Annual report mobilezone holding

Transcription

1 Annual report mobilezone holding ag 2003

2 Credits Copy: mobilezone holding ag Editing: Matthias Mächler, Zürich Design: AfIT, Buergi & Partner, Oberglatt ZH Photos: Marcel Studer, Zürich; Archives mobilezone Printing: Printing Press Horisberger, Regensdorf ZH Data: Current press and publications information is available on the Web at Link mobilezone holding ag This annual report is also available in German. To order the printed version or download the pdf-file:

3 mobilezone holding ag Financial report 2003 Group financial statements Consolidated income statement 26 Consolidated balance sheet 27 Consolidated cash flow statement 28 Consolidated statement of changes in equity 29 Notes to the consolidated financial statements 30 Report of the Group Auditors 53 mobilezone holding ag financial statements Income statement 54 Balance sheet 55 Notes to the financial statements 56 Proposal by the Board of Directors 58 Report of the Statutory Auditors 59 Annual report 2003 mobilezone holding ag 25

4 mobilezone Group Consolidated income statement for the years ended December Notes Total Group Continuing Discontinuing operations operations Revenues 344, , , ,929 74,905 98,751 Sales deductions including VAT 28,371 28,878 20,116 16,831 8,255 12,047 Net sales 1 316, , , ,098 66,650 86,704 Other operating income 1,672 1,555 1, Cost of materials and merchandise 249, , , ,438 57,265 71,985 Personnel costs 2 31,171 36,464 23,355 23,979 7,816 12,485 Other operating costs 3 16,204 18,823 11,199 11,473 5,005 7,350 Operating profit before depreciation & amortization (EBITDA) 21,709 11,647 24,690 15,993 2,981 4,346 Depreciation of property, plant & equipment 7 3,611 3,150 3,022 2, Amortization of intangible assets 9 1, , Impairment of intangible assets , ,127 Net result from termination of activities Operating profit before interest & tax (EBIT) 16,994 19,348 20,522 12,962 3,528 32,310 Share of the result of associated companies Other financial expenses 5 1,544 2, ,356 Other financial income Profit/loss before income taxes 15,959 21,074 20,052 12,591 4,093 33,665 Income tax expense 6 4,826 3,341 4,826 3, Net profit/loss for the year 11,133 24,415 15,226 9,250 4,093 33,665 (in CHF) (in CHF) Earnings/loss per share Earnings/loss per share diluted Annual report 2003 mobilezone holding ag

5 mobilezone Group Consolidated balance sheet as of December Notes ASSETS Land and buildings 7 0 4,843 Other property, plant & equipment 7 6,004 9,429 Investments in associated companies Intangible assets 9 2,981 2,100 Other financial assets ,183 Non-current assets 9,640 18,013 Inventories 11 22,641 24,746 Trade accounts receivable 12 32,044 28,864 Other accounts receivable 13 6,335 7,843 Cash & cash equivalents 14 11,941 11,173 Current assets 72,961 72,626 Total assets 82,601 90,639 LIABILITIES AND SHAREHOLDERS EQUITY Share capital 15 3,560 3,560 Additional paid-in capital (Share premium) 21,317 21,317 Retained earnings/accumulated deficits 3,392 7,716 Shareholders equity 28,269 17,161 Bank loans ,767 Shareholder loans ,000 Financial lease liabilities ,200 Deferred tax liabilities 6 2,297 1,938 Advances received 936 1,599 Provisions Non-current liabilities 3,953 19,333 Bank loans ,463 Finance lease liabilities Trade accounts payable 40,587 44,495 Current tax liabilities 4, Other current liabilities 18 5,625 5,238 Current liabilities 50,379 54,145 Total liabilities and shareholders equity 82,601 90,639 Annual report 2003 mobilezone holding ag 27

6 mobilezone Group Consolidated cash flow statement for the years ended December Notes Profit/loss before income tax 15,959 21,074 Interest income and expenses, net 679 1,757 Depreciation & amortization (incl. impairment) 7, 9 4,763 30,995 Gain on sale of property, plant & equipment Changes in provisions, net Changes in allowances, net 1, Other net expenses not involving the movement of funds ,675 12,057 Changes in trade accounts receivable 2,599 2,228 other accounts receivable 1, inventories 3,353 4,006 trade accounts payable 1,627 5,247 other current liabilities 2, Income taxes paid 1,164 1,943 Net cash provided by operating activities 17,885 10,162 Acquisitions of property, plant & equipment 7 3,126 4,131 intangible assets 9 2,108 1,897 other financial assets 0 1,111 Proceeds from disposals of property, plant & equipment investments in associated companies intangible assets other financial assets 11 0 Cash flow relating to acquisitions and disposals of subsidiaries 1 1,530 10,273 Interest received Net cash used in investing activities 6,246 17,215 Repayment of bank loans 3,480 6,206 Change in shareholder loans 16 7,000 2,000 Change in other interest-bearing liabilities Interest paid 541 1,317 Issuance of new shares 0 7,629 Net cash (used in)/provided by financing activities 11,083 1,991 Translation adjustments on cash & cash equivalents Net increase/(decrease) in cash & cash equivalents 768 5,368 Cash & cash equivalents at January 1 11,173 16,541 Cash & cash equivalents at December ,941 11,173 1 Details on assets and liabilities acquired and disposed of in 2003 are disclosed in the Notes under Changes in the scope of consolidation on page Annual report 2003 mobilezone holding ag

