VEM Aktienbank AG Annual Report 2006

vemag VEM Aktienbank AG Annual Report 2006

At a glance 5-year-period financial figuresk in EUR 000 2006 2005 2004 2003 2002 Interest income 344 383 105 32 54 Commissions income 10,702 9,101 3,994 1,189 928 Trading result 2,847 9,343 944 269 256 Other operating income 5,577 178 410 344 341 Total operating income (net) 19,470 19,005 5,453 1,842 1,579 Income from holdings (German Commercial Code HGB) 8 0 Financial investment result (IFRS) 470 233 78 Result from ordinary business activities 9,244 14,279 2,937 319 295 Annual surplus 5,892 8,748 1,734 319 87 Equity 31,971 25,677 7,350 2,643 2,324 Return on equity before tax 35.4 % 85.6 % 64.9 % 13.7 % 13.2 % NB: 2004, 2005, 2006 figures based on IFRS Return on equity: before tax, based on equity at end of financial year minus annual surplus Market shares of VEM Aktienbank AG in 2006 Mandates Total number managed by Market share Market share of mandates VEM 2006 2005 Rights offers (shares) 84 19 23 % 34 % Rights offers (convertible bonds) 13 10 77 % 55 % Listing procedures 246 32 13 % 18 % Designated sponsoring 783 59 7 % 6 % NB Rights offers concerning listed companies (incl. open market) Listing procedure: Frankfurt Stock Exchange (incl. open market) Designated Sponsoring: status: 4th quarter of 2006 according to evaluation of Deutsche Börse (German securities))

REPORT 2006 Table of contents Table of contents Page At a glance 2 Table of contents 3 Letter to the shareholders 4 Key figures of the share 6 Overview of transactions of VEM Aktienbank AG 7 Report by the Supervisory Board 8 Corporate governance report 11 Consolidated annual report for the financial year 2006 18 Consolidated accounts (IFRS) on 31 December 2006 40 Consolidated profit and loss account (IFRS) 01 January 2006 to 31 December 2006 42 Development of consolidated equity 2006 43 Cash flow statement 2006 44 Segment information 2006 45 Notes to consolidated accounts 2006 46 General details 46 Accounting and valuation policies 49 Balance sheet details 58 Details on profit and loss account 67 Other details 71 Auditor s report 76 Financial calendar 78 Imprint 79

Left to right: Erich Pfaffenberger, Andreas Beyer Dear shareholders, VEM Aktienbank has presented highly satisfactory results for the past financial year. The total operating income is once again slightly higher than the excellent level recorded in the previous year. This is due not only to the highest issue volume recorded so far, but also to the increase in proceeds stemming from sectors other than banking. The trading result is significantly lower than in the previous year, but the overall contribution to the operating income is nevertheless considerable. 2006 was marked by the expansion of our activities as planned. We strengthened our teams in the operative and administrative sectors and discovered new markets. Examples of these initiatives include the establishment of our office in London and our proposal to accompany Chinese firms on the stock exchange. The first direct listing of a Chinese firm on the Frankfurt Stock Exchange (the machine manufacturer Gongyou via our subsidiary TradeCross) represented a pioneering achievement together with our partners which received extensive praise in the press. We are also pleased with the development of our subsidiaries and shareholdings. Our new acquisition, Janosch film & medien AG, managed to achieve positive results for the first time in the history of the firm. The financial.de AG and EquityStory AG shareholdings are recording excellent progress. EquityStory is reaping the benefits of the far-reaching capital market provisions of the transparency guidelines / implementation law; the share price reached an all-time high following the publication of the annual figures. The VEM share is not in line with this trend. Price performance is generally unsatisfactory. With market capitalisation not far from the book value, the VEM share has become a defensive investment. Our profitability and market position are not valued highly by the stock exchange. It is therefore important that we increase the visibility of our securities and publicise our strategy even more than before.

REPORT 2006 Letter to the shareholders We are celebrating the tenth anniversary of our firm this year and have taken this opportunity to create an exclusive customer brochure: the VEM Designated Sponsoring Guide. The brochure presents the customers whose shares we look after in our capacity as designated sponsor. The VEM Designated Sponsoring Guide is intended as a useful handbook and reference work for all those involved in the capital market. It provides a unique compilation of Small Caps and as such is a real novelty. Nearly all branches and sectors are represented in it; the VEM Designated Sponsoring Guide provides a comprehensive overview of the extensive range of second-line stocks. We set the course in a number of important aspects last year and are considering 2007 as a year of transition. VEM Aktienbank AG has continued to develop and has progressed from an extremely active issuing bank to a banking and financing group with corporate structures. Our business model has proven successful. We are continuing to focus our strategy on acting as an investment bank for listed medium-sized businesses and being the first point of contact for our customers. Our attempt to obtain a full-service banking licence will not affect this in any way. On the contrary, it will enhance our possibilities of acting in a flexible manner and accepting market opportunities. We would like to thank all who have contributed to the success of our firm during the past year. Munich, April 2007 Andreas Beyer Erich Pfaffenberger

Key figures of the share 2006 Equity book value per share 3.20 EUR Earnings per share 0.61 EUR Maximum rate (13 February 2006) 10.90 EUR Minimum rate (08 December 2006) 4.50 EUR Year-end rate 4.69 EUR Average market turnover / day (all stock exchanges) 72,608 Stück Number of shares (year-end status) 9,675,000 Average number of shares 9,607,895 Market capitalisation (year-end) 45,375,750 EUR Free float at year-end approx. 70 % Details on the share Security ID number 760 830 ISIN DE0007608309 Market code VAB Market notice Munich (regulated market/m:access) Frankfurt (Open Market) Stuttgart, Düsseldorf, Berlin-Bremen, Hamburg (open market) XETRA (continuous trading) Price development 01 July 2004 10 April 2007 Xetra closing rate in euros 11,0 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 11,0 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2005 2006 2007

TRANSACTIONSN Transactions Issues and listings June 2006 July 2006 October 2006 February 2007 emqtec Initial public offering 1.9 million euros Entry standard Frankfurt Stock Exchange Initial public offering 6.4 million euros Genral standard Frankfurt Stock Exchange Initial public offering 17.6 million euros Prime standard Frankfurt Stock Exchange Initial public offering 10.8 million euros Entry standard Frankfurt Stock Exchange February 2006 March to Nov. 2006 April 2006 June 2006 Listing of 6,959,812 shares from cash capital increase under the regulated market (General standard) with a volume of 13.5 million euros Listing from of a total of four cash capital increases under the regulated market (Prime standard) with a volume of 72 million euros Two zero coupon convertible bonds 2006/2008 with a volume of 15.3 million euros Rights issue for 550,000 shares with a volume of 9.6 million euros June 2006 June 2006 July 2006 Sept. / Oct. 2006 Zero coupon convertible bond 2006/2010 with a volume of 20.1 million euros Listing of 35,546,874 shares from cash capital increase under the regulated market (General standard) with a volume of 37.3 million euros Listing of 412,000 shares from cash capital increase under the regulated market (General standard) with a volume of 3.7 million euros Accompaniment of take-over bid to the shareholders of MWG Biotech AG October 2006 November 2006 December 2006 December 2006 Rights issue for 9,200,000 shares with a volume of 18.4 million euros Listing of 16,563,818 shares from cash capital and noncash capital increase under the regulated market (General standard) Listing of 12.4 million shares from cash capital increases under the regulated market (Prime standard) with a volume of 18.6 million euros Listing of 6.694.457 shares from non-cash capital increase under the regulated market (Prime standard)

Left to right: Dr. Alfred Krammer, Mathias Girnth, Olaf Posten Report by the supervisory board The supervisory board fulfilled the tasks provided for by the laws and company bylaws in 2006. It reported on a regular basis to the board of directors, supervised the latter and was involved in all decisions of a particular significance for the firm. The board of directors informed the supervisory board during the financial year 2006 on a regular, punctual, comprehensive basis of all corporate issues relating to planning, business development, risk situation, risk management, strategic measures and important business procedures and plans. The supervisory board was provided with explanations when business procedures did not correspond to the established plans and targets. All measures requiring approval and the firm s strategic plans were discussed in detail. The supervisory board cast its vote after thorough verification and consultation if required by the laws, company bylaws and internal procedures. The chairman of the supervisory board was also informed of important business events and decisions between the supervisory board meetings and maintained contact with the board of directors at all times. Main consultation issues dealt with by the supervisory board During the financial year 2006, the supervisory board was informed about the current economic and strategic situation of the bank, business progress in the individual sectors, the development of risk, active risk management and new projects during five meetings and by means of the regular distribution of documents. The individual subjects were addressed and discussed in detail. All the members of the supervisory board were present at all the supervisory board meetings during the financial year. During the meeting of 31 March 2006, the supervisory board approved the annual accounts of VEM Aktienbank AG following in-depth private consultation and prior discussion. The main issues addressed in subsequent consultations included the draft invitation to the annual

REPORT 2006 Report by the supervisory board general meeting, the extension of the rental agreement for the bank s business premises in Munich, the planned establishment of a branch in London and the planned investment in Janosch film & medien AG. The main issues dealt with at the second supervisory board meeting on 27 June 2006 were the approval of the consolidated accounts on 31 December 2005 and the extension of the terms of office of the board of directors members Andreas Beyer and Erich Pfaffenberger. During the meeting following the annual general meeting on 23 August 2006, particular emphasis was placed on current business developments subject to the influence of difficult market conditions. were presented to all the members of the supervisory board and verified by the latter. Consultations took place in the presence of the auditors who reported on the essential results of their audit in the supervisory board meeting and answered questions. The supervisory board approved the results of the audit. Following the final results of its internal audit, the supervisory board did not issue any objections to the annual accounts of VEM Aktienbank AG and the consolidated accounts and approved the annual accounts of VEM Aktienbank AG and the consolidated accounts; the annual accounts of VEM Aktienbank AG were thus approved. The supervisory board assented to the board of directors suggestion concerning the use of the balance sheet profit. On 27 September 2006 the status of the full-service banking licence and the human resource development of the Changes in the board of directors and the supervisory bank were discussed in particular. board The supervisory board consists of three ordinary members The final supervisory board meeting of the financial year including the chairman. The members are: on 13 December 2006 focused on the results of external audits ( 44 of the German Banking Law KWG - audit, Matthias Girnth, chairman DPR audit), the bank s strategy (extension of the income Olaf Posten, deputy chairman basis outside the investment business, London, etc.), the Dr. Alfred Krammer, member board of directors risk report and the corresponding risk strategy. All the members of the supervisory board were appointed at the 2004 annual general meeting of VEM Aktienbank AG by individual voting. Audit of annual and consolidated accounts No changes were made to the composition of the supervisory board during the financial year 2006. The auditor selected by the annual general meeting last year, Ernst & Young accountancy and tax advisory firm, Stuttgart, subsidiary in Eschborn/ Frankfurt am Main, verified the annual accounts of VEM Aktienbank AG and the Aktienbank AG. Both boards were appointed for a further No changes were made to the board of directors of VEM consolidated accounts including the annual report for the five year term. financial year 2006 and issued an unlimited audit report. The annual accounts of VEM Aktienbank AG, the consolidated accounts, the annual report, the suggested use of the balance sheet profit, the board of directors report on relations with associated firms and the auditors reports Corporate Governance The requirements of the German Corporate Governance Code were particularly significant for the supervisory board. The board of directors and the supervisory board

Report by the supervisory board decided to comply in principle with the recommendations of the Corporate Governance Code. The declaration of conformity according to 161 of the German Stock Corporation Act (AktG) was presented by the board of directors and the supervisory board on 28 March 2007 and subsequently made available to shareholders on the firm s Website www.vem-aktienbank.de. The supervisory board thanked the board of directors and all the employees within the group for their successful work. Munich, 11 April 2007 The supervisory board Matthias Girnth Chairman 10

REPORT 2006 Corporate Governance Report Corporate Governance Report Basis The legal basis for Corporate Governance within VEM Aktienbank AG can be found essentially in the German Stock Corporation Act, the German Corporate Governance Code (version of 12 June 2006) (hereinafter DCGK ) and the Securities Trading Act. The corresponding statutory provisions concerning the combating of money laundering also apply and the bank s money laundering representative is responsible for guaranteeing compliance with the latter. Regulations concerning the management and supervision of the company can be obtained from the company bylaws agreed upon by the general meeting of VEM Aktienbank AG. In addition to these regulations established according to the laws and company bylaws, the company has also introduced compliance directives and guidelines for em- Joint report by the board of directors and the ployees for the issuing and security business. The bank s supervisory board of VEM Aktienbank AG according compliance representative is responsible for guaranteeing to figure 3.10 of the German Corporate Governance compliance with these provisions. Code (version of 12 June 2006) Preamble Corporate Governance generally includes all the principles and values involved in successful, responsible corpo- The company states in an annual declaration whether or Implementation of the DCGK recommendations rate management. Corporate Governance is therefore with what limitations the recommendations of the Government Committee for the German Corporate Gover- extremely varied and includes compulsory and optional measures such as the observance of laws and regulations nance Code presented by the federal justice department (compliance), the observation of recognised standards and in the official section of the electronic Federal Bulletin recommendations and the development and respect of have been and will be observed. This declaration of conformity by the board of directors and supervisory board of individual corporate guidelines. VEM Aktienbank AG is published on the company s Website (http://www.vem-aktienbank.de) which also presents VEM Aktienbank AG has always placed a great deal of importance on Corporate Governance, which is reflected the declarations of conformity for the past 3 years. in the long-term success of targeted corporate management, close, targeted cooperation in corporate achievements and supervision and in the transparency and clarity of 28 March 2007, the DCGK recommendations have In accordance with the current declaration of conformity of corporate communication. been and will be observed with the following limitations: DCGK figure 2.3.2 The convening of a general meeting is published in the legally stipulated form on the company s Website together with the convocation documents. No further notification is issued to national and international financial service providers, shareholders and shareholders associations. DCGK figure 4.2.1 The board of directors does not have a chairman; the members of the board of directors possess equal rights. The board member responsible for public relations is designated as the spokesman. DCGK figures 4.2.3, 4.2.4, 4.2.5 The chairman of the supervisory board does not inform the general meeting about the main features of the compensation system for the board of directors and the amendment of the latter. According to the decision of the ordinary general meeting of 23 August 2006, the 11

individual board members total compensation, divided into performance-related and non performance-related elements including names, does not have to be disclosed in the Notes to the annual accounts and in the consolidated accounts for a five year period. It follows that there is no individual disclosure of the total compensation of each board member and no explanation of the compensation system for the board members in the compensation report according to figure 4.2.5 of the German Corporate Governance Code. DCGK figures 5.1.2, 5.4.1 The supervisory board does not currently have any longterm succession planning in order to fill vacant positions on the board of directors. Due to the fairly recent establishment of the firm, this has not yet been planned. There are no age limits for members of the board of directors or the supervisory board. DCGK figures 5.3.1, 5.3.2, 5.2 The firm s supervisory board is made up of three people according to the company bylaws. Since a committee must consist of at least two or, in the case of a decisionmaking committee, three members, the establishment of committees would not render the activity of the supervisory board more efficient. DCGK figures 5.4.2, 5.5.3 The members of the supervisory board act partly as consultants with the firm s competitors or customers. The supervisory board and the board of directors are informed of any conflicting interests but no report is presented at the general meeting in view of the confidentiality of mandates. Conflicting interests do not generally result in the termination of the supervisory board s mandate. However, termination may be necessary in individual cases. accordance with the legally prescribed ad-hoc publicity, the principle of equal treatment of the shareholders is taken into account sufficiently in the information policy. DCGK figure 7.1.1 In the past, an optional half-year interim report was drawn up for the company according to the corresponding provisions of the stock exchange act and the stock exchange listing rules for the official market ( 40 BörsG and 53 ff. BörsZulV) and published on the company s Website. Against the background of the new regulations of disclosure and notification duties and transparency requirements by the law concerning electronic trade registers and associations registers in addition to the company register (EHUG) and the implementation law for the Transparency Guidelines (TUG), the company will publish a half-yearly financial report in the future (according to 37w of the German Securities Trading Act WpHG) taking into account the international accounting principles and interim notifications (according to 37x WpHG) or quarterly financial reports (according to the specifications of 37w para. 2 Nos. 1 and 2, paras. 3 and 4 WpHG). DCGK figure 7.1.2 Against the background of the new regulations in 290 para. 1 p. 2, 325 para. 4 p.1 of the latest version of the German Commercial Code HGB, the consolidated accounts will in the future be established, presented and made available to the public within the first 4 months of the consolidated financial year for the previous financial year. The binding half-year financial report stipulated by the Transparency Guidelines for listed companies will in future be made available to the public according to the statutory regulations in 37w WpHG (German Securities Trading Act) at the latest two months after the reporting period. DCGK figure 6.3 Mit Einhaltung der gesetzlich vorgeschriebenen Ad-hoc-In The so-called managers interim notifications required of domestic issuers according to 37x WpHG will in 12

