Notes to the company financial statements

1.Significant accounting policies

The company financial statements have been prepared in accordance with the provisions of Part 9 of Book 2 of the Netherlands Civil Code. Telegraaf Media Groep N.V. uses the option in Section 362(8) of Book 2 of the Netherlands Civil Code when determining its accounting policies. This means that the accounting policies (the policies for the valuation of assets and liabilities and the determination of the result) for the company financial statements of Telegraaf Media Groep N.V. are the same as those used for the consolidated financial statements. Investments in group companies are recognised at net asset value established in accordance with the accounting policies for the consolidated financial statements. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board as adopted by the European Commission and interpretations of these standards by the IFRIC.

Please see pages Accounting policies to Segment reporting for a description of the accounting policies. The share of result of associates is the share of Telegraaf Media Groep N.V. in the results of these participating interests. Results on transactions which have involved the transfer of assets and liabilities between Telegraaf Media Groep N.V. and its participating interests and between participating interests themselves have not been recognised insofar as they cannot be regarded as having been realised. See the Notes to the consolidated financial statements, unless otherwise stated.

Following a change in the law, public interest entities are no longer permitted to present an abridged statement of profit or loss in the company financial statements (as previously permitted pursuant to Section 402 of Book 2 of the Netherlands Civil Code). This change has only a small impact given the limited activities within Telegraaf Media Groep N.V.

Telegraaf Media Groep N.V. has its registered office in Amsterdam and is registered under number 33121350 in the Trade Registry.

2.Financial expense

This is 5.5% interest on the intercompany loan from TMG Investeringen B.V.

3.Financial assets

Movements in financial assets were as follows:

Deferred tax assets relate mainly to the cumulative losses of the TMG fiscal unity for income tax purposes, see note 29 to the consolidated financial statements.

A statement of the information required pursuant to Sections 379 and 414 of Book 2 of the Netherlands Civil Code has been filed with the Chamber of Commerce in Amsterdam.

4.Equity

The company equity is equal to the consolidated equity attributable to shareholders of Telegraaf Media Groep N.V. (see page Consolidated statement of changes in equity).

Movements in equity were as follows:

The statutory reserve is maintained pursuant to Section 365 of Book 2 of the Netherlands Civil Code for non-distributable profits of associates. The movements in 2016 were the capitalisation of internally-developed assets at associates offset by a release to the other reserves because of the depreciation of the same assets in 2016, and legally-required reserves held by subsidiaries abroad.

5.Non-current liabilities

The non-current Group companies liability relates to a loan from TMG Investeringen B.V.

6.Current liabilities

The liability to Group companies relates to liabilities within the group as a result of intra-group transactions.

7.Off-balance sheet liabilities

Joint and several liability and guarantees

Pursuant to Section 403(1)(f) of Book 2 of the Netherlands Civil Code, the Company is liable for the debts arising from the legal transactions of the Dutch group companies in which it held an interest of 95% or more throughout the year. A list of group companies has been filed with the Chamber of Commerce and will be made available by the Company upon request.

Fiscal unity

TMG and almost all of its wholly-owned subsidiaries in the Netherlands form a single fiscal unity for both income tax and VAT purposes. Within the fiscal unity, TMG companies are jointly and severally liable for tax liabilities to the tax authorities.

Other contractual obligations

The other off-balance sheet liabilities were 1,000. Of these 500 have a term of less than one year and 500 a term of between one and five years.

8.Subsequent events

On 23 January 2017, TMG received an unsolicited, non-binding conditional bid from Talpa Holding N.V. for the acquisition of all issued and outstanding TMG depositary receipts and shares for an indicative price of €5.90 (cum dividend) in cash per TMG depositary receipt. This followed an unsolicited, non-binding conditional bid received on 14 December 2016 from Mediahuis and VP Exploitatie for an indicative price of €5.25 per TMG depositary receipt.

On 20 February 2017, Mediahuis and VP Exploitatie increased the indicative price for its unsolicited, non-binding conditional bid to €5.90 (cum dividend) and on 5 March 2017 to €6.00 (cum dividend) in cash per TMG depositary receipt and share.

On 1 March 2017, Talpa Holding N.V. announced its intention to raise its indicative price to €6.35 (cum dividend) in cash per TMG depositary receipt. On 6 March 2017, this was increased to €6.50 (cum dividend) in cash per TMG depositary receipt.

On 5 March 2017, the Supervisory Board resolved to suspend both members of the Executive Board with immediate effect. In accordance with TMG’s articles of association, the Supervisory Board is temporarily performing the executive functions. Although they were both in office until the end of the 2016 financial year, in view of their suspension, the members of the Executive Board have not signed the financial statements.

On 5 March 2017, TMG, Mediahuis and VP Exploitatie entered into a conditional agreement in connection with the proposed bid by Mediahuis and VP Exploitatie for TMG. Mediahuis and VP Exploitatie have submitted a bid notice for approval by the Netherlands Authority for the Financial Markets on 8 March 2017. The bid will be made by publishing the approved bid notice. The bid will be conditional on certain requirements being met. TMG will announce its position with respect to the bid in a reasoned submission during an Extraordinary General Meeting of Shareholders in connection with the bid, that will be combined with the Annual General Meeting of Shareholders on 1 June 2017. It is expected that the bid will be finalised in the second or third quarter of 2017.

