GfK Group: Annual Report GfK. Growth from Knowledge

Transcription

1 GfK Group: Annual Report 2007 Beyond the horizon to global opportunities GfK. Growth from Knowledge

2 Contents GfK. Growth from Knowledge Beyond the horizon to global opportunities III Our corporate values IV GfK Group 2007 in figures Provisional key dates in the financial calendar 1 Mission Statement at a glance 4 The Supervisory Board 5 Report by the Supervisory Board 8 Letter to shareholders 12 The Management Board 14 Corporate Governance 21 GfK shares 29 GfK Special 32 HealthCare Lilly loves life 38 Media The customer on the couch rules 44 Consumer Tracking Making markets with brands 50 Retail and Technology A reliable database 56 Custom Research Think globally, act locally Management report and financial statements of the GfK Group 62 Management report 92 Financial statements 98 Notes to the consolidated financial statements 135 Auditors report Additional information 138 Overview of years 142 Glossaries IV Financial calendar V List of GfK company abbreviations VI Index VII Acknowledgements II

3 Our corporate values Client driven Our clients needs drive our business. We continuously seek to better understand our clients needs, improve all aspects of existing research products, offer innovative products and to be an integral part of our clients information systems. Accuracy, sound methodology, excellent client service, flexibility, timely delivery and cost effectiveness all ensure that we meet and even exceed our clients expectations. We build long-term partnerships with our clients, contributing to their success. Our people People are our main asset. Development through training, sharing ideas and sound experience is essential to our business. Our people have the freedom to explore and develop their talents and are empowered to achieve our common goals. We encourage and reward initiative, dedication and hard work. Fairness, good communication and working relationships at all levels and locations are key to our success. Innovation We recognize that investing in continuous innovation in both the process and the end product is a prerequisite to meeting clients requirements. Our aim is to be at the cutting edge with our key business activities. Clients needs, evolving markets, new technology and the expertise and ideas of our people throughout the world are what drive innovation. Global experience local knowledge We respect and learn from local business practices and cultures and provide knowledge tailored to local needs. Our global network comprises international teams, tools and products to provide multinational clients with consistent services. As proud members of the GfK Group, we share local and international expertise to continually improve all aspects of our business. Growth Profitable growth results in greater opportunities. As individuals, teams and business units, we are aware of the impact of our decisions and actions at all levels. We use financial and non-financial measurements to review and improve performance on an ongoing basis. Our growth provides investors with a fair return on the financial resources they have entrusted to us. III

4 GfK Group 2007 in figures Change in % Sales in eur m 1, , ebitda in eur m Adjusted operating income 1) in eur m Margin 2) in % Operating income in eur m Income from ongoing business activity in eur m Consolidated total income in eur m Tax ratio in % Cash flow from operating activity in eur m Earnings per share eur Dividend per share eur Total dividend in eur m No. of employees at year-end full-time 7,903 9, ) Adjusted operating income is calculated from operating income. The following expenses and earnings have been eliminated: integration costs arising in connection with the acquisition of companies, amortization on hidden reserves and impairment of additional assets identified on acquisitions as part of purchase price allocation, personnel expenses for share-based payments and long-term incentives, any other remaining operating income and expenses, in particular, currency effects resulting from the reporting date valuation. 2) Adjusted operating income in relation to sales in % Provisional key dates in the financial calendar March 31, 2008 Accounts press conference, Nuremberg March 31, 2008 Analysts conference, Frankfurt/Main May 15, 2008 Quarterly report as of March 31 1) May 21, 2008 Annual General Meeting, Fürth August 14, 2008 Interim report as of June 30 1) November 14, 2008 Quarterly report as of September 30 1) February 27, 2009 Provisional result for financial year ) March 31, 2009 Accounts press conference, Nuremberg March 31, 2009 Analysts conference, Frankfurt/Main May 15, 2009 Quarterly report as of March 31 1) May 20, 2009 Annual General Meeting, Fürth August 14, 2009 Interim report as of June 30 1) November 13, 2009 Quarterly report as of September 30 1) 1) Publication is scheduled for before the start of the trading session IV

5 Mission Statement GfK GROUP GfK. Growth from Knowledge > > > Companies need to make decisions. Knowledge is the basis for decision- making. Our business information services provide the essential knowledge that industry, retail, the service sector and the media need in order to make their decisions. > > > As a knowledge provider, we aim to be at the top in all the global markets in which we operate in the interests of our clients, our employees, our company, our shareholders and the general public. GfK_1

6 GfK GROUP 2007 at a glance 2007 at a glance January According to Research & Results magazine, GfK is the most-frequently quoted market research organization in political and economic reporting in the German media for 2005 and GfK acquires a further 80% of shares in Jan Schipper in the Netherlands, and the healthcare company becomes a 100% subsidiary of GfK. February Dr. Silvestre Bertolini, Managing Director of GfK Marketing Services, Italy, meets the Italian President Giorgio Napolitano to discuss the market-research industry. March The new area-planning software district 10 by GfK GeoMarketing wins the innovation prize of the Medium to Small Business Initiative in the category of Business Intelligence at the world s largest computer trade fair CeBIT in Hannover, Germany. GfK is Gold Sponsor of the Asian-Pacific Conference of the international market research association esomar in Kuala Lumpur, Malaysia. GfK nop uk is the main sponsor of the Jubilee Congress of the British Market Research Society (mrs) and at the same time celebrates its 50-year company anniversary with a series of donations to welfare projects running throughout the year. TOP CAREER WEBSITE 2007 April The career pages of the GfK website take up 18th position among German companies and receive the Top Career Website award for 2007 from the Swedish business consultant Potentialpark. GfK is the sole principal sponsor for the annual conference of the Advertising Research Foundation (arf) in New York, usa. May Dr. Richard B. Vanderveer, Group ceo of GfK s u.s. healthcare companies is awarded one the most respected prizes in the pharmaceutical market-research branch: the Mary Clement Lifetime Achievement Award from the industry association pbirg. GfK Hellas acquires the Greek Custom- Research company edge Market Research and Consultancy. June Within the companies of the S-Dax, GfK achieves third place in the Capital-Investor- Relations-Prize for 2007 awarded by the periodical Capital in Germany. Dr. Raimund Wildner, Managing Director of GfK Nuremberg e.v. and manager of Central Methods and Product Development is voted market-research personality of the year for 2007 at the annual congress of the Professional Association of German Market and Social Researchers. With the acquisition of Stratum Healthcare, GfK expands its network in Croatia and Serbia. 2_GfK

7 2007 at a glance GfK GROUP 2007 at a glance July Christian Weller von Ahlefeld, Chief Finance Officer of the GfK Group, is appointed as a member of the Management Board for a further five years. Joint Venture GfK m 2 founded. The new company, in which the GfK Group has a 70% participation, is based in the Swiss town of Hergiswil and is internationally active in the field of entertainment media. According to statistics from the American industry service Inside Research, the GfK Group leads the top-50 fastest-growing us market research companies. August GfK Group acquires 51% of the largest Macedonian market-research company Stratum Research. GfK-subsidiary isl (Institut de Sondage Lavialle) takes over the French Mystery- Shopping expert satisteme. September GfK is Gold Sponsor of the esomar annual congress in Berlin, Germany, and receives the Case-History Award for the essay Training the next generation: It s market research, but not as we know it. Intomart GfK takes over the Netherlands Daphne Communication Management Institute, one of the leading experts in reach measurement and evaluation of advertising campaigns. October The GfK Annual Report wins first prize for design and presentation in the Best Annual Report contest of German economics periodical manager magazine. GfK Group expands its network with the market research company Trustmark cfi based in Zurich, Switzerland. November The us-based GfK-subsidiary mri is voted most popular media researcher by the market-research magazine Inside Research. GfK Optics Japan is founded with the takeover of the Japanese Optic-Panel from The Nielsen Company. December Professor Dr. Klaus L. Wübbenhorst, ceo of the GfK Group, receives the Federal Service Cross. Debra a. Pruent is appointed to the Management Board as from January 1, GfK Group donates the profits of eur 40,000 from its worldwide Christmas campaign to the local Home for Children and Young People in Reutersbrunnen Strasse and other social care institutions in Nuremberg, Germany. GfK_3

8 GfK GROUP The Supervisory Board The Supervisory Board Hajo Riesenbeck Chairman of the Supervisory Board Director of McKinsey & Company, Düsseldorf, Germany President of GfK-nürnberg, Gesellschaft für Konsum-, Markt- und Absatzforschung e.v., Berlin, Germany Dr. Christoph Achenbach Managing Director and Partner of the intes Group, Bonn, Germany Dr. Wolfgang C. Berndt Member of the Board of Directors of the Institute for the Future, Menlo Park, California, usa Kerstin Döpfert Independent Works Council representative at GfK Aktiengesellschaft, Nuremberg, Germany Sandra Hofstetter Independent Works Council representative at GfK Aktiengesellschaft, Nuremberg, Germany Dr. Arno Mahlert Deputy Chairman of the Supervisory Board Chairman of the Board of Directors of maxingvest ag, Hamburg, Germany Stefan Pfander Senior Consultant at Wm. Wrigley Jr. Company, Chicago, usa Senior Consultant at Lehman Brothers, London, Great Britain Jürgen Schreiber ceo and President of Shopper Drug Mart, Toronto, Canada Dieter Wilbois Independent Works Council representative (Chairman of the Works Council and the Group Works Council) of GfK Aktiengesellschaft, Nuremberg, Germany Audit Committee Dr. Arno Mahlert (Chairman) Dr. Christoph Achenbach Stefan Pfander Dieter Wilbois HR Committee Hajo Riesenbeck (Chairman) Dr. Wolfgang C. Berndt Kerstin Döpfert Jürgen Schreiber Presidial Committee Hajo Riesenbeck (Chairman) Dr. Arno Mahlert Dieter Wilbois Nominations Committee Hajo Riesenbeck (Chairman) Dr. Wolfgang C. Berndt Dr. Arno Mahlert Peter Zühlsdorff Honorary Chairman of the Supervisory Board Managing Shareholder of dih Deutsche Industrie-Holding GmbH, Frankfurt/Main, Germany 4_GfK

9 Report by the Supervisory Board GfK GROUP Report by the Supervisory Board Hajo Riesenbeck Supervisory Board Chairman Director of McKinsey & Company, Düsseldorf In financial year 2007, the Supervisory Board kept itself informed on a regular basis of the GfK Group s business development, income and financial position, its personnel situation and impending investments. It has monitored and advised on the activities of the company s Management Board and discussed all significant business events with the Management Board. In financial year 2007, the Supervisory Board met six times with the Management Board and once without the Management Board. The Management-Board reports and the company s prospects for development were discussed in depth at these meetings. The main topics here were the strategic direction of the GfK Group, its international acquisitions activity, the annual accounts for 2006, the development of business during 2007 and the budget for financial year In financial year 2007, the Chairman of the Supervisory Board maintained constant contact with the Management Board. There were no changes to the Supervisory Board in The Supervisory Board has dealt with the rules of the German Corporate Governance Code and on December 12, 2007, issued a declaration of compliance pursuant to Section 161 of the German Stock Corporation Act (AktG). The company complies in full with the mandatory regulations with the exception of three requirements and with the voluntary regulations with the exception of one requirement. The few deviations are indicated on page 19 of the present Annual Report in the Corporate Governance Report. GfK_5

10 GfK GROUP Report by the Supervisory Board Report by the Supervisory Board The work of the Supervisory Board is supported by four committees: the Audit Committee, the Human Resources Committee, the Presidial Committee and the Nominations Committee. The Audit Committee is headed by Dr. Arno Mahlert, Deputy Chairman of the Supervisory Board. It met four times in the reporting period, dealt with the company s business development, income and financial position as well as impending investments. Additional focal points were issues of financing, questions pertaining to the accounting system including interim reporting, the internal audit and fraud reporting. The hr Committee is headed by Hajo Riesenbeck, Chairman of the Supervisory Board. It met three times in the reporting period. The focal points were the remuneration of the Management Board, the extension of the contract of Chief Finance Officer Christian Weller von Ahlfeld by five years and the appointment of Debra A. Pruent to the Management Board of GfK ag. Her first appointment as a member of the Management Board on January 1, 2008 was made according to the rules of the Corporate Governance Code for three years. Debra a. Pruent assumes responsibility for strategy, methods, products and marketing for the Custom-Research activities of the GfK Group in the North America region. She brings to the Board more than 25 years of professional experience in market research, both from the industry itself and also through her activities with nop World, especially in the automotive industry. With this expansion of the Management Board, the Supervisory Board takes into consideration the expanded, international orientation of the GfK Group. The Presidial Committee did not meet in the reporting period. The Supervisory Board formed a Nominations Committee in its meeting on December 12, Its members are Hajo Riesenbeck, Chairman of the Supervisory Board, Dr. Arno Mahlert, Deputy Chairman of the Supervisory Board and Dr. Wolfgang C. Berndt, Member of the Supervisory Board. The Committee deals with questions relating to the selection of future Supervisory Board members. In accordance with the Corporate Governance Code, the Supervisory Board commissioned an external specialist to audit the efficiency of its activities. The overall result of this audit is very satisfactory. The annual financial statements and management report for GfK ag and the GfK Group for financial year 2007 have been audited by kpmg Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Nuremberg, and provided with an unqualified auditors report. All Supervisory Board members received copies of the auditors report accurately timed. 6_GfK

11 GfK GROUP Report by the Supervisory Board The Audit Committee of the Supervisory Board discussed these documents at its preparatory meeting, as did the full Supervisory Board in its accounts meeting. Both these meetings were attended by the auditors, who signed the annual and consolidated financial statements. They reported on the audit in general and on the key points stipulated in the audit mandate and also gave detailed responses to questions from the members of the Supervisory Board. The Supervisory Board has noted the audit report and, following its own examination of the annual financial statements prepared by the Management Board, has given its approval. The financial statements are therefore adopted. The Supervisory Board has seconded the proposal of the Management Board for appropriation of profits. The Supervisory Board would like to thank the members of the Management Board, the Works Councils and the staff of the GfK Group for their hard work and commitment. Nuremberg, March 27, 2008 Hajo Riesenbeck GfK_7

12 GfK GROUP Letter to Shareholders Aktionärsbrief Professor Dr. Klaus L. Wübbenhorst Chief Executive Officer of GfK ag Dear Shareholders and Business Associates, We can look back on a successful financial year A new sales record, a higher operating income, a significantly-increased annual surplus and a good cash flow all demonstrate that we have the right employees, the right products and the right ideas. Review of 2007 The tail wind from an organic growth of 5.8%, assisted the GfK Group in the achievement of worldwide consolidated sales of eur 1.16 billion. In terms of growth of sales alone, we are the eighteenth largest company in the usa. At home, in Germany, we occupy fourth position. With around 3,000 employees in Central and Eastern Europe, Asia and the Pacific, and the Latin American region at the end of 2007, we have gained a significant profile in the growth regions of our industry. This represents a satisfactory result. Our positioning as one of the top-10 global players in the industry is secure. We have attained attractive market positions in the key nations. In the usa, the country with the highest sales in the industry worldwide according to esomar, the GfK Group is seventh in the market. Great Britain records the second highest sales in the industry. Here, GfK occupies fourth place. In France, the nation with the third highest sales, GfK is number four in the market. In Germany, where the fourth-highest sales for the industry worldwide were achieved, GfK holds its position as uncontested market leader. In the dynamically-growing bric countries, GfK has continued to develop its market position. For instance, GfK is in fifth position in Brazil, second in Russia, fourth in India and seventh in China. 8_GfK

13 GfK GROUP Letter to Shareholders To ensure that shareholders can participate in our corporate success, at the Annual General Meeting on May 21, 2008, the Supervisory Board and the Management Board will propose a significant increase in dividends by 25% from eur 0.36 to eur With a dividend-distribution quota of around 20% of the annual surplus adjusted for special effects, we particularly aim to have sufficient financial resources for repayment of debts and the development of operating business. Changes in the model for success There is therefore no doubt that our positioning in the market is a model for success. In spite of, or rather because of this fact, it is an important management responsibility to cast a critical eye over the current situation. The Management Board and the Supervisory Board fulfilled this responsibility in the preceding financial year and noted cardinal pointers for future years. From financial year 2008, the GfK Group will offer its services in three sectors, thereby moving forward from the previous structure of five business divisions. At the same time, the Management Board has been further internationalized with the appointment of the American member, Debra a. Pruent. The three sectors of the GfK Group are: Custom Research Retail and Technology Media The decisive factor in this new structure was the orientation of our offering towards the various information sources. We gather our raw material, which we transform into knowledge for our customers, from three different sources: consumers and doctors the retail trade the media We bundle information from consumers and doctors in the Custom Research sector. Data from the retail trade is bundled under Retail and Technology and media information is collated under Media. We are convinced that less is more. Controlling and communication through three sectors is clearer, more efficient and creates synergies, which will accelerate our dynamics. The qualitative goals associated with this approach will still be presented to you in terms of sales and income, and updated in our quarterly reports. Internal activities will be focussed even more sharply on our core competencies. GfK_9

14 GfK GROUP Letter to Shareholders Letter to shareholders The Custom Research sector offers a wide range of tests and studies relating to product and pricing policy, brand marketing, communications, distribution and customer loyalty. This sector specializes in the consumer, financial services, media and communications, business and technology, the automotive industry and the rapidly-developing fields of consumer tracking and healthcare. The Retail and Technology sector provides information and advisory services, which are derived from continuous data acquisition, and analyses the sale of consumer goods and services in the retail trade. These include, amongst others, studies relating to the market segments of office communication, photo-technology and optics, household electrical goods, information technology, telecommunications, sports equipment, tourism and entertainment electronics and media. The Media sector offers information services relating to the reach, intensity and type of exploitation of media and media offerings, and their acceptance. The new structure came into effect on January 1, Debra a. Pruent also added her strengths to the Management Board of GfK ag on January 1, She can look back over a long and successful career in market research with the central focus on the automotive industry. Within the Management Board, Debra a. Pruent will concentrate on North America, which will ensure even greater market proximity in the most important country for market research worldwide. Another step into the future was also achieved with the transformation of GfK ag into a European Company, GfK se. An se (Societas Europaea) is a modern legal form, which supports an open and international corporate culture. It is the expression of a corporatelyexperienced Europe. The change of form does not change the legal or economic identity of the company. For instance, the rights of shareholders, stock-exchange listing and the head office of the company will remain unchanged. The two-tier management system of Supervisory Board and Management Board is also retained. This change of legal form requires the agreement of the qualified majority of shareholders. The Supervisory Board and the Management Board, therefore, politely request your consent in this matter. 10_GfK

15 GfK GROUP Letter to Shareholders Outlook for 2008 At the beginning of 2008, there is an atmosphere of uncertainty about the development of the world economic situation. Experts believe that world economic growth will lose some of its momentum. This will be felt especially in the established, industrial nations. By contrast, economic performance in the newly-industrializing countries should maintain the same high level. In the past, market research regularly achieved growth rates above the growth rate of the world economy and the advertising industry. It has also proved resistant to crises and has remained stable, even in economically-troubled times. Your company, GfK, has a widely diversified corporate portfolio. Sectors, which pursue a rather steady market development, are supplemented by sectors, which are subject to more strongly-cyclical influences. Our guidance for the year 2008 takes this assessment of the economic situation into consideration. We assume an organic growth of more than 5.5%. This means we will grow more rapidly than our industry, the growth of which experts predict at between four and five percent. The group margin is supposed to be above 13%. This is significantly higher than the results of our substantial competitors. In view of our well-developed business model, we anticipate that we will be able to maintain our margin at a high level even with a regressive world economy. In this context, the pillars of our 5 Star Initiative will support operating measures: continuous further development of our business sectors, development of our network with the focus on the newly-industrializing countries and investment in our range of fact-based consultancy for our customers. I cordially invite you to accompany us along this path and should like to express my personal thanks to you for your support. Yours faithfully, Prof. Dr. Klaus L. Wübbenhorst GfK_11

16 GfK GROUP The Management Board An international line-up: Dr. Gérard Hermet, Petra Heinlein, Professor Dr. Klaus L. Wübbenhorst, Debra A. Pruent, Wilhelm R. Wessels, Christian Weller von Ahlefeld (from left to right) 12_GfK

17 The Management Board GfK GROUP The Management Board Professor Dr. Klaus L. Wübbenhorst born 1956 Chief Executive Officer (ceo), responsible for Strategy, Internal Audit, Method and Product Development, Corporate Communications and it Services Professional career Since 1998 Spokesman and, since 1999, ceo of GfK ag, appointed until 2012 Since 2005 President of the Chamber of Industry and Commerce for Middle Franconia in Nuremberg Member of the Management Board of GfK ag, responsible for Finances, Accounting, Financial Controlling, Personnel, Purchasing, Production and it Member of the Management Board of kba-planeta ag, Radebeul near Dresden Employee of Bertelsmann ag, Gütersloh, becoming Managing Director of Druck- und Verlagsanstalt Wiener Verlag, Himberg near Vienna Education 2005 Awarded the title of Honorary Professor by Friedrich-Alexander University in Erlangen- Nuremberg 1984 Doctorate from the Technische Hochschule, Darmstadt 1981 Graduated in Business Administration from the University/Gesamthochschule, Essen Christian Weller von Ahlefeld born 1958 Chief Financial Officer (cfo) and hr Director, responsible for Finances, Financial Controlling and Accounting, Personnel and Administration Professional career Since June 1, 2005 Member of the Management Board of GfK ag, appointed until cfo of the Tele-München Group Director and Head of Group Finance at Siemens ag and Manager of Siemens Financial Services division Executive Director of sbc Warburg and member of the corporate management of J. P. Morgan J. P. Morgan in New York, London and Frankfurt, becoming Vice President and member of the European Corporate Finance Executive Committee Assistant to the management of Heinrich D. Hansen in Flensburg Education 1981 Graduated in Business Administration from the Freie Universität Hamburg Petra Heinlein born 1958 Responsible for the Custom Research sector for all regions with the exception of North America Professional career Since 2002 Member of the Management Board of GfK ag, appointed until Integration management on behalf of GfK ag Managing Director of contest census in Frankfurt 1985 Joined GfK as project manager with GfK Marktforschung 1984 Research Assistant at the Arnold- Bergstraesser Institute, Freiburg im Breisgau Education 1984 Graduated in Political Science from the University of Bamberg Dr. Gérard Hermet born 1951 Responsible for the Retail and Technology sector Professional career Since 1999 Member of the Management Board of GfK ag, appointed until Chairman of the French Marketing Association (afm) Managing Director of GfK Sofema, France Managing Director of GfK France, then General Manager GfK Marketing Services, France Employed by Burke Marketing Research, Paris, France Education 1978 Doctorate from the University of Grenoble 1975 mba from the French Business School (icn) Debra A. Pruent born 1961 Responsibility for Custom Research North America Professional career Since January 1, 2008 member of the Management Board of GfK ag, appointed until Chief Operation Officer (coo) of GfK Custom Research North America Employee of the us automotive-industry market-researcher Allison-Fisher International, most recently as ceo Various management functions with General Motors Corporation, usa Extraordinary Professor of Statistics at Oakland University, usa Education 1986 Degree in Applied Statistics from Oakland University, usa 1983 Degree in Mathematics and Computer Science from Wayne State University, usa Wilhelm R. Wessels born 1952 Responsible for the Media sector Professional career Since 1996 Member of the Management Board of GfK ag, appointed until Managing Director of GfK ag, Gesundheitsforschung/i+g Gruppe Gesundheitsund Pharma-Marktforschung Managing Director of gpi, Gesellschaft für Pharma-Informationssysteme, Nuremberg/ Frankfurt 1978 Joined GfK as a Research Associate Education 1977 Graduated in Business Administration from the University of Saarbrücken GfK_13

18 GfK GROUP Corporate Governance Corporate Governance The management of GfK is committed to increasing the value added of the company on a responsible, transparent and sustained basis. This is documented by almost total compliance with the Corporate Governance principles Declaration of compliance without material restrictions The Management Board and the Supervisory Board issued their declarations of compliance pursuant to Section 161 of the Joint Stock Corporation Act (AktG) on December 12, The declaration of compliance is on page 19. The company complies with all of the recommendations under the Code apart from one. The exception relates to information regarding third companies. For these companies, the company publishes the share in capital and equity capital, but not the respective income from the preceding financial year. The decisive factor here is that transparency at the individual-company level could be disadvantageous to the company s competitiveness. GfK also complies with almost all of the non-binding suggestions in the Code. There is only one point where compliance is restricted. This relates to the appointment of a proxy-representative for the execution of shareholders voting rights in accordance with instructions. The appointment is to be implemented by the Management Board. The representative should also be contactable during the Annual General Meeting. Since 2007, the company provides a full, online webcast of the Annual General Meeting, unless there is any objection to this from shareholders and shareholders representatives. In future, it is intended to secure the contactability of shareholders representatives during the Annual General Meeting. This should guarantee that shareholders can issue instructions to the company via their representatives even during the Annual General Meeting. Management and control structure As a German joint stock company (ag), GfK is subject to the German Stock Corporation Act and has a two-tier management and control structure comprising Management Board consisting of six persons (from January 1, 2008) and a Supervisory Board with nine members. Two thirds of the members of the Supervisory Board comprise representatives of the shareholders and one third, representatives of the employees. In accordance with the standing rules of the Supervisory Board, its representatives are independent. Alongside their activity for the Supervisory Board, the majority of the members also held high-ranking positions in other companies during the last year. The Supervisory Board advises and monitors the Management Board in the management of business operations. Consequently, expertise from trade, industry and financial sector at both national and international levels should be represented in the composition of the Supervisory Board. The Supervisory Board has formed four independent committees, the Audit Committee, the Human Resources Committee, the Presidial Committee and the Nominations Committee. The Code recommends that the Chairman of the Audit Committee has particular expertise and experience in the application of accounting principles and internal financial controlling procedures. The Audit Committee is chaired by Dr Arno Mahlert, who has been a member of 14_GfK

19 GfK GROUP Corporate Governance the Management Board since 2004 and Chairman of the Management Board of maxingvest ag since May 1, As a result of these positions and his long professional career, he has the necessary expertise and experience. In 2007, there were no consultancy and other service and works contracts between members of the Supervisory Board and the company. Further details of the activities of the Supervisory Board are given in the detailed Report by the Supervisory Board on page 5 onwards. The company has taken out a d&o insurance policy with an appropriate deductible for members of the Management and Supervisory Boards. Responsible risk management Systematic risk management has been in place at the company for many years and has been reviewed by the year-end auditors. Details are provided in the Risk Report on page 82 onwards. Transparency in communications With the aim of transparent corporate communications, the company is pursuing its objective of providing the same information to all target groups at the same time. All press releases and corporate communications are available via the website. Newsletters in both electronic and printed form report on the latest news from the Group, and the survey results from the three sectors provide the findings from market research. Remuneration report Remuneration of the Management Board The remuneration of the members of the Management Board comprises four components; a fixed element, a bonus (variable, short-term remuneration), the 5 Star Incentive Program (variable, long-term remuneration) and the pension commitment. The structure of the remuneration system is reviewed regularly by the Supervisory Board in line with the recommendations of the hr Committee. The remuneration is based on the remit of the respective member of the Management Board, their personal performance and that of the full Management Board. The non-performance related remuneration components comprise a fixed element and the pension commitment. The variable remuneration elements comprise variable components dependent upon internal annual-performance targets (short-term components) and stock options or a claim under the 5 Star Incentive Program (long-term components). The 5 Star Incentive Program has the following objectives: This program continues on the same basis as the earlier stock-option program, without issuing new shares. The remuneration is based on cash benefit. As with the previous incentive program, the intention is to bind the management to long-term operational and strategic corporate goals. The term of each tranche is three years. Participation in the program is dependent upon individually-agreed performance targets. The contractually- GfK_15

20 GfK GROUP Corporate Governance Corporate Governance agreed remuneration component creates an entitlement to virtual shares upon the attainment of the internal performance targets. The number of virtual shares is calculated with reference to the amount of remuneration divided by the price of the virtual shares. The price is the listed price for the GfK share, which corresponds to the average price of the last 20 trading days before the year end. For every virtual GfK share acquired, the Management Board additionally receives a performance share. The development of the long-term remuneration, composed of the virtual shares and performance shares, depends upon the development of the share price and the attainment of two performance targets: the Total Shareholder Return (tsr) of the GfK share by comparison with the tsr of the shares of the companies in the Dow Jones Euro Stoxx Media Index and the increase in the operating income of GfK over a three-year period. The operating-income index is measured as an actual rise in the operating income over an expected rise of this parameter. The expectation is stipulated by the Supervisory Board of GfK on an individual basis for each tranche of the program. The Supervisory Board derives the performance targets from the expected capital-market income to companies from the index noted above. The performance shares granted by GfK lapse, reduce or increase dependent upon the attainment of both targets. The program is limited in accordance with the Corporate Governance Code. Structure of the pension commitments: The pension contracts for Management Board members are uniformly structured. After three service years as a member of the Management Board (waiting period), the company grants a retirement pension, an early-retirement pension, a disability pension and a widows / widowers and orphans pension. The fixed annual remuneration of the beneficiary agreed in the contract of employment is deemed to be the pensionable income. Beneficiaries receive a retirement pension, when they leave the service of the company upon reaching the normal retirement age. After three years service as a Member of the Management Board, the annual pension amounts to 30% of the pensionable income. This increases by three percentage points for each additional full year. The retirement pension is limited to 60% of pensionable income. The retirement pension is granted upon leaving the company at the age of 62. A reduced, early-retirement pension may be provided at the age of 60. If pension beneficiaries leave the service of the company before their 62nd birthday due to a partial or complete reduction in earning capacity, they receive a disability pension for the duration of the partial or total reduction in earning capacity. If the reduction in earning capacity still applies upon reaching the normal retirement age, the pension continues to be paid as a life-long pension. The disability pension is calculated in the same way as the retirement pension. The widows pension amounts to 60% of the retirement pension or disability pension last paid; the orphans pension amounts to 30% for full orphans and 15% for half orphans. After the commencement of the pension, the current pension is increased annually by two percentage points. The company can grant higher adjustments, if the consumer-price index shows a higher increase in prices. 16_GfK

21 GfK GROUP Corporate Governance Remuneration of the Management Board teur Annual salary Fixed salary Variable Component 5 Star Incentive Program No. of shares (units) Value at time of issue Total Liquidation of / allocation to pension provisions Pensions Pension provisions at year-end 2007 Prof. Dr. Klaus L. Wübbenhorst (Vorsitzender) , , ,692.8 Christian Weller von Ahlefeld , ,635.2 Petra Heinlein , ,114.1 Dr. Gérard Hermet , , ,584.2 Wilhelm R. Wessels , ,945.2 Bezüge , , , , , ,971.5 Bezüge , , , , , ,351.5 In the past financial year, members of the Management Board carried out share transactions involving a total of 50,366 shares. As of December 31, 2007, the Management Board held a total of 375,787 shares and 302,107 options for GfK shares. Remuneration of the Supervisory Board The remuneration of the Supervisory Board is regulated by the Annual General Meeting and stipulated in the Articles of Association of GfK ag. It is based on the remit and responsibility of the Supervisory Board member and on the commercial success of GfK. Essentially, this comprises the following elements: in addition to expenses, members of the Supervisory Board receive a fixed remuneration of eur 9, payable at the end of the financial year. They also receive annual remuneration, which is performance-based and dependent on income per share. This payment is linked to the attainment of a minimum value, which is calculated as follows: a performance-related remuneration of eur is paid for every eur 0.10 income per share above the threshold value of eur 0.30 income per share established in 2005, as shown in the consolidated financial statement in accordance with the International Financial Reporting Standards (ifrs). The amount of eur 0.30 is increased annually by eur 0.10, so that the minimum value for financial year 2007 is therefore eur The average income per share over the current financial year and the two preceding years is used as a basis for the calculation. GfK_17

22 GfK GROUP Corporate Governance Corporate Governance Performance-related remuneration may only amount to one and a half times the fixed annual remuneration. The Chairman of the Supervisory Board receives two and a half times the fixed and variable amounts mentioned above; the Deputy Chairman receives one and a half times this amount. The remuneration increases by 25% per membership of a committee, and by 50% per chair of a committee up to a maximum of 100% of the fixed and variable remuneration. GfK compensates every Supervisory Board member for any vat applying to their remuneration and the reimbursement of expenses. Supervisory Board members, who have only held their position for part of the financial year, are compensated on a pro rata basis. Remuneration of the Supervisory Board In eur 000 Fixed components Variable components Total remuneration Hajo Riesenbeck (Chairman) Dr. Arno Mahlert (Depoty Chairman) Dr. Christoph Achenbach Dr. Wolfgang C. Berndt Kerstin Döpfert Sandra Hofstetter Stefan Pfander Jürgen Schreiber Dieter Wilbois One member of the Supervisory Board carried out a share transaction, purchasing 145 shares. As of December 31, 2007, the Supervisory Board held a total of 3,462 shares. Members of the Supervisory Board hold no share options. Details of individual transactions by members of the Supervisory Board and Management Board are published on the website in accordance with the Corporate Governance Code. Former members of the management of GfK GmbH, Nuremberg, and of the Management Board of GfK Aktiengesellschaft, Nuremberg, and their dependents received a total remuneration of eur 0.9 million. There are provisions of eur 10.1 million for pension obligations to former Management Board members, their dependents and Managing Directors. The remuneration report forms part of the consolidated financial statements and of the Group management report. 18_GfK

23 GfK GROUP Corporate Governance Declaration of the Management Board and Supervisory Board pursuant to Section 161 German Stock Corporation Act (AktG) Pursuant to Section 161 of the German Stock Corporation Act (AktG), the management and supervisory boards of listed companies must declare each year the extent to which they have complied and will continue to comply with the recommendation of the Government Commission German Corporate Governance Code, published by the German Ministry of Justice in the official section of the online Federal Gazette and which recommendations have not or will not be complied with. This declaration must be made available to shareholders at all times. The German Corporate Governance Code (the Code ) contains regulations, some of which are binding. In addition to outlining the prevailing company law, it also includes recommendations from which companies may deviate, although in this case, they are obliged to publish information on such deviations every year. The Code also proposes suggestions, from which companies may deviate, without the necessity for this to be disclosed. GfK ag has been publishing details of deviations from recommendations or suggestions since These are reported separately below: I. Recommendations The Management Board and Supervisory Board of GfK ag declare that they have complied with and will continue to comply with the recommendations of the Government Commission German Corporate Governance Code in the version of June 14, 2007 published by the German Ministry of Justice on July 20, 2007 in the official section of the online Federal Gazette. Only the following recommendations have not been applied: 1) Point deals with variable remuneration components for the Management Board. With regard to stock options, there is a request for the Supervisory Board to agree a limitation option (cap) for extraordinary, unforeseeable developments. GfK s stock-option program expired on December 31, 2004 and there is no cap on this program. Tranches already issued or still to be issued may be exercised up to and including December 31, The Management and Supervisory Board agreed a new program on December 12 and December 14, 2005 which complies with the requirements of point ) Point regulates the publication of the consolidated financial statements within 90 days and interim reports within 45 days. The company has complied with the 45-day period for publication of its quarterly results since January 1, In 2007, the Annual Report was published within 94 days. Publication of the Annual Report is scheduled for March 31, 2008, which complies with the stipulated period. GfK_19

24 GfK GROUP Corporate Governance Corporate Governance 3) Point regulates the publication of information relating to third companies The company publishes information on all affiliated and associated companies and other substantial participations on an annual basis in the share-holdings list. This information includes the share in capital, equity capital and the financial year. Further information on income for the preceding financial year from companies, in which GfK has a significant participation, is not provided. The decisive factor here is that transparency at individual-company level has a disadvantageous effect on the company s competitiveness. II. Suggestions (n.b.: there is no obligation to explain any deviations from suggestions) The Management and Supervisory Boards of GfK ag declare that they have complied with and will continue to comply with the suggestions of the Government Commission German Corporate Governance Code in the version of June 14, 2007 published by the German Ministry of Justice on July 20, 2007 in the official section of the online Federal Gazette. Only the following suggestions are not applied: 1) Point 2.3.3: the Management Board should ensure the appointment of a representative to exercise voting rights for shareholders in accordance with instructions: such persons should also be contactable during the Annual General Meeting. In the past, the company has appointed a proxy representative to exercise the voting rights before the Annual General Meeting and will continue to do so in the future. Voting proxies shall be determined in accordance with the regulations listed in the invitation convening the Annual General Meeting. The details are published in the agenda and on the website under Voting during the Annual General Meeting is currently difficult for technical reasons. As soon as a practicable solution has been found for the secure transmission of votes, the company will look at introducing such a system. Compliance Officer: Bernhard Wolf Tel Fax [email protected] 20_GfK

25 GfK shares GfK GROUP GfK shares Stock market 2007: ups and downs 2007 was a very turbulent year for the stock market. The positive development on the equities markets continued at the high level of the previous year, despite a great deal of fluctuation, and share indices reached new record highs. Overvaluations repeatedly led to price corrections. By international comparison, the leading western indices mainly increased. The American Dow Jones index reached a new high in October at points and closed the stock market year up 7% at points. The Nasdaq and s&p 500 also gained 10% and 4% respectively over the year. The development of the main Germany index, the Dax, was fully independent, reaching a new all-time high in July at points and rising by 22% over the full year. The MDax rose slightly by 5%, retaining the high level of the previous year. While the subordinate index, the SDax, was the leader of the German indices in 2006, it fell by almost 7% in the reporting period. The Dow Jones Euro Stoxx Media, the index relevant to GfK listing international media and market research stocks, fell by around 5% over the year. In summer 2007, the wave of stock market euphoria died down significantly. Liquidity bottlenecks and write-downs associated with the subprime crisis spilled over onto the equity markets and affected companies development. Prices fell rapidly worldwide and the Dax alone fell by over 8% in just a few days. In addition to the credit crisis, increasing commodities prices and the weakening of the us dollar affected the global economy and the capital markets. The oil price reached a new record level of usd per barrel in November, while the euro climbed to an unprecedented usd In the usa, private consumption, which absorbs around 70% of all goods and services, had risen by the end of the year. In Germany, GfK s consumer climate index halved over the year from 8.5 to 4.5 points. One reason for the negative development was the vat increase at the start of the year, which dampened the mood of the company s consumers significantly. Furthermore, inflation fears in reaction to increased consumer prices and energy costs influenced consumer moods from late summer. This stock market environment had a significant impact on the shareholder structure in Germany. The number of share owners fell from 4.3 million investors in the first half of 2007 to 3.8 million investors in the second half. This is the lowest figure since 1996 (German Institute of Investors). GfK share key data German Securities code isin (International Securities Identification Number) Reuters Bloomberg Datastream First Call DE GFK.DE GFK GR D:GFKX GFK.DE GfK share price performance comparison From ipo to in ) GfK ag 16.2 % % Dax % % SDax 6.8 % % dj Euro Stoxx Media 4.5 % 35.9 % 1) Compared with the Initial Public Offering (ipo) of eur at the time of the stock exchange launch on September 23, 1999 (adjusted by the capital increase from corporate funds). GfK_21

26 GfK GROUP GfK shares GfK shares GfK shares in the tense capital market environment The stock market year 2007 was difficult for GfK shares. They were unable to hold on to the favorable development of the previous year, falling 16% below comparable indices, the SDax and the Dow Jones Euro Stoxx Media. At the beginning of the year, GfK shares were performing convincingly with a continual upward movement. On the first trading day, they rose by 4%. By mid February and before the publication of the 2006 annual financial statements, the share rose further by over 16% to eur The good stock market sentiment was turned on its head when price corrections set off alarm bells on the Asian markets. The GfK share price fell to eur 32. GfK share price performance from 1 January 2007 to 4 March 2008 in eur 1) January 2007 April 2007 July 2007 October 2007 January ) All values are indexed to the GfK share price GfK Dax 30 Performance SDax Performance dj Euro Stoxx Media In the second quarter, the GfK share moved almost constantly upwards to a level between eur 34 and 38. In mid July, it reached a new six-year high at eur By then the share was 21% up, equal with the Dax, up 22%, and the SDax, up 20%. In the same period, the Dow Jones Euro Stoxx Media achieved only 4% growth. At the start of August, when it was announced that GfK would end the second quarter below the value of the previous year and was to adjust its annual forecast downwards slightly, the market reacted with a significant price correction and the share fell to eur 32. The subprime crisis then began to influence activity on the international equity markets and the multiple reductions in discount rates were only able to revive the stock markets for a short time, which caused the GfK share to bottom out further. At eur 25.29, the share reached its lowest level of the year. 22_GfK

27 GfK GROUP GfK shares When the figures for the third quarter were published, the price of the GfK share improved to eur 30. The confirmation that GfK was going to reach the annual figures it had revised at the end of the first half was satisfied to investors. The 2007 stock market year ended for GfK with a closing price of eur (previous year: eur 32.82). For shareholders who had acquired their shares during the 1999 ipo and retained them since then, there was a price gain of 78% at the end of This equates to an annual return on invested capital of 8.7%. As a comparison, an alternative investment in fixed income securities such as government bonds would have generated an average annual return of 4.3% per year in the same period. Highest and lowest value of the GfK share from January 2007 to February 2008 in eur Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sept 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Highest and lowest share price Monthly closing price Daily turnover on stock markets doubled The GfK share is listed in the Frankfurt stock exchange s Prime Standard and in the SDax. In the 2007 reporting period, GfK reached a market cap of eur million (previous year: eur 1,165.2 million) and ranked number 13 in the Deutsche Börse rankings (previous year: 7th number) among the SDax companies. The average daily stock market turnover developed pleasingly, doubling to over 48,000 shares (previous year: 24,000 shares). At year-end, the GfK share took 26th number in the SDax turnover rankings (previous year: 31st number). GfK_23

