Tradition Passion Success

Transcription

1 Tradition Passion Success Business Report Borussia Dortmund, July 2006 June 2007

2 CONTENTS KEY FIGURES AT A GLANCE 2 PROLOGUE 3 MANAGEMENT'S GREETING 10 SIGNAL IDUNA PARK: History 12 REPORT OF THE SUPERVISORY BOARD 16 GOVERNING BODIES AND CORPORATE STRUCTURE 19 SIGNAL IDUNA PARK: BVB Sponsorship 20 THE BVB SHARE Share price performance 28 Shareholder structure 29 Investor Relations 30 Corporate governance report 32 THE 2006/2007 SEASON 38 SIGNAL IDUNA PARK: BVB Merchandising 40 MANAGEMENT REPORT BUSINESS AND FRAMEWORK CONDITIONS Financial year 2006/2007 in review 44 Development of the market and competitive environment in German professional football 46 Group structure and business 47 Organisation of management and control 48 Internal management system 51 Corporate strategy 52 POSITION OF THE COMPANY Results of operations 54 Sales development 55 Development of significant operating expenses Financial condition 59 Analysis of capital structure Analysis of investments Analysis of liquidity Net assets Overall summary of results of operations, financial condition and net assets COMPENSATION REPORT 60 RISK REPORT 61 Risk management system Specific risks 62 Strategic risks Personnel risks Competitive risks Sales risks Financial risks Risks jeopardising performance and continued existence The risk situation in summary 65 FORECAST REPORT Anticipated development of the Company Expected general economic environment Expected results of operations 66 Anticipated earnings development Anticipated development of revenues Anticipated development of significant operating expenses Expected dividends Expected financial condition Financial planning Capital expenditure planning Anticipated development of liquidity Opportunities 67 Development forecast in summary SUPPLEMENTARY REPORT 68 OTHER DISCLOSURES 69 SIGNAL IDUNA PARK: BVB Event 72 ANNUAL FINANCIAL STATEMENTS Balance sheet 80 Income statement 82 Notes 83 Notes to the balance sheet 84 Changes in fixed assets 85 Notes to the income statement 92 Other disclosures 94 Cash flow statement 98 AUDITORS REPORT 99 SIGNAL IDUNA PARK: BVB Media 100 GROUP MANAGEMENT REPORT BUSINESS AND FRAMEWORK CONDITIONS Financial year 2006/2007 in review 106 Development of the market and competitive environment in German professional football 108 Group structure and business 109 Organisation of management and control 112 Internal management system 115 Corporate strategy 116 POSITION OF THE COMPANY Results of operations 118 Sales development 119 Development of significant operating expenses Financial condition 122 Analysis of capital structure Analysis of investments Analysis of liquidity Net assets Overall summary of results of operations, financial condition and net assets COMPENSATION REPORT 124 RISK REPORT 125 Risk management system Specific risks 126 Strategic risks Personnel risks Competitive risks Sales risks Financial risks Risks jeopardising performance and continued existence The risk situation in summary 129 FORECAST REPORT Anticipated development of the Company Expected general economic environment Expected results of operations 130 Anticipated earnings development Anticipated development of revenues Anticipated development of significant operating expenses Expected dividends Expected financial condition Financial planning Capital expenditure planning Anticipated development of liquidity Opportunities 131 Development forecast in summary SUPPLEMENTARY REPORT 132 OTHER DISCLOSURES 133 SIGNAL IDUNA PARK: BVB Ticketing 136 CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet 140 Consolidated income statement 141 Consolidated cash flow statement 144 Notes to the consolidated financial statements 145 Notes to the consolidated balance sheet 154 Notes to the consolidated income statement 161 Other disclosures 165 AUDITORS REPORT 170 IMPRINT / FINANCIAL CALENDAR 171 EPILOGUE 172

3 KEY FIGURES AT A GLANCE BORUSSIA DORTMUND GmbH & Co. KGaA 2006/ / June June 2006 EUR millions EUR millions Equity Investments Gross revenue Operating profit/loss (EBIT) Financial result (investment income and net interest expense) Extraordinary income Net profit/loss for the period Earnings before interest, taxes, depreciation and amortisation (EBITDA) Cash flows from operating activities Number of shares (in thousands) 61,425 43,875 Earnings per share (in EUR) BORUSSIA DORTMUND GROUP 2006/ / June June 2006 EUR millions EUR millions Equity Investments Gross revenue Operating profit/loss (EBIT) Financial result (investment income and net interest expense) Net profit/loss for the period Earnings before interest, taxes, depreciation and amortisation (EBITDA) Cash flows from operating activities Weighted average number of share (in thousands) 58,665 31,021 Earnings per share (in EUR)

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5 SIGNAL IDUNA PARK 3

6 SIGNAL IDUNA PARK THE EIN FUSSBALLSTADION FOOTBALL STADIUM 4

7 PROLOGUE 5

8 SIGNAL IDUNA PARK MORE THAN 90 MINUTES OF FOOTBALL 6

9 PROLOGUE 7

10 SIGNAL IDUNA PARK CENTRE FOR BVB SPORT MARKETING Signal Iduna Park is a football stadium in Dortmund. With 80,708 seats, it is the largest stadium in Germany built exclusively for football. Signal Iduna Park is the ground of the Borussia Dortmund football Bundesliga team and has already been the location for numerous international football tournaments, most recently, the 2006 FIFA Football World Cup. The stadium, with its striking yellow pylons in the roof structure, is a landmark of the city of Dortmund. Source: Wikipedia.de SIGNAL IDUNA PARK is the source of revenues. Ranging from ticketing to income from TV marketing from Bundesliga matches and (where applicable) matches in European competition, from revenues from jersey, perimeter board and interior advertising to marketing of hospitality seats, from merchandising to event marketing: Borussia Dortmund GmbH & Co. KGaA's business activities have their source in a piece of earth of some 5,000 square metres covered with a roll-out pitch near Bundes - As described in the definition in the free encyclopaedia Wikipedia, the general public straße 1. SIGNAL IDUNA PARK is the Company's heart. Since summer 2006, it has again been owned by BVB. regards SIGNAL IDUNA PARK merely as a football ground, but it is also the POI (Point of Interest) the location around which much of Borussia Dortmund GmbH & Co. KGaA's activi ties revolve. Despite numerous measures and improvements in recent years, it continues to offer undeveloped marketing potential. In this business report, we outline potential for marketing the stadium in the Sponsoring, Merchandising, Event, Media and Ticketing sections. Moreover, we provide a short outlook on what will hopefully be a great future. 8

11 PROLOGUE History Page 12 BVB Sponsorship Page 20 BVB Merchandising Page 40 BVB Event Page 72 BVB Media Page 100 BVB Ticketing Page 136 Epilogue Page 172 9

12 Dear Shareholders, Borussia Dortmund GmbH & Co. KGaA performed well and in accordance with expectations in the 2006/2007 financial year. The capital increase implemented at the beginning of the year, which is reflected by our significantly Metzelder was out for practically the entire first half of the season due to injury. World Cup player Sebastian Kehl was injured so seriously in the first Bundesliga match that he was unavailable for games for the whole remainder of the season. improved equity position in the balance sheet, was renewed proof of the trust and value you place in us. We would like to thank you for that. Our stated goal for the future is to bring our sporting performance in line with the positive economic performance of our company as soon We are pleased to be able to report net profit of EUR 10.3 million in this annual report. This pleasing result was due not only to the World Cup but particularly also to the transfer of the club's David Odonkor to Real Betis Sevilla, a club in the Spanish Primera Division. as we can. For the first time, part of our transfer income was able to be invested again for contracting players for the beginning of the 2007/2008 season, and this investment promises to strengthen our squad considerably. We have contracted Thomas Doll, a dynamic coach, who was able to take 16 points from the last nine To our great regret we did not achieve our ambitious sporting goals this past financial year, even games of the past season, and in so doing steer the BVB ship back into calmer waters. though the gate to Europe, in other words participation in international competition, lay open right up until the last match day, despite the turbulent season. You, the shareholder, can be confident that we will patiently and doggedly forge ahead while at the same time strictly observing our credo: sporting success cannot be achieved without exercising good business sense. At the beginning of last season it was quite apparent that our team would have a fight on its hands in the aftermath of the World Cup, which was hosted by Germany. World Cup player Christoph Yours faithfully Hans-Joachim Watzke Managing Director (Chairman) Thomas Treß Managing Director 10

13 GREETING Hans-Joachim Watzke Managing Director (Chairman) Thomas Treß Managing Director 11

14 SIGNAL IDUNA PARK THE CREATION From the white meadow to Germany's largest stadium Every sports club needs a sports ground, and BVB's history therefore begins in 1906 on the so-called white meadow (Weiße Wiese) in Wambeler Straße. Here, members of the Holy Trinity Youth (Dreifaltigkeits-Jugend) regularly meet to play football. Three years later, an initial group of 18 people splits from the church because they feel systematically attacked and slandered by it. On 19 December 1909, BV. Borussia 09 e.v. Dortmund is founded. The sporting home remains the BVB's history commences on the white meadow in the suburb of Brackel. white meadow. On 10 August 1924, the white meadow is given a new name: Borussia-Sportplatz (Borussia Sports Ground). Over many years of hard work, including the investment of 50,000 Reichsmarks, club members have expanded the former urban sports ground into a jewel for 18,000 visitors. This own initiative is unique to date in Germany. In 1937, BVB has to relinquish the Borussia Sports Ground. It is allegedly intended for the Hoesch expansion, road construction and as a reserve for the planned Hoesch Park. Already years earlier, on 6 June 1926, the Red Earth Stadium (Kampfbahn Rote Erde) is opened in Dortmund's south in Strobelallee, in direct proximity to the Westfalenhalle. In 1937, it becomes the new home of Borussia Dortmund. Using wooden structures, capacity can be expanded to up to 43,000 viewers in the 1960s during BVB's peak, when it wins the German championship in 1956, 1957 and 1963, and then becomes the first German club to win a European Cup in 12 The Red Earth Stadium in its original condition. Next to it: two training areas. In 1971, construction of the former Westfalenstadion was commenced. The new ground almost completed: Roofs are covered, while the pitch is still missing.

15 HISTORY The former Westfalenstadion under construction: steel tube construction of the roof over the western stand. The stand's steps have not yet been fully completed However, urban planners realise at an early stage that this cannot be a permanent solution, yet a solid expansion or conversion would be too expensive. In 1965 the seeds are instead sown for building a new stadium. However, the project receives the decisive push only at the beginning of the 1970s, when Cologne decides not to be a World Cup city and Dortmund is able to apply to be a site for the 1974 World Cup. On 4 October 1971, the City Council decides to build the Westfalenstadion, which, for cost reasons, is built as a prefabricated system using a cement-slab structure based on the example of the Olympic city, Montreal (1976). For approximately EUR 17 million, a modern stadium with 54,000 seats is constructed and inaugurated on 2 April Until 1992, visitors attend the former Westfalenstadion in its original condition for 18 years. However, in the 14 years that follow there are many changes. For years a standard image: Former Westfalenstadion and Red Earth. After the first and second expansion stages: Space for 68,600 spectators. In the current construction stage, but still with the old name: The temple in Strobelallee. 13

16 1974 to 1995: For 21 years the former Westfalenstadion offered this picture, particularly attractive during floodlit games, and space for 54,000 visitors, most of whom were standing. For a long time it was regarded as the most modern stadium. In 1992, capacity is reduced to 42,800 viewers due to conversion of standing places to seats in the northern stand. As part of the first expansion stage, just three years later the western and eastern stands are expanded by upper terraces with 6,000 seats each. In the second expansion stage, capac- ity is increased to 68,600 in In this case, the southern stand the heart of Dortmund s footballing passion is expanded to 24,454 seats, thus becoming Europe's largest standing space area. The standing places can be converted to seats for international matches. After completion of the first to third expansion stages, SIGNAL IDUNA PARK is Germany's largest stadium with a capacity at one point of 83,000 visitors (currently 80,708). 14

17 HISTORY Always impressive: The yellow wall of the southern stand, the largest free-standing standing place areas in Europe, offering room for more spectators than the total capacity of some other Bundesliga stadiums. On 6 May 2002, work is commenced on closure and expansion of the corner areas. This permits a capacity increase by approximately 14,000 viewers to initially 83,000 seats. Three years later, for the 2006 World Cup, exactly 80,708 visitors fit into Germany's largest stadium due to various official requirements. Since 1 December 2005, the stadium has been called SIGNAL IDUNA PARK. Signal Iduna, the insurance and financial services provider with its registered office in Dortmund and Hamburg, has had a close relationship with BVB as sponsor for many years and for now has secured the naming rights until 30 June View from the stadium forecourt to the northern stand (1999). Old home, new name: SIGNAL IDUNA PARK (2005). First expansion stage: The roof is yet to come (1995/1996). Celebrations for the inauguration: Stadium with sponsor name. 15

18 REPORT OF THE SUPERVISORY BOARD Borussia Dortmund GmbH & Co. KGaA succeeded in getting back into the black in the 2006/2007 financial year. The Supervisory Board sees this as the tangible fruits of the restructuring measures introduced at the end of 2004/beginning of 2005 which have been steadily implemented since that time. In the 2006/2007 financial year, the Supervisory Board again dealt intensively with the condition and performance of the Company and the Group, exercising its rights and duties under the law and the Company's articles of association without restriction. WORK OF THE SUPERVISORY BOARD, MEETINGS The Supervisory Board supervised the transaction of the Company's business by the general partner and its managing directors. During the reporting period, the Supervisory Board kept management informed in a timely and comprehensive manner, specifically by providing regular oral and written reports within the meaning of 90 German Stock Corporation Act (AktG). The reports related primarily to the liquidity situation and financial condition, planned investments, corporate planning (financial, investment and human resources planning) and the risk situation of the Company and of the Group. Deviations in the course of business from plans and objectives were explained in detail to the Supervisory Board, which then reviewed and discussed these with management. The Supervisory Board reviewed and discussed in detail transactions of significance to the Company based on reports by management. These reports and discussions not only concerned economic performance but also sporting performance, particularly during the changeable yet ultimately pleasing second half of the 2006/2007 Bundesliga season. The Supervisory Board was also kept informed between sessions by means of written documentation. Outside of meetings, the chairman of the Supervisory Board was also in regular contact with management and was kept apprised of developments in the business as well as material events and transactions as they occurred. The Supervisory Board met five times in the 2006/2007 financial year (on 15 August 2006, 6 October 2006, 5 March 2007, 16 April 2007 and 24 May 2007). Resolutions of the Supervisory Board were adopted in accordance with the relevant statutory provisions and provisions of the Company's Articles of Association, in some cases outside of meetings by circular memorandum (Umlaufverfahren). The Supervisory Board is composed of six persons. Since committees must consist of three persons in order to have quorum, no Committees were created in view of the size of the Supervisory Board. There exists no information subject to disclosure concerning the frequency of Supervisory Board members' attendance at meetings. The Supervisory Board's resolutions during the reporting period essentially related to its motions to the extraordinary General Shareholders' Meeting on 15 August 2006 and the ordinary General Shareholders' Meeting on 28 November 2006, as well as to amendment of 4 and 5 no. 1 of the Articles of Association in connection with implementing the capital increase approved at the extraordinary General Shareholders' Meeting on 15 August 2006, and to approval of the agreement to transfer the handball division to Ballspielverein Borussia 09 e.v. Dortmund. The Supervisory Board also dealt with the accounting principles applied in the 2005/2006 financial year and preparation of both of the aforementioned shareholders' meetings. 16

19 REPORT OF THE SUPERVISORY BOARD CORPORATE GOVERNANCE The Supervisory Board and management of the general partner also dealt with the issue of corporate governance in the reporting period. In November 2006, they issued a Statement of Compliance (Entsprechenserklärung) with the German Corporate Governance Code, taking into account the amendments in the version dated 12 June This statement was made permanently available through publication in the Internet under Other details and information in this regard will be provided in a separate section in the Annual Report (Corporate Governance Report) in accordance with Section 3.10 of the German Corporate Governance Code. ANNUAL AND CONSOLIDATED FINANCIAL STATEMENTS 2006/2007 The annual financial statements of Borussia Dortmund GmbH & Co. KGaA and the consolidated financial statements as at 30 June 2007 as well as the management report for the Company and for the Group (each including an explanatory report on the figures in accordance with 289 (4), 315 (4) German Commercial Code (HGB)), which were prepared and submitted within the prescribed time by management, were audited along with the accounts in accordance with statutory provisions by the appointed auditor, BDO Westfalen-Revision GmbH Wirt - schafts prüfungs gesellschaft, Dortmund, and were issued with an unqualified opinion (un- eingeschränkter Bestätigungsvermerk). on 6 September 2007, at which the auditor personally presented the key findings of the audit. The Supervisory Board is in agreement with the results of the auditor's review and, based on the final result of its own examination, has no objections. The Supervisory Board adopted the annual financial statements of Borussia Dortmund GmbH & Co. KGaA and the consolidated financial statements as at 30 June 2007 at its meeting on 6 September Furthermore, the Supervisory Board conducted its own audit of the report prepared by the general partner pursuant to 312 AktG concerning relationships with affiliated enterprises (dependent company report) for the 2006/2007 financial year. The dependent company report was also reviewed by the auditor and the following auditor's opinion was issued thereon: Pursuant to our duly conducted audit and evaluation we hereby confirm that 1. the factual information in the report is accurate; 2. with respect to the reported transactions, the consideration paid by the Company was not unreasonably high, or any disadvantages have been compensated for; 3. with respect to the reported actions taken, no facts or circumstances exist that would argue for any assessment substantially different than that made by management. The annual financial statements, the consoli dated financial statements, the management report for the company, the Group management report, the risk report and the corresponding auditor's reports were provided to all members of the Supervisory Board and discussed in the auditor's presence at the Supervisory Board meeting held Based on the final result of its review, the Supervisory Board raised no objection to the general partner's statement at the conclusion of the dependent company report. The Supervisory Board approved and took note of the results of the auditor's review of the dependent company report. 17

20 REPORT OF THE SUPERVISORY BOARD The Supervisory Board recommends that the General Shareholders' Meeting adopt the annual financial statements as at 30 June The Supervisory Board also agrees with management's proposal to transfer the net retained profits for the 2006/2007 financial year of A ,83 to other revenue reserves. The Supervisory Board also recommends ratification (Entlastung) of the acts of the general partner, Borussia Dortmund Geschäftsführungs-GmbH, for the 2006/2007 financial year. PERSONNEL MATTERS Patrick Albert Lynch, of London (Great Britain), resigned from the Supervisory Board effective 26 February In his place, Christian Kullmann, of Hamminkeln, was appointed to the Supervisory Board by virtue of an order applied for by the general partner and handed down by the Local Court (Amtsgericht) of Dortmund on 21 May 2007 in accordance with 104 (2) AktG. The number of Supervisory Board members therefore meets the requirements of the Articles of Association. Pursuant to 8 no. 3 sentence 6 of the Articles of Association, the next General Shareholders' Meeting will have to elect a new Supervisory Board member for the remainder of the departing member's term of office. The Executive Committee of the Advisory Board of Borussia Dortmund Geschäftsführungs-GmbH reached an agreement earlier than required with the managing director and chairman, Hans- Joachim Watzke, to extend his managing director's agreement (the term of which was originally limited until 31 December 2008) by a further three years, i.e. until 31 December The term of office of the other managing director, Thomas Treß, currently runs until the end of The Supervisory Board wishes to thank management and all the employees for their once again successful work over the past financial year and their exceptional efforts on behalf of the Company. Many thanks also to the business partners, shareholders and fans of Borussia Dortmund for the confidence they have shown in us. Dortmund, 6 September 2007 The Supervisory Board Gerd Pieper Chairman 18

21 GOVERNING BODIES AND CORPORATE STRUCTURE GOVERNING BODIES BV. BORUSSIA 09 e.v. DORTMUND Management Board Dr. Reinhard Rauball Dr. Albrecht Knauf Dr. Reinhold Lunow President Vice President Treasurer BORUSSIA DORTMUND GmbH & Co. KGaA Supervisory Board Gerd Pieper Chairman Proprietor and Managing Director of Stadtparfümerie Pieper GmbH, Herne Harald Heinze Deputy Chairman Bernd Geske Managing partner of Bernd Geske Lean Communication, Meerbusch Ruedi Baer Delegate of the Board of Directors of mobilezone Group, Regensdorf (Switzerland) Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne Christian Kullmann since 23 May 2007 Head of the corporate communications division and board office of RAG Aktiengesellschaft, Essen Departed from the Supervisory Board Patrick Albert Lynch until 26 February 2007 Bank employee, London BORUSSIA DORTMUND GESCHÄFTSFÜHRUNGS-GmbH Hans-Joachim Watzke Thomas Treß Managing Director (Chairman) Managing Director CORPORATE STRUCTURE BORUSSIA DORTMUND GmbH & Co. KGaA 100,00% BVB Stadionmanagement GmbH (formerly: Westfalenstadion Dortmund Verwaltungs-GmbH) 100,00% goool.de Sportswear GmbH 100,00% Sports & Bytes GmbH 100,00% BVB Merchandising GmbH (formerly: Borussia Dortmund Beteiligungs-GmbH) 99,74% BVB Stadion GmbH (formerly: Westfalenstadion Dortmund GmbH & Co. KG) 94,90% BVB Beteiligungs GmbH 51,00% B.E.S.T. - Borussia Euro Lloyd Sports Travel GmbH 33,33% Orthomed GmbH 19

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23 BVB Sponsoring 21

24 Since 1 December 2005, Germany's largest football stadium has been called SIGNAL IDUNA PARK. SIGNAL IDUNA PARK & SPONSORSHIP PRIMARY SPONSOR The three most important partners of a football club are the jersey sponsor, the sponsor providing the stadium name and the equipment supplier. Borussia Dortmund has contractual ties with three high-level partners in the form of Evonik Industries AG, SIGNAL IDUNA Group and Nike. The primary and jersey sponsor of BVB is Evonik Industries AG. Since 14 September 2007, the BVB players have worn this name on their breast. This photo shows the scorer of two goals in the game against Werder Bremen (final score 3:0), Mladen Petric. In addition to many other marketing options, the primary sponsor is entitled to put its name on the breast of the players' jerseys. Since July 2006, BVB's partner in this respect has been Evonik, which was created in autumn 2007 from RAG and formed from the former group companies Degussa, Steag and RAG Immobilien. With activities in more than 100 countries, about 43,000 employees generate sales of approximately EUR 14.8 billion (2006). In the 2006/2007 season relevant for the reporting period, EVONIK established more than 3.7 billion contacts as a result of its commitment to BVB from advertising and media. Like earlier jersey sponsors, EVONIK will also succeed in significantly increasing its public profile. SPONSOR PROVIDING THE STADIUM NAME In December 2005, Borussia Dortmund was able to acquire SIGNAL IDUNA Group as the sponsor providing the stadium name. Since then, Germany's largest football stadium has been called SIGNAL IDUNA PARK. 77 percent of German companies are involved in sponsorship, spending EUR 3.8 billion on it each year, more than two-thirds of this amount flowing into sport. SIGNAL IDUNA Group also pursues this strategy. In terms of public profile, BVB is some way ahead of us, realises the financial and insurance provider s Chairman of the Managing Board, Reinhold Schulte, revealing that: We want to share in this public profile via SIGNAL IDUNA PARK. 22

25 BVB Sponsorship Jerseys, trousers, socks and boots, as well as BVB s complete training and match equipment, are provided by Nike. EQUIPMENT SUPPLIER In the fight for market share, the major sports article manufacturers rely on the platform offered by the major clubs. Top sportsmen are multipliers and act as examples for fashion and trend-conscious children and youths, who wish to wear the same shoes, trousers, jerseys and tracksuits as their icons. The American sports article manufacturer, Nike, which employs approximately 26,000 employees worldwide, has been BVB's equip- ment supplier since July All teams right down to young talent play in jerseys and boots bearing the world famous Nike logo known as Swoosh. It is one of the best known trademarks in the world. Nike acts as the exclusive equipment provider in the clothing, shoe and other product segments. As part of its commitment as an equipment supplier, Nike also uses BVB's commercial appeal in various ways inside the stadium (perimeter board advertising), and also utilises business to business potential in the catering areas of SIGNAL IDUNA PARK. The contract between Borussia Dortmund and its equipment supplier, Nike, runs until summer The newest boot by the U.S. sports article manufacturer shown here in the current advertising campaign appears in the BVB club colours. At present, for example, the Swiss national player, Philipp Degen, wears this model. 23

26 The basis of the sponsorship concept is formed by the more than 500 companies that use the various catering areas in SIGNAL IDUNA PARK, such as Business Club 09. SPONSORSHIP BVB's sponsorship concept has a clear hierarchy. The basis is formed by the more than 500 companies that use the various catering areas in SIGNAL IDUNA PARK in a business to business context in order to offer their customers and/or guests something special for home matches in the form of their business seats in VIP areas, as well as to establish or build upon business relations. In same cases, these companies link their commitment with advertising measures such as perimeter board advertising and appearances in print media and/or on the Internet. On the next highest level are the so-called partners, who use the BVB platform primarily in terms of regional exposure and the location. This principally involves perimeter board advertising, interior campaigns, naming rights of the VIP areas or the use of players for PR appointments. As a partner of BVB, a company has the right to use this title and the club's logo for its own purposes or PR work. One of BVB's champion partners is Sparda-Bank. The company has created an attractive savings card with variable interest for fans. Goals scored by the stars are points earned by the fans. For years, BVB has been closely connected with the Warsteiner brewery. It is also represented in the stadium on perimeter board advertising and thus reaches a large number of consumers. 24

27 BVB Sponsorship Business Club 09 (level 4) and Borussia Park (level 3) are located in the northern stand of SIGNAL IDUNA PARK. Coca-Cola has been a committed partner of BVB for years. Above these are the champion partners. These are companies that do business in Germany and internationally, which increase their public profile through BVB in that they or their advertising are placed in effective locations for television, for example, exclusively on the premium revolving board in the first row and on cam carpets. Moreover, they are entitled to one individual team photo. In addition, these companies enjoy industry exclusivity. This means that companies from the same business do not compete on this level. It goes without saying that the right to use this title and the club's logo for own purposes and for PR work applies in this case as well. Basically, the champion partners combine communication objectives such as public profile and sympathy; depending on their product, there are also broader objectives such as acting as a multiplier for improved sales. In media linking of the respective measures, the champion partners, the sponsor after whom the stadium is named, the primary sponsor and the equipment provider always appear when BVB can be seen in a context that has a media impact: this includes advertising on perimeter boards or in the interior. Furthermore, each camera that shows a player during an interview or the coach at a press conference takes in the background interview boards, which are covered with advertising. REGULARS' TABLE AREAS 3,668 business seats and 162 box seats are available in SIGNAL IDUNA PARK. During the game, everyone sits close to the action, and everyone can communicate with each other accordingly not only about football, but also about business. Whether in Business Club 09 (photo left) or in one of the exclusive boxes, hospitality is always of utmost priority. 25

28 Various hospitality areas were created during the expansion stages of SIGNAL IDUNA PARK. The Dannemann Lounge is particularly popular. View inside the Dannemann Lounge: Here, BVB's partners can, in turn, establish contacts. This picture shows the top-quality furnishings of the interior with the seating and bar well before a match. This way we satisfy the great interest of our customers, says Gerd Rossenbach, managing director of a BVB sponsor that keeps two boxes: Here we can look after our guests individually. The service is excellent and the view is outstanding. Just as long as the tradition of the regulars' table area, which was created in 1996, is the waiting list of companies that want to be involved. During the course of the stadium expansion, two new, high-quality areas (AIDA lounge and Dannemann lounge) were built. The customers of the regulars' tables enjoy comfortable seats in the western stand, reserved corporate tables, reserved parking spaces directly at the stadium and much more. The concept for Borussia Park is similar. Borussia also offers total solutions: The Conference Center, here leased to a partner from the IT industry. The variety of the areas is intended to offer something for every wish and wallet. The conference centre and the golf area also offer the possibility of purchasing larger ticket quotas for selected games, including full catering, as part of incentive packages. 26

29 BVB Sponsorship Young BVB fans and families with children find a home in the Langnese family block. LANGNESE FAMILY BLOCK The Langnese family block has enjoyed great popularity for years and its service and comfort were further improved for the current season. Amongst other things, parents and children moved closer to the playing field, and there is a strict smoking ban. There are numerous offers and attractions in the interior areas of the stands. Apart from provi- ding a location and care that caters to families, the idea behind this is to tie children and youths to the club Borussia Dortmund at an early stage, to awaken passions and to turn them into loyal fans who will later remain BVB customers as season ticket holders or maybe even in the catering areas. The family block was specially relocated for the new season in order to give children and parents a better view of the pitch. 27

