Restricciones legales

The term corporate governance is internationally under-stood to be the sound and responsible management and monitoring of business entities. The German Corporate Governance Code provides the significant legal regula-tions on this matter and includes nationally and interna-tionally recommended standards, as well as recommen-dations and suggestions. Its aim is to make the German corporate governance system transparent and plausible, and to help to promote the confidence of investors, cus-tomers, employees and the general public in the man-agement and monitoring of German publicly listed com-panies.

The legislators require the management board and the supervisory board to confirm once a year whether recom-mendations of the code have been or are being followed and which recommendations have not been adopted.

Premiere AG welcomes the various initiatives on the im-provement of corporate governance and regards corpo-rate governance as a major challenge for responsible and value-oriented corporate management. The manage-ment board and the supervisory board of Premiere AG is-sued the following declaration of compliance for the first time in September 2005:

“Declaration of Premiere AG with registered office in Un-terföhring, administrative district of Munich, entered in the Commercial Register at the Munich Municipal Court under HR B 154549, on the German Corporate Gover-nance Code in accordance with § 161 Stock Companies Act.

The management board and the supervisory board de-clare that the recommendations of the Government Com-mission on the German Corporate Governance Code pub-lished by the Federal Ministry of Justice in the official part of the Federal Gazette effecting the version of May 21, 2003 were followed in the financial year 2004, with the following exception: In Clause 4.2.4, the German Corporate Governance Code recommends that the com-pensation of the members of the management board be disclosed in the notes to the consolidated financial statements broken down between the fixed portions, earnings-related components and components with a long-term incentive effect.

Premiere AG did not disclose the compensation of the members of the management board and the superviso-ry board for the financial year 2004 in the notes to the consolidated financial statements broken down in the recommended way. The management board and the su-pervisory board furthermore declare that the recommen-dations of the Government Commission on the German Corporate Governance Code published by Federal Minis-try of Justice on July 20, 2005 in the Electronic Federal Gazette in effect as of June 2, 2005 will be complied with in full in 2005.”

Premiere AG complies with all recommendations of the code and most of its facultative suggestions. The pre-sentation on Premiere AG’s website at (http://info.pre-miere.de/cgc) provides information about compliance with each of the individual recommendations or sugges-tions.

Stockholders and general meeting of the stockholders Stockholders can exercise their rights and cast their votes at the general meeting of the stockholders. Each share in Premiere AG grants one vote. There are no shares with multiple voting rights, no preferred stock and no maximum voting rights.

Stockholders have the opportunity to exercise their voting rights themselves or have them exercised by a proxy of their choice or by a proxy-holder nominated by the Company who has to vote in accordance with the stockholder’s instructions.

As prescribed by the statutes, the chair at the general meeting of the stockholders is taken by the chairman of the supervisory board. That person is Mr. Rainer Groß-kopf for the time being.

To make it easier for the stockholders to exercise their rights and to enable them to prepare for the general meeting of the stockholders, the documents that are to be displayed for inspection by the stockholders at the Company’s business premises once the general meet-ing of the stockholders has been called (includmeet-ing the invitation to the general meeting of the stockholders pub-lished in the Electronic Federal Gazette) are available on Premiere AG’s website and copies of these will be sent to stockholders on request. Admission cards for the meeting can also be ordered, proxies issued, among

Corporate Governance

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others to the proxy-holders nominated by the Company, and instructions issued on the exercise of voting rights at the general meeting of the stockholders via Premiere AG’s website at (www.info.premiere.de/agm).

In addition, the Company’s statutes permit the chairman of the general meeting of the stockholders to allow the general meeting of the stockholders to be followed via electronic media, in a way to be determined by him, for the benefit of the stockholders and the general public, provided this is announced in the invitation to the respec-tive general meeting of the stockholders.

Cooperation between the Management board and the Supervisory board

In addition to its monitoring and advisory function, Premiere AG’s supervisory board also cooperates closely with the management board outside its meetings for the benefit of the Company. Their common aim is a sus-tained increase in corporate value.

To this end, the management board informs the super-visory board in the ordinary and extraordinary meetings of the supervisory board and by telephone regularly, on a timely basis and comprehensively about all significant aspects of the planning, development and strategy and on the Company’s risk management. The necessary docu-ments are issued to the supervisory board in good time before the meetings. Reports by the management board to the supervisory board are rendered verbally or in print.

For further details please refer to the review and moni-toring report of Premiere AG’s supervisory board for 2005.

The specific tasks and obligations of the management board in relation to the supervisory board are regulated in rules of procedure for the management board. These rules of procedure prescribe certain management board information and reporting obligations and define trans-actions of fundamental importance that are subject to approval by the supervisory board.

The Company did not grant any loans to members of the supervisory board or the management board during the past financial year.

