TA Triumph-Adler Group Key Figures

Transcription

1 Annual Report 2004 TA Triumph-Adler AG

2 Key Figures TA Triumph-Adler Group Key Figures Group in g m ** 2002 Sales EBITDA EBIT before goodwill amortization Consolidated net loss Cash flow Shareholders equity Total assets Number of employees (Dec. 31) 1,653 1,858 3,543 Share ** 2002 Number of shares 40,483,375 34,700,000 32,602,500 EBITDA per share in e 0.53* 0.45* 1.08 EBIT (before goodwill amortization) per share in e 0.05* 0.37* 0.06 Consolidated net loss per share in e 0.33* 0.73* 0.72 Cash flow per share in e 0.24* 0.02* 0.45 Stock exchange price at December 31 in e *Calculated on the weighted number of shares regarding IFRS/IAS **Data for 2003 adjusted please refer to the information given in the notes Details on Securities Securities Identification No Stock exchange abbreviation ISIN Code Stock market Frankfurt Indices TWN DE Official trading, XETRA Prime All Share Index Classic All Share Index Industrial Sector Index CDAX Color copying system TA Triumph-Adler DCC 2526 Title: Copying system TA Triumph-Adler DC 2140

3 TA Triumph-Adler AG Printing, copying, faxing, presenting, archiving. For professional users. We set the standards. With digital products, innovative services and customer-focused service.

4 2 Dear reader, Over the past three fiscal years our Group has undergone fundamental change. From the broadly diversified Mittelstand holding with investments in diverse industries we have strategically developed TA Triumph-Adler into an operating company in the office communication market. At the same time as we were executing this divestment program, we consistently expanded our core business with new products and services, and optimized our organizational structure. Our aim here was to secure and expand our leading position on the market while raising efficiency and lowering costs on a permanent basis. In line with our objectives, we succeeded in successfully implementing most of what we had prioritized on our agenda for fiscal year Nevertheless, the many positive results were impacted by the negative performance in our Presentation and Media Technology business segment. Sales declines in the professional sector of Media and Presentation Technology, accompanied by a sustained erosion of margins, picked up further speed in the first half of fiscal year 2004 and necessitated a thorough examination of our original restructuring measures for this business segment. As we saw that the outlook for this business segment irrespective of the current market problems would not meet our expectations even over the medium term, we decided to withdraw from the business segment in its current form, leaving behind only the activities in the Group that could provide a meaningful complement to our core business and generate the margins we were seeking. This process has since been completed. However, in our core business we considerably increased our operating profits. Unit sales of the printers, copiers and fax machines bearing our Group brands TA Triumph-Adler and UTAX increased for the fourth year in a row to above the level of the particular markets we are selling in despite the tough environment. We are increasing our customers awareness of cost-cutting potentials with new ideas that in turn will benefit sales of our machines. And, as we announced, we have made the structures of our Group and our Sales leaner, more flexible and more transparent, in the process opening up the potential for an enormous reduction in costs. This will have its full impact now and in subsequent years. The extraordinary expenses associated with the restructuring of our Group, especially those relating to our withdrawal from the Presen-

5 3 tation and Media Technology business segment, the restructuring of Group financing and the extensive cost-cutting measures, all impacted the consolidated result. We consequently recorded a substantial net loss last fiscal year as well. Before these extraordinary expenses we had generated a slightly positive net income. The TA Triumph-Adler Group today is excellently positioned in the office communication market. This applies to the direct business with end customers, our sales via resellers and our exports. All of this is providing us with advantages in the market that will pay off. We will be opening up further opportunities by acquiring competitors that provide a regional complement to our activities or which give us access to local markets where we do not yet have a presence. One example here is the acquisition in January 2005 of Sankopie, a major reseller in our market in the Dusseldorf area. by adding major international names is a strong indication of the potential of our business model today and of the soundness of our strategy. The management and employees of our entire Group are working with great commitment and a mindset focused on success so that we can soon be in a position to satisfy the expectations of our shareholders, and provide the returns on their investment they are seeking. Equipped with our good position on the market, the strategic alliance with Kyocera Mita and our new financial capability we can confidently work towards achieving our corporate goals. Sincerely, Dr. Dietmar Scheiter CEO To put us in a position to exploit growth opportunities of this nature, we restructured our Group s financing last November through a successfully placed capital increase, accompanied by a syndicated loan and a mezzanine loan. As a result we were able to align our financing for the long-term with the focus on growth. The fact that we were also able at the same time to broaden our group of investors

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7 Table of Contents 5 Table of Contents Boards of TA Triumph-Adler AG 7 Report of the Management Board 9 The TA Triumph-Adler Share 19 Group Management Report 23 Consolidated Financial Statements 33 Notes to the Consolidated Financial Statements 39 Auditor s Report on the Group 72 List of Subsidiaries 74 Supervisory Board Report 77 Triumph-Adler Foundation 79 Financial Calendar 81 Publications and Contact Addresses 81 Color printer TA Triumph-Adler CLP 4516

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9 Boards 7 Boards of TA Triumph-Adler AG Supervisory Board Management Board Dr. Wolfram Nolte, Cologne Chairman Dr. Dietmar Scheiter Chairman Andreas Weidemann, Nuremberg Deputy Chairman Rainer Boye, Hamburg Helge Ewald, Nuremberg Heiko Arnold Robert Feldmeier Masahiro Watashi (since May 2004) Alexander von Fuchs, Salzburg (until December 2004) Caspar von Hauenschild, Munich Katsumi Komaguchi, Osaka, Japan Anja Neumann, Schwerin Tetsuo Okada, Osaka, Japan Thomas Otto, Frankfurt / Main Reinhard Pöllath, Munich Alfred Sankowski, Nuremberg (until October 2004) Gerd Rüsse, Munich (since March 2005) Ulrich Grabowski, Munich (since February 2005) Laser fax TA Triumph-Adler Fax 925

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11 Report of the Management Board 9 Report of the Management Board 2004 A YEAR IN WHICH IMPORTANT DIRECTIONS WERE SET Profile sharpened, market position expanded In fiscal year 2003 we completed the reorganization we began three years previously of the Mittelstand holding into an operating company in the office communication market. In the period between 2000 and 2003 we exited from 40 participations outside our core business, decreasing sales in the process from e 700 million to e 400 million, cut bank liabilities by e 140 million to e 90 million, reduced the number of employees from 4,800 to 1,800 and practically halved the balance sheet total. With the reorganization of the Group completed, the focus then shifted in fiscal year 2004 to consistently aligning our Group to the core business based around all aspects of digital printing, copying, faxing, presenting and archiving. This process of change required more than just dismantling existing holding structures it affected the entire TA Triumph-Adler Group in the way it thinks and acts, the way it perceives itself and its structures. The transformation process to be undertaken has certainly not been completed with the end of last fiscal year, but will also extend well into this fiscal year. The interim balance does, however, reveal a broad range of positive results: The first is that TA Triumph-Adler AG was able to place more machines and systems than ever in fiscal year 2004 by solely concentrating all its resources on its principal market of office communication and achieve this while increasing the operating result before interest, taxes and extraordinary effects in the Group as a whole by e 13 million to e 11 million. Secondly, we were able to give a considerable boost to our export business last financial year. The strategic alliance we concluded with Kyocera Mita in 2003 is now enabling us to supply some of our brand products to countries where we previously had no access. This new situation has resulted in our subsidiary UTAX increasing its export business by more than 30 percent. Third, it is evident that the clearer profile we have gained as a leading company in our market has helped extend our importance far beyond our own customer groups. Our discussions with customers today are no longer Management Board: R. Feldmeier, M. Watashi, Dr. D. Scheiter, H. Arnold (from left)

12 10 Report of the Management Board mainly focused on the price of supplying machines or systems, but on overall solutions ranging from systems consulting to integration capabilities through to maintenance. Moreover, we succeeded in substantially reducing our costs through a wide range of different measures, ranging from restructuring the organization and adjusting jobs accordingly, and through to restructuring the financing of our Group. The successes we achieved during the past fiscal year in our core business were partly overshadowed by the increasing problems in our second business segment, Presentation and Media Technology. As a result, we took the decision at the middle of last year to part with the Presentation and Media Technology segment. Only selected businesses and products that offered the potential to supplement our core range were to be integrated into the core business. This process has been completed since. Three mainstays behind the new Group financing Our agenda for 2004 gave particular priority to the comprehensive restructuring of Group financing, as there was a need to create a solid platform for our growth targets on which we could plan for the medium term. At the end of last year we were able to announce several successes in this respect: We successfully placed the capital increase we announced in September of around 5.8 million shares, resulting in the expected inflow of funds to a company of around e 15 million. At the same time we successfully negotiated a syndicated loan totaling e 70 million. This syndicated loan was accompanied by a mezzanine loan of e 30 million. With the restructuring of our Group financing now successfully completed, Triumph-Adler is positioned as a company financed for the long-term and with an international group of investors. The consolidation in our core market is continuing. Growing customer demands require maintenance, support and service capacities which only larger corporate entities are in now a position to offer. For us as a leading company that operates nationwide and with our own brand products, this situation is a very promising one, but one which at the same time demands that we rigorously put in place all the basics that will enable us to achieve further growth. With this in mind, we took far-reaching decisions in fiscal year 2004 and set important directions. These concerned key operating issues, and especially substantial matters concerning the Group such as our corporate financing. We would now like to begin by reporting on the restructuring of our financing. Growth through proximity to customers and a demand-oriented sales concept Our growth strategy is clearly defined: whenever professional users need to print, photocopy, present, manage or archive documents and files we want to set the standard in consulting, range of products offered and follow-up service. With a dual, demand-oriented sales strategy organized into two sales channels, we cater for the different demands of professional end-customers and resellers. Our operating business focuses on the first sales channel, direct sales to end-customers. Our 400 system consultants und sales staff support more than 30,000 mainly Mittelstand customers operating out of around 60 loca-

13 Report of the Management Board 11 tions. In our direct business last year we placed 14,500 printers and 16,200 copying systems. At e 170 million, sales achieved in the Direct Sales segment in the fiscal year 2004 were in line with last year s level, though with a significantly improved profit ratio. Market breakdown by product group, Germany 2004* Market volume: e 3.6 bn. Copiers Printers Fax machines Our subsidiary UTAX forms the second sales channel which is exclusively directed at resellers. UTAX currently supplies more than 300 domestic and foreign resellers. UTAX performed extremely favorably, with sales up from e 52 million to e 66 million (+ 27 percent) in fiscal year 2004, while at the same time its exports ratio increased from 40 to 44 percent. This reflects the overall economic situation in Germany, which it is preventing almost all growth while exports enjoy significant growth. 9% 42 % *excl. Service *Source: CapVenture, DTC, EITO 49 % Two-brand strategy underpins sales concept The parallel sales channels of end customers and resellers is also reflected in our nowproven two-brand strategy. We offer products carrying the TA Triumph-Adler Brand solely in our direct business with end customers. UTAX-brand machines are supplied exclusively as part of distribution to resellers. Our own brands are forming an increasingly larger proportion of the products we place. Last year the share of our own-brand machines in total sales was 81 percent. Group sales of b/w copiers in 2004 by brand (based on unit numbers) TA Triumph-Adler UTAX Other brands 19 % 52 % 29 % The example of the range of printers we offer highlights the development of our own brands sales very clearly. We began selling printers in 2002, and supplied 2,600 printers of other makes and 400 of our own brand machines. The following year sales of printers of other makes rose by 15 % to 3,000 units, while sales of our own printers by contrast increased fifteen-fold to 6,000 machines. Last year we delivered a total of 17,100 printers, of which 11,600 carried our own brands TA Triumph-Adler or UTAX. As reported above, today our own-brand products are mainly produced by our strategic partner Kyocera Mita. Nevertheless, we retain

14 12 Report of the Management Board our independent status, and operate to the advantage of our customers by installing products of other manufacturers whenever we are not in a position to offer suitable machines. Sales share of the Group s business segments in 2004 Sales of imaging systems to end customers Sales of imaging systems to dealers Service and installation of imaging systems Presentation and Media Technology Group sales of b/w laser printers in 2004 by brand (based on unit numbers) 17 % TA Triumph-Adler UTAX Other brands 21 % 45 % 29 % 17 % 16 % 55 % the main driver behind product sales, the Total-Output-Management (TOM) sales concept being the key factor here. Innovative service offers: one of our key success factors Apart from these sales channels of direct customers and resellers described above, the independently organized Service unit is particularly important, for the new and followon business as well. Operating out of 60 sites, 600 service and logistics specialists support and maintain more than 120,000 systems. More than 70 percent of our customers extend their contracts once the average 45-month maintenance contract expires, illustrating the satisfaction of our customers. In fiscal year 2004 our service activities generated turn over of e 80 million. TOM: Contributing to cutting costs and leveraging growth TOM is a classic outsourcing offer for the office and administration and with no competition in the form in which we have developed it. The advantage of TOM is that it reduces the output costs of our customers, meaning the total investment and ongoing costs for copying and printing, and enables these costs to be calculated over a longer period. It is based on an agreed price per page output whether from a photocopier, printer or fax machine which covers all work performed: fully supplying and integrating the machines required, regularly maintaining them and supplying them with all the necessary consumables such as toner and color cartridges. Over and beyond its contribution to sales, our service offering is increasingly evolving into With paper consumption in the commercial sector increasing steadily each year by 5 per-

15 Report of the Management Board 13 cent, TOM offers the opportunity to achieve regular savings in producing and managing documents in the two-digit percentage range. it was primarily analog copiers that were sold, these hardly play a role any more in the professional area. Paper consumption in Germany (in billion pages) e 2005e 2006e 2007e Source: CapVenture, DTC, EITO The importance of TOM today, and also its future potential, is demonstrated by the fact that last fiscal year some of our companies were already generating more sales and earnings using TOM than from selling boxes. We are well positioned with our demand-oriented sales channels concept reflected through a two-brand strategy and innovative service offerings. However, our digital expertise gives us a special edge in the competition. Competitive advantages from digital expertise When we began selling our own brand products in 2000, we were one of the first to offer its range of products based entirely on digital technology. Whereas at the time, for example, Today the market combines digital technology and digital know-how with the two brands TA Triumph-Adler and UTAX. Evidence of this is provided by our steadily growing market share in digital black and white copiers, which we since have managed to expand to 11 percent in Germany. The market for color copying systems is also becoming increasingly important, with annual growth of 30 percent predicted for this market over the next few years. We are convinced that we will shortly be able to achieve a similar market positioning in the color machines market as we have already managed in the black and white market. We will be also able to profit from this growth market through the multifunctional devices we are set to introduce during the current fiscal year. Vertical and horizontal extension of our product and services range The examples we have outlined give a clear indication of our product strategy: color products to complement our range vertically, and horizontal extension by expanding our product range. Last year we were only able to partly exploit the opportunities provided by this concept owing to delivery problems with major new products, especially the multifunctional devices. In March 2004 at CeBIT, the most important trade fair for our market, we enjoyed great success with presenting our own-brand new color printers and color copiers, delivery of which was scheduled to begin in the first half

