1999/2000 Mil. Euro March 01 KEUR Capital ratio - 0,4% 72,0% 55,2% Gearing*./. - 95,9% - 40,4% 31 March 99 KEUR

Transcription

1 Annual Report 2000 / 2001

2 P&I in Zahlen The P&I-Group in fiscal years: Key figures (IAS) 1998/1999 Mil. Euro 1999/2000 Mil. Euro 2000/2001 Mil. Euro Group sales EBITDA EBIT Consolidated results (DVFA/SG) Number of employees (average) Earnings per share (DVFA/SG)./. Euro Euro 0.01 HIGHLIGHTS Confirmation in results with profit of 1.07 Mil. Euro Turnaround reached Increasing of group sales at 51% overtake payroll system from IBM Establishment on an internet-portal under the name of LOGA-net Future market ASP backlog of orders at 6 Mil. Euro FINANCIAL & EARNINGS SITUATION, PRODUCTIVITY Key Figures DVFA/SG 31 March 99 KEUR 31 March 00 KEUR 31 March 01 KEUR Capital ratio - 0,4% 72,0% 55,2% Gearing*./. - 95,9% - 40,4% EBIT margin - 4,1% - 13,8% 3,9% Return on sales (RoS) - 5,1% - 10,0% 0% Total return on capital employed (RoCe) - 17,6% 10,6% 5,8% Total output per employee 111,1 89,1 124,4 EBIT per employee - 4,6-12,3 4,8 Development costs to sales** 18,0% 19,9% 17,0% * Balance sheet structure according to DVFA/SG ** Incl. activated costs of development for LOGA International

3 Contents Forward by the Board of Directors Investor Relations Summarised Situation Report 2000/2001 A. Outline of Business Developments 1. Development in the Industry Sector and Economy as a Whole 2. Development in Sales and Orders 3. Research and Development 4. Business Investment 5. Financing 6. Personnel 7. Important Events B. Outline of the Situation 1. Assets 2. Financial Situation 3. Special Outline of the Development and Situation of the Company Annual Financial Statements for 2000/2001 Consolidated Financial Statements according to IAS Balance Sheet Statement of Income Cash Flow Statement Analysis of Fixed Assets Analysis of Equity Notes Audit Certificate AG Financial Statements according to HGB Balance Sheet Statement of Income Cash Flow Statement Report from the Supervisory Board Glossary Financial Calendar, Contact Person & Addresses

4 Foreword by the Board of Directors On the right track again Dear Shareholders, Ladies and Gentlemen, the above caption could well summarise the 2000/2001 financial year. In the previous year, 1999/2000, P&I Personal & Informatik AG had to overcome two set backs at once: the slump in sales due to the millennium blockade and the additional costs of the stock exchange flotation. It is no wonder that operating results left something to be desired. It is also no wonder that this had a negative impact on share prices. But we have now put this behind us. As promised in the previous Annual Report, in the last financial year we again concentrated fully and exclusively on growth. Sales of licences rose by an appreciable 74% and income from maintenance doubled through the take up of IBM Payroll. We were able to keep costs under control. We remained firm and true to both our strategic corporate objectives of technological market leadership and the Europeanisation of software through the development of LOGA-net, the Internet payroll accounting system, and the acquisition of the first customers in the Czech Republic, the Netherlands and Austria. We remain convinced that it will soon be a must for all commercial software systems to be capable of cross-border deployment in Europe. This will become particularly important when the market recognises that a company s success depends ultimately on the quality of its staff. Improving this quality will be the challenge faced over the next few years. It is clear to everyone that this cannot be achieved with index cards. The solution here is EDP-based software systems such as P&I are developing already today. Employee integration will only be made possible using Internet technology. Accordingly, P&I s objective is to set up E2E business (Employer to Employee) and thus to create significant added value for customers who will be glad to invest in this area. sgd. Egbert K. Becker sgd. Ingeborg E. Becker sgd. Volker U. Marquardt Chairman of the Deputy Chairman of the Board of Directors Board of Directors Board of Directors Marketing & Sales

5 Investor Relations P&I Shares SIN Number of Shares Class Shareholder Structure Trading Name Designated Sponsors (Neuer Markt, FWB) 7.7 million No-par-value bearer individual share certificates 61.04% Management and 38.96% diversified PUI Deutsche Bank AG, GZ-Bank AG Market Capitalisation Euro million (as at 31 March 2001) Year s high/low Euro / Euro 2.85 Price development Neuer Markt Index Comparison (12 Months) Prices in % P & I AG NEMAX All Share NM-Software Period: April 2000 March 2001 Source: Deutsche Börse AG The movement in P&I share prices paralleled developments in the Neuer Markt segment of the economy during the course of the 2000/2001 fiscal year. With the take up of the IBM Deutschland GmbH Payroll package in May 2000, an initial dip in prices was followed by a surge, taking prices above the industry sector and market indexes. This lead was subsequently affected by the decline in Neuer Markt prices in the second half of the year. The conclusion of a development and distribution co-operation agreement with ORACLE Deutschland GmbH in the second half of December had no impact in the environment of falling prices. However, since the middle of January, P&I shares have stabilised and have run counter to the Neuer Markt decline.

