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Selected explanatory notes on the consolidated accounts of September 30, 2007 (in accordance with IFRS)

I. IFRS regulations/accounting and assessment principles/accounting

Like the consolidated accounts as of December 31, 2006, the interim accounts of the GFKL Group as of September 30, 2007 were rendered in compliance with the regulations of the International Accounting Standards Board. These regulations comprise IAS/IFRS and SIC/IFRIC as they are applied in the EU.

The regulations concerning interim reporting contained in IAS 34 were applied as appropriate. The Group only made use of simplifications with regard to the extent of the reporting contained in the notes. The selected explanatory notes contained in the interim report mainly comprise information concerning major events and changes which are essential to understanding the changes in the company’s assets, financial position and earnings position arising since the last accounting date. Please refer to the notes on the consolidated accounts as of December 31, 2006 for detailed explanations of the accounting, assessment and consolidation methods used as these have not changed since this date.

While drawing up the GFKL Group’s consolidated accounts, standardized accounting and assessment principles were applied for all subsidiaries included in the accounts.

Figures are generally given in thousand EURO (EUR k), insofar as no notes exist to the contrary. Figures are not rounded (disclosures and annexes). In these notes, the figures as of September 30, 2007 are compared to the figures as of September 30, 2006. The presentation of the comparative figures as of September 30, 2006 was adjusted to conform to the presentation in the subsequent quarterly statements of accounts and the annual statement of accounts as of December 31, 2006.

The system used to invoice intra-group services has changed since the previous year. Beginning in January 2007, services rendered to subsidiaries by GFKL Financial Services AG are invoiced on the basis of directly imputable costs. As in previous years, holding costs are distributed among individual segments according to their source since June 2007 with effect from January 1, 2007.

Exercise of discretion and main sources of margins of error

Deferred taxes are set up to account for differences between the tax valuation of assets and debts and the valuation in the consolidated accounts. For purposes of simplification, taxes are calculated in the interim financial statement at the average tax rate expected for the end of the year; this is applied to the earnings for the period. Further simplification procedures were not used.

Following the German Bundestag (Lower Parliamentary House) the Bundesrat (Federal Council) passed the Corporate Tax Reform Act 2008 on July 6, 2007. For GFKL, this will mean not only changes to the assessment of balanced deferred taxes but also changes to the tax base in coming years. The theoretical tax rate of 40 percent applied to the German GFKL companies is expected to be cut to approximately 32 percent. This will mean an assessment of deferred taxes and deferred tax assets as of September 30, 2007 amounting to approximately EUR -1 million, thereby affecting the result. Here developments in the current business year affecting earnings are taken into consideration alongside the inventory valuation as of December 31, 2006.

Compulsory new accounting standards

In the past, the IASB published various amendments to existing standards (IAS/IFRS) and interpretations (IFRIC). The regulations which became obligatory on January 1, 2006 and their effects on the consolidated financial statement are described below, insofar as they are relevant to GFKL.

IFRS 7 “Financial Instruments: Disclosures”, passed by the IASB on August 18, 2006, replaces the previous standard IAS 30 and takes over all regulations on disclosures contained in IAS 32. This standard prescribes the provision of detailed information, especially with regard to financial instruments. Details concerning management targets, methods, risks, securities and processes are required in this context. Further to IFRIC 8 “Scope of IFRS 2”, IFRIC 9 “Reassessment of Embedded Derivatives” was adopted by the EU on September 9, 2006. IFRIC 8 stipulates that the regulations for share-based compensation contained in IFRS 2 shall also apply to agreements not offset or only inadequately offset against equivalents. To date, this has not necessitated any amendments to GFKL’s financial statements.

Optional new accounting standards

IFRIC 10 shall initially be applied to business years beginning after November 1, 2006. This interpretation states that impairment costs for goodwill recorded during an earlier reporting period may not be reversed. The interpretation was published on July 20, 2006. IFRIC 11 shall be applied to business years beginning after March 1, 2007. This interpretation stipulates that share-based compensation pursuant to IFRS 2 must be disclosed. Both IFRIC 10 and IFRIC 11 were adopted by the EU on June 1, 2007.

The application of IFRS 8 “Operating Segments” is compulsory for business years beginning after January 1, 2009. It replaces the previously applied standard IAS 14 “Segment Reporting”. IFRIC 12 “Service Concession Arrangements” regulates the treatment of public and private service concessions in the balance sheet and must be used for business years beginning after January 1, 2008. Both IFRS 8 and IFRIC 12 were published on November 30, 2006.

On March 29, 2007, the IASB published a revised version of IAS 23 “Borrowing Costs”. This standard regulates the treatment of borrowing costs and must be applied to business years beginning after January 1, 2009. This amendment concerns the abolition of voting rights for the immediate disclosure of borrowing costs as expenses. The publication of IFRIC 14 on July 5, 2007 is concerned with the obligation existing as of the balance sheet date to pay additional contributions into a pension scheme. The application of this interpretation is compulsory for business years beginning after January 1, 2008.

IFRIC 13 shall be applied for the first time to business years beginning on or after June 1, 2008. This interpretation prescribes how the free customer loyalty programs described in IAS 18 are to be treated.

