price is based on the market price of MEDION stock at the beginning of a fixed conversion period and the
MEDION AGs Management Board comprises three people and is independently responsible for managing the MEDION Group. The members of the Management Board hold joint management responsibility. At the same time, however, they are obliged to further the Companys interests and to increase its enterprise value on a sustained basis. The chairman of the Management Board coordinates the members activities. The Management Board has adopted a code of conduct. Members of the Management Board may be no older than 60 years. In the case of a first-time appointment to the Management Board, the maximum possible tenure of five years is not the rule. The Supervisory Board consults on the compensation system for the Management Board and reviews it regularly. The compensation for the members of the Management Board is determined by the Supervisory Board in the light of any remuneration received from other Group companies on the basis of a performance assessment.
performance of the stock relative to the MDAX index since the issue of the bond. In some cases, the members of the Management Board additionally receive a profit-tied bonus calculated on the basis of the absolute amount of the Companys net income and the change in earnings relative to the previous year. Any losses carried forward from the previous year or retentions required by statute or the Companys bylaws are deducted from net income for this purpose. The Supervisory Board has defined an individual maximum amount of compensation for each member of the Management Board to allow for extraordinary, unforeseeable events. The chairman of the Supervisory Board reports on the basic elements of the compensation system and any changes to it at the annual general meeting. The compensation paid to the Management Board is disclosed in the notes to the consolidated financial statements and broken down by fixed component, performance-
tied components and components with a long-term incentive effect. In the year under review, there were no conflicts of interest which each member of the Management Board is required to report to the Supervisory Board without delay.
sation is payable after the annual financial statements have been approved and adopted. The compensation paid to the members of the Supervisory Board is disclosed in the notes to the consolidated financial statements. Any conflicts in interests, particularly those liable to arise from a position held in an advisory capacity or on the management board or supervisory board of any of the

Groups customers, suppliers, lenders and other business partners, must be disclosed to the Supervisory Board
MEDION AGs Supervisory Board comprises three people. The Supervisory Board regularly advises the Management Board and monitors its activities. It is involved in decisions of key importance for the MEDION Group. The Supervisory Board appoints and dismisses the members of the Management Board and consults with the Management Board on long-term executive personnel planning. The chairman of the Supervisory Board coordinates the work of the Supervisory Board and presides over its meetings. The Supervisory Board has adopted a code of conduct. With their individual career backgrounds, the members of the Supervisory Board possess the requisite knowledge, skills and experience. In a resolution passed on May 14, 2003, the shareholders amended the Companys bylaws to provide for compensation for the Supervisory Board to comprise a fixed component of 10,000 per member and a variable component of 0.0275 percent of the Companys distributable profit after deducting an amount of 4 percent of the capital contributions paid. The variable compensation component is twice this size for the chairman and one-and-a-half for the deputy chairman. Compen-
by the member concerned. No such conflicts of interest were reported last fiscal year. In the event of any material and sustained conflict of interest on the part of any member of the Supervisory Board, this member is required to step down. In its meeting held on December 7, 2004 in particular, the Supervisory Board reviewed its activities on the basis of various criteria pursuant to Section 5.6 of the Code.

Transparency

In the interests of maximum transparency, the Group keeps shareholders, all capital market participants, financial analysts, shareholder associations and the media regularly and promptly informed of its business performance. The Internet is particularly used for this purpose. Among other things, the annual and interim reports as well as ad-hoc bulletins and press releases in both German and English are posted on the Companys website. The regular reporting dates are set out in the financial calendar. The Management Board publishes a notification imme-

corporate governance 15

sold. Whereas our business performance in the first quarter was most encouraging, with both the top and bottom lines up 5 percent on the same quarter a year ago, order receipts were increasingly showing signs of price and margin pressure towards the end of the second quarter as a result of sustained consumer restraint in Germany in particular. Thus, the negative trends which were emerging from the contracts being signed for the third and fourth quarters of the year, left us with no choice in the late summer of 2004 but to scale back the sales and earnings forecasts which we had considered to be realistic at the beginning of 2004. The pressure on prices and margins in the consumer electronics segment in our core German market took its toll on sales and gross margins. With sales contracting by roughly 300 million over the previous year to 2,624 million and the margin shrinking by 1.2 per-