28 GfK GROUP GfK shares GfK shares Annual General Meeting resolves authorized capital At the Annual General Meeting in Nuremberg on 23 May 2007, the GfK shareholders voted at least 86% in favor of the resolutions proposed by the Supervisory Board and the Management Board. Around 400 shareholders and proxy-representatives represent more than 80% of all shares. The Annual General Meeting authorized the company to increase the company s capital by up to eur 55 million by issuing new shares against cash or investment by 22 May Authorization was also given to issue convertible bonds and/or options which would allow the company the necessary flexibility in the creation of capital. This authorization is valid until 22 May 2012 for a sum of eur million. The existing share buy-back program was extended. Dividend proposal: 25% higher than the previous year The Management Board and Supervisory Board of GfK ag will propose a dividend of eur 0.45 per share to the Annual General Meeting on 21 May Compared with the previous year, this equates to an increase of 25.0%. The total distributed sum has risen by 25.8% from eur 12.8 million to eur 16.1 million, demonstrating that the company is continuing its policy of sharing its growing success with its shareholders through dividend increases. It is pursuing its goal of a dividend quota of around 20% of the Group s net annual income. Non-recurring effects are not taken into account with this. Since the ipo in 1999, GfK has increased its dividends every year and in this period, earnings per share has risen by 246%. GfK share indicators Unit High eur Low eur Closing price eur Average daily volume traded No. 23,959 48,128 No. of no-par shares (weighted) No. 35,155,998 35,682,085 No. of no-par shares as of Dec. 31 No. 35,501,795 35,863,031 Stock market capitalization as of Dec. 31 eur (million) 1, Ranking in SDax by sales by market capitalization Index weighting by market capitalization in % Dividend 1) eur Total dividend 1) eur (million) Earnings per share eur Free cash flow per share eur ) Proposal to th Annaual General Meeting on May 23, _GfK

29 GfK GROUP GfK shares Shareholder structure unchanged The shareholder structure of GfK ag has a balanced and global basis. The largest single shareholder is still GfK-Nürnberg e.v. with a shareholding of 56.8%. The proportion of shares in free float amounts 43.2%. The Management Board and Supervisory Board hold 1.1% as in the previous year. The distribution between institutional and private investors has not changed since the previous year. At the end of February 2008, the share of institutional investors was 28.2% (previous year: 28.2%) and the share of private investors was 13.9% (previous year: 13.4%). GfK shareholder structure as of February 28, 2008 Private Investors 13.9 Management Board and Supervisory Board 1.1 GfK-Nürnberg e.v Institutional Investors 28.2 of which usa 13.0 of which Großbritannien 8.1 of which Frankreich 3.7 of which Deutschland 1.9 of which other 1.5 In terms of country distribution, institutional investors come mainly from the usa and the uk. At the end of February 2008, us investment funds, with 13.0% (previous year: 10.3%), and British investment funds, with 8.1% (previous year: 7.2%), held three quarters of the free-float shares in the institutional domain. In the same period, the proportion of investors in France fell from 4.3 to 3.7% and in Germany, from 3.6 to 1.9%. Analyst interest continues on a high level The recommendations of financial analysts provide an important decision-making basis for institutional and private investors. The number of well-known banks valuing the GfK share was 13 at the end of February According to a recent survey by dirk (German Investor Relations Association), the average SDax company is valued by nine analysts. The GfK share is therefore valued by an above-average number of banks for a small caps company. Overall, there are nine buy recommendations and four hold. GfK_25

30 GfK GROUP GfK shares GfK shares Frequency of road shows and individual meetings increased again significantly Open and direct contact with institutional and private investors, analysts and financial journalists is decisive in communicating the GfK business model accurately and professionally. It is the basis of trust and sustainability. In 2007, GfK stepped up its communications activity further, mainly in one-to-one meetings (+60% from the previous year). The increase demonstrates the attractiveness of the share. In addition to the balance sheet press conference and the Annual General Meeting, the company has been present at 12 international investor conferences, a dvfa analysts conference, ten road shows in Germany, the uk, France, Italy, Canada and the usa, two meetings with bank representatives (sales briefings), six conference calls and 280 one-to-one meetings with fund and sales managers. GfK also hosted the Nuremberg stock market day for the third year in succession, in cooperation with the Munich stock exchange and the Munich Investment Club. Over 2,000 private investors and equity analysts took this opportunity to meet financial experts and attend specialist presentations. On the GfK website, the Investor Relations section gives detailed information on the Annual General Meeting, dates and presentations as well as the share price development. The gfk impuls newsletter for private investors, published several times a year, also provides information of the development of the company network, the latest survey results and developments in the market research sector. Excellent communications activity The company s vision and personal contact are essential for its external image. In 2007, GfK received several accolades for its communications activity. At the annual competition for the best annual report held by specialist journal manager, the GfK Annual Report gained 1st place (previous year: 3rd place) in the design category across all indices. As well as the overall look and layout, the typography, images, informational graphics, colors, production and processing were assessed. Among the SDax-listed companies, GfK gained 2nd place in the previous year. In the overall rankings, it took 9th place (previous year: 8th place). Overall, the panel assessed 128 entered annual reports for the categories of content, design, language and reporting efficiency. 26_GfK

31 GfK GROUP GfK shares The ir activity was also assessed very positively in For the Capital Investor Relations Prize, GfK achieved 3rd place among SDax companies with of a possible 500 points, jumping forward seven places from the previous year. The panel reported positively on the credible and active capital markets communication, the up-to-date and consistent reporting and the convincing information on corporate governance. Financial magazine Capital and the Society of Investment Professionals in Germany (dvfa) have been holding their Investor Relations awards since 1997, rating around 200 companies from Germany s major share indices. In 2007, over 400 analysts and fund managers provided assessment. GfK_27

32 28_GfK

33 GfK Special GfK SPECIAL 32 HealthCare Lilly loves life Interview with Thomas Resch, Lilly Deutschland GmbH > > > 38 Media The viewer on the couch rules Interview with Ruurd Biermann, npo Netherlands Public Broadcasting > > > 44 Consumer Tracking Making markets with brands Interview with Christoph Eibel, Henkel Central Eastern Europe GmbH > > > 50 Retail and Technology A reliable database Interview with Yorihisa Shiokawa, Director Panasonic Marketing Europe > > > 56 Custom Research Think globally, act locally Interview with Dr. Thomas Goerdt, bmw Group GfK_29

34 50 percent of all Americans live just three minutes by car from the nearest McDonald s restaurant GfK SPECIAL North America > > > New York 30_GfK

35 North America 400 interpretations of the us national anthem exist as well as the original version GfK SPECIAL North America In terms of sales, the usa is the largest market research country in the world. GfK opened its first subsidiary in the usa, GfK Custom Research, in GfK then established a foothold in Canada in Since acquiring nop World, which was extremely important in strategic terms, also in 2005, GfK has moved from being number 15 in the national market research industry in to number 7 today. It moved into the top 50 fastest-growing us market research institutes for the first time in The Group now has eleven subsidiaries in the usa and Canada. In reorganizing the various custom research companies into a single company, GfK Custom Research North America, which was completed in 2007, the company s presence in North America has been strengthened further. In the healthcare sector, marketing the three independent companies under the umbrella name GfK u.s. Healthcare proved to be a strategic success. Internationally, GfK is well in the lead when it comes to custom research specializing in pharmaceuticals markets. GfK_31

36 When did Colonel Eli Lilly found the Lilly company? GfK SPECIAL Germany 131,900 people die of breast cancer in the EU each year 32_GfK

37 Lilly loves life GfK SPECIAL Germany Health is a person s most valuable possession. To keep it that way, GfK s HealthCare division analyzes the Pharma market. This includes studying product developments, market communications, market positioning and customer satisfaction. Beyond borders, GfK HealthCare gives us group Lilly insights for better health prospects in oncology. Lilly has been tackling unresolved challenges in medicine for the past 132 years, and provides innovative pharmaceuticals to answer the most important questions. As long ago as 1923, for example, the company launched the first [synthetic] insulin in the world under the name Iletin for treating diabetes mellitus, which had been fatal up to then. And the company made a decisive contribution to treating infections by mass-producing penicillin in the 1940s. Lilly came up with a drug against infantile paralysis in the 1950s, and against depression in the 1980s (Prozac). In the 21st century, Lilly is making a drug to combat erectile dysfunction, Cialis. Diabetics have not forgotten neither: as well as a wide range of insulin products and pens, patients have had Incretin mimic Byetta since 2005, which can reduce blood sugar levels about as effectively as insulin, and can also help patients lose weight. Lilly s approach is clear: helping people through innovative, increasingly targeted drugs and so making a major contribution to health and quality of life. As well as psychiatry, endocrinology, cardiology, epidemiology and urology, the company is also extremely strong in oncology, that is, developing and making drugs to combat cancer. And, because cancer can be defined as the malign formation of new cells, the aim here is to put a stop to this malign creation. One way of doing this is to infuse cytostatics over a long period of time. This method of treatment, commonly known as chemotherapy, can also have serious side-effects, from hair loss to some cytostatics having a carcinogenic effect. Quality of life through research Constantly researching for new methods of first-line treatment for cancers is urgently required, because the number of people with cancer is rising fast. International cancer research centre iarc reports that more than 1.7 million people died of cancer in 2006 in the 27 Member States of the eu alone. The number of cases diagnosed rose to 3.2 million, 300,000 more than in > > > GfK_33

38 » Non-small-cell bronchial carcinoma, lung cancer for short, is, unfortunately, still number one, in cancers in Europe and worldwide. «GfK SPECIAL Germany Lilly s research concentrates on non-small-cell bronchial carcinoma (nsclc), the commonest form of lung cancer, which still plays a major role in cancer mortality in Europe and the world as a whole; and mammary carcinoma or breast cancer, number three in new diseases in Europe. GfK s research also includes cross-border studies at European level to see how individual drugs are accepted and used in different countries. As well as Germany, GfK is also looking at Spain, France, the uk and Italy. And, just as these countries are different from one another, so the problems are different too in many ways. Consequently, the researchers from Nuremberg face a major problem: the market is not homogeneous, and does not provide any useful information about other oncological indications. At the same time, as the population ages, the number of cancer cases generally is rising, and is also concentrating on very specific markets such as lung or breast cancer.» GfK began studying the German market for Lilly as long ago as Since early 2007, data has been gathered and analyzed at a European level for Lilly «Cancer is the number two cause of death worldwide, after cardiovascular disease. GfK began studying the German market for Lilly as long ago as Since early 2007, GfK has been working for Lilly, gathering and analyzing their data at European level. The core groups here are university clinics, which make up more than half of all research establishments; but GfK also compiles numbers and data from general clinics, specialist oncology clinics and private establishments, surveying oncologists at clinics and in practices and lung specialists on a regular basis. Clinics and practices of different sizes are covered to ensure that as representative a picture of first and second-line treatment as possible is produced. GfK covered more than 20,000 patients in four quarters Because cancer is as individual as the people who suffer from it, there is no one therapy for everyone. On the contrary, doctors are using so-called combination or monotherapies, such as with Lilly s Gemzar or Alimta, to try to achieve their therapeutic aims. GfK was able to gather data on more than 20,000 patients and their initial and subsequent treatment in lung and breast cancer patients in four quarters. The first problem was, that as drugs are becoming increasingly specific, making the market even harder to analyze, it is essential to focus on specific markets like lung or breast cancer. And it is even more important that the figures from these markets are recorded and analyzed, even though, or perhaps precisely because, they represent just a tiny proportion of cancer research. Problem number two: cancer is extremely individual in how it first appears, which makes treatment with one or more preparations more difficult and makes analyzing treatment and patient groups even more complicated. As a leading pharmaceutical company, Lilly is spending huge amounts into driving research in these segments further, and is contributing responsibly and lastingly to a possible solution. 34_GfK

39 Interview with Thomas Resch, Lilly Deutschland GmbH, Senior Market Research Manager for Europe for Oncology, Osteoporosis, Urology Thomas Resch: It gives us a fast and continuous feedback on the frequency of use of these and other preparations and what they are used to treat. GfK: Pharmaceutical research and data analysis are on difficult ground in cancer research. What are the interdisciplinary challenges to those involved? GfK SPECIAL Germany GfK: Lilly has a tradition of making drugs which have made history in pharmaceuticals. Lilly is making advances against cancer, with cytostatics against lung and breast cancer amongst others. What s happening in this field right now? Thomas Resch: Treating cancer is one of the fastest growing medical areas of specialism. As the population gets older, cancer becomes more common. Not forgetting, of course, that, today, we can treat cancers which were considered beyond treatment just a few years ago. GfK: Lilly has been hiring GfK HealthCare to analyze data since Could you summarize your initial results at all? Thomas Resch: GfK is involved in treatment habits for metastasing non-smallcell bronchial carcinoma and metastasing breast cancer in a number of countries. These countries have some significant commonalities, but also national differences in terms of treatment. Our aim is always to understand how people are being treated, and use follow-up studies to find out why different preparations are being used. What we have found is that, while some countries in Europe are concentrating on increasing life expectancy in incurable cancer cases, even at the price of more side-effects, other countries are more concerned about the side-effects of treatment. GfK: This study is a pan-european one. Why? Thomas Resch: Research and development into and marketing cytostatic preparations is an international business: so it goes without saying Lilly is interested in finding as many comparable results, studies and insights from as many different countries as possible. GfK: With Gemzar and Alimta, the group is well positioned in cancer treatment. Where does the GfK study come in here? Thomas Resch: The challenge to market research is to find out when preparations are used, and in what area of oncology. Secondary data is virtually non-existent, although there are databases containing such information for other areas of medicine. Since this is not the case here, we need more primary market research. The other challenge is that this is a highly specialized field, with equally specialized doctors. We need to get through to these specialists to find out about their treatment habits on anonymous basis. GfK_35

40 51.04 percent of the German population are women GfK SPECIAL Germany > > > Berlin 36_GfK

41 Germany 2.3 million Germans live in alternative households GfK SPECIAL Germany Germany is where GfK has its roots, and where it earns a quarter of all the GfK group s sales. In this, the fourth largest market research country in the world, GfK came into being 74 years ago as Germany s first market research company, at Erlangen-Nuremberg University. It has now been the undisputed market leader for more than two decades. As the milestones in GfK s history show, the company has always been in the vanguard of German and European market research. It produced its first brand survey in 1936, and developed purchasing power figures in Twenty years later, in 1957, saw consumer panel research arrive from the usa, which celebrated its fiftieth birthday in The first consumer climate survey was published in 1980, and, as is well known, GfK has been measuring the viewing figures since GfK has been expanding internationally from its base in Germany since the 1960s, founding its first company abroad in Austria. By 1986, GfK had six subsidiaries of its own in Europe and eight participations, three of them in New York and Tokyo. By the time GfK went public in 1999, it was already represented in 37 countries. The Group now has 115 operating companies covering over 100 countries. GfK_37

42 How many online questionnaires does GfK s Appreciation Panel collect each year? 2.3 million 5 million GfK SPECIAL Western Europe / Middle East / Africa 7 million 1.3 million opinions brought together each year 38_GfK

43 The viewer on the couch rules GfK SPECIAL Western Europe / Middle East / Africa With more tv channels than ever to choose from, do viewers actually make a choice? The Media business unit researches the satisfaction level of viewers in a number of countries. For public tv in the Netherlands (Nederlandse Publieke Omroep [Dutch public service broadcasting], or npo), GfK has developed the Appreciation Panel System (aps), the tool that sets standards. Viewers are happy, it seems. They have more tv channels to choose from than they could have imagined in their wildest dreams just a few years ago. Plus even more with digital tv. They can also watch tv increasingly on the Internet. What about viewers though, how are they coping with all this choice? And how do they decide what to watch from the increasingly overwhelming range on offer? Viewer satisfaction is the goal One of the major challenges is to public service broadcasters financed by tv license fees. Viewer satisfaction, along with essential viewing figures and market shares, is, of course, one of the key aims of program strategy and planning. The aim here is to monitor whether they are complying with the defined policy of entertaining and informing. From diary to appreciation panel This is why in the Netherlands, research has been going on since 1965 into how satisfied viewers are with the programs they watch, as well as surveying and, later, measuring ratings. They started by making extra entries in ratings diaries; in 1987, this was then integrated into the people meter, the electronic tv viewing behavior recording system, via assessment buttons. npo, or Dutch public television, then switched to its own independent, online appreciation panel at the end of As well as the Netherlands, this GfK tool is also currently in use in the uk, Ireland > > > GfK_39

44 GfK SPECIAL Western Europe / Middle East / Africa» Today, programmers have to respond quickly to challenge presented by constantly changing behavior patterns and audience ratings, which have not been stable for some time.«and Germany. Other countries in which GfK operates tv audience research, like Belgium, Austria and Switzerland, are still using their tv research panels to gather data on viewer satisfaction. Today, station programmers must respond very quickly to constantly changing behavior patterns and their viewers ratings, which stopped being stable a long time ago. What this means is, when it comes to program ratings, survey methods need to be developed constantly. Data must be meaningful, and must be available quickly. If the npo broadcasts a program on one of its channels today, for example, the viewer rating figures for it are available midday the next day, hardly any later than the viewing share figures. An initial snapshot assessment from the 8,000 respondent appreciation panel for the Netherlands is then extended, refined and structured over the following days: so station executives have fast, precise data in order that they can respond to what their viewers expect and need by fine-tuning their programs on offer.» As well as rating each program individually, viewers can also comment on them freely. «Nearly half of all panel members give their ratings daily, bringing around 1.3 million opinions a year together, using targeted panel management to monitor and optimize them continuously to ensure they are representative. Thereby guaranteeing a differentiated picture of the Netherlands as a tv nation as a whole. As well as rating each program individually, viewers can also comment on them freely. There is an additional questionnaire tool looking at details such as individual news topics, moderators and actors, giving a fine-tuned picture of what viewers prefer, and what they don t. GfK s appreciation panel systems, which also include networks radio programs and online products in some cases, gather a huge volume of current data. GfK s Intomart in Hilversum gets around seven million online questionnaires from these systems a year. Differential analysis online tool GfK is continuing the process of ongoing development: the differential analysis online tool is being extended and refined constantly, to include multimedia approaches or even questions for non-viewers. In this way, appreciation is integrated as a factor in the network, which also solves the problem of multiple languages. For respondents, using the tool is made more pleasant by making it easier for them to select their channels individually by looking at the overview of what programs were available the day before. aps is a flexible system aps is not rigid: it is a flexible system which offers station programmers and managers current, representative data and analyses. So, just like stations compete for viewer ratings, GfK s aps is rated by the clients who use it, although this is something that has to be confirmed anew every day. 40_GfK

45 Interview with Ruurd Biermann, npo Netherlands Public Service Broadcasting, Management Board Ruurd Biermann: In the digital world, we need to be innovative, while at the same time not forgetting the audience in the analogue world. This is a balancing act, as there are no additional budgets for the digital world. We have to achieve synergies with the content of the old. We are getting ready for major changes, but will only implement them if we have the audience with us. GfK SPECIAL Western Europe / Middle East / Africa GfK: npo scored with the talk show Die Welt dreht durch [ It s a crazy world ] last year. Did aps help in developing this format? GfK: The evening news at seems to be the highlight of Dutch tv. How come npo is so dominant, with so much competition from private tv? Ruurd Biermann: Yes, we have around 30% of the market, so we re pretty happy. Two years ago, we were struggling as our market share went down. Even though we have ten full-range channels and many specialist ones in the Netherlands, changing our strategy has put us back in the race. We ve built up three full-range channels tailored to our target group. It s a simple strategy, but it works. GfK: How do you see npo s role, now and in future? Ruurd Biermann: The way I see public tv myself is that it must be aimed at a wide audience. That s what we ve done in radio in the last two years, too. I think traditional viewing and listening habits will be around for a few years yet. We follow the public as it uses new services and platforms. We re experimenting with mobile tv and narrow-casting (tv for quite small target groups), in restaurants or waiting rooms, for instance. And a kind of navigator where we aim to help viewers navigate from channel content to the content behind it via a red button on their remote control. If someone s watching an interview with a conductor, for example, they can use the red button to call up career histories or even book tickets for future concerts. We re starting a pilot project on this at some point this year. The next step is to find out what any given person is looking for on all platforms, i.e. cross media research, which means we need to expand our appreciation panel further. GfK: Today, viewers want everything, anytime, anywhere. How is npo meeting this challenge? Ruurd Biermann: For the first time, we have succeeded in doing something we have wanted to do for a long time, that is, in defining the cultural agenda. Theatre, music, literature, this program covers the whole world of culture. There s been a long tradition of trial and error since 1988; but now it s such a success that one in six of all Dutch people watch it. The moderator is already more important than the panel, though. GfK: How do you rate npo and GfK working together? Ruurd Biermann: GfK combines know-how with the right people. But we need to do even more in the future for viewers with a migrant background, as they mostly watch private stations. We need to know more about these people, and push ahead with our highly strategic ethnic marketing project. GfK_41

46 GfK SPECIAL Western Europe / Middle East / Africa 1.5 billion cut tulips are sold annually at auctions in the Netherlands > > > Amsterdam 42_GfK

47 484 per km 2 is the population density of the Netherlands Western Europe / Middle East / Africa GfK SPECIAL Western Europe / Middle East / Africa In terms of sales, Europe is the biggest market research segment in the world. No less than four countries in this region (the uk, France, Italy and Spain) are among the top 10 market research countries. GfK is already long established in Western Europe, and started setting up subsidiaries in Austria, the Netherlands and France in the late 1960s, followed by Switzerland and Sweden. Today, GfK Austria has been no. 1 in that country for many years and GfK is at the top in Switzerland, the Netherlands and Italy as well. Highlights for 2008 include GfK nop s 50th anniversary in the uk, 40 years of GfK Sverige in Sweden and 10 years of GfK audimetrie in Belgium. In the Middle East, GfK s Retail and Technology Sector is involved in twelve countries, the surveys involved being coordinated by Arabian GfK-memrb Marketing Services from Dubai. In Africa, GfK Marketing Services South Africa in Johannesburg and GfK-memrb Marketing Services Maroc in Morocco cover 13 countries in all, including almost the whole of North Africa. GfK_43

48 What are the most important stains a washing powder has to remove? dirt on collar coffee and grass stains ketchup stains GfK SPECIAL Central and Eastern Europe 1 Persil is Henkel s number one product 44_GfK

49 Making markets with brands GfK SPECIAL Central and Eastern Europe In Central and Eastern Europe, or cee for short, GfK s Consumer Tracking researchers have been monitoring consumer purchasing patterns since The ConsumerScan household panel created a tool for looking at how brands or commercial brands work in Eastern Europe. GfK s consumer panel comes to the fore when it comes to making the right decisions concerning marketing, sales and choosing business partners. And to be ahead in the cee area, amidst all the confusion, there are many specific national characteristics that need to be taken into consideration. This is where market information from GfK s consumer panels can really help: Hungary (2,000), the Czech Republic (2,000), Slovakia (1,500), Poland (5,000), Bulgaria (2,000), Russia (7,000), Romania (2,200), the Ukraine (5,000), Serbia (1,000), Croatia (1,500), Bosnia-Herzegovina (1,000) and Kazakhstan (1,000). To develop a tool for all these countries that ensures that the performance of brands and trademarks is monitored constantly is a Herculean task. Not only do cee countries differ considerably from one another, their purchasers and consumers also differ widely. Nevertheless, the trends in business and on the consumer side are following the mega-trends in their model, Western Europe. The business landscape is blossoming, and covers every kind of business imaginable, from hypermarkets offering everything through to discounters and right down to sole traders in street markets. Purchasing patterns are changing But consumers have learned that the political changes mean things are changing for them too. Gross income is rising, unemployment is falling (in part, at least), technological progress is marching on. All this is not only changing people s buying habits, it is also changing how they feel about products they need every day and have been available ever since modern forms of trading appeared. Put it another way: market penetration is changing constantly, through brands and private labels, that is, own brands that discounters and other retail chains are introducing in cee countries. Consumers in Eastern Europe still have a long way to go to catch up in terms of purchasing power before they can get level with Western Europe. Some consumers are particularly active when it comes to buying, but there are others who are unable follow this trend so easily, due to ethnic or financial factors. GfK Consumer Tracking covers all this and catalogues it in indices, so that consumers needs can be responded to better and > > > GfK_45

50 » What we ultimately found was that all customers are different. Not just in terms of categories, but also in terms of their typical national characteristics. «GfK SPECIAL Central and Eastern Europe faster. GfK Lifestyle Research colleagues have come up with eight categories: adventurers, the demanding, the comfortable, the sedentary, the critical, dreamers, safety-seekers and the openminded. GfK Consumer Tracking adopted this national map of stereotypes and values for the countries of the cee, to be able to draw conclusions about these extremely complex markets. What was ultimately found was that all customers are different. Not just in terms of categories, but also in terms of their typical national attributes. The one thing that the GfK researchers found that people have in common is that they are all different. Another revelation was that, in Serbia and Montenegro, the sedentary category is 49% higher than in the rest of the European Union. This is not something that only the Consumer Tracking segment needs to respond to, but through this specific type of consumer insight, retailers, retail chains and brand marketers need to set their point of sale and their brand communication taking into account such particular national characteristics in order to achieve growth. Identifying untapped potential To GfK s clients, this means they can do business with retail partners who can increase both their penetration and share of category requirements. On the strategic side, brand indices help decide what product segments, variants or pack sizes to use. On the operational side, targeted support action can be pushed. From the account indices, clients can find out where there is untapped potential to be exploited. In specific terms, this means Category Management projects can analyze what levers to push with retail clients to succeed in markets together in terms of scope, buying frequency and pack sizes. Putting all these parameters into colored charts puts color into the brand and trademark landscape, like into consumer profiles. Through analyzing and interpreting, marketing consultants reveal structures, such as in households with children or the silver generation, that show brand marketers looking for suitable retail partners where the right price or promotion mix lies.» Indices offer retailers, retail chains and brand marketers the knowledge on how they need to set themselves up at the point of sale. «Constantly surveying people s opinions and updating the panels are fundamental when it comes to multinational, multi-ethnic surveys. Additionally, we have account reports, showing how demand is developing for specific product groups, and for individual key accounts such as Tesco, Kaufland and Metro. And not forgetting how loyal consumers are to those key accounts. The decision on how brands and own labels come to market is based on a range of factors, which GfK s ConsumerScan consumer panel make clear and show the options available. To businesses targeting national and international retail chains, and to brand manufacturers, market researchers are able to offer a broad spectrum of information to generate business in the emerging markets in Central and Eastern Europe, and also generate convincing growth in terms of returns on sales. 46_GfK

51 Interview with Christoph Eibel, Henkel Central Eastern Europe GmbH, Sales Director cee, Laundry & Home Care are afford a dishwasher, they do not want to do any washing up at all, and they certainly don t want to stand around in the kitchen by the sink. GfK: Retail brands, known as private labels, are playing a major role in the growth of international retail chains. What is Henkel doing in response to this? GfK SPECIAL Central and Eastern Europe Christoph Eibel: Quite simply, our brands have to convince consumers through their more attractive value to performance ratio. Only if consumers really care about better product quality, and are able experience it, will they be prepared to pay more. GfK: Henkel s cee success story is an impressive one. What are the competitive advantages behind it? GfK: GfK monitors Central and Eastern Europe for Henkel via its ConsumerScan division s household panels. What are the decisive changes here, and what do they mean for Henkel s corporate strategy in this region? Christoph Eibel: There are three trends we need to keep a watch on. First: purchasing power is growing, and with it the importance of premium brands like Persil. We are also benefiting from the ongoing modernization of household equipment: if more people are buying dishwashers, for instance, or investing in new WCs, this creates new product categories for us in terms of sales. Second: consumers have extremely high expectations of brands, so we have to make sure that the products we market in the cee region are just as good as those we market elsewhere in Europe. And, third, retail is growing in its professionalism. The client landscape is becoming increasingly international, and ambitious discounters are also seeking to make themselves stand. These are aspirations we need to fulfil. GfK: What are Henkel s latest innovations in Central and Eastern Europe, and what role does market research play in developing new products? Christoph Eibel: Precise analysis is the alpha and omega of all innovation. Two examples of what Henkel is doing in the market: we have launched Persil Gold in the Eastern European market, which even removes the most stubborn stains, such as hair colorant. Our market research shows stains of this nature are particularly relevant to consumers in this region. Consequently, we had to respond to this with our special formula Persil Gold. Equally, what was important with Somat Perfect, was that our dishwasher powder really cleans everything, even heavily encrusted pots and pans, and without any pre-wash either. Because, if consumers in Central and Eastern Europe Christoph Eibel: The glocal approach is important, that is, a mix of thinking globally and acting locally. You cannot just launch products without having your ear on the market and listening to customers. Having our regional management in Vienna means we can roll out successful ideas cee-wide faster, more efficiently and effectively than we could on a country by country basis. GfK: How do you see the growth prospects in Central and Eastern Europe generally? Christoph Eibel: They are very good: but we need to work hard, day in and day out, if we are to grasp these opportunities. My aim as Sales Manager is to expand Henkel s market position, which means, we want all our brands, especially Persil, to grow faster than the market. GfK s ConsumerScan market research data plays a decisive part here, both in evaluating potential and measuring success. GfK_47

52 4 out of ten marriages are second time around GfK SPECIAL Central and Eastern Europe 119 million is the average number of days tourists spend in Austria every year > > > Vienna 48_GfK

53 Central and Eastern Europe GfK SPECIAL Central and Eastern Europe The second GfK company to open outside Germany was in Eastern Europe: a subsidiary in Hungary in Further subsidiaries followed, in Poland, the Czech Republic and Russia. Consequently, when the Iron Curtain fell, GfK was one of the first international companies in what was, until then, still new territory in terms of market research. And GfK was still expanding in Central and Eastern Europe in GfK Custom Research Baltic of Latvia, which opened in 2006, has also opened branches in its fast-growing Baltic neighbors, Lithuania and Estonia. GfK Hungária acquired the business of Hungarian market research institute lhs Consulting, expanding its healthcare research. In acquiring the Stratum HealthCare business, GfK is pushing ahead with its expansion in Croatia and Serbia, and the Stratum Research organisation has added another new country to GfK s network, Macedonia. Today, GfK has a total of 21 companies covering 20 Central and Eastern European countries. GfK_49

54 How many countries worldwide benefit from GfK s Retail Panel? More than 30 Less than 50 More than 70 GfK SPECIAL Latin America 75 percent of all TVs bought in Germany last year were flat screen models 50_GfK

55 A reliable database GfK SPECIAL Latin America GfK Retail and Technology covers the entire retail sector, from small independent retailers through major specialist outlets to shopping online, covering everything from refrigerators to high-grade plasma screens. In over seventy countries worldwide, there is one tool decision-makers in industry and retail rely on: GfK s Retail Panel from Nuremberg For consumers, it is the easiest thing in the world to just pick up the remote control, press a button, and instantly access the flat-screen tv: and with the sound emanating from a multi-channel surroundsound system. Or, the washing machine detects that high-tech textiles have been loaded, and it self-adjusts the program accordingly. The customer is no longer a certainty to bank on if they can trust a reliable information system like GfK s Retail Panel. The Retail Panel monitors the high-tech consumer goods market, using absolutely identical methods, in more than seventy countries worldwide. Panel data is divided into four dimensions: products, periods (individually or cumulative), facts which are important to the industry but also to retailers, and sales channels. For decision-makers worldwide, it s not quite that simple. The high-tech consumer goods market is massive: the number of products is growing in unmanageable dimensions, and at tremendous speed. The customer is no longer a certainty to bank on, because trends and fashion in this business sector are changing almost daily and consumers are changing with them, on to the next product group. It is therefore of significant help to decision-makers This four-dimensional panel gathers data on individual product sales and prices from selected, representative businesses. As part of the Retail Panel, all major businesses in all major sales channels work with the Retail and Technology business segment worldwide. The questions are obvious: which products are selling in what quantity, and at what price? What are the growth segments? How is the importance of sales channels > > > GfK_51

56 » In line with the fast moving and rapidly changing market, data is available exclusively online globally «GfK SPECIAL Latin America developing? Which brands are especially strong on the market, and how are they developing? Which products are selling particularly well? The surveys cover small businesses, independent and cooperative specialist retailers. At the same time, major specialist outlets, mail order houses and cash & carry stores are also surveyed. Just as high street shops are of interest, so are Internet traders with no actual stores of their own. The data is collected at central level, where it is extrapolated, aggregated and assigned to individual product groups and categories by the StarTrack system. The results of the research are then made available to our clients worldwide via GfK s monthly, weekly or in some cases even daily panel reports. In line with the fast moving and rapidly changing market, data is available exclusively online globally.» In an age where decision-making structures are global, GfK s Retail Panel provides a highly fine-tuned planning tool. «Often there are specific national hits, or the panel shows a certain regional slant. Last year in Germany, for example, the latest flat-screen tvs already accounted for over 75% of demand. In the same period, in the emerging industrial nation of the People s Republic of China, more than 40% of all tvs owned were flat lcd or plasma models. Yet, in Latin America, or Brazil, to be more precise, 90% of the tv market remained with conventional crt models: just 10% of Brazilian users opted for flat screen lcd tvs. It is information and knowledge of this kind that GfK s Retail Panel provides: a highly fine-tuned planning tool in an age where decision- making structures are global. Those who know their way in and around sectors, categories, product groups, features, brands and individual products, and are monitoring the market and its trends with keen eyes, can with the Retail Panel, finely hone their product-stream channels to maintain their returns on sales at a high level. Decisions through to life cycle First, GfK s database gives precise details on a brand position, compared directly with the competition. This applies right down to the smallest subgroup, for example, who has sold how many vacuum cleaners, microwaves and cd/dvd recorders, and what earnings have been generated. The information is provided on clients own companies, just as it is on their market competitors. But that is not all, by any means. In order to respond globally to different markets, the GfK panel can give the decisive thrust when it comes to developing individual features and product attributes. For instance, if the demand in a Latin American market is for crt tvs with hybrid tuners, this information can go straight from the Panel s findings into production. Furthermore, by using the data and facts gathered, both the planned for sales channels and the way in which prices are to be set can be managed in this fiercely competitive market. It is even possible to go so far as to make decisions on individual models life cycles based on Retail Panel surveys. Put in a nutshell, the Retail Panel offers global insights into markets, enabling strategic positioning in each market concerned. Think globally, act locally. 52_GfK

57 Interview with Yorihisa Shiokawa, Panasonic Director Marketing Europe whether consumers want to buy different products or not, how consumers respond to novelties. All this differs from country to country and from region to region. And it is changing constantly. So the GfK Retail reports play a unique role for us in interpreting consumption patterns in individual regions worldwide. GfK SPECIAL Latin America GfK: How does the Retail Panel data affect your policy elsewhere in Europe? GfK: How important is the GfK Retail Panel to Panasonic? Yorihisa Shiokawa: GfK s Retail Panel is a unique source of data, which is accurate and neutral. This is of great benefit to us, as we can use the data which has been gathered to assess how the markets are performing generally, while at the same time getting a detailed picture of how retail is doing. GfK: Panasonic is a highly innovative company, which means product replacement cycles are short. In this context, what information from the Retail Panel is important through what channel was the tv sold? This information helps us use GfK s data as an accurate database when making our marketing decisions. GfK: Have GfK Retail Panel results been used as the basis for unplanned business decisions? Yorihisa Shiokawa: Yes, indeed. GfK s figures are based on daily retail reports. Conditions in electronic entertainment systems are changing almost daily, so we very often have to take decisions quickly as circumstances change. And GfK s figures help us to take the right ones. Yorihisa Shiokawa: What GfK gives us is an outstanding analysis of the heterogeneous consumer market. Let us look at multi-channel surround-sound audio systems, for instance. GfK shows they are catching on in the uk and the Netherlands much faster than elsewhere in Europe. On the other hand, with high definition flat screen sets, France is the trend leader. All this is information we can get quickly from GfK s documents. We benefit from this, because, as a consequence, we are able to support trends consciously in individual markets and move in the right direction. Yorihisa Shiokawa: GfK s Retail Panel is very important to us in this context, because it provides us with detailed point of sale data. It answers the six big Ws : Who, for example, sold plasma tvs? Which business was it? What country was involved? When was that? Why there? And, last but not least, GfK: Does the global information from the Retail Panel also influence how you roll out national or local product strategies? Yorihisa Shiokawa: Definitely. First, we can use GfK s presentations to find the contrasts between different countries: retail trends, GfK_53

58 380 is the number of different daily papers there are in Brazil GfK SPECIAL Latin America > > > Rio de Janeiro 54_GfK

59 Latin America 28.2 percent of the population is under 15 GfK SPECIAL Latin America Latin America is the region, so the experts believe, where the economies are on the way up, and domestic economies are stabilising. Add to this rising exports, business and healthcare reforms and a new middle class of avid consumers. The two biggest market research countries in Latin America are Brazil and Mexico, which between them account for two-thirds of all market research spend in the region. But market research is also significantly on the increase in Nicaragua, Venezuela and Argentina, where the growth rate is well over 10% per annum. Here too, GfK is involved. Having for many years offered its clients information on Latin American markets via its Custom Research Worldwide network, in early 2002, GfK launched its own company, GfK Indicator, based in São Paulo, Brazil. Thereafter, GfK Marketing Services in Brazil and Chile were founded in As a result, this meant that alongside Custom Research, a second GfK business division, Retail and Technology, was present in Latin America. Today, GfK has nine companies covering 23 countries. GfK_55

60 Which color car is the most popular in China? Black White Red Silver Blue Green GfK SPECIAL Asia and the Pacific 7 times is by how much BMW has increased its sales in China in the last five years 56_GfK

61 Think globally, act locally GfK SPECIAL Asia and the Pacific In 2008, BMW and GfK will have been working together for a decade. What started in 1998, with a positioning study for Germany, has grown steadily to a comprehensive monitoring of brands: Brand Monitor for driving pleasure. GfK s Custom Research division now researches for the Bavarian car manufacturer in sixty markets worldwide. Nowhere in the world is market share fought over so hard and persistently as in the automotive industry. Managing a brand and living a brand identity is definitely not child s play in this environment. But bmw has been involved in the market since the 1920s, and soon came to understand how to build a lasting brand image. Through its involvement in motor racing as far back as the 50s and 60s, Bayerische Motoren Werk fine-tuned its core brand, bmw. Dynamism, performance and sport were early messages that were communicated by the brand. Using brand identity as the basis for creating the brand image worldwide to the extent it is perceived so meaningfully is a huge challenge. bmw s claim, driving pleasure, sets the bar high, and stands for values such as pleasure, dynamism, aesthetics, luxury and high-tech. both very constructively and productively together. Following the first pilot Brand Monitor study in Germany, three months later the same study was carried out for another six of the bmw Group s core markets: usa, the uk, Spain, Italy, France and Japan. Core claim: bmw means pleasure Since the successful relaunch of the cult brand, the Mini, GfK Custom Research has also been using the Brand Monitor on the bmw Group s other brands. As well as the Mini, the Bavarians portfolio now includes a third brand, Rolls-Royce. This noble British brand marks the absolute pinnacle of car construction, and came under the bmw Group s roof in GfK now works on the Rolls Royce brand, just as it does for bmw s motorcycle segment. Today, the bmw Group has many more brands and series than when it first started. As it grew, GfK has been by the car manufacturer s side, working The bmw brand may be constantly developing, with new models and series, but the core of the brand remains the same. And the messages > > > GfK_57

62 »While the identity of a brand always remains the same, it is marketed differently from country to country, thereby reflecting the heterogeneous nature of the brand identity in each market and country. «GfK SPECIAL Asia and the Pacific are unchanged, too: bmw means pleasure. bmw is dynamic. bmw stands for elegant, sporting design, luxury and lifestyle and sophisticated top technology. As GfK has developed over the years, Brand Monitor has too, with facelifts launching new layouts, content and structures. GfK s portfolio has come to cover more and more countries. While the identity of a brand always remains the same, it is marketed differently in different countries, thereby reflecting the heterogeneous meanings of the brand identity dimensions in each market and country. Advertising Monitor: Is the message getting across? Alongside Brand Monitor, an Advertising Monitor has also been built up. It pre- and post-tests advertising campaigns to find out if customers understand and accept the inputs and communication aims involved. Is the message getting across? What exactly do people understand from the message being advertised? Does it fit in with the brand s identity? How are all these messages rated by individuals and how do they affect their possible purchase decision?» Efficient and effective for individual target groups and advertising platforms «Take the bmw 1 series, for example, which was launched as the new alternative in the hard-fought Golf class. The bmw 1 series, a typical brand representative, brings pleasure to compacts. This baby bmw was an absolute shooting star, supported not least by a highly successful, creative, broad-based advertising campaign. China: Oriented to local conditions What is special about all GfK s support activities is that Brand Monitor, Pre-test and Advertising Monitor findings all fit together like a puzzle. While the pieces of the puzzle may be of individual importance, it is only when all the results are put together that it is possible to analyse cause and effect relationships in brand management in depth. One huge challenge for bmw and GfK was the Chinese market: billions of people with the most widely differing values conceivable had to understand a premium European maker s brand identity and feel that it speaks to them. Therefore, GfK s strategy had to be orientated towards local needs. Sometimes, the wheel does have to be re-invented. In-depth market research surveys revealed that in the land of half a billion bicycles, the people have a weakness for big cars. Big, long and status-driven is how they like them. So now there is a special model, available only in China: the series 5 bmw stretch limousine. While only the 7 series is available in limo form in Europe and the rest of the world, the Bavarians are offering the 5 series stretch version in China, preferably in the fashion color, white. While Brand Monitor looks at how bmw s brands, bmw, the Mini and Rolls-Royce are perceived long term compared with the competition, Advertising Monitor focuses on how efficient and effective specific advertising is amongst individual target groups in the short term. 58_GfK

