SinnerSchrader Aktiengesellschaft Annual Report

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AS P ION E E R S I N TH E C ONCE PTIONand creation of innovative eBusiness strategies, we develop solutions that set industry standards and transform our clients into market leaders.

A H I G H L E V E L O F C O M M I T M E N T,enthusiasm for the project and real partnership lead to close identification of the team with the client. Only in this way can outstanding solutions be developed and perfectly implemented within a short time frame.

SinnerSchrader share price development

NemaxSinnerSchrader

2000

21.03. 16.05.25.01.

200%

0%

100%

300%

400%

1999

02.11. 30.11. 28.12. 22.02. 18.04. 13.06. 11.07. 08.08.

16.11. 14.12. 11.01. 08.02. 07.03. 04.04. 02.05. 03.05. 27.06. 25.07. 22.08.

issue priceNemaxSinnerSchrader

16.05.00 31.05.00 15.06.00 30.06.00 15.07.00 30.07.00 14.08.00 31.08.00

80%

60%

100%

120%

40%

20%

0%

Nemax InternetSinnerSchrader

31.08.

Key figures of the SinnerSchrader Group

1) weighted average number of shares outstanding (diluted)

2) annualised

Changein %

01.01.199931.08.1999

01.09.199931.08.2000

Revenues in DM 000s 28,677 8,400 241

thereof Project services in DM 000s 19,069 5,549 244

as % of revenue in % 66.5 66.1

Operating profit in DM 000s 6,576 2,826 133

as % of revenue in % 22.9 33.6

Net income in DM 000s 3,849 1,340 187

as % of revenue in % 13.4 16.0

Net income per share in DM 0.40 0.22 82

number of shares outstanding 1) in units 9,608,278 6,025,000

Number of employees – end of period 174 62 181

Number of employees – ø full-time equivalents 102.7 38.2 169

Project services per employee

ø full-time equivalents 2) in DM 000s 186 218 - 15

Shareholders’ equity in DM 000s 66,104 5,487 1,105

Balance sheet total in DM 000s 75,590 8,451 794

Liquid funds and marketable securities in DM 000s 60,718 6,150 887

Cashflow from operating activities in DM 000s - 609 2,582 - 124

B A S E D O N A N I N N O VAT I V E A N Dstandardised process model

and a culture that lives and breathes the principle of open knowledge

exchange, the innovation and implementation of our solutions are

as intelligent as they are efficient.

F LAT H I E RACH I E S AN D F LE X I B LE project teams encourage

a pragmatic attitude, guaranteeing a rapid reaction to both client

and market demands. This dynamism is the power behind

our outstanding growth.

We work for the success of our clients. We want to open up the Internet for them as an integrated platform for their successful business development. We call this Unified Commerce.

SinnerSchrader. Creating winners in eCommerce.

OLIVE R S I N N E R MATTH IAS SCH RAD E R D ETLE F WICH MAN N THOMAS DYCKHOFF

5LETTE R TO TH E S HAR E HOLDE RS4 LETTE R TO TH E S HAR E HOLDE RS

With a turnover of almost DM 29 million and operating profits of more than DM 6.5 million,turnover has organically trebled, whilst operatingprofits have doubled from last year. At the end of SinnerSchrader's first business year as a listed company, the SinnerSchrader team is pleased to beable to present to you a balance that has exceededour already ambitious plans.

This is all the more pleasing given that the endof our business year falls during a time of negativereports about the Internet sector, a time whenInternet euphoria seems to have been replaced by aclimate of scepticism. The opportunities, however,are still great! Only that it is now becoming clearwho can best benefit from the changes along the

entire value chain triggered by the Internet as anintegrated platform. Therefore, our previous business year was not just about increasing turn-over and profit for SinnerSchrader, but was alsoabout creating the conditions that will establish SinnerSchrader in a leading position as a compre-hensive service partner in this complex process.

At the centre of our strategy are the clients andthe challenge to make their respective businessmodels successful on the Internet. Together withour clients we have been able to achieve a greatdeal – because SinnerSchrader is not satisfied witheasy answers; because we can build on extensiveexperience from four years as an eCommerce enabler in our strike for innovative yet functionalsolutions; and because we possess the criticaltechnological competence and implementationpower. From the online launch of the multi-channelbank Deutsche Bank 24 on 1 September 1999 to thelaunch of the website for our client and venturepartner Blume 2000 on 18 August 2000, we haveimplemented a large number of successful eBusinesssolutions over the last year. More than ten newcustomers have opted for SinnerSchrader as theirpartner in the provision of consultancy and eBusinesssolutions; these include names such as Tchibo andOTTO Versand.

Unified commerce, the integration of all businessprocesses on an Internet based technology platformis our vision. During the past year we have consistentlyorientated our consultancy, process and technologycompetencies towards this vision. In a first phasewe have pursued an entirely organic growth path,aiming to strengthen the SinnerSchrader cultureand the scalability of the organisation.

Through work with foreign clients and the organicstart up of a subsidiary in London, we have takenthe first step towards the internationalisation ofSinnerSchrader. A successful launch on the stockexchange has given us the means to force thisexpansion process through the acquisition of othercompanies. However, the solid foundations of ourgrowth are more important to us than any short-termeffect on the stock exchange. Shortly after the closeof the business year, we have begun to implementour acquisition strategy by taking over the eCommerce

software specialist Netmatic Internet / IntranetSolutions GmbH. This acquisition means the signi-ficant extension of our technological competence.

The speed of development in the Internet worldis rapid; the opportunities are enormous. With thecharacteristics of SinnerSchrader, dynamism andmotivation, and on the basis of our achievementsduring the last business year, we will continue theSinnerSchrader success story. Leading, involved,smart and direct: those are the values that shallguide our business development. The new corporatedesign introduced with the start of the fiscal year2000 / 2001 sets an exciting framework reflectingthe enthusiasm of the whole SinnerSchrader teamin this work for the future of your company.

Hamburg, October 2000

The Management Board

Dear shareholders,

P R O F I L der SinnerSchrader AktiengesellschaftP R O F I L E of SinnerSchrader Aktiengesellschaft

M A R K E T

S U C C E S S S TO RY > Tchibo

B U S I N E S S M O D E L

S U C C E S S S TO RY > Schneider-Group

S T R AT E GY > U N I F I E D C O M M E R C E

S U C C E S S S TO RY > Libri

P R O C E S S M O D E L

S U C C E S S S TO RY > Europcar

S T R AT E GY > eV E N T U R E S

S U C C E S S S TO RY > LetMeShip

I N T E R N AT I O N A LI S AT I O N

S U C C E S S S TO RY > Ineas

E M P LOY E E S

S U C C E S S S TO RY > Blume 2000

O U T LO O K

S TO C K

G LO S S A RY

9MAR KET8 MAR KET

THE eBUSINESS MARKET IS ONE OF THE FASTEST GROWING INDUSTRIES WORLDWIDE. The demand for high-end eCommerce solutions in particular has recently grown beyond all expectations. Meanwhile,

the client structure for consultancy and service provision implementation has changed drastically over thelast 12 months. Initially it were young start-up enterprises that determined demand, with innovative ideas for net-based business models supported by a dynamic venture capital scene. Recently however, classicenterprises from the old economy have caught up dramatically, and it is they who now form the dominantclient base.

The central focus no longer lies with isolated Internet projects, but with business critical Internet strate-gies for the opening up of new markets andlines of distribution. Consequently, the requirements for providers of eBusiness-Services have also changed greatly over recent months: it is now the entire solutioncompetence – especially regarding the encapsulation of complex back-end systems and the systematic integration of all digital distribution channels – that has become the deciding point of differentiation whenchoosing service providers.

SinnerSchrader has an outstanding position within this new market environment. As a pioneer withinthe industry, SinnerSchrader has by far the most extensive experience in the conception and implementationof demanding eCommerce solutions. By consistently increasing capacity, SinnerSchrader has continued tobuild upon this leading position. Particularly notable is the above average development of an already verystrong technological competence, on a qualitative as well as quantitative basis. Considering the increasingcomplexity of projects and the strong competition in the personnel market this aspect is critical to success.

Focus on the market growth of eBusiness

THE OLD ECONOMY IS CATCHING UP RAPIDLY; within about six months, their share of SinnerSchrader’s

client structure has grown to 70 %.

10 S UCCE SS STORY

java beans

E very week a new world that ist what Tchibo presents via 15,000 retail outlets throughout Germany. The sale of consumer goods, grouped around a common theme changed weekly, has developed into anenduring and significant part of the company’s strategy. So has the Internet. Since 1998, Tchibo.de

has been one of the ten most successful eCommerce sites in Germany. Last year they realised sales in thetens of millions.

With the 2000 relaunch, Tchibo continues this success story in a determined fashion. Optimisation andfine-tuning of the front-end process, establishment of customer loyalty instruments and integration with theback-end systems, are all leading to greater customer service while in the same time reducing maintenancecosts. Solid foundations for future growth in new media are thereby being laid.

11S UCCE SS STORY

PATRICK HOFMANN

Managing Director, Tchibo Internet GmbH

We have a unique concept for success: every week a new world.

www.sinnerschrader.com/en/stories/tchibo/www.tchibo.de

CONSULTING: RE-THINK EVERYTHING

In order to be successful in eCommerce, it is essen-tial to learn many new rules. The reverse is also true: many rules from the old economy stillretain their validity today. Both businesses fromthe new economy and established brands are finding themselves involved in radical change andthey are rapidly becoming similar in many ways.

Our consultants actively work with this processof transformation, analyse options and developecommercial and operational eBusiness strategiesthat can be realistically implemented.

The strategies cover everything from branddevelopment, the development of front-end andback-end processes to the construction of intelli-gent customer retension programmes. In order tobe able to deliver an optimum depth of advice,consulting is structered around the solution centres: “Retail/Consumer Goods”, “Financial Services”, “Telcos/Logistics”, “Automotive/Tourism”and “Corporate”.

EXPERIENCE DESIGN: TEST EVERYTHING

In the field of user interface design for eCommerceapplications, important navigation standards havebeen established which are now understoodthroughout the world. Therefore, the challengefor design is these days to optimise session intothe depth of a transaction, the next “click”. Forthis, SinnerSchrader uses its own ExperienceModels developed in-house, which represents theknowledge gained from observing the behaviouralpattern of millions of user sessions, in the form ofoptimised front-end processes.

To attract users to a site, and to ensure an exciting shopping experience once they are there, an independent editorial team develops strategicand attractive content at SinnerSchrader. Animportant part of our method is the use of proto-types and usability -tests. In this way, a site canbe tested and improved with regards to its abilityto change visitors into buyers even before its actu-al implementation.

In the field of design, totally new tasks areemerging because of the implementation of multi-channel eCommerce strategies. Here, the bandwidthranges from the very limited possibilities of WAPsolutions through the classic GUI programmingof Swing-based back-office tools right up to TVdesign for broadband and kiosk applications.

1

CUSTOM MADE HIGH-END eCOMMERCE SOLUTIONS AND THEIR IMPLEMENTATION IN A SHORT TIME

REQUIRE FLEXIBLE PROJECT TEAMS that, together with the client, can quickly and independentlydevelop and produce innovative solutions. Providing comprehensive client services, in the sense of “one stop shopping”, SinnerSchrader differentiates between the services it provides according to four areas of competency: consultancy, design, engineering and business generation.

CONSULTING

2EXPERIENCE DESIGN

12 B US I N E SS MODE L

One stop, full service

ENGINEERING: INTEGRATE EVERYTHING

In order to attain maximum scalability of its engi-neering skills and project synergies, SinnerSchraderhas focused persistently on the leading standardsin the industry: Java , EJB , Corba and XML .By concentrating on these key technologies, SinnerSchrader controls the technologically mostimportant building block of each eCommercesolution – the Middleware , which links front-endand business logic to existing back-end systems.This Middleware competence allows SinnerSchraderto implement customised business processes andvalue added services within a short time period.In this way, SinnerSchrader obtains a visible marketadvantage and is able to react quickly and flexiblyto market changes and customer requirements.

Due to a concentration on high-volume trans-action solutions, the development of scalable andhigh-performance system platforms has becomeanother very important competence within theservice portfolio. This encompasses the planningand implementation of essential operation andsafety concepts.

BUSINESS GENERATING: OPTIMISE EVERYTHING

Successful eCommerce solutions require a corre-spondingly high profile within the market. By crea-ting integrated online campaigns – involvingeverything from planning, to banner creation andevaluating the performance – SinnerSchrader opti-mises the marketing budget of its clients. Thanksto Adtraction technology, developed in-house bySinnerSchrader, sales and clickstreams can beassigned directly to even a single advertisement forthe first time thus enabling an optimisation of thecost-per-order.

Using the Adraction technology, SinnerSchraderanalyses the behaviour of the user on eCommercesites with the help of modern Data mining tools.On the basis of these analyses front-end processesand product ranges are continually adjusted toincrease the conversion quota of visitors to buyers.

3ENGINEERING

4BUSINESS GENERATING

13B US I N E SS MODE L

14 S UCCE SS STORY

fashion flash

F or the Schneider group, doing pan European business, a new alignment to an eCommerce platform strategy was crucial: previously independently realised solutions were to be consolidated into a standardised eBusiness architecture. The integration of stock data, customer data and the business

processes into one eCommerce platform provided the necessary freedom to clearly differentiate individualdistribution lines with regard to their market position and their respective added values on the Internet.Consequently, the mail-order brand for the lifestyle products Conley’s, Impressionen and Bambola present them-selves in different ways on the web: cult in the first case, fine in the second, lascivious in the third case – butalways exactly suited to the target group.

15S UCCE SS STORY

THOMAS STAMER

Managing and Sales Director, e-lationship GmbH (Schneider group)

An enterprise such as the Schneider groupdemands a platform strategy, not isolated solutions.

www.sinnerschrader.com/en/stories/conleys/www.conleys.de

www.impressionen.dewww.bambola.de

16 STRATEGY

FORGET ISOLATED SOLUTIONS; in accordance with the unified commerce strategy, SinnerSchrader is integrating all sales channels into a consolidated process landscape using standardised business components.

THE INTERNET IS INCREASINGLY EVOLVING INTO AN UBIQUITOUS BASE TECHNOLOGY FOR ALL DIGITAL

DISTRIBUTION CHANNELS: new end appliances such as Internet compatible WAP or GPRS mobiles, PDAs , stationary Kiosk terminals and digital TV will gain acceptance. In the future, completly new and

highly integrated process chains will be build by means of the industrial standard XML .In the centre is the end user, who is able to make interactive contact with the business at any time, using

the entry point of choice. Regardless of whether the customer buys at a conventional retail outlet, over thetelephone, or on a website: customer data must be validated in real time, bonusses must be calculated andset off against the customer account, and consistency of price and conditions must be ensured across allchannels. It is the goal of the SinnerSchrader unified commerce strategy to consolidate all digital distributionchannels within one standardised process landscape.

To transform this vision into reality, SinnerSchrader has developed an adaptable reference architecture onJava / XML , which employs reusable, quality assured business components based upon conventional

Middleware such as J2EE and WebObjects. As a result of a classic multi-tier concept, this architecture offersmaximum flexibility for the optimisation and innovation of business processes as well as the integration of ERP -, CRM - and Content Manangement Systems . Using advanced caching and page pre-generating

techniques, this reference architecture is especially suitable for extremely high load solutions.

17STRATEGY

Unified Commerce

18 S UCCE SS STORY

books&mortar

B ooks are currently the most frequently traded item on the Internet. In 1996, Libri – as one of the pio-neers in Germany – decided to develop the Internet as a new distribution channel. In developing an eCommerce-strategy Libri forced the challenge of how to link the online offers wih the classic indirect

sales channel through book retailers. The solution: a platform strategy offering all book retailers the oppor-tunity to do business online. Libri develops and operates the eCommerce application and the catalog takescare of the logistics as well as the settling of payments. The Libri platform now has 700 retail partners. Thecustomer chooses whether to collect the goods from the bookshop around the corner or to let Libri.de deliverthem, free of postage and packaging costs.