7 mobilezone Group Consolidated statement of changes in equity Movements of shareholders equity Share Additional Retained Cumulative Total capital paid-in earnings/ translation capital accumulated adjustment deficits At 31/12/2001 3,350 13,898 16, ,997 Capital increase from authorized capital 210 7,419 7,629 Net loss 24,415 24,415 Translation adjustments At 31/12/2002 3,560 21,317 7, ,161 Net profit 11,133 11,133 Translation adjustments At 31/12/2003 3,560 21,317 3, ,269 The line item Retained earnings/accumulated deficits includes legally restricted reserves in the amount of CHF 2,198,000 (2002: CHF 2,138,000) which are not available for distribution. Such legal reserves are established based on the legal requirements of the Swiss Code of Obligations. As of April 12, 2002, the share capital was increased by 2,100,000 bearer shares issued from the authorized capital at CHF 4.05 per share. An investment bank placed these shares in the market. The related transaction costs of CHF 876,000 were deducted from additional paid-in capital. Additional information on the share capital and shareholder structure is given in Note15. Annual report 2003 mobilezone holding ag 29

8 mobilezone Group Notes to the consolidated financial statements Segment information Consolidated income statement mobilezone Group Trading Fixed line Discontinuing Other/ telecommunication operations eliminations Revenues 344, ,680 Sales deductions including VAT 28,371 28,878 Net sales 316, ,802 Other operating income 1,672 1,555 Cost of materials and merchandise 249, ,423 Personnel costs 31,171 36,464 Other operating costs 16,204 18,823 Operating profit before depreciation & amortization (EBITDA) 21,709 11,647 Depreciation of property, plant & equipment 3,611 3,150 Amortization of intangible assets 1, Impairment of intangible assets 0 27,127 Net result from termination of activities 48 0 Operating profit before interest & tax (EBIT) 16,994 19, , ,632 16,453 9,422 74,905 98, ,687 15,941 1, ,255 12, , ,691 15,024 8,532 66,650 86, ,069 1, , ,669 11,118 6,769 57,265 71, ,020 23, ,816 12, ,914 9,823 1,186 1,087 5,005 7, ,363 16,643 2, ,981 4, ,215 3,010 2, , , ,328 13,620 2, ,528 32, ,215 Consolidated balance sheet mobilezone Group Trading Fixed line Discontinuing Other/ telecommunication operations eliminations Non-current assets 9,640 18,013 Current assets 72,961 72,626 Total assets 82,601 90,639 7,802 7, , ,558 65,844 58,134 4,296 2,912 3,717 14, ,839 73,646 65,883 5,018 3,404 4,288 22, ,281 Liabilities 54,332 73,478 47,863 42,063 2,980 3,068 4,033 31, ,242 Net assets 28,269 17,161 25,783 23,820 2, , ,961 Investments in non-current assets 5,234 7,139 4,439 3, , ,100 The segment Trading comprises mobilezone ag and Europea Trade AG (since 1/1/2003). The segment Fixed line telecommunication comprises solely globalzone AG. Except for Europea Trade AG, the segment operations are limited to their respective markets. In 2003 gross sales of Europea Trade AG came to CHF 17.4 million in the EU and CHF 3.2 million in the Far and Middle East markets. The segment Discontinuing operations comprises Otto Boenicke GmbH & Co. and Otto Boenicke Vertriebsgesellschaft mbh (both until 30/6/2003) as well as Tebbe Harms Kleen GmbH & Co. KG, Kleen Vertriebs GmbH & Co. KG and Kleen Handels GmbH. 30 Annual report 2003 mobilezone holding ag Annual report 2003 mobilezone holding ag 31

9 mobilezone Group General mobilezone Group is a retailer. Business activity was started in May By now there are 92 mobilezone telecom shops in Switzerland. Europea Trade AG operates in the wholesale of mobiles and equipment/accessory mainly as supplier of mobilezone ag. globalzone ag, a so-called switchless retailer, offers its customers fixed line telecommunication. Jamba! AG (Schweiz), a joint venture with the German Jamba! AG, formed in October 2001 and included in the consolidated financial statements according to the equity method, operates an internet portal for mobile phones. Tebbe Harms Kleen GmbH & Co. KG operates 29 locations selling tobacco goods, magazines and newspapers and gifts in Germany. The parent company is mobilezone holding ag, Riedthofstrasse 124, 8105 Regensdorf/ Switzerland. The Company is listed on the Swiss Exchange (SWX). The consolidated financial statements have been prepared on a historical cost basis in accordance with the International Financial Reporting Standards (IFRS) and are in accordance with Swiss law. The reporting currency is Swiss francs (CHF). The significant accounting policies are set out below. Changes in the scope of consolidation The scope of consolidation is set out in Note 4 to the financial statements of mobilezone holding ag on page 56. In the year under review the scope of consolidation was extended as per 1/1/2003 by the acquisitions of Europea Trade AG and Premium Time AG, which subsequently merged, and reduced by the discontinuation of Otto Boenicke GmbH & Co. and Otto Boenicke Vertriebsgesellschaft mbh as per 1/7/2003. As per 1/6/2003 Kleen Handels GmbH was acquired for CHF 0.05 million. The effects on the consolidated balance sheet and income statement of the latter acquisition are immaterial. In the fiscal year 2003 Europea Trade AG made gross sales with third parties of CHF 27.5 million and a loss of CHF 0.2 million. The purchase price was CHF 2.0 million and correlated with the fair value of the net assets acquired. As of 1/1/2003 assets and liabilities acquired consisted of: Cash & cash equivalents CHF 0.5 mn Trade accounts receivable CHF 1.7 mn Other accounts receivable CHF 0.7 mn Trade accounts payable CHF 0.9 mn Total net assets acquired (purchase price) CHF 2.0 mn./.cash & cash equivalents acquired CHF 0.5 mn Payment in advance made in 2002 CHF 1.1 mn Net cash used in acquisition activities in 2003 CHF 0.4 mn 32 Annual report 2003 mobilezone holding ag