63 Interview with Dr. Thomas Goerdt, bmw Group, General Manager Market and Trend Research impressiveness. What they really value about the bmw brand is that it is exclusive. GfK: How long has bmw been in China? Dr. Thomas Goerdt: The rule here is, production follows the market. Early on we formed a joint venture in China, and are now manufacturing there very successfully. This helps us respond better to local needs, such as with the stretch version of the series 5. But that is not the only reason why we have increased our sales in China seven-fold in the last five years. GfK SPECIAL Asia and the Pacific GfK: Is there any convergence between the European and Asian value models? GfK: What does brand and brand identity mean to bmw? Dr. Thomas Goerdt: Strong brands are an essential part of our business model as a premium manufacturer. A brand s identity is its dna, so to speak, so it guides everything bmw does. From our brand identity, for example, we produced a product attribute profile, which defines the attributes bmws must lead on. So each bmw becomes a typical representative of the brand. GfK: How important is Brand Monitor to bmw? Dr. Thomas Goerdt: Before something can be managed, first it has to be measured. So, we measure brand perception, as comprehensively and as currently as we can, and use this as the basis for defining our brand management aims and actions. This makes Brand Monitor one of the main pillars of our brand management. GfK: What findings has the bmw Group drawn from the Brand Monitor? Dr. Thomas Goerdt: One of the most important things we ve found from Brand Monitor is that the bmw brand has a huge impact, and is seen as the strongest premium brand in many markets. Brand Monitor also helps us measure the success of bmw s EfficientDynamics. What we find here is that customers think the combination of bmw s typical road handling with consumption and emissions reduction is incredibly valuable. This strengthens bmw as an innovative, dynamic, and equally, responsible brand. GfK: Being an international study, did Brand Monitor reveal local peculiarities, which you might otherwise not have expected? Dr. Thomas Goerdt: Basically, bmw is a brand which is positioned globally. The bmw claim, driving pleasure, applies worldwide. Brand Monitor helps us precisely in growth markets, in finding out what they value particularly. In China, for example, customers put great value on status and Dr. Thomas Goerdt: Our premium customers value models worldwide aren t that different, really. bmw is used to speaking to customers in elevated, open-minded target groups, of course. In Asia, and in China in particular, we find people who buy luxury cars are very open to Western value patterns. China is now becoming more sensitive to environmental issues, driven by legislation among other things. GfK: How important to bmw is working with GfK? Dr. Thomas Goerdt: In all the years that we have been working together, GfK has been providing us with the foundations for important decision-making concerning brand management and communications, and has always given us precisely what we need. As a global player, we must have market research partners who make it possible for us cover the markets globally. GfK_59

64 million is how many bicycles there are in China GfK SPECIAL Asia and the Pacific > > > Shanghai 60_GfK

65 Asia and the Pacific 22 is the minimum age at which men can get married in China GfK SPECIAL Asia and the Pacific This region accounts for no less than three of the top ten market research countries worldwide: Japan, China and Australia. The Asia and the Pacific region has been booming for some years. It is a fiercely competitive market, but it still offers the market research business major growth potential. GfK recognized this as far back as the 1980s, and launched in Japan in 1985, in Australia in 1993 and in Hong Kong, India, Indonesia, Malaysia, Singapore and Taiwan in The two Chinese companies, China Market Monitor and Beijing Sino Market Research, have been strengthening the Retail and Technology business sector s Asian activities since October Today there is also GfK Optics Japan and in this region of the world GfK has a total of 20 companies in 15 countries. GfK_61

66 Management report of the GfK Group MANAGEMENT REPORT 1. The economy Overall economic developments: a global economy despite crisis Market research sector: on course for success 65 > > > 2. Economic and financial development Introduction GfK Group: figures show convincing growth Mandatory information under company law Business divisions: understanding consumers and markets Regions: a global presence 75 > > > 3. Research and development GfK methodology and product development Custom Research Retail and Technology Consumer Tracking Media HealthCare 79 > > > 4. Human Resources New Human Resources strategy No. of employees: growth, particularly in the Asiatic region Staff turnover: regional differences Total remuneration and shares of the Management and Supervisory Boards 81 > > > 5. Organization and administration Management Board and divisional executive bodies: matrix organization Administration: centralization of major Group services 81 > > > 6. Purchasing 81 62_GfK

67 Management report of the GfK Group 7. Environmental protection 81 > > > 8. Corporate Communications 81 > > > 9. Opportunity and risk position Principles of opportunity and risk management: an integrated system Assessing opportunities and risks: case-for-case basis Assessing opportunities and risks: overall basis 86 > > > 10. Major events since the end of the financial year 87 > > > 11. Outlook Macro-economic position: growth with risks Market research sector: wide-ranging growth potential Opportunities: further rise in international projects Research and development: faster data gathering and increasing online use Human Resources: recruiting and keeping well-qualified staff Organization and administration: changed organizational structure and additions to the Management Board Corporate Communications: expansion of the global communications strategy Investment and finance: ensuring and expanding the success of the Group Development of the GfK Group: increased sales and income Development of the sectors: optimized streamlining and use of synergies 90 MANAGEMENT REPORT GfK_63

68 Management report of the GfK Group MANAGEMENT REPORT 1. The economy 1.1 Overall economic development: a global economy despite the crisis Global growth again continued in Compared with the previous year, global gdp was up 5.1%, although since mid-2007, the economic climate clouded over as a result of the turmoil on the financial markets triggered by the subprime crisis. While growth of just 2.1% put a damper on the us economy, conversely, the South East Asian economies, particularly China, continued to expand at a fast pace. The economies of eu member states also continued to grow, although at a slower pace than in gdp Growth 1) In % ) ) Germany 0.8 2) 2.9 2) 2.5 2) 2.0 7) France uk Euro zone eu 16 8) eu accession countries eu 27 9) usa Latin America Asia 5) China Japan World 6) ) Sources: 1) diw Principles of Economic Development 2008/09, The situation of the global economy and the German economy in Spring 2007, based on oecd data. 2) German Dept. of Statistics, Wiesbaden 3) Estimate 4) Forecast 5) International Monetary Fund (imf), Regional Economic Outlook Asia and the Pacific 6) The Euroframe Autumn Report ) dihk 8) From 2006 eu 16 (eu 15 and Slovenia as a result of introduction of the euro in 2007), before that, eu 15 9) From 2006 eu 27 (entry of Bulgaria and Romania in 2007), before that, eu 25 10) Credit Suisse/GfK calculation Regional and country economies have developed as follows: germany recorded growth for the fourth year in succession in Although at 2.5%, the growth rate was slightly down, economic growth is clearly reflected in the job market, with the number in gainful employment reaching 39.7 million, its highest level since reunification. Despite the strong euro, exports rose. In addition to foreign trade, the demand for investment assets remained a strong growth driver. Private consumption declined slightly, due to the increase in the rate of vat at the beginning of the year, the general rise in consumer prices and escalating energy costs. Consumer climate in Germany: fluctuating emotions 1) Month January February March April May June July August October September November December Opinion trend Consumer climate forecast weakening a reality Decline halted. due to economic optimism Consumer climate forecast change begins Consumer climate significant recovery Consumer climate growth forecast for private consumption upgraded from 0.5% to 1% Consumer climate revival of propensity to buy Consumer climate stabilizes at good level Consumer climate clouds over Consumer climate moderate after summer high Fears of inflation dampen consumer climate Price rises toxic to consumer mood Consumer mood revives as the year draws to a close Propensity to buy 2) Change from previous month Consumer climate indicator 3) Change from previous month in % ) These findings are from the comprehensive GfK consumer climate maxx survey conducted each month since 1980 on behalf of the eu Commission. In the first half of the month a representative sample of around subjects are asked about their perceptions of the overall economic situation. their propensity to buy and their income expectations. 2) The consumer confidence or propensity to buy indicator is based on the following question to consumers: Do you think it is advisable to make major purchases at the moment? (good time neither good time nor bad time bad time). The values shown above are deviations from the long-term average value. The historic maximum value for the whole of Germany was in October whilst the historic minimum value was 55.5 in November ) The consumer climate indicator describes private consumption. Key factors are income expectations and buying propensity. The economic outlook has a more indirect effect on the consumer climate. generally as a result of income expectations. The historic maximum value for the indicator was 27.9 in March historic minimum value 8.7 in February _GfK

69 The economy of the european union remained on course for growth, however, at a slower pace than the prior year. The strongest growth drivers came from investment and exports, although here, the weak dollar had to be overcome. New member states recorded a higher growth dynamic in the process of catching up the other economies. The us economy was further weakened by the subprime crisis. To avert greater disaster, the us Fed pursued monetary and interest policies which would ensure adequate liquidity on the financial markets. After a long break, the low value of the dollar once again revived export business, which contributed to economic growth. The economic upswing continued in latin america, although at a slightly weaker pace. High raw material prices, reduced dependency on exports to the us and an improve macro-economic climate benefited the economy. The Asian economies again proved the growth drivers in the global economy in The economies of china and india continue to expand and together, they meanwhile represent just under 10% of global production. Major economic growth drivers were domestic as well as foreign economies. To counteract any overheating in the Chinese market and to stem inflation, the Chinese Central Bank raised the interest rate slightly. The other south east asian economies also developed well, and with inflation on the decline, interest rates were reduced. The japanese economy suffered and even the rise in exports, particularly to the emerging Asiatic economies, was counterbalanced by moderate domestic demand and a decline in investment. The impact of this is that clients expect more from market research and these days, more often than not, market research companies act as consultants, rather than as pure data suppliers. At the same time, the demand for cost effective, instant information on markets and consumers, is on the rise. This explains the strong increase of online research. In 2006, online expenditure ran to usd 3.1 billion, which represents growth of around 14% compared to the previous year. As in other sectors, there is a growing concentration of companies active in the market research industry. Indeed, the top 25 companies in the usa, uk, Germany, France, Japan and Brazil, together account for a global market share of 63%. The process of concentration in the market research industry has again escalated in As usual, market research also benefits from the positive development of national economies. Global market research sales in 2006 totaled usd 24.6 billion. Adjusted to take account of inflation, global growth in sales amounted to 4%, which was above expert expectations. Growth in the industry varies considerably from region to region. The fastest growing regions are Latin America (11.3%), the Middle East and Africa (9.5 %). With 6.6% growth, Asia and the Pacific have also developed well. North America is growing at a reasonable rate (3.4%), however, at 2.8%, Europe has the lowest level of recorded growth, while nevertheless remaining the region with the highest market share of 43% and sales amounting to usd 10.6 billion. The growth driver behind the very strong rise in sales recorded under Other European countries is first and foremost, Turkey, which registered 30.2% growth attributable to increased investment from abroad. In second place comes Russia, with growth of 27.1% accounted for by rising home demand from the consumer goods and retails sectors. MANAGEMENT REPORT 1.2 Market research sector: on course for success Market research puts its clients in a position to act effectively and efficiently. It achieves this by the objective, systematic and structured gathering of information, the provision of appropriate instruments and the interpretation of the findings from which recommendations for a plan of action can be derived. Market research facilitates an understanding of customers and markets, because it reflects the structures and dynamics of the market environment. Market research is also essential when it comes to reviewing the performance of a company and developing strategies for the future. This becomes increasingly important because of the escalating complexity of many of the markets. Whether this concerns the trend towards saturation, differentiation, altered consumer behavior or penetration of new regions, the challenges confronting the decision-makers are growing. Market share by region1 1) Europe eu 15 eu accession countries Rest of Europe America North America Latin America Sales 2005 usd (in million) 10,475 9, ,277 8, Sales 2006 usd (in million) 10,597 9, ,105 8,884 1,221 Growth 2005/2006 in % 2) ) Asia and the Pacific 3,330 3, The Middle East /Africa World 23,425 24, ) Possible rounding differences 2) Inflation adjusted growth, based on sales in national currencies 3) GfK calculations Source: esomar Industry Report 2007, published September 2007 GfK_65

70 Economic and financial development: GfK Group MANAGEMENT REPORT At national level, the usa is the biggest market research country in the world, followed by the uk, France, Germany and Japan. Of the top 10 countries, which together account for almost 80% of the sector s overall sales, China has recorded the highest sales growth. Germany, which is the third largest consumer research market in Europe, grew by 3.1%, which is markedly more positive than Europe s two biggest markets, the uk (0.1%) and France (0.8%). The top 10 national consumer research markets: sales, growth and share of the sector s overall sales In usd million Sales 2005 Sales 2006 usa 7,722 8, uk 2,411 2, France 2,247 2, Germany 2,185 2, Japan 1,405 1, Italy Canada China Australia Spain Top 10 total 18,748 19, World 23,425 24, The importance of the customer segments hardly changed in As before, the consumer goods segment remains the principle client for market research. Virtually half the sales (48%) were generated by this segment, followed at a considerable distance by Media (15%), the public sector (8%), financial services (5%) and retail (5%). As a full-service network, the GfK Group is among the leading market research companies in the world. In 2006, the GfK Group was ranked fifth in the top 10 market research companies. Top 10 of the consumer research sector Real growth 2005/2006 1) in % 1) The growth rates are inflation-adjusted and based on national currencies Source: esomar Industry Report 2006, published September 2007 Share of sector s overall sales 2006 in % Company Sales ) Growth in % 2) 1 The Nielsen Company, usa 3, ims Health, usa 1, Taylor Nelson Sofres, uk 1, Kantar Group 3), uk 1, GfK ag, Germany 1, Ipsos, France 1, Synovate, uk iri, usa Westat, usa Arbitron, usa ) in usd million 2) Growth in local currency, adjusted to take account of acquisitions/disposals 3) Estimate Source: esomar Industry Report 2007, published September Economic and financial development 2.1 Introduction The GfK Group prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (ifrs). The financial data for the divisions and regions originate from the Management Information System. In the figures for income set out below, adjusted operating income is discussed. Like its competitors, the GfK Group uses adjusted operating income as a key performance indicator. GfK is convinced that the explanations on business performance using the adjusted operating income will facilitate interpretation of the GfK Group s business development and enhance the informative value, in comparison with other major companies operating in the market research sector. Where income is mentioned below, this is the adjusted operating income. The margin is the ratio of adjusted operating income to sales. The adjusted operating income is calculated as follows: Reconciliation of adjusted operating income in eur million Change in % Operating income Integration costs in connection with acquisitions Amortization and impairment of additional assets identified on acquisitions Personnel expenses for share-based payments and long-term incentives Other operating income less remaining other operating expenses Adjusted operating income Where statements herein refer to the number of employees, in principle, this represents the total number of full-time posts. For this purpose, part-time posts have been converted to equate to full-time posts. The figures on the business development of the GfK Group and any percentage changes are based on figures in 1,000 euros. Accordingly, rounding differences may occur. The companies mentioned in the Management Report are referred to by their abbreviated names. The Additional information of the Annual Report includes a list of the full names of all the companies indicated. 66_GfK

71 2.2 GfK Group: figures show convincing growth Sales and income GfK sales rose by eur 49.9 million to eur 1,162.1 million in With organic growth of 5.8%, the Group significantly outperformed the industry. income increased by 4.7% from eur million to eur million, with the operating margin up to a very good level of 13.6% from its 2006 level of 13.5%. Earnings 1) In eur million Change in % Sales 1, , Cost of sales Gross income from sales Selling and general administrative expenses Other operating income Other operating expenses eb itda as a percentage of sales Adjusted operating income as a percentage of sales Highlighted items Operating income as a percentage of sales Income from participations ebit as a percentage of sales Financial income Financial expenses Income from ongoing business activity Tax on income from ongoing business activity Tax ratio in % Consolidated total income Attributable to equity holders of the parent Attributable to minority interests Consolidated total income ) Rounding differences may occur highlighted items include amortization and impairment of additional assets identified on acquisitions totaling eur 30.1 million (2006: eur 22.5 million). This relates to scheduled amortization and depreciation of eur 14.8 million, impairments amounting to eur 16.2 million and value write-ups totaling eur 0.9 million. In addition, the highlighted items include personnel expenses for share-based payments and longterm incentives totaling eur 1.7 million (2006: eur 2.9 million) as well as other operating income and expenses, which netted out at eur 10.6 million (2006: eur 2.6 million). The net gain posted under this item includes exchange rate differences totaling eur 1.6 million (2006: eur 1.2 million). Other operating income also includes an amount relating to the elimination of liabilities. In 2005, GfK ag acquired nop World from its former parent, uk company ubm. On completion of the nop World acquisition, the vendor sued GfK ag for payment of certain liabilities owed to ubm by nop World companies dating back to before completion of the acquisition. Im August 2006, ubm instituted court proceedings in London. GfK refuted the claim as unfounded in its amount. In out-of-court negotiations, the estimated level of the amount payable in respect of the liabilities as at the reporting date was revised and the other operating income of eur 10.2 million posted relates to the reduction of the liabilities owing. operating income increased by eur 17.9 million, or 15.1% compared to the previous year, from eur million to eur million. The personnel cost ratio, which expresses the ratio of personnel expenses to sales remained virtually unchanged from its 2006 level at 40.0%. In absolute terms, personnel expenses amounted to eur million (2006: eur million). depreciation and amortization amounted to eur 59.7 million (2006: eur 51.2 million). Scheduled depreciation on software and office equipment, in particular, fell slightly from its 2006 level of eur 45.5 million to eur 44.2 million. MANAGEMENT REPORT The GfK Group increased ebit by 14.3% from its 2006 level of eur million to eur million in GfK_67

72 Economic and financial development: GfK Group income from participations fell slightly from eur 3.4 million in 2006 to eur 3.0 million in other financial income, which is the balance of other financial income and expenses, stood at eur 22.3 million in 2007, which represents a significant improvement over the prior year, in which other financial income totaled eur 28.4 million. The reason for this is the lower interest expenditure attributable to the reduction of financial liabilities and a positive result in terms of income from derivative financial instruments. Overall, this has led to a marked increase in the income from ongoing business activity, which was up 25.2% from eur 93.5 million to eur million in The change in current assets is associated in the main with an increase in trade receivables and current income tax receivables. Liquid funds were centralized within the Group by means of cash pools and largely used to repay external bank liabilities. Current assets include a sum of eur 9.5 million relating to all the assets of the GfK Animal Healthcare GB and m2a France companies operating in the HealthCare business sector. GfK is planning to dispose of all the assets and liabilities of both these companies in 2008 by way of a contribution in kind in return for acquiring stockholdings. In accordance with ifrs 5, the relevant assets and liabilities of these two companies must be itemized separately as a disposal group. MANAGEMENT REPORT The income tax ratio again dropped from its previous year s level of 23.8% to 21.9%. In 2007, three factors led to the lower income tax ratio: first, a tax free gain from the elimination of liabilities associated with the out-of-court negotiations with ubm, second, income tax relating to previous years, and third, tax cuts in several countries, including Germany, the uk and the usa. The GfK Group: income and consolidated total income in eur million Income Consolidated total income The GfK Group has consequently increased its consolidated total income by eur 20.2 million from eur 71.2 million in 2006 to eur 91.4 million in 2007, which equates to a rise of 28.3%. Balance sheet growth In eur million Change in % Share of total assets in % Assets Non-currents assets 1, , Current assets Liabilities Equity Non-current liabilities Current liabilities Total assets 1, , The changes on the liabilities side are again characterized by the reduction of non-current financial liabilities of eur 79.3 million (2006: eur 68.3 million). Overall, netted against new loans and funding, financial liabilities totaling eur 74.2 million were repaid in the reporting year. Asset and capital position Compared with the previous year, the total assets of the GfK Group decreased by eur 25.4 million to eur 1,470.8 million. On the assets side of the balance sheet, the drop in non-current assets totaling eur 32.5 million, is attributable, in particular, to a currency-related reduction in goodwill, which is valued in us dollars or pounds sterling and to depreciation on intangible assets. Purchase price obligations for future shareholding acquisitions which are also included in the current and non-current interestbearing financial liabilities rose by eur 8.8 million to eur 70.2 million, a rise predominantly attributable to the positive business development of the companies concerned. 68_GfK

73 equity ratio as at 31 December 2007 ran to 34.6% compared with 31.2% in Development of equity ratio in % net indebtedness, defined as the balance of cash, cash equivalents and short-term securities less interest-bearing liabilities and pension obligations were reduced by eur 69.6 million from eur million to eur million. The reduction in the net level of indebtedness was mainly accounted for by the repayment of bank loans Development of net indebtedness Investment and finance In 2007, GfK investments totaled eur 73.7 million (2006: eur 56.6 million). The majority, eur 49.2 million, was attributable to the purchase of software, office equipment and other tangible assets and eur 22.8 million was accounted for by the acquisition of consolidated companies and other business units. With cash flow from ongoing operating activity amounting to eur million (2006: eur million), capital investment was fully financed. After cash flow from ongoing operating activity dropped in 2006 due to the increase in working capital, measures intended to manage working capital proved successful in the reporting year and in 2007, despite the increase in sales, it was reduced by eur 12.8 million. Taking account of expenses relating to capital expenditure amounting to eur 49.2 million, free cash flow totaled eur million (2006: eur 67.7 million), so that in the year under review, all acquisitions could be financed out of free cash flow, with the remainder used to pay back bank loans. In eur million Change in % Liquid funds Short-term securities and time deposits Liquid funds and short-term securities Liabilities to banks Pension obligations Liabilities from finance leases Other interest-bearing liabilities Interest-bearing liabilities Net indebtedness gearing, which is the ratio of net indebtedness to equity, fell to 92.8% (2006: 116.3%) during the past financial year. The positive trend was also reflected in the ratio of net indebtedness to key financial performance statistics, ebit, ebitda and free cash flow, all three of which decreased significantly in the reporting year. Gearing and ratio of net indebtedness to ebit, ebitda and free cash flow MANAGEMENT REPORT Development of free cash flow In eur million Change in % Cash flow from ongoing operating activity Capital expenditure Free cash flow before acquisitions, other investments and asset disposals Acquisitions Other financial investments Asset disposals Free cash flow after acquisitions, other investments and asset disposals Gearing (net indebtedness/equity) % 92.8 % Net indebtedness/ebit Net indebtedness/ebitda Net indebtedness/free cash flow The investments summarized under soft facts are not capitalized, but are charged as expenses in the income statement. They mainly include non-capitalized expenses for setting up and maintaining panels, for in-house software development and for staff training and professional development. These investments play a crucial role in securing the future success of the group, as they help to raise market entry barriers against any potential competitors. In the reporting year, investments posted under Soft Facts increased by 1.8% to eur 53.3 million. In 2007, expenses rose in all areas, apart from those attributable to in-house software development and the change in these is primarily accounted for by the fact that more of the costs were eligible for capitalization than in GfK_69

74 Economic and financial development: GfK Group Expenses relating to Soft Facts 1) In eur million Change in % Costs of maintaining panels (incl. recruitment) Costs of in-house software development (not eligible for capitalization) Training and ongoing professional development Other Total ) Rounding differences may occur or through an offering to shareholders, providing the cash price for the shares at the time of the sale is not significantly below the stock exchange price for similar shares in the company. The number of shares for sale may not exceed a maximum of 10% of the share capital of the company at the time the resolution was passed by the General Assembly on 23 May 2007 or if lower 10% of the registered capital of the company at the time of the sale of the shares. The buy-back of shares is limited to a maximum of 10% of the share capital at the time the authorization was granted. The new authorization applies until 22 November The acquisition is carried out through a public offering addressed to all the shareholders or via the stock market. MANAGEMENT REPORT In addition to Soft Fact expenses, eur 14.5 million (2006: eur 13.1 million) was invested in in-house software development and panel set ups. 2.3 Mandatory information under company law (Section 315 para. 4 of the hgb, German Commercial Code) The share capital of GfK ag amounts to eur 150,080, divided into 35,863,031 no-par shares made out to the bearer. There are no restrictions in the Articles of Association relating to voting rights of the assignment of shares. All shares carry the same rights. GfK-Nürnberg e.v. has a direct holding of 56.8% of the voting rights in GfK ag. The company has not received notification of any other shareholders with a stake of 10% or more of the capital. Employees with an interest in the capital may exercise their voting rights directly. Pursuant to section 5.2 of the Articles of Association of GfK ag, the Supervisory Board is responsible for determining the number of and appointing the members of the Management Board and their deputies, concluding service contracts and revoking appointments and where this applies, appointing a member of the Management Board as ceo, as well as other members of the Management Board as deputy ceos. The Articles of Association do not contain any regulations that exceed the statutory requirements of sections 133, 179 of the German Stock Corporation Act (AktG). If the Management Board makes use of the authorization to call in its own shares in the company, the call-in is carried out such that the share capital does not change, but that the proportion of other shares in the share capital is increased pursuant to section 8 para. 3 of the German Stock Corporation Act (section 237 para. 3 No. 3 German Stock Corporation Act). At the same time, the Management Board is authorized to amend the number of shares to this extent in the Articles of Association. With the consent of the Supervisory Board, the Management Board is empowered to utilize the above authorizations on one or more occasions, together or separately. The subscription right of shareholders to own shares is excluded to the extent that the shares are being used as part of a merger or acquisition of companies or to discharge obligations under the convertible bonds and/or stock options to be issued or for disposal via the stock market or by any other means. In the event of a disposal of shares as part of a sale offering addressed to all the shareholders, the Management Board can exclude the subscription right of shareholders for fractions with the consent of the Supervisory Board. GfK ag does not have any compensation agreements in the event of a takeover offer with the members of the Management Board and the employees. The Annual General Meeting on 23 May 2007 adopted a resolution authorizing GfK to acquire shares in GfK ag and to resell own shares held. The shares may be acquired in order to offer them to third parties as part of a merger of companies or acquisition of a company or participation or to enable the company to discharge its obligations in relation to any convertible bonds and/or share options to be issued. The same applies for calling in shares and the resale of shares on the stock market. Trading in own shares is not admissible. Shares may not be offered for subscription on the basis of an offering to all shareholders preserving their prescription rights and the principle of equality (section 53a German Stock Corporation Act) or by any other means than on the stock market 70_GfK

75 2.4 Business divisions: understanding consumers and markets GfK offers its clients from the consumer goods and pharmaceuticals industry, retail, media and the service sector, a comprehensive range of information and consulting services in a total of five business divisions. These deliver the fundamental knowledge which GfK clients need to make their marketing decisions. custom research: The Custom Research division supplies information and consulting services for operational and strategic marketing decisions in over 30 countries, and via partnerships in a further 60 countries. Adjustments have been made to the previous year s figures for four business divisions. This has been carried out in order to reflect the clear separation of business which can be unequivocally aligned to a particular division. Business originally assigned to Consumer Tracking has been included in Retail and Technology. The 2006 margin for Consumer Tracking has consequently risen by 0.6 percentage points and fallen by 0.8 percentage points in Retail and Technology. In the case of Custom Research, some areas which could be identified as HealthCare business have been retrospectively included in the HealthCare figures, although this has not affected the margins in either division. Custom Research offers a broad spectrum of services which include tests and studies, in particular, for product and pricing policy, brand management, communications, distribution and customer loyalty. GfK monitors products and services through from initial design to the more mature stages of the product lifecycle. Clients are the branded goods industry, retail and the media, as well as the service industry. retail and technology: The Retail and Technology division supplies clients with information and consulting services based on retail data from continuous surveys and analyses of sales of technical consumer goods and services in the retail sector in more than 70 countries worldwide. Among the market segments in which GfK surveys and analyzes data are office communications, photographic technology and optics, electrical household appliances, information technology, telecommunications, sports equipment, tourism, consumer electronics and entertainment media. consumer tracking: The Consumer Tracking division provides information services based on continuous surveying of consumer purchasing decisions and behavior patterns for the whole of Europe. The services cover virtually all fast moving consumer goods as well as a range of other consumer goods and services. Major clients include branded goods manufacturers, retailers and service providers. media: The Media division delivers information services on reach, intensity and nature of media usage and acceptance in more than 20 countries in Europe and the usa. The services are directed at clients from media companies, agencies and the branded goods industry. The range of available services includes continuous, as well as special one-off studies and analyses. Media division data sources come from tv, radio, print, outdoor advertising and online. healthcare: The HealthCare division provides its clients worldwide with information on prescription drugs as well as otc preparations, social health and pharmaceutical sector projects. Services include analysis of issues relating to product development and market communications, image cultivation and pricing of medicines, market positioning and customer satisfaction, as well as supplying information on the sales volumes of products used in dentistry and veterinary medicine. Clients mainly include manufacturers of products in the pharmaceutical sector and all institutions involved in health issues. Breakdown of growth of sales and income in % 1) Total growth Growth from acquisition Organic growth Currency effects Sales Income 1) Rounding differences may occur Proportion of divisional sales to total sales in % 1) Custom Research 46.3 Retail and Technology 22.4 HealthCare ) Rounding differences may occur: Other not taken into account on the chart Proportion of divisional income to total income in % 1) Custom Research 27.2 Retail and Technology 42.7 HealthCare 9.3 Consumer Tracking 8.9 Media 10.7 Consumer Tracking 5.5 Media ) Rounding differences may occur: Other not taken into account on the chart MANAGEMENT REPORT GfK_71

76 Economic and financial development: business divisions Margin by business division in % Custom Research Retail and Technology Consumer Tracking Media HealthCare Actual 2006 Actual other: The business divisions are supplemented by the Other division, which, in particular, covers GfK s central services for its subsidiaries and other services not related to market research. The division mainly includes some elements of iha-gfk ag, GfK Data Services, GfK Methoden- und Produktentwicklung and departments of GfK Group Services. custom research: Despite a difficult market environment in the usa and the uk, the Custom Research division was able to further increase its sales. At eur million, this, the GfK division recording the highest sales of the Group, achieved an increase of 4.0% compared with the 2006 result. Sales were above the level of the previous year in every quarter and in particular, sales in the final quarter of 2007 markedly outperformed those recorded in the same quarter the prior year. Organic growth achieved a factor of 4.5 percentage points, and the biggest growth in sales was recorded in Germany. Acquisitions contributed 1.7 percentage points to growth and currency effects impacted on total growth to the tune of 2.2 percentage points. Custom Research: key figures 1) In eur million Change in % Sales Income Margin in % ) No. of employees 3,573 4, ) Rounding differences may occur 2) Percentage points MANAGEMENT REPORT Business development: sustained increase in sales and income In 2007, the GfK Group achieved new historic record sales and income. Custom Research: breakdown of growth of sales and income in % 1) Total growth Growth from acquisitions Organic growth Currency effects , ,5 Sales Income 1) Rounding differences may occur Custom Research division income amounted to eur 42.9 million, which is just below the 2006 level. While acquisition-related growth recorded an increase of 1.4 percentage points, organic growth fell by 0.8 percentage points. In addition, currency effects of 1.6 percentage points contributed to the slight drop in income. The somewhat lower income recorded compared with the previous year can be attributed to the result for the second quarter 2007, which was adversely affected by the fact that some contracts in the syndicated automotive research were not extended. However, it is pleasing to report that business subsequently recovered in the following six months and on this basis, the profits in 2007 are almost at their level for the previous year. In the financial year under review, Custom Research achieved a margin of. 8.0%. 72_GfK

77 retail and technology: As in 2006, Retail and Technology sales again rose considerably. The division recorded overall growth of 10.8%, which is the highest in the entire GfK Group to record sales totaling eur million. Organic sales growth accounted for 11.6 percentage points, another record among all GfK business divisions. While consolidation effects were of minor importance only, currency effects reduced growth by 1.4 percentage points. The springboard for this sustained success is the strategy of consistent worldwide implementation of StarTrack, a production and reporting system now in global use. Retail and Technology is offering an increasingly wide range of harmonized, global and topical reporting for technical consumer goods in particular, which is tailored to suit specific client needs. Business performance worldwide was very pleasing. Retail and Technology: key figures 1) In eur million Change in % Sales Income Margin in % ) No. of employees 2,109 2, ) Rounding differences may occur 2) Percentage points consumer tracking: This division was able to increase its sales by 3.2% to eur million. Apart from minor currency effects, growth was almost exclusively organic in origins. On the German market in particular, GfK s Consumer Tracking division was able to further consolidate its lead with innovative products and standard panel business. In addition to winning new customers, business with existing clients was significantly increased by the new Advanced Business Solutions advisory team. Beyond Germany, Consumer Tracking business developed extremely well in many Eastern European countries. Growing client demand for Fact-based Consultancy was actively met by customized surveys. Consumer Tracking: key figures 1) In eur million Change in % Sales Income Margin in % ) No. of employees ) Rounding differences may occur 2) Percentage points Consumer Tracking: breakdown of growth of sales and income in % 1) Retail and Technology: breakdown of growth of sales and income in % 1) Total growth Growth from acquisitions Organic growth Currency effects , Total growth Growth from acquisitions Organic growth Currency effects Sales Income 1) Rounding differences may occur MANAGEMENT REPORT Sales Income 1) Rounding differences may occur This division also achieved the highest growth of any division within the GfK Group, with income rising by 13.8% to eur 67.3 million. This was due, in particular, to organic growth amounting to 14.5 percentage points. Acquisition-related changes from 2006 were of negligible importance, where income is concerned and the impact of currency effects was reflected by 1.0 percentage points. The Consumer Tracking business division recorded income totaling eur 8.6 million, representing growth of 10.2%, all of which was purely organic. In addition to higher sales, the increase in lucrative, panel-based studies and continuous online sampling contributed to the rise in income. The margin rose from 7.9% in 2006 to 8.4%. At 25.8%, the margin was the highest among all five business divisions, even outperforming the high level of the previous year. GfK_73

78 Economic and financial development: business divisions MANAGEMENT REPORT media: Sales in this business division increased by 6.4% to eur million, with 10.1 percentage points attributable to organic growth. This marked organic growth was due to a great extent to major contracts obtained in the regions Western Europe/Middle East/Africa and North America. In audience measuring, new multiyear contracts or contract extensions were obtained. The contract for tv audience research in the Netherlands, which was signed in 1964, was extended for a further three years. GfK Romania and GfK Ukraine have set up the necessary conditions to start measuring tv audience in their respective countries from January Together with the existing contracts, such contracts form the basis for further sales growth in this business division. However, the weak us dollar meant that overall growth had to absorb negative currency effects totaling 3.7 percentage points. Media: key figures 1) In eur million Changes in % Sales Income Margin in % ) No. of employees ) Rounding differences may occur 2) Percentage points Media: breakdown of growth of sales and income in % 1) Total growth Growth from acquisitions Organic growth Currency effects Sales Income ) Rounding differences may occur The Media division increased its income by 1.3% to eur 25.7 million, with 6.9 percentage points of organic growth. At the same time, currency effects reduced this growth by 5.5 percentage points. The higher income achieved results in particular for the pleasing development of business in the regions Western Europe/the Middle East/Africa. In the year under review, the margin totaled 20.6%, which, although slightly below the previous year s level, is still the clear runner-up in terms of yield in the GfK Group. This very good margin was achieved in spite of the increased costs associated with Evogenius production and analysis software. The new broadcast technologies and tv trends as a result of digitization, the Internet and mobile terminals have produced some very complex challenges on the market. GfK has developed a timely strategic response to these market developments in the Media sector and is implementing this successfully. healthcare: Sales in this business division amounted to eur million. Currency effects totaling 5.2 percentage points adversely affected overall growth. Since the majority of HealthCare sales are generated in North America, the effects of the weak zs dollar were evident. Organic development reduced overall growth by 0.2 percentage points. In particular, growth in the region Central and Eastern Europe was partly able to offset some of the decline in other regions. Company acquisitions contributed 1.1 percentage points to sales growth. HealthCare: key figures 1) In eur million Changes in % Sales Income Margin in % ) No. of employees ) Rounding differences may occur 2) Percentage points HealthCare: breakdown of growth of sales and income in % 1) Total growth Growth from acquisitions Organic growth Currency effects Sales Income ) Rounding differences may occur The HealthCare business division recorded income totaling eur 14.7 million, which was around 8.4% below the 2006 level. 4.6 percentage points of this decline are attributable to organic development and another 4.6 due to currency effects. Acquisitionrelated factors served to add a further 0.8 percentage points to growth. The generally difficult market environment in the healthcare industry caused business to decline in this area. Most affected out of the Group was uk business, although a glance at the individual quarterly figures shows that the sales and income figures for the uk in the last quarter of the financial year hardly differ from those of the previous year. This is an indicator that the restructuring measures have been successful. Conversely, the region North America recorded a marked increase in organic income growth. Despite the challenges described above, the margin in this business area was 11.1 %, which is close to the level of the previous year. 74_GfK

79 other: Sales recorded in this area were eur 3.7 million, which was below the figure for the previous year, which was eur 4.6 million. Others: key figures 1) In eur million Income in this field dropped slightly by comparison with the previous year from eur 1.1 million to eur 1.5 million. Changes in % Sales Income Margin in % ) No. of employees ) Rounding differences may occur 2) Percentage points 2.5 Regions: a global presence In 2007, the GfK Group restructured its business by regions. The company has recently intensified its activities in the new economic areas of Latin America, Central and Eastern Europe and Asia and the Pacific. The current regional divisions are in line with the dynamic development of the emerging markets, and are as follows: Germany, Western Europe/Middle East/Africa, Central and Eastern Europe, North America, Latin America and Asia and the Pacific. The GfK Group has a network of its own companies covering 100 countries all over the world. Geographically, its business is divided into six regions: germany Since the 60s, GfK has been extending its international network from its German base. western europe/middle east/africa GfK has been active in Western Europe since the 60s and now has a presence in a total of 16 countries. GfK is also present in 12 countries throughout the Middle East and 13 in Africa. central and eastern europe GfK established its first subsidiary here in 1989 and is today represented in 20 countries by 21 companies. north america In 1999, GfK opened its first subsidiary in the usa, followed in 2005 by Canada. Just two years on, by 2007, there were 11 GfK companies in the usa and Canada. latin america Having started here in 2002 by establishing its own company, today, GfK has nine companies in 23 countries in this region. asia and the pacific This part of the world was added to the GfK network in In 2007, GfK had more than 20 companies in 15 countries. MANAGEMENT REPORT Material changes in the GfK network Company Jan Schipper Satistème s.a. Daphne Communication Management b.v. GfK Optics Japan kk Beijing Sino Market Research Co. Ltd. China Market Monitor Co. Ltd. GfK Beijing Custom Research Investment activity Increased shareholding Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Stake in % Business division Region 100 HealthCare Western Europe/ Middle East/ Africa 100 Custom Research Western Europe/ Middle East/ Africa 100 Custom Research Western Europe/ Middle East/ Africa 100 Retail and Technology 100 Retail and Technology 100 Retail and Technology Asia and the Pacific Asia and the Pacific Asia and the Pacific 66 Custom Research Asia and the Pacific GfK_75

80 Economic and financial development: regions All the regions recorded organic growth in 2007 compared with the previous year. Regional breakdown of sales in % 1) Germany 25.0 Western Europe/ Middle East/Africa 41.3 Latin America 2.3 1) Rounding differences may occur Central and Eastern Europe 6.3 North America 20.7 Asia and the Pacific 4.4 germany: The GfK Group continues to be the undisputed market leader in Germany. In 2007, GfK increased its sales in Germany by 7.7% to eur million (2006: eur million). This corresponds to a quarter of the total sales recorded by the GfK Group. Sales growth was exclusively organic and was mainly attributable to the excellent business development of Retail and Technology, which also coordinates many international contracts from Germany. western europe/the middle east/africa: With sales totaling eur million, Western Europe/Middle East/Africa is the best performing region of the GfK Group. Out of sales growth amounting to 5.0%, 4.5 percentage points were generated organically. Acquisitions added 1.1% to sales, however, currency effects reduced growth by 0.7 percentage points. Retail and Technology, Custom Research and Media business divisions developed particularly well. Western Europe/Middle East/Africa: key figures 1) In eur million Change in % Sales No. of employees 3,179 3, ) Rounding differences may occur Western Europe/Middle East/Africa: breakdown of sales growth in % 1) Total growth Growth from acquisitions Organic growth Germany: key figures 1) Currency effects 0.7 MANAGEMENT REPORT In eur million Change in % Sales No. of employees 1,628 1, ) Rounding differences may occur Germany: breakdown of sales growth in % 1) 1) Rounding differences may occur central and eastern europe: GfK increased its sales by 13.4% to eur 73.1 million (2006: eur 64.4 million). Organic growth accounted for 12.4 percentage points. The subsidiaries in Russia, Poland and Hungary recorded a marked increased in their sales. Currency effects added another 1.0 percentage points. Total growth Growth from acquisitions Organic growth Currency effects Central and Eastern Europe: key figures 1) In eur million Change in % Sales No. of employees 1,118 1, ) Rounding differences may occur 1) Rounding differences may occur Central and Eastern Europe: breakdown of sales growth in % 1) Total growth Growth from acquisitions Organic growth Currency effects + 1,0 1) Rounding differences may occur 76_GfK

81 north america: The accelerated weakening of the US dollar reduced sales in the region by 8.2%, cutting the total sales by 6.5% from EUR million to EUR million. Organic growth accounted for 1.8% of sales. GfK is now ranked seventh of the top ten market research institutes in North America. North America: key figures 1) In eur million Change in % Sales No. of employees 1,057 1, ) Rounding differences may occur North America: breakdown of sales growth in % 1) asia and the pacific: With a rise of 28.4% from eur 39.6 million in 2006 to eur 50.8 million in financial year 2007, GfK recorded the highest percentage sales growth of all its regions in Asia and the Pacific. The majority of this, 15.9 percentage points, was of non-organic origins. At 17.9 percentage points, Asia and the Pacific also achieved the highest organic growth rate of the GfK Group. Currency effects reduced sales growth by 5.5 percentage points. Asia and the Pacific: key figures 1) In eur million Change in % Sales No. of employees 650 1, ) Rounding differences may occur Total growth 6.5 Growth from acquisitions Organic growth Currency effects 8.2 1) Rounding differences may occur Asia and the Pacific: breakdown of sales growth in % 1) Total growth + 28,4 Growth from acquisitions Organic growth Currency effects 5.5 latin america: The distinguishing feature of the region Latin America was its extraordinarily dynamic growth. Compared with the previous year, the GfK Group recorded a 12.9% increase in sales in the region to eur 26.7 million (2006: eur 23.7 million). With organic growth of 14.4 percentage points, GfK companies in this emerging region registered the second-highest organic growth rates within the Group. Currency effects reduced sales by 1.5 percentage points. 1) Rounding differences may occur MANAGEMENT REPORT Latin America: key figures 1) In eur million Change in % Sales No. of employees ) Rounding differences may occur Latin America: breakdown of sales growth in % 1) Total growth Growth from acquisitions Organic growth Currency effects 1.5 1) Rounding differences may occur GfK_77