6 Activities In the 2000/2001 fiscal year, alongside the financial press conference and the Annual General Meeting, several analyst discussions took place. To increase the capital market s awareness of P&I on a long-lasting basis, a set of measures in the area of Investor Relations were implemented. These included stepping up retail investment and the selection of analysts and investors for secondary issues in the Neuer Markt, all of which were implemented in the 2001/2002 fiscal year. Annual General Meeting On 7 September 2000 the first ordinary Annual General Meeting for P&I since the IPO was held at the Kurhaus Wiesbaden. The 112 shareholders attending accounted for over 63.68% of authorised capital. Pending resolutions included a vote on extending the Supervisory Board by a further three members, a change to the Memorandum and Articles of Association in respect of business activities and the empowerment of the Board of Directors enabling P&I to acquire its own shares. All of the eight items on the agenda were passed with an overwhelming majority. In particular, all the members of the Board of Directors and the Supervisory Board were ratified. Mr. Michael Abels, Solicitor, Prof. Dr. Werner Fröhlich and Dr. Steinbach were confirmed as new members of the Supervisory Board. Shareholdings by the Company and Members of Executive Bodies Neither P&I Personal & Informatik AG nor any other company pursuant to AktG (German Companies Act) held any shareholdings as at 31 March 2001 in P&I own shares. No convertible bonds or similar securities pursuant to AktG had been issued as of 31 March Shareholdings of Executive Bodies as at 31 March 2001: Board of Directors Number of shares Egbert K. Becker 2.35 million Ingeborg E. Becker 2.35 million Volker U. Marquardt 4,700 Supervisory Board Number of shares Bernd Jacob 32,500 Dr. Wolfgang Metz - Bernd Hentschel 2,000 Michael Abels - Prof. Dr. Werner Fröhlich - Dr. Martin Steinbach - No stock options nor any other entitlements to subscribe to P&I shares have been granted to any member of the Board of Directors or the Supervisory Board.

7 Consolidated Situation Report A. Outline of Business Developments A 1. Development in the Industry Sector and Economy as a Whole Our core product, LOGA, the strategic human resources management IT solution for medium-sized companies has ensured a favourable placing for I&P. Following the move into the new millennium, the entire IT industry reported only a slow growth in sales. It was only towards the close of the 2000 calendar year that users showed the first signs of an increased readiness to make investments. A surge in investments due to outstanding switchovers to the euro in outdated EDP software only became apparent at the start of It seems that a large number of personnel accounting systems are not able to implement this procedure within good time as it is complicated by the required capability of calculating backwards to DM periods. Spontaneous purchase of software is expected to come into play shortly before the close of Development in Sales and Orders P&I Personal & Informatik AG (P&I AG): Incoming orders improved steadily throughout the 2000/2001 fiscal year. Consequently, in the last quarter of the fiscal year, 40% of incoming orders for the year were received. Incoming orders include software licences and the consulting services for software implementation and support ordered in direct conjunction with licences. This year strong growth was reported by outsourcing business which is operated by the wholly owned P&I AG subsidiary, P&I Application Service GmbH. Sales of services is partly accounted for by direct branch office sales and partly by sales through partners. Partners include not only system houses but also providers of software accounting solutions who have added P&I AG products to their portfolios. Incoming orders generated by P&I AG Sales amounted to Euro 13.4 million in the fiscal year. Added to this are orders originating with Administration and Consulting at Euro 4.1 million which amounts to a total of Euro 17.5 million for incoming orders. Maintenance and outsourcing (ASP) sales for subsequent years are not included. Total sales at Euro 25.9 million represented an increase of 51% on sales of Euro 17.2 million for the previous year. P&I Application Service GmbH saw a pleasing start to the year thanks to its offerings in the field of outsourcing for payroll accounting via the Internet (ASP). Since the introduction of this business, incoming orders of just under Euro 1.5 million over each twelve-month period have been reported. With an average term of 48 months, this represent a figure for orders of about Euro 6 million over the period stated. P&I Midrange GmbH, who took over IBM Payroll in July, acts as a sub-supplier for P&I AG and undertakes the ongoing maintenance and improvement of the product which is now marketed under the name of LOGA /400. The technical and