30 Borussia Dortmund THE BVB SHARE SHARE PRICE PERFORMANCE In the 2006/2007 financial year, the factors affecting the performance of the share price were the successful conclusion of the restructuring and reorganisation programme and also the club's sporting position, in particular the unsatisfactory second half of the most recent Bundesliga season. Borussia Dortmund GmbH & Co. KGaA's shares started the 2006/2007 financial year at EUR 2.21 and reached their high for the reporting period of EUR 2.49 at the start of the season. The additional capital increase of a further 17,550,000 shares (existing number of shares: 43,875,000), resolved by the extraordinary General Shareholders' Meeting on 15 August 2006 and publicised by means of an ad hoc announcement on 15 August 2006, did not have a negative impact on the share price, which remained stable until well into October 2006 in a range of between EUR 2.50 and EUR The first sporting setbacks as a result of failing to win several home games in a row subsequently led to a modest downward trend, the share price reaching EUR 2.15 on 1 November The price recovered, however, thanks to the management's profit forecast of EUR 9-10 million (EBIT for the KGaA), the record profits for the first quarter of 2006/2007 communicated in an ad hoc announcement on 13 November 2006 and the improved mood of investors following the General Shareholders' Meeting on 28 November In the following period, the share price ranged between EUR 2.30 and EUR With the commencement on 20 December 2006 of trading in both tranches of the new shares from the capital increases in May and August 2006, the share price came under selling pressure and was quoted at the stock exchange year-end on 29 December 2006 at EUR The share price fell further at the start of the second half of the financial year as a result of increasing discussion about the position of the coach, Bert van Marwijk, which had already started at the end of 2006, the replacement of the coach with Jürgen Röber and the continued failure, despite the change, to achieve sporting successes. Following a brief recovery thanks to the home win against Bayern Munich at the start of the second half of the season on 26 January 2007, the share price was initially quoted at between EUR 2.10 and EUR A further change of coach then became necessary and Thomas Doll was appointed on 12/13 March 2007, which resulted in a fall in the share price to EUR When the club entered the relegation zone following the defeat against Arminia Bielefeld on 30 March 2007, the share price finally fell to EUR 1.59 on the next trading day, unhappily reaching its all-time low. With Thomas Doll and the unparalleled fans' initiative Wir sind Borussia ( We are Borussia ) lending their support to Borussia Dortmund, a sporting turnaround and a change in the financial climate followed. Inves - tors regained confidence. The share price recovered, and was quoted initially in April 2007 in a range between EUR 1.60 and EUR 1.70, and in May and June 2007 in a range between EUR 1.70 and EUR This was due not least to the positive licensing decision from the DFL for the 2007/2008 Bundesliga season, communicated to shareholders in the ad hoc announcement on 20 April 2007, and to the management maintaining an unchanged profit forecast. A noticeable feature was that the recovery in the share price was successful with high trading volumes with daily turnover in many cases of over 300,000 shares. 28

31 THE BVB SHARE Price performance SHAREHOLDER STRUCTURE At the beginning of the 2006/2007 financial year, the share capital of Borussia Dortmund GmbH & Co. KGaA amounted to EUR 43,875,000, divided into the same number of no-par value shares with a notional value of EUR 1.00 each. In the period from June to August 2006, the Com - pany was informed of changes in the shareholder structure as a result of notifications of voting rights by BlueBay Asset Management Ltd., London (United Kingdom), Absolute Capital Management Holdings Limited, Grand Cayman (Cayman Islands), Absolute Return Europe Fund Limited, George Town, Grand Cayman (Cayman Islands) and CSI Asset Man - agement Establishment, Vaduz (Liechtenstein). The capital increase of 17,550,000 new shares re - solved by the extraordinary General Shareholders' Meeting on 15 August 2006 was successfully placed in its entirety. The capital increase was entered in the commercial register on 19 September 2006 and the share capital of the Company was thereby increased to a present amount of EUR 61,425,000, divided into the same number of no-par value shares with a notional value of EUR 1.00 each. Having been admitted to listing, the new shares have been tradable on the stock exchange since 20 December Following the successful placement of the capital increase, the Company was informed of further changes in the shareholder structure in the period from September 2006 to June 2007 as a result of notifications of voting rights by Morgan Stanley & Co. International Limited, London (United Kingdom), Morgan Stanley, Wilmington (Delaware/USA), Morgan Stanley International Inc., Wilmington (Delaware/USA), Morgan Stanley International Limited, London (United Kingdom), Morgan Stanley Group (Europe), London (United Kingdom), Morgan Stanley UK Group, London (United Kingdom), Morgan Stanley Bank International Limited, London (United Kingdom), Morgan 29

32 Borussia Dortmund Stanley International Holdings Inc., New York (USA), Morgan Stanley Laxton, London (United Kingdom), Morgan Stanley Domestic Capital Inc., Kingdom), as well as OZ Management LLC, New York (USA) and Och-Ziff Management Europe Limited, London (United Kingdom). Wilmington (Delaware/USA), Morgan Stanley Capital Management LLC., Wilmington (Delaware/ USA), Ballspielverein Borussia 09 Dortmund e.v., Dortmund (Germany), European Catalyst Fund Limited, George Town, Grand Cayman (Cayman Islands), Absolute Octane Fund Limited, George Town, Grand Cayman (Cayman Islands), Absolute Capital Management Holdings Limited, Grand Cayman (Cayman Islands), CSI Asset Management Establishment, Vaduz (Liechtenstein), Credit Suisse Group, Zürich (Switzerland), Credit Suisse Securities (Europe) Limited, London (United Kingdom), Credit Suisse, Zürich (Switzerland), Credit Suisse (International) Holding AG, Zug (Switzerland), Credit Suisse Investments (UK), London (United Kingdom) and Credit Suisse Investment Holdings (UK), London (United Following the completion of the capital increase and the notifications of voting rights received by the Company, the shareholder structure of Borussia Dortmund GmbH & Co. KGaA at the close of the 2006/2007 financial year was therefore as follows: Morgan Stanley International Limited: 16,25% Absolute Capital Management Holdings Limited: 13,04% BlueBay Asset Management: 17,09% BV. Borussia 09 e.v. Dortmund: 7,24% Bernd Geske: 6,51% Free float: 39.87% The total number of invitations to the 2006 General Shareholders' Meeting sent out by banks suggests that the number of shareholders in Borussia Dort - mund GmbH & Co. KGaA is around 47,000. INVESTOR RELATIONS The high level of interest in Borussia Dortmund GmbH & Co. KGaA again increased significantly in the 2006/2007 financial year. The Company responded to the demand for information and devoted even more attention to institutional and private investors and analysts. 2005/2006 financial year. Changes in the shareholder structure were published by the Company in the official journals for the publication of statutory stock market notices. With the coming into effect of the reform of the German Securities Trading Act (Wertpapierhandels gesetz, WpHG ) on 20 January 2007, the Company made the change to publishing Market participants were kept informed promptly and comprehensively on developments at Borussia Dortmund GmbH & Co. KGaA. Great importance was attached to ensuring that communication with the public and the financial world was consistent, sustained and transparent, and not just against the background of two successfully placed capital increases in the reporting period. its mandatory announcements under capital market law on a Europe-wide basis in accordance with the statutory requirements. In this context, an overview of the Company's principal publications is provided by the Annual Document required by 10 German Securities Prospectus Act (Wertpapier pro spekt - gesetz, WpPG ), which can be found online at under Corporate Governance (CG). Here investors and shareholders can find all ad Borussia Dortmund GmbH & Co. KGaA published its financial figures in its interim report for the period from July to December 2006 and for the full hoc announcements, directors' dealings disclosures, notifications of voting interests, information regarding subscription offers etc. 30

33 THE BVB SHARE Turnover of shares In addition to financial reporting and the mandatory announcements required under capital market law, online communication represents the Company's principal means of providing information, with more than 100,000 hits each month. All items of information relevant to the stock exchange listing can be accessed at Registered users are provided with up-to-date ad hoc announcements, and Company and football news, by means of the free newsletter. In the 2006/2007 financial year, the Company also made the information on the Borussia share website available in English. In addition, the printed magazine Borussia Invest, which appears twice a year, also has a secure place in the Company's communications strategy. This publication is primarily aimed at private investors in Borussia Dortmund GmbH & Co. KGaA, with background reports, announcements, interviews and analysis by financial experts. As the final step in the Company's reorganisation, the extraordinary General Shareholders' Meeting held on 15 August 2006 in the Westfalenhalle in Dortmund cleared the way for a capital increase of 17,550,000 no-par value shares (existing number of shares: 43,875,000). The event was attended by more than 1,430 limited liability shareholders and guests. The shareholders present represented around 70.4% of the share capital. The ordinary General Shareholders' Meeting was held in turn during the reporting period on 28 November 2006, also in the Westfalenhalle in Dortmund. This event was attended by more than 1,000 limited liability shareholders and guests. In this case, the shareholders present represented around 72.2% of the share capital. The shareholders formally approved the actions of management by an extraordinary and remarkable voting percentage of 99.9% and thus expressed their confidence in the Chairman, Hans-Joachim Watzke, and the Chief Financial Officer, Thomas Treß. During the reporting period, Borussia Dortmund GmbH & Co. KGaA continued to work together with its designated sponsor, Gebhard & Co. Wertpapier - handelsbank AG, based in Munich. Increased liquidity in the BVB share and consistent price quality were ensured by maintaining bid and offered prices in the XETRA electronic trading system. The Company thereby acknowledged the continuing central importance of the XETRA electronic trading system, which now accounts for around 90% of stock exchange turnover. 31

34 CORPORATE GOVERNANCE REPORT Corporate Governance stands for transparent and responsible corporate management and supervision aimed at achieving long-term shareholder value. Key aspects of good corporate governance include efficient co-operation between management and the Supervisory Board, due regard to shareholders' interests, openness, and transparent corporate communication. The management of Borussia Dortmund Geschäftsführungs-GmbH, the general partner of Borussia Dortmund GmbH & Co. KGaA (the Company ), and the Supervisory Board of our Company are guided by these principles. GENERAL INFORMATION ON CORPORATE GOVERNANCE AT BORUSSIA DORTMUND GmbH & Co. KGaA Section 161 AktG requires the management board and supervisory board of any listed company to issue an annual statement as to whether and to what extent recommendations by the Government Commission for the German Corporate Governance Code (Regierungskommission Deutscher Corporate Governance Kodex) contained in the German Corporate Governance Code (the Code ) as published in the official section of the Electronic Federal Gazette (elektronischer Bundesanzeiger) were followed in the past and are being or will be followed now or in the future. As a rule, the Code is reviewed once annually and amended as required. It contains basic statutory provisions on the management and supervision of German listed companies based on internationally and nationally recognised standards for good and responsible corporate governance. The Code aims to make the German system of corporate governance transparent and understandable in an effort to boost the confidence of international and national investors, customers, employees and the general public in the management and supervision of German listed companies. Many of the Code's recommendations ( should provisions) are tailored exclusively to stock cor po- rations and are at most applicable by analogy to partnerships limited by shares (Kommandit ge - sell schaften auf Aktien, KGaA ), i.e. to our Company. A KGaA is a hybrid corporate form combining elements of a German stock corporation (Aktiengesellschaft) and a limited partnership (Kommanditgesellschaft). A KGaA is a separate legal entity whose share capital is divided into shares which are held by at least one shareholder (the general partner) that has unlimited liability as against creditors of the Company and limited liability shareholders (Kommanditaktionäre) that are not personally liable for the debts of the Company ( 278 (1) AktG). The key differences between a KGaA and a German stock corporation can be characterised as follows: Borussia Dortmund GmbH & Co. KGaA has no Management Board. Instead, the general partner, Borussia Dortmund Geschäftsführungs- GmbH, is solely responsible for its management and representation. This company, in turn, is represented by one or more managing directors; Ballspielverein Borussia 09 e.v. Dortmund is the sole shareholder of this company. 32

35 CORPORATE GOVERNANCE REPORT The rights and duties of the Supervisory Board of the limited partnership ( KGaA ) elected by the General Shareholders' Meeting are limited. Specifically, it has no authority with respect to matters involving personnel, i.e., no authority to appoint and dismiss managing directors at Borussia Dortmund Geschäftsführungs-GmbH or to regulate the terms of their contracts. Nor is the Supervisory Board authorised to adopt internal rules of procedure for the general partner or any list of transactions requiring its consent. Rather, such rights and duties are vested in the governing bodies of Borussia Dortmund Geschäftsführungs-GmbH, namely its Advisory Board and the Executive Committee created by the Advisory Board. Additional distinctions exist with respect to the General Shareholders' Meeting of the KGaA, which are primarily controlled by 285 and 286 (1) AktG and the Articles of Association of our Company. Consequently, the management of the general partner and the Supervisory Board of Borussia Dortmund GmbH & Co. KGaA are required to provide a Statement of Compliance (Ent spre - chens erklärung) pursuant to 161 AktG, taking into account the organisational distinctions of the legal form of a KGaA and their expression in the Articles of Association. The Statement of Compliance must be made permanently available to the shareholders. This is done by publishing the Statement of Compliance on our Company's Investor Relations website ( under the heading Corporate Governance [CG] ). The Statement of Compliance (including explanations of any deviations from the Code's recommendations), which was provided in November 2006, is reproduced in the annex to this Corporate Governance Report. The general partner's management and the Supervisory Board will issue the next Statement of Compliance as scheduled in December 2007, at which time the amendments to the Code dated 14 June 2007, which were published in the electronic Federal Gazette on 20 July 2007, must also be addressed. With respect to the Statement of Compliance from November 2006, to date the following key issues regarding corporate governance should be mentioned: Compliance with the recommendations of the Code relating to the treatment of so-called severance pay caps (Abfindungs-Caps) under management board employment agreements (these recommendations are directed at the supervisory board of stock corporations) is not a matter for the Supervisory Board at our Company because it has no authority in relation to personnel matters. Instead, severance pay caps fall within the purview of the Advisory Board of Borussia Dortmund Geschäftsführungs-GmbH. Subject to this proviso, the recommendations have been and are being complied with mutatis mutandis. Committees, specifically an audit committee, were not or are not being established by the Supervisory Board, because the Supervisory Board comprises only 6 persons, and committees would have to consist of 3 persons in order to have quorum. The Company intends to retain its existing practice in this regard, in other words all pending matters will be dealt with by the full Supervisory Board. It is for the same reason that the Supervisory Board has not created a nomination committee as is now recommended by the Code. In any 33

36 Management compensation Compensation for members of management is not stipulated by the Supervisory Board of our Company but rather by the Executive Committee of the general partner. Management compensation comprises two components: a fixed amount and a variable component. The fixed compensation component is stipulated by contract and is paid out in twelve equal monthly instalments. The variable compensation component is based on the performance of the business and is granted as a bonus contingent on the consolidated net income for the year before taxes and managing directors' bonuses. Any additional noncash or ancillary benefits granted primarily include insurance benefits at standard market conditions and the provision of a company car. There are no stock option plans or similar incentive plans. The comcase, if a nomination committee is established, the Code requires that it comprise shareholder representatives only; however, that is already the case with regard to the Supervisory Board. The Executive Committee of the Advisory Board of Borussia Dortmund Geschäftsfüh - rungs-gmbh reached an agreement with the managing director and chairman, Hans-Joachim Watzke, in June 2007, which was earlier than required, to extend his managing director's agreement (the term of which was originally limited until 31 December 2008) by a further three years, i.e. until 31 December This was in order to show continuity in terms of who would head up management. This Corporate Governance Report herewith submitted by our Company will be published in the Annual Report for the 2006/2007 financial year and on our website at under the heading Publications. ordinary General Shareholders' Meeting will be held on Tuesday, 27 November 2007 in Dortmund. At the end of February 2008 we will publish the interim report for the first six months of the 2007/2008 financial year. The consolidated financial statements and the interim reports are prepared in accordance with internationally accepted accounting principles. The annual financial statements of Borussia Dortmund GmbH & Co. KGaA were and will continue to be prepared in accordance with the provisions of the German Commercial Code ( HGB ). The 2005/2006 Annual Report is the first to be made available in English as well as German, and the entire website has also been available in English since 15 June This is a suggestion under the Code which we intend to follow now and in the future. Other means of communicating with market participants include the newsletter, Borussia Invest, which appears every 6 months, and the publication of analysts' recommendations and research studies on our website at under the heading Publications. Transparency Our Company informs the limited liability shareholders and shareholder associations, financial analysts and the interested public regularly as to the companies' condition and any material changes in its business. In particular, the ad hoc notices and directors' dealings disclosures we receive and the current version of the Articles of Association and the financial calendar are all published on our website. The Annual Document under 10 WpPG, which is also available on the website under Corporate Governance, provides an overview of the companies' key publications during the 2006/2007 financial year. The financial calendar contains key Company events and can also be viewed on the website under Financial Calendar. Borussia Dortmund GmbH & Co. KGaA's 34

37 CORPORATE GOVERNANCE REPORT pensation components provided are reasonable in and of themselves and overall. Compensation benefits paid to members of management are set out in the notes to the annual and consolidated financial statements in the aggregate and broken down by individual. tion presented above, this information is provided only as an aggregated amount rather than being broken down by individual. In the 2006/2007 financial year, the Company did not pay members of the Supervisory Board any additional compensation or grant them any additional benefits. Supervisory Board compensation Pursuant to 13 (1) of the Articles of Association, members of the Supervisory Board receive only a fixed compensation, which is set at a comparatively low amount of EUR 7,000 annually; the chairman receives twice this amount and the deputy chairman receives one and a half times this amount. Super - visory Board members' compensation is set out in the notes to the consolidated financial statements. In the interest of simplicity and in view of the informa- Disclosures relating to the ownership of shares in the Company by management or the Supervisory Board As at 30 June 2007, one member of management held 4,545 shares in our Company. As at the same date, members of the Supervisory Board held a total of 4,000,765 shares. In total, the shareholdings of management and the Supervisory Board constitute more than 1 % of the shares issued by Borussia Dortmund GmbH & Co. KGaA. Dortmund, September 2007 On behalf of the Supervisory Board On behalf of Borussia Dortmund Geschäftsführungs-GmbH Gerd Pieper Hans-Joachim Watzke Thomas Treß 35

38 STATEMENT OF COMPLIANCE BY THE MANAGEMENT AND SUPERVISORY BOARD OF BORUSSIA DORTMUND GMBH & CO. KGAA UNDER 161 AktG (NOVEMBER 2006) The management of the general partner (Borussia Dortmund Geschäftsführungs-GmbH) and the Supervisory Board of Borussia Dortmund GmbH & Co. KGaA hereby state in accordance with 161 AktG that since the last Statement of Compliance issued in December 2005, Borussia Dortmund & Co. KGaA has complied with the recommendations of the German Corporate Governance Code (the Code ) dated 2 June 2005 up until publication of the new version of the Code in the electronic Federal Gazette on 24 July 2006, and has also complied with the recommendations of the Code dated 12 June 2006 from the time of its publication in the electronic Federal Gazette on 24 July 2006, and the recommendations in the amended version dated 12 June 2006 will be complied with in the future; excepted herefrom are the following deviations which in part are due to organisational distinctions specific to the legal form of the KGaA and their expression in the Articles of Association: As to Section 3.8 sentence 3: The D&O insurance does not provide for any deductible. Based on our understanding, such an agreement would not be suitable as an incentive, nor would it strengthen the sense of responsibility with which members of corporate bodies conduct their duties and functions. As to Section sentence 2: The Supervisory Board of Borussia Dortmund GmbH & Co. KGaA has no authority with respect to personnel matters; this is the purview of the Executive Committee of Borussia Dortmund Geschäftsführungs-GmbH. Since January 2006, the management of Borussia Dortmund Geschäftsführungs-GmbH has comprised Hans- Joachim Watzke (managing director/chairman) and Thomas Treß (managing director). As their areas of responsibility have been adequately defined in their respective contracts and the managing directors otherwise exercise their statutory powers and powers under the Articles of Association in close co-operation, the competent governing bodies of Borussia Dort - mund Geschäftsführungs-GmbH have not in the past regarded it as necessary to also enact separate rules of procedure for management. As to Sections 4.2.2, and and Section 7.1.3: Section 7 of our Company's Articles of Asso - ciation provides that the general partner is entitled to reimbursement of personnel costs and the cost of materials incurred in connection with managing the Company, plus compensation equivalent to 3% of any otherwise accruing annual net income for the year of the Company. Compensation and the compensation system for managing directors of Borussia Dortmund Geschäftsführungs-GmbH are otherwise determined by its Executive Committee (deviation from the powers of the Supervisory Board stipulated under Section sentence 1 due to the Company's legal form). Compensation for the managing directors consisting of components that are long-term or risk-based in nature, such as stock options, was not and is not being provided, nor are pension commitments, and thus no further disclosures or explanations primarily relating to these issues were or will be made (deviation from Section sentences 6 to 9, Section sentences 2 and 3 and Section 7.1.3). As to Section sentence 3: Material transactions between the general partner and certain related parties on the one hand, and the Company on the other, within the meaning of 89, 112 in conjunction with 278 (3), 283 No. 5 AktG (e.g., loans) require the involvement of the Supervisory Board. In this respect, the recommendation was and is being followed. The Supervisory Board is not otherwise authorised to adopt a list of transactions requiring its consent for the general partner or its managing directors. As to Section 4.3.5: Because the Supervisory Board lacks authority in matters involving personnel, the Advisory Board of Borussia Dortmund Geschäfts - führungs-gmbh is responsible for approving any side 36

39 CORPORATE GOVERNANCE REPORT activities of the managing directors of the general partner. Subject to this proviso, the recommendations have been and are being complied with mutatis mutandis. As to Section sentences 2 and 6: These Code recommendations directed at the supervisory board of stock corporations are at most applicable by analogy to our Company, whose Supervisory Board does not have any authority with respect to personnel matters. The managing directors and the Exe cutive Committee of Borussia Dortmund Geschäfts füh - rungs-gmbh are responsible for making suc ce ssor arrangements over the long term (in accordance with Section sentence 2). The Executive Committee has and will have in the future the discretion to decide in the case of pending (re)appointments of managing directors on the age limit for managing directors of the general partner; without this generally needing to be stipulated (in deviation from Section sentence 6). As to Sections 5.2 sentence 2, sentence 1 and 5.3.2: No committees have been or will be established by the Supervisory Board, because it comprises only 6 persons, and committees would have to consist of 3 persons in order to have quorum. The Company intends to retain its existing practice in this regard, in other words all pending matters will be dealt with by the full Supervisory Board. As to Section sentence 2: There has been no set age limit for Supervisory Board members to date, nor will there be any in the future. The Supervisory Board feels that such a limitation is not justified as against other criteria for proposed candidates for the election of Supervisory Board members. As to Section sentence 3: Proposals for candidates for the chair of the Supervisory Board have not been made public in the past, nor will they be made public in the future, because the Supervisory Board feels that the individual election of its members already conducted is sufficient and does not feel that a vote in the General Shareholders' Meeting for or against a given candidate is practicable in view of his/her position on the Supervisory Board. As to Section sentences 3, 4 and 6: Pursuant to 13 (1) of the Articles of Association, the members of the Supervisory Board receive only a comparatively low annual fixed compensation of EUR 7,000; the chairman receives twice this amount and the deputy chairman receives one and a half times this amount. It was and is considered sufficient to provide the information on the Supervisory Board's compensation only as an aggregate figure in the notes to the consolidated financial statements. As to Section sentence 1: The recommendation that the Supervisory Board inform the General Shareholders' Meeting in its report of any conflicts of interest that may arise and how these are handled has not been and is not being followed. The principle of confidentiality of discussions within the Supervisory Board (see, 116 sentence 2 AktG and Section 3.5 of the Code) is accorded priority over this. As to Section sentence 3: The consolidated financial statements for the reporting period of 2005/2006 were published with a slight delay on 16 October 2006 (= 108 days after the close of the financial year). The interim report was and will be published within a reasonable period, which may in the specific case exceed 45 days after the end of the reporting period. Dortmund, November 2006 On behalf of the Supervisory Board On behalf of Borussia Dortmund Geschäftsführungs-GmbH Gerd Pieper Hans-Joachim Watzke Thomas Treß 37

40 Borussia Dortmund AFTER A TURBULENT SEASON, A DEPARTURE FOR NEW SHORES Borussia Dortmund experienced turbulent times last season. During the most difficult phase at the end of March 2007, the team had slipped into the relegation zone of the Bundesliga table. But in mid-may, as the season was coming to an end, the distress and worries had been forgotten. BVB managed a great final burst, won 16 points from the last nine games and enjoyed a happy ending that many sceptics had no longer believed possible. Prior to the final match day, it even seemed possible to reach a place in the table that would have allowed the team to take part in international competition. In the end, ninth place meant a solid position in the middle of the table. Almost all is well that ends well. I m glad that this Trainer Thomas Doll season is over, said Hans-Joachim Watzke, Managing Director and Chairman of Borussia Dortmund GmbH & Co. KGaA. I don't want to have to go the first time in 1972 for a period of four years had even slipped to a relegation position. through anything like that again. Shortly before, Borussia had again changed head The 2:0 victory against archrival FC Schalke 04 coach. in the final home game in front of 80,708 spectators in the sold-out SIGNAL IDUNA PARK resulted in a reconciliation with most fans following a season in which things were fairly chaotic, which was how Christian Wörns, the team captain and old-hand defender, summed up the season. Thomas Doll came from Hamburg in order to steer the black and yellow ship back into safe waters and to put it onto a successful course, which, after a few initial difficulties, the 41-year-old former national player and HSV coach succeeded in doing. Doll proved to be the saviour. He dissolved the blockages, was Twice during the 2006/2007 season the Clubs' man- agement felt it had to pull the ripcord and change coach in order to stop the sporting freefall. Bert van team captain Wörns' praise for the work of the football teacher, looking back on a rocky season. The club wishes to continue to work with Doll in the long term. Marwijk was followed in the winter break by the luckless Jürgen Röber, who managed a much celebrated 3:2 victory against FC Bayern Munich in his first match, but who then had just one win from the following seven matches with six defeats. Doll brought fresh verve, optimism and a clear sporting concept to Dortmund, awakening new self-confidence in his team and bringing to life his philosophy: Fear is a poor companion in all situations. His first objective was to stabilise the unsettled defence. The BVB was standing on the precipice: following the 27 th round, the six-time German football champion which had had to leave football's upper echelon for necessary goals were scored, above all, by the Swiss national captain, Alexander Frei, who had joined Borussia Dortmund at the beginning of the season 38

41 THE 2006/2007 SEASON Giovanni Federico Mladen Petric Jakub Blaszczykowski ( Kuba ) Diego Fernando Klimowicz Robert Kovac Marc Ziegler from the French league's Stade Rennes. With his 16 goals, he was able to make a decisive contribution to the fact that, in the final analysis, the season finished on an acceptable note. Nevertheless, when discussing the 2006/2007 season, sport director Michael Zorc said it was a nightmare at times. Hans-Joachim Watzke, the Managing Director and Chairman, called the preceding months the most difficult period of my life. The horror scenario of relegation would have been a major setback for the successfully concluded financial reorganisation of the Borussia Dortmund enterprise. During the troubled times, the meaning of solidarity by the people of Dortmund with their flagship Borussia became clear. The We are Borussia initiative by the BVB fan department resulted in a unique closing of the ranks between Dortmund's cit- izens, companies and public authorities. After the victory at VfL Wolfsburg and the resultant securing of non-relegation on the third last Bundesliga match day, the local derby against Schalke 04 finished 2:0, which finally chased away all dark thoughts and gave fans and sympathisers hope for a successful new season. The high level of enthusiasm and anticipation is shown by the 50,549 season tickets sold for the 2007/2008 season, a new Bundesliga record. BVB also held the old record, with 50,415 season tickets in 2003/2004. With six new players, Thomas Doll's team should be in a better position than in the previous season both in quantitative and qualitative terms. We have succeeded in giving the squad more depth, and the sense of competition within the team has increased, concluded sport director Michael Zorc. 39

42 40

43 BVB Merchandising 41

44 The fan shop in the August Lenz building, directly adjacent to the stadium forecourt. SIGNAL IDUNA PARK & MERCHANDISING By its nature, the retail business is stronger. In this respect, BVB has four fan shops of its own in Dortmund. Furthermore, as additional modern distribution channels, there is an Internet shop, an internal and external call centre and the possibility of ordering by mail order using the BVB fan article catalogue. The distribution channels are rounded off by a commercial network across Germany involving 150 partners (sports stores and chains such as Karstadt, Kaufhof, Intersport, Sport2000, Decathlon). Like all other clubs, Borussia Dortmund classically defines merchandising as the fan article business. In this respect, a distinction is drawn between retail and licensed business. For the latter, a licensed company may give its products the look and feel of Borussia Dortmund and use its own distribution channels for sales. As licensor, Borussia Dortmund receives a minimum licence fee and performancebased, per unit royalties. The grant of licences lends itself particularly to niche products where the licensee, as a specialist, has a strong distribution network. In this way, the Borussia Dortmund brand is transported and multiplied as best as possible. 42 The complete range of fan articles is, of course, also covered in the new fan shop at the stadium.