82 Research and development 3. Research and development 3.2 Custom Research MANAGEMENT REPORT The new and further development of methodologies and research tools is a major factor in retaining the loyalty of existing clients and gaining new ones. Ongoing development of innovative methods is a significant element of the GfK Group s day-to-day business. Most of the necessary development work is carried out by GfK Methoden- und Produktentwicklung in Nuremberg, Germany. The department concentrates on statistical and methodical surveying, the determination of basic units, the optimization of random sampling and extrapolation procedures, as well as designing programs for data gathering and analysis software. In addition, every individual business area will develop its own innovations based on its knowledge of market requirements, partly with the support of GfK Methoden- und Produktentwicklung. 3.1 GfK Methodology and product development On-shelf product placement can be an important and cost factor for success, particularly where fast-moving consumer goods are concerned. This is why GfK Methoden- und Produktentwicklung developed a new placement optimization system for the GfK Brand & Communication Research department of the Custom Research sector in The technique facilitates the management of positioning products in such as way as to maximize total shelf sales. Key success factors can be clearly identified, and their effect quantified, and the effectiveness of planned measures can be predicted using a simulation tool. The new GfK approach delivers correlation-based information on the relationship between cause and effect. For example, it answers the question whether reducing the number of units in a packet of a strong brand and at the same time increasing the number of units in a packet of a newly-launched weak brand influences shoppers in their decisions. In the much-debated area of neuro-marketing and particularly, neuro-market research, GfK Methoden- und Produktentwicklung has carried out a ground-breaking project in cooperation with the Chair in Neruo-psychology at Zurich University. The project tested whether nuclear tomography could be used to validate market research instruments, for which female student choc-oholics were questioned using both traditional tools and nuclear tomography. The result was unequivocal: the strength of brain activity correlated with the dimensions revealed by the traditional measurement techniques and so, for the first time, it could be proved that brand preference distinctions can also be measured in the brain. Key factors for acceptance and conversion of market research findings by clients are simple accessibility and comprehensibility. GfK octopus is an online reporting platform in the Custom Research sector which gives clients easy access to meaningful data, which they can download from anywhere at any time they choose. Complex market research results can be intelligently presented using dynamic, interactive user interfaces. At the same time, the platform serves as an online library and archive for document and file management. The design is custom-tailored to suit each individual customer and beyond this, the system is also able to respond the most varied management level needs. GfK shopper research gives companies the ability to improve in-store brand effectiveness. In a holistic approach, GfK delivers manufacturers and retailers penetrating insights into consumers, their social and cultural motivations, as well as information on the purchasing process and global buying trends. The qualitative and quantitative techniques used include detailed home or instore interviews as well as monitoring of purchasing behavior in the stores. Regular data collected via the consumer panels on the purchases made by private households round off the service package provided by GfK Shopper Research. gfk ad*vantage/multimedia is a new instrument which for the first time pre-tests advertising destined for various different media using an identical test design. It measures the efficiency of individual advertising with a high level of reliability and permits a comparison of the effectiveness of different advertising media such as tv, print, outdoor, radio, online and pos. In addition, GfK ad*vantage/multimedia makes it possible to compare the effectiveness of a campaign on each of the advertising media used. This subsequently enables GfK to give its clients recommendations for their media planning with a hitherto impossible degree of accuracy. 3.3 Retail and Technology What is the correlation between price and performance? How can we optimize our range in particular stores? Which of our portfolio of products should we be pushing? These and other questions can be answered by GfK retail analytics, a new tool offered by the Retail and Technology sector which forms an important complement to the retail panel. GfK Retail Analytics is hugely useful when it comes to issues such as price structure, competitive analysis, range structure and product marketing. It delivers clients detailed insights into market movements in individual stores. Clients with the benefit of GfK Retail Analytics can support their marketing activities on hard facts. 78_GfK

83 GfK temax, a barometer of the market which reflects the German technical consumer goods market, is directed at decision-makers in trade and industry, and at interested market watchers. Since August 2007, this index has been publishing the latest sales trends in electrical consumer goods on a quarterly basis. The barometer focuses on sales in the overall market and in individual market segments, entertainment electronics, photographic equipment, small domestic appliances, large domestic appliances, information technology, office equipment, fast moving consumer goods and telecommunications. GfK issue specific readership study from us-based mri, gives marketing specialists the ability to accurately determine the reach of a particular advertising campaign over a set period and consequently, to calculate the contribution made by a specific issue to the Return-on-Investment of the ad campaign. The initial study carried out by mri in June 2007 investigated the readership of around 200 individual magazine issues. Up till then, mri had been supplying newspaper and magazine publishers with average readership values on a twice-yearly basis. Issue-specific readership analysis is based on continuous weekly online surveying. 3.4 Consumer Tracking 3.6 HealthCare The efficiency of the management of the ConsumerScope GfK consumerjury panel enhances the communication interface between GfK and its panelists. The new online platform serves to record the purchases made by the online panel. In addition to questionnaires, the platform also includes all the other information exchanged between GfK and its panelists on a continuous basis. An additional module supports sample management by supplying all the information on sampling structure, questionnaire feedback and data validity. GfK ConsumerJury is multilingual and can consequently be used anywhere in the world. Assuring the quality of the purchasing data gathered from panelists is handled by the newly developed GfK new atracktive basic system (GfK nabs), an extended processing platform for consumer panel dataflow, data verification and database management. To a large extent, this automates the quality assurance processes, at the same time permitting flexible adaptation to the specific requirements of data gathering tools and a variety of product areas. The approach is subject to test rules which relate to features such as Are the prices right? or Are private labels appropriate for the store in question?. GfK nabs is already in use in Germany, Austria and the Benelux countries. GfK HealthCare, Germany, has taken on a pioneering role in survey technology. Since 2007, the participants of a new multi-client panel have been surveyed using state-of-the-art speech recognition software by GfK repinsight. Currently, around 400 doctors report the content of their conversations with pharmaceutical field services via computerized prompted telephone surveys. The responses to open-ended and closed questions are digitally recorded and later transcribed for clients. New product, GfK concept measures, permits predictions to be made by doctors, patients and other healthcare professionals on the market suitability of new product concepts and ideas. The tool was launched on the market by us-based GfK Market Measures in The target group of this web-based tool for quantitative market research is made up of healthcare industry marketing departments. The chances for success of a product can be predicted with a high level of statistical probability. GfK Concept Measures also facilitates comparisons with other products tested by GfK Market Measures. MANAGEMENT REPORT 3.5 Media A completely new method of readership measurement for the print media has been developed for the Media sector by GfK Austria together with the mediacom agency. GfK mediascan represents an alternative to the traditional readership analysis interview-based methods. Small scanners are used by the subjects to register product codes of newspapers and magazines they read during a set period of one to a maximum of four weeks. Participants scan the start as well as the end of their particular reading times, so that their media consumption is accurately recorded. GfK mediascan delivers new indicators which are already available for tv and radio and are used as reference values in media planning and for print advertising decisions. GfK_79

84 Human Resources 4. Human Resources The growth and internationalization of the GfK Group is having an escalating impact on the number and global distribution of the work force. More than 9,000 employees contributed to the success of the GfK Group in over 100 countries and in 2007, the staff complement not only increased markedly, but also reflected a much higher level of global diversity. With this, the increasingly complex environment of international cooperation between human resources organizations is of growing importance. In addition to the creation of the post of Global Head of Human Resources at the end of 2006, in 2007, the GfK Human Resources International department was also restructured. The department is responsible for the development and dissemination of human resources instruments for international application as well as for supporting local hr organizations. The newly created unit is managed as a global business partner and has already supported several companies with the local introduction of hr instruments. The department will be continuing to expand the services it offers in New Human Resources strategy Number of employees by division in % 1) Custom Research 46.7 Retail and Technology 27.1 Consumer Tracking 9.3 Total 100% 9,070 full-time positions 1) Rounding differences may occur Number of employees by region in % 1) Germany 18.9 Western Europe/ Middle East/Africa 36.8 Latin America 4.4 Total 100% 9,070 full-time positions 1) Rounding differences may occur Media 6.2 HealthCare 6.1 Other 4.6 Central and Eastern Europe 14.2 North America 12.0 Asia and the Pacific 13.6 MANAGEMENT REPORT All strategic targets and measures adopted by the Human Resources managements are consistently directed at the aims of the 5-Star Initiative and have been split into the three areas of Recruit Refresh Retain as special Human Resources activities. Recruit deals with all issues relating to long-term human resource planning, such as personnel recruitment and integration. Refresh relates to further development of the knowledge and skills of employees and Retain is concerned with cultivating and keeping staff. 4.3 Staff turnover: regional differences The staff turnover rate of the GfK Group is expressed as the ratio of employee resignations in relation to the total average number of employees of the Group in the reporting year. This was 13.0% in Compared to the previous year, this represents a rise of +1.6 percentage points. The sustained economic upswing in many countries has a tangible effect on the job markets and also impacts the retention of qualified and experienced employees by companies. 4.2 Number of employees: growth, particularly in the Asiatic region At the end of the financial year 2007, the staff complement of the GfK Group had risen by 1,167 or 14.8 % to 9,070 employees. Of the 1,167, 45 % were the result of new acquisitions. he number of employees in GfK companies outside Germany totaled 7,356, which corresponds to a rise of 1,081 compared with the prior year and brings the total of employees outside Germany to 81%. Approximately half the increase in total staff numbers in financial year 2007 is attributable to Asia and the Pacific, predominantly to company acquisitions in the region. Staff numbers continued to grow in all regions of the GfK Group. At business divisional level, more than half the rise in staff numbers was attributable to Custom Research and here again, the Asian region predominated. Retail and Technology contributed equally to the increased presence in the Asiatic markets, with around 30% more staff joining the GfK Group. However, the turnover rate remains at a low level, for example, in Germany, where it was 2.2% (2006: 2.1%). Conversely, in the dynamic market environment of growth areas, Asia and the Pacific, Latin America and Central and Eastern Europe, at about 20%, staff turnover rates were significantly higher. These very disparate values are accounted for by regional market differences and correspond to the average turnover rates for the regions concerned. 80_GfK

85 4.4 Total remuneration and shares of the Management and Supervisory Boards Information on the remuneration of the Management and Supervisory Boards and their shareholdings is given in the tables and explanations in the remuneration report in the Corporate Governance report on page 14ff. There were no loans or advances to members of the Management and Supervisory Boards. 5. Organization and Administration The GfK Group offers its clients information services based exclusively on market research. It continues to configure its organization to support the requirements of the global growth of the GfK Group. This constellation enables local companies to respond instantly to any market opportunities and risks arising. In Germany, the GfK Group network includes 15 consolidated companies and three participations in addition to the parent company. Globally, there are 130 consolidated subsidiaries active in over 100 countries. GfK AG functions both as a holding company, as well as an operational unit. The Group is headquartered in Nuremberg. 5.2 Administration: centralized services within the Group Group Service departments Corporate Communications, Human Resources and Financial Services are responsible for coordinating the global central functions of the GfK Group. The Financial Services department includes Group Accounting, Group Controlling, Treasury, Taxes, Legal Services and Transactions as well as Human Resources. The Financial Accounting and Operational Accounting units of the Financial Services department and the Central Services departments are responsible for most of the companies in Germany. Outside Germany, responsibility for the functions of these departments rests with the individual GfK companies. 6. Purchasing As an information service provider, purchasing in the traditional capital goods markets is of minor importance to GfK. Central Services, which form part of GfK Group Services and it Services, which belong to GfK Data Services, organize the purchase of work materials and standard office equipment. 7. Environmental protection 5.1 Management Board and divisional executive bodies: matrix organization In 2007, the GfK Group was run by a Management Board consisting of five members. The Chief Executive Officer (CEO) is responsible for the strategy of the GfK Group, contact with executive bodies and participations of a non-operational nature, research and development, Corporate Communications and ongoing executive personnel development strategy. The Chief Financial Officer (CFO) is responsible for Financial Services, Human Resources and Central Services. The operating business is organized on a matrix basis, whereby one board member is responsible for Custom Research business, another for Retail and Technology, and another for the Consumer Tracking, Media and HealthCare business divisions. Beyond this, board members also have regional responsibilities. Each business division also has its own executive body consisting of the responsible Management Board member and selected executives. The members of these executive bodies have the task of coordinating the strategic development of the business divisions and coordinating their work. The management of the GfK Group uses operating income as a key performance indicator to run the global business operations of the Group. With sales margin targets (or hurdle rates) serving as the management indicators. GfK is committed to issues relating to environmental protection and efficient use of natural resources. All GfK employees are urged to comply with environmental and recycling standards when using work materials and to limit their use to what is necessary. Central Services and IT Services are responsible for the purchase and appropriate disposal of materials. 8. Corporate Communications Subsidiary companies of the GfK Group are responsible for structuring their marketing activities in close consultation with Corporate Communications. The high level of decentralization gives GfK subsidiaries the necessary flexibility to conduct clientoriented marketing in line with their respective market environments and prevailing local conditions. Corporate Communications, which is responsible for global internal and external Group communications, including corporate and financial communications, also comprises Corporate Public Relations and Investor Relations. Based on the fundamental cornerstones of Corporate Public Relations, Corporate Design, Operations (trade fairs and exhibitions) and Investor Relations, the aim is to provide integrated global corporate communications directed at responding to the needs of the local target groups. These include representatives from the media, financial analysts, investors, shareholders, clients, the general public and employees. MANAGEMENT REPORT GfK_81

86 Opportunity and risk position MANAGEMENT REPORT 9. Opportunity and risk position The early identification, assessment and professional management of risks is the basis on which GfK is responsible for exploiting any opportunities presenting themselves on the consumer research market in the interests of the Group. GfK s opportunity and risk management is undergoing continuous development. In line with this, in 2007, improvements were made to the system for risk quantification and identification of market opportunities at business division level. As in previous years, the Group s external and internal auditors confirmed the effectiveness of the GfK early warning opportunity and risk identification system. 9.1 Principles of opportunity and risk management: an integrated system the principles of risk management: these are the basic principles of the GfK Group opportunity and risk management system which has been established to ensure the professional management of risks and the ability to identify opportunities arising. The key tenets of the system are: Only those risks which are known can be managed. Risks must be systematically assessed. Risk management is a duty for everyone. These principles are integral to the structures and business processes of the GfK Group. responsibilities and functions: Risk management coordinators The direct responsibility for early identification, management and communication of risks locally lies with the business management of the individual GfK companies. Local risk management coordinators promote risk awareness and ensure that the prescribed central principles are implemented by the respective organizations. Risk Management Committee The Management Board has established a Risk Management Committee under the terms of its overall responsibility for the opportunity and risk management system, whose standing members include the Management Board member with responsibility for HR and Finance as presiding chair and the head of Group Controlling. The Committee is charged with the continuous development and updating of rules for Group-wide efficient and functional opportunity and risk management. Beyond this, the Committee remit also extends to identifying relevant risks and notifying the Management and Supervisory Board of the current risk position within the Group. Whistleblowing: taking the initiative GfK encourages all its staff to report any actual or suspected infringements of any statutory or internal regulations. Staff members can contact their superiors, their risk management coordinators, internal audit or Human Resources. If employees do not wish to use these channels, even anonymously, they are at liberty to contact the Chairman of the Audit Committee of the Supervisory Board, Dr. Arno Mahlert, under the terms of the whistleblowing regulations. processes: In order to take full account of the opportunities and risks, the GfK Group applies an integrated opportunity and risk management strategy. This involves identifying and managing the strategic and operating risks at the level of the various GfK companies and regions and at divisional and Group level. GfK Group: integrated risk management system Group level GfK integrated opportunity and risk management system Divisional level Company level All principles, functions and processes of the GfK Group opportunity and risk management system are documented in a group handbook to which all employees have access via the Group intranet, gfk4u. The core of this system is the annual opportunity and risk inventory carried out by the managing directors and risk management coordinators covering developments relating to risks identified in the prior year and new risks that have emerged. Risks are assessed according to the probability of their occurrence and extent of potential damage for two consecutive years, so that concrete measures can be specified to manage them. In addition, the individual Management Board members responsible will identify the potential opportunities of the business divisions. If the risk situation changes or significant new risks arise during the year, ad hoc reporting measures ensure that the Management Board is informed immediately. Beyond this, a uniform Group-wide reporting system based on standard criteria guarantees that financial risks relating to current and future business development trends are monitored and that any opportunities arising are highlighted. Based on the commercial data provided by GfK companies, Group Controlling produces monthly internal reports which provide information on any potential risks to business performance at an early stage. Further forecasts and budget projections during the year provide key indicators of any imminent commercial risks. 82_GfK

87 Comprehensive guidelines also form part of the internal controlling process in which all mandatory approval processes and authorization mandates are specified. Internal audit checks the structure and functionality of the opportunity and risk management system at regular intervals. The subject of opportunity and risk management is also enshrined in all the audits carried out at subsidiary companies and the insights from these audits and recommendations made by the auditors in turn serve to further improve the system for early identification of opportunities and risks. Elements of the opportunity and risk management system Reporting system alongside the opportunities described below do not, therefore, signify that the commercial development of the GfK Group would be significantly jeopardized. divisional opportunities and risks: Escalating concentration of the client base due to mergers and acquisitions is affecting all GfK business divisions. There is increased competition for the marketing budgets of major companies, however, the dependency of the GfK Group on such major companies continues to remain limited and in fact, the share of Group sales accounted for by the 10 top clients rose only very slightly from 11 % in 2006 to 12% in the reporting year. Again, the risks relating to divisional operations are also only limited, since none of the divisions generates more than 10% of Group sales with a single client. The global presence of the GfK Group further ensures that there is no substantial risk of any regional dependency. Guidelines Risk management handbook Opportunity and risk inventory Exceptional risk reporting Other (e.g. security standards, integration concepts etc.) 9.2 Assessing opportunities and risks: case for case basis macro-economic risks: The GfK Group operates globally and reflects a very high level of diversity in its client portfolios, markets and products. For 2008, GfK is anticipating positive growth, although at a weaker rate. However, even a worsening macroeconomic climate would not mean any significant acute risk to the Group. In addition, the stronger accent on growth regions gives GfK an excellent opportunity for further overall market development, even in the light of the weaker economic position in the traditional industrial states. Consequently, the GfK Group does not anticipate any significant risks arising from macro-economic developments which might lead to any major erosion in orders or sales and income at Group level. sector risks: The growth trend in the market research sector continued in 2007 and sustained positive growth is anticipated for With its global network, the GfK Group is a full service provider offering a wide spectrum of surveys and analyses and is consequently in a position to absorb any regional or sector-related fluctuations. In general, in recent decades, the market research segment has proved itself to be less susceptible to economic influences than other segments of the marketing and advertising industry. The importance of market research is further benefiting from the intensified competition generated during the course of globalization and as a result of the increasing complexity of consumer behavior. Growing numbers of companies are outsourcing their market research activities and commissioning specialists to carry it out on their behalf. The risks indicated The level of bad debts is also insignificant in GfK s broad-based client portfolio and the liquidity position of the Group has not been detrimentally affected. The research segment in which the custom research division operates is characterized by many smaller local suppliers in addition to the major international groups. This is due in part to the existence of market niches filled by smaller suppliers and in part to the fact that market penetration barriers are lower, since they require a comparatively lower level of investment than continuous market research. Smaller market players frequently only cover a limited region or segment, and are therefore more narrowly positioned in the market. Potential loss of orders to competitors in these segments, for instance, because of a possible price advantage, presents a risk here and this is countered by GfK with continuous analysis, use of cost cutting exercises and ongoing optimization of the range of high quality, state-of-the-art products and methodologies on offer. A prime example here is the new online portal, GfK Octopus, which clients can use to download and analyze data from surveys they have commissioned. Syndicated business represents a special case, where the company carries out its own large-scale surveys and offers them on the market. One of the risks is the high cost of preparing the surveys, when there are too few customers interested in buying the analyses. However, syndicated business is predominantly on offer where the experience of the past shows that there is an assured number of takers. At the same time, this business area offers high potential, since the smaller suppliers are not in a position to offer such studies and each additional customer significantly increases the contribution to profit. MANAGEMENT REPORT GfK_83

88 Opportunity and risk position MANAGEMENT REPORT Global key account management has been developed further to respond to the requirements of major clients operating globally. In addition, customer expectations have expanded in the direction of the supra-divisional services offered by the GfK Group. In this area, GfK can capitalize on the available cross-selling potential, particularly in the HealthCare and Consumer Tracking areas. Supra-divisional data analysis also creates a most valuable pool of knowledge, which represents an important basis for the business model of Fact-based Consultancy, a further development of customer services. The demand for online market research is also continuing. Since GfK has been able to establish its online panels and techniques at an early stage, the Group is well represented in this area. GfK s online business benefits from the fact that clients are increasingly focusing on the quality of the research work carried out. Internationally, the demand for market research is continuing in the emerging markets. On these grounds, the great reservoir of potential identified for Custom Research is at the root of the further expansion of the network, particularly in growth regions such as Asia and the Pacific and Latin America. GfK is the leading supplier in the world in retail and technology. The Group s risk position is very sound, shaped as it is by the dependency of major clients and data suppliers. In this area, GfK is distinguished above all by its global network and uniform production and reporting system, as well as its own extensive database. The StarTrack platform is a state-of-the-art tool which GfK offers clients with global operations. The consistently maintained technological edge in the market, systematic expansion of the service spectrum and consistent worldwide expansion are the strategic cornerstones used by the division to grasp the opportunity of further expanding its market position. In addition to the launch of Retail and Technology business activities in a number of African states, the division s position in the emerging markets has also significantly improved. For the future, the growing demand for increased frequency of reporting, including in real time, offers the division further sales potential. The introduction of StarTrack-Explorer in 2008, which clients can use to tailor reports to their individual requirements for the first time, online, will further increase client loyalty and improve the already excellent competitive position of the division. The risk situation in consumer tracking continues to remain fiercely competitive. However, stable client relationships sustained for many years also give GfK a sound basis for success in this business area, as do the valuable databases, the extensive household panels and the high data quality. In Consumer Tracking, the main opportunities identified are in the attractive service and product package, such as the new Advanced Business Solutions service, intended to retain existing client loyalty and at the same time win over new clients. In Austria, conversion of the data gathering technique to scanning added new product groups and contributed to the gaining of new clients. Increasing customer loyalty is a potential opportunity which can also be used by expanding the functional uses of the web-based analysis software, GfK Analyzeit. A significant number of sales recorded by the media business division resulted from long-term fixed-volume contracts for continuous tv and radio audience research. The associated dependency on major clients presents a significant risk, however, the client relationships emerging from such contracts also offer a range of opportunities. GfK has made the most of its close working relationships with clients to conclude a series of contract extensions and new contracts, for example, in Central and Eastern Europe. In recent years, the media market has been shaped by comprehensive changes. New broadcast technologies, digitization and altered tv audience behavior present particularly complex challenges to the measurement of tv consumption. For instance, the mobile tv offering is constantly on the increase and here, GfK is already very well positioned, with a high level of potential for the future. GfK has responded to out-of-home viewing, for example at major events and in public places, with mobile data measurement systems, such as MediaWatch. The new GfK tc score measuring technology enables tv viewing at a later time, e.g. via fixed disk or dvd recorder, to be recorded. The development of the evogenius international software platform represents a contemporary holistic instrument for the production and analysis of media usage data. In the longer term, analysis will include such information as cross-media use in the future and further opportunities will arise for GfK from the rising interest in cross-media studies combined with consumer and buyer data. Based on the relatively strong political and legal influences in the market, the healthcare division is subject to specific risks. National health reforms, such as those in the usa, could mean budget reductions by the pharmaceutical industry. More use of generic drugs is also having an effect on the pharmaceutical manufacturers, which ultimately impacts on their market research budgets. In addition, failure to obtain fda approval in the face of increased obstacles in light of the more stringent political climate presents a further valid difficulty for this division. The GfK network, which is also growing in the HealthCare business division, is also proving beneficial to this market scenario, where global pharmaceuticals and consequently, the top clients in the business division, can identify a significant factor in the award of their contracts. Further internationalization is consequently 84_GfK

89 regarded as a potential bringer of great opportunity. For example, added presence in the Latin American and Asiatic markets have consolidated the reputation of the GfK HealthCare division as a global player and at the same time is generating additional local business. The transfer of existing market research tools to new countries also facilitates the use of synergies. New business opportunities have also been identified in the booming Wellness market. personell risks: The continuing improvement in the economic climate was also reflected in the job market in Recruiting and keeping qualified staff is consequently becoming more difficult for GfK companies. This is also evident in the slightly higher Group staff turnover compared with the year before. GfK offers a varied qualification and further training program and is constantly working on optimizing its personnel structures in order to recruit, integrate and keep management and specialist staff in the longer term. In this respect, the employee surveys carried out at regular intervals have provided some useful insights. financial risks: GfK has covered its financial requirement with a syndicated bank facility comprising a fixed euro and us dollar tranche and a variable revolving euro tranche. On the reporting date, the fixed tranches equated to eur 130 million respectively usd 122 million and 62% of the revolving credit totaling eur 250 million had been drawn down at the financial year-end. Under the terms of an agreement, the revolving credit line was available to GfK ag until the end of October In October 2007, GfK ag exercised its option and invited the consortium of banks to extend the credit line by a further year to October In spite of the us subprime crisis and the associated credit crunch, almost 90% of the banks involved agreed. In addition to the syndicated credit line, GfK also has bilateral credit lines amounting to around eur 70 million at its disposal, of which only a good 1% had been used by the year-end. In total, on the reporting date, the balance of remaining credit lines was eur million (2006: eur million). The funding elements indicated, and an existing cash holding of around eur 39 million at the reporting date assure the sound financial basis of the Group. Overall, the GfK Group is not anticipating any major fall-out from the subprime crisis for its business. foreign currency risk: As a global company, the GfK Group is exposed to transaction and currency translation risks. The transaction risk results from the sale and purchase of goods and services which are not paid for in the local currency of the respective GfK business unit. Due to the fact that all GfK operating companies have sales and expenses in the local currency, the currency risk of the GfK Group is restricted at operational level. Group guidelines regulate that all GfK companies monitor their currency risks and hedge against currency fluctuations for projects of a certain size. As a rule, GfK provides in-house financing in the local currency for subsidiaries. The ensuing currency risks in the Group s Treasury are hedged using derivatives. Hedging transactions usually run for a maximum of 12 months. The offsetting effects of the underlying transaction and the currency hedge are recognized in the income statement and are consequently identifiable. The currency translation risk is due to the fact that many GfK companies are outside the euro zone, while GfK reports its accounts in euro. In the consolidated financial statements, the balance sheets and income statements of companies outside the euro zone must be converted into euros. The translationrelated effects from changes in exchange rates are shown under equity in the GfK consolidated financial statements. As the participations are generally of a long-term nature, GfK dispenses with hedging directly for net assets. Instead, the Group tries to use natural hedges to provide cover for participations. To do this, the financing is in the currency of the respective company, so that the currency fluctuations are kept to a minimum. In order to eliminate volatility in the income statement relating to the reporting date valuation of currency liabilities, GfK uses hedge accounting according to ifrs pursuant to ias 39 for long-term financing. Accordingly, valuation effects are reported under equity. interest rate risk: At GfK, interest rate risks mainly arise for financial liabilities. In 2005, GfK used the favorable interest rate conditions to finance the nop World acquisition and to safeguard interest rates on a long-term basis and ensure greater accuracy when calculating financing requirements. For this reason, as of the reporting date, GfK ag had hedged the majority of its financial liabilities with interest rate swaps. As at the reporting date of December 31, 2007, the interest rate hedges had a positive fair value totaling eur 7.4 million. The counterparty risk in connection with the positive fair value of all derivatives is regarded as low, since transactions are only conducted with reputable German and international banks with a first class credit rating (S&P rating of between aa and a+). In addition, the counterparty risk is reduced as transactions are spread across several banks. legal risks: In many countries, such as Germany, the uk and France, the subject of apparent self-employment is still an issue. This harbors the risk that the interviewers and other freelancers working for GfK could become liable for social security contributions. GfK avoids additional costs by adjusting the employment terms to the respective national legislation as far as possible. There are growing doubts on the part of third parties regarding legitimacy of telephone market research. A decision on the issue by the German Federal Court is still awaited. MANAGEMENT REPORT GfK_85

90 Opportunity and risk position MANAGEMENT REPORT Material risks arising from compensation claims or legal proceedings have already been recognized as liabilities. The dispute arising pursuant to the acquisition of nop World was settled out-of-court in January 2008 and the effects on the balance sheet and income statement have been extensively reported in the 2007 financial statements. GfK is involved in civil proceedings in a number of different countries, caused by different legal aspects. However, the Management does not believe that these present any significant risks to the GfK Group. risks ensuing from acquisitions: The acquisition of new companies and their integration into the Group are associated with risks. As part of its Excellence management training program, a tailored concept was developed which describes the sequence of measures required when integrating newly acquired companies and which clearly indicates the areas of responsibility. The participation of colleagues from the global GfK network ensures compliance with all the requirements from an operating and communications perspective. Legal and accounting due diligence, usually carried out with the support of experienced local teams of consultants, alternative valuation methods and clear business plans are the precondition for an acquisition. In most cases, the vendor s management remains with the company for several years as a minority shareholder and/or director so as to ensure a clear motivation to assure the sustained success of the company. risks ensuing from information technology and other risks: Installation, maintenance and further development of security measures to protect information systems and the data they contain are essential for GfK. Precautionary measures serving to ensure the security of information technology and its applications have always been given the highest priority. GfK again carried out supplementary security checks with outside support at the Nuremberg headquarters in 2007, as, indeed, had been the case three years ago. Once again, this confirmed the fact that all the necessary measures to ensure the maximum security of it operations had been taken at the main computer center in Nuremberg. In 2006, the GfK Management Board took out a Group-wide security policy based on the recognized British Standard The global implementation of this it security standard which is mandatory throughout the Group will be completed in All the aforementioned measures as well as the it strategy of the GfK Group and the Group-wide security plans are coordinated by the Chief Information Officer (cio), who reports directly to the Management Board. Security issues are dealt with in cooperation with the it security specialists based in GfK companies in Germany and abroad. it audits also form an integral component of the audit carried out by the internal audit department and locally by it specialists. GfK is continuously assessing other risks beyond those relating to it as part of its disaster recovery plan. Material risks relating to losses and liabilities are either covered locally or by Group-wide umbrella insurances. No substantial risks relating to research and development activities have currently been identified. GfK monitors the development of large-scale, cost-intensive innovation projects by a system of regular reporting. No major it risks or other risks have currently been identified in the GfK Group. 9.3 Assessing opportunities and risks: overall basis The risks of GfK are limited and transparent and do not significantly impact the asset, finance and earnings position of the Group. Even in an overall assessment of the risk position of GfK, it is evident that no individual risks, currency effects or cumulative risks which might prejudice the commercial development of the company are currently anticipated. Potential opportunities for the GfK Group have been identified, particularly in relation to the further expansion of its global network and the availability of an innovative product portfolio incorporating state-of-the-art technology and which responds optimally to client needs. The Group has also defined its future opportunities in the strategic 5-Star Initiative program launched in October The aims and objectives of this program are being consistently pursued by GfK. To summarize, it can be concluded that the overall risk position of the GfK Group continues to be assessed as low. No risks have currently been identified which might jeopardize the continued existence of the GfK Group. 86_GfK

91 10. Major events since the end of the financial year At the beginning of 2008, the GfK Group expanded its Custom Research network and made the acquisitions below. As of January 1, 2008, GfK acquired a 100% share in the Blue Moon Group in Australia and beyond this, the acquisition in Turkey of market research institute, Bileşim International took effect on March 1, Changes in the GfK network Company Type of investment Shares in % Sector Region Blue Moon Group Acquisition 100 Custom Research Bileşim International Acquisition 100 Custom Research Asia and the Pacific Central and Eastern Europe In January 2008, the GfK ag Supervisory Board extended the service contract of Management Board member, Dr. Gérard Hermet, who is responsible for the Retail and Technology sector, by a further five years to December 31, On February 27, 2008, the Management and Supervisory Boards of GfK ag resolved to investigate changing the legal form of the GfK Aktiengesellschaft (German form of plc) into an se, a contemporary legal European form which supports an open and international corporate culture. It is the expression of a corporate European outlook and as such, the GfK Group would be documenting its ongoing development in Europe, the continent in which its roots lie. As an se, the company would be creating the conditions for intensifying the involvement of its European employees. The change of form would not change the legal or commercial identity of the company. Consequently, the rights of shareholders, stock exchange listing and registered headquarters of the company would remain unchanged. The dual corporate management structure of Management and Supervisory Boards would also be retained. The change of form requires the consent of the executive boards of the company, as well as its shareholders. A qualified majority is required for approval by the Shareholders Meeting. reporting date. On completion of the nop-world acquisition, the vendor lodged a claim against GfK ag for payment of certain sums paid to nop-world companies. The vendor alleged that the grounds for the claim were based on the nop-world purchase agreement. In August 2006, the vendor lodged a claim against GfK in the competent court in London. Negotiations continued during 2007, with the aim of achieving agreement with the vendor on the actual amount of the claim. By the reporting date, an imminent settlement with the vendor was in sight. The liabilities, which had already been posted on the balance sheet, were consequently reduced to the amount emerging as the negotiated probable sum due on the reporting date. 11. Outlook* 11.1 Macro-economic position: growth with risks According to expert opinion, the anticipated global growth for 2008 would be 3.5%, signifying a slowing down of the pace of growth. The greatest risk for economic development relates to the real estate crisis in the usa and the associated turmoil on the financial markets, whose negative effects are not totally predictable. In the main, it will be the industrialized countries which will be most affected by the economic weakening, while the economic dynamics in the emerging nations are likely to remain strong. The European economy is likely to experience continued growth momentum from domestic economies. Private consumption is expected to grow dynamically to the extent that they might largely offset the escalating slowdown of exports. For the German economy, a slower, but sustained growth rate of 2.0% is anticipated. The most important economic growth drivers in 2008 are likely to come from private consumption, which is recovering from the increase in the rate of vat and benefiting from buoyancy in the job market and the economic upswing of recent years. Exports are likely to weaken due to the weakness of the dollar, although they are anticipated to remain at a high level, with exporters predicted to maintain their share of the global markets. Although the upward trend on the job market is likely to continue, it will be more moderate than in 2007 in light of the fact that companies are planning fewer new jobs. MANAGEMENT REPORT At the end of January 2008, an agreement was reached with the vendors of nop-world companies in respect of the amount payable to settle all the disputed receivables claimed by the vendor. To a large extent, the actual amount agreed confirmed the assessment made by the Management Board as at the *The outlook contains predictive statements on future developments, which are based on current management assessments. Words such as anticipate, assume, believe, estimate, expect, intend, could/might, planned, projected, should, likely and similar such terms are statements of a predictive nature. Such predictive statements contain comments on the anticipated development of sales proceeds, income and personnel numbers for Such statements are subject to risks and uncertainties, for example, economic effects such as exchange rate fluctuations and changes in interest rates. Some uncertainties or other unforeseen factors which might affect ability to achieve targets are described under risk position in the Management Report. If these or other uncertainties and unforeseen factors arise or the assumptions on which the statements are based prove to be incorrect, actual income may vary considerably from the figures indicated or implied in the statements. We do not guarantee that our predictive statements will be correct. The predictive statements contained herein are based on the current structure of the Group and are made on the basis of the facts on the day of publication of the present document. We do not intend nor accept any obligation to update predictive statements on an ongoing basis. GfK_87

92 Outlook 11.2 Market research sector: wide-ranging growth potential 11.3 Opportunities: further rise in international projects MANAGEMENT REPORT In the past, the market research sector has achieved regular growth rates which were markedly above those for the economy as a whole and which have proved comparatively crisis-resistant even in difficult economic times. It is to be assumed that the robust nature of the market research sector will be maintained in the future, even if macro-economic developments are taken into account as influential factors. It is to be anticipated that the long-term growth of the market research sector will continue in 2008 and according to expert opinion, the growth rate is likely to be between four and five percent. In principle, it can be assumed that there will continue to be strong demand for market and consumer information and interpretation and consultancy services based on this. On the one hand, the yields required by the capital markets demand ongoing development of new sales potential through the development of new products and the identification of new sales markets. On the other, the demand for effective and efficient marketing and sales measures and evidence of their success is also rising. In many cases, the information delivered by market research is essential both for the development of new potential and for optimization processes. Viewed from a global perspective, the growth drivers are very disparate in economically developed regions on the one hand and in the emerging markets on the other. In established markets, and particularly in sectors where the trend is towards saturation, the competition to identify customer potential is constantly on the increase. At the same time, consumer behavior and communications are changing the dynamics of the media sector. The emergence of social online networks designated as Web 2.0 will radically change the way in which information is exchanged and perceptions of marketing activities. This requires a change in strategy on the part of companies and also generates a demand for information as the decision-making basis. While classic market research methods will retain their importance, the Internet and the need to adapt arising from the new dynamics, will pave the way for new research methodologies. The growth dynamic in the market research sector is positively influenced by several factors in the emerging markets. High levels of economic growth create a demand in national companies for a better understanding of their markets at home and abroad, and this includes the need to move from purely manufacturing goods to independent marketing, particularly in the luxury product and branded market segments. In this respect, the need to catch up plays a certain role where research tools and standards, which have long been an everyday reality in the established markets, are concerned. The emergence of prospering segments of population is also leading multinational groups from established economic regions to penetrate these segments in order to exploit the market potential on offer, particularly in the area of branded goods. In the course of globalization, multinational companies are targeting consumers in the emerging nations and national companies are expanding to increasing degree into neighboring countries. Accordingly, more customers are commissioning market research companies to carry out international market research projects. They need comparative data in order to create offerings and establish marketing plans which will be successful in more than one market. Analyzing data in a cultural and national ethnic context is the key to reliable income generation. This requires analysis tools which can recommend strategies for action and which take into account the cultural mechanic and particular economic development phase of the countries involved. New online surveying possibilities In one short decade, cost effective and time-saving online surveying has become an important market research data gathering tool. Today, the Internet is widely used in most developed and even emerging countries, and reaching the right target group is generally no longer a problem. The technological development of the Internet and escalating universal use of broadband in the industrialized countries have opened up new possibilities for the market research sector. For instance, multimedia elements and consequently, more realistic situations can be embedded in the surveys, and analysis of Web 2.0 applications, such as blogs or forums, has generated entirely new data gathering methodologies. Customer Relationship Management In many sectors, the generation of information which reflects consumer behavior and identifies the determining decision-making factors is becoming increasingly important. Especially in sectors such as telecommunications and IT, and certainly in liberalized consumer markets, keeping the loyalty of hard-won customers is gaining in importance. Accurate observation of retail shopper behavior is of great interest to both retail and industry in order to optimize product listings and placement and to equip outlets accordingly. The user-friendliness of websites is a key factor to the success of Internet-based business models. As a result and in general, increasing demand can be anticipated in these areas for research instruments which deliver information on optimizing customer contact and service which can be directly implemented. 88_GfK

93 11.4 Research and development: faster data gathering and increasing online use The consistent further development of methodologies and tools by GfK is focused on three main areas: Data gathering must become even more valid and reflect the behavior examined, for example, product purchasing or perception of advertising, with a higher degree of accuracy. Surveys must be more varied, interesting and if applicable, shorter. These are inter-related aims: only an interested subject gives thoughtful and apposite responses. For this, not only are new surveying techniques being trialed, but current methods are also being checked for their validity, including by the use of brain scanning. To this end, GfK works with marketing specialists, statisticians and neuropsychologists and in this way, takes into account the current findings of research carried out by universities, while itself not initiating such studies. Another aim is improved analysis and faster delivery of the results. Here, GfK is developing database, statistical modeling and simulation software instruments. The aim is to automate internal workflows and make data accessible online. Analysis software is continuously being optimized in all areas of the business. The increasingly wide range of products requires a rise in sampling numbers and for this, GfK is focusing on online survey questionnaires, a method which is becoming possible in more and more countries Human Resources: recruiting and keeping well-qualified staff The GfK Group is anticipating a further rise in the number of employees in 2008 and here, it is operating in a very demanding environment where recruiting and maintaining personnel are concerned. The search for the right talent needs sustained planning of personnel and management development and employee incentive schemes. This applies, in particular, to the Asia and the Pacific, Latin American and Central and Eastern European regions, which have a higher staff turnaround rate than other regions in which GfK operates. In order to counter this situation, the Group has installed a number of special employee incentive programs. The declared aim is to prepare well-qualified staff for a more extensive role, and to enthuse and incentivize staff for the GfK Group. To this end, the development and implementation of new concepts and instruments will continue in These include a program for the development of international management, as well as measures aimed at extending functional remits and supra-regional planning. New and broader remits and increasing internationalization of the GfK Group offer employees excellent personal and professional development opportunities. Working on international committees and the opportunities afforded by global exchanges complement these development opportunities. The international employee secondment program, InterAct!, which promotes an understanding of other cultures and markets, is another intense learning opportunity for further development Organization and Administration: changed organizational structure and additions to the Management Board At the beginning of the year, the GfK Group turned its attentions to the organizational structure and changed it from the previous five business divisions to three sectors. The previous Custom Research, Retail and Technology, Consumer Tracking, Media and HealthCare divisions were transformed into three sectors: Custom Research, Retail and Technology and Media. The altered structure made it possible for the GfK Group to make increased use of the available synergies offered by supra-business divisional use of technologies, such as in the online panels, for data gathering and in the use of methodologies. Stringent concentration on three sectors facilitates better positioning, an amalgamation of reporting and clearer communications, and this applies to both clients and the public arena. Beyond this, a sixth member was appointed to the GfK ag Management Board at the beginning of the new year. At a session held on December 12, 2007, the Supervisory Board passed a resolution to appoint Debra a. Pruent to the Management Board and as a result, there have been changes to the areas of responsibility in what was formerly the Custom Research business division. In this sector, Debra A. Pruent is responsible for the North American region and for its Business and Technology and Automotive areas. Petra Heinlein is responsible for all other regions and for the Consumer, Financial and Media and Communications areas. The responsibilities of the other Management Board members remain unchanged Corporate Communications: expansion of the global communications strategy The focus in 2007 was on implementing a global communications strategy. This will improve networking and the alignment of global communication activities across all business sectors and regions. While in 2007, the key focus of international communications was on Europe, 2008 will see the global expansion of communications activities. MANAGEMENT REPORT GfK_89