An extensive book and CD range – comprising more than one million titles – is backed up by large amountsof supplementary information such as cover illustrations, articles and reviews. Editorial content, prices anddelivery deadlines are updated daily on the site. In this way and by appropriate marketing strategies applyinginteractive agents, Libri.de has become one of the most successful shopping platforms on the web and is developing into Europe’s largest literature portal.

19S UCCE SS STORY

LARS KILANDER

Managing Director, Libri.de GmbH

Selling as a wholesaler on the Internet?Without fear of contradiction: Libri.de makesthe book trade fit for Internet business.

www.sinnerschrader.com/en/stories/libri/www.libri.de

21PROCE SS MODE L20 PROCE SS MODE L

IN AS DYNAMIC A MARKET AS THE eBUSINESS ENABLING FIELD, IT IS PARAMOUNT FOR CLIENTS TO

WORK WITH A PARTNER WHO OWNS A PROVEN PROJECT METHOD. The constant paring down of time periods for projects together with the increasing complexity of solutions is strengthening this trend. Unliketraditional consulting or software engineering, the conception and implementation of an eBusiness strategyis not a sequential process. The areas of consulting, design and engineering are closely interdependent. Based on the experience gained from many complex eCommerce projects over the past years, SinnerSchraderhas developed an iterative tool and rule based project process – the SINNERSCHRADER UNIFIED COMMERCE

PROCESS [“SUCCESS”].

The most important elements of “Success” are measurable milestones, which document project progressas well as standardised project documents, which promote the transformation of project knowledge into the company-wide knowledge management system. A further important component presents a binding routine that delivers a concrete procedure model for the interplay between team and client on the basis ofmilestones and documents.

With “Success”, SinnerSchrader owns a project approach that allows the scaling of successful businessmodels without either compromising quality or increasing project risk.

Success: SinnerSchrader Unified Commerce Process

SUCCESS: standardised and tested project runs on the basis of uniform milestones and project documents (deliverables), guaranteeing the successful implementation of complex eBusiness projects within the shortest possible time period.

22 S UCCE SS STORY

wap car

R eserve a car online and pick it up on site? The recipe for the success of Europcar on the Internet is thatsimple. The technology behind it is of course more complex: it is the first data base supported rental station on the web with a real time reservation system. At www.europcar.de, one of the most innovative

eCommerce applications, everything is focused on customised mobility and services, as it is at the green stations. The online ordering system is exactly tailored to fit customer needs. The best value conditions arealways chosen automatically and the customer receives a confirmation on his printer, quickly and simply.Business customers can integrate an individualised Extranet page with their Intranet and thereby rapidlyaccess the company specific conditions.

Additionally, Europcar offers a reservation solution, with which it is possible, for the first time, to rentvehicles via Internet compatible mobile phones. Due to the successful integration of web and WAP commercesolutions, Europcar customers can pick vehicles from three categories on their mobile display and freely choose the place as well as the length of rental. As confirmation of reservation they immediately receive an SMS.

23S UCCE SS STORY

KATJA ANETTE BRANDT

Managing Director (Marketing, Communication and Sales)Europcar Autovermietung GmbH

Our WAP solution was developed at warpspeed: on the basis of the existing web appli-cation within a few days.

www.sinnerschrader.com/en/stories/europcar/www.europcar.dewap.europcar.de

25STRATEGY24 STRATEGY

eVentures

VENTURES – A LOGICAL STEP: with the development of transaction-centred solutions, a close partnership between client and service provider is created which can lead to actual participation.

SINNERSCHRADER FOLLOWS A CONSISTENT “TIME-TO-VALUE” APPROACH THAT IS ALIGNED TO RAPID

SHAREHOLDER VALUE GROWTH ON THE CLIENT’S S IDE. In the past, this has often resulted in the generation of extremely large increases in shareholder value.

This success has motivated SinnerSchrader to scale its leading knowledge in development, implementationand marketing of eCommerce solutions by taking equity stakes in clients it serves. After careful consideration, SinnerSchrader offers to become venture partner of both start-ups and of established companies, which contri-bute their product knowledge as well as their logistical and financial strenght. SinnerSchrader does not comein expressly as a venture capitalist, but sees its role more as the conversion partner for innovative enterprises.

Blume 2000, the leading flower and plant chain in Germany, founded an eFlower company at the end of1999: the Blume 2000 new media ag. The company has been successfully offering bouquets and plants to thegift and home market at www.blume2000.de since the middle of 2000. An expansion of the business model,the product range and service offerings is planned within the coming months.

SinnerSchrader has been involved with LetMeShip GmbH since the beginning of 2000. As an eLogistic hub,this Franco-German enterprise bundles courier and express orders from small and medium-sized customersand passes them on to carriers such as Deutsche Post Euro Express, TNT, DHL, UPS, FedEX, Alphalegatus orChronopost. As an operator independent platform, LetMeShip.com ensures transparency within a veryheterogeneous market and offers significant rationalisation potential to both sender and carrier through thecomplete digitalisation of the process chain.

26 S UCCE SS STORY

UPS, DHL, XML

L LetMeShip brings together couriers and express orders from ad hoc customers and passes them on to Deutsche Post Euro Express, TNT, DHL, UPL, UPS, FedEX, Alphalegatus or Chronopost, thus effectively operating as an eLogistic hub. As an operator independent platform, LetMeShip.com primarily ensures

transparency in a very heterogeneous market and offers rationalisation potential to both sender and carrierthrough the complete digitalisation of the process chain.

Providing a direct cost and performance comparison of the supplier, the complex tariff systems of thenationally and/or internationally operating courier and express service providers are brought together in anobject oriented data base. LetMeShip determines each of the available services and presents an overview oftheir transport costs and performance. Thereafter, orders can be placed directly on a uniform interface. Inthe same way, the placing of billing is executed electronically on the basis of individual booking data. Thanks to large numbers of XML interfaces, LetMeShip can offer seamless logistics services, to portals aswell as to eRetailers.

27S UCCE SS STORY

BORIS WINKELMANN

Managing Director, LetMeShip GmbH

As an eLogistic-hub, the open exchange with third systems is absolutely critical to our success.The solution: XML.

www.sinnerschrader.com/en/stories/letmeship/www.letmeship.com

OSLO

LONDON AMSTERDAM HAMBURG

PARIS FRANKFURT

MUNICH

S I NCE S I N N E RSCH RADE R WAS FOU N DE D I N G E R MANY – E U ROPE’S MOST I M PORTANT I NTE R N ET

MARKET – IT HAS DEVELOPED A LEADING MARKET POSITION as a provider of high-end eCommerce solutions. This position offers ideal conditions for further expansion into the entire European market. Inaddition, the flotation has established the financial background necessary for such expansion.

However, sufficient financial resources are not the only prerequisite for successfully growing an Europeanbusiness. Equally important is the expansion of orientation and thinking of the existing organisationtowards international and intercultural contexts as an essential milestone for any successful internationali-sation strategy.

Consequently, SinnerSchrader is following a three-step approach to European expansion. The first step is to support the internationalisation of clients within the existing German client base, as well as to obtainforeign clients with pan-European plans. SinnerSchrader has already made headway here with the adapta-tion of the Ricardo auction platform for the English market www.goricardo.co.uk and the expansion of theLetMeShip application for the French market, along with the acquisition of new clients in the Netherlands(Ineas) and Norway (Coshopper). The second step is to support the organic growth of offices within chosenEuropean countries, offices which are to both look after German clients locally and also to pitch for newbusiness within relevant local markets. The opening of the first subsidiary, SinnerSchrader UK Limited,marks the successful beginning of this phase. Within the first few months of operation, SinnerSchrader UKLtd. has already acquired local clients, in addition to managing Europcar.co.uk and GoRicardo.co.uk. In athird step, SinnerSchrader will accelerate the process of internationalisation through selected acquisitions.First options have already been evaluated in the past business year.

29I NTE R NATIONALI SATION28 I NTE R NATIONALI SATION

Go northsouthwest

INTERNATIONAL PROJECTS IN THE PREVIOUS YEAR: Amsterdam, Frankfurt, Hamburg,

London, Munich, Oslo, Paris.

30 S UCCE SS STORY

intersurance

T he Ineas Insurance Company N.V., Europe's first online insurer, has also been offering its services to German customers since March 2000. To accompany this development, SinnerSchrader relaunched this site taking into consideration that the site’s easy adaptability is a crucial characteristic. In the

context of European expansion, county-specific content needs to be edited locally with utmost case andspeed. In addition, considering the various stages of development of the net infrastructure within Europe,the site has also been optimised for extremely short loading times.

Through the seamless integration of the web processes into the back-end system, Ineas consistentlydraws out rationalisation potential and at the same time offers the customer a visible service advantage.

www.sinnerschrader.com/en/stories/ineas/www.ineas.com

31S UCCE SS STORY

FRANK LEYHAUSEN

Campaign Manager EuropeIneas Insurance Company N.V.

We are not a direct seller, but a self servicerestaurant: the secret are simple, quick andstandardised products.

Maintaining and strengthening this business culture is so important to us that we support it with a wholerange of measures. An open office architecture and many common events – from a daily breakfast to heavilysubsidised memberships of health and fitness clubs – allow numerous opportunities for informal communi-cation. Perhaps the most important component is our significant investment in the continued training and development of our staff.

As a result, we have been able to better our targeted staff level of 124 employees by more than 40 % to 174 employees by the end of the fiscal year. In all, our employee numbers actually rose by 180 % during thebusiness year.

SINNERSCHRADER PROVIDES A HIGHLY SPECIALISED SERVICE THAT REQUIRES IT TO WIN OVER AND

integrate the best talent in the industry. Along with attractive clients and projects, SinnerSchradersucceeds in creating an environment that develops and promotes the intellectual capital of our employees tothe optimum level. Our unique business culture provides the conditions for this, bonding all employees closely together regardless of status or location.

Pioneer Culture

RAPID GROWTH: through organic growth,

employee numbers increasedlast year by 180 %.

180 %

32 E M PLOYE E S 33E M PLOYE E S

34 S UCCE SS STORY

flower tower

B lume 2000 – the largest German flower chain – is a successful example of how established market leaderscan intelligently combine offline and online business. In order to use the potential of its high market recognition as well as established distribution and logistics structures, Blume 2000 decided on a con-

sistent multi-channel-strategy: web, retail outlets and call centres are all seamlessly integrated on a uniformplatform. Customers can not only order over the Internet around the clock, but soon will also be able to orderbouquets and plants at branches using a kiosk system (“Flower Tower”). Telephone and fax combine to formthe third ordering channel. Using an independent back-office application based upon Java/Swing technology,call centre staff are able to access the eCommerce application directly, can record orders in input masks andcan competently answer service queries because of the transparent order status tracking system (“Track & Trace”).The latter is for a further component to the solution: a direct connection to the logistics and payment systemof the post eCommerce services.

35S UCCE SS STORY

The integration of all sales channels – web, branches and call centres – is our toppriority.

www.sinnerschrader.com/en/stories/blume2000/www.blume2000.de

DR. MIRKO KOSCHYK

Chief Marketing Officer (CMO), Blume 2000 new media ag

37OUTLOOK36 OUTLOOK

THE GROWTH OF THE MARKET FOR eBUSINESS SOLUTIONS HAS ONLY JUST BEGUN. RENOWNED

RESEARCH INSTITUTES PREDICT A FOUR-FOLD INCREASE IN INVESTMENT IN INTERNET SERVICES AND

eBUSINESS SOLUTIONS. Germany is predicted to remain the largest European market, closely followed byGreat Britain. Other European countries are also growing rapidly and have already reached an interesting size.

The attraction of the market for eBusiness solutions has also led, however, to a significant increase in thenumber of companies offering these services. In particular, established firms from related sectors have deve-loped own offerings and solution competence within the eBusiness service area.

SinnerSchrader was, in 1996, one of the first in Germany to build up business focused on eCommercesolutions from the beginning consistently integrating the necessary consultancy, design and technology competencies. We remain committed to this business concept. The organic development of knowledge, expe-rience and capacity – also at the forefront during the business year 1999/2000 – has made SinnerSchrader aleading eCommerce enabler with an advantage over its its competition.

In order to fully utilize growth potential, we are also pursuing growth through acquisitions, alongsidethis path of organic growth. Our goal is clear: we want to be positioned as one of the top three providers ofcomplex eBusiness solutions in Europe.

Command of the continual technological challenge is a deciding factor for success. Consequently, ouracquisitions strategy aims firstly at strengthening our technological competence. The take over of NetmaticInternet/Intranet GmbH shortly after the end of the business year 1999/2000 – subject to agreement at theAGM – marks our first successful step in implementing this strategy. The second thrust of this strategy istowards regional expansion. During the business year 2000/2001, SinnerSchrader intends to establish itselfwithin three more European markets, in addition to that of Great Britain. We will then be in a position tobetter support our clients in the implementation of Europe-wide business concepts. Based upon our conceptsand methods, we will also strike to participate in the respective regional growth. Through the take over ofNetmatic we will also be presented with a small team, in the USA, for the first time. Finally, this expansionabroad will be accompanied by expansion to at least two additional locations within Germany itself.

To sum up, we are striving for our turnover during the business year 2000/2001 to double that of the pre-vious year. We also want to increase our operating profit before possible depreciations of goodwill.

Our targets are high and they are only attainable if SinnerSchrader succeeds in enthusing the people whoare constantly putting them into action. Offering our staff an environment that provides suitable conditionsfor development is a constant challenge. We are currently in the process of setting up a new eCommerce “factory” in Hamburg, in order to address this challenge and to provide a stimulating environment for 450employees.

Development of internet investment in Europe

Internet investment in Europe for 2003

One step –the next steps

SOURCE: IDC, Datamonitor

SOURCE: IDC

39STOCK38 STOCK

514190–Internet stockwith P/E-Ratio

SINCE 2 NOVEMBER 1999, WKN 514 190 STANDS FOR SINNERSCHRADER AKTIENGESELLSCHAFT ON THE

“NEUER MARKT” IN FRANKFURT – and for the successful combination of Internet, growth, and profitability.In the past fiscal year, the launch on the stock exchange was the most important event for SinnerSchrader. Inintensive discussions with analysts and fund managers, SinnerSchrader presented its clear positioning as aleading service provider for high-end eCommerce solutions in Germany. The result: a twenty-eight fold over-subscription of the share offering, an issue price of 12 at the high-end of the bookbuilding range, and afirst closing price of 21.50 .

The strength of SinnerSchrader’s business model has convinced many prestigious investors from GreatBritain, Italy, Switzerland, the USA, and Germany. Of the 2,475,000 shares placed on the market (including thegreenshoe) 65% were sold to institutional investors and 35% to private investors. Net proceeds totalled DM54.8 million and went completely to the company to finance the growth strategy. As a result of the flotation,24.8% of the total of 9,975,000 shares outstanding are free float. 51.7% of the shares are controlled by OliverSinner and Matthias Schrader (approx. 2% have been lent as security loan). A further 8.6% are owned by Sin-nerSchrader management, with the remaining 14.9% being held by strategic investors.

Since launching on the stock exchange, the stock price has become an important measure for the successof the work at SinnerSchrader. A dynamic development in share value inspires confidence in our shareholders,which in turn acts to create the basis for developing further innovation and growth potential. Not least arethe SinnerSchrader employees part of this consideration, as their compensation and motivation are dependentupon the value development of SinnerSchrader stock due to the consistent use of stock options as a means tocreate equity participation. Following erratic fluctuations on the technology stock markets, however, it isquestionable whether short-term share price movements – be it up or down – are a realistic reflection of thetrue value development.