16 14 Report of the Management Board of We had planned substantial sales for this range of products in The actual delivery date was set back considerably because the new machines needed to be aligned even better to the quality requirements of our Mittelstand customer base. It was autumn before the urgently awaited machines could be provided, so we were only able to book half of the sales planned. Likewise scheduled for 2004, the delivery of multifunctional devices, meaning systems that combine the functions of copiers, printers, scanners and fax machines as standard, had to be postponed until as late as 2005, which meant that the level of sales planned for fiscal year 2004 could not be achieved here either. Coded consumables: increasingly important Especially the high margin ancillary business of supplying coded consumables is becoming increasingly important in our plans for the future. The increasing share of our own-brand products means that sales of coded consumables for these products black and white toner cartridges for printers, fax machines and copiers is also growing. These cartridges are specially configured for our devices. To run their machines customers need to be supplied exclusively by us. In addition we offer paper for copiers and printers. On an average usage frequency and duration, calculations show that the follow-on consumables costs are much greater than the costs of acquiring the machines. Managing and archiving documents: a promising new offering In the 2003 annual report we already described our promising activities in the area of document archiving and document management that we were marketing under the name of TADocForms and UTAXDocForms. DocForms represents a carefully selected addition to our core offering: when printing, copying, scanning or faxing documents these items can be stored, registered, allocated and archived digitally using a combination of hardware and software. Our aim is not just to market document archiving as an individual product but also at the same time to integrate this into our TOM concept at a fixed price per archived page. Successes in the core business impacted by losses from the Presentation and Media Technology business segment In the last annual report, and in the subsequent quarterly reports in 2004, we dealt in detail with the problematic performance of the Presentation and Media Technology business segment, and reported on the plans and measures we were taking to counter this. The primary cause of the problems was, and remains, the cyclical slump in demand for presentation and media technology on the part of professional customers. The price wars that ensued saw, for example, prices of data/video projectors falling annually by around 25 percent, and resulted in a comprehensive change in retail structures that came at the expense of resellers and their specialized offerings and services. This development benefited consumer markets, electronic goods retail chains and grocery products discounters who dominate the market with semiprofessional products geared towards private use, and so product ranges not covered by our brand philosophy: we exclusively target professional users with our pro-

17 Report of the Management Board 15 fessional machines that we distribute either through resellers or directly to commercial end customers. Nevertheless, the nonprofessional sales channels are causing the price war to intensify all the time. The continued acceleration of this price and distribution competition last year basically removed the foundations behind our endeavors to restructure the Presentation and Media Technology segment. As of the 2004 six-month balance sheet date we posted a drop in sales of over 20 percent compared to the previous year s period, down to e 37.3 million. Despite extensive cost-cutting measures, we were obliged to book an operating loss that was three times higher. As a result, following a further review of the situation we decided to strategically reposition the hitherto independently and separately organized Presentation and Media Technology business segment, selling businesses abroad in particular, and only integrating into the existing core business structures those product areas that provided a meaningful complement to our core business and which could meet our earnings expectations. This reorientation has since been completed. At the end of August last year we sold the CAN.media Group, which specializes in media integration, to a strategic investor. Anders + Kern U. K., specialist in digital and conventional presentation equipment, was sold last autumn as part of a management buyout. We merged Anders + Kern Germany into our subsidiary UTAX at the end of the year. What was originally a comprehensive range of 2,000 presentation products of Anders+Kern Germany has since been reduced to less than 100 items, consisting mainly of data/ video projectors, overhead projectors and plasma and LCD large-format screens. These devices allow us to provide a sensible complement to the UTAX product range for resellers. With the completion at the beginning of March 2005 of the sales negotiations for the PPE Group Benelux, our former Presentation and Media Technology business segment has now been dismantled. Leaner structures with improved efficiency Apart from intensively scrutinizing our range of products and services, along with the related distribution and marketing policy, the existing operating structures required special examination last fiscal year. In important sub-sections the former structure of the Mittelstand holding continued to typify the organizational structure of our Group, even after we had sold activities that were outside our core business area. Last fiscal year we subjected the structure of the Group and its operations to critical examination, and decided to almost totally dismantle the level of the subholdings, and to substantially reduce the number of regional sales and service companies through sensible mergers. The aim of this restructuring was to reduce our costs through having a leaner organization, and to increase the efficiency and effectiveness of sales and service. Last year we not only initiated this change, we were also able to carry it through to a great extent. So, for example, we merged TA Triumph- Adler Baden-Württemberg with TA Triumph- Adler Heilbronn, with the same applying to our companies in Bremen and Hamburg and in Leipzig.

18 16 Report of the Management Board Once the organizational restructuring has been completed we will have reduced the number of regional companies by more than a third. We are already noticing that this restructuring has made us significantly stronger: our flexibility has increased through flatter structures, administration work has been substantially cut to the benefit of our customer support, and cost-cutting effects in the six and seven digit range have been realized depending on the particular merger. Apart from optimizing the domestic sales structures, in fiscal year 2004 we targeted a radical expansion of our foreign sales. Enormous opportunities for exports The delivery restrictions imposed on us by the manufacturers of our products meant that we were only able to export a limited number of our brand products through to However, as a result of the strategic partnership we concluded, Kyocera Mita accorded us extensive access to the key markets in Europe, Africa and the Middle East. Once we had succeeded in acquiring wellpositioned distributors in the countries we were targeting, we were able to book significant customer orders during the course of last year. In France our sales have since doubled and in South Africa increased almost six fold. Business perspectives for Italy and Great Britain are good, while other countries are still in the preparatory phase. Outlook At the beginning of fiscal year 2005, TA Triumph- Adler AG stands positioned as a focused, flexible and lean Group that has put the groundwork in place to be an even more significant systems partner for its customers in the coming years, offering products tailored to the needs of the market and innovative sales and service ideas. Although fiscal year 2004 finished again with a substantial loss as a result of restructuring, a reversal of the trend was underway in the last quarter of This positive trend was reinforced by the many measures and initiatives prepared over the past two years, and will lead to significantly improved earnings and returns over the short to medium-term. We are expecting significant impetus to growth when we receive deliveries of the multifunctional devices that we have not yet been able to offer. In the area of color products we intend to expand our offer with additional copier and printer models, so that we can be ready with an attractive and comprehensive range of products not just here in Germany, but also in the export markets we are targeting. We are expecting additional sales increases to come from our MIF replacement project (MIF = Machines in Field), which aims to exchange old products for new ones ahead of time. Only 40 percent of the 120,000 machines we are maintaining through service contracts carry our own brands TA Triumph-Adler and UTAX. We intend to move beyond the further development of our own business and expand our nationwide coverage through the targeted acquisition of resellers. In January 2005 we gained one of the most significant resellers in copying and printing systems in the Dusseldorf area, when we acquired Sankopie GmbH. As a result we have been able to further expand our leading market position in the Rhineland.

19 Report of the Management Board 17 The significantly improved financial structure is enabling us to fully exploit these growth opportunities. Accordingly, we are preparing further acquisitions of companies of the size of Sankopie this year. At the same time as we acquire suitable companies with which to enable us to strengthen our market position and expand further, we are carefully pursuing further optimization of our internal structures. This is focused on the one hand on our sales and technical activities, and on the other hand on further developing our site concept and continually pushing ahead with centralizing administrative work. We are convinced that at the end of fiscal year 2005, TA Triumph-Adler will be able to present itself as a strong, healthy and future-focused company, with a bright outlook for customers and investors. Nuremberg, March 2005 The Management Board

20 18 Bericht des Vorstands

21 The Share 19 The TA Triumph-Adler Share On September 27, 2004, the Management Board of our company on the basis of the corresponding resolutions of the previous Annual General Meeting resolved to implement a capital increase with subscription rights for the shareholders which was expected to yield an inflow of funds of around 15 million euros. The aim of this capital increase was, in combination with a simultaneous comprehensive restructuring of the Group s external financing, to create a solid long-term foundation for the growth that the Group is targeting, including through company acquisitions. The Baader Wertpapierhandelsbank AG was entrusted to handle the transaction, namely the issuing of 5,783,375 new bearer shares, with the obligation to offer them for subscription to the shareholders of TA Triumph-Adler AG at a ratio of 6:1. The subscription price corresponded to the nominal value of the share of 2.56 euros. Our strategic major shareholder Kyocera Mita declared that it was willing to raise its current investment as a result of this capital increase from 25 percent to a maximum of 29.9 percent. The CEO of our company, Dr. Dietmar Scheiter, also signaled his intention to raise his investment from 2.8 percent to a maximum of 3.5 percent. We stepped up our investor relations and press efforts to give broader publicity to the upcoming completion of restructuring, the operating successes in our core business and our solid starting position for the coming years. In the run-up to the capital increase we visited many German and foreign investors, where we received a positive response to our equity story. We accompanied our presentations with interviews with the financial and stockmarket media, which resulted in a favorable reporting on the further outlook for our Group and the probability of the new shares being placed in full. Following the publication of the rights offering on November 6, 2004, this assessment was confirmed by demand from existing shareholders and newly acquired private and institutional investors alike. Nevertheless, the successfully executed capital increase represented only one component of the restructuring of our Group s financing that we announced in the previous annual report. Following intensive negotiations we succeeded in concluding a syndicated loan agreement in November last year with a banking syndicate lead-managed by the Deutsche Bank and the Bayerische Landesbank for Color copying system TA Triumph-Adler DCC 2526

22 20 The Share TA Triumph-Adler AG share highs and lows in g and TA Triumph-Adler AG share price performance vs. the SDAX Volatility TA Triumph-Adler AG SDAX % % /04 02/04 03/04 04/04 05/04 06/04 07/04 08/04 09/04 10/04 11/04 12/04 70 % approximately 70 million euros and with a term of four and a half years. Complementing this syndicated loan, which reduces our interest expense and eases the work of the finance department by reducing the number of banks whose services we use from 50 to 11, is a third component of our restructured Group financing a mezzanine Shareholder structure in %* Kyocera Mita WestTA Management Board Free Float 29.9 % 51.6 % 14.8 % loan of up to 30 million euros has been made available to TA Triumph-Adler by an Anglo- American investment consortium lead-managed by the Dresdner Anschutz Mezzinvest, which has its headquarters in London. The capital increase, the syndicated loan and the mezzanine capital now provides our company with a total financing volume of 130 million euros that can be deployed flexibly a solid and sufficient financial basis for our future objectives. On the other hand, we cannot be satisfied with the performance of our share. Many factors affected the price of the TA Triumph-Adler share. Of particular note here are the persistently uncertain domestic economy and the continued decline in spending in Germany. Apart from these basic factors, the charges we announced in connection with the restructuring of our Group and relating to the Presentation and Media Technology business segment continued to have a heavy impact on our share price. *as of March %

23 The Share 21 After its initial constant upward development, at the end of May the TA Triumph-Adler share achieved its peak for the year in Xetra trading at 2.94 euros and exhibited a slightly falling sideways movement into the summer on sustained low sales. In August the share price at around 2.60 euros declined to a level of 2.20 euros, and thereafter fluctuated heavily until the end of the year at prices between 1.94 euros and 2.28 euros. We regard the trading volume that rose to a level far in excess of the average of the last years as a positive sign, because it reflects the increased attention of the capital market. Daily trading volumes regularly exceeded the 100,000 unit mark, particularly in the second half of the year, and at its peak as many as 350,000 shares and above were traded on one day on the stock market. This increased liquidity accommodated the investment principles of investment companies in particular. In addition to a large number of investor relations activities we also intend to respond to the attention gained from the capital markets with a new Designated Sponsor. On December 1, 2004, HSBC Trinkaus & Burkhardt began its work on behalf of our company and will be supporting us, for example, by regularly conducting research studies and at roadshows. Moreover, independent analyst companies have compiled studies on the TA Triumph-Adler share Independent Research and Kayenburg are two examples. A reappraisal of our company by the capital market to fully take into account our new opportunities and capabilities in the business of printing, copying, faxing and archiving is a key issue for us and we are working intensively on moving this reappraisal ahead accordingly in Trading volume March 2002 to February 2005 (units per month) 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Q1/2002 Q2/2002 Q3/2002 Q4/2002 Q1/2003 Q2/2003 Q3/2003 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004 Q1/2005

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25 Group Management Report 23 Group management report of TA Triumph-Adler Aktiengesellschaft, Nuremberg, for fiscal year 2004 General business climate In 2004 general expectations of the overall business climate again went unfulfilled. The economic situation in Germany continued to be characterized by very difficult underlying conditions. In 2004 the economy was unable to break free of its stagnating, and in some sectors even recessive, underlying base. The expectations expressed at the beginning of the year with regard to economic growth of over 2 % were successively revised downwards during the course of the year. Growth in gross domestic product slowed significantly, especially in the second half of the year, amounting to just 1.7% for the full year Consequently, Germany once again recorded some of the weakest economic development in the euro area. Once again, more than 70 % of economic development came on the back of foreign trade, with domestic demand continuing to be weak the latter contributing only 30 % to growth in the nominal gross domestic product. As there was again a disproportionately strong increase in the surplus of exports compared to the previous year, the proportion of the exports surplus in the nominal gross domestic product increased accordingly. Investment in equipment that is relevant for the TA Triumph-Adler Group, which generated 71 % of its sales in Germany in 2004, performed negatively for the fourth time in succession showing a decline of 0.1 % compared to the previous year. This figure reflects the continuing high jobless ratio of over 10 % on an annualized average basis which put a strain on the investment behavior of commercial enterprises and on the public purse. Owing to the decidedly tight budgetary situation of the local and regional authorities, itself a result of overall economic development, the public sector as a force for investment was largely absent in 2004 as well. The TA Triumph-Adler Group s Mittelstand commercial and public authority customers were in turn unable to escape these developments. This was reflected in a reduced, and at times totally absent, inclination to spend. Owing to the current overall economic situation we are not expecting the Group s immediate business environment to ease rapidly. Sales performance The TA Triumph-Adler Group generated group sales of e 386 million in fiscal year 2004, which is 20.3 % lower than the figure for the same period the previous year (e 484 million). This figure for the previous year included the remaining operations of the Beteiligungs division that were sold as of June 30, 2003, with sales of e 76 million, so that on a like-to-like basis there was a decline in sales of 5 %. As a Copying system TA Triumph-Adler DC 2116

