Axel Springer AG
Annual Report 2014

Plain-text annual report

Annual Report 14Contents 4 Foreword 78 Report of the Supervisory Board 6 Executive Board 86 Consolidated Financial Statements 8 The Axel Springer share 10 Combined Management Report 12 Fundamentals of the Axel Springer Group 22 Economic report 41 Economic position of Axel Springer SE 44 Events after the reporting date 45 Report on risks and opportunities 56 Forecast report 61 Disclosures and explanatory report of the Executive Board pursuant to takeover law 65 Corporate Governance Report 87 Responsibility Statement 88 Auditor’s Report 89 Consolidated Statement of Financial Position 91 Consolidated Statement of Comprehensive Income 92 Consolidated Statement of Cash Flows 93 Consolidated Statement of Changes in Equity 94 Consolidated Segment Report 95 Notes to the Consolidated Financial Statements 158 Boards Group Key Figures Continuing operations in € millions Group Total revenues Digital media revenues share EBITDA1) EBITDA margin1) Digital media EBITDA share2) EBIT3) Consolidated net income Consolidated net income, adjusted3) Segments Revenues Paid Models Marketing Models Classified Ad Models Services/Holding EBITDA1) Paid Models Marketing Models Classified Ad Models Services/Holding Liquidity and financial position Free cash flow4) Capex5) Total assets6) Equity ratio6) Net liquidity/debt6) Share-related key figures7) Earnings per share, adjusted (in €)3) 8) Earnings per share (in €) Earnings per share (in €), discontinued Dividend (in €)9) Year-end share price (in €) Market capitalization as of December 3110) Change yoy 2014 2013 2012 8.4 % 3,037.9 2,801.4 2,737.3 53.2 % 47.5 % 42.4 % 11.6 % 507.1 454.3 498.8 16.7 % 16.2 % 18.2 % 72.1 % 62.0 % 49.4 % 9.7 % 31.9 % 9.3 % 394.6 235.7 251.2 359.7 178.6 229.8 413.6 190.7 258.6 2.6 % 1,561.4 1,521.5 1,582.9 10.8 % 27.2 % 6.1 % – 2.4 % 6.0 % 35.2 % − 794.1 512.0 170.5 244.2 109.7 221.4 – 68.2 716.5 402.6 160.8 250.1 103.4 163.8 – 63.0 662.8 330.2 161.4 301.8 98.1 133.6 – 34.8 – 0.8 % − 244.1 – 95.9 246.1 – 94.5 297.3 – 77.3 16.4 % 5,557.7 4,773.8 4,808.2 42.4 % 47.0 % 46.9 % − – 667.8 – 471.3 – 449.6 11.2 % 27.1 % >100 % 0.0 % 7.2 % 7.2 % 2.01 1.71 6.37 1.80 1.81 1.34 0.65 1.80 2.20 1.64 0.78 1.70 50.08 46.70 32.29 4,954.9 4,620.5 3,189.9 Average number of employees 8.4 % 13,917 12,843 12,080 1) Adjusted for non-recurring effects. 2) EBITDA of Services/Holding segment not allocated to digital media. 3) Adjusted for non-recurring effects and amortization and impairments from purchase price allocations. 4) Cash flow from operating activities minus capital expenditures, plus cash inflows from disposals of intangible assets and property, plant, and equipment. 5) Capital expenditures on intangible assets, property, plant, and equipment, and investment property. 6) As of December 31, 2014 and December 31, 2014, respectively. 7) Quotations based on XETRA closing prices. 8) The earnings per share (basic/diluted) adjusted for non-recurring effects and amortization and impairments from purchase price allocations were calculated on the basis of average weighted shares outstanding in the reporting period (98.9 million). 9) Dividend proposal for the financial year 2014. 10) Based on outstanding shares at the closing price, excluding treasury shares.  Foreword Annual Report 2014 Axel Springer SE Foreword When I look back to the 2014 financial year, I initially think - and I ask our shareholders to excuse me for a moment - of our Christmas celebrations. It was a rather exuberant party for all company employees who work in Berlin and Hamburg. Almost 5,000 people were present. Bands and DJs from Berlin, New York, and Detroit were present. The last guests were asked to go home at about 6:30 am. The evening was fruitful for two reasons in particular: we were able to thank our employees for their contribution to an extremely successful and eventful financial year in a way they certainly would never forget. It also became clear to us once again how Axel Springer has become a rather different company in a relatively short period of time and just how far-reaching the structural and cultural changes have been. Something is different. This was not just because there were so many new colleagues - two- thirds of employees had never been to an Axel Springer Christmas party. Nor was it just because the average age has fallen dramatically. One could sense something elec- trifying, a different atmosphere. The employees within our digital business, previously a peripheral part of our company, have become a core part of the company now in both an economic and cul- tural sense. Axel Springer is now truly a digital publisher. 53.2 percent of total revenues in the year 2014 was gen- erated from the digital sector. 72.1 percent of our EBITDA was generated online. And 74.5 percent of advertising revenue came from marketing digital products. Our objec- tive is clear: we will strive to become the leading digital publisher. That means to become number one in all mar- kets in which we are active. This will be done via paid models, marketing models, and classified ad models, as was the case earlier when as an analog publisher and leading provider of journalism, this success was monetized due to paying readers, advertisers and classified ad cus- tomers. That is our business model, that is our strategy. The year began with a turning point for the company and the employees who were affected by it. The sale of our regional newspapers, women's magazines and TV pro- gram guides to FUNKE Mediengruppe for € 920 million was completed, which corresponds to an EBITDA factor of 9.7 before tax. The first two-thirds of the purchase 4 Annual Report 2014 Axel Springer SE Foreword price were transferred in accordance with the agreement. The resulting restructuring of central and service sectors was shaping the whole year, which will last into the 2015 financial year. At the same time we are also fully concentrating on investments in our future growth businesses. Implementation of successful, digital Paid Models was a matter of high priority within the Paid Models segment in 2014. Our core brands BILD and WELT already achieved over 310,000 digital subscribers in December (253,471 digital subscribers for BILD and 57,736 digital subscrib- ers for DIE WELT). This development means that in the face of the ever-expanding reach of both offers and the ever-increasing number of paid offers within the publish- ing sector we are extremely confident. The complete integration of the WELT Group and N24 into a new multimedia news company for quality journal- ism is in full swing. We have announced that we will invest in English- language journalism portals. With an equity stake in the US-American online magazine OZY, Axel Springer has added to its existing early stage investments in Silicon Valley. Along with POLITICO we are developing a new European media portal for political journalism. Within the Marketing Models segment kaufDa has suc- ceeded with a promising foray into the US market with Retale.com. The Classified Ads portfolio was also en- hanced with a series of acquisitions including the pur- chase of Jobsite, a successful job portal in Great Britain, the takeover of Yad2, the largest classified ads portal in Israel, as well as takeovers of LaCentrale, the French classified ad portal for automobiles and @Leisure, the online broker for holiday real estate. Two further strategic courses for the future took place at the end of the year. share package was immediately purchased in cash. Axel Springer has a purchase option for the other half. If the option is exercised for granting shares, the result is that General Atlantic converts its remaining shares in the Classified Ads segment into Axel Springer shares and we will again gain 100 percent of profits from this fast- growing, highly profitable and strategically exceptionally well-positioned business. The transaction also has a beneficial side-effect: It shows that an extremely growth and value-oriented financial investor wishes to participate with a large investment in Axel Springer due to having greater belief in their appreciation potential in synergy compared to the Classified Ads model which is extreme- ly successful in its own right. Secondly: the start of preparations for converting the company into a KGaA (partnership limited by shares) was a further item of good news at the end of the year. Exchange-listed companies such as Merck, Henkel, or Fresenius converted to this legal form years ago with great success for their shareholders, and the prerequi- sites should be de facto created so that Axel Springer remains a family business whilst being able to fully profit from the ability to raise capital that is available to ex- change-listed companies. We intend to be able to grow quicker and also be able to potentially carry out large, transformative acquisitions. It should therefore be possible to understand why we - regardless of inherent caution in our culture - look to the future with great confidence - and that during our Christmas celebrations even the Executive Board went home in the early hours of the morning. Thank you kindly for the trust and confidence you have placed in our company. Firstly: the announcement of the planned reacquisition of the 30 percent equity share in our very successful Classi- fied Ads business held by General Atlantic. Half of the Sincerely yours, Mathias Döpfner 5 Executive Board Dr. Mathias Döpfner Jan Bayer Ralph Büchi Chairman President BILD and WELT Group President International Division until April 2014 Born 1963, journalist. Career milestones: Born 1970, Master’s degree in media studies. Career mile stones: Born 1957, business economist. Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung; Publisher Career milestones: Editor Gruner+Jahr; Chief Editor Wochen- Volksstimme, Magdeburg; Publisher Handelszeitung; Chairman of post, Hamburger Morgenpost, Süddeutsche Zeitung; Chairman of the Executive Board of the and DIE WELT. Member of the the Executive Board of the WELT Handelszeitung publishing group; Executive Board since 2000, Group. Member of the Executive CEO Axel Springer Schweiz AG; Chairman since 2002. Board from 2012. President of Axel Springer Interna tional. 2012–2014 in the Executive Board. Since April 2014 President International of the Axel Springer SE. 6  Executive Board Dr. Julian Deutz Lothar Lanz Dr. Andreas Wiele Chief Financial Officer Chief Financial Officer and Chief Operating Officer President Marketing and Classified Ad Models Born 1968, Master’s degree in until April 2014 business administration. Career Born 1962, lawyer. milestones: OC&C Strategy Born 1948, Master’s degree Career milestones: Editor, Consultants; head of M&A/Investor in commerce. Career milestones: Hamburger Morgenpost; Head Relations Pixelpark AG; CFO Bayerische Hypotheken- und of Publishing Capital and Geo, Venturepark AG; CFO Steilmann- Wechselbank AG; member of Gruner+Jahr, Paris/France; Gruppe; Axel Springer International; the Executive Board at HSB Execu tive Vice President and Chief Head of Group Controlling/Corporate HYPO Service-Bank AG; Operating Officer of Gruner+Jahr Development Axel Springer SE. member of the Executive Board USA Publishing, New York. Since January 2014 member of the at Nassauische Sparkasse; Member of the Executive Board Executive Board. Since April 2014 member of the Executive Board since 2000. Chief Financial Officer. and Chief Financial Officer at ProSiebenSat.1 Media AG. 2009–2014 in the Executive Board. Since April 2014 member of the Supervisory Board of the Axel Springer SE. 7  The Axel Springer share Annual Report 2014 Axel Springer SE The Axel Springer share Turbulent year on the Stock Exchange in 2014 reached on October 29, 2014 with a price of € 41.17. Market capitalization was almost € 5.0 billion at the end of 2014. Analyst coverage The number of analysts publishing assessments of our shares rose from 18 to 21 during financial year 2014. Currently, seven brokers are expressing a “buy” recom- mendation, twelve recommend “hold/neutral” and two analyst firms recommend “sell/underweight”. You can find the latest recommendations and share price targets in the Investor Relations section of our website at www.axelspringer.de. Investor relations The company’s Management and Investor Relations team presented the company and its strategy at investor conferences and road shows in Europe and the United States on a total of 21 days in 2014. In addition, we maintained an ongoing dialog with investors, analysts, and other capital market players in numerous discus- sions and telephone conferences throughout the year. As usual, the telephone conferences held in connection with the publication of our financial reports were broad- cast live on the Internet as audio webcasts, after which they remained available to users of our website. The seventh annual Capital Markets Day for analysts, institu- tional investors, and bank representatives was held at our company headquarters in Berlin on December 10, 2014. This event was broadcast live as a video webcast and is available as a download from our website, togeth- er with the presentations shown at the event. Finally, we inform you regularly of current events in the Investor Relations section of our website at www.axelspringer.de. The stock market has seen a turbulent year: the conflict in Ukraine, the ECB interest rates policy, and the falling oil price are just some of the factors which contributed to considerable volatility on the financial markets. The Ger- man leading share index, the DAX, showed considerable fluctuations during the year of 2014, but finished the year almost unchanged compared to its previous year-end price (– 0.1 %), and also achieved an all-time high during December. The MDAX, in which also the Axel Springer share is listed, faced similar developments to the DAX and also finished the year at about the prior-year figure (+ 0.1 %). With growth of 7.4 % the DJ EuroStoxx Media, which tracks the most important European media stocks, showed greater development and reached a new five- year high at the end of December 2014. Performance Axel Springer Share Axel Springer 1) DAX MDAX 1) DJ EuroStoxx Media 1) Closing price: € 50.08 50 45 40 01/01/14 12/31/14 1) Indexed on the year-end share price of Axel Springer SE as of December 31, 2013. Axel Springer share reaches a new all- time high The Axel Springer share largely developed in line with the market during financial year 2014, but at the end of the year it was able to outperform the German benchmark indices. The price was € 50.08 at the end of the year, which represented a 7.2 % increase compared to the start of the year. Our share reached an all-time high of € 51.27 on February 21, 2014. The annual low was 8 Annual Report 2014 Axel Springer SE The Axel Springer share Share Information € Earnings per share1) Earnings per share (adjusted)1) 2) Dividend3) 2014 2013 Change 1.71 2.01 1.80 1.34 27.1 % 1.81 11.2 % 1.80 0.0 % Total dividend payout (€ millions) 178.1 178.1 0.0 % Year-end share price 50.08 46.70 7.2 % Highest price Lowest price 51.27 46.99 9.1 % 41.17 30.92 33.2 % Market capitalization (€ millions)4) 5) 4,954.9 4,620.5 7.2 % or 100 % of their profit-sharing bonus or performance- dependent compensation into shares of Axel Springer SE. To those employees who opted to convert half their prof- it-sharing bonus or performance-dependent compensa- tion, Axel Springer contributed an additional 20 %, and to those employees who opted to convert the full amount, the company contributed an additional 30 %. The re- quired holding period is four years, both for employees eligible for a profit-sharing bonus and for those with target agreements. The Axel Springer shares used in this case were purchased on the stock market in advance. Daily traded volume (Ø, € thousands) 6,574.4 6,981.3 – 5.8 % Shareholder Structure Axel Springer Gesellschaft für Publizistik Dr. h. c. Friede Springer Dr. Mathias Döpfner Other shareholdings 40.2 % 3.1 % 5.2 % 51.5 % Status: December 31, 2014 Information on Listing Share type Registered share with restricted transferability Stock exchange Germany (Prime Standard) Security Identification Number 550135, 575423 ISIN Thomson Reuters Bloomberg DE0005501357, DE0005754238 SPRGn.DE SPR GY Dividend yield3) 5) 3.6 % 3.9 % Total yield per share per year6) 11.1 % 49.9 % - - 1) Continuing operations. 2) Adjusted for non-recurring effects and amortization and impairments from pur- chase price allocations; on the basis of average weighted shares outstanding in the reporting period (98.9 million). 3) Dividend proposal for financial year 2014. 4) Calculated on the basis of the year-end closing price. 5) Based on shares outstanding, excluding treasury shares. 6) Share price development plus dividend payment. Annual shareholders’ meeting The annual shareholders' meeting of Axel Springer SE took place in Berlin on April 16, 2014. Approximately 430 shareholders or 79.8 % of capital carrying voting rights participated. All resolutions proposed by the Manage- ment – including the proposal to pay a dividend of € 1.80 per qualifying share (PY: € 1.70) were approved by major- ities of at least 87.0 %. Based on the closing price of the company’s share at year-end 2013, the dividend yield came to 3.9 %. The total dividend pay-out was € 178.1 million. Share ownership program Our employees have the opportunity to benefit directly from the appreciation of the company’s value by partici- pating in our share ownership program. Under this pro- gram, all employees of Axel Springer SE and its domes- tic subsidiaries who were eligible for a profit-sharing bonus for 2013, or who had entered into a target agree- ment, were given the chance in May 2014 to convert 50 % 9 Combined Management Report 12 Fundamentals of the Axel Springer Group 22 Economic report 41 Economic position of Axel Springer SE 44 Events after the reporting date 45 Report on risks and opportunities 56 Forecast report 61 Disclosures and explanatory report of the Executive Board pursuant to takeover law 65 Corporate Governance Report Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Summary of business performance and operating results in 2014 advertising revenues will more than compensate for the fall in circulation revenues and other revenues. The following statements refer exclusively to continuing operations (see page 27). Axel Springer has had a successful conclusion to the 2014 financial year. The forecast targets published in March 2014 were essentially attained (see page 58). During the financial year, the total revenues generated, worth € 3,037.9 million, were significantly higher (8.4 %) than the prior-year figure of (€ 2,801.4 million). All operat- ing segments contributed to this revenue growth. Adjust- ed for consolidation and currency effects, total revenues were above the level of the prior-year figure (+ 2.8 %). The pro-forma revenues of digital media activities increased to € 1,705.8 million (PY: € 1,568.6 million), reflecting an organic growth rate of 8.7 %. EBITDA rose, compared to the previous year, by 11.6 % to € 507.1 million (PY: € 454.3 million). Furthermore, the EBITDA margin also improved to 16.7 % (PY: 16.2 %). The growth of earnings in our Classified Ads and Market- ing Models are contrasted with falls in the case of Paid Models and also in the Services/Holding segment. The EBITDA of digital activities rose by 29.9 % from € 281.6 million to € 365.8 million. The adjusted earnings per share for continuing opera- tions of € 2.01 was above the prior-year figure of € 1.81. The Executive Board and Supervisory Board will propose a dividend of € 1.80 (PY: € 1.80) per qualifying share at the annual shareholders’ meeting to be held on April 14, 2015. Outlook for 2015 We anticipate in the Group that total revenues will be higher for the 2015 financial year than the prior-year figure by an amount in the low to mid single-digit per- centage range. We assume that the planned increase in We expect a rise in EBITDA in the high single-digit per- centage range. In this case a rise in EBITDA in the Clas- sified Ads Models and Services/Holding segments is expected, whilst the EBITDA of Paid Models should finish below the level of the prior year due to planned invest- ments in product quality and also in digitization. For the Marketing Models segment we also, amongst other things, expect EBITDA to be below the level of the prior year due to planned structural adjustments within per- formance marketing, planned expenditure for increasing competitiveness, and internationalization of digital busi- ness models within the field of reach marketing. For EBIT we expect developments to be similar to those for EBITDA. For the adjusted earnings per share we expect, due to a lower proportion of adjusted consolidated net income that is due for minorities, an increase in the low double-digit percentage range compared to the prior- year figure. Introductory remarks The current combined management report for Axel Spring- er SE and the Group contains statements concerning the economic situation and business performance of the Axel Springer Group. These statements are also largely applica- ble to the Axel Springer SE. Additional information on the economic situation of the parent company Axel Springer SE is provided in a separate chapter on page 41. For the sake of better comparability, the operating earn- ings indicators EBITDA and EBIT have been adjusted for non-recurring effects and amortization and impairments from purchase price allocations (see Section (31) of the notes to the financial statements). 11 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Fundamentals of the Axel Springer Group Segments Axel Springer Group Paid Models Marketing Models Classified Ad Models Services/ Holding the Executive Board and Supervisory Board after the as yet ongoing tax and legal audits are completed. As soon as the audits are complete with the desired results and the necessary preparatory work then the Executive Board and Supervisory Board intend to put the conversion to the vote at the annual shareholders' meeting. A decision is yet to be made regarding the exact point in time. Segments of the Axel Springer Group Axel Springer’s business activities are organized into three operating segments: Paid Models, Marketing Models, and Classified Ad Models. In addition, there is the Services/Holding segment. The segment structure reflects the different customer groups and revenue types of an increasingly digital publisher. Paid Models The Paid Models segment encompasses all business models that are primarily used by paying readers. Portfolio and market position Paid Models are sub-divided into national and interna- tional offerings. The principal activities are summarized in the graph below. Business model Axel Springer is a leading publishing company in Europe. Journalism is the foundation of the business model. The broad-based media portfolio includes successfully estab- lished brand families such as the BILD Group and the WELT Group. Journalistic content is delivered to Internet users, readers, viewers, and advertising customers via digital, print, and TV channels. The portfolio is divided into Paid Models which are generally used by paying readers, into Marketing Models where revenues are primarily generated by advertising customers and into Classified Ad Models where revenues are primarily gen- erated by job ads, real estate and car ads. The focus is on the digital transformation of the business. Building on its competencies in journalism, technology, and business administration, Axel Springer strives to become the lead- ing digital publisher. Legal structure, business locations Axel Springer SE, as the flagship company of the Axel Springer Group, is an exchange-listed stock corporation with its registered head office in Berlin. The Group also maintains offices at other locations in Germany. In addi- tion, the Group comprises numerous companies in other countries. The consolidated shareholdings of the Group are listed in Section (42) in the notes to the consolidated financial statements. The Executive Board and Supervisory Board decided in December 2014 to prepare to change Axel Springer SE into a partnership limited by shares (KGaA) (see page 25). A final decision regarding the conversion will be made by 12 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Portfolio Paid Models National International BILD Group WELT Group Switzerland Russia Spain France Belgium Austria Ringier Axel Springer Media Poland Hungary Slovakia Serbia National Paid Models are mainly offered by the BILD Group and the WELT Group. The BILD Group comprises the digital media offerings and the newspapers and magazines of the BILD family of brands and B.Z. Bild.de is Germany's largest news and entertainment portal with the widest reach in the country with a digital subscription model. Bild.de is also distributed via mobile channels, with apps for nearly all kinds of smartphones, tablet PCs, and smart TVs, not to mention the mobile portal, once again Germany’s most-visited mobile media brand in 2014 (“mobile facts 2014-III” of the Working Group for Online Research (AGOF). Bild.de also offers the products stylebook.de, travelbook.de, BUNDESLIGA bei BILD, and BILD Shop. Autobild.de is the clear leader among automotive portals featuring edito- rial content in Germany. BILD is Europe’s biggest daily newspaper with the widest reach, as well as the unchal- lenged number one in Germany, with a share of 75.6 % by newsstand sales. (All figures for the German newspapers and magazines are based on paid circulation as per IVW as of December 31, 2014). BILD am SONNTAG is Ger- many’s best-selling nationwide Sunday newspaper, with a share of 61.7 %. B.Z. is Berlin’s biggest newspaper. The automotive, computer, and sports media of the BILD brand family make up a magazine and online portfolio built on the core brands of AUTO BILD, COMPUTER BILD, and SPORT BILD. With a share of 55.3 % AUTO BILD contin- ues to be Germany’s biggest automotive magazine. It is also the No. 1 automotive magazine in Europe. Further- more, the magazines COMPUTER BILD and SPORT BILD occupy leading European market positions in their respec- tive segments. Based on paid circulation, their German shares are 40.3 % and 48.2 % respectively. The WELT Group comprises the digital media offerings and the newspapers and magazines of the WELT family of brands. DIE WELT ONLINE is one of the most suc- cessful online/mobile sites in the segment of German premium newspapers. The offering is also available on PC tablets, smartphones and e-readers, and also as a digital subscription model. The DIE WELT iPad app has the strongest turnover of any news app in the German app store. DIE WELT am SONNTAG is the undisputed No.1 title in the nationwide premium newspaper sector. DIE WELT (including WELT KOMPAKT) is the third- biggest premium newspaper in Germany, with a share of 18.5 %, based on paid circulation. DIE WELT Group, together with N24 satisfied the neces- sary conditions in 2014 for merging both companies into a multimedia news company under the auspices of the new WeltN24 company as of January 1, 2015. In the future this will be the basis for the development of the Group to become the leading multi-media news organiza- tion for quality journalism in German-speaking countries. Since July 2014 the Gründerszene portal, with its focus on start-ups, the digital economy, and venture capital, has been part of the WELT Group. Our music magazines ROLLING STONE, MUSIKEX- PRESS and METAL HAMMER were also assigned to the Paid Models National segment. International Paid Models comprise Axel Springer’s digital and print activities in western and eastern Europe. In eastern Europe, the joint venture Ringier Axel Springer Media is the leader in the segment of mass-circulation dailies in the countries of Poland, Hungary, Slovakia, and Serbia. Our Hungarian activities were combined with the Hungarian activities of Ringier in the joint venture Ringier Axel Springer Media on November 1, 2014. The media offering currently comprises more than 160 digital and printed products. We reach 70.6 % of Internet users in Poland through the leading Polish online group Onet. With FAKT as the largest newsstand newspaper and PRZEGLAD SPORTOWY as the country’s only national sports daily, the joint venture 13 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group controls 46.7 % of the market for national dailies (based on paid circulation), making it the biggest newspaper publish- er in Poland. Measured in the number of Internet users, the strongest growth was seen in 2014 by our news portal fakt.pl. Onet also owns 80.0 % of shares in Skapiec.pl, the second-largest shopping comparison portal in Poland, and has taken over Opineo.pl, the leading website for product comparisons in Poland. An agreement regarding the acquisition of nk.pl has also been signed. The online platform nk.pl, which was founded in 2006, is one of the leading gaming platforms in Poland and is also one of the most popular social networks in the country. In Janu- ary 2014 Media Impact Polska, the joint marketing organi- zation for Ringier Axel Springer Poland and Onet, was also founded. Media Impact Polska is the largest marketing organization in the Polish market. The range consists of strong brands and offers clients innovative, integrated advertising solutions. Above all, Ringier Axel Springer Media's portfolio in Hun- gary will comprise titles with a strong market position in their respective sectors and with excellent potential for digitization, which predominantly include mass- circulation dailies, including the leader BLIKK, and wom- en’s magazines. Ringier Axel Springer Media AG has also signed an agreement regarding the acquisition of Profession.hu, the Hungarian job portal. Profession.hu is the leading job portal with the highest levels of online traffic of all job portals in the country. Finalization of the transaction should take place in the first quarter of 2015 after approval from the Hungarian cartel authorities. The majority-owned azet.sk is the leading Internet portal in Slovakia, reaching 83.2 % of Internet users in that country. The leadership position in the print business is mainly based on the NOVY CAS family of brands, consisting of two newspapers and four magazines. The mass- circulation daily of the same name is the country’s biggest newspaper, with a share of 45.2 %. In total, Ringier Axel Springer Media publishes nine magazines in Slovakia. In Serbia, Ringier Axel Springer Media is the publisher with the biggest total circulation and reach, with three newspapers and seven magazines and the correspond- ing web portals. Furthermore, our joint venture publishes Serbia’s biggest mass-circulation dailies, ALO! and BLIC, together with their high-reach online portals. In Switzerland, Axel Springer publishes HANDELS- ZEITUNG and twelve magazines. Based on paid circula- tion, it holds the leadership position in the segments of business magazines, consumer advice magazines, and TV program guides. HANDELSZEITUNG and the business magazine BILANZ are among the country’s biggest publi- cations in the business press segment. In the segment of consumer advice magazines, Axel Springer publishes BEOBACHTER, which is the biggest subscription maga- zine in Switzerland, and the TV program guides TELE and TV STAR, which are likewise leaders in their segment. The portfolio also includes brand-derived online portals and the web portals students.ch, usgang.ch and partyguide.ch. In December 2014, Ringier and Axel Springer announced plans for establishment of a further joint venture in Switzer- land where both companies would have an equal equity stake. On the one hand, all Swiss-German and West Swiss newspaper titles from Ringier including their associ- ated online portals as well as the West Swiss broadsheet Le Temps should be included, but on the other hand Axel Springer Switzerland, which combines all business in Switzerland, should also be included. Any transaction would be subject to the approval of the Supervisory Boards of both companies and the relevant competition authorities. In Russia, we publish a total of six print titles and three online portals. Besides the business magazine FORBES and the website of the same name, and the magazines GALA BIOGRAFIA and OK!, the portfolio also includes three magazines of the GEO brand family. Axel Springer is represented in Spain by seven magazines and three online portals. In particular, we occupy leading positions in the video game and computer magazines segments and also in automotive magazines. We are represented in France in a joint venture with the Mondadori Group with three automotive magazines and associated online portals. 14 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group In September 2014 an agreement was set up to create a joint venture (50:50) between Axel Springer and POLITICO, the leading media brand for political journalism in Wash- ington D.C. The objective of the new media company, headquartered in Brussels, is to develop and market the European business of POLITICO in the form of a website, newspaper, digital newsletter and conferences from early 2015. European business should be established together with EUROPEAN VOICE and the Development Institute International (DII), France's leading event agency in the public affairs sector, which were both acquired in January 2015 by the new joint venture company. Business model and key factors The revenues generated in the Paid Models segment consist mainly of circulation revenues and advertising revenues. Circulation revenues are generated on sales of newspapers and magazines and digital subscriptions models. Advertising revenues are generated by market- ing the reach of our online and print media. The value chain, which spans all media comprises all essential processes involved in the production of information, entertainment, and video content, from conception to editorial work and production, and from there to sales and marketing. The cross-media approach is conducive to the optimal realization of synergies, competencies, and reach values. All journalism content is collected in integrated news- rooms, some of which are used for more than one publi- cation, and processed there in accordance with the demands of our print and online media. The production process for digital paid content involves the production of editorial content, which we then post on our websites or other digital resources such as smartphones, PC tablets, and smart TVs, or the processing and aggrega- tion of information in databases. Our newspapers are produced, amongst other things, in the three offset print- ing plants in Hamburg-Ahrensburg, Essen-Kettwig, and Berlin-Spandau, which were changed into independent subsidiaries on January 1, 2015. We therefore carry out all steps in the value chain ourselves, from production to monitoring dispatch logistics. Distribution of digital prod- ucts takes place predominantly via our own Internet pages or download platforms such as the app stores owned by Apple and Google. The print media are dis- tributed nationally and internationally mainly via wholesale press distribution companies, train station bookstores, and press import companies. In Germany there are about 109 thousand retail outlets where our newspapers and magazines are sold. Paid Models are centrally marketed in Germany by Axel Springer Media Impact (ASMI), one of the leading cross- media marketers based on gross market shares. The digi- tal marketing portfolio also includes content produced by other companies. The business performance of this segment is, amongst other things, strongly influenced by the growing use of digital content. A key growth driver is the mobile Internet, via smartphones and tablets, which are mostly used in addition to stationary Internet connections (source: AGOF mobile facts 2014-III). Other key factors besides online usage behavior are the willingness of consumers to pay for online content and the development of the market for paid content. Digital content is also driving the growth of the advertising market, while print media ad- vertising revenues are declining across the board. Regardless of media types, this segment is influenced by the political situation in the relevant markets, as well as the economic environment and performance of advertis- ing markets, in particular. Aside from the general market cyclicity, seasonal aspects and non-recurring effects also play a role. Marketing Models The Marketing Models segment comprises all business models that generate revenues predominantly through sales to advertising customers of reach-based or suc- cess-based marketing services. Portfolio and market position The Marketing Models segment is sub-divided into reach-based and performance-based services. The principal activities are summarized in the graph below. 15 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Portfolio Marketing Models Reach Based Marketing Performance Marketing Idealo aufeminin Bonial Smarthouse finanzen.net zanox Digital Window eprofessional Axel Springer’s Reach Based Marketing portfolio in- cludes idealo.de, Germany’s leading portal with the widest reach for product searches and price compari- sons. Idealo searches more than 1.8 million products and more than 170 million offers of online dealers (as of year-end 2014). Furthermore, its success is increasingly international. The ladenzeile.de product comparison portal is also part of the Idealo Group. aufeminin is the largest women's portal worldwide and is active in 15 countries with its articles on fashion, beauty, and lifestyle. The onmeda health portals in Germany and Spain, the marmiton cooking Internet site, the netmums online portal and the My Little Paris recommendations portal, acquired at the beginning of 2014 belong, amongst others, to the Group also. kaufDA.de and MeinProspekt.de, which was acquired in 2014 as Germany's leading consumer information portals regarding local shopping, operate under the auspices of the Bonial International Group. The company distributes digitized advertising retail leaflets predominantly via mobile Internet at a regional level. These services are also offered in France (Bonial France), Spain (Ofertia), Russia (Lokata), South America, including Brazil (Guiato), and the United States (Retale). Germany’s widest-reach finance portal finanzen.net provides up-to-date financial markets data on every business day. In line with its internationalization strategy, this portal also operates in Switzerland, Russia, and Austria, among other places. Smarthouse Media is a leading European provider of complex, web-based financial applications for banks, online brokers, and other providers of financial services. Within the TV and Radio sector Axel Springer, with its majority shareholding in Talpa Germany (49.9 % of the company, initially formed as Schwartzkopff TV, was sold to the Dutch Talpa Group in the final quarter of 2014), has one of the leading independent TV production com- panies, which mainly produces TV shows in the enter- tainment segment for private and public TV channels. With direct and indirect investments in leading private- sector radio stations, Axel Springer holds one of the biggest radio portfolios in Germany. Axel Springer contin- ues to hold a minority interest in Turkey’s biggest private- sector TV and radio company, the Do⁄an TV Group. Axel Springer’s Performance Marketing activities are bundled within the zanox Group. The leading provider of success-based online marketing in Europe brings adver- tisers and publishers together, giving advertisers an efficient way to market their products and services on the Internet. The corporate group comprises the compa- nies ZANOX AG, including Digital Window, and the per- formance marketing agency eprofessional. Business model and key factors In our Reach Based Marketing activities, ad space is marketed to advertising customers and charged on the basis of the reach generated by the given media offerings (number of users or listeners) or the interaction generated by the reach. Attractive content generates high reach values and topic-specific environments enable advertisers to precisely reach the desired target groups. Due to the rising use of online media, reach marketing on the Internet is a major business. Besides display ads like banners, layer ads, and wallpaper, videos are also in- creasingly being used as online advertising formats. In addition, advertisers are increasingly turning to marketing cooperation ventures and advertising forms such as native advertising, sponsoring, and marketing via YouTube channels. The growing prevalence of mobile terminal devices, in addition to stationary Internet usage, represents additional potential for reach marketing. 16 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Performance Marketing gives advertisers the chance to advertise their products on websites and publishers’ offerings via text links, banners, and online videos. Ad- vertisers only pay for successfully completed actions, and publishers receive a portion of this compensation in the form of a commission. Our platforms provide the infrastructure for this efficient form of marketing, record the data flows and transactions, and allow for a variety of services for advertisers and publishers. This segment benefits from the growth of stationary and mobile Internet usage and the increasing tendency of con- sumers to make purchases. Through performance market- ing, Axel Springer benefits from the increasing demand of advertising companies for success-based advertising and marketing models. Classified Ad Models All Business models which predominantly generate reve- nues in online classified advertising are summarized in the Classified Ad Models segment. Portfolio and market position Axel Springer has established a portfolio of leading online classified ad portals over the last few years. To acceler- ate growth through acquisitions, a strategic partnership with American growth investor General Atlantic was agreed upon in April 2012; they still hold a 15 % share of Axel Springer Digital Classifieds at the end of this financial year (see page 25). The main portals are bundled into jobs, real estate, automobile, and general classified ads under the auspices of the company The principal activities of the Classified Ad Models segment are summarized in the graph below. Portfolio Classified Ad Models Jobs Real Estate StepStone Totaljobs Saongroup YourCareerGroup Jobsite SeLoger Immonet Immoweb General/ Other LaCentrale @Leisure meinestadt.de Yad2 CarWale Jobs comprises StepStone, the leader among private- sector job exchanges in Germany and Belgium, and one of the leading providers in Europe. The StepStone Group, with its portals specializing in technical and managerial personnel, has the greatest coverage in Germany and has the largest online recruiting portal in Great Britain with the Totaljobs Group. In addition, the major job ex- change Jobsite was also acquired in 2014 in Great Britain, which also includes the specialist portals CityJobs.com and eMedcareers.com. The Saongroup, which was ac- quired by StepStone Group at the end of 2013, operates job portals in 16 countries and is the leader in Ireland, Northern Ireland, and South Africa. The specialty provider YourCareerGroup, which was likewise acquired at the end of 2013, is the leading niche portal in the German- speaking countries for online ads for hotel and restaurant jobs. StepStone took over ictjob SPRL, the leading IT job portal in Belgium and Luxembourg, at the beginning of 2015. In Real Estate, Axel Springer is the leader in France (with SeLoger) and Belgium (with Immoweb). SeLoger’s portfo- lio also includes some niche portals such as vacanc- es.com and a-Gites.com for vacation home rentals, and belles-demeures.com for luxury properties. The Classified Ad Models segment also contains Immonet, one of the leading real estate portals in Germany. Since July Axel Springer has also held a majority share- holding (51 %) of Car & Boat Media SAS, headquartered in Paris, which belongs to General/Other (see page 24). This company operates LaCentrale, the leading specialist classified ads portal for used cars in France, as well as other portals related to cars and boats. Yad2, a portal which was likewise acquired in 2014, is the leading gen- eral classified ad portal in Israel for real estate, automo- bile and classified ads. The German regional portal meinestadt.de consists of marketplaces for jobs, auto- mobiles, real estate and classified ads. In addition, city information, classified directories, and event calendars are also provided, amongst others. Axel Springer has an equity stake in CarWale in India. Furthermore, since the beginning of 2015 this includes the majority (51 %) of shares in @Leisure, a leading operator of online broker- age portals for vacation home rentals in the Classified Ad 17 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Models segment. The company is headquartered in Amsterdam and also operates, amongst others, the portals belvilla and casamundo (see page 25). Business model and key factors The Classified Ad Models segment generates revenues mainly from sales of classified ads. In addition, it also generates revenues by marketing online ad space, through cooperation arrangements, and by providing software functions to clients. Business developments are significantly determined by the economic environment in the respective market segments, the market position in the respective market segment, and online usage behav- ior of advertisers and seekers. Long-term growth drivers are the continuing shift of classified ads to the Internet, the rising number of Internet users, and the monetization of supplementary products. Within Jobs, ads are sold to job advertisers, and online resume databases which belong to the respective portals are marketed in which the job advertisers can actively search for suitable candidates. Real Estate portals generate revenues by selling adver- tising and display space to brokers, project developers, housing agencies, or private individuals. Within General/Other, revenues are based on the focus of the relevant portal. Alongside the above consumer groups, commercial automobile sales and renters of holiday homes are the main target groups. Services/Holding Service and holding functions are combined under the Services/Holding segment. This segment also compris- es our centralized marketing unit Axel Springer Media Impact as well as all activities related to the production and distribution of the BILD Group and the company’s magazines, including the Group’s three printing plants and the management of all logistical activities for Axel Springer. Discontinued operations The regional newspapers, the program guides, and women’s magazines, which were sold to FUNKE Mediengruppe in a deal concluded on April 30, 2014 (see page 26) are again listed separately in the previous year as discontinued operations in the 2014 consoli- dated financial statements. Activities listed as discontinued operations include the regional newspapers BERLINER MORGENPOST and HAMBURGER ABENDBLATT, the advertising supple- ments in Berlin and Hamburg, and the five TV program guides and two women’s magazines of Axel Springer (HÖRZU, TV DIGITAL, FUNK UHR, BILDWOCHE, TV NEU, BILD der FRAU, FRAU von HEUTE), including the corresponding digital brands. Also presented under discontinued operations are the business activities and equity investments of Ringier Axel Springer Media in the Czech Republic, including the leading mass-circulation daily BLESK and the leading news magazine REFLEX, as well as the au- tomotive and women’s magazines in that country. The portfolio of newspapers, magazines, and brand-derived online activities were also sold to two Czech entrepre- neurs on April 30, 2014 (see page 26). 18 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group Management and supervision Executive Board divisions The Executive Board of Axel Springer SE currently com- prises four members, whose work is supported and supervised by a Supervisory Board composed of nine members. Axel Springer Executive Board Divisions Executive Board Divisions Chairman and Chief Executive Officer Dr. Mathias Döpfner Chief Financial Officer Dr. Julian Deutz (Member of the Executive Board since January 2014, with this responsibility since April 2014) BILD and WELT Group Jan Bayer Marketing and Classified Ad Models Dr. Andreas Wiele International Division Ralph Büchi (until April 2014) Chief Financial Officer and Chief Operating Officer Lothar Lanz (until April 2014) Executive Board responsibilities are divided as follows: Dr. Mathias Döpfner is Chairman and Chief Executive Officer of Axel Springer SE. All editors-in-chief and the corporate staff functions of corporate communications, public affairs, M&A and strategy, as well as the Axel Springer International division report to him. Furthermore the Executive Personnel, Axel Springer Academy, and Customer Loyalty sectors are also part of his responsibilities. Dr. Julian Deutz was appointed to the Executive Board in January 2014 and since April 2014 has been in charge of Finance and Personnel. The department covers com- mercial sectors, internal auditing, and the Governance, Risk & Compliance, Law, and Group Purchasing sectors. Jan Bayer is the President of the BILD and WELT Group. IT and domestic printing plants are also assigned to this sector alongside national brands within the Paid Models segment. These also include Customer Services and the Sales Impact sales company. Dr. Andreas Wiele is the President of Marketing and Classified Ad Models and is responsible for the corre- sponding segments including the associated direct and indirect investments as well as the marketing unit Axel Springer Media Impact. Ralph Büchi, member of the Executive Board until April 2014, in addition to his previous functions as CEO of Axel Springer Switzerland and Chairman of the Board of Directors of Ringier Axel Springer Media AG, also exercis- es responsibility for the international Paid Models of Axel Springer as President International. Lothar Lanz, Chief Financial Officer of Axel Springer SE until April 2014, has moved to the Supervisory Board following agreement in the annual shareholders’ meeting in April 2014. Corporate governance principles Axel Springer’s corporate governance principles are aligned with our core values of creativity, entrepreneur- ship, and integrity, as well as the five principles enshrined in Axel Springer’s own corporate constitution. For more information on our internal guidelines, please refer to the corporate governance statement pursuant to Sec- tion 289a HGB contained in the section entitled “Signifi- cant corporate governance practices” on page 66 of the present Annual Report. Basic principles of the compensation system The compensation of our employees, all the way up to senior management level, consists of a fixed component and for qualifying employees, a variable component as well. Variable compensation is determined on the basis of individual performance and the company’s success. To this end, individual target agreements encompassing both company-wide targets and division targets are adopted every year anew. The part of variable compen- sation that reflects the attainment of company-wide 19 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group targets in 2014 is determined mainly with reference to the financial indicator EBITDA. A detailed description of Executive Board compensation can be found in the “Compensation Report” section of the “Corporate Gov- ernance” chapter (starting on page 74). There, you will also find information on the compensation of our Super- visory Board members (starting on page 76). Goals and strategy Axel Springer pursues a strategy of profitable growth, with the overarching goal of becoming the leading digital publisher. This goal will be attained when the Group is the No.1 player in every one of the market segments and countries in which it operates. Furthermore, journalism is and always will be the foundation of our business model. Segment strategies In the Paid Models segment, Axel Springer will strive to realize the full potential of its strong brands BILD, WELT, and N24, as well as its established international media. By means of linking its print, online, and mobile offerings ever more closely, the BILD Group achieves a higher level of reading time and usage time than its competitors, expanding share among young and high-income readers in particular. Through the digital brand subscription BILDplus, Axel Springer is building and expanding a base of paying online readers. Together with N24, the WELT Group will strive to be- come the leading multimedia provider of news-based quality journalism across the platforms of digital, print, video, and live TV. The two companies will contribute their respective strengths to this endeavor. Thus, the WELT Group can make good use of the video inventory of N24 in its media offerings, and the quality TV news station can exploit its full online potential in cooperation with the WELT Group. Furthermore, the WELT Group will use its digital subscription model to further expand the base of paying readers on the Internet. The Group’s centralized marketing company Axel Spring- er Media Impact (ASMI) offers an attractive, cross-media platform for advertising campaigns – with a reach that is rivaled only by the big TV marketing firms. As one of the leading cross-media marketers (based on gross market shares), ASMI will continue to expand its external market- ing portfolio in the print and digital segments. The strategy of profitable growth in the Marketing Models segment is followed both in Reach Based Mar- keting and Performance Based Marketing. In the area of Reach Based Marketing, the strategy is focused on ex- panding the reach and usage of products, increasing the ad space utilization rate, and developing new advertising and pricing models. The continued internationalization of services is also a growth driver. Furthermore, innovative products and business models are promoted and devel- oped via investments in early-stage activities. In the Per- formance Marketing sector, the integration of the Group and expansion of services and the publisher network are of utmost importance. In the Classified Ad Models segment, Axel Springer will strive to further extend its position as a leading international player. Both organic growth and comple- mentary acquisitions will contribute to the growth of this business. Furthermore, internal synergies will be realized systematically. Organic and acquisitions-driven growth Generally speaking, the organic growth measures of the different segments pursue the same goal of expanding the market shares of the current portfolio and increasing the revenues and profits per reader/user on the basis of attractive product design and pricing. These measures will be accompanied by acquisitions-driven growth. In all segments, Axel Springer seizes opportunities to expand the business model by acquiring companies with innovative business ideas, which are still in an early phase of their development. For this purpose in 2013 Axel Springer started the Axel Springer Plug & Play ac- celerator program in conjunction with the Silicon Valley- based accelerator Plug & Play, and is also involved in the Project A Ventures early stage fund. 20 Annual Report 2014 Axel Springer SE Combined Management Report Fundamentals of the Axel Springer Group When the opportunity arises, Axel Springer will also acquire companies that are well established in the mar- ket. Suitable acquisition targets are chosen on the basis of complementary business strategies, as well as the quality of management, and the profitability and scalabil- ity of the business model. We employ a capitalized earnings approach based on weighted capital costs to assess the economic efficiency of investments in new or existing business segments. The weighted capital costs are determined with refer- ence to a target capital structure. In general, we employ a capital markets equilibrium method, using beta for the business-specific, systematic risk, and a market premium for the country-specific, unsystematic market risk, to assess the risks of an in- vestment opportunity. Essentially, we assume that the systematic risk of our company is the same, on average, as that of our peer group, meaning other European media companies. Internal management system We have designed our internal management system and defined suitable control parameters in alignment with our group strategy. We use both financial and non-financial performance indicators to measure the success of our strategy. Detailed monthly reports are an important element of our internal management and control system. These reports contain the monthly results of our most important activi- ties, along with a consolidated statement of financial position, income statement, and cash flow statement. We use these reports to compare actual values with budget values. When variances arise, we investigate further or initiate suitable corrective measures. These reports are supplemented by periodic forecasts of anticipated advertising revenues in the following weeks and by months and by forecasts of the probable devel- opment of our financial performance. Financial performance indicators Our central focus is to sustainably increase both the profitability and the value of our company. The most important target and control parameters for the compa- ny’s financial performance are revenues, EBITDA, and EBIT. EBITDA (and from financial year 2015, EBIT) also forms the basis for the performance-based compensation of management (please refer to page 74 for more infor- mation on the compensation system). These indicators and the EBITDA margin are anchored in our internal plan- ning and controlling system. Financial Control Parameters1 Selected financial control parameters on the Group level, € millions 2014 2013 2012 Consolidated revenues 3,037.9 2,801.4 2,737.3 EBITDA2) EBITDA margin2) EBIT2) 507.1 454.3 498.8 16.7 % 16.2 % 18.2 % 394.6 359.7 413.6 1) Continuing operations. 2) Adjusted for non-recurring effects and amortization and impairments from pur- chase price allocations. Non-financial performance indicators In addition to the financial performance indicators, the following non-financial performance indicators are rele- vant to an evaluation of our performance with respect to customers, the market, and offerings, although they are not employed as the basis for managing the company:  Unique users/visitors and other business model- specific indicators of our online media, and the result- ing market positions  Average paid circulation of all principal newspapers and magazines  Reach values of our media in the advertising market and indicators of brand and advertisement familiarity  Digital subscriptions 21 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Economic report General economic conditions and business developments General economic conditions According to estimates from the International Monetary Fund in January 2015 the world economy is currently barely profiting from low oil prices. The global economy has picked up slightly during the second half of 2014, with the result that the world economy has grown in total by 3.3 % in real terms. On the other hand, the Interna- tional Monetary Fund has observed continued underin- vestment in many industrial and emerging countries. Stagnation and low inflation remain, as ever, a cause for worry for the IMF within Japan and the euro zone. On the other hand, economic recovery in the USA has proven to be better than expected. The German economy has generally shown itself to be robust during 2014 according to calculations from the German Federal Statistical Office. Gross Domestic Prod- uct was 1.5 % higher in real terms compared to the prior year. Consumption showed itself to be the most im- portant growth motor for the German economy once again. Private consumer spending rose by 1.1 % in real terms. Capital expenditures also increased: in real terms business and the government have increased expendi- ture in equipment by 3.7 % compared to the prior-year figure. Construction investments also generated a sizable return of 3.4 % in real terms. Despite an ongoing de- manding external economic environment, German for- eign trade improved slightly on average during 2014: in real terms Germany exported 3.7 % more than in 2013. Imports rose almost as quickly, by 3.3 %. In 2014 the number of unemployed fell to an average of 3.0 million, a fall of 1.8 % compared to the prior-year figure, the rate of unemployment was 6.7 %. The con- sumer research organization Gesellschaft für Konsum- forschung (GfK) established that the consumer climate has rebounded in 2014. As a consequence, the recovery of the German economy has also gathered pace in the opinion of German consumers. According to calcula- tions from the German Federal Statistical Office con- sumer prices rose by 0.9 % during 2014. The continued fall in the rate of inflation was characterized considerably by the fall in energy prices. According to calculations from the ifo Institute, the eco- nomic recovery in central and eastern European member EU states has slowed down since the middle of 2014. The main reason was reduced demand from the euro zone. Domestic demand remained robust in almost all countries. Anticipated Economic Development1) (Selection) Change in gross domestic product compared to prior year (real) Germany United Kingdom France Poland Switzerland2) Hungary Belgium Slovakia Netherlands Serbia2) Austria Ireland Italy Spain USA Russia Israel2) Brazil2) China 2014 1.5 % 3.0 % 0.4 % 3.2 % 1.3 % 3.3 % 0.9 % 2.4 % 0.7 % – 0.5 % 0.5 % 5.2 % – 0.3 % 1.3 % 2.3 % 0.8 % 2.5 % 0.3 % 7.4 % 1) Source: ifo Institut. December 2014. 