Group Key Figures at a Glance (according to IFRS)

Transcription

1 Annual Report 2006

2 2 Group Management Report Consolidated Financial Statements Notes Group Key Figures at a Glance (according to IFRS) Values in millions of EUR (unless otherwise stated) 2006 Δ% Total sales to third parties (consolidated) % Segment sales Managed IT Services % SAP Solutions % Human Resource Services (9%) Other Operations % Sales by country Germany % Austria % Switzerland % Rest of Europe % Personnel at year-end % Average number of personnel % Personnel expenses % As % of sales 48% 55% EBITA % As % of sales 3% 2% EBITDA % As % of sales 6% 7% EBIT % As % of sales 2% 2% EBT (34%) As % of sales 1% 2% Earnings after tax (1.9) 1.0 As % of sales 2% Net result (after minority interests) (1.8) 1.1 As % of sales 2% Earnings per share (IFRS) in EUR (0.35) 0.22 Cash flow from operating activities % Balance sheet total % Shareholders equity (8%) Shareholders equity ratio 39% 63% The figures before the financial year have not been adjusted in regard to IAS 17 / IFRIC 4. The figures are therefore not comparable.

3 Segment Reporting Corporate Governance Group Information 3 AC-Service: Full-Scale SAP Services for the Midmarket Operating primarily in Germany, Austria and Switzerland, AC-Service is an industry focussed full-scale IT service provider for the small to mid-sized business market. Market observers rank AC-Service among the leading companies serving the German-language market for SAP and HR services. AC-Service AG features a number of established brands including AC, All for One, ACCURAT, Process Partner and KWP. Originating in Switzerland, the AC-Group has been operating for over 45 years, has amassed an impressive track record and now serves over 1,200 clients. With wide-ranging expertise in the whole of the IT value chain, AC implements integral solutions providing SAP licenses and software maintenance, industry solutions, business consulting, business intelligence, managed IT services on a leading edge technology basis, payroll and human capital management as well as HR business process outsourcing. With its outstanding service culture and extensive industry know-how, the AC-Group makes claim to a quality leadership and is regularly recognised with awards for outstanding customer satisfaction and service quality. AC-Service follows a clear growth strategy and currently employs around 440 members of staff and expects sales of around 77 to 79 million euros. AC-Service AG is listed in the Prime Standard segment of the Frankfurt Stock Exchange (ISIN DE , WKN ) and is a subsidiary of BEKO HOLDING AG, which owns around 55% of its stock.

4 4 Group Management Report Consolidated Financial Statements Notes Contents Group Management Report 5 Group Auditors Report 18 Consolidated Financial Statements 19 Group Profit and Loss Account 19 Group Balance Sheet 20 Group Cash Flow Statement 22 Changes in Shareholders Equity of the Group 24 Notes to the Consolidated Financial Statements 26 Accounting Principles 26 Notes to the Consolidated Financial Statements 36 Segment Reporting 58 Report of the Supervisory Board 62 Corporate Governance Declaration 66 Group Information 68 Remarks EBIT and EBITA figures pertaining to the business divisions are before unallocated central costs from the Corporate Services division. Graphics and the chronicle of the year (milestones 2006) are for illustration purposes only and are not an integral part of this management report. The German version is the definitive version of the report. The annual financial statements and management report of AC-Service AG were certified with an unqualified audit opinion and will be published in the electronic official Federal Gazette, at www. deutsche-boerse.com and and in the electronic commercial register at de. A copy may be requested directly from AC-Service AG.

5 Segment Reporting Corporate Governance Group Information 5 AC-Service Posts Strong Growth in Sales AC-Service is moving ahead on a clear path of growth with its strategy of being a full-scale service provider that covers the entire IT value chain and delivers end-to-end support to small and mid-sized businesses in countries where German is spoken. Playing a key role in this is the since-renamed company All for One Midmarket Solutions GmbH (All for One) that has belonged to the AC-Group since February The estimates published in the outlook section of the last annual report were surpassed (sales) and just achieved (EBITA), as the financial year finished with a major increase in sales and an impressive gain in operating earnings (EBIT). This large increase in sales is attributable mostly to the SAP Solutions business division. A lot of investment spending was made to manage this enormously increased volume of business, which temporarily burdens earnings. SAP Solutions earnings performance lagged behind expectations, while the other divisions surpassed expectations. The earnings before taxes were positive, but were burdened by major one-time costs for the extension of a loan for funding the acquisition. A large income tax expense that for the most part had no impact on liquidity caused a loss for the year. The investment climate has clearly improved and the demand for IT services has grown noticeably. SAP s new midmarket strategy is also generating greater momentum. However, there is still no change in the tremendous pressures on prices and overall sensitivity to price fluctuations. Recruitment and staffing increases, particularly in consulting resources, remain critical challenges in view of the serious shortage of professionals and highly skilled workers on the job market. The inclusion of All for One has led to some fundamental structural changes in the consolidated financial statements. In addition, the amended financial reporting standards (IAS 17 / IFRIC 4) announced in the financial statements have been applied and resulted in an adjustment to last year s figures. The strategic objectives behind the acquisition of All for One have been achieved and the integration process has produced some extremely promising initial successes. This company is the engine of sales growth for the AC-Group. Joint client projects have already reaped benefits from the potential for cross selling. AC-Service has made great strides in its work to conceptualise key strategic issues in the past financial year. The focus in 2007 will be on implementing the strategy of being a full-scale SAP service provider. Product and Service Developments The AC-Group s business activities concentrate on the range of products and services it offers as a full-scale SAP service provider, which primarily encompasses consulting, outsourcing, software licenses and maintenance services. The company upgrades and enhances SAP AG standard software solutions to support sales and the execution of industry-specific projects. These mostly involve the SAP industry solutions All for Machine (machinery and systems engineering), All for Automotive (auto-parts suppliers), All for Plastics (plastics industry), All for Metal (metal components industry), All for Electric (electronics components industry), All for Service and ProServ (services companies), KWP.All-in-One.HR (human resources management) and numerous other specific solution supplements and add-ons. The Group also develops, expands and enhances standardised managed IT services in the areas of finance and accounting, human resources, archiving and document management that are largely based on SAP software solutions. The customers jointly share the software solutions and the infrastructure when using such services, which we call»asp Performance Centers«. Additional ASP Performance Centers continued to be established. Within the Human Resource Services business division, the ACCURAT family of human-resources software continues to be further developed into an all-encompassing process platform that covers and handles all the workflow within the field of personnel management. The AC-Group conducts no research activities. Midmarket Companies Resume Investing in IT The overall economic situation developed favourably during the reporting year. There was a marked upturn in the tendency toward making investments particularly among small to mid-sized companies. Big increases were posted in such key industries as machinery and systems engineering, among auto-parts suppliers and in special service sectors. There was a noticeable rise in the demand for the kind of one-stop IT services that the AC- Group provides. Despite the major upturn in demand, there was no significant let-up in pricing pressures or sensitivity to price fluctuations. SAP is providing additional momentum with its new partner concept for winning new midmarket customers. SAP has divided its partner landscape for small to mid-sized enterprises into the levels Gold, Silver and Associate, with All for One being named a Gold Partner. Bigger licensing margins and better support and resources for marketing and sales come with this title. Throughout its channel partner network, SAP is increasingly relying on system contractors that have demonstrated outstanding solutions and business-process expertise as they focus on key industries and branches. SAP also actively supports leading Gold Partners like All for One in selling within the high-end midmarket segment. License sales in this segment had previously been reserved mostly for SAP s own direct sales and distribution operations. And so this changed SAP midmarket strategy is leading to an improved sales approach and customer support. Key Strategic Issues Successfully Pursued AC-Service used a strategy process to restructure its business lines in order to optimally benefit from SAP s new midmarket strategy. The centre of attention was on integrating All for One and in the alignment of the Group s overall strategy. The goal is to take a leading position as a full-scale SAP service provider for small to mid-sized companies in countries where German is spoken. A systematic sales effort will win new customers, comprehensively serve and support them and sustain their high level of customer satisfaction. Together with an all-inclusive range of products

6 6 Group Management Report Consolidated Financial Statements Notes and services, we especially want to further increase that already considerable share of recurring revenues from software maintenance or IT operating services (so called Managed IT Services) provided from within the data center. In line with the overall strategy, this reporting year saw the first major steps being taken in integrating All for One within the AC-Group. At the forefront were the efforts to coordinate such areas as sales, marketing, consulting and IT operations, which play a crucial role in the providing of a complete, end-to-end range of products and services. The first joint client projects were successfully completed. The consulting teams from All for One and AC Solutions in Germany were consolidated by a merger into one legal entity. All for One s successful sales model is already starting to pay off for AC in Austria. SAP in Austria named AC- Service and All for One jointly as a preferred territory partner for the auto-parts industry, machine-making and service-provider segments. The SAP industry solution from the AC-Group company Process Partner AG of St. Gallen, which is already a market leader in Switzerland among specialised service companies, has already met with some good initial success in Germany where it is sold and distributed through All for One s partner network. Important Key Indicators Used in Managing the Company In addition to sales revenues, the board of directors also uses the»ebita«(earnings before interest, tax and amortisation) metric as a key financial indicator for managing the company. The»EBITA«excludes the amortisation of goodwill and other intangible assets in measuring earnings and is used in the singular throughout this annual report ( the EBITA was ). Along with it, the board of directors also uses supplementing, non-financial indicators in managing the company, most notably the staffing levels and customer satisfaction index. Part-time positions are calculated as full-time equivalents in measuring the staffing strength. Customer satisfaction surveys and analyses are used to determine the customer satisfaction index. contributions to rounding out the AC-Group s comprehensive portfolio are provided by the KWP companies specialised on human resource management functions within SAP software; the ACCURAT companies in the Human Resource Services division that focus primarily on payroll services and human resource business process outsourcing; as well as by the AC companies in Belgium and Luxemburg. The latter provide hardware-related technology services for public entities. All of the companies are well positioned within their target markets. Major Increase in Sales. Impressive Rise in Operating Earnings. Year Closes with a Loss. Sales increase 63% from EUR 44.7 million to EUR 72.9 million. EBITA more than doubles from EUR 1.1 million to EUR 2.4 million. EBIT improves from EUR 0.8 million to EUR 1.4 million. After-tax result of minus EUR 1.9 million (prior year: EUR 1.0 million) following a high income tax expense that had mostly no impact on liquidity. AC-Service completed the financial year 2006 with sales of EUR 72.9 million (prior year: EUR 44.7 million) and an EBITA of EUR 2.4 million (prior year: EUR 1.1 million). It also surpassed (sales) and just achieved (EBITA) the estimates announced in the outlook section of last year s annual report. This range of estimates called for sales of between EUR 67 to 70 million and an EBITA of EUR 2.4 to 2.9 million for Even the EBIT, which improved from EUR 0.8 to 1.4 million, showed an impressive increase. Nevertheless, operating earnings are unsatisfactory. The Group s earnings after taxes were minus EUR 1.9 million (prior year: EUR 1.0 million) and include one-time charges that weighed on the financial result, as well as high income taxes, which for the most part had no effect on liquidity. The major increase in sales is due predominantly to the inclusion of All for One and its organic growth. The company has been included in the consolidation since February 2006 and generated sales of EUR 25.9 million and an EBITA of EUR 0.3 million over a period of eleven months in The majority interest in the SAP HR consulting company Kümmel Wiedmann + Partner Unternehmensberatung GmbH and its subsidiaries (KWP), which have been fully consolidated since March and were Milestones 2006 In February AC-Service AG acquires 100% of the shareholdings in All for One Systemhaus GmbH Midmarket Solutions (All for One) and moves into one of the top positions among SAP service providers on the Germanlanguage small to mid-sized business market. The purchase price was EUR 15,350,000 and is completely debt-financed. All for One represents an annual sales volume of more than EUR 23 million and employs some 110 people. All for One managing director Lars Landwehrkamp is appointed member of the AC-Service AG board of directors. From 9-15 March AC-Service AG and All for One make their first joint public appearance at the CeBIT 2006 where they exhibit their superbly complementing range of products and services. In addition to SAP industry solutions from All for One, the spotlight is also on the expanded portfolio including IT operating services, full-service outsourcing and ASP performance centers. The number of visitors is double that of last year. In addition, the signing of the contract at the CeBIT officially seals the company s membership in and commitment to United

7 Segment Reporting Corporate Governance Group Information 7 included in the prior-year figures for a period of ten months, contributed to earnings in their entirety for the first time in The KWP companies sales to external customers were some EUR 7.8 million (prior year: EUR 5.8 million) and the EBITA was EUR 0.2 million (prior year: minus EUR 0.1 million). sales within the sense of a finance lease in the year that the arrangement was made. The average number of full-time equivalents in the AC-Group during the reporting year was 421 (prior year: 302) and the number of individuals as of the end-of-year reporting date was 444 (prior year: 303). Focus on German-speaking countries. IT consulting and outsourcing services are biggest sales mainstays. About 92% of sales (prior year: 87%) is attributable to the AC companies in Germany, Austria and Switzerland. IT consulting and outsourcing services are the biggest sales drivers, whose sales rose mostly inorganically from EUR 15.0 million to EUR 26.9 million. Their share of total sales was 37% (prior year: 34%). Outsourcing services (»data processing services«) also performed well and posted a purely organic improvement from EUR 18.4 million in to EUR 19.3 million in These now represent the second-biggest revenue position with a share of 26% (prior year: 41%) of total sales. Thanks to a rigorous sales effort, software licenses were able to post the biggest increase in sales, accounting for an approximately 14% share (prior year: 4%) of total sales. The proceeds from the rental of hardware and software reported in last year s annual report as leasing transactions of the AC company in Luxemburg are now recognised as hardware Managed IT Services Improves Sales and Earnings and Exceeds Expectations Strategy as full-scale service provider already generating positive momentum. Managed IT Services increasingly being offered during new SAP implementation projects. Increasing demand shown for all-inclusive operating concepts to meet the complex IT requirements of mid-sized and larger companies. The Managed IT Services division, with sales of EUR 18.8 million (prior year: EUR 17.4 million) and an EBITA of EUR 0.8 million (prior year: minus EUR 0.1 million), did better than last year and surpassed the expectations of the board of directors. In addition to increased data processing services, it was also the unanticipated high level of project revenues from technology VARs (value added resellers), the global alliance of leading SAP systems contractors. The goal of United VARs is to deliver onestop support to international clients and set worldwide standards for quality and performance. This global partner network is currently represented in 34 countries. On 28 March AC-Service AG publishes its annual financial statements and announces its business plans that include significant growth prospects. Sales total EUR 44.7 million, EBITA is EUR 1.1 million and earnings per share are 22 euro cents. These figures do not include the acquisition of All for One. The analyst presentation and balance sheet conference held in Frankfurt are extremely well received. According to the provisions of the Sarbanes- Oxley Act, corporate processes in public American companies and their subsidiaries must be more intensively described, defined and controlled. In addition to offering process-compliant software solutions, SOXcertified service providers also support both the establishment of appropriate processes and compliance with these provisions. In April ACCURAT achieves important milestones in the certification it completed in December, thus also offering an efficient basis for human-resource processes with high valueadded factors to companies outside the scope of SOX applicability.

8 8 Group Management Report Consolidated Financial Statements Notes consulting services that contributed the most to the rise in sales and earnings. The average number of full-time equivalents in the Managed IT Services division during the reporting year was 96 (prior year: 94), while the number of individuals as of the end-ofyear reporting date was 98 (prior year: 93). The Managed IT Services division is where AC-Service plans, develops and implements comprehensive operating concepts for the kinds of complex IT requirements that arise among midsized, larger and often internationally operating companies. The technical support and management of the systems and applications is handled in the Managed IT Service Center, sometimes remotely through what are called»remote support services«or on site at the using company. AC-Service data centers are located in Germany, Austria and Switzerland and are supplemented by»backup service centers«. These secondary data centers are equipped almost identically to the primary outsourcing service centers and take over and ensure continued IT operations in case of emergency or disaster. Covering the entire spectrum of IT operating models In the course of its intensified alignment on providing a full range of services, AC-Service has observed a greater demand within the Managed IT Services division for IT operating models that range from outsourcing all the way to remote support and technology services. IT operations in user companies increasingly reach their limits once new SAP features are rolled out or after infrastructure-driven projects, which small to mid-sized user companies implement years later in reaction to changes that have long since occurred in their operating landscape. Recurring IT operating tasks are being entrusted to external partners much more today than in the past. Although an entry level package developed jointly by AC-Service and All for One in response to the market trends outlined above now makes only a marginal contribution to sales and earnings, it does hold the potential for generating multi-year outsourcing contracts in the future. Called Implementation Service, this package is specially geared to the roll-out phase of SAP projects. Expiring outsourcing agreements with existing customers were renewed and often significantly expanded. Enhanced professional expertise for complex and comprehensive IT infrastructure projects contributed to the positive trends in The focus for the future will be on closely cooperating with the SAP Solutions division to better position our complete and all-embracing range of products and services so that our customers will recognise us as the only source they need to better and more thoroughly satisfy all their needs and requirements. SAP Solutions as Growth Engine Major investments in expanding the business. Sales more than tripled. Improved earnings still at a lower-than-expected level. Successful sales of SAP software licenses generating future recurring revenues from software maintenance. Positive response to full-scale product and services portfolio. The increase in sales in the SAP Solutions business division was even more striking than in Managed IT Services. Including the sales by All for One (starting in February 2006) and KWP, the segment sales for this division more than tripled and were well above the board of directors expectations. A rigorous marketing effort resulting in a sharp surge of new customer projects, especially in the second half of the 2006 year. The increase in new orders for All for One alone increased by 78% over last year to EUR 23.5 million. The average number of full-time equivalents in the SAP Solutions division during the reporting year was 216 (prior year: 86), while the number of individuals as of the end-ofyear reporting date was 236 (prior year: 95). There were mainly two developments in opposite directions behind the rise in sales within the SAP Solutions division from EUR 12.4 million () to EUR 39.7 million (2006). The sale of SAP software licenses generated significantly more revenues than were planned. What makes this particularly good news is the fact that the customer base where these were installed grew larger than was anticipated, which translates into a correspondingly greater potential for future follow-on sales. What s more, software maintenance agreements were signed that will lead to sustained In early May the Austrian AC-Service GmbH relocates to the site of AC Solutions and KWP in Vienna. This move merely places under one roof what these three AC companies have been doing for a long time, namely collaborating across corporate boundaries and areas of responsibility to be their clients one-stop provider of full-scale SAP solutions. year: EUR 0.6 million) are burdened by a one-time charge of EUR 0.2 million for the provision of the loan in connection with the acquisition of All for One. AC-Service AG s annual general meeting is held in Stuttgart on 18 May. Represented at the meeting are 63% of the voting share The first quarter report is published on 11 May. The AC-Group has adopted a clear path of growth. Sales increase 51% to EUR 15.9 million. All for One is included in the consolidation since February. The EBITA of the quarter of EUR 0.3 million (prior

9 Segment Reporting Corporate Governance Group Information 9 and recurring maintenance revenues in the future. On the other hand, capacity factors kept revenues from consulting services well below budget. Along with costs for personnel recruitment and development that far exceeded budget, greater use also had to be made of outside services in order to manage this growth. The division s EBITA was EUR 0.9 million (prior year: EUR 0.4 million) and remained well below the board of directors expectations. Strong sales effort A powerful sales performance generated numerous full-scale SAP implementation projects mostly among small to mid-sized machine-making and auto-parts supplier companies. In addition to that, new client projects in the high-end midmarket sector were completed in Germany. This slice of the market was previously handled by SAP itself and only began being shared with its partners in conjunction with its new midmarket strategy for the sale of SAP licenses. Such high-end projects for mid-sized companies mostly comprise license sales for several hundred users and implementation services that often range from between 700 and more than 1,000 man days. All for One is producing a lot of positive impulses in Austria and Switzerland. As a part of its new support model for small to midsized enterprises, SAP named AC-Service and All for One jointly as a preferred territory partner for the auto-parts industry, machinemaking and service-provider segments. ProServ from Process Partner AG, St. Gallen the SAP All-in-One industry solution well established in Switzerland is now also being marketed and managed in Germany under the name All for Service by selected companies from All for One s partner network. Partner network further expanded Significant progress was made in expanding the partner network. The AC-Group operates with its own companies and facilities in countries where German is spoken. This is why its partner network mostly includes consultancies. They actively focus on machinemaking and systems engineering, on auto-part suppliers for the automotive industry or on special sectors within the services industry. These partners reinforce the sales resources and help deliver services within selected regions or handle industry-specific issues. As globalisation increases, so does the demand for worldwide services and support. Instead of expanding by adding their own branch offices, which can quickly reach the limits of their capacity, the leading SAP system contractors in their respective countries have therefore followed the initiative of All for One and joined together in one global partnership. Called»United VARs«, this network operates on the partnership model used by airlines, lawyers offices and advertising agencies and currently counts some 16 value added resellers covering 34 countries across the globe. This partner network sets the standards for such critical SAP project issues as implementation methodology, quality and performance. It also manages and facilitates the sharing of information with the various SAP departments both globally and locally. Already one of every three new direct-sales customers also chooses selected services from the Managed IT Services division when buying licenses or rolling out a new industry solution a fact that underscores the popularity and appeal behind offering the full range of SAP products and services. Human Resource Services with Broadened Market Portfolio High contribution to operating earnings on an adjusted prioryear basis despite drop in sales. Successful completion of certification under the Sarbanes-Oxley Act. The HR Business Process Outsourcing sub-segment further expanded. Upgrades and improvements to ACCURAT to become an all-encompassing HR business process platform. AC-Service holds an important position in the market for human resource services in Germany under the ACCURAT brand. Its products and services are focused on the unique demands of the key»public Sector«,»Services, Commerce, Industry«and»Banking, Finance, Insurance«segments. Besides consulting and outsourcing services capital. All of the proposals submitted by management are approved by a large majority. The next annual general meeting is scheduled for 15 May In June Implenia AG, Wallisellen, and AC-Service (Schweiz) AG, Wettingen, agree to an extensive collaboration. In the course of implementing the IT strategy of this newly formed construction and buildingservices provider, its in-house developed SAP construction solution and the expanded SAP systems will be gradually deployed throughout the entire Implenia Group in cooperation with AC-Service. This will be the biggest and most comprehensive SAP application operation yet within AC-Service s Managed IT Service Center, one that will be expanded incrementally from its current 850 users to over 1,600 users. The successfully completed switch to mysap ERP was one of the first project steps made for Implenia s IT in AC-Service s Managed IT Service Center. This makes Implenia one of the first companies in Switzerland to have mysap ERP in productive operation. In July the two consulting companies in Germany, All for One Systemhaus GmbH Midmarket Solutions and AC Solutions GmbH, merge to form All for One Midmarket Solutions GmbH. Staffing is increased at the Oberessendorf and Stuttgart locations.

