CORPORATE RESPONSIBILITY REPORT 2015 INDEX INTRODUCTION Letter from the Chairman 6 Letter from the Chief Executive Officer 8 GOVERNANCE MODEL Group organizational structure 10 Corporate Governance System 16 Risk Management System 23 Data Protection 32 Cybersecurity 34 Supply Chain Management 35 Content Management Content Management Model 40 Content Accessibility 45 Management of Corporate Communication 47 Advertising Management 49 Team Management 51 Stakeholder Relations 56 Participation in Public Policy Development 58 Involvement in Corporate Responsibility Initiatives 60 BUSINESS MODEL Industry Outlook 63 Strategy and Business Model 64 Key Success Elements 70 Performance Key Performance Elements 72 Audiovisual Business 73 Advertising Business 128 Workforce 133 Shareholder Value 147 Financial-economic Value and Tax Position 154 Value for Society 157 Environmental Performance 162 Other Performance Indicators 168 ABOUT THIS REPORT Scope 171 International Standards 171 Preparation of this Report 172 Materiality analysis 172 Dialogue 174 External Assurance 175 GRI Content Index 178 Glosary 194 Directory 196 INTRODUCTION INTRODUCTION LETTER FROM THE CHAIRMAN Dear shareholders, once again I am pleased to inaugurate of this is subject to the markets economic variables, with this report which you have before you to present the the beginning of the year seeing widespread falls in stock main management indicators in 2015, a year in which we markets and sharp corrections in almost all territories for have once again demonstrated the effectiveness of our various reasons, such as uncertainty about the Chinese business model in a context of slow but gradual economic economy and emerging countries, the declines in oil recovery, a positive compared to the economic evolution prices or geopolitical crises (Syria, Iran or North Korea, in the European Union countries. I want to emphasize among others). that among these words the one which I believe unifies our valuable network, and that word is COMMITMENT. The national context of economic recovery, a 6.4% And around it I will summarise the coordinates that have increase in advertising investment on television in marked the main lines of our activity for the year and 2015, plus television consumption maintaining high its results: levels and, complementarily consumption in the online environment (tablets, mobiles) have been the winds that From an economic management point of view, we have have contributed to, twelve years after taking the historic ended the year with an improvement in all financial leadership of the advertising market, which until then was parameters -earnings (971.9m€ net total), operating held by the public broadcaster, Mediaset España once margins (EBITDA 222.7m€ and EBIT 205.2m€), and in again being the communication group with the largest particular in net profit (166.2m€) - with the highest figures investment share with 43.4%, 1.3 points ahead of its since the decline of the advertising market in 2008 and nearest competitor. with a positive and unique financial position in the sector, which means the commitment made to our shareholders An excellent commercial management carried out regarding the remuneration policy has been fulfilled, by in a way that is increasingly synergetic in terms of both, the cash buyback plans carried out in recent months content management. With both we have fulfilled our and offering one of the most attractive dividend payments COMMITMENT to advertisers and viewers, with proven of the Spanish stock exchange. results: with the broadcast of 72% of the most-watched spots on Spanish television in 2015 and leading in both Regarding the continuous market behaviour, the appeal television (with the best historical results and commercial of the company has once again become apparent, with target) and Internet and social network consumption, also 523.45 million shares traded in 2015, 2.3 times more including the results of the subsidiary Telecinco cinema, than the nearest competitor in this same period (230.27 which has exemplified our approach on focusing our million shares). We maintain the top position of market business vision and channelling the obligation of investing capitalization among Spanish communication companies in film, monopolizing the Spanish film market share for the and fourth place among European media companies. All second consecutive year. 6 CORPORATE RESPONSIBILITY REPORT 2015 Alejandro Echevarría Chairman Our expertise has served as collateral for a new license to From a creative and technological point of view, 2016 is full broadcast a high definition channel that will soon see the of opportunities. We will maintain our COMMITMENT light of day, this involves a renewed responsibility for this to all the agents of the sector by pacing the passage of new challenge that will reinforce our strong programming this evolution in the different ways of communicating, and line-up and also, provide the long awaited confirmation of we’ll do it with the best team behind us, professionals stability in the sector in the medium and