REPORT 2006 Corporate Governance Bericht future be made available to the public during the period between ten weeks after the start and six weeks before the end of the first and second halves of the financial year. If the company decides to establish quarterly reports (according to the provisions of 37w para. 2 Nos. 1 and 2, paras. 3 and 4 WpHG) instead of interim notifications according to 37x WpHG, these reports must be made available to the public at the latest two months after the end of the first and third quarters of the financial year. Implementation of the DCGK proposals The DCGK proposals have been fulfilled with the exception of the divergences described below. These divergences relate to the fact that either compliance with the corresponding proposal was not appropriate due to the current structure of the company or further benefits for the company s shareholders are questionable. incentives and risks, since the latter are already given through the significant involvement of both members of the board of directors in the company with a high level of financial commitment. DCGK figure 5.1.2 The firm s supervisory board is made up of three people according to the company bylaws. Since a committee must consist of at least two or, in the case of a decisionmaking committee, three members, the establishment of committees to prepare for the appointment of board members would not render the activity of the supervisory board more efficient. DCGK figure 5.3.3, 5.3.4 The above-mentioned explanations concerning fig. 5.1.2 of the code apply accordingly to the proposals in figs. 5.3.3 and 5.3.4. DCGK figure 2.3.3 The company s representative of voting rights can only be contacted in principle until the day before the general meeting. Shareholders present at the general meeting or their representatives have the possibility, however, of issuing instructions to the representative of voting rights at the meeting venue. DCGK figure 2.3.4 It is not possible at present to follow the general meeting by means of modern communication media (e.g. Internet) as proposed in figure 2.3.4. DCGK figure 3.6 The proposal to hold regular separate discussions with shareholders and employees only concerns codetermined supervisory boards in large firms. DCGK figure 4.2.3 The variable components of the board of directors compensation do not include any components with long-term DCGK figure 5.4.6 The purpose of the regulation stipulated in fig. 5.4.6 to appoint supervisory board members on different dates for different periods is controversial. The company is of the opinion that the activity of the supervisory board becomes more efficient when the board operates for several years with the same members. The members of the supervisory board of VEM Aktienbank AG are therefore re-elected at the same time and for the same period. DCGK figure 5.4.7 The performance-related compensation of the supervisory board does not include any elements which relate to the long-term success of the firm. Instead it is based essentially on the results of the company s ordinary business activities which are outlined in the consolidated accounts drawn up by the company according to IAS/IFRS (International Financial Reporting Standards). DCGK figure 6.8 Since most of the company s shareholders are from Ger- 13

man speaking regions, publications are currently issued only in German. Shareholders and general meeting The shareholders of VEM Aktienbank AG acknowledge their rights at the general meeting and exercise their voting rights in this context. Each share grants one vote in principle. There are no shares with cumulative voting, preferential voting or maximum voting rights. The company s board of directors presents the annual accounts and the consolidated accounts at the general meeting. It decides upon the use of profits and the discharging of the board of directors and the supervisory board and generally appoints the auditor. The general meeting also determines the company bylaws and aim of the company, amendments to the company bylaws and essential corporate measures such as the issuance of new shares and convertible and option bonds and the authorisation to acquire the company s own shares. All the shareholders are authorised to take part in the general meeting, to express their opinions on the items on the agenda and raise questions and proposals concerning the issues in hand. Cooperation between the board of directors and the supervisory board The board of directors and the supervisory board of VEM Aktienbank AG work in close cooperation for the benefit of the firm. The board of directors determines the strategic direction of the firm with the supervisory board and discusses the status of strategic implementation with the latter at regular intervals. The board of directors informs the supervisory board on a regular basis in a comprehensive, timely manner of all relevant planning and business development matters relating to the firm. Board of directors The board of directors of VEM Aktienbank AG manages the firm under its own responsibility. It is committed to the interests of the firm and the enhancement of its longterm value. It guarantees compliance with the legal provisions, ensures that they are respected by the companies of the group and provides for appropriate risk management and risk control within the firm. No changes were made to the personal composition of the board of directors during the financial year 2006. In its meeting on 27 June 2006, the company s supervisory board extended the terms of office of the board of directors members Andreas Beyer and Erich Pfaffenberger ahead of schedule by a further five years. There were no conflicting interests between board of directors members during the financial year 2006 within the meaning of fig. 4.3 of the DCGK. Supervisory board The supervisory board of VEM Aktienbank AG advises and supervises the board of directors in the management of the firm and is directly involved in decisions which are of particular significance for the company. It evaluates the efficiency of the board of directors activities once a year. The results of this evaluation form the basis for the continued improvement of this body s work. The composition of the supervisory board of VEM Aktienbank AG remained unchanged during the financial year 2006. The board of directors and the supervisory board were informed of potential conflicting interests of members of the supervisory board (within the meaning of fig. 5.5 of the DCGK) during the financial year 2006. The compensation granted to supervisory board members is specified in 11 paras. 4 and 5 of the company bylaws and was distributed between the individual members as following during the financial year 2006: 14

REPORT 2006 Corporate Governance Bericht Fixed Variable In EUR compensatio compensation Total Matthias Girnth, chairman 6,500 9,000 15,500 Olaf Posten, deputy chairman 5,000 9,000 14,000 Dr. Alfred Krammer 5,000 9,000 14,000 Total 16,500 27,000 43,500 fig. 6 of DCGK ( Transparency ) were complied with during the previous financial year. During the financial year 2006, VEM Aktienbank AG published the following information on its Website under the heading Investor Relations on the company s share-related business (ISIN DE0007608309) conducted by individuals with directors dealings: The members of the supervisory board did not receive any compensation or other advantages for any personal services during the financial year 2006. Accounting and auditing The consolidated accounts were drawn up according to the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) applicable in the European Union. The IFRS also include the International Accounting Standards (IAS) still valid and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) former Standing Interpretations Committee (SIC). The individual financial statements of VEM Aktienbank AG are drawn up according to the specifications of the German Commercial Code. Individual and consolidated accounts are drawn up by the company s board of directors, verified by the auditor appointed by the general meeting and the supervisory board and subsequently confirmed and approved by the supervisory board. Transparency Transparency is an essential requirement for the operation and efficiency of a capital market from the point of view of the board of directors and supervisory board of VEM Aktienbank AG. All the recommendations laid down in 15

Details on business subject to disclosure requirements Details on individuals subject to disclosure requirements (full name or firm) Base Buy / Place Price Businessvolume * sell Date ** (in EUR) Number (in EUR) Girnth Matthias 2 Sell 01.03.2006 FWB 26.50 250 250.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 15.05.2006 FWB 20.05 300 6,015.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 15.05.2006 FWB 20.12 1,000 20,120.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 16.05.2006 FWB 19.52 400 7,808.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 16.05.2006 FWB 19.30 300 5,790.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 17.05.2006 FWB 20.06 300 6,018.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 17.05.2006 XTR 20.01 380 7,603.80 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 17.05.2006 XTR 20.11 120 2,413.20 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 17.05.2006 FWB 19.00 300 5,700.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 18.05.2006 XTR 17.56 300 5,268.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 18.05.2006 XTR 18.30 50 915.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 18.05.2006 XTR 17.56 45 790.20 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 18.05.2006 FWB 17.58 300 5,274.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 18.05.2006 XTR 17.85 300 5,355.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 19.05.2006 FWB 18.15 250 4,537.50 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 19.05.2006 XTR 18.11 55 996.05 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 19.05.2006 XTR 18.01 195 3,511.95 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 XTR 16.49 250 4,122.50 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 FWB 16.05 300 4,815.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 XTR 17.81 250 4,452.50 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 XTR 16.47 500 8,235.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 FWB 16.46 250 4,115.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 XTR 16.53 250 4,132.50 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 22.05.2006 XTR 16.54 183 3,026.82 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 30.05.2006 FWB 17.95 200 3,590.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 30.05.2006 XTR 17.51 30 525.30 RBG Rosental Beteiligungsgesellschaft mbh 1 Buy 14.06.2006 FWB 14.50 300 4,350.00 Pfaffenberger Erich 3 Buy 21.09.2006 FWB 18.20 71 1,292.20 RBG Rosental Beteiligungsgesellschaft mbh 3 Sell 19.12.2006 OM 5.00 100,000 500,000.00 BrunellCo GmbH 3 Sell 20.12.2006 OM 5.85 425,000 2,486,250.00 RBG Rosental Beteiligungsgesellschaft mbh 3 Buy 21.12.2006 FWB 4.83 1,055 4,095.65 RBG Rosental Beteiligungsgesellschaft mbh 3 Sell 21.12.2006 OM 4.70 500,000 2,350,000.00 BrunellCo GmbH 3 Buy 21.12.2006 OM 4.70 500,000 2,350,000.00 Abano Capital GmbH 3 Buy 21.12.2006 OM 4.70 500,000 2,350,000.00 16

REPORT 2006 Corporate Governance Bericht * Key:: ** Key: 1: Person with management duties: member of FWB: Frankfurt management body XTR: XETRA 2: Person with management duties: member of OM: off market administrative or supervisory body 3: Legal person, company or establishment in close contact with a person with management duties (function: member of management body) Munich, 28 March 2007 VEM Aktienbank AG The board of directors The supervisory board 17

Consolidated annual report for the financial year 2006 Financial year 2006 The rise in the stock markets continued last year. The shares in companies which are represented in a selection index have generally developed in an extremely positive manner. The DAX increased by 22.0% in 2006. Whilst the MDAX recorded a performance of over 28.6%, the SDAX recorded a maximum price increase of +31.0% which is a new index record. The shares in the third line did not follow this development. Most second-line stocks, which are not included under any of the selection indices listed above due to their size, decreased in value compared with the maximum levels recorded in 2006. The German stock market recorded a positive development up until the end of April, marked among other things by the euphoria surrounding Solar shares. From May onwards, trade in second-line stocks was marked by reduced turnover and sales pressure which sometimes reached panic proportions. The recently established Entry Standard Index reflects this development. The decline in the index in 2006 amounted to minus 11.5%. The Entry Standard Index even lost 34.8% compared with its maximum level. To conclude we can confirm, with regard to the market techniques, that the VEM group (also referred to below as VEM Aktienbank or VEM) had four very healthy trading months at the beginning of the year, but the following eight trading months were not optimum. The 2006 issue market The past year marked a real IPO boom for Germany with as many initial pubic offerings as in 2000. The open market was the strongest market segment pursuing the trend of the previous year. In addition to traditional new issues, listings without corporate actions were stepped up. The extremely positive mood in the capital market enlivened the issue market during the first months of 2006. Issues of Small Caps were highly sought after although price developments were often disappointing. This led to a critical view of initial public offerings in subsequent periods. Significant initial public offerings with a volume of over 100 million euros were in an advantageous position. Issuers and issuing banks were confronted with unstable positions and were often forced to make concessions in terms of price. However, prices of issuers with a market capitalisation of over 250 million euros developed in a satisfactory manner. Business with small IPOs with an issue volume of less than 50 million euros was difficult. Although the market showed a certain tendency towards saturation, the number of market candidates available remained at a surprisingly high level. This meant that issuers had to accommodate investors. Issue concepts were altered shortly before the start of trading in order to obtain admission in the capital market, investors determined the issue price and quantities were reduced. Apart from a few exceptions, the start of trading was not marked by euphoria. A number of initial public offerings were completely cancelled but most issuers managed to get listed. In terms of figures, initial public offerings during the past trading year can be presented as follows: there were 38 new entries in 2006 in the official and regulated markets of the Frankfurt Stock Exchange compared with 16 in the previous year (figures excluding transfers from the open market or other German stock markets). The open market of the Frankfurt Stock Exchange recorded 146 (40) new listings, 50 (14) of which opted for listings in the Entry Standard. The Entry Standard celebrated its first anniversary in October 2006 and enjoyed continued popularity among 18

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T issuers who raised over 425 million euros in new equity in 2006. The overall market capitalisation of the Entry Standard amounted to approximately 5.9 billion euros (on 31 December 2006). The Entry Standard has thus become firmly established after an only brief period in the stock exchange environment. The open market was characterised above all by new listings, particularly private placements and to a lesser extent public offers. Issue volumes were well below 25 million euros. Stock exchange listings in the Entry Standard mainly concerned securities. They were accompanied above all by banks trading in securities although full-service banks also stepped up the provision of their services. 2006 was also an extremely active year with regard to follow-up issues. The issuers listed on the German stock exchange (including the open market) completed 84 rights issues (previous year: 95)*. As was the case in the previous year, small and medium-sized firms were the main issuers of new shares. Only one DAX value completed a rights issue. 25 banks supervised these corporate actions. 13 rights offers by listed companies for convertible bonds were recorded during the year (previous year: 10) and were accompanied by four banks. A total of 246 listing procedures (previous year: 266) were recorded at the Frankfurt Stock Exchange (cash and noncash capital increases and listings of conditional capital). 39 banks accompanied these procedures. To conclude, we can say that the issue market developed in the field of new issues as had been predicted with additional follow-up financing being of particular importance. VEM Aktienbank was extremely active in both areas. Development of the VEM group The past financial year presents a mirror image of the development of the issue market for the VEM group. The scope of our business activities has developed considerably. VEM Aktienbank acquired and invested shares and convertible bonds equivalent to approximately 390 million euros (previous year: 207 million euros) as an accompanying issuing bank. This represents an all-time high. VEM Aktienbank accompanied 15 initial public offerings with security prospectus over the past year including two entries in the regulated market (emqtec and GWB Immobilien). The subsidiary TradeCross completed five listings in the open market. Our positive market position has been documented by the corporate finance ranking of Deutsche Börse AG. In the official and regulated markets of the Frankfurt Stock Exchange VEM Aktienbank dealt with a total of 32 listing procedures. As was the case in the previous year, VEM Aktienbank is the most active bank in Germany in the supervision of listed companies based on the number of transactions. VEM accompanied 19 rights offers for new shares and ten for convertible bonds. As far as listing procedures are concerned, VEM completed 32 procedures in the past year. Our market shares are as follows: rights offers for shares 23%, rights offers for convertible bonds 77%, listings at the Frankfurt Stock Exchange 13%. On 31 December 2006 VEM Aktienbank was acting as a Deutsche Börse listing partner with eleven Entry Standard firms. This function is outlined in the Entry Standard statutes and includes the continuous supervision of issuers. We generate a fixed income on this basis which is comparable with that of a designated sponsor. *Source: ebundesanzeiger (German Federal Bulletin) 19

The Entry Standard has strategic value for us due to its establishment as an issue platform. We anticipate that this quality segment may be the preferred transparency segment for many issuers in the future. Because the Entry Standard is included in the open market, the EU transparency directive does not apply to the firms listed in it; however, the Frankfurt Stock Exchange as a market operator imposes additional requirements on issuers. VEM Aktienbank is also involved in the accompaniment of takeover bids. In the past year we supervised two takeovers providing banking services. We have significantly developed our activity as a designated sponsor in the electronic trading system Xetra. At the end of 2006 we were supervising 59 (30) securities ** in the context of designated sponsoring including our own shares. Deutsche Börse gave our activity as designated sponsor the highest rating (AA) for the financial year as a whole. Compared with the total number of supervised securities our company recorded a market share of approximately 7% (6%). 46 (38) banks were involved in this field of business at the end of 2006. Development of the Janosch group In March 2006, we acquired a share of almost 70% from the majority shareholder in Janosch film & medien AG, Berlin, which possesses an 85% holding in Papa Löwe Filmproduktion GmbH, Munich. The Janosch subgroup (Janosch group) was incorporated in the VEM Aktienbank consolidated accounts on 31 March 2006. Within the framework of the corporate actions of Janosch film & medien AG, we increased our share to 75.6% in December 2006. The Janosch group possesses proprietary claims to proceeds and partial rights of use in the entire works of the painter, graphic artist and author and manages the comprehensive exploitation of a large part of his entire works. Janosch is one of the best-known authors of children s books in Germany and has received numerous international awards for around 300 children s books. The exploitation covers the fields of licensing, claims to proceeds and film production. The company receives a significant cash inflow stemming from these rights and the high renown of the artist and his work with a unique market position. However, due to major payment obligations, it experienced economic difficulties and has been faced with acute liquidity problems. Against this background, VEM embarked on participation with the company with the aim of bringing about a sustainable new structure and possible partial or total separation from it at some point in the future. During the following months, the liabilities of Janosch film & medien AG were restructured: A reduction in capital to 977,272.00 euros with a ratio of 23:1 was implemented and subscribed capital was increased to 2,931,816.00 euros within the framework of a subsequent capital increase with subscription rights. Janosch film & medien AG possesses solid financing with this equity base. Obligations towards the artist Janosch were settled and incorporated in the company as non-cash capital contributions within the framework of the capital increase. Unscheduled repayments were agreed upon with the lending bank and the loan was extended with improved conditions. Janosch film & medien AG is currently in a position to generate a high free cash flow on the basis of extremely low fixed costs. The Janosch holding Papa Löwe Filmproduktion GmbH produces films and television series on the basis of the Janosch characters. The first Janosch film for cinema Oh wie schön ist Panama, a joint production with the Warner Bros. Hollywood studio, was launched in September 2006. ** Source: DS statistics of Deutsche Börse AG, 4th quarter of 2006 20