Asia/Pacific Rim

centage points to 10.1 percent, gross profit fell by 66 million to 264 million. As operating expenses in 2004 increased by a total of 23 million over the previous year, operating earnings (EBIT) contracted by half to 90 million in 2004. Personnel expenses climbed by 15 million to 61 million in 2004 on account of various factors. For one thing, we additionally reinforced our personnel resources in strategically promising areas as well as at our non-German offices. For another, we established MEDION Service GmbH in September 2004 to pool
We generated considerable top-line growth in the Asia/Pacific Rim in 2004, with sales surging by 22 million to 51 million (previous year: 29 million). Business performance was encouraging in Australia in particular. In these countries, we are also accompanying our long-standing retail partners in their efforts to expand into foreign markets.
Sales and earnings down on the previous year
our service activities in a separate subsidiary. As a result, the activities hitherto performed with external
As of mid year, 2004 was characterized by pronounced uncertainty on the part of our customers with respect to trends in demand and the volumes capable of being
partners were transferred to this new subsidiary to gain a more direct influence in this area, which is of decisive importance for customer satisfaction, and to
manage quality more effectively. At the same time, we signed temporary contracts with staff in our Call Centre who had previously been employed by employment agencies and terminated joint activities with outside employment agencies in this area of work. This resulted in a shift from other operating expenses to personnel expenses. These structural adjustments caused personnel expenses as a proportion of sales to widen from 1.6 percent in 2003 to 2.3 percent in 2004. Other operating expenses were particularly inflated by the increase of 11 million or 36.1 percent in freight and logistic costs. This increase was due to changed logistic structures in some customer segments calling for non-centralized delivery of fairly small volumes to a larger number of different locations and branches on the part of our customers, which resulted in a structural increase in warehouse and logistics costs. At the same time, there were price hikes in 2004 as a result of the in some parts reduced availability of ocean and air freight capacity as well as higher energy costs. At 4 million, net borrowing costs were unchanged over the previous year. EBT and EBIT both contracted by around 90 million, with EBIT coming to 86 million. At 40.9 percent, the consolidated tax rate fell slightly short of the previous years figure of 41.3 percent, reflecting in particular the absence of the surcharge on corporate tax pursuant to the Flood Victim Assistance Act. Consolidated net income for the year declined from 103.1 million to 50.7 million. Earnings per share dropped from 2.13 to 1.05.

Solid financial condition
2.7 million remitted to a trust account kept by a notary towards the acquisition of 24.9 percent of GERICOM AGs capital. Litigation against Oberlehner Deutschland Beteiligungsgesellschaft mbH, Munich concerning the relinquishment of this block of shares has been pending since June 2004.
In the wake of the lower net income for the year, gross cash flow also shrank from 185.8 million in 2003 to 97.4 million in 2004. However, at 65.0 million, cash flow from operating activities was a good deal closer to the previous years figure of 75.3 million on account of the reduction of 63.5 million in net working capital. Throughout virtually the entire year, the MEDION Group enjoys a substantial positive net cash

Subsidiaries

Human resources
On September 1, 2004, we spun off our repair services in Germany into a wholly owned subsidiary MEDION Service GmbH. This company additionally provides logistic services in the after-sales and e-commerce areas. This centralization marks a key step towards improving the management and quality of our service activities. Our European subsidiaries continued to perform well in 2004 again, with our subsidiaries in Denmark, the United Kingdom and France achieving particular sales successes. This bears out our principle of building up a local presence in key growth markets. With the establishment of MEDION Schweiz GmbH on February 1, 2004, we set up permanent operations in yet another European market. Following the roll-out of SAP at our subsidiaries in the United Kingdom and the Netherlands in the first half of 2004, we made further headway in integrating our business processes. In addition, we extended our presence in the Asian/ Pacific region with the incorporation of a subsidiary in South Korea on July 1, 2004. As expected, our subsidiary in the United States sustained a loss.
Last year, the MEDION Group employed a global average of 1,504 people (previous year: 1,092). Of these, 1,247 were based at MEDION AG and its domestic subsidiaries. The average headcount outside Germany rose by 59 percent from 162 in 2003 to 257 in 2004 due to the Group's ongoing international expansion.

