the use of a Group Shared Service Center for most of the recorded transactions included in the consoli- dated financial statements (cid:132) Assurance of uniform accounting through Group-wide guidelines, procedures and trainings (cid:132) Monthly internal reports for the Group (complete income statement, balance sheet, cash flow state- ment) and monthly reports on all cost units of the Group, including analysis and reporting of significant developments and budget/actual variances. The effectiveness of the internal control and risk man- agement system as it relates to the (Group’s) financial accounting system is systematically reviewed and evalu- ated by means of regularly performed control tests; a Group-wide reporting system ensures that up-to-date information is provided on a regular basis to the Man- agement Board and the Supervisory Board. Management Report of the Group and Management Report of Axel Springer AG 87 Outlook Anticipated economic environment General economic environment Now that the financial markets crisis and global recession have been overcome, the expectations for the future de- velopment of the economic environment have brightened again. The IMF is predicting global economic growth of 3.9 % for 2010. However, this growth will be driven less by the industrialized nations and more by the emerging economies. The international financial markets are still not functioning at full strength. The fact that credit conditions are still restrictive worldwide will have a tremendous nega- tive impact on the ability to raise financing for investments and new jobs. Furthermore, the need to consolidate pub- lic-sector budgets and social security systems in Germany and abroad is becoming ever more urgent. This circum- stance could lead to additional burdens on the citizens of the respective countries and exert a negative influence on their consumer spending propensity. The German economy will gain pace only slowly in 2010. ifo is predicting real growth of 1.7 %. The funds provided in connection with the various economic stimulus packages will slowly run out and market forces will assume a more prominent role. Consumer spend- ing is expected to provide only little impetus to the economy. Although net incomes are rising as a result of tax cuts (especially those contained in the Growth Ac- celeration Act), consumer spending will hardly rise from the level of 2009, as an increase of only 0.2 % in real terms is expected. According to ifo, a sudden drop in employment is not to be expected in 2010. According to that institute, the average annual number of unemployed persons can be expected to rise by 0.2 million to 3.6 million. In that case, the unemployment rate would rise from 8.1 % to 8.6 %. Consumer prices will increase only at a moder- ate rate of 0.6 %. In view of the fact that the economic recovery is rather subdued, price pressures will remain in effect. Exports are expected to regain momentum relatively quickly and increase at a real rate of 8.4 % in 2010. According to ifo’s forecast, however, investment in plant and equipment will expand only at a restrained rate of 1.0 % in 2010, below the growth rate of the overall economy. Internationally, the downward slide has been arrested in most of the eastern European member states of the EU; according to ifo, however, a quick economic recov- ery is not foreseeable at the present time. In Poland, a real economic growth rate of 2.2 % is pre- dicted for 2010, while the economy of the Czech Repub- lic is expected to expand by 1.5 %. In Hungary, a further moderate decrease of 0.5 % is predicted. Russia can be expected to experience an economic recovery during the course of 2010. The real growth rate for 2010 is ex- pected to be 1.5 %. In western Europe, economic growth is likewise expected to be restrained. According to forecasts, the French economy will revive somewhat and probably expand at a real rate of 1.6 % in 2010. For Switzerland, economic growth of 1.1 % is anticipated. In Spain, it will probably take longer for an economic recovery to set in, because the collapse of the building sector and the anticipated austerity measures of the Spanish government will stand in the way of a rapid recovery; according to forecasts, the Spanish economy will contract by 0.5 % in real terms in 2010. Industry environment In view of the anticipated stagnation of consumer spend- ing, the German press distribution market will likely be restrained again in 2010, even as competition pressure remains intense. Due to the rising use of digital media, but also due to the growing availability of free advertis- ing papers, the average circulation of newspapers and magazines is likely to continue falling. Renewed copy price increases are hardly feasible in many cases, with the result that the circulation declines will probably affect circulation revenues to a greater extent than in the pre- ceding year. The trend of declining print media circula- tion will also persist in the key international markets of Axel Springer. On the other hand, the global advertising market is ex- pected to stabilize, following the worst drop in worldwide advertising expenditures in decades. According to the latest forecast by ZenithOptimedia (Advertising Expendi- ture Forecasts of December 2009), a slight worldwide increase of 0.9 % is anticipated for 2010, assuming that 88 Annual Report 2009 Axel Springer AG the economy continues to improve. According to Zenith- Optimedia, the markets of North America, western Europe, and Japan, which were hard hit by the economic crisis, will recover more slowly and even contract again in 2010. For the TV market in Germany, the media agency Zenith- Optimedia is predicting a 1.6 % decline in net advertising revenues. For the radio market, ZenithOptimedia an- ticipates a 1.0 % increase in net advertising revenues over the level of 2009. In view of the still fragile state of the German economy, it is hard to discern any positive factors that would stimu- late the advertising market. Consequently, all the relevant associations and industry representatives consider it probable that competition for tight advertising budgets will intensify among media outlets. In addition, the development of the advertising market is influenced by structural and political factors. For the time being, the extent to which national and European law- makers will expand or restrict the leeway for commercial advertising is unclear. Government intervention in com- mercial advertising, as in the case of food products, alcoholic beverages, or cars, for example, could prompt advertisers to seek new communication channels be- yond the traditional media to advertise their products. The advertising market in Germany could also be strained further by the ongoing push for more regulation, especially on the EU level. This scenario would be exac- erbated by the pressure for change associated with the shrinking and ageing of the population in Germany. For Germany, ZenithOptimedia predicts a 1.5 % contrac- tion in the total advertising market; specifically, the net ad volume of newspapers is expected to decline by 1.8 % and that of magazines by 3.3 %. For 2010, the Central Association of the German Advertising Industry (ZAW) anticipates that companies will spend 3 % less on adver- tising than in 2009. This forecast refers to both conven- tional media, as well as direct advertising and online advertising, among other segments. According to ZenithOptimedia, net advertising expendi- tures in the online market (including search term mar- keting and affiliate advertising) can be expected to con- tinue growing at a rate of 2.1 % in 2010. Thus, increas- ingly larger proportions of advertising budgets will be allocated to digital media. In general, it is expected that the mobile and stationary Internet will converge further from the perspective of users. The communication industry sees new growth opportu- nities mainly in new marketing offers, networked adver- tising concepts, the creation of new business lines, and product innovations. The industry expects that the two sports highlights of 2010, the Winter Olympics in Van- couver and the World Soccer Cup in South Africa, will provide a boost to the advertising market, with sports- related advertising channels benefiting most. For the international markets in which Axel Springer is active, ZenithOptimedia (as of December 2009) is fore- casting a mixed development of the net advertising revenues (including classified ads) of newspapers and magazines. Anticipated Print Advertising Demand 2010 (Selection) Change in net ad volume compared to prior year Newspapers Magazines Germany Poland1) Switzerland2) Hungary France Spain1) Russia3) Czech Republic2) – 1.8 % – 8.2 % – 0.6 % 2.2 % – 0.8 % – 3.2 % – 3.3 % – 7.5 % – 1.3 % 2.2 % – 3.5 % – 4.5 % 5.2 % 2.5 % 2.8 % Source: Forecast according to ZenithOptimedia, Advertising Expenditure Forecasts 2009. 1) Excluding classified ads. 2) Gross ad volume, excluding classified ads. 3) Print media in total. Based on the assumption of constant exchange rates, ZenithOptimedia expects that the net ad volume in the online market of western Europe will increase by 4.6 % to US-$ 16.3 billion in 2010. The growth rates in some of the eastern European markets will probably be much higher. Management Report of the Group and Management Report of Axel Springer AG 89 Anticipated Advertising Demand for Online Media (Selection) Change in net ad volume compared to prior year Germany Poland Switzerland Hungary France Spain Russia Czech Republic 2010 2.1 % 13.6 % 12.3 % 10.6 % 10.3 % 11.0 % 14.8 % 15.6 % 2009 1.2 % 8.6 % 13.2 % 7.6 % 6.5 % 5.0 % – 13.4 % 25.7 % Source: Forecast according to ZenithOptimedia, Advertising Expenditure Forecasts 2009. Strategic and organizational orientation In 2010 and beyond, Axel Springer will continue to pursue its strategy based on the core elements of expanding the market leadership position in the German-language core business, internationalization, and digitization. The market leadership position in the German-language core business will be expanded by continually building on our strong brands and by developing and establishing innovative cross-media advertising formats. By this means, the extraordinarily high reach of our print media and content portals can be put to optimal use. Axel Springer will continue energetically to pursue its internationalization strategy. The Group will focus on strong, established print brands that appeal to a broad base of readers. Important criteria for making invest- ments in companies are the editorial quality, the profes- sionalism of the management, and the suitability of the corresponding content for digital media. Geographically, Axel Springer will focus mainly on the countries of central and eastern Europe. The digitization strategy is geared to expanding content portals, marketplaces, and marketing. With regard to the content portals, we will focus on the continued develop- ment of paid content and offers. In this endeavor, we can make use of the experiences gathered in connection with the popular formats that have already been introduced. In the segment of marketplaces, the Group’s portfolio has been expanded significantly through the acquisition of StepStone. In the marketing segment, we intend to pursue further international growth as a result of the acquisition of Digital Window’s affiliate network, as a complement to the business of zanox. Significant adjustments to the Group’s organization are not planned from today’s perspective. Anticipated business developments and operating performance The consequential effects of the global recession will continue to be felt in the press distribution and advertis- ing markets, especially in view of the fact that the market has begun to stabilize on a comparatively low level. For the full year 2010, we anticipate stable to slightly higher revenues for the Group, with revenue growth in the low single-digit range. Although circulation revenues are expected to fall, we anticipate higher advertising and other revenues. We believe that the declines in the print business can be made up with rising revenues from the digital media. As a result of operational improvements, positive effects from restructuring measures, and the continued practice of strict cost discipline in all areas of the Group, EBITDA for the full year 2010 is expected to be around 10 % higher than the corresponding prior- year figure. Assuming that the economic recovery continues, we anticipate a further, slight increase in revenues and EBITDA in fiscal year 2011. The continual expansion of the Group’s international and digital business activities will be the main driver of that growth. 90 Annual Report 2009 Axel Springer AG As for the segments, we expect that the total revenues of the Newspapers National segment will be moderately lower in 2010, due to slightly lower advertising and circu- lation revenues. Despite the lower income from invest- ments resulting from the discontinuation of the contribu- tions of the regional newspapers that were sold, we will strive to increase EBITDA by means of the restructuring measures that have been initiated. The Group’s German magazines continue to operate in an extremely challenging competitive environment; there- fore, we anticipate that revenues in the advertising and press distribution market will continue to come under pressure. Nonetheless, we anticipate that EBITDA for the Magazines National segment will be higher than the prior-year figure due to the efficiency enhancement measures that have been implemented. Based on early signs of a market stabilization in the fourth quarter of 2009, our expectations for the Print International segment are cautiously positive, even though advertising and circulation revenues are expected to decline further. We expect that this segment’s EBITDA will be substantially higher than the corresponding figure for 2009, also due to the fact that the positive effects of the substantial reduction of cost structures will be re- flected in the full-year results for the first time. The anticipated significant revenue growth in the digital media is based on organic growth and on the full-year consolidation of StepStone and Digital Window. Both advertising revenues and other revenues are expected to be instrumental in the expected revenue growth. The significantly higher revenues and our growing success in generating profits in our brand-derived online activities are expected to result in a higher EBITDA for the Digital Media segment. For the Services/Holding segment, we anticipate slightly lower revenues and also a lower EBITDA, due to higher project costs and lower income from investments. Anticipated development of liquidity and financial position According to the current planning status, the Group’s liquidity and financial position will not change significantly in 2010. Axel Springer has extensive short-term and long-term credit facilities, which can also be used for acquisitions. Based on the capital expenditures projects planned to date, investments in property, plant and equipment and intangible assets will likely be higher than the corresponding prior-year figure, due in part to the further development of the Group’s web-based systems and IT infrastructure. The financing will be provided by the cash flow from operations. Dividend policy Axel Springer strives to maintain a continuous dividend policy, in accordance with the Group’s business devel- opment and operating performance, in a manner that allows for the further strengthening of the equity base and the financing of growth. Anticipated workforce development Despite constant workforce adjustment measures in the German print business, the average workforce in the Group for 2010 is expected to be higher than the corre- sponding figure for 2009, mainly due to the integration of StepStone and Digital Window into the Axel Springer Group. Furthermore, the organic growth of digital media will lead to a slight increase in personnel. Planning assumptions We plan the future development of the financial perfor- mance, liquidity, and financial position on the basis of assumptions that are plausible and sufficiently probable from today’s perspective; nonetheless, such assump- tions are fraught with great uncertainties in the current economic environment. The actual development, there- fore, could possibly be much different from the assump- tions applied and the resulting business plans and trend forecasts. Management Report of the Group and Management Report of Axel Springer AG 91 Disclosures pursuant to Sections 289 (4), 315 (4) HGB and Explanatory Report pursuant to Section 176 (1) (1) AktG Composition of subscribed capital The company’s subscribed capital amounts to € 98,940,000 and is divided into 32,980,000 registered shares, each representing an imputed share of the capi- tal stock equivalent to € 3.00. The shares can be trans- ferred only with the company’s consent (registered shares of restricted transferability, see below). The com- pany has only one class of shares. All shares carry the same rights and obligations. Each share grants the right to cast one vote in the annual shareholders’ meeting and represents the basis for de- termining the shareholder’s entitlement to the company’s net profit. By way of exception, the treasury shares do not confer any rights to the company (cf. Section 71b AktG). Restrictions on voting rights or transfer of shares By virtue of Article 5 para. 3 of the company’s Articles of Incorporation, shares of Axel Springer AG and subscrip- tion rights can be transferred only with the company’s consent. Such consent must be granted by the Man- agement Board, although internally, it is the Supervisory Board that adopts the resolution to grant such consent. According to the company’s Articles of Incorporation, such consent can be refused without indication of rea- sons. However, the company will not arbitrarily refuse its consent to the transfer of company shares. The share transfer restriction agreements described below, which the company has concluded with various shareholders for the purpose of upholding the restric- tions on the transfer of shares set forth in the Articles of Incorporation even in the case of indirect share transfers, give rise to transfer restrictions based on the German law of obligations (Schuldrecht). In exchange, the company has, in most cases, agreed to pledge the shares in ques- tion to the financing banks. (cid:132) In connection with the acquisition of company shares by Hellman & Friedman in October 2003, the company en- tered into a share transfer restriction agreement with Hellman & Friedman (and with the purchasing compa- nies affiliated with Hellman & Friedman and with Deutsche Bank Aktiengesellschaft and Deutsche Bank Luxembourg S.A.) on October 8, 2003. In this agree- ment, Hellman & Friedman expressly recognized the re- strictions on the transfer of shares according to the company’s Articles of Incorporation as binding upon it and its affiliated companies. In exchange, the company promised to support a widely distributed sale of the shares held by Hellman & Friedman on the stock ex- change or by means of a secondary placement (subject to the condition that no more than 4 % of the company’s capital stock would be transferred to a single investor) and to take all the necessary steps to obtain a stock ex- change listing for the shares of Axel Springer AG on the Frankfurt Stock Exchange. It is expressly stated in the share transfer restriction agreement that the correspond- ing support obligations of the company will have no bearing on the share transfer restrictions according to the company’s Articles of Incorporation. A secondary placement has been effected in the meantime, through the partial sale of the shares held by Hellman & Friedman in fiscal year 2006 (representing 9.8 % of the company’s capital stock at that time). (cid:132) In connection with the purchase of company shares from Dr. h. c. Friede Springer by Good Media Invest- ment Holdings S.A.R.L., the company entered into another share transfer restriction agreement with Mi- chael Lewis, Nova Trust Ltd. in its capacity as the trustee of Michael Lewis Capital Discretionary Settle- ments, and other “ML” investors held directly and in- directly by Nova Trust Ltd., alone or as a majority owner (Hague Holdings Ltd., Colmar Investment Holdings Ltd., and Media Investment Holdings S.A.R.L.), and the Governor and Company of the Bank of Scotland, by date of February 16, 2006. In this share transfer restriction agreement, the compa- nies participating on the side of Michael Lewis prom- ised to observe the share transfer restrictions set forth in the company’s Articles of Incorporation in respect of all indirect and direct purchases, disposals, and encumbrances of the company’s shares. Under the supplementary agreement of July 31/September 11, 2006, the company granted its prior consent to the acquisition of up to 340,000 additional shares of the company (representing 1 % of the existing capital stock) by Good Media Investment Holdings S.A.R.L., and the parties agreed to apply the obligations under the share transfer restriction agreement of February 16, 2006 to the shares to be purchased in the future 92 Annual Report 2009 Axel Springer AG as well. In the confirmation agreement of May 21, 2007, the parties specified that the above-mentioned agreements will also apply to any loan increase and to the existing subordinated pledge right that had again been stipulated for the shares by way of precaution. (cid:132) Finally, a share transfer restriction agreement was concluded between Dr. Mathias Döpfner, the company Brilliant 310. GmbH, Axel Springer AG, and M.M. War- burg & Co. KGaA dated July 31/August 4, 2006. Under this share transfer restriction agreement, the direct and indirect purchase of and the direct and indirect disposal over the shares of Axel Springer AG by Brilliant 310. GmbH or Dr. Mathias Döpfner were made contingent on the prior consent of Axel Springer AG according to the company’s Articles of Incorporation. Furthermore, transfer restrictions based on the German law of obligations apply in connection with the bonus share and share ownership program for the employees of the Axel Springer Group. The holding period is set at one year for the bonus share and at two years for the share ownership program (see page 46). The company is not aware of any restrictions on voting rights. Shareholdings that represent more than 10 % of the company’s voting rights At the end of the fiscal year 2009, Axel Springer Gesell- schaft für Publizistik GmbH & Co. KG held around 51.5 % of the company’s capital. This investment is attributable to AS Publizistik GmbH (in its function as general partner of Axel Springer Gesellschaft für Pub- lizistik GmbH & Co. KG), Friede Springer GmbH & Co. KG, Friede Springer Verwaltungs GmbH (in its function as general partner of Friede Springer GmbH & Co. KG), and Dr. h. c. Friede Springer herself. At the end of fiscal year 2009, Dr. h. c. Friede Springer directly held an addi- tional holding equal to about 7.0 % of the company’s capital stock. Thus, the total shareholding controlled by Dr. h. c. Friede Springer amounted to around 58.5 %. Shares endowed with special rights that confer powers of control There are no shares endowed with special rights that would confer powers of control. Manner of exercising voting rights when employees hold shares in the company’s capital and do not directly exercise their rights of control In connection with the two employee share ownership programs implemented in 2009 (see page 46), Deutsche Bank AG was initially recorded in the Share Register as a third-party holder with respect to the shares transferred to employees. However, every employee is at liberty to have himself or herself recorded in the Share Register as a shareholder. Statutory provisions and provisions of the Articles of Incorporation relative to the appointment and dismissal of Management Board members and amendments to the Articles of Incorporation The company’s Articles of Incorporation provide that the Management Board of Axel Springer AG must be com- posed of at least two members. The Supervisory Board decides on the number of Management Board members and on the appointment and dismissal of Management Board members. The term of office is at the most five years and can be re-established or renewed for no more than five years thereafter (cf. Section 84 (1) (1) to (4) AktG). If more than one person has been appointed to the Management Board, the Supervisory Board is authorized to appoint one of those members as the Chairman (Section 84 (2) AktG). If a required Management Board member would be lacking, the court is authorized, in urgent cases, to appoint the necessary member at the request of one involved party (Section 85 (1) (1) AktG). The Supervisory Board is author- ized to revoke the appointment of a Management Board member and the Management Board Chairman for impor- tant cause (cf. Section 84 (3) (1) and (2) AktG). Amendments to the company’s Articles of Incorporation require a resolution of the annual shareholders’ meeting, carried not only by a simple majority of the votes cast, but also by at least three quarters of the capital present and represented at the time of voting on the resolution (cf. Section 179 (2) (1) AktG in conjunction with Article 21 para. 2 of the company’s Articles of Incorporation). An amend- ment of the management principles set forth in Article 3 of the Articles of Incorporation requires a majority equal to at least four-fifths of the capital present and represented at the time of voting on the resolution (cf. Article 21 para. 3 of the company’s Articles of Incorporation). Management Report of the Group and Management Report of Axel Springer AG 93 The Supervisory Board is authorized to resolve amend- ments to the Articles of Incorporation that only involve changes to the wording (Article 13 of the Articles of Incorporation). Authority of the Management Board to issue or buy back shares Axel Springer AG has established no authorized or con- ditional capital that would authorize the Management Board to issue new shares. By resolution of the annual shareholders’ meeting of April 23, 2009 (Agenda Item 6), the Management Board is authorized, with the consent of the Supervisory Board, to purchase the company’s own shares up to an amount equivalent to 10 % of the current capital stock in the time until October 22, 2010. Such purchases can be effected on the stock exchange or by means of a public offer to all shareholders or a public invitation to submit an offer. In addition, the company is authorized to purchase the company’s own shares in connection with the Manage- ment Participation Program for the Management Board that was resolved at the annual shareholders’ meeting of April 14, 2004, in the time until October 22, 2010 (Agenda Item 7 of the annual shareholders’ meeting of April 23, 2009). Along with the shares held by the company or attribut- able to the company in accordance with Sections 71 a ff. AktG, the shares purchased by virtue of the foregoing authorizations may not at any time exceed 10 % of the company’s capital stock. Details concerning these two authorizations are provided in the invitation to the annual shareholders’ meeting of April 23, 2009, which is avail- able on the website of Axel Springer AG. (See also Agenda Items 6 and 7 and the Management Board’s report on this subject). At the end of 2009, the company held 3,179,784 of its own shares (representing 9.6 % of the capital stock). Significant agreements of the company subject to the condition of a change of control resulting from a takeover offer With the exception of a € 1,500,000,000 credit facility, the company has not entered into any significant agreements that would be subject to a change of control resulting from a takeover offer. The € 1,500,000,000 credit facility ex- tended to the company by a bank syndicate by date of August 14, 2006 is subject to the condition of a change of control insofar as the bank syndicate is entitled, in such a case, to terminate the credit facility with advance notice of 30 days in the event of a change of control. Aside from specific exceptions that relate to the shareholders that currently control Axel Springer AG, a change of control is understood to mean, in the context of the credit facility, the acquisition of shares of Axel Springer AG representing more than 50 % of the capital stock and/or voting rights by one or more parties acting together. Indemnification agreements of the company with Management Board members or employees in the event of a change of control The majority of the members of the Management Board is entitled to cancel their employment contracts in re- sponse to a change of control. In such a case, they will be entitled to payment of their base salary for the re- maining term of their contract, according to the most recent agreement, but at least to payment of one year’s base salary. Furthermore, the company will pay the per- formance-based compensation at the pro-rated per- centage for the period of time served in the year of resig- nation. The employment contracts of the Management Board members do not provide for any other compensa- tion in the event of the termination of the employment contract in response to a change of control. There are no such indemnification agreements with em- ployees of the company. Final Declaration as per Section 312 (3) AktG “According to the circumstances known to the manage- ment at the time of each transaction with an affiliated company, Axel Springer AG received adequate consid- eration for every such transaction and did not take or fail to take any actions in fiscal year 2009, either at the be- hest or in the interest of the controlling company or a company affiliated with the controlling company.” 94 Annual Report 2009 Axel Springer AG Declaration on Corporate Governance pursuant to Section 289a HGB and Corporate Governance Report The Declaration on Corporate Governance pursuant to Section 289a of the German Commercial Code (HGB) comprises the Declaration of Conformity pursuant to Section 161 of the German Stock Corporations Act (AktG), as well as relevant disclosures concerning man- agement practices, a description of the internal proce- dures followed by the Management Board and Supervi- sory Board, and listings of the composition and proce- dures of their committees. In accordance with Section 3.10 of the German Corporate Governance Code, the Management Board reports on the company’s corporate governance (Corporate Governance Report), also on behalf of the Supervisory Board, in the Declaration on Corporate Governance. Responsible corporate governance Good corporate governance as a guiding principle At Axel Springer, good corporate governance is consid- ered to be a crucial element of responsible management and control and thus an essential basis for the com- pany’s lasting success. In this regard, we are guided by the German principles of sound corporate management, especially as set forth in the German Corporate Govern- ance Code. We have taken appropriate measures to implement and ensure compliance with the principles of corporate gov- ernance. The Management Board member in charge of “Finance and Services” also serves as Corporate Gov- ernance Officer. The implementation of, and adherence to, the recommendations of the German Corporate Gov- ernance Code are reviewed on a continual basis. The Chairmen of the Management Board and the Supervi- sory Board are informed of the results of this review on a regular basis. Declaration of Conformity pursuant to Section 161 AktG In accordance with Section 161 of the German Stock Corporations Act (AktG), the Management Board and Supervisory Board of Axel Springer AG hereby make the following declaration: I. “Axel Springer adheres to the recommendations of the German Corporate Governance Code (the Code) in the version of June 18, 2009, published by the Federal Min- istry of Justice in the official announcements section of the electronic Federal Gazette on August 5, 2009, with the following exceptions: 1) The published list of third-party companies in which the company holds an equity investment that is not in- significant for the company in question contains the legally required disclosures (Section 7.1.4 (3) of the Code). To the extent that information regarding the equity and profit or loss can be omitted in accordance with the foregoing, the company does not make such disclosures, in order to avoid any disadvantages for the private indi- viduals involved. Otherwise, the company has made full use of the allowed option of presenting some of the required disclosures in a list of equity holdings, instead of in the notes to the (consolidated) financial statements, for the last time in fiscal year 2009; this option is no longer allowed for fiscal year 2010 due to the elimination of Sections 287, 313 (4) HGB by the Accounting Moderni- zation Act (BilMoG) that entered into force on May 29, 2009. 