Annual Report 2005

The Year 2005

February 2005 EM.TV Beteiligungs GmbH & Co. KGcompletely repays the zero-coupon note to its holders,through the transfer of net proceeds from the sale ofits 45 percent stake in Tele München Gruppe (TMG).

EM.TV AG reaches an agreement with KarstadtQuelleNew Media AG and Swiss sports investor Dr. h. c.Hans-Dieter Cleven regarding the acquisition of theirstakes in sports TV station DSF and online sportsplatform Sport1. The EM.TV Group is now sole stake-holder of both sports companies.

With C&A and the Deichmann Group, EM.TV wins tworespected retail companies as new licensees for the2006 FIFA World Cup™. Their extensive national andinternational retail networks are a decisive contributi-on to the expansion of distribution channels.

March 2005 EM.TV subsidiary EM.EntertainmentGmbH reaches an agreement with ZDF on the exten-sion to their existing framework contract until 2012.The agreement relates to the period starting 2006and encompasses a total of around 625 half-hourprograms. Furthermore, the two companies agree tocontinue their joint co-production activities within thechildren’s and youth sector.

May 2005 DSF acquires an extensive rights packageto the UEFA Cup matches for the next three seasonsfrom sports rights marketing agency SPORTFIVE,beginning with the 2005/2006 season.

June 2005 EM.TV AG partially repays the 8% bondwith warrants attached of 2004/2009 with a nominalpayment of 10 million Euro on June 30, 2005.

September 2005 Following countless anniversaryinitiatives in celebration of the 30th TV birthday ofcartoon series Vicky the Viking, the three-part Vickypromotion run in 2004 by EM.Entertainment GmbHin co-operation with Autobahn Tank & Rast GmbH isvoted Promotion of the Year by licensing body LIMA.

December 2005 EM.Entertainment GmbH takes animportant step in the expansion of its home entertain-ment activities when it secures long-term program con-tracts with Munich-based Universum Film GmbH andHamburg-based Warner Bros. Entertainment GmbH.

In the course of the TV rights issue by DFL DeutscheFußball Liga GmbH in Frankfurt, DSF secures an exten-sive rights package to the Premier and Second GermanSoccer League for the next three seasons, starting withthe 2006/2007 season. The rights package encom-passes the exclusive first free-TV highlights to both theSunday matches played in the Premier Soccer League,as well as the exclusive free-TV highlights to the SecondSoccer League, including the live match on Mondays.

PLAZAMEDIA reaches an agreement with PREMIEREon the continuation of their long-term strategic partner-ship, as of January 1, 2007. Within the scope of thepartnership, PLAZAMEDIA will provide a wide rangeof services in studio production (contract term untilJune 30, 2011) and outside production (contract termuntil December 31, 2009).

In addition, PLAZAMEDIA takes over 100 percent ofthe stakes in PREMIERE subsidiary Creation Club (CC)GmbH. Creation Club and PREMIERE also agree onan extensive production framework contract with aterm of three years and an option to extend by a fur-ther two years.

Key Figures

2003

414.8

284.1

675.9

146.0

-17.5

-2.6%

435.8

80.8

270.0

89.6

179.6

0.8

-11.6

-85.5

-97.1

-135.2

-129.9

85.3

-40.1

-14.5

146.0

0.85

122.7

146.0

-0.89

570

In Euro million

Non-current assets

> Intangible assets

Total assets

Subscribed capital

Equity

Equity ratio (in percent)

Long-term financial liabilities

Short-term financial liabilities

Sales

> Sports

> Entertainment

> Others

Earnings before interest, taxes, depreciation and amortization (EBITDA)

Depreciation and amortization

Earnings before interest and taxes (EBIT)

Earnings before taxes (EBT)

Shareholders’ interests

Cash flow from operational activities

Cash flow from investment activities

Cash flow from financing activities

Outstanding shares in million

Share price December 31, in Euro

Market capitalization (based on outstanding shares)

Average number of outstanding shares (undiluted) in million

Earnings per share (undiluted) in Euro

Employees (annual average)

*In acordance with IFRS 2 the previous year numbers (2004) were adjusted.

2005

178.9

89.8

316.2

66.6

153.6

48.6%

64.5

5.6

209.5

177.8

30.6

1.1

21.2

-15.5

5.7

0.8

0.2

-4.0

53.5

-115.8

53.1

4.33

229.9

51.5

0.00

640

2004*

131.1

94.1

426.6

65.6

153.1

35.9%

181.9

0.0

206.6

177.6

29.0

0.0

73.1

-22.5

50.6

142.5

134.3

26.2

-19.4

-13.1

49.3

2.87

141.4

41.7

3.22

609

Corporate Structure I Simplified Structure

18.9% 100%Junior.TV GmbH & Co. KG

EM.Entertainment GmbHEM.Sport GmbH

Sport Media Holding GmbH

DSF DeutschesSportFernsehen GmbH

Sport1 GmbH

PLAZAMEDIA GmbH TV- und Film-Produktion

Creation Club (CC) GmbH

50.1%

100%

100%

100

%

81.1

%81

.1%

49.9%

18.9%

100%

Yoram Gross- EM.TV Pty. Ltd.

Australia

Planeta Junior S.L. Spain

Junior ProduktionsGmbH

EM.TV & Wavery B.V.Netherlands

100

%

33

.3%

100

%

100

%

Sports segment Entertainment segment

EM.TV – Our Profile

We are a medium-sized media company which operates in

the core sectors of Sports and Children and Youth

Entertainment. In sports business we are the leading

German TV production company and run the leading plat-

forms DSF and Sport1. In the entertainment business we

are internationally oriented, have one of the largest pro-

gram libraries in the children and youth sector and distin-

guish ourselves by many years of experience with the deve-

lopment and marketing of license themes and characters,

all of which are duly esteemed and appreciated in the mar-

ket. After a successful restructuring and reorientation from

2001 to 2004, we now have an attractive investment port-

folio, together with a sound financial basis for further

growth in the future.

EM.TV – Our Strengths

We are an independent group and on account of this inde-

pendent position an established partner for a large number

of companies. We encounter the challenges of our markets

with classical medium-sized virtues such as speed, flexibili-

ty, reliability and creativity.

EM.TV – Our Objectives

With our products and services, our aim is to satisfy the

emotional requirements of our ultimate customers. We will

only succeed in this respect if our products are marked by

a high level of creativity and quality.

As far as our shareholders are concerned, our aim is to

seize market opportunities with a due sense of proportion

by means of a growth strategy, to create added-value and

to ensure an attractive return on their investment.

EM.TV intends to comply with its social responsibilities with its productsand entrepreneurial actions.

Dr. Andreas Pres Werner E. Klatten Rainer Hüther

Forward-looking statementsThis annual report contains statements relating to future events that arebased on management’s assessments of future developments. A series offactors beyond the control of the company, such as changes in the generaleconomic and business environment and the incidence of individual risks oroccurrence of uncertain events, can result in the actual results differing sub-stantially from those forecast. EM.TV does not intend to continually updatethe forward-looking statements contained in the annual report.

Important noticeIn case of any differences the German version of the annual report prevails.

Content

2 Foreword by the Chairman of the Management Board

5 Boards6 Report of the Supervisory Board

10 Corporate Governance Report14 The EM.TV AG Share18 Company Strategy

22 Business Units Reports I Sports22 TV I DSF Deutsches SportFernsehen24 Online I Sport125 Production Services I PLAZAMEDIA27 Licensing I European Licensing Representative

2006 FIFA World Cup™

30 Business Units Reports I Entertainment30 Production31 TV-Sales33 Licensing I Merchandising34 Licensing I Home Entertainment35 TV I Junior Channel

38 Management Report on the Situation of the Group and the AG

38 Economic Conditions 42 Sales and Earnings45 Net Worth Position46 Financial Position48 Investments49 Personnel Report50 Innovation51 Risk and Opportunities Report57 Occurrences after the End of the Fiscal Year57 Forecast Report

63 Consolidated Financial Statements64 Consolidated Balance Sheet66 Consolidated Profit an Loss Account67 Consolidated Cash Flow Statement68 Changes in Consolidated Equity

69 Notes on the Consolidated Financial Statements69 General Explanation76 Accounting and Valuation Principles81 Explanations on Invidual Items in the Balance Sheet96 Explanations on Items in the Profit and Loss Account

102 Explanations on Items in the Cash Flow Statement103 Segment Reporting106 Contingent Liabilities and Other Financial

Commitments107 Occurrences after the End of the Fiscal Year108 Other Mandatory Disclosures108 Other Explanations and Disclosures111 Auditors’ Report

113 Annual Financial Statements of the AG114 Balance Sheet116 Profit an Loss Account

117 Finance Calendar117 Production Credits

1

2005 saw EM.TV AG continue on a path of positive deve-

lopment. For the first time since 1999, we have been able

to report a Group profit before tax and special or one-off

effects, as well as achieve a single figure percentage

growth in Group sales. This falls exactly within the forecast

that we issued at the beginning of the business year.

EM.TV has thus been true to its word. This is of great

importance to me, as the new EM.TV, which came into

being as a result of the restructuring of the former EM.TV &

Merchandising AG, must take its place on the capital mar-

ket as a reliable and predictable player.

The result that has been achieved pleases me all the more,

as we found ourselves facing numerous obstacles during

2005 that were either not apparent at the start of the year

or, at least, not as substantial:

> The development of the German economy in 2005 was

disappointing, and was unable to inject new life into

the advertising market. This had a subduing effect on

sales development at our free-TV station DSF.

> Due to the failure to pay on the part of two of its busi-

ness partners, DSF found itself obliged to make a sub-

stantial bad debt provisions.

> During the previous year, EM.TV made significant

investments in attractive programming and new busi -

ness activities. These included the acquisition of exten-

sive rights packages in sports, as well as expenditure

on the preparation for market entry into the “sports

betting” sector. While these investments had a nega-

tive short-term impact on performance, in the medium-

term they will significantly strengthen the operating

business and deliver a positive contribution to profitabi-

lity. In this respect, this money has been well invested.

The 2005 business year demonstrated that the EM.TV Group

is strategically well positioned with its two operating busi-

ness divisions Sports and Entertainment, and able to ope-

rate profitable. We have made progress in both segments

as well as securing and extending our market position.

Within the Sports segment, we took over the stakes of the

former co-owners of DSF and online portal Sport1 on attrac-

tive terms. This means that EM.TV now holds also, either

directly or indirectly, 100 percent of the stakes in these

companies.

> In the free-TV sector, the reporting year saw DSF stabi-

lize its market share within its core target group of

males aged 14 to 49 at 1.9 percent. With the acquisi-

tion of extensive rights packages to the UEFA Cup for

the 2005/2006 to 2007/2008 seasons, and to the

Premier and Second German Soccer League for the

2006/2007 to 2008/2009 seasons, DSF has secured

its ability to offer top soccer to its viewers. Therefore

DSF offers an attractive advertising environment for its

advertising customers. This is an important condition

for the station’s ongoing commercial success. These

rights acquisitions also demonstrate that, through the

establishment of a clear program profile, DSF has

achieved a position over the last three years as one of

the top players on the German TV market. The editorial

quality and the independence of the station is valued

and respected by not only the viewers, but also by the

sporting community.

> In terms of production services, our subsidiary PLAZA-

MEDIA enjoyed continued success with good levels of

capacity utilization across all its business units. The

company completed close to 90,000 program hours

2

Foreword by the Chairman of the Management Board

3

and handled around 1,500 national and international

productions. PLAZAMEDIA concentrates its service offe-

ring on state-of-the-art production technology, and thus

is increasingly able to offer its customers genuine added

value. One good example of this innovative spirit is the

company’s introduction of new television standard

HDTV (High Definition Television) throughout its entire

production chain, thus giving PLAZAMEDIA a unique

position within the market. At the end of 2005, we were

able to significantly strengthen the position as a provider

of creative production services through the acquisition

of Creation Club GmbH from PREMIERE. The Creation

Club is successfully positioned in promotion, on and

off-air design, advertising and TV formats, and thus

complements perfectly PLAZAMEDIA’s service portfolio.

> Within the online sector, sports portal Sport1 was yet

again successful in strengthening its position signifi-

cantly as the most popular German-language sports

website, with a 40 percent growth in ratings. Sport1

is also demonstrating increasing success in its media

sales activities, i.e. the sale of sports content for tele-

text and mobile platforms (SMS, MMS, and WAP) to

third parties.

> We have been delighted with the development during

the last year of our merchandising marketing activities

for the 2006 FIFA World Cup™. By the end of 2005 we

had secured contracts with a total of 53 license partners

– clear proof that the timely introduction of our marke-

ting strategy for this mega-event has been highly

successful. It is already evident that the commercial

success of the FIFA project will be significantly greater

than originally forecast.

Within the Entertainment segment – encompassing the pro-

duction and marketing of high quality program for children

and young people – 2005 saw us achieve the conditions

necessary in terms of structure and human resources in

order to put the business onto a path of sustainable growth.

These measures included the bundling of all production and

distribution activities into EM.Entertainment GmbH, with the

purpose of achieving clear and transparent divisional respon-

sibilities. This also included the strengthening of production

competence by means of a partial renewal of EM.Entertain-

ment’s management team. It remains our objective to en-

sure the continued attractiveness of our library with additio-

nal new, in-house program rights.

Although demand for children’s and youth program wit-

nessed a slight increase both nationally and internationally

during 2005, this trend has yet to impact pricing. EM.Enter-

tainment has, however, demonstrated that it remains possi-

ble to secure attractive business under these conditions,

with extensive and long-term agreements such as those se-

cured in the home entertainment sector during the fourth

quarter with Universum Film GmbH and Warner Bros. Enter-

tainment GmbH. Despite the difficult market conditions, the

entertainment division was nevertheless able to improve its

financial result – proof of the substance of our program

portfolio.

The global market for children’s and youth programming con-

tinues to find itself in a phase of consolidation. During the

reporting year, the Management Board considered various

options for the development of the Entertainment division

through M&A transactions. In the end, these intensive inve-

stigations did not produce any results that were commerci-

ally compelling. This notwithstanding, we will continue to

strive to play an active role in the consolidation of the sector.

The progress made in the operating business is also reflec-

ted in the development of the EM.TV share price. During

2005 it demonstrated a growth in value of 51 percent, thus

significantly exceeding the overall growth of the SDAX, which

increased by 35 percent. With a daily average of 500,000

shares, EM.TV was the most traded share of the SDAX. For

the sake of every one of our shareholders that stood by us

during the long process of restructuring, we are particularly

pleased by this positive share price development, which is

accompanied by an ever-increasing interest in our company

on the part of investors and analysts.

During the current business year, we want to develop our

market position within both of our key business sectors. One

significant step in this process is the agreement reached in

the Sports segment at the beginning of March between PLA-

ZAMEDIA and Arena Sport Rechte und Marketing GmbH,

making PLAZAMEDIA the exclusive production partner for

Arena’s pay-TV offer for the German Soccer League. In

order to improve our position in the market place, we will

also seek in future to make greater use of synergies between

our Sports segment stakeholdings in order to be able to

offer customers turnkey solutions.

The organizational and conceptual preparations for EM.TV’s

entry into the “sports betting” sector are well advanced.

The German market remains restricted, preventing our entry

for the time being. We continue to attribute substantial

sales and profit potential to this business, but are prepared

to take a decision to act only when the commercial concept

is fully cohesive and its legal basis beyond all possible

doubt.

Within the Entertainment segment, the focus of efforts du-

ring 2006 will be on the start of in-house productions. We

will also be pushing forward with the further internationali-

zation of our businesses, with particular emphasis on streng-

thening our presence within the Anglo-Saxon markets. In

this regard, added-value M&A activities are certainly con-

ceivable.

Dear shareholders,

in recent years, EM.TV has developed a market position

that presents many fascinating perspectives. Our ultimate

objective continues to be to guide the EM.TV Group into a

phase of sustainable growth, evidenced by an ongoing

improvement of profitability. In this spirit, EM.TV will enrich

the media market as an independent and flexible partici-

pant, operating on all the best principles of a medium-sized

enterprise.

Unterföhring, March, 2006

With best regards,

Werner. E. Klatten

Chairman of the Management Board

4

Foreword by the Chairman of the Management Board

5

Werner E. Klatten,

Chairman of the Management Board, CEO

Werner E. Klatten is Chairman of the Management Board

of the EM.TV AG. He is responsible for the the corporate

strategy, the Entertainment segment, central functions:

Legal Matters, Communication, Human Resources and

Administration, as well as for shareholdings.

Rainer Hüther,

Member of the Management Board, COO Sports

Rainer Hüther is resposible for the Sports segment. In addi-

tion to his Board Member activities at EM.TV, he is Chief

Executive of sports broadcaster DSF since June 2, 2003.

Dr. Andreas Pres,

Member of the Management Board, CFO

Dr. Andreas Pres is member of the Board and responsible

for Finance, Investor Relations, Accounting, Controlling, IT

and Process Management.

Management Board

Boards

Dr. Bernd Thiemann, Chairman

Dr. Hans-Holger Albrecht, Deputy Chairman

Arthur Bastings, Member

Supervisory Board

The Supervisory Board of EM.TV AG met a total of six times

during 2005, including one telephone conference. As in the

previous year, the board, which in accordance with legal

requirements consists of only three members, did not crea-

te any separate committees.

Under the terms of the German Stock Corporation Act, the

Supervisory Board is responsible for monitoring the activities

of the Management Board. During the reporting year, the

Supervisory Board of EM.TV regularly monitored the Manage-

ment Board and provided it with advice. By means of oral

and written reports from the Management Board, the Super-

visory Board was kept abreast with business operations at

EM.TV AG and the EM.TV Group, business planning, ongoing

business development, risk factors and significant business

events.

The Supervisory Board was represented in full at all mee-

tings held in 2005. Furthermore, all members of the Ma-

nagement Board also participated in those meetings in

order to report to the Supervisory Board and to answer its

questions. In keeping with previous years, the Supervisory

Board also called upon the advice of external experts, in

the form of lawyers and publicly certified accountants.

Furthermore, between meetings, there was ongoing contact

between the members of the Management and Supervisory

Boards, and between the Chairmen of the Management

and Supervisory Boards in particular. Where necessary in

the interests of timing, documentary information was circu-

lated between meetings in order to obtain decisions from

the Supervisory Board.

During 2005, the Supervisory Board of EM.TV AG dealt prin-

cipally with the following issues:

Business status and current business development

Throughout the entire business year, the Supervisory Board

dealt in detail with the current business status of EM.TV AG

and the EM.TV Group. This included principally the analysis

of business activities during the course of the year in both

the Sports and Entertainment divisions, with particular em-

phasis on positive and negative deviations from the budget.

Within this process, the Management Board gave clear and

detailed statements on the current status of the business

and on plans for the year ahead for the individual divisions

and for EM.TV AG as the holding company, as well as on the

risks to group business development.

Significant investments in the operating business

The Supervisory Board used the circulation procedure to ap-

prove the acquisition by DSF of extensive exploitation rights

to the UEFA Cup matches for the 2005/2006, 2006/2007

and 2007/2008 seasons. It likewise gave its approval to

the acquisition by DSF of exploitation rights to the Premier

and Second German Soccer League for the 2006/2007,

2007/2008 and 2008/2009 seasons. The Supervisory

Board is of the opinion that both rights acquisitions ensure

that DSF’s program portfolio is suitably stocked with attrac-

tive top-end sports on a long-term basis. This is a fundamen-

tal requirement for the further commercial success of the

station.

Portfolio initiatives

In 2005, EM.TV AG completed the reorganization of the

Entertainment division, as a result of which the company

takes on the role of holding company without direct business

operations. In the course of this process, the Supervisory

Board used the circulation procedure to approve the mea-

sures necessary in order to bundle all the production and

6

Report of the Supervisory Board

Dr. Bernd Thiemann I Chairman of the Supervisory Board

7

sales activities of the Entertainment division into EM.Enter-

tainment GmbH and its subsidiaries. EM.Entertainment is a

100 percent subsidiary of EM.TV AG.

The Supervisory Board also used the circulation procedure

to approve the acquisition of further shares in sports com-

panies DSF and Sport1 from the possession of their previous

co-owners KarstadtQuelle New Media AG and Dr. h. c. Hans-

Dieter Cleven. The acquisition means that EM.TV AG now

holds either directly or indirectly 100 percent of each sports

company. The Supervisory Board considers the transactions

as important to the strengthening of the Sports segment.

Using the circulation procedure, the Supervisory Board

granted its approval to the acquisition of all stakes in the

Creation Club (CC) GmbH from PREMIERE through EM.TV

subsidiary PLAZAMEDIA. This included an extension of the

current production services framework contract between

PLAZAMEDIA and PREMIERE, ending December 31, 2006,

for a period of three years (outside production) and 4.5

years (studio production). In acquiring the Creation Club, the

Supervisory Board is convinced that PLAZAMEDIA is now

able to broaden significantly the added value of its creative

activities, while at the same time having achieved a long-

term relationship with an important customer in the shape

of PREMIERE.

Legal issues

2005 also saw the Supervisory Board focus a great deal of

its advisory efforts on the investigation of corporate dama-

ges claims against former board members. The Supervisory

Board heard reports on a regular basis from the appointed

legal experts, as well as from the Management Board, on

the status of the investigations and the outcome of the claim

entered on October 13, 2004 at the Munich I Regional Court.

This claim is against former CEO Thomas Haffa, former

Deputy CEO Florian Haffa and former Supervisory Board

Chairman Dr. Nickolaus Becker, and cites negligent breach

of duty in respect of the acquisition of Formula 1 shares in

2000. The damages claims asserted run to almost 148 mil-

lion Euro, plus release from claims entered by the Morgan

Grenfell Group.

As a result of the oral hearing of March 31, 2005, the

Munich I Regional Court ruled on August 25, 2005 that the

evidence of expert witnesses be submitted for consideration

in respect of certain factual matters. It is estimated that

the report of the expert witnesses will be submitted in the

course of 2006.

The intensive examination of further factual circumstances

revealed possible breach of duty in respect of loans made

to TheatrO CentrO GmbH in 2000 and 2001, the acquisiti-

on of stakes in Tabaluga Film- und Fernsehproduktion GmbH,

a major charitable donation, and in respect of the closing

of several co-production and licensing contracts. Following

requisite statements made by the former board members,

neither the Management nor the Supervisory Board were

able to reach any alternative conclusion on these matters,

and thus the company entered claims with the Munich I

Regional Court in August and September 2005. The claims

for damages entered in respect of the combined TheatrO

CentrO/Tabaluga/donation issues amount to around 17 mil-

lion Euro, with those arising from the co-production and

licensing contracts totaling around 18 million Euro.

With the exception of the aforementioned issues, the highly

time intensive and complex investigations carried out into

the major business transactions of the former EM.TV & Mer-

chandising AG have not led to the establishment of any

enforceable damages claims resulting from the dealings of

former board members – despite repeated acts of negli-

gence. This is particularly the fact in respect of the acquisi-

tion of major holdings Junior.TV, Tele München Gruppe and

the Jim Henson Company. In spite of the necessary in-depth

investigation, insufficient grounds were found on which the

company could base a case for damages resulting from the

misconduct of the former company directors. The same

applies to around ten further, smaller company acquisitions;

to the majority of co-production, rights purchase and license

contracts agreed by the company; and to a series of other

business transactions.

Group strategic direction

During the reporting year, the Supervisory Board dealt inten-

sively with issues concerning the future strategic direction

of the EM.TV Group. This included, in particular, opportuni-

ties for strategic development in both the Sports and Enter-

tainment segments through acquisition or divestment ini-

tiatives, and on the development of new business sectors.

The Management Board called extensively upon advice in

the matter of its plans for entry into the “betting” sector. The

Supervisory Board considered detailed reports on the vario-

us strategic options associated with this potential venture.

Changes to the Boards of Directors

The Management Board saw no changes in the course of

the reporting year.

Supervisory Board Members Prof. Roland Berger and

Dr. Andreas Meissner stepped down from their positions

with effect from the Annual General Meeting (AGM) on July

5, 2005. Prof. Berger and Dr. Meissner were with the com-

pany throughout its restructuring and reorientation, and

brought their extensive knowledge and advice to bear

during a very difficult phase for EM.TV. The Chairman of

the Supervisory Board offers his sincere gratitude to both

Prof. Berger and Dr. Meissner for their commitment to the

good of the company.

At the AGM on July 5, 2005, Dr. Hans-Holger Albrecht and

Mr. Arthur Bastings were approved as new members of the

Supervisory Board. With these two individuals, EM.TV has

gained the services of two highly knowledgeable and hands-

on media managers, with huge international experience. In

its meeting of July 5, 2005, the Supervisory Board unani-

mously voted Dr. Albrecht to the position of Deputy Chairman

of the Board.

Having been tasked with auditing the company reports,

PricewaterhouseCoopers AG Wirtschaftsprüfungsgesell-

schaft, München audited the annual accounts of EM.TV AG,

the Group annual accounts and the combined company

and Group management reports of December 31, 2005,

and issued them with an unconditional audit certificate. The

company annual accounts, the Group annual accounts and

the combined Group and company management reports

were passed in a timely manner to all members of the Super-

visory Board along with the audit reports.

The auditors furnished the Supervisory Board with the

significant findings of their audit at the meeting of the

Supervisory Board on March 23, 2006. The Supervisory

Board examined in detail the annual accounts of the AG

and the Group, as well as the combined company and

Group management reports, and approved the findings of

the auditors. Following the completion of its examination,

the Supervisory Board raised no objections to either the

company annual accounts or the Group annual accounts

and thus approved the company and Group annual

accounts as presented by the Management Board on

March 27, 2006. The annual accounts are thus final.

8

Report of the Supervisory Board

9

In the aftermath of the far-reaching restructuring that took

place in 2004, the Supervisory Board is of the opinion that

the 2005 business year was a successful one. Despite initi-

ally unforeseen burdens such as those arising through im-

portant program investments and ongoing difficult market

conditions, the forecast of a positive Group financial result

before tax and special and one-off effects has been achie-

ved for the first time since 1999. In addition, the business

year saw the foundations laid for the continuation of this

positive business development through a series of success-

ful business agreements. The Supervisory Board thanks

the Management Board and all the employees of the EM.TV

Group for their enormous commitment.

March 2006

Supervisory Board of EM.TV AG

Dr. Bernd Thiemann

Chairman of the Supervisory Board

In accordance with Article 3.10 of the German Corporate

Governance Code, the Management Board and the Super-

visory Board hereby report on the corporate governance of

EM.TV AG.

The Management Board and the Supervisory Board work

together on a basis of mutual trust for the benefit of the

company, and are fundamentally committed to achieving

sustainable growth in the company’s corporate worth. It is

the objective of EM.TV AG to justify the trust put in it by its

shareholders, customers and employees, as well as to live

up to its corporate responsibilities. EM.TV AG thus stands

for transparent and timely communication.

Shareholders and Annual General Meeting

In its annual and quarterly reports, EM.TV AG regularly pub-

lishes information regarding the development of its business.

In so doing, shareholders are provided with regular opportu-

nities to follow analysts’ conferences on those reports live

in the internet. Further detailed information on EM.TV AG is

also available on our homepage www.em.tv.

EM.TV AG shareholders are able to exercise their rights, as

well as their voting rights at the Annual General Meeting

(AGM). Each and every shareholder is entitled to participate

in the AGM, to take the floor on any agenda item, to ask

questions and to submit requests. EM.TV AG simplifies the

process for its shareholders to exercise their rights perso-

nally, by providing proxy voting representation bound by the

instruction of the shareholder. The AGM for the 2004 busi-

ness year took place on July 5, 2005, at which around 1,150

shareholders were represented, with a total of some 9.8 mil-

lion votes. All agenda items were agreed with majorities of

over 99 percent.

Cooperation between the Management and Supervisory

Boards

As the Group’s holding company and a German incorporati-

on (Aktiengesellschaft), EM.TV AG has a two-tier manage-

ment and control system i.e. the Management and Super-

visory Boards operate on a strictly separate basis.

The Management Board of EM.TV AG comprises three mem-

bers. The Management Board is responsible for running

EM.TV AG’s operating business, and for representing the

company to third parties. The main tasks of the Management

Board include the establishment of strategic direction, ma-

nagement of the Group and monitoring of risk management.

The Supervisory Board of EM.TV AG comprises three mem-

bers. The Supervisory Board advises and monitors the

Management Board in its management of the company. Its

responsibilities include, but are not restricted to, the appoint-

ment of Management Board members and the determinati-

on of Management Board remuneration.

The Management Board works together with the Supervisory

Board. It provides the Supervisory Board in a regular and

timely manner with information on all planning issues rele-

vant to the company and the Group, as well as on business

development, risk exposure and risk management. In doing

so, the Management Board agrees the company’s strategic

direction with the Supervisory Board, and discusses strate-

gic implementation at regular intervals.

Documents requiring approval, in particular EM.TV AG’s an-

nual accounts, its consolidated financial statement and

audit report, are presented in front of a meeting of the

Supervisory Board members. Laid down in the internal regu-

lations governing the Management Board is the requirement

for the approval of the Supervisory Board in respect of busi-

ness decisions of fundamental importance to the company.

A total of six Supervisory Board meetings were held during

the 2005 business year.

10

Corporate Governance Report

Corporate Governance Report

11

Further information concerning the Management and Super-

visory Boards can be found in the section on corporate bo-

dies and within the Group appendix.

Management and Supervisory Board Remuneration

The Management Board contract with Mr. Werner E. Klatten

runs until December 31, 2007.

Following the acquisition in early 2005 of all stakes in DSF

GmbH and Sport1 GmbH from KarstatdtQuelle and Dr. h.c.

Hans-Dieter Cleven, both positions held by Mr. Rainer Hüther

– one with EM.TV AG and one with DSF GmbH – were trans-

ferred into a single contract effective as of June 1, 2005.

Mr. Hüther’s contract ends on February 28, 2009. The con-

tract of Chief Financial Officer Dr. Andreas Pres runs until

December 31, 2008.

In accordance with the German Code of Corporate Gover-

nance, the total remuneration of each Management Board

member comprises both fixed and variable elements. The

variable remuneration elements are made up of one-off com-

ponents granted by the Supervisory Board for extraordinary

performance, and from components based on the financial

performance of the Group and its subsidiaries. The values

of these variable components are set by the Supervisory

Board and have contractual limits.

As variable remuneration components with a long-term in-

centive, the members of the Management Board of the for-

mer EM.TV & Merchandising AG had, at an earlier juncture,

received stock option packages as part of the stock option

program 2000 (“Option Program 2000”).

As the result of a decision made by the AGM of the former

EM.TV & Merchandising AG on July 22, 1999 (“Option Pro-

gram 1999”), which was then changed by a decision made

by the AGM of the former EM.TV & Merchandising AG on

July 26, 2000 (“Option Program 2000”), the Management

Board of the former EM.TV & Merchandising AG was empo-

wered, with the approval of the Supervisory Board, to issue

a stock option program for employees and members of the

Management Board of the Group companies. These options

also retain their fundamental validity following the restruc-

turing that took place in 2004.

