Annual Report 2008 TÜV SÜD AG

Transcription

1 TÜV SÜD 600 locations 14,000 employees Revenue of C 1.4 billion INDUSTRY TÜV SÜD Industry Services TÜV SÜD Product Services TÜV SÜD Chemical Services TÜV SÜD Rail MOBILITY TÜV SÜD Auto Services TÜV SÜD Automotive PEOPLE TÜV SÜD Management Services TÜV SÜD Life Services TÜV SÜD Academy TÜV SÜD Life Science TÜV SÜD creates increased safety and added economic value. As process partners with comprehensive industry knowledge our teams of specialists provide early consultation and continuous guidance, thus achieving the optimization of technology, systems and expertise. In this manner we strenghten the competitive strength of our customers throughout the world. Annual Report 2008 TÜV SÜD AG 2

2 978 1,034 1,168 1,163 1,271 1, * 2007* 2008* Revenue in A million 10,014 10,565 11,946 13,185 14, Headcount 47.8% INDUSTRY 35.0% MOBILITY Key figures Business development (C million) HGB HGB HGB IFRS IFRS IFRS Revenue , , , , ,365.2 Personnel expenses Cash flow from operating activities Capital expenditures Income before taxes Consolidated net income EBT margin (%) EBT margin, adjusted (%) EBITDA margin (%)* EBITDA margin, adjusted (%)* Assets (C million) Non-current assets , , Current assets Total assets 1, , , , , ,162.6 Equity ratio (%) Employees (annual average) Full-time equivalents 9,237 9,647 10,863 10,863 12,360 13,122 Employees (as of December 31) Headcount 10,014 10,565 11,946 11,946 13,185 14,138 * EBITDA: Earnings before interest, taxes, depreciation and amortization, including result from investments. Content Group 2-23 Key Figures 2-4 International Success 4 Message from the Board of Management 6-7 The Challenge of Sustainability 8-23 Supervisory Board Report Group Management Report Business Operations Macroeconomic Development and Developments in Relevant Markets Business Review and Economic Situation Net Assets, Financial Position and Results of Operations Non-financial Performance Indicators Risk Report Subsequent Events 62 Opportunities and Outlook Consolidated Financial Statements Consolidated Income Statement 70 Consolidated Balance Sheet 71 Consolidated Cash Flow Statement 72 Consolidated Statement of Income and Expense 73 Consolidated Statement of Changes in Equity 74 Notes to the Consolidated Financial Statements International Success Auditor s Report % OTHERS 16.1% PEOPLE Revenue by strategic business segment * Pursuant to IFRS: TÜV SÜD AG prepared consolidated financial statements in accordance with International Financial Reporting Standards for the first time in TÜV SÜD is an international service provider specializing in technical services. Our 14,000 employees generate annual revenue of almost A 1.4 billion. This makes us a leader in our industry. We have more than 140 years of experience. From our group headquarters in Munich, Peabody and Singapore, we direct our activities in the fields of consulting, testing, certification and training. Of total group revenue, around 48 percent (A 653 million) is allocable to the INDUSTRY strategic business segment, 35 percent (A 478 million) to the MOBILITY strategic business segment and 16 percent (A 220 million) to the PEOPLE strategic business segment. 30 percent of our revenue was generated outside of Germany. Growth in Germany remained constant. With around 1,000 new employees and by using forwardlooking, solid financial management, we were able to meet our obligations to society as a socially responsible employer with secure jobs in Corporate Boards

3 Message from the Board of Management Successful corporate strategy International markets have rewarded our corporate strategy, which is essentially based on the following pillars: Concentrating on our core competencies of consulting, testing, certification and training Independence and impartiality Positioning ourselves as an added value provider and process partner for our customers Establishing our company as a leading service provider on the basis of our strong position on our home market Profitable growth by continuously developing our business model The Board of Management of TÜV SÜD AG (left to right): Dr.-Ing. Manfred Bayerlein, Dr. Peter Klein, Dr.-Ing. Axel Stepken Dear business partners, We are happy to inform you about the development of our company over the past year as well as our prospects for 2009 in this annual report was not a good year for the economy. Financial crisis, recession, layoffs, investment caps and factory shutdowns were common phrases during the second half of the year. Despite these difficult conditions, TÜV SÜD continued to enjoy great success in the reporting year. This makes us proud. We increased our headcount by some 1,000 employees compared to the prior year and raised revenue by more than seven percent. We grew profitably for the sixth year in a row. This put us ahead of many other global players. All three strategic business segments, with their ten divisions, contributed to this positive result. Market position reinforced across the board Our market activities in the Americas and Asia Pacific progressed particularly well. Those areas saw revenue grow by 13.5 percent and close to 9 percent respectively. The operating units of the PSB group, which we acquired in 2006, account for 20 percent of revenue in Asia Pacific. This is proof of their successful integration. In Germany, we were able to combat the liberalization surrounding the testing of industrial plant subject to inspection and build on our position by reinforcing our nationwide representation and providing cross-industry services from a single point-of-call. We also consistently pursued a strategy of expanding our know-how using targeted acquisitions. One example of this is the acquisition of the clinical research center Msource Medical Development in Brussels, which we are using to set up our new TÜV SÜD Life Science division. We have successfully completed the start-up phase of the TÜVTURK project. Together with our partners, we had already carried out a million regular vehicle inspections in Turkey by the end of 2008 using the German model. Our comprehensive network of 189 service centers and 81 mobile testing units is in perfect working order. Never before has such a complex vehicle monitoring project been implemented in such a short space of time. We assume that the current economic crisis will also have an effect on our markets. However, this will not be to the same extent as in other industries because, as globalization progresses, the documenting of safety and functioning processes by independent third parties is becoming increasingly important. Nevertheless, 2009 will also be a year of extraordinary challenges for us. Sustainability is necessary for the future We fear, however, that turbulence on the financial markets and its impact on the global economy could negatively affect climate conservation and product safety. This is why we will continue to support and pursue the course of sustainability taken by politics and industry, even in difficult times. We support our customers efforts to take full responsibility for the state of the environment and subsequent generations in their actions and their business. In their development and production as well as the operation of industrial plant. To this end we offer our wide-ranging, interdisciplinary, specialist services throughout the world. For our customers, and for a future worth living in. Sincerely, We would like to thank you, our customers, for your confidence in our services, as well as our team for their outstanding efforts. Axel Stepken, CEO Manfred Bayerlein Peter Klein 6 7

4 The Challenge of Sustainability

5 The Challenge of Sustainability Our international teams of experts work across disciplines and have a networked mindset. Sustainability is based on values. Such as responsibility. Sustainability depends on ethical values, with responsibility being perhaps the most important. The principle of sustainability is based on the realization that the rampant exploitation of natural resources threatens the long-term well-being of a society. Applied to the 21st century, sustainable economic activity involves finding and maintaining a balance between economic, environmental and social factors. We help our customers do this by offering solutions and concepts at more than 600 locations throughout the world. We are represented in nearly all of the important production and trade centers of Europe, the Americas and Asia Pacific. Our global activities are directed from our group headquarters in Munich, Peabody and Singapore. Our INDUSTRY, MOBILITY and PEOPLE strategic business segments focus on our core competencies: consulting, testing, certification and training (CTCT). As process partners, our interdisciplinary teams of specialists optimize technology, systems and know-how. In this manner we strengthen the competitive strength of our customers throughout the world. TÜV SÜD s services in the INDUSTRY strategic business segment range from testing in the interest of improving the safety, reliability and efficiency of industrial plant, improving energy-efficiency and assessing international climate protection projects to the blanket inspection and monitoring of products in global trade. In the MOBILITY strategic business segment, our experts help vehicle manufacturers with the development and global approval of new models, in addition to conducting roadworthiness tests and exhaust-gas analysis on private vehicles. In the PEOPLE strategic business segment, our Academy and our cooperative initiatives with institutes of higher education promote up-to-date, practical education and certify management systems in almost all industries in accordance with internationally accepted standards. Our international teams of experts work across disciplines and have a networked mindset. They are well-versed in technical standards and cultural peculiarities, and have all the accreditations necessary to access local and regional markets throughout the world. As an independent and impartial process partner, TÜV SÜD is a single source for solutions. This inspires confidence. Confidence in TÜV SÜD as a partner and confidence in the possibility of combining economic success, environmental sustainability and social responsibility. Sustainability means added value. This is our belief, upon which our services are based. 11

6 The Challenge of Sustainability Sustainability begins at home. Successfully mastering the current challenges requires know-how, networking and partnership. For TÜV SÜD, this begins with its positioning as a service provider. Our three strategic business segments INDUSTRY, MOBILITY and PEOPLE combine a broad range of competencies. By bringing together diverse pools of specialists into a tight, international network, we are able to react swiftly and appropriately to new challenges and problems. Being responsible means acting responsibly. This is what we do. As an active process partner and provider of support throughout the entire value added chain, our focus is always on the added value for our customers. And we know that added value has to be lasting to be real. This requires a holistic approach and long-term vision. That is what our services are based on. This also applies to TÜV SÜD s largest strategic business segment, INDUSTRY. In the TÜV SÜD Industry Services division, we offer comprehensive services to manufacturers and operators of industrial plant, buildings and infrastructural facilities. We provide consulting for planning and construction, support the implementation of projects, ensure smooth operation and assist in the dismantling and disposal process. We also offer our customers a comprehensive service that is suited to the entire life-cycle of their industrial plant in the TÜV SÜD Chemical Services division. The safe, reliable and fault-free operation of industrial plant alone meets the most important objective of sustainability: realizing economic goals without negatively affecting people or the environment. In the TÜV SÜD Product Services division, TÜV SÜD creates crucial competitive advantages for manufacturers and trading companies. Because aside from safety, quality and user-friendliness, the manufacturing conditions of products are becoming increasingly important to consumers. This is why TÜV SÜD s product experts take the interests of the customers into consideration along the entire value added chain, from innovation and development to series production and sale. The fourth division belonging to the INDUSTRY strategic business segment, TÜV SÜD Rail, offers a comprehensive range of services relating to the safety of railway vehicle technology. This division s experts have successfully positioned themselves as partners for high-tech projects throughout the world. Expertise is a vital factor in shaping the future in a sustainable manner. This is a key issue for the PEOPLE strategic business segment, comprising the divisions TÜV SÜD Management Services, TÜV SÜD Life Services, TÜV SÜD Academy and TÜV SÜD Life Science. The acquisition of Msource Medical Development in Brussels enabled the establishment of the new, forward-looking division TÜV SÜD Life Science. This adds the pharmaceutical and biotech industries to the range of services on offer. At TÜV SÜD Life Services, for example, our consultants provide support to more than 10,000 companies in the field of occupational health, and in so doing play an important part in preventing disease and maintaining performance levels into old age. Long-term solutions to the consequences of demographic change and the economic crisis are supplied by TÜV SÜD Academy, with international cooperation initiatives with institutes of higher education and seminar programs on more than 400 subjects. TÜV SÜD Management Services is responsible for the entire scope of quality management at manufacturing companies and service providers in all industries, including technology, standards and corporate management. Gaining know-how is a first step towards sustainable business. The second step involves the targeted, concrete implementation of this know-how. As experts, we know that sustainability pays, for people, the environment and companies. Transportation is also a key factor in the MOBILITY strategic business segment. Even if you can t keep reinventing the wheel, it is possible to develop new, environmentally friendly drive technologies. This forms the core of the engineering services and R&D consulting offered by the TÜV SÜD Automotive division. The range of services offered by TÜV SÜD Auto Services includes roadworthiness tests and exhaust-gas analysis, damage assessments, driver's license tests, fleet management and fleet consulting. Sustainability also plays an important role in these fields. Certified, ideally configured vehicles and trained drivers reduce operating costs and minimize the impact on the environment. We presented the GreenFleet Award for the first time in 2008, which recognizes outstanding achievements in the environmentally friendly management of vehicle fleets

7 The Challenge of Sustainability It pays to balance your emissions account. Policy makers have set definitive targets for reducing global CO 2 emissions in the interest of averting the pending climate catastrophe. TÜV SÜD considers these targets to be realistic. And we help our customers throughout the world to achieve them. We are a leading verifier of climate protection projects. Emissions trading on the basis of the Kyoto Protocol is a key component of climate conservation policy. The Carbon Management Services department of TÜV SÜD Industry Services has been validating and verifying climate protection projects since the year With more than 1,000 reports alone in the field of the Clean Development Mechanism (CDM) of the Kyoto Protocol, TÜV SÜD is one of the leading verification companies in the world. In order for companies to be able to trade successfully with emissions allowances, these projects must be validated by independent service providers that have been accredited by the United Nations. TÜV SÜD was the first company in the world to be accredited for all 15 sectors of the Clean Development Mechanism, which is targeted at projects in developing countries. TÜV SÜD was also the first company in the world to be accredited for the verification of Joint Implementation projects, which are aimed at realizing climate protection projects in industrial nations. Our expertise with regard to climate protection projects and emissions trading is appreciated. Readers of the British business magazine Environmental Finance voted TÜV SÜD the best verification company for climate protection projects relating to the Kyoto Protocol. TÜV SÜD has maintained a leading position in international competition in this field for years. More and more companies are recognizing the opportunities offered by trading in emissions. They promote climate protection in developing and emerging economies, and offset their emissions at home. And having a balanced emissions account is not only profitable. It also helps to boost image. 14

8 The Challenge of Sustainability Conserving energy gives a competitive advantage. It pays to be well advised. Businesses that fail to invest in the efficient use of energy today will suffer from significant competitive disadvantages tomorrow. Rising energy costs in recent years make savings measures even more urgent. The solution is simple. Less is more. And the spectrum of possibilities for optimizing energy consumption is huge. It ranges from improving building insulation and optimizing manufacturing processes to the realization of smart electricity grids. The experiences of our energy efficiency experts show that the cost/benefit factor in this field is very high. Organizational measures and comparably low investment can lead to significant reductions in a company s energy consumption, reduced costs and less impact on the environment. TÜV SÜD has developed a series of services and certificates aimed, for example, at helping operators of industrial plant and real estate raise potential efficiency. These include complex energy consulting, energy and material flow management and certification as an energyefficient company. With complex energy consulting, TÜV SÜD helps companies to identify and exploit existing potential for savings. Following a comprehensive analysis of all equipment and processes, an interdisciplinary team draws up a tailored practice concept for saving energy and rationalizing the use of electricity, gas and other power sources, working together closely with the customer. This procedure enabled one textile manufacturer, for example, to reduce energy consumption by 15 percent, representing an annual saving of A 500,000. We developed the energy-efficient company certification in order to enable customers to document their activities in this field. The certificate is awarded taking into account the technical and economic feasibility of energy saving measures and willingness to implement such measures. The identification of existing potential for savings both creates the preconditions for and increases the motivation to exploit such potential. This has the positive effect of reducing energy consumption, lowering energy costs and cutting emissions. With their energy-efficiency services, TÜV SÜD s experts support our customers with modern energy planning. In this way, they also make an important contribution to ensuring the companies remain competitive in the long term. The best advice leaves no question unanswered, neither questions of profitability nor questions regarding the environment. 17

9 The Challenge of Sustainability It pays to not let things go up in smoke. Crude oil reserves will be exhausted in around 40 years. This is one of the main reasons why efficiency has become a hot topic in the automotive industry. TÜV SÜD is committed to improving efficiency. This is a particular issue for the automotive industry because it is not only a climate-related aspect but also a question of costs. In addition to carrying out emissions tests, TÜV SÜD is also continuously developing new ways of determining and reducing emissions. The TÜV SÜD Automotive division operates an emissions laboratory in Heimsheim, Germany, one of the largest independent laboratories of its kind in Europe. In addition to simulating a variety of operating conditions, this is also capable of testing hybrid vehicles. A third testing station, which can measure evaporative emissions from vehicles, will begin operations in Heimsheim in With the unique combination of measurement and testing facilities to be found there, automotive manufacturers and suppliers benefit from state-of-the-art technology. TÜV SÜD Auto Services mainly deals with vehicle roadworthiness tests and exhaust-gas analysis, and therefore the road traffic safety and environmental friendliness of vehicles. This is a matter of course in Germany, drivers do not know it any other way. TÜV SÜD is proud that know-how and experience in this field can be transferred to other countries, adding value for road traffic safety and the environment. In Turkey, TÜVTURK, a joint venture between TÜV SÜD and its two Turkish partners Dogus and Akfen, has set up a comprehensive network of service centers within a short space of time, and already carried out one million vehicle roadworthiness tests in This development has a lot of impetus behind it. Around 2,400 employees are working to ensure more safety and efficiency on the road. A service for mankind and the environment. And a good opportunity for TÜV SÜD to gain important experience. The knowledge gained from this successful, major project has created a solid foundation for the next step: the ongoing expansion of international activities in the field of vehicle roadworthiness tests and exhaust-gas analysis. We are constantly developing new ways of measuring and reducing emissions. 18

10 The Challenge of Sustainability Training means staying flexible. It pays to invest in brilliant minds. A shortage of expert personnel is one of the problems associated with demographic change. People are living longer. This is particularly noticeable in industrial nations. TÜV SÜD recognized the challenges at an early stage. Training is one of our core competencies. This is targeted at the employees of our customers throughout the world, as well as our own 14,000 employees. Training means staying flexible. This is why training at TÜV SÜD is written with a capital T. TÜV SÜD Academy has developed a range of appealing programs to this end. Those who complete one of the many seminars and courses acquire professional qualifications with certificates that are respected on the job market. We also collaborate with colleges and universities. Together with Deggendorf University of Applied Sciences, for example, we have developed a Masters program in Risk and Compliance Management. And at the Sino-German College of Tongji University in Shanghai, we have financed a chair for the Safety of Technical Systems. Intelligent instruments make training more appealing. This is why TÜV SÜD Academy is constantly expanding the number of e-learning courses offered. By combining traditional training with new technologies and digital media, e-learning offers great potential for more flexibility. In real terms, this means learning any place and any time, at your own speed and according to your own schedule. There is also constant access to supplementary educational material such as professional articles, checklists or videos. It also pays for the industry. Because the aging society means that companies have to go to considerably more effort to attract and keep employees. 85 percent of employers now believe that training is essential for keeping employees. Sustainable action also means providing the best support for people's training. One thing is particularly clear in these times of financial and economic crisis: knowledge is and remains the most important form of capital. 21

11 The Challenge of Sustainability Sustainability pays. Right from the start. We have been gathering know-how for more than 140 years. Sustainability is the future, of that there can be no doubt. With our services we play an active role in shaping that future. TÜV SÜD has been accumulating know-how for more than 140 years. In 1866, the time of the industrial revolution, our company was founded following the disastrous explosion of a steam boiler. The purpose of the new company: Protecting people, the environment and property from the negative effects of technology. This was the mission that united 21 steam boiler operators. They wanted to combine successful business with the protection of people and the environment. This is still the same today. Today, TÜV SÜD s employees create certainty and add value and sustainability throughout the world. We have grown, along with our work, our responsibility, our solutions, our innovations, and above all our partners. This is how we continue to pursue the principles of our founding fathers with regard to sustainable action and business. Because our historical duty is more relevant now than ever, and is certain to stay relevant into the future. 22

12 Supervisory Board Report Facing the future with confidence The global economy has been in a state of severe crisis since the second half of No one dares to make a serious prediction of a recovery. TÜV SÜD managed to perform well in 2008 s increasingly challenging economic environment. Revenue rose once more, and new jobs were created. This once again showed that our corporate strategy is right. The markets acknowledge our position as an add value partner for our customers. The planned merger with TÜV Rheinland did not take place due to requirements stipulated by the German Federal Anti-Trust Office. We regret this. But our group is strong enough to successfully go it alone. The Supervisory Board of TÜV SÜD AG fulfilled its tasks in accordance with the law and the articles of incorporation and bylaws in the reporting year. Discussions at the three ordinary meetings and one extraordinary meeting focused on the planned merger with TÜV Rheinland, acquisitions to bolster and expand the portfolio of services, building up the Life Science division, the successful conclusion of the start-up phase of the TÜVTURK project and the strategic orientation and economic situation of the Group. Despite challenging economic conditions, the Supervisory Board is confident about TÜV SÜD s future. By optimizing technology, systems and know-how in order to give a measureable competitive advantage, we can be of great benefit to our customers with our international representation and interdisciplinary range of services, particularly in economically difficult times. On behalf of the Supervisory Board, I would like to thank the Board of Management, executives, employees and workforce representatives for their successful work and exemplary commitment. Munich, May 8, 2009 The Supervisory Board Univ.-Prof. Dr.-Ing. habil. Prof. e.h. Dr. h.c. Hans-Jörg Bullinger Chairman The Board of Management gave the Supervisory Board regular reports on the current situation of the company at its meetings. Reporting covered the general situation of the company and current state of business, corporate planning, strategic direction and risk management, including any risks. Quarterly reports completed the flow of information. Personal meetings were also held on an ongoing basis between the Chairman of the Supervisory Board and the Chairman of the Board of Management. This ensured that the Supervisory Board was always kept informed about the company s situation and plans. The annual financial statements and management report of TÜV SÜD AG, as well as the consolidated financial statements and group management report, were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, who issued an unqualified audit opinion. These documents and the audit reports were made available to the members of the Supervisory Board and discussed at length at the Supervisory Board s closing meeting on May 8, After holding its own review of the annual financial statements, consolidated financial statements, management report and group management report, the Supervisory Board agreed with the findings of the audit and approved both the annual financial statements and the consolidated financial statements. The annual financial statements are therefore ratified. The Supervisory Board agreed to the Board of Management s proposal for the appropriation of retained earnings