26 24 Group Management Report result, in light of the underlying economic conditions described the sales and income objectives could not be fully realized. Each of the two remaining business segments, Imaging and Presentation and Media Technology, performed differently. The Imaging business segment managed to increase sales by 3% from e 314 million to e 322 million, despite tough market conditions. Here, the sales breakdown also reflects the overall economic circumstances. Whereas in Germany sales generated in this business segment were largely at last year s level, the share of exports in the Distribution segment increased by 36 % to e 29 million. Overall, the pressure on prices that made itself felt on the market was more than offset by corresponding unit sales. Compared to the year before, sales of copying systems increased by 8 % at around 22,500 units. The proportion of new copying systems sold under the TA Triumph-Adler brand name via direct sales as a percentage of total sales of new systems was more than 80 % in financial year 2004 as well, meaning that eight out of ten copying systems placed in direct sales carry the brand name TA Triumph-Adler. The market share of the TA Triumph-Adler Group in the market for black and white digital copying systems (not including multifunctional devices) was 10 % in fiscal year The contributions to sales expected from the introduction of our own brand color copiers was not fully achieved in 2004 because the supplier Kyocera Mita was unable to provide the systems presented at CeBIT 2004, which were positively received by the market, until the third quarter of In fiscal year 2004 we were unable to participate in the positive development of the fastest growing market segment in our core market Imaging, namely multifunctional products, because our supplier Kyocera Mita delayed the start of production in order to be able to meet the high quality demands of our customers. The products will not come onto the market finally until Our expectations for the sales of printers and faxing systems bearing the TA Triumph-Adler and UTAX group brands were met in Compared to the previous year, unit sales of printers increased by 37 %. Sales targets set for the presentation and media technology business segment fell significantly short in fiscal year Sales of e 64 million were substantially short of the previous year s level of e 94 million. The recessive market performance, a significant shift in the distribution structure towards mass sales channels and continuing high pressure on prices and margins were the reasons behind the decision taken by the Management Board and Supervisory Board of TA Triumph- Adler AG to terminate the operations of this business segment in their existing form. The implementation of this decision led to the disposal of the essential foreign companies of the Presentation and Media Technology business segment, the merger of individual economically viable businesses into the Imaging business segment and the dissolution of the subgroup parent company Triumph- Adler A-Vi-Tec Präsentations- und Medientechnik GmbH. While this rigorous strategic repositioning was ongoing, the loss-making subsidiary operation of media integration was sold to a strategic investor in summer The British subsidiary was sold by way of an MBO in the fourth quarter of Likewise in the fourth quarter 2004, the distribution activities of the Presentation and Media Technology business segment were integrated into the

27 Group Management Report 25 corresponding businesses of the Imaging business segment, while the product portfolio was at the same time substantially streamlined. Profit situation The consolidated result before interest, taxes and one-time expenses (EBIT) came to e 11 million euros in fiscal year 2004 (previous year: e 2 million). Apart from operating improvements and the elimination of charges against earnings arising from the TA Beteiligung division, sold the previous year, the increase in the EBIT is primarily due to the initial positive effects of the measures undertaken in 2004 to achieve a sustained increase in earnings at the TA Triumph-Adler Group. The restructuring measures already mentioned, which were developed as part of a comprehensive consulting project working together with a renowned and leading German corporate consulting company, are aimed at optimizing the earnings position of the TA Triumph- Adler Group so as to achieve at least an 8 % return on capital employed (ROCE) by the end of This is to be accomplished through a sustained improvement in the earnings position of the whole TA Triumph-Adler Group by way of cost-cutting measures and sales increase effects. The relevant subprojects were introduced and implemented as planned in 2004, and already began to show initial effects in Significant full-year effects will be in evidence in The EBIT in the Imaging business segment increased by 47% to e 25 million from e 17 million the year before. In addition to the ongoing consistent marketing of the Group s own brands and income achieved through the sales initiative Total-Output-Management (TOM), this increase in earnings is also due to lean cost management and the measures introduced to restructure the TA Triumph-Adler Group. In the Presentation and Media Technology business segment, the unsatisfactory sales situation heavily impacted earnings, despite strict cost management. The EBIT decreased from e 1 million the previous year to e 3 million in fiscal year The Central Division is included in the Group EBIT at e 11 million (previous year: e 15 million) for fiscal year This figure includes pension costs of e 7 million. This means in turn that there was a significant improvement in the Central division costs in fiscal year In fiscal year 2004 there was a net figure of e 15 million in one-time charges. This relates to the restructuring of the TA Triumph-Adler Group (e 7 million) and the strategic repositioning of the businesses of the presentation and media technology business segment (e 5 million). The restructuring of the TA Triumph- Adler Group incurred extraordinary expenses primarily for redundancy payments for laidoff employees (e 3 million), consulting costs (e 2 million) and other restructuring expenses (e 2 million). The activities of the presentation and media technology business segment incurred extraordinary expenses primarily relating to the disposal of individual companies. This amount already includes accounting for the losses from the disposal of the Benelux businesses in March Further, one-time charges of e 3 million were incurred in connection with the restructuring of the financing structure of the TA Triumph-Adler Group in fiscal year The net financial result improved in turn by e 3 million to e 8 million. After minority interests and tax effects (e 1 million) there is a consolidated net loss for the year of e 12

28 26 Group Management Report million (previous year e 25 million). Earnings per dividend-entitled share for 2004 came to e 0.33 (previous year: e 0.73). Net assets and financial position The Group s balance sheet total came to e 431 million as of December 31, 2004, practically unchanged year-on-year (e 436 million). Additional pension provisions of e 137 million (32 % of the balance sheet total) continue to be available to the TA Triumph-Adler Group for long-term financing, plus long-term liabilities from financial leasing, the bank financing restructured in the fourth quarter into longterm financing and the mezzanine loans taken up by TA Triumph-Adler Group in relation to the restructuring amounting to a total of e 135 million (31 % of the balance sheet total). The listed fixed assets of e 76 million (previous year: e 86 million) include goodwill of e 37 million (previous year: e 42 million). The current assets (inventories, accounts receivable and other assets) came to e 170 million (previous year: e 172 million) at the balance sheet date. e 171 million is recognized for deferred tax assets (previous year: e 168 million). This item resulted in the amount of e 106 million (previous year: e 101 million) out of the tax situation of TA Triumph-Adler AG with tax loss carryforwards that can be utilized to a considerable extent in the future. A further e 65 million (previous years: e 68 million) resulted from the differences in intra-group profits between the consolidated balance sheet and the tax accounts of TA Triumph-Adler AG. The TA Triumph-Adler Group s overall net bank debt was further reduced from e 80 million (previous year) to e 39 million. The operating cash flow in fiscal year 2004 came to e 9 million (previous year: e 1 million). The inflow of funds from ordinary operations came to e 43 million (previous year: e 18 million). The outflow of funds from investment activities came to e 21 million in fiscal year 2004 (previous year: inflow of funds of e 65 million). The outflow of funds from financing activities in 2004 came to e 18 million (previous year: e 81 million). As a result, there was a net change in cash and cash equivalents in fiscal year 2004 amounting to e 5 million (previous year: e 3 million). Consolidated equity (including the minorities share in the equity) came to e 52 million (previous year: e 52 million) as of December 31, The shareholders equity ratio therefore remained unchanged at 12 %. This figure includes the capital increase of 16.7 % that was successfully carried out in the fourth quarter of 2004, which placed 5,783,375 new shares at a value of e 2.56 per share. The company s subscribed capital is now made up of 40,483,375 shares amounting to e 103,637,440. In addition, the item shareholders equity included the costs of the capital increase (e 0.6 million) directly offset against the shareholders equity. Employees The TA Triumph-Adler Group employed an annualized average of 1,759 staff during the past fiscal year (previous year: 2,367). There were 1,653 employees working for the TA Triumph-Adler Group on the reporting date of December 31, 2004, (1,858 on the reporting date the previous year); of these, 28 employees worked in the Central division (previous year: 54 employees).

29 Group Management Report 27 Research and development Major research and development expenditures were not incurred in fiscal year 2004 due to the nature of the business activities. Outlook Following the completion of the focusing strategy in fiscal year 2003, the internal resources were focused in fiscal year 2004 on the core division with its Imaging and Presentation and Media Technology business segments, and on the projects in the Central division of the TA Triumph-Adler Group. The consistent restructuring of the TA Triumph- Adler Group began in 2004, with the aim of achieving a return on capital employed of at least 8 % by the end of This restructuring will be continued in the coming two years. The restructuring of Group financing that was successfully carried out in fiscal year 2004 laid the groundwork for future investment in growth in the Imaging business segment, and thereby through acquisitions as well to benefit as market leader from the consolidation tendencies in this market. A good example of this is the acquisition of Sankopie that took place at the beginning of January 2005, which again expanded our market leading position in the Rhineland and enabled significant synergy potentials to be leveraged in procurement, administration and technology. This new financing structure has successfully reduced a substantial risk, stated in last year s Management Report, for the future development of the TA Triumph-Adler Group. What previously amounted to more than 50 local bank accounts in the TA Triumph-Adler Group has been restructured into a syndicated loan of e 70 million with a term that runs until Further, a capital increase of approximately e 15 million was carried out and a mezzanine loan of up to e 30 million was included. All financing has been brought into the TA Triumph- Adler AG, where it will be handled centrally. This has not only reduced the complexity of administrative tasks, increased transparency and significantly improved the maturity structure of the financing, but also substantially increased TA Triumph-Adler s room to maneuver financially. We assume that this new and internationally aligned financing structure, for which TA Triumph-Adler AG has received very positive feedback in the national and some of the international press, will also improve the rating situation of TA Triumph- Adler AG with our financing partners for the long-term. Structurally, the merger of the regional holdings and the subgroup holdings which is now practically complete has eliminated one level of the hierarchy from the TA Triumph-Adler Group, and further increased the market proximity and flexibility of the organizational structure. The merger of nine operating companies into four larger units has also created the foundation for further improvements in efficiency in these units over the coming years. Despite the prolonged period of weakness in the German economy, the market for output solutions offers attractive growth opportunities. We are convinced that our leading market position makes us better placed to profit from the upturn in business trends than our competition. In addition to external growth initiatives such as acquisitions further internal growth is particularly important. In fiscal year 2005, we aim to continue with the positive growth of exports and further increase the percentage of sales generated abroad to a significant extent. In the domestic market of Germany there is further major potential in

30 28 Group Management Report sales and earnings to be derived from continuing to rigorously press ahead with our own-brand strategy and from the business in consumables that results, from the opportunity to consistently market our own-brand color systems and multifunctional products for the first time as well as from implementing the cost-cutting and efficiency improvement measures that form part of the restructuring plan. As one of these measures, TA Triumph-Adler AG has recently invested substantial funds in improving the productivity of sales and technical services in order to achieve a sustained improvement in profitability. This process, which is not yet complete, has resulted in the new sales information and management system that was successfully tested in fiscal year 2003 being introduced nationwide in 2004, and which as planned will bring sustained improvements in the productivity of Sales, starting In Technical Services a new technician control and evaluation system will be tested at selected sites during pilot projects. The nationwide rollout of this system will be completed in As part of continued improvements in efficiency, in fiscal year 2005 the underlying conditions will be put in place in order to further restructure administrative functions in the TA Triumph-Adler Group. The planned reduction in the number of legally independent units will see individual subsidiaries being merged at further sites in Also important in this connection is the expansion of our activities in the area of document management software/archiving that we began in fiscal year 2004, which we intend to use to enhance our Total-Output-Management sales concept and from which we are expecting substantial sales growth in the next few years. Altogether, the strategic alliance with Kyocera Mita is of major importance for the further development of TA Triumph-Adler. Apart from our access to Kyocera Mita s complete product range, we will now be able to tap into new markets to which the Triumph-Adler Group previously had no access. A good example here is the entry into the new export markets, which has already contributed to substantial export sales growth in In 2004 Kyocera Mita again made clear the strategic importance of the collaboration with our company by increasing its stake in TA Triumph-Adler AG as part of the capital increase carried out in 2004 to its present 29.9 % of the subscribed capital of TA Triumph-Adler AG. It is by far the largest single shareholder in TA Triumph-Adler AG. Corporate Governance The Management Board and Supervisory Board of TA Triumph-Adler AG feel that they are committed to ensuring efficient and comprehensive corporate governance. Accordingly, TA Triumph-Adler AG applies practically all the stipulations of the German Corporate Governance Code and/ or follows the recommendations of the code. The following recommendations only are not applied: agreeing an appropriate deductible when taking out D&O (directors and officers liability) insurance for the Management Board and Supervisory Board (clause 3.8), Supervisory Board members exercising mandates or consultancy functions for the company s main competitors (clause 5.4.2) and the nature and details of the Supervisory Board s compensation (clause 5.4.5). Publishing the compensation given to individual members of the Management Board separately is not applied (clause 4.2.4). The recommendation to publish a list of companies in which the company holds a substantial stake is not applied with regard to stating the operating results of the subsidiaries (clause 7.1.4).

31 Group Management Report 29 In accordance with 161 of the German Stock Company Act (AktG) Management Boards and Supervisory Boards of publicly-listed stock corporations must issue an annual declaration of compliance, stating whether and to what extent they are complying with or deviating from the stipulations of the German Corporate Governance Code. Management Board and Supervisory Board have issued this declaration and made it available to the shareholders. Potential risks There is a comprehensive risk management system in place within our Group with a risk manager appointed for each company reporting at quarterly intervals to the central risk management committee. Risk management is an integral and proven component by which the Management Board manages and the Supervisory Board controls the company. Following the focus on the Imaging business segment the potential operating risk of an insufficient earning situation becomes particularly important. Due to the existing structure of the TA Triumph-Adler Group, with a high, fixed amount of central costs due to pension payments to be made, the company has to succeed, in line with the restructuring concept developed, in achieving a sustained increase in productivity and profitability to cover these central costs and to generate a sufficient return on capital employed, in order to once again make TA Triumph-Adler AG an attractive focus for investment for the capital markets. To avoid this risk the company has, together with a renowned German corporate consulting company, initiated a restructuring concept involving comprehensive cost-cutting and sales increase measures. This concept is currently being implemented. The measures that were defined will affect the operating units and the Central division. Last year the potential risk of the finance situation was dealt with the restructuring of financing. The financing agreements (syndicated loan agreement, mezzanine loan agreement) commit TA Triumph-Adler AG to meeting certain key ratios (so-called covenants) with regard to the financial and profits situation, as is normal for financing of this nature. These key ratios were derived from the company model in accordance with the restructuring concept; this is another reason why the future operating performance is particularly important. Owing to the variable interest rates for the loans in these agreements, which is again a normal practice, the development of interest rates is also very important for the earnings situation of TA Triumph-Adler AG. This potential risk has since been countered by concluding appropriate long-term interest hedging. The advantage of a high level of customer loyalty created through long-running end customer contracts in direct sales is contrasted with the need to refinance these leasing, rental and all-inclusive agreements. An adequate financing capacity is consequently of major importance for the liquidity situation. In addition to optimizing the interest charged as a result of refinancing, the TA Triumph-Adler Group pursues the strategy of pooling the required volume into a manageable number of refinancing partners. This includes permanently monitoring refinancing terms, conditions and volumes, with head office tracking a large number of projects aimed at securing an adequate financing ratio. We are assuming that the improvement in our ratings among our financing partners will further optimize the refinancing costs of our end customer business. Through the introduction of a new refinancing vehicle focused on capital markets, we intend to use this newly-acquired room for maneuver to further optimize our refinancing conditions and to thereby generate a competitive operating advantage.