10 Notes to the consolidated financial statements The two Boenicke companies, for which provisional insolvency proceedings were initiated on August 6, 2003, generated in the first half of the reporting period gross sales with third parties of CHF 22.3 million and a loss of CHF 3.9 million. At the time of the de-consolidation, as per 1/7/2003, the carrying amounts of assets and liabilities amounted to the following: Cash & cash equivalents CHF 1.1 mn Other current assets CHF 7.3 mn Non-current assets CHF 8.0 mn Bank and other interest-bearing liabilities CHF 8.6 mn Finance lease liabilities CHF 6.8 mn Total net assets (excluding Group loans) CHF 1.0 mn Translation adjustments CHF 0.3 mn Loss on de-consolidation CHF 1.3 mn Net cash outflow from de-consolidation (cash & cash equivalents derecognized) CHF 1.1 mn Discontinuing operations On August 6, 2003, provisional insolvency proceedings were initiated for the two Group companies Otto Boenicke GmbH & Co. and Otto Boenicke Vertriebsgesellschaft mbh.together with the companies of the Kleen Group the aforementioned companies comprised the segment mobilezone Germany. On January 20, 2004, mobilezone informed in a press release about negotiations of the disposal of the Kleen Group and the decision to discontinue its business operations in Germany. Accordingly this segment is presented as a discontinuing operation. The result of the discontinuing operation is disclosed separately in the income statement. The related assets and liabilities are reported as part of segment information on pages 30/31. Cash flow from discontinuing operations Cash flow from operating activities 4,104 8,856 Cash flow from investing activities 412 2,171 Cash flow from financing activities with third parties 1,714 9,053 The de-consolidation of the insolvent Boenicke companies as per 1/7/2003 caused a loss of CHF 1.3 million included in the income statement under Net result from termination of activities. In addition the item contains a provision for litigation risks of CHF 0.5 million as well as income from a partial purchase price refund amounting to CHF 1.9 million.the net result did not have any income tax effect. Annual report 2003 mobilezone holding ag 33

11 mobilezone Group Significant accounting policies Principles of consolidation The consolidated financial statements of mobilezone include the financial statements of mobilezone holding ag and all the subsidiaries it controls directly or indirectly by majority of voting rights. Those entities are fully consolidated, whereby assets, liabilities, income and expenses are incorporated at 100% in the consolidated accounts. Investments and joint ventures,on which mobilezone exercises significant influence but no control,are recorded according to the equity method. For this purpose, the fair value of the share of net assets as of the date of acquisition is determined and recognized under investments in associated companies. Subsequently, this value is adjusted for the share of mobilezone in the profit or loss incurred. Significant positions and transactions with such investments and joint ventures are disclosed separately as items in respect of associated companies. Capital consolidation is based on the purchase method, whereby the acquisition cost of subsidiaries is eliminated at the time of acquisition against the fair value of net assets acquired, determined according to uniform corporate valuation principles. During the year under review, companies acquired or disposed of are consolidated at the date of acquisition and de-consolidated at the date of disposal. Any gain or loss on de-consolidation is recognized in the income statement. Accounts payable to, accounts receivable from, and income and expenses between the companies included in the scope of consolidation are eliminated. Intercompany profits within the Group are also eliminated upon consolidation. Discontinuing operations Income and expenses result from discontinuing operations are presented separately in the income statement. Foreign currency translation The consolidated financial statements are prepared in Swiss francs. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates prevailing at the balance sheet date.transactions in foreign currencies are recorded using exchange rates prevailing at the time of the transaction. Gains or losses arising from the settlement of these transactions are included in current year s income. Assets and liabilities of subsidiaries, which do not report in Swiss francs, are translated into Swiss francs for consolidation purposes at the exchange rate in effect at the balance sheet date.the income statement, cash flow statement and other movements are translated at the average rate of the reporting period. Currency translation differences resulting from the translation of the balance sheet and income statements of subsidiaries and from the translation of equity-like corporate loans denominated 34 Annual report 2003 mobilezone holding ag