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T The buying resistance of private households which has limited economic growth since 2001 was less marked in 2006. This is a positive sign for the Janosch group s market. Children s and young people s media recorded increased turnover in 2006 as predicted although a large number of individual titles, particularly in the film sector, remained behind expectations due to the large number of productions. Janosch film & medien AG recorded an annual surplus for the financial year 2006 for the first time in the history of the company. It finally succeeded in curbing the continued erosion of turnover of previous years. Following the significant level of impairment losses during the past years, the rights are now valuated in a way that their scheduled write-downs can be achieved. The remaining costs remain at the same low level as in the previous year. A significant number of activities were launched during the previous financial year around the 75th anniversary of Janosch and the cinema launch of Oh wie schön ist Panama. The media reaction was extremely positive and certainly helped to maintain the level of turnover. The decline in turnover recorded last year in the books sector was compensated for and turnover in the merchandising sector increased slightly. Audiences for the film Oh wie schön ist Panama, a joint production by Warner Bros., Mabo and Papa Löwe Filmproduktion GmbH, were below expectations however, calling for a corresponding writedown of the film. Income situation The VEM group receives most of its income from commission proceeds and security trading. Since the incorporation of the Janosch group in the consolidated accounts, other operating income has been obtained from proprietary claims for proceeds, licences and film production. Commissions include remuneration for investment activities, organisation and coordination of investments, initial public offerings and the assumption of placement guarantees as well as investors stock commissions. This item also comprises issuer remuneration for designated sponsoring and supervision services as a Deutsche Börse listing partner. As a result of the increased investment activity and allocated designated sponsoring mandates, commission earnings increased by 63% from 11,275,000 euros to 18,355,000 euros. Due to the increased involvement of selling agents, commissions paid increased disproportionately which meant that the net commissions income only increased by 18% from 9,101,000 euros to 10,702,000 euros. The security trade was marked by a lengthy consolidation phase affecting the majority of securities involved in designated sponsoring. The result is nevertheless satisfactory. The trading result amounts to 2,847,000 euros compared with 9,343,000 euros in the previous year. The balance of other operating income and expenditure increased from 178,000 euros last year to 5,577,000 euros. This increase can be accounted for by the incorporation of the Janosch group in the consolidated accounts and concerns primarily income from proprietary claims for proceeds and licences as well as film production. Interest income increased from 388,000 euros last year to 709,000 euros (+83%) and stems essentially from bank business. Interest expenditure stands at 365,000 euros compared with 5,000 euros last year. This increase stems from the incorporation of the Janosch group and concerns the financing of loans assumed for the rights as reported in the balance sheet. The overall interest income decreased by 10% compared with the previous year (383,000 euros) to 344,000 euros. 21

The total operating income (including interest income, commissions income, trading result and other operating income) amounts to 19,470,000 euros representing a 2% increase compared with the previous year (19,005,000 euros). Staff expenditure increased by 25% during the financial year from 3,374,000 euros to 4,204,000 euros. This is due essentially to the increasing workforce linked to the increasing scope of business (increase in average number of employees including board of directors from 21 in previous year to 44 in 2006). Other administrative expenditure increased from 1,457,000 to 2,414,000 euros (+66%). This increase corresponds to the increase in commissions income and reflects the increasing scope of business. The cost of premises linked to increased office space and consulting and auditing costs increased considerably compared with the previous year. The initial inclusion of the Janosch group in the consolidated accounts is also particularly significant. Write-downs and allowances for intangible and tangible assets are related essentially to the cinema film Oh wie schön ist Panama (3,243,000). A complete write-off was applied since audience figures were far below expectations. The result of ordinary business activities has decreased by 35% from 14,279,000 to 9,244,000 euros. The pre-tax equity return on equity without taking the period result into account amounted to 36%. This significant performance indicator is higher than average for German banks. The income tax charge decreased disproportionately in comparison with the result of ordinary business activities from 5,531,000 euros to 3,118,000 euros (-44%). The annual surplus based on third party shares decreased from 8,748,000 euros to 5,892,000 euros (-33%). To conclude, it can be said that the decline in results during the year under review was determined essentially by a significantly reduced trading result. The increase in commissions income was not sufficient to make up for this reduction. The Janosch group made a positive contribution to the group s result during the initial consolidation year with a proportionate result of the Janosch subgroup before non-group shares amounting to 854,000 euros. Financial and assets position The VEM group balance sheet total increased by more than half to 70,388,000 compared with 45,372,000 in the previous year. This increase was a result of issues which had not been fully settled on the balance sheet date, the acquisition of proprietary claims for proceeds and partial rights of use in the entire works of the artist Janosch, which were recorded at the initial incorporation of the Janosch group as intangible assets, and the associated loan financing as well as the increase in equity due to the annual surplus. VEM refinances itself almost exclusively with equity. Shortterm collateral loans are used to finance day-to-day bank business and overdrafts are used if necessary. There are no long-term liabilities with credit institutions relating to bank business. The recorded long-term liabilities with credit institutions relate to the loan financing taken over within the framework of the acquisition of the Janosch group. The cash share of the capital increase conducted with Janosch film & medien AG was used for the most part to reduce debt. This meant that it was possible to restructure the large loan with the lending bank in the form of lower repayment rates and an extension until 2015 of the current loan agreement which had previously been until the end of 2007. The liquidity situation of the Janosch group has improved considerably compared with previous years. 22

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T The group equity on the balance sheet amounted to 31,971,000 euros on the balance sheet date (previous year: 25,677,000). This includes 977,000 euros in minority interests due to the initial incorporation of the Janosch group. The increase in equity by 6,294,000 euros stems essentially from the annual surplus (6,126,000 euros). On the balance sheet date the subscribed capital amounted to 9,675,000 euros with capital reserves of 3,041,000 euros, retained earnings of 10,576,000 euros and a group profit of 7,702,000 euros. With the transfer of the entire balance sheet profit to retained earnings, the capital resources of VEM AG amounted to 28,759,000 euros according to 10 of the German Banking Act KWG on the balance sheet date and the equity rate (ratio between liable equity and weighted risk assets) amounted to 158%. Holdings The VEM group possessed the following main holdings on the balance sheet date: Following the annual surplus of 329,000 euros in the previous year, the company recorded an annual surplus of 573,000 euros in 2006. The company s equity on 31 December 2006 amounted to 1,134,000 euros. The company has a positive cost structure. Positive results are also being predicted for the financial year 2007. EquityStory AG provides comprehensive Online Investor Relations services in the German-speaking world and extensive services in the fields of disclosure requirements, financial portals, audio and video presentations of investor events, online financial reports and outsourced Websites for over 1,000 listed domestic and international firms. The field of disclosure requirements is dealt with by the subsidiary Deutsche Gesellschaft für Ad-hoc-Publizität mbh (DGAP). DGAP is an institution involved in the organisation of statutory disclosure obligations for listed companies and has been a market leader since its establishment in 1996. Its services include in particular ad-hoc reports, directors dealings notifications and the circulation of corporate news and press notifications. financial.de AG (25%) EquityStory AG operates a network of portals for investor EquityStory AG (10%) relations contents in 25 leading financial portals such as Handelsblatt, OnVista and wallstreet:online. Listed public financial.de AG is an Investor Relations company which companies instruct EquityStory to present and distribute deals with small and medium-sized domestic and international stock corporations. The company is involved in proposals presented correspond to over 200 million page their corporate information via these portals. All the the fields of capital market communication and business impressions every month. reports for these target groups. The group of companies employs financial analysts, communication experts and software developers and thus has The services in the business field of capital market communication include above all the effective distribution of access to the three key skills for online investor relations. corporate information via personal email distributors. In The EquityStory group currently employs 36 people. the field of business reports, financial.de AG deals with the creation of reports from the determination of content Since May 2006, the shares of EquityStory AG have been to the layout and composition and the production of the listed in the Entry Standard of the Frankfurter Stock Exchange. Following a consolidation phase spanning printed business report. several 23

months, the share price has been developing rapidly since November 2006 and exceeded the issue price of 15.30 euros at the beginning of February 2007. The EquityStory AG business enjoys a high level of attention at present as the disclosure obligations of listed companies have been significantly extended by the EU transparency directive. The strong business model and positive future prospects for our investment are being recognised more and more by other investors. We place a high strategic value on our investment which exceeds the current market value. With an investment share of 10.34%, we are currently the second largest shareholder. Risk report The bank deals with financial risks, without which successful business would not be possible, in a conscious, controlled manner in the context of its business activity. In order to manage these risks, the bank has introduced a risk monitoring and risk management system which corresponds to the requirements of the federal office for financial service supervision and the German Stock Corporation Act. Risk monitoring and management is an essential part of our business process and the aim is to recognise risks at an early stage and deal with existing risks in an appropriate manner. Staff Staff numbers including the board of directors increased from 24 on 31 December 2005 to 48 on the balance sheet date. We have provided our bank service with the businesslike, organisational framework it requires. Thanks to our qualified, motivated employees, we are able to complete orders within the deadlines ensuring a high level of quality. Our members of staff are highly trained, qualified individuals. Skills and efficiency are increased by targeted training measures. Our staff policy focuses on the motivation of employees and their long-term connection with the firm. The availability and involvement of our employees earns them particular recognition. In addition to the functional separation of the Controlling, Reporting and Legal departments, essential elements in the work-flow organisation are significant in this context. The controls involved in the work-flow organisation (particularly the second set of eyes principle) and on-going reporting help to recognise individual risk items and implement appropriate measures in good time. Comprehensive risk-related behavioural provisions within the framework of work-flow limit potential risks to a justifiable extent. All business processes associated with a special risk are audited at least once a year in the context of the internal audit which is outsourced and carried out by a renowned economic auditing firm. This firm reports directly to the board of directors, is not bound by instructions and can carry out its tasks independently from the operative business. The basis for the internal audit activity is a three-year revolving audit plan which covers all the bank s essential business processes. The requirements of the federal office for financial service supervision have been fulfilled with regard to the structure of the internal audit. 24

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T The bank s internal risk management serves both to calculate the risk and to control the risk return. The allocation of the risk capital is completed following a prior, detailed risk analysis which provides an indication of the required risk capital for individual risks and takes into account the different risk contexts and the bank strategy. Specific limits are determined following the allocation of capital to the individual risk categories. The fact that individual limits must be readily operational on the one hand and compatible with the overall limit on the other hand has to be taken into account in this context. The risk capital (limit) calculated according to these requirements limits the risks of the individual sectors. The accumulation of the risk capital associated with the individual sectors represents the authorised overall risk capital of the bank and must not be exceeded. All measures involved in the limitation of risks are implemented in the context of an economically viable ratio which takes into account the size of the institute and the particular business model, with an emphasis on the accompaniment of corporate actions. It is important to take into account the fact that the board of directors is directly involved in all major procedures due to the size of the bank. All the elements in the risk management process are adapted to any changing conditions in good time. Within the framework of the regular risk analysis, the bank has determined and, as far as possible, quantified all existing risks. The risks have been divided into the following main risk categories: Market price risks Address non-payment risk Liquidity risks Operational risks Other The consistency of the system provided for in the Basel Accord is guaranteed thanks to this distribution. By including the Other risks item, it is also possible to include risks which are not covered by other categories but which are significant for the institute in an overall risk evaluation. All risks affecting the institute have been assessed with a balanced, fairly limited level of detail so that identification, analysis and control measures resulting in effective risk management are possible. The essential risks within the above-mentioned categories are presented below together with possible reduction and supervision methods. Market price risks Market price risks include potential losses which may be incurred due to changes in prices in the financial markets for our items in the trading and investment book. Market price risks include the categories of share price risks and interest rate amendment risks. In order to fully evaluate market price risks and the utilisation of the risk capital allocated for market price risks, listed investments are also included in the supervision and control (separate from the balance sheet approach which does not make the adjustment of the book value compulsory in the case of a temporary impairment). Nonlisted items in the investment book for which neither price fixing nor consolidation apply, represent a limited portion and are therefore only evaluated once a year. 25

VEM did not conduct any trading transactions in precious metals or foreign currency during the reporting period. Additional risks, such as the foreign currency risk, are therefore supervised but are not included in the market price risk representation as the items are less important. Market price risk management Market price risks are included and managed within the trading business segment. The risk controlling department supervises and reports on market price risk situations to the trading sector and the board of directors (trade and supervision) and informs the board of directors immediately about any major changes relating to risks. Market price risk supervision The supervision of risk items in the trading and investment book is carried out by means of a unified, multi-layered limit system which limits the loss potential stemming from market price risks. The risk limits are approved annually by the board of directors and must not be exceeded. If these limits are exceeded, the hierarchy is immediately informed and their timely reduction is supervised. Limit adjustments based on the specific situation of business policy for derived partial limits are possible and may only be applied according to the specified rules and within the defined limits. The market price risk controlling department has immediate access to the portfolio maintenance system and thus supervises the risk situation intraday. The management is informed on a daily basis of the development of the market price risk, the application of limits and the trading results. The management is informed of the risk analysis results and scenario considerations on a quarterly basis. Limitation of market price risks In order to limit risks to a level which is manageable for the institute, the following risk limiting options were implemented: The board of directors proposed the bank a total loss limit as a risk limit based on the balance sheet equity and the business conducted during the fiscal year which can be handled by the institute without further difficulties and without creating a risky situation. A portfolio value at which the defined loss limit would be totally exhausted is determined for all items at regular intervals on the basis of a market scenario. The portfolio value determined according to this method is used as an upper portfolio limit. On the basis of the upper loss and portfolio limits, further limits were set in order to identify the causes of increasing market price risks in good time and be in a position to take appropriate action. Therefore the number of items per trader and upper volume and loss limits per individual security were limited as a framework within which each individual trader can determine his items at his own discretion. The limitation consists of ensuring that the day-to-day P&L (realised + non-realised) never exceeds the total loss limit. Within the framework of daily risk evaluation and control, VEM conducts a sensitivity analysis with the open trading portfolio including the most extreme market scenarios and thus determines hypothetical P&L values (non-realised) for different market fluctuations. The limits were not exceeded in any significant manner in 2006. The hypothetical P&L values are compared with the dayto-day-p&l and supervised. If the set thresholds are excee- 26

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T ded, the result of the trading day concerned is examined in more detail. The hypothetical P&L values from the sensitivity analysis serve above all to determine the market fluctuations with which the absolute upper loss limits set by the board of directors would be reached. The suitability of the risk measurement method is verified on a regular basis. The risk capital allocated for market price risks amounts to 12.5% of the total allocated risk capital. Address non-payment risks A risk control and supervision system corresponding to the size of the institute has been established to determine address non-payment risks. This system provides for the identification, evaluation, control, supervision and communication of essential address non-payment risks. Address non-payment risks concerning credit institutes Receivables from credit institutes mainly concern receivables from domestic credit institutes and are used for the settlement of payment transactions, capital market transactions and trading business. The non-domestic credit institutes concerned are well-known credit institutes which operate worldwide. The address non-payment risk concerning credit institutes is generally considered to be low. Nonetheless limits have also been set for all institutes with which VEM holds accounts or invests fixed-term deposits or time deposits. These limits are monitored daily and verified with regard to compliance. Specific protective measures have also been agreed upon with small individual institutes in order to minimise the non-payment risk. VEM s receivables from credit institutes are therefore distributed between several institutes so that the non-payment of one institute can be overcome and the survival of VEM guaranteed. As a security trading bank focusing on the issue business, Compliance with limits is supervised to ensure that the limit applied for each individual institute is determined daily VEM Aktienbank AG does not offer credits in the traditional sense. A number of asset items on the balance sheet and if a level of 85% is reached, a notification is issued in are akin to credits and embody address non-payment risks order to respond to this high level and to take appropriate which subsequently have to be determined and supervised. This relates essentially to the balance sheet item of is immediately informed and their timely reduction is steps. If the limits are exceeded (> 100%), the hierarchy Receivables from credit institutes, which includes cash supervised. The limits were not exceeded in any significant accounts and fixed-term deposits with other banks and manner during the reporting period. the item of Other assets, which comprises delivery claims for shares or redemption claims from not yet registered capital increases. 27