On 31 August 2000, the SinnerSchrader share price stood at 33.40 , just over 180% higher than the issueprice and about 55% above the first day’s closing price. Over the time period since 2 November 1999, SinnerSchrader shares have performed below the level of the Nemax-All-Share-Index. However, the SinnerSchraderstock outperformed the Internet subindex since it has been first published on 15 May 2000. The latter comparison is already indicative of the strength of SinnerSchrader’s business model.

The Stock

German securities code number 514190

Symbol SZZ

Stock exchange Frankfurter Wertpapierbörse (Neuer Markt)

Indices Nemax All Share, Nemax Internet Index

Shares in circulation (31.08.00) 9,975,000

Issue price 12.00

Business year end share price (31.08.00) 33.40

High/low share price (02.11.99 – 31.08.00) 91.00 /18.00

Ø-Sales volume (02.11.99 – 31.08.00) 49,846 shares per day /1.8 million

Market capitalisation (31.08.00) 333.2 million

Stock results

Result per share 0.20

Price to profit ratio 167 x

SinnerSchrader's goal is to dynamically, and above all steadily, increase its business value over a number ofyears. A crucial building block for this is our committed and active investor relations work. The aim of thiswork is to instil confidence through the provision of transparent, rapid and comprehensive information;short-term effects on share price are not the goal. SinnerSchrader has always striven to make informationconcerning business development, planning and strategy publicly available: at national and internationalconferences, for example in Frankfurt, Berlin, Milan and London last year; during one-to-one meetings withinvestors and analysts at SinnerSchrader's “eCommerce factory” in Hamburg; at road-shows; and also throughintensive work with the trade and financial press. Personal contact is always supplemented with detailed and up-to-date information on the Internet. In-depth data and information is available worldwide at

www.sinnerschrader.com or also at www.wkn514190.de.

Adtraction

Adtraction is one of the technolo-gies SinnerSchrader has develo-ped to rate advertising success;it enables online media cam-paigns to be uniformly tracked,assessed, optimised and refined.

Back-office

Web-based back-office applica-tion, through which the websiteoperator can control all proces-ses and administer all data(order data, CRM-Systems).

Broadband

Transmission channel with abandwidth of at least 768 KB,sufficient, for example, for thebroadcast of a film in real time.The bandwidth refers to thetransmission capacity of a distri-bution system and is shown inBit or Mbit per second.

Caching

A cache is an intermediate storagesystem that saves frequently needed data on a rapid memorymedium. This intermediatestorage system can be realised ashardware or software. The reasonfor caching is to increase speed.

41G LOSSARY40 G LOSSARY

Clickstream

A Clickstream consists of thesequence of pages called up(“clicks”) by a user within a specific time period.

Content Management Systems

Content Management Systems(CMS) are editing systems that support the creation andadministration of editorial content for websites.

Corba

The abbreviation for “CommonObject Request Broker Architec-ture”. Corba is the standard thatdefines the communication between separate applications.Corba is system independentand is not restricted to any oneprogramming language.

CRM

CRM (Customer RelationshipManagement) refers to the use ofspecific methods and programmesthat allow businesses tool-basedanalysis and organisation of theircustomer relations.

Data-mining

Data analysis, in large data bases,in order to uncover hidden rela-tionships between transactionsand information, leading to busi-ness related decisions.

EJB

Abbreviation for “Enterprise JavaBeans”. A model for the develop-ment of Java components withina distributed multi-tier environ-ment. An EJB is a server orientedportable component which focuses on the business logic ofan application.

ERP

ERP – Enterprise Resource Plan-ning Systems – refers to applica-tion software that integrates theall business process of an enter-prise into one multi-modularsystem.

Experience Models

Experience Models, set up on thebasis of scientific experience, practical testing and comprehen-sive market analysis, allow for adetailed reconstruction of contactwith the Internet by the user. A vivid profile of customer beha-viour is produced, which thenoffers important insights into brandloyalty, purchase motivation, pro-duct use and marketing strategy.

GPRS

The GPRS technology (GeneralPacket Radio Service) is the preliminary stage to UMTS andsupports cordless transmissionspeed which is rapid enough tosurf on the Internet in fullcolour. GPRS uses a number oftransmission time slots simulta-neously (Multislot-technology)

and so attains a transmissionspeed of up to 171 KBit/s. GPRS isbased on the use of single datapackets and does not send a con-stant stream of data.

GUI

“Graphical User Interface” (GUI) is the technical reference to the graphical user interface of, forinstance, Windows or Swing.

Java

Java, developed by Sun Micro-systems, is a platform independentobject oriented programminglanguage.

Kiosk-System

Kiosk-systems are computer basedinformation enquiry and trans-action systems that support newtypes of distribution. Their broadspectrum ranges from productinformation systems, to electronicguiding aids for retailers to pointof information systems in publicplaces, airports or train stations,through to interactive TV-shopping.

Middleware

Middleware links the user inter-face with the existing back-endsystem on the basic of leadingindustry standards Java, EJB, Corbaor XML .

Multi-tier-architecture

In multi-tier-architecture, usuallythree-tier-architecture, a distin-ction is made between data storage, application logic and pre-sentation level. This separationallows for a modular, flexible,scaleable system architecture.

PDA

Abbreviation for “Personal DigitalAssistant”; often a compact com-puter with calendar and messagefunction. Also referred to as aHandheld.

Swing

A Java class library. Part of the JDK1.2 (Java Development Kit) fromSun Microsystems. Swing simplifiesthe production of standardisedand upmarket user interfaces suchas those known from Windows or Apple.

Usability

User friendliness of a website,achieved by clear design andwith a clearly structured navi-gation that generate greater “stickiness”.

WAP

WAP (Wireless Application Pro-tocol) is a protocol defining the broadcast and presentation of specialised Internet content onappliances with reduced presen-tation space such as mobiles orhandhelds (PDAs).

XMLXML (Extensible Markup Language)is a standard for the definition ofplatform independent, structureddata formats. XML, like HMTL, isalso a part of SGML (StandardGeneralised Markup Language).While HTML is used for represen-tation, XML can describe data definition.

A E

J

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M U

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XP

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DG

C O N S O L I D AT E D S TAT E M E N T S of SinnerSchrader Aktiengesellschaft 1999 / 2000

J O I N T S TAT U S R E P O R T O FT H E S I N N E R S C H R A D E R G R O U PA N D T H E S I N N E R S C H R A D E RA K T I E N G E S E LLS C H A F T F O R T H EF I S CA L Y E A R 1 9 9 9 / 2 0 0 0

C O N S O LI DAT E D B A L A N C E S H E E T S

C O N S O LI DAT E D S TAT E M E N T SO F O P E R AT I O N S

C O N S O LI DAT E D S TAT E M E N T SO F S H A R E H O LD E R S ’ E Q U I T Y

C O N S O LI DAT E D S TAT E M E N T SO F CA S H F LOW S

N OT E S TO T H E C O N S O LI DAT E DF I N A N C I A L S TAT E M E N T S

S U M M A RY O F S I G N I F I CA N TD I F F E R E N C E S B E T W E E N U S - G A A PA N D G E R M A N L AW W I T H R E G A R DTO AC C O U N T I N G , VA LUAT I O NA N D C O N S O LI DAT I O N P R I N C I P LE S

AU D I TO R S ’ O P I N I O N G R O U P

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44 JOI NT STATUS R E PORT

I . G E N E R A L

The SinnerSchrader Group (“SinnerSchrader” or “Group”) is made up of SinnerSchrader Aktienge-sellschaft (“SinnerSchrader AG” or “AG”, a joint stock company or PLC) and its subsidiaries Sinner+Schrader Interactive Marketing GmbH (“SinnerSchrader IM”), Sinner+Schrader Interactive SoftwareGmbH (“SinnerSchrader IS”) and SinnerSchrader UK Limited. SinnerSchrader is one of Germany’sleading consultancy and service companies for the development, design and implementation ofeCommerce and eBusiness solutions.

SinnerSchrader AG performs the functions of a managerial holding company. The consultancyand services business is carried out by the subsidiaries, and the status of SinnerSchrader AG istherefore reported on together with that of the Group. Unless specific reference is made to the AG,the information provided refers to the Group. The Annual Accounts for the Group were drawn upin accordance with § 292a HGB (German Commercial Code) with discharging effect, on the basisof US accounting principles (“US-GAAP”). The individual accounts of the AG are produced in accor-dance with German accounting rules.

The fiscal year 1999/2000 of the AG and the Group ran from 1 September 1999 to 31 August 2000. Inthe following report on the Group’s business development, comparisons with previous periodsare based on the accounts from the partial fiscal year 1999 from 1 January 1999 to 31 August1999, and the fiscal year of 1 January 1998 to 31 December 1998.

I I. M A R K E T A N D C O M P E T I T I V E E N V I R O N M E N T

The number of Internet users has grown explosively over recent years, and against this backdrop theInternet has asserted itself over the past year and a half in Europe, particularly here in Germany,as a platform for the buying and selling of goods and services. The number of Internet users inEurope has risen from 24 million in 1998 to more than 92 million in 2000; in Germany this figurehas grown from 10 million to 18 million. The value of transactions performed over the Internetwithin the same time period is estimated to have risen from DM 12 billion to DM 135 billion inEurope and from DM 4 billion to DM 35 billion in Germany. This indicates that the status of theInternet has developed from that of a presentation and communication medium to that of a trans-action platform.

Shaped by this progress, the demand for consultancy and implementation services for Internet-based business strategies is also growing extremely fast. Estimates of the average annual growthrate from 1998 to 2000 fluctuate between 80 % and 120 % for Europe, while Europe’s share in theworld market for these services has also grown. The market development during 1998 and 1999was heavily characterised by the start-up enterprises of the so-called New Economy, whereas thegrowth dynamic of the Internet services market has more recently been spearheaded by the com-

Joint status report of the SinnerSchrader Group and the SinnerSchrader Aktiengesellschaftfor the fiscal year 1999/2000

45JOI NT STATUS R E PORT

panies of the Old Economy who have recognised the strategic necessity for developing and put-ting into practice an eCommerce strategy. Furthermore, the expansion or transferral of businessprocesses onto the Internet is increasingly becoming an initiating factor for a fundamental re-examination of business processes.

The business model of the “integrated eCommerce enabler” has evolved among pure Internet serviceproviders as a service that combines the three fields of consultancy, design and technical imple-mentation within one integrated process. Numerous companies from this sector have been listedon the world’s stock exchanges over the past 18 months, and the capital absorbed as a result hasplaced them on an aggressive, often acquisition-based growth course. Another consequence ofthe success of the Internet has been that established enterprises in the IT service and advertisingindustry have forced their way into the Internet market and begun to offer their own services.

I I I. D E V E L O P M E N T A N D P O S I T I O N O F T H E G R O U P

Since its foundation in 1996, SinnerSchrader has consistently developed its business model of anintegrated eCommerce enabler, and by focussing early on the market for transactional Internetapplications the company has achieved an excellent position in the German market. Within thisprocess of evolution, SinnerSchrader has always managed to combine business expansion with pro-fit growth.

SinnerSchrader has maintained this successful business development over the fiscal year 1999/2000. The year was marked on the one hand by the organic expansion of the organisation and theactualisation of growth opportunities in the German market with many existing and new clients.On the other hand SinnerSchrader also succeeded in creating the conditions for further growth in Europe, by launching itself on the stock exchange on 2 November 1999, by sharpening its techno-logical profile, by preparing for acquisition moves, and by beginning its internationalisation throughthe setting up of a London office.

Revenues tr ipled

47JOI NT STATUS R E PORT46 JOI NT STATUS R E PORT

By retaining clear market positioning, SinnerSchrader upheld the high levels of growth of previousyears. Revenues during the fiscal year 1999/2000 rose to DM 28.7 million as opposed to DM 8.4 millionover the first eight months of 1999. This corresponds to a growth of 241%. DM 19.1 million of thesesales were generated by Project services, compared with DM 5.5 million during the partial fiscalyear 1999, a rise of 244 %. SinnerSchrader successfully launched more than 20 eCommerce/eBusinesssolutions for its clients during the fiscal year 1999/2000. The share in total sales claimed by Projectservices was 66.5 % during the fiscal year, slightly higher than its share during the first eightmonths of 1999, but still beneath the strategic target range of 70 - 75 %.

In its Media services business SinnerSchrader achieved revenues of DM 7.6 million, approximately150 % more than in the partial fiscal year 1999. The share of this in total sales for 1999/2000 was26.5 %. For the establishment of client relationships with foreign clients, the Media services providean attractive link-point. The service offering to our clients also in the marketing phase of a websitehas become one of SinnerSchrader’s firmly established services.

Other services generated DM 2 million of sales, around 7 % of total turnover. A large proportion of this figure resulted from sales of hardware and software, which clients requested us to buy inas part of the technical consultancy for, and operation of, the eCommerce solutions we created.Sales from Other services were still comparatively low in previous years.

Client basis expanded considerably

This rise in revenues compared with the previous partial fiscal year has resulted, in approximatelyequal measure, from business with both existing and new clients. This shows that SinnerSchraderhas succeeded in utilising the growth potential of the existing client portfolio without neglectingexpansion. 16 new clients chose SinnerSchrader during 1999/2000 as the company to realise theirInternet-based business strategies, signifying a reduced dependency on individual clients in com-parison with previous periods. SinnerSchrader generates around 62 % of its revenues from its sixbiggest clients; in the previous partial fiscal year this figure was 70 %. Five clients accounted forsales of more than DM 2 million during the fiscal year, while the next three clients generatedsales of more than DM 1 million during the year.

With regard to its vertical structures, SinnerSchrader’s client portfolio shows a clear emphasis on eRetailers. Other prominent shares are accounted for by the finance and corporate/eMarketsindustries.

Organic growth

SinnerSchrader has kept pace with the growth in its business purely through the organic expan-sion of its organisation. The number of employees rose from 62 at the end of August 1999 to 174at the end of August 2000. This growth was enabled because of attractive projects, a prominentcorporate culture, flat company hierarchies, and not least by people’s increased awareness of SinnerSchrader as a result of its flotation on the stock exchange. Employee growth was particu-larly strong in the engineering department due to the increasing technical complexity of thesolutions that SinnerSchrader designs and implements. In this field the team was built up from22 at the end of the previous period to 60 at the end of the fiscal year 1999/2000.

The challenge is to gain the loyalty of our employees. To succeed in this, SinnerSchrader offers abalanced total package of cultural and financial elements, speaking to the individual employeeas a whole person, and providing him with the opportunity for broad personal development. Theshare options available to every employee are an important element of this package, allowing themto share in the success of the company. By the end of August 2000, 165,300 options had beenissued to employees from the 1999 Stock Option Plan at an average striking price of 32.96.

After adjustment for part-time employment, an average of around 103 people were employed by SinnerSchrader during the fiscal year 1999/2000, as opposed to around 38 in the partial fiscalyear 1999. The total revenues per employee were therefore approximately DM 279,000 in1999/2000. Average sales from Project services were approximately DM 186,000. These figures,during the previous period, were approximately DM 330,000 and DM 218,000 respectively. The fallin per-employee sales was expected and was primarily a result of the necessary expansion of cen-tral administrative functions, especially in the personnel, financial and controlling departments.Furthermore, the settling-in period for new employees to the point of full productivity has risen,among other things because of the increased complexity of projects. Despite this fall in per-capitasales, however, SinnerSchrader’s employees are still among the most productive in the industry.