long term. who, as a sports lover would say “feel the colours” the blues of Telecinco and Boing, Cuatro red, pink Divinity, Furthermore, our ethical, transparent, sustainable and Factoría de Ficción green, black Energy ... These colours, solid management, with policies that have driven the without a doubt, form part of TV entertainment in the broadcast of responsible content and advertising, have 21st century. once again become the guidelines that have shaped the relationship with our employees, suppliers, customers and industry institutions, in short, our COMMITMENT with regards to those who we develop the various processes with, ends in the results that I have summarised in these lines. We have obtained a marked improvement in terms of corporate governance, referring to the score obtained in the last analysis of the Carbon Disclosure Project (CDP) with a 99B valuation, the highest out of the listed companies in our sector. Mediaset España has taken part in this initiative since 2009. CDP analyses more than 3,500 international companies listed on the major stock indexes and is backed by 827 institutional investors. And we are especially grateful for the positive response to our corporate responsibility initiative ‘12 Meses’, which this year has been focused on raising awareness on gender equality and the fight against trafficking in women (‘Doy la cara’ campaign), raising awareness to combat child poverty situations in our country (‘Los Comprometidos’) and the fight against AIDS, among other issues. 7 INTRODUCTION LETTER FROM CHIEF EXECUTIVE OFFICER Paolo Vasile Chief Executive Officer It would be risky to say that we have definitively restarted Cuatrois the fastest growing channel, Factoría de Ficción on the long awaited path of sustained growth. The leads thematic television, and the rest of our thematic minimum amount of prudence and humility prevent us channels -Divinity, Energy and Boing- are shining in their from saying so, in view of the consequences that have been respective target audiences. suffered by everyone during the tough crisis experienced in recent years, in addition to the political uncertainty that With regard to our participation in film production, is still happening in Spain. the results could not have been better, as is evidenced by the takings obtained by our films “8 APELLIDOS I considered it necessary to begin this letter in this way CATALANES”, “CATCH THE FLAG” and “REGRESSION”. because any observer might think otherwise in view of the excellent results that Mediaset España and its Group In the economic field, Mediaset España has closed 2015 of Companies have obtained in 2015; results affecting with the largest share of the television advertising market all facets of our business and which are nothing but the (43.4%), with a total net income of 971.9 million Euros continuation of a trend, which we have maintained even (+4.3%); while achieving lower costs (-2.5%), which has as the crisis erupted. allowed it to end the year with an adjusted EBITDA of 222.7 million Euros (+35.9%), and confirms a net profit I said in April 2014 that our greatest pride was that we were margin of 22.9%. Meanwhile, EBIT increased by 41.7% beginning to get over those previous bitter years while to 205.2 million Euros, resulting in a net profit margin retaining the same workforce as in 2008. We achieved of 21.1%. this, as well as avoiding entering into losses, making what was then, and still is today, what we considered as the Finally, net profit amounted to 166.2 million Euros, nearly main interpretation of corporate responsibility. three times that of the figure obtained last year, which will go almost entirely towards shareholder remuneration, It has been that excellent management which, at every with a dividend of almost 0.50 Euros per share, the highest opportunity offered by the market, has allowed us to dividend of the Ibex 35. return to the path of maximum profitability. All of this data makes Mediaset España the most Indeed, the efforts made then are reaping their rewards profitable Spanish audio-visual company and one of the today, allowing us to maintain leadership in television leading European media companies, thanks once again to audience share, internet, cinema, advertising fees, profit- the strength of our business model and to our excellent ability (margins, net profit and cash generation) and share- workforce. holders remuneration. In a year in which, television consumption in Spain has grown once again, Mediaset España has obtained the highest cumulative audience (31%), with Telecinco as the most watched channel (its best figure in the last six years) 8 GOVERNANCE MODEL GOVERNANCE MODEL GROUP ORGANIZATIONAL STRUCTURE The media group Mediaset España consists of companies The Group’s consolidated companies are as follows: engaged in businesses related to the audiovisual sector, Fully - the core activities being television content production Country 2015 2014 and broadcasting, and the exploitation of advertising consolidated companies space on its TV channels. Grupo Editorial Tele 5, S.A.U.