8 financial take-over of the product is considered to have been successful and went according to plan. The company does not have any external sales. Both the Swiss P&I companies in Thalwil near Zurich and in Meyrin near Geneva saw positive developments. Their combined sales for the financial year amounted to Euro 1.5 million compared to Euro 1.0 million in the previous year (+ 50%). With the acquisition of the Principality of Liechtenstein, LOGA was also deployed in public administration for the first time. The P&I representative in Vienna expanded its position. Of particular notes is its success in acquiring international customers who also use LOGA for their payroll accounting in Germany or the Czech Republic. Sales for the fiscal year amounted to Euro 0.6 million compared to Euro 0.4 million in the previous year, representing an increase of 61%. In the Czech Republic the first large customer, Infineon, was acquired by the local P&I company, representing the first major breakthrough in the marketing of LOGA in those countries on the threshold of joining the EU. Even after taking the low price level into account, P&I Prague managed, for the first time, to achieve annual sales of Euro 0.05 million. The P&I company in the Netherlands also managed to expand its business. Alongside three new contracts, the first customer projects were completed. Sales amounted to Euro 0.2 million. Licence sales within the Group rose by a total of 62% from Euro 5.3 million in the previous year to Euro 8.6 million in the current fiscal year. Winning over new customers is important as the software maintenance business derives directly from this. Consulting income grew in relation to licence sales. However, it remained below growth rates for licence income, as growth in the licensing sector was only achieved in the 4th quarter and consulting services will feel the impact only in the next fiscal year. Nonetheless, there was an increase of 8%, which represents sales of Euro 8.5 million compared to the previous year of Euro 7.9 million. Income from Maintenance services grew in relation to licence sales for the previous year. The significant increase, however, is due to the acquisition of the former IBM Payroll. Over 1,700 users now have their software maintained by P&I. In the fiscal year, a total income of Euro 9.3 million was posted, 101% above the figure for the previous year of Euro 4.6 million. Maintenance income, which is mainly invoiced as of 1 January in any one calendar year, is only shown at ¼ of its value in the operating results for the 2000/2001 fiscal year in respect of the invoices for 2001; the remainder is accrued. Sales for ASP Application Service Providing grew significantly, showing an 11- fold increase in the fiscal year reaching Euro 0.6 million. Sales of Third Party merchandise grew by 21% to Euro 0.7 million.

9 Sales for P&I AG grew as follows: 1999/2000 millions euro 2000/2001 millions euro Licences Maintenance Consulting Third Party Other Total Research and Development In the 2000/2001 fiscal year, software in three areas in particular saw intensive improvements. a) The international version of LOGA was perfected even further. The target group for this software consists of small to medium-sized, international companies who recognise the advantages provided by uniform data maintenance and software. Further benefits include a reduction in running costs through improved transparency and the reliability of analyses. This investment has ensured P&I an excellent placing among software providers, because sooner or later it is only European solutions which have a chance of doing well on the market. b) Alongside traditional payroll accounting methods, DP-supported human resources management methods were improved further. Mention should particularly be made of those applications in which management or even employees directly operate the EDP. One highlight here is also the improvement in personnel expenses planning which enables a large variety of simulations and forecasts to be made. c) A Java-based version of an Internet payroll accounting program was developed from scratch. This future-oriented product, called LOGA net, made its debut in January At present companies employing up to 100 staff are being targeted. This economical system allows users to store personnel data onto a P&I computer via the Internet, to create a pay slip at any time and to print it out from the Internet straightaway, without requiring much in the way of EDP skills. The developments cited above have consolidated and improved P&I s position as a technological market leader for small and medium-sized companies. The trend towards using the Internet as a means of accessing applications and data has intensified. 4. Business Investment In the preceding fiscal year, business investment was focussed solely on the acquisition of IBM Payroll. Users make use of the software and have a maintenance contract which guarantees them updates, particularly with respect to the latest amendments to legislation. To safeguard this service, a new company was set up together with the four main players who had previously carried out maintenance service for IBM as freelancers and entrepreneurs. Alongside P&I AG,

10 these four entrepreneurs each have a 10% investment in P&I Midrange GmbH based in Böblingen. The obligations to users arising from maintenance contracts are performed in full under the direction of P&I. Moreover, a new graphic dialogue surface was completed this fiscal year which facilitates the operation of the software for the payroll officer. In addition, the software was made Internet-compatible in order to match current user requirements. The agreement with IBM, which came into effect on 1 July 2000, has proved to be a financial success at a relatively low-risk investment and promises to make a lasting positive contribution to P&I operating results in the future as well. 5. Financing The Company is highlighted by its solid equity capital base. Bank loans were taken out to partially finance the take-over of IBM Payroll, in order to provide sufficient play for further financial investments. 6. Personnel The number of employees varied insignificantly in the course of the fiscal year and at 223 staff, remained virtually unchanged. This is due in particular to a) increased outsourcing in Consulting b) the use of freelancers and companies for the maintenance of the former IBM Payroll (LOGA /400) c) a sensible staffing policy The goal of our staffing policy is quality rather than quantity. With the appointment of Mr. Volker U. Marquardt, taking effect from 1 August 2000, an experienced manager was gained as Managing Director of Marketing & Sales. B. Outline of the Situation P&I AG: Fixed assets rose from Euro 6.6 million in 1999/2000 to Euro 26.8 million in 2000/2001. Current assets saw an increase in receivables and other assets from Euro 4.4 million in 1999/2000 to Euro 5.1 million in 2000/2001. Liquid funds decreased from Euro 21.7 million to Euro 12.4 million in 2000/2001 (incl. other securities). Authorised capital amounted to Euro 7.7 million. Total equity capital saw an increase from Euro 25.8 million in1999/2000 to Euro 27.2 million in 2000/2001. Under accruals, accruals for pensions increased from Euro 1.6 million to Euro 1.8 million. Other accruals increased from Euro 1.4 million to 2.5 million (incl. tax accruals amounting to Euro 0.8 million). Liabilities rose from Euro 1.0 million to Euro 5.8 million, with trade payables rising from Euro 0.4 million to Euro 0.5 million.