2) Source: IMF. October 2014. Industry environment Press distribution market Continuing the trend of prior periods, the German press distribution market contracted somewhat further. The total paid circulation of newspapers and magazines was 4.5 % below the corresponding prior-year figure. Thanks to the price increases implemented in the past four quarters, however, circulation revenues declined by only 2.7 %. 22 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Advertising market According to the latest advertising market forecast of ZenithOptimedia (“Advertising Expenditure Forecast”, December 2014), the total volume of the German adver- tising market in 2014 was slightly above the prior-year figure. According to these surveys, total net advertising revenues (including classified ads and advertising sup- plements, less discounts granted and agency commis- sions, and excluding production costs) amounted to € 18.5 billion, in the reporting period, reflecting a nominal increase of 1.5 % from the prior-year figure. In the German online advertising sector (display ads, search term marketing, and affiliates), net advertising revenues rose by 8.5 % to € 4.5 billion in 2014. In the category of print media, the net advertising reve- nues of newspapers (newspapers, advertising supple- ments, and newspaper supplements) amounted to € 4.9 billion in 2014, reflecting a 4.0 % decrease from the prior- year figure. The net advertising revenues of magazines (general-interest and trade magazines, directory media) declined by 2.2 % to € 3.1 billion. In 2014, television advertising in Germany rose by 3.3 % to € 4.3 billion, and net advertising revenues in radio advertising rose by 1.7 % to € 759 million. The net ad- vertising revenues of outdoor advertising rose by 4.1 % to € 928 million in 2014. The 359 IVW registered daily and Sunday newspapers achieved total sales of 19.6 million copies per publication day. Compared to the prior-year figure, this corresponds to a fall of 4.1 %. As in the prior-year period, newsstand sales suffered a much greater decline (– 8.3 %) than subscription sales (– 2.7 %). Within the press distribution market, the demand for daily and Sunday newspapers (weighted for their respective publication frequencies) declined by 4.1 %. Overall sales of general-interest magazines including membership and club magazines was 102.3 million cop- ies per publication day. Compared to the prior-year figure, this corresponds to a fall of 3.9 %. IVW tracked a total of 822 titles (– 3.1 % from the prior-year figure). Weighted for their respective publication frequencies, the demand for general-interest magazines declined by 5.7 %. Whereas the circulation volumes of print media declined again in 2014, online media continued the growth trend of prior years. According to the study “internet facts 2014-11” by the Working Group for Online Research (AGOF), 55.6 million people in Germany use the Internet today (Internet users within the last three months). That number represents 75.7 % of German residents aged 10 and older. Of the total regular Internet users 72.5 % go online to obtain information about world events, and 64.6 % use the Internet for regional or local news. Thus, getting the news is one of the main reasons for using the Internet, besides e-mail, online searches, online shop- ping, and weather forecasts. Job listings are also one of the 20 most-used online categories. Alongside the wired Internet, the mobile Internet is unchanged in gaining in importance according to the study “mobile facts 2014-III”. In the third quarter of 2014, 34.3 million people were mobile online (48.7 %) of the German-speaking residen- tial population of Germany over 14 years of age). In most cases (63.2 %), mobile Internet use was predominantly in addition to desktop use. According to IVW, content portals of German print media were visited somewhat more frequently in 2014 compared to the previous year. The 20 most popular portals of German daily newspa- pers increased the number of visits by an average of 12.4 %, whilst the visits to portals belonging to maga- zines rose by 19.1 %. 23 Annual Report 2014 Axel Springer SE Combined Management Report Economic report ZenithOptimedia expects the following advertising reve- nue forecasts for selected countries in 2014: Anticipated Advertising Activity 2014 (Selection) Change in net ad revenues compared to prior year (nominal) Germany United Kingdom France1) Poland1) Switzerland2) Hungary Belgium2) Slovakia1) Netherlands Serbia1) Austria1) Ireland Italy1) Spain1) USA Russia Israel Brazil Online Print 8.5 % – 3.4 % 18.3 % – 7.5 % 3.3 % – 8.0 % 12.2 % – 16.9 % 11.4 % 0.2 % 7.0 % – 2.2 % 8.1 % 1.2 % 3.4 % – 2.4 % 6.6 % – 5.5 % 20.0 % 17.0 % 16.9 % – 5.5 % 16.6 % – 9.0 % 5.8 % – 9.7 % 5.0 % – 3.6 % 18.3 % – 5.0 % 15.0 % – 16.4 % 2.8 % – 8.1 % 5.0 % – 7.3 % Source: ZenithOptimedia, Advertising Expenditure Forecast (December) 2014 1) Excluding classified ads. 2) Gross advertising revenues (excluding classified ads). Gross advertising revenues do not adequately reflect the true development of advertising revenues. Business performance both companies into a multimedia news company under the auspices of the new WeltN24 company on January 1, 2015. In the future this will be the basis for the develop- ment of the Group to become the leading multi-media news organization for quality journalism in German- speaking countries. At the start of May 2014, Axel Springer Digital Classifieds (ASDC), the strategic partnership between Axel Springer and General Atlantic in the online classified ads market, acquired 100 % of the shares in Coral-Tell Ltd., which operates the leading classified ad portal Yad2 in Israel. The purchase price was approximately € 170 million. Likewise in May 2014, StepStone entered into a pur- chase agreement to acquire Evenbase Recruitment Ltd. (Jobsite) in order to expand its activities in the United Kingdom. StepStone is part of the ASDC Group and is represented in the UK by, among others, its subsidiary Totaljobs. Evenbase Recruitment Ltd. has its registered head office in Havant and operates the job website jobsite.co.uk along with brands such as CityJobs.com and eMedcareers.com. The purchase price was about € 114 million. After approval was granted by the British cartel authorities, the transaction was completed at the end of October 2014. At the end of July 2014, ASDC also acquired the majority share (51 %) in Car & Boat Media SAS with its registered head office in Paris. This company operates LaCentrale, the leading specialist classified ads portal for used cars in France, as well as other portals related to cars and boats. The purchase price was about € 73 million. In the first quarter of 2014, we sold about 2.6 % of our equity stake in Do⁄an TV Holding A.S., Istanbul, Turkey. The revenues from this transaction amounted to € 62.5 million. At the end of February 2014, after approval by anti-trust and media law bodies the purchase agreement signed in December 2013 to acquire 100 % of the shares in N24 Media GmbH was finalized. N24 is the leading German news channel. DIE WELT Group, together with N24, satisfied the necessary conditions in 2014 for merging At the end of July 2014 we sold the minority interest (17.2 %) in SeLoger held iProperty, an operator of real estate portals in the South East Asian market for € 74.3 million. The gain of disposal, totaling € 55.1 million (be- fore tax of € 2.2 million) was recorded as income from investments, listed as a non-recurring effect in the Clas- sified Ad Models segment, and 30 % of the interest was assigned to other shareholders. At the end of August 2014, Ringier Axel Springer Media AG, a joint venture between Axel Springer and Ringier, 24 Annual Report 2014 Axel Springer SE Combined Management Report Economic report concluded an agreement to acquire the leading job por- tal in Hungary, namely profession.hu. The Hungarian cartel authorities approved the transaction in October. Completion of the profession.hu transaction is expected to be in the first quarter of 2015. After approval by the Hungarian cartel and media authorities and the success- ful partial sale of the Ringier AG and Axel Springer SE Hungarian portfolio, both companies have combined their activities within Hungary and combined them into Ringier Axel Springer Media AG as of November 1, 2014. In particular, the portfolio consists of the leading mass- circulation brands Blikk, successful women's magazines and additional licensed titles. Incorporation of the portfo- lio was already agreed in 2010 during the course of founding the joint venture between Ringier AG and Axel Springer SE. At the beginning of September 2014 an agreement was set up to create a joint venture (50:50) between Axel Springer and POLITICO, a leading media brand for polit- ical journalism in Washington D.C. The objective of the new media company, with headquarters in Brussels, is to develop and market the European business of POLITICO. In January 2015 the joint venture took over EUROPEAN VOICE (EV), which is also headquartered in Brussels, as well as the Development Institute International (DII), France's leading event agency in the public affairs sector, headquartered in Paris. From early 2015, a website, newspaper, digital newsletter and conferences will be published and be managed under the POLITICO brand. At the beginning of October 2014, Axel Springer signifi- cantly extended its partnership entered into in the first quarter with OZY, an English-language online magazine for news and culture from the Silicon Valley founded in 2013, increasing its share to about 17 % with an invest- ment of US$ 20 million. In November 2014 an agreement was finalized regarding acquisition of the majority (51 %) of @Leisure, a leading European operator of online brokerage portals for vaca- tion home rentals. The company is headquartered in Amsterdam and also operates the portals belvilla.com and casamundo.com. Finalization of the transaction took place at the beginning of January 2015. In December 2014, Axel Springer SE increased its share of Axel Springer Digital Classifieds GmbH from 70 % to 85 % for a cash payment of € 446 million, and finalized a binding agreement with General Atlantic for a purchase option for the remaining 15 %. As far as it is possible and allowed, General Atlantic shall receive Axel Springer shares in return if the option is exercised. The number of shares to be granted is calculated from the companies’ valuation determined in accordance with the IDW S1 valuation standard. Authorized capital should be established at the next annual shareholders’ meeting, which could be used for satisfying all requirements if the option is exercised. In case no Axel Springer shares can or must be granted, Axel Springer can acquire the remaining 15 % equity stake for a purchase price of an additional € 446 million plus interest. If Axel Springer does not exercise this option, then General Atlantic has the right to sell its remaining equity stake from January 1, 2018 onwards or to demand that Axel Springer Digital Classifieds GmbH enters the stock exchange from January 1, 2020. Alongside the context of agreement with these transactions, the Executive Board and Supervisory Board agreed in December to prepare to change Axel Springer SE into a partnership limited by shares (KGaA). A final decision regarding the conversion will be made by the Executive Board and by the Supervisory Board after the as yet ongoing tax and legal audits are completed. As soon as the audits are complete with the desired results and the necessary preparatory work then the Executive Board and Supervisory Board intend to put the conversion to the vote at the annual shareholders' meeting. A decision is yet to be made regarding the exact point in time. In December Ringier and Axel Springer also announced the plans for establishment of a further joint venture in Switzerland where both companies would have an equal equity stake. All Swiss-German and West Swiss newspa- per titles from Ringier including their associated online portals as well as the West Swiss broadsheet Le Temps should be included, with Axel Springer Switzerland, which combines all business in Switzerland. Any transaction is subject to the approval of the Supervisory Boards of both companies and the relevant competition authorities. 25 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Discontinued operations The sale of the Group’s German regional newspa- pers, TV program guides, and women’s magazines to FUNKE Mediengruppe, which was contractually agreed in December 2013, was finalized on April 30, 2014, with economic effect as of January 1, 2014. The purchase price agreed before the contractually stipulated purchase price adjustment was € 920 million. A prelimi- nary purchase price of € 874.8 million was established upon finalizing the purchase agreement. The purchase price adjustment reflected the circumstance, among others, that the buyer assumed net liabilities as part of the transaction. Of the provisional purchase price, an amount of € 634.1 million was paid in cash; for the balance, FUNKE Mediengruppe assumed a multi-year, subordinat- ed loan obligation vis-à-vis Axel Springer SE in the amount of € 240.7 million. The tax payable in connection with the sale is expected to be € 248.3 million. In order to fulfill a proviso imposed in connection with merger control law, FUNKE Mediengruppe sold some of the TV program guides acquired under the transaction, as well as some of its own TV program guides, to a company of Klambt Mediengruppe. To assist in the financing of this acquisition, Axel Springer SE guaranteed a bank loan taken out by this company of Klambt Me- diengruppe, up to an amount of € 51.0 million. (consist- ing of € 43.1 million until December 31, 2014) In connection with the conclusion of the purchase agreement, the parties also agreed to form joint ventures, for the marketing of print and digital offerings, and for retail distribution, to bundle the partners’ activities, re- sources, and knowledge in these areas. Axel Springer will exercise managerial control over, and hold the ma- jority of shares in, both these companies. Foundation of the joint venture requires approval by the relevant merger and cartel authorities; the foundation of the joint venture was registered with the German Federal Cartel Office for marketing in January 2015. Axel Springer and FUNKE Mediengruppe have already been cooperating in these areas since the finalization of the purchase agreement. In addition, Ringier Axel Springer Media AG completed a contractual agreement on April 30, 2014 which was initially made in December 2013 to sell their business activities and equity investments in the Czech Re- public to two Czech entrepreneurs. These activities include the leading mass-circulation daily BLESK and the leading news magazine REFLEX, as well as automotive magazines and women’s magazines. The purchase price of € 196.5 million, which is based on a company value of € 170 million, additionally reflects the net liquidity trans- ferred to the buyer, in particular. Overall statement of the Executive Board on the course of business and economic environment The economic environment for media companies is strongly characterized by the trend towards digitization. Segments within the Axel Springer Group have therefore developed accordingly. The strongest increase in reve- nues was recorded with the two segments that have been fully digitized, namely Classified Ads and Marketing Models. The increase in revenues for Paid Models was somewhat lower in comparison due to the higher propor- tion of print business which declined due to structural changes. The course of business was also characterized by active portfolio management and the acquisition of digital business models. This development confirms our strategy for rigorously digitizing the company. 26 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Financial performance, liquidity, and financial position Financial performance of the Group (continuing operations) Total Revenues € millions The following presentation of the Group’s financial per- formance refers exclusively to continuing operations. Advertising Circulation Other At € 3,037.9 million, the total revenues generated in financial year 2014 were considerably higher (8.4 %) than the prior-year figure (€ 2,801.4 million). All operating segments contributed to this revenue growth. Adjusted for consolidation and currency effects, total revenues were above the level of the prior-year figure (+ 2.8 %). 404.5 759.1 1,637.8 487.5 735.3 1,815.1 The pro-forma revenues of digital media activities increased to € 1,705.8 million (PY: € 1,568.6 million), re- flecting organic growth of 8.7 %. Thus, the digital media share of the Group’s pro-forma total revenues rose from 51.6 % in 2013 to 54.5 % in 2014. For the operative seg- ments organic growth was 7.2 % for Paid Models, 8.9 % for Marketing Models, and 9.4 % for Classified Ads. The pro-forma revenues take into account the development of companies, which currently belong to the Axel Springer Group and hence also the companies acquired in 2013 and 2014 on the basis of unaudited financial data. At € 1,309.3 million, international revenues rose from 1,164.4 million with 12.4 % compared to the prior-year figure and accounted for 43.1 % (PY: 41.6 %) of Axel Springer’s total revenues. The increase resulted from the growing internationalization of the digital business. 2,801.4 2013 2014 3,037.9 The increase in advertising revenues of 10.8 % to € 1,815.1 million (PY: € 1,637.8 million) was predomi- nantly based on growth in the classified ads and market- ing models, whilst advertising revenues from paid models only increased slightly. The share of total revenues repre- sented by advertising revenues was 59.7 % (PY: 58.5 %). About three quarters (74.5 %) of total advertising reve- nues were generated in the Group’s digital activities. At € 735.3 million, the circulation revenues were 3.1 % less than the prior-year figure (€ 759.1 million). Primarily, consolidation effects had an impact. Adjusted for these effects, circulation revenues were only slightly less, by 1.3 %, than the prior-year comparison figure. Circulation revenues accounted for 24.2 % (PY: 27.1 %) of total revenues. The other revenues of € 487.5 million were 20.5 % higher than the prior-year figure (PY: 404.5 € million), due to higher revenues in the Paid Models and Marketing Models segments. Consolidation effects have the major effect in this case. When adjusted for such effects the increase was 5.1 %. Thus, they accounted for 16.0 % (PY: 14.4 %) of total revenues. 27 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Depreciation amounted to € 255.6 million, which was considerably higher than the prior-year value of € 155.1 million. This resulted, alongside higher depreciation on purchase price allocations, in particular from exceptional depreciation of € 33.0 million carried out as part of the evaluation of real estate held for sale and from exceptional depreciation on goodwill in the Marketing Models segment. The € 19.4 million increase in other operating income to € 164.7 million (PY: € 145.3 million) resulted mainly from the recognition of income related to the Kirch insol- vency, and from the revaluation of contingent purchase price liabilities. The other operating expenses of € 757.2 million which mainly arose as a consequence of consolidating newly acquired subsidiaries were above the prior-year figure of (PY: € 697.7 million). This figure also contains income and expenses from the settlement of intra-Group payments between continuing and discon- tinued operations. Net investment income of € 81.4 million (PY: € 25.7 million during the reporting period was particularly impacted by the profit realized on the sale of our minority shareholding in iProperty (€ 55.1 million). In addition, as in the prior year, the profit realized on the sale of 2.6 % of our equity stake in Do⁄an TV was recorded. The operat- ing net investment income included in the calculation of EBITDA amounted to € 10.7 million (PY: € 12.1 million). The Group's financial result improved, in particular due to the interest income generated from loans granted in the context of the sale of the domestic print activities, to € – 21.1 million (PY: € – 23.1 million). Increased expenses of contingent considerations had a partially compensating effect. Income taxes amounted to € – 78.9 million (PY: € – 88.1 million). The low tax rate for the reporting period of 25.1 % (PY: 33.0 %), in particular, resulted from largely tax-neutral income from the disposal of investments. Segment Revenues Paid Models Marketing Models Classified Ad Models Services/Holding 5.6 % 16.9 % 26.1 % 51.4 % The comparison of segment revenues reveals substan- tial growth in the Classified Ad Models and Marketing Models, and lower growth in Paid Models. Total expenses rose compared to the prior-year figure by 10.3 % to € 2,977.3 million (PY: € 2,700.2 million). The total of purchased goods and services rose by 6.9 % compared to the prior-year figure to € 990.0 million (PY: € 925.8 million). In particular, consolidation of N24 and My Little Paris and increases within performance-based mar- keting models are contrasted with circulation-related falls in our printing activities. The ratio of purchased goods and services to total revenues rose slightly to 32.6 % (PY: 33.0 %). The rise in personnel expenses from € 52.8 million or 5.7 % to € 974.4 million (PY: € 921.6 million) resulted, above all, from the consolidation of newly acquired sub- sidiaries and increase in the number of employees within digital business models, which rose on average by 8.4 % on average during the year. At the same time, reduced expenses due to restructuring and revaluation of virtual stock option programs also had an effect. 28 Annual Report 2014 Axel Springer SE Combined Management Report Economic report The earnings before interest, taxes, depreciation and amortization (EBITDA) increased, compared to the pre- vious year, by 11.6 % to € 507.1 million (PY: € 454.3 million). The EBITDA margin therefore improved slightly to 16.7 % (PY: 16.2 %). The EBITDA of digital activities rose by 29.9 % from € 281.6 million to € 365.8 million. This meant that the share of digital busi- ness of EBITDA rose from 62.0 % to 72.1 %. As a result of the increase in depreciation the earnings before interest and taxes (EBIT) only rose, compared to the previous year, by 9.7 % to € 394.6 million (PY: € 359.7 million). Non-recurring effects such as e. g. gains or losses on the sale of business divisions and investments are not included in EBITDA and EBIT; furthermore write-downs from pur- chase price allocations and write-downs linked with the sale of real estate are not included in EBIT. Consolidated Net Income (continuing operations) € millions 2014 2013 Consolidated net income (continuing operations) Non-recurring effects Depreciation from purchase price allocations Taxes attributable to these effects 235.7 – 45.0 103.9 – 43.4 178.6 10.4 59.4 – 18.7 Consolidated net income, adjusted (from continuing operations) 251.2 229.8 Attributable to non-controlling interest, adjusted 52.3 50.9 Adjusted consolidated net income from continuing operations attributable to shareholders of Axel Springer SE 198.8 178.8 EBITDA € millions EBITDA margin in % 16.2 % 454.3 16.7 % 507.1 Earnings per share from continuing operations (basic = diluted) amounted to € 1.71 (PY: € 1.34). Based on average weighted shares outstanding in 2014 (98.9 million), adjusted earnings per share from continuing opera- tions (basic = diluted) rose from € 1.81 to € 2.01. The adjusted consolidated net income and the adjusted diluted earnings per share are not defined under Interna- tional Financial Reporting Standards and should there- fore be regarded as supplementary information to the consolidated financial statements. 2013 2014 Consolidated net income from continuing operations amounted to € 235.7 million (PY: € 178.6 million). Ad- justed consolidated net income from continuing opera- tions rose markedly to € 251.2 million (PY: € 229.8 million). 29 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Financial performance of the operating segments (continuing operations) Paid Models The Paid Models segment comprises all business mod- els that are predominantly used by paying readers. This segment is subdivided into national and international paid-content models. Paid Models National The net reach values of selected portals are presented in the table below. Because Internet usage via mobile de- vices is particularly important for some of our digital activities, mobile reach values are presented in addition to stationary Internet usage. Unique Users Millions (monthly average) Bild.de welt.de computerbild.de autobild.de N24.de transfermarkt.de travelbook.de stylebook.de bz-berlin.de Unique Users stationary1) Change yoy Unique Users mobile2) Change yoy3) 16.9 20.7 % 9.4 4.94) 4.4 3.3 1.5 1.4 1.1 1.1 4.2 % 20.2 % 46.1 % -3) – 6.7 % -3) – 3.4 % – 7.5 % 5.8 3.3 1.4 0.7 1.9 1.8 - - 0.4 - - - - - - - - - 1) Source: AGOF internet facts 2014-11, monthly average 2014 (Sep.–Nov.). 2) Source: AGOF mobile facts 2014-III, monthly average 2014 (Jul.–Sep.). 3) Comparison to prior-year figures not applicable. 4) Source: AGOF internet facts 2014-11, Nov. 2014. The focus of the national digital Paid Models remained to sign up paying subscribers, also in the area of stationary Internet. For this purpose, marketing campaigns with exclusive events were carried out, amongst others, par- ticularly for subscribers of digital paid models from BILD- plus and WELT. Both BILDplus and the corresponding offerings from WELT showed a clear increase in the number of subscribers to digital offers. The circulation numbers of the print media in the segment Paid Models declined in financial year 2014, due to market trends, while the reach values increased in some cases. Circulation, Digital Subscriptions, and Reach Thousands Bild/B.Z. Circu- lation/ Digital Subs1) Change yoy Reach2) Change3) 2,384.0 – 7.7 % 11,321.1 0.0 % Bild am Sonntag 1,158.9 – 7.5 % 8,818.7 – 4.6 % Bild digital 232.1 -4) 16,892.0 20.7 % Die Welt/ Welt Kompakt 206.4 – 8.7 % 698.3 0.2 % Welt am Sonntag/ Welt am Sonntag Kompakt 400.9 – 0.1 % 902.3 – 8.8 % Welt digital 55.1 -4) 9,424.0 4.2 % Auto Bild Sport Bild 476.9 – 7.9 % 2,835.3 1.8 % 377.2 – 6.8 % 4,152.5 – 1.7 % Computer Bild 357.1 – 23.6 % 3,085.5 – 9.0 % 1) Source: IVW, average paid circulation 2014; For BILD digital and WELT digital: IVW, digital subscriptions (paid content), monthly average 2014 (May–Dec.). 2) Source: ma 2015 Pressemedien I; Für BILD digital and WELT digital: unique users, AGOF internet facts 2014-11, monthly average 2014 (Sep.–Nov.). 3) Compared to ma 2014 Pressemedien II. 4) Comparison to prior-year figures not applicable. During the reporting period BILD published two special editions, which each had a circulation of approximately 42 million and were distributed, free of charge, to almost all households in Germany. One issue was published on June 6, 2014, due to the World Cup, and the second issue was published on November 8, 2014, commemo- rating the 25th anniversary of the fall of the Berlin Wall. Both issues were successfully marketed to advertising customers. 30 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Paid Models International The net reach values of selected portals are presented in the table below. Unique Visitors Millions (monthly average) onet.pl fakt.pl forbes.ru blic.rs azet.sk cas.sk Unique Visitors 20141) Change yoy 16,463.6 – 1.8 % 3,624.4 12.5 % 2,961.9 41.1 % 2,894.1 63.3 % 2,218.6 0.0 % 1,567.5 10.2 % 1) Source: comScore Europa, monthly average 2014 (Jan.–Dec.). The circulation and reach figures for the leading mass- circulation dailies within the countries of our joint venture Ringier Axel Springer Media are presented in the table below. Circulation and Reach Thousands Circulation 2014 Change yoy Reach 2014 Change yoy Fakt1) Blic2) Novy Cas3) Alo!2) 324.7 – 4.2 % 1,783.5 106.6 – 8.6 % 813.2 7.6 % 0.2 % 101.2 – 8.0 % 747.6 – 8.4 % 91.4 – 17.4 % 446.6 – 10.4 % 1) Poland. Circulation: ZKDP; Reach: PBC General. 2) Serbia. Circulation: ABC; Reach: Ipsos Strategic Marketing. 3) Slovakia. Circulation: ABC; Reach: Median. The circulation numbers of our international newspapers and magazines declined, in line with market trends. Key Figures Paid Models € millions 2014 2013 Change External revenues 1,561.4 1,521.5 2.6 % Advertising revenues Circulation revenues Other revenues 671.0 735.3 155.0 664.0 1.1 % 759.1 – 3.1 % 98.5 57.5 % National 1,172.7 1,115.3 Advertising revenues Circulation revenues Other revenues International Advertising revenues Circulation revenues Other revenues EBITDA National International 497.7 576.9 98.1 388.7 173.4 158.3 57.0 244.2 190.9 53.3 5.1 % 3.6 % 480.5 577.5 – 0.1 % 57.3 71.1 % 406.2 – 4.3 % 183.5 – 5.5 % 181.6 – 12.8 % 41.1 38.5 % 250.1 – 2.4 % 195.9 – 2.6 % 54.1 – 1.6 % EBITDA margin 15.6 % 16.4 % National International 16.3 % 17.6 % 13.7 % 13.3 % The total revenues of the segment Paid Models rose by 2.6 % to € 1,561.4 million (PY: € 1,521.5 million). Adjusted for consolidation effects, total revenues were 1.4 % less than the prior-year figure. Total advertising revenues of the segment Paid Models rose by 1.1 % to € 671.0 million (PY: € 664.0 million). Adjusted for con- solidation effects, this meant a fall of 3.4 %. The con- solidation effects predominantly affected the national advertising revenues. Adjusted for such effects, this meant a fall of 3.1 % here. The circulation revenues fell by 3.1 % to € 735.3 million (PY: € 759.1 million). In Germany, circulation revenues were nearly unchanged (– 0.1 %). This development was influenced by the effects of price increases as well as higher digital circulation revenues. The 12.8 % drop in the international sector 31 Annual Report 2014 Axel Springer SE Combined Management Report Economic report resulted mainly from consolidation effects related to the sale of the Group’s women’s magazines and TV pro- gram guides in France in the middle of last year. When adjusted for consolidation effects, the drop was 4.1 %. The considerable increase of other revenues in the Paid Models segment of 57.5 % to € 155.0 million (PY: € 98.5 million) was primarily due to consolidation. When adjusted for these effects, the other revenues rose by 8.4 % in the national segment and 16.4 % in the international segment. Unique Users Millions (monthly average) Unique Users stationary1) aufeminin.com idealo.de kaufDA.de finanzen.net hamburg.de 38.44) 9.65) 3.4 2.7 1.4 Change yoy – 16.6 % – 7.2 % – 13.8 % 16.5 % 4.6 % Unique Users mobile2) Change yoy3) - - 2.8 0.3 0.4 - - - - - At € 244.2 million, the EBITDA figure was 2.4 % lower than the prior-year figure (€ 250.1 million). The decline of the higher margin advertising and circulation revenues for the print titles could only be partly offset by the newly acquired business (N24) and growth in the other revenues. Restruc- turing expenses (€ 26.4 million, PY: € 37.4 million) and the launch costs for establishing new business models (€ 17.2 million as compared to PY: € 26.7 million) were below prior-year figures. The margin on the segment fell from 16.4 % in the previous year to 15.6 % in the current financial year. EBIT in the Paid Models segment fell by 7.5 % from € 225.2 million to € 208.2 million. This was due to higher write-downs of 44.2 %, which, during the financial year, amounted to € 35.9 million (PY: € 24.9 million). Marketing Models The segment Marketing Models comprises all business models that generate revenues predominantly through sales to advertising customers of reach-based or perfor- mance-based marketing services. Internet usage via mobile devices is particularly important for some of our digital activities. Accordingly, the mobile net reach values of selected portals (to the extent they are available) are presented in addition to stationary Internet usage, in the table below. 1) Source: AGOF internet facts 2014-11, monthly average 2014 (Sep.–Nov.). 2) Source: AGOF mobile facts 2014-III, monthly average 2014 (Jul.–Sep.). 3) Comparison to prior-year figures not applicable. 4) Source: comScore World, monthly average 2014 (Jan.–Dec.). 5) Source: AGOF internet facts 2014-11, Nov. 2014. Under the local brand name retale.com kaufDA success- fully continued its entry into the US-American market which started at the end of 2013, and has gained addi- tional advertising clients. Key Figures Marketing Models € millions External revenues Advertising revenues Other revenues Reach Based Marketing Performance Marketing 2014 794.1 651.3 142.7 279.3 514.7 2013 Change 716.5 10.8 % 592.0 10.0 % 124.5 14.6 % 239.9 16.5 % 476.7 8.0 % EBITDA1) 109.7 103.4 6.0 % Reach Based Marketing Performance Marketing 90.8 23.7 87.2 20.1 4.1 % 17.9 % EBITDA margin1) 13.8 % 14.4 % Reach Based Marketing 32.5 % 36.3 % Performance Marketing 4.6 % 4.2 % 1) Total EBITDA includes costs of € 4.8 million in 2014 and € 3.9 million in 2013, not allocated to the two pillars. 32 Annual Report 2014 Axel Springer SE Combined Management Report Economic report The total revenues of the Marketing Models segment were 10.8 % higher compared to prior-year figures at € 794.1 million (PY: € 716.5 million). When adjusted for consolidation effects, revenues rose markedly by 7.8 %. Most of the revenue growth resulted from the 10.0 % in advertising revenues to € 651.3 million (PY: € 592.0 million). This increase was mainly attributable to zanox Group in the area of Performance Marketing. Growth of other revenues by 14.6 % to € 142.7 million (PY: € 124.5 million) was predominantly due to consolidation of My Little Paris within the reach marketing segment; when adjusted for consolidation effects this increase was 1.5 %. EBITDA in the segment rose by 6.0 % to € 109.7 million (PY: € 103.4 million). The lower increase in earnings compared to the rise in revenue is, on the one hand, linked to lower margins in high-turnover Performance marketing and also to higher expenses for establishing new business models (€ 12.8 million, compared to PY: € 7.1 million) as well as restructuring expenses to a lesser extent (€ 1.3 million, compared to PY: € 0.0 million). The EBITDA margin fell slightly from 14.4 % to 13.8 %. EBIT in the Marketing Models segment fell slightly by 1.1 % from € 93.9 million to € 92.8 million. This was due to higher write-downs of 76.5 %, which, during the financial year, amounted to € 16.9 million (PY: € 9.6 million). Classified Ad Models All Business models which predominantly generate reve- nues in online classified advertising are summarized in the Classified Ad Models segment. The segment is sub-divided into jobs, real estate, and general/other. Key Figures Classified Ad Models € millions External revenues Advertising revenues Other revenues Jobs Real Estate General/Other EBITDA Jobs Real Estate General/Other 2014 512.0 492.7 19.3 256.4 193.5 62.1 221.4 117.7 92.4 14.9 2013 Change 402.6 27.2 % 381.9 29.0 % 20.8 – 7.0 % 198.9 28.9 % 181.3 6.7 % 22.4 >100 % 163.8 35.2 % 81.6 82.3 44.3 % 12.3 % 2.8 >100 % EBITDA margin 43.2 % 40.7 % Jobs Real Estate General/Other 45.9 % 41.0 % 47.8 % 45.4 % 23.9 % 12.6 % 1) Total EBITDA includes costs of € 3.5 million in 2014 and € 2.9 million in 2013, not allocated to the three pillars. The segment Classified Ad Models registered the biggest revenue growth during the financial year with revenues of € 512.0 million and growth of 27.2 % compared to the previous year (€ 402.6 million). Alongside an improve- ment in operative results, consolidation effects due to the acquisitions of Saongroup, YourCareerGroup and of Jobsite within Jobs sector and of Yad2 and LaCentrale in the general/other ads sectors, amongst others, were also noted during the financial year. Adjusted for these effects, revenue growth came to 10.7 %. Similarly, the increase in advertising revenues by 29.0 % to € 492.7 million (PY: € 381.9 million) was largely attribut- able to consolidation effects. Adjusted for these effects, the increase came to 12.7 %. 33 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Segment EBITDA rose considerably by 35.2 % to € 221.4 million (PY: € 163.8 million). As in the case of revenues, some of this increase can be attributed to consolidation effects. Adjusted for these effects, the increase came to 18.3 %. The margin increased from 40.7 % to 43.2 %. EBIT in the Classified Ad Models segment rose by 35.3 % from € 149.6 million to € 202.3 million. This was due to higher write-downs of 34.3 %, which, during the financial year, amounted to € 19.1 million (PY: € 14.2 million). Services/Holding Service and holding functions are combined under the Services/Holding segment. This segment also comprises our centralized marketing unit Axel Springer Media Im- pact as well as all activities related to the production and distribution of the BILD Group and the company’s mag- azines, including the Group’s own three printing plants and the management of all logistical activities for Axel Springer. Key Figures Services/Holding € millions External revenues 2014 170.5 2013 Change 160.8 6.1 % EBITDA – 68.2 – 63.0 External revenues in the Services/Holding segment were € 170.5 million, 6.1 % above the prior-year figure of (€ 160.8 million). EBITDA was at € – 68.2 million, and as a consequence of lower reversals of provisions it was lower than the prior-year figure (€ – 63.0 million). Restructuring expens- es were € 20.2 million, slightly below the prior-year figure of (€ 21.3 million). The EBIT in the Services/Holding segment remained almost unchanged at € – 108.8 million (PY: € – 108.9 million). This was a result of depreciation being lower by 11.7 %, which stood at € – 40.6 million during the reporting period (PY: € 46.0 million). Financial performance of discontinued operations Discontinued operations include the German regional newspapers, TV program guides, and women’s maga- zine that were purchased by FUNKE Mediengruppe as of April 30, 2014, as well as the business activities and equity investments of Ringier Axel Springer Media in the Czech Republic that were sold to two Czech entrepre- neurs (see page 26). Discontinued operations also in- clude the current results realized in the period from Jan- uary 1 to April 30, 2014, and gains on disposal. Discontinued Operations € millions External revenues Jan.–Apr. 2014 181.3 2013 572.6 EBITDA 29.3 116.6 EBITDA margin 16.2 % 20.4 % Given the non-comparability of the periods covered in the present report, no commentary is offered on the year-on-year development of revenues and EBITDA from discontinued operations. Consolidated net income from discontinued opera- tions amounted to € 668.3 million (PY: € 65.1 million); this figure included the gains on disposal of the Group’s German and international print activities as of April 30, 2014, in the amount of € 649.2 million (after taxes). Adjusted for non-recurring effects and amortization and impairments from purchase price allocations, consolidat- ed net income from discontinued operations amounted to € 19.7 million (PY: € 80.6 million). Earnings per share from discontinued operations (basic/diluted) amounted to € 6.37 (PY: € 0.65). Based on the average weighted shares outstanding in the re- porting period (98.9 million), adjusted earnings per share from discontinued operations (basic/diluted) de- creased by € 0.73 to € 0.17. 34 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Adjusted consolidated net income and adjusted earnings per share are not defined under International Financial Reporting Standards, and should therefore be regarded as supplementary information to the consolidated finan- cial statements. Liquidity Financial management As a general rule, Axel Springer SE 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 in the form of maturity- matched financing. Net Liquidity/Debt € millions Cash and cash equivalents Financial liabilities Net liquidity/debt 2014 383.1 1,050.9 2013 248.6 719.8 value of € 56.5 million), up to April 2018 (nominal value of € 112.0 million), up to October 2018 (nominal value of € 220.0 million) and up to October 2020 (nominal value of € 248.5 million). Alongside the Schuldschein there is a credit facility of € 900.0 million, the repayment of which is due in September 2017. Both the Schuldschein and the credit facility may be used either for general business purposes and/or for financing acquisitions. As of December 31, 2014 € 409.0 million of the existing credit facility has been used (December 31, 2013: € 150.0 million). The total available amount of unutilized short-term and long-term credit facilities was € 511.0 million (December 31, 2013: € 770.0 million). Cash flows The following presentation of cash flows also includes discontinued operations. Consolidated Cash Flow Statement (Condensed) – 667.8 – 471.3 € millions Cash flow from continuing operations 2014 360.8 2013 423.4 Cash flow from investing activities 92.7 – 178.8 Cash flow from financing activities – 343.8 – 210.9 Change in cash and cash equivalents 109.6 Cash and cash equivalents at December 31 383.1 33.7 248.6 The cash flow from operating activities amounted to € 360.8 million (PY: € 423.4 million). The decrease re- sulted mainly from the fact that the current figure only includes discontinued operations up until April 30, 2014. This figure included continuing operations in the amount of € 339.2 million (PY: € 338.9 million). This slightly posi- tive development resulted from the improved set of op- erating results, which were affected by higher restructur- ing expenses in the previous year; during the reporting period they had a negative effect on cash flow due to the increased outgoings on structural measures. The increase in the net debt presented as of December 31, 2014, in the amount of € 667.8 million (PY: € 471.3 million) resulted predominantly from cash outflows from finalized company acquisitions and increasing our holding in Axel Springer Digital Classifieds as part of our digitization and internationalization strategy. This was only partially offset by payments from the sale of domestic and international print activities, our 17.2 % non-controlling interests in iProperty and of 2.6 % of our share in Do⁄an TV. Up until September 30, 2014, there was a Schuldschein (promissory note) with a nominal value of € 500.0 million and terms up to April 2016 (nominal value of € 269.5 million) and up to April 2018 (nominal value of € 230.5 million). In order to optimize our financing conditions, in October 2014, we improved the average rate of interest, increased the financing volume by € 137.0 million and extended the average term around two years through the partial termination, transformation and subscription of new Schuldschein volumes. From now on, new tranches of the Schuldschein have terms up to April 2016 (nominal 35 Annual Report 2014 Axel Springer SE Combined Management Report Economic report The cash flow from investing activities amounted to € 92.7 million (PY: € – 178.8 million). This figure included discontinued operations in the amount of € 533.5 million (PY: € – 3.9 million); this largely comprises the receipt of the purchase price (less cash and cash equivalents given up) from the finalized sale of our print activities of € 792.4 million less tax prepayments of € 254.1 million. The cash flow from investing activities from continued activities in the amount of € – 440.8 million (PY: € – 174.9 million) was mainly characterized by payments (less cash equivalents acquired) from the acquisition of subsidiaries and financial investments of € 572.5 million in total, which particularly included the acquisitions of N24, My Little Paris, Yad2, LaCentrale, Jobsite, Project A and OZY. Furthermore, alongside ongoing investments in intangible assets, and property, plant, and equipment, full repayment of the purchase price claim from the sales of our regional newspaper investments in 2009 (€ 75.0 million; PY: € 25.0 million), payments from the sale of our 17.2 % non-controlling interest in iProperty (€ 74.3 million) and the sale of our 2.6 % share in Do⁄an TV (€ 62.5 million; PY: € 61.6 million). The cash outflow of € – 181.7 million in the prior year was mainly influenced by the acquisitions of Saongroup and YourCareerGroup. The cash flow from financing activities during the report- ing period amounted to € – 343.8 million (PY: € – 210.9 million). It was solely included within continuing opera- tions and was, in particular, characterized by the acquisi- tion of a 15 % equity stake in Axel Springer Digital Classi- fieds from General Atlantic (€ 446.0 million) as well as new loans as financial liabilities. Furthermore, the current figure included payment of dividends to shareholders of Axel Springer SE and a special distribution of funds of € 90.7 million in connection with the completed sale of our print activities in the Czech Republic. Financial position The following presentation also includes the separately presented assets and liabilities attributable to discontin- ued operations. Consolidated Balance Sheet (Condensed) € millions Non-current assets Current assets Assets Equity Non-current liabilities Current liabilities Equity and liabilities 12/31/2014 12/31/2013 4,315.8 3,680.2 1,241.9 1,093.6 5,557.7 4,773.8 2,354.9 2,244.0 2,169.6 1,601.7 1,033.2 928.1 5,557.7 4,773.8 At € 5,557.7 million, the total assets presented in the consolidated statement of financial position were consid- erably higher than the corresponding figure at year-end 2013 (PY: € 4,773.8 million). This increase resulted mainly from the sale of national and international print activities, which was completed in late April. A profit on disposal (before taxes) of € 897.4 million was recognized, and purchase price proceeds (less cash and cash equiv- alents transferred to the buyer, and tax prepayments) of € 538.3 million were recognized in connection with this transaction. Development of the long-term financial position resulted predominantly from the increase in intangible assets, which amounted to € 652.0 million after initial consolida- tion of My Little Paris, N24, Yad2, LaCentrale, and Jobsite took place. Furthermore, financial investments increased from € 433.9 million to € 633.2 million, which was primarily due to the long-term loan granted as part of the sale of our domestic print activities which was not paid in cash (€ 240.7 million) and the acquisition of Project A and OZY, and at the same time the sale of our 17.2 % equity investment in iProperty and the sale of 2.6 % of our holding in Do⁄an TV offset this. 36 Annual Report 2014 Axel Springer SE Combined Management Report Economic report In contrast, in connection with a planned sale of property that was previously held under property and equipment and also as an investment in assets held separately for sale at fair value less planned sales costs of € 95.9 mil- lion. In addition, the other long-term assets were reduced due to the premature and full repayment of the purchase price claim from the sale of our regional newspaper in- vestments, which took place in 2009. The increase in current assets from € 1,093.6 million to € 1,241.9 million predominantly resulted from an in- crease in the existing cash and cash equivalents, from the reclassification of long-term assets kept for sale (€ 95.9 million), and the increase in trade receivables. In addition, the other short-term assets increased, mainly due to initial consolidation of acquired companies, and granting a loan for immediate payment of a special dis- tribution of funds in connection with the completed sale of print activities in the Czech Republic. By contrast, finalization of the sale of our domestic and international print activities allowed the assets held for sale from the previous year to be written off. Equity amounted to € 2,354.9 million and was, despite the consolidated net income generated, only slightly above that of the end of 2013 (PY: € 2,244.0 million). Alongside the payments of dividends to the shareholders of Axel Springer SE and to minority partners, this could be traced back to the acquisition of 15 % of shares in Axel Springer Digital Classifieds, within the context of which the difference between the purchase price and the holdings of other partners was recorded within equity without affecting net income. The equity ratio fell to 42.4 % (PY: 47.0 %). The increase in long-term outside capital was largely due to an increase in pension provisions, financial liabilities and other liabilities. The increase in pension provisions results from the current market level following adjustment of the discounting rate to 1.9 % (as of December 31, 2013: 3.6 %). Financial liabilities rose, in particular, due to utilization of our credit facility in connection with completed company acquisitions, and by restructuring and subscrip- tion of our Schuldschein (promissory note). The increase in other liabilities was primarily due to initial consolidation of acquired companies and in particular due to recogni- tion of liabilities from option rights granted for acquisition of remaining non-controlling interests. Current liabilities rose mainly due to consolidation-related increases of trade payables and other liabilities. In addi- tion, we have also identified a long-term finance lease liability of € 62.0 million as being kept for sale as it con- sists of part of a building which was an asset held for sale as part of a finance lease as of December 31, 2014. In contrast, finalization of the sale of domestic and for- eign print activities resulted in de-recognition of the liabili- ties that were held for sale. Non-financial performance indicators Employees Axel Springer had an average of 13,917 (PY: 12,843) employees (excluding vocational trainees and journalism students/interns) in the reporting period. The 8.4 % in- crease over the prior-year figure resulted primarily from newly consolidated companies. Outside of Germany, Axel Springer had an average of 5,727 employees (PY: 5,281); this accounted for 41.2 % (PY: 41.1 %) of the workforce. On average, 5,847 of the Group’s total work- force were women and 8,070 were men. The number of editors fell during the reporting period by 0.9 % to 2,771, however the number of employees - largely due to ex- pansion of digital business activities and new equity stakes - rose by a total of 14.1 % to 10,457 employees. Employees by Segments (continuing operations) Average number per year 2014 2013 Change Paid Models 5,951 5,882 Marketing Models 2,220 1,882 Classified Ad Models 2,580 1,826 Services/Holding 3,166 3,253 1.2 % 18.0 % 41.3 % – 2.7 % Group 13,917 12,843 8.4 % 37 Annual Report 2014 Axel Springer SE Combined Management Report Economic report The small increase in the Paid Models segment was pri- marily due to initial consolidation of the N24 Group. In the Marketing Models segment, the increase resulted from the growth of reach-based marketing activities. The strongest growth occurred in the Classified Ad Models segment, mainly due to acquisitions, but also to organic growth. Length of service and age structure As of December 31, 2014, the average length of service with the Axel Springer Group was 10.5 (PY: 10.4) years; 42.5 % (PY: 46.3 %) of employees have worked for the company for longer than ten years. More than half of all employees are between 30 and 49 years of age. The proportion of severely disabled employees in German companies was, on average over the year, 3.8 % (PY: 3.7 %). Equal opportunity and diversity Axel Springer promotes the development of all its em- ployees equally. Thus in 2010, Axel Springer launched a new, Group-wide project entitled “Chancen:gleich!” to increase the percentage of women in senior manage- ment positions, so as to achieve a better balance be- tween women and men in the company’s management. The objective of this program is to increase the percent- age of women on all management levels to more than 30 %, as a company-wide average. Instead of a uniform quota, we adopted individual targets for each area of the company. As of December 31, 2014, women held 27.8 % of management positions at Axel Springer’s companies in Germany. Personnel development The training and continuing education activities of Per- sonnel Development have been closely aligned with the requirements of the digitization movement in prior years. More than one third of the continuing education program in 2014 consisted of newly developed training courses that cover various aspects of the digital transformation. Together with the formats and seminars that have already been successfully established, the new personnel devel- opment activities are clearly focused on digital content. The “move” personnel development started in January 2014, which is an initiative which represents change and movement, and should drive and support the transfor- mation process in the company. A variety of unconvention- al formats, measures and offers are part of "move"; these deal with future topics in the digital world and emphasize the networking aspect whilst simultaneously providing knowledge transfer. Around 70 “move” events took place during the year. The initiative won several awards. Research and development Axel Springer does not have a traditional research and development department of the kind that industrial en- terprises maintain. All areas of the company constantly strive to optimize their existing products and introduce innovative new products to the market. Above all, we seek to continuously expand our portfolio with innova- tions in the digital sector, as well as new print formats, besides continuously improving our editorial content and upgrading our journalistic excellence. In that regard, we pay especially close attention to identifying changing media usage habits as early as possible. Technology platform for paid content offerings The existing platforms for paid content were also sys- tematically expanded during the financial year. Improve- ments in the registration process (“Single Sign On”), integration of additional sales agreements and further developments in the area of content management sys- tems were implemented on our platforms. Further development of marketing services In the Marketing Models, existing online offers were continuously developed and supplemented by new ones. Development of innovative product functionalities and marketing technologies for increasing reach and use of offers as well as monetization is a key priority for our investments. In addition, we also invest in new compa- nies in an early stage of development, which develop new business models and technologies. This is either as a direct investment, or indirectly via investment compa- nies such as the Project A-Ventures, where Axel Springer and the Otto Group are both involved, or Axel Springer Plug & Play Accelerator GmbH, a joint venture with Plug & Play Tech Center in Silicon Valley. 38 Annual Report 2014 Axel Springer SE Combined Management Report Economic report Since the mid-1990s Axel Springer has published envi- ronmental reports, and sustainability reports have been published since 2000. Since 2005 we have published a sustainability report on a biannual basis, which follows the full list of indicators of the Global Reporting Initiative (GRI), the internationally relevant format for sustainability report- ing. The current sustainability report in "GRI+" format is also documented in the "Media Sector Supplement" (GRI+). This section provides additional indicators that are reflective of the specific issues encountered by journalism companies. At the same time, the report focuses on aspects of digitization which are relevant from a sustaina- bility perspective. Axel Springer’s sustainability reports are audited by independent auditors. The current sustainabil- ity report appeared in the middle of 2014 and can be found at www.sustainability.axelspringer.com. The next sustainability report will appear in the middle of 2016. Further development of classified portals The development of the forefront activities also applies to the Classified Ad Models segment. For this reason, the StepStone Group also invested in its mobile offerings during 2014. A new Totaljobs app was launched in Great Britain, and a new app for recruiters was introduced in Germany which enables direct search- ing for candidates to be carried out on the move. In the real estate models, Immonet has brought out an app for Android Wear, the smart watch operating system, which should make searching in real-time for real estate easier. Sustainability and social responsibility For Axel Springer, sustainability is the nexus between economic success and conduct that is both environmen- tally responsible and socially fair. These three criteria are firmly anchored in the company’s business strategy. Therefore, sustainability is an integral part of all the com- pany’s business processes. The Sustainability Depart- ment supports all the company’s activities in this area, ranging from resource efficiency measures to social responsibility initiatives. This department reports directly to the Executive Board Chairman. Through our sustaina- bility strategy, we exercise responsibility for current and future generations and establish the foundation for long- term business success. 39 Annual Report 2014 Axel Springer SE Combined Management Report Economic report General assessment of the company’s financial performance, liquidity, and financial position by the Executive Board Axel Springer has systematically continued to follow the strategy of digital transformation in financial year 2014. We have driven digitization organically as well as via acquisi- tions. The most meaningful step in this context was the agreement with growth investor General Atlantic finalized at the end of 2014 regarding the acquisition of their 30 % equity share in our digital classified advertising business. Already during the first half of the year, the sale of domes- tic regional newspapers and the TV program guides and women’s magazines to FUNKE Mediengruppe was suc- cessfully finalized. EBITDA, EBIT, and the adjusted earn- ings per share from continuing operations were all consid- erably higher than in the previous year. Considering the strong cash flow, the still exceedingly solid balance sheet structure, and the cost-effective financing options available to the company, Axel Springer finds itself in an excellent position to generate future growth, both through organic growth and through acquisitions. We continue to believe that the path of systematic digiti- zation is the right strategy for assuring and further im- proving the company’s profitability in the future. Financial performance, liquidity, and financial position (continuing operations) Group Key Figures (Selection, in € millions) 2014 2013 2012 Total revenues 3,037.9 2,801.4 2,737.3 EBITDA1) EBITDA margin1) EBIT2) Tax rate 507.1 454.3 498.8 16.7 % 16.2 % 18.2 % 394.6 359.7 413.6 25.1 % 33.0 % 32.8 % Consolidated net income 235.7 178.6 190.7 Consolidated net income, adjusted2) Earnings per share, adjusted (in €)2) 3) Dividend per share (in €)4) Total dividends4) Net debt/liquidity Free cash flow5) 251.2 229.8 258.6 2.01 1.80 1.81 1.80 2.20 1.70 178.1 178.1 167.9 – 667.8 – 471.3 – 449.6 244.1 246.1 297.3 1) Adjusted for non-recurring effects. 2) Adjusted for non-recurring effects and amortization and impairments from purchase price allocations. 