94 Outlook MANAGEMENT REPORT 11.8 Investment and finance: ensuring and expanding the success of the Group In 2008, the GfK Group will continue to pursue a course of targeted investment aimed at securing the success of the Group and this includes investment in the further expansion of the network. Beyond this, investment will also be allocated to new measuring technologies in the Media sector, to ongoing development of the StarTrack platform in the Retail and Technology sectors and to panel development. In tv media, due to the high development costs associated with new measurement technologies, investment is likely to be at the upper end of the target range of between 3% and 5% of sales. Authorized capital and credit lines as well as positive cash flow development provide the GfK Group with sufficient equity and outside capital. In 2008, the GfK Group will again be using a major proportion of its free cash flow to expand its own network and repay loans Development of the GfK Group: increased sales and income GfK will continue to pursue the aims and objectives of its 5-Star Initiative in The first Fact-based Consultancy initiative concerns the consistent establishment of a service package of high-grade fact-based and continuous consultancy services for the top management of clients. The second objective, known as top 3 enshrines GfK s vision for its positioning in the global consumer research market. GfK is aiming to be the number 3 in the industry and at the same time, the number 3 in every major market research country throughout Europe, the Americas and the Asia and the Pacific region, as well as in each of its three sectors. Third, under the terms of its Global Initiative, GfK is planning on expanding its global network still further and establishing its own subsidiaries in all relevant countries, and fourth, the Full Service initiative is aimed at the continuing establishment of GfK as a full service market research group. A fifth initiative, Superb financial position is targeted at achieving sales of eur 1.5 billion in the medium-term and includes plans for further acquisitions, in particular, in the Central and Eastern Europe, Latin America and Asia and the Pacific growth regions. Beyond this, the Group is aiming at achieving an income margin (adjusted operating income to sales) in the range of between 13% and 15%. GfK anticipates it will be able to increase its sales in financial year 2008 by more than 5.5% in organic terms with the companies forming part of the scope of consolidation at the beginning of the year. This does not take into account the effects of exchange rate fluctuations. This will mean that once again, the GfK Group will be growing at a faster pace than the market in general. The margin of the GfK Group will be above 13.0%. Due to its balanced business model, GfK anticipates that it will be able to maintain its margin at a high level, even in the face of a decline in the global economy. GfK expects highlighted items for 2008 to be in the eur 20 to 25 million range, including the anticipated cost of conversion to Societas Europaea (se), European joint stock company form. income from participations is anticipated to be at the level of the prior year for net financial expenses are expected to around eur 20 million. Tax changes were introduced in Germany on January 1, 2008 and one of the results of these is that corporation tax has been lowered. At the same time, a raft of tighter regulations and limitations became effective. The GfK Group is not anticipating its tax liability to be reduced as a consequence of the new fiscal legislation. Moreover, the effect of the German tax ratio on the group tax ratio is limited. Overall, GfK is anticipating a Group tax ratio of approximately 30% Development of the sectors: optimized streamlining and use of synergies For 2008, GfK is assuming positive growth in all of its sectors. Taking planned investments in network expansion, new products and services into account, the margins achieved by the sectors are anticipated to be in the range of the prior year: GfK Sektors: 2008 Guidance Sales growth in % ) Margin in % 2007 Sales In eur million 2007 Custom Research > > 8.0 Retail and Technology > > 25.0 Media > > 19.0 GfK Group 2) 1,162.1 > > ) excluding currency effects 2) including Other In detail, the GfK Group expects the following trends: Margin 1) in % 2008 In the custom research sector, the GfK Group is anticipating an increase in sales of more than 4.5% and a margin in excess of 8%. The expansion which began in Latin America and Asia and the Pacific in 2006 will be successfully sustained with the expansion of business in Australia. In future, Asian business development will be further accelerated and beyond this, the focus will be on the Fact-based Consultancy business model for more expansive client services, as well as on achieving crossselling potential and better utilization of the synergies available within the sector. 90_GfK

95 In the retail and technology sector, the GfK Group is planning to increase its sales by more than 8%, with the margin expected to be above 25%. Expansion will continue in the Central and East European, West European, Middle Eastern and African, Latin American and Asia and the Pacific regions. As before, the activities of the sector will concentrate on the issue of digital convergence in the entertainment electronics, information technology, telecommunications and photographic segments. In the media sector, GfK is anticipating sales growth in excess of 7%, with a margin higher than 19%. The activities of the sector will focus on the further development of information services for the international media markets. For example, 2008 will see implementation of evogenius media research software and the conditions for its global application will be created. Initially, evogenius will be used to analyze tv consumption data, although in the coming years, this application will be successively extended to include analysis data on radio, print, outdoor, online and crossmedia use. In addition, there are plans to expand the appreciation panels, an innovative contemporary online tv research tool delivering data for differentiated analysis, including levels of audience satisfaction with broadcast programs in particular. Nuremberg, March 12, 2008 Prof. Dr. Klaus L. Wübbenhorst Christian Weller von Ahlefeld Petra Heinlein Dr. Gérard Hermet GfK has started off well in At the end of February, the order books had already reached 42.2% of the anticipated sales for the year (2007: 41.1%). This represents an improvement of 1.1 percentage points compared with the prior year. Debra A. Pruent Wilhelm R. Wessels MANAGEMENT REPORT GfK_91

96 Financial statements for the GfK Group FINANCIAL STATEMENTS Consolidated income statement 94 > > > Consolidated balance sheet 95 > > > Consolidated cash flow statement 96 > > > Consolidated statement of recognized income and expense 97 > > > Notes to the consolidated financial statements for General information Consolidation principles Accounting policies Scope of consolidation and major acquisitions Sales Cost of sales Other operating income Other operating expenses Personnel expenses Adjusted operating income Other financial income Financial expenses Tax on income from ongoing business activity Earnings per share Intangible assets Tangible assets Financial assets Other non-current assets and deferred items Trade receivables Cash and cash equivalents Other current assets and deferred items including assets held for sale Due dates of non-impaired assets _GfK

97 Financial statements for the GfK Group 23. Equity 113 Proposed appropriation of profits Long-term provisions Long-term and short-term interest-bearing financial liabilities Other long-term liabilities and deferred items Short-term provisions Other short-term liabilities and deferred items including held for sale Sensitivity analysis Notes to the consolidated cash flow statement Disposal groups Related parties Contingent liabilities and other financial commitments Financial instruments and derivates Segment reporting Pro-forma statements in according with ifrs Pending litigations and claims for compensation Events after the balance sheet date Amendments to ifrs standards and interpretations Supplementary disclosures 125 > > > Supervisory Board 127 > > > Management Board 128 > > > Declaration on the German Corporate Governance Code 129 > > > Shareholdings of the GfK Group 130 > > > Auditors report 135 FINANCIAL STATEMENTS GfK_93

98 Consolidated income statement of the GfK Group in accordance with ifrs in eur 000 for the period January 1 to December 31, 2007 Note Sales 5., 35. 1,112,159 1,162,055 Cost of Sales , ,393 Gross income from sales 359, ,662 Selling and general administrative expenses , ,034 Other operating income 7. 15,628 25,813 Other operating expenses 8. 23,043 18,064 Operating income 1) 3., , ,377 Income from associates 3., 35. 3,271 3,001 Other income from participations ebit , ,426 Other financial income 11. 4,562 7,901 Other financial expenses ,041 30,270 Income from ongoing business activity 93, ,057 Tax on income from ongoing business activity ,233 25,664 Consolidated total income 71,234 91,393 Attributable to equity holders of the parent: 65,260 83,230 Attributable to minority interests: 5,974 8,163 Consolidated total income 71,234 91,393 FINANCIAL STATEMENTS Basic earnings per share (eur) Diluted earnings per share (eur) ) Reconciliation to internal management indicator adjusted operating income amounting to eur 157,621 thousand (2006: eur 150,486 thousand) is shown in the Management Report. FINANCIAL STATEMENTS 94_GfK GfK_94

99 Consolidated balance sheet of the GfK Group in accordance with ifrs in eur 000 as of December 31, 2007 Assets Note Goodwill , ,692 Other intangible assets , ,583 Tangible assets ,865 82,173 Investments in associates 17., 35. 9,248 9,160 Other financial assets 17. 6,436 8,542 Deferred tax assets ,110 44,255 Other non-current assets and deferred items 18. 4,528 5,878 Total non-current assets 1,120,770 1,088,283 Trade receivables 19., , ,462 Short-term income tax assets 13., ,888 16,225 Securities and fixed-term deposits 3. 2, Cash and cash equivalents ,862 37,746 Other current assets and deferred items 21., ,626 40,677 Assets held for sale 21., ,530 Total current assets 375, ,470 Total assets 1,496,174 1,470,753 Equity and liabilities Subscribed capital 150, ,081 Capital reserve 185, ,750 Retained earnings 122, ,584 Income and expense recognized directly in equity 9,703 47,039 Equity attributable to equity holders of the parent 448, ,376 Minority interests 17,511 20,175 Total equity , ,551 Long-term provisions ,038 53,637 Long-term interest-bearing financial liabilities , ,884 Deferred tax liabilities ,971 72,380 Other long-term liabilities and deferred items 26. 4,331 14,275 Non-current liabilities 543, ,176 Short-term provisions 27. 8,668 7,723 Short-term income tax liabilities ,325 25,862 Short-term interest-bearing financial liabilities , ,803 Trade payables 3. 64,791 70,987 Liabilities on orders in progress , ,462 Other short-term liabilities and deferred items , ,014 Liabilities held for sale 28., ,175 Current liabilities 486, ,026 FINANCIAL STATEMENTS Total liabilities 1,029, ,202 Total equity and liabilities 1,496,174 1,470,753 GfK_95

100 Consolidated cash flow statement of the GfK Group in accordance with ifrs in eur 000 for the period January 1 to December 31, 2007 Note Consolidated total income 71,234 91,393 Write-downs/write-ups of intangible assets ,506 39,425 Write-downs/write-ups of tangible assets ,646 20,254 Write-downs/write-ups of other financial assets 11 0 Total write-downs/write-ups 50,163 59,679 Increase/decrease in inventories and trade receivables 22,359 12,801 Increase/decrease in trade payables and liabilities on orders in progress 1,409 20,058 Change in other assets not attributable to investing or financing activity 398 3,230 Change in other liabilities not attributable to investing or financing activity 10,966 8,812 Total changes in working capital 3. 32,314 12,839 Profit/loss from disposal of non-current assets Non-cash income from associates Increase/decrease in long-term provisions 2,476 3,845 Other non-cash income/expenses 1,485 13,348 Net interest income 11., ,804 22,167 Change in deferred taxes 13. 5,398 6,410 Current income tax expense ,514 32,075 Taxes paid 32,580 33,188 a) Cash flow from operating activity , ,129 FINANCIAL STATEMENTS Cash outflows for investments in intangible assets 20,660 24,406 Cash outflows for investments in tangible assets 21,907 24,843 Cash outflows for acquisition of consolidated companies and other business units net of cash acquired 12,243 22,836 Cash outflows for other financial assets 1,804 1,615 Cash inflows from disposal of intangible assets Cash inflows from disposal of tangible assets 4,518 1,888 Cash inflows from disposal of consolidated companies and other business units net of cash acquired 31 0 Cash inflows from disposal of other financial assets 145 1,488 Interest received 3,949 5,620 b) Cash flow from investing activity ,965 64,584 Cash inflows from equity contributions ,291 8,622 Cash outflows to equity holders of parent ,566 12,781 Cash outflows to minority interests 2,501 6,458 Cash inflows from loans raised 23,915 51,820 Cash outflows for repayment of loans 84, ,978 Interest paid 26,203 28,126 FINANCIAL STATEMENTS c) Cash flow from financing activity , ,901 Changes in cash and cash equivalents 28,561 9,356 (total of a), b) and c)) Changes in cash and cash equivalents owing to exchange gains/losses and valuation 3, Cash and cash equivalents at the beginning of the period ,599 47,862 Cash and cash equivalents at the end of the period ,862 37,746 96_GfK GfK_96

101 Consolidated statement of recognized income and expense for the GfK Group in eur 000 for the period January 1 to December 31, 2007 Note Currency translation differences 35,971 49,897 Changes in fair value of equity securities available-for-sale Changes in fair value of cash flow hedges (effective portion) 34. 2,717 1,436 Valuation of net investment hedges for foreign subsidiaries ,552 10,042 Actuarial gains/losses on defined benefit plans 24. 1,990 3,704 Total income and expense recognized directly in equity 22,680 37,627 Consolidated total income 71,234 91,393 Total recognized income and expense 48,554 53,766 Attributable to: Equity holders of the parent 43,271 45,894 Minority interests 5,283 7,872 Total recognized income and expense 48,554 53,766 FINANCIAL STATEMENTS GfK_97

102 Notes to the consolidated financial statements for General information GfK Aktiengesellschaft (GfK ag) is a listed joint stock company under German law with its registered office on Nordwestring 101, Nuremberg, Germany. GfK ag and its subsidiaries (GfK Group) are among the world s leading market research companies. The GfK Group provides information services for its clients in the consumer goods, pharmaceuticals, retail and services industries and media, which they use in marketing decision-making. The consolidated financial statements of GfK ag include the company itself and all consolidated subsidiaries. They have been prepared in compliance with the International Financial Reporting Standards (ifrs), as they must be applied within the European Union. All International Financial Reporting Standards (ifrs) binding for financial year 2007 and the announcements of the International Financial Reporting Interpretations Committee (ifric) have been applied where they have been adopted by the European Union. Additionally, the accounting principles set out in 315a sub-section 1 of the German Commercial Code (hgb) have been considered when preparing the consolidated financial statements. The consolidated financial statements have been prepared in euros and rounded up to the nearest thousand euros. All figures are specified in thousand euros, unless otherwise indicated. The annual financial statements of the parent company, GfK ag, have been prepared in accordance with hgb and published in the online Federal Gazette (Bundesanzeiger) under hr b Section 39 of these notes describes standards, interpretations and amendments to ifrs that have been applied for the first time or that have been published but not yet applied. The figures stated for the prior year regarding interest-bearing liabilities have been adjusted in line with non-current and current liabilities. The reclassification of non-current as current interestbearing financial liabilities amounted to eur 93,771 thousand. acquired in business combinations and identified as part of purchase price allocation are entered on the balance sheet at fair value. Any difference arising on the assets side after this crediting and purchase price allocation is reported under non-current assets as goodwill. All transactions and balances between the companies of the GfK Group which are included in the consolidated financial statements are eliminated when preparing the consolidated financial statements. Differences arising from debt consolidation are recorded in the income statement. Intercompany results and asset movements are eliminated with impact on the income statement if they are significant. FINANCIAL STATEMENTS 2. Consolidation principles The annual financial statements of GfK ag and all material subsidiaries, whose financial and operating policies are controlled directly or indirectly, are included in the consolidated financial statements of GfK ag. The financial statements of all companies included in the consolidated financial statements have been prepared according to uniform accounting principles. Companies in which the GfK Group has a participation of no more than 50%, but over which significant influence can be exercised, are generally accounted for at equity as associates. All other companies in the GfK Group are reported at acquisition cost. A list of shareholdings of GfK ag is attached to these notes. Capital consolidation is carried out in accordance with ifrs 3, Business Combinations, on the basis of purchase accounting, whereby the acquisition costs of the participation are charged against the parent company s pro rata share in the revalued equity of the subsidiary at the acquisition date. Intangible assets Associates and joint ventures are included at equity (one-line consolidation). They are stated for the first time at the acquisition date. First-time valuation is in line with full consolidation. Any difference on the assets side arising from offsetting the carrying amount of the participation against the pro rata equity capital at initial valuation is included in the equity book value. The consolidation on transition from equity valuation to full consolidation takes place with no impact on the income statement but is carried out separately for every part-acquisition. The acquisition costs included in capital consolidation comprise the equity net book value and the acquisition costs for the majority acquisition. Profits or losses from mergers arising from the merger of two consolidated companies in the GfK Group are eliminated. Mergers, therefore, have no impact on the income statement of the GfK Group. Company mergers involving external minority shareholders do not give rise to any change in the total minority interests or the consolidated total income. If further shares are acquired in companies which are already fully consolidated, the purchase price of the additional acquisition is credited with the proportionate additionally acquired equity with no impact on the income statement. Any difference on the assets side arising from the entry is shown as goodwill. Shares in the equity of subsidiaries attributable to external minority interests are shown separately under equity. Shares in the subsidiaries results attributable to external minority interests are shown as a separate item in the income statement. 3. Accounting policies Currency translation Transactions in foreign currencies are translated into the functional currency of the reporting company at the exchange rate on the date on which they were carried out. As of the balance sheet date, monetary items are translated at the exchange rate on that date and non-monetary items are valued at the historical rate on the transaction date. Differences resulting from these conversions are, in principle, reported with impact on the income statement. FINANCIAL STATEMENTS 98_GfK GfK_98

103 The balance sheets of foreign subsidiaries not prepared in euros, as well as hidden reserves disclosed as part of purchase price allocation and goodwill from acquisitions, are translated into euros in accordance with the functional currency concept, based on the mean exchange rates on the reporting date. The annual average euro exchange rate, calculated as the mean of all month-end exchange rates, is applied to the income statements of these subsidiaries. Differences arising from the translation of asset and liability items at the exchange rate on the reporting date compared with the translation on the prior reporting date, and differences arising from translation of the annual result in the balance sheet (reporting date rate) and the consolidated income statement (average rate) are reported in equity with no impact on the income statement. Exchange rate differences arising from capital consolidation are reported in income and expense recognized directly in equity. The exchange rates against the euro of the key currencies for the GfK Group are indicated in the table below. Income statement The income statement is prepared in accordance with the cost of sales accounting method. Expenses are shown by function. Sales Euro mean rate on balance sheet date Euro abverage rate during reporting period Main currencies Unit of Country currency usa 1 usd uk 1 gbp Switzerland 100 chf Singapore 1 sgd Japan 100 jpy The method of recognizing sales is largely determined according to ias 18 and depends on the nature of the underlying transaction: panel business involves surveying individuals, households and companies and is characterized by the fact that the same circumstances are analyzed at the same, regular intervals on the basis of the same sample and always using the same methods. For business involving panels, the GfK Group recognizes sales pro rata temporis according to the progress of the project. Thus, the sales for a project are distributed evenly over its duration. Each month during the term of a contract, the same sales are recognized in terms of amount. ad hoc research business is systematic, empirical research which serves as the basis for marketing decisions in all areas of the marketing mix. This includes tests and surveys on product and pricing policy, brand positioning and brand management relating to traditional and modern forms of communication with consumers and users. Its function is to optimize distribution and enhance customer loyalty. Ad hoc research business is valued using the percentage of completion method. Progress on the project is determined as the ratio of the actual costs incurred to overall anticipated costs of the project. The estimate of total cost is continuously checked during the life of the project. Changes in the estimate of total cost flow into the calculation of recognizable sales at the time at which they can be anticipated. Costs to be included in this calculation comprise all direct personnel expenses and other cost of sales as well as pro rata indirect costs. Provisions are set up for expected losses on orders in progress, when they can be anticipated. syndicated business analyzes markets and market players without this being specifically commissioned by a client to, whose requirements the survey would be tailored. The completed survey is marketed without customer-specific adjustments. Syndicated surveys may be conducted once or on a recurring basis, without fulfilling the distinct and highly specific features of a panel. Various market participants may be questioned in repeated surveys, or the studies may be published at different intervals. In terms of determining sales, syndicated business is treated like panel business if it is comparable to panel business in nature, because it involves repeated surveys, where the cost behavior pattern is relatively evenly distributed over the term. For other syndicated business, the method of recognizing sales depends on the empirical estimate of the profitability of the respective survey: If a profit from the survey is probable, it is valued the same as an ad hoc research contract. If it is not yet sufficiently certain that enough purchasers will be found for a survey, the sale is recognized corresponding to the accumulated costs. If the value of the actual incoming orders is less than that of the costs incurred, recognizable sales are limited to the value of incoming orders. As soon as it is certain that the value of orders exceeds the costs, sales are recognized according to the method used for ad hoc research contracts. In all other business transactions, sales are only recognized once the work has been completed and invoiced. Cost of sales, selling and general administrative expenses In addition to personnel expenses, services rendered and scheduled depreciation/amortization of tangible and intangible assets, the cost of sales, selling and general administrative expenses comprise all other costs directly linked to the operational activity of the GfK Group. They also include personnel expenses from the stock option program and long term incentive plan, as well as scheduled amortization on additional assets identified on acquisitions and impairments (unscheduled decreases in value) of non-current assets. Research and development Research and development costs are basically recorded as expenses at the time they are incurred and shown under cost of sales. Development costs incurred within the GfK Group, particularly for setting up new panels, are shown under other intangible assets if the recognition criteria are met. Internally generated intangible assets are only capitalized if they have resulted from the development phase and not the research phase and if further precisely defined preconditions have been cumulatively fulfilled. These include the technical viability of project completion, the scheduled completion and use and the usefulness to the company or saleability of the intangible asset. Future economic benefits and the availability of the necessary FINANCIAL STATEMENTS GfK_99

104 Accounting policies technical, financial and other resources to complete the project, must also be reported. Reliable calculation of the costs associated with the intangible asset during its development phase is also a precondition for capitalization of internally generated intangible assets. Other operating income and expenses side at fair value. Profit distributed to minority interests, which hold rights to make delivery (put options or bonds), is also reported under interest expenses. Interest is recorded as income or expense at the time it is incurred. Interest is deferred on the basis of the effective interest rate method. At the GfK Group, interest expenses are not capitalized. Other operating income and expenses comprise income and expenses relating to operations, of which the allocation to sales or functional costs would not be appropriate. They include mainly exchange rate gains and losses, profit and loss from the disposal of fixed assets, impairments not attributable to functional costs and recoverable value and expenses for legal disputes. Income from ongoing business activity The income from ongoing activity indicator has been included in the income statement as a sub-total. Income from ongoing business activity corresponds to consolidated total income before tax on income. Operating income Operating income in the GfK Group comprises gross income from sales, less cost of sales, selling and general administrative expenses, and net other income comprising other operating income and other operating expenses. Tax on income Tax on income from ongoing business activity comprises current and deferred tax liabilities. Current taxes are calculated by the companies within the GfK Group according to valid tax law in their country of registration. Deferred taxes are calculated according to the liability method, whereby deferred tax assets and liabilities are entered on the balance sheet for temporary differences between the carrying amounts attributed in the consolidated financial statements and the tax basis of the assets and liabilities. Any effects on deferred taxes from changes in tax law are incorporated in the income statement from the date on which the tax law is passed. Deferred tax assets are only entered on the balance sheet if it is probable that they can be recognized at a future date. This is generally the case where the relevant company is sufficiently likely to achieve enough taxable profit to use the tax benefit. Adjusted operating income The indicator adjusted operating income is used internally to manage the GfK Group s business. It is derived from operating income. To calculate adjusted operating income, the following expenses and income items are excluded: integration costs in connection with acquisitions, write-ups and write-downs of additional assets identified on acquisitions, personnel expenses for share-based payments and long-term incentives and other remaining operating income and expenses. Income from associates Income from associates comprises income and expenses resulting from the valuation of pro rata shares in associates at equity. Other income from participations If deferred tax assets already recorded are not expected to be recognized within the foreseeable future as a result of new information, carrying values are adjusted. Tax on items recognized directly in equity is not included in the income statement. FINANCIAL STATEMENTS Other income from participations essentially comprises dividends from non-consolidated companies and other participations of the GfK Group, profit and loss from the disposal of such companies and income and expenses from profit transfer agreements with these companies. ebit The performance indicator ebit (earnings before interest and taxes) has been included as a sub-total in the income statement. ebit is determined by adding income from associates and other income from participations to operating income. Other financial income and expenses Other financial income and expenses comprise interest income and expenses, income and expenses from the valuation of derivative financial instruments used to hedge against interest rate risks, transaction costs for loans from banks and other financial income. Interest expenses also include additional interest on discounted debt. Such additional interest relates, for example, to future purchase price components from acquisitions, which are stated on the liabilities Impairments If an asset is impaired and is therefore depreciated, the cost of impairment is included in the income statement. The value of assets with an indefinite life and intangible assets under development is checked once a year by means of an impairment test. An impairment test is also carried out if triggering events occur, which may significantly affect the value of the assets concerned. Impairments on intangible assets are applied if the recoverable amount is below the amortized cost of acquisition or production. The recoverable amount is defined as the higher of the two sums of the fair value, less costs to sell or value in use of an asset whose expected future cash flows at the GfK Group are based on a minimum 3-year period, and which is discounted on the basis of a discount rate to be determined individually at market conditions. The growth rate of the cash flow beyond the period of detailed planning is usually taken into account by reducing the discount rate by one to two percentage points. FINANCIAL STATEMENTS 100_GfK GfK_100

105 Earnings per share The earnings per share (eps) reported in the consolidated income statement show the proportion of consolidated total income attributable to equity holders of the parent, which relates to the weighted average number of shares in the reporting period. To calculate diluted earnings per share, the average number of shares is adjusted by the options as yet not exercised, which are in the money as of the reporting date, as well as pro rata by any options exercised during the financial year under review. Stock options for employees and executives of the GfK Group Up until 2005, selected executives of the GfK Group were entitled to convert part of their variable remuneration into stock options in GfK ag. The option term is five years; options cannot be exercised until two years after issue. The GfK Group applies ifrs 2 for stock options issued after November 7, This remuneration, which is to be settled with equity instruments, is valued at the fair value on the grant date. The obligation is entered as expense in the income statement whilst the counter entry is made under capital reserve. Long Term Incentive Plan for employees and executives of the GfK Group (5 Star Incentive Program) Since financial year 2006, selected executives of the GfK Group have been entitled to convert part of their variable remuneration into virtual GfK shares. Virtual shares entitle the holders to cash payments at the end of the three-year performance period. GfK grants a corresponding volume of additional performance shares. The payment for the performance shares, which is also due at the end of the performance period depends on the achievement of two performance targets, the total shareholder return (tsr) on GfK shares compared with the tsr on shares of companies listed in the dj Euro Stoxx Media Index, and on the increase in operating profit at GfK over a three-year period. The amount payable at the end of the performance period is accumulated as provisions. The amount of the provisions is based on an actuarial opinion. Intangible assets Goodwill Goodwill arising from the capital consolidation of subsidiaries and that transferred from subsidiaries financial statements into the consolidated financial statements is reported by the GfK Group under intangible assets. In business combinations, goodwill represents the remaining difference in assets after the costs of acquisition of the participation are offset against the proportion of acquired revalued equity. Goodwill from the acquisition of companies, which do not report in euros is recorded in the reporting currency of the acquired subsidiary. The exchange rate at the time of first consolidation is used to calculate the goodwill at initial recognition. Subsequent measurements are based on the mean rate as of the reporting date. The GfK Group checks the recoverability of its cash generating units, including goodwill, as part of an impairment test, once a year or when triggering events or changed circumstances arise. For this purpose, goodwill is allocated to six cash generating units corresponding to the business areas, matching the internal Group control. The cash generating units are Custom Research, Retail and Technology, Consumer Tracking, Media, HealthCare and Other. Recoverability of goodwill is indicated when the recoverable amount is not less than the carrying amount of the cash generating unit. The recoverable amount corresponds to the fair value less costs to sell or the value in use if higher. The GfK Group calculates the fair value less costs to sell as part of the impairment test, using the discounted cash flow procedure based on anticipated future cash flow from the relevant current five-year plan. The growth in cash flow after the five-year period is taken into account by reducing the discount rate by two percentage points. Similar to the discount interest rate, this deduction from the growth rate is derived from available external capital market data. The discount rate is determined by carrying out a weighted average capital costs calculation, taking into account the standard industry capital structure and standard industry financing costs. The resulting discount rate is 8.11% to 8.30%, depending on the cash generating unit (2006: between 6.39% and 6.60%). The discount rate takes into account the respective equity and country risks as well as tax advantages from external financing of the cash generating unit concerned. Other intangible assets Where an intangible asset has been subject to impairment, there is a maximum write-up to the recoverable amount if a higher amount is recoverable at a later date. The carrying value after the write-up may not exceed the carrying value which would have resulted had the impairment not taken place in the past. The write-up is reported in the income statement. Internally generated intangible assets At the GfK Group, internally generated intangible assets mainly comprise software and panel set-up costs. As a rule, software developed by companies in the GfK Group is used internally for analyzing and processing market research data. In some cases, it is destined for external users and has been written specifically to meet user requirements. Internal costs of software development are capitalized under non-current assets if the criteria according to ias 38 are met. Amortization commences on completion of the software. Panel set-up costs generally involve capitalized development costs for setting up new panels or expanding existing panels. Capitalized panel set-up costs include: Spending on materials and services used in constructing panels Wages and salaries and other employment expenses for staff directly involved in setting up panels Overheads necessarily incurred in panel set-up and which can reasonably and regularly be allocated to this, based on cost accounting. FINANCIAL STATEMENTS GfK_101

106 Accounting policies Costs from the preparation and application phases and maintenance costs for current panels cannot be capitalized. They are included in expenses. Panel set-up costs are only subject to scheduled amortization if they are directly incurred in conjunction with a specific, fixed-term current client order. As a rule, the amortization period in such cases is based on the duration of the contract or the useful life. In all other cases, the useful life of panels is indefinite and they are not subject to scheduled amortization. The value of panels is checked at least once a year as part of an impairment test. Expenses for research activities are reported as expenses in the period under review. Development costs, which did not result in a capitalizable intangible asset, are also reported as expenses. Lease arrangements are entered on the balance sheet according to ias 17, with either a finance or an operating lease depending on the type of contract. Finance leases are characterized by the fact that risks and rewards of leased assets are generally transferred to the lessee. With a finance lease, the leased item is capitalized by the lessee and a corresponding leasing liability is recorded. The leasing liability is equivalent to either the present value of the minimum lease payments or the fair value of the leased asset at the start of the lease arrangement if lower. The leased asset is subject to scheduled straight line depreciation. The depreciation period is the lease term or the economic useful life whichever is shorter. Subject to fulfillment of the preconditions, an impairment is recorded. The lease liability is amortized over the contractual period through lease payments. Discounts are written up by applying a constant interest rate to the remaining debt and recorded in interest expenses within other financial expenses. Miscellaneous intangible assets Miscellaneous intangible assets include, in particular, software acquired, surveys, customer relations and brands. Miscellaneous intangible assets are entered in the balance sheet at amortized cost and are subject to scheduled, straight line amortization. This does not apply to customer relations and brands. As a rule, the useful life of software and other intangible assets is three to ten years. With operating leases, the leased assets are entered on the balance sheet of the lessor. The lessee records the regular payments as rental expenses. Financial instruments FINANCIAL STATEMENTS Customer relations are generally written down over a period of 10 to 30 years at an individually determined customer churn rate of between 5% and 20%. Brands are not subject to scheduled amortization and have an indefinite useful life. They are subject to an impairment test at least once a year. Interest on borrowing is not capitalized. Intangible assets with an indefinite useful life are subject to an impairment test at least once a year. Tangible assets Tangible assets are valued at cost less cumulative depreciation. Interest on borrowing is not capitalized. Cumulative depreciation includes scheduled straight line depreciation up to the balance sheet date and any impairments recorded. The depreciation period corresponds to the useful life. Assets in the course of set-up are not subject to scheduled depreciation. The GfK Group normally applies the useful life periods shown in the following table. Useful life Asset in years Administration buildings 50 it equipment 3 to 5 Cars and other vehicles 5 Office equipment 3 to 5 Office furniture 10 to 13 Pursuant to ias 32 and ias 39, financial instruments are contracts which result in a financial asset with one company and a financial liability or an equity instrument with another. In the GfK Group, financial instruments are entered on the balance sheet as bought or sold on the trade date, i.e. on the date on which the obligation to buy or sell a financial instrument was entered into. In the case of fixed-income financial instruments, interest rate changes may result in a change in fair value and in the case of variable rate financial instruments, in fluctuations in interest payments. In principle, short-term receivables and liabilities are not subject to interest rate risks. Financial assets and financial liabilities are recorded if the GfK Group is a contractual party in relation to a financial instrument. Financial assets are taken off the books if the contractual rights to payments arising from the financial assets expire or if the financial assets are transferred with all material risks and rewards. Financial liabilities are taken off the books if the contractual obligations have been settled, extinguished or have expired. Borrowing costs are recorded as expenses in the period in which they were incurred. With regard to the accounting policies applied to financial investments, management has stipulated at its discretion as the competent body that financial investments are never classified as held to maturity, but instead always available-for-sale. Primary financial instruments Primary financial assets are initially valued at fair value, taking into account directly attributable transaction costs. Primary financial liabilities are initially valued at fair value, which usually corresponds to the amount recovered. Subsequent valuation is at amortized cost on the basis of the effective interest rate method. FINANCIAL STATEMENTS Loans granted, receivables and liabilities are valued at fair value when they are added. This usually corresponds to the nominal value of the liability or loan amount granted. Non-interest bearing and low-interest long-term loans and receivables are recognized 102_GfK GfK_102

107 at the present value. Subsequent valuation with impact on income is at amortized cost and based on the effective interest rate method. Liabilities are valued at amortized cost. This applies only where receivables and liabilities do not relate to hedging transactions. Shares in companies, which do not qualify as subsidiaries or associated companies, are also shown as primary financial instruments at cost. The GfK Group only reports trading securities under securities; all other securities are reported under other financial assets as available-for-sale securities. The GfK Group does not hold any securities as held to maturity. Derivative financial instruments, hedge accounting The GfK Group concludes transactions throughout the world in various international currencies, which may involve currency risks. In addition, short-term investments, investment in securities and borrowing from banks take place in various currencies and can result in risks due to changes in exchange rates, interest rates and market prices. More detailed information on currency and interest rate risks as well as the goals, strategies and processes of risk management is provided in the risk report, which is part of the management report. The GfK Group uses currency forward transactions, combined interest rate and currency swaps as well as interest rate swaps to hedge against currency and interest rate risks. No derivative financial instruments are held for trading purposes. Derivative financial instruments are reported at cost as asset or liability at the time of the transaction and subsequently valued at fair value. The valuation of derivative financial instruments is carried out using standard market procedures based on instrument-specific market parameters. Market prices are calculated on the basis of present value and option price models. Where possible, the relevant market prices and interest rates on the balance sheet date are used as input parameters for these models. Changes in the value of derivative financial instruments used in hedge accounting are recorded differently, depending on whether the instrument is a fair value hedge, cash flow hedge or net investment hedge. If the derivative financial instrument is used to hedge against the risk of changes in the value of assets or liabilities, it represents a fair value hedge. In this case, changes in the fair value of both the hedged underlying item and the derivative financial instrument are taken to the income statement. With changes in the fair value of cash flow hedges used to hedge underlying transactions against risks from fluctuations in future payment flows, the effective portions of the fair value fluctuations are initially reported under income and expense recognized directly in equity. Once the hedged transaction affects the income statement, the profits and losses accumulated in the income and expense recognized directly in equity must be released with impact on the income statement. Net investment hedges can be used to secure net investment in foreign subsidiaries. This may, for example, involve a foreign currency loan in the local currency of the acquired participation. Any exchange gains or losses resulting from the cut-off date valuation of the foreign currency loan relating to the effective portion are recorded in income and expense recognized directly in equity as is the case for cash flow hedges. If the hedge is considered highly effective, the exchange gains and losses from the hedging instrument are posted in the income and expense recognized directly in equity. The release with impact on the income statement of this item does not occur at the end of term of the hedging instrument, but only upon sale or liquidation of the hedged item. The prerequisite for using any type of hedge accounting is that the link between the hedged item and the hedging instrument must be accurately documented. It must also be recorded how the hedging instrument used effectively compensates for the risk relating to the hedged item and which methods are used to substantiate the effectiveness. Generally, the part of the changes in value not covered by the hedged item is taken to the income statement. If the prerequisites for reporting an item as a hedging instrument (hedge accounting) are not met as per regulations in ias 39, the changes in value of the derivatives are immediately charged to the income statement. Fair values of forward currency transactions, combined interest rate and currency swaps and interest rate swaps are determined on the basis of market conditions as of the reporting date. Receivables and other assets Trade receivables include both billed and unbilled receivables. Unbilled receivables can arise in the context of the valuation of sales. Receivables are stated at nominal value or, in the case of identifiable specific risks, at the lower attributable value. These valuation allowances take sufficient account of the default risk. Receivables that are not subject to a specific valuation allowance and which are not material if viewed separately are grouped and a valuation allowance is applied on the basis of historical values. From financial year 2008 onwards, hedging against default risks, which was previously managed separately by each company, will be arranged uniformly throughout the Group. The credit rating of specific new clients will then need to be checked. Existing customer relations will be analyzed regularly. The criteria for valuation allowances will be standardized throughout the Group. Non-interest bearing or low-interest receivables with a time to maturity in excess of one year are discounted. Inventories Inventories are valued at the lower of cost and net realizable value. Due to their subordinated importance to the consolidated financial statements of the GfK Group, inventories are reported under other current assets and deferred items. Cash and cash equivalents Cash and cash equivalents contain cash on hand and in banks as well as liquid investments with a remaining term of less than three months. FINANCIAL STATEMENTS GfK_103

108 Accounting policies Equity and liabilities Capital reserve The company s equity, which is not part of the subscribed capital attributable to capital contributions of shareholders and which does not result from generated income, is reported under the capital reserve. Services that are linked to deposits for the purposes of acquiring shares or granting privileges, as well as other services aimed at strengthening equity, are also reported under capital reserve. The GfK Group reports rights to make delivery (put options or obligations) held by minority shareholders as purchase price elements, which depend on future events. The minority interests affected by this are no longer reported as minority interests but are stated under non-current or current liabilities. These financial obligations are valued at fair value. Earnings distributed to minority interests and the interest added to payment obligations are reported as interest expenses. Retained earnings Amounts created from income in the financial year under review or prior financial years are reported as retained earnings. This includes a statutory reserve to be created from income. Trade payables and other liabilities Trade payables and other liabilities are stated at repayment value. Obligations under invoices outstanding are reported under trade payables from financial year 2007 onwards. They were previously reported under other liabilities. Interest-free or low-interest non-current liabilities are discounted and stated at present value. Liabilities are reported for the first time at the date when the obligation arises. Income and expenses recognized directly in equity Income and expenses recognized directly in equity include changes in Group equity which have no impact on the income statement and which do not involve deposits by shareholders or distributions to shareholders. These changes result from exchange rate differences, unrecognized profits and losses from available-for-sale securities, actuarial gains and losses from provisions for pensions and unrecognized income and expenses from derivative financial instruments. Provisions Liabilities on orders in progress Liabilities on orders in progress comprise payments on account and accrued amounts from the recognition of sales. Within this item, sales are accrued which have arisen from contractually agreed invoices for prepayments or payments on account, but cannot yet be recognized as sales according to the above described sales recognition methods. FINANCIAL STATEMENTS In principle, provisions are set up when an obligation to a third party will probably result in an outflow of funds. In addition, the level of the obligation needs to be estimated reliably. Longterm provisions are discounted if they are interest-free or lowinterest. Provisions for pensions are valued in accordance with the projected unit credit method, in which future compensation increases are taken into account. The amount shown on the balance sheet represents the present value of the obligation adjusted by the unrecognized past service costs after offsetting the fair value of the plan assets. The discount rate is based on the interest rate for prior-ranking, fixed-income corporate bonds. Payments for defined contribution plans are stated as expenses when they occur. Actuarial gains and losses on defined benefit plans are recorded in income and expense recognized directly in equity in exercise of the option in ias 19. Financial liabilities Consolidated cash flow statement The cash flow statement shows the changes to the balance sheet item, cash and cash equivalents, resulting from cash flows from operating activity, investing activity and financing activity. The cash flow from operating activity is derived indirectly from changes to balance sheet entries. These are adjusted for the effects of currency translation and changes in the scope of consolidation. As a consequence, only a limited reconciliation is possible between the changes in the balance sheet items according to the consolidated cash flow statement and the arithmetical changes in the consolidated financial statements, the schedule of movements in non-current assets and other information in the notes to the financial statements. The internally used indicator changes in working capital, has been included in the consolidated cash flow statement. This indicator comprises changes in trade receivables and payables, liabilities on orders in progress, other assets, other liabilities, securities and fixed-term deposits, as well as short-term provisions. FINANCIAL STATEMENTS Financial liabilities include interest-bearing liabilities relating to financing, particularly loans from banks and other lenders, liabilities under finance leases and other interest-bearing liabilities. They are stated at the present value if they are interest-free or low-interest. Further valuation is carried out at amortized cost using the effective interest rate method. Estimates To a certain extent, estimates and assumptions cannot be avoided in the consolidated financial statements. They may affect assets and liabilities as well as contingencies on the balance sheet date and the income and expenses for the financial year. These estimates were made by the management, taking into account all known facts to the best of their knowledge. Nevertheless, the actual amounts may deviate from such estimates. 104_GfK GfK_104

109 In connection with reporting on the business combination due to the acquisition of Beijing Sino Market Research Co., Ltd. and China Market Monitor Co., Ltd., both with registered office in Beijing, China, as of October 1 and 31, 2007, a material adjustment to assets and liabilities may become necessary as a result of updated estimates within one year from the date of first-time consolidation, that is September 30 and October 30, 2008 respectively. Such an adjustment would have no impact on the income statement. Intangible assets would possibly be affected as well as the related deferred tax liabilities. The maximum adjustment required will correspond to 1% of consolidated total assets. The most important estimates regarding the future performance of the GfK Group and its economic environment are described in the outlook section of the management report. 4. Scope of consolidation and major acquisitions Fully consolidated companies As of December 31, 2007, the scope of consolidation in accordance with ifrs included 15 (2006: 15) German and 130 (2006: 128) foreign subsidiaries in addition to the parent company. The table below shows the changes in fully consolidated subsidiaries between January 1, 2007 and December 31, Fully consolidated subsidiaries (No.) Additions Disposals Germany Abroad Total In January, Jan Schipper Compagnie b.v., Bussum, Netherlands, was consolidated for the first time following an increase in the number of shares held by 80% from 20% to 100%. The company s activities are based in HealthCare and it was previously classified as an associate. In August, GfK acquired 66% of the shares in GfK Custom Research Co., Ltd., Beijing, China, 100% of the shares in Satisteme sa, Paris, France, and 100% of the shares in Daphne Communication Management b.v., Amstelveen, Netherlands. All three companies were fully consolidated for the first time. The companies operate in Custom Research. In October, GfK acquired 100% of the shares in China Market Monitor Co., Ltd. and Beijing Sino Market Research Co., Ltd., both with registered office in Beijing, China, and with activities in Retail and Technology. The companies have been fully consolidated. The total purchase price for the acquisitions mentioned here was eur 24,417 thousand over the reporting period. This figure comprises eur 13,041 thousand covered by liquid funds including incidental acquisition costs. The remaining purchase price is not yet due; this relates to obligations regarding future purchase price adjustments and put options of minority interests amounting to eur 2,884 thousand. These acquisitions produced goodwill of eur 22,271 thousand relating mainly to Retail and Technology and Custom Research. Goodwill represents mainly the expertise of the employees of these companies, which cannot be capitalized separately as such. Previously unreported intangible assets totaling eur 2,936 thousand, which related primarily to client relationships, were disclosed as part of the acquisition procedures outlined. The assets and liabilities, which were adopted during the acquisition of these consolidated companies, are shown in the following table. Prior to the merger As of the acquisition date Non-current assets 1,014 3,811 Current assets 5,406 5,545 Cash and cash equivalents 1,011 1,011 Liabilities and provisions 7,207 7,207 The cumulative income from these companies for the period during which they belonged to the GfK Group totaled eur 163 thousand. In 2007, the companies made a contribution to the GfK Group s consolidated total sales amounting to eur 6,318 thousand. In January, GfK HealthCare Asia Pte Ltd., Singapore, Singapore, whose activities are based in HealthCare and Corporación Empresarial asa sa de cv, Mexico City, Mexico, with Custom Research-based operations, GfK nop Field Marketing Services Limited and GfK Mystery Shopping Services Ltd., both with registered office in London, uk, which also operate in Custom Research, were fully consolidated for the first time. The same applies to GfK Market Consulting (Beijing) Co. Ltd., Beijing, China, whose activities relate to Retail and Technology. The companies were not previously included in the consolidated financial statements due to their subordinate role. GfK Healthcare Holding, Inc., Wilmington, Delaware, usa, was established in September and has been fully consolidated since then. In October, GfK Optics Japan kk, Tokyo, Japan, which operates in Retail and Technology, was founded and has since been fully consolidated. As of January 1, 2007, GfK Martin Hamblin Limited and GfK Media Ltd., both based in London, uk were deconsolidated. The companies no longer conduct operational activities and are of minor importance to the consolidated financial statements of the GfK Group. The companies Numbers Market Research Limited and Numbers Data Processing Limited, both with registered office in London, uk, and afi Holdings llc, Wilmington, Delaware, usa, as well as Adware Media Solutions b.v., Hilversum, Netherlands, were wound up in the year under review. The companies Mode Services Pvt Ltd., Mode Modellers Pvt Ltd, Modus Analysis and Information Pvt Ltd and Rocol iro Pvt Ltd, all based in Kolkata, India, were merged with GfK Mode Pvt Ltd, Kolkata, India. E. Friedman Marketing Services, Inc., Harrison, New York, usa, was merged with GfK nop, llc, New York, New York, usa, as of September 30, Companies of minor importance The GfK Group did not include 52 (2006: 57) companies in the consolidated financial statements during the reporting year because they were of minor significance for the net assets, financial position and income of the Group. FINANCIAL STATEMENTS External sales, total assets and annual income from these companies together totaled approximately 1% of the corresponding figures in the consolidated financial statements GfK_105