10 10 Group Management Report Consolidated Financial Statements Notes for personnel administration, ACCURAT is becoming increasingly active in the field of HR business process optimisation and systems integration. This element of the»hr Business Process Outsourcing«field involves taking over the customer s entire personnel administration mission. With ACCURAT, AC-Service is one of the leading service providers in Germany. This division posted a drop in sales from EUR 11.3 million to EUR 10.3 million during the reporting year. This development saw the payroll accounting services line being subject to greater pricing pressures than were anticipated. Even the sales from consulting services were slightly down. On the other hand, the proceeds from the sale of software licenses improved. Despite an overall sales performance that was below the expectations of the board of directors, the segment s operating earnings did manage to remain on par with the adjusted prior-year level thanks to some cost-saving measures and income from capitalised softwaredevelopment work, and finished slightly better than expected. ACCURAT achieved an EBITA of EUR 1.1 million. The corresponding year-earlier figure of EUR 1.4 million includes proceeds of EUR 0.3 million from the reversal of provisions for personnel measures relating to other periods. This reporting year s EBITA includes for the first time about EUR 0.5 million (prior year: 0) in softwaredevelopment income. The average number of full-time equivalents in the Human Resource Services division during the reporting year was 90 (prior year: 102), while the number of individuals as of the end-of-year reporting date was 89 (prior year: 95). SOX certification creates an enhanced basis for HR Business Process Outsourcing The provisions of the Sarbanes-Oxley Act (SOX) apply for all companies that are required to register with the U.S. Securities and Exchange Commission (SEC). This also includes their foreign subsidiaries, for example in Germany, many of which use Human Resource Services from ACCURAT. The SOX regulations are designed so that appropriate procedures and internal controls can prevent fraudulent or inadequate information from affecting or damaging the quality of financial reporting and corporate governance. Well-designed HR processes not only help in complying with SOX rules, they also open up and capitalise on far-reaching, valueadding opportunities. For this reason SOX in Germany is becoming more and more important beyond just the subsidiaries of U.S. companies. In December 2006 AC-Service successfully completed the certification process based on the provisions of the Sarbanes- Oxley Act for its Human Resource Services business. In addition to process consulting, ACCURAT also offers HR outsourcing services along this basis. These services will also benefit from this SOX certification, as will the HR Business Process Outsourcing sub-segment. During the reporting year ACCURAT succeeded in expanding its sales within this sector by 17% over last year and increasing its customer base to over 120 clients. With that, ACCURAT is taking on an important position in this market segment in Germany one that entails assuming the customer s entire personnel administration effort. The continued growth in HR Business Process Outsourcing Services was, however, only able to partially compensate for the decline in sales within the classic HR outsourcing business. The specialist for optimising HR processes In the future ACCURAT will position itself more as a service provider for HR Business Process Outsourcing and as a specialist for optimising HR processes. Remarkable progress was made during the reporting year in improving the ACCURAT product family toward becoming a universal HR business process platform. It delivers customised, service-oriented architectures that act as a pervasive process hub to ensure the widest coverage and best-possible optimisation of human-resource operations and procedures. Impressive Increase in Operating Earnings. Negative After-Tax Result. Interest charges on acquisition funding and one-time costs for arranging the loan lead to a negative financial result. Big tax expense with mostly no effect on liquidity. The AC-Group s EBITA of EUR 2.4 million (prior year: EUR 1.1 million) rose impressively and represents a 3% (prior year: 2%) share of sales. This figure includes one-time unanticipated legal ProServ, the SAP All-in-One industry solution for service providers from the AC-Group company Process Partner AG (and superbly positioned in Switzerland), is being marketed since July in Germany under the name All for Service as a part of All for One s product portfolio. Sales of All for Service in Germany are made exclusively through selected resellers from All for One s partner network. In August AC-Service and All for One start promoting the launch of their new Implementation Service. This service package, focused primarily on the implementation phase of mysap solutions, involves the provision, operation and maintenance of all the systems needed during this phase entirely from within the Managed IT Service Center. This Implementation Service is especially geared to the needs of implementation, optimisation and roll-out projects for the SAP industry solutions from All for One.

11 Segment Reporting Corporate Governance Group Information 11 consulting costs in the amount of EUR 0.2 million in connection with the credit agreement for the acquisition funding. In addition to the segment earnings from the Managed IT Services, SAP Solutions and Human Resource Services business divisions, the EBITA of the AC-Group also includes earnings contributions from Other Operations. This division is where AC-Service offers hardwarerelated technology services for public entities in Luxemburg, such as municipal administrations and agency-related offices and facilities. The division posted an EBITA of EUR 1.8 million (prior year: EUR 1.2 million). The drop in earnings contribution by Corporate Services from minus EUR 1.8 to minus 2.2 million is attributable primarily to higher-than-budgeted costs for strategy development, to consulting services relating to the financing agreements mentioned above and to the auditing and review of additional acquisition projects. The Group s operating earnings (EBIT) totalled EUR 1.4 million (prior year: EUR 0.8 million). This includes regular amortisation of other intangible assets in the amount of EUR 1.0 million (prior year: EUR 0.2 million). Amortisation and depreciation in the reporting year totalled EUR 3.1 million compared to EUR 2.2 million last year. The interest on financial liabilities including finance leasing commitments resulted in an interest expense of EUR 0.9 million (prior year: EUR 0.2 million). Among other things, the other financial expenses of EUR 0.6 million (prior year: 0) include onetime charges in the amount of EUR 0.4 million that were paid as an»arrangement fee«upon concluding the acquisition loan. On the plus side is financial income in the amount of EUR 0.8 million (prior year: EUR 0.5 million). All together the financial result was minus EUR 0.7 million (prior year: EUR 0.3 million). Besides the negative financial result there was also a high, mostly bookentry income tax expense of EUR 2.6 million (prior year: EUR 0.1 million). The income tax payments having an effect on liquidity in 2006 totalled only EUR 0.6 million (prior year: EUR 0.4 million). Earnings after taxes are negative and total minus EUR 1.9 million (prior year: EUR 1.0 million). The earnings per share (IFRS) of minus 35 euro cents (prior year: 22 euro cents) were determined on the basis of an unchanged average number of 5,173,418 shares outstanding in Balance Sheet and Cash Flow Statement Changed balance of accounts following the acquisition of All for One. Balance sheet total, goodwill, intangible assets and financial liabilities all increase significantly. Declining level of equity financing. Major cash outflow for acquisition-related one-time charges. The inclusion of All for One fundamentally changed AC-Service s balance of accounts. The total reported assets grew from EUR 42.4 to 64.3 million, while total goodwill and other intangible assets increased from EUR 5.7 to 18.7 million. Impairment tests were used to review the goodwill and intangible assets having an indefinite life for impairment and validate what was reported in the financial statements. In contrast, the other intangible assets are subject to regular amortisation. Deferred tax assets increased from EUR 4.2 to 6.8 million. Trade accounts receivable and payable increased dramatically following the inclusion of All for One and total EUR 13.2 million (prior year: EUR 6.6 million) and EUR 5.3 million (prior year: EUR 1.7 million) respectively. Cash and cash equivalents declined from EUR 11.9 to 9.3 million. This decrease is attributable mostly to the large amounts of cash used for acquisition-related one-time costs and to lower-than-expected cash flows from operating activities. AC-Service AG took out a loan of EUR 15.5 million to fund the acquisition of All for One. According to the loan repayment schedule, this loan is to be repaid by 30 December The scheduled principal repayments in 2006 totalled EUR 2.5 million, while the interest payments totalled EUR 0.6 million. The changes in cash flow from investing and financing activities are due mostly to the purchase of All for One and its financing. Cash and cash equivalents thus receded slightly from last year. Nevertheless, safeguarding liquidity does place new demands on the financial management effort in light of the acquisition loan. Liquidity is supported by cash flows from operating activities, which totalled EUR 4.3 million and were higher than the year- Semi-annual operating figures are announced on 29 August. The sales of EUR 33.3 million for the first half year are 50% above those of the same period a year ago. Growthrelated factors hold earnings from keeping pace with sales. The EBITA for the first half year is EUR 0.7 million (prior year: EUR 0.7 million). The leading market position generates a strong rise in the number projects for new and current customers. The unexpectedly tight labour market puts an additional burden on earnings. On 1 September Process Partner AG, St. Gallen, joins with its clients, partners and staff to celebrate its 10th anniversary. Managing director Daniel Eberle demonstrates the latest trends and advancements in information technology made possible by wireless solutions during a spectacular show. While descending by parachute from an altitude of 4,000 meters, he invoices an entire service order on his PDA using the ProServ SAP industry solution. Agreements are signed in September in conjunction with Partner Edge, SAP s programme for the small and mid-sized business market. All for One garners the highest achievable partner level of»gold«on the basis of such criteria as SAP license sales, a focus on defined target industries and conformity with the SAP strategy. Even within the high-end midmarket segment, one that was previously reserved exclusively for SAP, the outstanding range of products and services offered by AC-Service and All for One has truly made its mark.

12 12 Group Management Report Consolidated Financial Statements Notes earlier level of EUR 3.4 million despite much lower earnings before taxes and the large, one-time cash outflows mentioned above. Over and above the acquisition loan, there is also an operational funding line of credit in the amount of EUR 4.0 million. to the operating business divisions Managed IT Services, SAP Solutions and Human Resource Services. Other business activities of a more local nature are presented in the segment reporting under the item Other Operations. The companies of the Managed IT Services and SAP Solutions divisions are located in Germany, Austria and Switzerland; whereby those of the SAP Solutions division are also located in France and the Czech Republic. Human Resource Services is focused on Germany alone. The acquisition of All for One was entirely debt financed, which, among other reasons, was why the financial liabilities rose from EUR 3.1 to a total of 15.5 million. The degree of equity financing, which is the ratio of shareholders equity to the balance sheet total, declined from 63% to 39%. Equity of EUR 24.8 million (prior year: EUR 26.9 million) was recognised as at the end of the reporting year. The degree to which equity covers fixed assets (»non-current assets«) is 67% (prior year: 141%). Organisation In terms of management, the companies and their subsidiaries (regardless of the countries where they operate) are assigned Principles of Compensation for Members of the Board of Directors The AC-Service AG board of directors comprised the following members during the reporting year: Herbert Werle (chairman), Marco Fontana and Lars Landwehrkamp (since 17 February 2006). Compensation for the members of the board of directors is individualised in the notes to the consolidated financial statements. It includes all of their employment relationships with The full range of SAP products and services offered by AC-Service and All for One meet with great enthusiasm among customers on the market. By October All for One has acquired over 20 important new client projects through direct selling. Successful sales of SAP software licenses increase recurring software maintenance revenues. Already one in three new customers also take advantage of Managed IT Services provided from the Outsourcing Service Center. margin to sales of 3% (prior year: 4%). All the operational business divisions contribute to this business performance with positive earnings. After a strong third quarter, the board of directors believes the company will achieve the objectives for the full 2006 year that were announced in March In early March 2007, as a means of further strengthening its business operations as a full-scale SAP service provider, AC-Service AG gives its subsidiaries AC-Service GmbH, Stuttgart and Vienna; AC Solutions GmbH & Co KG, Vienna; and All for One Midmarket Solutions & Services GmbH, Stuttgart, a uniform market image with the development and launch of the new brand name»all for one. Member of AC-Group«. This new design will make its formal debut at the CeBIT 2007 computer trade show in Hanover. The third quarter report is published on 14 November. AC-Service posts a 54% increase in sales to EUR 51.3 million during this 2006 nine-month period. The EBITA improves from EUR 1.4 to 1.8 million resulting in an EBITA

13 Segment Reporting Corporate Governance Group Information 13 companies included in the consolidation. In line with an even greater concentration on healthy growth and profitability, the supervisory board in 2006 took the major criteria for measuring the board of directors variable compensation components and tied them to profitability goals and strategic-growth factors. No options for AC-Service AG stock were granted in Total compensation for the board of directors (three members) during the reporting year was EUR 841 K (prior year: EUR 598 K for two members). Total compensation for the supervisory board in 2006 was EUR 64 K (prior year: EUR 54 K). Presentation of the individualised compensation for the board of directors and the supervisory board is made in the notes to the consolidated financial statements (see Note 32, Related Parties). Investor Relations SES Research, a Warburg Group company, has assumed regular coverage of AC-Service AG. An initial in-depth study with a»buy«rating and a price target of EUR 8.40 was published on 2 November AC-Service surpassed these expectations with its figures for the third quarter In its updated research report with its adjusted projections published on 15 November 2006, SES raised the price target to EUR 8.60 and reaffirmed its»buy«rating. The Landesbank Baden Württemberg (LBBW) state bank also began regular coverage of AC-Service AG. The initial corporate study on AC-Service published on 5 December 2006 included a price target of EUR Their rating was also»buy«. Shareholder Structure As at 31 December 2006, BEKO HOLDING AG was recorded in the shareholders ledger of AC-Service AG as the holder of a total of 2,957,586 registered, no-par-value individual share certificates. BEKO HOLDING AG thus holds around 55% of the share capital of EUR 16,200,000 that consists of 5,400,000 individual share certificates. AC-Service AG itself held an unchanged number of 226,582 shares of treasury stock and thus about 4% of the company s share capital. These shares stem from two repurchase programmes. During the financial year 2006 as in no additional shares were repurchased. The board of directors hold 137,000 shares, or just under 3% of the share capital. The remaining shares are in free float. After the balance sheet date Universal-Investment-Gesellschaft mbh, Frankfurt am Main, reported pursuant to 21, Section 1 of the German Securities Trading Act (WpHG) that it has held a total of 275,710 shares, and thus 5.11% of the voting rights, since 1 March Disclosures Pursuant to 289, Section 4 of the German Commercial Code (HGB) Composition of issued share capital (No. 1) The issued share capital in the amount of EUR 16,200,000 consists of 5,400,000 registered, no-par-value individual share certificates. Restrictions affecting voting rights or the transfer of shares (No. 2) Except for the dormant voting rights pursuant to 71 b, German Stock Corporation Law (AktG) for 226,582 shares of AC-Service AG treasury stock, the board of directors is aware of no restrictions affecting voting rights or the transfer of shares, or in particular of any restrictions that could result from agreements between the shareholders. Direct or indirect shares in the capital exceeding 10% of the voting rights (No. 3) Your attention is directed to the section»shareholder Structure«regarding direct or indirect interests in the capital that exceed 10% of the voting rights. Only BEKO HOLDING AG holds more than 10% of the company s capital and voting rights. Holders of shares with special rights (No. 4) There are no AC-Service AG shares with special rights. Type of voting rights control for employee shares (No. 5) There are no employees having an interest in the share capital of AC-Service AG who can not directly exercise their rights of control. Legal provisions and stipulations in the Articles of Association governing the appointment and removal of members of the board of directors and on amending the Articles of Association (No. 6) a) Appointment of members of the board of directors In accordance with 84, Section 1, Sentence 1 of the German Stock Corporation Law (AktG) and 6, Section 1 of the Articles of Association, the supervisory board appoints the members of the board of directors of AC-Service AG for a maximum term of five years. A repeat appointment or extension of the term of office, each not to exceed five years, is authorised. According to 84, Section 1, Sentence 3, AktG, a new resolution by the supervisory board is required for the repeat appointment or extension of the term, whereby this resolution must be made no earlier than one year prior to the end of the current term of office. In accordance with 84, Section 1, Sentence 4, AktG, an appointment for a term of less than five years may be extended without a new resolution by the supervisory board, provided such extension does not cause the entire term of office to exceed a period of five years. According to 6, Section 2 of the Articles of Association, the board of directors shall consist of at least two individuals. Furthermore, the supervisory board will determine the number of members in the board of directors in accordance with the provisions set forth by law. The supervisory board can appoint a member of the board of directors to be chairman/chairwoman of the board of directors, and deputy members of the board of directors may also be appointed. In accordance with 85, Section 1, AktG, the court can, in urgent cases and on petition of an involved party, appoint the member in the event that a required member of the board of directors is missing (for example when there is only one member of the board of directors in office). An immediate appeal of this decision is permissible. In any case, and pursuant to 85, Section 2, AktG, the term of office of the court-appointed member of the board of directors expires as soon as the original deficiency is corrected.