3) For all years indicated herein, the adjusted basic/diluted earnings per share were calculated on the basis of weighted average shares outstanding in the given finan- cial year (98.9 million). 4) Dividend proposal for financial year 2014. 5) Cash flow from operating activities, less capital expenditures, plus cash inflows on disposal of intangible assets and property, plant, and equipment. 40 Annual Report 2014 Axel Springer SE Combined Management Report Economic position of Axel Springer SE Economic position of Axel Springer SE € millions Revenues Net income Transfers to retained earnings1) Total dividends1) Dividend per share (in €)1) 2) 2014 2013 2012 2011 2010 1,174.6 1,442.8 1,507.1 1,551.2 1,576.6 590.8 412.7 178.1 1.80 186.4 8.3 178.1 1.80 371.9 204.0 167.9 1.70 260.2 161.3 92.6 167.6 1.70 4.0 157.3 1.60 1) The amount of the dividend for 2014 and the appropriation to retained earnings (after deduction of an advance appropriation of € 295.4 million) are subject to the condition of approval by the annual shareholders’ meeting. 2) The dividend per share for the year 2010 was adjusted to account for the share split conducted in 2011. Introductory remarks The management report of the parent company Axel Springer SE, Berlin, is combined with the management report of the Axel Springer Group. The following state- ments are based on the separate financial statements of Axel Springer SE, which were prepared in accordance with the regulations of the German Commercial Code and the German Stock Corporations Act. The separate financial statements and the management report will be announced in the Electronic Federal Gazette and pub- lished on the website of Axel Springer SE. Business activity Axel Springer SE is operationally active in the Paid Models segment and mainly publishes nationwide daily and weekly newspapers as well as automobile, comput- er, and sports magazines. Furthermore, Axel Springer SE, in its role as a parent company of the Axel Springer Group also exercises holding functions, monitors Group- wide liquidity management and performs other services to Group companies. The general economic conditions of Axel Springer SE correspond essentially to those of the Group and are described in the economic report (see page 22 et seq). Financial performance The financial performance of Axel Springer SE in the financial year 2014 was characterized by the sale of regional newspapers as well as TV program guides and women's magazines to FUNKE Mediengruppe, which was finalized at the end of April 2014. The profit on dis- posal due to Axel Springer SE amounted to € 797.8 million, and was recorded as extraordinary profit. As the income and expenses relating to the sold activities were no longer included from May 2014 onwards as a conse- quence of the sale, considerable falls were noted, partic- ularly in revenues and also in purchased goods and services and personnel expenses. Income Statement (Condensed) € millions Revenues Other operating income 2014 2013 1,174.6 1,442.8 125.3 133.4 Purchased goods and services – 290.4 – 368.3 Personnel expenses – 382.1 – 481.3 Amortization, depreciation, and impairments of intangible assets and property, plant and equipment Other operating expenses – 45.7 – 34.0 – 532.1 – 550.5 Net income from non-current financial assets 52.3 111.9 Net interest income Profit from ordinary activities Extraordinary profit Taxes Net income – 32.2 – 24.5 69.7 229.5 797.8 0.0 – 276.7 – 43.1 590.8 186.4 Revenues fell by € 268.2 million or 18.6 %. There was also a fall in circulation and advertising revenues of € 197.8 million and € 78.9 million, respectively. In con- trast, other revenues were 5.9 % above prior-year figures at € 153.7 million. 41 Annual Report 2014 Axel Springer SE Combined Management Report Economic position of Axel Springer SE The cost of purchased goods and services was less than the prior-year figure, due to the lower expenses for paper, printing services, and fees, falling by € 77.9 million to € 290.4 million. At roughly 25 %, the ratio of purchased goods and services to total revenues was little changed from the prior year. conversion of existing tranches as well as subscription the average rate of interest was improved, the financing vol- ume was increased by € 137.0 million to € 637.0 million and the average term was extended by two years (further details can be seen in Group Liquidity, page 35). The personnel expenses of € 382.1 million remained 20.6 % lower than the prior-year figure. The cause of this was the lower number of employees in particular. The average number of employees declined by 21.4 %, from 4,282 in the prior year to 3,364 in financial year 2014. Amortization, depreciation, and impairments of intangible assets and property, plant and equipment increased by € 11.7 million to € 45.7 million, mainly due to an impair- ment of one item of property. Net income from non-current financial assets amounted to € 52.3 million. The fall of € 59.6 million resulted largely from a lower income from participating interests (€ 19.3 million; PY: € 105.2 million), which contained additional dividend payments in preparation for the sale of newspa- per and magazine activities in the previous year. At the same time, profit and loss transfers as well as earnings from loans rose by € 8.6 million and € 9.1 million, respec- tively. Also, lower impairments of € 8.6 million of financial investments were recorded during the reporting period. Net interest income (€ – 32.2 million) fell by € 7.7 million. The reasons for this were mainly higher interest expendi- ture as part of Group-wide liquidity management and prepayments penalty in connection with the restructuring of the existing Schuldschein (promissory note). Alongside the promissory note there is a credit facility of € 900.0 million, the repayment of which is due in Septem- ber 2017. Both the promissory note and the credit facility may be used either for general business purposes and/or for financing acquisitions. Net debt (liabilities due to banks and promissory note less cash and cash equivalents) on December 31, 2014 amounted to € 946.1 million (PY: € 587.4 million). As of the reporting date unutilized short-term and long-term credit facilities amounted to € 511.0 million. (PY: € 770.0 million). Financial position Balance Sheet (Condensed) € millions 12/31/2014 12/31/2013 Intangible assets, and property, plant, and equipment 220.9 245.8 Non-current financial assets 4,284.7 3,231.9 Trade receivables Receivables from affiliated companies Cash and cash equivalents Other assets Total assets Equity Provisions 39.4 71.8 99.9 136.9 42.7 62.6 102.6 166.4 4,819.3 3,886.3 1,965.1 1,552.4 383.2 375.8 Profit from ordinary activities amounted to € 69.7 million in financial year 2014 (PY: € 229.5 million). After taking the extraordinary profit into consideration and tax ex- penditures there was an annual surplus of € 590.8 million (PY: € 186.4 million). Liabilities due to banks and promissory note bonds 1,046.0 650.0 Liabilities to affiliated companies 1,328.7 1,160.1 Other liabilities 96.3 148.0 Total equity and liabilities 4,819.3 3,886.3 Liquidity Axel Springer SE restructured the existing Schuldschein during the financial year. Due to partial cancellation and Total assets rose by € 933.0 million to € 4,819.3 million during the financial year. Non-current assets amounted to € 4,505.6 million (PY: € 3,477.7 million) and account- 42 Annual Report 2014 Axel Springer SE Combined Management Report Economic position of Axel Springer SE ed for 93.5 % (PY: 89.5 %) of total assets. 43.6 % (PY: 44.6 % was covered by equity. Profit utilization proposal Non-current financial assets increased during the financial year by € 1,052.8 million to € 4,284.7 million. The in- crease mainly resulted from additional payments to capital reserves by subsidiaries for financing acquisitions as well as vendor loans granted to the amount of € 240.7 million as part of the sale of the German regional newspapers, TV program guides, and women’s magazines. A major factor in the reduction of trade receivables by € 97.5 million to € 39.4 million was the contribution of marketing and distribution activities into independent service companies. This resulted in contrary effects, espe- cially in receivables from affiliated companies, which rose by € 29.1 million to € 71.8 million. In other assets, the payment of the deferred purchase price for the sale of regional newspaper investments final- ized in the 2009 financial year amounted to € 75.0 million. Equity increased by € 412.7 million to € 1,965.1 million. The equity ratio increased to 40.8 % (PY: 39.9 %). Provisions increased by € 7.4 million to € 383.2 million compared to the same time last year. The main reasons for the increase were provisions for guarantees granted in connection with the sold newspaper and magazine activi- ties. Contrary effects arose from lower tax provisions. In particular, lower subscription prepayments as a result of the sale of the German regional newspapers, TV program guides, and women’s magazines led to a reduction of other liabilities. The Supervisory Board and Executive Board propose that the company apply an amount of € 178.1 million (PY: € 178.1 million) from the distributable profit of € 295.4 million (PY: € 178.1 million) to pay a dividend of € 1.80 (PY: € 1.80) per qualifying share for financial year 2014, and to appropriate the remaining amount of €117.3 million (PY: € 0.0 million) to the other retained earnings. The company does not currently hold any treasury shares, so that all the company’s shares qualify for divi- dends. However, the number of shares qualifying for dividends may be reduced in the time remaining before the annual shareholders’ meeting. In that case, an ad- justed profit utilization proposal will be submitted to the annual shareholders’ meeting, without changing the target dividend of € 1.80 per qualifying share. Dependency Report The Executive Board of Axel Springer SE submitted the Dependency Report prescribed by Section 312 of the German Stock Corporations Act (AktG) to the Super- visory Board and made the following concluding state- ment: “According to the circumstances known to the manage- ment at the time of each transaction with an affiliated company, Axel Springer SE received adequate consider- ation for every such transaction and did not take, or fail to take, any actions in the reporting period, either at the behest or in the interest of the controlling company or a company affiliated with the controlling company.” 43 Annual Report 2014 Axel Springer SE Combined Management Report Events after the reporting date Events after the reporting date On February 11, 2015 we finalized an agreement with the shareholders of the real estate portal Immowelt re- garding combining the Immowelt Group and the Immo- net Group, belonging to Axel Springer Digital Classifieds. After finalization of various purchase and contribution agreements both real estate portals will be brought un- der the auspices of the new Immowelt Holding AG com- pany, where we will have a majority shareholding of 55 % via Axel Springer Digital Classifieds. The remaining 45 % is kept by the current shareholders of Immowelt AG, and they have various options available for selling their hold- ing. The transaction was based on a valuation of both companies totaling € 420 million. We will pay a total of approximately € 131 million as purchase price payments to the previous partners of Immowelt in connection with creating the new structure. The combining of both por- tals makes it possible to sustainably improve the com- petitive position within the German market segment for real estate portals. The transaction is still awaiting ap- proval from the relevant cartel authorities. At the beginning of January 2015 the acquisition of 51 % of shares in @Leisure Holding B.V., Amsterdam, the Netherlands, was completed (see page 25). 44 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities Report on risks and opportunities Risk policy principles and risk strategy At Axel Springer, we define risks as the possibility of negative deviations of actual business performance from the planned targets or objectives, while opportunities represent the possibility of positive deviations. The risk policy principles and risk strategy of Axel Springer are closely aligned and coordinated with the business strat- egy and business objectives. We do not seek to avoid risks at all costs, but to carefully weigh the opportunities and risks associated with our decisions and our business activities, from a well-informed perspective. Accordingly, opportunities should be systematically exploited and risks should be assumed only if they remain within ap- propriate limits that are acceptable to the company as well as create additional opportunities to sustainably generate income or increase the company’s value. Thus, risks should be limited to a level deemed acceptable by the company’s management by taking appropriate measures, be transferred to third parties in full or in part, or, in those cases where risk mitigation is not considered advisable, be avoided or monitored closely. All employ- ees are duty-bound to handle risks responsibly within their own area of responsibility. Group-wide risk management system In accordance with national and international require- ments, we also continued the process of establishing the individual components of our internal monitoring system during the financial year (risk management, compliance management, internal control system, and internal audit), and adapted them to reflect the changed corporate environment as well as the ever-changing Group. An important focus lay on continued development and op- timization of existing processes and structures, the inte- gration of acquisitions into the existing risk management system, and continuous improvement of quality of risk inventory and corresponding countermeasures. The general form of structures and processes in the risk management system are based on the internationally recognized "Enterprise Risk Management Framework", a framework developed by the Committee of Sponsoring Organizations of Treadway Commission (COSO). This integrates the risk management process into the internal control system. The use of this holistic, integrated ap- proach should ensure that countermeasures and moni- toring activities are systematically focused upon the strategic, operative, reporting-related and compliance- related objectives of Axel Springer and their risks. To ensure close interaction of individual subsystems in the long term which results in an appropriate, effective monitoring system for Axel Springer, group-wide coordi- nation of systems and centralized reporting by means of risk management, compliance management and the internal control system by the Governance, Risk & Com- pliance central sector. The risk management system at Axel Springer is focused on recognizing and evaluating all significant and existen- tial risks as well as essential changes in the risk situation as promptly as possible. It should therefore be assured in accordance with risk policy principles and risk strategy that corresponding control and countermeasures can be used in time to react to such risks. This approach gives us the necessary maneuvering room and allows for the controlled and responsible management of risks. The risks at Axel Springer are divided into strategic, operative, reporting-relevant, and compliance-relevant risks based on COSO (risk categories). The compliance- relevant risks arise from potential infringement of external and internal regulations and guidelines. Insofar it is sen- sible and applicable, risks are assessed quantitatively with reference to the parameters “loss amount” and “probability of occurrence”. To achieve focus on the relevant issues, essential contents, a materiality limit is established based on EBITDA which is risk-oriented at a Group level, and further threshold values are determined from this. Currently, the materiality limit is € 10 million. A theoretical threat to the company’s survival as a going concern is assessed with reference to the possible gross loss amount and the resulting effect on the financial position and liquidity (excessive debts and insolvency) of the Group. Based on the classification scheme de- scribed above, risks are assigned to one of the following 45 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities systematic process for risk assessment and evaluation carried out annually and the updates carried out on a semi-annual basis, they are expected to observe their division or their company for any changes in the risk situation. Significant changes in the risk situation must be reported immediately to the Corporate Office of Govern- ance, Risk & Compliance. This decentralized risk inventory process is supplement- ed by a centralized risk inventory, which is conducted by means of a systematic procedure involving top managers, under the direction of the Group-wide Risk Manager. The goal of this procedure is to identify and assess risks that are not specific to operating divisions or processes, and so fill in any gaps in the risk inventory, by employing a specialized methodology. The Corporate Risk Manager is assigned to the Corpo- rate Office of Governance, Risk & Compliance. He su- pervises all necessary risk management activities, aggre- gates the risks on the Group level, judges the plausibility, and verifies the completeness of reported risks. He is also responsible for the constant optimization of the risk management system and the web-based data process solution employed on a Group-wide basis. The semi- annual and ad-hoc risk reports submitted to the Execu- tive Board and Supervisory Board are focused primarily on existential risks and significant risks, along with the countermeasures adopted in every case, and suitable early warning indicators, to the extent they are available. The risk management system, including the responsibili- ties for the various activities, is documented in a Corpo- rate Guideline, which is reviewed at least once a year and adjusted when necessary by the Corporate Office of Governance, Risk & Compliance. At present, we do not intend to survey and document entrepreneurial opportunities systematically in the con- text of our risk management system. Instead, business opportunities are taken up and documented as part of the strategy and budgeting process. risks classes: existential risks, significant risks, risks to be monitored, and other risks. Risk Matrix of Axel Springer SE Critical Risks Significant Risks Risks to be Monitored Other Risks very high 50 % high 25 % medium 10 % low 5 % very low e c n e r r u c c O f o y t i l i b a b o r P Extent of Damage (€ millions) very low low medium high very high 0.5 2.5 5 10 To ensure the greatest possible transparency in the presentation of Axel Springer’s risk situation, and also for assessing existing weaknesses in monitoring and control if necessary, all identified risks are assessed both prior to the implementation of risk management measures (gross risk assessment - inherent risk), and after the corre- sponding measures are taken (net risk assessment - residual risk). While overall responsibility for risk management lies with the whole Executive Board, the various divisions and affiliated companies of the Group are primarily responsi- ble for the management of individual risks, including the early detection, identification, assessment, management, and documentation of risks, as well as the adoption and implementation of countermeasures and appropriate communications. The senior managers of Axel Springer and the Group companies bear the responsibility for the content of the risk management system implemented within their divi- sion or company and the respective risks Alongside the 46 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities Internal audit system Group Auditing within Axel Springer SE is organized as a process-independent staff department, which is under the control of the full Executive Board in functional terms, and under the Executive Board member in charge of Personnel and Finance in disciplinary terms. It provides consulting and investigations in all Group companies and divisions in a risk-oriented manner and aligns its activities with relevant national and international professional standards. In particular, Group Auditing has the task of inspecting the effectiveness of the internal risk management and control system as well as the compliance management system based on a risk-oriented inspection plan and to derive measures for eradicating weaknesses. Implemen- tation of improvement measures is followed up based on a systematic process. The results of individual audit or consultancy mandates are typically reported to the Executive Board and period- ically summarized to the Audit Committee of the Super- visory Board. To ensure the effectiveness of the internal audit system, a quality assurance and improvement process is set up, which provides for external quality assessments amongst other things in accordance with professional guidelines. Report on the financial reporting-related risk management system and internal control system pursuant to Section 289 (5) and Section 315 (2) (5) HGB The (consolidated) financial reporting-related risk man- agement system and the connected internal control system are important elements of the internal manage- ment system of Axel Springer SE, which is also based on the internationally recognized framework of the Commit- tee of Sponsoring Organizations of the Treadway Com- mission (COSO). As emphasized in the concept, the effective interplay of the risk management system and internal control system is meant to ensure the effective- ness and economic efficiency of the Group’s business activities, as well as the completeness and reliability of its financial reporting. The (consolidated) financial reporting- related risk management system and internal control system comprise all organizational regulations and measures aimed at the detection and management of risks related to financial reporting. With a view to the (consolidated) financial reporting process, the internal control system is meant to ensure that the Group’s fi- nancial reports convey a true and fair view of the financial position, liquidity, and financial performance of Axel Springer SE and the Axel Springer Group, in compliance with all relevant laws, regulations, and standards. How- ever, even an effective, and therefore adequate and well- functioning internal control system cannot guarantee the prevention or detection of all irregularities or inaccurate disclosures. We consider the following elements of the risk manage- ment system and internal control system to be significant with respect to the (consolidated) financial reporting process:  Processes for identifying, assessing, and document- ing all significant financial reporting-related processes and risk areas, including the corresponding key con- trols. Such processes include financial and account- ing processes, as well as administrative and opera- tional business processes that generate important information used in the preparation of the separate and consolidated financial statements, including the management reports of the parent company and the Group.  Process-integrated controls (computer-aided controls and access restrictions, dual control principle, separa- tion of functions, analytical controls).  Standardized financial accounting processes, through the use of an internal, Group-wide Shared Services Center for most of the consolidated German compa- nies of the Group. 47 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities  Group-wide accounting directives in the form of ac- counting guidelines, charts of accounts, and reporting procedures. divisional basis, thereby enhancing the effectiveness and economic efficiency of the entire system.  Quarterly communication of information to all consoli- dated Group companies on current developments re- lated to accounting and the process of preparing the financial statements, as well as the reporting dead- lines to be observed. Risk areas If not stated elsewhere, all risks will be mentioned in the following which have a considerable negative effect on reaching our company-wide targets. Within the risk areas described below, risks are presented in the order of their priority for Axel Springer.  Assuring the requisite expertise of employees involved in the financial reporting process by means of appro- priate selection procedures and training. Provided that these are not strategic risks, then the risks are generally pertaining to the 2015 forecasting period.  Centralized preparation of the consolidated financial statements, employing manual and computer-system controls in respect of financial reporting-specific con- nections and dependencies.  Protection of financial reporting-related IT systems against unauthorized access, by means of access re- strictions.  Monthly internal reports (complete income statement, statement of financial position, cash flow statement) and monthly reports on all cost units of the Group, in- cluding analysis and reporting of significant develop- ments and budget/actual variances. The effectiveness of the (consolidated) financial reporting- related risk management system and internal control system is systematically reviewed and assessed by means of periodic control tests; a Group-wide reporting system ensures that up-to-date information is provided on a regular basis to the division heads, Executive Board, and Supervisory Board. Both the risk management system and the internal con- trol system are continuously refined. For example, the financial reporting-related control system is being inte- grated, extending beyond the area of accounting, on a step-by-step basis into a comprehensive system of internal corporate monitoring. By that means, we syn- chronize and optimize our control elements on a cross- Market and competition risks Whilst economic growth is forecast for Germany despite geopolitical tensions, the euro zone in its entirety is re- covering only slowly. The fact that individual countries are currently not able to correct their deficits and that the required structural reforms are only being implemented slowly is causing a growing economic chasm between euro zone countries. There is also considerable uncer- tainty pertaining to the future development of emerging countries such as Russia and China, as economic pow- ers that still hold considerable importance for the global economy. A renewed economic downturn within EU member states and therefore our key markets could have a negative impact on economic growth generally and could lead to a significant deterioration of the reve- nue situation of our customers, and result in slower growth of the online market. In such a scenario, a more severe decline than expected of Axel Springer's print advertising revenues cannot be ruled out. Besides re- ducing advertising revenues in Germany, a negative development of the general market environment could also reduce the Group’s advertising revenues in central and eastern Europe, and it therefore represents a risk for all the segments of Axel Springer SE. Furthermore, the general market situation is still charac- terized by intense competition pressure. The entry of new competing titles and formats into the market ex- poses the Axel Springer Group to the risk of lost reve- nues and market shares in the online and print business. The loss of major advertising customers due to switching 48 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities over to other advertising media such as TV, radio, and online or mobile advertising, could considerably reduce our print advertising revenues. Our print advertising reve- nues could also be reduced by the loss of major com- mercial customers, who are increasingly shifting their advertising budgets to radio and TV. The above-mentioned market risks are exacerbated by changing consumption and reading habits, primarily due to demographic change. Another source of persistent uncertainty pertains to the intensified competition be- tween traditional print media and the increased use of online and mobile media. The above-mentioned general market risks are moni- tored and minimized primarily through management on the operational level and through continuous observation of the market and the competition. At the same time, the digitization of our products will be driven, our product portfolio will be expanded both nationally and interna- tionally, and our journalistic and technological compe- tences will be enhanced and optimized. Adjustments to evolving consumer and reader requirements also occurs via technical and product-specific innovations. This will be accompanied with pricing and product policy measures. In addition, there is a risk of increasing price erosion within the online marketing sector, e.g. display advertising due to increased competition by global players with developed targeting products and a high number of users. We coun- ter this risk by, amongst other things, consolidating and continuously building on our position in the competitive arena as well as innovative, target group-oriented market- ing products. The spread of ad blockers presents a risk for advertising revenues which must be taken seriously in the digital advertising sector. Specially pre-configured browsers and browser add-ons prevent ads from being displayed on visited web pages and the effects of said ads depending on how the add-ons were installed by the user. The con- tinued spread of ad blockers could lead to substantial declines in advertising revenues, especially in our perfor- mance-oriented business models. As a means of minimiz- ing this risk, we are currently conducting a joint information campaign with our advertising partners, to raise aware- ness of this problem within the advertising industry. We are also exploring legal and technological options for ef- fectively addressing the problem of ad blockers. Digital markets are subject to dynamic markets and com- petition with short innovation cycles. Our digital portals are therefore exposed to the risk that new portals and com- petitors aiming to break into the market, alongside chang- es in usage behavior, could jeopardize the existing market position in the long run. Increasing competition is a threat not only on the part of the world's leading Internet compa- nies aiming to penetrate into new market segments, but also for new companies with innovative business concepts. Intensive observation of current happenings on the market, and continuous and adapted further developments of our portals are our counters to the stated risks. Many of our digital offers are additionally confronted with the risk arising from the dominant position of major Inter- net search engines. If, for example, these search engines change their search algorithms or expand their business models that compete with our business sectors, this can have noticeable effects on the future revenue situation, especially with regards to our Marketing Models. Even small changes in visibility or in position on the results pages could lead to significant losses in turnover with certain business models. We counter this risk by means of targeted ad place- ments on search engine pages/results pages, search engine optimization and management as well as the further expansion of the Group’s activities in target-group relevant social media channels. Simultaneously, we are focusing on adequate measures to reinforce the brands and offerings of Axel Springer SE so that their usage will not be as dependent on services provided by third par- ties, particularly the visibility on search engines and social media networks. Through the constant further develop- ment and expansion of our apps for mobile use, we are continuously increasing the degree of digitization and implementing our strategy of becoming the leading digi- tal publisher. By means of acquisitions, new company start-ups, and the expansion of existing digital media, we 49 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities will strive to adapt to changes in the media world and further promote the cross-media networking and integra- tion of our brands. (For more information on this subject, please refer to the report on the operating segments, beginning on page 12, and the report on the financial performance of the segments, starting on page 30). Political and legal risks The already pronounced concerns of the public, politi- cians, and consumer protection organizations in matters of data protection have become even more prominent. This development has been caused by two factors, the first being the public debate regarding the use of the personal data of German citizens by foreign intelligence services, and the second being the practice of social networks, search engines, and other online platforms to collect the data entered by users and use it for their own commercial purposes. Even where such actions fall within legally admissible limits, parts of the public and certain interest groups (including consumer protection organizations, among others) have successfully argued that consumers’ right to privacy should always take precedence over commercial interests. For this reason, among others, consumer protection and data privacy proposals have gained significance in the legislative and executive bodies of the German states and the German Federal Government, and at European level as well. This trend is particularly worrisome for digital business models, because they are almost entirely reliant upon the use of data. This uncertainty has been exacerbated particularly by the as yet incomplete legislative process on the sub- ject of a fundamental data privacy regulation at EU level. Specifically, such a regulation would affect the use of so- called "cookies" and similar technologies, the permissibil- ity of generating user profiles (profiling and tracking), and other measures that necessitate the use of personal data without prior consent. Furthermore, recent regulatory proposals are potentially more advantageous for the providers of registration-required online services than for advertising-financed online services and advertising networks that do not maintain direct contacts with end customers, because the popular, registration-required online services already possess a large, personalized subscriber base, making it much easier for them to ob- tain permission from their users. Restrictions of the ad- vertising and customer-retention possibilities associated with these technologies could result in substantial reve- nue losses for mobile and web-page-based business models. The growing Internet activities of public-sector broad- casters currently pose another risk to our business. ARD in particular has intruded into the business sphere of the private-sector press and distorted the competition envi- ronment with a text-oriented news app for Tagesschau financed by license fees. Faced with competition from this cleverly designed “free offer”, it is naturally hard for pub- lishing companies to successfully offer paid apps. After conducting fruitless negotiations with ARD and NDR, Axel Springer SE and seven other publishing companies, with the full support of the newspaper publishers’ associ- ation BDZV, filed a lawsuit against ARD and NDR in the Competition Division of the Cologne Regional Court. In September 2012, the court granted the claim in most respects. The defendants appealed this ruling and pre- vailed in the appellate instance before the Cologne Higher Regional Court. The plaintiffs have lodged an appeal against this ruling before the Federal Supreme Court. Concurrently with the court proceeding, the publishing companies are conducting settlement negotiations with ARD, with the aim of establishing fundamental playing rules for the Internet. If no agreement can be reached and the publishing companies lose the case in the high- est instance, it will be much more difficult for Axel Springer to successfully offer paid journalism content in the fast-growing mobile market. Our business will continue to be exposed to the compe- tition-distorting effects of state-owned media and the regulatory pressure of legislators on all relevant levels of government, despite the countermeasures we have taken. Breaches of confidentiality agreements and violations of insider trading regulations, as well as the incorrect publi- cation of data or the non-observance of data privacy laws, could lead to economic or legal consequences for Axel Springer. Moreover, the reputation of Axel Springer 50 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities or its brands could be damaged by negative reporting or social media campaigns on this subject, even if no laws have been broken. To minimize such risks, Axel Springer has adopted various control mechanisms and consultation rules and initiated extensive training programs, among other measures. The company intends to intensify such activities in the future. IT risks For Axel Springer, a Group with an increasingly high degree of digitization, there are numerous important risks for the Group regarding the availability of IT systems used, as well as the confidentiality and integrity of information. Due to the high degree of integration of information technology within business processes, Axel Springer is reliant on high availability of IT components. Failure of IT infrastructure components can have considerable influ- ence on the availability of a business process as well as the applications that are driven by said processes. Pos- sible causes of such impairments are internal factors such as increasing complexity of systems and infrastruc- ture which has grown over a prolonged period of time, but also include external factors such as, for example, computer criminality via DDoS attacks. At worst, these could cause interruptions in business activities along with far-reaching consequences regarding revenues and reputation. Additional IT risks are classified as important if the confi- dentiality of information and data integrity is compro- mised as a consequence. In consideration of the grow- ing importance of paid content offerings and services requiring authentication, and the related collection and storage of personal data, as well as the steadily growing threat of computer criminality, the careful handling and protection of the above-mentioned customer data are of great importance. For this reason targeted measures have been undertak- en to avoid or to limit the effects of criminal activities and the failure of IT components as far as is possible. Measures such as back-up systems, emergency data centers, firewalls, use of encryption, identity & access management, and hardening of systems are used to reduce risk. The stated measures are continuously ana- lyzed and expanded or improved where necessary. Reputation risks As an internationally active and expanding enterprise, Axel Springer has adopted a catalog of social standards known as the International Social Policy, as a binding guideline for social integrity, applicable to all our compa- nies throughout the world. Non-observance of the Inter- national Social Policy, especially in connection with the procurement of advertisements and product giveaways, as well as merchandising or the sale of title licenses, could potentially cause serious damage to the compa- ny’s reputation. One step that Axel Springer has taken to mitigate such risks has been to integrate the International Social Policy into the Group-wide Code of Conduct. In addition, all relevant corporate guidelines, particularly those applica- ble to procurement activities, contain a binding reference to the procurement-relevant standards of the Interna- tional Social Policy. The Axel Springer Group has institut- ed a sustainability management program that meets international standards. The overly late detection of pos- sible ecological or social conflicts relative to the pro- curement of resources along the value chain of wood, pulp, paper, and recycled materials could harm the Group’s reputation. To minimize this risk effectively, we work closely together with experts in the wood, pulp, and paper industry and with environmental protection organizations. We also conduct monitoring measures across the value chain. Our internal and external com- munications on this subject are characterized by open- ness and transparency. Strategic and other risks Strategic risks arise primarily from the possibility that the Group would invest in new business models and seg- ments that would unexpectedly prove not to be success- ful on a sustainable basis or would be forced out of the market by newer Internet business models, or that future profits could be sharply reduced by rising customer retention costs. This could lead to negative financial 51 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities results, possibly resulting in the insolvency of a subsidi- ary in the worst case. The consequence of this could be unscheduled impairment losses when permanent im- pairment is expected in the context of the impairment test which is to be carried out. This risk could materialize in our activities in the Marketing Models, Classified Ad Models, and Paid Models operating segments. By virtue of the high degree of internationalization of Ringier Axel Springer Media AG, the relevant market risks are distributed over various countries, although that also gives rise to heightened foreign exchange risks (EUR, CHF, eastern European currencies). When required these foreign exchange risks have been countered by means of appro- priate hedging activities. In general, the business segments and models of our interests are, however, extremely heterogeneous, such that cluster risks are limited by means of diversification. Such risks are further diversified by means of preventa- tive measures such as the clear investment criteria, in accordance with which we check new investments as part of our M&A activities, as well as active portfolio and investment management, the recruitment and retention of highly qualified managers, and the continuous moni- toring of business and market developments. Furthermore, we try to counter the stated strategic risks by constant innovation. Despite the partial use of paid content, the reach of BILD.de could generally be main- tained at an extremely high level. Besides generating advertising and circulation revenues, paid content mod- els support the strategy of building a sustainable sub- scriber base for paid digital journalism. In addition, Axel Springer continues to rigorously pursue a strategy of profitable growth, primarily in the area of digital business models. The online classified advertising business, and Ringier Axel Springer Media AG, founded as a joint ven- ture with Ringier AG, form a key component in digitiza- tion and also internationalization. Ringier Axel Springer Media and its subsidiaries are mainly exposed to market and financial risks. Declining circulation numbers, which in return reduce circulation revenues and potentially also advertising revenues in the medium term, represent a significant market risk. Above all, the advertis- ing market in eastern Europe is exposed to significant market risks related to the structural shift from print to online. We rigorously manage market risks by marketing the combined and expanded product portfolio, with the objective of being able to offer even better, tailored solu- tions to customers in the market. With regard to our investment in Do⁄an TV Holding A.S., the potential risk of financial loss – associated with the risk of depreciation of the investment – arising from the existing contractual agreement regarding the sale, are fully hedged by bank guarantees. In the previous reporting year Axel Springer has issued loans to business partners as part of the transaction with FUNKE Mediengruppe. The risk of default on loan claims is countered by gathering information on the economic and financial situation of the business partner, along with corresponding analysis and preparation of such data. We are able to quickly recognize default risks using this meth- od. In addition, these business partners have granted us secondary security to their assets. The loss of major clients, especially in the advertising sector, and the dependency of economic changes within the retail sector could have a negative impact on the business success of the Group and its activities. Howev- er, this risk is countered by customer retention measures as well as wide-ranging discussions with our clients and agency partners. In the area of distribution, the sale of our women’s mag- azines, TV program guides, and regional titles to FUNKE Mediengruppe (see page 26), and the associated drop in sales volumes and various economies of scale, entail the risk of cost increases. Since May 2014, there is a circula- tion cooperation with FUNKE Mediengruppe to handle distribution activities, which is meant to counter these cost increases in the area of retail sales. A loss or termination of existing business partnerships of strategic importance, especially in the reach-based sector, would have considerable losses in revenue as a conse- 52 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities quence. This risk is countered by active support of key customers. The marked increase in the threat of terrorism is coun- tered, amongst other things, with enhanced security standards, more stringent access regulations and con- trols, and comprehensive education and training of all security representatives. Natural hazards such as fires, for example, still represent significant risks for Axel Springer. We counter these risks in two ways: First, we take structural and organizational measures to raise the Group’s security standards even further, and second, we have maintained insurance to mitigate all financial consequences of terrorism. Personnel risks The individual skills, professional competence, and commitment of our employees contribute greatly to the success of the Axel Springer Group. As a consequence, the loss of specialist staff and management is a signifi- cant risk which we actively look to counter. A primary focus of human resource management is the targeted, progressive development of employees and motivation with the aid of focused and continuous training, attrac- tive bonus schemes, flexible working time models and a better work/life balance. Age-related employee turnover is also acted upon at an early stage with systematic succession planning, ensuring that the transfer of valua- ble knowledge and experience takes place. In addition, the increasingly difficult situation regarding the recruitment of possible junior staff also represents an ever-increasing risk. It is increasingly difficult to recruit qualified staff, and this is a result of demographic change, and also a matter of increasing competition on the hu- man resources market. This risk, which is monitored from a Group standpoint, is countered with an employer marketing campaign which was started in 2011 and revised in 2014. The initiative aims to differentiate signifi- cantly from other companies, and portrays Axel Springer as an innovative, modern employer. Financial risks and risks associated with the use of financial instruments The financial risks especially relevant to the Axel Springer Group are interest rate risks and currency risks. Interest rate risks arise primarily from financial assets or liabilities with variable interest rates. Currency risks arise from expenses, revenues, investment income and expenses, and receivables and liabilities denominated in foreign currencies (transaction risk). The risk of changing interest rates inherent in variable- interest assets or liabilities is minimized through the use of interest rate derivatives. Interest rate risks were coun- tered by the agreement of fixed interest tranches for promissory note proceeds in 2012 as well as the partial cancellation, conversion, and subscription of the existing Schuldschein (promissory notes) in 2014. The risk of value changes arising from exchange rate fluctuations are avoided primarily in that operating costs are incurred in the same countries in which we sell our products and services. Residual currency risks arising from cash flows denominated in foreign currencies are immaterial because we generate most of our earnings in the euro zone. Currency risks inherent in receivables and liabilities denominated in foreign currencies (excluding contingent purchase price liabilities) with net exposures of € 5 million or more per foreign currency are usually hedged by means of maturity-matched forward ex- change deals. Local-currency cash flows generated in non-euro zone countries are either reinvested to expand local business operations, or invested with Axel Springer SE and hedged by means of forward exchange deals or distrib- uted in the form of dividends. Therefore, the liquidity risk arising from exchange rate changes affecting cash flows denominated in foreign currencies is limited. Currency effects arising from the translation of financial statements denominated in foreign currencies (currency translation risk) are recognized directly in the equity item of other comprehensive income. Therefore, Axel Springer does not hedge such currency effects. 53 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities Significant financing risks resulting from the uncertain outlook for the financial sector are not evident for the Axel Springer Group at the present time because the credit line in the amount of € 0.9 billion (through 2017) obtained for liquidity assurance purposes has been committed by the participating banks with binding effect. The credit facility is contingent upon the observance of covenants that are based primarily on a certain ratio of net debt to the earnings indicators of the Axel Springer Group. Even if the credit facility were to be drawn down in full, we do not expect to breach any of the agreed cove- nants and therefore we consider the risk of acceleration of borrowed amounts to be minor. Based on our continu- ous observation of the money markets, capital markets, and credit markets, we have concluded that companies with outstanding creditworthiness and strong reputations can always raise funding at favorable conditions. Fur- thermore, Axel Springer can generate liquidity reliably, thanks to its broadly diversified customer base and the absence of significant payment delays and defaults. Surplus cash not needed for operations is invested on the basis of criteria set out in a corporate guideline, which sets loss limits that may not be exceeded, as a means (among others) of limiting risks. The risks arising from financial instruments and hedging activities are discussed in detail in Section (34) of the notes to the consolidated financial statements. Overall risk assessment In the preceding sections, we reported on significant individual risks. The overall risk situation of the Axel Springer Group is composed of the individual risks in all risk categories of the consolidated subsidiaries and corporate divisions. In consideration of the interdependency of individual risks, no individual risks that could endanger the continued operation of the Axel Springer Group or significantly influence the Group’s financial position, financial perfor- mance, and liquidity can be discerned, unless the econ- omy within our markets were to worsen dramatically, leading to a significant deterioration of the Group’s mar- ket position and financial performance. Furthermore, risk concentrations are being incrementally reduced by means of increasing diversification, internationalization, optimization of the brand and product portfolio, and digitization. The overall risk position has increased com- pared to the prior year due to, amongst other things, the additional acquisitions within the digital business models segment carried out in the course of the year, as well as the loans issued in connection with the transformation of the company. Opportunities Market opportunities If the economy within our markets - as is currently fore- cast by leading economic institutes despite geopolitical tensions - continues to stabilize, then this could have a positive effect on our revenue development. Even a negative development of the overall economy could create opportunities. For example, competitors could pull out of the market, thereby strengthening our own market position on a long-term basis. Furthermore, there may be the option of acquiring companies at low valuations, then subsequently expanding their market share in existing markets and investing in new markets with growth po- tential. Political opportunities The ancillary copyright for news publishers that took effect on August 2013 can be expected to strengthen the protection of intellectual property rights in Germany. Strategic opportunities In a constantly changing environment we continue to develop our company so that we are able to face global challenges in the future with innovative solutions. The digitization strategy offers especially promising oppor- tunities for generating additional revenues via the positive development of revenues in the online advertising market. Axel Springer is taking advantage of this market trend through the swift and consistent combination of diverse media channels (print, TV, and online offerings), by invest- ing in companies, entering into cooperation agreements and partnerships, and continually expanding its existing and newly acquired activities. N24 plays a major role in 54 Annual Report 2014 Axel Springer SE Combined Management Report Report on risks and opportunities linking print, TV, and online offerings by means of: a joint editorial team will deliver the most comprehensive multi- media coverage in the German media landscape, span- ning digital, print, video, and live TV, with an emphasis on quality journalism as the hallmark in all media channels. By this means, we will continuously draw closer to the goal of becoming the leading digital publisher. In addition, the Group invested heavily in expanding Paid Models in the Internet and expanded its digital portfolio through additional acquisitions of Marketing and Classi- fied Ad Models. All divisions and companies work on continuous improve- ment of technologies and processes in order to maintain and expand their market position in the face of competi- tion. This also includes an intensive, Group-wide exchange and transfer of business models, technologies, and pro- cesses. It is assumed that this exchange at the company headquarters in Berlin will be made simpler and also inten- sified due to spatial proximity in the planned Axel Springer Campus. On the one hand, acquisition of equity stakes in attractive companies with digital business models in early stage and growth phases in their lifecycle provides us with the option of establishing contacts within the industry and to other founders and investors, and also grants access to new ideas and business models. On the other hand, we also obtain access to co-investments, which could remain open, if necessary, for subsequent acquisition of a majority stake. In the event of substantial development of the as- sociate companies, we can also profit from a significant appreciation in value. We also see opportunities in the internationalization of successful business models. For example, introduction of the kaufDA business model into the USA offers consider- able potential. We have an advantage over our competi- tors in that we have already attained strong market posi- tions in many countries, and, indeed, leading positions. 55 Annual Report 2014 Axel Springer SE Combined Management Report Forecast report Forecast report The ifo Institute expects the upward trend of prices to weaken further. According to the forecast, consumer prices should rise in 2015 only by 0.8 % overall. The working population will increase by an average of 190,000 people. The unemployment rate should fall slightly to 6.6 %. The ifo Institute anticipates a slight deceleration in eco- nomic growth for central and eastern Europe. Eco- nomic weakness in the euro zone puts a strain on the exports sector. The fall in unemployment and low infla- tion rates should also continue to support the purchasing power of consumers. Furthermore, an easing of the government's austerity drive is expected. Anticipated Economic Development1) (Selection) Change in gross domestic product compared to prior year (real) Germany United Kingdom France Poland Switzerland2) Hungary Belgium Slovakia Netherlands Serbia2) Austria Ireland Italy Spain USA Russia Israel2) Brazil2) China 1) Source: ifo Institut, December 2014. 2) Source: IMF, October 2014. 2015 1.5 % 2.6 % 0.4 % 3.0 % 1.6 % 2.5 % 0.8 % 2.0 % 1.1 % 1.0 % 0.9 % 2.5 % – 0.2 % 2.0 % 3.3 % 0.0 % 2.8 % 1.4 % 7.1 % Anticipated economic environment General economic environment Despite the momentum caused by the low oil price, the International Monetary Fund (IMF) lowered its growth forecast for the world economy in January 2015. The reason for this is the weak outlook for China, Russia, Japan and the euro zone. According to the forecast, the world economy will ex- pand in 2015 by 3.5 % in real terms. The IMF expects growth of 3.6 % for the USA in real terms. Lower energy costs are expected to lead to a considerable increase in consumer spending here. The IMF has slightly lowered its expectations for China and expects the Chinese economy to increase by 6.8 % in real terms during 2015. The IMF expects an increase in Gross Domestic Product of only 1.2 % for the euro area in real terms during 2015. Clearance of the Swiss franc exchange rate is not as- sessed by the IMF. The major Swiss bank UBS has already altered its growth forecast for 2015 from 1.8 % to 0.5 %. According to a forecast from the ifo Institute, the German economy will gradually become more dynamic after a period of stagnation in the summer half-year of 2014. Gross Domestic Product is expected to increase by 1.5 % in real terms during 2015. The recovery is mainly driven by the domestic economy, which has profited from the drop in crude oil prices. In 2015, capital expenditures in new systems must grow by 2.0 % in real terms, as the increasing load on production capacity means that investments in new capacity are necessary. Construction investments will also rise by 1.7 % in real terms. With increasing real income, private con- sumption is also expected to expand by 1.7 %. According to the ifo Institute exports will increase by 5.2 % as the world economy is growing and price competitiveness of the German export economy to third markets increased due to the euro's fall against the US dollar. In conjunction with the expected improvement of the domestic economy, imports should rise even faster, by 5.8 %. 56 Annual Report 2014 Axel Springer SE Combined Management Report Forecast report Industry environment According to the current advertising market forecast by ZenithOptimedia an increase of 4.9 % is expected for 2015 worldwide (nominally). ZenithOptimedia therefore corrected its forecast of + 5.3 % from September 2014 downwards. Currently available forecasts for the German advertising industry predict mixed developments for the different types of media. ZenithOptimedia expects net advertising market revenue in Germany to increase by 1.3 % during 2015 (nominal). Thus, the total advertising market will not grow as fast as the general economy, which is expected to expand at a nominal rate of 2.8 % (+ 1.5 % in real terms). This growth will be driven by digital (+ 7.1 %) and TV advertising (+ 2.8 %), outdoor advertising (+ 2.5 %) and radio advertising (+ 1.6 %). ZenithOptimedia is pre- dicting a drop in net advertising revenues for newspa- pers (– 4.1 %) and magazines (– 1.1 %). The forecast data also reflects the structural shift of advertising expenditures in favor of digital platforms. The proportion of total advertising expenditures targeted to online and mobile platforms will rise further. According to ZenithOptimedia, social media and mobile devices are current drivers of the advertising market. Due to the continued spread of mobile devices, improvements in advertising forms and variety, and technical innovations in controlling multi-device campaigns, considerable growth in advertising expenditure is expected. The German Advertising Association (ZAW) assumes in its forecast for 2015 that the advertising industry can generally pick up momentum with the outlook of an increase of real consumer spending by consumers. "Stable at least, with opportunities for more" was the summary of the industry by ZAW when looking at the 2015 advertising year. ZenithOptimedia’s forecast (as of December 2014) for the international markets in which Axel Springer con- ducts business through its own subsidiaries paints a mixed picture. According to the forecast by ZenithOptimedia in 2015, the net advertising volume on the online market in west- ern Europe will increase by 11.4 % to US-$ 34.9 billion, based on the assumption of consistent exchange rates. The growth rates in eastern European markets are signif- icantly higher in some cases. Anticipated Advertising Activity 2015 (Selection) Change in net ad revenues compared to prior year (nominal) Germany United Kingdom France1) Poland1) Switzerland2) Hungary Belgium2) Slovakia1) Netherlands Serbia1) Austria1) Ireland Italy1) Spain1) USA Russia Israel Brazil Online Print 7.1 % – 3.0 % 16.8 % – 5.8 % 3.8 % – 6.4 % 11.8 % – 16.7 % 14.2 % – 5.2 % 7.0 % 15.0 % 1.0 % 1.4 % 33.3 % – 4.4 % 7.0 % – 3.5 % 16.5 % – 2.6 % 15.3 % – 4.9 % 14.9 % – 5.0 % 7.0 % – 3.9 % 10.0 % 0.0 % 18.2 % – 5.2 % 10.0 % – 10.0 % 3.3 % – 0.7 % 25.0 % – 1.2 % Source: ZenithOptimedia, Advertising Expenditure Forecast (December) 2014 1) Excluding classified ads 2) Gross advertising revenues (excluding classified ads). Gross advertising revenues do not adequately reflect the true development of advertising revenues. 