32 30 Group Management Report The operating risks in the individual subsidiaries have not changed substantially from the year before. These risks lie primarily in the development of the market and the competitive situation, which can hamper the further improvement required in our earnings performance. In addition, there are risks which could arise through dependence on individual high-performing managers especially in sales, risks in inventory management, defaults on trade receivables and to a lesser extent currency risks. The deferred taxes item includes future financial benefits arising from tax loss carryforwards of around e 106 million. Potential operating risks to be mentioned in this respect are the risk of non-realization due to the company s profit situation, and the risk that the loss carryforwards cannot in future be utilized or can only be utilized to a partial extent. There is a further potential accounting risk in the future revision and development of the International Financial Reporting Standards to possibly include the introduction of a defined period for utilizing loss carryforwards to determine the deferred tax assets. The risk of future non-utilization due to the profit position of the company is still considered slight because of the development of the operating earnings performance in 2004 and the restructuring measures that have been introduced; the risk from a restricted opportunity to utilize tax loss carryforwards has been minimized for the company through organizational measures taken in the preceding years. In light of the economic situation in Germany and the ongoing discussion about further reforms in corporate taxation, negative effects that could impact this balance sheet item by lowering the tax rate, further restrictions in future in the extent to which tax loss carryforwards can be used and/or other structural taxation measures cannot be ruled out. The company has no information of a change in the IFRS from which it could conclude that a change of this nature is being considered. Significant post-balance sheet events By restructuring Group financing, the TA Triumph-Adler Group has opened up the opportunity for future investment in the growth of the Imaging business segment. As part of the realization of these opportunities for growth, at the beginning of January 2005 the company was able to acquire the Sankopie company in Kaarst, with which TA Triumph- Adler AG again expanded its market leading position in the Rhineland. By merging this acquired company consistently into our TA Rheinland company, we have already begun to leverage the synergy potentials expected from this acquisition. With the sale of the PPE Group at the beginning of March along with its operations in Holland, Belgium and South Africa, the strategic repositioning of the Presentation and Media Technology business segment was completed quicker than planned. This transaction enabled the target structure of the TA Triumph- Adler Group as market leader in copying, printing, faxing and archiving to be realized. Nuremberg, March 2005 The Management Board

33 Group Management Report 31

34

35 Consolidated Financial Statements 33 Consolidated Financial Statements Consolidated Income Statements for the Financial Year 2004 in g Sales (7)* 385,829, ,188, Change in finished goods, inventories and work in progress 125, , Other operating income (8)* 24,267,931 47,523, Cost of materials (9)* 235,571, ,851, Gross profit 174,651, ,280, Personnel expenses (10)* 90,857, ,034, Depreciation on intangible assets and on tangible assets (11)* 23,179,333 33,358, Other operating expenses (12)* 64,967, ,263, Operating profit 4,352,877 18,376, Investment result 119, , Financial result (13)* 8,049,395 11,296, Result from ordinary operations 12,282,336 29,555, Taxes on income (14)* 988,366 6,795, Other taxes 373,944 1,485, Net loss before minority interests 11,667,914 24,245, Minority interests in net income 175, , Net loss after minority interests 11,843,419 24,730,496 Earnings per share (g) (diluted and undiluted) (23)* *Information in the notes under this figure. Beamer Anders+Kern AstroBeam S 400

36 34 Consolidated Financial Statements Consolidated Balance Sheet as of December 31, 2004 Assets Dec. 31, 2004 in g Dec. 31, 2003 in g A. Non-current assets I. Tangible assets (15)* 31,828,293 41,015,810 II. Intangible assets (15)* 40,229,186 43,634,404 III. Shares in associated companies (15)* 19,943 19,943 IV. Other financial assets (15)* 4,247,754 1,149,037 V. Receivables from financial leasing (15)* 28,703,020 22,798,238 VI. Other long-term receivables (17)* 3,402,989 2,940,762 VII. Deferred taxes (14)* 170,587, ,018, ,352, ,910,524 B. Current assets I. Inventories (16)* 62,633,944 62,841,167 II. Receivables from financial leasing (18)* 10,977,980 7,967,579 III. Other current receivables (17)* 62,264,715 73,403,386 IV. Tax assets 1,740,807 2,227,817 V. Cash and cash equivalents 14,636, ,254,384 10,087, ,527,033 Total assets 431,273, ,437,557 *Information in the notes under this figure.

37 Consolidated Financial Statements 35 Equity and liabilities Dec. 31, 2004 in g Dec. 31, 2003 in g A. Equity (19)* I. Subscribed capital 103,637,440 88,832,000 II. Capital reserve 37,752,327 38,382,288 III. Currency translation adjustments 676, ,799 IV. Offset for IAS ,887 V. Accumulated loss 89,754,840 50,958,632 77,911,421 48,600,955 B. Minority interests 1,264,621 3,681,384 C. Long-term debt (20, 21)* 1. Provisions for pensions and similar obligations 127,983, ,677, Other provisions 733,915 3,116, Finance debt 68,651,125 15,808, Liabilities from finance leases 37,020,384 40,944, Other liabilities 2,264,500 2,476, Deferred taxes 74, ,727,724 78, ,102,217 D. Current liabilities (20, 21)* 1. Provisions for pensions and similar obligations 9,211,199 9,402, Tax liabilities 3,809,038 3,930, Other provisions 14,969,889 18,589, Finance debt 8,075,296 73,830, Liabilities from finance leases 21,579,337 21,705, Other liabilities 84,677, ,322,267 64,594, ,053,001 Total liabilities 431,273, ,437,557 *Information in the notes under this figure.

38 36 Consolidated Financial Statements Consolidated Cash Flow Statement from January 1, 2004 to December 31, 2004 Within the context of the changes in the companies included in the consolidation, the following assets and liabilities were sold: in g thsd Total sales Cash 155 Goodwill 3,802 Other fixed assets 259 Inventories 1,503 Accounts receivable 2,353 Other assets 261 8,333 Minority interests 296 Accrued taxes (incl. deferred taxes) 20 Provisions for pensions 0 Other provisions 456 Bank liabilities 61 Other obligations 4,511 Other liabilities 1,321 6,665 Cash 155 Gain on divestments 1,022 Income from divestments 491

39 Consolidated Financial Statements 37 in g thsd Net loss 11,843 24,731 Minority interests in net income Taxes on income 988 6,796 Depreciation and amortization on fixed assets 23,179 33,359 Changes in pension provisions 1,891 1,449 Income tax received/paid Cash flow 8, Net interest income 8,049 11,296 Income from disposal of fixed assets 5,882 25,253 Changes in other provisions 4,394 4,145 Changes in current assets 24,882 27,012 Changes in other balance sheet items I. Net cash provided for operating activities 43,102 18,396 Intangible assets/fixed assets Investments 27,863 23,154 Income from disposal of fixed assets 5,257 7,374 Acquisitions, participations Investments 2, Income from disposals ,814 Interest income 3,375 2,697 II. Net cash provided/used for investment activities 20,775 64,684 Change of subscribed capital/capital reserve 13,789 5,370 Dividends 0 0 Increase in finance debt 66,935 0 Finance debt repayments 10,632 10,292 Changes in current account liabilities 69,154 54,440 Increase in finance lease liabilities from sale-and-lease-back 9,876 14,583 Repayment of finance lease liabilities from sale-and-lease-back 16,811 21,269 Interest expenses 11,519 13,963 Changes in minority interests III. Net cash used for financing activities 17,777 80,568 Net change in cash and cash equivalents (I.+II.+III.) 4,550 2,512 * ** Cash and cash equivalents at beginning of year 10,087 7,575 Net change in cash and cash equivalents 4,550 2,512 Cash and cash equivalents at end of year 14,637 10,087 **This item includes in 2003 non-cash-flow affecting changes of e 40,600 thsd. from the sale of the TA Beteiligung GmbH. **This item includes in 2003 e 26,000 thsd from debt assumption concerning the sale of the TA Beteiligungs GmbH.

40 38 Consolidated Financial Statements Consolidated Statement of Changes in Shareholders Equity in g thsd Subscribed Capital Currency Offset Accumulated Total Capital Reserve translation IAS 39 loss adjustment Balance at Jan. 1, ,463 38,382 1, ,180 67,566 Capital increase 5,370 5,370 Currency translation adjustment Net loss for current year 24,731 24,731 Change in offset for IAS Balance at Dec. 31, ,833 38, ,911 48,601 Capital increase 14,804 14,804 Currency translation adjustment Net loss for current year 11,843 11,843 Change in offset for IAS Comprehensive Income Costs of capital increase Balance at Dec. 31, ,637 37, ,754 50,959

41 Notes 39 Notes to the Consolidated Financial Statements for fiscal year 2004 TA Triumph-Adler AG, Nuremberg DETAILS ON THE ACCOUNTING AND VALUATION METHODS 1. Principles and Methods The consolidated financial statements of TA Triumph-Adler AG have been prepared according to the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS) while taking the interpretations (IFRIC, SIC) into account. The IASB adopted the International Accounting Standards (IAS) published by the IASC. The IASB standards published thereafter will be issued as International Financial Reporting Standards (IFRS). As permitted, the standards that were published as part of the improvement project and the new standard IAS 32/39 (revised 2003) have not yet been applied early. As permitted, IFRS 2 (share-based payments) have not yet been applied. IFRS 3 (business combinations) and thus also IAS 36 (revised 2004) and IAS 38 (revised 2004) have been applied retroactively as of January 1, The valuation of the pension provisions has been converted from the immediate recognition of actuarial gains and losses to the corridor method. This corridor method stipulates that actuarial gains and losses need not be recognized until the expected DBO (defined benefit obligation) differs by more than 10 % from the actual DBO. The recognition of actuarial gains and losses as income or expense is then spread over the remaining working life. The previous year s figures have been adjusted accordingly. Conversion was carried out to avoid particularly substantial effects on shareholders equity and annual net income/ loss due to interest rate changes in the discounting factor to be applied in each case, and over which we have no influence, and also to allow the financial statements to be compared better with other financial statements since the large majority of companies apply the corridor method that the IFRS regards as the benchmark. As permitted, IFRS 4, 5, 6 and IFRIC 1 5 have not been applied early. The prerequisites under 292a HGB (German Commercial Code) for an exemption from the obligation to prepare consolidated financial statements in accordance with German commercial law have been met. The assessment of these preconditions is based on the German Accounting Standard No.1 (DRS 1) published by the German Accounting Standards Committee. In addition to the profit and loss statement and the balance sheet, a cash flow statement and consolidated statement of changes in shareholders equity will be issued. The notes will include a report on the individual segments.

42 40 Notes Various items of the balance sheet and profit and loss statement have been summarized for clarification purposes and to improve the presentation. These items are separately accounted for and explained in the notes. The income statement is prepared according to the nature of expense method. The consolidated financial statements have been drawn up in euros. All amounts in the Notes on the consolidated financial statements are stated in thousands of euros (e thsd). 2. Major differences between the German Commercial Code (HGB) and International Financial Reporting Standards (IAS/ IFRS) The consolidated financial statements contain the following accounting and valuation methods which differ from German law: Balance sheet classification and format In contrast to the HGB, the balance sheet was classified for the first time with assets and liabilities disclosed fully in the order of their liquidity, as per IAS The balance sheet as of December 31, 2003, has therefore been adjusted accordingly. Additionally, provisions with the nature of liabilities are listed under liabilities. Intangible assets IAS 38 requires internally generated intangible assets to be capitalized if it is probable that the future economic benefits attributable to the asset will flow to the enterprise, and that the manufacturing costs of the asset can be measured reliably. HGB does not permit internally generated intangible assets to be capitalized. Leasing IAS/ IFRS and HGB employ different rules for classifying operating leasing and financial leasing. Construction contracts In fiscal year 2003 the percentage-of-completion method was used as prescribed by IAS 11 to recognize construction contracts. This means profits are realized in proportion to the stage of completion of contract activity. No construction contracts of this nature were recognized in fiscal year 2004 due to the disposal of TA Beteiligung division in Pursuant to HGB, profits are realized only after the construction contract has been fully completed. Foreign currency translation Accounts receivable and payable in foreign currency are converted at the exchange rate applicable on the reporting date. Unrealized gains and losses are shown as net loss/profit. Unrealized currency translation adjustments from long-term loans between affiliated companies are treated as not affecting income (IAS 21). In accordance with HGB, unrealized gains are not stated. Deferred taxes The balance sheet-oriented liabilities method is used for reporting deferred taxes (IAS 12). Unlike HGB, IAS/ IFRS rules require that deferred taxes in particular are to be capitalized as tax losses carried forward, if the tax losses carried forward reduce later tax expenditure. Starting 2003, German Accounting Standard 10 (DRS 10) requires deferred taxes to be capitalized as tax loss carryforwards. The HGB provides an option to capitalize deferred tax assets in the non-consolidated financial statements. 40