Operating income doubled, operat ing prof i t margin at nearly 23 %

As a consequence of high employee productivity, the success of the projects on which SinnerSchraderis working, and the consistently low sales costs, SinnerSchrader succeeded in achieving an opera-ting profit margin of 22.9 % during the fiscal year 1999/2000, placing the company firmly atthe peak of the industry. In absolute terms SinnerSchrader achieved an operating income of DM 6.6 million in 1999/2000, 133 % or DM 3.7 million more than in the first nine months of 1999.As expected and announced, the operating profit margin was lower than the previous period’s33.6 %. Aside from the factors already mentioned, other notable causes of this were: the increasein legal and consultancy costs, the costs of an image campaign linked with the stock exchange flotation, the fact that a discount on client accounts receivable was allocated to bad debt allow-ences for the first time, and the cost of setting up the office in London. A limited amount of costswere also incurred in the development and evaluation of basis technologies.

The net income for the year 1999/2000 was DM 3.8 million, 187 % more than in the previous 8-monthsperiod. Because of the financial result made possible by the earnings from the stock exchangelisting, the annual net income margin was 13.4 %, only slightly less than in the previous period.

49JOI NT STATUS R E PORT

List ing on stock exchange creates basis for fur ther stages of growth

With the successful placement of around 2.5 million shares on the Neuer Markt (New Market) ofthe Frankfurt Stock Exchange SinnerSchrader has paved the way for the continuation of its dynamicgrowth. The significant strengthening of the equity capital base and the influx of DM 54.8 millionof cash resources after deduction of the costs of the placement, as well as the possibility of takingover companies using shares, has given SinnerSchrader new room for manoeuvre. However, theobjective is not the short-term acceleration of growth in sales. Instead we are keen to continuedeveloping SinnerSchrader in such a way that a basis is formed for medium and long-term valuegrowth. To this end, SinnerSchrader sees its job firstly as widening its technological competence,and secondly as expanding the basis of its business in other European countries.

The balance sheet structure is basically shaped by the effects of the launch on the stock exchange.With DM 66.1 million equity capital, the equity ratio is more than 87 %. Cash resources and short-term investments amounting to DM 60.7 million dominate the assets section. Alongside this,accounts receivable from trade debtors are prominent at DM 8.3 million. Significant tax positionsare on both sides of the consolidated balance sheet, with DM 3.4 million of outstanding tax debtsbalanced off by around DM 4.1 million of tax reserves (without deferred tax liabilities).

Technological competence is the decisive competit ive factor

SinnerSchrader is convinced that the mastery and continuous expansion of technological exper-tise is the key factor for its future success as an eCommerce/eBusiness enabler. For this reason,the sharpening of its technological profile was one of the tasks in which SinnerSchrader wasespecially involved during the fiscal year 1999/2000. The fact that SinnerSchrader was one of thefirst service providers in Germany to establish a WAP-based mCommerce solution for a client atthe end of January is evidence of the company’s potential.

Another decisive step towards continued development was the combining of experience and ex-pertise from the previous eCommerce solutions in the Unified Commerce Platform, to form abasis for the development of new client projects. The technological platform will be complementedby a unified commerce process model with which SinnerSchrader will be able to create success-ful eCommerce and eBusiness solutions with even greater efficiency. Also, by establishing a competence centre for Intershop Enfinity, SinnerSchrader has extended its technological range to include one of the most promising standard products in the market for eCommerce solutions.

IV. D E V E L O P M E N T A N D P O S I T I O N O F T H E A G

SinnerSchrader AG is the managerial holding company of the SinnerSchrader Group. Shares inSinnerSchrader AG have been traded on the Neuer Markt of the Frankfurt Stock Exchange since 2 November 1999.

The business activities of SinnerSchrader AG centre around the management of the fully ownedsubsidiaries, the central handling of administrative tasks for the Group, the management of the majority of the Group’s cash resources, the management of other investments, and the per-formance of central Group tasks.

48 JOI NT STATUS R E PORT

The result per share reached DM 0.40 on a diluted basis, an increase of 81 %. The effect of the hig-her net income for the year was partially compensated for by the increased number of outstandingshares after the flotation.

Tax payments lead to negative operat ive cash f low

In spite of the successful development of business, cash flow from operating activities was nega-tive at DM -0.6 million during the fiscal year 1999/2000. One of the reasons for this is that SinnerSchrader had to pay significant provisions for income taxes for the first time, approximatelyDM 2.1 million. But a sharp rise in client accounts receivable by DM 7.3 million net, or includingservices not yet invoiced by DM 1.6 million, was also negatively affecting the cash flow from ope-rating activities. The average age of receivables was 45 days. This places SinnerSchrader in a rela-tively good position for the industry, although it is still our aim to reduce capital tied up in clientaccounts receivable relative to sales.

Star t of work with ventures

In accordance with its venture strategy, SinnerSchrader began work with two partner companiesin the fiscal year 1999/2000. Business models were successfully launched on the Internet for bothLetMeShip GmbH and Blume 2000 new media ag. In the weeks following the end of the fiscalyear, LetMeShip GmbH’s application won its first eBusiness award. The aim of the venture strategyis to retain minority shareholdings of up to 20 % in the partner companies. This is legally securedin both ventures, although the corresponding capital subscription has in part not yet been possible,with the result that the effects of the planned investments impacted only slightly on the cashflow for investing activities on the one hand and the investment assets on the other.

Investments in tangible assets of approximately DM 1.1 million were made, mainly for equippingemployees’ workplaces, purchasing software and extending the central hardware infrastructure.

50 JOI NT STATUS R E PORT

The main event for the AG in the fiscal year 1999/2000 was its admission to the Neuer Markt ofthe Frankfurt Stock Exchange, and the placement of 2,475,000 shares at the beginning of November1999. The listing created an influx of DM 58.1 million to the AG, while the costs of the flotationwere DM 3.3 million, which are included as other operating expenses in the AG’s profit and loss statement.

During the course of the year, cash resources were put into interest-bearing investments and mar-ketable securities (including money-market investment funds) with a duration of no more thanthree months, offered by banks with good financial standing. This created interest earnings ofDM 1.2 million, DM 10,000 of which resulted from the financing of affiliated companies. Otherincome and expenses that applied to financial items, stemming from buying and selling of themarketable securities, currency exchange rate hedges, fees and commissions are included underother operating income/expenses. They amounted to DM 0.3 million net.

The AG generated a turnover of DM 0.9 million by performing managerial functions for the subsi-diaries. Dividend payouts from the subsidiaries also generated investment income of DM 5.5 millionfor the AG. Major items balancing this on the other side, in addition to the costs of flotation, werepersonnel costs of DM 1.2 million and other operating expenses of DM 2.9 million, in particularfor legal services, consulting and advertising. This produced a result from ordinary business activities of DM 1.1 million (previous year DM 0.2 million). After around DM 0.4 million in taxes,primarily commercial tax, the remaining net profit for the year was DM 0.7 million (previousyear DM 0.2 million).

The assets side of the balance sheet consists mainly of cash resources and securities amountingto DM 59.8 million (previous year: DM 4.0 million) and equity interest of DM 16.1 million (pre-vious year: DM 16.0 million). The other assets of DM 3.7 million (previous year: DM 0.0 million)were dominated by receivable income tax and turnover tax; accounts due from affiliated compa-nies amounted to DM 1.5 million. Opposing this on the liabilities side was mainly the equity capitalof DM 78.6 million (a DM 0.1 million deficit was not covered by equity capital the previous year).

V. R I S K S O F F U T U R E B U S I N E S S

The future business development of SinnerSchrader is subject to risks which could have a negativeeffect on its earnings and financial situation, or which could mean that SinnerSchrader fails toachieve its development objectives. These risks are related principally to the volatility of the, stillyoung, market for Internet services, to SinnerSchrader’s relatively short business history, and tothe strong growth which the Group intends to achieve. The risks relate to the following potentialscenarios (this is not an exhaustive list):

A slowing of the growth of investment in Internet-based business models, and an increase in competitive intensity above that which is predicted.

Higher costs and integration effort for future acquisitions, as well as the need to depreciate goodwill from acquisitions in a way that effects the results.

Dependency on key employees and the need for a continuous intake of qualified staff.

Dependency on a few clients who make up a significant share of sales, and the economic failureof clients in whom SinnerSchrader has invested.

Overstepping costs in fixed price projects, suffering quality difficulties in the delivery of service.

51JOI NT STATUS R E PORT

The Management Board of SinnerSchrader Aktiengesellschaft considers it one of its main tasks to continuously evaluate the risks with regard to a) their potential effect on earnings and financesand b) the likelihood of them occurring, and to introduce suitable measures if necessary.

VI. E V E N T S A F T E R T H E R E P O R T I N G D AT E

On 15 September 2000 SinnerSchrader and the other shareholders of LetMeShip GmbH approveda capital increase in which SinnerSchrader and a third-party investor would subscribe new sharesagainst cash. As part of this increase SinnerSchrader will contribute DM 300,000.

On 18 September 2000 SinnerSchrader signed an agreement with the shareholders of NetmaticInternet/Intranet Solutions GmbH relating to the contribution of 100 % of the shares in Netmatic.Netmatic Internet/Intranet Solutions GmbH is a profitable eCommerce software specialist withmore than 50 employees and predicted sales of DM 10 million for the year 2000. The agreementhas still to be approved by the General Meeting of Shareholders in accordance with § 52 of theAktiengesetz (German Stock Corporation Law).

If this approval is granted, SinnerSchrader will have considerably expanded its technological com-petence with this first take-over, and acquired crucial know-how and attractive customer links inthe field of programming on the basis of WebObjects. The price of the takeover is not yet finalised;it will be based on Netmatic’s sales and pre-interest, pre-tax profits during the year 2000. An ini-tial purchase price instalment of DM 30 million, which also represents the lower purchase pricelimit, will be due following approval by the General Meeting of Shareholders. A small percentageof the purchase price will be paid in cash, while most of it will be covered by issuing new sharesin SinnerSchrader AG from approved capital.

VII. O U T L O O K

SinnerSchrader is predicting that investments in Internet solutions in Europe will double in theyear 2001. The difficulties currently being experienced by pure Internet companies (“dot.coms”)will only have a temporary damping effect. Because of the successful development of its businessduring the fiscal year 1999/2000, SinnerSchrader is now in an excellent position for further dy-namic growth. The challenge lies in supplementing organic growth, which will be pursued vigo-rously, with acquisitions. The focus of these acquisitions will be technology and regional expansionwithin Europe. The takeover of Netmatic Internet/Intranet Solutions GmbH was a successful startin this respect.

SinnerSchrader is expecting sales to double during the fiscal year 2000/2001, and predicts a furtherabsolute rise in its operating result before any adjustment for goodwill depreciation which mightoccur. However, the operating profit margin will, according to current estimates, come in atbelow 20% on account of the expenditure necessary for growth.

53CON SOLI DATE D FI NANCIAL STATE M E NTS52 CON SOLI DATE D FI NANCIAL STATE M E NTS

31.08.2000in DM

31.08.1999in DM

31.12.1998in DM

01.09.199931.08.2000

in DM

01.01.199931.08.1999

in DM

01.01.199831.12.1998

in DM

01.09.199831.08.1999

in DM 1)

31.08.2000in DM

31.08.1999in DM

31.12.1998in DM

Revenues

Project services 19,068,682 5,548,649 2,717,051 6,632,395

Media services 7,584,759 2,743,550 788,800 3,057,394

Others 2,023,332 107,500 91,325 128,783

Total revenues, gross 28,676,773 8,399,699 3,597,176 9,818,572

Media costs - 6,352,517 - 2,370,250 - 694,893 -2,655,562

Total revenues, net 22,324,256 6,029,449 2,902,283 7,163,010

Cost of revenues - 10,724,951 - 2,319,020 - 1,815,654 -3,039,113

Gross profit 11,599,305 3,710,429 1,086,629 4,123,897

Sales, general and administrative expense - 5,023,272 - 884,246 - 816,329 - 1,299,467

Operating Income 6,576,033 2,826,183 270,300 2,824,430

Other income/other expense, net 57,979 25,600 29,353 34,605

Financial income, net 1,575,127 12,045 7,726 15,728

Income before provision for income taxes 8,209,139 2,863,828 307,379 2,874,763

Provision for income taxes - 4,359,942 - 1,524,171 - 214,469 -1,593,807

Net income 3,849,197 1,339,657 92,910 1,280,957

Net income per share (basic) 0.40 0.22 0.02 0.21

Shares used in computing basic net income per share 9,563,942 6,025,000 6,000,000 6,016,500

Net income per share (diluted) 0.40 0.22 0.02 0.21

Shares used in computing diluted net income per share 9,608,278 6,025,000 6,000,000 6,016,500

1) pro-forma figures unaudited

The accompanying notes are an integral part of these financial statements.

Consolidated balance sheetsas of 31 August 2000, 31 August 1999 and 31 December 1998

Consolidated statements of operationsfor the fiscal year ended 31 August 2000, the period from 1 January 1999 to 31 August 1999and for the fiscal year ended 31 December 1998

Assets

Current assets:

Cash and cash equivalents 567,158 6,149,889 167,543

Short-term investments 60,151,188 0 0

Accounts receivable, net of allowances for doubtful accounts (DM 484,608, previous years: DM 0, and DM 0, respectively) 8,318,657 1,460,095 267,911

Unbilled services 1,648,164 0 90,054

Other current assets and prepaid expenses 3,639,008 196,112 28,127

Total current assets 74,324,175 7,806,096 553,635

Property and equipment 1,122,320 521,177 301,365

Investments 143,228 123,670 0

Total assets 75,589,723 8,450,943 855,000

Liabilities and Shareholders’ Equity

Current Liabilities:

Accounts payable 1,289,257 592,505 156,718

Accrued tax liabilities and deferred tax liabilities 4,766,728 1,776,698 184,242

Other accrued liabilities 2,104,177 439,508 125,694

Other current liabilities and deferred revenue 1,325,195 217,993 78,400

Total current liabilities 9,485,357 2,963,704 545,054

Commitments and contingencies (NOTE III.D. )

Shareholders’ equity

Common stock, par value 1,outstanding: 9,975,000, 7,500,000, 0 sharesin 2000, 1999, 1998, respectively 19,509,404 14,668,725 0

Additional paid in capital,net of equity adjustment 41,275,425 - 10,425,724 243,000

Receivables from shareholders 0 - 48,896 - 50,000

Retained earnings 5,142,331 1,293,134 116,946

Accumulated other comprehensive income 177,206 0 0

Total shareholders’ equity 66,104,366 5,487,239 309,946

Total liabilities and shareholders’ equity 75,589,723 8,450,943 855,000

The accompanying notes are an integral part of these financial statements.

- 25.000

–

- 25.000

–

- 50.000

–

50.000

–

- 48.896

–

- 48.896

–

–

48.896

–

–

55CON SOLI DATE D FI NANCIAL STATE M E NTS

- 25,000

–

- 25,000

–

- 50,000

–

50,000

–

- 48,896

–

- 48,896

–

–

–

48,896

–

–

24,036

92,910

–

–

116,946

1,339,657

–

- 163,469

–

–

1,293,134

3,849,197

–

–

–

–

5,142,331

–

–

–

–

–

–

–

–

–

–

–

–

177,056

150

–

–

177,206

–

92,910

–

–

92,910

1,339,657

–

–

–

–

1,339,657

3,849,197

177,056

150

–

–

4,026,403

49,036

92,910

25,000

143,000

309,946

1,339,657

50,000

- 163,469

3,951,105

–

5,487,239

3,849,197

177,056

150

48,896

56,541,828

66,104,366

50,000

–

50,000

143,000

243,000

–

–

–

1,066,256

- 11,734,980

- 10,425,724

–

–

–

–

51,701,149

41,275,425

Comprehensiveincome

in DM

Totalshareholders’

equityin DM

Retainedearnings

in DM

Receivables fromshareholders

in DM

Additional paid-in capital, net of

equity adjustmentin DM

Accumulatedother comprehensive

income in DM

54 CON SOLI DATE D FI NANCIAL STATE M E NTS

Nominal valuein DM

Numberof shares

COMMON STOCK

Balance as of 31 December 1997

Net income

Contribution of capital

Stock compensation

Balance as of 31 December 1998

Net income

Payment of receivables from shareholders

Distribution of earnings

Sale of common stock

Reclassification for formation of stock corporation

Balance as of 31 December 1999

Net income

Unrealised gains on available-for-sale securities (net of tax)

Foreign currency translation adjustment (net of tax)

Payment of receivables from shareholders

Issuance of stock in initial public offering (net)

Balance as of 31 August 2000

The accompanying notes are an integral part of these financial statements.