Within the scope of the restructuring process, the AGM of

EM.TV AG decided on March 19, 2004, to grant those entit-

led to stock options the right to take one 10/73 ordinary

share in EM.TV AG at the strike option price, in return for

the right to one ordinary share in EM.TV & Merchandising

AG at the strike option price. The original issue volume of

1,488,012 shares comes from the Conditional Capital III

set aside for this purpose. Of the total stock option volume,

30 percent was reserved for members of the Management

Board and Group directors, with 70 percent reserved for

group company employees. This notwithstanding, the opti-

on terms of the 1999 and 2000 Option Programs retain

their validity. In accordance with the option terms, this in-

cludes a reduction in strike price in respect of the issue of

share certificates to existing shareholders within the scope

of the merger (dilution protection).

The Option Program 2000 requires that 50 percent of the

stock options may be exercised at the earliest after no less

than 2 years (in subsequent tranche 1), with the remaining

50 percent to be exercised at the earliest after no less than

4 years (in subsequent tranche 2). The strike price is deter-

mined by averaging the opening and closing price of EM.TV

shares on the Frankfurt Stock Exchange on the day of the

decision to issue (reference price); the price being no less

than the pro-rata amount of the subscribed capital for one

share, plus an additional 10 percent for tranche 1 and 20

percent for tranche 2. The stock options are valid for ten

years. On exercising stock options, the holder receives

ordinary shares in EM.TV AG, whereby shares arising from

options are eligible for participation in profit sharing from

the start of the year in which the option was exercised.

As of December 31, 2005, members of the Management

Board were eligible for a total of 600,000 stock options from

the Option Program 2000, entitling them to a total of

82,190 shares in EM.TV AG. The stock options are appor-

tioned among the members of the Management Board as

follows:Notes:1 Original strike price per share in the former EM.TV & Merchandising AG

prior to increases in accordance with option terms and dilution protection2 Price payable per EM.TV AG share on exercising option following increase

in accordance with option terms. Adjustment in keeping with the merger ratio of 73:10 and dilution protection in respect of issued certificates

12

Corporate Governance Report

Stock options

Quantity

200,000

200,000

100,000

100,000

Name

Werner E. Klatten

Rainer Hüther

Dr. Andreas Pres

Issue Date

31/01/02

31/01/02

07/06/02

30/06/03

Original StrikePrice1

Euro/Share

2.28

2.28

1.29

1.60

Shares

Quantity

27,397

27,397

13,698

13,698

Price perShare2

Tranche 1Euro/Share

17.48

17.48

9.53

12.02

Price perShare2

Tranche 2Euro/Share

19.14

19.14

10.47

13.19

SharePrice

31/12/05Euro

4.33

4.33

4.33

4.33

Due to the share price performance of the former EM.TV &

Merchandising shares, as well as those of EM.TV AG, it has

thus far not been possible to exercise stock options held by

the Management Board. Therefore we currently attribute no

tangible value to the stock options.

Remuneration of Supervisory Board members is specified

in paragraph 12 of EM.TV AG’s articles of association.

Alongside the reimbursement of their expenses, Supervisory

Board members receive a fixed remuneration. The introduc-

tion of success-based remuneration for the Supervisory

Board has been deferred. The fixed remuneration of

Supervisory Board members in the 2005 business year

was as follows:

Name Function Period Fixed Remuneration

Dr. Bernd Thiemann Chairman / Supervisory Board 01/01/2005 to 31/12/2005 90,000.00 Euro

Dr. Hans Holger-Albrecht Deputy Chairman / Supervisory Board 05/07/2005 to 31/12/2005 22,068.49 Euro

Arthur Bastings Member / Supervisory Board 05/07/2005 to 31/12/2005 14,712.33 Euro

Prof. Dr. h.c. Roland Berger Deputy Chairman / Supervisory Board 01/01/2005 to 05/07/2005 22,931.51 Euro

Dr. Andreas Meissner Member / Supervisory Board 01/01/2005 to 05/07/2005 15,287.67 Euro

13

Neither the Management Board members nor the Supervi-

sory Board members conducted any acquisitions or dispo-

sals during the 2005 business year that were subject to

mandatory reporting requirements. The direct or indirect

ownership by any board member of any shares issued by

EM.TV AG was no greater than 1%. The position with regards

to shares and shares from stock options on the part of any

board member as of December 31, 2005 was as follows:

Further information regarding the remuneration of the

Management and Supervisory Boards can be found in the

group appendix and on our homepage.

Statement of Conformity with the German Code of

Corporate Governance

The Management and Supervisory Boards of EM.TV AG state

that the recommendations of the German Code of Corporate

Governance dated May 21, 2003 have been met, with the

exceptions detailed below, as will the recommendations of

the Code dated June 2, 2005 be met, with the same excep-

tions:

> Section 4.2.3 para. 2, final clause of the code

With regard to stock options, a cap will be agreed on new

option issues. In the case of existing share options, which

currently have no tangible value, it is not necessary to

amend finalized contracts in respect of a cap.

> Section 4.2.4 para. 2 of the code

The remuneration of Management Board members is not

individually reported as this is the personal information of

the Management Board members. The company will re-

port Management Board remuneration individually as of

the 2006 business year, as required by law.

> Sections 5.3.1 and 5.3.2 of the code

Separate committees were not formed, as the Supervisory

Board consists of only three members.

> Section 5.4.7 of the code

The introduction of success-based remuneration for the

Supervisory Board has been deferred, as there currently

remains a lack of clarity in respect of the reliability of

success-based remuneration.

> Section 7.1.2 of the code

The deadline for publication of quarterly reports (interim

reports) has not yet been reduced to 45 days after the end

of the reporting period. The Management Board is striving

to meet this recommendation as quickly as possible by

optimizing internal procedures.

The current version of the statement of conformity with the

German Code of Corporate Governance, as well as earlier

versions, can be found on our homepage.

Number of Shares fromShares Stock Options

Werner E. Klatten 0 27,397

Rainer Hüther 0 27,397

Dr. Andreas Pres 6,000 27,396

Supervisory Board Members 0 0

Development of the EM.TV share

The EM.TV Share developed with substantial price fluctu-

ations very positively in 2005 with a value increase of 51

percent. The percentage increase of the share price excee-

ded that of the SDAX therefore which advanced by 35 per-

cent and also the Prime Media which fell by 1 percent. The

share price rose from January to the middle of March and

reached its current 52-week high of Euro 6.37 during a pe-

riod of high trading volumes. A consolidation then set in un-

til the end of May, with the share price falling to Euro 4.76

in April. The share price then rose again until the middle of

July. Between July and the end of the year, the share price

declined and reached its current 52-week low of Euro 3.68.

The price of the EM.TV share closed the year at Euro 4.33.

This was equivalent to a price increase of Euro 1.46 and

51 percent respectively.

In 2005, the EM.TV share was the SDAX security with the

highest level of trading with a total volume of approximately

199 million shares (daily average of 0.5 million). Over the

12-month period, this was equivalent to a trading volume

of approximately four times the outstanding shares and re-

flected the high liquidity of the share.

Subscribed capital and shareholder structure

The subscribed capital of the EM.TV share amounted to

approximately Euro 69.9 million as of December 31, 2005,

including new shares from exercised warrants of the bond

with warrants attached, the entry of which in the Commercial

Register was still outstanding at the balance date.

EM.TV AG held 23.9 percent of the subscribed capital equi-

valent to 16.7 million non-voting shares. Approximately

15.0 million thereof were reserved for servicing the certifi-

cate series. After deducting the Company’s own, non-voting

shares, there were approximately 53.1 million outstanding

shares as of December 31, 2005.

On June 8, 2005, Centaurus Capital LP fell below the thres-

hold of 5 percent of the voting rights in EM.TV AG. As of

December 31, 2005, Constant Ventures B.V. held 6.9 per-

cent of the share capital, equivalent to 9.1 percent of the

voting rights. Scattered shareholders therefore held 69.2

percent of the share capital, equivalent to 90.9 percent of

the voting rights.

Shareholder structure as of December 31, 2005

14

The EM.TV AG Share

The EM.TV AG Share

Constant Ventures B.V. 6.9%

Treasury Shares 23.9%

Free Float 69.2%

Constant 9.1% Ventures B.V.

90.9% Free Float

15

Issues of derivates by EM.TV AG

As part of the restructuring of the convertible bond of

2000/2005, three different derivatives have been issued

which enable to purchase EM.TV shares.

Approximately 3.3 million shares were issued from Condi-

tional Capital I in 2005 after exercising warrants for the

8% bond with warrants attached of 2004/2009. By the

end of the exercise period on March 30, 2006, it will be

possible to purchase approximately an additional 1.0 mil-

lion shares at a subscription price of Euro 1.00 per share.

As part of the merger of EM.TV & Merchandising AG into

EM.TV AG, the shareholders have also received certificates

in addition to shares in EM.TV AG. The Certificates (Series

1 and 2) relate to covered warrants, i.e. if they are exerci-

sed, shares will be issued from EM.TV AG’s treasury sha-

res. In 2005 0.5 million shares were issued by exercising

the Certificates Series 1. An additional 7.3 million shares

may still be purchased at a subscription price of Euro 2.50

per share by the end of the exercise period on April 18,

2006. The exercise of Certificates Series 2 resulted in the

issue of 0.1 million shares in 2005. An additional 7.7 milli-

on shares may still be purchased at a subscription price of

Euro 3.50 per share by the end of the exercise period on

April 18, 2008.

0

1

2

3

4

5

6

7

01/01/05 31/03/05 30/06/05 30/09/05 31/12/05

EM.TV AG SDAX Prime Media

Xetra closing prices of the EM.TV share in comparison

with the SDAX and Prime Media

Comparative indices indexed to the EM.TV closing price as of December 31, 2004

7

6

5

4

3

2

1

0

16

The EM.TV AG Share

Investor Relations activities

EM.TV AG aims at justifying the trust of investors and the

public by timely and transparent publications of its finan-

cial data, business transactions, corporate strategy, oppor-

tunities and risks. Extensive information concerning EM.TV

AG is available on our homepage www.em.tv.

Investor Relations activities were intensified in 2005. All

quarterly figures were explained to analysts and investors

by telephone or in person. The results for the third quarter

were presented at the Deutsches Eigenkapitalforum 2005

(German Equity Capital Forum) in Frankfurt.

EM.TV AG participated in six capital market conferences

and a road-show in Frankfurt and London. It was also avai-

lable to institutional investors in a large number of additio-

nal one-on-one meetings. Various individual enquiries by

private investors were also handled by our Investor Rela-

tions team.

Investor Relations activities were particularly directed to a

systematic extension of analysts’ coverage. Three additio-

nal institutes initiated coverage during the course of 2005.

Regular contacts are currently being maintained with the

following institutes:

> CA Cheuvreux > Deutsche Bank

> DZ Bank > WestLB

The aim of Investor Relations activities in 2006 will be par-

ticularly directed to expanding the analyst coverage even

further and increasing the number of long-term oriented in-

stitutional investors.

17

ISIN

> Ordinary Share DE0009147207

> New Share* DE000A0AHSX7

Segment Prime Standard

Regulated Market

Indices SDAX, Prime Media Index

Bloomberg /Reuters EV4 GR/EV4G.DE

Share price Euro 4.33

52-week high/52-week low Euro 6.37/Euro 3.68

Subscribed capital (inkl. shares from exercised warrants of bond with warrants attached) Euro 69.9 million

Outstanding shares 53.1 million Shares

Potential shares from outstanding warrants

> Certificates Series 1 (Subscribed price Euro 2.50 until April 18, 2006) 7.3 million Shares

> Certificates Series 2 (Subscribed price Euro 3.50 until April 18, 2008) 7.7 million Shares

> Warrants of bond with warrants attached (Subscribed price Euro 1.00 until March 30, 2006) 1.0 million Shares

> Others (Employee participation programs and convertible bond) 0.4 million Shares

Market capitalization (based on outstanding shares) Euro 230.1 million

Market evaluation for own issues of outstsanding derivates Euro 29.2 million

Information on the EM.TV Share as of

December 31, 2005

*Since January 1, 2006, shares are issued by EM.TV AG from the conditional capital.These are being traded under a separate ISIN as “New Shares”. The background to thisis a deviating profit entitlement in comparison with ordinary shares. The “New Shares”will be transferred into ordinary shares after the resolution of the General Meeting on theappropriation of profits for the 2005 financial year.

The Company considers itself as a lean and flexible medium

sized media company which is able to manoeuvre indepen-

dently within the rapidly changing media industry, as it is

not part of one of the large media groups in Germany.

Therefore, the Company is able to cooperate with nearly all

other market participants from a neutral position.

The Company pursues a two segment strategy focusing on

sports and entertainment.

The Company is generally aiming to achieve organic growth

as well as growth by acquisitions in each segment. The

growth path will only be pursued provided that it does not

jeopardize the primary goal of the Company to achieve pro-

fitability for each segment and to generate a positive free

cash flow before extra ordinary investments.

However, due to currently consolidating markets, the Com-

pany may also decide to sell certain of its assets if the cir-

cumstances are favourable to the Company.

Strategy of Sports segment

The Sports segment comprises mainly of DSF, PLAZAMEDIA

and Sport1 with a range of seamlessly fitting services to

offer turnkey production solutions together with access to

distribution platforms in the TV and the internet and mobile

devices.

It is intended that DSF will further sharpen its profile as a

niche sports channel towards its target group of men aged

14 to 49 years by increasing the number of hours of natio-

nal and international premium sports as highlights or even

live formats. In addition, the channel will further seek to level

out the dependency on classical advertising with other add

on services such as T-Commerce i.e. revenue streams from

interactive formats. In the medium term, an expansion of

the existing broadcast activities by additional DSF channels,

particularly via digital distribution platforms could become

an attractive option.

PLAZAMEDIA shall further exploit its current market positi-

on as one of the leading sports production companies by

means of expanding its customer base. It shall seek to de-

velop itself further towards a general contractor for a varie-

ty of sport events. As such, its involvement in production

services during the upcoming 2006 FIFA World Cup™ may

qualify PLAZAMEDIA for additional sports production con-

tracts. Moreover, demand from foreign TV stations as well

as the changing environment for new broadcast technology

such as HDTV offer opportunities that PLAZAMEDIA intends

to take advantage of.

Sport1 shall further exploit its market position as the lead-

ing German sports internet platform in order to grow its ad-

vertising revenue and expand its strategic partnerships for

cross promotions. International expansion may also be con-

sidered. Given the strong development of online advertising

market in other countries, the Company believes that

Sport1 has potential to grow profits.

The market for sports betting has developed very positively

in the last few years in the German speaking area and offers

significant sales and earnings opportunities in the opinion

of the Company. In the event of liberalization, EM.TV would

be in a position to enter the market immediately as a result

of the extensive preparations carried out in 2005 and would

be able to participate with promising market perspectives.

With DSF and Sport1, the Group also has two extremely

18

Company Strategy

Company Strategy

19

appropriate advertising platforms for making appropriate

offers for sports betting.

Strategy of Entertainment segment

The Entertainment segment with its large library is aiming

at producing and acquiring youth and kids’ content and the

comprehensive exploitation of all its properties throughout

distribution channels and territories worldwide.

The Company, through its subsidiaries EM.Entertainment

GmbH and Junior Produktions GmbH, intends to increase

its production activities in order to heighten the value of the

library and its freshness. Further, it is intended to adjust its

rights library to older children and teenagers with an increa-

sed focus on distribution channels besides TV. Thus, the

aim is to grow the non-TV related revenue in order to lower

the dependency on TV license fees currently paid for kids’

and youth program.

The Company is also endeavouring to obtain increased

direct access to distribution platforms such as television

stations, audio and video distributors. Content exploitation

through mobile platforms and applications could become

an additional distribution tool.

In order to get access to territories, where the Company has

so far been weak distributing to such as UK, US and

Canada, the Company contemplates acquisitions, partner-

ships or distribution joint ventures and expand its entertain-

ment activities in a fragmented, but consolidating media

market.

20

21

With its products, EM.TV intends to satisfy the interests and emotionalrequirements of its customers and viewers. These products have to becreative, emotional, qualitatively equivalent to the „state of the art“ andupright from a contents point of view.

DSF has been an integral feature of the German media

landscape since the station was founded. With a clear

focus on the core advertising target group of males aged

14 to 49, DSF has achieved distinctive positioning. No

other German free-TV station provides such comprehensive

reporting on sporting events, with independence, neutrality

and critical distance being hallmarks of the station’s edito-

rial policy.

Long-term coverage secured

In keeping with the station’s motto “Mehr Sport, Mehr Live”

(more sport, more live), the top quality broadcast rights ac-

quired during the previous year were converted into attrac-

tive sports coverage. At the same time, the reporting period

saw comprehensive premium soccer rights secured for the

future. A further operational highlight was the successful

finalization of feeder contracts with cable companies, secu-

ring both analog and digital transmission on a long-term

basis. With these sports rights and new levels of transmis-

sion security, DSF has laid a firm foundation for the further

development of the station.

Financial result impacted by program investments and

special effects

Despite a difficult TV advertising market, in which DSF – in

contrast to 2004 – was no longer able to buck the general

trend in terms of advertising income, turnover remained on

the same level as the previous year.

DSF’s operating result was down against the 2004 business

year. This decrease was largely due to costs associated with

the acquisition of the UEFA Cup rights, and bad debt provi-

sions in respect of two service partners, which could not be

compensated for by other positive effects.

Co-operations with key customers expanded

In spite of difficult overall conditions, DSF was able to ex-

pand or extend co-operations with key customers, as well

as form new partnerships within the sponsoring and special

advertising sector. Top class customers such as Deutsche

Telekom, Hasseröder, Betandwin, DA Direkt, Nike, Erdinger

Weißbräu and BMW extended their partnerships, while other

customers have expanded their co-operations with DSF.

Thus, Krombacher (current title sponsor of DSF-Doppelpass)

is now also presenter of the UEFA Cup broadcasts. Suzuki

has now entered in soccer, in addition to its involvement in

motorsport projects. New customers in the sponsoring sec-

tor include König Pilsner, LG Electronics, Puma and DiBa.

DSF grows market share over previous year

Within the target group of viewers overall, DSF succeeded

in increasing its market share for the year from 1.1 to 1.2

percent against 2004. In the core target group of males

aged 14 to 49, DSF maintained its market share against

the previous year at 1.9 percent. The previous year’s level

was also reached in the fourth quarter 2005, with 1.1 per-

cent (viewers overall) and 1.9 percent (males aged 14 to

49) exactly matching the figures for the last quarter 2004.

Significant growth in market share was achieved by DSF-

teletext. For the full year 2005, DSF saw increases over

2004 among viewers overall (from 4.8 to 5.2 percent), as

well as among the target group of males aged 14 to 49

(from 6.3 to 7.6 percent).

Long-term rights secured: German Soccer League, UEFA

Cup, FA Cup and Davis Cup

DSF remains the soccer station in German free-TV. Following

the TV rights granted by the Deutsche Fußball Liga (German

Soccer League) (DFL), December 2005 saw DSF receive a

22

Business Units Reports I Sports

TV I DSF Deutsches SportFernsehen

23

renewal for the next three years of the exclusive first high-

lights in free-TV to the Premier Soccer League Sunday mat-

ches, as well as the exclusive first free-TV highlights to the

Second Soccer League, including the live match on Mon-

days. With this deal, DSF has secured its core rights for the

next three years. License expenditure for this is not due

until the start of each respective season.

Alongside the Soccer League, the 2005 business year saw

DSF invest in further long-term, top-class broadcasting rights.

The top event acquired by DSF next to the Soccer League

was the UEFA Cup. From the 2005/2006 season through

to the 2007/2008 season, DSF will be broadcasting at least

two UEFA cup matches live on every match day up to and

including the semi-finals. Furthermore, DSF has also secu-

red the exclusive live and highlights rights to the traditional

English FA Cup for a period of two years up to and including

the 2006/2007 season, as well as the live and exclusive

rights to the matches of the German Davis Cup team for

2005 and 2006.

DSF increases its share of live coverage against previous

year

DSF has stood by the motto it issued at the beginning of the

year “Mehr Sport, mehr Live” and presented a host of pro-

gram highlights during 2005. Alongside top soccer from the

Premier and Second Soccer League and the UEFA Cup, DSF

reported live from, among others, the Handball World Cham-

pionship (January), the Ice Hockey World Championship

(May), the Tour de Suisse (June) and the European Basket-

ball Championship and the Davis Cup (both in September).

Thus DSF demonstrated during 2005, an increase in live

reporting of a little over seven percent. In the fourth quar-

ter 2005 alone, DSF achieved an increase against the

same period the previous year of around 17 percent.

In addition, DSF also presented a program innovation in

2005. For the very first time, viewers were able to select

for themselves a live match from the Handball Bundesliga

over a period of six weeks. With this initiative, DSF presen-

ted something completely new in German sports free-TV.

On the road to success with Bundesliga formats and the

UEFA Cup

The soccer formats on DSF continue on the road to success.

All formats from the Premier and Second Soccer League

achieved significant increases in market share against the

previous year within the core target group of males aged 14

to 49. For example, during the reporting period, Bundesliga

– Der Sonntag recorded growth in market share against

2004 from 10.1 to 10.7 percent, while DSF-Doppelpass

witnessed an improvement from 7.9 to 9.3 percent.

With Bundesliga – Der Sonntag, DSF achieved a milestone

in its broadcast history on March 13, 2005. The highlights

of the Sunday matches Schalke 04 versus Bayern Munich,

and Borussia Dortmund versus VfB Stuttgart achieved ra-

tings of an average of 4.7 million, and a peak value of 5.5

million viewers. This saw DSF record its second best ratings

since the station was founded, and only narrowly missed its

absolute record from 1993 (an average of 4.8 million vie-

wers watched the UEFA Cup semi-final Dortmund versus

Auxerre). With 17.6 percent market share in the target group

of males aged 14 to 49, March 13 saw DSF achieve a new

best for Bundesliga – Der Sonntag since the acquisition of

the Bundesliga rights in 2003. Bundesliga – Der Sonntag

was also DSF’s highest-rating format for 2005 as a whole.

Alongside the Bundesliga, DSF also achieved very good

ratings with the UEFA Cup. An average of 1.8 million viewers

followed the broadcasts on DSF; with the station achieving

a market share of 11.7 percent among males aged 14 to

49. DSF achieved its top ratings for the UEFA Cup with FSV

Mainz 05 versus FC Sevilla. An average of 2.31 million vie-

wers overall followed the match live on DSF (market share

males 14 to 49 years – 13.3 percent). This was almost

equaled in the fourth quarter 2005, when the live transmis-

sion of HSV versus Viking Stavanger on November 3 brought

an average of 2.3 million viewers (market share males 14

to 49 – 11.9 percent).

Strong ratings with European Basketball Championship

and Handball World Championship

Other sporting disciplines also produced outstanding

ratings during 2005. With the final of the European Basket-

ball Championship in September between Germany and

Greece, DSF achieved strong ratings averaging 1.34 million

viewers, while the Handball World Championship at the end

of January was equally well received with up to 1.1 million

viewers.

24

Business Units Reports I Sports

Online I Sport1

Sport1.de continues to be the most popular German-lan-

guage sports website offering up-to-the-minute, well-re-

searched content from the exciting world of sports. In addi-

tion, as a multimedia sports platform, Sport1 provides

sports content for teletext and mobile platforms such as

SMS, MMS and WAP. Within this business sector, Sport1

includes private TV stations and leading telecommunica-

tions companies among its customers.

Focus on core business

Following the portfolio restructuring that took place in 2004,

efforts during the 2005 business year were focused entirely

on the core business activities of media sales and content

syndication. Due to the absence of major sporting events,

Sport1 took the opportunity to use 2005 as a preparation

year for the forthcoming major event – the 2006 FIFA

World Cup™ in Germany.

Sport1 further developed its successful strategy of mana-

ging operations outside of its core business with external

partners. The Auto&Motor unit saw a partnership agreed

with production service “onpact” during the first quarter, as

well as a co-operation with auto portal “mobile.de”. This

concept, which minimizes risk for Sport1, has also been

successfully implemented in a similar way within the

Games unit with partner “Gameduell”.

Successful business year for Sport1

Due to the ongoing focus on core business, Sport1 was able

to sustain the successful business development achieved

in the previous year, and to confirm its position as Germany’s

leading multimedia sports platform.

Massive growth in usage of more than 40 percent – mar-

ket leadership position expanded

With over 180 million visits and over 1.3 billion page im-

pressions during the 2005 business year, equating to an

increase in usage of well over 40 percent compared with

2004, Sport1 accomplished yet another significant expan-

sion in its market leadership. Sport1 achieved the highest

visit ratings in its six year history in September 2005 with

over 17.3 million visits.

Sport1 confirms position as teletext producer

In the second quarter 2005, the major contract with Seven

One Interactiv GmbH for the production and delivery of

25

editorial teletext content for the sports sector was extended

until December 31, 2008. Thus, Sport1 still produces and

delivers the entire editorial teletext sports content for TV

stations ProSieben, Sat.1, kabel eins, N24 and DSF.

Co-operations with Adidas and Suzuki

2005 saw a long-term strategic co-operation reached with

sporting goods manufacturer Adidas. This encompasses

exclusive advertising campaigns for the DAX group within

the soccer sector. Furthermore, “Suzuki” was also secured

as a strategic and long-term partner.

New marketing agency mediasquares GmbH

In recognition of the strong growth ongoing in the online ad-

vertising market, 2005 saw Sport1 further expand its sales

team. In another move, a contract was signed on March 1,

2005 with Hamburg-based online marketing agency medias-

quares GmbH for the marketing of classic advertising space

on www.sport1.de, as well as the associated ad manage-

ment. Mediasquares is one of Germany’s highest performers

in online marketing and is therefore an excellent strategic

partner for sport1.de, ideally complementing its in-house

marketing activities associated with sponsoring, co-opera-

tions and cross-media.

Sport1 with new sports database

In respect of future strategy at Sport1, the third quarter 2005

saw the implementation of an in-house sports database. This

technical project was realized in co-operation with Norwe-

gian sports data supplier “Betradar.com-Market Monitor AS”.

PLAZAMEDIA is a leading full-service company for TV and

new media, operating in outside production, studio produc-

tion, post production, new media, program management and

creative services. Within the reporting period, the company

created close to 90,000 hours of programming and mana-

ged around 1,500 national and international productions.

2005 business year sees positive development and posi-

tioning for further growth

The 2005 business year was marked by good capacity utili-

zation across all business activities. Despite the loss of the

contract to produce the base signal for the Premier and

Second Soccer League as of the 2004/2005 season,

PLAZAMEDIA’s business development in 2005 was in line

with expectations. Major contributors to the progress made

during the reporting period were increased profitability and

additional contracts. The opening up of new technologies

and business sectors was pushed forward, and will also con-

tinue to bring about sustainable business growth.

During the last year, PLAZAMEDIA was able to lay down the

foundations for forward-looking production technology.

Through the introduction of “HDTV” (High Definition Tele-

vision) throughout the entire production chain, the company

was able to secure its unique position in the marketplace.

This production capability has already won PLAZAMEDIA

significant contracts such as that for the production of the

2005 FIFA Confederation Cup from Host Broadcast Service

(HBS) based in Switzerland, which is also the official produc-

tion partner of the 2006 FIFA World Cup™. This tournament

functioned as a dress rehearsal for the imminent 2006

FIFA World Cup™ in Germany, which, for the first time ever,

will be produced entirely in the new HDTV technology.

Production Services I PLAZAMEDIA

The last business year also saw an agreement reached with

HBS to provide production services on the worldwide signal

for the 2006 FIFA World CupTM. HBS has contracted PLAZA-

MEDIA to generate the worldwide signal using two venue

production teams. The contract also covers the final of the

2006 FIFA World Cup™ in Berlin.

In addition to this, PLAZAMEDIA will also create, under con-

tract to HBS, the city profiles for all the host cities of the

2006 FIFA World Cup™. These profiles are the means by

which the individual host cities will be presented to the

event’s worldwide audience.

Numerous other contracts were also secured during the re-

porting period. These included the take over by PLAZAMEDIA

of playout for the PLANET documentary channel, the realiza-

tion of the PREMIERE SPORT PORTAL, as well as the first

live-capable program production in HDTV for PREMIERE HD

SPORT, plus production of the 2005 FIFA Confederation Cup

as well as the UEFA Champions League (2005/2006 sea-

son) for Premiere and the UEFA Cup for DSF. In addition,

the company also handled conception and production of

the Kabel Deutschland Info Channel under contract to Kabel

Deutschland GmbH.

Entry into international markets and capacity expansion

During 2005, Outside Production also realized numerous

national and international series productions, including pro-

duction of the Premier and Second Soccer League for DSF;

the Red Zac First League and T-Mobile Bundesliga for

PREMIERE Austria; Formula 1, the German BBL Basketball

League and the DEL German Ice Hockey League for Pre-

miere; plus the HBL German Handball League for DSF.

At the same time, the New Media business unit further

expanded its international activities. Under contract to US

internet company Bluelake Media, PLAZAMEDIA produced

the Premier and Second Soccer League, the 2005 IIHF Ice

Hockey World Championship, the 2005 European Basket-

ball Championship, the qualifying matches for the 2006

FIFA World Cup™ and the three-language highlights of all

16 of the 2005 FIFA Confederation Cup matches. Japanese

company Softbank and Brazilian telecommunications com-

pany Terra Networks received pre-prepared video clips of

the German Soccer League.

During the fourth quarter, PLAZAMEDIA reached an agree-

ment with PREMIERE for the continuation of their long-term

strategic partnership as of January 1, 2007, as well as ex-

tending the framework production contract covering exten-

sive studio and outside production services. In terms of

sports, the studio production services (period of agreement

extends until June 30, 2011) will in future also encompass

full program management of PREMIERE’s sports program

and HD portfolio, post production, studio production and

production of the conference channel for the Champions

League matches. In outside production, PLAZAMEDIA will

also continue production of the Champions League, as well

as handling the multi-channel transmission of Formula 1 for

a period of three years until December 31, 2009.

Expansion of management team and the Creative

Services business unit

In addition, December 31, 2005 saw PLAZAMEDIA take

over from PREMIERE 100 percent of shares in PREMIERE

subsidiary Creation Club (CC) GmbH. With this acquisition,

PLAZAMEDIA expanded its creative services portfolio within

both its existing and new customer business activities. The

Creation Club is successfully positioned in promotion, on

and off-air design, advertising and TV formats. Creation

Club’s Managing Director Zeljko Karajica has also been

appointed to the PLAZAMEDIA management team.

26

Business Units Reports I Sports

27

Licensing I EM.TV is exclusive marketer of merchandising rights to the 2006FIFA World Cup™ within Europe

Since acquiring the European merchandising marketing

rights to the 2006 FIFA World Cup™ in spring 2002, EM.TV

AG has been focused on implementing its objective of crea-

ting a broad network of distribution channels for licensees.