43 Notes 41 Equity In accordance with Standard Interpretation Committee (SIC) 17, the costs of the capital increase are directly offset against shareholders equity having no effect on net profit/ loss. HGB stipulates that these costs are to be stated as expense in the income statement. Pension provisions Pension provisions are valued using the projected unit credit method, taking into account future salary and pension developments (IAS 19). The corridor method is used for the first time to recognize actuarial gains and losses. Provisions Under IAS/ IFRS, provisions can only be recognized if there is more than a 50 % probability that an outflow of resources will result from meeting the obligation, and the amount of the provision can be estimated reliably. In contrast to HGB, setting up provisions for expenses and provisions for future internal costs is not permitted (IAS 37). Derivative financial instruments In contrast to HGB stipulations, derivative financial instruments are included in the balance sheet and recorded at the fair market value. Gains and losses arising from changes to the fair value are recorded to net profit /loss, as long as the criteria for cash flow hedging are not met, otherwise they are recorded as not affecting net profit/ loss. Specific available-forsale securities are carried at fair value. Changes to the fair value are treated as having no effect on net profit/loss (IAS 39). statements have in general been prepared according to uniform accounting and valuation principles. Sales and other operating income are recorded when the services have been rendered or the risks have been transferred to the customer. As far as possible, sales are recorded according to the percentage of completion method, for customer-related, long-term production contracts. There were no more long-term construction contracts in fiscal year Operating expenses are shown as net profit/ loss at the point of time when the service is used or at the time the expense has occurred. Interest income and expenses are recorded in the valid accounting period. The purchased intangible assets are capitalized at acquisition cost and are depreciated on a systematic straight-line basis over their estimated useful life. In accordance with IFRS 3, since January 1, 2004, scheduled amortization of goodwill has not been applied. In the case of acquisitions made until December 31, 2003, the book value of goodwill remaining at this point of time is regarded as an acquisition cost. Development costs for newly developed products are capitalized, as long as expenses can be clearly allocated and the technical feasibility and marketability of the new products are established (IAS 38). The development costs are written off on a straight-line basis over a period of 3 years. Research costs are reported as an expense. 3. Accounting and valuation methods The annual financial statements of the companies included in the consolidated financial The tangible fixed assets are valued according to the acquisition cost or manufacturing cost less systematic straight-line depreciation. Interest on borrowings is charged directly as an expense (IAS 23). The movable fixed

44 42 Notes assets are written off on a straight-line basis. The following useful life periods are employed to determine systematic depreciation. Software/other rights 3 to 4 years Buildings/parts of buildings 20 to 40 years Technical equipment and machines 5 to 10 years Fixtures and fittings of plant and office 3 to 10 years other equities are sold, all changes in value are recognized in the income statement. The valuation of the other loans and co-operative shares is stated at fair value for the first valuation. Subsequent valuations are done at the continued acqusition costs. Valuation is done in accordance with IAS 39. The other loans are classified in the loans-originated category, the co-operative shares in the available-forsale category. Special depreciation allowances stated in the non-consolidated financial statements of subsidiaries were not included in the Group balance sheet. All intangible assets (including capitalized development costs and goodwill) are examined for impairment at the end of a financial year where these have an indefinite useful life and if a triggering event occurs. Fixed assets (property, plant and equipment) are examined for impairment when an event occurs that may impact their value. Where the recoverable value of the asset is less than its carrying value, an extraordinary depreciation is charged. If the reason for an extraordinary depreciation charged earlier no longer exists the loss is reversed (IAS 36) where permissible. In the case of financial assets, interests in non-consolidated affiliated companies not accounted for by the equity method are shown at their fair value at the balance sheet date. Associated companies are recognized using the equity method (IAS 28). Long-term securities and other equity interests have been valued in accordance with IAS 39, with the long-term securities and other equity interests being placed in the available-for-sale category. They are recognized at fair value. As stipulated by IAS 39, changes in the fair value are offset with no effect on net profit /loss. At the point of time when the long-term securities and When accounting for leasing contracts, a distinction must be made between the following alternatives: For lease contracts in which the TA Group is the lessee as a result of refinancing its own assets, the commercial ownership in the leased items is assigned to the lessee in accordance with IAS 17, where the lessee bears all chances and risks associated with the ownership of the leased item (finance lease). The methods used to calculate depreciation and useful life of the assets stated under fixed assets are the same as for comparable purchased assets. At the point of time when the agreement is concluded capitalization of these assets is carried out at the fair value or at the present value of the minimum leasing payments. The corresponding leasing obligations are stated as financial leasing liabilities. The leasing payments to be paid to the lessor are divided into interest and repayment, with the interest portion of the leasing payment recorded in the income statement for the period of the lease. In the case where the leased items are commercially owned by an outside lessor (operating leasing contracts), the leased items are shown on the lessor s balance sheet. The lease expenses incurred for this are shown in full as an expense. 42

45 Notes 43 The core business of the TA Group is renting copying, printing and faxing systems. These are often based on leasing arrangements with customers. The balance sheet accounting will differ depending on the how contract is drawn up: In financial leasing arrangements where the TA Group is the lessor and the leasing asset is sold on for refinancing under financial leasing by way of sale-and-lease-back, the present value of the lease payments is stated under accounts receivable from the lessee. Liabilities are expensed to the refinancer at the corresponding amount. The interest portion of the leasing payments that the lessee has to pay to the TA Triumph-Adler Group is stated as interest income for the period of the agreements. The interest portion of the leasing payments that the TA Triumph-Adler Group has to pay to the refinancer is stated in the income statement as an interest expense for the period of the refinancing agreements. If the financial leasing agreements with the end customer are not refinanced, the present value of the lease payments that the lessee has to pay to the TA Triumph-Adler Group in the future is stated under accounts receivable. The interest portion of the leasing payment that the lessee has to pay to the TA Triumph-Adler Group is stated as interest income over the period of the agreements. Assets that are leased from the TA Group via operating leasing are stated in the balance sheet within fixed assets under leased assets. The assets are written off over their economic useful life in a similar way to the business assets used by the Group. The income from these operating leasing arrangements are recorded as leasing income. For the sale-andlease-back of these contracts, the income from the disposal of the assets is deferred over the period of the leasing contracts. Inventory is recorded at either acquisition or manufacturing cost. Acquisition costs are determined on the basis of average prices. The manufacturing costs contain direct costs (such as production material and wages) as well as fixed and variable material and production overheads. Financing costs are not taken into account. Inventory risks due to decreased usability are taken into account using appropriate reductions in value. If the net realizable value of the inventories is lower than their book value on the balance sheet date, then the lower value is recognized. Where the net realizable value of inventories that were previously devalued has risen, the resulting increased valuation is included as a reduction in the manufacturing cost. Payments in advance received from customers are shown under other liabilities. Long-term construction contracts were accounted for in fiscal year 2003 using the percentage-of-completion method as far as possible. No more construction contracts were recognized in fiscal year 2004 due to the sale of TA Beteiligung division in fiscal year IAS 11 requires the gross amount due from customers for construction contracts to be shown as an asset under the inventories, and the gross amount due to customers for construction contracts is to be shown as a liability under other liabilities. Losses anticipated from orders are covered by valuation adjustments or provisions. They are calculated taking into account all recognizable risks and are shown in the income statement under sales. Accounts receivable and other accounts receivable are recognized at acquisition cost or at the fair value, if the latter is lower. All recognizable individual risks are accounted for by valuation adjustments. The general risk

46 44 Notes on receivables is covered by setting up individual provisions for bad debt. Accounts receivable held in foreign currency are recognized at the average exchange rate on the balance sheet date. known at the balance sheet date, as well as increases in salaries and retirement benefits to be expected in the future. The corridor method is used to account for actuarial gains and losses. All derivative financial instruments are shown as assets and liabilities and recorded at the fair market value. Derivative financial instruments are used to hedge interest and exchange risks. As long as the financial instruments used provide effective hedging according to the rules stipulated by IAS 39, changes to the fair value will not have effects on the result of that period during the term of the derivative. As stipulated by IAS 39, changes to the fair value from effective cash flow hedging are offset with no effect on net profit/loss. If the derivative financial instruments do not qualify as effective hedges, then all changes to the fair value must be recognized directly as profit or loss in the income statement. Deferred taxes are calculated using the balance sheet-oriented liability method (IAS 12). This rule requires deferred tax liabilities to be recognized for all temporary accounting and valuation differences between the amount of a liability carried in accordance with IAS/ IFRS and the tax base of the amount. Moreover, deferred tax assets are to be taken into account for future financial benefits arising from tax losses carried forward. However, deferred tax assets have only been taken into account where there is an expectation that they can be realized. The tax rate is determined on the basis of tax regulations that applied, or were expected to apply, on the balance sheet date. The valuation of the pension provisions is based on the projected unit credit method for defined benefit-oriented schemes as specified in IAS 19. This method takes into account the retirement benefits and benefit entitlements For defined contribution pension schemes (e.g. direct insurance policies), the obligatory contributions payable are directly charged as an expense. All other provisions are set up for obligations towards third parties that represent a future charge against assets and where the amount or due date remains uncertain. All identifiable obligations are taken into account in the other provisions. The provisions are carried at their settlement value and not set off against positive profit contributions. The settlement value employed here is the one that is the most probable. Liabilities are expensed at the continued acquisition costs. Liabilities in foreign currencies are carried at the average exchange rate on the balance sheet date. Liabilities on financial leasing agreements are expensed at the present value of the outstanding leasing payments. Taxable subsidies and major non-taxable grants for fixed assets are accounted for as other liabilities, and are included in line with the depreciation of fixed assets as other operating income. Contingent liabilities are possible or existing obligations that arise from past events and which are unlikely to be claimed. Additionally they may include possible obligations that have arisen from past events and whose existence has yet to be confirmed due to uncertain future events which are not entirely under the control of the company. Or they may include obligations that cannot be recorded 44

47 Notes 45 because the amount of the obligation cannot be estimated with sufficient reliability. They are not recorded in the balance sheet. The amount carried for contingent liabilities is in line with the extent of the liability determined on the balance sheet date. 5. Scope of consolidation The parent company TA Triumph-Adler AG has its registered office in Nuremberg and is registered in the Trade Register of the Nuremberg Local Court under number HRB 442. TA Triumph-Adler AG has a majority holding 4. Currency translation Positions stated in a foreign currency within the annual financial statements of consolidated companies that are drawn up in a local currency are recorded at the exchange rate applicable on the reporting date (IAS 21). The differences arising from the conversion are recognized in the net profit or loss. in the companies included in the consolidated financial statements. Apart from TA Triumph- Adler AG, 39 German and 16 foreign companies were included in the consolidated financial statements. In addition, one company was consolidated at equity whose contributions to profits are immaterial. The annual financial statements of the foreign companies included in the consolidated financial statement are converted according to the functional currency concept (IAS 21). The functional currency is the national currency, since the foreign companies included in the consolidated financial statements operate their business independently in their national currency. This requires that assets and liabilities be converted at the exchange rate applicable on the reporting date, and income and expenses at the average exchange rate for the year. Resulting conversion differences, as well as those from the currency conversion carried forward from previous years, are listed in the total equity not affecting the net profit/loss. The following exchange rates were used to convert the currencies of the non-european Monetary Union countries: Average Reporting date in g Slovakian krone British pounds Swiss francs Czech krone The scope of consolidation has changed from the year before essentially as follows: Triumph-Adler A-Vi-Tec GmbH sold the CAN.media Group at a price of e 1.00 through a contract dated August 12, The sales of the CAN.media Group came to e m up to the point of time it was sold (previous year: e m); earnings came to e 889,000 up to the point of time it was sold (previous year: e m). As per contract dated November 9, 2004, PPE UK sold its stake (51%) in A+K UK for a purchase price of 340,000 GBP. Sales of A+K UK came to e m (previous year: e m); the company s earnings came to e 164,000 up to the point of time it was sold (previous year: e 237,000). Where holdings in subsidiaries were of minor importance from the Group perspective they are accounted for at acquisition cost or at the fair value, if the latter is lower. Pages 74/75 of this Annual Report contain a list of all the main subsidiaries of TA Triumph-Adler AG.

48 46 Notes The full list of subsidiaries will be filed with the Commercial Register. The balance sheet date of all the companies included in the consolidated financial statements is identical with the balance sheet date of the parent company. 6. Principles of consolidation The consolidation methods used have remained unchanged from the previous year. expenses. Depreciations made in non-consolidated financial statements on interests in consolidated companies and on receivables from these companies, are reversed. c) Elimination of intra-group profits Insofar as the inventories to be taken over in the consolidated financial accounts originated from deliveries and services by group companies, these were valued at the Group purchasing costs. This resulted in the elimination of intra-group profits to the value of e 938,000 (previous year: e m). a) Equity consolidation In the capital consolidation the acquisition costs of the participation are set off against the fair values of the purchased assets and liabilities. Remaining active credit differences are capitalized as goodwill under intangible assets in accordance with IFRS 3. In accordance with IFRS 3, scheduled amortization of goodwill is no longer applied since January 1, They are subject to an annual impairment test. In accordance with IAS 22 (old version), goodwill resulting from company acquisitions before January 1, 1995, were directly written off against reserves, not affecting net profit or loss. When calculating the gains on divestments from the disposal of consolidated companies, goodwill that had been offset against equity in accordance with IAS 22 (old version) was not taken into account. Shares in the subscribed capital, in the reserves and the earnings, held by parties outside the Group are recorded as minority interests. d) Deferred taxes For temporary differences arising from the consolidation deferred taxes are recognized, as required by IAS 12. NOTES TO THE INCOME STATEMENT The income statement was prepared using the nature of expense method. 7. Sales Sales are recorded when the risk has transferred to the customer. Excluded are contract revenues generated by applying the percentage-of-completion method for long-term construction contracts in The segment report contains the breakdown into segments and regions. b) Consolidation of liabilities, expenses and earnings The effects of intra-group transactions have been eliminated. Accounts receivable and payable between the consolidated companies were set off against each other. Intra-group earnings were offset with the corresponding 46

49 Notes Other operating income The employees are grouped as follows: in g m Guarantee insurance Release of provisions Advertising expense subsidies Payments in kind Indemnities from insurances Technical Services Sales Administration Logistics Total 1,653 1, Indemnities Reduction in allowances for doubtful receivables Rental income Exchange gains Own work capitalized Gains on divestments Other operating income Total A break-down by company segment produces the following distribution for the Group: Imaging 1,465 1,517 Presentation technology Central Division Total 1,653 1, Cost of materials The cost of materials breaks down as follows: in g m Cost of raw materials and supplies and purchased goods Cost of purchased services Total On an annualized basis the employees are grouped as follows: Technical Services Sales Administration Logistics Personnel expenses Production Total 1,759 2,367 Personnel expenses break down as follows: in g m Wages and salaries Statutory social security costs Pension costs Total By division, the employees are grouped as follows on an annualized basis: Imaging 1,487 1,516 Presentation technology Central Division Employees at the balance sheet date The TA Triumph-Adler Group employed 1,653 employees (previous year: 1,858) at the balance sheet date (excluding trainees and managing directors). TA Beteiligung Total 1,759 2,367

