Preliminary Version
of the Annual Report and Accounts
for DocCheck AG, Cologne
for the financial year 2006
Indicators of DocCheck AG
Change
01/01/2006- 01/01/2005- expressed
31/12/2006 31/12/2005 as a
EUR EUR percentage
Sales 13,595,691 11,201,613 21
of which Communication 6,612,721 5,506,622 20
of which DocCheck, Commerce & Logistic 6,979,143 5,694,799 23
Overall performance 13,692,616 11,244,093 22
EBITDA 1,574,119 854,266 84
EBIT 1,094,319 496,815 120
Consolidated annual net income 907,207 639,411 42
Annual net income per share 0,16 0,11 43
Liquid assets/securities 16,496,483 17,099,512 -4
Number of employees as at 31/12. 115 78 47
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The Annual Financial Statements
1.1 Management Report
1.2 Consolidated Profit and Loss Account in accordance with IFRS
1.3 Group Balance Sheet in accordance with IFRS
1.4 Development of fixed assets
1.5 Consolidated Notes to the Accounts of DocCheck AG, Cologne for the financial year
2006
1.6 Statement of Equity Capital
1.7 Copy of the Auditors'Report
1.8 Declaration of conformity in accordance with 161 German Stock Corporation Law
(AktG)
1.9 Report from the Supervisory Board
3
1.1 Management Report DocCheck AG 2006
Combined Management Report and Consolidated Management Report of DocCheck AG,
Cologne, for the financial year 2006.
1.1.1 Structure
The DocCheck Group consists of the DocCheck joint-stock company ("DocCheck AG") and
its subsidiaries
antwerpes+partner Aktiengesellschaft ("antwerpes+partner ag")
DocCheck Medical Services Gesellschaft mit beschr�nkter Haftung ("DocCheck
GmbH")
DocCheck Medizinbedarf und Logistik Gesellschaft mit beschr�nkter Haftung
("DocCheck Shop")
medicalpicture Gesellschaft mit beschr�nkter Haftung ("medicalpicture")
medizinstudent.de Gesellschaft mit beschr�nkter Haftung ("medizinstudent")
DocCheck TV Gesellschaft mit beschr�nkter Haftung ("DocCheck TV")
DocCheck AG carries out the tasks of an acting holding company and has its place of
business in Cologne. The operating business is managed by the subsidiaries. The
following explanatory notes relate to both the company and the Group.
1.1.2 Introduction
DocCheck AG has, together with its subsidiaries, specialised in the growth market,
healthcare. Agency, portal and trading business are the core activities. Within the
operating business the DocCheck Group is made up of two brands:
antwerpes+partner
DocCheck
antwerpes+partner represents the agency business. Under this brand, integrated and
cross-media communication concepts are developed for the healthcare and business-to-business
market. Traditional advertising campaigns, direct marketing, e-marketing and
public relations form part of the service portfolio.
DocCheck represents the portal and trading business within the Group. The largest
European portal for medical specialist groups is operated under www.doccheck.com. The
portal is based on a password system for medical professionals. With the free-of-charge
DocCheck password, users gain access to information on the websites of pharmaceutical
companies and medical publishing firms which is only intended for medical specialist
groups. From the portal, DocCheck develops services which allow transactions to take
place between users and the industry. Online market research, publishing, Customer
Relationship Management, IPTV (Internet television) and paid content are currently the
most important business models.
The trading, logistics and e-commerce activities within the DocCheck Group are brought
together under DocCheck Shop. DocCheck Shop is a multi-channel distributor for
medical supplies. Medical products are sold to doctors set up in practice via the mail-order
business, the Internet shop under www.doccheckshop.de and via the company's
own sales force. In addition, DocCheck Shop provides logistics services for the
pharmaceutical industry.
4
DocCheck Group aims to interlink the agency, portal and trading business more and
more closely, develop suitable business models and group the sales activities together.
This will enable the company to have a unique presence in the healthcare market and
will help DocCheck Group customers solve many of their communications, sales and
logistics problems efficiently and on a one-stop basis. From this standpoint, DocCheck
Group is sure to grow more strongly than the market over the next few years.
1.1.3 The Group's development and situation
Market
With a growth in Germany of 2.5 per cent1 in 2006, even the optimistic forecasts which
were made at the beginning of last year (1.7 per cent2) were very much exceeded. Even a
strong euro and crude oil prices which had climbed to a record-high in the meantime
could not stop the economic train once it had started. It seems that Germany is reverting
to the growth rates which were evident at the start of this millennium. Caught up in this
strong upward surge, even the unemployment rate dropped and the social welfare funds
were replenished. After the prevailing mood of recession felt in Germany from 2002 to
2005, this trend came as a surprise even for some economic research institutes3.
Currently growth figures of 1.8-2.84 per cent are also quoted for 2007. With a growing
economy, inflation risks and skill shortages5 are once more very much the focus of the
economic policy. Overall the German economy, particularly exports, is showing strong
form and the majority of German companies are making the most of the last few years to
gain a clear competitive edge. Whether this proves to be a sustained trend or is just an
interim peak will very much depend on whether Germany succeeds in further reforming
the social welfare system and whether more people have the necessary qualifications for
the jobs of the future. If however you consider the debate concerning health reform and
take into account the fact that, until 2009, almost continuous voting will take place in the
Federal Lands and then within the Federal Government, it is unlikely to be much of a
success for the time being.
The economic activity which has shown clear signs of growth during the course of the
year also has a positive effect on the advertising climate. In 2006 Nielsen Media
Research calculated an increase of 5.2 per cent to a gross investment volume of about 14
billion euro for the traditional advertising market6. The crowd puller for the
communications sector continues however to be online advertising with an increase of
65.5 per cent to 692.4 million euro7. For 2007, just as for this year, the communications
sector is expecting a five per cent growth rate8 for the advertising market overall. With
online advertising becoming increasingly important, the link-up between online and
offline is set to become the most significant trend in the advertising sector. Thus the
1 Real Gross Domestic Product, Economic Research Institute Registered Association (ifo), Munich 12/2006
2 Real Gross Domestic Product Forecast, Economic Research Institute Registered Association (ifo), Munich 12/2005
3 Press Release, ifo, 01/2007
4 ifo, Munich 12/2006 and World Economy Institute Forecast, Kiel 03/2007
5 Study on shortage of manpower, DIHK, Autumn 2006
6 Nielsen Media Research, annual balance sheet 2006
7 Gross advertising investments according to Nielsen Media Research, 01/2007
8 The umbrella organisation of communications agencies (GWA), autumn monitor 2006
5
statement"Interaction in advertising is increasing"in the GWA Autumn Monitor 2006
achieved the highest value with an approval rate of 97 per cent9.
The trend in the healthcare market appears to be somewhat more complex.
Due to technical progress and demographic development, the growth potential for the
healthcare market continues to be very high. Since 197010 alone, the share of the
healthcare market in the gross domestic product almost doubled to 11.3 per cent11 and
exceeded the automotive sector12. However since a predominant part of the healthcare
services is paid for using social security contributions, legislators have for years
responded with state intervention in order to prevent an uncontrolled increase in health
insurance contributions. In accordance with the Health Modernisation Act (keyword:
"surgery charge") in 2004, the"Medical Supply Economy Act" (keyword: "jumbo
groups"13) was passed in 2006 and in 2009 the"Major Health Reform"will take place
(keyword: "health fund").
Each of these reforms increases the pressure on healthcare costs and a positive
economic trend in the overall market and in the advertising market does not
automatically mean that the basic economic conditions in the healthcare market, in
which DocCheck AG achieves 75 per cent of its sales, will follow the same positive trend.
For 2007 the DocCheck Group is assuming that marketing budgets will be deferred. Thus
the pharmaceutical sales force, as the key sales instrument in the pharmaceutical
industry, will concentrate more on the core target groups and other target group
channels will become increasingly important. The Internet will, due to ever increasing
use and acceptance of the medium, the higher proportion of broadband accesses and
the numerous opportunities to approach target groups, benefit from this development.
According to a study by Frost & Sullivan, e-marketing in the healthcare market in Europe
will increase annually by 80 per cent until 200814. Against the background of the high
level of importance already attached to electronic media in the USA healthcare market,
there is a clear backlog potential here in the European market15.
With its healthcare, marketing and Internet know-how, as well as the corresponding
target group channel, the DocCheck Group is well equipped for this future development
in the healthcare market and will benefit overproportionally from the changes in the
marketing mix.
The DocCheck Group companies in profile
antwerpes+partner ag
The roots of the DocCheck Group lie in the agency business. Since 1990 antwerpes+
partner has acted as the agency in the healthcare market and has bases in Cologne and
Basle. The service portfolio is divided into three units:
Classical Communication
Classical Communication supplies communication concepts for the healthcare industry
in print, direct marketing and events.
9 GWA, autumn monitor 2006
10 Organisation for Economic Co-operation and Development (OECD), Health Data 2004
11 Federal Statistical Office: Health expenditure and health personnel bill, 2005
12 Federal Association of Medical Technology Registered Association (BVMed), Business Sector Report, 11/2006
13 Definition of"Jumbo Group": Pharmaceutical group with a fixed upper price limit
14 Study by Frost & Sullivan, 2006
15 Mercer Study, 10/2006
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Digital Communication
Digital Communication develops and implements internet, intranet and extranet
applications as well as e-marketing and e-detailing concepts (customised and interactive
electronic marketing).
Public Relations
In addition to traditional PR, Public Relations also offers web-based tools and online PR.
DocCheck
DocCheck Medical Services GmbH, DocCheck Medizinbedarf und Logistik GmbH,
medicalpicture GmbH, DocCheck TV GmbH and medizinstudent.de GmbH are grouped
together in the DocCheck Division:
I. DocCheck Medical Services GmbH (�DocCheck�)
DocCheck Medical Services GmbH operates the largest European portal for healthcare
professionals with around 470,000 users and over 1,500 co-operation partners from the
whole of the healthcare sector. Almost one out of two doctors in Germany is a DocCheck
user and almost all the reputable drugs manufacturers in Germany use DocCheck. From
the portal, DocCheck is constantly developing new services which enable transactions to
take place between the users and the industry.
The most important business activities of DocCheck Medical Services GmbH include:
Media
By means of the DocCheck Newsletter, DocCheck has the most far-reaching electronic
publication for medical professionals in Europe. It is sent to 240,000 subscribers and is
published in German and English.
Online Market Research
DocCheck Online Market Research has a panel with a range of 60,000 doctors and
16,000 pharmacists and, as regards costs and speed, it clearly has the edge over
traditional market research.
Direct Marketing
DocCheck has contact with almost 120,000 medical professionals by e-mail. Via the
DocCheck Mail service, the customer can contact his target group quickly and cost-effectively
with an extremely high e-mail response rate of up to 40 per cent.
Paid Content
In November 2006 the"DocCheck Pro"Premium Service Subscription for DocCheck users
was launched. The service gives access to premium offers and high-value medical
contents which are subject to a charge. In just a few months DocCheck Pro had already
sold about 1,000 subscriptions.
II DocCheck Medizinbedarf und Logistik GmbH (�DocCheck Shop�)
DocCheck Shop focuses on the medical trade. In addition to a range of 15,000 medical
products, about 150 own-brand products are also produced and sold under the brand
name"DocCheck". The medical products are sold to doctors and pharmacists via three
channels:
7
Internet
Under www.doccheckshop.de, DocCheck Shop has established itself as the online shop
with the highest turnover for medical supplies in Germany.
Mail-Order Business
DocCheck Shop has its own catalogue which is distributed to DocCheck users and as an
insert in publications for doctors. Orders are placed using DocCheck Shop's own call
centre.
Sales force
DocCheck Shop is present in the doctor's surgery by means of its own sales force. The
sales network was expanded in this respect in 2006 so that, in addition to Stuttgart as
the location in the South, DocCheck Shop is now also on hand for its customers with its
location in the East in Leipzig. On 13 March 2007, DocCheck Medizinbedarf und Logistik
GmbH acquired Medilab Essen DocCheck�s new location in the West. Thus, the planned
expansion of locations has already started in the first quarter of 2007. Further locations
will be added in 2007.
Logistics services for the pharmaceutical industry round off the range of services offered
by DocCheck Shop and use the existing resources of the logistics centre in Stuttgart.
III medicalpicture GmbH (�medicalpicture�)
As a picture agency, medicalpicture GmbH specialises in the healthcare market and is a
market leader in Germany with over 100,000 media items relating to medicine,
pharmaceuticals and science. In addition to the syndication (licensing) of picture media,
medicalpicture offers media management solutions and services to the industry.
IV DocCheck TV GmbH (�DocCheck TV�)
DocCheck TV produces the IPTV broadcast of the DocCheck Group in its own studio.
Under www.doccheck.tv and in co-operation with the DocCheck Newsletter, the TV
formats are made available on the Web to doctors.
V medizinstudent.de GmbH (�medizinstudent.de�)
medizinstudent.de GmbH operates the largest German portal for medical students and
serves as a bridge for future DocCheck users and therefore for prospective customers of
the healthcare industry.
The integrated collaboration of DocCheck and antwerpes+partner enables the DocCheck
Group to manage the complete communications value chain of the healthcare market-
starting with the development of innovative and cross-media products and services, via
appropriate communications concepts, through to communications with the target
group. The DocCheck Group has thus become the one-stop shop for the marketing of
healthcare services and products.
8
Competition
Due to its broad range of products and services within the healthcare market, the
DocCheck Group faces very diverse competitors. Beyond all the products and services
available, by working together with almost all the large pharmaceutical companies in
Germany, the DocCheck Group considers its competitive strength to be proven.
antwerpes+partner
antwerpes+partner ag was placed 7th in the ranking list of companies providing
specialist advertising services (B-to-B ranking) in 200516 by more than 2000 companies
surveyed. In the ranking of the umbrella organisation of communications agencies (GWA)
in 2006, the DocCheck Group came 24th out of the owner-managed agencies
represented in the ranking. In 2006 the DocCheck Group moved up to Number 14
(previous year: Number 17) 17 in the ranking of the multimedia agencies and thus
maintained its position as one of the top 20 New Media Agencies in Germany.