Address non-payment risks concerning issue monitoring Other assets essentially include delivery claims for shares or redemption claims from not yet registered capital increases. The accompaniment and implementation of corporate actions constitutes the bank s core business. The item Other assets therefore varies a great deal during the fiscal year according to the volume and number of corporate actions accompanied. The determination and supervision of the address nonpayment risk concerning delivery claims for shares or redemption claims from not yet registered capital increases were implemented according to the specific conditions of the institute. The accompaniment of an issue is a new process with each issuer. Therefore, it is always the board of directors who decides upon the completion of an issue and the assumption of an address non-payment risk (by transferring the capital increase amount to the issuer). The decision to complete an issue is reached after detailed auditing procedures concerning the documents of the firm planning the corporate action. VEM works, when necessary, with the support of external third parties in order to reduce the risks involved in issue accompaniment. If a prospectus is required for the listing of new shares, a suitable third party conducts a legal due diligence and if necessary a financial due diligence. The period between the transfer of the capital increase amount to the issuer and the entry of the corporate action in the trade register is at the centre of the address non-payment risk during the accompaniment of an issue process which needs to be supervised and, as far as possible, reduced and controlled. Since the accompaniment of issues is VEM s core business, a large proportion of the risk capital (approx. 70%) was allocated for this purpose. The transfer of the capital increase amount to the issuer represents a considerable liquidity outflow which at this stage is only covered by an unsecured redemption claim and, following the entry of the capital increase in the trade register, by a secured claim (the delivery of new shares). The institute has access to different possibilities with regard to risk reduction. The aim is to limit and / or significantly reduce the institute s risks arising in the context of total issues relating to the subscription (by VEM for third parties) by implementing suitable measures. In addition to the involvement of qualified, experienced employees who complete the issue process in a responsible manner and ascertain the readiness of the issuer to make issues, a maximum of 25% of the subscription amount is transferred to the issuer prior to the entry of the corporate action in the trade register. The accompaniment of each issue is an individual process for which a proportion of the total available risk capital is allocated. Within the framework of the determination of the decision-making basis for the completion of an issue, the board of directors and responsible employees determine the risk capital associated with each issue taking into account the quality of the issuer, the issue volume and the use of risk-reducing measures. If several issues are accompanied at the same time, the total amount must not exceed the total amount allocated for the accompaniment of issues. Monitoring and the daily updating of the project list including on-going corporate actions allow for the early identification of the potential exceeding of the allocated risk capital. If the allocation for individual projects exceeds the total risk capital for issue processes, the escalation procedure is 28

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T applied in such a way that dates for corporate actions are adjusted and overlaps are avoided. Corporate actions are implemented in succession only when the previous ones have been totally settled. The exceeding and postponement of corporate actions for this reason did not occur during the reporting period. Address non-payment risks concerning other balance sheet items Other balance sheet items on the assets side which are taken into account in the context of the supervision and control of address non-payment risks are the items Trading assets, Financial assets and Customer receivables. The items Trading assets and Financial assets are supervised and controlled in connection with market price risks as businesses essentially involve stock exchange businesses in which the equivalent has been obtained or is to be obtained by payment versus delivery or for which corresponding cover exists. The counterpart catalogue for trading assets therefore only includes domestic credit and financial service institutes and XETRA trading participants. Other counterparts are only authorised subject to the agreement of the board of directors. Business which is carried out for customers for which no cover exists as yet is represented in connection with market price risks until settlement with the customer (generally delivery versus payment). Customer receivables include receivables from issuers as well as institutional and private customers within the framework of services provided in the issuing, trading and consulting business. VEM does not consider a separate limit system for this asset item to be necessary. Major customer receivables (per individual customer) mainly occur in the context of issue accompaniment. They are generally settled with the customer upon payment (of the last tranche) of the issue proceeds. Consultancy services which extend over a long period are settled as the project progresses and payment obligations are therefore spread over several due dates in order to reduce the address nonpayment risk for each individual customer. Services for private customers are generally only provided subject to prepayment. Customer receivables stemming from trading business for which no cover exists as yet are represented, as already stated, in connection with market price risks until settlement with the customer (generally delivery versus payment). Customer receivables within the Janosch group mainly concern domestic licence partners with good or very good creditworthiness. A calculated advance is generally agreed upon when a licence is issued which considerably limits the address non-payment risk. Liquidity risks Liquidity risks include the (short-term) liquidity risk in the limited sense, the refinancing risk and the market liquidity risk. The short-term liquidity risk concerns the risk of VEM failing to fulfil its payment obligations in time or to the full extent. The refinancing risk concerns the risk that the resources required for refinancing may not be provided or not provided in time or that the costs incurred may be too high. The market liquidity risk concerns the risk that liquidity reserve assets may not be liquidated or not liquidated in time or only with deductions. The Cash Management department controls liquidity. VEM supervises the available liquidity on a daily basis and presents regular liquidity overviews for an appropriate period which compares the forecast inflows of resources with the forecast outflows. For this purpose and in order 29

to determine the liquidity indictors according to principle II, VEM has established an overview which contains all contracts, the associated financial obligations and the earliest possible cancellation. With the help of this overview and the other on-going costs, the required liquidity is determined on a monthly basis. Two scenarios are considered. On the one hand, the amount of liquidity required from income is determined so that the inflows and outflows can be balanced. On the other hand, an unusual scenario is considered whereby no further liquidity inflows occur during the current month. The available liquidity must be sufficient to cover the outflows on the last day of the following month. Additional resources, minus a generous float, which remain daily available, are invested and are available in addition to the liquidity reserves to cover scenarios in the following month. and considerably reduced by special redemption and external financing. The payment capacity of the Janosch group has thus been significantly improved. The interest amendment risk was limited by hedging until 30 April 2008. The refinancing risk was also considerably limited by the extension of the financing period until 2015. VEM was able to cover liquidity outflows at all times during the reporting period. The available daily resources were allotted in good time so that regrouping in line with the liquidity outflows was only occasionally necessary. The above-mentioned additional measures to cover liquidity outflows (the early release of fixed-term deposits of invested liquidity surpluses or the acceptance of an overdraft) were not necessary during the reporting period. Because VEM invests liquidity surpluses in fixed-term deposits with short maturities (max. 90 days) or in daily tradable fixed-rate securities or bonds from public issuers or issuers with an external rating of at least A, the potential loss (reduced proceeds due to early disposal or high interest rates on the basis of short-term financing via overdrafts) is not considered to be particularly significant. The probability of loss is rated as low since liquidity outflows are continually monitored and the unusual scenario whereby no liquidity inflows are received is taken into account. Overall the liquidity risks category has been allocated a correspondingly low risk capital (1.25% of the total risk capital). Liquidity risks within the Janosch group based on the existing external financing share are particularly significant. Liquidity inflows and outflows are planned on a monthly basis in order to guarantee the applicable interest and redemption rates. Current payment obligations were settled Operational risks The operational risks category describes all operational risks which could result in a case of loss for the institute. Operational risks are identified at least once a year and evaluated according to the possibilities for risk reduction in view of the potential associated loss and likelihood of occurrence. In the context of the evaluation of individual operational risks, the limitation of the potential loss (e.g. by taking out corresponding insurance) or the reduction of the likelihood of occurrence (e.g. by implementing appropriate measures) are taken into account accordingly. If operational risks with high potential losses are identified, these risks are considered in more detail even if their likelihood of occurrence is limited. The product of the likelihood of occurrence and the corresponding potential loss is the risk capital required for the individual operational risk. The risk capital required for the 30

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T operational risks corresponds to the sum of the individual risks without taking into account any risk-reducing correlations. Following the identification and evaluation of the individual risks, the operational risks category was allocated 2.5% of the total risk capital available. Appropriate monitoring instruments have been defined for the supervision and identification of operational risks. Operational risks essentially include IT risks, staff risks and risks stemming from internal and external business operations. IT risks IT risks relate to the availability, efficiency and reliability of the IT system. They also include IT administration risks, IT / software licence risks and risks of external hacker attacks and viruses which can affect internal and external business operations. In order to limit these risks, emergency concepts have been developed, back-up systems created and IT availability guaranteed by agreeing on response times with system suppliers. In order to prevent external hacker attacks and viruses, the operating systems are protected by multi-layered firewall architecture and a so-called demilitarised zone. The IT administration risks are limited thanks to reliable employees (including their substitutes). IT / software licence risks are limited by continual updating and appropriate licence administration. The measures applied are verified on a regular basis by including IT/EDP processes in the internal audit. Staff risks The individual risks included in the staff risks category are the absence of staff, lack of staff, recruitment, commitment of employees and the implementation skills of internal and external business operations. VEM has implemented various measures in order to limit staff risks. They include appropriate substitution regulations, the establishment of sufficient numbers of qualified employees and the regular training and education of employees. Risks relating to business operations Various internal and external influences and associated risks can affect the regular execution of business operations. Internal influencing factors include the possible theft, manipulation or misuse of internal information. The risk of the disruption of business operations is limited by appropriate means such as data protection, partial data accessibility and the verification of employee reliability. External influencing factors include break-ins, theft, vandalism and natural and unnatural catastrophies. The possible consequences of the disruption of business operations by external influencing factors are limited by precautionary measures, emergency plans and financially by means of appropriate insurance. Significant cases of loss relating to operational risks are immediately analysed to determine their causes and corresponding risk reduction measures are implemented as far as possible. No major cases of loss occurred during the reporting period. 31

Other risks The Others risks category essentially includes legal, reputation and strategic risks, as strategic and reputation risks according to figure 644 of the Basel Accord are not included under operational risks. In addition to the operational risks, other risks are also identified at least once a year and evaluated according to the possibility of risk reduction in view of the potential associated loss and likelihood of occurrence. The risk capital required for other risks corresponds to the sum of the values determined for the risk capital required for the individual risks. Following the identification and evaluation of the individual risks, the Other risks category was allocated 2.5% of the total risk capital available. Legal risks Legal risks concern in particular the risks relating to the enforcement of contractual claims and the application of assets and liabilities procedures for enforcing or defending such claims, as well as liability risks - particularly the risks relating to liability for statements made in the prospectus. VEM employs several fully qualified lawyers in the context of the issue business and supports a legal department with the aim of reducing legal risks by taking risk-prevention action to reduce and where possible prevent the occurrence of events of loss. Possible risk-prevention action includes in particular the careful processing of projects and contracts by qualified employees, by appropriate liability exclusions and risk information in the conclusion of business and contracts whenever possible or essential. By appropriate levels of due diligence relating to the legal and economic situation of the issuers and the involvement of experienced lawyers / auditors in the establishment of the prospectus, the risks relating to liability for statements made in the prospectus are kept at a level which is manageable for the bank. Insurance policies have been taken out wherever possible to cover the financial consequences of liability risks and financial losses. VEM is a member of the German compensatory fund of securities trading companies (EdW), which is financed in the proportionate contribution procedure. The compensation case of Phoenix Kapitaldienst GmbH is currently being dealt with by EdW. On the basis of a bankruptcy plan, an amicable clarification of open legal questions is to be provided, particularly relating to the extent to which investor receivables can be determined. The possible compensation benefits of EdW are dependent on this and on the extent of the bankruptcy estate. Possible compensation benefits of approximately 200 million euros have been identified in public. This corresponds to approximately 50 times the annual contribution to EdW. VEM might face special contributions of approximately 2.5 million euros as a result. The continuation of the compensation procedure is currently completely open as this event of loss calls into question the basic viability of the EdW concept and compliance with EU law. Due to this unclear situation, VEM does not yet consider it necessary to create provisions for possible special contributions. The liquidator of Baumhaus Medien AG, Frankfurt a. M. issued a complaint at the end of 2005 against Janosch film & medien AG in connection with a transfer of rights completed in 2001. The scope of the rights involved is of little importance but the amount in dispute is considerable. We are optimistic about the possibility of dismissing the complaint. If the complaint were to be accepted contrary to this estimation, the costs incurred would weight heavily on the company s liquidity. According to German copyright, it is possible for an author to cancel the granting of rights of use for future 32

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T works or to reclaim rights if they are not exercised. On the basis of the contractual situation and the works already created by Mr Janosch and comprehensively exploited by the Janosch group, we nevertheless estimate the associated financial risk to be low. appropriate to the level of risk. VEM is therefore standing by the approved price policy and will continue to strive to enhance the attractiveness of its own offers in order to comply with quality expectations and be considered in the market as a high-quality provider. This can also result in mandates being issued to other banks. Reputation risks Our activity as a designated sponsor is characterised by In accompanying initial public offerings each bank is the obligation to present continuous quotes in Xetra faced with a reputation risk. An unsuccessful initial public on the basis of which other market players can trade. offering can be detrimental for the issuing bank as public The market maker s risk in terms of organising profitable opinion relates price losses to the bank s service. Even if trading for his own account is increased in markets which this criticism is often unfounded, public opinion may nevertheless be negative and this can make the attainment maker s risk is generally compensated for by the so-called only move in one direction over a long period. The market of future mandates difficult. spread (margin). However, Deutsche Börse sets the maximum spread which represents a risk for the designated sponsor. The low-liquidity and extremely news-orientated Strategic risks trade in second-line stocks represents a particular risk if Strategic risks mainly relate to the risk that the bank s the designated sponsor is not able to determine the opposite side of his item. management fails to recognise significant market and competition trends in time or evaluates the latter incorrectly. Strategic decisions based on incorrect evaluations This can result in trade losses. can subsequently prove unfavourable for the bank s development. For this reason, the management is continually context of issues, the accompanying bank is often faced If the investment volume is not fully invested in the observing the market and the position of VEM in this with sales pressure in its function as designated sponsor. environment. The bank s business strategy is verified on a This can lead to an increased risk in trade which must be regular basis and adjusted where necessary to changing taken into account and monitored in the consideration of framework conditions. market price risks. Increased pressure from competition has been identified over the past 18 months following the entry of new market players proposing special offers. Attempts to compete with such offers would, in our opinion, probably fail and result in the medium term in existing customers demanding the adaptation of their conditions to the special offer for new customers. This concerns both the field of designated sponsoring and the issue business. A highquality service can only be provided with remuneration 33

Organisational and legal basis The share capital of VEM Aktienbank AG amounts to EUR 9,675,000.00, divided into 9,675,000 no-par bearer shares. The families of the board of directors members Andreas Beyer and Erich Pfaffenberger together hold a total of 30.0% of the company s shares directly and indirectly. The Beyer family holds 17.5% and the Pfaffenberger family 12.5%. The shareholders listed below have the joint right to delegate one third of the number of supervisory board members determined according to the company bylaws to the supervisory board at their discretion: Mr Andreas Beyer, Stöckelhuber Treuhandgesellschaft mit beschränkter Haftung, Steuerberatungsgesellschaft, Mr Klaus Schneider, Ms Christine Schneider, Mr Erich Pfaffenberger, Ms Annette Pfaffenberger, Ms Barbara Tulach. The board of directors is authorised to increase the share capital in one or several turns with the approval of the supervisory board until 23 August 2011 by issuing new ordinary shares in the form of non-par shares in return for cash and / or non-cash capital contributions by a maximum of 4,837,500.00 euros (2006 authorised capital). The board of directors is authorised to decide upon the exclusion of shareholders from the subscription right with the agreement of the supervisory board. The subscription right can be excluded in particular in the following cases: to exclude peak amounts from the shareholders subscription right, in the case of capital increases in return for non-cash capital contributions, particularly in the form of firms and parts of firms or other assets, in the case of capital increases in return for cash ca pital contributions if the share amount advanced is not significantly lower than the market price and the shares issued excluding the subscription right do not exceed a total of 10% of the share capital, The delegation right is exercised according to a joint declaration to the company, represented by the board of directors. The shareholders authorised for delegation have the right to appoint a representative for the company who exercises the delegation right for them. If the above-mentioned shareholders contribute their shares to a company, the delegation right will be transferred to this company. to issue employee shares to employees of the compa ny and its associated firms to grant holders of convertible bonds and / or covered warrants issued by the company a subscription right for new shares within the scope they would be entitled to after the exercising of their conversion or option right, but only insofar as the shares have not already been granted on the basis of conditional capital. 34