50 48 Notes 11. Depreciation 14. Taxes on income There is e m (previous year: e m) depreciation on the fixed assets and e m (previous year: e m) on the intangible assets. There was extraordinary and exceptional depreciation of e m on goodwill as per IFRS 3. The actual and deferred tax expenditure and income concerns German and foreign taxes on income, and are made up as follows: in g m Actual taxes Germany Foreign Other operating expenses in g m Restructuring expenses Expenses for premises Total Deferred taxes Germany Foreign Total Costs of motor vehicles Administration expenses Selling expenses Advertising expenses Consulting expenses Allowances for doubtful receivables Operating expenses Contributions and fees Losses from the disposal of fixed assets Other operating expenses Total Financial result The financial result is achieved as follows: in g m Interest and similar income of which from affiliated companies: e 0 m (previous year: e 0 m) 2. Interest and similar expenses of which from affiliated companies: e 0 m (previous year: e 0 m) Total The taxes on income include German corporate tax and the solidarity tax for East Germany, as well as trade tax or comparable taxes payable by foreign subsidiaries. The following table shows a reconciliation between expected and actual tax expense. The theoretical tax rate is 38 %. It was determined on the basis of a trade tax rate of 16 % and a corporate tax rate of 25 % and a solidarity surcharge of 5.5 % on the corporate tax. This did not produce any change in the tax rate compared with the previous year. in g m Income before taxes Theoretical tax rate 38 % 38 % Theoretical tax expense Changes in expected tax expense due to: Loss carryforwards Intra-Group restructuring and deconsolidation Non-deductible expenditure Differing foreign tax rates Taxes unrelated to the accounting period Miscellaneous Total

51 Notes 49 The tax rates for deferred taxes in the Group are 38 % in Germany and 25 % abroad (primarily in Switzerland). The deferred tax income is a result of the following: According to the current status of the projected results and tax legislation, the loss carryforwards will be consumed over a 22-year span (previous year: 25). in g m Loss carryforwards (balance) Intra-group gains from divestments of trademarks eliminated within the Group Differences in valuation of provisions (especially pension provisions) Differences in the accounting of leasing agreements Goodwill amortization from balance sheets of Group companies Miscellaneous Total Deferred taxes are assigned to the following balance sheet items: Dec. 31, 2004 Dec. 31, 2003 Asset Liability Asset Liability in g m side side side side Loss carryforwards Fixed assets Current assets Provisions Total Deferred tax assets from loss carryforwards were only included where there was sufficient certainty that the loss carryforwards would be realized. No deferred taxes were capitalized on domestic corporate tax loss carryforwards of e m (previous year: e m). No deferred taxes were capitalized on foreign losses carried forward.

52 50 Notes NOTES ON THE BALANCE SHEET 15. Fixed assets I. Tangible assets Land, Technical Factory and Payments Income Total buildings, equipment and office on account, from rental on non-owned machines equipment assets under assets in g m land construction Acquisition or production costs Jan. 1, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Acquisition or production costs Dec. 31, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Acquisition or production costs Dec. 31, Accumulated depreciation Jan. 1, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Accumulated depreciation Dec. 31, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Accumulated depreciation Dec. 31, Book value Dec. 31, Book value Dec. 31,

53 Notes 51 II. Intangible assets Goodwill Development Other intangible Payments Total in g m costs assets on account Acquisition or production costs Jan. 1, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Acquisition or production costs Dec. 31, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Acquisition or production costs Dec. 31, Accumulated depreciation Jan. 1, Currency adjustment Change in scope of consolidation Additions Disposals Accumulated depreciation Dec. 31, Currency adjustment Change in scope of consolidation Additions Disposals Transfers Accumulated depreciation Dec. 31, Book value Dec. 31, Book value Dec. 31,

54 52 Notes In accordance with IFRS 3, since January 1, 2004, scheduled amortization of goodwill has no longer been applied. Accumulated depreciation of e m was eliminated and acquisition costs correspondingly reduced. Goodwill of e m stated in the previous year was reclassified into other intangible assets. Earnings improved by e m as a result of applying IFRS 3 for the first time. The previous year s figures were not adjusted because IFRS 3 has been prospectively applied since January 1, As in the previous year, no research costs were capitalized. The additions to other intangible assets include e 397,000 for software produced in-house. The other intangible assets concern e 191,000 for profit potential and e m for software; e 388,000 of this amount is for leased software to be considered as the commercial property of the Group according to IAS 17. The capitalized software corresponds to financial leasing liabilities of e 340,000. In fiscal year 2004, there was extraordinary depreciation on goodwill of e m due to a triggering event. This extraordinary depreciation became necessary due to the upcoming sale (in the year following the reporting year) of the PPE Group. The fact that this group of companies would soon be sold was not foreseen at the time of the last quarterly financial statements, and as a result there was no need for an extraordinary depreciation. Goodwill in general is examined for impairment once per year at the time of the September quarterly financial statements. Where unforeseen events occur, a further impairment test is carried out for the company concerned. For the impairment test that is to be conducted as per IFRS 3, each TA Triumph-Adler Group company represents a cash generating unit, with the exception of the PPE Group, which represents one cash generating unit in total. The impairment test is conducted on the basis of the discounted free cash flow method, based on a capitalization interest of 8.1%. The future free cash flows were determined by drawing up a business model through to

55 Notes 53 III. Financial assets Shares in Shares in Share- Securities Miscellaneous Total affiliated associated holdings loans to affiliated companies companies companies/coop- erative shares in g m Acquisition or production costs Jan. 1, Change in scope of consolidation Additions Disposals Change in fair value Acquisition or production costs Dec. 31, Change in scope of consolidation Additions Disposals Change in fair value Acquisition or production costs Dec. 31, Accumulated depreciation Jan. 1, Change in scope of consolidation Additions Disposals Accumulated depreciation Dec. 31, Change in scope of consolidation Additions Disposals Accumulated depreciation Dec. 31, Book value Dec. 31, Book value Dec. 31,

56 54 Notes The acquisition of a typically silent participation in the Selltec Group is stated under shareholdings. Silent shareholders take a 34 % participation in the profit or loss. There is no obligation to make additional contributions. The acquisition of this silent participation is stated at fair value. As there was no information to the contrary at the balance sheet date, the subsequent valuation was made at fair value at the time of acquisition. IV. Accounting of leasing agreements In the Imaging division, the rental and leasing of products plays an important role alongside marketing. In this connection there are two forms of refinancing to be distinguished: Refinancing via sale-and-lease-back and refinancing via so-called direct leasing. Refinancing via sale-and-lease-back involves rental objects being sold in a second contractual arrangement to a refinancing institute and leased back. Rental contracts with customers are signed for a fixed term usually ranging between 24 and 74 months. Customers return the equipment when the rental period expires. In general, there are no options for extended rental or purchase. After expiry of the basic rental period, during which there is no termination option, the contract with the customer extends for a period fixed in advance in the original contract, provided the customer does not terminate the contract through a period of notice specified in the contract. Contracts signed for periods up to 54 months are classified as operating leases to the customer. Consequently, incoming lease payments received are immediately recognized as full income. These amounts are monthly leasing payments that do not vary. With these contracts the TA Group is recognized as having economic ownership of the leased assets in accordance with IAS 17. The leased property is therefore shown as rental assets under fixed assets and depreciated over an economic useful life of 5 years. They are valued at their Group acquisition costs corresponding to their fair value. Contracts for periods of more than 54 months are treated as financial leasing to the customer. In this case the customer is regarded as the de facto economic owner of the leased asset. In the TA Group these items are shown as receivables from financial leasing and are reported at their net investment value. The interest portion of the leasing payments received is included under interest income. For these agreements, under which the customer has economic title to the leased assets, any gains realized when the assets are sold are fully recognized as income. Depending on how the agreements are drawn up, when refinancing the customer contracts the TA Group is obliged at the request of the refinancing company (the refinancing company s pre-emptive tender right) to re-acquire legal title to the products on expiry of the basic rental period of the lease agreement, during which there is no termination option. All related sale-and-lease-back agreements represent financial leasing in relation to the refinancing company as defined in IAS 17. The present value of the leasing obligations is shown under liabilities from financial leasing. The interest portion of the leasing payments is included under interest expenses. 54

57 Notes 55 In total the following leasing revenues are expected from the Triumph-Adler Experts at Output division: The revenues from these contracts correspond to the following leasing obligations to the refinancing company: Term Term Total in g m < 54 months > 54 months Within one year Between 1 and 5 years After 5 years Total Term Term Total in g m < 54 months > 54 months Within one year Between 1 and 5 years After 5 years Total The leasing revenues expected in subsequent periods under the operating leasing agreements are as follows: The leasing payments due in the subsequent periods from the agreements that have a term of up to 54 months are as follows: from Total in g m to Leasing revenues Discounting amounts Present values from Total in g m to Leasing payments Discounting amounts Present values The leasing revenues expected in subsequent periods under the finance leasing agreements are as follows: The leasing payments due in the subsequent periods from the agreements that have a term of more than 54 months are as follows: from Total in g m to Leasing revenues Discounting amounts Present values: from Total in g m to Leasing payments Discounting amounts Present values: Due to the notice period /amount congruent refinancing, the leasing revenues expected from the agreements refinanced via sale-andlease-back correspond to the leasing expenses listed below: In the case of so-called direct leasing the TA Group arranges a rental or leasing agreement between the customer and a leasing company. The TA Group sells the machines to the company leasing out the leased assets. The machines are sold to the leasing company under normal market terms and conditions. The companies of the TA Group are normally contracted to collect the rental or lease installments.

58 56 Notes The item rental assets under fixed assets includes leased items that are to be counted as property of the Group under IAS 17, with a total book value of e m (previous year: e m). The item also includes rental assets that are the economic as well as the legal property of the Group. Fixed assets with a book value of e m (previous year: e m) are subject to restrictions on disposal in the form of mortgages and assignments as collateral. 16. Inventories The inventories are broken down as follows: in g m Dec. 31, 2004 Dec. 31, Raw materials and supplies Work in process Finished goods and merchandise Payments on account Total The book value of inventories valued at the lower net realizable value is e m (previous year: e m). Liabilities are secured by inventories to the value of e m (previous year: e m). 17. Other accounts receivable The accounts receivable are broken down as follows: in g m Dec. 31, 2004 Dec. 31, Trade receivables Receivables due from enterprises in which a participation is held Other receivables Total The reported book values of the monetary financial assets recorded in these positions correspond to the market values. The other receivables include an amount of e m (previous year: e m) that is not due for more than one year and is shown in the balance sheet under long-term receivables The remaining receivables primarily include claims on Corona Beteiligungs V1 GmbH of e m (previous year: e m), receivables due from guarantee insurance of e m (previous year: e m), tax refund claims amounting to e m (previous year: e m), refund claims from pension obligations against the Olivetti Group in the amount of e m (previous year: e m) and receivables from bonuses and advertising expense subsidies of e m (previous year: e 0 m). 18. Receivables from financial leasing The receivables from financial leasing include an amount of e m (previous year: e m) that is not due for more than one year. These receivables are connected with office equipment rentals. They apply to all leasing contracts signed since financial year 2001 that have a term of more than 54 months that are refinanced via sale-and-lease-back. The receivables are valued at net sales revenues. If the agreements underlying the receivables from financial leasing are refinanced via sale-and-lease-back, the receivables from financial leasing correspond to leasing liabilities in the same amount. We refer you to the details given on fixed assets in the Notes for more information regarding the leasing revenues expected from receivables from financial leasing stated under receivables. 56

59 Notes Equity In the equity structure, the earnings reserves were combined with the accumulated loss. In addition, an offset is shown for IAS 39 and an offset for currency translation adjustment is shown. Otherwise there were no differences to the classification in the non-consolidated financial statements of TA Triumph-Adler AG. The reported capital reserve is identical with the equivalent item in the non-consolidated financial statements of TA Triumph-Adler AG. The dividend payment is dependent on the individual result of TA Triumph-Adler AG. Subscribed capital Using the authorized capital I according to 4 para. 2 of the Articles of Association the company s subscribed capital was increased by e 14,805,440, up from e 88,832,000 to e 103,637,440, through the issue of 5,783,375 new bearer shares against cash contributions. The subscription rights of the shareholders were excluded with regard to a fractional amount of e The capital increase was entered into the Commercial Register on November 4, Following the capital increase the subscribed capital is divided into 40,483,375 bearer shares. Authorized capital I According to 4 para. 2 of the Articles of Association, the Management Board is authorized to increase the subscribed capital of the company until June 14, 2009 with the approval of the Supervisory Board by up to a total of e 20,727,360 (divided into up to 8,096,625 shares) by issuing new shares all at once or in installments against cash contributions and contributions in kind. The Management Board is authorized, with the approval of the Supervisory Board, to a) exclude fractional amounts from the subscription right and b) to exclude the subscription rights of the shareholders, where the new shares are issued against contributions in kind for the purchase of companies or interests in companies. The Management Board, with the approval of the Supervisory Board, will determine the timing, the extent and the other conditions for capital increases. Following the capital increase carried out in 2004, the authorized capital I now amounts to e 5,921,920. Authorized capital II In accordance with 4 para. 3 of the Articles of Association, the Management Board is authorized, with the approval of the Supervisory Board, to increase the subscribed capital of the company in the period to June 14, 2009, by up to a total of e 8,883,200 (divided into a maximum of 3,470,000 shares) by issuing new shares against cash contributions, either in a single action or in installments. The Management Board is authorized, with the approval of the Supervisory Board, to exclude the subscription rights of the shareholders in order to issue the new shares at an offer price that is not considerably lower than the market price of the listed shares of the company at the time the issue price is set; where the Management Board makes no use of this authorization, the subscription rights of the shareholders can be excluded for fractional amounts only. The Management Board, with the approval of the Supervisory Board, will determine the timing, the extent and the other conditions for capital increases. Conditional capital I In accordance with 4 para. 4 of the Articles of Association, the subscribed capital is conditionally increased by up to e 962,560, divided into a maximum of 376,000 bearer shares through the issue of new shares. The Articles of Associations provide the new shares with the same rights as the previously