Taking approximately 20 healthcare agencies represented by the GWA as a basis,
antwerpes+partner ranks as one of the 5 agencies with the highest turnover in
pharmaceutical marketing in Germany, which includes the Pharma Units of the large
network agencies.
DocCheck
DocCheck is the largest portal for healthcare professionals in Germany. The password
service guarantees that the DocCheck Community grows dynamically. Every month about
7,500 9,000 new users are added.
In its basic version, the password service itself is free of charge both for the users and
for co-operation partners. There is no competitive system offering a comparable service.
As regards the products and services which are developed on the basis of this portal,
DocCheck faces various competitors from the online and offline world.
Publishing firms
Market research companies
Direct marketing agencies
Doctors'portals
Divisional programs
In the publishing/media sector, with over 240,000 subscribers, DocCheck has
succeeded in setting up the newsletter for medical professionals with the widest
readership in the German-speaking world. According to the ranking for medical trade
journals (LA-MED)18, the newsletter is in fact the most-read electronic publication for
German doctors. According to IVW Online Ranking19, as regards visits and page
impressions, the DocCheck portal ranks third in medical offers, just below the online
offers from the established media �rzteblatt and �rztezeitung and is growing faster than
the competition.
The focus on offline market research still prevails in the market for market research
services. Compared to offline competition, the DocCheck Market Research Unit has a
16 B-to-B Ranking 2005, Horizont journal
17 New Media Service Ranking 2006 and 2005
18 Working Party LA-MED Registered Association 2006
19 IVW Registered Association gathering information in order to determine the spread of advertising mediums,
comparable with the counting of print runs or TV viewing figures
9
qualified panel of 60,000 doctors and 16,000 pharmacists together with price and speed
advantages which are typical of the Internet. Only a few companies in Germany have a
clear focus on online healthcare market research. This enabled the Unit to increase sales
in 2006 by more than 60 per cent.
The DocCheck Mail service benefits from a mailing list of 120,000 medical professionals
and a high response rate of up to 40 per cent. With an increase in turnover of 100 per
cent, this service benefits from the strong market position of the DocCheck portal. This is
why DocCheck Mail is the fastest growing service in the whole of the DocCheck Group.
In November 2006, with DocCheck Pro, DocCheck also entered into direct competition
with other online subscriptions paid for by doctors, such as for example Business
Solutions Medicine Online (BSMO). In just a few months DocCheck Pro had already sold
about 1,000 subscriptions. When compared to the competition, DocCheck Pro regards
itself as an open platform for services and content with the target group Healthcare
Professionals. The objective is to achieve a market leadership which is comparable with
that of the free of charge basic service-DocCheck became interesting for doctors
through the increasing number of co-operation partners and became interesting for co-operation
partners through the increasing number of DocCheck users.
DocCheck TV
The market forecasts in Germany for IPTV (Internet television) are that there will be three
million users and a total market volume of 450 million euro20 by 2010. DocCheck has
access to the target group via sales contacts and marketing know-how and as a result
will be able to set up an Internet television channel for doctors in Germany. The declared
intention is to constantly develop and expand our lead position as First Mover. The know-how
available from the USA21 demonstrates that, on the Web TV market, only those
companies which create a differentiation via innovative value-added services for special
target groups benefit on a sustained basis.
DocCheck Shop
Contrary to the trend in the market, DocCheck Medizinbedarf und Logistik GmbH was
able to develop and expand sales considerably in the medical supplies sector. In
addition to sound management, the use of the DocCheck brand, which almost every
doctor in Germany is familiar with by now, played a key role in its success.
www.doccheckshop.de may well be the online shop with the highest turnover in
Germany for surgery and medical practice supplies. However, as regards surgery and
medical practice supplies, the e-commerce share in the total market volume is still small
at the present time and with about five million euro in 2006, despite all the sales
channels, DocCheck Shop's sales are only in the middle range when compared to the
competition.
In order to increase competitiveness, we are therefore striving to achieve a critical
volume over the next few years. A network of four locations will be set up for this purpose
with their own sales force as selling in the medical trade is still mainly done by sales
representatives. The first move was made in 2006 with the acquisition of the Leipzig
location. In March 2007 the location West was added when DocCheck Shop acquired
Medilab Essen. In 2007 further locations will be added.
20 Mercer Study, 10/2006
21 Mercer Study, 10/2006
10
Overall the DocCheck Group has been able to improve its competitiveness over the last
few years. As a result of the Group focusing on the healthcare market, concentrating on
the two brands DocCheck and antwerpes+partner and integrating marketing concepts,
marketing tools and target groups, a unique selling position was achieved. Currently no
competitor in Germany covers the market for healthcare communications in a
comparable way.
Income Situation
The sales, costs and results trend within the Group
The DocCheck Group increased sales in 2006 by 21 per cent, taking them from 11.2 to
13.6 million euro. This was the sharpest increase in sales since 2001. Gross earnings
(total turnover and operating revenue less material costs) increased even more sharply
by 30 per cent, rising from 6.7 to 8.7 million euro. Costs (staff costs, other operating
expenses and write-downs) increased at a disproportionately lower rate when compared
to gross earnings, rising from 6.3 to 7.6 million euro, which represents a 21 per cent
increase.
It was possible to achieve scale effects in the Group in 2006. With an increase of 2
million euro in gross earnings and an increase in costs totalling 1.3 million euro,
earnings before interest and taxes (EBIT) doubled by 0.5 million in the DocCheck Group,
rising to 1.1 million euro.
The financial result (interest and similar income less write-downs on financial
investments) in 2006 was slightly below the level of 2005 (447 thousand euro compared
to 517 thousand euro) and is comprised of interest income from funds totalling 16 million
euro on average.
As a result of the operating result doubling and a financial result slightly below the
previous year's level, profit from ordinary business activities increased by 50 per cent,
rising from 1.0 million euro in 2005 to 1.5 million euro in 2006. After taxation, the profit
per share is 16 cent (2005: 11 cent).
Sales and results trend in the antwerpes+partner and DocCheck Divisions
Both Divisions contributed to the marked increase in sales and profit within the
DocCheck Group:
antwerpes+partner
The antwerpes+partner Division increased sales in 2006 by 20 per cent, taking them
from 5.5 to 6.6 million euro. The sound trend in DocCheck Group's agency business in
2006 was intimated already in the last six months of 2005, when sales following one
year of consolidation were 11 per cent above sales for the same period in the previous
year.
Due to a slightly lower material input quota (2006: 22 per cent, 2005: 24 per cent), gross
earnings in this segment increased at a disproportionately higher rate (29 per cent) when
compared to sales and achieved a value of 5.3 million euro.
Staff costs in the agency Division, which only comprise the wage costs of the
operationally active employees, rose by 20 per cent to 2.2 million euro which was in step
with sales. The increase in other operating expenses to 2.2 million euro was comparably
smaller (15 per cent). The share of the Group allocation in other operating expenses is
about 88 per cent. All administrative activities as well as office and workshop space
costs and overheads are included in the Group allocation. Thus the costs in the
antwerpes+partner Division in 2006 totalling 4.5 million euro, were 18 per cent higher
11
than in 2005. As a result of this trend, the antwerpes+partner Division showed a slight
improvement in the EBIT margin which was 15.2 per cent (1.1 million euro) compared to
14.3 per cent (0.8 million euro) in 2005.
DocCheck
The DocCheck Division recorded a sales increase of 23 per cent, rising from 5.7 million
euro to 7.0 million euro. 0.8 million euro of this is apportionable to the DocCheck Shop
location near Leipzig which was consolidated for the first time for the last six months of
2006. At the same time, as opposed to 2005, DocCheck Medical Services GmbH handed
over its e-detailing project business totalling 0.4 million euro to the antwerpes+partner
Division so that, netted out, the organic sales increase for DocCheck was about 14 per
cent.
Lower-margin key account business in DocCheck Shop was compensated for by more
profitable end-customer business. The cost of goods sold quota clearly dropped in the
Division as a whole by 11 per cent and the gross earnings increased at a
disproportionately higher rate of 41 per cent, rising from 2.2 to 3.1 million euro.
As the costs, with an increase of 33 per cent to 3.2 million, remained below the increase
in gross earnings, the result improved from 250 thousand euro to-91,000 euro. Whilst a
clearly positive result was achieved in Shop (204 thousand euro) and the DocCheck TV
and medicalpicture shareholdings ended the financial year with just a slight deficit,
DocCheck Medical Services GmbH recorded a loss of 260 thousand euro due to the rate
of investment which continued to accelerate. The marketing, staff and development
expenses for the start of the Paid Content Services DocCheck Pro, for the relaunch of the
DocCheck portal and for internationalisation pushed up costs. Due to the effect of the
DocCheck brand for the whole of the Group and the significance of the DocCheck
marketing tool for the development of the antwerpes+partner Division's e-marketing
activities, these investments are key to the successful development of the Group in the
future.
Assets and financial situation
Balance sheet total, liquid assets, securities and cash flow
The balance sheet total for the DocCheck Group was 22.1 million euro and so had only
changed slightly when compared to the total of 21.6 million euro in 2005. Liquid assets
totalling 4.0 million euro and current-asset securities totalling 12.4 million euro made up
75 per cent of the assets. At the end of 2006 funds totalling 12.4 million euro are
invested in one mortgage bond and two loans against promissory notes with an average
term up to July 2007 and an average rate of return of 3.16 per cent and 2.4 million euro
are invested in time deposits which are subject to call. The increase in trade debtors of
57 per cent, rising from 1.4 million euro to 2.2 million euro, results from the company's
growth and a very strong fourth quarter with a corresponding development of accounts
receivable. The other asset items are at the same level as in the previous year.
On the liabilities side, the own shares holding increased from 411,449 to 598,393 euro
due to the second share buy-back programme. The equity quota is 86 per cent compared
to 87 per cent in the previous year.
Liquid assets and current-asset securities have dropped by 0.6 million euro to 16.5
million euro when compared to the previous year. The higher operating result and the net
inflow of funds from the net interest income totalling 0.7 million euro, and, on the other
hand, the dividend disbursement on 1 June 2006 totalling 0.5 million euro, the purchase
of own shares totalling 0.2 million euro and the increase of 0.7 million euro in
receivables, have had a significant influence on cash flow.
12
Participating interests
In the financial year 2006 only changes to the participating interest in DocCheck
Medizinbedarf und Logistik GmbH, Weil im Sch�nbuch, have occurred in the DocCheck
Group's portfolio of participating interests. The company increased its participating
interest in Albert Geisselmann Medizinbedarf GmbH, Eilenburg, from 33.3 per cent to
84.6 per cent on 27 April 2006 with financial effect from 1 July 2006. Subsequently the
participating interest in DocCheck Medizinbedarf und Logistik GmbH, Eilenburg was
renamed on 2 November 2006. In future Eilenburg will be developed as the Eastern
location for the trading and logistics activities of DocCheck.
Locations
DocCheck AG and all its subsidiaries except for DocCheck Medizinbedarf und Logistik
GmbH have their registered offices in Cologne. antwerpes+partner ag also has a branch
in Basle and DocCheck Medizinbedarf und Logistik GmbH has a location in Weil im
Sch�nbuch in Southern Germany and another one in Eilenburg in Eastern Germany.
A consolidation of sales and a corresponding earnings statement according to location
do not form an integral part of the Group's financial reporting. Segmentation is done
based upon the Divisions DocCheck and antwerpes+partner (formerly Communication).
Therefore the declaration of individual sales figures per location only has limited
informative value. At the Basle location 0.6 million euro sales were generated in 2006
just like in 2005. DocCheck Medizinbedarf und Logistik GmbH, Weil im Sch�nbuch,
generated unconsolidated sales totalling 4.0 million euro compared to 3.9 million euro in
the previous year. DocCheck Medizinbedarf und Logistik GmbH, Eilenburg, generated
unconsolidated sales totalling 0.8 million euro. At the Cologne location, sales totalled 11
million euro compared to 9 million euro in 2005 and this includes sales which the
holding company generates through the Group's sharing of costs with the subsidiaries.
Employees
The number of employees within the DocCheck Group, when compared to the previous
year, increased in 2006 by 37 employees taking the total to 115 employees. Only
permanent employees are included, excluding board members, managing directors and
trainees. If you include this group in the calculation as well, the total number of
employees was 150 at year end.
Research and Development
antwerpes+partner
In the antwerpes+partner Division, development currently focuses on concepts by
means of which the sales force employee can organise his sales approach vis-�-vis the
doctor more effectively (Sales Force Effectiveness).
An integral part of these concepts is ISA (Intelligent Sales Assistance), an electronic
sales force folder based on a Tablet PC, with which the sales force employee can hold
discussions with the doctor far more flexibly than with traditional discussion documents.
In addition to the discussion and as a supportive measure, personalised e-mails are sent
to the doctor (�Aftergate�) through which he receives additional information on the
product discussed (e-detailing). At the beginning of 2007 the sales and development
activities under the heading Sales Force Effectiveness were combined in one
autonomous Unit.
The aim of the development activity in the antwerpes+partner Division is to market new
concepts and technologies within the context of project business and to use these as a
differentiation feature in terms of competition.
13
DocCheck
In the DocCheck Division development focused on three areas in 2006:
DocCheck Pro
The development of Paid Content Services"DocCheck Pro"had already begun in the first
quarter of 2006, as had the recruiting of co-operation partners. After a development
period of 6 months, DocCheck Pro went into operation in November.
DocCheck 4.0
Since December 2006 DocCheck has been redesigning itself and now no longer presents
itself as a password and access service but rather as a full-value Web 2.0 portal for
healthcare professionals with editorial content, user-generated content and a multitude
of transaction opportunities for the user.
DocCheck TV
In the summer of 2006, with its own studio in Vogelsanger Stra�e, Cologne, DocCheck TV
went on the air. DocCheck TV is not a full programme yet. In the first phase own formats
are regularly placed for the DocCheck Newsletter in order to test the acceptance of the
medium in the target group. The most popular format is the"DocCheck Fight Club"in
which two opinion leaders hold controversial discussions on current topics concerning
healthcare in the"DocCheck boxing ring".