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T The share capital has been conditionally increased by up to EUR 1,935,000.00 euros in up to 1,935,000 no-par bearer shares (2006 conditional capital). The conditional capital increase is only completed to the extent to which the holders of convertible bonds and / or covered warrants issued by the company or its direct or indirect subsidiaries on the basis of the authorisation decision of the general meeting of 23 August 2006 in return for cash make use of their conversion or option rights or holders of convertible bonds comply with their conversion obligation and provided that own shares are not used as a condition. The authorisation has been issued until the end of the next ordinary general meeting which, according to 120 para. 1 AktG (German Stock Corporation Act), is to rule on the discharge of the members of the board of directors and the supervisory board for the financial year 2006 up until 12 January 2008 at the latest. The board of directors is also authorised to acquire the company s own shares for purposes other than security trading up to a level of 10% of the company s share capital. The new shares shall participate in the profit from the The purchase price of a share (excluding secondary acquisition costs) must not exceed the daily closing price of start of the financial year in which they are created by the exercising of conversion or option rights or the fulfilment of conversion obligations. The board of directors is of VEM Aktienbank AG in XETRA trade (or a comparable the trading day preceding the purchase of no-par shares authorised to determine further details of the conditional replacement system) on the Frankfurt Stock Exchange capital increase and its execution with the approval of the by more than 10% and must not fall below this level by supervisory board. more than 10%. The board of directors is authorised to acquire and dispose of own shares of the company for the purpose of security trading. The trading portfolio of shares acquired for this purpose must not exceed 5% of the company s share capital at the end of each day. The purchase price of a share (excluding secondary acquisition costs) must not exceed the daily closing price of the trading day preceding the purchase of no-par shares of VEM Aktienbank AG in XETRA trade (or a comparable replacement system) on the Frankfurt Stock Exchange by more than 15% and must not fall below this level by more than 30%. In individual cases, an excess or deficit of up to 50% may be authorised if this is necessary to enable the company to fulfil its obligations towards third parties, particularly on the basis of its position as designated sponsor or market maker. The authorisation has been issued until the end of the next ordinary general meeting which, according to 120 para. 1 AktG (German Stock Corporation Act), is to rule on the discharge of the members of the board of directors and the supervisory board for the financial year 2006 up until 12 January 2008 at the latest. The board of directors is authorised, with the approval of the supervisory board, to dispose of own shares acquired on the basis of this or another authorisation by means other than the stock exchange or by making offers to all shareholders pro-rata to their participation in the company. This authorisation applies in particular, but is not limited to, the following cases: 35

when the shares are disposed of at a price which is not significantly lower than the market price of company shares of the same structure at the time of the disposal. In this case, the number of shares to be disposed of combined with shares issued at a similar time on the basis of an authorisation for a capital increase with a subscription right exclusion according to 186 para. 3 p. 4 AktG (German Stock Corporation Act) must not exceed the limit of 10% of the total share capital; in order to be able to offer the company s acquired own shares to third parties within the framework of business combinations or the acquisition of firms or holdings; in order to use the acquired own shares for the fulfilment of option or conversion rights or conversion obligations stemming from conversion bonds or covered warrants issued by the company. The shareholders subscription right concerning these shares is excluded in this context. The board of directors is also authorised to collect the own shares acquired on the basis of this authorisation with the agreement of the supervisory board without any further decisions by the general meeting. The board of directors of VEM Aktienbank is made up of two or more people. The supervisory board determines the number of members according to 8 of the company bylaws. The board of directors is appointed by the supervisory board for a maximum period of 5 years. The appointment and dismissal of the board of directors are determined according to the statutory provisions of 84, 85 of the German Stock Corporation Act. The general meeting must issue a decision for the amendment of the company bylaws of VEM Aktienbank according to 119 para. 1 No. 5, 179 of the German Stock Corporation Act. The supervisory board may decide upon amendments to the company bylaws according to 18 of the company bylaws which only apply to the version concerned. In addition to expenses relating to their activities, each member of the supervisory board receives fixed compensation of an annual amount of 5,000.00 euros (basic compensation) payable at the end of the financial year; the chairman receives 6,500.00 euros. From 1 January 2006 onwards, each member of the supervisory board will receive variable compensation in addition to the basic compensation. The variable compensation is dependent on the result of the company s ordinary business activities which is stated in the consolidated accounts drawn up by the company according to IAS/IFRS (International Financial Reporting Standards). For every 1,000,000.00 euros of the result declared for ordinary business activities before the deduction of the board of directors performance-related compensation and the supervisory board s variable compensation, each supervisory board member receives the amount of 1,000.00 euros. The variable compensation is payable after the approval of the consolidated accounts for the financial year concerned. If the company does not establish consolidated accounts during a financial year according to IAS/ IFRS, the supervisory board s variable compensation will be calculated for this financial year on the basis of the result of ordinary business activities which is stated in the annual statement published by the company. The variable compensation is payable in this case after the determination of the annual statement for the financial year concerned. 36

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T The company reimburses each supervisory board member the turnover tax applied to their compensation. The company takes out liability insurance (D&O insurance) for the bodies of the company, including members of the supervisory board, with appropriate insurance amounts and settles the corresponding premiums. The total compensation of the supervisory board amounted to 43,500.00 euros for the financial year 2006. They were distributed as follows between the individual members: Fixed In EUR compensation Matthias Girnth, Variable compensation Total Chairman 6,500 9,000 15,500 Olaf Posten, Deputy Chairman 5,000 9,000 14,000 Dr. Alfred Krammer 5,000 9,000 14,000 Total 16,500 27,000 43,500 The board of directors total compensation for the financial year 2006 amounted to 1,946,000 euros. This included performance-related elements amounting to 1,670,000 euros. The company s general meeting of 23 August 2006 decided that the individualised statements of the board of directors compensation will not be disclosed for the period from 2006 to 2010 Events after the balance sheet date On 28 March 2007 (initial consolidation date) VEM Aktienbank AG acquired 94% of the land development company Am Schönberg GmbH, Augsburg. The company is involved in the preparation and development of land for the municipality of Wenzenbach. No further events of particular significance arose after the close of the financial year. Strategy Each member of the board of directors receives a basic VEM Aktienbank has been positioned over the past four monthly salary which is payable at the end of each month years as one of the leading issuing banks with an emphasis on listed medium-sized businesses. The business model after the application of statutory deductions. Each member also receives additional benefits, notably in the form is characterised by the fact that VEM Aktienbank is able of the use of company cars, insurance and other financial to supervise issuers in all areas. One of the main aims in advantages. this context is to establish contact with a large number of firms in order to work with continuous orders. Our second Each member of the board of directors also receives main pillar, designated sponsoring, supplements the issue variable (performance-related) compensation. The variable business as a secondary area of business. Both businesses compensation depends on the result of the company s are profitable. ordinary business activities which is stated in the consolidated accounts drawn up by the company according to With our capital procurement measures and retained IAS/IFRS (International Financial Reporting Standards). earnings, we have established equity which forms the essential basis for our activity and makes the current scope of our business possible. Within the framework of capital investments taking the required liquidity into account, our aim is to identify investment possibilities which enable us to be slightly more independent from stock exchange 37

developments. Our investments in EquityStory AG and Janosch film & medien AG stem from this strategy. At the beginning of the previous financial year, we established cooperation with directa S.I.M.p.a., one of the leading Italian online brokers. The Xetra orders of directa s customers are passed on via VEM Aktienbank to the Xetra system of Deutsche Börse. Volumes have developed along positive lines. We are predicting a limited contribution to the operating income from this cooperation this year. With the establishment of a branch in London, we are extending our placement power through new, high-quality investors whom we supervise locally. We offer our issuers direct access to the leading financial market in Europe and obtain new investor circles for them. We consider our presence in London to be a major competitive advantage over our competitors. The costs incurred by our London office with its two employees are manageable. We currently possess an excellent placement infrastructure which we look forward to optimising in the future by dealing with increased issue volumes. During the past year, the general meeting agreed to an extension of the business aim to that of a full-service bank. We have already completed preliminary work and are working on a number of different bank systems. Our intention this year is to propose the attainment of the full-service bank status to BaFin (German Federal Financial Supervisory Authority). This should not alter the nature of our bank. However, we would also manage accounts for our issuers, implement interim financing and receive an interest margin. The growing economies in the Far East are becoming increasingly important for the stock exchange. The rapidly growing Chinese market is particularly attractive. At the beginning of 2007, VEM Aktienbank gained a 5% holding in the listed Corporate Finance Boutique Orchid Capital based in West Perth, Australia in order to gain access to the Chinese IPO market. The first project is already being implemented. The VEM subsidiary TradeCross has therefore been commissioned to complete the first direct listing of a Chinese company, the machine manufacturer Gongyou. This initial public offering is marked by a high level of public interest in this transaction. We are confident that this plan will be successful and are planning subsequent projects. Outlook The positive overall economic framework data and healthy economic outlook for the near future continue to set a positive mood on the stock exchange. The price development in third-line Small Caps stocks was significantly behind that of Blue Chips, but positive company developments could boost these prices. However, our business is affected not only by price developments but also by exchange transactions in second-line stocks. We anticipate that increasing prices will lead to a significantly higher liquidity in trade which will support our placement business as well as designated sponsoring. The issue business will be increasingly dominated by supply and we are therefore anticipating a further increase in the number of stock exchange candidates. As was the case last year, we are predicting more than 100 initial public offerings including listings on German stock exchanges. The past year clearly revealed that especially companies with a capital market affinity have entered the stock exchange market. These include companies which have been financed by private equity companies or Business Angels with stock exchange connections. Traditional German medium-sized businesses have not yet discovered the stock exchange and its financing possibilities. We 38

M A N A G M E N T Consolidated annual report for the financial year 2006 R E P O R T shall attempt to identify new candidates in this field and introduce them to the stock exchange. We would like to confirm our forecast from the last year when we estimated that a few hundred initial public offerings per year were possible. 2006 marked the start of a new issue market. Initial public offerings will take place essentially in the open market and issuers wishing to define themselves positively will apply for additional trading in the Entry Standard. We intend to maintain and develop our strong market position in this issue market. We accompanied several issues last year with volumes in excess of 20 million euros. We would like to develop in this field in the future. In this context, we are also planning to extend our placement activities by offering our placement services to other banks. Our forecast for 2007 as a whole is extremely positive. The attainment of our strategic aims will be characterised by development activities which could temporarily be detrimental to income. We are nevertheless confident that the VEM group is an extremely efficient banking and finance group which holds an excellent position in the Small Cap market and is able to become even stronger in the future. Our aim for 2007 is to generative a healthy total operating income as was the case last year. The same applies to the following year. Our equity return is the success indicator that we use as a reference for our business activities. The equity return of VEM Aktienbank should be above the average level recorded by German banks. The activities which are being implemented or planned within the Janosch group should make it possible to increase and develop exploitation proceeds over the coming years. The forecast turnovers, which form a basis for the evaluation of the Janosch rights, are the subject of assumptions naturally marked by uncertainty as to their attainment in term of time and level. Because of the strong dependency of the Janosch group on merchandising proceeds, this is particularly applicable for this field. The extensive corporate actions and associated reduction of liabilities and payment obligations during the previous financial year will result in a considerable reduction of the interest burden and liquidity problems this year and in subsequent years and therefore in a significant improvement in the subgroup s balance sheet. The start of the current financial year was once again positive. Ordinary business activities generated a result of 0.8 million euros in the first two months. 39

VEM Aktienbank AG Consolidated accounts (IFRS) on 31 December 2006 Assets 31 December 31 December 2006 2005 Variation Note(s) EUR 000 EUR 000 EUR 000 in % Cash reserves (29) 6 5 1 20% Receivables from credit institutes (13) (30) 37,175 22,855 14,320 63% Receivables from credit institutes (13) (31) 2,819 1,678 1,141 68% Provision for risks (14) (32) -222-93 -129 139% Trading assets (15) (33) 14,651 14,801-150 -1% Financial assets (16) (34) 3,581 1,953 1,628 83% Tangible assets (17) (35) 294 247 47 19% Intangible assets (18) (36) 7,728 45 7,683 17,073% Income tax assets (24) (37) 1,904 0 1,904 Sonstige Aktiva (19) (38) 2,452 3,881-1,429-37% Total assets 70,388 45,372 25,016 55% 40

F I N A N C I A L Group D ATA Liabilities 31 December 31 December 2006 2005 Variation Note(s) EUR 000 EUR 000 EUR 000 in % Liabilities with credit institutes (20) (39) 6,586 3,228 3,358 104% Customers liabilities (20) (40) 24,149 6,902 17,247 250% Trading liabilities (21) (41) 2,727 3,878-1,151-30% Provisions (22) (42) 478 0 478 Income tax liabilities (24) (43) 664 3,891-3,227-83% Other liabilities (23) (44) 3,813 1,796 2,017 112% Equity (45) (46) 31,971 25,677 6,294 25% VEM shareholder equity 30,994 25,677 5,317 21% Subscribed capital 9,675 3,870 5,805 150% Capital reserves 3,041 9,631-6,590-68% Retained earnings 10,576 3,866 6,710 174% Group profit 7,702 8,310-608 -7% Minority interests 977 0 977 Total liabilities 70,388 45,372 25,016 55% 41

VEM Aktienbank AG Group profit and loss account (IFRS) for the period from 1 January to 31 December 2006 Profit and loss account 1 Jan 31 Dec 1 Jan 31 Dec Variation 2006 2005 Note(s) EUR 000 EUR 000 EUR 000 in % 1. Interest income (48) 344 383-39 -10% 2. Commissions income (49) 10,702 9,101 1,601 18% 3. Trading result (50) 2,847 9,343-6,496-70% 4. Financial investments result (51) 470 233 237 102% 5. Administrative expenditure (52) -6,618-4,831-1,787 37% 6. Write-downs and allowances for intangible and tangible assets (53) -3,969-71 -3,898 5,490% 7. Other operating income (54) 7,675 178 7,497 4,212% 8. Other operating expenditure (55) -2,098 0-2,098 9. Provision for risks (57) -109-57 -52 91% 10. Result from ordinary business activities 9,244 14,279-5,035-35% 11. Income tax on the result of ordinary business activities (58) -3,118-5,531 2,413-44% 12. Annual surplus 6,126 8,748-2,622-30% 13. Results of minority interests -234 0-234 14. Annual surplus after minority interests 5,892 8,748-2,856-33% Number of shares (average) (59) 9,607,895 8,884,143 Undiluted earnings per share (EUR) (59) 0.61 0.98 42

Retained earnings Equity Minority Group Capital Subscribed Total interests VEM share holder profit capital In EUR 000 equity Stand 01.01.2005 2,750 1,167 583 1,101 15 1,699 1,734 7,350 7,350 Additions from capital 185 1,147 1,332 1,332 increases against cash contribution Additions from capital 265 2,517 2,782 2,782 increases against cash contribution Transfer of group profit to retained earnings 2,172 2,172-2,172 Capital increase from F I N A N C I A L Group D ATA company resources 320-320 Additions from capital 350 5,985 6,335 6,335 increases against cash contribution Acquisition/disposal of own shares -865-865 -865 Release of revaluation reserves -5-5 -5-5 Annual surplus 8,748 8,748 8,748 3,870 9,631 2,755 1,101 10 3,866 8,310 25,677 25,677 Status 31 Dec 2005/ 1 Jan 2006 Transfer of group profit to retained earnings 6,432 6,432-6,432 Capital increase from company resources 5,805-5,805 Acquisition/disposal of own shares -785-785 -785 Changes in consolidated group -68-68 743 675 Additions to revaluation reserves 278 278 278 278 Annual surplus 5,892 5,892 234 6,126 Status 31 Dec 2006 9,675 3,041 9,187 1,101 288 10,576 7,702 30,994 977 31,971 VEM Aktienbank AG Development of consolidated equity 2006 First application Revaluation Total reserves Other 43

VEM Aktienbank AG Cash flow statement 2006 Cash flow statement 2006 2005 EUR 000 EUR 000 1. Annual surplus 5.892 8.748 2. Write-downs, allowances and write-ups for receivables, tangible assets and securities of fixed assets 4,012-2 3. Other non-cash affecting expenditure / income Expenditure for taxes on income 3,145 5,531 Other -471-79 4. Profit/loss from disposal of tangible assets and securities of fixed assets 1-2 5. Other adjustments (balance) 0 0 6. = Subtotal 12,579 14,196 7. Customer receivables -670-972 8. Trading assets 150-10,584 9. Other assets from ordinary business activities 1,691-970 10. Liabilities With credit institutes -4,176 3,228 With customers 17,247 3,494 11. Certified liabilities 0-1,000 12. Trading liabilities -1,151 1,189 13. Other liabilities from ordinary business activities -1,748 847 14. Payments of taxes on income -7,919-1,696 15. = Cash flow from ordinary business activities 16,003 7,732 16. Payments received from outflows of Financial assets 57 166 17. Payments made for investments in Financial assets -1,071-1,510 Tangible assets -172-113 Intangible assets -1-30 18. Inflows from acquisition of consolidated firms and other business units 290-336 19. Change in cash and cash equivalents from other investment activities 0 0 20. = Cash flow from investment activities -897-1,823 21. Payments received from capital increases 0 10,449 22. Change in cash and cash equivalents from other financing activities -785-865 23. = Cash flow from financing activities -785 9,584 24. Change in cash and cash equivalents with cash effects (total of 15, 20, 23) 14,321 15,493 25. Cash and cash equivalents at start of period 22,860 7,367 26. = Cash and cash equivalents at end of period 37,181 22,860 44

F I N A N C I A L Group D ATA VEM Aktienbank AG Segment information 2006 Segment reporting financial year 2006 Trading/ Designated Sponsoring Issue business Exploitation through media Other/ Consolidation Group EUR 000 EUR 000 EUR 000 EUR 000 EUR 000 Segment income 4,511 9,101 7,115 1,311 22,038 Results from ordinary business activities 1,606 6,042 810 786 9,244 Segment assets 28,352 7,431 9,874 24,731 70,388 Segment liabilities 17,541 13,541 6,119 1,216 38,417 Additional details on segments subject to reporting: Investments in tangible and intangible assets during reporting period 88 84 11,528 Scheduled write-downs of segment assets 82 63 581 Other expenditure with no cash effects 990 596 3,243 Segment reporting financial year 2005 Trading/ Designated Sponsoring Issue business Exploitation through media Other/ Consolidation Group EUR 000 EUR 000 EUR 000 EUR 000 EUR 000 Segment income 10,258 8,247 0 733 19,238 Results from ordinary business activities 7,389 6,390 0 500 14,279 Segment assets 9,063 5,420 0 30,889 45,372 Segment liabilities 1,648 10,418 0 7,629 19,695 Additional details on segments subject to reporting: Investments in tangible and intangible assets during reporting period 98 45 0 Scheduled write-down of segment assets 44 28 0 Other expenditure with no cash effects 553 202 0 45