2) For members of the Supervisory Board, a deductible equal to at least 10 % of the insured loss under D&O insurance and up to one and a half times the fixed an- nual compensation of Supervisory Board members will be stipulated for members of the Supervisory Board, in accordance with the legal situation as for members of the Management Board, only as of July 1, 2010 (Section 3.8 (5) of the Code). Because the higher minimum deductible applicable to members of the Management Board (Section 93 (2) (3) AktG) under the D&O insurance contracted prior to Au- gust 5, 2009 (as in the case of the company) is to take effect only as of July 1, 2010 in accordance with Section 23 (1) EGAktG, the increase in the minimum deductible for members of the Supervisory Board will also be ef- fected only as of July 1, 2010, for reasons of uniformity and efficiency. Management Report of the Group and Management Report of Axel Springer AG 95 3) The compensation granted to each individual member of the Supervisory Board and the fees paid by the com- pany to individual members of the Supervisory Board for the services provided by them are not disclosed in the Corporate Governance Report (Section 5.4.6 (6) and (7) of the Code). Such itemized information is not disclosed because the competitors of Axel Springer Aktiengesellschaft also do not publish such compensation information. II.a. In the time since the last Declaration of Conformity was published in December 2008, with amendments in Feb- ruary 2009, until the new version of the Code was an- nounced on August 5, 2009, the company has adhered to the German Corporate Governance Code in the ver- sion of June 6, 2008, published by the Federal Ministry of Justice in the official announcements section of the electronic Federal Gazette on August 8, 2008, with the exception of the points I.1) and I.3) mentioned above and the exceptions noted below. 1) In fiscal year 2009, as in prior years, the Personnel Committee of the Supervisory Board resolved on the compensation system of the Management Board, includ- ing the main contractual elements (Section 4.2.2 (1) of the Code). The resolution by the Personnel Committee, which regu- larly deals with matters related to the Management Board, assured an objective and appropriate decision. In the future, however, the Supervisory Board intends to resolve on the Management Board compensation system in its full session, in accordance with the recommendation of the Code. 2) The full Supervisory Board did not review the com- pensation system of the Management Board in fiscal year 2009 (Section 4.2.2 (1) of the Code). In view of the fact that the Personnel Committee of the Supervisory Board adopted a resolution on the restruc- tured compensation system of the Management Board in connection with the introduction of the new Management Participation Program in fiscal year 2009, a further review of the compensation system so shortly thereafter did not appear to be necessary. In the future, however, the Supervisory Board intends to review the compensation system of the Management Board in its full session on a regular basis again, as in the past, in accordance with the recommendation of the Code. 3) The Management Participation Program adopted by the annual shareholders’ meeting on April 14, 2004 does not stipulate a cap in the event of extraordinary, unfore- seeable developments (Section 4.2.3 (8) of the Code). The Management Participation Program entails practi- cally no financial burden for the company. By virtue of an option contract entered into with the shareholders H&F Rose Partners, L.P. and H&F International Rose Partners, L.P., Axel Springer AG is entitled to repurchase the same number of shares that have been sold to the members of the Management Board under the Management Partici- pation Program at a comparable price or receive a cash settlement instead. Due to the financial protection af- forded by this agreement, the Management Participation Program does not stipulate a cap depending on the share price. II.b. Axel Springer has adhered to the recommendations of the German Corporate Governance Code (the Code) in the version of June 18, 2009, published by the Federal Ministry of Justice in the official announcements section of the electronic Federal Gazette on August 5, 2009, in the time since it was announced, with the exception of the points I.1), I.2), and I.3) as well as points IIa.1) and IIa.2) mentioned above. Berlin, December 2009 Axel Springer AG The Supervisory Board The Management Board” 96 Annual Report 2009 Axel Springer AG This Declaration of Conformity pursuant to Section 161 AktG was published in December 2009. Like the older versions, it can be viewed at www.axelspringer.de/ declarationofconformity. Relevant standards and practices of corporate governance Axel Springer is the only media company to have a cor- porate constitution. The principles set forth therein are anchored in Article 3 of the company’s Articles of Incor- poration and therefore serve as a guideline for all em- ployees. The corporate constitution can be viewed at and downloaded from www.axelspringer.de/corporate- principles. The main principles of the corporate constitu- tion are presented in the section entitled “Social respon- sibility” on page 47 of this report. A Managerial Guideline concretizes the requirements to be met by the management of the Axel Springer Group in accordance with the corporate constitution. Axel Springer has also instituted Guidelines of Journalis- tic Independence, which concretize and broaden the scope of the journalistic principles set forth in the Code of Conduct of the German Press Council. Specifically, they address the separation between advertising and editorial texts and delineate the boundaries between the private and business interests of reporters and editors; they forbid personal enrichment and set rules for the treatment of sources. Thus, these guidelines define the framework conditions for independent and critical jour- nalism in the editorial departments of all media of the Axel Springer Group. The editors-in-chief are responsible for observing and implementing the guidelines in the company’s day-to-day activities. The complete guide- lines can be viewed at www.axelspringer.de/guidelines. Finally, Axel Springer has developed a catalog of social standards known as the International Social Policy. This policy clarifies the company’s position with respect to human rights, the rule of law, the protection of children and adolescents, the treatment of employees, health and safety, and the compatibility of work and family, among other issues. The International Social Policy can be downloaded from www.axelspringer.de/socialpolicy_en. Internal procedures of the Management Board and Supervisory Board and the composition and procedures of their committees Cooperation between the Management Board and Supervisory Board In accordance with the prescriptions of law, a dual sys- tem of management and supervision has been imple- mented at Axel Springer. The Management Board man- ages the company under its own responsibility. The Supervisory Board appoints the members of the Manage- ment Board and monitors and advises the Management Board in the conduct of business. The two boards work closely together, in an atmosphere of trust and confi- dence, to enhance the company’s value. The two boards are strictly separated from each other with respect to personnel and responsibilities. Management by the Management Board In its capacity as the executive managerial instance, the Management Board is bound by duty to promote the company’s interests and enhance the company’s value on a sustainable basis. It develops the company’s busi- ness strategy and is responsible for implementing that strategy, in coordination with the Supervisory Board. The Management Board manages the company’s business in accordance with the relevant laws, Articles of Incorpora- tion and its internal rules of procedure. The Management Board provides comprehensive and timely information to the Supervisory Board on all rele- vant matters of strategy, planning, business develop- ments, risks, and risk management. Important deci- sions of the Management Board require the approval of the Supervisory Board. Such decisions include, in par- ticular, the creation or discontinuation of business divi- sions, the acquisition or sale of significant equity in- vestments, and the adoption of the company’s annual budget and financial plan. Management Report of the Group and Management Report of Axel Springer AG 97 The internal rules of procedure of the Management Board contain detailed prescriptions. They govern the following matters, among others: (cid:132) The obligation to observe, comply with, and ensure the Group-wide implementation of the corporate constitution (cid:132) The division of managerial responsibilities and the decisions to be made by the full Management Board (cid:132) The duties of the Management Board Chairman (cid:132) Transactions that require the consent of the Supervi- sory Board (cid:132) The prompt, regular provision of comprehensive in- formation to the Supervisory Board (cid:132) Rules governing meetings and resolution procedures, and (cid:132) Reporting duties and the disclosure of conflicts of interest. The Management Board currently consists of four members: (cid:132) Dr. Mathias Döpfner (Chairman, head of “Subscription Newspapers and International”) Supervision and advice by the Supervisory Board The Supervisory Board consists of nine members, who are elected by the annual shareholders’ meeting. The term of office of Supervisory Board members is five years; they are eligible for re-election at the end of their terms. The Supervisory Board elects its Chairman from among its own ranks; the term of office of the Supervisory Board Chairman is coincident with that of the Supervisory Board. The Supervisory Board advises the Management Board and oversees its work, meeting at least four times a year. In case of necessity, it meets without the Man- agement Board in attendance. Meetings may be held and resolutions adopted also by way of written corre- spondence, telephone calls, telexes, or other forms of telecommunication. The Supervisory Board discusses the company’s business developments, planning, strat- egy, and significant capital expenditures at regular inter- vals of time. The Supervisory Board adopts the separate financial statements of Axel Springer AG and approves the consolidated financial statements of the Group. The Supervisory Board reviews the efficiency of its work on a regular basis. For information on the specific activities of the Supervisory Board in 2009, please refer to the Re- port of the Supervisory Board (see pages 107ff.). The internal rules of procedure of the Supervisory Board fulfill the requirements of the German Corporate Gover- nance Code, with the few exceptions mentioned in the Declaration of Conformity. These rules govern the follow- ing matters, among others: (cid:132) Rudolf Knepper (Vice Chairman, head of “Printing, (cid:132) The election and duties of the Chairman and Vice Logistics and HR”) Chairman (cid:132) Lothar Lanz (Chief Financial Officer and Chief Operat- (cid:132) The convocation of meetings ing Officer) (cid:132) Dr. Andreas Wiele (head of “BILD Group and Magazines”) The members of the Management Board bear joint re- sponsibility for the management of the company; they work together in a collegial manner and keep each other regularly informed of important measures and events in their respective areas of responsibility. (cid:132) The adoption of resolutions within meetings or by way of written correspondence or telephone consultation, and (cid:132) The obligation to disclose conflicts of interest. 98 Annual Report 2009 Axel Springer AG The members of the Supervisory Board are: Executive Committee (cid:132) Dr. Giuseppe Vita (Chairman) Responsibilities Members in fiscal year 2009 (cid:74) Publishing and journalistic (cid:74) Dr. Giuseppe Vita (Chairman) (cid:132) Dr. h. c. Friede Springer (Vice Chairwoman) affairs (cid:74) Dr. h. c. Friede Springer (cid:132) Dr. Gerhard Cromme (cid:132) Oliver Heine (cid:132) Klaus Krone (cid:132) Prof. Dr. Wolf Lepenies (cid:132) Michael Lewis (cid:132) Dr. Michael Otto (cid:132) Brian M. Powers The term of office of all current Supervisory Board mem- bers ends upon the close of the regular annual share- holders’ meeting in 2014. Composition and internal procedures of committees The Management Board has not instituted any commit- tees. The Supervisory Board currently has four commit- tees: the Executive Committee, Personnel Committee, Nominating Committee, and Audit Committee. The members and responsibilities of the committees are presented below: (cid:74) Strategy, financial planning (Vice Chairwoman) (cid:74) Capital expenditures, financing (cid:74) Dr. Gerhard Cromme (cid:74) Klaus Krone (cid:74) Preparation of decisions for the organization of the Management Board (cid:74) Approval of the sale of registered shares of Axel Springer AG and of subscription rights for such registered shares (cid:74) Approval of management measures requiring the approval of the Supervisory Board, which have been referred to the Executive Committee Personnel Committee Responsibilities Members in fiscal year 2009 (cid:74) Preparation of decisions (cid:74) Dr. Giuseppe Vita (Chairman) (cid:74) Dr. h. c. Friede Springer (Vice Chairwoman) (cid:74) Dr. Gerhard Cromme regarding the appointment and dismissal of Management Board members (cid:74) Resolutions on the conclusion, amendment, and termination of employment contracts with Management Board members (except determination and change of their compensation) (cid:74) Resolutions on the extension of loans within the meaning of Sections 89, 115 AktG (cid:74) Approval of contracts with Supervisory Board members as per Section 114 AktG (cid:74) Representation of the company in legal transactions with Management Board members (cid:74) Approval of management measures requiring the approval of the Supervisory Board, which have been referred to the Personnel Committee Management Report of the Group and Management Report of Axel Springer AG 99 Nominating Committee Responsibilities Members in fiscal year 2009 (cid:74) Preparation of proposals (cid:74) Dr. Giuseppe Vita (Chairman) (cid:74) Dr. h. c. Friede Springer (Vice Chairwoman) (cid:74) Dr. Michael Otto regarding the appointment and dismissal of Management Board members (cid:74) Formulation and review of the required qualifications which the company expects of Supervisory Board members (cid:74) Observation of the national and international environment in order to identify suitable candidates Audit Committee Responsibilities Members in fiscal year 2009 (cid:74) Preparation of decisions for the (cid:74) Dr. Giuseppe Vita (Chairman) adoption of the separate financial statements and the approval of the consolidated financial statements (cid:74) Dr. h. c. Friede Springer (Vice Chairwoman) (cid:74) Preliminary review of the annual (cid:74) Klaus Krone (cid:74) Oliver Heine, since April 2009 financial statements, Dependency Report, consolidated financial statements, management report and Group management report (cid:74) Review of the proposal for the utilization of the unappropriated net profit (cid:74) Review of the interim financial statements and interim reports (cid:74) Review of the risk management system (cid:74) Discussion of the audit report and the report on the auditor’s review of interim financial statements with the independent auditor (cid:74) Preparation of the proposal for the election of the independent auditor for the annual shareholders’ meeting (cid:74) Issuance of the audit engagement for the separate financial statements and consolidated financial statements, adoption of audit priorities his decisions, pursue personal interests or take advan- tage of business opportunities that should be the prov- ince of the company. Management Board members may not, in connection with their activities, request or accept gifts or other bene- fits either for their own benefit or that of others, or grant unjustified benefits to third parties. Any sideline activities of the Management Board members require the consent of the Supervisory Board. The Management Board mem- bers are subject to a comprehensive anti-competition clause during the period of their activity for Axel Springer. Every Management Board member must inform the Supervisory Board of any conflict of interest without delay. In the same manner, every Supervisory Board member must inform the Supervisory Board of any such conflicts without delay. The Supervisory Board reports any conflicts of interest and the manner of handling them to the annual shareholders’ meeting (for information on conflicts of interest arising in fiscal year 2009, see the Report of the Supervisory Board on page 107 and the Corporate Governance Report below. Seats held by Management Board and Supervisory Board members on other supervisory boards A summary of the seats held by the Management Board and Supervisory Board members of Axel Springer AG on other legally prescribed Supervisory Boards and/or com- parable boards in Germany and abroad can be found on page 182. Corporate Governance Report 2009 Further development of Corporate Governance The new version of the German Corporate Governance Code adopted on June 18, 2009 contains a number of changes, most of which were necessitated by the Act on the Appropriateness of Management Board Compensa- tion (VorstAG), which entered into force in August 2009. These changes are the following: Conflicts of interest The members of the Management Board and Supervi- sory Board are bound by duty to promote the interests of the company. No member of either board may, through (cid:132) Section 3.8 of the GCGC now prescribes quantitative requirements for the deductible of Management Board members under D&O insurance. That deductible must be at least equal to 10 % of the insured loss; the 100 Annual Report 2009 Axel Springer AG maximum limit must be at least one and a half times the fixed annual compensation. A corresponding de- ductible should be stipulated for members of the Supervisory Board as well. (cid:132) According to Section 4.2.2, the full Supervisory Board sets the total compensation of the individual Man- agement Board members. In addition, the full Super- visory Board should adopt and regularly review the compensation for the Management Board. The ap- propriateness of the total compensation is to be as- sessed with respect to the duties of each individual member of the Management Board, his personal per- formance, and the economic situation of the company. If an outside compensation expert is consulted, care must be taken to ensure his independence. (cid:132) According to Section 4.2.3, the compensation struc- ture must be geared to the objective of sustainable business development; as a rule, variable compensa- tion components should be measured on the basis of results spanning several years, should take into ac- count both positive and negative developments, and should not induce the members of the Management Board to take inappropriate risks. (cid:132) Section 4.2.4 was updated to reflect the legal require- ments relative to the itemized disclosure of Manage- ment Board compensation. Other changes pertain to the Supervisory Board. With regard to the composition of the Management Board and the proposals made for the election of Supervisory Board members, the Supervisory Board should give due consid- eration to the principle of diversity. Management Board members may not be elected to the company’s Supervi- sory Board until two years after the expiration of their term of office as Management Board members, unless they are elected at the proposal of shareholders representing more than 25 % of the voting rights in the company. In this latter case, a former Management Board member should be appointed as the Chairman of the Supervisory Board only in exceptional cases, which must be justified to the annual shareholders’ meeting. In addition, it is recommended that the Chairman of the Audit Committee should be independ- ent and not a former member of the company’s Manage- ment Board whose term of office there ended less than two years previous to their new appointment. Axel Springer adheres to the new legal requirements and recommendations of the German Corporate Governance Code, with the reservation that the new regulations and recommendations concerning the deductible under D&O insurance will be implemented in mid-2010. In view of the fact that considerable parts of the long-term variable com- pensation elements had been newly introduced in fiscal year 2009, a review of the compensation system of the Management Board by the full Supervisory Board did not appear to be necessary. In the future, however, the Super- visory Board intends to review the compensation system of the Management Board in its full session on a regular basis again, as in prior years, in accordance with the recommen- dation of the Code. For information on other exceptions to the recommendations of the Code, please refer to the Dec- laration of Conformity of December 2009. Conflicts of interest No conflict of interest arose for any member of the Man- agement Board in 2009. In the Supervisory Board, two conflicts of interest arose in 2009, which are described in the following. In July 2009, the Supervisory Board deliber- ated on the conclusion of a settlement agreement be- tween Axel Springer AG and Hellman & Friedman. The subject of this agreement was the waiver by the company of its right to exercise a call option to purchase 62,300 shares in the company from Hellman & Friedman in con- nection with the Management Participation Program. In exchange, Axel Springer received a cash settlement. To avoid any possible conflicts of interest, Supervisory Board member Brian Powers did not participate in the voting. Acting on the recommendation of the Personnel Commit- tee, the Supervisory Board voted to approve, in December 2009, the cash settlement of the share options held by the eligible Management Board members in connection with the Management Participation Program 2004, which would expire in December 2009, and an agreement with Hellman & Friedman to amend the call option agreement of April 8, 2004. Also in this matter, Brian Powers ab- stained from voting in order to avoid any possible conflicts of interest. No further conflicts of interest arose for mem- bers of the Supervisory Board in fiscal year 2009. Shareholders and annual shareholders’ meeting The annual shareholders’ meeting of Axel Springer AG is the central governing authority in which the shareholders exercise their rights and cast their votes. Every share Management Report of the Group and Management Report of Axel Springer AG 101 confers the right to cast one vote in the annual share- holders’ meeting. Those shareholders who are registered in the share register and have registered for the meeting in time are entitled to vote. The Chairman of the Supervi- sory Board also chairs the shareholders’ meeting. To make it easier for shareholders to exercise their preroga- tives at the annual shareholders’ meeting, their votes can be cast by authorized representatives. In particular, Axel Springer AG designates a voting proxy whom sharehold- ers can elect to exercise their voting rights according to their instructions at the annual shareholders’ meeting. All required reports and documents are made available to the shareholders prior to the meeting, also by posting them on the company’s website. The annual shareholders’ meeting specifically reaches decisions concerning the utilization of the unappropriated net profit, the ratification of the actions of the Manage- ment Board and Supervisory Board, the election of the Supervisory Board, the selection of the independent auditor, and other matters reserved for them by law, such as corporate actions regarding changes in capital and other amendments to the Articles of Incorporation. The resolutions of the annual shareholders’ meeting require a simple majority of the votes cast, unless an- other majority is prescribed by law or by the company’s Articles of Incorporation. The Articles of Incorporation can be viewed at the company’s website at www.axelspringer.de/articlesofassociation. Transparency Axel Springer is committed to always providing compre- hensive, timely, and consistent information on the signifi- cant events and developments relevant to an evaluation of the company’s present and future business performance to all capital market participants. The company reports on its business situation and results in its annual report, at its annual financial statements press conference, and in its quarterly reports. For this purpose, the company also uses Internet communication channels whenever possible. To the extent required by law, the company also provides information in the form of ad-hoc announcements and press releases and on the company’s website. To ensure the equal treatment of all capital market partici- pants, information relevant to the capital markets is pub- lished at the same time in the German and English lan- guages on the company’s website. The financial reporting dates are published in the financial calendar with sufficient advance notice. In accordance with Section 15 a of the German Securities Trading Act (WpHG), any changes in the composition of the shareholder structure that are subject to the reporting obligation according to Section 26 WpHG and the purchase and sale of shares by persons who perform management duties at Axel Springer (direc- tors’ dealings) are promptly reported as well. Shareholdings and directors’ dealings At the balance sheet date of December 31, 2009, the Management Board members of the company directly or indirectly held 429,684 shares of Axel Springer AG. Of that number, 373,449 shares were held indirectly by Dr. Mathias Döpfner via the company Brilliant 310. GmbH. The remaining 56,235 shares are held directly by the Management Board members (including Dr. Mathias Döpfner). The Management Board members eligible under the Management Participation Program 2004 and in office as of December 31, 2009, also hold options to purchase up to 214,312 additional shares of Axel Springer AG based on the Management Participation Program 2004 and subject to its terms. At the balance sheet date, the Supervisory Board mem- bers directly or indirectly held a total of 20,511,437 shares of Axel Springer AG. Dr. h. c. Friede Springer held 17,000,010 shares indirectly via the companies Friede Springer GmbH & Co. KG and Axel Springer Gesellschaft für Publizistik GmbH & Co., and 2,308,980 shares di- rectly. Michael Lewis held another 1,190,447 shares indirectly via the companies Good Media Investment Holdings S.