Alongside a total of over 300 scheduled official 2006 FIFA

World Cup™ shops run by KarstadtQuelle, EM.TV also se-

cured both C&A and Deichmann as license partners at the

beginning of 2005. Their extensive national and internatio-

nal retail networks are playing a decisive role in the develop-

ment of distribution channels.

33 license contracts negotiated in 2005 – comprehensive

license program realized

The constantly increasing media attention focused on the

2006 FIFA World Cup™ was also evident during the past year

by the number of license contracts agreed. As FIFA “Licen-

sing Representative”, EM.TV negotiated 33 new license

contracts during the reporting period. By the end of 2005,

the total number of licensees stood at 53 companies. In

achieving this, however, EM.TV stood by its strategy of crea-

ting a comprehensive licensing program in each product

category with a relatively small group of respected compa-

nies. Due to its significant marketing success during the

reporting period, EM.TV was able to exceed expectations

considerably and to make a substantial contribution to the

operating result of the Sports segment.

Europe-wide development of distribution network

In the first quarter 2005, EM.TV secured two internationally

significant retail companies as 2006 FIFA World Cup™ licen-

sees, in the form of C&A and the Deichmann Group. German

fashion company C&A acquired a non-exclusive license for

non-branded textiles, while well-known shoe retailing group

Deichmann secured exclusive rights to shoes with the excep-

tion of flip-flops and bathing sandals.

Furthermore, NICI AG was granted an exclusive European

license for plush products, as well as non-exclusive rights

to plush cushions and polyresin figures, also within Europe,

for the 2006 FIFA World Cup™. Further agreements were

reached with companies such as Dillen Asiatex GmbH, which

expanded its existing license contract for home textiles to

incorporate a non-exclusive license for adult bedding (non-

branded), and with drinking bottle manufacturer SIGG

Switzerland AG, which acquired exclusive rights to reusable

drinking bottles made from aluminum and plastic.

2005 FIFA Confederation Cup increases demand

The second quarter was marked by the 2005 FIFA Confede-

ration Cup as a sort of “dress rehearsal”, not only from a

sporting perspective, but also in terms of the licensing pro-

gram for the 2006 FIFA World Cup™. Heightened interest

surrounding the “mini World Cup” precipitated an increase

in demand for Official Licensed Products. Agreements

reached in the second quarter included among others con-

tracts with cosmobrandlab AG and TVMania GmbH.

The ongoing high media presence enjoyed by this particular

licensing topic, also had a positive effect on the marketing

of merchandising rights during the second half of the year.

The third quarter saw EM.TV attract among others VIP Mer-

chandising GmbH and in the fourth quarter further nine new

licensees such as DOBE Merchandising AG, Selva S.p.A.

and MENTOR.NET Dienstleistungs- und Vermarktungs GmbH.

Official Licensed Products received an important boost in

Christmas business as a result of the final draw that took

place on December 9, 2005 in Leipzig, watched by around

350 million TV viewers and marking the start of the count-

down to the 2006 FIFA World Cup™.

28

29

EM.TV intends to work in a customer-oriented manner. Service provi-ders and customers are to be convinced of the quality claim, competi-tiveness and sense of responsibility of the Company.

The willingness of national and international TV stations to

invest in new programs continued to be subdued by a weak

advertising market during the 2005 business year. However,

program suppliers able to come up with creative and inno-

vative productions stood a good chance of awaking the

interests of buyers. Alongside a strong storyline and pithy

characters, a further decisive element is the marketing

potential of a new show. Thus – the broader the possibili-

ties for exploiting a new production, the greater its sales

chances on the TV market.

Alongside the establishment of new distribution channels,

EM.Entertainment GmbH was faced with the challenges of

appealing to the largest possible range of target groups,

and of offering great variety in the development of subject

matter. In order to meet these requirements, the company

is working on the development and production of a host of

new topics that appeal to both girls and boys, as well as to

a variety of age groups. Alongside programs for school kids

aged between eight and twelve, the spectrum ranges from

educational entertainment for pre-school kids, through to

productions for toddlers from two to four years old. In addi-

tion, TV stations also demonstrated a keen interest in

language-based shows for pre-school target groups, as well

as in interactive TV formats, whereby, for example, children

can participate in the storyline using mobile devices.

Among the key business events of the first quarter 2005,

was the extension of the existing framework contract with

ZDF. In March 2005, EM.Entertainment GmbH agreed with

the German TV station to extend the contract until 2012.

The new agreement covers the period from 2006, and com-

prises a total of around 625 half-hour programs. Additionally,

the license periods for a host of series and feature films

were also extended. Furthermore, EM.TV and ZDF agreed to

continue their joint co-production activities.

On April 1, 2005, Susanne Schosser came on board along-

side Patrick Elmendorff as Managing Director of

EM.Entertainment GmbH and its sister company Junior.TV

GmbH & Co. KG.

October 1, 2005 saw proven expert in the international pro-

gram market and experienced producer Dominique Chrisitina

Neudecker take over management of production activities.

In December 2005, Junior.TV GmbH & Co. KG acquired the

exclusive pay-TV rights to LazyTown – let’s go for the German-

speaking region. Following the great success of the children’s

series on Super RTL, January 1, 2006 saw the Icelandic pro-

duction celebrate its German pay-TV premiere on Junior.

The license package also includes the free-TV rights for Ger-

man-speaking Switzerland, which are being incorporated

into the existing framework contract with Swiss TV company

SF DRS.

In addition, EM.Entertainment and Junior.TV made a host

of further program acquisitions during the fourth quarter.

These included teen live-action series 15 Love, preschool

production Strawberry Shortcake, 2D comedy series Trollz

and Sponge Bob Square Pants, as well as studio producti-

on Finger Tips.

By the end of 2005, 21 episodes had been completed in

German and English of 2006 FIFA World Cup™ Official

Mascot TV series GOLEO VI. The first 16 of a total of 24

spots had also been filmed. GOLEO VI is a comedy for the

whole family consisting of a live-action production with pup-

pet animation (21 episodes of 40 seconds each) and a 3D

30

Business Units Reports I Entertainment

Production

31

animation with 24 ten second spots. Both formats were

conceived and developed under contract from Junior

Produktions GmbH by Creation Club (CC) GmbH, which has

belonged to EM.TV subsidiary PLAZAMEDIA GmbH TV &

Film Produktion since the end of 2005.

The 2005 business year saw a host of new TV stations

taking to the air, including children’s broadcasters such as

NICK in Germany and France (Viacom Group) and digital

terrestrial station GULLI, a co-operation project between

Lagardère Group and France Télévisions. In Spain, four new

licenses were granted for national TV broadcasters, also

including one children’s station, while numerous regional

programs were approved and are now being broadcast

across the digital terrestrial network.

The cable and satellite sector, particularly in Asia and

Eastern Europe, also witnessed the arrival of an array of

new platforms and TV channels, all of which present new

marketing opportunities for program suppliers such as

EM.TV.

The introduction of the new technologies in the TV, video

and mobile entertainment sectors also led to the creation

of a series of new markets during the 2005 business year,

and these will surely multiply further during the years to

come. As far as the business operations of EM.Entertain-

ment are concerned, i.e. the production and marketing of

children’s and youth programming, it was activities in video-

on-demand and mobile content that enjoyed the greatest

benefits. In these growing markets, EM.Entertainment can

already count among its customers Telekom Austria (video-

on-demand) and Plan B, a company that markets mobile

content worldwide.

Key agreements in the TV Sales business unit during the

first quarter 2005 included the licensing of 65 half-hour

programs to Italian media group Mediaset. In France, TF1

acquired rights to the third season of Tabaluga, while

France 5 secured a free-TV license for 52 episodes of the

Heidi animation series.

In pay-TV, EM.Entertainment successfully finalized contracts

with AON.TV, Telekom Austria’s broadband service provider,

and with Nickelodeon Latin America. The agreements secu-

red AON.TV exclusive pay-per-view rights to a wide range of

classics amounting to a total of 260 program half hours,

while Nickelodeon acquired the pay-TV rights to EM.TV co-

production Creepschool for Latin America.

The most important event of the second quarter was the

MIPTV trade fair in April 2005 in Cannes, France. And it was

there that EM.Entertainment secured a volume contract

with Ukrainian TV station K1, granting it exclusive exploitati-

on rights to a total of 1,200 half-hour episodes over a three

year period. In the same quarter, all 104 episodes of Maya

the Bee were licensed to Bulgarian distributor Diema Vision,

while Turkish program purchasing company Tara Film acqui-

red the free-TV rights to 24 animation films on behalf of

broadcaster ATV.

Within the pay-TV sector, EM.Entertainment successfully li-

censed 40 episodes of the Captain Future series to broadca-

sting group Universal Studio Networks for its SCI FI channel.

TV Sales

Third quarter highlights included the sale of three seasons

of live-action series Clueless to Nickelodeon Deutschland

for new children’s channel NICK, which began broadcasting

in September 2005. In addition, Asian media group Power

International Media (PIM) acquired all 50 episodes of series

classic Anne of Green Gables for pay-TV.

At MIPCOM in October 2005 – the year’s most important

TV trade fair alongside MIPTV in spring – EM.Entertainment

presented two new products; children’s series Marvi Häm-

mer presents NATIONAL GEOGRAPHIC WORLD and Dogstar.

The EM.TV subsidiary acquired the exclusive rights worldwi-

de, excluding the German-speaking region, to the entertai-

ning, bilingual educational program Marvi Hämmer from

licensor YOUA edutainment GmbH & Co. KG. The rights port-

folio to comedy cartoon series Dogstar extends across free-

TV, pay-TV and home entertainment, and covers the German-

speaking countries, the French-speaking areas of Europe

(excluding Switzerland), Spain, Asia (excluding Japan) and

Latin America. Dogstar is currently being produced by

Australian animation studio Media World Pictures Pty Ltd in

co-operation with ZDF, BCC, the EM.TV group and Daro Film

Distribution. It is scheduled for completion in March 2007.

At MIPCOM there were also good news for GOLEO VI, the

TV series accompanying the 2006 FIFA World Cup™ Official

Mascot. Pay-TV provider Premiere secured exclusive pay-TV

rights to the sitcom for the German-speaking region. Further-

more, the contract includes an option to acquire the Ger-

man-speaking free-TV rights, as well as non-exclusive rights

for radio use.

Further significant TV agreements reached in the fourth

quarter included the sale of Farscape I to children’s channel

NICK and the sale of new Futurikon production Dragon

Hunter to ORF. In France, TF1 acquired the rights to Flipper

& Lopaka III, and 30 episodes of live-action series A Twist

in the Tale were licensed to the Disney Channel. In addition,

Magyar RTL Television secured all four seasons of Digimon

for broadcast in Hungary, the Czech Republic, Slovakia and

Romania, while Dutch distributor AVRO purchased the free-

TV rights to the entire Pippi Longstocking library.

28

Business Units Reports I Entertainment

32

29

As in the previous year, promotional activities and joint mar-

keting initiatives attracted keen interest within the license

market for children’s and youth material, alongside classic

merchandising. Furthermore, growth potential is to be found

within the baby and toddler sector, where international com-

parison indicates that this segment has yet to be fully ex-

ploited. At a domestic level, the most important distribution

channels remained department stores and major retail

chains, although discounters were able to continue building

market share during the reporting period.

Maya the Bee proved to be one of the dominant products

during the reporting period, due to her 30th TV anniversary

in 2006. A host of companies were already buying licenses

in 2005 for an array of products featuring the popular bee.

In the first half, J. Bauer GmbH & Co. KG extended its con-

tract for children’s dairy products for a further two years. In

the stationery and paper goods sector, Papstar Vertriebs

GmbH & Co. KG secured Europe-wide rights to party goods,

while Wekre GmbH acquired a license for stationery.

Alongside Maya the Bee, the first half also saw substantial

demand for characters from Vicky the Viking and Tabaluga.

GlaxoSmith Kline Consumer Healthcare GmbH & Co. KG

was granted rights to the little Viking for dental care and

oral hygiene products within the German-speaking region.

EM.Entertainment also entered into a strategic partnership

with uniVersa Versicherung that took the form of an agree-

ment to use Tabaluga as a name and figurehead for its

new children’s insurance policy concept.

Alongside food, license categories that witnessed the stron-

gest sales included the home & living and textile sectors.

Within the textile category, SANETTA Textilwerk Gebrüder

Ammann GmbH & Co. KG and TVMANIA GmbH secured

contracts for children’s clothing featuring characters from

series classics Vicky the Viking and Maya the Bee.

Third quarter highlights included the licensing.forum 2005,

at which EM.Entertainment and Autobahn Tank & Rast

GmbH were honored with the LIMA Award in the “Best

Promotion” category for their three-part Vicky promotion.

Agreements reached during the third quarter included a

licensing contract with Flötotto GmbH, who acquired rights

to children’s furniture in Maya the Bee designs, and a con-

tract extension with SIGG Switzerland AG for aluminum

drinks containers. Further licenses were granted to FUN

LITES Handels- und Vertribs GmbH (lamps and lights),

Panini-Verlag (the Maya the Bee magazine) and the compa-

ny Global Labels for bedding.

In the fourth quarter, a license contract was agreed with

Ravensburger Spielverlag GmbH for a wide range of puzzle

games of Maya the Bee for the entire German-speaking

region. The products are set to reach the market during the

2006 anniversary year. Furthermore HEUNEC GmbH & Co.

KG extended its contract for soft toys featuring Maya the

Bee and her friends.

Licensing I Merchandising

33

Within the home entertainment division, which includes the

licensing of exploitation rights for video and DVD, the 2005

business year saw EM.Entertainment achieving a series of

national and international agreements.

In the first quarter, Koch Media AG acquired home entertain-

ment rights to 10-part fairy tale series Princess Fantaghiro

for the entire German-speaking region. Key international

sales included an agreement with TF1 Video, granting

France’s leading video producer and distributor exclusive

exploitation rights to Flipper & Lopaka I and II, as well as

to the Tabaluga Christmas movie.

In the second quarter, EM.Entertainment achieved its first

license contract with Epix Media AG. The Berlin company

secured video and DVD rights to children’s series Anne of

Green Gables and Marco. In France, EM.Entertainment

signed a contract with Innovation Distribution Production

(IDP). The distribution company acquired a video/DVD licen-

se for all 50 episodes of Tao Tao.

Third quarter highlights included the sale of exclusive rights

to the Heidi animation series and a TV feature film to Latin

American marketing group Tycoon Entertainment. In additi-

on, having already licensed an array of EM.TV co-producti-

ons, Finnish company Panvision has now also acquired the

rights to classics Maya the Bee and Tao Tao.

EM.Entertainment took a key step in the expansion of its

home entertainment activities during the fourth quarter.

The company secured two long-term agreements with Uni-

versum Film and Warner Bros. Entertainment, the total

value of which lies in the mid seven-figure ball park.

The program contract with Universum Film encompasses

DVD and video exploitation of popular children’s and youth

programs from the EM.Entertainment rights library, including

series and feature films based on the novels of Astrid Lind-

gren such as classic Pippi Longstocking and Heidi. The con-

tract also entitles Universum Film to select three out of six

new EM.Entertainment co-productions or program purchases

between now and 2011. The license region extends across

Germany and Austria, with some programs also including

Switzerland.

The second agreement saw Warner Bros. Entertainment

acquire home entertainment rights for Germany and Austria

over a long-term period to the Maya the Bee animation

series, as well as the animation feature film Maya the Bee.

34

Business Units Reports I Entertainment

Licensing I Home Entertainment

35

EM.TV subsidiary Junior.TV GmbH & Co. KG presents the

Junior children’s and family-orientated pay-TV channel, which

can be received in Germany via pay-TV provider PREMIERE.

Subscriptions to the channel are available individually, as

well as within the “PREMIERE Kinder” and “PREMIERE

Thema” packages, and the overall “PREMIERE Komplett”

package.

Alongside exclusive distribution within Germany, Austria and

South Tyrol, the agreement with PREMIERE encompasses

non-exclusive distribution in German-speaking Switzerland,

Luxembourg and Liechtenstein. Further partner companies

in Switzerland are Cablecom GmbH and Swisscom Broad-

cast AG, which likewise offer Junior on their pay-TV services.

In the first half of the year, Junior hosted broadcast premie-

res for a large number of series and feature films. Series

Der silberne Hengst and fairy tale Es war einmal in einem

fernen Land enjoyed their German premieres.

Channel and platform firsts included well-known children’s

series such as Hallo Spencer and Catweazle, as well as

animated feature film Beauty and the Beast and feature

film Sinbad the Sailor. Furthermore, animated special Irre

Kinderei – Unendliche Geschichten für einen Drachen and

Children’s series Rasmus und der Vagabund, based on the

novels of Astrid Lindgren, made their channel and platform

premiere.

TV I Junior Channel

36

37

EM.TV intends to assign its employees in line with their talents and therequirements of the company and to compensate them by results basedon the relevant corporate objectives.

1.1 The general economic environment

The economy remained on a growth course in 2005. Econo-

mic experts unanimously agreed on a growth in the gross

domestic product slightly in excess of 4 percent. The rate is

still above the medium-term growth trend of the world eco-

nomy therefore. Despite the increase in the price of oil, the

extremely robust world economy was again driven by the

USA and the booming economies of China and India.

Amongst the industrial countries, the upturn in Japan conti-

nued to increase further in 2005. On the other hand, the

speed of recovery even receded at times in the European

Currency Union and Great Britain. Generally speaking, the

economy in the Euro-zone failed to keep pace with the world-

wide trend. The gross domestic products in 2005 in the

countries of the European Currency Union only amounted

to 1.3 percent (2004: +2.1 percent). Germany was at the

lower end of the Euro member countries with a plus of 0.9

percent. Whereas German exports benefited from the favou-

rable operating conditions in the world economy, demand

on the domestic market remained weak. Private consump-

tion stagnated and gross capital investments receded slightly

once again.

Sources:2006 Economic Forecast, DZ Bank/F.A.Z. Institute, November 18, 2005Economic Report Federal Association of German Banks, November 2005Eurostat, Pres Release, February 14, 2006Federal Statistics Office, Press Release, January 12, 2006

1.2 The sports sector

Television

The subdued state of the general economy in Germany also

had its effect on the TV advertising market. Bookings were

increasingly made at short notice in media such as the

radio, online or daily newspapers. This development was

particularly reflected in the cautious booking conduct of

market participants in the sponsoring and special adverti-

sing sector, especially in the 1st half of the report year.

Classical advertising developed positively.

The slightly positive development of gross advertising reve-

nues by TV stations continued in 2005. Expenditures by

the advertising industry rose by approximately 4.3 percent

to more than Euro 8 billion (Source: NielsenMedia Research).

It is, however, questionable whether a similar recovery was

experienced with net income levels, i.e. after deducting

rebates and cash discounts.

As the growth motor in the German TV market, the so-called

transaction television continues to be prevalent, e.g. auc-

tions, gaming and betting offers. This market segment is

also marked by an increasing level of competition, however.

Online

The online advertising market in Germany developed ex-

tremely positively in 2005. According to Nielsen Market Re-

search, advertising spending rose by more than Euro 410

million in the online advertising market which is relevant for

Sport1 GmbH, with this being equivalent to a growth rate of

approximately 33 percent in comparison with 2004, when

growth amounted to 4 percent. This was mainly attributable

to the sharp increase in Internet accesses used for private

purposes, to quicker Internet connections and to the increase

attractiveness of online services. Online advertising has

gained very much in importance in the communication mix

of advertising companies as a result. The Internet offers

companies a unique direct interaction with consumers in

comparison with other media. This is an aspect which coun-

38

Management Report

1. Economic Conditions

39

teracts the changed advertising conduct - namely the trend

away from long-term oriented image advertising to short-

term sales advertising.

Production services

The business climate in the German production market was

basically tense in 2005. The continuing growth of new TV

stations and programs as well as higher demand for inno-

vative production solutions resulted in an increased level of

orders in comparison with 2004.

1.3 The entertainment sector

Production

The advertising market in the environment of children and

youth programs is still tense and is continuing to create a

difficult market environment for suppliers of the specific pro-

grams involved. Demand is for formats which can be used

in the whole exploitation chain, also including merchandi-

sing and publishing in addition to TV and video/DVD usages.

In order to build up products and minimize risks, TV stations

wish to make creative contributions and to be active as co-

production partners – or they only make a buying decision

when the first episodes are available so that the quality of

the series can be clearly and conclusively assessed.

In the continued tense market environment, program pro-

ducers are starting to develop new target groups and to es-

tablish new distribution channels. Programs are being increa-

singly developed for young children in the age of 1 to 3 which

are being mainly produced for the video market. In this way,

contact is made with parents who wish to promote the ear-

lier education of their children. Formats with educational

contents which prepare children for kindergarten and school

requirements at the earliest possible age are also the sub-

ject of increasing demand.

The dissemination of program contents on portable tele-

phones is also part of this upward trend (mobile contents).

In addition to ring tones and downloads which have already

established themselves with children, there is also an

increasing interest in TV formats which integrate viewers in

current happenings interactively and by portable telephone.

TV-sales

The market for the worldwide sale of TV rights also experi-

enced a slight upward trend in 2005 which is not yet reflec-

ted in the relevant achievable prices, however. Both on a

national and international level, demand by stations rose

for new productions and for existing program goods. This is

not least attributable to the establishment of a range of new

stations, including both full-programs and also specific chil-

dren’s stations (e.g. in Germany, France and Spain). Various

new platforms and stations which enquire children and youth

programs have also been established in the cable and satel-

lite sector across the globe – especially in Asia and Eastern

Europe.

Licensing

There was no dominant theme in the merchandising sector

in 2005. Strong, established characters were able to assert

themselves on the market but without setting any new

trends. There was an increased level of demand for licenses

from the promotion sector in particular and sport licenses

also gained in importance.

1.4 Group structure and organization

EM.TV AG is an international media company based in Unter-

föhring near Munich. It emerged in 2004 from the restructu-

ring of the former EM.TV & Merchandising AG. The operating

business activities of the EM.TV Group have been based on

the two segments Sports and Entertainment since 2003.

In the Sports segment, EM.TV operates in the television

sector (inter alia DSF), Online sector (Sport1), production

services (PLAZAMEDIA) and Licensing (European “Licensing

Representative” 2006 FIFA World Cup™). EM.Sport GmbH

is the parent company of the Sports segment which holds

100 percent of the shares in PLAZAMEDIA GmbH TV & Film

Produktion. The shares in DSF Deutsches SportFernsehen

GmbH and Sport1 GmbH are partially held directly by

EM.TV AG and partially indirectly by EM.Sport GmbH or its

subsidiary Sport Media Holding GmbH.

The Entertainment segment includes the production of

high-class children and youth programs, worldwide sales of

TV rights and the marketing of home entertainment and

merchandising rights. For this purpose, EM.TV has one of

the world’s largest program libraries for children and youth

entertainment besides the large studios (majors). Since the

report year, all production and selling activities in the enter-

tainment sector have been bundled in EM.Entertainment

GmbH which is a wholly-owned subsidiary of EM.TV AG and

its subsidiaries. The extensive program library is grouped

together in the legal right companies Junior.TV GmbH & Co.

KG and Junior Productions GmbH.

The Group parent company, EM.TV AG, acts as the Group

holding company. It is responsible for central functions (ac-

counting, law, financing and investor relations) and also

strategic control of the Group. The management of the Group

parent company mainly controls the companies beneath

the two segments through advisory boards or similar bodies.

Operating responsibility rests with the management of the

individual subsidiaries. Sales, earnings and cash-flow ratios

are the main control ratios applied within the Group.

1.5 Changes in the investment portfolio of the Group

Tele München Gruppe (TMG):

EM.TV Beteiligungs GmbH & Co. KG, a whole-owned subsi-

diary of EM.TV AG, sold its 45 percent holding in Tele Mün-

chen Group (TMG on December 15, 2004 to a company

owned by the co-shareholder Dr. Herbert Kloiber. As part of

the restructuring of the 4% convertible bond of 2000/2005

of the former EM.TV & Merchandising AG carried out in the

first half of 2004, EM.TV committed itself to sell the afore-

said. The transaction was executed on January 3, 2005 by

payment of the purchase price of EUR 118 million. On

February 3, 2005, the full redemption of the zero-coupon

notes was effected by transferring the net income after de-

ducting costs and other expenses to the holders of the zero-

coupon notes which had been granted in return for the issue

of the 4% convertible bond of 2000/2005 to the former

bondholders.

DSF/Sport1

EM.TV increased the existing holdings in DSF Deutsches

SportFernsehen GmbH and Sport1 GmbH in two stages to

100 percent in 2005.

On February 1, 2005, EM.TV reached an agreement with

KarstadtQuelle New Media AG on the purchase of the sha-

res held by KarstadtQuelle in Sport Media Holding GmbH

(49.9 percent) for a price of EUR 27 million. EM.TV AG the-

reby increased its indirect holding in Sport Media Holding

GmbH – which in turn holds 81.13 percent in DSF and

Sport1 – to 100 percent.

On February 10, 2005 EM.TV AG reached an agreement

with the Swiss investor Dr. h.c. Hans-Dieter Cleven for the

purchase of his 18.87 percent holding in DSF and Sport1

for a price of EUR 12.6 million. The increase in the hol-

dings was executed after submitting all cartel and media

related approvals on May 23, 2005. EM.TV AG has had a

direct or indirect 100 percent holding in both sports com-

panies since then.

Arena Media

With effect from July 12, 2005, EM.TV’s subsidiary PLAZ-

AMEDIA acquired a 33.33 percent holding in arena media

GmbH in Munich. Arena Media commenced the interactive

auction station arena on September 27 of last year. The

holding of PLAZAMEDIA which is also responsible for the

40

Management Report

41

complete production and processing of the station was

reduced to 25 percent in the report year by the entry of an

additional shareholder. This holding is consolidated by the

EM.TV Group at equity.

Creation Club:

EM.TV’s subsidiary PLAZAMEDIA acquired all shares in

Creation Club (CC) GmbH from Premiere Fernsehen GmbH

& Co. KG with effect from December 31, 2005. Creation

Club is positioned as an independent and innovative com-

pany for audiovisual services with promotion, on and off air

design, advertising and TV formats. The range of the audio-

visual services which it offers is extremely extensive with a

networked team of graphic artists, animation experts, text

writers, promotion producers, editors and sound designers.

The company has already been distinguished with an award

for its creative productions with a whole series of recognized

prizes, inter alia with the “Eyes & Ears Award 2004“ and

the Promax & BDA International Awards 2005.

The Company has been included in the consolidated finan-

cial statements of the EM.TV Group since December 31,

2005.

1.6 Group financial reporting and accounting principles

EM.TV AG draws up its consolidated financial statements in

accordance with International Financial Reporting Standards

(IFRS). The prerequisites laid down in §315 a of the German

Commercial Code (HGB) for the preparation of the consolida-

ted financial statements based on IFRS as they are to be

applied by the EU have been met. The consolidated financial

statements have been supplemented by additional notes

and the Group Management Report. The annual financial

statements of the individual company have been prepared

in accordance with the German Commercial Code.

In comparison with the consolidated financial statements

in the previous year, IFRS 2 (share-based compensation)

has been applied for the first time in the accompanying

consolidated financial statements at December 31, 2005,

with this giving rise to an adjustment in the previous year’s

figures.

The valuation and accounting principles in the annual

financial statements of EM.TV AG have remained unchan-

ged in the report year.

EM.TV changed its segment reporting at the beginning of

2005. For greater transparency, the “Others” segment is

shown in detail, with this including amongst other things

the income and costs of EM.TV AG as the holding company

of the Group. The holding company was previously alloca-

ted to the Entertainment Segment. In addition, the previous

“Consumer Products” segment has been transferred to the

“Others” segment. The previous year’s figures for the new

segment have been adjusted in order to ensure compari-

son validity.

2.1 Overall evaluation

The EM.TV-Group developed in line with its budgets in

2005 and achieved its financial objectives. The Group

attained positive earnings before taxes (EBT) for the first

time since 1999 excluding one-off and special effects. This

was achieved despite additional, originally unplanned

expenses, e.g. for the acquisition of attractive sports rights

(e.g. the UEFA Cup) and preparations for the entry into the

betting and gambling sector. Against the background of

these additional expenses and in view of the continuing

tense situation in the TV advertising market, the

Management Board regards the earnings for the financial

year 2005 to be a positive achievement.

2.2 Consolidated sales and earnings

Sales of the EM.TV Group amounted to EUR 209.5 million

in the financial year 2005. This was equivalent to an increa-

se of 1.4 percent in comparison with the previous year

(EUR 206.6 million), with the forecast of a slight growth

rate being achieved. EUR 63.0 million of the sales for the

year were attributable to the strong fourth quarter (2004:

EUR 58.0 million). The long-term program agreements rea-

ched in December with Universum Film GmbH and Warner

Bros. Entertainment GmbH in the Home Entertainment sec-

tor had a positive effect on the development of sales in the

final quarter.

Other operating income amounted to EUR 22.4 million, the-

reby remaining well below the corresponding amount for

the previous year (EUR 76.8 million) which was, however,

marked to a considerable extent (EUR 48.2 million) by the

one-off income amounts from the final agreement with

KirchMedia GmbH & Co. KGaA i.In. (“Kirch-Settlement“).

Other operating expenses particularly consisted in the report

year of the release of provisions, exchange rate differences

and non-period income.

At EUR 114.0 million, the cost of materials were 3.3 per-

cent lower than the previous year at EUR 117.9 million.

Personnel expenses increased by 4.1 percent from EUR

48.2 million to EUR 50.2 million, with the aforesaid reflec-

ting the increased number of employees in the EM.TV

Group. Depreciation and amortization amounted to EUR

15.5 million in the report year (2004: EUR 22.5 million).

Other operating expenses increased at a moderate rate of

4.0 percent from EUR 45.3 million to EUR 47.1 million.

They mainly consisted of legal and consultancy expenses,

valuation adjustments, advertising and travelling expenses

and expenses relating to premises. Other operating expen-

ses include bad debt provisions of DSF in respect of two

major service partners amounting to EUR 3.6 million.

Earnings before interest, taxes and depreciation (EBITDA)

amounted to EUR 21.2 million in the report year compared

with EUR 73.1 million in the previous year. If the previous

year’s figure is adjusted for the one-off income from the

“Kirch-Settlement” (EUR 48.2 million), the EBITDA amoun-

ted to EUR 24.9 million.

At EUR 15.5 million, depreciation and amortization were

31.1 percent lower than in the previous year (EUR 22.5 mil-

lion). No exceptional amortization charges were necessary

on intangible assets in the report year, especially on film

assets.

After charging depreciation, the EM.TV Group achieved ear-

nings before interest and tax (EBIT) of EUR 5.7 million which

42

Management Report

2. Sales and Earnings

43

was therefore higher than the adjusted figure in the previo-

us year (2004: EUR 50.6 million, adjusted for the “Kirch-

Settlement”: EUR 2.4 million).