14 14 Group Management Report Consolidated Financial Statements Notes b) Removal of members of the board of directors The supervisory board may revoke the appointment as member of the board of directors and the appointment as chairman/ chairwoman of the board of directors with good cause in accordance with 84, Section 3, Sentence 1, AktG. Good cause according to 84, Section 3, Sentence 2, AktG, is namely gross dereliction of duty, inability to properly manage the business or a vote of no confidence by the annual general meeting, unless such confidence by the shareholders was withdrawn for clearly irrelevant reasons. The revocation of appointment to the board of directors is effective according to 84, Section 3, Sentence 4, AktG, until such time as the invalidity of such revocation is judged legally final. c) Amendments to the Articles of Association Under 179, Section 1, AktG, each amendment to the Articles of Association requires a resolution of the general meeting. The supervisory board is, however, authorised according to 17 of the Articles of Association in connection with 179, Section 1, Sentence 2, AktG, to approve amendments to the articles of association that only affect its wording. Under 179, Section 2, Sentence 1, AktG, a resolution by the annual general meeting on amending or changing the Articles of Association requires a majority vote that includes at least threefourths of the represented share capital at the time the resolution was adopted. According to 179, Section 2, Sentence 2, AktG, the Articles of Association may set forth other requirements and a different capital majority, although only a larger capital majority for any changes to the corporate purpose. On the basis of this statutory authority, 14, Section 3, Sentence 3 of the Articles of Association provides that resolutions for amending the company s Articles of Association be approved by simple majority vote to the extent that such is legally permissible. This means that resolutions by the AC-Service AG general meeting regarding amending the Articles of Association can be approved by a simple majority of the votes cast, except for amendments that change the corporate purpose, which require a majority of at least three-fourths of the share capital represented at the time of adoption. It is also important to point out in particular, that resolutions by the general meeting on increasing the share capital through contributions, on creating contingent capital, on creating authorised capital, on a capital increase through corporate funds, and on a reduction in share capital each require a majority of at least three-fourths of the share capital represented at the time of adoption in accordance with 182, Section 1, Sentence 1; 193, Section 1, Sentence 1; 202, Section 2, Sentence 2; 207, Section 2, Sentence 1 and 222, Section 1, Sentence 1, AktG. Authority of the board of directors, particularly regarding the ability to issue or repurchase shares (No. 7) The board of directors manages AC-Service AG and represents it both in and out of court. The members of the board of directors are required to conduct the business of the company subject to the law, the Articles of Association, the standing rules for the board of directors to include the allocation of duties, and subject to the consent provisos of the supervisory board in accordance with 111, Section 4, Sentence 2, AktG. The board of directors have the following authority regarding the issue and repurchase of shares a) Authority to issue shares In accordance with 5, Section 4 of the Articles of Association, and until 17 May 2011, the board of directors is authorised, with the approval of the supervisory board, to increase the company s share capital once or several times up to a total of EUR 8,100,000 (authorised capital) through the issuance of new shares against cash contributions or contributions in kind. The board of directors is authorised to exclude fractional shares from the shareholders subscription rights. The board of directors is furthermore authorised, with the approval of the supervisory board, to exclude shareholder subscription rights; to issue new shares for cash contributions with a pro rata share of the authorised capital in the amount of up to a total of EUR 1,620,000, provided that these new shares are issued at an issue price that does not lie significantly below the stock-exchange price ( 186, Section 3, Sentence 4, AktG); to issue new shares for contributions in kind, provided these new shares are issued as consideration for the purchase of companies, parts of companies or interests in companies and provided that the purchase of the companies, parts of companies or interests in companies are understood to be in the best interest of the company. The board of directors, with the approval of the supervisory board, will decide on the content of the respective share rights and the other stipulations regarding the issuance of shares in connection with the authorised capital. The supervisory board is authorised to modify the wording of the Articles of Association according to the intended utilisation of the authorised capital or following the expiration of the period of authorisation. In accordance with 5, Section 5 of the Articles of Association, the company s share capital was conditionally raised by up to EUR 1,080,000 through the issue of up to 360,000 shares. This conditional capital increase serves the awarding of option rights to AC-Service AG stock, which the board of directors has granted or will grant with the approval of the supervisory board, to members of the company s board of directors, as well as to members of management and executives of associated companies in accordance with the resolution by the annual general meeting of 5 November The contingent capital increase will only be made to the extent that the holders of option rights exercise these. The 270,000 option rights granted under this authorisation can no longer be exercised. There are currently no plans for any additional granting of option rights. b) Authority to repurchase shares There is currently no authorisation in place pursuant to 71, Section 1, No. 8, AktG, for the board of directors to buy back AC- Service AG treasury stock. The 226,582 shares of treasury stock

15 Segment Reporting Corporate Governance Group Information 15 were purchased using authorisations that have since expired. Therefore, there is only the right to buy back or acquire treasury stock if the acquisition is necessary in order to avert serious and directly impending damage to the company ( 71, Section 1, No. 1, AktG); if the shares are to be offered for purchase to individuals who have or had an employment relationship with the company or one of its associated companies ( 71, Section 1, No. 2, AktG); if the acquisition is made to indemnify shareholders according to 305, Section 2, 320 b, AktG, or 29, Section 1, 125, Sentence 1 in connection with 29, Section 1, 207, Section 1, Sentence 1 of the German Corporate Conversion Act ( 71, Section 1, No. 3, AktG); if the acquisition is made at no charge ( 71, Section 1, No. 4 Alt. 1, AktG), through universal succession ( 71, Section 1, No. 5, AktG), and on the basis of a future resolution of the general meeting for the recall according to the provisions for the reduction in share capital ( 71, Section 1, No. 6, AktG) or on the basis of a future resolution on the purchase of treasury stock pursuant to 71, Section 1, No. 8, AktG. The stock acquired in accordance with 71, Section 1, No. 1 to 3 and No. 8, together with any other company shares that the company has acquired or still owns, may not exceed 10% of the share capital. Applicable legal provisions governing the acquisition of treasury stock may prescribe additional restrictions on the acquisition or buyback of treasury stock. Important agreements subject to the condition of a change of control resulting from a takeover bid (No. 8) AC-Service AG, as the parent company, borrower and guarantor, along with individual subsidiaries of AC-Service AG, are parties to a credit agreement for an acquisition loan in the original amount of EUR 15,500,000, as well as to an operational funding line of credit in the amount of EUR 4,000,000 (»credit agreement«). As at 31 December 2006 the acquisition loan was valued at EUR 13,000,000. The operational funding line of credit was utilised as of 31 December 2006 in the form of avals to third parties outside the Group in the amount of EUR 796, and in the form of an overdraft on a current account of a subsidiary in the amount of EUR If an entity, which is not an associated company of BEKO HOLDING AG within the sense of 15, AktG, obtains the opportunity to exercise the rights stipulated in 290, Section 2, HGB (»control«) over AC-Service AG (»change of control«), then such will constitute a reason for the termination of the credit agreement. The lenders are then authorised to terminate the credit agreement and/or any bilateral loans thereunder either in part or in their entirety either without giving notice or by setting an appropriate deadline, and/or to refuse the disbursement of loans and/or the issuance of guarantees based on the call-in under the credit agreement, or to refuse the disbursement of bilateral loans, and/or to file for damages to include damages for lost profits, and/or to demand that the obligations of a guarantor bank or the lenders from issued guarantees or from guarantees extended under a bilateral loan be secured by cash collateral, provided the related guarantees or avals are not returned, and/or to direct the collateral agent(s) to liquidate any security or collateral extended for the loan. Furthermore, the lenders in such a case can demand that additional, sound collateral be provided for the loan. Company indemnity agreements with members of the board of directors or other employees in the event of a takeover bid (No. 9) No company indemnity agreements with members of the board of directors or other employees have been made for the event of a takeover bid. Corporate Governance The declaration of conformity in accordance with 161 of the German Stock Corporation Law (AktG) for the financial year 2006 was published on 21 December 2006 and made permanently available on the company s website. The full text of this declaration is included in this annual report. Significant Subsequent Events No significant events occurred after the reporting date. Early Warning Risk Control Systems The board of directors and managing directors of Group companies hold regular management meetings. The monthly reporting and the variance analyses are prepared throughout the Group according to standardised guidelines. These put the board of directors in a position to identify early on any risks to assets and any changes in economic performance within the business divisions and Group companies, as well as any other threats that endanger the company. The assessment of the risk situation is supplemented by an annual strategic progress review with all the managing directors in connection with an ongoing examination of compliance with the strategic action plans. Expanded internal company planning, control and reporting systems contribute to this effort. Each forecast period for management planning covers three years. The board of directors and all managing directors also prepare systematic risk assessments each year. This provides a reliable basis for measures to not only reduce risks, but also to prepare the consolidated financial statements and management report. Opportunities for Future Business Performance AC-Service has the opportunity to move forward on a major path of growth with its strategy of being a full-scale service provider that covers the entire IT value chain and provides end-to-end support to small and mid-sized enterprises in countries where German is spoken. Now more than ever the clear focus on key industries in selected mid-size-company segments offers the chance to become the customers first choice as consulting, solutions and services partner for whatever IT projects they may wish to undertake.

16 16 Group Management Report Consolidated Financial Statements Notes Our base of reference clients will be further expanded through a rigorous and systematic sales effort together with the image of being a highly quality-conscious and economically stable services partner that has earned a very good reputation on the market by offering its customers outstanding long-term investment benefits. The prominent position as one of the leading Gold Partners with a high degree of visibility within the SAP organisation will only open up greater access to high-end mid-sized customer segments as a part of SAP s new midmarket strategy. As we extend our portfolio of one-stop products and services, there will also be ample opportunity to not only fully support our customers as they grow, but to also go beyond what was initially provided and gradually place and sell the entire range of AC-Group solutions and services. Our expanded partner network gives us an important competitive edge, which together with membership in the United VARs alliance will ensure global customer service and support through the application of uniformly high standards and best practices. The large number of actively usable references within our large pool of customer installations has so far enhanced our ability to garner new clients. Another factor that will favourably impact future business performance is that impressive share of recurring revenues, which we owe to a large extent to our years of experience and professional expertise in Managed IT Services for small to mid-sized enterprises. Risks to Future Business Performance Business environment and industry risks The AC-Group operates on highly competitive markets that are characterised by rapid advances in technological developments. This quite naturally results in risks and hazards, in addition to the opportunities already discussed. Risks involved in strategy development, particularly from the integration of All for One Additional risks that are directly or indirectly linked to the further development and implementation of the strategy are inherent within integration projects, such as combining All for One into the AC-Group This integration is part of a wider strategy process where all the AC companies, their executive management and key employees are involved. Product and service portfolio risks Our strategy s greater focus on providing a full range of SAP services means that our dependence on the world s largest business software company has grown. Other potential risks stem from the fact that it is impossible to predict with any certainty what kind of success current and future SAP products will have on the market, or how sustainable the SAP midmarket strategy and its related concept for channel partner sales will be. The high degree of competitive pressure could lead to higher-than-expected strains on prices and margins, as well as to an unbudgeted rise in selling expenses. Along with the expanded range of high-quality services, each business division is working hard to improve the benefits and value for the customer in order to reduce the pressure on prices and margins. The use of industry solutions that are constantly being improved also helps counteract the pressure on the daily billing rates we charge our customers. Personnel risks Other risks go hand in hand with the tight labour market and the tremendous challenges we face in recruiting, developing and motivating human resources. This is why personnel management activities have been expanded with the further development of career-path models for personnel development and more investment in in-house training programmes, which, due to the critical shortage of qualified specialist personnel, increasingly include college graduates. Risks from the dependence on key clients AC-Service mitigates its dependence on key clients through very tight controls and intensive account management. Measures that ensure the customers lasting satisfaction with the provided solutions and services, together with appropriate contractual commitments (terms), are also highly effective in improving customer loyalty. Risks from a credit agreement for an acquisition loan in the original amount of EUR 15.5 million and for operational funding of up to EUR 4.0 million Should certain events described within the credit agreement arise, including the failure to fulfil conditions or other obligations from the credit agreement, then the lenders, regardless of any fault on the part of the borrowers, are authorised among other things to terminate the loans, immediately call them due and payable and liquidate any collateral or security. Risks from interest hedges Interest hedges were entered into in connection with the credit agreement for funding the acquisition of All for One and must be regularly valued. Changes in value must in part be recognised in the profit and loss account and can therefore cause volatility in the financial result. On the other hand, this also limits the risk of an increase in interest expenses. Other factors beyond the influence or control of the AC-Group also pose risks to the future business performance. These include such things as changes in tax legislation or unfavourable developments in the general economic environment. Such changes can impair or affect the soundness of reported assets, such as goodwill and deferred tax assets. Outlook After several years of stagnating revenues, the AC-Group has moved into a phase of significant sales growth and is on the threshold of a development that also promises excellent growth rates for the coming years. What s more, we have the opportunity to serve and support customers as they move forward along their own paths of growth.

17 Segment Reporting Corporate Governance Group Information 17 The board of directors expects sales of approximately EUR 77 to 79 million for 2007 and some EUR 89 to 92 million for We will continue to see goodwill amortisation due to the corporate acquisitions we made. This amortisation is expected to range from about EUR 1.0 to 1.2 million for each of the years 2007 to 2008 and will be included in the EBIT. In light of this we will continue to use the EBITA instead of the EBIT as the key indicator for evaluating the AC-Group s operating performance. The board of directors projects the EBITA to be between EUR 2.3 and 2.7 million for 2007 and between EUR 4.2 and 4.7 million for This disproportionately large increase in estimated earnings for 2008 is attributable for the most part to»economies of scale«: The increase in business volume should appreciably exceed any additional needed investments, such as for Managed IT Service Center infrastructure. Improved productivity from new recruitment made in 2006 and budgeted for in 2007, as well as from our personnel development programmes, should have a greater impact on performance starting in The reform of corporate income taxes in Germany planned for 2008 could have an overall detrimental effect on AC-Service. Because of existing losses to be brought forward, the lower tax rates anticipated with this reform might not benefit the company for several years and could lead to book-entry burdens on earnings from the reversal of deferred tax assets as early as in The AC-Group has taken on a new strategic direction through the acquisition of All for One and the subsequent integration phase. AC-Service is clearly and successfully developing into a full-scale SAP service provider and in so doing is moving into leading positions on the German-language SAP small to mid-sized enterprise marketplace. This new one-stop range of products and services covers the entire value chain including SAP licenses, industry solutions, roll-out, maintenance and operation within the Managed IT Service Center. This certainly makes AC-Service well prepared for even greater growth. Stuttgart, 22 March 2007 AC-Service AG The Board of Directors Herbert Werle Marco Fontana Lars Landwehrkamp

18 18 Group Management Report Consolidated Financial Statements Notes Group Auditor s Report We have audited the consolidated financial statements prepared by the AC-Service AG of Stuttgart comprising the balance sheet, the profit and loss account, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements together with the group management report for the business year from 1 January to 31 December The preparation of the consolidated financial statements and the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW) and under additional consideration of the International Standards on Auditing (ISA). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Stuttgart, 27 March 2007 KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Bayer Auditor Rettich Auditor

19 Segment Reporting Corporate Governance Group Information 19 Group Profit and Loss Account 1 January to 31 December Note 2006 Sales to third parties Capitalised services 493 Other operating income Cost of traded goods and third party services 5 (21 831) (8 542) Personnel expenses 6 (34 756) (24 453) Depreciation and amortisation 8 (3 081) (2 249) Other operating costs 9 (12 811) (9 637) EBIT Financial income Financial expense (1 455) (206) Financial result 10 (676) 282 Result from associated company (7) EBT Income tax 11 (2 634) (89) Earnings after tax (1 901) Attributable to: Equity holders of the parent (1 835) Minority interests (66) (131) Earnings after tax (1 901) Earnings per share EUR (undiluted and diluted) (0.35) 0.22 Average number of shares in circulation

20 20 Group Management Report Consolidated Financial Statements Notes Group Balance Sheet Assets Note Non-current assets Goodwill Other intangible assets Tangible fixed assets Financial assets Other assets Deferred tax assets Total non-current assets Current assets Inventories Trade accounts receivable Current income tax assets Financial assets Other assets Cash and cash equivalents Total current assets Total assets

21 Segment Reporting Corporate Governance Group Information 21 Equity and Liabilities Note Shareholders equity 23 Share of equity attributable to equity holders of the parent Issued share capital Treasury stock 24 (1 023) (1 023) Capital reserve Currency conversion reserve (191) 37 Market valuation of financial instruments according to IAS Retained earnings (2 877) (1 042) Share of equity attributable to equity holders of the parent Minority interests Total shareholders equity Liabilities Non-current liabilities Provisions Post-employment benefit liabilities Financial liabilities Deferred tax liabilities Other liabilities Total non-current liabilities Current liabilities Provisions Current income tax liabilities Financial liabilities Trade accounts payable Other liabilities Total current liabilities Total liabilities Total equity and liabilities

22 22 Group Management Report Consolidated Financial Statements Notes Group Cash Flow Statement Note 2006 Cash flows from operating activities EBT Adjustments for: Depreciation and amortisation on non-current assets Hardware purchases in finance leases 639 Hardware sales in finance leases (3 119) (3 806) Decrease in value adjustments and provisions (849) (1 245) Foreign currency losses (profits) (99) 30 Profit from sale of non-current assets (6) (51) Interest result (net) 234 (288) Share of loss from associated company 7 Adjusted net result before changes in current assets and non-financial liabilities (25) (1 360) Decrease in inventories (Increase) decrease in trade accounts receivable (1 134) 595 Decrease in other and financial assets Decrease in trade accounts payable (3 036) (137) Increase in post-employment benefit liabilities Increase (decrease) in other liabilities 118 (84) Cash flows from operating activities before taxation Income tax paid (560) (405) Cash flows from operating activities

23 Segment Reporting Corporate Governance Group Information 23 Note 2006 Cash flows from investing activities Cash flow from purchase of tangible fixed assets (3 276) (1 419) Cash flow from investment in intangible assets (551) (13) Cash flow from acquisition of shares 1 (14 481) (2 684) Cash flow from sale of tangible fixed assets Cash flow from disposal of other non-current assets Cash flow from interest received Cash flows from investing activities (17 555) (3 498) Cash flows from financing activities Cash flow from change in bank overdraft Dividend payments to minority shareholders (48) Cash flow from long-term financial liabilties Cash flow from capital contribution from minority shareholder 33 Cash flow from repayment of financial liabilities (4 018) (1 257) Cash flow from interest paid (692) (128) Cash flows from financing activities (1 046) Decrease in cash and cash equivalents (2 479) (1 120) Effect of exchange rate fluctuations on cash and cash equivalents (82) (32) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Significant non-cash transactions Initial inclusion of tangible fixed assets in finance leases Acquired maintenance assets in finance leases Liability from acquisition of intangible assets from acquisition agreement 655 Liability from acquisition of intangible assets from Process Partner AG, St. Gallen/Switzerland, share purchase agreement

24 24 Group Management Report Consolidated Financial Statements Notes Changes in Shareholder s Equity of the Group Issued share capital Treasury stock 1 January (1 023) Adjustment to accounting standards IAS 17 / IFRIC 4 1 January - adjusted (1 023) Currency conversion differences (adjusted) Net income and expense recognised directly in equity Earnings after tax (adjusted) Total recognised income and expense Withdrawal from capital reserve Additions from changes in the scope of the consolidation Acquisition of minority interest Contribution to capital Dividends from subsidiaries 31 December (1 023) 1 January (1 023) Currency conversion differences Market valuation of financial instruments according to IAS 39 Deferred taxes on market valuation of financial instruments Net income and expense recognised directly in equity Earnings after tax Total recognised income and expense 31 December (1 023)

25 Segment Reporting Corporate Governance Group Information 25 Capital reserve Currency conversion reserve Share of equity attributable to equity holders of the parent Minority interests Shareholders equity Market valuation of financial instruments according to IAS 39 Retained earnings Total (9 872) (7 936) (4) (4) (1) (5) (4) (4) (1) (5) (131) (4) (132) (5 747) (48) (48) (1 042) (1 042) (228) (228) 3 (225) (20) (20) (20) (228) 31 (197) 3 (194) (1 835) (1 835) (66) (1 901) (228) 31 (1 835) (2 032) (63) (2 095) (191) 31 (2 877)

26 26 Group Management Report Consolidated Financial Statements Notes Summary of the Fundamental Accounting Principles Accounting Principles AC-Service AG is a public corporation with headquarters at Schockenriedstrasse 7, Stuttgart, Germany. The consolidated financial statements for the financial year ended 31 December 2006 include the corporation and its subsidiaries (together called the»ac-group«). The consolidated financial statements are based on AC-Group s uniform accounting and valuation guidelines and the annual financial statements of the individual companies as listed in Note 1 as at 31 December The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) which are required to be applied in the European Union as of 31 December The AC-Group s consolidated financial statements apply the historical cost principle except for securities and first-timereported assets from business combinations at the time control was assumed. These assets are reported at their respective fair values. Expense and income items are allocated on an accrual basis. The consolidated financial statements are presented in thousand euros () rounded to the next thousand. The valuation, consolidation and classification principles were applied uniformly by all the Group companies. Changes in Accounting Principles The following amendments to the standards of the International Accounting Standards Board (IASB) and new interpretations took effect on 1 January 2006: Amendment to IAS 19»Employee Benefits«Amendment to IAS 21»The Effects of Changes in Foreign Exchange Rates«Amendments to IAS 39»Financial Instruments: Recognition and Measurement«IFRIC 4»Determining Whether an Arrangement Contains a Lease«It was primarily the adoption of the following standards and interpretations that had a direct impact on the AC-Group s consolidated financial statements: IAS 19»Employee Benefits«The requirement to provide information in the notes in connection with pension commitments to employees was vastly expanded. A reconciliation of the opening and closing balances for the plan assets as well as for the benefit obligations must be shown. Also to be included is the employer s best estimate regarding the contributions that are expected to be made in the reporting period that begins after the balance sheet date. IFRIC 4»Determining Whether an Arrangement Contains a Lease«IFRIC 4 contains criteria to identify lease elements within arrangements that are not formally designated as lease arrangements. Contractual elements that fulfil the criteria of IFRIC 4 should be accounted for as lease contracts in accordance with the provisions of IAS 17»Leasing«. There exists a number of different contractual arrangements within the AC-Group that meet the criteria of IFRIC 4. The AC-Group has been applying IFRIC 4 since 1 January IFRIC 4 does not require any retroactive application in accordance with IAS 8 in the sense of adjusting the earlier comparable periods as if IFRIC 4 had always been applied. However, the contractual arrangements in the 2006 consolidated financial statements that existed on 1 January and fall under IFRIC 4, as well as in the prior year s presentation (), must be depicted as if the interpretations of IAS 17 had already been adopted for these arrangements in the financial year. The projected effects on the comparable figures for the balance sheet at 31 December and the profit and loss account for the financial year within the 2006 consolidated financial statements were presented in the Annual Report from applying IFRIC 4 to the contractual arrangements that existed on 1 January. This overview was modified. In the fourth quarter of 2006 a refinement was made in the actuarial computation model used for depicting finance lease transactions in one of the subsidiaries in order to more accurately reflect the actual relationships. The effects on the comparable figures for the balance sheet as at 31 December and the profit and loss account for the financial year are now as follows:

27 Segment Reporting Corporate Governance Group Information 27 Change to the opening balance as at 1 January Consolidated financial statements Adjustment Adjusted values Adjustment of balance sheet as at 1 January Tangible fixed assets (5 748) Non-current financial assets Current financial assets Other current assets Deferred tax liabilities (473) (795) (1 268) Shareholders equity Attributable to: Equity holders of the parent Minority interests Change to the closing balance as at 31 December Consolidated financial statements Adjustment Adjusted values Adjustment of balance sheet as at 31 December Tangible fixed assets (5 561) Non-current financial assets Current financial assets Other current assets Deferred tax liabilities (570) (690) (1 260) Currency conversion reserve (40) 3 (37) Accumulated losses (1 664) Minority interests (461) (20) (481) Adjustment of profit and loss account Sales to third parties (1 012) Other operating income Cost of traded goods and third party services (5 883) (2 659) (8 542) Depreciation and amortisation (5 075) (2 249) Other operating costs (9 647) 10 (9 637) Financial income Income tax (194) 105 (89) Earnings after tax (281) Attributable to: Equity holders of the parent (272) Minority interests (122) (9) (131) Earnings after tax (281) Earnings per share in EUR (undiluted and diluted) 0.27 (0.05) 0.22

28 28 Group Management Report Consolidated Financial Statements Notes That portion of sales that falls under IFRIC 4 from data-center services or from the rental of hardware is no longer depicted as revenues realised over the term of the arrangement, but instead as finance leases as if the hardware had been sold to the client as part of a finance lease at the outset of the agreement. Therefore these revenue items formerly reported under the designation dataprocessing sales or revenues from leases are no longer included. On the other hand, the depreciation and amortisation on items previously reported as tangible fixed assets, which fall under these new rules, are also eliminated. The presentation as a sale of hardware in connection with a capitalised finance lease results on the one hand in a related materials expense in the amount of the cost price, and on the other hand to revenues from the sale of hardware. Furthermore, the accounts receivable from finance leases within the item financial assets are also stated. Income resulting from changes in agreements is reported under other operating income. The interest income relating to the finance lease is stated in the financial result in the profit and loss account over the term of the finance lease. Periodic customer payments, which up till now were recognised as sales in the profit and loss account, are, after adjustment for the interest income contained therein, used for the repayment of lease receivables. The periodic payments made in settlement for services or for the use of noncustomer-specific assets will continue to be recognised as sales revenues in the profit and loss account on an accrual basis over the term of the agreement. The modified presentation under IFRIC 4 pertains exclusively to the Managed IT Services and Other Operations business divisions. If refinements to the actuarial computation model had already been implemented during the reporting period, then it would have resulted in the following effects on the quarterly figures: The total impact of this effect was recognised in the fourth quarter and pertains only to the Other Operations business division. Additional New or Revised Standards Not Yet in Force The board of directors has judged the following additional IASB publications regarding changes in IFRS to be important for the consolidated financial statements, because additional disclosures or adjustments in the presentation can result following their planned application for the 2007 consolidated financial statements: IFRS 7»Financial Instruments: Disclosures«Amendment to IAS 1»Presentation of Financial Statements: Capital Disclosures«The adoption of IFRIC 10»Interim Financial Reporting and Impairment«starting on 1 January 2007 will have no effect on the consolidated financial statements since the Group already fulfils the requirements of IFRIC 10. The following publications will be applied in However, from today s perspective, these are not likely to be relevant for the AC- Group or have no significant effect on the consolidated financial statements: IFRIC 7»Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies«IFRIC 8»Scope of IFRS 2«IFRIC 9»Reassessment of Embedded Derivatives«IFRIC 11»IFRS 2 Group and Treasury Share Transactions«Effects on quarterly figures 1st quarter nd quarter rd quarter 2006 Total Sales to third parties (92) (123) (143) (358) Other operating income Financial income Earnings before tax (46) (72) (69) (187) Income tax Earnings after tax (32) (50) (48) (130)

29 Segment Reporting Corporate Governance Group Information 29 Furthermore, the following interpretation will be applied beginning in 2008, which from today s point of view is not of significance for the AC-Group: IFRIC 12»Service Concession Arrangements«The new IFRS 8»Operating Segments«standard will take effect beginning in the financial year 2009 and is expected to have a significant impact on how the segments are presented in the consolidated financial statements. Consolidation Principles The consolidated financial statements include all subsidiaries over which the parent Group company can directly or indirectly exercise control. The exercise of control is presumed once the parent company holds more than 50% of the voting rights in a company or controls in any other way the financial or business policies of a company or can exercise a controlling influence on the company through a majority in the supervisory board or other executive body. The financial statements of the companies to be included in the consolidated financial statements are included in the consolidated financial statements from the beginning of the time exercise of control was possible until the end of the time of possible exercise of control. The»purchase method«was used in the capital consolidation. Goodwill arises from the difference in the amount between the historical cost of the company or the shareholdings in the company and the pro rata fair values of the assets and liabilities recognised under IFRS 3 at the time control was taken over. Inter-company business transactions and relationships including unrealised inter-company profits will be eliminated. The minority interests (or minority shareholders ) share of assets and liabilities including their share of the earnings of the related company, will be combined and reported separately. Companies on which the parent company has a material influence, but cannot exercise control over the financial and business policies, are included in the consolidated financial statements using the»equity method«. To the extent to which they may be applicable, that part of the equity in the associated company attributable to the AC-Group is reported in the consolidated financial statements under the balance sheet item»shares in associated company«. This pro rata equity is reported at historical cost. The carrying value will change as a result of dividend distributions or the AC- Group s share of annual net earnings, which is reported in the Group s profit and loss account as»earnings from associated companies«. A pro rata loss reduces the stated carrying value of the equity interest until this reaches zero. No other pro rata losses are taken into account, unless the AC-Group has agreed to such related obligations towards the associated company. Currency Conversion Business transactions made in currencies other than the local currency are recognised at the exchange rate at the time of the transaction. At the end of the financial year, monetary assets and liabilities in foreign currency are valued at the exchange rate of the reporting date. Any valuation differences that arise will be reflected in the profit and loss account either under operating result or financial result depending on the type of asset or liability. Non-monetary assets and liabilities in foreign currency are reported at historical cost. The functional currency concept is applied for the financial statements of included companies that are prepared in foreign currency. Under this concept, the annual financial statements of foreign subsidiaries prepared in currencies different from that of the consolidated financial statements, including the goodwill and fair values attributable to them in connection with the consolidation, will be converted at the exchange rate of the reporting date. Foreign-currency income, expenses and cash flows of foreign subsidiaries are reported in the consolidated financial statements at the exchange rates closest to the exchange rate at the time of the transaction. Average exchange rates are used here as a rule. Currency differences arising from the conversion of the financial statements of included companies prepared in foreign currency are reported in the currency conversion reserve in the shareholders equity of the Group. Upon the sale of a foreign Group company, the respective portions of the currency conversion reserve will be treated as a part of the profit or loss from the sale of the company. Currency-related valuation differences from inter-company loans in foreign currencies, which from a business perspective are viewed as an investment in the related company, will be recognised immediately in the currency conversion reserve as a part of the Group s shareholders equity. The foreign currency exchange rates used are shown in Note 2, Foreign Currency Exchange Rates. Cash Flow Statement The cash flow statement depicts an analysis of the changes in cash and cash equivalents. In accordance with IAS 7, the cash flow statement differentiates between cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. The cash flow statement is derived from the Group s balance sheet and the profit and loss account using the indirect method. Influences from changes in the scope of the consolidation, as well as any currency-related valuation differences affecting the cash and cash equivalents are shown separately. Goodwill Goodwill arises from applying the»purchase method«to business combinations. Under this method, those shares of assets and liabilities in the company being taken over, which is allocated to the purchaser, are reported at their fair value at the time control was taken over. If the purchase cost exceeds the pro rata fair values of the acquired and identifiable assets and liabilities, then the differential amount will be reported as goodwill. Any negative difference between the purchase cost and the acquired net assets is reported in the profit and loss account in the period the acquisition was made.

30 30 Group Management Report Consolidated Financial Statements Notes In accordance with IFRS 3 no goodwill amortisation has been made since 1 January. Goodwill will be tested for impairment (»impairment tests«) at least annually should there be any indication that the asset may be impaired. Any impairment or loss in value is reported immediately in the profit and loss account. Subsequent restatements of value are not authorised and therefore not made. Other Intangible Assets Intangible assets acquired in the course of business combinations under IFRS 3 are reported at fair value in the balance sheet, provided they meet the criteria of IAS 38. Regular amortisation using the straight-line method should only be made if the end of its useful life can be accurately determined. Research costs are reported as an expense in the profit and loss account in the periods in which they arise. Development expenditures, consisting primarily of personnel expenses for the development of standard software to be sold or used internally, are only applied as intangible assets in the balance sheet when all of the following prerequisites have been met in terms of IAS 38: a) The technical feasibility of completing this intangible asset is given, so that it will be available for sale or use. b) There exists the intent to complete the intangible asset and to use or sell it. c) The ability to use or sell the intangible asset can be clearly demonstrated. d) There is clarity regarding the manner in which this intangible asset will generate future economic benefits. This includes being able to demonstrate the existence of a market for the products of the intangible asset. e) Suitable technical, financial and other means are available to complete development and to use or sell the intangible asset. f) The applicable costs of the intangible asset during the development phase can be measured reliably. Tangible fixed assets serving development purposes are included in the balance sheet like other tangible fixed assets and depreciated over their useful lives. Other intangible assets, provided they meet the requirements of IAS 38, are reported at cost and amortised by the straight-line method over the course of their useful life, provided such is not an asset with an indefinite useful life. The expected useful life is determined on an individual basis. Tangible Fixed Assets Tangible fixed assets are reported at cost less accumulated depreciation. Regular depreciation is made on a straight-line basis over the estimated useful life of the asset and taking into consideration an existing terminal value if applicable. Land is not depreciated. Buildings Leasehold improvements Hardware and software Office furniture and other effects 30 years 2-15 years 2-5 years 4-10 years The useful life of leasehold improvements is limited to the fixed term of the facility s rental agreement. In the case of agreements that are automatically extended, the useful life may not exceed the next possible date at which termination can be made. Appropriate provisions are made for any renovation or restoration obligations. Assets rented or leased under terms whereby the AC-Group bears the risks and rewards incident to ownership from an economic perspective are classified as finance leases. Tangible fixed assets acquired through finance-lease models are capitalised at either the fair value at the inception of the lease or the lower present value of the minimum lease payments. Regular amortisation is made systematically using the straight-line method over the estimated useful life of the property, or fully over the shorter term of the lease agreement, if at the beginning of the lease period there is no adequate assurance that ownership will be transferred at the end of the term. Any projected utility or residual value existing at the end of the lease term will be taken into consideration in determining the total amount of amortisation to be made. Any income or loss generated from the disposal of tangible fixed assets is reported in the profit and loss account. Impairment of Assets Impairment testing is performed regularly on all assets, including intangible assets, to determine if any events or changed circumstances indicate that the actual value is lower than the carrying value. If there are such indications, then an impairment test is made within the sense of IAS 36. An impairment loss is reported in the profit and loss account when the asset s carrying value exceeds the amount considered to be recoverable for the asset. If the value in use according to IAS 36 is applied as the recoverable value, then this will be determined from an estimate of the expected net cash inflows from its continued use discounted at an appropriate interest rate and from any potential disposal value. Impairment testing will be made at least once a year on intangible assets having an indefinite life. When performing the impairment test, the assets will be consolidated into the smallest identifiable cash-generating units. How cash-generating units are defined in the AC-Group is described in Note 12, Goodwill. Permanent impairment is recognised in the profit and loss account. Non-Current Financial Assets These include finance lease entitlements, securities, security deposits, as well as advances and loans with a residual term of more than 12 months. First-time recognition of non-current financial assets is made at purchase cost including transaction costs. Securities available for sale are valued at their fair value

31 Segment Reporting Corporate Governance Group Information 31 on the reporting date. As appropriate, the fair value is based on the values as traded on the market. The AC-Group employs adequate valuation methods to determine the value in the event that market values are not available, such as when the instrument is no longer traded on a securities exchange for example. Should a lack of information make it impossible to establish the value of a security, then the instrument will continue to be reported at its purchase price less any required value adjustments. Gains or losses are recorded under shareholders equity. In case of sale or disposal, the cumulative value difference shown in shareholders equity is reported in the profit and loss account. Securities are tested for permanent impairment when their fair value on the reporting date is lower than their purchase cost minus any impairment recognised earlier. Hedging Transactions Hedging transactions are reported in the balance sheet at fair value and revalued based on their performance. The manner in which a change of fair value is recognised depends on whether the instrument meets the criteria for accounting treatment as a hedging transaction (»hedge accounting«). To qualify for treatment as a hedging transaction, a hedging relationship must fulfil specific requirements relating to the documentation, the probability of its occurrence, the effectiveness of the hedging instrument and the reliability of the valuation. At the inception of a hedge, the relationship between the hedging instrument and the hedged item, as well as the purpose and strategy of the risk hedging, must be documented. At its inception, a hedging instrument that qualifies for hedge accounting is defined as a) a hedge of the fair value of the recognised asset or liability (»fair value hedge«), or b) a hedge of the cash flow from a future transaction or from a firm commitment (»cash flow hedge«), or c) a hedge of a net investment in a foreign Group company. Changes in the value of hedging instruments, which are used to hedge the fair value of a balance sheet item and which are effective hedges, are recognised in the profit and loss account together with the change in the fair value of the hedged asset or liability. Fair value adjustments from cash flow hedging instruments, which can be allocated to the effective portion, are recognised in the listing of all income and expenses under equity. The change in fair value attributable to the ineffective portion is recognised in the profit and loss account. Hedges of net investments in foreign Group companies are recognised from a future transaction or firm commitment, similar to cash flow hedges. When a hedging instrument expires or is sold, or when the conditions set forth for the hedging transactions are no longer met, then the cumulative changes in fair value up to that time remain in the presentation of all the income and expenses under equity and are only then recognised in the profit and loss account if the future transaction actually occurs. If however, the forecast transaction is no longer expected to occur, then the cumulative changes in fair value under equity are immediately shifted to the profit and loss account. Non-Current Assets Held for Sale Non-current assets (and groups of assets) classified in terms of IFRS 5 as held for sale are valued at the lesser of carrying value or net proceeds from sale. Assets are considered held for sale whose carrying value is realised predominantly from the business of selling and not from their continued use. The sale or disposal is expected within twelve months of the time of reclassification. No regular amortisation is made on these reclassified assets. Inventories Inventories of merchandise are valued at average cost or their potentially lower net realisable sale value. An appropriate value adjustment will be made for any other impairment. Trade Accounts Receivable and Other Assets Receivables are stated at their continued historical carrying values. Accounts receivable that are subject to an increased risk of default are evaluated individually and value adjusted as needed. Rendered services that have yet to be invoiced as part of a services or data-center agreement are reported at their contractually agreed price under trade accounts payable, provided it is probable that payment will be made to the Group. Cash and Cash Equivalents These include cash on hand, deposits at banks and short-term monetary instruments with an original maturity date of within the next 90 days. Short-term liabilities to banks are reported under financial liabilities. Cash is stated at nominal value and foreigncurrency assets at the exchange rate of the reporting date. Provisions Provisions are made for obligations of uncertain amount or cause if there is a legal or actual obligation stemming from an event occurring prior to the balance sheet date and if it is probable that an economic cost will be incurred in fulfilling the obligation. Provisions are established on the basis of estimates regarding the probable expenditure of economic resources. These estimates will be reviewed at each reporting date. If the effect is significant, then the expected future cash outflows for long-term provisions will be discounted. Provisions will also be established for contractual obligations in which the unavoidable expenses in fulfilling or terminating them are greater than the expected benefits and proceeds (onerous contracts). Provisions are established for expected costs in connection with restructurings at the time that detailed and formal action plans are approved, provided the restructurings have either begun or been publicly announced. Provisions will not be made for future expenses in connection with continued operating units which are offset by a comparable economic benefit. Post-Employment Benefit Liabilities Current and former employees receive benefits and pensions based on the different country s statutory post-employment benefit plans. With the exception of the Swiss companies, private insurance models are used as a supplement to the benefits provided by the state pension insurance agencies. The employees of one company in

32 32 Group Management Report Consolidated Financial Statements Notes Switzerland belong to a trust. This is a legally independent benefit plan that meets the definition of being a»defined benefit plan«according to IAS 19. The employees of the other Swiss companies are members of a retirement fund (a legally independent trust) whose assured benefits also meet the criteria as being a»defined benefit plan«. The Swiss post-employment benefit plans provide retirement and disability benefits to the employees and benefits to their survivors in case of death. There are additional defined benefit plans available for selected individuals in Germany. In addition, there are also contribution-based plans. These plans are financed as a rule through participant (employee) and company (employer) contributions. All of the employer contributions are recognised in the profit and loss account for the respective period for all benefit plans with defined contribution plans. The projected unit credit method is used for determining the share of benefit obligations for defined benefit plans. This benefits cash-value method considers not only the known pensions and accrued benefits as at the balance sheet date, but also the discounted, expected future increases in wages and pensions. An independent actuary annually calculates all the material obligations and the assets used to provide coverage for them. Benefit costs, which relate to the work performed during the reporting periods (»current service cost«), are reported in the profit and loss account after deduction of interest expenses and employee contributions, provided that they are not covered by the expected investment income. Benefit costs relating to past work (»past service costs«) attributable to new or modified benefits are reported in the profit and loss account for active employees as employee benefit expenses using the straight-line method until the time of eligibility to the benefit; and reported immediately as a one-time charge for retired employees. Actuarial gains and losses are reported using the corridor method. Overfunding of employee benefits is only recognised in the balance sheet if the surplus is available to the AC-Group in the form of contribution reimbursements or reductions, or on an unrestricted basis (such as in the form of company contribution reserves). In accordance with the rules of the pension fund, any disposition over such funds requires a parity resolution, in other words one made jointly by representatives of management and the workforce. In light of this, any calculated surplus of assets to liabilities from this benefit plan is not reported as an asset in the balance sheet of the Group. Contingent Liabilities Potential obligations for which the outflow of resources is considered improbable are not reported in the balance sheet. However, the projected potential financial effects (»exposure«) existing on the reporting date are disclosed as contingent liabilities in these notes. Financial Liabilities The financial liabilities include interest-bearing liabilities from loans and from finance lease transactions, as well as short-term liabilities to banks. First-time recognition of finance lease obligations is made at the fair value at the time the lease began for the asset on which the finance lease is based, or at the lower cash value of the minimum lease payments. Lease payments are divided into interest payments treated as income, calculated based on the effective interest method, and amortisation of the finance lease obligations having a neutral effect on income. Taxes Current income taxes are calculated on the basis of earnings before taxes taking into account regulations governing the computation of taxable income. Deferred income tax assets and liabilities result from the differences between the amounts stated for assets and liabilities in the tax balance sheet and the consolidated financial statements, provided such differences are not permanent. The Group uses the»liability method«, according to which deferred tax assets or liabilities can be determined based on the legal principles that are either valid or actually in force on the closing date. In this case the tax rates at the time of the projected tax realisation are applied. Deferred tax assets also result from accumulated tax losses that can be carried forward (tax loss carry forwards) that can be offset against later taxable earnings. Deferred tax assets on temporary differences and on tax losses brought forward are only recognised in an amount corresponding to the probability that in the foreseeable future there will be sufficient taxable income available and that the Group will derive a benefit from applying them to it. The foreseeable future is principally considered to be the next four financial years. No deferred tax liabilities are recognised on temporary differences between the carrying values of the subsidiaries or associated companies and on their pro rata tax value, and particularly not on undistributed profits, provided that AC-Service AG can control the timing of the reversal of the temporary differences (distribution of profits, for example) or it is probable that the reversal will not take place in the foreseeable future. Other taxes, such as transaction taxes or taxes on wealth and capital, are shown as operating expenses. Profit and Loss Account The profit and loss account was prepared on the basis of the nature of expense method. Revenue Recognition Sales are credited to the profit and loss account at the time the product is delivered to or the service is rendered for the customer. Sales revenues are stated net and less value-added tax, credit notes from returns and commercial discounts. In the Managed IT Services business division, data processing revenues are the predominant contributors to sales. Contracts made with the clients always involve multiple-year agreements for providing data-center services. As a rule, invoicing is made monthly covering the period of services rendered.

