Group Financial Statements 2009/2010

Transcription

1 Group Financial Statements 2009/2010

2 Joint Status Report of SinnerSchrader AG 04 General 05 Group Business and Structure 08 Market and Competitive Environment 12 Business Development and Group Situation 25 Development and Situation of SinnerSchrader AG 28 Corporate Governance Declaration and Explanation of Compensation System for the Company Boards 33 Takeover Information Pursuant to Article 289 Para. 4 and Article 315 Para. 4 of the German Commercial Code 35 Risks and Opportunities of Future Business Development 42 Major Events after the Balance Sheet Date 42 Forecast Consolidated Financial Statements of SinnerSchrader AG 47 Consolidated Balance Sheets 49 Consolidated Statements of Operations 50 Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Shareholders Equity 53 Consolidated Statements of Cash Flows 55 Notes 113 Auditors Opinion 114 Responsibility Statement Annual Financial Statements of SinnerSchrader AG 117 Balance Sheets of SinnerSchrader AG 119 Statements of Operations of SinnerSchrader AG 121 Notes of SinnerSchrader AG 147 Auditors Opinion 148 Responsibility Statement

3 01 Joint Status Report of SinnerSchrader AG

4 4 Joint Status Report 01 General The following Status Report is the joint Consolidated Status Report and Group Status Report of SinnerSchrader Aktiengesellschaft ( SinnerSchrader AG or AG ) for the 2009/2010 financial year, which covered the period from 1 September 2009 to 31 August In particular, it shows the development of the income, financial, and asset status of the SinnerSchrader Group ( SinnerSchrader or Group ) and the AG in the 2009/2010 financial year and addresses the key risks and opportunities and the probable future development of business. Unless explicit reference is made to the AG, the statements refer to the Group. The Consolidated Financial Statements for 2009/2010 were drawn up according to International Financial Reporting Standards ( IFRS ). The 2009/2010 Annual Report of the AG follows German accounting regulations. The Status Report and the Group Status Report, particularly Section 10, contain statements and information aimed at the future. These can be recognised by the use of words such as expect, anticipate, forecast, intend, plan, strive, estimate, become, and should. Such forward-looking statements are based on current knowledge, estimates, and assumptions. They therefore entail a number of risks and uncertainties. A variety of factors, many of which are outside SinnerSchrader s sphere of influence, have an impact on business development and its results. These factors mean that the actual future business development of SinnerSchrader or the AG and the actual results achieved may differ significantly from the explicit or implicit information in the forward-looking statements.

5 5 Joint Status Report 02 and Group Business Structure 2.1 Business Activities With more than 300 employees as of 31 August 2010, Sinner- Schrader is one of the largest independent digital agency groups in Germany. SinnerSchrader offers companies in Germany and abroad a comprehensive range of services for using digital technologies and further developing and optimising their business. The emphasis is on the use of the Internet for the sale of goods and services (e-commerce), for marketing and communication, and for the acquisition and retention of customers. SinnerSchrader s key services include: consultation related to and the development of strategies for using digital technologies for marketing, sales, and communication and for the establishment of digital business models, the customised conception, design, and technical development of websites, Internet applications, and mobile applications, the maintenance of content and technologies, performance measurements and optimisation, and technical operations, including the provision of the technical infrastructure for websites and Internet applications, the design and implementation of digital marketing and communication measures, particularly using and social networks, the planning and execution of online advertising campaigns with a focus on performance-driven display advertising ( online media business ), the provision of and performance measurements for advertising media ( ad serving ) with modern targeting and re-targeting features which comply with data protection regulations via a software-as-a-service model and based on an ad-serving solution developed in-house, and acceptance of overall responsibility for the establishment and management of sales channels on the Internet, including logistics, payment transactions, and shop management ( e-commerce outsourcing ).

6 6 Joint Status Report SinnerSchrader provides its services from offices in Hamburg and Frankfurt am Main and mainly works for companies based in Germany, though in the 2009/2010 financial year it also worked for well-known companies from Denmark, the UK, France, Italy, and Morocco. One of SinnerSchrader s goals is to establish long-term customer relationships, and some of its key customers have been part of the Group s customer base for more than five or even ten years. Most of these customers are from the Retail & Consumer Goods, Financial Services, Telecommunications & Technology, and Transport & Tourism sectors. 2.2 Structure of the Group SinnerSchrader currently carries out its business from five operative companies: SinnerSchrader Deutschland GmbH, spot-media AG, mediaby GmbH, newtention technologies GmbH, and next commerce GmbH. SinnerSchrader Deutschland GmbH and its predecessors have been part of the Group since the agency group was founded in It is the largest subsidiary, and under the SinnerSchrader brand it operates the Group s digital agency business, which primarily involves managing the complete digital sales and marketing activities of large companies and international customers with a focus on e-commerce. The online media business, which SinnerSchrader Deutschland GmbH established in 1998 and successfully operated, was spun off in the 2009/2010 financial year to form an independent subsidiary of SinnerSchrader AG known as mediaby GmbH with the goal of significantly expanding online media activities with a focus on performance-driven display advertising. The spin-off took effect retroactively from the start of the financial year on 1 September This spin-off followed the acquisition in the 2008/2009 financial year of the newtention Group, consisting of newtention technologies GmbH and newtention services GmbH. The newtention Group develops ad serving technology under the n7 brand, which offers the latest profiling, targeting, and re-targeting features in compliance with strict German data protection standards. The newtention Group provides ad serving services to advertising companies, online media agencies, and ad space providers from its own data centre via a software-as-a-service model. The newtention Group has been consolidated since 1 December 2008 and was part of the Group for an entire financial year for the first time in 2009/2010. spot-media AG and its subsidiary spot-media consulting GmbH were acquired by SinnerSchrader AG in February The goal was to strengthen the Group with a second digital agency brand and expand its competence profile as regards

7 7 Joint Status Report the maintenance of large online shops and portals, the development and implementation of website projects for SME clients, and the use of technologies such as PHP and TYPO3. spotmedia AG has also broadened the Group s spectrum of services, particularly in the fields of social media and newsletter marketing. With the establishment of next commerce GmbH in May 2009, SinnerSchrader has expanded its range of services to include e-commerce outsourcing. On the basis of multi-year contracts, next commerce GmbH develops and manages online sales channels for companies in return for a performance-based share of revenues. next commerce GmbH began operating its first online shop for a customer in the 2009/2010 financial year. In addition to the operative companies in Germany already mentioned, the Group still has the foreign subsidiaries Sinner- Schrader UK Ltd. London, UK, and SinnerSchrader Benelux BV, Rotterdam, the Netherlands. They were once again operatively inactive in the 2009/2010 financial year. SinnerSchrader AG acts as the managing holding company of the Group and is responsible for the strategic control and further development of the Group, financing its operating business, managing the liquidity reserves, and communicating with the capital market. SinnerSchrader AG also provides central infrastructure and administrative services for the subsidiaries. For controlling and reporting purposes, SinnerSchrader structures its operative business in the segments Interactive Marketing, Interactive Media, and Interactive Commerce. SinnerSchrader Deutschland GmbH and the spot-media Group form the Interactive Marketing segment, while mediaby GmbH and the newtention Group make up the Interactive Media segment, and next commerce GmbH covers the Interactive Commerce segment. The costs incurred by SinnerSchrader AG for the central provision of infrastructure and administrative services are transferred to the individual Group companies and thus to the operative segments. The costs for the strategic management and further development of the Group as well as financing and communicating with the capital market are borne by the AG and are reported outside the operative segments. There are control agreements and profit and loss transfer agreements between SinnerSchrader AG and its subsidiaries in the Interactive Marketing and Interactive Commerce segments. The business development of these subsidiaries and their opportunities and risks therefore have a direct effect on SinnerSchrader AG.

8 8 Joint Status Report 03 Market and Competitive Environment In the previous financial year, the overall economic environment for SinnerSchrader was shaped by the global financial crisis and its severe negative effects on the real economy, as a result of which economic performance in Germany as measured by the real gross domestic product fell by 6.8 % compared to the previous year in the second calendar quarter of But the trough of the recession had already passed by at the start of the 2009/2010 financial year on 1 September The German economy was growing again, though according to the German Federal Statistical Office this growth was moderate until the first calendar quarter of 2010, with price-adjusted, seasonallyadjusted, and calendar-adjusted growth rates of 0.3 % to 0.7 %. In the second calendar quarter of 2010, however, the economy picked up with a growth spurt of 2.2 % compared to previous quarter, which came as a surprise to many. Compared to the second calendar quarter of 2009, the German economy grew by 4.1 % as measured by the real gross domestic product. According to the German Federal Statistical Office, foreign trade and investments played the largest part in this growth, but there was also noticeable growth impetus from private consumers. The ifo Business Climate Index highlights the positive atmosphere in the German economy in the 2009/2010 reporting period: From July 2010, following another significant jump to more than 106 points, the barometer of German economic development stayed at nearly the same level as its peak values in 2006 and In September 2009, on the other hand, the Index was only at 91.3 points. According to the last available measurement, the positive trend continued in October 2010, when the ifo Business Climate Index rose again compared to the previous month and reached points. The remarkable aspect of this development is that, of the four industry and trade sectors whose business situation and expectations are covered by the Index, retailing reached the highest level of the last five years. The situation for retailers actually appears better than at any time since the retail boom triggered by German reunification in the early 1990s. Based on the figures for the second calendar quarter of 2010, many experts now expect the German gross domestic product to grow by over 3 % on a broad economic basis in They

9 9 Joint Status Report have accordingly raised their growth forecasts for the year 2011 to 2 % and higher. Over the entire year 2009, the real gross domestic product declined by 4.7 % according to the latest figures from the German Federal Statistical Office. The statistics for 2009 show that the Internet sector was able to develop positively even during the greatest economic crisis in recent German history. The total expenditure for goods purchased on or via the Internet rose in 2009 compared to 2008 by nearly 16 % to 15.5 billion based on the figures from the German E-Commerce and Distance Selling Trade Association (bvh). When the purchase of services, such as travel or concert tickets, is taken into account, the growth amounted to 12.4 % according to the bvh. Retail revenues as a whole, on the other hand, declined by 2 % in the same period in 2009 according to the German Retail Federation (HDE). The bvh reported that for the first time ever, online sales accounted for over half of all German distance retail in 2009, amounting to a share of 53 %; in 2008, they accounted for only 47 %. Online revenues alone were to thank for the fact that distance retailing ended the crisisridden year with a slight overall revenue increase of nearly 2 %, unlike other retail trade. The course of business in the second half of 2009, which covered the first four months of the Sinner- Schrader 2009/2010 financial year, and the Christmas business in particular played a major role in the positive development of online retail for the year. A similar picture can be seen in the online advertising market in According to reports by Nielsen Media Research for Germany, overall gross advertising revenues for so-called abovethe-line media without traditional online advertising decreased by 0.2 %, while the traditional advertising market grew by nearly 10 %. The Circle of Online Marketers (OVK) in the German Association for the Digital Economy (BVDW), which supplements the Nielsen data with its own projections, announced in its Online Report 2010/01 that traditional online advertising (that is, without search engine and affiliate marketing) grew by nearly 13 % in Here, too, the fourth quarter of 2009 saw growth of nearly 20 % compared to the previous year according to the OVK, which contributed significantly to this positive development. The fact that the Internet economy experienced double-digit growth even during the economic crisis in 2009 is impressive proof of the effect of the continual development of the fundamental drivers of the Internet economy over the past few years, such as coverage, the frequency and duration of Internet usage, and the quality and diversity of Internet access. Consumers are becoming interactive consumers.

10 10 Joint Status Report This development is nowhere near complete. As the ipad launched by Apple in April 2010 shows, it is continually driven forward by technical innovations. The ipad and other comparable tablet PCs offer the prospect of integrating the Internet even more closely in a variety of ways into the everyday lives of users. Two years earlier, smart phones paved the way for the breakthrough of the mobile Internet and triggered the development of mobile Internet usage, which is also still in its infancy. At the start of 2010, the trade journal of the German advertising and marketing industry, Werben & Verkaufen, issued the following forecast: The marketing of tomorrow will be digital. To accompany the publication of the figures for 2009, the bvh said: We expect the Internet to become the purchasing channel for all age groups. The first figures for 2010 so far and forecasts for the year 2010 as a whole for the Internet economy are correspondingly positive. For the first nine months of 2010, Nielsen Media Research calculated that gross advertising revenues in traditional online advertising were nearly 34 % above those of the first nine months of For all above-the-line media, Nielsen calculated an increase of 10.9 % for the same period. The German Federal Association for Information Technology, Telecommunications, and New Media (BITKOM) which, unlike Nielsen and the OVK, publishes net revenue figures (gross revenues minus discounts, agency commissions and similar items) for the traditional online advertising market reported 28 % growth in the traditional advertising market in the first half of This dynamic development is also reflected in the current forecasts for 2010 from the OVK in its Online Report 2010/02 of October For the entire online advertising market, including search engine and affiliate marketing, the OVK expects growth of 19 %, up from the 14 % forecast in February With forecasted growth of 23 %, traditional online advertising is expected to grow considerably more strongly than search engine marketing and affiliate marketing, for which the OVK foresees growth rates of 15 % and 10 %, respectively. Statistics are not publicly available during the year for online retailing, but in professional circles growth on the scale of 13 % is expected for online revenues from goods in the first half of For the year as a whole, the bvh forecasted growth rates of 15 % for online retailing with goods and 12 % for goods and services in July This forecast seems to be at the lower end of what is possible in light of the greatly improved mood in retailing in the second half of 2010 according to the ifo.

11 11 Joint Status Report Good economic figures in conjunction with the pressure to change in marketing and sales driven by the ongoing development of the fundamental factors of the Internet economy drove up investments on a broad scale in digital and interactive marketing and sales platforms as well as expenditures on the acquisition and retention of interactive consumers in the course of the SinnerSchrader 2009/2010 financial year. At the start of 2010, the German Association for the Digital Economy reported that 90 % of companies in the online sector expected revenue growth during the year. New market players in many product categories are setting the pace of change in the markets. For nearly two years, zalando an online start up for shoes in Germany has been challenging established retailers such as specialists like Görtz and generalists like the Otto Group. The Otto Group reacted to this challenge by establishing a new online platform for shoe sales under the mirapodo brand that was launched in February Similarly, the entrance of Amazon, the world s largest online retailer, into the online grocery sales market in Germany in early July 2010 drew the attention of established grocery retailers to the Internet, with the result that the REWE retail group, for instance, announced in September 2010 that it would be launching new Internet initiatives in The importance of the Internet as a sales platform has grown, and its usage as an information, entertainment, and communication medium is increasing as well through the momentum provided by the phenomenon of social networks. Correspondingly, the online share of marketing and sales budgets has continued to grow at the expense of traditional media such as television, daily newspapers, and popular magazines. Agencies focusing on traditional media felt the effects of this in 2009 in the form of falling advertising expenditure. As a result, these agencies are beginning to push into the market for digital services in order to protect their business and search for additional growth. They are concentrating above all on digital branding and communication, fields in which the competitive pressure is growing. The rising budgets for online advertising once again moved in the direction of traditional online and display advertising during the 2009/2010 financial year, while in previous years search engine marketing was the primary driver of the online advertising market. With the revival of banner ads in all forms, including animated images and video ads, a major role is played by the fact that campaigns can be controlled in a more result-oriented way and are thus considerably more efficient thanks to better ad serving technologies. Result-oriented remuneration models therefore were and are increasingly in demand and on offer in the market, for which targeted advertising is very important.

12 12 Joint Status Report This led to increased interest in so-called targeting and retargeting technologies in the year under review. wunderloop and nugg.ad, two German providers of such technologies for marketers which were independent until the spring of 2010, were taken over in quick succession by an American advertising network and Deutsche Post, respectively, in the summer of Supported by these positive conditions, SinnerSchrader was able to reach or surpass its revenue and earning goals for the 2009/2010 financial year. Its net revenue growth amounted to 14.3 %, which was higher than the previous year s growth of 14.1 %, as forecasted. Growth in the previous year benefited from the fact that spot-media AG contributed to consolidated revenues for an entire year for the first time in 2008/2009 after being acquired in February Business Development and Group Situation The shift in marketing from traditional to interactive and digital strategies made it possible for SinnerSchrader to grow and invest in the expansion of its business even during the financial and economic crisis. As expected, this trend picked up in the 2009/2010 financial year and boosted the development of Sinner- Schrader. The economic recovery in Germany, and particularly its surprising acceleration in the late spring and summer of the current year, gave additional impetus to this trend, which will probably extend beyond the end of the current financial year. SinnerSchrader achieved an operating result (EBITA) of 2.2 million in the year of the report, thus surpassing the previous year by nearly 0.75 million or 52 %. This improvement was 0.3 million higher than SinnerSchrader had anticipated for the year. The operating margin (the relation between the EBITA and net revenues) was 9.1 %. The expansion of the service portfolio to include ad serving and e-commerce outsourcing which began in the 2008/2009 financial year resulted in initial losses of around 1.0 million in the previous year and around 1.25 million in the current year. Without these initial losses, the EBITA in the year under review would have been around 3.45 million and the operating margin would have been 14.4 %. The course of business from quarter to quarter highlights the positive trend in SinnerSchrader s development. The net revenue growth rate compared to the previous year rose from

13 13 Joint Status Report a good 6 % in the first quarter to a welcome 27 % in the fourth quarter. With net revenues of 6.8 million, an operating result of over 1.1 million, and initial losses from the new fields of business of around 0.2 million, SinnerSchrader achieved a considerable leap in growth in the fourth quarter of 2009/2010. In light of higher amortisation costs for the acquisitions of previous years, lower income from the investment of the liquidity reserve, and an effective tax burden that was higher than in the previous year, SinnerSchrader s operative success has not yet had an effect on the consolidated income attributable to SinnerSchrader shareholders; this amounted to 1.1 million in the year under review, which was around 0.1 million lower than the previous year, resulting in earnings per share of 0.10 compared to 0.11 in the year before. Thanks to operating cash flows of 2.3 million, the liquidity reserve rose by 0.3 million in the year of the report compared the level on 31 August 2009, reaching 8.3 million as of 31 August The equity ratio amounted to around 60 % on the balance sheet date and was thus 1.6 percentage points lower than in the previous year on account of the significant growth of the Group. The development of the key indices for business development in the reporting period and the Group s asset and financial situation as of the balance sheet date are described in the following. 4.1 Revenues SinnerSchrader generated net revenues of 23.9 million in the 2009/2010 financial year. This amounts to growth of 3.0 million or 14.3 % compared to the volume of business in the previous year. This business development continued to gain momentum throughout the financial year: The growth rates compared to the previous year increased from 6.4 % in the first quarter to 11.2 % and 12.7 % in the second and third quarter, reaching 27.0 % in the fourth quarter of 2009/2019. In the final quarter, SinnerSchrader generated net revenues of 6.8 million and thus achieved revenues of over 6.0 million in a single quarter for the first time in the company s history. Business with existing customers remained stable and expanded by around 0.3 million, so the acquisition of new customers is what drove SinnerSchrader s growth. Across the three segments, SinnerSchrader generated net revenues of 2.7 million with customers to whom it provided services for the first time in the 2009/2010 financial year. This means that the new customer rate improved by 1.8 percentage points compared to the previous year, reaching 11.3 %. New customers in the period of the report included the Gucci Group, s.oliver, the duty-free shop operator Heinemann, babywalz, Bosch, two renowned insurance companies and another telecommunications company. SinnerSchrader not only strengthened its business base with promising new customers, it also made inroads into new sub-

14 14 Joint Status Report sectors such as fashion brands and insurers, and it expanded its business with international clients. to be eliminated for internal company business rose in the period under review by 0.3 million. The fourth quarter of 2009/2010 was particularly successful as regards the new customer rate: Revenues of around 1.5 million generated with new customers led to a rate of 22.7 %. As a result, this quarter also topped the other three quarters of 2009/2010 as regards incoming orders in the Interactive Marketing segment, which increased by 37.3 %. For the year as whole, incoming orders rose by 16.8 % compared to the year before. The welcome result of the dynamic acquisition of new customers was that SinnerSchrader s dependence on its largest customer relationships was reduced considerably in the period covered by the report: The ten largest customers combined accounted for around 76 % of net revenues in 2009/2010, which was down from 84 % in the year before. The five largest customers were responsible for nearly 58 % and the largest customer was responsible for around 19 %; the comparable values for the 2008/2009 financial year were 66 % and 21 %, respectively. Nearly 2.1 million of the increase in the Group s net revenues was accounted for by existing business with project, maintenance, and operating services in the Interactive Marketing segment. The Interactive Media and Interactive Commerce segments contributed 0.7 million and 0.5 million, respectively, to the increase in consolidated revenues. The amount While the absolute growth in the Interactive Marketing segment was a good 0.15 million below that of the 2008/2009 financial year, the combined growth from the two other segments, the establishment or expansion of which SinnerSchrader invested in last year, rose by nearly 0.55 million. Net revenues in the Interactive Marketing segment increased by 10.5 % in the 2009/2010 financial year to reach a volume of 21.8 million. Unlike the previous financial year, when the spotmedia agency was solely responsible for the positive revenue development in the Interactive Marketing segment, over 60 % of which was consolidation-related, the SinnerSchrader agency and spot-media agency achieved organic revenue growth in this segment with increases of 1.2 million and 0.9 million, respectively. The new customer rate in the segment amounted to 10.3 %, and the SinnerSchrader agency above all achieved welcome success in 2009/2010 with the establishment of new customer relationships with great potential for the coming years. Prices in the Interactive Marketing segment were stable in the 2009/2010 financial year, but they already showed signs of a slight rise thanks to the dynamic growth in demand towards the end of the year.