12 Notes to the consolidated financial statements in foreign currencies are recognized directly in equity and presented separately as cumulative translation adjustment. Financial risk management and derivative financial instruments Approximately 70% of mobilezone s purchases for Switzerland are paid in Euro. Due to the short-term nature of payments and the high inventory turnover, the Group does not hedge any foreign currency risks on purchases. Accordingly, the Group did not hold or issue any derivative financial instruments during the year under review. Property, plant & equipment Property,plant & equipment are stated at historical cost less accumulated depreciation and impairment losses. Property, plant & equipment acquired by way of finance leases are stated at an amount equal to the lower of the present value of the minimum lease payments and their fair value. The corresponding finance lease liabilities are presented as a liability on the balance sheet. Depreciation is charged to the income statement on a straight-line basis over the following estimated useful lives of items of property, plant & equipment: Administration buildings Office equipment and furniture Shop equipment Vehicles 22 years 3 to 5 years 5 to 8 years 3to5 years Intangible assets Acquired rights such as contracts with clients, lessors, suppliers and similar rights that are generating a positive cash flow are capitalized and amortized over 5 years at maximum. Goodwill arising on an acquisition, determined as the difference between the purchase price and the fair value of the net assets acquired, is capitalized and amortized on a straight-line basis over its estimated useful life, but limited to 20 years at maximum. Impairment The carrying amounts of the Group s non-current assets, including goodwill and other intangible assets,are reviewed at each balance sheet date to determine whether there is any indication of impairment.if any such indication exists,the asset s recoverable amount is estimated.whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the income statement in that amount.the recoverable amount is the higher of the expected discounted cash flows and the estimated net selling price. Annual report 2003 mobilezone holding ag 35

13 mobilezone Group Inventories Inventories are stated at the lower of cost and net realizable value.the cost of inventories is calculated using the weighted average method. Goods with long storage periods and obsolete stocks are written down. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses. The proceeds from the sale of inventories normally comprise both the price for the mobile communication product and the commission due from the telecommunication provider for the introduction of a new subscriber. The price of the mobile communication product is determined based on whether the product is sold on a stand-alone basis or in conjunction with a subscription. Net realizable value therefore takes into account both components.in addition,the Company benefits from price protection arrangements with certain suppliers that are also considered in determining the need for any write-off. Trade and other accounts receivable Trade and other accounts receivable are stated at their nominal amounts less any valuation adjustments for credit risks. Cash & cash equivalents Cash & cash equivalents are stated at nominal value. They include cash on hand, postal and bank accounts, and money market deposits with original due dates of 3 months or less. Shareholder loans Shareholder loans bear interest at market rates. They are stated at nominal amounts that correspond to their amortized cost. Provisions A provision is recognized on the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provisions are determined based on the best possible estimate. If the effect is material, provisions are determined by discounting the expected future cash flow at the balance sheet date at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. Contingent liabilities are disclosed if the future obligation is possible but the amount cannot be reliably estimated. Leasing Leasing contracts are recognized when the significant risks and rewards of ownership are assumed by the Group. Leasing payments are divided according the annuity-method into interest and principal payments.leased assets are depreciated over the lower of the lease term and the estimated useful life. 36 Annual report 2003 mobilezone holding ag

14 Notes to the consolidated financial statements Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives are recognized in the income statement as an integral part of the total lease expense. Revenue-based and other contingent leases are accrued on an estimated basis. Retirement benefits No retirement benefit plan exists for the employees in Germany. The mobilezone Group s Swiss companies have established a retirement benefit plan for all its employees, which is maintained by Winterthur-Columna Stiftung für berufliche Vorsorge. The plan is funded by employees and employers' contributions and has certain characteristics of a defined benefit plan.the financial impact of this plan on the consolidated financial statements is determined based on the projected unit credit method. In accordance with IAS19 the difference between plan assets and defined benefit obligation is principally recognized as an asset or a liability on the consolidated balance sheet.however,a pension surplus is recognized as an asset only if the asset embodies future economic benefits that are actually available to the Group in the form of refunds or reductions in future contributions. Actuarial gains and losses arising from the periodical reassessments by external actuaries are recognized to the extent that they decrease or increase a pension deficit, if and to the extent that they exceed 10% of the higher of the projected benefit obligation and the fair value of plan assets.the amount exceeding this corridor is amortized over the expected average remaining working lives of the employees participating in the plan. Revenue The net sales include all revenues from the sale of goods and services,less rebates,discounts,vat and write-downs of trade accounts receivable. Revenue from sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. One-time commissions from providers are recognized at the time of the conclusion of the contract. The recurring airtime profit-sharing commissions are normally based on the subscribers monthly payments of phone bills to the providers. They are accrued and recognized in the income statement based on the respective revenues generated and communicated by the providers for a specific period. Income tax Current tax is determined on the taxable income for the year, and recognized in the income statement. Deferred tax is recognized using the balance sheet liability method, on any temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Deferred tax is calculated using tax rates enacted or substantially enacted at the balance sheet date and based on the expected manner of realization and settlement. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilized. Annual report 2003 mobilezone holding ag 37

15 mobilezone Group Notes to the consolidated income statement 1 Net sales Mobile communication products and related insurance services 128, ,434 One-time commissions from providers and recurring airtime profit-sharing commissions 122, ,844 Fixed line telecommunication revenues 14,876 8,410 Kiosk assortment 50,319 65,114 Total net sales 316, ,802 2 Personnel costs Wages and salaries 27,067 31,072 Social security costs 3,198 4,150 Pension costs Other employee benefit costs Total personnel costs 31,171 36,464 Number of employees at balance sheet date (based on full-time employment) Remuneration of directors The total remuneration of non-executive members of the Board of Directors amounted to CHF 175,000 in 2003 (2002: CHF 70,000). The total remuneration of executive members of the Board of Directors and to the members of the executive management amounted to CHF1,999,000 (2002:CHF1,596,000). No termination benefits were paid to any leaving or former members of the Board of Directors or executive management. Options In 2003 the existing option program for the members of the Board of Directors,the executive and upper management was replaced by a bonus agreement. In the years 2001 and 2002 the following options were granted according to the conditions set out below: Grant year Number 989,000 1,720,000 Expiry 15/4/ /11/2004 Exercise ratio 1:1 1:1 Exercise price CHF CHF Annual report 2003 mobilezone holding ag