1.1.4 DocCheck AG
DocCheck AG carries out the tasks of an acting holding company and has its place of
business in Cologne. The operating business is managed by the subsidiaries.
Since 17 April 2000, the shares have been quoted on the Frankfurt Stock Exchange. On 15
January 2003 DocCheck AG was admitted to Prime Standard. It is represented in TecAll
Share and GEX. The holding company's balance sheets are drawn up in accordance with
the German Commercial Code (HGB).
Development and situation of DocCheck AG
As at year end, DocCheck AG employed 12 people excluding managing directors and
trainees. It offers to take over the administrative corporate functions from its
subsidiaries. These include:
Management of the business of the company
Accounting
Controlling
Facility Management
Human Resources
Organisational Development
Corporate Communications
Front Office Services
Depending on the degree of participation and the location, these corporate functions are
required by the subsidiaries to a varying extent. The revenue which DocCheck AG
generated as a result of this work amounted to 2.7 million euro.
In addition to the revenue from operating activities, there is interest income from the
investment of liquid funds totalling 0.5 million euro as well as income from profit transfer
agreements totalling 1.1 million euro and expenses totalling 0.3 million euro.
14
The result from ordinary business activities amounts to 0.7 million euro, the annual net
income is 0.9 million euro or 16 cent per share. The Board of Directors and the
Supervisory Board will propose to this year's annual general meeting that the dividend
for the financial year 2006 be increased from 8 cent to 10 cent.
Share buy-backs
The DocCheck AG Board of Directors decided on 7 September 2006 to start a share buy-back
programme. The basis for the share buy-back is the resolution passed by the
annual general meeting on 31 May 2006 which empowers the company to buy back a
maximum of 590,431 shares up until 30 November 2007. The company already holds
91,500 shares as a result of an earlier buy-back programme. The buy-back is first of all
restricted to a maximum of 100,000 shares (which corresponds to 1.7 per cent of the
capital stock). The purchase of shares began on 11 September 2006 and was done
exclusively via the stock exchange. In the period from September to December 2006 a
total of 53,098 shares were bought back at an average price of 4.11 euro. At this price
level, the market capitalisation of DocCheck AG is 24.27 million euro. Having deducted
the average funds balance in 2006 amounting to 16 million euro, a value of 8 million euro
is calculated for the business model in the opinion of the Board of Directors,
DocCheck's potential is not taken into account sufficiently in the price and thus justifies
a share buy-back at this price level.
1.1.5 Supplementary Report
There have been no significant events following the end of the financial year which had a
fundamental effect on the business trend of the DocCheck Group.
1.1.6 Risks and opportunities
The Board of Director and Supervisory Board meetings, a separate workshop concerning
risk management for all senior staff as well as the results from the first extensive
employee survey, in which 95 per cent of all Cologne and Basle employees participated,
form the basis for identifying risks and opportunities in the DocCheck Group.
On this basis, the opportunities and risks were assigned to four areas. With these areas
the company's environment will be covered as comprehensively as possible:
Market/Customers/Strategy
Systems
Costs
Human Resources
Market/Customers/Strategy
The DocCheck Group achieves more than 75 per cent of its sales in the healthcare
market. Through this focus, synergies are achieved in development and sales.
Risk
A large part of the healthcare expenditure is financed by the state or almost completely
by the state. For this reason, the market is exposed to numerous regulatory interventions
by legislators which are not always calculable in terms of their effects on the amount and
structure of the marketing budget. For example it is currently not completely clear what
effects the introduction of the healthcare fund in 2009 will have on marketing in the
healthcare sector. It is however anticipated that the cost pressure on all those involved
in the healthcare market will increase.
15
Opportunity
The DocCheck group assumes that the cost pressure will result in an increased demand
for lower-cost marketing instruments and channels and subsequently in an increased
demand for e-marketing and integrated marketing concepts. The strategy of the
DocCheck Group is in line with this trend. Therefore more opportunities than risks are
envisaged due to this trend.
Systems
DocCheck's strategy is based on linking up the individual activities in the Group to a
product and service portfolio with a unique selling position. There are currently strong
competitors in the individual Divisions. The business model can only begin to
demonstrate its full effect by combining and closely interlinking, from an organisational
point of view, market knowledge, marketing know-how and target group channels.
Risk
In comparison to a one-product company, the DocCheck Group business model makes
exceptional demands on communication and co-operation between employees, on
planning and processes within the company and as a result on corporate culture. The
success of the strategy can be jeopardised by departmental thinking.
Opportunity
Through a series of measures in organisational and personnel development, in the last
few years the DocCheck Group has succeeded in developing a corporate culture in line
with the increasing complexity of the company. This also becomes clear from the results
of the employee survey which, without exception, demonstrates that employees identify
closely with the company's goals. The corporate culture is therefore the mainstay of the
corporate strategy.
Costs
Despite volatile sales, costs within the DocCheck Group have been controlled effectively
in the last few years. The holding company's costs decreased between 2002 and 2005
from 3.3 million euro to 2.3 million euro and staff costs in the operational areas
developed in proportion to gross earnings. The moderate development of costs also
benefited from low inflation and wage pressure.
Risk
The macro-economic picture has changed during the course of 2006: A higher inflation
rate and increasing wages have, for the first time since 2001, once more resulted in a
marked increase in the holding company's costs which rose from 2.4 million euro to 2.7
million euro. The staff costs of the operationally active subsidiaries increased, adjusted
by the acquisition of DocCheck Shop Leipzig, from 3.1 million euro to 3.7 million euro.
Additional semi-variable costs such as rent and depreciation for a new office floor at the
Cologne location will be added in 2007. In order to implement the scale effects striven for
in the DocCheck Group, the Board of Directors put a programme into motion mid-2006
which will guarantee that the rates at which the planning costs increase will turn out to
be lower than the growth rates in the next few years.
Opportunity
As a result of this cost control and with an increase in sales of 21 per cent, the operating
result more than doubled in 2006. Thus, by implementing the scale effects, the
16
DocCheck Group has the opportunity to increase the return on sales on a sustained basis
over the next few years.
Human Resources
The development of the DocCheck Group is based on a stable corporate culture. This is
reflected in the way employees closely identify with the company's goals and in a low
employee turnover within the company.
Risk
Due to interlinked know-how, capital and family ties, the sudden absence of one of the
directors Dr. Frank Antwerpes, Mr. Jan Antwerpes (DocCheck AG) or Ms. Tanja Antwerpes
(antwerpes+partner ag) could bring about a risk situation.
Opportunity
The main focus of staff development since 2004 has been the development of a stable
second level of management. In 2005 eight employees and in 2006 sixteen employees
below the Board of Directors were included in an executive personnel programme and
became qualified for their management tasks. In 2007 over 20 senior staff will be
prepared for their tasks at the"DocCheck Management Academy". Overall there are 30
employees in the DocCheck Group, including all directors and executives, who are
responsible for staff. No senior executive manages more than five employees directly.
With this qualified management team, the DocCheck Group can seize opportunities for
growth on a selective and well-targeted basis.
1.1.7 Looking back, Looking ahead
With an increase in sales of 21 per cent and with profit per share increasing by 50 per
cent in 2006, the DocCheck Group achieved the highest increase in sales and income
since 2001.
The work carried out over the last few years has been worthwhile. We have once again
focused more sharply on the healthcare market and intensified sales. The development
of new products was speeded up and the quality of service was improved. New business
areas have been developed and we pushed ahead with internationalisation. The
management team was expanded appreciably and co-operation between antwerpes+
partner and DocCheck was intensified. And we have moulded DocCheck into a brand in
the healthcare market. In short, we are of the opinion that DocCheck has never been in
such good shape.
So we begin 2007 full of confidence. Growth, acquisitions and an increase in goodwill
are on the agenda.
We want to increase sales by at least 10 per cent in 2007, taking the figure to over 15
million euro. Following on from the clear leap in sales in 2006 experienced by the agency
business under antwerpes+partner, we envisage growth for the DocCheck Division once
again in 2007.
The qualitative and quantitative growth within the DocCheck Group will also be
supported in 2007 through acquisitions. By expanding our market position we have
become more attractive as a strategic partner and our aim in 2007 is to acquire the
majority shareholding in 1-2 companies.
17
One of the biggest challenges faced in 2007 is to make sure that the development of the
Group over the last few years is reflected in the share price. Prices of 4.50 euro and a
market capitalisation of just under 26 million euro do not reflect the growth and earnings
potential of the DocCheck Group. One of the jobs still to be done within the Group is to
increase the company's value. We want to change this in 2007.
1.1.8 Information in accordance with 289 Section 4, 315 Section 4 German
Commercial Code (HGB)
As at 31 December 2006 the company's subscribed capital totalled 5,904,312.00 euro
which is divided up into 5,904,312 non-par individual share certificates made out to
bearer. There are no restrictions that affect the voting rights or transfer of shares.
Therefore one share has a stake of one euro in the capital stock. Dr. Frank Antwerpes
and Jan Antwerpes hold direct participating interests in the capital stock which exceed 10
per cent of the voting rights.
The regulations concerning the appointment and withdrawal of members of the Board of
Directors are laid down in 84, 85 of the German Companies Act and in 7 Section 2 of
DocCheck AG's Articles of Association:
"The appointment and the revocation of the appointment of Board members is done by
the Supervisory Board which also determines the number of members. The Supervisory
Board can appoint the chairman of the Board as well as the deputy chairman."
Regulations concerning any amendments to the Articles of Association are in principle
laid down in 179, 181, 133 of the German Companies Act. Various additional
provisions contained in the German Companies Act are possibly also relevant as regards
amendments to the Articles of Association and supplement or replace the
aforementioned regulations. In this respect, 182 and following of the German
Companies Act concerning increases in capital, 222 and following of the German
Companies Act concerning capital reductions and 262 of the German Companies Act
concerning dissolution of the joint-stock company are referred to as examples.
According to 17 of DocCheck AG's Articles of Association, the Supervisory Board is
authorised to approve amendments to the Articles of Association if these only concern
the wording.
As regards the Board of Directors'powers to issue shares, we refer to the Group's notes
to the accounts and the heading"Explanatory Notes on the Profit and Loss Account,
Result per Share". "Supplemental Information, Own Shares"as well as the Ad Hoc Press
Release from the company dated 7 September 2006 in which DocCheck AG announced
that it was buying back up to a maximum of 100,000 individual share certificates,
equating to 1.7 per cent of the capital stock, exclusively via the stock exchange.
The basis for the share buy-back is the resolution adopted at the Annual General Meeting
held on 31 May 2006, Point 8 on the agenda, by means of which the company was
empowered to buy up to 590,431 own share certificates. Authorisation became effective
on 13 June 2006 and is valid until 30 November 2007. The purchase price paid per share
(excluding ancillary purchase costs) must not fall below or exceed by more than 10 per
18
cent the price of a company share as determined by the opening auction held on the
same trading day on the XETRA trading platform. The shares are purchased via a bank
which guarantees adherence to the Safe Harbour Regulations of the Securities Trading
Act and EU Decree 2273/2003. The purchase of shares started on 11 September 2006.
The DocCheck AG share buy-backs are updated each week and published on the
company's website.
The company has not entered into any major agreements that are subject to reservation
in the event of a change of control due to a take-over bid. In addition the company has
not entered into any compensation agreements with the Board members or employees
which cover the possibility of a take-over bid.