15 15 Joint Status Report In the Interactive Media segment, SinnerSchrader s net revenues grew by 51.4 % to nearly 2.1 million in the year covered by the report. The growth in business volume was due not least to the acquisition of the newtention Group last year. The newtention Group s contribution to net segment revenues rose because the newtention Group was included for the entire 12-month financial year for the first time instead of just nine months as in the previous year and because of the gradual expansion of revenues through the provision of ad serving, targeting, and re-targeting technologies in the form of softwareas-a-service. Additionally, the online media business, which was spun off as a separate company in the course of the year, was able to focus more clearly on performance display marketing based on newtention s technology and achieved initial success in the acquisition of new customers with this honed profile. In the spring of 2010, the segment gained s.oliver as a customer for performance display marketing. The overall new customer rate was a welcome 27.2 %. While the segment s net revenues rose, the gross revenues, which include the costs for advertising space passed on to customers, fell by around 1.2 million. This reflects the change in the business model of the Interactive Media segment brought about by the acquisition of the newtention Group and the focus on performance display marketing. On the level of the Sinner- Schrader Group, the gross revenue growth amounted to 3.8 %, which was considerably lower than the net revenue growth. The volume of business in the Interactive Commerce segment reached nearly 0.7 million in the first full year of business activity for next commerce GmbH, which was established in May In the months from May to August 2009, which fell in the previous 2008/2009 reporting period, the net revenues amounted to 0.15 million. next commerce GmbH launched its first shop for the Olsen fashion brand in October 2009, and since then it has earned a commission on the sales generated by the shop in accordance with its business model. Furthermore, in May 2010, next commerce assumed partial responsibility on a service basis for the management of an existing online shop for another fashion brand with the goal of assuming full responsibility in the course of the year in return for a commission on sales. In the revenue distribution by sectors, there was a continuation of the development which began last year in which the proportion of revenues from customers in the Retail & Consumer Goods sector increased at the expense of nearly every other sector in which SinnerSchrader operates; the proportion of revenues here rose by another 6.4 percentage points compared to the year before, reaching 38.0 %. The rise in net revenues generated with companies in the Retail & Consumer Goods sector amounted to 2.5 million, which equates to a growth rate of 37.5 %.

16 16 Joint Status Report Only the proportion of revenues from the Financial Services sector remained stable at 26.6 %, with net revenue growth of 0.8 million or 14.7 % compared to the year before. The volume of business with customers from the other large sectors Telecommunications & Technology, Transport & Tourism, and Media & Entertainment declined by 0.1 million to 0.2 million. The proportions of revenues fell by 3.0, 2.5, and 1.4 percentage points, respectively, to 16.4 %, 12.5 %, and 2.8 %. The proportion of revenues from companies in other sectors rose slightly by 0.4 percentage points to 3.7 %, which corresponds to growth of 0.2 million. 4.2 Operating Result (EBITA) Unlike in the previous financial year, the growth of revenues in 2009/2010 had a positive effect on the Group s key performance indicator, the development of the operating result as measured by the earnings before interest, taxes, and amortisation effects from acquisitions (EBITA). This effect arose despite the fact that the burdens caused by initial losses from the establishment of the new ad serving and e-commerce outsourcing business units, which began in 2009, were even higher than in the year before. The EBITA reached 2.2 million in the 2009/2010 financial year. This was an improvement of 0.75 million compared to last year, a 52 % increase that was stronger than expected and disproportionately high compared to the growth of revenues. The 0.25 million increase in initial losses, which amounted to 1.25 million, was compensated for by the good performance of the established business units. As a result of the disproportionate improvement in earnings, the operating margin the relation of the EBITA to net revenues rose from 6.9 % in the previous year to 9.1 % in the year under review. Without the initial losses in ad serving and e-commerce outsourcing, the operating margin would have been 14.4 % with an EBITA of a good 3.4 million. The distribution of the operating result across the four quarters shows a pattern similar to that of the previous year. A strong first quarter with an EBITA of 0.6 million was followed by two considerably weaker quarters with an EBITA of 0.2 million each. The fourth quarter was once again the best of the financial year: With an EBITA of 1.1 million, SinnerSchrader was able to surpass the one-million mark in its operating result for the first time since the second quarter of 1999/2000. Development of Operating Result by Segments The improvement in the result was driven first and foremost by the well-established Interactive Marketing segment. Following an EBITA of 2.6 million and a margin of 13.2 % in the previous year, this segment achieved an EBITA of 3.4 million and a margin of 15.7 % in the year under review. This development stemmed from a variety of factors, including a decrease in the use of freelancers in favour of SinnerSchrader s own resources as well as better operative control of projects and employee

17 17 Joint Status Report deployment, which led to higher capacity utilisation and improved contribution margins. Additionally, there were 4 more working days than in the year before, an increase of nearly 2 %. The Interactive Media segment achieved a positive operating result of 0.2 million in the 2009/2010 financial year after slipping into the red in the previous year with an EBITA of 0.1 million on account of entering the ad serving business with the purchase of the newtention Group. The decline in initial losses in the ad serving business contributed only 0.1 million to this return to the profit zone. Though the ad serving business of the newtention Group reached the break-even point on a monthly basis for the first time in August 2010, the improvement in the EBITA was minimal for the year as a whole because the newtention Group contributed to revenues and earnings for the entire financial year for the first time, as opposed to the previous year when it was consolidated in the SinnerSchrader Group for only nine months. Even though the direct contribution to earnings from the ad serving business was still negative in the year covered by the report, direct access to the latest targeting and re-targeting technology developed by the newtention Group played a key role in the welcome development of SinnerSchrader s established media business, which showed an improvement in net revenues and EBITA compared to the year before thanks to convincing performance-based offers. In the Interactive Commerce segment, the operating losses in the year of the report increased according to plan. The EBITA amounted to 0.8 million in the 2009/2010 financial year compared to 0.4 million in the year before. This was due primarily to the nature of the outsourcing business operated by next commerce GmbH which is orientated on multi-year projects the first of which was launched in October 2009 in which the break-even is generally preceded by a one- to two-year start-up phase with negative results. Furthermore, the Interactive Commerce segment was first established in the course of the 2008/2009 financial year, so negative development was expected in the overhead costs compared to the year before as well. As in the previous year, the costs remaining with the holding company amounted to 0.6 million. Cost increases in certain central Group functions were countered by higher cost amounts being passed on to the operative subsidiaries due to the expansion of business. Development of Costs by Functions The manner in which function costs (revenue, marketing, general and administrative, and research and development costs) are reported in the Statements of Operations cannot be compared to previous reports because of a different interpretation of IFRS rules in International Accounting Standard ( IAS ) 1. The amortisation

18 18 Joint Status Report expenses that is, the depreciation of intangible assets that were to be entered in the balance sheet in the course of acquiring companies or parts of companies in the context of the purchase price allocation and that, unlike any resulting goodwill, are to be depreciated according to schedule in the event of a limited usage period are no longer reported separately in the Statements of Operations but are instead distributed across one or more function costs depending on the type of asset. This means that the key performance indicator in the Sinner- Schrader Group, the EBITA, can no longer be derived directly from the Statement of Operations without additional information. However, the EBITA and the reconciliation of the EBITA to the earnings before taxes reported in the Statements of Operations are still listed in the segment report in the Notes in Section 3. Additionally, the explanation of the development of the function costs now includes components that, in accordance with the steering philosophy of the SinnerSchrader Group, are not assigned to the operative division. In total, there were amortisation expenses of 0.6 million in the 2009/2010 financial year, of which 0.35 million was assigned to revenue costs and a good 0.25 million was assigned to marketing costs. In the previous year, amortisation expenses of 0.5 million were reported separately in the Statements of Operations. For the purposes of comparison and in accordance with the relevant IFRS rules, the previous year s figures were adjusted, with nearly 0.3 million being assigned to revenue costs and 0.2 million to marketing costs. Following this new reporting method, the gross profit margin for the 2009/2010 and 2008/2009 financial years was 1.5 and 1.3 percentage points lower, respectively, than the value posted following the former reporting method with separately posted amortisation expenses. The ratio of marketing costs to net revenues has been raised by 1.1 percentage points in each of the two years due to the change in reporting. From the 2008/2009 to 2009/2010 financial year, revenue costs rose disproportionately slowly compared to revenues, so the gross profit margin improved by 0.6 percentage points. The effects of the clear operative improvements in the Interactive Marketing segment and the good margin development in the media business were somewhat mitigated by the fact that the initial losses in the Interactive Commerce segment in particular were shifted to the revenue costs and thus to the gross profit, unlike in the previous year. Marketing costs rose in absolute terms by 0.2 million in the course of business growth. Here, too, however, the increase was disproportionately small and the ratio of marketing costs to net revenues declined accordingly by 0.3 percentage points to 9.8 %.

19 19 Joint Status Report The decrease in the ratio of general and administrative costs to net revenues was even more considerable; it fell by 1.6 percentage points to 14.5 % because of the decline above all in the expenses for the establishment of new fields of business in the year under review, which were assigned to the general and administrative expenses In absolute terms, the general and administrative expenses increased by 0.1 million. The proportion of research and development costs rose again in the 2009/2010 financial year by 0.1 percentage points to 1.7 %, which corresponds to nearly 0.1 million in additional expenses in this cost category. The overwhelming majority of research and development costs were incurred for the ongoing development of the n7 software of the newtention Group. In addition to this, research and development expenses arose in the agencies for the maintenance and further development of the component libraries, which are used primarily in the development of online shops. The increase in research and development costs came about primarily because the newtention Group contributed to the Group s revenues and costs for the full 12 months of the financial year, as compared to nine months in the year before. Personnel costs rose by 1.9 million or 14.2 % to 15.3 million. Revenue and personnel costs developed nearly in parallel in the 2009/2010 financial year, with the result that the personnel cost rate improved only minimally to 64.0 %. The rise in personnel costs can be attributed on the one hand to the fact that personnel capacity increased by 11 % from 244 full-time employees on average in the 2008/2009 financial year to 271 employees in the year under review. On the other hand, the average personnel costs per full-time employee rose by 2.8 %. The development of all other cost types was disproportionately slow compared to revenues. The expenses for purchased goods and services rose by only 3.8 % or 0.1 million to 2.45 million. Material and external costs still made up 10.2 % of net revenues in the year of the report, which is 1.0 percentage point less than in the previous year. SinnerSchrader continued to replace external service providers with internal employees, which contributed to the improvement in the margin. This can also be seen in the increase in added value net revenues minus the expenses for purchased goods and services per employee, which rose by 4.1 % to 79,200. Development of Costs by Cost Types In accordance with the service focus of the SinnerSchrader business model, the expansion of the volume of business went hand in hand with a significant increase in personnel costs. Depreciation without amortisation expenses remained unchanged from the previous year. It amounted to 0.5 million, which corresponded to 2.2 % of the net revenues of 2009/2010 and 2.5 % of the net revenues of 2008/2009.

20 20 Joint Status Report The other operating expenses rose by 7.0 % to 3.5 million, particularly in the area of premises, travel, and telecommunication costs. However, the proportion of net revenues accounted for by these expenses declined by 1.0 percentage point to 14.6 %. The other income and expenses fell in 2009/2010 by a total of 0.05 million. In the year before, it was almost 0.1 million. In both years, income arose primarily from the dissolution of liabilities and accrued expenses. 4.3 Consolidated Income The welcome operative development of SinnerSchrader did not have a positive effect on the bottom line before the end of the 2009/2010 financial year. Though the Statements of Operations for 2009/2010 show an increase of nearly 0.2 million in the consolidated income compared to the year before, the consolidated income relevant to SinnerSchrader shareholders, without the income attributable to external shareholders, amounted to 1.1 million in the year under review and thus did not quite reach the previous year s level of 1.2 million. After acquiring all shares of newtention technologies GmbH at the end of May 2009, the initial losses from the newtention Group were attributed fully to SinnerSchrader s shareholders. Prior to this, initial losses in the amount of 0.3 million after taxes were still attributable to the previous owners for half a year despite the fact that the newtention Group was consolidated for the first time as of 1 December Three other effects associated with the newtention takeover had a negative influence on the consolidated income attributable to SinnerSchrader shareholders in the 2009/2010 financial year compared to the year before. First of all, the n7 software activated in the context of the purchase price allocation for the newtention takeover was depreciated for a full twelve months in the year under review as opposed to just nine months in the previous year. This primarily caused amortisation expenses in the report period to rise by 0.1 million to 0.6 million. Secondly, the debt waiver of a silent partner in the context of the takeover of the newtention Group resulted in a one-time gain of 0.1 million in the financial result of the previous year, but there was no comparable gain in the 2009/2010 financial year. Finally, with an effective tax rate in the Group of 25 %, the income tax burden in the previous year was comparatively low due to a tax depreciation allowance from the newtention transaction for which there was no counterpart in the IFRS accounting rules for the Group and which thus led to a permanent difference. This was also a one-time effect. In the

21 21 Joint Status Report year under review, the effective tax rate was 33 %. The current and deferred income tax liabilities therefore rose for the 2009/2010 financial year compared to the year before by nearly 0.25 million to 0.55 million. under review resulted in rounded-up earnings per share of 0.10, which is 0.01 lower than the previous year. 4.4 Cash Flows Additionally, the income from the investment of liquid funds declined as a result of another significant decrease in interest rates. Over the course of the SinnerSchrader financial year, the 1-month and 3-month Euribor reached average rates of 0.46 % and 0.67 %, respectively, which were much lower than the previous year s rates of 2.1 % and 2.5 %, respectively. Sinner- Schrader was able to largely shield itself from the full effects of the development of interest rates at the short end of the interest curve thanks to its investment in the previous financial year in securities with a remaining term of up to two years. Though the average liquidity rose from 7.9 million in the previous year to 8.2 million in the period under review, this still fell short of the previous year s result by nearly 0.1 million. Together with the lack of the debt waiver from the silent partner in the newtention Group and slightly higher interest expenditure from the calculative compounding of non-current liabilities, the financial result declined by a total of 0.2 million to nearly 0.1 million. The consolidated income of 1.1 million attributable to SinnerSchrader shareholders and a lower number of shares in circulation due to the buying back of 90,289 shares in the year In the 2009/2010 financial year, the cash flows of the Sinner- Schrader Group without the additions or disposals of securities that take place in the context of investment decisions for the liquidity reserve led to an inflow of funds in the amount of 0.3 million. In the previous financial year, there was an outflow of funds in the amount of 1.1 million. This change can be attributed first and foremost to the fact that, in the year covered by the report, nearly 0.7 million less was used for investments and 0.7 million less for the dividend payment and share buyback, amounting to around 1.3 million less. Furthermore, 0.1 million more was generated from operating activities than in the year before. The cash flows from operating activities reached a good 2.3 million in the year of the report, up from 2.2 million in the year before. The cash flows from operating activities were only marginally stronger despite the considerable improvement in the operating result primarily because of the higher amount of funds tied up in receivables and unbilled services for customer projects. The very dynamic development of revenues and high rate of new customers in the last quarter in particular led to this

22 22 Joint Status Report increase in open items vis-à-vis customers, in which additional funds amounting to nearly 1.3 million were tied up. In the 2008/2009 financial year, both items together still had a neutral effect on cash. In the year of the report, funds of nearly 0.95 million were used for investments in the narrower sense, that is, for the purchase and sale of securities; of this amount, 0.55 million went towards earn-out payments which became due in the financial year for acquisitions, for the takeover of spot-media AG in 2008, and for the acquisition of a customer relationship and the associated customer team by spot-media AG in In the 2008/2009 financial year, SinnerSchrader used nearly 1.1 million in total for earn-out payments and for the acquisition of the newtention Group. Around 0.4 million was used in 2009/2010 to replace software and equipment, expand the central infrastructure, and equip workstations. A good 0.1 million more was used for this in the previous year. The consumption of funds from financing activities decreased considerably in the year of the report compared to the previous year. On the one hand, the dividend payment of 0.9 million in December 2009 was nearly 0.5 million lower than the dividend in December At the proposal of the Supervisory Board and Management Board, the Annual General Meeting on 16 December 2009 agreed to lower the dividend to 0.08 per share in light of the burdens from the establishment of the new ad serving and e-commerce outsourcing fields of business. SinnerSchrader also used around 0.2 million less in cash to buy back treasury stock in the year under review than in the previous year. The cash flows from financing activities thus show that the consumption of funds decreased overall from 1.7 million in the previous year to 1.1 million in 2009/2010. The cash flows from the purchase and sale of securities show that SinnerSchrader shifted 1.3 million on balance from cash to securities. With an increase in the liquidity reserve totalling 0.3 million, this means that cash decreased in the 2009/2010 financial year by around 1.0 million in favour of securities. 4.5 Asset and Financial Situation The development of the asset situation was shaped primarily by business growth which led to an increase in current receivables on the one hand and current liabilities and accrued expenses on the other. The current assets without cash and securities (liquidity reserve) grew by a good 1.3 million or 20.5 % to 7.5 million. This increase, which was considerably higher than the growth of revenues, can be attributed to the revenue dynamics of the last three months of the financial year. The liquidity reserve consisting

23 23 Joint Status Report of cash and securities increased in the financial year by 0.3 million to 8.3 million as of 31 August However, current liabilities also increased on a similar scale to current assets without the liquidity reserve. Not only the liabilities vis-à-vis suppliers, but also deposits from customers, accrued expenses (particularly the accrued expenses for personnel costs relating to the capacity expansion), and tax liabilities were higher on the balance sheet date than in the previous year. Non-current assets, unlike the current assets, declined by a total of 0.9 million. The amortisation of activated intangible assets with a limited usage period, which are to be depreciated according to schedule, relating to the purchase price allocations for the acquisitions of the previous financial years played the largest part in this decline. These consisted primarily of the n7 software activated in the course of the newtention takeover, along with a customer base and a customer relationship which were activated with usage periods of 2.5 and 4 years, respectively, of which the customer base was fully amortised in the course of the financial year. At the time of the initial consolidation, the usage period for the software was estimated to be 4 years, of which 21 months had passed by the balance sheet date on 31 August Since no further acquisitions were carried out in the 2009/2010 financial year and the investments in the purchase of software for the central infrastructure and/ or workstations were on a normal level, the value of the other intangible assets declined by a good 0.5 million. The goodwill decreased by nearly 0.2 million when the outstanding earn-out payments were re-estimated. In light of the below-average volume of investments in the replacement or expansion of equipment, the value of property and equipment fell by 0.1 million. Finally, other prepaid expenses in the amount of 0.1 million were used in the period of the report. Parallel to this, the non-current liabilities decreased by 0.7 million. The remaining earn-out obligations as of 31 August 2010 were a good 0.45 million below the value on 31 August 2009 as a result of the earn-out payments made in the 2009/2010 financial year and reduced estimates for the remaining amounts to pay. The deferred tax liabilities fell by nearly 0.25 million primarily on account of the amortisation expenses. Shareholders equity increased only slightly by 0.04 million during the financial year. The positive balance from the consolidated income attributable to SinnerSchrader shareholders and the value of the dividend payment in the amount of nearly 0.2 million was consumed largely through the buy-back of treasury stock with a corresponding reduction in shareholders equity

24 24 Joint Status Report of 0.2 million. The shareholders equity rate fell by nearly 2 percentage points to 60 % compared to its value on 31 August The return on shareholders equity, based on the average shareholders equity and the income attributable to Sinner- Schrader s shareholders, amounted to 8.8 % in the 2009/2010 financial year, down from 9.8 % in the year before. newtention acquisition. The number of full-time employees in the Interactive Commerce segment rose by 1.5 to an average of 3.5 for the year. Only the cross-segment holding company had fewer full-time employees in 2009/2010 than in the year before; the average personnel capacity here decreased by 1.5 to nearly 23 full-time employees. 4.6 Employees In the knowledge that attracting qualified employees will be critical to further development in many industries, particularly the service industry, SinnerSchrader used its good operative development as an opportunity to expand its personnel capacity and thus reduce the use of external service providers wherever possible and reasonable. This meant that the average number of full-time employees rose by 27 to 271 in the 2009/2010 financial year. This corresponds to an increase of 11.1 %. The Interactive Marketing segment had around 25 full-time employees more than in the previous year, which resulted in an average personnel capacity for the year of 225 full-time employees. In the Interactive Media segment, the personnel capacity rose only slightly by 2 employees to 20 full-time employees in 2009/2010 following the significant increase in personnel in the previous year as a result of the Categorised by functions, there were 80 full-time employees assigned to consulting (including media planning) in 2009/2010, nearly 125 full-time employees in technology (including technical operations), and 35 full-time employees in creative roles. The remaining 31 full-time employees held administrative positions. At the end of the financial year, SinnerSchrader had 305 employees (including the Management Board and managing directors). This was 26 more than at the end of the previous year. There were 257 permanent employees, 19 employees in training, and 29 employees working as students or interns. As of 31 August 2010, the Interactive Marketing segment had 257 employees, the Interactive Media and Interactive Commerce segments had 20 and 4 employees, respectively, and SinnerSchrader AG had 24 employees.