16 Notes to the consolidated financial statements The allocated options vest over 1 to 3 years from grant date.as of today,no options from these programs were exercised. The issuance of the options, except for the social security contribution, is not recognized in the consolidated financial statements. The executive members of the Board of Directors,the executive and upper management and the related persons owned the following options as of December 31, 2003: Grant year Number 470, ,000 The non-executive members of the Board of Directors and the related persons owned the following options as of December 31, 2003: Grant year Number 240, ,800 Maximum remuneration The maximum remuneration of a member of the Board of Directors amounted to CHF 833,000 in 2003 (2002: CHF 734,000). In addition, in 2002 this member also received options with a value of CHF 50,840 (2003: none). Employee benefits The calculation of the Group s obligation in respect of the defined benefit plan in Switzerland in accordance with IAS 19 was performed as of December 31, 2003, and resulted in the following situation: Components of pension costs Current service costs 1, Interest costs Expected return on plan assets Pension cost, gross 1, Less employee s contributions Pension costs, net Annual report 2003 mobilezone holding ag 39

17 mobilezone Group Funded status and recognized asset/(liability) Present value of defined benefit obligation 6,432 4,801 Fair value of plan assets 5,947 4,821 (Excess of funded obligation over assets)/ excess of assets over funded obligation Unrecognized actuarial losses/gains, net Recognized pension asset/(liability) 0 0 Roll-forward of the amount recognized Pension asset/(liability) as of January Pension costs 1, Contributions 1, Unrecognized surplus/deficit Pension asset/(liability) as of December The following assumptions were applied: Discount rate 3.50% 4.00% Expected return on plan assets 3.25% 4.00% Future salary increases 0 1.5% 0 1.5% Future benefit increases 0% 0% Fluctuation rate up to 21.9% up to 21.6% Average remaining service years 7.7 years 16.9 years Number of insured employees at December Other operating costs Operating lease costs 9,090 11,074 Marketing costs 15,596 14,925 General and administrative costs 8,533 10,022 less: contributions received from third parties 17,015 17,198 Total other operating costs 16,204 18,823 Marketing costs are mostly, and operating lease costs to a lesser extent, borne by cost contributions and location contributions of business partners. 40 Annual report 2003 mobilezone holding ag

18 Notes to the consolidated financial statements 4 Net result from termination of activities Disposal of investments of Boenicke Group 1,322 0 Provision for litigation and warranty claims Partial purchase price refund 1,870 0 Total net result from discontinuing operations 48 0 The net results did not have any income tax effect. 5 Other financial expenses Interest on bank loans Other interest expenses 612 1,098 Bank commissions and foreign exchange losses Total other financial expense 1,544 2,017 6 Income tax expense Current income tax expense 4,501 2,830 Deferred income tax expense Total income tax expense 4,826 3,341 Current income tax expense solely relates to the profit of the respective accounting period. Deferred income tax expense solely relates to changes in temporary differences. Taxes on capital are included in Other operating costs. Annual report 2003 mobilezone holding ag 41

19 mobilezone Group Income tax expense can be analyzed as follows: (in CHF 000 or as indicated) Net profit/loss before income taxes 15,959 21,074 Average tax rate 21.4% 27,5% Expected income tax expense 3,409 5,795 Items that increase/reduce income tax expense Non-tax deductible expenses 136 6,582 Effect of previously unrecognized tax losses utilized Unrecognized tax loss carry-forwards on current losses 1,640 2,614 Other items Effective income tax expense 4,826 3,341 The Group disposes of a tax loss benefit of CHF 2,399,000 relating to tax loss carry-forwards (2002: CHF 4,527,000). As in the previous year, no deferred tax asset was recognized in respect of such tax benefit due to the uncertainty as to whether future taxable profit will be available against which the Group will be able to utilize such benefits. Tax losses expire in 2007 (CHF 466,000), 2008 (CHF 49,000), 2009 (CHF 1,761,000) and 2010 (CHF 38,000) respectively. The remaining tax losses of CHF 85,000 do not expire. Deferred tax liabilities Other property, plant & equipment 0 74 Intangible assets Inventories 1,788 1,423 Trade accounts receivable Provisions Total deferred tax liabilities 2,297 1, Annual report 2003 mobilezone holding ag