57 Annual Report 2014 Axel Springer SE Combined Management Report Forecast report For the Paid Models and Classified Ad Models segments an update of the forecast has been carried out during the year. In the case of Classified Ad Models growth expec- tations were adjusted upwards in August with the publi- cation of the semi-annual report due to acquisition ef- fects and slightly stronger organic growth. We expect a fall in EDITDA in the low double-digit percentage range due to planned investments into product quality and also into digitization. From then on a noticeable increase in revenues and EBITDA has been expected. Within the Paid Models segment the forecast was adjusted follow- ing the publication of the nine-month report in November for the development of advertising revenues from an increase to stable development over the course of the year. Accordingly, and also due to higher than expected restructuring expenses, the EBITDA of paid models has been expected to show a decline in the low to mid single- digit range. EBITDA of Marketing Models has developed slightly better than expected. In the Services/Holding segment revenue development has been better than expected, whilst EBITDA remained below expectations mainly due to restructuring expenses being higher than expected. Anticipated business developments and financial performance of the Group We anticipate in the Group that total revenues will be higher for the 2015 financial year than the prior-year figure by an amount in the low to mid single-digit per- centage range. We assume that the planned increase in advertising revenues will more than compensate for the decline in circulation revenues and other revenues. We expect EBITDA to rise by an amount in the high single-digit percentage range. In this case, a rise in EBITDA within the Classified Ad Models and Ser- vices/Holding is expected, whilst the Paid Models and the Marketing Models should achieve an EBITDA that is below that of the level of the previous year. For EBIT we expect developments to be similar to those for EBITDA. Group Strategic and organizational orientation The highest strategic priority for Axel Springer is to pursue the consistent digitization of our business. We aim to attain the goal of becoming the leading digital publisher by further developing our digital offerings in Germany and abroad, and by making targeted acquisitions. Comparison of forecast with actual performance The forecast targets published in March 2014 were essentially attained. Group Revenues EBITDA Forecast mid single-digit percentage increase low double-digit percentage increase Earnings per share, adjusted low double-digit percentage increase 2014 8.4 % 11.6 % 11.2 % Forecast 2014 Segments Revenues Paid Models Marketing Models Classified Ad Models Services/Holding EBITDA Paid Models low single-digit percentage increase low double-digit percentage increase low double-digit percentage increase mid single-digit percentage decline low to mid single-digit percentage increase 2.6 % 10.8 % 27.2 % 6.1 % – 2.4 % 6.0 % 35.2 % Marketing Models stable Classified Ad Models low double-digit percentage increase Services/Holding significant improvement – 8.3 % 58 Annual Report 2014 Axel Springer SE Combined Management Report Forecast report For the adjusted earnings per share we expect, due to a lower proportion of the adjusted consolidated net income that is due for minorities, an increase in the low double-digit percentage range compared to the prior- year figure. Anticipated business developments and financial performance of the segments In the Paid Models segment we expect a decline in total revenues in the low single-digit percentage range for the 2015 financial year. Due to structural shifts in the national and international print business we expect declining advertising and circulation revenues. We expect an in- crease in other revenues. We expect a decline in EDITDA in the low double-digit percentage range due to planned investments into product quality and also into digitization. We expect the total revenues of the Marketing Models segment to increase by an amount in the low to mid single-digit percentage range, mainly based on the antic- ipated growth of other revenues. We also expect EBITDA to fall below the level of the previous year in a mid to high single-digit percentage range due to, amongst other things, planned structural adjustments within perfor- mance marketing, planned expenditure for increasing competitiveness, and internationalization of digital busi- ness models within the field of reach marketing. The revenues of the Classified Ad Models segment are expected to rise considerably due to organic growth and consolidation effects. A marked increase is also ex- pected for EBITDA. Due to falling print revenues and lower revenues from services in connection with the sale of activities to FUNKE Mediengruppe we expect a considerable fall in revenues for the Services/Holding segment, which should result in considerably improved EBITDA figures due to lower expenses for structural adjustments and positive special items such as further payments as a result of the insol- vency proceedings against the Kirch Group. For EBIT we expect developments to be similar to those for EBITDA. Anticipated liquidity and financial position Based on the capital expenditure projects planned to date, investments in property, plant, and equipment, and intangible assets are likely to be higher than the corre- sponding prior-year figure with regards to the liquidity and financial position. Financing will be provided by operating cash flow. Dividend policy Subject to the condition of sound financial performance in the future, Axel Springer will pursue a dividend policy of stable or slightly increased dividend distribution, while also allowing for the financing of growth. Anticipated development of the workforce The average full-year number of employees in 2015 will be higher than in 2014, mainly due to organic growth and acquisitions in connection with the digital transfor- mation of the Group’s business. 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. However, actual developments could possibly be much different from the assumptions applied and thus from the business plans and trend forecasts prepared on the basis of those assumptions. The forecasts for EBITDA, EBIT, and the adjusted earn- ings per share do not reflect any possible effects result- ing from possible future acquisitions, divestitures, and capital measures as well as from unplanned restructur- ing expenses. Possible effects from the planned combi- nation of the Immonet and Immowelt real estate portals into a joint venture have not been taken into account in the forecast EBITDA, EBIT, and the adjusted earnings per share do not contain any non-recurring effects, any write-downs from purchase price allocations, nor any associated tax effects. Non-recurring effects are defined as effects resulting from the acquisition and sale of subsidiaries, divisions, and equity investments, as well as write-downs and write-ups of equity investments, effects resulting 59 Annual Report 2014 Axel Springer SE Combined Management Report Forecast report from the sale of real estate, impairments, and write-ups of real estate used for operational purposes. Purchase price allocation write-downs include the expenses of amortization, depreciation, and impairments of intangible assets, and property, plant, and equipment acquired in connection with the acquisition of companies and business divisions. We consider EBITDA, EBIT, and adjusted earnings per share to be suitable indicators for measuring the opera- tional profitability of Axel Springer, because these indica- tors ignore effects that do not reflect the fundamental business performance of Axel Springer. EBITDA, EBIT, and adjusted earnings per share are not defined under International Financial Reporting Stand- ards and should therefore be regarded as supplementary information. 60 Annual Report 2014 Axel Springer SE Combined Management Report Disclosures and explanatory report of the Executive Board pursuant to takeover law Disclosures and explanatory report of the Executive Board pursuant to takeover law This section contains the disclosures pursuant to Sec- tions 289 (4), 315 (4) HGB, along with the explanatory report of the Executive Board pursuant to Section 176 (1) (1) AktG. Composition of subscribed capital The company’s subscribed capital amounts to € 98,940,000. It is divided into 98,940,000 registered shares. The shares can only be transferred with the company’s consent (registered shares of restricted transferability, see below). The company 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, treasury shares do not confer any rights to the company (cf. Section 71b AktG). (Please refer to page 64 for information on the company’s treasury shares.) Restrictions on voting rights or the transfer of shares Transfer restrictions By virtue of Article 5 para. 3 of the company’s Articles of Incorporation, shares of Axel Springer SE and subscrip- tion rights can be transferred only with the company’s consent. Such consent must be granted by the Executive 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 reasons. However, the company will not arbitrarily refuse its consent to the transfer of company shares. To the company’s knowledge, transfer restrictions based on the German law of obligations (Schuldrecht) exist by virtue of the following agreements:  A share transfer restriction agreement was concluded between Dr. Mathias Döpfner, Brilliant 310. GmbH, Axel Springer SE, and M.M. Warburg & Co. KGaA on July 31 / August 4, 2006. Under this share transfer restriction agreement, the direct and indirect purchase or disposal of the shares of Axel Springer AG by Brilliant 310. GmbH or Dr. Mathias Döpfner are made contin- gent on the prior consent of Axel Springer SE, in ac- cordance with the company’s Articles of Incorporation.  By virtue of a declaration dated August 14, 2012, Dr. Mathias Döpfner acceded to a pool agreement (“pool agreement”) concluded between Dr. h. c. Friede Springer and Friede Springer GmbH & Co. KG, in re- spect of the 1,978,800 shares of Axel Springer SE that were given to him as a present by Dr. h. c. Friede Springer on the same date. In total, the pool agree- ment covers 52,826,967 voting shares of Axel Springer SE (“pool-bound shares”). Under the terms of the pool agreement, a pool member who wishes to transfer his pool-bound shares to a third party must first offer these shares for purchase by the other pool members (purchase right). The purchase right expires two weeks after the purchase offer. The purchase right does not apply in the case of transfers to certain persons who are related to the pool member. Other transfer restrictions based on the German law of obligations exist in connection with the share ownership programs conducted in the 2012 and 2013 financial years, as well as the current financial year, for the em- ployees of the Axel Springer Group. In general the shares acquired as part of the share ownership program in 2012, 2013, and 2014 are subject to a minimum holding period of four years (i.e. until May 31, 2016, May 31, 2017, and May 31, 2018). During the minimum holding period, employee shares are held in a blocked account with Deutsche Bank AG. The above-mentioned holding peri- ods for the Share Ownership Programs 2012 and 2013 have been waived for those employees who have been transferred to FUNKE Mediengruppe when the sale of Axel Springer’s regional newspapers, TV program guides, and women’s magazines to that company was finalized. The employees that were transferred to FUNKE Medien- gruppe no longer took part in the 2014 share ownership program as on the relevant reporting date, May 16, 2014, the transfer was already finalized and therefore the con- ditions for participation were not satisfied. 61 Annual Report 2014 Axel Springer SE Combined Management Report Disclosures and explanatory report of the Executive Board pursuant to takeover law The minimum holding periods for shares issued under share ownership programs in earlier years have already expired. Shareholdings that represent more than 10 % of voting rights In connection with the Virtual Stock Option Plan 2011 and 2014 for senior executives, the beneficiaries are required to personally invest in shares of Axel Springer SE. These shares are not subject to any restrictions on disposal, but any disposition of these shares would cause the corresponding virtual stock option rights to lapse without replacement or compensation (see page 76 for information on the virtual stock option plan 2011 and 2014 for senior executives). The same applies to the virtual stock option plans 2009, 2012, and 2014 for members of the Executive Board (see page 74 for information on the virtual stock option plans 2009, 2012, and 2014 for Executive Board members). Voting right restrictions Under the above-mentioned pool agreement between Dr. Mathias Döpfner, Dr. h. c. Friede Springer, and Friede Springer GmbH & Co. KG, the voting rights and other rights attached to the pool-bound shares are to be exer- cised in the annual shareholders’ meeting of Axel Springer SE in accordance with the corresponding resolutions of the pool members, regardless of whether and how the respective pool member voted on the resolution of the pool. The voting rights of pool members in the meeting of pool members are based on their voting rights in the an- nual shareholders’ meeting of Axel Springer SE, depend- ing on the number of pool-bound voting shares held. To the extent that Friede Springer GmbH & Co. KG indirectly holds shares in Axel Springer SE, its voting rights are based on the imputed number of pool-bound voting shares indirectly held by Friede Springer GmbH & Co. KG. At the end of financial year 2014, the following direct and indirect shareholdings in the equity of Axel Springer SE represented more than 10 % of voting rights in the com- pany: Axel Springer Gesellschaft für Publizistik GmbH & Co, Berlin, Germany (direct), AS Publizistik GmbH, Berlin, Germany (indirect), Friede Springer GmbH & Co. KG, Berlin, Germany (indirect), Friede Springer Verwaltungs- GmbH, Berlin, Germany (indirect), Dr. h. c. Friede Springer, Berlin, Germany (indirect), and Dr. Mathias Döpfner, Potsdam, Germany (indirect). Information on the amounts of the above-mentioned shareholdings may be found in the disclosures pertain- ing to voting rights notifications in the notes to the 2014 financial statements of Axel Springer SE, www.axelspringer.com/financialpublications, and in the section entitled “Voting rights notifications” of the com- pany’s website at www.axelspringer.com/votingrights. Shares endowed with special rights that confer powers of control There are no shares endowed with special rights that 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 bonus share and share ownership program for employees conducted in 2009 and the share ownership programs for the years 2011, 2012, 2013, and 2014, Deutsche Bank AG was initially entered into the share register as the third-party holder of the shares transferred to the employees. However, each employee is free to be registered personally as a share- holder in the share register. 62 Annual Report 2014 Axel Springer SE Combined Management Report Disclosures and explanatory report of the Executive Board pursuant to takeover law Statutory provisions and provisions of the Articles of Incorporation pertaining to the appointment and dismissal of Executive Board members and amendments to the Articles of Incorporation The company’s Articles of Incorporation provide that the Executive Board of Axel Springer SE must be composed of at least two persons. The Supervisory Board decides on the number of Executive Board members, and on the appointment and dismissal of Executive Board members. According to Article 46 para. 1 of the EU Regulation on European Companies (SE-VO), the maximum term of office for members of the Executive Board of a European company (Societas Europaea, SE) is six years; in the present instance, this maximum term is shortened to five years by virtue of Article 8 para. 2 sub-para. 1 of the Articles of Incorporation of Axel Springer SE – corre- sponding to the previous maximum term pursuant to Section 84 (1) (1) of the German Stock Corporations Act (AktG). The term of office can be renewed or extended for a period of no more than five years thereafter (for details, see Article 8 para. 2 of the company’s Articles of Incorporation; Article 46 para. 1 and para. 2 SE-VO). If more than one person has been appointed to the Execu- tive Board, the Supervisory Board is authorized to ap- point one of those members as the Chairman (Article 8 para. 3 sub-para. 2 of the Articles of Incorporation of Axel Springer SE). If a required Executive Board member is lacking, the court is authorized, in urgent cases, to appoint the necessary member at the request of one involved party (Article 9 para. 1 letter c). ii) SE-VO in conjunction with Section 85 (1) (1) AktG). The Superviso- ry Board is authorized to revoke the appointment of an Executive Board member and the Executive Board Chairman for an important reason (for details, see Article 39 para. 2 sub-para. 1, Article 9 para. 1 letter c). ii) SE- VO, Section 84 (3) (1) and (2) AktG). Insofar as obligatory laws or provisions of the Articles of Incorporation do not require a greater majority, amend- ments to the company’s Articles of Incorporation require a resolution of the annual shareholders’ meeting carried by a majority of the votes cast, or provided that at least one half of the company’s share capital is represented, by a majority (see Article 21 para. 2 sub-para. 2 of the company’s Articles of Incorporation in conjunction with Section 51 (1) of the European Company Implementing Act (SEAG), Article 59 para. 1 and 2 SE-VO); the latter does not apply to an amendment changing the business object and purpose of the company, or to a resolution regarding the relocation of the registered head office of the SE to another member state pursuant to Article 8 para. 6 SE-VO (see Section 51 (1) SEAG, Article 59 para. 1 and 2 SE-VO). An amendment of the corporate governance principles set forth in Article 3 of the compa- ny’s Articles of Incorporation requires a majority equal to at least four fifths of the votes cast represented in the adoption of the resolution (see Article 21 para. 3 of the Articles of Incorporation). 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 Executive Board to issue or buy back shares Axel Springer SE has neither established authorized capital that would authorize the Executive Board to issue new shares, nor conditional capital. By way of a resolution at the annual shareholders' meet- ing on April 14, 2011 (Agenda Item 7) the Executive Board was authorized with approval of the Supervisory Board until April 13, 2016 to acquire treasury shares of the company up to 10 % of the existing share capital on adoption of the resolution. In the context of the company being converted into an SE with effect of December 2, 2013, as a precautionary measure in case non- registrable resolutions would be held to not remain valid after the conversion, it was resolved at the annual share- holders’ meeting of 16 April 2014 to authorize the Com- pany again to acquire and use treasury shares, with a prolonged term until April 15, 2019, whilst revoking the previous authorization. Acquisition must only take place on the stock exchange or via a public offer directed at all 63 Annual Report 2014 Axel Springer SE Combined Management Report Disclosures and explanatory report of the Executive Board pursuant to takeover law shareholders or a public invitation to submit an offer to buy. Along with the shares held by the company or attribut- able to the company in accordance with Article 5 SE-VO in conjunction with Sections 71a ff. AktG, the shares purchased by virtue of the foregoing authorization may not at any time exceed 10 % of the company’s capital stock. Details concerning this authorization are provided in the invitation to the annual shareholders’ meeting of April 16, 2014, which is available on the website of Axel Springer SE (see Agenda Item 8 and the Executive Board’s report on this subject). At the end of financial year 2014, the company held no treasury shares. Significant agreements of the company subject to the condition of a change of control resulting from a takeover offer With the exception of regulations in the credit facility and the Schuldschein stated in the following, as well as con- tractually entitled cancellation rights for part of Executive Board members in case of a change of control (for more information see page 64 (right-hand column) and page 75 of this Annual Report, the company has not made any major agreements that would take effect in the event of a change of control due to a takeover. The company placed a Schuldschein with a nominal volume of € 500,000,000 on the capital market in April 2012; the financing volume was increased by € 137,000,000 for optimizing financing terms in October 2014 by partial cancellation, conversion, and subscrip- tion of the existing promissory note. The lender can demand, in the event of a change of control, that the receivables held can be partially or fully paid back early within a 90 day period. In September 2012, moreover, the company took out a new credit facility in the amount of € 900,000,000 (“credit facility 2012”); also in this case, the lender is entitled to call in the credit facility within a notice period of 30 days, in the event of a change of control. Aside from specific exceptions that relate to the share- holders that currently control Axel Springer SE, a change of control is understood to mean, in the context of the credit facility 2012 and the promissory note loan, the acquisition of shares of Axel Springer SE representing more than 50 % of the capital stock and/or voting rights by one or more parties acting together. Indemnification agreements between the company and Executive Board members or employees in the event of a change of control Some Executive Board members have the right to termi- nate their employment contracts in the event of a change in control. A change in control within the meaning of these contracts would exist if the majority shareholder Dr. h. c. Friede Springer would cease to hold or control the majority of shares, indirectly or directly. In such a case, they will have the right to receive payment of their base salary for the most recently negotiated remain- ing contractual term, while some of the eligible Executive Board members will have the right to receive payment of an amount equal to at least one year’s base salary. Fur- thermore, the company will pay the pro-rated percent- age of the success-based compensation for the period of time served in the year of resignation. The employ- ment contracts of the members of the Executive Board do not provide for any other compensation if the em- ployment relationship is terminated as a result of a change in control. There are no such indemnification agreements with other employees of the company. 64 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report Corporate Governance Report There follows a report by the Executive Board – also on behalf of the Supervisory Board – on corporate govern- ance at Axel Springer, in conformity with the recommen- dation set out in Section 3.10 of the German Corporate Governance Code (GCGC). This section also contains the management declaration pursuant to Section 289a of the German Commercial Code (HGB) and the Compensation Report. I. Future-related Section The Company fulfills the recommendations of the “Ger- man Corporate Governance Code” (the “Code”) in the version of June 24, 2014, as published by the German Federal Ministry of Justice and for Consumer Protection in the official announcements section of the Federal Gazette of September 30, 2014, subject to the devia- tions set out and reasoned below: Good corporate governance as a guiding principle 1. Disclosure of the individual Executive Board compen- sation in tabular form as part of the remuneration report (Item 4.2.5 sentences 5 und 6 of the Code)) At Axel Springer, sound corporate governance is consid- ered to be a crucial element of responsible management and supervision geared to increasing the company’s value on a sustainable basis. It promotes the trust and confidence of our national and international investors, customers, employees, and the public in the manage- ment and supervision of the company and is therefore an essential basis for the company’s long-term success. In this respect, we are guided by the German Corporate Governance Code (GCGC). We have taken appropriate measures to implement and ensure compliance with the recommendations of GCGC. The Corporate Governance Officer is the Executive Board member in charge of Fi- nance and Personnel. The implementation of and adher- ence to the recommendations of GCGC are reviewed continually. Management declaration pursuant to Section 289a HGB Declaration of Conformity pursuant to Section 161 AktG The Executive Board and Supervisory Board published the following Declaration of Conformity on Monday, November 10, 2014: “In accordance with Section 161 of the German Stock Corporation Act ("AktG") the Executive Board and the Supervisory Board of Axel Springer SE declare the following: The disclosure of the Executive Board compensation is made in accordance with legal requirements taking into account the so-called “opt-out” resolution of the Share- holders' Meeting on April 16, 2014. Based on this reso- lution and in accordance with Section 286 para. 5 sen- tence 1 and Section 314 para. 2 sentence 2 of the German Commercial Code, no disclosure of the individ- ual compensation of the members of the Executive Board is made in the Company's annual financial and annual consolidated financial statements for the fiscal years 2014 through 2018 (included). As long as a re- spective “opt-out” resolution of the Shareholders' Meet- ing is effective, the Company will not include in its remu- neration report the individual information recommended by Item 4.2.5 sentences 5 and 6 of the Code. 2. Chairman of the Audit Committee (Item 5.3.2 sentence 3 of the Code) The Audit Committee of the Supervisory Board is chaired by Mr Lothar Lanz, who is a former member of the Exec- utive Board of the Company whose appointment ended less than two years ago. The Supervisory Board is convinced that Mr Lanz’ long- standing experience as CFO, his specialist knowledge and his personality make him an exceptionally suitable Chairman of the Audit Committee. Therefore, the Super- visory Board is of the opinion that Mr Lanz should chair the Audit Committee. 65 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report 3. Disclosure in election recommendations of relations of candidates for the Supervisory Board with the company, its corporate bodies and with shareholders holding a material interest in the company (Item 5.4.1 sentences 6 to 8 of the Code) of June 10, 2013 subject to the deviations set out and reasoned above under I. 2, I. 3. and I. 4.1 Period since publication of the new version of the Code on September 30, 2014: In its election recommendations to the Shareholders' Meeting, the Supervisory Board will provide all statutory information with respect to the members of the Supervi- sory Board and, where possible, will introduce the candi- dates in the Shareholders' Meeting. Further, during the Shareholders' Meeting, shareholders are able to ask questions with respect to the candidates. The Superviso- ry Board is of the opinion that this constitutes a solid and sufficient basis of information for the shareholders’ as- sessment of the recommendations regarding Supervisory Board candidates. 4. Individualized disclosure of the remuneration of the members of the Supervisory Board (Item 5.4.6 sentences 5 and 6 of the Code) The remuneration granted to the members of the Super- visory Board as well as the payments made by the Com- pany to members of the Supervisory Board for personally provided services are not disclosed in the notes or the management report in an individualized manner (Item 5.4.6 sentences 5 and 6 of the Code). The information is not individualized because competitors of Axel Springer SE do not publish such remuneration either. II. Past-related Section Period between the last declaration of conformity on April 17, 2014, and the publication of the new version of the Code on September 30, 2014: During the period between the last declaration of con- formity on April 17, 2014, and the publication of the new version of the Code on September 30, 2014, the Com- pany has fulfilled the Code in the version of May 13, 2013, as published by the German Federal Ministry of Justice in the official announcements section of the Federal Gazette The Company has fulfilled the Code in the version of June 24, 2014, as published by the German Federal Ministry of Justice and for Consumer Protection in the official an- nouncements section of the Federal Gazette of Septem- ber 30, 2014, in the period since the publication of the new version of the Code subject to the deviations set out and reasoned above under I. 2, I. 3. and I. 4.1 Berlin, November 10, 2014 Axel Springer SE The Supervisory Board The Executive Board" 1) A past-related deviation from the recommendation of the Code mentioned under I. 1 above does not need to be declared because the corresponding recommen- dation applies only to remuneration reports for financial years starting after December 31, 2013. The Declaration of Conformity for 2013 from November 5, 2013, was previously updated on April 17, 2014. The update became necessary as a result of election of the new Supervisory Board in the annual shareholders' meeting and the concomitant changes in the composi- tion of the Supervisory Board and its committees. The Declaration of Conformity from November 10, 2014 can, just like previous versions, also be seen along with the update of the 2013 Declaration of Conformity from April 2014 via the link www.axelspringer.com/- declarationofconformity. Important management practices Axel Springer is the only independent media company that has provided itself with a corporate constitution. This is anchored in Article 3 (“Principles of Corporate Govern- ance”) of the company’s Articles of Incorporation and is thus a guiding principle for all employees. The five princi- ples formulated therein form the basis for the company’s journalistic practices. They express fundamental convic- 66 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report tions of corporate social policy, but do not dictate per- sonal opinions. Axel Springer has also defined corporate values as the foundation of its corporate culture, to guide the work of every employee. They are: creativity as the crucial pre- requisite for success in journalism and business; entre- preneurship in the sense of being courageously inventive, self-reliant and results-oriented, qualities that are ex- pected of all managers and employees; integrity in all dealings with the company, readers, customers, em- ployees, business partners, and shareholders. The man- agement principles, which are built on company values, should give management a concrete framework that creates transparency regarding the requirements and expectations of management roles. In addition, Axel Springer had already introduced guide- lines for ensuring journalistic independence back in 2003. These guidelines substantiate and expand on the profes- sional ethics of the press as set out by the German Press Council in conjunction with the press associations in the publishing principles (Press Code), and which Axel Springer voluntarily commits with regard to printed com- plaints (see Section 16 of the Press Code). They specifi- cally delineate the boundaries between advertising and editorial copy, and between the editors’ and reporters’ private and business interests. They also preclude actions in pursuit of personal advantages and define the compa- ny’s position with respect to the treatment of news sources. The guidelines thus represent the framework for independent and critical journalism in the editorial de- partments of all media belonging to the Group. The edi- tors-in-chief are responsible for observing and implement- ing the guidelines in the company’s day-to-day activities. In addition, Axel Springer has developed a catalog of social standards applicable to all the company’s activities. Known as the International Social Policy, it states the company’s positions on matters of human rights, adher- ence to the rule of law, equal opportunities, the protec- tion of children and young people, the treatment of em- ployees, health and safety, and the compatibility of work and family, and other matters. Furthermore, the company has issued an Environmental Guideline comprising four points, which serves as a practical guide to the many environmental protection measures conducted at Axel Springer. The management principles and guidelines of Axel Springer can be found at www.axelspringer.com/- corporateprinciples. In addition, Axel Springer maintains a Corporate Govern- ance, Risk & Compliance department. In this case, this supports subsidiaries and central divisions in responsibly handling risks via approaches and requirements, amongst other things, for a comprehensive risk man- agement system, an internal control system, and a com- pliance management system. The division operates, amongst others, risk management, the internal control system and the compliance management system. As described in the Risk Report (see page 45), risk man- agement and the internal control system seek to identify, analyze, and report on risks at Axel Springer and to systematically monitor the measures taken to minimize risks. At Axel Springer, compliance means the fulfillment of all laws, regulations, and guidelines, as well as the commitments undertaken voluntarily. Based on the fore- going, the goal of compliance management is to institute structures and processes to ensure that all directors and employees, and especially senior executives, conduct themselves in accordance with applicable laws and regulations. Another goal of compliance management is to prevent harm to the company’s reputation and finan- cial condition that could result from violations of laws and regulations. As a further step for reinforcing good corporate govern- ance and establishing a sensible compliance management system, Axel Springer published a Code of Conduct dur- ing the 2011 financial year. This summarizes existing cor- porate principles and values as well as essential Axel Springer regulations and guidelines, and also specifies ethical, moral, and legal requirements which should be adhered to by all employees. The Code of Conduct can be found at www.axelspringer.de/coc_en. 67 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report Procedures of the Executive Board and Supervisory Board, and composition of the committees of the Supervisory Board Cooperation between the Executive Board and Supervisory Board Even after the change of form into a European company (Societas Europaea, SE), which took effect upon being entered in the Commercial Register on December 2, 2013, management and supervision of the company – as was the case with Axel Springer AG – are effected by means of a dual board system. The Executive Board manages the company under its own responsibility. The Supervisory Board appoints the members of the Executive Board, and monitors and advises the latter in the conduct of the busi- ness. The two boards work closely together in an atmos- phere of trust and confidence to sustainably enhance the company’s value. The two boards are strictly separated in terms of personnel and their areas of authority. Procedures of the Executive Board In its executive function, the Executive Board is obligated to pursue the interests of the company and dedicated to sustainable company development. It develops the stra- tegic orientation of the company and is responsible for its implementation in coordination with the Supervisory Board. The Executive Board manages the company’s affairs in compliance with the relevant laws, the Articles of Incorporation, and its rules of procedure. It provides regular, timely, and comprehensive infor- mation to the Supervisory Board on all relevant matters of strategy, planning, business development, risk man- agement including the risk situation, and the internal control system and compliance management system. In accordance with the internal rules of procedure adopted by the Supervisory Board, important decisions of the Executive Board require the approval of the Supervisory Board. Such decisions include, above all, the creation or discontinuation of business divisions, the acquisition or sale of significant equity investments, and the adoption of the company’s annual business and financial plan. The members of the Executive Board are jointly respon- sible for the management, work together collegially, and keep each other informed of important measures and business transactions in their business divisions. Not- withstanding the general responsibility of all Executive Board members, each member of the Executive Board manages the business division assigned to him, under his own responsibility, with the exception of those deci- sions that are incumbent on the full Executive Board. The Executive Board meets regularly in the form of Ex- ecutive Board meetings, which are convened and chaired by the Executive Board Chairman, as a general rule. Furthermore, every Executive Board member and the Chairman of the Supervisory Board are entitled to convene a meeting. As a general rule, the full Executive Board adopts resolutions by a simple majority of the votes cast; in the case of resolutions adopted by a sim- ple majority, the Chairman casts the deciding vote. A resolution adopted in spite of being opposed by the Executive Board Chairman is deemed to be invalid, also subject to the limits of the applicable laws. The internal rules of procedure adopted by the Supervi- sory Board for the Executive Board provide more precise rules, including the following:  The obligation to observe and comply with the corpo- rate constitution and to anchor it throughout the Group  The executive organization chart and the decisions to be made by the full Executive Board  The duties of the Chairman of the Executive Board  Transactions that require the approval of the Super- visory Board  Rules concerning the regular, timely, and comprehen- sive provision of information to the Supervisory Board  Rules concerning meetings and the adoption of resolutions  Obligation to disclose conflicts of interest 68 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report With the appointment on January 1, 2014 of Dr. Julian Deutz to the Executive Board, the departure of Mr. Lo- thar Lanz as Chief Financial and Chief Operating Officer on April 16, 2014, and the departure of Mr. Ralph Büchi as President International which also took place in April, the Executive Board currently consists of four members:  Dr. Mathias Döpfner, Chairman and Chief Executive Officer tional information on the specific activities of the Supervi- sory Board in financial year 2014. The internal rules of procedure of the Supervisory Board comply with the requirements of the German Corporate Governance Code and contain rules covering the follow- ing topics, among others:  Election and duties of the Chairman and Vice Chair- man of the Supervisory Board  Jan Bayer, President BILD and WELT Group  Dr. Julian Deutz, Chief Financial Officer.  Calling of meetings  Dr. Andreas Wiele, President Marketing and Classified Ad Models  Adoption of resolutions at meetings or by voting by way of written correspondence, telephone calls, fax, or electronic media Procedures of the Supervisory Board As per the company’s Articles of Incorporation, the Su- pervisory Board of Axel Springer SE is composed of nine members, who are elected by the annual shareholders’ meeting. The regular 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 Executive Board and monitors the work of the Ex- ecutive Board. It holds at least four meetings a year. In case of necessity, it meets without the Executive Board in attendance. Meetings may be held and resolutions adopted also by way of written correspondence, tele- phone calls, faxes, or electronic media. As a general rule, the Supervisory Board adopts resolutions by a simple majority of the members voting on the resolution; in case of a tie, the Chairman casts the deciding vote. The Su- pervisory Board deliberates on the company’s business developments, planning, strategy, and significant capital expenditures at regular intervals. The Supervisory Board adopts the separate financial statements of Axel Springer SE and approves the consolidated financial statements of the Group. It regularly assesses the efficiency of its work by means of a questionnaire. Please refer to the report of the Supervisory Board (see page 79) for addi-  Supervisory Board committees, including their com- position, organization, and duties  Obligation to disclose conflicts of interest After the end of the annual shareholders' meeting, which took place on April 16, 2014, the Supervisory Board consists of nine members. The members of the Super- visory Board are:  Dr. Giuseppe Vita, Chairman  Dr. h. c. Friede Springer, Vice Chairwoman  Oliver Heine  Rudolf Knepper (since April 16, 2014)  Lothar Lanz (since April 16, 2014)  Dr. Nicola Leibinger-Kammüller  Prof. Dr. Wolf Lepenies  Prof. Dr.-Ing. Wolfgang Reitzle (since April 16, 2014)  Martin Varsavsky (since April 16, 2014) 69 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report The term of office of all current Supervisory Board mem- bers ends at the end of the annual shareholders' meeting in 2019. Long-term Supervisory Board members Dr. Gerhard Cromme, Klaus Krone, and Dr. Michael Otto have stepped down from the Supervisory Board after the end of the 2014 annual shareholders' meeting. The requirements for expert knowledge and independ- ence as defined by Article 100 para 5 AktG (financial expert) are satisfied amongst others by Dr. Giuseppe Vita, Chairman of the Supervisory Board, who was also Chairman of the Audit Committee until the end of the 2014 annual shareholders meeting, and Lothar Lanz, who has succeeded Dr. Vita as Chairman of the Audit Committee as of April 16, 2014. Composition and procedures of committees The Executive Board has not formed committees. In accordance with its internal rules of procedure, the Supervisory Board has formed four committees to sup- port the work of the full board: the Executive Committee, the Personnel Committee, the Nominating Committee, and the Audit Committee. In those matters stipulated in the internal rules of procedure of the Supervisory Board, the committees prepare the resolutions to be adopted and other matters to be addressed by the full board. Within the limits of applicable laws, the committees also adopt resolutions in lieu of the full board in those matters stipulated in the internal rules of procedure of the Super- visory Board. The internal rules of procedure of the Su- pervisory Board stipulate the procedures for meetings and resolutions adopted by the committees and define their areas of responsibility. Please refer to the Report of the Supervisory Board (see page 79) for information on the areas of responsibility and composition of the committees. By way of exception to the recommendation set out in Section 5.2 para 2 GCGC, the Chairman of the Supervi- sory Board, Dr. Giuseppe Vita, is also the Chairman of the Audit Committee of the Supervisory Board (see the stated exception in the Declaration of Conformity of November 5, 2013) until the end of the annual share- holders' meeting in 2014. He satisfies the requirements of expert knowledge and independence within the mean- ing of Article 9 para 1 letter c) ii) SE-VO in conjunction with Section 107 paras 4, 100 para 5 AktG (financial expert), and the requirements of the recommendations in Section 5.3.2 paras 2 and 3 GCGC. In the constituent meeting on April 16, 2014 of the newly-elected Supervi- sory Board which was elected by the annual sharehold- ers' meeting, Mr. Lothar Lanz was elected as Chairman of the Audit Committee by way of exception to the rec- ommendation set out in Section 5.3.2 para 3 sub-para 2 GCGC (see the stated exception in the Declaration of Conformity of November 5, 2013, which was updated on April 17, 2014 as well as in the Declaration of Conformity from November 10, 2014, see page 65). He satisfies the requirements of expert knowledge and independence in the sense of Article 9 para 1 letter c) ii) SE-VO in conjunction with Section 107 paras 4, 100 para 5 AktG (financial expert), and the requirements of the recommendations in Section 5.3.2 paras 2 and 3 sub-para 1 GCGC. Further information on corporate governance Goals for the composition of the Supervisory Board The Supervisory Board of Axel Springer SE has decided on the following objectives for its composition with re- spect to Section 5.4.1 GCGC.  The Supervisory Board of Axel Springer SE should be composed in such a way that its members generally possess all knowledge, abilities, and professional ex- perience necessary to properly perform the duties of the Supervisory Board.  With due consideration given to the company’s busi- ness object and purpose set forth in the Articles of In- corporation, the size of the company, and the relative importance of its international activities, the Supervi- sory Board will also strive, as a goal for the upcoming regular elections, to bring about a composition of its members that is appropriate in view of the following considerations, in particular: 70 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report  At least two seats on the Supervisory Board should be held by persons who fulfill the criterion of interna- tionality to a particular degree (for example, by reason of relevant experience in international business).  Supervisory Board members should not hold any position on a board or perform any consulting work for important competitors of the company.  The Supervisory Board should have an adequate proportion of women. Currently, two of the nine members (22.2 %) are women; the Supervisory Board considers this adequate in any event.  In making nominations, due consideration should be given to the general rule that Supervisory Board members should not be older than 72 years; the Su- pervisory Board can approve exceptions to this poli- cy. Furthermore, the Supervisory Board should ob- serve the principle that as few members as possible should be subject to a potential conflict of interest, as in connection with an advisory role or board seat with significant customers, suppliers, creditors, or other significant business partners of Axel Springer. Fur- thermore, the Supervisory Board should give due consideration to the principle that its composition should meet the criterion of diversity.  With respect to its composition, the Supervisory Board adopted the goal that at least two of its mem- bers will be independent according to the definition of the GCGC. The foregoing principles have already been completely implemented with the current composition of the Super- visory Board of Axel Springer SE. Goals for the composition of the Executive Board The Supervisory Board has decided on the following objectives for the composition of the Executive Board of Axel Springer SE with respect to Section 5.1.2 GCGC. should strive in particular to give appropriate consid- eration to women.  The Supervisory Board should work together with the Executive Board to assure long-term succession planning.  At the time of being (re-)appointed to the Executive Board, no member should be older than 62, as a gen- eral rule; the Supervisory Board can approve excep- tions to this rule. In appointing the new Executive Board member Dr. Julian Deutz as of January 1, 2014, the Supervisory Board gave due consideration to the principles men- tioned above and appointed the most qualified candidate, in its opinion. Goals concerning the staffing of key functions In view of the recommendation set out in Section 4.1.5 GCGC, reference is made to the description of personnel policies designed to assure equal opportunity and diver- sity on page 38 of the present Annual Report. Shareholders and annual shareholders’ meeting The annual shareholders' meeting is the central organ via which Axel Springer SE shareholders can exercise their rights and their voting rights. Every share confers the right to cast one vote in the annual shareholders’ meet- ing. 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 Supervisory Board generally chairs the shareholders’ meeting. To make it easier for shareholders to exercise their prerogatives at the annual shareholders’ meeting, their votes can be cast by authorized proxies. Axel Springer SE also desig- nates a voting proxy whom shareholders can elect to execute their voting rights according to their instructions. All required reports and documents are made available to the shareholders in advance, also on the company’s Internet page.  In making decisions concerning the composition of the Executive Board, the Supervisory Board should give due consideration to the principle of diversity and The annual shareholders’ meeting resolves specifically on the utilization of the distributable profit, the ratification of the actions of the Executive Board and Supervisory 71 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report Board, the election of the Supervisory Board, the elec- tion of the independent auditor, and other matters legally assigned to them, such as corporate actions and other amendments to the Articles of Incorporation. The resolu- tions of the annual shareholders’ meeting require a sim- ple majority of the votes cast, unless another majority is prescribed by law or by the company’s Articles of Incor- poration. The Articles of Incorporation can be inspected on the company’s website at www.axelspringer.com/- articlesofassociation. Conflicts of interest The members of the Executive Board and Supervisory Board are bound to promote the interests of the company. No member of either board may, through their decisions, pursue personal interests or take advantage of business opportunities that should be the province of the company. Executive Board members may not demand or accept gifts or other benefits from, or grant unjustified benefits to, third parties in connection with their activities, either for their own benefit or for that of others. Sideline activi- ties of the Executive Board require the consent of the Supervisory Board. Executive Board members are sub- ject to a comprehensive anti-competition clause during the period of their activity for Axel Springer. Every Execu- tive Board member must inform the Supervisory Board of any conflict of interest without delay. No conflicts of interest arose within the Executive Board in the financial year. Also, every member of the Supervisory Board must inform the Supervisory Board immediately of any con- flicts of interest that may arise. In the annual sharehold- ers' meeting, the Supervisory Board reports on all con- flicts of interest and how to treat them. No conflicts of interest arose in the Supervisory Board either, see the Report of the Supervisory Board, see page 79). Memberships on other supervisory bodies A summary of the seats held by the Executive Board and Supervisory Board members of Axel Springer SE on other legally prescribed supervisory boards or comparable boards in Germany and abroad can be found on page 158. Transparency Axel Springer is committed to always providing compre- hensive and consistent information in a timely and simul- taneous manner on the significant events and develop- ments relevant to an evaluation of the company’s present and future business performance to all capital market participants. Reporting on the business situation and Group results is presented in its annual report, at its annual financial statements press conference, and in its semi-annual financial report and quarterly financial re- ports. For this purpose, the company also uses Internet communication channels whenever possible. Axel Springer also regularly participates in conferences and roadshows in key international financial centers; addi- tional information on this subject can be found on page 8 of the present Annual Report. 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. In order to ensure equal treatment of all capital market participants, Axel Springer also publishes information relevant to the capital markets simultaneously in German and English on the company’s website. Financial report- ing dates are published in the financial calendar with sufficient advance notice. Immediately upon receiving the corresponding notices, the company publishes changes in the composition of the shareholder structure that are subject to the reporting obligation according to Section 26 of the German Securities Trading Act (Wertpapier- handelsgesetz, WpHG), and on the purchase and sale of shares by persons who exercise management duties at Axel Springer (directors’ dealings), in accordance with Section 15a WpHG. Shareholdings The Executive Board members in office at the reporting date directly or indirectly held 3,148,581 shares of Axel Springer SE at the reporting date of December 31, 2014. Of that number, 3,024,495 shares were held directly by the Chairman of the Executive Board, Dr. Mathias Döpfner, and indirectly. 