In connection with the conditional agreement that TMG, Mediahuis and VP Exploitatie entered into on 5 March 2017,Talpa Beheer B.V. and Dasym Investments II B.V. applied to the Enterprise Chamber of the Amsterdam Court to take immediate relief measures, to institute an investigation into the course of events at TMG and to appoint an independent supervisory director. The Enterprise Chamber made a provisional judgement on 21 March 2017, ruling that there were no valid grounds to doubt proper policy-making or the course of events at TMG. It dismissed all requests to impose immediate measures. The request submitted by the suspended members of the Executive Board of TMG to lift their suspension was also dismissed by the Enterprise Chamber. The date of the session during which the request to order an inquiry will be addressed, has not yet been determined.

On 14 March 2017, the Supervisory Board appointed Mr Hans Bakker as interim Executive Director of TMG with immediate effect. In this position, Mr Bakker will be responsible for the daily management of the company. He will continue to hold this position until a new Executive Board has been appointed.

On 13 March 2017, all conditions required to effectuate the revolving credit facility agreed in December 2016 were met. The amendments relate chiefly to allow a possible sale and leaseback of property and are chiefly the extension of the facility by 20 months to 10 March 2020, the reduction of the maximum amount that can be drawn to €50 million and the provision of collateral such as pledges of receivables, IP rights and shares in Keesing Media Group B.V. and a positive mortgage pledge on certain properties. The facility will be reduced to €30 million after a possible sale and leaseback has been completed.

On 23 March 2017, TMG announced the intended sale of a substantial part of its weekly magazines portfolio (door-to-door newspapers and brands), which is part of the Holland Media Combinatie segment, to BDUmedia (part of Koninklijke BDU in Barneveld). This is a component of the organisational changes announced in July 2016, aimed at continuation of the 24/7 strategy and structural cost reductions. In 2016, the contribution of the titles to be sold amounted to € 13,951 and their contribution to the result was marginal. The transaction will involve a restructuring charge of around €3,000.

9.Appropriation of profit

The Executive Board proposes, with the approval of the Supervisory Board, that the General Meeting of Shareholders adds the profit for the year of 1,558 for the financial year 2016 to the other reserves. This proposal has not yet been recognised in the Financial Statements.

10.Remuneration of the members of the Executive and Supervisory Boards

Remuneration

The short-term variable remuneration of the Executive Board is a maximum of 50% of the basic salary, 60% of which is determined by the degree to which the joint targets of the Executive Board are achieved and 40% by the degree to which the individual targets for members of the Executive Board are achieved. Mr van der Snoek’s 2016 targets were strategic, financial, HR, communication-related and operational. Mr Epskamp’s targets were primarily financial in nature. For 2016, 50% of the targets set were achieved by both board members. Mr van der Snoek's variable remuneration amounts to € 114,188 (2015: €202,500) for 2016. Mr Epskamp's variable remuneration amounts to € 95,156 (2015: €168,750) for 2016.

In 2015, the phantom share plan was added to the long-term remuneration of the members of the Executive Board. Under this plan, the members of the Executive Board are entitled to a cash payment equal to the number of unconditionally awarded phantom shares at the end of the performance period (31 December 2018) multiplied by the average price of the TMG share in the final quarter of the plan period (fourth quarter of 2019). These cash-settled phantom shares are conditional on being in office during the performance period and meeting the four performance targets. These targets relate to the development of the price of the TMG share compared to a peer group (30% weighting), a revenue target for 2018 (15% weighting), an EBITDA margin target for 2018 (25% weighting) and two ESG criteria, being the reduction of CO₂ and the implementation of an internal Talent Management Program (30% weighting). The fair value of the obligation on the reporting date was established taking into account the characteristics of the long-term remuneration plan and using an estimate of the extent to which the various performance criteria had been achieved.

On 31 December 2016, the fair value of the conditionally awarded phantom shares was € 4.75 per share and the outstanding liability for the phantom share plan was 145 (2015: 76). The cost charged to profit or loss was 69 (2015: 76). The maximum number of phantom shares that can be awarded at the end of the performance period is 74,013 to Mr van der Snoek and 61,678 to Mr Epskamp.

The table below shows the remuneration of the members of the Executive and Supervisory Boards on an accrual basis and other benefits.

1. Car lease costs, expenses and compensation for cap on accrual of pension entitlements

Remuneration of the Supervisory Directors

No deferred remuneration is granted to Supervisory Directors.

From 2015, the remuneration of Supervisory Directors is being indexed using the CPI index.

Share ownership at 31 December 2016

None of the members of the Executive Board or the Supervisory Directors held any shares in Telegraaf Media Groep N.V. on the reporting date (2015: nil).

11.Audit fees

The fee recognised in the financial statements for the external auditor Deloitte Accountants B.V. and its affiliated audit firms, pursuant to Section 382 of Book 2 of the Netherlands Civil Code, was as follows:

The external auditor has not received fees for tax and/or other non-audit services.

Amsterdam, 31 March 2017