11 1. Earnings Group: The capital assets for the Group are dominated by the parent company. With an equity of Euro 23.6 million and a balance sheet total of Euro 42.7 million P&I AG is well equipped. P&I AG: The German P&I AG saw positive results on ordinary business activities of Euro 2.5 million compared to Euro 0.3 million in the previous year, representing an 8- fold increase. Operating results after taxes improved from Euro 1.5 million in the previous year to Euro 1.4 million. Group: Group earnings are determined by the parent company. Heavy investment in building up a European Group has certainly put pressure on results, but thanks to the outstanding achievement of the German parent company, this fiscal year also saw positive operating results (EBIT) for the Group, amounting to Euro 1.1 million and Euro 0.1 million after taxes (EAT). This indicates that the predicted turnaround has been achieved. 2. Special Outline of the Development and Situation of the Company and of Risks associated with Future Development In the next fiscal year, P&I AG plans to increase sales by over 10% compared to the previous year. The process of consolidation in the software industry seems to be continuing systematically, particularly in the payroll accounting sector which is influenced by ongoing maintenance service. The complexity of the statutory and collective bargaining stipulations make it very difficult for large foreign companies to establish themselves in Germany. As part of its European strategy P&I plans to enter into further co-operations. Increased participation by the partner means less investment for P&I. In the previous year a development and distribution partnership agreement was concluded in Poland with a German-based company. A preliminary agreement with a competent partner in Hungary has also been ratified. Alongside the direct earnings from a country, there are significant additions to sales to be taken into account, also from Germany, arising from German users who include their factories and/or branches in these countries in their software solution. Taking this into account, a return on investment within 3-4 years can be anticipated. Ongoing changes in legislation, which on the one hand justify the high maintenance fees, also contain the risk of mistakes being made in creating payroll accounts which could lead to recourse claims by customers. This risk is greater in foreign countries where P&I AG has gathered less experience. More substantial changes are expected in the future with the final introduction of the euro within the euro zone. This may lead to a new round of consolidations in the industry. As a leading provider of ASP Application Service Providing for payroll accounting in conjunction with human resources management via the Internet, P&I

12 has positioned itself as a competent partner and technological leader in this sector. Our objective for the 2001/2002 fiscal year is to greatly increase the number of employees whose pay is processed using this method. Due to its investment in software for public administration (LOGA PersInf), P&I expects to win substantial orders from both Federal and State authorities, particularly as P&I can produce specific solutions for human resources management as well as good references. However, there is always some uncertainty as to whether public administration is willing to provide the required funds. A problem area, faced also by other software companies, is the staff situation whereby P&I s requirements are rather in the Sales and Consulting sectors. This, however, can be offset by sales and consulting partnerships. Nonetheless, the possible lack of qualified personnel could lead to a loss of incoming orders and thus sales. When it comes to Management itself, Company growth may be restricted and targets missed because of a lack of qualified experts.

13 Consolidated Balance Sheet Balance Sheet 31 March March 2000 prepared according to IAS KEUR KEUR Assets Noncurrent assets Property, plant and equipment 1,467 1,144 Intangible assets 18,998 2,306 Other intangible assets 1, Financial assets Deferred taxes ,525 5,086 Current assets Inventories Trade receivables 5,160 4,062 Cash and cash equivalents 12,873 22,751 Other current assets 1, ,160 27,857 Total assets 42,685 32,943 Liabilities and shareholders equity Shareholders equity Subscribed capital 7,700 7,700 Capital reserves 18,214 18,410 Earning reserves -2,335-2,386 23,579 23,732 Minority interest 0 Noncurrent debt capital Long-term liabilities to shareholders 0 13 Deferred taxes Pension obligation 1,995 1,696 Other noncurrent liabilities 2, ,858 2,190 Current debt capital Other short-term liabilities 2,733 1,223 Trade accounts payable Tax liabilities Other accruals 1,941 1,552 Accrued expenses and deferred income 7,845 3,624 14,213 7,021 Total liabilities and shareholder s equity 42,685 32,943

14 Consolidated Income Statement Income Statement 2000 / / 2000 prepared according to IAS KEUR KEUR Sales 27,731 18,352 Cost of sales 9,755 8,073 Gross profit 17,976 10,279 Research and development costs 4,707 3,654 Sales and marketing costs 5,718 5,363 Adminsitrative enpenses 3,898 3,606 Depreciation goodwill 1, Other operating income Other operating expenses 1, Earnings from operating activities (EBIT) 1,074-2,524 Other financial income Other financial costs Result from ordinary activities before taxes (EBT) 1,321-1,687 Taxes on income 1, Result from ordinary activities after taxes 9-1,842 Minority interest DVFA consolidated annual net profit (EAT) 51-1,821 Average numbers of share 7,700,000 5,846,612 Earnings per share in EUR