Research and development

MEDION works very closely with the leading manufacturers of components and products in the multimedia and entertainment electronics segments, something which ensures constant access to the latest results derived from research and development projects. In line with our business model, we therefore concentrate on readying innovative technologies swiftly for a broad-based consumer target group. Accordingly, we do not maintain R&D facilities engaged in work on basic technology.
group management report 25

III. Risk report

Corporate governance

1. Economic risks

MEDION is committed to observing the principles of transparent, responsible corporate governance aimed at maximizing value. The Management Board, Supervisory Board and officers of MEDION identify with these principles. MEDION considers compliance with corporate governance principles to constitute an important means of instilling confidence on the part of present and future shareholders, creditors, employees, business partners and the public in national and international markets. MEDIONs corporate governance principles are based on the German Corporate Governance Code in the version dated May 21, 2003. Contrary to the recommendations of the German Corporate Governance Code, MEDION AGs Supervisory Board has not formed any committees as it comprises only three members. In addition, the disclosures on the compensation for the members of the Management Board and the Supervisory Board set out in the notes to the consolidated financial statements are not individualized. The joint declaration of conformance issued by the Management Board and the Supervisory Board on December 7, 2004 is reproduced in the notes to this annual report. Moreover, MEDIONs corporate governance principles as well as the declaration of conformance are published on its corporate website in German and English and can also be requested directly from the Company.
Like any company that operates in the consumer goods segment, MEDIONs success hinges greatly on consumers purchasing power and inclination to buy. While purchasing power is influenced by general economic parameters such as the growth of the economy, inflation and unemployment, consumer inclination to buy is strongly shaped by soft factors such as the overall business mood and consumer confidence. As a seller of innovative products offering very good value for money we have in the past been able to shrug off the effects of even difficult economic conditions. However, consumer purchasing power and inclination to buy in our core market of Germany was muted in the year under review. Should consumer confidence in our key markets continue to deteriorate, we cannot rule out the possibility of this having repercussions for MEDIONs sales and earnings.

In this connection, we pay particular attention to the intelligent marriage of existing technologies with new product ideas. Highly successful examples of this include the combination of PDAs and navigation systems, the integration of DVB-T receivers in PCs and notebooks as well as our new product, the Digitainer media centre. The Digitainer also illustrates how we want to play a leading role in the nascent convergence of multimedia and home entertainment. With our broad range, which is rivalled by only a very small number of peers, we have been at home in both areas for years. High creativity and flexibility coupled with short timeto-market for new products in the mobile computing, home cinema and telecommunications areas as well as wireless home networks form the underpinnings of this positive development. At the same time, we are supplementing our range with additional services such as our medionmusic.com Internet music platform, which was successfully launched in December 2004.
group management report 31
International expansion In our home German market, we hold roughly 9 percent of the entire consumer electronics market. In spite of our range, which plays a leading role in terms of both price and technology, this means that we are exposed to fluctuation in domestic demand as the large basis already achieved makes it a good deal more difficult to gain market share compared with markets which the Company is only just beginning to enter. In Western Europe excluding Germany, we currently have a far smaller share of the market of only 1.5 percent. We have proved that our business model can also be implemented in foreign markets with excellent results. It is here that we see the main growth potential for our Company over the next few years. We will continue to intensify our relations with existing customers and, with the extensive reach of our subsidiaries, have established a very good basis for further expansion in our foreign activities. Our ability to successfully handle multinational projects is meeting with a great response on the part of international retail groups in particular. In addition to Western Europe, we are particularly also setting our sights on Eastern Europe as there is strong demand for innovative and
affordable consumer electronics, which is currently being confined only by insufficient purchasing power in this region. However, as a vendor of inexpensively priced products, we consider ourselves to be well positioned to be amongst the first to open up this market in a real way. With our potent logistics and after-sales structure, we have created a solid basis for making the most of the opportunities presenting themselves to us.
Yet, in addition to developing structures and tapping future opportunities, it is important to swiftly bring costs into line with sales. That said, we have little influence on margins and the exchange rate of the US dollar as these are primarily determined by general market trends. Active cost management primarily involves concentrating on projects which we can handle efficiently on the basis of our structures and for which cost drivers over the course of the project can be reliably calculated, controlled and thus capped effectively. In particular, these activities can help to ensure that service and logistics costs return to the levels achieved in earlier years and that as a result the most efficient possible use is made of personnel resources. We are convinced that by taking appropriate action in 2005 we will be able to achieve savings without sacrificing the quality of our service and have already commenced implementing these measures. A number of promising signals emerged from the retail sector in the fourth quarter of 2004. However, it remains to be seen whether these signals are evidence of consumer spending and ordering volumes returning to normal. In any case, sales in the first quarter are likely to be around 19 percent down on the admittedly very high level in the same quarter a year ago. Similarly, the gross margin will not reach the level in the first quarter of last year. Accordingly, with the ratio of operating expenses still relatively high, earnings in the first quarter will drop at a greater pace than sales.