The management board and the supervisory board will be liable to pay damages to the Company in the event of their culpable violation of their incumbent duty to take due care. In order to protect its management, Premiere AG has effected Directors’ and Officers’ Liability (D&O) insurance for both bodies with a deductible that is deemed to be reasonable from the point of view of the Company of EUR 50,000.00 for each insurable event.

Management board

Every member of the management board is fully respons-ible for his division at the Company as laid out in the re-spective organization chart with the aim of continuously increasing the corporate value of Premiere AG, within the framework of the rules of procedure for the manage-ment board of Premiere AG and the resolutions of the management board. The members of the management board bear joint responsibility for the overall manage-ment of the company.

The management board of Premiere AG has five mem-bers as of December 31, 2005. Information about the individual members and their areas of responsibility can be found on page 39.

The responsibilities of the CEO, Dr. Georg Kofler and of the other members of the management board are defined in the rules of procedure for the management board of Premiere AG and the organization chart. The rules of pro-cedure also define decisions and measures of a funda-mental nature or of significant financial importance for Premiere AG and the Group companies that require a decision by the entire management board.

The supervisory board has set an age limit of 65 years of age for the members of the management board.

Members of the management board must disclose con-flicts of interest to the supervisory board without delay and inform the other members of the management board as well. Thus, contracts concluded with the Company for instance by a related party (spouse, registered life-partner, relation in the first degree) of a member of the management board or by a business entity on which the member of the management board or a related party can exercise significant control, have to be approved by the supervisory board. No contracts of this nature existed during the reporting period. Members of the

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ment board may only take up secondary positions, such as in particular on the supervisory boards of non-group companies, with the approval of the supervisory board.

No such conflicts of interest arose with regard to mem-bers of the management board of Premiere AG during the past business year.

Supervisory board

The supervisory board advises the management board on the management of the Company and monitors its activities. In order to monitor the management of the company, the supervisory board uses the annual budget as approved for the financial year 2005. It arranged to receive reports at regular intervals from the manage-ment board in particular about business policies and corporate planning, profitability, the course of the busi-ness and significant measures carried out by the Com-pany and to be issued with documents for inspection. In addition, the supervisory board reviewed in the reporting period in accordance with the rules of procedure of the management board in particular eight transactions that were subject to authorization prior to their completion.

Thus, the supervisory board for instance considered the management board’s bidder strategy in the tendering procedures for the “New Bundesliga contract for the years 2006 to 2009” in a special meeting on November 11, 2005 and in the course of various telephone con-ferences. Further details are provided in the review and monitoring report by the supervisory board of Premiere AG for 2005.

Premiere AG’s supervisory board has three members.

As of December 31, 2005, these were Mr. Rainer Groß-kopf as chairman, Mr. Richard Roy, the deputy chairman, and Dr. Stefan Jentzsch. The periods of office of the above-mentioned supervisory board members terminate at the end of the ordinary general meeting of the stockholders in 2009. Since the Co-determination Act is not applicable to Premiere AG, only persons elected by the stockhol-ders with a simple majority can serve on the supervisory board. In the proposals to the general meeting of the stockholders for the election of the members of the super-visory board, care is taken that only persons are nomi-nated who are particularly qualified for this office on account of their professional knowledge and personal experience. For instance, Mr. Großkopf served for many years on the management board of Tchibo GmbH and brings to the supervisory board exceptional experience

in the fields of sales, customer loyalty and market-ing, while Dr. Jentzsch, as a former member of the man-age-ment board of Bayerische Hypo- und Vereinsbank AG and currently the head of the Corporate & Investment Banking Division as well as member of the management board of Dresdner Bank, is well suited, thanks to his special expertise in the financial area, to monitor these aspects of the management of the Company by the man-agement board. As the former head of Microsoft Ger-many, Mr. Roy contributes to the supervisory board an understanding for and control of companies in the inno-vative consumer technologies field.

The supervisory board has issued its own rules of proce-dure. These define the tasks, obligations and internal or-ganization of the supervisory board and its committees and therefore include detailed provisions on confiden-tiality on conflicts of interests and on the reporting obli-gations of the management board.

The supervisory board has established subcommittees in anticipating a possible enlargement of the supervisory board, which at present consists of the persons acting on the supervisory board. These comprise a presidential committee, which prepares the meetings of the supervi-sory board and deals with personnel matters concerning the management board, and an audit committee, which performs the tasks of an audit committee as set out in recommendation 5.3.2 of the German Corporate Gover-nance Code and especially reviews the consolidated financial statements together with the group manage-ment report and the annual financial statemanage-ments together with the management report, before they are discussed by the supervisory board. Further details are provided in the review and monitoring report by the supervisory board of Premiere AG for 2005.

No former member of the Company’s management board or one of its legal predecessors is a member of either the supervisory board or one of its committees.

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The supervisory board has set an age limit for its mem-bers. In accordance therewith, no proposals shall be made to the general meeting of the stockholders with regard to future candidates for the supervisory board if the member of the supervisory board would reach the age of 69 during his term of office.