45 BVB Merchandising Off the rack: The current jerseys are of course a hit in the merchandising business. The successes are reflected in the current business report: Revenues increased to EUR 5.2 million compared to the previous financial year. With these figures, Borussia Dortmund is in the top five in the Bundesliga. In contrast to many other clubs, the entire trading structure is controlled by Borussia Dortmund: this ranges from product range planning through to procurement and logistics, while some other clubs have outsourced some of these aspects to a service provider. BVB opened its fourth fan shop in Dortmund only at the beginning of 2007, right beside Signal Iduna Park, and thus corrected a strategic error of not having a suitable merchandising store right where the fans are, according to managing director Hans-Joachim Watzke. This deficiency no longer exists: 600 square meters of sales space is available, and the entire product range is covered. The fan shops are open on match days until kick-off (at the stadium, even until well after the final whistle) in order to satisfy the fans' needs. Moreover, there are mobile stands at and in SIGNAL IDUNA PARK. In recent years, BVB has placed ever more emphasis on fan articles especially for women. With success. Always popular, and not only on match days: The August Lenz building fan shop at the stadium. 43

46 Borussia Dortmund GmbH & Co. KGaA BUSINESS AND FRAMEWORK CONDITIONS FINANCIAL YEAR 2006/2007 IN REVIEW At the close of the General Shareholders' Meeting of our Company in November 2006, Gerd Pieper, Chairman of the Supervisory Board, was able to announce an extraordinary voting result per cent of the shareholders present formally approved the actions of the management and thereby expressed their confidence in us. We see this acknowledgement as a confirmation of KG and for related incidental costs. Ownership of SIGNAL IDUNA PARK has therefore been almost completely (99.7%) regained. The remaining loan amount of EUR 21.7 million was used for the purpose of reducing and refinancing the existing liabilities of Borussia Dortmund GmbH & Co. KGaA ( BVB-KGaA ). In addition, BVB-KGaA was granted a revolving credit line amounting to EUR 10.0 million by Morgan Stanley. the work we are doing and will continue to practise the transparency and openness that received your stamp of approval at the last General Shareholders' Meeting, as well as a high level of cost consciousness and an appropriate policy on investments. As part of the restructuring process, the creditors' agreement of March 2005 was annulled in June 2006 and the steering committee set up at that time was dissolved. Furthermore, this created the essential conditions for the implementation of the capital increase resolved in May 2006 (utilisation of authorised capital with a nominal amount of up to EUR 14,625,000) with an issue amount of EUR 29,250,000. This entire amount was used for a further reduction of existing liabilities in July Having overcome a life-threatening situation, our Company is once again in the black, which confirms that the nature of our actions was correct and reinforces our belief that we should continue down our chosen path. On 7 June 2006, i. e. in the past financial year, a loan agreement was signed between Borussia Dortmund GmbH & Co. KGaA, and its subsidiaries, and the US investment bank Morgan Stanley for credit facilities amounting in total to EUR 79.2 million with a term of 15 years, thereby laying the foundations for the long-term stabilisation of the Company. A total of EUR 57.5 million of the loan was used for the payment to MOLSIRIS Vermietungs - gesellschaft mbh & Co. Objekt Westfalenstadion KG of the price for the repurchase of the limited partner's share in Westfalen stadion Dortmund GmbH & Co. Borussia Dortmund was also able to buy back the goool.de trademark on 3 July Gerling- Konzern Globale Rückversicherungs-AG, Cologne, had entered into an agreement with Borussia Dortmund in 2000 for the purchase and immediate relicensing of the goool.de trademark and thus became the legal owner of the BVB merchandising trademark rights. As a result of the repurchase, all the trademark rights once again rest with the Borussia Dortmund Group. 1 st Round 11 August 2006 FC Bayern 2:0 BVB 2 nd Round 19 August 2006 BVB 1:1 FSV Mainz A foul with nasty results: Kehl is badly injured during this tackle from Salihamidzic and is out for months. What a start: What a start: with this header, Amedick puts BVB 1:0 in front. Right: Pienaar, Pekovic.

47 MANAGEMENT REPORT The capital increase resolved by the General Shareholders' Meeting of Borussia Dortmund GmbH & Co. KGaA on 15 August 2006 for a nominal amount of up to EUR 17,550,000 to EUR 61,425,000 was fully placed. The indirect subscription right for a total of 7,567,585 new shares was exercised by the Company's limited liability shareholders. Morgan Stanley & Co. International Limited, London, England ( MSIL ) subscribed for an additional 9,982,415 new shares in accordance with the resolution authorising the capital increase dated 15 August MSIL paid in its non-cash contribution by assigning to the Company a partial claim held by its sister company, Morgan Stanley Bank International Limited, against the Company for a nominal amount of EUR 21,961,313. The capital increase was entered in the commercial register of the Local Court of Dortmund on 19 Sep - tember Thus, the Company's share capital is EUR 61,425,000 (previously EUR 43,875,000) and is divided into the same amount of no-par value shares. Management used EUR 10 million of the new cash funds generated from the capital increase (approximately EUR 15.1 million in total) to finance working capital and put the remainder toward reducing existing liabilities. The restructuring of the liability side of the balance sheet, with the aim of strengthening equity resources, achieving a more manageable debt maturity structure and improving interest rate terms, has now been fully implemented. Key financial indicators Key financial figures Borussia Dortmund GmbH & Co. KGaA 2006/ /2006 EUR millions Equity Investments Gross revenue Operating profit/loss (EBIT) Financial result (investment income and net interest expense) Extraordinary income Net profit/loss for the period Earnings before interest, taxes, depreciation and amortisation (EBITDA) Cash flows from operating activities Number of shares (in thousands) 61,425 43,875 Earnings per share (in EUR) rd Round 26 August 2006 VfB Stuttgart 1:3 BVB DFB Cup 9 September 2006 Thannhausen 0:3 BVB Frei, Brzenska and Kringe celebrate the victory in Stuttgart with their fans. TSG Thannhausen brought about many opportunities, but BVB won 3:0. 45

48 Borussia Dortmund GmbH & Co. KGaA DEVELOPMENT OF THE MARKET AND COMPETITIVE ENVIRONMENT IN GERMAN PROFESSIONAL FOOTBALL Ticketing Spectator numbers in the Bundesliga continue to be unusually high. However, a slight decline of 1.43% was recorded in comparison with the record set in the previous year. This was most likely due to the smaller stadium capacities of the three teams promoted, Alemannia Aachen, FC Energie Cottbus and VfL Bochum, compared with the relegated teams, 1. FC Köln, 1. FC Kaiserslautern and MSV Duisburg. The biggest attraction for spectators in the Bundesliga was once again Borussia Dortmund with 1,161,769 tickets sold, ahead of Bayern Munich (1,133,973) and Schalke 04 (1,028,317). Three Bundesliga clubs therefore reached the coveted target of more than 1 million spectators. In sales of season tickets, Borussia Dortmund (44,018) outperformed Schalke 04 (42,339), as in the previous year, and was a long way ahead of the competition in the Bundesliga. On average, each club in the Bundesliga sold 20,450 season tickets last season. TV-marketing The continuing enthusiasm for football can also be seen in the revenues generated for the clubs by TV marketing. The three-year contract for TV marketing for the Bundesliga and the Second Bundesliga entered into by the German Football League (DFL) in December 2005 was for a total amount of over EUR 1.2 billion. This represents an increase of around 40% compared with the previous TV marketing agreement. With the coming into effect of the new TV marketing agreement, the basis of allocating revenues to the clubs was adjusted. The new basis of allocation is intended to link payment more closely to performance, to generate higher income for all clubs and to cushion the effect of relegation from the Bundesliga. An additional consideration is to ensure that the split of revenues between the Bundesliga and the Second Bundesliga remains stable. In concrete terms, this means that a club in the Bundesliga can achieve a maximum of around EUR 23.3 million but a minimum of around EUR 11.7 million from domestic income for championship games. In the Second Bundesliga, the range is between EUR 3.6 million and EUR 7.2 million. On top of that, the Bundesliga clubs benefit separately from the income from foreign marketing. The German champion receives EUR 4.0 million from this source, while an average of EUR 0,518 million goes to the club in 18th position on the league table. Sponsorship Nor has the Bundesliga lost any of its attraction as an advertising forum. On the contrary, the clubs can look back on a successful season with further increases in income from sponsorship and other revenue sources. The Bundesliga therefore continues to be a growth sector, with professional management ensuring that the economic basis is in place for an exciting competition and so guaranteeing a highly attractive product for fans, media partners and, above all, sponsors. The sector's continuing attractiveness and strong television presence also ensure great interest from the advertising industry. In an anonymous survey conducted by the trade magazine Sponsors, the clubs' leading sponsors awarded the Bundesliga's image a score of 2.18 on a scale of 1-6, 1 being the highest mark. The average rating of 1.75 for the Bundesliga as an advertising platform is an outstanding achievement. Interest on the part of sponsors may also be linked to the enormous level of brand recognition enjoyed by the Bundesliga. 98.7% of those questioned had heard of the top German division. 4 th Round 16 September 2006 BVB 1:0 Hamburger SV 5 th Round 22 September 2006 Bor. M gladbach 1:0 BVB 46 Guerrero (left) and Ljuboja (right) watch as Wörns jumps for the header. Brzenska is already hoping for the goal... The scene that possibly decided the match: Frei is beaten by Keller, which created the counter attack that led to 1:0.

49 MANAGEMENT REPORT GROUP STRUCTURE AND BUSINESS In addition to its core activities of football and the marketing of SIGNAL IDUNA PARK, Borussia Dortmund is involved in lines of business related to football. At present, the Company holds direct and indirect interests in the following companies: BVB Stadionmanagement GmbH (100.00%), goool.de Sportswear GmbH (100.00%), Sports & Bytes GmbH (100.00%), BVB Merchandising GmbH (100.00%), BVB Stadion GmbH (99.74%), BVB Beteiligungs-GmbH (94.90%), B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH (51.00%) and Orthomed GmbH (33.33%). Some of these companies have concluded mutual control and/or profit and loss transfer agreements. Borussia Dortmund GmbH & Co. KGaA 100% 100% goool.de sportswear GmbH BVB Stadionmanagement GmbH 94,90% 94,90% BVB Stadion GmbH 5,10% BVB Beteiligungs-GmbH 5,10% BV. Borussia 09 e.v. Dortmund 100% BVB Merchandising GmbH 100% Sports & Bytes GmbH 51,00% B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH 49,00% Hogg Robinson Germany GmbH & Co. KG 33,33% Orthomed GmbH 66,67% Other shareholders 6 th Round 29 September 2006 BVB 2:2 Hannover 96 7 th Round 15 October 2006 Cottbus 2:3 BVB Borussia devastated: Even two goals by Smolarek (on the ground) were not enough to secure a victory against a rejoicing Hanover. Two goals by a defender: Brzenska (here against Kioyo) scored twice in a match for the first time in the Bundesliga. 47

50 Borussia Dortmund GmbH & Co. KGaA ORGANISATION OF MANAGEMENT AND CONTROL The general partner, Borussia Dortmund Geschäfts - führungs-gmbh, is responsible for management and representation of Borussia Dortmund GmbH & Co. KGaA. This limited liability company ( GmbH ) is in turn represented by its Managing Directors Hans- Joachim Watzke and Thomas Treß; its sole shareholder is Ballspielverein Borussia 09 e.v. Dortmund. The remuneration of the Managing Directors is made up of fixed and performance-related components, with the latter based on the consolidated net profit for the year before income taxes. The following chart shows the structures and responsibilities as between Ballspielverein Borussia 09 e.v. Dortmund, Borussia Dortmund GmbH & Co. KGaA and Borussia Dortmund Geschäfts - führungs-gmbh. Ballspielverein Borussia 09 e.v. Dortmund elects Executive Board appoints Members Meeting Council of economic affairs Borussia Dortmund Geschäftsführungs-GmbH (General Partner) appoints and supervises elects Borussia Dortmund GmbH & Co. KGaA Supervisory Board Advisory Board Managing Directors (Consisting of members of the Executive Board, Council of economic affairs and non-voting, associated members) No right of appointment, only right of supervision General Shareholders Meeting 8 th Round 20 October 2006 BVB 1:1 VfL Bochum DFB Cup 24 October 2006 BVB 0:1 Hannover With this spectacular move Pienaar set up the equaliser in the home match against the regional neighbour VfL Bochum. Dariusz Zuraw wins the battle against Ebi Smolarek.

51 MANAGEMENT REPORT The rights and duties of the KGaA's Supervisory Board, which is appointed by the General Shareholders' Meeting, are limited. Specifically, it has no authority with respect to matters involving personnel, i.e., no authority to appoint and dismiss managing directors at Borussia Dortmund Ge - schäftsführungs-gmbh or to regulate the terms of their contracts. Nor is the Supervisory Board authorised to adopt internal rules of procedure for the general partner or issue any list of transactions requiring its consent. Rather, such rights and duties are vested in the governing bodies of Borussia Dortmund Geschäftsführungs-GmbH, namely its Advisory Board and the Executive Committee created by the Advisory Board. The members of the Supervisory Board are as follows: Gerd Pieper (Chairman) Proprietor and Managing Director of Stadtparfümerie Pieper GmbH, Herne Harald Heinze (Deputy Chairman) Ruedi Baer Delegate of the Board of Directors of mobilezone group, Regensdorf (Switzerland) Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne Bernd Geske Managing partner of Bernd Geske Lean Communication, Meerbusch Patrick Albert Lynch Bank employee, London (until 26 February 2007) Christian Kullmann Head of the corporate communications division and board office of RAG Aktiengesellschaft, Essen (since 23 May 2007, by decision of the Local Court of Dortmund dated 21 May 2007) 9 th Round 28 October FC Nuremberg 1:1 BVB 10 th Round 4 November 2006 BVB 1:1 Arm. Bielefeld Tinga gets through in the penalty area and gives keeper Schäfer no chance to save from a tight angle. Artistic: Pienaar against Bielefeld s Kauf, who would later set up Wichniarek's goal for Arminia's 1:0 lead. 49

52 Borussia Dortmund GmbH & Co. KGaA Within Borussia Dortmund GmbH & Co. KGaA, there are four independent areas of responsibility below the management, namely, communications, sports, finance and organisation. The responsible employees and the divisions for which they are responsible can be seen from the following chart. BORUSSIA DORTMUND GmbH & Co. KGaA Management Hans-Joachim Watzke [Chairman] Management Thomas Treß Communications Sport Finance Organisation J. Schneck M. Zorc M. Knipping Dr. C. Hockenjos Corporate communications Professional football Finances and accounting General organisation Sport communications Amateurs Controlling Stadium management Publications Youth Investor Relations Match organisation Fan support Training fields IT (Information Technology) V.I.P. Hospitality Stadium announcements and program Personnel Sportfive (sponsors) PR work Risk Management Events Complaints management Merchandising DFB/DFL Affiliates Ticketing Sportfive (Commission processing) Real estate Third party events 11 th Round 7 November 2006 BVB 0:0 Aachen 12 th Round 10 November 2006 Werder Bremen 1:3 BVB 50 It was not Dede's fault that Borussia did no better than 0:0 against Alemannia (tackle with Ebbers). Sahin here against Schulz had a strong match on the Weser and set up the first two goals.

53 MANAGEMENT REPORT INTERNAL MANAGEMENT SYSTEM Sports management The great challenge for the future will be to play football successfully with a cost-optimised budget. In order to achieve this aim, BVB will continue to try to present a strong, competitive team in the future and, in this respect, will back young players with potential, who will create a healthy mixture with the seasoned players. This will create a realistic chance of qualifying for international competitions. The sporting objectives will be aligned with financial circumstances. This means that the salary budget will generally be tied to realistic sporting objectives and that the target for the sporting management with Mr. Watzke, Mr. Zorc and the coach will be to lead BVB into an international competition again in the next few years. This would increase the financial flexibility for acquiring new players, although no unknown risks will be taken. There will be no new debt in order to strengthen the team. Financial management One of the main aims of BVB's management is to increase profitability in the long-term and thus to further improve Borussia Dortmund GmbH & Co. KGaA's equity resources. In addition, there is a focus on financial strength. As well as a constant improvement in the operating result, generating positive cash flow is therefore the most important financial objective of our Company. We are seeking to optimise cash flow by concentrating on the impacting factors of operating results and investments. The operating result is the most important indicator for measuring success. For us, the operating result means earnings before interest and taxes (EBIT). Therefore we are constantly monitoring the operating results in all lines of business and areas of responsibility based on monthly comparisons between the budget and the actual situation. The most important drivers for the operating result are further improvement in sales revenues in the major revenue sources of ticketing, sponsorship, TV marketing and merchandising, and disciplined management of operating expenses. In coming years we will concentrate on achieving the best possible balance between limiting operating expenditure and, at the same time, generating sales growth. In this respect, the decisive factor is qualifying for international competitions. Capital management In addition to securing the KGaA's equity as determined in accordance with HGB, the management's capital management responsibilities also include stabilising and increasing the consolidated equity as determined in accordance with IFRS. We will reach these targets, in particular, by improving the operating result and through effective investments. The utilisation of the authorised capital with a nominal amount of EUR 21.9 million resolved by the extraordinary General Shareholders' Meeting on 15 August 2006 represents an instrument enabling management to respond flexibly to future requirements for capital. The same applies to the ability to issue convertible bonds and bonds with warrants (conditional capital with a nominal amount of EUR 14.6 million). At the present time, however, the management has no specific plans to make use of these instruments. 13 th Round 18 November 2006 BVB 1:2 Hertha BSC Berlin 14 th Round 25 November 2006 Frankfurt 1:1 BVB Kringe kept trying to push the game forward. But here he was stopped by Samba. Tinga shoots, but his shot is blocked. Only in the 79 th minute did Smolarek (right) score for the final score of 1:1. 51

54 Borussia Dortmund GmbH & Co. KGaA CORPORATE STRATEGY less dependent on short-term sporting success in the future, Borussia Dortmund will push ahead Borussia Dortmund's aim is to establish itself over the medium-term as one of the leading German further with national and international marketing of its brand name. football clubs after Bayern Munich. Following the successful implementation of the reorganisation, the restructuring of our financial liabilities and the first moderate investments in the professional squad, we consider ourselves to be on the right path. Germany continues to be Europe's largest football market, which, however, is behind some other European markets in financial terms. This provides great growth potential. The financial foundations of the first and to date only listed German football company have been expanded with the exclusive marketing right for SIGNAL IDUNA PARK, more effective use of the Borussia Dortmund brand and the establishment of footballrelated lines of business. However, the core business will in future also be professional football together with its classic income sources of TV marketing, sponsorship, ticketing and merchandising. For the All financial activities at Borussia Dortmund are oriented around the target groups that are relevant for a football club: its fans, members and business partners. Products and services should be tailored to these groups in the best way possible. Through its existing brand potential, Borussia Dortmund intends to utilise all the commercial opportunities presented by professional club football in an international context for the benefit of the shareholders. following reasons, BVB is convinced that it will be able to further stabilise and expand its position: The current business strategy can principally be summarised as follows: Borussia Dortmund is in sporting terms one of the most successful, well known and most popular German football clubs with an outstanding fan base that provides BVB with one of the highest average numbers of spectators in Europe. A football company can only be financially successful if it enjoys sporting success in the long term. In order to make its financial performance Strengthening the financial condition Sustainable adjustment of sporting perspectives Intensifying the promotion of up and coming talent Fan involvement Utilisation of the Borussia Dortmund brand 15 th Round 2 December 2006 BVB 1:0 VfL Wolfsburg 16 th Round 10 December 2006 FC Schalke 04 3:1 BVB 52 Hofland wins this tackle against Smolarek but in the decisive scene Smolarek prevails. Valdez suffered a serious knee injury during this tackle with Pander (who was not at fault).

55 MANAGEMENT REPORT However, financial and business development is largely dependent on sporting success. Since sporting success can only be planned to a very limited degree, the best management can do is to create a foundation for success. Investments, particularly in the professional squad, are therefore a necessary prerequisite for achieving sporting objectives, such as qualifying for the UEFA Cup. However, in order to meet financial goals, planned investments and decisions must under certain circumstances be postponed to the extent these would only be possible by incurring new debt. Moreover, a player may be sold based on financial considerations in cases where this would not have happened had the decision been made based solely on sporting criteria. goals. In such cases, management weighs up the opportunities and risks to find a solution that is broadly in line with our strategic objectives from a medium-term point of view. We plan to further increase gross revenue in the medium term. The first steps in bringing us closer to this goal have been taken with the marketing of the stadium name, the new main sponsor agreement with RAG and the conclusion of the new TV agreement by DFL. Moreover, further significant revenue potential is available, especially by qualifying for international competitions, which would have a positive effect on all Borussia Dortmund's revenue sources. A conflict, or a situation where sporting considerations and financial considerations affect each other adversely, therefore arises between the pursuit of financial interests and sporting interests, particularly if the club continually falls short of its sporting Positive operating results and moderate investments, mainly in the professional squad, depending on those results, are expected to enable Borussia Dortmund GmbH & Co. KGaA to achieve stable, positive cash flows over the long term. 17 th Round 17 December 2006 BVB 1:2 Leverkusen 18 th Round 26 January 2007 BVB 3:2 FC Bayern Two of the three goal scorers in one picture: Amedick, who had bad luck in hitting the post, in a duel with Voronin. Even van Bommel could not stop an outstanding Frei that evening. Pienaar watches on the left. 53

56 Borussia Dortmund GmbH & Co. KGaA POSITION OF THE COMPANY RESULTS OF OPERATIONS In the past financial year for the 2006/2007 season, Borussia Dortmund GmbH & Co. KGaA achieved an increase in revenues compared with the previous sea- son of 9.2%, from EUR 83.3 million to EUR 90.9 million, in its core business activities of ticketing, sponsorship, TV rights, catering, licences and transfers. Borussia Dortmund GmbH & Co. KGaA Revenues in per cent 16% 7% 20% 34% 23% Transfer income Ticketing TV rights Sponsorship Catering, licences and other 19 th Round 31 January 2007 FSV Mainz 05 1:0 BVB 20 th Round 4 February 2007 BVB 0:1 VfB Stuttgart 54 Niculae tries to thread the ball past Kruska. Metzelder watches the situation in the background. Metzelder tackling goal scorer Gomez. Metze was unfortunate that his header was cleared off the line

57 MANAGEMENT REPORT SALES DEVELOPMENT Despite a season with few high points from a sporting point of view, Borussia Dortmund GmbH & Co. KGaA again achieved an increase in revenues of EUR 7.6 million to more than EUR 90 million. In addition to the new basis of allocating TV marketing income which came into effect in the past financial year, the 9.2% increase is owed mainly to the loyalty of the supporters and sponsors, because substantial revenue growth was recorded both in ticket sales (+6.2%) and in income from sponsorship (+12.4%). Gross revenue for the 2006/2007 financial year of EUR 99.7 million was only just short of the EUR 100 million target and was achieved even without participation in an international competition Borussia Dortmund GmbH & Co. KGaA Revenues in EUR millions 100 6, , ,7 14,8 21, ,2 30,5 17,2 18, / /07 Transfer income Catering and licences incl. other TV marketing Sponsorship Ticketing 21 st Round 10 February 2007 Hamburger SV 3:0 BVB 22 nd Round 17 February 2007 BVB 1:0 Bor. M gladbach The scene that resulted in the penalty: Mahdavikia dives in front of Weidenfeller, referee Wagner falls for the performance. After the final whistle: the twins David and Philipp Degen. Both had their opportunities to score... 55

58 Borussia Dortmund GmbH & Co. KGaA Details of the performance of the individual revenue sources are provided in the following paragraphs. Income from ticketing Borussia Dortmund's receipts from match operations, i.e. income from ticketing and friendly games, increased by EUR 1.1 million to EUR 18.3 million Income from sponsorship Borussia Dortmund's income from sponsorship conformed to the upward trend enjoyed by all clubs in the Bundesliga and reached EUR 30.5 million, thus exceeding the EUR 30 million target for the first time with an increase of 12.4% compared with the prioryear figure. in the past financial year for the 2006/2007 season. The largest individual contribution to growth amounting to EUR 0.7 million was made by income from Bundesliga match and season ticket sales. In addition the home game against Hannover 96 in the second main round of the DFB Cup generated a surplus of EUR 0.1 million, while various friendly games and match operations for the regional league team Despite not participating in an international competition, BVB's games were watched by an average of 72,164 spectators and therefore represented an attractive advertising platform, especially for regional companies. The creation of additional capacity for perimeter boards also created the opportunity to offer perimeter board advertising to new potential clients. provided additional income of EUR 0.3 million. In addition to RAG, acting as main sponsor for the The average number of spectators was increased from 71,378 to 72,164, despite lower season ticket sales compared with the previous year and a rather difficult season from the sporting point of view, with the club's participation in the first division next season not made certain until the 32nd match day. On an international basis, Borussia Dortmund therefore continues to first time in the last financial year, and SIGNAL IDUNA, which has given its name to the largest stadium in the Bundesliga, Borussia Dortmund and its marketing partner SPORTFIVE succeeded once again in increasing the number of so-called champion partners and partners compared with the previous year. occupy third place in terms of numbers of spectators behind Manchester United and Real Madrid, despite not participating in an international competition. The development of the hospitality areas also made a substantial contribution to the increase in income from sponsorship. In addition to the reserved seating The loyalty of the club's supporters, even following an unsuccessful sporting season, is made clear by the number of season tickets already sold for next season. With 50,549 tickets sold for the 2007/2008 season, Borussia Dortmund has beaten its own Bundesliga record of 50,415 season tickets sold for 2003/2004. In comparison, an average of 20,450 season tickets were sold in the Bundesliga for the 2006/2007 season. area in the West Stand at SIGNAL IDUNA PARK which has been fully booked for years, the new Business Club 09 concept was gratefully received by many customers. Not only does it offer participants the chance to experience all BVB matches at SIGNAL IDUNA PARK close up, it also creates the opportunity to benefit from the Borussia Dortmund phenomenon away from the pitch. The number of seats sold was more than double the previous year's 23 rd Round 24 February 2007 Hannover 96 4:2 BVB 24 th Round 4 March 2007 BVB 2:3 Cottbus 56 During the game in Hanover, Valdez did not have his nerves under control. Here he starts a fight with Vinicius. Left: referee Fandel. Three goals (of which only two counted) and still Frei had to be consoled by Cvitanovic.