The retail industry associations do not expect any improvement in consumer confidence in Germany this year either. Record unemployment, additional strains on consumers as well as pronounced uncertainty as to future economic trends are not conducive to any recovery in consumer spending in the near future in what is our most important market. At the same time, there are signs of difficult economic conditions in some foreign markets, exacerbated by limited forward visibility as to the margins which can be achieved in the market as well as the dollar/euro parity. A weak US dollar places a damper on our final retail prices and thus also on our sales and earnings. In view of the multitudinous uncertainties, it is not possible at this early stage to provide any reliable estimate of the Groups expected business performance in 2005. Needless to say, we will be doing our outmost to make the best possible use of the market opportunities presenting themselves to MEDION and attempting to enhance the Companys profitability by means of systematic cost management.
group management report 33

in good company

Who would you most like to be entertained by this evening? Fortunately, you dont have to decide now. Instead, you can wait until you get home. Thats because with the MEDION Digitainer and other MEDION products, you can enjoy your favourite stars whenever you want either in live digital quality via television or radio or in recorded form. Either way, MEDION home entertainment products offer you the whole world of entertainment in your living room. And what could be better than if this means having your friends and relatives drop by more frequently?

home entertainment

projector md 42125 if design award 2005
digitainer md 90888 good design award 2004
plasma md 40333 red dot award 2004 good design award 2003
whether it's dvd recorders, home cinema projectors or mp3 music players medion is always synonymous with top entertainment.
the medion business model

_simple yet convincing

Our business model
The idea behind the MEDION business model is as simple as it is convincing. In over 20 years it has proven itself on several continents and is permanently being optimized. The principle involves providing customers with functional products of good quality with an eyecatching design incorporating the latest technological advances and offering outstanding value for money. Indeed, the MEDION range embraces the entire spectrum of modern consumer electronics including PCs, notebooks, LCD and plasma TV sets, DVD recorders, MP3 players, navigation systems and household appliances. Regardless of the product, retail partners are assured of receiving the broadest range of modern consumer electronics under a single roof at MEDION. Yet, MEDION is not a product manufacturer. Rather, it sees itself as a service provider offering retail partners the right product at the right time at an attractive price offering good value for money. MEDION supervises and manages the entire value chain from the initial product idea right through to after-sales service. With its proximity to final consumers on the one hand and producers on the other, MEDION has a very precise idea of what customers want and what the latest technological trends are. Essentially, we bring together all the individual links in the value chain, namely designers and engineers with new ideas, quality-conscious producers, quality managers, reliable transportation companies and not least of all retailers. We ensure that the entire process runs smoothly, taking personal charge of key aspects such as product conceptualization, design, quality management and after-sales service. We source our products and components from globally active brand-name manufacturers, thus ensuring access