15 Consolidated Cash Flow Statement Cash Flow Statement 2000/ /2000 prepared according to IAS KEUR KEUR Consolidated Earning before interest and taxes 1,116-2,503 Depreciation and amortization on fixed assets 2, Additions to pension accruals Cashflow 3,823-2,049 Changes in inventories, receivables and other assets - 1,181-1,025 Changes in liabilities and shareholders equity 7,165 1,003 Cash earnings (interest) from current operations - 2, Net cash flow From current operations - 7,709-1,374 From invetsment activities - 20,878-2,549 From financial activities 3,224 24,810 Net change in cash - 9,945 20,887 Net cash at the beginning of the reported period 22,751 1,864 Net cash at the end of reported period 12,806 22,751

16 Development of Fixed Assets Acquisition and Production Costs Accrued Depreciation Net Book Value Addition s euro euro Disposal s Addition s euro euro euro Disposal s euro euro euro Intangible assets Software Goodwill Total Tangible assets Factory and office equipment Fixtures Total Financial assets Long term investments Other loans Total fixed assets

17 P & I PERSONAL & INFORMATIK AG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 2000/2001 GENERAL Commercial Register, Memorandum and Articles of Association and Corporate Object The Company is based in Wiesbaden and has been registered there at the Local Court in the commercial register, Department B, under No since 28 May The Memorandum and Articles of Association were concluded on 2 April 1998 and last amended on 7 September The corporate object is the creation, marketing and maintenance of software and the associated consultation and training of operators, as well as dealing in EDP equipment and software. In accordance with the Memorandum and Articles of Association, emphasis is placed on the human resources sector and information technology activities falling within this sector, such as programming, personnel databases, project management, personnel data graphics, image processing, procedure data processing, PPS, network control and special query language. In addition, the Company may undertake any business which furthers its corporate purpose. It may invest in companies active in the same or similar industry sectors and takeover their management. For the rest, the Company has the right to carry out any business and take any actions which directly or indirectly further the business object, in particular to set up branch offices, to conclude corporate agreements and to set up other companies at home or abroad or to acquire or invest in such companies and takeover their management. A further corporate object is the provision of software by the Company via a computer centre for its use by third parties as well as the related provision of services. Not included in the corporate object is any form of business requiring a permit if such a permit has not been granted. Since 7 July 1999, the Company s shares have been admitted for trading in the Neuer Markt on the Frankfurt Stock Exchange. ACCOUNTING AND VALUATION METHODS 1. PRINCIPLES OF FINANCIAL ACCOUNTING In this fiscal year, the consolidated financial statements have been compiled in euro for the first time. The figures for the previous year have been converted into euro at the conversion rate of DM for Euro 1. Expenses arising from write downs of goodwill have been shown separately in the income statement for the first time (in the previous year it was included under research and development costs as well as cost of sales). The figures for the previous year were adjusted in conformity with IAS 8. In accordance with IAS 12 (revised 2000) in connection with IAS 8.49, the Company no longer capitalizes deferred taxes which were created for the income tax credit of its German subsidiaries and which are posted to equity capital for taxation purposes. The figures for the previous year have been amended in accordance with IAS 8 by adjusting the figures for the opening balance.

18 The consolidated financial statements as at 31 March 2001 for the 2000/2001 fiscal year were compiled in accordance with the International Accounting Standards (IAS). In addition, the interpretations of the Standing Interpretations Committee (SIC) were observed. The Company has compiled consolidated financial statements for its release pursuant to 292a HGB (German Commercial Code). German accounting regulations deviate from the IAS regulations in several areas. Deviations occur particularly as to: - deviations in the valuation of accruals for pensions - the creation of deferred taxes for all significant temporary differences between the commercial balance sheet and tax statement - the capitalization of specific leasing items by the lessee (capital lease) - the capitalization of specific self-produced fixed assets - the neutral offsetting of costs arising from the procurement of equity with the equity capital The annual financial statements for the companies included in the P&I consolidated financial statements have been compiled as at the consolidated balance sheet date. Compiling the annual financial statements in accordance with the International Accounting Standards has required the Board of Directors to make estimates and assumptions which affect the figures given in the assets and liabilities, in the notes and in the income statement. Actual results may differ from the estimates. IAS 39 Financial Instruments: estimate and valuation as well as for IAS 12 Income Taxes (amended 2000) were already taken into account before the deadline for their initial compulsory application. The consolidated balance sheet and the consolidated income statement have been compiled in an aggregate form with close reference to the relevant reporting standards of the Deutschen Vereinigung für Finanzanalyse e.v. (DVFA) (German Association for Financial Analysis). Individual items have been combined for purposes of clarity; the items are explained in the Notes. 1. PRINCIPLES OF CONSOLIDATION Consolidated Companies and Consolidation Methods In the consolidated financial statements for the 2000/2001 fiscal year, alongside P&I Personal & Informatik AG (P&I AG), eight domestic and foreign subsidiaries have been integrated in which P&I AG, directly or indirectly, has a majority of voting power or a controlling position within the meaning of IAS 27 on the basis of other rights. Capital consolidation is based on the acquisition method, whereby the purchase value of the investments is set against the proportional current value of their shareholders equity at acquisition date. Assets and liabilities are shown at their purchase price. The difference remaining on the asset side is shown as goodwill and is written off on a straight-line basis over a period of 5 to 10 years.