Cologne, March 2007
The Board of Directors of DocCheck AG
Dr. Frank Nicolas Antwerpes
Jan Antwerpes
Helmut Rieger
1.2 Consolidated Profit and Loss Account in accordance with IFRS
01/01/2006 -
31/12/2006
in �
01/01/2005 -
31/12/2005
in �
1. Sales (net) 13,595,691 11,201,613
2. Other operating income 181,344 138,512
3. Differences between opening and closing stocks of finished
and unfinished goods 96,925 42,479
4. Cost of materials a) Cost of raw materials and supplies and
goods purchased for resale 3,470,494 3,118,643
b) Cost of external services 1,663,312 1,444,726
5,133,806 4,563,370
5. Staff costs a) Wages and salaries 4,073,059 3,399,509
b) Social security contributions 710,716 585,629
4,783,775 3,985,138
6. Amortisation of intangible fixed assets and depreciation of
tangible fixed assets 479,799 357,451
7. Other operating expenses 2,379,174 1,998,183
8. Income from participating interests -3,085 18,353
9. Operating result (EBIT) 1,094,319 496,815
For information: EBITDA 1,574,119 854,266
10. Interest and similar income 563,402 574,551
11. Write-downs on long-term investments and current-asset
securities 116,449 57,746
12. Interest and similar expenses 7,271 7,041
13. Result before tax (and minority shareholdings) 1,534,002 1,006,579
14. Personal income tax and tax on earnings 588,602 335,350
15. Other taxes 1,699 2,327
16. Result before minority shareholdings 943,701 668,902
17. Minority shareholdings 36,494 29,490
18. Consolidated annual net income 907,207 639,412
19. Profit brought forward 2,785,972 2,616,110
20. Distribution of profit 464,345 469,549
21. Net earnings 3,228,834 2,785,972
Net earnings per share in accordance with IAS 33 (undiluted) 0,16 0,11
Net earnings per share in accordance with IAS 33 (diluted) 0,16 0,11
Average shares currently in circulation (undiluted) 5,802,510 5,858,182
Average shares currently in circulation (diluted) 5,808,132 5,868,182
1.3 Group Balance Sheet in accordance with IFRS
01/01/2006- 01/01/2005-
31/12/2006 31/12/2005
Assets in in
Short-term assets
Liquid funds 4,048,223 2,230,712
Current-asset securities 12,448,260 14,868,800
Trade debtors 2,172,136 1,403,455
Amounts owed by group undertakings 0 41,528
Stocks 600,604 405,986
Prepaid expenses and deferred charges 50,681 24,114
Total short-term assets 19,319,904 18,974,595
Tangible fixed assets 1,366,883 1,219,433
Intangible fixed assets 130,713 92,144
Participating interests 70,804 70,694
Goodwill 697,617 697,617
Other assets 514,588 581,267
Deferred taxes 2,800 3,300
Total assets 22,103,309 21,639,050
21
01/01/2006- 01/01/2005-
31/12/2006 31/12/2005
Equity and liabilities in in
Short-term liabilities
Short-term loans and short-term share in
long-term loans 29,775 4,022
Trade creditors 477,610 410,656
Payments received on account 928,500 1,070,170
Other provisions for liabilities and
charges 625,384 523,598
Tax provisions 384,917 66,273
Deferred income and other short-term
liabilities 470,927 626,912
Amounts owed to group undertakings 64,564 12,462
Total short-term liabilities 2,981,676 2,714,093
Deferred taxes 58,000 101,600
Capital and reserves
Subscribed capital 5,904,312 5,904,312
Capital reserve 13,421,409 13,421,409
Net earnings/net loss 3,228,836 2,785,972
Revenue reserves 71,700 71,700
Capital adjustment items -3,245,570 -3,245,570
Special revaluation reserve -40,552 32,509
Own shares -598,393 -411,449
Minority shareholdings 321,891 264,472
Total capital and reserves 19,063,633 18,823,357
Total equity and liabilities 22,103,309 21,639,050
22
1.4 Development of fixed assets as at 31.12.2006
Acquisition/manufacturing costs Depreciation/amortisation/write-downs Balance Sheet
Value Additions Disposals Value Value Additions Disposals/additions Value
01.01.2006 31.12.2006 01.01.2006 31.12.2006 31.12.2006 31.12.2005
EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR
I. Tangible assets
Other factory and
office equipment 3,108,331 641,743 1,161,843 2,588,230 1,888,897 474,874 1,139,924 1,223,847 1,364,383 1,219,433
II. Intangible fixed assets
Concessions, industrial property rights and similar rights and assets,
including licences on such rights and assets
487,442 82,563 314,741 255,264 395,298 43,907 314,655 124,551 130,713 92,144
III. Long-term investments
1. Shares in group undertakings which have not been consolidated
4,205 0 4,205 0 4,205 0 4,205 0 0 0
2. Participating interests 70,694 45,404 45,294 70,804 0 0 0 0 70,804 70,694
74,899 45,404 49,499 70,804 4,205 0 4,205 0 70,804 70,694
IV. Goodwill
Goodwill 1,191,667 0 0 1,191,667 494,050 0 0 494,050 697,617 697,617
4,862,339 769,710 1,526,083 4,105,966 2,782,450 518,781 1,458,783 1,842,448 2,263,517 2,079,888
1.5 Consolidated Notes to the Accounts of DocCheck AG, Cologne
for the financial year 2006
1.5.1 Accounting principles and methods
The consolidated financial statements have been prepared pursuant to 315a Section 1
of the German Commercial Code in accordance with the provisions of the International
Financial Reporting Standards (IFRS), the International Accounting Standards Board
(IASB), London, as well as the interpretations of the International Financial Reporting
Interpretations Committee (IFRIC) which were valid as at the cut-off date and these are
expected to be released for publication by the Supervisory Board on 06 March 2007. The
term International Financial Reporting Standards (IFRS) has been used since 2003 for the
whole of the accounting standards which were prepared by the International Accounting
Standards Board (IASB), London. Thus the term International Accounting Standards (IAS)
is replaced. Accounting standards which the IASB issued before this change of name
continue to be referred to as IAS.
The Board of Directors and the Supervisory Board of DocCheck AG issued a declaration
on 21 December 2006 to the German Corporate Government Code as required according
to 161 German Stock Corporation Law. This is made permanently available to the
shareholders under the heading"Company"on the DocCheck AG website.
The consolidated financial statements according to IFRS are based on the historical costs
of acquisition principle with the exception of certain items such as financial assets
available for sale and derivative financial instruments which are shown with the current
value. Standard accounting and evaluation principles form the basis of the annual
financial statements of the companies included in the consolidated financial statements.
The financial year runs from 1 January to 31 December each year.
The consolidated financial statements were drawn up in euro. Unless there is a note to
the contrary, all amounts are shown in full euros (EUR).
The consolidated profit and loss account has been prepared according to the total cost
type of accounting.
The shareholders'meetings of antwerpes+partner ag and DocCheck Medical Services
GmbH decided in September 2006 to make use of the facilitation opportunity pursuant to
264 Section 3 of the German Commercial Code and to dispense with the preparation of
notes to the accounts for the financial year 2006. The statutory requirements have been
complied with by both subsidiaries.
Any changes to the accounting and evaluation methods are explained in the Notes to the
Accounts. Provided that no differing regulation is planned for the standard concerned,
the retrospective application of revised and new standards requires that the results for
the same period in the previous year and the opening balance sheet for this comparable
period are adjusted as if the new accounting and evaluation methods had already been
applied. The financial statements as at 31 December 2005 were adjusted to the revised
and new standards applied by the Group for the first time on 01 January 2006.
1.5.2. Summary of the accounting, evaluation and consolidation principles according to
IFRS which fundamentally differ from the German Commercial Law
1. General
The consolidated financial statements of DocCheck AG as at 31 December 2006 were, in
accordance with 315 a of the German Commercial Code, drawn up in compliance with
the International Financial Reporting Standards (IFRS) as they are to be applied in the EU.
Some aspects of the provisions of the German Commercial Code and the German Stock
Corporation Act are fundamentally different to those in the IFRS. The fundamental
differences, which could be relevant for the assessment of the assets, financial and
income situation of the company, are described below.
2. Capital adjustment items
Within the context of the business combination antwerpes+partner ag and DocCheck
AG, a capital adjustment item was included in the balance sheet in accordance with IFRS
3.21 and this reduces the consolidated capital.
3. Partial profit realisation
The partial profit realisation for production orders is, according to the prevailing opinion
in German Commercial Law, only allowed to a very limited extent. In principle only the
Completed Contract Method is deemed to be admissible. IAS 11 in conjunction with IAS
18 on the other hand allows sales and corresponding profits to be realised in accordance
with the so-called Percentage of Completion Method (POC). The prerequisite is the
reliable determination of the level of completion, as well as the reliable estimate of the
total order costs and revenue and its recoverability. The level of completion was
determined analogous to the amount of goods produced.
4. Current-asset securities
Current-asset securities are evaluated at acquisition cost or at the lower stock exchange
or market price in accordance with German Commercial Law. According to IAS 39,
financial assets available for sale correspond to securities falling within the category
"available for sale"and these are to be evaluated at Fair Value (market price) as
determined on the cut-off date. These changes are to be recorded in a special revaluation
reserve in capital and reserves with no effect on the operating result until the securities
are sold. They are only recorded as affecting net income at that point in time when they
are taken out of the accounts.
5. Amortisation of goodwill
In accordance with IFRS 3 (Business Combinations), no more scheduled amortisation of
goodwill is to be carried out and this includes goodwill ensuing from capital
consolidations. Once a year intangible fixed assets which are subject to an indefinite
useful life are to be checked to see if reductions in value are possible (impairment only
approach). If events or changed circumstances occur which point to a possible reduction
in value, the intrinsic value needs to be checked more frequently.
25
6. Own shares
Contrary to German Commercial Law, own shares are not shown as assets. On the
contrary, the provision contained in IAS 32.33 f. prescribes that own shares are to be
shown in the balance sheet as valuation items of the capital and reserves. Therefore, in
accordance with IFRS, capital and reserves are recorded as being lower than they would
be in financial statements drawn up according to German Commercial Law.
7. Minority shareholdings
Minority shareholdings of outside shareholders are to be shown as a component part of
the capital and reserves and no longer as a separate item between capital and reserves
and outside capital. Changes to this item are to be shown accordingly in the capital and
reserves statement.
8. Finance leasing
According to IAS 17.8, a leasing contract is classified as finance leasing if it essentially
transfers all the risks and opportunities which are connected with ownership. According
to IAS 17.20, lessees have to show finance leasing contracts at the start of the leasing
contract period in the balance sheet as assets and liabilities of equal amount. The
amount is to be the current market value of the leasing object which is to be attributed at
the start of the leasing contract or the cash value of the lease payments if this value is
lower. In the subsequent periods the minimum lease payments are to be divided up into
the financing costs and the redemption part of the residual debt. Conditional lease
payments are to be shown as expenses in the period in which they accrue.
9. Deferred taxes on business transactions which are recorded as having no effect on the
operating result
According to IAS 12.61, deferred taxes are to be charged or credited directly to the capital
and reserves if the tax relates to items which are charged or credited directly to the
capital and reserves in the same or in another period.
10. Transaction costs for capital and reserves transactions
In accordance with IAS 32.35, transaction costs for a capital and reserves transaction,
reduced by all the income tax benefits associated therewith, are to be shown in the
balance sheet as a deduction from capital and reserves.
1.5.3 Fundamental principles of the consolidated financial statements
1. Consolidation methods
The capital is consolidated by offsetting the book values of the participating interests
against the proportionate reassessed capital and reserves of the subsidiaries on the
date of their acquisition. Thus assets, liabilities and contingent liabilities are shown
using their current market values. Residual positive differences are shown in the balance
sheet as goodwill, a negative difference is on the contrary recorded directly in the profit
and loss account as other operating income. The disclosed hidden reserves and charges
26
are, during the course of subsequent consolidations, continued according to the
corresponding asset values and liabilities.
Inter-group profits and losses, sales, expenses and income as well as the inter-group
accounts receivable and payable are eliminated.
The consolidated financial statements contain the transactions of those companies in
which DocCheck AG directly or indirectly has the majority of voting rights (subsidiaries).
Inclusion begins from the date on which there is a possibility of control. It ends when the
possibility of control no longer exists.
However, those participating interests over which DocCheck AG exercises considerable
influence as a rule due to a shareholding of between 20 and 50 per cent are
evaluated according to the Equity Method.
2 Accounting and evaluation principles
a) Net sales
Sales are realised after deduction of taxes and reduction in earnings at that point in time
when the risk is transferred or the service is provided.
Expenses incurred when setting up provisions for sales discounts are taken into account
in the period in which the sale is realised. Net sales are reduced by these amounts.
Pursuant to IAS 11 in conjunction with IAS 18, order projects are valued according to the
Percentage of Completion Method. If the net income for an order cannot be reliably
estimated, the income recorded is only that which equates to the incurred order costs
which can probably be recouped. The order costs are recorded as expenses in the period
in which they are incurred.
There were no apparent impending losses relating to production orders as at the balance
sheet date. Profits are realised if the prerequisites for determining the level of
completion, the estimate of the total order costs and the total order revenue which can
be collected, are met.
b) Research and development costs
According to IAS 38, research costs may not be capitalised and development costs may
only be capitalised if certain prerequisites exist which are specified precisely.
Capitalisation is therefore always required if one is sufficiently sure that the
development work will result in future inflows of funds which, in addition to covering the
normal costs, will also cover the corresponding development costs. In addition, various
criteria must be met on a cumulative basis with regard to the development project and
the product or process which is to be developed. As in the previous year, these
prerequisites are not stated.
27
c) Intangible Assets
Intangible fixed assets acquired against payment are valued at cost. According to their
respective useful life, they are amortised over three to five years according to schedule
and on a straight line basis.
d) Goodwill
In accordance with IFRS 3 in conjunction with IAS 36, from the financial year 2004
goodwill is no longer amortised according to schedule. The goodwill's ability to maintain
its value is regularly checked by means of impairment tests and, if required,
corresponding value adjustments are made. In the financial year 2006, on the basis of
the test to check its ability to maintain its value, there was no need to devalue it.
e) Tangible fixed assets
According to IAS 16, the tangible fixed assets are evaluated at acquisition or production
cost, reduced by scheduled amortisation. Amortisation is done according to the straight-line
method. In accordance with 6 (2) of the Income Tax Act in conjunction with IAS 16,
low-value assets are depreciated in full in the year of acquisition. Factory and office
equipment is depreciated over 3 to 33 years.
In accordance with IAS 36 in conjunction with IAS 16, within the context of the annual
impairment test, the tangible fixed assets'ability to maintain their book value is
regularly checked at the end of a financial year. If the realisable amount of an asset value
falls below the book value, it will be depreciated on a non-scheduled basis.
The trend of the fixed assets according to the balance sheet items up until the balance
sheet date on 31 December 2006, can be seen in the attached statement of asset
additions and disposals. The breakdown of the development of consolidated fixed assets
corresponds to the breakdown of the consolidated balance sheet according to IFRS.
f) Participating interests
By means of the notarial purchase contract dated 27 April 2006, the subsidiary DocCheck
Medizinbedarf und Logistik GmbH, Weil im Sch�nbuch acquired a further 51.3 per cent of
the shares in Albert Geisselmann GmbH, Eilenburg. The transfer became effective on 01
July 2006 and was fully consolidated from that date.
Up until that date, the participating interest in Albert Geisselmann GmbH, Eilenburg was
evaluated according to the Equity Method and was stated showing the proportionate
capital and reserves in accordance with the book value method.
On 02 November 2006 the change of name to DocCheck Medizinbedarf und Logistik
GmbH was recorded in the commercial register.
g) Stocks
In accordance with IAS 2, finished goods and goods purchased for resale as well as
unfinished goods are shown under stocks. The stocks are evaluated at acquisition or
production cost or taking their net sales value, whichever is the lower.
28
Unfinished goods are evaluated at production cost. If the production costs exceed the
value ascribed on the cut-off date, the goods will be depreciated. The production costs
are determined progressively. When determining the production costs, individual costs
of materials, individual costs of production as well as a reasonable proportion of the
necessary production overheads are taken into account. Interest on borrowed capital is
not taken into account.