59 MANAGEMENT REPORT figure. Regular meetings on journeys to away games and many other events promote a constant exchange between the companies and Borussia Dortmund. The successful development of this initiative is reflected in the figures, with an increase in advertising income from Business Club 09 of 120%. Incentive packages were also especially heavily booked by business customers during the last financial year. These enable companies to invite their guests to SIGNAL IDUNA PARK on individual match days, independently of a season package. In order to satisfy all the requests in this segment, the indoor golf area located at the south of SIGNAL IDUNA PARK and the newly built Conference Center were converted into hospitality areas on match days. Income from TV marketing Income from TV marketing amounted to EUR 21.3 million in the past financial year and was therefore approximately EUR 6.5 million higher than in the previous year. The reason for this was the new TV agreement which came into effect for the first time in the 2006/2007 season, under which the clubs in the Bundesliga and the Second Bundesliga will receive around EUR 1.2 billion over three years. This represents an increase in the amount distri - buted annually of around 40% compared with the previous TV agreement. As well as the increase in the amount distributed, a new basis of allocation was also introduced at the start of the past financial year under which the football clubs are ranked in order of preference, using a weighted method of calculation based on the last four years' seasons. In addition, a bonus is paid at the end of the season depending on the club's position on the league table. Although Borussia Dortmund occupied ninth posi- tion on the table on average during the season, it benefited from its positions in previous years and continues to rank seventh on the allocation list. The absence of the live game in the DFB Cup and the club's non-participation in the UI Cup resulted in a loss of income of around EUR 0.3 million, but the promotion of the amateur squad to the regional league and the associated TV receipts made up for this. Transfer income Income from transfers recorded a decline of EUR 5.6 million to EUR 6.8 million. While three key players with unexpired contracts, Henrique Ewerthon, Niclas Jensen and Tomas Rosicky, were sold in one go in the 2005/2006 financial year, in the most recent season Borussia Dortmund GmbH & Co. KGaA only said goodbye to David Odonkor, who transferred to the Spanish first division club Betis Sevilla following an outstanding World Cup. Income from catering and licences including other income Borussia Dortmund achieved income from catering, licences and other income of EUR 14.1 million in the 2006/2007 financial year compared with EUR 11.7 million in the 2005/2006 financial year. The growth in income mainly reflected the performance in catering. The marketing successes already mentioned in the context of sponsorship also had an impact here, because the majority of agreements with business customers provide for an element of catering services as well as advertising space. This item continues to include income from catering on match days, the sale of publications, advance booking fees and licence fees for events at SIGNAL IDUNA PARK on non-match days. The latter also recorded an upward 25 th Round 10 March 2007 VfL Bochum 2:0 BVB 26 th Round 17 March 2007 BVB 0:0 1. FC Nuremberg Here Weidenfeller still manages to save: Borussia's keeper stops an early goal from Gekas. Left: Wörns. He brought new energy: Together with Tinga, Marc Kruska (right) attacks Nuremberg's Jan Polak. 57

60 Borussia Dortmund GmbH & Co. KGaA trend, as did catering income in the circulation areas at SIGNAL IDUNA PARK, which were able to achieve an increase of EUR 0.20 in spending per head thanks to a wider range of items offered. Income in this area will also participate in the general upward trend in future as a result of the construction of the Conference Center, a state-of-the-art conference facility, and the letting of the Center by Stadionlive GmbH, which has been marketing and organising the other events successfully since Other income, which mainly comprises rental and lease income, amounted to EUR 5.7 million. This item represents rental income from the letting of SIGNAL IDUNA PARK for the 2006 FIFA World Cup. Other operating income Other operating income achieved growth of around EUR 2.0 million to EUR 8.7 million in the most recent financial year. This item included receipts from distributions and allocations of profit from the FIFA 2006 World Cup, which alone accounted for income of EUR 4.6 million. around EUR 2.2 million was once again achieved in the professional match operations area alone, despite several changes of coach. In the 2004/2005 season, these expenses amounted to EUR 36.6 million. Depreciation and amortisation Depreciation and amortisation fell as planned by EUR 0.8 million compared with the previous year to EUR 6.9 million. Other operating expenses Other operating expenses amounted to EUR 42.7 million in the 2006/2007 financial year compared with EUR 57.0 million in the previous year. The decline was mainly due to a fall of EUR 5.8 million in transfer expenses, a reduction of EUR 4.4 million in legal and advisory costs, valuation allowances on receivables lower by EUR 2.4 million, a reduction of EUR 3.2 in other administrative expenses and a fall of EUR 1.3 million in licence fees. The decline was offset principally by higher marketing commissions (EUR 1.3 million). In addition to the expenses of match operations and the rental costs for SIGNAL IDUNA PARK and the training ground, marketing represents the major item of expenses. DEVELOPMENT OF SIGNIFICANT OPERATING EXPENSES Personnel expenses A further reduction of EUR 3.0 million was achieved in personnel expenses which amounted to EUR 34.3 million compared with EUR 37.3 million in the 2005/2006 financial year. A reduction in expenses of Income taxes No income taxes were required to be included in the financial statements because, with the repurchase of the trademark rights, the provision for anticipated losses on pending transactions established in previous years in the HGB financial statements was also recognised for tax purposes in the 2006/2007 financial year. 27 th Round 30 March 2007 Arm. Bielefeld 1:0 BVB 28 th Round 7 April 2007 Aachen 1:4 BVB 58 Relegation battle: Following the 0:1 in Bielefeld (here Schuler), BVB slipped with Valdez to 17 th position. Outstanding: Tinga played his best match to date in the BVB strip at the Tivoli. Here he leaves Aachen's Pinto behind.

61 MANAGEMENT REPORT FINANCIAL CONDITION ANALYSIS OF CAPITAL STRUCTURE With the capital increase resolved by the extraordinary General Shareholders' Meeting on 15 August 2006, the share capital of Borussia Dortmund GmbH & Co. KGaA (previously EUR million) rose by EUR million to EUR million, while equity, after taking into account the net profit for the year, increased to EUR million compared with EUR million in the previous year. The equity ratio therefore improved from 29% to 62% as planned. The funds generated by the capital increases in the previous and current financial years have been used mainly to reduce financial liabilities, achieve a more manageable debt maturity structure and obtain improved interest-rate terms. Liabilities were reduced significantly compared with the previous year from EUR million to EUR million. The main component of the financial liabilities is the loan from Morgan Stanley in an amount of EUR 21.7 million. In order to minimise the interest-rate-related cash flow risk associated with this loan and the loans granted by Morgan Stanley to subsidiaries amounting to EUR 57.5 million, the Company has entered into an interest rate hedging transaction which results in a rate of interest payable, on this loan, of 6.195% per annum, irrespective of actual changes in market rates of interest. ANALYSIS OF INVESTMENTS Additions to intangible assets amounting to EUR million related almost entirely to investments in the professional squad. Additions to tangible fixed assets amounted to EUR 2,317 million. Significant individual investments worthy of mention were the conversion of the former offices at the stadium, the August Lenz building, into a fan shop and the construction of a conference centre on Level 4 of the stadium's North Stand. ANALYSIS OF LIQUIDITY As at 30 June 2007, Borussia Dortmund GmbH & Co. KGaA held cash of EUR million, of which EUR million was subject to restrictions. In addition, the revolving credit facility granted by Morgan Stanley for EUR million and an overdraft facility of EUR million are available to the Group for their full amounts. The cash flow statement gives details of the development of liquidity. NET ASSETS The total assets of Borussia Dortmund GmbH & Co. KGaA declined from EUR million to EUR million. The principal reasons for the decline were the reduction in cash funds and lower non-current trade receivables. At the same time, intangible assets were higher. 29 th Round 15 April 2007 BVB 0:2 Werder Bremen 30 th Round 21 April 2007 Hertha BSC Berlin 0:1 BVB Stumble: Metzelder & Co had to face the last defeat for five weeks against Wiese s Werder Bremen. Scorer of the winning goal on the Spree: Markus Brzenska. First to congratulate him are Ebi Smolarek (left) and Florian Kringe. 59

62 Borussia Dortmund GmbH & Co. KGaA OVERALL SUMMARY OF RESULTS OF OPERATIONS, FINANCIAL CONDITION AND NET ASSETS The results of operations, financial condition and net assets of Borussia Dortmund GmbH & Co. KGaA showed significant positive development following the successful implementation of the reorganisation measures and the completed restructuring of the liability side of the balance sheet. Particular mention should be made of the improvement in the operating result, the Group's equity resources and the reduction in liabilities, which will once again allow BVB room for manoeuvre in its future sporting development. COMPENSATION REPORT The structure of the compensation system for management is determined and regularly reviewed by the can be made on the basis of resolutions approved by the Executive Committee of the Advisory Board. Executive Committee of the Advisory Board. The Executive Committee is also responsible for determining the compensation of management in detail and sets the appropriate amount of compensation. The principal criteria for determining the appropriate amount of compensation are the responsibilities of The component not related to performance comprises a fixed annual salary and benefits in kind, mainly derived from the amounts required to be taken into account in accordance with tax regulations e.g. for the use of company cars. the particular member of management, their personal performance and the financial condition, success and future prospects of Borussia Dortmund. The Supervisory Board's compensation is governed by 13 of the Articles of Association, pursuant to which each member of the Supervisory Board As well as annual payments not related to performance and based on market rates at comparable companies, the compensation includes a performancerelated component that is based on consolidated earnings before taxes. In addition, special payments receives fixed compensation amounting to EUR 7 thousand; the Chairman receives twice that amount, while the Deputy Chairman receives one and a half times that amount. Value-added tax is reimbursed to the members of the Supervisory Board. 31 st Round 28 April 2007 BVB 2:0 Frankfurt 32 nd Round 5 May 2007 VfL Wolfsburg 0:2 BVB 60 Alexander Frei here against Chris shot down Eintracht almost by himself with two attractive free kicks. In the third last round, Valdez scored the longed-for first goal for BVB. Van der Leegte cannot stop him.

63 MANAGEMENT REPORT RISK REPORT In the course of its business activities, Borussia Dortmund GmbH & Co. KGaA is constantly exposed to risks which may have a negative effect on the Company's operations. The identification, assessment and management of these dangers define the areas of responsibility of a company's risk management system. RISK MANAGEMENT SYSTEM Risk management as an ongoing task is an integral part and major precondition of sound company management. With the aid of a properly implemented internal monitoring system, developments which endanger the continued existence of Borussia Dortmund GmbH & Co. KGaA and its subsidiaries can be recognised and counteracted at an early stage. In the risk management system, management has laid down principles and guidelines to enable uncertainties to be identified and countermeasures to be taken in good time. Borussia Dortmund's risk management system is integrated into the organisational structure of the whole Company and therefore ensures that the responsible employees maintain a high level of valueoriented risk awareness. It implements the requirements of the German Control and Transparency Act. The Group-wide risk management system ensures that risks are identified at an early stage, recorded consistently, evaluated, managed and monitored. Within the framework of its risk management system, Borussia Dortmund, together with the specialist departments, identifies, documents and evaluates possible risks on the basis of the potential amount of loss they may cause and their likelihood of occurring, and collates them at the level of the corporate divisions. The risks are categorised and steps are taken to ensure that they are constantly monitored and that appropriate measures to manage the risks are implemented right from the start. The aim of the risk management system is to obtain information about risks and their financial and other consequences as early as possible and to enable the Company to take appropriate countermeasures. Particular attention is paid to risks which could endanger the continued existence of Borussia Dortmund GmbH & Co. KGaA or its subsidiaries in their existing form (high priority risk). Responsibilities have been established for the individual corporate divisions and the procedures to be observed and the monitoring system have been defined as follows: The risk position is regularly recorded on a consistent basis and compared with the existing data. This enables countermeasures to be taken in good time if negative developments can be identified. The executives responsible are required to inform management immediately of any significant chan - ges in the risk profile. Constant observation of the market enables changes in the environment to be recognised promptly and action to be taken in response. Differences in the Company's results of operations and net assets from the budgeted figures are identified and analysed using detailed monthly and quarterly financial reports. 33 rd Round 12 May 2007 BVB 2:0 FC Schalke th Round 17 May 2007 Leverkusen 2:1 BVB Total commitment: Christian Wörns in a tackle against the Schalke player, Gerald Asamoah. BVB wins 2:0. The last chance of the 2006/2007 season: Lars Ricken just misses Leverkusen's goal in time added on. 61

64 Borussia Dortmund GmbH & Co. KGaA In this context, Borussia Dortmund applies the following principles/rules of conduct: Management determines the basis on which risks are to be assessed and identified. The identification of risks takes place in the individual corporate divisions since that is where knowledge about specific risks is available. Risks are assessed by a group of people chosen by the management. The criteria to be applied are also defined by management. The governing bodies of Borussia Dortmund are kept regularly informed of the current risk position. The efficiency and effectiveness of the risk management system is examined as part of the audit carried out by the Company's auditors. The following paragraphs describe in more detail the specific risks to which Borussia Dortmund GmbH & Co. KGaA is exposed, which affect the Company's business operations as a result of internal and external factors and may have a major influence on them over the long term. SPECIFIC RISKS STRATEGIC RISKS In addition to financial success, the primary objective of a company participating in the football business in the Bundesliga remains sporting success, irrespective of business plans which do not depend on the club's position on the league table and the maintenance of profitability in a variety of different sporting scenarios. This can be justified solely on the grounds of public interest, which is largely focused on the winning of titles. If the club has no success over longer periods, the management is faced with a balancing act, attempting to keep the profitability of the company sporting achievements, because winning titles generates additional demand from spectators, business customers, sponsors and in other areas of the business. A conflict of objectives therefore arises. The achievement of one company objective may therefore necessarily entail abandoning or modifying another objective. In such cases, management will weigh up the risks and opportunities and attempt to find a solution that is broadly in line with the strategic objectives from a medium-term point of view, while remaining within the range of defined company performance indicators in order not to jeopardise the financial objectives. and the sporting objectives in harmony with each other. Measures which are necessary for sporting success, such as investments, must not be allowed to PERSONNEL RISKS endanger the financial objectives, for example, ensuring adequate liquidity, even over several years. But economic success also depends to a large extent on The available potential of its employees, from both a sporting and a financial point of view, forms the basis for DFB Cup 4 August FC Magdeburg 1:4 BVB 1 st Round 12 August 2007 BVB 1:3 MSV Duisburg 62 In overcoming Magdeburg, Tinga and Co were not quite as in control as the result suggests. Sebastian Kehl in a tackle against the Duisburg player, Manasseh Ishiaku.

65 MANAGEMENT REPORT Borussia Dortmund's future development as a business. Their ability, commitment and performance will play a decisive role in future sporting and financial success. In this regard the professional squad is of critical importance. The wrong investments in this area would have far-reaching effects on the Company's sporting objectives, and therefore financial objectives, as would insufficient identification with the club and a lack of commitment. To some extent, it may not be possible to make up for the loss of key players as a result of injury and, as a result, the ability to meet internally defined objectives may be endangered. The Company's success is based on making business decisions and putting them into effect, and both are largely determined by the quality of the relevant employees. The structure of Borussia Dortmund's organisation is based on a clear separation of the individual corporate divisions, which thus enables business decisions to be analysed and prepared in individual departments with the relevant expertise before a decision is made for the Company as a whole. The constant exchange between the corporate divisions through the medium of well established meetings contributes beforehand to optimising the quality of the decisions made and avoiding conflicts of objectives. From the point of view of risk management, it is equally indispensable for a company to be able to rely on qualified executives and their staff. Management and all the Company's employees have a permanent responsibility to identify risks at an early stage, to monitor and therefore limit them, and at the same time to pursue business opportunities rigorously. COMPETITIVE RISKS Competition between football clubs, for example in obtaining sponsors, has intensified, and not just as result of the stadiums built for the 2006 FIFA World Cup. Differing decisions made under the influence of regional politics can also affect the ability to attract and retain interested companies. In the most recent season, in particular, sponsors have been rated differently by regional politicians, and in some cases have therefore been approved for certain competitors while being simultaneously banned for others. An additional difficulty is that there is an unusually high concentration of competitors in North Rhine- Westphalia in particular, with six clubs currently in the Bundesliga and several in the Second Bun - desliga. This can have negative consequences for attracting sponsors based in the region because, in contrast to other regions, there is the risk for sponsors that they will be in conflict with each other for potential customers. SALES RISKS The future performance of Borussia Dortmund's individual lines of business depends on its sporting success. A lack of sporting success over a long period could have a major impact on demand for the products offered and therefore on the achievement of financial and sporting objectives. It is also not possible to be fully certain in advance of the consequences for the Company of statutory provisions. Equally, the development of pay TV will have a longterm effect on TV income achievable in future. 2 nd Round 18 August 2007 FC Schalke 04 4:1 BVB 3 rd Round 25 August 2007 BVB 3:0 Cottbus Gerald Asamoah's actions in this scene with Robert Kovac do not look like a tender embrace... Diego Klimowicz scorer of two goals heading against Cottbus. 63

66 Borussia Dortmund GmbH & Co. KGaA FINANCIAL RISKS Borussia Dortmund finances itself primarily from long-term bank loans, trade payables, season tickets paid for in advance and payments from sponsors. The related risks arising comprise interest-rate-related cash flow risks, market risks, liquidity risks and credit risks. On the other hand, the Company is not exposed to any significant currency risks. Under the terms of the loan agreements entered into by Borussia After taking account of this interest rate swap, all the Company's significant financial liabilities carried a fixed rate of interest as of June 30, Future changes in the level of interest rates will therefore have only a small impact on the interest expense, even in the medium term. CREDIT RISK Dortmund and its subsidiaries with Morgan Stanley & Co. International Ltd., London, England, the lender has an early right of termination in the event of failure to maintain certain contractually defined financial ratios (covenants). The methods of managing the individual types of risk are described in the following. The Company conducts business exclusively with third parties of high credit standing. Concentrations of credit risk can arise in the context of a player transfer and from long-term sponsorship agreements. Such concentrations of risk are monitored in the course of the Company's operating activities. INTEREST RATE RISKS The counterparty for the interest rate swap described above was a major German bank with the highest The financial liabilities consist mainly of a variable-rate loan from Morgan Stanley & Co. International Ltd., London, England, based on Euribor. The interest credit rating. LIQUIDITY RISK expense associated with this loan is therefore dependent on the future development of the general level of interest rates. In order to minimise the interest-raterelated cash flow risk associated with the loan, the Company therefore entered into an interest rate swap in respect of this loan in August The effect of this interest rate hedging transaction is an overall future rate of interest payable of 6.195% per annum, irrespective of actual changes in market rates of interest. The Group constantly monitors the risk of possible liquidity bottlenecks, taking into account the probable maturities of its financial liabilities and the timing of the expected cash flows from operating activities. Following the restructuring completed in the 2005/2006 financial year, liquidity risks have been sharply reduced thanks to the Company's new financing structure, which is overwhelmingly long-term. RISKS JEOPARDISING PERFORMANCE AND CONTINUED EXISTENCE In order to participate in Bundesliga matches, Borussia Dortmund requires a licence from DFL Deutsche Fußball Liga GmbH (German Football League, DFL ) which is issued for each season. If the licence were to be revoked or denied because of failure to comply with conditions or evidence of inability to meet financial criteria, this would result in automatic relegation. But relegation to the Second Bundesliga can also result from lack of sporting suc- cess. The effects of relegation on earnings and liquidity could jeopardise the Company's existence. Following the successful implementation of the restructuring and in accordance with its current financial condition and results of operations, Borussia Dortmund was awarded the licences for both the Bundesliga and for the Second Bundesliga, which had to be applied for in view of the sporting situation, without conditions. 64

67 MANAGEMENT REPORT In order to minimise the risk of relegation, Borussia Dortmund has strengthened the professional squad significantly for the 2007/2008 season and therefore at the same time substantially improved the chances of qualifying for international competitions in the following season. THE RISK SITUATION IN SUMMARY Borussia Dortmund takes appropriate measures to counteract the risks it faces. New risks are systematically incorporated in the risk management system as they arise, communicated and highlighted, and a search is made for effective countermeasures. At the present time, there are no recognisable risks that could endanger the continued existence of the Borussia Dortmund Group. Borussia Dortmund has succeeded in minimising risks which could adversely impact its development or jeopardise its existence. The fact that we are not involved in competitions on an international level is no longer a threat to Borussia Dortmund's existence. If we succeed in qualifying for the UEFA Cup or the Champions League, our financial condition and results of operations will improve even further. FORECAST REPORT ANTICIPATED DEVELOPMENT OF THE COMPANY After having completed the restructuring of the liabilities of Borussia Dortmund GmbH & Co. KGaA and the selective strengthening of its professional squad, Borussia Dortmund should once again be in a position in the medium term to compete for one of the first five places on the Bundesliga table. We will continue on the course we have set for ourselves on a solid equity base and without exposing ourselves to financial risks, so that BVB will once more become a leading football club in Germany and preferably also in Europe. EXPECTED GENERAL ECONOMIC ENVIRONMENT Professional football in Germany is booming as never before. The Bundesliga's unfailing popularity with the fans and the resulting interest of media companies and sponsors has also made it a commercial success story. Since the formation of the League Association (Ligaverband) in 2000, the clubs and corporations of professional football have not been able to produce any figures as good as those in the past football season. And this although the increase in TV revenues is not yet included in the present figures because the media con- tracts only entered into effect in July As the KirchGruppe had been the chief source of money for the clubs, its insolvency presented them with a major challenge. Now, five years down the line, the league is in a better position than ever before. Professional football has emerged all the stronger from the crisis in the television and advertising markets. Tough cutbacks on the one hand, and a long-term approach to management with a readiness to invest in the future on the other, are starting to pay off. 65

68 Borussia Dortmund GmbH & Co. KGaA EXPECTED RESULTS OF OPERATIONS ANTICIPATED EARNINGS DEVELOPMENT UEFA Champions League, or possible income from transfers, could result in a significantly higher revenue figure than this. We anticipate that, including all the control and profit and loss transfer agreements, the Company will generate a net profit for the year for the 2007/2008 ANTICIPATED DEVELOPMENT OF SIGNIFICANT OPERATING EXPENSES season. The amount of profit cannot be forecasted reliably on the basis of the information currently available, because earnings depend to a large degree on the sporting performance and on successful transactions With the exception of expenditure on the professional squad, operating expenses will continue to decline in the 2007/2008 financial year. EXPECTED DIVIDENDS in the transfer market. ANTICIPATED DEVELOPMENT OF REVENUES Against the background of the Group's financial liabilities, which are still high in relation to current profitability, we are not planning any dividend distributions in the next few financial years despite a marked Revenues are expected to amount to between around EUR 80 million and EUR 83 million in the 2007/2008 financial year. Qualification for the UEFA Cup or the improvement in earnings. We expect that it will be possible to discuss a dividend payment at the earliest in 3 4 years' time. EXPECTED FINANCIAL CONDITION FINANCIAL PLANNING CAPITAL EXPENDITURE PLANNING As a result of the improved earnings situation and the debt restructuring, which also includes, in particular, long-term financing of the stadium shares, we will again achieve a further substantial reduction in our liabilities. This will be implemented, in particular, through the repayment in instalments of the longterm stadium financing as from the 2007/2008 financial year, while the amount of the other liabilities in the context of our operating activities will be relatively unchanged. Our future investment activities will be focussed on the professional squad, further modernisation of SIGNAL IDUNA PARK and its environs and the construction of the Borusseum in the north-east corner of SIGNAL IDUNA PARK. The conversion of the August Lenz building into a merchandising shop and catering operation, and the construction of the Conference Center in the North Stand, on the other hand, were completed in the past financial year. 66

69 MANAGEMENT REPORT Thus we will concentrate on the core business of Borussia Dortmund and, in so doing, will not be taking any financial risks which cannot be calculated in advance. In essence, this means that we will only be incurring capital expenditure to the extent permitted by the anticipated financial leeway. In preparing the capital expenditure budget, we will therefore not include any uncertain sporting successes which, if they failed to materialise, would result in new indebtedness. ANTICIPATED DEVELOPMENT OF LIQUIDITY Following the implementation of the capital increases, the further reduction in debt consequent thereto and the improvement in earnings, we will as from the 2007/2008 financial year be in a position to generate substantial financial surpluses, which will significantly improve Borussia Dortmund's room for manoeuvre and its competitiveness. OPPORTUNITIES Borussia Dortmund's greatest opportunities lie in unlocking and exploiting additional revenue potential by participating in international competitions, such as the UEFA Cup and the UEFA Champions League. Participation in the UEFA Cup group phase alone would result in additional revenues of around EUR 5 million, generated through extra TV, ticketing and sponsorship revenues. According to our estimations, we would be guaranteed at least EUR 10 million in additional sales if we were to reach the group phase of the UEFA Champions League. In addition, an international presence would almost certainly have a positive impact on the merchandising business. Participation in the national cup competitions, the DFB Cup and the DFL League Cup, represents further significant earnings potential. However, the financial benefits also depend, to a large extent, on which teams we are drawn against. Borussia Dortmund's professional squad, which includes a large number of young and talented players, has enormous potential. These players will be able in the future to lead BVB back to the top of the table in Germany, and possibly even further. In addition to the sporting success we are striving for, this team will enable us to achieve a significant improvement in profitability and offers tremendous transfer potential for the future. DEVELOPMENT FORECAST IN SUMMARY Since the completion of the restructuring focusing on the buyback of the stadium shares, Borussia Dortmund is once again in a position to make investments in the professional squad, which will significantly improve the quality of the team. The contracts with the professional players Marc Ziegler, Robert Kovac, Mladen Petric, Giovanni Federico, Diego Klimowicz and Jakub Kuba Blaszczykowski demonstrate the point impressively. In our future development, we will not enter into any further financial risks that could jeopardise the existence of Borussia Dortmund. Generating financial surpluses will be a prerequisite for further investments in the professional squad. We are convinced that this is the right way to establish Borussia Dortmund in the medium term as one of the leading clubs in the Bundesliga. 67

70 Borussia Dortmund GmbH & Co. KGaA SUPPLEMENTARY REPORT BVB was standing on the precipice: following the 27 th round, the six-time German football champion which had had to leave football's upper echelon for the first time in 1972 for a period of four years had even slipped to a relegation position. for the 2nd main round of the DFB Cup on 12 August 2007 provided Borussia Dortmund with an attractive opponent in the form of Eintracht Frankfurt, also a Bundesliga club. The match is expected to be played on 30 or 31 October 2007 at SIGNAL IDUNA PARK. During the troubled times, the meaning of solidarity by the people of Dortmund with their flagship Borussia became clear. The We are Borussia initiative launched by the BVB fan department resulted in a unique closing of the ranks between Dortmund's citizens, companies and public authorities and the whole region. After outstanding performances during the run-up to the 2007/2008 Bundesliga season, Borussia Dort - mund began with a false start by losing 1:3 to the newly promoted MSV Duisburg on 12 August 2007 in front of 75,700 spectators at SIGNAL IDUNA PARK. Ishiaku (2) and Tararache were the goalscorers for the Zebras and Kringe for BVB. It was the The high level of enthusiasm and excitement in anticipation of the new 2007/2008 season is demonstrated first win for MSV at Strobelallee for 35 years and only the second ever. by the 50,549 season tickets sold, a new Bundesliga record. On 6 July 2007, the Bundesrat approved the act From the sporting point of view, things are looking distinctly encouraging. With six new players, Thomas Doll's team is in a better position both in terms of numbers and of quality than in the previous season. "We have succeeded in giving the squad more depth, implementing the reform of corporate taxation in As a consequence, the future effects of the reform were not yet required to be reflected in the consolidated balance sheet prepared as of 30 June and the sense of competition within the team has increased," concluded sport director Michael Zorc. Head coach Thomas Doll is also convinced that this will result in an ability to produce better performances and more attractive football. The reform of corporate taxation included substantial cuts in the rates of both trade tax and corporation tax. While the act results in a net reduction in the tax burden on companies intended by the legislature, it will also give rise to some extra tax payments One week before the start of the 2007/2008 Bundesliga season, Borussia Dortmund has already as a result of broadening the basis of assessment to taxation. given a positive sign of its sporting potential. In the DFB Cup, coach Thomas Doll's team achieved a 4:1 victory over 1. FC Magdeburg. In addition to Ebi Smolarek, goals were also scored by new signings Diego Klimowicz (2) and Mladen Petric. The draw An initial analysis of the future effects of the reform of corporate taxation on the BVB Group did not reveal any indications of particular tax risks in future as a result of the reform. 68

71 MANAGEMENT REPORT OTHER DISCLOSURES REPORT IN ACCORDANCE WITH 289 (4) HGB The Company gives the following information in response to the requirements of 289 (4) Nos. 1 to 9 HGB: 1. The share capital of Borussia Dortmund GmbH & Co. KGaA amounts to EUR 61,425, and is divided into 61,425,000 no-par value ordinary bearer shares. All of the shares have been admitted to trading on the Official Market (General Standard) of the Frankfurt Stock Exchange and in the over-the-counter markets (Regulated Unofficial Markets) in Berlin-Bremen, Stuttgart, Munich, Hamburg and Düsseldorf. Each no-par value share entitles the holder to one vote at the General Shareholders' Meeting. The Company therefore has only one class of shares and all shares carry the same rights and obligations. Additional rights and responsibilities attaching to the Company's shares are determined in accordance with the German Stock Corporation Act (Aktiengesetz, AktG ). 5. There is no control of voting rights in cases where employees are shareholders. 6. Because of its legal form as a partnership limited by shares, Borussia Dortmund GmbH & Co. KGaA does not have a management board. Instead, the Company's management and representation is the responsibility of the general partner. The terms of 6 No. 1 of the Articles of Association provide that this executive body of the Company is Borussia Dortmund Geschäfts - führungs-gmbh, whose registered office is in Dortmund, on a permanent basis and not for a limited period of time, by virtue of its status as a shareholder. The appointment and removal of managing directors of Borussia Dortmund Geschäftsführungs-GmbH is governed by 8 No. 6 of its shareholders' agreement and is the responsibility of the Executive Committee of its Advisory Board, and therefore not of the Supervisory Board of Borussia Dortmund GmbH & Co. KGaA. 2. There are no restrictions affecting the voting rights or transfer of the shares. 3. As of 30 June 2007, the Company had been notified of the following interests in the share capital of Borussia Dortmund GmbH & Co. KGaA in excess of 10% of the voting rights: - Morgan Stanley International Limited: 16.25% - Absolute Capital Management Holdings Limited: 13.04% - BlueBay Asset Management: 17.09% 4. There are no shares with special rights which confer powers of control. In principle, changes may be made to the Articles of Association of Borussia Dortmund GmbH & Co. KGaA only by a resolution of its General Shareholders' Meeting, which must be passed, in accordance with 133 (1) AktG, by a simple majority of votes and also, in accordance with 15 No. 3 of the Articles of Association of the Company together with 179 (1) and (2) AktG, by a simple majority of the capital represented at the passing of the resolution, except to the extent that there are mandatory statutory provisions to the contrary or the Articles of Association provide otherwise. It is a mandatory provision of statute that a resolution of 69