The financial performance deteriorated from EUR -2.3 mil-

lion to EUR -4.9 million. The major influential factors were

lower interest income as a result of the reduction in liquid

funds and higher interest expenses as a result of the first-

time inclusion of the 8% bonds with warrants attached of

2004/2009 for a full year and a special expense with no

liquidity effect as a result of the early redemption of part of

the aforesaid bond with warrants attached.

The Group showed earnings before tax (EBT) of EUR 0.8 mil-

lion in 2005 of which EUR 7.2 million was attributable to the

strong fourth quarter. The previous year’s earnings of EUR

142.5 million were particularly marked by a substantial

income with no liquidity effect (EUR 94.4 million) arising

from the restructuring of the 4% convertible bond of

2000/2005 of the former EM.TV & Merchandising AG in

addition to the one-off “Kirch-Settlement”. The EBT for the

year adjusted for both the aforesaid effects amounted to a

loss of EUR 0.1 million.

The slightly positive EBT was achieved despite intensive

preparations for the envisaged entry into the betting busi-

ness. A total of EUR 2.7 million was spent on the betting

business in the report year. This had a negative effect of

EUR 1.5 million on the EBT.

The Group shows a tax income of EUR 0.3 million for 2005,

compared with a tax charge of EUR 4.2 million in 2004.

After tax, earnings prior to minority interests were equiva-

lent to EUR 1.1 million. The amount in the previous year

was EUR 138.3 million, with post-tax losses being equiva-

lent to EUR -4.3 million after adjusting for the “Kirch-

Settlement” and the restructuring gain.

At EUR 0.8 million, minority interests were much lower than

in the previous year (EUR 4.0 million). This downturn was

mainly attributable to the increase of EM.TV’s holdings in

the subsidiaries DSF and Sport1 to 100 percent in both

cases; there were no more minority interests accruing after

the relevant date of May 23, therefore.

After minority interests, the Group showed a surplus of EUR

0.2 million (2004: EUR 134.3 million; adjusted for the

“Kirch-Settlement” and the restructuring gain of EUR -8.3

million). The undiluted earnings per share amounted to

EUR 0 (2004: EUR 3.22) and the diluted earnings per share

taking account of the outstanding warrants to EUR 0

(2004: EUR 2.96).

2.3 Development of the segment business

The major value generators in the Sports Segment are main-

ly the access to attractive sports rights with a high marke-

ting potential, marketing activities for the 2006 FIFA World

Cup™, the development of intelligent value-added services

and utilizing capacities in the production service sector by

means of technologically high-class and innovative orders.

The Sports Segment attained a sales level of EUR 177.8

million in 2005 which was the same level as the previous

year (EUR 177.6 million). The subsidiaries PLAZAMEDIA and

DSF reached slightly lower sales whereas higher sales were

achieved by the marketing of the merchandising rights to

the 2006 FIFA World Cup™. The share of the Sports Seg-

ment in relation to total sales remained almost unchanged

at 85 percent (2004: 86 percent). The Segment earnings

of EUR 10.1 million were significantly lower than the previo-

us year (EUR 21.8 million), however. This was attributable

to a weaker earnings contribution by DSF, inter alia on ac-

count of the costs for the UEFA Cup and higher bad debt

provisions. In the case of PLAZAMEDIA, the discontinuation

of the production order for the basis signal for the Premier

and Second Soccer League with effect from the 2004/2005

season had a dampening effect on earnings.

A major value generator in the Entertainment Segment is

the maintenance of the library program quality, access to

rights and production structures and a national and inter-

national distribution access. Sales of EUR 30.6 million were

generated by this Segment in 2005, equivalent to an in-

crease of 5.5 percent in comparison with 2004 (EUR 29.0

million). This corresponded to 14 percent of Group sales

(2004: 14 percent). Segment earnings amounted to EUR

5.7 million. The previous year’s level of EUR 43.4 million

was mainly marked by the one-off income from the “Kirch-

Settlement”; on an adjusted basis, it would have amounted

to EUR -4.8 million.

The “Others” Segment shown as such for the first time

shows sales of EUR 1.1 million in connection with contracts

remaining from the reorganization of the Entertainment Seg-

ment in EM.TV AG. The earnings of EUR -10.0 million reflect

the costs of the Group’s holding function. The previous

year’s equivalent amounted to EUR -14.6 million. This reduc-

tion is attributable to stricter cost management and costs

recharged to the individual segments.

2.4 Sales and earnings of EM.TV AG

The individual financial statements of EM.TV AG which

have been prepared in accordance with the provisions of

the German Commercial Code (HGB) show sales of EUR 8.8

million in 2005, with these being mainly attributable to the

marketing of merchandising rights for the 2006 FIFA World

Cup™. This activity is allocated to the Sports Segment in

the Group. The downturn in sales in comparison with the

previous year was equivalent to EUR 23.7 million. This resul-

ted from the reorganization the Entertainment Segment

with the introduction of all production and selling activities

into EM.Entertainment GmbH and its subsidiaries (cf. Sec-

tion 1.4.). Most of the other items in the profit and loss

account were also affected by the aforesaid reorganization,

especially cost of materials and depreciation/amortization.

At EUR 19.6 million, other operating expenses remained

well below the level of the previous year (EUR 25.8 million).

This downturn was, inter alia, attributable to lower bad debt

provisions which fell from EUR 8.3 million to EUR 3.1 milli-

on. The previous year’s amount was marked by expenses in

connection with the “Kirch-Settlement” to a very large extent.

Financial results were increased from EUR -6.5 million to

EUR 9.1 million. A substantially lower level of investment

income in comparison with the previous year was offset by

the absence of major write-downs of financial assets and

marketable securities under current assets. In the previous

year, extensive write-downs were made on the valuation of

various affiliated companies in connection with the settle-

ment of intra-group receivables. In addition, the net interest

payable included in the financial results was reduced from

EUR -5.6 million to EUR -2.0 million.

EM.TV AG shows earnings of EUR 2.8 million from ordinary

business activities in 2005 (2004: EUR -28.7 million). Unlike

the situation in the previous year, no expenses were incurred

in the report year arising in connection with the restructu-

ring of the 4% convertible bond of 2000/2005. Earnings

for the year amounted to EUR 1.5 million compared with a

loss of EUR 38.8 million in 2004.

44

Management Report

45

3.1 Net worth position of the Group

At EUR 316.2 million, the balance sheet totals of the EM.TV

Group at December 31, 2005 was 25.9 percent or EUR

110.4 million lower than the equivalent value at the end of

2004. The main reason for the substantial reduction is the

execution of the sale of the 45 percent holding in TMG in the

first quarter. The largest asset item in the Group at the end

of 2005 were intangible assets which reached an amount

of EUR 89.8 million. The downturn in comparison with the

amount in the previous year (EUR 94.1 million) was mainly

attributable to scheduled amortization charges. Goodwill in-

creases substantially from EUR 8.9 million to EUR 54.5 mil-

lion, mainly on account of the increased holdings in the

sports companies DSF and Sport1. Investments in affiliated

companies rose from EUR 2.8 million to EUR 5.3 million, with

this being attributable to the minority holding of PLAZAMEDIA

in arena media GmbH. In total, long-term assets rose by EUR

47.8 million from EUR 131.1 million to EUR 178.9 million.

Short-term assets decreased by EUR 158.4 million from

EUR 295.6 million to EUR 137.2 million. This downturn was

attributable to the reduction in liquid funds (cash on hand

and at banks) in addition to the execution of the sale of the

holding in TMG which resulted in a reduction in other assets

from EUR 138.2 million to EUR 19.9 million. Cash on hand

and at banks fell from EUR 106.0 million to 45.8 million,

mainly on account of the acquisitions in the Sports Segment

(DSF, Sport1 and Creation Club), together with the partial re-

demption of the 8% bond with warrants attached of 2004/

2009. In contrast, trade accounts receivable rose by EUR

21.7 million to EUR 68.7 million with this being mainly on

account of the marketing of the merchandising rights to the

2006 FIFA World Cup™ to a very large extent.

On the liabilities side of the consolidated balance sheet,

shareholders’ equity amounted to EUR 153.6 million at

December 31, 2005. This change in comparison with the

previous year (EUR 153.1 million) was, inter alia, caused by

the reduction of minority interests in view of the fact that

EM.TV increased its holdings in DSF and Sport1 to 100

percent in the report year and also on account of the con-

tributions made to execute the resolved capital increase

connected with exercised warrants from the 8% bond with

warrants attached of 2004/2009. The Group showed a

sound equity ratio of 48.6 percent at December 31, 2005

which is well above the ratio of the previous year on

account of the substantial reduction in the balance sheet

total (35.9 percent).

After the redemption of the zero-coupon note on February

3, 2005 arising from the sale proceeds of the shares in

TMG, the Company had no long-term, non-interest bearing

financial liabilities at the end of the financial year. Long-

term financial liabilities amounted to EUR 64.5 million com-

pared with EUR 181.9 million at the end of 2004. The down-

turn was attributable to the partial repayment of the nomi-

nal amount of EUR 10 million of the 8% bond with warrants

attached of 2004/2009 (with a value of EUR 34.3 million

on the balance sheet date). The remaining balance of the

restructured 4% convertible bond of 2000/2005 issued by

the former EM.TV & Merchandising AG is also included

under this heading (with a value of EUR 26.0 million on the

balance sheet date). In addition, an amount of EUR 4.2 mil-

lion is included which was still payable on the balance sheet

date to a former co-shareholder for the acquisition of sha-

res in the Sports Segment.

Short-term liabilities are marked by “Other liabilities” which

3. Net Worth Position

4.1 Cash flow of the Group

The outflow of funds in connection with normal business

activities amounted to EUR 4.0 million in the 2005 finan-

cial year, compared with an inflow of funds equivalent to

EUR 26.2 million in the previous year. The downturn is in

connection with the restructuring effects in the previous

year. Based on the operating business, the increase in net

working capital and the increase in deferred taxes had a

negative effect.

The inflow of funds in the report year relating to investment

activities amounted to EUR 53.5 million compared with an

outflow of funds equivalent to Euro 19.4 million in the pre-

vious year. The investments in new film rights receded in

the 2005 financial year in comparison with 2004 in view

4. Financial Position

reached EUR 44.1 million on the balance sheet date (De-

cember 31, 2004: EUR 36.5 million). They relate to a very

large extent to customary liabilities in connection with ordi-

nary business activities, such as outstanding invoices or

unpaid commission and licence claims. The Group shows

short-term bank liabilities of EUR 5.6 million on the balan-

ce sheet date (December 31, 2004: EUR 0) which are attri-

butable to PLAZAMEDIA.

3.2 Net worth position of EM.TV AG

The balance sheet total of the individual financial year of

EM.TV AG amounted to EUR 284.0 million at December 31,

2005 (December 31, 2004: EUR 295.1 million).The reor-

ganization of the Entertainment Segment concluded in the

report year by contributing the whole production and sales

activities of EM.TV AG to EM.Entertainment GmbH gave rise

to significant changes in the structure of the individual

balance sheet. Intangible assets fell from EUR 24.9 million

to EUR 0.8 million in view of the fact that the rights library

was sold to Junior Produktions GmbH. As a result of the

investment acquisition in the Sports Segment and the reor-

ganization of the Entertainment Segment, shares in affilia-

ted companies rose from EUR 130.9 million to EUR 197.5

on the balance sheet date; financial investments rose from

EUR 141.7 million to EUR 199.1 million.

In current assets, the increase in accounts receivable from

affiliated companies rose from EUR 18.2 million to EUR

24.3 million, mainly attributable to the effects of the reor-

ganization of the Entertainment Segment. Other assets

amounting to EUR 14.6 million (December 31, 2004: EUR

9.9 million) include a loan of EUR 4.0 million to EM.TV

Sport Management GmbH for the development of concepts

in the betting and gambling sector. Liquid assets (cash on

hand and at banks) fell from EUR 73.4 million to EUR 25.9

million on account of large investments in the report year.

EM.TV AG had an equity of EUR 169.5 million at December

31, 2005, with this representing an increase of EUR 6.4 mil-

lion compared with the equivalent amount in the previous

year. The equity ratio was equivalent to 59.7 percent and

rose by 4.4 percentage points in comparison with December

31, 2004. Bond liabilities fell from EUR 73.6 million to EUR

63.8 million on account of the redemption of the 8% bond

with warrants attached of 2004/2009. EM.TV AG had no

bank liabilities at December 31, 2005.

46

Management Report

47

of the fact that additional investments were made in the

previous year as part of the “Kirch-Settlement”. In contrast,

additional investments were effected in production systems.

The main outflow of funds for acquisitions and financial

investments consisted of EUR 39.8 million for the acquisiti-

on of outstanding shares in DSF Deutsches SportFernsehen

GmbH and Sport1 GmbH together with a cash-effective pur-

chase price installment in the amount of EUR 10.0 for the

acquisition of shares in Creation Club (CC) GmbH. On the

other hand, the inflow of funds in connection with the exe-

cution of the sale of shares in Tele München Gruppe had a

positive effect in the amount of EUR 118.0 million.

The outflow of funds for financing activities amounted to

EUR 115.8 million and were therefore significantly higher

than the previous year’s amount of EUR 13.1 million. The

outflow of funds was mainly attributable to repayment of

the zero-coupon note of EUR 113.4 million and the partial

repayment of the 8% bond with warrants attached of

2004/2009. This item also includes the inflows from the

receipt of long-term financial loans of EUR 4.2 million and

EUR 4.8 million in connection with exercised warrants and

certificates.

Total payment flows gave rise to an outflow of funds

amounting to EUR 66.4 million compared with an inflow of

funds equivalent to EUR 60.9 million in the previous year.

4.2 Liquidity position and liquidity management of the

Group

Liquid funds of the Group amounted to EUR 45.8 million at

December 31, 2005. In the consolidated financial state-

ments, liquid funds of EUR 18.0 are allocated to the Sports

Segment, EUR 13.5 to the Entertainment Segment and

EUR 14.3 million to the Others Segment. The control of

liquid funds is carried out by the Group parent company in

co-ordination with the operating companies.

The net debt of the EM.TV Group consisted of the following

items at December 31, 2005:

Of the long-term interest-bearing financial liabilities, the

balance of the 4% convertible bond is repayable by January

9, 2007 and the 8% bond with warrants attached until

March 30, 2009. Inflows of funds for the exercised war-

rants and certificates of EM.TV AG are earmarked for the

redemption of the bond with warrants attached.

The short-term financial liabilities originate from a bank

loan of EUR 5.6 million being taken up by PLAZAMEDIA.

At December 31, 2005 the EM.TV Group had bank credit

lines of EUR 17.5 million. The aforesaid credit lines are

attributable to DSF in the amount of EUR 10.0 million and

PLAZAMEDIA in the amount of EUR 7.5 million. There were

no bank credit lines of any materiality with any other Group

companies.

Liquidity management of the EM.TV Group which is structu-

red conservatively is mainly concerned with safeguarding

liquidity. Operating companies are basically required to

finance their liquidity requirements from the cash flow from

operational activities. Any additional financing measures

are agreed with the Group parent company in the event of

any larger investments or acquisitions.

Liquide funds Euro 45.8 m

./. Less short-term financial liabilities Euro -5.6 m

./. Less long-term financial liabilities Euro -64.5 m

= Net debt Euro -24.3 m

Investments in the EM.TV Group amounted to EUR 64.6

million in the report year, of which EUR 52.3 was used for

investments in company acquisitions and financial invest-

ments. In the Entertainment Segment, EUR 3.9 million was

mainly invested for acquisitions of new programs in the TV

sector. In the Sports Segment EUR 8.4 million was mainly

invested for new technologies in order to be able to meet

increased customer requirements and also to maintain the

existing systems.

5. Investments

EM.TV is striving to optimize the financing structure of the

Group. The Group is in ongoing discussions with banks in

this respect in order to be able to exploit favourable market

circumstances for financing growth or refinancing existing

financial liabilities. For this purpose, it may be attractive to

have recourse to external capital listed on the stock

exchange, especially bond witch warrants attached and

convertible bonds. The aim is to ensure that EM.TV is able

to operate its business activities with a reasonable and

appropriate external capital ratio. This is ultimately desi-

gned to increase the return on the equity capital employed.

4.3 Liquidity situation and liquidity management of

EM.TV AG

EM.TV AG had liquid funds of EUR 25.9 million in its indivi-

dual financial statements drawn up in accordance with the

German Commercial Code (HGB) at December 31, 2005.

The net debt of EM.TV AG consisted of the following items

at December 31, 2005:

EM.TV AG had no bank credit lines on the balance sheet

date. The Company is striving to have active access to short

and long-term sources of finance and secures its liquidity

by means of profit and loss transfer agreements with its

subsidiaries inter alia.

Of the long-term financial liabilities, the balance of the 4%

convertible bond is repayable by January 9, 2007 and the

8% bond with warrants attached until March 30, 2009.

Inflows of funds for the exercised warrants and certificates

of EM.TV AG are earmarked for the redemption of the bond

with warrants attached.

48

Management Report

Liquid funds Euro 25.9 m

./. Short-term liabilities to banks Euro -0.0 m

./. Long-term financial liabilities Euro -68.0 m

= Net debt Euro -42.1 m

49

The EM.TV Group had an average of 640 employees during

the financial year 2005 (2004: 609). The increase was

attributable to the moderate increase in personnel in the

Sports companies.

The average number of employees in EM.TV AG was reduced

from 72 employees in the previous year to 49 in 2005. This

reduction was connected to a very large extent to the reor-

ganization of the Entertainment Segment in which emplo-

yees were taken over by the subsidiary EM.Entertainment

GmbH.

The aim of EM.TV’s personnel policy is to establish a creati-

ve corporate culture in all companies within the Group. For

the aforesaid purpose, EM.TV allocates employees on the

basis of the requirements of the individual companies and

the corresponding individual talents and capabilities of the

relevant employees. The EM.TV Group will only be success-

ful and competitive in the long-term with qualified and dedi-

cated employees.

Clear principles and rules are essential in personnel ma-

nagement for a successful personnel policy. The manage-

ment principles defined for the EM.TV Group define the

form of collaboration with employees in order to promote

the key qualifications of “Customer Orientation”, “Dedi-

cation” and “Professionalism” together.

A guideline for structured discussions with employees has

been developed on the basis of the aforesaid principles

and was introduced in several Group companies in April

2005. The principles are designed to consolidate the dialo-

gue and feedback-oriented corporate culture even further

and to improve collaboration and understanding between

employees and their superiors. It is also a question of for-

mulating and agreeing clear and binding objectives between

all the parties concerned and opening up individual advan-

ced training and development possibilities for employees.

The compensation of employees of the EM.TV Group are to

be in line with the individual target agreements and the last

results achieved. Whereas the aforesaid compensation prin-

ciples are already binding for senior and junior managerial

staff to a very large extent, compensation should be linked

to personal target achievement even more than has been

the case in the past.

A total of 14 apprentices, eight volunteers and one student

from the university of cooperative education were employed

in the EM.TV Group in the report year. In the commercial sec-

tor, apprenticeships for an “Office Clerk” and a “Business-

man/-woman for audio-visual media” are offered; in the

technical sector “Audiovisual Media Designer” and “Events

Technician” are offered. By promoting young persons, the

Company is ensuring that the Company has qualified per-

sonnel at an early stage who are familiar with the corporate

structure and also with the relevant entrepreneurial objecti-

ves. The Group is also offering training positions in the com-

mercial and technical sectors in 2006.

EM.TV also enables young motivated people to gain detailed

insights into operating procedures in various departments

within the Company.

6. Personnel Report

Innovation activities are also held in various sectors of the

EM.TV Group.

Television

DSF’s aim is to implement innovative program concepts

and to increase market shares, with the question of TV vie-

wer research being an important component in the afore-

said respect. The subsidiary is a licensed broadcaster of

the “Television Research Working Group (Arbeitsgemein-

schaft Fernsehforschung) which commissions the Company

for Consumer Research (Gesellschaft für Konsumforschung

(GfK)) with ongoing TV viewer research. DSF has all the data

and analysis possibilities of this joint research system there-

fore. DSF’s media research takes account of the special

requirements of a divisional broadcasting station in its

coverage reporting by means of competition analyses detai-

led on a daily basis and interpreted in writing. Special sport

events data banks provide information on coverages and

target groups of the whole supports transmitted on German

television during the last four years.

The combination of classical TV advertising together with

sponsoring and special forms of adverting plays an impor-

tant part in the advertising research conducted by DSF. In

addition to the customary planning tools, such as a”target

group navigator”, DSF not only offers advertising partners

regular tracking of their advertising commitments (cross

media tracking of the German Soccer League and the UEFA

Cup) but also acts as a fundamental study for the complex

response and impact pattern of integrated communication

on the trademark. DSF is also involved in several study

courses in the sponsoring sector which are held every year.

Production services

As part of the production of the sport contents for new

media, PLAZAMEDIA completed production processes in

2005 which have been possible for the first time by HDTV.

With the “Pan & Scan Technology”, the contents for the

relatively small display of a mobile terminal are, on account

of the high resolution, produced in a visibly better quality in

which the optimal picture detail is selected and which can

be zoomed into the picture.

PLAZAMEDIA is developing the “Camera Moving Systems”

together with TV Skyline GmbH from Mainz as its technolo-

gy partner. These are flexible and innovative camera and

high-speed camera tracking systems which are used at

national and international events. The camera family has

had a HDTV-capability since 2005 and is being continually

expanded. TV Skyline’s research and development depart-

ment is developing the innovative camera systems in coope-

ration with the Technical University of Ilmenau. Research

and production is closely oriented to the production require-

ments of the market and PLAZAMEDIA’s TV productions.

50

Management Report

7. Innovation

51

8.1 Risk management

Risks are interpreted as the possibility of unfavourable de-

velopments or circumstances occurring in the future which

are anticipated with a substantial, although not necessarily

overriding, degree of probability. EM.TV assesses and con-

trols risks on the basis of a risk management guideline

which defines the risk management systems of the Group.

The aforesaid guideline applies for all companies in the

Group.

Defined risks are summarized in a quarterly risk report which

consolidates the relevant risks and consolidates the precau-

tionary measures already taken for the Group and lists and

assesses them on an individual basis for each company.

The risk report is discussed in the Management Board and

is presented to the Supervisory Board in its major aspects.

Major individual risks are also noted and reported indepen-

dently of the quarterly procedure.

8.2 Risks in the Sports Segment

Television

The availability of attractive sports rights is of elementary

importance for a sports TV station. With regard to the acqui-

sition of such rights, DSF is in intense competition with other

free-TV stations and increasingly with other content suppliers

such as telecommunication groups, for example. DSF could

therefore be exposed to increased competition in the future

both as far as the purchase of rights is concerned and also

with viewers and the adverting industry. This particularly

applies for soccer transmission rights as by far the most

popular sports in Germany. A similar development also

applies in the long-term for offers in the Internet in the

sports sector.

As is the case with all free-TV stations, the development of

DSF’s sales depends on the development of the advertising

markets in Germany. The TV market is still in an unchanged

tense situation. A radical increase in advertising expenditu-

re cannot be anticipated in the short-term. By means of a

systematic development of new sources of income (e.g. the

development of additional interactive show formats), DSF is

still making efforts to have a balanced sales mix which

restricts its dependency on the classical television adverti-

sing market.

DSF is making itself independent of rights to a certain extent

by means of its own formats. In view of the fact that the

station has been able to secure major rights with some of

them extending well beyond the 2005 report year, the risk

of a short-term increase in license costs is reduced as a re-

sult. An increase in license expenses cannot be ruled out in

the medium-term, however.

The TV market for added-value services is subject to increa-

sing competition and is approaching saturation limits with

viewers. Against this background, it is not certain that DSF

will be able to maintain its strong position in this particular

income sector in the long-term.

For exercising its television activities, DSF is dependent on

limited licenses and permits issued by the German Super-

visory Authorities for private broadcast (Federal Media Insti-

tutions). The Company is assuming that the existing trans-

mission licenses and permits will be extended as in the past

as long as DSF continues to comply with the conditions and

8. Risk and Opportunities Report

impositions in force with regard to the transmission licen-

ses and permits; there is therefore no guarantee that addi-

tional transmission licenses or permits will be issued or that

the current transmission licenses and permits will be exten-

ded or renewed after their expiry.

With the exception of one cable network operator, DSF has

concluded long-term contracts with all other operators for

transfers into the digital and analogue cable network.

Negative effects cannot be excluded if DSF has to secure

access to the digital program platforms, however.

Online

In addition to special interest portals, the main competitors

of Sport1 in the future will be the general interest portals

with their sport rubrics and these will possibly strength com-

petitors’ activities. The establishment of new sport portals

is also not excluded. Sport1 is preparing itself for this com-

petition by means of close cooperation with DSF, e.g. in the

cross media marketing sector.

Production services

The major risk for PLAZAMEDIA and its subsidiary Creation

Club lies in its dependency on the pay-TV provider Premiere.

As a result of the agreement reached in December 2005

between PLAZAMEDIA and Premiere on a new extensive

frame production contract with effect from January 1, 2007

and a term of 3 to 5 years, PLAZAMEDIA has acquired a

planning safeguard for the next few years.

Creation Club and Premiere also concluded an extensive

frame production agreement in December 2005 which has

an outstanding term of three years and may be extended

for a further two years. A negative development of Premiere’s

business holds an inherent risk, however, that both PLAZA-

MEDIA and also Creation Club would have to reckon with

significant sales and earnings impairments. Extending the

customer portfolio is therefore still a strategic objective for

both companies – not least for PLAZAMEDIA by means of

intensified internationalization efforts. This is also the case

in the light of the sustained pricing pressures in Germany.

It has to be generally assumed that competition and pricing

pressures will continue unabated with production services.

Sports betting

In the report year, EM.TV made intense preparations for its

entry into the sport betting and gambling sector which ne-

cessitated corresponding consultancy, planning and develop-

ment costs being incurred. EM.TV is still planning to enter

this particular sector, with this being associated with additio-

nal costs. The sports betting market is still regulated in Ger-

many, however, with the result that an offer of sports betting

is not legally possible as such in Germany. Market experts

and also the Company, are anticipating a speedy liberaliza-

tion of the market but whether and when this will ultimately

take place will depend above all on the ruling of the Federal

Constitution Court which is expected on March 28, 2006.

8.3 Opportunities in the Sports Segment

As a result of its close integration with the Sport1 online

portal, DSF is well prepared to encounter the increasing

competition for attractive sports rights. In addition, the tele-

vision broadcasting station has also succeeded in acquiring

such rights in recent years (inter alia, Sunday games in the

1st and 2nd Soccer League, and extensive rights package

for the UEFA Cup for three seasons as from 2005/2006)

which secures the presence of top-class soccer in DSF in

the coming years and increases the attractiveness of the

station for the classic advertising industry.

PLAZAMEDIA is encountering competition and price pres-

sures in the market for production services by positioning

itself as a premium supplier which offers technologically

innovative solutions. For example, the Company sees itself

as a pioneer in the market with regard to the new television

technology HDTV for which the Company is already able to

52

Management Report

53

depict the whole production chain. The acquisition of Crea-

tion Club (CC) GmbH in the report year extends the creativity

service portfolio of PLAZAMEDIA even further. This good

technological presentation constitutes an opportunity to in-

tensify existing customer relationships and to acquire new

customers.

The market for sports betting has developed very positively

in the last few years in the German speaking area and

offers significant sales and earnings opportunities in the

opinion of the Company. In the event of liberalization, EM.TV

would be in a position to enter the market immediately as a

result of the extensive preparations carried out in 2005 and

would be able to participate with promising market perspec-

tives. With DSF and Sport1, the Group also has two extreme-

ly appropriate advertising platforms for making offers for

sports betting. However, it is not sure that that the volume

of business in the coming years will develop as dynamically

as predicted by market experts.

8.4 Risks in the Entertainment Segment

Program/Production

In the internal and co-production sector, there is a risk that

it will not be possible to re-license programs produced inter-

nally or in co-production to the anticipated extent or whether

they can only be re-licensed to third parties at license pri-

ces which do not cover the relevant costs. The acceptance

of new programs by the public cannot be predicted reliably

either at this stage. In addition, there is already a wide

range of children and youth programs both nationally and

internationally with the result that higher license privacies

can only be obtained on the market for new productions

with difficulty.

The ongoing market environment calls for the application of

stricter investment criteria with productions in order to

ensure the competitiveness of EM.TV. In order to reduce

the producer’s own risk, production costs are being allocated

to several co-producers. The refinancing of a large part of

this investment volume also ought to be secured by future

sales to TV stations or other buyers. In particular, it may be

necessary to vary compliance with the aforesaid criteria on

different levels if EM.TV has entered in delivery obligations

for its own productions.

TV Sales

On the one hand, there is still a surplus of children and

youth programs. On the other hand, it is the buying policy

of TV stations to continue to be cautious in the light of the

stagnating advertising market. This market environment is

also resulting in producers and license dealers frequently

not being able to demand price which are commensurate

with the quality of the programs involved.

From the point of view of the Company, it is not certain that

the advertising income of the TV stations will consistently

increase again in the future and also that the prerequisites

for an increasing demand with regard to children and youth

programs are thereby assured.

EM.TV has carried out several value adjustments to its rights

inventory in the past. It cannot be excluded that future im-

pairment tests will lead to further adjustment to the value

of the program inventory.

In the pay-TV sector, the development of Junior.TV is connec-

ted to the developed of the pay-TV provider Premiere with

which an agreement was reached in August 2004 for an

exclusive distribution in Germany until December 31, 2009.

It also remains to be seen how the future develops and

whether the Junior channel has developed positively in the

report year.

EM.TV is still striving to internationalize its pay-TV activities

in order to reduce its dependency on the German market.

This could give rise to a possible weakening of the pay-TV

market with the result that Junior.TV will not be able to

establish itself abroad as speedily as intended. In the event

of weakness in the German market, it cannot be ruled out

that access to program windows on foreign pay-TV chan-

nels will not be possible either.

Merchandising

Merchandising business is typically very much dependent on

the development of the economy as a whole and the attrac-

tiveness of the themes to be marketed. The market accep-

tance of initially successful themes may change quickly for

the worse with the result that a sustained exploitation can-

not be reliably predicted on account of the short terms of

the merchandising and license agreements in many cases.

Finally, suppliers of merchandising and licensing themes

are dependent on making new, attractive themes available

to an adequate extent in addition to the themes already

acquired. EM.TV is also exposed to the aforesaid risk. In

addition, in the present market situation, merchandising

and licensing business is marked by a noticeable surplus

of license themes in the children’s sector and by the resul-

ting downward turn in price levels.

EM.TV is encountering these risks by positioning itself as a

full service merchandise agent which offers licensees an

extensive package of service and consultancy performances.

It is also intended that a risk reduction will be achieved by

extending the target groups.