72 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report At the reporting date, the Supervisory Board members directly or indirectly held a total of 56,179,621 shares of Axel Springer SE. Dr. h. c. Friede Springer held 51,000,030 shares indirectly via Friede Springer GmbH & Co. KG and Axel Springer Gesellschaft für Publizistik GmbH & Co, and 5,104,341 shares directly. Preparation and audit 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. The consolidated financial statements also contain the disclosures pre- scribed by Section 315a (1) HGB. The consolidated financial statements are prepared by the Executive Board of Axel Springer SE and audited by the independent auditor. Axel Springer publishes the consolidated financial statements within 90 days and the quarterly financial reports within 45 days of the respec- tive period ending dates. The notes to the consolidated financial statements also contain information on the company’s relationships with shareholders who are to be classified as related parties according to the definitions of the applicable accounting regulations. In accordance with the German Corporate Governance Code, it is agreed with the independent auditor in each financial year that the latter will inform the Chairman of the Supervisory Board or the Audit Committee without delay of any circumstances arising during the course of the audit that would constitute grounds for disqualifica- tion or partiality. It is also agreed that the independent auditor will immediately report any material issues, mat- ters, and events arising during the course of the audit that fall within the purview of the Supervisory Board. It is further agreed that the independent auditor will inform the Supervisory Board or make an observation in the audit report if the independent auditor were to discover, during the course of the audit, any facts that contradict the Declaration of Conformity by the Executive Board and Supervisory Board according to Section 161 AktG. Ongoing actions for nullification The current state of ongoing legal actions is as follows: On May 21, 2009, the shareholder Dr. Oliver Kraus filed an action to nullify the resolution of the annual share- holders’ meeting of April 23, 2009 relating to Agenda Item 7 (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) and contested the election of Dr. h. c. Friede Springer and Brian Powers to the Supervisory Board of the company (Agenda Item 8). Moreover, Dr. Oliver Kraus petitioned for a finding that the company is obli- gated to provide him, in his capacity as a shareholder, with a transcript of those portions of the “stenographic minutes from its question recording and question an- swering system” that cover his questions and comments, as well as the information provided by the company in response. The shareholders SCI AG and Oliver Wieder- hold joined the action on the side of the defendant. The Berlin Regional Court rejected the suit in its entirety by judgment dated June 10, 2010 (Case No. 95 O 52/09), that is, both with regard to the action to nullify, as well as the petition for a finding. Dr. Oliver Kraus filed an appeal against this decision before the Berlin Appellate Court; the appeal proceeding is being conducted under Case No. 23 U 125/10. On May 21, 2010, Dr. Oliver Kraus filed an additional action to nullify the resolutions of the annual sharehold- ers’ meeting of April 23, 2010 relating to the ratification of the actions of the Executive Board and the Superviso- ry Board for financial year 2009 (Agenda Items 3 and 4), as well as the general authorization to purchase and use the company’s own shares according to Section 71 (1) (8) AktG and to exclude the preemptive right, and the special authorization, to purchase and use the compa- ny’s own shares according to Section 71 (1) (8) AktG in connection with the Management Participation Program and to exclude the right to tender and preemptive right (Agenda Items 6 and 7). The shareholders Frank Scheu- nert and Gastro Beteiligungs AG joined this action on the side of the defendant. In its ruling of March 7, 2012 (Case No. 105 O 53/10), the Berlin Regional Court par- tially granted the claim and nullified the resolutions of the 73 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report annual shareholders’ meeting adopted under Agenda Items 4, 6, and 7. The company has filed an appeal against this ruling with the Berlin Appellate Court. The appeal is pending under Case No. 23 U 92/12. Compensation report Axel Springer’s compensation policy follows the principle of granting compensation to the Executive Board and Supervisory Board that is based on their performance in the interest of sustainable corporate development. This compensation consists of fixed and variable perfor- mance-dependent components. Executive Board In accordance with the requirements of the German Stock Corporation Act and the recommendations of GCGC, the compensation of the Executive Board mem- bers consists of fixed and variable components. The variable compensation is composed of a cash compo- nent paid in the form of an annual bonus and a long-term, stock-based component. All components of compensa- tion are appropriate, both individually and as a whole. The criteria used to determine appropriateness are the tasks of the individual Executive Board member, his personal performance, as well as the economic situation, profit, and the future prospects of Axel Springer. Due consideration is also given to the industry environ- ment. The Supervisory Board did not consult with out- side compensation experts during the financial year. The fixed compensation corresponds to the annual fixed salary; in addition, the Executive Board members receive a company car or company car allowance and security expenses as fringe benefits. The annual fixed salary is established for the entire term of an employment agreement and is disbursed in 12 monthly installments. It is set on the basis of the duties of the individual Executive Board member, the current economic situation, the profit, and the future prospects of the Group, among other considerations. The variable compensation is in the form of an annual bonus as a cash component, and depends on individual performance with regards to individual objectives (relating to the quantitative divisional objectives and qualitative individual objectives, amongst others, based on the strat- egy of Axel Springer SE) as well as Group objectives; it is limited to double the sum payable for 100 % achievement of objectives. Group objective in the 2014 financial year was Group EBITDA (PY: Group EBITDA and EBITDA in the Digital Media segment). Individual objectives for measuring performance of individuals and Group objec- tives are decided upon by the Supervisory Board. Part of the variable cash component is based on achievement of Group objectives established for an assessment period of three years. Achievement of objectives is initially estab- lished by the Supervisory Board members and chairman with the relevant Executive Board member and then finalized by the Supervisory Board. In addition, there is a long-term variable compensa- tion component in the form of virtual stock option plans, the parameters of which are shown in the following: Executive Board Program 2009 2012 2014 I 2014 II Grant date 07/01/2009 01/01/2012 01/01/2014 09/01/2014 Term in years Vesting period in years Stock options granted 6 4 6 4 6 4 6 4 1,125,0001) 450,000 205,313 675,000 Underlying (€) 20.291) 30.53 44.06 44.56 Maximum payment (€) Value at grant date (€) Total value at grant date (€ millions) 40.571) 4.221) 61.06 88.12 89.12 5.26 6.69 6.26 4.7 2.4 1.4 4.2 1) Adjusted to account for the share split conducted in 2011. If the Executive Board service agreement or the ap- pointment to the Executive Board exists for at least the end of the four year waiting period, then all virtual stock options may become vested to the member of the Exec- utive Board. If the working relationship or the appoint- ment of the authorized member of the Executive Board 74 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report finishes before the end of the waiting period, but is at least one year after the grant date, then the stock op- tions become vested pro rata temporis relating to the waiting period. A further condition for vesting to take place is that either the volume-weighted average price of the Axel Springer share is at least 30 % over the base value or that the percentage increase of this average price exceeds that of the base value of the development of the DAX over a period of 90 calendar days within a time period of a year before the end of the waiting period. Exercising stock options is only possible if the volume- weighted average price of the Axel Springer share 90 calendar days before exercising such options is at least 30 % over the base value and that the percentage in- crease exceeds that of the DAX index. Each option grants a payment claim in the amount of the growth in value of the Axel Springer share, restricted to a maxi- mum of 200 % of the base value, which corresponds to the difference between the volume-weighted average price during the last 90 calendar days prior to exercise and the base value. Executive Board members are obligated to hold one Axel Springer share for every ten stock options as a personal investment. Disposing of these shares prior to exercising the options would result in the stock options being for- feited at the same rate. The 2009 Executive Board Program was completed in 2013 as the remaining options were exercised. With regards to the Executive Board Programs that are grant- ed, see the information in the notes to the consolidated financial statements under Section (12). Executive Board members have received contractually- agreed pension provisions. Payment of pension applies when reaching the age of 62, provided that the Executive Board member is no longer at their post at this point. In case of premature departure the Executive Board member has - after the end of five years since the pension com- mitment or since earlier entry into the company - a vested claim to a pension payment proportional to the length of his employment with the company. Payments are also made in case of a complete reduction in earning capacity. Some Executive Board members have the right to termi- nate their employment contracts in the event of a change in control. They will then have the right to receive pay- ment of their base salary for the most recently negotiated remaining contractual term, while some of the eligible Executive Board members will have the right to receive payment of an amount equal to at least one year’s base salary. Furthermore, the company will pay the pro-rated percentage of the success-based compensation for the period of time served in the year of resignation. The employment contracts of the members of the Executive Board do not provide for any other compensation if the employment relationship is terminated as a result of a change in control. In the 2014 financial year the total compensation paid to the Executive Board was € 17.8 million. (PY: € 20.1 million), plus € 5.6 million (PY: € 0.0 million) in the form of a long-term stock-based compensation compo- nent (virtual stock option plans 2014 I and 2014 II). The fixed components totaled € 8.9 million (PY: € 9.4 million); also containing the contributions for fringe benefits (company car or company car allowance and security expenses). The variable cash component came to a total of € 8.9 million (PY: € 10.7 million). According to this, the fixed compensation including fringe benefits in the finan- cial year amounts to a proportion of 38 % of total com- pensation (including long-term stock-based compensation components) (PY: 47 %). Guaranteed pension payments to members of the Exec- utive Board resulted in a personnel expense of € 0.5 million in fiscal year 2014 (PY: € 0.5 million). The cash value of the guaranteed pension payments in pension provisions totaled € 11.4 million (PY: € 7.0 million). Cred- its or advance payments were not granted to members of the Executive Board in the 2014 financial year. In the case of guaranteed pension payments to Executive Board members, which became effective with the rele- vant recommendation in Section 4.2.3 sentence 10 GCGC on June 10, 2013, the Supervisory Board estab- lished the pension level desired in compliance with the 75 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report previously stated Code recommendation and considered the annual and long-term expense for the company derived from this. Supervisory Board is paid an annual salary of € 0.1 mil- lion for his services as an author. Axel Springer SE does not disclose the total compensa- tion of individual Executive Board members by name, given that Sections 314 (2) and 286 (5) HGB expressly place the disclosure of Executive Board compensation by name under the reservation of a differing resolution of the annual shareholders’ meeting with a qualified majority of the share capital represented upon the adoption of the resolution. The annual shareholders’ meeting of Axel Springer SE held on April 16, 2014, adopted such a resolution with the requisite majority. The reason for this is that Axel Springer SE’s competitors do not disclose item- ized compensation either. Supervisory Board The compensation of the Supervisory Board is set by the annual shareholders’ meeting. The compensation of the Supervisory Board of Axel Springer SE is regulated by Article 16 of the Articles of Incorporation of Axel Springer SE. According to this, the Supervisory Board receives fixed compensation of € 3.0 million annually. The Supervisory Board decides how the aforementioned amount is distributed among its mem- bers, with appropriate consideration given to their activi- ties as chairman and in the committees. If the member does not serve on the Supervisory Board or exercise a higher-paying function of a Supervisory Board member for the full year, such member will receive a pro-rated share of the full-year compensation. Only full months of activity are taken into account for this purpose. The compensation is payable after the close of the given financial year. For financial year 2014, the Supervisory Board will receive total compensation of € 3.0 million (PY: € 3.0 million). In addition, the company reimburses all mem- bers of the Supervisory Board for their expenses and for the value-added tax payable on their compensation and on the reimbursement of their expenses. The company pays the premium for the D&O insurance taken out for members of the Supervisory Board. One member of the Contrary to Section 5.4.6 sentences 5 and 6 of the Ger- man Corporate Governance Code, the compensation paid to members of the Supervisory Board, as well as the compensation paid by the company to them for services rendered personally, are not presented in the Corporate Governance Report, since Axel Springer SE’s competitors do not disclose such information either. Share-based compensation of senior executives Axel Springer has issued virtual stock option plans for selected senior executives, the main parameters of which are shown in the following: Senior Executive Program Grant date Term in years Vesting period in years 2011 I 2011 II 2014 10/01/2011 10/01/2011 03/01/2014 4 2 6 4 5 3 Stock options granted 472,500 472,500 60,000 Underlying (€) Maximum payment (€) 30.00 60.00 35.00 70.00 Value at grant date (€) 2.74 2.31 46.80 93.60 8.14 Total value at grant date (€ millions) 1.3 1.1 0.5 Provided that the beneficiary is employed by the compa- ny at least until the expiration of the respective vesting period, all virtual stock options granted to the relevant senior executive may become vested. If the authorized senior executive is not employed by the company before the end of the vesting period, but is at least one year after the grant date, the stock options are vested up to one half (Senior Executive Programs 2011 I and 2014) or to one quarter per elapsed year of the vesting period (Senior Executive Program 2011 II). A further condition for vesting to take place is that either the volume-weighted average price of the Axel Springer share is at least 30 % over the base value or that the percentage increase of this average price exceeds that 76 Annual Report 2014 Axel Springer SE Combined Management Report Corporate Governance Report of the base value of the development of the DAX over a period of three calendar months within a time period of a year before the end of the waiting period. Exercising stock options is only possible if the volume- weighted average price of the Axel Springer share during the three calendar months before exercising such options is at least 30 % over the base value and that the percent- age increase exceeds that of the DAX index. Each option grants a payment claim in the amount of the growth in value of the Axel Springer share, restricted to a maximum of 200 % of the base value, which corresponds to the difference between the volume-weighted average price during the last three calendar months prior to exercise and the base value. Beneficiaries are obligated to hold one Axel Springer share for every ten stock options as a personal invest- ment. Disposing of these shares prior to exercising the options would result in the stock options being forfeited at the same rate. The Senior Executive Program 2011 I was completed during the financial year as the stock options were exer- cised or forfeited. With regards to the executive programs that are granted, see the information in the notes to the consolidated financial statements under Section (12). 77 Report of the Supervisory Board Dr. Giuseppe Vita Chairman Dr. h. c. Friede Springer Vice Chairwoman Oliver Heine Attorney at law and partner in the law firm Heine & Partner Rudolf Knepper (since April 16, 2014) Entrepreneur Lothar Lanz (from April 16, 2014) Member of various Supervisory Boards Dr. Nicola Leibinger-Kammüller President and Chairwoman of the Executive Board of TRUMPF GmbH + Co. KG Prof. Dr. Wolf Lepenies University Professor (emer.) FU Berlin; Permanent Fellow (emer.) at Wissenschaftskolleg zu Berlin Prof. Dr.-Ing. Wolfgang Reitzle (since April 16, 2014) Entrepreneur Martin Varsavsky (since April 16, 2014) CEO, Fon Wireless Limited Dr. Gerhard Cromme (until April 16, 2014) Chairman of the Supervisory Board of Siemens AG Klaus Krone (until April 16, 2014) Entrepreneur Dr. Michael Otto (until April 16, 2014) Chairman of the Supervisory Board of Otto GmbH & Co KG 78 Annual Report 2014 Axel Springer SE Report of the Supervisory Board In financial year 2014, the Supervisory Board performed all the duties incumbent upon it by virtue of applicable laws, the company’s Articles of Incorporation, and internal rules of procedure. The Supervisory Board worked closely and trustfully with the Executive Board in an advisory role and supervised the management of the company. By means of written and oral reports, the Executive Board informed the Supervisory Board in detail, regularly, and promptly about all relevant matters of strategy, planning, business performance, and the risk situation of the compa- ny, as well as the risk management system, the Internal Control System (ICS), and matters pertaining to compli- ance. The Executive Board informed the Supervisory Board of matters of particular importance between meetings, whilst Supervisory Board members and Executive Board members frequently consulted and exchanged information with each other. The Supervisory Board examined the relevant planning documents and financial statements presented to it and assured itself that they were correct and appropriate. It reviewed and discussed all submitted reports and documents to an appropriate extent. It was not necessary in financial year 2013 for the Supervisory Board to inspect company books and documents beyond those presented during the normal course of reporting by the Executive Board. The Supervisory Board discussed with the Executive Board all matters of crucial importance for the company, especial- ly the company’s business plan, business strategy, major investment and disinvestment plans, and personnel mat- ters. Furthermore, the Supervisory Board discussed specif- ic transactions of importance to the company’s future development. It adopted resolutions on those transactions and measures for which the participation of the Supervisory Board is required by law, by the company’s Articles of Incorporation, or by the Executive Board’s internal rules of procedure. After in-depth review, the Supervisory Board approved all matters presented to it by the Executive Board for resolution or approval. Composition of the Supervisory Board The Supervisory Board of Axel Springer SE was newly elected, as scheduled, at the annual shareholders' meet- ing on April 16, 2014. Former members of the Supervi- sory Board Dr. Gerhard Cromme, Klaus Krone, and Dr. Michael Otto were no longer available for election; Dr. Giuseppe Vita, Dr. h. c. Friede Springer, Oliver Heine, Dr. Nicola Leibinger-Kammüller, and Prof. Dr. Wolf Lepenies were re-elected as members of the Supervisory Board. In addition, Rudolf Knepper, Lothar Lanz, Prof. Dr.-Ing Wolfgang Reitzle, and Martin Varsavsky were elected as new members of the Supervisory Board. The regular term of all members of the Supervisory Board will end after the end of the annual shareholders' meeting for the 2019 financial year. The Supervisory Board thanks long-term members Dr. Michael Otto, Klaus Krone, and Dr. Gerhard Cromme for their successful work in the Supervisory Board as they left during the 2014 financial year. Dr. Michael Otto has been a member of the Supervisory Board of our company since listing on the stock exchange in 1985, and has been a member of the Nominating Com- mittee of the Supervisory Board since its foundation in 2007; during almost 30 years with the company he has played an essential part in our company thanks to his exceptional entrepreneurial experience and competence, his instinct for economic developments, and his insight into human nature. Klaus Krone has been member of the Supervisory Board and the Executive Committee since 1999 as well as of the Audit Committee since 2007; we are extremely grateful for his technical and entrepreneurial know-how and creative drive as well as his interest in technology-based innovation. Dr. Gerhard Cromme was appointed to the Supervisory Board in 2002; since then he has become a member of 79 Annual Report 2014 Axel Springer SE Report of the Supervisory Board the Executive Committee and from 2004 he has been a member of the Personnel Committee. His advice was built on his strategic vision, his cosmopolitan character, and above all, on his expertise in national and interna- tional corporate governance questions gathered from his time as Chairman of the Government Commission of the German Corporate Governance Code from 2002 to 2008 was of crucial importance for our company. functions: Ralph Büchi, as President International of Axel Springer SE, is responsible for all international business and Lothar Lanz is responsible as a member of the Su- pervisory Board and as Chairman of its Audit Committee. In connection with the appointment of Dr. Deutz to the Executive Board and the departure of Mr. Lanz and Mr. Büchi, the Supervisory Board has agreed on an updated executive organization chart for the Executive Board. Immediately after the 2014 annual shareholders’ meeting, Dr. Vita was re-elected to the position of Chairman of the Supervisory Board and Dr. h. c. Springer was elected to Vice Chairwoman in the constituent meeting. The Supervisory Board of Axel Springer AG held a total of seven meetings in the reporting period, four of which were in the first half and three in the second half of the calendar year. With the exception of the extraordinary meeting of the full board on December 8, 2014, at which two members of the Supervisory Board were excused as they were unable to take part personally, but were able to submit votes in writing, all incumbent members of the Supervisory Board took part during all meetings of the Supervisory Board in the 2014 financial year. When nec- essary, Supervisory Board resolutions were adopted by way of written circulation. The work of the committees and the resolutions passed by the committees was re- ported in the meetings of the full board. Changes in the Executive Board On January 1, 2014, the Supervisory Board of Axel Springer SE appointed Dr. Julian Deutz as a new mem- ber of the Executive Board. With the departure of Lothar Lanz from the Executive Board at the end of the 2014 annual shareholders’ meeting on April 16, 2014, he has taken over the responsibility for Finance and Personnel. As of April 30, 2014, Ralph Büchi, President International, also left the Executive Board of the company. The Su- pervisory Board would like to thank Mr. Büchi and Mr. Lanz for their successful work in the Executive Board of the company. Both men have provided considerable momentum during a phase of digital Group restructuring, and have also played a part in creating and sustaining this. They also remain with Axel Springer SE in new Important matters addressed by the Supervisory Board In its meeting of Monday, February 10, 2014, the Supervi- sory Board discussed and approved the financial plan for 2014 submitted by the Executive Board. The Executive Board informed the Supervisory Board of preliminary fig- ures in the 2013 business year and reported on, amongst other things, the current state of the pending antitrust proceedings with the sale of regional newspapers and magazines to FUNKE Mediengruppe, and other transaction plans for Axel Springer SE. The Supervisory Board also devoted its attention to granting virtual stock option pro- grams to selected senior executives in the company. In its meeting of March 3, 2014, the Supervisory Board devoted its attention primarily to the separate financial statements of the parent company and the consolidated financial statements of the Group as of December 31, 2013 (including, in each case, the combined manage- ment report and Group management report), as well as the report on the company’s dealings with affiliated companies (Dependency Report), the Executive Board’s profit utiliza- tion proposal for financial year 2013, and the Corporate Governance Report issued jointly with the Executive Board. It also focused on the proposals for selection of the inde- pendent auditor for the 2014 financial year which was submitted at the annual shareholders' meeting. Further- more, the Supervisory Board dealt with the agenda for the 2014 annual shareholders’ meeting; this covered the pro- posed resolutions for the annual shareholders' meeting including the proposed resolutions for the required out- sourcing measures as part of the sale of regional newspa- pers and magazines to FUNKE Mediengruppe, and the Supervisory Board's election proposals at the annual shareholders' meeting for the appointments to the Supervi- 80 Annual Report 2014 Axel Springer SE Report of the Supervisory Board sory Board based on the corresponding recommendations from the Nomination Committee. In addition, the Supervi- sory Board adopted a resolution regarding its report for the 2013 financial year which was submitted at the annual shareholders' meeting. Furthermore, the Supervisory Board agreed to the share ownership program set up during the 2014 financial year for employees with a target agreement or who were eligible for a profit-sharing bonus, and, in this context, acquisition of (own) shares as part of the 2014 share ownership program, and the (re)sale of unused own shares as part of the share ownership program. The Su- pervisory Board also adopted a resolution regarding exten- sion of the term of a member of the Executive Board alongside the associated extension of the employment contract as a member of the Executive Board. Finally, the Supervisory Board adopted a resolution regarding the status of the investment of the company in Do⁄an TV. At its meeting of April 16, 2014, the Supervisory Board again primarily dealt with the preparations for the up- coming shareholders’ meeting. In addition, the Executive Board reported to the Supervisory Board regarding the current state of acquisition projects. Directly after the annual shareholders’ meeting the Super- visory Board of Axel Springer SE, newly elected at the annual shareholders' meeting, met on April 16, 2014 for its constituent meeting and elected Dr. Giuseppe Vita as Chairman and Dr. h. c. Friede Springer as Vice Chair- woman of the Supervisory Board. The Supervisory Board then decided upon a change in its internal rules of proce- dure regarding the composition of the Supervisory Board's committees. The Supervisory Board's committees were reconstituted. The Supervisory Board also adopted a resolution to update the Declaration of Conformity, which was necessary due to the recent appointments to the Supervisory Board and its committees. Also, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft was commissioned with auditing the required closing balance sheets in accordance with the German Transformation Act in conjunction with the divestitures for selling regional newspapers and magazines. Finally, the Executive Board reported on the state of various projects, in particular those regarding new building projects at Lindenfeld, the state of the transaction with FUNKE Mediengruppe, and current acquisition projects. In the meeting of August 27, 2014, the required closing balance sheets for Axel Springer SE in accordance with the German Transformation Act were approved and therefore adopted. The Executive Board then reported on business developments as of July 2014; directly after- wards the Supervisory Board discussed current devel- opments in the media industry with the Executive Board. The Supervisory Board was also informed of the status of various projects. The Supervisory Board also adopted a resolution regarding granting virtual stock option pro- grams for Executive Board members within the company. In its meeting of November 4, 2014, the Supervisory Board focused on and discussed the corporate strategy of Axel Springer based on a wide-ranging presentation by the Executive Board with particular emphasis on further action with regards to the equity stake held by General Atlantic in Axel Springer Digital Classifieds GmbH. In this context advice was given about potentially changing Axel Springer SE into a partnership limited by shares (KGaA). The Supervisory Board also adopted a resolution regard- ing the 2014 Declaration of Conformity. The Supervisory Board also carried out a questionnaire-based self- evaluation and after discussions based upon this rated its work as efficient. Furthermore, the Executive Board informed the Supervisory Board regarding the economic development as of September 30, 2014, and the current transaction plans of the company, with particular regard to the planned acquisition of an equity stake in @Leisure Holding B.V. The execution of common training activities for Supervisory Board members supported by the com- pany was also discussed. In an extraordinary meeting of the full board of the Su- pervisory Board on December 8, 2014, the Supervisory Board agreed upon the acquisition of 15 % of shares in Axel Springer Digital Classifieds GmbH held by General Atlantic, and agreement on call options with regards to the remaining 15 % of shares held by General Atlantic. The Executive Board and Supervisory Board also decid- ed together to prepare to change Axel Springer SE into a partnership limited by shares (KGaA). 81 Annual Report 2014 Axel Springer SE Report of the Supervisory Board Conflicts of interest Conflicts of interest have not occurred amongst Super- visory Board members during the financial year. Corporate governance The Executive Board and Supervisory Board issued their common Declaration of Conformity (pursuant to Section 161 of the German Stock Corporations Act (AktG)) on November 10, 2014. This explanation with information on exceptions to the recommendations made in the GCGC are made permanently available on the compa- ny's website. It is presented on page 65 of the present Annual Report. The 2013 Declaration of Conformity of November 5, 2013 issued on April 17, 2014 became necessary as a result of election of the new Supervisory Board in the 2014 annual shareholders' meeting and the concomitant changes in the composition of the Supervi- sory Board and its committees. Additional information on corporate governance in the Axel Springer Group may be found in the joint Corporate Governance Report of the Executive Board and Supervi- sory Board (see page 65). Work of the 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, an Audit Committee, a Personnel Commit- tee, and a Nominating Committee as permanent com- mittees. The Chairman of the Audit Committee is Mr. Lanz, and in the other committees Chairman of the Su- pervisory Board, Dr. Giuseppe Vita fulfills that role. The Committee Chairmen report on the work of the commit- tees in the subsequent meeting of the Supervisory Board. Notwithstanding the general responsibility of the full Supervisory Board, the Executive Committee is re- sponsible for fundamental matters related to publishing and journalism and for matters of strategy, financial plan- ning, investments, and the financing of investments. It is also responsible for preparing decisions on the organiza- tion of the Executive Board, the approval of sales of company shares and subscription rights for such shares, and for approving certain management actions that require the approval of the Supervisory Board, which have been delegated to the Executive Committee. Until the end of the annual shareholders' meeting on April 16, 2014, the members of the Executive Committee were Dr. Giuseppe Vita, Chairman, Dr. h. c. Friede Springer, Vice Chairwoman, Dr. Gerhard Cromme and Klaus Krone; at the constituent meeting of the newly-elected Supervisory Board on April 16, 2014 Dr. Giuseppe Vita was re- elected as Chairman, Dr. h. c. Friede Springer was re- elected as Vice Chairwoman, and Lothar Lanz and Prof. Dr.-Ing. Wolfgang Reitzle were elected as further mem- bers of the Executive Committee. The Executive Committee held seven meetings during the reporting period, of which two were extraordinary meetings; members of the Executive Board also took part frequently at these meetings. The Executive Commit- tee agreed, amongst other things, with the following acqui- sitions: the acquisition of 100 % of shares in Coral-Tell Ltd., Israel by Axel Springer Digital Classifieds GmbH, the acquisition of 100 % of shares in Evenbase Recruit- ment Ltd., Great Britain by the StepStone Group, exer- cising a call option regarding founder shares in Bonial International GmbH by Axel Springer SE, the acquisition of 51 % of shares in Car & Boat Media SAS, France, by Axel Springer Digital Classifieds GmbH, the acquisition of 100 % of shares in MeinProspekt GmbH by Bonial Inter- national GmbH, the acquisition of a further 19.99 % of shares in finanzen.net GmbH from co-shareholders by Axel Springer Digital Ventures GmbH, the acquisition of the Hungarian job portal profession.hu by Ringier Axel Springer Media AG, the acquisition of approximately 17 % of shares in OZY Media, Inc., USA , and the acquisition of 51 % of shares in @Leisure Holding B.V. by Axel Springer Digital GmbH. The deliberations and adopted resolutions also affected agreement on the sale of the 17.2 % equity stake in iProperty Group Limited by SeLoger.com SAS, agreement on exercising a second put option against Do⁄an TV and regarding further actions concerning the equity stake in Do⁄an TV, agreement for the partial sale of the Axel Springer portfolio in Hungary whilst incorpo- rating the rest of the Hungarian portfolio into the Ringier 82 Annual Report 2014 Axel Springer SE Report of the Supervisory Board Axel Springer joint venture as well as agreement for selling 49.9 % of shares in Schwartzkopff TV-Productions GmbH & Co. KG and Schwartzkopff TV-Productions Verwaltungsgesellschaft mbH to Talpa Germany Holding B.V. Amongst other things, it was decided that the Schuldschein should be increased up to € 150 million by authorization from the whole of the Board. Another object was also gaining advice and adopting a resolution for finalizing a controlling and profit and loss transfer agreement between StepStone GmbH and YourCareer- Group GmbH as well as decisions about issuing an agreement for transferring company shares in accord- ance with Section 5 para. 3 of the company's Articles of Incorporation. The Personnel Committee is responsible in particular for preparing decisions on the appointment and dismissal of Executive Board members. It is also responsible for pre- paring the resolutions to be adopted by the Supervisory Board on the compensation of individual members of the Executive Board; in all other matters pertaining to em- ployment contracts, the Personnel Committee approves resolutions in lieu of the Supervisory Board. The Personnel Committee also adopts resolutions in lieu of the Supervi- sory Board in matters pertaining to the extension of loans within the meaning of Sections 89, 115 AktG and on the approval of contracts with Supervisory Board members pursuant to Section 114 AktG. To the extent it bears re- sponsibility, the Personnel Committee also represents the company in transactions with individual Executive Board members. Finally, the Personnel Committee decides on the approval of the transactions requiring the approval of the Supervisory Board, which have been delegated to the Personnel Committee. Members of the Personnel Com- mittee were, until the end of the annual shareholders' meeting on April 16, 2014, Dr. Giuseppe Vita, Chairman, Dr. h. c. Friede Springer and Dr. Gerhard Cromme; since the constituent meeting of the newly-elected Supervisory Board on April 16, 2014 the Personnel Committee com- prises Dr. Giuseppe Vita as Chairman and Dr. h. c. Friede Springer as Vice Chairwoman. of a member of the Executive Board alongside the associ- ated extension of the employment contract as a member of the Executive Board, and the issue of virtual stock option programs for Executive Board members and senior executives of the company. It also dealt with the individual goals and corporate goals for the cash component of the variable compensation of the Executive Board. The Audit Committee, notwithstanding the responsibility of the full Supervisory Board, is responsible for preparing the decisions to be made by the Supervisory Board on the adoption of the separate financial statements of the parent company and the approval of the consolidated financial statements of the Group, by means of conduct- ing a preliminary review of the separate financial state- ments, the Dependency Report, and the consolidated financial statements, as well as the management report for the company and the management report for the Group, the review of the profit utilization proposal, the discussion of the audit report with the independent audi- tor, and the monitoring of the risk management system, the effectiveness of the internal control system (ICS), the compliance management system and the internal auditing system. It is also responsible for reviewing the interim financial statements and interim reports, and for discuss- ing the report of the independent auditor on the critical review of the interim financial statements. With regard to the audit of the financial statements, the Audit Committee is responsible for preparing the proposal of the Supervi- sory Board to the annual shareholders’ meeting on the election of the independent auditor and the engagement of the independent auditor, and for adopting audit priori- ties, among other matters. Until the end of the annual shareholders' meeting on April 16, 2014 the Audit Com- mittee consisted of Dr. Giuseppe Vita, Chairman, Dr. h. c. Friede Springer, Klaus Krone, and Oliver Heine; during the constituent meeting of the newly-elected Supervisory Board on April 16, 2014 Lothar Lanz was elected as Chairman of the Audit Committee, Dr. Giuseppe Vita as Vice-Chairman, and Oliver Heine, Rudolf Knepper as well as Dr. h. c. Friede Springer were elected as further mem- bers of the Audit Committee. The Personnel Committee met five times during the re- porting period. It prepares, amongst other things, deci- sions of the full board regarding the extension of the term The Audit Committee held five meetings during the course of the financial year. It has been informed of the 83 Annual Report 2014 Axel Springer SE Report of the Supervisory Board scope, course, and result of the 2013 annual financial statements and consolidated financial statements, the decisions of the Supervisory Board regarding adoption of the financial statements, and prepared approval of the Group consolidated statements as well as the audited interim financial statements and reports. Alongside this the Audit Committee handled preparation of the passing of the resolution by the full board regarding the proposal at the annual shareholders' meeting to commission the independent auditor for the 2014 financial year. To this effect, the Supervisory Board was also in receipt of writ- ten confirmation from Ernst & Young GmbH Wirtschafts- prüfungsgesellschaft regarding their independence. In addition, the Audit Committee dealt with the audit priori- ties of the independent auditor for the 2014 financial year and issued the auditor with the audit assignment for the 2014 financial year. The Audit Committee also dealt with the monitoring of the risk management system, the effec- tiveness of the internal control system (ICS), of the com- pliance management system and of the internal audit system, as well as additional compliance issues. The Nominating Committee prepares the proposal of the Supervisory Board to the annual shareholders’ meeting on the election of Supervisory Board members; in particular, it proposes suitable candidates for the Supervisory Board, also in consideration of the diversity and independence criteria adopted by the Supervisory Board. It develops and reviews job profiles relative to the qualifications expected of Supervisory Board members by the company, and contin- ually adapts them to suit changing requirements. Until the annual shareholders' meeting on April 16, 2014, the Nomi- nating Committee composed of Dr. Giuseppe Vita, Chair- man, Dr. h. c. Friede Springer, and Dr. Michael Otto. Since the constituent meeting of the newly-elected Supervisory Board on April 16, 2014, the Nomination Committee is composed of Dr. Giuseppe Vita as Chairman and Dr. h. c. Friede Springer as Vice Chairwoman. The Nomination Committee met twice during the finan- cial year and dealt with the election of the entire Supervi- sory Board after the end of the term of office of the pre- vious Supervisory Board set out in the Articles of Association at the end of the 2014 annual shareholders' meeting, particularly regarding the identification of suita- ble candidates corresponding to the objectives of the Supervisory Board after the departures of Dr. Gerhard Cromme, Klaus Krone, and Dr. Michael Otto from their positions on the Supervisory Board, and prepared the proposals for the annual shareholders' meeting regarding elections. Separate financial statements of the parent company and consolidated financial statements of the Group; management report for the parent company and the Group Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft audited the annual financial statements of the parent company and the consolidated financial statements of the Group, as well as the combined management report of the parent company and the Group, all of which were prepared by the Executive Board for financial year 2014, and issued an unqualified audit opinion in every case. In connection with the audit, the independent auditor also noted in summary that the Executive Board has imple- mented a risk management system that fulfills the re- quirements of law, and that this system is generally suita- ble 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 Executive Board for the utilization of the distributable profit, as well as the audit reports of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, were provided to all members of the Supervisory Board in a timely manner. The documents were audited and discussed in the pres- ence of the independent auditor in the meetings of the Audit Committee on February 20, 2015, and February 27, 2015. The independent auditor reported on the key results of the audit and was available for additional information if required. No deficiencies in the internal control and risk management system, as it relates to the financial account- ing process, were noted. The independent auditor ex- plained further the scope, priorities, and costs of the audit. The independent auditor also provided services for the company (including affiliated companies) to the value of € 1.9 million in addition to services rendered for auditing. 84 Annual Re Axel Sprin eport 2014 nger SE No circums ty of the ind resolved to approve the company a Group, as w the parent stances that w dependent aud o recommend t e separate fina and the consoli well as the com company and ould cast doub ditor arose. The to the Supervis ancial statemen idated financia mbined manag the Group. bt on the impar e Audit Commi sory Board that nts of the paren l statements of ement report o rtiali- ittee t it nt f the of Report of f the Supervis sory Board Erns Both Sup inde st & Young Gm h reports were pervisory Board ependent audit mbH Wirtschaft e also provided d in advance. T tor reads as fo ftsprüfungsges d to each mem The audit opin ollows: sellschaft. mber of the ion of the “Bas ance sed on the aud e with our profe dit and evaluatio essional duties on conducted i , we hereby co in accord- onfirm that The Audit C the balance investigatio thereof, alo the separat and consol the combin and the Gro documents the report a and the rep prüfungsge independen Committee repo e sheet meeting ons carried out ongside their rec te financial stat idated financia ned manageme oup. The Supe s in question, h and recommen ports of Ernst & esellschaft, and nt auditor, who orted to the Su g of February 2 by the Commit commendation ements of the al statements of ent report of the ervisory Board h aving noted an ndations of the & Young GmbH d having discus o was in attenda upervisory Boar rd in e 27, 2015 on the sults ttee and the res ns for approval of ny parent compan nd f the Group, an e parent compa any he has reviewed th ered nd duly conside tee Audit Committ H Wirtschafts- sed them with ance. the The Superv audit results Supervisory Based on t the Superv statements financial sta manageme all of which cordingly, t SE were off visory Board ac s. Based on th y Board noted he recommend isory Board ap s of the parent c atements of the ent report of the were prepared he annual finan fficially adopted cknowledged a he results of its that it had no o dations of the A pproved the ann company and t e Group, as we e parent compa d by the Execu ncial statement d. he he aise. ee, and approved t own review, th objections to ra Audit Committe nual financial ed the consolidate ined ell as the comb any and the Gr roup, tive Board. Ac- - ger s of Axel Sprin The Superv Executive B ble profit an tion of the c and financin visory Board als Board concerni nd concurred w company’s fina ng plan. so reviewed the ing the utilizatio with that propo ancial year net i e proposal of th on of the distrib sal, in consider ncome, liquidit he buta- ra- ty, 1. th he factual infor mation contain ned in the repor rt is correct; he consideratio 2. th o of the legal tran nappropriately in on provided by sactions mentio high.” the company oned in the rep in respect port was not The Exec purs aud mee also and Sup repo resu obje repo Boa 312 Supervisory B cutive Board o suant to Sectio itor’s report on eting of Februa o reported orall provided add pervisory Board ort of the indep ults of its own r ections to raise ort of the indep ard’s declaratio (3) AktG. Board also revie on the dealings on 312 AktG a n this subject. ary 27, 2015, t y on the princ itional informat d acknowledge pendent audito review, the Su e with respect pendent audito on on the repo ewed the repo s with related p and the indepe At the Superv the independe ipal findings of tion, as reques ed and approv or. Based on th pervisory Boa to the results o or or the Execu ort pursuant to ort of the parties ndent isory Board nt auditor f the audit sted. The ved the he final rd had no of the audit utive Section Th Bo hanks to th ard and to he members o all emplo s of the Ex oyees xecutive Fina of th stan ally, the Supervi he Executive Bo nding work in th sory Board wis oard and all em he past year. shes to thank a mployees for the all members eir out- Berl The in, February 27 Supervisory B 7, 2015 Board The Execu company’s Section 31 (AktG) to th was also in tive Board also s dealings with 2 of the Germ he Supervisory n receipt of the o submitted its h related partie man Stock Corp y Board. The S e correspondin e s report on the s pursuant to porations Act Supervisory Bo ng audit report oard by Dr. G Cha Giuseppe Vita airman 85 Consolidated Financial Statements 87 Responsibility Statement 88 Auditor’s Report 89 Consolidated Statement of Financial Position 91 Consolidated Statement of Comprehensive Income 92 Consolidated Statement of Cash Flows 93 Consolidated Statement of Changes in Equity 94 Consolidated Segment Report Notes to the Consolidated Financial Statements 95 General information 114 Notes to the consolidated statement of financial position 134 Notes to the consolidated statement of comprehensive income 140 Notes to the consolidated statement of cash flows 141 Notes to the consolidated segment report 143 Other disclosures Annual Re Axel Sprin eport 2014 nger SE Resp ponsib bility S Statem ment Consolidate Re ed Financial S esponsibility Statements Statement th To the bes the applica financial sta cial positio Group, and review of th ness and t scription of with the ex st of our knowle able reporting p atements give n, liquidity, and d the Group m he developme he position of f the principal xpected develo edge, and in a principles, the a true and fair d financial perf management re nt and perform the Group, tog rewards and r opment of the accordance wit consolidated r view of the fin formance of th eport includes a mance of the b gether with a d isks associate Group. nan- he a fair busi- de- ed Berlin, Feb 5 bruary 17, 2015 Axel Spring ger SE Dr. Mathias s Döpfner Jan Bayer Dr. Julian D Deutz Dr. Andreas W Wiele 87 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Auditor’s Report Auditor’s Report We have audited the consolidated financial statements prepared by Axel Springer SE, 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 state- ments together with the combined management report of the Axel Springer Group and Axel Springer SE for the fiscal year from January 1 to December 31, 2014. The preparation of the consolidated financial statements and the combined management report of the Axel Springer Group and Axel Springer SE in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a para 1 HGB [“Handelsgesetzbuch”: “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 Axel Springer SE 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 state- ments in accordance with the applicable financial report- ing framework and in the combined management report of the Axel Springer Group and Axel Springer SE are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environ- ment of the Group and expectations as to possible mis- statements are taken into account in the determination of audit procedures. The effectiveness of the accounting- related internal control system and the evidence support- ing the disclosures in the consolidated financial state- ments and the report on the situation of the company Axel Springer SE and the Axel Springer Group are exam- ined 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 consolida- tion, 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 report on the situation of the Axel Springer Group and Axel Springer SE. In our opinion, our audit provides a sufficiently sound 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 IFRS as adopted by the EU, the additional requirements of Ger- man commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, financial posi- tion, and results of operations of the Axel Springer Group in accordance with these requirements. The combined management report of the Axel Springer Group and Axel Springer SE is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportu- nities and risks of future development. Berlin, February 20, 2015 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Glöckner Mielke Wirtschaftsprüfer Wirtschaftsprüferin 88 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Statement of Financial Position Consolidated Statement of Financial Position € millions ASSETS Non-current 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 due from related parties 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 Note 12/31/2014 12/31/2013 (4) (5) (6) (7) (36) (10) (26) (8) (9) (36) (10) (29) (2d), (5) 4,315.8 3,680.2 3,018.3 2,411.5 523.5 31.3 633.2 51.2 582.0 30.9 15.6 8.5 54.4 640.3 55.0 433.9 8.7 425.2 25.5 19.8 53.1 41.2 1,241.9 1,093.6 23.6 523.8 12.7 46.7 156.1 383.1 95.9 23.5 472.8 10.4 40.8 81.6 248.6 215.9 5,557.7 4,773.8 89 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Statement of Financial Position € millions EQUITY AND LIABILITIES Equity Shareholders of Axel Springer SE Non-controlling 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 Note 12/31/2014 12/31/2013 (11) 2,354.9 2,244.0 2,004.2 1,869.9 350.8 374.1 2,169.6 1,601.7 (13) (14) (15) (36) (16) (26) (13) (14) (15) (36) (16) (2d), (5) 376.6 76.7 1,047.0 0.3 7.7 333.3 327.9 267.0 56.0 718.7 0.7 4.1 241.7 313.5 1,033.2 928.1 23.1 209.6 3.9 20.8 169.1 1.1 313.2 270.7 9.2 40.4 365.8 68.0 11.0 37.8 326.7 90.8 5,557.7 4,773.8 90 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Statement of Comprehensive Income Consolidated Statement of Comprehensive Income € millions 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 Income from continued operations Income from discontinued operations Net income Net income attributable to shareholders of Axel Springer SE Net income attributable to non-controlling interests Basic/diluted earnings per share (in €) from continued operations Basic/diluted earnings per share (in €) from discontinued operations € millions Consolidated Statement of Recognized Income and Expenses Note Net income Actuarial gains/losses from defined benefit pension obligations Items that may not be reclassified into the income statement in future periods Currency translation differences Changes in fair value of available-for-sale financial assets Changes in fair value of derivatives in cash flow hedges Other income/loss from investments accounted for using the equity method Items that may be reclassified into the income statement in future periods if certain criteria are met Other income/loss Comprehensive income Comprehensive income attributable to shareholders of Axel Springer SE Comprehensive income attributable to non-controlling interests (28) – 113.0 791.0 694.7 96.3 91 Note 2014 2013 3,037.9 2,801.4 164.7 29.0 145.3 17.7 – 990.0 – 925.8 – 974.4 – 921.6 – 255.6 – 155.1 – 757.2 – 697.7 (18) (19) (20) (21) (22) (23) (24) (25) (26) (2d) (27) (27) 81.4 – 2.5 83.9 – 21.1 – 78.9 235.7 668.3 904.1 799.8 104.3 1.71 6.37 2014 904.1 – 73.0 – 73.0 – 27.2 – 13.1 – 0.1 0.4 – 40.0 25.7 1.8 23.9 – 23.1 – 88.1 178.6 65.1 243.7 197.1 46.6 1.34 0.65 2013 243.7 2.5 2.5 – 65.4 11.5 – 0.4 0.0 – 54.3 – 51.9 191.9 150.7 41.1 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows € millions Net income Reconciliation of net income to the cash flow from operating activities Depreciation, amortization, impairments, and write-ups Result from investments accounted for using the equity method Dividends received from investments accounted for using the equity method Result from disposal of consolidated subsidiaries and business units and intangible assets, property, plant, and equipment, and financial 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 1) 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 non-current financial assets Proceeds from investments in short-term financial funds 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 non-current financial assets Cash flow from investing activities 1) Dividends paid to shareholders of Axel Springer SE Dividends paid to other shareholders Purchase of non-controlling interests Disposal of non-controlling interests Purchase/Issuance of treasury shares Repayments of liabilities under finance leases Proceeds from other financial liabilities Repayments of other financial liabilities Additions to plan assets Other financial transactions Cash flow from financing activities 1) 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 relating to assets held for sale Cash and cash equivalents at end of period 1) For the portion attributable to discontinued operations see note (2d) € millions Cash flows contained in the cash flow from operating activities Income taxes paid Income taxes received Interest paid Interest received Dividends received 92 Note (7) (7) (29) 2014 904.1 249.9 2.5 3.0 2013 243.7 164.9 10.1 5.4 – 746.9 – 0.7 19.0 – 42.0 5.1 – 18.6 23.8 – 39.2 360.8 0.7 535.1 225.6 0.0 – 96.2 9.8 3.4 5.4 6.4 3.6 – 28.7 423.4 1.7 1.1 87.6 10.8 – 98.4 – 169.8 – 11.9 – 178.8 – 167.9 – 23.2 0.0 2.2 4.9 – 0.2 320.3 (2c) – 507.7 (29) – 64.8 92.7 – 178.1 – 102.7 – 460.8 6.0 0.0 – 0.9 567.0 – 170.9 – 315.0 0.0 – 3.5 – 25.0 – 7.0 (29) – 343.8 – 210.9 109.6 – 2.8 0.1 248.6 27.6 383.1 33.7 – 7.9 – 3.7 254.1 – 27.6 248.6 (29) 2014 2013 – 401.5 – 183.1 34.0 – 30.4 5.6 14.9 39.8 – 21.7 8.8 19.2 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity € millions Balance as of 01/01/2013 Net income Other income/loss Comprehensive income Dividends paid Purchase/Issuance of treasury shares Change in consolidated companies Purchase and disposal of non-controlling interests Other changes Balance as of 12/31/2013 Net income Other income/loss Comprehensive income Dividends paid Change in consolidated companies Purchase and disposal of non-controlling interests Other changes Balance as of 12/31/2014 Accumulated other comprehensive income Changes in fair value Sub- scribed capital Ad- ditional paid-in capital Accumu- lated retained earnings Treasury shares Currency translation Available- for-sale financial assets Deriva- tives in cash flow hedges Other equity Share- holders of Axel Springer SE Non- controlling interests Equity 98.9 44.0 1,755.9 – 2.8 53.0 1.4 – 0.2 – 62.6 1,887.5 365.6 2,253.1 197.1 197.1 – 167.9 2.1 2.8 – 0.1 – 5.6 0.2 – 56.7 – 56.7 8.0 8.0 – 0.1 – 0.1 2.3 2.3 197.1 – 46.4 150.7 46.6 – 5.5 243.7 – 51.9 41.1 191.9 – 167.9 – 23.2 – 191.1 4.9 0.0 – 0.1 – 5.4 4.9 2.9 2.1 2.9 2.2 – 14.5 – 19.9 98.9 44.2 1,781.6 0.0 – 3.7 9.4 – 0.3 – 60.3 1,869.9 374.1 2,244.0 799.8 799.8 – 178.1 – 23.3 – 23.3 – 9.1 – 9.1 – 0.1 – 0.1 – 72.6 – 105.1 – 72.6 694.7 – 7.9 96.3 – 113.0 791.0 799.8 104.3 904.1 – 178.1 – 51.2 – 229.2 0.0 9.5 9.5 – 384.9 – 79.3 – 464.1 2.5 1.2 3.7 – 383.4 – 1.4 1.1 1.4 98.9 45.3 2,021.3 0.0 – 28.5 0.3 – 0.4 – 132.9 2,004.2 350.8 2,354.9 93 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Consolidated Segment Report Consolidated Segment Report Operating segments (31) Paid Models Marketing Models Classified Ad Models Services/Holding Consolidated totals € millions 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 External revenues 1,561.4 1,521.5 794.1 716.5 512.0 402.6 170.5 160.8 3,037.9 2,801.4 Internal revenues 7.8 16.8 11.0 9.7 0.5 1.1 Segment revenues 1,569.1 1,538.3 805.1 726.3 512.5 403.7 205.5 376.1 211.0 371.8 244.2 250.1 109.7 103.4 221.4 163.8 – 68.2 – 63.0 507.1 454.3 15.6% 16.4% 13.8% 14.4% 43.2% 40.7% 16.7% 16.2% 4.2 3.6 4.6 4.2 3.5 – 1.5 3.4 – 3.3 – 1.6 – 1.5 0.0 0.0 3.8 0.0 4.0 10.7 12.1 0.0 – 1.2 1.8 – 35.9 – 24.9 – 16.9 – 9.6 – 19.1 – 14.2 – 40.6 – 46.0 – 112.5 – 94.7 208.2 225.2 92.8 93.9 202.3 149.6 – 108.8 – 108.9 394.6 359.7 EBITDA1) EBITDA margin1) Thereof income from investments Thereof accounted for using the equity method Depreciation, amortiza- tion, impairments and write-ups (except from non-recurring effects and purchase price allocations) EBIT1) Amortization and impairments from purchase price allocations Non-recurring effects – 1.5 8.6 37.8 – 9.0 41.6 – 19.1 – 18.5 – 47.6 – 12.0 – 37.0 – 28.9 – 12.8 – 0.1 – 32.9 – 0.1 – 103.9 – 59.4 2.8 45.0 – 10.4 Segment earnings before interest and taxes Financial result Income taxes Income from continued operations Income from discontinued operations Net income 187.6 215.3 82.9 72.9 206.9 107.9 – 141.7 – 106.2 335.7 289.8 – 21.1 – 23.1 – 78.9 – 88.1 235.7 178.6 668.3 65.1 904.1 243.7 1) Adjusted for non-recurring effects (see note (31)). Geographical information (31) € millions Germany Other countries Consolidated totals 2014 2013 2014 2013 2014 2013 External revenues 1,728.7 1,637.0 1,309.3 1,164.4 3,037.9 2,801.4 Non-current segment assets 1,099.1 1,180.2 2,474.0 1,926.5 3,573.1 3,106.7 94 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements General information (1) Basic principles Axel Springer SE is an exchange-listed stock corporation with its registered head office in Berlin, Germany. The principal activities of Axel Springer SE and its subsidiar- ies (“Axel Springer Group”, “Axel Springer” or the “Group”) are described in note (30a). On February 17, 2015, the Executive Board of Axel Springer SE authorized the consolidated financial state- ments for fiscal year 2014 and subsequently presented them to the Supervisory Board for approval. The consol- idated financial statements were prepared by application of Section 315a HGB in accordance with the Internation- al Financial Reporting Standards (IFRS) of the Interna- tional Accounting Standards Board (IASB) and the inter- pretations of the IFRS Interpretations Committee (IFRS IC) approved by the IASB, in effect and recognized by the European Union (EU) at the reporting date. The re- porting currency is the Euro (€); unless otherwise indi- cated, all figures are stated in Euro millions (€ millions). Totals and percentages have been calculated based on the Euro amounts before rounding and may differ from a calculation based on the reported million Euro amounts. The consolidated financial statements and consolidated management report will be published in the Federal Gazette in Germany. (2) Consolidation (a) Consolidation principle The financial consolidated statements include Axel Springer SE and its subsidiaries over which Axel Springer SE either directly or indirectly has control, can influence variable outflows from the subsidiary, and is exposed to the variability of these outflows. 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 remain- ing positive difference allocated to our interests is capital- ized as goodwill and recognized in the amount allocated to our shares, unless we acquire all shares in the com- pany. Negative differences are immediately recognized as income. The acquisition date indicates the time at which the option for gaining control of the acquired busi- ness or company was obtained. We offset differences arising from disposals and purchases of non-controlling interests in equity. Associated companies in which the Axel Springer Group can exert significant influence over the financial and operating policies, as well as joint venture companies that are managed jointly by Axel Springer and one or more other parties, are included in the consolidated financial statements by application of the equity method. The IFRS separate and consolidated financial statements of these companies as at the Axel Springer Group’s reporting date, respectively, serve as the basis for apply- ing the equity method. Goodwill and assets and liabilities included in the amortized carrying amount are accounted for using the accounting principles applied to business combinations. Losses 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 prof- its and losses are eliminated on a pro-rated basis. The carrying amounts of investments are tested for impair- ment; if impairments exist, they are written down to the lower recoverable amount. 95 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (b) Companies included in the consolidated financial statements Companies included in the consolidated financial state- ments broke down as follows: Fully consolidated companies Germany Other countries Investments accounted for using the equity method Germany Other countries 12/31/2014 12/31/2013 67 92 5 5 64 82 4 3 Consolidated companies are listed in note (42). Essen- tially, the following changes occurred in 2014 In June, we acquired 88 % of the shares in Vertical Media GmbH, Berlin, and 51 % of the shares in ImmoSolve GmbH, Bad Bramstedt. The companies have been in- cluded in our consolidated financial statements since the acquisition date. At the end of July 2014, we purchased 51 % of the shares in Car&Boat Media S.A.S., Paris, France, and have fully consolidated this company as well as one further foreign subsidiary since then. At the beginning of August 2014, we acquired all of the shares in MeinProspekt GmbH, Munich, and have fully consolidated the company since then. At the end of September 2014 we acquired 65 % of the shares in WEBIMM SAS, Paris, France, and have fully consolidated the company since then. At the beginning of January, we acquired 60 % of the shares in My Little Paris S.A.S., Paris, France, and 100 % of the shares in Merci Alfred S.A.S., Paris, France. As a consequence, both entities and two further foreign sub- sidiaries have been fully consolidated since then. At the beginning of October 2014 we acquired 16.8 % of the shares in Ozy Media, Inc., Mountain View, USA. Since then, we have included the company as an associate in our consolidated financial statements using the equity method. Since the beginning of January, Project A Ventures GmbH & Co. KG, Berlin, and MDB S.A.S., Evry, France, have been included in our consolidated financial state- ments as associate companies using the equity method. At the end of October 2014 we acquired 100 % of the shares in Evenbase Recruitment Ltd., London, Great Britain, and have fully consolidated the company since then. The acquisition of all shares in the N24 Group, Berlin, was finalized at the end of February. As a consequence of this acquisition, the N24 Group, consisting of three domestic subsidiaries after a group internal reorganiza- tion, has been fully consolidated since then. At the end of May 2014, we acquired 100 % of the shares in Coral-Tell Ltd., Tel Aviv, Israel, and have fully consolidated the company since then. At the end of May 2014, we purchased 80 % of the shares in Skapiec Sp. z.o.o., Wroclaw, Poland, and 80 % of the shares in Opineo Sp. z.o.o., Wroclaw, Poland. The two companies have been consolidated since then. At the beginning of November 2014, the integration of the Hungarian business activities of Axel Springer and Ringier in Ringier Axel Springer Media AG was finalized, and Blikk Kft., Budapest, Hungary, a subsidiary contrib- uted by Ringier, was fully consolidated for the first time. In this context, we sold our shares in five previously fully- consolidated Hungarian companies at the end of July 2014. The acquisition of 50 % of shares in AS TYFP Media GmbH & Co. KG, Munich, was finalized in November. Since then, the company has been included in the con- solidated financial statements using the equity method. 