33 Segment Reporting Corporate Governance Group Information 33 Within the SAP Solutions business division, IT consulting and management sales represent the biggest share of revenues. The consulting services ordered by the clients are continuously recorded and invoiced at least monthly. In the case of fixed-price projects, the stage of completion is determined by the responsible project manager at the end of the quarter and the amount of recognisable revenue is determined using the percentage of completion (POC) method. The stage of completion is determined based on the ratio of work hours performed to the total estimated number of work hours. Should losses on the entire project be projected, then the POC elements of the receivables are first value adjusted. If this is not enough, then provisions will be established. Software licenses and software maintenance contracts in the SAP Solutions segment also contribute to revenues. The transfer of the right to use the software is recognised as license income at the time of delivery to the using customer, provided the customer no longer has a right of withdrawal from the arrangement. Fees for software maintenance are reported as software maintenance revenues in the period for which the fee pertains economically. Accounting is generally made on a quarterly basis and on individual occasions annually, in the latter case mainly at the start of a period to which the maintenance fee pertains. Data-center services are also the biggest contributors to sales in the Human Resource Services business division. The services used by the clients are recorded and invoiced to them at least once a month. Invoicing is made upon providing the service and depends on the amount of services used (for example, the number of payroll vouchers printed). In the Other Operations business division, revenues from hardware sales and hardware-related technology services for local public authorities in Luxemburg are the main contributors to sales. Invoicing is normally made monthly. Government Subsidies Government subsidies are only reported if there is sufficient assurance that the subsidy will be granted and its underlying terms and conditions will be fulfilled. Subsidies representing a substitute for expenses are reported in the profit and loss account as income for that period in which the expenses arise. Investment subsidies are reported systematically as income in the profit and loss account over the useful life of the subsidised asset. Income from investment tax credits is reported as a reduction in depreciation of the asset for which the tax credit was awarded. In the event that any income arises from investment tax credits pertaining beneficially to prior years, then these will be reported as other operating income. Financial Result Valuation differences from adjustments of foreign currency exchange rates, which arise on financial assets and liabilities including internal Group financial relationships, are reported in the financial result. Financial expenses include the interest expenses from loans and finance lease obligations, as well as other expenses directly related to the financing or to the investment in financial assets, examples being the costs of interest-rate hedging, bank commissions for arranging and providing of loans, currency-hedging costs and losses on instruments for hedging interest rates, insofar as these are not required to be reported as shareholders equity. Interest expenses are recognised in the profit and loss account using the effective-interest method. Interest expenses are not capitalised. Besides dividend income from unconsolidated equity interests, interest income from loans granted and assets from finance leases, financial income also includes the recognition of other income directly connected with the funding or with the investment in financial assets, such as income from interest-rate-protection and other hedging instruments to include any gains from the sale or disposal of such interests, insofar as these are not required to be reported as shareholders equity. Earnings from associated companies and joint ventures are reported separately from the financial results. Segment Reporting In terms of management, the companies included in the consolidation are divided across all the countries into the operating business divisions Managed IT Services, SAP Solutions and Human Resource Services. Other business activities of a more local nature are carried in the segment reporting under the item»other Operations«and elsewhere in this annual report under the shortened designation»other«. The companies of the Managed IT Services and SAP Solutions business divisions are located in Germany, Austria and Switzerland, whereby the SAP Solutions division also operates in France and the Czech Republic. The segment information conforms to the management organisation of the Group for the years and 2006 and corresponds with the structure of the internal reporting tools used for monitoring and control by the board of directors. Managed IT Services Business Division The Managed IT Services business division is where the AC-Group develops, plans and implements end-to-end operating concepts to satisfy the complex IT requirements often faced not only by midsized and larger companies, but internationally operating ones as well. The technical management and upkeep of the systems and applications is made predominantly within the data centers and is increasingly taking the form of»remote Support Services«or onsite in the user organisation s facilities. The data centers are located in Germany, Austria and Switzerland and are each complemented by a second data center to improve operational system stability. SAP Solutions Business Division The service porfolio of All for One Midmarket Solutions GmbH in Germany, the two SAP consulting companies in Austria and Switzerland, as well as of Kümmel Wiedmann + Partner Unternehmensberatung GmbH including its subsidiaries and foreign offices (»KWP companies«) are combined within the SAP Solutions business division.

34 34 Group Management Report Consolidated Financial Statements Notes Its primary focus is on the sale of software licenses for SAP AG products and the extensive related software consulting and implementation delivered as an end-to-end enterprise solution at the client s facilities. The KWP companies concentrate on special human resources issues and the associated elements of the SAP solutions (»Human Capital Management«). In contrast to the KWP companies that target customers in different industries and also serve major clients, All for One Midmarket Solutions GmbH focuses primarily on small to mid-sized business clients in the machinemaking and auto-parts supplier industries. The Switzerland-based company Process Partner AG and its preconfigured SAP solutions concentrate on companies that have people-intensive service processes. A large part of this division s services involves managing regular customers. Here priority is given not only to providing services included in software maintenance agreements, but also to other ongoing support, follow-up projects, such as conversions to different software versions, as well as to add-ons or extensions to better use the software solution. The cooperation with the Managed IT Services division is very close throughout all the countries. Human Resource Services Business Division Under its ACCURAT brand, the Human Resource Services business division specialises exclusively in Germany in consulting and outsourcing services for personnel administration as well as in business-process optimisation and systems integration. Its range of services and products are focused on the specific needs and requirements of its three core segments»public Sector«,»Services, Commerce, Industry«and»Banking, Finance, Insurance«. This business division is also prepared to take over its clients entire personnel administration mission, something it calls»hr Business Process Outsourcing«. The basis for this comprehensive range of products and services is formed by the proprietary software platforms ACCURAT Multipers for payroll operations and ACCURAT Office for human resources management. This business division operates solely in Germany. Other Operations Besides the Managed IT Services, SAP Solutions and Human Resource Services segments, there are also Other Operations involving financed hardware sales and hardware-related technology services for local public authorities in Luxemburg. The secondary segment reporting depicts the geographical markets divided into Germany, Austria, Switzerland, the rest of Europe and the rest of the world. The segment reporting by geographical markets corresponds to the sales markets in which the AC-Group operates. The service charges between business divisions (inter-segment sales) are made at prices comparable to those of independent business partners. All internal service charges are shown separately in the segment information and are eliminated accordingly under»consolidations«. All operating assets and liabilities (except tax liabilities and financial liabilities), which can be allocated either directly or on the basis of an objective allocation formula, are reported in the respective business divisions and geographic markets. Financial Risk Management Financial risk management is handled in the AC-Group according to principles established by the board of directors. These govern how the Group will be protected against currency, interest and credit risks. There also exist rules and principles for the control of cash and cash equivalents, as well as for short-term and longterm financing. The responsible offices and individuals control their financial risks in line with the risk policies prescribed for their area. The goal is to reduce financial risks while weighing the hedging costs against the risks being taken. Derivative financial instruments to hedge the mainstream business may be used when deemed appropriate. In order to minimise the counterparty credit risk, transactions will only be made with first-class counterparts. Currency Risks Fluctuations in currency rates have an impact on the presentation of assets and liabilities in the consolidated financial statements that are prepared in euros, insofar as assets and liabilities are denominated in currencies other than the euro. This is why the AC-Group strives to fund its assets in the same currency. Revenue recognition within the individual companies is made predominantly in the same currency as that used for expenses. To the extent deemed necessary, remaining risks involved in foreign-currency accounting are covered using currency transactions (futures, options). There were no currency-hedging transactions undertaken in Interest Rate Risks There will be exposure to changes in interest rates as long as there are long-term, interest-bearing liabilities with variable interest rates. The Group protects against such risks to an adequate extent by using and weighing the efficiency of interest-ratehedging transactions, such as interest-rate swaps or interest-rate cap transactions, to the extent that the impacts of exposure to changes in interest rates could be significant. Liquidity Risks The directors of the AC-Group place the utmost importance on maintaining solvency at all times, which is why each company itself maintains an adequate amount of cash. The Group parent also maintains a liquidity reserve or unused lines of business credit, which can be used to support the subsidiaries. Credit Risks Credit risks arise primarily from affording clients time to make payments and from the counterparty risk involved in financial transactions. The credit risks from providing services and products are addressed in part through credit sale insurance, credit checks on customers, monitoring of accounts receivable and the implementation of regular reminder procedures. Counterparty risk is also limited by only entering into financial transactions with parties having first-class credit ratings.

35 Segment Reporting Corporate Governance Group Information 35 Fundamental Assumptions and Sources of Uncertainty Regarding Management Estimates General Preparing the consolidated financial statements in accordance with IFRS requires the board of directors to make estimates and assumptions that affect the accounting principles applied. In implementing the accounting principles, estimates and assumptions affect the reported amounts of assets, liabilities, income and expenses, as well as how such are presented in the consolidated financial statements. These estimates and assumptions are based on past knowledge and various other factors, which were considered to be applicable under the given circumstances. The actual amounts and values can deviate from these estimates. The estimates and assumptions made are continuously reviewed and adjusted to the latest circumstances when new information becomes available. assets and liabilities from deferred income taxes. Any changes can be attributed to such factors as amendments to tax legislation, final tax assessments or positive or negative developments in the taxable income forecast of the subsidiaries. Such factors can result in adjustments to the reported income tax assets and liabilities. Provisions As at 31 December 2006, AC-Service AG reported provisions totalling EUR 2,218 K including ones for severance payments and for an additional purchase price stemming from the acquisition of the shares in Process Partner AG (see Note 27, Provisions). In establishing the provisions, the board of directors estimated the probability and the amounts of the anticipated future outflow of resources for the respective obligations and circumstances. The following provides a discussion of the most important assumptions regarding future performance and the most important sources of uncertainty about the estimates, which could precipitate the need for making significant adjustments to the reported amounts of assets and liabilities within the next twelve months. Tangible Fixed Assets, Goodwill and Intangible Assets The balance sheet of the Group reports goodwill with a carrying value of EUR 6,538 K (see Note 12, Goodwill); other intangible assets with a carrying value of EUR 12,184 K (see Note 13, Other Intangible Assets) and tangible fixed assets with a carrying value of EUR 8,848 K (see Note 14, Tangible Fixed Assets). When determining if there is impairment, the board of directors makes estimates regarding the projected cash inflows from the use of the assets and any potential proceeds from their sale. The cash inflows actually realised can vary from both the projected and the discounted cash flows recognised on the reporting date. Changes in the use of buildings, leasehold improvements and EDP systems; obsolescence of technology; the loss of customers from the regular customer business reported in the balance sheet, and the belowexpectations sales that go with it, can result in impairment or the curtailment of useful lives. Current and Deferred Income Tax Assets and Liabilities As at 31 December 2006, AC-Service AG reported net liabilities from current income taxes totalling EUR 1,102 K and net deferred income tax assets totalling EUR 1,609 K (see Note 11, Income Tax). The board of directors must make far-reaching estimates in determining the assets and liabilities from current and deferred income taxes. These are based among other things on interpretations of the respective country s existing tax laws and regulations. The board of directors makes estimates about the future taxable income situation of the subsidiaries upon first-time recognition and during regular valuations of deferred tax assets from tax-deductible losses brought forward. Numerous internal and external factors can favourably or unfavourably affect the Provisions for Severance Payments Severance payments are recognised when current employment relationships must be terminated for operational reasons or be amicably dissolved. The amount of such severance payments is not always definitively established as at the accounting date. In such cases provisions are recognised in the amount that would be anticipated to be paid if the matter were to be settled by a court. Provisions for Process Partner AG Additional Purchase Price Within the framework and share purchase agreements of October 2004, AC-Service AG had come to an agreement with the other shareholders to increase its holdings in Process Partner AG, St. Gallen/Switzerland, from then 40% to 100%. This transaction was made in such a manner, that the company returned all the shares in Process Partner AG as part of an asymmetric capital reduction. This capital reduction was recorded in the commercial register on 31 December Effective that same date, the other shareholders then transferred all the shares of Process Partner AG to AC-Service AG. The total purchase price consists of a minimum purchase price component and a variable additional purchase price component. The minimum purchase price component totals EUR 1,948 K (CHF 3,000 K) and was paid in cash on 5 January. The variable additional purchase price component is derived from the company s audited annual financial statements for the financial years, 2006 und The definitive measurement base for the variable additional purchase price component is the level at which the EBIT goals are surpassed in the three financial years. The additional purchase price component will not exceed EUR 1,491 K (CHF 2,400 K). This additional purchase price component is to be paid within 30 days of the date the annual financial statements for the financial year 2007 approved by the Process Partner AG annual shareholders meeting (see Note 27, Provisions). The board of directors used all the information available to it to determine the amount of provisions needed with regard to the additional purchase price.

36 36 Group Management Report Consolidated Financial Statements Notes Notes to the Consolidated Financial Statements 1. Scope of the Consolidation As at 31 December 2006 AC-Service AG held directly or indirectly 100% (lesser values are stated) of the nominal or share capital of the following companies: Name and Address of the Company Country AC-Service GmbH Informationsverarbeitung Systeme und Service Schockenriedstraße 7, Postfach , Stuttgart C Germany AC-Service Beteiligungs GmbH Schockenriedstraße 7, Postfach , Stuttgart C Germany ACCURAT Informatik GmbH Im Gefierth 13, Postfach , Dreieich C Germany ACCURAT Consulting GmbH Im Gefierth 13, Postfach , Dreieich C Germany All for One Midmarket Solutions GmbH Schockenriedstraße 7, Postfach , Stuttgart C Germany AC-Service Gesellschaft für Datenverarbeitung GmbH Zirkusgasse 13, 1020 Vienna C Austria AC Solutions EDV BeratungsgmbH (83.66% share) Zirkusgasse 13, 1020 Vienna C Austria AC Solutions EDV BeratungsgmbH & Co KG (83.66% share) Zirkusgasse 13, 1020 Vienna C Austria Kümmel, Wiedmann + Partner Unternehmensberatung GmbH (56% share) Schlossstraße 20, Talheim C Germany KWP Human Capital Consulting GmbH (69.55% share) Zirkusgasse 13, 1020 Vienna C Austria KWP Czech s.r.o. (44.80% share) Mariánske Hory, Pašerových 1/1270, Ostrava C Czech Republic KWP France S.à.r.l. (56% share) 12, Rue du Puits, Haguenau C France AC-Service (Schweiz) AG (95% share) Hardstrasse 73, Postfach 31, 5430 Wettingen 1 C Switzerland AC-Service Management AG Hardstrasse 73, Postfach 31, 5430 Wettingen 1 C Switzerland Process Partner AG Bionstrasse 5, Postfach 1638, 9001 St. Gallen C Switzerland AC Automation Center SA/NV Excelsiorlaan, 85, 1930 Zaventem C Belgium AC Automation Center Sàrl Place de Nancy 6, 2212 Luxembourg C Luxembourg C = Fully consolidated company

37 Segment Reporting Corporate Governance Group Information 37 Changes in the Scope of the Consolidation On 7 February 2006 AC-Service AG acquired control of 100% of the shares in All for One Systemhaus GmbH Midmarket Solutions with headquarters in Oberessendorf/Germany. This company ranks among the leading partners of SAP AG within the discrete-manufacturing market segment in countries where German is spoken. The purchase price of EUR 15,350 K was paid in cash. The total acquisition cost was EUR 15,624 K including indirect acquisition costs. These indirect acquisition costs of EUR 274 K comprise consulting fees, lawyer s fees and notary fees in connection with the due diligence and the execution (purchase agreement) of the transaction. The other costs in connection with the transaction, particularly for initiating the financing, were charged against the profit and loss account. Initial recognition of All for One Systemhaus GmbH Midmarket Solutions in the consolidated financial statements of AC-Service AG was made as at 7 February 2006, the date that control over the company was exercised for the first time. The assets, liabilities, contingent liabilities on the date of initial consolidation, information on the allocation of realised intangible assets, deferred taxes, the recognition of goodwill and the effects on the cash flow statement can be seen in the following table: Goodwill totals EUR 2,434 K and is due primarily to the fact that the acquired employees do not meet the criteria for recognition as other intangible assets. The EUR 10,804 K in intangible assets realised in the course of allocating the purchase price include the value of the sales potential from the regular customer base (EUR 6,225 K), current contracts (EUR 58 K), the industry solutions (EUR 1,238 K) and the rights of use of»all for One«(EUR 3,283 K). If the date of the initial consolidation had been 1 January 2006, then AC-Group s sales would have been EUR 1,681 K higher and earnings EUR 66 K lower. The monthly amortisation of the realised intangible assets is EUR 58 K. Monthly deferred tax expenses are also incurred. This company has contributed sales to third parties amounting to EUR 25,907 K and an after-tax loss amounting to EUR 1,987 K since the time of its initial recognition in the consolidated financial statements of the AC-Group. All for One Systemhaus GmbH Midmarket Solutions, Oberessendorf, merged with AC Solutions GmbH, Stuttgart, under an agreement dated 5 July The combination was effective on 10 October 2006 when it was recorded in the commercial register. The merger record date is 1 January AC Solutions GmbH was renamed All for One Midmarket Solutions GmbH at the same time. Initial consolidation of All for One Systemhaus GmbH Midmarket Solutions Carrying values Allocation Initial consolidation Other intangible assets Tangible fixed assets Non-current financial assets Deferred tax assets (1 766) Inventories Trade accounts receivable Current financial assets Other current assets Cash and cash equivalents Deferred tax liabilities (2 847) (2 847) Provisions (78) (78) Trade accounts payable (6 699) (6 699) Other liabilities (3 133) (3 133) Total identifiable assets and liabilities Goodwill Total acquisition costs including transaction costs Cash acquired (1 143) Net cash outflow for acquisition of equity holdings

38 38 Group Management Report Consolidated Financial Statements Notes 2. Foreign Currency Exchange Rates 4. Other Operating Income Year-end rate Average exchange rate in EUR CHF CZK Sales to Third Parties By types of proceeds 2006 IT consulting and professional services Data processing services Software licenses Software maintenance Hardware sales Leasing Other sales Total Sales revenues include deferred sales totalling EUR 5,328 K (prior year: 0), which were determined using the percentage of completion method Income from release of provisions and value adjustments Insurance benefits and other compensations Income from disposal of fixed assets Rent for sub-leased premises 4 Other items Total Cost of Traded Goods and Services 2006 Third party services Cost of traded goods Total Of the cost of traded goods, EUR 6,587 K (prior year: EUR 536 K) relates to purchased SAP software licenses and EUR 3,020 K (prior year: EUR 3,211 K) to the procurement of hardware for customer orders. By groups of customer Personnel Expenses Sales to associated company 17 Sales to BEKO-Group Sales to other third parties Total Further breakdowns by business divisions and geographic areas are presented in the segment reporting Salaries and wages Social security contributions Defined contribution plan expenses Defined benefit plan expenses Other personnel expenses Total Of the personnel expenses, EUR 55 K (prior year: EUR 145 K) is attributable to redundancy and severance payments and EUR 250 K (prior year: EUR 107 K) to the cost of partial retirement arrangements.

39 Segment Reporting Corporate Governance Group Information 39 Number of employees by function IT consulting and data center operations Software development and maintenance Sales and marketing Management and administration Total Part-time employees are reported as full-time equivalents. Figures do not include cleaning staff, trainees and employees permanently unable to work for whom no personnel expenses were incurred. 7. Post-Employment Benefit Plans The following information provides an overview of the financial situation of the defined benefit plans as at 31 December 2006 and : 2006 Benefit obligations as at 1 January Additions from changes in the scope of the consolidation 144 Interest expense Current service cost Benefits (1 029) (2 606) Contributions Actuarial losses Foreign currency differences (865) (147) Benefit obligations as at 31 December Market value of plan assets as at 1 January (22 511) (22 768) Additions from changes in the scope of the consolidation (65) Expected return on plan assets (777) (789) Company contributions (523) (550) Participant contributions (332) (349) Benefits Contributions (950) (67) Actuarial profits (1 560) (675) Foreign currency differences Market value of plan assets as at 31 December (24 714) (22 511) Surplus (1 542) (131) Uncapitalised surplus (Asset Ceiling as per IAS 19.58A) Unconsidered actuarial losses Post-employment benefit liability as at 31 December

40 40 Group Management Report Consolidated Financial Statements Notes The development of post-employment benefit liabilities is portrayed in the following table: 2006 Post-employment benefit liability as at 1 January Additions from changes in the scope of the consolidation 77 Expenses for benefit plans recognised in the profit and loss account Company contributions (523) (550) Foreign currency differences (7) (1) Post-employment benefit liability as at 31 December The expenses for benefit plans reported under personnel expenses consist of the following: 2006 Current service cost Interest expense Expected return on benefit plan assets (777) (789) Gross benefit expense for the period Participant contributions (332) (349) Uncapitalised additional payments Total expenses for benefit plans The assumptions for the actuarial valuations differ for each individual plan, since they were made by taking into consideration the specific circumstances of the asset investment strategy and the personnel structure of the affiliated companies. The following table shows the key benchmarks of the plans that are included in the calculation and the average weighted assumptions on which the actuarial estimates of the defined benefit plans were based: 2006 Number of plans 4 4 of which with assets set aside 2 2 of which with no assets set aside 2 2 Number of individuals participating in the plans of whom are active insurance participants of whom are retired Discount rate (weighted) 2.91% 3.01% Expected return on plan assets (weighted) 3.50% 3.50% Development in wages 0-1.5% 0-0.5% Development in pensions 0-2% 0% Average projected remaining working life of participants years years Effective return on plan assets 10.38% 7.72%

41 Segment Reporting Corporate Governance Group Information 41 The following table shows how the defined benefit obligations are secured and the impact of variances between the expected and actual return on the plan assets over the past five years: Plan assets (24 714) (22 511) (22 767) (25 522) (26 448) Obligations from benefit plans Surplus (1 542) (131) 151 (1 658) (1 250) Difference between expected and actual return on plan assets (1 560) (674) (389) (1 117) (935) Actuarial adjustments to benefit obligations The average weighted distribution of the plan assets as at 31 December 2006 and by investment category is shown below: 2006 Rented properties 11% 11% Owner-occupied properties 18% 15% Obligations CHF 43% 52% Obligations other currencies 1% 0% Shares Switzerland 4% 4% Shares other countries 18% 14% Liquid assets and other financial assets 5% 4% Total plan assets 100% 100% The AC-Group s expected payments for pension plans for the year 2007 are EUR 545 K (prior year: EUR 503 K).