72 Borussia Dortmund GmbH & Co. KGaA the General Shareholders' Meeting passed by a majority of three-quarters of the share capital re - presented at the passing of the resolution is required for changes to the Articles of Association relating to ther authorised, with the approval of the Supervisory Board, to disapply the statutory subscription right of the limited liability shareholders in certain circumstances. the objects of the Company ( 179 (2) sentence 2 AktG), the issuance of non-voting preferred shares ( 182 (1) sentence 2 AktG), capital increases where subscription rights have been disapplied ( 186 (3) AktG), the creation of conditional capital ( 193 (1) AktG), the creation of authorised capital ( 202 (2) AktG) where appropriate with authorisation to disapply subscription rights ( 203 (2) sentence 2 together with 186 (3) AktG), the ordinary or simplified reduction of capital ( 222 (1) sentence 2 and/or 229 (3) AktG) or a change of legal form ( 233 (2) and/or 240 (1) German Reorganisation Act (Umwand lungs - gesetz, UmwG )). In addition, capital increases, other changes to the Articles of Association and other decisions of a fundamental nature may only be resolved with the approval of the general partner, in accordance with 285 (2) sentence 1 AktG. The Supervisory Board is authorised in accordance with 12 No. 5 of the Articles of In addition, by a resolution of the General Shareholders' Meeting held on 22 November 2005, the share capital of Borussia Dortmund GmbH & Co. KGaA has been conditionally increased by up to EUR 14,625, by the issue of up to 14,625,000 new no-par value ordinary bearer shares. The general partner is authorised until 31 October 2010, with the approval of the Supervisory Board, to issue bearer bonds with warrants and/or convertible bonds with a total nominal amount of up to EUR 40,000, and a maximum maturity of 25 years on one or more occasions. The holders of bonds with warrants may be granted rights to subscribe for, and the holders of convertible bonds may be granted rights to convert into, a total of up to 14,625,000 new no-par value ordinary bearer shares of the Company in accordance with the detailed terms and conditions of the bonds with warrants and/or convertible bonds. Association to resolve changes to the Articles of Association which relate only to their wording, in particular in connection with the amount of capital increases out of authorised and conditional capital. In the event of a takeover offer for shares issued by the Company and admitted to trading on an organised market, general statutory responsibilities and powers also apply to the general partner. For 7. In accordance with 5 No. 4 of the Articles of Association of Borussia Dortmund GmbH & Co. KGaA, the general partner is authorised until 31 July 2011, with the approval of the Supervisory Board, to increase the share capital by the issue of up to 21,937,500 new no-par value ordinary bearer shares against cash or non-cash contributions on one or more occasions, but by a maximum of EUR 21,937, in total (Authorised Capital 2006). In all cases, the new shares participate in profits from the beginning of the financial year in which they are issued. The general partner is fur- example, if a takeover offer were to be received, the general partner and the Supervisory Board would be required to issue and publish a response to the offer, giving their reasons, in accordance with 27 of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG ), so that the limited liability shareholders can make a decision on the offer on an informed basis. Moreover, in accordance with 33 WpÜG, once a takeover offer has been announced, the general partner may not take any actions outside the ordinary course of business 70

73 MANAGEMENT REPORT which could frustrate the success of the offer, unless those actions have been authorised by the General Shareholders' Meeting, or the Supervisory Board has given its approval to the actions or the actions relate to obtaining a competing offer. In making their decisions, the general partner and the Supervisory Board are bound to have regard to the interests of the Company, its employees and its shareholders. At the balance sheet date, there were no provisions of the Articles of Association within the meaning of 33a 33c WpÜG (European prohibition on frustrating action, European breakthrough rule, reservation of reciprocity). 8. The Company is not a party to any material agreements which are conditional on a change of control following a takeover offer for the issued shares of Borussia Dortmund GmbH & Co. KGaA. 9. The Company is not a party to any compensation agreements applying in the event of a takeover offer. STATEMENT OF THE GENERAL PARTNER CONCERNING RELATIONS WITH AFFILIATED COMPANIES The Dependent Company Report prepared by Borussia Dortmund GmbH & Co. KGaA pursuant to 312 AktG sets out the relations with BV. Borussia 09 e.v. Dortmund as the controlling entity and its affiliated companies. The general partner represented by its Managing Directors issued the following concluding statement: that was in each case reasonable under the circumstances known to us at the time such transactions were entered into. In all other cases, the Company has been compensated for any disadvantages having arisen. No other measures within the meaning of 312 (1) AktG were taken or omitted during the financial year. With respect to the transactions set out in the report concerning relations with affiliated companies, the Company received consideration in the financial year Dortmund, 15 August 2007 Borussia Dortmund GmbH & Co. KGaA Borussia Dortmund Geschäftsführungs- GmbH Hans-Joachim Watzke Managing Director (Chairman) Thomas Treß Managing Director 71

74 72

75 BVB Event 73

76 Event and entertainment: The Blue Man Group played before the game against Bayern Munich (final score: 3-2) on 26 January SIGNAL IDUNA PARK & EVENT related reasons no rock or pop concerts can (yet) be held in SIGNAL IDUNA PARK which was designed at the beginning of the 1970s, the Strobelallee temple (as it is referred to by fans due to its impressive structural character) is open 365 days a year. Only about decade ago, a pure football stadium such as that in Dortmund was an open, drafty building that was used for only approximately 25 events each year. Namely, when the relevant club used the stadium for a league or cup match. Then it was closed. Until the next match. The stadion live! agency, commissioned by In the meantime, stadiums in Germany have developed into modern, comfortable arenas that invite visitors to linger longer: well beyond the final whistle and on all other days. This development is also being pursued consistently by Borussia Dortmund. Although for statics- BVB, alone holds approximately 200 events a year. In SIGNAL IDUNA PARK with its different VIP levels there is always a suitable location, ranging from birthday parties to meetings in the newly built Conference Center in the belly of the northern stand through to large corporate BVB shows its colours: Fan representatives from more than 20 nations, who otherwise stand together in the southern stand, showed where they come from during a parade of flags and thus made a statement against racism and xenophobia. 74

77 BVB Event One of BVB's pretty faces: Anna-Lisa Herrmann held the title Miss Borussia in the 2006/2007 season. parties in one of the large regulars' tables areas for up to 1,500 people. There is no comparable opportunity in Dortmund, says the former professional player, Norbert Dickel, who is responsible for event marketing at Borussia Dortmund: There is something going on almost every day in the Dannemann or Aida lounge and in Borussia Park. Even on Christmas and New Year's Eve. Signal Iduna Park is no ordinary location. Many football-related themes can be transmitted and absorbed at the place where they originally took place, for example, through a stadium tour or a champagne reception in the stand. The experts also take care of culinary and cultural highlights: ranging from the simple hot dog through to the three course menu, from table magicians through to the live band, no desires are left unfulfilled. Coupled with the nearby hotels and the optimal transport links, Signal Iduna Park is the top address for meetings and celebrations in the eastern Ruhr region. Even smaller trade fairs with up to 100 exhibitors are held there, as well as the socalled internal trade fairs, where sponsors Magdalena Tomaszewski is the current Miss Borussia. In the current fan catalogue, she presents the BVB women's collection. Here she poses before the camera with the professional player Sebastian Kehl (middle) and special prize winner Hannelore Kettler (left). 75

78 The Borusseum will tell the history of Borussia Dortmund. The opening is planned for 2008/2009. and promoters of BVB are able to make presentations and develop business contacts. The spacious (parking) area surrounding Germany's largest stadium is also available for a monthly flea market. The market is organised by the Essen event organiser, EXPO Concept, which has already successfully established stadium markets in Cologne and Düsseldorf. most modern and largest indoor golf facilities in Germany, with an area in excess of 1,000 square metres. Eight real image golf simulators make it possible for players to play virtual rounds on the most beautiful and best known golf courses in the world. Moreover, through precision analysis, the simulators conduct checks to measure the ball speed, the swing path, club speed and the stroke direction in order to optimise each player's technique. And it is not only football lovers who find a home in SIGNAL IDUNA PARK. In the southeastern corner of the stadium, the motto is drive, putt and pitch at any weather golf for anyone at any time! It is home to one of the Stadium Cinema was the name of an event which was initiated for the first time in summer 2007 and proved a success despite the poor weather. There were 35 showings, Other types of sport also want to get close to crowd pleasers like Borussia Dortmund: BVB is a member of the Superleague Formula a car racing series commencing in Borussia receives a royalty for this. BVB and its sponsors kick off the season with many campaigns around SIGNAL IDUNA PARK Sponsors present their products at the BVB internal trade fair. 76

79 BVB Event Stadium Cinema: In summer 2007, selected film highlights could be seen at SIGNAL IDUNA PARK. There were 35 showings attended by 31,200 viewers. during which a total of 4,602 film minutes from all well-known blockbusters flickered on the huge screen, attended by 31,200 viewers. A great festival, was the résumé of Dr. Christian Hocken - jos, the or ganisational head of Borussia Dortmund, who was able to point to profits and announced a repeat performance for summer 2008: This series of events not only provided positive impetus for the partners, sponsors and SIGNAL IDUNA PARK, it was also a financial success the first time round. Another big attraction for SIGNAL IDUNA PARK is just about to open: the Borussia Dortmund Museum, or Borusseum. The project is being managed by Dr. Reinhold Lunow, the treasurer of the registered association BV. Borussia 09 e.v. Dortmund: We hope that we will be able to open as early as However, it will be ready by no later than the anniversary in Access is being built via a bridge from the August Lenz building fan shop to SIGNAL IDUNA PARK. Thus there is a possibility for visitors to stock up on merchandising articles before or after a visit. In the Borusseum, the interior revolves around seven thematic sections ranging from the history of Borsigplatz through to BVB's greatest games and major successes. BVB has also rediscovered its stadium for itself and has held the season opening BVB's mascot is called Emma and is intended to tie young fans to the Borussia Dortmund brand at an early stage. Associated campaigns in Signal Iduna Park, such as this one by Sparda-Bank: Infostand and campaigns in the interior in front of the sponsors' boards. 77

80 Social Marketing: Borussia Dortmund is happy to offer various institutions a platform on which to present their concerns to a broad public. celebrations of the last two years here. A total of more than 80,000 visitors came to the two family days alone. Farewell matches, such as those for the legends Julio César, Jürgen Kohler and Michael Zorc, offer further occasions on which to use Germany's largest football stadium outside of competition. However, SIGNAL IDUNA PARK is also an ideal location for promotion campaigns. For example, the candidates for the Pro7 television show Germany's Next Top Model used the pitch as a catwalk during the halftime break of a match. However, Borussia Dortmund does not just pursue commercial aims with SIGNAL IDUNA PARK. The responsible individuals are open minded specifically with regard to social marketing, and offer charitable organisations such as the network against child prostitution, Roter Keil, the Mein Körper gehört mir (my body belongs to me) initiative for the prevention of sexual abuse of children, With the construction of the Conference Center of almost 400 square meters in the northern stand, with capa - city for 300 persons, Borussia Dortmund wishes to bring plenty of life to SIGNAL IDUNA PARK. And thus to create added value. Use of the stadium on nonmatch days is actively promoted. This can certainly involve football, such as here for the farewell match of the former BVB legend, Jürgen Kohler, who said adieu before a huge backdrop. 78

81 BVB Event BVB has also rediscovered its stadium for itself and has held the season opening celebrations of the last two years here. A total of more than 80,000 visitors came to the two family days alone. Kindernothilfe and many other institutions a platform to present their concerns to a broad public. The BVB Learning Centre beneath the northern stand is another of the social components. The idea like football itself comes from England: In most stadiums of Premier League clubs there are so-called elearning centres, in which youths with social or schooling problems are given a chance to utilise educational opportunities and to gather experience with new media. This unschooled type of learning, which relies upon voluntary participation, is particularly motivating for many youths due to the project's location the stadium and the proximity to the club. 79

82 Borussia Dortmund GmbH & Co. KGaA BALANCE SHEET A S S E T S 30 June June 2006 EUR EUR A. Fixed assets I. Intangible assets 1. Concessions, industrial property rights and similar rights and assets and licences in such rights and assets 11,867, ,530, Payments on account 3,670, ,125, ,538, ,655, II. Tangible fixed assets 1. Land, land rights and buildings on third-party land 22,477, ,959, Other equipment, operating and office equipment 8,010, ,063, Payments on account and assets under construction ,488, ,023, III. Non-current financial assets 1. Shares in affiliated companies 82,265, ,329, Loans to affiliated companies ,763, Other equity investments 95, , Other loans 252, , ,613, ,389, B. Current assets I. Inventories 1. Merchandise 51, , Payments on account , , , II. Receivables and other assets 1. Trade receivables 15,622, ,815, Receivables from affiliated companies 293, ,352, Receivables from other long-term investees and investors Other assets 2,642, ,527, ,559, ,696, III. Securities Own shares 41, , IV. Cash-in-hand and bank balances 13,393, ,551, C. Prepaid expenses 2,105, , ,790, ,034,

83 ANNUAL FINANCIAL STATEMENTS E Q U I T Y A N D L I A B I L I T I E S 30 June June 2006 EUR EUR A. Equity I. Subscribed capital 61,425, ,875, II. Capital reserves 34,171, ,625, III. Revenue reserves Reserve for own shares 41, , IV. Net retained profits/net accumulated losses for the period 4,592, ,679, ,229, ,875, B. Provisions 1. Provisions for taxes 843, ,899, Other provisions 2,248, ,011, ,091, ,910, C. Liabilities 1. Liabilities to banks 23,380, ,782, Trade payables 4,972, ,229, Liabilities to affiliated companies 8,737, ,355, Other liabilities 14,009, ,998, ,100, ,365, D. Deferred income 8,368, ,882, ,790, ,034,

84 Borussia Dortmund GmbH & Co. KGaA INCOME STATEMENT 7/2006-6/2007 7/2005-6/2006 EUR EUR 1. Revenues 90,939, ,255, Other operating income 8,719, ,750, ,658, ,006, Personnel expenses a) Wages and salaries 32,671, ,702, b) Social security and other pension costs 1,591, ,263, ,623, Depreciation and amortisation 6,880, ,700, Other operating expenses 42,712, ,962, Income from investments 39, , of which from affiliated companies: 2006/2007: 39, / 2005/2006: 60, Income from profit and loss transfer agreements 231, , Income from other securities and long-term loans ,417, of which from affiliated companies: 2006/2007: 0.00 / 2005/2006: 1,417, Other interest and similar income 1,050, ,016, Write-downs of financial assets and securities classified as current assets 11, , Expenses from profit and loss transfer agreements 3,585, , Interest and similar expenses 3,257, ,310, Profit/loss from ordinary activities 10,268, ,952, Extraordinary income ,195, Taxes on income , Other taxes 10, , Net profit/loss for the year 10,257, ,912, Accumulated losses brought forward -5,679, ,770, Withdrawals from revenue reserves 13, , Net retained profits/net accumulated losses for the period 4,592, ,679,

85 ANNUAL FINANCIAL STATEMENTS NOTES GENERAL DISCLOSURES TO THE ANNUAL FINANCIAL STATEMENTS The annual financial statements of Borussia Dortmund GmbH & Co. KGaA for the 2006/2007 financial year have been prepared in accordance with the requirements of the German Commercial Code (Handelsgesetzbuch, HGB ) and the particular accounting requirements of the German Stock Corporation Act (Aktiengesetzbuch, AktG ). There is an additional obligation in accordance with 315a (1) HGB to prepare consolidated financial statements applying international financial reporting standards (IFRS). The balance sheet classifications comply with the classification format under commercial law in accordance with 266 HGB, while the income statement has been prepared in the vertical format using the nature of expense method in accordance with 275 HGB. The additional information to be provided in accordance with the statutory requirements is presented in the notes for reasons of clarity and accessibility. As a result of the fact that BV. Borussia 09 e.v. Dortmund holds 100% of the shares in Borussia Dortmund Geschäftsführungs-GmbH and is therefore regarded indirectly as a controlling company, Borussia Dortmund GmbH & Co. KGaA qualifies as a dependent company within the meaning of 17 AktG and accordingly is required to prepare a Dependent Company Report in accordance with 312 AktG. This report must also contain the statutory concluding statement required in accordance with 312 AktG which must be included in the management report. ACCOUNTING POLICIES Fixed assets Intangible assets are measured at cost less amortisation based on their expected useful lives or at the lower fair value. Player registrations reported in these financial statements are measured at cost, taking into account the decision of the Federal Court of Finance (Bundesfinanzhof, BFH ) of 26 August 1992, I R 24/91 and the FIFA Regulations for the Status and Transfer of Players contained in circular no. 769 of 24 August 2001 which came into force on 21 September 2001, and are amortised on a straight-line basis in accordance with the term of the individual contracts for professional players. Tangible assets are measured at cost less accumulated depreciation. Low-value items are fully written off in the year of acquisition. Depreciation is based on the useful lives authorised for tax purposes. Financial assets are measured at cost. Inventories Inventories are measured at cost less any discounts, subject to the strict lower of cost or market principle. 83

86 Borussia Dortmund GmbH & Co. KGaA Receivables and other assets, securities and cash funds Receivables and other assets are measured at their nominal amounts. General valuation allowances are made for the overall credit and interest-rate risk while separate allowances are recognised for identifiable individual risks. Non-interest-bearing items with a remaining maturity over one year are reported at their discounted present value. Securities classified as current assets are measured at cost or the lower fair value taking account of the lower of cost or market principle. Cash and balances with banks are recognised at their nominal amounts. Prepaid expenses Prepaid expenses consist principally of prepayments relating to the professional squad and insurance premiums. The amounts are reversed ratably over the terms/lives of the individual items. Provisions Provisions for taxes and other provisions are recognised in appropriate amounts for all identifiable uncertain liabilities on the basis of careful estimates. They are measured in all cases at the amount necessary at the balance sheet date, in accordance with prudent business judgment, to cover future payment obligations. Liabilities Liabilities are recognised at the repayment amount. Deferred income Deferred income comprises receipts from ticket sales, sponsorship and licences relating to the following season. The amounts are reversed ratably over the periods to which they relate. NOTES TO THE BALANCE SHEET Fixed assets The breakdown of fixed assets is as follows: in EUR thousands 30 June June2006 Intangible assets 15,538 6,655 Tangible assets 30,488 30,024 Financial assets 82,613 79, , ,068 84

87 ANNUAL FINANCIAL STATEMENTS Computer software, purchased trademark rights and player registrations are reported as intangible assets. The main changes to this item in the 2006/2007 financial year were additions (EUR 13,910 thousand), amortisation (EUR 4,973 thousand) and write-downs (EUR 54 thousand) of player registrations to the lower fair value as a result of expected permanent impairment. The players Valdez, Frei, Tinga and Blaszczykowski (payment on account) were signed up in return for transfer payments. Tangible assets consist principally of real property in the stadium site and the adjoining area Am Luftbad. They also include the commercial premises constructed on land subject to hereditary building rights and buildings and sporting facilities at the training ground, the youth centre, the catering extensions and other movable components of the stadium, as well as operating and office equipment at these facilities and at the administrative headquarters. The training ground in Dortmund- Brackel was constructed in the previous financial year by DSW 21 Dortmunder Stadtwerke AG and let to the Company on a long-term lease. In the 2006/2007 financial year, work on the conversion of the former offices at the stadium, the August Lenz building, into a merchandising shop and the construction of a conference centre on the circulation level of the stadium were completed. Financial assets, in addition to the direct equity investments described in more detail in the list of shareholdings, principally comprise a tenant's loan relating to the administration building reported under other loans. The Company has entered into control and profit and loss transfer agreements with its subsidiaries BVB Stadionmanagement GmbH, BVB Merchandising GmbH and goool.de Sportswear GmbH. For its part, goool.de Sportswear GmbH has entered into profit and loss transfer agreements with BVB Stadion GmbH and BVB Beteiligungs-GmbH. During the reporting period, the Company transferred the tenant's loan in an amount of EUR 21,900 thousand granted to BVB Stadion GmbH to the capital reserves of goool.de Sportswear GmbH and the latter in turn to those of BVB Stadion GmbH with the result that the claims arising from the loan have been extinguished because debtor and creditor are the same legal person (confusion of debts). In addition, Borussia Dortmund GmbH & Co. KGaA transferred further receivables amounting to EUR 5,037 thousand to the capital reserves of goool.de Sportswear GmbH. Land, land rights and equity investments have been assigned or pledged in order to provide security for loans. The development of gross fixed assets and of accumulated depreciation and amortisation for the individual items of fixed assets are shown in the following analysis. 85

88 Borussia Dortmund GmbH & Co. KGaA CHANGES IN FIXED ASSETS Cost At At 01 July 2006 Additions Disposals Reclassifications 30 June 2007 EUR EUR EUR EUR EUR I. Intangible assets 1. Concessions, industrial property rights and similar rights and assets and licences in such rights and assets 37,951, ,239, ,456, ,125, ,860, Payments on account 3,125, ,670, ,125, ,670, ,077, ,910, ,456, ,530, II. Tangible fixed assets 1. Land, land rights and buildings on third-party land 25,648, , , ,743, Other equipment, operating and office equipment 17,342, , , ,566, Payments on account and assets under construction ,365, ,366, ,991, ,317, ,309, III. Non-current financial assets 1. Shares in affiliated companies 55,329, ,172, ,763, ,265, Loans to affiliated companies 23,763, ,763, Other equity investments 95, , Other loans 200, , , , ,389, ,250, , ,613, ,458, ,477, ,482, ,453, Current assets Current assets are made up as follows:: in EUR thousands 30 June June 2006 Inventories Receivables and other assets 18,559 24,696 of which with a remaining term over one year: EUR 4,290 thousand (2005/2006: EUR 8,852 thousand) Securities Cash-in-hand and bank balances 13,393 39,552 32,045 64,356 Inventories represent the material value of decorative shares in the form of printed physical share certificates, measured at cost. Receivables and other assets declined largely as a result of payments received in respect of transfer receivables and receivables from the jersey sponsor 86

89 ANNUAL FINANCIAL STATEMENTS Accumulated depreciation and amortisation Net carrying amount At At As at As at 01 July 2006 Additions Disposals 30 June June June 2006 EUR EUR EUR EUR EUR EUR 34,421, ,027, ,456, ,992, ,867, ,530, ,670, ,125, ,421, ,027, ,456, ,992, ,538, ,655, ,689, , ,265, ,477, ,959, ,279, ,276, ,555, ,010, ,063, ,968, ,852, ,821, ,488, ,023, ,265, ,329, ,763, , , , , ,613, ,389, ,390, ,880, ,456, ,813, ,639, ,068, and main sponsor. Future claims from season ticket sales (excluding the hospitality area), TV income and the agreement for the rights to the stadium name, have been assigned as security for loans. The securities item includes the Company's own shares relating to the decorative share certificates. Under the terms of a resolution of the General Shareholders' Meeting held on 16 November 2004, the Company is authorised to sell its own shares either on or off the stock market. Off-market sales are permitted, among other purposes, for the sale of shares in the form of printed physical share certificates which are freely transferable and tradable. In such cases, shareholders' subscription rights are excluded in accordance with 71 (1) No. 8 AktG. In the period between the date of admission of the Company's shares to trading (31 October 2000) and the balance sheet date, the Company acquired a total of 34,000 no-par value shares and sold 10,365 no-par value shares offmarket in the form of printed physical share certificates. The gain on disposal has been reported separately under other operating income. At the balance sheet date, the Company's holding of its own securities consisted of 23,635 no-par value shares. They were measured at the rate prevailing on the balance sheet date. A reserve for own shares in the amount of the asset item has been set up in accordance with 272 (4) HGB. 87

90 Borussia Dortmund GmbH & Co. KGaA Further disclosures required in accordance with 160 AktG are given in the following overview, the income from the sale of shares has been included in the profit from operating activities: Purchases Sales Holding of own of own of own Amount of Percentage of Purchase Sale Month shares shares shares share capital share capital price price Euro % Euro Euro Holdings at June ,871 23, July Dec Holdings at Dec ,804 23, January June , Holdings at June ,635 23, Bank balances amounting to EUR 19 thousand (prior year: EUR 3,608 thousand) are subject to restrictions. Prepaid expenses Prepaid expenses consist principally of personnel expenses relating to the professional squad and insurance premiums paid in advance. Equity in EUR thousands 30 June June 2006 Subscribed capital 61,425 43,875 Capital reserves 34,172 14,625 Revenue reserves Net retained profits/accumulated losses 4,592-5, ,230 52,875 The Company's subscribed capital amounts to EUR 61,425,000 and is divided into just as many no-par value shares, each representing a notional share in the share capital of EUR During the reporting period, the share capital was increased by EUR 17,550,000 to EUR 61,425,000 by means of cash and non-cash contributions in accordance with the resolution of the extraordinary General Shareholders' Meeting held on 15 August The limited liability shareholders exercised their indirect subscription right to purchase new shares in the ratio of 5:2 at an issue price of EUR 2.00 per share for a total of 7,567,585 new shares. Morgan Stanley & Co. International Limited, London subscribed for a further 9,982,415 shares at a price of EUR 2.20 per share in the form of a non-cash contribution. The capital increase was entered in the commercial register on 19 September The premium of EUR 19,547 thousand over the nominal amount of the issue was added to capital reserves. 88

91 ANNUAL FINANCIAL STATEMENTS In addition, a conditional increase in the share capital of up to EUR 14,625,000 was resolved by the General Shareholders' Meeting on 22 November The purpose of the conditional capital is to cover the grant of option rights and the agreement of option obligations and the settlement of conversion rights and obligations, in all cases issued by the Company during the period until 31 October 2010 on the basis of the authorisation granted by the General Shareholders' Meeting on 22 November To date, no use has been made of the authorisation referred to. The extraordinary General Shareholders' Meeting held on 15 August 2006 also authorised the general partner until 31 July 2011, with the approval of the Supervisory Board, to increase the share capital by the issue of up to 21,937,500 new no-par value shares for cash or non-cash contributions (Authorised Capital 2006). The development of reserves was as shown below: in EUR thousands 01 July 2006 Additions Withdrawals 30 June 2007 Capital reserves 14,625 19, ,172 Revenue reserves (Reserve for own shares) The premium resulting from the capital increase resolved in August 2006 amounting to EUR 19,547 thousand was added to capital reserves. The withdrawal reflects the adjustment of the reserves to the amount of own shares held. Changes in equity were as follows: Changes in equity 01 July 2006 Additions/ Profit for 30 June 2007 in EUR thousands Withdrawals the year Subscribed capital 43,875 17, ,425 Capital reserves 14,625 19, ,172 Revenue reserves Net accumulated losses/ retained profits -5, ,258 4,592 52,875 37,097 10, ,230 The annual financial statements for 2005/2006 were approved at the General Shareholders' Meeting held on 28 November

92 Borussia Dortmund GmbH & Co. KGaA Provisions in EUR thousands 30 June June2006 Provisions for taxes 843 2,899 Other provisions 2,248 23,012 3,091 25,911 The provisions for taxes comprise additional payments resulting from a wages tax audit for the period 1 July June 2004 which have not yet been finally determined. In addition to staff-related obligations such as unclaimed holiday entitlements, contributions to employer's liability insurance schemes, bonuses and one-off payments etc, other provisions include provisions for cost and supplier invoices not yet received. The provision recognised in previous years for expected losses from pending transactions in connection with the reversal of trademark rights amounting to EUR 17,487 thousand was utilised on the repurchase of the trademark rights. Liabilities The maturities and security granted in respect of liabilities reported at 30 June 2007 are shown in the following overview. in EUR thousands of which with a remaining term of Total up to 1 to 5 more than 1 year years 5 years 1. Liabilities to banks 23,381 1,123 5,833 16, Trade payables 4,973 4, Liabilities to affiliated companies 8,738 4,506 4, Other liabilities - of which from taxes: EUR 4,480 thousand (2005/2006: EUR 2,552 thousand) - of which relating to social security: EUR 2 thousand (2005/2006: EUR 24 thousand) 14,009 9,127 1,976 2,906 51,101 19,484 12,286 19,331 The liabilities to banks are secured in an amount of EUR 23,381 thousand (previous year: EUR 23,433 thousand) by the real property liens, assignments and pledges described in greater detail above. As well as short- to medium-term loans amount- ing to EUR 5,284 thousand, other liabilities consist mainly of wages and salaries outstanding at the end of the financial year and the associated social security contributions. In addition, there are liabilities relating to wages tax and VAT. 90

93 ANNUAL FINANCIAL STATEMENTS Deferred income Deferred income includes income from licences, sponsorship and payments received from season ticket sales. Other financial obligations and contingent liabilities At the balance sheet date, there were financial obligations resulting, among other things, from rental, leasing, hereditary lease and licensing agreements, and inter-company agreements. The classification by maturity is shown in the following table: in EUR thousands of which with a remaining term of Total up to 1 to 5 more than 1 year years 5 years Stadium rent 107,536 5,377 21,507 80,652 Marketing fees 24,972 8,324 16,648 0 Rental and leasing 28,921 2,450 8,966 17,505 Agreements between companies 29,267 3,520 12,276 13,471 Purchase commitments 4,700 2,600 2,100 0 Other 2, , ,483 22,316 61, ,492 In connection with the repurchase of the shares in the stadium by subsidiaries, there were contingent liabilities at the reporting date from guarantee agreements in favour of affiliated companies amounting to EUR 57,550 thousand which are secured, among other methods, by real property liens, assignments and pledges granted by Borussia Dortmund GmbH & Co. KGaA, and which gave rise to the following financial obligations corresponding to the redemption amounts: in EUR thousands of which with a remaining term of Total up to 1 to 5 more than 1 year years 5 years goool.de sportswear GmbH 51,775 2,429 11,320 38,026 BVB Beteiligungs-GmbH 5, ,252 4,204 57,500 2,698 12,572 42,230 91