13 Group Management Report

14 Group Management Report Business operations Our business As an impartial, technology-based services group, TÜV SÜD provides integrated services of a largely technical nature throughout the world alongside tailor-made, customer-friendly solutions in the fields of B2B and B2C at the interface between people, technology and the environment. Indeed, it is part of the historical mission of TÜV SÜD to enable people, the environment and manufactured goods to coexist harmoniously with technology in a sustainable manner. We increase safety and add economic value for our customers. As process partners with comprehensive industry knowledge our teams of specialists provide early consultation and continuous guidance, thus achieving the optimization of technology, systems and expertise. In this manner we strengthen the competitive strength of our customers throughout the world, from the private sector, industry, trade and government. We provide support in particular in the fields of manufacturing, registration, operation and training. Our customers benefit from our global presence and our ability to support our international customers activities throughout the world with our region-specific experience, competence, expertise and presence. As an impartial and internationally active service provider, TÜV SÜD s activities are centered on its core competencies of consulting, testing, certification and training. The market for the testing and certification of products, plant and systems as well as consulting and training services is global. TÜV SÜD s employees are committed and responsible process partners for our customers entire value added chains, and enhance their competitiveness at a national and international level. We see our specific core competencies as optimizing technology, systems and know-how, improving processes and increasing the availability and reliability of technical systems. We also take care of people at their place of work. Group structure In order to offer customers throughout the world the greatest possible added value with our comprehensive range of services, we are divided into three strategic business segments: INDUSTRY, MOBILITY and PEOPLE. All three offer interdisciplinary expert tools, crossindustry services and international support. INDUSTRY: The INDUSTRY strategic business segment s service packages support the safe and economic operation of production plant, buildings and infrastructural facilities. At the same time, TÜV SÜD supports its customers with industry-specific services in order to quickly develop innovative ideas into market-ready and competitive products for industry, medicine, household, leisure and nature conservation. M O B I L I T Y : TÜV SÜD has concentrated all of its activities relating to the registration, development and safe operation of motor vehicles in the MOBILITY strategic business segment. The portfolio covers all aspects from vehicle roadworthiness tests for private customers to framework concepts for the automotive industry. PEOPLE: The PEOPLE strategic business segment combines all of TÜV SÜD s activities that concern work, health, leisure and training. The portfolio of services ranges from adult training at TÜV SÜD s own academies and the optimization of processes in industry, trade and the service sector to occupational medicine and psychological counseling. Our strategic business segments combine our know-how in a total of ten divisions that participate directly in the market. TÜV SÜD INDUSTRY MOBILITY PEOPLE TÜV SÜD Industry Services TÜV SÜD Auto Services TÜV SÜD Management Services TÜV SÜD Product Services TÜV SÜD Automotive TÜV SÜD Life Services TÜV SÜD Chemical Services TÜV SÜD Rail TÜV SÜD Academy TÜV SÜD Life Science 28 29

15 Group Management Report INDUSTRY The INDUSTRY strategic business segment is made up of four divisions: TÜV SÜD Industry Services, TÜV SÜD Product Services, TÜV SÜD Chemical Services and TÜV SÜD Rail. TÜV SÜD Industry Services: TÜV SÜD Industry Services is a partner for the safe and reliable operation and improvement of industrial plant, buildings and infrastructural facilities. The portfolio of services ranges from the planning, construction and operation to the dismantling and disposal of machinery and facilities. This includes office buildings, elevators, refineries, power plants, urban light rail and underground systems, but also climate protection initiatives requiring certification on the basis of the Kyoto Protocol. TÜV SÜD Product Services: Readiness for and access to the market are the focus of the portfolio of product-related services offered by TÜV SÜD Product Services. The product specialists of TÜV SÜD see products through the entire value added chain, from development via production all the way to marketing. From simple toys to complex pharmaceuticals, from domestic appliances to tools or machines. Successful qualification is rewarded with a certificate and a certification mark the blue octagon. TÜV SÜD Chemical Services: As a service provider supplying the chemical industry, TÜV SÜD Chemical Services specializes in services relating to the safety, reliability and availability of chemical plants. TÜV SÜD Chemical Services focuses on markets in Europe, China and the US. TÜV SÜD Rail: The fourth division of the INDUSTRY strategic business segment, TÜV SÜD Rail tests railway vehicles, signaling technology and rail infrastructure with regard to functionality and safety. Its services range from authorization (homologation) to authorization management for entire sections of track. MOBILITY The services offered by TÜV SÜD s MOBILITY strategic business segment are provided by two divisions: TÜV SÜD Auto Services and TÜV SÜD Automotive. PEOPLE With the divisions TÜV SÜD Management Services, TÜV SÜD Life Services, TÜV SÜD Academy and TÜV SÜD Life Science, TÜV SÜD offers customers of the PEOPLE strategic business segment tailor-made service packages. TÜV SÜD Management Services: TÜV SÜD Management Services certifies quality, environment and safety management systems for all industries throughout the world. To date, more than 37,000 certifications have been carried out worldwide. TÜV SÜD Life Services: The TÜV SÜD Life Services division offers consulting and training for problems with driver s licenses, as well as carrying out driving suitability tests such as the medical-psychological assessment [ Medizinisch-Psychologische Untersuchung (MPU)]. TÜV SÜD Life Services offers companies comprehensive advice and support in all fields of occupational health and safety. TÜV SÜD Academy: TÜV SÜD Academy offers a training program including seminars on load securing, quality management, data protection and on-site energy consultation. It trains around 80,000 participants for industry, trade and public service each year. TÜV SÜD Academy also offers in-house training for companies, and is responsible for the entire organization of employee training at TÜV SÜD. TÜV SÜD Life Science: The TÜV SÜD Life Science division supports pharmaceutical firms, biotech companies and medical equipment manufacturers with their clinical research as a contract research organization. It offers services with regard to the reliability, safety and quality of products, for example in connection with clinical studies, data management, statistics, pharmaceutical safety and quality assurance. In fiscal 2008, we transferred the TÜV SÜD Rail division from the MOBILITY strategic business segment to the INDUSTRY strategic business segment also saw the creation of the TÜV SÜD Life Science division within the PEOPLE strategic business segment. TÜV SÜD Auto Services: The range of services offered by the TÜV SÜD Auto Services division includes roadworthiness tests and exhaust-gas analysis as well as valuation reports, damage assessments, used vehicle certification and classic car certification. TÜV SÜD s experts are also points of contact for the fields of driving licenses, vehicle conversions and full vehicle type approval test reports. For corporate customers, TÜV SÜD Auto Services offers workshop tests, fleet services and testing of quality standards at dealerships. TÜV SÜD Automotive: TÜV SÜD Automotive s main tasks involve optimizing products and processes for the international automotive industry. The division s experts help manufacturers and suppliers develop and test new models and vehicle components, and award type approval in accordance with international regulations as provided for by law. Other priorities include consulting on safety issues, crash tests and chassis testing

16 Group Management Report Geographic structure We offer our services at more than 600 locations throughout the world. For our organization to be able to provide this level of service, we have divided our global activities into three regions. EUROPE: This region covers Europe and the Middle East. The headquarters of our European business are at group headquarters in Munich, Germany. AMERICAS: This region incorporates North and South America. The headquarters of our American operations are in Boston, USA. ASIA PACIFIC: This region covers all countries in the Asia-Pacific area. Due to the size of the region, a sub-regional structure has been set up with Greater China, India, Japan, Korea and the ASEAN economic region. The headquarters of our Asia Pacific operations is in Singapore. Legal structure The TÜV SÜD Group s independence and impartiality are ensured by its unique legal structure. The parent company is a German stock corporation ( Aktiengesellschaft ) based in Munich, and takes care of the operational management of the subsidiaries as a management holding company. The shares in TÜV SÜD AG are wholly held by TÜV SÜD e.v., based in Mannheim. TÜV SÜD e.v. has transferred its shares in TÜV SÜD AG to an independent shareholder committee, TÜV SÜD Gesellschafterausschuss GbR. The purpose of this civil law association is to hold and manage the investment under German stock corporation law held by TÜV SÜD e.v., Mannheim, in TÜV SÜD AG, Munich. TÜV SÜD e. V. TÜV SÜD Gesellschafterausschuss GbR TÜV SÜD AG Subsidiaries in Germany Subsidiaries in the AMERICAS Subsidiaries in EUROPE Subsidiaries in ASIA PACIFIC INDUSTRY MOBILITY PEOPLE TÜV SÜD + subsidiaries AMERICAS EUROPE ASIA PACIFIC Headquarters Headquarters Headquarters TÜV SÜD America Inc. TÜV SÜD AG TÜV SÜD Asia Pacific Pte. Ltd. Boston, USA Munich, Germany Singapore 32 33

17 Group Management Report Strategy and goals The current market environment is characterized by technological advancement, shorter innovation cycles, the increasing prevalence of technology and globalization of our environment. Markets for goods, and the products and industrial plant on offer are becoming ever more complex, networked and sophisticated. The safety and manageability of technical products, industrial plant and processes, as well as faith in the quality of management processes, are becoming fundamental to success in the face of national and international competition. In international business in particular, quality, safety and compliance with international technical standards form the basis for trusting cooperation between companies. In light of this, knowing and meeting standards of safety, manageability and quality for technologies, technical products and processes is becoming increasingly challenging in terms of time and cost. On account of these framework conditions, companies are seeking to reduce the number of their service providers by selecting those that cover the entire value added process as process partners. For internationally active companies in particular it is crucial that the service provider be familiar with the peculiarities of individual countries, and that it can guarantee the success of the respective company s globalization efforts by having a global presence. This applies particularly to issues of quality and safety, as well as standards and norms. To this end, TÜV SÜD offers a broad range of services, not only in its individual business areas, but also across fields and throughout the world. We want to build on our position as market leader in our core markets, while reinforcing our role as a leading international provider of technical services. Our goal is to add value for our customers throughout the world with our global presence, and claim market leadership in every field in which we are active. Sustainable and value-added growth enables us to improve further on our strong competitive position while retaining our impartiality and objectivity for the benefit of our customers. We also aim to add value for our customers by intensifying cooperation between our divisions. In light of this ambitious target, TÜV SÜD is pursuing a strategy of globalization and growth. The core of TÜV SÜD s strategy is a long-term increase in the value of the company through targeted and profitable growth in expanding, profitable market segments in which the company operates throughout the world. Impartiality and objectivity, quality and safety provide the necessary foundation. TÜV SÜD concentrates its growth on attractive fields of technology and industries with prospects for long-term growth as well as regions with growing economies and stable framework conditions. Our strategy for long-term growth is based on seven main pillars: 1. Defending our market share in Germany: Our market in Germany is largely saturated, and has been characterized since 2008 in particular by liberalization and deregulation in our core fields of steam, printing and bulk material handling technology, which limits the potential for growth. By expanding our regional network, intensifying our sales activities and adding innovative products to our product portfolio, we still aim to defend or even slightly increase our market share in Germany. 2. Expanding our range of competencies and services in markets in which we are already active: We aim to further boost growth by transferring services and business models that have met with success in Germany to other markets in which we are already active. This is best exemplified by our activities in Turkey. For the next 18 years, we and our Turkish partners will be the exclusive providers of vehicle roadworthiness tests and exhaust-gas analysis based on the German example. In so doing, we are playing an important part in increasing road traffic safety in Turkey. We outsource the implementation of some vehicle inspections to a local business partner by means of a franchise model. In such cases, the franchise holders TÜV SÜD, Dogus and Akfen make the service centers and trained personnel available to the operators. We also operate directly as franchisee in two regions. 3. Tapping into new sales regions: Breaking into new sales regions is a key component of our growth and globalization strategy. In regional markets that are undergoing rapid development but where we are not yet directly active, we are in the process of systematically expanding our portfolio of services. This way we can support our globally active customers in particular. Outside of Germany, we are represented in almost all of the world s most important commercial centers with more than 100 sales offices. We have reinforced our international network with new laboratories in Asia, including laboratories for the analysis of textiles. 4. Developing new, profitable services: Our aim is to boost growth while helping our customers face the challenges of climate change, among other things, with a range of new services. This concerns both ethical and economic aspects. By developing new and profitable services, we are also safeguarding our own company's long-term future. The challenge of designing technology to be efficient and safe is a common theme throughout the history of TÜV SÜD. Yesterday s steam power is tomorrow's satellite navigation, geothermics and similar innovations. 5. Cooperation and acquisition: We enter into cooperations and make acquisitions in the interest of exploiting our full potential for growth. This supports our entire strategy of growth and globalization. This not only adds competencies to our divisions, it also plays a crucial role in enhancing the value of the company. As we will not always be able or inclined to build up the know-how necessary for new services, we will continue to scour the market for meaningful cooperations and acquisitions. 6. Improving profitability: The market for technical services is highly competitive. We have both large competitors and smaller, regional service providers who enjoy great success in small segments of our portfolio. In this context, it will also be necessary in the future to continually monitor our cost structures, adapting them to market conditions where necessary. This is the only way for us to enjoy long-term success on the market while securing jobs at our company

18 Group Management Report 7. Investing in employees: Our employees are the foundation of our growth strategy. This is why qualitative and quantitative investment in our employees forms such a key element of that strategy. We focus in particular on developing management personnel, training employees, adapting structures and optimizing our business processes in connection with the continued globalization of TÜV SÜD necessitated by growth, but also in connection with the increasing level of competition on our domestic market. We are also creating new jobs. Corporate management In order to achieve our goals, we have set up a corporate management system that is based on the criteria for publicly traded companies. Because at TÜV SÜD AG, we aim to manage our Group as efficiently as a publicly traded company in order to generate sufficient funds to implement our globalization and growth strategy, as well as remaining appealing to both customers and employees. TÜV SÜD AG s management system primarily consists of an integrated controlling system, risk management system and corporate governance system. Integrated controlling system The integrated controlling system is aimed at continuously enhancing the value of the Group, increasing operating profits in line with competition and at the same time meeting our obligations to our customers, employees and society. Based on a group-wide management reporting system and harmonized accounting in accordance with IFRS, we focus on financial targets and performance indicators. By constantly improving revenue and profit and optimizing the employment of capital, we aim to sustainably improve the return on capital employed (ROCE), cash flow and company value. Using these performance indicators, corporate planning and regular forecasts, target deviations are analyzed at Group and division level, and suitable countermeasures introduced to optimally manage the divisions and the Group. In accordance with our goal of increasing value and optimally exploiting economic and commercial potential, TÜV SÜD uses supplementary, contemporary management instruments, for example in working capital management and value-based investment and acquisition management. TÜV SÜD AG s integrated controlling system is constantly being revised and adapted to changes within the company and its environment. Risk management system For an international company like TÜV SÜD, comprehensive risk management is a fundamental component of the corporate management system and is an integral part of the regulatory framework for management and controlling. The purpose of our risk management is to spot, identify and evaluate risks at an early stage in order to be able to implement the appropriate controls, preventive measures, security procedures and countermeasures. Risk management, i.e. reporting on identified risks and implemented countermeasures, represents an integral component of standardized corporate planning and monitoring processes, and is linked to TÜV SÜD s information and communication system. TÜV SÜD continually and systematically monitors external and internal risks for all divisions and subsidiaries, and evaluates them using standardized criteria throughout the Group according to potential damages and likelihood of occurrence. Risk analysis is based on an identification of risks specific to TÜV SÜD. Identified risks are assigned to risk categories. TÜV SÜD s risk categories distinguish between systemic and industry risks, corporate strategy risks, operating and financial risks, and compliance risks. Risk reports are submitted to the Board of Management and Supervisory Board on a quarterly basis. Significant issues are communicated to company management in ad hoc reports. The risk management system is constantly subject to revision. Adjustments are regularly made for changes in the legal and economic framework. The risk management system is audited by the independent group auditors. Corporate governance system TÜV SÜD AG believes in responsible corporate governance. We are convinced that it forms the basis for the success of the company. The aim of the TÜV SÜD Group s corporate governance is to bring about corporate management and control that is responsible, transparent and aimed at adding value. In this way, TÜV SÜD subjects itself to similar high standards to those we subject our customers in connection with our business operations of testing and certification. In order to safeguard this claim, TÜV SÜD AG has set up a corporate governance system with the dual management system, risk management system and compliance management system with the TÜV SÜD Code of Ethics as its key components. Company-specific policies and rules specify the goal of responsible and transparent corporate governance for all TÜV SÜD employees. In drafting these policies and rules, TÜV SÜD will increasingly refer to the requirements for publicly traded companies and the German Corporate Governance Code as a guide. The existing policies and rules are regularly reviewed and adjusted where necessary to reflect new experiences and changed statutory provisions, as well as the ongoing development of national and international standards

19 Group Management Report Macroeconomic development and developments in relevant markets Macroeconomic development Economic growth is slowing: The economic environment deteriorated noticeably in the past fiscal year. The global economy underwent a marked, uniform downturn in Prices for raw materials and power fell and global inflationary pressure eased as a result. The continuing slowdown of the global economy is mainly a consequence of developments in the manufacturing industry, where output has fallen dramatically. While the situation in the services sector did not deteriorate further, it still remained weak. At 3.4%, global economic output grew at a much lower rate than in the prior year (5.2%) GROSS DOMESTIC PRODUCT* World USA China India Euro zone Germany * Estimate of change on prior year in % (real) 7.3 America: The US is currently experiencing a recession. While real GDP rose 2.0% in 2007, it only increased by 1.1% in 2008 according to the most recent estimates for the year as a whole. In the last months of the year, however, GDP declined. Demand for consumer goods fell on account of rising unemployment, falling consumer confidence and a loss in value of assets held by private households. The US economy continued to suffer as a result of the severe weakness of the housing market. Companies became more reluctant to invest due to the poor prospects for sales and income, and more stringent credit conditions offered by commercial banks. Despite the weakness of the dollar and low oil prices, exports were down on the prior year. The federal budget deficit grew due to a drop in tax receipts compounded by an increase in expenditure on account of the fiscal policy measures aimed at supporting the system of finance and the economy. 9.0 Asia: The economic surge continued in Asia, albeit at a slower pace. The exports in particular of most Asian countries were dragged down by low overseas demand, which resulted in a fall in industrial production. Domestic demand also fell throughout the region. In an international comparison, the emerging economies of Asia still demonstrated the highest levels of growth. China s GDP grew by 9.0%. However, even there, the end of 2008 saw a sharp decline in the economy, due in part to the downturn in real estate markets and falling property prices. Economic growth also slowed in India, with GDP increasing by just 7.3% (prior year: 9.3%). Europe: The economy in Europe cooled off sharply in 2008 by the tensions within the financial sector spreading to the real economy. In the euro zone, economic growth lost impetus in the course of the year, with GDP growing 1.0%, less than in the prior year. However, the fourth quarter of 2008 saw a dramatic fall in GDP. The EU member states outside the euro zone also saw economic growth fall on the prior year. Germany: The German economy only grew at a moderate pace in GDP was up 1.3% in 2008 on the prior year. This means that it developed considerably worse than in 2006 and 2007, when real GDP rose by 3.0% and 2.5% respectively. Economic growth stemmed mainly from gross investment, and to a lesser extent from state spending. Foreign trade, an important driver of economic growth in previous years, only made a limited contribution to growth. This is mainly due to a fall in overseas demand while the German economy remains reliant on imports. The increase in gross investment is due in particular to investment in construction rather than capital expenditure by companies. Spending on consumption in 2008 was only slightly higher than in the prior year, with private consumer spending remaining unchanged and only state consumption seeing any growth. Currency trends: The euro made massive gains in the first quarter of 2008, briefly topping the 1.60 US dollar/euro mark in April. The dollar recovered during the rest of the year, with the euro trading at 1.40 US dollars by the end of the year. The recession in the US led the Federal Reserve to reduce its base interest rate to between 0 and 0.25% in The European Central Bank reduced its base rate to 2.5%. The euro also rose against the pound sterling, almost achieving parity at the end of The Turkish lira was highly volatile against the euro and the US dollar in It lost considerably in value against both currencies at the end of the year

20 Group Management Report Developments in relevant markets The market for the testing and certification of products, plant and systems as well as consulting and training services is global. Demand for such services is concentrated in highly industrialized and export-dependent countries, particularly in Europe and Asia but also the Americas. New sales markets for these services are also appearing in many emerging and developing economies. These markets are highly varied, and independent of the respective business environments and regional developments. Five fundamental and international developments influence our activities on the market for testing and certifying products, plant and systems and for consulting and training services: 1. Globalization: The elimination of trade and customs barriers has enabled companies to access new markets and transfer activities to places where there are competitive advantages. At the same time, international trade is booming. This has led companies in emerging and developing economies in particular to want and need corresponding certification that they meet international standards in order to be able to document the quality of their work. This applies equally to the quality of consumer products and the safety and quality of production plant and management systems. 2. Liberalization: The markets for technical services, like many other markets, are faced with trends towards liberalization and deregulation. This presents market participants with new opportunities, but also removes barriers in previously protected markets. 3. Outsourcing: Companies throughout the world are realizing the opportunities presented by outsourcing services that are not part of their core competencies. Outsourcing allows more efficient cost structures, as well as more of a focus on core competencies. 4. Technological development: The present day is characterized by increasing technological development, meaning that new technologies are introduced at ever-shorter intervals. However, new technologies are only accepted and applied if they are considered safe and manageable. 5. Demographic change: The global change in age distributions entails both opportunities and risks. One particular risk is the increasing difficulty of recruiting suitable employees. Opportunities arise where the changed age distribution raises demand for our services. Influence of business environment and market characteristics on our business The aforementioned macroeconomic developments in 2008 and the characteristics of the markets had a range of different effects on our business. Overall, the slowdown in the global economy only had a muted effect on our business in This is thanks to our cross-industry business model with a balanced product portfolio (diversification) on the one hand, as well as the relatively low susceptibility of our business to the vagaries of the economy. From the perspective of the strategic business segments, TÜV SÜD did not suffer any significant negative consequences from the deteriorating macroeconomic conditions in From a regional perspective, severe fluctuations in exchange rates between the euro, the US dollar and the Turkish lira had a particular impact on business outside the euro zone. The global economic downturn was particularly apparent from the slowdown in growth in the ASIA PACIFIC region. Business review and economic situation Fiscal 2008 was characterized by plans for mergers, consolidation drives and business combinations. The planned merger of TÜV SÜD and TÜV Rheinland was scuppered by resistance from the German Federal Anti-Trust Office (Bundeskartellamt). TÜV SÜD and TÜV Rheinland were unable to meet the various criteria imposed by the Federal Anti-Trust Office for the approval of the merger for business reasons and on account of company policy. Both companies will now, among other things, cooperate in order to continue building on their international presence on globalized markets. In Europe, TÜV SÜD mainly experienced the negative consequences of the global crisis in the financial markets in its TÜV SÜD Automotive division. A lack of orders from the automotive industry, particularly from the fourth quarter onwards, led the division to adjust its forecast for income. In order to be able to better deal with the challenges posed by this deleterious economic environment in the future, goodwill and certain test benches with low capacity utilization were written off in full. The structural streamlining that was initiated in the Americas in the prior year was continued. EST Testing Solutions Inc., Holland, was merged with TÜV SÜD America Inc., Peabody. TÜV SÜD America Acquisition Inc., Wilmington, transferred its share in PetroChem Inspection Services Inc., Pasadena, to TÜV SÜD America Inc., Peabody, in order to then be liquidated along with its direct parent, TÜV SÜD America Holding Inc., Wilmington