19 Initial consolidation comes into effect on that date on which P&I AG, directly or indirectly, assumes a controlling interest in the subsidiary. Figures for minority shareholdings are shown separately in both the consolidated balance sheet and the consolidated income statement. Minority interests include the share of equity owned by third parties in the companies integrated into the consolidate financial statements, as well as the share in the profit/loss of the subsidiaries attributable to this shareholding. Minority interests are assessed on the basis of the share in net assets of the subsidiary attributable to the minority shareholdings before acquisition. Third party shares in losses which exceed their share of equity is set against Group shareholders equity in accordance with IAS 27. Intragroup gains and losses, sales, expenses and income as well as claims and liabilities existing between the consolidated companies have been eliminated. For those consolidation transactions affecting results, the income tax consequences were recognised and deferred taxes were formed. A list of the subsidiaries integrated into the consolidated financial statements is given in Note 35. The impact of the first-time integration of newly acquired goodwill is shown in Note 31. Foreign Exchange Conversion The consolidated financial statements have been compiled in euro (Euro). The functional currency of each Group subsidiary is the local currency of the country in which the company is based. Accordingly, assets and liabilities which are shown in foreign currencies in the balance sheets of foreign subsidiaries (except for shareholders equity) are converted into euro at the relevant balance sheet date. Conversion of income and expenditure is effected at the average rate for the quarter. The difference arising from the valuation of equity at historic rates and at the rate prevailing on balance sheet date is shown as a neutral change in equity. Assets and liabilities shown in foreign currencies, and unsettled spot transactions are always converted at the rate prevailing on balance sheet date. Cash Flow Statement The cash flow statement shows how the funds available to P&I changed during the course of the year under review through the inflow and outflow of funds. The effects of acquisitions have thereby been eliminated. For the initial integration of subsidiaries only the actual net cash flows are shown in the cash flow statement. The amount affecting liquidity arising from the purchase of companies i.e. the purchase price less funds acquired with the company, is shown as an outflow of funds from investment activities. In conformity with IAS 7, net cash flows from operating, investing and financing activities are shown separately. 3. PRINCIPLES OF ACCOUNTING AND VALUATION Sales The Company achieves sales by granting licenses for software products to end users. The Company also achieves sales from services such as consulting (technical and expert support of new customers on implementation of the software and support of existing customers), from maintenance services, from Application Service Providing (ASP) and from the sale of third party goods (merchandise). Sales are shown less VAT and after deduction of cash discounts granted.

20 Sales from granting licenses after handover of the software are considered realized when the software has been installed at the customer s or the master CD has been delivered to the sales partner and payment has been ensured, i.e. license payments are due within a year and are firmly fixed by contract. Consulting sales are connected directly to services arising from implementation and installation which are effected on the basis of separate service agreements. Consulting and training sales are realized when the service has been provided. Should one license agreement include both software and service elements, these elements are clearly differentiated from each other. Services are not an essential component of software functionality and the software is not modified. Only installation in the customer s system and a menu-controlled adjustment to the customer s requirements take place. Sales realization for software and services are effected separately here. The agreed remuneration is divided in proportion to the market value of the individual components to each other. The share in software sales in technical installations is realized as if the software had been sold separately. Sales of services are realized in accordance with the service provided. Maintenance sales are accrued over the period of the maintenance service. Sales arising from the ASP business sector include the provision and use of hardware and own, as well as third party, software, the printing and enveloping of payroll as well as travel expense accounts and carrying out the monthly accounting. Realization of sales is effected in line with the provision of services. Intangible and Tangible Assets Acquired intangible assets are shown at their purchase price and are systematically written down on a straight-line basis over their expected useful lives. Intangible assets arising from development activities are capitalized in accordance with IAS 38 only if (a) it is sufficiently probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and (b) the cost of the asset can be measured reliably. In the year under review these criteria applied to the LOGA property rights for the international version of LOGA. These property rights will be written off on a straight-line basis over five years. For LOGA International property rights, depreciation will begin after completion of the respective localization process (adaptation of LOGA to local conditions in each country) and the start of its actual implementation. Costs of updating the software to take account of continuously changing legislation will be posted by the Company to expenses as they incur. Other acquired intangible assets are systematically written off on a straight-line basis over their useful life which, as a rule, is from three to four years. Goodwill (the capitalized differences arising from capital consolidation) has a useful life of five to ten years. In the follow-up valuation of intangible assets, the benchmark method is applied. Should the carrying amount exceed the estimated recoverable amount, non-scheduled depreciation is made on the estimated recoverable amount in accordance with IAS 36. The recoverable amount of an intangible asset not as yet available for use is estimated at the end of the fiscal year.