sales by division

in 2004

mio. 2004 2003

PC/multimedia 1,919 2,091

Entertainment and

household electronics

Communictions technology

pcs notebooks scanners printers software monitors tft-screens tvs vcrs stereo systems cameras video cameras household appliances dvd devices phones answerphones fax machines satellite receiver systems
our partners _our customers
The economic situation in Europe remained difficult last year, causing competition in the retail sector to intensify. In our home market of Germany in particular, high unemployment, uncertainty caused by political reforms and future incomes as well as greater health and pension-insurance levies placed a damper on consumer confidence, resulting in even greater buying restraint than in the already weak previous years. Consequently, German retail sales contracted again in 2004. Muted consumer spending additionally fuelled pricebased competition, which had already intensified dramatically in earlier years. We do not expect to see any sustained improvement in this situation in 2005, either. The consolidation of the retail sector, which has been gaining momentum for some time, has accelerated still further in the wake of difficult market conditions and now spreads to larger retailers after being essentially confined to mid-size companies until now. We assume that this shake-out in the retail sector will continue and in fact intensify. At the end of the day, a substantial part of the market will be in the hands of large retail groups with international operations. These groups are growing quickly, have excellent credit ratings, generate large sales and engage in extensive marketing activities. Generally speaking, they operate in numerous countries and, in some cases, across several continents. With a share of around 75 percent, specialist retailers have remained the dominant sales channel for consumer electronics in Germany. However, other retailers such as discounters, coffee retailers, cash & carry markets and petrol stations are making growing inroads into this market. The large grocery chains in particular have realized that non-food campaigns can boost store fre-
quency rates and deliver attractive additional margins. As a result, non-specialist retailers now account for around 25 percent of consumer electronics sales in Germany. In other European markets, specialist retailers play an even greater role. The same thing applies to direct marketers particularly also in North America.

30,000.00

January 1, 2002

5,000.00

CHF 100,000.00

February 1, 2004

US$ 10,100,000.00

April 1, 2001

AU$ 10,000.00

Incorporated in 2003

November 1, 2003

KRW 120,000,000.00

July 1, 2004
The subsidiaries predominantly provide distribution and after-sales services for MEDION AG in the respective local countries. AMS provides call-centre services. MSGs business activities entail repair and logistic services for after-sales and e-commerce business. MEDION USA operates independently in the North American market. The subsidiaries were consolidated on the basis of their individual annual financial statements for the period from January 1 until December 31, 2004, which were prepared according to local law and audited in some cases. The individual subsidiaries submitted IFRS reconciliation statements, which were certified by the auditors. The annual financial statements of MSG, MEDION Schweiz and MEDION Korea were included in the consolidated financial statements for the year ending December 31, 2004 for the first time. MEDION AGs other foreign subsidiaries were not consolidated on account of their general immateriality (see III.7 Related parties).
capitalized. Capitalized goodwill is written down on a straight-line basis over its expected useful life of four years. In addition, receivables and liabilities as well as income and expenses are consolidated. The currency differences arising from the consolidation of income and expenses are recognized in the income statement. In the light of the IFRS principle of materiality, no intercompany gains needed to be eliminated.
4. Currency translation principles
The foreign subsidiaries which do not prepare their individual financial statements in euro are classified as foreign entities in accordance with the criteria set out in IAS 21. The national currency of these subsidiaries constitutes their functional currency. Foreign-currency amounts are translated using the modified closing-rate method (IAS 21.30). Accordingly, all monetary and non-monetary assets and liabilities carried on the face of the balance sheet are measured at the closing rate,

3. Consolidation methods

while equity is converted at the historical rate prevailing on the date of acquisition or, where applicable, the
The subsidiaries were consolidated in accordance with IAS 22 using the acquisition method as of the date on which the equity interest in question was acquired. If the acquisition values of the equity interests exceed the Groups share in the equity of the subsidiary in question, this gives rise to goodwill, which must be

Dec. 31, 2004 Assets Liabilities thousand Short term: Recognized directly in equity Long term: Property, plant and equipment Inventories Recognized directly in equity Pension provisions Other provisions Dec. 31, 2003 Assets Liabilities thousand

shown as long term

(8) Financial assets are carried at cost plus ancillary purchasing costs. Advance payments made on shares in investees include an advance payment of 2,714 thousand for a 24.9 percent stake in GERICOM AG, Linz, Austria. Litigation concerning the release of the shares has been pending with Oberlehner Deutschland Beteiligungsgesellschaft mbH, Munich, since June 2004.