42 42 Group Management Report Consolidated Financial Statements Notes 8. Depreciation and Amortisation 11. Income Tax Regular amortisation Other intangible assets Tangible fixed assets Total Other Operating Costs 2006 Data processing expenses Cost of premises Losses from disposal of assets Other items Total The item»data processing expenses«includes an amount of EUR 1,724 K (prior year: EUR 1,885 K) in expenses for maintenance and license fees in connection with the operation of the data centers. The»other items«position includes travel costs and expenses for communications, postage, advertising, marketing, investor relations and administration. Also included in this item are the expenses for personnel recruitment and training, various operating expenses of an overhead nature and other taxes in the amount of EUR 57 K (prior year: EUR 25 K). 10. Financial Result 2006 Interest income from finance leases Other interest income Other financial income Total financial income Interest expense from finance leases (81) (100) Other interest expense (779) (96) Other financial expense (595) (10) Total financial expense (1 455) (206) Total financial result (676) 282 Current tax charges (860) (535) Deferred tax (charges) credits (1 774) 446 Total (2 634) (89) Current tax charges 2006 Current income tax for the reporting year (864) (539) Current income and withholding taxes relating to prior periods 4 (15) Tax reductions from activation of tax loss carry forwards of which no deferred taxes were applied 19 Total (860) (535) Credits (charges) from deferred taxes 2006 Change in tax charge on undistributed profits for the reporting year (5) 55 Change in temporary differences from change in tax rates 23 Change in temporary differences for the reporting year (1 533) (186) Realisation of tax assets from tax losses brought forward for prior years (117) (50) Value adjustment to deferred tax assets from tax losses brought forward for prior years (297) Recognition of tax assets from tax losses brought forward for prior years Total (1 774) 446 Reference is made to Notes 17 and 29 regarding the changes in deferred tax assets and tax liabilities. Based on tax legislation in effect in Germany as at the balance sheet date, taxable earnings are expected to be subject to an unchanged tax rate of 39%. The other financial expense includes commissions of EUR 401 K (prior year: 0) for the extension of the loan and EUR 113 K (prior year: 0) in expenses for the interest hedges.

43 Segment Reporting Corporate Governance Group Information 43 Expected tax rate relating to earnings before tax (100%) 2006 Changes in deferred tax assets and liabilities 2006 Municipal trade tax 17.0% 17.0% Corporation tax (25% of profit after municipal trade tax, unchanged) 20.8% 20.8% Solidarity surtax (5.5% of corporation tax, unchanged) 1.2% 1.2% Total tax burden as percentage of earnings before tax 39.0% 39.0% The following reconciliation shows the main factors that lead to a tax expense which differs from the tax expense that was expected: 2006 EBT Expected tax charge at the rate of 39% (prior year: 39%) (287) (429) (Net) tax effect from non-taxable charges/profits Deferred tax charges/profits from tax losses brought forward for prior years Current tax charges/profits relating to prior periods 4 (15) Utilisation of tax losses brought forward 19 Value adjustment of tax losses brought forward for prior years (297) Current tax losses not utilised (2 714) (434) Effect of different tax rates in foreign countries Other effects 110 (9) Total (2 634) (89) The following table shows a transition of the changes in deferred tax assets and liabilities to the charges/credits from deferred taxes reported in the profit and loss account. Change in deferred tax assets Change in deferred tax liabilities (3 882) 8 Total (1 350) 149 Tax charge recorded in the profit and loss account (1 774) 446 Tax charge recorded in the shareholders equity (20) Initial consolidation 437 Liability from value adjustment to intangible assets (297) Foreign currency differences 7 Total (1 350) Goodwill Historical costs January Additions from changes in the scope of the consolidation Additions from acquisition of minority interests Foreign currency differences (46) (4) 31 December Accumulated amortisation 1 January Amortisation in reporting year Impairment loss Foreign currency differences 31 December Net book values 1 January December The additions from changes in the scope of the consolidation pertain to the acquisition of All for One Systemhaus GmbH Midmarket Solutions, Oberessendorf (see Note 1, Scope of the Consolidation). The addition from the acquisition of minority interests pertains to a goodwill adjustment in connection with the purchase of the shares in Process Partner AG, St. Gallen, that was completed in 2004 (see Note 27, Provisions).

44 44 Group Management Report Consolidated Financial Statements Notes Goodwill Purchase price Foreign currency differences Additions reporting year Net book value Part of Rechenzentrum Schulte GmbH operations Part of BRW GmbH operations Process Partner AG (46) Part of Pauli Data GmbH operations AC Solutions EDV BeratungsgmbH & Co KG Kümmel, Wiedmann + Partner Unternehmensberatung GmbH All for One Midmarket Solutions GmbH December (46) Impairment Testing of Goodwill In testing for impairment, the AC-Group has identified the following companies as being cash-generating units (CGUs) to which the goodwill listed above can be allocated: 2006 ACCURAT Informatik GmbH ACCURAT Consulting GmbH Kümmel, Wiedmann + Partner Unternehmensberatung GmbH Process Partner AG AC Solutions EDV BeratungsgmbH & Co KG and AC-Service Gesellschaft für Datenverarbeitung GmbH All for One Midmarket Solutions GmbH Total The value in use was applied when testing goodwill for impairment. The value in use of future cash flows was determined using the discounted cash flow method, which does not consider tax payments. The applied discount rate built on the capital asset pricing model and was derived from the average weighted cost of capital. The cost of equity is based on a risk-free capital-market interest rate for the respective period taking into consideration the Beta for the industry and a risk premium based on the relevant capital market. From this a pre-tax discount rate was derived based on the tax situation. Corporate management has prepared and put in place, and the board of directors has audited, capital-investment, sales and cost budget forecasts covering the next three years for these cash-generating units. These budgets consider the latest management estimates on the development of sales and costs. From this prospective cash flow, statements were derived and plausible assumptions about further performance in the years that follow were made. ACCURAT Informatik GmbH: This company was allocated the goodwill from the operating units of Rechenzentrum Schulte GmbH and BRW GmbH. A growth rate of 1% was applied for the»terminal value«in determining the free cash flows. An average pre-tax discount rate of 7.98% arose based on the assumptions that were made. The determined value in use exceeds the assets and liabilities allocated to this cash-generating unit. Therefore there was no impairment as at 31 December The discount rate is lower than that of the prior year because a slower reduction in outside capital and a growth rate in»terminal value«of 1% are expected. The board of directors believes that there is a certain risk that a goodwill impairment loss will have to be recognised in the future. An average discount rate of 13% just barely covers the goodwill. ACCURAT Consulting GmbH: This cash-generating unit is allocated the goodwill from the operating unit from Pauli Data GmbH. Since this company operates in the same branch as ACCURAT Informatik GmbH, the same assumptions were made. The average pre-tax discount rate of 7.75% is slightly lower than that for ACCURAT Informatik. The impairment test revealed that no unscheduled amortisation on impairment is necessary on the goodwill from the operating unit taken over from Pauli Data GmbH. Kümmel, Wiedmann + Partner Unternehmensberatung GmbH: The implied average pre-tax discount rate is 16.92%. The impairment test revealed that overall the assets and liabilities of Kümmel, Wiedmann + Partner Unternehmensberatung GmbH are not impaired, which in turn means that there is no impairment to goodwill recognised at 31 December The board of directors believes, aside from extraordinary events, that even a reasonable adjustment to the assumptions made would not result in the carrying amount of the goodwill exceeding the recoverable amount. Process Partner AG: The implied average pre-tax discount rate is 13.66%. The impairment test showed that overall there is no impairment to the assets and liabilities allocated to this company. Therefore the goodwill is not impaired.

45 Segment Reporting Corporate Governance Group Information 45 AC Solutions EDV BeratungsgmbH & Co KG: This cash-generating unit was changed. Formerly only AC Solutions EDV BeratungsgmbH & Co KG was considered a unit. Now this unit has been expanded by the addition of AC-Service Gesellschaft für Datenverarbeitung GmbH. In light of the intended close cooperation among the Austrian companies, these were treated as a unit (without KWP Human Capital Consulting GmbH) in the planning and budgeting process. The implied average pre-tax discount rate is 13.88%. The impairment test revealed no goodwill impairment as at 31 December The board of directors believes that, aside from extraordinary events, even a reasonable modification to the assumptions would not result in the carrying amount of the goodwill exceeding the recoverable amount. All for One Midmarket Solutions GmbH: A growth discount of 1% was applied to the capitalisation rate for the»terminal value«in determining the free cash flows. There arose an average pre-tax discount rate of 8.15% based on the assumptions that were made. The determined value in use exceeds the assets and liabilities allocated to this cash-generating unit. Therefore there was no impairment as at 31 December The board of directors believes that, aside from extraordinary events, even a reasonable modification to the assumptions would not result in the carrying amount of the goodwill exceeding the recoverable amount. 13. Other Intangible Assets The additions from the change in the scope of the consolidation pertain to the acquisition of the shareholdings in All for One Systemhaus GmbH Midmarket Solutions, Oberessendorf (see Note 1, Scope of the Consolidation). Other intangible assets 2006 Historical costs 1 January Additions from changes in the scope of the consolidation Additions from the acquisition of minority interests 191 Other additions Disposals (12) Foreign currency differences (18) (4) 31 December Accumulated amortisation 1 January Additions from changes in the scope of the consolidation Amortisation in reporting year Disposals (12) Foreign currency differences (9) (1) 31 December Net book values 1 January December

46 46 Group Management Report Consolidated Financial Statements Notes The other additions in 2006 primarily concern the costs of a subsidiary s self-created software that meets the recognition criteria as an intangible asset. Other intangible assets Purchase price Additions reporting year Estimated useful life Months Remaining useful life Months Net book value Multipers payroll software Internal SAP R/3 solution Sales potential from All for One Midmarket Solutions GmbH customer base All for One Midmarket Solutions GmbH industry solutions All for One Midmarket Solutions GmbH trademark rights infinite infinite Sales potential from Process Partner AG customer base Preferred partnership agreement Sales potential from Kümmel, Wiedmann + Partner GmbH customer base Sales potential from KWP Human Capital Consulting GmbH customer base Sales potential from AC Solutions EDV BeratungsgmbH & Co KG customer base Other intangible assets December

47 Segment Reporting Corporate Governance Group Information Tangible Fixed Assets Land and buildings Leasehold improvements IT installations Other fixed costs Total Historical costs 1 January Adjustment to accounting standards IAS 17 / IFRIC 4 as at 1 January (13 326) (13 326) 1 January - adjusted Additions from purchase of assets Additions to finance lease assets Additions from changes in the scope of the consolidation Disposals of purchased assets (268) (678) (515) (1 461) Foreign currency differences (22) (47) (7) (76) 31 December January Additions from purchase of assets Additions to finance lease assets Additions from changes in the scope of the consolidation Disposals of purchased assets (226) (1 955) (480) (2 661) Disposals of finance lease assets (350) (350) Foreign currency differences (58) (226) (37) (321) 31 December Accumulated depreciation 1 January Adjustment to accounting standards IAS 17 / IFRIC 4 as at 1 January (7 578) (7 578) 1 January - adjusted Depreciation in reporting year Additions from changes in the scope of the consolidation Disposals (266) (661) (501) (1 428) Foreign currency differences (6) (41) (4) (51) 31 December January Depreciation in reporting year Additions from changes in the scope of the consolidation Disposals of purchased assets (216) (1 953) (412) (2 581) Disposals of finance lease assets (350) (350) Foreign currency differences (40) (175) (31) (246) 31 December Continued on page 48

48 48 Group Management Report Consolidated Financial Statements Notes Continued from page 47 Land and buildings Leasehold improvements IT installations Other fixed costs Total Net book values 1 January December January December Finance leases thereof 1 January December January December The land and buildings pertain to a Belgian Group company s commercial building. Under leasehold improvements are also included those improvements over which the lessor has since assumed legal ownership, but which remain in the beneficial ownership of the lessee for the term of the lease. The useful life for depreciation purposes is the shorter of the remaining term of the lease or the useful life. The»IT installations«item includes standard software usage rights acquired from third parties, which are used in the sense of an operating resource for the provision of services. The other tangible fixed assets include office machines and equipment, office furniture and furnishings, as well as company vehicles. The lessor has legal ownership of the tangible fixed assets of EUR 810 K (prior year: EUR 591 K) under finance leases. At the end of the lease term, the lessee has the option of buying the item at a residual purchase price that is significantly lower than the market value. This option is generally made use of. As of the balance sheet date there were purchase commitments totalling EUR 464 K (prior year: EUR 799 K) for the procurement of hardware. 15. Non-Current Financial Assets 2006 Finance leases Deposits paid Securities Other loans 10 9 Total There are no finance lease arrangements with a remaining term of more than five years. The share of unrealised interest in the income from finance leases is EUR 386 K (prior year: EUR 287 K). The average interest rate for lease receivables during the reporting year was 6.1%. The average remaining term of the lease receivables is approximately 20 months for the arrangements in Switzerland and approximately 25 months for the arrangements in Luxemburg. The securities relate to the provisions for severance payments in Austria (see Note 27, Provisions). In the Austrian subsidiary had to invest 20% of the obligation, or EUR 13.1 K, in certain

49 Segment Reporting Corporate Governance Group Information 49 bonds that were reported in the tax balance sheet at the end of the prior year (EUR 65.5 K). These bonds may only be used as security for the provisions for redundancy and severance payments. The Constitutional Court of Austria overturned this stipulation in its verdict of 6 October Securities-based collateralisation of the provisions for severance payments are no longer required as at the balance sheet date of 31 December This means that the entire amount of these securities (EUR 42 K) is freely available for use. Securities are classified»available for sale«. Changes in valuation are recognised in equity. 16. Other Non-Current Assets 2006 Support and maintenance entitlements 272 Total 272 Support and maintenance agreements, in the form of total packages for an initial maintenance period, are concluded at the same time that hardware and software are bought. These support and maintenance assets are recognised as other receivables and are then eliminated over an agreed term. 17. Deferred Tax Assets January Increase in deferred income tax assets for prior years 628 Changes in the scope of the consolidation Other increases Value adjustment to deferred income tax assets (259) Use of deferred income tax assets from tax loss carry forwards for prior years (50) Timing differences concerning goodwill (393) Other decreases (639) (98) Foreign currency differences 4 31 December As at the balance sheet date, AC-Service GmbH Informationsverarbeitung Systeme und Service, Stuttgart, had corporation tax loss carry forwards in the amount of EUR 2,117 K (prior year: EUR 2,403 K) and municipal trade tax loss carry forwards of EUR 0 (prior year: EUR 225 K). Taxable earnings of EUR 357 K were generated during the reporting year, which were netted against the corporation and municipal trade tax loss carry forwards, and for which deferred tax assets were recognised in prior years. Since it is probable that AC-Service GmbH Informationsverarbeitung Systeme und Service will join in the corporation and municipal trade tax consolidation in the year 2007, the remaining capitalised tax assets in the amount EUR 274 K were completely value adjusted. Temporary differences and assets from deferred taxes Loss carry forward / temporary differences 2006 Deferred tax assets 2006 Loss carry forward / temporary differences Deferred tax assets German tax loss brought forward (KöSt) German tax loss brought forward (GewSt) Austrian tax loss brought forward Goodwill Tangible fixed assets Trade accounts receivable Post-employment benefit liabilities Provisions Other temporary differences Total

50 50 Group Management Report Consolidated Financial Statements Notes As at the balance sheet date, AC-Service AG had corporation tax loss carry forwards in the amount of EUR 18,465 K (prior year: EUR 11,577 K) and municipal trade tax loss carry forwards of EUR 18,427 K (prior year: EUR 11,844 K). As at 31 December 2006 deferred tax assets in the amount of EUR 665 K were recognised on these loss carry forwards. AC-Service AG s latest budget planning for the coming years shows future taxable earnings, which indicate the probable use of the tax loss carry forwards only in the amount recognised. The Austrian subsidiary AC-Service Gesellschaft für Datenverarbeitung GmbH, Vienna, has tax loss carry forwards of EUR 3,017 K (prior year: EUR 2,994 K). The amount of EUR 42 K reported last year was adjusted by EUR 23 K to EUR 19 K. Recognition of deferred tax assets is made on the basis of the each respective company s budget. This budget is revised annually and requires a number of estimations on the part of management of the subsidiary and the board of directors. Such estimations may change as a result of changes in the market, the competitive environment, customer structure and general economic situation. There is a great deal of volatility involved in recognising deferred tax assets in light of the regular reassessments that are made. 18. Inventories 2006 Hardware for further sale Software for further sale Expendable and operating materials Value adjustments (386) (105) Total The value adjustments pertain to inventory items having a gross value of EUR 1,056 K (prior year: EUR 159 K). 19. Trade Accounts Receivable 2006 Accounts receivable from BEKO-Group Accounts receivable from other third parties Value adjustments (763) (195) Total The trade accounts receivable of Kümmel, Wiedmann + Partner Unternehmensberatung GmbH are pledged to the financing bank through global assignment. The accounts receivable as at 31 December 2006 totalled EUR 1,400 K (prior year: EUR 1,369 K) and are used to secure a bank overdraft in the amount of EUR 400 K (prior year: EUR 455 K) (see Note 28, Financial Liabilities). Trade accounts receivable from using the percentage of completion method totalled EUR 541 K (prior year: 0) as at 31 December Current Financial Assets 2006 Finance leases Advances and loans to employees Interest-rate-hedging transactions 51 Deposits paid Total The amounts reported under finance leases include that share of the income from the finance leases that is due within twelve months. The unrealised share of interest therein totalled EUR 391 K (prior year: EUR 306 K). 21. Other Current Assets 2006 Support and maintenance entitlements Prepaid services Other accounts receivable Total Cash and Cash Equivalents 2006 Cash assets Financial investments with an original fixed term of under 90 days Total

51 Segment Reporting Corporate Governance Group Information 51 The average interest on bank deposits was 1.67% (prior year: 1.2%). Of the cash and cash equivalents 78.1% (prior year: 80.1%) is denominated in EUR, 21.7% (prior year: 19.8%) in CHF and 0.2% (prior year: 0.1%) in CZK. Under the framework and share-purchase agreements of October 2004, AC-Service AG came to an agreement with the other shareholders to increase its holdings in Process Partner AG, St. Gallen/Switzerland, from then 40% to 100%. The variable, additional purchase price, which becomes payable in the first half of calendar year 2008, was secured through the granting of a firstpriority right of lien on the claims of the principal bank in the amount of EUR 1,550 K in favour of the seller of the shares. 23. Shareholders Equity The issued share capital is divided into 5,400,000 registered, nopar-value shares (individual share certificates). The arithmetic nominal value is an unchanged EUR 3 per share. In addition to the share capital of EUR 16,200 K there is also authorised capital in the amount of EUR 8,100 K, which can be used until 17 May 2011 in accordance with the annual general meeting s resolution of 18 May The board of directors is authorised, with the approval of the supervisory board, to exclude shareholders subscription rights for parts of the authorised capital. The company s contingent capital totals EUR 1,080 K. 24. Treasury Stock No shares (prior year: none) were purchased during the reporting period. As at 31 December 2006 AC-Service AG held 226,582 shares (prior year: 226,582 shares), which were repurchased at an average price of EUR 4.52 (prior year: EUR 4.52). As at 31 December 2006 there were 5,173,418 shares outstanding (prior year: 5,173,418). 25. Earnings per Share Earnings per share were calculated based on the net annual earnings and the average number of shares outstanding (issued shares less treasury stock). An average number of 5,173,418 shares (prior year: 5,173,418) were outstanding in the year The average number of shares (diluted) outstanding is the same as the average number of shares (undiluted) outstanding. The diluted earnings per share are therefore the same as the undiluted earnings per share. 26. Minority Interests January Adjustment to accounting standards IAS 17 / IFRIC January - adjusted Dividend distribution (48) Profit share of current year (66) (131) Acquisition of minority interest (5) Allocation of intangible assets from acquisition of minority interest 45 Contribution to capital reserve 33 Addition from changes in the scope of the consolidation 342 Foreign currency differences 3 (1) 31 December Treasury stock Accumulated from the start since Repurchased shares Number of repurchased treasury shares Average cost price in EUR Highest price paid in EUR Lowest price paid in EUR Cost price of repurchased treasury shares, Amount of nominal capital allotted to treasury shares, Percentage of treasury shares to nominal capital 4.20% 4.20% 0.34% 1.45% 2.41%