The members of the supervisory board have no conflicts of interest with regard to the Company, nor has any member of the supervisory board concluded a consul-tancy or service agreement or a contract for work and services with the Company.

At its meeting on January 17, 2006, the supervisory board reviewed its efficiency and discussed possibilities of optimizing procedures. In the course of this discussion, the supervisory board, among other things, decided in future to take up before every meeting the remaining open points from the previous meeting of the supervisory board and the resolutions passed at the previous meet-ing, in order to facilitate the regular review of the imple-mentation of the resolutions passed by the supervisory board. This meeting took place without the members of the management board. The review was carried out with the help of a control sheet, which was answered by the members of the supervisory board. The chairmen of the supervisory board documented the evaluation in the control sheet.

Compensation of the Management board and the Supervisory board

The supervisory board or its presidential committee is responsible for the compensation of the management board. It reviews the compensation system at regular intervals.

In addition to a fixed annual salary, the basic principles of the management board compensation system allow for a variable compensation component, which is based not only on the absolute amount of the EBITDA but also on annual growth rate over prior year. The fixed annual compensation is payable in twelve equal monthly amounts, and the variable components are paid out in the February of the following year.

The compensation of the supervisory board is defined by the statutes. It complies with the recommendations in clause 5.4.7 of the German Corporate Governance Code, in so far that it takes particular account of the chairmanship and the deputy chairmanship of the super-visory board and also allows, for a performance-based compensation in addition to a fixed element. In accor-dance with this, the chairman, Mr. Großkopf, receives a fixed annual fee of EUR 30,000.00, his deputy, Mr. Roy, a fixed annual fee of EUR 22,500.00 and Dr. Jentzsch, a fixed annual fee of EUR 15,000.00. In addition to this, the supervisory board members participate in the Com-pany’s long-term success through variable compensa-tion. The performance-based compensation is based on the development of the dividend per share: the supervi-sory board members receive a fee of EUR 100.00 for each EUR 0.01 by which the dividend paid exceeds EUR 0.10 per share, with a ceiling however of EUR 10,000.00 which will be due when the dividend is paid.

No stock option plans or comparable constructions exist at Premiere AG, neither for the management board and the supervisory board nor for employees or other third parties.

In the past, the compensation of the members of the management board and the members of the supervisory board was not disclosed in the notes to the consolidated financial statements on an individualized basis. The in-dividualized compensation of the members of the man-agement board and the members of the supervisory board split between fixed and variable components have been published for the first time for the financial year 2005 in the notes to the consolidated financial state-ments (page 123).

The basic principles of this compensation can also be found on Premiere AG’s website at (www.info.premiere.

de/cgc). They will also be explained to the stockholders at their general meeting.

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Transparency

Premiere AG’s management board operates an open and timely information policy concerning the general situation and significant business-related changes in the company with stockholders, financial analysts, investors, the media and the interested general public.

In order to achieve this, in addition to financial state-ments press conferences, telephone conferences and a large number of events are held with journalists, analysts and investors at home and abroad, in addition to the regular information such as interim reports and the an-nual report that has to be published.

In order to provide comprehensive information that ensures timely availability to all of its stockholders, Premiere AG uses the Internet as well as other available channels of communication.

All significant deadlines (e.g. the annual report, interim reports or the general meeting of the stockholders) are published in good time in a financial calendar. The finan-cial calendar can be found on page 128 of this annual report and can also be called up in the Internet at www.info.premiere.de/financialcalendar.

Premiere AG immediately publishes any insider facts that directly affect the Company, even if they occur outside the regular reporting cycle. That happens in accordance with the relevant legal provisions (ad hoc publicity).

In addition, Premiere AG will also immediately provide in-formation in accordance with the legal provisions follow-ing a notification that anyone has attained, exceeded or fallen below 5, 10, 25, 50 or 75 percent of the voting rights in Premiere AG by acquisition or disposal or in any other way.

Premiere AG discloses securities transactions by mem-bers of the management board and the supervisory board and other management staff who have regular access to insider information and are empowered to take significant entrepreneurial decisions (and persons closely related to them as defined by the German Secur-ities Trading Act (WpHG) pursuant to § 15a WpHG immed-iately following notification of this (directors’ dealings).

Such information can also be called up in accordance with the legal provisions in the Internet under www.info.

premiere.de/dd.

Information on notifiable securities transactions by members of the management board and the supervisory board for the financial year 2005 are included in the “An-nual document” prepared in accordance with § 10 WpHG that can be called up on Premiere AG’s website under www.info.premiere.de/publications. This document also includes the other disclosures prescribed by German

Information on notifiable securities transactions by members of the management board and the supervisory board for the financial year 2005 are included in the “An-nual document” prepared in accordance with § 10 WpHG that can be called up on Premiere AG’s website under www.info.premiere.de/publications. This document also includes the other disclosures prescribed by German