8.5 Opportunities in the Entertainment Segment

As one of the world’s leading suppliers of children and youth

programs in the production sector, EM.TV has many years’

of extensive know-how for estimating the market opportuni-

ties of individual productions. In addition, this segment was

strengthen personnel-wise and restructured from an organi-

zational point of view last year. These factors reduce the

risk of incorrect estimates of market opportunities and

enable new attractive programs to be developed and produ-

ced with corresponding marketing opportunities.

In the TV sales sector, EM.TV has a wide range of national

and international frame agreements constituting a good

starting point in the struggle for transmission places for chil-

dren and youth entertainment. Access to one of the largest

libraries across the globe also constitutes a competitive ad-

vantage for supplying whole channels and program windows

with high-class children and youth programs.

The worldwide market for producers and rights dealers in

the children and youth program sector is currently in a con-

solidation phase. In the opinion of market experts, including

the Company, there will be a trend to larger units and there-

by to an elimination of small competitors. In this process,

EM.TV sees an opportunity for playing an active role and

moving out of the consolidation phased strengthened in

the sense of an improvement in its national and internatio-

nal position on the market.

8.6 Financial risks

Default risks

A creditworthiness or default risk exists with the danger

that the liable party in respect of a claim is unable to settle

his or its aforesaid claim. The maximum default risk with

original financial instruments corresponds in theory to the

current value of all claims less liabilities due to the same

liable parties if offsetting can be applied. In the annual

financial statements of EM.TV AG and the EM.TV Group,

identified default risks have been taken into account by

means of appropriate bad debt provisions. In addition, the

Company insures the risk of a default caused by the insol-

vency of a debtor by means of an insurance of accounts

receivable to a very large extent.

54

Management Report

55

Currency risks

A currency risk exists in particular if accounts receivable or

payable are stated in a currency which is different from the

underlying currency used for the annual financial state-

ments. Exchange rate fluctuations can then change the cur-

rent value of the relevant Euro currency used in the annual

financial statements. The exchange rate of the US Dollar/

Euro is important for the Group in this respect. In order to

reduce exchange rate risks associated with its business

activities, the Group concluded currency hedging transac-

tions with the US-Dollar relating to future payment flows. In

view of the fact that the development of the US Dollar in

terms of the Euro cannot be predicted, additional effects

on earnings may also arise in future in the aforesaid

respect.

Liquidity risks

A liquidity risk may also arise if the payment obligations of

the Group cannot be covered by existing liquidity or corre-

sponding credit lines. On the balance sheet date, the EM.TV

Group had adequate liquidity reserves on the 2005 balance

sheet date.

The EM.TV Group could be forced in the medium or long-

term to refinance its existing financial liabilities or to finance

its growth by taking up external capital in the capital market

or through banks. It is, as yet, not certain that the aforesaid

financing resources will be available on market conditions

or whether they will be available at all.

Interest risk

The Company is only exposed to interest fluctuations to a

minor extent. These interest fluctuations relate to liquid

funds, bank liabilities, convertible bond and bond with war-

rants attached which are sensitive to interest rate move-

ments. No interest hedging contracts have been concluded

in view of the fact that the Company only has minor finan-

cial instruments subject to variable interest rates.

8.7 Risks in connection with legal proceedings

Compensation claims and shareholders’ lawsuits

140 lawsuits and 21 payment orders together with a whole

series of claim letters have been received by EM.TV &

Merchandising AG and EM.TV AG. The total damage

amount currently stands at around EUR 13 million.

A petition has also been submitted for approval of litigation

cost assistance at the “ORA”, the Public Legal Information

and Conciliation Office of the Free Hanseatic City of

Hamburg, and four petitions were submitted for executing

reconciliation proceedings. The claims were enforced by

means of a complaint after conciliation proceedings had

broken down. The claims in question were based on diffe-

rent legal reasons and circumstances. The background was

the fall in the value of the EM.TV share.

All rulings to date (63 in the first instance and 28 in the

second instance) have been issued in favour of EM.TV.

Approximately 50 rulings are now legally binding. A large

number of claimants have withdrawn their claims prior to a

judicial ruling being issued.

One petitioner submitted a petition for a ruling on a number

of facts and legal matters based on the new Capital Investor

Specimen Protection Act (KapMuG). It is possible that such

specimen proceedings will be conducted on certain matters

with a possible consequence of a binding effect for other

proceedings.

It cannot be excluded that Plaintiffs will succeed in indivi-

dual cases with the documentation of causality and that a

favourable ruling will be issued. If this is the case, the Com-

pany will enforce any recourse claims against the former

board members of the Company.

Substantial legal costs will be incurred in certain cases for

various active and passive litigation processes being con-

ducted by the Company (approximately EUR 1.3 million)

which cannot be settled in the event of defeat.

8.8 Opportunities in legal proceedings

Liability proceedings against former board members

On October 13, 2004, EM.TV AG opened judicial proceedings

against former board members at the Munich I Regional

Court in connection with the purchase of the Formula 1

participation in 2000. Action was also brought for judge-

ment that the former board members are obliged to indem-

nify EM.TV AG against claims lodged by the German Morgan

Grenfell Group. In addition to the aforesaid proceedings

which are already known, the Company also lodged an ad-

ditional claim in the Munich I Regional Court in August 2005

against a number of former members of the Management

and Supervisory Boards for possible breaches of duty in

connection with TheatroCentro GmbH, the acquisition of

participations in Tabaluga GmbH and a large donation to a

charitable organization.

In September 2005, EM.TV also initiated three additional

proceedings for breaches of duty by former board members

and is continuing the aforesaid on account of the fact that,

in the opinion of the Company, the necessary approvals of

the corresponding bodies had not been obtained in respect

of various co-productions and license contracts and the

respective economic bases had not been sufficiently deter-

mined when a decision was made.

The Company estimates its prospects of success as good

in all the aforesaid proceedings.

8.9 Tax risks

EM.TV AG undertook to sell its indirect holding in Tele-

München Gruppe as an integral part of the restructuring

carried out in 2004. EM.TV Beteiligungs GmbH & Co, KG, a

subsidiary of EM.TV AG, sold its shares in Tele München

Gruppe at the end of 2004. This transaction did not give

rise to a direct tax charge for EM.TV AG but it cannot be ex-

cluded that the disposal had indirect implications on the

restructuring gain. This, in turn would have implications for

the tax situation of EM.TV AG after the restructuring. As the

relevant risk, there could be a tax charge of approximately

EUR 13 million for EM.TV AG in the aforesaid respect.

In connection with the restructuring, various companies in

which EM.TV AG held more than 50 percent of the shares

were restructured within the Group. If new assets are mainly

acquired by these companies in the next five years, the tax

loss carry-forward existing at the time of the transfer of

shares would be lost.

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Management Report

57

On January 11, 2006, the Company announced that

EM.Entertainment GmbH had acquired the remaining 50

percent in Yoram Gross-EM.TV PTY Ltd.. EM.Entertainment

now owns 100 percent of the Australian production Group,

including a participation of 45 percent in Yoram Gross

Productions, a production unit forming part of the Group in

which the founders still retain a majority holding.

On February 14, 2006, DSF and Premiere agreed on a stra-

tegic co-operation extending over a period of three years.

Under the “Champions TV” brand name, Premiere is to pre-

sent a European top soccer game in the UEFA Champions

League live and unencrypted in DSF on every playing day

with effect from the 2006/2007 season. “Champions-TV”

selected matches of all the German teams and highlights

of additional games will be shown on the 13 playing days.

“Champions TV” which was developed in consultation with

UEFA is produced by Premiere.

As a result of this agreement, no significant effects are to

be expected on the sales and earnings of DSF. An increase

in the market share and a strengthening of if its position as

the “Soccer channel” is anticipated, however.

On March 3, 2006, PLAZAMEDIA and Arena Sport Rechte

und Marketing GmbH (hereinafter referred to as “Arena”)

agreed on an extensive cooperation on March 3, 2006. The

agreement envisages that PLAZAMEDIA will exclusively

assume the whole technical production of the live reporting

of the games of the DFL Premier German Soccer League

and the Second Soccer League for the 2006/2007,

2007/2008 and 2008/2009 seasons. The transaction

volume will depend on the program project planned by

Arena and will probably be in the mid-double-digit-million-

Euro range over the whole period, but at least in the lower-

double-digit-million-Euro range.

9. Occurrences after the End of the Fiscal Year

10.1 Economic environment

Economic experts are assuming that the robust develop-

ment of the world economy will also continue in 2006. The

Asiatic threshold companies India and China and also, as

in the past, the USA and increasingly also Japan are regar-

ded as motors of the world economy. The forecasts for the

Euro zone are concurringly and reservedly optimistic. For

example, the OECD is anticipating a growth rate in the BIP

of 2.1 percent. A slight upward turn in the development of

the economy is also anticipated for Germany whereby a

slight increase in private spending is considered possible

(Sources: Economic forecasts for 2006, BZ Bank/F.A.Z.

Institute, November 18, 2005; OECD Prospects, 29.

November 2005).

10. Forecast Report

10.2 Sectoral environment

An upturn in the TV advertising market is generally not anti-

cipated in 2006. Even though the first reservations at the

beginning of the year were above those of the previous year,

a generally stagnating development is assumed. Impulses

may emanate from major events, however, especially the

FIFA WM 2006™ (Sources: GfK Advertising Climate, OMG

Summer Monitor 2005, OMW).

10.3 Strategic priorities

The Company’s strategic priorities for 2006 will be concen-

trated on developing the Sports sector and also strengthe-

ning the Entertainment sector

.

As part of the new issue of transmission rights for the 1st

and 2nd Soccer League, a main aspect in the Sports sector

will be directed to increasing the customer portfolio of

PLAZAMEDIA. Another objective is to develop the brand sta-

tus of Sport1 further against the background of the 2006

FIFA World Cup™. For DSF and Sport1, a major step in the

realization of advertising income will be in the betting and

gambling sector.

The start of new productions is of major importance in the

Entertainment sector. Efforts will simultaneously be made

to increase the exploitation scope, especially in the mobile

sector. The anticipated consolidation in the Entertainment

sector will be an opportunity for value-increasing M&A acti-

vities, ideally in combination with access to Anglo-Saxon

markets.

From the point of view of the Holding company, a refinan-

cing of the Group until 2007 is also under consideration.

10.4 Forecast and prospects

The EM.TV Group regards itself to be excellently positioned

especially in view of the latest changes in the sports environ-

ment in Germany. The appearance of new and strong mar-

ket participants in the pay-TV sector is making it possible

for the Group to establish new customer relationships and

to enter into new strategic partnerships. Digitalization and

the increased offering of videos/motion pictures over the

Internet is having an effect in the same direction. As far as

EM.TV is concerned, perspectives are opening in the medi-

um-term of becoming a producer or becoming a major sup-

plier of sports content in particular, with focus on soccer,

for end-customer oriented distribution networks (cable,

satellite and broad band Internet). This perspective allows

growth in sales and earnings, as well as a reduction in the

volatility of sales in view of the lower dependency on adver-

tising and a broader customer basis.

For the 2006 financial year, the Management Board is anti-

cipating an increase in Group sales of approximately 10 per-

cent. Group earnings targets are not being specified at this

moment, as possible negative contributions to earnings

cannot yet be quantified, among others, in connection with

new business activities (especially regarding sports betting).

However, it is already forseeable, that the results of our

main operational units will show positive development.

Unterföhring, March 17, 2006

The Management Board

Werner E. Klatten, Chairman

Rainer Hüther, Member of the Board

Dr. Andreas Pres, Member of the Board

58

Management Report

59

60

EM.TV intends to generate a sustained rate of return for its investorsand will be a transparent, cost-efficient and generally responsibility-conscious partner in dealings with them.

61

62

Content

63

Consolidated Financial Statements

64 Consolidated Balance Sheet66 Consolidated Profit and Loss Account67 Consolidated Cash Flow Statements68 Changes in Consolidated Equity69 Notes on the Consolidated Financial Statements69 General Explanations76 Accounting and Valuation Principles81 Explanations on Individual Items in the Balance Sheet96 Explanations on Items in the Profit and Loss Account

102 Explanations on Individual Items in the Cash-Flow Statement

103 Segment Reporting106 Contingent Liabilities and Other Financial Commitments107 Occurences after the End of the Fiscal Year108 Other Mandatory Disclosures108 Other Explanations and Disclosures111 Auditors’ Report

Annual Financial Statements EM.TV AG

114 Balance Sheet116 Profit and Loss Account

Note

3.1

3.2

3.3

3.3

3.3

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.10

31/12/2005

89,832

54,508

1,285

7,806

4,026

790

5,253

328

9,021

6,069

178,918

72

68,650

2,827

19,886

45,806

137,241

316,159

31/12/2004

94,056

8,906

1,617

3,965

1,702

73

2,768

322

12,761

4,895

131,065

66

46,991

4,346

138,194

105,961

295,558

426,623

ASSETS AT DECEMBER 31, 2005 in EUR ‘000

Non-current assets

Intangible assets

Goodwill

Land, property rights and buildings

Technical equipment and machinery

Other equipment, factory and office equipment

Advance payments and assets under construction

Investments in associated companies

Other investments

Long-term receivables

Deferred tax assets

Current assets

Finished goods and merchandise/work in progress

Trade receivables

Receivables due from associated companies

Other assets

Cash and cash equivalents

64

Consolidated Financial Statements I Balance Sheet

31/12/2004

65,617

-17,317

983

100,631

33

-142,268

134,331

11,090

153,100

3,100

181,935

0

7,316

192,351

30

0

3,100

18,759

1,675

36,511

16,871

4,226

81,172

426,623

31/12/2005

66,601

-16,726

3,274

101,600

316

-7,937

229

6,242

153,599

1,763

64,549

210

8,966

75,488

30

5,577

3,353

17,516

1,386

44,106

9,837

5,267

87,072

316,159

Note

3.11

3.11

3.11

3.11

3.11

3.11

3.20

3.13

3.14

3.15

3.16

3.17

3.18

3.18

3.19

3.20

EQUITY/LIABILITIES AT DECEMBER 31, 2005 in EUR ‘000

Equity

Subscribed capital

Own shares

Contributions made to execute the resolved captial increase

Capital reserves

Other reserves

Accumulated losses carried forward

Shareholders’ interests

Minority interests

Long-term liabilities

Long-term accruals

Long-term financial liabilities

Pension accruals

Deferred tax liabilities

Short-term liabilities

Bonds

Liabilities to banks

Advance payments

Trade accounts payable

Liabilities due to joint ventures

Other liabilities

Other accruals

Tax accruals

65

1/1 to31/12/2004

206,619

1,152

207,771

76,847

-40,987

-76,951

-117,938

-41,503

-6,739

-48,242

-22,519

-22,519

-45,326

50,593

-216

5,010

-2,925

-4,363

-2,278

94,366

142,465

-2,975

-1,182

-4,157

138,308

-3,977

134,331

3.22

2.96

1/1 to31/12/2005

209,495

569

210,064

22,413

-44,647

-69,312

-113,959

-43,328

-6,857

-50,185

-15,548

-15,548

-47,093

5,692

-16

2,685

-11

-7,565

-4,891

0

785

-1,335

1,625

290

1,075

-846

229

0.00

0.00

JANUARY 1 TO DECEMBER 31, 2005 in EUR ‘000

Sales

Own work capitalized

Total output

Other operating income

Expenses for licenses, comissions and materials

Expenses for outside services

Cost of materials

Salaries

Social security and pension costs

Personnel expenses

Amortization of intangible assets and depreciation of tangible fixed assets

Amortization and depreciation

Other operating expenses

Earnings before interest and taxes

Earnings from investments in associated companies

Interest and similar income

Write-downs of financial assets and marketable securities

Interest and similar expenses

Financial result

Restructuring gain

Earnings before taxes

Taxes on income

Deferred taxes

Taxes

Earnings after taxes

thereof minority interests

Shareholders’ interests

Shareholders’ interests for the year per share undiluted in Euro

Shareholders’ interests for the year per share diluted in Euro

Note

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

4.14

Consolidated Financial Statements I Consolidated Profit and Loss Account

66

Consolidated Financial Statements I Consolidated Cash Flow Statements

67

1/1 to31/12/2004

134,331

3,977

1,224

2,975

-647

216

-94,366

9,151

15,834

-520

-44,197

16,103

-21,473

-198

4,749

-969

0

26,190

-1,828

-13,613

-4,659

-71

620

106

89

-19,356

67,220

1,054

-3

0

-18,853

4,684

-13,118

60,936

47,573

105,961

-2,548

60,936

1/1 to31/12/2005

229

846

-1,638

1,335

4,880

16

0

2,326

15,558

-47

-5,735

-9,834

-9,928

-4,215

2,333

-401

243

-4,032

-49,772

-4,597

-7,737

-2,511

5

81

118,000

53,469

0

4,833

0

160

-124,986

4,200

-115,793

-66,356

105,961

40,229

624

-66,356

JANUARY 1 TO DECEMBER 31, 2005 in EUR ‘000

Shareholders’ interests

Minority interests

Deferred taxes

Taxes on income

Net interest expenses

Income from associated companies

Restructuring gain

Cost of materials through use of fixed assets disposal

Amortization depreciation of fixed assets

Losses on disposal of fixed assets

Other non-cash items

Changes in inventories, trade receivables and other assetswhich are not allocable to investment or financing activities

Changes in trade payables and other liability which are not allocable to investment or financing activities

Paid interests

Received interests

Paid taxes on income

Received taxes on income

Cash flow from operating activities

Payments for acquisition of companies

Payments for intangible assets

Payments for tangible assets

Payments for financial assets

Proceeds from disposals of intangible assets

Proceeds from disposals of tangible assets

Proceeds from disposals of financial assets

Cash flow from investment activities

Cash flow form changes in liquid funds through deconsolidation

Proceeds from capital increases and allowances by shareholders

Dividends paid

Proceeds from minority interests

Repayment of long-tem liabilities

Proceeds from receipt of long-term liabilities

Cash flow from financing activities

Cash flow for the year

Net funds at the beginning of the year

Net funds at the end of the year

Effects of foreign currency differences

Changes in net funds

Note

5.2

5.1

68

Consolidated Financial Statements I Changes in Consolidated Equity

JANUARY 1 TO DECEMBER 31, 2005 in EUR ‘000

Balance 1/1/2004

Reclassification of earnings brought forward from the previous year

Withdrawl from special reservefor payment of convertible loan

Employee shared-based payment

Cash increase from convertible bonds

Withdrawl from capital reserve for end of conersion right for the convertible bond

Capital reduction as a result of the merger (73:10)

Capital increase from issueing of shares to the former bondholders

Creation of own shares

capital increase from bonds

Capital increase from options

Offsetting of capital reserves with accumulated losses carried forward

Changes in consolidated enities

Adjustments on equity

Currency conversion differences

Dividends paid

Net profit for the year

Balance 31/12/2004

Reclassification of earnings brought forward from the previous year

Cash increase from convertible bonds

Capital increase from convertible loans

Capital increase from options

Employee shared-based payment

Changes in consolidated enities

Currency conversion differences

Acquisition of minority interests

Net profit of the year

Balance 31/12/2005

Resolved capital

increase

0

983

983

-983

3,274

3,274

Total

-17,552

0

0

57

17

0

0

28,265

0

3,184

1,054

0

-2

-84

-144

-3

138,308

153,100

0

0

3,274

1,560

65

184

218

-5,878

1,075

153,599

Subscribedcapital

146,054

17

-126,062

28,265

17,343

65,617

983

66,601

Capitalreserves

1,968,527

-28,660

126,062

3,184

45

-1,968,527

100,631

969

101,600

Otherreserves

651

-24

57

-507

-144

33

65

218

316

Accumulatedlosses carried

forward

-2,010,021

-129,965

24

28,660

507

1,968,527

-142,268

134,331

-7,937

Share-holders’

interests

-129,965

129,965

134,331

134,331

-134,331

229

229

OwnShares

0

-17,343

26

-17,317

591

-16,726

Minorityinterests

7,202

-2

-84

-3

3,977

11,090

184

-5,878

846

6,242

1.1 General information on the Group

As the group parent company, EM.TV AG has its registered

office in Beta-Straße 11, Unterföhring near Munich,

Germany.

The business activities of the Group include the following

segments:

Sports segment

This Segment includes coverage of the whole medial

added-value chain in the sports sector, commencing with

the original license right for the production and implemen-

tation of the respective contents and extending to distribu-

tion through its own TV and online platform.

Entertainment segment

This Segment includes the sale of television and home-video

rights and rights to sound carriers and music production,

including merchandising, promotion and also the producti-

on and co-production of film and television contributions.

The consolidated financial statements are presented in

EUR which is the functional and reporting currency of the

Company. The individual amounts are basically in thousand

Euro (TEUR) unless stated otherwise.

Consolidated companies have drawn up their annual finan-

cial statements at December 31, 2005 with the exception

of Yoram Gross-EM.TV PTY Ltd., Sydney, Australia with a fis-

cal year ending on June 30, 2006. In the case of Yoram

Gross-EM.TV PTY Ltd., interim financial statements were

drawn up on the consolidated balance sheet date in order

to make an appropriate period allocation.

1.2 Accounting

Application of IFRS regulations

The consolidated financial statements of EM.TV AG have

been drawn up in accordance with § 315a, para. 1 of the

German Commercial Code in compliance with International

Reporting Standards (IFRS) as they are to be applied in the

EU, together with the supplementary commercial law regula-

tions which have to be applied. All IFRS/IAS and SIC/IFRIC

regulations which had to be applied on December 31,

2005 have been duly observed.

A schedule of the subsidaries and joint venture companies

included in the consolidated financial statements is provi-

ded in these Notes. The effects of the initial consolidation

of subsidaries and joint venture companies is shown in the

section “Details of the companies consolidated”.

The profit and loss account has been prepared using the

cost summary method.

The annual and interim financial statements of the compa-

nies included in the consolidated financial statements are

based on the uniform accounting and valuation methods

corresponding to the individual activities.

The preparation of the consolidated financial statements

necessitates estimates and assumptions to be made which

affect the value of assets, liabilities and financial obliga-

tions on the balance sheet date and also income and expen-

ses in the report year. Further details on the bases of esti-

mates are to be found under the individual balance sheet

items with separate explanations.

69

1. General Explanations

Consolidated Financial Statements I Notes

In the report year, the Company has applied IFRS 2 “Share-

based compensation” for the first time. The comparative

figures for the previous year have been adjusted in compli-

ance with IFRS 2, No. 55, According to IFRS 2, No. 53, all

options granted after November 7, 2002 and not exercised

as at January 1, 2005 have been included in the valuation.

The effects of the first-time application are shown under

Section 2.8.

A premature application of IFRS 7 has been waived, namely

”Financial Instruments: Disclosures” (obligatory as from

January 1, 2007), IFRS 6 ”Exploration for and evaluation of

Mineral Resources” (obligatory as from January 1, 2006),

changes in IAS 39 (Option right of valuing at the attributable

market value) (obligatory as from January 1, 2006), IAS 19

(Actuarial profits and losses, group plans and disclosure

information in the Notes) (obligatory as from January 1,

2006) and IFRIC 4,5 and 6 (obligatory as from January 1,

2006). The application of the aforesaid regulations will pro-

bably give rise to no changes in accounting procedures

with the exception of the change in IAS 39. The change in

IAS 39 will result in financial instruments previously classi-

fied as “available-for-sale financial assets” having to be

reclassified as, inter alia, “at fair value through profit and

loss” and their value fluctuation having to be shown under

equity instead of in the profit and loss account.

Explanations on the major differences between the IFRS

and German Commercial Code

Internally produced intangible assets, especially film and

merchandising rights (production and development), have

been capitalized at cost in these IFRS consolidated financi-

al statements insofar as the prerequisites of IAS 38 are met.

Capitalization is not permitted under the HGB ("Handels-

gesetzbuch": German Commercial Code), however.

Derivative goodwill („Goodwill“) is, in accordance with IFRS 3,

not being amortized at the standard rate. Any amortization

requirement is established annually instead by means of an

appropriate impairment test. According to the HGB, acquired

goodwill has to be spread over the estimated useful life

and has to be amortized in the following years in at least

four instalments. Any negative goodwill arising on consolida-

tion (“Badwill“) has to be written off against earnings im-

mediately in accordance with IFRS 3. According to the

HGB, a release may only be made with a net income effect

if the occurrence justifying the lower purchase price occurs

or if it is clear that the deferred differences corresponds

with a realized gain on the balance sheet date.

Convertible bonds are shown under equity and debt based

on IAS 32. These allocations are also reduced by the attri-

butable issue costs. According to the HGB, it is not allowed

to deduct issue costs and, in order to account for the obli-

gation at the relevant repayment amount, equity capital

share is increased by a discount which is recorded off in

instalments over the term of the debt in question or is

immediately released as income.

In accordance with IFRS 2 “Share-based payment”, options

on the purchase of shares of the issuing company to

employees and members of the executive boards are to be

stated at their fair value on the issue date. The amount

determined in this way is to be allocated over the option

period and included as a personnel expense. A separate

item is to be simultaneously established under equity in

the same amount.

According to the HGB, issued options are to be valued at

their intrinsic value on the balance sheet date and the dif-

ferent between the aforesaid valuation and the intrinsic

value at the commencement of the period is to be recor-

ded as an expense and a accrual. The intrinsic value on

the balance sheet date may deviate significantly from the

option value on the date of the issue.

70

Consolidated Financial Statements I Notes

1.3 Information on the companies included in the conso-

lidated financial statements

71

SUBSIDIARIES (fully consolidated) in %

ACC-Agentur für Communication und Concept Gesellschaft für Public Relation GmbH, Unterföhring

Creation Club (CC) GmbH, Unterföhring

DSF Deutsches SportFernsehen GmbH, Ismaning

EM.Entertainment GmbH, Unterföhring

EM.Sport GmbH, Unterföhring

EM.TV Sport Management GmbH

EM Supply Handelsgesellschaft mbH i.L., Unterföhring

EM.TV France S.A.S., Paris, France

EM.TV Musikverlag GmbH, Unterföhring

EM.TV Publishing GmbH, Unterföhring

EM.TV USA Inc., New York, USA

EM.TV Verwaltungs GmbH, Unterföhring

EM.TV & Wavery B.V. Rijswijk, Netherlands

EM.TV Beteiligungs GmbH & Co. KG, Unterföhring

EM-VA Film und TV-Produktions GmbH, Unterföhring

Haffa Inc., Hermosa Beach, USA

Junior Produktions GmbH, Unterföhring

Junior.TV GmbH & Co. KG, Unterföhring

Junior.TV Verwaltungs GmbH, Unterföhring

MUC Media GmbH, Munich

OM Oktoberfest München, Merchandising, Film und Fernseh GmbH i.L., Unterföhring

PLAZAMEDIA GmbH TV- und Film-Produktion, Ismaning

PMM Sports Production GmbH, Ismaning

Produktions-GbR Castillo II, Unterföhring

Produktions-GbR Cocco Bill, Unterföhring

Produktions-GbR Nick & Perry, Unterföhring

Produktions-GbR Tabaluga II, Unterföhring

Produktions-GbR The World of Tosh, Unterföhring

Sport Media Holding GmbH, Unterföhring

Sport1 GmbH, Ismaning

Sport1 Multimedia GmbH, Vienna, Austria

Tabaluga Film- und Fernsehproduktion GmbH, Unterföhring

Capitalholding

100

100

100

100

100

0

100

100

100

100

100

100

100

100

100

100

100

100

100

60

100

100

85

66.5

60

90

65

75

100

100

100

100

Period included in the con-solidated financial statements

1/1 to 31/12/2005

31/12 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

not included

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

not included

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

22/12 to 31/12/2005

not included

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

72

Consolidated Financial Statements I Notes

ASSOCIATED COMPANIES in %

Planeta Junior S.L., Barcelona, Spain

Planeta Junior s.r.I., Milan, Italy

Tabaluga Coproduktions GbR, Unterföhring

Trackdown Digital Pty. Limited, Sydney, Australia

arena media GmbH, Munich

Capitalholding

33.33

33.33

66.7

21

25

Period included in the con-solidated financial statements

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

12/7 to 31/12/2005

Joint Ventures Companies

The following joint venture companies are included in the

consolidated financial statements on the basis of a propor-

tionate consolidation.

Balance effects attributable to joint ventures

Proportional profit and loss account amounts attributa-

ble to joint ventures

JOINT VENTURE COMPANIES in %

Produktions-GbR Fairy Tale Police Department, Unterföhring

Produktions-GbR Flipper + Lopaka 2, Unterföhring

Yoram Gross-EM.TV PTY Ltd., Sydney, Australia

Capitalholding

50

50

50

Period included in the con-solidated financial statements

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to 31/12/2005

1/1 to31/12/2005

3,465

260

-1,053

-1,213

-1,313

-465

70

16

-233

1/1 to31/12/2004

8,454

960

-8,820

-1,707

-3,151

-4,654

246

-82

-8,754

PROFIT AND LOSS ACCOUNT, JOINT VENTURES in EUR ‘000

Total output

Other operating income

Cost of material

Personnel expenses

Amortization and depreciation

Other operating expenses

Financial result

Tax income/expenses

ASSETS, JOINT VENTURES in EUR ‘000

Non-current assets

Current assets

31/12/2005

4,044

2,332

31/12/2004

3,852

1,857

LIABILITIES, JOINT VENTURES in EUR ‘000

Long-term liabilities

Short-term liabilities

31/12/2005

1,104

1,140

31/12/2004

1,052

830

73

Associated companies

The associated companies are included in the consolida-

ted financial statements „at equity“.

A detailed presentation of the assets, liabilities, income

and the period results of the associated companies is to

be found under No. 3.4.

Tabaluga Coproduktions GbR, Unterföhring

The Articles of Association of Tabaluga Coproduktions GbR

provide that all important business decisions are to be

made with a qualified majority (75 percent). EM.TV is not in

a position to exercise control therefore. A proportionate or

full consolidation is not possible, therefore. The participati-

on is included “at equity” even though nominally EM.TV

holds a majority share.

The following changes were made in the companies

included in the consolidated financial statements in

2005:

First consolidation

EM.TV Sport Management GmbH, Ismaning

This company was included in the consolidated financial

statements with effect from January 1, 2005. EM.TV AG

has an option to acquire 90 percent of the shares and

voting rights which is exercisable at any time. This is a

potential voting right within the meaning of IAS 27.14. No

purchase price has been paid. The company develops new

business models in the sports sector. The share capital

amounts to EUR 25,000.

MUC Media GmbH, Munich

PLAZAMEDIA GmbH TV- und Film-Produktion, a wholly-

owned subsidiary, acquired all the shares in MUC Media

GmbH with an agreement dated December 22, 2005. EUR

25,000 was paid in cash as the purchase price. The com-

pany’s business is concerned with the production and pro-

cessing of TV-productions.