25 25 Joint Status Report 05 Development and Situation of SinnerSchrader AG SinnerSchrader AG is the managing holding company of the SinnerSchrader Group. Its business activities comprise developing and implementing the Group strategy, expanding the business portfolio, guiding and controlling the operating Group companies and financing them, administering and controlling Group liquidity, managing the German tax integration, performing central Group tasks such as investor relations work, providing and administering the infrastructures jointly used by the Group companies, in particular the office space, and centrally providing administrative services. Development of Income Situation With respect to the provision of administrative services and infrastructure, SinnerSchrader AG is in a direct business relationship with its subsidiaries; it charges for the services rendered and earns its own revenues from this. In the 2009/2010 financial year, these revenues amounted to 3.15 million and were thus 0.05 million above the value of the previous year due to the expansion of the business portfolio. Other operating income in the amount of 2.3 million arose in the year of the report. This came nearly entirely from the reversal of impairment losses for the stake in SinnerSchrader Deutschland GmbH. This increase in value resulted from the good operative performance of the agency business carried out under the Sinner- Schrader brand as well as from the discount factors for the valuation calculation which were adjusted because of the low interest level. On the basis of the historical acquisition costs for the company, which amounted to 19.8 million after deduction of the spun-off media business, it was to be reported with an effect on profits under investments, which subsequently amounted to 15.0 million. As of 31 August 2010, there was no opportunity for reversals of impairment losses or unscheduled depreciation of the balance sheet items for the other AG investments. In the year before, other operating income in the amount of 0.2 million arose primarily through the resolution of accrued expenses and the sale of securities in the context of liquidity management. The comparable figures for the 2009/2010 financial year were under 0.05 million in total.

26 26 Joint Status Report A third major source of income for SinnerSchrader AG was the transfer of profits through the profit and loss transfer agreements with its subsidiaries. Such agreements exist between the AG and SinnerSchrader Deutschland GmbH, spot-media AG, and, since the 2009/2010 financial year, next commerce GmbH, through which their results are posted as income from the transfer of profits or expenses from the transfer of losses in the individual result of the AG. Through the retroactive spin-off of the media business of SinnerSchrader Deutschland GmbH to form the independent mediaby GmbH, the profits from the media business were no longer part of the profit transfer in the 2009/2010 financial year. The newtention Group was also not included in the domestic group of companies of SinnerSchrader AG. The transfer of profits and losses led to income of around 2.2 million on balance in 2009/2010, down from 2.9 million in the year before. The decline compared to the previous year was due to the loss of the profit transfer from the media business and to the inclusion in the group of companies of next commerce GmbH, which is still in its initial loss-making phase. The AG generated additional income in the amount of 0.15 million from interest on the Group s liquidity reserve, which is largely centrally managed. This income was at the same level in the last financial year. These proceeds and income of around 8.0 million in total were countered by expenses of 4.0 million in total. The personnel costs of the AG amounted to 1.5 million in the year of the report. Because there were around 3 fewer full-time employees on average in the financial year, these costs were 0.2 million below those of the previous year. The decrease in the number of employees was associated with the foundation of next commerce GmbH at the end of May 2009, to which the founding team was transferred from the AG. The expenditure for purchased services, expenses for depreciation, and other operating expenses were on the level of the previous year, amounting to 0.2 million, 0.2 million, and nearly 1.9 million, respectively. Interest and similar expenses, which arose primarily through internal liquidity pooling in the Group vis-à-vis the subsidiaries, amounted to nearly 0.1 million in 2009/2010 compared to 0.2 million in the year before. This decline can be attributed to the fact that the internal interest rate for investments by the AG was adjusted in accordance with the development of the external interest achievable by the AG. SinnerSchrader AG still has no interest-bearing liabilities outside the Group.

27 27 Joint Status Report On balance, the AG generated income of 4.0 million from ordinary activities in 2009/2010, compared to 2.1 million in the 2008/2009 financial year. The rise in income was therefore slightly below the contribution to income made by the reversal of impairment losses for the stake in SinnerSchrader Deutschland GmbH. Since the reversal of impairment losses did not trigger any income tax burden, the tax burden was at the level of the previous year, amounting to 0.7 million. The annual net income therefore reached 3.3 million, surpassing the previous year s value by 1.9 million. Of this annual net income, the income from the reversal of impairment losses of 2.3 million was reported under other reserves in accordance with Article 58 para. 2a of the German Stock Corporation Act. Of the remaining net income of 1.1 million, half was also posted to the other reserves in accordance with Article 58 para. 2 of the German Stock Corporation Act. The remaining 0.5 million, together with the remaining profit from the 2008/2009 financial year of 0.85 million after the dividend payment in December 2009 of 0.9 million, resulted in accumulated income of 1.35 million for the 2009/2010 financial year. Development of Asset and Financial Situation The development of the asset and financial situation of the AG was shaped by the reversal of impairment losses for Sinner- Schrader Deutschland GmbH, which was countered on the liabilities side by a corresponding increase in shareholders equity. The total assets of the AG as of 31 August 2010 had risen compared to 31 August 2009 by a good 2.8 million. As of 31 August 2010, the shareholders equity rate was 91 %. The shareholders equity rate of the previous year was also 91 %. The shares in affiliated companies rose by a total of 2.4 million; in addition to the reversal of impairment losses, the payments to the capital reserve of newtention technologies GmbH and next commerce GmbH led to a corresponding increase in the respective stakes. The tangible and intangible assets declined by 0.1 million primarily due to the scheduled depreciation of leasehold improvements in the rented offices in Hamburg and Frankfurt am Main, which were countered only by insignificant investments. The current assets rose as of the balance sheet date compared to 31 August 2009 by nearly 0.4 million in total, whereby the portion of the liquidity reserve held by the AG and the value of the treasury stock rose by 0.5 million and the receivables and other assets decreased by 0.1 million. In the course of the 2009/2010 financial year, liquid funds in the amount of around 0.2 million were invested in the buy-back of 90,289 shares of treasury stock. As of the balance sheet date, SinnerSchrader held 360,945 shares of treasury stock with an average purchase price of 1.65 per share as of 31 August 2010.

28 28 Joint Status Report 06 The shareholders equity rose by 2.5 million to nearly 30.7 million. Due to the allocation to other reserves in accordance with Article 58 para. 2 and para. 2a of the German Stock Corporation Act, the rise in shareholders equity took place in the reserves, which increased by 2.8 million. The accumulated income, which amounted to 1.7 million in the previous year because there was no allocation to other reserves, fell by 0.3 million to 1.4 million. The tax reserves also increased significantly by 0.6 million to 1.7 million because there was no assessment for the previous year in the course of the 2009/2010 financial year. The other reserves and liabilities fell by 0.25 million mainly because other earn-out payments were made in the course of the financial year for which reserves had been formed. Corporate Governance Declaration and Explanation of Compensation System for the Company Boards 6.1 Corporate Governance Declaration As a German stock corporation, SinnerSchrader AG is managed in compliance with the German Stock Corporation Act and the principles of the most recent version of the German Corporate Governance Code. The Company organs comprise the Annual General Meeting, the Supervisory Board, and the Management Board. The statutes of the Company specify the tasks and rights of the Company organs within the framework established by the German Stock Corporation Act. The internal operations and decision-making processes of the Company organs are regulated in detail by rules of procedure. The Supervisory Board has decreed rules of procedure for itself through a resolution and has also decreed the rules of procedure for the Management Board. The Annual General Meeting did not decree rules of procedure for itself in accordance with Article 129 para. 1 of the German Stock Corporation Act. One fundamental principle of German stock corporation law is the so-called dual management system, according to which the management board, which is the executive organ, and the supervisory board, which monitors the work of the management board, each have their own competencies and do not have overlapping members. Within this dual management system, the Management Board and Supervisory Board of SinnerSchrader AG work closely together in the interests of the Company. The management board of a stock corporation is appointed by the supervisory board and is independently responsible for managing the enterprise. It carries out business following the law, the statutes of the company, and the rules of procedure decreed by the supervisory board for the management board. It regularly, promptly, and comprehensively reports to the supervisory board on the business development of the company and group as well as on significant business transactions. The

29 29 Joint Status Report statutes of the company and the rules of procedure of the management board also specify which transactions and decisions must be approved in advance by the supervisory board. The principle of overall responsibility applies here, according to which the members of the management board bear joint responsibility for the entire management of the company and jointly determine the corporate strategy and the essential corporate policy. The rules of procedure for the management board define the principles of cooperation within the management board. In particular, they regulate the departmental responsibilities of each management board member, the decisions to be made solely by the entire management board, the details of the adoption of resolutions and the coordination of work within the management board through regular management board meetings as well as the rights and duties of the chairman of the management board. The Management Board of SinnerSchrader AG currently consists of two members. Mr Matthias Schrader, one of the two founders and the largest individual shareholder of the SinnerSchrader Group, is the Chairman of the Management Board of SinnerSchrader AG and is responsible for the strategic development of the Group managed by the AG as well as for marketing and sales. Mr Schrader has currently been appointed until 31 December Mr Thomas Dyckhoff is the Chief Financial Officer of SinnerSchrader AG and is responsible for accounting, controlling, investor relations, legal issues, and human resources. Mr Dyckhoff has currently been appointed to the Management Board until 31 December In the context of controlling the Group companies, both Board members hold various roles on the boards of the subsidiaries. In particular, Mr Schrader and Mr Dyckhoff are managing directors of the largest subsidiary, SinnerSchrader Deutschland GmbH. More information on the Management Board members can be found on the Company website at Vorstand.html. The Supervisory Board monitors the Management Board and advises it on the management of the Company. The key tasks of the Supervisory Board include appointing members of the Management Board, establishing the compensation for these members, acting as the representative of SinnerSchrader AG to the Management Board, monitoring the work of the Management Board and the Company, particularly as regards accounting processes, the effectiveness of the internal monitoring system, and the effectiveness of the risk management system, commissioning the financial auditors and monitoring the financial audit, approving the Annual Financial Statements and Consolidated Financial Statements, and making decisions regarding the business transactions that require approval under the law, the statutes of the Company, or the rules of procedure of the Management Board. The rules of procedure of the supervisory board define the fundamental principles of cooperation within the supervisory board.

30 30 Joint Status Report The chairman of the supervisory board coordinates the work of the supervisory board, leads its meetings, and externally represents the concerns of the supervisory board. The Supervisory Board of SinnerSchrader AG consists of three members who were elected by the Annual General Meeting. On account of its manageable size, the Supervisory Board declined to form any committees. Dieter Heyde has been Chairman of the Supervisory Board since 16 December 2009 and is a Managing Partner of SALT Solutions GmbH, Würzburg. He has been a member of the Supervisory Board since 27 January 2006 and was its Deputy Chairmen until 16 December of the Annual General Meeting which will vote on discharging the Supervisory Board for the financial year ending on 31 August More information on the Supervisory Board members can be found on the Company website at s2ir/de/aufsichtsrat.html. On 16 December 2009, in accordance with Article 161 of the German Stock Corporation Act, the Supervisory Board and Management Board of SinnerSchrader AG submitted the declaration of compliance with the recommendations of the Government Commission on the German Corporate Governance Code from 18 June 2009: Prof. Cyrus D. Khazaeli, a professor for information and interaction design at the Berliner Technische Kunsthochschule, has been Deputy Chairman of the Supervisory Board since 16 December Prof. Khazaeli was appointed to the Supervisory Board on 12 November 2007 by court order until the following Annual General Meeting on 19 December The Annual General Meeting then elected Prof. Khazaeli to the Supervisory Board. The Management Board and Supervisory Board of Sinner- Schrader declare that the recommendations of the Government Commission on the German Corporate Governance Code in the version of 18 June 2009 were met, with the following restrictions, in the 2008/2009 financial year ( ) and will be met in the current 2009/2010 financial year ( ) and in future: The third member of the Supervisory Board is Mr Philip W. Seitz, General Counsel & Director of Government Affairs of Tchibo GmbH, Hamburg. Mr Seitz was elected to the Supervisory Board by the Annual General Meeting on 16 December All Supervisory Board members have been appointed to the Supervisory Board by the Annual General Meeting until the end Management Board Section 4.2.3: Variable compensation components and share options have been waived in the compensation package of Mr Matthias Schrader, CEO of SinnerSchrader AG, due to Mr Schrader s high proportion of shares in the Company.

31 31 Joint Status Report Section 4.2.3: The share options awarded to other Management Board members originate from the 2000 and 2007 Stock Option Plans adopted by the Annual General Meeting. In accordance with the conditions adopted by the Annual General Meeting, the exercise criteria for the options involve reaching a share price increase of 20 % for the 2000 Plan and 30 % to 50 % for the 2007 Plan above the average price of the SinnerSchrader share on the ten and five trading days prior to allocation, respectively, waiting periods of two to four and three to five years, respectively, and a term of six and seven years, respectively. The option conditions make no provision for a cap in the event of extraordinary, unforeseen developments because caps would run counter to the desired incentive effect, particularly in the case of multi-year waiting periods. Supervisory Board Section 3.8: D&O insurance with no excess has been taken out for the members of the Supervisory Board. However, there are plans to change the D&O insurance by 30 June 2010 by introducing an excess in accordance with the recommendations of the Corporate Governance Code. Section ff.: The Supervisory Board has not formed any committees because it only comprises three members. The declaration can be found on the Company website at Compensation System for the Management Board The compensation system for the Management Board has not changed since the 2008/2009 Joint Status Report and Consolidated Financial Statements, with the exception of the increase in the excess for D&O insurance which is in compliance with the law. The specification of the structure and the level of compensation for the Management Board is the duty of the Supervisory Board. The compensation system for the Management Board is aimed at paying the individual members appropriately according to their areas of activity and responsibility while taking adequate account of individual performance, company success, and the

32 32 Joint Status Report development of the share price by means of a substantial variable portion. It is made up of the following components: a fixed basic salary to be paid in twelve equal monthly instalments a performance-related annual bonus, partially on the basis of achieving individual goals and company goals laid down in the annual plan and partially as management bonuses based on the Group result a share-based payment component with a medium- to long-term incentive effect orientated on the relevant period other benefits (mainly a company car, accident insurance, D&O insurance with an excess, the reimbursement of expenses) The individual weighting of each component takes account of the fact that the Management Board members hold varying stakes in the Company. As of 31 August 2010, Matthias Schrader, co-founder of SinnerSchrader AG, held 2,455,175 shares or % of all shares issued. When Thomas Dyckhoff joined the Management Board of SinnerSchrader AG in 1999, he acquired 49,950 shares at the share price of the time, which he still holds and which correspond to 0.4 % of all shares issued. By exercising share options in the 2006/2007 and 2007/2008 financial years, he increased his proportion by 12,500 shares each time to 74,950 shares or 0.6 % of all shares issued. The salary package of Mr Schrader therefore comprises only a fixed basic salary and the other benefits, whereas all components are part of Mr Dyckhoff s salary agreement. As a share-based compensation component, Mr Dyckhoff was, in connection with his reappointment for the period from 1 January 2008 to 31 December 2012, promised 75,000 share options from the 2007 Stock Option Programme, which was decided at the Annual General Meeting on 23 January The 2007 Stock Option Programme provides for an exercise price in the amount of the average closing price of the SinnerSchrader share on the five trading days before allocation, exercise thresholds of 30 %, 40 %, and 50 % above the exercise price, and waiting periods of three, four, and five years for one-third each of the allocated options. The D&O insurance concluded for the members of the Management Board as part of the other benefits provided for an excess of 10,000 until 30 June As of 1 July 2010, the excess prescribed by Article 93 para. 2 sentence 3 of the German Stock Corporation Act went into effect. The members of the Management Board are subject to a postcontractual ban on competition which provides for remuneration for observing this period in the amount of 50 % of the most recent fixed annual compensation payment received. With respect to the compensation payments, it was agreed with the members of the Management Board that they must fulfil the recommendations of the Corporate Governance Code Section

33 33 Joint Status Report An individualised and itemised overview of the compensation for the members of the Management Board for the 2009/2010 financial year can be found in the Notes to the Consolidated Financial Statements and the Notes to the SinnerSchrader AG Annual Financial Statements. 6.3 Compensation System for the Supervisory Board The compensation system for the Supervisory Board is also unchanged. The Chairman of the Supervisory Board receives fixed and variable compensation that is double the compensation of the regular members. His deputy receives one and half times the fixed and variable compensation. An individualised and itemised overview of the compensation for the members of the Supervisory Board for the 2009/2010 financial year can be found in the Notes to the Consolidated Financial Statements and the Notes to the SinnerSchrader AG Annual Financial Statements. The compensation for the regular Supervisory Board members is composed of the following components in accordance with the Annual General Meeting resolution of 28 January 2004: basic compensation of 4,000 per year variable compensation of a further 4,000 per year maximum which is dependent on the increase in the consolidated income per share in comparison to the previous year, with a variable payment of 400 being due for every 0.01 positive change per share expenses D&O insurance without excess reimbursement of the turnover tax to be paid on the Supervisory Board compensation and the expenses 07 Takeover Information Pursuant to Article 289 Para. 4 and Article 315 Para. 4 of the German Commercial Code The subscribed capital of SinnerSchrader AG is divided into 11,542,764 individual no-par value share certificates with a calculated face value of 1 issued in the name of the owner. Different classes of shares have not been formed. The members of the Management Board are underwriters of a consortium agreement in which the pre-ipo investors in Sinner- Schrader AG are obligated to the pooling of voting rights in the event of exercising rights and to standard pre-purchase and co-sale rights.