96 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The sale of the Group’s German regional newspapers, TV program guides, and women’s magazines to FUNKE Mediengruppe was finalized on April 30, 2014. As a con- sequence, seven domestic companies were deconsoli- dated. Furthermore, the sale of the business activities and investments in the Czech Republic became effective on April 30, 2014. As a result, two companies that were previously fully consolidated and one company that was formerly accounted for using the equity method were de- consolidated. In the middle of December, we sold our shares in Metri- go GmbH, Hamburg, which was previously fully consoli- dated. As a consequence, the company was deconsoli- dated. (c) Acquisitions and divestitures To broaden our activities in the women’s portals sector, we acquired 60 % of the shares in My Little Paris S.A.S., Paris, France, and 100 % of the shares in Merci Alfred S.A.S., Paris, France, via the aufeminin Group in January 2014. Reciprocal call and put options were agreed upon for the remaining 40 % of the shares in My Little Paris, in which the purchase price to be paid has not been contractually limited and will be measured by the future corporate earnings of My Little Paris. The acquisition costs amounted to € 59.6 million and consisted of the purchase price paid in the reporting period in the amount of € 21.1 million, the payment of a liability assumed in the amount of € 0.6 million, and a contingent purchase price liability in the value of € 37.9 million for the agreed option rights, which was recorded at the acquisition date. The acquisition-related expenses recorded in other operating expenses of the fiscal year amounted to € 0.2 million. Based on the purchase price allocation, the acquisition costs were allocated to the purchased assets and liabili- ties at the acquisition date as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost Goodwill Carrying amount after acquisition 16.8 0.1 0.1 4.2 1.4 3.4 – 3.9 – 1.6 – 5.8 14.7 59.6 44.9 Of the intangible assets acquired, intangible assets with carrying amounts of € 10.1 million have indefinite useful lives. The non-tax-deductible goodwill is above all at- tributable to inseparable values such as employee exper- tise and expected synergy effects from the integration, and was allocated to the Marketing Models segment. The gross amount of the acquired trade account receiv- ables was € 4.4 million. Corresponding valuation allow- ances in the amount of € 0.2 million were recorded. Since first inclusion as of January 1, 2014, My Little Paris and Merci Alfred contributed to consolidated revenues in the amount of € 22.7 million and to consolidated net income in the amount of € 2.9 million. At the end of February 2014, we acquired 100 % of the shares in N24 Media GmbH, Berlin, and thus obtained control over the N24 Group. The acquisition represents an additional strategic investment towards digitalization of journalism. The news station N24 will become a cen- tralized supplier of video for all Axel Springer brands. At 97 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements the same time, N24 and the WELT Group were merged in the newly-established WeltN24 as of January 1, 2015. The acquisition costs consisting of the paid purchase price amounted to € 116.7 million. The acquisition- related expenses recorded in other operating expenses of the fiscal year amounted to € 0.3 million. Based on the purchase price allocation, the acquisition costs were allocated to the purchased assets and liabili- ties at the acquisition date as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost Goodwill Carrying amount after acquisition 42.1 3.9 4.8 7.5 7.1 31.8 – 25.1 – 8.5 – 12.4 51.4 116.7 65.3 Of the intangible assets acquired, intangible assets with carrying amounts of € 18.0 million have indefinite useful lives. The non-tax-deductible goodwill is above all attribut- able to inseparable values such as employee expertise and expected synergy effects from the integration, and was allocated to the Paid Models segment. The gross amount of the acquired trade account receiv- ables was € 8.1 million. Corresponding valuation allow- ances in the amount of € 0.6 million were recorded. amount of € 2.9 million. If N24 had already been fully consolidated at January 1, 2014, N24 would have con- tributed to consolidated revenues in the amount of € 83.2 million and to consolidated net income in the amount of € 2.5 million. To broaden our activities in the online classifieds sector, we have acquired 100 % of the shares in Coral-Tell Ltd., Tel Aviv, Israel, at the end of May 2014. We thus gained control over the leading classified ad portal Yad2 (yad2.co.il) in Israel. The acquisition was carried out by Axel Springer Digital Classifieds. The acquisition costs amounted to € 170.1 million and consisted of the purchase price paid in the reporting period. The acquisition-related expenses recorded in other operating expenses of the fiscal year amounted to € 0.4 million. Based on the purchase price allocation, the acquisition costs were allocated to the purchased assets and liabili- ties at the acquisition date as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost Goodwill Carrying amount after acquisition 78.4 0.2 1.6 5.2 0.5 6.0 – 8.4 – 0.5 – 21.1 61.9 170.1 108.2 Since first inclusion as of February 28, 2014, N24 con- tributed to consolidated revenues in the amount of € 70.2 million and to consolidated net income in the Of the intangible assets acquired, intangible assets with carrying amounts of € 47.3 million have indefinite useful lives. The non-tax-deductible goodwill is above all at- 98 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements tributable to inseparable values such as employee exper- tise, expected synergy effects from the integration and the strategic advantages resulting from the leading mar- ket position of the acquired company, and was allocated to the Classified Ad Models segment. Based on the purchase price allocation, the acquisition costs were allocated to the purchased assets and liabili- ties at the acquisition date as follows: The gross amount of the acquired trade account receiv- ables was € 5.5 million. Corresponding valuation allow- ances in the amount of € 0.4 million were recorded. € millions Intangible assets Property, plant, and equipment Carrying amount after acquisition 81.4 0.7 8.6 2.5 3.2 – 9.8 – 3.5 – 26.6 56.6 153.2 96.6 Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost Goodwill Of the intangible assets acquired, intangible assets with carrying amounts of € 38.8 million have indefinite useful lives. The non-tax-deductible goodwill is above all at- tributable to inseparable values such as employee exper- tise, expected synergy effects from the integration and the strategic advantages resulting from the leading mar- ket position of the acquired company, and was allocated to the Classified Ad Models segment. The gross amount of the acquired trade account receiv- ables was € 9.7 million. Corresponding valuation allow- ances in the amount of € 1.1 million were recorded. Since first inclusion, Car & Boat Media contributed to consolidated revenues in the amount of € 21.3 million and to consolidated net income in the amount of € 4.0 million. If Car & Boat Media had already been fully consolidated at January 1, 2014, Car & Boat Media would have contributed to consolidated revenues in the amount of € 50.4 million and to consolidated net income in the amount of € 9.1 million. Since first inclusion, Coral-Tell contributed to consolidat- ed revenues in the amount of € 11.2 million and to con- solidated net income in the amount of € 3.4 million. If Coral-Tell had already been fully consolidated at Janu- ary 1, 2014, Coral-Tell would have contributed to consol- idated revenues in the amount of € 17.4 million and to consolidated net income in the amount of € 4.2 million. To broaden our activities in the online classifieds sector, we have acquired 51 % of the shares in Car & Boat Media S.A.S., Paris, France, at the end of July 2014. With LaCentrale.fr the company particularly operates the leading specialized classifieds ad portal for used cars in France as well as other portals in the car and boat sector. Reciprocal call and put options were agreed upon for the remaining 49 % of the shares, in which the purchase price to be paid will be measured by the future corporate earnings of Car & Boat Media and has not been contrac- tually limited. The acquisition was carried out by Axel Springer Digital Classifieds. The acquisition costs amounted to € 153.2 million and consisted of the purchase price paid in the reporting period in the amount of € 72.9 million, and a contingent purchase price liability in the value of € 80.3 million for the agreed option rights, which was recorded at the acquisition date. The acquisition-related expenses recorded in other operating expenses of the fiscal year amounted to € 0.5 million. 99 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements To broaden our activities in the online classifieds sector, we have acquired 100 % of the shares in Evenbase Recruitment Ltd., Havant, Great Britain, via the StepStone Group at the end of October 2014. Evenbase Recruitment Ltd. operates the job website jobsite.co.uk along with brands such as CityJobs.com and eMed- careers.com. The preliminary acquisition costs amounted to € 114.4 million and consisted of the purchase price paid in the reporting period. The acquisition-related expenses recorded in other operating expenses of the fiscal year amounted to € 2.3 million. Based on the preliminary purchase price allocation, the preliminary acquisition costs were allocated to the pur- chased assets and liabilities at the acquisition date as follows: € millions Intangible assets Property, plant, and equipment Trade receivables Other assets Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost (preliminary) Goodwill (preliminary) Carrying amount after acquisition 56.5 1.3 4.3 7.2 – 4.3 – 1.7 – 10.7 52.6 114.4 61.8 The purchase price allocation considers all knowledge and adjusting events about conditions that already exist- ed at the acquisition date, and has not yet been com- pleted, particularly due to the closeness in time to the reporting date. Of the intangible assets acquired, intangible assets with carrying amounts of € 32.6 million have indefinite useful lives. The non-tax-deductible goodwill is above all at- tributable to inseparable values such as employee exper- tise, expected synergy effects from the integration and the strategic advantages resulting from the leading mar- ket position of the acquired company, and was allocated to the Classified Ad Models segment. The gross amount of the acquired trade account receiv- ables was € 4.4 million. Corresponding valuation allow- ances in the amount of € 0.1 million were recorded. Since first inclusion, Evenbase contributed to consolidat- ed revenues in the amount of € 6.1 million and to con- solidated net income in the amount of € 1.1 million. If Jobsite had already been fully consolidated at Janu- ary 1, 2014, Jobsite would have contributed to consoli- dated revenues in the amount of € 38.7 million and to consolidated net income in the amount of € 7.7 million. The other business combinations finalized in the year 2014 included the acquisition of Skapiec Sp. z o.o. (80 %) and Opineo Sp. z o.o. (80 %), Vertical Media GmbH (88 %), ImmoSolve GmbH (51 %), MeinProspekt GmbH (100 %), WEBIMM SAS (65 %) and Blikk Kft. (100 %). These acquisitions were generally carried out in the con- text of our strategy to become the leading digital pub- lisher and individually had no major effects on the finan- cial position, liquidity, and financial performance of the Axel Springer Group during the 2014 financial year. The consideration transferred for these acquisitions in the amount of € 40.3 million contained the purchase prices paid in the financial year as well as contingent consideration in the amount of € 5.7 million. The acquisi- tion-related expenses recorded in other operating ex- penses amounted to € 1.5 million. The contingent consideration resulted from option rights for the acquisition of the remaining shares in the compa- nies. They were measured on the basis of the current fair value of the options at the acquisition date. The current fair value predominantly depends on earnings perfor- mance of the acquired companies in the years prior to possible exercise dates of the options. 100 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Based on the purchase price allocations, the cumulative acquisition costs were allocated to the purchased assets and liabilities at the respective acquisition dates as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Deferred tax liabilities Net assets Share of non-controlling interests in net assets Acquisition cost Goodwill Carrying amount after acquisition 25.1 0.2 0.0 2.1 1.1 4.0 – 3.6 – 6.1 22.9 5.2 40.3 22.6 Of the intangible assets acquired in these acquisitions, intangible assets with carrying amounts of € 14.8 million have indefinite useful lives. The non-tax-deductible goodwill is above all attributable to inseparable values such as employee expertise, expected synergy effects from the integration and is assigned to the Paid Models (€ 8.8 million), Marketing Models (€ 8.7 million), and Classified Ad Models (€ 5.2 million) segments. Since their respective initial consolidation, these compa- nies have contributed to 2014 consolidated revenues in the amount of € 8.6 million and to 2014 consolidated net income in the amount of € 1.5 million. If the acquisitions had already been finalized on January 1, 2014, 2014, consolidated revenues would have increased by € 13.9 million, and consolidated net income by € 2.8 million. In December 2014, Axel Springer increased its share in Axel Springer Digital Classifieds GmbH from 70 % to 85 % via a cash payment in the amount of € 446 million. The proportion of net assets related to non-controlling interests in Axel Springer Digital Classifieds was reduced by € 85.0 million. The accumulated retained earnings related to shareholders of Axel Springer SE fell by € 362.6 million and the other accumulated comprehen- sive income increased by € 1.5 million. In addition, Axel Springer has agreed on a binding basis with General Atlantic regarding an option to acquire the remaining 15 % of the shares. As far as it is possible and allowed, General Atlantic will receive Axel Springer shares in re- turn if the option is exercised. In the event that Axel Springer shares are not allowed to be granted, Axel Springer can acquire the remaining 15 % of the shares for a purchase price of an additional € 446 million plus interest. Additional transactions carried out in 2014, as well as finalizations of purchase price allocations arising from acquisitions of companies in the prior year, had no mate- rial effects individually and collectively on the financial position, liquidity, and financial performance of the Axel Springer Group. In November 2014 an agreement was signed regarding acquisition of 51 % of shares in @Leisure Holding B.V., Amsterdam, the Netherlands, and its subsidiaries. The company is a leading European operator of online bro- kerage portals for vacation home rentals and operates – among others – the portals belvilla.com and casamun- do.com. The transaction was finalized at the beginning of January 2015. The preliminary acquisition costs amount- ed to € 64.8 million. The acquisition-related expenses recorded in other operating expenses of the fiscal year amounted to € 0.8 million. Because the acquisition oc- curred shortly before the publication of this Annual Re- port, audited financial information regarding the acquired net assets is not yet available. 101 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Acquisitions and divestitures in the prior year: In the context of the growth campaign in the online clas- sified advertising sector, we acquired control of Saon- group Ltd., Dublin, Ireland, and thus of its subsidiaries (hereinafter collectively: Saongroup) at the beginning of November 2013. Saongroup is a worldwide operator of online job portals. Of the intangible assets acquired, intangible assets with carrying amounts of € 16.0 million have indefinite useful lives. The non-tax-deductible goodwill is above all attribut- able to inseparable values such as employee expertise, expected synergy effects from the integration and the strategic advantages resulting from the leading market position of the acquired company and was allocated to the Classified Ad Models segment. The preliminary acquisition costs in the amount of the purchase price paid in 2013 totaled € 76.1 million. The acquisition-related expenses recorded in other operating expenses of the reporting year 2013 amounted to € 1.4 million. Based on the preliminary purchase price allocations as of December 31, 2013, the preliminary acquisition costs were allocated to the purchased assets and liabilities as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost (preliminary) Goodwill (preliminary) Carrying amount after acquisition 40.8 0.3 1.6 2.5 2.9 1.8 – 4.3 – 1.8 – 8.5 35.2 76.1 40.9 The gross amount of the acquired trade accounts re- ceivable was € 2.6 million. Corresponding valuation allowances in the amount of € 0.1 million were recorded. Since first inclusion, Saongroup contributed to 2013 consolidated revenues in the amount of € 1.8 million and to 2013 consolidated net income in the amount of € - 0.6 million. If Saongroup had already been fully con- solidated at January 1, 2013, Saongroup would have contributed to 2013 consolidated revenues in the amount of € 17.2 million and to 2013 consolidated net income in the amount of € – 3.4 million. In the context of the growth campaign in the online clas- sified advertising sector, we acquired control of YOUR- CAREERGROUP International GmbH & Co. KG, Düssel- dorf, and YourCareerGroup AG, Düsseldorf, (hereinafter collectively YourCareerGroup) at the end of December 2013. YourCareerGroup is Germany’s leading operator of online job portals for the hotel, gastronomy, and tour- ism industries. The preliminary acquisition costs amounted to € 47.5 million, comprising the purchase price of € 39.1 million paid in 2013, a liability of € 6.9 million for a purchase price retention, and an expected purchase price adjustment of € 1.5 million recognized as a liability. The acquisition-related expenses recorded in other op- erating expenses of the reporting year 2013 amounted to € 0.3 million. 102 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Based on the preliminary purchase price allocations as of December 31, 2013, the preliminary acquisition costs were allocated to the purchased assets and liabilities as follows: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Trade payables Deferred tax liabilities Net assets Acquisition cost (preliminary) Goodwill (preliminary) Carrying amount after acquisition 20.4 0.1 0.0 0.5 0.3 2.3 – 1.1 0.0 – 5.6 16.8 47.5 30.7 Of the intangible assets acquired, intangible assets with carrying amounts of € 10.0 million have indefinite useful lives. The amount of € 5.0 million of the resulting goodwill is expected to be deductible for tax purposes. The goodwill is above all attributable to inseparable values such as em- ployee expertise, expected synergy effects from the inte- gration and the strategic advantages resulting from the leading market position of the acquired company and was allocated to the Classified Ad Models segment. The gross amount of the acquired trade accounts receiva- bles was € 0.5 million. Corresponding valuation allowances in the amount of € 0.1 million were recorded. Due to the acquisition at the end of the financial year, no revenues and no operating profits from YourCareerGroup were recognized in the 2013 consolidated financial state- ments. If YourCareerGroup had already been fully consoli- dated at January 1, 2013, YourCareerGroup would have contributed to 2013 consolidated revenues in the amount of € 6.6 million and to 2013 consolidated net income in the amount of € 0.6 million. At the end of December 2013, Autoreflex.com SAS, Paris, France, and two related French holding companies were deconsolidated because the possibility of exercis- ing the call options enabling control at any time no longer exists. The loss on deconsolidation recorded in other operating expenses amounted to € 14.5 million. The following table shows the carrying amounts of the ass¬ets and liabilities disposed of: € millions Goodwill Other intangible assets Property, plant, and equipment Trade receivables Other assets Cash and cash equivalents Provisions and other liabilities Trade payables Deferred tax liabilities Disposal net assets Share of non-controlling interests in net assets Deconsolidation result Carrying amount 9.4 13.6 0.1 5.5 0.6 1.0 – 9.7 – 2.0 – 4.6 13.9 – 0.6 – 14.5 Additional transactions carried out in fiscal year 2013, as well as finalizations of purchase price allocations arising from acquisitions of companies in the prior year, had no material effects individually and collectively on the finan- cial position, liquidity, and financial performance of the Axel Springer Group. (d) Discontinued operations As in the previous year, the German regional newspapers, TV program guides, and women’s magazines as well as the business activities and investments held by Ringier Axel Springer Media in the Czech Republic, are shown separately as discontinued operations in the 2014 consol- idated financial statements. 103 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The assets and liabilities of the sold operations are shown in the following table: € millions Goodwill Other intangible assets Property, plant, and equipment Non-current financial assets Deferred tax assets Inventories Trade receivables Other assets Cash and cash equivalents Provisions for pensions Other provisions Trade payables Other liabilities Deferred tax liabilities Disposal net assets Cumulative translation differences Net realizable value after deduction of contractual guarantees Gain on disposal before taxes Income taxes Gain on disposal after taxes Carrying amounts 41.1 86.5 21.5 5.9 3.2 2.5 13.2 15.1 38.1 – 17.2 – 6.4 – 8.5 – 40.5 – 18.0 136.4 6.6 1,040.4 897.4 – 248.3 649.2 The sale of the Group’s German regional newspapers, TV program guides, and women’s magazines to FUNKE Mediengruppe was finalized on April 30, 2014, with economic effect as of January 1, 2014. Before the con- tractually agreed purchase price adjustment the pur- chase price was € 920 million. Upon finalization of the purchase agreement a provisional purchase price of € 874.8 million was calculated. This calculation reflected the circumstance, among others, that the buyer as- sumed net liabilities as part of the transaction. Of the provisional purchase price, an amount of € 634.1 million was paid in cash; for the balance, FUNKE Mediengruppe assumed a multi-year, subordinated loan obligation vis- à-vis Axel Springer SE in the amount of € 240.7 million. The provisional purchase price was increased by € 1.9 million as of December 31, 2014. The final pur- chase price calculation will be carried out in the first half of 2015. In connection with the disposal, a tax burden of € 248.3 million is anticipated. In order to fulfill a proviso imposed in connection with merger control law, FUNKE Mediengruppe sold some of the TV program guides acquired under the transaction, as well as some of its own TV program guides, to a company of Klambt Mediengruppe. To assist in the financing of this acquisition, Axel Springer SE guaranteed a bank loan taken out by this company of Klambt Me- diengruppe, up to an amount of € 51.0 million (Value as of December 31, 2014: € 43.1 million). In addition, Ringier Axel Springer Media AG has sold its business activities and investments in the Czech Repub- lic to two Czech entrepreneurs effective with approval from the Czech cartel authorities on April 30, 2014. These activities included the leading mass-circulation daily BLESK and the leading news magazine REFLEX, as well as automotive magazines and women’s magazines. The purchase price that was based on a company value of € 170 million amounted to € 196.5 million and reflect- ed particularly the net assets transferred to the buyer 104 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The results of the discontinued operations are as follows: (e) Translation of separate financial statements € millions Revenues Other operating income Expenses Operating result from discontinued operations (before taxes) Income taxes Operating result from discontinued operations (after taxes) 2014 181.3 2.8 2013 572.6 8.6 – 155.7 – 476.0 28.4 – 9.1 105.1 – 28.0 19.3 77.2 Impairment loss due to remeasurement to fair value less costs to sell 0.0 – 12.1 Gain on disposal of discontinued operations before taxes Taxes on the gain on disposal Gain on disposal of discontinued operations after taxes Income from discontinued operations Thereof attributable to shareholders of Axel Springer SE Thereof attributable to non-controlling interests 897.4 – 248.3 649.2 668.4 0.0 0.0 0.0 65.1 630.7 64.2 37.7 0.9 The following table shows the cash inflows and cash outflows attributed to the discontinued operations: € millions Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 2014 21.5 533.5 0.0 2013 84.5 – 3.9 0.0 denominated in foreign currency Assets and liabilities of subsidiaries for which the func- tional currency is not the euro have been translated at the exchange rate in effect on the reporting date. The goodwill and fair value adjustments of assets and liabili- ties 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 reporting date. Items of the income statement of these subsidiaries have been translated at the weighted average exchange rate for the year. Equity components have been translated at the historical exchange rate at the date of origination. Foreign exchange differences resulting from the transla- tion have been recognized within accumulated other comprehensive income and/or non-controlling 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: Average price Exchange rate on balance sheet date 2014 2013 12/31/2014 12/31/2013 4.18 1.21 4.20 1.23 4.32 1.20 4.15 1.23 308.60 296.72 315.31 297.02 1 € in foreign currency Polish zloty Swiss franc Hungarian forint British pound 0.81 0.85 0.78 0.83 (3) Explanation of significant accounting and valuation methods (a) Basic Principals The accounting and valuation principles applied uniformly across the Axel Springer Group in fiscal year 2014 are basically the same as those applied in the prior year. For information on the accounting and valuation methods resulting from new or revised IFRSs and IFRS IC Inter- pretations, please refer to note (3q). 105 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (b) Recognition of income and expenses The Axel Springer Group mainly generates circulation 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 the economic benefits will flow to the enterprise. Revenues are stated net of any discounts allowed. Revenues from services rendered over a certain period in an indefinite number of transac- tions are recognized on a straight-line basis over the contractual term. Circulation revenues encompass the sales of newspa- pers and magazines to retailers, wholesalers, and sub- scribers. Revenue is not recognized for that portion of products sold, which can be expected, on the basis of historical experience, to be returned. Additionally, circula- tion revenues comprise the sale of digital applications and formats. The advertising revenues encompass revenues from sales of advertising spaces in the published newspapers and magazines and the revenues generated in the cate- gories of display, affiliate marketing, online classifieds, and search. Where 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 corre- sponding commission income or proportion of revenue accruing to the Axel Springer Group are recognized as revenues. Offers that contain multiple service components are separated for purposes of revenue recognition when the delivered components have an independent benefit and the market values of goods not yet delivered or services not yet performed can be determined objectively. The total remuneration for these offers is distributed in princi- ple among the individual service components in such a way that the service components still to be provided are allocated remuneration in the amount of their fair value, and then the service components already provided are allocated the remaining remuneration in proportion to their fair values. Revenues from barter transactions are recognized if the goods or 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 transac- tions cannot be measured reliably, the fair value is de- termined on the basis of the service rendered. Other income is recognized when the future inflow of economic benefits from the transaction can be meas- ured 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. (c) Intangible assets Internally generated intangible assets are measured as the sum of costs incurred in the development phase from the time when the technical and economic feasibil- ity has been demonstrated until the time when the intan- gible asset has been completed. The capitalized produc- tion costs include all costs that are directly or indirectly allocable to the development phase. Costs for the self- development of websites are capitalized only when the website directly serves the generation of revenues. Pur- chased intangible assets are measured at cost. 106 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Internally generated and purchased intangible assets that have a determinable useful life are 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 for property, plant, and equipment: Software Licenses Supply rights Internet platform Customer relationships Buildings Leased buildings Leasehold improvements Printing machines Editing systems Other operational and business equipment Useful life in years 3 – 8 3 – 10 3 – 6 3 – 8 3 – 17 Useful life in years 30 – 50 19 – 20 5 – 15 12 – 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 recog- nized as other operating income or expenses. Leased assets whose economic benefits are attributable to Axel Springer are recognized 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 over the minimum contract term, taking any existing residual value into consideration. When it is reasonably certain that ownership will pass to Axel Springer at the end of the lease period, such assets are depreciated over their useful lives. The present value of the payment obligations associated with the minimum future lease payments is recognized as a liability. Capital investment subsidies and bonuses granted by the government are recognized when it is reasonably certain that the subsidies will be granted and the related terms and conditions will be fulfilled. Bonuses and subsi- dies granted for the acquisition or construction of prop- erty, plant and equipment are recognized in a deferred income item within other liabilities. In subsequent periods, the deferred income item is released and recognized as income over the useful life of the corresponding assets. (e) Investment property Investment property intended for lease to third parties is measured at amortized cost. Such property is depreciat- ed over a useful life of 50 years using the straight-line method. For leased assets whose economic benefits are attributable to Axel Springer, see note (3d). (f) Recognition of impairment losses in intangible assets, in property, plant, and equipment, and in investment property Impairment losses are recognized in intangible assets, in property, plant, and equipment, and in investment prop- erty when as a result of certain events or changed cir- cumstances, 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 recovera- ble amount for the next-higher group of assets is applied. 107 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Estimation uncertainties arise in the following assump- tions applied in calculating the value-in-use of the report- ing units: Medium-term planning: The medium-term planning is determined on the basis of past historical values, and factors in business-segment-specific expectations about future market growth. Here, we assume that cash flows in the electronic media sector will usually exhibit higher growth rates than in the print sector. Discount rates: Based on the average weighted capital costs of the sector in question, the discount rates of the reporting units also consider country-specific risks, which reflect the current market estimates. Growth rates: The growth rates are determined on the basis of published market research reports for the sec- tors in question. In estimating the long-term growth rates, due consideration was given to the compensatory ef- fects between the different business lines, based on the adopted strategy of the Group. Impairment losses are reversed when the recoverable amount exceeds the carrying amount of the asset due to changes in the estimates upon which the measurement is based. The reversal is limited to the amount that would have resulted if previous impairment losses had not been recognized. A recognized impairment loss in goodwill is never reversed. Goodwill and intangibles with indefinite useful lives ac- quired in the context of business combinations are test- ed at least once annually for impairment. In order to carry out the impairment tests, these assets are assigned to those cash-generating units or those cash-generating groups (i.e. each “reporting unit”) that can be expected to profit from the synergies of the business combinations. 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 inte- grated business models, individual titles and digital me- dia are summed up 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 value in use of the reporting units is determined primarily by the terminal value, however. 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. The cash flows to be received after the five-year period are extrapolated on the assumption of a growth rate of 1.5 to 4.0 % (PY: 1.5 to 2.5 %) which does not exceed the assumed average market or industry growth rate. In order to determine the present value, the discount rates are calculated on the basis of the weighted average capital costs of the Group, taking country-specific con- siderations into account. The discount rates range from 6.3 % to 11.7 % (PY: from 6.3 % to 9.9 %) after tax or from 8.2 % to 13.7 % (PY: from 8.2 % to 12.6 %) before taxes. 108 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (g) Financial assets and liabilities Financial assets are mainly composed of cash and cash equivalents, deferred purchase price receivables, 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, promissory notes, con- tingent consideration, and financial derivatives with nega- tive market values. The initial recognition and derecognition of financial in- struments coincide with the settlement dates of custom- ary market purchases and sales of financial assets. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset have expired or have been transferred to third parties, or when the Group has assumed a contractual obligation to pay the cash flows to a third party, under which the risks and rewards or the power of control were transferred. A finan- cial liability is derecognized when the obligation underlying the liability is settled or annulled, or has expired. For financial assets and financial liabilities which need to be measured at fair value, we apply the following valua- tion hierarchy. Hereby, the input factors used in the valuation models are categorized into three levels: Level 1 – in active markets for identical assets or liabilities (unadjusted) quoted prices (e.g., stock market prices), models into the respective valuation hierarchy levels is monitored at the end of each reporting period. Investments and securities Investments that have not been consolidated or ac- counted for using the equity method in the consolidated financial statements, as well as securities, 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 invest- ment income. We assume that the fair value of invest- ments and securities is not reliably measurable when either material valuation differences appear in estimating fair values based on projections and scenarios, or when the likelihood of such projections and scenarios cannot be reliably determined. 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 reporting date to determine whether there are objective indications of an impairment. If an impairment is found to exist, an impairment loss is rec- ognized and charged to income. Level 2 – input factors other than quoted prices which are observable for the asset or the liability, either directly or indirectly (e.g., interest yield curves, forward rates), and Level 3 – input factors that are not observable on a mar- ket for the asset or the liability (e.g., estimated future results) When determining fair value, the application of relevant and observable input factors is given high priority, whereas the application of non-observable input factors is given less priority. The classification of the valuation Loans, receivables, and other financial assets Upon initial recognition, loans, receivables, and other financial assets are measured at fair value plus transac- tion 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 receiv- able may not be fully collectible. Such an indication might be the insolvency or other considerable financial prob- lems 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, 109 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements 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 receiv- ables 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. Financial derivatives Financial derivatives are utilized to hedge against curren- cy and interest rate risks that have an influence on future cash flows. They are measured at fair values based on stock exchange or market prices, or using generally accepted valuation methods. If the conditions for the application of hedge accounting are met, changes in the fair values, including the tax effects, are recognized di- rectly in equity as accumulated other comprehensive income. The amounts recognized in accumulated other comprehensive income are recycled when the underlying transaction is recognized on the balance sheet or in- come statement. The changes in the fair value of deriva- tives 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. Furthermore, financial derivatives are used to cover the risk of impairments of investments and securities. When the underlying financial assets are recognized at amor- tized costs because their fair values are not reliably measurable, the financial derivative is recognized at amortized costs as well. Contingent consideration Options and earn-out agreements in connection with business combinations and the acquisition of non- controlling interests are treated as contingent considera- tion at fair value. To the extent it can be reliably meas- ured, this value is derived from the estimated profit trends of the acquired companies in the years prior to the possible exercise dates of the options or the pay- ment dates of the earn-outs. In the subsequent periods, changes in the fair value are recognized immediately in income. The discount rates are determined on the basis of the interest rates charged on the Group’s borrowings. The earnings used as a basis for measurement are gen- erally EBITDA figures adjusted for material non-recurring effects. In case of an increase/a decrease of the relevant earnings measures by 10 %, the value of the contingent consideration would also fluctuate by 10 %. Other financial liabilities Upon initial recognition, other non-derivative financial liabilities are measured at fair value less transaction costs. In subsequent periods, they are measured at amortized cost using the effective interest method. (h) Inventories 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 reporting 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 fin- ished goods and services less remaining costs of com- pletion. Impairments are reversed whenever the reasons justifying an earlier write-down no longer exist. 110 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (i) Assets held for sale and discontinued operations Assets are classified as for sale when their disposal has been initiated, the sale of such is likely and the asset or disposal group is available for immediate sale in its pre- sent condition. The non-current assets held for sale are measured at the lower of the carrying amount or the fair value less costs to sell. Depreciation is no longer applied to these assets. Liabilities that are held in connection with assets held for sale are disclosed likewise separately in the balance sheet as a current item. Discontinued operations represent a material geograph- ical or operational line of business of the Group that is available for sale. The results from continued operations in the reporting year and the prior year are shown in the income state- ment. The results from discontinued operations are shown separately. Cash inflows and cash outflows from discontinued operations are shown separately in the notes to the consolidated financial statements. The in- formation in the notes relates to the continued opera- tions of the Group. (j) Pension provisions Pension obligations under defined benefit plans are determined using the projected unit credit method under which future changes in compensation and benefits are taken into account. In order to calculate the pension provisions, the present value of the obligations is netted against the fair value of the plan assets. The expected life spans of the participants are deter- mined with reference to the country-specific recognized actuarial tables. The present value of the defined benefit commitments is determined by discounting the estimat- ed future cash outflows. The discount rate applied for this purpose is determined with reference to high-quality AA-rated corporate bonds that match the underlying pension obligations with respect to currency and maturi- ty. If corporate bonds with matching terms do not exist, then the yields of these bonds at the balance sheet date are adjusted along the yield curve for fixed-interest gov- ernment bonds using a constant spread over the term of the underlying pension obligations. The return underlying the measurement of the plan as- sets is identical to the discount rate for defined benefit commitments. Actuarial gains and losses resulting from changes in actuarial parameters are 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 reporting date by application of appropriate market rates of interest. Provi- sions are recognized for restructuring expenses only when the intended measures have been sufficiently con- cretized and announced on or before the reporting 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 prob- able that the differences will reverse or the tax loss carry- forwards can be utilized. Deferred tax assets are recog- nized 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 de- ferred taxes are based on the income taxes imposed by 111 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements 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 compensa- tion 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 at the reporting date (in case of cash-settled programs). The fair values are determined on the basis of generally accepted option pricing models. The corresponding amount is recognized in the additional paid-in capital (in the case of equity- settled programs) or as provisions/liabilities (in the case of cash-settled programs). Additions to liabilities or provi- sions are recognized in personnel expenses; reversals are accounted for in other operating income. (o) 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 reporting date. Any foreign exchange gains or losses resulting from such translations are recognized in income. (p) Estimates and assumptions The preparation of the consolidated financial statements requires estimates and assumptions that have an influ- ence on the presentation of assets and liabilities, the disclosure of contingent liabilities at the reporting date, and the presentation of income and expenses. Estimates and assumptions that are subject to uncertainty relate in particular to discounted cash flows for the purposes of impairment testing, purchase price allocations and the measurement of contingent purchase price obligations in connection with business combinations and the acquisi- tion of non-controlling interests, future taxable income to determine the ability to utilize tax loss carry-forwards, uncertain tax positions and discount rates for the meas- urement of pension obligations. Information concerning the carrying amounts determined with the use of esti- mates can be found in the comments on the specific line items. (q) New accounting standards The following IFRSs relevant for Axel Springer were ap- plied for the first time in the fiscal year: Since January 1, 2014 we are applying IFRS 10 “Consol- idated Financial Statements”, IFRS 11 “Joint Arrange- ments”, IFRS 12 “Disclosure of Interests in Other Enti- ties”, amendments to IAS 27 “Consolidated and Separate Financial Statements”, and amendments to IAS 28 "Investments in Associates”. IFRS 10 replaces the previous regulations on consolidat- ed financial statements (parts of IAS 27 “Consolidated and Separate Financial Statements”) and special pur- pose entities (SIC 12 “Consolidation – Special Purpose Entities”) and prescribes the control model as a uniform principle. The standard additionally includes guidelines for assessing control in doubtful cases. The application of IFRS 10 had no major effects on the financial position, liquidity, and financial performance. IFRS 11 replaces the previously applicable regulations for recognizing shares in joint ventures (IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly Controlled Entities – Non-Monetary Contributions by Venturers”).At the same vein, IAS 28 is expanded to include regulations for rec- ognizing shares in joint ventures. It is now mandatory to account for shares in associated companies and joint ventures using the equity method. Application of IFRS 11 or the newly revised IAS 28 had no major effects on the financial position, liquidity, and financial performance. IFRS 12 is a merging of the disclosure requirements on equity shares in subsidiaries, associated companies, joint agreements, and non-consolidated structured entities previously set out in IAS 27, IAS 28, and IAS 31. The 112 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements information to be disclosed in accordance with IFRS 12 has been provided in notes (7a), (11f), (42). Otherwise, no material changes resulted in fiscal year 2014 for Axel Springer from IFRS standards or IFRIC interpretations to be applied for the first time. The following IFRSs have already been published, but not yet applied. With the publication of the final version of IFRS 9 "Finan- cial Instruments" the IASB completed its project for re- placing IAS 39 "Financial Instruments: Recognition and Valuation" in July 2014. IFRS 9 provides a standardized approach for classification and evaluation of financial assets and liabilities which is primarily based on the company's business model and the cash flows of the financial instrument. Furthermore, IFRS 9 contains a new depreciation model which also demands the recording of expected losses in addition to incurred losses. Finally, IFRS 9 also contains new guidelines for the use of hedge accounting, targeted in particular at better illustration of the risk management activities of a company and the monitoring of non-financial risks. IFRS 9 is to be applied to fiscal years starting on or after January 1, 2018. Early application is permitted. EU Endorsement of IFRS 9 is still pending. Regarding the effects of the application of the new standard, we currently do not expect any major changes in the presentation and recognition of financial assets and liabilities. In May 2014, IASB published IFRS 15 "Revenue from Contracts with Customers". The regulations and defini- tions in IFRS 15 replace the contents of IAS 18 "Reve- nue" and also those from IAS 11 "Construction Con- tracts". Revenue in accordance with IFRS 15 can be recognized when the customer obtains control over the agreed goods and services and can derive benefits from these. The concept of transferring significant risks and rewards as provided for in IAS 18 is no longer relevant. Revenues are recognized in the amount of the consider- ation that the company will presumably receive. Revenue recognition is divided into a five-step process, consisting of identifying the contract with the customer, identifying the separate contractual obligations, determining the transaction price, allocating the transaction price to the contractual obligations, and recognizing revenues for every contractual obligation based on the allocated transaction price. IFRS 15 is to be applied to fiscal years starting on or after January 1, 2017. Early application is permitted. EU Endorsement of IFRS 15 is still pending. We are currently evaluating the effects that the applica- tion of the new standard might have on our revenue recognition accounting. IASB and IFRS IC published additional pronouncements that had or will have no material influence on our consolidated financial statements. 113 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Notes to the consolidated statement of financial position (4) Intangible assets The changes in intangible assets were as follows: € millions Acquisition or production cost Balance as of January 1, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Purchased rights and licenses Internally generated rights 1,401.7 69.0 – 15.5 – 16.4 33.0 – 3.7 – 113.9 1,354.3 293.2 – 2.7 0.3 36.3 – 6.8 0.1 92.4 16.3 – 1.0 – 0.5 22.0 – 0.1 1.5 130.6 10.7 – 6.2 1.3 23.2 – 0.4 0.8 Goodwill Total 1,369.4 2,863.5 92.5 – 39.9 – 5.0 0.0 – 3.7 – 43.1 1,370.2 408.6 – 4.3 2.2 0.0 0.0 0.0 177.8 – 56.4 – 21.9 55.0 – 7.4 – 155.5 2,855.0 712.5 – 13.2 3.7 59.4 – 7.1 0.9 Balance as of December 31, 2014 1,674.7 159.9 1,776.7 3,611.3 Depreciation, amortization, and impairments Balance as of January 1, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2014 Carrying amounts Balance as of December 31, 2014 Balance as of December 31, 2013 296.3 0.1 – 4.1 – 2.3 78.4 – 1.9 – 26.5 340.0 0.4 – 2.5 1.1 95.2 – 5.1 6.0 435.0 39.1 0.4 – 0.6 – 0.2 20.7 0.0 1.0 60.5 0.0 – 6.2 0.8 35.4 – 0.2 – 5.4 84.8 72.7 0.1 – 30.4 0.0 2.7 0.0 – 2.0 43.0 0.0 – 0.5 – 0.4 31.1 0.0 – 0.1 73.2 408.1 0.6 – 35.1 – 2.5 101.9 – 1.9 – 27.4 443.6 0.4 – 9.2 1.5 161.8 – 5.4 0.5 593.0 1,239.7 1,014.2 75.1 70.1 1,703.4 1,327.1 3,018.3 2,411.5 114 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The purchased rights and licenses mainly comprised title rights, trademarks, and customer relationships. The internally generated intangible assets mainly con- sisted of software solutions and websites. The reclassifications in the prior year consisted almost exclusively of the classification as assets held for sale (see note (2d)). The goodwills and the purchased rights and licenses that were included in the intangible assets with indefinite useful lives totaled € 2,514.3 million (PY: € 1,979.9 million). Of this amount € 554.1 million (PY: € 466.1 million) was allocated to the Paid Models segment, € 522.6 million (PY: € 484.4 million) to the Marketing Models, and € 1,437.1 million (PY: € 1,029.0 million) to the Classified Ad Models segment. The reclassified goodwill (€ 40.7 million) of assets held for sale in the previous year as well as intangible assets with indefinite useful lives (€ 77.1 million) in the Paid Models segment are disposed of in the fiscal year. With the exception of the SeLoger and StepStone reporting units assigned to the Classifieds Ad Models, and the Ringier Axel Springer Media reporting unit assigned to the Paid Models segment, the total of goodwill and intangible assets with indefinite useful lives that have been assigned to the other individual reporting units amounted to less than 9 % (PY: 9 %) of the total value. These other reporting units are assigned goodwill and intangible assets with indefinite useful lives of € 1,238.5 million (PY: € 814.2 million). With goodwill of € 465.6 million (PY: € 465.3 million) and intangible assets with indefinite useful lives of € 130.5 million (PY: € 129.7 million), about 24 % (PY: 30 %) of the total value is assigned to the SeLoger reporting unit. In order to determine the value in use, a discount rate of 6.8 % or 9.4 % before taxes (PY: 7.1 % or 9.9 % before taxes) and a growth rate of 1.5 % (PY: 1.5 %) is used for cash flows after the five-year mid- term planning period has elapsed. The surplus be- tween the value in use and the carrying amount of this reporting unit amounts to € 465.3 million (PY: € 265.7 million). Material assumptions in the context of the medium- term planning of SeLoger relate to the assumption of stagnation in the online real estate market in France, strengthening brand awareness in a competitive mar- ket environment, focusing marketing activities on the goal of increasing average revenue per customer, improving market penetration particularly in regions outside of Paris, and accelerating growth in vertical niche portals by increasing market share. With goodwill of € 106.6 million (PY: € 103.9 million) and intangible assets with indefinite useful lives of € 204.4 million (PY: € 199.4 million), about 12 % (PY: 15 %) of the total value is assigned to the Ringier Axel Springer Media reporting unit. The increase was pre- dominantly a result of the effects of initial consolida- tion and opposite currency effects. In order to deter- mine the value in use, a discount rate of 8.4 % or 9.7 % before taxes (PY: 7.4 % or 8.4 % before taxes) and a growth rate of 2.5 % (PY: 2.5 %) is used for cash flows after the five-year mid-term planning period has elapsed. The surplus between the value in use and the carrying amount of this reporting unit amounts to € 63.9 Mio. (PY: € 217.7 million). In the medium-term planning of Ringier Axel Springer Media, we assume that the two large revenue streams in sales and the print advertising market will come under increasing pressure in the coming years. It will be possible to compensate for the declining circulation figures primarily by using price increases. We assume that new revenue sources from additional business in the strong boulevard brands as well as strict cost management will make it possible to largely maintain profitability. We further assume that our online busi- nesses will profit from the trend towards performance- based forms of advertising and will be able to partici- pate in the structural shift of print advertisements into digital channels. With goodwill of € 226.6 million (PY: € 160.4 million) and intangible assets with indefinite useful lives of € 142.3 million (PY: € 107.1 million), about 15 % (PY: 14 %) of the total value is assigned to the StepStone reporting unit. The increase in goodwill resulted in 115 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements particular from the acquisition of JobSite (€ 61.8 million) and from currency effects. In order to determine the value in use, a discount rate of 6.8 % or 8.7 % before taxes (PY: 6.9 % or 9.2 % before taxes) and a growth rate of 1.5 % (PY: 1.5 %) is used for cash flows after the five-year mid-term planning period has elapsed. The surplus between the value in use and the carrying amount of this reporting unit amounts to € 1,551.6 million (PY: € 1,051.4 million). In the medium-term planning of the StepStone Group, we assume that the anticipated development of the economy will have a positive impact on the labor mar- ket. The assumptions made include rising sales reve- nues in our European and South African core markets and in our other markets in Africa and Latin America, as well as further strict cost management in order to maintain the high level of return of the past years. In particular, by the further development of the product range and the expansion of the system landscape, the market position should be expanded and strengthened. The surplus between the value in use and the carrying amount of the reporting units would reduce to zero if the material measurement parameters would change as follows: Reduction of cash flow in the fifth year of medium- term planning by Increase of discount rate (after taxes) to Reduction of growth rate to 10.9% – 4.5% – 52.9% 26.8% – 134.7% – 96.3% Increase of discount rate (before taxes) to 15.4% 35.4% 10.7% 9.2% 1.4% – 15.7% 2014 SeLoger StepStone Ringier Axel Springer Media Reduction of cash flow in the fifth year of medium- term planning by Increase of discount rate (after taxes) to Reduction of growth rate to 9.3% – 1.5% – 34.7% 22.3% – 50.5% – 90.5% Increase of discount rate (before taxes) to 13.1% 30.6% 11.4% 9.8% – 0.8% – 40.0% 2013 SeLoger StepStone Ringier Axel Springer Media 116 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (5) Property, plant, and equipment The changes in property, plant, and equipment were as follows: Technical equipment and machinery Other equipment, operational and office equipment Construction in progress Land and buildings 564.3 549.6 218.5 € millions Acquisition or production cost Balance as of January 1, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2013 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2014 0.0 0.0 – 0.8 7.8 – 9.7 – 1.1 560.6 1.0 – 0.6 – 1.0 0.8 – 0.2 – 124.8 435.8 0.1 0.0 – 2.2 11.7 – 7.9 – 20.6 530.5 2.8 – 0.2 – 0.7 5.2 – 6.8 0.4 531.3 Depreciation, amortization, and impairments Balance as of January 1, 2013 157.3 355.2 Deconsolidation Currency effects Additions Disposals Transfers 0.0 – 0.1 10.6 – 4.8 – 1.5 0.0 – 1.6 24.5 – 6.6 – 9.3 Balance as of December 31, 2013 161.6 362.2 Initial consolidation Deconsolidation Currency effects Additions Disposals Transfers Balance as of December 31, 2014 Carrying amounts Balance as of December 31, 2014 Balance as of December 31, 2013 0.3 0.1 – 0.4 22.6 – 6.8 – 0.6 377.4 153.9 168.3 0.0 – 0.4 – 0.2 33.7 – 0.1 – 50.4 144.3 291.4 399.0 117 Total 1,345.3 3.1 – 2.0 – 4.5 44.8 – 33.7 – 38.3 1,314.8 8.5 – 2.4 – 2.8 39.6 – 26.2 – 139.7 1,191.8 654.6 – 1.2 – 2.3 62.9 – 24.0 – 15.6 674.4 0.9 – 1.4 – 1.2 83.0 – 25.2 – 62.4 668.2 523.5 640.3 12.9 0.0 0.0 – 0.2 4.2 – 0.1 – 12.7 4.2 0.0 0.3 0.0 12.6 – 0.2 – 3.8 13.1 – 0.1 0.0 0.0 0.0 0.0 0.0 – 0.1 0.0 0.0 0.0 0.0 – 0.1 0.0 – 0.1 13.2 4.3 3.0 – 2.0 – 1.3 21.1 – 16.0 – 3.9 219.5 4.7 – 1.9 – 1.1 21.0 – 19.0 – 11.5 211.6 142.2 – 1.2 – 0.7 27.7 – 12.6 – 4.8 150.8 0.7 – 1.1 – 0.7 26.8 – 18.3 – 11.5 146.6 65.0 68.7 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements As of December 31, 2014, property, plant and equipment with acquisition or production cost of € 261.5 million (PY: € 276.1 million) were in use that had already been fully depreciated. At the balance sheet date, property, plant, and equip- ment amounting to € 21.5 million (PY: € 21.7 million) had been pledged as security for own liabilities. The carrying amount of property, plant, and equipment as part of finance leases was, as of December 31, 2014, € 2.0 million (PY: € 52.9 million). In prior year the amount was almost entirely attributable to properties and buildings. Due to the planned sale on December 31, 