–

–

–

–

–

–

–

–

2,933,745

11,734,980

14,668,725

–

–

–

–

4,840,679

19,509,404

–

–

–

–

–

–

–

–

1,500,000

6,000,000

7,500,000

–

–

–

–

2,475,000

9,975,000

Consolidated statements of shareholders’ equityfor the fiscal year ended 31 August 2000, the period from 1 January 1999 to 31 August 1999and for the fiscal year ended 31 December 1998

56 CON SOLI DATE D FI NANCIAL STATE M E NTS

31.08.2000in DM

31.08.1999in DM

31.12.1998in DM

Consolidated statements of cash flowsfor the fiscal year ended 31 August 2000, the period from 1 January 1999 to 31 August 1999and for the fiscal year ended 31 December 1998

Cash flows from operating activities:

Net income 3,849,197 1,339,657 92,910

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 425,766 191,684 161,877

Bad debt expense 484,608 0 0

Non-cash expense / -revenue - 71,023 -30,955 143,000

Loss on disposal of property and equipment 8,485 18,919 0

Gain/loss on disposal of market securities (available-for-sale) - 1,035,671 0 0

Changes in:

Accounts receivable - 7,343,170 - 1,192,185 -235,242

Unbilled services - 1,648,164 0 0

Other current assets and prepaid expenses - 1,685,224 - 77,930 -64,450

Accounts payable, other liabilities and deferred revenues 1,952,823 426,510 154,064

Accrued tax liabilities and deferred tax liabilities 2,788,774 1,592,457 162,228

Other accrued liabilities 1,664,669 313,814 85,658

Net cash provided/used by operating activities - 608,930 2,581,971 500,045

Cash flows from investing activities:

Proceeds from sale of property and equipment 30,328 5,134 0

Purchase of property and equipment - 1,080,418 - 435,550 - 365,673

Purchase of investments - 19,558 -6,845 0

Purchase of short-term investments - 170,722,369 0 0

Proceeds from sale of short-term investments 111,985,163 0 0

Net cash used in investing activities - 59,806,854 - 437,261 -365,673

Cash flows from financing activities:

Payment of receivables from shareholders 48,896 50,000 0

Distribution of earnings 0 - 163,469 0

Contribution to capital 0 0 25,000

Proceeds from sale of stock 54,784,157 3,951,105 0

Net cash provided by financing activities 54,833,053 3,837,636 25,000

Net change in cash and cash equivalents - 5,582,731 5,982,346 159,372

Cash and cash equivalents, beginning of period 6,149,889 167,543 8,171

Cash and cash equivalents, end of period 567,158 6,149,889 167,543

The accompanying notes are an integral part of these financial statements.

57CON SOLI DATE D FI NANCIAL STATE M E NTS

I. Organisation and operations of the SinnerSchrader Group

As of 31 August 2000 the SinnerSchrader Group (“SinnerSchrader” or “Group”) consists of Sinner

Schrader Aktiengesellschaft (“SinnerSchrader AG” or “Company”), Sinner+Schrader Interactive

Marketing GmbH (“SinnerSchrader IM”), Sinner+Schrader Interactive Software GmbH (“Sinner

Schrader IS”) and SinnerSchrader UK Limited (“SinnerSchrader UK”). The consolidated companies

are electronic commerce (“eCommerce”) consulting and service organisations and serve other

enterprises in the conception, implementation, establishment, and marketing of eCommerce

solutions. The services include eCommerce strategy consulting, user experience design and deve-

lopment, software and systems development and integration, eCommerce solution management

and maintenance, as well as planning, implementation and controlling of online media campaigns.

In addition, SinnerSchrader AG holds minority stakes in companies that are concerned with

establishing Internet-based businesses.

SinnerSchrader IM was founded in February 1997 and SinnerSchrader IS was founded in Decem-

ber 1997 as limited liability companies. With the aim of functioning as a holding company for

SinnerSchrader IM and SinnerSchrader IS, Desideria Vermögensverwaltung GmbH was formed

in July 1999 and later on converted from a limited liability company to a stock corporation (“Ak-

tiengesellschaft”) and renamed to “SinnerSchrader Aktiengesellschaft” in August 1999. As part of

the formation of SinnerSchrader AG the shareholders of SinnerSchrader IM and SinnerSchrader

IS contributed their interest in these companies to a capital increase of SinnerSchrader AG for

6,000,000 no-par value ordinary shares of SinnerSchrader AG with a nominal value of 1. On

the same day, an outside investor purchased a total of 1,500,000 no-par value ordinary shares in

SinnerSchrader AG with a nominal value of 1 – 1,475,000 of which in conjunction with a capital

increase – for a total cash contribution of DM 4 million.

The consolidated financial statements for the periods ended prior to 31 August 1999 have been

presented as if SinnerSchrader IM, SinnerSchrader IS, and SinnerSchrader AG had been combined

Notes to the consolidatedfinancial statements

59CON SOLI DATE D FI NANCIAL STATE M E NTS

E . C O N C E N T R AT I O N O F C R E D I T R I S K A N D S I G N I F I CA N T C U S T O M E R S

SinnerSchrader extends credit to its customers in the normal course of business, performs ongoingcredit evaluations of its customers and maintains allowances for doubtful accounts.

Net receivables from and unbilled services to significant customers as a percentage of total netreceivables and unbilled services were as follows:

Gross sales to significant customers as a percentage of total gross revenues were as follows:

In July 1999, SinnerSchrader entered into an arrangement with Client A whereby the clientwould receive a limited amount of services from SinnerSchrader, and, in exchange, SinnerSchraderentered into a convertible debt at par value of 3.500, and has the option to convert the debt into 3,500 shares of Client A at an exercise price of 33 per share. These options expire in June2004. The option to purchase shares of Client A was valued at the date of grant at DM 116,600 assuming a risk-free interest rate of 5.4 %, an expected life of five years, and expected volatility of70 %. This amount was first recorded as deferred revenue and later recognised as services wereprovided to Client A. Approximately 27 % of the hours to be provided under the arrangement wereprovided prior to 31 August 2000. The remaining 63 % were delivered in the first quarter of fiscalyear 1999/2000.

58 CON SOLI DATE D FI NANCIAL STATE M E NTS

II. Summary of significant accounting policies

A . B A S I S O F F I N A N C I A L S TAT E M E N T S

The consolidated financial statements have been prepared according to United States generallyaccepted accounting principles (US-GAAP). They include the accounts of SinnerSchrader AG andits wholly owned subsidiaries SinnerSchrader IM, SinnerSchrader IS, and SinnerSchrader UK. All significant intercompany transactions and balances between the companies have been elimi-nated. The accounts have been prepared after making necessary adjustments to the Company’sbooks and records that are maintained in accordance with the German Commercial Code.

All references in the Notes to Consolidated Financial Statements to the periods “1999/2000”,“1999”, and “1998” refer to the periods from 1 September 1999 to 31 August 2000, 1 January 1999to 31 August 1999, and the year ended 31 December 1998, respectively.

B . U S E O F E S T I M AT E S

The preparation of financial statements in conformity with generally accepted accounting prin-ciples in the United States requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ form those estimates.

C . F O R E I G N C U R R E N CY

The functional currencies of SinnerSchrader’s subsidiaries outside of Germany are the local cur-rencies. The financial statements of these subsidiaries are translated to Deutsche Mark using peri-od-end rates of exchange for assets and liabilities and average rates during the period for revenues,cost of revenues, and expenses. Translation gains and losses are accumulated as a component ofshareholders’ equity. Transaction gains and losses are reported in the consolidated statements ofoperations.

D . FA I R VA L U E O F F I N A N C I A L I N S T R U M E N T S

SinnerSchrader’s financial instruments, including cash equivalents, marketable securities, accountsreceivable, accounts payable, are carried at amounts which approximate fair value.

Client A 13 % 17 % –

Client B 11 % – –

Client C 10 % – –

Client D 8 % 25 % –

Client E 8 % 20 % –

Client F 4 % – 26 %

Client G – – 54 %

31.12.199831.08.199931.08.2000

01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Client A 17 % 16 % 2 %

Client D 8 % 12 % 2 %

Client E 13 % 9 % 3 %

Client F – 13 % 38 %

Client H 1 % 5 % 11 %

Client G – 15 % 2 %

61CON SOLI DATE D FI NANCIAL STATE M E NTS

up by SinnerSchrader and a third party investor. As a consequence of the capital increase Sinner-Schrader AG’s share in the company dropped below 20 %. The capital increase has not yet beenregistered with the commercial register.

The investments are accounted for under the cost method. SinnerSchrader assesses the fair marketvalue of its cost-based investments and recognises any identified impairment.

H . I M PA I R M E N T O F L O N G - L I V E D A S S E T S

SinnerSchrader periodically evaluates the recoverability of the carrying amount of its long-livedassets in accordance with SFAS 121, “Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to be disposed of ”. Whenever events or changes in circumstances indicate thatthe carrying amounts of those assets may not be recoverable, the Company will compare undis-counted net cash flows estimated to be generated by those assets to the carrying amount of thoseassets. When these undiscounted cash flows are less than the carrying amounts of the assets, theCompany will record impairment losses to write the asset down to fair value, measured by thediscounted estimated net future cash flows expected to be generated from the assets. During theperiods ended 31 August 2000, 31 August 1999 and 31 December 1998, the Management believesthat no such impairments exist.

I . S TAT E M E N T S O F CA S H F L O W S

SinnerSchrader paid DM 1,268, DM 21, and DM 115 for interest in the fiscal periods ended 1999/2000,1999 and 1998, respectively. The Company paid DM 2,096,508, DM 30,180, and DM 75,194 for taxesin 1999/2000, 1999, and 1998, respectively.

For the purpose of the consolidated statements of cash flows, SinnerSchrader considers all highlyliquid investments purchased with original maturities of three months or less to be cash equiva-lents. Cash equivalents consist of amounts on deposit at commercial banks.

J . R E V E N U E R E C O G N I T I O N

Pro ject serv ices . Services provided by SinnerSchrader range from consulting services foreCommerce strategies and concepts for transactional web solutions, the design and productionof web-based user front-ends, to the implementation of software for middleware and back-endsystems, as well as to maintenance and content management services for installed solutions. Project and service agreements are either on the basis of time and material or on a fixed-feebasis. Revenues pursuant to a fixed-fee contract are generally recognised as services rendered onthe percentage-of-completion method of accounting according to the provisions of Statement ofPosition (SOP) 81-1 of the American Institute of Certified Public Accountants (AICPA), “Accountingfor Performance of Construction Type and Certain Production Type Contracts”. Percentage of completion is determined based on the total efforts expended to date measured in man hours as a percentage of the total efforts expected to be incurred under the contract. Provisions for estimated losses on uncompleted contracts are made on a contract by contract basis and arerecognised in the period in which such losses become probable. To date, no such losses haveoccurred. Revenues pursuant to time and materials contracts are generally recognised as servicesperformed. Revenues include reimbursable expenses charged to and collected from clients.

60 CON SOLI DATE D FI NANCIAL STATE M E NTS

The chairman of SinnerSchrader AG’s Supervisory Board is general manager of Customer F. TheCompany recognised DM 2,662,736, DM 1,123,520, and DM 1,353,677 in revenue from this custo-mer in 1999/2000, 1999, and 1998, respectively. As of 31 August 2000 outstanding receivables fromCustomer F amounted to DM 364,875.

F. P R O P E R T Y A N D E Q U I P M E N T

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calcula-ted using the straight-line method over the estimated useful lives of the assets, generally three toten years. Depreciation expense is included in cost of revenues and operating expenses.

G . I N V E S T M E N T S

SinnerSchrader considers all investments with maturities of less than one year as of 31 August 2000to be short-term. Short-term investments as of 31 August 2000 are comprised entirely of marketablesecurities. In accordance with Statement of Financial Accounting Standards No. 115, “Accountingfor Certain Investments in Debt and Equity Securities”, SinnerSchrader has categorised these marketable securities as “available-for-sale”. Hence, unrealised gains are included as a separatecomponent of shareholders’ equity, net of tax.

SinnerSchrader’s investments consist of equity interests and convertible securities in two of itsclients. Those interests do not reach more than 20 % and SinnerSchrader does not have the abilityto exercise significant influence over the management of the respective companies. The equityinterest in one client amounted to 20 % on 31 August 2000. SinnerSchrader acquired this interestin February 2000 with the obligation under certain conditions to sign a capital increase as part ofwhich third party investors would contribute to equity and SinnerSchrader AG’s share in thecompany would dilute below 20 %. On 15 September 2000, a capital increase was signed and paid

Convertible bond 123,669 – – 123,669

Total investments 123,669 – – 123,669

Recorded Basis

UnrealisedLosses

UnrealisedGains

Cost Basis31.08.2000in DM

Recorded Basis

UnrealisedLosses

UnrealisedGains

Cost Basis31.08.2000in DM

Money market funds 59,772,877 378,311 – 60,151,188

Total short-term investments 59,772,877 378,311 60,151,188

Convertible bond 123,669 – – 123,669

Equity interest 19,558 – – 19,558

Total investments 143,228 – – 143,228

63CON SOLI DATE D FI NANCIAL STATE M E NTS

Accumulated other components of comprehensive income (loss) were as follows:

A summary of the components of other comprehensive income for the year ended 31 August 2000is shown in the following table:

N . N E T E A R N I N G S P E R S H A R E

SinnerSchrader computes earnings per share in accordance with SFAS No. 128, “Earnings per Share”.Prior to August 1999, SinnerSchrader was composed of two limited liability companies, Sinner-Schrader IM and SinnerSchrader IS, and there were no shares of common stock outstanding. Therefore, earnings per share for the periods prior to fiscal year 1999/2000 are provided on a pro-forma basis as if the relative ownership interests in the limited liability companies were shares of SinnerSchrader Aktiengesellschaft, the current holding company of the limited liability com-panies.

Basic earnings per share are computed using the weighted-average number of vested shares ofcommon stock outstanding. Diluted earnings per share are computed using the weighted averagenumber of vested shares of common stock outstanding and, when dilutive, unvested commonstock outstanding from potential common shares from options and warrants to purchase commonstock using the treasury stock method. SinnerSchrader has granted options to purchase shares of common stock to its employees under the 1999 Stock Option Plan. These options are dilutiveand thus included in the calculation of the diluted weighted average number of shares of commonstock outstanding.

62 CON SOLI DATE D FI NANCIAL STATE M E NTS

Media serv ices . SinnerSchrader also provides online-marketing services, i.e. the planning,design, execution and controlling of online-marketing campaigns, for Internet websites mainlyto project services customers. For these services, customers are billed for the cost of the relatedadvertising space, for the campaign planning and controlling services rendered by SinnerSchradereither on the basis of a monthly fixed rate or as a percentage of the total value of advertisingspace managed, and for the design and production services of related online-marketing instru-ments on an hourly basis. Revenues for the advertising space are generally recognised after theappearance of the advertising. The additional services are generally recognised as performed on a monthly basis. While gross revenues include the entire amount invoiced, the cost of advertisingspace are excluded from net revenues consistent with industry practice.