34 34 Joint Status Report On 31 August 2010 SinnerSchrader held 360,945 shares of treasury stock, which give it no voting rights or other rights. Several shareholders have notified SinnerSchrader AG pursuant to Article 21 of the Securities Trading Act ( WpHG ) in conjunction with Article 22 WpHG that over 10 % of the votes can be assigned to them. The most recent notification for each individual is listed in the Notes to the SinnerSchrader AG Annual Financial Statements as of 31 August According to the information there, as well as the presentation of the shares held by the Board members in the Notes to the Annual Financial Statements of the AG, Matthias Schrader, co-founder of SinnerSchrader and Chairman of the Management Board of the AG, directly held 2,455,175 shares as of 31 August 2010, corresponding to % of all voting rights. None of the shares issued in SinnerSchrader AG are granted special rights. The appointment and dismissal of the members of the Management Board is based on Article 84 of the German Stock Corporation Act ( AktG ). In addition, the Statutes of SinnerSchrader AG make provisions for the Management Board to be made up of at least two people and for the Supervisory Board to be able to appoint deputy members of the Management Board. According to Article 119 para. 1 No. 5 AktG, amendments to the Statutes are subject to the Annual General Meeting. According to the Statutes, the Supervisory Board is furthermore authorised to adopt amendments to the statute that affect only the wording. The Annual General Meeting of 18 December 2008 authorised the Management Board to increase the share capital of the AG once or repeatedly by up to a total of 5,770,000 until 15 January 2013 with the approval of the Supervisory Board by issuing new no-par-value shares in return for a contribution in cash or a contribution in kind. The AG does not initiate voting controls for employees holding a share of the capital if these employees do not fall under the cited consortium agreement. The Annual General Meeting of 23 January 2007 authorised the Management Board to conditionally increase the share capital of the AG with the approval of the Supervisory Board by 31 December 2011 by issuing a total of up to 600,000 option rights to no-par-value share certificates of the AG to employees and members of the management of the AG and affiliated companies by up to 600,000.

35 35 Joint Status Report According to the Annual General Meeting of 16 December 2009, the Management Board is entitled to buy back treasury stock up to a total share in the AG of 10 % of the share capital via the stock exchange or a public purchase offer addressed to all shareholders by 15 December The Management Board may not take advantage of this authorisation to trade treasury stock. As of 31 August 2010, there were no major agreements of the AG that are subject to the condition of the change of control. 08 Risks and Opportunities of Future Business Development In its business, SinnerSchrader is subject to many risks which could have a negative impact on the Group s and the AG s asset, financial, and income situation or could result in Sinner- Schrader failing to meet the goals it has set for future business development. No compensation agreements made by the AG in the event of a takeover offer have been made with members of the Management Board or employees. It is necessary to take risks when engaged in entrepreneurial activity aimed at earning profits. To ensure that the success is sustainable, it is important to manage these risks. On the one hand, this means evaluating them for probability of occurrence and the possible impact on the asset, financial, and income situation and continuously monitoring them. On the other hand, it means identifying measures with which risks can be limited or avoided and with regard to the Group s own core expertise, financial strength, and the costs of the relevant measures defining which limitation or avoidance measures can be taken and to what extent for which risks.

36 36 Joint Status Report In managing the Group, it is one of the key tasks of the Management Board to define general conditions and processes for risk management for the SinnerSchrader Group, to monitor compliance with them, and to regularly analyse the development of the risks in each division with the managers of the operating units and administrative divisions. In principle, SinnerSchrader s risk management system also aims to secure the shareholders equity base for the long term and achieve an appropriate return on invested capital. The Group strives for a high shareholders equity rate in order to guarantee the independence and competitiveness of the company and the continued existence of the operative companies and to finance both organic and inorganic growth. The SinnerSchrader Group s risk management system and the risk profiles of the individual divisions are documented in a risk manual. An employee from the financial division of the AG has been appointed the Group s risk commissioner and has been commissioned to subject the specified risk management system to regular internal evaluation and to document the results in a risk report to the Management Board at least once a year. Furthermore, it is the task of the risk commissioner to randomly analyse individual divisions on behalf of the Management Board with regard to how far the specified measures to limit or avoid risks are being implemented. It is the responsibility of the managers of the individual divisions to continuously monitor and manage the risks in their own divisions. If there is a significant increase in the degree of individual risks above a specified threshold, they are required to report it immediately to the Management Board. Good risk management depends on quickly and reliably providing information to the management about the course of business. To this end, SinnerSchrader has set up a controlling and reporting system which reports on a monthly basis on the development of key business data in the individual divisions and on the financial results. Key Aspects of the Internal Control and Risk Management System with Respect to the Accounting Process Pursuant to Article 289 Para. 5 and Article 315 Para. 2 No. 5 of the German Commercial Code The risk management system of SinnerSchrader also covers the accounting-related processes in the managing AG and in the subsidiaries that are included in the Consolidated Financial Statements. The goal is to ensure regulation-compliant financial statements through principles, procedures, and controls and to prevent material misstatements in the context of external reporting.

37 37 Joint Status Report Risk management in the accounting process is based on Groupwide standardised accountancy rules, compliance with which is regularly checked by the controlling and accounting departments centrally embedded in SinnerSchrader AG. Furthermore, a central accounting system based on Microsoft Dynamics NAV has been implemented, which is managed and posted to by the central accounting department. With the exception of the spotmedia Group, all operatively active companies were included in this central accounting system in the 2009/2010 financial year. The inclusion of spot-media AG in the central accounting system is planned for the 2010/2011 financial year. Another key aspect of the accounting-related risk management system is the creation of monthly financial statements, which form the basis for monthly reporting on all business units and companies. The monthly reports include the closing figures for the month and the accumulated closing figures for the current financial year as well as an updated forecast for the entire year. They also compare the current figures to the planned figures and to those of the previous year as well as to the key figures from the Statements of Operations and the key operating figures as related to the last forecast. The reports are the starting point for a monthly review discussion between the Management Board of SinnerSchrader AG and the managers of the respective units or companies. This discussion is prepared by the central controlling department and serves to explain the key business developments and thus the plausibility of the monthly closing figures. The close integration of the central controlling and accounting departments is also a factor in the risk management system for the accounting process. The figures reported by controlling for the individual companies, sub-groups, and the Group must correspond to the figures posted. To ensure that the accounting department is always up to date with the latest legal requirements, the employees in accounting are regularly trained either internally or externally. Furthermore, if there are complex or new situations and procedures which are significant as regards correctly reporting the accounts of each company and the Group, an appraisal by the auditor will be carried out during the year; when necessary, SinnerSchrader AG also takes advantage of the expertise of other external professionals. The cornerstones of the accounting-related control system are appropriate access regulations and book entry permissions for the accounting system and observance of the second partner review principle as an important controlling tool.

38 38 Joint Status Report Furthermore, internal guidelines for making payments and investing liquid funds serve to safeguard the Company s assets. The internal control routines are supplemented by the external auditing of the Annual and Consolidated Financial Statements on behalf of the Supervisory Board by an auditor approved by the Annual General Meeting once a year. As far as the key risk areas are concerned, the risk profile of the SinnerSchrader Group did not change significantly in the 2009/2010 financial year. In light of a large-scale public discussion about data protection on the Internet and legal changes, however, this issue did become more important in the context of risk management. In the following, individual risk areas identified as being important will be explained in more detail. This selection of risks does not mean that there can be no significant impact on the asset, financial, and economic situation of Sinner- Schrader from other risks that have not been mentioned. Economic Risks The general economic development influences the volume of investments in IT and Internet services as well as expenditure on online marketing and supporting services. A deterioration in the economic situation could reduce the market volume addressed by SinnerSchrader with regard to quantity and price. The measures for capacity adjustment which are necessary as a reaction to such a development may be effective only with a time lag and would lead to costs for restructuring measures. Competition Competition in the market for Internet services continues to be intense. The market is fragmented and the number of competitors is high. Furthermore, new providers with a wider service portfolio and international operations are entering the market. The future development of SinnerSchrader depends largely on how well the Company succeeds in achieving adequate prices for its services. The extent to which the procurement of programming services in emerging nations becomes more important for competitiveness in relation to the individual developments offered by Sinner- Schrader is also significant in this context. SinnerSchrader does not currently have sources for such services and, if necessary, could only build them up over time. Bigger competitors with an international market presence already have relevant structures or would be able to establish them more quickly.

39 39 Joint Status Report Operational Risks SinnerSchrader earns around 19 % of its net revenues with one customer; the ten biggest customers together account for slightly 76 % of the net revenues. It would only be possible to compensate for the loss of the business of these important customers after a considerable period of time, if at all, during which it would not be possible to reduce costs correspondingly. Since the revenues from business in the Interactive Marketing and Interactive Media segments are not usually secured by long-term contracts, but instead largely come about on the basis of individual orders for a limited period, revenue plans are subject to a high degree of uncertainty. Orders on hand do not usually extend beyond one quarter s revenues. The projects that SinnerSchrader undertakes for renowned customers sometimes have a considerable effect in the public sphere. Quality deficiencies in the services provided, particularly those which enable unauthorised access to personal data, can result in negative publicity which could significantly impair the sale of services and thus future business development. Within the context of providing its services, SinnerSchrader sometimes has access to the personal data of its customers customers. This data could be abused as a result of deliberate or negligent acts by its employees. In addition to the directly resultant damage, if such an incident were to become known, the associated loss of confidence in SinnerSchrader would make the sale of its services much more difficult. SinnerSchrader processes a major part of its revenues within the framework of fixed price agreements. Because of the complexity and the high technical demands, the originally calculated costs may be exceeded, resulting in unplanned losses. Furthermore, SinnerSchrader assumes standard guarantee and liability stipulations within the framework of project contracts which can result in considerable follow-up costs for individual projects. In the new segment of Interactive Commerce, SinnerSchrader offers to develop, maintain, and operate online sales channels for companies in return for a share of the revenues; this service includes fulfilment, payment transactions, customer care, and, where appropriate, online marketing. Since the establishment and start-up costs are completely or largely borne by Sinner- Schrader, contracts lasting several years are concluded with

40 40 Joint Status Report customers, in the course of which SinnerSchrader can cover its initial investment and generate a positive overall income from the project. Negative developments on the part of the customer, e.g. a deterioration in the perception of the customer s brand, a deterioration in the relative competitive position of the customer in its industry or a bankruptcy can mean that SinnerSchrader cannot earn back its initial investment with an adequate return. Personnel Risks The success of SinnerSchrader is largely dependent on the qualification and motivation of its employees. Some employees in key roles are particularly important. If SinnerSchrader is unable to attract and hold onto a sufficient number of qualified professionals and talented newcomers at adequate prices, the further growth and success of SinnerSchrader could be significantly affected. Technological Risks The market for IT and Internet services is characterised by a high speed of change in the basic technologies used and by a level of standardisation which remains low. The future market success of SinnerSchrader depends on the extent to which the breadth and depth of the technological expertise can be kept at an adequate level and technological dead-ends can be avoided in view of the high employee orientation costs with limited resources. In the new business field of ad serving, SinnerSchrader basically develops and markets a software product. Keeping this product competitive in the long term requires annual development expenditure of a considerable level. It is decisive to the success of the product on the market that these further developments satisfy market needs in terms of content and time. If this is not successful, the preliminary development work could no longer be covered by income from marketing. Competitors in this market have bigger development teams, more financial resources, and maybe also the opportunity to position their ad serving product with an attractive price due to cross-subsidies. If SinnerSchrader does not succeed in establishing an adequate cost-benefit ratio by means of differentiation, preliminary development work may not be covered. Risks from Acquisitions SinnerSchrader is also interested in expanding its market position in Germany through targeted acquisitions. The success of acquisitions depends on the extent to which the acquired company can be integrated in the Group structure and the

41 41 Joint Status Report desired synergies are achieved. In this context, acquisitions in the field of professional services entail the particular risk that the expertise, market knowledge, and customer relations which are being acquired are rarely permanently tied to the acquired company. Unsuccessful integration can therefore quickly lead to the need for considerable depreciation or even a total loss of the investment. In spite of the relevance of the risks listed above and on the basis of the available information, no risks are currently apparent that would threaten the future existence of the SinnerSchrader Group or SinnerSchrader AG. Thanks to good business development in the 2009/2010 financial year, the asset and financial situation of the Group is stable. A special opportunity lies in the development of the position of digital agencies in the market for marketing and advertising services. Because of their growing importance, digital agencies could take on a leading role among companies with respect to their marketing and advertising services and replace the service providers currently established there in the coming years. As a result, higher order volumes, longer-term customer relationships, and overall higher margins could be possible for SinnerSchrader. The expansion of the business portfolio in the 2008/2009 financial year resulted in synergies above and beyond the extent currently planned for, and it also helped to extend the customer base. The risks are countered by opportunities, and SinnerSchrader could exceed its goals if they occur. The main opportunities lie with existing customers, the SinnerSchrader brand name, the positive signals for the development of the companies taken over, and the performance of some key members of staff, especially those with sales and customer care tasks. Above and beyond what is assumed in the plans, these factors could result in the acquisition of large new high-potential customers or currently unforeseeable individual orders from existing customers. Also, the rising demand for the services offered by Sinner- Schrader alone could result in SinnerSchrader being able to achieve higher prices on the market than assumed in the plans. Furthermore, other successful acquisitions could bring about a very positive change in the planned development, since the forecasts are based solely on the organic development of the companies in the SinnerSchrader Group.

42 42 Joint Status Report 09 Major Events after the Balance Sheet Date There were no major events after the balance sheet date that should be reported. analysts are expected to slow down by around 1 percentage point compared to What is positive from SinnerSchrader s point of view is that, in the current upswing, forecasters expect consumption to be a noticeable growth factor, which would mean good development opportunities for the sector which is currently most important to SinnerSchrader, namely, Retail & Consumer Goods. 10 Forecast SinnerSchrader ended the 2009/2010 financial year with a record quarter and thus made better progress in the year under review than planned. The strong economic boost in Germany in the second calendar quarter of 2010 led to an astonishing revival in the demand for the services of the SinnerSchrader Group in all of its business divisions. This recovery can be seen most clearly in the growth rates for incoming orders in the Interactive Marketing segment, which were 37 % higher in the fourth quarter of 2009/2010 than in the previous year. The latest analyses and forecasts for the development of the Germany economy show that the second calendar quarter was not an isolated spike but rather the start of a growth phase with comparatively high growth rates, even though the growth dynamics of 2011 as currently predicted by the majority of Parallel to this, the digitisation of marketing is continuing, which will lead to growth in the market for the services offered by Sinner- Schrader. Social media and app economy are just two of the recent keywords which represent the continued high speed at which digitisation is creating new opportunities for shaping the relationship between companies and customers. From the point of view of gross advertising revenues, the Internet was already catching up with newspapers to be the second-largest medium following television in 2010 according to the latest forecasts from the OVK. The Online Report 2010/2 of the OVK showed that at the end of 2010, there was less than 1 percentage point between the Internet and newspapers as regards the proportion of gross advertising expenditures. In light of this, SinnerSchrader sees significant growth opportunities and only minimal potential for a reversal in the market for the 2010/2011 financial year. The challenge in the financial year

43 43 Joint Status Report will be to take advantage of these growth opportunities in order to improve the relative market position of SinnerSchrader and, parallel to this, to develop the organisation so that it can continue to meet increasing demands. The success of SinnerSchrader will depend not least on the Company s ability to acquire the best minds and talents in the competitive market. The largest relative contributions to growth are expected from the Interactive Media and Interactive Commerce segments. Through the acquisition of newtention technologies GmbH in 2009, SinnerSchrader prepared itself ideally in the Interactive Media segment for the dynamics in traditional online advertising and the demand for performance-based media offers. At the start of the 2010/2011 financial year, SinnerSchrader also strengthened the management of this segment with competent individuals from the online media sector. This constellation should make it possible to perpetuate the success of the second half of the old financial year and lead the segment to new dimensions in the medium term. This should also help the segment tap new revenue streams through the establishment and marketing of a performance network under the mementoo brand which is to be launched during the first quarter of the 2010/2011 financial year. In the Interactive Commerce segment, in which SinnerSchrader began operations in the last quarter of the 2008/2009 financial year, there are plans to achieve a breakthrough with the acquisition of the first large project in 2010/2011 and to use the tailwind from the expected positive consumer climate in existing projects to achieve a rapid break-even. But these things alone will not be enough in the 2010/2011 financial year to move the segment as a whole into the profit zone; there should be a noticeable decrease in initial losses, however. The Interactive Marketing segment will play on its strengths in e-commerce as well as marketing and sales platforms in 2010/2011 and thus once again make the largest absolute contribution to the growth of SinnerSchrader. The goal in this segment, too, however, is to significantly strengthen competencies and visibility on the side of digital brand communication, even if this stands in the way of further improvement in the margins. The development of the margin will also come down to how the increases on the cost side, particular among personnel costs, can be absorbed or passed on to customers by increasing the effective realised daily rates.

44 44 Joint Status Report Overall, SinnerSchrader anticipates organic growth in net revenues of between 15 % and 20 % for the 2010/2011 financial year and an improvement in the operating result (EBITA) of at least the same amount. The operative improvements in the 2010/2011 financial year will also have a positive effect on the net income and the earnings per share. Beyond the organic growth, expansions or extensions are possible through acquisitions in the 2010/2011 financial year. For the following years, SinnerSchrader expects that the pace of organic growth will slow down again, though it will still be in the double-digit range. In the medium term, SinnerSchrader is aiming for an operating margin (EBITA in relation to net revenues) of 15 %. Through the integration of key operative subsidiaries via profit and loss transfer agreements, the positive developments expected for the Group will also have a positive effect on the profit development of SinnerSchrader AG, which would leave room for a dividend increase. Hamburg, 29 October 2010 The Management Board Matthias Schrader Thomas Dyckhoff

45 02 Consolidated Financial Statements of SinnerSchrader AG

46 46 sinnerschrader Annual Report Consolidated Financial Statements

47 47 Consolidated Financial Statements Consolidated Balance Sheets Consolidated Balance Sheets as of 31 August 2010 Assets in Notes No Current assets: Liquid funds ,246,227 3,214,983 Marketable securities 4.6 6,043,662 4,773,391 Cash and cash equivalents 8,289,889 7,988,374 Accounts receivable, net of allowances for doubtful accounts of 191,040 and 155,924 at and , respectively 2.9 6,106,158 5,202,256 Unbilled revenues 4.3 1,212, ,816 Other current assets and prepaid expenses , ,694 Total current assets 15,785,406 14,209,140 Non-current assets: Goodwill 4.1 2,965,047 3,134,986 Other intangible assets 4.1 1,166,992 1,703,583 Property and equipment ,008 1,028,480 Tax receivables , ,047 Other non-current assets and prepaid expenses ,449 Total non-current assets 5,195,998 6,132,545 Total assets 20,981,404 20,341,685

48 48 Consolidated Financial Statements Consolidated Balance Sheets Liabilities and shareholders equity in Notes No Current liabilities: Trade accounts payable ,991,202 2,020,562 Advance payments received , ,922 Other accrued expenses ,196,367 1,701,860 Tax liabilities 4.9 1,845,589 1,256,734 Other current liabilities and deferred income ,012,067 1,081,201 Total current liabilities 7,772,820 6,482,279 Non-current liabilities: Other non-current liabilities , ,745 Deferred tax liabilities , ,598 Total non-current liabilities 632,879 1,325,343 Shareholders equity: Subscribed capital Common stock, stated value 1, issued: 11,542,764 and 11,542,764, outstanding: 11,181,819 and 11,272,108at and , respectively ,542,764 11,542,764 Treasury stock, 270,656 and 45,185 at and , respectively , ,027 Additional paid-in capital 4.8 3,599,444 3,599,444 Reserves for share-based compensation , ,037 Accumulated deficit -2,132,749-2,334,226 Changes in shareholders equity not affecting net income ,129 42,071 Total shareholders equity 12,575,705 12,534,063 Total liabilities and shareholders equity 20,981,404 20,341,685 The accompanying notes are an integral part of these Consolidated Financial Statements.

49 49 Consolidated Financial Statements Consolidated Statements of Operations Consolidated Statements of Operations for the 2009/2010 and 2008/2009 financial years in Notes No. 2009/ /2009 Gross revenues ,718,061 27,664,453 Media costs -4,783,236-6,728,899 Total revenues, net 23,934,825 20,935,554 Cost of revenues -19,197,787-14,250,376 Gross profit 7,737,038 6,685,178 Selling and marketing expenses -2,344,473-2,114,372 General and administrative expenses -3,467,610-3,370,147 Research and development expenses , ,817 Operating income 1,514, ,842 Other income , ,519 Other expenses ,718-19,990 Financial income , ,431 Financial expenses ,756-38,347 Income before provision for income tax 1,653,800 1,253,455 Income tax , ,364 Net income 1,103, ,091 Net income attributable to external shareholders ,935 Net income attributable to the shareholders of SinnerSchrader AG 1,103,246 1,231,026 Net income per share (basic) Net income per share (diluted) Weighted average shares outstanding (basic) 11,253,987 11,356,215 Weighted average shares outstanding (diluted) 11,253,987 11,356,680 The accompanying notes are an integral part of these Consolidated Financial Statements.