Notes to the consolidated accounts 2006 General details (1) Details on the firm VEM Aktienbank AG is a public company whose head offices are in 80331 Munich, Rosental 5, registered in Germany in the trade register of the district court of Munich under number HRB124255. The purpose of the firm is: The acquisition and disposal of financial instruments on its own behalf and for the account of third parties (financial commission business), the acceptance of financial instruments at its own risk for placement or acceptance of guarantees of the same value (issue business), the intermediation of business through the acquisition and disposal of financial instruments or their evidence (investment agent), the acquisition and disposal of financial instruments on behalf and for the account of third parties (acquisition agent), the administration of individual assets invested in financial instruments for third parties with a scope of decision-making (financial portfolio administration), the acquisition and disposal of financial instruments in the context of proprietary trading for third parties (proprietary trading) and the provision of all kinds of services relating to securities. Transactions requiring authorisation according to the German Banking Act (KWG) other than those referred to in 1 para. 1 p. 2 No. 4, 10, para. 1a p. 2 No. 1, 2, 3, 4 KWG may not be carried out. The firm is also involved in the field of electronic data processing: the provision of all kinds of services in the EDP sector, the purchase and sale of hardware and software, the provision of services on and for the Internet, particularly the sale of advertising space on the Internet, the structuring of Internet presence and the associated consultancy, the operation of a technical Internet platform, the provision of financial and economic services, particularly the provision of information on the Internet, the organisation and creation of advertising space and Internet marketing as well as media planning, the placement and activation of all kinds of advertisements in online, print and other media and the placement and activation of airtime, particularly on the radio and television. The acquisition, maintaining, administration and sale of majority and minority holdings in firms and firms with a similar aim and trading with these holdings and firms. (2) ) Consolidated accounts according to IFRS The consolidated accounts on 31 December 2006 of VEM Aktienbank AG were drawn up according to the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) as applicable in the EU. The IFRS also include the International Accounting Standards (IAS) still valid and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) formerly the Standing Interpretations Committee (SIC). The consolidated accounts and the accounts of the firms included in the consolidated accounts were drawn up on 31 December 2006 and audited by the auditing company Ernst & Young AG and Ebner, Stolz, Mönning GmbH. The financial 46

N O T E S Notes to the consolidated accounts 2006 year corresponds to the calendar year. The reporting currency is the Euro and all amounts are given in thousands of Euros (Euro 000) unless stated otherwise. Various items on the balance sheet and profit and loss account are summarised in order to enhance clarity. These items are presented separately and explained in the notes to the consolidated accounts. The consolidated accounts drawn up according to the IFRS on 31 December 2006 have a discharging effect according to 315a of the German Commercial Code HGB. The consolidated annual report fulfils the requirements of 315 paras. 1 and 2 HGB (German Commercial Code) and contains the consolidated risk report according to 315 HGB and IAS 32. (3) Applicable provisions The following IFRS/IAS were taken into account in the establishment of the consolidated accounts on 31 December 2006: IFRS 3 Business combinations IAS 1 Presentation of financial statements IAS 7 Cash flow statement IAS 8 Accounting policies, changes of estimates and fundamental errors IAS 10 Events after the balance sheet date IAS 11 Construction contracts IAS 12 Income taxes IAS 14 Segment reporting IAS 16 Tangible assets (property, plant and equipment) IAS 17 Leases IAS 18 Income IAS 19 Employee benefits IAS 20 Accounting for government grants and disclosure of government assistance IAS 21 Effects of changes in foreign exchange rates IAS 24 Related Party Disclosures IAS 27 Consolidated financial statements and accounting for investments in subsidiaries according to IFRS IAS 28 Accounting for investments in associates IAS 30 Disclosures in the financial statements of banks and similar institutions IAS 32 Financial instruments: disclosure and presentation IAS 33 Earnings per share IAS 36 Impairment of assets IAS 37 Provisions, contingent liabilities and contingent assets IAS 38 Intangible assets IAS 39 Financial instruments: recognition and measurement 47

(4) Published, not yet binding applicable standards and interpretations which have not been applied in advance The recently published or revised standards and interpretations referred to below, whose application is only compulsory after the end of the financial year 2006, have not been and are not applied in advance. IFRS 7 Financial instruments: Disclosures must be applied to the financial years which begin on or after 1 January 2007 and will replace IAS 30 completely and IAS 32 partially. Amendments will be necessary to the structure of the profit and loss account, the balance sheet and notes. The amendment to IAS 1 (IAS 1.124A-124C Capital disclosures ) published in August 2005 contains details on capital management for the financial years which begin on or after 1 January 2007. IFRS 8 Operating segments will replace IAS14 Segment reporting and must be applied for financial years which begin on or after 1 January 2009. The effects of this standard cannot be judged conclusively at present. We are not anticipating any major effects from the interpretations of IFRIC 7 to IFRIC 12 published in 2006. 48

N O T E S Notes to the consolidated accounts 2006 Accounting and valuation policies (5) Standard accounting within the group The individual financial statements of the firms included in the consolidated accounts are drawn up according to IAS 27 on the basis of the standard balancing and evaluation policies. (6) Consistency The accounting and valuation policies have been continually applied according to IAS 1. No amendments have been made compared with the previous year. (7) Discretionary decisions, assumptions and estimates Accounting and valuation according to IFRS call for discretionary decisions, assumptions and estimates for certain balance sheet items which affect the recognition and measurement in the balance sheet and profit and loss account. They are carried out according to the applicable standard on the basis of the most recent reliable information available, historical experiences and expectations with regard to future events which appear reasonable in the given circumstances. The actual amounts obtained may differ from these estimates. Assumptions and estimates are required in particular in the following cases: in the purchase price assessment and determination of goodwill in the context of acquisitions, in the assessment of the need to recognize and the measurement of impairment losses relating to intangible assets and tangible assets in the assessment of the recoverability of deferred tax assets. An impairment test is carried out annually on intangible assets on the basis of income planning covering several years and based on the assumption of growth rates specific to the business sector for the subsequent period. Any changes in these key factors may possibly result in higher or lower impairment losses being recognized. The recognition and the measurement of Other provisions are based on the assessment of the probability of an outflow of resources, and on past experience and circumstances known at the balance sheet date. The actual outflow of resources may therefore differ from the figure included in Other provisions. Deferred tax assets are entered in the accounts on the basis of the estimate concerning the future recoverability of tax advantages, i.e. when there is sufficient tax income. The actual tax situation in future periods may differ from the assessment made at the date the deferred tax assets are recognized. 49

(8) Consolidated group The consolidated accounts include VEM Aktienbank AG as the parent company and TradeCross AG, Janosch film & medien AG and Papa Löwe Filmproduktion GmbH as fully-consolidated firms. Financial.de AG is assessed as an associated firm according to las 28 on the basis of the at-equity method. In EUR 000 Holding share Fully consolidated firms: TradeCross AG, Munich 100 % Janosch Film & Medien AG, Berlin 75 % Papa Löwe Filmproduktion GmbH, Munich 85 % Associated firms: financial.de AG, Friedberg 25 % On 31 March 2006 (initial consolidation date), VEM Aktienbank AG acquired a 69.27% share in Janosch film & medien AG. VEM thus possessed 69.41% of the company at that point in time, including previous acquisitions. The share purchase price amounted to 347,000 euros. According to the assessment of assets and liabilities and the recognition of deferred tax assets on the basis of existing accrued deficits used for tax purposes, a negative difference of 289,000 euros was recorded and entered in the consolidated profit and loss account under the financial investments result. Within the framework of corporate actions of Janosch film & medien AG, VEM increased its share to 75.6% in December 2006. This led to a further negative difference of 66,000 euros creating a total negative difference of 355,000 euros. The Janosch film & medien AG possesses proprietary claims to proceeds and partial rights of use in the entire works of the painter, graphic artist and author Janosch and generates income from the use of these rights and claims. Janosch is one of the best-known authors of children s books in Germany and has received numerous international awards for around 300 children s books. Janosch film & medien AG has an 85% holding in Papa Löwe Filmproduktion GmbH. The company produces films and television series on the basis of the Janosch characters. The first Janosch film for cinema Oh wie schön ist Panama, a joint production with the Warner Bros. Hollywood studio, was launched in September 2006. The consolidated result includes a proportionate result of the Janosch subgroup before minority interests amounting to 854,000 euros. If the acquisition of the Janosch group had been completed on 1 January 2006, the total operating income of the VEM group would have amounted to 19,516,000 euros and the consolidated result before minority interests would have been at 6,052,000 euros. On 28 March 2007 (initial consolidation date) VEM Aktienbank AG acquired 94% of the land development company Am Schönberg GmbH, Augsburg. The company is involved in the preparation and development of land for the mu- 50

N O T E S Notes to the consolidated accounts 2006 nicipality of Wenzenbach. At the time of presentation of the consolidated accounts to the supervisory board, no interim financial statements were in existence within the company which would have allowed for the determination of reliable details on the book values used or interim results which could also affect the purchase price. (9) Consolidation principles The capital consolidation is carried out according to the purchase method. This involves offsetting the acquisition costs of an associated firm with the proportionate equity at the time of the acquisition. In order to determine the equity, the assets and liabilities of the acquired firm are assessed at their fair value on the acquisition date. A positive difference between the higher acquisition costs for the acquired firm and the proportionate equity is entered as a business value or goodwill in the balance sheet under intangible assets. This business value or goodwill is only written down in extraordinary circumstances in accordance with las 36 (impairment-only approach). The impairment test is to be carried out once a year. A negative difference is immediately entered as proceeds. An acquired firm is included in the consolidated group from the date on which the group actually takes over control. A firm leaves the consolidated group in the event of a sale, a specific disposal plan or if VEM Aktienbank AG no longer exerces a controlling influence. The initial consolidation is carried out on the acquisition date; expenditure and income in the profit and loss account are subsequently and proportionately incorporated in the consolidated accounts after the initial consolidation date. Receivables and liabilities as well as income and expenditure between firms which are included in the consolidated accounts are settled within the framework of the consolidation of debts or the consolidation of income and expenditure; interim results recorded within the group are eliminated. (10) Currency conversion Business transactions in foreign currencies are converted at the rate in force on the transaction date. Monetary assets and liabilities in foreign currencies are converted at the rate in force on the balance sheet date. (11) Financial instruments A financial instrument according to IAS 32 is a contract which results in a financial asset for one firm and a financial liability or equity instrument for another at the same time. On the date of receipt, all financial instruments are to be allocated to a category which is significant for the subsequent valuation. 51

Financial assets and liabilities within the VEM group are currently entered on the trading date and are divided between the following categories: Trading assets and trading liabilities This category includes financial instruments and derivative financial instruments which have been acquired with a shortterm disposal intention or sold with a short-term buy-back intention and are therefore classified as being for trading purposes. They are accounted for on the acquisition date at their acquisition cost and subsequently at their fair value. Profits and losses stemming from the assessment are entered under the income-affecting trading result in the profit and loss account along with actual profits and losses. Listed and non-listed shares included under trading assets stemming from capital increases which have not yet been transferred to the subscriber are entered at their acquisition costs corresponding to the fair value. Receivables This category includes non-derivative financial instruments with fixed or definable payments which are not listed on an active market and have not been acquired with a short-term re-disposal intention. They are entered in the accounts at their acquisition cost. Available-for-Sale This category includes all other non-derivative financial instruments which cannot be allocated to any of the other categories. This essentially concerns fixed-rate securities, shares and investments referred to under financial assets. They are accounted for on the acquisition date at their acquisition cost and subsequently at their fair value. The assessment result is entered under a separate equity item which does not affect net income (revaluation reserve). In the event of the disposal or dissolution of an available-for-sale portfolio, the corresponding share of the revaluation reserve is released and entered in the profit and loss account. Other financial liabilities This category includes all other financial liabilities which are not included in the trading liabilities category. This includes in particular liabilities with credit institutes and customers, tax liabilities and liabilities in the staff sector. They are entered in the accounts at their acquisition cost carried forward. (12) Fair value of financial instruments The fair values of all the financial instruments of VEM Aktienbank AG entered in the consolidated accounts according to IFRS for 2005 and 2006 correspond to the stated book values. This concerns the items Cash reserves, Receivables from credit institutes, Customer receivables, Trading assets, Financial assets, Other assets, Liabilities with credit institutes, Customer liabilities, Certified liabilities, Trading liabilities and Other liabilities. 52

N O T E S Notes to the consolidated accounts 2006 (13) Receivables Receivables from credit institutes and customer receivables are entered at their nominal amount. Identifiable individual risks are accounted for by means of appropriate allowances. Receivables from credit institutes also include interest accrued from these receivables. (14) Allowances (provision for risks in the credit business) The deferred provision for risks of receivables include all losses and other provisions for receivables which are subject to recognisable risks. Adequate provisions for these risks are established according to the principles of commercial prudence. The judgement of the extent to which the agreed payments are actually provided represents a decisive criterion for the valuation. (15) Trading assets The trading assets include securities of the trading portfolio. Trading assets are essentially evaluated at their fair value with the exception of listed and non-listed shares stemming from capital increases which have not yet been transferred to the subscriber. These are entered at their acquisition cost. All realised and non-realised profits and losses generated in the context of trading assets are entered under the trading result in the profit and loss account. (16) Financial assets Financial assets are entered in the accounts at their acquisition cost and in the subsequent assessment at their fair value. They are written down to the lower fair value in the event of anticipated impairment losses. The discounted expected future payment inflows are used to determine the fair value. Write-ups are applied in the absence of grounds for impairment. Interest income and allowances as well as write-ups are entered in the financial investments results. Holdings in financial.de AG valuated according to the at-equity method are also entered under financial assets. The writeups and write-downs occurring in carrying-forward the holding s book value which corresponds to the proportionate equity of the participating firm are entered under the financial investments result. (17) Tangible assets Tangible assets are entered in the accounts at their carried-forward acquisition cost, reduced by scheduled straight-line write-downs corresponding to the expected useful life. The write-down period for tangible assets corresponds to the predicted useful life within the firm, which may be shorter than the economic useful life and is between three and ten years. In the event of expected impairments, impairment losses are introduced. In the absence of grounds for impairments, write-ups corresponding to the maximum level of carried-forward acquisition costs will be introduced. Write-downs of 53

tangible assets are accounted for in general administrative expenditure. The acquisition of tangible assets of low item-value, for reasons of materiality, is entered under administrative expenditure with an effect on the profit during the year of acquisition. (18) Intangible assets Intangible assets include rights, particularly rights of use and proprietary claims for proceeds, and to a lesser extent software. They are accounted for at acquisition or construction costs carried forward and reduced by scheduled straightline write-downs. The underlying useful life for rights corresponds to between 10 (rights of use) and 50 years (claims for proceeds / development rights) and for software between two and three years. The remaining useful life on the balance sheet date is 5-15 years for rights of use and 44 years for claims for proceeds. The valuations of rights and write-down methods are verified at least once a year. In the context of the application of the Impairment Test according to IAS 36, the book value is set against the attainable proceeds. The attainable amount is the higher of the two amounts out of the net disposal price and the value of use of an asset. The value of use is the cash value of the estimated future cash flow. When determining the value of use, the forecasts are based on reliable, defensible assumptions (best estimates). The interest rate used to determine the cash value is 14.5%. Scheduled write-downs and impairments are entered under write-downs and allowances for tangible and intangible assets. (19) Other assets Other assets essentially include delivery claims for shares from corporate actions if they are not entered in the trade register and other delivery claims for securities and other assets. They are entered in the accounts at their acquisition cost as carried forward. (20) Liabilities Liabilities are evaluated at their redemption or nominal amount. Liabilities with credit institutes include a bank loan taken out by Janosch film & medien AG to finance Janosch rights, share delivery liabilities stemming from subscriptions by credit institutes for issues accompanied by us in the context of capital increases, liabilities relating to commissions and a current account. (21) Trading liabilities Trading liabilities include delivery obligations from short sales of securities, insofar as they serve trading purposes, negative fair values of derivative trade instruments and early deliveries of issues backed by securities lending. Trading liabilities are basically accounted for at their fair value. This does not apply to early deliveries of issues which are set against delivery 54