21 Tangible assets are always shown at their acquisition or production cost and are systematically written down on a straight-line basis over their estimated useful operating lives of 3 to 13 years (in the previous year 3 to 10 years). In calculating depreciation, residual values have been ignored due to their insignificance. Low value items are fully written off in the year of their acquisition. Tangible assets are not revaluated. Fixtures are written off over the term of the lease or, if shorter, over their estimated useful life. Should the carrying amount exceed the estimated recoverable amount, non-scheduled depreciation will be made on the estimated recoverable amount in accordance with IAS 36. On the sale or disposal of tangible assets their purchase price together with cumulative depreciation is removed from the relevant accounts. Gains or losses made on the disposal of fixed assets are shown as other operating income or expenses. Service and maintenance costs are posted to expenditure in the income statement. By applying IAS 17, leased assets which can be allocated to the Company as beneficial owner are capitalized and written down over their normal operating life. The liabilities arising from the leasing arrangement are correspondingly carried as liabilities and reduced by that part of the leasing rate comprising the redemption sum. Other leasing arrangements taken up by the Company are classified as operating leasing arrangements. The payments made are posted to the income statement on a straight-line basis over the term of the lease. Long-term financial investments which serve as collateral security are classified as financial assets and are shown at their market value in conformity with IAS 25. Financial Instruments Financial instruments appearing in the balance sheet include liquid funds (including shortterm securities), trade receivables, trade payables, other borrowed funds and finance leases. The individual accounting methods are explained under the relevant items, other details on financial instruments can be found in Note 30. Other financial instruments can be disposed of at any time and are shown at balance sheet date at their current value, as a rule their market value. Income or expenses arising from the market valuation are posted as a special item direct to equity until their disposal date. On realization, the cumulative gain/loss is included in the results for the year. Inventories are valued at the lower of their purchase price or their realizable net selling price at balance sheet date. The valuation of inventories is based on the FIFO method. Trade receivables and other receivables are always shown at their nominal value taking into account individual value adjustments and general provisions for bad debts. For purposes of financial accounting, liquid resources comprise cash, short-term securities (holdings in investment funds and listed shares), cheques and bank balances less short-term liabilities to banks. Assets and liabilities are shown separately in the balance sheet. Accruals are formed to cover legal and effective obligations which originate in the past if it is probable that fulfilling the obligation will lead to an outflow of Group resources, and if the value of the obligation can be estimated reliably.

22 The periodic net pension contributions under IAS 19 are made up of differing components which reflect the varying aspects of the financial arrangements made by the Company and the costs of the benefits drawn by employees. These components are derived using actuarial costing methods and are based on actuarial assumptions which are stated in Note 24. The intention of the Company s accounting principles is to: reflect all benefit increases in the plan obligations which the Company is required to undertake as of the current valuation date. amortize cumulative actuarial gains and losses of over 10% of the plan obligation in excess of the estimated future benefits of active employees participating in the plan. Deferred taxes are formed according to the liability method conforming to IAS 12 for all temporary differences between the taxable values and the carrying amount of assets and liabilities. Deferred tax assets and liabilities are calculated on the basis of the legislation and regulations applying on balance sheet date. An asset item for tax losses brought forward is only capitalized to the extent that it is likely to be set off against future taxable income.

23 NOTES TO THE STATEMENT OF INCOME The statement of income has been prepared according to the cost of sales method. 4. SEGMENT REPORTING Segments within the meaning of IAS 14 are differentiated by geographical region. The management of the Company is strongly regional; the German corporation is headed by the Board of Directors while the foreign subsidiaries and P&I Application Service GmbH are headed by the regional managing director. The objective is to provide both local payroll accounting systems which meet local requirements and also human resources management systems. The regions form the basis on which the Company presents its primary segment information. In the year under review, blanket contracts covering accounting for services existed between the parent company, its subsidiaries and their subsidiaries. Among the companies of the P&I Group services are accounted for according to the resale price and cost mark-up method. Sales and other transactions between the German and foreign segments have been eliminated. Information regarding sales, ordinary operating results, segment assets and segment liabilities, as well as investment and depreciation expenses for the segments is set out geographically as follows: 2000/01 Germany Foreign Elimination Group 1999/ / euro 1999/ euro 2000/ euro 1999/ euro 2000/ /00 Sales to third parties 25,376 17,004 2,355 1, ,731 18,352 Sales between the segments Segment sales 26,300 17,250 2,355 1, ,731 18,352 Segment result 2, ,350-1, ,074-2,524 Other interest and similar income Other interest and similar expenses Result of ordinary business activities 1,321-1,687 Taxes on income 1, Result of ordinary business activities after tax 9-1,842 Share of other shareholders in the year s result Group result 51-1,821

24 2000/01 Germany Foreign Elimination Group 1999/ / / euro 1999/ euro 2000/ euro 1999/ euro 1999/00 Segment assets 45,089 34,189 1,677 3,520-4,237-5,457 42,529 32,252 Miscellaneous assets Group assets 45,089 34,189 1,677 3,520-4,081-4,766 42,685 32,943 Segment liabilities Miscellaneous liabilities Group liabilities 18,672 7,993 4,618 5,743-4,259-4,602 19,031 9, ,672 7,993 4,618 5,743-4,219-4,525 19,071 9,211 Additions to assets 21,333 1, , ,434 4,127 Additions to miscellaneous assets Group additions to assets 21,333 1, , ,434 4,127 Depreciation 2, , Group depreciation 2, , Non-payable expenses other than depreciation Sales between segments are posted separately and eliminated. Assets and liabilities are clearly assignable to the segments. Additions to assets relate to both tangible and intangible assets and other investments. Business Sectors: The Company develops and sells its products: Payroll, HRMS and ASP and provides related Consulting and Maintenance services, and in connection with the licensing of its own software, it sells a limited range of hardware, software and printed forms produced by other companies (third party business) The product sectors Payroll and HRMS are comparable both in their development processes and in their methods of handling the market. Third party sales account for 2% of total sales. The share of the newly established business sector of ASP is currently at 1%. In the previous fiscal year, the important product sectors of Payroll and HRMS were marketed in all geographical segments, with Payroll being predominant in the foreign market.