52 52 Group Management Report Consolidated Financial Statements Notes These pertain to an interest of 5% held by Sanitas Privat versicherungen AG, Zurich, in the shareholders equity of AC-Service (Schweiz) AG, Wettingen, and an interest of % in the shareholders equity of each of AC Solutions EDV BeratungsgmbH, Vienna, and AC Solutions EDV BeratungsgmbH & Co KG, Vienna. 27. Provisions Provisons made Provisons used Provisons reversed Interest Foreign currency differences Reclassification Severance payments Austria Additional purchase price for Process Partner (38) Other severance payments (145) Long-term share thereof (75) 394 Other long-term provisions Impending project losses Guarantee and damages cases (65) 82 Total (145) (65) 74 (38) Long-term (> 12 months) (38) (75) Short-term (< 12 months) (145) (65) Total (145) (65) 74 (38) Severance Payments Austria This item pertains to statutory entitlements to severance payments or redundancies in cases of regular retirement or separation actions initiated by the company in Austria. The values recognised are based on actuarial calculations. Variable Additional Purchase Price Component for Process Partner AG Because of the contractual agreement made in 2004, the provision established during the reporting year for the variable additional purchase price component stemming from the acquisition of 40% of the shares in Process Partner AG was increased to EUR 1,262 K (prior year: EUR 987 K). This increase includes a share of EUR 31 K (prior year: EUR 19 K) for accrued interest expenses. The increase to this provision coincided with an adjustment to goodwill in the same amount (see Note 12, Goodwill). 28. Financial Liabilities Total liabilities Due under 1 year Due between 1 and 5 years Due after 5 years Future payments for finance leases Interest thereof (91) (47) (44) Finance lease liabilities Bank loans Other financial liabilities Total December December

53 Segment Reporting Corporate Governance Group Information 53 AC-Service AG and Dresdner Bank AG, Frankfurt, concluded a credit agreement for an acquisition loan in the amount of EUR 15,500 K and for an operational funding line of credit of EUR 4,000 K in order to fund the purchase of the shareholdings in All for One Systemhaus GmbH Midmarket Solutions. The agreement is dated 13 February 2006 and has a term of until 30 December Repayment of the acquisition loan is made semi-annually in contractual installments on 30 June and 31 December of each year. Special early principal repayments are possible and may also be required in special instances. The interest rates are based on the EURIBOR plus a spread of between 1% and 1.9% depending on certain financial indicators. There are a number of covenants that must be met for the periodic extension of the loan, including maintaining a number of different financial figures and periodically providing other guarantees. A senior pledge of all the interest in All for One Midmarket Solutions GmbH, Stuttgart, and ACCURAT Informatik GmbH, Dreieich, was made as security for the financing bank. The average interest rate for lease liabilities was 3.27% (prior year: 3.61%) during the reporting period. The lease payments are established when the arrangement is made and are not subject to change in installment amount or interest for the duration of the term. The average remaining term of finance lease liabilities is about 21 months (prior year: approximately 27 months). The amounts due to banks as at 31 December 2006 consisted of the acquisition loan of EUR 13,000 K, a bank overdraft of EUR 358 K (interest rate: 9.75%) (prior year: EUR 354 K), as well as a bank loan of EUR 37 K (interest rate: 5.50%) (prior year: EUR 55 K). The liabilities from the bank overdraft and from the bank loan are secured through global assignments of the trade accounts receivable of Kümmel, Wiedmann + Partner Unternehmensberatung GmbH. There are no other contractual guarantees or obligations in place. The other financial liabilities are subject to interest averaging 2.46% (prior year: 2.59%). The average remaining weighted term is seven months (prior year: nine months). Of the financial liabilities, 86.3% (prior year: 13.1%) are denominated in EUR, 13.7% (prior year: 86.9%) in CHF and 0% (prior year: 0.1%) in CZK. As at the balance sheet date the AC-Group had approved lines of credit at banks in the amount of EUR 19,077 K (prior year: EUR 4,722 K). These have been utilised in the form of aval guarantees for rental security deposits in the amount of EUR 224 K (prior year: EUR 169 K), performance bonds of EUR 598 K (prior year: 0) and bank loans of EUR 13,395 K (prior year: EUR 409 K). 29. Deferred Tax Liabilities January Adjustment to accounting standards IAS 17 / IFRIC January - adjusted Intangible assets from changes in the scope of the consolidation Reduction in undistributed profits (55) Addition to undistributed profits 5 Other reductions (254) (165) Other additions Foreign currency differences (9) (1) 31 December Make-up of deferred income tax liabilities Temporary differences 2006 Deferred tax liabilities 2006 Temporary differences Deferred tax liabilities Intangible assets Financial assets Tangible fixed assets Trade accounts receivable Provisions Undistributed profits Total

54 54 Group Management Report Consolidated Financial Statements Notes For corporation-tax purposes, distributions from subsidiaries to a parent company in Germany are subject to a flat-rate offset to operating expenses in the amount of 5% of the amount distributed. Deferred tax liabilities are then recognised for the resulting additional anticipated corporation-tax expense. The increase in temporary differences on the»intangible assets«position stems primarily from the changes in the scope of the consolidation mentioned in Note Other Liabilities 2006 Personnel obligations Other tax liabilities Advanced payment on maintenance charges for following year Liabilities from KWP cooperation agreement Other liabilities Total Short-term element thereof Long-term element thereof The item»personel obligations«relates predominantly to liabilities from unused vacation leave, partial retirement work arrangements, as yet unpaid variable compensation components, commissions, flexitime and overtime payments, bonuses and liabilities to social security insurance providers. 31. Trade Accounts Payable Trade accounts payable relate solely to third parties outside the Group. As at 31 December 2006 the trade accounts payable under the percentage of completion method totalled EUR 60 K (prior year: 0). 32. Related Parties BEKO HOLDING AG and its Group Companies BEKO HOLDING AG, Nöhagen/Austria, held an interest of more than 50% of the share capital of AC-Service AG, Stuttgart, as at the balance sheet date. BEKO HOLDING AG, Nöhagen/Austria, as the majority shareholder, prepares the consolidated financial statements for the largest grouping of companies that includes AC-Service AG, Stuttgart. During the reporting year sales of EUR 81 K (prior year: EUR 79 K) were generated with BEKO HOLDING AG group companies in connection with support relating to the applications deployed and the operation of an SAP R/3 system. All business transactions with BEKO HOLDING AG and its group companies were made on the basis of terms and conditions that would apply among independent business partners. Members of the Supervisory Board The following individuals were members of the supervisory board during the reporting year: Peter Brogle (corporate consultant, chairman), Rainer Schad (lawyer, deputy chairman), Peter Fritsch (CFO of BEKO HOLDING AG, Nöhagen/Austria, and member of corporate bodies in other BEKO-Group companies). During the reporting year, the members of the supervisory board were also members of the supervisory boards and control bodies of the following companies in terms of 125, Section 1, Sentence 3 of the German Stock Corporation Law (AktG): Peter Brogle: Alupak AG, Belp/Switzerland (member of the administrative board), Nahrin AG, Sarnen/Switzerland (member of the administrative board), AC-Service (Schweiz) AG, Wettingen/ Switzerland (member of the administrative board since 29 June 2006), RedIT AG, Zug/Switzerland (president of the administrative board) and its subsidiaries: InteGreat Business Solutions AG, Zug/Switzerland (president of the administrative board), Tristar Technologie AG, Zug/Switzerland (president of the administrative board), MGA Informatik AG, Buochs/Switzerland (president of the administrative board since 14 June 2006), MGA Solutions Baar AG, Baar/Switzerland (president of the administrative board since 30 June 2006), MGA Solutions Frauenfeld AG, Frauenfeld/Switzerland (president of the administrative board since 30 June 2006), MGA Solutions Zürich AG, Zürich/Switzerland (president of the administrative board since 30 June 2006), Object DynamiX AG, Luzern/Switzerland (president of the administrative board since 30 June 2006). Rainer Schad: VPT AG Packaging Technology, Spaichingen/ Germany (deputy chairman of the supervisory board until 22 April 2006), Stiftung-Solarenergie, Freiburg i. Br./Germany (member of the foundation s board), Triplan AG, Bad Soden/Germany (member of the supervisory board since 1 January 2006), Bodensee Capital AG, Konstanz/Germany (chairman of the supervisory board). Peter Fritsch: Pallas Soft AG, Regensburg/Germany (member of the supervisory board). Total fixed compensation for the supervisory board was as follows: Compensation for Supervisory Board 2006 Peter Brogle Peter Fritsch Rainer Schad Total 64 54

55 Segment Reporting Corporate Governance Group Information 55 In addition to the compensation as set forth by the Articles of Association, Mr. Brogle also received a fee of EUR 10 K in the financial year 2006 for his business consulting activities based on a resolution of the supervisory board pursuant to 114, Section 1, AktG. Members of the Board of Directors The board of directors, consisting of Herbert Werle and Marco Fontana (appointed until October 2008), was enlarged on 17 February 2006 by the addition of Lars Landwehrkamp (appointed until January 2009). Membership by these three members of the board of directors in control bodies in terms of 125, Section 1, Sentence 3 of the German Stock Corporation Law (AktG), are limited to various companies within the AC-Group. Compensation for the members of the board of directors for all of their employment relationships in companies included within the scope of the consolidation for the year 2006 include salaries, bonuses (performance-related components) and lump-sum compensation for representation and automobile expenses. Employer contributions for retirement benefits (pension fund) were not included during the reporting year as these involve contributions set under statute that are made to a retirement benefit plan regulated by law. The contribution requirement applies to all employees of the affiliated companies. The performance-related compensation components are measured on the basis of the level at which the qualitative and quantitative short-term annual goals are reached, which are established annually with the supervisory board. Any minimum entitlements to bonuses are allocated to the fixed-component part of the compensation. During the reporting year, the quantitative goals for measuring the performance-related components primarily involved the achievement of an objective within the Group s operating earnings (EBITA) for the financial year As a qualitative goal, all members of the board of directors were tasked to actively participate in the execution of a project to modify and adapt the corporate strategy and ensure its implementation. Additional goals of a qualitative and quantitative nature were established for each member on an individual basis. The supervisory board determines the extent of goal achievement annually following the presentation of the audited consolidated financial statements. This means that the amounts stated for the performance-related components are estimates. The actual amounts to be paid may vary from these estimates. Any amounts below or in excess of the estimated amounts will be recognised in the consolidated financial statements of the following year and are presented above as a»change in provisions for prior year«. No options for shares of AC-Service AG stock were granted during the reporting year. No loans were extended to members of corporate bodies. Apart from the previously mentioned compensation for Mr Brogle, no payments for consulting activities were made. There were no unusual transactions made with related parties. Compensation for Board of Directors Herbert Werle Marco Fontana Lars Landwehrkamp Total Compensation for Board of Directors 2006 Fixed components Performance-related components Total compensation paid for Change in provisions for prior year Total compensation Compensation for Board of Directors Fixed components Performance-related components Total compensation paid for Change in provisions for prior year (5) (5) Total compensation

56 56 Group Management Report Consolidated Financial Statements Notes Pension Fund of AC-Service (Schweiz) AG, Wettingen/Switzerland The AC-Service (Schweiz) AG pension fund rents office space in Wettingen to AC-Service (Schweiz) AG. The terms and conditions of the rental agreement are within the range of what is customary. Rent expenses relating to this were EUR 289 K (prior year: EUR 293 K) during the 2006 reporting year. AC-Service Management AG and AC-Service (Schweiz) AG provide services in connection with the administration of the pension fund of AC-Service (Schweiz) AG. Compensation for this totalled EUR 33 K (prior year: EUR 43 K). 33. Other Financial Liabilities not Reported on the Balance Sheet Future liabilities for firm commitments from»operating leases«not reported in the balance sheet consist of the following: and later Total The AC-Group operates from rented office space except for its facility in Belgium. A variety of infrastructure (e.g. hardware, operating software) needed for the operation of the data centers is provided through leasing agreements. The majority of company vehicles provided to employees are also leased. The original fixed rental periods range from one to ten years. Expenses for»operating leases«of EUR 3,220 K (prior year: EUR 2,365 K) during the reporting year were recognised in the profit and loss account. The finance lease liabilities are included under financial liabilities (see Note 28, Financial Liabilities). There also exist future financial obligations from maintenance agreements in the amount of EUR 1,293 K (prior year: EUR 1,797 K). 34. Interest Hedges On 2 March 2006 an interest rate swap agreement was made for an initial EUR 7,000 K and a term of until 30 December The agreement stipulates that AC-Service AG will pay interest of 3.47% (fixed interest rate) quarterly on the secured amount and simultaneously receive interest based on the 3-month EURIBOR. The contract value at 31 December was EUR 6,000 K and the positive market value was EUR 51 K and is reported under other current assets. In addition, an interest cap for EUR 4,000 K with a term of until 30 June 2010 was concluded on 2 March With this, the maximum interest rate on the basis of the 3-month EURIBOR is limited to 3.25%. The bank reimburses AC-Service AG for any interest in excess of that. Its contract value as at 31 December 2006 was still EUR 4,000 K and the negative market value was minus EUR 113 K and is reported under other liabilities. Under certain capital-market conditions, a bonus will be due for this interest-cap transaction beginning on 6 March 2008 until 30 June This bonus will be between 0% and 3.5% p.a. depending on the difference between the 2-year and 10-year swap rates. 35. Contingent Liabilities AC-Group is in litigation with a minority shareholder of one of the consolidated companies. The amount in dispute was heretofore set at EUR 100 K. A conciliatory hearing was held on 11 April Proceedings have been suspended. The parties are in negotiations regarding an out-of-court settlement. In the board of directors assessment, this matter will not lead to any negative effects on the AC-Group s assets and earnings situation. 36. Shares Held by Members of AC-Service AG Corporate Bodies Supervisory Board 2006 Shares Shares Peter Brogle Rainer Schad Peter Fritsch Board of Directors Herbert Werle Marco Fontana Lars Landwehrkamp The change in the holdings of Herbert Werle result from the sales of stock on 24 November 2006 (50,000 shares) and 5 December 2006 (20,000 shares). 37. Announcements Pursuant to 21, Section 1 of the German Securities Trading Act (WpHG) BEKO HOLDING AG, Nöhagen/Austria, notified the company on 27 November 2003 in accordance with 21, Section 1, WpHG that on 27 November 2003 it exceeded the threshold of 50% of the voting rights to the company and that it now holds a 50.25% interest in the company. The company published this announcement in the Financial Times Deutschland newspaper on 4 December 2003.

57 Segment Reporting Corporate Governance Group Information 57 Universal-Investment-Gesellschaft mbh, Frankfurt am Main, notified the company on 1 March 2007 in accordance with 21, Section 1, WpHG, that on 1 March 2007 its share of the voting rights in the company exceeded the threshold of 5% and since that time has totalled 5.11% (corresponding to 275,710 voting rights or shares). At the same time, Universal-Investment-Gesellschaft mbh also reported that the voting-rights threshold of 3% had already been exceeded prior to the enactment of the German Transparency Directive Implementation Act (TUG) on 20 January Auditing fees include all the fees for the auditing of the consolidated financial statements and the auditing costs for the financial statements of AC-Service AG and its subsidiaries to the extent that these services were performed by KPMG Germany. 40. Release of Consolidated Financial Statements for Publication The board of directors released these consolidated financial statements for publication on 22 March Corporate Governance Code In December 2006 the board of directors and the supervisory board published the declaration of conformity for the year 2006 in accordance with 161 of the German Stock Corporation Law (AktG) and made it permanently accessible. The full text of this declaration is included in this annual report. 39. Group Auditor Fees and Services The fees for Group auditor services in the financial years 2006 and were: 2006 Auditing fees Other fees 8 Total

58 58 Group Management Report Consolidated Financial Statements Notes Segment Reporting Values in Managed IT Services SAP Solutions Sales to third parties Inter-segment sales Total sales Operational segment result 749 (153) (69) 190 Unallocated Group costs Total operational result Interest income and other financial expense and income (14) 19 (53) (1) Share of result for the period from associated company (7) Income tax Net result for the year Attributable to: Equity holders of the parent Minority shareholders 10 (6) (76) (125) Net result for the year Further segment information Segment assets Unallocated Group assets Total consolidated segment assets Segment liabilties Financial liabilities Unallocated Group liabilities Total consolidated segment liabilities Operational segment result before depreciation Investments Depreciation Other non-cash expenditure Personnel As of 31 December Average for the year

59 Segment Reporting Corporate Governance Group Information 59 Human Resource Services Other Operations Consolidation Adjustments Rounding Differences Total (1 768) (2 128) (1 768) (2 128) (2 202) (1 780) Unallocated (1 019) 33 (676) 282 (7) (2 634) (89) (2 634) (89) (1 901) (1 835) (66) (131) (1 901) Unallocated (2 169) (1 762)

60 60 Group Management Report Consolidated Financial Statements Notes Geographical Segment Reporting Values in Germany Austria Sales to third parties By location of customer By location of assets Other data Segment assets Unallocated income tax assets Total consolidated segment assets Investments Personnel As of 31 December Average for the year

61 Segment Reporting Corporate Governance Group Information 61 Switzerland Rest of Europe Rest of the World Total Stuttgart, 22 March 2007 AC-Service AG The Board of Directors Herbert Werle Marco Fontana Lars Landwehrkamp

62 62 Group Management Report Consolidated Financial Statements Notes Report of the Supervisory Board Pursuant to 171, Section 2 of the German Stock Corporation Law AC-Service achieved another important milestone on its way to becoming a leading full-scale SAP service provider for small to mid-sized enterprises with the acquisition of All for One Systemhaus GmbH Midmarket Solutions (All for One GmbH) that was completed in February After detailed discussions and careful consideration of the risks and benefits involved, the supervisory board unanimously approved AC-Service AG s purchase of all the shareholdings in this SAP systems contractor, the taking out of an acquisition loan and the appointment of Lars Landwehrkamp to the board of directors effective 17 February And so, the 2006 year was dominated to a large extent by a fast pace of growth and the integration of All for One GmbH within a comprehensive strategy process. The supervisory board continually advised and oversaw the board of directors. In addition to the corporate strategy, their focus was directed predominantly on the issues of operational earnings, medium-term planning, organisation, corporate governance and the risk early warning system. The supervisory board also concerned itself with the compensation for the board of directors. Comments on Information Presented Pursuant to 289, Section 4 and 315, Section 4 of the German Commercial Code (HGB) From the supervisory board s point of view, the following comments should be made regarding the information that the board of directors presented in the management report and consolidated financial statements for the 2006 financial year pursuant to 289, Section 4, HGB and 315, Section 4, HGB: Composition of Issued Share Capital As is accurately reported by the board of directors in the management report and the consolidated financial statements, the issued share capital of AC-Service AG totals EUR 16,200,000 and consists of 5,400,000 registered no-par-value individual share certificates. Restrictions Affecting Voting Rights or the Transfer of Shares In accordance with 71 b of the German Stock Corporation Law (AktG) the voting rights from treasury shares held by a stock corporation are dormant. This also applies to the 226,582 shares of AC-Service AG treasury stock. Furthermore, the supervisory board knows of no restrictions affecting voting rights or the transfer of shares. Direct or Indirect Shares in the Capital Exceeding 10% of the Voting Rights As the board of directors correctly reported in the management report and in the consolidated financial statements, BEKO HOLDING AG is the only party holding more than a 10% share in the capital and voting rights of AC-Service AG, namely some 54.8% of the capital and voting rights. This corresponds to about 57.2% of the exercisable voting rights (total number of voting rights less the 226,582 dormant shares of AC-Service AG treasury stock in accordance with 71 b, AktG). Shares with Special Rights There are no shares with special rights in AC-Service AG. Each individual share certificate entitles one vote at the general meeting. Type of Voting Rights Control for Employee Shares There neither exist voting right controls over employee shares nor does the company have an interest in pursuing such. Legal Provisions and Stipulations in the Articles of Association Governing the Appointment and Removal of Members of the Board of Directors and on Amending the Articles of Association Legal provisions and the stipulations in the Articles of Association regarding the appointment and removal of members of the board of directors and regarding amendments to the Articles of Association presented in the management report and the consolidated financial statements are quite conventional rules, which for the most part are based on compulsory stock corporation law (examples being the regulation in 84, Section 1, Sentence 1, AktG according to which the supervisory board appoints the members of the board of directors for a maximum of five years; or the regulation in 84, Section 3, Sentence 1, AktG according to which an appointment to the board of directors may only be revoked with good cause). The stipulation in 14, Section 3, Sentence 3 of the Articles of Association, according to which resolutions amending the articles can be approved by a simple majority of the votes cast at the annual general meeting, to the extent that such is legally permissible, does indeed represent a departure from what is the normal legal case. The stipulation in 179, Section 2, Sentence 2, AktG does, however, expressly foresee the possibility of such a deciding majority, although it may not be used to change or amend the corporate purpose or for the mentioned capital measures. Authority of the Board of Directors, Particularly Regarding the Ability to Issue or Repurchase Shares The board of directors has in particular the authority to issue new shares by using the authorised capital in accordance with 5, Section 4 of the Articles of Association. In so doing, the board of directors may not only maintain the subscription rights and issue new shares to shareholders, but can thereby also exclude fractional amounts from their subscription rights. What s more, the board of directors can, with the approval of the supervisory board, exclude shareholders subscription rights for the issuance of new shares for cash contributions in line with the simplified subscription rights exclusion pursuant to 186, Section 3, Sentence 4, AktG; or for the issuance of new shares for contributions in kind, provided the new shares are issued as consideration for the purchase of companies, parts of companies or interests in companies and provided the purchase of companies, parts of companies or interests in companies is deemed to be in the best interests of the company. Both possible ways of excluding subscription rights afford the board of directors the potential to undertake flexible courses of action to benefit the company, such as to strengthen AC- Service AG s equity base at short notice, or to issue new shares as consideration when acquiring a different company. In accordance with 5, Section 5 of the Articles of Association, the contingent