Major effects on GFKL’s financial statements arising from the application of the standards mentioned are not anticipated.

Companies consolidated

HANSEN & SCHUCHT Debitorenmanagement GmbH was renamed Proceed Collection Services GmbH on entry into the commercial register on April 12, 2007. RCU Leasing GmbH & Co. KG was renamed ADA Financial Services GmbH & Co. KG with entry into the commercial register as of March 29, 2007. The renaming of RCU Leasing Verwaltungsgesellschaft mbH as ADA Financial Services Verwaltungsgesellschaft mbH was entered into the commercial register on July 11, 2007. The renaming of debifact.Debitoren-Factoring GmbH & Co. KG as debifact Factoring GmbH & Co. KG and the renaming of INKASSO BECKER WUPPERTAL Dieter Becker GmbH & Co. KG as INKASSO BECKER WUPPERTAL GmbH & Co. KG was entered into the commercial register on August 2, 2007.

The acquisition of company shares has caused the companies consolidated to change since the previous year.

Wolter Inkasso OHG, Essen, was initially consolidated as of January 1, 2007. The company specializes in the collection of transnational receivables, and cooperates with partners in more than 100 countries. The acquisition of OHG shares by Domnowski Inkasso GmbH has caused Wolter Inkasso OHG shares to accrue.

With the acquisition of ID Innovative Datenverarbeitung GmbH, Kevelaer, GFKL Financial Services AG is continuing with the expansion of its software division. The business objective of ID GmbH is the development and distribution of software components for financial service providers, in particular for the insurance sector. These applications are currently used in Germany and 16 other European countries.

As of March 1, 2007, the English leasing company Hanover Financial Group of Companies, London, joined the companies consolidated through the acquisition of 100 percent of its business shares by GFKL. The group of companies acquired comprises the Hanover Financial Group Ltd., Virtual Lease Services Ltd. and Hanover Asset Finance Ltd. As a leasing corporation, the Hanover Group finances the acquisition of movable investment goods, especially in the so-called micro-ticket segment. Moreover, the Hanover Group takes over the administration of leasing portfolios for outside companies and advises companies on structuring financing.

95 percent of the Madrid-based company Multigestion Portfolio SLU was acquired with effect from April 2, 2007. A loan amounting to EUR 22 million was placed at the company’s disposal, 95 percent of which was allocated to GFKL and 5 percent to minority shareholders. The company used the loan for the acquisition of Multigestion Cartera 2004 S.A., Multigestion Iberia S.A. and Corfisa Financial Services S.A. The core competences of these Madrid-based companies are the administration and collection of non-performing loan receivables on behalf of third parties and the purchase of portfolios.

The merger of Wiese + Partner Unternehmensberatung GmbH, Wiese + Partner Management Consulting GmbH and Wiese + Partner Software GmbH (absorbed entities) with ID Innovative Datenverarbeitung GmbH (absorbing entity) and the renaming of the resulting entity as GENEVA-ID GmbH was resolved pursuant to the merger agreement of August 20, 2007 and the necessary company partner resolutions from the companies involved, which were passed on the same day. For purposes of simplification, September 1, 2007 was chosen as date of initial consolidation. The accounting and tax merger took place with fiscal effect from January 1, 2007. The sole interest holder in all absorbed entities was Wiese Consulting GmbH, Hamburg. For the purpose of the merger, GENEVA-ID GmbH’s founding capital was increased by the issue of a new business share. Once the merger has been executed, GFKL will hold 75 percent of GENEVA-ID GmbH, and Wiese Consulting GmbH will hold 25 percent. Also on August 20, 2007, GFKL and Wiese Consulting GmbH concluded an option agreement relating to GFKL’s acquisition of all shares in GENEVA-ID GmbH held by Wiese Consulting GmbH. According to this agreement, Wiese Consulting GmbH is entitled to tender up to 20 percent of its shares (this corresponds to 5 percent of the capital stock) for sale to GENEVA-ID GmbH from the time the option agreement is signed, and to tender the remaining shares for sale to GFKL during the period from January 1, 2010 to December 31, 2012. Insofar as Wiese Consulting GmbH does not exercise its put option or only exercises it in part, GFKL will be entitled to acquire all shares in GENEVA-ID GmbH held by Wiese Consulting GmbH through purchase during the period from February 1, 2013 to December 31, 2014.

Since their foundation in 1970, the software and consulting companies Wiese + Partner Unternehmensberatung GmbH, Wiese + Partner Management Consulting GmbH and Wiese + Partner Software GmbH have focused their business on project situations in major German insurance companies. has program service GmbH from Hamburg, which provides software and consulting services for health and other insurance companies in the insurance, inventory management, health care and business intelligence areas, is a wholly-owned subsidiary of Wiese + Partner Unternehmensberatung GmbH.