à r.l. and TriAlpha Oceana Concentrated Opportunities Fund Ltd. Another 10,000 shares were held by Dr. Giuseppe Vita and 2,000 shares by Mr. Oliver Heine. Preparation and auditing of the financial statements The consolidated financial statements and interim finan- cial statements are prepared in accordance with Interna- tional Financial Reporting Standards (IFRS), as they are to be applied in the European Union. In addition, the consolidated financial statements contain the disclosures prescribed by Section 315a (1) HGB. 102 Annual Report 2009 Axel Springer AG The Management Board of Axel Springer AG is responsi- ble for preparing the consolidated financial statements. The independent auditor audits the consolidated financial statements. Axel Springer publishes the consolidated financial statements within 90 days and the quarterly re- ports within 45 days of the respective period ending dates. The company makes full use of the allowed options to present some of the required disclosures in a list of eq- uity holdings, rather than in the notes to the financial statements and the notes to the consolidated financial statements. The list of equity holdings contains the le- gally prescribed disclosures. To the extent that it is pos- sible to omit the disclosure of equity and profit-or-loss information, such disclosures are omitted. Dealings with shareholders that are to be classified as related parties within the meaning of the applicable financial accounting regulations are disclosed in the notes to the consolidated financial statements. In accordance with the German Corporate Governance Code, it was agreed with the independent auditor that the latter will inform the Chairman of the Supervisory Board or the Audit Committee without delay of any cir- cumstances arising during the course of the audit that would constitute grounds for disqualification or partiality. It was also agreed that the independent auditor will im- mediately report any matters and events arising during the course of the audit that fall within the purview of the Supervisory Board. It was further agreed that the inde- pendent auditor would inform the Chairman of the Audit Committee or make an observation in the audit report if he discovered any facts during the course of the audit that would contradict the Declaration of Conformity by the Management Board and Supervisory Board accord- ing to Section 161 AktG. Actions for nullification and disclosure, both ongoing and ended in fiscal year 2009 On May 24, 2006, Dr. Oliver Krauß filed an action to nullify the resolutions of the annual shareholders’ meeting of April 27, 2006 relating to Agenda Item 3 (Ratification of the actions of the Management Board), Agenda Item 4 (Ratifi- cation of the actions of the Supervisory Board), and Agenda Item 6 (Authorization to purchase and use the company’s own shares according to Section 71 (1) (8) AktG). Pomoschnik Rabotajet GmbH joined the action before the Berlin Regional Court (Case No. 23 U 88/07) on the side of the plaintiff. Following the oral proceedings of April 26, 2007, the Berlin Regional Court dismissed the action and assigned the costs to the plaintiff. On June 12, 2007, the plaintiff filed an appeal with the Berlin Appellate Court against this judgment of the Berlin Regional Court (Case No. 93 O 88/07). The appeal was denied and the costs were assigned to the appellant by the judgment of May 26, 2008. The appeal against this denial of appeal was allowed only to a limited extent, with regard to Agenda Item 4 (Ratification of the actions of the Supervisory Board). Thereupon, the plaintiff filed an appeal with the Federal Supreme Court against the judgment of the Berlin Appel- late Court (Case No. II ZR 174/08) and, to the extent that the appeal was not allowed, the appellant also filed an appeal against denial of leave to appeal. The Federal Su- preme Court completely allowed the appeal against denial of leave to appeal by judgment of April 6, 2009. In its ruling of September 21, 2009, the Federal Supreme Court set aside the appellate judgment of the Berlin Appellate Court of May 26, 2008 to the extent that the action for nullification of the ratification resolutions of the annual shareholders’ meeting of April 27, 2006 had been dismissed. The Federal Supreme Court declared the corresponding resolutions (Agenda Items 3 and 4) to be void because the originally correct Declaration of Conformity issued by the Manage- ment Board and Supervisory Board in December 2005 had become incorrect in accordance with Section 161 (1) AktG (old version) with respect to conformity with the recom- mendation set forth in Section 5.5.3 of the German Corpo- rate Governance Code, in that the disclosure of a conflict of interest had been accidentally omitted in the report of the Supervisory Board to the annual shareholders’ meeting. In all other respects, the Federal Supreme Court dismissed the action for nullification. Therefore, the resolutions on the ratification of the actions of the Management Board and Supervisory Board for fiscal year 2005 will be repeated at the annual shareholders’ meeting in 2010. On May 18, 2007, Dr. Oliver Krauß filed an action to nullify the resolutions of the annual shareholders’ meeting of April 19, 2007 relating to Agenda Item 3 (Ratification of the actions of the Management Board), Item 4 (Ratification of Management Report of the Group and Management Report of Axel Springer AG 103 the actions of the Supervisory Board), and Item 8 (Special authorization to purchase and use the company’s own shares according to Section 71 (1) (8) AktG in connection with the Management Participation Program). Mr. Frank Scheunert joined this action pending before the Berlin Regional Court (Case No. 95 O 51/07) on the side of the defendant. By judgment of November 1, 2007, the action was dismissed and the costs were assigned to the plaintiff. Dr. Krauß filed an appeal with the Berlin Appellate Court against the judgment of dismissal (Case No. 23 U 188/07). The appeal was denied and the costs were assigned to the appellant in the oral proceedings of July 7, 2008. An appeal against the denial of appeal was not allowed. Also in this matter, the plaintiff filed an appeal against denial of leave to appeal with the Federal Supreme Court (Case No. II ZR 223/08), which the Federal Supreme Court dis- missed by judgment of September 21, 2009. Thus, the dismissal of the appeal is now unappealable. By way of an action for disclosure according to Section 132 AktG of May 8, 2008, Dr. Oliver Krauß filed a motion to place the Management Board under the obligation to provide information about his questions that were allegedly not answered at the 2008 annual shareholders’ meeting. The oral proceeding before the Berlin Regional Court (Case No. 90 O 40/08) took place on October 27, 2008. In a partial ruling of the same date, the competent division for commercial matters of the Berlin Regional Court found the action for disclosure to be partially resolved in the main issue and dismissed the action for disclosure with respect to the majority of the questions in dispute. In its final ruling of December 22, 2008, the Berlin Regional Court dis- missed the action for disclosure also with respect to the remaining questions in dispute. The plaintiff filed an appeal with the Berlin Appellate Court against the partial judgment of October 27, 2008 and against the final ruling of De- cember 22, 2008) (combined Case No. 23 W 69/08). By judgment of July 16, 2009, the Berlin Appellate Court dismissed the appeals in full. On July 30, 2009, the plaintiff filed a plea of remonstrance against this judgment, which the Berlin Appellate Court dismissed, with assignment of costs to the plaintiff, by judgment of November 2, 2009. Thus, the dismissal of the appeal is now unappealable. On May 20, 2008, Dr. Oliver Krauß filed another action to nullify the resolutions of the annual shareholders’ meeting of April 24, 2008 relating to Agenda Item 2 (Utilization of the unappropriated net profit), Agenda Item 3 (Ratification of the actions of the Management Board), Agenda Item 4 (Ratifica- tion of the actions of the Supervisory Board), and Agenda Item 7 (Special authorization to purchase and use the com- pany’s own shares according to Section 71 (1) (8) AktG in connection with the Management Participation Program). On May 26, 2008, moreover, the shareholder Klaus Zapf filed an action to nullify, or failing that, to annul the resolution of the annual shareholders’ meeting of April 24, 2008 relat- ing to the Agenda Item 3 (Ratification of the actions of the Management Board). The Berlin Regional Court combined the two actions into one (Case No. 98 O 49/08). The share- holders Oliver Wiederhold, Gastro Beteiligungs AG and SCI AG joined the action on the side of the defendant. The Berlin Regional Court dismissed both actions in full on March 17, 2009. The plaintiff Dr. Oliver Krauß filed an appeal with the Berlin Appellate Court against this judgment (Case No. 23 U 63/09), while the plaintiff Klaus Zapf did not pur- sue the matter further. The oral proceeding before the Berlin Appellate Court was held on January 25, 2010. The date of announcement of the decision has been set for February 25, 2010. By order issued on February 25, 2010, the Berlin court of appeal set a continuation and evidence-taking trial date for May 3, 2010. By way of an action for disclosure according to Section 132 AktG of May 6, 2009, Dr. Oliver Krauß filed a motion to place the Management Board under the obligation to provide information about his questions that were alleg- edly not answered at the 2009 annual shareholders’ meeting. The action had been pending before the Berlin Regional Court (Case No. 93 O 46/09), which dismissed the action for disclosure in full without an oral proceeding by its judgment of January 5, 2010, and did not allow an immediate appeal. Thus, the dismissal of the action for disclosure is now unappealable. On May 21, 2009, Dr. Oliver Krauß filed another action to nullify the resolution of the annual shareholders’ meeting of April 23, 2009 relating to Agenda Item 7 (special authoriza- tion to purchase and use the company’s own shares ac- cording to Section 71 (1) (8) AktG in connection with the Management Participation Program), and the elections of Dr. h. c. Friede Springer and Mr. Brian Powers to the Super- visory Board of the company (Agenda Item 8). Furthermore, 104 Annual Report 2009 Axel Springer AG Dr. Krauß filed a declaratory motion to establish that the company is obligated to make available to him, in his ca- pacity as a shareholder of the company, a copy of parts of the “stenographic record from its question-recording and question-answering system,” that include his questions and comments and the information provided to him by the company in return. The proceeding is currently pending before the Berlin Regional Court (Case No. 95 O 52/09). The shareholders SCI AG and Oliver Wiederhold joined the action on the side of the defendant. The oral proceeding took place on February 25, 2010; the date of announce- ment of the decision has been set for March 29, 2010. Compensation report Axel Springer’s compensation policy is based on the principle of performance-oriented compensation for the work of the Management Board and Supervisory Board, with compensation consisting of fixed and variable per- formance-dependent components. Management Board In fiscal year 2009, as in prior years, the Personnel Commit- tee of the Supervisory Board of the company resolved on the compensation system for the Management Board, including the main contractual elements. In the future, how- ever, the Supervisory Board intends to resolve on the Man- agement Board compensation system in its full session, in accordance with the amended legal requirements and the recommendation of the German Corporate Governance Code (the Code). The full session of the Supervisory Board did not review the compensation system in fiscal year 2009. In view of the fact that considerable parts of the long-term variable compensation elements had been newly introduced in fiscal year 2009, such a review did not appear to be necessary. In the future, however, the Supervisory Board intends to review the compensation system of the Man- agement Board in its full session on a regular basis again, as in prior years, in accordance with the recommendation of the Code. In accordance with the requirements of the VorstAG and the recommendations of the German Corpo- rate Governance Code, the compensation of Management Board members consists of fixed and variable elements. The variable compensation elements are composed of a cash component and long-term, share-based compensa- tion components. Every compensation component is ap- propriate in itself and also in their entirety. The criteria ap- plied for assessing the appropriateness of the total com- pensation are the duties of each individual member of the Management Board, his or her personal performance, and the economic situation of the company, as well as the suc- cess and future prospects of Axel Springer. Due considera- tion is given also to our industry environment. No outside compensation experts were consulted in fiscal year 2009. The fixed compensation consists of the fixed annual salary; in addition, the members of the Management Board receive a company car and security expenditures as ancillary benefits. The fixed annual salary is set for the full term of an employment contract and is paid in twelve monthly installments. It is determined, among others, on the basis of the duties of each individual member of the Management Board and the current economic situation, success, and future prospects of the Group. The variable compensation element in the form of a cash component is limited as to the maximum amount. It is determined on the basis of the individual board member’s performance, both with regard to individual goals and Group goals, which consist of the consolidated EBITDA, the Group-wide customer satisfaction index, the revenues of the Digital Media segment, and EBITDA of the Digital Media segment. For that purpose, the Group goals are adopted by the Supervisory Board for every fiscal year. The individual goals applied to measure the performance of the individual board member are determined by agreement between the Supervisory Board Chairman and the respec- tive Management Board member; the Supervisory Board Chairman also adopts the goal fulfillment for the cash component in agreement with the Management Board member. Long-term variable compensation components exist in the form of two share-based compensation elements, the Management Participation Program established in 2004, and a Virtual Share Options Program established in 2009. Management Participation Program: In 2004, the members of the Management Board purchased a total of 62,300 shares of Axel Springer AG. The purchased shares were subject to a multi-year holding period, which lapsed for 50 % of the purchased shares on December 18, 2007 and for 50 % of the purchased shares on December 18, 2008. In conjunction with this personal investment on their part, the Management Report of the Group and Management Report of Axel Springer AG 105 members of the Management Board were granted share options for the purchase of originally up to 498,400 shares. The number of exercisable options was dependent on the achievement or over-achievement of certain EBITA targets in fiscal years 2005 and 2006. These targets were surpassed. At the grant date in 2004, the value of the options was € 16.018 million. The imputed compensation component for 2009 was € 0 thousand (PY: € 406 thousand). In total, 34,888 options were exercised in 2009. On December 17, 2009, the eligible Management Board members waived their right to exercise 214,312 options and received in exchange a claim to payment of a cash settlement of € 12.00 per option. The cash settlement, which was paid in January 2010, amounted to € 2,572 thousand, which was € 4,329 thousand less than the fair value of the corre- sponding options at the grant date. As of December 31, 2009, therefore, 249,200 share options were still out- standing. For more information on the Management Par- ticipation Program, please also refer to the comments in Note (13f) of the notes to the consolidated financial state- ments, as well as the statements made in the Declaration of Conformity pursuant to Section 161 AktG on page 94, and the detailed description of the Management Participa- tion Program at www.axelspringer.de/managementshare program. Virtual Share Option Plan: Effective July 1, 2009, 375,000 virtual share options were issued to the members of the Management Board. The virtual share options have a life of six years, i.e., until June 30, 2015, and can be exercised at the earliest after four years, i.e., on July 1, 2013. Provided that the Management Board employment contract or ap- pointment to the Management Board remained in effect at least until June 30, 2013, all virtual share options granted to the Management Board member can become vested. If a member resigns from the Management Board after June 30, 2010, but before July 1, 2013, the virtual share options granted to him will be vested only pro rata temporis in proportion to the four-year vesting period. Other vesting conditions include performance and outperformance hur- dles in relation to the share price of the Axel Springer share. The share options can be exercised only when the average share price of Axel Springer AG will have been at least 30 % higher than the baseline value of € 60.86 during the 90 calendar days prior to exercising the share options and if the percentage increase in the share price of the Axel Springer share will have exceeded the percentage increase in the DAX stock market index over the same period. Every share option embodies a claim to payment of an amount equal to the appreciation of the Axel Springer share, but limited to a maximum amount of € 121.72; this amount is the difference between the volume-weighted average share price during the 90 calendar days prior to exercise of the share options and the baseline value. The Management Board members are obligated to hold one Axel Springer AG share for every 10 share options as a personal investment. Disposition of these shares prior to exercise of the options will lead to the forfeiture of the share options, in the propor- tion of one share for every 10 share options. At the grant date, the value of the virtual share options was € 4,743 thousand. In fiscal year 2009, the imputed compensation component was € 1,460 thousand. For more information on the subject of the Virtual Share Option Plan, please also refer to our comments in Note (13f) of the notes to the consolidated financial statements. Contractual pension commitments have been extended to most members of the Management Board. Pension payments commence at the end of the 62nd year of life of the respective Management Board member, if that member no longer serves on the board at that time. In the event of an earlier departure from the company, the Management Board member will have a vested right to pension payments in proportion to his length of service with the company, provided that he will have worked for the company for at least five years. Payments are also due in the event of completely reduced earnings capacity lasting for an indefinite period of time. Most members of the Management Board are entitled to cancel their employment contracts in the event of a change of control. In such a case, they will be entitled to payment of their base salary for the remaining term of their contract, according to the most recent agreement, but at least to payment of one year’s base salary. Furthermore, the company will pay the performance-based compensa- tion at the pro-rated percentage for the period of time served in the year of resignation. The employment con- tracts of the Management Board members do not provide for any other compensation in the event of termination of the employment contract due to a change of control. The total compensation of the Management Board in fiscal year 2009 amounted to € 17.7 million (PY: € 13.1 million). The fixed salaries amounted to 106 Annual Report 2009 Axel Springer AG € 8.9 million (PY: € 8.2 million); this figure includes an amount of € 426 thousand for ancillary benefits (com- pany car and security expenses). The total variable com- pensation for the same period amounted to € 8.8 million (PY: € 4.9 million). The imputed compensation compo- nent in connection with the long-term share-based com- pensation (Management Participation Program 2004 and Virtual Share Option Plan) totaled € 1,460 thousand (PY: € 406 thousand). Neither this amount nor the cash set- tlement of € 2,572 thousand paid in January 2010 in exchange for the waiver of exercise of share options in connection with the Management Participation Program are included in the above-mentioned total compensation. In connection with the pension rights granted to Manage- ment Board members, the pension provisions increased by an amount of € 736 thousand (PY: € 897 thousand). No loans or advances were extended to members of the Management Board in fiscal year 2009. Axel Springer AG does not disclose the total compensa- tion of each named member of the Management Board itemizing his name because Sections 314 (2) and 286 (5) HGB expressly state that such itemized disclosure is not required if a qualified majority of the annual shareholders’ meeting resolves to withhold disclosure. The annual shareholders’ meeting of Axel Springer AG held on April 27, 2006 passed such a resolution with the requisite majority. The reason for non-disclosure is the fact that Axel Springer AG’s competitors also do not disclose their compensation on an itemized basis. Supervisory Board The compensation is determined by the annual shareholders’ meeting and regulated in Article 16 of Axel Springer AG’s Articles of Incorporation. Accordingly, the compensation is comprised of fixed and variable components. The Super- visory Board receives a fixed annual salary of € 2.0 million. In addition, it also receives compensation in the amount of € 1 thousand for every cent (€ 0.01) of the dividend per share in excess of € 0.15, or a minimum of 4.0 % of share capital per share, distributed to shareholders. The Super- visory Board also receives compensation in the amount of € 300 thousand if the basic earnings per share for the fiscal year (based on the share of the company’s share- holders in consolidated net income) exceeds the basic earnings per share of the third previous fiscal year calcu- lated in the same manner by 15 % or more. For fiscal years in which no positive consolidated net income can be applied as a reference benchmark, an amount of € 3.00 per share will be applied as the refer- ence benchmark for calculating the increase in the fiscal year net income. For fiscal years that close with a con- solidated net loss, only the fixed compensation of € 2.0 million will be paid. The Supervisory Board decides how the aforementioned amounts are distributed among its members, with adequate consideration of its mem- bers’ activities as Chairman and in the committees. The Supervisory Board received total compensation of approximately € 2.4 million (PY: € 2.7 million) for its work in fiscal year 2009. The variable compensation of € 425 thousand (PY: € 725 thousand) was determined on the basis of the dividend proposed by the Manage- ment Board and Supervisory Board; therefore, it is sub- ject to the reservation of a corresponding resolution by the annual shareholders’ meeting. The prior-year variable compensation in the total amount of € 725 thousand was composed of an amount of € 425 thousand based on the paid dividend of € 4.40 and another amount of € 300 thousand, due to the fact that the undiluted earn- ings per share for fiscal year 2008 had exceeded the undiluted earnings per share calculated in the same manner for the third-to-last fiscal year by 15 % or more. This precondition was not met in the case of the undi- luted earnings per share for fiscal year 2009. In addition, the company reimburses every member of the Supervisory Board for his or her expenses and for the valued-added tax payable on their compensation. The company pays the premium for the D&O insurance taken out for members of the Supervisory Board. One member of the Supervisory Board is paid an annual professional fee of € 125 thousand for his services as an author. By way of exception to Section 5.4.6 (6) and (7) of the Code, the itemized compensation paid to individual members of the Supervisory Board and the itemized compensation paid in respect of personally rendered services is not presented in the Corporate Governance Report because the competitors of Axel Springer AG also do not disclose such information. Report of the Supervisory Board Report of the Supervisory Board 107 107 In fiscal year 2009, the Supervisory Board worked close- ly with the Management Board in a spirit of trust and confidence, and supervised the management of the company in accordance with applicable laws and regula- tions, the company’s Articles of Incorporation, and the principles of good corporate governance. In its meetings and the meetings of its committees, as well as by means of additional written and oral reports by the Management Board, the Supervisory Board obtained detailed informa- tion about the company’s situation and development, important business transactions, and the risk manage- ment program on a regular basis. The Management Board also kept the Supervisory Board informed of sig- nificant events in the time between its meetings. In addi- tion, the Supervisory Board Chairman and the Manage- ment Board Chairman held information and consultation meetings on a regular basis. The Supervisory Board discussed with the Management Board all matters of crucial importance for the company, including the company’s business plan, business strat- egy, larger capital expenditure projects, and personnel matters. Furthermore, the Supervisory Board discussed significant individual transactions of importance to the company’s future development and adopted resolutions on those legal transactions and measures for which the input of the Supervisory Board is required by law, by the company’s Articles of Incorporation, or by the Manage- ment Board’s internal rules of procedure. At the regular annual shareholders’ meeting for 2009, which was held on April 23, 2009, the Supervisory Board was completely re-elected without personnel changes; directly thereafter, Dr. Vita was confirmed as the Super- visory Board Chairman and Dr. Springer as the Supervi- sory Board Vice Chairwoman. The Supervisory Board held a total of five meetings in 2009; four meetings (in- cluding the constitutive meeting of April 23, 2009) were held in the first half and one meeting in the second half of the calendar year. One member attended fewer than half the meetings of the Supervisory Board and was excused for those absences. In July 2009, the Supervisory Board deliberated by way of written correspondence on the conclusion of a Set- tlement Agreement between Axel Springer AG and Hell- man & Friedman. The subject of this agreement was the waiver by the company of its right to exercise a call op- tion for the purchase of 62,300 shares in the company from Hellman & Friedman in connection with the Man- agement Participation Program 2004 for the Manage- ment Board; in exchange, Axel Springer received a cash settlement. To avoid any possible conflicts of interest, the Supervisory Board member Brian Powers, Managing Director of Hellman & Friedman, abstained from voting. Acting on the recommendation of the Personnel Com- mittee, the Supervisory Board voted to approve, in De- cember 2009, the cash settlement of the share options held by the eligible Management Board members under the Management Participation Program 2004, which expired in December 2009, and an agreement with Hellman & Friedman to amend the call-option agreement of April 8, 2004. Also in this matter, the Supervisory Board member Brian Powers abstained from voting in order to avoid any possible conflicts of interest. No fur- ther conflicts of interest arose for members of the Super- visory Board in fiscal year 2009. As part of its deliberations in fiscal year 2009, the Super- visory Board focused especially on evaluating the busi- ness strategy of Axel Springer AG, under which the company has consistently pursued the goals of “market leadership in the German-language core business,” “internationalization,” and “digitization” since 2001. With reference to a Management Board presentation, the Supervisory Board in this context focused in particular on the steps taken to build the digital business and generate multimedia growth, especially by means of monetization strategies centered on the core competencies of the company. In addition, the Supervisory Board deliberated on the parent company’s financial statements and on the con- solidated financial statements of the Group at December 31, 2008, the agenda for the annual shareholders’ meet- ing held in 2009, and the introduction of a central 108 Annual Report 2009 Axel Springer AG compliance organization for the entire Axel Springer Group, which had been resolved by the Management Board. The Supervisory Board also discussed and ap- proved the sale of the regional newspaper investments, among other topics. The Supervisory Board adopted a resolution on the Declaration of Conformity for 2009 in December 2009. Furthermore, the Supervisory Board reviewed the efficiency of its own work by means of a self-evaluation and found its work to be orderly and efficient. In early February 2010, the Supervisory Board approved the 2010 finance plan presented by the Man- agement Board. On March 10, 2009, the Supervisory Board of Axel Springer AG appointed Lothar Lanz as a new member of the Management Board, charged with responsibility for the Management Board division “Finance and Services,” effective May 1, 2009. He took the place of Steffen Naumann, who left Axel Springer AG as of that date after more than seven years of successful service to the company. The Supervisory Board wishes to thank Mr. Naumann again for his successful service to the company. In connection with the appointment of Mr. Lanz to the Management Board and the assignment of the compli- ance organization to the CFO, the Supervisory Board adopted an updated division of managerial responsibilities. Corporate Governance In December 2009, the Management Board and Super- visory Board issued their joint Declaration of Conformity according to Section 161 AktG and made that declara- tion permanently available on the company’s website. Axel Springer AG adheres to nearly all the recommenda- tions of the German Corporate Governance Code. The Declaration of Conformity, along with an explanation of the few exceptions to the recommendations, can be found on page 94 of the Annual Report. Additional information on corporate governance in the Axel Springer Group may be found in the joint Corporate Governance Report of the Management Board and Supervisory Board, which is reproduced on page 99 as part of the Declaration on Corporate Governance Committees of the Supervisory Board In the interest of performing its duties in an efficient man- ner, the Supervisory Board has formed an Executive Committee, a Personnel Committee, an Audit Committee, and a Nominating Committee. The Chairman of the Supervisory Board is the Chairman of the Executive Committee, the Personnel Committee, the Audit Com- mittee, and the Nominating Committee. The Executive Committee, which is responsible for fun- damental matters related to publishing and for matters of strategy, business planning, capital expenditures, and financing, among other matters, notwithstanding the general responsibility of the full Supervisory Board, held six meetings in 2009. Aside from personnel-related mat- ters, the deliberations and resolutions of this committee were devoted in particular to the decisions concerning the acquisition or sale of companies or investments in companies, including for example the acquisition of a minority interest in the joint venture Infor Biznes Sp. z o.o., Warsaw/Poland, a majority interest in Digital Window Ltd, London/Great Britain, and the acquisition of StepStone ASA, Oslo/Norway, along with the subsequent squeeze- out, as well as the sale of the company’s investments in Westfalen-Blatt Vereinigte Zeitungsverlage GmbH and Family Media GmbH & Co. KG, and the sale of the titles Mädchen, Popcorn, and Jolie by the subsidiary AS Mediahouse GmbH. The Executive Committee also dealt with the investment in Dogan TV. In addition, it deliberated on the bonus share and share ownership program for employees and managers. Furthermore, the Executive Committee adopted resolutions on the deci- sions to grant approval to the transfer of shares of Axel Springer AG, in accordance with Article 5 para. 3 of the company’s Articles of Incorporation. Until August 5, 2009, when the Appropriateness of Man- agement Board Compensation Act (VorstAG) entered into force, the Personnel Committee had been responsible in particular for the conclusion, amendment, and termination of employment contracts with members of the Manage- ment Board. Since that date, the Personnel Committee’s role in such matters concerning the determination or modification of the Management Board compensation has been limited to preparation. Report of the Supervisory Board 109 The Personnel Committee held four meetings in fiscal year 2009. It dealt with matters of Management Board personnel, among other matters, and recommended to the Supervisory Board, among other things, that Mr. Lothar Lanz be appointed as a new member of the Management Board charged with responsibility for Finance and Services, and that the Management Board members Rudolf Knepper and Dr. Andreas Wiele be reappointed to the Management Board. Prior to the effective date of the VorstAG, moreover, the Personnel Committee dealt with the Management Board compensation system and re- solved to introduce a new Management Participation Program for the Management Board; after the VorstAG entered into force, the Personnel Committee dealt with the (old) Management Participation Program 2004 and recommended to the Supervisory Board that the share options held by the eligible members of the Management Board under the Management Participation Program 2004, which expired in December 2009, be settled by means of a cash settlement. The Audit Committee kept itself informed of the status, scope, execution, and results of the audit of the separate financial statements of the parent company and the consolidated financial statements of the Group for 2008, prepared the decisions of the Supervisory Board on the adoption of the separate financial statements and the approval of the consolidated financial statements, re- viewed the interim financial statements and interim re- ports, clarified questions related to the independent auditor, kept itself informed about the investment in Dogan TV, and also kept itself informed about the risk management system and the activities of the Internal Audit Department. The Audit Committee held five meet- ings in 2009. By resolution of the Supervisory Board at its constitutive meeting of April 23, 2009, the number of its members was extended from three to four. The Nominating Committee met once in preparation for the Supervisory Board elections at the annual sharehold- ers’ meeting in 2009 and prepared the Supervisory Board’s proposals regarding those elections to be pre- sented to the annual shareholders’ meeting. Separate financial statements of the parent company and of the Group, management report of the parent company and of the Group Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, audited the annual financial statements of the parent company and the consolidated financial statements of the Group, prepared by the Management Board as well as the management report for the parent company and the consolidated management report for the Group, for the fiscal year 2009, and provided them with an unquali- fied audit opinion in each case. In connection with the audit, the independent auditor also noted in summary that the Management Board has implemented a risk management system that fulfills the statutory require- ments, and that this system is basically suitable for the early detection of any developments that could endanger the company’s survival as a going concern. The aforementioned documents and the proposal of the Management Board for the utilization of the unappropri- ated net profit, as well as the audit report of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, were provided to all members of the Supervisory Board in a timely manner. The documents were discussed extensively in the pres- ence of the independent auditor in the meetings of the Audit Committee of February 24, 2010 and March 9, 2010. At these meetings, the independent auditor re- ported on the principal findings of his audit. No deficien- cies in the internal control and risk management system, as it relates to the financial accounting process, were noted. No circumstances that would cast doubt on the impartiality of the independent auditor arose. Further- more, the independent auditor did not render any ser- vices other than the audit of financial services. 