94 Borussia Dortmund GmbH & Co. KGaA NOTES TO THE INCOME STATEMENT Revenues The following table shows sales classified by area of activity as required by the German Football League (Deutsche Fußball Liga GmbH, DFL ) for the licensing procedure: in EUR thousands 2006/ /2006 Ticketing 18,262 17,190 Sponsorship 30,549 27,170 TV marketing 21,250 14,843 Transfer income 6,767 12,399 Catering, licences and other 14,111 11,654 90,939 83,256 Sponsorship revenues increased compared with the 2005/2006 financial year as a result of the marketing of the stadium name and the conclusion of a new main sponsor agreement with RAG. Revenues from TV marketing were also higher following the conclusion of the new TV agreement from the 2006/2007 season onward. In addition, transfer income for the first half of the year and one-time receipts from the marketing of the stadium during the 2006 Football World Cup made a significant contribution to the rise in revenues and the improvement in earnings. Personnel expenses The breakdown of personnel expenses is as follows: in EUR thousands 2006/ /2006 Wages and salaries 32,672 35,702 Social security and pensions and other benefits 1,592 1,624 34,264 37,326 Personnel expenses were reduced from EUR 45.9 million in 2004/2005 and EUR 37.3 million in 2005/2006 to the current level of EUR 34.3 million. This reflected the positive effects of the savings in the expenses for the professional squad which fell from EUR 36.6 million in 2004/2005 and EUR 31.4 million in 2005/2006 to EUR 29.2 million. 92

95 ANNUAL FINANCIAL STATEMENTS Other operating expenses in EUR thousands 2006/ /2006 Match operations 20,819 18,748 Advertising and marketing 10,752 9,437 Transfers 1,967 7,772 Media and printing 1,198 1,291 Administration 6,925 13,408 Other 1,051 6,307 42,712 56,963 Other operating expenses fell by a total of EUR 14,251 thousand in comparison with the previous year. The principal contributory factors to this were lower transfer expenses, a reduction in advisory costs following completion of the restructuring of the Company's equity and debt capital and lower valuation allowances on receivables compared with the previous year. In contrast, expenses for marketing fees were higher as a result of the growth in revenues while the expenses of match operations rose due to the rental of the training ground in Brackel. Taxes No income taxes were required to be included in the financial statements because, with the repurchase of the trademark rights, the provision for anticipated losses on pending transactions established in previous years in the HGB financial statements was also recognised for tax purposes in the 2006/2007 financial year. Extraordinary income There were no items of extraordinary income in the past financial year. In the previous year, the merchandising division was transferred to an existing wholly-owned subsidiary with retrospective effect as of 1 July 2005 at fair value, thereby giving rise to an extraordinary non-cash gain amounting to EUR 10.2 million. 93

96 Borussia Dortmund GmbH & Co. KGaA OTHER DISCLOSURES Corporate Governance The management and Supervisory Board have issued the statement of compliance with the German Corporate Governance Code prescribed by 161 AktG. The statement has been made available to the shareholders and can be viewed at any time at EXECUTIVE BODIES General partner The general partner is Borussia Dortmund Geschäftsführungs-GmbH, whose registered office is in Dortmund and which does not have an interest in the Company's share capital. Its share capital amounts to EUR 30,000. It is exempt from the restrictions contained in 181 of the German Civil Code (Bürgerliches Gesetzbuch, BGB ) and is listed in the commercial register of the Local Court of Dortmund, HRB No The Managing Directors of this company are Mr. Hans- Joachim Watzke (Dipl.-Kfm.) (Chairman) and Mr. Thomas Treß (Dipl.-Kfm.), each of whom has sole power of representation. In the most recent financial year, the members of management received the following amounts for their activities, including responsibilities relating to subsidiary companies: in EUR thousands 2006/ /2006 Hans-Joachim Watzke fixed components - fixed remuneration other remuneration performance-related components - special remuneration bonus Thomas Treß fixed components - fixed remuneration other remuneration performance-related components - special remuneration bonus ,227 1,130 94

97 ANNUAL FINANCIAL STATEMENTS Supervisory Board The current members of the Supervisory Board of the Company, their names, occupations and further responsibilities in other management bodies are listed below. In the past financial year, the Supervisory Board received remuneration amounting to EUR 52.5 thousand. Dipl.-Kfm. Gerd Pieper Harald Heinze Othmar Freiherr von Diemar Bernd Geske Ruedi Baer Patrick Albert Lynch Christian Kullmann Chairman Deputy Chairman (until 26 Feb 2007) (since 23 May 2007) Occupations Proprietor and Managing Director of Stadtparfümerie Pieper GmbH, Herne Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne Managing partner of Bernd Geske Lean Communication, Meerbusch Delegate of the Board of Directors of the mobilezone group, Regensdorf (Switzerland) Managing Director of Morgan Stanley & Co., London (England) Head of the board office and corporate communications division of RAG Aktiengesellschaft, Essen Other responsibilities Member of the Supervisory Board of Beauty Alliance Deutschland GmbH & Co. KG, Bielefeld Member of the Supervisory Board of E-M-S new media AG, Dortmund Member of the Member of the Supervisory Board Supervisory Board of of WV Energie AG, Herner Sparkasse, Frankfurt am Main Herne Member of the Supervisory Board of M-Exchange AG, Frankfurt am Main Member of the Advisory Board of Haftpflichtverband öffentlicher Verkehrsbetriebe (HÖV), Dortmund Chairman of the Supervisory Board of Informium AG, Cologne Member of the Supervisory Board of 004 Beratungs- und Dienstleistungs- GmbH, Aschaffenburg Substitute member of the Supervisory Board of Arques Industries AG, Starnberg Chairman of the Board of Directors of mobilezone AG, Regensdorf (Switzerland) Chairman of the Board of Directors of mobilezone com AG Regensdorf (Switzerland) Chairman of the Board of Directors of Europe Trade AG Regensdorf (Switzerland) Chairman of the Board of Directors of Destination Travel AG, Liebefeld (Switzerland) Member of the Supervisory Board of Ploucquet Holding GmbH, Unterföhring Chairman of the Board of Directors of B&B Beratungs AG, Watt (Switzerland) Chairman of the Board of Directors of Bablo Immobilien AG, Watt (Switzerland) Member of the Board of Directors of Immoplaza AG, Regensdorf (Switzerland) Chairman of the Board of Directors of AP Fashion AG, Watt (Switzerland) 95

98 Borussia Dortmund GmbH & Co. KGaA Employees The average number of employees during the year was 175 (previous year: 193). The reduction is mainly the result of staff cuts and the transfer of employment contracts to subsidiaries. List of shareholdings The following table gives summarised information relating to companies in which the Company has a shareholding of more than 20%: Company Registered Capital Share- Equity Profit/loss office EUR thou. holding % EUR thou. EUR thou. BVB Stadionmanagement GmbH * Dortmund goool.de Sportswear GmbH * Dortmund ,526-3,069 B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH Dortmund BVB Merchandising GmbH * Dortmund , Sports & Bytes GmbH Dortmund BVB Stadion GmbH* Dortmund , BVB Beteiligungs-GmbH * Dortmund Orthomed Medizinisches Leistungs-und Rehabilitationszentrum GmbH Dortmund * Companies subject to profit and loss transfer agreements, profit/loss from 1. January June 2007 before transfers to tax group parent. The companies are included in the consolidated financial statements of Borussia Dortmund GmbH & Co. KGaA, Dortmund. 96

99 ANNUAL FINANCIAL STATEMENTS Information relating to expenses recognised for audit fees for the single-entity and consolidated financial statements The audit fees recognised in the income statement in the 2006/2007 financial year were made up as follows: in EUR thousands 2006/ /2006 Audit of the consolidated, interim and single-entity financial statements Other audit-related work 0 50 Tax advice Other services Notifiable shareholdings under 160 (1 ) No. 8 AktG together with 21 of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG ) We have been informed of the following notifiable shareholdings: (in %) Blue Bay Asset Management Morgan Stanley (via Morgan Stanley & Co. International Ltd., London) Absolute Capital Management Holding Limited Ballspielverein Borussia 09 e.v. Dortmund 7.24 Bernd Geske Information relating to derivative financial instruments In order to protect against the interest rate risk associated with the variable-rate loan from Morgan Stanley to the Company and its subsidiaries, the Company has entered into a fixedrate swap for a similar term and amount. As at 30 June 2007, the fair value of the swap amounted to EUR 2,888 thousand. The fair value of the swap was determined on the basis of widely recognised valuation models (Black-Scholes, Health-Jarrow- Morton). Proposal on the appropriation of profit The 2006/2007 financial year finished with a net profit for the year of EUR 10,257, After deducting accumulated losses brought forward amounting to EUR 5,579, and adding a partial release of the reserve for own shares amounting to EUR 13,300.98, there remains an unappropriated net profit amounting to EUR 4,592, The management proposes that the unappropriated net profit amounting to EUR 4,592, reported for the 2006/2007 financial year be transferred to other revenue reserves. 97

100 Borussia Dortmund GmbH & Co. KGaA CASH FLOW STATEMENT The following additional information is given in relation to the cash flow statement: Cash funds for the purposes of the cash flow statement are defined as cash-in-hand plus bank balances less restricted funds amounting to EUR 19 thousand (previous year: EUR 3,608 thousand) and overdraft facilities used amounting to EUR 0 (previous year: EUR 8,000 thousand). 2006/ /2006 EUR thou. EUR thou. Net profit/loss for the year 10,258-3,913 Depreciation and amortisation 6,880 7,701 Extraordinary income from the hive-down of company divisions 0-10,196 Profit from disposals of fixed assets -6,767-5,857 Loss from disposals of fixed assets 0 0 Changes in balance sheet items Provisions -2,918 5,131 Inventories Trade receivables and other assets 3,682 11,543 Prepaid expenses -1, Deferred income ,098 Trade payables and other liabilities ,866 Change in restricted funds 3,589-3,143 Cash flow from operating activities 11,893-5,469 Proceeds from the disposal of tangible assets Proceeds from the disposal of intangible assets 6,065 9,988 Payments for investments in tangible assets -2,317-6,032 Payments for investments in intangible assets -13,599-4,976 Proceeds from the disposal of financial assets Payments for investments in financial assets Cash flows from investing activities -9,905-1,123 Cash inflows and outflows from new borrowings and repayments of borrowings - new borrowings 0 27,253 - repayments of borrowings -31,692-24,496 Changes in equity and capital and revenue reserves 15,135 29,250 Cash flows from financing activities -16,557 32,007 Net change in cash funds -14,569 25,415 Cash funds at the beginning of the financial year 27,943 2,528 Cash funds at the end of the financial year 13,374 27,943 Dortmund, 15 August 2007 Borussia Dortmund GmbH & Co. KGaA Borussia Dortmund Geschäftsführungs-GmbH Hans-Joachim Watzke Managing Director (Chairman) Thomas Treß Managing Director 98

101 ANNUAL FINANCIAL STATEMENTS AUDITORS REPORT We have audited the annual financial statements consisting of the balance sheet, income statement and notes together with the bookkeeping system and the management report of Borussia Dortmund GmbH & Co. KGaA, Dortmund, for the financial year from 1 July 2006 to 30 June The maintenance of the bookkeeping system and the preparation of the annual financial statements and management report in accordance with German commercial law and the supplementary provisions in the Articles of Association is the responsibility of the Company s legal representatives. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and on the management report, based on our audit.. Knowledge of the business activities and the economic and legal environment of the Company 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 books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the Company's legal representatives, as well as evaluating the overall presentation of the annual financial statements and the management report. We believe that our audit provides a reasonable basis for our opinion. We conducted our audit of the annual financial statements in accordance with 317 of the German Commercial Code (Handelsgesetzbuch, HGB)and the generally accepted standards for the audit of financial statements in Germany promulgated by the German Institute of Chartered Accountants (Institut der Wirtschaftsprüfer, IDW). 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 annual financial statements in accordance with German principles of proper accounting and in the management report are detected with reasonable assurance. Our audit has not led to any reservations. In our opinion, based on the results of our audit, the annual financial statements comply with the statutory requirements and the supplementary provisions in the Articles of Association and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with German principles of proper accounting. The management report is consistent with the annual financial statements, provides as a whole a suitable view of the Company's position and suitably presents the opportunities and risks of future development. Dortmund, 17 August 2007 BDO WESTFALEN-REVISION GmbH Wirtschaftsprüfungsgesellschaft R. Schepers ppa. J. Königshoven Auditor Auditor 99

102 100

103 BVB Media 101

104 SIGNAL IDUNA PARK & MEDIA In mid-september 2007, a Borussia Dort - mund match was able to be seen live on television in more countries than ever before. Football fans worldwide could watch the Bundesliga match between BVB and Werder called global players have since recognised the advertising value of what was once the strongest football league in the world, media presence is a factor that cannot be underestimated in marketing the company. Bremen in 139 countries. This was the second highest penetration ever achieved by the Bundesliga. Dortmund is a household name not only in domestic football, but also internationally. SIGNAL IDUNA PARK, constructed for the 1974 This might be of subordinate importance for those partners of Borussia Dortmund with a regional focus, but due to the fact that the so- World Cup, has often hosted major international events with corresponding TV penetration. The finals of two European Cup competitions have been held in Strobelallee: in 1993 between Borussia Dortmund and Juventus Turin (Italy), and in 2001 between CD Alaves (Spain) and FC Liverpool (England). During both World Cup tournaments, the entire football world was looking at Dortmund. In 1974, the stadium then called Westfalenstadion was the scene, amongst other things, for the knockout semi-final between the Netherlands and Brazil. In 2006, television cameras broadcast images from the four group matches in Dortmund and the second round match between Cup holders Brazil and the outsider, Ghana. There was an aver- Interview in front of the sponsors' wall: Player Mladen Petric with media representatives (above) and Philipp Degen in the cameras sights (bottom). 102

105 Geschäftsbericht Juli Juni 2007 BVB Media Watched by an audience of millions: World star Ronaldo in front of the advertising board with the text Dortmund at the 2006 FIFA World Cup. age of 260 million viewers for each match at the 2006 FIFA World Cup. And it was once again in Dortmund where one of the finalists was decided when, on 4 July 2006, the German and Italian team faced each other at SIGNAL IDUNA PARK. At its peak, 31.3 million viewers sat before their television sets in Germany alone, a number which does not even count the contacts through the successful public viewing, while the global number was approximately half a billion television viewers. They saw an exciting match. They saw the late goals in extra time scored by Grosso and del Piero. They saw the advertising messages of the sponsors and partners of the world football association, FIFA. And they were confronted by the name Dortmund. which appeared at the halfway line, was estimated at EUR 500,000 per match and thus a total amount of EUR 3 million. According to experts' estimates, the tournament as such and the associated global reporting had an advertising value of EUR 200 million for the city of Dortmund. A Time to Make Friends in Dortmund Just the advertising value of the perimeter board for the organising city of Dortmund, BVB print media: Yearbook, stadium and member magazine, business report, investor information. Tradition Leidenschaft Erfolg 103

106 BVB TV BVB NetRadio BVB online The club's own media also report in detail on BVB: Net radio reporters Norbert Dickel and Boris Rupert. During the 2006/2007 Bundesliga season relevant to the reporting period, during which only the final phase of the championship could be described as successful for Borussia Dortmund, BVB and hence its advertising partners as well could be seen for a total hours on television, exactly 74 hours 52 minutes and 22 seconds of which were on free-toair television. The television sector recorded 11 billion contacts and therefore almost 50 percent more than the league average. Media experts predict in any event that the future lies with the Internet. In the last 11 years, the worldwide web has established itself as the third greatest pillar of media consumption and has recorded the largest growth. In 2007, average use of the Internet was 54 BVB makes its partners known via the media. minutes per person per day (TV: 225 minutes). The jersey sponsor RAG, which today does business under the company name EVONIK Industries AG, generated a total of 3.7 billion contacts. This figure consists of fade-ins at 30 second intervals in the television segment (1.9 billion), and images of the jersey in newspapers and magazines (1.1 billion) and on the Internet (700 million). Borussia Dortmund was one of the first providers that recognised the significance and, above all, strengths of the www for football. BVB has already been using the Internet as a communications platform since Since then, the online presence of the six-time German champion has constantly been expanded BVB and new media: Season DVD, website with cutting-edge reports and detailed investor relations area: 104

107 BVB Media Pure emotions: A flying camera (halfway in from the left in picture) captures the dancing BVB stars in front of the southern stand (Dortmund 2:0 Schalke, 12 May 2007). and optimised. The club prepares the content itself and has it placed it on the web via its subsidiary, Sports & Bytes. BVB is represented on its own website with its own net radio and video reports on the games and important events and can expect revenues potential here. The view of press and television representatives is that Borussia Dortmund's online offer is by far the best of the Bundesliga. Independent analyses see BVB's online offer as amongst or at the top of the league in terms of content and implementation. With BVB Club, Borussia Dortmund has already been a trendsetter in the paid Internet segment since The camera is ever present and caters to the enormous public interest. 105

108 Borussia Dortmund BUSINESS AND FRAMEWORK CONDITIONS FINANCIAL YEAR 2006/2007 IN REVIEW At the close of the General Shareholders' Meeting of our Company in November 2006, Gerd Pieper, Chairman of the Supervisory Board, was able to announce an extraordinary voting result per cent of the shareholders present formally approved the actions of the management and thereby expressed their confidence in us. related incidental costs. Ownership of SIGNAL IDUNA PARK has therefore been almost completely (99.7%) regained. The remaining loan amount of EUR 21.7 million was used for the purpose of redu - cing and refinancing the existing liabilities of Borussia Dortmund GmbH & Co. KGaA ( BVB-KGaA ). In addition, BVB-KGaA was granted a revolving credit line amounting to EUR 10.0 million by Morgan We see this acknowledgement as a confirmation of Stanley. the work we are doing and will continue to practise the transparency and openness that received your stamp of approval at the last General Shareholders' Meeting, as well as a high level of cost consciousness and an appropriate policy on investments. As part of the restructuring process, the creditors' agreement of March 2005 was annulled in June 2006 and the steering committee set up at that time was dissolved. Furthermore, this created the essential conditions for the implementation of the capital Having overcome a life-threatening situation, our Company is once again in the black, which confirms that the nature of our actions was correct and reinforces our belief that we should continue down our chosen path. On 7 June 2006, i. e. in the past financial increase resolved in May 2006 (utilisation of authorised capital with a nominal amount of up to EUR 14,625,000) with an issue amount of EUR 29,250,000. This entire amount was used for a further reduction of existing liabilities in July year, a loan agreement was signed between Borussia Dortmund GmbH & Co. KGaA, and its subsidiaries, and the US investment bank Morgan Stanley for cre - dit facilities amounting in total to EUR 79.2 million with a term of 15 years, thereby laying the foundations for the long-term stabilisation of the Company. A total of EUR 57.5 million of the loan was used for the payment to MOLSIRIS Vermietungsgesellschaft mbh & Co. Objekt Westfalenstadion KG of the price for the repurchase of the limited partner's share in West - falenstadion Dortmund GmbH & Co. KG and for Borussia Dortmund was also able to buy back the goool.de trademark on 3 July Gerling- Konzern Globale Rückversicherungs-AG, Cologne, had entered into an agreement with Borussia Dortmund in 2000 for the purchase and immediate relicensing of the goool.de trademark and thus became the legal owner of the BVB merchandising trademark rights. As a result of the repurchase, all the trademark rights once again rest with the Borussia Dortmund Group. 1 st Round 11 August 2006 FC Bayern 2:0 BVB 2 nd Round 19 August 2006 BVB 1:1 FSV Mainz A foul with nasty results: Kehl is badly injured during this tackle from Salihamidzic and is out for months. What a start: What a start: with this header, Amedick puts BVB 1:0 in front. Right: Pienaar, Pekovic.

109 GROUP MANAGEMENT REPORT The capital increase resolved by the extraordinary General Shareholders' Meeting of Borussia Dortmund GmbH & Co. KGaA on 15 August 2006 for a nominal amount of up to EUR 17,550,000 to EUR 61,425,000 was fully placed. The indirect subscription right for a total of 7,567,585 new shares was exercised by the Company's limited liability shareholders. Morgan Stanley & Co. International Limited, London, England ( MSIL ) subscribed for an additional 9,982,415 new shares in accordance with the resolution authorising the capital increase dated 15 August MSIL paid in its non-cash contribution by assigning to the Company a partial claim held by its sister company, Morgan Stanley Bank International Limited, against the Company for a nominal amount of EUR 21,961,313. The capital increase was entered in the commercial register of the Local Court of Dortmund on 19 September Thus, the Company's share capital is EUR 61,425,000 (previously EUR 43,875,000) and is divided into the same amount of no-par value shares. Management used EUR 10 million of the new cash funds generated from the capital increase (approximately EUR 15.1 million in total) to finance working capital and put the remainder toward reducing existing liabilities. The restructuring of the liability side of the balance sheet, with the aim of strengthening equity resources, achieving a more manageable debt maturity structure and improving interest rate terms, has now been fully implemented. Key financial indicators Key financial figures Borussia Dortmund Group 2006/ /2006 EUR millions Equity Investments Gross revenue Operating profit/loss (EBIT) Financial result (investment income and net interest expense) Net profit/loss for the period Earnings before interest, taxes, depreciation and amortisation (EBITDA) Cash flows from operating activities Weighted average number of shares (in thousands) 58,665 31,021 Earnings per share (in EUR) rd Round 26 August 2006 VfB Stuttgart 1:3 BVB DFB Cup 9 September 2006 Thannhausen 0:3 BVB Frei, Brzenska and Kringe celebrate the victory in Stuttgart with their fans. TSG Thannhausen brought about many opportunities, but BVB won 3:0. 107

110 Borussia Dortmund DEVELOPMENT OF THE MARKET AND COMPETITIVE ENVIRONMENT IN GERMAN PROFESSIONAL FOOTBALL Ticketing to generate higher income for all clubs and to cushion the effect of relegation from the Bundesliga. An additional consideration is to ensure that the split of revenues between the Bundesliga and the Second Bundesliga remains stable. Spectator numbers in the Bundesliga continue to be unusually high. However, a slight decline of 1.43% was recorded in comparison with the record set in the previous year. This was most likely due to the smaller stadium capacities of the three teams promoted, Alemannia Aachen, FC Energie Cottbus and VfL Bochum, compared with the relegated teams, 1. FC Köln, 1. FC Kaiserslautern and MSV Duisburg. In concrete terms, this means that a club in the Bundesliga can achieve a maximum of around EUR 23.3 million but a minimum of around EUR 11.7 million from domestic income for championship games. In the Second Bundesliga, the range is between EUR 3.6 million and EUR 7.2 million. On top of that, the Bundesliga clubs benefit separately from the income from foreign marketing. The German champion The biggest attraction for spectators in the Bun - desliga was once again Borussia Dortmund with 1,161,769 tickets sold, ahead of Bayern Munich (1,133,973) and Schalke 04 (1,028,317). Three Bundesliga clubs therefore reached the coveted target of more than 1 million spectators. receives EUR 4.0 million from this source, while an average of EUR 0,518 million goes to the club in 18th position on the league table. Sponsorship Nor has the Bundesliga lost any of its attraction as an advertising forum. On the contrary, the clubs can look In sales of season tickets, Borussia Dortmund (44,018) outperformed Schalke 04 (42,339), as in the previous year, and was a long way ahead of the competition in the Bundesliga. On average, each club in the Bundesliga sold 20,450 season tickets last season. TV marketing back on a successful season with further increases in income from sponsorship and other revenue sources. The Bundesliga therefore continues to be a growth sector, with professional management ensuring that the economic basis is in place for an exciting competition and so guaranteeing a highly attractive product for fans, media partners and, above all, sponsors. The continuing enthusiasm for football can also be seen in the revenues generated for the clubs by TV marketing. The three-year contract for TV marketing for the Bundesliga and the Second Bundesliga entered into by the German Football League (DFL) in December 2005 was for a total amount of over EUR 1.2 billion. This represents an increase of around 40% compared with the previous TV marketing agreement. With the coming into effect of the new TV marketing agreement, the basis of allocating revenues were adjusted. The new basis of allocation is intended to link payment more closely to performance, The continuing attractiveness and the strong television presence also ensure great interest in the advertising industry. In an anonymous survey conducted by the trade magazine Sponsors, the clubs' leading sponsors awarded the Bundesliga's image a score of 2.18 on a scale of 1-6, 1 being the highest mark. The average rating of 1.75 for the Bundesliga as an advertising platform is an outstanding achievement. Interest on the part of sponsors may also be linked to the enormous level of brand recognition enjoyed by the Bundesliga. 98.7% of those questioned had heard of the top German division. 4 th Round 16 September 2006 BVB 1:0 Hamburger SV 5 th Round 22 September 2006 Bor. M gladbach 1:0 BVB 108 Guerrero (left) and Ljuboja (right) watch as Wörns jumps for the header. Brzenska is already hoping for the goal... The scene that possibly decided the match: Frei is beaten by Keller, which created the counter attack that led to 1:0.

111 GROUP MANAGEMENT REPORT GROUP STRUCTURE AND BUSINESS Group legal structure The Group management report is based on the consolidated group of Borussia Dortmund GmbH & Co. KGaA. In addition to its core activities of football and the marketing of SIGNAL IDUNA PARK, Borussia Dortmund is involved in lines of business related to football. At present, the Company holds direct and indirect interests in the following companies: BVB Stadionmanagement GmbH (100.00%), goool.de Sportswear GmbH (100.00%), Sports & Bytes GmbH (100.00%), BVB Merchandising GmbH (100.00%), BVB Stadion GmbH (99.74%), BVB Beteiligungs- GmbH (94.90%), B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH (51.00%) and Orthomed GmbH (33.33%). Some of these companies have concluded mutual control and/or profit and loss transfer agreements. Borussia Dortmund GmbH & Co. KGaA 100% 100% goool.de sportswear GmbH BVB Stadionmanagement GmbH 94,90% 94,90% BVB Stadion GmbH 5,10% BVB Beteiligungs-GmbH 5,10% BV. Borussia 09 e.v. Dortmund 100% BVB Merchandising GmbH 100% Sports & Bytes GmbH 51,00% B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH 49,00% Hogg Robinson Germany GmbH & Co. KG 33,33% Orthomed GmbH 66,67% Other shareholders 6 th Round 29 September 2006 BVB 2:2 Hannover 96 7 th Round 15 October 2006 Cottbus 2:3 BVB Borussia devastated: Even two goals by Smolarek (on the ground) were not enough to secure a victory against a rejoicing Hanover. Two goals by a defender: Brzenska (here against Kioyo) scored twice in a match for the first time in the Bundesliga. 109

112 Borussia Dortmund BVB Merchandising GmbH Despite an unconvincing season from a sporting point of view, BVB Merchandising GmbH, which was spun off from Borussia Dortmund GmbH & Co. KGaA on 1 July 2005, was able to benefit from the positive trend of interest in and loyalty to BVB, and the associated demand. GmbH. This channel alone recorded growth of around EUR 0.4 million, and therefore accounts for approximately 29% of all income from retailing. The reasons for this are the new online shop and the po - sitive reception of the fan merchandise catalogue. Sports & Bytes GmbH A further increase in the revenues of Sports & Bytes An increase of EUR 1.2 million in revenues to EUR 5.3 million was achieved compared with the 2005/2006 financial year. In its operating business, BVB Mer - chandising GmbH generated an earnings contribution to consolidated earnings of EUR 0.5 million. GmbH, which rose by EUR 28 thousand to EUR 729 thousand, was achieved compared with the previous financial year, while earnings of EUR -2 thousand (prior year EUR 55.7 thousand) were almost at break even. Major contributory factors to this were the revamped product range, focused more specifically on areas of demand, and the creation of new sales channels, together with the optimisation of existing ones. The responsibilities of Sport & Bytes, a whollyowned subsidiary, continue to be the optimisation and implementation of IT processes, as well as the design and development of the BVB website. Borussia Dortmund's website is currently recording By converting the August Lenz building into a modern fan shop on two levels, Borussia Dortmund has addressed what has hitherto been a strategic shortcoming, namely the lack of a fan shop directly next to SIGNAL IDUNA PARK. At the beginning of 2007, the fourth fan shop located in Dortmund created an additional sales channel, giving supporters access to the complete range of fan merchandise even on match days, both before and after the game, with a floor space of around 600 square metres. But even apart the highest number of web visitors since its launch, with up to 12.5 million hits per month on the German-language football pages alone. In addition to the 150 or so news items monthly just relating to football, BVB TV, the Netradio service with live reports from the Bundesliga games and the BVB club have become firmly established media. The review of the season produced by Sports & Bytes GmbH, now already in its third year of publication, is also highly popular. from match operations, the new fan shop is receiving a warm reception from customers thanks to the plentiful supply of parking spaces and the growing number of other services available around SIGNAL IDUNA PARK, such as the professional stadium tours and the At the same time, demand is rising from non-group companies for consultancy and design assistance in setting up their own websites and making photographic and video material available. new Strobels bar and restaurant for supporters. New business opportunities are therefore opening up Mail order via the Internet has now become the most important sales channel for BVB Merchandising to Sports & Bytes GmbH in addition to its original area of activity. 8 th Round 20 October 2006 BVB 1:1 VfL Bochum DFB Cup 24 October 2006 BVB 0:1 Hannover With this spectacular move Pienaar set up the equaliser in the home match against the regional neighbour VfL Bochum. Dariusz Zuraw wins the battle against Ebi Smolarek.