The share capital is EUR 25,000. A capital increase of EUR

75,000 to EUR 100,000 was made by issuing two new

shares in the company, with PLAZAMEDIA GmbH TV- und

Film-Produktion’s holding being reduced to 60 percent as a

result. As part of this capital contribution, additional EUR

284,000 were paid in cash into the capital reserve.

arena media GmbH, Munich

PLAZAMEDIA GmbH TV- und Film-Produktion, a wholly-

owned subsidiary, acquired a 33.33 percent interest in

arena media GmbH with effect from July 12, 2005. The

capital contribution amounted to EUR 2,500,000 and was

paid in cash. The share capital was increased from TEUR

50 to TEUR 75 at the time of the capital contribution. This

company operates an interactive auction channel. With

effect from September 27, 2005, PLAZAMEDIA’s share was

reduced to 25 percent as a result of a capital increase to

EUR 100,000 and the entry of an additional shareholder.

Creation Club (CC) GmbH, Munich

PLAZAMEDIA GmbH TV- und Film-Produktion, a wholly-

owned subsidiary, acquired all the shares in Creation Club

(CC) GmbH with effect from December 31, 2005 for an

amount of EUR 16,433,926. The purchase price was or will

be paid in cash. The company provides services in the “On

Air Design” and “On Air Promotion” sectors. The share capi-

tal amounts to EUR 25,000.

If Creation Club (CC) GmbH had been included in the con-

solidated financial statements as at January 1, 2005, this

would have had the following effects on the sales and ear-

nings of the Group.

As part of the purchase price allocation, long-term custo-

mer contracts of Creation Club (CC) GmbH were capitalized

in the amount of TEUR 5,271 and which will be written-off

over the contract term. The capitalization was made on the

basis of a five-year earnings plan. No further capitalizable

intangible assets were identified. The book values of the

remaining balance sheet items correspond with their cur-

rent fair values to a very large extent.

The additional price representing the goodwill can be justi-

fied on the strength of the positive operational prospects,

existing synergies between the product range of PLAZAME-

DIA GmbH TV- und Film- Produktion and the services of

Creation Club (CC) GmbH. Better and new customers can

also be acquired for Creation Club (CC) GmbH with the help

of PLAZAMEDIA GmbH TV- und Film-Produktion.

The assets and liabilities assumed are shown in detail for

each balance sheet item in the cash-flow notes (Section

5.2)

No purchase price allocations have been made with MUC

Media GmbH and EM.TV Sport Management GmbH as

there were no hidden reserves or liabilities.

All other companies were new foundations or only com-

menced their business activities after forming part of the

EM.TV Group. Their inclusion on the consolidated financial

statements at the beginning of the report year would have

no effect on the sales and earnings of the Group therefore.

EFFECTS OF FIRST CONSOLIDATIONS in EUR ‘000

Subsidiaries (fully consolidated)

EM.TV Sportmanagement GmbH

Creation Club (CC) GmbH

MUC Media GmbH

Associated companies (at equity)

arena media GmbH

Earnings after tax

-1,055

0

-1

-344

Current assets

1,461

2,068

121

0

Non currentassets

1,486

19,357

521

2,156

Long-term liabilities

0

2,186

0

0

Short-term liabilities

181

2,805

74

0

Sales

0

0

0

0

74

Consolidated Financial Statements I Notes

EFFECTS ON SALES AND EARNINGS in EUR ‘000

1/1 to 31/12/2005 (fully consolidated)

Creation Club (CC) GmbH

Sales

18,266

Earnings after tax

395

Business combination after December 31, 2005

Yoram Gross-EM.TV Pty Ltd., Sydney, Australia

With effect from January 11, 2006, EM.Entertainment

GmbH, a wholly-owned subsidiary of EM.TV AG, acquired

the second 50 percent of the joint venture company

Yoram Gross-EM.TV PTY. The purchase price amounted to

TEUR 4,674. The seller was the previous partner Yoram

Gross Holdings.

75

The company will be included in the consolidated financial

statements by means of a full consolidation with effect from

the aforesaid date (to date on a pro rata basis).

TEUR 623 of the purchase price is allocated to hidden reserves

in the existing film assets, TEUR 623 to a new technical deve-

lopment in the interactive games sector and TEUR 156 to the

investment book value in Trackdown Digital Pty. Ltd. There are

no other detectable potentials or risks which have to be inclu-

ded in the company’s financial statements. The balance repre-

sents the acquisition goodwill.

The aforesaid goodwill is justified by better using the poten-

tials and synergies that it was previously the case as a joint

venture company and on account of the positive business pro-

spects for the company and its subsidiaries.

Information on the assets and liabilities to be assumed and

the exact amount of the goodwill cannot be made at this

stage in view of the absence of available financial statements

on the acquisition date.

Consolidation methods

All major subsidiaries for which EM.TV AG has the possibility

of controlling are included in full in the consolidated financial

statements. The consolidation of joint venture companies is

carried out on a pro rata basis, i.e. assets values and liabili-

ties together with items of income and expenditure are inclu-

ded in the consolidated financial statements in line with the

respective investment ratio. Holdings in associated compa-

nies are valued on the equity method.

The capital consolidation – consolidation of inter-company

shareholdings – is carried out in accordance with IFRS 3 by

setting off the investment book values against the proportio-

nate newly valued pro rata equity of the subsidiaries at the

time of their acquisition. For this purpose, assets and liabili-

ties are stated at their fair value. The remaining differences

are capitalised as goodwill. Any resulting impairment require-

ment is recorded as an expense with a net income effect. Any

credit balance difference arising upon consolidation is shown

in full as an income component in the year in which the afore-

said credit balance occurs.

Investments which are recorded in the Group on the equity

method are stated at their acquisition cost at the time of

acquisition. Any identified goodwill is recorded in the invest-

ment valuation and is not taken into account as independent

goodwill. The earnings of the companies are taken over by the

Group and are added to the investment book value.

Companies which leave the consolidation group in view of the

fact that they can no longer be controlled cease to be consoli-

dated in full in accordance with IAS 27. The date of the subsi-

diary’s departure from the group is regarded as the deconsoli-

dated date. The deconsolidation is treated in this connection

as a disposal of all assets and liabilities attributable to the

subsidiary, in-cluding goodwill and debts. The income and

expenses accruing up to the aforesaid date are included in

the consolidated financial statements.

The effects of inter-company transactions have been elimina-

ted. Receivables and liabilities due to or from fully consolidated

companies are set off against each other and existing differen-

ces are eliminated by a transfer to operations. Inter-company

profits are eliminated if they are material. Intercompany income

is set off against the corresponding expense.

Consolidated Financial Statements I Notes

76

1.4 Foreign currency conversions

The balance sheets of foreign group companies are conver-

ted in accordance with the functional currency at the mid-

rates on the balance sheet date, the profit and loss

account being converted at the annual average rates and

equity at historic rates. The resulting foreign currency con-

version differences and differences arising from the con-

version of the previous year’s figures are included under

equity capital with no effect on earnings.

Foreign currency items which are valued during the year on

the date of the relevant transaction are basically converted

at the year-end rate in the financial statements of the indi-

vidual group companies, with the resulting foreign currency

differences being shown directly in earnings.

The exchange rates of the consolidation currencies in

terms of the EUR have changed as follows:

The basis of the rate on the balance sheet date is the offi-

cial mid-rate on the last trading day in the respective finan-

cial year.

EXCHANGE RATE TO EURO: 1 EUR

Closing rate

2005

2004

Average rate

2005

2004

Australia – AUD

1.61090

1.74849

1.63060

1.68668

USA – USD

1.17970

1.36040

1.24539

1.24386

2. Accounting and Valuation Principles

2.1 Intangible assets

These are mainly film rights, merchandising rights and soft-

ware programs and intangible assets identified during the

course of purchase price allocations, e.g. customer relati-

onships, which are valued at acquisition cost less standard

straightline and impairment depreciation/amortization and

utilization-related disposals. We refer in this respect to our

comments in the section on “Profit Realization Principles”.

Amortization is determined on the basis on the contrac-

tually agreed term (film rights, merchandising rights and

customer relationships) or the normal useful service life of

three years (software programs). Film rights are subject to

impairment amortization in individual cases. Film and mer-

chandising rights with an unlimited useful life are not amor-

tized on a standard basis in accordance with IAS 38 but

are subject to an examination of their value every year

(further explanations under Section 2.13).

Production costs for licenses are capitalized upon completi-

on and are written off in accordance with the same stan-

dards such as film and merchandising rights. The capitaliza-

tion includes directly allocable costs and also development

costs allocable to specific productions. General research

and development costs are not capitalized in accordance

with IAS 38.

2.2 Goodwill

Derivative goodwill is stated at its acquisition cost. Goodwill

is the difference between the acquisition cost and the fair

value of the identifiable assets and liabilities acquired on

77

the purchase date. Goodwill is allocated to the individual

segments as the smallest cash-flow generating units.

An “impairment test” in accordance with IAS 36 will be car-

ried out once a year for goodwill if corresponding indications

are available in order to establish the achievable amount

which constitutes the higher amount arising from the net

sales value and the usable value and this is then compared

with the corresponding book value. If the achievable amount

determined in this way is less than the book value, an extra-

ordinary write-down has to be made. Standard amortization

in accordance with IFRS 3 is not made. Exceptional write-

downs of goodwill cannot be written back again in subse-

quent years.

2.3 Tangible fixed assets

Land, property rights and buildings are valued at their

acquisition cost less standard depreciation based on an

estimated useful life of 25 years on buildings. Technical

plant and equipment, including factory and office equip-

ment, are valued at their acquisition cost less standard

and non scheduled depreciation. Standard depreciation is

charged on a straight-line basis over a normal useful life of

three to ten years. Repair and maintenance work is normal-

ly charged as an expense when it is incurred.

In the case of lease contracts in which the Group acts as

lessee, the leased asset is capitalized and the leasing liabi-

lity for the same amount is capitalized if the economic

ownership of the leased asset is attributable to the lessee

(financing lessee). This is the case in accordance with IAS

17 if the lessee mainly bears the risks and rewards in con-

nection with the leased assets associated with the owner-

ship. The capitalization is effected in these cases at the

attributable fair value of the leased asset at the commen-

cement of the lease contract or at the cash value of the

minimum lease payments if the latter is lower. The corre-

sponding lease liabilities are shown in the balance sheet

under long-term liabilities. The interest element of the lease

liability is included under financial expenses with a charge

to income over the term of the lease contract.

If the economic ownership of the leased asset is attributable

to the lessor (operating lease), the leased asset is included

in the balance sheet of the lessor. Lease payments in con-

nection with operating leases are recorded in the profit and

loss account as other operating expenses on a basis over

the term of the lease contract.

2.4 Financial assets

Financial assets include participations in associated com-

panies, other investments, other loans and derivatives which

are shown under other assets. With the exception of shares

in associated companies valued on the equity method, in-

vestments and short-term financial assets as defined in

IAS 39 are allocated to the category “at fair value through

profit and loss”.

Management classifies financial assets at the time of

acquisition and reviews this classification at regular inter-

vals with regard to whether the criteria for the classification

can be maintained. All purchases and sales of financial

assets are recorded on the relevant trading date.

Acquisition costs include the related transaction costs. In

the following period, other investments/participations and

short-term financial assets such as derivatives are revalu-

ed at the fair value corresponding to the stock exchange

price on the balance sheet date. If no market value is avai-

lable, an attributable fair value is to be determined by

means of other valuation methods. Realized and unreali-

zed gains and losses arising from changes in the fair value

of the aforesaid financial assets are shown in the profit

and loss account.

Consolidated Financial Statements I Notes

78

Loans are classified as “loans and receivables” and are to

be stated at their updated acquisition costs.

2.5 Inventories

Raw materials and supplies are valued at their acquisition

cost, or their estimated lower net selling price, less any costs

which still have to be incurred (sales-oriented, loss-free va-

luation). Acquisition and production costs are valued on

the average price method. Slow-moving or obsolete stocks

are written off in full.

2.6 Receivables and other assets

Short-term receivables are stated at cost. Non-interest-bea-

ring monetary receivables with a term of more than one

year are discounted to their current cash value at an annu-

al rate of 5.488 percent. In accordance with IAS 18, the

net value of the transaction and the related financing as-

pects are taken into account in sales in the consolidated

financial statements.

If there are doubts concerning the collectibility of outstan-

ding receivables, the receivables in question are stated at

their lower realisable value. In addition to any necessary

specific bad debt provisions, a flat rate provision is made

for general default risks based on past experience. The

book values are approximately equivalent to their fair

values.

2.7 Cash and cash equivalents

This item includes cash and sight deposits at banks which

are only subject to immaterial value fluctuations and which

have a term to maturity of less than three months. This

item also includes partially available sight deposits which

are deposited as security within the scope of guarantees.

Liquid assets are stated at their updated acquisition costs;

deposits in foreign currencies are valued at the closing rate

on the balance sheet date and approximate their fair values.

2.8 Share options

In accordance with IFRS 2, No. 53, all options issued to em-

ployees or executive bodies after November 7, 2002 but

which were not exercisable as at January 1, 2005 are valu-

ed at their fair value on the respective issue date. The re-

sulting personnel expenses are allocated over the remaining

holding periods taking due account of any fluctuations.

For options which were granted prior to November 7, 2002

and which have not been valued in accordance with IFRS 2,

there are only certain information obligations (cf. Section

3.11).

In accordance with IFRS 2, Section 55, an adjustment of

comparable information and any opening balance sheet

value of profit reserves has to be made for the earliest re-

porting period shown. As a result, this gave rise to the follo-

wing adjustments in the profit and loss account and also in

the balance sheet of the previous year:

EFFECTS OF INITIAL APPLICATION OF IFRS 2 in EUR ‘000

Effects on the P&L

Personnel expenses

Deferred taxes

Balance sheet effects to 31/12/2004

Adjustment reserveAccumulated loss

Deferred tax assets

1/1 to31/12/2005

-65

24

1/1 to31/12/2004

-57

21

87-54

33

79

As a result of the initial application of IFRS 2, there are only

marginal effects on undiluted and diluted earnings per

share (less than one cent per share).

2.9 Accruals

In accordance with IAS 37, accruals include all identifiable

obligations to third parties which have arisen in the past

and the settlement of which will probably result in an out-

flow of funds and if it is possible to make a reasonable

esti-mate of the amount of the obligation involved.

Accruals are stated at the anticipated payment amount or,

in the case of any long-term accruals, at the cash value of

the anticipated payment amount calculated by applying the

applicable current market rate of interest if the interest

effect is material.

The actuarial valuation of the performance-related pension

and similar obligations within the provisions for pensions

and similar obligations are based on the accrued cash

benefit valuation method. On the basis of the accrued cash

benefit valuation method to be applied (“projected unit cre-

dit method), future obligations are determined on the basis

of the pro rata benefit entitlements accrued on the balan-

ce sheet date. With regard to the valuation, trend assumpti-

ons are taken into account for the relevant orders of

magnitude which have an effect on the benefit amount.

The anticipated increases in salaries and pensions are

included as relevant orders of magnitude. Pension obligati-

ons have been determined on the basis of an actuarial

valuation. The interest element included in pension expen-

ses is shown as part of the financial results. Actuarial

gains and losses are recorded in full with a net income

effect when they have been established.

Accruals for anticipated losses arising in connection with

incomplete business (provisions for anticipated losses) are

formed if the unavoidable costs for executing the business

in question is higher than the anticipated economic benefit.

Before an accrual is made, value-reductions on assets are

to be made in connection with the aforesaid business.

2.10 Liabilities

Long and short-term financial liabilities (bonds, liabilities to

banks, etc.) trade accounts payable, advance payments

and other liabilities are subsummated under liabilities.

These are capitalized at their updated acquisition costs. If

the interest effect is material, long-term liabilities bearing

lower or interest free are stated at their respective cash

value when incurred and interest is accrued on a period

basis up to maturity.

The carrying values of the monetary liabilities included

under this item are equivalent to their fair values. Reference

is made to special explanatory comments under Section

3.14 for the accounting treatment of long-term financial lia-

bilities.

2.11 Deferred taxes

The group determines deferred taxes for temporary diffe-

rences between the book values and tax values of assets

and liabilities and tax loss carry-forwards. Deferred tax

assets on temporary deductible differences and tax loss

carry-forwards are only shown to the extent that it can be

assumed with reasonable probability that the company in

question is able to generate sufficient taxable income to

utilise the deferred tax assets.

In accordance with IAS 12.47, deferred tax liabilities are

calculated on the basis of the tax rates which are applica-

ble in the individual countries at the realization date or tax

rates to be applied in the future. Deferred taxes within the

group are based on a uniform rate of 37.5 percent.

Consolidated Financial Statements I Notes

80

Set-off is practiced if deferred tax assets and deferred tax

liabilities exist from or to the same tax authorities relating

to the same tax type and if they cancel each other out in

the same financial year

2.12 Borrowing costs

External borrowing costs are stated as expenses in the

period in which they are incurred.

2.13 Profit Realization Principles

Realisation of profit

Sales in the entertainment segment are realized at the

time of the transfer of transmission rights. A prerequisite

for this, however, is that the Company has basically com-

plied with its obligations and commitments, i.e. the serials

or TV programs are ready for transmission and only have to

be requisitioned by the TV station.

Contracts with an imputable minimum guarantee are main-

ly concluded in the merchandising sector. This gives rise to

a corresponding sale when the license commences. If addi-

tional sales are reported by the licenses over and above

the aforesaid minimum guarantee, these are received on

an instalment basis.

Sales are basically only realized when the following conditi-

ons have been met:

> there is a signed contract prior to the balance sheet date;

> the series or programs are complete and have been deli-

vered or are ready for delivery;

> there are no doubts concerning settlement of claims;

> the total amount of the royalties has been established,

has been agreed with the licensee and is also payable

even if the series or programs are not broadcasted;

> the license period has commenced.

Distribution and sales commissions for film and merchan-

dise rights are recorded when the contract is signed in

view of the fact that performances have carried out.

In the case of the sports companies, sales are realized

when the relevant service has been provided. If advertising

income is involved, the sales realization is basically on the

date of the transmission of the advertising spot. In the pro-

duction sector, sales are realized upon completion and

acceptance of the production by the customer.

Amortization and recording of license-related expenditure

Amortization based on a specific time period

Film rights included under intangible assets are amortized

on a straight-line basis over their estimated useful lives,

normally between 5 and 20 years. If a film asset with a

short life is involved with its exploitation rights in cinemas

being re-stricted, for example, the amortization period may

be significantly shorter (between one and five years).

Usage-related fixed asset disposal

For the purpose of usage-related and performance-related

income and expenditure accruals, performance-related dis-

posals are charged in line with the granted license period

over and above the specific term-related impairment char-

ge. Addition disposals to be recorded are shown under cost

of materials.

“Impairment test”

In accordance with IAS 36 an “impairment test” has to be

made annually for goodwill and intangible assets with an

undefined lifetime. This means, the relevant assets have to

be examined for a reduction in value. If value reduction

have to be made in previous periods, value increase need

to be taken into account. An “impairment test” is also car-

ried out during the year if there are indications of an value

decrease. For example, reductions in current values are

based on a substantial reduction in the market value of

81

assets, significant changes in the economic environment

and substantiated indications of obsolescence or any

changed earnings expecta-tions. The calculation of an

impairment write-down is based on the calculation of the

achievable amount equivalent to the net selling price or

the usable value of an asset whichever is the higher. If the

calculation of the achievable amount is made in the form

of the utilizable value of the asset, corresponding cash-flow

projections are applied.

If value increases are established on the basis of the

“impairment tests”, these are made with a net income

effect but with a maximum up to the theoretically updated

acquisition costs. Exceptions from the aforesaid value

increases are value reductions for goodwill.

3. Explanations on Individual Items in the Balance Sheet

3.1 Intangible assets

In addition to typical film library business, the group is also

involved in the co-production and co-financing of animated

programs. There are four programs in various stages of co-

production in the Group at the present point of time. They

are being financed either from existing liquidity or by

means of special project loans.

Intangible assets are stated at their attributable beneficial

usage value determined on the basis of the “discounted

cash-flow method” as part of an “impairment test”. This

method was based on a uniform discounting interest rate

of six percent. This interest rate is determined on the

basis of the security equivalence method.

The future beneficial value of film rights is influenced by a

large number of exploitation forms. The growth in adverti-

sing revenues of the television station is substanstal. The

Company estimates the annual growth potential documen-

ted by external studies. This assumption is used as a basis

for impairment considerations. If the growth changes by

one percent, there would be a change in the beneficial use

of approximately three percent based on the aforesaid

model.

The “impairment test” gave rise to no accelerated amorti-

zation charges in the current reporting period (2004: TEUR

8,212). Value adjustments were necessary in the previous

year on account of extraordinary amortization charges of

TEUR 6,685 made in previous years. Of the intangible

assets shown in the consolidated financial statements,

TEUR 53,045 (2004: TEUR 59,885) are, inter alia, pledges

as security for the 8% bond with warrants attached

2004/2009 (cf. the section on “Securities” under 3.13).

With our present amortization rate, the average residual

usage term of the Group’s film assets is seven years.

The book value of TEUR 88,651 (2004: TEUR 93,915)

includes internally developed intangible assets amounting

to TEUR 13,510 (2004: TEUR 12,634).

Consolidated Financial Statements I Notes

82

Total intangible

assets

654,003

5,569

491

4,596

15,817

648,842

559,947

322

12,227

13,486

559,010

660,535

-5,513

-235

13,613

14,397

0

654,003

376,428

174,058

-151

10,960

8,312

6,685

2,975

559,947

89,832

94,056

AdvancePayments

1,494

0

0

1,040

0

2,534

1,353

0

0

0

1,353

14,397

-6,449

0

38

0

-6,492

1,494

1,353

0

0

0

0

0

0

1,353

1,181

141

Intangibleassets

652,509

5,569

491

3,556

15,817

646,308

558,594

322

12,227

13,486

557,657

646,138

936

-235

13,575

14,397

6,492

652,509

375,075

174,058

-151

10,960

8,312

6,685

2,975

558,594

88,651

93,915

Goodwill

8,906

45,601

1

0

0

54,508

0

0

0

0

0

72,246

-48,241

-2

0

15,097

0

8,906

42,700

-27,601

-2

0

0

0

15,097

0

54,508

8,906

INTANGIBLE ASSETS in EUR '000

Acquisition and production costs 2005

01/01/2005

Changes in consolidated group

Foreign currency differences

Additions

Disposals

Total 31/12/2005

Accumulated depreciation 2005

01/01/2005

Foreign currency differences

Depreciation for the year

Disposals

Total 31/12/2005

Acquisition and production costs 2004

01/01/2004

Changes in consolidated group

Foreign currency differences

Additions

Disposals

Transfers

Total 31/12/2004

Accumulated depreciation 2004

01/01/2004

Changes in consolidated group

Foreign currency differences

Depreciation for the year

Non-scheduled depreciation

Write-up

Disposals

Total 31/12/2004

Net book values 2005

Net book values 2004

83

Total tangible

assets

18,670

2,147

69

7,739

459

28,166

11,313

50

3,321

425

14,259

15,827

-1,246

-37

4,659

533

18,670

9,449

-929

-25

3,247

429

11,313

13,907

7,357

Advance pay-ments and

assets underconstruction

73

0

0

717

0

790

0

0

0

0

0

33

0

0

40

0

73

0

0

0

0

0

0

790

73

Technicalequipment

and machinery

6,881

0

0

5,710

161

12,430

2,916

0

1,867

159

4,624

3,839

0

0

3,265

2,230

6,881

2,124

0

0

964

172

2,916

7,806

3,965

Land,Property

rights andbuildings

5,104

49

0

123

0

5,276

3,487

0

504

0

3,991

5,110

-166

0

172

120

5,104

2,471

-43

0

1,068

9

3,487

1,285

1,617

TANGIBLE ASSETS in EUR ‘000

Acquisition and production costs 2005

01/01/2005

Changes in consolidated group

Foreign currency differences

Additions

Disposals

Total 31/12/2005

Accumulated depreciation 2005

01/01/2005

Foreign currency differences

Depreciation for the year

Disposals

Total 31/12/2005

Acquisition and production costs 2004

01/01/2004

Changes in consolidated group

Foreign currency differences

Additions

Disposals

Total 31/12/2004

Accumulated depreciation 2004

01/01/2004

Changes in consolidated group

Foreign currency differences

Depreciation for the year

Disposals

Total 31/12/2004

Net book values 2005

Net book values 2004

Other equip-ment factory

and officeequipment

6,612

2,098

69

1,189

298

9,670

4,910

50

950

266

5,644

6,845

-1,080

-37

1,182

298

6,612

4,854

886

-25

1,215

248

4,910

4,026

1,702

3.2 Tangible assets

Consolidated Financial Statements I Notes

84

EFFECTS ON PROFIT AND LOSS ACCOUNT in EUR '000

Effects on profit and loss account

Associated companies

Tabaluga Coproduktions GbR

Planeta Junior Group

arena media GmbH

Trackdown Digital Pty. Ltd.

Earningsafter tax

69

1,042

-1,376

-242

Sales

127

11,890

268

0

EFFECTS ON THE BALANCE SHEET in EUR '000

Effects on the balance sheet

Associated companies

Tabaluga Coproduktions GbR

Planeta Junior Group

arena media GmbH

Trackdown Digital Pty. Ltd.

Total liabilities

3,255

11,162

1,430

665

Total assets

5,836

20,595

5,200

741

3.3 Goodwill

The goodwill amounts attributable to the Group in connecti-

on with shares in subsidiaries and joint ventures acquired in

prior years and in the report year are shown as follows:

As part of the impairment test for goodwill, future cash-flows

have been taken into account on the basis of a detailed fife

year earnings calculation. A discount rate of 12 percent has

been used for calculating the corresponding cash value.

This interest rate was determined with the help of the risk

premium method.

The future cash-flow is influenced by the development of the

advertising market in the case of sports companies and, in

the case of DSF Deutsches SportFernsehen GmbH, also be

development of view market shares in particular. The growth

rate over and above the detailed planning period has been

specified at zero percent. If the actual growth rate changes

by one percentage point, this would give rise to a change in

value of approximately fife percent .

3.4 Investments in associated companies

The companies included under investments in associated

companies have shown the following values in their financi-

al statements at December 31, 2005 (with the exception of

Trackdown, with the last available financial statements

being June 30, 2005):

3.5 Long-term receivables

Long-term receivables are all receivables with a due date in

excess of one year. Net receivables of TEUR 9,021 include

long-term receivables from associated companies in the

amount of TEUR 4,028 (2004: TEUR 3,775). These consist

exclusively of receivables from Planeta Junior S.L., Barcelona

and its 100 percent subsidiary Planeta Junior s.r.l., Milan.

New receivables originating in the report year and falling

due after December 31, 2006 have been discounted at the

interest rate of 5.488 percent (2004: 5.154 percent) valid

on the date of the original transaction. The 3M EURIBOR

increased by 300 base points has been used as the rele-

vant basis. Discounted long-term receivables originating

prior to the report year have been discounted by using the

original interest rate.

The fair value of long-term receivables is TEUR 8,983

(2004: TEUR 12,769).

31/12/2005

162

54,346

54,508

31/12/2004

162

8,744

8,906

GOODWILL in EUR ‘000

Segment Entertainment

Segment Sports

Total

85

3.6 Deferred tax assets

Deferred tax assets of TEUR 6,069 (2004: TEUR 4,895)

have developed as follows:

The previous year’s figure has been increased by TEUR

33 in comparison with the previous year’s value on

account of the effects of the initial application of IFRS 2

“Share-based Payment”.

Deferred tax assets are valued at a tax rate of 37.5 percent.

They are to be regarded as long-term.

In total within the Group, there are tax loss carry-forwards

of TEUR 139,672 (2004: TEUR 143,637).

3.7 Trade receivables

TEUR 2,167 of the specific bad debt provisions is mainly

attributable to receivables from Q1 Deutschland GmbH,

TEUR 1,628 to receivables from SAT1 Satelliten Fernsehen

GmbH, TEUR 1,622 to receivables from Buena Vista

International Inc. and TEUR 1,471 to receivables due from

Dr. Weinsziehr Media GmbH.

On account of higher outstanding receivables in US

Dollars, the Company decided during the report year to

hedge foreign currencies in the form of forward exchange

dealings. In view of the fact that the conditions for hedge

accounting are not specified in accordance with IAS 39,

the effects are directly taken up with an appropriate ear-

nings effect. On the balance sheet date, there was a nega-

tive current value (TEUR -313) with forward exchange trans-

actions and consequently they are stated under other liabi-

lities in the balance sheet.

LONG-TERM RECEIVABLES in EUR ‘000

Long-term receivables

Discounts

Total

31/12/2005

9,608

-587

9,021

31/12/2004

13,783

-1,022

12,761

DEFERRED TAX ASSETS in EUR ‘000

Temporary differences in the individual financial statements

Accumulated losses

Consolidation differences

Total

31/12/2005

135

5,920

14

6,069

31/12/2004

130

4,765

0

4,895

DEVELOPMENT OF DEFERRED TAX ASSETS ON LOSSESCARRIED FORWARD in EUR ‘000

Total

Not accounted for due tolack of utilization

Total

31/12/2005cumulative

52,377

-46,457

5,920

31/12/2004cumulative

53,864

-49,099

4,765

DEVELOPMENT OF RECEIVABLES in EUR ‘000

Gross amount

Specific bad debt provision

General bad debt provision

Net amount

31/12/2005

84,116

-14,975

-491

68,650

31/12/2004

97,519

-50,103

-425

46,991

Consolidated Financial Statements I Notes

86

3.8 Receivables due from associated companies

3.9 Other assets

The Purchase price receivables shown in the previous year

in the amount of TEUR 118,000 was due from HK Beteili-

gungs GmbH. The basis for this claim which was settled on

January 3, 2005 was the sale of shares in Tele-München

Gruppe.

The guarantee payments mainly include the minimum gua-

rantee payments to FIFA and relate to the commercialisati-

on of the 2006 FIFA World Cup™. They are reduced by the

notified sales.

Other assets mainly include option premiums, deposits

and amounts recharged. The option premium is valued at

its relevant market price with a corresponding charge or

credit to earnings. The acquisition costs of foreign currency

options amounted to TEUR 655 ( cf. Section 3.10): The

market value amounted to TEUR 2,539 (TEUR 3,521) on

the balance sheet date.

This item also includes a derivative of TEUR 207 (2004:

TEUR 470) arising from the premature repayment possibili-

ty at 101 percent of the 8% bond with warrants attached in

conjunction with an assumed improved refinancing rate of

7.4 percent. This downturn is attributable on the one hand

to the premature part-repayment of a nominal EUR 10 milli-

on on June 30, 2005 and, on the other, to the reduction in

the relevant current value.

3.10 Cash and cash equivalents

Out of the liquid funds of TEUR 45,806 (2004: TEUR

105,961), TUSD 9,500 equivalent to TEUR 8,053 (2004:

TEUR 6,983) were deposited on a blocked account in order

to obtain a guarantee payment by the banks in connection

with the 2006 FIFA World Cup™. The cash deposit ist secu-

red by a currency option which is shown in the balance

under “other assets”. In addition, TEUR 2,379 (2004: TEUR

1,057) in connection with the encashment of options and

certificates (cf. also Section 3.11) are pledged for the

repayment of the 8% bond with warrants attached of

2004/2009.