21 Group Management Report In the Asia Pacific region, the participations were strategically realigned further according to region and division. TÜV SÜD South Asia Pte. Ltd., Mumbai, was transferred by TÜV SÜD China Holding Ltd., Hong Kong, to TÜV SÜD Asia Pacific Pte. Ltd., Singapore. Further transfers of smaller companies between TÜV SÜD PSB Pte. Ltd., Singapore, PSB Academy Pte. Ltd., Singapore, and TÜV SÜD China Holding Ltd., Hong Kong, completed the streamlining of the investment structure, particularly in the Academy business. TÜV SÜD added to its competencies in its core European market through the targeted acquisition of companies. Acquiring the Msource group in June 2008 resulted in the creation of a new division at TÜV SÜD: TÜV SÜD Life Science. The Msource group offers clinical research services for the pharmaceutical industry, biotech companies and medical equipment manufacturers on the European market, as well as the US market by way of cooperation. Senton GmbH EMV-Prüfzentrum, Straubing, was acquired in December This company is incorporated into the TÜV SÜD Product Services division. TÜV SÜD reinforced its TÜV SÜD Auto Services division in June 2008 by acquiring a 25.1% share in Hannover Leasing Automotive GmbH, Grünwald, and with the acquisition of GÜK Gesellschaft zur Überwachung von Kraftfahrzeugen GmbH, Bad Homburg, in July In August 2008, TÜV SÜD acquired the Brunel Railmotive center of competence from Brunel GmbH, Bremen. The center of competence was incorporated into TÜV SÜD Rail GmbH, Munich, making it a part of the TÜV SÜD Rail division. As anticipated, revenue developed favorably in the course of the fiscal year, although the favorable economic conditions forecast for 2008 were replaced by a global economic downturn. The crisis in the financial markets and its impact on the real economy have so far had a limited impact on the commercial success of the TÜV SÜD Group. Adjusted for negative exchange rate effects, the planned overseas revenue of 30% of total revenue was achieved for TÜV SÜD therefore came another step closer this fiscal year to its goal of increasing this figure to 40% in the medium term. Income before taxes fell short of the forecasts made by the 2007 management report, while consolidated net income grew at the anticipated rate. In addition to certain one-off effects that reduced income, the influence of the crisis in the financial markets on business activities and to a significant extent on the financial result was responsible for the deviation from the prior year's forecasts. The one-off effects in the fiscal year were the costs of the planned merger with TÜV Rheinland, the impairment of assets in the TÜV SÜD Automotive division and the negative exchange rate effects resulting from the weakness of the Turkish lira. The vehicle inspection business in Turkey has successfully started up. A nationwide network of service stations was set up by TÜV SÜD together with its two Turkish joint venture partners Dogus group, Istanbul, and Akfen group, Ankara. At the end of the fiscal year, 183 service stations were already operative in 77 cities and towns. Some vehicle inspections are carried out by local business partners using a kind of franchise model. However, TÜV SÜD is also directly involved in the vehicle inspection business as franchisee via two companies. TÜVTURK Istanbul Tasit Muayene Istasyonlari Isletim A.S., Istanbul, (TÜVTURK Istanbul) is a joint venture with Dogus and Akfen, while TÜV SÜD Bursa Tasit Muayene Istasyonlari Isletim A.S., Istanbul, (TÜV SÜD Bursa) is currently a wholly owned subsidiary of TÜV SÜD. The twelve service stations in Istanbul were opened on November 14, 2008, followed by that in Bursa on November 22, The entire project was financed by the contribution of equity by the three venturers, advance payments by the franchise partners and project financing. An international syndicate of banks had supplied a loan of USD 552 million to this end in the prior year. USD 200 million of this loan was paid back in the course of the year. The corporate guarantee issued and borne equally by TÜV SÜD AG and the two Turkish venturers as collateral for any future payment commitments on the part of the investors will remain in place until the remaining service stations have been opened and all service stations have received final accreditation. This is scheduled for May 2009 at the latest. The equity paid in by TÜV SÜD and the bank loan are secured against political risks by the Federal Republic of Germany s guarantee for overseas capital investments

22 Group Management Report Net assets, financial position and results of operations Results of operations Fiscal 2008 concluded favorably with revenue of A 1,365.2 million. This constitutes an increase of A 94.5 million on the prior year, or relative growth of 7.4%. The increased revenue mainly stems from increased volumes and prices in the existing service business. The positive effect from the expansion of the scope of consolidation and business combinations amounted to A 14.4 million of additional revenue. This means that 6.3 percentage points of the growth in revenue was attributable to organic growth, with 1.1 percentage points of growth attributable to changes in the scope of consolidation. 55.5% of the extra revenue was generated in Germany. 44.5% was generated in other countries (prior year: 67.4%), which translates into a A 42.0 million increase in revenue. The portion of total revenue generated outside of Germany increased marginally to 29.2% (prior year: 28.1%). Despite negative exchange rate effects totaling A 15.6 million, the increase in revenue from increased volumes and prices came to A 80.1 million, just short of the prior-year value of A 83.7 million. The target of raising revenue by 10% or more in the course of the fiscal year would not have been achievable even without the negative exchange rate effects. This was due to insufficient external growth from business combinations in Growth in revenue adjusted for exchange rate effects was at 8.7% in Purchased service cost developed at a higher rate than revenue. This increase was mainly caused by the employment of freelancers in order to flexibly cover peaks in demand at TÜV SÜD Industry Service Inc., Dover, and at the TÜV SÜD Academy division in Germany and Singapore. The ratio of purchased service cost to revenue was 12.9%, one percentage point above the value for the prior year. Personnel expenses rose 9.6%. Accordingly, the ratio of personnel expenses to total operating performance rose 1.2 percentage points from 57.1% in the prior year to 58.3%. The increase in expenses for wages and salaries including social security contributions was mainly caused by the expansion of the workforce in Germany and elsewhere at the companies already included in consolidated financial statements in the prior year, as well as expansion due to business combinations and the expansion of the scope of consolidation. Retirement benefit costs rose by 77.4%. In the prior year, personnel expenses were partially offset by a A 29.2 million positive effect from retirement benefit costs. Excluding this one-off effect of A 29.2 million arising from the recognition with an effect on income of the raising of the statutory retirement age and the reduction of the Christmas bonus for pensioners under Bavarian civil service law as past service cost, retirement benefit costs remained almost unchanged on the prior year. Amortization, depreciation and impairment fell by 1.6%. This slight change is due to a level of investment that is relatively unchanged on the prior year, with little effect on amortization and depreciation of assets. Amortization, depreciation and impairment include impairment losses of A 3.5 million recognized in the TÜV SÜD Automotive division. Other expenses rose 8.3%, substantially in line with the growth in revenue. The main cost drivers in the fiscal year were consulting costs in connection with the planned merger with TÜV Rheinland, as well as consultancy fees for various projects relating to process optimization and group-wide efficiency and growth issues. Other income rose in part due to increased income from the reversal of provisions. Due to its effect on the automotive industry as a whole, the crisis in the financial markets had a negative impact on the forecast income of the TÜV SÜD Automotive division. Accordingly, the impairment of goodwill included the relatively low goodwill of the TÜV SÜD Automotive division. The net loss from investments accounted for using the equity method amounted to A 3.3 million for the fiscal year (prior year: net income of A 12.0 million). This loss is mainly a consequence of the losses made by the joint venture companies in Turkey, amounting to A 7.8 million (prior year: net income of A 6.8 million). In addition to operating start-up losses, exchange rate losses resulting from the weakness of the Turkish lira against the US dollar also impacted this result. The decline of the currency had a proportionate negative effect on the results of the joint venture companies totaling A 3.8 million. The operating business of TÜVTURK Istanbul is also not yet developing as planned. The acquisition and preparation of land for the construction of the service stations resulted in a significant increase in money and time expended. The completion of the service stations was therefore not achieved until November The net interest income in particular had a significant influence on the other financial result. The net interest income fell sharply on the prior year, with a drop of 64.3%. This was mainly influenced by the crisis on the financial markets that had a negative impact on interest income, while interest expenses rose significantly due to the credit-financed operator s license for vehicle inspections as franchisee in the Turkish cities of Bursa and Yalova. Income before taxes came to A million, which represents an 8.0% reduction on the prior year. The fall in income before taxes was entirely due to one-off effects. These one-off effects include the impairment of assets at the TÜV SÜD Automotive division, the costs of the planned merger with TÜV Rheinland and exchange rate losses stemming from activities in Turkey. These reduced income before taxes by A 12.7 million. In contrast, the one-off effects of the prior year had contributed A 14.2 million to income. These mainly concerned one-off income from pensions and exchange rate gains from activities in Turkey, offset among other things by the impairment of goodwill in the US

23 Group Management Report The return on sales, measured using income before taxes, fell 1.3 percentage points to 7.8%, while the adjusted return on sales which is more suited to assessing results was at 8.7% (prior year: 8.0%). Adjusted EBITDA, which is EBITDA after income from participations, rose 10.6% to A million (prior year: A million). Income before taxes adjusted for the aforementioned one-off effects increased 17.4% to A million, compared to an adjusted prior-year value of A million. At A 68.6 million, consolidated net income was A 16.5 million above the prior-year value of A 52.1 million despite a drop in income before taxes. As in the prior year, consolidated net income was heavily influenced by taxes. The German business tax reform of 2008 resulted in a write-down of deferred tax assets in 2007 due to the reduction of the group tax rate. Income tax expenses fell significantly in fiscal 2008 as a result. Financial position General principles and objectives of finance management The main objectives of finance management are continuously maintaining solvency while reducing risks relating to financial assets in connection with the crisis on the financial markets. In addition to the broad diversification of risks, a much stronger focus is also being placed on limits for counterparty risks. The TÜV SÜD Group was therefore always in a position to meet its payment obligations thanks to the continuous optimization of liquidity management. Due to recent developments on the financial markets, which are increasingly spreading from the financial sector to other parts of the economy, maintaining liquidity will remain an important objective for the TÜV SÜD Group s finance management for the foreseeable future despite the considerable amount of liquid funds available, particularly in order to ensure sufficient resources for future business combinations. Contracts are currently being negotiated with various banks for the provision of credit lines. In the interest of safeguarding liquidity in the short term, investments are made in overnight deposits and money market funds, which can be drawn upon at short notice. The maximum counterparty limits allowed were significantly reduced in the course of the prior year in order to limit counterparty risk. Investment in fixed-rate securities continues to be carried out exclusively in securities with investment grade credit ratings in order to minimize risk. The revision and expansion of corresponding policies has optimized procedures relating to the achievement of further objectives. These include added value creation, profitability, exchange rate hedging and limiting market value volatility while minimizing net financing costs. Capital expenditure The volume of capital expenditure excluding business combinations came to A 68.5 million in the fiscal year. The main expenditures were on operator's licenses, software, land and buildings, and other equipment, furniture and fixtures. Investment activities were concentrated in the strategic business segments MOBILITY and INDUSTRY, with expenditure of A 39.3 million and A 11.5 million respectively. In the MOBILITY strategic business segment, acquisitions were made in the fields of operator's licenses, land and buildings and technical equipment, furniture and fixtures, while acquisitions in the INDUSTRY strategic business segment focused on technical and other equipment, furniture and fixtures. The considerable level of expenditure in the MOBILITY strategic business segment can be explained in part by TÜV SÜD s involvement in the vehicle inspection business in Turkey. TÜV SÜD has acquired an operator's license for seven service stations in Bursa and Yalova, as franchisee. A total of A 59.8 million was invested in EUROPE, A 6.7 million in ASIA PACIFIC, and just over A 2.0 million in the AMERICAS. Compared to the prior year, the volume of capital expenditure in the EUROPE region increased by A 28.0 million, above all due to the procurement of an operator s license. In the ASIA PACIFIC region, absolute capital expenditure remained almost unchanged, while investment levels doubled in the AMERICAS region. As of the balance sheet date, there were no material capital commitments. In the fiscal year, the TÜV SÜD Group invested A 37.2 million in companies and participations (prior year: A 21.8 million). Liquidity analysis TÜV SÜD s situation with regard to liquidity continued to improve. Cash flow from operating activities increased by A 55.2 million (44.7%) to A million. Cash flow from investing activities rose A 58.8 million to A million. This was mainly due to increased expenses for business combinations and a higher level of investment in intangible assets and property, plant and equipment in the fiscal year. Acquisitions of consolidated affiliated companies resulted in a cash outflow of A 26.1 million (prior year: A 3.9 million). Contribution to pension plans (A 40.5 million; prior year: A 38.9 million) primarily consists of the contribution of cash to TÜV SÜD PENSION TRUST e.v. in return for the reimbursement of pension payments. The investment income generated by the pension trust resulted in an increase in plan assets, and accordingly contributed among other things to a reduction in the existing funding deficit. The loans taken out to finance the operator s license in order to conduct vehicle inspections in the Turkish cities of Bursa and Yalova resulted in an increase in the cash flow from financing activities

24 Group Management Report The A 41.4 million increase in cash and cash equivalents, consisting of checks, cash in hand, bank balances and securities with an original term of less than three months, to A million reflects the further increase in liquidity over the fiscal year. The increase in liquidity is the result of the positive contributions made by the operating companies and the external financing of investment, and is offset by increased expenditure on intangible assets and property, plant and equipment, as well as business combinations. Including securities, TÜV SÜD had A million of short-term liquidity at its disposal as of the end of the fiscal year (prior year: A million). Net assets Assets, liabilities and shareholders equity Total assets rose 6.3% to A 1,162.6 million in the fiscal year. Assets increased by A 69.0 million, primarily due to the increase in intangible assets and property, plant and equipment (+ A 48.9 million), as well as an increase in cash and cash equivalents (+ A 41.4 million). There were further positive effects in the non-current assets from other financial assets, which increased A 17.1 million, and in current assets from trade receivables, which rose A 12.7 million. This was partly offset by a drop in deferred tax assets (- A 31.2 million) and income tax receivables (- A 20.1 million). The increase in intangible assets is mainly due to the acquisition of an operator s license for the vehicle inspection business as a franchisee in Turkey, as well as business combinations in Europe, while property, plant and equipment increased in particular on account of the renovation of the leased building on Kaiserstrasse in Munich. The acquisition of long-term securities and certain non-consolidated companies as well as the capital increases at various non-consolidated companies in Asia increased the level of other financial assets. A 28.6 million of the reduction of deferred tax assets from A 71.5 million to A 40.3 million is allocable to the change in deferred taxes on pension provisions. This reduction is mainly due to the change in tax-neutral elements of the market value of the Oktagon fund, which led to a A 17.8 million reduction in net deferred tax assets. Whereas tax-free share gains more than compensated for taxable income from securities in the prior year, tax-neutral share losses were incurred as of the balance sheet date of December 31, 2008 that are more than covered by taxable income from securities. At 6.2%, growth in trade receivables was slower than in revenue. However, the value of outstanding trade receivables was considerably higher than the average for the year on account of an increase in invoicing towards the end of the year. Equity rose to A million, which represents an increase of A 83.6 million. The equity ratio is 32.5%, well above the target ratio of 25%. The improvement is mainly due to the net income for the year. To a lesser extent, actuarial factors relating to pension obligations also contributed to the positive development. Provisions for pensions fell 14.1% to A million. This was mainly a consequence of raising the discount rate from 5.50% to 5.85%, alongside changes in inventories and pension adjustments, which led to a net actuarial gain of A 52.4 million. In order to extend the external financing of pension obligations in Germany, since 2006 operating assets have been transferred to TÜV SÜD PENSION TRUST e.v., established for this purpose, as part of a contractual trust agreement. The funds are administered by this association in a fiduciary capacity, and serve solely to finance pension obligations. Pursuant to IAS 19, the transferred funds are to be treated as plan assets, and are therefore offset against pension obligations. Due to the unsatisfactory development of capital markets, plan assets included actuarial losses (totaling A 16.9 million), meaning that lower returns were reported than anticipated as a long-term average. Overall, plan assets covered 64.5% of pension obligations as of the balance sheet date (prior year: 60.6%). The global crisis in the financial markets has only had a slight negative impact on plan assets so far. A return of 4.3% (+ A 4.9 million) was generated by the Oktagon fund in the fiscal year. The benchmark return would have been - 1.0%, meaning that an active investment policy was rewarded with an additional return of 5.3% or about A 30.7 million. The increase in non-current liabilities is a consequence of financing the operator's license for the vehicle inspection business in Turkey with credit, acquired by a fully consolidated Turkish subsidiary as franchisee. The increase in current liabilities is concentrated on the current provisions and liabilities to banks. The increase in current provisions was mainly caused by personnel provisions such as those for the German phased retirement scheme, one-off payments to employees and overtime, while the increase in liabilities to banks resulted from the current portion of the credit for financing the acquisition of the operator's license in Turkey. In the fiscal year, TÜV SÜD held loan and cash pool receivables with a value of A 39.7 million due from TÜV SÜD e.v., offset by cash pool liabilities to other related companies totaling A 11.8 million. 77.0% of intangible assets and property, plant and equipment is covered by equity (prior year: 66.6%). The change in the opinion of the fiscal authorities regarding the transfer of pension obligations means that debt assumption expenses can be claimed with immediate effect for tax purposes, while income is distributed over a period of five years. This raised income tax receivables to A 23.5 million in the prior year. They were paid out in 2008 following the submission of the amended tax returns after the tax field audit

25 Group Management Report Overview: Development of strategic business segments and strategic regions All three strategic business segments (INDUSTRY, MOBILITY and PEOPLE) were once again able to increase their revenue in the fiscal year. Revenue growth was also achieved in the regions EUROPE, AMERICAS and ASIA PACIFIC. The INDUSTRY strategic business segment accounted for most of the Group s revenue growth with a A 39.9 million increase in revenue (+ 6.5%). The TÜV SÜD Industry Services division was once again the division of the INDUSTRY strategic business segment with the highest growth in revenue, with 65.4%. The highest percentage growth in revenue (67.1%) was generated by the TÜV SÜD Rail division which had been transferred from the MOBILITY strategic business segment as of January 1, The acquisition of the Brunel Railmotive center of competence from Brunel GmbH had an additional positive effect on the development of revenue. The (on average) 6,184 employees of the INDUSTRY strategic business segment generated 47.8% or A million of group revenue. Summary review of net assets, financial position and results of operations Despite the growing crisis in the global economy, TÜV SÜD s business continued to develop favorably in Revenue rose once more. All three strategic business segments, INDUSTRY, MOBILITY and PEOPLE, as well as the regions EUROPE, ASIA PACIFIC and AMERICAS contributed to the positive result. In 2008, TÜV SÜD was able to achieve sustainable and stable growth in its revenue, safeguarding a good return on sales for the long term. The development of cash flows and levels of cash and cash equivalents show that TÜV SÜD is on a strong commercial footing. In the interest of growing its business, TÜV SÜD pursues a strategy of offering a balanced product portfolio of high-quality, sophisticated services across industries and borders. At the same time, TÜV SÜD is constantly updating its strategy in order to reflect current market expectations. The MOBILITY strategic business segment contributed increased revenue of A 29.5 million (+ 6.6%) to group revenue. The TÜV SÜD Auto Services division, which is mainly responsible for the positive development of revenue, contributed 88.2% of the MOBILITY strategic business segment's revenue. The contribution to revenue from the TÜV SÜD Automotive division remained largely constant at 11.8%. The (on average) 4,066 employees of the MOBILITY strategic business segment generated 35.0% (prior year: 35.3%) or A million of total revenue. The revenue of the PEOPLE strategic business segment grew A 28.7 million (+ 15.1%). The contribution to group revenue rose from 15.0% in the prior year to 16.1%. With growth of 23.1%, the TÜV SÜD Academy division saw the strongest growth in revenue within the PEOPLE strategic business segment, and was able to raise its share of the total revenue of the PEOPLE strategic business segment slightly to 26.8%. The acquisition of the Msource group to form the new TÜV SÜD Life Science division contributed a further 3.6% of the total revenue of the PEOPLE strategic business segment. The (on average) 1,765 employees of the PEOPLE strategic business segment generated A million of group revenue. The EUROPE region covers geographical Europe, the Middle East and Turkey. 83.2% of group revenue for the fiscal year was generated in Europe. Revenue grew by 6.8%. The (on average) 9,647 employees generated consolidated revenue of A 1,136.1 million. North and South America constitute the AMERICAS region. The region contributed 6.3% to total revenue. Revenue grew by 13.5% despite the difficult economic situation. Group revenue of A 86.5 million was generated by an average of 740 employees. The ASIA PACIFIC region stretches from India to Japan. The region accounts for 10.2% of total revenue. Revenue grew by 8.8%. The (on average) 2,736 employees generated consolidated revenue of A million

26 Group Management Report Non-financial performance indicators Innovations report Developing new products and services is of crucial importance for TÜV SÜD in order to be able to offer a broad range of services on the international market for technical services. Research and development activities are decentralized, being organized by division. Over the fiscal year, TÜV SÜD spent A 3.8 million on the development of new services (prior year: A 3.5 million). INDUSTRY The TÜV SÜD Industry Services division was able to acquire new customers and contracts in Germany. In order to offset the effects of liberalization in the core divisions, new fields of activity were developed. There is high demand for certification and validation according to UNFCC regulations in the field of carbon management. The innovation conferences in 2007 and 2008 led, inter alia, to the development and successful market launch of the new products REACH, ImmoVisit and sound emission analysis. REACH is a project relating to the implementation of the EU Chemicals Regulation. ImmoVisit is a software solution aimed at the efficient implementation of real estate inspections. Sound emission analysis is an innovative method for non-destructive testing of load-bearing components in process plant. A center of competence has been set up in Leipzig for the further development of these services. The TÜV SÜD Industry Services division has added non-intrusive throughput measurement and a new tank calibration process to its range of products for the crude oil and natural gas industry. Services relating to the certification of CO 2 emissions were developed especially for the AMERICAS region. Photovoltaic services and energy-saving measures supplemented the TÜV SÜD Industry Services division's product portfolio in the ASIA PACIFIC region. By acquiring Senton GmbH EMV-Prüfzentrum, Straubing, the TÜV SÜD Product Services division has built on its competencies in the field of electromagnetic compatibility (EMC) of products and components. New, innovative and holistic testing methods according to SA-8000, Business Social Compliance Initiative (BSCI) standards and ethical and social standards have been added to the portfolio of services. Close cooperation between Europe and Asia on the expansion of services in the field of the certification of batteries has enabled us to win a contract to test battery systems and related components for the new smart phone brought out by a leading global manufacturer of computers, entertainment electronics and software. Following successful Good Laboratory Practice (GLP) certification for the research laboratory in Singapore, services relating to biocompatibility testing, pharmaceutical testing and toxicity testing can now be offered at an international level. Since last year, the TÜV SÜD Chemical Services division's product Support for Global Sourcing has been aimed at customers procuring plant components for international use subject to various regulations and standards throughout the world. By acquiring the Railmotive division from Brunel GmbH, the TÜV SÜD Rail division has added a service station for railway vehicles that is recognized by DAP German Accreditation System for Testing and the German Federal Railway Authority. This acquisition added the field of technical documentation for railway vehicles to the range of services. Expansion continued in the fields of safety management for rail infrastructure operators, registration services for high-speed rail transport and signaling technology and the certification of freight carriages. MOBILITY The TÜV SÜD Auto Services division launched a pilot project to take on vehicle management for large dealerships and leasing companies by establishing the TÜV SÜD Retail Center in the Rhine-Main metropolitan region. Standardized vehicle assessments are carried out for manufacturers and major fleet operators by Industrial Car Remarketing in the interest of reusing vehicles. The TÜV SÜD Automotive division pooled its services relating to emissions measurement by setting up a leading European emissions laboratory in Heimsheim. The testing of knee airbags supplements the range of services for improving occupant safety. Cooperation on new vehicle development had to be terminated prematurely due to the difficult economic situation of the cooperation partner. PEOPLE In collaboration with Management Zentrum St. Gallen, the TÜV SÜD Management Services division developed the TÜV SÜD Malik Management Excellence certification. The issue of water safety was also added to the portfolio of services. Cooperation with the TÜV SÜD Life Services division on drug screening was successfully expanded. In Asia, the range of services was supplemented by workplace safety. The field of occupational psychology was added to the fields of occupational medicine and occupational safety at the TÜV SÜD Life Services division. New diagnostic services offered by Medizinisch-Psychologisches Institut (MPI) in Germany for waterways, rail and air transport ways supplement the range of services offered by the company. The TÜV SÜD Academy division is making the transition from a product supplier to a provider of solutions aimed at taking on all training tasks on behalf of customers. The summer academy has enabled seminars on quality and project management to be established on the market. Content on corporate management and soft skills was also incorporated into the training program. An international training and certification program for IT service managers based on ISO/IEC was developed, receiving the Innovation Award of the IT Service Management Forum itsmf. Together with Deggendorf University of Applied Sciences, the TÜV SÜD Academy division presented the Risk and Compliance Management Masters program. In April 2008, PSB Academy opened a new Business Process Management School in Wuxi, China, in collaboration with Wuxi College of Science and Technology. In Singapore, a Bachelor of Logistics program was added to the other degree programs. By making lectures, training materials and essays available via a virtual campus, PSB Academy is entering new territory in the provision of training