110 Annual Report 2009 Axel Springer AG The Audit Committee reported on the results of its ex- amination to the full Supervisory Board. At its meeting of March 9, 2010, the Supervisory Board reviewed the documents in question, having noted and duly consid- ered this report of its committee and the report of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, and having discussed them with the independent auditor, who was in attendance. The Supervisory Board acknowledged and approved the audit results. Based on the results of its own review, the Supervisory Board had no objections to raise. The Su- pervisory Board approved the annual financial state- ments of the parent company and the consolidated financial statements of the Group as well as the man- agement report of the Axel Springer AG and of the Axel Springer Group that were prepared by the Management Board, as well as the management report and the con- solidated management report for the Group. As a result, the 2009 annual financial statements of Axel Springer AG were officially adopted. The Supervisory Board also reviewed the proposal of the Management Board concerning the utilization of the unappropriated net profit and concurred with that pro- posal, in consideration of the company’s fiscal year net income, liquidity, and financing plan. The Management Board also submitted its report on the company’s dealings with related parties pursuant to Section 312 of the German Stock Corporation Act (AktG) to the Supervisory Board. The Supervisory Board was also in receipt of the corresponding audit report by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft. Both reports were also provided to each member of the Su- pervisory Board. The audit opinion of the independent auditor reads as follows: “Based on the audit and evaluation conducted in accor- dance with our professional duties, we hereby confirm that 1. 2. the factual information contained in the report is correct, and the consideration provided by the company in re- spect of the legal transactions mentioned in the re- port was not inappropriately high.” The Supervisory Board also reviewed the report of the Management Board on the dealings with related parties pursuant to Section 312 AktG and the independent auditor’s report on this subject. At the Supervisory Board meeting of March 9, 2010, the independent auditor also reported orally on the principal findings of his audit. The Supervisory Board acknowledged and approved the report of the independent auditor. Based on the final results of its own review, the Supervisory Board had no objections to raise with respect to the results of the audit report of the independent auditor or the Management Board’s declaration on the report pursuant to Section 312 (3) AktG. Report of the Supervisory Board 111 Supervisory Board Thank you to the members of the Management Board and the employees of the company In closing, the Supervisory Board thanks the members of the Management Board and all employees for their out- standing work in the past fiscal year. Berlin, March 9, 2010 The Supervisory Board Dr. Giuseppe Vita Chairman Dr. Giuseppe Vita Chairman Dr. h. c. Friede Springer Vice Chairwoman Dr. Gerhard Cromme Chairman of the Supervisory Board of ThyssenKrupp AG Oliver Heine Lawyer and partner in the law firm Oliver Heine & Partner Klaus Krone Member of the Supervisory Board of Axel Springer AG Prof. Dr. Wolf Lepenies University professor Michael Lewis Investment Manager Dr. Michael Otto Chairman of the Supervisory Board of Otto (GmbH & Co. KG) Brian M. Powers Chief Executive Officer (CEO) of the investment group Hellman & Friedman LLC 112 ullstein bild “Freedom, when rightly understood—not freedom from something but freedom for something—is a rock-solid part of my publishing creed.” Axel Springer, 1978 ullstein bild 113 People have fought for freedom throughout history. They have struggled for racial equality, against the indiscriminate exercise of government authority, and for civil and human rights. What follows is a brief selection of themes from the extensive holdings of ullstein bild, the photo agency of Axel Springer AG. They are reminders of great pursuits of freedom that made headlines in history. BILD, JunE 27, 1963 The Berlin Wall was not yet two years old, the world had hardly caught its breath following the Cuban Missile Crisis, and Cold War tensions were at a high. This was the situation when U.S. President John F. Kennedy gave the hope of freedom to the half-city of West Berlin by his visit. And he made history when he said, “All free men, wherever they may live, are citizens of Berlin, and, therefore, as a free man, I take pride in the words ‘Ich bin ein Berliner’!”  “Apartheid” stands for a segregation policy that not only separates races but devalues people with dark skin. A man who paid for his fight to overcome racism with decades of imprisonment became a symbol of resistance to this dehumanizing ideology and practice: the later Nobel Peace Prize winner Nelson Mandela. DIE WELT, FEbruarY 12, 1990 “Nelson Mandela free again after 27 years”  There was unrest in Warsaw Pact countries in 1953 in East Germany, Hungary in 1956, Czechoslovakia in 1968. And each time, it was put down by force of arms. When workers at the Gdansk Shipyards started striking in 1980 under the leadership of electrician Lech Walesa, there was no reason to think that things would turn out any differently. But it was the beginning of a great geopolitical transformation. B.Z., August 18, 1980 “Poland Dramatic escalation! striking workers now demand: Release all political prisoners! End censorship! Abolish perks for party officials!” b.Z. aM MITTag, SEpTEMbEr 10, 1931 “Where will gandhi stay? a holy man approaches an unholy city” Regarding Dürer’s portrait of his haggard mother, Klaus Staeck once asked, “Would you rent a room to this woman?” When Mahatma Gandhi arrived in London to attend the constitutional conference for India, Ullstein’s B.Z. apparently had similar misgivings. But sometimes intelligence and staying power are more important than clothes. This strategy ultimately led to victory in 1947 for the Indian independence movement. BERLInER MORgEnPOst, JunE 18, 1953 “uPRIsIng sPREADs tO sOvIEt sEctOR BLOODy IncIDEnts In BERLIn cLAIM sEvEn cAsuALtIEs. nOw stAtE Of EMERgEncy In sOvIEt sEctOR—OPEn uPRIsIng AgAInst thE sOcIALIst Unity Party of Germany” Events were triggered by plans to increase work quotas by ten percent for the same pay. This was too much for construction workers at Berlin’s Stalinallee. What started as a local protest on June 17th soon spread to large parts of East Germany. And the strike for fair wages became a popular uprising for German freedom and unity which the East German communist party put down with the aid of Soviet tanks. In the end there were over 6,000 arrests and 500 dead. HaMburgEr abENDbLaTT, NovEMbEr 7, 1989 “popular anger grows Mass demonstrations in cities” It was supposed to be a 40th anniversary celebration but turned out to be a swan song. East Germany’s falsified election results in May 1989 stood out in truly unflattering contrast to the glasnost and perestroika of Gorbachev’s Soviet Union. The bold actions of Poland’s Solidarity movement also set a forceful example. East Germans gathered their courage. Long-simmering dissatisfaction erupted in open protest. In early November 500,000 people at Leipzig’s weekly demon- stration shouted, “We are the people!” BERLInER MORgEnPOst, August 29, 1963 “Blacks and whites hand in hand for equality Kennedy greets 200,000 demonstrators” Substandard schools, off-limits park benches and discrimination in count- less areas were facts of life for African-Americans into the 1960s, especially in the South. One man who led the protest against this injustice was Baptist minister Martin Luther King. “I have a dream,” he proclaimed to 200,000 listeners in Washington. A vision of justice. Not long after, the U.S. Congress passed laws prohibiting political, legal, and social discrimination on the basis of race. BILD, JunE 6, 1989 “Beijing now they’re shooting at everything in sight” Ideological disputes within the Communist Party, drastic price increases due to upheavals in the economic system, and the mounting pressure from lack of freedom were three forces that gave rise to the student democracy movement in post-Cultural Revolution China. But government leaders tired of public protests and hunger strikes; the occupation of Tiananmen Square in Beijing had to end. Some 2,600 civilians were killed when the protests were crushed. This photo by Charlie Cole became a symbol of the courage of the individual.  The twentieth anniversary of the fall of the Berlin Wall was the reason, and the fiftieth anniversary of the publishing house was the occasion for the unveiling of Stephan Balkenhol’s sculpture “Balanceakt” in front of the headquarters of Axel Springer AG. It is a monument to the difficult path to Germany’s unity in freedom. It’s also a remembrance of Axel Springer’s commitment to the self-determination of the German people. BILD, MAy 26, 2009 “unveiled! the ‘Wall Walker’ of Berlin” 132 Consolidated Financial Statements 134 Consolidated Statement of Financial Position 136 Consolidated Statement of Comprehensive Income 137 Consolidated Statement of Cash Flows 138 Consolidated Statement of Changes in Equity 139 Segment Report Notes to the Consolidated Financial Statements 140 General information 151 Notes to the consolidated statement of financial position 166 Notes to the consolidated statement of comprehensive income 171 Notes to the consolidated statement of cash flows 172 Notes to the segment report 173 Other disclosures Auditor’s Report 133 Auditor’s Report We have audited the consolidated financial state- ments prepared by the Axel Springer Aktiengesell- schaft, Berlin, comprising the statement of financial position, the income statement, the statement of recognized income and expenses, the statement of cash flows, the statement of changes in equity, and the notes to the consolidated financial statements, together with the combined management report of the Axel Springer Group and of Axel Springer AG for the fiscal year from January 1 to December 31, 2009. The preparation of the consolidated financial statements and the combined management report of the Axel Springer Group and of Axel Springer AG in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB [“Handels- gesetzbuch”: “German Commercial Code”] are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the combined management report of the Axel Springer Group and of Axel Springer AG based on our audit. We conducted our audit of the consolidated financial statements in accordance with Sec. 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the combined management report of the Axel Springer Group and of Axel Springer AG are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Axel Springer Group and the expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting- related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the combined management report of the Axel Springer Group and of Axel Springer AG are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the combined management report of the Axel Springer Group and of Axel Springer AG. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Axel Springer Group in accordance with these requirements. The combined management report of the Axel Springer Group and of Axel Springer AG is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development. Berlin, February 25, 2010 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Plett Wirtschaftsprüfer [German Public Auditor] Glöckner Wirtschaftsprüfer [German Public Auditor] 134 Annual Report 2009 Axel Springer AG Consolidated Statement of Financial Position € thousands ASSETS Non-current assets Fixed assets Intangible assets Property, plant, and equipment Investment property Non-current financial assets Investments accounted for using the equity method Other non-current financial assets Receivables from income taxes Other assets Deferred tax assets Current assets Inventories Trade receivables Receivables due from related parties Receivables from income taxes Other assets Cash and cash equivalents Assets held for sale Total assets *) Adjusted due to the change of the accounting policy for pension obligations. Note 12/31/2009 12/31/2008* 01/01/2008* 1,874,600 1,715,724 2,245,092 1,666,249 1,655,185 2,186,787 835,438 737,964 704,707 704,752 722,249 756,789 31,704 29,663 27,369 94,355 165,309 697,922 59,702 129,993 639,371 34,653 39,829 35,316 58,551 44,457 46,511 152,249 3,050 16,273 13,032 3,066 8,728 1,059,702 1,093,341 1,579,953 31,900 44,225 37,990 301,947 264,875 269,221 43,987 55,944 70,364 55,582 63,417 37,586 70,292 62,001 110,281 197,259 154,529 198,056 358,301 474,543 830,696 2,934,302 2,809,065 3,825,045 (4) (5) (6) (7) (11) (28) (8) (9) (10) (11) (31) (12) Consolidated Financial Statements 135 Note 12/31/2009 12/31/2008* 01/01/2008* (13) 1,196,848 1,067,702 1,215,363 1,145,206 1,025,134 1,134,269 51,642 42,568 81,094 966,087 1,041,871 1,504,255 310,415 296,026 294,468 39,327 14,062 20,936 383,801 512,432 930,149 1,536 4,135 1,743 20 519 2,925 58,987 51,331 78,493 167,886 166,257 176,765 771,367 699,492 1,105,427 49,056 47,943 47,971 161,233 155,642 192,417 6,480 11,596 10,988 204,802 183,246 234,525 (14) (15) (16) (17) (18) (28) (14) (15) (16) (17) 22,213 24,498 39,860 54,866 46,843 83,597 272,717 229,724 237,522 0 0 258,547 2,934,302 2,809,065 3,825,045 € thousands EQUITY AND LIABILITIES Equity Shareholders of Axel Springer AG Minority interests Non-current provisions and liabilities Provisions for pensions Other provisions Financial liabilities Trade payables Liabilities due to related parties Other liabilities Deferred tax liabilities Current provisions and liabilities Provisions for pensions Other provisions Financial liabilities Trade payables Liabilities due to related parties Liabilities from income taxes Other liabilities Liabilities related to assets held for sale Total equity and liabilities *) Adjusted due to the change of the accounting policy for pension obligations. 136 Annual Report 2009 Axel Springer AG Consolidated Statement of Comprehensive Income € thousands Consolidated Income Statement Revenues Other operating income Change in inventories and internal costs capitalized Purchased goods and services Personnel expenses Depreciation, amortization and impairments Other operating expenses Income from investments Result from investments accounted for using the equity method Other investment income Financial result Income taxes Net income Net income attributable to shareholders of Axel Springer AG Net income attributable to minority interests Basic earnings per share (in €) Diluted earnings per share (in €) € thousands Note (20) (21) (22) (23) (24) (25) (26) (27) (28) 2009 2008 2,611,591 2,728,538 70,654 4,112 85,521 5,241 – 886,445 – 945,374 – 791,943 – 722,457 – 92,350 – 112,088 – 705,107 – 697,335 212,141 407,755 – 18,369 – 55,449 230,510 463,204 – 24,980 – 61,547 – 83,840 – 117,187 313,833 571,067 303,481 560,050 10,352 11,017 (29) (29) 10.20 10.19 18.58 18.54 Consolidated Statement of Recognized Income and Expenses Note 2009 2008 Net income Actuarial gains/losses from defined benefit pension obligations Currency translation differences Changes in fair value of available-for-sale financial assets Changes in fair value of derivatives in cash flow hedges Changes in revaluation surplus Other income/loss from investments accounted for using the equity method Other income/loss Comprehensive income Comprehensive income attributable to shareholders of Axel Springer AG Comprehensive income attributable to minority interests 313,833 571,067 – 6,100 1,655 3,882 10,339 6 – 434,169 – 4,503 – 11,334 – 3,086 0 – 4,578 – 12,318 (30) – 16,606 – 443,600 297,227 127,467 286,824 116,500 10,403 10,967 Consolidated Financial Statements 137 Consolidated Statement of Cash Flows € thousands Net income Reconciliation of net income to the cash flow from operating activities Depreciation, amortization, impairments, and write-ups of fixed assets Result from investments accounted for using the equity method Dividends received from investments accounted for using the equity method Result from derecognition of fixed assets Changes in non-current provisions Changes in deferred taxes Other non-cash income and expenses Changes in trade receivables Changes in trade payables Changes in other assets and liabilities Cash flow from operating activities Proceeds from disposals of intangible assets, property, plant and equipment Proceeds from disposals of consolidated subsidiaries and business units less cash and cash equivalents given up Proceeds from disposals of other non-current financial assets Purchases of intangible assets, property, plant, equipment and investment property Purchases of shares in consolidated subsidiaries and business units less cash and cash equivalents acquired Purchases of investments in other non-current financial assets Cash flow from investing activities Dividends paid to shareholders of Axel Springer AG Dividends paid to other shareholders Equity contributions Re-issuance/Purchase of treasury shares Repayments of liabilities under finance leases Proceeds from other financial liabilities Repayments of other financial liabilities Cash flow from financing activities Cash flow-related changes in cash and cash equivalents Changes in cash and cash equivalents due to exchange rates Changes in cash and cash equivalents due to changes in companies included in consolidation Cash and cash equivalents at beginning of period Reclassification from held-for-sale assets Cash and cash equivalents at end of period € thousands Cash flows contained in the cash flow from operating activities Income taxes paid Income taxes received Interest paid Interest received Dividends received Note 2009 2008 313,833 571,067 (32) 87,759 18,369 11,728 114,818 55,449 32,166 – 215,065 – 438,565 39,653 – 22,848 – 5,404 – 12,094 12,118 41,956 270,005 220 8,695 170,004 – 38,941 – 66,210 – 18,729 61 – 17,475 20,793 4,802 – 50,453 – 27,548 265,115 4,266 5,960 542,330 – 46,722 – 162,740 – 42,457 (32) 55,039 300,637 – 130,604 – 122,400 – 10,913 0 7,993 – 74 98,076 – 6,053 6,900 – 73,532 – 193 151,579 – 248,359 – 568,493 – 283,881 – 612,192 41,163 – 46,440 – 196 1,764 779 319 154,529 198,056 0 1,815 (31) 197,259 154,529 2009 2008 – 117,393 – 150,051 11,941 – 27,470 10,548 31,959 48,971 – 27,096 19,049 57,900 138 Annual Report 2009 Axel Springer AG Consolidated Statement of Changes in Equity € thousands Accumulated other comprehensive income Subscribed capital Additional paid-in capital Accumu- lated retained earnings Treasury shares Currency translation Changes in fair value Available- for-sale financial assets Deriva- tives in cash flow hedges Share- holders of Axel Springer AG Other equity* Minority interests* Equity Balance at 01/01/2008 98,940 39,002 698,610 – 133,762 1,144 434,170 195 – 7,566 1,130,733 81,095 1,211,828 98,940 39,002 698,610 – 133,762 1,144 434,170 195 – 4,030 1,134,269 81,094 1,215,363 3,536 3,536 – 1 3,535 560,050 – 122,400 – 73,532 10,235 – 434,166 – 11,181 – 8,438 116,500 10,967 127,467 – 122,400 – 6,053 – 128,453 – 73,532 – 73,532 0 – 16,037 – 16,037 – 30,997 – 27,403 – 58,400 Purchase of minority interests – 30,997 Other changes 1,277 – 2,792 2,809 1,294 0 1,294 Balance at 12/31/2008 98,940 40,279 1,102,471 – 207,294 11,379 303,481 – 130,604 1,618 4 4 – 10,986 – 9,659 1,025,134 42,568 1,067,702 – 4,489 – 13,790 286,824 10,403 297,227 – 130,604 – 10,914 – 141,518 1,391 6,607 7,998 7,998 Change in accounting policies Balance at 01/01/2008 adjusted Comprehensive income Dividends paid Purchase of treasury shares Change in consolidated companies Comprehensive income Dividends paid Re-issuance of treasury shares Change in consolidated companies Purchase and disposal of minority interests – 919 – 38,506 – 919 36,332 35,413 – 38,506 – 26,493 – 64,999 – 4,721 – 254 – 4,975 Other changes 2,824 – 7,545 Balance at 12/31/2009 98,940 43,103 1,229,769 – 200,687 12,997 8 – 15,475 – 23,449 1,145,206 51,642 1,196,848 *) Adjusted due to the change of the accounting policy for pension obligations. Segment Report Consolidated Financial Statements 139 Operating segments € thousands Newspapers National Magazines National Print International Digital Media Services/Holding Consolidated totals 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 External revenues 1,213,683 1,277,584 517,793 564,068 311,665 409,750 470,378 378,181 98,071 98,955 2,611,591 2,728,538 Internal revenues 8,617 16,967 4,323 6,940 14,035 10,101 22,840 32,186 305,398 319,418 Segment revenues 1,222,300 1,294,551 522,116 571,008 325,700 419,851 493,218 410,367 403,470 418,373 EBITDA 1) 243,766 348,895 54,954 88,817 12,257 27,756 43,192 20,931 – 20,466 – 223 333,705 486,175 Thereof income from investments Thereof accounted for using the equity method Depreciation, amortization, impairments and write-ups (except from purchase price allocations) Impairment losses in goodwill EBIT 1) Effects of purchase price allocations 4,807 19,894 1,949 457 2,101 7,830 10,096 903 4,071 2,685 23,025 31,769 0 14,636 1,335 790 1,869 4,866 1,987 – 8,860 – 2,785 – 6,604 2,406 4,828 – 2,775 – 3,213 – 3,541 – 3,925 – 6,667 – 6,427 – 9,262 – 5,002 – 42,514 – 45,490 – 64,760 – 64,057 0 0 0 – 2,107 0 0 0 0 0 0 0 – 2,107 240,991 345,682 51,413 82,785 5,591 21,329 33,930 15,929 – 62,979 – 45,713 268,945 420,011 0 0 – 65 – 27,028 – 3,928 – 4,172 – 22,628 – 15,201 – 72 – 72 – 26,692 – 46,473 Non-recurring effects 214,357 – 1,616 – 6,318 0 464 0 – 10,750 437,393 – 17,353 – 59,514 180,400 376,263 Segment earnings before interest and taxes Financial result Income taxes Net income 455,348 344,066 45,030 55,757 2,127 17,157 552 438,121 – 80,404 – 105,299 422,653 749,801 – 24,980 – 61,547 – 83,840 – 117,187 313,833 571,067 Segment assets 279,379 254,596 75,513 89,398 294,447 287,617 1,101,579 994,944 817,685 879,555 2,568,604 2,506,110 1) Adjusted for non-recurring effects and effects of purchase price allocations. Geographical information € thousands External revenues Non-current segment assets Germany Other countries Consolidated totals 2009 2008 2009 2008 2009 2008 2,063,975 2,131,690 547,616 596,848 2,611,591 2,728,538 1,271,669 1,280,454 300,225 209,422 1,571,894 1,489,876 140 Annual Report 2009 Axel Springer AG Notes to the Consolidated Financial Statements General information (1) Basic principles The Axel Springer Aktiengesellschaft (“Axel Springer AG”) is an exchange-listed stock corporation with its registered head office in Berlin/Germany. The principal activities of Axel Springer AG and its subsidiaries (“Axel Springer Group”, “Axel Springer” or the “Group”) are described in note (33a). On February 23, 2010, the Management Board of Axel Springer AG authorized the consolidated financial statements for fiscal year 2009 and presented them to the Supervisory Board for approval. The consolidated financial statements were prepared by application of Section 315a HGB in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) approved by the IASB, in effect and recognized by the European Union (EU) at the balance sheet date. The reporting currency is the Euro (€); unless otherwise indicated, all figures are stated in thousands (€ thousands). The consolidated financial statements and consolidated management report will be filed with the Electronic Federal Gazette in Germany. Axel Springer AG is kept on file with the Commercial Register of the Berlin-Charlottenburg Local Court under the No. 4998. (2) Consolidation (a) Consolidation principles The consolidated financial statements include Axel Springer AG and its subsidiaries. Subsidiaries are entities in which Axel Springer AG is able to control, directly or indirectly, the financial and operating policies. The consideration transferred in business combinations is offset against the pro-rated fair value of the acquired assets and liabilities at the acquisition date. Any remaining positive difference is capitalized as goodwill. Negative differences are immediately recognized as income. The date of acquisition is the date when the ability to control the net assets and the financial and operating activities of the acquired business passes to the Axel Springer Group. We offset differences arising from sales and purchases of minority interests within equity. Associated companies are included in the consolidated financial statements by application of the equity method. Associated companies are defined as companies in which the Axel Springer Group can exert significant influence over the financial and operating policies of the company. With regard to calculating the goodwill and the proportional fair value of the assets and liabilities, the accounting principles applied to business combinations apply here as well. Goodwill is included in the amortized carrying amount of the investment in the associated company. The IFRS financial statements of these companies as at the Axel Springer Group’s balance sheet date serve as the basis for applying the equity method. Losses from associated companies that exceed the carrying amount of the investment, or any other long-term receivables related to the financing of these companies, are not recognized, unless the Axel Springer Group is bound by additional contribution requirements. Intercompany profits and losses are eliminated. The carrying amounts of investments are tested for impairment; if impairments exist, they are written down to the lower recoverable amount. Consolidated Financial Statements 141 (b) Companies included in the consolidated financial statements Companies included in the consolidated financial statements broke down as follows: Fully consolidated companies Germany Other countries Fully consolidated special purpose entities Germany Investments accounted for using the equity method Germany Other countries 12/31/2009 12/31/2008 53 76 3 5 2 52 38 3 7 2 Special purpose entities consist of closed property funds of which, in substance, the risks and rewards are attributable to Axel Springer. Consolidated companies are listed in note (44). The list of shareholdings of Axel Springer AG and the Group is to be filed with the Electronic Federal Gazette. The following changes occurred in 2009: In the context of the acquisition of StepStone ASA, Oslo/Norway, we fully consolidated three German companies and 39 companies located outside Germany of the StepStone ASA Group. The shares already held in StepStone ASA and in StepStone Deutschland AG, Düsseldorf, were no longer accounted for using the equity method as of September 1, 2009. In addition, we have acquired the majority of the shares in Digital Window Ltd., London/Great Britain, through our subsidiary DW-Holding GmbH, Berlin, which was first consolidated in the reporting year. The remaining change in the fully consolidated companies resulted from the initial consolidation of AS Nyomda Kft, Kecskemét/Hungary, which is of subordinate importance to the Axel Springer Group. In Zurich/Switzerland, moreover, TR7 AG was merged into Axel Springer Schweiz AG, Handelszeitung Fachverlag AG was merged into Handelszeitung und Finanzrundschau AG and usgang.ch GmbH was merged into Avivum AG. In September, three German investments in the T&M Group were sold. The shares in Myby GmbH & Co. KG, Düsseldorf, were no longer accounted for using the equity method due to the petition filed in June 2009 for commencement of insolvency proceedings. In the reporting year, we acquired a 49 % share of INFOR BIZNES Sp. z o.o., Warsaw/Poland. The investment was accounted for using the equity method. (c) Acquisitions and divestitures At the beginning of September 2009, Axel Springer AG increased its share in StepStone ASA, Oslo/Norway, from 33.3 % to 52.8 % and thus assumed control. Costs of purchase of € 26,557 thousand were incurred for the increase to 52.8 %, as well as incidental acquisition costs of € 2,886 thousand. The acquisition of 33.3 % in StepStone ASA in 2008 resulted in a purchase price of € 34,886 thousand. Using the mandatory takeover offer for the remaining outstanding shares as well as additional share purchases and the squeeze-out that was initiated, we increased our share to 100.0 % by the balance sheet date for total costs of € 65,410 thousand. 