20 Notes to the consolidated financial statements Notes to the consolidated balance sheet 7 Property, plant & equipment Land Shop Other Total and equipment property, buildings plant & equipment Cost: At 31/12/ ,787 2,163 9,950 Additions 0 3, ,131 Disposals Changes in scope of consolidation 6,986 5,304 1,211 13,501 Translation adjustment At 31/12/2002 6,863 15,993 3,999 26,855 Additions 0 2, ,126 Disposals 0 1, ,525 Changes in scope of consolidation 7,288 5,211 1,764 14,263 Translation adjustment At 31/12/ ,670 2,505 14,175 Accumulated depreciation: At 31/12/ , ,175 Additions 120 2, ,150 Disposals Changes in scope of consolidation 1,934 3,835 1,054 6,823 Translation adjustment At 31/12/2002 2,020 7,899 2,664 12,583 Additions 0 2, ,611 Disposals 0 1, ,150 Changes in scope of consolidation 2,145 2,906 1,302 6,353 Translation adjustment At 31/12/ ,803 1,368 8,171 Carrying amount: At 31/12/2002 4,843 8,094 1,335 14,272 At 31/12/ ,867 1,137 6, Property, plant & equipment pledged as collateral 0 1,320 Fire insurance value of property, plant & equipment and inventories 31,882 41,112 Assets held under finance leases (land and buildings) 0 4,843 Annual report 2003 mobilezone holding ag 43

21 mobilezone Group 8 Investments in associated companies Share of equity in associated companies At 31/12/ Additions 0 Disposals 80 Share of results 41 At 31/12/ Share of results 125 At 31/12/ As per 31/12/2003, the 49.9% investment in Jamba! AG (Schweiz) is the only investment in an associated company. 9 Intangible assets Acquired Acquired Customer Total shop locations goodwill list Cost: At 31/12/2001 1,741 1, ,594 Additions ,529 1,897 Disposals Changes in scope of consolidation 0 27, ,170 At 31/12/2002 2,109 28,980 1,510 32,599 Additions 1, ,108 Disposals Changes in scope of consolidation Translation adjustment At 31/12/2003 3,471 28,980 2,143 34,594 Accumulated amortization: At 31/12/ , ,655 Additions , ,845 Disposals Changes in scope of consolidation At 31/12/2002 1,301 28, ,499 Additions ,152 Disposals Changes in scope of consolidation Translation adjustment At 31/12/2003 2,041 28, ,613 Carrying amount: At 31/12/ ,292 2,100 At 31/12/2003 1, ,551 2, Annual report 2003 mobilezone holding ag

22 Notes to the consolidated financial statements The goodwill from the acquisition of the German Boenicke Group in 2002 was entirely written off in the year of acquisition (impairment of CHF 27,127,000), due to the deteriorating market environment for retailers in Germany, which raised doubts regarding generation of positive results in the medium term. In August 2003 provisional insolvency proceedings were initiated for two entities of Boenicke Group. 10 Other financial assets Advance payments Rent deposits/ Total on acquisitions loans At 31/12/ Additions 1, ,111 Disposals/settlements At 31/12/2002 1, ,183 Additions Disposals/settlements 1, ,111 At 31/12/ The advance payments on acquisitions relate to the acquisition of Europea Trade AG and Premium Time AG, which were acquired at their net asset value as of 1/1/2003, and merged as of 1/1/2003 to form Europea Trade AG. 11 Inventories Inventories, gross 23,289 25,267 Valuation allowance Total inventories 22,641 24, Trade accounts receivable Accounts receivable from third parties 33,397 30,277 Accounts receivable from associated companies Valuation allowance 1,389 1,471 Total trade accounts receivable 32,044 28,864 Annual report 2003 mobilezone holding ag 45

23 mobilezone Group 13 Other accounts receivable Prepaid expenses and accrued income 5,676 5,728 Other accounts receivable 659 2,115 Total other accounts receivable 6,335 7, Cash & cash equivalents Cash on hand, at banks and on postal accounts 11,824 11,173 Fixed-term deposits Total cash & cash equivalents 11,941 11,173 Of cash & cash equivalents, CHF 304,000 (2002: CHF 381,000) are subject to restrictions. 15 Share capital and reserves Bearer shares CHF 0.01 CHF 0.10 par value par value Issued and fully paid-in at 31/12/2001 6,000 33,499,400 Issued for cash from authorized capital 2,100,000 Issued and fully paid-in at 31/12/2002 6,000 35,599,400 Capital increase for the purpose of pooling the bearer shares 6,000 2,544 Issued and fully paid-in at 31/12/ ,601,944 At the Annual General Meeting on April 29, 2004, the Board will propose a reduction of the par value of each bearer share from CHF 0.10 to CHF 0.01 by paying CHF 0.09 per share in cash instead of a dividend. The holders of all shares issued as of December 31, 2003, are equally entitled to dividends and voting rights at the meeting of shareholders. Details on the contingent and authorized capital are included in the Note 5 to the annual financial statements of mobilezone holding ag on page Annual report 2003 mobilezone holding ag

24 Notes to the consolidated financial statements Significant shareholders 31/12/ /12/2002 According to the disclosure requirements of the Swiss Exchange, the following shareholders control more than 5% of the voting rights: % % Hans-Ulrich Lehmann/Lehmann Holding AG Rudolf Baer/B + B Beratungs AG Martin Lehmann Asia Land Holding Corp., B.V. I STW Ltd., B.V. I Erich Traber Calculation of earnings/loss per share Consolidated net profit/loss for the year CHF 11,133,000 24,415,000 Weighted average number of shares outstanding Pieces 35,601,000 35,005,000 Earnings/loss per share basic CHF Consolidated net profit/loss for the year CHF 11,133,000 24,415,000 Weighted average number of outstanding and potential shares Pieces 35,869,000 35,005,000 Earnings/loss per share diluted CHF Annual report 2003 mobilezone holding ag 47