27 Group Management Report The acquisition of the Msource group led to the creation of the new TÜV SÜD Life Science division. TÜV SÜD Life Science offers pharmaceutical companies in particular a broad range of clinical services. The services on offer range from the provision of expert personnel for the implementation of clinical studies and the overall implementation of clinical studies to consulting, training and quality assurance. At 34.4%, the average share of the workforce abroad was significantly larger than the share of overseas revenue (29.2%). Specific services are offered for individual industries, such as the aviation industry. The individual requirements of customers and statutory provisions are implemented in a much more targeted manner thanks to the industry focus. Employees As an international service provider, our employees are our most important resource, and their know-how our biggest capital. The strong growth of revenue in 2008 presented us with new challenges in the field of human resources. At a national and international level, we expanded our workforce to reflect the growth of revenue, meaning we hired a significant number of new employees. We also give our employees the opportunity to keep pace with the ongoing globalization of the Group and take on new responsibilities thanks to training and qualification measures. Development of group headcount: By the end of 2008, the number of employees throughout the world adjusted for part-time employees rose by 908 to 13,473. On account of acquisitions and due to the changed scope of consolidation the number of employees increased by 248 full-time equivalents, 18 within Germany and 230 abroad. Existing companies, both in Germany and abroad, saw increases in their workforce. They hired a total of 660 employees, creating new jobs. At 13,122 full-time equivalents, the average headcount adjusted for part-time employees, which is more suitable for assessing the development of productivity, rose 6.2% on the prior-year figure of 12,360. This represents an average increase of 762 full-time equivalents. Non-German companies added an average of 562 full-time equivalent positions; German companies ,237 9, Development of workforce (average full-time equivalents for the year) 10,863 Development of workforce by strategic business segment: The INDUSTRY strategic business segment saw the strongest growth in its workforce, with 460 additional employees. The segment has 6,297 employees, more than any other within the Group. With 4,173 employees, the MOBILITY strategic business segment employed 297 more employees in 2008 than in the year before. The workforce of the PEOPLE strategic business segment grew by 248 employees to a total of 1,886. The relatively strong growth in the workforce of the PEOPLE strategic business segment reflects the strong growth of this segment's revenue, as well as its strategic importance for the Group as a whole. TÜV SÜD AG as management holding company and other companies not incorporated into the strategic business segments saw growth of 95 employees to a total of 1,117. Development of workforce by region: With 538 additional employees, the EUROPE region saw the largest workforce expansion. The region has 9,939 employees, more than any other within the Group. We have 8,504 employees in Germany alone. The companies of the ASIA PACIFIC region employed 2,826 people as of year-end, 314 more than the prior year, due in particular to organic growth. Our workforce in the AMERICAS region grew by 56 to 708. The relatively high level of growth in the workforce in the ASIA PACIFIC region reflects the strong growth of revenue in Asia and the extraordinary strategic importance of this region to TÜV SÜD s growth and globalization strategy. 12,360 13,

28 Group Management Report College marketing in support of traditional recruitment: With our need for engineers and other technical experts, we are facing growing competition for the best minds in the industry. We are already active among academic institutions in order to find and attract the right employees for our company. By presenting our company at job fairs and offering internships and student trainee programs, we are able to motivate young people to work at TÜV SÜD. This is met with increasing success at many locations, for example Singapore, Shanghai and Mumbai, where we hire local graduates each year. Entry-level programs and mentor programs for recent graduates help career starters gain practical experience at these, and other, locations. In addition to college marketing, we also make use of traditional channels such as the job bulletin board on our web site, job advertisements and job exchanges on the internet in our search for new employees. This has shown us that TÜV SÜD s attractive range of benefits for its employees, ranging from profit participation to company pensions, gives us a competitive edge. The chances of an international career and our manifold opportunities for training convince many of the applicants we speak to. Management development: The Group strategy, which is aimed at growth and globalization, requires a significantly larger number of management personnel. In addition to the targeted external acquisition of managers, this need is met by consistently training up internal personnel. For example, managers are prepared for overseas assignments with training. High potentials are prepared for future management functions with corresponding courses. This is exemplified by the TÜV SÜD CHAMP program (Corporate High Achievers' Management Program) in the ASIA PACIFIC region, which selects and supports management high potentials. This 18-month support program prepares young high potentials for future management functions. The development of first- and second-tier management, high potentials and executives in preparation for an overseas assignment is the joint responsibility of the respective managers and the corporate HR development department. Training of high potentials: TÜV SÜD was also involved in the training of young people in In addition to traditional training vocations, TÜV SÜD offers high school graduates the opportunity to participate in dual track courses in collaboration with universities of cooperative education for services marketing and vehicle engineering. This dual training provides an ideal combination of theory and practice. In addition, TÜV SÜD promotes high potentials by entering into collaborations with national and international institutions of higher education. For example, the TÜV SÜD Academy division created the first-ever complete Masters program in Risk and Compliance Management in collaboration with Deggendorf University of Applied Sciences. In addition, the company financed a chair for Reliability and Safety of Technical Systems at the Sino-German College of Tongji University in Shanghai. This commitment promotes Chinese high potentials in the field of engineering. TÜV SÜD operates its own university in Singapore aimed at preparing young people for working life. Work / life balance: Employees are also given real support in better combining their career and their family. In a pilot project in Munich, daycare places were acquired and awarded for children of employees from The cooperation with pme Familienservice has led to the planning of further projects such as consulting and arrangement of supervision options for small children, a holiday program and seminars on issues such as parental leave and re-entry into the workforce. Our heartfelt gratitude goes to the employees of TÜV SÜD for their extraordinary level of commitment and the contribution of their new ideas and knowledge. They have made a significant contribution to the success of the company. We would also like to thank the employee representatives for the trustful cooperation. Training: As employees of a knowledge-based service organization and international corporation that works with innovation at the forefront of science and technology, TÜV SÜD s employees must constantly adapt to new challenges posed by the market and new technologies, while keeping pace with the globalization of the Group. TÜV SÜD lays the foundation for this with its comprehensive program of training. This enables employees to add to their knowledge in TÜV SÜD s own seminars, workshops and courses. In the course of these events, employees can learn new techniques, methods, skills, languages and IT programs, while gaining or improving the intercultural skills which are key to implementing the strategy of globalization. TÜV SÜD provides its employees with targeted training. Individual training requirements are determined in the course of personal interviews, and training measures are tailored to specific needs. Introductory forums and specialized training seminars for new employees form an additional basis for these efforts. The TÜV SÜD Academy division in particular supports the training of employees as an internal service provider and partner. This division offers professional and interdisciplinary training at a national and international level in a range of subjects such as quality, the environment, safety, health, technology and testing, and in so doing makes an important contribution to improving service quality

29 Group Management Report Corporate governance report TÜV SÜD AG s corporate governance system remained a guideline and reliable framework for management and control of the company in Dual management and control structure: As a German stock corporation (Aktiengesellschaft), TÜV SÜD AG is required by law to maintain a dual management and control system, characterized by the separation of personnel between the management body and supervisory body. The Board of Management is responsible for managing the company, develops the company s strategic orientation, coordinates the same with the Supervisory Board and ensures its implementation. The Supervisory Board monitors and advises the Board of Management s management activities. It appoints the members of the Board of Management. Its agreement is required for fundamental decisions. Dr. Manfred Bayerlein was appointed to the Board of Management on January 1, As Chief Operations Officer, Dr. Bayerlein is responsible for Operations Management. Responsibility was reallocated accordingly. The Supervisory Board consists of 12 members, six of whom represent the employees. There were no changes to the composition of the Supervisory Board in the year under review. Appropriate controlling and risk management system: The corporate governance system also covers the company s responsible treatment of risk. This is why the Board of Management continued to ensure appropriate risk management and risk controlling within the company in the year under review. Systematic risk management as part of our value-based corporate management ensures that risks are recognized and evaluated at an early stage, and risk positions optimized. The Board of Management reported to the Supervisory Board on existing risks and their development on a regular basis. There were further developments to the risk management system in the reporting year in order to adapt it to changed conditions. Corporate compliance: As a core element of the corporate governance system, corporate compliance comprises measures aimed at ensuring compliance with law, statutes and internal company policies, as well as behavior of the company and its employees in the form of business activities that are compliant with the law. The Board of Management has launched a corporate compliance program. The program was reviewed and adjusted in the reporting year. Adjustment of the corporate governance system: In the reporting year, the Board of Management approved and implemented new regulations for the corporate governance system. In the reporting year, a corporate governance project drew up and implemented the TÜV SÜD Code of Ethics as part of the TÜV SÜD corporate compliance program. The TÜV SÜD Code of Ethics defines the Group s ethical principles. The TÜV SÜD Code of Ethics also includes the TÜV SÜD Code of Conduct. In accordance with the guiding principle ethical behavior adds value for us and our customers, this code of conduct presents our principles for proper and responsible behavior. This enables us to meet the target we aspire to of combining top economic performance with ethical behavior. In order to implement the code of conduct and clarify all associated issues, the Board of Management appointed a Chief Compliance Officer in 2008, whose job is to monitor the TÜV SÜD corporate compliance program on his/her own initiative. If employees or business partners are faced with breaches of the TÜV SÜD Code of Conduct, they may also report them to an external system of ombudsmen who are sworn to secrecy and anonymity. Suitable measures are taken in the event of breaches, where necessary including labor law or disciplinary measures. Risk report The main risks that could have a significant impact on the net assets, financial position and results of operations are discussed in the following according to the categorization used by risk management. TÜV SÜD's policies and risk reporting system distinguish between the categories systemic and industry, corporate strategy and operating, financial risks, and risks relating to the TÜV SÜD brand and compliance. Systemic and industry risks: In its core European market in particular, TÜV SÜD is exposed to systemic and industry risks that could negatively affect the revenue and performance of the INDUSTRY and MOBILITY strategic business segments. This mainly relates to sales risks on account of the liberalization and deregulation of the European market completed on January 1, 2008, resulting in increased competition in the relevant industries. TÜV SÜD has successfully mitigated these risks for years by optimizing its business processes, developing and implementing sales and marketing concepts and diversifying its portfolio of products and services. The INDUSTRY strategic business segment is exposed to additional risks resulting from the revision of the German Atomic Energy Act limiting the operating lives of nuclear power stations, as well as the potential centralization of atomic energy regulation. The global financial and economic crisis is expected to have a slight or notable impact on the revenue of all strategic business segments, as well as the regions AMERICAS and ASIA PACIFIC. By making flexible use of capacities, the effect on the group result will be disproportionately low compared to revenue. At the INDUSTRY strategic business segment, this would become apparent in particular if planned construction projects were cancelled or postponed, while the earnings and revenue of the MOBILITY strategic business segment would be influenced by the downturn of the automotive industry. State economic rescue packages in Germany could have a mitigating effect. A range of obligations which, if not met, could in a worst-case scenario result in the withdrawal of the franchise, arise for the franchise holders TÜVTURK Kuzey Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TÜVTURK Kuzey) and TÜVTURK Güney Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TÜVTURK Güney) from the franchise agreement on vehicle inspections with the Turkish privatization authority. All 189 service stations had to be completed and opened by February 14, 2009, 18 months after the franchise agreement was signed. The franchisor may extend the deadline in exceptional cases

30 Group Management Report The individual service stations are then to be accredited by an independent accreditation authority, within one year after their opening. The successful accreditation of the service stations represents the official completion of Project Accreditation. The franchise holders are also required to assure the quality of vehicle inspections, and are responsible for the training of experts and the infrastructure. The common terms agreement concluded between the international banking syndicate and TÜVTURK Kuzey, TÜVTURK Güney and TÜVTURK Istanbul requires the three joint venture companies to conduct a cover ratio test. This test is to be carried out between June 30, 2009 at the earliest and December 31, 2009 at the latest, although the joint venture companies may apply for the deadline to be extended as far as December 31, Commercial completion will be assumed following the successful completion of the cover ratio test. TÜV SÜD s maximum liability upon completion of Project Accreditation amounts to USD 15 million. As soon as commercial completion has been achieved, the joint venture partners are completely released from the liability for financing. Operating risks: TÜV SÜD aims to be a committed and responsible process partner that increases safety and adds economic value for its customers with its services throughout the world. Unprofessional or defective performance would damage the image of the TÜV SÜD brand for the long term. Efficient and consistent order controlling and defined quality management ensure that recognizable risks are identified at an early stage, and countermeasures are promptly implemented. TÜV SÜD s success is heavily dependent on the commitment, motivation and skills of its employees. TÜV SÜD sees personnel-related opportunities in the training, international orientation and innovative ability of its employees. There is a risk of not being able to attract or retain such high potentials. This is why TÜV SÜD positions itself as an attractive employer, and supports the long-term retention of employees within the Group. Financial risks: The financing of TÜV SÜD and its operating companies is taken care of centrally by TÜV SÜD AG. TÜV SÜD AG s role is to provide sufficient reserves of liquidity for short-term financing requirements. In order to be able to safeguard the liquidity and financial flexibility of the Group at all times, active finance management based on multipleyear financial planning and monthly liquidity planning are used to provide for sufficient cash. Cash pooling, used to allocate cash and cash equivalents among group companies according to need, has up until now been concentrated predominantly on the German group companies. Currency-related risks in connection with contracts or intra-group payments are secured using forward exchange transactions. Intra-group loans in foreign currencies are secured using forward exchange transactions and cross-currency swaps. An interest rate swap secures future cash flows from the loan financing the operator's license for the vehicle business in Turkey. The floating interest rate is swapped for a fixed interest rate. Interest rate and price risks relating to special non-current capital investment funds are partly secured with various derivative financial instruments. With regard to operating activities, financial derivatives are exclusively used to hedge underlying transactions. The development of interest and exchange rates influences the valuation of participations and assets with regard to recoverability. At the same time, it has an effect on the valuation of pension obligations, owing to corresponding consequences for earnings and, in particular, equity. Almost two thirds of TÜV SÜD s pension obligations are covered by assets that are detached from operating assets in order to reduce risks associated with pension liabilities, and to allow a policy of investment that reflects liabilities. The special pension assets are largely managed in trust by TÜV SÜD PENSION TRUST e.v., founded in 2006, and invested in accordance with conservative investment principles by external investment companies. The fair value is subject to fluctuations resulting from changes in interest rates and share prices. Should actual return on plan assets fall short of expectations, the resulting actuarial losses represent risks with regard to equity. At the same time, changes in the interest rate spread in particular can have negative consequences on equity from the valuation of pension entitlements. Currency risks relating to financing that cannot be reasonably hedged exist in connection with the franchise acquired together with two Turkish joint venture partners to exclusively conduct the vehicle inspection business in Turkey for 20 years. Some vehicle inspections are carried out by local business partners using a kind of franchise model. TÜV SÜD also participates as a franchisee together with both partners via the company TÜVTURK Istanbul. In order to finance itself, this company has taken out a loan amounting to USD 200 million with a term to maturity of up to twelve years. Exchange rate fluctuations necessitate adjustments to the loan with effect on income, which impacts TÜV SÜD s consolidated financial statements because the company is accounted for using the equity method. If the Turkish lira continues to slide against the US dollar, TÜVTURK Istanbul could suffer a further significant exchange rate loss. Exchange rate gains could result if the Turkish lira increases against the US dollar. In addition, TÜV SÜD Bursa holds a USD 31 million loan as of the cut-off date that is equally subject to currency-related risks. Brand risks: Approval for the use of the brand name TÜV by competitors in their company name or product/service designations as a result of ongoing legal proceedings could be detrimental to the TÜV SÜD brand name. In the reporting year, TÜV SÜD continued to pursue its consistent and intensive brand management strategy, while promoting and intensifying trustful, long-term customer relationships by reinforcing its market position as a process and add value partner. Compliance and other risks: The US subsidiary TÜV SÜD America Inc., Peabody, faces pending arbitration by the American Arbitration Association in which an expert working freelance for the company is claiming in a class action that he is an employee in practice, and asserting a claim for damages. TÜV SÜD considers the damages claimed to be severely exaggerated, and will contest them with all available legal resources. Several ongoing legal disputes arising from services performed by TÜV SÜD do not give rise to significant risks, mainly due to the global insurance coverage in place. Sufficient provisions have been recognized to cover the remaining risk

31 Group Management Report Overall statement on the risks faced by the Group: The risk management system set up by TÜV SÜD does not currently indicate any risks for the next two years that could have a serious impact on TÜV SÜD s net assets, financial position and results of operations. The organization creates all preconditions necessary to recognize developing risks at an early stage. Subsequent events Pursuant to the franchise agreement with the Turkish government, all 189 service stations in Turkey had to be put into operation by February 14, The Turkish Republic Ministry of Transportation has granted an extension until March 15 and April 30, 2009 respectively for the regions Giresun and Tunceli, which are not yet completed due to problems with the procurement of land. The service stations in Giresun opened on March 7, Construction of the service stations in Tunceli is going according to schedule. The joint venture partner Akfen is planning to leave the vehicle inspection business in Turkey. TÜV SÜD is considering acquiring some or all of the Akfen group s shares in the franchise holders TÜVTURK Kuzey and TÜVTURK Güney by exercising its right of first refusal. TÜV SÜD is also considering raising its share in TÜVTURK Istanbul, a company operating directly on the market as a franchisee. The Dogus group has the same right of first refusal. Initial discussions have already been held with banks on potential forms of financing for the acquisition of shares. Opportunities and outlook Food scandals continued to worry consumers throughout the world. China made world headlines with contaminated baby food. New food safety policies are aimed at boosting consumer confidence in locally-produced food in China. TÜV SÜD is well-positioned as an international, independent service provider with a strong commitment in China, in order to operate on the market as a Chinese food inspection agency. A new microbiological laboratory was opened in Shanghai at the beginning of The infrastructure project and the call by the Chinese government to consume domestic products create opportunities for TÜV SÜD, and the TÜV SÜD Product Services division in particular, to test products for the Chinese market. The TÜV SÜD Rail division sees opportunities to support major rail transport projects. The strategic realignment of the TÜV SÜD Automotive division will be continued in order to enable it to better deal with the consequences of the global economic crisis, particularly for the automotive industry. With a centralized sales function and four business segments Comfort and Vehicle Dynamics, Environmental and Powertrain Technologies, Safety and Electronics, and Homologation and Certification, TÜV SÜD Automotive is able to redouble its focus on profitable, strong-growth products. Current issues faced by customers, politics and industry, in particular CO 2 and cost reduction measures for our customers, will lead to an increase in orders for TÜV SÜD Automotive in the medium term after the rather reserved budget approvals at the present time. With its new technologies, TÜV SÜD offers customers innovative solutions in a highly specialized market environment. In the eyes of our customers, TÜV SÜD s brand profile is that of a committed and responsible process partner that increases safety and adds economic value for its customers throughout the world. Opportunities for the future development of the TÜV SÜD Group The future development of the TÜV SÜD Group is expected to be influenced by the following opportunities in particular: The Akfen group is currently offering its share in the franchise holders TÜVTURK Kuzey and TÜVTURK Güney for sale. TÜV SÜD has a contractual right of first refusal, and is currently assessing the benefit of acquiring some or all of these shares. By acquiring the Akfen group s shares in the two joint venture companies, TÜV SÜD could dramatically raise its revenue and the development of revenue for the next few years in one fell swoop. Acquiring additional shares would require the full consolidation of the companies, which had previously been accounted for using the equity method. Acquiring Akfen's shares in TÜVTURK Istanbul would give TÜV SÜD a higher degree of market penetration in the operating business. Broad positioning as both franchisor and operator of service stations enables TÜV SÜD to play a shaping role in the future of the vehicle inspection business in Turkey. At the same time, the service stations in Istanbul serve as models, and can be referenced for future invitations to tender in other countries