According to IAS 32, a put option which is settled in cash or other financial assets constitutes a financial liability to the cash value of the purchase price, regardless of whether this obligation is to be settled merely by the contractual party exercising an option right, and regardless of the probability of such a right being exercised. The best possible estimate was based on the calculation of the contractually agreed minimum purchase price. As the wording of the agreement presupposes the transfer of the risks and benefits associated with the shares to GFKL on August 20, 2007, no minorities are disclosed. The difference between the purchase/strike price and the minority share is disclosed as an equity decrease amounting to EUR 1,281k. In the income statement, the earnings distributed to the minority shareholders (EUR 0k) and the changes to the cash value of possible payment obligations (EUR 10k) are disclosed as financial expenses.

GFKL is applying this regulation in keeping with the development in national and international accounting practice of put options held by minority shareholders. These financial obligations are measured at fair value in accordance with the regulations set down in IAS 39. The difference between the strike price and the book value of minority shares is treated as a purchase price obligation dependent on future events with parallel application of the regulations on presenting company mergers. As of August 30, 2007, GFKL acquired a 48 percent holding in HFI Finanz- und Investitions-Beratungsgesellschaft Hamm mbH, subject to approval by the anti-trust authorities. HFI is an indirect subsidiary of BAG Bankaktiengesellschaft in Hamm, the central competence center which handles problem loans for the cooperative banking sector (Volksbanken and Raiffeisen banks) in Germany. Further to its holding in HFI, GFKL has also acquired the same percentage of a BAG special purpose vehicle, which will serve as a purchasing company. The transfer of shares is subject to payment of the purchase price, which in turn is subject to the condition precedent of approval by the anti-trust authorities. This approval had not yet been given as of the accounting date. For this, please refer to the information on events that occurred since the balance sheet date.

The goodwill of the companies acquired largely rests on the intended opening up of foreign markets as well as on synergy effects from the development of existing market positions. The companies newly consolidated by GFKL during the first nine months of 2007 are using IFRS/IAS for the first time in their opening balance sheet. This means that the provision of information required by IFRS 3.70 (a) and (b) is not necessary. The acquisition costs include ancillary costs directly associated with the ac-quisition such as legal counseling, registration and due diligence costs. The company acquisitions carried out as of September 30, 2007 are listed in the table below. The EBT disclosed covers the respective earnings from the period between initial consolidation and September 30, 2007.

^{1 For purposes of simplification, September 1, 2007 was chosen as the time of initial consolidation}

The effects of the changes in the companies consolidated on important items in the balance sheet and income statement are presented in the following overview. Due to the roll-up of Wolter Inkasso OHG, no separate disclosure as of September 30, 2007 is possible.

The following overview shows the assets and liabilities of the acquired companies at the time of initial consolidation:

II. Individual notes on the balance sheet

1. Factoring receivables

Along with the expansion of the business activities of Universal Factoring GmbH, founded in 2006, the increase in factoring receivables is largely due to the acquisition of Corfisa Financial Services S.A. as part of Multigestion Portfolio SLU.

2. Liabilities due to banks

Along with the additions from company acquisitions, the increase in non-current and current liabilities due to banks is influenced by the assumption of long-term loans by GFKL Financial Services AG in its function as a holding company. The amount of EUR 90 million borrowed during the first nine months is composed of seven separate loans, on which interest is largely charged at a variable rate based on EURIBOR. Interest hedges amounting to EUR 60 million have been concluded for the loans on which interest is charged at a variable rate. These interest rate swaps are effective both prospectively and retrospectively.

3. Equity

During the first nine months, 5,135 shares were repurchased as part of the company’s cash compensation offer at an issue price of EUR 13.93 per share, and instated in the Group’s equity under the item “Own shares”. For information concerning the development of the Group’s equity, please refer to the “Statement of Changes in Group Equity” attached to this financial statement (Annex 3).

4. Contingent liabilities

Since December 31, 2006, the contingent liabilities have fallen from a total of EUR 3.5 million to EUR 1.6 million as of September 30, 2007.

5. Personnel

Personnel development according to full-time positions is shown in the following overview, which is divided into business divisions:

The increase in the number of personnel compared to the previous year is largely due to the acquisitions made.

6. Earnings from changes to exchange rates

As of September 30, 2007, earnings from changes to exchange rates amounted to EUR -373k. There were no foreign currency items open as of the reference date.

III. Information on events that occurred since the balance sheet date

On October 17, 2007, the anti-trust authorities approved the acquisition of the 48 percent interest in HFI Finanz- und Investitions-Beratungsgesellschaft Hamm mbH and the BAG special-purpose vehicle.

IV. Business transactions with affiliated companies and affiliated persons

In its meeting of April 24, 2007, the supervisory board passed a resolution revoking the ongoing appointment of Dr. Peter Jänsch and Dr. Tom Haverkamp as of April 30, 2007, and reappointing Dr. Jänsch and Dr. Haverkamp as members of the executive board for the period from May 1, 2007 to April 30, 2012. Moreover, a resolution was passed to conclude new employment agreements with all members of the executive board. All contracts were concluded with the members of the executive board on the same day.

There were no further major business transactions with affiliated companies and affiliated persons during the period under review.


Essen, October 19, 2007


Dr. Peter Jänsch       Jürgen Baltes       Dr. Till Ergenzinger       Dr. Tom Haverkamp