Other serv ices . SinnerSchrader also provides operational services, e.g. hosting services andapplication management and monitoring services. Fees for these services are generally billed andrecognised on a monthly basis. In addition, SinnerSchrader provides customers with any requiredhardware and software on a by request basis. Revenue for third party hardware and software isrealised upon delivery.

K . A D V E R T I S I N G E X P E N S E

SinnerSchrader expenses the cost of advertising and promoting its services and the image of SinnerSchrader in general as incurred. These expenses are included in sales, general and administrative expenses in the consolidated statement of operations. They totalled DM 492,204, DM 10,149, and DM 9,568 in the financial periods 1999/2000, 1999, and 1998, respectively.

L . S T O C K- B A S E D C O M P E N S AT I O N

In October 1995, the Financial Accounting Standard Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”. This standardpermits the use of either a fair value based method of accounting or the method defined inAccounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees” toaccount for stock-based compensation arrangements.

SinnerSchrader has elected to account for its employee stock compensation arrangements inaccordance with provisions of APB 25, and complies with the provisions of SFAS No. 123 to dis-close the pro forma net income that would have resulted from the application of a fair valuebased method under section V.b of these notes. Under APB No. 25, compensation expense is basedon the difference, if any, on the date of grant between the fair market value of SinnerSchrader’scapital stock on the date of grant and the exercise price.

M . C O M P R E H E N S I V E I N C O M E

In June 1997, the FASB issued SFAS No. 130, “Reporting Comprehensive Income”, which SinnerSchraderadopted beginning on 1 January 1998. SFAS No. 130 establishes standards for reporting anddisplay of comprehensive income and its components in a full set of general purpose financialstatements. The objective of SFAS No. 130 is to report a measure of all changes in equity of an enterprise that results from transactions and other economic events of the period other thantransactions with shareholders (“comprehensive income”). Comprehensive income is the total ofnet income and all other non-owner changes in equity.

31.12.199831.08.199931.08.2000in DM

Unrealised gains on marketable securities available-for-sale 378,311 - 201,255 177,056

Foreign currency translation adjustment 321 - 171 150

Total 378,632 - 201,426 177,206

Unrealised gains on marketable securities available-for-sale 177,056 – –

Foreign currency translation adjustment 150 – –

Total 177,206 – –

in DMTotal

after taxIncome taxTotal

before tax

65CON SOLI DATE D FI NANCIAL STATE M E NTS

criteria are met. If a derivative instrument qualifies for hedge accounting, the gains or lossesfrom the derivative may offset results from the hedged item in the statement of operations orother comprehensive income, depending on the type of hedge. To adopt hedge accounting, acompany must formally document, designate and assess the effectiveness of transactions thatreceive hedge accounting.

In June 2000, the Financial Accounting Standards Board issued SFAS No. 138, “Accounting for Cer-tain Derivative Instruments and Certain Hedging Activities”. This Statement addresses a limitednumber of issues causing implementation difficulties for numerous entities that apply SFAS No. 133and this Statement amends the accounting and reporting standards of SFAS 133 for certain deri-vative instruments and certain hedging activities.

SFAS No. 137 delayed the effective date of SFAS No.133 to fiscal years beginning after 15 June 2000.A Company may implement the statements as of the beginning of any fiscal quarter after issuance;however, SFAS No. 133 cannot be applied retroactively.

The adoption of SFAS No. 133, SFAS No. 137, and SFAS No. 138 will not have a material impact onthe financial position or the results of operations of the Group.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulle-tin No. 101, “Revenue Recognition in Financial Statements” (SAB 101). SAB 101 outlines the SEC’sviews on applying generally accepted accounting principles to revenue recognition in financialstatements. Specifically, the bulletin provides both general and specific guidance as to the peri-ods in which companies should recognise revenues. In addition, SAB 101 also highlights factorsto be considered when determining whether to recognise revenues on a gross or net basis. SAB101, as amended by SAB 101/A and SAB 101/B, is effective beginning no later than in the fourthfiscal quarter of the fiscal year beginning after 15 December 1999; as SinnerSchrader’s fiscal yearbegins on 1 September 2000 this would be the quarter ending 31 August 2001. The Group believesthat its policies in regards to the recognition of revenues are in compliance with the guidance ofSAB 101 and does not expect that the adoption of this standard will have any material effects onits results of operations, cash flows or financial position.

In March 2000, the FASB issued Interpretation No. 44 (“FIN 44”), “Accounting for Certain TransactionsInvolving Stock Compensation – an Interpretation of APB 25”. This interpretation clarifies the definition of employee for purposes of applying Opinion 25, the criteria for determining whethera plan qualifies as a non-compensatory plan, the accounting consequences of various modifica-tions to the terms of a previously fixed stock option or award, and the accounting for an exchangeof stock compensation awards in a business combination. This interpretation is effective 1 July 2000,but certain conclusions in the interpretation cover specific events that occur after either 15 De-cember 1998, or 12 January 2000. SinnerSchrader has adopted FIN 44 in its financial statementsas of 31 August 2000. It did not have any material impact on the financial condition or results ofSinnerSchrader.

In May 2000, the Emerging Issues Task Force (EITF) reached consensus on EITF00-8, “Accounting bya Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or Services”.The EITF reached a consensus that a grantee should measure the fair value of the equity instru-ments received using the stock price and other measurement assumptions as of the earlier of

64 CON SOLI DATE D FI NANCIAL STATE M E NTS

O . S E G M E N T R E P O R T I N G

In 1998 SinnerSchrader adopted the provisions of SFAS No. 131, “Disclosure about Segments of anEnterprise and Related information”. SFAS No. 131 requires a new basis of determining reportablebusiness segments (i.e. the management approach). This approach requires that business seg-ment information used by management to assess performance and manage company resourcesbe the source for information disclosure.

SinnerSchrader engages in business activities in one operating segment, which provides integratedeCommerce strategy, implementation and marketing services. Revenue by geographic locationare attributed to the country from which the sale is made. In 1998, 1999 and 1999/2000 substanti-ally all of SinnerSchraders’s revenues are attributed to Germany. In 1999/2000 SinnerSchraderalso generated revenue in the United Kingdom.

P. R E C L A S S I F I CAT I O N S

Certain prior year amounts have been reclassified to confirm to the current year presentation.

Q . R E C E N T A C C O U N T I N G P R O N O U N C E M E N T S

In June 1998, the Financial Accounting Standards Board issued Statement of Financial AccountingStandards (SFAS) No. 133, “Accounting for derivative instruments and hedging activities”. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument(including certain derivative instruments embedded in other contracts) be recorded on the balancesheet as either an asset or liability measured at its fair value. The statement requires that chan-ges in the derivative’s fair value be recognised currently in earnings unless specific accounting

in DM or shares01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Net Income 3,849,197 1,339,657 92,910

Basic weighted average shares ofcommon stock outstanding 9,563,942 6,025,000 6,000,000

Basic earnings per share 0.40 0.22 0.02

Basic weighted average shares ofcommon stock outstanding 9,563,942 6,025,000 6,000,000

Add: Dilution because of stock option grants 44,336 – –

Diluted average shares of common stock outstanding 9,608,278 6,025,000 6,000,000

Diluted earnings per share 0.40 0.22 0.02

67CON SOLI DATE D FI NANCIAL STATE M E NTS

C . A C C R U E D L I A B I L I T I E S

Other accrued liabilities consist of the following:

D . C O M M I T M E N T S :

Facilities and certain furniture and equipment are leased under operating leases. As of 31 August2000 future annual minimum lease payments are as follows:

Total rent expense was DM 650,743, DM 231,659, and DM 196,703 in 1999/2000, 1999 and 1998,respectively.

66 CON SOLI DATE D FI NANCIAL STATE M E NTS

the date a performance commitment is reached or the date on which the grantee’s performancenecessary to earn the equity instruments is complete. For transactions in which any of the termsof the equity instruments are subject to adjustment after the measurement date, changes in fairvalue resulting from the achievement of grantee performance conditions should be recorded asadditional revenue from the transaction using “modification accounting”, as discussed in SFASNo. 123. This Issue applies to all grants and modifications of existing grants that occur after 16March 2000. SinnerSchrader has received equity instruments in conjunction with providing ser-vices in one instance in the past (see Note II.e.), and may do so in the future. SinnerSchrader doesnot expect that the application of the guidance in this issue has a material impact onits financial conditions or results of operations.

III. Balance Sheet Components

A . P R O P E R T Y A N D E Q U I P M E N T

Property and equipment is comprised of the following:

B . O T H E R C U R R E N T A S S E T S A N D P R E PA I D E X P E N S E S

The major components of other current assets and prepaid expenses are shown in the followingtable:

31.12.199831.08.199931.08.2000in DM

in DM 01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Tax receivables 3,412,188 – –

Deferred tax assets – 100,072 –

Other current assets 130,206 9,926 6,500

Prepaid expenses 96,614 86,114 21,627

Total 3,639,008 196,112 28,127

in DM

Minimumlease

payments

01.09.00 – 31.08.01 1,245,598

01.09.01 – 31.08.02 2,777,041

01.09.02 – 31.08.03 2,732,020

01.09.03 – 31.08.04 2,729,692

01.09.04 – 31.08.05 2,424,361

thereafter 2,493,080

Total 14,401,792

31.12.199831.08.199931.08.2000in DM

Accrued compensation 574,345 250,000 99,154

Accruals for invoices outstanding for online media placements 605,531 – –

Other accruals 924,301 189,508 26,540

Total 2,104,177 439,508 125,694

Computer hardware and software 1,157,395 414,580 247,163

Furnitures and fixtures 718,987 490,375 270,214

Total, at cost 1,876,382 904,955 517,377

Less: Accumulated depreciation - 754,062 - 383,778 - 216,012

Total, at book value 1,122,320 521,177 301,365

69CON SOLI DATE D FI NANCIAL STATE M E NTS

V. Shareholders’ equity

A . I N I T I A L P U B L I C O F F E R I N G

In November 1999, SinnerSchrader AG issued 2,475,000 new shares of common stock as part of an initial public offering on the Neuer Markt (225,000 shares thereof as greenshoe) at a price of 12 per share. The offering raised aggregate proceeds – net of expenses for the flotation of DM 3.3 million – of DM 54.8 million. The cost resulting from the initial public offering were charged against the capital reserve net of tax of DM 1.76 million.

B . E M P L OY E E S T O C K O P T I O N P L A N

In October 1999, the shareholders of SinnerSchrader AG approved the SinnerSchrader 1999 StockOption Plan (the “1999 Plan”) which provides for the granting of stock options to the members of the Management Board of SinnerSchrader AG, the management of affiliated companies, allemployees of SinnerSchrader AG, as well as all employees of affiliated companies. The total num-ber of options that can be assigned by the Management Board and the Supervisory Board of Sinner-Schrader AG is 375,000 of which 40,000, 10,000, 55,000, and 270,000 are dedicated to the beforementioned groups, respectively.

Options granted under the 1999 Plan have an exercise price of 120 % of the average Frankfurt clo-sing price during the ten trading days prior to the grant date. Options granted on 1 November 1999,the day of the initial public offering, had an exercise price of 14,40. The options of the 1999 Planvest in equal instalments of one third over two, three and four years. They have to be exercisedwithin six years after the date of grant. As of 31 August 2000 a total of 165,300 stock options fromthe 1999 Plan were outstanding which were granted with an average exercise price of 32,96. Nooptions were granted to the Management Board and the management of affiliated companies.

SinnerSchrader applies APB No. 25 in accounting for its stock option plan. Had compensationexpense for options granted in 1999/2000 been determined based on the fair value at the grantdates as prescribed by SFAS No. 123, SinnerSchrader’s net income and net income per share wouldhave been affected as indicated in the following table:

68 CON SOLI DATE D FI NANCIAL STATE M E NTS

IV. Components of the statements of operations

A . C O S T S A N D O P E R AT I N G E X P E N S E S BY E X P E N D I T U R E

The split of cost of revenues and operating expenses by expenditure is shown in the followingtable:

B . F I N A N C I A L I N C O M E

The financial income, net, consists of the following components:

in DM

01.01.199831.12.199801.01.1999

31.08.199901.09.199931.08.2000

in DM 01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Reported net income 3,849,197 1,339,657 92,910

Pro forma compensation expense due to options granted - 870,964 – –

Pro forma net income 2,978,233 1,339,657 1,339,657

Reported net income per share, basic 0.40 0.22 0.02

Pro forma net income per share, basic 0.31 0.22 0.02

Reported net income per share, diluted 0.40 0.22 0.02

Pro forma net income per share, diluted 0.31 0.22 0.02

Personnel cost 8,696,115 1,922,506 1,618,837

Cost of materials and services in cost of revenues

Materials 1,290,267 41,913 45,399

Sub-contracted services 448,418 95,093 137,397

Depreciation 425,766 191,685 161,877

Other operating expenses 4,887,657 952,069 668,473

Total 15,748,223 3,203,266 2,631,983

Interest income 569,577 12,066 7,841

Realised gains on marketable securities 1,035,671 – –

Interest expense - 1,268 - 21 - 115

Fee expense in relation to gains on marketable securities - 28,853 – –

Total 1,575,127 12,045 7,726

in DM

Expected life of the option 3.5 years

Risk-free interest rate 3.9 % – 5.2 %

Expected dividend yield 0 %

Expected volatility 90 %

71CON SOLI DATE D FI NANCIAL STATE M E NTS

D . AU T H O R I S E D CA P I TA L

The Management Board is authorised to increase the Company’s share capital for a period ending30 September 2004 with the approval of the Supervisory Board in one or more steps up to a maximum of 4,650,000 shares. To date no shares have been issued based on that authorisation.

Additionally, the Management Board is authorised to increase the Company’s share capital for aperiod ending 24 September 2004 with the approval of the Supervisory Board in one or moresteps up to a maximum of 225,000 shares. In November 1999, the Company issued 225,000 sharesbased on this authorisation in connection with the greenshoe granted to banks as part of theinitial public offering.

E . E Q U I T Y A D J U S T M E N T

As discussed under I, the consolidated financial statements for periods prior to 31 August 1999are presented as if all entities of SinnerSchrader were consolidated from inception. As a result,the contribution of SinnerSchrader IM and SinnerSchrader IS was recorded at historical bookvalue of these companies in the consolidated balance sheet of SinnerSchrader. In order to present SinnerSchrader AG’s common stock par value of 7,500,000 it was necessary to correctthe difference resulting from the consolidation of the equity accounts of DM 11,739,980 as an “Equity adjustment”.

VI. Income tax

SinnerSchrader accounts for income taxes pursuant to SFAS No. 109, “Accounting for IncomeTaxes.” The provision for income taxes consists of the following:

The provision for income taxes differs from the expected tax provision amount computed byapplying the statutory income tax rate to income before taxes. For the fiscal periods ended 31 August 2000 the statutory income tax rate for income retained was at 53.2 % (1999: 53.2 %,1998: 57.5 %) consisting of municipal trade tax (“Gewerbesteuer”) at 19.0 % (1999: 19.0 %, 1998: 19.0 %),corporate tax (“Körperschaftsteuer”) at 40 % (1999: 40 %, 1998: 45 %) and a corporate tax surcharge(“Solidaritätszuschlag”) of 5.5 % (1999: 5.5 %, 1998: 5.5 %). On 14 July 2000, legislation was passed in Germany according to which the tax rate for corporate tax (“Körperschaftsteuer”) will be redu-ced from 40 % to 25 % effective for all fiscal years starting after 31 December 2000. With the new

70 CON SOLI DATE D FI NANCIAL STATE M E NTS

The fair value of each option was estimated on the date of grant using the Black-Scholes optionpricing model with the following weighted-average assumptions for the options granted in1999/2000:

The following table summarises the changes in the total options outstanding in the fiscal year1999/2000:

The subsequent table presents a summary of the stock options outstanding as of 31 August 2000:

C . C O N D I T I O N A L CA P I TA L

As of 31 August 2000 the Company had conditional capital which is equivalent to shares reservedfor future issuance of 375,000 for the SinnerSchrader 1999 Stock Option Plan described under b.