N O T E S Notes to the consolidated accounts 2006 claims towards issuers. They are entered at the issue price which corresponds to the fair value. All realised and non-realised profits and losses occurring in the context of trading liabilities are entered under the trading result in the profit and loss account. (22) Provisions Provisions are entered in accordance with IAS 37 for liabilities whose amounts and due dates are uncertain. A provision should only be entered if the company has a current (legal or de facto) obligation due to a past event, if it is likely that an outflow of resources embodying economic benefits will be required to fulfil the obligation and a reliable estimation of the amount of the liability is possible. (23) Other liabilities In addition to liabilities from deliveries and services, income tax on wages and salaries and social security contributions, other liabilities include accrued liabilities according to IAS 37. This includes future expenditure which is uncertain in terms of amounts or due dates but whose uncertainty is less significant than in the case of provisions. Liabilities from outstanding invoices for received deliveries and services and short-term liabilities with employees stemming from holiday or commission claims are covered by this category. Accrued liabilities are entered at the amount of the expected claim. (24) Taxes on income Taxes on income are entered in the accounts according to IAS 12. Deferred taxes are determined according to the temporary concept relating to the balance sheet. According to this concept, the valuation of assets and liabilities is compared in the balance sheet with valuations that are the taxation basis of the associated company concerned. If differences in these valuations are not lasting but only result in temporary value differences, deferred tax assets or deferred tax liabilities should be taken into account in this context. The tax rates which are likely to apply at the time of the reversal of the value difference are used to calculate deferred taxes. Deferred tax assets are entered if it is likely that the future tax advantage can also be utilised. The uncertainty surrounding the future utilisation of the tax advantage is taken into account by safety deductions. Therefore only tax losses carried forward by Janosch film & medien AG are taken into account and only to an amount which is likely to be used within a period of three years. No deferred tax assets were entered for corporation tax losses carried forward amounting to 32,187,000 euros. (25) Leases A distinction is made between financial leasing and operating leasing in terms of leasing relationships according to IAS 17. A leasing relationship is classified as a financial leasing relationship when all the opportunities and risks associated with the property are essentially transferred to the lessee. By contrast, in the case of operating leasing, the opportunities and risks associated with the property are not essentially transferred to the lessee. 55

All the firms included in the consolidated accounts are lessees and the existing leasing relationships are classified as operating leasing. The leasing property is therefore not entered in the balance sheet accounts; the leasing rates are considered as rental expenditure and included under administrative expenditure. (26) Government grants and government assistance Public subsidies are granted to VEM in the form of film promotion resources. Film promotion loans are accrued on the liabilities side at the time of payment. Conditional redeemable loans are included under other operating income if redemption is unlikely due to the expected occurrence of condition subsequent. All the loans granted during the financial year amounting to 1,692,000 euros were considered as other operating income and entered under contingent liabilities. An outstanding payment amounting to 165,000 euros has been entered under other assets. (27) Details on the cash flow statement The cash flow statement is determined according to the indirect method and presents the origin and use of financial resources as well as the increase/decrease of cash and cash equivalents during the reporting period. Cash and cash equivalents include receivables from credit institutes and cash reserves. Janosch film & medien AG was acquired and entered in the consolidated accounts for the first time during the financial year. The fair values of assets and liabilities in the Janosch subgroup are presented below: In EUR 000 Cash reserves 0 Receivables from credit institutes 642 Customer receivables 471 Financial assets 27 Tangible assets 9 Intangible assets 11,518 Income tax assets 1,296 Other assets 262 Liabilities with credit institutes -7,534 Provisions -1,021 Income tax liabilities -941 Other liabilities -3,765 Minority interests -323 Goodwill -289 Purchase price payment 352 Minus acquired means of payment -642 Cash inflow by acquisition of the firm -290 56

N O T E S Notes to the consolidated accounts 2006 The interest and dividends from ordinary activities included in the cash flow amounted to: In EUR 000 2006 2005 Interest and dividends received 727 405 Interest paid -365-5 Total 362 400 10,371,000 euros were pledged from cash and cash equivalents as securities for VEM liabilities at the end of the period and are not immediately freely available. (28) Details on segment reporting Segment reporting is carried out on the basis of business segments which correspond to the organisational structure of the VEM group. The main sub-activities are divided into three segments subject to reporting requirements. Issue business VEM Aktienbank advises firms within the framework of their planned or existing listing, structures corporate actions, obtains securities from issues and places them with investors. Trading / designated sponsoring VEM Aktienbank deals with market and off-market trading in securities and derivatives on its own behalf both for its own account and for the account of third parties, and it acts as an agent in this type of business. VEM Aktienbank is also committed, for certain securities in electronic Xetra trade, to quoting buying / selling prices on a minimum level specified by the stock exchange and thus determining the liquidity of these securities (designated sponsoring). Exploitation through media VEM Aktienbank deals with the overall exploitation of a large proportion of Janosch works within the framework of the Janosch group. Janosch is one of the best-known authors of children s books in Germany and has produced a wide range of different works. The exploitation covers the fields of licensing, claims for proceeds and film production. The directly and indirectly attributable expenditure and income in these three segments are included in the segment result and the additional necessary details are provided. Other non-essential sub-activities and central functions which are neither directly nor reasonably indirectly transferrable are included in Other / Consolidation for the transfer to group figures. VEM Aktienbank provides its services essentially in Germany for domestic customers. No secondary geographical segmenting is therefore provided at present. 57

Balance sheet details (29) Cash reserves In EUR 000 2006 2005 Cash 6 5 Total 6 5 (30) Receivables from credit institutes In EUR 000 2006 2005 Due at call 17,346 9,276 With agreed term 19,829 13,579 Total 37,175 22,855 In EUR 000 2006 2005 Credit institutes in Germany 31,007 21,675 Credit institutes abroad 6,168 1,180 Total 37,175 22,855 Cash in bank amounting to 10,371,000 euros was pledged as a security for liabilities recorded in the balance sheet. (31) Customer receivables In EUR 000 2006 2005 Receivables from services 2,337 1,263 Other receivables 482 415 Total 2,819 1,678 Receivables from services relate mainly to commissions stemming from services provided within the framework of issue and consultancy businesses. All Other receivables stem from payment obligations of customers for the settlement of commercial transactions. (32) Development of credit volumes and provision for risks In EUR 000 1 Jan 2006 Changes in consolidated group Additions Release Consumption 31 Dec 2006 Receivables from credit institutes 22,855 - - - - 37,175 Customer receivables 1,678 - - - - 2,819 Provision for risks -93-20 -129 20 0-222 Total 24,440-20 -129 20 0 39,772 58

N O T E S Notes to the consolidated accounts 2006 (33) ) Trading assets In EUR 000 2006 2005 Shares and other non-fixed-interest rate securities Shares 14,104 14,560 Bonds and investment shares 547 241 Of which: Negotiable securities listed 9,729 8,803 non-listed 634 5,998 Total 14,651 14,801 (34) Financial assets In EUR 000 2006 2005 Holdings 1,688 1,510 Holdings accounted for at equity 273 130 Shares and other non-fixed interest rate securities 1,140 0 Bonds and other fixed intrest rate securities 480 313 Total 3,581 1,953 The fair values of the financial assets correspond to the book values. The VEM group possesses the following major holdings in non-consolidated firms: In EUR 000 Holding share Balance sheet equity Result panama arthaus GmbH, Berlin 75.1 % * 47 0 EquityStory AG, Munich 10 % ** 6,007 541 * Year-end accounts on 31 December 2005 ** Year-end accounts on 31 December 2006 The company general meeting of panama arthaus GmbH on 28 November 2005 decided to dissolve the company on 28 February 2006. On 31 December 2005 the balance sheet presented equity amounting to 47,000 euros. The holding is evaluated at the forecast liquidation proceeds amounting to 10,000 euros. Additional details concerning holdings in financial.de AG, Friedberg, accounted for at equity: In EUR 000 2006 2005 Balance sheet total 1,262 571 Liabilities and provisions 129 11 Income 1,113 487 Annual surplus 573 329 59

(35) Tangible assets Tangible assets developed as follows during the financial year: In EUR 000 2006 2005 Acquisition / construction costs - Status 1 Jan 2006 788 766 - Inflows 171 113 - Changes in consolidated group 10 0 - Outflows -161-91 - Reposting 0 0 - Status 31 Dec 2006 808 788 Depreciations - Status 1 Jan 2006 541 566 - Current write-downs 133 66 - Write-ups during reporting year 0 0 - Outflows -160-91 - Reposting 0 0 - Status 31 Dec 2006 514 541 Book values - Status 31 Dec 2005 247 200 - Status 31 Dec 2006 294 247 No grounds for impairment losses have been identified. No write-ups based on previous impairments were applied during the reporting year. 60

N O T E S Notes to the consolidated accounts 2006 (36) Intangible assets The intangible assets developed as follows during the financial year: in EUR 000 2006 2005 Acquisition / construction costs - Status 1 Jan 2006 165 146 - Inflows 1 30 - Changes in consolidated group 11,518 0 - Outflows -95-11 - Reposting 0 0 - Status 31 Dec 2006 11,589 165 Depreciations - Status 1 Jan 2006 120 126 - Current write-downs 3,836 5 - Write-ups during reporting year 0 0 - Outflows -95-11 - Reposting 0 0 - Status 31 Dec 2006 3,861 120 Book values - Status 31 Dec 2005 45 20 - Status 31 Dec 2006 7,728 45 Intangible assets underwent an impairment test according to IAS 36. Since no active market exists for the rights in the film Oh wie schön ist Panama allocated to the Exploitation through media segment, the value of the rights of use was determined. Due to the audience figures clearly lower than expected, the film is not expected to generate a positive cash flow. A complete impairment loss amounting to a total of 3,243,000 euros was therefore entered. (37) Income tax assets In EUR 000 2006 2005 Deferred tax assets 578 0 Actual taxes 1,326 0 Total 1,904 0 61

(38) Other assets In EUR 000 2006 2005 Delivery claims for shares from corporate actions 1,500 3,836 Delivery claims for other securities 629 0 Other assets 323 45 Total 2,452 3,881 (39) Liabilities with credit institutes In EUR 000 2006 2005 Due at call 1,623 3,228 With agreed term 4,963 0 Total 6,586 3,228 In EUR 000 2006 2005 Credit institutes in Germany 6,369 2,678 Credit institutes abroad 217 550 Total 6,586 3,228 A long-term loan amounting to 4,900,000 euros whose due date falls on 30 April 2015 is associated with variable interest rates. The interest rate adjustment dates are 30 April and 30 October each year. The interest rate adjustment risk is limited by an additional interest rate limiting transaction in the form of a maximum interest rate agreement until 30 April 2008. (40) Customer liabilities In EUR 000 2006 2005 Customers in Germany 23,229 6,580 Customers abroad 920 322 Total 24,149 6,902 (41) Trading liabilities In EUR 000 2006 2005 Delivery obligations from security sales 1,540 861 Negative fair values of derivative financial instruments 187 112 Advance deliveries of issues 1,000 2,905 Total 2,727 3,878 An interest rate swap transaction was decided upon during the financial year 2005 for an amount of 3,000,000 euros and a due date of 24 March 2015 which had a market value of -187,000 euros on the balance sheet date. The market value of the financial instrument was determined by means of internal calculation models. 62

N O T E S Notes to the consolidated accounts 2006 (42) Provisions In EUR 000 01 Jan 2006 Addition Release Consumption 31 Dec 2006 Legal and consultancy costs 0 288 0 0 288 Costs of litigation 0 115 0 0 115 Other provisions 0 75 0 0 75 Total 0 478 0 0 478 Legal and consultancy costs relate to forecast costs for the enforcement of the bank s existing claims with third parties or for the prevention of unjustified claims made against the bank. Costs of litigation relate to the costs incurred for the legal enforcement or prevention of such claims. (43) Income tax liabilities In EUR 000 2006 2005 Actual taxes 80 3,528 Deferred tax liabilities 584 363 Total 664 3,891 199,000 euros of deferred tax liabilities were settled directly against equity. (44) Other liabilities In EUR 000 2006 2005 Accrued liabilities 1,339 666 Other liabilities 2,474 1,130 Total 3,813 1,796 Other liabilities essentially include liabilities from income tax on wages and salaries, deliveries and services. (45) Equity Subscribed capital In EUR 000 or per item 2006 2005 Subscribed capital 9,675 3,870 No-par bearer shares 9,675,000 3,870,000 The proportionate amount of share capital allocated to each share amounts to 1.00 euro per share. 63

Authorised capital In EUR 000 or per item 2006 2005 Authorised capital 4,837,5 1,410 No-par bearer shares 4,837,500 1,410,000 The board of directors is authorised, with the approval of the supervisory board, to increase the share capital until 23 August 2011 by issuing new ordinary shares in the form of individual share certificates in return for cash and / or non-cash capital contributions in one or several turns up to a total amount of 4,837,500.00 euros (2006 authorised capital). Insofar as the shareholders are granted a subscription right, the shares can also be offered to a credit institute or a firm acting according to 53 para. 1 p. 1 or 53 b para. 1 p. 1 or para. 7 of the German Banking Act KWG with the obligation of offering them to the shareholders for purchase (indirect subscription right). The board of directors is authorised, with the approval of the supervisory board, to decide upon the exclusion of the subscription right of the shareholder. The subscription right may be excluded in particular in the following cases: a) to exclude maximum amounts from the shareholders subscription right, b) in the context of capital increases in return for non-cash capital contributions, particularly in the form of firms and parts of firms or other assets, c) in the context of capital increases in return for cash capital contributions if the share issue amount is not significantly lower than the market price and the shares issued and excluded from the subscription right do not exceed a total of 10% of the share capital, d) to issue employee shares to the employees of the company and its associated firms and e) to grant holders of conversion or option bonds issued by the company a subscription right for new shares to the level which they would be granted after the exercising of their conversion or option right but only if the shares cannot already be granted on the basis of a conditional capital. Conditional capital In EUR 000 or per item 2006 2005 Authorised capital 1,935 1,600 No-par bearer shares 1,935,000 1,600,000 The share capital is increased by up to 1,935,000.00 euros divided into up to 1,935,000 no-par shares (2006 conditional capital). The conditional capital increase is only completed to the extent that the holders of conversion and / or option bonds issued by the company or its direct or indirect subsidiaries on the basis of the authorisation decision of the general meeting of 23 August 2006 in return for cash make use of their conversion or option rights or the holders of conversion bonds fulfil their conversion obligation in so far as own shares are not used as a condition. The new shares will participate 64

N O T E S Notes to the consolidated accounts 2006 in the profit from the beginning of the financial year in which they are created by the exercising of conversion or option rights or by the fulfilment of conversion obligations. The board of directors is authorised, with the agreement of the supervisory board, to determine further details of the conditional capital increase and its implementation. (46) Own shares The company possessed 103,044 own shares on 31 December 2006 (previous year 35). Within the framework of the securities trading business subject to disclosure and in accordance with 71 para. 1 No. 7 of the German Stock Corporation Act AktG, the company acquired 456,986 own shares at an average price of 7.82 euros each and disposed of 354,029 own shares at an average sale price of 7.87 euros each in order to guarantee the liquidity of the market in its shares, adjusted against the capital increase from company resources in a ratio of 1:1.5 at the current prices. The result from trading with own shares was calculated according to IAS 32.33 as not affecting net income and was offset against the capital reserve. The highest daily amount of own shares stood at 118,310 shares during the reporting period adjusted against the capital increase from company resources in a ratio of 1:1.5 (corresponding to an amount of 118,310.00 euros or 1.22% of the share capital). Amounts in EUR Number of shares Proportion of share capital Share capital Proportion of share capital Shareholding on 1 January 2006 35 35.00 3,870,000.00 0.00 % Adjustment of capital increase from company resources 52 52.00 2006 purchases 456,986 456,986.00 2006 sales -354,029 354,029.00 Shareholding on 31 December 2006 103,044 103,044.00 9,675,000.00 1.07 % Securities lending in own shares Amounts in EUR Number of shares Proportion of share capital Share capital Proportion of share capital Shareholding on 1 January 2006 5,400 5,400.00 3,870,000.00 0.14 % Adjustment of capital increase from company resources 8,100 8,100.00 Shareholding on 31 December 2006 13,500 13,500.00 9,675,000.00 0.14 % 65

(47) Maturity breakdown in EUR 000 on 31 December 2006 Due at call Up to 3 months 3 months to 1 year 1 to 5 years More than 5 years Total Receivables from credit institutes 17,346 19,829 0 0 0 37,175 Customer receivables 2,125 386 294 14 0 2,819 Trading assets 9,727 4,924 0 0 0 14,651 Financial assets 2,728 569 10 274 0 3,581 Income tax assets 0 0 1,437 467 0 1,904 Other assets 1,557 40 225 630 0 2,452 Total 33,483 25,748 1,966 1,385 0 62,582 Liabilities with credit institutes 1,623 0 563 2,900 1,500 6,586 Customer liabilities 24,149 0 0 0 0 24,149 Trading liabilities 2,540 6 20 94 67 2,727 Provisions 0 75 403 0 0 478 Income tax liabilities 0 80 0 584 0 664 Other liabilities 2,337 1,006 416 54 0 3,813 Total 30,649 1,167 1,402 3,632 1,567 38,417 in EUR 000 Up to 3 months t 1 to 5 years More than on 31 December 2005 Due at call 3 months o 1 year 5 years Total Receivables from credit institutes 9,276 13,579 0 0 0 22,855 Customer receivables 1,678 0 0 0 0 1,678 Trading assets 8,803 5,998 0 0 0 14,801 Financial assets 313 0 1,510 130 0 1,953 Income tax assets 0 0 0 0 0 0 Other assets 3,825 0 56 0 0 3,881 Total 23,895 19,577 1,566 130 0 45,168 Liabilities with credit institutes 3,228 0 0 0 0 3,228 Customer liabilities 6,902 0 0 0 0 6,902 Trading liabilities 3,766 3 12 56 41 3,878 Provisions 0 0 0 0 0 0 Income tax liabilities 0 3,528 0 363 0 3,891 Other liabilities 915 840 2 39 0 1,796 Total 14,811 4,371 14 458 41 19,695 The maturity breakdown shows the capacity of the bank to fulfil its payment obligations. In certain cases this may call for an early disposal of assets. The classification of assets according to maturities is based on their disposability rather than the existing disposal intention. 66