142 Annual Report 2009 Axel Springer AG The cost of purchase of the majority acquisition to 52.8 % was allocated to the acquired assets and liabilities as follows: € thousands Carrying amount before acquisition Adjust- ment amount Carrying amount after acquisition Other intangible assets 8,514 68,138 76,652 Window Ltd., London/Great Britain, at the beginning of October 2009. Due to the call and put options that can be exercised in subsequent years for the remaining 49.9 % of the shares, only the minority interests allocable to the minority shareholder of DW-Holding GmbH were recognized. The purchase price amounted to € 21,735 thousand plus incidental acquisition costs of € 487 thousand and included contingent consideration in the amount of € 11,586 thousand. Property, plant, and equipment Other non-current assets 4,429 1,641 4,429 1,641 The cost of purchase was allocated to the acquired assets and liabilities as follows: Current assets 21,161 742 21,903 Cash and cash equivalents 31,937 31,937 Deferred tax assets 10,587 – 4,077 6,510 Provisions and liabilities – 54,998 7,088 – 47,910 € thousands Carrying amount before acquisition Adjust- ment amount Carrying amount after acquisition Deferred tax liabilities 0 – 25,048 – 25,048 Other intangible assets 41 10,921 10,962 Net assets 23,271 46,843 70,114 Minority interests Acquisition cost Revaluation surplus Goodwill 33,115 64,329 3,086 24,243 Of the other intangible assets acquired, intangible assets with carrying amounts of € 41,075 thousand have indefinite useful lives. The goodwill is above all attributable to inseparable values such as employee expertise and expected synergy effects from the integration, and was allocated to the Digital Media segment. Since initial consolidation, the StepStone Group has contributed to consolidated revenues in the amount of € 29,351 thousand and to consolidated net income in the amount of € – 12,651 thousand. If the acquisition had already occurred on January 1, 2009, the consoli- dated revenues would have changed by € 95,923 thousand, and the consolidated net income by € – 17,240 thousand; in addition, investment income of € – 2,289 thousand would not have been recorded. DW-Holding GmbH, Berlin, in which our wholly-owned subsidiary Axel Springer Venture GmbH holds 52.5 % of the shares, acquired 50.1 % of the shares in Digital Property, plant, and equipment Trade receivables Other current assets Cash and cash equivalents Deferred tax assets 366 7,213 396 6,905 2 366 7,213 396 6,905 2 Provisions and liabilities – 7,714 – 7,714 Deferred tax liabilities 0 – 3,058 – 3,058 Net assets 7,211 7,863 15,074 Minority interests Acquisition cost Goodwill 7,160 22,222 14,308 Of the other intangible assets acquired, no assets have indefinite useful lives. The goodwill is above all attributable to inseparable values such as employee expertise and expected synergy effects from the integration, and was allocated to the Digital Media segment. Since initial consolidation, Digital Window Ltd. has contributed to consolidated revenues in the amount of € 16,241 thousand and to consolidated net income in the amount of € 943 thousand. If the acquisition had already occurred on January 1, 2009, the consolidated revenues would have changed by € 47,980 thousand, and the consolidated net income by € 1,021 thousand. Consolidated Financial Statements 143 The sale of a number of investments in regional newspapers and Elmshorner Nachrichten took place in March, April, and August 2009 following approval under anti-trust law. € 173,975 thousand of the purchase price in the amount of € 323,975 thousand was paid at the beginning of the second quarter and in the third quarter. The remainder of the purchase price was deferred and will be payable in installments in the period from 2011 to 2016. The carrying amounts of investments and financial receivables assigned to the Newspapers National segment in the amount of € 109,175 thousand were disposed of from the assets held for sale. A gain on disposal totaling € 214,357 thousand was recognized. In this context, tax expenses were incurred in the amount of € 21,780 thousand. Additional acquisitions and divestitures carried out in 2009 collectively had no material effects on the net assets, financial position, and results of operations of the Axel Springer Group. In 2008, we acquired various companies and businesses, which collectively had no material effects on the net assets, financial position, and results of operations of the Axel Springer Group. Items of the income statement have been translated at the weighted average exchange rate for the year. Equity components of the subsidiaries have been translated at the historical exchange rate at the date of origination. The foreign exchange differences resulting from the translation have been recognized as currency translation adjustments within accumulated other comprehensive income and/or minority interests. The exchange rates to the euro of foreign currencies that are significant for Axel Springer Group underwent the following changes in the past year: Unit of foreign currency per one euro Polish zloty Swiss franc Average exchange rate Exchange rate on balance sheet date 2009 4.34 1.51 2008 12/31/2009 12/31/2008 3.52 1.59 4.14 1.49 4.17 1.49 Hungarian forint 280.55 250.12 272.48 265.64 British pound 0.89 0.80 0.90 0.97 Norwegian krone 8.75 8.24 8.32 9.91 (d) Translation of separate financial statements valuation methods (3) Explanation of significant accounting and denominated in foreign currency The assets and liabilities of subsidiaries for which the functional currency is not the euro have been translated at the exchange rate in effect on the balance sheet date. The goodwill and fair value adjustments of assets and liabilities related to the acquisition of companies outside the European Monetary Union are assigned to the acquired company and accordingly translated at the exchange rate in effect on the balance sheet date. (a) Basic principles The accounting and valuation principles applied uniformly across the Axel Springer Group in fiscal year 2009 are basically the same as those applied in the prior year with the exception of the following changes. We have implemented the regulations of the new IAS 1 (revised 2007), “Presentation of Financial Statements”. Changes in equity resulting from transactions with owners in their capacity as equity providers are presented separately from other equity changes. Our statement of changes in equity presents all details concerning transactions with owners, while all other equity changes are presented in a single line item. In addition, we present total comprehensive income, which includes all components of income, in a separate statement of recognized income and expenses. 144 Annual Report 2009 Axel Springer AG Since January 1, 2009, we have changed the accounting for defined benefit pension plans from the corridor method to immediate recognition of all actuarial gains and losses with no effect on income. The complete disclosure of the employer pension plans in the balance sheet leads to an improved presentation of the financial situation. The prior-year amounts at December 31, 2008, and January 1, 2008, were adjusted as follows: reduction in the long-term accruals for pensions by € 10,941 thousand (01/01/2008: € 5,371 thousand) with no effect on income, as well as a reduction in deferred tax assets by € 3,570 thousand (01/01/2008: € 1,894 thousand) with no effect on income. The effects were offset against other equity within accumulated other comprehensive income. The change of the accounting method did not result in any effects on the income statements of the prior years. For information on the changes in accounting and valuation methods resulting from new or revised IFRSs and IFRIC Interpretations, please refer to note (3r). (b) Recognition of income and expenses The Axel Springer Group mainly generates circulation revenues from sales of newspapers and magazines and advertising revenues. Revenues are recognized at the time when the significant risks of ownership have passed to the buyer / the services have been rendered, the amount of revenue can be reliably measured, and it is sufficiently probable that economic benefits will flow to the enterprise. Revenues are stated net of any discounts allowed. Circulation revenues encompass the sales of newspapers and magazines to retailers, wholesalers and subscribers. Revenue is not recognized for that portion of products sold, which can be expected, on the basis of historical experience, to be returned. The advertising revenues encompass revenues from sales of advertising spaces in the published newspapers and magazines and the revenues generated in the categories of display, affiliate marketing, and search in the Digital Media segment. If significant risks and rewards of business activities do not lie with the Axel Springer Group or the income is collected in the interest of third parties, only the corresponding commission income or proportion of revenue accruing to the Axel Springer Group are recognized as revenues. Revenues from barter transactions are recognized if the services exchanged are dissimilar and the amount of revenue can be measured reliably. Revenues are measured at the fair value of services received. If the fair value of the service received under barter transactions cannot be measured reliably, the fair value is determined on the basis of the service rendered. Other income is recognized when the future inflow of economic benefits from the transaction can be measured reliably and was received by the company during the reporting period. Operating expenses are recognized either when the corresponding goods or services are sold or rendered, or at the time of their origination. Interest expenses and income are recognized on an accrual basis in the period of their occurrence. Interest expenses incurred in connection with the acquisition and production of qualified assets are capitalized as assets in the financial statements. Dividend income is recognized when the legal entitlement is constituted. Intangible assets (c) Internally generated intangible assets are measured as the sum of costs incurred in the development phase from the time when the technical and economic feasibility has been demonstrated until the time when the intangible asset has been completed. The capitalized production costs include all costs that are directly or indirectly allocable to the development phase. Purchased intangible assets are measured at cost. Internally generated and purchased intangible assets that have a determinable useful life are Consolidated Financial Statements 145 amortized over their expected useful lives using the straight-line method, starting from the time when they become available for use by the enterprise, as follows: For depreciation purposes, the following useful lives are applied: Software Licenses Supply rights Internet platform Customer relationships Useful life in years Buildings 3 – 8 3 – 10 3 – 6 3 – 8 3 – 16 Leasehold improvements Printing machines Editing systems Other operational and business equipment Useful life in years 30 – 50 5 – 15 15 – 20 3 – 7 3 – 14 Intangible assets with an indefinite useful life, which include goodwill, title rights, and brand rights, are not amortized. At present, the use of these assets by the company is not limited by any economic or legal restrictions. (d) Property, plant, and equipment Property, plant, and equipment are measured at cost and depreciated over their expected useful lives using the straight-line method. Any gains or losses on the disposal of property, plant, and equipment are recognized as other operating income or expenses. Leased assets over which Axel Springer retains beneficial ownership are recognized as fixed assets and measured at the present value of the minimum future lease payments or the lower fair value of the leased asset and depreciated by the straight-line method. The present value of the payment obligations associated with the minimum future lease payments is recognized as a liability. When it is reasonably certain that ownership of the assets leased under finance lease will pass to Axel Springer at the end of the lease period, such assets are depreciated over their useful lives. Capital investment subsidies and bonuses granted by the government are recognized when it is reasonably certain that the subsidies will be granted and that the Group will fulfill the related terms and conditions. The bonuses and subsidies granted for the acquisition or construction of long-term assets are recognized as deferred income and presented among other liabilities. In subsequent periods, the deferred income item is released and recognized as income over the useful life of the corresponding assets. Investment property (e) Investment property that the Axel Springer Group intends to lease out to third parties is measured at amortized cost. Such property is depreciated over a useful life of 50 years using the straight-line method. 146 Annual Report 2009 Axel Springer AG Estimation uncertainties arise in the following assumptions applied in calculating the value-in-use amounts of the reporting units: Medium-term planning: The medium-term planning is determined on the basis of past historical values, and business segment specific expectations about future market growth. It is assumed that cash flows in the electronic media sector will usually exhibit higher growth rates than in the print sector. Discount rates: The discount rates reflect the current market estimates of the country-specific risks attributable to each reporting unit. The discount rate was estimated on the basis of the average weighted capital costs of the sector in question. Growth rates: The growth rates were determined on the basis of published market research reports for the sectors in question. In estimating the long-term growth rates, due consideration was given to the compensatory effects between the different business lines, based on the adopted strategy of the Group. Impairment tests of the goodwill resulting from preliminary purchase price allocations are conducted only when certain events have occurred. Impairment losses are reversed when the recoverable amount exceeds the carrying amount of the asset. The reversal is limited to the amount which would have resulted if previous impairment losses had not been recognized. A recognized impairment loss in goodwill is never reversed. (f) Recognition of impairment losses in intangible assets and in property, plant, and equipment Impairment losses are recognized in intangible assets and in property, plant, and equipment, when as a result of certain events or changed circumstances the carrying amount of the asset exceeds its recoverable amount (fair value less the costs to sell or the value in use). If it is not possible to determine the recoverable amount of an individual asset, the recoverable amount for the next-higher group of assets is applied. Goodwill and intangibles with indefinite useful life is tested once annually for impairment. In order to carry out the impairment tests, these assets are assigned to those cash generating units or those groups of cash generating units (i.e., each “reporting unit”) that can be expected to profit from the synergies of the business combination. These reporting units represent the lowest level at which these assets are monitored for management purposes. They generally correspond to individual titles and digital media of the Axel Springer Group. In the case of integrated business models, individual titles and media are combined into a single reporting unit. The impairment test is conducted by determining the value in use of the reporting units, determined as the sum of the discounted estimated future cash flows, which are derived from the company’s Medium-Term Plan. The planning horizon for the medium-term planning is five years. The cash flows to be received after this five-year period are extrapolated on the assumption of a growth rate of 1.5 % (PY: 1.5 %), which does not exceed the assumed average market or industry growth rate of the respective reporting units. The discount rates are calculated on the basis of the weighted average capital costs of the Group, taking country-specific considerations into account. The discount rates range from 6.2 % to 12.3 % (PY: from 6.2 % to 12.8 %) after taxes and from 7.9 % to 15.4 % (PY: from 7.9 % to 16.0 %) before taxes. Consolidated Financial Statements 147 (g) Financial assets and liabilities Financial assets are mainly composed of cash and cash equivalents, trade receivables, receivables due from related parties, loans, investments, securities, and financial derivatives with positive market values. Financial liabilities are mainly composed of trade payables, liabilities due to related parties, liabilities due to banks, contingent consideration in business combinations, and financial derivatives with negative market values. The initial recognition and derecognition of financial assets and liabilities coincide with the settlement dates of customary market purchases and sales. If reliably measurable, fair values of financial assets and liabilities are determined on the basis of appropriate market prices or valuation methods. If valuation methods are applied, the fair values are determined as the sum of the discounted expected cash flows based on reference interest rates in effect on the balance sheet date. After initial recognition non-derivative financial liabilities are measured at amortized cost by application of the effective interest method. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or when the Group transfers the contractual rights to receive the cash flows to third parties, or assumes a contractual obligation to pay the cash flows immediately to a third party, under which the risks and rewards or the power of control were transferred. A financial liability is derecognized when the obligation underlying the liability is settled or annulled, or has expired. Investments and securities Investments that have not been consolidated or accounted for using the equity method in the consolidated financial statements are measured at fair value if it can be determined reliably on the basis of stock exchange or market prices and generally accepted valuation methods, respectively. Otherwise, they are measured at amortized cost. The valuation methods employed include especially the discounted cash flow method (DCF method) based on the expected investment income. However, the income is considered to be not reliably measurable in those cases when sufficiently detailed information is not available, when the fungibility/comparability of the investments in such companies are highly restricted, when the Axel Springer Group has no influence on the dividend policies by virtue of its status as a minority shareholder, or when the dividend payments do not regularly occur in the same or subsequent fiscal year. Any unrealized gains or losses resulting from the changes in fair value of the financial assets and liabilities, considering resulting tax effects, are recognized in accumulated other comprehensive income. Changes in fair value are not recognized in income until the corresponding non-current financial assets are sold or an impairment loss is recognized. The carrying amounts of investments and securities are reviewed at every balance sheet date to determine whether there are objective indications of an impairment. If an impairment is found to exist, an impairment loss is recognized and charged to income. Loans, receivables, and other financial assets Upon initial recognition, loans, receivables, and other financial assets are measured at fair value plus transaction costs. In subsequent periods, they are measured at amortized cost, after deduction of any write-downs, using the effective interest method. A write-down is taken when objective indications suggest that the receivable may not be fully collectible. Such an indication might be the insolvency or other considerable financial problems of the debtor, for example. The amount of the write-down is measured as the difference between the carrying amount of the receivable and the present value of the estimated future cash flows from this receivable, discounted by application of the effective interest rate. Write-downs are charged against income both in the form of an account for allowances on doubtful accounts and by means of direct write-downs. The account for allowances on doubtful accounts is used, in particular, for allowances on doubtful trade receivables and receivables due from related parties. If in subsequent periods the fair value has objectively risen, the write- downs are reversed and recognized in income in the appropriate amounts. 148 Annual Report 2009 Axel Springer AG Cash and cash equivalents The cash and cash equivalents consist of cash (cash in banks, cash on hand, and checks) and marketable securities. These items are measured at amortized cost. Contingent consideration Contingent consideration related to options and earn- out agreements in connection with company transactions in which the Axel Springer Group acquires control over the companies in question is measured at its present value, provided that the acquisition costs are probable and can be measured reliably. The discount rates are determined on the basis of the interest rates charged on the Group’s borrowings. Financial derivatives Financial derivatives are utilized exclusively to hedge against currency and interest rate risks that have an influence on future cash flows. If the conditions for the application of hedge accounting are met, the effective portion of the fair value changes, including the tax effects, is recognized directly in equity as accumulated other comprehensive income. Any ineffective portions are recognized immediately in income. The amounts recognized in accumulated other comprehensive income are recycled when the underlying transaction is recognized on the balance sheet or income statement. The changes in the fair value of derivatives that do not meet the conditions for the application of hedge accounting, despite their economic hedging effect, are measured at fair value through profit and loss. Inventories (h) Inventories are measured at cost. Purchase costs are determined on the basis of a weighted average value. Production costs include all costs directly related to the units of production and production-related overhead costs. Inventories are measured at the balance sheet date at the lower of the purchase or production cost and the net realizable value. The net realizable value is the estimated selling price less estimated costs to be incurred until the sale. The net realizable value of goods and services in progress is calculated as the net realizable value of finished goods and services less remaining costs of completion. Impairments are reversed whenever reasons justifying an earlier write-down no longer exist. (i) Assets held for sale Assets are classified as held-for-sale when their disposal has been initiated. The non-current assets held for sale are measured at the lower of the carrying amount or the fair value less costs to sell. (j) Pension provisions The provisions for pension obligations under defined benefit plans are calculated using the projected unit credit method under which future changes in compensation and benefits are taken into account. The following parameters were applied in the 2009 and 2008 fiscal years: Information in % Discount rate 2009 2008 3.0 / 5.3 3.0 / 5.8 Expected return on plan assets 3.25 – 3.5 3.25 – 3.5 Expected return on reimbursement rights Salary trend Pension trend 5.3 5.8 1.5 – 2.0 1.5 – 2.5 0.25 – 2.0 0.25 – 2.25 The expected life spans are determined with reference to the country-specific recognized actuarial tables. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. The discount rate applied for this purpose is determined with reference to high-quality corporate bonds that match the underlying pension obligations with respect to currency and maturity. Actuarial gains and losses resulting from changes in actuarial parameters are immediately offset against accumulated other comprehensive income without affecting net income. (k) Other provisions and accrued liabilities Other provisions have been formed to account for all discernible legal and constructive obligations to third parties, provided that the settlement of the obligation is probable and the amount of the obligation can be reliably estimated. The amount of each provision corresponds to the expected settlement amount. In the case of long-term provisions, the expected settlement amount is discounted to the present value at the balance sheet date by application of appropriate Consolidated Financial Statements 149 market rates of interest. Provisions are recognized for restructuring expenses only when the intended measures have been sufficiently concretized and announced on or before the balance sheet date. (l) Deferred taxes Deferred taxes are recognized to account for the future tax effects of temporary differences between the tax bases of assets and liabilities and the carrying amounts of those assets and liabilities in the consolidated financial statements, and for interest and tax loss carry-forwards. Deferred taxes are measured on the basis of the tax laws already enacted for those fiscal years in which it is probable that the differences will reverse or the tax loss carry-forwards can be utilized. Deferred tax assets are recognized for temporary differences or interest and tax loss carry-forwards only when the ability to utilize them in the near future appears to be reasonably certain. Deferred taxes are recognized for temporary differences resulting from the fair value measurement of assets and liabilities obtained through business combinations. Deferred taxes are recognized for temporary differences relating to goodwill only when the goodwill can be utilized for tax purposes. Deferred tax assets and liabilities of tax groups are netted if they are based on the same kind of income taxes; otherwise, they are netted only if the deferred taxes are based on the income taxes imposed by the same tax authority and only when current taxes can be netted as well. (m) Treasury shares Treasury shares are measured at cost and are charged directly to equity. The treasury shares are presented in a separate line item of the consolidated statement of changes in equity. (n) Share-based payment programs As part of performance-based remuneration programs, Axel Springer Group grants equity-settled and cash-settled share-based payment programs. The compensation components to be recognized as expenses over the vesting period are measured as the fair value of the options granted at the time when they were granted (in case of equity-settled programs) or the fair value of the options granted at the balance sheet date (in case of cash-settled programs). The fair values are determined on the basis of the Black- Scholes model. An increase corresponding to the same amount is reflected in the additional paid-in capital (in the case of equity-settled programs) or is recognized as provisions/liabilities (in the case of cash- settled programs). (o) Liabilities related to assets held for sale The liabilities and provisions of discontinued operations and other disposal groups are summarized under this balance sheet item. (p) Transactions in foreign currencies Purchases and sales in foreign currencies are translated at the exchange rate on the date of the transaction. Assets and liabilities in foreign currencies are translated into the functional currency at the exchange rate on the balance sheet date. Any foreign exchange gains or losses resulting from such translations are recognized in income. (q) Use of estimates The preparation of the consolidated financial statements requires estimates and assumptions that have an influence on the presentation of assets and liabilities, the disclosure of contingent liabilities at the balance sheet date, and the presentation of income and expenses. Significant estimates and assumptions relate in particular to allowances for doubtful receivables, the actuarial parameters used to measure pension provisions, product return rates, medium-term planning, discount rates and growth rates for the valuation of goodwill and intangibles with an indefinite useful life, contingent considerations in business combinations, and the ability to utilize deferred tax assets in the future. Information concerning the carrying amounts determined with the use of estimates can be found in the comments on the specific line items. 150 Annual Report 2009 Axel Springer AG (r) New accounting standards The following IFRSs relevant for Axel Springer were applied for the first time in the fiscal year: IAS 1 “Presentation of Financial Statements”: Starting January 1, 2009, we have implemented the amended version of the new IAS 1 published in September 2007 (revised 2007) for the presentation and structure of the financial statements (cf. note (3a)). The amendments affected the presentation of the consolidated financial statements, but did not result in any effects on the net assets, financial position, and operating results. IFRS 7 “Financial Instruments: Disclosures”: In March 2009, the IASB published amendments to IFRS 7 with the title “Improving Disclosures about Financial Instruments.” The amendments provide for expanded disclosures on the measurement of financial instruments at fair value and on liquidity risks. These changes are required to be applied for fiscal years that begin on or after January 1, 2009. The amendments did not have a significant effect on the notes to the consolidated financial statements. The following IFRSs relevant for Axel Springer have already been published, but not yet applied. In April 2009, the second improvement to IFRSs standard was published by the IASB, amending a total of ten standards and two interpretations. A large number of the amendments must be applied for fiscal years that begin on or after January 1, 2010. These amendments have not yet been incorporated into European law. They have no significant effects on net assets, financial position, and operating results. IFRS 3 “Business Combinations” and IAS 27 “Consolidated and Separate Financial Statements”: The IASB published revised versions of the IFRS 3 and IAS 27 in January 2008. Incorporation into EU law took place during the reporting year. The new regulations must be applied prospectively for the first time in fiscal years that begin on or after July 1, 2009. The amendments affect the recognized amount of goodwill, the measurement of minority interests, the accounting for step acquisitions, and the treatment of contingent considerations and incidental acquisition costs. Due to the changes to IAS 27, changes in the amount of equity held in a subsidiary (without loss of control) must now be accounted for exclusively as an equity transaction. Moreover, the regulations applicable to the distribution of losses to non-controlling interests were changed, as were the regulations applicable to the accounting treatment of transactions that lead to a loss of control. The changes will have an effect on future company transactions, particularly on the results of the reporting period in which an acquisition occurred, and on future results. IFRS 9 “Financial Instruments”: This standard was published by IASB in November 2009 and represents the first of a total of three phases in the complete replacement of IAS 39. Upon the conclusion of one phase, the corresponding content is taken from IAS 39 and inserted into IFRS 9. The first phase leads to a fundamental change in the regulations on the categorization and measurement of financial assets and liabilities, and concentrates in its content exclusively on financial assets. IFRIC 9 is required to be applied to fiscal years that begin on or after January 1, 2013. These amendments have not yet been incorporated into European law. The application of the new standard will lead to changes in the presentation and recognition of financial assets and liabilities. Consolidated Financial Statements 151 Notes to the consolidated statement of financial position (4) Intangible assets The changes in intangible assets were as follows: € thousands Acquisition or production cost Balance at January 1, 2008 Initial consolidation Currency effects Additions Disposals Transfers Balance at December 31, 2008 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance at December 31, 2009 Amortization and impairments Balance at January 1, 2008 Initial consolidation Currency effects Additions Disposals Write-ups Balance at December 31, 2008 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Write-ups Balance at December 31, 2009 Carrying amounts At December 31, 2009 At December 31, 2008 Purchased rights and licenses Internally generated rights Goodwill Total 436,916 6,315 8,802 31,243 – 14,098 514 469,692 77,250 – 2,745 – 502 17,387 – 62,054 143 499,171 111,781 403 698 55,746 – 1,776 – 285 166,567 116 – 1,622 – 447 35,463 – 55,605 337 – 261 144,548 25,153 667 31 1,041 0 0 26,892 10,557 0 337 2,125 – 68 – 86 39,757 9,401 0 – 6 4,081 0 0 13,476 0 0 215 4,405 – 68 0 0 18,028 412,096 4,324 5,867 7,416 0 42,103 471,806 36,299 – 1,878 1,364 0 – 286 0 507,305 48,276 0 0 2,107 0 0 50,383 0 – 1,878 0 0 – 286 0 0 48,219 874,165 11,306 14,700 39,700 – 14,098 42,617 968,390 124,106 – 4,623 1,199 19,512 – 62,408 57 1,046,233 169,458 403 692 61,934 – 1,776 – 285 230,426 116 – 3,500 – 232 39,868 – 55,959 337 – 261 210,795 354,623 303,125 21,729 13,416 459,086 421,423 835,438 737,964 152 Annual Report 2009 Axel Springer AG The internally generated intangible assets mainly consisted of software solutions and websites. The total of goodwill and intangible assets with indefinite useful lives that have been assigned to the individual reporting units amounted to less than 25 % of the total amount of all goodwill and intangible assets with indefinite useful lives measured at December 31, 2009, in the amount of € 655,179 thousand (PY: € 575,901 thousand). The value in use of the reporting units is determined primarily by the terminal value. The amount of the terminal value depends on the forecasted cash flow in the fifth year of medium-term planning, on the growth rate of the cash flows subsequent to the medium-term planning, and on the discount rate (see explanations in note (3f) on assumptions in the context of the annual impairment test). Goodwill amounting to € 319,781 thousand and intangible assets with indefinite useful lives amounting to € 116,259 thousand, representing approximately 70 % of the total amount, were assigned to a total of four reporting units in the Digital Media segment. A reduction of cash flows by approximately 60 % in the fifth planning year would reduce the surplus between the value in use and the carrying amount of these reporting units to zero. A reduction in the growth rate by 0.5 percentage points would reduce the surplus by 14.3 %, and an increase in the discount rate by 0.5 percentage points would reduce the surplus by 17.4 %. Please refer to the explanations at note (24) on the impairments of goodwill and other intangible assets. Consolidated Financial Statements 153 (5) Property, plant, and equipment The changes in property, plant, and equipment are presented in the table below: € thousands Acquisition or production cost Balance at January 1, 2008 Initial consolidation Currency effects Additions Disposals Transfers Balance at December 31, 2008 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance at December 31, 2009 Depreciation and impairments Balance at January 1, 2008 Initial consolidation Currency effects Additions Disposals Transfers Write-ups Balance at December 31, 2008 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance at December 31, 2009 Carrying amounts At December 31, 2009 At December 31, 2008 Land and buildings, including buildings on non-owned land Technical equipment and machinery Other equipment, operational and office equipment Construction in progress 577,739 0 268 1,933 – 2,520 – 2,715 574,705 4,112 0 – 261 2,131 – 843 3,976 583,820 150,348 0 53 11,604 – 328 – 193 0 161,484 804 0 – 144 11,843 – 766 360 173,581 535,680 79 24 3,179 – 3,179 2,879 538,662 6,532 – 80 – 200 2,433 – 3,970 1,088 544,465 262,629 79 – 15 23,582 – 3,133 132 0 283,274 2,866 5 – 82 24,207 – 3,752 369 306,887 165,191 1,032 – 1,231 15,071 – 8,959 1,707 172,811 5,243 – 59 50 13,752 – 12,195 – 272 179,330 114,176 710 – 223 14,312 – 7,664 74 – 133 121,252 375 – 29 6 15,716 – 11,128 – 372 125,820 5,954 0 – 15 1,751 – 1,442 – 4,166 2,082 0 0 12 2,937 – 136 – 1,470 3,425 622 0 0 0 – 622 0 0 0 0 0 0 0 0 0 0 Total 1,284,564 1,111 – 954 21,934 – 16,100 – 2,295 1,288,260 15,887 – 139 – 399 21,253 – 17,144 3,322 1,311,040 527,775 789 – 185 49,498 – 11,747 13 – 133 566,010 4,045 – 24 – 220 51,766 – 15,646 357 606,288 410,239 413,221 237,578 255,388 53,510 51,558 3,425 2,082 704,752 722,249 At December 31, 2009, property, plant, and equipment with acquisition or production cost of € 159,692 thousand (PY: € 145,981 thousand) were in use that had already been fully depreciated. 