276 122

263 161

shown as short term

2,943 4,479

226 2,853 4,134

(9) Loans include interest bearing loans. These are carried at their nominal values and have terms expiring in
Deferred taxes from items directly recognized in equity arise from cash flow hedges in connection with hedge accounting pursuant to IAS 39.
(13) Tax provisions break down as follows:
Dec. 31, 2004 Dec. 31, 2003 thousand thousand MEDION AG Trade tax Corporate tax/ solidarity surcharge Deferred tax MSG MEDION France
(11) Other non-current assets and prepaid expenses primarily comprise the retained ownership rights to be claimed in the medium term with respect to a receivable of 128 thousand (previous year: 276 thousand) as well as the long-term part of a loan discount of 9 thousand (previous year: 17 thousand).

10,220

9,20,394

Current liabilities

MEDION NL MEDION Italia
(12) Short-term debt and current portion of long-term debt, trade payables and other current liabilities are recognized at their repayable amounts or, in the case of foreign-currency items, at their fair value. Short-term debt and the current portion of long-term debt comprise solely liabilities to banks. Other current liabilities relate for the most part to VAT and payroll liabilities.

AMS Others

(14) Other provisions take account of all discernible risks and contingent liabilities. The amount of provisions is determined on the basis of the best possible estimate of the expenditure required to settle the obligations. Provisions for guarantees have been set aside for expected repairs and credits on the basis of a general calculation method depending on the volume of sales of the products in question. The percentages applied vary according to the product group. Provisions are consumed on the basis of certain rates calculated on the basis of historical figures over the applicable guarantee period (months). As the guarantees arise in con-

notes 89

Dec. 31, 2003 thousand Guarantees Outstanding invoices Personnel Other provisions 59,193 60,765 3,617 1,231 124,806
Utilization thousand 53,410 42,698 3,347 1,240 100,695

Reversal thousand 921

Addition thousand 45,495 33,329 4,713 1,526 85,063
Exchange-rate differences thousand 234
Dec. 31, 2004 thousand 51,186 50,409 4,976 1,448 108,019
nection with ongoing business operations, the parts of the provisions related to periods greater than 12 months can also be classified as short term. The provisions for outstanding invoices include, among other things, future royalties. Allowance has also been made for the possibility of similar charges being levied on PCs and notebooks. Personnel provisions include outstanding expenses for vacation leave, management bonus, anniversaries, bonus and dues for the vocational insurance association. Other provisions primarily entail the cost of auditing the financial statements, legal costs and the compensation payable to the Supervisory Board.

Non-current liabilities

(15) Bonds include four convertible bonds with a total value of 1,171,350.00 issued to management and executive staff under a staff compensation scheme. The bond issued in April 2000 with a total nominal value of 240,150.00 was valued at 185,650.00 on December 31, 2004. It is divided into evenly valued bearer debentures of 1.00 each. The bond is subject to interest at a rate of 4 percent per annum and, in the event that the conversion right is not exercised, repayable at its nominal value on March 31, 2005 at the latest. The convertible bond was established prior to the issue of the bonus shares arising from the capital increase financed by the Companys own funds and vests in staff the fundamentally irrevocable right to have each debenture with a nominal value of 1.00 converted into two shares. The right of conversion was subject to exercise no earlier than on the second bank working day after the publication of the report for the second quarter of 2002. It expires upon termination or the lapse of the employment contract, in which case the bond must be repaid prematurely. The conversion

The cash outflows from financing activities primarily resulted from the payment of a dividend of 33,892 thousand approved for fiscal 2003. After the deduction of the cash outflows from investing activities (minus 19,727 thousand) and financing activities (minus 38,865 thousand) from the cash inflows from operating activities ( 65,008 thousand), there was a net increase in cash and cash equivalents of 6,416 thousand.
III. Supplementary disclosures