Weighted average

exercise price€

NumberWeighted average

exercise price€

Weighted average remai-

ning contractuallife in years

NumberRange of exercise prices€

14,40 – 30,00 78,200 5.17 14.40 – –

30,00 – 50,00 46,200 5.77 37.79 – –

50,00 – 70,00 30,600 5.53 58.60 – –

70,00 – 90,00 10,300 5.59 76.00 – –

Total 165,300 5.43 32.96 – –

Weighted average

exercise price€ (DM)

Numberof options

granted

Outstanding at beginning of year – –

Granted 189,100 33.64 (65.79)

Exercised – –

Cancelled - 23,800 38.37 (75.05)

Outstanding at end of year 165,300 32.96 (64.46)

in DM 01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Current 3,828,931 1,700,724 115,031

Deferred 531,011 - 176,553 99,438

Total 4,359,942 1,524,171 214,469

Options outstanding Options exercisable

corporate tax rate the total statutory income tax rate for income retained will amount to 40.4 %.For deferred items that are reasonably expected to materialise in a fiscal year for which the newstatutory income tax will be applied, this tax rate has been used to compute deferred taxes. Thefollowing table presents the reconciliation of tax provisions shown in the statements of opera-tions to the income tax provisions expected under the statutory income tax rate:

The deferred tax position consists of the following items:

1) according to the “percentage of completion” method

in DM 01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

73CON SOLI DATE D FI NANCIAL STATE M E NTS

VII. Subsequent events

On 15 September 2000 SinnerSchrader AG paid up approximately DM 300.000 for a capital increaseby one of the companies in which SinnerSchrader holds a minority interest (ref. to note II.G). Aspart of the capital increase, a third party investor contributed additional equity capital in cash.

On 18 September 2000 SinnerSchrader AG entered into an agreement to purchase 100 % of theshares of Netmatic Internet/Intranet Solutions GmbH, Hamburg. Netmatic Internet/IntranetSolutions provides software design and development services for transactional web applications.According to the German law for stock corporations (“Aktiengesetz”) the consummation of thetransaction is dependent upon shareholders’ approval. The Company will present the transactionto its shareholders’ at the ordinary shareholders’ meeting in December 2000. The final purchaseprice for the acquisition depends on Netmatic’s revenue and earnings performance in the year2000. A first instalment consists of DM 3 million in cash and 437.246 shares of common stock ofSinnerSchrader AG. The first instalment will become due upon approval of the transaction by theshareholders’ meeting.

Hamburg, October 2000

The Management Board

72 CON SOLI DATE D FI NANCIAL STATE M E NTS

in DM 01.01.199831.12.1998

01.01.199931.08.1999

01.09.199931.08.2000

Tax provision at statutory rate 4,367,129 1,524,171 176,650

Tax benefit for distributed income – – - 35,030

Non deductible expenses 8,477 – 82,182

Valuation allowance loss carry forwards of foreign subsidiary 71,241 – –

Corporate tax deduction due to assumed foreign withholding tax - 129,551 – –

Limited ability to set off income and losses within the group regarding the corporate tax surcharge 83,747 – –

Change in tax rate for deferred taxes - 45,001 – - 9,333

Other 3,900 – –

Provision for income tax 4,359,942 1,524,171 214,469

Deferred tax assets:

Tax on loss carry forwards of foreign subsidiary 26,783 100,072 –

Valuation allowance on loss carry forwards of foreign subsidiary - 26,783 – –

Total deferred tax assets – 100,072 –

Deferred tax liabilities:

Valuation of unfinished/unbilled services 1) 329,885 – 25,061

Valuation of unrealised gains on marketable securities available for sale 201,255 – –

Valuation of fixed assets 96,399 25,633 77,053

Valuation of current assets 30,289 – –

Total deferred tax liabilities 657,828 25,633 102,114

75CON SOLI DATE D FI NANCIAL STATE M E NTS

fiscal year. Regarding the loss carried forward by the consolidated SinnerSchrader UK Ltd. a valuation allowance was recorded for the entire amount due uncertainties concerning future profitability.

4 . E M P L OY E E S T O C K O P T I O N S

According to US-GAAP, stock-based compensation issued to employees may be accounted for in twoways. Under one method, the “fair value” of stock-based compensation is determined and recordedas an expense over the vesting period of the option. Alternatively, only the difference between theexercise price of the option and the fair market value of the underlying security (“intrinsic value”)on the date of grant is recognised as an expense over the vesting period. Under the latter method,the impact on net income of accounting for the stock-based compensation using the first methodmust be disclosed in a pro-forma calculation in the financial statements. SinnerSchrader has electedthe intrinsic value method as its accounting policy.

As noted before, the difference between the exercise price of the option and the market value ofthe underlying security on the date of grant are to be treated, according to US-GAAP, as personnelexpenses recorded ratably over the vesting period of the option and correspondingly recorded underequity. Because of the negative intrinsic value at the time of the options’ granting, according toUS-GAAP there was no personnel cost from the granting of stock options.

In line with currently accepted accounting rules, no expense would occur in the income statementpursuant to HGB. Only the capital increase necessary upon exercising of options would have to berecorded under equity.

5 . F I N A N C I A L A S S E T S

Financial assets include a convertible bond that a client of SinnerSchrader afforded as part ofthe return for services rendered. The investment was recognised at the market value on thegrant day. For that the option component of the convertible bond was valued using the Black-Scholes-Model.

Under HGB, the value of the assets offered in barter transactions would determine principally theacquisition cost.

6 . E Q U I T Y

According to HGB, the Company would have had to prepare consolidated financial statements forthe first time following the acquisition of Sinner+Schrader Interactive Marketing GmbH and Sinner+Schrader Interactive Software GmbH on 27 August 1999 and perform the capital consolidationas of this date. The difference between the book value of the participation and the equity capitalof its subsidiary would have to be distributed according to the actual value of the assets and liabilities included in consolidation. The remainder would have to be shown as goodwill and eitheramortised over its expected useful life or off-set against the capital reserves on the face of thebalance sheet. The subscribed capital in the consolidated balance sheet would be the subscribedcapital of the company.

According to US-GAAP the contribution of shares of Sinner+Schrader Interactive Marketing GmbHand of Sinner+Schrader Interactive Software GmbH to SinnerSchrader is recognised at the book valueof Shareholders’ equity of these companies. As a consequence, no goodwill was created by this

74 CON SOLI DATE D FI NANCIAL STATE M E NTS

1 . G E N E R A L

The consolidated financial statements of SinnerSchrader Aktiengesellschaft, (hereinafter referred to asthe “Company” or “SinnerSchrader”) as of 31 August 2000, 31 December 1999 and of 31 December 1998were prepared in accordance with US generally accepted accounting principles (US-GAAP).

The provisions of the German Commercial Code (HGB) and German Stock Corporation Law (AktG)differ from US-GAAP in certain significant respects. The main differences that may be relevant toan evaluation of the net worth, financial position, and the results of the Company are describedbelow:

Pursuant to HGB, all items in the balance sheet and income statement must be set out in the formand order laid down in §§266, 275 HGB. US-GAAP requires a different presentation, in which theshort-term items in the balance sheet are presented first.

2 . P R O P E R T Y A N D E Q U I P M E N T

Purchased software for internal use is not shown as an intangible asset, as it is in financial state-ments prepared according to HGB, but as property and equipment, such as fixtures, furnitureand office equipment. According to US-GAAP, costs to develop software to be sold, leased or otherwise marketed can be capitalised and amortised over their estimated economic life. Accordingto HGB, the cost of internally developed software cannot be capitalised. In all fiscal years up to 31 August 2000, the Company has charged all software development cost against income alsounder US-GAAP.

According to HGB accelerated depreciation permitted according to German corporate tax regula-tions (§ 7g EstG) are shown as special reserves and are dissolved over the average useful life of theassets. According to US-GAAP these tax driven depreciation were not considered.

According to HGB, the depreciation were made applying a linear depreciation schedule and thehalf-year method (“Halbjahresmethode”). Under US-GAAP linear depreciations had to be considered asfrom the day of purchase.

3 . D E F E R R E D TA X E S O N L O S S CA R RY- F O R WA R D S

According to HGB, deferred tax refund claims arising from loss carry-forwards may not beshown on the balance sheet as expected future tax savings are deemed to be not yet realised.According to US-GAAP, these types of future tax reduction claims are to be capitalised. Theirvalue depends on whether it is more likely than not that the loss carry-forward can be usedbefore they expire. In 1999/2000, the Company used its loss carry-forwards from the previous

Summary of significant differences between US-GAAP and German Law with regard to accounting, valuation and consolidation principles.

76 CON SOLI DATE D FI NANCIAL STATE M E NTS

transaction. For the presentation of the statement of SinnerSchrader’s share capital of 7.500.000 atthe date of the transaction an equity adjustment was made as part of total equity.

Effectively, under US-GAAP, the capital consolidation of the Company in line with APB 16 “BusinessCombination” is recorded for as a “transaction under common control”, which eliminates the contributionof the shares in Sinner+Schrader Interactive Marketing GmbH and Sinner+Schrader Interactive SoftwareGmbH to SinnerSchrader AG and means that only the amounts raised originally are shown asequity. In accordance with this no goodwill results from these transactions under US-GAAP.

Therefore, according to US-GAAP, the time of first consolidation does not apply, so that the dis-closures made before the formation of SinnerSchrader AG reflect the respective group structure.

7. R E V E N U E R E C O G N I T I O N

Under US-GAAP, revenues for services are recognised in compliance with “American Institute ofCertified Public Accountants Statement of Postition” (SOP) 81-1, “Accounting for Performance of construction type and certain production type contracts”. US-GAAP requires accounting for workin process on service transactions to be performed according to the “percentage of completionmethod”, whereby the progress in a project leads to revenue recognition on a pro-rata basis. Themain condition for the application of the “percentage of completion method” is the reconcilableand controllable measurement of progress made in a project.

HGB requires the “completed contract method”. According to that method, service revenues wouldonly be taken into account upon completion of work.

8 . VA L UAT I O N O F S E C U R I T I E S ( AVA I L A B L E F O R S A L E )

According to US-GAAP, the securities under current assets are shown at market value on the balancesheet date, in case they are held available for sale at any time. Profits and losses that have not yetbeen realised through sales are shown in shareholders’ equity and are part of comprehensive income.

According to HGB, SinnerSchrader AG values the securities under current assets at acquisitioncosts or at market value, whichever is lower.

9 . C O S T S O F I N I T I A L P U B L I C O F F E R I N G

According to US-GAAP, costs connected with the initial public offering on the stock exchange areto be treated as a reduction of the proceeds from the issuing of stocks net of the effect from thetax deductability of these costs. According to HGB, these costs of DM 3.3 million represent otheroperating expenses.

Auditors’ Opinion

We have audited the consolidated financial statements, consisting of balance sheet, income statement,statement of shareholders’ equity, cash flow statement and notes to the consolidated financialstatements of SinnerSchrader Aktiengesellschaft for the financial year from 1 September 1999 to31 August 2000. The preparation and the content of the consolidated financial statements is theresponsibility of the Company’s management. Our responsibility is to express an opinion on theconsolidated financial statements in accordance with accounting principles generally accepted inthe United States of America (U.S. GAAP), based on our audit.

We conducted our audit of the consolidated financial statements pursuant to German auditingstandards and in compliance with the generally accepted auditing principles set forth by the Institutder Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of materialmisstatement. The scope of the audit was planned taking into account our understanding of busi-ness operations, the Company’s economic and legal environment, and any anticipated potentialerrors. An audit includes examining, mainly on a basis of spot checks, evidence supporting theamounts and disclosures in the consolidated financial statements. The audit also includes assessingthe accounting principles used and significant estimates made by the management, as well asevaluating the overall presentation of the consolidated financial statements. We believe that ouraudit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present in compliance with U.S.-GAAP a trueand fair view of the financial position, the results, and cash flows of the Company.

Our audit, which also includes the management report for the fiscal year from 1 September 1999 to31 August 2000, prepared by the legal representatives of the Company, did not give any cause forqualification. In our opinion the management report accurately presents, in all material respects,the situation of the Company and the risks arising from future developments. Furthermore, weconfirm that the consolidated financial statements and the management report meet the require-ments for an exemption to present consolidated financial statements and a management reportaccording to German law.

Hamburg, 24 October 2000

ARTH U R AN D E R S E N

WirtschaftsprüfungsgesellschaftSteuerberatungsgesellschaft mbH

Nendza SchneiderCertified Auditor Certified Auditor

77AU DITORS’ OPI N ION G ROU P

B A L A N C E S H E E T S

S T A T E M E N T S O F O P E R A T I O N S

N O T E S T O T H E F I N A N C I A L S T A T E M E N T SA T 3 1 A U G U S T 2 0 0 0

A U D I T O R S ’ O P I N I O N AG

S U P E R V I S O R Y B O A RD RE P O R T

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F I N A N C I A L S TAT E M E N T S of SinnerSchrader Aktiengesellschaft 1999/2000

80 F I NANCIAL STATE M E NTS AG 81F I NANCIAL STATE M E NTS AG

19.07.199931.08.1999

in DM

01.09.199931.08.2000

in DM

Revenues 892,743 0

Other operating income 1,062,437 0

Wages and salaries 0Social security - 1,173,639 0Personnel expenses - 29,531 0Total personnel cost - 1,203,170

Depreciation of intangible assets, property and equipment - 7,479 0

Other operating expenses - 6,264,337 - 194,617

Income from participations 5,428,571 0thereof from affiliated companies DM 5,428,571 (previous year DM 0)

Other interest and similar income 1,169,691 0

Other interest and similar expenses -415 0

Results from ordinary operations 1,078,041 - 194,617

Taxes on income - 410,192 0

Other taxes - 574 0

Net income/loss for the year 667,275 - 194,617

Accumulated deficit carried forward - 194,617 0Addition to statutory reserves - 354,494 0

Retained earnings/accumulated deficit 118,164 - 194,617

The accompanying notes are an integral part of these financial statements.

31.08.2000in DM

31.08.1999in DM

31.08.2000in DM

31.08.1999in DM

Balance sheets as of 31 August 2000 and 31 August 1999

Statement of operationsfor the fiscal year ended 31 August 2000 and the period from 19 July to 31 August 1999

Assets

Fixed Assets:

Property, plant and equipment:

Other equipment, plant and office equipment 3,515 0Financial assets:

Shares in affiliated companies 16,032,095 16,000,000Participations 19,558 0Total financial assets 16,051,653 16,000,000

16,055,168 16,000,000Current assets:

Receivables and other assets

Receivables from affialiated companies 1,480,793 0Other assets 2,705,943 7,003Total receivables and other assets 4,186,736 7,003Securities:

Other securities 59,772,877 0Cash-in-hand and bank balances 74,898 3,950,789Total current assets 64,034,511 3,957,792Prepaid expenses 78,336 0Deficit not covered by Equity 0 145,722

Total assets 80,168,015 20,103,514

Liabilities and Shareholders’ Equity

Equity:

Subscribed capital (Conditional capital: DM 733,436; previous year: DM 0) 19,509,404 48,895Capital surplus 58,578,748 0Statutory reserves 354,494 0Retained earnings/accumulated deficit 118,164 - 194,617Deficit not covered by equity 0 145,722Total equity 78,560,810 0Paid-in capital for capital increase not yet registered 0 19,902,209Accruals:

Accrued tax liabilities 304,302 0Other accrued liabilities 660,591 150,000Total accrued liabilities 964,893 150,000Liabilities:

Liabilities to banks 2,135 0Trade payables 560,112 51,305Payables to affiliated companies 1,669 0

Other liabilitiesthereof taxes: DM 36,224 (previous year DM 0)thereof relating to social security and similar obligations: DM 8,082 (previous year DM 0) 78,396 0

Total liabilities 642,312 51,305

Total Liabilities and Shareholders’ Equity 80,168,015 20,103,514

The accompanying notes are an integral part of these financial statements.