154 Annual Report 2009 Axel Springer AG (6) Investment property (7) Investments The development of the investment property was as follows: Investments accounted for using the equity method showed the following development: Investment property € thousands 2009 2008 Carrying amount at January 1 129,993 639,371 49,318 560 2,440 52,318 516 – 3,616 49,218 21,949 656 193 – 142 22,655 716 – 357 – 5,500 17,514 31,704 29,663 Attributable net income Dividends Changes recognized in other comprehensive income Impairment losses Acquisitions Disposals 1,524 4,432 – 11,728 – 32,166 – 3,233 – 560 – 20,498 – 60,000 14,819 34,845 – 51,779 0 Reclassified as held-for-sale assets 0 – 456,049 Other changes 604 120 Carrying amount at December 31 59,702 129,993 The disposals in the fiscal year related to our shares in StepStone ASA and StepStone Deutschland AG. They resulted from the initial full consolidation of the StepStone Group. The acquisitions related to the purchase of 49 % of the shares in INFOR BIZNES. The financial data for the investments accounted for using the equity method were as follows: € thousands Net income Revenues Assets Liabilities 2009 2008 – 92,506 – 14,029 719,561 858,372 622,760 956,967 524,885 668,178 € thousands Acquisition or production cost Balance at January 1, 2008 Additions Transfers Balance at December 31, 2008 Additions Transfers Balance at December 31, 2009 Depreciation and impairments Balance at January 1, 2008 Additions Transfers Write-ups Balance at December 31, 2008 Additions Transfers Write-ups Balance at December 31, 2009 Carrying amounts At December 31, 2009 At December 31, 2008 The fair value of investment property at December 31, 2009 amounted to € 31,704 thousand (PY: € 29,663 thousand). The fair value was determined by application of the discounted cash flow method, with reference to the estimated cash flows from the rental of the property. In calculating this value, a discount rate of 7.0 % (PY: 8.0 %) and a perpetuity capitalization rate of 6.0 % (PY: 7.0 %) was applied. As a result of the positive development of the fair value, impairment losses of prior years amounting to € 5,500 thousand have been reversed. In 2009, rental income of € 2,955 thousand (PY: € 2,807 thousand) was generated, with corresponding rental expenses of € 1,436 thousand (PY: € 930 thousand). Directly allocable expenses of € 108 thousand (PY: € 96 thousand) were incurred for the space that had not yet been rented. Consolidated Financial Statements 155 The financial information for the associated companies classified as held for sale (cf. note (12)) is based on financial data available at the reporting date. In the current period, it exclusively (PY: essentially) relates to financial data as of September 30, 2009. € thousands Net income Revenues Assets Liabilities 2009 2008 – 85,510 – 15,433 200,594 633,474 679,983 1,115,870 725,844 732,569 Based on the publicly listed market prices, the fair value at December 31, 2009 of the Group’s investment in the associated company ZertifikateJournal AG, Veitshöchheim, amounted to € 1,798 thousand (PY: € 1,748 thousand). (8) Inventories (9) Trade receivables The trade receivables broke down as follows: € thousands 12/31/2009 12/31/2008 Trade receivables, nominal 317,257 274,147 Allowances for doubtful trade receivables – 15,310 – 9,272 Trade receivables 301,947 264,875 The changes in the allowances for doubtful trade receivables are presented in the table below: € thousands Balance at January 1 Addition due to initial consolidation Consumption Reversals Additions Other changes 2009 9,272 0 2008 8,972 104 – 6,417 – 5,889 – 641 13,013 83 – 784 6,805 64 The inventories broke down as follows: Balance at December 31 15,310 9,272 € thousands 12/31/2009 12/31/2008 Raw materials and supplies 27,171 38,995 Semi-finished goods Finished goods and merchandise Inventories 2,179 2,550 2,471 2,759 31,900 44,225 Inventories of € 9,455 thousand (PY: € 10,460 thousand) were measured at their net realizable value. At December 31, 2009, the valuation allowance for these inventories amounted to € 2,047 thousand (PY: € 1,943 thousand), of which € 364 thousand (PY: € 1,686 thousand) was recognized in income in 2009. At December 31, 2009, receivables in the amount of € 183,638 thousand (PY: € 166,481 thousand) were neither past due nor subject to valuation allowances. With regard to these receivables, there were no indications at balance sheet date that customers would not fulfill their payment obligations. The past-due trade receivables at the balance sheet date for which no valuation allowances have been charged are presented in the table below: € thousands up to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 days and longer 12/31/2009 12/31/2008 51,543 43,188 26,139 35,054 8,914 3,420 10,063 11,675 8,999 1,806 156 Annual Report 2009 Axel Springer AG (10) Receivables due from related parties (11) Other assets The receivables due from related parties broke down as follows: The other assets broke down as follows: € thousands 12/31/2009 12/31/2008 € thousands 12/31/2009 12/31/2008 Receivables due from associated companies 35,249 35,520 Receivables due from other related parties 8,738 20,062 Deferral of payment for regional newspaper investments Advance payments H&F-Call-Option Receivables due from related parties 43,987 55,582 Receivables from Kirch insolvency 150,000 0 16,403 15,649 10,835 7,586 5,503 4,394 566 1,840 6,175 5,833 7,382 1,483 27,327 26,690 222,613 65,051 Receivables from other taxes Credit balances in accounts payable Receivables due from employees Other Other assets The receivables due from associated companies included a reimbursement right for pension obligations in the amount of € 29,464 thousand (PY: € 29,754 thousand (cf. note (14)). The changes in the valuation allowances for receivables due from related parties are presented in the following table: € thousands Balance at January 1 Reversals Additions Other changes 2009 2008 19,259 18,529 – 6 474 557 – 250 1,001 – 21 Balance at December 31 20,284 19,259 At December 31, 2009, receivables in the amount of € 42,841 thousand (PY: € 49,895 thousand) were neither past due nor subject to valuation allowances. With regard to these receivables, there were no indications at balance sheet date that the related parties would not fulfill their payment obligations. The deferral of payment resulting from the sale of regional newspaper investments is described in note (2c). By agreement of April 8, 2004, the shareholders H&F Rose Partners, L.P. and H&F International Rose Partners, L.P. (collectively referred to as “H&F” in the following) granted to Axel Springer AG 560,700 call options for the purchase of Axel Springer AG shares. Thus, Axel Springer AG is principally entitled to purchase one share of Axel Spring AG from H&F for each share issued to a member of the Management Board under the Management Participation Program. Axel Springer AG waived this right in connection with 62,300 shares by an agreement with H&F of June 30, 2009. In return, Axel Springer AG received a cash settlement. After the conclusion of this agreement, 498,400 call options still existed, whose exercise was subject to the condition that Management Board members have exercised options under the corresponding Management Participation Plan. The entitled members of the Management Board waived exercise of 214,312 options under the Management Participation Plan in exchange for a promise of a settlement payment of € 12.00 per option (see the discussion of the Management Participation Program under note (13f). Parallel to this, an agreement was made with H&F on December 17/18, 2009 regarding 214,312 call options. According to this agreement, Axel Spring AG is entitled to exercise the stated 214,312 call options against H&F regardless of Consolidated Financial Statements 157 whether the entitled members of the Management Board have waived the options in the context of the Management Participation Program. Exercise of these 214,312 options is only possible in June 2010. However, these call options will lapse if and to the extent that H&F sells the shares in Axel Springer AG for its part and in exchange pays a cash settlement to Axel Springer. Otherwise, that is, for the 284,088 call options, the right to exercise them under the original H&F agreement of April 8, 2004, continues in force. Insofar as H&F would no longer have a sufficient number of the shares of Axel Springer AG to fulfill existing call options in case of exercise of call options by Axel Springer AG, Axel Springer AG is entitled to a cash settlement whose amount corresponds basically to the difference between the sale price received by H&F less the exercise price of the call options. The call options are recognized as financial assets and measured at fair value on the respective balance sheet date by application of an option pricing model. At the time when H&F granted the options to Axel Springer AG, the fair value of the options was € 19,800 thousand. Because the granting of options by H&F is categorized as a shareholder transaction, the additional paid-in capital was increased by the amount of the fair value. Changes in fair value of the options are recognized in the financial result. The increase in fiscal year 2009 resulted mainly from the higher underlying stock exchange price. Insofar as advance payments for asserted receivables are announced in the context of the insolvency proceedings against KirchMedia GmbH & Co. KGaA i.L., we reverse write-offs on receivables accordingly. The receivables accepted in the table of claims by the insolvency administrator originally totaled € 325,000 thousand. In addition, specified claims in the amount of € 1,411 thousand were recorded in 2009. The miscellaneous financial assets include loans and receivables due from other investee companies and security deposits, among other items. The purchase price deferral arising from the sale of the investments in regional newspapers is described in note (2c). (12) Assets held for sale and liabilities related to assets held for sale Due to a planned sale of 5.1 % of the shares in Dogan TV Holding A.S, Istanbul/Turkey (DTV), a classification of the investment in DTV as an asset held for sale (€ 352,016 thousand) occurred in the fourth quarter of 2008. The contract concluded in November 2008 was not performed, however; instead, it was replaced by a new agreement in November 2009. The new agreement provides that the share of DTV held by Axel Springer will be reduced to 19.9 % by capital increases. In case of non-performance of the capital increases, there is a right to sell 5.1 % of the shares at the original purchase price plus interest. Once the reduction in shares is completed, the remaining investment in DTV will be presented within the other non-current financial assets. The investment is assigned to the Digital Media segment. The total expenses recognized in accumulated other comprehensive income in connection with this sale amounted to € 16,710 thousand. An initial capital increase was completed in January 2010, so that our share in DTV was reduced to 22.1 %. When determining the recoverable amount in the context of the impairment test of our investment in DTV, we factored in both estimated future cash flows and a number of contractually stipulated value-securing mechanisms. Moreover, in order to assess the recoverable amount of our investment, we carried out an estimation of the prospects of success for suits filed by DTV against assessed tax claims and tax penalties based on external expert opinions. According to these estimates, there was no need for impairment at December 31, 2009. In the prior year, the investments in a number of regional newspapers were classified as held-for-sale (€ 122,527 thousand). The sale of these investments assigned to the Newspapers National segment was completed in fiscal 2009, with the exception of the investment in Westfalenblatt (cf. note (2c)). The sale of our investment in Westfalenblatt (€ 6,190 thousand) was completed in January 2010. 158 Annual Report 2009 Axel Springer AG (13) Equity The components and changes in consolidated equity are summarized in the consolidated statement of changes in equity. (a) Subscribed capital The subscribed capital of € 98,940,000 is fully paid in. Based on the percentage of subscribed capital that each share represents, the shares are valued at € 3.00 per share. The subscribed capital is divided into 32,980,000 registered shares, which can be transferred only with the consent of the company. At balance sheet date 29,800,216 shares were outstanding (PY: 29,682,659). During fiscal year 2009 117,557 treasury shares were issued (cf. note (13d)). (b) Additional paid-in capital The additional paid-in capital resulted primarily from a shareholder contribution in the form of financial assets (H&F call option, cf. note (11)). Furthermore, the amount of the corresponding personnel expenses for the share- based programs is included (cf. note (13f). (c) Accumulated retained earnings Besides the net income for the current period, the accumulated retained earnings also include the income of past periods of the companies included in the consolidated financial statements, to the extent that they have not been distributed to shareholders. In 2009, Axel Springer AG has distributed an amount of € 130,604 thousands as dividend payments (€ 4.40 per qualifying share) for the fiscal year 2008. Equity changes resulting from owner transactions are recognized directly in accumulated retained earnings. The acquisition of minority interests in the reporting year gave rise to equity reductions of € 38,506 thousand. (d) Treasury shares In the reporting year, Axel Springer AG issued 117,557 treasury shares in the context of the share-based payment programs to the Management Board and the employees (cf. note (13f)). After this, Axel Springer AG held 3,179,784 treasury shares, corresponding to 9.6 % of its capital stock. (e) Accumulated other comprehensive income Other equity within the accumulated other compre- hensive income mainly consisted of changes related to companies which are accounted for using the equity method. (f) Share-based payment On April 14, 2004, the shareholders at the annual meeting of Axel Springer AG approved a Management Participation Program, under which the members of the Management Board of Axel Springer AG are entitled to purchase shares of Axel Springer AG. Under the terms of this plan, 62,300 shares were offered for purchase on or after July 1, 2004. The Management Board purchased the shares in August 2004 for a purchase price of € 54.00 per share (plus 2 % interest from July 1, 2004). These shares were originally subject to a multiple-year holding period, which expired on December 18, 2007 for 50 % of the shares acquired, and on December 18, 2008 for the other 50 % of the shares acquired. For each of the 62,300 shares purchased, the members of the Management Board were granted eight additional options to purchase shares of Axel Springer AG. These options entitle their holders to purchase what was originally up to 498,400 shares at a price of € 54.00 per share, plus 2 % interest from July 1, 2004. The number of exercisable options was dependent on achieving or exceeding certain EBITA targets in fiscal years 2005 and 2006. These targets were exceeded. The vesting period for the first 50 % of the options ended on December 18, 2007, and for the second 50 % of the options on December 18, 2008. Consolidated Financial Statements 159 In 2009, a total of 34,888 options were exercised at a weighted average exercise price of € 59.67. The weighted average market price at the exercise times was € 70.13. On December 17, 2009, the entitled members of the Management Board stated that they were waiving exercise of 214,312 options, and in exchange received a promise of a settlement payment of € 12.00 per option. On December 17, 2009, the market price of a share in Axel Springer AG was € 75.96 (XETRA closing price), and the calculated exercise price of the options was € 59.90. The settlement payment was made in January 2010. On December 31, 2009, 249,200 options were thus still outstanding. The exercise period of the options ends on December 20, 2010. The expense recognized in 2009 for the Management Participation Program was € 0 thousand (PY: € 406 thousand). Effective July 1, 2009, 375,000 stock appreciation rights (SARs) were issued to the members of the Management Board. The SARs are granted until June 30, 2015, and can be exercised at the earliest from July 1, 2013. If the Management Board Employment Contract or the appointment to the Management Board continues to exist until June 30, 2013, then all of the SARs granted to the Management Board member can become vested. If a Management Board member leaves after June 30, 2010, but before July 1, 2013, the SARs granted vest pro rata temporis in proportion to the four-year waiting period. An additional requirement for vesting to occur is that, within the period from July 1, 2012, to June 30, 2013, during a period of 90 consecutive calendar days, either the price of the Axel Springer share is at least 30 % higher than the base value of € 60.86, or the percentage by which the price of the Axel Springer share is above the base value on average exceeds the average percentage price development of the DAX. Exercise of the SARs is only possible if the average share price of Axel Springer AG in the 90 calendar days prior to exercise is at least 30 % above the basis value and the percentage price increase of the Axel Springer share exceeds the development of the DAX price index in the corresponding period. Each SAR grants a payment claim in the amount of the growth in value of the Axel Springer share, restricted to a maximum of € 121.72; this corresponds to the difference between the volume- weighted average price during the last 90 calendar days prior to exercise and the base value. The Management Board members are obligated to hold one share of Axel Springer AG as their own investment for each ten SARs. Disposal of these shares prior to exercise of the SARs leads to a lapse of the SARs in the proportion of one share for each ten SARs. The value of the SARs was determined to be € 12.65 (€ 4,743 thousand for all warrants) by application of a Black-Scholes model in a Monte-Carlo simulation at the grant date. The total value will be recognized in liabilities due to related parties over the vesting period and presented within the personnel expenses. In 2009, € 1,460 thousand were recognized as personnel expenses. The liability was € 1,460 thousand at December 31, 2009. In May 2009, as part of a free share and stock participation program, 82,669 treasury shares were issued in the form of free shares or by conversion of Group employee bonus claims at their respective fair value at the time of issue in the amount of € 71.51 or € 69.15. Personnel expenses of € 3.6 million were incurred in the reporting year for both programs. Prior to its acquisition by Axel Springer on September 2, 2009, StepStone ASA had granted stock options for shares of StepStone ASA to employees and management. Due to the acquisition of all of the shares in StepStone ASA by Axel Springer, related with a deregistration of the shares of StepStone ASA commenced in December 2009, existing stock options were repurchased by the end of January 2010. At balance sheet date, 6,113,807 options still existed with a weighted average exercise price of € 0.78. The personnel expenses recognized in the consolidated financial statements of Axel Springer AG amounted to € 2,417 thousand. 160 Annual Report 2009 Axel Springer AG auFeminin.com S.A., Paris/France, granted its senior executives subscription rights for free shares and stock options. These share-based payments must be settled with shares of auFeminin.com S.A. The fair values of the stock options granted in current and prior year were determined by application of the Black-Scholes model at the grant date. For this purpose, the following parameters were applied: The 53,000 free shares that were granted in April 2008, as well as the 37,000 free shares that had already been granted at the date of acquisition of auFeminin.com S.A. in July 2007, will be transferred to the plan participants after a period of two years after the grant date provided that certain operating targets (particularly EBIT and revenue targets), and in some cases also market goals (audience group quotas), have been achieved, provided that the participants are still employed with the company and provided that the free shares have not expired. The holding period after the transfer of shares is an additional two years. The 99,000 stock options, each one entitling the holder to purchase one share of auFeminin.com S.A., that were granted by the April 2008 stock option plan, as well as the 74,000 stock options that had already been granted at the date of acquisition of auFeminin.com S.A. in July 2007 (weighted average exercise price of € 18.95), will become vested in equal annual installments over a period of four years. The option grant is not conditioned on any further earnings or market conditions. These options can be exercised for the first time at the end of the fourth year after the options were granted and for a total of four years thereafter. The stock options entitle the holders to purchase up to 99,000 shares at a price of € 20.46 per share. In June 2009, 300,000 stock options for acquisition of one share of auFeminin.com S.A. each with an exercise price of € 8.94 were issued to senior employees. These options vest upon expiration of the first (50 %) and second (50 %) year after the grant date, insofar as the earnings target established for the individual tranche (EBITDA 2009 or EBITDA 2010) is achieved. Once they have vested, the options can be exercised for a total of five (50 %) or four (50 %) years. Options June 2009 Options April 2008 Share price in € Exercise price in € Interest rate for risk-free investments, in % Expected life, in years Expected volatility, in % Expected dividend yield, in % 9.00 8.94 0.96 resp. 1.62 1 resp. 2 40.00 0.00 Fair value at grant date, in € 1.49 resp. 2.14 13.50 20.46 3.74 4 25.00 0.00 1.43 In 2009, no options or rights to purchase free shares lapsed. In the prior year, no options, but 40,000 rights to purchase free shares lapsed. At the balance sheet date, a total of 473,000 stock options with a weighted average exercise price of € 12.92, as well as 50,000 rights to get free shares had been issued. None of these options was yet exercisable at the balance sheet date. The compensation expenses for the share-based payment programs of auFeminin.com S.A. amounted to € 466 thousand in fiscal year 2009 (PY: € 617 thousand). The additional paid-in capital was increased by the same amount. (g) Minority interests The minority interests mainly related to the following companies: € thousands ZANOX Group auFeminin Group Digital Window wallstreet:online Special-purpose entities Other companies Minority interests 12/31/2009 12/31/2008 17,469 17,472 11,639 11,102 7,673 4,258 5,905 4,698 0 5,686 3,399 4,909 51,642 42,568 Consolidated Financial Statements 161 (14) Pension obligations The amount of the provision was calculated as follows: Provisions for pensions were accounted for the obligations arising from vested pension rights and current benefits for former and active employees of the Axel Springer Group and their survivors. The different pension plans within the Group are organized in accordance with the legal, tax-related, and economic conditions of each country. The provision for defined benefit plans amounts to the present value of the obligation at balance sheet date net of the fair value of plan assets. Under its defined contribution pension plans, the Group mainly contributes to public-sector pension insurance carriers by virtue of the applicable laws. The current contribution payments are presented as social security costs within personnel expenses (cf. note (23), € 39,804 thousand in 2009 (PY: € 39,208 thousand)). Expenses of € 22,958 thousand were incurred for defined benefit pension plans in 2009 (PY: € 22,077 thousand). These expenses broke down as follows: € thousands Current service cost Interest expense Employee contribution 2009 7,089 2008 7,461 21,361 20,123 – 1,400 – 1,381 Expected income from plan assets – 2,433 – 2,508 Expected income from reimbursement rights Pension expenses – 1,658 – 1,618 22,958 22,077 Actual income from plan assets Actual income from reimbursement rights 1,960 2,244 1,574 1,618 Service cost and employee contributions are presented within the personnel expenses. The interest portion contained in the pension expenses and the expected income from the plan assets are presented as components of interest expenses and interest income, respectively. € thousands 12/31/2009 12/31/2008* Present value of defined benefit obligations financed by fund 80,212 83,586 Fair value of plan assets – 72,066 – 76,184 Assets from over-coverage 0 445 Present value of defined benefit obligations financed by provision Provision Reimbursement right Net obligation 351,324 336,122 359,471 343,969 – 29,464 – 29,754 330,007 314,215 *) Adjusted due to the change of the accounting policy for pension obligations. At balance sheet date, actuarial gains before deferred taxes amounting to € 2,379 (PY: € 11,003) were accounted for in the accumulated other comprehensive income. In connection with the contribution of the rotogravure printing operations to PRINOVIS Ltd. & Co. KG, Hamburg, it was also agreed in 2005 to transfer the pension obligations attributable to this division. The Commercial Register entry, upon which the legal validity of this transfer depends, had not yet been effected at the balance sheet date for the current pension obligations and the vested pension claims of former employees. By virtue of contractual agreements, Axel Springer AG is entitled to reimbursement of the pension obligations or pension expenses arising in this respect. The reimbursement right is presented as a separate asset (cf. note (10)), whereas in the income statement, the income from the reimbursement is netted with the corresponding pension expenses. In 2009, this provision amounted to € 29,464 thousand (PY: € 29,754 thousand). The changes in the reimbursement right in the reporting period consisted of compounding the corresponding pension provisions by € 1,658 thousand (PY: € 1,618 thousand), actuarial gains of € 586 thousand (PY: € 0 thousand) and reimbursement of pension payments of € 2,534 thousand (PY: € 2,548 thousand). 162 Annual Report 2009 Axel Springer AG The fair value of the plan assets showed the following changes: The changes in the present value of the pension obligations financed by fund and by provision are presented in the table below: € thousands 2009 2008 Plan assets at January 1 76,184 66,106 € thousands Expected income from plan assets Employee contribution Employer contribution Benefits paid Actuarial losses Exchange rate changes 2,433 1,400 1,684 2,508 1,381 1,230 – 9,107 – 1,565 – 473 – 56 – 935 7,458 Plan assets at December 31 72,066 76,184 Obligation at January 1 Current service cost Interest expense Actuarial losses (PY: gains) Payments by employees Transfer of pension obligation Exchange rate change Payments to retirees 2009 2008 419,708 407,649 7,089 7,461 21,361 20,123 8,746 – 6,512 3,109 – 260 3,146 0 – 46 8,143 – 28,170 – 20,301 The plan assets almost entirely consisted of claims under insurance contracts. The investment strategy is based on specific legal requirements which are in line with our investment policy. The expected long-term income from plan assets is derived from the expected income of the asset classes within the portfolios and is based on a value-securing investment strategy mainly investing in obligations of issuers with high credit rating and real estate. The investment portfolio broke down as follows: Target port- folio structure Actual portfolio structure 12/31/2010 12/31/2009 12/31/2008 Obligation at December 31 431,537 419,708 Of the indicated pension payments, an amount of € 2,534 thousand (PY: € 2,548 thousand) related to the pension obligations that have not yet been transferred to PRINOVIS Ltd. & Co. KG, Hamburg, and which are subject to the reimbursement right. Bonds Shares 71.5 % 73.3 % 3.0 % 2.2 % Real estate 19.0 % 18.9 % Others Total 6.5 % 5.6 % 100.0 % 100.0 % 100.0 % 73.4 % 1.0 % 19.0 % 6.6 % Consolidated Financial Statements 163 In fiscal year 2010, contributions to fund-financed defined benefit plans are expected to total € 1,938 thousand. The amounts of the current and the prior four reporting periods for the present value of the obligations, the fair value of plan assets and the experienced-based adjust- ments to plan assets and liabilities are summarized in the table below: € thousands 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 Present value of defined benefit obligations financed by fund 80,212 83,586 71,404 Fair value of plan assets 72,066 76,184 66,106 - - - - Present value of defined benefit obligations financed by provision 351,324 336,122 336,245 362,502 370,151 Experience-based adjustments to plan liabilities – 3,858 2,820 1,848 2,926 Experience-based adjustments to plan assets – 480 16 9 - - - (15) Other provisions and accrued liabilities The other provisions and accrued liabilities broke down as follows: € thousands Structural measures Other obligations towards employees Partial early retirement program (Altersteilzeit) Returns Litigation expenses Discounts and rebates Dismantling obligations Other taxes Other Balance at 01/01/2009 Utilization Reversals Additions Other changes Balance at 12/31/2009 15,696 36,686 36,407 31,157 12,164 6,596 4,036 2,396 14,874 35,415 13,194 27,915 8,044 5,863 118 2,394 822 1,271 869 3,242 4,120 733 357 2 52,954 42,622 10,031 24,990 8,555 5,490 1,499 4,169 24,566 15,972 1,551 10,845 – 2 122 2,987 2,630 19 – 29 339 – 25 416 52,952 42,744 35,362 27,620 8,574 5,461 5,399 4,144 18,304 Other provisions 169,704 123,789 12,967 161,155 6,457 200,560 Non-current provisions are primarily contained in the provisions for partial early retirement programs (Altersteilzeit). Other obligations towards employees primarily included variable compensation tied to performance and loyalty bonuses. Provisions for structural measures mainly included provisions for restructuring measures in various areas of the Group. Among others, miscellaneous other provisions comprise anticipated losses on rental agreements, interest from tax audits, contributions, and custody/archiving obligations. The other changes resulted primarily from currency translation differences and compound interest. 