32 Group Management Report Report on expected developments Overall, there is a great degree of uncertainty when making forecasts as it is difficult to assess the impact of the crisis in the financial markets. The consequences of the financial and economic crisis will be felt strongly by the global economy for at least the next two years. The economic downturn will intensify in industrial nations, while economic growth in the emerging economies of Asia will continue to shrink. The world economy is not expected to grow much, if at all, in Real global GDP is expected to fall 0.8% on 2008 levels. A slight increase in real GDP is expected for China s real GDP is expected to grow at a rate of 6.0% p.a. in the forecast period. Real GDP in the US is expected to fall 2.6% in 2009, with a slight recovery in the form of a 0.2% upturn in real GDP in the following year. In the euro zone, real GDP is expected to fall 3.2%, with a slight recovery in Within the euro zone and also in the US, wide-ranging programs have been launched with the aim of stabilizing the financial system and restoring confidence in the banking industry. It is currently difficult to estimate the impact of these support measures on the financial sector and real economy. In both economic areas, spending on investment and consumption will continue to fall due to the gloomy economic outlook, difficulty in obtaining credit, rising financing costs and, particularly with regard to private consumption, due to the fear of unemployment. The Chinese economy, which is heavily dependent on exports, is losing orders due to the global economic crisis. At the same time, the rate of growth in investment, particularly in commercial and residential real estate, is slowing. In order to counteract this, the Chinese government has launched an infrastructure project with an investment volume of RMB 4 trillion, and is campaigning for the consumption of products made in China. Private consumption is expected to grow sluggishly, as falling wages and rising unemployment impact the spending patterns of private households. The German economy is expected to remain weak throughout 2009, with a slight recovery expected for the following year. The outlook for exports is expected to fall sharply due to a drop in global demand in 2009, before recovering in Impetus for investment will only come from the government s economic recovery package, and increased public spending on account of the economic recovery. Real GDP is expected to fall by at least 3.7% in 2009 and 0.1% in Inflation is expected to come to around 0.7% in 2009 and 0.9% in Outlook for 2009 and 2010 Statements on the forecast for fiscal years 2009 and 2010 are based on the budget officially approved by group management and the Supervisory Board in November 2008, as well as a scenario analysis evaluating the risks associated with the consequences of the global economic crisis, conducted in December At the same time, new information on the impact of the crisis on the financial markets and the economy on TÜV SÜD's divisions arose from the monthly meetings between the Board of Management and the departmental heads responsible. The development of the US dollar has a direct impact on the earnings of the operating US subsidiaries. At the same time, the result from the participation in vehicle inspections in Turkey is also subject to potential exchange rate fluctuations, as one subsidiary and one joint venture company, accounted for using the equity method, are financed using US dollars. The decline of the Turkish lira against the US dollar and start-up losses from the operating business brought the carrying amount of the investment in TÜVTURK Istanbul, which is accounted for using the equity method, to zero. For the forecast period, we do not expect the company to generate a significant positive contribution to earnings. Our stated goal is to double revenue in the medium term. We anticipate stable growth for the TÜV SÜD Group, and stand by our goal of increasing group revenue by almost A 1 billion to A 2.3 billion by Revenue must grow by at least 10% each year in order to achieve this goal. This growth in revenue is to be realized in equal parts by organic growth through increased volumes and prices, and growth through business combinations. Organic growth of 5.5% for 2009 and 6.8% for 2010 is currently planned. The growth rate for the forecast period could be considerably lower than expected due to the global economic crisis. In the next two years, the contribution of the non-german group companies to revenue is to increase to 30% and 33% respectively. In the medium term, 40% of group revenue is to be generated outside of Germany. According to expectations, the growth of the INDUSTRY strategic business segment will be rather low in 2009 due to the effects of liberalization, recovering slightly in We see revenue risks in the divisions TÜV SÜD Product Services and TÜV SÜD Chemical Services, where orders may be delayed. The TÜV SÜD Industry Services division will remain largely unaffected by the crisis. The revenue of the MOBILITY strategic business segment is expected to grow at around 5% with a slight increasing tendency. Here, we mainly see revenue risks with regard to the TÜV SÜD Automotive division. Reduced working hours at automotive manufacturers and suppliers are having a considerable impact. The TÜV SÜD Auto Services division expects to remain largely unaffected by the global economic crisis. Growth at the PEOPLE strategic business segment is expected to average out at 9%. We see revenue risks with regard to the TÜV SÜD Management Services division. The TÜV SÜD Academy division could even experience a positive effect on its revenue as a result of the crisis

33 Group Management Report Planning assumes growth in revenue of around 5% p.a. in EUROPE and more than 15% p.a. in ASIA PACIFIC. The ASIA PACIFIC region in particular could be exposed to a revenue risk totaling several millions of euro as a result of the global economic crisis. Negative growth is initially anticipated for the AMERICAS region, before becoming slightly positive in Risks are mainly associated with defaults on payments and customer insolvencies. Possible negative influences on the INDUSTRY strategic business segment stemming from liberalization lead us to anticipate a slight decline in income before taxes for the next fiscal year. Due to the global economic crisis, the previously anticipated group income before taxes for 2009 could be reduced by up to 10%. Our corporate management system, and the early warning indicators built into the integrated controlling system and risk management system in particular, give us up-to-the-minute information that enables us to spot discrepancies at an early stage in order to introduce measures aimed at safeguarding revenue, earnings and liquidity. Countermeasures in response to the effects of the global economic crisis on the TÜV SÜD Group currently focus on cost and investment management. Please note that actual events in the course of the coming fiscal years could deviate from our expectations. In order to achieve these goals, TÜV SÜD and its employees concentrate on attractive technologies and industries with prospects for long-term growth as well as regions with growing economies and stable framework conditions. This means defending high market shares in Germany, expanding the range of competencies and services in the AMERICAS and ASIA PACIFIC, and improving profitability and providing directed personnel development throughout the world. We plan to expand upon our market position outside of Germany and in promising, profitable markets by making strategic business acquisitions. We will continue to consistently pursue our strategic goals. This is why we assume that TÜV SÜD s business will continue to develop successfully and positively in the future. Munich, March 18,

34 Consolidated Financial Statements

35 Consolidated Financial Statements Consolidated Income Statement for the Period from January 1 to December 31, 2008 Consolidated Balance Sheet as of December 31, 2008 In C '000 Notes * Revenue (7) 1,365,158 1,270,662 Own work capitalized Purchased services -175, ,256 Operating performance 1,189,726 1,119,417 Personnel expenses (8) -795, ,663 Amortization and depreciation (9) -46,892-47,656 Other expenses (10) -254, ,681 Other income (11) 30,877 24,659 Impairment of goodwill (12) ,197 Operating result 124, ,879 Income from investments accounted for using the equity method (13) -3,258 12,046 Other financial result (14) -14,394-12,998 Financial result -17, Income before taxes 106, ,927 Income taxes (15) -38,085-63,822 Consolidated net income 68,601 52,105 Attributable to: Shareholders of TÜV SÜD AG 63,497 49,357 Minority interests (16) 5,104 2,748 Earnings per share in C (17) * Restated; for more information please refer to Note 6. In C '000 Notes Dec. 31, 2008 Dec. 31, 2007 ASSETS Intangible assets (18) 139,737 97,103 Property, plant and equipment (19) 350, ,246 Investment property (20) 32,855 30,030 Investments accounted for using the equity method (21) 53,089 58,502 Other financial assets (22) 127, ,741 Other non-current assets (23) 4,739 4,080 Deferred tax assets (15) 40,300 71,478 Non-current assets 749, ,180 Inventories (24) 2,208 2,110 Trade receivables (25) 218, ,179 Income tax receivables (25) 3,381 23,510 Other receivables and other current assets (25) 54,249 50,578 Cash and cash equivalents (26) 134,268 92,910 Non-current assets held for sale (27) 592 2,218 Current assets 413, ,505 TOTAL ASSETS 1,162,638 1,093,685 EQUITY AND LIABILITIES Capital subscribed (28) 26,000 26,000 Capital reserve (28) 124, ,354 Revenue reserves (28) 107,033 41,652 Other reserves (28) 98,654 84,386 Minority interests 21,452 17,501 Equity 377, ,893 Provisions for pensions and similar obligations (29) 385, ,853 Other non-current provisions (30) 34,202 37,564 Non-current liabilities (31) 26,341 10,096 Deferred tax liabilities (15) 16,347 13,132 Non-current liabilities 462, ,645 Current provisions (30) 114, ,765 Income tax liabilities (31) 13,119 10,341 Trade payables (31) 35,187 31,579 Other current liabilities (31) 159, ,462 Current liabilities 322, ,147 TOTAL EQUITY AND LIABILITIES 1,162,638 1,093,

36 Consolidated Financial Statements Consolidated Cash Flow Statement* Consolidated Statement of Income and Expense Recognized in Equity In C ' Consolidated net income 68,601 52,105 Write-downs/write-ups of intangible and tangible assets 46,510 66,853 Write-downs/write-ups of financial assets Change in non-current provisions 27,793 2,860 Change in deferred tax assets and liabilities ,790 Gain/loss on disposal of intangible and tangible assets -1, Other non-cash income/expenses 5,173-10,884 Change in inventories, receivables and other assets 11,428-56,327 Change in liabilities and current provisions 19,964 29,440 Cash flow from operating activities 178, ,585 Cash paid for investments in Intangible and tangible assets -68,548-39,715 Financial assets -33,293-33,997 Investments in consolidated affiliated companies (net of acquired cash) -26,078-3,945 Cash received from disposals of Intangible and tangible assets 1,810 3,751 Financial assets 9,627 14,668 Contribution to pension plans -40,507-38,925 Cash flow from investing activities -156,989-98,163 Dividends paid to shareholders and minority interests -2,769-2,339 Proceeds from loans/repayments of loans 22,743 3,137 Cash flow from financing activities 19, Net change in cash and cash equivalents 41,753 26,220 Effect of currency translation adjustments and change in scope of consolidation on cash and cash equivalents ,050 Cash and cash equivalents at the beginning of the period 92,910 64,640 Cash and cash equivalents at the end of the period 134,268 92,910 In C ' Consolidated net income 68,601 52,105 Actuarial gains and losses* 52,383 75,221 Available-for-sale financial assets (securities) Changes in fair value recognized in equity Recognition of fair value in income statement 5 68 Currency translation differences -4,708-2,639 Cash flow hedges -1,942-1,070 Deferred taxes -30,927-18,328 Income and expense recognized directly in equity 14,926 52,949 Total recognized income and expense for the year 83, ,054 Attributable to: Shareholders of TÜV SÜD AG 77, ,336 Minority interests 5,761 4,718 * Including minority interests of A 387 thousand (prior year: A 2,655 thousand). * For more information please refer to Note

37 Consolidated Financial Statements Consolidated Statement of Changes in Equity In C '000 Capital subscribed Capital reserve Revenue reserves Currency translation adjustment Other reserves Market valuation of securities Actuarial gains and losses from defined benefit pension plans Cash flow hedges Equity before minority interests Minority interests As of January 1, , ,354-5, , ,848 15, ,204 Recognized income and expense 49,357-2, ,566-1, ,990 5, ,382 Deferred taxes ,670-17, ,328 Dividend paid 0-2,339-2,339 Change in scope of consolidation Other changes -1,534-1, ,611 As of December 31, , ,354 41,652-2, ,064-1, ,392 17, ,893 Recognized income and expense 63,497-5, ,996-1, ,525 5, ,454 Deferred taxes , , ,927 Dividend paid 0-2,769-2,769 Change in scope of consolidation 1,071 1, ,949 Other changes As of December 31, , , ,033-7, ,733-2, ,041 21, ,493 Total equity Notes to the Consolidated Financial Statements for Fiscal Year 2008 General information 1 General TÜV SÜD is a leading service provider operating in the strategic business segments INDUSTRY, MOBILITY and PEOPLE in EUROPE, the AMERICAS and ASIA PACIFIC. The range of services covers consulting, testing, certification and training. TÜV SÜD Aktiengesellschaft, with registered offices in Munich, Germany, is entered in the commercial register of the Munich District Court under the number HRB , as the parent company of the Group. The ultimate parent company of the Group is TÜV SÜD e.v., Mannheim. TÜV SÜD e.v. has transferred its share rights in TÜV SÜD AG to the independent shareholders committee TÜV SÜD Gesellschafterausschuss GbR, in order to ensure that the ideal status of the registered association TÜV SÜD e.v. according to its standing rules is maintained when fulfilling its duties. The purpose of the limited partnership TÜV SÜD Gesellschafterausschuss GbR is to hold and manage investments under German stock corporation law held by TÜV SÜD e.v., Mannheim, in TÜV SÜD AG, Munich. TÜV SÜD AG prepared its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) as of December 31, 2008 by exercising its option under Section 315a (3) HGB [ Handelsgesetzbuch : German Commercial Code]. All IFRSs that are binding for the fiscal year 2008 and the pronouncements issued by the International Financial Reporting Interpretations Committee (IFRIC) have been applied to the extent that these have been adopted by the European Union. On March 18, 2009, TÜV SÜD AG s Board of Management approved the 2008 consolidated financial statements for submission to the Supervisory Board. The consolidated group was expanded by the first-time inclusion of two domestic affiliated companies and five foreign affiliated companies. These additions relate to four business combinations and three group companies that were previously stated under the investments in affiliated companies recorded at acquisition cost. One domestic company and four foreign companies left the consolidated group as a result of a merger, liquidation or deconsolidation. Two domestic associated companies (prior year: one) and five foreign associated companies (prior year: five) as well as three foreign joint ventures (prior year: three) are valued within the Group using the equity method. Entities that are not material for the presentation of a true and fair view of the net assets, financial position and results of operations were not included in the consolidated financial statements. The impact of the option to forgo full consolidation amounts to a 0.6 percent fall in consolidated revenue (prior year: 0.8 percent) and a 1.4 percent increase in consolidated equity (prior year: 1.2 percent). Moreover, six associated companies (prior year: seven) were not consolidated due to immateriality. The affiliated companies, associated companies and joint ventures included in the consolidated financial statements are listed under Note 40 Consolidated entities along with the consolidation method applied. The list of the Group s entire shareholdings is published in the German Electronic Federal Gazette (elektronischer Bundesanzeiger) as an integral part of the notes to the financial statements. 3 Business combinations TÜV SÜD Life Science GmbH finalized the acquisition of 100% of the shares in the Msource group before the end of June The Msource group has been partly included in the consolidated financial statements of TÜV SÜD AG since July 1, The purchase price for the Msource group, including incidental acquisition cost, totaled A 18,283 thousand. The purchase price was paid in cash. In the process of purchase price allocation, intangible assets of A 7,038 thousand were recognized, which are subject to amortization. Deferred tax liabilities of A 2,390 thousand were recorded. 2 Scope of consolidation In addition to TÜV SÜD AG, Munich, the consolidated financial statements include 31 (prior year: 30) domestic and 42 (prior year: 41) foreign companies in which TÜV SÜD AG holds either a direct or indirect majority of voting rights, or whose financial and operating policy it controls in some other manner

38 Consolidated Financial Statements Net assets acquired; goodwill and purchase price of the Msource group In C '000 Carrying amount before revaluation Fair value as of acquisition date Intangible assets and property, plant and equipment 525 7,563 Other assets (net of cash) 2,470 2,470 Cash and cash equivalents Current liabilities 2,113 2,113 Non-current liabilities 267 2,657 Total net assets acquired 1,319 5,967 Goodwill arising on acquisition 12,316 Purchase price including costs directly attributable to the acquisition 18,283 Less: Cash acquired 704 Net cash paid for business combinations 17,579 In the current fiscal year, the Msource group is included in TÜV SÜD AG s consolidated financial statements with revenue of A 7,972 thousand. Following elimination of amortization and depreciation on hidden reserves disclosed in the course of the purchase price allocation, it generated a net loss for the year of A 158 thousand. Assuming that this acquisition had been concluded at the beginning of the fiscal year, the TÜV SÜD Group s revenue would have amounted to approximately A 1,372,621 thousand. In August 2008, the Group further acquired Brunel GmbH s Railmotive division and, in December, Senton GmbH EMV-Prüfzentrum, Straubing. Senton GmbH has been included in the consolidated financial statements of TÜV SÜD AG for the first time as of December 31, Individually, none of the acquisitions were material. Collectively, the two acquisitions had the following impact on the consolidated financial statements based on the respective amounts at the date of acquisition: Net assets acquired; goodwill and purchase price of other business combinations In C '000 Carrying amount before revaluation Fair value as of acquisition date Intangible assets and property, plant and equipment 1,565 5,174 Other assets (net of cash) 820 1,004 Cash and cash equivalents Current liabilities Non-current liabilities 317 1,226 Total net assets acquired 1,352 4,236 Goodwill arising on acquisition 4,422 Purchase price including costs directly attributable to the acquisition 8,658 Less: Cash acquired 159 Net cash paid for business combinations 8,499 The above table contains preliminary figures for the acquisition of Senton GmbH because the purchase price allocation had not yet been finalized by December 31, Consolidation principles The consolidated financial statements are based on the annual financial statements of TÜV SÜD AG and the subsidiaries included in consolidation, prepared in accordance with uniform accounting policies. The capital consolidation of entities before January 1, 2006 used the book value method (Section 301 (1) HGB). In doing so, the equity posted by the subsidiaries at the time of first-time consolidation was offset against acquisition cost. Any goodwill arising was offset on the face of the balance sheet against reserves, or capitalized in connection with the previous method of accounting under German GAAP and written down using the straight-line method over a period of 15 years. Existing goodwill from earlier asset deals was transferred to the opening IFRS balance sheet at its carrying amount as of January 1, 2006 in accordance with IFRS 1. For entities included in the consolidated financial statements for the first time since January 1, 2006, capital consolidation is performed using the purchase method in accordance with IFRS 3 Business Combinations. The investment carrying amounts recognized at the parent company are offset against the pro rata revalued equity of the subsidiary. In the course of the revaluation, all assets, liabilities, contingent liabilities and additional intangible assets of the acquired entity that are subject to recognition are recognized at fair value if they are identifiable and can be measured reliably. Any positive difference resulting from this purchase price allocation is recognized as goodwill, while a negative difference is recorded directly in the income statement with an effect on net income for the period. Revenue, expenses and income as well as receivables and liabilities between consolidated entities are eliminated. Intercompany profits from transactions within the Group are also eliminated. 5 Currency translation All financial statements of consolidated entities that have been prepared in foreign currency are translated into euro using the functional currency concept. As the foreign subsidiaries are independently operating entities, the functional currency is considered to be the currency of the respective country in which they are situated. Balance sheet items are therefore translated using the mean rate on the balance sheet date. This does not include equity, which is translated using historical rates. Expense and income items are stated using mean quarterly exchange rates. Exchange rate differences are treated as not affecting income, and recognized directly in equity, under other reserves. Monetary items are translated using the closing rate as of the balance sheet date, while non-monetary items continue to be valued using the historical exchange rate as of the date of the transaction. Differences resulting from such translations are generally recognized in the income statement. The exchange rates used to translate the most important currencies developed as follows: Closing rate at balance sheet date Dec. 31, 2008 Dec. 31, 2007 Average annual rate US dollar (USD) Pound sterling (GBP) Singapore dollar (SGD) Turkish lira (TRY) Accounting policies Revenue mainly consists of income from services, and is recorded using the percentage of completion method pursuant to IAS This involves recognizing costs and revenue in line with the degree to which the contract has been completed. If it is not possible to reliably estimate contract revenue, contract costs or the percentage of completion of a contract, revenue is not recognized according to the percentage of completion. Instead, the zero profit method is used. Contract-related goods and services are recognized as purchased services. Intangible assets include goodwill as well as acquired and internally generated intangible assets. The carrying amounts for goodwill recorded as of December 31, 2005 in accordance with the previous principles of accounting according to German GAAP were used unchanged in connection with the transition to accounting using IFRS on January 1, Goodwill is no longer subject to amortization since then. Instead, goodwill is tested for impairment at least once a year or whenever there is any indication of impairment, and written down if appropriate. This impairment test is based on cash generating units and compares the recoverable amount with the carrying amount. According to the management approach, TÜV SÜD s cash generating units are the AMERICAS and ASIA PACIFIC regions as well as the individual divisions within the EUROPE region. The calculation of the recoverable amount is based on the value in use of the cash generating unit. This is derived from management s approved three-year planning data, with the aid of the discounted cash flow method. Impairment losses recognized on goodwill are not reversed. Other intangible assets acquired for a consideration, such as software or accreditations, are valued at cost. Internally generated intangible assets such as software or development costs are stated at cost if it is probable that the economic benefits arising from production will flow to the entity and the costs can be measured reliably. Production cost comprises the costs directly and indirectly allocable to the development process. Research costs are expensed as incurred. In addition, this item includes assets such as customer relationships, brand name rights and bans on competition identified in the course of purchase price allocations. Intangible assets with finite useful lives are amortized using the straight-line method over a period of 3 to 20 years. Intangible assets with an indefinite useful life are tested for impairment each year instead of being amortized