50 50 Consolidated Financial Statements Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income for the 2009/2010 and 2008/2009 financial years in Notes No. 2009/ /2009 Net income 1,103, ,091 Other comprehensive income Foreign currency translation adjustment Change in fair value of available-for-sale financial instruments ,906 25,075 Taxes on income recognised directly in shareholders equity 4.6 9,975-8,093 Changes in shareholders equity not affecting net income -20,942 17,000 Consolidated comprehensive income 1,082, ,091 Comprehensive income attributable to external shareholders -291,935 Comprehensive income attributable to the shareholders of SinnerSchrader AG 1,082,305 1,248,026 The accompanying notes are an integral part of these Consolidated Financial Statements.

51 51 Consolidated Financial Statements Consolidated Statements of Shareholders Equity Consolidated Statements of Shareholders Equity for the 2009/2010 and 2008/2009 financial years in Notes No. Number of shares outstanding Common stock Treasury stock Balance at ,497,579 11,542,764-72,192 Comprehensive income Disbursed dividend 4.8 Deferred compensation 4.8 Purchase of treasury stock , ,761 Re-issuance of treasury stock ,000 30,926 Acquisition of external interests 2.3 Changes in basis of consolidation 2.3 Balance at ,272,108 11,542, ,027 Comprehensive income Disbursed dividend 4.8 Deferred compensation 4.8 Purchase of treasury stock , ,115 Balance at ,181,819 11,542, ,142 The accompanying notes are an integral part of these Consolidated Financial Statements.

52 52 Consolidated Financial Statements Consolidated Statements of Shareholders Equity Additional paid-in capital Reserves for sharebased compensation Retained earnings/losses Changes in shareholders equity not affecting net income Total shareholders equity without external interests External interests Total shareholders equity 3,601,770 70,778-2,197,346 25,071 12,970,845 12,970,845 1,231,026 17,000 1,248, , ,091-1,367,906-1,367,906-1,367,906 31,259 31,259 31, , ,761-2,326 28,600 28, , , , ,762 3,599, ,037-2,334,226 42,071 12,534,063 12,534,063 1,103,246-20,942 1,082,304 1,082, , , ,769 39,222 39,222 39, ,115 3,599, ,259-2,132,749 21,129 12,575,705 12,575,705

53 53 Consolidated Financial Statements Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows for the 2009/2010 and 2008/2009 financial years in Notes No. 2009/ /2009 Cash flows from operating activities: Net income 1,103, ,091 Adjustments to reconcile net income to net cash used in operating activities: Amortisation of intangible assets , ,166 Depreciation of property and equipment , ,332 Share-based compensation 6 39,222 31,259 Bad debt expenses 35,116-2,000 Gains/losses on the disposal of fixed assets 5.3 2, Deferred tax provision , ,271 Changes in assets and liabilities: Accounts receivable , ,726 Unbilled revenues , ,799 Tax receivables ,182 40,961 Other current assets , ,267 Accounts payable, deferred revenues, and other liabilities , ,264 Tax liabilities ,133 1,083,535 Other accrued expenses , ,907 Net cash provided by (used in) operating activities 2,342,668 2,228,702

54 54 Consolidated Financial Statements Consolidated Statements of Cash Flows in Notes No. 2009/ /2009 Cash flows from investing activities: Acquisition of subsidiary companies less acquired liquid funds ,770 Purchase price payments for acquisition of subsidiary companies in previous years , ,280 Purchase of property and equipment , ,175 Proceeds from sale of equipment 4.1 2,396 7,322 Additions of marketable securities 4.6-3,800,000-4,748,315 Proceeds from the disposal of marketable securities 4.6 2,500,000 - Net cash provided by (used in) investing activities -2,231,530-6,344,218 Cash flows from financing activities: Payment to shareholders ,769-1,367,906 Payment for treasury stock , ,761 Net cash provided by (used in) financing activities -1,079,884-1,744,667 Net effect of rate changes on cash and cash equivalents Net increase/decrease in cash and cash equivalents -968,756-5,860,165 Cash and cash equivalents at beginning of period ,214,983 9,075,148 Cash and cash equivalents at end of period ,246,227 3,214,983 thereof back-up of bank guarantees 651, ,855 For information only, contained in cash flows from operating activities: Interest payment received ,569 96,095 Paid interest 5.4-3,526-2,758 The accompanying notes are an integral part of these Consolidated Financial Statements.

55 03 Notes of the SinnerSchrader Group

56 56 Consolidated Financial Statements Notes 01 General Foundations and Business Activities of the Company The Consolidated Financial Statements of SinnerSchrader Aktiengesellschaft (hereinafter referred to as SinnerSchrader AG or AG ) and its subsidiaries (hereinafter referred to as SinnerSchrader Group, SinnerSchrader or Group ) for the 2009/2010 financial year were completed according to the International Financial Reporting Standards ( IFRS ) of the International Accounting Standards Board ( IASB ), as they are to be applied in the European Union (EU), in force on the report date, 31 August 2010, taking account of the interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ) and corresponding to the supplementary requirements of Article 315 a of the German Commercial Code ( HGB ). The statements were prepared on a going-concern basis. The representation of the Annual Financial Statements was adapted in implementation of IAS 1 rev. Among other things, the Consolidated Financial Statements were supplemented by a statement of recognised income and expense. The representation of the Consolidated Statement of Operations has also been changed with respect to the cost of sales method. Scheduled amortisations for intangible assets identified within the scope of initial consolidation have all been assigned to the relevant function costs. The information for the previous year has been adapted accordingly. The Consolidated Financial Statements as of 31 August 2010 were released for submission to the Supervisory Board on 29 October The Consolidated Financial Statements will probably be approved at the balance sheet meeting of the Supervisory Board on 3 November 2010; until the time of approval it is possible for the Supervisory Board to amend the Consolidated Financial Statements.

57 57 Consolidated Financial Statements Notes The SinnerSchrader Group is a service company which is mainly active in Germany with its headquarters in Hamburg. With its services, SinnerSchrader supports its customers in the use of interactive technologies, especially the Internet. In particular, Sinner- Schrader provides the following services: Conception, implementation, and servicing of custom-made interactive IT systems Consultancy, conception, design, and technical implementation of interactive advertising and marketing campaigns and online brand management measures Technical operation and administration of Internet-based IT systems Structuring, analysis, and preparation of data on the behaviour of users of interactive systems Planning and management of online marketing campaigns Provision and performance measurement of online advertising media via a software-as-a-service model Complete handling of the set-up and management of online sales channels The SinnerSchrader Group started its work in SinnerSchrader AG was founded in 1999 as a new managing parent company and was listed on the stock exchange in the same year. All 11,542,764 shares issued in SinnerSchrader AG have been approved for trade in the regulated market of the Frankfurt Stock Exchange. 02 Presentation of the Main Evaluation and Balancing Methods 2.1 Financial Year The Consolidated Financial Statements of the SinnerSchrader Group refer to the financial years covering 1 September 2009 to 31 August 2010 ( 2009/2010 ) and from 1 September 2008 to 31 August 2009 ( 2008/2009 ) as well as the report dates 31 August 2010 and 31 August 2009, respectively.

58 58 Consolidated Financial Statements Notes 2.2 New Accounting Principles The following standards and interpretations or amendments to these standards and interpretations, to be applied for the first time in the 2009/2010 financial year, did not have any effect or only had an immaterial effect on the presentation of the asset, financial, and income situation of the Group. IAS/IFRS/IFRIC Content To be applied for annual periods beginning on or after the following date IAS 1 1) Presentation of Financial Statements 1 January 2009 IAS 23 1) Borrowing costs 1 January 2009 IAS 27 1) Consolidated and Separate Financial Statements 1 July 2009 IAS 32 1) Financial Instruments: presentation (Puttable Instruments) 1 January 2009 IAS 39 1) Financial Instruments: Recognition and Measurement (Eligible Hedged Items) 1 July 2009 IFRS 1 1) First-time Adoption of IFRS (Restructuring of the Standard) 1 July 2009 IFRS 1 1) /IAS 27 1) Cost of an Investment in a subsidiary, jointly-controlled entity or associate 1 January 2009 IFRS 2 1) Share-based payments (Vesting Conditions and Cancellation) 1 January 2009 IFRS 3 1) Business Combinations 1 July 2009 IFRS 7 1) Financial Instruments: Disclosures 1 January 2009 IFRS 8 Operating Segments 1 January 2009 IFRIC 12 Service Concession Arrangements 28 March 2009 IFRIC 15 Agreements for the Construction of Real Estate 1 January 2009 IFRIC 16 Hedges of a Net Investment in a Foreign operation 30 June 2009 IFRIC 17 Distributions of Non-cash Assets to owners 1 July 2009 IFRIC 18 Transfers of Assets from Customers 1 July 2009 Various Annual Improvement Project January 2009 Various Annual Improvement Project June ) IAS International Accounting Standards IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standards 1) Amendments 2) Applies for amendments to IAS 38 and IFRS 2

59 59 Consolidated Financial Statements Notes In the reporting period, the IASB issued standards as well as interpretations and amendments to existing standards, the application of which was not mandatory in the Consolidated Financial Statements for this period. The application of these innovations also presumes that they have been assumed within the context of the EU s IFRS endorsement procedure. The following standards are concerned: IAS/IFRS/IFRIC Content To be applied for annual periods beginning on or after the following date IAS 24 1) Related party Disclosures 1 January 2011 IAS 32 1) Financial Instruments: Classification of Rights Issues 1 February 2010 IFRS 1 1) Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters 1 Juliy 2010 IFRS 9 Financial Instruments: Reassessment of Embedded Derivatives 1 January 2013 IFRIC 14 1) / IAS 19 1) The limit on Defined Benefit Asset Minimum Funding Requirements and their Interaction 1 January 2011 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1 Juliy 2010 Various Annual Improvement Project January ) Amendments

60 60 Consolidated Financial Statements Notes Furthermore, in the previous year, the IASB issued standards as well as interpretations and amendments to existing standards which have since been adopted in the context of EU endorsement but the application of which was not mandatory for Sinner- Schrader as of 31 August The following standards are concerned: IAS/IFRS/IFRIC Content To be applied for annual periods beginning on or after the following date IFRS 2 1) Share-based Payment (Vesting Conditions and Cancellation) 1 January 2010 IFRS 1 1) Additional exceptions for first-time adoption of IFRS 1 January 2010 Various Annual Improvement Project January ) 1) Amendments 2) With the exception of amendments of IFRS 2 and IAS 38 which are to be applied for periods beginning after 30 June 2009 SinnerSchrader is currently examining the impact on its consolidated assets, financial, and income situation as a result of applying these regulations for the first time. Additional information in the Notes will probably result from the first application of IAS 24 and the amended standards in conjunction with the two Annual Improvement Projects.

61 61 Consolidated Financial Statements Notes 2.3 Consolidation Group The consolidation group as of 31 August 2010 consisted of the AG as well as the following direct or indirect subsidiaries of the AG, each of which was fully consolidated: 1. SinnerSchrader Deutschland GmbH, Hamburg, Germany 2. spot-media AG, Hamburg, Germany 3. spot-media consulting GmbH, Hamburg, Germany 4. newtention technologies GmbH, Hamburg, Germany 5. newtention services GmbH, Hamburg, Germany 6. next commerce GmbH, Hamburg, Germany 7. mediaby GmbH, Hamburg, Germany 8. SinnerSchrader UK Ltd., London, UK 9. SinnerSchrader Benelux BV, Rotterdam, the Netherlands Compared to the balance sheet date of the previous year, the consolidation group changed to include the mediaby GmbH. mediaby GmbH mediaby GmbH came about as a result of the spin-off of the online media division from SinnerSchrader Deutschland GmbH, which was decided on 28 April 2010 and entered in the Commercial Register on 15 June The spin-off was retroactive as at 1 September The company is a 100 % subsidiary of SinnerSchrader Aktiengesellschaft. mediaby GmbH s business is consultancy in and planning, implementation and accounting of advertising on the Internet in the broadest sense, including the design and production of advertising media.

62 62 Consolidated Financial Statements Notes newtention Group newtention technologies GmbH and its subsidiary newtention services GmbH have been included in the Consolidated Financial Statements of SinnerSchrader AG since 1 December The core business of newtention technologies GmbH is the development and marketing of ad serving software, a special application software used to carry out and control advertising and marketing measures on the Internet. The software runs in a data centre operated by newtention technologies GmbH and is used by advertising companies, media agencies, and advertising platforms following the software-as-as-service model. Using ad serving technology, newtention services GmbH has developed online forms of advertising and planned and controlled online campaigns for customers based on this. In the previous year, all of the shares in the newtention Group were still owned by the former shareholders ( external interests ) until the transfer to SinnerSchrader AG in May For this reason, both the acquired net assets on 1 December 2008 and the profits until transfer of the shares to the AG were completely assigned to these external interests. At the end of May 2009, SinnerSchrader bought them out and took over all the net assets so that the results of the newtention Group were to be attributed entirely to Sinner- Schrader s shareholders as of 1 June The purchase price for the final take-over of the newtention Group contained a variable purchase price component paid in April 2010 on the basis of the development of certain key figures of newtention s business. This was estimated at 40,000 within the context of first consolidation. As part of the payment in the ongoing financial year it was set at 49,000. The difference of 9,000 increased the goodwill from the purchase of the newtention Group. next commerce GmbH next commerce GmbH was founded on 20 May 2009 as a 100 % subsidiary of SinnerSchrader AG with the goal of establishing a new field of business, e-commerce outsourcing, which is reported in the Interactive Commerce segment. On 3 November 2009 SinnerSchrader AG and next commerce GmbH concluded a profit-and-loss-transfer and control agreement. The Annual General Meeting of SinnerSchrader AG endorsed this agreement on 16 December The agreement took effect when it was entered in the commercial register on 16 March 2010 and was effective for the entire short next commerce GmbH financial year from 20 May 2009 to 30 April 2010.

63 63 Consolidated Financial Statements Notes spot-media Group spot-media AG and its subsidiary spot-media consulting GmbH have been included in the Consolidated Financial Statements since 1 February The spot-media Group is a digital agency that focuses on maintaining large online shops and portals and on the conception and implementation of website projects for small and medium-sized companies. The purchase price for the takeover of spot-media AG includes an earn-out component to be paid in the years 2009 to 2012 on the basis of the operating performance of spot-media AG in the years 2008 to The two first earn-out payments were made in February 2009 and February As at 31 August 2010, the estimate of the outstanding earn-out components was reviewed and adjusted on the basis of the business results and plans. As a result, the goodwill from the acquisition of spot-media AG fell by 179,000. As at 31 August 2010 the discounted value of the purchase price liability amounted to 516,000, of which 227,000 were posted to current and 289,000 to non-current liabilities. 2.4 Consolidation Principles All transactions and balances between affiliated companies within the group were eliminated. The Consolidated Financial Statements were prepared on the basis of the individual financial statements of the above-mentioned Group companies, which are compiled according to the relevant local accounting regulations, in particular the regulations of the German Commercial Code, with any necessary adjustments to IFRS being made. For the Consolidated Financial Statements, the same balancing and evaluation principles were used as a basis for the same business incidents and events under similar conditions. For newtention technologies GmbH, newtention services GmbH, next commerce GmbH, mediaby GmbH, and SinnerSchrader Benelux BV, interim reports were drawn up as of the reporting date of the parent company because they have different financial years from their parent company. The financial statements of all other companies included in the consolidation group are prepared according to the reporting date of the parent company. This is the same as the Group reporting date.

64 64 Consolidated Financial Statements Notes 2.5 Report Currency and Currency Conversion The currency of the report is the euro ( ). The report is cited in full euro amounts. The functional currency of the foreign subsidiaries outside the euro zone the group of European countries that have introduced the euro as their currency is the relevant national currency. The financial statements of these foreign subsidiaries are converted into euros, with the assets and liabilities being converted at the conversion rate of the balance sheet date and the sales revenues, the costs of sales revenues and expenditure being converted at the average rate for the financial year in question. The accumulated currency profits and currency losses from foreign currency conversion for the financial statements are identified in other Income. Where relevant, currency profits and losses from foreign currency transactions are treated with an effect on profits. 2.6 Estimates and Assumptions Drawing up consolidated financial statements according to IFRS requires the management to make estimates and assumptions that have an influence on the values posted for assets and liabilities and the information on contingent claims and contingent liabilities on the balance sheet date and on the posted revenue and expenses for the period covered by the report. The actual results may deviate from these estimates. Major estimates concern the application of the percentage-of-completion (POC) method, the posting of accrued expenses, and the approach for the purchase price instalments which depend on the future results of spot-media AG and the customer relationship acquired by spot-media AG. Estimates are also made in connection with determining the reduction in the value of fixed assets and intangible assets. Indications of a reduction in value, the estimates of future cash flows, and the determination of the current value to be ascribed to assets (or groups of assets) are associated with major estimates which the management must make regarding the identification and review of

65 65 Consolidated Financial Statements Notes signs of a reduction in value, of the expected cash flows, the applicable discount rates, the respective usage periods, and the residual value. To determine the amount achievable by a cash-generating unit, assumptions are also made regarding the development of revenues and markets which have a significant effect on the amount of the current value to be ascribed to goodwill. 2.7 Non-current Assets Intangible Assets Intangible assets comprise software, customer relationships, and goodwill and are subject to the balancing regulations of IAS 38. Intangible assets are evaluated on receipt at their procurement or manufacturing cost. They are identified if it is probable that the future economic benefit to be assigned to the assets will come to the company and if the procurement or manufacturing costs of the assets can be reliably assessed. Costs for the procurement of software should be activated under intangible assets if they are not to be considered a component of the associated hardware. After initial reporting, intangible assets are evaluated at their procurement or manufacturing costs minus the accumulated regular depreciation and the accumulated costs for impairment of value. The planned depreciation is linear over estimated usage periods. The depreciation period and method are reviewed annually at the end of each financial year. Software Depreciation for purchased software is linear over an estimated usage period of at least three years. The costs that are incurred to reinstate or maintain the future economic benefit that a company can expect from the originally assessed performance of existing software is to be recorded as an expense.

66 66 Consolidated Financial Statements Notes Intangible Assets Acquired in the Course of a Company Merger Other intangible assets which are acquired in the course of a company merger are identified and reported separately from goodwill in accordance with IFRS 3 as long as they meet the definition of intangible assets and the current value to be ascribed to them can be determined reliably. The procurements costs correspond to the current value to be ascribed to them at the time of acquisition. The active difference between the procurement costs and the identifiable assets and liabilities valued at the current values and acquired proportionately should be assumed as the goodwill from a company purchase. After being reported for the first time, other intangible assets which were acquired in the context of a company merger are evaluated the same as directly acquired intangible assets with their procurement costs minus accumulated planned depreciation over the estimated usage period and accumulated unscheduled reductions in value if the estimated usage period is determined to be limited. Goodwill has an unlimited usage period. It is therefore not depreciated according to schedule, but subjected to an annual impairment test in accordance with IAS Tangible Assets In accordance with IAS 16, tangible assets are posted as assets if it is probable that the future economic benefit associated with them will come to the company and if the procurement or manufacturing costs of the assets can be reliably assessed. The tangible assets shall be evaluated at the procurement and manufacturing costs minus accumulated regular and non-scheduled depreciation. The procurement and manufacturing costs of the tangible assets contain the purchase price, import duties, and other non-reimbursable taxes as well as all directly assignable costs that are incurred to put the asset in a condition fit for use. Reductions in the purchase price, such as discounts, bonuses, and deductions are subtracted from the purchase price. Subsequently incurred costs, such as

67 67 Consolidated Financial Statements Notes maintenance and repair costs, are recorded with an effect on expenses in the year in which they are incurred. If such costs demonstrably lead to an increase in the future economic benefit resulting from the use of the asset and above the original volume of performance, the costs shall be posted as subsequent procurement and manufacturing costs. The property and equipment of SinnerSchrader comprises objects of company and business equipment, computer hardware, and leasehold improvements. Depreciation is linear. A usage period of three years is usually assumed for computer hardware; four to eight years for other electronic and electrical devices and equipment, and eight to thirteen years for office furniture. Improvements to rented premises are depreciated over the estimated usage period of the improvements or the residual term to the end of the tenancy, if this is shorter. The cost of depreciation is included in the costs of sales revenues and operating expenses. The costs of repair and maintenance work are recorded with an effect on expenses. In the event of the sale or decommissioning of tangible asset items, the relevant procurement or manufacturing costs and the accumulated depreciation are debited and any profit or loss posted in the Statements of Operations as other revenues or other expenses Reductions in Value of Non-current Assets The posted value of asset items is reviewed if there are signs of non-scheduled reduction of value. If the posted value of an asset exceeds its achievable amount, a non-scheduled depreciation is made according to IAS 36. The achievable amount is the net sale price or commercial value, whichever is higher. The net sale price is the amount that can be achieved from a sale under standard market conditions minus the sales costs; commercial value is the cash value of the expected income from further use of the asset and the sale value at the end of the usage period. The commercial value is determined individually for every asset or for the corresponding cash-generating unit.