If daily deposits or sight deposits are involved, the afore-

said funds bear interest at the current rate. In the case of

Euro deposits, the average interest rate was 2.2 percent

(2004: 2.0 percent). An average interest rate of 2.7 percent

has been achieved for US deposits. (2004: 1.5 percent).

ANALYSIS in EUR ‘000

Planeta Junior S.L.

Planeta Junior s.r.l.

Tabaluga Coproduktions GbR

arena media GmbH

Other companies

Net amount

31/12/2005

256

812

1,131

551

77

2,827

31/12/2004

2,325

1,275

711

0

35

4,346

OTHER ASSETS in EUR ‘000

Other taxes

Guarantee payments

Taxes on income

Deferred expenses

Suppliers with debit balance

Advance payments

Purchase price receivables

Other assets

Total

31/12/2005

4,683

4,383

2,226

1,590

1,521

1,108

0

4,375

19,886

31/12/2004

4,451

3,418

1,854

1,203

1,604

1,985

118,000

5,679

138,194

87

3.11 Equity

Reference is made to the analysis of equity changes during

the report year.

Subscribed capital

The subscribed capital of the group parent company, EM.TV

AG, at December 31, 2005 amounted to EUR 66,600,936,

divided into 66,600,936 bearer shares with a nominal

value of EUR 1.00 per share.

At December 31, 2004, the registered capital of EM.TV AG

amounted to EUR 65,617,462 divided into 65,617,462

bearer shares. Following the entry in the Commercial

Register of the balance sheet item shown separately on

December 31, 2004 with effect from February 3, 2005 –

“Contributions made to execute the resolved capital increa-

se” – the subscribed capital was increased to a total of

EUR 66,600,936 as a result of the exercise of the conversi-

on rights in connection with convertible bonds amounting

to EUR 983,474.

Own shares

In order to discharge the certificates granted on April 19,

2004, 15,607,652 ordinary shares were held back at the

beginning as own shares. In addition, a total of 1,735,500

ordinary shares could not be issued to former holders of

the convertible bond on account of the acceptance ratio

for the restructuring of the 4% convertible bonds which

was less than 100 percent.

After the completion of the restructuring process, the Com-

pany therefore had 17,343,152 own shares with a nominal

value of EUR 1.00 for each own share, i.e. a total of EUR

17,343,152. A separate reserve for own shares was esta-

blished in this amount in accordance with IAS 32.33.

In view of the fact that a total of 591,115 own shares were

issued in the report year after the exercise of subscription

and purchase rights in connection with certificates, the

reserve for own shares at December 31, 2005 fell to EUR

16,726,149, with this being equivalent to 16,726,149 own

shares. The Company has no rights whatsoever in connecti-

on with its own shares.

Capital reserve

The capital reserve of the Group amounted to EUR

101,599,782.15 at December 31, 2005.

The exercise of the subscription and purchasing rights in

connection with certificates resulted in the report year to

an issue of 591,115 own shares and an increase in the

capital reserve of EUR 968,855.50 arising from the addi-

tional contributions received.

Other reserves

Other reserves include the special reserve for employee

convertible bonds in the amount of TEUR 50 (2004: TEUR

50), the reserve for the employee option program in the

amount of TEUR 152 (2004: TEUR 87) and the reserve for

the foreign currency conversion in the amount of TEUR 218

(2004: TEUR -104).

As part of the restructuring process, the outstanding 2 per-

cent employee convertible loans 1997/2007 which were

issued on the basis of the annual general meeting held on

September 17, 1997 were transferred to EM.TV AG. The

holders of the convertible loan have the right to subscribe

for new ordinary shares, with their total arithmetical value

of the subscribed capital exceeding the nominal value of

the convertible loan. In accordance with § 218, clause 2 of

the German Joint Stock Corporation Act (AktG), a special

reserve was established in order to cover the difference

between the issue amount of the convertible loan and the

pro rata amount of the subscribed capital.

Consolidated Financial Statements I Notes

88

Upon exercising the conversion rights under the employee

convertible loan, the subscribed capital is replenished from

this reserve. Upon repayment of the convertible loan, the

corresponding amount of the special reserve will be trans-

ferred to retained earnings with no net income effect.

As a result of the application of IFRS 2, the expense in con-

nection with the employee option program (cf. below) is

simultaneously transferred to reserves. The previous year’s

figures have also been adjusted according the standard

The reserve in connection with the foreign currency conver-

sion includes conversion differences arising as part of the

consolidation of Yoram Gross-EM.TV PTY Ltd., Sydney.

Authorized capital

Authorized capital I

Based on the resolution of the annual general meeting on

July 5, 2005 and subject to approval by the Supervisory

Board, the Management Board was empowered to increase

the subscribed capital by a total of EUR 9,000,000 by

means of a single or multiple cash contribution or contribu-

tion in kind by July 4, 2010 and to exclude the subscription

right of the shareholders on certain conditions, especially

in the event of capital increases for assets in kind.

Conditional capital

Conditional capital I

Based on the resolution of March 19, 2004, the annual

general meeting of the Company resolved to conditionally

increase the subscribed capital of the Company by up to

EUR 5,625,000 by the issue of up to 5,625,000 bearer

shares. The conditional capital is designed to discharge

option rights in connection with the 8% convertible bond

2004/2009 which had been issued in return for the acqui-

sition of EM.Sport GmbH (formerly EM-Sport Sportmarketing

GmbH).

After the capital increase was entered in the commercial

register on February 3, 2005 for the 983,474 shares issued

in 2004 with a nominal value of EUR 1.00, the conditional

capital I amounted to EUR 4,641,526 at December 31,

2005.

After exercising option right, an additional 3,273,967 shares

were issued from conditional capital I in 2005 with a pro

rata amount of the subscribed capital equivalent to EUR

1.00 per share. The entry of the capital increase in the Com-

mercial Register was made in February 7, 2006.

As at December 31, 2005, there were 9,263 option rights

outstanding which entitle holders up to subscribe for

1,042,087 ordinary shares in EM.TV AG with a nominal

value of EUR 1.00 per share.

Conditional capital II

Based on the resolution of March 19, 2004, the annual

general meeting of the Company resolved to conditionally

increase the registered capital of the Company by up to

EUR 181,096 by the issue of up to 181,096 bearer shares.

The conditional capital is designed to discharge conversion

rights in connection with the 2% convertible loan issued by

the former EM.TV Merchandising AG as from 1997.

At December 31, 2005, EUR 30,038 convertible bonds

were nominally outstanding with the conversion rights to

80,476 shares in EM.TV AG securing a pro rata amount of

the subscribed capital equivalent to EUR 1.00 per share.

Conditional capital III

Based on the resolution of March 19, 2004, the annual

general meeting of the Company resolved to conditionally

increase the registered capital by up to EUR 1,488,012 by

the issue of up to 1,488,012 bearer shares. The conditional

capital is designed to discharge option rights which were

89

issued on the strength of the resolutions of the annual ge-

neral meetings of EM.TV & Merchandising AG of July 22,

1999 and July 26, 2000 (hereinafter referred to as “Stock

Options”).

At December 31, 2005, a total of 1,915,000 option rights

had been issued which entitle the purchase of 262,329

shares in EM.TV AG with a value of the registered capital

equivalent to EUR 1.00 per share.

Conditional capital IV

By the resolution passed in the annual general meeting of

the Company on March 19, 2004, it was resolved to condi-

tionally increase the subscribed capital up to EUR 515,020

by the issue of up to 515,020 bearer shares. The conditio-

nal increase is designed to discharge conversion rights in

connection with the 4% convertible bond 2000/2005 which

had been issued by the former EM.TV & Merchandising AG

in February 2000.

At December 31, 2005, bonds equivalent to a nominal

EUR 23,127,000 were outstanding which secure the conver-

sion rights to 29,820 shares in EM.TV AG with a value of

the subscribed capital equivalent to EUR 1.00 per share.

Conditional capital V

Wirth the resolution of the general meeting on July 5,

2005, the subscribed capital of the Company was conditio-

nally increased by up to EUR 15,000,000 by the issue of up

to 15,000,000 bearer shares. The conditional capital is to

be used to discharge the conversion and option rights on the

basis of the authorization granted by the general meeting

on July 5, 2005 to issue convertible bonds and bonds with

warrants attached by July 4, 2010 for a total amount of up

to EUR 100 million.

No use had been made of the aforesaid authorization by

December 31, 2005.

Contributions made for executing the resolved capital

increases

After executing the option rights in 2005, the shareholders’

equity was increased by EUR 3,273,967 by the issue of

3,273,967 ordinary shares in EM.TV AG equivalent to EUR

1.00 per share of conditional capital I. The shares are fully

paid and are made out to bearer. The aforesaid amount

has to be shown separately until the capital increase has

been entered in the commercial register. The entry of the

capital increase was made in the Commercial Register on

February 7, 2006.

Distributions

EM.TV AG distributed no dividends in fiscal year 2005.

Stock options

As part of the restructuring process, the general meeting of

EM.TV AG resolved in March 19, 2004 to grant the enti-tled

parties under the stock options which were issued by the

former EM.TV Merchandising AG on the basis of the resolu-

tions passed by the general meetings of EM.TV & Merchan-

dising AG on July 22, 1999 (1999 Option Program) and July

26, 2000 (2000 option program), instead of the right to

purchase one bearer share in EM.TV & Merchandising AG

to grant them the right to purchase 10/73 ordinary shares

in EM.TV AG at the underlying price for each option right.

The shares to be granted are issued from the Conditional

Capital III envisaged for the aforesaid purpose.

The conditions of the 1999 option program envisage that

50 percent of the option rights may be exercised at the ear-

liest 2 years after their issue date and the remaining 50 per-

cent at the earliest 4 years after their issue date if the pre-

tax DVFA earnings of the Company have risen by an average

of at least 15 percent p.a. in the financial years since the

issue and prior to the exercise of the option right. The under-

lying price is calculated on the basis of the average of the

closing rate in XETRA-trading for the EM.TV share during

Consolidated Financial Statements I Notes

90

the last 10 stock exchange days prior to the issue of the

option right, plus an increase factor of 5 percent p.a. for the

period up to the exercise of the option right is fixed as the

underlying price. The stock options have a term of 10 years.

The option conditions on the 2000 option program envisage

that a maximum of 50 percent of the granted option rights

may be exercised at the earliest 2 years after their issue

date (hereinafter referred to as „Tranche 1“) and the remai-

ning 50 percent at the earliest 4 years after their issue date

(hereinafter referred to as „Tranche 2“). The underlying price

is calculated on the basis of the average of the opening and

closing rate of the EM.TV share on the Frankfurt Stock Ex-

change on the date of the issue resolution (reference price)

but at least the pro rata amount of the subscribed capital

for one share, plus an uplift of 10 percent for Tranche 1

and a 20 percent uplift for Tranche 2. The stock options

have a term of 10 years.

A total of 1,915,000 (2004: 2,017,500) option rights relating

were outstanding on December 31, 2005, with this entitling

EM.TV AG to purchase 262,329 (2004: 276,369) shares

with a pro rata amount of the subscribed capital equivalent

to EUR 1.00 per share. Thereof, 348,000 option rights and

47,672 ordinary shares were attributable to the 1999 option

program and 1,567,000 option rights and 214,658 shares

under the 2000 option program. The reduction in compari-

son with the previous year is explained by the encashment

of stock options after the departure of employees.

The following parameters have been used as a basis for

calculating the attributable current values of the options:

INPUTS TO OPTION PRICING MODELS IN ACCORDANCE WITH IFRS 2

Originally issued options Amount

Resting period Years

Expiry date

Market price Euro

Exercise price at the grant date* Euro

Average option life Years

Risk-free interest Percent

Expected volatility Percent

Estimated fluctuation Percent

Expected dividend yield Percent

*Exercise price after merger Euro

Tranche 1

78,250

2

30/06/2013

1.60

1.76

3

2.479

68.89

30

0

12.84

Tranche 2

78,250

4

30/06/2013

1.60

1.92

7

3.523

68.89

30

0

14.01

20/12/2002

Tranche 2

66,500

4

20/12/2012

0.91

1.09

7

3.084

67.29

30

0

7.96

Tranche 2

19,000

4

19/09/2013

1.51

1.81

7

3.955

65.43

30

0

13.22

Tranche 1

19,000

2

19/09/2013

1.51

1.66

3

3.021

65.43

30

0

12.12

30/06/2003 19/09/2003

For valuing the options on the issue date, the Black-Scholes-

Model was used by making the above-mentioned assump-

tions. The anticipated volatility is a derivation from the

historic closing rates in the last 250 trading days (equiva-

lent to one year) prior to the resolution/issue date. No divi-

dends were assumed for the period from 2002 to 2007 in

view of the fact that no dividends could be anticipated on

the issue date either. The basis for risk-free interest is the

91

OPTIONS NOT ACCOUNTED FOR IN ACCORDANCE WITH IFRS 2

Date of issue

November 15, 1999

August 3, 2000

March 1, 2001

January 31, 2002

June 7, 2002

December 20, 2002

Number ofauthorized

Options

348,000

2,500

184,500

1,043,000

119,000

58,000

Amount ofshares

47,671

342

25,273

142,876

16,301

7,945

Referenceprice after

consolidationin EUR

357.55

381.43

47.45

16.64

9.42

6.64

Outstandingat the end of

the period

348,000

2,500

180,500

992,500

119,000

54,000

Outstandingat the begin-

ning of theperiod

365,500

2,500

184,500

1,061,000

123,500

58,000

OPTIONS ACCOUNTED FOR IN ACCORDANCE WITH IFRS 2

Date of issue

December 20, 2002

June 30, 2003

September 19, 2003

Amount ofauthorized

Options

58,000

137,500

27,000

Amount ofshares

7,945

18,835

3,698

Referenceprice after

consolidationin EUR

6.64

11.68

11.02

Outstandingat the end of

the period

54,000

137,500

27,000

Outstandingat the begin-

ning of theperiod

58,000

137,500

27,000

so-called “stripped” government bond whereby an interest

rate is established for a “synthetic zero-coupon note” by

separating the interest claims from the capital amount

from a financial point of view with the aim of excluding the

reinvestment problem for distributed interest amounts.

The estimates are reviewed on each balance sheet date.

The effects of any changes of original estimates which may

have to be taken into account are included in the profit

and loss account by means of an appropriate adjustment

in the equity capital over the outstanding period in questi-

on.

The payment includes with the exercise of the options are

credited to subscribed capital (nominal value) and to the

capital reserve.

Consolidated Financial Statements I Notes

92

3.12 Accruals and liabilities

MATURITY DATES OF ACCRUALS AND LIABILITIES in EUR '000

Long-term liabilities

Long-term accruals

Pension accruals

Financial depts

Deferred tax liabilities

Total

Previous year

Short-term liabilities

Bonds

Liabilities to banks

Advance payments

Trade accounts payable

Liabilities due to joint ventures

Other liabilities

Other accruals

Tax accruals

Total

Previous year

Less than 1 year

0

0

30

5,577

3,353

17,516

1,386

44,106

9,837

5,267

87,072

81,172

1 to 5 years

1,763

64,549

8,966

75,278

192,302

0

0

Total

1,763

210

64,549

8,966

75,488

192,351

30

5,577

3,353

17,516

1,386

44,106

9,837

5,267

87,072

81,172

More than 5 years

210

210

49

0

0

3.13 Long-term financial liabilities

Long-term financial liabilities are mainly made up of the fol-

lowing items:

Convertible bond

Based on the authority granted by the annual general mee-

ting on July 22, 1999, the former EM.TV & Merchandising

AG issued a 4% p.a. convertible bond on the capital market

on February 16, 2000 with a nominal value of EUR 400

million and an original term of 5 years.

The convertible bond was restructured in 2004 on the

strength of an offer to all bond holders to conclude a wai-

ver agreement with EM.TV & Merchandising AG as a result

of which the bond holders were to completely release EM.TV

& Merchandising AG from its liabilities in connection with

the convertible bonds. Approximately 94.22 percent of the

bond holders had accepted the offer of EM.TV & Merchan-

dising AG by the end of the acceptance period and period

of grace on March 17, 2004 with the result that a nominal

amount of EUR 23,127,000 was still outstanding.

93

The outstanding convertible bonds have been transferred

to the Company as part of the restructuring process. The

annual general meeting of the Company resolved on March

19, 2004 to make an offer to the non-complying bond hol-

ders to exchange them into an equivalent number of shares

in EM.TV AG with a nominal value of EUR 1.00 per share

multiplied with the merger ratio of 10/73 instead of the

right arising in accordance with the conditions of the conver-

tible bond to make an exchange into a specified number of

bearer shares in EM.TV & Merchandising AG. The shares to

be granted will be issued from Conditional Capital IV.

After taking account of the merger, a convertible bond with

a nominal amount of EUR 1,000 justifies a conversion into

1.2894 ordinary shares in EM.TV AG with the result that

there were outstanding conversion rights to 29,820 ordinary

shares in EM.TV AG on December 31, 2005 with a par value

of the subscribed capital equivalent to EUR 1.00 per share.

The convertible bonds will bear interest at 4 percent p.a.

retroactively as from February 16, 2006 and are due for re-

demption on January 9, 2007 at a rate of EUR 1,172.51 for

each bond with a nominal amount of EUR 1,000, plus ac-

cumulated interest.

The convertible bond is separated into an equity portion

and a third party liability portion. The third party liability

portion bears interest over the term of the bond up to the

repayment amount.

The effective interest rate of the convertible bond is 7.4

percent. The fair value on the balance sheet date is EUR

26,017,875 (2004: EUR 22,664,460).

Bond with warrants attached

Based on the resolution of the annual general meeting on

March 5, 2004, the Management Board of the Company

was empowered to make a single issue of a bond with war-

rants attached with a total amount of EUR 50 million by

March 4, 2009 which entitle the purchase of 5,625,000

ordinary shares with a nominal value of EUR 1.00 in the

registered capital of the Company. On the strength of the

aforesaid authority, the bond with warrants attached was

issued on March 30, 2004 with an interest rate of 8 per-

cent p.a. and a maturity term of 5 years and with a separa-

ble and, after detachment, with an independent tradable

option right to subscribe for 112.5 ordinary shares in the

Company for a subscription price of EUR 1.00 per ordinary

share. The option rights are discharged from Conditional

Capital I.

As a result of the acceptance level which was less than 100

percent for the offer to restructure the 4% convertible bond

2000/2005, it was not possible to give out a nominal

amount of EUR 2,893,000 to former holders of the conver-

tible bond and was then withdrawn on September 28, 2004.

A nominal amount of EUR 47,107,000 was therefore outstan-

ding on January 1, 2005. The bonds with warrants attached

are payable on March 30, 2009 at a nominal amount of

EUR 1,000 plus accumulated interest. The Company is en-

titled to repurchase fractional bonds on the market. The

Company is also entitled to make a premature repayment

at 101 percent of the nominal amount, plus accumulated

interest.

Use was made of the aforesaid redemption right on June 30,

2005 and a partial nominal amount of EUR 10,000,000

was repaid.

CONVERTIBLE BOND in EUR ‘000

Equity portion

Liabilitiy portion

Total

31/12/2005

1,760

26,020

27,780

31/12/2004

1,760

24,226

25,986

Consolidated Financial Statements I Notes

94

A nominal amount of EUR 37,107,000 was still outstanding

on December 31, 2005.

As a result of the repayment possibilities referred to above,

there is a valid embedded derivative in view of the fact that

the refinancing possibilities of the Company have improved.

Reference is made in this respect to the notes on “Other

assets”.

The bond with warrants attached is separated into an equi-

ty portion and a third party liability portion. The third party

liability portion bears interest over the term of the bond

(at an effective rate of 10.9 percent) up to the repayment

amount.

As part of the aforesaid repayment all options not yet sepa-

rated from the bond with warrants attached up to the afore-

said date are listed as independently tradable option rights

on the stock exchange.

A total of 29,102 option rights (2004: 8,742) were issued

in 2005 and a total of 3,273,967 ordinary shares (2004:

983,474) were there upon issued with a par value of the

registered capital equivalent to EUR 1.00 per share. The

capital increase was entered in the commercial register on

February 7, 2006.

The remaining 9,263 option rights (2004: 38,365) were

quoted with a closing rate of EUR 375 at December 31,

2005 (2004: EUR 110.50) for each option right, with this

being equivalent to a current value of EUR 3,473,625

(2004: EUR 4,239,333) for the purchase of a total of

1,042,087 ordinary shares in EM.TV AG (2004: 4,316,063)

with a par value of the registered capital equivalent to EUR

1.00 per share.

The following securities have been provided for the bond

with warrants attached (net assets within the Group):

> a pledge on all shares in EM.Sport GmbH (TEUR 37,601)

> a pledge on all shares in Junior.TV Verwaltungs GmbH

(TEUR 28)

> a pledge on all limited partners’ shares in Junior.TV

GmbH & Co. KG (TEUR 69,508)

> a pledge on the account held by WestLB, with receipts

arising from the exercise of the option rights secured as

purchase warrants being made to this account (TEUR

2,379).

Purchase price liability

Other long-term liabilities of TEUR 4,200 (2004: EUR 0) are

connected with the finance required for the purchase of the

18.87 holding in DSF Deutsches SportFernsehen GmbH

and Sport1 GmbH. The financial liabilities bear interest at

market rates with the result that the fair value corresponds

with the book value.

Zero-coupon-note

The TEUR 113,439 shown under this heading in the previo-

us year resulted from the zero-coupon-note which was issu-

ed as part of the restructuring of the 4% convertible bond

of 2000/2005. This was repaid in full in February 2005

with the net proceeds arising from the sale of Tele München

Gruppe with a settlement ratio of 76.39 percent.

3.14 Pension accruals

Creation Club (CC) GmbH which was consolidated for the

first time on December 31, 2005 has made pension promi-

ses to its employees. The relevant pension plans relate to

defined benefit pension plans, with the pension obligation

BOND WITH WARRATNS ATTACHED in EUR '000

Equity portion

Liability portion

Total

31/12/2005

3,184

34,272

37,456

31/12/2004

3,184

42,628

45,812

95

being dependent in the remuneration of threw individual

employees when they go into retirement. The pension pro-

mise also includes widow, surviving dependants’ and invali-

dity pension benefits in addition to a retirement pension.

In view of the fact that no pension plan assets are availa-

ble within the meaning of IAS 19 and all actuarial gains

and losses are recorded immediately as soon as they have

been established, the corresponding reversionary cash

value of the pension promise (“present value of the defi-

ned benefit obligation - DBO”) and pension-related obligati-

ons are equivalent to the pension accruals as shown in the

balance sheet.

In view of the fact that the pension accruals only existed as

a result of the company acquisition on December 31, 2005,

it is not possible to present any development of the DBO.

The book value which simultaneously corresponds with the

fair value amounted to TEUR 210 on the balance sheet date.

In view of the fact that the pension obligations have only

been included in the consolidated financial statements at

December 31, 2005, there are no effects in the profit and

loss account as far as the report year is concerned.

3.15 Deferred tax liabilities

Deferred tax liabilities have been accrued in the amount of

TEUR 8,966 (2004: TEUR 7,316) and have developed as

shown in the following Table:

Other temporary differences are made up of a number of

individual items. In the first place, they relate to foreign

currency valuations of accounts receivable and payable,

tax write-offs on goodwill and other asset usage periods

deviating from a tax point of view.

We also refer to our comments and explanations on the tax

charge. The consolidation differences refer to consolidation

adjustments with an earnings effect.

3.16 Bonds

Convertible loan

Based on the approval of the annual general meeting of

EM.TV & Merchandising AG granted on September 17,

1997, the Management Board of EM.TV & Merchandising

AG issued a 2 percent p.a. convertible loan with a total

nominal amount of EUR 316,490 (formerly DM 619,000)

DEFERRED TAX LIABILITIES in EUR '000

Temporary differences in individual statements

Consolidation differences

Total

31/12/2005

8,623

343

8,966

31/12/2004

6,336

980

7,316

ASSUMPTION FOR THE CALCULATION OF THE PENSIONACCRUALS

Discount rate

Pension growth

Salary growth

Staff turnover rate

31/12/2005

4.25%

1.50%

2.00%

8.30%

COMPOSITION OF THE DEFERRED TAX LIABILITIES inEUR '000

Bonds

Own film productions

Costumer base activation

Non-recognition of accruals

Other temporary differences

Total

31/12/2005

1,361

1,223

1,977

1,881

2,524

8,966

31/12/2004

2,556

1,331

0

1,125

2,304

7,316

Consolidated Financial Statements I Notes

96

with a term of up to 10 years, i.e. at the latest by October

28, 2007. The conversion right may only be exercised for at

least one tenth of the loan amount or for a multiple there-

of. It may only be exercised for the first time two years

after it was granted for 50 percent of the shares to be pur-

chased and four years after it was granted for an additio-

nal 50 percent. The conversion price for the shares to be

exchanged is reduced if the borrower issues bonds with

conversion or option rights simultaneously granting a direct

or indirect subscription right to the shares or if the capital

increases as a result of the issue of new shares or if the

issue price falls below the falls below the relevant conversi-

on price for the convertible loan unless a subscription right

is granted to the loan lenders.

In connection with the merger of EM.TV & Merchandising

AG into EM.TV AG, the annual general meeting of the com-

pany resolved on March 19, 2004 that, instead of the right

of conversion into a bearer share of EM.TV & Merchandising

AG in exchange for the difference between the conversion

price and the nominal amount of the convertible loan to be

exchanged, the convertible loan creditors should be granted

a right of conversion into 10/73 ordinary bearer shares of

the company in exchange for payment of the difference bet-

ween the nominal amount of the convertible loan and the

conversion price for a share in EM.TV & Merchandising AG

in accordance with the terms and conditions of the conver-

tible loan. The shares to be granted are to be issued from

Conditional Capital II. The terms and conditions of the con-

vertible loan apply in other respects in accordance with the

loan contracts between convertible loan creditors and EM.TV

& Merchandising AG. The outstanding balance of the conver-

tible loan which also corresponds with its fair value amoun-

ted to EUR 30,038 on December 31, 2005 and included

conversion rights on a total of 80,476 ordinary shares.

3.17 Liablilities to banks

These relate to a short-term bank loan. The nominal interest

rate is 4.128 percent which simultaneously also reflects the

effective interest rate.

3.18 Trade accounts payable

The liabilities shown in the balance sheet are not collatera-

lised further with the exception of customary reservations

of ownership. The aforesaid liabilities of TEUR 17,516

(2004: TEUR 18,759) are mainly connected with licensing

or services.

3.19 Other liabilities

The significant liabilities from outstanding invoices mainly

result from delayed receipts of invoices from service pro-

viders in the sports sector.

Liabilities for personnel expenses relate to obligations for

bonuses, pensions which do not satisfy the relevant criteria

OTHER LIABILITIES in EUR '000

Outstanding invoices

Commissions and licences

Purchase price liabilities

Personnel liabilities

Other taxes and social security

Short-term interest

Debitor accounts with credit balances

Sales tax liabilities

Deferred income

Others

Total

31/12/2005

12,994

7,618

6,434

5,180

2,723

2,347

2,215

1,966

1,343

1,286

44,106

31/12/2004

12,452

7,463

0

2,884

2,478

2,834

2,130

4,114

596

1,560

36,511

97

of IAS 19 on the valuation of a accrual, together with

claims for overtime and outstanding vacation entitlements.

Interest liabilities – mainly attributable to the bond with

warrants attached – were lower in comparison with the pre-

vious year on account of the nominal partial repayment of

EUR 10 million remitted on June 30, 2005, plus the inte-

rest accumulated up to the payment date. Current interest

charges have been significantly reduced as a result of the

partial repayment.

The purchase price liability shown in the balance sheet is

connected with the acquisition of shares in Creation Club

(CC) GmbH and is due on March 15, 2006 at the latest.

3.20 Accruals

OTHER ACCRUALS in EUR '000

Licenses

Losses from onerous contracts

Accruals for litigations costs

Accruals for personnel expenses

Other accruals

Total

Balance1/1/2005

5,607

638

4,811

468

8,447

19,971

Changes inconsolidation

0

0

0

85

1

86

Balance31/12/2005

3,670

107

2,752

230

4,841

11,600

Utilization

2,093

313

282

133

823

3,644

Allocation

200

88

97

134

476

995

Release

44

306

1,874

324

3,260

5,808

The license accrual has been made for third party licenses

which have not yet been settled. The accrual for litigation

costs has been made in order to take account of various liti-

gation proceedings which are pending or threatening.

Other accruals include long-term obligations of TEUR 1,763

(2004: TEUR 3,100) in connection with vacant office premi-

ses, together with reinstatement commitments. Rents are

subject to an escalation clause.

Consolidated Financial Statements I Notes

98

4.1 Sales

With regard to the analysis of sales, reference is made to

the following segment reporting in the Notes (Section 6).

4.2 Own work capitalized

Own work capitalized in the amount of TEUR 569 (2004:

TEUR 1,152) relates to intangible assets produced internal-

ly (TV-/film productions).

4.3 Other operating income

Income from the release of accruals mainly consists of re-

leases of other accruals amounted to TEUR 3,260. These

include, inter alia, the release of an accrual for the purchase

of rights for servicing a skeleton agreement (TEUR 2,374)

and the release of an accrual for reinstatement obligations

(TEUR 700) in view of the fact that an agreement has been

reached with the lessor regarding a lapse of the aforesaid

obligation. This item is also marked by the release of accru-

als for litigation costs (TEUR 1,874). This partially resulted

from the termination of the underlying processes and revised

estimates regarding risks.

In the previous year, an agreement was reached on a final

and conclusive arrangement and settlement of all mutual

rights and license matters existing between Kirch Media,

Junior TV and EM.TV AG as part of the acquisition of the

second fifty percent of Junior TV GmbH & Co. KG from Kirch

Media GmbH & Co. KG in insolvency (“Kirch-Settlement”).

This gave rise to one-off income and expenses items in the

Group companies’ equivalent to a net amount of TEUR

17,226. In addition, the treatment as income as required by

IFRS 3 of the credit balance difference (“Badwill”) arising

from the transitional consolidation of Junior.TV GmbH &

Co. KG gave rise to an income of TEUR 30,994.

The income arising from the incremental value in the pre-

vious year resulted from the impairment test on the film

rights at the end of the year. It was established in this pro-

cess that the development of part of the film stock has

been better than was assumed in 2004. Part of the excep-

tional amortization charged in the past has been reversed

therefore. The impairment test in 2005 gave rise to no

incremental value requirement.

Income from the write-off of liabilities mainly relates to re-

leases of accrued debts which were not incurred to the full

extent.