82 F I NANCIAL STATE M E NTS AG

III. Notes and explanations to individual items of the balance sheet

A . A S S E T S

Changes to the fixed assets are shown in the table below:

B . A C C O U N T S R E C E I VA B L E A N D O T H E R A S S E T S

Accounts receivable and other assets amounting to DM 4,186,736 are due within one year.

83F I NANCIAL STATE M E NTS AG

01.09.1999 Disposals 31.08.2000Additions

Notes to the Financial Statements at 31 August 2000

Acquisition and manufacturing costI. General

The company is considered to be a large corporation as defined by § 267 of the German CommercialCode. The company’s annual financial statements were drawn up in accordance with the accountingand valuations regulations stipulated in the German Commercial Code (HGB) and the GermanStock Corporation Law (AktG).

II. Accounting and valuation methods

The results are drawn up in DM.

Tangible fixed assets are recorded at acquisition cost or manufacturing cost, minus linear depre-ciation as scheduled. Linear depreciation is calculated on the basis of the useful life of the asset.Assets acquired in the first half of the fiscal year are subject to the full rate of depreciation andassets acquired in the second half of the fiscal year are subject to half that rate. Low value itemswith an acquisition cost of up to DM 800 are depreciated in full in the year of acquisition.

Financial assets are recorded at acquisition cost, or at their value on the balance sheet date ifthat is lower.

Accounts receivable and other assets are recorded at face value. Accounts receivable in foreigncurrencies are recorded at the original exchange rate or at the rate on the balance sheet date ifthat is lower.

Other accrued liabilities cover all foreseeable risks. They are set at a level considered necessary inaccordance with sound commercial practice.

Liabilities are recorded at the amount repayable. Liabilities in foreign currencies are recorded atthe original exchange rate or at the rate on the balance sheet date if that is higher.

Tangible fixed assets:

Other equipment, fixtures and fittings 0 10,994 0 10,994

Financial assets:

Shares in affiliated companies 16,000,000 32,095 0 16,032,095

Participations 0 19,558 0 19,558

16,000,000 62,647 0 16,062,647

01.09.1999 Disposals 31.08.2000AdditionsAccumulated depreciation

Tangible fixed assets:

Other equipment, fixtures and fittings 0 7,479 0 7,479

Financial assets:

Shares in affiliated companies 0 0 0 0

Participations 0 0 0 0

0 7,479 0 7,479

01.09.1999 31.08.2000Net book value

Tangible fixed assets:

Other equipment, fixtures and fittings 0 3,515

Financial assets:

Shares in affiliated companies 16,000,000 16,032,095

Participations 0 19,558

16,000,000 16,055,168

C . M A R K E TA B L E S E C U R I T I E S

Marketable securities consist of shares in money market funds or funds of a similar nature thatare recorded at acquisition cost.

D . A C C R U E D I N C O M E A N D P R E PA I D E X P E N S E S

Accrued income and prepaid expenses consist principally of exceptional lease payments.

E . S H A R E CA P I TA L

The company’s share capital stood at 9,975,000 as of 31 August 2000. It is made up of 9,975,000individual bearer shares with no face value. 225,000 of this results from the Authorised Capital Iapproved by the Shareholders’ Meeting on 4 October 1999; all of this capital was devoted to the exercise of the additional distribution option (greenshoe) in the context of the company’s stockmarket launch.

The Shareholders’ Meeting on 8 October 1999 gave the Management Board the power to increasethe company’s share capital by up to 4,650,000 with approval of the Supervisory Board by 30 September 2004; this increase could take place in a single action or could be split into severalactions, and would consist of issuing individual bearer shares with no face value in return forcontributions in cash or in kind not confering any subscription rights on the shareholders (Autho-rised Capital II). The Management Board did not make use of these authorisations in the fiscal year1999/2000.

The Shareholders’ Meeting on 26 October 1999 created a conditional capital of 375,000 to conferon employees and members of management of the Company and affiliated companies subscriptionrights to 375,000 individual shares. By 31 August 2000, employees of the company and affiliatedcompanies had been granted 165,300 option rights at an average exercise price of 32.96. None ofthese option rights had been exercised as at the balance sheet day.

F. CA P I TA L S U R P L U S

The following changes affected the capital reserve in the financial year 1999/2000:

G . O T H E R A C C R U E D L I A B I L I T I E S

A reserve of DM 304,302 was formed to cover trade tax. The other reserves of DM 660,591 were formed principally to cover the auditing cost, holiday entitlement as well as outstanding in-voices.

H . L I A B I L I T I E S

All the liabilities amounting to DM 642,312 have maturities of up to one year.

IV. Notes and explanations to individual items of the profit and loss account

A . R E V E N U E S

Revenues amounting to DM 892,743 relate to management services provided by the Company tocompanies within the SinnerSchrader Group.

B . O T H E R O P E R AT I N G I N C O M E

Other operating income results with an amount of DM 788,940 mainly from the sale of marketablesecurities. In addition, DM 229,807 concern reimbursements of costs from affiliated companies.

C . P R O P O S A L F O R D I S P O S I T I O N O F E A R N I N G S

The Management Board and Supervisory Board propose to the Annual General Meeting to carryforward the balance sheet profit of DM 118,164.49 to the new fiscal year.

IV. Other information

A . O T H E R F I N A N C I A L O B L I G AT I O N S

The financial obligations relate principally to rent Payments for the new office building for theCompany and its affiliated companies. The Company will start to move into these new premisesin December 2000 and the move will be completed in July 2001.

B . S TA F F

The company had 4 employees on 31 August 2000. The average number of staff for the fiscal year1999/2000 was 2.

85F I NANCIAL STATE M E NTS AG84 F I NANCIAL STATE M E NTS AG

Capital surplus as at 31.08.1999 DM 0

Premium from capital increase through contribution in cash DM 58,578,748

Capital surplus as at 31.08.2000 DM 58,578,748

Obligations arising from rent and leasing contracts

01.09.2000-31.08.2001 DM 698,181

01.09.2001-31.08.2002 DM 2,314,607

01.09.2002-31.08.2003 DM 2,274,024

01.09.2003-31.08.2004 DM 2,271,696

01.09.2004-31.08.2005 DM 2,271,696

after 01.09.2005 DM 2,493,080

D . F I N A N C I A L A S S E T S

The company holds the following investments and shares in affiliated companies and participations:

1) Stub period from 01.01.2000 to 31.08.20002) Stub period from 23.03.2000 to 31.08.20003) The company was founded in February 2000 and has not yet published results.

Hamburg, October 2000

The Management Board

87F I NANCIAL STATE M E NTS AG86 F I NANCIAL STATE M E NTS AG

C . M A N A G E M E N T B OA R D

The following persons were members of the Management Board in the fiscal year 1999/2000:

Matthias Schrader, Co-Chief Executive OfficerOliver Sinner, Co-Chief Executive OfficerThomas Dyckhoff, Chief Financial OfficerDetlef Wichmann, Chief Technology Officer

Messrs. Dyckhoff and Wichmann were appointed as members of the Management Board by a decision of the Supervisory Board on 27 Ocotober 1999. The appointment was recorded in theTrade Register on 22 February 2000.

Total emoluments paid to the Management Board in the financial year amounted to DM 949,922.

D . S U P E R V I S O RY B OA R D

The following persons were members of the Supervisory Board in the fiscal year:

Dr. Markus Conrad, Chairman

Managing partner of Georg Lingenbrink GmbH & Co., HamburgMember of the Supervisory Board of Tchibo Holding AG, HamburgMember of the Supervisory Board of Zapf Creation AG, Rödental

Fritz Seikowsky, Deputy chairman, since 29 September 1999

Managing Director of Bain & Company Germany, MunichDeputy chairman of the Supervisory Board of The Internet.z AG, HamburgMember of the Supervisory Board of insure.XL GmbH, MunichMember of the Advisory Board of Servolutions GmbH, Berlin

Reinhard Pöllath, Lawyer, Munich

Member of the Supervisory Board of TA Triumph-Adler AG, NurembergMember of the Supervisory Board of Wanzl Metallwarenfabrik GmbH, LeipheimMember of the Supervisory Board of F-LOG AG, GrevenMember of the Supervisory Board of Tchibo Holding AG, Hamburg

Dr. Andrea von Drygalski, Lawyer, Munichuntil 28 September 1999

The remuneration to the Supervisory Board in the fiscal year amounted to DM 35,205.

Authorisedshare

capital

Net equity Last annualprofit/loss

CurrencyStakein %

Company

Sinner+Schrader Interactive Marketing GmbH, Hamburg 100.00 DM 50,000 2,931,3681) 3,740,575 1)

Sinner+Schrader Interactive Software GmbH, Hamburg 100.00 DM 50,000 91,0211) 17,620 1)

SinnerSchrader UK Limited, London, UK 100.00 £ 10,000 - 31,8432) - 41,843 2)

LetMeShip GmbH, Hamburg 20.00 50,000 3) 3)

89S U PE RVI SORY BOAR D R E PORT

Supervisory Board Report

The Supervisory Board continuously oversaw the progress of business at SinnerSchrader Aktien-gesellschaft throughout the fiscal year 1999/2000. It was regularly informed about the positionand progress of the company and about major business transactions by the Management Board –both during scheduled meetings and outside these meetings. On this basis, the Supervisory Boardfulfilled the responsibilities it carries according to the law and the Articles of Incorporation, andsupervised the management activities of the Management Board.

During the past financial year the Supervisory Board was convened for six meetings. The SupervisoryBoard did not form any committees.

The Supervisory Board resolved on 1 September 1999 to elect Mr. Dr. Markus Conrad as its Chairmanand Mr. Reinhard Pöllath as his deputy. At an extraordinary General Meeting on 29 September1999 Mr. Fritz Seikowsky was appointed member of the Supervisory Board, replacing Mrs. Dr.Andrea von Drygalski who had resigned from her office on 28 September 1999. In a resolutionpassed by the Supervisory Board on 30 September 1999, Mr. Seikowsky succeeded Mr. Pöllath in hiscapacity as Deputy Chairman of the Supervisory Board. On 27 October 1999, the Supervisory Boardappointed Mr. Detlef Wichmann and Mr. Thomas Dyckhoff as members of the Management Boardof SinnerSchrader AG.

At the request of the Supervisory Board, Arthur Andersen Wirtschaftsprüfungsgesellschaft Steuer-beratungsgesellschaft mbH (certified auditors and tax consultants), Hamburg, audited the book-keeping and financial statements of SinnerSchrader Aktiengesellschaft, as well as the consolidatedfinancial statements of the SinnerSchrader Group drawn up in compliance with § 292 a HGB (Ger-man Commercial Code) with discharging effect, under application of the US GAAP, including thejoint status report of the Group and of SinnerSchrader Aktiengesellschaft. These were awarded anunqualified auditors’ opinion in October 2000.

In a meeting on 31 October 2000, the Supervisory Board discussed the financial statements andthe consolidated financial statements in detail on the basis of the auditor’s report in the presenceof the auditors and the Management Board. The Supervisory Board did not raise any objectionsand endorsed the results of the auditors. The Management Board’s suggestion of carrying theyear’s balance sheet profit of DM 118,164.49 forward to the new accounts was approved by theSupervisory Board. The Supervisory Board approved the financial statements drawn up by theManagement Board; they are thereby confirmed.

The fiscal year 1999/2000 was a very successful year for SinnerSchrader Aktiengesellschaft. Ambi-tious sales and earnings targets were exceeded, and profitability were unequalled in the industry.The challenge now is to continue on this successful course during the fiscal year 2000/2001. To thisend, the Supervisory Board will support the Management Board in every possible respect.

The Supervisory Board expresses its gratitude to the members of the Management Board and allthe employees for their commitment, and for all their work during the past fiscal year.

Hamburg, November 2000

Dr. Markus ConradChairman of the Supervisory Board

88 AU DITORS’ OPI N ION AG

Auditors’ Opinion

We have audited the financial statements including the accounting and the management report ofSinnerSchrader Aktiengesellschaft for the fiscal year from 1 September 1999 to 31 August 2000. The legal representatives of the Company are responsible for the accounting and preparation ofthe financial statements and management report in compliance with German commercial lawand the supplementary regulations in the articles of association. Our responsibility is to expressan opinion, based on our audit, on the financial statements, including the accounting, and onthe management report.

We conducted our audit of the financial statements pursuant to sec. 317 HGB and in compliancewith the generally accepted auditing principles set down by the Institut der Wirtschaftsprüfer (IDW).Those standards require that we plan and perform the audit to obtain reasonable assurance thatinaccuracies and violations are recognised which significantly affect the presentation of the assets,liabilities, financial position and results of the Company as conveyed by the financial statements,in compliance with generally accepted accounting principles, and by the management report.The scope of the audit was planned taking into account our understanding of business operations,the Company’s economic and legal environment, and any potential errors anticipated. In thecourse of the audit, the effectiveness of the system of internal controls has been assessed, and thedisclosures made in the accounting, financial statements and management report have been veri-fied, mainly on the basis of spot checks. The audit also includes assessing the accounting princi-ples used and significant estimates made by the legal representatives, as well as evaluating theoverall presentation of the financial statements and the management report. We believe that ouraudit provides a reasonable basis for our opinion.

Our audit did not give any cause for qualification.

In our opinion, the financial statements are in compliance with generally accepted accountingprinciples and present a true and fair view of the assets, liabilities, financial position and resultsof the Company. In all material respects, the management report accurately presents the situationof the Company and the risks arising from future developments.

Hamburg, 24 October 2000

ARTH U R AN D E R S E N

WirtschaftsprüfungsgesellschaftSteuerberatungsgesellschaft mbH

Nendza SchneiderCertified Auditor Certified Auditor

HAM B U RG

SinnerSchrader AktiengesellschaftPlanckstraße 1322765 Hamburg

GermanyPhone: +49 (0)40 39 88 55-0

Fax: +49 (0)40 39 88 55-55eMail: info@sinnerschrader.com

www.sinnerschrader.com

SinnerSchrader AktiengesellschaftI NVE STOR R E LATION S– Julia Kretschmann –

Planckstraße 1322765 Hamburg

GermanyPhone: +49 (0)40 39 88 55-0

Fax: +49 (0)40 39 88 55-55eMail: ir@sinnerschrader.com

www.sinnerschrader.com

LON DON

SinnerSchrader UK Ltd.The Birdseed Building

Mill StreetLondon SE1 2DZ

Great BritainPhone: +44 (0)781 804 56 37

eMail: info.uk@sinnerschrader.comwww.sinnerschrader.co.uk

Contact

AN N UAL G E N E RAL M E ETI NG12 December 2000

QUARTE R LY R E PORT S E PTE M B E R – NOVE M B E R 2000

January 2001

QUARTE R LY R E PORT DECE M B E R 2000 – FE B R UARY 2001

April 2001

QUARTE R LY R E PORT MARCH – MAY 2001

July 2001

AN N UAL R E PORT 2000/2001November 2001

Financial Calendar 2000/2001

PU B LI S H E RSinnerSchrader Aktiengesellschaft,

Hamburg

CONCE PTION AN D DE S IG NMUTABOR, Hamburg

PHOTOG RAPHYUte Schuckmann, Hamburg

PR I NTLangebartels & Jürgens, Hamburg

Editorial

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