Unfinished services whose total order costs and expected revenue can be estimated
reliably were evaluated on the basis of the level of completion determined in accordance
with the Percentage of Completion Method (POC), IAS 11. These are shown under
amounts owed or customers'advance payments and net sales whilst deferring additional
or reduced costs expressed as percentages.
h) Amounts receivable and other assets
Amounts receivable and other assets are shown at par or at the lower ascribable value.
i) Current-asset securities
The current-asset securities are allocated to the category"available for sale"and, in
accordance with IAS 39, are to be evaluated at Fair Value (market price). Fair Value
changes, netted out by the deferred taxes apportionable thereto, are first of all recorded
in the capital and reserves in a special revaluation reserve with no effect on the
operating result until that point in time when the securities are taken out of the
accounts. If there is evidence of a permanent reduction in value, an impairment test will
be carried out and the reduction in value will be taken into account by means of non-scheduled
write-downs. The sales are shown in the balance sheet on the trading day.
j) Deferred taxes
Deferred taxes are calculated in accordance with IAS 12. Deferred taxes are determined
as a result of temporary differences between the valuations of assets and liabilities in
the commercial balance sheet and the tax balance sheet, consolidation processes and
differences between the valuations according to the German Commercial Code and IFRS.
k) Own shares
In accordance with IAS 32.33 f., own shares are shown in the balance sheet at
acquisition cost and as a deduction from the capital and reserves.
l) Provisions for liabilities and charges
Provisions are set up for contingent liabilities from past business transactions or events
in respect of which there is uncertainty on the balance sheet date as to the amount of
funds coming out of assets and the date that this will occur. Other provisions are
evaluated in accordance with IAS 37. They are shown taking the amount set aside which
is most likely to be called upon.
29
m) Liabilities
The amounts which are to be paid back are shown as the liabilities. Liabilities ensuing
from finance leasing are shown in accordance with IAS 17.20 taking the cash value of the
leasing instalments.
n) Accruals and deferrals
Revenue and expenses for the following financial year are recorded before the balance
sheet date under accruals and deferrals.
3. Impairment tests
In accordance with IFRS 3 in conjunction with IAS 36 and IAS 38, from the financial year
2004 the scheduled amortisation of goodwill is dispensed with in favour of an annual
impairment test. Within the framework of the impairment test, the residual book values
of the individual cash generating units were compared with their respective recoverable
amount, that is, the higher value from the net selling price and its value in use. The cash
generating units in the DocCheck Group correspond to the separate legal units of the
subsidiaries.
If the book value of the cash generating unit is higher than its recoverable amount, the
amount of the difference represents a devaluation loss. As a first step, the goodwill of
the strategic cash generating unit concerned is amortised by the calculated devaluation
loss. If there is a residual amount, this will be allotted on a proportionate basis to the
other assets of the respective strategic cash generating unit on the basis of the residual
book values of each individual asset on the balance sheet date.
The annual results 2006, the detailed planning from 2007 until 2010 and the adoption of
a perpetual annuity (exclusive of growth rate) from the financial year 2011 formed the
basis each time for determining the values in use. The discounting rates (before taxes)
for the individual cash generating units are composed of a risk-free rate of interest and a
company-specific risk premium and amount to between 14 and 16 per cent for the tested
units. The income values thus determined are compared to the respective book values of
the goodwill.
The impairment tests for the cash generating units within the DocCheck Group did not
result in a devaluation being required for the goodwill shown in the balance sheet on the
cut-off date 31 December 2006.
4. Statement of sources and application of funds
The consolidated statement of sources and application of funds shows how the cash and
cash equivalent of the DocCheck Group has changed during the course of the year under
review as a result of an inflow and outflow of funds. In conformity with IAS 7, a
distinction is made between cashflows from operating activities and cashflows from
investment and financing activities. The cashflows from the ordinary business activities
are specified according to the indirect method. Changes to the funds which do not affect
payments are shown separately.
30
The liquidity shown in the flow of funds analysis includes cash balances, cheques and
cash at banks. Financial futures with an original maturity of up to three months are also
included together with the current-asset securities.
5. Currency conversion
The annual financial statements of antwerpes+partner ag, Basle branch (Switzerland)
are, in accordance with IAS 21 (The Effects of Changes in Foreign Exchange Rates),
converted according to the concept of functional currency. The currency used by the
branch is Swiss Francs as the company runs its business independently from a financial,
commercial and organisational point of view. Assets and liabilities are therefore
converted at the rate applicable on balance sheet date and expenses and income are
converted taking the annual average rate.
1.5.4 Scope of consolidation
The consolidated financial statements cover associated companies over which the Group
holding company exercises control. Control is exercised as soon as the parent company
has 50 per cent of the subsidiary's voting rights or if it can determine the financial and
corporate policy of a subsidiary or if it can provide the majority of the supervisory board
or management board members. On 31 December 1999 IAS consolidated financial
statements were drawn up for the first time.
In addition to DocCheck AG as the parent company, the consolidated financial
statements include the following companies which have their head office in Germany:
The companies and their participating interests
Participating Capital and
interest quota reserves as at Annual Result
as at 31/12/2006 2006
Name and registered office of the company 31/12/2006 in,000 euro in,000 euro
DocCheck Medical Services GmbH, Cologne 100.00% 514 0*
antwerpes+partner ag Cologne 100.00% 298 0*
medizinstudent.de GmbH, Cologne 100.00% 11 7
DocCheck TV GmbH, Cologne 63.46% -115 -22
DocCheck Medizinbedarf und Logistik
GmbH, Weil im Sch�nbuch 51.00% 793 103
medicalpicture GmbH, Cologne 51.00% -84 -17
DocCheck Medizinbedarf und Logistik
GmbH, Eilenburg*** 84.60% 167 -4**
* After profit and loss transfer to DocCheck AG
**The participating interest totalling 84.6% in DocCheck Medizinbedarf GmbH, Eilenburg is held indirectly
via DocCheck Medizinbedarf und Logistik GmbH, Weil im Sch�nbuch.
***formerly Albert Geisselmann Medizinbedarf GmbH
31
The majority shareholdings in the subsidiaries were acquired on the dates detailed in the
following table:
Date of acquisition
of the majority
shareholding
antwerpes+partner ag Cologne 30. Dez. 1999
DocCheck Medical Services GmbH, Cologne 15. Nov. 1999
DocCheck Medizinbedarf und Logistik
GmbH, Weil im Sch�nbuch 17. Nov. 2000
DocCheck Medizinbedarf und Logistik
GmbH, Eilenburg 1. Jul. 2006
DocCheck TV GmbH 1. Jul. 2004
medicalpicture GmbH 1. Apr. 2002
medizinstudent.de GmbH 15. Okt. 2003
The indirect 33 per cent holding in DocCheck Medizinbedarf und Logistik GmbH,
Eilenburg (formerly Albert Geisselmann Medizinbedarf GmbH) was, in accordance with
IAS 28.13, consolidated using the Equity Method up until 30 June 2006. With effect from
01 July 2006, the subsidiary of DocCheck AG, DocCheck Medizinbedarf und Logistik
GmbH, Weil im Sch�nbuch, acquired a further 51.3 per cent in DocCheck Medizinbedarf
und Logistik GmbH, Eilenburg. Since that date, the indirect participating interest has
been 84.6 per cent. Consolidation according to the method used to date is no longer
allowed. In accordance with IFRS 3, inclusion in the consolidated financial statements is
done according to the acquisition method. The negative difference ensuing from the
initial consolidation amounting to 40 thousand euro was recorded as having an
immediate effect on net income.
Antwerpes Romania S.R.L., which was not included in the consolidated financial
statements due to its negligible contribution, was dissolved in 2006. The book value of
the participating interest was 0 euro at the time of dissolution and so had no effect on
the consolidated results.
1.5.5. Explanatory notes on the profit and loss statement
1. Net sales
Net sales increased by a total of 2.4 million euro or by 21.4 per cent to 13.6 million euro
compared to 2005.
32
Net sales can be broken down as follows:
2006 2005
million euro million euro
Revenue from the provision of services 8.4 7.0
Revenue from the sale of goods 4.8 3.9
Rentals 0.4 0.3
Total 13.6 11.2
In the period under review, sales realised totalled 309 thousand euro (previous year: 332
thousand euro) using the Percentage of Completion method pursuant to IAS 11 in
conjunction with IAS 18. Partial profit realisation led to the following changes to results:
Changes due to use of POC:
2006 2005
EUR 1,000 EUR 1,000
Stocks -150 -116
Trade debtors 309 332
Provisions for outstanding costs -12 -13
Change in result 147 203
2. Other operating income
Other operating income is mainly made up of revenue from rents and the release of
provisions.
There was a negative difference of 40 thousand euro as a result of the initial
consolidation of DocCheck Medizinbedarf und Logistik GmbH (Eilenburg). In accordance
with IFRS 3.56 this is to be recorded as having an immediate effect on net income and is
therefore also included in the item, other operating income.
3. Cost of materials
Cost of materials totalled 5,134 thousand euro (previous year: 4,563 thousand euro), of
which 3,471 thousand euro (previous year: 3,119 thousand euro) was attributable to
expenses for raw materials and supplies and bought-in goods and 1,663 thousand euro
(previous year: 1,445 thousand euro) was attributable to expenses for bought-in
services.
33
4. Staff costs
Staff costs increased by 799 thousand euro in 2006, taking them to 4,784 thousand euro
(previous year: 3,985 thousand euro). The increase resulted from the rise in the number
of personnel as well as from the initial consolidation of DocCheck Medizinbedarf und
Logistik GmbH, Eilenburg. The number of employees as at 31 December 2006 was 115
(previous year: 97). The average for the year was 97 employees (excluding apprentices
and members of the Board of Directors).
5. Depreciation
The amortisation of intangible fixed assets and the depreciation of tangible fixed assets
contain useful life adjustments for tenant's fixtures which total 56 thousand euro. In the
previous year a reduction in the value of the goodwill of DocCheck TV GmbH, totalling
14,000 euro, was included in the amortisation figures.
6. Other operating expenses
Other operating expenses mainly arise from advertising, travelling, financial statement
and audit expenses as well as rental expenses. Fees charged by the auditor of the
consolidated financial statements for the financial year 2006, which were recorded as
expenses, totalled 55 thousand euro for auditing, 14 thousand euro for tax consulting
services and 2 thousand euro for other services.
7. Personal income tax and tax on earnings
Personal income tax and tax on earnings, totalling 589 thousand euro, mainly comprise
corporation tax for 2006 totalling 340 thousand euro, trade tax for 2006 totalling 288
thousand euro, additional payments of corporation tax for previous years totalling
18,000 euro. Taxes ensuing from items which were charged directly against capital and
reserves totalled 27 thousand euro. An adjustment totalling-61,000 euro was made to
provisions for taxes on earnings due to a fiscal audit of the accounts. Deferred tax on the
liabilities side totalled-22 thousand euro and deferred tax on the assets side totalled-
1,000 euro.
8. Deferred taxes
A mixed taxation rate of 39.9 per cent forms the basis of the calculation of deferred taxes
which is made up of a corporation tax rate of 25 per cent, a solidarity surcharge rate of
5.5 per cent on corporation tax and a trade tax rate of 18.37 per cent which is deductible
when calculating the corporation tax.
34
Composition and development of deferred taxes:
Deferred Deferred taxes on Deferred Deferred
taxes on the the assets side taxes on the taxes on the
assets side 2005 liabilities side liabilities
2006 2006 side 2005
EUR 1,000 EUR 1,000 EUR 1,000 EUR 1,000
Tangible assets 3 3 0 0
Stocks 0 0 -60 -46
Trade debtors 0 0 123 131
Other securities 0 0 0 22*
Provisions for liabilities 0 0 -5 -5
and charges
Total 3 3 58 102
*In accordance with IAS 12.61, offset against the capital and reserves with no effect on the operating
result
The actual tax expenditure for the financial year 2006 of 589 thousand euro differed by
-23 thousand euro from the expected tax expenditure of 612 thousand euro, which would
have arisen had a weighted expected average tax rate of 39.9 per cent been applied to
the pre-tax result of the Group. The reasons for the difference between the expected and
actual tax expenditure are as follows:
2006
EUR 1,000
Expected income tax expense 612
Income from the initial Eilenburg consolidation which does not attract tax -10
Notional tax on the Eilenburg six-months profit included in the
consolidated financial statements -13
Tax reduction as a result of lower foreign tax rates -18
Tax expense for earlier years 18
Actual tax expenditure 589
9. Distribution of profit
35
As at 01 June 2006, a dividend of 464 thousand euro for the financial year 2005 was paid
out in accordance with the resolution passed at the Ordinary Annual General Meeting of
DocCheck AG on 31 May 2006.
10. Earnings per share
Undiluted earnings per share pursuant to IAS 33 were calculated on the basis of the
equity of DocCheck AG, determined from the average number of shares in the financial
year.
Following the resolution passed on 07 September 2006, the Board of Directors approved
the start of another share buy-back programme. The basis for this share buy-back is the
resolution passed at the Annual General Meeting on 31 May 2006 which empowers the
company to buy back its own shares, up to a maximum of 590,431, up until 30 November
2007. 91,500 shares are already held due to an earlier share buy-back programme. To
start with, the buy-back was limited to another 100,000 shares which corresponds to
1.7 per cent of the capital stock. The programme started on 11 September 2006. As at 31
December 2006, the company holds 144,598 of its own shares.
Taking into account the number of own shares bought in 2006, the average number of
shares for the financial year 2006 is 5,802,510 individual share certificates (also see
Point VI.18). Undiluted earnings per share calculated in this manner were 0.16 euro.
Taking into account the stock options of the third tranche, totalling 1,500 in number,
diluted earnings per share were 0.16 euro.
1.5.6 Explanatory notes on the consolidated balance sheet
1. Intangible Assets
Intangible assets mainly include bought-in software.
2. Goodwill
The goodwill is a result of the consolidation of DocCheck Medical Services GmbH,
DocCheck TV GmbH, medicalpicture GmbH, medizinstudent.de GmbH and DocCheck
Medizinbedarf und Logistik GmbH. This resulted in the following goodwill:
36
subsequent
increase in
goodwill Goodwill Goodwill
through the book book
Goodwill acquisition accumulated value as accumulated value as
from the of reductions at Reductions Additional reductions at
initial additional in value as 31/12/05 in value in goodwill in value as 31/12/06
consolidation shares in at 31/12/05 in EUR 2006 in in 2006 in at 31/12/06 in EUR
Company in EUR 1,000 EUR 1,000 in EUR 1,000 1,000 EUR 1,000 EUR 1,000 in EUR 1,000 1,000
DocCheck 29 0 12 17 0 0 12 17
Medical
Services
GmbH
DocCheck 155 5 14 146 0 0 14 146
TV GmbH
medicalpict 92 0 10 82 0 0 10 82
ure GmbH
medizin-student. 182 0 131 51 0 0 131 51
de
GmbH
DocCheck 756 0 354 402 0 0 354 402
Medizin-bedarf
und
Logistik
GmbH*
Total 1.214 5 521 698 0 0 521 698
3. Tangible fixed assets
The development of assets according to balance sheet items up to the cut-off date, 31
December 2006, can be seen in the attached statement of asset additions and disposals,
which forms an integral part of the notes to the accounts.