OTHER OPERATING INCOME in EUR '000

Income from the release of accruals

Exchange gains

Prior year income

Income from teletext

Income from the release of bad dept provisions

Income from write-off of liabilities

Income from Kirch-Settlement

Write-up film portfolio

Income from the sale of TMG investment

Other income

Total

31/12/2005

5,808

4,598

3,100

2,738

1,970

1,561

0

0

0

2,638

22,413

31/12/2004

2,677

420

3,721

2,213

3,477

4,717

48,220

6,685

3,061

1,656

76,847

4. Explanatory Comments on Items in the Profit and Loss Account

Income not relating to the current year results from subse-

quent contract changes of contracts concluded in prior

periods or from the lapse of obligations included in prior

year annual financial statements.

Other operating income includes a whole range of items

which cannot be allocated to the items shown separately,

including insurance compensation payments, marketing

compensation, indemnity payments, supplier reimburse-

ments and other refunds.

Foreign exchange gains include earnings effects of TEUR

88 (2004: TEUR 190) arising from the valuation of foreign

currency options and the corresponding US-Dollar account.

4.4 Cost of materials

Expenses for licenses, commissions and materials amoun-

ting to TEUR 44,647 (2004: TEUR 40,987) are attributable

in full to payments for licenses and commissions in the

amount of TEUR 44,629 (2004: TEUR 40,987) and other

material expenses of TEUR 18 (2004: TEUR 0).

Expenses for bought-in services in the amount of TEUR

69,312 (2004: TEUR 76,951) are made up of usage-related

fixed asset disposals of TEUR 2,326 (2004: TEUR 9,151),

production costs of TEUR 60,958 (2004: TEUR 59,767)

and expenses for bought-in services amounted to TEUR

6,028 (2004: TEUR 8,033).

4.5 Personnel expenses

An expense of TEUR 3,698 has been taken into account

for contribution-related commitments, of which TEUR

2,968 were paid to the state pension fund.

4.6 Amortization and depreciation of intangible assets

and tangible fixed assets

The total amortization and depreciation charge of TEUR

15,548 (2004: TEUR 22,519) includes no amortization of

goodwill in view of the fact that the impairment tests gave

rise to no exceptional amortization charge.

Likewise no exceptional amortization of film rights was made

in 2005 (2004: TEUR 8,312) in view of the fact that no

additional impairment requirement was established on the

basis of the relevant impairment considerations.

As part of the impairment tests, the future beneficial

values of fixed assets have been determined by using the

discounted cash-flow method. A discount rate of 6 percent

was applied in these calculations.

4.7 Other operating expenses

99

31/12/2005

9,919

9,312

9,287

7,302

2,766

1,660

1,538

1,480

931

578

394

119

101

1,706

47,093

31/12/2004

9,083

10,120

5,425

6,713

1,641

1,628

1,600

3,026

1,250

2,022

456

204

854

1,304

45,326

OTHER OPERATING EXPENSES in EUR ‘000

Advertising and travelling expenses

Legal, consultancy and year-end costs

Additions in bad dept provisions

Rental, repair and maintenance expenses

Administration expenses

IT costs

Insurance expenses and dues

Exchange losses

Freelancer, other personnel expenses

Non-period expenses

Vehicle expenses

Costs of sales

Bank charges

Other expenses

Total

Consolidated Financial Statements I Notes

100

In addition to trade fair costs, advertising and travelling

expenses also include costs for advertising agencies and

marketing consultancy services.

Legal, consultancy and year-end costs include a wide range

of individual items for numerous projects, inter alia, con-

sultancy expenses (TEUR 1,833) are included in connecti-

on with the marketing of the 2006 FIFA World Cup™. The

costs for the sale of the TMG investment were also inclu-

ded under this heading in the previous year.

Bad debt provision expenses are mainly connected with

the write-down of advance payments in the amount of

TEUR 639 (2004: TEUR 1,278), an increased risk in receiv-

ables from a program agent in the amount of TEUR 2,346

(2004: TEUR 1,291) and provisions of TEUR 2,300 relating

to skeleton agreements in prior years which are not paid.

Exchange losses include TEUR 313 in connection with the

valuation of forward exchange transactions

4.8 Earnings from investments in associated companies

4.9 Interest and similar income

TEUR 2,685 (2004: TEUR 5,010) of the total interest and

similar income amounting to TEUR 527 (2004: TEUR 390)

are attributable to interest on accounts receivable and

TEUR 2,158 (2004: TEUR 2,379) to interest income on bank

credit balances and loans granted. TEUR 60 (2004: TEUR

55) of the loan interest is subject to a bad debt provision.

The amount in the previous year included an income of

TEUR 1,771 in connection with the discounting of non-con-

verted parts of the 4% convertible bond of 2000/2005

when they were rebooked and an income of TEUR 470 ari-

sing from the capitalization of an embedded derivative in

the 8% bond with warrants attached of 2004/2009.

4.10 Write-downs of financial investments and marketa-

ble securities

The write-down of financial investments and marketable

securities amounted to TEUR 11 (2004: TEUR 2,925). In

the previous year, they were almost exclusively attributable

to impairments of Tele München Gruppe as a financial

investment.

4.11 Interest and similar expenses

4.12 Restructuring gain

An one-off gain of TEUR 94,366 was made in 2004 on the

restructuring of the 400 million Euro 4% convertible bond

of 2000/2005. This consists of the following items:

1/1 to31/12/2005

347

-363

-16

1/1 to31/12/2004

21

-237

-216

EARNINGS FROM ASSOCIATED COMPANIES in EUR ‘000

Earnings from associated companies

Planeta Junior Group

Other companies

Total

31/12/2005

5,015

1,795

262

493

7,565

31/12/2004

3,441

724

0

198

4,363

INTEREST EXPENSES in EUR ‘000

Interest on the 8% bond with warrants attached of 2004/2009

Interest on the 4% convertible bond of 2000/2005

Valuation of derivatives

Other interests and similar expenses

Total

101

4.13 Taxation expenses

The anticipated tax rate (37.5 percent) has been calculated

in the amount of the corporation tax (25 percent) plus the

solidarity surcharge (5.5 percent of the corporation tax)

and the corresponding trade tax on income (11.1 percent).

Current and deferred taxes

The income tax calculation is based on the tax laws in

force in the financial year. An anticipated average rate of

37.5 percent has been used for calculating deferred taxes.

This takes account of the different national tax rates and

assumes that the calculated rate will probably apply upon

the materialization date of the relevant deferred taxes. It is

assumed that the calculated rate will probably apply when

the deferred taxes are realized.

The difference between the changes in the asset and liabi-

lity items in the balance sheet presentation of deferred

taxes between the report year and the previous year does

not correspond with the deferred tax expense as shown in

the profit and loss account, with this being attributable to

foreign currency conversions. The foreign currency conver-

sion difference amounts to TEUR 90 (2004: TEUR 93).

RESTRUCTURING GAIN in EUR ‘000

Waiver by holders (write-off of bond liabilities)

Surrender of zero-coupon-note

Write-down of investment in Tele München Guppe

Surrender of bond with warrants attached

Surrender of shares

Cash severance payments

Release of deferred tax liabilities

Others

Total

31/12/2004

422,146

-91,619

-144,505

-47,108

-28,265

-18,843

2,565

-5

94,366

31/12/2005

785

-294

-113

0

0

-114

-1,155

411

-755

290

36.9

31/12/2004

142,465

-53,425

0

-677

35,387

-14,171

0

0

387

-4,157

2.9

CALCULATION OF TAXES in EUR '000

Earnings before tax

Anticipated taxes by tax rate of 37.5 percent

Derivating tax rates

Write-down of deferred tax assets on losses carried forward

Tax-free income

Permanent differences

Deferred tax assets

Tax income for prior year

Other effects

Actual taxes

Effective tax rate in percent

4.14 Annual earnings per share

5.1 Composition of the net funds

5.2 Cash outflow attributable to changes in the consoli-

dated group

“Others” includes the additions for MUC Media GmbH and

EM.TV Sport Management GmbH and in the “Sport compa-

nies” column, the minority interest purchases by DSF,

Sport1 and Sport Media Holding. The incremental

assets and liabilities in the case of the first two companies

is immaterial in total. In the case of the minority interest

acquisitions, all that changes are the minority interests and

goodwill because these companies have already been con-

solidated in full.

Consolidated Financial Statements I Notes

102

CONSOLIDATED EARNINGS PER SHARE

Shareholders’ interest

Average number of outstanding shares

Average number of outstanding convertible and option rights

Shareholders’ interest per share undiluted

Shareholders’ interest per share diluted

1/1 to 31/12/2004

134,331 TEUR

41,669,042 shares

3,757,236 shares

EUR 3.22

EUR 2.96

1/1 to 31/12/2005

229 TEUR

51,527,546 shares

17,734,393 shares

EUR 0.00

EUR 0.00

5. Explanations on Individual Items in the Cash-Flow Statement

1/1 to31/12/2005

45,806

-5,577

40,229

-60,155

5,577

1.1 to31/12/2004

105,961

0

105,961

-22,381

-80,769

COMPOSITION OF THE NET FUNDS in EUR '000

Cash and cash equivalents*

Short-term liabilities to banks

Short-term net financial ressources at the end of the reporting year

Changes of liquidity funds

Changes of short-term liabilities to banks

*thereoff 10.432 TEUR are bound for security reasons (2004: 8.040 TEUR)

103

Creation Club(CC) GmbH

5,570

2,147

7,717

2,030

9

6

23

2,068

-210

-1,977

-956

-1,763

-85

-4,991

4,794

11,640

16,434

Sportscompanies

0

0

5,877

0

5,877

33,891

39,768

Total

5,570

2,147

7,717

2,030

59

307

23

2,419

10,136

5,852

-210

-1,977

-956

-1,849

-85

-5,077

775

10,911

45,602

56,513

307

-6,434

49,772

Others

0

50

301

351

-25

-86

-86

240

71

311

The allocation of sales and assets to the individual regions

has been made on the basis of the location where the rele-

vant performances of the Group companies were rendered.

Sales and services between the business sectors are basi-

cally performed at prices which would have been agreed by

third parties.

6. Segment Reporting

CASH OUTFLOW FROM INVESTMENTS in EUR '000

Intangible assets

Tangible assets

Non-current assets

Trade receivables

Other current assets

Cash and cash equivalents

Current assets

Minority interests

Pension accruals

Deferred tax liabilities

Trade account payables

Other liabilities

Other accruals

Short-term liabilities

Net worth

Goodwill

Purchase price

Acquired liquid funds

Outstanding purchase price

Cash outflow from investments

Consolidated Financial Statements I Notes

104

SEGMENT INFORMATION BASED ON REGIONS in EUR ‘000

External sales

Period results of associated companies

Segment assets

> thereof shares of associated companies

Segment investments

Rest ofEurope

1,305

347

10,270

3,082

1,142

Rest ofthe world

2,874

-19

4,871

0

1,363

Total

209,495

-16

309,762

5,253

15,193

German-speaking

205,316

-344

294,621

2,171

12,688

Group

209,495

0

569

22,413

-226,785

-15,547

5,692

-16

-11

-7,565

2,685

785

309,762

5,253

6,397

316,159

78,171

84,389

162,560

15,193

Entertainment

30,637

80

569

6,311

-31,919

-11,366

5,678

328

133,019

3,097

17,439

3,893

Others

1,101

0

0

9,828

-20,971

-1,055

-10,042

0

31,659

0

20,781

181

Sports

177,757

132

0

8,900

-176,733

-3,126

10,056

-344

145,084

2,156

39,951

11,119

Transition

0

-212

0

-2,626

2,838

0

0

6.1 Segment information from January 1 to December 31, 2005

SEGMENT INFORMATION BASED ON OPERATING SECTORS in EUR ‘000

External sales

Intercompany sales

Other capitalized service

Remaining segment gains

Segment expenses

> thereof amortization and depreciation

Segment result

Period result of associated companies

Non-allocated operational elements

Write-down financial assets and marketable securities

Interest expenses

Interest income

Earnings before taxes

Other segment informations

Segment assets

> thereof shares of associated companies

Non-allocated elements

Assets of the Group

Segment liabilities

Non-allocated elements

Liabilities of the Group

Segment investments

105

6.1 Segment information from January 1 to December 31, 2004

Group

206,619

1,152

76,847

-234,025

-22,519

-8,312

50,593

-216

-2,925

-4,363

5,010

94,366

142,465

421,406

2,768

5,217

426,623

80,016

193,507

273,523

18,343

Entertainment

28,973

1,152

64,491

-51,238

-18,688

-8,312

43,378

-216

334,690

2,768

50,225

13,525

Others

0

0

3,742

-18,304

-1,114

-14,562

0

472

543

0

Sports

177,646

0

8,614

-164,483

-2,717

21,777

0

86,244

29,248

4,818

Transition

0

SEGMENT INFORMATION BASED ON REGIONS in EUR ‘000

External sales

Period results of associated companies

Segment assets

> thereof shares of associated companies

Segment investments

Rest ofEurope

3,201

21

9,323

2,735

113

Rest ofthe world

3,098

-52

4,178

18

1,404

Total

206,619

-216

421,406

2,768

18,343

German-speaking

200,320

-185

407,905

15

16,826

SEGMENT INFORMATION BASED ON OPERATING SECTORS in EUR ‘000

External sales

Intercompany sales

Other capitalized service

Remaining segment gains

Segment expenses

> thereof amortization and depreciation

Segment result

Period result of associated companies

Non-allocated operational elements

Write-down financial assets and marketable securities

Interest expenses

Interest income

Restructuring gain

Earnings before taxes

Other segment information

Segment assets

> thereof shares of associated companies

Non-allocated elements

Assets of the Group

Segment liabilities

Non-allocated elements

Liabilities of the Group

Segment investments

Consolidated Financial Statements I Notes

106

7. Contingent Liabilities and Other Financial Commitments

7.1 Rental and leasing commitments

The company rents, hires and leases offices, storage space

and equipment. The contracts have outstanding terms of

between 1 and 7 years.

The main rental and leasing contracts arte allocable to the

“operating lease” category as defined in IAS 17.

The minimum obligations for non-terminable contracts at

December 31, 2005 are shown in the following Table:

7.2 Guarantees and warranties

Guarantees and warranties amounted to TEUR 8,073 at

December 31, 2005 (2004: TEUR 33,402).

The liability risk of EM.TV AG as shown in the previous year

to Jim Henson Company arising from the sale of the com-

pany expired on July 31, 2005 as far as most of the war-

ranties are concerned. There are nonetheless still statutory

warranty claims under US law which have not yet expired.

In the event of any over-indebtedness of the affiliated com-

panies Junior Produktions GmbH, EM Supply Handels-

gesellschaft mbH in liquidation, all based in Unterföhring,

and also EM.TV France S.A.S., Paris, the group parent com-

pany has issued letters of comfort and/or financing commit-

ments in which it undertakes to structure the aforesaid

companies financially in such a way that they are able to

settle their obligations in an orderly and proper manner.

These commitments amounted to TEUR 500 on the balan-

ce sheet date (2004: TEUR 672).

As a result of a liquidity guarantee to the indirect subsidiary

PLAZAMEDIA GmbH TV- und Film-Produktion, the Company

has undertaken up to a maximum amount of EUR 15 milli-

on to structure it financially in such a way that PLAZAME-

DIA GmbH TV- und Film-Produktion is at all times able to

settle all its payment obligations to its present and future

creditors on time.

7.3 Contingent liabilities

Contingent liabilities amounted to TEUR 5,000 (2004:

TEUR 7,067) at December 31, 2005. TEUR 4,500 (2004:

TEUR 3,000) thereof relate to litigation costs and TEUR

500 (2004: TEUR 1,277) to subsequent acquisition costs.

The probability of the contingent liabilities materializing is

well below 50 percent.

RENTAL AND LEASING CONTRACTS in EUR ‘000

Due within one year

Due between one and five years

Due after five years

Total

31/12/2005

13,689

31,318

3,680

48,687

31/12/2004

16,428

36,941

255

53,624

RENTAL AND LEASING CONTRACTS WITH JOINT VENTURES in EUR ‘000

Due within one year

Due between one and five years

Due after five years

Total

31/12/2005

76

77

0

153

31/12/2004

75

125

63

263

107

7.4 Purchase commitments

Contractual commitments for the purchase of license

rights and orders place for services for film productions

relating to children and youth programs and sporting rights

amounted to TEUR 47,371 on the balance sheet date

(2004: TEUR 78,991). TEUR 42,324 of the aforesaid com-

mitments (2004: TEUR 74,895) are attributable to the

acquisition of license rights and TEUR 4,047 to services

(2004: TEUR 4,096).

On January 11, 2006, the Company announced that

EM.Entertainment GmbH had acquired the remaining 50

percent in Yoram Gross-EM.TV PTY Ltd.. EM.Entertainment

now owns 100 percent of the Australian production group,

including a participation of 45 percent in Yoram Gross

Productions, a production unit forming part of the Group in

which the founders still retain a majority holding.

On February 14, 2006, DSF and Premiere agreed on a stra-

tegic co-operation extending over a period of three years.

Under the “Champions TV” brand name, Premiere is to pre-

sent a European top soccer game in the UEFA Champions

League live and unencrypted in DSF on every playing day

with effect from the 2006/2007 season. “Champions-TV”

selected matches of all the German teams and highlights

of additional games will be shown on the 13 playing days.

“Champions TV” which was developed in consultation with

UEFA is produced by Premiere. As a result of this agree-

ment, no significant effects are to be expected on the

sales and earnings of DSF. An increase in the market share

and a strengthening of if its position as the “Soccer chan-

nel” is anticipated, however.

On March 3, 2006, PLAZAMEDIA and Arena Sport Rechte

und Marketing GmbH (hereinafter referred to as “Arena”)

agreed on an extensive cooperation on March 3, 2006.

The agreement envisages that PLAZAMEDIA will exclusively

assume the whole technical production of the live reporting

of the games of the DFL Premier German Soccer League

and the Second Soccer League for the 2006/2007,

2007/2008 and 2008/2009 seasons. The transaction

volume will depend on the program project planned by

Arena and will probably be in the mid-double-digit-million-

Euro range over the whole period, but at least in the lower-

double-digit-million-Euro range.

8. Occurences after the End of the Fiscal Year

Consolidated Financial Statements I Notes

108

9.1 Relationships with associated companies

There are business relationships with associated participati-

ons in Tabaluga GbR for mediating sales of film and mer-

chandising rights. In the report year, commission payments

were made by Tabaluga GbR to Group companies in the

amount of TEUR 48 (2004: TEUR 0). Revenue participations

in the amount of TEUR 47 (2004: TEUR 43) also had to be

paid by Group companies to the aforesaid company.

There are business relationships with the associated partici-

pation in Planeta Junior S.L., Barcelona and its 100 percent

subsidiary Planeta Junior s.r.l., Milan arising from the sale

of film and merchandising rights. This gave rise to no sales

in the report year (2004: TEUR 9,005).

There are business relationships with the associated partici-

pation arena media GmbH, Munich arising from the provi-

sion of services as part of program arrangements and their

execution. This gave rise to sales of TEUR 315 in 2005.

The development of claims and liabilities is to be found

under the corresponding balance sheet items.

9.2 Relationships with related persons

Related persons in the Group are the members of the

Management Board and Supervisory Board and their rela-

tives as set out under Section 10.5. The wife of a Director

provided consultancy services of TEUR 12 during the

report year. The invoice has been paid in full. Services of

TEUR 120 were performed for companies in the Modern

Times Group which is controlled by the Supervisory Board

member Dr. Hans-Holger Albrecht. There were no outstan-

ding items on the balance sheet date. An office of the

attorneys of the former Supervisory Board member Dr.

Andreas Meissner submitted charges for services amoun-

ting to TEUR 32 up to his departure from the Supervisory

Board.

Notes on the remuneration of the members of the

Management Board and Supervisory Board are to be found

in Section 10.5.

9. Other Mandatory Disclosures

10. Other Explanations and Disclosures

10.1 Financial risks

Liquidity risk

A liquidity risk may also arise if the payment obligations of

the Group cannot be covered by existing liquidity or corre-

sponding credit lines. On the balance sheet date, the EM.TV

Group had adequate liquidity reserves on the 2005 balance

sheet date.

The EM.TV Group could be forced in the medium or long-

term to refinance its existing financial liabilities or to finan-

ce its growth by taking up external capital in the capital

market or through banks. It is, as yet, not certain that the

aforesaid financing resources will be available on market

conditions or whether they will be available at all.

109

Default risk

A creditworthiness or default risk exists with the danger

that the liable party in respect of a claim is unable to settle

his or its aforesaid claim. The maximum default risk with

original financial instruments corresponds in theory to the

current value of all claims less liabilities due to the same

liable parties if offsetting can be applied. In the annual

financial statements of EM.TV AG and the EM.TV Group,

identified default risks have been taken into account by

means of appropriate bad debt provisions. In addition, the

Company insures the risk of a default caused by the insol-

vency of a debtor by means of an insurance of accounts

receivable to a very large extent.

Currency risk

A currency risk exists in particular if accounts receivable or

payable are stated in a currency which is different from the

underlying currency used for the annual financial state-

ments. Exchange rate fluctuations can then change the

current value of the relevant Euro currency used in the

annual financial statements. The exchange rate of the US

Dollar/ Euro is important for the Group in this respect. In

order to reduce exchange rate risks associated with its

business activities, the Group concluded currency hedging

transactions with the US-Dollar relating to future payment

flows. In view of the fact that the development of the US

Dollar in terms of the Euro cannot be predicted, additional

effects on earnings may also arise in future in the afore-

said respect.

Interest risk

The Company is only exposed to interest fluctuations to a

minor extent. These interest fluctuations relate to liquid

funds, bank liabilities, convertible bond and bond with war-

rants attached which are sensitive to interest rate move-

ments. No interest hedging contracts have been concluded

in view of the fact that the Company only has minor finan-

cial instruments subject to variable interest rates.

10.2 Audit expenses

An expense of TEUR 379 payable to PriceWaterhouse

Coopers AG, auditor of the consolidated financial state-

ments, is shown under other operating expenses. This

amount refers exclusively to audit services. No consultancy

services were required in the report period.

10.3 German Corporate Governance Code

The Management and Supervisory Boards of EM.TV AG

have agreed on applying the German Code of Corporate

Governance for companies listed on a stock market. The

recommendations of the German Code of Corporate

Governance were met with only a view exceptions. The

statement is published on the homepage www.em.tv.

10.4 Number of employees

21 of the aforesaid employees (2004: 32) are attributable

to companies which have been included in the consolida-

ted financial statements on a pro rata basis.

The average number of employees in the Group developed

as follows in the fiscal year:

NUMBER OF EMPLOYEES

Salaried employees

Industrial employees

Total

2005

640

0

640

2004

609

0

609

Consolidated Financial Statements I Notes

110

10.5 Executive bodies of the company

Management Board

Werner E. Klatten, Hamburg (Chairman)

Rainer Hüther, Munich

Dr. Andreas Pres, Munich

The above-mentioned members of the Management Board

are members of the following control bodies:

Mr. Werner E. Klatten is a member of the following control

bodies:

> Member of the Advisory Board of Tele München Gruppe,

Munich (until January 31, 2005)

Dr. Andreas Pres is a member of the following control

bodies:

> Member of the Advisory Board of Tele München Gruppe,

Munich (until January 31, 2005)

Mr. Rainer Hüther was not a member of a control body

during the report year.

Remuneration of the members of the Management Board

The remuneration expense for members of the Management

Board amounted to TEUR 2,824 (2004: TEUR 2,866). The

total remuneration includes fixed payments of TEUR 1,594

and variable payments of TEUR 1,230. TEUR 28 (2004:

TEUR 31) are also booked as expenses for option rights

issued to members of the Management Board.

Compensation to the members of the Supervisory Board

amounted to TEUR 165 (2004: TEUR 165) in the financial

year from January 1 to December 31, 2005. No share opti-

on rights were issued to members of the Supervisory

Board. No shares in the Company were held by members of

the Supervisory Board either.

Supervisory Board

Dr. Bernd Thiemann, Managing Partner of Drueker & Co.

GmbH Co. KG , Frankfurt a.M. (Chairman)

Prof. Dr. h.c. Roland Berger, Management Consultant,

Munich (Deputy Chairman until July 5, 2005)

Dr. Andreas Meissner, Attorney-at-Law, Hamburg (until July

5, 2005)

Dr. Hans-Holger Albrecht, President of the Management

Board of Modern Times Group AB, Stockholm (Deputy

Chairman as from July 5, 2005)

Arthur Bastings, Managing Director of Discovery Networks

Europe, London (as from July 5, 2005)

Unterföhring, March 17, 2006

Management Board of the Group parent Company

Werner E. Klatten, Chairman of the Management Board

Rainer Hüther, Member

Dr. Andreas Pres, Member

SHAREHOLDINGS AND OPTIONS HELD BY MANAGEMENT BOARD

Werner E. Klatten

Rainer Hüther

Dr. Andreas Pres

Shares held

0

0

6,000

Share options

27,397

27,397

27,396

111

We have audited the consolidated financial statements

prepared by the EM.TV AG, comprising the balance sheet,

the income statement, statement of changes in equity,

cash flow statement and the notes to the consolidated

financial statements, together with the group management

report, which is combined with the management report of

the EM.TV AG for the business year from January 1 to

December 31, 2005. The preparation of the consolidated

financial statements and the combined management

report in accordance with the IFRSs, as adopted by the EU,

and the additional requirements of German commercial

law pursuant to § (Article) 315a Abs. (paragraph) 1 HGB

("Handelsgesetzbuch": German Commercial Code) are the

responsibility of the parent Company's Board of Managing

Directors. Our responsibility is to express an opinion on the

consolidated financial statements and the combined

management report based on our audit.

We conducted our audit of the consolidated financial state-

ments in accordance with § 317 HGB and German general-

ly 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 miss-

tatements materially affecting the presentation of the net

assets, financial position and results of operations in the

consolidated financial statements in accordance with the

applicable financial reporting framework and in the combi-

ned management report are detected with reasonable

assurance. Knowledge of the business activities and the

economic and legal environment of the Group and expecta-

tions 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 in the combined management

report are examined primarily on a test basis within the fra-

mework of the audit. The audit includes assessing the

annual financial statements of the companies included in

consolidation, the determination of the companies to be

included in consolidation, the accounting and consolidati-

on principles used and significant estimates made by the

Company's Board of Managing Directors, as well as evalua-

ting the overall presentation of the consolidated financial

statements and the combined management report. We

believe that our audit provides a reasonable basis for our

opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit the con-

solidated financial statements comply with the IFRSs, as

adopted by the EU, the additional requirements of German

commercial law pursuant to § 315a Abs. 1 HGB and give a

true and fair view of the net assets, financial position and

results of operations of the Group in accordance with these

provisions. The combined 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.

Munich, March 17, 2006

PricewaterhouseCoopers AG

Wirtschaftsprüfungsgesellschaft

Wagner, German Public Auditor

Fell, German Public Auditor

11. Auditors’ Report

Consolidated Financial Statements I Auditors’ Report

112

113

Annual Financial Statements I Content

Annual Financial Statements EM.TV AG

114 Balance Sheet 116 Profit and Loss Acount

Annual Financial Statements I Balance Sheet

114

31/12/2005

837

3

928

479

197,529

0

1,098

439

201,313

17,837

24,270

0

14,631

0

25,909

82,647

42

284,002

31/12/2004

24,876

3

1,160

576

130,854

1,976

8,338

578

168,361

18,266

18,214

5,369

9,856

1,146

73,429

126,280

412

295,053

ASSETS AT DECEMBER 31, 2005 in TEUR

Fixed assets

Film and merchandising rights, software programs

Advance payments

Land, property rights and buildings

Other equipment, factory and office equipment

Shares in affiliated companies

Loans to affiliated companies

Shares in associated companies

Loans to associated companies

Current assets

Trade receivables

Receivables due from affiliated companies

Receivables due from associated companies

Other assets

Other securities

Checks, Cash on hand and bank balances

Deferred expenses

Assets

115

31/12/2004

65,617

983

135,273

50

-38,810

163,113

0

22,975

22,975

73,568

2,975

9,688

14,900

3,097

4,737

108,965

295,053

31/12/2005

66,601

3,274

136,833

50

-37,266

169,492

1,155

17,619

18,774

63,841

1,652

3,746

14,759

3,211

8,527

95,736

284,002

EQUITY AND LIABILITIES AT DECEMBER 31, 2005 in TEUR

Equity

Subscribed capital

Contributions made to execute the resolved captial increase

Capital reserves

Other reserves

Accumulated losses

Accruals

Tax acccruals

Other accruals

Liabilities

Bonds

Advanced payments

Trade accounts payable

Liabilities due to affiliated companies

Liabilities due to associated companies

Other liabilities

Equity and liabilities

Annual Financial Statements I Profit and Loss Account

116

1/1 to31/12/2004

23,719

9,984

-10,012

-536

-10,548

-6,420

-677

-7,097

-12,441

-25,819

-22,202

39,725

3,835

-40,640

-9,374

-6,454

-28,656

-9,633

-517

-1

-38,807

-3

-38,810

1/1 to31/12/2005

8,795

12,556

-41

-2

-43

-6,512

-507

-7,019

-1,055

-19,589

-6,355

11,273

2,613

-153

-4,598

9,135

2,780

0

-1,234

-2

1,544

-38,810

-37,266

JANUARY 1 TO DECEMBER 31, 2005 in TEUR

Sales

Other operating income

Expenses for licenses, comissions and materials

Expenses for outside services

Cost of materials

Salaries

Social security and pension costs

Personnel expenses

Amortization of intangible assets and depreciation of tangible fixed assets

Other operating expenses

Earnings before interest and taxes

Income from participations

Interest and similar income

Write-downs of financial assets and marketable securities

Interest and similar expenses

Financial result

Earnings for ordinary business

Extraordinary expenses

Taxes on income and earnings

Other taxes

Earnings after taxes

Loss carried forward

Accumulated losses

Finance calendar 2006

May 23, 2006 Report for the first quarter of 2006

June 30, 2006 Annual General Meeting (AGM) for 2005

business year

August 22, 2006 Report for the second quarter of 2006

November 21, 2006 Report for the third quarter of 2006

Note: Analysts conference calls will usually be on the release day of the annualreport and the quarterly reports respectively.

Production credits

Published by

EM.TV AG

Beta-Straße 11, 85774 Unterföhring, Germany

Tel. +49 (0) 89 99 500-0, Fax +49 (0) 89 99 500-111

E-Mail info@em.tv, www.em.tv, HRB 148 760 AG Munich

Edited by

EM.TV AG Kommunikation/Investor Relations

Frank Elsner Kommunikation für Unternehmen GmbH,

Westerkappeln

Designed by

EM.TV AG Graphics

Picture credits

Andreas Pohlmann Fotografie,

PLAZAMEDIA, DSF, Yoram Gross-EM.TV

EM.TV AGBeta-Straße 1185774 Unterföhring, GermanyTel. +49 (0) 89 99 500-0Fax +49 (0) 89 99 500-111E-Mail info@em.tvInternet www.em.tvHRB 148 760 AG Munich