25 mobilezone Group 16 Interest-bearing liabilities Non-current: Bank loans (due within 1 5 years) 0 1,767 Shareholder loans (due within 1 5 years) 0 7,000 Finance lease liabilities 0 6,200 Current: Bank loans 0 3,463 Finance lease liabilities Total interest-bearing liabilities 0 18,554 Bank loans were primarily due in Euro. In 2003 the liabilities bore interest at an average rate of 5.7% (2002: 6.7%). The shareholder loans were due in Swiss francs and bore interest at 5.5%. The finance lease liabilities were denominated in Euro and related to the building of Boenicke in Holzkirchen (Germany). They bore interest at an average rate of 6.3% (2002: 6.3%). 48 Annual report 2003 mobilezone holding ag

26 Notes to the consolidated financial statements 17 Provisions TEGE Litigation and Total warranty claims At 31/12/ Additions Used Reversed Changes in scope of consolidation At 31/12/ Additions Used Reversed Transfers Changes in scope of consolidation Translation adjustments At 31/12/ After finalizing the liquidation of former foreign TEGE entities, the related provision was released to the extent of CHF 270,000. The increase in the provision for litigation and warranty claims of CHF 0.5 million relates to the expected claims in connection with the discontinuing operations. 18 Other current liabilities Accrued expenses and deferred income 3,559 1,733 Other current accounts payable 2,066 3,505 Total other current liabilities 5,625 5,238 Annual report 2003 mobilezone holding ag 49

27 mobilezone Group Other disclosures 19 Operating leases Future payments under non-cancelable operating leases as of balance sheet date will become due as follows: Less than one year 7,098 9,574 Between one and five years 15,010 21,994 More than five years 3,760 6,706 Total 25,868 38,274 The expected lease income from sub-lease arrangements amounts to CHF 433,000 (2002: CHF 1,483,000). As of December 31, 2003, mobilezone Group operated 121 shops of which all were leased. Leases typically have fixed terms between 3 and 5 years, with an option to renew for several years. During the year under review,chf 9,090,000 were recognized as an expense in the income statement in respect of operating leases (2002: CHF 11,074,000). These expenses included revenue-based rents in the amount of CHF 178,000 (2002: CHF 146,000). Index-linked lease payments amounted to CHF 4,362,000 (2002: CHF 6,304,000). 21 Contingent liabilities and similar commitments, capital commitments and restrictions of ownership As of December 31, 2003 and 2002, no items had to be reported under this heading. 21 Financial instruments The Group is, in its normal course of business, exposed to market risks from changes in interest rates and foreign currency exchange rates. The Group did not hold or issue any derivative financial instruments during the years under review. Credit risk The Group is also exposed to credit risks in the ordinary course of its operating activities. Due to industry practice most sales are paid in cash relatively few receivables are outstanding compared to total sales. There is a concentration of credit risk due to the facts that the mobile telecommunication providers are a limited number of enterprises regulated by law. Such risks are considered in the negotiation of relatively short payment terms. 50 Annual report 2003 mobilezone holding ag

28 Notes to the consolidated financial statements Foreign currency risk The Group s revenues are all denominated in local currency. Purchases of mobilezone Germany are denominated in Euro. As far as the purchases of mobilezone Switzerland are concerned, 70% are paid in Euro. The Group does not hedge any currency risk on purchases due to the short payment terms and the high inventory turnover. Interest rate risk No long-term financial liabilities or long-term fixed-interest-bearing investments existed as at December 31, Fair value of financial assets and liabilities The fair values of the Group s financial assets and liabilities approximate their carrying amounts. 22 Transactions with related parties The following are considered related parties to the Group: Autronic AG, Dübendorf B+ B Beratungs AG, Watt Europea Trade AG, Regensdorf (until 31/12/2002) Immoplaza AG, Regensdorf Morasol AG in liquidation (formerly best-buy ag; until 31/12/2003), Regensdorf Premium Time AG, Watt (until 31/12/2002) Rudolf Baer, Watt; Delegate of the Board of Directors and CEO; significant shareholder of mobilezone holding ag, Europea Trade AG (until 31/12/2002), Premium Time AG (until 31/12/2002), Morasol AG in liquidation and Immoplaza AG. Hans Ulrich Lehmann, Glattfelden; member of the Board of Directors; significant shareholder of mobilezone holding ag, Autronic AG, Morasol AG (in liquidation) and Immoplaza AG. As per January1, 2003, mobilezone holding ag acquired both Europea Trade AG and Premium Time AG. The purchase price was based on the net asset value of both entities as of December 31, As per January 1, 2003, the entities were merged to form the new Europea Trade AG. Business relationships with related parties Autronic AG is a distributor of Nokia and Samsung mobile phones in Switzerland.mobilezone purchases approximately 20% of its mobile phones from Autronic AG. Autronic AG has no exclusive delivery rights and the purchases are effected at arm s length. Mr. Rudolf Baer (CEO) is not on the Company s payroll. His management services are billed to mobilezone by B+B Beratungs AG. Annual report 2003 mobilezone holding ag 51