2015/January 1, 2016 of an office building that is both used by the company and also by third-party companies at the Hamburg site, the corresponding carrying amount of € 68.5 million (property, plant, and equipment) and € 27.4 million (investment property) was reclassified as assets held for sale. Before reclassification, impairment losses in the amount of € 23.6 million or € 9.4 million were recorded. Part of the building was recognized as part of finance leases, which are to be terminated at the planned time of sale. The proportional residual carrying amounts were € 31.8 million (property, plant, and equipment) and € 14.6 million (investment property), the proportional impairment losses were € 11.0 million and € 5.0 million respectively. In connection with liabilities associated with the finance lease totaling € 68.0 million, financial liabilities (€ 62.9 million) and other liabilities (€ 5.1 million) were reclassified into liabilities related to assets held for sale. (6) Investment property The development of the office and retail spaces in Berlin and Hamburg leased to third parties was as follows: € millions Acquisition or production cost Balance as of January 1, 2013 Additions Disposals Transfers Balance as of December 31, 2013 Transfers Balance as of December 31, 2014 Depreciation, amortization, and impairments Balance as of January 1, 2013 Additions Disposals Transfers Write-ups Balance as of December 31, 2013 Additions Transfers Write-ups Balance as of December 31, 2014 Carrying amounts As of December 31, 2014 As of December 31, 2013 Investment property 81.5 5.1 – 9.3 – 1.5 75.8 – 32.9 42.9 24.5 1.4 – 4.2 0.1 – 1.0 20.8 10.9 – 13.8 – 6.3 11.6 31.3 55.0 118 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements For reclassifications in the assets held for sale, see note (5). Furthermore, due to reduced use of office space reclassifications with carrying amounts totaling € 8.3 million took place from property, plant, and equip- ment to investment property. On the reporting date no carrying amounts for invest- ment property were identified as part of finance leases (PY: € 11.4 million). The fair value of investment property as of December 31, 2014 totaled € 31.4 million (PY: € 55.5 million). The evaluation carried out by ourselves took place on the basis of forecasted net cash flows using the DCF meth- od. In calculating this value, a discount rate of 6.85 % and a perpetuity capitalization rate of 5.85 % were ap- plied, unchanged from the prior year. As a result of the change in fair value, write-ups amounting to € 6.3 million (PY: € 1.0 million) were carried out. Recognition took place in other operating income in the Services/Holding segment. In the fiscal year, rental income of € 7.0 million (PY: € 5.2 million) was generated, with corresponding directly attributable operating expenses of € 0.7 million (PY: € 0.6 million). As in the prior year, directly allocable ex- penses of less than € 0.1 million were incurred for non- rented space. The future minimum lease payments from investment property broke down as follows: € millions Due in up to one year Due in one to five years Due in more than five years Total 2014 2013 2.0 6.2 2.0 10.2 3.4 10.2 4.4 18.0 (7) Non-current financial assets (a) Investments recognized using the equity method Summarized financial information regarding all compa- nies which are accounted for using the equity method and are not individually material are shown below: € millions Carrying amount Share in income from continued operations Share in other income Share in comprehensive income 2014 51.2 – 1.8 0.4 – 1.4 2013 8.7 1.8 0.0 1.8 The increase in carrying amounts mainly resulted from new acquisitions, especially Project A Ventures GmbH and Ozy Media Inc. The proportionate income/losses to be recognized in income from investments were not recognized in the reporting year in the amount of € – 18.4 million. (PY: € – 23.0 million), and cumulatively in the amount of € – 68.9 million (PY: € – 50.5 million). The corresponding net carrying amount of investments was already fully depreciated in 2010. (b) Other non-current financial assets The other non-current financial assets with an amount of € 259.1 million (PY: € 305.5 million) were mainly attributable to our options to sell our shares in Do⁄an TV (“put options”, PY: our shares in Do⁄an TV); in the re- porting period, we sold approximately 2.6% of the shares. The proceeds from this transaction amounted to € 62.5 million. The resulting profit recognized in invest- ment income amounted to € 16.0 million. In the previous year, a reliable measurement of our minority investment in Do⁄an TV was difficult due to significant fluctuations with regard to the estimation of fair values based on projections and scenarios of which the probabilities of occurrence could not be reliably determined. In the context of the merger of Do⁄an Yayin 119 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Holding A.S. (major shareholder of Do⁄an TV) with Do⁄an Sirketler Grubu Holding A.S. carried out in the reporting period, the minority shareholders were granted a takeover offer. The low valuation of Do⁄an Yayin Hold- ing A.S. presented in this takeover offer as well as the low market capitalization of Do⁄an Sirketler Grubu Hold- ing A.S., besides other influencing factors reflect the negative income situation and the declining business development of Do⁄an TV. In the reporting period, we have furthermore signed new agreements with respect to the value-securing mechanism regarding our invest- ment in Do⁄an TV. According to these agreements, put- option rights secured by bank guarantees with a fixed price for the disposal of all shares in Do⁄an TV exist as of the balance sheet date. The put options are exercisa- ble unilaterally by us without any further requirements in the years 2016, 2020 as well as 2022. In connection with the aforementioned objective evidence at the end of the reporting period, we as a minority shareholder have fully reduced the value of our investment in Do⁄an TV and at the same time recognized the fair value of the contractually-agreed put options. In total, there was no income effect. The valuation of the put options at the balance sheet date is based on the discounted payment claim deriving from the agreed option rights, minus all costs to be incurred. Non-current financial assets also include a subordinated loan with a multi-year term in the amount of € 240.9 million from the sale of regional newspapers, TV program guides, and women's magazines (see note (2d)). During the reporting period we sold our minority interest (17.2 %) held by SeLoger in the iProperty Group Ltd., Sydney, Australia, for € 74.3 million. The gain of disposal, recorded within income from investments, was € 55.1 million (before a tax effect of € 2.2 million). (8) Inventories The inventories broke down as follows: € millions 12/31/2014 12/31/2013 Raw materials and supplies Semi-finished goods Finished goods and merchandise Inventories 13.9 4.5 5.2 23.6 15.8 2.4 5.4 23.5 Inventories of € 9.3 million (PY: € 10.1 million) were valued at their net realizable value. The write-downs for these assets totaled as of December 31, 2014 € 3.0 million (PY: € 2.9 million), of which € 0.6 million (PY: € 0.3 million) was recognized in the profit or loss statement 2014. (9) Trade receivables The trade receivables broke down as follows: € millions 12/31/2014 12/31/2013 Trade receivables, nominal Allowances for doubtful trade receivables Trade receivables 550.2 – 26.4 523.8 498.2 – 25.5 472.8 The changes in the allowances for doubtful trade receiv- ables are presented below: € millions Balance as of January 1 Additions Reversals Utilization Disposal due to deconsolidation Other changes Balance as of December 31 2014 25.5 7.0 – 2.5 – 1.9 – 0.1 – 1.6 26.4 2013 25.0 6.4 – 2.0 – 1.0 – 0.9 – 2.1 25.5 120 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements As of December 31, 2014, receivables in the amount of € 360.7 million (PY: € 333.6 million) were neither past due nor subject to valuation allowances. With regard to these receivables, there were no indications at the re- porting date that would suggest that the customers would not fulfill their payment obligations. The past-due trade receivables at the reporting date for which no valuation allowances have been charged are presented in the table below: € millions up to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 days and longer 12/31/2014 12/31/2013 42.5 17.1 5.8 5.1 5.3 49.8 20.2 5.1 3.9 4.6 (10) Other assets The other assets broke down as follows: € millions Current loans Credit balances in accounts payable Derivatives Deferral of payment for regional newspaper investments Other 12/31/2014 12/31/2013 53.1 2.4 0.5 0.0 68.3 0.0 6.9 0.5 75.0 20.8 Other financial assets 124.4 103.3 Advance payments Receivables from other taxes Other non-financial assets 27.5 12.7 40.2 20.6 10.8 31.4 Other assets 164.6 134.6 The residual purchase price from the sale of investments in regional newspapers in 2009 was fully repaid in the course of the reporting year. The current loans relate to a prepaid extraordinary dis- bursement with regard to the sale of the Czech print activities, which was not legally executed as of Decem- ber 31, 2014. The miscellaneous financial assets include loans and receivables due from other investment companies, re- ceivables from insolvency proceedings against the Kirch Group and security deposits, among other items. (11) 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 € 98.9 million is fully paid in. Based on the percentage of subscribed capital that each share represents, the shares are valued at € 1.00 per share. The subscribed capital is divided into 98,940 thousand registered shares, which can be transferred only with the consent of the company. At the reporting date, 98,940 thousand shares were out- standing (PY: 98,940 thousand shares). (b) Additional paid-in capital The additional paid-in capital primarily resulted from a shareholder contribution granted in previous years and the amount of imputed compensation for the share- based payment programs (see note (12)). (c) Accumulated retained earnings The accumulated retained earnings included the income of the companies included in the consolidated financial statements, to the extent that they have not been dis- tributed to shareholders. Moreover, transactions with shareholders are recognized here. In 2014, Axel Springer SE distributed an amount of € 178.1 million (€ 1.80 per qualifying share) for the fiscal year 2013. In 2012, the amount of € 167.9 million was distributed as dividend payments (€ 1.70 per qualifying share) for the fiscal year 2012. 121 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements In connection with the increase of our participation in Axel Springer Digital Classifieds the difference amount of € 362.6 million resulting from the acquisition of non- controlling interests was set off within accumulated re- tained earnings in the reporting year (see note (2c)). (d) Treasury shares As of December 31, 2014, as in the prior year, we did not hold any treasury shares. In the reporting year, 116 thousand treasury shares (PY: 194 thousand shares) were issued at their fair value at the date of issue in the amount of € 43.88 (PY: € 32.70) by conversion of variable compensation tied to perfor- mance of the employees of the Group. Personnel ex- penses of € 2.1 million (PY: € 2.6 million) were incurred by granting increases in the conversion amounts. The amounts have already been placed in a provision in the prior year. For this purpose, treasury shares were ac- quired previously at the fair value of € 7.7 million and resold at a value of € 2.6 million. Acquisition, issuing and the sale of treasury shares have no effect on the level of equity. During the previous year € 2.1 million was re- ceived to increase equity and recorded as a paid-in surplus within accumulated retained earnings. (e) Accumulated other comprehensive income At the reporting date, accumulated other comprehensive income contained effects companies accounted for using the equity method in the amount of € – 10.0 million (PY: € – 10.4 million), actuarial gains/losses from em- ployer pension plans of € – 119.7 million (PY: € – 46.8 million), as well as a revaluation reserve of € – 3.1 million (PY: € – 3.1 million). In conjunction with the sale of our minority shareholding (17.2 %) in iProperty Group Ltd., Sydney, Australia, held by SeLoger, effects from the market price revaluation totaling € 44.8 million after taxes (as of December 31, 2013: € 13.1 million) included within other comprehen- sive income were reclassified into the income statement in the context of income recognition (see note (7)) in the reporting year. (f) Non-controlling interest The non-controlling interests mainly related to the follow- ing companies: € millions 12/31/2014 12/31/2013 Ringier Axel Springer Media AG, Zurich, Switzerland 189.6 173.7 Axel Springer Digital Classifieds GmbH, Berlin Other companies 88,8 72,3 132.8 67.6 Non-controlling interests 350.8 374.1 As of December 31, 2014 the non-controlling interests in Ringier Axel Springer Media amounted to 50.0 % (PY: 50.0 %), whilst their share in Group results amounted to € 50.1 million (PY: € 17.0 million). In addition, they re- ceived dividends in the amount of € 91.5 million in the fiscal year (PY: € 0.4 million). This primarily related to an extraordinary dividend with regard to the executed sale of the Czech print activities. The distribution with a partial amount of € 53.1 million was not legally executed as of December 31, 2014. Summarized financial information for the Ringier Axel Springer Media subgroup will be shown in the following: € millions Revenues Net income Comprehensive income Current assets Non-current assets Current liabilities Non-current liabilities Cash flows 2014 268.5 177.4 161.5 215.8 481.6 59.0 85.0 56.5 2013 297.1 33.6 11.3 120.5 593.7 56.7 131.6 0.5 122 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements As of December 31, 2014 the non-controlling interests in Axel Springer Digital Classifieds GmbH amounted to 15.0 % (PY: 30.0 %; for changing the non-controlling interests see note 2(c)), their share in Group results amounted to € 43.3 million (PY: € 13.0 million). In addi- tion, they received a dividend in the amount of € 0.2 million in the fiscal year (PY: € 0.2 million). Summarized financial information for the Axel Springer Digital Classifieds subgroup will be shown in the following: € millions Revenues Net income Comprehensive income Current assets Non-current assets Current liabilities Non-current liabilities Cash flows 2014 508.0 130.6 126.8 183.1 2013 403.1 41.7 49.4 142.7 1,788.6 1,351.4 399.9 922.0 – 1.4 155.2 804.5 – 35.3 (12) Share-based payment Members of the Executive Board and selected executives (beneficiaries) were granted various virtual stock option plans, the fundamental parameters of which are described below: Virtual stock option plans Executive Board Program Senior Executive Program 2009 2012 2014 I 2014 II 2011 I 2011 II 2014 07/01/2009 01/01/2012 01/01/2014 09/01/2014 10/01/2011 10/01/2011 03/01/2014 6 4 6 4 6 4 6 4 4 2 6 4 5 3 1,125,0001) 450,000 205,313 675,000 472,500 472,500 60,000 20.291) 40.571) 4.221) 4.7 30.53 61.06 5.26 2.4 44.06 88.12 6.69 1.4 44.56 89.12 6.26 4.2 30.00 60.00 2.74 1.3 35.00 70.00 2.31 1.1 46.80 93.60 8.14 0.5 Grant date Term in years Vesting period in years Stock options granted Underlying (€) Maximum payment (€) Value at grant date (€) Total value at grant date (€ millions) 1) Adjusted due to the share split in June 2011. Provided that the beneficiary is employed by the compa- ny at least until the expiration of the vesting period, all virtual stock options granted to the relevant senior exec- utive may become vested. If the authorized senior execu- tive's employment with the company ends before the end of the vesting period, but is at least one year after the grant date, the stock options are vested on a pro- rated basis of the vesting period (Executive Board pro- gram), up to one half (executive programs 2011 I and 2014), or to one quarter per elapsed year of the vesting period (executive program 2011 II). A further condition for vesting to take place is that either the volume-weighted average price of the Axel Springer share is at least 30 % over the base value or that the percentage increase of this average price exceeds that of the base value of the development of the DAX over a period of 90 calendar days (Executive Board program) or 123 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements three calendar months (executive program) within a time period of a year before the end of the waiting period. Exercising stock options is only possible if the volume- weighted average price of the Axel Springer share 90 calendar days (Executive Board program) or three calen- dar months (executive program) before exercising such options is at least 30 % over the base value and that the percentage increase exceeds that of the DAX index. Each option grants a payment claim in the amount of the growth in value of the Axel Springer share, restricted to a maximum of 200 % of the base value, which corre- sponds to the difference between the volume-weighted average price during the last 90 calendar days or three months prior to exercise and the base value. Beneficiaries are obligated to hold one Axel Springer share for every ten stock options as their own investment. Disposing of these shares prior to exercising the stock options would result in the stock options being forfeited at the same rate. The value of the options was determined by application of a Black-Scholes model in a Monte-Carlo simulation at the grant date. The options will be remeasured at each reporting date and recognized proportionally in accord- ance with the projected vesting. The development of the stock options is shown below: Virtual stock option plans Executive Board Program Senior Executive Program 2009 2012 2014 I 2014 II 2011 I 2011 II 2014 01/01/2013 Grant Exercise 12/31/2013 Grant Exercise Forfeiture 12/31/2014 1,040,6251) 450,000 0 – 1,040,625 0 0 0 0 0 0 0 450,000 0 0 – 56,250 0 0 0 0 0 0 0 0 472,500 472,500 0 0 0 0 472,500 472,500 0 0 0 0 205,313 675,000 0 0 0 0 0 – 471,650 – 850 0 0 0 60,000 0 0 393,750 205,313 675,000 0 472,500 60,000 1) Adjusted due to the share split in June 2011. The expenses and income in the reporting year, as well as the portfolio of liabilities and provisions at the report- ing date are shown below: € millions Expenses/Income 2014 Expenses/Income 2013 Carrying amount as of 12/31/2014 Carrying amount as of 12/31/2013 Virtual stock option plans Executive Board Program Senior Executive Program 2009 0.0 – 11.5 0.0 0.0 2012 – 1.7 – 2.7 5.8 4.1 2014 I 2014 II 2011 I 2011 II – 0.9 – 1.0 0.0 0.9 0.0 0.0 1.0 0.0 – 0.2 – 6.0 0.0 7.6 – 1.2 – 2.1 4.6 3.4 2014 – 0.2 0.0 0.2 0.0 124 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements For the stock options program for employees of the Group see note (11d). The development of the virtual options is shown below: Various free share and stock option programs existed at our subsidiary SeLoger at the acquisition date. They provided for granting or exercise by the right holders from the years 2009 to 2013 onwards, linked with a subsequent holding period of two years. The stock options with a weighted average purchase price of € 20.93 are vested in 2017 until 2019. The right holders were offered call and put options as part of the acquisition of SeLoger for transferring all shares from these programs (up to a maximum of 525 thousand) to Axel Springer in return for a cash payment. The call and put options are not linked to any market-related or company- related or any other conditions and vest immediately after the issuance of the shares to the employees. The purchase price upon exercise amounts to € 38.05 (squeeze-out price) multiplied by the ratio of the volume-weighted 1-month- aver¬age rate of the Axel Springer share on the last day of trading prior to exercise of the options to the volume- weighted 1 month-average rate of the Axel Springer share on the last trading day before squeeze-out (€ 36.15 when taking the share split of 2011 into account). Following the principle of substance over form, the pro- grams are treated by us as virtual stock option programs granting a payment claim in the amount of the difference between the exercise price and the purchase price. Measurement at the grant date is based on the Black- Scholes model or the current share price, considering future dividends. The weighted average fair value at the date of exercise of the options was € 28.83 per virtual stock option or € 15.1 million in total. The virtual options will be remeasured at each reporting date and recog- nized proportionally in accordance with the vesting that has now completely occurred. in thousands 2014 2013 Option rights as of January 1 Exercise Option rights as of December 31 € millions Personnel expenses Other operating income (+) / expenses (-) Liabilities as of December 31 243 – 51 192 2014 – 1.0 – 0.1 9.9 310 – 67 243 2013 – 3.8 – 0.2 11.3 Our subsidiary AUFEMININ SA granted its senior execu- tives subscription rights for free shares and stock options. These share-based payments must be settled with shares of AUFEMININ SA. In November 2013, 300 thousand stock options for acquisition of one share of AUFEMININ SA, each with an exercise price of € 26.19, were issued to senior employ- ees. These options vested upon expiration of the first (50 %) and second (50 %) years after the grant date, insofar as the earnings target established for the individ- ual tranche (EBITDA 2013 or EBITDA 2014) was achieved. Once they have vested, the options can be exercised for a total of five (50 %) or four (50 %) years. In November 2010, 300 thousand stock options for acquisition of one share of a AUFEMININ SA, each with an exercise price of € 17.15, were issued to senior em- ployees. These options vested upon expiration of the first (50 %) and second (50 %) years after the grant date, insofar as the earnings target established for the individ- ual tranche (EBITDA 2010 or EBITDA 2011) was achieved. Once they have vested, the options can be exercised for a total of five (50 %) or four (50 %) years. 125 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements In June 2009, 300 thousand stock options for acquisition of one share of AUFEMININ SA, each with an exercise price of € 8.94, were issued to senior employees. These options vested upon expiration of the first (50 %) and second (50 %) years after the grant date, insofar as the earnings target established for the individual tranche (EBITDA 2009 or EBITDA 2010) was achieved. Once they have vested, the options can be exercised for a total of five (50 %) or four (50 %) years. Ninety-nine thousand stock options granted in April 2008, each one entitling the holder to purchase one share of AUFEMININ SA (exercise price: € 20.46) as well as the 74 thousand stock options that had already been grant- ed at the date of acquisition of auFeminin.com S.A. in July 2007 (exercise price: (exercise price: € 18.60 or € 21.21), will become vested in equal annual installments over a period of four years. The option grant is not con- ditioned 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 fair values of the stock options granted in the previ- ous year were determined by application of the Black- Scholes model at the grant date. For this purpose, the following parameters were applied: Share price at the grant date in € Exercise price in € Options Nov. 2013 29.21 26.19 Interest rate for risk-free investments, in % 0.14 / 0.28 Expected term until fully vested in years Expected term of the options in years Expected volatility, in % Expected dividend yield, in % 1 / 2 6 40.00 0.00 Fair value at grant date, in € 6.08 / 7.87 The expected volatility was determined based on histori- cal volatility rates using a period corresponding to the term of the options. The number of options and the weighted average exer- cise price developed as follows: 2014 2013 Options in thousands Exercise price1) in € Options in thousands Exercise price1) in € Balance as of January 1 Lapse Exercise Issuance Balance as of December 31 Thereof exercisable 609 – 12 – 40 0 21.13 18.31 15.16 – 496 – 25 – 163 300 15.20 18.36 12.81 26.19 557 21.62 609 21.13 407 19.93 309 16.21 1) Weighted average exercise price. The weighted average stock price at the date of exercise of the stock options during the financial year was € 28.2 (PY: € 22.6 ). The exercise prices for the options outstanding on the reporting date were unchanged and remained between € 8.94 and € 26.19in the prior year. The weighted average remaining term of these options was 3 years (PY: 4 years). The compensation expenses for the share-based pay- ment programs of AUFEMININ SA. recorded in person- nel expense amounted to € 1.1 million in the reporting year (PY: € 0.2 million). The additional paid-in capital was increased by the same amount. 126 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (13) Pension obligations 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 and amount to € 52.7 million (PY: € 52.1 million), of which € 7.1 million (PY: € 4.9 million) are allocated to foreign pension insur- ance carriers. Provisions for pensions were created to account for the obligations arising from vested pension rights and cur- rent 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 pension plans corresponds to the present value of the obligations at the reporting date net of the fair value of the plan assets. The Group companies are subject to various risks in connec- tion with the pension plans. Along with general actuarial risks such as risks from salary and pension increases, longevity risk, and interest rate risk, these are inflation risk and capital market and investment risk. Essentially, three different pension plans exist in the German Group companies that are subject to the Ger- man Company Pension Act, and thus to the statutory regulations relating in particular to vesting, compensation for inflation in the benefit phase, and insolvency protec- tion by the Pensions Guarantee Corporation. The pen- sion plans are partially financed by premium reserve funds that are managed by Axel Springer Pensionstreu- hand e.V. as trustee. The two defined-benefit pension plans provide for an annual pension for entitled persons based on fixed amounts that depend for the first pension plan only on the length of service in the company, and for the second pension plan additionally on the position in the company, and are static in the vesting period and dynamic in the benefit payment period in accordance with the requirements of the Company Pension Act. The promises to the Executive Board correspond in their design to the second pension plan and are additionally dynamic in the vesting period depending on inflation. The third pension plan is a defined-contribution benefit in which a benefit is calculated using fixed factor tables dependent on converted compensation components. Ongoing benefits are adjusted from the beginning of pension payments at 1 % p.a. Pension commitments in other countries relate above all to Switzerland. The employees are insured against the risks of old age, death, and disability in various defined- benefit plans in a legally separate employee benefit fund at an independent third party. The retirement benefit is calculated using the retirement fund balance existing at the time of retirement applying a conversion rate. The retirement fund balance earns interest and accrues using age-dependent staggered savings contribution rates depending on the insured salary up to retirement age. The risk benefits for death and disability are calculated as a percentage of the insured salary. As for the plan assets existing for foreign pension com- mitments, the values of the assets essentially correspond to the individual surrender values of the reinsurer. For the active insured persons, this is the retirement fund balance, and for the retirees, this is the premium reserves/provisions of the reinsurer. The measurement was based on the following parameters: Information in % Discount rate Salary trend Pension trend 2014 2013 Germany Other countries Germany Other countries 1.9 1.75 1.75 1.0 1.0 0.0 3.6 1.75 1.75 2.0 1.0 0.25 127 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The amount of the provision was calculated as follows: € millions 12/31/2014 12/31/2013 Germany Other countries Total Germany Other countries Present value of defined benefit obligations financed by fund 477.1 109.8 586.9 379.2 101.1 Total 480.3 Fair value of plan assets – 155.7 – 91.0 – 246.7 – 149.3 – 88.4 – 237.7 Present value of defined benefit obligations not financed by fund 56.3 3.1 59.5 Provision Reimbursement right Net obligation 377.8 21.9 399.7 – 30.6 0.0 347.2 21.9 – 30.6 369.0 44.4 274.2 – 27.9 246.3 1.0 13.7 0.0 13.7 45.3 287.9 – 27.9 260.0 The changes in the present value of the pension obligations are presented in the table below: € millions 2014 Germany Other countries Total Germany 2013 Other countries Present value of obligations as of January 1 423.5 102.1 525.5 438.2 105.5 Change in consolidated companies Current service cost Interest expense Actuarial gains/losses arising from changes in demographic assumptions Actuarial gains/losses arising from changes in financial assumptions Payments by employees Transfer of pension obligation Exchange rate change Payments to retirees 0.0 5.0 15.1 – 1.0 106.3 3.1 – 0.4 0.0 1.3 2.6 2.1 0.0 6.2 2.0 0.0 2.0 1.3 7.5 17.2 – 0.9 112.5 5.1 – 0.4 2.0 Total 543.6 1.0 9.4 17.1 – 2.8 5.4 – 1.4 – 1.8 – 26.8 0.9 0.0 0.9 1.0 6.2 15.3 0.0 3.2 1.8 – 0.4 – 2.4 3.5 – 1.4 0.0 2.0 0.0 – 1.8 – 6.2 – 21.0 – 5.3 – 26.4 – 20.6 Reclassification into or from liabilities in connection with assets held for sale 3.0 0.0 3.0 – 19.3 0.0 – 19.3 Present value of obligations as of December 31 533.5 112.9 646.4 423.5 102.1 525.6 In fiscal year 2015, contributions to fund-financed de- fined benefit plans are expected to total € 2.4 million (PY: € 27.3 million), of which € 2.4 million (PY: € 2.3 million) are employer contributions from Swiss companies. 128 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The fair value of the plan assets showed the following changes: € millions Plan assets as of January 1 Income from plan assets Employee contribution Employer contribution Benefits paid Actuarial gains/losses arising from changes in demographic assumptions Actuarial gains/losses arising from changes in financial assumptions Transfer of plan assets Exchange rate changes 2014 Germany Other countries Total Germany 2013 Other countries 149.3 88.4 237.7 109.9 89.6 5.4 0.0 0.0 0.0 1.0 0.0 0.0 0.0 1.8 2.0 2.4 7.1 2.0 2.4 – 5.3 – 5.3 0.0 0.2 0.0 1.7 1.0 0.2 0.0 1.7 Total 199.5 5.5 2.0 2.3 1.5 2.0 2.3 – 6.2 – 6.2 0.1 0.0 0.1 0.4 0.0 – 1.2 88.4 0.4 35.3 – 1.2 237.7 Plan assets as of December 31 155.7 91.0 246.7 149.3 The carryovers from the previous year related to real estate assets previously held in fully-consolidated struc- tured entities with fair values of € 10.8 million minus transaction costs in the amount of € 0.5 million, and liquid funds of € 25.0 million. The investment portfolio broke down as follows: 12/31/2014 12/31/2013 Germany Other countries Total Germany Other countries 10.3 53.1 0.0 17.7 7.1 3.3 68.2 0.0 0.0 0.1 13.6 121.3 0.0 17.7 7.2 Total 8.8 108.2 1.4 0.0 32.1 150.4 83.3 4.0 87.3 237.7 3.2 66.3 0.0 0.0 0.1 69.6 14.8 4.0 18.8 88.4 82.8 4.2 86.9 246.7 149.3 € millions Shares Bonds Derivatives Money market instruments Cash and cash equivalents Plan assets with market price quotations 88.2 71.6 159.8 Real Estate Others Plan assets without market price quotations Total 67.5 0.0 67.5 155.7 15.3 4.2 19.4 91.0 The fair value of the plan assets includes real estate used by the company itself in the amount of € 46.2 million (PY: € 56.1 million). 129 4.0 0.0 0.0 0.0 0.0 35.3 0.0 5.5 41.9 1.4 0.0 32.0 80.8 68.5 0.0 68.5 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Axel Springer SE is entitled to reimbursement of pension obligations or pension expenses arising in connection with them in the context of the contribution of rotogra- vure printing operations to an affiliated company in Germany in 2005. The reimbursement right is presented as a separate asset (see note (36)), whereas in the income statement, the income from the reimbursement is netted with the corresponding pension expenses. Based on the existing contractual regulations, we do not assume a short-term settlement of the reimbursement claim and the corresponding pension obligations any more, and therefore in the reporting period, we classified the asset as well as the related pension liability in an amount of € 28.3 million (PY: € 25.5 million) as long-term. The value of the reimbursement right developed as follows: € millions Reimbursement right as of January 1 Income from reimbursement rights Paid-out benefits Actuarial gains/losses arising from changes in demographic assumptions Actuarial gains/losses arising from changes in financial assumptions Reimbursement right as of December 31 2014 27.9 1.0 – 2.3 2013 29.4 1.0 – 2.4 – 0.1 – 0.1 4.2 30.6 0.0 27.9 € millions Current service cost Interest expense Income from plan assets Income from reimbursement rights Pension expenses Germany 5.0 15.1 – 5.4 – 1.0 13.8 The expenses for defined benefit pension plans broke down as follows: 2014 Other countries 2.6 2.1 – 1.8 0.0 2.8 Total Germany 7.5 17.2 – 7.1 – 1.0 16.6 6.2 15.3 – 4.0 – 1.0 16.6 2013 Other countries 3.2 1.8 – 1.5 0.0 3.5 Total 9.4 17.1 – 5.5 – 1.0 20.0 Service cost is presented within the personnel expenses. The interest portions contained in the pension expenses and the income from the plan assets and interest reim- bursements are presented as components of interest expenses. An increase or decrease in the material actuarial as- sumptions would have the following effects on the pre- sent value of the total pension obligations as of Decem- ber 31, 2014: Information in % Increase by 25 basis points Decrease by 25 basis points Germany Other countries Germany Other countries Discount rate Salary trend Pension trend – 3.4 0.0 2.6 – 2.3 0.4 1.8 3.9 0.0 – 2.4 2.4 – 0.4 0.0 130 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The sensitivity calculations are based on the average term of the pension obligations calculated as of Decem- ber 31, 2014. The calculations were carried out in isola- tion for the actuarial parameters classified as material. As sensitivity analysis is based on the average term of the expected pension obligations and as a consequence, the expected payment dates are not taken into account, they only lead to approximate information or to describe tendencies. In case of changes to the mortality rates or life expectancies which act as a basis, it is assumed that if life expectancy of the beneficiary increases by one year as of December 31, 2014, pension obligations in Ger- many would have risen by 3.7 % in Germany and 3.6 % in the remaining countries. As of December 31, 2014, the weighted average dura- tion of the defined-benefit obligation in Germany was 16.0 years (PY: 16.0 years), while that of the defined- benefit obligation in foreign countries was 10.5 years (PY: 9.7 years). (14) Other provisions and accruals The other provisions and accrued liabilities broke down as follows: € millions Other obligations towards employees Structural measures Partial early retirement program (Altersteilzeit) Returns Discounts and rebates Other taxes Dismantling obligations Litigation expenses Other Other provisions Balance as of 01/01/2014 Utilization Reversals Additions Other changes Balance as of 12/31/2014 89.5 38.9 33.7 24.0 11.2 4.9 4.3 3.8 14.8 225.1 – 62.8 – 29.7 – 11.6 – 22.9 – 9.4 – 2.7 – 0.1 – 0.2 – 8.0 – 3.0 – 2.5 – 0.1 – 0.2 – 1.6 0.0 – 0.6 – 0.7 – 0.9 – 147.3 – 9.5 68.1 34.8 15.6 16.8 10.0 6.4 0.7 4.0 55.4 211.9 0.8 – 0.7 1.4 – 0.2 2.4 – 0.4 2.0 – 0.9 1.5 6.0 92.7 40.9 39.1 17.5 12.6 8.1 6.4 6.1 62.8 286.3 Other obligations towards employees primarily included variable compensation tied to performance. Structural measures were mainly allocated to the newspaper and magazine and printing plant segments. Provisions for returns comprise the expected sales returns of pub- lishing products. Other provisions were mainly allocated to guarantee obligations in the context of the takeover of domestic regional newspapers, TV program guides, and women's magazines by FUNKE Mediengruppe. The other changes result from the initial consolidation of acquired companies, currency translation differences, and also compounding. Non-current provisions are primarily contained in the provisions for partial early retirement programs, compen- sation tied to performance, and structural measures. 131 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (15) Financial liabilities The financial liabilities comprise liabilities from a promis- sory note loan in the amount of € 631.7 million (PY: € 499.1 million), other liabilities due to banks amounting to€ 417.2 million (PY: € 156.2 million) and finance leases amounting to € 2.0 million (PY: € 64.5 million). In October 2014 we restructured our promissory note loan and decreased the average rate of interest, in- creased the financing volume by € 137.0 million and extended the average term by two years through the partial termination, transformation and subscription of new volumes. The promissory note loan was character- ized by the following utilizations, interest rates, and ma- turities at the reporting date. 2014 € million 2013 € million Interest rate in % Maturity The interest rates were mainly equivalent to the effective rates of interest. In the case of fixed-interest loan tranch- es, the interest rates were fixed until the maturity date. Furthermore, at the reporting date additional unused short-term and long-term credit facilities amounted to € 511.0 million (PY: € 770.0 million). On the reporting date liabilities from finance leases in the amount of € 62.9 million, which are linked with the planned sale of an office building in Hamburg, are dis- closed as liabilities related to assets held for sale, see note (5). The future minimum lease payments from finance leases can be derived as follows as of December 2014 from their present value: 177.0 162.0 112.0 71.5 58.0 56.5 0.0 0.0 0.0 0.0 178.5 0.0 0.0 143.0 1.47 10/12/2020 1.034 10/11/2018 3.06 04/11/2018 € millions Due in up to one year Due in one to five years 6-month EURIBOR + 0.9 10/12/2020 6-month EURIBOR + 0.7 10/11/2018 Total 2.38 04/11/2016 Minimum lease payments Interest portion Present value 0.8 1.4 2.2 0.1 0.1 0.2 0.7 1.3 2.0 126.5 6-month EURIBOR + 1.0 04/11/2016 52.0 6-month EURIBOR + 1.3 04/11/2018 The reconciliation as of December 31, 2013 breaks down as follows: The other liabilities due to banks were characterized by utilization, interest rates, and maturities set forth in the table below. All liabilities were denominated in euros. Short-term loans are not presented in the table. 2014 € million 2013 € million Interest rate in % Maturity 409.0 150.0 1-month Euribor + 0,575 09/18/2017 3.8 4.3 3-month EURIBOR + 0.30 10/15/2022 € millions Due in up to one year Due in one to five years Due in more than five years Total Minimum lease payments 4.5 17.2 106.5 128.2 Interest portion Present value 3.8 15.0 44.8 63.7 0.6 2.2 61.7 64.5 In the previous year we expected future payments from subleasing arrangements amounting to € 4.2 million. 132 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Liabilities due to employees related to outstanding wage and salary payments, management bonuses, and sever- ance award claims. Accrued liabilities contain liabilities resulting from over- time and unused vacation. (16) Other liabilities The other liabilities broke down as follows: € millions 12/31/2014 12/31/2013 Contingent consideration 266.4 178.7 Debit balances in accounts receivable Liabilities due to employees Liabilities from derivatives Other Other financial liabilities Advance payments from customers Liabilities from other taxes Accrued liabilities Advance payments Capital investment subsidies Liabilities due to social insurance carriers Liabilities for duties and contributions Other Other non-financial liabilities Other liabilities 11.5 30.1 44.6 60.0 412.6 136.1 53.7 22.6 14.7 12.4 9.6 5.5 32.0 286.5 699.2 11.7 24.2 28.9 63.8 307.4 131.9 46.4 21.6 9.2 15.2 7.9 6.0 22.6 261.0 568.3 (17) Maturity analysis of financial liabilities The contractually agreed (undiscounted) payments related to financial liabilities are presented in the following table: € millions Financial liabilities Contingent consideration Other non-derivative financial liabilities Derivative financial liabilities Carrying amount as of 12/31/2014 1,050.9 266.4 424.4 44.6 Undiscounted cash outflows 2015 2016– 2019 2020 ff. 13.6 26.9 394.9 0.3 833.2 247.0 27.4 44.2 252.3 0.0 2.9 0.1 133 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements € millions Financial liabilities Contingent consideration Other non-derivative financial liabilities Derivative financial liabilities Carrying amount as of 12/31/2013 719.8 178.7 382.3 28.9 Undiscounted cash outflows 2014 2015– 2018 2019 ff. 20.2 23.7 345.1 0.4 701.3 161.0 28.1 28.5 53.0 0.0 3.4 0.0 Notes to the consolidated statement of comprehensive income (18) Revenues (19) Other operating income The revenues broke down as follows: The other operating income broke down as follows: € millions Advertising revenues Circulation revenues Printing revenues Other revenues Revenues 2014 2013 1,815.1 1,637.8 735.3 67.7 419.8 759.1 75.1 329.5 3,037.9 2,801.4 € millions Revaluation of contingent consideration Income from reversal of provisions Foreign exchange gains Write-ups Miscellaneous operating income Other operating income 2014 32.0 9.5 9.7 6.3 107.2 164.7 2013 25.8 14.4 12.4 1.0 91.7 145.3 During the fiscal year, revenues from barter transactions amounted to € 55.2 million (PY: € 48.6 million). These revenues were generated mainly from the bartering of advertising services. The increase in operating revenues year on year resulted particularly from the initial consolidation of acquired companies. The miscellaneous operating income included income from providing services to discontinued operations, income from the insolvency proceedings of the Kirch Group and a large number of circumstances with imma- terial amounts. 134 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (20) Purchased goods and services The average number of employees in the Group is shown below: The purchased goods and services broke down as follows: € millions 2014 2013 Salaried employees Raw materials and supplies and purchased merchandise Purchased services Purchased goods and services 196.8 793.2 990.0 189.1 736.6 925.8 Raw materials and supplies and purchased merchandise comprised paper costs amounting to € 78.2 million (PY: € 93.3 million). The cost of purchased services was predominantly composed of purchased third-party printing services and professional fees, as well as publisher services in the context of performance-based marketing. The purchased third-party printing services also included paper costs. (21) Personnel expenses The personnel expenses broke down as follows: € millions Wages and salaries Social security Pension expenses Expenses for share-based payments Other benefit expenses Personnel expenses 2014 820.3 130.1 8.5 11.2 4.3 2013 760.9 120.2 9.8 26.3 4.4 974.4 921.6 2014 2013 10,457 2,771 689 9,167 2,797 880 Editors Wage-earning employees Total employees 13,917 12,843 The increase in personnel figures compared to the prior year resulted particularly from the initial consolidation of acquired companies and from staff increases in the strongly growing digital business units. (22) Depreciation, amortization, and impairments The depreciation, amortization, and impairments broke down as follows: € millions Impairment losses in goodwill Amortization of other intangible assets Impairment losses in other intangible assets Depreciation of property, plant, and equipment Impairment losses in property, plant, and equipment Depreciation of investment property Impairment losses in investment property 2014 31.1 111.2 2013 2.7 90.7 19.4 1.9 58.2 58.4 24.9 1.4 9.4 0.0 1.4 0.0 Depreciation, amortization, and impairments 255.6 155.1 Impairment losses in goodwill primarily affected a report- ing unit in the Marketing Models segment (in the prior year in the Paid Models segment) and resulted from market-related reduced performance expectations of the reporting unit. 135 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The increase in the amortization of other intangible as- sets primarily resulted from increased ongoing invest- ments as well as increased effects of purchase price allocations. The impairment losses on other intangible assets mainly affected the Paid Models and Marketing Models segments. The impairment losses on both property, plant, and equipment and investment property are linked to the planned sale of an office building in Hamburg, see note (5). Impairment losses in non-current financial assets recog- nized in the reporting year are included in the income from investments. (23) Other operating expenses The other operating expenses broke down as follows: € millions Advertising expenses Expenses for non-company personnel Mailing and postage expenses Commissions and gratuities Rental and leasing expenses Maintenance and repairs Travel expenses Services provided by related parties Allowances for doubtful receivables Foreign exchange losses Other taxes 2014 174.3 129.5 102.7 40.6 43.7 35.4 28.3 11.4 9.8 5.9 9.0 2013 162.0 118.7 87.9 41.1 37.5 30.5 24.6 16.4 11.9 10.4 7.1 Miscellaneous operating expenses Other operating expenses 166.7 757.2 149.6 697.7 The miscellaneous operating expenses included addi- tions to provisions relating to legal and other risks, as well as other operating expenses. The following professional fees for the services rendered by the auditor Ernst & Young GmbH were recognized: € millions 2014 2013 Audits of the annual financial statements Other certification or appraisal services Tax advisory services Other services Total professional fees 1.0 0.8 0.3 0.8 2.9 1.0 0.4 0.5 0.1 2.0 The professional fees for the audit of financial statements include the audit of the separate financial statements of Axel Springer SE and other German subsidiaries, and the audit of the consolidated financial statements. The other certification and appraisal services primarily include fees for the auditor's review of the quarterly financial state- ments and audits to verify compliance with contractual agreements; the increase results from additional auditing services in connection with the sale of our domestic print activities during the reporting year. The tax advisory fees are a result of support services regarding specific tax questions. Other services consisted of due diligence services as part of acquisitions within the fiscal year. (24) Income from investments The income from investments in the reporting year amounting to € 81.4 million (PY: € 25.7 million) was particularly characterized by income from the disposal of investments. At the end of July 2014, we sold our minority interest held by SeLoger (17.2 %) in the iProperty Group Ltd., Sydney, Australia, for € 74.3 million. The profit amounted to € 55.1 million (before a tax effect of € 2.2 million). This amount was taken into account as a non-recurring effect in the Classified Ad Models segment, with 30 % of it being attributed to other shareholders. 136 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements In addition, we sold about 2.6 % of the shares in Do⁄an TV in the reporting period and recognized a profit of € 16.0 million (PY: € 15.1 million), which was recorded in income from investments. Please see note (7b) regarding the fair value changes of the investment in Do⁄an TV recorded in the income from investments and the put options economically related to it. Also included within income from investments were impairment losses of € 6.6 million (PY: € 3.0 million). (25) Net financial result The net financial result broke down as follows: (26) Income taxes The income taxes paid or owed and the deferred taxes are recognized under income taxes. The income taxes consist of the trade tax, corporate income tax, and soli- darity surcharge, and the corresponding foreign income taxes. The income tax expenses are broken down below: € millions Current taxes Deferred taxes Income taxes from continued operations Income taxes from discontinued operations Income taxes 2014 121.1 – 42.1 78.9 257.4 336.4 2013 89.4 – 1.3 88.1 28.0 116.0 € millions Interest income from bank accounts Interest income from loans and securities Interest income from derivatives Other interest income Interest income Interest expenses on liabilities due to banks and on promissory note Interest expenses on pension provisions, less reimbursements Miscellaneous interest expenses Interest and similar expenses Other financial result Financial result – 8.9 – 21.4 – 44.0 5.1 – 10.0 – 13.3 – 37.5 3.8 – 21.1 – 23.1 A total of € 14.4 million (PY: € 5.9 million) of the interest income and € – 24.1 million (PY: € – 21.7 million) of the interest expense was allocated to financial assets and liabilities that were not measured at fair value through profit or loss. 2014 2.1 12.3 0.0 3.5 17.9 2013 2.4 3.4 1.6 3.1 10.5 The expected income tax expense applying the tax rate of Axel Springer SE is reconciled to the income tax ex- pense recognized in the income statement as follows: – 13.7 – 14.2 Income before income taxes € millions 2014 314.7 2013 266.7 Tax rate of Axel Springer SE 31.00% 31.19% Expected tax expenses Differing tax rates Changes in tax rates Permanent differences Adjustments to carrying amounts of deferred taxes Current income taxes for prior years Deferred income taxes for prior years Non-deductible operating expenses 97.5 – 0.4 – 3.7 1.3 – 3.0 – 3.4 – 2.1 13.7 83.2 – 3.0 0.2 5.4 – 0.6 – 4.8 2.1 15.7 Tax-exempt income – 23.6 – 11.6 Trade tax additions/deductions Other effects Income taxes 3.4 – 0.9 78.9 4.5 – 2.9 88.1 Companies having the legal form of a corporation resi- dent 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, the profits of 137 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements 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 exclu- sively. The net income is assigned to the shareholder for purposes of corporate income tax. Due to various regional developments, the corporate tax rate of the Group fell to 31.0 % (PY: 31.19 %). The effects of different tax rates for partnerships and for foreign income taxes from the tax rate applicable to Axel Springer SE are explained in the reconciliation in the item differing tax rates. The permanent differences result mainly from impairment losses in goodwill and deconsolidation effects that are not taken into account for tax purposes. The adjustments made to the carrying amounts of de- ferred taxes included € 5.8 million (PY: € 4.0 million) for the non-recognition of deferred taxes on tax loss carry- forwards. Deferred tax assets and liabilities were recognized to account for temporary differences and tax loss carry- forwards, as follows: 12/31/2014 12/31/2013 Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities € millions Intangible assets 18.0 315.6 19.0 274.0 Property, plant, and equipment and investment property Non-current financial assets Inventories Receivables and other assets Pension provisions Other provisions Liabilities 1.8 89.4 1.8 106.2 0.7 1.0 28.0 30.2 11.8 35.8 1.9 0.0 2.8 0.8 13.8 33.5 0.1 2.4 1.6 8.2 9.6 29.2 0.2 0.0 10.5 11.1 3.2 0.6 Temporary differences 127.2 424.9 105.0 405.8 Tax loss carry-forwards 24.3 0.0 28.5 0.0 Total Offsetting 151.5 424.9 133.5 405.8 – 97.0 – 97.0 – 92.3 – 92.3 Amounts as per balance sheet 54.4 327.9 41.2 313.5 The increase in deferred tax liabilities related to intangible assets mainly results from initial consolidations that took place during the fiscal year. The increase in deferred tax liabilities related to pension provisions results from lower discount rates for IFRS purposes. The net balance of deferred tax items from January 1 to December 31, 2014 was derived as follows: € millions Deferred tax assets as of January 1 2014 41.2 2013 61.2 Deferred tax liabilities as of January 1 – 313.5 – 329.8 Net tax position as of January 1 – 272.4 – 268.7 Deferred tax of current year 42.1 1.4 Changes in deferred taxes recognized in other comprehensive income 39.0 – 6.5 Changes in consolidation group – 66.9 – 13.8 Deferred taxes from discontinued operations 0.6 0.0 Reclassification into assets and liabilities held for sale – 15.9 15.1 Net tax position as of December 31 – 273.5 – 272.4 Deferred tax assets as of December 31 54.4 41.2 Deferred tax liabilities as of December 31 – 327.9 – 313.5 Of the deferred tax assets, an amount of € 30.7 million (PY: € 9.4 million), and of the deferred tax liabilities, an amount of € 13.6 million (PY: € 6.9 million) can be real- ized in the short term. The amount of deferred tax assets to be disclosed in accordance with IAS 12.82 was € 11.3 million (PY: € 22.9 million). It is expected that this amount can be realized by application against the available operating income. Deferred taxes in the total amount of € 54.6 million (PY: € 15.6 million) were recognized directly in equity, as they relate to matters that were likewise recognized directly in equity. 138 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (27) Earnings per share The earnings per share were determined as follows: Result of continued operations attributable to shareholders of Axel Springer SE Result of discontinued operations attributable to shareholders of Axel Springer SE Net income attributable to shareholders of Axel Springer SE € millions € millions € millions 2014 2013 169.1 133.0 630.7 64.2 799.8 197.1 Weighted average shares outstanding 000s 98,940 98,888 Earnings per share from continuing operations (basic/diluted) Earnings per share from discontinued operations (basic/diluted) Net income attributable to shareholders of Axel Springer SE per share (basic/diluted) 1.71 1.34 6.37 0.65 € 8.08 1.99 In fiscal year 2014, no deferred tax assets were recog- nized with respect to corporate income tax loss carry- forwards amounting to € 109.3 million (PY: € 122.4 million), and with respect to trade tax loss carry-forwards mount- ing to € 18.6 million (PY: € 1.7 million) because it did not appear probable that sufficient taxable income could be generated for these amounts in the near future. In addi- tion, there are interest carry-forwards amounting to € 2.3 million for which no deferred tax assets were rec- ognized. Of these tax loss carry-forwards, an amount of € 5.5 million (PY: € 11.3 million) can be carried forward for up to five years and an amount of € 3.3 million (PY: € 9.9 million) can be carried forward for six to ten years. The utilization of tax loss carry-forwards or interest carry- forwards that had not previously been recognized as deferred tax assets caused a reduction in income tax expenses of € 2.0 million (PY: € 5.7 million). In the past fiscal year, there were corrections of recognized tax loss carry-forwards due to tax audits or differing tax assess- ments in the amount of € 2.5 million (PY: € 0.5 million). 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 consolidat- ed 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 € 7.5 million (PY: € 28.9 million) be- cause a realization is not planned at the present time. In the case of sale or profit distribution, the gain on disposal or the dividend, respectively, would be subject to taxa- tion at 5 % in Germany; in addition, foreign withholding taxes might be incurred. 139 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (28) Other income/loss The other income/loss broke down as follows: € millions Before tax Tax effect Net Before tax Tax effect Net 2014 2013 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 Other income/loss from investments accounted for using the equity method Other income/loss – 105.2 – 27.2 – 20.0 0.0 0.4 – 152.1 32.2 0.0 6.9 – 0.1 0.1 39.0 – 73.0 – 27.2 – 13.1 – 0.1 3.0 – 65.4 17.4 – 0.4 0.4 0.0 – 113.0 – 45.4 Notes to the consolidated statement of cash flows (29) Other disclosures The cash and cash equivalents were composed of short- term available cash in banks, securities, cash on hand, and checks. Asset additions of € 5.9 million (PY: € 4.9 million) were not reflected in cash. This related to additions in both intangible assets and property, plant, and equipment. The acquisition costs, cash payments, and purchased assets and liabilities for business acquisitions are pre- sented in the following table: € millions Intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents Provisions and liabilities Deferred tax liabilities Net assets Acquisition cost (preliminary) Thereof paid – 0.6 0.0 – 5.9 0.0 0.0 – 6.5 2014 300.3 6.5 6.5 31.9 19.8 48.4 – 70.7 – 82.6 260.1 651.3 523.1 2.5 – 65.4 11.5 – 0.4 0.0 – 51.9 2013 84.6 0.4 1.7 4.3 4.0 7.7 – 10.2 – 20.4 72.0 157.7 130.0 The amounts from the purchases of shares in consoli- dated subsidiaries and business units less cash and cash equivalents acquired reported in the cash flow statement, in addition to the cash payments and ac- quired funds listed in the table, also include payments for acquisitions of the previous years (in particular payments from contingent consideration; see note (33)). 140 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The following table provides details of sales proceeds, paid up amounts, and disposed assets and liabilities arising from transactions with loss of control (including the deconsolidation of AutoReflex in the previous year, see note (2c)): € millions Goodwill Other intangible assets Property, plant, and equipment Non-current financial assets Trade receivables Other assets Cash and cash equivalents 2014 2013 4.0 1.8 0.6 2.2 3.5 4.3 5.1 9.5 13.7 0.8 0.1 12.4 5.0 7.3 Provisions and other liabilities – 13.6 – 22.9 Deferred tax liabilities Disposal net assets Net realizable value Thereof paid-up – 2.1 5.8 9.0 7.1 – 4.6 21.2 4.6 4.6 The disclosure of cash inflows from divestitures in the cash flow statement is made under proceeds from dis- posals of consolidated subsidiaries and business units less cash and cash equivalents given up in the previous year as well as under the changes in cash and cash equivalents due to changes in companies included in consolidation. In the previous year, we contributed both € 25.0 million in cash and real estate assets with carrying amounts of € 9.8 million to our plan assets to secure and service existing pension obligations of Axel Springer (see note (13)). Notes to the consolidated segment report (30) Basic principles of segment reporting The segment reporting reflects the internal management and reporting structures. The reporting format is broken down into the three operating segments, those being Paid Models, Marketing Models, and Classifieds Ads Models. In addition, there is the Services/Holding segment. Segmentation of assets, liabilities, and investments based on the operating segments does not occur as these measures do not serve as a basis for decision making at segment level. (a) Operating segments The Paid Models segment comprises all business mod- els that are primarily used by paying readers. Paid Mod- els National is based primarily on the BILD and WELT Group and comprises the digital media offers as well as the newspapers and computer, automotive, sport, and music magazines of the BILD, B.Z., and WELT brand family. The news station N24, which was acquired in February 2014 and will be combined with the WELT Group to form a multimedia news company, also be- longs to this segment. In addition, the investments in newspaper and magazine publishers in Germany are included. Paid Models International comprises the digital media offers as well as the newspapers and magazines in Western, Central, and Eastern Europe, where we are particularly represented in Poland, Slovakia, Serbia, Hungary, Switzerland, Russia, and Spain. Onet.pl and azet.sk, the leading Internet portals in Poland and Slo- vakia, also belong to this segment. The Marketing Models segment collects all domestic and foreign business models whose revenues are primarily generated by advertising customers in marketing based on performance or reach. These particularly include the performance-based activities of the zanox Group and the reach-based marketing offers of Idealo, auFeminin, and Bonial. Furthermore, this segment also comprises the investment in the TV broadcast company Do⁄an TV. 141 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The Classified Ad Models segment comprises all busi- ness models whose revenues are primarily generated in the online classifieds business. Our portfolio comprises leading domestic and foreign online classifieds portals, with the focus areas of real estate, job, car and general classified advertising. This largely covers the real estate portals SeLoger, Immoweb, and Immonet, the job portals of the StepStone Group, the regional portal meinestadt.de, as well as the car and general classified ad portals Yad2 and LaCentrale acquired in the year 2014. 