60 58 Notes issued shares; they participate in profits from the start of the financial year in which they are created though the exercising of conversion rights. In the years 1997 to 1999, 3 convertible bonds were issued to employees and the Management Board. The right to conversion in each case comes into effect after a term of one year. The conversion rights expire when the employee leaves the TA Triumph-Adler Group. Employees who have left the Group may sell back the convertible bonds they have purchased at the market price. By the end of 2004, 46 employees/management Board members had sold bonds with a nominal value of e 791,740. The right of conversion associated with these convertible bonds has expired. Conditional capital II The subscribed capital is conditionally increased by up to e 38,333,440 through the issue of new shares. The conditional increase in capital will only be implemented provided the creditors of convertible bonds and option bonds that, based on the authorization of the Annual General Meeting of June 15, 2004, have been granted until June 14, 2009, by TA Triumph- Adler AG or by companies in which TA Triumph- Adler AG holds a majority interest either directly or indirectly exercise their conversion and option rights, or where this is required in order to fulfill the conversion obligations, and provided the company s own shares are not used to service these bonds. The new shares are issued in accordance with the shareholders resolution stated above, each at a conversion or option price to be specified. The shares of the company created as a result of exercising the conversion or option right, or from fulfilling the conversion obligations, carry dividend rights for the full fiscal year in which they originate. The Management Board is authorized, with the approval of the Supervisory Board, to determine the further details for carrying out the conditional capital increase. Conditional capital III According to 4 para. 5 of the Articles of Association, the subscribed capital is conditionally increased by a maximum by up to e 5,120,000 through the issue of up to 2,000,000 bearer Nominal amount Conversion rights Exercising Conversion price (in g) to TA shares hurdle (in g) (per share in g) (number) TA Triumph-Adler AG Management Board 97/08 102,258 97/08 40, /08 92,033 98/08 36, /09 30,720 99/09 12, ,011 88,000 Other employees 97/08 110,439 97/08 52, /08 98,168 98/08 44, /09 40,960 99/09 19, , ,000 Amount repurchased 791,740 Conversion rights have expired Total 1,266, ,000 58

61 Notes 59 shares. The conditional increase in capital will only be carried out inasmuch as the holders of stock options which were issued in line with the June 21, 2000, shareholders resolution concerning the company s stock option plan make use of their option rights, and the company does not grant any of its own shares to fulfill the option rights. The new shares in the company created when these option rights are exercised participate in the profits of the company from the start of the financial year in which these shares are issued. 392,600 stock options were issued in 2000 as part of the stock option plan, 384,000 stock options in 2001, 242,200 in 2002 and 224,400 in Of these, 60,000 stock options were taken up by the Management Board of the company in 2000, 60,000 in 2001, 40,000 in 2002 and 60,000 in No stock options were issued in increase of e 628,000 were offset in 2004 against the capital reserve with no effect on net profit/loss. Currency translation adjustment The currency translation adjustment results from the non-inclusion as income of the conversion differences resulting from the consolidation of financial statements of foreign subsidiaries. Offsets for IAS 39 The offsets were created for the valuation of securities at fair value that were classified in the available-for-sale category, and at the fair value of the financial derivatives used for cash flow hedging purposes. Offset for Offset for Total available-for- hedging in g thsd sale assets transactions Balance on Jan. 1, Current financial year: The purchase price of the shares consists of the reference price of e 9.69 (2000), e 9.55 (2001), e 2.87 (2002) and e 1.51 (2003) and a 20 % issue surcharge, and therefore amounts to e (2000), e (2001), e 3.44 (2002) and e 1.81 (2003). The company reimburses the issue surcharge paid when the option is exercised, provided the average closing price for the shares over the previous 10 days of stock market trading is at least 20 % higher than the reference price. The time period that must elapse before the option rights can be exercised is 2 years when exercising up to one third of the options, 3 years when exercising up to two thirds and 4 years when exercising the residual option rights granted under one tranche. The stock option plan did not result in any bookings affecting profit and loss in Capital reserve The capital reserve includes the premium from capital increases. The costs of the capital Changes with no effect on net profit/loss Subtotal for current financial year Balance on Dec. 31, Provisions Pension provisions Pension schemes consist of defined contribution and benefit plans. In the case of defined contribution plans, the company enters into no further commitments beyond the establishment of contribution payments to appropriated funds. The costs are reported under personnel expenses. In the year under review, payments were made to defined contribution plans amounting to e 0.8 m (previous year: e 0.9. m). In the case of defined benefit plans, the obligation of the company is to make specific promised payments to active and former employees.

62 60 Notes Employers pension commitments within the Group are mainly with TA Triumph-Adler AG. The pension commitments at TA Triumph- Adler AG exist for all employees who joined the company before June 7, There are no pension commitments for employees who joined the company after June 7, 1995 Pension commitments at subsidiaries exist mainly at UTAX GmbH. Upon reaching retirement age, entitled employees receive a pension in accordance with the pension plan. The existing plans are not fund financed. The pension commitments apply primarily in Germany. The employers pension commitments are financed by means of pension provisions. The guaranteed pensions are valued annually using the projected unit credit method. The pension provisions are determined on the basis of the so-called corridor method for the first time. Consequently, the actuarial profits or losses are no longer recorded immediately as an expense or income. The previous year s figures have been adjusted accordingly. In the financial years 2004 and 2003, the pension provisions developed as follows: The following pension payments can be expected over the next five years: 2005 e m 2006 e m 2007 e m 2008 e m 2009 e m The total expense is shown as personnel expenses. The main pension commitments were calculated on the basis of the following premises: Dec. 31, 2004 Dec. 31, 2003 Actuarial assumptions in % in % Interest rate Wage increase trend Pension increase trend The 1998 life expectancy tables of Prof. Klaus Heubeck were used as the biometric basis for calculation. Fluctuation probabilities were not taken into account. No pension revaluations were assumed for the next three years owing to the economic situation. in g m Balance on Jan Pensions paid Service cost Interest cost Commitments taken on 0 0 Disposal of commitments The pension commitments were transferred in December 2002 to the Unterstützungsverein der TA TRIUMPH-ADLER AG incurring tax effects. As a result the direct obligation became an indirect obligation. The transaction did not have an effect on the amount of the provision. Balance on Dec Because pension provisions are valued using the corridor method actuarial losses of e m are not taken into account. 60

63 Notes 61 Other provisions The other provisions in the financial year developed as follows: Initial amount Currency Change Provisions Reversals Additions Final Jan. 1, 2004 adjustment in scope of paid balance in g m consolidation Dec. 31, 2004 Provisions for: Earn-out obligation Anticipated losses Other obligations towards personnel Warranties Litigation expenses Restructuring and reorganization Advertising expense subsidies Other provisions Total other provisions The balance sheet shows provisions of e 734,000 (previous year: e m) under longterm debt. Earn-out obligations, whose maturity depends on the terms stated in the individual contracts, account for e 227 m of the provisions stated under a long-term debt. In addition, warranty obligations amounting to e 303,000 are stated, the maturity of which depends on when the warranty case occurs. No pension revaluations were assumed for the next three years owing to the economic situation.

64 62 Notes 21. Liabilities Period to maturity up to 1 to over Balance up to 1 to over Balance in g m 1 year 5 years 5 years Dec. 31, year 5 years 5 years Dec. 31, 2003 Liabilities to banks Mezzanine loans Borrowings Liabilities from financial leasing Other liabilities Bonds of which convertible: Trade payables incl. notes payable Remaining liabilities Other liabilities TA Triumph-Adler AG restructured Group financing during the last fiscal year. Starting with a capital increase of e 15 million, two further measures were carried out in order to extend the maturity of its financing, to concentrate its banking relationships on a few core banks, to unlock the efficiency improvement potentials associated with the centralization of financing and to finance the future growth of the Group. First, a syndicated loan agreement for e 70 million was concluded with 11 banks, with a term of four and a half years. At the same time, an arrangement was made with an investment consortium to bring in subordinated mezzanine capital of an additional e 30 million with a term of 5 years. A part of this amount, e 25 million, was paid out in The remainder will be paid out in the course of For the syndicated loan and the mezzanine loan there are financial covenants in place for which a right of termination exists in the event they are not met. The bonds are convertible bonds issued within the framework of the TA Triumph-Adler Group s stock option plan that was valid until December 31, No profit or loss effects arose in conjunction with the issue of the convertible bonds. The interest rate on the bond is between 4.5 % and 5.0 %. The other liabilities primarily include social security contributions e m (previous year: e m), vacation obligations e m (previous year: e m), other loans e m, bonuses e m (previous year: e m), unpaid bonuses e 945,000 (previous year: e 779,000) and customers with credit balances e 677,000 (previous year: e 729,000). As part of the fundamental reorganization of Group financing via the syndicated loan, the collateral for this was also reorganized through a so-called security pool agreement. The security pool agreement specifies that the so-called old collateral, meaning the collateral that was available previously to banks of the syndicate secure existing loans, is incorporated into the security pool agreement, and that additional securities ( additional securities ) to be newly provided to the banks and the security pool leader are combined 62

65 Notes 63 into the security pool agreement. The collateral combined into the security pool agreement secures the syndicated loan with a total credit line of e 70 million. Payments to the syndicate banks and mezzanine loan provider of e million associated directly with the borrowings have been deducted from the debts, and will be distributed in equal installments over the term of the loans. Bank liabilities, calculated using the discounted cash flow method, amount to e m (previous year: e m). For all other liabilities, the book value is equivalent to the market value. Of the total bank liabilities, an amount of e m was subject to a fixed rate of interest at the balance sheet date. The weighted average interest rate of variable interest loans was 6.66 % at the reporting date (previous year: 5.98 %), with interest rates ranging between 2.55 % (previous year: 2.63 %) and % previous year: %). The weighted average interest rate for fixedinterest loans is 6.09 % (previous year 6.02 %), broken down in 2004 as follows according to the fixed-interest term: Fixed-interest Volume Weighted Lowest/ term in g m average highest interest rate interest rate Up to 1 year % 6.93 % / 6.93 % 1 to 5 years % 4.50 % / 6.25 % Over 5 years 0 n/a n/a 22. Financial instruments The TA Triumph-Adler Group s operating activities expose it to interest rate, foreign exchange and price fluctuation risks. Risk management is performed by a central treasury unit applying business principles approved by the Management Board. The treasury unit identifies, evaluates and hedges financial risks in close cooperation with the subsidiaries. The Management Board sets the general risk management principles and specifies the approach for hedging exchange rate and interest rate risks and for using financial derivatives. The TA Triumph-Adler Group documents all relationships between hedging instruments and secured positions, as well as its risk management targets and strategies in connection with the various hedging transactions. This process involves associating all derivatives identified as hedging instruments with specific assets, debts, fixed liabilities or planned transactions. Moreover, when entering into these hedging transactions and subsequently on an ongoing basis, the Group documents whether the derivatives used as hedging instruments are highly effective with regard to offsetting changes in the cash flow for the secured positions. The Group has foreign subsidiaries whose net assets are subject to exchange rate risks. These risks are hedged to some extent by borrowings in the various national currencies. In fiscal year 2003 the fixed-interest term broke down as follows: Fixed-interest Volume Weighted Lowest/ term in g m average highest interest rate interest rate Up to 1 year % 5.50 % / 6.20 % 1 to 5 years % 4.50 % / 7.35 % Over 5 years % 4.75 % /4.75 % The forward exchange transactions carried out within the Group in the past do not fulfill the requirements for hedging transactions as stipulated in IAS 39. No forward exchange transactions were concluded in The Group is exposed to risk from changing interest rates. For long-term bank loans taken out at variable interest rates, the interest

66 64 Notes risk is hedged by interest rate swaps and caps. There were no hedging transactions of this nature as of the balance sheet date. The interest hedging required under the terms of the syndicated loan agreement and the mezzanine loan agreement for at least 75 % of the loan volume in each case was put into effect in February 2005 through appropriate interest rate swaps. These derivatives are part of hedging relationships that meet the prerequisites of a highly effective hedging transaction in accordance with IAS 39. Changes in the fair values of these derivatives are shown under equity under offsets in accordance with IAS 39. They amounted to e 0 m (previous year: e 0 m) in the year under review. OTHER NOTES 23. Earnings per share according to IAS 33 Liabilities from guarantees, warranties on notes and checks primarily include a guaranteed maximum amount for leasing contracts relating to company vehicles to ING CarLease (e m), guarantees to Hermes Kreditversicherung (e 500,000) and a guarantee to Miller Leasing Miete GmbH from IT hardware financing (e 256,000). The liabilities from warranty contracts include an agreement for joint liability for liabilities of Europlay Grundstücks GmbH to IKB and still concern the TA Beteiligungs division, which was divested in mid Moreover, there are obligations from warranty for companies sold, in particular for possible payment of tax for the periods up to the sale. There are presently no specific obligations of this nature recognizable. Other financial important commitments: Undiluted earnings in g m Total up to from 1 to Maturity 1 year 5 years more than 5 years Net income in e m Number of shares (weighted average) Earnings per share in euros The diluted earnings per share is equivalent to the undiluted earnings per share, as there are no potentially diluting shares in circulation. Commitments from operating leasing (excluding copier business, see Notes sub.16) Commitments from rental contracts Other obligations Total Contingencies and other financial commitments 25. Exemption of TA Experts at Output GmbH relating to annual financial statements in g m Contingencies from guarantees, warranties on notes and checks Contingencies from warranty contracts Total In accordance with 264 para. 3 of the HGB and the shareholders resolution of March 11, 2005 the subsidiary TA Experts at Output GmbH is exempt from the audit requirement and the disclosure of the annual financial statements for fiscal year 2004, since these have 64

67 Notes 65 already been included in the consolidated financial statements for TA Triumph-Adler AG. The consolidated financial statements will be submitted to the Commercial Register for TA Experts at Output GmbH, Nuremberg. 26. Compliance Statement on the German Corporate Governance Code The Management Board and the Supervisory Board of TA Triumph-Adler AG issued the Statement on the German Corporate Governance Code pursuant to 161 of the German Stock Company Act (AktG ) and made available to the shareholders. 27. Notes on the statement of cash flows The cash flow statement shows how the Group s cash and cash equivalents changed during the period through the inflow and outflow of funds. In the statement of cash flows, the flows of cash are broken down according to operating, investment and financing activities (IAS 7). The currency adjustments are summed up under the heading of changes in other balance sheet items. The financial funds recorded in the statement of cash flows consists exclusively of the cash and cash equivalents. to resellers and the service and installation of imaging systems. In addition, this still includes the residual activities of the Typewriter business. Presentation and Media Technology: This segment consists on the one hand of the sale of data /video projectors, plasma screens and other classic presentation media through direct sales and distribution. The subdivision business of technically demanding installation of presentation systems in conference rooms was sold with CAN.media in fiscal year In addition, A+K UK was sold in With the disposal of the PPE Group in 2005 the strategic repositioning of the Presentation and Media Technology business segment was essentially completed. Segment information by geographic markets Germany represents the largest geographical market for the TA Triumph-Adler Group; sales are generated in particular through direct sales of imaging systems and selling imaging systems to resellers. Sales in the Benelux countries were generated primarily by the PPE Group (sold after the reporting date) selling presentation media. Sales in France, in the rest of Europe and in the rest of the world were generated in particular by the UTAX group and the TA Schweiz through their exports of imaging systems, and from the sale of presentation media by A+K UK (sold in 2004), Visinfo and A+K Germany. 28. Segment reporting Segment reporting by division As in the previous year, the TA Experts at Output division is divided into two segments. Imaging: The Imaging segment consists of the direct sales of imaging systems to end customers, the sale and export of imaging systems