29 mobilezone Group Until the end of 2003, Morasol operated retail shops with an assortment of household and entertainment electronics in Switzerland. mobilezone used Morasol as an additional sales channel for mobile phone assortments at places where an own location would not be profitable. The deliveries were effected at arm s length. Morasol uses head-office services of mobilezone at the location in Regensdorf at full cost rates and therefore relieved the cost structure of mobilezone.in 2003,Morasol successively discontinued its operations. In order to benefit from better terms,mobilezone optimizes the purchases of mobile phones in the international market with purchases from and sales to Europea Trade AG. The conditions for these transactions are in accordance with the low margins that are usual in the trading business. In October 2001, the Swiss companies of mobilezone Group moved their offices to Immoplaza in Regensdorf. mobilezone benefits from special lease conditions in this related-party transaction. Until the end of 2002, Premium Time AG imported accessories for mobile devices on behalf of mobilezone Group. All transactions were conducted at arm s length. Transactions and balances with related parties Purchases of mobile phones from Autronic AG 40,575 44,500 Purchases of mobile phones and accessories from Europea Trade AG 10,124 Sales of mobile phones and accessories to Europea Trade AG 19,443 Purchases of accessories from Premium Time AG 1,983 Sales of mobile phones and accessories to Morasol AG 1,233 1,713 Purchases of goods and fixed assets from Morasol AG Income from head-office services provided to Morasol AG Management services provided by B+B Beratungs AG Operating lease expenses to Immoplaza AG Accounts payable to Autronic AG 5,608 2,640 Accounts receivable from Morasol AG Accounts payable to Europea Trade AG Post-balance-sheet events There have been no events that would require an adjustment to the consolidated financial statements or would need to be disclosed hereafter. The Board of Directors approved the consolidated financial statements for issue on March19, Annual report 2003 mobilezone holding ag

30 mobilezone Group Report of the Group Auditors Report of the Group Auditors to the General Meeting of mobilezone holding ag, Regensdorf As group auditors, we have audited the consolidated financial statements presented on pages 26 to 52 (balance sheet, income statement, statement of changes in equity, cash flow statement and notes) of mobilezone holding ag for the year ended December 31, These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the International Standards on Auditing (ISA), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law. We recommend that the consolidated financial statements submitted to you be approved. KPMG Fides Peat Fredy Luthiger Swiss Certified Accountant Auditor in Charge Markus Ackermann Swiss Certified Accountant Zurich, March 19, 2004 Annual report 2003 mobilezone holding ag 53

31 mobilezone holding ag Income statement January 1 to December Notes Income from investments 1 13,874 13,011 Financial income Releases of provisions Other income Total income 14,789 13,590 Administrative expenses 1, Financial expenses Losses on investments 2 3,732 34,431 Total expenses 5,212 36,162 Net profit/loss for the year 9,577 22, Annual report 2003 mobilezone holding ag

32 mobilezone holding ag Balance sheet before appropriation of available earnings as of December Notes ASSETS Cash & cash equivalents Accounts receivable from Group companies 1,024 1,856 Third parties Prepaid expenses and accrued income Current assets 1,636 2,306 Advance payment on acquisition 0 1,100 Investments 4 31,120 29,099 Non-current assets 31,120 30,199 Total assets 32,756 32,505 LIABILITIES AND SHAREHOLDERS EQUITY Current accounts payable to Third parties Group companies 782 3,147 Accrued expenses and deferred income Current liabilities 1,142 3,698 Provisions Shareholder loans 0 7,000 Non-current liabilities 720 7,490 Share capital 5 3,560 3,560 General reserves 38,544 38,544 Unrestricted reserves Accumulated deficits Balance brought forward 21,149 1,423 Net profit/loss for the year 9,577 22,572 Shareholders equity 30,894 21,317 Total liabilities and shareholders equity 32,756 32,505 Annual report 2003 mobilezone holding ag 55

33 mobilezone holding ag There are no further facts than disclosed hereafter that would require disclosure in accordance with Art. 663b of the Swiss Code of Obligations. 1 Income from investments This line item includes dividend and interest income relating to investments in subsidiaries and associates. 2 Losses on investments This line item mainly includes the write-off of investments and accounts receivable from Group entities recognized in the year under review. 3 Contingent liabilities 31/12/ /12/2002 Subordination letters issued in favor of subsidiaries Guarantees issued in favor of subsidiaries 1,040 3,149 Joint and several liabilities from VAT Group taxation p.m. p.m. 4 Scope of consolidation and significant investments in subsidiaries and associates Switzerland investment held paid-in capital consolidation (%) (1,000) mobilezone ag, Regensdorf CHF 2,850 C globalzone ag, Regensdorf CHF 100 C Europea Trade AG, Regensdorf CHF 100 C Jamba! AG (Schweiz), Regensdorf 49.9 CHF 1,000 E mobilezone international ag, Regensdorf CHF 200 C Germany Tebbe Harms Kleen GmbH & Co. KG, Hausham EUR 284 C 1 Kleen Vertriebs GmbH & Co. KG, Hausham EUR 176 C 2 Kleen Handels GmbH, Hausham EUR 25 C 2 C= Fully consolidated E = Included in the consolidated financial statements according to the equity method 1 Indirectly owned subsidiary of mobilezone holding ag (via Kleen Vertriebs GmbH) 2 Management company not engaged in operations 56 Annual report 2003 mobilezone holding ag