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, personnel, and corporate staff departments. Our three offset printing plants, 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. For purposes of geographical segment reporting, the revenues are segmented according to the location of the customer’s registered office and the non-current assets according to the location of the legal entity. (31) 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 comprise circulation revenues from the sale of publishing products, advertising reve- nues, 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. We use the performance figure EBITDA, which illustrates earnings before interest, taxes, depreciation and amorti- zation, as well as EBIT, which is defined as earnings before interest and taxes, to measure segment results. In calculating this performance figure, non-recurring effects and effects of purchase price allocations 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 of € – 1.5 million (PY: € 8.6 million) in the Paid Models National segment relate particularly to the effects from the revaluation of contin- gent purchase price liabilities (€ 10.7 million; PY: € 24.0 million), costs in connection with initiated divest- ments (€ – 9.0 million; PY: € – 14.8 million), as well as depreciation on financial assets (€ – 2.8 million; PY: € – 0.5 million). The non-recurring effects of € 37.8 million (PY: € – 9.0 million) in the Marketing Mod- els segment are particularly based on the revaluation of contingent purchase price liabilities (€ 18.0 million; PY: € – 8.1 million) as well as profits from the sale of equity investments (€ 21.8 million; PY: € 0.5 million). In the Classified Ad Models segment, non-recurring effects of € 41.6 million (PY: € – 12.8 million) were identified in particular as being from the sale of investments (€ 55.1 million; PY: € – 0.1 million), expenses in connec- tion with realized acquisitions (€ – 8.7 million; PY: € – 5.1 million) and the revaluation of contingent pur- chase price liabilities (€ – 3.0 million; PY: – 7.5 million). In the Services/Holding segment non-recurring effects (€ – 32.9 million; PY: € 2.8 million) mainly resulted from impairment losses in connection with the planned sale of real estate. The effects of purchase price allocations mainly consist- ed of amortization and depreciation on newly measured assets acquired in the context of business combinations. They also contain impairment losses on goodwill during the reporting year in the amount of € 31.1 million as well as on other intangible assets in the amount of € 5.5 million in the Marketing Models segment (PY: € 2.7 million on goodwill in the Paid Models segment). 142 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements The reconciliation of the income from investments carried on the income statement as well as the impairments is shown below: Other disclosures (32) Capital management € millions 2014 2013 Income from investments included in EBITDA Non-recurring effects included in income from investments Income from investments 10.7 12.1 70.6 81.4 13.6 25.7 Depreciation, amortiza-tion, impairments and write-ups (except from purchase price allocations) Thereof write-ups Non-recurring effects from depreciation Effects of purchase price allocations as far as depreciation, amortization and impairments are affected Depreciation, amortization, and impairments – 112.5 – 94.7 – 6.3 – 33.0 – 1.0 0.0 – 103.9 – 59.4 – 255.6 – 155.1 The non-current segment assets include goodwill, intan- gible assets, property, plant, and equipment as well as investment properties. Beyond the provisions of German law applicable to stock corporations, Axel Springer SE is not subject to any further obligations relating to capital preservation, wheth- er from its own Articles of Incorporation or from contrac- tual obligations. The financial key figures we used for management purposes are primarily earnings-driven. The goals, methods, and processes of our capital manage- ment are subordinate to the earnings-driven financial key figures. We can utilize the funds derived from the promissory notes placed in the prior year (€ 637.0 million) and also draw down our credit line (€ 900.0 million) both for gen- eral business purposes as well as to finance acquisitions. The promissory note loan was restructured in October 2014. Until September 30, 2014, this had a financing volume of € 500.0 million and a maturity up to 2016 (nominal value of € 269.5 million) or up to 2018 (nominal value of € 230.5 million). The new tranches of the prom- issory note loan have maturities up to 2016 (nominal value of € 56.5 million), up to 2018 (nominal value of € 332.0 million), and up to 2020 (nominal value of € 248.5 million). In addition, we have a credit line in the amount of € 900.0 million. Drawdowns of this credit line will be- come due and payable in September 2017. The draw- down of the credit lines is tied to compliance with the credit terms. Since the existence of the credit lines we have fully complied with all credit terms. For the purpose of maintaining and adjusting the capital structure, the company can adjust the dividend pay- ments 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 the reporting date and the prior year's reporting date we held no treasury shares. 143 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (33) Financial assets and liabilities The balance sheet items comprising financial assets and liabilities can be attributed to the measurement categories according to IAS 39 as follows: € millions Assets 12/31/2014 Other non-current investments and securities Loans and advances Derivatives Other non-current financial assets Trade receivables Receivables due from related parties Derivatives Other Other assets Cash and cash equivalents Liabilities 12/31/2014 Financial liabilities Trade payables Liabilities due to related parties Derivatives designated as a hedging instrument Derivatives not designated as a hedging instrument Contingent consideration Other Other liabilities Assets 12/31/2013 Other non-current investments and securities Loans and advances Other non-current financial assets Trade receivables Receivables due from related parties Derivatives Other Other assets Cash and cash equivalents Liabilities 12/31/2013 Financial liabilities Trade payables Liabilities due to related parties Derivatives designated as a hedging instrument Derivatives not designated as a hedging instrument Contingent consideration Other Other liabilities Available- for-sale financial assets Financial assets and liabilities held for trading No category according to IAS 39 and non financial assets and liabilities Carrying amount Loans and receivables Financial liabilities 288.5 288.5 523.8 13.0 112.0 112.0 383.1 41.0 41.0 472.8 8.0 102.7 102.7 248.6 1,049.0 313.5 9.2 101.7 101.7 655.3 271.4 11.0 99.8 99.8 34.4 34.4 384.2 384.2 259.1 259.1 0.5 0.5 43.6 43.6 0.5 0.5 27.9 27.9 30.6 52.1 52.1 2.0 7.7 0.9 266.4 286.5 553.8 27.9 31.4 31.4 64.5 4.1 0.9 178.7 261.0 440.6 34.4 288.5 259.1 582.0 523.8 43.6 0.5 164.1 164.6 383.1 1,050.9 313.5 16.9 0.9 43.6 266.4 388.2 699.2 384.2 41.0 425.2 472.8 36.0 0.5 134.1 134.6 248.6 719.8 271.4 15.1 0.9 27.9 178.7 360.8 568.3 144 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements With the exception of the following financial assets and liabilities, the valuation is at amortized cost. 12/31/2014 12/31/2013 Fair value based on observable market data (level 2) Fair value not based on observable input factors (level 3) Fair value based on market price (level 1) 0.0 Fair value based on market price (level 1) 39.3 Fair value based on observable market data (level 2) Fair value not based on observable input factors (level 3) 259.1 0.5 0.9 43.6 0.5 0.9 27.9 266.4 178.7 € millions Other non-current investments and securities Derivatives not designated as a hedging instrument (positive fair value) Derivatives designated as a hedging instrument (negative fair value) Derivatives not designated as a hedging instrument (negative fair value) Contingent consideration The fair values of contingent considerations developed as follows: € millions 01/01/2014 Acquisition Divestment Payment Revaluation not affecting net income Revaluation affecting net income Thereof other operating income Thereof other operating expenses Compound 12/31/2014 Thereof Car&Boat Media Thereof Immoweb Thereof Onet 53.7 67.1 0.0 80.3 Thereof Immoweb Thereof Onet 46.1 89.7 2013 201.5 16.4 – 2.2 – 2.0 – 42.0 2.3 2.3 1.5 57.5 – 11.0 – 11.0 1.5 55.6 1.9 82.2 11.2 – 9.0 – 25.8 16.8 2.8 6.8 6.8 0.8 178.7 53.7 – 23.6 – 23.6 1.0 67.1 2014 178.7 134.6 0.0 – 27.4 0.0 – 26.2 – 32.0 5.8 6.6 266.4 145 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Payments during the previous year related particularly to the acquisition of the remaining shares in Digital Window. tion changes and other expenses for financial derivatives assigned to this category. With the exception of the financial liabilities presented below, the carrying amounts of the financial assets and liabilities were identical to their fair values. 12/31/2014 12/31/2013 Carrying amount Fair value Carrying amount Fair value 1,049.0 1,062.3 655.3 663.5 During the reporting year, positive fair value changes of € 27.0 million (PY: € 17.3 million) before taxes were rec- ognized directly in equity without affecting net income. Related to the sale of our investment in iProperty (see note (11e)) the unrealized gains recorded in other com- prehensive income amounting to € 47.0 million before taxes were reclassified into the income statement in the context of income recognition. 631.7 645.0 499.1 507.3 (34) Financial risk management 417.2 417.2 156.2 156.2 € millions Liabilities Thereof promissory note Thereof due to banks The fair value disclosed is determined on the basis of the advantage between the contractually agreed fixed inter- est rate and the market interest rate (level 2 of the meas- urement hierarchy, see note (3g)). The net gains and losses of financial instruments (exclud- ing interest and dividends) recognized in the income statement are presented in the following table. € millions Loans and receivables, financial liabilities Available-for-sale financial assets Financial assets and liabilities held for trading 2014 19.7 – 186.9 2013 29.8 12.8 240.8 – 25.4 The net gains and losses in the categories of “loans and receivables” and “financial liabilities” consisted mainly of the result from the currency translation and valuation allowances. 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 and impairments. The net gains and losses in the category of “financial assets and liabilities held for trading” mostly resulted from valua- With respect to its financial assets and liabilities, the Axel Springer Group is exposed to financial market risks, liquidity risks, and credit risks. The task of financial risk management is to limit these risks by means of targeted measures. (a) Financial market risks Financial market risks for financial assets and liabilities mainly consist of interest rate risks and exchange rate risks. In principle, the effects of these risks on the value can be assessed promptly and, where applicable, the loss risks can be reduced. Selected derivative hedging instruments are used to hedge risks. The use of financial derivatives is governed by appropriate guidelines of the Group. These guidelines define the relevant responsibilities, permissible actions, reporting requirements and business partner limit, and prescribe the strict separation of trading and back-office functions. To hedge the interest rate risk, we employ in particular interest rate derivatives such as interest rate swaps, in addition to increased use of fixed interest agreements. The degree of hedging specified in the Axel Springer finance regulations ranges between 30 % and 100 % of the underlying transaction volume. The use of fixed inter- est agreements and interest rate derivatives resulted in an annual average hedging ratio regarding the gross 146 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements indebtedness (promissory note loan and liabilities for banks) of 56.0 % (PY: 80.5 %). The effects of market interest rate changes on variable- interest financial instruments not hedged with financial derivatives are calculated using a sensitivity analysis. Assuming a parallel shift in the yield curve of 50 basis points, the financial result would change by € 2.7 million (PY: € 1.6 million). Currency risks from operations are mainly avoided through the occurrence of operating costs in the coun- tries in which we sell our products and services. Remain- ing currency risks from operations are insignificant to the Group since the majority of EBITDA is earned in the euro currency zone. In the reporting period, the share of EBITDA not earned in euros was 20 % (PY: 19 %). Currency risks from foreign currency claims and liabilities (without contingent compensation) as well as claims and liabilities in euros in non-euro countries with net expo- sures starting at € 5 million per foreign currency are hedged by means of coordinated forward exchange transactions. Local-currency cash flows generated in non-euro zone countries are either reinvested to expand local business operations, or invested with Axel Springer SE and hedged by means of forward exchange deals or distrib- uted in the form of dividends. Therefore, the foreign exchange risk from fluctuating exchange rates for foreign currency cash and cash equivalents is limited. Effects from the currency translation of statements pre- pared by subsidiaries in foreign currencies are recorded directly in accumulated other comprehensive income. Therefore, Axel Springer does not hedge such currency effects. (b) Liquidity risk We continually monitor the availability of financial re- sources to fund the company’s operating activities and investments by means of a Group-wide liquidity planning system and monthly cash flow analyses. Liquidity and financial flexibility of the Axel Springer Group is ensured by fixed credit lines in the amount of € 900.0 million (until 2017) as well as by the promissory note (€ 637.0 million). Note (17) contains a maturity analysis of our financial liabilities. The payment obligations for financial obliga- tions that have been contractually agreed but not yet recorded are presented in note (39). (c) Credit risk Financial assets may be impaired if business partners do not adhere to payment obligations. The maximum expo- sure to risk from financial assets, which are fundamental- ly subject to credit risk, correspond to their carrying amounts. Significant risk items are contained in non-current finan- cial assets (loans) as well as in trade receivables, receiv- ables due from related parties, and other assets. The majority of our business models are based on a widely distributed and heterogeneous customer base. We therefore estimate the risk of significant defaults to be low. To the extent that credit risks are discernible, we reduce them using active management of receivables, credit limits, and credit checks of our business partners. Appropriate allowances are formed to account for dis- cernible default risks. In connection with the sale of regional newspapers, TV program guides, and women's magazines we granted in the amount of € 240.7 million a multi-year, subordinated loan to FUNKE Mediengruppe. Currently, we do not see any default risk. For collateralization purposes, our busi- ness partners granted second-tiered securities regarding their assets. Investments in securities are made only in instruments with first-class ratings according to our finance regula- tions. Investment in time deposits occurs exclusively at financial institutions that belong to the deposit protection fund and are classified by leading rating agencies as being at least of Investment Grade Status BBB- (S&P) or Baa3 (Moody’s)). 147 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements value measurement of these forward exchange transac- tions, as well as the opposite profits and losses from the foreign currency measurement of the hedged loan claims and obligations were recognized. In order to secure our investment in Do⁄an TV, we con- cluded several put options for a successive sale of all shares with the seller. With regard to the accounting of this hedging agreement see note (7b). Beside the agreed fixed price secured by bank guarantees, the valuation of the derivatives depends in particular on the discount rate. A supposed variation of 25 basis points would alter the valuation recorded within the income from investments by € 2.7 million. (36) Relationships with related parties Related parties are defined as those persons and com- panies that control the Axel Springer Group, or that are controlled, jointly managed, or subject to significant influence by the Axel Springer Group. Accordingly, the members of the Springer family, the companies con- trolled, jointly managed, or subject to significant influence by this family, as well as companies in whose manage- ment they hold a key position have been defined as related parties for the Axel Springer Group. Control of the Group is exercised by Axel Springer Gesellschaft für Publizistik GmbH & Co. or its parent company, Friede Springer GmbH & Co. KG, a majority of which is attribut- able to Dr. h. c. Friede Springer. In addition, the subsidi- aries, joint ventures, and associated companies of the Axel Springer Group have been defined as related com- panies. In addition to the active members of the Execu- tive Board and Supervisory Board of Axel Springer SE (including their family members) and their majority hold- ings, the institutions managing the plan assets of the Axel Springer Group must also be considered related parties. (35) Financial derivatives (a) Financial derivatives designated as hedging instruments In the reporting period, designated hedging instruments were used in particular to hedge against the interest rate risks of long-term liabilities. The cash flows were hedged through an interest rate swap. Regarding maturity and nominal amount the interest rate swap was chosen to match the corresponding tranches of the variable- interest loans (hedged items). The interest rate swap was measured at fair value. The changes in the fair value were recognized in accumulated other comprehensive income until the hedged item was realized. The fair value measurement of the interest rate swap at the reporting date yielded negative fair values of € – 0.9 million (PY: – 0.9 million). During the reporting period a profit of less than € 0.1 million was recorded in other comprehensive income (PY: € 0.3 million). In addition, two designated hedging instruments were used to hedge against currency risks from purchase price payments for company acquisitions. Regarding the for- ward exchange transaction implemented and realized during the year for hedging the purchase price payment for acquiring Jobsite an unrealized gain of € 2.8 million, initially recorded in other comprehensive income, was included in the acquisition costs for acquired non-financial assets. On the reporting date the negative fair value of the remaining forward exchange transactions for hedging the purchase price payment of an additional acquisition was less than € – 0.1 million. (b) Financial derivatives not designated as hedging instruments As of December 31, 2014 forward exchange transac- tions with a negative fair value of € – 43.6 million and a positive fair value of € 0.5 million (PY: negative fair value of € – 27.9 million, positive fair value of € 0.5 million) were recorded; these were entered in order to secure against currency risks in loans from foreign subsidiaries or a contingent purchase price liability. The nominal value of the hedged transactions amounted to € 461.2 million (PY: € 472.3 million). The profits and losses from the fair 148 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements Besides the business relationships with the consolidated subsidiaries, the following business relationships existed with related parties: € millions Balance sheet Loans Receivables Thereof trade Allowances included Provisions Liabilities Thereof trade Income statement Goods and services supplied Goods and services received Financial result Total Associated companies Other related parties Total Associated companies Other related parties 12/31/2014 12/31/2013 6.3 43.6 8.4 24.1 11.4 16.9 3.6 2014 18.6 58.5 0.9 5.5 36.9 2.9 2.9 0.0 1.5 1.5 15.3 18.6 0.9 0.8 6.7 5.4 21.1 11.4 15.4 2.1 3.2 39.9 0.0 5.0 36.0 6.6 25.7 7.0 15.0 5.2 2013 18.0 63.2 0.6 3.2 31.2 2.9 2.2 0.0 4.0 4.0 16.0 30.3 0.5 1.8 4.8 3.7 23.5 7.0 11.0 1.2 2.0 32.9 0.1 With regard to discontinued operations, services were rendered amounting to € 28.3 million (PY: € 79.9 million) and services were received amounting to € 1.8 million (PY: € 6.5 million). The changes in the allowances for receivables due to related parties are presented in the table below: € millions Balance as of January 1 Additions Utilization Reversals Other changes Balance as of December 31 2014 25.7 4.5 – 4.5 – 1.5 – 0.2 24.1 2013 28.1 0.9 0.0 – 3.4 0.0 25.7 As of December 31, 2014, receivables in the amount of € 34.8 million (PY: € 31.1 million) were neither past due nor subject to valuation allowances. With regard to these receivables, there were no indications at the reporting date that would suggest that the related parties would not fulfill their payment obligations. The receivables due from associated companies in- cluded a reimbursement claim for pension obligations in the amount of € 30.6 million (PY: € 27.9 million) (see note (13)). The provisions referred to pension obligations owed to members of the Executive Board. The liabilities include obligations from share-based remuneration owed to members of the Executive Board in the amount of € 7.7 million (PY: € 4.1 million). 149 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (37) Contingent liabilities As of December 31, 2014, contingent liabilities from guarantees existed in the amount of € 49.0 million (PY: € 11.6 million). In connection with the disposal to FUNKE Mediengruppe, we assumed an additional guar- antee (see note (2d)). (38) Contingent assets Contingent assets were due from KirchMedia GmbH & Co KGaA i.L. in the amount of € 240.5 million (PY: € 263.3 million). Insofar as advance payments are an- nounced in the context of the insolvency proceedings against KirchMedia GmbH & Co. KGaA i.L., we recog- nize them as receivables. The receivables accepted in the table of claims by the insolvency administrator origi- nally totaled € 325.0 million. A total of € 6.5 million (PY: € 6.5 million) was paid in the reporting year. Goods and services provided to related companies were mostly related to the distribution of newspapers and magazines. The services received from related compa- nies mainly comprised purchased publishing products and printing services. A master agreement for the print- ing of magazines is in effect with PRINOVIS until Decem- ber 31, 2019. Under this agreement, services in the amount of € 15.4 million (PY: € 17.9 million) were ren- dered for companies of the Axel Springer Group in 2014. In 2014, the fixed compensation of the members of the Executive Board of Axel Springer SE amounted to € 8.9 million (PY: € 9.4 million). The variable compensa- tion amounted to € 8.9 million (PY: € 10.7 million). The measurement of the share-based compensation granted to the Executive Board of Axel Springer SE gave rise to personnel expenses of € 3.6 million (PY: € 14.2 million). Guaranteed pension payments to members of the Execu- tive Board resulted in a personnel expense of € 0.5 million in fiscal year 2014 (PY: € 0.5 million). The compensation of the members of the Supervisory Board amounted to € 3.0 million (PY: € 3.0 million). A Supervisory Board member received a compensation of € 0.1 million for services as an author (PY: € 0.1 million). The compensation of the members of the Executive and Supervisory Board is described in detail in the compen- sation report, which is part of the notes to the consoli- dated financial statements. The compensation report is included in the section “Corporate Governance Report”. An amount of € 2.6 million (PY: € 2.6 million) was paid to former Executive Board members and special directors and their survivors. A total amount of € 37.2 million (PY: € 32.4 million) was allocated to the provisions for pension obligations. For transactions with the institutions managing the plan assets of the Axel Springer Group, please find the expla- nations in note (13). 150 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (39) Other financial commitments (40) Events after the reporting date The other financial commitments broke down as follows: € millions 12/31/2014 12/31/2013 Purchase commitments for - intangible assets - property, plant, and equipment - inventories Future payments under operating leases Future payments under finance leases Long-term purchase obligations Other financial obligations 3.0 3.3 17.4 158.9 2.2 68.0 252.9 4.9 5.9 21.1 106.0 80.9 113.4 332.2 The long-term purchase obligations resulted from paper supply contracts. The finance leases for the office building, which was reclassified as assets held for sale, shall be terminated at the estimated time of disposal and are not included as a commitment. From the total amount of € 74.5 million, € 4.0 million are expected to be paid out in the short-term. The future minimum lease payments from operating leases at December 31, 2014 are broken down in the following table: € millions Due in up to one year Due in one to five years Due in more than five years 2014 47.1 94.3 17.5 2013 34.5 69.2 2.3 Total 158.9 106.0 At the beginning of January 2015 the acquisition of 51 % of shares in @Leisure Holding B.V., Amsterdam, the Netherlands, was completed (for further details, see note (2c)). On February 11, 2015 we signed an agreement with the shareholders of the real estate portal Immowelt regarding combining the Immowelt Group and the Immonet Group, belonging to Axel Springer Digital Classifieds. After finali- zation of various purchase and contribution agreements both real estate portals will be brought under the auspi- ces of the new Immowelt Holding AG company, where we will have a majority shareholding of 55 % via Axel Springer Digital Classifieds. The remaining 45 % will be kept by the current shareholders of Immowelt AG, and they were granted various options available for selling their holding. The transaction was based on a valuation of both companies totaling € 420 million. We will pay a total of approximately € 131 million as purchase price to the previous partners of Immowelt in connection with creating the new structure. The combining of both por- tals makes it possible to sustainably improve the com- petitive position within the German market segment for real estate portals. The transaction is still awaiting ap- proval from the relevant cartel authorities. There are no further significant events after the reporting date to be reported. (41) Declaration of Conformity with the German Corporate Governance Code Axel Springer SE 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 website www.axelspringer.de → Investor Relations → Corporate Governance, where it is permanently available to share- holders. The Declaration of Conformity is also printed in the Corporate Governance section of this Annual Report. 151 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements (42) Companies included in the consolidated financial statements and share property No. Company 1 Axel Springer SE, Berlin (parent company) Segment - 12/31/2014 12/31/2013 Share- holding in % - Share- holding in % - via No. - via No. - Fully consolidated subsidiaries Germany AS Osteuropa GmbH, Berlin AS TV-Produktions- und Vertriebsges. mbH, Hamburg ASV Direktmarketing GmbH, Hamburg Axel Springer Asia GmbH, Hamburg Axel Springer Auto-Verlag GmbH, Hamburg Axel Springer Digital Classifieds GmbH, Berlin Axel Springer Digital Classifieds Holding GmbH, Berlin Axel Springer Digital GmbH, Berlin 2 3 4 5 6 7 8 9 10 Axel Springer Digital TV Guide GmbH, Berlin 11 Axel Springer Digital Ventures GmbH, Berlin 12 Axel Springer Financial Media GmbH, Munich 13 Axel Springer ideAS Engineering GmbH, Berlin 14 Axel Springer ideAS Ventures GmbH, Berlin 15 Axel Springer International GmbH, Berlin 16 Axel Springer International Holding GmbH, Berlin 17 Axel Springer Media Impact GmbH & Co. KG, Berlin 18 Axel Springer Media Logistik GmbH, Berlin 19 Axel Springer Mediahouse Berlin GmbH, Berlin 20 Axel Springer Medien Accounting Service GmbH, Berlin 21 Axel Springer Services & Immobilien GmbH, Berlin 22 Axel Springer Syndication GmbH, Berlin 23 Axel Springer TV Productions GmbH, Hamburg 24 "Axel Springer Verlag" Beteiligungsgesellschaft mbH, Berlin Paid Models Marketing Models Services Holding Paid Models, Marketing Models Paid Models Classified Ad Models Classified Ad Models Services/Holding Marketing Models Services/Holding Paid Models Services/Holding Services/Holding Services/Holding Services/Holding Services/Holding Services/Holding Paid Models Services/Holding Services/Holding Paid Models Marketing Models Services/Holding 25 Axel Springer Vertriebsservice GmbH, Hamburg Paid Models, Services/Holding 26 B.Z. Ullstein GmbH, Berlin 27 Bergedorfer Buchdruckerei von Ed. Wagner (GmbH & Co), Hamburg 28 Berliner Morgenpost GmbH, Berlin 29 BERLINER WOCHENBLATT Verlag GmbH, Berlin 30 Bilanz Deutschland Wirtschaftsmagazin GmbH (previously Zweiundsiebzigste "Media" Vermögensverwaltungsges. mbH), Hamburg 31 BILD GmbH & Co. KG, Berlin 32 Bonial International GmbH, Berlin Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Marketing Models 33 Buch- und Presse-Großvertrieb Hamburg GmbH & Co. KG, Hamburg Paid Models, Services/Holding 34 Commerz-Film GmbH, Berlin 35 comparado GmbH, Lüneburg 36 COMPUTER BILD Digital GmbH, Hamburg 37 Content Factory TV-Produktion GmbH, Berlin 38 eprofessional GmbH, Hamburg 39 finanzen.net GmbH, Karlsruhe 40 Gofeminin.de GmbH, Cologne 41 hamburg.de GmbH & Co. KG, Hamburg 42 Idealo International GmbH, Berlin 43 Idealo Internet GmbH, Berlin 44 Immonet GmbH, Hamburg Marketing Models Marketing Models Paid Models Paid Models Marketing Models Marketing Models Marketing Models Marketing Models Marketing Models Marketing Models Classified Ad Models 152 100.0 100.0 100.0 100.0 100.0 85.0 100.0 100.0 - 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 - - - 16 100.0 1 1 100.0 100.0 16 100.0 1 9 7 1 - 9 1 24 24 1 15 1 1 1 1 1 100.0 70.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 16 1 1 16 1 9 7 1 1 9 1 24 24 1 15 1 1 1 1 1 24 100.0 24 1 1 1 100.0 100.0 100.0 24 100.0 - - - 100.0 100.0 100.0 100.0 24 100.0 100.0 87.4 78.1 100.0 100.0 100.0 100.0 100.0 75.0 100.0 61.9 100.0 74.9 88.7 1 1 1 16 43 1 72 76 11 83 9 43 9 8 100.0 74.9 78.1 100.0 100.0 100.0 - 100.0 55.0 100.0 61.9 100.0 74.9 88.7 5) 5) 5) 5) 5) 5) 5) 5) 6) 5) 5) 5) 5) 5) 5) 5) 5) 5) 6) 9) 6) 1 1 1 24 1 24 71 24 1 1 1 16 43 5) 5) 1 - 76 11 83 10) 6) 9 43 9 8 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements 9) 6), 9) 5) via No. - 1 - 49 8 48 - 76 71 5) 1 5) 6) 43 14 1 14 11 1 62 8 23 6) - 31 24 44 6) 5) 6), 9) 9) - 43 71 28 5) 1 62 62 62 9 No. Company 45 ImmoSolve GmbH, Bad Bramstedt 46 ims Internationaler Medien Service GmbH & Co. KG, Hamburg 47 Maz&More TV-Produktion GmbH, Berlin 48 meinestadt.de GmbH, Cologne 49 meinestadt.de Holding GmbH, Berlin 50 meinestadt.de Vertriebs-GmbH, Cologne 51 MeinProspekt GmbH, Munich 52 Metrigo GmbH, Hamburg 53 Niendorfer Wochenblatt Verlag GmbH & Co. KG, Hamburg 54 PACE Paparazzi Catering & Event GmbH, Berlin 55 Panther Holding GmbH, Berlin 56 Room 49 GmbH, Berlin 57 Sales Impact GmbH & Co. KG, Hamburg 58 Shop Now GmbH, Berlin 59 Smarthouse Media GmbH, Karlsruhe 60 Sohomint GmbH i.L., Hamburg 61 StepStone Deutschland GmbH, Düsseldorf 62 StepStone GmbH, Berlin Segment Classified Ad Models Services/Holding Paid Models Classified Ad Models Classified Ad Models Classified Ad Models Marketing Models Marketing Models Paid Models Services/Holding Marketing Models Marketing Models Services/Holding Marketing Models Marketing Models Marketing Models Classified Ad Models Classified Ad Models 63 Talpa Germany GmbH & Co. KG (previously Schwartzkopff TV-Productions GmbH & Co. KG), Hamburg Marketing Models 64 thads.media vermarktungs gmbh, Berlin 65 Transfermarkt GmbH & Co. KG, Hamburg 66 Ullstein Ges. mit beschränkter Haftung, Berlin 67 Umzugsauktion GmbH & Co. KG, Schallstadt 68 Vertical Media GmbH, Berlin 69 Visual Meta GmbH, Berlin 70 WBV Direktzustell-GmbH, Hamburg 71 WBV Wochenblatt Verlag GmbH, Hamburg 72 WeltN24 GmbH (previously Zweiundfünfzigste "Media" Vermögensverwaltungsges. mbH), Berlin Paid Models Paid Models Paid Models Classified Ad Models Paid Models Marketing Models Paid Models Paid Models Paid Models 73 YOURCAREERGROUP AG, Düsseldorf Classified Ad Models 12/31/2014 12/31/2013 Share- holding in % Share- holding in % via No. 51.0 55.0 100.0 100.0 100.0 100.0 100.0 - - 100.0 100.0 100.0 100.0 90.0 91.0 72.6 100.0 100.0 50.1 100.0 51.0 100.0 100.0 88.0 76.0 - - 100.0 - 44 1 72 49 8 48 32 - - 1 43 14 1 14 11 1 62 8 23 72 31 24 44 72 43 - - 1 - - 55.0 - 100.0 100.0 100.0 - 56.1 100.0 100.0 100.0 100.0 100.0 100.0 91.0 72.6 100.0 100.0 100.0 - 51.0 100.0 51.0 - 76.0 100.0 100.0 100.0 100.0 74 YOURCAREERGROUP GmbH (previously StepStone Verwaltungs GmbH), Düsseldorf Classified Ad Models 100.0 62 100.0 75 YOURCAREERGROUP International GmbH & Co. KG, Düsseldorf Classified Ad Models 76 ZANOX AG, Berlin 77 Zuio GmbH, Berlin Other countries 78 alFemminile s.r.l., Milan, Italy 79 Amiado Group AG, Zurich, Switzerland 80 Amiado Online AG, Zurich, Switzerland 81 APM Print d.o.o., Belgrade, Serbia/Kosovo 82 AS-NYOMDA Kft, Kecskemét, Hungary 83 AUFEMININ SA, Paris, France 84 auFeminin.com Productions SARL, Paris, France 85 Automotive Exchange Private Limited, Maharashtra, India 86 Axel Springer - Magyarország Kft, Tatabánya, Hungary 87 Axel Springer Digital Classifieds France SAS, Paris, France 88 Axel Springer España S.A., Madrid, Spain 89 Axel Springer France S.A.S., Paris, France 90 Axel Springer IdeAS Polska Sp. z o. o., Wroslaw, Poland Marketing Models Marketing Models Marketing Models Paid Models Paid Models Paid Models Paid Models Marketing Models Marketing Models Classified Ad Models Paid Models Classified Ad Models Paid Models Paid Models Services/Holding 153 - 52.5 100.0 100.0 100.0 100.0 74.9 25.1 100.0 80.8 100.0 91.3 - 100.0 100.0 100.0 99.0 - 9 100.0 52.5 24 100.0 24 5) 83 95 79 164 142 144 16 83 5 - 8 1 1 100.0 100.0 100.0 74.9 25.1 100.0 80.8 100.0 72.8 93.5 100.0 100.0 100.0 13 - 83 95 79 164 142 86 16 83 5 1 8 1 1 - Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements No. Company 91 Axel Springer International AG (previously Handelszeitung Medien AG), Zurich, Switzer- land 92 Axel Springer International Limited, London, Great Britain 93 Axel Springer Norway AS, Oslo, Norway 94 "Axel Springer Russia" Geschlossene Aktiengesellschaft, Moscow, Russia 95 Axel Springer Switzerland AG, Zurich, Switzerland 96 Azet.sk a.s., Zilina, Slovakia 97 Belles Demeures S.A.S., Paris, France 98 Blikk Kft., Budapest, Hungary 99 Bonial SAS, Paris, France 100 Candidate Manager (US) Inc, Boston, USA 101 Candidate Manager Ltd, Dublin, Ireland 102 Car&Boat Media SAS, Paris, France 103 CaribbeanJobs Ltd, George Town, Cayman Islands 104 Coral-Tell Ltd., Tel Aviv, Israel 105 Diagorim SAS, Paris, France 106 Digital Window Inc., Wilmington, USA 107 Digital Window Limited, London, Great Britain 108 DreamLab Onet.pl sp. z o.o., Krakow, Poland 109 enFemenino SARL, Madrid, Spain 110 Etoilecasting.com SAS, Paris, France 111 Evenbase Recruitment Ltd., London, Great Britain 112 Gambettes Box SAS, Paris, France 113 Garantie System SAS, Paris, France 114 GoBrands Sp. z o.o., Krakow, Poland 115 Grupa Onet.pl SA, Krakow, Poland 116 Immoweb SA, Brussels, Belgium 117 IT-Jobbank A/S, Kopenhagen, Denmark 118 Jobs LU Ltd, Dublin, Ireland 119 Jobs.ie Ltd, Dublin, Ireland 120 Marmiton SAS, Paris, France Segment Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Classified Ad Models Paid Models Marketing Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Marketing Models Marketing Models Paid Models Marketing Models Marketing Models Classified Ad Models Marketing Models Classified Ad Models Paid Models Paid Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Marketing Models 121 Media Impact Polska Sp. z o.o., Warsaw, Poland Paid Models 122 Merci Alfred S.A.S., Paris, France 123 My Little Campus SAS, Paris, France 124 My Little Paris S.A.S., Paris, France 125 My Web Ltd, Ebene, Mauritius 126 MyJob Group Ltd, Sheffield, Great Britain 127 Népújság Kft, Békéscsaba, Hungary 128 Netmums Limited, Watford, Great Britain 129 NIJobs.com Ltd, Belfast, Ireland 130 NIN d.o.o., Belgrade, Serbia/Kosovo 131 ofeminin.pl Sp. z o.o., Warsaw, Poland 132 ONET Holding Sp. z o.o., Warsaw, Poland 133 OnetM Sp. z o.o. (previously OnetMarketing Sp. z o.o.), Krakow, Poland Marketing Models Marketing Models Marketing Models Classified Ad Models Classified Ad Models Paid Models Marketing Models Classified Ad Models Paid Models Marketing Models Paid Models Paid Models 134 OnetMarketing Sp. z o.o. (previously OnetMarketing Sp. z o.o. S.K.A), Krakow, Poland Paid Models 154 12/31/2014 12/31/2013 Share- holding in % Share- holding in % via No. 1 92 16 92 2 1 149 139 146 32 101 151 8 - 100.0 - 100.0 100.0 100.0 70.0 100.0 - 100.0 100.0 100.0 - via No. - 95 - 9 2 1 149 139 - 32 101 151 9) - 151 100.0 151 8 152 107 76 115 83 83 162 124 102 115 132 87 - 151 151 83 147 115 83 124 83 137 151 - 83 151 142 83 147 146 115 115 133 - 82.2 100.0 100.0 100.0 100.0 100.0 - - - 100.0 100.0 80.0 100.0 100.0 100.0 100.0 50.0 50.0 - - - 100.0 100.0 94.0 100.0 100.0 99.7 51.0 49.0 75.0 100.0 99.9 0.1 - 152 107 76 115 83 83 - - - 115 132 87 62 151 151 83 147 115 9) - - - 9) 137 151 24 83 151 142 83 147 146 9) 115 115 133 1.0 100.0 100.0 100.0 100.0 100.0 70.0 100.0 100.0 100.0 100.0 100.0 51.0 100.0 100.0 82.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 80.0 - 100.0 100.0 100.0 50.0 50.0 100.0 100.0 60.0 100.0 100.0 - 100.0 100.0 99.7 51.0 49.0 75.0 100.0 99.9 0.1 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements No. Company 135 Opineo Sp. z o.o., Wroclaw, Poland 136 Petöfi Lap- és Könyvkiadó Kft, Kecskemét, Hungary 137 Pnet (Pty) Ltd, Johannesburg, South Africa 138 Poliris S.A.S., Paris, France 139 PressImmo On Line S.A.S., Paris, France 140 RAS Online d.o.o., Belgrade, Serbia/Kosovo 141 Ringier Axel Springer CZ a.s., Prague, Czechia 142 Ringier Axel Springer d.o.o., Belgrade, Serbia/Kosovo 143 Ringier Axel Springer Inwestycje Sp. z o.o., Warsaw, Poland 144 Ringier Axel Springer Magyarország Kft (previously Axel Springer - Budapest Kiadói Kft), Budapest, Hungary 145 Ringier Axel Springer Management AG, Zurich, Switzerland 146 Ringier Axel Springer Media AG, Zurich, Switzerland 147 Ringier Axel Springer Polska Sp. z o.o., Warsaw, Poland 148 Ringier Axel Springer Print CZ a.s., Prague, Czech Republic 149 Ringier Axel Springer Slovakia a.s., Bratislava, Slovakia 150 runtastic GmbH, Pasching, Austria 151 Saongroup Limited, Dublin, Ireland 152 SeLoger.com SAS, Paris, France 153 Skapiec Sp. z o.o., Wroclaw, Poland 154 SmartAdServer SAS, Paris, France 155 soFeminine.co.uk Limited, London, Great Britain 156 StepStone A/S, Kopenhagen, Denmark 157 StepStone B.V., Leiden, Netherlands 158 StepStone France SAS, Paris, France 159 StepStone NV, Brussels, Belgium 160 StepStone Austria GmbH, Vienna, Austria 161 StepStone Services Sp. z o.o., Warsaw, Poland 162 StepStone UK Holding Limited, London, Great Britain 163 Totaljobs Group Limited, London, Great Britain 164 Trans Press d.o.o., Belgrade, Serbia/Kosovo 165 Villaweb SARL, Rennes, France 166 Viviana Investments Sp. z o.o., Warsaw, Poland 167 WEBIMM SAS, Paris, France Segment Paid Models Paid Models Classified Ad Models Classified Ad Models Classified Ad Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Paid Models Classified Ad Models Classified Ad Models Paid Models Marketing Models Marketing Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Classified Ad Models Paid Models Classified Ad Models Paid Models Classified Ad Models 168 YOURCAREERGROUP Switzerland GmbH (StepStone Switzerland GmbH), Kloten, Switzerland Classified Ad Models 169 zanox B.V., Amsterdam, Netherlands 170 ZANOX Hispania SL, Madrid, Spain 171 zanox Reklam Hizmetleri Limited Sirketi, Istanbul, Turkey 172 zanox SAS, Paris, France 173 zanox Sp. z o.o., Warsaw, Poland 174 zanox SRL, Milan, Italy Marketing Models Marketing Models Marketing Models Marketing Models Marketing Models Marketing Models 175 ZANOX VEICULAÇÃO DE PUBLICIDADE NA INTERNET LTDA., São Paulo, Brazil Marketing Models 176 zanox we create partners AB, Stockholm, Sweden Marketing Models 177 ZÖLD ÚJSÁG Tömegkommunikációs és Kiadói Zrt, Budapest, Hungary Paid Models 155 12/31/2014 12/31/2013 Share- holding in % 80.0 - 100.0 93.0 7.0 100.0 100.0 Share- holding in % - via No. 132 - 94.0 151 152 139 152 142 100.0 93.0 7.0 100.0 100.0 - - 100.0 100.0 146 100.0 99.0 96.5 100.0 50.0 100.0 146 147 146 146 92 146 100.0 - 92.9 50.0 100.0 - - 100.0 100.0 50.1 100.0 98.0 0.5 80.0 100.0 100.0 - 100.0 100.0 100.0 146 11 162 87 8 132 83 83 - 62 62 62 0.0 160 100.0 100.0 100.0 100.0 100.0 100.0 100.0 65.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 - 61 62 62 162 142 139 147 152 62 76 76 76 76 76 76 76 38 76 - 100.0 50.1 100.0 98.0 0.5 - 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 via No. - 24 151 152 139 152 142 146 146 - 1 16 3) 146 141 146 11 162 87 8 - 83 83 62 62 62 62 160 7) 61 62 62 162 142 139 147 - 62 76 76 76 76 76 76 76 38 76 86 7) Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements No. Company Other subsidiaries1) Germany 12/31/2014 Share- holding in % via No. No. Company 12/31/2014 Share- holding in % via No. 218 Zweiundsechzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 1 178 Achtundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 179 Achtzigste "Media" Vermögensverwaltungsges. mbH, Berlin 180 AS Buchversand GmbH, Munich 181 Axel Springer Druckhaus Spandau GmbH & Co. KG, Berlin 182 Axel Springer Media Impact Management GmbH, Berlin 100.0 100.0 100.0 100.0 183 Axel Springer Offsetdruckerei Kettwig GmbH & Co. KG, Essen 100.0 184 Axel Springer Print Management GmbH (previously Neunundfünf- zigste "Media" Vermögensverwaltungsges. mbH), Berlin 185 Axel Springer Security GmbH, Berlin 186 BILD Multimedia Verwaltungs GmbH, Berlin 187 CEO Event GmbH, Berlin 100.0 100.0 100.0 100.0 188 Dreiundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 189 Dreizehnte "Media" Vermögensverwaltungsges. mbH, Hamburg 100.0 190 Einundachtzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 191 Finanzen Corporate Publishing GmbH, Berlin 100.0 192 Fünfundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 193 hamburg.de Beteiligungs GmbH, Hamburg 194 Hammerich & Lesser Zeitschriften- und Buchverlag GmbH, Hamburg 195 Hauptstadtsee 809. VV GmbH, Berlin 196 ims Verwaltungs GmbH, Hamburg 197 Informationsmedien Handels GmbH, Hamburg 198 kinkaa GbR, Berlin 199 meinestadt.de Vermögensverwaltungsgesellschaft mbH (previ- ously "Dating Café" Vermittlungsagentur GmbH), Hamburg 200 myPass GmbH, Berlin 100.0 100.0 100.0 55.0 100.0 50.0 50.0 100.0 100.0 201 Neunundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 202 New Waves Entertainment GmbH, Berlin 203 Sales Impact Management GmbH, Hamburg 204 Scubia GbR, Berlin 205 Sechsundsechzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 100.0 50.0 50.0 100.0 1 1 24 1 1 1 1 1 1 68 24 1 1 1 24 41 1 1 1 1 43 55 48 1 1 63 1 43 55 1 206 Sechsundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 24 207 Siebenundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 208 SmartAdServer GmbH, Berlin 209 Talpa Germany Verwaltungsgesellschaft mbH (previously Schwartzkopff TV-Productions Verwaltungsges. mbH), Hamburg 210 Tarif24 GmbH, Berlin 211 TOPS Online Publications GbR, Lüneburg 212 Transfermarkt Verwaltungs GmbH, Hamburg 213 TunedIn Media GmbH, Berlin 214 Umzugsauktion Verwaltungs GmbH, Schallstadt 100.0 100.0 100.0 100.0 90.0 10.0 51.0 86.4 100.0 215 Vierundsiebzigste "Media" Vermögensverwaltungsges. mbH, Berlin 100.0 216 Zanox 1 AG i.L., Berlin 217 Zebra Interactive UG (haftungsbeschränkt), Berlin 100.0 100.0 1 83 23 43 35 43 31 1 44 24 76 308 Other countries 219 African Jobs Online Ltd, Port Louis, Mauritius 220 Alpha Real spol. s.r.o., Zilina, Slovakia 221 AUTOVIA, s.r.o., Bratislava, Slovakia 222 Axel Springer Digital Ventures Inc., Wilmington, USA 223 Axel Springer Editions SAS, Paris, France 224 Axel Springer Group Inc., New York, USA 225 Axel Springer Hírszolgálat Kft, Tatabánya, Hungary 100.0 100.0 100.0 100.0 100.0 100.0 100.0 226 Axel Springer International Group Limited, London, Great Britain 100.0 227 Axel Springer Media France S.A.R.L., Neuilly-sur-Seine, France 100.0 228 Axel Springer Media Italia s.r.l., Milan, Italy 229 Axel Springer Offsetdruckerei Ahrensburg GmbH & Co. KG, Ahrensburg 100.0 100.0 230 Axel Springer Publishing International Limited, London, Great Britain 100.0 231 Axel Springer TV International Limited, London, Great Britain 232 Azet.sk – katalóg s.r.o., Zilina, Slovakia 233 BEMFEMININO.COM.BR, Sao Paulo, Brazil 234 Beyond the Job Ltd, Dublin, Ireland 235 Car Price List Yad2 Ltd., Tel Aviv, Israel 100.0 100.0 99.9 0.1 100.0 100.0 236 Communications Smart AdServer Canada inc., Montreal, Canada 100.0 237 CompuTel Telefonservice AG, Chur, Switzerland 238 Cpress Media s.r.o., Zilina, Slovakia 239 Cybersearch S.A., Guatemala City, Guatemala 240 Digitality Tech Solutions Private Limited, Mumbai, India 241 Estascontratadocom S.A., Panama City, Panama 242 Euro Blic Press d.o.o., Banja Luka, Bosnia-Herzegovina 243 eurobridge Inc., New York, USA 244 Immostreet ES, Barcelona, Spain 245 Jean Frey AG, Zurich, Switzerland 246 Job Navigator (Pty) Ltd, Johannesburg, South Africa 247 Jobcity Ltd., Tel Aviv, Israel 248 Motogo India Private Limited, Mumbai, India 249 My Kenyan Network Ltd, Nairobi, Kenya 250 My Little Box KK, Tokyo, Japan 251 Newtopia GmbH, Königs Wusterhausen 252 Périclès Atlantique S.A.R.L, Casablanca, Marokko 253 Saongroup Caribbean (Jamaica) Ltd, Kingston, Jamaica 151 96 96 11 194 17 144 1 17 17 1 226 226 96 83 84 151 104 83 95 96 266 100.0 100.0 100.0 0.0 151 7) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 55.6 100.0 100.0 100.0 51.0 16.0 100.0 85 266 142 1 139 95 137 104 85 219 124 63 138 139 103 254 Saongroup Caribbean (Trinidad) Ltd, Port of Spain, Trinidad and Tobago 100.0 103 255 Saongroup.com India Pvt Ltd, Pune, India 256 SMART ADSERVER DO BRASIL LTDA., São Paulo, Brazil 257 Smart AdServer Espana S.L., Madrid, Spain 258 Smart AdServer Italia S.r.l., Milan, Italy 259 Smart Adserver Limited, London, Great Britain 260 Smart AdServer Polska Sp. z o.o., Krakow, Poland 100.0 100.0 100.0 100.0 100.0 100.0 151 83 83 83 83 83 156 Annual Report 2014 Axel Springer SE Consolidated Financial Statements Notes to the Consolidated Financial Statements No. Company 261 Smart AdServer USA Inc., Wilmington, USA 262 SPORT.SK s.r.o., Zilina, Slovakia 263 Tecoloco Com S.A. de C.V. Costa Rica, San Jose, Costa Rica 264 Tecoloco El Salvador S.A. de C.V., San Salvador, El Salvador 265 Tecoloco Holding S.A. de C.V., San Salvador, El Salvador 266 Tecoloco International Inc, Panama City, Panama 267 Tecoloco S.A. de C.V. Honduras, Tegucigalpa, Honduras 268 Tecoloco.com S.A. de C.V. Nicaragua, Managua, Nicaragua 269 Tecoloco.com S.A. de C.V. Panama, Panama City, Panama 270 wewomen.com Inc., Wilmington, USA 271 Yad2Pay Internet Ads Ltd., Haifa, Israel 272 Yad2Pay Ltd., Tel Aviv, Israel 273 zanox ltd., London, Great Britain 274 zanox Switzerland AG, Zurich, Switzerland Investments accounted for using the equity method Germany 275 AS TYFP Media GmbH & Co. KG, Munich 276 Bonial Enterprises GmbH & Co. KG, Berlin 277 Bonial Ventures GmbH, Berlin 278 PRINOVIS Ltd. & Co. KG, Hamburg 279 Project A Ventures GmbH & Co. KG, Berlin Other countries 280 Blendle B.V., Utrecht, Netherlands 281 Editions Mondadori Axel Springer (EMAS) S.E.N.C., Montrouge Cedex, France 282 INFOR BIZNES Sp. z o.o., Warsaw, Poland 283 MDB SAS, EVRY CEDEX, France 284 Ozy Media, Inc., Mountain View CA, USA Other associated companies and joint ventures2) Germany 285 Agenda Media GmbH, Hamburg 286 autohaus24 GmbH, Pullach 287 Axel Springer Plug and Play Accelerator GmbH, Berlin 288 Berliner Pool TV Produktion Gesellschaft mbH, Berlin 289 Blitz-Tip Radio Hessen Beteiligungsges. mbH & Co. KG, Bad Soden am Taunus 12/31/2014 Share- holding in % 100.0 66.7 via No. 83 96 100.0 266 0.0 151 7) 100.0 266 0.0 151 7) 100.0 266 0.0 151 7) 100.0 99.6 0.4 95.0 3.0 2.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 65.0 74.9 25.1 26.3 21.0 50.0 49.0 49.0 16.8 49.0 50.0 50.0 50.0 33.3 151 266 151 266 264 239 266 83 104 104 76 76 1 9 4) 1 4) 1 9 11 89 143 87 11 8) 72 6 11 72 1 290 Bonial Enterprises Verwaltungs GmbH, Berlin 1) No full consolidation due to immaterial impact (relation of net income and balance sheet total fo 9 4) 65.0 12/31/2014 No. Company 291 Dropspot GmbH, Berlin 292 Filmgarten GmbH, Berlin 293 Ges. für integr. Kommunikationsforschung mbH & Co. KG, Munich 294 Ges. für integr. Kommunikationsforschung Verwaltungs GmbH, Munich 295 Harburger Zeitungsverwaltungsgesellschaft mbH, Hamburg 296 hyvent GmbH, Berlin 297 Intermedia Standard Presse-Code GmbH, Hamburg 298 InterRed GmbH, Haiger Share- holding in % 40.0 42.0 25.0 25.0 24.8 49.0 32.0 24.0 299 ISPC Intermedia Standard Presse-Code GmbH & Co.KG, Hamburg 32.0 300 "Lühmanndruck" Harburger Zeitungsges. mbH & Co. KG, Hamburg 24.8 301 Mont Ventoux Media GmbH, Berlin 302 Motor-Talk GmbH, Berlin 303 MSV Medien Special Vertrieb GmbH & Co. KG, Hamburg 304 Myby GmbH & Co. KG i. L., Düsseldorf 305 Project A Management GmbH, Berlin 306 Qivive GmbH i. L., Bad Homburg 307 Radio Hamburg GmbH & Co. KG, Hamburg 308 Sparheld International GmbH, Berlin 309 TraderFox GmbH, Reutlingen 310 V.V. Vertriebs-Vereinigung Berliner Zeitungs- und Zeitschriften- Grossisten GmbH & Co. KG, Berlin 50.0 20.0 50.0 25.1 26.3 33.3 35.0 30.0 25.1 48.5 311 Verwaltungsges. MSV Medien Special Vertrieb m.b.H., Hamburg 50.0 312 Zeitungs- und Zeitschriften Vertrieb Berlin GmbH, Berlin 35.5 via No. 1 43 1 1 1 1 1 1 1 1 23 11 33 1 9 1 1 43 39 1 33 1 Other countries 313 AR Technology SAS, Paris, France 314 Asocijacija Privatnih Media, Belgrade, Serbia/Kosovo 315 Autoreflex.com SAS, Paris, France 316 BULGARPRESS OOD, Veliko Tarnovo, Bulgaria 317 EMAS Digital SAS, Montrouge Cedex, France 318 HUNGAROPRESS Sajtóterjesztö Kft, Budapest, Hungary 319 ITAS Media Private Limited, Delhi, India 320 Les Rencontres aufeminin.com SAS, Paris, France 321 PRINOVIS Ltd., London, Great Britain 322 SOKOWEB TECHNOLOGIES, S.L., Barcelona, Spain 323 Swan Insights SA / NV, Brussels, Belgium 324 VINA WOMAN UK LTD., London, Great Britain Other significant investments Other countries 86.5 20.0 100.0 317 142 313 25.5 50.0 24.0 49.0 50.0 25.1 31.2 25.1 30.0 1 89 1 5 83 1 32 62 83 325 Doğan TV Holding A.S., Istanbul, Turkey 14.8 34 6) The company has exercised the exemption options of Section 264b of the German Commer- the company to net income and balance sheet total of the Group). cial Code (Handelsgesetzbuch - HGB). 2) No at-equity consolidation due to immaterial impact (relation of net income of th company to net income of the Group). 3) Control due to existing option rights. 4) No control due to the lack of contractual agreements, which exclude the power of control and the possiblility to influence the variable outflaws. 5) The company has exercised the exemption options of Section 264 (3) of the German Commercial Code (Handelsgesetzbuch - HGB). 7) Shares less than 0.1%. 8) Significant influence due to the representation in the supervisory board. 9) Due to option rights in the reporting year and/or in the prior year a share of 100 % consolidated. 10) Due to option rights in the reporting year and/or in the prior year a share of 89.99 % consolidated. 157 Boards Supervisory Board The Supervisory Board is composed of the following persons: Name, occupation Seats on other mandatory supervisory boards Seats on comparable boards in Germany and abroad Dr. Giuseppe Vita Chairman of the Supervisory Board of Axel Springer SE UniCredit S.p.A., Italy (Chairman of the Board of Directors) Dr. h. c. Friede Springer Vice Chairwoman of the Supervisory Board of Axel Springer SE ALBA Finance plc & Co. KGaA ALBA plc & Co. KGaA ALBA Group plc & Co. KG (Advisory Board) Oliver Heine Attorney at law and partner in the law firm Heine & Partner Rudolf Knepper (since April 16, 2014) Entrepreneur Lothar Lanz (since April 16, 2014) Member of various Supervisory Boards YooApplications AG, Switzerland (Board of Directors) TAG Immobilien AG (Supervisory Board; Chairman from June until November 2014) Zalando SE (since February 2014) Axel Springer Digital Classifieds GmbH (Chairman of the Supervisory Board until June 2014) Axel Springer International Finance B.V., Netherlands (Supervisory Board until April 2014) Do⁄an TV Holding A.S., Turkey (Supervisory Board) Ringier Axel Springer Management AG, Switzerland (Board of Directors until May 2014) Ringier Axel Springer Media AG, Switzerland (Board of Directors until May 2014) Dr. Nicola Leibinger-Kammüller President and Chairwoman of the Executive Board of TRUMPF GmbH + Co. KG Lufthansa AG Siemens AG Voith GmbH Prof. Dr. Wolf Lepenies University Professor (emer.) FU Berlin; Permanent Fellow (emer.) at Wissenschaftskolleg zu Berlin Prof. Dr.-Ing. Wolfgang Reitzle (since April 16, 2014) Entrepreneur Continental AG (Chairman) Hawesko Holding AG (since August 2014) Medical Park AG (Chairman since June 2014; Supervisory Board since January 2014) Holcim Limited, Switzerland (Chairman of the Board of Directors since April 2014; previously Board of Directors) Martin Varsavsky (since April 16, 2014) CEO, Fon Wireless Limited Dr. Gerhard Cromme (until April 16, 2014) Chairman of the Supervisory Board of Siemens AG Siemens AG (Chairman) Klaus Krone (until April 16, 2014) Entrepreneur Dr. Michael Otto (until April 16, 2014) Chairman of the Supervisory Board of Otto GmbH & Co KG Otto GmbH & Co KG (Chairman) FORUM Grundstücksgesellschaft m.b.H. (Chairman of the Advisory Board) Robert Bosch Industrietreuhand KG (Partner) 158 Annual Report 2014 Axel Springer SE Executive Board The Executive Board is composed of the following persons: Executive Board member Seats on mandatory supervisory boards Seats on comparable boards in Germany and abroad Boards Dr. Mathias Döpfner Chairman and Chief Executive Officer Journalist Jan Bayer President BILD and WELT Group Media scholar Dr. Julian Deutz (since January 1, 2014) Chief Financial Officer (since April 16, 2014) Master’s Degree in Business Administration Dr. Andreas Wiele President Marketing and Classified Ad Models Lawyer dpa Deutsche Presse-Agentur GmbH (until June 2014) ZANOX AG (Chairman since August 2014; previously Supervisory Board) Ralph Büchi (until April 30, 2014) President International Division Master’s Degree in Business Administration ZANOX AG (Supervisory Board; previously Chairman of the Supervisory Board until August 2014) Lothar Lanz (until April 16, 2014) Chief Financial Officer and Chief Operating Officer TAG Immobilien AG (Supervisory Board; Chairman from June until November 2014) Zalando SE (since February 2014) Master’s Degree in Business Administration 159 Axel Springer Schweiz AG, Switzerland (Chairman of the Board of Directors) B.Z. Ullstein GmbH (Advisory Board) Ozy Media Inc., USA (Board of Directors since October 2014) RHJ International SA, Belgium (Board of Directors) Time Warner Inc., USA (Board of Directors) Warner Music Group Corp., USA (Board of Directors since May 2014) meinestadt.de GmbH (Supervisory Board until June 2014) Amiado Group AG, Switzerland (Board of Directors until March 2014) AUFEMININ SA, France (Board of Directors until June 2014) Automotive Exchange Private Limited, India (Board of Directors) Axel Springer Digital Classifieds GmbH (Supervisory Board since June 2014) Axel Springer International Finance B.V., Netherlands (Supervisory Board from April until December 2014) Axel Springer Magyarország Kft., Hungary (Supervisory Board until September 2014) Axel Springer Schweiz AG, Switzerland (Board of Directors) ITAS Media Private Limited, India (Board of Directors) Ringier Axel Springer Magyarország Kft., Hungary (Supervisory Board) Ringier Axel Springer Management AG, Switzerland (Board of Directors since May 2014) Ringier Axel Springer Media AG, Switzerland (Board of Directors since May 2014) AUFEMININ SA, France (Board of Directors) Axel Springer Digital Classifieds France SAS, France (Chairman of the Supervisory Board since June 2014) Axel Springer Digital Classifieds GmbH (Chairman of the Supervisory Board since June 2014) Axel Springer Digital Classifieds Holding GmbH (Chairman of the Advisory Board) B.Z. Ullstein GmbH (Advisory Board) Car & Boat Media SAS, France (Chairman of the Supervisory Board since July 2014) Coral-Tell Ltd., Israel (Chairman of the Board of Directors since May 2014) Immoweb SA, Belgium (Chairman of the Board of Directors since June 2014) meinestadt.de GmbH (Chairman of the Supervisory Board since June 2014) PRINOVIS Limited, Great Britain (Board of Directors) SeLoger.com SAS, France (Chairman of the Supervisory Board since June 2014) StepStone GmbH (Chairman of the Supervisory Board) Amiado Group AG, Switzerland (Chairman of the Board of Directors) Amiado Online AG, Switzerland (Chairman of the Board of Directors) AUFEMININ SA, France (Board of Directors) AR Technology SAS, France (Board of Directors) Automotive Exchange Private Limited, India (Board of Directors) AutoReflex.com SAS, France (Board of Directors) Axel Springer Digital Classifieds France SAS, France (Chairman of the Supervisory Board until June 2014) Axel Springer International AG, Switzerland (Chairman of the Board of Directors) Axel Springer Schweiz AG, Switzerland (Vice Chairman of the Board of Directors) Car & Boat Media SAS, France (Supervisory Board since July 2014) CompuTel Telefonservice AG, Switzerland (Chairman of the Board of Directors; inactive) Grupa Onet.pl S.A., Poland (Supervisory Board; Chairman of the Supervisory Board until October 2014) Immoweb SA, Belgium (Chairman of the Board of Directors until June 2014) ITAS Media Private Limited, India (Board of Directors) Ringier Axel Springer Management AG, Switzerland (Chairman of the Board of Directors) Ringier Axel Springer Media AG, Switzerland (Chairman of the Board of Directors) SeLoger.com SAS, France (Chairman of the Supervisory Board until June 2014) Today Merchandise Private Limited, India (Board of Directors until January 2014) Axel Springer Digital Classifieds GmbH (Chairman of the Supervisory Board until June 2014) Axel Springer International Finance B.V., Netherlands (Supervisory Board until April 2014) Do⁄an TV Holding A.S., Turkey (Supervisory Board) Ringier Axel Springer Management AG, Switzerland (Board of Directors until May 2014) Ringier Axel Springer Media AG, Switzerland (Board of Directors until May 2014) Financial Calendar March 4, 2015 Annual Report, Annual Results Press Conference, Investor/Analyst Conference Call April 14, 2015 Annual General Meeting May 7, 2015 Quarterly Financial Report as of March 31, 2015 August 4, 2015 Interim Financial Report as of June 30, 2015 November 4, 2015 Quarterly Financial Report as of September 30, 2015 Imprint Address Axel Springer SE Axel-Springer-Strasse 65 10888 Berlin Phone: +49 30 2591-0 Investor Relations ir@axelspringer.de Phone: +49 30 2591-77421/-77425 Fax: +49 30 2591-77422 Corporate Communications information@axelspringer.de Phone: +49 30 2591-77660 Fax: +49 30 2591-77603 Design Axel Springer SE Corporate Communications Photos Daniel Biskup (p. 4, p. 6) Matti Hillig (p. 6, p. 7) Sergio Rinaldi (p. 78) The Annual Report and up-to-date information about Axel Springer are available on the Internet at www.axelspringer.com The English translation of the Annual Report is provided for convenience only. The German original is legally binding. 

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