113 GROUP MANAGEMENT REPORT Sports & Bytes GmbH recently completed work on a completely redesigned website and on the Internet portal meinbvb ( my BVB ), which allows customers to maintain their personal data themselves and enables them to use a single login to access all aspects of BVB's Internet presence. In addition to the advantages for customers, the new portal with its single login also benefits Borussia Dortmund GmbH & Co. KGaA and its subsidiaries. By integrating the Groupwide ERP system, access to an improved and more up-to-date customer base can be achieved. goool.de Sportswear GmbH Following the buyback of the stadium shares by means of a purchase agreement dated 12 May 2006, goool.de Sportswear GmbH, a wholly-owned subsidiary, directly and indirectly holds 99.74% of the shares in BVB Stadion GmbH. The company's earnings for the financial year under review were impac - ted by net finance costs amounting to EUR -3.3 million as a result of financing the stadium shares. goool.de Sportswear GmbH is a manufacturer of sports articles and finished the 2006/2007 financial year with a loss before transfers to the KGaA amounting to EUR 3.4 million (prior year EUR -1.3 million). B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH Borussia Dortmund GmbH & Co. KGaA has a 51% interest in Borussia Euro Lloyd Sports Travel GmbH. management services and organises sports-related and incentive trips. B.E.S.T. Borussia Euro Lloyd Sports Travel GmbH closed the financial year with a profit of EUR 116 thousand. BVB Stadionmanagement GmbH (formerly: Westfalenstadion Verwaltungs GmbH) The object of the business activities of BVB Stadion - management GmbH, trading as Westfalen stadion Dortmund Verwaltungs GmbH until 25 August 2006, is the provision of personnel and other services for the management and administration of the operating facilities of Borussia Dortmund GmbH & Co. KGaA, in particular SIGNAL IDUNA PARK. In October 2006, BVB Stadionmanagement GmbH entered into a profit and loss transfer agreement with Borussia Dortmund GmbH & Co. KGaA. The company ended the financial year with a net profit amounting to EUR 120 thousand before transfers. Orthomed GmbH Borussia Dortmund has a 33.3% interest in Ortho - med Medizinisches Leistungs- und Reha bili tations - zentrum GmbH. The business of the company in the most recent financial year consisted of all kinds of rehabilitation activities, in particular services relating to extended ambulant physiotherapy under medical supervision. B.E.S.T offers all the specific services of a travel operator combined with the expertise of a sports specialist under one roof. In addition to business and private travel services, the company provides event Orthomed offers an all round concept for medical rehabilitation, particularly for competitive athletes. All of Borussia Dortmund's sporting departments are therefore also attended to by Orthomed. 9 th Round 28 October FC Nuremberg 1:1 BVB 10 th Round 4 November 2006 BVB 1:1 Arm. Bielefeld Tinga gets through in the penalty area and gives keeper Schäfer no chance to save from a tight angle. Artistic: Pienaar against Bielefeld s Kauf, who should later set up Wichniarek's goal for Arminia's 1:0 lead. 111

114 Borussia Dortmund In the most recent financial year, gross revenue increased slightly by EUR 44 thousand, while the net profit for the year ended 31 December 2006 amounted to EUR 57 thousand (previous year: EUR 149 thousand). BVB Beteiligungs-GmbH The newly formed BVB Beteiligungs-GmbH was entered in the commercial register on 2 May The company holds 5.1% of the shares in BVB Stadion GmbH. BVB Stadion GmbH Following the buyback of the stadium shares, the holding company for SIGNAL IDUNA PARK is almost wholly-owned by the BVB Group. B.V. As a result of the profit and loss transfer agreement entered into on 24 August 2006, the loss amounting to EUR -0.3 million, caused by the costs of financing the shareholding, will be transferred to goool.de sportswear GmbH. Borussia 09 e.v. Dortmund holds 5.1% of the shares in BVB Beteiligungs-GmbH, which, in turn, holds 5.1% in BVB Stadion GmbH. Therefore the club has an indirect 0.26% holding in BVB Stadion GmbH as ORGANISATION OF MANAGEMENT AND CONTROL a minority shareholder. The remaining 99.74% is held by the BVB Group via goool.de sportswear GmbH and BVB Beteiligungs-GmbH. The general partner, Borussia Dortmund Geschäfts - führungs-gmbh, is responsible for management and representation of Borussia Dortmund GmbH & Co. BVB Stadion GmbH is the legal successor company to Westfalenstadion Dortmund GmbH & Co. KG. On 29 June 2006, the company entered into a lease agreement with Borussia Dortmund GmbH & Co. KGaA. This limited liability company ( GmbH ) is in turn represented by its Managing Directors Hans- Joachim Watzke and Thomas Treß; its sole shareholder is Ballspielverein Borussia 09 e.v. Dortmund. KGaA for the use of SIGNAL IDUNA PARK with a fixed term until 30 June The remuneration of the Managing Directors is made up of fixed and performance-related components, with BVB Stadion GmbH concluded a profit and loss transfer agreement with goool.de Sportswear GmbH the latter based on the consolidated net profit for the year before income taxes. on 3 August The net loss for the financial year from 1 July 2006 to 30 June 2007 determined in accordance with IFRS amounted to EUR -3.4 million before profit and loss transfers (previous year: EUR -9.9 million). The following chart shows the structures and responsibilities as between Ballspielverein Borussia 09 e.v. Dortmund, Borussia Dortmund GmbH & Co. KGaA and Borussia Dortmund Geschäftsführungs-GmbH. 11 th Round 7 November 2006 BVB 0:0 Aachen 12 th Round 10 November 2006 Werder Bremen 1:3 BVB 112 It was not Dede's fault that Borussia did no better than 0:0 against Alemannia (tackle with Ebbers). Sahin here against Schulz had a strong match at the Weser and set up the first two goals.

115 GROUP MANAGEMENT REPORT Ballspielverein Borussia 09 e.v. Dortmund elects Executive Board appoints Members Meeting Council of economic affairs Borussia Dortmund Geschäftsführungs-GmbH (General Partner) appoints and supervises elects Borussia Dortmund GmbH & Co. KGaA Supervisory Board Advisory Board Managing Directors (Consisting of members of the Executive Board, Council of economic affairs and non-voting, associated members) No right of appointment, only right of supervision General Shareholders Meeting The rights and duties of the KGaA's Supervisory Board, which is appointed by the General Shareholders' Meeting, are limited. Specifically, it has no authority with respect to matters involving personnel, i.e., no authority to appoint and dismiss managing directors at Borussia Dortmund Ge - schäftsführungs-gmbh or to regulate the terms of their contracts. Nor is the Supervisory Board authorised to adopt internal rules of procedure for the general partner or issue any list of transactions requiring its consent. Rather, such rights and duties are vested in the governing bodies of Borussia Dortmund Geschäftsführungs-GmbH, namely its Advisory Board and the Executive Committee created by the Advisory Board. The members of the Supervisory Board are as follows: Gerd Pieper (Chairman) Proprietor and Managing Director of Stadtparfümerie Pieper GmbH, Herne Harald Heinze (Deputy Chairman) Ruedi Baer Founder and CEO of the mobilezone group, Watt (Switzerland) Othmar Freiherr von Diemar Proprietor and manager of Othmar von Diemar Vermögensverwaltung + Beratung, Cologne Bernd Geske Managing partner of Bernd Geske Lean Communication, Meerbusch Patrick Albert Lynch Bank employee, London, (until 26 February 2007) Christian Kullmann Head of the corporate communications division and board office of RAG Aktiengesellschaft, Essen (since 23 May 2007, by decision of the Local Court of Dortmund dated 21 May 2007) 13 th Round 18 November 2006 BVB 1:2 Hertha BSC Berlin 14 th Round 25 November 2006 Frankfurt 1:1 BVB Kringe kept trying to push the game forward. But here he was stopped by Samba. Tinga shoots, but his shot is blocked. Only in the 79 th minute did Smolarek (right) score for the final score of 1:1. 113

116 Borussia Dortmund Within Borussia Dortmund GmbH & Co. KGaA, there are four independent areas of responsibility below the management, namely, communications, sports, finance and organisation. The responsible employees and the divisions for which they are responsible can be seen from the following chart. BORUSSIA DORTMUND GmbH & Co. KGaA Management Hans-Joachim Watzke [Chairman] Management Thomas Treß Communications Sport Finance Organisation J. Schneck M. Zorc M. Knipping Dr. C. Hockenjos Corporate communications Professional football Finances and accounting General organisation Sport communications Amateurs Controlling Stadium management Publications Youth Investor Relations Match organisation Fan support Training fields IT (Information Technology) V.I.P. Hospitality Stadium announcements and program Personnel Sportfive (sponsors) PR work Risk Management Events Complaints management Merchandising DFB/DFL Affiliates Ticketing Sportfive (Commission processing) Real estate Third party events 15 th Round 2 December 2006 BVB 1:0 VfL Wolfsburg 16 th Round 10 December 2006 FC Schalke 04 3:1 BVB 114 Hofland wins this tackle against Smolarek but in the decisive scene Smolarek prevails. Valdez suffered a serious knee injury during this tackle with Pander (who was not at fault).

117 GROUP MANAGEMENT REPORT INTERNAL MANAGEMENT SYSTEM Sports management The great challenge for the future will be to play football successfully with a cost-optimised budget. In order to achieve this aim, BVB will continue to try to present a strong, competitive team in the future and, in this respect, will back young players with potential, who will create a healthy mixture with the seasoned players. This will create a realistic chance of qualifying for international competitions. The sporting aims will be aligned with financial circumstances. This means that the salary budget will generally be tied to realistic sporting objectives and that the target for the sporting management with Mr. Watzke, Mr. Zorc and the coach will be to lead BVB into an international competition again in the next few years. This would increase the financial flexibility for acquiring new players, although no unknown risks will be taken. There will be no new debt in order to strengthen the team. Financial management One of the main aims of BVB's management is to increase profitability in the long-term and thus to further improve the Group's equity resources. In addition, there is a focus on financial strength. As well as a constant improvement in the operating result, generating positive cash flow is therefore the most important financial objective of our Company. We are seeking to optimise cash flow by concentrating on the impacting factors of operating results and investments. The operating result is the most important indicator for measuring success. For us, the operating result means earnings before interest and taxes (EBIT). Therefore we are constantly monitoring the operating results in all lines of business and areas of responsibility based on monthly comparisons between the budget and the actual situation. The most important drivers for the operating result are further improvement in sales revenues in the major revenue sources of ticketing, sponsorship, TV marketing and merchandising, and disciplined management of operating expenses. In coming years we will concentrate on achieving the best possible balance between limiting operating expenditure and, at the same time, generating sales growth. In this respect, the decisive factor is qualifying for international competitions. Capital management In addition to securing the KGaA's equity as determined in accordance with HGB, the management's capital management responsibilities also include stabilising and increasing the consolidated equity as determined in accordance with IFRS. We will reach these targets, in particular, by improving the operating result and through effective investments. The utilisation of the authorised capital with a nominal amount of EUR 21.9 million resolved by the extraordinary General Shareholders' Meeting on 15 August 2006 represents an instrument enabling management to respond flexibly to future requirements for capital. The same applies to the ability to issue 17 th Round 17 December 2006 BVB 1:2 Leverkusen 18 th Round 26 January 2007 BVB 3:2 FC Bayern Two of the three goal scorers in one picture: Amedick, who had bad luck in hitting the post, in a duel with Voronin. Even van Bommel could not stop an out - standing Frei that evening. Pienaar watches on the left. 115

118 Borussia Dortmund convertible bonds and bonds with warrants (conditional capital with a nominal amount of EUR 14.6 million). At the present time, however, the management has no specific plans to make use of these instruments. CORPORATE STRATEGY A football company can only be financially successful if it enjoys sporting success in the long term. In order to make its financial performance less dependent on short-term sporting success in the future, Borussia Dortmund will push ahead further with national and international marketing of its brand name. Borussia Dortmund's aim is to establish itself over the medium-term as one of the leading German football clubs after Bayern Munich. Following the successful Germany continues to be Europe's largest football market, which, however, is behind some other European markets in financial terms. This provides great growth potential. implementation of the reorganisation, the restructuring of our financial liabilities and the first mode - rate investments in the professional squad, we consider ourselves to be on the right path. All financial activities at Borussia Dortmund are oriented around the target groups that are relevant for a football club: Its fans, members and business partners. Products and services should be tailored to these groups in the best way possible. Through its existing brand potential, Borussia Dortmund intends to utilise all the commercial opportunities presented by professional club football in an international context for the benefit of the shareholders. The financial foundations of the first and to date only listed German football company have been expanded with the exclusive marketing right for SIGNAL IDUNA PARK, more effective use of the Borussia Dortmund brand and the establishment of footballrelated lines of business. However, the core business will in future also be professional football together with its classic income sources of TV marketing, sponsorship, ticketing and merchandising. For the following reasons, BVB is convinced that it will be able to further stabilise and expand its position: Borussia Dortmund is in sporting terms one of the most successful, well known and most popular German football clubs with an outstanding fan base that provides BVB with one of the highest average numbers of spectators in Europe. The current business strategy can principally be summarised as follows: Strengthening the financial condition Sustainable adjustment of sporting perspectives Intensifying the promotion of up and coming talent Fan involvement Utilisation of the Borussia Dortmund brand 19 th Round 31 January 2007 FSV Mainz 05 1:0 BVB 20 th Round 4 February 2007 BVB 0:1 VfB Stuttgart 116 Niculae tries to thread the ball past Kruska. Metzelder watches the situation in the background. Metzelder tackling goal scorer Gomez. Metze was unfortunate that his header was cleared off the line

119 GROUP MANAGEMENT REPORT However, financial and business development is largely dependent on sporting success. Since sporting success can only be planned to a very limited degree, the best management can do is to create a foundation for success. Investments, particularly in the professional squad, are therefore a necessary prerequisite for achieving sporting objectives, such as qualifying for the UEFA Cup. However, in order to meet financial goals, planned investments and decisions must under certain circumstances be postponed to the extent these would only be possible by incurring new debt. Moreover, a player may be sold based on financial considerations in cases where this would not have happened had the decision been made based solely on sporting criteria. In such cases, management weighs up the opportunities and risks to find a solution that is broadly in line with our strategic objectives from a medium-term point of view. We plan to further increase gross revenue in the medium term. The first steps in bringing us closer to this goal have been taken with the marketing of the stadium name, the new main sponsor agreement with RAG and the conclusion of the new TV agreement by DFL. Moreover, further significant revenue potential is available, especially by qualifying for international competitions, which would have a positive effect on all Borussia Dortmund's revenue sources. A conflict, or a situation where sporting considerations and financial considerations affect each other adversely, therefore arises between the pursuit of financial interests and sporting interests, particularly if the club continually falls short of its sporting goals. Positive operating results and moderate investments, mainly in the professional squad, depending on those results, are expected to enable Borussia Dortmund GmbH & Co. KGaA to achieve stable, positive cash flows over the long term. 21 st Round 10 February 2007 Hamburger SV 3:0 BVB 22 nd Round 17 February 2007 BVB 1:0 Bor. M gladbach The scene that resulted in the penalty: Mahdavikia dives in front of Weidenfeller, referee Wagner falls for the performance. After the final whistle: the twins David and Philipp Degen. Both had their opportunities to score

120 Borussia Dortmund POSITION OF THE COMPANY RESULTS OF OPERATIONS In the past financial year for the 2006/2007 season, the Borussia Dortmund Group achieved an increase in revenues compared with the previous season of 9.1%, from EUR 89.1 million to EUR 97.1 million, in its core business activities of ticketing, sponsorship, TV rights, catering, licences and transfers. Borussia Dortmund Group Revenues in per cent 21% 7% 19% 31% 22% Transfer income Ticketing TV rights Sponsorship Catering, licences and other 23 rd Round 24 February 2007 Hannover 96 4:2 BVB 24 th Round 4 March 2007 BVB 2:3 Cottbus 118 During the game in Hanover, Valdez did not have his nerves under control. Here he starts a fight with Vinicius. Left: referee Fandel. Three goals (of which only two counted) and still Frei had to be consoled by Cvitanovic.

121 GROUP MANAGEMENT REPORT SALES DEVELOPMENT Despite a season with few high points from a sporting point of view, the Group again achieved an increase in revenues of EUR 8.0 million. In addition to the new basis of allocating TV marketing income which came into effect in the past financial year, the 9.1% increase is owed mainly to the loyalty of the supporters and sponsors, because substantial revenue growth was recorded both in ticket sales (+6.2%) and in income from sponsorship (+11.4%). Borussia Dortmund Konzern Revenues in EUR millions 100 6, ,2 14,8 20,2 21, ,4 30,5 17,2 18, / /07 Transfer income Catering and licences incl. other TV marketing Sponsorship Ticketing 25 th Round 10 March 2007 VfL Bochum 2:0 BVB 26 th Round 17 March 2007 BVB 0:0 1. FC Nuremberg Here Weidenfeller still manages to save: Borussia's keeper stops an early goal from Gekas. Left: Wörns. He brought new energy: Together with Tinga, Marc Kruska (right) attacks Nuremberg's Jan Polak. 119

122 Borussia Dortmund Details of the performance of the individual revenue sources are provided in the following paragraphs. Income from ticketing Borussia Dortmund's receipts from match operations, i.e. income from ticketing and friendly games, Income from sponsorship Borussia Dortmund's income from sponsorship conformed to the upward trend enjoyed by all clubs in the Bundesliga and reached EUR 30.5 million, thus exceeding the EUR 30 million target for the first time. increased by EUR 1.1 million to EUR 18.3 million in the past financial year for the 2006/2007 season. Despite not participating in an international competition, BVB's games were watched by an average The largest individual contribution to growth amo un - ting to EUR 0.7 million was made by income from Bundesliga match and season ticket sales. In addition the home game against Hannover 96 in the second main round of the DFB Cup generated a surplus of EUR 0.1 million, while various friendly games and of 72,164 spectators and therefore represented an attractive advertising platform, especially for regional companies. The creation of additional capacity for perimeter boards also created the opportunity to offer perimeter board advertising to new potential clients. match operations for the regional league team provided additional income of EUR 0.3 million. In addition to RAG, acting as main sponsor for the first time in the last financial year, and SIGNAL The average number of spectators was increased from 71,378 to 72,164, despite lower season ticket sales compared with the previous year and a rather difficult season from the sporting point of view, with the club's participation in the first division next season not made certain until the 32nd match day. On IDUNA, which has given its name to the largest stadium in the Bundesliga, Borussia Dortmund and its marketing partner SPORTFIVE succeeded once again in increasing the number of so-called champion partners and partners compared with the previous year. an international basis, Borussia Dortmund therefore continues to occupy third place in terms of numbers of spectators behind Manchester United and Real Madrid, despite not participating in an international competition. The development of the hospitality areas also made a substantial contribution to the increase in income from sponsorship. In addition to the reserved seating area in the West Stand at SIGNAL IDUNA PARK which has been fully booked for years, the new The loyalty of the club's supporters, even following an unsuccessful sporting season, is made clear by the number of season tickets already sold for next season. With 50,549 tickets sold for the 2007/2008 season, Borussia Dortmund has beaten its own Bundesliga record of 50,415 season tickets sold for 2003/2004. By comparison: On average, 20,450 season tickets were sold in the Bundesliga for the 2006/2007 season. Business Club 09 concept was gratefully received by many customers. Not only does it offer participants the chance to experience all BVB matches at SIGNAL IDUNA PARK close up, it also creates the opportunity to benefit from the Borussia Dort - mund phenomenon away from the pitch. The number of seats sold was more than double the previous year's figure. Regular meetings on journeys to away games and many other events promote a constant 27 th Round 30 March 2007 Arm. Bielefeld 1:0 BVB 28 th Round 7 April 2007 Aachen 1:4 BVB 120 Relegation battle: Following the 0:1 in Bielefeld (here Schuler), BVB slipped with Valdez to 17 th position. Outstanding: Tinga played his best match to date in the BVB strip at the Tivoli. Here he leaves Aachen's Pinto behind.

123 GROUP MANAGEMENT REPORT exchange between the companies and Borussia Dortmund. The successful development of this initiative is reflected in the figures, with an increase in advertising income from Business Club 09 of 120%. Incentive packages were also especially heavily booked by business customers during the last financial year. These enable companies to invite their guests to SIGNAL IDUNA PARK on individual match days, independently of a season package. In order to satisfy all the requests in this segment, the indoor golf area located at the south of SIGNAL IDUNA PARK and the newly built Conference Center were converted into hospitality areas on match days. Income from TV marketing Income from TV marketing amounted to EUR 21.3 million in the past financial year and was therefore approximately EUR 6.5 million higher than in the previous year. The reason for this was the new TV agreement which came into effect for the first time in the 2006/2007 season, under which the clubs in the Bundesliga and the Second Bundesliga will receive around EUR 1.2 billion over three years. This represents an increase in the amount distri - buted annually of around 40% compared with the previous TV agreement. As well as the increase in the amount distributed, a new basis of allocation was also introduced at the start of the past financial year under which the football clubs are ranked in order of preference, using a weighted method of calculation based on the last four years' seasons. In addition, a bonus is paid at the end of the season depending on the club's position on the league table. Although Borussia Dortmund occupied ninth position on the table on average during the season, it benefited from its positions in previous years and continues to rank seventh on the allocation list. The absence of the live game in the DFB Cup and the club's non-participation in the UI Cup resulted in a loss of income of around EUR 0.3 million, but the promotion of the amateur squad to the regional league and the associated TV receipts made up for this. Transfer income Income from transfers recorded a decline of EUR 5.6 million to EUR 6.8 million. While three key players with unexpired contracts, Henrique Ewerthon, Niclas Jensen and Tomas Rosicky, were sold in one go in the 2005/2006 financial year, in the most recent season Borussia Dortmund only said goodbye to David Odonkor, who transferred to the Spanish first division club Betis Sevilla following an outstanding World Cup. Income from catering and licences including other income Borussia Dortmund achieved income from catering, licences, merchandising and other income of EUR 20.2 million in the 2006/2007 financial year compared with EUR 17.2 million in the 2005/2006 financial year. The growth in income mainly reflected the performance in catering and a substantial increase in retail sales at BVB Merchandising GmbH. The marketing successes already mentioned in the context of sponsorship also had an impact here, because the majority of agreements with business customers provide for an element of catering ser vices as well as advertising space. This item continues to include income from catering on match days, the sale of publications, advance booking fees and licence fees for events at SIGNAL IDUNA PARK on non-match days. The latter also recorded an upward trend, as did 29 th Round 15 April 2007 BVB 0:2 Werder Bremen 30 th Round 21 April 2007 Hertha BSC Berlin 0:1 BVB Stumble: Metzelder & Co had to face the last defeat for five weeks against Wiese s Werder Bremen. Scorer of the winning goal on the Spree: Markus Brzenska. First to congratulate him are Ebi Smolarek (left) and Florian Kringe. 121

124 Borussia Dortmund catering income in the circulation areas at SIGNAL IDUNA PARK, which were able to achieve an increase of EUR 0.20 in spending per head thanks to a wider range of items offered. Income in this area will also participate in the general upward trend in future as a result of the construction of the Conference Center, a state-of-the-art conference facility, and the letting of the Center by Stadionlive GmbH, which has been marketing and organising the other events successfully since DEVELOPMENT OF SIGNIFICANT OPERATING EXPENSES Personnel expenses A further reduction of EUR 2.8 million was achieved in personnel expenses which amounted to EUR 37.0 million compared with EUR 39.8 million in the 2005/2006 financial year. A reduction in expenses of around EUR 2.2 million was once again achieved in the professional match operations area alone, despite several changes of coach. Despite an unconvincing season from a sporting point of view, BVB Merchandising GmbH, which was spun off from Borussia Dortmund GmbH & Co. KGaA on 1 July 2005, was able to benefit from the positive trend of interest in and loyalty to BVB, and the associated demand, and to increase its revenues accordingly. Depreciation and amortisation Depreciation and amortisation fell as planned by EUR 0.7 million compared with the previous year to EUR 13.5 million. Other operating expenses Other operating expenses amounted to EUR 36.6 Other operating income achieved growth of around EUR 5.3 million to EUR 8.9 million in the most recent financial year. This item included receipts from distributions and allocations of profit from the FIFA 2006 World Cup, which alone accounted for income of EUR 4.6 million. million in the 2006/2007 financial year compared with EUR 46.3 million in the previous year. The decline mainly reflected the fall in transfer expenses, lower legal and advisory costs and a reduction in valuation allowances on receivables. This was offset principally by higher marketing commissions. FINANCIAL CONDITION ANALYSIS OF CAPITAL STRUCTURE after taking into account the net profit for the year, increased to EUR million compared with EUR With the capital increase resolved by the extraordinary General Shareholders' Meeting on 15 August 2006, the million in the previous year. The equity ratio therefore improved from 13.6% to 33.5% as planned. share capital of Borussia Dortmund GmbH & Co. KGaA (previously EUR million) rose by EUR million to EUR million, while equity, The funds generated by the capital increases in the previous and current financial years have been used 31 st Round 28 April 2007 BVB 2:0 Frankfurt 32 nd Round 5 May 2007 VfL Wolfsburg 0:2 BVB 122 Alexander Frei here against Chris shot down Eintracht almost by himself with two attractive free kicks. In the third last round, Valdez scored the longed-for first goal for BVB. Van der Leegte cannot stop him.

125 GROUP MANAGEMENT REPORT mainly to reduce financial liabilities, achieve a more manageable debt maturity structure and obtain improved interest-rate terms. Liabilities were reduced significantly compared with the previous year from EUR million to EUR million. Current liabilities fell from EUR 99.7 million to EUR 36.3 million as a result of the repayment of liabilities following the capital increases. Additions to property, plant and equipment amounted to EUR million. Significant individual investments worthy of mention were the conversion of the former offices at the stadium, the August Lenz building, into a fan shop and the construction of a conference centre on Level 4 of the stadium's North Stand. ANALYSIS OF LIQUIDITY Non-current liabilities declined by EUR 4.8 million during the financial year to EUR million. ANALYSIS OF INVESTMENTS Additions to intangible assets amounting to EUR million related almost entirely to investments in the professional squad. As at 30 June 2007, the Borussia Dortmund Group held cash of EUR million, of which EUR million was subject to restrictions. In addition, the revolving credit facility granted by Morgan Stanley for EUR million and an overdraft facility of EUR million are available to the Group for their full amounts. The cash flow statement gives details of the development of liquidity. NET ASSETS The Group's total assets declined from EUR million to EUR million. The substantial improvement of EUR 48.9 million in consolidated equity contrasted with reductions in liabilities (in particular short-term financial liabilities) of EUR 68.1 million, financed mainly from cash funds and the capital increase referred to above. OVERALL SUMMARY OF RESULTS OF OPERATIONS, FINANCIAL CONDITION AND NET ASSETS The results of operations, financial condition and net assets of Borussia Dortmund showed significant positive development following the successful implementation of the reorganisation measures and the completed restructuring of the liability side of the balance sheet. Particular mention should be made of the improvement in the operating result, the Group's equity resources and the reduction in liabilities, which will once again allow BVB room for manoeuvre in its future sporting development. 33 rd Round 12 May 2007 BVB 2:0 FC Schalke th Round 17 May 2007 Leverkusen 2:1 BVB Total commitment: Christian Wörns in a tackle against the Schalke player, Gerald Asamoah. BVB wins 2:0. The last chance of the 2006/2007 season: Lars Ricken just misses Leverkusen's goal in time added on. 123

126 Borussia Dortmund COMPENSATION REPORT The structure of the compensation system for management is determined and regularly reviewed by the can be made on the basis of resolutions approved by the Executive Committee of the Advisory Board. Executive Committee of the Advisory Board. The Executive Committee is also responsible for determining the compensation of management in detail and sets the appropriate amount of compensation. The principal criteria for determining the appropriate amount of compensation are the responsibilities of The component not related to performance comprises a fixed annual salary and benefits in kind, mainly derived from the amounts required to be taken into account in accordance with tax regulations e.g. for the use of company cars. the particular member of management, their personal performance and the financial condition, success and future prospects of Borussia Dortmund. The Supervisory Board's compensation is governed by 13 of the Articles of Association, pursuant to which each member of the Supervisory Board As well as annual payments not related to performance and based on market rates at comparable companies, the compensation includes a performancerelated component that is based on consolidated earnings before taxes. In addition, special payments receives fixed compensation amounting to EUR 7 thousand; the Chairman receives twice that amount, while the Deputy Chairman receives one and a half times that amount. Value-added tax is reimbursed to the members of the Supervisory Board. DFB Cup 4 August FC Magdeburg 1:4 BVB 1 st Round 12 August 2007 BVB 1:3 MSV Duisburg 124 In overcoming Magdeburg, Tinga and Co were not quite as in control as the result suggests. Sebastian Kehl in a tackle against the Duisburg player, Manasseh Ishiaku.