110 Notes to the consolidated income statement Associated companies 6. Cost of sales The consolidated financial statements as of December 31, 2007 report on participations in 19 (2006: 17) associated companies. The following table shows the changes in associated companies between January 1, 2007 and December 31, The cost of sales amounting to eur 781,393 thousand (2006: eur 752,342 thousand) include research and development costs totaling eur 6,874 thousand (2006: eur 5,993 thousand). 7. Other operating income Associed companies (No.) Additions Disposals Germany Abroad Total The participation in Phononet ag, Zurich, Switzerland, was increased to 20% in the year under review. The Retail and Technology-based company Consumer Zoom sas, Rueil-Malmaison, France, was established in June GfK ag has a direct shareholding of 30% in the company. The remaining 70% of the shares are held by the associated company, MarketingScan snc, Rueil-Malmaison, France. GfK has a decisive influence on Bureau voor Reclame Statistiek Hoofddorp b.v., Hoofddorp, Netherlands, and the company has therefore been reclassified from other participations to associated companies. As of January 1, 2007, a 36% stake was acquired in mrc-mode Pvt. Limited, Dhaka, Bangladesh. Following the additional acquisition of shares to make up 100%, Jan Schipper Compagnie b.v., Bussum, Netherlands, was included under affiliated companies. The shares in incoma Consult s.r.o., Prague, Czech Republic, were sold in December Other operating income of eur 25,813 thousand (2006: eur 15,628 thousand) contains exchange gains of eur 11,006 thousand (2006: eur 11,509 thousand). In 2005, GfK ag acquired nop World from its former British parent company, ubm. Following completion of the nop World acquisition, the seller asserted a claim against GfK ag for repayment of certain liabilities owed to ubm by nop World companies prior to completion of the acquisition. In August 2006, ubm filed an action with the competent court in London. GfK ag opposed the action, as it believed the amount of the claim applied for to be unfounded. Taking into account the negotiations out of court, a new estimate regarding the expected amount payable to settle these liabilities was made as of the balance sheet date. The reduction in the amount relating to the liabilities produced other operating income of eur 10,205 thousand. Other participations The number of other participations fell by comparison with the prior year from six to five. Phononet ag, Zurich, Switzerland, and Bureau voor Reclame Statistiek Hoofddorp b.v., Hoofddorp, Netherlands, were reclassified as associated companies. A 5% interest was acquired in the partnership, TMC Thomson Media Control GmbH & Co. kg, Baden- Baden, Germany. 8. Other operating expenses Other operating expenses include the items shown in the table below Exchange losses 10,326 9,386 Non-operating depreciation/amortization 5,676 3,223 Expenses from legal liability, fines and compensation 2,050 1,984 Miscellaneous 4,991 3,471 Other operating expenses 23,043 18,064 As in the prior year, non-operating depreciation/amortization primarily includes impairments on additional assets identified on acquisitions. 9. Personnel expenses FINANCIAL STATEMENTS 5. Sales Sales are broken down according to type as shown in the table below Sales in respect of third parties, billed 1,089,442 1,134,079 Sales in respect of third parties, unbilled 18,303 21,857 Sales in respect of related parties and groups 1,609 1,220 Sales in respect of affiliated companies 2,090 4,216 Sales in respect of associated companies Sales in respect of other participations 0 9 Sales 1,112,159 1,162,055 The expense items in the income statement include the personnel expenses listed in the table below Wages and salaries ,392 Social security contributions and expenses for pensions 69,341 73,783 Personnel expenses 442, ,175 FINANCIAL STATEMENTS The breakdown of sales according to division and region is shown under section 35 Segment reporting. 106_GfK GfK_106

111 10. Adjusted operating income Adjusted operating income is the internal management indicator for the GfK Group and is explained in detail in the management report. It is derived as follows: Operating income 118, ,377 Integration costs in connection with acquisitions 4,042 0 Write-ups and write-downs of additional assets identified on acquisitions 22,515 30,083 Personnel expenses for share-based payment and long-term incentives 2,943 1,677 Remaining other operating income 14,951 25,444 Remaining other operating expenses 17,411 14,928 Adjusted operating income 150, ,621 Write-ups and write-downs on additional assets identified on acquisitions The composition of write-ups and write-downs on additional assets identified on acquisitions and the allocation to items in the income statement are shown in the table below. Current amortization Cost of sales 17,560 14,769 Impairments Cost of sales 0 6,175 Selling and general administrative expenses 0 6,894 Other operating expenses 5,632 3,136 Reversal of impairments Cost of sales Other operating income Write-ups and write-downs of additional assets identified on acquisitions 22,515 30,083 Further details are provided in section 15, in the sub-section amortization and impairments on intangible assets. Personnel expenses for share-based payments and long-term incentives Personnel expenses shown here include tranches 6 and 7 of the stock option program for GfK Group managers (eur 1,312 thousand; 2006: eur 2,287 thousand). The total value of each tranche is notified two years to the day after the options are issued, which corresponds to the period between issue and the date on which options can be exercised for the first time. The item also includes expenses for the Long Term Incentive Plan for GfK Group employees and managers of eur 365 thousand (2006: eur 656 thousand). This is the amount allocated to the relevant provisions in addition to the premium waiver of the employees included for 2007, which is based on calculations by an expert. Details are provided in the section entitled accounting policies. The table below shows the number, term and value of virtual shares and virtual performance shares issued as part of the Long Term Incentive Plan. Tranche 1 2 Year issued Year of payment Number of virtual shares issued (qty.) 59,633 54,416 Number of virtual performance shares issued (qty.) 59,633 54,416 Fair value of a virtual share at the time of issue in eur Fair value of a virtual performance share at the time of issue in eur Other financial income Other financial income amounting to eur 7,901 thousand (2006: eur 4,562 thousand) mainly comprises income from derivative financial instruments (eur 6,019 thousand; 2006: eur 491 thousand) as well as interest on bank credit balances of eur 1,371 thousand (2006: eur 3,674 thousand). 12. Financial expenses Financial expenses break down as shown in the table below: Interest and similar expenses due to banks 24,683 22,334 Other interest expenses 7,086 6,559 Interest expenses 31,769 28,893 Other financial expenses 1,272 1,377 Financial expenses 33,041 30, Tax on income from ongoing business activity The main elements of the Group s tax on income are shown in the table below Current tax expenses/income Taxes on income from other periods 3,650 4,360 Taxes based on tax losses not previously utilized Other actual taxes on income 31,377 37,035 Current tax expenses 27,514 32,074 Deferred tax expenses/income from the formation or conversion of temporary differences 4,243 5,032 from changes in the tax rate/new taxes 186 2,281 based on previously non-utilized tax losses based on previously unaccounted temporary differences from write-ups and write-downs of additional assets identified on acquisitions 8,893 11,417 Other deferred tax expenses 234 2,440 Deferred tax expenses/income 5,281 6,410 Taxes on income from ongoing business activity 22,233 25,664 FINANCIAL STATEMENTS GfK_107

112 Notes to the consolidated income statement The tax advantage from the utilization of tax loss carryforwards during financial year 2007 amounted to eur 5,939 thousand (2006: eur 2,149 thousand). The balance sheet for 2007 recorded a deferred tax claim due to non-utilized tax losses totaling eur 10,879 thousand (2006: eur 12,793 thousand). In addition, there was a deferred tax claim from deductible and applicable tax credit amounting to eur 8,304 thousand (2006: eur 11,263 thousand). The tax rate used to calculate deferred taxes for the German companies with registered offices in Nuremberg comprises corporation tax of 15% (2006: 25%) plus the solidarity surcharge of 5.5% on the corporation tax debt paid, as well as the effective trade tax rate of % (2006: %). This results in a tax rate of % as of December 31, 2007 (2006: %). The deferred taxes of the remaining German companies are calculated according to the relevant municipal factor of the trade tax rate. The deferred taxes of the companies outside Germany are calculated according to the respective country-specific tax rates. The table below contains a reconciliation of the anticipated income tax expense on the income tax expense stated in financial year To calculate the anticipated tax expense, the tax rate of the parent company, GfK ag, valid during the reporting year of % is multiplied by the pre-tax result. The deferred taxes result from the balance sheet items listed in the following table Goodwill 9,223 7,235 Other intangible assets 5,493 4,487 Tangible assets 1,674 1,952 Shares in affiliated companies 4,085 5,625 Associates and other participations Other financial assets 10,858 22,816 Other non-current assets and deferred items Non-current assets 31,415 43,024 Receivables and other current assets 1, Securities and fixed-term deposits, cash and cash equivalents Current assets 1, Long-term provisions 5,844 6,660 Other long-term liabilities and deferred items 1) 818 2,969 Non-current liabilities 6,662 9,629 Short-term provisions 5, Other short-term liabilities and deferred items 1) 23,420 18,705 Current liabilities 28,429 19,602 Tax loss carryforwards and tax credits 24,056 19,183 Deferred tax assets 92,440 92,073 FINANCIAL STATEMENTS Total tax rate % % Expected tax expense 37,223 46,617 Increase/reduction in income tax debt resulting from: Differences in tax rates 9,345 9,715 Other tax-exempt income 5,111 7,652 Additional tax payments or refunds from prior years 1,729 5,834 Adjustment of deferred tax due to changes in tax rates 156 3,995 Income from participations valued at equity, not eligible for tax Change in permanent differences Release of tax liability for tax risk relating to 1998 and ,218 0 Tax benefit from the revaluation of intangible assets under Italian law 2,525 0 Tax-exempt income from the disposal of participations 19 0 Change in temporary differences not recognized as deferred tax assets Consolidation of taxable income rom participations 1,097 1,308 Non-deductible expenses 2,117 1,547 Deviating tax base 3,386 4,042 Other 221 1,262 Tax expense reported 22,233 25,664 Goodwill 8,808 11,624 Other intangible assets 74,724 59,311 Tangible assets 8,717 7,325 Shares in affiliated companies 1,525 1,304 Associates and other participations Other financial assets Other non-current assets and deferred items Non-current assets 94,225 80,032 Receivables and other current assets 27,695 22,249 Securities and fixed-term deposits, cash and cash equivalents 36 0 Current assets 27,731 22,249 Long-term provisions Other long-term liabilities and deferred items 1) 7,200 13,691 Non-current liabilities 7,247 14,324 Short-term provisions Other short-term liabilities and deferred items 1) 4,509 3,203 Current liabilities 5,098 3,593 Deferred tax liabilities 134, ,198 Net deferred tax liabilities 41,861 28,125 1) Adjusted figures for prior year Deferred taxes are reported in the balance sheet as shown in the following table Deferred tax assets 43,110 44,255 Deferred tax liabilities 84,971 72,380 Net deferred tax liabilities 41,861 28,125 FINANCIAL STATEMENTS Taxes on items posted directly to equity amounted to eur 3,680 thousand (2006: eur 3,436 thousand). As of December 31, 2007, the Group had domestic tax loss carryforwards amounting to eur 7,802 thousand (2006: eur 5,147 thousand), which can be utilized exclusively for the purposes of trade tax. Additional loss carryforwards of eur 5,146 thousand (2006: eur 4,318 thousand) can be used for corporation tax and trade tax purposes. In addition, there are foreign tax loss carry- 108_GfK GfK_108

113 forwards totaling eur 33,308 thousand (2006: eur 37,669 thousand). The domestic loss carryforwards can be carried forward without restriction in terms of time and amount. Of the foreign loss carryforwards, the amount of eur 28,680 thousand may be carried forward without limit or for a period of more than 15 years, and the amount of eur 8 thousand is available for carryforward until eur 4,620 thousand can be carried forward until The estimate of their future realizability governs the recognition and valuation of deferred tax assets. This is dependent on the generation of future taxable profits during accounting periods, in which tax valuation differences are reversed and tax loss carryforwards can be applied. In view of expected future performance, it is assumed probable that the relevant benefits of the recognized deferred tax assets will be realized according to the provisions of ifrs. Deferred tax assets are also stated for companies which have been or are in a loss-making situation, if there is sufficient assumption of future profits. The items for which no deferred tax assets have been stated are shown in the table below Temporary differences 0 4 Tax losses as yet not utilized 6,456 6,259 Tax credits as yet not utilized 0 2,970 6,456 9, Intangible assets The movement in tangible assets is shown in the table below. Acquisition and manufacturing costs Goodwill Internally generated intangible assets Miscellaneous intangible assets Total: intangible assets As of January 1, ,609 23, ,463 1,074,604 Exchange rate changes 26, ,694 43,882 Change in scope of consolidation 59, ,126 67,684 Additions 15 14,748 6,094 20,857 Disposals ,479 2,179 Reclassifications 0 3, ,940 As of December 31, ,242 41, ,692 1,121,024 As of January 1, ,242 41, ,692 1,121,024 Exchange rate changes 46, ,526 63,888 Change in scope of consolidation 33, ,438 41,972 Additions 1,066 17,491 6,919 25,476 Disposals 7, ,735 22,616 Reclassifications As of December 31, ,859 58, ,527 1,101,707 Of the tax losses not recognized as deferred tax assets, an amount of eur 1,942 thousand lapses within the next five years. eur 8 thousand will lapse within the next six to ten years. The remaining eur 4,309 thousand will lapse after more than 15 years or include amounts with no time limit on their use. Tax credits as yet not utilized can be applied without restrictions. The GfK Group reports deferred taxes on retained profits from foreign subsidiaries where these profits are distributable and are not to remain permanently invested in the subsidiaries. Pay-outs to shareholders of GfK ag do not result in income tax consequences at GfK ag level. 14. Earnings per share Earnings per share are derived as shown below: Consolidated total income attributable to equity holders of the parent 65,260 83,230 Weighted average of shares outstanding non-diluted 35,155,998 35,682,085 Weighted average of shares outstanding diluted 35,715,730 35,903,757 Earnings per share in eur Earnings per share (diluted) in eur The average number of shares is diluted by 221,672 shares from options issued, not yet exercised and options under tranches three to six exercised in the financial year, which are in the money as of the reporting date. This results in a dilution effect of eur 0.01 per share. Additional information about the stock option program is provided in section 23 of these notes. Business events involving potential ordinary shares did not arise after the balance sheet date. Cumulative amortization As of January 1, ,035 6,052 70, ,837 Exchange rate changes 2, ,577 5,078 Change in scope of consolidation Additions 0 2,222 23,330 25,552 Disposals ,455 1,860 Impairment 0 0 5,632 5,632 Reversal of impairment Reclassifications As of December 31, ,587 7,825 95, ,441 As of January 1, ,587 7,825 95, ,441 Exchange rate changes ,339 Change in scope of consolidation Additions 0 3,310 20,679 23,989 Disposals 1, ,883 14,057 Impairment ,292 16,327 Reversal of impairment Reclassifications As of December 31, ,167 11, , ,432 Carrying values As of January 1, ,574 17, , ,767 As of December 31, ,655 33, , ,583 As of January 1, ,655 33, , ,583 As of December 31, ,692 47, , ,275 FINANCIAL STATEMENTS GfK_109

114 Notes to the consolidated balance sheet Intangible assets of major importance Goodwill The sum total of all intangible assets of major importance is shown in the table below. These refer to intangible assets with an individual value of more than eur 5 million. The allocation of goodwill to the cash-generating units is shown in the following table Goodwill 714, ,813 Software 15,382 21,614 Surveys 66,668 48,698 Customer relations 17,185 14,626 Brands 29,238 26, eur m eur m Custom Research Retail and Technology Consumer Tracking Media HealthCare Goodwill The major portion of goodwill primarily refers to nop World companies. Goodwill and brands have an indefinite useful life and are not subject to scheduled amortization. Software relates to the internally developed StarTrack analysis and production system in the Retail and Technology division with a remaining useful life of six years as well as the Evogenius software, which is still being developed for the Media division and has a useful life of ten years. The surveys, customer relations and brands stem primarily from the purchase price allocation as part of the acquisition of nop World. The useful life for the surveys is ten years. The customer relations are generally written down over a period of ten to 30 years at an individually determined customer churn rate of between 5% and 20%. Amortization and impairments charged on intangible assets Internally generated intangible assets Internally generated intangible assets primarily comprise internally developed software totaling eur 30,403 thousand (2006: eur 22,224 thousand) as well as panel set-up costs of eur 11,762 thousand (2006: eur 8,277 thousand). Panel set-up costs only have a limited useful life if the panel was created for a specific, fixed-term client order. Capitalized panel set-up costs amounting to eur 9,318 thousand (2006: eur 2,892 thousand) have an unlimited useful life Miscellaneous intangible assets The breakdown of miscellaneous intangible assets is shown in the table below. FINANCIAL STATEMENTS Amortization and impairments charged on intangible assets are included in the following items on the income statement Cost of sales 24,636 29,244 Selling and general administrative expenses 917 7,915 Other operating expenses 5,632 3,157 Total 31,185 40,316 An impairment test is carried out at least once a year to determine whether and to what extent existing goodwill is to be impaired. No impairment adjustment was required as a result of the impairment tests for 2006 and There were therefore no impairment expenses for either financial year. The recoverability of panel set-up costs and brands with an unlimited useful life was also reviewed as part of an impairment test. The impairments total eur 16,328 thousand (2006: eur 5,632 thousand). eur 3,136 thousand relate to impairment losses on brands and eur 585 thousand to impairments on panels. Impairments on surveys of eur 5,712 thousand and of eur 6,895 thousand on customer relations are also included. The impairment adjustments were identified in the impairment test, which was based on updated capital market data and adjusted business planning. Impairments charged on brands are reported in the income statement under other operating expenses, while impairments on surveys, panels and customer relations are shown in the functional costs Disclosed hidden reserves from purchase price allocation: Surveys 72,251 53,941 Customer relations 40,681 32,093 Brands 38,709 32,704 Panels 4,102 5,259 Contracts 2,285 1,456 Order book Software 15,401 14,026 Panel set-up costs Sundry intangible assets 4,993 4,968 Miscellaneous intangible assets 179, ,316 Brands, which have been identified and capitalized as part of the purchase price allocation, also have an unlimited useful life as they are established brands with a high degree of brand recognition. The allocation of brands to the divisions is shown in the table below Custom Research 22,191 18,048 Media 12,896 11,713 HealthCare 3,622 2,803 Retail and Technology Brands 38,709 32,704 FINANCIAL STATEMENTS 110_GfK GfK_110

115 16. Tangible assets The movement in tangible assets is shown in the table below. Acquisition and manufacturing costs A land charge has been entered on a piece of land with company buildings in Nuremberg with a carrying value of eur 6,794 thousand (2006: eur 7,024 thousand) for the granting of a loan by a bank. The carrying value of the secured liability was eur 2,588 thousand (2006: eur 3,265 thousand) as of the reporting date. Leasing Land and buildings and assets in the course of construction Fixtures and fittings Tangible assets As of January 1, , , ,175 Exchange rate changes ,521 Change in scope of consolidation 0 1,667 1,667 Additions ,638 23,190 Disposals 4,325 11,420 15,745 Reclassifications As of December 31, , , ,225 As of January 1, , ,225 Exchange rate changes 341 4,040 4,381 Change in scope of consolidation Additions ,238 25,155 Disposals 826 7,593 8,419 Reclassifications As of December 31, , , ,680 Kumulierte Abschreibungen As of January 1, , , ,454 Exchange rate changes 176 1,185 1,361 Change in scope of consolidation Additions 1,298 18,663 19,961 Disposals 93 10,917 11,010 Impairment Reversal of impairment Reclassifications As of December 31, , , ,360 As of January 1, , , ,360 Exchange rate changes 117 2,686 2,803 Change in scope of consolidation Additions 1,248 18,940 20,188 Disposals 168 6,683 6,851 Impairment Reversal of impairment Reclassifications As of December 31, , , ,507 Carrying values As of January 1, ,747 43,974 80,721 As of December 31, ,612 48,253 79,865 As of January 1, ,612 48,253 79,865 As of December 31, ,449 51,724 82,173 The GfK Group leases office premises and business equipment under long-term lease agreements. As a rule, the lease installments consist of a minimum lease payment plus a contingent lease payment whose level is governed by the level of use of the leased assets. In cases in which the GfK Group bears the risks and opportunities arising from the use of the leased assets to a substantial extent, these are capitalized (finance lease). Otherwise, the lease installments are carried as an expense (operating lease). Operating Lease The payments listed in the table below under operating lease agreements were carried as expenses: Minimum lease payments 27,459 28,476 Contingent lease payments Less sub-lease payments received Lease payments 27,635 28,542 The future minimum lease payments under non-terminable agreements are due as of December 31, 2007 as follows: Payable Within one year 26,056 26,335 Between one and five years 73,400 68,824 After more than five years 39,283 34,839 Future minimum lease payments under operating leases 138, ,998 The main operating leases in the GfK Group involve leases on land and buildings, some with options to extend the lease. They have differing future expiry dates. Finance Lease The carrying values of capitalized leased items as of December 31, 2007 are shown in the table below Buildings 10,379 10,033 Other leased items 2,346 1,899 Capitalized leased items 12,725 11,932 Determination of the present value and due date of future minimum lease payments are shown in the tables below Payable Minimum lease installment Less interest Present value minimum lease installment Within one year 2, ,182 Between one and five years 7, ,672 After more than five years 8,375 2,184 6,191 Future minimum lease installment 18,307 3,262 15, Payable Minimum lease installment Less interest Present value minimum lease installment Within one year 2, ,184 Between one and five years 13,590 2,373 11,217 After more than five years Future minimum lease installment 16,107 2,489 13,618 FINANCIAL STATEMENTS GfK_111

116 Notes to the consolidated balance sheet In the reporting year there were no contingent rents to be recognized as expenses. There were no material sub-lease arrangements under finance leases. The main finance leases held by the GfK Group are for buildings and part buildings as well as fixtures and fittings. In April 1992, GfK ag entered into a sale-and-leaseback agreement for part of the office building at Nordwestring 101, Nuremberg, which qualifies as a finance lease. The lease was concluded for 30 years with an original obligation amount of eur 13,012 thousand. The original lease period without right of cancellation ends in March 2012, but with the option to acquire the building for eur 7,533 thousand. Other financial assets The breakdown of other financial assets is shown in the table below Shares in affiliated companies 1,986 4,654 Other participations Loans to affiliated companies 2,955 2,980 Other loans Available-for-sale securities Long-term fixed deposits Other financial assets 6,436 8,542 The finance lease liability is eur 13,618 thousand (2006: eur 15,045 thousand) of which eur 2,184 thousand (2006: eur 2,182 thousand) has a remaining term of under one year. 17. Financial assets Investments in associates The GfK Group s investments in associates are shown in the list of shareholdings attached to these Notes as an appendix. The table below gives a summary of financial information on the main investments in associates which have been valued at equity in the consolidated financial statements. The shares in affiliated, non-consolidated companies and other participations are reported at amortized cost, as no market prices exist for them and other methods of realistically estimating the fair value are not practicable. Further information on the GfK Group s shares in affiliated companies and other participations is provided in the list of shareholdings in the appendix to the Notes Assets 43,949 44,220 Liabilities 18,221 18,215 Sales 58,622 59,296 Total income for the period 11,861 11, Other non-current assets and deferred items Other non-current assets of eur 5,878 thousand (2006: eur 4,528 thousand) comprise mainly long-term receivables from insurance companies of eur 1,993 thousand (2006: eur 1,787 thousand) and deposits amounting to eur 1,523 thousand (2006: eur 1,436 thousand). 19. Trade receivables Trade receivables break down as follows: During the reporting period there were no material pro rata losses on the shareholdings in associates. As in the prior year, the equity valuation was based on financial statements with differing reporting dates for the following associated companies: Billed trade receivables 231, ,518 Unbilled trade receivables 46,368 49, , ,281 Less valuation allowances 5,857 4,819 Trade receivables 271, ,462 Media Focus (arge), Hergiswil, Switzerland (November 30, 2007) FINANCIAL STATEMENTS org-gfk Marketing Services (India) Private Limited, Mumbai, India (March 31, 2007) Sports Tracking Europe, b.v., Amstelveen, Netherlands (September 30, 2007) npd Intelect, l.l.c., Port Washington, New York, usa (September 30, 2007) The carrying amount for these shares and the income from associates are not materially affected by including these financial statements with differing reporting dates. Moreover, for practical reasons, preparing interim financial statements would not be possible. Impairment expenses amounted to eur 1,734 thousand (2006: eur 2,153 thousand). They are shown in the income statement under the item selling and general administrative expenses. Allocations to valuation allowances totaled eur 1,734 thousand (2006: eur 2,153 thousand) and reversals of valuation allowances stood at eur 958 thousand (2006: eur 631 thousand). Valuation allowances of eur 1,717 thousand (2006: 1,108 thousand) were utilized. 20. Cash and cash equivalents A breakdown of cash and cash equivalents is shown in the table below. FINANCIAL STATEMENTS Credit with banks 43,473 28,655 Cash equivalents and fixed-term deposits with a remaining term of less than 3 months 4,749 10,844 Checks in transit 1,761 2,502 Cash in hand and checks 1, Cash and cash equivalents 47,862 37, _GfK GfK_112

117 Of the cash and cash equivalents, eur 226 thousand (2006: eur 1,054 thousand) are not freely available. The restriction on availability results mainly from commitments towards the tax authorities. 21. Other current assets and deferred items including assets held for sale The other current assets and deferred items break down as shown in the table below Deferred items 11,655 11,124 Assets held for sale 0 9,530 Derivative financial instruments 11,861 7,805 Receivables from tax and other authorities 5,284 4,665 Inventories 516 2,447 Other current assets 14,329 16,438 43,645 52,009 Less valuation allowance 1,019 1,802 Other current assets and deferred items 42,626 50, Equity Subscribed capital The subscribed capital and contingent capital were recalculated in 2007 in connection with the retrospective inclusion of the issue of new shares between the Annual General Meeting on June 15, 2004 and entry in the commercial register. This resulted in a reduction in the share capital of eur 1,684, and an increase in the capital reserve of the same amount. The number of no-par shares issued rose by 2,306 units. The stock options exercised in 2007 increased the share capital of GfK ag. In the stock option program, in 2007, the holders of option rights from tranches 2002/2007, 2003/2008, 2004/2009 and 2005/2010 were entitled to acquire new no-par shares in GfK ag in the ratio 1:1.2 against submission of the option rights. In 2007, 358,930 no-par shares were acquired by exercising 299,109 options. As a result of the recalculation of the subscribed capital and the issue of new shares, the subscribed capital, capital reserve and the number of no-par bearer ordinary shares issued developed as follows: The derivatives reported here are primarily part of a cash flow hedge used to hedge the interest rate risk. The assets held for sale are detailed in Note Due dates of non-impaired assets The trade receivables and other short-term assets fall due for payment as shown in the table below Trade receivables 271, ,462 of which: neither impaired nor overdue 143, ,439 of which: non-impaired and overdue as follows by up to 30 days 82,538 73,786 by between 31 and 90 days 33,210 30,126 by between 91 and 180 days 6,306 7,858 by between 181 and 360 days 3,033 1,552 by more than 360 days 3,165 3,701 In the GfK Group, a considerable portion of the trade receivables is due on the billing date. Trade receivables which are not due include unbilled receivables amounting to eur 49,763 thousand (2006: eur 46,368 thousand). The receivables overdue by more than 360 days mainly relate to refund claims against the seller of nop World from the period prior to the acquisition in Further information is given in Notes 37. and Income tax receivables and other current assets and deferred items 53,514 56,902 of which: neither impaired nor overdue 50,993 52,507 of which: non-impaired and overdue as follows by up to 30 days 1,278 1,591 by between 31 and 90 days 133 1,669 by between 91 and 180 days by between 181 and 360 days by more than 360 days Subscribed capital eur 000 Capital reserve eur 000 Number of no-par shares issued Units As of January 1, , ,050 35,501,795 Adjustments 1,685 1,685 2,306 Issue of new shares through conversion of options from contingent capital 919 7, ,930 Personnel expenses for stock options 0 1,312 0 As of December 31, , ,751 35,863,031 The 35,863,031 no-par shares are fully-paid up. Each shareholder is entitled to receive dividends on his shares in accordance with the respective profit distribution resolution. Each share grants one vote at the Annual General Meeting. Authorized capital By resolution of the Annual General Meeting on May 23, 2007, the previously authorized capital (authorized capital 2002 and 2005 i) was cancelled and replaced by new authorized capital (authorized capital 2007 i). The Management Board is therefore authorized, with the consent of the Supervisory Board, to increase the capital against cash and/or contributions in kind on one or more occasions until May 22, 2012 by up to a total amount of eur 55,000 thousand, whereby the shareholders subscription rights may be excluded (authorized capital 2007 i). Contingent capital In June 1999, the shareholders passed a resolution for a contingent increase of eur 5,120 thousand in the company s share capital by issuing up to 2,000,000 new no-par bearer shares. At the Extraordinary General Meeting of September 3, 1999, a resolution was passed to relate profit entitlement to the start of the financial year in which the options are exercised. The aim of the contingent capital increase is to grant option rights to the senior management teams of the company and its affiliated companies within the meaning of Section 15 ff. of the German Stock Corporation Act. Acquiring option rights is contingent on FINANCIAL STATEMENTS GfK_113

118 Notes to the consolidated balance sheet the achievement of a minimum target, to be agreed with each individual entitled person, for their immediate area of responsibility. The number of options available to each entitled person is based on the variable salary component advised to each entitled person in an individual letter, which can be replaced by options in the ratio of 1:2.5 by waiving a portion of the promised bonus. The actual number of options for tranches 1 to 3 results from division of this figure by a factor of 4.5. The option right can be exercised at the earliest two years after issue and only within defined exercise windows. The exercise price for tranches 2000/2005 and 2001/2006 was the equivalent of 120% of the average price of GfK shares in the Xetra closing auction on the five trading days prior to the issue of the option rights or 120% of the price of GfK shares in the Xetra closing auction on the date of issue, if this was higher than the aforementioned average price. In June 2002, the shareholders consented to cancelling the existing authorization to grant option rights and approved a new authorization and an increase of the contingent capital by eur 6,687 thousand. In 2004, the contingent capital increased through the issue of bonus shares in the ratio of 5:1 to eur 13,262 thousand. Tranche Term Total options Of which Management Board Exercise Exercisable price in eur from to Options exercised Shares issued / ,300 85, ) ) 380, , / , ) ) ) 395, , / , ,110 1) ) ) 238, , / , ,221 1) ) ) 73,415 88, / , , ) ) 1) Including members who have since left the company. 2) Exercise of options commences after the Annual General Meeting. Options may not be exercised during the 14 days before publication of quarterly, half-yearly, annual or preliminary annual figures. The company may set further periods during which options may not be exercised. The development of the stock options issued is shown in the table below. FINANCIAL STATEMENTS The option terms resolved apply to tranches 2002/2007, 2003/2008, 2004/2009, 2005/2010 and 2006/2011 and deviate from those of the prior tranches of the program as follows: Members of the Management Board of GfK ag may hold a maximum of 30% of the option rights being granted (previously 20%). Options may not be exercised during the 14 days before publication of quarterly, half-yearly, annual or preliminary annual figures. In addition, the company may set further periods at its discretion during which options may not be exercised. For each of the tranches to be issued, the exercise price to acquire a share is the share s average Xetra price between the respective previous accounts press conference and the Annual General Meeting or, if higher, the price of the share in the Xetra closing auction on the trading day on which the respective tranche is issued, plus a premium of 5%. Trading days are those days on which the Frankfurt Stock Exchange determines a price for the company s shares. At the start of 2007, the contingent capital for exercising options amounted to eur 12,424 thousand, equivalent to 2,903,620 no-par bearer shares. In 2007, the recalculation of the company s contingent capital led to a reduction of eur 3,587 thousand. The company s contingent capital fell by eur 919 thousand through the exercise of options in By resolution of the Annual General Meeting on May 23, 2007, the company s contingent capital was increased by eur 21,250 thousand through the issue of up to 5,000,000 new no-par bearer shares (contingent capital 2007 i). The contingent capital 2007 i is used to grant shares to holders of options and/or convertible bonds issued on the basis of the authorization of the Annual General Meeting of May 23, The contingent capital of the company amounts to eur 29,168 thousand as of December 31, 2007, which corresponds to 7,544,690 no-par shares. Number of options Weighted average price in eur/share Number of options Weighted average price in eur/share Balance at start of year 1,615, ,470, Options granted 551, Exercised 378, , Forfeited 4, , Expired Repayments Balance at year-end 1,470, ,157, Exercisable at year-end 469, , During financial year 2007, the stock option program involved personnel expenses of eur 1,312 thousand (2006: eur 2,287 thousand). The fair value of the stock options issued by GfK in the years 2001 to 2006 was calculated as of the date of granting on the basis of a Black-Scholes option pricing model, which takes account of the issue terms and conditions. The parameters considered when calculating the fair value and the overall amounts based on it are shown in the table below. Tranche Implicit volatility on issue date in % Risk-free investment interest in % 1) Term in years Fair value per option in eur Total value per program 2,902 2,654 2,809 2,289 1,730 1) Interest rate of zero coupon bonds with a maturity of three years FINANCIAL STATEMENTS Stock options As a result of the capital increase in 2004 out of company funds and the issue of bonus shares in the ratio of 5:1, the subscription right in respect of the issued options of tranches one to six increased from one share to 1.2 shares per option. The exercise prices were adjusted accordingly. As of tranche seven, to which GfK executives were invited to subscribe after the capital increase in 2004, one option again corresponds to the right to subscribe one share. The calculation of volatility is based on historical volatility data for GfK shares (weekly average prices, net of any extraordinary past prices) for the expected term of the options. The average weighted remaining term for the stock options was 2.6 years as of December 31, 2007 (2006: 3.2 years). The development in the individual items of equity is shown in the table below. 114_GfK GfK_114

119 Subscribed capital Capital reserve Retained earnings Currency translation differences Attributable to equity holders of the parent Fair value of securities availablefor-sale Income and expense recognized directly in equity Valuation of cash flow hedges (effective portion) Valuation of net investment hedges for foreign subsidiaries Actual gains/losses on defined benefit plans Total Minority interests As of January 1, , ,402 68,669 15, ,706 3,745 2, ,274 22, ,441 Total income 65,260 35, ,717 12,552 2,022 43,271 5,283 48,554 New shares issued 1,930 8,361 10,291 10,291 Dividends to shareholders 11,566 11,566 2,650 14,216 Other changes 2, ,624 7,289 4,665 As of December 31, , , ,700 20, ,423 8,807 4, ,894 17, ,405 As of January 1, , , ,700 20, ,423 8,807 4, ,894 17, ,405 Total income 83,230 49, ,436 10,041 3,748 45,894 7,872 53,766 New shares issued 919 7,703 8,622 8,622 Dividends to shareholders 12,781 12,781 6,354 19,135 Other changes 1,685 2,997 2, , As of December 31, , , ,584 69, ,987 18, ,376 20, ,551 Total equity During the reporting year, eur 12,781 thousand (2006: eur 11,566 thousand) were distributed to the shareholders. This corresponds to eur 0.36 (2006: eur 0.33) per share. Proposed appropriation of profits In accordance with the German Stock Corporation Act, the dividend that may be distributed is determined by the retained profit reported in the annual financial statements of GfK ag. These are prepared under the provisions of the German Commercial Code (hgb). The retained earnings and retained profit of GfK ag reported under the provisions of the dgb are available for distribution in their entirety to shareholders. The capital reserve may not be distributed to shareholders. A proposal will be made to the Annual General Meeting to distribute a dividend of eur 16,138 thousand (eur 0.45 per no-par share) to shareholders out of the retained profit of eur 110,392 thousand and to transfer eur 94,254 thousand to other retained earnings. 24. Long-term provisions The breakdown of long-term provisions is shown in the table below: Pension provisions 40,371 34,749 Other long-term provisions 16,667 18,888 Long-term provisions 57,038 53,637 Pension provisions Pension provisioning within the GfK Group is based on both defined contribution plans and defined benefit plans for each company. Für beitragsorientierte Altersversorgungssysteme (defined For defined contribution plans, which are entirely funded by external resources, there are no further obligations for GfK companies other than paying contributions. Expenses for defined contribution plans also include employer contributions to statutory pension plans. Pension commitments are based on statutory or contractual arrangements or are on a voluntary basis. The basis of assessment for contributions to defined contribution plans is mainly the length of service with the company and the wage or salary level of the employee. However, the benefits can vary depending on the legal, fiscal and economic framework conditions of the country concerned. The pension expenses for defined contribution plans amounted to eur 12,827 thousand (2006: eur 12,561 thousand) in The pension obligations arising from defined benefit plans are reported according to the projected unit credit method. Actuarial reports are produced annually by independent actuaries for defined benefit plans. The actuaries apply statistical and actuarial calculations to determine the assets and provisions to be carried on the balance sheet. Determining the present value of defined benefit plans and pension assets is based on empirical and statistical estimated values such as, for example, future salary raises, mortality rates or expected long-term returns on the plan assets. FINANCIAL STATEMENTS Discrepancies between the actual values and these estimated values are expressed as actuarial gains or losses. The GfK Group GfK_115

120 Notes to the consolidated balance sheet is utilizing the option under ias 19 whereby actuarial gains and losses are not recognized in the income statement but recognized directly in equity. In the year under review, actuarial gains of eur 5,455 thousand (2006 losses: eur 2,931 thousand) were reported in this way. This also includes actuarial gains and losses from refund claims. The amount of income and expenses recognized directly in equity totaled eur 1,563 thousand (2006: eur 7,018 thousand) as of December 31, These figures do not include deferred taxes. The calculation of obligations and, in certain cases, associated plan assets, is based on the actuarial and statistical assumptions listed in the table below (weighted average) The table below shows the movement in plan assets Fair value of plan assets as of January 1 39,388 41,627 Change in the scope of consolidation 1,006 0 Expected return on plan assets 1,668 1,844 Actuarial gains/losses Exchange rate changes 1,466 1,214 Employer contributions 2,203 1,755 Participant contributions 950 1,023 Benefits paid 933 1,006 Company mergers Plan settlements 2,442 2,559 Fair value of plan assets as of December 31 41,627 40,754 Discount rate 3.53 % 4.27 % Rate of salary increase 2.40 % 2.40 % Fluctuation rate 0.14 % 0.38 % Expected growth in pensions 1.03 % 1.18 % Expected long-term return on plan assets 4.43 % 4.42 % Mortality rates for GfK companies in Germany were taken from the 2005 guideline tables by Dr. Klaus Heubeck. The breakdown of pension provisions reported in the balance sheet is shown in the table below Present value of unfunded obligations 36,471 33,453 Present value of funded obligations 45,527 41,883 Present value of overall obligations 81,998 75,336 Fair value of plan assets 41,627 40,754 Impact of ceiling in accordance with ias (b) 0 58 Net present value of obligations 40,371 34,640 The plan assets for funded pension obligations essentially comprise financial instruments amounting to eur 35,987 thousand (2006: eur 40,751 thousand). The general expected return on the plan assets was determined based mainly on experience from the past ten years. The expected return on plan assets reported in the financial statements for 2007 is on average 4.42% (2006: 4.43%). The actual return on plan assets amounted to eur 821 thousand (2006: eur 2,532 thousand) in According to GfK estimates, contributions of around eur 226 thousand will be payable into funded pension plans over the coming year. The amounts reported in the income statement break down as shown in the table below: Service cost 3,383 3,172 FINANCIAL STATEMENTS Pension provisions 40,371 34,749 Other assets Net amount reported on balance sheet 40,371 34,640 The movement in the present value of the defined benefit obligation (dbo) during the period under review is shown in the table below Present value of defined benefit obligation as of January 1 77,831 81,998 Change in scope of consolidation 1,102 8 Current service cost 3,383 3,172 Interest cost 2,824 2,796 Participant contributions 950 1,029 Actuarial gains/losses 3,780 6,395 Exchange rate changes 1,759 1,331 Benefits paid 2,484 2,986 Past service cost Company mergers Plan reductions Plan settlements 4,081 2,558 Present value of defined benefit obligation as of December 31 81,998 75,336 Interest cost 2,824 2,796 Expected return on plan assets 1,668 1,850 Past service cost Profit/loss from curtailment or discontinuation of pension plans Pension expenses 4,328 3,393 The pension expenses are included mainly in cost of sales, selling and general administrative expenses and interest expenses. FINANCIAL STATEMENTS 116_GfK GfK_116