39 Consolidated Financial Statements Property, plant and equipment are accounted for at cost less depreciation and any impairment losses. Depreciation is generally charged using the straight-line method. Buildings and parts of buildings are depreciated over a maximum period of 40 years, technical equipment over a period of between 5 and 15 years, and furniture and fixtures over a period of between 8 and 13 years. For materiality reasons, low-value assets with a cost of up to A 150 are expensed as incurred. If an asset necessarily takes a substantial period of time to get ready for its intended use, the borrowing costs directly attributable to its production are capitalized as part of the respective asset. Rented or leased property, plant and equipment that are economically attributable to TÜV SÜD (finance leases) are recognized in the balance sheet at the lower of the net present value of the minimum lease payments or the fair value. The economic title to the leased asset is allocated to the lessee in cases in which it bears substantially all risks and rewards incidental to ownership of the leased asset. The leased asset is depreciated over the shorter of the lease term and its useful life. Net rental payments made under operating leasing are charged to the income statement over the term of the lease. TÜV SÜD s investment properties that are mainly for rental to third parties are stated at cost less depreciation. Buildings and parts of buildings are depreciated using the straight-line method over a maximum period of 40 years. At each balance sheet date, the Group assesses whether there is any indication that the carrying amounts of intangible assets, property, plant and equipment and investment property may be subject to impairment. If any such indication exists, an impairment test is performed. For this purpose, the recoverable amount is determined for the asset concerned, which is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the expected future cash flows. If it is not possible to determine the recoverable amount for an individual asset, the recoverable amount is determined for the smallest identifiable group of assets (cash generating unit) to which the asset can be allocated and which generates cash inflows that are largely independent of the cash inflows from other (groups of) assets. If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced and the impairment loss is recognized immediately in profit or loss. If the recoverable amount of the asset or cash generating unit increases again after recognition of the impairment loss, the impairment loss is reversed. However, the asset s or cash generating unit s carrying amount must not exceed the carrying amount that would have been determined net of amortization or depreciation had no impairment loss been recognized. A reversal of an impairment loss is recognized immediately in profit or loss. Investments accounted for using the equity method are recognized at cost upon acquisition. In subsequent periods, the carrying amounts of equity investments in associated companies or joint ventures are increased or decreased each year by the pro rata profit or loss, distributed dividends or other changes in equity, in accordance with the equity method. The principles of purchase price allocation for full consolidation are applied by analogy to the first-time valuation of investments accounted for using the equity method. Any goodwill is assessed in connection with impairment tests for the equity investment (IAS 39) or joint venture. Goodwill is not amortized. Interim financial statements whose balance sheet dates are no more than three months in the past are used for the valuation of investments accounted for using the equity method which have a diverging fiscal year. Other financial assets particularly include shares in non-consolidated affiliated companies, participations, loans and securities. Pursuant to IAS 39, financial assets are divided into the following categories at fair value through profit or loss, available for sale, and held to maturity. The fourth category is loans and receivables originated by the entity. The category of financial assets at fair value through profit or loss includes derivative financial instruments for which no hedge accounting is applied. TÜV SÜD does not use this category for any other financial instruments. There are also no financial instruments that are held to maturity by TÜV SÜD. The valuation category available for sale includes shares in non-consolidated affiliated companies, participations and long- and short-term securities. They are measured at fair value. The unrealized gains and losses resulting from valuation are posted directly to other reserves within equity, taking deferred taxes into account. The reserve is reversed through profit or loss, either upon disposal or when the fair value falls permanently below cost. The fair value of traded securities corresponds to their market value. In the absence of a market value for shares in affiliated companies and participations, valuation is based on amortized cost. Loans fall under the category of loans and receivables, and are stated at amortized cost. Deferred tax assets and liabilities are recognized for temporary differences between the carrying amounts in the IFRS balance sheet and the tax basis of the assets and liabilities, as well as for consolidation measures with an effect on income. In addition, taxes are deferred for tax loss carryforwards provided the realization of such carryforwards can be sufficiently guaranteed. Deferred taxes are calculated on the basis of the anticipated tax rates at the time of realization. Deferred tax assets and liabilities are offset against each other by entity or fiscal unity. Inventories are valued at the lower of cost or net realizable value. Trade receivables are valued at cost less any impairment losses. In some cases, impairment losses are recognized using an allowance account. The decision of whether to account for a default risk by using an allowance account or by directly writing down the receivable depends upon the ability to reliably estimate the risk involved. Specific and portfolio-based allowances are generally recognized in proportion to the anticipated default risk. Unbilled trade receivables from service contracts are accounted for using the percentage of completion method in accordance with IAS The percentage of completion per contract to be recognized is calculated as the ratio of the actual costs incurred to overall anticipated costs of the project ( cost-to-cost method ). If the result of a construction contract cannot be determined reliably, income is only recognized at the amount of the contract costs incurred ( zero profit method ). Anticipated losses from ongoing contracts are taken into account if they are probable, and are directly deducted from the corresponding receivables. If this results in a negative balance, this is posted to liabilities according to the percentage of completion method. Advance payments received for client orders are stated without offsetting in current liabilities. Other receivables and other assets are valued at acquisition cost less valuation allowances. Specific bad debt allowances are recognized in relation to the anticipated default risks. Derivative financial instruments are mainly used to hedge interest and exchange rate risks. They are generally valued at fair market value, in accordance with the categorization set forth in IAS 39. Hedge accounting is only used for selected hedges relating to future transactions (cash flow hedges) at the TÜV SÜD Group. The effective part of the change in the market value of the derivative is recorded directly in equity. The ineffective part, as well as changes in the market value of derivatives that do not meet the criteria of hedge accounting, are recorded directly in the income statement. Cash and cash equivalents contain cash on hand and other liquid financial assets with an original term to maturity of no more than three months. They are recognized at nominal value. Non-current assets held for sale primarily consist of real estate that is available for sale and is recognized at the lower of its carrying amount and its fair value less costs to sell. Provisions for pensions and similar obligations are valued using the actuarial projected unit credit method for defined benefit pension plans. The amount shown on the balance sheet represents the current value of the pension obligation after offsetting the fair value of plan assets as of the balance sheet date. Actuarial gains and losses are charged against other reserves directly within equity, taking deferred taxes into account. The interest portion of pension expenses and expected return on plan assets are posted to the financial result. Almost all of the reports used to determine pension provisions have been issued by Watson Wyatt Heissmann GmbH, Wiesbaden, or its partners. Similar obligations relate to provisions for termination benefits abroad. Other provisions are recorded if the obligation to a third party results from a past event which is expected to lead to an outflow of economic benefits and can be reliably determined. They are valued using the best estimate of the settlement value, and cannot be offset against rights of recourse. Provisions due in more than one year are discounted where the effect of the time value of money is material. Liabilities are measured at amortized cost in accordance with the effective interest method. Liabilities from finance leases are stated at the lower of the fair value of the leased asset or the present value of the minimum lease payments. Estimates The preparation of the consolidated financial statements requires that assumptions or estimates be made for some items which have an effect on the values stated in the company s balance sheet, the disclosure of contingent liabilities and the recognition of income and expenses. This particularly relates to the value of the pension obligations and other provisions, the value of goodwill and the value of deferred tax assets on tax loss carryforwards. Actual amounts may differ from the estimates. Goodwill is tested for impairment annually on the basis of the smallest cash generating unit to which the goodwill has been assigned as well as management s approved three-year operative planning and the long-term growth rates estimated for the respective reporting units for the subsequent period. Except for the Automotive Europe cash generating unit, the impairment test is performed by calculating the value in use for all cash generating units. Even a 10% reduction in the cash flows used to calculate the value in use of the cash generating units would not result in any further impairment. The impairment test for the Automotive Europe cash generating unit is based on fair value less costs to sell. A 10% reduction in the cash flows used to calculate the fair value less costs to sell would result in another impairment loss recognized on the Automotive Europe cash generating unit s intangible assets and property, plant and equipment of A 1,944 thousand. The defined benefit obligations and the pension expenses for the subsequent year are calculated using the actuarial parameters given in Note 29. Increasing or decreasing the discount rate by 0.25% would result in a reduction/increase of pension obligations by A 33 million/ A 35 million. Moreover, discrepancies between the anticipated 78 79

40 Consolidated Financial Statements development of salaries and pensions and actual collective wage increases and between expected and actual return on plan assets in the respective fiscal year have a much lower impact. Such a change of the parameters would, however, have no impact on the consolidated net income for the year, as actuarial gains and losses are immediately posted directly to equity. In the case of other balance sheet items, a change to the original basis for estimation results in a change to the respective balance sheet item, with an effect on income. New accounting standards The application of the following standards, interpretations and amendments of standards, which were ratified by the IASB prior to the preparation of TÜV SÜD s consolidated financial statements, is mandatory for reporting periods beginning after January 1, TÜV SÜD decided not to early adopt such standards on a voluntary basis. Standard / Interpretation Effective date Anticipated impact on TÜV SÜD AG's consolidated financial statements IAS 1 "Presentation of Financial Statements" (revised) January 1, 2009 No significant consequences are expected for the presentation of the consolidated financial statements. Amendments to IAS 23 "Borrowing Costs" January 1, 2009 There will be no consequences for the consolidated financial statements as borrowing costs are already capitalized on qualifying assets. Amendments to IAS 32 "Financial Instruments: Presentation" and IAS 1 "Presentation of Financial Statements" (Puttable Financial Instruments and Obligations Arising on Liquidation) "IFRS Improvements Standard" issued as a result of the first annual improvements project Amendments to IFRS 1 "First-time Adoption of IFRSs" and to IAS 27 "Consolidated and Separate Financial Statements" January 1, 2009 January 1, 2009 January 1, 2009 No significant consequences are expected for the consolidated financial statements. No significant consequences are expected for the consolidated financial statements. No significant consequences are expected for the consolidated financial statements. Amendments to IFRS 2 "Share-based Payment" January 1, 2009 There will be no consequences for the consolidated financial statements, as currently no such arrangements exist. IFRS 8 "Operating Segments" January 1, 2009 There will be no consequences for the consolidated financial statements as no segment reporting has been prepared to date. IFRIC 13 "Customer Loyalty Programmes" January 1, 2009 No significant consequences are expected for the consolidated financial statements. IFRIC 14 "IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" January 1, 2009 No consequences are expected for the consolidated financial statements. The table below shows those standards, interpretations and amendments to existing standards issued by the IASB which have not yet been adopted by the EU and which are therefore not applicable for IFRS financial statements prepared pursuant to Sec. 315a HGB. Standard / Interpretation Effective date Anticipated impact on TÜV SÜD AG's consolidated financial statements Amendments to IAS 27 "Consolidated and Separate Financial Statements" Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" regarding eligible hedged items July 1, 2009 July 1, 2009 No significant consequences are expected for the consolidated financial statements. No significant consequences are expected for the consolidated financial statements. IFRS 3 "Business Combinations" (revised) July 1, 2009 No significant consequences are expected for the consolidated financial statements. IFRIC 12 "Service Concession Arrangements" January 1, 2008 No significant consequences are expected for the consolidated financial statements. IFRIC 15 "Agreements for the Construction of Real Estate" January 1, 2009 This interpretation is not relevant for TÜV SÜD. IFRIC 16 "Hedges of a Net Investment in a Foreign Operation" October 1, 2008 No significant consequences are expected for the consolidated financial statements. IFRIC 17 "Distributions of Non-Cash Assets to Owners" July 1, 2009 No consequences are expected for the consolidated financial statements. Restatement of the consolidated income statement The amounts recognized in the consolidated income statement for the period from January 1, 2007 to December 31, 2007 were changed on the one hand as a result of the reclassification from purchased services to personnel expenses of A 12,897 thousand for employees on hire from the German state of Hesse. As these employees are assigned the same operational tasks in the review of equipment requiring inspection as employees of TÜV Hessen, the related expenses are now reported under personnel expenses. As of the balance sheet date, the number of employees on hire from the state office Landesbetrieb Hessen came to 184 (prior year: 199). On the other hand, the presentation of exchange rate gains and losses from forward exchange transactions, cross-currency swaps, loans and borrowings was changed. In the prior year, A 4,929 thousand had been recognized in other expenses and A 4,175 thousand in other income. Where they relate to financing activities, such income and expenses are now recognized under other financial result. The other financial result for 2007 was thus reduced by A 754 thousand

41 Consolidated Financial Statements Notes to the income statement 7 Revenue Revenue was generated by the individual consolidated divisions and regions as follows: Revenue by division In C ' TÜV SÜD Industry Services 426, ,930 TÜV SÜD Product Services 156, ,731 TÜV SÜD Chemical Services 52,322 48,590 TÜV SÜD Rail 16,802 10,053 Total INDUSTRY 652, ,304 TÜV SÜD Auto Services 421, ,499 TÜV SÜD Automotive 56,350 51,964 Total MOBILITY 478, ,463 TÜV SÜD Management Services 102,279 94,758 TÜV SÜD Life Services 50,480 48,234 TÜV SÜD Academy 58,714 47,715 TÜV SÜD Life Science 7,972 0 Total PEOPLE 219, ,707 Other 15,552 19,188 Total 1,365,158 1,270,662 Revenue by region In C ' Germany 966, ,713 Other European countries 169, ,570 EUROPE 1,136,116 1,063,283 AMERICAS 86,451 76,170 ASIA PACIFIC 139, ,528 Other countries 2,821 2,681 Total 1,365,158 1,270,662 Revenue relates mainly to service contracts. It includes income from service contracts that have not yet been billed totaling A 5,327 thousand (prior year: A 6,848 thousand), recognized using the percentage of completion method. The allocation of the TÜV SÜD Rail division was changed in the reporting year, and it is now allocated to the INDUSTRY strategic business segment instead of the MOBILITY strategic business segment. The prior-year figures were restated accordingly. 8 Personnel expenses In C ' * Wages and salaries 632, ,258 Social security contributions and other benefit costs 87,261 86,944 Retirement benefit costs 63,963 36,064 Incidental personnel costs 11,551 9,397 *Restated; for more information please refer to Note , ,663 Personnel expenses include expenses totaling A 12,998 thousand (prior year: A 12,897 thousand) for leasing civil servants from the German state of Hesse. These employees are assigned the same operational tasks in the review of equipment requiring inspection as employees of TÜV Hessen. In the prior year, these expenses had been disclosed under purchased services. The prior-year figures were restated accordingly. The change in wages and salaries is a result of the expansion of the workforce and collective wage increases in 2008, which averaged at around 2.6% in Germany. Retirement benefit costs also include employer contributions to state pensions. The prior-year figure for retirement benefit costs comprises non-recurring income of A 29,217 thousand due to the increase of the retirement age and reduction of the Christmas bonus for pensioners. The TÜV SÜD Group had an average headcount of 13,122 employees in the reporting year (prior year: 12,360 employees). The Group s workforce mainly comprises salaried employees. 9 Amortization (excluding goodwill) and depreciation In C ' Amortization and depreciation of intangible assets 11,216 8,742 of property, plant and equipment 31,755 34,742 of investment property Impairment losses 3,609 3,917 46,892 47, Other expenses Other expenses of A 254,133 thousand (prior year: A 234,681 thousand) primarily include expenses for travel costs, rental and occupancy costs, operating and administrative costs, advertising and communication costs as well as fees and dues. The increase in other expenses was partly due to consulting costs relating to the planned merger with TÜV Rheinland. In the prior year, this item had included exchange rate losses from forward exchange transactions, cross-currency swaps, loans and borrowings. Where they relate to financing activities, such expenses are now recognized in the financial result. The prior-year expense was reduced accordingly, by A 4,929 thousand. In addition, other expenses comprise other taxes amounting to A 5,633 thousand (prior year: A 5,003 thousand). Impairment losses of A 5,788 thousand (prior year: A 2,831 thousand) on trade receivables (including amounts derecognized) are also included. The increase shows the beginning effects of the financial crisis felt by some customers of our subsidiaries, in particular in the automotive industry. 11 Other income Other income of A 30,877 thousand (prior year: A 24,659 thousand) primarily consists of income from the reversal of provisions, exchange rate gains, rental and lease income, and income from the disposal of property, plant and equipment. As of this reporting year, exchange rate gains from forward exchange transactions, cross-currency swaps, loans and borrowings relating to financing activities are disclosed in the financial result. In the prior year, they had been included in other income with an amount of A 4,175 thousand. The prior-year figure was restated accordingly. 12 Impairment of goodwill The impairment losses of A 33 thousand recognized on goodwill are attributable in full to the Automotive Europe cash generating unit. The impairment losses of A 19,197 thousand recognized on goodwill in the prior year related exclusively to goodwill from the acquisition of the companies EST Testing Solutions Inc., USA, and PetroChem Inspection Services Inc., USA, assigned to the Americas cash generating unit. Further details on the impairment of goodwill are given in Note 18 Intangible assets. 13 Income from investments accounted for using the equity method The loss from investments accounted for using the equity method of A 3,258 thousand (prior year: income of A 12,046 thousand) is primarily due to the pro rata net loss of A 7,756 thousand incurred by the Turkish joint venture companies (prior year: net income of A 6,779 thousand). It was mainly caused by the exchange rate losses recorded in the fiscal year 2008, which amounted to A 3,835 thousand, compared to exchange rate gains of A 10,462 thousand recorded in In contrast, income from investments accounted for using the equity method was boosted by pro rata income from ATISAE Asistencia Técnica Industrial S.A.E., Spain, of A 4,390 thousand (prior year: A 4,487 thousand). 14 Other financial result In C ' * Profit or loss from the sale of participations Write-downs of participations Dividend income and result from profit and loss transfer agreements Income from participations Profit or loss on other securities 3,314 4,115 Profit or loss on loans 2, Income from other investments 5,348 3,946 Interest income 4,798 5,725 Interest expenses -3,687-2,617 Net interest income 1,111 3,108 Net finance costs for pension provisions -20,720-20,085 Other Sundry financial result -20,859-20,627 Other financial result -14,394-12,998 *Restated; for more information please refer to Note 6. Profit or loss on other securities comprises interest and dividend income from available-for-sale financial assets amounting to A 3,304 thousand (prior year: A 3,847 thousand). The profit or loss on loans mainly includes interest income from loans and receivables of A 2,108 thousand (prior year: A 114 thousand)

42 Consolidated Financial Statements The total interest expense from assets and liabilities not measured at fair value through profit or loss amounted to A 3,687 thousand in fiscal 2008 (prior year: A 2,617 thousand). Total interest income came to A 10,231 thousand (prior year: A 9,679 thousand) and is recognized in various items that are contained in other financial result. The interest expense or income from derivative financial instruments is included in the sundry financial result. Net finance costs for pension provisions consist of interest costs for pension and termination benefit obligations amounting to A 60,927 thousand (prior year: A 55,926 thousand) and an expected return on plan assets totaling A 40,207 thousand (prior year: A 35,841 thousand). In C ' Consolidated net income before taxes 106, ,927 Expected tax rate 30.2% 39.0% Expected income tax expense 32,219 45,212 Tax rate differences ,616 Tax reductions due to tax-free income -2,256-4,940 Tax increases due to non-deductible expenses 5,368 4,436 Tax effect from accounting for associated companies using the equity method 984-4,698 Tax increases due to non-deductible impairment loss on goodwill 10 2,578 Deferred tax assets and liabilities result from the following balance sheet items and tax loss carryforwards: In C '000 Dec. 31, 2008 Deferred tax assets Dec. 31, 2007 Deferred tax liabilities Dec. 31, 2008 Dec. 31, 2007 Non-current assets 8,139 7,283 38,671 34,571 Current assets 1,616 1,322 11,148 9,065 Non-current liabilities Pension provisions 39,641 68, Other non-current liabilities 8,590 9,354 3,884 2,907 Temporary differences on investments in subsidiaries, foreign branches and associated companies as well as joint ventures totaling A 68,459 thousand did not give rise to deferred tax liabilities because either the differences are not expected to reverse in the near future by way of realization (distribution or sale of the entity) or the profits are not subject to taxation. 16 Minority interests In C ' Minority interest in profits 5,104 2,885 Minority interest in losses For the first time, the other financial result also includes exchange rate gains and losses from forward exchange transactions, crosscurrency swaps, loans and borrowings. On aggregate, a net expense is reported here for these items amounting to A 558 thousand. In the prior year, expenses of A 4,929 thousand had been recognized in other expenses and income of A 4,175 thousand in other income. The prior-year figures were restated accordingly. 15 Income taxes In C ' Current taxes 38,298 24,940 Deferred taxes ,882 from temporary differences -1,490 35,454 from tax loss carryforwards 1,277 3,428 Income taxes 38,085 63,822 Current tax expenses for the fiscal year 2008 include expenses of A 485 thousand for current taxes from prior periods (prior year: income of A 9,548 thousand). The following reconciliation for the TÜV SÜD Group presents a summary of the individual entity-specific reconciliations prepared using the respective local tax rates taking consolidation entries into account. The expected income tax expense is reconciled to the effective income tax expense. Taxes for prior years Changes in valuation allowances on deferred taxes and unrecognized deferred tax assets on loss carryforwards 935 3,068 Effect of changes in tax rate ,131 Other differences Effective income tax expense 38,085 63,822 Effective tax rate 35.7% 55.1% The expected tax rate of 30.2% (prior year: 39.0%) is the result of applying the German corporate income tax rate of 15.0% (prior year: 25.0%) plus the solidarity surcharge of 5.5% (prior year: 5.5%) and a trade tax rate of 14.4% (prior year: 13.0%) based on an average trade tax multiplier of 410% (prior year: 410%). Deferred taxes are generally recognized based on the tax rates applicable at each individual entity. In the interest of convenience, a uniform tax rate of 30.2% (prior year: 30.2%) is used to calculate deferred taxes on consolidation entries with effect on net income. Current liabilities 19,964 16,579 1, , ,782 54,987 46,938 Offsetting per fiscal unity -38,640-33,806-38,640-33,806 Deferred taxes from temporary differences 39,310 68,976 16,347 13,132 Deferred taxes from tax loss carryforwards 4,907 6,317 Valuation allowances on deferred taxes from tax loss carryforwards -3,917-3,815 Carrying amount 40,300 71,478 16,347 13,132 Deferred tax liabilities of A 70,311 thousand (prior year: A 39,384 thousand) that were posted directly to equity were offset against deferred tax assets. They are deferred taxes that were recognized on actuarial gains and losses for pension provisions and the market value reserve. The change in the corresponding deferred tax reserves amounted to A 30,927 thousand in fiscal 2008 (prior year: A 18,328 thousand). Valuation allowances are recorded if the future realization of the corresponding tax advantages is unlikely. The taxable income considered likely on the basis of the respective company s planning for the subsequent years is taken as the basis for the assessment. As of the balance sheet date, TÜV SÜD held tax loss carryforwards in Germany for corporate income tax and solidarity surcharge amounting to A 14,866 thousand (prior year: A 14,645 thousand) and for trade tax of A 6,499 thousand (prior year: A 6,168 thousand). In addition, the Group has tax loss carryforwards abroad amounting to A 6,438 thousand (prior year: A 10,372 thousand). As of December 31, 2008, the Group has a total of A 23,676 thousand of tax loss carryforwards (prior year: A 22,575 thousand) on which no deferred tax assets have been recognized. Of these loss carryforwards, A 22,911 thousand (prior year: A 21,496 thousand) can be carried forward indefinitely. Most of these are loss carryforwards in Germany which cannot be used as long as profit and loss transfer agreements exist or for other reasons. 5,104 2,748 The minority interests in the net income for the year are primarily attributable to TÜV Technische Überwachung Hessen GmbH, Darmstadt, and Jiangsu TÜV Product Service Ltd., Wuxi. 17 Earnings per share Profit share of shareholders of TÜV SÜD AG (A '000) 63,497 49,357 Number of shares as of December 31 (in thousands) 26,000 26,000 Earnings per share (C) Shares with the potential to dilute earnings have not been issued by TÜV SÜD. Basic and diluted earnings per share are therefore the same

43 Consolidated Financial Statements Notes to the balance sheet 18 Intangible assets In C '000 Goodwill Purchased intangible assets Internally Concessions, industrial and similar rights Other intangible assets generated intangible assets Advance payments and intangible assets under development Cost As of January 1, ,452 3,784 35,087 27,098 1, ,913 Currency translation differences -4, , ,343 Change in scope of consolidation Acquisitions of subsidiaries 4, ,752 Additions , ,688 Disposals , ,374 Reclassifications , , As of December 31, 2007 / January 1, ,277 3,229 43,027 26, ,489 Currency translation differences , ,267 Change in scope of consolidation Acquisitions of subsidiaries 16, ,578 7, ,994 Additions ,192 3, ,030 28,516 Disposals Reclassifications As of December 31, ,696 26,556 48,158 35,223 1, ,822 Amortization As of January 1, , ,124 2, ,578 Currency translation differences Acquisitions of subsidiaries Amortization ,718 4, ,742 Impairment losses 19, ,333 Disposals 3 0 1, ,588 Reclassifications As of December 31, 2007 / January 1, , ,482 7, ,386 Currency translation differences 1, ,563 Change in scope of consolidation Amortization ,260 5, ,216 Impairment losses Disposals Reclassifications As of December 31, ,784 1,573 36,671 13, ,085 Carrying amount as of December 31, ,912 24,983 11,487 22,166 1, ,737 Carrying amount as of December 31, ,666 2,365 11,545 19, ,103 Total The carrying amount of goodwill primarily consists of the goodwill of the PSB group, with a carrying amount of A 27,633 thousand (prior year: A 27,051 thousand), that is allocable to the Asia cash generating unit. The additions to goodwill relate to the Msource group acquired in the fiscal year (A 12,316 thousand) and are attributable to the Life Science Europe cash generating unit. The additions to concessions, industrial and similar rights comprise expenses of A 23,015 thousand for the license for regular vehicle inspections in Turkey, which were payable by TÜV SÜD Bursa to TÜVTURK Kuzey in accordance with the franchise agreement. The license is amortized over its term until August 2027 using the straight-line method. The internally generated intangible assets primarily include the customer relationships, brand name rights and bans on competition recorded upon acquisition of the PSB group, which are written down over a remaining period of between 3 and 18 years. The additions under internally generated intangible assets essentially relate to the brand rights, order backlog and customer relationships recognized in the course of the acquisition of the Msource group at a carrying amount of A 7,038 thousand. Impairment losses relate to write-downs carried out according to the impairment only approach that are performed in accordance with IAS 36 Impairment of Assets. Impairment losses amounting to A 33 thousand (prior year: A 19,197 thousand) were recognized on goodwill. The impairment of goodwill in the current year related exclusively to the Automotive Europe cash generating unit, where the carrying amount on the balance sheet was higher than the recoverable amount. The difficulties experienced by the automotive industry as a result of the financial crisis are having a sustained negative impact on the prospective business development of the European operations, which are combined in the Automotive cash generating unit. Impairment testing of goodwill in other cash generating units did not result in any further need to recognize impairment losses. The calculation of the value in use per cash generating unit was based on a discount rate of between 7.0% and 9.0%. Research and development expenses totaling A 3,816 thousand were recognized in the income statement in the reporting year (prior year: A 3,542 thousand)