68 68 Consolidated Financial Statements Notes If the reasons for the non-scheduled depreciation are no longer in place, the original value will be reinstated, except in the case of goodwill. In the 2009/2010 and 2008/2009 financial years, there were no signs of a reduction in the value of goodwill or of the other intangible or tangible assets. 2.8 Financial Instruments According to IAS 39, a financial instrument is a contract which leads to the creation of a financial asset for one company and the creation of a financial liability or an equity capital instrument for another. In accordance with IAS 39, when they are first reported, financial instruments are to be posted with the current value to be ascribed to them, which usually corresponds to the procurement costs. Transaction costs are included in the first evaluation if no evaluation for fair value with an effect on profits takes place. Purchases and sales of financial instruments should be posted as of the trading day. With respect to the subsequent evaluation, a distinction is made between various categories of financial instruments, including financial instruments held for trading purposes, financial instruments to be held until they are finally due, credits and claims submitted by the company, and financial instruments available for sale. Financial instruments with fixed payments or payments that can be determined and a fixed term that the company intends to hold until they are finally due, excluding credits and claims submitted by the company, are classified as financial instruments to be held until they are finally due. All other financial instruments, excluding credits and claims submitted by the company, are classified as financial assets available for sale. Financial instruments held for trading purposes and financial assets available for sale are evaluated at the current value without deduction of transaction costs in the subsequent evaluation. The current values are usually found from reporting date prices on

69 69 Consolidated Financial Statements Notes financial markets. Profits and losses from the evaluation at the current value of financial instruments held for trading purposes shall be reported with an effect on profits. Profits and losses from evaluation of the current value of financial instruments available for sale are to be recorded in other income with a neutral effect on profits until the financial instrument is sold, withdrawn or otherwise dispatched or as soon as a permanent value reduction has been identified for it. Where necessary, profits and losses recorded directly in the shareholders equity are posted in the item Shareholders equity items with a neutral effect on profits. Financial instruments to be held to maturity shall be assessed at their continued procurement costs using the effective interest method. Financial instruments to be held to maturity with a remaining term of up to twelve months are posted in the current assets. Financial assets available for sale are posted in the current assets if the company is planning to sell them in the next twelve months. A financial asset is debited if the company loses the economic or contractual right to hold it. A financial liability is debited if the obligation upon which this liability is based is fulfilled, terminated or deleted. On 5 March 2009 the IASB published amendments to IFRS 7 Financial Instruments: Disclosures. The amendments to IFRS 7 concern information on determining the fair value or information about the liquidity risk. The information on determining the fair value has been specified in that a breakdown has been introduced for every class of financial instrument on the basis of a three-level fair value hierarchy and the scope of disclosure requirements has also been expanded. A distinction is made between three evaluation categories: Level 1: On the first level of the fair value hierarchy, the fair values are determined on the basis of publicly quoted market prices because the best possible objective indication of the fair value of a financial asset or financial liability can be seen on an active market.

70 70 Consolidated Financial Statements Notes Level 2: If there is no active market for an instrument, a company determines the fair value with the help of evaluation models. The evaluation models include the use of the most recent business incidents between expert, willing and independent business partners, a comparison of the fair values of other, broadly identical financial instruments, the use of the discounted cash flow method or option price models. The fair value is estimated on the basis of the results of an evaluation method which uses as much data from the market as possible and is based as little as possible on company-specific data. Level 3: The evaluation methods used at this level are also based on parameters that cannot be observed on the market. 2.9 Accounts Receivable and Unbilled Services Accounts receivable are posted at their nominal value minus appropriate value corrections. The value of the claims is regularly checked on an individual basis. Value corrections are formed in the case of identifiable individual risks. Services provided for fixed-price projects which were realised according to the cost-to-cost method in accordance with their degree of completion but had not yet been billed are posted with a proportion of the total payment agreed for the fixed-price project, i.e. including the profit margin, as unbilled services, with any deposits that may have been made for the project being offset as receivables from POC Other Current Assets Other current assets are entered on the balance sheet at their nominal value or achievable amount, whichever is lower.

71 71 Consolidated Financial Statements Notes 2.11 Funds Funds comprise cash flows, bank credits available on a daily basis, and fixed deposits with a remaining period of less than three months. They are posted at their nominal value Statements of Cash Flows The statement of cash flow is drawn up according to IAS 7 using the indirect method (cash flow from operating activities) and the direct method (cash flow from investment or financial activities). The financial funds whose change is shown in the statement of cash flows, comprise funds and cash equivalents Trade Accounts Payable and other Liabilities Trade accounts payable and other liabilities are posted at the repayment value Accrued Expenses According to IAS 37, accrued expenses are formed for legal and actual obligations that were incurred economically by the reporting date if it is probable that fulfilment of the obligation will lead to the Group funds being depleted and a reliable estimate of the level of the obligation can be made. Reserves are reviewed on every balance sheet date and adjusted to the best estimate in each case. The amount of reserves corresponds to the value of the expenses probably needed to fulfil the obligation. The accrued expenses take account of all recognisable obligations vis-à-vis third parties according to IAS Treasury Stock Under IAS 32, treasury stock is posted at its procurement costs as a deducted item within the shareholders equity.

72 72 Consolidated Financial Statements Notes 2.16 Deferred Taxes Under IAS 12 deferred tax reimbursement claims or liabilities under IFRS are to be posted in the balance sheet if there are differences between the posted values of assets and liabilities in the balance sheet under IFRS and those in the tax balance sheet that will reverse in future years ( temporary differences ). Furthermore, deferred tax reimbursement claims must also be formed for the future use of tax loss carry-forwards. Deferred tax reimbursement claims and liabilities are to be determined on the basis of the liability method. The deferred tax reimbursement claims and liabilities from temporary differences must be determined separately for every tax subject. Tax claims should be posted only if or to the extent to which tax liabilities are due to them or to which realisation can probably be classified by future taxable profits. Tax reimbursement claims and liabilities are posted in balanced form for a tax subject. Balancing between different tax subjects is not permitted. For the evaluation of the temporary differences or loss carry-forwards, the tax rates valid on the balance sheet date or, for a future reversal of temporary differences, the tax rates legally entered into force on the balance sheet date shall be used. Deferred tax expenditures or revenues shall be offset with a neutral effect on profit if they refer to differences that do not have an impact in the profit and loss statement, such as evaluation changes to financial assets available for sale Revenue Realisation SinnerSchrader provides services of various kinds that are treated differently with respect to revenue realisation. In principle, Sinner- Schrader only realises revenues, once the service has been performed according to the underlying contractual agreements and the risk has been transferred to the recipient of the service or the purchaser, if it is probable that the economic benefit from the business

73 73 Consolidated Financial Statements Notes will flow into the company and the level of sales revenues can be reliably determined. The revenues are posted net, without turnover tax, discounts, customer bonuses or deductions. They contain reimbursable expenses, such as travel expenses, if the customer has been invoiced for them and has paid them. Project and Consultancy Services Project and consultancy services are billed either according to actual expenditure or on the basis of a fixed price. The revenues from projects on a fixed-price basis are entered on the balance sheet according to the progress achieved using the POC method according to IAS 11. In this connection, progress is determined as a proportion of the project costs already incurred in relation to the expected total costs for the project as a whole. To cover imminent losses from not-yet-completed projects, accrued expenses are formed on the basis of an individual evaluation of the project at the expense of the period in which such a loss is probable. Revenues within the scope of contracts based on actual expenses are generally posted monthly according to the expenditure incurred to provide the service. Revenues realised on the basis of the POC method, but as yet unbilled, are posted as unbilled services in the balance sheet. Amounts billed to customers that exceed the scope of the accrued revenues are posted as advance payments received. Media Services SinnerSchrader performs services for its customers for planning and implementing advertising campaigns on the Internet (media services). In the context of implementing advertising campaigns, SinnerSchrader buys advertising space at its own expense. In the course of billing for these media services, the costs for buying advertising space (media costs) are passed on to the customers together with a fixed payment or a payment calculated on the basis of the actual media costs. In principle, revenues for media services are realised with or after the appearance of the advertising. In this connection, the entire amount to be charged to the customer is recorded as gross revenues, and the amount reduced by the media costs that have been passed on to customers comprises the net revenues.

74 74 Consolidated Financial Statements Notes Realised revenues that have not yet been billed are posted as unbilled services in the balance sheet, reduced by deposits received for the advertising campaigns and including deposits paid for purchasing advertising space as part of advertising campaigns. Operating Services SinnerSchrader performs operating services for its customers, which in particular also include the 24-hour monitoring and management of Internet applications with an on-call service. Payment for these services usually comprises a fixed monthly service fee plus variable, performance-related components, and the customers are billed for them monthly or quarterly. If the IT system monitored by SinnerSchrader is operated in SinnerSchrader s own computer centre, fixed usage fees are also charged monthly. Sale of Hardware and Software In addition to other services, SinnerSchrader supplies its customers with hardware and standard software on request that Sinner- Schrader itself buys on the market. The revenues from this are realised after billing or after the transfer of risk. Software as a Service With the subsidiary newtention technologies GmbH, SinnerSchrader offers the use of self-created software in the context of a software-as-a-service model. Users are generally invoiced monthly for the usage fees depending on the actual usage in accordance with agreed usage parameters. Revenues are realised in the amount of the usage fees invoiced Advertising Costs In principle, SinnerSchrader takes the expenditure for advertising and promotional campaigns into account under the marketing costs in the Statements of Operations at the time the expenditure is incurred. In the 2009/2010 and 2008/2009 financial years, these expenses amounted to 235,476 and 259,732, respectively.

75 75 Consolidated Financial Statements Notes 2.19 Research and Development Expenditure Expenditure for research and development is recorded as an expense in the period in which it is incurred. Development costs that can be activated are an exception if they completely meet the criteria according to IAS 38. In 2009/2010, research and development costs in the amount of 410,895 were recorded as an expense in comparison to 332,817 in 2008/2009. In both years, the criteria for activation of the research and development costs according to IAS 38 were not met since research and development activities cannot be separated (circular process) Leasing Leasing payments should be recorded in a linear fashion as an expense in the Statements of Operations over the term of the leasing contract if they are incurred within an operating leasing relationship where all of the risks remain with the lessor. SinnerSchrader has concluded only operating leasing contracts. They mainly concern automobiles made available as company cars Share-based Compensation IFRS 2 calls for costs resulting from the issue of employee options to be entered in the balance sheet on the basis of their current value with an effect on income. In this connection, the market value of the option on the issue date should be distributed over the waiting period for exercising the option and then proportionately entered in the Statements of Operations as personnel costs for the relevant period. The costs are recorded against the shareholders equity in the reserve for share-based compensation. As of 31 August 2010, there were two stock option plans at SinnerSchrader; their structure will be described in more detail in Section 6.1.

76 76 Consolidated Financial Statements Notes 2.22 Earnings per Share SinnerSchrader calculates the earnings per share in agreement with IAS 33. The undiluted earnings per share are determined on the basis of the weighted average of the outstanding common stock. According to this, treasury stock is not considered in the calculation of the basis for the earnings per share on the date these shares were bought back. The weighted average of the outstanding shares is increased by the dilution effect from the potential exercise of outstanding options, calculated according to the Treasury Stock Method, in order to determine the diluted earnings per share. As part of its employee option programmes of 2000 and 2007, SinnerSchrader issued options to employees to buy common stock. The outstanding options in the 2009/2010 and 2008/2009 financial years were considered accordingly in the calculation of the dilution effect. 03 Segment Reporting In the Annual Report for the 2009/2010 financial year according to the Management Approach, SinnerSchrader continues to report on the Interactive Marketing, Interactive Media and Interactive Commerce segments. The segments are controlled on the basis of the EBITA. The Interactive Marketing segment develops Internet strategies, handles the customised conception, design, and technical development of websites and Internet applications, the maintenance of content and technologies, performance measurements and optimisation as well as technical operations, including the provision of the technical infrastructure for websites and Internet applications. The Interactive Media segment plans and implements advertising campaigns on the Internet with focus on performance-driven display advertising (e.g., banner ads) and provides and measures the performance of advertising media (ad serving). The Interactive Commerce segment accepts overall responsibility for the set-up and management of sales channels on the Internet, including logistics, payment transactions, and shop management (e-commerce outsourcing).

77 77 Consolidated Financial Statements Notes In the 2009/2010 financial year SinnerSchrader merged mediaby GmbH and the subsidiary newtention technologies GmbH acquired in the 2008/2009 financial year to form the Interactive Media segment. next commerce GmbH forms the Interactive Commerce segment and spot-media AG, together with SinnerSchrader Deutschland GmbH without its media division hived off as of 1 September 2009, come together to form the Interactive Marketing segment. All of SinnerSchrader s revenues were earned by Group companies based in Germany. In the Interactive Marketing segment, net revenues in the amount of 4,533,000, 3,307,000, and 2,401,000 were achieved with companies from three company groups. The Interactive Media segment achieved net revenues in the amount of 838,000 with companies from one company group. Table 1a shows the segment information for the 2008/2009 financial year, while the comparable data from the previous year is shown in Table 1b: Segment information for the 2009/2010 financial year in and number Table 1a Interactive Marketing Interactive Media Interactive Commerce Sum Segments Holding/ consolidation Group External revenues 21,470,245 6,575, ,556 28,718,061 28,718,061 Internal revenues 343, , , ,337 Gross revenues 21,813,831 6,834, ,556 29,320, ,337 28,718,061 Media Costs -4,783,236-4,783,236-4,783,236 Total revenues, net 21,813,831 2,050, ,556 24,537, ,337 23,934,825 Segment income (EBITA) 3,422, , ,336 2,803, ,188 2,185,124 Employees, end of period

78 78 Consolidated Financial Statements Notes Table 1b Segment information for the 2008/2009 financial year in and number Interactive Marketing Interactive Media Interactive Commerce Sum Segments Holding/ consolidation Group External revenues 19,548,926 7,961, ,846 27,664,453 27,664,453 Internal revenues 191, , , ,966 Gross revenues 19,740,085 8,083, ,846 27,977, ,966 27,664,453 Media Costs -6,728,899-6,728,899-6,728,889 Total revenues, net 19,740,085 1,354, ,846 21,248, ,966 20,935,554 Segment income (EBITA) before external shareholders 2,603, , ,225 2,473, ,413 1,833,854 Segment income (EBITA) 2,603, , ,225 2,079, ,413 1,440,537 Employees, end of period All internal revenues were carried out under the usual market conditions. Accounting for the individual segments follows the accounting principles that are also used in the Group. Administrative costs incurred by SinnerSchrader AG are charged to the operative segments, where they can be assigned. Costs that cannot be assigned primarily costs for original holding tasks, such as investor relations work are not distributed to the segments.

79 79 Consolidated Financial Statements Notes Table 1c explains the reconciliation of the total of the segment earnings to the earnings before tax in the Group for the period from 1 September 2009 to 31 August 2010 and for the comparable period in the previous year: Reconciliation of segment income to income before taxes of the Group in Table 1c 2009/ /2009 Segment income (EBITA) all reporting segments 2,803,312 2,079,950 Central costs not passed on to segments -618, ,413 EBITA of the Group 2,185,124 1,440,537 Amortisation of intangible assets from first consolidation -618, ,166 Financial incom of the Group 87, ,084 Income before taxes of the Group 1,653,800 1,253,455

80 80 Consolidated Financial Statements Notes 04 Information on the Balance Sheet 4.1 Goodwill, Other Intangible Assets, Property and Equipment, Participations, and Loans The development of goodwill, other intangible assets, and property and equipment in the 2009/2010 financial year is shown in Table 2a: Table 2a Development of goodwill, other intangible assets, and property and equipment in the 2009/2010 financial year in Acquisition costs: Additions Disposals Goodwill 3,134,986 9, ,239 2,965,047 Other intangible assets 2,930, ,263 1,343 3,088,943 Computer hardware 1,822, ,448 24,802 2,016,596 Furniture and fixtures 1,096, ,130 25,195 1,173,043 Leasehold improvements 425,571 5, ,772 Total fixed assets 9,409, , ,579 9,674,401 Accumulated depreciation, Additions Disposals amortisation and writedowns: Goodwill Other intangible assets 1,226, ,852 1,341 1,921,951 Computer hardware 1,362, ,747 24,511 1,605,738 Furniture and fixtures 672, ,400 20, ,505 Leasehold improvements 280,952 74, ,160 Total fixed assets 3,542,589 1,150,207 46,442 4,646,354 Net book value: Goodwill 3,134,986 2,965,047 Other intangible assets 1,703,583 1,166,992 Computer hardware 460, ,858 Furniture and fixtures 423, ,538 Leasehold improvements 144,619 75,612 Total fixed assets 5,867,049 5,028,047

81 81 Consolidated Financial Statements Notes The development of goodwill, other intangible assets, property and equipment, participations, and loans in the 2008/2009 financial year is shown in Table 2b: Development of goodwill, other intangible assets, and property and equipment in the 2008/2009 financial year in Table 2b Acquisition costs: Addition from first consolidation Additions Disposals Goodwill 2,592, ,523 3,134,986 Other intangible assets 1,073,252 1,402, , ,930,023 Computer hardware 1,510,013 32, ,632 8,669 1,822,950 Furniture and fixtures 1,038,637 5,319 56,351 4,199 1,096,108 Leasehold improvements 424, ,571 Investments and loans receivable 250, ,000 Total fixed assets 6,889,112 1,983, , ,870 9,409,638 Accumulated depreciation, Additions Disposals amortisation and writedowns: Goodwill Other intangible assets 636, ,173 1,226,440 Computer hardware 1,109, ,860 2,650 1,362,502 Furniture and fixtures 574, ,091 2, ,695 Leasehold improvements 208,577 72, ,952 Investments and loans receivable 250, ,000 Total fixed assets 2,778,179 1,019, ,089 3,542,589 Net book value: Goodwill 2,592,463 3,134,986 Other intangible assets 436,985 1,703,583 Computer hardware 400, ,448 Furniture and fixtures 464, ,413 Leasehold improvements 261, ,619 Investments and loans receivable Total fixed assets 4,110,933 5,867,049

82 82 Consolidated Financial Statements Notes Goodwill The goodwill in the amount of 2,965,000 posted to the balance sheet as of 31 August 2010 arose from the acquisition of the spotmedia Group in the 2007/2008 financial year and the acquisition of the newtention Group in the 2008/2009 financial year. The value of the goodwill as of 31 August 2009 was 3,135,000. In the 2009/2010 financial year the goodwill of the spot-media Group was reduced from 2,792,000 to 2,613,000 because of changed estimates of the outstanding earn-out payments. The goodwill of the newtention Group rose from 343,000 to 352,000 because the earn-out payment to be made in April 2010 was 9,000 higher than previously estimated. The goodwill was assigned to the respective company groups as cash-generating units ( CGU ). The impairment tests of the goodwill were carried out on 31 August 2001 at the level of these CGUs. The value of the goodwill was confirmed. The calculation of the achievable amount of the newtention Group cash-generating unit and the spot-media Group cash-generating unit was determined on the basis of the Value in Use or the Fair Value less Costs to Sell, making use of cash flow forecasts as of 31 August of a financial year. The forecasts are based on the financial plans approved by the management for a period of three years. The company plans are based on historical data and take account of expectations for the future development of the relevant markets. Revenues and earnings are as far as possible forecast on a customer basis.