121 The funding status is shown in the table below Pension liabilities 81,998 75,336 Pension assets 41,627 40,754 Impact of ceiling in accordance with ias (b) 0 58 Funding status 40,371 34,640 Empirical adjustment in liabilities 5.35 % 8.12 % Empirical adjustment in assets 5.68 % 2.10 % Other long-term provisions The movement in other long-term provisions in the period under review is shown in the table below. Personnel Potential contractual losses Sundry Total As of January 1, ,592 6,031 1,044 16,667 Currency effects Write-ups to discounted provisions Addition 3, ,281 5,668 Utilization ,279 Release Reclassifications to short-term provisions ,217 As of December 31, ,974 4,807 3,107 18,888 Personnel provisions comprise mainly commitments relating to employees leaving and from provisions for anniversary expenses based on contractual agreements. In addition, they comprise provisions for the Long Term Incentive Plan of eur 4,421 thousand (2006: eur 2,404 thousand). The provision for potential contractual losses relates to two longterm rental contracts at non-standard terms. The larger contract has been in place since 2002 at a company of nop World. The remaining term is nine years. The agreed rent has been compared with the current and estimated future market rates and the amount in excess has been recognized in the provision. As this is an interest-free commitment, the present value has been used. The discount was calculated at an interest rate of 7%. The nominal amount of the commitment as of the reporting date was eur 9,026 thousand (usd 13,197 thousand). In 2007, a write-up on this discounted provision amounting to eur 476 thousand was applied. If the market price for rents does not follow the trend assumed for recognition of this provision, the provision will be adjusted accordingly. 25. Long-term and short-term interest-bearing financial liabilities The breakdown of financial liabilities is shown in the table below Amounts due to banks 464, ,261 of which with a remaining term of less than one year 96,137 93,083 of which with a remaining term of between one and five years 368, ,178 of which with a remaining term of over five years 0 0 Liabilities under financial leases 15,045 13,618 of which with a remaining term of less than one year 2,183 2,184 of which with a remaining term of between one and five years 6,671 11,217 of which with a remaining term of over five years 6, Other financial liabilities 72,956 75,808 of which with a remaining term of less than one year 56,869 63,536 of which with a remaining term of between one and five years 15,834 11,639 of which with a remaining term of over five years Financial liabilities 552, ,687 of which with a remaining term of less than one year 155, ,803 of which with a remaining term of between one and five years 390, ,034 of which with a remaining term of over five years 6, With regard to the amounts due to banks, the prior year s figure was adjusted in respect of the remaining term. Other financial liabilities included loan liabilities totaling eur 3,592 thousand (2006: eur 9,869 thousand) as of December 31, 2007, of which eur 2,766 thousand (2006: eur 9,404 thousand) concerned related parties. As of December 31, 2007, the weighted average interest rate for the amounts due to banks was 5.23% (2006: 4.62%) before interest rate hedging. The financial liabilities become due in the next five years and thereafter, as shown in the table below. Due date Within one year 1) 155, ,803 one two years 104,216 96,384 two three years 98,698 55,747 three four years 55, ,421 four five years 132,339 6,483 More than five years 6, Financial liabilities 552, ,687 1) Includes current account liabilities payable on demand in the context of credit lines FINANCIAL STATEMENTS As of December 31, 2007, the GfK Group had confirmed loans and credit lines of eur 553,332 thousand (2006: eur 650,379 thousand), of which eur 165,265 thousand (2006: eur 183,020 thousand) have not been used. The weighted average rate of interest on the loans and credit lines is 5.35% (2006: 4.54%) before interest rate hedging. GfK_117

122 Notes to the consolidated balance sheet Collateral of eur 2,704 thousand (2006: eur 3,439 thousand) is in place for amounts due to banks and liabilities under leases of eur 400,880 thousand (2006: eur 479,460 thousand). The collateral breakdown is shown in the following table. 28. Other short-term liabilities and deferred items including liabilities held for sale The breakdown of other short-term liabilities and deferred items is shown in the table below Amounts due to banks secured by mortgage 3,265 2,588 Liabilities under leases secured by transfer of movable assets Secured liabilities 3,439 2,704 In addition to the collateralization of liabilities to banks, the GfK Group has undertaken to meet certain covenants as part of a syndicated credit facility. The ratio of net indebtedness in relation to modified ebitda, which is established on the basis of specific criteria, must be lower than The ratio of modified ebitda to interest expenses must be higher than 4.0. In the event of these covenants being breached, the credit margin of the banks providing the finance increases and a new agreement on the covenants to be met in future must be concluded with the creditors. Both covenants were met by the GfK Group as of December 31, Accounts payable to employees 56,130 58,929 Liabilities from other taxes 22,673 23,159 Other operating liabilities 18,504 18,779 Non-operating liabilities 8,797 7,809 Interest owed 7,841 5,353 Liabilities to related parties 828 5,311 Liabilities held for sale 0 1,175 Outstanding invoices from suppliers 12,144 0 Sundry liabilities 3,073 4,674 Other short-term liabilities and deferred items 129, ,189 Short-term liabilities to employees mainly comprise liabilities for the payment of bonuses (eur 25,486 thousand) and holiday and flexitime claims (eur 15,721 thousand), liabilities arising from social security (eur 8,615 thousand) and liabilities from wages and salaries (eur 4,695 thousand). The GfK Group only concludes financing transactions with renowned German and foreign banks with a first-rate creditstanding. The default risk is further reduced by spreading the transactions across several banks. Despite the us real estate crisis and the resultant increase in their refinancing costs, almost 90% of the syndicate banks were prepared to renew the credit line for a further year until October These measures served to minimize the default risk. Other liabilities from operating business mainly comprise amounts owed to interviewers (eur 5,225 thousand), to households and respondents (eur 4,892 thousand) as well as to customers (eur 2,770 thousand). Liabilities from non-operating business mainly include liabilities for external year-end closing costs and legal and consultancy costs (eur 2,727 thousand) as well as liabilities for rental (eur 2,450 thousand). 26. Other long-term liabilities and deferred items Other long-term liabilities and deferred items of eur 14,275 thousand (2006: eur 4,331 thousand) include long-term liabilities from share and asset deals of eur 9,842 thousand (2006: eur 506 thousand). The liabilities held for sale are explained in Note 31. As of financial year 2007, liabilities from outstanding invoices are reported under trade payables. 29. Sensitivity analysis Exchange rate risks can arise in the GfK Group from transactions conducted in a currency other than the respective functional currency. The main currencies are shown in euros in the table below. FINANCIAL STATEMENTS 27. Short-term provisions The movement in short-term provisions in the year under review is shown in the table below. Personnel Potential contractual losses Authorities and insurance companies Sales Sundry Total As of January 1, ,762 1,236 1, ,658 8,668 Currency effects Addition , ,240 3,570 Utilization ,313 Release Reclassifications from long-term provisions ,217 As of December 31, ,839 1,148 1, ,462 7, eur EUR USD GBP CHF SGD JPY Loans 3, , , Trade receivables 16,124 5, Cash and cash equivalents 1,649 2, Interest-bearing financial liabilities ,082 24, ,238 1,912 Trade payables 5,038 2,613 2, Liabilities from orders in progress 1,542 9, FINANCIAL STATEMENTS 118_GfK GfK_118

123 eur EUR USD GBP CHF SGD JPY Loans ,618 93, Trade receivables 11,514 3, Cash and cash equivalents 1, Interest-bearing financial liabilities ,370 29, ,837 Trade payables 4,972 3,289 2, Liabilities from orders in progress 1,255 2, Equity Income statement Overall impact Interest rate change in percentage points Variable rate instruments 0 0 4,516 4,516 4,516 4,516 Interest rate swaps 6,713 7,507 4,144 4,144 10,857 11,651 Cash flow sensitivity 6,713 7, ,341 7,135 The exchange rates of the most important currencies to the euro are shown in the section on accounting policies. The sensitivity analysis approximately quantifies the risk that can arise under certain assumed conditions if specific parameters change. The table below shows how equity and net income are affected by a simultaneous parallel appreciation of all foreign currencies of 10% against the euro while all other factors remain constant Equity Income statement Overall impact Interest rate change in percentage points Variable rate instruments 0 0 3,783 3,783 3,783 3,783 Interest rate swaps 3,409 3,088 2,936 2,822 6,345 5,910 Cash flow sensitivity 3,409 3, ,562 2,127 Equity Income statement Overall impact Equity Income statement Overall impact EUR 0 1,618 1, USD 14,988 9,235 5,753 9,896 12,834 2,938 GBP 0 7,532 7, ,174 6,174 CHF SGD JPY Total 14,988 14, ,896 18,003 8,107 Interest rate risks can arise for variable rate financial instruments and for fixed-income financial instruments not measured at amortized cost. Changes in the market value of fixed-income financial assets and liabilities are not recognized in the income statement; moreover, there are no interest rate derivatives which are allocated to fixedincome instruments as fair value hedges in accordance with ias 39 and reported in fair value hedge accounting. A change in interest rates on the reporting date, therefore, has no impact on the income statement or the equity as this item is measured at amortized cost. The effects before tax on the equity and income statement of a change in interest rates for variable rate financial instruments of 100 basis points on the reporting date are shown in the table below. This analysis assumes that all other variables, especially exchange rates, remain constant. 30. Notes to the consolidated cash flow statement The cash flow statement is presented at the front of the Notes. It shows the changes in the GfK Group balance sheet item, cash and cash equivalents during the year under review. In accordance with ias 7, a distinction is made between cash flows from operating activity and from investing and financing activity. The funding sources covered in the cash flow statement comprise cash and cash equivalents. They encompass cash in hand, checks, cash equivalents and fixed-term deposits where they are available within three months. The cash flow from operating activity amounted to eur 168,129 thousand (2006: eur 110,268 thousand). It covered investments which totaled eur 73,700 thousand (2006: 56,614 thousand) in full. Of this, eur 49,249 thousand (2006: eur 42,567 thousand) related to capital expenditure. The disbursements for the acquisition of consolidated companies and other business units amounted to eur 22,836 thousand (2006: eur 12,243 thousand), while the total cash purchase prices stood at eur 13,041 thousand according to the section on scope of consolidation and major acquisitions. The difference is mainly attributable to additional acquisitions in already consolidated companies and non-consolidated companies. In addition, cash flow from operating activity was used for loan repayments (eur 125,978 thousand; 2006: eur 84,800 thousand), which contributed to a clearly negative figure for cash flow from financing activity (eur 112,901 thousand; 2006: eur 90,864 thousand). In the year under review, interest paid amounted to eur 28,126 thousand (2006: eur 26,203 thousand). FINANCIAL STATEMENTS Dividends totaling eur 19,239 thousand (2006: eur 14,067 thousand) were paid to shareholders of GfK ag and minority shareholders in subsidiaries. The cash and cash equivalents reported in the balance sheet fell by eur 10,116 thousand (2006: eur 31,737 thousand). Income tax payments resulted overall in a cash outflow of eur 33,188 thousand (2006: eur 32,580 thousand) in financial year Funds acquired through the purchase of subsidiaries amounted to eur 2,573 thousand (2006: eur 707 thousand). GfK_119

124 Segment reporting 31. Disposal groups At the beginning of 2008, the GfK Group is planning to sell its holdings in GfK Animal Healthcare Limited, West Byfleet/Surrey, uk and m2a s.a., Saint Aubin, France. The disposal of participations in these companies, which operate in HealthCare, has commenced. Consequently the assets and liabilities of the companies meet the criteria for disclose as disposal groups. All assets of the two companies are reported separately in the line item assets held for sale (eur 9,530 thousand). This relates mainly to goodwill (eur 6,542 thousand) and other intangible assets (eur 1,723 thousand). The liabilities of the business operations being sold are reported under liabilities held for sale (eur 1,175 thousand). 32. Related parties Related parties are persons or groups, which could be influenced by the GfK Group or could have an influence on the GfK Group. In the year under review, the following major transactions were carried out involving related parties: There was a dividend liability to Emer Marketing Research s.a., Valencia, Spain, the minority shareholder in GfK Marketing Services España, s.a., Valencia, Spain, of eur 1,710 thousand (2006: eur 0). The liabilities due to the former shareholders of Beijing Sino Market Research Co., Ltd., Beijing, China, mainly comprised purchase price obligations of eur 9,884 thousand (2006: eur 0). There were mainly loan obligations amounting to eur 665 thousand (2006: eur 7,510 thousand) due to GfK-nürnberg, Gesellschaft für Konsum-, Markt- und Absatzforschung e.v., Berlin, the majority owner of GfK ag. The corresponding interest expenses stood at eur 217 thousand (2006: eur 172 thousand). Unless stated otherwise, amounts owed to and by related parties mainly have a remaining term of less than one year. Material receivables, liabilities, income and expenses with nonconsolidated affiliated companies, associated companies and other participations of the GfK Group are specified in the Notes under the respective items. GfK ag has submitted a letter of comfort in favor of GfK Asia Pte Ltd., Singapore, Singapore to a leasing company with a maximum guarantee commitment of eur 407 thousand (sgd 857 thousand). bwv Holding ag, St. Gallen, Switzerland, sold shares in two Swiss and one Austrian joint stock company with agreement dated July 28, GfK ag has assumed a purchase price payment obligation of up to eur 5,135 thousand (chf 8,500 thousand) to cover claims by the purchaser arising from contractual infringements. From July 28, 2009 the guarantee drops to eur 4,531 thousand (chf 7,500 thousand) and ends by December 31, Following the acquisition of nop World Group in 2005, the GfK Group was restructured in part and sub-groups and intermediate holding companies were set up. GfK ag has issued a declaration to the three managing directors of these sub-groups, which releases them from any future claims that may be made by third parties in connection with their positions as managing directors of these companies. It is possible that subsequent tax payments may be necessary following future tax audits at GfK Group companies. The occurrence and amount of such future liabilities cannot be estimated. Future commitments arising from lease agreements are described in the section on leases under non-current assets. 34. Financial instruments and derivatives The default risk linked to the positive fair values of the derivatives is estimated to be low, as transactions are only concluded with renowned German and foreign banks with a first rate creditstanding. Furthermore, the default risk is reduced by spreading the transactions across several banks. The maximum default risk of the GfK Group amounts essentially to the carrying value of all financial assets. The global activities of the GfK Group and the large number of customers, which include many established major companies, reduce the concentration of the default risk. The carrying values of the derivative financial instruments of the GfK Group are shown in the table below. FINANCIAL STATEMENTS 33. Contingent liabilities and other financial commitments The contingent liabilities and other financial commitments that are not carried as liabilities in the consolidated balance sheet are reported at nominal values and break down as shown in the following table Commitments arising from maintenance, service and license agreements 406 6,327 guarantees and sureties 3,256 2,406 order commitments 1,587 2,370 Of these commitments, eur 4,033 thousand (2006: eur 2,024 thousand) had a remaining term of less than one year. In addition, there are the following contingent liabilities and financial commitments: Assets Currency hedging contracts including cross currency swap Interest rate hedging contracts 11,574 7,428 Liabilities Currency hedging contracts 6 98 Interest rate hedging contracts 8 0 The carrying values of all financial instruments correspond to the fair values. The derivative financial instruments are valued on a marking-tomarket basis, in accordance with the market conditions as of the reporting date. In addition, the Group s own calculations are checked for plausibility by the market assessments provided by the banks. As of December 31, 2007, the GfK Group had currency hedging contracts relating to Australian dollars, us dollars, Singapore dollars, Swedish krona, pound sterling, Swiss francs and the Czech koruna. The nominal volume of the currency hedging contracts totals eur 20,874 thousand (2006: eur 4,730 thousand), whereby all contracts have a remaining term of less than one year. FINANCIAL STATEMENTS 120_GfK GfK_120

125 In addition, as of the reporting date, the GfK Group had combined interest rate and currency swaps with a nominal volume of eur 6,634 thousand (2006: eur 4,997 thousand). Of these, eur 5,130 thousand (2006: eur 3,709 thousand) have a remaining term of more than one year. The fair value as of the reporting date amounts to eur 302 thousand (2006: eur 281 thousand). As of the year-end, the GfK Group also held an amortizing interest rate cap with a nominal volume of eur 17,235 thousand (2006: eur 0 thousand) and a fair value as of the reporting date of eur 2 thousand. eur 10,533 thousand of the nominal volume have a remaining term of more than one year. As of the year-end, the GfK Group also held interest rate hedging contracts with a total nominal amount of eur 282,215 thousand (2006: eur 424,161 thousand) and a positive fair value of eur 7,428 thousand (2006: eur 11,566 thousand). As a result, an interest rate of between 2.6% and 2.7% was secured for loans in euros. The interest rate secured for loans in us dollars is 3.7% or 4.1% (all figures before credit margin). Of this, interest rate swaps with a nominal volume of eur 281,990 thousand (2006: eur 414,396 thousand) are classified as cash flow hedges. The total interest rate swaps mature in the next five years as shown in the table below. 35. Segment reporting The primary classification of the GfK Group into segments (business divisions) is based on the organization of the divisions in line with the products and services offered. The secondary classification is by region. The GfK Group provides services in the divisions Custom Research, Retail and Technology, Consumer Tracking, Media, HealthCare and in Other. In the Custom Research division, the GfK Group and around 50 subsidiaries in more than 30 countries provide clients across the world with information services for their operating and strategic decisions relating to all areas of the marketing mix. In the Retail and Technology division, the GfK Group provides its clients in the retail and industrial sectors with regular information services gained from ongoing surveys and analyses of sales of electronic and technical consumer goods in retail in over 70 countries in the world. In the Consumer Tracking division, the GfK Group provides its clients with regular information services on consumer goods and services based on continuous surveys and analyses of consumer buying decisions and habits in 26 European countries. Maturity Less than one year 90,310 71,417 Between one and two years 98,024 71,055 Between two and three years 89, ,743 Between three and four years 150,455 0 Between four and five years Nominal volume of interest rate swaps 428, ,215 In the case of derivatives used as cash flow hedges, changes in fair value are reported in the income and expenses recognized directly in equity. For the year under review, the amount posted under income and expenses recognized directly in equity amounted to eur 3,206 thousand before tax (2006: eur 4,515 thousand) and eur 2,197 thousand after tax (2006: eur 2,717 thousand). During the year under review there was also a change in the deferred tax on amounts allocated in prior years due to the cut in the deferred tax rate in Germany, as well as a reduction amounting to eur 761 thousand after tax. The GfK Group used net investment hedges to hedge net investments in foreign subsidiaries. In the year under review, effective changes in value of a loan in us dollars, which was concluded as part of the acquisition of nop World, as well as existing us dollar loans for the financing of GfK arbor, llc, Media, Pennsylvania, usa, and GfK v2, llc, Blue Bell, Pennsylvania, usa, amounting to eur 12,869 thousand before tax (2006: eur 20,859 thousand) and eur 8,818 thousand after tax (2006: eur 12,552 thousand), were recognized directly in equity. The change in the deferred tax rate in Germany also led to an adjustment of eur 1,223 thousand after tax in Gains and losses from derivative financial instruments, which are not reported as part of hedge accounting, are posted in other financial income or expenses respectively. In total, the income from these financial instruments amounted to eur 1,063 thousand (2006: eur 491 thousand), while expenses amounted to eur 743 thousand (2006: eur 25 thousand). In the Media division, the GfK Group provides clients, in over 20 countries and in the usa, with information services based on continuous studies, as well as custom research surveys on the intensity and nature of media usage and media offerings, as well as media acceptance. In the HealthCare division, the GfK Group provides its clients with information and advisory services for the special pharmaceuticals and healthcare markets in all countries in which the GfK network is present. These divisions are complemented by Other which comprises, in particular, the head office services of GfK ag for its subsidiaries and participations as well as its partners. In the GfK Group, the internal control and reporting are largely based on the same accounting and valuation methods as the consolidated financial statements. The Group measures the success of its divisions by reference to the adjusted operating income. The adjusted operating income of a division is determined on the basis of the operating income net of the following income and expenses: integration costs linked to company acquisitions, write-ups/write-downs on additional assets identified on acquisitions, personnel expenses from share-based payments and long-term incentives, other operating income and expenses. However, according to ias 14, operating income must be presented by segment. In the following table, the column marked Reconciliation shows the items which cannot be allocated to the individual divisions. These mainly include central functions such as administrative and financial departments at the Group Head Office. Assets, liabilities, income and expenses, where, due to their characteristics, no definite allocation to divisions is possible, are also shown in the Reconciliation column. Intersegment sales are covered exclusively by the division of Other. Their elimination is also reported in the Reconciliation column. In principle, intra-group business transactions are recorded at the same conditions as for third parties. FINANCIAL STATEMENTS GfK_121

126 Segment reporting Information on segments for financial years 2006 and 2007 is shown in the two tables below. Custom Research Retail and Technology Consumer Tracking Media Sales to third parties 517, , , ,803 99, , , ,497 Internal sales Operating income 24,447 22,730 59,131 67,035 6,156 7,501 19,358 20,543 Segment assets 1) 661, , , ,114 56,745 58, , ,726 Segment liabilities 209, ,333 78,477 96,930 51,333 42,277 56,340 59,389 Asset additions 36,791 38,799 47,766 32,231 8,723 6,643 8,007 6,015 Scheduled amortization/depreciation 20,438 19,791 6,052 6,512 3,945 3,581 9,336 8,972 Impairment 4,699 15, Material non-cash expenses 117 2, , Income from associates ,013 2, Investments in associates ,436 8, HealthCare Other Reconciliation Group Sales to third parties 137, ,885 4,592 3, ,112,159 1,162,055 Internal sales ,587 53,960 25,587 53, Operating income 11,387 13,142 1,953 5, , ,377 Segment assets 1) 223, ,363 9,285 4,075 99, ,984 1,496,174 1,470,753 Segment liabilities 55,684 50,725 5,116 4, , ,364 1,029, ,202 Asset additions 12,816 8, ,720 93,024 Scheduled amortization/depreciation 5,346 4, ,513 44,177 Impairment ,676 16,393 Material non-cash expenses ,437 6,188 Income from associates ,271 3,001 Investments in associates ,248 9,160 1) Including investments in associates FINANCIAL STATEMENTS Reclassifications were carried out for the prior year figures in four of the business divisions. In Retail and Technology, figures previously included in Consumer Tracking were additionally taken into account on a retrospective basis. The pro rata figures in Custom Research that were identified as part of HealthCare business activities were allocated retrospectively to the HealthCare division. The adjustments were implemented to show a definite separation between clearly allocable business operations. The prior year s figures for segment assets and liabilities were also allocated more appropriately. Segment assets and liabilities which cannot be assigned and the effects of consolidation are shown in the table below. Segment assets include all capitalized assets which can be assigned to the segments. These mainly involve intangible assets, tangible assets and trade receivables Segment assets 1,396,439 1,357,769 Short-term income tax assets 10,888 16,225 Short-term securities and fixed-term deposits 2, Cash and cash equivalents 47,862 37,746 Other current assets and deferred items 42,626 40,677 Consolidation effects 4,112 17,506 Assets according to the consolidated balance sheet (assets) 1,496,174 1,470,753 Segment liabilities mainly comprise trade payables, liabilities on orders in progress, provisions and other liabilities Segment liabilities 455, ,838 Long-term interest-bearing financial liabilities 397, ,884 Short-term income tax liabilities 23,325 25,862 Short-term interest-bearing financial liabilities 155, ,803 Consolidation effects 1, Liabilities according to the consolidated balance sheet 1,029, ,202 The reconciliation of operation income to consolidated total income is as follows: Operating income 118, ,377 Income from associates 3,271 3,001 Other income from participations Other financial income 4,562 7,901 Other financial expenses 33,041 30,270 Tax on income from ongoing business activity 22,233 25,664 Consolidated total income 71,234 91,393 FINANCIAL STATEMENTS 122_GfK GfK_122

127 The secondary segmentation is based on the regions in which the GfK Group operates. These are Germany, Western Europe/Middle East/Africa, Central and Eastern Europe, North America, Latin America and Asia and the Pacific. The regions Western Europe/Middle East/Africa and Central and Eastern Europe comprise all the countries in the European Union with the exception of Germany, as well as other European countries where GfK is represented. In addition, South Africa, the United Arab Emirates and Israel are allocated to the segment Western Europe/Middle East/Africa. The segment North America, includes the United States of America and Canada. Brazil, Chile, Venezuela, Argentina and Mexico are allocated to the segment Latin America. Asia and the Pacific, includes Hong Kong, Japan, Thailand, Singapore, Malaysia, Indonesia, South Korea, China, India and Australia. Segment information by region for financial years 2006 and 2007 is shown in the table below. Sales to third parties Assets Additions to assets Germany 269, , , ,864 41,190 16,514 Western Europe/Middle East/Africa 1) 457, , , ,531 48,937 28,037 Central and Eastern Europe 64,472 73,068 36,309 48,214 1,563 9,173 North America 257, , , ,158 19,246 6,312 Latin America 23,666 26,723 42,994 38,374 1,770 2,319 Asia and Pacific 39,551 50,777 26,722 55,612 2,014 30,669 Group 1,112,159 1,162,055 1,496,174 1,470, ,720 93,024 1) The figures still allocated to the region North Europe in the prior year are now allocated to Western Europe/Middle East/Africa. The region America reported in the prior year has been split into North America and Latin America as of During the reporting year, as in the prior year, none of the segments recorded sales with any single client exceeding 10% of consolidated sales. 36. Pro-forma statements in accordance with ifrs 3 As a result of company acquisitions, the prior year s figures are not unreservedly comparable with the figures in the consolidated financial statements as of December 31, To improve comparability, the impact resulting from the changes has been eliminated in the pro forma statement in accordance with ifrs 3. The pro forma statement in the table below shows the sales and consolidated total income for 2007 under the assumption that all major acquisitions in affiliated companies that took place in the financial year had already taken place on January 1, The following transactions are taken into account in the pro forma statement: First-time consolidation of GfK Custom Research Beijing Co., Ltd., Beijing, China 37. Pending litigation and claims for compensation Following completion of the acquisition of nop World, the seller lodged a claim against GfK ag for payment of certain settlements to nop World companies. The seller saw the basis for this claim in the nop World purchase agreement. In August 2006, the seller then filed an action against GfK ag before the competent court in London. During the course of 2007, ongoing negotiations were held with the seller with the aim of agreeing the actual amount of the claim. As of the reporting date, it was foreseeable that an agreement with the seller is imminent. The liabilities already reported on the liabilities of the balance sheet were therefore reduced to the likely payable amount based on the status of negotiations as of the reporting date. The negotiations were successfully concluded at the start of No other material disputes involving GfK ag or one of its subsidiaries were pending as of December 31, First-time consolidation of China Market Monitor Co., Ltd., Beijing, China First-time consolidation of Beijing Sino Market Research Co., Ltd., Beijing, China First-time consolidation of Beijing Sino Market Research Co., Ltd., Beijing, China First-time consolidation of Daphne Communication Management B.V., Amstelveen, Netherlands First-time consolidation of GfK Optics Japan kk, Tokyo, Japan FINANCIAL STATEMENTS 2007 Difference Actual Pro forma Absolute % Sales 1,162,055 1,173,462 11,407 1,0 Consolidated total income 91,393 91, ,5 GfK_123

128 Supplementary disclosures 38. Events after the balance sheet date At the end of January 2008, an agreement was reached with the seller of the nop World companies on the amount to settle all the disputed claims of the seller. The actual amount agreed essentially confirmed the Management Board s assessment as of the reporting date. On January 1, 2008, the GfK Group took over 100% of the shares in one of the leading Custom Research companies in Australia, the Blue Moon Group. This acquisition strengthens the GfK Group s network in the Asia and the Pacific region. In addition, on March 1, 2008, the Group also acquired the market research institute, Bileşim International in Turkey, also operating in the Custom Research segment, as a wholly owned subsidiary. In January 2008, the Supervisory Board extended the contract of Management Board member Dr. Gérard Hermet, responsible for the Retail and Technology sector, by further five years until December 31, On February 27, 2008 the Management Board and Supervisory Board of GfK ag resolved to look into the conversion of GfK Aktiengesellschaft into a European Company (Societas Europaea, se). The change of form does not change the legal and financial identity of the company. The rights of the shareholders, stock exchange listing and registered office of the company remain unaffected. The dual management system of Management Board and Supervisory Board will also be retained. The change of form requires the consent of the executive boards and the shareholders of the company. A qualified majority is required for the consent of the Annual General Meeting. There were no further events materially affecting the GfK Group after the reporting date. ifric 10 (Interim Financial Reporting and Impairment), published in July 2006 and adopted by the European Union in July 2007, focuses on the interaction between the provisions of ias 34 (Interim Reporting) and the regulations on reporting impairments relating to goodwill and specific financial assets. ifric 10 stipulates that impairments, which were reported in interim financial statements and for which a prohibition of reversal exists according to ias 36 and ias 39 respectively, cannot be reversed in subsequent interim financial statements, year-end financial statements and consolidated financial statements. The interpretation applies to financial years starting on or after November 1, In the past, the GfK Group has not reversed such impairments in subsequent financial statements if they were first reported in interim financial statements. ifric 10 therefore supports the practice used by the GfK Group to date and no further consequences result for the accounting of the GfK Group. Standards or interpretations adopted by the EU and not yet applied As a result of ifrs 8 (Operating Segments), segment reporting has switched from what was known as the risk and reward approach to the management approach in terms of segment identification under ias 14. Here the information regularly made available to the chief operating decision maker for decision-making purposes is the decisive factor. At the same time, the valuation of the segments has been switched from the risk and reward approach to the management approach. ifrs 8 was published in November 2006 and adopted by the European Union in November The standard is binding for financial years starting on or after January 1, Early application is permitted. On first-time application, ifrs 8 will lead to changes in the disclosures in the GfK Group s segment reporting. ifric 11 (ifrs 2 Group and Treasury Share Transactions) deals with the issue of how group share-based remuneration should be reported, which are the effects of staff changes within a group and how share-based payment should be treated when the company issues its own shares or needs to acquire shares from a third party. ifric 11 was published in November 2006 and adopted by the European Union in June The interpretation is to be applied for financial years starting on or after March 1, Early application is recommended. ifric 11 is not expected to have any impact on the future consolidated financial statements of the GfK Group. FINANCIAL STATEMENTS 39. Amendments to ifrs standards and interpretations First-time application of standards or interpretations ifrs 7 (Financial Instruments: Disclosures) published by the iasb in August 2005 requires information on the importance of financial instruments for the net assets, financial position and results of operations of companies and also includes new requirements with regard to qualitative and quantitative reporting on risks associated with financial instruments. The standard was adopted by the European Union in January 2006 and its application is binding for financial years starting on or after January 1, As a result of ifrs 7, the GfK Group extended the information in the Notes on risks relating to financial instruments to include, for example, sensitivity analyses for currencies and interest rates. The amendment to ias 1 (Presentation of Financial Statements: Capital Disclosures) published in August 2005 was adopted by the European Union in January The change provides for additional disclosures, which enable the target group of the financial statements to assess the targets, methods and processes when managing their capital. The supplements to ias 1 must be applied to financial years which commence on or after January 1, The first-time application in the GfK Group resulted in additional disclosures in the Notes. Standards or interpretations not yet adopted by the eu and not yet applied ifric 14 ( ias 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) indicates how to determine the limit on a surplus which can be recognized as a defined benefit asset in accordance with ias 19 Employee Benefits. In addition, it explains the impact on the measurement of assets and provisions for defined benefit plans resulting from a legal obligation to make a minimum contribution payment, stipulated for example by law or in the plan rules. ifric 14 was published by the iasb in July 2007 and is binding for financial years starting on or after January 1, The standard has not yet been adopted by the European Union. ifric 14 will not have any material impact on the consolidated financial statements of the GfK Group. FINANCIAL STATEMENTS 124_GfK GfK_124

129 In September 2007 the iasb published a revised version of the ias 1 (Presentation of Financial Statements: A revised Presentation), which is intended to make it easier for users to analyze and compare financial statements. Under this, all non-equity holder related changes in equity have to be shown in one single statement of comprehensive income or in two separate reporting components with an income statement taken from the previous statement of comprehensive income. The corresponding income tax effect is to be shown for the individual components of other comprehensive income. The new version of ias 1 is to be applied to financial years starting on or after January 1, Adoption by the European Union is currently outstanding. The presentation of changes in equity will be amended accordingly by the GfK Group in line with the requirements of ias 1. Through the publication of the revised version of ifrs 3 (Business Combinations) and the amendments to ias 27 (Consolidated and Separate Financial Statements) in January 2008, iasb completed the second phase of the Business Combinations project. The main changes include the accounting treatment of minority interests and the remeasurement, through profit or loss, of already existing shares at the time control was gained for successive company acquisitions. Changes in the participation quota without loss of control are to be recorded solely as equity transactions. In future, acquisition-related costs are to be recognized as expenses. For possible adjustments to acquisition costs, as a result of future events which are to be recognized as liabilities at the time of acquisition, no adjustment to goodwill in subsequent valuations is possible. The new version of ifrs 3 is to be applied to company mergers commencing on or after July 1, Early application is permitted, but is limited to reporting periods beginning on or after June 30, The amendments to ias 27 are to be applied to financial years which start on or after July 1, 2009, whereby early application is permitted. However, early application of one of the two standards is contingent on the simultaneous early application of the respective other standard. Adoption by the European Union is currently outstanding. The GfK Group expects that the treatment of acquisition-related costs in the event of company acquisitions as expenses will lead to additional expense, the level of which depends on several factors, including the size of the acquisition. The impact of reporting adjustments in acquisition costs contingent on future events, which at the time of acquisition are to be treated as liabilities in the income statement, depends on the individual case. In January 2008, the iasb published the amendment to ifrs 2 (Share-based Payment: Vesting Conditions and Cancellations). The amendments clarify that exercise conditions are only service and goal fulfillment conditions. As a result of the changes in the definition of exercise conditions, non-exercise conditions are now to be taken into account when measuring the fair value of the equity instruments granted. The changes are to be applied for financial years starting on or after January 1, Early application is permitted where indicated. Adoption by the European Union is currently outstanding. Application will not have a material impact on the earnings position of the GfK Group. In February 2008 in a document entitled Puttable Financial Instruments and Obligations Arising on Liquidation, the iasb published the amendments to ias 32 (Financial Instruments: Presentation) and ias 1 (Presentation of Financial Statements). The amendments relate essentially to questions relating to the demarcation between equity and liability. In particular, the revision now permits, under certain circumstances, the option of classifying puttable instruments as equity. The amendments are to be applied to financial years starting on or after January 1, Early application is permitted. Adoption by the European Union is currently outstanding. This regulation has no impact on the GfK Group. In addition to the outlined standards, interpretations and amendments, the following statements have been issued by the iasb and ifric: ifric 12 (Service Concession Arrangements) addresses accounting for infrastructure services by private companies and was published in November ifric 13 (Customer Loyalty Programmes) was published by the iasb in June 2007 and deals with the treatment and measurement of customer loyalty programs. The amendment to ias 23 (Borrowing Costs) was published by the iasb in March 2007 and deals with capitalization of borrowing costs. These accounting principles are not presently relevant to the financial statements of the GfK Group and are therefore not explained in detail here. 40. Supplementary disclosures Auditors service fee In the year under review, the expenses for the fee for the auditors of GfK Aktiengesellschaft, Nuremberg, amounted to eur 1,120 thousand (2006: eur 921 thousand) and for the first time in 2007 also includes the auditors service fee for the audited accounts of the English subsidiaries. The fee comprises the auditing of the annual financial statements of GfK ag in accordance with the German Commercial Code (hgb), the Group reporting package in accordance with ifrs and the consolidated financial statements in accordance with ifrs. In addition, the auditors service fee includes the audited financial statements of the German and English subsidiaries in accordance with national legislation as well as the ifrs reporting package. The cost of tax advice from the auditors in Germany and England was eur 413 thousand (2006: eur 520 thousand) and eur 86 thousand (2006: eur 175 thousand) for other services provided by the auditors. Exemption of subsidiaries from the obligation to prepare financial statements Pursuant to Section 264b and Section 264 (3) of the German Commercial Code (hgb) respectively, GfK Marketing Services GmbH & Co. kg, Nuremberg, and GfK GeoMarketing GmbH, Bruchsal, are exempt from preparing, having audited and disclosing annual financial statements and a management report in accordance with the provisions for joint stock companies pursuant to Sections 264 ff. hgb. FINANCIAL STATEMENTS GfK_125

130 Hier Supplementary steht Text disclosures Number of staff In the year under review, 8,655 (2006: 7,784) staff were employed on average. The annual average number of staff was determined on the basis of full-time employees. The average was calculated using the key dates of March 31, June 30, September 30 and December 31. The allocation of staff to segments is shown in the table below ) 2007 Custom Research 3,502 4,027 Retail and Technology 2,013 2,223 Consumer Tracking Media HealthCare Other ,638 8,500 Managing Directors/Management Board members Trainees Full-time employees 7,784 8,655 1) Prior year adjustment due to more appropriate segment allocation Total remuneration and shares of the Management Board and Supervisory Board Information about the remuneration of the Management Board and the Supervisory Board and their shareholdings is shown in the tables and explanations in the remuneration report on page 14f of the Corporate Governance report. There were no loans and advances to members of Management Board and Supervisory Board. FINANCIAL STATEMENTS FINANCIAL STATEMENTS 126_GfK GfK_126

131 Supervisory Board Hajo Riesenbeck Chairman Business consultant Kerstin Döpfert Independent Works Council representative at GfK Aktiengesellschaft, Nuremberg Director at McKinsey & Company, Düsseldorf President of GfK-nürnberg Gesellschaft für Konsum-, Markt- und Absatzforschung e.v., Berlin Sandra Hofstetter Independent Works Council representative at GfK Aktiengesellschaft, Nuremberg Dr. Arno Mahlert Deputy Chairman Chairman of the Management Board of maxingvest ag, Hamburg Seats held on other supervisory boards and comparable supervisory bodies: Tchibo GmbH, Hamburg (Chairman) Springer Science + Business Media s.a., Luxembourg, Luxembourg (Chairman) Saarbrücker Zeitung GmbH, Saarbrücken (Deputy Chairman) Beiersdorf ag, Hamburg Dr. Christoph Achenbach Stefan Pfander Senior Consultant at Wm. Wrigley Jr. Company, Chicago, Illinois, usa and at Lehman Brothers, London, uk Seats held on other supervisory boards and comparable supervisory bodies: icga, Brussels, Belgien (Chairman) Sweet Global Network e.v., Munich (Deputy Chairman) Barry Callebaut ag, Zurich, Switzerland Beiersdorf ag, Hamburg maxingvest ag, Hamburg Tchibo GmbH, Hamburg Managing Director and Partner of Intes Gruppe, Bonn Seats held on other supervisory boards and comparable supervisory bodies: tv GmbH, Munich (Deputy Chairman) SinnLeffers GmbH, Hagen Dr. Wolfgang C. Berndt Member of the Board of Directors of the Institute For The Future, Menlo Park, California, usa Jürgen Schreiber ceo and President at Shoppers Drug Mart, Toronto, Canada Seats held on other supervisory boards and comparable supervisory bodies: Arcandor ag, Essen Dieter Wilbois FINANCIAL STATEMENTS Seats held on other supervisory boards and comparable supervisory bodies: Cadbury Schweppes plc, London, uk Lloyds tsb Bank plc, London, uk Lloyds tsb Group plc, London, uk Telekom Austria Group ag, Vienna, Austria Independent Works Council representative (Chairman of the Works Council and the Group Works Council) at GfK Aktiengesellschaft, Nuremberg GfK_127

132 Management Board Professor Dr. Klaus L. Wübbenhorst Chief Executive Officer (ceo) Seats held on supervisory boards and comparable supervisory bodies: Dr. Gérard Hermet Responsible for Retail and Technology Seats held on supervisory boards and comparable supervisory bodies: bu Holding GmbH & Co. kg, Nuremberg (Chairman) ergo Versicherungsgruppe ag, Düsseldorf npd Intelect llc, New York, New York, usa Christian Weller von Ahlefeld Chief Financial Officer (cfo) Responsible for Financial Services, Central Services and Human Resources Services Seats held on supervisory boards and comparable supervisory bodies: Brauns Heitmann GmbH & Co. kg, Warburg Debra A. Pruent (since January 1, 2008) Responsible for Custom Research, North America Wilhelm R. Wessels Responsible for Consumer Tracking, Media and HealthCare Seats held on supervisory boards and comparable supervisory bodies: Petra Heinlein Responsible for Custom Research, all regions except North America Leoni ag, Nuremberg TriStyle Mode GmbH & Co. kg, Fürth FINANCIAL STATEMENTS FINANCIAL STATEMENTS 128_GfK GfK_128

133 Declaration on the German Corporate Governance Code Declaration on the German Corporate Governance Code The declaration prescribed by Section 161 of the German Stock Corporation Act has been issued by the Management Board and Supervisory Board and made permanently available to shareholders. Prof. Dr. Klaus L. Wübbenhorst Release for publication The Management Board of GfK ag released the consolidated financial statements for passing on to the Supervisory Board on March 12, It is the duty of the Supervisory Board to check the consolidated financial statements and to declare whether it approves the consolidated financial statements. Christian Weller von Ahlefeld Responsibility statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group. Petra Heinlein Dr. Gérard Hermet Nuremberg, March 12, 2008 Debra A. Pruent Wilhelm R. Wessels FINANCIAL STATEMENTS GfK_129