127 GROUP MANAGEMENT REPORT RISK REPORT In the course of its business activities, Borussia Dortmund is constantly exposed to risks which may have a negative effect on the Company's operations. The identification, assessment and management of these dangers define the areas of responsibility of a company's risk management system. RISK MANAGEMENT SYSTEM Risk management as an ongoing task is an integral part and major precondition of sound company management. With the aid of a properly implemented internal monitoring system, developments which endanger the continued existence of Borussia Dort mund GmbH & Co. KGaA and its subsidiaries can be recognised and counteracted at an early stage. In the risk management system, management has laid down principles and guidelines to enable uncertainties to be identified and countermeasures to be taken in good time. Borussia Dortmund's risk management system is integrated into the organisational structure of the whole Company and therefore ensures that the responsible employees maintain a high level of valueoriented risk awareness. It implements the requirements of the German Control and Transparency Act. The Group-wide risk management system ensures that risks are identified at an early stage, recorded consistently, evaluated, managed and monitored. Within the framework of its risk management system, Borussia Dortmund, together with the specialist departments, identifies, documents and evaluates possible risks on the basis of the potential amount of loss they may cause and their likelihood of occurring, and collates them at the level of the corporate divisions. The risks are categorised and steps are taken to ensure that they are constantly monitored and that appropriate measures to manage the risks are implemented right from the start. The aim of the risk management system is to obtain information about risks and their financial and other consequences as early as possible and to enable the Company to take appropriate countermeasures. Particular attention is paid to risks which could endanger the continued existence of Borussia Dortmund GmbH & Co. KGaA or its subsidiaries in their existing form (high priority risk). Responsibilities have been established for the individual corporate divisions and the procedures to be observed and the monitoring system have been defined as follows: The risk position is regularly recorded on a consistent basis and compared with the existing data. This enables countermeasures to be taken in good time if negative developments can be identified. The executives responsible are required to inform management immediately of any significant changes in the risk profile. Constant observation of the market enables changes in the environment to be recognised promptly and action to be taken in response. Differences in the Company's results of operations and net assets from the budgeted figures are identified and analysed using detailed monthly and quarterly financial reports. 2 nd Round 18 August 2007 FC Schalke 04 4:1 BVB 3 rd Round 25 August 2007 BVB 3:0 Cottbus Gerald Asamoah's actions in this scene with Robert Kovac do not look like a tender embrace... Diego Klimowicz scorer of two goals heading against Cottbus. 125

128 Borussia Dortmund In this context, Borussia Dortmund applies the following principles/rules of conduct: Management determines the basis on which risks are to be assessed and identified. The identification of risks takes place in the individual corporate divisions since that is where knowledge about specific risks is available. Risks are assessed by a group of people chosen by the management. The criteria to be applied are also defined by management. The governing bodies of Borussia Dortmund are kept regularly informed of the current risk position. The efficiency and effectiveness of the risk management system is examined as part of the audit carried out by the Company's auditors. The following paragraphs describe in more detail the specific risks to which Borussia Dortmund is exposed, which affect the Company's business operations as a result of internal and external factors and may have a major influence on them over the long term. SPECIFIC RISKS STRATEGIC RISKS the strategic objectives from a medium-term point of view, while remaining within the range of defined In addition to financial success, the primary objective of a company participating in the football business in the Bundesliga remains sporting success, irrespective of business plans which do not depend on company performance indicators in order not to jeopardise the financial objectives. PERSONNEL RISKS the club's position on the league table and the maintenance of profitability in a variety of different sporting scenarios. This can be justified solely on the grounds of public interest, which is largely focused on the winning of titles. If the club has no success over longer periods, the management is faced with a balancing act, attempting to keep the profitability of The available potential of its employees, from both a sporting and a financial point of view, forms the basis for Borussia Dortmund's future development as a business. Their ability, commitment and performance will play a decisive role in future sporting and financial success. the company and the sporting objectives in harmony In this regard the professional squad is of critical importance. The wrong investments in this area would have far-reaching effects on the Company's sporting objectives, and therefore financial objectives, as would insufficient identification with the club and a lack of commitment. To some extent, it may not be possible to make up for the loss of key players as a result of injury and, as a result, the ability to meet internally defined objectives may be endangered. with each other. Measures which are necessary for sporting success, such as investments, must not be allowed to endanger the financial objectives, for example, ensuring adequate liquidity, even over several years. But economic success also depends to a large extent on sporting achievements, because winning titles generates additional demand from spectators, business customers, sponsors and in other areas of the business. A conflict of objectives therefore arises. The achievement of one company objective may therefore necessarily entail abandoning or modifying another objective. In such cases, management will weigh up the risks and opportunities and attempt to find a solution that is broadly in line with The Company's success is based on making business decisions and putting them into effect, and both are largely determined by the quality of the relevant employees. The structure of Borussia Dortmund's 126

129 GROUP MANAGEMENT REPORT organisation is based on a clear separation of the individual corporate divisions, which thus enables business decisions to be analysed and prepared in individual departments with the relevant expertise before a decision is made for the Company as a whole. The constant exchange between the corporate divisions through the medium of well established meetings contributes beforehand to optimising the quality of the decisions made and avoiding conflicts of objectives. From the point of view of risk management, it is equally indispensable for a company to be able to rely on qualified executives and their staff. Management and all the Company's employees have a permanent responsibility to identify risks at an early stage, to monitor and therefore limit them, and at the same time to pursue business opportunities rigorously. COMPETITIVE RISKS Competition between football clubs, for example in obtaining sponsors, has intensified, and not just as result of the stadiums built for the 2006 FIFA World Cup. Differing decisions made under the influence of regional politics can also affect the ability to attract and retain interested companies. In the most recent season, in particular, sponsors have been rated differently by regional politicians, and in some cases have therefore been approved for certain competitors while being simultaneously banned for others. An additional difficulty is that there is an unusually high concentration of competitors in North Rhine- Westphalia in particular, with six clubs currently in the Bundesliga and several in the Second Bun - desliga. This can have negative consequences for attracting sponsors based in the region because, in contrast to other regions, there is the risk for sponsors that they will be in conflict with each other for potential customers. SALES RISKS The future performance of Borussia Dortmund's individual lines of business depends on its sporting success. A lack of sporting success over a long period could have a major impact on demand for the products offered and therefore on the achievement of financial and sporting objectives. It is also not possible to be fully certain in advance of the consequences for the Company of statutory provisions. Equally, the development of pay TV will have a longterm effect on TV income achievable in future. FINANCIAL RISKS Borussia Dortmund finances itself primarily from longterm bank loans, trade payables, season tickets paid for in advance and payments from sponsors. The related risks arising comprise interest-rate-related cash flow risks, market risks, liquidity risks and credit risks. On the other hand, the Company is not exposed to any significant currency risks. The methods of managing the individual types of risk are described in the following. Under the terms of the loan agreements entered into by Borussia Dortmund and its subsidiaries with Morgan Stanley & Co. International Ltd., London, England, the lender has an early right of termination in the event of failure to maintain certain contractually defined financial ratios (covenants). 127

130 Borussia Dortmund INTEREST RATE RISKS CREDIT RISK The financial liabilities consist mainly of a variablerate loan from Morgan Stanley & Co. International Ltd., London, England, based on EURIBOR. The interest expense associated with this loan is therefore dependent on the future development of the general level of interest rates. In order to minimise the interest-rate-related cash flow risk associated with the loan, the Company therefore entered into an interest rate swap in respect of this loan in August The effect of this interest rate hedging transaction is an overall future rate of interest payable of 6.195% per The Company conducts business exclusively with third parties of high credit standing. Concentrations of credit risk can arise in the context of a player transfer and from long-term sponsorship agreements. Such concentrations of risk are monitored in the course of the Company's operating activities. The counterparty for the interest rate swap described above was a major German bank with the highest credit rating. LIQUIDITY RISK annum, irrespective of actual changes in market rates of interest. The Group constantly monitors the risk of possible After taking account of this interest rate swap, all the Company's significant financial liabilities carried a fixed rate of interest as of June 30, Future changes in the level of interest rates will therefore have only a small impact on the interest expense, even in the medium term. liquidity bottlenecks, taking into account the probable maturities of its financial liabilities and the timing of the expected cash flows from operating activities. Following the restructuring completed in the 2005/2006 financial year, liquidity risks have been sharply reduced thanks to the Company's new financing structure, which is overwhelmingly long-term. RISKS JEOPARDISING PERFORMANCE AND CONTINUED EXISTENCE In order to participate in Bundesliga matches, Borussia Dortmund requires a licence from DFL Deutsche Fußball Liga GmbH (German Football League, DFL ) which is issued for each season. If the licence were to be revoked or denied because of failure to comply with conditions or evidence of inability to meet financial criteria, this would result Following the successful implementation of the restruc turing and in accordance with its current financial condition and results of operations, Borussia Dortmund was awarded the licences for both the Bundesliga and for the Second Bundesliga, which had to be applied for in view of the sporting situation, without conditions. in automatic relegation. But relegation to the Second Bundesliga can also result from lack of sporting success. The effects of relegation on earnings and liquidity could jeopardise the Company's existence. In order to minimise the risk of relegation, Borussia Dortmund has strengthened the professional squad significantly for the 2007/2008 season and therefore at the same time substantially improved the chances of qualifying for international competitions in the following season. 128

131 GROUP MANAGEMENT REPORT THE RISK SITUATION IN SUMMARY Borussia Dortmund takes appropriate measures to counteract the risks it faces. New risks are systematically incorporated in the risk management system as they arise, communicated and highlighted, and a search is made for effective countermeasures. At the present time, there are no recognisable risks that could endanger the continued existence of the Borussia Dortmund Group. Borussia Dortmund has succeeded in minimising risks which could adversely impact its development or jeopardise its existence. The fact that we are not involved in competitions on an international level is no longer a threat to Borussia Dortmund's existence. If we succeed in qualifying for the UEFA Cup or the Champions League, our financial condition and results of operations will improve even further. FORECAST REPORT ANTICIPATED DEVELOPMENT OF THE COMPANY After having completed the restructuring of the liabilities of Borussia Dortmund GmbH & Co. KGaA and the selective strengthening of its professional squad, Borussia Dortmund should once again be in a position in the medium term to compete for one of the first five places on the Bundesliga table. We will continue on the course we have set for ourselves on a solid equity base and without exposing ourselves to financial risks, so that BVB will once more become a leading football club in Germany and preferably also in Europe. EXPECTED GENERAL ECONOMIC ENVIRONMENT Professional football in Germany is booming as never before. The Bundesliga's unfailing popularity with the fans and the resulting interest of media companies and sponsors has also made it a commercial success story. Since the formation of the League Association (Ligaverband) in 2000, the clubs and corporations of professional football have not been able to produce any figures as good as those in the past football season. And this although the increase in TV revenues is not yet included in the present figures because the media con- tracts only entered into effect in July As the KirchGruppe had been the chief source of money for the clubs, its insolvency presented them with a major challenge. Now, five years down the line, the league is in a better position than ever before. Professional football has emerged all the stronger from the crisis in the television and advertising markets. Tough cutbacks on the one hand, and a long-term approach to management with a readiness to invest in the future on the other, are starting to pay off. 129

132 Borussia Dortmund EXPECTED RESULTS OF OPERATIONS ANTICIPATED EARNINGS DEVELOPMENT UEFA Champions League, or possible income from transfers, could result in a significantly higher revenue figure than this. We anticipate that, including all the control and profit and loss transfer agreements, positive consolidated earnings (EBIT) will be generated for the 2007/2008 ANTICIPATED DEVELOPMENT OF SIGNIFICANT OPERATING EXPENSES season. With the exception of expenditure on the professional squad, operating expenses will continue to decline in the 2007/2008 financial year. EXPECTED DIVIDENDS The amount of the operating profit cannot be forecasted reliably on the basis of the information currently available, because earnings depend to a large degree on the sporting performance and on successful transactions in the transfer market. ANTICIPATED DEVELOPMENT OF REVENUES Against the background of the Group's financial liabilities, which are still high in relation to current profitability, we are not planning any dividend distributions in the next few financial years despite a marked Revenues are expected to amount to between around EUR 87 million and EUR 90 million in the 2007/2008 financial year. Qualification for the UEFA Cup or the improvement in earnings. We expect that it will be possible to discuss a dividend payment at the earliest in 3 4 years' time. EXPECTED FINANCIAL CONDITION FINANCIAL PLANNING CAPITAL EXPENDITURE PLANNING As a result of the improved earnings situation and the debt restructuring, which also includes, in particular, long-term financing of the stadium shares, we will again achieve a further substantial reduction in our liabilities. This will be implemented, in particular, through the repayment in instalments of the longterm stadium financing as from the 2007/2008 financial year, while the amount of the other liabilities in the context of our operating activities will be relatively unchanged. Our future investment activities will be focussed on the professional squad, further modernisation of SIGNAL IDUNA PARK and its environs and the construction of the Borusseum in the north-east corner of SIGNAL IDUNA PARK. The conversion of the August Lenz building into a merchandising shop and catering operation, and the construction of the Conference Center in the North Stand, on the other hand, were completed in the past financial year. 130

133 GROUP MANAGEMENT REPORT Thus we will concentrate on the core business of Borussia Dortmund and, in so doing, will not be taking any financial risks which cannot be calculated in advance. In essence, this means that we will only be incurring capital expenditure to the extent permitted by the anticipated financial leeway. In pre - paring the capital expenditure budget, we will therefore not include any uncertain sporting successes which, if they failed to materialise, would result in new indebtedness. ANTICIPATED DEVELOPMENT OF LIQUIDITY Following the implementation of the capital increases, the further reduction in debt consequent thereto and the improvement in earnings, we will as from the 2007/2008 financial year be in a position to generate substantial financial surpluses, which will significantly improve Borussia Dortmund's room for manoeuvre and its competitiveness. OPPORTUNITIES Borussia Dortmund's greatest opportunities lie in unlocking and exploiting additional revenue potential by participating in international competitions, such as the UEFA Cup and the UEFA Champions League. Participation in the UEFA Cup group phase alone would result in additional revenues of around EUR 5 million, generated through extra TV, ticketing and sponsorship revenues. According to our estimations, we would be guaranteed at least EUR 10 million in additional sales if we were to reach the group phase of the UEFA Champions League. In addition, an international presence would almost certainly have a positive impact on the merchandising business. Participation in the national cup competitions, the DFB Cup and the DFL League Cup, represents further significant earnings potential. However, the financial benefits also depend, to a large extent, on which teams we are drawn against. Borussia Dortmund's professional squad, which includes a large number of young and talented players, has enormous potential. These players will be able in the future to lead BVB back to the top of the table in Germany, and possibly even further. In addition to the sporting success we are striving for, this team will enable us to achieve a significant improvement in profitability and offers tremendous transfer potential for the future. DEVELOPMENT FORECAST IN SUMMARY Since the completion of the restructuring focusing on the buyback of the stadium shares, Borussia Dortmund is once again in a position to make investments in the professional squad, which will significantly improve the quality of the team. The contracts with the professional players Marc Ziegler, Robert Kovac, Mladen Petric, Giovanni Federico, Diego Klimowicz and Jakub Kuba Blaszczykowski demonstrate the point impressively. In our future development, we will not enter into any further financial risks that could jeopardise the existence of Borussia Dortmund. Generating financial surpluses will be a prerequisite for further investments in the professional squad. We are convinced that this is the right way to establish Borussia Dort - mund in the medium term as one of the leading clubs in the Bundesliga. 131

134 Borussia Dortmund SUPPLEMENTARY REPORT BVB was standing on the precipice: following the 27 th round, the six-time German football champion which had had to leave football's upper echelon for the first time in 1972 for a period of four years had even slipped to a relegation position. Diego Klimowicz (2) and Mladen Petric. The draw for the 2nd main round of the DFB Cup on 12 August 2007 provided Borussia Dortmund with an attractive opponent in the form of Eintracht Frankfurt, also a Bundesliga club. The match is expected to be played on 30 or 31 October 2007 at SIGNAL IDUNA PARK. During the troubled times, the meaning of solidarity by the people of Dortmund with their flagship Borussia became clear. The We are Borussia initiative launched by the BVB fan department resulted in a unique closing of the ranks between Dort - mund's citizens, companies and public authorities and the whole region. After outstanding performances during the run-up to the 2007/2008 Bundesliga season, Borussia Dortmund began with a false start by losing 1:3 to the newly promoted MSV Duisburg on 12 August 2007 in front of 75,700 spectators at SIGNAL IDUNA PARK. Ishiaku (2) and Tararache were the The high level of enthusiasm and excitement in anticipation of the new 2007/2008 season is demonstrated by the 50,549 season tickets sold, a new goalscorers for the Zebras and Kringe for BVB. It was the first win for MSV at Strobelallee for 35 years and only the second ever. Bundesliga record. From the sporting point of view, things are looking distinctly encouraging. With six new players, Thomas Doll's team is in a better position both in terms of numbers and of quality than in the previous season. On 6 July 2007, the Bundesrat approved the act implementing the reform of corporate taxation in As a consequence, the future effects of the reform were not yet required to be reflected in the consolidated balance sheet prepared as of 30 June We have succeeded in giving the squad more depth, and the sense of competition within the team has increased, concluded sport director Michael Zorc. Head coach Thomas Doll is also convinced that this will result in an ability to produce better performances and more attractive football. The reform of corporate taxation included substantial cuts in the rates of both trade tax and corporation tax. While the act results in a net reduction in the tax burden on companies intended by the legislature, it will also give rise to some extra tax payments as a result of broadening the basis of assessment to One week before the start of the 2007/2008 taxation. Bundesliga season, Borussia Dortmund has already given a positive sign of its sporting potential. In the DFB Cup, coach Thomas Doll's team achieved a 4:1 victory over 1. FC Magdeburg. In addition to Ebi Smolarek, goals were also scored by new signings An initial analysis of the future effects of the reform of corporate taxation on the BVB Group did not reveal any indications of particular tax risks in future as a result of the reform. 132

135 GROUP MANAGEMENT REPORT OTHER DISCLOSURES REPORT IN ACCORDANCE WITH 315 (4) HGB The Company gives the following information in response to the requirements of 315 (4) Nos. 1 to 9 HGB: 1. The share capital of Borussia Dortmund GmbH & Co. KGaA amounts to EUR 61,425, and is divided into 61,425,000 no-par value ordinary bearer shares. All of the shares have been admitted to trading on the Official Market (General Standard) of the Frankfurt Stock Exchange and in the over-the-counter markets (Regulated Unofficial Markets) in Berlin-Bremen, Stuttgart, Munich, Hamburg and Düsseldorf. Each no-par value share entitles the holder to one vote at the General Shareholders' Meeting. The Company therefore has only one class of shares and all shares carry the same rights and obligations. Additional rights and responsibilities attaching to the Company's shares are determined in accordance with the German Stock Corporation Act (Aktiengesetz, AktG ). 5. There is no control of voting rights in cases where employees are shareholders. 6. Because of its legal form as a partnership limited by shares, Borussia Dortmund GmbH & Co. KGaA does not have a management board. Instead, the Company's management and representation is the responsibility of the general partner. The terms of 6 No. 1 of the Articles of Association provide that this executive body of the Company is Borussia Dortmund Geschäftsführungs-GmbH, whose registered office is in Dortmund, on a permanent basis and not for a limited period of time, by virtue of its status as a shareholder. The appointment and removal of managing directors of Borussia Dort - mund Geschäftsführungs-GmbH is governed by 8 No. 6 of its shareholders' agreement and is the responsibility of the Executive Committee of its Advisory Board, and therefore not of the Supervisory Board of Borussia Dortmund GmbH & Co. KGaA. 2. There are no restrictions affecting the voting rights or transfer of the shares. 3. As of 30 June 2007, the Company had been notified of the following interests in the share capital of Borussia Dortmund GmbH & Co. KGaA in excess of 10% of the voting rights: - Morgan Stanley International Limited: 16,25% - Absolute Capital Management Holdings Limited: 13,04% - BlueBay Asset Management: 17, 09% 4. There are no shares with special rights which confer powers of control. In principle, changes may be made to the Articles of Association of Borussia Dortmund GmbH & Co. KGaA only by a resolution of its General Shareholders' Meeting, which must be passed, in accordance with 133 (1) AktG, by a simple majority of votes and also, in accordance with 15 No. 3 of the Articles of Association of the Company together with 179 (1) and (2) AktG, by a simple majority of the capital represented at the passing of the resolution, except to the extent that there are mandatory statutory provisions to the contrary or the Articles of Association provide otherwise. It is a mandatory provision of statute that a resolution of 133

136 Borussia Dortmund the General Shareholders' Meeting passed by a majority of three-quarters of the share capital re - presented at the passing of the resolution is required for changes to the Articles of Association relating to authorised, with the approval of the Supervisory Board, to disapply the statutory subscription right of the limited liability shareholders in certain circumstances. the objects of the Company ( 179 (2) sentence 2 AktG), the issuance of non-voting preferred shares ( 182 (1) sentence 2 AktG), capital increases where subscription rights have been disapplied ( 186 (3) AktG), the creation of conditional capital ( 193 (1) AktG), the creation of authorised capital ( 202 (2) AktG) where appropriate with authorisation to disapply subscription rights ( 203 (2) sentence 2 together with 186 (3) AktG), the ordinary or simplified reduction of capital ( 222 (1) sentence 2 and/or 229 (3) AktG) or a change of legal form ( 233 (2) and/or 240 (1) German Reorganisation Act (Umwandlungsgesetz, UmwG )). In addition, capital increases, other changes to the Articles of Association and other decisions of a fundamental nature may only be resolved with the approval of the general partner, in accordance with 285 (2) sentence 1 AktG. The Supervisory Board is authorised in accordance with 12 No. 5 of the Articles of Association to resolve changes to the Articles of In addition, by a resolution of the General Shareholders' Meeting held on 22 November 2005, the share capital of Borussia Dortmund GmbH & Co. KGaA has been conditionally increased by up to EUR 14,625, by the issue of up to 14,625,000 new no-par value ordinary bearer shares. The general partner is authorised until 31 October 2010, with the approval of the Supervisory Board, to issue bearer bonds with warrants and/or convertible bonds with a total nominal amount of up to EUR 40,000, and a maximum maturity of 25 years on one or more occasions. The holders of bonds with warrants may be granted rights to subscribe for, and the holders of convertible bonds may be granted rights to convert into, a total of up to 14,625,000 new no-par value ordinary bearer shares of the Company in accordance with the detailed terms and conditions of the bonds with warrants and/or convertible bonds. Association which relate only to their wording, in particular in connection with the amount of capital increases out of authorised and conditional capital. In the event of a takeover offer for shares issued by the Company and admitted to trading on an organised market, general statutory responsibilities 7. In accordance with 5 No. 4 of the Articles of Association of Borussia Dortmund GmbH & Co. KGaA, the general partner is authorised until 31 July 2011, with the approval of the Supervisory Board, to increase the share capital by the issue of up to 21,937,500 new no-par value ordinary bearer shares against cash or non-cash contributions on one or more occasions, but by a maximum of EUR 21,937, in total (Authorised Capital 2006). In all cases, the new shares participate in profits from the beginning of the financial year in which they are issued. The general partner is further and powers also apply to the general partner. For example, if a takeover offer were to be received, the general partner and the Supervisory Board would be required to issue and publish a response to the offer, giving their reasons, in accordance with 27 of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG ), so that the limited liability shareholders can make a decision on the offer on an informed basis. Moreover, in accordance with 33 WpÜG, once a takeover offer has been announced, the general partner may not take any 134

137 GROUP MANAGEMENT REPORT actions outside the ordinary course of business which could frustrate the success of the offer, unless those actions have been authorised by the General Shareholders' Meeting, or the Supervisory Board has given its approval to the actions or the actions relate to obtaining a competing offer. In making their decisions, the general partner and the Supervisory Board are bound to have regard to the interests of the Company, its employees and its shareholders. At the balance sheet date, there were no provisions of the Articles of Association within the meaning of 33a 33c WpÜG (European prohibition on frustrating action, European breakthrough rule, reservation of reciprocity). 8. The Company is not a party to any material agreements which are conditional on a change of control following a takeover offer for the issued shares of Borussia Dortmund GmbH & Co. KGaA. 9. The Company is not a party to any compensation agreements applying in the event of a takeover offer. STATEMENT OF THE GENERAL PARTNER CONCERNING RELATIONS WITH AFFILIATED COMPANIES The Dependent Company Report prepared by Borussia Dortmund GmbH & Co. KGaA pursuant to 312 AktG sets out the relations with BV. Borussia 09 e.v. Dortmund as the controlling entity and its affiliated companies. The general partner represented by its Managing Directors issued the following concluding statement: that was in each case reasonable under the circumstances known to us at the time such transactions were entered into. In all other cases, the Company has been compensated for any disadvantages having arisen. No other measures within the meaning of 312 (1) AktG were taken or omitted during the financial year. With respect to the transactions set out in the report concerning relations with affiliated companies, the Company received consideration in the financial year Dortmund, 15 August 2007 Borussia Dortmund GmbH & Co. KGaA Borussia Dortmund Geschäftsführungs- GmbH Hans-Joachim Watzke Managing Director (Chairman) Thomas Treß Managing Director 135

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139 BVB Ticketing 137

140 SIGNAL IDUNA PARK & TICKETING Record figures in Germany's largest stadium With an average of 79,647 people attending the 17 Bundesliga home matches, Borussia Dortmund set a European record for this millennium in the 2003/2004 season. In the last season, BVB's appeal had reached an average of 72,164 viewers per match, which still represents the top place on a domestic level, and third position internationally behind Real Madrid and Manchester United. BVB always creates headlines with its attendance figures. Since 1998, the club has broken the magic threshold of one million or more visitors per Bundesliga season each year. For almost 20 years, the football Bundesliga 79,030 viewers attended the home match on 14 September 2007 live in SIGNAL IDUNA PARK. BVB defeated Werder Bremen 3:0. has recorded a constant increase in attendance figures, fluctuating only due to changing stadium capacities as a result of relegated and promoted teams or stadium conversions. Average attendance figures doubled from 17,631 in the 1988/89 season to 37,644 last season. Yet while the league can point to an increase of 113 percent, the increase in interest in Borussia Dortmund has been disproportionately high, growing from 29,176 visitors to (most recently) 72,164 cially as the last major domestic and international successes of the club at the end of the last millennium and the beginning of the current millennium have since faded slightly. What has remained, however, is the great interest by the fans in also actually attending the club's matches. visitors per home match. The strong interest in BVB is a deep rooted process and not attributable to trends, espe- When, during the first years of its membership of the football Bundesliga founded in 1963, BVB played its matches in the time honoured Red Earth stadium a stadium without any flair or comfort average attendance An analysis by the magazine Computer-Bild found out ordering tickets from BVB on the Internet is exemplary. Grade: B+, second place in the Bundesliga. was approximately parallel to that of the league (see chart). Interest in BVB exploded with the building of the Westfalenstadion, which has been called SIGNAL IDUNA PARK since December Even in the second division, the stadium built for the 1974 World Cup was often sold out, and following the club's return to the top 138

141 BVB Ticketing Long queues form before the counters of the BVB office when ticket presales open for the next game. flight in the 1976/77 season, interest remained disproportionately high. Since then, BVB's average attendance has continually been higher than that of the league. The curve declined only in the very meagre years at the beginning of the 1980s, but again surged upwards no later than upon winning the DFB Cup in With the stadium's expansion (from 1992 to the beginning of 1996, capacity was only 42,800 seats) over three stages to a level of 83,000 (currently 80,708 seats), the fans' interest in enjoying the unique atmosphere in the Strobelallee football temple with their own eyes also increased. Year for year, BVB sells between 45,000 and 50,000 season tickets more than any other club. With exactly 50,549 season tickets sold, sales for the current season were stopped at midnight on 31 July in order to be able to continue to offer a sufficient number of day tickets. Today there are already waiting lists for season tickets for the coming season. The enthusiasm is centred in the southern stand, Europe's largest standing place area with capacity for 24,454 fans. Even before the kick-off for the first game, tickets for the rest of the season had been sold out. Attendance figures compared to league average. Liga BVB 139