68 66 Notes Segment reporting 2004 by divisions Segment reporting by divisions Presentation systems Imaging in g m Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 External sales Intra-group sales Sales Total operating performance Other segment income of which come from divestments of shares in associated companies Income from participations Income from associated companies Cost of materials Personnel expenses incl. pension expenses of which pension expenses in Central Division Other operating expenses EBITDA Depreciation of which value surplus EBIT before goodwill amortization Goodwill amortization Segment result Financial result Taxes Minorities Deferred Taxes Consolidated net profit/loss Segment assets of which equity valuation Unallocated corporate assets Total consolidated assets Segment liabilities of which equity valuation Unallocated corporate liabilities Group liabilities Segment investments Non-cash expenses

69 Notes 67 Triumph-Adler Experts at Output TA Beteiligung Division TA Central Division Consolidation TA Group Total Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31,

70 68 Notes Segment reporting 2004 by geographic markets Germany France in gm Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Sales Segment assets Unallocated corporate assets Total consolidated assets Segment liabilities Unallocated corporate liabilities Group liabilities Investments Non-cash expenses Information on related parties Management Board and Supervisory Board The total remuneration of the Management Board for carrying out its duties in the parent company and subsidiary companies amounted to e 1,061,370 during the fiscal year, e 107,000 of which was in the form of variable payments. Members of the Management Board received e 305,000 for the sale of shares in affiliated companies. The remunerations for former Board Members and their surviving dependents came to e 1,897,057 in the financial year. The full amount of provisions was made for the pension obligations to former members of the Management Board and their surviving dependants at e 23,088,972. The Members of the Supervisory Board received a remuneration of e 202,000 for their Supervisory Board activity during fiscal year Members of the Supervisory Board received a remuneration of e 144,000 for their legal advice. Related companies Only insubstantial delivery and service relationships exist between the group and non-consolidated, affiliated companies. Settlement is at market prices. The strategic partner Kyocera Mita holds a 29.9 % stake in the subscribed capital of TA Triumph-Adler AG. At the reporting date there were liabilities to Kyocera Mita of e m. Kyocera Mita was TA Triumph- Adler Group s main supplier in Other related persons There were no relationships to other related persons. Post balance sheet date events On March 8, 2005, TA Triumph-Adler Group sold PPE Holding B.V. together with all its subsidiaries plus ProjectorEurope.com B.V. and thus essentially completed the strategic repositioning of the activities of the Presentation and Media Technology business segment. 68

71 Notes 69 Benelux Other European countries Rest of World Total Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, This results in a loss from divestment in the Group of e 2.6 million. This was already accounted for in the consolidated financial statements for 2004 through extraordinary depreciation of the goodwill of the PPE Group. The company Sankopie GmbH, Kaarst, was acquired on December 22, 2004, effective January 1, 2005, for a purchase price of e 2.4 million, further expanding our market position in the Rhineland. There were no further events of significance through to March 24, The company s boards Management Board Dr. Dietmar Scheiter, Grünwald, Chief Executive Officer Robert Feldmeier, Lorsch, Board member responsible for sales Heiko Arnold, Grünwald, Chief Financial Officer Masahiro Watashi, Hamburg, Board member responsible for technology (since May 1, 2004) Details of the Supervisory Board Mandates of Board Members Dr. Dietmar Scheiter Chairman of the Supervisory Board of Zapf Creation AG, Rödental

72 70 Notes Members of the Supervisory Board Dr. Wolfram Nolte, Chairman Cologne, businessman Andreas Weidemann, Deputy Chairman Nuremberg, trade union secretary Alfred Sankowski, Nuremberg, systems analyst (until October 31, 2004) Rainer Boye, Hamburg, technician Helge Ewald, Nuremberg, Accounts Head Alexander von Fuchs, Salzburg, businessman (until December 12, 2004) Caspar von Hauenschild, Munich, businessman Katsumi Komaguchi, Osaka, Kyocera Mita Corporation, businessman Anja Neumann, Schwerin, office information electronics technician Tetsuo Okada, Osaka, Kyocera Mita Corporation, President Thomas Otto, Frankfurt / Main, trade union secretary Reinhard Pöllath, Munich, attorney Gerd Rüsse, Munich, employee (since March 10, 2005) Ulrich Grabowski München, entrepreneur (since February 22, 2005) Information on additional positions held by members of the Supervisory Board Dr. Wolfram Nolte Deutsche Reihenhaus AG, Kaiserslautern * (Chair), resigned in May 2004 Reinhard Pöllath Tchibo Holding AG * (Chair), Tchibo GmbH **, SinnerSchrader AG *, Beiersdorf AG *, Deutsche Woolworth GmbH & Co. OHG ** (Chair) Andreas Weidemann M + W Zander AG * Thomas Otto SMS GmbH *, MAN AG *, MAN Nutzfahrzeuge AG *, MAN Nutzfahrzeuge Vertrieb GmbH * Caspar von Hauenschild Saint-Gobain Isover G + H AG *, IS Teledata AG *, Robert Kunzmann GmbH & Co. KG ** Katsumi Komaguchi Kyocera Mita Corporation ***, Daiken Company Limited ***, Daiken Hongkong Limited ***, Kyocera Mita America Inc. ***, Kyocera Mita Canada Ltd. ***, Kyocera Mita Mexico S.A. ***, Kyocera Mita Industrial Co. (HK) Ltd. ***, Kyocera Mita New Zealand Ltd. ***, Kyocera Mita Australia PTY. LTD ***, Kyocera Mita Europe B.V. ***, Kyocera Mita (U.K.) LTD. ***, Kyocera Mita Italia S.P.A. ***, S.A. Kyocera Mita Belgium N.V. ***, 70

73 Notes 71 Kyocera Mita España S.A. ***, Kyocera Mita Finland Oy ***, Kyocera Mita Deutschland GmbH ***, Kyocera Mita Nederland B.V. ***, Kyocera Mita Svenska AB ***, Kyocera Mita Portugal LDA. ***, Kyocera Mita Singapur PTE Ltd. ***, Kyocera Mita Hongkong Ltd. ***, Kyocera Mita Taiwan Corporation ***, Kyocera Mita Office Equipment (Dong Guan) Co. Ltd. ***, Kyocera Technologydevelopment Europe GmbH ***, Daiken Hong Kong Ltd. ***, Kyocera Mita Office Equipment (Dong Guan) Co. Ltd. ***, Kyocera Technologydevelopment Europe GmbH ***, Kyocera Technologydevelopment Inc. *** Kyocera Technologydevelopment Inc. *** Tetsuo Okada Kyocera Mita Corporation ***, Kyocera Mita Japan Corporation ***, Daiken Company Limited ***, Daiken Hongkong Limited ***, Kyocera Mita America Inc. ***, Kyocera Mita Canada Ltd. ***, Kyocera Mita Mexico S.A. ***, Kyocera Mita Industrial Co. (HK) Ltd. ***, Kyocera Mita New Zealand Ltd. ***, Kyocera Mita Australia PTY. LTD ***, Kyocera Mita Europe B.V. ***, Kyocera Mita (U.K.) LTD. ***, Kyocera Mita Italia S.P.A. ***, S.A. Kyocera Mita Belgium N.V. ***, Kyocera Mita España S.A. ***, Kyocera Mita France S.A. ***, Kyocera Mita Finland Oy ***, Kyocera Mita Deutschland GmbH ***, Kyocera Mita GmbH Austria***, Kyocera Mita Nederland B.V. ***, Kyocera Mita Svenska AB ***, Kyocera Mita Danmark S/A ***, Kyocera Mita Portugal LDA. ***, Kyocera Mita South Africa (PTY) LTD. ***, Kyocera Mita South Carolina Inc. ***, Kyocera Mita Singapur PTE Ltd. ***, Kyocera Mita Hongkong Ltd. ***, *) Membership of other Supervisory Boards whose formation is mandatory by legal regulations **) Membership in comparable German and foreign control bodies of business enterprises ***) Company positions as defined by 100 para. 2 AG

74 72 Auditors Report Auditors Report on the Group We have audited the consolidated financial statements of TA Triumph-Adler Aktiengesellschaft, Nuremberg, consisting of the balance sheet, the income statement and the statement of changes in equity and cash flows as well as the notes to the financial statements for the business year from January 1 to December 31, The preparation and the content of the consolidated financial statements according to the International Financial Reporting Standards of the IASB (IFRS) are the responsibility of the Management Board. Our responsibility is to express an opinion, based on our audit, whether the consolidated financial statements are in accordance with IFRS. We conducted our audit of the consolidated financial statements in accordance with German auditing regulations and generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer in Deutschland (IDW). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements are examined on a test basis within the framework of the audit. The examination includes an evaluation of the accounting principles used and of the main assumptions made by the Management Board, as well as an assessment of the entire presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position, results of operations and cash flows of the Group for the financial year in accordance with IFRS. Our audit, which also extends to the group management report prepared by the Managing Directors for the business year from January 1 to December 31, 2004, has not led to any reservations. In our opinion, on the whole the group management report, together with the other information of the consolidated financial statements, provides a suitable understanding of the Group s position and suitably presents the risks of future development. We additionally confirm that the consolidated financial statements and the Group manage- 72

75 Auditors Report 73 ment report for the financial year from January 1 to December 31, 2004 fulfil the prerequisites exempting the company from preparing consolidated financial statements and a Group management report in accordance with German law. Munich, March 24, 2005 PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Franz Wagner German Chartered Accountant Reiner Kunz German Chartered Accountant

76 74 List of subsidiaries List of Subsidiaries as of December 31, 2004 No. Share capital Parent Shareholding Shareholding company of the parent of TA no. company Triumph-Adler AG in % in % 1000 TA Triumph-Adler Aktiengesellschaft, Nuremberg g 103,637, Triumph-Adler Experts at Output GmbH, Nuremberg g 15,442, TA Triumph-Adler Baden-Württemberg GmbH, Stuttgart e 767, TA Triumph-Adler München GmbH, Munich e 26, Fröhlich GmbH Büro- und Kopiertechnik, Memmingen e 256, Triumph-Adler Frankfurt GmbH, Frankfurt/Main e 30, TA Triumph-Adler Schweiz AG, Embrach (CH) CHF 200, Bieri Repro AG, Beromünster (CH) CHF 300, Triumph-Adler Regensburg GmbH, Regensburg e 26, Triumph-Adler Rheinland GmbH, Bonn e 614, TA Triumph-Adler Westfalen GmbH, Dortmund DM 1,300, TA Triumph-Adler Norddeutschland GmbH, Bremen e 522, TA Triumph-Adler Mecklenburg-Vorpommern GmbH, Stralsund e 103, TA Triumph-Adler Ost GmbH, Berlin **** e 158, **** Triumph-Adler Berlin-Brandenburg GmbH, Teltow e 55, Kopiersysteme Vertriebs GmbH Dessau, Dessau e 52, TA Triumph-Adler Mitteldeutschland GmbH, Leipzig e 400, Kopier Nordhausen GmbH, Nordhausen DM 200, Triumph-Adler Sachsen-Anhalt GmbH, Magdeburg e 52, Triumph-Adler SüdOst GmbH, Fellbach g 517, Triumph-Adler Dresden GmbH, Dresden e 290, TA Triumph-Adler Lausitz Oderland GmbH, Hoyerswerda e 251, Triumph-Adler Chemnitz GmbH, Chemnitz e 103, TA Triumph-Adler Westthüringen GmbH, Erfurt e 130, TA Triumph-Adler GmbH, Gera Jena Zwickau, Gera e 57, Kopier Saalfeld GmbH, Saalfeld e 52, CHC Copia Holding CSFR GmbH, Fellbach e 103, COPIA Kancelarska technika CR, spol. s.r.o. (GmbH), Prague (CR) CK 95,300, *) Company was not included into the Consolidated financial statements **) in liquidation ***) The merger/accretion has not yet been registered in the Commercial Register 74

77 List of subsidiaries 75 No. Share capital Parent Shareholding Shareholding company of the parent of TA no. company Triumph-Adler AG in % in % 2409 COPIA Slovákia spol s.r.o. (GmbH), Baska Bystrica (SR) SK 1,950, TA Triumph-Adler Ceská republika, spol. s.r.o. (GmbH), Prague (CR) Kc 200, UTAX GmbH, Norderstedt g 15,851, **** UTAX Danmark A/S, Brondby (DK) ** * DKK 2,500, UTAX (U.K.) Ltd., Newbury (GB) GBP 1,500, I.T.S.T. Independent Training & Support Team GmbH, Norderstedt e 26, UTAX Bürosysteme s.r.o., Prague (CR) CZK 40,211, Bürosysteme Slovakia s.r.o., Bratislava (CR) CZK 200, UTAX DocForms GmbH, Dortmund e 25, TA Leasing GmbH, Freiberg g 779, Triumph-Adler Output Solutions GmbH, Nuremberg DM 41,250, TSS Technical Service & Support GmbH, Schwerin e 128, ISS Imaging Solution & Support GmbH, Schwerin e 26, Willmy Bürofachversand GmbH, Nuremberg e 25, Kopier Holding Ost GmbH, Schwanebeck DM 500, Triumph-Adler A-Vi-Tec Präsentations- und Medientechnik GmbH, Norderstedt *** g 5,000, Presentation Products Europe Holding B.V., Ridderkerk (NL) g 30, BIS Bedrijfs Informatie Systemen B.V., Ridderkerk (NL) e 15, BIS Business Information Systems N.V., Mechelen (B) e 74, Business Presentation Products (Proprietary) Ltd., Pretoria (South Africa) Rand Anders + Kern Präsentationssysteme GmbH & Co. KG, Norderstedt *** e 100, Anders + Kern Verwaltungs GmbH *** e 100, PPE Presentation Products Europe U.K. Ltd. GBP A + K Italia s.r.l., Pisa * ** e 25, Anders + Kern Audiovisuel S.A.S., Colombes (F) ** e 100, ProjectorEurope.com Deutschland GmbH, Norderstedt * e 25, ProjectorEurope.com B.V., Ridderkerk (NL) e 100, Visinfo AG, Baden (CH) CHF 100, tectro Spielwaren GmbH, Munich g 26, Majorette GmbH, Langenfeld DM 1,000, Consulta Bürotechnik spol. s.r.o., Vyskow (CR) ***** CK 2,400, ****) The amendment to the Articles of Association has not yet been registered in the Commercial Register *****) At equity consolidated

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