134 Shareholdings of the GfK Group As of December 31, 2007 Company name and registered office Share in the capital in % Financial year Equity (eur 000) Affiliated companies (Germany) included in the consolidated financial statements (details according to hgb commercial balance sheet i) encodex International GmbH, Nuremberg ) enigma GfK Medien- und Marketingforschung GmbH, Wiesbaden ) GfK cee Finance GmbH, Nuremberg ) ,209 GfK GeoMarketing GmbH, Bruchsal ) GfK Marketing Services GmbH & Co. kg, Nuremberg ) GfK Non-Food Tracking Holding GmbH, Nuremberg ,842 1) GfK North America Holding GmbH, Nuremberg ,412 1) GfK North America Investment GmbH, Nuremberg ) ,652 1) GfK u.s. Automotive Holding GmbH, Nuremberg ) ,774 1) GfK u.s. Equity GmbH, Nuremberg ,512 1) GfK us Custom Research Holding GmbH, Nuremberg ,493 1) ifr Deutschland GmbH (formerly Beyen Marktforschung GmbH), Düsseldorf ) ,848 2) media control GfK international GmbH, Baden-Baden ) ,928 Media Markt Analysen GmbH & Co. kg, Frankfurt/Main Modata GmbH, Berlin ) ) FINANCIAL STATEMENTS Affiliated companies (abroad) included in the consolidated financial statements (details according to ifrs commercial balance sheet ii) Adimark Investigaciones de Mercado Ltda., Providencia, Santiago, Chile ) ,880 Adimark s.a., Providencia, Santiago, Chile afi Investments ulc, London, uk ) audimedia sarl, Issy les Moulineaux, France ) ,197 Barterstore ulc, London, uk ) ,812 Beijing Sino Market Research Co., Ltd., Beijing, China ) China Market Monitor Co., Ltd., Beijing, China ) Collect Investigaciones de Mercado s.a., Providencia, Santiago, Chile ) Corporación Empresarial asa sa de cv, Mexico City, Mexico ) Daphne Communication Management b.v., Amstelveen, Netherlands ) Dealtalk Limited, London, uk ) ,633 Eiphos Holding ag, Hergiswil, Switzerland ) ,575 Encodex Japan k.k., Osaka, Japan ) Financière isl Société Anonyme, Issy les Moulineaux, France ) ,741 GfK - Centar za istrazivanje trzista d.o.o., Zagreb, Croatia ) GfK - memrb Marketing Services Limited, Nicosia, Cyprus ) GfK (u.k.) Ltd., West Byfleet/Surrey, uk ) ,774 GfK Animal Healthcare Limited, West Byfleet/Surrey, uk ,421 GfK Arastirma Hizmetleri a.s., Istanbul, Turkey ,528 GfK arbor, llc, Media, Pennsylvania, usa ) ,044 GfK Asia Pte Ltd., Singapore, Singapore ) ,652 GfK Audimetrie n.v., Brussels, Belgium ) ,177 GfK Austria GmbH (formerly fessel-gfk Institut für Marktforschung Ges.m.b.H.), Vienna, Austria ,198 GfK Automotive, llc, Southfield, Michigan, usa ) ,533 GfK Belgrade d.o.o., Belgrade, Serbia ) FINANCIAL STATEMENTS 1) Profit and loss transfer agreement 2) Details according to commercial balance sheet II 3) Full indirect shareholding 4) Partially indirect shareholding 5) Details not available 6) Details as per provisional financial statements drawn up under national law 7) Newly established in ) In liquidation 9) Stub period 130_GfK GfK_130

135 Company name and registered office Share in the capital in % Financial year Equity (eur 000) GfK Benelux Marketing Services b.v., Amstelveen, Netherlands ) ,373 GfK bh d.o.o., Sarajevo, Bosnia and Herzegovina ) GfK consumer and business information italy S.p.A., Milan, Italy ) ,322 GfK Custom Research Beijing Co., Ltd., Beijing, China gfk custom research france sarl, Rueil-Malmaison, France ,605 GfK Custom Research Inc., Minneapolis, Minnesota, usa ) ,180 GfK Danmark a/s, Frederiksberg, Denmark gfk emer Ad Hoc Research, s.l., Valencia, Spain ,839 GfK Equity Research Inc., Boston, Massachusetts, usa ) GfK Eurisko S.r.l., Mailan, Italy ) ,915 GfK HealthCare Asia Pte Ltd., Singapore, Singapore ,117 GfK Healthcare Holding, Inc., Wilmington, Delaware, usa ), 7) gfk hellas e.p.e. (formerly GfK market analysis e.p.e.), Athens, Greece ) gfk holding mexico, s.a. de c.v., Mexico City, Mexico GfK Holding, Inc., Wilmington, Delaware, usa ) ,134 GfK Hungária Piackutató Kft., Budapest, Hungary ) ,941 GfK Immobilier Société à responsabilité limitée, Rueil-Malmaison, France ) GfK Indicator Ltda., São Paulo, Brazil ) ,683 GfK Kleiman Sygnos s.a., Buenos Aires, Argentina GfK Malta Holding Limited, Portomaso, Malta ,605 GfK Malta Services Limited, Portomaso, Malta ) ,390 GfK Market Consulting (Beijing) Co. Ltd., Beijing, China ) GfK Market Consulting (China) Co. Ltd. (formerly GfK Market Research (Shanghai) Co. Ltd.), Shanghai, China ) ,120 GfK Marketing Services (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia ) GfK Marketing Services (Thailand) Limited, Bangkok, Thailand ) GfK Marketing Services Australia Pty. Ltd., Sydney, Australia ) ,354 GfK Marketing Services España, s.a., Valencia, Spain ) ,379 GfK Marketing Services France sas, Rueil-Malmaison, France ) GfK Marketing Services Hong Kong Limited, Hong Kong, China ) GfK Marketing Services Indonesia, pt, Jakarta, Indonesia ) GfK Marketing Services Italia S.r.l., Milan, Italy ) ,411 GfK Marketing Services Japan k.k., Tokyo, Japan ) ,572 GfK Marketing Services Korea Limited, Seoul, Korea ) GfK Marketing Services Ltd., Hong Kong, China ) ,411 GfK Marketing Services Ltd., West Byfleet/Surrey, uk ) ,433 GfK Marketing Services South Africa (Proprietary), Sandton, South Africa ) GfK Martin Hamblin Inc., Hartford, Connecticut, usa ) GfK Mode Pvt Ltd (formerly Consumer Touch India Pvt Ltd), Kolkata, India ) GfK Mystery Shopping Services Ltd., London, uk ) GfK nop Field Interviewing Services Limited, London, uk ) GfK nop Field Marketing Services Limited, London, uk ) GfK nop Limited, London, uk ) ,567 GfK nop Mystery Shopping Services Limited, London, uk ) GfK nop Services Limited, London, uk ) GfK nop Telephone Interviewing Services Limited, London, uk ) GfK nop u.k. Holding Limited, London, uk ) ,077 GfK nop, llc, New York, New York, usa ) ,541 GfK Norge a/s, Oslo, Norway GfK Optics Japan kk, Tokyo, Japan ) GfK Panel Services Italia S.p.A. (formerly iha Italia S.p.A.), Milan, Italy ) ,385 FINANCIAL STATEMENTS 1) Profit and loss transfer agreement 2) Details according to commercial balance sheet II 3) Full indirect shareholding 4) Partially indirect shareholding 5) Details not available 6) Details as per provisional financial statements drawn up under national law 7) Newly established in ) In liquidation 9) Stub period GfK_131

136 Shareholdings of the GfK Group FINANCIAL STATEMENTS Company name and registered office Share in the capital in % Financial year Equity (eur 000) GfK Panelservices Benelux b.v., Dongen, Netherlands ) ,369 GfK Panelservices Benelux Holding b.v., Dongen, Netherlands ,696 GfK Polonia Sp. z o.o., Warsaw, Poland ) ,215 GfK portugal Marketing Services, Limitada, Lisbon, Portugal ) ,306 GfK Research Dynamics, Inc., Mississauga, Canada ,413 GfK Romania-Institut de Cercetare de Piata Srl, Bucharest, Romania ) GfK Slovakia Inštitút pre prieskum trhu s r.o., Bratislava, Slovakia ) gfk slovenija, tržne raziskave d.o.o. (vormals gfk gral-iteo tržne raziskave d.o.o.), Ljubljana, Slowenia ) GfK Sverige Aktiebolag, Lund, Sweden GfK u.s. Healthcare Companies lp, East Hanover, New Jersey, usa ) GfK Ukraine, Kiev, Ukraine ) ,055 GfK us Holdings, Inc., Wilmington, Delaware, usa ) ,746 GfK v2, llc, Blue Bell, Pennsylvania, usa ) ,417 GfK-Bulgaria, Institut für Marktforschung EGmbH, Sofia, Bulgaria ) GfK-Memrb Marketing Services fz-llc, Dubai, United Arab Emirates ) ,307 GfK-Praha, spol s r.o., Prague, Czech Republic ) ,530 GfK-rus Gesellschaft mbh, Moskow, Russia ) ,796 ifr Europe Ltd., London, uk ) ,229 ifr France s.a., Rueil-Malmaison, France ) ,009 ifr Italia S.r.L., Milan, Italy ) ifr Marketing España s.a., Madrid, Spain ) ifr Monitoring Canada Inc., Niagara Falls, Canada ) ifr Monitoring usa Inc., Niagara Falls, New York, usa ) iha-gfk ag, Hergiswil, Switzerland ,670 incoma Research, s.r.o., Prague, Czech Republic ) Informark Pty. Ltd., Braddon, Australia ) Institut de Recherche d Informations statistiques (irdis) sarl, Montigny le Bretonneux, France ) Institut de Sondage Lavialle (isl) s.a., Issy les Moulineaux, France ) ,590 Institut Français de Recherche-i.f.r. s.a., Rueil-Malmaison, France ,281 Interactive Research Limited, London, uk ) intercampus-recolha, tratamento e distribuição de informação, Limitada, Lisbon, Portugal ) ,084 Intomart GfK b.v., Hilversum, Netherlands ) ,635 Intomart GfK Belgium n.v., Brussels, Belgium ) ,237 Intomart GfK Group b.v., Hilversum, Netherlands ,295 Jan Schipper Compagnie b.v., Bussum, Netherlands ) Liechti ag, Kriegstetten, Switzerland ) ,959 m2a s.a., Saint Aubin, France Mediamark Research & Intelligence, llc (vormals Mediamark Research Inc.), New York, New York, usa ) ,819 merc Analistas de Mercados s.a. de c.v., Mexico City, Mexico ) ,194 metris-métodos de recolha e investigação social, lda, Lisbon, Portugal ) mil Research Group Limited, London, uk ) Modata ag, Hergiswil, Switzerland ) National Opinion Polls Limited, London, uk ) ,285 nop World Limited, London, uk ) ,207 Numbers Services Limited (vormals Numbers (Holdings) Limited), London, uk ) 2007 Orange Interactive Research ab, Stockholm, Sweden ) Oz Toys Marketing Services Pty. Ltd., Sydney, Australia ) FINANCIAL STATEMENTS 1) Profit and loss transfer agreement 2) Details according to commercial balance sheet II 3) Full indirect shareholding 4) Partially indirect shareholding 5) Details not available 6) Details as per provisional financial statements drawn up under national law 7) Newly established in ) In liquidation 9) Stub period 132_GfK GfK_132

137 Share in the capital Financial Equity Company name and registered office in % year (eur 000) Research Matters ag, Basel, Switzerland ,851 Risposta Srl, Milan, Italiy ) Roperasw Europe Limited, Leatherhead/Surrey, uk ) ,451 Satisteme sa, Paris, France ) Significant GfK bvba, Heverlee, Belgium ) ,694 Strategic Marketing Asia, Ltd., Bala Cynwyd, Pennsylvania, usa ), 8) Telecontrol ag, Hergiswil, Switzerland ) ,990 Telecontrol Bulgaria Switzerland ag, Hergiswil, Switzerland ) Affiliated companies (Germany) not included in the consolidated financial statements (details according to hgb commercial balance sheet i) dm-plus Direktmarketing GmbH, Nuremberg ) GfK Fünfte Vermögensverwaltungs GmbH, Nuremberg ) ) GfK Marketing Services Verwaltungs-GmbH, Nuremberg ) GfK Vierte Vermögensverwaltungs GmbH, Nuremberg ) ), 9) 25 Media Markt Analysen Verwaltungs-GmbH, Frankfurt/Main mil Handels- und Investitions GmbH, Nürnberg ) Affiliated companies (abroad) not included in the consolidated financial statements Adfinders b.v., Hoofddorp, Netherlands ) bdi Research Limited, London, uk ) bem Limited, London, uk ) bwv Holding ag, St. Gallen, Switzerland ) ,048 Canales y Consumo, sa, Buenos Aires, Argentina ) caticall - recolha de informação assistida por computador, lda., Lisbon, Portugal ) dragon eye Ltd., Hergiswil, Switzerland ) Eurisko nopworld rom s.r.l., Iasi, Romania ) GeoAdimark s.a., Providencia, Santiago, Chile ) GfK Audience Research Bulgaria ag, Sofia, Bulgaria ) ) GfK Custom Australia Holding Pty. Limited, Sydney, Australia ) GfK Custom Research Baltic, Riga, Latvia ) GfK Custom Research Development and Training Center eig (formerly gfk Custom Research Worldwide gie), Brussels, Belgium ) ) GfK Custom Research Latam Holding, s.l., Valencia, Spain GfK Kasachstan too, Almaty, Kazakhstan ) gfk latinoamerica holding, s.l., Valencia, Spain ) GfK m2 GmbH, Hergiswil, Switzerland ) GfK Marketing Service Chile Limitada, Santiago, Chile ) GfK Marketing Services Argentina s.a., Buenos Aires, Argentina ) GfK Marketing Services Baltic sia, Riga, Latvia ) GfK Marketing Services Eastern Europe Holding spol. z o. o., Warsaw, Poland ) GfK marketing services ltda., São Paulo, Brazil ) GfK Marknadsundersökning Sverige ab, Lund, Sweden ) GfK Martin Hamblin Limited, London, uk ) ) GfK Media Ltd., London, uk ) GfK memrb Marketing Services Maroc, Casablanca, Morocco ) GfK npd Marketing Services Worldwide b.v., Amstelveen, Netherlands GfK Retail & Technology Ltd., Ramat Gan, Israel ) gfk Skopje ltd Skopje, Skopje, Macedonia ) GfK Stratégie et développement Groupement d intérêt Economique, Rueil-Malmaison, France ) FINANCIAL STATEMENTS 1) Profit and loss transfer agreement 2) Details according to commercial balance sheet II 3) Full indirect shareholding 4) Partially indirect shareholding 5) Details not available 6) Details as per provisional financial statements drawn up under national law 7) Newly established in ) In liquidation 9) Stub period GfK_133

138 Shareholdings of the GfK Group Share in the capital Financial Equity Company name and registered office in % year (eur 000) GfK Trustmark ag, Zollikon, Switzerland ) GfK-Media Research Middle East sa, Hergiswil, Switzerland ) ifr Asia Co. Ltd., Beijing, China ) ifr Central Europe Market Research llc, Budapest, Hungary ) ifr Field sarl, Rueil-Malmaison, France ) ifr Nederland b.v., Amsterdam, Netherlands ) ifr Polska Sp. z o.o., Warsaw, Poland ) ifr rus Limited, Moscow, Russia ), 7) ifr u.k. Ltd., London, uk ) Intomart DataCall b.v., Hilversum, Netherlands ) Media Control ag, Zurich, Switzerland ) Media Control Marketing Research España, s.l., Madrid, Spain ) merc Analistas de Mercados c.a., Caracas, Venezuela ) nop Market Research Limited, London, uk ), 8) nopw Limited, London, uk ) Server s.a., Providencia, Santiago, Chile ) Associated companies (Germany) (details according to hgb commercial balance sheet i) Ernst und GfK Grundstücksgesellschaft, Nuremberg ) Infotab Research GmbH, Munich ) ) FINANCIAL STATEMENTS Associated companies (abroad) agb Nielsen, medijske raziskave, d.o.o., Ljubljana, Slovenia ) Brand Index vof, Hilversum, Netherlands ), 8) ) Bureau voor Reclame Statistiek Hoofddorp b.v., Hoofddorp, Netherlands ), 8) Common Technology Centre eeig, London, uk ) ) Consumer Zoom sas, Rueil-Malmaison, France ) ) Europanel Raw Database gie, Brussels, Belgium ) ) ggc-nop Limited, London, uk ) i + g Infratest Medical Research Inc., Rhode Island, usa ) ) MarketingScan snc, Rueil-Malmaison, France ,849 2) Media Focus (arge), Hergiswil, Switzerland ) 2006/ ) mrc-mode Pvt. Limited, Dhaka, Bangladesh ) ) npd Intelect, l.l.c., Port Washington, New York, usa ) 2006/ ,674 2) org-gfk Marketing Services (India) Private Limited, Mumbai, India ) 2006/ ) Phononet ag, Zurich, Switzerland ) Sports Tracking Europe b.v., Amstelveen, Netherlands / ) St. Mamet Saisie Informatique (smsi) s.a.r.l., St Mamet la Salvetat, France ) ) Starch Research Services Limited, Toronto, Ontario, Canada ) 2006/ ) Other participations (abroad) iri Infoscan Ltd., Maidenhead/Berkshire, uk ) ) FINANCIAL STATEMENTS 1) Profit and loss transfer agreement 2) Details according to commercial balance sheet II 3) Full indirect shareholding 4) Partially indirect shareholding 5) Details not available 6) Details as per provisional financial statements drawn up under national law 7) Newly established in ) In liquidation 9) Stub period 134_GfK GfK_134

139 Auditors report We have audited the consolidated financial statements prepared by the GfK Aktiengesellschaft, Nuremberg, comprising the balance sheet, the income statement, statement of recognized income and expense, cash flow statement and the notes to the consolidated financial statements, together with the Group management report for the business year from 1 January 2007 to 31 December The preparation of the consolidated financial statements and the Group management report in accordance with ifrs, as adopted by the eu, and the additional requirements of German commercial law pursuant to 315a section 1 hgb (and supplementary provisions of the shareholder agreement/articles of incorporation) are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the Group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 hgb (Handelsgesetzbuch German Commercial Code ) and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (idw). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the Group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and Group 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 consolidated financial statements comply with ifrs, as adopted by the eu, the additional requirements of German commercial law pursuant to 315a section 1 hgb (and supplementary provisions of the shareholder agreement/articles of incorporation) and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The Group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Nuremberg, March 13, 2008 kpmg Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Renner (German Public Auditor) Kiesewetter (German Public Auditor) FINANCIAL STATEMENTS GfK_135

140 FINANCIAL STATEMENTS FINANCIAL STATEMENTS 136_GfK GfK_136

141 Additional information Overview of years 138 > > > Glossary of financial terminology 142 > > > Glossary of specialist GfK terms 144 > > > Financial calendar IV > > > List of GfK companies V > > > Index VI > > > Acknowledgements VII GfK_137 ADDITIONAL INFORMATION

142 Overview of the years 1) 2004 to 2007 according to ifrs Key figures income statement eur million/percent Sales , ,162.1 Change in % on prior year Personnel expenses Change in % on prior year Depreciation/amortization 2) Change in % on prior year Adjusted operating income Change in % on prior year ebitda Change in % on prior year ebitda margin in % Operating income Change in % on prior year Margin in % Income from participations Change in % on prior year ebit Change in % on prior year Margin in % Income from ongoing business activity Change in % on prior year Consolidated total income Change in % on prior year Tax ratio in % ) GfK has been using ifrs accounting methods since 2004 and so this year. only four years are included in the overview of years. 2) Tangible and intangible assets ADDITIONAL INFORMATION Overview of years 138_GfK

143 Overview of the years 1) 2004 to 2007 according to ifrs Key indicators balance sheet eur million/percent Non-current assets , , ,088.3 Change in % on prior year Current assets Change in % on prior year Asset structure in % Investments Change in % on prior year thereof in tangible assets 2) Change in % on prior year thereof in financial assets Change in % on prior year Equity Change in % on prior year Borrowings , , Change in % on prior year Total assets , , ,470.8 Change in % on prior year Net indebtedness Change in % on prior year + 1, Key indicators funds statement eur million/percent Cash flow from ongoing business activity Change in % on prior year Cash flow from investment activity Change in % on prior year Cash flow from financing activity Change in % on prior year + 4, Free cash flow Change in % on prior year ) GfK has been using ifrs accounting methods since 2004 and so this year. only four years are included in the overview of years. 2) Tangible and intangible assets GfK_139 ADDITIONAL INFORMATION Overview of years

144 Overview of the years 1) 2004 to 2007 according to ifrs Key indicators profitability Capex as a percentage of sales Return on capital employed in % Profit to sales ratio in % Ratio of net indebtedness to cash flow, in years Pay-out ratio in % Key indicators company valuation Earnings per share in eur 2) Change in % on prior year Free cash flow per share in eur 2) Change in % on prior year Gearing in % Net indebtedness in relation to ebit in % ebitda in % Free cash flow in % Dividend per share in eur Total dividend Change in % on prior year Dividend yield in % Year-end share price in eur 2) Weighted number of shares (in thousand) 31,367 33,486 35,156 35,682 Number of shares as of Dec 31 31,475 35,048 35,502 35,863 1) GfK has been using ifrs accounting methods since 2004 and so this year. only four years are included in the overview of years. 2) Tangible and intangible assets ADDITIONAL INFORMATION Overview of years 140_GfK

145 Overview of the years 1) 2004 to 2007 according to ifrs Sales by division and region eur million/percent ) 2007 Geschäftsfelder 2) Custom Research Change in % on prior year Retail and Technology Change in % on prior year Consumer Tracking Change in % on prior year Media Change in % on prior year HealthCare Change in % on prior year Regions 2) Germany Change in % on prior year Western Europe/Middle East/Africa Change in % on prior year Western and Southern Europe Change in % on prior year Northern Europe Change in % on prior year Central and Eastern Europe Change in % on prior year North America Change in % on prior year 6.5 Latin America Change in % on prior year America Change in % on prior year Asia and the Pacific Change in % on prior year Number of employees at year-end 5,539 7,515 7,903 9,070 Change in % on prior year ) GfK has been using ifrs accounting methods since 2004 and so this year. only four years are included in the overview of years. 2) Data taken from the Management Information System 3) Adjusted for clarification purposes GfK_141 ADDITIONAL INFORMATION Overview of years

146 Glossary of financial terminology A Adjusted operating income (ifrs) Adjusted operating income does not take into account Highlighted items. The management uses this financial indicator in the Group-wide management of GfK s operating business. Affiliated companies Companies which are controlled by the parent. As a rule, the parent holds the majority of the voting rights and capital of the company. Assets (ifrs) Resources that are at the disposal of the company as a result of events in the past and which should represent an economic benefit in the future. Asset structure (ifrs) The asset structure describes the relationship between non-current assets and current assets. It is determined on the basis of the ratio of noncurrent assets to current assets multiplied by 100. Associated companies Minority participations in companies on whose business or company policy a decisive, but not controlling influence is exercised. Associated companies are in principle valued at equity. Borrowings Total assets less equity B C Cost of sales accounting Form of income statement which shows the income achieved in the market during the accounting period. Opposite: total cost accounting. Here the total operating income for the period is shown, whereby the sales and changes in inventories are shown against the total cost. Both forms of accounting produce the same income for the accounting period. Current assets (ifrs) The total of all short-term receivables, deferrals, funds, securities and inventories reported on the assets side of the balance sheet. Current liabilities (ifrs) The total of all short-term provisions, liabilities and deferrals reported on the liabilities side of the balance sheet D Deferred taxes Tax assets or liabilities reported in the balance sheet to equalize the difference between the tax debt actually assessed and the commercial tax burden based on the financial reporting in accordance with ifrs for the commercial balance sheet. The basis for determining deferred taxes is the difference between the value of the assets and liabilities reported in the balance sheet in accordance with ifrs and the local tax balance sheet. Dividend yield Dividend per share in relation to the annual closing price. Equity ratio Balance sheet equity in relation to total assets. The higher the indicator, the lower the level of indebtedness. F Financial expenses (ifrs) Financial expenses that do not result directly from participating interests. These are calculated as interest expenses plus other financial expenses. Financial income (ifrs) Financial income that does not result directly from participating interests. This is calculated as interest income plus other financial income. Free cash flow Cash flow from operating activity less capex. G Goodwill Intangible business asset that represents the value of the intangible assets of a company at the time of its acquisition that are not separately capitalizable, such as the expertise of staff. This is calculated as the purchase price of the company less revalued equity on a pro rata basis. Gross income from sales Sales less Cost of sales ADDITIONAL INFORMATION Glossaries 142_GfK Cash flow Balance of funds inflow and outflow affecting payment. Consolidated total income (ifrs) Consolidated total income attributable to the equity holders plus consolidated total income attributable to minority interests; also referred to as consolidated total income before minority interests. Cost of sales Total of all types of operating costs which can be directly allocated to clients orders. These include in particular costs for external data procurement, costs for interviewees and interviewers. E ebit (ifrs) Abbreviation for earnings before interest and taxes calculated as Operating income plus income from associates plus Other income from participations. ebitda Earnings before interest, taxes, depreciation and amortization, calculated as ebit plus depreciation and amortization charges. Equity (ifrs) Equity comprises funds from the equity holders available to the company as capital contributions and/or deposits and retained profits as well as equity attributable to minority interests. H Highlighted items (IFRS) The costs that are not taken into account in Adjusted operating income: integration costs, amortization on disclosed hidden reserves as part of purchase price allocation, share-based payments and long-term incentives, other income and expenses including, in particular, currency effects from the valuation on the reporting date.

147 Glossary of financial terminology I M P ias The International Accounting Standards (ias) were developed and published by the iasc from 1973 to Unless specific standards have been revoked, they are still valid in full today. Since the reworking of ias 1 in 2003, the old ias have been collectively referred to as ifrs. Any existing standards are developed further as ias and all new standards are known as ifrs. ifrs The International Financial Reporting Standards (ifrs) are accounting principles developed and published by the iasb. In addition to the actual ifrs, the ias that are still valid and the interpretations of the ifric and sic are grouped under the ifrs. Impairment Write-down of assets in addition to scheduled amortization/depreciation, or in place of scheduled amortization/depreciation in the case of intangible assets with an indefinite useful life. Impairment tests are used to establish whether the carrying value of assets is higher than recoverable amount for the asset. The asset is written down to the recoverable value as necessary. Income (ifrs) Adjusted operating income Income from operating activity (ifrs) ebit plus Financial income less Financial expenses. L Non-current assets (ifrs) Assets that benefit business operations in the long term. In addition to intangible assets, tangible assets and investments, these include deferred tax assets and other non-current receivables and deferrals. Margin A margin represents the relationship of an indicator ( Income, ebit, ebitda etc.) to sales. Majority participations Affiliated companies. Minority participations Generic term for Associated companies and Other participations. The participation quota is below 50%. N Net indebtedness (ifrs) Liquid funds and securities less pension liabilities and financial liabilities. O Operating income (ifrs) Gross income from sales less Selling and general administrative expenses plus Other operating income less Other operating expenses. Other income from participations Income from Affiliated companies not included in the scope of consolidation and Other participations as well as expenses and income from write-ups or write-downs of book values of investments plus gains/losses from the disposal of participations. Other operating expenses Expenses in connection with ongoing business activity, excluding financial expenses, not attributable to Cost of sales or selling and general administrative expenses. Examples are Impairments, losses from the disposal of fixed assets and exchange losses. Pay-out ratio Total dividend in relation to consolidated total income. Profit to sales ratio (ifrs) Consolidated total income in relation to sales. Purchase price allocation Allocation of the purchase price when companies are acquired to assets and liabilities not previously reported or not in such amounts. R Ratio of net indebtedness to cash flow Net indebtedness in relation to Free cash flow. Return on equity Consolidated total income in relation to average shareholders equity. S Sales and general administrative costs Operating costs not directly aligned to individual client orders, such as general marketing or accounting measures. T Tax ratio (ifrs) Tax on income from operating activity in relation to Income from ongoing business activity. Total return on equity (ifrs) ebit in relation to average total assets. Non-current liabilities (ifrs) Total of all long-term provisions, liabilities, deferred tax liabilities and other deferrals reported on the liabilities side of the balance sheet. Other operating income Income from ongoing business activity, excluding financial income, which does not represent sales. Examples are profits on the disposal of fixed assets and exchange gains. Other participations Companies in which a participation is held but on whose business policy no decisive influence is exercised. The participation quota is below 20%. GfK_143 ADDITIONAL INFORMATION Glossaries

148 Glossary of specialist GfK terms A SONSTIGES Glossaries 144_GfK Ad hoc research Systematic empirical research as a basis of marketing decisions. One of GfK s business divisions. Custom Research. Advertising Monitor Advertising research instrument used to test whether the message has been effectively put across by the campaign. Appreciation Panel System (aps) Tool used in tv research to survey customer satisfaction levels as well as audience ratings at the same time. Media. B Basic research Market research is based on the findings of many different sciences, including psychology, sociology and statistics. Basic research reviews those findings and establishes by means of its own research whether and under which circumstances these findings can be applied in market research. C Conjoint analysis Multivariate analysis method to determine complex patterns of consumer preferences. Consumer climate Indicator that is calculated on the basis of the findings of a monthly consumer survey carried out on behalf of the European Commission. It gives insight into the level and general trends of private consumption specific countries: Propensity to buy. Consumer electronics Also known as brown goods, which comprise products such as tv sets, dvd players, games consoles, mp3 players: Retail and Technology. Consumer Jury Online Panel for slow moving consumer goods in the Consumer Tracking division. It combines instruments for recruiting panel participants, for panel management and survey management with standardized survey software and also comprises output interfaces for various types of software: Panel. Consumer Panel A sample of households which provide regular information on their purchases: ConsumerScan, ConsumerScope, panel. ConsumerScan Consumer panel in which the purchasing behavior of households and individuals is recorded. Covers purchases of nearly all fast moving consumer goods. Consumer Tracking, Household Panel, Panel. ConsumerScope Mail panel, carrying out continuous surveys of purchases of consumer goods with slow moving acquisition cycles and the use of services. Consumer Tracking, Panel, Consumer Panel. Consumer Tracking A survey of households and individual consumers that is repeated at regular intervals; Consumer Tracking is one of GfK s business divisions. Household Panel, Panel Tracking. Custom Research One of GfK s business divisions Ad hoc research Evogenius Instrument used to produce and analyze media usage data. Initially designed for tv research, it has since been expanded to include radio, print, posters, online and cross-media: Media. E Excellence Team As part of the Excellence program set up in 2001, GfK managers selected globally work together on a project of strategic importance to GfK for one year at a time. The current Excellence vii Team is focusing on idea and innovation management at GfK. Extrapolation Derived total result based on partial results. In order to extrapolate as precisely as possible, the partial results used must take account of all conceivable aspects and be sufficient in size. This is known as a representative Sample. F 5 Star Incentive Programm Part of the remuneration system for GfK Management Board members. The amount of these partial remuneration payments varies, depending on the share price trend and the key figures in the consolidated accounts. Face-to-Face interview Oral, direct interview conducted by an interviewer. Respondents do not see the questionnaire, but are asked the relevant questions by the interviewer. Fact-based consultancy Strategic client consulting based on figures. One of the five aims of GfK s corporate strategy 5 Star Initiative. G GfK Ad*Vantage/MultiMedia Measures the promotional effectiveness of individual advertising resources and facilitates a comparison of the impact of various advertising media, such as tv, print, outdoor, online or pos. GfK Concept Measures An instrument used to predict the chances of success of a healthcare industry product with a high level of probability. HealthCare. GfK ConsumerJury An online platform which records online panel purchases: ConsumerScope GfK Issue Specific Readership Study Data gathering based on weekly online surveys to put marketing specialists in a position to accurately measure the reach of an advertising campaign in a specific magazine issue and consequently to calculate the contribution made by the magazine to the RoI of the advertising measure: Media Media Research. GfK MediaScan Method of measuring readership in the print media, which delivers indicators already regarded as standard in TV and radio. The information is used in media planning and the placement of print advertising as reference data: Media, Reach Research, Media Research, Radio Research. GfK New Atracktive Basic System (GfK nabs) Used to assure the quality of purchasing data from the consumer panel. In this way, extensive automation of the quality assurance processes and a flexible adjustment to suit specific requirements of the most varied data gathering instruments for a wide range of product areas is possible: Consumer Tracking. GfK RepInsight New surveying technology, where the participants of a doctors panel take part in computerized, prompted telephone surveys with the aid of voice recognition software. The responses to openended and closed questions are digitally recorded and later transcribed for clients: HealthCare.

149 Glossary of specialist GfK terms GfK Retail Analytics An addition to the Retail Panel for Retail and Technology, this is an instrument which delivers clients additional knowledge on subjects such as pricing, competitive analysis, range structuring and product marketing, and also supplies details on market movements in individual stores. GfK Shopper Research Analyzes the social and culturally-based buying motivations of consumers on the basis of extensive interviews, observation of purchasing behavior and data originating from the Consumer Panels. GfK Temax Index which collects data on the latest sales trends in electrical equipment on a quarterly basis: Retail and Technology, Panel. Media Media is one of GfK s business divisions, which provides information services on reach, intensity and type of use of media and media offering and their acceptance: tv audience research, Media research, Reach research, tv Panel. Media research Systematic, empirical research used as a basis for media planning by media companies and their advertising clients: Media, tv audience research, Reach, Reach research. MediaWatch An electronic metering device incorporated into a wristwatch, used to measure usage of various media. Media, Media research, Reach research. Panel portal Website with a members section, which only registered Panel participants can access. It provides information about the next surveys for online participants and the findings of previous surveys: gop, Panel. Propensity to buy The intention of consumers to make major acquisitions in the near future. The propensity to buy is one of the indicators used in the GfK consumer climate survey based on consumers being asked the following question: Do you think that it is wise to make major purchases at the moment? Consumer climate. R Global Key Account Management Selected GfK employees in the Custom Research division who manage global corporate client accounts. H Household Panel Representative sample of households, which report regularly on their purchases: ConsumerScan, ConsumerScope, Consumer Tracking, Panel. N Neuromarketing Interdisciplinary field of research. Previously unknown patterns and processes, which control the decision of potential customers for or against a product, are researched on the basis of changes in the flow of blood in the brain and put in relation to actual visible behavior. P Radio research Measuring the listening habits of radio listeners: Media, MediaWatch, Portable people meter, Radiocontrol. Reach The percentage of the total population or a specific target group reached by a medium. A central concept in media planning and Media research: tv Panel, Reach research. Reach research The continuous recording of media usage: Media Reach. HealthCare HealthCare is one of GfK s business divisions, which supplies information services on product development, communications, image and nba for drugs and devices and services in healthcare. K kes Knowledge exchange solution. GfK initiative on global knowledge sharing between employees. M Market segmentation Division of an overall market into sub-markets using different categories. Segmentation can be by product type, price classes, geographic split or psychological and socio-economic lifestyle features and value categories of consumers: Lifestyle research. Panel A survey of individuals, households, companies etc. to obtain data on a single subject at regular intervals over a longer period, using the same Sample and carried out using the same methods each time Consumer Tracking, ConsumerScan, ConsumerScope, Household Panel, tv Panel, Panel maintenance, Tracking. Panel maintenance Instrument used to ensure the quality of Panel surveys. Following the departure of Panel participants or their familiarity with a survey topic, participants are removed from the Panel at specific intervals and replaced by new Panel members. Panel maintenance also comprises the exclusion of incentive hunters who only participate in Panels to benefit from the reward system: Consumer Tracking, Panel. Retail and Technology GfK business division which provides retail information about consumer technology markets: Retail Panel. Retail Panel/research Regular recording of sales, product categories and products via a representative sample of retailers with different retail types and sales channels. Retail and Technology, Tracking. GfK_145 ADDITIONAL INFORMATION Glossaries

150 Glossary of specialist GfK terms S Sample The observation data and/or survey units which are selected from all of the units and included in a specific survey: Extrapolation, Panel. Segmentation Market segmentation. StarTrack it platform used to produce and evaluate data in the Retail and Technology division. Syndicated business Market or market player surveys, not necessarily commissioned by a client or tailored to suit client requirements, which are offered on the market without client-specific adaptation. Syndicated surveys can be carried out on a one-off or repeated basis, without the need to conform to the strict limitations of a panel. T Test market Largely self-contained sub-market, in which a new product is tested in a reality-based situation, e.g. a superstore specifically equipped for this purpose or in a region that is representative of a whole country. Tracking Surveys of individuals, households and companies, repeated at regular intervals and using the same interview method each time. Unlike a Panel, the data is not necessarily collected from the same sources each time, but the structure of the sample is the same in each case: Sample, Consumer Tracking. tv audience research tv audience research is used to determine audience share. Media, Media research, Reach, tv Panel. ADDITIONAL INFORMATION Glossaries 146_GfK tv Panel A representative group of households whose tv viewing is continuously determined via tv meters and used as the basis for audience share and ratings. tv audience research, Media, Panel, Reach.

151 List of GfK company names Beijing Sino Market Research Co. Ltd. Beijing Sino Market Research Co., Ltd., China Bileşim International Bileşim International Arastirma ve Danismanlik a.s., Turkey Blue Moon Group Blue Moon Research and Planning Pty. Ltd., Australia Blue Moon Quantitative Research Pty. Ltd., Australia China Market Monitor Co. Ltd. China Market Monitor Co., Ltd., China Daphne Communication Management b.v. Daphne Communication Management b.v., Netherlands GfK ag, Germany GfK Aktiengesellschaft, Germany GfK Animal Healthcare gb GfK Animal Healthcare Limited, uk GfK audimetrie GfK Audimetrie n.v., Belgium GfK Austria, Austria GfK Austria GmbH, Austria GfK Beijing Custom Research GfK Custom Research Beijing Co., Ltd., China GfK Custom Research Baltic GfK Custom Research Baltic, Latvia GfK Data Services GfK Aktiengesellschaft, GfK Data Services division GfK Group Services GfK Aktiengesellschaft, GfK Group Services division GfK HealthCare, Germany GfK Aktiengesellschaft, GfK HealthCare division GfK Hungária GfK Hungária Piackutató Kft., Hungary GfK Indicator, Brazil GfK indicator Ltda., Brazil GfK Marketing Services Brazil, Brazil GfK marketing services ltda., Brazil GfK Marketing Services Chile, Chile GfK Marketing Service Chile Limitada, Chile GfK Marketing Services South Africa GfK Marketing Services South Africa (Proprietary), South Africa GfK Market Measures, usa GfK u.s. Healthcare Companies lp, usa, GfK Market Measures division GfK Marktforschung GfK Aktiengesellschaft, GfK Marktforschung division GfK-memrb Marketing Services GfK-Memrb Marketing Services fz-llc, United Arab Emirates GfK-memrb Marketing Services Maroc GfK memrb Marketing Services Maroc, Morocco GfK Methoden- und Produktentwicklung GfK Aktiengesellschaft, GfK Methoden- und Produktentwicklung division GfK nop uk, uk GfK nop Limited, uk GfK Optics Japan kk GfK Optics Japan kk, Japan GfK Ukraine GfK Ukraine, Ukraine GfK-Nürnberg e.v. GfK-nürnberg Gesellschaft für Konsum-, Markt- und Absatzforschung e.v., Germany iha-gfk ag iha-gfk ag, Switzerland Jan Schipper Jan Schipper Compagnie b.v., Netherlands m2a France m2a s.a., France mri, usa Mediamark Research & Intelligence, llc, usa Satistème s.a. Satistème sa, France Stratum Research GfK Skopje LTD Skopje, Macedonia GfK Romania GfK Romania-Institut de Cercetare de Piata Srl, Romania GfK Sverige GfK Sverige Aktiebolag, Sweden V

152 Index 98ff. Accounting and valuation methods 101, 106, 119, 121 Acquisitions Adjusted operating result see income 60f., 77, 140 Asia and the Pacific 139 Assets 95 intangible 106 Associated companies 99, 108, 116, 120 Balance sheet 116 Notes to the accounts 139 Total assets 118, 120, 139 Borrowings Cashflow 96, 139 from financing activity IV, 69, 96, 139 from investment activity 96, 139 from ongoing operating activity 96 Cash flow statement 48f., 76, 140 Central and Eastern Europe Consolidated 92ff. financial statements IV, 94, 138 income Consolidation 98 principles 105 scope 78, 140 Consumer Tracking 81, 89 Corporate Communications 14ff., Corporate Governance 89, 101 Corporate value/goodwill 78, 140 Custom Research 95 Deferred taxes IV, 24, 140 Dividend 140 Dividend ratio 69, 94, 100, 138 ebit IV, 69, 118, 138 ebitda IV, 105, 126, 140 Employees 81 Environmental issues 113 Equity 69, 138 ratio 102 Financing 102, 120 Financial instruments 118 Financial investments 104, 117 Financial liabilities 69, 140 Gearing 36f., 76, 140 Germany 79, 140 HealthCare 80ff. Human Resources IV, 67f. Income 100, 138 from ongoing business activity per share see Shares operating see Operating Income 94, 100, 122, 138 Income from participations 94, 99 Income statement 100 Income tax 89, 139 Investments 81 Investor Relations 54ff. Latin America 111f. Leasing 13f., 15f., 81, 128 Management Board IV, 138 Margin 79, 140 Media 140 Net indebtedness 30f., 77, 140 North America 100, 138 Operating income 81 Organization and administration Profit for the year see Consolidated income 140 Profit to sales ratio 121 Pro forma statements (ifrs 3) 104 Provisions 81 Purchasing 78 Research and Development 78, 140 Retail and Technology Return see Margin 140 Return on capital employed 82ff. Risk report IV, 99 Sales 121f. Segment reporting 21ff., 94, 98, 10f. Share IV, 21, 24, 94 Income 24 Key indicators 22 Share price performance 25 Shareholder structure 130ff. Shareholdings 70 Soft facts Staff see Employees 4ff., 93, 124, 129 Supervisory Board 95f., 102, 111 Tangible assets Taxes see Income tax 42, 76, 140 Western Europe, the Middle East and Africa VI

153 Acknowledgements The present Annual Report is available in German and English. Both versions and supplementary press information are available for download online from Annual reports, interim reports, press information and GfK studies are obtainable from: Editorial support services Abacus Presse & pr, Jo Clahsen, Esslingen Translation arb limited, London, Corporate Communications Design Scheufele Kommunikationsagentur GmbH, Frankfurt/Main Contacts Bernhard Wolf Global Head of Corporate Communications Tel. +49 (0) Fax +49 (0) Marion Eisenblätter Corporate Public Relations Tel. +49 (0) Fax +49 (0) Photography Annette Hornischer (cover, pages 5, 8, 12, 30 31, 35, 38, 41, 44, 47, 50, 56, 53, 59) Corbis (pages 48 49) Getty Images (pages 32, 36 37, 54 55) Shutterstock (pages 42 43, 60 61) Lithography 607er Druckvorlagen, Darmstadt Publisher GfK ag Nordwestring Nuremberg Printing Mediahaus Biering GmbH, München VII

154