The ProSiebenSat.1 Group The power of television The ProSiebenSat.1 Media AG is the leading electronic media group in Germany. We provide people with first-class entertainment and comprehensive information - whenever they need it, wherever they are. Unit Free TV Free TV Segment Free TV Stations Marketing Production Sat.1 SevenOne Media ProSiebenSat.1 Produktion ProSieben Sat.1 Schweiz Producers at kabel eins Work N24 Unit Diversification Transaction Other TV Diversification Segment Segment Transaction Multimedia Pay TV Merchandising/ International TV Licensing Distribution 9Live SevenOne SevenSenses MM Merchandising SevenOne Intermedia Media International ProSieben SevenOne Sat.1 Welt Art Merchandising Interactive & Media AG Wetter Fernsehen starwatch music The power of television: to create stars. 5186 applicants wanted to get into the new POP- STARS band on ProSieben. Bahar, Mandy and Senna finally made it. They are the girl The power of television band Monrose and are under contract at starwatch, the ProSiebenSat.1 Group‘s music la- bel. Their first single „Shame“ rose from zero to number one on the Media Control Top Annual Report 2006 100 single charts in 2006. The secret of starwatch‘s success: the label uses the reach of the Groups‘s TV channels to promote its artists. Key Figures Key Figures for the ProSiebenSat.1 Group 2006 2005 Change EUR m EUR m Free TV Segment Total revenues 1,932.2 1,860.0 4% External revenues 1,866.5 1,811.1 3% Operating profit 401.3 353.6 13% EBITDA 429.1 379.0 13% Key Figures for the ProSiebenSat.1 Group Employees* 2,598 2,473 5% Key balance sheet figures Stations 12/31/2006 12/31/2005 Change Sat.1 Total revenues 855.5 830.9 3% EUR m EUR m Pre-tax profit 204.6 161.0 27% Total assets 1,932.1 2,016.6 -4% EBITDA 205.4 161.3 27% Shareholders‘ equity 1,240.5 1,187.7 4% Employees* 246 224 10% Liabilities 591.5 772.2 -23% Equity ratio 64% 59% 8% ProSieben Pre-tax return on equity 31% 30% 3% Total revenues 736.8 751.7 -2% Programming assets 1,056.3 1,057.5 - / - Pre-tax profit 147.9 167.1 -11% Programming assets of total assets 55% 52% 4% EBITDA 147.6 165.6 -11% Net financial debt 121.8 227.2 -46% Employees* 263 259 2% Key cash flow figures kabel eins 2006 2005 Change Total revenues 255.2 223.3 14% Pre-tax profit 69.7 47.0 48% Cash flow 1,273.2 1,210.2 5% EBITDA 69.7 46.6 50% Cash flow from operating activities 1,272.0 1,165.8 9% Employees* 51 47 9% Cash flow from investing activities -979.6 -1,095.7 11% Free cash flow 292.4 70.1 317% Cash flow from financing activities -386.4 -252.6 -53% N24 Total revenues 89.4 83.0 8% Key figures Pre-tax profit 13.1 9.4 39% EBITDA 13.3 10.0 33% 2006 2005 Change Employees* 167 161 4% Revenues 2,104.6 1,989.6 6% Gross profit 803.5 714.4 12% Diversification Operating profit 444.3 383.7 16% Financial loss -57.5 -33.0 -74% Transaction TV Segment** Pre-tax profit 386.7 350.7 10% Total revenues 95.8 54.9 74% Consolidated profit 240.7 220.9 9% External revenues 94.1 54.0 74% Earnings per preference share (IFRS) (in EUR) 1.11 9% Operating profit 24.6 8.0 208% EBITDA 484.3 418.5 16% EBITDA 26.5 14.0 89% EBIT 444.3 382.7 16% Employees* / *** 100 64 56% EBITDA margin 23% 21% 10% Pre-tax profit margin 18% 18% - / - Other Diversification Segment Programming investments 955.0 907.3 5% Total revenues 165.7 135.0 23% Depreciation and amortization of intangible assets External revenues 144.0 124.5 16% and property, plant and equipment 40.0 34.8 15% Operating profit 25.2 21.5 17% Personnel expenses 235.5 212.6 11% EBITDA 29.1 25.1 16% Employees* 2,976 2,788 7% Employees* 278 251 11% * Averaging full-time equivalent jobs ** Consolidation of 9Live since June 1, 2005 *** 2005: Average Q1-Q4 THE GROUP GROUP MANAGEMENT REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION Contents THE GROUP 6 Major Events of 2006 8 Reports from the Executive Board & Supervisory Board 32 The power of television 64 The ProSiebenSat.1 Share 68 Employees 70 Market Research 72 Corporate Responsibility GROUP MANAGEMENT REPORT 76 Group & Business Conditions 92 Earnings Situation, Financial Position & Net Worth 106 Segment Report 116 Subsequent Events 118 Risk Report 133 Outlook Report FINANCIAL STATEMENTS 166 Auditor‘s Report 168 Financial Statements 172 Notes ADDITIONAL INFORMATION 214 Four-Year-Summary 216 Index 217 Production Credits 217 Financial Calendar 3 THE GROUP 6 Major Events of 2006 8 Reports from the Executive Board & Supervisory Board 12 Letter from the CEO 14 Management‘s Proposed Allocation of Profits 16 Supervisory Board Report 25 Corporate Governance Report 32 The power of television 64 The ProSiebenSat.1 Share 68 