63 Segment Reporting Corporate Governance Group Information 63 capital serves the granting of option rights to AC-Service AG stock to members of the company s board of directors, as well as to members of management and executives of associated companies in accordance with the resolution by the annual general meeting of 5 November At present there are no plans for granting new option rights on this basis. There is currently no authorisation for the board of directors to purchase treasury shares pursuant to 71, Section 1 Nr. 8, AktG. The 226,582 treasury shares were purchased on the basis of authorisations that have since expired and may only be used as stipulated by the annual general meeting. The applicable resolutions by the annual general meeting made on 27 May 2003 and 19 May 2004 provide in particular for the option of selling the treasury shares on the stock exchange or through a public offer to all shareholders. It is also possible to sell treasury stock to third parties for contributions in kind, provided the acquisition of the contributions in kind is in the best interests of the company and provided that the consideration to be made by the third parties for the treasury shares is not unreasonably low distribute treasury shares to third parties for cash contributions in order to introduce the shares onto a foreign stock exchange, on which the company s stock has thus far not been admitted, or dispose of the treasury stock in accordance with the provisions in 186, Section 3, Sentence 4, AktG Treasury stock may also be redeemed without the need for any further resolution by the general meeting. Consequently, the board of directors currently only has the authority to buy back or purchase treasury stock as provided by law. No new authorisation under 71, Section 1 Nr. 8, AktG is to be granted to the board of directors during the next annual general meeting. Apart from that, there is currently no authorisation for the board of directors based on a precautionary resolution by the general meeting pursuant to 33, Section 2 of the German Securities Acquisition and Takeover Act (WpÜG). Important Agreements by the Company Subject to a Change of Control Resulting from a Takeover Bid In order to not endanger the acquisition of All for One GmbH, AC-Service AG accepted the right of termination and other rights of the lender in the event of a change of control as part of the credit agreement mentioned in the management report and consolidated financial statements. These stipulations, which are quite common for acquisition loans, were a precondition on the part of the lender for concluding the credit agreement. Company Indemnity Agreements with Members of the Board of Directors or Other Employees in the Event of a Takeover Bid As the board of directors correctly reported in the management report and consolidated financial statements, no indemnity agreements on the part of the company were made with members of the board of directors or employees for the event of a takeover bid. Corporate Governance The joint declaration of conformity of the board of directors and supervisory board, which was prepared in accordance with 161 of the German Stock Corporation Law in conjunction with the German Corporate Governance Code, was published in the electronic official Federal Gazette and made permanently available on the company s website on 21 December The full text of the declaration of conformity is also included in this annual report. The reporting of the salaries for individual members of the board of directors was made for the first time in the Annual Report. The board of directors regularly and thoroughly informed the supervisory board both orally and in writing about the AC-Service AG s situation, particularly about the operational and financial situation, the human resources situation, business performance, as well as about acquisition projects, capital investment plans and fundamental issues of corporate policy. The board of directors continuously briefed the supervisory board on key operating figures and special business transactions. The chairman of the supervisory board was kept abreast by the chairman of the board of directors on important developments, decisions and projects during numerous one-on-one discussions. The chairman of the supervisory board routinely informed the members of the supervisory board about the content of these one-on-one discussions. The supervisory board discussed the corporate strategy in detail with the board of directors and regularly dealt with the company s economic situation on the basis of extensive monthly reports from the board of directors. No conflicts of interest on the part of the members of the supervisory board arose during the reporting period. Supervisory Board Meetings The supervisory board convened eight meetings during the reporting year which were held on 17 January, 1 February, 16 and 17 March, 5 May, 4 July, 25 August, 10 November and 20 November Additional supervisory board meetings were held in 2007 on 31 January, 5 March and 13 March. The supervisory board conducted an efficiency review after each meeting. In addition, the supervisory board held telephone conferences as needed. 17 January 2006 During this meeting the supervisory board examined in great detail the status of talks and negotiations concerning the planned acquisition of All for One GmbH. Also discussed were the plans for the strategy process to integrate the SAP systems house, which was co-initiated by the supervisory board and would require the AC Group to assume a new strategic alignment.

64 64 Group Management Report Consolidated Financial Statements Notes 1 February 2006 The supervisory board again convened on the matter of the planned acquisition of All for One GmbH and, after carefully discussing the results of the due diligence, approved the planned buy-out, the financing and the appointment of Lars Landwehrkamp as a new member of the AC-Service AG board of directors. 16 and 17 March 2006 The important issues handled during this balance sheet meeting were reported about in the Annual Report. The supervisory board also dealt in depth with the selection of the consultancy and its mandate in supporting the strategy process. 5 May 2006 The meeting on 5 May 2006 was convened primarily to discuss the results of the first quarter 2006 and to consult on how the strategy process had performed so far. 4 July 2006 During this meeting the supervisory board conferred extensively about the five-month results, the status of new corporateacquisition activities and the further progress of the strategy process. 25 August 2006 In its meeting of 25 August 2006 the supervisory board reviewed and discussed the semi-annual results and the interim report on the strategy process. 10 November 2006 In the meeting convened on 10 November the supervisory board dealt with the nine-month figures, the further course of the strategy process and the declaration of conformity with the German Corporate Governance Code. 20 November 2006 This meeting focused on the results of the strategy process and consultations regarding how the developed strategies are to be put in action. After very thorough discussions, the supervisory board took an approving note of the results of the strategy process. 31 January and 5 March 2007 In the two supervisory board meetings of 31 January and 5 March 2007 the budget and multi-year planning were discussed and approved, the 2006 risk report was debated and adopted, and consultations were held regarding the ongoing implementation of the strategy process. 13 March 2007 In this balance sheet meeting the supervisory board primarily discussed the annual financial statements of 31 December 2006; the management report; the board of directors proposals for the appropriation of the net earnings; the Dependent Company Report for the financial year 2006 covering AC-Service AG s relationships with associated companies; the outcome of the auditing firm s audit of the annual financial statements; management report and consolidated financial statements; the consolidated financial statements of 31 December 2006; the draft text of the group management report; and the auditing results from the group auditor as of that time. The company and group auditors reported on the significant findings from their audits during the balance sheet meeting. No separate meetings of the supervisory board s audit committee were held during the reporting year. The duties of the audit committee were performed by the three-member supervisory board as a whole under the direction of board member Peter Fritsch. Otherwise there were no other supervisory board committees established for the company. Opinions and Comments on the Dependent Company Report, the Annual Financial Statements and the Consolidated Financial Statements The Dependent Company Report for the financial year 2006 prepared by the board of directors was audited by the accounting firm UWP Unitreu GmbH Wirtschaftsprüfungsgesellschaft, Eschborn. The auditors issued the following unqualified audit opinion in the auditor s report of 7 March 2007:»Based on our statutory audit and evaluation, we certify that 1. The actual information contained in the report is correct, 2. The actions listed in the report provide no cause for any significantly different assessment than that expressed by the board of directors.«the Dependent Company Report for financial year 2006 prepared by the board of directors and examined by the auditors was submitted for review to the supervisory board on 13 March The supervisory board itself examined the Dependent Company Report for the financial year 2006 and, based on its own review, concurs with the findings from the auditors examination. Based on the final results of its own examination, there were no objections to be raised to the board of directors closing statement in the Dependent Company Report for the financial year The annual financial statements of 31 December 2006 and the management report of AC-Service AG for the 2006 financial year prepared by the board of directors were audited by the accounting firm UWP Unitreu GmbH Wirtschaftsprüfungsgesellschaft. The auditors issued an unqualified audit opinion on 7 March The supervisory board itself examined the annual financial statements, the management report and the board of director s proposal for the appropriation of the net earnings. After examining the submissions, considering the reports and explanations provided by the auditors and holding extensive discussions with the group auditors and the board of directors during the meeting of 13 March 2007 and subsequent thereto, the supervisory board concurred with the findings of the audit of the annual financial statements. The supervisory board raised no objections based on the final results of its own examination. The supervisory board approved the annual financial statements of 31 December 2006 prepared by the board of directors and audited by auditors. These are hereby finalised. The consolidated financial statements of 31 December 2006 and the group management report for the 2006 financial year prepared by the board of directors were audited by the accounting

65 Segment Reporting Corporate Governance Group Information 65 firm KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Stuttgart. The auditors issued an unqualified audit opinion on 27 March The supervisory board itself also examined the consolidated financial statements and group management report. After examining the submissions, considering the reports and explanations provided by the auditors and holding extensive discussions with the group auditors and the board of directors during the meeting of 13 March 2007 and subsequent thereto, the supervisory board concurred with the findings of the audit of the consolidated financial statements. The supervisory board raised no objections based on the final results of its own examination. The supervisory board approved the consolidated financial statements of 31 December 2006 prepared by the board of directors and audited by auditors. The board of directors and supervisory board worked very conscientiously together during the financial year The supervisory board wishes to thank and recognise the company directors, executives and all the employees of AC-Service AG and its Group companies for their outstanding work. 27 March 2007 AC-Service AG The Supervisory Board Peter Brogle Rainer Schad Peter Fritsch Chairman Deputy Chairman

66 66 Group Management Report Consolidated Financial Statements Notes Joint Declaration of Conformity by the Board of Directors and the Supervisory Board of AC-Service AG under Article 161 of German Stock Corporation Law The term corporate governance stands for responsible business management. The critical aspects of good corporate governance are an efficient and effective cooperation between the Board of Directors and the Supervisory Board, respect for the interests of the shareholders, as well as candour and transparency in corporate communications. AC-Service AG s Commitment to Corporate Governance AC-Service AG is a stock corporation under German law. Accordingly, the company is managed by a Board of Directors, who are monitored and advised by a Supervisory Board. Corporate governance holds a position of great importance within AC- Service AG. Our Board of Directors and Supervisory Board work closely together for the benefit of the company. The ongoing and intense dialogue between the two boards is the basis for efficient corporate management and control. AC-Service AG welcomes the German Corporate Governance Code that the government commission published on 26 February 2002 and most recently amended on 12 June The Board of Directors and Supervisory Board are pleased to provide the following Declaration of Conformity in accordance with Article 161 of the German Stock Corporation Law (AktG) Joint Declaration of Conformity with the German Corporate Governance Code by the Board of Directors and Supervisory Board of AC-Service AG in accordance with Article 161 of the German Stock Corporation Law in its Version of 12 June 2006: The Board of Directors and Supervisory Board of AC-Service AG hereby declare: Since the last Declaration of Conformity in November, we have been in compliance with the recommendations put forth by the German government s Commission on the German Corporate Governance Code regarding corporate management and control in its version of 12 June 2006 (published on 24 July 2006) and will continue to comply with them in the future except for the sections outlined below: Section 3.8 Suitable Deductible on Concluding a D&O Insurance Policy The recommendation under section 3.8, sentence 3, whereby a suitable deductible shall be agreed to if the company takes out a D&O insurance policy for the Board of Directors and Supervisory Board will no longer be complied with effective 1 January From that time on the existing D&O insurance without deductible will continue in force. Agreeing to a deductible does not result in any savings in premiums on the currently existing insurance policy. Furthermore, the company s D&O insurance is a group policy covering a number of employees both in Germany and abroad. A deductible is an unusual feature in countries outside Germany. Apart from that, it does not appear to be appropriate to differentiate between members of corporate bodies and other employees. Section Individualised Disclosure of Compensation for the Board of Directors in a Compensation Report as Part of the Corporate Governance Report The recommendation under section 4.2.5, paragraph 1, according to which individualised disclosure of compensation for the Board of Directors will be made in a compensation report that, as part of the corporate governance report, describes the compensation system for each member of the Board of Directors in a generally understandable manner was not complied with in its entirety. The company did disclose total compensation for each member of the Board of Directors for the financial year in accordance with section and the disclosure was also made in a compensation report, which explained the compensation system for the members of the Board of Directors in a generally understandable manner. However, this disclosure was not made as a part of the corporate governance report as prescribed by the code for the first time in its version of 12 June 2006, but was included instead in the notes to the annual financial statements and in the notes to the consolidated financial statements. The notes to the consolidated financial statements are in turn a part of the company s annual report. In the future, disclosure of total compensation for the members of the Board of Directors will again be made pursuant to legal stipulations in the notes to the annual financial statements and in the notes to the consolidated financial statements. The corporate governance report will contain a link or reference directing readers to the individualised disclosure of compensation for the Board of Directors located in the notes to the annual financial statements and in the notes to the consolidated financial statements. Section Long-Term Succession Planning The recommendation under section 5.1.2, paragraph 1, sentence 2, whereby the Supervisory Board, together the Board of Directors, should ensure that there is a long-term succession plan for the Board of Directors was not complied with. In light of the current board members ages, the Board of Directors and Supervisory Board have so far seen no necessity to establish a long-term succession plan. In the future, however, the Supervisory Board together with the Board of Directors will regularly examine if there is a need for action on this matter and ensure a long-term succession plan for the Board of Directors. Section Compensation for Members of the Supervisory Board The recommendation under section 5.4.7, paragraph 1, sentence 3, whereby the compensation of the members of the Supervisory Board should recognise the positions of chairman and deputy chairman of the Supervisory Board, as well as chairman and members of committees, was and will only be partially complied with. According to the company by-laws, the compensation of the members of the Supervisory Board only recognises the positions of chairman and deputy chairman of the Supervisory Board. It is the opinion of the Supervisory Board and the Board of Directors that the recognition of the positions of chairman and members of committees when calculating compensation is not necessary at this time.

67 Segment Reporting Corporate Governance Group Information 67 The recommendation under section 5.4.7, paragraph 2, whereby the members of the Supervisory Board should receive performancebased components in addition to the fixed compensation was and will only be partially complied with. According to the company bylaws, the compensation of the Supervisory Board consists only of a fixed compensation. There is still very heated public debate on the question of whether performance-based compensation for the Supervisory Board is desirable or not. The Supervisory Board and the Board of Directors will closely watch the future development of this matter. The recommendation under section 5.4.7, paragraph 3, whereby compensation for members of the Supervisory Board, particularly those benefits afforded to them by the company for personally provided services, in particular for consulting and negotiation services, is to be reported individually in the corporate governance report subdivided by components was not and will not be complied with in its entirety. The company did report the total compensation for each individual member of the Supervisory Board for the financial year. However, the disclosure was not made as a part of the corporate governance report but rather in the notes to the annual financial statements and in the notes to the consolidated financial statements. The notes to the consolidated financial statements are in turn a part of the company s annual report. In the future, disclosure of total compensation for the members of the Supervisory Board will again be made pursuant to legal stipulations in the notes to the annual financial statements and in the notes to the consolidated financial statements. The corporate governance report will contain a link or reference directing readers to the individualised disclosure of compensation for the Supervisory Board located in the notes to the annual financial statements and in the notes to the consolidated financial statements. Section Publication of Consolidated Financial Statements, Interim Reports The recommendation under section 7.1.2, sentence 3, concerning the publication of the consolidated financial statements within 90 days and interim reports within 45 days was satisfied by having published these on the Internet sites of the company and the Deutsche Börse, except for the interim report covering the second quarter of the current financial year, which, in consideration of the summer break, was published within 60 days. The Board of Directors will continue with this practice in the future. The Board of Directors and the Supervisory Board would also like to add and point out that the future-related part of the last declaration of conformity dated November, which still makes reference to the German Corporate Governance Code in its version of 2 June, was consistently complied with. Stuttgart, December 2006 AC-Service AG Supervisory Board and Board of Directors

68 68 Group Management Report Consolidated Financial Statements Notes Investor Relations Facts and Figures The AC-Service Share ISIN DE WKN Stock Exchange Prime Standard Date of Listing Share Capital EUR 16.2 million Number of Shares (Registered Shares) Par Value EUR 3 Number of Shares in Cirulation on ,173,418 Share Values 2006 High EUR 7.81 Low EUR 5.08 On EUR 5.34 On EUR 5.80 Shareholder Structure (approximate distribution according to statements of owners as of ) BEKO HOLDING AG ca. 55% Board of Directors ca. 3% Free Float ca. 42% Accounting Standards IFRS Financial Calendar Annual Accounts for Analyst Presentation Accounts Press Conference Quarterly Report 1/ Annual General Meeting Quarterly Report 2/ Quarterly Report 3/ Analyst Presentation Further dates and information can be found on the internet at

69 Segment Reporting Corporate Governance Group Information 69 AC-Service Group Locations Germany Headquarters AC-Service AG Schockenriedstraße 7 D Stuttgart Telefon: +49 (0) Telefax: +49 (0) Oberessendorf All for One Midmarket Solutions GmbH Unixstraße 1 D Oberessendorf Telefon: +49 (0) Telefax: +49 (0) Austria Vienna AC-Service GmbH Zirkusgasse 13 A-1020 Vienna Telefon: +43 (0) Telefax: +43 (0) Stuttgart AC-Service GmbH Schockenriedstraße 7 D Stuttgart Telefon: +49 (0) Telefax: +49 (0) Dortmund All for One Midmarket Solutions GmbH Robert-Bosch-Straße 2 D Holzwickede Telefon: +49 (0) Telefax: +49 (0) Vienna AC Solutions GmbH & Co KG Zirkusgasse 13 A-1020 Vienna Telefon: +43 (0) Telefax: +43 (0) Frankfurt ACCURAT Informatik GmbH ACCURAT Consulting GmbH Im Gefierth 13c D Dreieich Telefon: +49 (0) Telefax: +49 (0) Heilbronn Kümmel, Wiedmann + Partner Unternehmensberatung GmbH Schlossstraße 20 D Talheim Telefon: +49 (0) Telefax: +49 (0) Vienna KWP Human Capital Consulting GmbH Zirkusgasse 13 A-1020 Vienna Telefon: +43 (0) Telefax: +43 (0) Switzerland Corporate Center AC-Service Management AG Hardstrasse 73 CH-5430 Wettingen 1 Telefon: +41 (0) Telefax: +41 (0) Wettingen/Zurich AC-Service (Schweiz) AG Hardstrasse 7 CH-5430 Wettingen 1 Telefon: +41 (0) Telefax: +41 (0) St. Gallen Process Partner AG Bionstrasse 5 CH-9001 St. Gallen Telefon: +41 (0) Telefax: +41 (0) Rest of Europe Belgium AC Automation Center SA/NV Excelsiorlaan, 85 B-1930 Zaventem Téléphone: +32 (0) Téléfax: +32 (0) Czech Republic KWP Czech, s.r.o. Mariánske Hory Pašerových 1/1270 CZ Ostrava Telefon: +42 (0) Luxembourg AC Automation Center Sàrl Place de Nancy, 6 L-2212 Luxembourg Telefon: +32 (0) Telefax: +32 (0) France KWP France S.A.R.L. 12, Rue du Puits F Haguenau Telefon: +33 (0) Telefax: +33 (0)

70 70 Group Management Report Consolidated Financial Statements Notes Group Structure

71 Segment Reporting Corporate Governance Group Information 71

72 AC helps companies to focus on their core business. For over 45 years. With wide-ranging expertise in the whole of the IT value chain, AC implements first-class integral solutions for the midmarket. More than 1,200 customers value the quality of AC s outstanding service culture. AC-Service AG Schockenriedstraße 7 D Stuttgart Telefon +49 (0) Telefax +49 (0)