According to the regulations for handling finance leasing and pursuant to IAS 17.20 and
IAS 17.27, fixtures which originally cost EUR 162 thousand were capitalised and
depreciated on a straight line basis over the probable useful life of ten years.
4. Participating interests
The participating interests contain the participating interest in DocCheck Medizinbedarf
und Logistik GmbH (formerly Albert Geisselmann Medizinbedarf GmbH), Eilenburg, which
was consolidated according to the Equity Method up until 30 June 2006, and the book
value was increased by the difference to the proportionate annual result for 2005
totalling 8 thousand euro and was decreased by the result for the first six months of
2006 totalling 12 thousand euro. With effect from 01 July 2006, the subsidiary DocCheck
Medizinbedarf und Logistik GmbH, Weil im Sch�nbuch, acquired the majority
37
shareholding in DocCheck Medizinbedarf und Logistik GmbH, Eilenburg. From that date
the company was fully consolidated. Consequently no book value for the participating
interest was shown as at 31 December 2006.
5. Stocks
Stocks are comprised as follows:
2006 2005
EUR 1,000 EUR 1,000
Unfinished goods and services
198 106
Finished goods and goods purchased for resale
383 261
Payments on account
20 39
Total
601 406
In accordance with IAS 2, reported and valued unfinished products totalling 150
thousand euro (previous year: 223 thousand euro) are included in stocks, totalling 601
thousand euro as at 31 December 2006 (previous year: 406 thousand euro).
6. Accounts receivable
All accounts receivable have a residual term of less than one year.
7. Other assets
Other assets mainly include interest deferrals and tax claims. Other assets totalling 116
thousand euro (previous year: 104 thousand euro), whose time to maturity is between
one and five years, are included under this heading.
8. Current-asset securities
In the financial year 2006 accumulated Fair Value changes to current-asset securities
totalling-67 thousand euro, netted out by the deferred taxes apportionable thereto of 27
thousand euro, were allocated to a special revaluation reserve with no effect on the
operating result.
On 20 October 2006, the mortgage bond of the Bayrische Hypotheken-und Vereinsbank
AG was settled on the final due date and 100 per cent of the capital, totalling 2,250
thousand euro was paid back to the company. There were no price gains or losses
ensuing from the transaction. The released capital is invested in a demand deposit
account until an investment decision is made. Your attention is drawn to a corresponding
change to the item"current-asset securities"and"liquid assets".
As at 31 December 2006 the securities are made up of one mortgage bond (nominal
value: 5,000,000 euro; due date July 2007) and two loans against promissory notes
(nominal value: 5,000,000 euro and 2,500,000 euro respectively; due date May 2008
38
and May 2007 respectively). Financial risks according to IAS 32.51 and following exist
due to the securities not being repaid 100 per cent upon final maturity.
9. Liquid funds
Liquid funds include bank credits and cash provisions that are reported at nominal value.
10. Prepaid expenses
Prepaid expenses include expenses for the following financial year which were paid
before the balance sheet date.
11. Deferred taxes on the assets side
The deferred taxes on the assets side, totalling 3 thousand euro (previous year:3
thousand euro) result from evaluation differences between the German Commercial Code
(HGB) and IFRS ensuing from finance leasing conditions pursuant to IAS 17.20.
12. Subscribed capital
As at 31 December 2006, the subscribed capital was 5,904,312.00 euro and this is
divided up into 5,904,312 individual share certificates at 1 euro each. These are bearer
shares. The attached equity statement shows the development of equity during the year.
In accordance with the resolution passed by the Annual General Meeting on 15 June
2005, in the period until 14 June 2010 the Board of Directors is empowered to increase
the share capital of the company to EUR 2,952,156, with the agreement of the
Supervisory Board, through a one-off or multiple issue of bearer shares for cash and/or
contributions in kind (approved capital) and to determine the conditions of the share
issue with the agreement of the Supervisory Board. Furthermore, the Board of Directors
is empowered, with the agreement of the Supervisory Board, to decide that the statutory
subscription rights of the shareholders should be ruled out. The statutory subscription
rights of the shareholders can be ruled out.
In accordance with the resolution passed by the Annual General Meeting on 16 May
2001, the share capital will, on a contingent basis, be increased by up to EUR 590,431 by
issuing up to 590,431 new shares with an entitlement to a share in the profits from the
start of the financial year in which the issue takes place.
The contingent capital increase will be used solely to grant subscription rights to Board
members and employees of DocCheck AG, as well as to managers and employees of
companies associated with DocCheck AG. If the rights are granted to the Board
members, the Board of Directors and the Supervisory Board are empowered to grant
subscription rights to rightful claimants. The contingent capital increase shall only be
carried out to the extent that the bearers of subscription rights exercise these rights.
13. Capital reserve
As at 31 December 2006, the capital reserve totalled 13,421,408.68 euro (previous year:
13,421,408.68 euro). The adjustment made to the capital reserve in 2004 totalling
89,592.52 euro was cancelled in the year under review and in the previous year. Due to a
39
change in legislation, the input tax ensuing from IPO expenses is deductible, contrary to
the view maintained at that time by the Group auditor. The sales tax liability and the
ensuing refunds of tax on earnings were cancelled accordingly. In this respect, the
capital reserve also had to be adjusted.
14. Revenue reserve
As at 31 December 2006, the revenue reserves totalled EUR 71,700.23 (previous year:
EUR 71,700.23).
15. Net earnings
Net earnings totalled 3,228,834 euro (previous year: 2,785,972 euro).
16. Capital adjustment items
The equity in the balance sheet was adjusted in Adjusting items for capital by EUR 3,246
thousand pursuant to IFRS 3.21 in conjunction with IAS 8 (For details on this, see Section
II.2).
17. Special revaluation reserve
The special revaluation reserve totalling-41 thousand euro (previous year: 32 thousand
euro) comprises the fair value amendments to the current-asset securities, netted out by
the taxes apportionable thereto, which, pursuant to IAS 39 and until the securities are
written off, are first of all recorded in capital and reserves as not affecting the operating
result.
18. Own shares
The portfolio of own shares consisted of 144,598 shares as at the reporting date. In
accordance with the resolutions passed by the Ordinary Annual General Meetings on 30
June 2004, 15 June 2005 and 31 May 2006, they were bought between April and October
2005 and between September and December 2006 at an average price of 4.11 euro. As at
the cut-off date, 31 December 2006, the market value of the shares was 596,332.24 euro.
The change in the number of shares in circulation as at 31 December 2006 is shown in
the following table:
Shares in circulation as at 01/01/2006 5,802,314 Position
Disposal of own shares through exercising options 8,500 Position
Purchase of own shares in financial year 2006 -53,098 Position
Shares in circulation as at 31/12/2006 5,749,216 Position
19. Minority interests
Minority interests concern stakes held by third parties in the capital and reserves of
medicalpicture GmbH, DocCheck TV GmbH as well as DocCheck Medizinbedarf und
Logistik GmbH.
20. Provisions for liabilities and charges
40
Tax provisions as at 31 December 2006 totalled 385 thousand euro (previous year: 66
thousand euro) and mainly concern trade tax totalling 289 thousand euro (previous year:
61 thousand euro) and corporation tax totalling 96 thousand euro (previous year: 5
thousand euro).
The following table illustrates the composition of other provisions. All provisions have a
residual term of less than one year.
Provisions statement for DocCheck AG up until 31 December 2006:
Position Use/ Position
01.01.06 consumption Release Transfer 31.12.06
euro euro euro euro euro
Staff
a) Shares in profits 120,998.58 -120,521.78 -476.80 187,304.51 187,304.51
b) Holiday provisions 127,000.00 -122,100.00 -4,900.00 150,800.00 150,800.00
c) Employees'accident
insurance fund 14,355.00 -13,582.95 -772.05 18,080.00 18,080.00
d) Disability charge 4,320.00 -722.70 -3,597.30 2,350.00 2,350.00
Administration and operations
e) Bonuses 83,200.00 -74,809.46 -8,390.54 51,177.28 51,177.28
f) Artists'social fund 0.00 0.00 0.00 3,900.00 3,900.00
g) End-of-year accounting and
audit costs 120,004.42 -104,387.92-12,035.50 143,768.00 147,349.00
h) Supervisory Board's
remuneration 26,311.00 -24,830.19 -1,480.81 18,021.00 18,021.00
i) Follow-up costs 12,964.78 -12,964.78 0.00 12,181.17 12,181. 17
j) Litigation costs 2,173.18 -1,608.50 -564.68 0.00 0.00
k) other 12,270.91 0.00 0.00 21,949.09 34,220.00
Total 523,597.87 -475,528.28-32,217.68 609,531.05 625,382.96
21. Trade creditors
In accordance with the regulations for handling finance leasing pursuant to IAS 17.20,
leasing liabilities totalling 71 thousand euro (previous year: 89 thousand euro) were
shown as liabilities.
41
EUR 1,000
of which due within one year 20
of which due after more than one year and up to five years 51
of which due after more than five years 0
Total 71
Contingent rental payments taken into account during the financial year and which affect
the operating result totalled 18 thousand euro (previous year: 15 thousand euro). The
leasing liabilities relate to the fixtures as explained in Section VI.3.
22. Other liabilities
Other liabilities have a residual term of up to one year and are made up as follows:
2006 2005
EUR 1,000 EUR 1,000
Debtors showing a credit balance 0 1
Income tax and church tax 75 51
Sales tax 325 428
Social security 43 104
Salaries and wages 0 5
Salaried employees'travelling expenses 3 3
Amounts owed to shareholders 1 1
Other liabilities 13 12
Total 460 605
23. Deferred taxes on the liabilities side
Deferred taxes on the liabilities side result from temporary differences in evaluations in
the individual financial statements which, in accordance with the German Commercial
Code, are relevant for taxation purposes and from evaluations according to IFRS (IAS) in
the consolidated financial statements (in this respect, see the explanatory notes in
Section V.8).
24. Other financial obligations
As at 31 December 2006 the following financial obligations applied:
42
EUR 1,000
From rent 2,247
From leasing 127
2,374
-of which due within one year 730
-of which due after more than one year and up to five years 1,644
-of which due after more than five years 0
Due to the rental agreement for the Basle branch, Switzerland, which can be terminated
with a notice period of three months at the end of a month, there are financial
obligations for the following year of 12 thousand euro. Contingent liabilities were only
posted insofar as they were not included in other provisions.
25. Financial instruments
The stock of primary financial instruments (accounts receivable, liabilities, liquid funds)
is reported in the balance sheet. There are no significant differences between book and
market values. In principle, there can be credit risks and risks of default in this area. As
at the reporting date there were no significant risks for the Group�s primary financial
instruments. The company is mainly open to the risk of default through trade debtors.
The company continuously monitors the creditworthiness of its customers and, because
of its customer structure, has reported hardly any loan losses in the past. The Group
companies have not concluded any contracts for interest rate derivatives. As at the
reporting date, there was no significant interest rate risk.
As at 31 December 2006 the Group companies had no notable receivables or liabilities in
foreign currencies, so there was no exchange rate risk as at the reporting date.
As at the reporting date there were no financial instruments used for purposes of trading
or speculation.
1.5.7 Explanatory notes on the Group funds statement
Financial resources as at 31 December 2006 include third-party funds of 29 thousand
euro (previous year: 28 thousand euro). These are outstanding doctors� fees which
DocCheck AG cannot dispose of in any other way.