164 Annual Report 2009 Axel Springer AG (16) Financial liabilities (18) Other liabilities The financial liabilities comprise exclusively liabilities due to banks and were characterized by utilization, interest rates, and maturities set forth in the table below. All liabilities are denominated in euros. Short-term loans are not presented in the table. 2009 € thousands 2008 € thousands Interest rate in % Maturity The other liabilities broke down as follows: € thousands Prepaid subscriptions 12/31/2009 12/31/2008 73,952 64,871 Acquisition-related liabilities 50,085 54,373 Liabilities due to employees 36,011 26,171 Advance payments 305,000 430,000 3-month EURIBOR + 0.15 08/14/2013 Liabilities from other taxes 34,988 37,320 17,043 18,376 13,233 15,242 11,034 11,649 5.64 10/31/2012 Liabilities from derivatives 4.63 07/31/2011 Debit balances in accounts receivable 19,827 10,718 5.65 06/30/2012 Capital investment subsidies 5.09 11/30/2013 Liabilities for duties and contributions 6,231 6,711 3-month EURIBOR + 0.30 10/15/2022 Liabilities due to social insurance carriers 0 1,500 3.99 03/31/2009 Other 23,320 30,313 22,414 27,649 21,769 15,236 17,221 18,932 6,107 3,353 4,373 2,789 57,646 25,630 The interest rates were mainly equivalent to the effective rates of interest. In the case of fixed-interest loans, the interest rates are fixed until the maturity date. Furthermore, at balance sheet date additional unused short-term and long-term credit facilities amounted to € 1,220 million (PY: € 1,095 million). (17) Liabilities due to related parties The liabilities due to related parties broke down as follows: € thousands 12/31/2009 12/31/2008 Liabilities due to associated companies 9,051 9,036 Liabilities due to other related parties 17,297 15,482 Liabilities due to related parties 26,348 24,518 Other liabilities 331,704 281,055 Acquisition-related liabilities consisted of contingent liabilities resulting from put options and earn-out agreements in respect of business combinations and acquisition of minority interests. Liabilities due to employees related to outstanding wage and salary payments, management bonus and severance award claims, as well as liabilities resulting from overtime and unused vacation. The increase in miscellaneous other liabilities primarily derives from the initial consolidation of acquired companies. Consolidated Financial Statements 165 (19) Maturity analysis of financial liabilities We continually monitor the availability of financial resources to fund the company’s operating activities and investments in companies by means of a Group-wide liquidity planning system. In particular, the financial resources raised by a credit facility granted to the Group have contributed to the high degree of financial flexibility of the Axel Springer Group. The contractually agreed (undiscounted) payments related to non-derivative financial liabilities and derivatives are presented in the following table: € thousands Undiscounted cash outflows Liabilities due to banks Liabilities from the purchase of minority interests Carrying amount at 12/31/2009 390,281 43,470 Other non-derivative financial liabilities 290,715 283,364 Derivative financial liabilities designated as a hedging instrument 21,769 6,660 2010 2011 – 2014 16,611 401,771 3,585 43,580 1,826 14,952 2015 ff. 3,948 0 5,525 157 € thousands Undiscounted cash outflows Liabilities due to banks Liabilities from the purchase of minority interests Carrying amount at 12/31/2008 524,028 29,886 Other non-derivative financial liabilities 254,063 247,596 Derivative financial liabilities designated as a hedging instrument 15,236 3,628 2009 2010 – 2013 32,348 575,835 2014 ff. 4,692 3,734 29,145 1,890 11,370 4,577 238 166 Annual Report 2009 Axel Springer AG Notes to the consolidated statement of comprehensive income (22) Purchased goods and services The purchased goods and services broke down as follows: (20) Revenues The revenues broke down as follows: € thousands Circulation revenues Advertising revenues Printing revenues Other revenues Revenues 2009 2008 1,176,239 1,215,748 1,138,501 1,248,074 42,892 46,545 253,959 218,171 2,611,591 2,728,538 The revenues from barter transactions amounted to € 36,922 thousand in 2009 (PY: € 33,352 thousand). These revenues were mainly generated from bartering advertising services. (21) Other operating income The other operating income broke down as follows: € thousands Income from disposal of fixed assets Income from cost allocations to related parties Income from Kirch insolvency Foreign exchange gains 2009 9,086 8,466 7,586 5,829 2008 885 9,198 6,175 1,752 Miscellaneous operating income 39,687 67,511 Other operating income 70,654 85,521 For information about the income from the Kirch insolvency, please refer to note (11). In addition to a reversal of impairment losses on investment properties in prior years amounting to € 5,500 thousand (PY: € 142 thousand), miscellaneous other operating income includes a variety of immaterial circumstances. € thousands 2009 2008 Raw materials and supplies and purchased merchandise Purchased services 282,697 314,112 603,748 631,261 Purchased goods and services 886,445 945,374 Raw materials and supplies and purchased merchandise comprise paper costs amounting to € 196,125 thousand (PY: € 223,872 thousand). The cost of purchased services was predominantly composed of purchased third-party printing services and professional fees, as well as publisher services. The purchased third-party printing services also include paper costs. (23) Personnel expenses The personnel expenses split up as follows: € thousands Wages and salaries Social security Expenses for share-based payments Pension expenses Other benefit expenses 2009 2008 691,009 626,035 83,859 82,430 4,307 7,609 5,159 1,023 8,412 4,557 Personnel expenses 791,943 722,457 The average number of employees in the Group is shown below: Salaried employees Editors Wage-earning employees 2009 6,436 3,378 927 2008 6,112 3,566 988 Total employees 10,740 10,666 The increase year-on-year resulted from the initial consolidation of acquired companies. Consolidated Financial Statements 167 (24) Depreciation, amortization, and impairments (25) Other operating expenses The depreciation, amortization, and impairments split up as follows: The other operating expenses broke down as follows: € thousands Impairment losses in goodwill 2009 0 2008 2,107 € thousands 2009 2008 Mailing and postage expenses 161,743 170,845 Advertising expenses 151,183 152,864 Amortization of other intangible assets 38,217 31,096 Expenses for non-company personnel 92,446 91,853 Impairment losses in other intangible assets Depreciation of property, plant, and equipment Impairment losses in property, plant, and equipment Depreciation of investment property Depreciation, amortization, and impairments 1,651 28,731 Commissions and gratuities 75,897 83,630 Rental and leasing expenses 34,105 33,410 51,387 49,492 Services provided by related parties 31,843 29,663 379 716 7 656 Maintenance and repairs Travel expenses Adjustment of allowances for doubtful receivables 92,350 112,088 Other taxes Foreign exchange losses 25,446 26,886 18,540 20,127 15,975 10,250 6,868 5,362 8,722 4,465 The increase in the amortization of other intangible assets primarily resulted from additional amortization charges deriving from the initial consolidation of acquired companies in fiscal year 2009. Impairment losses in goodwill and other intangible assets of the prior year primarily related to the segment Magazines National. Impairment losses in non-current financial assets are included in income from investments. Miscellaneous operating expenses 80,811 69,508 Other operating expenses 705,107 697,335 The following professional fees for the services rendered by the auditor Ernst & Young GmbH were recognized: € thousands 2009 2008 Audits of the annual financial statements Other certification or appraisal services Tax advisory services Other services 786 188 132 692 627 130 561 220 Total professional fees 1,798 1,538 The professional fees for the audit of financial statements include the audit of the separate financial statements of Axel Springer AG and other German subsidiaries, and the audit of the consolidated financial statements. The other certification and appraisal services include fees for the auditor’s review of the quarterly financial statements, the semi-annual financial statement, and the audits to verify compliance with certain contractual agreements. The tax advisory fees include support provided with regard to specific tax questions. 168 Annual Report 2009 Axel Springer AG (26) Income from investments The investment income in the reporting year mainly resulted from the profit from the sale of investments in regional newspapers (€ 210,971 thousand), as well as impairments of the investments in PRINOVIS (€ 16,024 thousand) and ZertifikateJournal (€ 4,474 thousand). In the prior year, the investment income primarily resulted from the profit from the sale of shares of ProSiebenSat.1 Media AG in the amount of € 438,250 thousand, as well as the impairment of the investment in PRINOVIS. The other financial result contained income of € 9,432 thousand (PY: expenses of € 27,806 thousand) for the change in fair value of the H&F options, which particularly resulted from the increased share price. The total interest income and expenses for those financial assets and liabilities that were not measured at fair value through profit or loss are presented in the table below: € thousands Total interest income 2009 5,943 2008 9,840 Total interest expenses – 21,235 – 32,427 (28) Income taxes The income taxes paid or owed and the deferred taxes are recognized under income taxes. Income taxes consist of trade tax, corporate income tax, and solidarity surcharge, and the corresponding foreign income taxes. The income tax expenses are broken down below: € thousands Current taxes Deferred taxes Income taxes 2009 2008 99,700 120,249 – 15,860 – 3,062 83,840 117,187 (27) Financial result The financial result broke down as follows: € thousands 2009 2008 Interest income from derivatives 526 14,810 Interest income from bank accounts Interest income from loans and securities 1,757 155 5,772 1,343 Miscellaneous interest income 10,817 11,453 Interest income 13,255 33,378 Interest expenses on liabilities due to banks – 12,075 – 29,278 Interest expenses on pension provisions, less reimbursements – 19,703 – 18,505 Interest expenses from derivatives – 8,464 – 10,815 Miscellaneous interest expenses – 7,439 – 8,136 Interest and similar expenses – 47,681 – 66,734 Other financial result Financial result 9,446 – 28,191 – 24,980 – 61,547 Consolidated Financial Statements 169 The income tax expense applying the tax rate of Axel Springer AG reconciles to the income tax expense recognized in the income statement as follows: in ProSiebenSat.1 Media AG. The trade tax deductions in 2009 mainly resulted from the sale of investments in partnerships. € thousands 2009 2008 Income before income taxes 397,739 688,254 Tax rate of Axel Springer AG 31.19 % 31.19 % Expected tax expenses 124,055 214,666 Differing tax rates Permanent differences 7,253 15,364 – 5,576 33,586 Deferred tax assets and liabilities were recognized to account for temporary differences and tax loss carry- forwards, as follows: € thousands 12/31/2009 12/31/2008 Deferred tax assets Deferred tax liabilities Deferred tax assets* Deferred tax liabilities Adjustments to carrying amounts of deferred taxes Current income taxes for prior years Deferred income taxes for prior years Non-deductible operating expenses 8,653 – 3,838 Intangible assets 13,742 84,409 16,767 62,597 435 4,203 8,490 3,862 169 11,359 Other property, plant and equipment Non-current financial assets 105 124,913 102 126,145 862 3,336 4,576 18,233 Tax-exempt income – 37,273 – 160,191 Inventories 1,278 0 915 0 Receivables and other assets 1,009 6,359 1,504 8,089 Pension provisions 21,414 0 17,551 Other provisions Liabilities 6,901 9,248 623 569 5,611 7,345 0 203 375 Temporary differences 54,559 220,209 54,371 215,642 Tax loss carry-forwards 14,037 0 8,046 0 Total Offsetting 68,596 220,209 62,417 215,642 – 52,323 – 52,323 – 49,385 – 49,385 Amounts as per balance sheet 16,273 167,886 13,032 166,257 *) Adjusted due to the change of the accounting policy for pension obligations. Trade tax additions/deductions Other effects Income taxes – 25,494 – 906 1,264 947 83,840 117,187 Companies having the legal form of a corporation resident in Germany are subject to corporate income tax at the rate of 15 % and solidarity surcharge of 5.5 % of the corporate income tax owed. In addition, these companies are subject to trade tax, for which the amount is municipality-specific. Companies having the legal form of a partnership are subject to trade tax exclusively. The net income is assigned to the shareholder for purposes of corporate income tax. The effects of different tax rates for partnerships and for foreign income taxes from the tax rate applicable to Axel Springer AG are explained in the reconciliation in the item differing tax rates. The permanent differences mainly resulted from impairment losses in goodwill, deconsolidation effects, and foreign losses that are not taken into account for tax purposes. The adjustments to the carrying amounts of deferred taxes included € 8,262 thousand (PY: € 14,982 thousand) for the non- recognition of deferred taxes on tax loss carry-forwards. The tax exemption effects in 2009 mainly resulted from the sale of investments in regional newspapers, in the previous year predominantly from the sale of the shares 170 Annual Report 2009 Axel Springer AG The net balance of deferred tax items from January 1 to December 31, 2009, was derived as follows: € thousands Deferred tax assets at January 1 2009 13,032 2008* 8,733 Deferred tax liabilities at January 1 – 166,257 – 198,465 Net tax position at January 1 – 153,225 – 189,732 Deferred tax expenses of current year 15,860 3,062 Changes in deferred taxes recognized in other comprehensive income 6,706 1,676 Changes in consolidation group – 20,954 31,769 Net tax position at December 31 – 151,613 – 153,225 Deferred tax assets at December 31 16,273 13,032 Deferred tax liabilities at December 31 – 167,886 – 166,257 *) Adjusted due to the change of the accounting policy for pension obligations. Of the deferred tax assets, an amount of € 4,602 thousand (PY: € 7,824 thousand), of the deferred tax liabilities, an amount of € 2,767 thousand (PY: € 2,443 thousand) can be realized in the short term. The amount of deferred tax assets to be disclosed in accordance with IAS 12.82 was € 14,771 thousand (PY: € 17,104 thousand). It is expected that this amount can be realized by application against the available operating income and structural measures in subsequent years. Deferred taxes in the total amount of € 6,433 thousand (PY: € – 269 thousand; adjusted due to the change of the accounting policy for pension obligations) were recognized directly in equity, as they relate to matters that were likewise recognized directly in equity. In fiscal year 2009, no deferred tax assets were recognized with respect to corporate income tax loss carry-forwards amounting to € 389,295 thousand (PY: € 109,849 thousand), and with respect to trade tax loss carry-forwards amounting to € 39,875 thousand (PY: € 38,481 thousand) because it did not appear probable that sufficient taxable income could be generated for these amounts in the near future. Of these tax loss carry- forwards, an amount of € 64,266 thousand (PY: € 41,833 thousand) can be carried forward for up to five years and an amount of € 9,718 thousand (PY: € 11,214 thousand) can be carried forward for six to ten years. The utilization of tax loss carry-forwards that had not previously been recognized as deferred tax assets caused a reduction in income tax expenses of € 95 thousand (PY: € 2,472 thousand). Capitalized tax loss carry-forwards in the amount of € – 280 thousand (PY: € – 6,750 thousand) were corrected as a result of tax audits or differing tax assessments. As a rule, deferred taxes must be recognized to account for the difference between the Group’s interest in the equity of the subsidiaries as presented in the consolidated balance sheet and the corresponding investment balance recognized in the financial statements for tax purposes. Such differences can result from the retention of earnings. Deferred tax liabilities were not recognized on differences of € 10,206 thousand (PY: € 13,276 thousand) because a realization is not planned at the present time. In the case of sale or profit distribution, the gain on disposal respectively the dividend would be subject to taxation with 5 % in Germany; in addition, foreign withholding taxes might incur. (29) Earnings per share The earnings per share were determined as follows: 2009 2008 Net income attributable to shareholders of Axel Springer AG € thou- sands 303,481 560,050 Weighted average shares outstanding Dilution effect upon exercise of stock options 000s 29,748 30,141 000s 33 63 Weighted average shares diluted 000s 29,781 30,204 Net income attributable to shareholders of Axel Springer AG per share basic diluted € € 10.20 10.19 18.58 18.54 Consolidated Financial Statements 171 (30) Other income/loss The other income/loss broke down as follows: € thousands Before tax Tax effect Net Before tax Tax effect Actuarial gains/losses from defined benefit pension obligations – 8,624 2,524 – 6,100 5,554 – 1,672 2009 2008 Net 3,882 10,339 – 434,169 0 0 1,655 10,339 6 – 434,169 0 0 2,021 – 4,503 – 15,402 4,068 – 11,334 0 – 3,086 0 0 0 2,161 6,706 – 4,578 – 10,872 – 1,446 – 12,318 – 16,606 – 444,550 950 – 443,600 Currency translation differences Changes in fair value of available-for-sale financial assets Changes in fair value of derivatives in cash flow hedges Changes in revaluation surplus Other income/loss from investments accounted for using the equity method Other income/loss 1,655 6 – 6,524 – 3,086 – 6,739 – 23,312 In the prior year, changes in fair value of available-for- sale securities were recognized in income in the amount of € 434,174 thousand. Notes to the consolidated statement of cash flows (31) Composition of cash and cash equivalents (32) Other disclosures Cash and cash equivalents were composed of the following elements: € thousands Cash 12/31/2009 12/31/2008 197,259 154,521 Securities with a term of less than three months 0 8 Cash and cash equivalents 197,259 154,529 Of the cash and cash equivalents presented in the consolidated cash flow statement, an amount of € 3,464 thousand (PY: € 4,460 thousand) was restricted. The other non-cash income and expenses particularly resulted from the fair value measurement of financial derivatives. Capital expenditures of € 1,737 thousand (PY: € 584 thousand), most of which for investments in property, plant, and equipment, had not yet been realized as cash payments. Acquisitions obtaining control respectively divestitures losing control of companies and businesses resulted in net payments of € 31,259 thousand (PY: € 12,932 thousand). In the prior year, the cash flows related to assets held for sale were assigned to the original line items in the consolidated cash flow statement. 172 Annual Report 2009 Axel Springer AG Notes to the segment report (33) Basic principles of segment reporting The segment reporting reflects the internal management and reporting structures. We already applied IFRS 8 “Operating Segments” in the prior year. The reporting format is structured according to the operating business areas of the Axel Springer Group and comprises the reporting segments Newspapers National, Magazines National, Print International, Digital Media, and Services/Holding. Segment liabilities and investments were no longer disclosed as these measures are not used for decision making at segment level. (a) Operating segments The Newspapers National segment includes daily and Sunday newspapers, national and regional subscription newspapers, and advertising supplements. This segment also included investments in German newspaper publishing companies. The Magazines National segment includes TV program guides, women’s magazines, men’s magazines, youth magazines, computer magazines, business magazines, news magazines, family magazines, and further special- interest magazines, as well as investments in magazine publishing companies in Germany. The newspapers and magazines published in foreign countries are comprised within the Print International segment. The online and broadcasting activities are comprised within the Digital Media segment. In particular, this segment comprises online activities derived from print brands and the previously existing activities of ZANOX, Idealo, Immonet, auFeminin, StepStone, and Digital Window. Furthermore, this segment also comprises the investment in the TV broadcast company Dogan TV. The Services/Holding segment comprises the remaining business activities, including services such as customer service, sales, logistics, direct marketing, and office buildings, as well as purely internal departments like IT, accounting, human resources, and corporate staff departments. Our three offset printing plants, investments in two offset printing plants outside Germany, and the rotogravure printing company PRINOVIS are likewise included in the Services/Holding segment. (b) Geographical Information The activities of the Axel Springer Group are conducted mainly in Germany and in other European countries. (34) Segment information The segment information was compiled on the basis of the recognition and measurement methods applied in the consolidated financial statements. The external revenues consist of circulation revenues from the sale of publishing products, advertising revenues, and revenues from rendering services. The internal revenues consist of revenues from the exchange of goods and services between the various segments. The transfer pricing is based on cost coverage. Consolidated Financial Statements 173 Other disclosures (35) Capital management Beyond the provisions of German law applicable to stock corporations, Axel Springer AG is not subject to any further obligations relating to capital preservation, whether from its own Articles of Incorporation or from contractual obligations. The financial key figures used by the company for management purposes are primarily earnings-driven. The goals, methods, and processes of our capital management are subordinate to the earnings- driven financial key figures. For the purpose of maintaining and adjusting the capital structure, the company can adjust the dividend payments to its shareholders or purchase treasury shares representing up to 10.0 % of the subscribed capital. Treasury shares can be used for acquisition financing or they can be retired. At December 31, 2009, the treasury shares represented 9.6 % of the company’s share capital. Under the terms of its Management Participation Program, the company is obligated to sell treasury shares to the management. At the balance sheet date we possessed enough treasury shares to fulfill the obligations of the program. We use the performance figure EBITDA (earnings before interest, taxes, depreciation and amortization) to measure segment earnings. In calculating this performance figure, non-recurring effects and purchase price allocation effects are eliminated. Non-recurring effects include effects from the acquisition and disposal of subsidiaries, business divisions, and investments, as well as impairment and write-ups of investments, effects from the sale of real estate, and special depreciation and write-ups of real estate used by the company. The non-recurring effects include the results of the sale of a number of investments and business divisions (€ 208,039 thousand), impairment of investments (€ – 21,827 thousand), and costs in connection with acquisitions of business occurring in the fiscal year and planned for the future (€ – 5,812 thousand). In the prior year, effects from the sale of investments (€ 438,736 thousand) and write-ups and impairment of investments (€ – 62,473 thousand) were recognized. The effects of purchase price allocations mainly consisted of amortization and depreciation, as well as impairments of intangible assets and property, plant, and equipment that were acquired in the context of business combinations. In 2009, the effects of purchase price allocations amounted to € 26,692 thousand (PY: € – 46,473 thousand). Impairment of € 28,731 thousand was included in the prior year. Segment assets are composed of the assets required for operation. Certain assets in the amount of approximately € 366 million (PY: € 307 million) were not segmented. They mainly included cash and cash equivalents as well as income tax assets. For purposes of geographical segment reporting, the revenues are segmented according to the location of the customer’s registered office. 174 Annual Report 2009 Axel Springer AG (36) Financial assets and liabilities (a) Presentation by categories The balance sheet items comprising financial assets and liabilities can be attributed to the measurement categories according to IAS 39 as follows: € thousands Assets 12/31/2009 Other non-current investments and securities Loans and advances Other non-current financial assets Trade receivables Receivables due from related parties Derivatives not designated as a hedging instrument Other Other assets Cash and cash equivalents Liabilities 12/31/2009 Financial liabilities Trade payables Liabilities due to related parties Derivatives designated as a hedging instrument Other Other liabilities Assets 12/31/2008 Other non-current investments and securities Loans and advances Other non-current financial assets Trade receivables Receivables due from related parties Derivatives designated as a hedging instrument Derivatives not designated as a hedging instrument Other Other assets Cash Securities with a term of less than three months Cash and cash equivalents Liabilities 12/31/2008 Financial liabilities Trade payables Liabilities due to related parties Derivatives designated as a hedging instrument Other Other liabilities Financial liabilities measured at amortized cost Available- for-sale financial assets Financial assets and liabilities held for trading No category according to IAS 39 Carrying amount Loans and receivables 30,287 30,287 31,533 31,533 4,366 4,366 301,947 14,523 189,538 189,538 197,259 3,783 3,783 264,875 25,828 41,236 41,236 154,521 154,521 30,287 4,366 34,653 301,947 43,987 11,169 211,444 222,613 197,259 390,281 206,338 26,348 21,769 309,935 331,704 31,533 3,783 35,316 264,875 55,582 19 1,840 63,192 65,051 154,521 8 154,529 524,028 184,989 24,518 15,236 265,865 281,101 390,281 206,338 22,213 104,578 104,578 524,028 184,989 24,518 74,442 74,442 11,169 11,169 29,464 21,906 21,906 4,135 21,769 205,100 226,869 257 257 1,840 1,840 8 8 29,754 19 21,956 21,975 15,236 191,423 206,659 Consolidated Financial Statements 175 (b) Other disclosures for financial assets and (37) Financial risk management liabilities For financial assets and liabilities measured at fair value, measurement was based on generally accepted valuation methods using observable market data. With the exception of the financial liabilities presented in the table below, the carrying amounts of the non- derivative financial assets and liabilities were identical to their fair values. € thousands 12/31/2009 12/31/2008 Carrying amount Fair value Carrying amount Fair value Liabilities due to banks 390,281 394,839 524,028 527,325 The net gains and losses recognized in the income statement (excluding financial derivatives subject to hedge accounting) are presented in the following table: € thousands 2009 2008 Loans and receivables, financial liabilities – 16,657 – 7,897 Available-for-sale financial assets 12,784 435,904 Financial assets and liabilities held for trading 1,432 – 24,732 The net gains and losses in the categories of “loans and receivables” and “financial liabilities” consisted mainly of valuation allowances, net gains or losses on disposal, and the result from the currency translation of these financial assets and liabilities. The net gains or losses of available-for-sale financial assets consisted mainly of the gains and losses on the disposal of these financial assets. The net gains and losses in the category of “financial assets and liabilities held for trading” did not include interest. The effects mostly resulted from valuation changes and other expenses for financial derivatives assigned to this category. Relating to available-for-sale financial assets, positive fair value changes of € 4 thousand (PY: € 8 thousand) were recognized directly in equity. Profits of € 0 thousand (PY: € 434,174 thousand) were transferred from equity to income. (a) Basic principles of financial risk management With respect to its assets, liabilities, and planned transactions, the Axel Springer Group is especially exposed to risks relating to changes in interest rates, foreign exchange rates, and stock market prices. The task of financial risk management is to limit these market risks by means of targeted measures. To this end, selected derivative hedging instruments are employed, depending on the assessment of the risk in question. To reduce the default risk, hedging transactions are conducted, as a rule, only with leading financial institutions that have top-quality credit ratings. The use of financial derivatives is governed by appropriate guidelines of the Group. These guidelines define the relevant responsibilities, permissible actions, and reporting requirements, and prescribe the strict separation of trading and back-office functions. With regard to the market price risks of selected financial assets and liabilities, compliance with prescribed loss limits is monitored on a daily basis. In principle, the effects of market price risks on the value of these financial assets and liabilities can be assessed promptly and, where applicable, the loss risks can be reduced. Interest rate risk (b) To hedge the interest rate risk, the Group employs interest rate derivatives such as interest rate swaps, collars, forward rate agreements, and interest futures. The goals and methods are defined in the internal finance regulations. Market