1. Segment reporting

In the period under review, MEDION AG was engaged almost exclusively in a single segment, namely the provision and arrangement of services together with the distribution of PC/multimedia, entertainment and household electronics and communications technology products. The value processes for all product groups largely exhibit the same structure with respect to the levels of production and also marketing methods and channels. The organizational structure is therefore uniformly oriented to the typical sequence of steps in projects. The risk structure of the projects is very largely identical for the various product types. Given the uniform project sequence, the individual projects have largely the same income structures even on international markets. For this reason, the product groups cannot be viewed as separate segments as defined in

notes 97

IAS 14. Accordingly, segment reporting pursuant to IAS 14.is confined to a breakdown of the main items of the income statement and the balance sheet by region.
comprise the corresponding liabilities. Intercompany assets and liabilities are eliminated in the column entitled Rest of the world/consolidation. Capital spending includes additions in the year under review to property, plant and equipment and
External sales are assigned to the regions in which they are generated (customers sites). Intercompany sales are eliminated in the column entitled Rest of the world/consolidation. Segment EBIT is adjusted for intercompany netting. Segment cash flow is calculated on the basis of the EBIT of the individual segment plus depreciation assigned to the segment. Segment assets comprise assets used to generate the EBIT in the segment in question. Segment liabilities

intangible assets.

America
Rest of the world/ consolidation
thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand
External sales (net) Intercompany sales (net) Sales (net) EBIT Cash flow Segment assets Segment liabilities Capital spending

1,548,682

1,916,345

978,237

921,683

46,430

56,602

50,759

29,441

2,624,108 2,924,071

60,948 1,609,629 55,074 60,399 532,772 262,745 15,506

give a true and fair view of the net assets, financial position, results of operations and cash flows of the MEDION Group for the business year in accordance with IFRS. Our audit, which according to German auditing regulations also extends to the Group management report prepared by the Management Board of MEDION AG for the business year from January 1 to December 31, 2004 has not led to any reserves in our opinion, on the whole the Group management report together with the other information of the consolidated financial statements, provides a suitable understanding of the Groups position and suitably presents the risks of future development. In addition, we confirm that the consolidated financial statements and the Group management report for the business year from January 1 to December 31, 2004 satisfy the conditions required for the Companys exemption from its duty to prepare consolidated financial statements and the Group management report in accordance with German accounting law.

Essen, February 21, 2005

MRKISCHE REVISION GMBH WIRTSCHAFTSPRFUNGSGESELLSCHAFT
Dipl.-k. K.-H. Berten German certified public auditor
Dipl.-Kfm. H.-H. Schfer German certified public auditor

at home wherever you go

Experiencing new things, travelling, visiting other regions and countries is always lots of fun provided that the weather is not a disappointment. And if it is, the latest technology will keep your spirits up. DVB-T is the magic word. With this system, you are now able to watch your favourite TV programmes across much of Europe. And to make sure that this really is as simple as it sounds, MEDION has come up with the perfect receivers and screens for when you are away from home. All you have to worry about is finding batteries or a source of power.

dvb-t receiver md 29006

dvb-t interior and exterior antenna md 29990
information and entertainment even when you are away from home: everything you need to enjoy dvb-t.
medion ag annual financial statements 109
medion ag annual financial statements pursuant to german commercial code
medion ag annual financial statements

balance sheet

A. Fixed assets I. Intangible assets 1. Industrial property rights, computer software 2. Advance payments made

10,11,344

5,375 2,910 8,285
II. Tangible assets 1. Land and buildings 2. Other plant, operating facilities and business equipment 3. Advance payments made

20,493 7,29,046

15,042 7,22,621
III. Financial assets 1. Shares in affiliated companies 2. Shares in investees 3. Advance payments made on shares in investees 4. Other Ioans

10,2,13,138 53,528

11,11,786 42,692
B. Current assets I. Inventories II. Receivables and other assets 1. Trade receivables 2. Receivables from affiliated companies 3. Other assets 273,524 276,813