43
Statement of Sources and Application of Funds (in EUR)
01/01/2006- 01/01/2005-
31/12/2006 31/12/2005
Surplus for the period before extraordinary profit 907,207 642,704
of which funds received from interest 563,402 574,551
of which funds paid as interest 7,271 7,041
+Amortisation of intangible fixed assets and
depreciation of tangible fixed assets 479,799 357,451
+Loss from the addition and disposal of fixed assets 16,917 23
+Loss from the disposal of own shares 13,036 0
+/-Increase/decrease in provisions 420,430 -120,480
-/+Increase/decrease in trade debtors -727,153 -286,225
-/+Increase/decrease in other assets 66,679 380,247
-/+Increase/decrease in stocks -194,618 -140,240
-/+Increase/decrease in prepaid expenses and deferred charges -26,566 24,661
+/-Increase/decrease in deferred income -10,891 12,944
-/+Increase/decrease in deferred taxes reported as assets 500 4,415
-/+Reduction/increase in deferred taxes reported as liabilities -43,600 18,400
+/-Increase/decrease in trade creditors and other liabilities -110,290 951,178
Cash flow from current business activities 791,451 1,845,078
Proceeds/outgoings for disinvestments/investments in tangible
fixed assets, intangible fixed assets, participating interests and
+/-goodwill -682,846 -246,654
-Outgoings from the sale of consolidated companies 0 0
+Write-downs on fixed-asset securities 0 0
+/-Proceeds/outgoings from the sale/purchase of securities 0 0
Cash flow from investment activities -682,846 -246,654
-Repayment of loans 25,753 -6,317
-Payment to shareholders ensuing from capital reduction 0 -14,760,780
-Disbursement from dividend payments -464,345 -469,549
+/-Proceeds/outgoings from the sale/purchase of own shares -199,980 -411,449
Cash flow from financing activities -638,573 -15,648,095
44
Change in funds to hand which affects payment -529,968 -14,049,670
Change in funds to hand due to evaluation (special revaluation
+reserve) -73,061 -56,058
+Change in funds to hand as a result of the regrouping of securities 0 0
+Funds at the start of the period 17,099,512 31,205,241
Funds at the end of the period 16,496,483 17,099,512
Composition of the funds to hand
-Cash and cash equivalent 4,048,223 2,230,712
-Securities 12,448,260 14,868,800
1.5.8 Divisional Reporting
Divisional Reporting for the consolidated financial statements 2006:
Divisional Reporting as at 31/12/2006 (in EUR)
financial statement 2006 antwerpes+partner DocCheck Holding Total
Net sales for the divisions 6,612,721 6,979,143 3,827 13,595,691
Intra-group sales 68,237 412,935 2,669,513 3,150,685
EBIT 1,051,811 -41,425 83,933 1,094,319
Result before taxes on earnings 1,056,553 -57,690 535,138 1,534,002
Total assets 1,986,948 3,264,673 16,851,688 22,103,309
Total liabilities 939,895 595,846 424,402 1,960,143
Depreciation of tangible fixed assets 26,138 92,707 360,955 479,799
Investments 23,633 62,374 546,141 632,148
Employees 50 53 12 115
45
1.5.9 Supplementary notes
1. Relations with affiliated persons
In addition to the companies included in the consolidated financial statements, the
following companies and individuals are affiliated with the Group in accordance with
IAS 24:
expressed as Number of
Shareholder structure as at 31 December 2006: a percentage shares
Dr. Frank Antwerpes, CEO* 47.15 2,783,925
Jan Antwerpes, CFO* 13.95 823,477
Dr. Johannes Kersten, antwerpes+partner ag Supervisory Board 7.32 432,031
Freefloat 31.58 1,864,879
Hermann Korte, antwerpes+partner ag Supervisory Board 0.95 56,038
Roland Ortloff, Managing Director, DocCheck Medizinbedarf GmbH 0.75 44,312
Tanja Antwerpes, antwerpes+partner ag Board of Directors 0.41 23,933
Michael Thiess, Chairman of the Supervisory Board 0.10 6,060
Dr. Joachim Pietzko, Member of the Supervisory Board 0.01 866
Winfried Leimeister, Member of the Supervisory Board 0.00 0
Helmut Rieger, Director Trade 0.01 400
DocCheck AG 2.45 144,598
*Half of the shares of immediate relatives were allocated to Messrs. Antwerpes.
The shares of Helmut Rieger's wife were included.
The executive bodies of DocCheck AG had the following interests in Group companies or
other companies:
Executive bodies of DocCheck AG Membership of other controlling committees
The Board of Directors
Dr. Frank Antwerpes, Cologne antwerpes+partner ag, Cologne
Chairman of the Board of Directors, CEO (Chairman of the Board of Directors until
15/07/2006)
(Chairman of the Supervisory Board since
15/07/2006)
DocCheck Medical Services GmbH, Cologne)
(Managing Director)
medizinstudent.de GmbH, Cologne (Managing
Director)
46
Jan Antwerpes, Cologne antwerpes+partner ag, Cologne
Finance Director, CFO (Chairman of the Supervisory Board until
15/07/2006)
(Member of the Board of Directors since
15/07/2006)
Helmut Rieger, Weil im Sch�nbuch, Director DocCheck Medizinbedarf und Logistik GmbH,
Trade Weil im Sch�nbuch
(Managing Director)
Supervisory Board
Michael Thiess, Feldkirchen, Management
Consultant Sanemus AG (Chairman of the Board of Directors)
Chairman of the Supervisory Board
Dr. Joachim Pietzko, Cologne, Lawyer
Deputy Chairman of the Supervisory Board
Winfried Leimeister, Cologne, Tax Consultant
Member of the Supervisory Board
Other
Dr. Johannes Kersten, Duisburg antwerpes+partner ag, Cologne (Member of the
Supervisory Board)
Tanja Antwerpes, Cologne antwerpes+partner ag, Cologne (Member of the
Board of Directors)
(Member of the Board of Directors until
15/07/2006)
(Chairman of the Board of Directors since
15/07/2006)
Thilo K�lzer, Cologne antwerpes+partner ag, Cologne (Member of the
Board of Directors)
Roland Ortloff, Weil im Sch�nbuch DocCheck Medizinbedarf und Logistik GmbH,
Weil im Sch�nbuch (Managing Director)
Thomas Schmidt, Cologne medicalpicture GmbH, Cologne (Managing
Director)
Hermann Korte, Cologne antwerpes+partner ag, Cologne (Member of the
Supervisory Board)
Stephan Feifel, Marburg DocCheck TV GmbH, Cologne (Managing Director)
47
2. Remuneration of the Board of Directors
The Board of Directors of DocCheck AG received the following remuneration in 2006:
Share in Number of share
Fixed allowance profits paid in options granted as
Name of the Board Member paid in at 31/12/2006
Dr. Frank Nicolas Antwerpes, CEO 152,823 41,948 0
Jan Antwerpes, CFO 111,057 27,965 0
Helmut Rieger, Director Trade 20,004 0 0
Total: 283,884 69,913 0
No further remuneration components with a long-term incentive and benefits within the
meaning of Section 314 German Commercial Code (HGB) (revised) have been promised to
Directors in the event of the termination of their duties as Directors.
3. Remuneration of the Supervisory Board
The Supervisory Board of DocCheck AG received the following remuneration in 2006:
fixed Variable
allowance remuneratio
Name of the Supervisory Board Member paid in n in
Michael Thiess, Chairman of the Supervisory Board 12,000 8,700
Dr. Joachim Pietzko, Deputy Chairman of the Supervisory Board 6,000 4,300
Winfried Leimeister 6,000 4,300
Total: 24,000 17,300
Contracts with Mr Thiess and Dr. Pietzko are in force for general consulting and legal
consulting services. In the financial year 2006 transactions with Mr Thiess totalled 0
euro (previous year: 1 thousand euro), with Dr. Pietzko 1 thousand euro (previous year: 5
thousand euro), and with Mr Leimeister 0 euro (previous year: 1 thousand euro).
4. Notifications pursuant to Section 20 German Stock Corporation Law (AktG) or Section
21 German Securities Trading Act (WpHG)
There were no notifications pursuant to Section 20 Paragraph 1, Section 20 Paragraph 4,
German Stock Corporation Law (AktG) or pursuant to Section 21 Paragraph 1 or 1a
German Securities Trading Act (WpHG) during the financial year.
5. Stock Options
48
In accordance with the resolution passed at the Annual General Meeting on 16 May 2001,
the company grants, by means of an options contract, subscription rights to certain
employees regarding the acquisition of DocCheck AG shares. According to the grade and
position of the employee, the company offers contracts to certain employees which cover
the granting of share options (options contract). As at 31 December 2006, 30,500 stock
options had been issued (previous year: 42,000). The portfolio reduction resulted from
the exercising of 8,500 options and from the departure of employees in 2006 who were
entitled to subscribe.
Exercising a subscription right depends on whether at the time the following
performance goals were met:
The market price of the DocCheck AG share has performed better than the Nemax
All Share Index (now Technology All Share Index)
The current market price of the share must be higher than the comparative market
price and the comparative market price of the share is
o for subscription rights granted up to five days before the initial public
offering, the initial public offering price as determined in the bookbuilding
process for the DocCheck AG share for the purposes of the initial public
offering
o for one or two subscription rights granted during an acquisition period, the
average of the Xetra closing prices for the 20 trading days before the first
day of the respective acquisition period.
The employee has an employment contract with a company within the DocCheck
Group and notice to terminate this has not been served, nor has it been
terminated in some other way.
Exercising the options granted is only permissible at any time during the following
periods:
On the respective fourth and the 19 subsequent bank working days following a
DocCheck AG Ordinary Annual General Meeting.
On the respective fourth and the 19 subsequent bank working days following the
publication of the DocCheck AG quarterly report which covers the 3rd quarter of a
financial year.
On 19 February 2004, the IASB published the Standard IFRS 2"Share-based Payment".
The Standard makes the provision that share options are valued at fair value and that
they are recorded as staff costs. IFRS 2 is to be used for the first time in financial years
which begin on or after 1 January 2005 and is to be retrospectively applied to share
option plans which were granted after 7 November 2002 (date of the publication of the
draft of the Standard). DocCheck AG decided, for materiality reasons, to waive a
retrospective balancing of accounts for its share options issued before 7 November
2002. A valuation of the share options issued as at 31 December 2006 by means of the
Black Scholes Model would have resulted in a staff cost of 2 thousand euro (previous
year: 4 thousand euro) in the financial year 2006.
49
Composition of Stock Options as at 31 December 2006:
Issued stock options balance as at 31/12/2005 42,000
Options granted in 2006 0
Options exercised in 2006 8,500
Options which have lapsed in 2006 3,000
Issued stock options balance as at 31/12/2006 30,500
The first tranche (issue: April 2000, issue price: 18.50 EUR, term: 7 years) 27,000
of which to management exercisable on 30.09.2006 22,000
of which to employees exercisable on 30.09.2006 5,000
The second tranche (issue: December 2000, issue price: 15.46 EUR, term: 7 years) 2,000
of which to employees exercisable on 30.09.2006 2,000
The third tranche (issue: May 2002, issue price: 2.66 EUR, term: 7 years) 1,500
of which to management 1,500
of which with a waiting period up until the first implementation on 31.05.2007 1,500
Against the backdrop of the special distribution of profits of 2.50 euro per share
performed at the beginning of February 2005, the issue prices of the options were
adjusted downwards by 2.50 euro from 21.00 euro to 18.50 euro for the first tranche,
downwards by 2.50 euro from 17.96 euro to 15.46 euro for the second tranche, and
downwards by 2.50 euro from 5.16 euro to 2.66 euro for the third tranche.
50
6. Events after the reporting date
At this year�s Annual General Meeting, the Board of Directors and the Supervisory Board
of DocCheck AG will propose to pay out a dividend of 10 cent per share for the financial
year 2006. This corresponds to a gross dividend of 590,431.20 euro. If DocCheck AG
holds own shares on the date that the resolution is passed by the Annual General
Meeting, these are not entitled to dividends according to the German Stock Corporation
Act.
Cologne, 06 March 2007
The Board of Directors of DocCheck AG
Dr. Frank Nicolas Antwerpes
Chairman of the Board of Directors
Jan Antwerpes
Member of the Board of Directors
Helmut Rieger
Member of the Board of Directors
51
1.6 Statement of Equity Capital in accordance with IAS 1 Subsections 96-101 (in euro)
Reserve in
accordance
with the
company's Other Special Capital Minority
Subscribed Capital Statutory Articles of revenue revaluation adjust-ment Own share-holdings
capital reserve reserve Association reserves reserve Net earnings items shares Total
Balance as at 31/12/2004
before an adjustment for
the previous year's figures 5,904,312 13,421,409 39,253 0 32,448 88,567 2,616,112 -3,245,570 0 229,645 19,086,175
Additional acquisition of
shares DocCheck TV GmbH 5,338 5,338
Purchase of own shares -411,449 -411,449
Revaluation of securities -56,058 -56,058
Distribution of dividends -469,549 -469,549
Annual net income as at 31/12/2005 * 639,410* 29,490 668,901
Balance as at 31/12/2005 5,90,312 13,421,409 39,253 0 32,448 32,509 2,785,973 -3,245,570 -411,449 264,473 18,823,358
Balance as at 31/12/2005 5,904,312 13,421,409 39,253 0 32,448 32,509 2,785,973 -3,245,570 -411,449 264,473 18,823,358
Share acquisition DocCheck
Medizinbedarf Eilenburg 20,924 20,924
Revaluation of securities -126,905 -126.905
Transfer of own shares 35,646 35,646
Own shares -222,590 -222,590
Distribution of dividends -464,345 -464,345
Annual net income as at 31/12/2006 0 934,051 36,494 970,545
Balance as at 31/12/2006 5,904,312 13,421,409 39,253 0 32,448 -94,396 3,255,680 -3,245,570 -59,393 321,891 19,063,633
*Reversal of bookkeeping entry. Booking in accordance with SIC 17 in conjunction with IAS 8
1.7 Copy of the Auditors'Report
According to the final result of our audit, we have issued the following unqualified
auditors'report to DocCheck AG, Cologne, for the consolidated financial statements
dated 31 December 2006 attached as Appendix 1 to 5 and for the group management
report which is presented in Appendix 6:
"Auditors'Report from the Balance Sheet Auditor
We have audited the consolidated financial statements prepared by DocCheck AG-
comprising the profit and loss account, the balance sheet, notes to the accounts,
statement of sources and application of funds, statement of changes in equity capital
and divisional reporting and the group management report for the financial year from 1
January to 31 December 2006. The legal representatives of the company are responsible
for preparing the consolidated financial statements and group management report in
accordance with IFRS, as they are to be applied within the EU, and in addition in
accordance with the provisions under commercial law which are to be applied according
to 315 a Section 1 HGB (German Commercial Code) as well as in accordance with the
supplementary regulations in the Articles of Association. Our task is to assess the
consolidated financial statements and group management report on the basis of the
audit carried out by us.
We conducted our audit of the consolidated financial statements in accordance with
317 HGB whilst taking into account the generally accepted German auditing standards as
set out by the German Institute of Auditors (IDW). Accordingly we are required to plan
and carry out the audit in such a way that it is possible to ascertain with adequate
certainty whether there are any inaccuracies or irregularities which will have a significant
impact on the presentation of the asset, financial and income situation as conveyed by
the consolidated financial statements, taking into account the statutory accounting
requirements which are to be applied, and the group management report. Knowledge of
the business activities and the legal and economic situation of the Group as well as
expectations of possible mistakes are taken into account when determining the audit
procedures. Within the framework of the audit, the effectiveness of the internal control
system for accounting purposes as well as evidence supporting the disclosures in the
consolidated financial statements and group management report are predominantly
assessed on the basis of spot checks. The audit covers the assessment of the annual
financial statements of the companies included in the consolidated financial statements,
the demarcation of the scope of consolidation, the applied accounting and consolidation
principles and the fundamental assessments made by the legal representatives as well
as the appraisal of the overall presentation of the consolidated financial statements and
the group management report. We are of the opinion that our audit forms a sufficiently
sound basis for our assessment.