interest rate risks are assessed by means of sensitivity analysis techniques. Such techniques represent the effects of changes in market interest rates on interest payments, interest income and expenses, other components of income, and where applicable, also on equity. The interest rate sensitivity analysis is conducted on the basis of the assumptions described below: 176 Annual Report 2009 Axel Springer AG Changes in market interest rates of non-derivative fixed- interest financial assets and liabilities have an impact on income only when they are measured at fair value. Therefore, all fixed-interest financial assets and liabilities measured at amortized cost are not exposed to risks resulting from interest rate changes. Changes in market interest rates have an impact on the income of non-derivative variable-interest financial assets and liabilities when the interest payments are not designated as underlying transactions for cash flow hedges against interest rate risks, and are therefore included in the calculation of the sensitivity analysis with respect to income. Changes in market interest rates of financial assets and liabilities that have been designated as hedging instruments in connection with a cash flow hedge against cash flow variability resulting from changes in interest rates have an impact on the accumulated other comprehensive income, and are therefore included in the sensitivity analysis with respect to equity. Changes in market interest rates of interest rate derivatives that are not designated as hedging instruments have an impact on the financial result, and are therefore included in the sensitivity analysis with respect to income. If the market interest rates had been 50 basis points higher (lower) at the balance sheet date, the measured value of interest rate derivatives at the balance sheet date would have been € 4,514 thousand higher (€ 4,624 thousand lower). The changes in the valuation would have been recognized directly in equity. At the balance sheet date, an amount of € 0 (PY: € 128 million) of the variable-interest liabilities due to banks was not hedged. In the annual average, 91 % (PY: 87 %) of the liabilities have been hedged. (c) Currency risk The currency risks of the Axel Springer Group result primarily from investments, financing activities, and operating activities. Currency risks are hedged to the extent that they have an impact on the Group’s cash flows. Currency risks that do not have an impact on the Group’s cash flows (i.e., those risks that result from the currency translation of the assets and liabilities of foreign subsidiaries to the Group’s reporting currency) are not taken into account. The individual Group companies conduct their business predominantly in their functional currency. They are exposed to operational currency risks only to an extent that is insignificant for the Group. These currency risks are hedged by means of forward exchange transactions, which are based on the strategic currencies that have been defined on the Group-wide level. The forward exchange dates of such transactions are determined on the basis of the expected cash flows. At December 31, 2009, forward exchange transactions existed for loans of foreign subsidiaries with a nominal value of € 19,220 thousand. The fair value was € 334 thousand. At the balance sheet date of the prior year, no forward exchange transactions were in the portfolio. Due to the insignificant impact of currency risks on the Group’s income and equity, a sensitivity analysis was not conducted. (d) Credit risk Financial assets may be impaired if business partners do not adhere to payment obligations. Especially trade receivables resulting from operating activities are subject to credit risk. Their maximum exposure to credit risk is reflected in the total amount of trade receivables presented in the statement of financial position. Consolidated Financial Statements 177 A deferred payment of € 150,000 thousand plus interest payable arising from the sale of investments in regional newspapers is secured by a lien on one of the disposed investments. The receivable is included in other assets (non-current). To reduce the credit risk, we conduct an active management of receivables and credit checks of our business partners. Investments in securities are made only in instruments with first-class ratings. Appropriate allowances, especially for doubtful trade receivables, are formed to account for discernible default risks. (38) Financial derivatives (a) Financial derivatives designated as hedging instruments In 2009, designated hedging instruments were used in particular to hedge against the interest rate risks of long- term liabilities. The cash flows were hedged through interest rate derivatives (interest rate swaps and collars). The maturities and nominal amounts of the interest rate derivatives were chosen to match the corresponding tranches of the variable-interest loans (hedged items). The interest rate derivatives were measured at fair value. The changes in the fair value are recognized in accumulated other comprehensive income until the hedged item is realized. At December 31, 2009, loans in the nominal amount of € 311,231 thousand (PY: € 311,711 thousand) were hedged. The fair value measurement of the interest rate derivatives at the balance sheet date yielded positive fair values of € 0 thousand (PY: € 19 thousand) and negative fair values of € 21,769 thousand (PY: € 15,236 thousand). Fair value changes in the net amount of € – 15,475 thousand (PY: € – 10,986 thousand) after taxes were recognized in accumulated other comprehensive income. (b) Financial derivatives not designated as hedging instruments For interest rate management purposes, no financial derivatives were employed without designation as a hedging instrument. In the prior year, interest rate futures were employed to hedge the fair values of interest rate hedging instruments, from which € 8,988 thousand were recognized to income. (39) Relationships with related parties Related parties are defined as those persons and companies that control or can exert a significant influence over the Axel Springer Group, or that are controlled or subject to significant influence by the Axel Springer Group. In particular, the members of the Springer family, the companies controlled or subject to significant influence by this family, the active members of the Management Board and Supervisory Board of Axel Springer AG, and the subsidiaries and associated companies of the Axel Springer Group have been defined as related parties. Prior year disclosures have been adjusted due to an amended allocation scheme for certain investments to related parties. Besides the business relationships with the consolidated subsidiaries, the following business relationships existed with related parties: € thousands Balance sheet Loans Receivables Provisions Liabilities Income statement Goods and services supplied Good and services received Financial result Note 12/31/2009 12/31/2008 (i) (ii) (iii) (iv) 2,483 2,083 43,987 55,582 5,435 4,699 26,349 24,519 2009 2008 (v) 74,804 79,160 (vi) 141,635 173,439 690 2,231 178 Annual Report 2009 Axel Springer AG (i) At the balance sheet date, the loans to related parties related to associates, in the amount of € 446 thousand (PY: € 499 thousand), and other related companies in the amount of € 2,037 thousand (PY: € 1,584 thousand). (ii) Of the total receivables due from related parties, trade receivables accounted for € 13,049 thousand (PY: € 17,435 thousand). Of this amount, € 4,738 thousand (PY: € 4,422 thousand) was owed by associates and € 8,311 thousand (PY: € 13,013 thousand) by other related companies. Valuation allowances were deducted from the receivables stated above. At the balance sheet date, allowances had been charged against receivables due from associated companies in the amount of € 2,694 thousand (PY: € 2,074 thousand), and against receivables due from other related companies in the amount of € 17,590 thousand (PY: € 17,185 thousand). Moreover, a receivable of € 29,464 thousand (PY: € 29,754 thousand) was owed by an associated company in connection with the right to reimbursement of pension obligations (cf. note (14)). (iii) These are pension obligations owed to members of the Management Board. (iv) The liabilities due to related parties consisted of trade payables in the amount of € 19,191 thousand (PY: € 22,784 thousand). Of this amount, € 4,469 thousand (PY: € 7,568 thousand) was owed to associates and € 14,722 thousand (PY: € 15,217 thousand) to other related companies. (v) Goods and services provided to related companies were mostly related to the distribution of newspapers and magazines. Revenues of € 66,423 thousand (PY: € 70,415 thousand) were generated with associated companies and revenues of € 8,381 thousand (PY: € 8,745 thousand) were generated with other related companies in 2009. (vi) The goods and services received from related companies were primarily rendered by associates. Of this amount, € 75,717 thousand (PY: € 113,335 thousand) mainly related to purchased publishing products and printing services. In addition, services in the amount of € 43,868 thousand (PY: € 42,928 thousand) were purchased from other related companies. A master agreement for the printing of magazines is in effect with one associated company until December 31, 2019. Under this agreement, services in the amount of € 63 million (PY: € 73 million) were rendered for companies of the Axel Springer Group in 2009. In 2009, the fixed compensation of the members of the Management Board of Axel Springer AG amounted to € 8,887 thousand (PY: € 8,237 thousand). The variable compensation amounted to € 8,800 thousand (PY: € 4,891 thousand). The share-based compensation granted to the Management Board of Axel Springer AG (cf. note (13f)) gave rise to an imputed compensation component of € 1,460 thousand (PY: € 406 thousand), in addition to the compensation mentioned above. This amount was recognized as personnel expenses. The pension provisions were increased by an amount of € 736 thousand in fiscal year 2009 (PY: € 897 thousand). The compensation of the members of the Supervisory Board amounted to € 2,425 thousand in fiscal year 2009 (PY: € 2,725 thousand). This figure included variable compensation of € 425 thousand (PY: € 725 thousand). A Supervisory Board member received a compensation of € 125 thousand (PY: € 125 thousand) for his services as an author. Consolidated Financial Statements 179 The compensation of the members of the Management and Supervisory Board is described in detail in the compensation report, which is part of the notes to the consolidated financial statements. The compensation report is included in the section “Declaration on Corporate Governance pursuant to Section 289a HGB and Corporate Governance Report”. An amount of € 3,856 thousand (PY: € 2,140 thousand) was paid to former Management Board members and special directors and their survivors. A total amount of € 26,082 thousand (PY: € 25,599 thousand) was allocated to the provisions for pension obligations. (40) Contingent liabilities At December 31, 2009, contingent liabilities from guarantees existed in the amount of € 33,268 thousand (PY: € 20,746 thousand). In addition, obligations from an acquisition-related contingent consideration existed in the amount of € 2,415 thousand (PY: € 0 thousand), but we consider their occurrence as unlikely. Furthermore, property, plant, and equipment in the amount of € 98,053 thousand (PY: € 104,529 thousand) had been pledged as security for liabilities at December 31, 2009. (41) Contingent assets Contingent receivables were due from KirchMedia GmbH & Co KGaA i.L. in the amount of € 274 million (PY: € 280 million (cf. note (11)). (42) Other financial commitments The other financial commitments broke down as follows: € thousands 12/31/2009 12/31/2008 Purchase commitments for - intangible assets - property, plant and equipment - inventories 8,359 7,565 9,921 6,488 5,412 11,926 Future payments under operating leases 71,051 93,693 Long-term purchase obligations 285,226 292,083 Other financial commitments 382,122 409,602 The long-term purchase obligations resulted from paper supply contracts. The total future payment obligations under operating leases at December 31, 2009 are broken down in the following table: € thousands Due in up to one year Due in one to five years Due in more than five years Total Future payments under operating leases 24,131 44,031 Total 24,131 44,031 2,889 2,889 71,051 71,051 (43) Events after the balance sheet date There were no significant events after the balance sheet date. 180 Annual Report 2009 Axel Springer AG (44) Companies included in the consolidated financial statements Share- hold- ing in % Held via No. Other dis- closures Fully consolidated companies Germany Axel Springer Aktiengesellschaft, Berlin AS Online Beteiligungs GmbH, Berlin AS Osteuropa GmbH, Berlin AS TV-Produktions- und Vertriebsgesellschaft mbH, Hamburg ASV Direktmarketing GmbH, Berlin Axel Springer Asia GmbH, Hamburg Axel Springer Auto-Verlag GmbH, Hamburg Axel Springer Digital TV GmbH, Berlin Axel Springer Digital TV Guide GmbH, Berlin Axel Springer Financial Media GmbH, Munich Axel Springer Media Logistik GmbH, Berlin Axel Springer Mediahouse Berlin GmbH, Berlin (formerly Axel Springer Mediahouse München GmbH, Munich) Axel Springer Medien Accounting Service GmbH, Berlin Axel Springer Services & Immobilien GmbH, Berlin Axel Springer TV NEWS GmbH, Hamburg Axel Springer TV Productions GmbH, Hamburg Axel Springer Venture GmbH (formerly AS Venture GmbH), Berlin 'Axel Springer Verlag' Beteiligungsgesellschaft mbH, Berlin Axel Springer Verlag Vertriebsgesellschaft mbH, Hamburg B.Z. Media GmbH, Berlin B.Z. Ullstein GmbH, Berlin Bergedorfer Buchdruckerei von Ed. Wagner (GmbH & Co.), Hamburg BERLINER WOCHENBLATT Verlag GmbH, Berlin BILD digital GmbH & Co. KG, Berlin Buch- und Presse-Großvertrieb Hamburg GmbH & Co. KG, Hamburg Commerz-Film GmbH, Berlin comparado GmbH, Lüneburg Computerbild Online Dienstleistungs-GmbH, Hamburg DW-Holding GmbH, Berlin eprofessional GmbH, Hamburg gamigo AG, Hamburg Gofeminin.de GmbH, Cologne (formerly Gofeminin.de GmbH, Berlin) Idealo Internet GmbH, Berlin Immonet GmbH, Hamburg ims Internationaler Medien Service GmbH & Co. KG, Hamburg Niendorfer Wochenblatt Verlag GmbH & Co. KG, Hamburg "Sächsischer Bote" Wochenblatt Verlag GmbH, Dresden Schwartzkopff TV-Productions GmbH & Co. KG, Hamburg Smarthouse Media GmbH, Karlsruhe Sport-B.Z. GmbH, Berlin StepStone Group (3 domestic companies) Transfermarkt GmbH & Co. KG, Hamburg Ullstein Gesellschaft mit beschränkter Haftung, Berlin VISION MEDIA Holding GmbH, Hamburg VVDG Verlags- und Industrieversicherungsdienste GmbH, Berlin wallstreet:online AG, Berlin wallstreet:online capital AG, Berlin WBV Direktzustell-GmbH, Hamburg WBV Wochenblatt Verlag GmbH, Hamburg ZANOX.de AG, Berlin ZZ-Kurier Gesellschaft für Zeitungs- und Zeitschriftenvertrieb mbH, Hamburg Other countries Amiado Group AG (formerly Verlag Sport Wochenzeitung AG), Zurich/Switzerland Anima Publishers, s.r.o., Zlin/Czech Republic - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 69.8 100.0 74.9 100.0 52.5 52.5 100.0 82.4 74.9 100.0 55.0 100.0 100.0 100.0 88.0 100.0 100.0 51.0 100.0 100.0 100.0 75.0 75.1 100.0 100.0 52.5 100.0 99.8 74.9 - 1 1 1 1 1 1 1 1 1 1 1 1 1 16 1 1 1 1 21 43 1 49 1 1 1 33 1 17 50 17 56 17 1 1 49 49 16 1 43 1, 79 24 18 1 18 10 10 49 1 17 1 66 64 (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (3) (1) (3) (3) (1) (2) (1) (2) (4) (1) (2) (3) (3) (1) (3) (4) (3) (1) (2) (1) (2) No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 Share- hold- ing in % Held via No. AS-NYOMDA Kft, Kecskemét/Hungary auFeminin.com Productions SARL, Paris/France auFeminin.com S.A., Paris/France Avivum AG, Zurich/Switzerland Axel Springer - Budapest Kiadói Kft, Budapest/Hungary Axel Springer - Magyarország Kft, Tatabánya/Hungary Axel Springer Editions S.A.S., Levallois- Perret/France Axel Springer España S.A., Madrid/Spain Axel Springer France S.A.S., Levallois- Perret/France "Axel Springer Polska" Sp. z o.o., Warsaw/Poland Axel Springer Praha a.s., Prague/Czech Republic "Axel Springer Russia" Geschlossene Aktiengesellschaft, Moscow/Russia Axel Springer Switzerland AG, Zurich/Switzerland Digital Window Limited, London/Great Britain Handelszeitung und Finanzrundschau AG, Zurich/Switzerland Les Publications Grand Public S.A.S., Levallois-Perret/France Marmiton SAS, Paris/France Népújság Kft, Békéscsaba/Hungary PartyGuide.ch AG, Hünenberg/Switzerland Petöfi Lap- és Könyvkiadó Kft, Kecskemét/Hungary Shanghai Springer Advertising Company Ltd., Shanghai/China Shanghai Springer Distribution Company Ltd., Shanghai/China Smart Adserver Limited, London/Great Britain SmartAdServer SAS, Paris/France soFeminine.co.uk Limited, London/Great Britain StepStone ASA, Oslo/Norway (incl. 38 foreign companies of StepStone Group) Students.ch AG (formerly Amiado AG), Zurich/Switzerland Viviana Investments Sp. z o.o., Warsaw/Poland zanox B.V., Amsterdam/Netherlands ZANOX Hispania SL, Madrid/Spain zanox Inc., Chicago/USA zanox ltd., London/Great Britain zanox SAS, Paris/France zanox SRL, Milan/Italy zanox we create partners AB, Stockholm/Sweden ZÖLD ÚJSÁG Tömegkommunikációs és Kiadói Zrt, Budapest/Hungary Fully consolidated special purpose entities Germany Axel-Springer-Immobilien-Fonds-I Dr.Rühl & Co.KG, Düsseldorf Axel-Springer-Immobilien-Fonds-II- Produktionszentrum Dr.Rühl & Co.KG, Düsseldorf Axel-Springer-Immobilien-Fonds-III- Ostflügel Dr.Rühl & Co.KG, Düsseldorf Investments accounted for using the equity method Germany buecher.de GmbH & Co. KG, Augsburg Cora Verlag GmbH & Co. KG, Hamburg Jahr Top Special Verlag GmbH & Co. KG, Hamburg PRINOVIS Ltd. & Co. KG, Hamburg ZertifikateJournal AG, Veitshöchheim Other countries Editions Mondadori Axel Springer (EMAS) S.E.N.C., Paris/France INFOR BIZNES Sp. z o.o., Warsaw/Poland 93.5 82.4 82.4 99.8 92.9 93.5 100.0 100.0 100.0 100.0 100.0 100.0 99.8 26.3 100.0 100.0 82.4 94.0 99.8 94.0 100.0 100.0 82.4 82.4 82.4 100.0 100.0 100.0 52.5 52.5 52.5 52.5 52.5 52.5 52.5 93.5 -- -- -- 33.3 50.0 50.0 25.1 33.3 50.0 49.0 59 56 2 52 1 1 62 1 1 1 1 3 1 29 1 62 56 18 52 18 6 6 56 56 56 1 68 63 50 50 50 50 50 50 50 59 -- -- -- 1 18 18 1 1 62 63 Other dis- closures (4) (4) (4) (4) No. 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 Additional disclosures: (1) Control and profit transfer agreement with the parent company. (2) The company has exercised the exemption options of Section 264 (3) HGB. (3) The company has exercised the exemption options of Section 264b HGB. (4) Included for the first time in fiscal year 2009. Consolidated Financial Statements 181 (45) Declaration of Conformity with the German (46) Responsibility statement Corporate Governance Code Axel Springer AG published the Declaration of Conformity with the German Corporate Governance Code issued by the Management Board and Supervisory Board in accordance with Section 161 of the German Stock Corporations Act (AktG) on the company’s Web site www.axelspringer.de → Investor Relations → Corporate Governance, where it is permanently available to shareholders. The Declaration of Conformity is also printed in the Corporate Governance section of this Annual Report. To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group, and the Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Berlin, February 23, 2010 Axel Springer AG (Dr. Mathias Döpfner) (Rudolf Knepper) (Lothar Lanz) (Dr. Andreas Wiele) 182 Boards Supervisory Board The Supervisory Board was composed of the following persons in the 2009 fiscal year: Name, regular occupation Seats on other legally mandated Supervisory Boards Seats on comparable boards in Germany and abroad Dr. Giuseppe Vita Chairman of the Supervisory Board Axel Springer AG Deutz AG (Chairman, until July 2009) Dussmann Verwaltungs AG (since April 2009) Medical Park AG (since February 2009) Allianz S.p.A., Italy (Vice Chairman of the Board of Directors) Humanitas S.p.A., Italy (Board of Directors) Barilla S.p.A., Italy (Board of Directors) Gruppo Banca Leonardo, Italy (Chairman of the Board of Directors) Dr. h. c. Friede Springer Vice Chairwoman of the Supervisory Board Axel Springer AG Alba Berlin AG Deutsche Bank AG (Advisory Board) Dr. Gerhard Cromme Chairman of the Supervisory Board ThyssenKrupp AG Allianz SE Siemens AG (Chairman) ThyssenKrupp AG (Chairman) Compagnie de Saint Gobain, France (Board of Directors) Oliver Heine Attorney at law and partner in the law firm Oliver Heine & Partner Klaus Krone Member of the Supervisory Board Axel Springer AG Prof. Dr. Wolf Lepenies University Professor Michael Lewis Investment Manager borawind AG, Switzerland (Chairman of the Board of Directors until July 2009) OIC 07178 Limited, Great Britain (Executive) Oceana Investment Corporation Limited, Great Britain (Chief Executive) Oceana Concentrated Opportunities Fund Limited, Great Britain (Non-Executive) Oceana Fund Managers (Jersey) Limited, Great Britain (Non- Executive) Oceana Capital Partners LLP, Great Britain (Executive, since October 2008) Oceana Investment Partners LLP, Great Britain (Executive, since February 2009) United Trust Bank Limited, Great Britain (Non-Executive) UTB Partners Limited, Great Britain (Non-Executive) Cheyne Capital Management Limited, Great Britain (Non-Executive) Foschini Limited, South Africa (Non-Executive) Strandbags Group (Pty) Limited, Australia (Executive) Strandbags Holdings (Pty) Limited, Australia (Executive) ProChon Biotech Limited, Israel (Non-Executive) Peltours Limited, Israel (since September 2009, registration pending) Dr. Michael Otto Chairman of the Supervisory Board Otto GmbH & Co. KG Brian M. Powers CEO of investment group Hellman & Friedman LLC Otto GmbH & Co. KG (Chairman) FORUM Grundstücksgesellschaft mbH (Advisory Board) Robert Bosch Industrie und Treuhand KG (Partner) Artisan Partners Limited Partnership, USA (Advisory Board) Getty Images, Inc., USA (Board of Directors) Boards 183 Management Board The following persons served on the Management Board in the 2009 fiscal year: Seats on other legally mandated Supervisory Boards Seats on comparable boards in Germany and abroad Management Board member Dr. Mathias Döpfner Chairman and Chief Executive Officer Head of Subscription Newspapers and International Journalist Rudolf Knepper Vice Chairman Head of Printing, Logistics, and HR Master’s degree in engineering and in business/engineering Lothar Lanz Chief Operating Officer and Chief Financial Officer (since May 2009) Master’s degree in business administration Dr. Andreas Wiele Head of BILD Division and Magazines Lawyer ZANOX.de AG (Supervisory Board, Chairman, until August 2009) Steffen Naumann Chief Operating Officer and Chief Financial Officer (until April 2009) Master’s degree in business administration and master’s degree in economics Odeon Film AG (Chairman of the Supervisory Board, until March 2009) dpa Deutsche Presse Agentur GmbH (Supervisory Board) Leipziger Verlags- und Druckereigesellschaft mbH & Co. KG (Advisory Board, until April 2009) B.Z. Ullstein GmbH (Advisory Board) Time Warner Inc., USA (Board of Directors) RHJ International S.A., Belgium (Supervisory Board) Axel Springer Schweiz AG, Switzerland (Board of Directors) auFeminin.com S.A., France (Supervisory Board, until August 2009) PRINOVIS Ltd., Great Britain (Board of Directors) esmt European School of Management and Technology GmbH (Supervisory Board, since July 2009) Axel Springer International Finance B.V., Netherlands (Supervisory Board, since May 2009) Independent News & Media PLC, Ireland (Board of Directors, since November 2009) Jahr Top Special Verlag GmbH & Co. KG (Advisory Board) B.Z. Ullstein GmbH (Advisory Board) dpa Deutsche Presse Agentur GmbH (Supervisory Board, since January 2010) auFeminin.com S.A., France (Supervisory Board) StepStone ASA, Norway (Supervisory Board, since October 2009) esmt European School of Management and Technology GmbH (Supervisory Board, until April 2009) Axel Springer International Finance B.V., Netherlands (Supervisory Board, until April 2009) 184 Glossar Affiliate Sales partner or agent that receives a commis- sion for advertising sales. Associated companies Companies in which an inves- ting company holds a minority interest of at least 20 % and has the ability to exert significant influence over the financial and operating policies of the investee company by participating in the corresponding decision proces- ses. In the Axel Springer Group, associated companies are included in the consolidated financial statements by application of the equity method. Cash and cash equivalents Cash on hand and cash in certain bank accounts of a company, plus other resour- ces such as marketable securities, sight deposits and term deposits, which can be liquidated on a short-term basis. Classified ads Small ads that generally appear in daily newspapers and are arranged by specific categories, such as jobs, property and cars, for example. comScore (Media Matrix) Market research firm that measures the be-havior of Internet users, in order to determine the reach, for example. Consolidation group All the companies included in the consolidated financial statements, by way of full con- solida-tion or at equity. Content portal Website containing editorial content, not just advertising or navigation pages. Contingent purchase price liabilities Liabilities arising from future purchase price adjustments (earn-out agreements) and from option rights for the purchase of minority shares. Copy price Retail sales price of a given publication. Cross-media concept Content-related, creative and formal networking of different media channels and adver- tising vehicles with the goal of achieving optimal adverti- sing success by means of a multi-channel approach. Derivatives in cash flow hedges Financial instruments used to hedge the risk of future variations in cash flows, due to changes in interest rates or exchange rates, for example. Earn-out agreement Agreement under which the pay- ments by the buyer to the seller are deferred to a later point in time; depending on the business performance of the purchased company. Electronic Program Guide Digital version of a printed magazine guide for TV programs and radio programs, which is integrated into the reception device. Equity method The equity method is a method of ac- counting for associated companies in the consolida-ted financial statements under which changes the net value of the company are added to or deducted from the acquisition cost of the investment. External revenues Revenues resulting from transac- tions with companies and persons that are not part of the consolidati-on group. Fair value Amount at which an asset can be exchanged or a liability settled between two knowledgeable, willing parties in an arm’s length transaction. Fair value is de- termined with reference to market prices (such as stock market prices, for example), if available, or if not, on the basis of reference transactions or valuation models. Financial derivatives Financial instruments, the value of which is derived from the value of an underlying (e.g., security, interest rate, currency, loan). Financial deriva- tives are used for hedging currency and interest rate risks, for example. Glossar 185 IFRS (International Financial Reporting Standards) Ac- counting rules issued by the IASB (International Accoun- ting Standards Board). Reach Percentage of a target group that is reached at least once by an advertising vehicle or combination of advertising vehicles. Interest rate swap Contractually defined swap transac- tion. In an interest rate swap, the interest payments under a variable interest rate are exchanged for with those under a fixed interest rate, or vice versa. The party paying interest under the fixed interest rate is protected against rising interest rates (loan protection), while the party being paid interest under a fixed interest rate is protected against falling interest rates (investment pro- tection). IVW (Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern). This German organiza- tion tracks the reach of print media and online offerings. Job printing Acceptance of third-party printing orders with the goal of utilizing idle capacities in order to enhan- ce profitability. Newsroom An editorial center where all journalistic con- tent is collected, processed and produced for various media channels, e.g. online, TV, print and mobile services. Portal Website covering a wide range of different sub- jects that help users to navigate the internet. Special-in- terest portals such as car or book portals try to cover the complete range of their target group’s interests by way of a common entrance platform. Pro-forma revenues Revenues that comprise revenues from business combinations prior to the date of initial recognition in the consolidated financial statements. Purchase price allocation Process in which the pur- chase price of a business combination is allocated to the fair values of all identifiable assets and liabilities. Registered shares of restricted transferability Reg- istered shares which can be transferred only with the consent of the respective stock corporation. Search term marketing Type of marketing geared to specific target groups, using search engines. The cus- tomer of such a service defines the search terms which, when entered by the online user, will trigger the place- ment of the customer’s banner or advertising message on the search engine’s web page. Special-purpose entities Companies that are formed for the purpose of fulfilling a specified narrowly defined purpose. A special-purpose entity must be consolidated if the Axel Springer Group controls the special-purpose entity in substance or if, in substance, the majority of the risks and rewards from the special-purpose entity’s operations lie with Axel Springer. For this purpose, it is not required that the Axel Springer Group holds an equity interest in the special-purpose entity or vice versa. Success-based marketing Form of advertising under which an Internet sales partner (publisher) receives a share of the proceeds of every successfully completed transaction (e.g., sale of a product or sign-up for a news- letter), in the form of a commission. Tabloid-Format Small-size format for newspapers. Unique visitors Number of persons who have visited a website at least once during a specified period of time. It corresponds to the net reach. Visits Connected series of usage events (visits). After an interruption of 30 minutes, a new visit is counted. A usa- ge event is defined as a technically successful page load by an Internet browser from a specific online offering. Financial Calendar March 10, 2010 Annual Report, annual financial statements press conference, analyst/investor teleconference, Berlin April 23, 2010 Annual shareholders’ meeting, Berlin May 11, 2010 Quarterly financial report at March 31, 2010 August 5, 2010 Quarterly financial report at June 30, 2010 November 10, 2010 Quarterly financial report at September 30, 2010 Impressum Address Axel Springer AG Axel-Springer-Straße 65 10888 Berlin Phone: +49 (0) 30 25 91-0 Investor Relations ir@axelspringer.de Phone: +49 (0) 30 25 91-7 74 21/-7 74 25 Fax: +49 (0) 30 25 91-7 74 22 Corporate Communications information@axelspringer.de Phone: +49 (0) 30 25 91-7 76 60 Fax: +49 (0) 30 25 91-7 76 03 Design Axel Springer AG Corporate Communications Photos Daniel Biskup (p. 2, p. 6–7), Matti Hillig (p. 7, p. 08 ff) ullstein bild – AP (p. 129), Axel Springer AG (p. 132), Lehnartz (p. 116), Imagno (p. 122), ullstein bild (p. 124), PAI-Foto.pl (p. 120), Reuters (p. 126, p. 130), WTT/SIPA (p. 119) The Annual Report and up-to-date information about Axel Springer are also available on the Internet at www.axelspringer.com The English translation of the Axel Springer AG annual report is provided for convenience only. 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