44 Consolidated Financial Statements 19 Property, plant and equipment In C '000 Land and buildings Technical equipment and machinery Other equipment, furniture and fixtures Advance payments and assets under construction Cost As of January 1, ,412 77, ,371 6, ,136 Currency translation differences -1,409-3, ,462 Change in scope of consolidation Acquisitions of subsidiaries Additions 6,540 4,365 17,569 2,747 31,221 Disposals 470 5,088 18, ,969 Reclassifications 2,031 2,041 1,253-5, As of December 31, 2007 / January 1, ,049 75, ,358 2, ,433 Currency translation differences -1,302-2, ,109 Change in scope of consolidation Acquisitions of subsidiaries 211 3,912 1, ,719 Additions 13,078 5,416 20, ,032 Disposals 1,117 2,096 6, ,882 Reclassifications 3, ,319 1,917 As of December 31, ,731 80, ,173 1, ,411 Depreciation As of January 1, ,516 50, , ,789 Currency translation differences , ,312 Change in scope of consolidation Acquisitions of subsidiaries Depreciation 10,890 7,254 16, ,742 Impairment losses 0 2, ,802 Disposals 0 4,169 17, ,624 Reclassifications As of December 31, 2007 / January 1, ,228 53, , ,187 Currency translation differences 146-1, ,844 Change in scope of consolidation Acquisitions of subsidiaries 0 2, ,334 Depreciation 10,530 5,978 15, ,755 Impairment losses 2 0 3, ,516 Disposals 726 1,999 6, ,858 Reversals of impairment losses Reclassifications 1, ,113 As of December 31, ,878 57, , ,916 Carrying amount as of December 31, ,853 22,312 50,916 1, ,495 Carrying amount as of December 31, ,821 21,864 47,713 2, ,246 Total The impairment losses were charged in accordance with IAS 36 Impairment of Assets. Impairment losses totaling A 3,514 thousand (prior year: A 2,802 thousand) were charged on test facilities due to excess capacity. A 3,511 thousand thereof is attributable to property, plant and equipment of the Automotive Europe cash generating unit, recorded in the course of impairment testing of that cash generating unit. Items of property, plant and equipment with a net value of A 933 thousand were reclassified from assets held for sale to land and buildings in the reporting year because they were no longer intended for sale (prior year: reclassification of A 480 thousand from property, plant and equipment to assets held for sale). The carrying amounts of finance lease assets recognized under property, plant and equipment break down as follows: In C '000 Dec. 31, 2008 Dec. 31, 2007 Technical equipment and machinery Other equipment, furniture and fixtures Finance lease assets The corresponding liabilities from finance leases are presented under liabilities, Note Investment property In C ' Cost As of January 1 36,373 35,893 Additions 3, Disposals Reclassifications As of December 31 39,510 36,373 Depreciation As of January 1 6,343 5,396 Depreciation Impairment losses Disposals 0 37 Reclassifications As of December 31 6,655 6,343 Carrying amount as of December 31 32,855 30,030 As of December 31, 2008, investment properties had a market value of A 44,144 thousand (prior year: A 41,486 thousand). The market values were calculated using the capitalized earnings method without the involvement of an actuary. Rental income totaling A 1,304 thousand (prior year: A 1,978 thousand) was generated in fiscal 2008 from investment properties whilst the related expenses for repair and maintenance were A 821 thousand (prior year: A 1,643 thousand). In addition, expenses of A 1 thousand (prior year: A 2 thousand) were incurred in connection with investment properties that did not generate rental income. 21 Investments accounted for using the equity method The annual financial statements of associated companies that are accounted for using the equity method give the following financial information, which has not been adjusted to the share held by the Group. In C '000 Dec. 31, 2008 Dec. 31, 2007 Aggregated assets 162, ,925 Aggregated liabilities 99,785 64,413 Total amount of unrecognized gains of the period Accumulated total amount of unrecognized losses In C ' Aggregated revenue 147, ,659 Aggregated net income for the year 10,140 12,314 The following table summarizes financial information on the Group s joint ventures. The information relates to the Group s interest in the respective joint ventures. In C '000 Dec. 31, 2008 Dec. 31, 2007 Aggregated current assets 31,968 13,027 Aggregated non-current assets 203, ,999 Aggregated current liabilities 23,296 80,648 Aggregated non-current liabilities (including advance payments by franchisees) 200, ,994 In C ' Aggregated revenue 15,856 0 Aggregated net loss/income for the year -8,004 6,

45 Consolidated Financial Statements The financial data posted is on the one hand from the two Turkish joint venture companies TÜVTURK Kuzey, Istanbul, and TÜVTURK Güney, Istanbul. The venturers of the joint ventures are the Dogus group, the Akfen group and the TÜV SÜD Group, which each have a one-third stake in the joint ventures. In 2007, the TÜVTURK joint venture companies concluded a franchise agreement with the Turkish government, governing the implementation of regular vehicle inspections throughout Turkey. The joint venture is the exclusive provider of vehicle inspections in Turkey for the 20-year term of the contract. In 2008, efforts were made to expand the network of service stations, a multitude of franchise agreements were concluded and, in stages, vehicle inspection activities commenced. By mid-march 2009, 188 of the planned 189 service stations had started operations. On the other hand, the table includes the financial data of the franchisee TÜVTURK Istanbul, Istanbul. This company was established in 2007 and has been included in the consolidated financial statements using the equity method since that time. The shareholders are the three venturers with equal interests, as well as Westway Investment UK Ltd., with a 2.31% share. In 2008, the TÜVTURK joint venture companies recorded an overall loss of A 24,300 thousand, principally on account of start-up losses and exchange rate losses on loans taken out in USD. In the prior year, exchange rate gains from these USD loans had contributed significantly to the net income of A 20,236 thousand recorded by the TÜVTURK joint venture companies. In the reporting year, the remaining portion of the Group s share in losses of the TÜVTURK Istanbul joint venture amounting to A 248 thousand (prior year: A 0 thousand) was not recognized under income from investments accounted for using the equity method. In addition, the pro rata amount of A 3,608 thousand from the negative development of the cash flow hedge s market value after tax was not recognized in equity. The negative prior-year figure of A 1,070 thousand, representing the Group s share, was recognized directly in equity, under other reserves. TÜV SÜD paid A 3,200 thousand into the equity of the joint venture companies in Having successfully granted the licenses to franchisees, TÜVTURK was able to repay its liabilities of USD 352 million in full in the second half of TÜVTURK Istanbul has a loan amounting to USD 200 million that is repayable over the next ten years. The financing agreements, which meet international standards for project financing, also provide for limits with regard to further loans to the Turkish companies, or distribution limits. A number of additional covenants must also be taken into account by the contracting parties, who are also required to submit regular, detailed financial reports. 22 Other financial assets In C '000 Dec. 31, 2008 Dec. 31, 2007 Investments in affiliated companies 13,662 8,920 Loans to affiliated companies 2,188 3,457 Loans to associated companies Investments in other participations 1,158 1,159 Loans to participations 0 50 Long-term securities 61,305 50,361 Share of policy reserve from employer's pension liability insurance 11,525 10,975 Other loans 37,204 35, , ,741 Impairment losses of A 986 thousand (prior year: A 1,047 thousand) were recorded in the reporting year in accordance with IAS 36 Impairment of Assets. Impairment losses of A 973 thousand and A 13 thousand (prior year: A 732 thousand and A 30 thousand) are attributable to investments in affiliated companies and participations respectively. No impairment losses were incurred on loans (prior year: A 283 thousand) or available-for-sale securities (prior year: A 2 thousand) in the reporting year. Other loans mainly comprise a loan of A 37,000 thousand (prior year: A 35,000 thousand) granted to TÜV SÜD e.v. 23 Other non-current assets Of other non-current assets totaling A 4,739 thousand (prior year: A 4,080 thousand), A 2,368 thousand (prior year: A 1,888 thousand) relate to forward exchange transactions recorded at market value. The balance sheet item includes impairment losses amounting to A 468 thousand (prior year: A 457 thousand). 24 Inventories Inventories amounting to A 2,208 thousand (prior year: A 2,110 thousand) primarily consist of supplies. 25 Receivables and other current assets In C '000 Dec. 31, 2008 Dec. 31, 2007 Receivables according to the percentage of completion method 36,624 31,529 Other trade receivables 189, ,302 Valuation allowances on trade receivables -7,624-5,652 Trade receivables 218, ,179 Income tax receivables 3,381 23,510 Receivables from affiliated companies 6,216 3,620 Receivables from associated companies 1, Receivables from participations Loans to affiliated and associated companies 2 0 Fair values of derivative financial instruments Reimbursement claims from insurance 20,470 15,515 Other receivables and assets 25,068 29,887 Other receivables and other current assets 54,249 50,578 Other receivables and assets totaling A 25,068 thousand (prior year: A 29,887 thousand) include above all receivables due from the labor office for the German phased retirement scheme, cash pool receivables, accrued interest and prepaid expenses. In C '000 Specific valuation allowances The maturity profile of other trade receivables is as follows: In C '000 Dec. 31, 2008 Dec. 31, 2007 Other trade receivables 189, ,302 thereof neither impaired nor past due 81,357 66,872 thereof past due with the following maturity profile before valuation allowances: up to 30 days 71,825 71, to 60 days 13,848 19, to 90 days 6,705 6, to 180 days 6,978 5, to 360 days 4,655 5,252 more than 360 days 4,535 5,213 Valuation allowances on trade receivables -7,624-5,652 Other trade receivables (net) 182, ,650 There is no indication that customers might not be able to settle their obligations regarding receivables that are neither past due nor impaired. Valuation allowances on trade receivables are recognized on separate accounts and have developed as follows: Portfolio-based valuation allowances Valuation allowances as of January 1 3,232 3,440 2,420 2,224 5,652 5,664 Currency translation differences Change in scope of consolidation Addition , ,984 1,240 Utilization , Reversal Valuation allowances as of December 31 2,869 3,232 4,755 2,420 7,624 5,652 Total In the course of financing the project in Turkey, the shareholders concluded a share pledge agreement, pledging all shares in the Turkish joint venture companies to Bayerische Hypo- und Vereinsbank AG, Munich, as the security agent. However, until an event of default, voting rights and entitlement to dividends remain with the shareholders

46 Consolidated Financial Statements 26 Cash and cash equivalents This item includes cash in hand, checks and bank balances that are available within three months. 27 Non-current assets held for sale The amounts stated under current assets pursuant to IFRS 5 mainly relate to real estate that is offered for sale. 28 Equity The capital subscribed of TÜV SÜD AG is divided into 26,000,000 no-par value bearer shares with no nominal value. The capital reserve mainly includes the premium for various capital increases carried out since Revenue reserves contain the undistributed profits generated in the fiscal year and in the past by the entities included in the consolidated financial statements. Moreover, the revenue reserves record the offsetting of debit and credit differences resulting from capital consolidation for acquisitions prior to December 31, 2005, as well as the net amount of the adjustments recognized directly in equity in connection with the first-time application of IFRS. Other reserves record the differences arising from the currency translation of foreign subsidiaries annual financial statements without effect on income, effects from the valuation of available-for-sale securities and cash flow hedges without effect on income and the impact of offsetting actuarial gains and losses arising from pension obligations/ plan assets against equity, less the corresponding deferred taxes. In addition to ensuring the continued existence of the company as a going concern, TÜV SÜD's capital management aims to achieve an adequate return in excess of the cost of capital in order to increase the value of the company in the long term. TÜV SÜD AG is not subject to any statutory capital requirements. 29 Provisions for pensions and similar obligations In C '000 Dec. 31, 2008 Dec. 31, 2007 Domestic pension provisions 377, ,507 Foreign pension provisions 5,995 8,066 Provisions for similar obligations abroad 2,519 2,280 framework conditions of the country concerned and are usually based on the length of employee service and level of remuneration. The provisions for similar obligations relate to termination benefits abroad. The Group s post-employment benefits include both defined contribution and defined benefit plans. In the case of defined contribution plans, the company pays contributions to state or private pension funds on legal, contractual or voluntary basis. The company has no obligation to provide further benefits once it has made these payments. Ongoing premium payments (including contributions to state pension insurance) are stated as pension expenses for the respective year; in fiscal 2008 they amounted to a total of A 42,372 thousand (prior year: A 40,965 thousand). In Germany, pension systems maintained by the company are mostly defined benefit plans. The pension commitments are integrated schemes similar to those for civil servants, against which the state pension is offset. The integrated schemes were discontinued in 1981 and 1992 respectively. Pension obligations were then granted in accordance with the dual pension formula. The amount of the pension benefit is based on the qualifying period of employment and the pensionable income; different percentage rates are applied to determine the benefit amount depending on whether the pensionable income is above or below the income threshold. These defined benefit plans were discontinued in Only the employees at TÜV Hessen currently receive direct guarantees. Cover is provided in part directly, and in part by legally independent pension and welfare institutions. The benefit obligations covered by welfare institutions take the plan assets of such institutions into account. In order to extend the external financing of pension obligations in Germany, operating assets were transferred to TÜV SÜD PENSION TRUST e.v., established for this purpose, in 2006 as part of a contractual trust agreement. The funds are administered by this association in a fiduciary capacity, and serve solely to finance pension obligations. Pursuant to IAS 19, the transferred funds are to be treated as plan assets, and are therefore offset against pension obligations. actuarial assumptions. The defined benefit obligation was calculated on the basis of the following actuarial assumptions: Actuarial assumptions for determining the defined benefit obligation Dec. 31, 2008 Dec. 31, 2007 Germany Other countries Germany Other countries Discount rate 5.85% 5.16% 5.50% 5.67% Future salary increases 2.25% 3.13% 2.25% 3.81% Future pension increases 2.00% 2.45% 2.00% 3.05% Adjustment for forecast long-term inflation is taken into account in the development of salaries and wages. Actuarial gains or losses result from changes in the portfolio and deviations of actual developments from the assumptions made in the valuation (e.g. salary or pension increases). On the balance sheet date actuarial gains and losses after tax are posted directly to equity without affecting the income statement. The assumptions used to calculate the defined benefit obligation as of the respective measurement date of December 31 of the prior year also apply to the calculation of the interest cost and the current service cost in the subsequent fiscal year. The assumptions used in the calculation of the pension expenses for fiscal 2008 are therefore already defined as of the balance sheet date December 31, The assumptions that are crucial to the calculation of pension expenses are presented in the following overview: Actuarial assumptions for determining pension expenses Germany Other countries Germany Other countries Discount rate 5.50% 5.67% 4.60% 5.17% Future salary increases 2.25% 3.81% 2.00% 3.57% Future pension increases 2.00% 3.05% 1.75% 2.31% Return on plan assets 5.40% 6.07% 5.27% 5.71% The assumptions relating to the expected overall return on plan assets are based on the anticipated long-term returns for the individual asset categories, and take into account the target portfolio structure: Portfolio structure of plan assets as of measurement date Target allocation Share in plan assets Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Shares 23.1% 11.6% 23.1% Fixed-interest securities 75.8% 87.0% 75.1% Real estate and similar assets 0.5% 0.6% 0.6% Other 0.6% 0.8% 1.3% All of the shares were hedged as of year-end Initial hedges were already entered into in The remainder was then hedged in January and mid-september , ,853 Pension provisions are recorded as a result of benefit plans for old age, disability and surviving dependants pension commitments. The Group s obligations vary according to legal, fiscal and economic Abroad, pension plans financed by external institutions are in place in the UK. The amounts of the pension obligation (actuarial present value of earned benefit entitlements, defined benefit obligation) are based on 92 93

47 Consolidated Financial Statements The funded status of defined benefit obligations as well as the breakdown of pension provisions in the balance sheet is shown in the table below: Funded status of the defined benefit obligation In C '000 Germany Other countries Total Defined benefit obligation 1,052,423 1,090,349 34,791 48,103 1,087,214 1,138,452 Fair value of plan assets 675, ,842 26,277 37, , ,599 Net obligation = carrying amount as of December , ,507 8,514 10, , ,853 Changes in defined benefit obligations and plan assets are as follows: Development of defined benefit obligation In C ' Germany Other countries Total Germany Other countries Total Defined benefit obligation as of January 1 1,090,349 48,103 1,138,452 1,187,841 48,493 1,236,334 Service cost 17,062 1,219 18,281 20,286 1,561 21,847 Interest cost 58,626 2,301 60,927 53,557 2,369 55,926 Benefits paid -50,459-1,023-51,482-47,673-1,501-49,174 Contributions by the beneficiaries Actuarial gains (-) and losses (+) -63,018-6,218-69,236-94,645 1,382-93,263 Past service cost , ,626 Change in scope of consolidation Currency translation differences 0-10,535-10, ,514-4,514 Defined benefit obligation as of December 31 1,052,423 34,791 1,087,214 1,090,349 48,103 1,138,452 thereof unfunded 196,395 2, , ,828 1, ,806 thereof partially funded 856,028 32, , ,521 46, ,646 Development of plan assets In C ' Germany Other countries Total Germany Other countries Total Fair value of plan assets as of January 1 651,842 37, , ,363 37, ,082 Expected return on plan assets 38,228 1,979 40,207 33,729 2,112 35,841 Actuarial gains (+) and losses (-) -10,915-5,938-16,853-18, ,042 Contributions by the employer 39,258 1,251 40,509 37,288 1,638 38,926 Contributions by the beneficiaries Benefits paid -43,179-1,130-44,309-41,171-1,191-42,362 Currency translation differences 0-8,486-8, ,568-3,568 Fair value of plan assets as of December ,234 26, , ,842 37, ,599 Actual return on plan assets 27,313-3,959 23,354 15,362 2,437 17,799 The actuarial losses of A 10,915 thousand incurred in Germany in 2008 are primarily attributable to the Oktagon fund and a result of the lower than expected return on shares. Overall, the Oktagon fund still achieved a return of +4.3% against a benchmark development of -1.0%. The total expense for defined benefit plans (expenses less income) recorded in the income statement for fiscal years 2008 and 2007 breaks down as follows: Net pension expenses for defined benefit plans In C ' Germany Other countries Total Germany Other countries Total Service cost 17,062 1,219 18,281 20,286 1,561 21,847 Interest cost 58,626 2,301 60,927 53,557 2,369 55,926 Expected return on plan assets -38,228-1,979-40,207-33,729-2,112-35,841 Past service cost , ,626 Net pension expenses 37,460 1,541 39,001 10,897 1,409 12,306 Around 57% of the defined benefit obligation is allocable to pensioners, and 43% to active employees. The average duration of the obligations is 12.7 years (prior year: 13.4 years). The decrease in the defined benefit obligation is due above all to the increase in the discount rate in Germany from 5.50% as of December 31, 2007 to 5.85% as of December 31, Further reasons for the decrease include the pension adjustments of the statutory pension scheme and changes in the portfolio. Total pension payments of A 52,707 thousand are expected for fiscal

48 Consolidated Financial Statements Net actuarial gains totaling A 52,383 thousand (prior year: A 75,221 thousand) were recorded in fiscal 2008, which are a result of actuarial gains from pension obligations totaling A 69,236 thousand (prior year: A 93,263 thousand) and actuarial losses from plan assets totaling A 16,853 thousand (prior year: A 18,042 thousand). These were included in the consolidated statement of income and expense recognized in equity during the reporting year without affecting the income statement. Adjusted for currency fluctuation, cumulative net actuarial gains amounting to A 182,510 thousand (prior year: A 131,374 thousand) were posted directly to equity by the end of the reporting year. The provisions are counterbalanced by claims for reimbursement from insurance companies totaling A 20,470 thousand (prior year: A 15,515 thousand) that have been recognized as current assets. These provisions developed as follows in the reporting year: In C '000 Opening balance Jan. 1, 2008 Addition Utilization Reversal Other changes* Closing balance Dec. 31, 2008 Personnel provisions 99,287 70,199 59,114 1, ,917 Sundry provisions 44,042 10,787 7,387 7, ,806 Other provisions 143,329 80,986 66,501 9, ,723 * Change in scope of consolidation, currency translation adjustments, unwinding of discount. The defined benefit obligation, plan assets, funded status and experience adjustments for this fiscal year and prior fiscal years are as follows: There were no significant increases in non-current provisions due to unwinding of discount in fiscal Experience adjustments In C ' Defined benefit obligation 1,087,214 1,138,452 1,236,334 Plan assets 701, , ,082 Funded status 385, , ,252 Experience increase (+)/decrease (-) of the present value of defined benefit obligation -28, ,082 Experience increase (+)/decrease (-) of the fair value of plan assets -16,853-18,042-9, Other provisions In C '000 Dec. 31, 2008 Dec. 31, 2007 Total thereof current Total thereof current Personnel provisions 108,917 84,530 99,287 76,607 Sundry provisions 39,806 29,991 44,042 29,158 Other provisions 148, , , ,765 The personnel provisions mainly pertain to variable remuneration for staff and management including associated social security contributions, obligations arising from the agreements under the German phased retirement scheme, medical benefits and anniversary bonuses. 31 Liabilities In C '000 Non-current Current Total Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Income tax liabilities ,119 10,341 13,119 10,341 Liabilities according to the percentage of completion method 0 0 3,391 3,314 3,391 3,314 Other trade payables ,796 28,265 31,796 28,265 Trade payables ,187 31,579 35,187 31,579 Liabilities to banks 20,520* 378 6,170 3,033 26,690 3,411 Advance payments received ,990 15,169 17,240 15,204 Liabilities to affiliated companies 0 0 5,183 3,667 5,183 3,667 Liabilities to associated companies 0 0 1, , Vacation claims, flexitime and overtime credits ,729 39,653 45,729 39,653 Outstanding invoices ,151 13,674 14,151 13,674 Other taxes ,201 31,111 29,201 31,111 Social security liabilities 1,785* 4,797* 2,354 2,584 4,139 7,381 Fair values of derivative financial instruments , , Sundry liabilities 3,578* 4,886* 35,387 33,207 38,965 38,093 Other liabilities 26,341 10, , , , ,558 * Thereof more than five years: A 10,381 thousand (prior year: A 3,374 thousand). Sundry provisions mainly include provisions for legal costs and damages as well as for employer s liability insurance contributions. Moreover, the posted provisions include provisions for restructuring costs amounting to A 13,352 thousand (prior year: A 13,496 thousand), most of which relate to restructuring measures in the TÜV SÜD Industry Services division. These were created on the basis of the plans ratified and communicated by management