83 83 Consolidated Financial Statements Notes Table 3 shows the most important assumptions used in the impairment test for the goodwill of the relevant cash-generating unit: Overview of the assumptions for goodwill impairment tests Table 3 Name of CGU Evaluation concept Growth rate Discount factor 2009/ / / / / /2009 spot-media group FVlCtS FVlCtS 0.5 % 0.5 % 8.8% 10.6 % newtention group ViU FVlCtS 0.5 % 0.5 % 12.5% 10.6 % FVlCtS ViU Fair Value less Costs to Sell Value in Use The determined Value in Use of the newtention Group and the Fair Value less Costs to Sell of the spot-media Group" cashgenerating unit react most sensitively to the assumptions with regard to revenue growth and the development of the EBITA margin in the detailed planning period. Calculation of the achievable amount of the spot-media Group cash-generating unit In the financial planning of the spot-media Group, an average revenue growth of around 8 % was estimated and a slightly increasing EBITA margin over that of the 2009/2010 financial year was assumed. This means that the average revenue growth is below the growth of past financial years. Beyond the three-year planning period, the cash flows of the spot-media Group cash-generating unit were adjusted, taking account of a consistent growth rate of 0.5 %. The growth rate used has been chosen conservatively for the sector under consideration. The discount rate after tax used for the cash flow forecasts is 8.8 %. This is based on the concept of the Weighted Average Cost of Capital. On the basis of the information used, no need was seen for impairment of value for the spot-media Group cash-generating unit within the impairment test as of 31 August 2010.

84 84 Consolidated Financial Statements Notes By sound reasoning, any conceivable changes to basic assumptions on determining the Fair Value less Costs to Sell of the spotmedia Group cash-generating unit could not result in the fair value of the cash-generating unit considerably exceeding it achievable amount. Calculation of the achievable amount of the newtention Group cash-generating unit The financial planning of the newtention Group is largely based on the fact that revenue in the next three financial years will rise cumulatively by two and a half times and a double-digit EBITA will be achieved. The planned positive development of the company results from the close link of the business activity of the newtention Group to mediaby GmbH within the Interactive Media segment. The cash flows of the newtention Group cash-generating unit incurred after the period of three years will be adjusted using a consistent growth rate of 0.5 %. The discount rate before tax used for the cash flow forecasts is 12.5 %. On the basis of the information used, no need was seen for impairment of value for the newtention group cash-generating unit within the impairment test as of 31 August If turnover in the next three financial years does not grow by at least 10 % per year, the surplus of the achievable amount over the book value would be reduced to zero. Moreover, there could be a need to impair value if the EBITA margin were below 4 % on average in the planning period Intangible Assets As of 31 August 2010, the balance sheet of the SinnerSchrader Group showed intangible assets with a book value of 1,167,000 compared to a book value of 1,704,000 at the end of the previous financial year. In the course of the financial year, intangible assets with total procurement costs of 54,000 were acquired; 106,000 had to be posted to intangible assets as a result of the increase in the estimated purchase price of a customer relation at spot-media AG acquired in the previous year.

85 85 Consolidated Financial Statements Notes Amortisations to intangible assets were assigned as follows in the financial year: Amortisation of 139,000 arose in the 2009/2010 financial year because of the customer relation acquired by spot-media AG with effect from 1 January 2009, which was assumed to have a usage period of four years. As of 31 August 2010, the remaining usage period of this intangible asset was 2 years and 4 months. A variable purchase price, payable in three yearly instalments, was agreed for the acquisition and was based on the business volume realised with the customer. At the time of purchase, a total of 394,000 was estimated for the three purchase price instalments. In the current financial year, the estimated value was increased by 106,000. The first two instalments in the amount of 120,000 and 220,000 were paid in March 2009 and March The discounted value of the purchase price liability outstanding as at 31 August 2010 was 166,000 and was reported as a current liability on 31 August With an assumed usage period of four years, amortisations in the amount of 350,000 arose in the 2009/2010 financial year for the n7 software developed and marketed by newtention technologies GmbH acquired in the previous financial year as part of the initial consolidation of the newtention Group. The residual usage period as at 31 August 2010 was 2 years and 3 months. 4.2 Deferred Taxes Both in the 2009/2010 and the 2008/2009 financial years, deferred taxes had to be posted in the Group because of differences in the postings for assets and liabilities according to IFRS and according to the relevant tax regulations. Section 5.5 contains more details on this. 4.3 Unbilled Services from POC As of 31 August 2010 and 31 August 2009, receivables from POC for ongoing fixed-price projects in the amount of 725,935 and 448,315, respectively, were posted as unbilled services. In connection with this, deposits received for the projects in the amount of 218,682 and 212,714 respectively, were deducted from the total amounts of 944,617 and 661,029, respectively, for the POC evaluation of the projects.

86 86 Consolidated Financial Statements Notes 4.4 Tax Reimbursement Claims As of 31 August 2010 and 31 August 2009 tax reimbursement claims reached a value of 275,293 and 211,129, respectively. This is paid tax collected at source on capital and interest earnings in the amounts of 107,361 and 49,082, respectively upon which SinnerSchrader has a claim for offsetting vis-à-vis the Tax Office within the context of tax assessment. As of 31 August 2010 and 31 August 2009, the claim from paid capital earnings tax was balanced against the tax reserves to be formed. There was also a tax reimbursement claim in the amount of 167,951 comprising payment claims from corporation tax credits identified which were to be activated in full by virtue of the introduction of the Act on Accompanying Tax Measures on the introduction of the European Company and Amending Other Tax Regulations ( SEStEG ). Upon introduction of the SEStEG, payment in instalments starts beginning in September 2008 with a term of ten years irrespective of any dividends. The cash value was used because the claims for reimbursement cannot bear interest. Discounting was effected at a risk-free interest rate. As of 31 August 2009, the discounted reimbursement claim was 162,047. In the 2009/2010 financial year, 58,267 was paid in capital earnings tax and 50,547 corporation tax and trade tax advance payments were made. In the previous financial year, 123,328 was refunded in capital earnings tax and creditable corporation tax and 29,962 was paid. 4.5 Other Current Assets The other current assets largely consist of payments for investor relations services, insurance policies, maintenance contracts and contributions.

87 87 Consolidated Financial Statements Notes 4.6 Securities The securities as of 31 August 2010 and 31 August 2009 consisted of corporate bonds and bonds payable to the bearer from solvent companies with remaining terms at the time of purchase of 8 to 23 months and 7 to 21 months, respectively. The securities can be sold at any time and serve to cover short-term financing needs. In accordance with IAS 39, SinnerSchrader qualified these securities as available for sale and accordingly evaluated them with their fair value ( marked-to-market ). Provided that they are not to be qualified as permanent, the unrealised profits or losses apportionable to these securities as of the report date are reported directly in the shareholders equity in the item Changes to shareholders equity with a neutral effect on profits, taking into account the taxes apportionable to them. The securities held and the unrealised profits and losses apportionable to them as of 31 August 2010 due to the market evaluation as well as the distribution of maturity are shown in Table 4: Marketable securities in Remaining term as of Acquisition cost Amortisation of acquisition cost Unrealised gains Unrealised losses Book value as of Book value as of Table 4 Marketable securities Less than 1 year 5,000,000 47,819 2,316-7,654 5,042,481 2,544,510 Marketable securities 1 to 5 years 1,000,000 1, ,001,181 2,228,881 Marketable securities, total 6,000,000 49,493 2,316-8,147 6,043,662 4,773,391 As at 31 August 2009, unrealised profits in the amount of 25,075 were posted. From these unrealised profits, 5,552 were realised in the 2009/2010 financial year from the sale of individual securities.

88 88 Consolidated Financial Statements Notes 4.7 Funds Cash flows and bank balances resulted in liquid funds of 2.2 million as of 31 August 2010 (previous year: 3.2 million). As of 31 August 2010, funds in the amount of 0.6 million were used as cash deposits for bank guarantees (see Section 4.13). 4.8 Shareholders Equity Subscribed Capital As of 31 August 2010 and 31 August 2009, the subscribed capital of SinnerSchrader AG was 11,542,764 and was divided into 11,542,764 no-par-value share certificates in the names of the bearers, each with a calculated value of 1 per share. On 31 August 2010 and 31 August 2009, 11,181,819 and 11,272,108 shares, respectively, of all issued outstanding shares were in circulation. The remaining 360,945 and 270,656 shares, respectively, were held as SinnerSchrader AG treasury stock. Authorised Capital The Annual General Meeting of 18 December 2008 authorised the Management Board to increase the share capital once or repeatedly by up to a total of 5,770,000 until 15 January 2013 with the approval of the Supervisory Board by issuing no-par-value share certificates issued in the name of the owner in return for a contribution in cash or a contribution in kind, excluding the shareholders subscription right ( Authorised Capital 2008 ). This became legally effective upon entry of the decision in the Commercial Register on 16 February In the 2009/2010 and 2008/2009 financial years, no capital increases were carried out using the authorised capital. Conditional Capital As of 31 August 2010, SinnerSchrader AG had conditional capital in the amount of 896,538, which was created in 1999 ( Conditional Capital I ), 2000 ( Conditional Capital II ), and 2007 ( Conditional Capital III ) for the issue of share options to employees. With the Annual General Meeting resolution of 23 January 2007, Conditional Capital I and Conditional Capital II were cancelled to the extent that they were no longer needed to service subscription rights and were correspondingly reduced from 375,000 to 127,909 and

89 89 Consolidated Financial Statements Notes 168,629, respectively. Until 31 December 2011, options can be issued to employees from Conditional Capital III in the amount of 600,000, newly created by the Annual General Meeting resolution of 23 January In the 2009/2010 financial year, 25,000 options were allocated. Details on the option programmes and outstanding options are in section 6. Treasury Stock As of 31 August 2010, the Company held 360,945 shares of treasury stock. The average price of all shares of treasury stock held was 1.65 as of 31 August As of 31 August 2009, the Company held 270,656 shares of treasury stock which had been purchased at an average acquisition cost of 1.54 per share. In the 2009/2010 financial year, 90,289 shares of treasury stock were purchased on the stock market at an average price of ,945 shares of treasury stock represent 3.13 % of the share capital. Under IFRS, a deducted item in shareholders equity representing procurement costs has been set up for treasury stock. Capital Reserve As of 31 August 2010 and 31 August 2009, the capital reserve reached a value of 3,599,444. Reserve for Share-based Compensation The reserve comprises the accumulated costs from issuing share-based compensation. As of 31 August 2010 and 31 August 2009, they reached a value of 141,259 and 102,037, respectively. Accumulated Deficit (icl. Revenue Reserves) The Annual General Meeting of SinnerSchrader AG on 16 December 2009 decided to pay a dividend of 0.08 per share from the balance sheet profit as of 31 August 2009 at the suggestion of the Management Board and Supervisory Board. An amount of 901,769 was thus paid to the shareholders on 17 December 2009; the liquid funds and the shareholders equity fell by this amount.

90 90 Consolidated Financial Statements Notes Changes to Shareholders Equity with a Neutral Effect on Income The changes to shareholders equity with a neutral effect on income as of 31 August 2010 and 31 August 2009 amounted to 21,129 and 42,071, respectively, and originated in the amount of 25,078 and 25,088, respectively, from currency conversion within the context of the consolidation of the companies in the consolidation group reporting in foreign currency and in the amount of 3,949 and 16,983, respectively, from the evaluation of securities available for sale on the report date with no effect on income. The changes to these items are shown in the Consolidated Financial Statements. 4.9 Tax Liabilities As of 31 August 2010, the reserves for corporation tax and commercial tax were 1,845,589 (previous year: 1,256,734). Tax reimbursement claims were reported in the amount of 107,361 from paid tax collected at source on capital and interest earnings, upon which SinnerSchrader has a claim for offsetting vis-à-vis the Tax Office within the context of tax assessment Accrued Expenses The accrued expenses are made up as shown in Table 5: Table 5 Accrued expenses in Utilised Allocated Dissolved Accrued compensation 1,028,856-1,028,651 1,526, ,526,326 Accrued project-oriented expenses for warranties and allowances 297,626-87,089 50, ,747 Accrued rent and related expenses 160,009-18, , ,532 Reporting and auditing expenses 92,300-81,266 62,850 73,884 Other accruals 123,069-59,592 59,146-34,745 87,878 Total 1,701,860-1,275,449 1,804,707-34,751 2,196,367

91 91 Consolidated Financial Statements Notes 4.11 Other Current Liabilities As of 31 August 2010, the other current liabilities had a remaining term of less than one year and were broken down into the main components listed in Table 6: Other liabilities in Table Liabilities from income tax 208, ,705 Liabilities from value-added tax 319, ,972 Other current liabilities 455, ,368 Deferred revenues and deferred income 29,381 28,156 Total 1,012,066 1,081,201 The other current liabilities include liabilities for future purchase price instalments from company mergers and the purchase of a customer relationship in the amount of 393,339 and 509,698, respectively Non-current Financial Liabilities The non-current financial liabilities consist exclusively of the liability for a future purchase price instalment from company mergers which will be due for payment in Financial Liabilities and Contingent Liabilities SinnerSchrader rents its office premises at the Hamburg and Frankfurt am Main locations as well as company vehicles as part of rental and operating leasing contracts. The minimum remaining term of the rental contracts for the offices in Hamburg and Frankfurt am Main was between 8 and 28 months as of 31 August The leasing contracts for the company vehicles had a remaining

92 92 Consolidated Financial Statements Notes term of between 2 and 30 months on the balance sheet date. In the years ahead, the rental and leasing contracts will result in financial liabilities in the amount shown in Table 7: Table 7 Financial liabilities in Leasing Renting , , ,390 16, ,113 1,255, , , , , ,428 87, ,588 After Total 58,852 68,315 3,080,392 2,562,898 In the 2009/2010 and 2008/2009 financial years the total expenditure for rents including operating costs was 1,113,248 and 1,080,745, respectively. In the 2009/2010 and 2008/2009 financial years the total expenditure for leasing contracts was 93,939 and 88,847, respectively. In addition, SinnerSchrader has certain regular contingent liabilities that arise in the ordinary course of business activities. The Company will form accrued expenses for these if there is an over-50 % chance that future expenditures will be have to be made in this regard and that such expenditures can be estimated with sufficient reliability. As of the balance sheet date, the consolidated companies that are part of the SinnerSchrader Group were open to one legal claim, which is based on the conversion of the former company building. As of 31 August 2010 and 31 August 2009, the reserve with respect to this legal claim amounted to 100,000. It is part of the accrued expenses shown in section 4.10.

93 93 Consolidated Financial Statements Notes In the course of renting office space at the Hamburg and Frankfurt am Main locations, the landlords each demanded securities, which were provided in the form of bank guarantees. Further securities in the form of bank guarantees were provided to the vendors of spot-media AG to secure future purchase price instalments. As of 31 August 2010, the volume of this guarantee was 651,107 (previous year: 617,855). With a guarantee of this scope, SinnerSchrader can dispose of its liquid funds only with the explicit approval of the guaranteeing bank Financial Instruments Information according to IFRS 7 Liquid funds and cash equivalents, accounts receivable, and unbilled services as well as other liabilities are mainly short-term (remaining terms less than three months or less than one year). Due to the slight failure risk of the accounts receivable, reserves for bad debts have been necessary only to a minor extent in recent financial years. In the current financial year, SinnerSchrader had no notable bad debt losses to report; additions had to be made to the reserves for bad debts in the amount of 35,116. The book value of the financial assets as of 31 August 2010 almost corresponds to the current value to be ascribed. Trade accounts payable and other current liabilities are also due within one year. The book values correspond to the current values to be ascribed. The long-term liability in the amount of 289,000 for the sixth purchase price instalment from the purchase of spot-media AG which is linked to an earn-out clause with respect to future EBIT expectations has been posted at its cash value. This corresponds to the fair value.

94 94 Consolidated Financial Statements Notes Summarised according to categories pursuant to IAS 39, the picture presented in Table 8a results for the financial instruments reported in the SinnerSchrader AG Consolidated Financial Statements as of 31 August 2010: Table 8a Financial instruments acc. to IFRS 7 in 000s Category of measurement acc. to IAS 39 Book value Fair value Book value Fair value Funds LaR 2,246 2,246 3,215 3,215 Maketable securities AfS 6,044 6,044 4,773 4,773 Accounts receivable, net LaR 5,380 5,380 4,754 4,754 Receivables from production orders (POC) LaR Other current assets LaR Funds and current assets 14,420 14,420 13,205 13,205 Trade accounts payable FLaC 1,991 1,991 2,021 2,021 Accrued expenses for reporting and auditing FLaC Other current liabilities LaR Other non-current liabilities LaR Financial liabilities 3,017 3,017 3,625 3,625 AfS available-for-sale financial assets FLaC financial liabilities at amortised cost LaR loans and receivables Financial instruments are all assigned to evaluation category Level 1 in line with the IFRS 7 fair value hierarchy.

95 95 Consolidated Financial Statements Notes The net profits and losses from financial instruments arising in the financial year are shown in Table 8b: Net income from financial instruments acc. to IFRS 7 in Table 8b From fair-valuemeasurement From subsequent measurement From disposals Net gains/losses From amortisation of acquisition costs From componding/ discounting Loans and receivables LaR -53,230-53,230 Available-for-sale financial assets AfS -5,831 49,493 5,552 49,214 Total -5,831 49,493-53,230 5,552-4,016 AfS LaR available-for-sale financial assets loans and receivables Table 8c shows the age structure of the trade accounts receivable after value adjustments: Maturity of accounts receivable after adjustments in 000s Table 8c Accounts receivable Not due Days overdue more than 1 90 days days days 360 days as of 31 August ,252 1, as of 31 August ,852 2, See Section 7 of in these Notes for the market risks associated with financial instruments.

96 96 Consolidated Financial Statements Notes 05 Elements of the Statements of Operations 5.1 Revenues The revenues of 28,718,061 (previous year: 27,664,453) include order income of 944,617 (previous year: 661,029) from incomplete projects as of 31 August 2010 identified with the POC method. The accumulated costs of the revenues for these orders were 597,759 (previous year: 425,270). 5.2 Breakdown of Expenses According to the Total Cost Method The total revenues, marketing, administrative, and research and development costs of the 2009/2010 and 2008/2009 financial years was broken down according to cost types, as shown in Table 9: Table 9 Operating costs by cost type in 2009/ /2009 Personnel expense 15,329,697 13,425,043 Costs of materials 426, ,240 Costs of services 2,023,657 1,977,620 Depreciation of property and equipment, as far as not from first consolidation 531, ,332 Other operating expenses 3,490,936 3,263,311 Amortisation of intangible assets from first consolidation 618, ,166 Total 22,420,765 20,067,712 The personnel expenditure refers to an average personnel capacity of 271 full-time employees in the 2009/2010 financial year and 244 full-time employees in the 2008/2009 financial year.

97 97 Consolidated Financial Statements Notes The expenditure for purchased materials was largely incurred for hardware and software, which SinnerSchrader acquired to sell on to its customers. The expenditure for purchased services mainly comprises costs resulting from using freelancers and sub-contractors. Within the other operating expenses, 1,113,248 and 1,080,745 were incurred for renting and operating the office space in the 2009/2010 and 2008/2009 financial years, respectively. Additionally, within the other operating expenses, 9,522 was apportionable to bad debt losses in the 2009/2010 financial year. In the comparable period of the previous year bad debt losses amounted to 43, Other Income/Expenses Table 10 shows the composition of the other income/expenses: Other income and expenses in Table / /2009 Income from dissolving of accrued expenses 39, ,829 Compensation for damages 2,090 5,690 Income from disposal of fixed assets Other income 26,980 Total 68, ,519 Losses of accounts receivable -11,930 Expenses from disposal of fixed assets -2, Other expenses -13,216-7,600 Total -15,718-19,990

98 98 Consolidated Financial Statements Notes 5.4 Financial Result The financial result is made up as shown in Table 11: Table 11 Table 11 Financial income in 2009/ /2009 Interest income 138, ,427 Realised gains/losses, net on the sale of marketable securities 5,551 59,004 Interest expenses -56,756-38,347 Income from waiver of receivables 122,000 Total 87, ,084 Interest income and realised profits from the sale of marketable securities were earned from the investment of free liquid funds on the capital market. Interest expenditure and similar expenditure was largely incurred for the guarantees provided by banks and for the compounding of interest of the purchase price liability set at the cash value at the moment of purchase associated with the takeover of spot-media AG. The income from the debt waiver in the previous year arose in newtention technologies GmbH as a result of the takeover by Sinner- Schrader.