Employees 70 Market Research 72 Corporate Responsibility 2006 2006 JanuarJanuary February MarchMärz MayMai JuneJuni JulyJuli August August September OctoberOktober November December Februar September ProSiebenSat.1 Group No takeover of ProSie- SevenOne Inter- ProSiebenSat.1 Group ProSiebenSat.1 Media Start of video-on- Dr. Marcus Englert Video-on-demand ProSiebenSat.1 Group ProSiebenSat.1 Group ProSiebenSat.1 Group Lavena Holding 4 signs contracts benSat.1 Media AG by national distributes and HanseNet sign AG announces divi- demand portal heads Diversification rights acquired for acquires stake in MyVi- acquires free TV rights extends Constantin GmbH to be new The ProSiebenSat.1 Axel Springer AG global Call TV produc- IPTV contract dends proposal “maxdome” on Executive Board “Lost” and “Desperate deo to latest James Bond deal another two years majority shareholder Group pursued its stra- Axel Springer AG and tions for 9Live The ProSiebenSat.1- The Executive Board The ProSiebenSat.1 Dr. Marcus Englert was Housewives” The ProSiebenSat.1 Film, “Casino Royale” The ProSiebenSat.1 of ProSiebenSat.1 tegic goal of providing P7S1 Holding L.P. mutu- SevenOne Interna- Group expanded its and the Supervisory Group and United Inter- appointed to the Ex- The ProSiebenSat.1 Group purchased 30 The ProSiebenSat.1 Group secured the Ger- Media AG content via a number of ally agreed to terminate tional, the global pro- programming coverage Board of ProSiebenSat.1 net launched the new ecutive Board of Pro- Group signed a contract percent of Germany’s Group entered into a man free TV rights to Lavena Holding 4 pathways, so that view- plans for Springer to gram distributor for the through a contract with Media AG decided to video-on-demand portal SiebenSat.1 Media AG with Disney‘s largest video communi- broad agreement with all international and GmbH, a holding com- ers can select from the acquire ProSiebenSat.1 ProSiebenSat.1 Group, HanseNet. This means recommend a dividend “maxdome” on July 27, on August 1, 2006, and Buena Vista Interna- ty, MyVideo. This acqui- MGM International. The domestic in-house pro- pany controlled by Group’s portfolio of pro- Media AG, due to legal now offers inter- the Group’s free and of EUR 0.84 per pre- 2006. The portal offers has assumed respon- tional Television for vi- sition means the Group Group acquired the ductions and co-produc- funds advised by KKR gramming according to complications surround- national quiz broad- pay TV stations are ferred share and EUR a comprehensive port- sibility for all of the deo-on-demand rights now offers user gen- free TV debut broad- tions from Constantin and Permira, has signed their own preferences. ing antitrust and media caster 9Live’s com- now carried over the 0.82 per common share folio of films, comedy Group’s new lines of to the series „Lost“ erated content on the cast rights for the new Film AG for the next a share purchase agree- oversight issues. plete call TV solutions. telecommunications at the Annual Sharehol- and series. The program business. The Execu- and „Desperate House- German equivalent of James Bond “Casino two years, in an exten- ment for the acquisi- Effective January Target groups are TV provider‘s DSL cable ders‘ Meeting. features successful for- tive Board’s portfolio wives.” The currently “YouTube.” Royale” along with the sion of its February tion of German Media 2006, free TV program- Additional contracts stations seeking to opti- networks, which goes mats from the family of reflects the increasing available episodes can rights to all Bond films 2005 broadcast rights Partners LP’s majority ming from Sat.1, ProSie- for digital feed mize their programming under the „Alice“ brand ProSiebenSat.1 Group stations, in addition to importance of the new be accessed a week produced to date. agreement for film pro- stake in ProSiebenSat.1 ben, kabel eins and N24 In February 2006, the time slots through inno- name. expands its pay TV Hollywood favorites. business and revenue prior to their free TV duction from Germany‘s Media AG on December portfolio became available via di- ProSiebenSat.1 Group vative call TV windows, model that is bundled broadcast via max- leading production 14, 2006. On June 1, 2006, the gital cable. This was se- signed contracts with to maximize revenues with the Diversifica- dome. house. ProSiebenSat.1 Group cured by contract with Kabel Deutschland and and to expand viewer tion unit. launched two new pay the Unity Media corpor- Baden-Württemberg loyalty through interac- Appraisal proceedings cable operator Kabel tive call broadcasts. TV stations, Sat.1 Come- ation.