49 Consolidated Financial Statements Sundry liabilities include liabilities from finance leases totaling A 909 thousand (prior year: A 537 thousand). The present value of future minimum lease payments, by maturity profile, is as follows: In C '000 Dec. 31, 2008 Dec. 31, 2007 Due in less than 1 year Due in 1 to 5 years Present value of future minimum lease payments Contingent liabilities In C '000 Dec. 31, 2008 Dec. 31, 2007 Guarantee obligations 28,204 4,085 Contingent liabilities arising from litigation risks 1, Sundry contingent liabilities Contingent liabilities 29,568 4,589 In addition, one consolidated company is jointly and severally liable for the joint ventures TÜV TRANSRAPID, TÜV ENERGIE CONSULT and Kerntechnik-Gutachter Arbeitsgemeinschaft Baden-Württemberg. Furthermore, there are contingent liabilities relating to the project Vehicle inspections in Turkey (see Note 21 Investments accounted for using the equity method ). Initially, TÜV SÜD AG has issued an unlimited guarantee to the financing banks, according to which the company is liable for all financial risks up to a share of 33.33%. This obligation is secured by a bank guarantee totaling USD 60 million. Once the project has been successfully set up, this guarantee will be repaid in the course of the second quarter of Any additional payment obligations that may arise will then only be covered up to USD 15 million by a shareholder guarantee. After fiscal year 2009 and on the basis of positive business trends, financing will then enter the non-recourse phase. As of that time, only the invested equity will be at risk. The two partners, Dogus group and Akfen group, have also issued corresponding guarantees. The posted guarantees primarily relate to the financing of the franchise license for Bursa and Yalowa by TÜV SÜD Bursa Tasit Muayene Istasyonlari Isletim A.S., Istanbul. TÜV SÜD AG had issued bank guarantees of USD 31 million as of the balance sheet date for this purpose. 33 Legal proceedings TÜV SÜD AG and its subsidiaries are not involved in any legal proceedings which could have a material impact on the economic or financial situation of the individual companies or the Group as a whole. The group entities concerned have formed provisions at suitable amounts to account for any burdens from other litigation proceedings. 34 Other financial obligations The following minimum lease payments will be due in future on the basis of existing rental and lease agreements: In C '000 Due in less than 1 year Due in 1 5 years Due in more than 5 years Dec. 31, 2008 Total Future obligations from rental and lease agreements for real estate 23,453 49,198 27,213 99,864 Future obligations from other operating leases 3,448 4, ,606 Total future obligations from rental and lease agreements 26,901 53,356 27, ,470 In C '000 Due in less than 1 year Due in 1 5 years Due in more than 5 years Dec. 31, 2007 Total Future obligations from rental and lease agreements for real estate 19,149 45,657 26,951 91,757 Future obligations from other operating leases 3,478 4, ,176 Total future obligations from rental and lease agreements 22,627 50,355 26,951 99,933 Rental and leasing expenses amounted to A 24,398 thousand in fiscal 2008 (prior year: A 17,921 thousand). There are also other financial obligations amounting to A 6,309 thousand (prior year: A 6,667 thousand). Other notes 35 Additional information on financial instruments The following tables show the measurement of categories of financial instruments relevant under IFRS 7 on the basis of the items of the balance sheet: In C '000 Carrying amount Dec. 31, 2008 Financial assets/ liabilities held for trading at fair value through profit or loss Measurement categories in accordance with IAS 39 Loans and receivables at amortized cost* Available-for-sale financial assets measured at fair value recognized in equity A S S E T S Non-current assets Other financial assets 127,822 Securities 61,305 61,305 Loans and other receivables 51,697 51,697 Financial instruments that do not fall in the scope of IFRS 7 14,820 Other non-current assets 4,739 Other assets 2,371 2,371 Financial derivatives 2,368 2,368 Financial liabilities at amortized cost* Current assets Trade receivables 218, ,903 Other receivables and other current assets 54,249 Other receivables 49,100 49,100 Financial derivatives Non-financial assets 4,233 Cash and cash equivalents 134,268 Cash and cash equivalents 134, ,228 Short-term securities E Q U I T Y A N D L I A B I L I T I E S Non-current liabilities Non-current liabilities 26,341 Liabilities to banks 20,520 20,520 Sundry liabilities 3,828 3,828 Financial derivatives Non-financial liabilities 1,785 Current liabilities Trade payables 35,187 35,187 Other current liabilities 159,725 Liabilities to banks 6,170 6,170 Sundry liabilities 45,049 45,049 Financial derivatives 3,307 3,307 Non-financial liabilities 105,199 Total by measurement category in accordance with IAS 39 3,284 / 3, ,299 61, ,754 * The carrying amount approximates fair value

50 Consolidated Financial Statements In C '000 Carrying amount Dec. 31, 2007 Financial assets/ liabilities held for trading at fair value through profit or loss Measurement categories in accordance with IAS 39 Loans and receivables at amortized cost* Available-for-sale financial assets measured at fair value recognized in equity A S S E T S Non-current assets Other financial assets 110,741 Securities 50,361 50,361 Loans and other receivables 50,301 50,301 Financial instruments that do not fall in the scope of IFRS 7 10,079 Other non-current assets 4,080 Other assets 2,192 2,192 Financial derivatives 1,888 1,888 Financial liabilities at amortized cost* Current assets Trade receivables 206, ,179 Other receivables and other current assets 50,578 Other receivables 45,209 45,209 Financial derivatives Non-financial assets 4,740 Cash and cash equivalents 92,910 Cash and cash equivalents 92,907 92,907 Short-term securities 3 3 E Q U I T Y A N D L I A B I L I T I E S Non-current liabilities Non-current liabilities 10,096 Liabilities to banks Sundry liabilities 4,922 4,922 Financial derivatives 0 0 Non-financial liabilities 4,796 Current liabilities Trade payables 31,579 31,579 Other current liabilities 142,462 Liabilities to banks 3,033 3,033 Sundry liabilities 40,384 40,384 Financial derivatives Non-financial liabilities 98,948 Total by measurement category in accordance with IAS 39 2,518 / ,788 50,364 80,296 * The carrying amount approximates fair value. In the case of current loans and receivables and liabilities measured at amortized cost, it is assumed that the nominal value is equal to the fair value on account of the short residual terms. In the case of respective non-current items, the fair value is estimated as the nominal value less impairment losses. Net gain or loss by measurement category The net gain or loss on the financial instruments recognized in the income statement, by measurement category, is as follows: In C '000 Net gain or loss Financial assets/liabilities at fair value through profit or loss 1,164 2,702 Loans and receivables -1,955-8,672 Available-for-sale financial assets Liabilities measured at amortized cost -5, ,769-5,555 The net gain or loss was mainly attributable to effects from currency translation, impairment losses and measurement at fair value. Interest on financial instruments and the impairment losses for other securities, loans and participations are posted under other financial result. Impairment losses for trade receivables are recorded in other expenses. Exchange rate gains and losses from currency translation differences are either disclosed in the financial result or as other expenses or other income, depending on the economic nature of the factors that gave rise to them. 36 Financial risks The TÜV SÜD Group faces financial risks in the form of default risks, liquidity risks and market risks. The principles of risk management are defined by TÜV SÜD s internal finance policy as well as numerous strategies and guidelines and discussed in more detail in the management report. Default risks exist with regard to the operating business as well as to available-for-sale financial assets and derivative financial instruments. In order to avoid default risks, for all transactions relating to the operating business, collateral must be requested, credit ratings obtained or a track record of prior business relations, particularly payment behavior, depending on the nature and extent of the respective transactions. Recognizable risks are taken into account through appropriate bad debt allowances that are based on objective indications in individual cases, or the maturity profile and actual default history. Trade receivables, receivables according to the percentage of completion method and loans may be defaulted at most to the value of their carrying amount as of December 31, Trade receivables that are past due are listed in Note 25 Receivables and other current assets. The maximum credit risk at the time of the disposal of available-forsale assets and derivative financial instruments corresponds to their market value as of December 31, The risk of default on securities is minimized by a high degree of diversity in the investment strategy. Only securities with an excellent credit rating are selected. In spite of the financial crisis, the TÜV SÜD Group has not recorded any default on securities. Derivative financial instruments are only concluded with partners with a high rating where a breach of contractual obligations is not expected. According to internal trading policies, derivative financial transactions may only be concluded in close consultation with the specialist department and in connection with a hedged transaction. Subsidiaries are prohibited from purchasing securities in order to limit risks. In order to manage liquidity risks, the TÜV SÜD Group always has up-to-date liquidity planning and sufficient liquidity reserves in the form of cash and credit lines. Positive bank balances are held solely at banks with excellent credit ratings. In addition, maximum investment limits are set for funds invested at various banks and they have been adjusted conservatively in light of the financial crisis. Risks relating to short-term securities are minimized by widely diversifying issuers. The maturity profile of the anticipated undiscounted cash flows is detailed under Note 31 Liabilities. The main market risks resulting from financial instruments are currency and interest rate risks. The scope for action with regard to currency management is defined by TÜV SÜD s internal policies. Currency risks in connection with the operating business are hedged using derivative financial instruments. Forward exchange transactions and cross-currency swaps are used for intra-group loans in foreign currencies

51 Consolidated Financial Statements Currency risks as of the balance sheet date are assessed using sensitivity analyses. With regard to trade receivables and payables, a 10% increase in the value of the euro against all other currencies as of December 31, 2008 would only have an immaterial effect on consolidated net income for the year and equity. In the event of a 10% decrease in value of the euro, the market value of forward exchange transactions would fall by A 1,896 thousand (prior year: A 1,591 thousand). The market value of cross-currency swaps would drop by A 1,301 thousand (prior year: A 2,834 thousand) accordingly. In the event of a 10% increase in value of the euro against all other currencies, the market value of forward exchange transactions would rise by A 1,723 thousand (prior year: A 1,330 thousand). The market value of crosscurrency swaps would increase by A 1,057 thousand (prior year: A 2,319 thousand) accordingly. There are interest rate risks on investments in fixed-interest securities. A 1% rise in interest rates would result in a decrease in market value of A 831 thousand (prior year: A 781 thousand). 37 Notes to the cash flow statement The cash and cash equivalents presented in the cash flow statement contain all highly liquid items shown in the balance sheet, i.e. cash in hand, checks and bank balances that are available within three months. Cash is not subject to any restrictions on their disposal. The change in non-current provisions relates to pension payments of A 38,717 thousand made by trustors and refunded by TÜV SÜD PENSION TRUST e.v. (prior year: A 36,744 thousand). The trustors subsequently made further payments to TÜV SÜD PENSION TRUST e.v. again. Together with further additions to other plan assets, these payments constitute contribution to pension plans and are allocable to the cash flow from investing activities. The cash flow from operating activities comprises the following payments: 38 Related parties Parties considered to be related to the TÜV SÜD Group are TÜV SÜD e.v., Mannheim, TÜV SÜD Gesellschafterausschuss GbR, Munich, TÜV Föderation GmbH Unternehmensgruppe TÜV Süddeutschland, Munich, and all affiliated and associated companies not included in the scope of consolidation, as well as joint ventures. Members of the Board of Management and the Supervisory Board are also considered related parties. Within the framework of contracts for services, the activities of the Technische Prüfstelle in Baden-Württemberg (accreditation which authorizes TÜV SÜD to operate the road vehicle technical inspectorate and the official inspection body) are carried out by the operating companies of the TÜV SÜD Group for TÜV SÜD e.v., Mannheim, as client and recognized contractor. Business is conducted on behalf of, at the instruction of and in the name of TÜV SÜD e.v., and had a total volume of A 112,339 thousand in 2008 (prior year: A 108,659 thousand). In 2008, TÜV SÜD AG, Munich, recorded a loan receivable of A 37,000 thousand (prior year: A 35,000 thousand) due from TÜV SÜD e.v., Mannheim, and a cash pool receivable of A 2,710 thousand (prior year: A 6,831 thousand). A cash pool liability of A 11,811 thousand (prior year: A 8,927 thousand) was due to TÜV Föderation GmbH Unternehmensgruppe TÜV Süddeutschland, Munich, a subsidiary of TÜV SÜD e.v. In the current fiscal year, TÜV SÜD made contributions of A 3,200 thousand to the equity of the TÜVTURK joint venture companies (prior year: A 16,480 thousand). Guarantees issued to the TÜVTURK joint venture companies are described above in Note 32 Contingent liabilities. Transactions between the TÜV SÜD Group and other related parties are not material. Remuneration of the Board of Management and Supervisory Board The remuneration of active members of the Board of Management amounted to A 2,111 thousand in fiscal 2008 (prior year: A 1,514 thousand). The additional service cost incurred for pension obligations amounted to A 46 thousand (prior year: A 46 thousand). The present value of the defined benefit obligation amounted to A 467 thousand as of the balance sheet date (prior year: A 372 thousand). The total remuneration of former members of the Board of Management and their surviving dependents including pension payments and other payments (advisory services) amounted to A 851 thousand (prior year: A 746 thousand). Pension obligations (DBOs) amounting to A 11,606 thousand (prior year: A 11,828 thousand) are in place with regard to former members of the Board of Management and their surviving dependents. Members of the Supervisory Board received total remuneration of A 368 thousand in fiscal 2008 (prior year: A 368 thousand). No loans or advances were granted to members of the Board of Management or Supervisory Board as of the balance sheet date. 39 Proposal for the appropriation of profits The Board of Management and Supervisory Board will propose to the annual general meeting to distribute A 13,000 thousand from the retained earnings of TÜV SÜD AG totaling A 31,463 thousand. That is equivalent to A 0.50 per share. The remaining amount of A 18,463 thousand is to be transferred to other revenue reserves. In C ' Interest paid 4,560 1,942 Interest received 10,970 7,187 Income taxes paid 35,664 45,170 Income taxes refunded 20,401 1,141 Dividends received 2,084 1,

52 Consolidated Financial Statements 40 Consolidated entities Name and registered offices of the entity Share in capital % Consolidated affiliated companies - Germany ARMAT GmbH & Co. KG, Pöcking * 100 ARMAT Hessen GmbH & Co. KG, Pöcking * 100 ARMAT Südwest GmbH & Co. KG, Pöcking * 100 Auto-Pflegezentrum GmbH & Co. KG, Darmstadt * 100 Elektro-Beratung Bayern GmbH, Landwirtschaftlicher Prüfdienst, Munich 100 ISV Ingenieurgesellschaft für Schienenverkehrstechnik mbh, Berlin LC Auto Consult GmbH, Recklinghausen 90 LSG-ELAB GmbH, Siegen * 100 LSG-Hygiene Institute GmbH, Neu-Isenburg 75 PIMA-MPU GmbH, Munich * 100 Senton GmbH EMV-Prüfzentrum, Straubing F 100 TÜV Ecoplan Umwelt GmbH Unternehmensgruppe TÜV Süddeutschland, Munich 100 TÜV Hanse GmbH TÜV SÜD Gruppe, Hamburg * 90 TÜV Hessen Consulting GmbH, Arnstadt 100 TÜV SÜD Akademie GmbH, Munich * 100 TÜV SÜD Auto Plus GmbH, Stuttgart 100 TÜV SÜD Auto Service GmbH, Stuttgart * 100 TÜV SÜD Automotive GmbH, Munich * 100 TÜV SÜD Chemie Service GmbH, Leverkusen * 100 TÜV SÜD Energietechnik GmbH Baden-Württemberg, Filderstadt * 100 TÜV SÜD Immobilien Service GmbH, Munich * 100 TÜV SÜD ImmoWert GmbH, Munich * 100 TÜV SÜD Industrie Service GmbH, Munich * 100 TÜV SÜD Informatik und Consulting Services GmbH, Munich * 100 TÜV SÜD Life Science GmbH, Munich F 100 TÜV SÜD Life Service GmbH, Munich * 100 TÜV SÜD Management Service GmbH, Munich * 100 TÜV SÜD Pluspunkt GmbH, Munich * 100 TÜV SÜD Product Service GmbH, Munich 100 TÜV SÜD Rail GmbH, Munich * 100 TÜV Technische Überwachung Hessen GmbH, Darmstadt 55 Name and registered offices of the entity Share in capital % Consolidated affiliated companies - other countries e4t electronics for transportations s.r.o., Prague, Czech Republic 51 EMI-TÜV SÜD Minöségügvi és Biztonságtechnikai Korlátolt Felelösségu Társaság, Szentendre, Hungary Jiangsu TÜV Product Service Ltd., Wuxi, China 51 Magyar TÜV SÜD Müszaki Szakértoi Korlátolt Felelösségu Társaság, Szentendre, Hungary 100 Msource Medical Development B.V., NJ Vianen, Netherlands F 100 Msource Medical Development B.V.B.A., Kraainem, Belgium F 100 Nuclear Technologies plc., Gloucester, UK 100 PetroChem Inspection Services Inc., Pasadena (Texas), USA 100 PSB Academy Pte. Ltd., Singapore 100 PSB Technologies Pte. Ltd., Singapore 100 TÜV Italia S.r.l., Milan, Italy 100 TÜV NEL Ltd., Glasgow, UK 100 TÜV Product Service Ltd, Fareham Hants, UK 100 TÜV SÜD (UK) Ltd., Fareham Hants, UK 100 TÜV SÜD América de México S.A. de C.V., Monterrey N.L., Mexico 100 TÜV SÜD America Inc., Peabody (Mass.), USA 100 TUV SUD Asia Ltd., Kowloon, Hong Kong 100 TUV SUD Asia Pacific Pte. Ltd., Singapore 100 TÜV SÜD Auto CZ s.r.o., Prague, Czech Republic 100 TÜV SÜD Bursa Tasit Muayene Istasyonlari Isletim A.S., Istanbul, Turkey 100 TÜV SÜD Canada Inc., Guelph (Ontario), Canada 100 TÜV SÜD Central Eastern Europe s.r.o., Prague, Czech Republic 100 TUV SUD China Holding Ltd., Kowloon, Hong Kong 100 TÜV SÜD Czech s.r.o., Prague, Czech Republic 100 TUV SUD Hong Kong Ltd., Hong Kong 100 TÜV SÜD Iberia, S.L., Barcelona, Spain 100 TUV SUD Industry Service Inc., Dover (Delaware), USA 100 TÜV SÜD Japan Ltd., Tokyo, Japan 100 TUV SUD Korea Ltd., Seoul, South Korea 100 TÜV SÜD Landesgesellschaft Österreich GmbH, Jenbach, Austria 100 TÜV SÜD Middle East LLC, Abu Dhabi, United Arab Emirates F 51 TÜV SÜD Polska Sp. z.o.o., Warsaw, Poland 100 Name and registered offices of the entity Share in capital % TUV SUD PSB (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia 100 TUV SUD PSB (Thailand) Limited, Pathumthani, Thailand 100 TUV SUD PSB Certification Pte. Ltd., Singapore 100 TUV SUD PSB Pte. Ltd., Singapore 100 TUV SUD Romania S.r.l., Bucharest, Romania F 100 TÜV SÜD Sava d.o.o., Ljubljana, Slovenia 100 TÜV SÜD Slovakia s.r.o., Bratislava, Slovakia 100 TUV SUD South Asia Pte. Ltd., Mumbai, India 100 TÜV SÜD Teknik Güvenlik ve Kalite Denetim Ticaret Ltd. Sirketi (TGK), Esentepe (Istanbul), Turkey 100 TUV SUD Middle East LLC (Qatar), Doha, Qatar F 100 Consolidated associated companies - Germany Fleet Company GmbH, Oberhaching 40 Hannover Leasing Automotive GmbH, Grünwald F Consolidated associated companies - other countries ATISAE Asistencia Técnica Industrial S.A.E., Tres Cantos, Spain SECTA Société Européenne de Contrôle Technique Automobile S.A., Courbevoie Cedex, France Swiss TS Technical Services AG, Wallisellen, Switzerland TÜV SÜD Ohtama Ltd., Tokyo, Japan 50 TÜV SÜD SZA Österreich Technische Prüf-GmbH, Vienna, Austria 50 Consolidated joint ventures - other countries TÜVTURK Kuzey Tasit Muayene Istasyonlari Yapim ve Isletim A.S., Istanbul, Turkey TÜVTURK Güney Tasit Muayene Istasyonlari Yapim ve Isletim A.S., Istanbul, Turkey TÜVTURK Istanbul Tasit Muayene Istasyonlari Isletim A.S., Istanbul, Turkey F stands for first-time consolidation. * The domestic subsidiary meets the requirements of Section 264 (3) HGB or Section 264b HGB, and takes advantage of the corresponding exemption regulations. Munich, March 18, 2009 TÜV SÜD AG The Board of Management Dr.-Ing. Axel Stepken Dr.-Ing. Manfred Bayerlein Dr. Peter Klein

53 Auditor s report We have audited the consolidated financial statements prepared by TÜV SÜD AG, Munich, comprising the income statement, the balance sheet, cash flow statement, statement of income and expense recognized in equity, statement of changes in equity and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, The preparation of the consolidated financial statements and the group management report in accordance with IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB [ Handelsgesetzbuch : German Commercial Code] are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Munich, March 18, 2009 KPMG AG Wirtschaftsprüfungsgesellschaft (former KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft) Huber Wirtschaftsprüfer [German public auditor] Sandhaas Wirtschaftsprüferin [German public auditor] Corporate Boards Supervisory Board Univ.-Prof. Dr.-Ing. habil. Prof. e.h. Dr. h.c. Hans-Jörg Bullinger President of Fraunhofer-Gesellschaft Munich Chairman Josef Bichler* Management representative Controller Warngau Wolfgang Dehen Member of the Board of Management Siemens AG Erlangen Thomas Eder* Expert Altdorf Franz Holzhammer* Expert Sauerlach Peter Kardel* Expert Rudersberg Zygmunt Mierdorf Member of the Board of Management Metro AG Düsseldorf Dietrich Schallehn* Trade union representative Berlin Deputy Chairman Gerold Tandler Member of the Board of Management (ret.) Linde AG Munich Dr. Eberhard Veit Member of the Board of Management for Product and Technology Management Spokesman of the Board of Management Festo AG Esslingen Prof. Dr. rer. nat. Martin Winterkorn Chairman of the Board of Management VW AG Wolfsburg Board of Management Dr.-Ing. Axel Stepken Chairman and CEO Munich Dr.-Ing. Manfred Bayerlein Chief Operating Officer (COO) Berg Dr. Peter Klein Chief Financial Officer and Chief Information Officer (CFO and CIO) Munich Our audit has not led to any reservations. Edgar Scherner* Trade union representative Haar * Employee representative

54 AMERICAS TÜV SÜD America Inc. 10 Centennial Drive Peabody, Massachusetts Phone: Fax: EUROPE TÜV SÜD AG Westendstrasse Munich Germany Phone: Fax: ASIA PACIFIC TÜV SÜD Asia Pacific Pte. Ltd. 3 Science Park Drive #04-01/05 The Franklin Singapore Phone: Fax: Imprint: Published by TÜV SÜD AG, Corporate Communications, Westendstrasse 199, Munich, Phone: , Fax: , TÜV SÜD AG, Munich. All rights reserved.

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