99 99 Consolidated Financial Statements Notes 5.5 Taxes from Income and from Earnings The taxes from income and earnings posted in the 2009/2010 and 2008/2009 financial years are made up of current and deferred components, as shown in Table 12a: Income tax in Table 12a 2009/ /2009 Current 785, ,635 Deferred -234, ,271 Total 550, ,364 Deferred taxes had to be formed because of the evaluation differences between the balance sheet items according to IFRS and the postings in the relevant tax balances as well as on the basis of the remaining loss carry-forwards that can be used for tax purposes. Table 12b shows the composition of the deferred tax items as of 31 August 2010 and 31 August 2009, broken down according to the items where there was an evaluation difference:

100 100 Consolidated Financial Statements Notes Table 12b Deferred tax items in Deferred tax assets: Loss carry-forwards 610, ,122 Valuation of accrued expenses ,225 Valuation allowance -553, ,122 Total deferred tax assets 57,076-13,225 Deferred tax liabilities: Valuation of unfinished/unbilled services 194, ,589 Valuation of unrealised gains or losses on marketable securities available for sale 748 8,093 Valuation of intangible assets 197, ,622 Valuation of fixed assets 2,429 2,966 Valuation of current assets 6,003 11,103 Total deferred tax liabilities -343, ,373 Total deferred tax assets/liabilities, net -343, ,598 thereof: deferred tax assets/liabilities formed with an effect on net income -345, ,505 deferred tax from the valuation change of AfS financial instruments 1,882-8,093 In accordance with IAS 12, deferred taxes were to be balanced with temporary differences in connection with interests in Group companies (outside basis differences). For outside basis differences in the amount of 0.7 million, no deferred tax liabilities were formed since it will not be possible to reverse the temporary differences in the foreseeable future.

101 101 Consolidated Financial Statements Notes As of 31 August 2010 and 31 August 2009, the calculation of deferrals was based on tax loss carry-forwards in Germany, the UK, and the Netherlands. In the three countries, the relevant loss carry-forwards could be brought forward without limitation. The extents of the loss carry-forwards and the tax rates used to calculate them are listed in Table 12c: Loss carry-forwards and statutory income tax rates in and % Table 12c For corporate tax Loss carry-forwards Tax rate Loss carry-forwards Tax rate Germany -129, % 1) -129, % 1) Great Britain -1,170, % -1,138, % Netherlands -220, % -210, % For municipal trade tax Loss carry-forwards Tax rate Loss carry-forwards Tax rate Germany -641, % -641, % Great Britain Netherlands 1) 15 % corporate tax plus 5,5 % solidarity surcharge Deferred tax assets may be posted only to the extent that the future realisation of the relevant advantage is sufficiently probable or if they are countered by deferred tax liabilities. Correspondingly, as of 31 August 2010 and 31 August 2009, the values of the tax claims from loss carry-forwards in the UK and the Netherlands were adjusted because the operating business in these countries continues to be inactive. The same applies to tax claims from loss carry-forwards prior to tax consolidation of a domestic subsidiary because here, too, realisation cannot yet be forecast with sufficient probability.

102 102 Consolidated Financial Statements Notes The deferred tax claims are to be calculated according to IAS on the basis of the currently valid tax rates. In this connection, the statutory tax rate of 32.3 % was applied to the calculation of active and passive deferred taxes as of 31 August 2010 and 31 August It was made up of the trade tax rate of 16.5 %, the corporation tax rate of 15 %, and the solidarity surcharge of 5.5 % on the corporation tax. The deferred tax assets and liabilities were posted separately for every tax subject for identification on the balance sheet. The tax expenditure or income identified in the Statements of Operations deviates from the value that would result from the use of the statutory tax rates on the pre-tax profits. Table 12d explains the difference between the calculated tax expenditure or income on the basis of the statutory tax rate and the tax expenditure or income recorded in the Statements of Operations for the 2009/2010 and 2008/2009 financial years: Table 12d Tax reconciliation in 2009/ /2009 Income before income tax 1,653,800 1,253,455 Statutory tax rate in Germany 32,28% 32,28% Tax provision (+), tax credit (-) 533, ,553 Non-deductible expenses for share-based compensation 12,659 10,089 Other non-deductible expenses/non-taxable income 22,700 29,447 Depreciation of goodwill, effecting tax -213,015 Transfer of losses from different financial year of subsidiaries with effect on taxes -80,901 Deferred tax assets, not recognised 80,901 Changes in valuation allowances for deferred tax assets and differences in tax rates concerning losses in foreign group companies, net of tax effects on consolidation Taxes for previous years ,373 Other Income tax corresponding to income statement 550, ,364

103 103 Consolidated Financial Statements Notes 5.6 Earnings per Share The derivation of the undiluted and diluted earnings per share for the 2009/2010 and 2008/2009 financial years is shown in Table 13: Earnings per share in and number Table / /2009 Net income 1,103, ,091 Net income attributable to external shareholders -291,935 Net income attributable to the shareholders of SinnerSchrader AG 1,103,246 1,231,026 Basis weighted average shares of common stock outstanding 11,253,987 11,356,215 Basic earnings per share Weighted average shares of common stock outstanding 11,253,987 11,356,215 add: stock option grant 465 Diluted average share of common stock outstanding 11,253,987 11,356,680 Diluted earnings per share

104 104 Consolidated Financial Statements Notes 06 Share-based Compensation 6.1 Stock Option Plans SinnerSchrader Stock Option Plan 2000 In December 2000, the Annual General Meeting of SinnerSchrader AG approved the SinnerSchrader Stock Option Plan 2000 ( 2000 Plan ), which provides for the granting of stock options to allocate a total of 375,000 shares to the members of the Management Board of SinnerSchrader AG (40,000 options), to the management of the affiliated companies (40,000 options), to all employees of SinnerSchrader AG (55,000 options) as well as to all employees of the affiliated companies (240,000 options) by 10 January Options granted under the 2000 Plan have an exercise price of 120 % of the average closing price of the SinnerSchrader share on the Frankfurt Stock Exchange during the ten trading days prior to the allocation date. The options of the 2000 Plan can be exercised in equal instalments of one-third each two, three, and four years after allocation at the earliest. They have to be exercised within six years after the allocation date. In the 2009/2010 financial year, no options were exercised. As of 31 August 2010, a total of 38,367 options from the 2000 Plan were still outstanding with an average exercise price of SinnerSchrader Stock Option Plan 2007 In January 2007, the Annual General Meeting of SinnerSchrader AG approved the SinnerSchrader Stock Option Plan 2007 ( 2007 Plan ), which provides for the granting of stock options to allocate a total of 600,000 shares to the members of the Management Board of SinnerSchrader AG (200,000 options) and to the members of the management of the affiliated companies (200,000 options) as well as to selected employees performing managerial tasks within SinnerSchrader AG and affiliated companies (200,000 options). Options granted under the 2007 Plan have an exercise price of at least the mean value of the closing price of SinnerSchrader AG shares in the Xetra trading system of Deutsche Börse AG (or an equivalent successor system) during the five trading days prior to the allocation date. The options can be exercised in equal instalments of one-third each three, four, and five years after allocation at the earliest. The options of the first third may be exercised only if the mean value of the closing price of SinnerSchrader AG shares

105 105 Consolidated Financial Statements Notes in the Xetra trading system of Deutsche Börse AG (or an equivalent successor system) during the five trading days before the day of exercise (reference price) is 30 % above the exercise price. The options of the second third may be exercised only if the reference price is 40 % above the exercise price. The options of the last third may be exercised only if the reference price is 50 % above the exercise price. The latest exercise period is seven years after the allocation date. In the 2009/2010 financial year, 25,000 options with an average exercise price of 1.69 were allocated to members of the management of subsidiary companies. In previous financial years, 250,000 options with an average exercise price of 1.62 were allocated to members of the SinnerSchrader AG Management Board and to members of the management of subsidiary companies. Table 14a shows the parameters used for evaluation of the options newly assigned on 1 September 2009 on the basis of a binomial model according to Cox/Ross/Rubinstein: Parameters for valuation of stock options at valuation date Table 14a 2009/2010 Expected life of option years Risk-free interest rate 2.44 % Expected dividend yield 6 % Expected volatility 37 % 41 % Exercise price 1.69 Share price at valuation date 1.71 The volatility was determined by the closing prices of the last 840, 1,080 and 1,320 trading days before the date of issue.

106 106 Consolidated Financial Statements Notes Table 14b summarises the changes in the number of options outstanding from the 2000 Plan and the 2007 Plan in the 2009/2010 and 2008/2009 financial years: Table 14b Outstanding stock options in and number Number of options Weighted average exercise price Weighted average grant date fair value Outstanding at 31 August , Granted Exercised Cancelled -7, Expired -15, Outstanding at 31 August , Granted 25, Exercised Cancelled Expired Outstanding at 31 August ,

107 107 Consolidated Financial Statements Notes Additional information on all options outstanding on 31 August 2010 is listed in Table 14c: Outstanding stock options according to exercise price in, number, and years Table 14c Options outstanding Options exercisable Range of exercise price in Number Weighted average remaining contractual life in years Weighted average exercise price in Number Weighted average exercise price in , , Total 313, , Risk and Capital Management 7.1 Liquidity Risk Liquidity risks result from potential financial bottlenecks and the increased refinancing costs caused by them. The goal of liquidity management at SinnerSchrader is to ensure continual solvency within the agreed payment terms through sufficient liquid funds. The Group monitors these liquid funds, and only the free liquidity not considered necessary to balance out fluctuations in cash flows is invested for longer terms. Furthermore, when longer-term investments are made, the Group ensures that these investments are only made in securities that can be sold at any time.

108 108 Consolidated Financial Statements Notes 7.2 Credit Risk Credit risks arise for SinnerSchrader in that, after services have been provided, the services are invoiced with the payment terms agreed with the customer, but customers do not always meet the resulting payment obligations. SinnerSchrader reduces this risk by carrying out regular credit checks on new customers and by regularly monitoring its customers outstanding payment obligations. In the 2009/2010 financial year, as in past years, SinnerSchrader had no major bad debt losses to report or reserves for bad debt to form, despite the financial and economic crisis. Furthermore, SinnerSchrader faces credit risks from holding available liquid funds in bank balances and from investing this liquidity in the capital market. SinnerSchrader reduces this risk through the selection of its bank partners and cooperation with several different banks and by restricting the credit rating of the investment instruments to a minimum rating of BBB or A3 for short-term investments. The maximum default risk arises from the book values of the financial receivables in the balance sheet or the fair values of the securities included in the balance sheet. 7.3 Market Risks Currency Risks Since SinnerSchrader calculates its revenues exclusively in euros, its suppliers primarily issue invoices in euros, and the Company holds no notable assets in foreign currencies, the Group faces no major foreign currency risks. Interest Risks The Company does not have any major interest-bearing financial liabilities. Interest risks therefore arise exclusively from the investment of free liquidity in interest-bearing assets. As of 31 August 2010, SinnerSchrader held interest-bearing securities in the nominal volume of 6 million.

109 109 Consolidated Financial Statements Notes A rise in the market interest rate of 0.5 percentage points would cause the current value of the portfolio to decrease by 44,000. Due to SinnerSchrader s investment policy, which is aimed at security and rapid liquidity with short terms, last year s financial crisis continued to have a negative effect on the financial result in the 2008/2010 financial year because of the decline in interest rates, since the reinvestment of freed liquidity was only possible at lower interest rates. Exchange Risks As of 31 August 20109, SinnerSchrader did not hold any shares of other companies listed on the stock exchange. The Group therefore faced no exchange risks. 7.4 Capital Management SinnerSchrader fundamentally pursues the goal of securing its shareholders equity base in the long term and achieving a suitable return on its capital. A high level of shareholders equity is also aimed at because it supports the independence and competitiveness of the company. SinnerSchrader s capital management also aims to ensure that the operating companies will continue to operate and to finance organic and inorganic growth. As of 31 August 2010, the shareholders equity rate of SinnerSchrader was 60 % (previous year: 62 %). The return on shareholders equity the ratio of the share of consolidated income of SinnerSchrader s shareholders and the shareholders equity on the report date amounted to 8.8 % and 9.8 % in the 2009/2010 and 2008/2009 financial years, respectively. See the Statements of Shareholders Equity and Section 4.8 (Shareholders Equity) of these Notes for the composition of the shareholders equity.

110 110 Consolidated Financial Statements Notes 08 Related Party Transactions In the 2009/2010 and 2008/2009 financial years, subsidiaries of SinnerSchrader AG generated revenues of 7,809,719 and 10,997,701, respectively, with companies of a group of companies in which members of the Supervisory Board of SinnerSchrader also held supervisory board positions or held other decisive positions as of the Annual General Meeting on 16 December The total of unbilled services and accounts receivable to these companies on and amounted to 978,023 and 1,566,983, respectively. The related party transactions were carried out under the usual market conditions. 09 Major Events after the Balance Sheet Date There were no major events after the balance sheet date that should be reported.

111 111 Consolidated Financial Statements Notes 10 Supplementary Information Required by the German Commercial Code 10.1 Participations See Annual Financial Statements of SinnerSchrader Aktiengesellschaft, Section Use of Article 264 Para. 3 of the German Commercial Code SinnerSchrader Deutschland GmbH, Hamburg, and spot-media AG, Hamburg, made use of the exemption provision in Article 264 para. 3 of the German Commercial Code for the Annual Report as of 31 August 2010.next commerce GmbH also made use of the exemption provision in Article 264 para. 3 of the German Commercial Code for the Annual Report as of 30 April Employees In the 2009/2010 financial year, there were an average of 291 employees in the SinnerSchrader Group, 5 of whom were board members or managing directors of the Group companies and 33 trainees, students, and interns. In the previous year, there was an average of 256 employees in the Group.

112 112 Consolidated Financial Statements Notes 10.4 Payment of the Auditors 65,822 was spent on the audit of the Annual Financial Statements and Consolidated Financial Statements of SinnerSchrader AG as of 31 August BDO AG Wirtschaftsprüfungsgesellschaft received another 2,950 for other certification services Management Board See Annual Financial Statements of SinnerSchrader Aktiengesellschaft, Section Supervisory Board See Annual Financial Statements of SinnerSchrader Aktiengesellschaft, Section Directors Holdings of Shares and Subscription Rights to Shares (Directors Dealings) See Annual Financial Statements of SinnerSchrader Aktiengesellschaft, Section Declaration of Conformity on the Acceptance of Recommendation of the Government Commission on the German Corporate Governance Code On 16 December 2009 the Management Board and Supervisory Board submitted the Declaration of Compliance with the Corporate Governance Code required by Article 161 of the German Stock Corporation Act and made it permanently accessible to the shareholders on the Company s website. Hamburg, 29 October 2010 The Management Board Matthias Schrader Thomas Dyckhoff

113 113 Consolidated Financial Statements Auditor s Report Auditor s Report We have audited the consolidated financial statements prepared by SinnerSchrader Aktiengesellschaft, Hamburg, comprising the statement of financial position, the statement of comprehensive income, income statement, statement of changes in equity, statement of cash flows and the notes to the consolidated financial statements, together with the group management report for the business year from September 1, 2009 to August 31, 2010, which was combined with the management report of the parent company. The preparation of the consolidated financial statements and the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to sec. 315 a para. 1 HGB are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with sec. 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accor dance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations.

114 114 Consolidated Financial Statements Responsibility Statement In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to sec. 315 a para. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the group s position and suitably presents the opportunities and risks of future development. Hamburg, October 29, 2010 BDO AG Wirtschaftsprüfungsgesellschaft signed Dr. Probst Wirtschaftsprüfer (German Public Auditor) signed Brandt Wirtschaftsprüfer (German Public Auditor) Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements of the SinnerSchrader Group and the annual financial statements of SinnerSchrader Aktiengesellschaft give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the AG, and the joint consolidated status report and group status report includes a fair review of the development and performance of the business and the position of the Group and the AG, together with a description of the principal opportunities and risks associated with the expected development of the Group and the AG. Hamburg, 29 October 2010 The Management Board Matthias Schrader Thomas Dyckhoff

115 04 Annual Financial Statements of SinnerSchrader AG

116 116 sinnerschrader Geschäftsbericht Jahresabschluss der AG

117 117 sinnerschrader Annual Report Annual Financial Statements of SinnerSchrader AG Balance Sheets Balance Sheets of SinnerSchrader AG as of 31 August 2010 Assets in Fixed assets Intangible assets: Concessions, industrial property rights, and similar rights and assets, as well as licences in such rights and assets 29,956 54,070 Tangible assets: Other equipment, plant, and office equipment 240, ,909 Leasehold improvements 70, ,190 Total tangible assets 311, ,099 Financial assets: Shares in affiliated companies 22,833,928 20,431,867 Total financial assets 22,833,928 20,431,867 Total fixed assets 23,174,886 20,836,036 Current assets Receivables and other assets: Trade receivables 4,233 7,833 Receivables from affiliated companies 2,250,643 2,361,266 Other assets 228, ,423 Total receivables and other assets 2,483,664 2,578,522 Securities: Treasury stock 596, ,027 Other securities 5,991,853 4,700,000 Total securities 6,587,995 5,118,027 Cash on hand and in banks 1,502,196 2,465,667 Total current assets 10,573,855 10,162,216 Prepaid expenses 57,729 30,189 Total assets 33,806,470 31,028,441

118 118 sinnerschrader Annual Report Annual Financial Statements of SinnerSchrader AG Balance Sheets Liabilities and shareholders equity in Shareholders equity Subscribed capital (conditional capital: 896,538; previous year: 896,538) 11,542,764 11,542,764 Capital surplus 2,603,673 2,603,673 Reserves: Reserve for treasury stock 596, ,027 Other reserves 14,507,075 11,888,322 Retained earnings/accumulated deficit 1,369,892 1,746,793 Total shareholders equity 30,619,546 28,199,579 Accruals Accrued taxes 1,690,040 1,077,363 Other accrued liabilities 1,274,715 1,439,119 Total accrued liabilities 2,964,755 2,516,482 Liabilities Trade payables 136,936 84,294 thereof with a remaining term up to one year: 136,936 (previous year: 84,294) Other liabilities 84, ,349 thereof with a remaining term up to one year: 84,296 (previous year: 226,349) thereof taxes: 71,753 (previous year: 226,319) thereof relating to social security and similar obligations: 56 (previous year: 0) Total liabilities 221, ,643 Prepaid expenses 937 1,737 Total liabilities and shareholders equity 33,806,470 31,028,441

119 119 sinnerschrader Annual Report Annual Financial Statements of SinnerSchrader AG Statements of Operations Statements of Operations of SinnerSchrader AG for the 2009/2010 and 2008/2009 financial years in 2009/ /2009 Revenues 3,159,095 3,103,485 Other operating income 2,308, ,891 Material expenses: Expenses for purchased services -232, ,211 Total material expenses -232, ,211 Personnel expenses: Wages and salaries -1,285,287-1,423,643 Social security -212, ,919 Total personnel expenses -1,498,078-1,700,562 Depreciation of intangible assets, property, and equipment -200, ,951 Other operating expense -1,846,395-1,864,525 Expense from profit/loss transfer agreement -989,687 Income from profit/loss transfer agreement 3,226,390 2,945,290 Other interest and similar income 156, ,244 thereof from affiliated companies: 23,230 (previous year: 243) Writedowns on investments -8,146 Interest and similar expenses -76, ,162 thereof from affiliated companies: 215,230 (previous year: 157,189) Income from ordinary activities 3,998,389 2,132,499

120 120 sinnerschrader Annual Report Annual Financial Statements of SinnerSchrader AG Statements of Operations in 2009/ /2009 Income tax -672, ,350 Other taxes -4, Net income 3,321,736 1,430,162 Profit brought forward from previous year 845, ,631 Withdrawal from reserves: from reserves for treasury stock from other reserves 178, ,835 Additions to reserves: to reserves for treasury stock -178, ,835 to other reserves -2,796,868 Net income for the year 1,369,892 1,746,793

121 05 Notes of SinnerSchrader AG