No objections were raised to our audit.
In our opinion, on the basis of the knowledge acquired when carrying out the audit, the
consolidated financial statements conform to the IFRS, as they are to be applied within
the EU, and in addition they conform to the provisions under commercial law which are
to be applied according to 315a Section 1 HGB (German Commercial Code) and the
supplementary regulations in the Articles of Association and, taking into account these
regulations, convey a picture of the Group's asset, financial and income situation which
corresponds to the actual circumstances. The group management report is in line with
the consolidated financial statements, is overall a true reflection of the Group's situation
and provides an accurate picture of the opportunities and risks of future development.�
We have produced the above report on the audit of the consolidated financial statements
dated 31 December 2006 (consolidated balance sheet total 22,103,309 euro;
consolidated annual net income 907,207 euro) and the group management report for the
2006 financial year of DocCheck AG in conformity with the statutory provisions and the
principles of proper and correct reporting when carrying out the audit of financial
statements (IDW PS 450).
Cologne, March 2007
PKF HERFORT VAN KERKOM STREIT
Collateral joint-stock company
Accountancy and tax consultancy firm
R. van Kerkom W. van Kerkom
Auditor Auditor
54
1.8 Declaration of conformity in accordance with 161 German Stock
Corporation Law (AktG)
Declaration of conformity by the Board of Directors and the Supervisory Board of
DocCheck AG to the recommendation of the Government Commission of the German
Corporate Governance Code in accordance with 161 German Stock Corporation Law
(AktG)
The Board of Directors and the Supervisory Board of DocCheck AG hereby declare that
the conduct recommended by the"Government Commission of the German Corporate
Governance Code�in its current version of 12 June 2006 is complied with apart from the
following exceptions. The Board of Directors and the Supervisory Board regularly
examine whether further recommendations and suggestions of the Code can be applied
to DocCheck AG in the future.
2 Shareholders and Annual General Meeting
2.2 Annual General Meeting
2.2.2 Subscription rights in the case of share issues
In principle, when new shares are issued, DocCheck AG ensures that its shareholders
have subscription rights corresponding to their stake. However, in accordance with the
resolution of the Annual General Meeting of 31 May 2006, subscription rights can be
restricted or excluded within the framework of an authorised capital increase.
Exclusion of subscription rights is also in the direct interest of the shareholders, as this
enables the capital market to be exploited more intensively and puts the company in a
position in which, within the scope of its expansion, it can acquire more participating
interests in exchange for own shares and thus maintain its own liquidity.
3 Co-operation between the Board of Directors and the Supervisory Board
3.8 Rules of proper corporate management, Paragraph 2, taking out a D&O insurance
policy
The company has taken out a D&O insurance policy without a deductible. The Board of
Directors and the Supervisory Board are of the opinion that a deductible does not have a
noticeable positive influence on the quality of the work of the Boards of Directors or
Supervisory Boards.
4 The Board of Directors
4.2 Composition and remuneration
4.2.3 Composition of the remunerations for the Boards of Directors, Sentences 3 and 4
The remunerations for the DocCheck AG's Directors do not at the present time contain
any variable remuneration components with a long-term incentive effect as all Directors
have a major stake in DocCheck AG and/or its subsidiaries. The Board of Directors and
the Supervisory Board are of the opinion that these stakes create an adequate long-term
incentive.
4.2.4 Publication in the Corporate Governance Report, Sentence 1
The company has published the remuneration of the members of the Board of Directors
and that of the Supervisory Board members in its business report since the introduction
of the Corporate Governance Report in 2002.
55
5 Supervisory Board
5.3 Formation of committees
Statement by DocCheck AG in respect of 5.3 and all other points relating to the
formation of committees:
This point serves to promote more efficient work by the Supervisory Board. The
Supervisory Board of DocCheck AG only comprises three members and only constitutes a
quorum with this number. Therefore, the formation of a committee is impractical for
DocCheck AG.
5.4. Composition and remuneration
5.4.7 Evidence of the remuneration of the Supervisory Board members in the Corporate
Governance Report.
The company has published the remuneration of the Supervisory Board members and
that of the members of the Board of Directors in its business report since the
introduction of the Corporate Governance Report in 2002.
6 Transparency
6.6. Disclosure of the acquisition or sale of shares by executive bodies and insiders
(Directors'Dealing) as well as the declaration of shareholdings in the Corporate
Governance Report
The company discloses all the information concerning Directors'Dealing on its website
and notifies the German Federal Financial Supervisory Authority (BaFin) of this. The
information on shares held by the company's executive bodies is published in the
business report. Therefore additional information in the Corporate Governance Report is
dispensed with.
The Board of Directors and the Supervisory Board of DocCheck AG
Cologne, 21 December 2006
Signed on behalf of the Supervisory Board
Michael Thiess, Chairman of the Supervisory Board
Signed on behalf of the Board of Directors
Dr. Frank Antwerpes, Chairman of the Board of Directors
56
1.9 Report from the Supervisory Board
In this report the Supervisory Board provides information on its activities during the
financial year 2006. The explanatory statements focus on its ongoing dialogue with the
Board of Directors, reporting procedures as well as the audit of the annual and
consolidated financial statements.
The Supervisory Board has continuously monitored the management practices of the
Board of Directors in accordance with the tasks assigned to us by law and the Articles of
Association and has convened in five meetings on 2 March 2006, 14 March 2006, 30 May
2006, 27 July 2006 and 9 November 2006. All the members of the Supervisory Board
either attended the meetings personally or were linked up via a conference call. In
addition, by means of regular reports, the Supervisory Board has been kept informed
verbally and in writing of the company's situation by the Board of Directors. If required,
the Supervisory Board can pass resolutions by circulating them to all concerned this
was the case on 03 April 2006.
The focal areas of the Supervisory Board meetings, in terms of advice, in the financial
year 2006 were:
Reporting by the Board of Directors on
o the 2005 annual financial statements
o the quarterly financial statements
o the company's situation
o the business trend of the holding company, its subsidiaries and
participating interests
o the activities in the Mergers & Acquisition Division
o the German Corporate Governance Code
o the corporate strategy
o risk management
checking the efficiency of the Supervisory Board
extending the directors'contracts (for Messrs. Antwerpes, DocCheck AG, and
Tanja Antwerpes, antwerpes+partner ag)
preparing for the ordinary annual general meeting on 31 May 2006
High Corporate Governance Standards adhered to once again
The Supervisory Board has continuously monitored the further development of the
Corporate Governance Standards and has regularly provided advice on this matter. The
Board of Directors and the Supervisory Board issued an up-to-date Declaration of
Conformity on 21 December 2006 in accordance with 161 German Stock Corporation
Law and has arranged for shareholders to be able to access this permanently on the
company's website. In accordance with the new version of the German Corporate
Governance Code dated 12 June 2006, DocCheck AG also complies with the key points
contained in the recommendations of the Government Commission, German Corporate
Governance Code.
57
Audit of annual and consolidated financial statements discussed in detail
The annual financial statements for the financial year 2006 and the management report
of DocCheck AG are audited by PKF HERFORT VAN KERKOM STREIT OHG, an accountancy
and tax consultancy firm, and were provided with an unqualified auditors'report. The
auditors'reports on the audit of the annual and consolidated financial statements and
the management report have been presented to all the members of the Supervisory
Board. The reports were checked thoroughly by Mr. Leimeister in the run-up to the
meeting and discussed in detail in the presence of the auditor at the meeting to approve
the balance sheet held by the Supervisory Board on 19 March 2007. The Supervisory
Board had no objections, endorsed the findings of the auditor and approved the annual
financial statements and management report prepared by the Board of Directors on 19
March 2007. The annual financial statements were therefore adopted. The consolidated
financial statements and group management report prepared by the Board of Directors
were also approved.
Positive business trend in 2006
With an increase in sales of 21 per cent to 13.6 million euro and an increase in the
operating result of 120 per cent to 1.1 million euro, the DocCheck Group can look back on
a successful financial year in 2006. With these figures the company exceeded its own
sales forecast which had already been increased during the course of the year.
The fact that both Divisions in the company demonstrated dynamic growth was seen to
be a very positive trend by the Supervisory Board.
Good prospects for 2007
With its strategy of offering integrated and innovative services for marketing, logistics
and commerce, the Supervisory Board considers the DocCheck Group to be well on the
way to increasing sales, profit and goodwill over the next few years. The Supervisory
Board supports the Board of Directors in its efforts to increase sales and profit once more
in the financial year 2007.
Increased dividends
Due to the sound trend in the financial year 2006, the Supervisory Board agrees with the
Board of Directors'proposal that the dividend payment of 8 cent per share be increased
to 10 cent per share.
The Supervisory Board thanks the Board of Directors and all the employees for their
commitment and wishes them every success in facing the challenges of the financial
year 2007.
Cologne, March 2007
Signed by Michael Thiess
Chairman of the Supervisory Board
58
Imprint
Editing
DocCheck AG, Cologne
Layout
Katrin Hinrichs
Design
antwerpes+partner ag, Cologne
Printing
Heggendruck GmbH, Leverkusen
DocCheck AG
Corporate Communications
Tanja Mumme
phone: +49(0)221.92053-139
email: [email protected]
59
<MSTARMODIFIED TYPE=IS><32>
Consolidated Income Statement
EUR 2006 2005
Sales (net) 13,595,691 11,201,613
Other operating income 181,344 138,512
Differences between opening and closing stocks of finished and unfinished goods 96,925 42,479
Cost of materials a) Cost of raw materials and supplies and goods purchased for resale 3,470,494 3,118,643
Cost of external services 1,663,312 1,444,726
Staff costs 4,073,059 3,399,509
Social security contributions 710,716 585,629
Amortisation of intangible fixed assets and depreciation of
tangible fixed assets 479,799 357,451
Other operating expenses 2,379,174 1,998,183
Income from participating interests -3,085 18,353
Operating result (EBIT) 1,094,319 496,815
For information: EBITDA 1,574,119 854,266
Interest and similar income 563,402 574,551
Write-downs on long-term investments and current-asset
securities 116,449 57,746
Interest and similar expenses 7,271 7,041
Result before tax (and minority shareholdings) 1,534,002 1,006,579
Personal income tax and tax on earnings 588,602 335,350
Other taxes 1,699 2,327
Result before minority shareholdings 943,701 668,902
Minority shareholdings 36,494 29,490
Consolidated annual net income 907,207 639,412
Net earnings per share 0.16 0.11
Diluted earnings per share 0.16 0.11
Average shares currently in circulation 5,802,510 5,858,182
Diluted Average shares currently in circulation 5,808,132 5,868,182
</MSTARMODIFIED TYPE=IS>
<MSTARMODIFIED TYPE=CF><35>
Consolidated Cash Flow Statement
EUR 2006 2005
Surplus for the period before extraordinary profit 907,207 642,704
of which funds received from interest 563,402 574,551
of which funds paid as interest 7,271 7,041
+Amortisation of intangible fixed assets and depreciation of tangible fixed assets 479,799 357,451
+Loss from the addition and disposal of fixed assets 16,917 23
+Loss from the disposal of own shares 13,036 0
Increase/decrease in provisions 420,430 -120,480
Increase/decrease in trade debtors -727,153 -286,225
Increase/decrease in other assets 66,679 380,247
Increase/decrease in stocks -194,618 -140,240
Increase/decrease in prepaid expenses and deferred charges -26,566 24,661
Increase/decrease in deferred income -10,891 12,944
Increase/decrease in deferred taxes reported as assets 500 4,415
Reduction/increase in deferred taxes reported as liabilities -43,600 18,400
Increase/decrease in trade creditors and other liabilities -110,290 951,178
Cash flow from current Operating activities 791,451 1,845,078
Proceeds/outgoings for disinvestments/investments in tangible
fixed assets, intangible fixed assets, participating interests and
goodwill -682,846 -246,654
Cash flow from investment activities -682,846 -246,654
Repayment of loans 25,753 -6,317
Payment to shareholders ensuing from capital reduction 0 -14,760,780
Disbursement from dividend payments -464,345 -469,549
Proceeds/outgoings from the sale/purchase of own shares -199,980 -411,449
Cash flow from financing activities -638,573 -15,648,095
Change in funds to hand which affects payment -529,968 -14,049,670
Change in funds to hand due to evaluation (special revaluation + reserve) -73,061 -56,058
+Change in funds to hand as a result of the regrouping of securities 0 0
Funds at the start of the period 17,099,512 31,205,241
Funds at the end of the period 16,496,483 17,099,512
</MSTARMODIFIED TYPE=CF>
<MSTARMODIFIED TYPE=BS><38>
Consolidated Balance Sheet
EUR 2006 2005
Liquid funds 4,048,223 2,230,712
Current-asset securities 12,448,260 14,868,800
Trade debtors 2,172,136 1,403,455
Amounts owed by group undertakings 0 41,528
Stocks 600,604 405,986
Prepaid expenses and deferred charges 50,681 24,114
Total short-term assets 19,319,904 18,974,595
Tangible fixed assets 1,366,883 1,219,433
Intangible fixed assets 130,713 92,144
Participating interests 70,804 70,694
Goodwill 697,617 697,617
Other assets 514,588 581,267
Deferred taxes 2,800 3,300
Total assets 22,103,309 21,639,050
long-term loans 29,775 4,022
Trade creditors 477,610 410,656
Payments received on account 928,500 1,070,170
Other provisions for liabilities and charges 625,384 523,598
Tax provisions 384,917 66,273
Deferred income and other short-term liabilities 470,927 626,912
Amounts owed to group undertakings 64,564 12,462
Total short-term liabilities 2,981,676 2,714,093
Deferred taxes 58,000 101,600
Subscribed capital 5,904,312 5,904,312
Capital reserve 13,421,409 13,421,409
Net earnings/net loss 3,228,836 2,785,972
Revenue reserves 71,700 71,700
Capital adjustment items -3,245,570 -3,245,570
Special revaluation reserve -40,552 32,509
Own shares -598,393 -411,449
Minority shareholdings 321,891 264,472
Total capital and reserves 19,063,633 18,823,357
Total equity and liabilities 22,103,309 21,639,050
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