25 Sales listed according to product lines developed as follows: Sales according to product lines 2000/ /2000 Payroll (wages/salary and travel expenses accounting) 23,262 15,036 HRMS (Human Resources Management System) 3,207 2,707 ASP (Application Service Providing) Third Party (merchandise) ,731 18,352 Further information Payroll HRMS Third Party ASP Miscllan eous Group Segment assets 2000/ ,806 4, , / ,500 4, ,854 Miscellaneous assets 2000/2001 1,059 1, / Group assets 2000/ ,806 4, , / ,500 4, ,943 Additions to assets 2000/ , , /2000 3, , SALES The Company achieves sales through the granting of licenses for the software it develops and through the services it offers, such as training courses, consultation, provision of computing services and undertaking wage, salary and travel expenses accounting as well as personnel administration for third parties (ASP (Application Service Providing)). Over and above this, income is realized through performing maintenance services and sales resulting from third party business. The breakdown of sales for the Group is as follows: Sales according to category 2000/ /2000 Licences 8,565 5,289 Consulting (consultation and training) 8,481 7,847 Maintenance 9,280 4,607 ASP (Application Service Providing) Third Party (merchandise) Other ,731 18,352 No client accounted for more than 10% of Group sales during the fiscal years 1999/2000 and 2000/2001.

26 4. DETAILS TO THE INCOME STATEMENT ACCORDING TO THE COST OF SALES METHOD Cost of Sales The historic costs of activities leading to the generation of sales include expenses arising from the categories of Consulting and ASP (both primarily for personnel, purchased services from partners and expenditure on material resources) plus the cost of goods purchased in the category of Third Party and other costs of sales. Cost of sales have developed as follows: 2000/ /2000 Historic costs Consulting 8,273 7,293 Historic costs ASP Cost of goods purchased Third Party and other cost of sales ,755 8,073 Research and Development Expenses Significant expenses occur regularly under research and development projects which are undertaken in the expectation of future earnings. Research costs are expensed in relation to the work carried out. Development expenses are, according to the project, either capitalized (e.g. LOGA ) International and then systematically written off or, if the requirements for capitalization are not met, expensed. Sales and Marketing Expenses Alongside personnel expenses (and commissions to partners), advertising expenses and expenditure on trade fairs and congresses are shown under sales and marketing expenses. In the 2000/2001 fiscal year, the Group faced expenses for advertising, trade fairs and congresses amounting to Euro 993,000 (previous year: Euro 889,000). General Administrative Expenses In addition to the cost of personnel employed in the area of administration, general administrative expenses also include 50% of the expenses for the Board of Directors. Over and above this, legal and accounting expenses as well as auditing costs are included under administration. 4. OTHER OPERATING EXPENSES Other operating expenses primarily comprise expenses for Investor Relations (Euro 463,000) and for executive bodies (Euro 109,000).

27 5. ADDITIONAL DETAILS TO THE INCOME STATEMENT ACCORDING TO THE COST OF SALES METHOD Cost of Materials The cost of goods purchased in the category of Third Party Products amounted to Euro 732,000 in the 2000/2001 fiscal year compared to Euro 730,000 in the previous year. Personnel Expenses Personnel expenses rose from Euro 12,750,000 in the 1999/2000 fiscal year to Euro 14,647,000 in the 2000/2001 fiscal year. In the same reporting period, the number of employees, calculated as an average employment quotient at the end of the year, rose from 222 as at 31 March 2000 to 225 as at 31 March Depreciation Depreciation amounted to Euro 2,408,000 (previous year: Euro 615,000 ) and comprises write downs on intangible assets (including goodwill) and tangible assets. Other Operating Expenses Operating expenses include the following items: 2000/ /2000 Expenses for purchased services 2,955 2,037 Expenses for rents and leases 1,127 1,058 Advertising expenses Travel expenses Vehicle expenses Legal and consulting expenses, accounting service Telecommunications Sales commission Staff recruitment Equipment rental and leasing Qualification measures IBM administrative services Other 1, ,557 6, OTHER FINANCIAL INCOME In the year under review, this item related chiefly to income from the disposal of shares in investment funds (Euro 503,000; previous year: Euro 819,000) and bank interest (Euro 317,000; previous year: Euro 178,000). 5. OTHER FINANCIAL expenses Other financial expenses primarily comprise interest arising from financing the acquisition of the IBM Payroll/400 division.