N O T E S Notes to the consolidated accounts 2006 Details on the profit and loss account (48) Interest result In EUR 000 2006 2005 Interest received from Credit and financial market transactions 688 362 Shares and other non-fixed interest rate securities 21 26 Interest payable for Certified liabilities 0-4 Other -365-1 Total 344 383 (49) Commissions result In EUR 000 2006 2005 Commissions received from Issue business 12,118 6,631 Trading 1,828 1,170 Other consultancy business 4,409 3,474 Commissions paid -7,653-2,174 Total 10,702 9,101 (50) Trading result In EUR 000 2006 2005 Realised trading result 4,237 9,146 Non-realised trading result (balance of write-downs and write-ups) -1,390 197 Total 2,847 9,343 (51) Financial assets result In EUR 000 2006 2005 Interest income from fixed interest rate securities 17 17 Financial assets adjustment -45 0 financial.de AG write-up 143 73 Negative difference from capital consolidation of TradeCross AG 0 143 Negative difference from capital consolidation of Janosch AG 355 0 Total 470 233 The financial assets adjustment relates mainly to shares and other non-fixed interest rate securities. 67

(52) Administrative expenditure In EUR 000 2006 2005 Staff expenditure Wages and salaries 3,947 3,220 Social security contributions 231 144 Expenditure for old age pension schemes and support 26 10 Other administrative expenditure 2,414 1,457 Total 6,618 4,831 The increase in Other administrative expenditure can be accounted for essentially by the increased cost of premises due to additional office space, increased consultancy and audits costs following the extended scope of business and the initial incorporation of the Janosch group in the consolidated accounts. (53) Write-downs and allowances for intangible and tangible assets In EUR 000 2006 2005 Write-downs and allowances Tangible assets 133 66 Software 27 5 Rights 3,809 0 Total 3,969 71 (54) Other operating income In EUR 000 2006 2005 Janosch group sales revenue 5,744 0 Other 1,931 178 Total 7,675 178 (55) Other operating expenditure In EUR 000 2006 2005 Material expenditure, services relating to Janosch group 2,097 0 Other 1 0 Total 2,098 0 68

N O T E S Notes to the consolidated accounts 2006 (56) Total operating income In EUR 000 2006 2005 Interest result 344 383 Commissions result 10,702 9,101 Trading result 2,847 9,343 Other operating income / expenditure 5,577 178 Total 19,470 19,005 (57) Provision for risk In EUR 000 2006 2005 Additions to provision for risks 129 57 Release of provision for risks -20 0 Total 109 57 (58) Taxes on income In EUR 000 2006 2005 Actual taxes 3,145 4,797 Deferred taxes -27 734 Total 3,118 5,531 Public companies in Germany are liable to corporation tax amounting to 25% and a solidarity surcharge of 5.5% of the corporation tax. A municipal trade tax is also applied which is deductible when the corporation tax is determined. Taking into account the municipal percentage for the trade tax, VEM Aktienbank AG is liable to a trade tax of 19.68% and with the deductibility of the trade tax, an overall tax rate of 40.86% which is unchanged compared with the previous year.. In EUR 000 2006 2005 Result before tax 9,244 14,279 Applicable tax rate 40.86 % 40.86% Forecast taxes on income 3,777 5,834 Tax effects from Tax-free income 14-58 Non-deductible expenditure 96 7 Permanent differences -123-255 Aperiodic effects -277 0 Tax losses carried forward -360 0 Varying tax rates -7 0 Other -2 3 Recorded taxes on income 3,118 5,531 69

(59) Earnings per share In EUR 000 2006 2005 Annual surplus 5,892 8,748 Average number of shares 9,607,895 8,884,143 Earnings per share in EUR 0.61 0.98 In the calculation of the average number of shares, the effect of the capital increase from company resources decided upon and implemented during the financial year was also taken into account for 2005 with retrospective effect. 70

N O T E S Notes to the consolidated accounts 2006 Other details (60) Contingent liabilities and other liabilities In EUR 000 2006 2005 Contingent liabilities 3,339 0 Other liabilities Delivery liabilities from securities lending 18,318 12,987 Office rental agreements 1,109 683 Buy-back of securities 700 0 Other liabilities 569 262 Total 24,035 13,932 Contingent liabilities concern existing redemption obligations for film promotion loans received and recognised in current earnings, and conditionally redeemable subcontractor services. The occurrence of requirements for possible redemption is not expected. Office rental agreements relate to the bank s business premises; they were extended by a further 5 years in October 2005. In 2006, additional office space was rented with the same term. Other obligations stem mainly from rental, leasing, maintenance and usage agreements for technical equipment, facilities and vehicles. The contractual terms are standard for the market. Maturity breakdown: in EUR 000 Up to 3 months 1 to 5 years More than on 31 December 2006 Due at call 3 months to 1 year 5 years Total Contingent liabilities 0 0 0 3,339 0 3,339 Other liabilities Delivery liabilities from securities lending 11,855 6,463 0 0 0 18,318 Office rental agreements 0 100 262 747 0 1,109 Buy-back of securities 0 700 0 0 0 700 Other liabilities 0 485 71 13 0 569 Total 11,855 7,748 333 4,099 0 24,035 (61) Related party disclosures Transactions with associated firms and individuals according to IAS 24 are generally carried out at market prices. In addition to expenses relating to their activities, each member of the supervisory board receives fixed compensation of an annual amount of 5,000.00 euros (basic compensation) payable at the end of the financial year; the chairman receives 6,500.00 euros. 71

From 1 January 2006 onwards, each member of the supervisory board will receive variable compensation in addition to the basic compensation. The variable compensation is dependent on the result of the company s normal business activities which is stated in the consolidated accounts drawn up by the company according to the IAS/IFRS (International Financial Reporting Standards). For every 1,000,000.00 euros result declared for ordinary business activities before the deduction of the board of directors performance-related compensation and the supervisory board s variable compensation, each supervisory board member receives the amount of 1,000.00 euros. The variable compensation is payable after the approval of the consolidated accounts for the financial year concerned. If the company does not establish consolidated accounts during a financial year according to IAS/ IFRS, the supervisory board s variable compensation will be calculated for this financial year on the basis of the result of ordinary business activities which is stated in the annual statement published by the company. The variable compensation is payable in this case after the determination of the annual statement for the financial year concerned. The company reimburses each supervisory board member the turnover tax applied to their compensation. The company takes out liability insurance (D&O insurance) for the bodies of the company, including members of the supervisory board, with appropriate insurance amounts and settles the corresponding premiums. The total compensation of the supervisory board amounted to 43,500.00 euros for the financial year 2006. They were distributed as follows between the individual members: In EUR Fixed 2006 Variable Total 2005 Matthias Girnth, Chairman 6,500 9,000 15,500 6,500 Olaf Posten, Deputy Chairman 5,000 9,000 14,000 5,000 Dr. Alfred Krammer 5,000 9,000 14,000 5,000 Total 16,500 27,000 43,500 16,500 The members of the supervisory board did not receive any compensation or other benefits during the financial year 2006 for personal services provided. The supervisory board held 103,120 company shares on 31 December 2006. Each member of the board of directors receives a basic monthly salary which is payable at the end of each month after the application of statutory deductions. Each member also receives additional benefits, notably in the form of the use of company cars, insurance and other financial benefits and advantages. Each member of the board of directors also receives variable (performance-related) compensation. The variable compensation depends on the result of the company s ordinary business activities which is stated in the consolidated accounts drawn up by the company according to IAS/IFRS (International Financial Reporting Standards). The board of directors total compensation for the financial years 2006 amounted to 1,946,000 euros. This included performance-related elements amounting to 1,670,000 euros. The company s general meeting of 23 August 2006 decided that the individualised statements of the board of directors compensation will not bee disclosed for the period from 2006 to 2010. No advances or credits were granted, neither to board of directors nor to supervisory board members. 72

N O T E S Notes to the consolidated accounts 2006 (62) Auditor s fees Ernst & Young AG accountancy and tax advisory firm and Ebner, Stolz, Mönning GmbH accountancy and tax advisory firm were commissioned to audit the annual accounts of the incorporated firms and the consolidated accounts. The auditor s fees entered as expenditure during the financial year can be broken down as follows: In EUR 000 2006 2005 Audit 169 81 Other certification and valuation services 23 29 Tax advisory services 0 0 Other services 8 0 Total 200 110 The audit concerns expenditure for the verification of the year-end accounts and the consolidated accounts. Other certification and valuation services refer to additional certifications due to legal provisions for credit institutes and securities service firms. Ernst & Young AG accountancy and tax advisory firm and Ebner, Stolz, Mönning GmbH accountancy and tax advisory firm did not provide any tax advisory services for the incorporated firms during the reporting period. (63) Employees Average payroll during the financial year (excluding board of directors): 2006 2005 Full-time employees 32 14 Part-time employees 10 5 Total 42 19 (64) Supervisory board and board of directors Supervisory board Matthias Girnth, consultant, Bad Soden Olaf Posten, lawyer, Kronberg/Taunus Dr. Alfred Krammer, lawyer, Munich Chairman Deputy chairman Board of directors Andreas Beyer, business graduate Erich Pfaffenberger, business graduate 73

Membership of supervisory boards and other auditing committees according to 125 para. 1 section 3 of the German Stock Corporation Act AktG: Andreas Beyer BinTec Communications AG, Nuremberg (since 7 July 2006) Supervisory Board Deputy chairman (since 11 July 2006) Fimatrix AG, Munich Supervisory Board Member Janosch Film & Medien AG, Berlin (since 13 April 2006) Supervisory Board Member TradeCross AG, Munich (since 9 August 2006) Supervisory Board Deputy chairman Erich Pfaffenberger BinTec Communications AG, Nuremberg (since 7 July 2006) Supervisory Board Chairman (since 11 July 2006) financial.de AG, Friedberg Supervisory Board Chairman TradeCross AG, Munich, (since 9 August 2006) Supervisory Board Chairman Janosch Film & Medien AG, Berlin (since 13 April 2006) Supervisory Board Deputy chairman (since 24 April 2006) S+P 9805 Vermögensverwaltung AG, Munich (until 24 March 2006) Supervisory Board Chairman Matthias Girnth Impera Total Return AG, Frankfurt (since 19 January 2006) Supervisory Board Chairman Olaf Posten Alloheim Senioren-Residenzen AG, Düsseldorf Supervisory Board Chairman Triton-Format AG, Hamburg (from 15 December 2006) Supervisory Board Chairman Dr. Alfred Krammer Nanostart AG, Frankfurt Supervisory Board Chairman AAA Aktionärsakademie AG, Munich Supervisory Board Member Ispex AG, Bayreuth (since 08 February 2006) Supervisory Board Chairman Inspire AG, Paderborn (since 19 May 2006) Supervisory Board Chairman 74

N O T E S Notes to the consolidated accounts 2006 (65) Corporate Governance Code declaration The board of directors and the supervisory board of VEM Aktienbank AG have presented the Corporate Governance Code declaration prescribed according to 161 German Stock Corporation Act AktG and made it available for shareholders on the bank s Website. (66) Suggestion for the approval of the annual accounts and the use of the balance sheet profit of VEM Aktienbank AG The annual accounts of VEM Aktienbank AG drawn up according to the provisions of the German Commercial Code and the German Stock Corporation Act are published in the electronic Federal Bulletin and published in the company register. For the financial year 2006, VEM Aktienbank AG as the parent company of the group records a balance sheet profit of 5,329,053.15 euros (previous year 6,432,575.20 euros). The board of directors suggested to the supervisory board, within the framework of the approval of the annual statements, that the following use of the profit be suggested to the general meeting for the adoption of a resolution: Transfer of the total balance sheet profit amounting to 5,329,053.15 euros to retained earnings. (67) ) Release of the consolidated accounts for publication The board of directors of VEM Aktienbank will present the consolidated accounts drawn up according to IFRS to the supervisory board. The supervisory board is required to verify the consolidated accounts and to state whether it approves them. The board of directors will present the consolidated accounts for publication following a successful approval. Munich, 30 March 2007 VEM Aktienbank AG The board of directors Andreas Beyer Erich Pfaffenberger 75

Auditors report We have verified the consolidated accounts of VEM Aktienbank AG, Munich consisting of the balance sheet, profit and loss account, the statement of changes in shareholders equity, cash flow statement and notes in addition to the consolidated annual report for the financial year from 1 January to 31 December 2006. The establishment of the consolidated accounts and the consolidated annual report in accordance with IFRS as applicable within the EU and with the applicable trade law provisions according to 315a para. 1 of the German Commercial Code HGB is the responsibility of the legal representatives of the company. Our responsibility is to express an opinion on the consolidated annual report based on our audit. We conducted our audit of the consolidated accounts according to 317 of the German Commercial Code HGB taking into account the German principles for standard audits established by the German Auditors Institute (IDW). On this basis, the audit is to be planned and implemented in such a way that misstatements and violations which have a significant effect on the asset, financial and income position presented in the consolidated accounts based on the applicable accounting policies and the impression presented by the consolidated annual report are recognised with a sufficient degree of certainty. In determining the audit procedures, our knowledge of the business activities and economic and legal environment of the group as well as expectations concerning possible errors are taken into account. Within the framework of the audit, the effectiveness of the internal control system relating to accounting and evidence of the details in the consolidated accounts and the consolidated annual report are evaluated above all on the basis of sampling. The audit includes to express an opinion on the annual accounts of the firms incorporated in the consolidated accounts, on the deferrals and accruals of the consolidated group, on the accounting and consolidation policies applied and on the essential opinions of the legal representatives as well as the approval of the overall presentation of the consolidated accounts and the consolidated annual report. In our opinion, the audit provides a sufficiently secure basis to express our opinion. Our audit did not give rise to any objections. In our opinion, which is based on the conclusions of the audit, the consolidated accounts are in accordance with IFRS as applicable within the EU and the additional applicable trade law provisions according to 315a para. 1 of the German Commercial Code HGB and, with regard to these provisions, reflects the assets, financial and income position of the group corresponding to the actual situation. The consolidated annual report, in line with the consolidated accounts, provides a fair presentation of the position of the group and outlines the opportunities and risks for future development. Eschborn / Frankfurt am Main, 4 April 2007 Ernst & Young AG Accountancy firm Tax advisory firm Griess Auditor Clausen Auditor 76

77 N O T E S Auditor s report

Financial calendar 3 May 2007 Entry and General Standard Conference in Frankfurt 10 May 2007 M:access Analyst conference in Munich 21 May 2007 General meeting in Munich 31 May 2007 * Financial report for first quarter of 2007 31 August 2007 * Six-monthly financial report 2007 30 November 2007 * Financial report for third quarter of 2007 30 April 2008 * Annual financial report 2007 * at the latest 78

Imprint Postal address VEM Aktienbank AG Postfach 330705 80067 Munich Adress VEM Aktienbank AG Rosental 5 80331 Munich Phone: +49 (0) 89/ 23 001-0 (head office) Phone: +49 (0) 89/ 23 001-200 (Investor Relations) Fax.: +49 (0) 89/ 23 001-111 Internet: http://www.vem-aktienbank.de E-Mail: info@vem-aktienbank.de E-Mail: ir@vem-aktienbank.de (Investor Relations) Board of Directors Andreas Beyer, business graduate, Erich Pfaffenberger, business graduate Supervisory Board Matthias Girnth, business graduate (chairman) Register Munich District Court HRB 124 255 Bundesbank account: Deutsche Bundesbank, Munich branch (sort code 700 000 00), account number 700 091 20 Admissions to trading: Xetra, Frankfurt Stock Exchange, Munich Stock Exchange, Vienna Stock Exchange Functions: Deutsche Börse Listing Partner Designated Sponsor in Xetra trade Appointment as an issue expert according to 4 para. 3 Regulations M:access by the Munich Stock Exchange Supervisory authorities: Federal office for financial service supervision (Bundesanstalt für Finanzdienstleistungen) Member of: Federal association of security firms on German stock exchanges (Bundesverband der Wertpapierfirmen an den Deutschen Börsen e. V.) German compensatory fund of securities trading companies (Entschädigungseinrichtung der Wertpapierhandelsunternehmen - EdW) Layout financial.de AG Friedberg, Germany NB: Xetra is a registered trademark of Deutsche Börse AG. 79

VEM Aktienbank AG, Rosental 5, 80331 München, Tel.: +49 (0) 89 / 23001-0, www.vem-aktienbank.de